Document of
The World Bank
Report No: 35238-CN
PROJECT DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$ 100 MILLION
AND
PROPOSED GRANT FROM THE
GLOBAL ENVIRONMENT FACILITY TRUST FUND
IN THE AMOUNT OF US$ 5.25 MILLION
TO THE
PEOPLE’S REPUBLIC OF CHINA
FOR THE
GUANGXI INTEGRATED FORESTRY DEVELOPMENT AND CONSERVATION
PROJECT
October 17, 2006
Rural Development and Natural Resources Sector Unit
East Asia and Pacific Region
1
CURRENCY EQUIVALENTS
(Exchange Rate Effective June 7, 2006)
Currency Unit =
Y 1.0 =
US$ 1.0 =
Renminbi (RMB) Yuan (Y)
US$ 0.12
Y 8.07
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
ABC
A/R
ASEAN
BCF
BO
BRAT
CAS
CBD
CBIMS
CDB
CDM
CIFOR
CQ
DA
DNR
EA
EFC
EMDP
EMMP
ERR
FFs
FMR
FRR
GEF
GEFSEC
GEPRI
GFB
GIFDCP
GPFB
GPDRC
GZAR
GoC
HHs
IA
IBRD
ICB
ILP
IMC
IPM
IUCN
Agricultural Bank of China
Afforestation/Reforestation
Association of South East Asian Nations
BioCarbon Fund
Biodiversity Office
Biodiversity Rapid Assessment Team
Country Assistance Strategy
Convention on Biological Diversity
China Biodiversity Information Monitoring System
China Development Bank
Clean Development Mechanism
Center for International Forestry Research
Consultant Qualification
Designated Account
Division of Nature Reserves (national)
Environmental Assessment
Increasing Ecological Forest Cover Component (of the GIFDCP)
Ethnic Minority Development Plan
Environment Management and Monitoring Plan
Economic Rate of Return
Forest Farms
Financial Management Report
Financial Rate of Return
Global Environment Facility
GEF Secretariat
Guangxi Environmental Protection Research Institute
Guangxi Forestry Bureau
Guangxi Integrated Forestry Development and Conservation Project
Guangxi Provincial Finance Bureau
Guangxi Provincial Development and Reform Committee
Guangxi Zhuang Autonomous Region
Government of China
Households
Implementing Agency
International Bank for Reconstruction and Development
International Competitive Bidding
Integrated Land use Plan
Enhancing Institutional and Management Capacity Component (of the GIFDCP)
Integrated Pest Management
World Conservation Union
2
km
LOC
m2
m3
M&E
MAB
METT
MNRC
MOF
NCB
NDRC
NFPP
NGO
NR
NRMP
NTFP
PCG
PDF
PIP
PLG
PMO
PMG
PPMO
PRA
QBS
QCBS
RCC
SA
SBD
SEPA
SFA
SFDP
SFE
SIL
SOE
STAP
TPC
TSP
WB
WHO
WMD
WCNRDP
WMD
WNRMS
WWF
kilometer
Line of Credit
square meters
cubic meters
Monitoring and Evaluation
Man and Biosphere
Management Effectiveness Tracking Tool
Improving Management of Nature Reserves Component (of the GIFDCP)
Ministry of Finance
National Competitive Bidding
National Development and Reform Commission
National Forest Protection Program
Non-government organization
Nature Reserve
Nature Reserves Management Project
Non-timber Forest Products
Project Coordination Group
Project Development Facility
Project Implementation Plan
Project Leading Group
Project Management Office
Project Management Group
Provincial Project Management Office
Participatory Rural Appraisal
Quality Based Selection
Quality & Cost Based Selection
Regional Credit Cooperative
Social Assessment
Standard Bidding Document
State Environment Protection Agency
State Forestry Administration
Sustainable Forest Development Project
State Forest Enterprise
Sector Investment Loan
Statement of Expenditure
Scientific and Technical Advisory Panel
Extending Timber Plantations Component (of the GIFDCP)
Technical Support Panel
World Bank
World Health Organization
Wildlife Management Division
Wildlife Conservation and Nature Reserves Development Program
Wildlife Management Division
Wildlife and Nature Reserve Management Station
World Wide Fund for Nature
Vice President:
Country Manager/Director:
Acting Sector Director:
Task Team Leaders:
James W. Adams
David Dollar, EACCF
Christian Delvoie, Acting, EASRD
Liu Jin & Mohamed Noureddine Benali, EASRD
3
CHINA
Guangxi Integrated Forestry Development and Conservation Project
CONTENTS
A.
STRATEGIC CONTEXT AND RATIONALE ......................................................... 6
1.
Country and sector issues ........................................................................................... 6
2.
Rationale for Bank involvement ................................................................................. 7
3.
Higher level objectives to which the project contributes ........................................... 8
B.
PROJECT DESCRIPTION ....................................................................................... 10
1.
Lending instrument ................................................................................................... 10
2.
Project development objective and key indicators. .................................................. 10
3.
Project components .................................................................................................. 10
4.
Lessons learned and reflected in the project design ................................................. 13
5.
Alternatives considered and reasons for rejection .................................................... 13
C.
IMPLEMENTATION ................................................................................................ 14
1.
Partnership arrangements ......................................................................................... 14
2.
Institutional and implementation arrangements ....................................................... 14
3.
Monitoring and evaluation of outcomes/results ....................................................... 15
4.
Sustainability and Replicability ................................................................................ 16
5.
Critical risks and possible controversial aspects ...................................................... 17
6.
Loan/credit conditions and covenants ...................................................................... 18
D.
APPRAISAL SUMMARY ......................................................................................... 20
1.
Economic and financial analyses .............................................................................. 20
2.
Technical .................................................................................................................. 21
3.
Fiduciary ................................................................................................................... 22
4.
Social ........................................................................................................................ 22
5.
Environment ............................................................................................................. 24
6.
Safeguard policies .................................................................................................... 25
7. Policy Exception and Readiness .................................................................................. 28
4
Annexes
Annex 1: Country and Sector Background ........................................................................... 29
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 33
Annex 3: Results Framework and Monitoring ..................................................................... 36
Annex 4: Detailed Project Description ................................................................................. 41
Annex 5: Project Costs ......................................................................................................... 67
Annex 6: Implementation Arrangements ............................................................................ 69
Annex 7: Financial Management and Disbursement Arrangements .................................... 71
Annex 8: Procurement Arrangements .................................................................................. 80
Annex 9: Economic and Financial Analysis ........................................................................ 85
Annex 10: Safeguard Policy Issues ...................................................................................... 96
Annex 11: Project Preparation and Supervision ................................................................. 102
Annex 12: Documents in the Project File........................................................................... 103
Annex 13: Statement of Loans and Credits ........................................................................ 104
Annex 14: Country at a Glance .......................................................................................... 109
Annex 15: Incremental Cost Analysis ................................................................................ 110
Annex16: Scientific & Technical Advisory Panel Roster Review ..................................... 117
Maps ................................................................................................................................... 141
MAPS: IBRD Nos. 34708, 34734, 34735
5
A.
STRATEGIC CONTEXT AND RATIONALE
1. COUNTRY AND SECTOR ISSUES
China, the most populous and largest developing country, has long been a forest-poor country.
The government has done a remarkable job in increasing forest cover, mainly through an
extensive plantations program, from 13 percent in 1980s to 18.2 percent today. However, the
current area of forest per capita is 0.13 ha, significantly below the world average of 0.6 ha. The
increasing gap between timber supply and demand is a key constraint to sustainable forestry
development. Currently, annual timber consumption exceeds supply by approximately 80
million cubic meters m3. Furthermore, most natural forest habitats have been reduced to small
and isolated fragments. This has led to a significant threat to biodiversity, and many of the
threatened species are of global importance. While the launch by the Government of China
(GoC) of the Natural Forest Protection Program (NFPP) in 1998 was environmentally
beneficial to China, it further widened the gap between timber supply and demand. All these
factors have also led to a significant increase in the import of timber and wood products from
neighboring countries contributing to unsustainable exploitation of those natural forests.
In order to bring the forestry sector under more sustainable management and development, the
GoC formulated a “Sustainable Forestry Development Strategy”, focused on “the four shifts”
as follows: (a). the shift from harvesting wood from natural forests to harvesting wood from
plantation forests; (b) the shift from deforestation for the purpose of land reclamation to
conversion of steep cropland to plantation forest; (c) the shift from non-funded management of
ecological forests; and (d) the shift from giving the public sector the exclusive right to develop
forest resources to widening that mandate to include the participation of other social actors.
The “four shifts” have brought about a historical and fundamental change in China’s forestry
sector. (See Annex 1 for more details on the sector).
With the objective of implementing the shift from harvesting natural forests to plantations, in
2002 the State Forestry Administration (SFA) designated four areas of the country as key
timber production bases/areas to promote forest plantation establishment. Guangxi Zhuang
Autonomous Region (GZAR) is one area designated because of its near perfect agro-ecological
conditions for producing large quantities of timber. However, GZAR has a wood shortage; the
annual timber consumption in the Region is approximately 7.8 million m3, which is more than
the annual production of 5 million m3. The growing demand for timber in Guangxi has also
increased the pressure on Guangxi’s natural ecosystems and threatened its unique biodiversity,
including one of the largest and most important representatives of karst ecosystem in the world.
Inadequate protection from illegal logging and unsustainable use of non-timber forest products
(NTFP) have led to the loss of natural forests, critical to watershed protection, and extirpation
of globally important biodiversity such as the eastern black-crested gibbon (Nomascus nasutus)
and tiger (Panthera tigris). These developments have made the effective development,
management and protection of forest resources into a high priority of the GZAR Government.
The GZAR recently launched a number of forestry programs to increase timber production,
manage watersheds to reduce soil and water erosion, and protect natural forest and biodiversity.
6
These programs include: (a) the Intensively Managed Timber Products Bases Development
Program; (b) the Integrated Management for the Protection Forests in the Middle and Upper
Reaches of the Pearl River Program; and (c) the Natural Regeneration of Vegetation on Karst
Hill Program. The government also established a system of nature reserves. All these
programs will contribute to achieving both the provincial and national goals of managing and
developing forest resources in a sustainable manner. During the next five years (2006-2010)
and in accordance with its forestry development programs, the GZAR plans to increase the area
of timber plantations by 870,000 ha and bring 66,700 ha of watershed areas under effective
protection.
While the GZAR government has taken positive steps towards sustainable forest management,
it faces many challenges. For instance, to develop the wood producing sector the GZAR is
relying on its provincial- and county-level Forest Farms (FF) and a combination of private
sector partnerships/concessions (APP, Stora Enzo, etc.). While the FFs are the primary vehicle
for implementing the public sector’s forestry policy, they have been constrained by financial
weakness, structural shortcomings and low levels of technology. The GZAR government
recognizes these constraints and is taking measures to restructure these FFs in line with the
national program of State Forest Enterprise (SFE) reform. Although GZAR is an important
region for the protection of the Pearl River Watershed and karst biodiversity, the province lacks
sufficient resources, technical and institutional capacity, and effective models for the protection
of the ecological forests and forest nature reserves set aside to protect valuable biodiversity.
The government has also managed the three forest types of production, protection and
conservation forests separately, thus missing opportunities to enhance long-term sustainability
of the sector as a whole.
2. RATIONALE FOR BANK INVOLVEMENT
The proposed Guangxi Integrated Forestry Development and Conservation Project (GIFDCP)
is designed to support the GZAR government in achieving its objective of sustainable
management of forest resources and biodiversity conservation. The rationale for and value
added of World Bank (the Bank) involvement is as follows:

The project would introduce and expand the improved silvicultural techniques,
multiple-function protection management models and environmental management
guidelines by building upon the Bank’s 20 years of highly successful involvement in the
forest sector in China, as well as adopt latest research results and international
experience. Furthermore, this project, which would focus on a single province, would
introduce a sector-wide, integrative and comprehensive approach to sustainable forest
management and biodiversity conservation by supporting improvement of all three
forest categories of timber production, ecological environment protection and
biodiversity conservation in the context of sustainable forest management in GZAR, as
well as support the development and implementation of a GZAR forest sector
development and conservation strategy, and priority policy studies and regulation
revision. The Bank has had a highly successful engagement in the forestry sector in
China for over 20 years. This project would benefit from the experiences and lessons
learned from the five previous Bank- funded forestry projects.
7

Previous GEF-supported biodiversity conservation projects in China have focused
principally on improving the management of sites included in the national system of
protected areas. The GIFDCP would continue this theme but it would also promote the
strategic option of addressing biodiversity conservation issues in areas adjoining
established nature reserves. Guangxi’s natural forest management policy, which
identifies the natural regeneration of its karst hills as a key objective, provides a
valuable opportunity for integrating biodiversity conservation objectives into an
existing watershed management program.

The Bank is active in the forestry sector in many countries and would be able to
facilitate the introduction of global best practices such as improved silvicultural
techniques, ecosystems/landscape approach to conservation, sectoral analyses and
reforms.

There is significant scope to add value from the Bank to introduce participatory and
“bottom-up” approaches to forest resources planning and management by involving
local communities, planting entities and households early in project design to better
respond to communities’ preferences and protect the farmers' interests, and to promote
more equitable benefit-sharing arrangements. More active involvement of local
communities will lead to better adherence to management prescriptions and effective
management. The Bank’s involvement in the project would ensure that households’
and small communities’ interests are fully taken into account when they enter into
production or rental arrangement with FFs and when forests are set aside for protection
or conservation purposes.

The Bank’s involvement has also allowed for the leveraging of additional trust fund
resources from the GEF and the Bio-Carbon Fund for biodiversity conservation and
carbon sequestration, respectively.

To attain their forestry development goals and to reduce the wide gap between timber
demand and supply, the GoC and the GZAR need to use private and public investments
to sustain the growth of the sector. While the private sector has focused exclusively on
fast-growing forest species such as eucalyptus, the involvement of the Bank in this
project would allow for the use of a broader range and mixture of species. While the
growth of these mixed species is slower than that of the hybrid eucalyptus varieties, for
example, their impact on protecting watersheds and reducing wind- and water-induced
erosion is more durable and significant. The Bank’s involvement has also influenced
the project design to include the reform of FFs to make them into commercial
enterprises, which was not part of the project original concept.
3. HIGHER LEVEL OBJECTIVES TO WHICH THE PROJECT CONTRIBUTES
CAS document number: 35435-CHA Date of latest CAS discussion: May 23, 2006
The proposed project would contribute to support forest resources management priorities of
China, including ecological forest protection, biodiversity conservation and timber plantation
8
expansion. The proposed project is highly relevant to the Bank’s previous (2003) and new
Country Assistance Strategy (CAS of May 23, 2006) for China and fits well within their goals
of respectively: (a) “Improving efficiency and sustainability of the use of natural resources” by
promoting sound natural resource management practices and value addition through
appropriate technologies, training and modern management experience, as well as on
generating income opportunities for disadvantaged rural farmers in poor regions; and (b)
“Managing resource scarcity and environmental challenges” by focusing on encouraging the
development and use of clean renewable energy technologies, accelerating afforestation and
reforestation programs to support carbon sequestration and demonstrate the use of carbon
finance transactions, piloting improved approaches to natural resource management and
formulating a strategy to protect biodiversity.
GEF Operational Strategy/program objective addressed by the project:
China ratified the Convention on Biological Diversity (CBD) in January 1993. The project is
consistent with the GEF Operational Strategy, particularly strategic priority BI (Catalyzing
Sustainability of Protected Areas) in that it will enhance the sustainability of Guangxi
Province’s nature reserves system and strengthen the management of five nature reserves of
global biodiversity significance with a total area that exceeds 650 km2. At selected sites
outside these nature reserves, biodiversity management would be promoted through the
integration of specific habitat and wildlife conservation recommendations into forest protection
contracts for important watershed management areas. These sites would be located near to the
project nature reserves and would thus act as ‘corridors’ for the distribution and dispersal of
wildlife.
The project will also therefore contribute to GEF strategic priority BII
(Mainstreaming Biodiversity in Production Landscapes and Sectors).
The project conforms to the national Biodiversity Conservation Action Plan (1994) which was
prepared with support from the GEF Pre-Investment Facility during the GEF Pilot Phase in
China. The Action Plan identified two of the project areas as centers of China’s biodiversity
(see Annex 2 for a more detailed evaluation of the project’s proposed target sites). The
conservation of Guangxi’s unique and rich biodiversity is also listed as a priority in several
national biodiversity strategies, including the World Wide Fund for Nature (WWF) supported
Biodiversity Review of China (1996) and China’s Biodiversity: A Country Study (1998).
The project is a key early component of the China/UNDP/GEF Biodiversity Partnership
Program for the Conservation and Sustainable Utilization of Biodiversity in China. The
Programming Framework for this Partnership anticipates at least one new WB/GEF project that
would help strengthen protected area management at the site level. This is the role in the
Partnership that the project will fill. The project would also contribute to the Partnership’s
objective of integrating biodiversity into investment decision-making at the provincial level and
would demonstrate how biodiversity conservation can be mainstreamed into forest management
at this level.
9
B.
PROJECT DESCRIPTION
1. LENDING INSTRUMENT
A Specific Investment Loan (SIL) is proposed. The GoC will borrow the Loan on the standard
IBRD terms, with an 20-year maturity and a five-year grace period. Ministry of Finance
(MOF) will on-lend the IBRD Loan to the Guangxi Government on the same terms as the
World Bank. In addition, about US$5.25 million will be provided by GEF as a grant to finance
nature reserve management and biodiversity conservation activities. The BioCarbon Fund will
also provide US$2 million as a carbon trade revenue (not project financing) to support the
BioCarbon pilot program to test the carbon sequestration and trade process. The proposed
project would be implemented over a period of six years.
2. PROJECT DEVELOPMENT OBJECTIVE AND KEY INDICATORS.
The overall project development objective is to improve the effectiveness of forest management
and institutional arrangements in timber production, watershed protection and nature reserves
management in selected areas of the GZAR. Progress towards the attainment of this objective
would be measured by monitoring: (a) timber production efficiency such as planting survival
and plantation growth rates under different institutional and partnership arrangements between
forest farms and communities/households, as well as individual households; and (b) the
increase in the vegetation cover in targeted watershed areas.
The global development objective of the project is to improve the conservation of the globally
significant biodiversity of the GZAR by ensuring effective in-situ protection of threatened and
globally important forest habitats and rare and endemic species. Progress towards the
achievement of these objectives would be measured by monitoring how well the five project
nature reserves are being managed, how well biodiversity conservation is integrated into
watershed protection, and how institutional capacity to deal with biodiversity conservation is
improved.
3. PROJECT COMPONENTS
The project would have four components: (a) expanding timber plantations; (b) increasing
ecological forest cover; (c) strengthening management of nature reserves; and (d) enhancing
institutional and management capacity. A summary description of these components is found
below and a detailed description is in Annex 4. The costs shown below include physical and
price contingency provisions.
a.
Component 1: Expanding Timber Plantations (Projected Cost US$171.10 million)
Under this component, the project would finance: (a) the establishment of approximately
200,000 ha of fast-growing, high-yield timber plantations; and (b) the improvement of nursery
management, including the establishment of four central nurseries and facilities to produce
high-quality planting materials to enable the introduction of superior genetic materials and
10
management technologies. These activities would enhance the productivity of forest resources
and increase the supply of timber products, thereby taking pressure off natural forests and
biodiversity conservation as well as increasing household incomes by generating job
opportunities for local farmers. Most of the plantation sites would be located in rugged hill
terrain. It is expected that the project would carry out its proposed planting activities and
plantation management by engaging in contractual arrangements between households and FFs.
The component would be implemented in 37 counties (33 counties applied through the forest
bureaus and four additional counties where only FFs would work with individual farmers) and
spread over 22,400 sites with an average size of 8 ha. Few sites are larger than 100 ha.
Counties would implement the afforestation program on the basis of a master plan which will
define, inter alia, the species and the plantation and management techniques to be used in
executing the afforestation program within each specific county. These master plans would be
prepared and reviewed by the PPMO prior to the end of the first year of the project. There
would therefore be no large-scale monoculture plantations and much of the planting would be
done in areas that are currently denuded of perennial vegetation. Apart from eucalyptus, which
has exhibited no invasive characteristics in China, this component will include at least ten other
species, all but one native to China. The location of the GIFDCP project counties is shown in
the appended project Map and a list of these counties is provided in Annex 4.
A plantation development and wood demand study was commissioned from Center for
International Forestry Research (CIFOR) to assess the GZAR plantation resources and
profitability, the requirements of the wood processing sector, and the risks involved. The major
conclusions were: 3.6 million ha of land is potentially available in all tenures for planting; the
region’s wood industry is well situated for expansion but already suffers from a severe supply
deficit which is growing rapidly; locally grown wood has a cost advantage over imported wood
but at the same time relatively high plantation costs reduce international competitiveness of the
wood industry; the wood industry is well positioned for access to domestic and ASEAN
markets; and there is the potential to increase value added in industrialized products. The
Guangxi Forestry Bureau (GFB) has used this study to choose an optimal species selection,
design economic planting models, concentrate plantations on economic site types and locations,
and incorporate the reduction of biological risks into the project design.
b.
Component 2: Increasing Ecological Forest Cover (Projected Cost US$18.67
million)
A large part of the watershed of the Pearl River is located in Guangxi Province and much of the
vegetation in this watershed has been seriously degraded. Since 1996, the GZAR has been
implementing the Integrated Management of Protection Forests in the Upper Reaches of the
Pearl River project. This component would contribute to the objectives of this government
program by developing and demonstrating models that would combine economic,
environmental and social benefits. The proposed component would be financed entirely
through counterpart funds. Under this component, the project would finance the establishment
of approximately 18,000 ha of multiple-use protection forests in 25 GZAR counties including
the development of a BioCarbon Fund pilot plantation. The BioCarbon initiative would cover
about 4,000 ha in Huanjiang and Changwu counties. This pilot would demonstrate technical
and methodological approaches to carbon sequestration and test the carbon trade process. The
11
project would also support the government’s program of rehabilitating 100,000 ha of natural
vegetation on Guangxi’s karst hills in 17 counties by closing and protecting these areas. On
about one-third of these closed forests, enrichment planting would be carried out. A large
number of these sites are located in close proximity to the project’s nature reserves.
The protection forest models would pilot improved community-based plantations. Timber or
multiple-use tree species would be established on land that has remained under collective land
use rights in poor and remote villages. Sustainable harvesting regimes would be set up and
incomes would flow into the administrative village budget to fund community expenses such as
small infrastructure. Township forestry stations would improve their capacity to provide
technical support at all stages from plantation to planning the allocation of income. The
enrichment planting activity would markedly increase the speed and quality of rehabilitation of
vegetation cover on karst hills in poor counties compared to the existing program.
In order to ensure unified management measures, the homogeneous growth of the plantations
and effective monitoring, as well as to maintain the carbon sequestered and reduce risks from
natural disasters during the 30-year crediting period, the proposed Afforestation/Reforestation
(A/R) activity under the Clean Development Mechanism (CDM) will be implemented either
directly by individual farmers (440 ha) or through cooperation arrangements between
farmers/communities and farmers/FFs (3,560 ha). Participation in the project would be decided
through a participatory process carried out at the village level. Under the cooperative
farmers/communities and FFs arrangement, the revenue from selling the carbon credit, which
will accrue from the second year after plantation to year 10, will be split. Sixty percent will go
to the farmers and forty percent to the FFs. For individual farmers, the income from the sale of
the forest products and the revenue from the sale of the carbon credit would belong in its
entirety to the local farmers/communities. The revenue from the sale of bio-carbon credit
would initially go from the BioCarbon Fund to the GFB, which will pass it on to the farmers/
communities and FFs.
c.
Component 3: Improving Management of Nature Reserves (Projected Cost US$
7.02 million)
The aim of this component is to enhance the management of existing nature reserves; increase
management capacity and knowledge of biodiversity resources (particularly in the little-known
limestone ecosystems); and strengthen cooperation between local communities and nature
reserve staff to address areas of mutual interest. Specifically, the component would finance: (a)
the development and implementation of management plans for five globally significant, high
priority nature reserves for demonstration purposes including staff training and capacity
building; (b) targeted biodiversity survey and research to increase knowledge, particularly of
karst biodiversity (outside the nature reserves), to better integrate biodiversity conservation into
the broader landscape; (c) activities which will strengthen collaboration between nature
reserves and local communities; and (d) development and implementation of a simple
participatory monitoring and evaluation system focused on the nature reserves and building on
the experiences of previous GEF-financed biodiversity projects in China. In addition,
replication of its experience and lessons will be actively promoted within Guangxi Province,
with neighboring provinces and nationally through the China Biodiversity Partnership Program.
12
d.
Component 4. Enhancing Institutional and Management Capacity (Projected Cost
US$5.06 million)
Financing from the Bank Loan, GEF Grant and counterpart funds would be used to implement
an integrated institutional and management capacity-building program that would: (a)
strengthen the capacity of the provincial forestry bureau to develop and implement a
sustainable provincial forest sector development and protection strategy (for production,
ecological forests and biodiversity) and support priority policy studies, guidelines, and
regulations revision; (b) implement applied research programs to generate operationally usable
technologies to improve commercial forestry development, ecological forest protection, and
biodiversity conservation; (c) disseminate research results, technical guidelines and lessons
learned to GFB staff and beneficiaries; and (d) the establishment of a simple project monitoring
and evaluation system to monitor project performance towards the achievement of its
development objectives and assess the project’s environmental and socio-economic impacts.
4. LESSONS LEARNED AND REFLECTED IN THE PROJECT DESIGN
The proposed project draws principally on the experience of other projects, in China and
elsewhere, and on Bank reports in the forestry sector, including the 1991 and 2002 Operations
Evaluation Department (OED) reviews of forestry projects; the 1994 Environment/Agriculture
review of implementation of the Bank’s forestry policy; the 1998 and 2002 Quality Appraisal
Group/Agriculture reviews of the Bank’s forestry portfolio and GEF-supported project
managed by the Bank; and the 2004 Development Strategy on Sustaining Forests. The key
lessons learned and incorporated in the design of the proposed project include: (a) the
development and use of new technologies such as the use of high performance species, high
quality seedlings and more efficient planting practices is essential to improve productivity; (b)
the linkages between silviculture research and afforestation institutions are of key importance
to facilitating technology transfer; (c) the stakeholders’ participation in project design through
consultative meetings is significant and effective in directing the scope of the project; (d)
provision of benefits to local stakeholders to protect ecological forest cover, such as the
BioCarbon pilot program; (e) substantive local participation in the definition of objectives of
protected areas management (including development of mechanisms to ensure that local
communities benefit from protected areas) is essential to sustainable forest management; and
(f) building capacity at the provincial forestry department level to support comprehensive
planning and implementation is of key importance for supervision and organizational
sustainability.
5. ALTERNATIVES CONSIDERED AND REASONS FOR REJECTION
The team considered:

Proposing that the forest resource development (plantations and watershed protection) and
nature reserve management be designed as two distinct projects with separate implementing
agencies. Component 3 was originally linked to the Chinese Academy of Sciences rather
than to an agency such as GFB that has the necessary management authority. This option
was rejected in favor of an integrated project approach that would tackle forestry
13



C.
development holistically and enhance the likelihood of overall project objectives being
achieved.
Including more provinces in a similar manner to previous Bank-financed forestry projects
in China. This was rejected because focusing on one province would allow the project to
tackle more of the institutional and sector-specific issues which are difficult to address in
multi-provincial projects.
Focusing mainly on rural households in afforestation efforts since many lack access to
credit for tree planting. However, the social assessment found that many households were
not interested in being directly involved in tree planting but rather wished to enter into
some shareholding arrangement with forest farms and companies for the use of their land
for forestry. Likewise, the team considered channeling project funds through a financial
intermediary instead of through the government network. This was rejected because none of
the rural commercial banks was interested in extending long-term loans for afforestation
activities involving households and small-size planting entities in the remote areas.
With regard to improving livelihoods of local communities living near the boundaries of
nature reserves (or co-management), the team chose not to target a small number of
demonstration villages for livelihood activities because it has not had the impacts
anticipated and has proven to be difficult to replicate and scale up. Instead, the team chose
to work with a large number of villagers to create an enabling environment that would
allow nature reserve staff and communities to solve common problems.
IMPLEMENTATION
1. PARTNERSHIP ARRANGEMENTS
In addition to the Bank and GEF partnership, the BioCarbon Fund will allocate about US$ 2
million to support a pilot afforestation program for the purpose of CO2 sequestration and
reducing greenhouse gases.
This pilot initiative would demonstrate technical and
methodological approaches to carbon sequestration and test the carbon trade process for the
A/R CDM program.
2. INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS
Project management arrangements have been designed on the basis of successful
implementation structures and models tried and proven effective under earlier Bank-supported
forestry projects. In the case of the proposed GIFDCP, a Project Leading Group (PLG), Project
Coordination Group (PCG) and Project Management Offices (PMOs) would be established at
the provincial level. The PLG will be chaired by the Vice-Governor responsible for forestry
and will comprise representatives from the forestry, finance, planning and audit departments.
The PCG will be located in the GFB and will be led by the Director General. It will comprise
the relevant Deputy Directors and Division Chiefs including the leader of the Wildlife
Management Division. The PLG and PCG will set the principles and policies for the project,
approve the overall implementation plan, coordinate inter-agency discussions and resolve
major issues during the project’s implementation. The PCG will regularly undertake reviews of
the inter-component cooperation to foster integration and cross-fertilization of activities.
14
The current provincial PMO, which was established to implement the existing Bank-financed
projects, is located in the GFB. It will be responsible for Components 1 and 2 and the
BioCarbon pilot program. It will also provide the financial management and procurement
support to the Component 3. A Biodiversity Office (BO) has been set up in the Wildlife and
Nature Reserves Management Station (WNRMS) to be responsible for Component 3 and to
ensure that biodiversity concerns are integrated with the activities of the other components.
The WNRMS works closely with the Wildlife Management Division (WMD) which is
responsible for biodiversity-related policies and regulations. The GFB will be responsible for
ensuring close coordination between WNRMS, WMD, and provincial PMO. The BO would
have a broader mandate to manage those activities included in Components 3 and 4 that are
financed by the GEF grant.
PLGs and PMOs would also be established at the county level for Components 1 and 2. For
Component 3, a Project Management Group (PMG) would be established in each of the five
nature reserves directly under the nature reserve director. The PMG would be responsible for
supervision of all aspects of project activities in that nature reserve. It would report to the
WNRMS. The PMG would include the head of the nature reserve’s Management Planning
Team, the head of its Community Relationships Team, its Training Coordinator, and its chief
financial officer. Technical advice would be sought from the Forest Survey and Design Institute
and the Guangxi Academy of Forestry as required. The Department of Forest Protection in the
SFA will serve in an advisory capacity to the GFB during project implementation. For
instance, management plans for national nature reserves produced by the project would be
submitted to the Division of Nature Reserves (DNR) in Beijing for review and comment of
technical aspects.
A Technical Support Panel (TSP) has been established within GFB the members of which are
from relevant research and technical institutes. The TSP would be responsible for overall
quality assurance and control; identification and implementation of research and extension
programs; assisting the Provincial PMO and BO in carrying out project monitoring, training
and technical services; and coordinating relevant departments and institutions to undertake the
forestry strategy, policy study and the regulatory work.
The project beneficiaries include households, groups of households, state-owned FFs, local
small private planting groups, and nature reserves. With regard to the timber plantations, the
exact production arrangements between households, forest farms and communities would be
decided through a participatory process carried out at the village level. This process would
allow farmers and communities to choose and decide on whether they wish to manage their
plantations by themselves or in cooperation with forestry farms or other private planting
entities
3. MONITORING AND EVALUATION OF OUTCOMES/RESULTS
Monitoring and evaluation (M&E) for the project would be based on a simple, inexpensive and
therefore sustainable plan. The provincial and county PMOs, BO and nature reserve PMGs
would monitor the project’s progress and evaluate the overall project impacts. A detailed M&
15
E plan has been drafted and was reviewed at appraisal and formally agreed to during project
negotiations. A computerized baseline data system would be set up to monitor project
implementation progress, the performance of all afforestation entities, including progress in
plantation establishment, detailed contractual arrangements with households and communities,
as well as loan disbursement and reimbursement schedules. The comparison of plantation
growth rates of smallholder forestry versus large-scale plantations would be an important
element in this monitoring system. The GEF’s protected areas Management Effectiveness
Tracking Tool (METT) was used at the end of project preparation to establish a baseline score
for each of the targeted nature reserves and its usage will be repeated at the mid-term review
and before project closing. The experience and results of the GEF co-financed biodiversity
conservation components, and in particular the efforts to better integrate biodiversity
conservation initiatives into forest resource and land management, will be thoroughly
documented and the resulting reports will be shared with the Management Office and with the
Steering Committee of the China Biodiversity Partnership, as well as its Advisory and
Coordination Group.
The project’s progress and outcomes would be measured regularly and the results would be
included in the project semi-annual reports. Under Component 4 of the project, provisions
have been made to build the capacity of project institutions to complete the required M&E
activities.
4. SUSTAINABILITY AND REPLICABILITY
Experience from previous Bank involvement in forestry in China strongly supports the
expectation of sustainable impact. The recently completed in full (NRMP) and the existing in
full (SFDP) have demonstrated good results in terms of raising the quality of staff and
management and also institutionalizing project activities into the SFA system. The long-term
institutional sustainability of the GIFDCP will be achieved through a comprehensive program
of technical assistance and training to strengthen existing capacity and ensure the development
of long-term management skills in project management units, extension institutions, nature
reserves, and local communities involved in multiple-use activities in the nature reserves. This
program will make use of management planning guidelines, training materials and curricula
developed under the NRMP to identify needs and to design appropriate responses. In addition,
the project will rely on existing administrative and organizational structures, especially at the
local levels, to implement activities, which will continue after the end of the project. Ecological
sustainability is being addressed through the implementation of nature reserve management
plans, environmental protection guidelines for plantations, and better management regimes for
ecological protection forests. Social and cultural sustainability at the community level will be
addressed by ensuring representation of all ethnic minority groups and women in the
development of project activities. In addition, by integrating WMC interventions with NRMC
activities in particular areas, some local communities will benefit from the livelihood
enhancement opportunities that this component will provide in the long term.
The project's potential for replication is high, assuming, as expected, that its experience is
wholly or at least largely successful. Past experience has shown that the GoC is highly capable
of replicating and scaling up successes, as illustrated by the following examples: (a) training
manuals produced under the GEF-financed Nature Reserves Management Project are now
16
being used by the SFA’s training unit; and (b) reimbursement arrangements for plantation
establishment introduced in earlier WB-financed afforestation projects is now adopted by the
SFA for its national programs.
The project design includes activities to disseminate and promote replication of its experiences
and lessons within the GZAR, in adjacent provinces and nationally. For example, the improved
biodiversity conservation management planning and community approaches that will be
supported in the target nature reserves will be disseminated as best practice and will be
replicated in other nature reserves in Guangxi by the GFB. This will be done by organizing and
holding short training sessions/workshops for staff from other nature reserves in Guangxi
during the later years of the project. Replication in neighboring provinces will be encouraged
by inviting nature reserve managers from these provinces to the workshops. Nationally,
replication will be encouraged by inviting key staff of the China Biodiversity Partnership
Framework (CBPF) program to participate in the workshops, and by sharing the training and
workshop materials with the CBPF Steering Committee and Management Office.
5. CRITICAL RISKS AND POSSIBLE CONTROVERSIAL ASPECTS
Based on the performance and lessons learned from prior Bank-financed forestry development
projects in China, the risks that the project would not meet its development objectives are low
to moderate. The expected risks and their ratings are summarized in the following matrix:
Risk
Risk
Rating
Risk Mitigation Measure
Key stakeholders may not
support conservation measures
M
Cooperation and contractual
arrangements between farmers
and FFs may not reflect the
preference and interests of
households or be transparent.
M
The project planning entities
may not perform effectively or
be financially sound.
M
Plantation establishment and nature reserve plans
will be developed with the close participation of all
key stakeholders.
During project preparation and through farmer and
community consultation, appropriate contractual
arrangements were identified and a model contract
produced. These model contracts would be used
by farmers and FFs. An effective monitoring
system would be put in place.
A thorough assessment of FFs (operational,
financial and structural efficiency, profitability,
asset and liability) was carried out during project
preparation. Regular audits of each participating
FF will be used each year to monitor performance
and apply corrective measures.
Arrangements to minimize the change of use rights
and to monitor the screening procedure will ensure
there is no conversion of natural forests.
Land of adequate productivity
N
may not be available without
upsetting resource rights of
forest farmers and forestdependent communities and
without converting natural
forests
Farmers may not have M
The project will also provide payments for
17
sufficient
incentives
forestation activities.
for
Sufficient counterpart funds N
may not be available and
project funds may not be
disbursed in a timely manner
Institutional capacity may not N
be adequate and project staff
may not be technically
qualified
afforestation labor, which would generate revenue
for households to meet their immediate needs for
income requirements.
For the nature reserves and ecological forest
protection activities, most of the counterpart funds
would be committed by the provincial government.
For timber plantation activities, the ability to
provide sufficient counterpart funds was a criterion
for county/entities participation.
The project will provide substantial training and
capacity-building program. Guangxi has extensive
experience with plantation projects, and
implementation capacity is not expected to be an
issue.
Overall Risk Rating
M
Risk Rating: -H (High Risk), S (Substantial Risk). M (Modest Risk), N (Negligible or Low Risk)
6. LOAN/CREDIT CONDITIONS AND COVENANTS
a.
Project Implementation.

A PMO and BO at the provincial level, and PMOs at county level, would be maintained
in forestry agencies at all times during project implementation with staffing, functions
and responsibilities acceptable to the Bank.

Nature reserve management plans for proposed project nature reserves incorporating a
time-bound implementation schedule, a description of civil works required, and an
environmental assessment, carried out in accordance with guidelines acceptable to the
Bank should be prepared and furnished to the Bank for comments no later than March
30, 2009. No civil works construction, such as that planned for the project nature
reserve, shall commence until it has been provided for and agreed upon in such plan.

All afforestation sites should be established in accordance with afforestation models
acceptable to the Bank; all afforestation activities (including technical design,
production arrangements, and cooperation and contractual arrangements involving
afforestation entities) would be carried out in accordance with guidelines acceptable to
the Bank and the Provincial PMO would complete the review of all county afforestation
master plans in accordance with guidelines acceptable to the Bank by June 30, 2007.

A participatory planting design should be used during project implementation to define,
inter alia, farmers’ preferences concerning forest species to be planted,
contractual/operational arrangement between farmers and FFs, etc.

Guidelines for karst management would be drafted by March 30, 2011.
18
b.
Financial

The MOF would on-lend the loan to the Guangxi government with a maturity period of
twenty years including a grace period of five years, with all other terms and conditions
as received from the Bank.

Sub-loan terms: sub-loans made to end-borrowers (individual farmers, farmer
groups/communities and small-scale entities) by forestry bureaus would have the
following terms:
(a) for fast-growing eucalyptus species, interest payments would be annual, starting at
the end of the first year in which the sub-loan was made, and the recovery of the
principal would be made through balloon payments at the end of the seventh year;
(b) for forest species such as Quercus, Bamboo and Acacia species, interest payments
would be annual, starting at the end of the first year in which the sub-loan was made,
and the recovery of the principal would be made after a six-year grace period in six
equal payments from the end of year seven to the end of year twelve;
(c) for long-gestation species such as Chinese fir, Masson pine and broad leaf species,
interest payments would be annual, starting at the end of the first year in which the subloan was made, and the recovery of the principal would be made after a six-year grace
period in twelve equal payments from the end of year seven to the end of year eighteen.
The interest rate to be paid by end-borrowers would be at a minimum equal to the WB
rate to the GoC plus a surcharge to cover actual transaction costs and credit risks. In
view of the fact that: (a) sub-loans would be appraised, disbursed, monitored and
recovered through existing FB offices and staff; and (b) no forest can be cut or sold
without FB approval, estimates place the value of this surcharge at about two percent.
c.
Environment and social

All project activities would be carried out in accordance with the Process Framework
for Mitigating Potentially Adverse Livelihood Impacts and the Ethnic Minorities
Development Plan and the Resettlement Policy Framework prepared by the Guangxi
Forestry Bureau, dated April, 2006.

All project activities would be carried out in accordance with the Environment
Protection Guidelines and the Pest Management Plan, both prepared by GFB, dated
April, 2006
d.

Reporting and monitoring
Semi-annual progress reports would be furnished to the Bank for review by February 28
and August 31 of each year, commencing on August 31, 2007. The semi-annual
progress reports should contain the results of M&E activities performed pursuant to
above.
19
D.

A mid-term report on the progress of the project implementation and proposed
adjustment plan, if needed, as well as METT scorecard, would be furnished to the Bank
by February 28, 2010, and a mid-term review would be conducted by June 30, 2010.

An annual work and budget plan for the project for the next calendar year would be
furnished to the Bank for review by December 31 of each year, commencing on
December 31, 2007.
APPRAISAL SUMMARY
1. ECONOMIC AND FINANCIAL ANALYSES
It is calculated that the Economic Rate of Return (ERR) of the project would be about 24
percent and its Financial Rate of Return (FRR) would be about 12 percent. The project would
generate significant economic benefits. The major benefits would be directly generated by the
additional wood and timber products, which are in high demand in the project area. The project
is expected to produce a total of 25.1 million m³ of timber, 2.9 million tons of fuel wood and
3.6 million tons of bamboo poles, as well as a range of non-wood forest products such as resin,
bamboo sprouts, various types of bark and fruits. Other major benefits from the project include
the incremental sequestration of carbon. This is directly addressed in the 4,000 ha of watershed
protection plantations where carbon emission rights are expected to be traded. However, all
plantations under the project are expected to contribute to the sequestration of carbon. The total
incremental sequestration of carbon is estimated at 61.2 million tons, with a value of between
US$4 - 5/ton, constituting a major benefit of the project. The other downstream and global
benefits, such as the impact on soil and water conservation and on biodiversity conservation, are
also significant. They are, however, not quantified in the economic analysis. The results of the
financial and economic analysis are summarized below and detailed in Annex 9.
without global
benefits
Component/Activity
ERR %
16.7
20.9
14.7
16.0
10.7
11.1
10.6
16.2
Timber Plantation
Eucalyptus plantations
Slow growing timber
Bamboo plantations
Watershed Protection
BioCarbon plantations
Watershed plantations (excl. BioCarbon)
Project
FRR %
12.2
14.2
11.3
11.3
8.6
7.7
8.9
11.9
with carbon
sequestration benefits
ERR %
23.8
32.6
18.4
28.7
16.1
20.6
15.1
23.8
If carbon sequestration benefits are included, all project activities show IRRs above the 12
percent used as the reference value for the economic opportunity cost of capital investment.
The financial cash flow of individual project investments varies. Within the different types of
plantation, most fast-growing eucalyptus plantations are attractive due to their high and
20
relatively quick financial returns. The relatively low attractiveness of slow-growing timber,
from a financial as well as an economic point of view, suggests careful selection of this option.
2. TECHNICAL
The GFB has developed detailed afforestation models for timber plantation, multiple-purpose
protection plantations, ecological forest and vegetation rehabilitation in the watershed and karst
areas. National and international experience has been integrated in the project technical design.
The selection of species and planting sites is based on guidelines agreed with the Bank during
project preparation, as follows: forest species were selected on the basis of market demand,
farmers’ preferences, growth potential, climatic and ecological suitability to specific site
conditions, and environmental objectives. The sites were selected on the basis of the soil
fertility, rainfall, temperature, erosion hazard and access to timber processing location. Those
models drew on the implementation experience of previous WB-financed forestry projects in
China, and incorporated several changes to meet the specific aspects of Guangxi. The WB
reviewed and approved all the afforestation and forest rehabilitation models. The project
design emphasizes the use of improved genetic materials and improved nursery management
practices, intensive silviculture to speed the growth of commercial species, minimized rotation
lengths, adaptive research, training and technical extension systems. Diversified species
selection is emphasized to contribute to improvement of the environment and the stability of
landscape.
A BioCarbon pilot will be implemented for multiple-function plantation establishment. The
pilot, the first one in China, will explore and demonstrate the technical and methodological
approaches of a credible carbon sequestration and trade process by afforestation activities. The
innovative methodological measures including baseline methodology and monitoring
methodology have been reviewed and approved by CDM-EB. National and international
experiences gained in forest restoration and watershed management have been adopted.
The Bank also added its global experience in the design of the nature reserve management and
biodiversity conservation. At present, no formal mechanism exists within the established
administrative structures in China for the approval of nature reserve management plans in the
format which will be used under the GIFDCP. In order to facilitate approval of the final
management plan documents, the project will produce management plans in two separate
volumes. The Strategic Management Plan will include details of the baseline conditions,
management strategy and objectives, and proposed zonation and management activities for the
target site. The Operational Management Plan will include a detailed budget specifying
investments (e.g., civil works and equipment) and recurrent costs (e.g., salaries, fuel, supplies
and spare parts). Although both volumes of each Management Plan produced by the project
will be submitted jointly to the appropriate authorities for review purposes, only the Strategic
Plan will require official endorsement. The Operational Plan will be used (with cross
referencing to the other volume) by the nature reserve authorities as the basis for soliciting
funds from local, national and international sources as and when required. The project will also
support the GFB to produce provincial forestry and conservation plans including funding
priorities to implement nature reserve management plans.
21
3. FIDUCIARY
a.
Financial management
The Bank has conducted a thorough assessment of the adequacy of the financial management
system of the GIFDCP and has found that this management system can meet the financial
management requirements stipulated in BP/OP 10.02 and provide, with reasonable assurance,
accurate and timely information on the status of the project in the reporting format agreed with
the project and as required by the Bank. Training will be provided to project financial staff on
an annual basis. The detailed financial management and disbursement arrangements are
referred to Annex 7.
b.
Procurement
An assessment of the capacity of the implementing agency to carry out procurement for the
project was carried out by the World Bank’s Office in Beijing in October 2005. The
assessment reviewed its organizational structure and functions, past experience, staff skills,
quality and adequacy of supporting and control systems, and its legal and regulatory
framework. The overall risk for procurement is low. The detailed procurement arrangements
are referred to in Annex 8.
4. SOCIAL
While this project principally aims to improve the management, sustainability, and
environmental condition of Guangxi forest resources, it also attempts to enhance the incomes of
local people and give them an incentive to participate. Most of the project areas are in remote
mountains and about half of the areas are located in nationally/regionally designated poverty
counties that are home to the poorest and most disadvantaged ethnic minority people in the
GZAR. In order to make maximum use of project opportunities and fully mobilize the target
people’s participation, a Social Assessment (SA) was carried out during project preparation to
analyze stakeholder roles, diagnose potential risks and development opportunities, build local
capacity and reinforce public consultation and involvement. In addition, more than 25,000
copies of project information leaflets have been widely distributed to the communities of the
proposed project counties to inform the communities and households of the projects’ activities,
loan terms and condition, to open options to households participating in the project and
expected benefits, and to collect the feedback on whether they would like to participate in the
project and their preference on production and contractual arrangements. The feedback from
the communities has been incorporated into the project design. The participation exercise will
be continued during project implementation through a participatory planting design for the
plantation establishment activities and through the strengthening of local community
relationships for the nature reserve management and rehabilitation of ecological forest cover.
The whole project design has therefore been made more efficient by its promotion of local
ownership, ensuring equitable access to its benefits by poor farmers, vulnerable groups and
ethnic minority peoples. The following are the key concerns identified by the SA and addressed
by the project design.
Operations/Contractual Arrangements for Implementing Forest Plantations. Under the
project, the FFs would cooperate with farmers and communities in carrying out the plantation
establishment activities under different contractual arrangements. Currently, there are at least
22
four types of contractual arrangements: (a) a contract to lease the land with annual payments;
(b) a contract with profit-sharing at harvest; (c) a contract with a mix of annual payments and
profit-sharing at harvest; and (d) a contract with a guaranteed amount at harvest. During preappraisal, the different contractual/operations arrangements were reviewed. It was confirmed
that the menu of options would remain open and that these options have been included in the
project information leaflet disseminated to villages and households. It was agreed that details of
the contractual arrangements, such as inputs and benefit-sharing, would be included in the
Participatory Project Design Manual as part of the Project Implementation Plan (PIP). This
would ensure that farmers make an informed choice.
Even though most households seem to prefer the prevailing practice of a contract with annual
payments, it was agreed that such a contract would be improved compared to the current
practice of long-term land leasing. First, the contract would include a clause for arbitration to
help resolve disputes which arise between households and the FF. Second, the contract would
offer two options to allow for an increase in the land rental fee during the contract period which
ranges from 15-30 years. The first option would allow for the adjustment of the rental fee after
first cultivation, based on the current timber price. The second option would increase the rental
fee by a negotiated percentage every five years until the end of the contract period. The
negotiated percentage would be agreed upon before the contract is signed.
Community Participation in Nature Reserve and Karst Rehabilitation: The project would
promote better community relationships between the project nature reserves and communities
to solve key problems together. Financing would be provided to support increasing target
community and local government stakeholders’ understanding of biodiversity conservation
through the development and implementation of a community conservation education strategy
and the provision of training and technical assistance to communities to empower villagers to
address key problems of concern to both the communities and the nature reserve (e.g.,
participate in government programs for alternative livelihoods). The project will also provide
modest funds for early interventions to decrease the threats from over-use of the nature
reserves’ resources (such as for fuelwood), through targeted applications of sustainable,
practical, culturally appropriate and cost-effective measures (such as biogas) to reduce use from
the nature reserves.
Gender Consideration in the Project Context. Women play important roles in rural production
and family life in the project areas. Although both young men and women migrate for off-farm
work, more adult women than men tend to remain in home villages. As the SA shows, most of
the households interviewed stated that decisions would be shared by husband and wife with
regard to the land-use rights and forest activities on household hills, participation in tree
planting and technical training, and the responsibility for harvesting forest by-products. Women
prove to be enjoying a relatively high position in the family, and gender would not be a critical
issue for households participating in the project. However, when households still rely on
fuelwood for their energy needs, fuelwood collection for subsistence is a heavy workload for
women. Meanwhile, water collection remains a predominantly female task in many places.
Therefore, women expressed strong interest in project activities that improve water access or
reduce fuelwood collection, which would have a clear positive impact on them. In both the
23
nature reserve and karst rehabilitation components, project design has been responsive to these
concerns and has earmarked financing to address these issues.
Ethnic Minority Groups: Concerns on ethnic minorities are the focal point of the SA. Nine of
the ethnic minority groups present in the project area fall into the category of intended people
under the Bank’s social safeguard policy OD4.20 (now OP4.10). Most of these ethnic minority
peoples remain vulnerable compared to the rest of the population due to a remaining gap with
the mainstream society as well as due to their location in remote, disadvantaged areas. The SA
studies proved that these groups have expressed a strong interest in participating in the
activities of the project, and there are few limiting factors that would restrict their access.
However, in each component a number of risks of potential negative impact from participation
in the project have been identified, some of them specific to ethnic minority people. An Ethnic
Minority Development Plan (EMDP) was developed to address all of the issues specific to
these groups and to indicate the ways for project activities to be designed compatibly with
ethnic minorities’ cultures. The EMDP was closely followed in project design and will also be
followed in implementation period. See Annex 10 for more details.
The SA also screened for any possible impact on known archeological and historical sites and
designated special localities with unique natural value that could be at risk under the current
project design. The conclusion is that no significant damage to non-replicable cultural property
will occur under this project.
5. ENVIRONMENT
The GIFDCP has been assigned an Environmental Assessment (EA) category ‘B’ in the Bank's
classification system. To review the project's likely positive and negative environmental and
social impacts, an EA (including an Environmental Management and Monitoring Plan EMMP) covering possible impacts, mitigation measures, monitoring, and institutional
strengthening, and a separate Social Assessment were prepared, building on the work of similar
previous projects in China. Overall, the project is expected to generate significant
environmental benefits because it focuses on high-priority natural resource management issues.
The major potential impacts on the environment include: impact to vegetation and potential soil
erosion due to temporary land occupation at the planting sites and land cultivation for site
preparation for plantation; short-term impacts on native fauna; and pollution/waste
management issues at the planting site. If the mitigation measures proposed in the EMMP are
implemented, the negative impacts during the implementation/planting phases will be
minimized.
The components on Ecological Forest and Nature Reserves are expected to have positive
environmental impacts, both directly by protecting some of the most important remaining
natural forests and associated biodiversity in Guangxi and indirectly through protecting key
forested watersheds. Any negative environmental issues arising from these components are
expected to be insignificant and easily mitigated.
The Plantation Establishment component should also have positive environment impacts
through the reduction of pressure on natural forests as well as a decreased demand for imports
24
of forest resources from outside China and contributions to local community income. Negative
environmental issues arising from this component are expected to be limited in scope and easily
mitigated. Nonetheless, these will require careful planning and execution principally because
of the wide coverage and small unit size of the component. An objectively verifiable process
of screening of sites identified for conversion to plantations under the component has been
developed to ensure that they are outside of intact forests, will not convert or degrade any
natural habitats, and will not adversely affect cultural property. In addition, a Pest Management
Plan as well as a set of environmental protection guidelines for plantation establishment (based
on the Bank’s on-going Sustainable Forestry Development Project) have been agreed, covering
establishment and operations protocols to ensure that unintended environmental impacts are
avoided, with special attention to issues of pest management. The main features are briefly
described above and discussed in more detail in Annex 10.
Date of receipt of final EA/EMMP : April 2006 (submitted to Infoshop on 04/18/2006)
Date of receipt of final SA : April 2006 (submitted to Infoshop on 04/18/2006).
Consultation on the project was thorough. Methods used included the posting of public letters
in project areas, publishing notices in local newspapers, placing notices in government offices
and libraries, organizing meetings and interviews with villagers, holding five general symposia
and two expert symposia (to which NGOs were invited), preparing public participation
questionnaires and consulting with individuals, and receiving many telephone calls. In the rural
areas, families were consulted about current uses of farmland/forestland, pesticides and
fertilizer application, living conditions, public health, project design and attitudes. The
consultations were done in cooperation with the Social Assessment Group. Three
counties/cities (Qinxi, Laibing and Huanjiang) were selected for detailed interviews. A total of
1800 questionnaires was sent to a wide range of people, from government officials, technicians
and project beneficiaries, of which 1,678 were returned. Almost all respondents believe the
project is necessary although there were concerns over soil quality, erosion, pests and diseases,
biodiversity, and short-term waste management issues. One-third of the respondents did not
think there would be any environmental impacts at all and that the project would benefit the
environment and provide jobs. A number of constructive suggestions was made such as
developing mixed forests, ensuring that state and provincial laws were followed, promoting
environmentally-friendly fertilizers, provide training opportunities, taking care when using
exotic species, subsidizing those forestry activities with biological benefits, and clarifying use
rights. The expert meetings also raised a series of suggestions such as ensuring that the
biological impacts are minimized, ensuring that timber exploitation is minimized, avoiding
monoculture of trees, giving attention to land suitability for plantations, avoiding large areas of
plantations and looking for ways to use natural forest to act as corridors between blocks of
plantation. The project design accommodated all reasonable suggestions.
6. SAFEGUARD POLICIES
Safeguard Policies Triggered by the Project
Environmental Assessment (OP/BP/GP 4.01)
Natural Habitats (OP/BP 4.04)
Pest Management (OP 4.09)
Cultural Property (OPN 11.03, being revised as OP 4.11)
25
Yes
[X]
[]
[X]
[]
No
[]
[X]
[]
[X ]
Involuntary Resettlement (OP/BP 4.12)
Indigenous Peoples (OD 4.20, being revised as OP 4.10)
Forests (OP/BP 4.36)
Safety of Dams (OP/BP 4.37)
Projects in Disputed Areas (OP/BP/GP 7.60)*
Projects on International Waterways (OP/BP/GP 7.50)
[X]
[X]
[X]
[]
[]
[]
[]
[]
[]
[X]
[X]
[X]
a.
Environmental Assessment. A thorough EA was conducted, a summary of which is
provided in Annex 10. The EA is the result of work by the experienced group of experts from
the Guangxi Environmental Protection Research Institute (GEPRI) and the Forestry College of
Guangxi University in Nanning, with additional help from an international consultant. The EA
is complemented by a separate SA. The EA has an EMP which includes Environmental
Protection Guidelines and Pest Management Plan for the timber plantations component.
b.
Pest Management. Increasing the area of plantations could increase the incidence of
pests and disease which, in turn, could result in an increased use of pesticides. The SFA
advocates and follows an integrated pest management (IPM) approach which is adopted in turn
by the GFB. Thus the use of: (a) non-chemical methods of pest and disease control as a first
option; and (b) chemicals as last resort based on objective monitoring of pest and disease levels
are promoted. These procedures have been institutionalized within the project in the form of a
Pest Management Plan which includes a training program for participating households and
forestry bureau staff responsible for project implementation. All chemicals recommended by
GIFDCP fall within the World Health Organization’s (WHO) hazard categories II (moderately
hazardous), III (slightly hazardous), or U (chemicals unlikely to present acute hazard in normal
use).
c.
Involuntary Resettlement. The social specialist team investigated the involuntary
resettlement and land acquisition issues for the project. No involuntary population relocation
or land acquisition is expected under the project. However, some potential loss of land or
assets by individuals in a community might occur due to small-scale infrastructure construction
(e.g., village roads, storage sheds, etc.), which will be identified through a community-based
planning process. A Policy Framework for Resettlement and Land Acquisition has hence been
prepared by the SA team in accordance with the Bank safeguard policy OP4.12 (Involuntary
Resettlement), to establish the agreed principles and procedures to be followed in the event that
development activities requiring land taking are determined during project implementation.
Moreover, in compliance with the policy to adequately address possible adverse impacts on
people’s livelihoods arising from new restrictions on access to resources in the nature reserves
or hill closure areas under the project, a Process Framework for Mitigating Potential Adverse
Impact has been developed by the SA. The Process Framework will ensure that project
implementation includes a participatory process used for local people to avoid significant
restriction impacts under the nature reserve management and watershed rehabilitation
components, select and agree measures to mitigate those impacts which cannot be avoided, and
resolve any conflicts. Both the Policy Framework and Process Framework will be available in
*
By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the
disputed areas
26
the Bank Infoshop as to the public in county PMOs and Township Forestry Stations in the
project areas before project appraisal.
d.
Indigenous Peoples. Guangxi is a Zhuang Minority Nationality Autonomous Region,
where the number of Zhuang people is more than 15 million, accounting for 33 percent of the
total. The other ethnic minorities account for about 5 percent, including mainly Maio, Yao,
Dong, Maonan and Yi. In the 42 project counties, nine of these ethnic minorities are present,
they represent 593,000 beneficiaries or 34.9 percent of the total project population. The project
SA was carried out to investigate and assess various situations of the minority peoples by the
expert team including a minority nationalities expert and an EMDP was developed. Led by the
SA exercise, extensive consultation has taken place with the dissemination of project leaflets
and sample application forms in all proposed communities of project counties. More than 130
villages were intensively consulted by the SA team and county PMOs, and more than 1500
households have been surveyed by questionnaire. As the SA indicates, most of the ethnic
minority groups in the project areas remain vulnerable in terms of poverty incidence and
difficult natural environments, and all of them express a willingness to participate in project
activities. The EMDP therefore sets out the practical steps that will be taken to ensure: (a) that
ethnic minority groups have equitable opportunities to take part in, and fully benefit from, the
project; and (b) that the risks of potential negative impacts identified are avoided or minimized.
Before project appraisal, the EMDP was made available in both the Han and local ethnic
minority languages (e.g., the Yi written language) in the related county PMOs/Libraries and
Township forestry stations. It has also been made available to the public at the WB Info shop.
e.
Forestry. The project fully complies with the Bank's Forest Policy. It would not
finance plantations that involve any conversion or degradation of critical natural habitat,
including adjacent or downstream critical natural habitats. Project plantations would be
established on unforested sites or on lands already converted (not converted in anticipation of
the project). The project would not introduce invasive species that could pose a threat to
natural habitats. While the project would not finance any type of forest harvesting, it has made
provisions to finance: (a) the training of Forest Bureau management and staff in forest
certification; and (b) the implementation of a step-wise forest certification pilot.
During project pre-appraisal, the Borrower and the WB team agreed on the principle that
certification of project plantations would not only bring higher prices for the wood products but
would also broaden its market base, since the demand for certified wood in China is increasing.
Because of these potential benefits, the GFB and the Bank task team have agreed to implement
a step-by-step forest certification pilot under the project. Sensitizing the Borrower to forest
certification started during project preparation when the WWF-China Program was invited to
conduct a workshop to introduce the concept of forest certification to GFB, PMO, and State
Forest Farms participating under the project. This workshop took place in December 2005.
During project pre-appraisal, the pilot certification process was initiated by inviting (through
WWF-China) a Chinese forest certification expert to hold more in-depth discussion with the
GFB and one State FF on certification procedures and requirements (including potential costs
associated with certification). After completion of this first step, it was agreed that the next step
would be an informal pre-assessment of a candidate FF (i.e., Gaofeng Forest Farm) to
determine more precisely the gaps, the steps required, and the investment costs needed to meet
27
the required certification standards. The pre-assessment was carried out in July 2006..
Completion of further steps would be evaluated by Gaofeng FF and the GFB on the basis of
their short-term and long-term financial and economic viability and impact on Gaofeng’s
operations. According to the GFB, Stora Enso, a multinational private sector company active
in the Guangxi Province, has shown some interest in participating in the pilot certification to be
initiated in the Gao Fung FF under the project. It indicated it may contribute its own financial
resources to this exercise once acquisition of its plantation lands has been concluded.
The GoC has made a commitment to move toward sustainable management of its natural
forests and to retain as much effective forest cover as possible. The project focuses on the
development of small blocks of plantations to relieve pressures on natural forest resources and
to help improve watershed forests and forest nature reserves The site screening process
undertaken as part of the EA (see Annex 10) would be continued during project implementation
to ensure that plantations would be established on sites outside areas of intact forest.
7. POLICY EXCEPTION AND READINESS
As designed, the project is fully consistent with Bank policies and no exceptions to policy are
required.
28
Annex 1: Country and Sector Background
CHINA: Guangxi Integrated Forestry Development and Conservation Project
A.
Background:
1.
The People’s Republic of China (PRC), the most populated and largest developing
country, is poor in forest resources. Its forests cover an area of about 175 million ha or 18.2
percent of its land area. This is equivalent to 0.13 hectare per capita, which is significantly
below the world average of 0.6 hectare per capita. The total standing volume of wood in the
country is estimated to be about 12.5 billion cubic meters or about 9.42 cubic meters per capita.
This represents only 12.6 percent of the World’s average of 72 cubic meters per capita. In the
past decades, more than seventy percent of timber came from harvesting primary and secondary
natural forests and less than 30 percent from plantations. As a result of its rapid economic
growth and rising population, China is now confronted with increasing environmental
degradation and challenges.
2.
Environmental degradation is one of the fundamental constraints to China’s sustainable
economic and social development. Water and soil erosion is very serious in many watersheds.
Erosion has had an impact on areas that cover nearly 3.6 million square kilometers (37 percent
of the total land area). Desertification is estimated to have had an impact on more than 1.7
million square kilometers (18 percent of the total land area). It is estimated that only 16
provinces in China still have some natural forest cover. Most natural forest habitats have been
reduced to small and isolated fragments; this in turn has led a significant proportion of the local
fauna and flora to become threatened.
3.
The gap between timber supply and demand has recently become huge. To satisfy the
rapidly growing demand of its industry and markets, the country relies on imports. Currently,
annual timber consumption exceeded supply by approximately 80 million cubic meters. At the
current pace of economic development, it is estimated that the gap between wood demand and
supply will reach 120 million cubic meters by 2010. The launch by the GoC of the NFPP in
1998, which put in place a logging ban on natural forests, has further widened the gap between
timber supply and demand. This has also led to a significant increase in the import of timber
and wood products from neighboring countries and elsewhere. Trade statistics show that in
2004 China imported about 26.3 million cubic meters of logs and about 82.7 million cubic
meters of sawn timber, veneer, plywood, furniture, wood pulp, paper and paperboard and other
wood products, which represent more than 545 percent of the logs, 302 percent of the wood
board and 176 percent of the wood pulp and paper products that were imported in 1998 before
the logging ban was instituted.
4.
The management of forest resources is still poor in many areas of China and the quality
of existing natural and planted forests is low. According to the national forest inventory carried
out between 1999 and 2003, the average forest stand volume in China is about 50.4 cubic
meters per hectare, or only about 50 percent of the world average. Chinese forest land
productivity and ecological functions need to be improved significantly through the
introduction and adoption of sustainable forest management approaches and advanced
technologies.
29
5.
To address the above issues and maximize the positive contributions of forestry to the
environment and to the national economy, the GoC formulated a “Sustainable Forestry
Development Strategy”. This focused “the four shifts”, as follows: (a) the shift from harvesting
wood from natural forests to harvesting wood from plantation forests; (b) the shift from
deforestation for the purpose of land reclamation to conversion of steep cropland to plantation
forest; (c) the shift from non-funded management of ecological forest to funded management of
these ecological forest; and (d) the shift from giving the public sector the exclusive right to
develop forest resources to widening that mandate to include the participation of other social
actors. The “four shifts” have brought about a historical and fundamental change in China’s
forestry sector development strategy. To implement these changes, the GoC launched the
following six forestry development programs.
a.
The Natural Forest Protection Program (NFPP). The NFPP established a
complete logging ban on the natural forests along the upper reaches of the Yangtze
River and the upper and middle reaches of the Yellow River, and significantly reduced
the allowable in cutting key state-owned forest areas in Northeast China and Inner
Mongolia. The NFPP also mandated local governments to protect natural forests in
other regions of the country and aimed at rehabilitating and developing natural forest in
these regions.
b.
The Three Northern Areas and Yangtze Basin Shelterbelt Development
Program. This program was designed to establish key forest shelterbelt systems in
China’s three northern areas (northwest, northeast and northern part of China) to control
desertification and to reverse the deterioration of the ecosystems in those areas. The
Program also aimed to develop shelterbelts in the Yangtze River Basin, which included
controlling water and soil erosion in the Pearl River and Hui River watersheds.
c.
The Conversion of Cropland to Forest and Grassland Program (also known as
the Grain for Green Program). This is a strategic program aimed at controlling and
reducing soil and water erosion in steep mountainous areas throughout the country.
d.
The Beijing Area Desertification Control Program. This program was
established for the purpose of reducing the impact of wind erosion and shifting sand
dunes on the environment around Beijing and to establish an ecological shelterbelt
around the outskirts of Beijing and Tianjin city.
e.
The Wildlife Conservation and Nature Reserve Development Program. This
long-term program focuses on biodiversity conservation and wetland protection. It
promotes genetic conservation and the establishment of gene banks, biodiversity
conservation, environmental protection for wetland ecosystem and the establishment of
nature reserves.
f.
The Fast-growing and High-Yielding Timber Plantation Base Program. This program
was designed to address the widening gap between the supply of and demand for timber
products. It is an afforestation program aimed at increasing timber plantations to meet the
30
demands for wood-based products. It also contributes to reducing the logging pressure on
China’s remaining natural forests. Upon completion of its implementation, the program is
expected to generate about 130 million cubic meters of timber annually.
6.
The GZAR is located in the poor southwestern part of China. Because it is located in
sub-tropical and tropical zones, with high precipitation and temperatures as well as adequate
soils and a long growing season, the GZAR has near perfect agro-ecological conditions for
growing forest trees and producing large quantities of timber. Currently, the annual timber
consumption in the province is approximately 8 million cubic meters compared to an annual
production of about 5 million cubic meters. Based on economic and wood-related industrial
development, demand for timber in 2010 will reach about 13 million cubic meters per year,
whereas supply is expected to remain at about 80 million cubic meter per year. During the last
few years, the province has been designated by the SFA as one of four key timber production
bases/areas of China. In formulating their economic development strategy, the GZAR
authorities have adopted a land use development policy that strongly promotes afforestation.
Its industrial development is based in part on wood product processing and includes several
paper mills and furniture manufacturing facilities.
7.
To implement its afforestation policy, the GZAR decided to use a combination of
private sector partnerships/concessions (Stora Enzo, etc.) and its provincial and county level
FFs. While they are the primary instruments for implementing the public sector’s forestry
policy, these public sector institutions have not been able to fully engage and their contribution
to the development of the sector remains much below its potential. The low contribution of the
FFs to the development of the forestry sector is due to: (a) their weak financial capabilities; (b)
the lack of local sources of credit for the forestry sector; and (c) structural inefficiencies, which
include a low level of production and management technology and high cost of production due
to overstaffing and high labor charges. In order to energize its FFs and increase afforestation
and timber production, the GZAR government is in need of assistance to improve the financial
capacity of its FFs and reform their operation to make them into technologically advanced
commercial enterprises.
8.
Over the last years, the reform in land use arrangement has been widespread among all
FFs. These reforms, which have taken a variety of forms, lead to better incentives for
improving quality of afforestation works and better prospects of profitability in afforestation
projects. The concrete definition of different types of reform of FFs include: (a) contracting
state-owned forest land by SFF workers for afforestation activities, which became a form of
settlement with the semi laid-of workers; (b) share-holding and/or partnership: this typically
involves a group of workers contracting out a large piece of forest-land under SFFs for
management. Each involved worker pays investment to the partnership and owns certain
shares based on his/her investment, while the farm also owns a certain amount of shares. This
arrangement is also widespread within most of the farms and on the farm-community
corporation land; and (c) individually-managed forest-land for orchard growing, which is made
mainly to provide farm workers a basic means of living (much like the private plot allotment in
the rural area). Workers own all the products of this type of private operation.
31
9.
Currently, reforms in SFFs have mainly occurred internally under SFFs. SFF
management re-structure has been put in the government’s agenda, which will be implemented
in the next a few years. The further reform will include the following steps. First, the existing
SFFs would be re-categorized into two types: (a) Ecological and Public Interest (EPI) SFFs,
and (b) Commercial SFFs. For EPI SFFs government funding will increase because major
functions of these farms will be provision of ecological services. For Commercial SFFs, a
higher level of independence and less direct government funding will expected, for the reason
that these farms will be operating mainly for economic ends. Second, the main form of new
institutional arrangement for Commercial SFFs will be share-holding system, the private sector
would be allowed to buy out some of the state-owned assets and participate in management of
SFFs and their forest resource. Third, all social functions of the SFFs would be transferred to
local government so that newly-formed enterprises from SFFs would be able to operate more
efficiently.
10.
Nearly 50 percent of the Pearl River watershed basin is located in the northern and
north-eastern parts of Guangxi which has the richest limestone flora and fauna resources in
China. The GZAR is therefore an important contributor to the protection of the Pearl River
watersheds and the karst ecological systems. However, because of its slow economic
development, the province lacks the resources to implement the soil and water conservation
measures, including the plantation of multi-species forests, for the protection of its watersheds.
11.
In addition to the negative impacts resulting from illegal logging and over-use of NTFP
by poor rural dwellers, the strong demand for timber is also increasing the pressure on
Guangxi’s natural ecosystems and threatening its fragile biodiversity. Moreover, poor
management and lack of protection of natural forests have resulted in the deterioration of
hydrological systems, serious soil erosion, and major habitat degradation, fragmentation and
loss. Many animal and plant species are now threatened; some are facing near extinction,
especially in the large limestone areas in the western part of Guangxi. This situation has made
comprehensive and integrated development, management and protection of forest resources
very high priorities of the GZAR Government.
12.
In accordance with the National Forestry Development strategy, the GZAR recently
launched a number of forestry development programs to increase timber production, manage
watershed to reduce soil and water erosion and protect natural forest and biodiversity. These
programs include: (a) the Intensively Managed Timber Products Basis Development Program;
(b) the Integrated Management for the Protection Forests in the Upper Reaches of the Pearl
River Program; and (c) the Natural Regeneration of Vegetation on Karst Hill Program. These
three programs will contribute to achieving both the provincial and national goals of managing
and developing forest resources in a sustainable manner. During the period from 2005 and
2010 and in accordance with its forestry development programs, the GZAR plans to increase
timber plantations by 870,000 ha and bring 667,000 ha of watershed areas under effective
protection. To reach these goals, the GoC and the GZAR Government are seeking the Bank’s
financial and technical assistance to support the Guangxi forestry development programs.
32
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
CHINA: Guangxi Integrated Forestry Development and Conservation Project
Sector Issue
Project
Bank Group-financed in China:
Latest Supervision (PSR) Ratings
(Bank-financed projects only)
Implementation
Progress (IP)
Development
Objective (DO)
S
S
S
S
IFC- Developing Wood
Products Processing in
Guangxi Province
S
S
Timber concession planning and
management.
Cambodia – Forest
Concession Management
and Control Pilot Project
U
U
Linking better management and
conservation with local rural
development
Vietnam – Forest
Protection and Rural
Development Project
S
S
Lao PDR—Sustainable
Forestry and Rural
Development Project
U
S
Smallholder plantation establishment
and sustainable financing
mechanism for biodiversity
conservation.
Vietnam—Forest Sector
Development Project
S
S
Other Development Agencies
China – European
Union-Natural Forest
Management Project
Afforestation, management of
natural forests, and biodiversity
conservation.
Forestry Development in
Poor Areas Project
Sustainable Forestry
Development Project
Bank-Financed (in other
Countries)
Natural forest management
S
S
IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)
33
GEF-supported Projects
Sustainable Forestry Development Project (existing). The main objectives of the SFDP are the
development and adoption of innovative management approaches to better manage some of the
last remaining forested areas in China and to establish plantations to relieve pressures on those
forest resources. The approaches developed for and applied to the protection of sustainable
management of natural forest resources in pilot areas in China will provide models for wider
application under the government’s national NFPP. The SFDP has three components: (a)
Natural Forest Management; (b) Plantation Establishment; and (c) Protected Areas
Management. The Protected Areas Management Component is financed by the GEF.
The GEF grant will: (a) enhance the management of priority nature reserves located in the
logging ban areas of the NFPP which are of global significance for biodiversity conservation
purposes; (b) identify and survey the wildlife in areas important for biodiversity conservation in
Western Sichuan which forms part of a globally important eco-region known as Southwest
China Temperate Forests; (c) increase participation of communities in nature conservation and
the sustainable management of natural resources; (d) strengthen the capacity of institutions,
particularly at the provincial and reserve levels, to manage the natural forests/nature reserves
sustainably; and (e) support key protected area and natural forest-related policy studies.
Wetland Biodiversity Conservation and Sustainable Use Project (existing). This project will
remove barriers to effective wetland conservation at four demonstration sites (Sanjiang Plain,
Ruoergai Marshes, Yancheng Coast and Dongting Lakes) of global biodiversity significance.
These barriers include: (a) a lack of integration of wetland management and biodiversity
conservation into development planning; (b) no institutional mechanisms for multi-sectoral
wetland management; (c) limited awareness of wetland values and functions at all levels; (d)
lack of examples of sustainable development of wetland resources and involvement of local
communities; and (e) lack of technical capacity at national and local levels to manage and
conserve wetlands and their biodiversity. A national coordination component will ensure that
lessons learned from this project will be appropriately transferred to other wetlands throughout
the country. GEF support will be closely allied with new GoC programs that conserve
biodiversity and ensure locally sustainable development.
Multi-agency and Local Participatory Cooperation in Biodiversity Conservation in Yunnan’s
Upland Ecosystem existing). This project addresses threats to mountain ecosystem biodiversity
in two sites in Yunnan Province. The principal constraining factors identified include: (a) poor
inter-sectoral planning and management; (b) limited involvement of local communities in
conservation planning and management; and (c) a lack of capacity, awareness and information
required to conserve biodiversity.
In order to address these issues, the project will initiate five sets of complementary activities
related to (a) the development of inter-sectoral planning and management mechanisms; (b)
capacity building for the Wuliangshan Reserve Co-management Council and the Qinshan
Watershed Management Council; (c) the promotion of ecologically-sustainable livelihoods; (d)
public awareness, training and education; and (e) community-based biodiversity inventory and
monitoring.
34
Nature Reserves Management Project (completed). The main objective of the NRMP was to
enhance biodiversity conservation through innovative approaches to organization, planning,
skills development, information management, and the integration of local communities into
reserve management. It was designed to: (a) to strengthen conservation, management and
sustainable use of ecosystems and habitats that have been identified as national priorities by the
GoC in the Biodiversity Conservation Action Plan; (b) to increase the involvement of local
communities in the planning and management of nature reserves, addressing in particular the
social and economic requirements of poor households in poverty areas; (c) to introduce an
innovative economic incentive program to reduce biodiversity land-use conflicts in critical
habitats that involves enterprise restructuring and job redeployment; (d) to build institutional
capacity for the preparation of conservation plans and the implementation of sustainable landuse programs; (e) to develop new research mechanisms and priorities to encourage scientific
excellence and facilitate international exchange; (f) to expand the role of local and international
NGOs in sector planning and management; and (g) to promote conservation of endemic
species, such as the giant panda and other plants and animals unique to China. Project areas
include the Xishuangbanna (Yunnan), Shennongjia (Hubei) and Wuyishan (Fujian/Jiangxi)
Nature Reserves; the Poyang Lake (Jiangxi); and the Qinling mountains of Shaanxi Province
(Foping, Niubeiliang, Zhouzhi and Taibaishan cluster of reserves).
35
Annex 3: Results Framework and Monitoring
CHINA: Guangxi Integrated Forestry Development and Conservation Project
Results Framework
PDO/Global
Environment Objective
To improve effectiveness of
forest management and
institutional arrangements in
timber production, watershed
protection and nature reserves
management in selected areas
of the GZAR.
Outcome Indicator
1.1.
Project-supported timber
plantations achieve higher timber
volume growth per hectare than nonproject plantations areas.
1.2. Project FF employees are able to
engage in self employment.
Use of Outcome Information
1.1. PY2-3. FBs and FFs would
evaluate plantation quality (success
rates) and improve technology as
relevant.
1.2. PY6. FFs and FFs workers to
evaluate achievement and find other
avenue of self employment, if
needed.
2.1. Increase in vegetation cover in
targeted watersheds at project
completion.
2.1. PY4-5. GFB and FBs to monitor
impact of forest closures and
ecological forest plantations to
document results and to guide
ecological forest management and
policy.
3.1 Populations of key indicator species
(e.g., primates & turtles) or areas of
limestone forest in at least 4 out of 5
nature reserves remain stable or increase.
3.1. PY3-6. Changes in biodiversity,
resource use and threats used to
guide local decision-making and to
adjust nature reserve management
plans.
Intermediate Results
One per Component
Results Indicators for Each
Component
Use of Results Monitoring
Component One:
Expanding timber plantations:
Timber production by FFs and
HHs increases in the project
area.
Component One:
1.1 Afforested area increases by 200,000
ha with a tree survival rate above 90%.
The GE objective is to
improve the conservation of
the globally significant
biodiversity of the GZAR.
Component Two:
Increasing Ecological Forest
Cover:
Watershed protection land and
water conservation improved
and carbon sequestration
increased.
Component Three:
Improving Management of
Nature Reserves
Management effectiveness of
five target nature reserves
improved.
1. 2 100 percent of all contractual
arrangement per type (operations
models) recorded in project M&E
database.
1.3 Number of participating farm
households reached.
Component Two:
2.1 Area in ha of multiple protection
forest established.
2.b Tons of carbon sequestered.
Component Three:
3.1 a Average Nature Reserve
Management Effectiveness Tracking
Tool score for five target reserves
improves from 43 to 60 at mid-term and
to 70 at completion.
3.1b. Project-supported nature reserves
36
Component One:
PY2-5. GFB and PMOs monitor
plantation establishment goals, and
improve implementation and
techniques to achieve targets.
PY2 Farmer preference for different
contractual arrangements used to
adjust participatory design manual.
Component Two:
2.a PY2-3. Forest/vegetative cover is
monitored systematically to define
the best combination of soil and
water conservation practices.
Component Three:
PY2-3. Nature Reserve Management
Plan implementation performance
and outcomes evaluated and plans
strengthened as needed.
PY5: With-and without- project
interventions evaluated and results
maintain a higher METT score than a
sample of comparable non-project nature
reserves.
3.1c. Measurable improvement occur on
at least one pre-defined indicator for
each of the five project nature reserves
(see targets in monitoring table below).
New sites with high
biodiversity value identified
and protection initiated.
3.2. Two new high biodiversity value
sites identified, threats analyzed,
conservation plans prepared and
implementation begun.
Component Four:
Enhancing Institutional and
Management Capacity
Provincial Forest Bureau,
County Forest Bureau, FFs,
HHs and nature reserve
management entities have the
skills needed to formulate
strategy and to develop and
sustainably manage forest
plantations and nature
reserves.
Component Four:
4.1 Provincial forest strategy formulated
and adopted by Guangxi authorities.
4.2 Number of staff and households
trained.
4.3 Number of guidelines and technical
advisory bulletins developed and
disseminated.
4.4 Monitoring and evaluation system
performance evaluated periodically and
improved.
37
used to guide future decisions by the
autonomous region.
PY3-4: Actual versus planned target
values are compared to guide nature
reserve management decisions.
PY4-5: Biodiversity values of new
sites confirmed. Status/threat
analysis guides management plan
design.
Component Four:
PY3-4. Project monitoring system
and indicators evaluated and results
used to improve project
implementation, focus and impact.
Arrangements for Results Monitoring
Target Values (in Cumulative numbers)
Outcome Indicator
1.1 Relative productivity of timber plantations
under the project compared to non-project
areas increases as measured by annual
timber volume growth per hectare
1.2 Number of employees of participating FFs
no longer on payroll
2.1. Percent of increase in vegetation cover in
targeted watersheds
3.1. Number of nature reserves within which
key indicator species or limestone forest
areas remain stable or increase
Results Indicator
Component One: (Expanding timber
plantation)
1.a Afforested area in ha with a tree survival
rate above 90% (‘000ha)
1.b Number of participating farm households
reached (‘000HH)
1. c. Monitor and report on sub-loan appraisal
and performance per Para. 15 of Annex 17
Component Two: (Increasing Ecological
Forest Cover)
2.a Number of ha of multiple protection forest
established (‘000ha)
Baseline
YR1
N/A
Data Collection and Reporting
YR2
YR3
YR4
YR5
YR6
Frequency and
Reports
15%
15%
20%
20%
25%
Annual M&E
reports
1600
10%
0
N/A
5%
Baseline
survey
results
2
3
4
4
0
50
110
170
200
200
200
0
35
70
95
112
112
112
0
-
-
-
-
-
-
0
5
12
16
18
18
18
38
Data
Collection
Instrument
Field surveys
and project
reporting
Responsibility
for Data
collection
PPMO
Project ICR
Survey
PPMO
Mid-term and
project ICR
Mid-term and
end of project
Field surveys
PPMO
Expert
survey
assessment,
participatory
monitoring
and dialogue
with NR staff
BO
Semi-annual
progress reports
Semi-annual
M&E report
MIS
PMOs
MIS
Semi-annual
M&E report
MIS
PPMO,
supported by
PMOs
PPMO,
supported by
PMOs
Semi-annual
progress reports
MIS
PPMO,
supported by
PMOs
Target Values (in Cumulative numbers)
Outcome Indicator
2.b Carbon sequestered (/000 tons)
Component Three: (Improvement
Management of Nature Reserves)
3.1.a Management effectiveness of five targeted
nature reserves measured by average
incremental scores on scorecard
3.1.b Project-supported nature reserves
maintain a higher METT score than a
sample of comparable non-project nature
reserves
3.2 Number of new sites with high biodiversity
value identified and protection initiated.
3.3 Forest dependency score for birds in
Damingshan Nature Reserve
Baseline
YR1
0
Data Collection and Reporting
YR2
YR3
YR4
YR5
YR6
Frequency and
Reports
5.4
11.2
17.0
23.0
30.0
Mid-term and
project ICR
Data
Collection
Instrument
Field surveys
Responsibility
for Data
collection
PPMO
Nature Reserves
supported by
BO
Base score
of 43
Score
of 60
Score of
70
Mid-term and
end of project
METT and
RPM&E
0%
difference
10%
highe
r
15%
higher
Mid-term and
project ICR
METT
1
Mid-term and
project ICR
Annual
assessment,
Mid-term and
project ICR
Annual
assessment,
Mid-term and
project ICR
Annual
assessment,
Mid-term and
project ICR
Mid-term and
project ICR
Surveys and
RPM&E
Fixed
transect field
surveys
BO
Fixed
transect field
surveys
Nature Reserve
supported by
BO
Field surveys
Nature Reserve
supported by
BO
Fixed
transect field
surveys
Nature Reserve
supported by
BO
Annual
Field surveys
Nature Reserve
0
3.0
3.4 Kilometric abundance score for four forestdependent pheasants in Maoershan Nature
Reserve
0.47
3.5 Area utilized by Francoisi leaf monkeys in
Nong Gang Nature Reserve
26 sq km.
3.6 Number of slipper orchids along 19 fixed
transects in Mulun Nature Reserve e
849
3.7 Area affected by fires in Longshan Nature
19.7 ha
1
3.0+
26
3.0+
3.0+
3.5+
0.5+
06+
0.6+
1.0+
26+
30+
35+
35+
26
Less
than
10%
declin
e
since
start
Yr 1
Less
39
4.0+
4.0+
No
decline
from
previou
s year
Less
Less
Less
Nature Reserve
supported by
BO
Target Values (in Cumulative numbers)
Outcome Indicator
Baseline
YR1
YR2
Reserve Donghong Section
Component Four: (Enhancing Institutional
Capacity and Management)
4.a Provincial forest strategy formulated and
adopted by Guangxi authorities
4.b Number of forest staff and households
trained (‘000)
4.c Number of guidelines and technical
advisory bulletins developed and
disseminated
4.d Monitoring and evaluation system
performance evaluated periodically and
improved.
N/A
0
40
100
YR3
YR4
YR5
YR6
than
10 ha
affect
ed by
fire
since
start
Yr 1
than 7
ha
affect
ed by
fire
since
start
Yr 2
than 5
ha
affect
ed by
fire
since
start
Yr 3
than 30
ha
affected
by fire
since
start Yr
4
170
adopt
ed
180
formu
lated
150
0
10
Qualitative assessment
40
190
20
Data Collection and Reporting
Frequency and
Reports
Data
Collection
Instrument
assessment,
Mid-term and
project ICR
Responsibility
for Data
collection
supported by
BO
Semi-annual
progress reports
Semi-annual
progress reports
Semi-annual
progress reports
MIS
PPMO
MIS
PMOs
MIS
PPMO
Mid-term and
project ICR
Expert
assessment
PPMO
Annex 4: Detailed Project Description
CHINA: Guangxi Integrated Forestry Development and Conservation Project
A.
Project Area
1.
Guangxi is a Zhuang Autonomous Region (GZAR) with a large population of ethnic
minority people from 54 different ethnic groups. Together these ethnic groups comprise 18
million people (38 percent of GZAR’s total population). The vast majority (86 percent) of
ethnic minority people in Guangxi are Zhuang. Ten other groups are recognized as native
nationalities: the Yao, Miao, Dong, Mulao, Maonan, Jing, Yi, Shui, Yilao and Hui. The other
42 ethnic minority groups present in Guangxi are non-native minorities with a total population
of less than 20,000. Nine of the ethnic minorities groups present in the project area are native
nationalities.
2.
Karst hills cover 38 percent of the GZAR’s total land area. These karst areas are
renowned for their combination of human poverty and fragile, often degraded vegetation cover.
The issues of poverty reduction and environmental rehabilitation in Guangxi are closely linked.
Degradation of the GZAR’s natural habitats is a complex historical process that was not slowed
until the mid-1990s when there was massive migration out of karst regions by the poor to the
off-farm labor market. This helped to reduce pressure on local resources, and farming in
Guangxi’s karst areas is now mostly a part-time occupation. At the same time a series of
provincial government programs was initiated to improve the standard of living in karst areas
and enhance the quality of natural forest habitats. The Ecological Forest Cover and Nature
Reserves Management Components of the GIFDCP are directly linked to the government’s
program of encouraging the rehabilitation of natural vegetation on Guangxi’s karst hills.
3.
The project areas are located in 42 counties. Plantation establishment activities will be
carried out in 37 counties and ecological forest management activities will be undertaken in 25
counties, including two counties which would participate in the BioCarbon pilot program. In
addition, five nature reserves/clusters will participate in the nature reserves component. They
are Nonggang Cluster, Damingshan/Longshan, Maoershan and Mulun Nature Reserves, and
one as-yet unidentified cave site to gazette as a protected area in order to capture the globallysignificant biodiversity found underground in the exceptional cave system of Guangxi. To the
extent possible, counties with proposed nature reserves also include timber plantation
establishment and ecological forest activities to enhance biodiversity values and contribute to
local livelihoods in the areas adjacent to nature reserves in order to reduce pressure on the
forest resources.
B.
Project Components
Component 1: Expanding Timber Plantations (Total Cost US$171.10 million)
4.
The aim of component is to establish new timber plantations in an economically,
environmentally and socially sustainable way to meet the growing gap between domestic
supply and demand, to generate new employment and income for forestry farms and rural
households, and to improve environmental management by the reduction of pressure on natural
forest and decrease of timber product inputs from outside of China. The key activities are: (a)
41
establishment of timber plantations; and (b) provision of related technical support services such
as planting stock development, nursery management and extension of the improved
technologies for plantation establishment and management.
5.
The timber plantations sub-component would finance the establishment of about
200,000 ha of timber plantations with high-quality planting materials and modern management
including incorporation of environmental considerations into plantation management for fiber
and pulp, plywood and construction timber production to meet forecast national and local
shortages of wood. Specifically, funding would be provided for: (a) all labor requirements for
site preparation and planting in the first year, as well as maintenance during the first three years
of plantation establishment; (b) materials and equipment, including seedlings, organic and
chemical fertilizer, and simple agricultural tools; and (c) indirect costs related to survey and
design at the start of the project and environmental/social management and monitoring. The
plantation sites are located in 37 counties (of which 33 counties applied through the forest
bureaus and four additional counties where only FFs would work with individual farmers) and
spread over 22,400 sites with an average size of 8 ha. Very few sites are larger than 100 ha.
6.
Species, planting sites and project areas have been selected on the basis of guidelines
agreed during project preparation. The 11 species were selected according to farmer
preferences, growth potential, climatic and ecological suitability to specific site conditions,
technical experience and acceptance in China, environmental objectives, and product
marketability. They are clones of Eucalyptus, also Quercus griffithi, Q acutissima, Betula
alnoides, Acacia mangium, Liquidambar formosana, Pinus massoniana, and Cunninghamia
lanceolata, and the selected bamboos are Phyllostachys pubescens, Bambusa pervariabilis,
Sinocalamus latiflorus, and Dendrocalamopsis grandis. The sites were selected on the basis of
soil fertility, rainfall, temperature, erosion hazard, and economic access to end-use markets.
All project sites have been identified, and detailed technical design plans for the first year
plantations would be completed before project implementation begins.
7.
All plantations would be established in accordance with afforestation models for each
species agreed with the Bank, which cover technical/silvicultural prescriptions, growth targets,
establishment costs, and financial and economic rates of return. There are 14 models; 11 for
timber tree species; two for bamboo establishment and one for bamboo rehabilitation. These
models draw on the implementation experience of previous Bank-financed forestry projects in
China, and incorporate changes to meet the specific Guangxi situation, including lower planting
densities in order to promote shorter production cycles; faster income generation; revised
fertilizer application rates that reflect the specific nutrient requirements of the sites to stabilize
the fertility of soil; less intensive site preparation, smaller planting holes and reduction in
tending times to decrease labor requirements and minimize environmental damage on steep
sites; and greater reliance on clonal planting stock and other improved planting materials in
order to promote faster tree growth. Due to variable conditions in the project areas, the generic
afforestation models may be adjusted based on local site conditions and market opportunities
but subject to review and approval by Guangxi PMO. The Bank would review and approve all
the affforestation models. Assurances would be obtained at negotiations that all project
plantations would be established in accordance with models acceptable to the Bank, and GFB
would complete the review of all technical design plans for the plantation sites, in accordance
42
with guidelines acceptable to the Bank by April 20, 2007 The afforestation models for
individual species are summarized in the PIP.
8.
In contrast with previous Bank-financed plantation projects in China, this subcomponent would also better link timber production, marketing and processing by closely
linking the selection of the plantation site location, the planting design and production
arrangements to the existing and approved timber processing industries. A market analysis of
timber supply and demand was carried out by CIFOR in collaboration with GFB to assess
GZAR plantation resources and profitability, the requirements of the wood processing sector,
and risks involved. The major conclusions were: 3.6 million ha of land is potentially available
in all tenures for planting; the region’s wood industry is well situated for expansion but already
suffers from a severe supply deficit which is growing rapidly; locally grown wood has a cost
advantage over imported wood; relatively high plantation costs reduce international
competitiveness of the wood industry; the wood industry is well positioned for access to
domestic and Association of South East Asian Nations (ASEAN) markets; and there is potential
to increase value-added in industry products. GFB has used this study to make an optimal
species selection, design economic planting models, concentrate plantations on economic site
types and locations, and incorporate the reduction of biological risks into the project design.
The study also underscored the importance of correct plantation site location according to the
usual biological criteria for each species, and also economic return criteria, and the extraction
and transport costs to the utilization industry.
9.
The main afforestation entities are provincial and county-level FFs, communities and
households, of which FF is accounting for 53.6 percent, communities about 15 percent and
households about 30.5 percent of the total loan. Communities and individual households would
participate in the planting activities separately; the FFs would largely cooperate with farmers
and communities in carrying out the plantation establishment activities under different
“plantation production arrangements” which would bring more benefits to farmers. The project
would address the problem of fragmented production by testing different models of stakeholder
organizations and contractual systems creating economies of scale, which are necessary for
efficient supply chains to enable new products to reach the markets. The state FFs are in the
best position to provide and extend the latest technologies offering better returns on the land as
well as access to the timber market. A concentration of production yielding marketable
quantities of timber products, which are commonly achieved through these contracts, reduces
transaction costs. In addition, since demand for certified wood in China is increasing, the
possibility of piloting forest certification could potentially bring additional benefits to the
households.
10.
The technical support services sub-component would finance: (a) planting stock
development and up-grading of four FF forest nurseries; and (b) infrastructure requirements of
afforestation. More specifically,
(a) The Planting Stock Development Program would include the introduction of
improved genetic materials and nursery management technologies, and the production
of about 424 million seedlings required under the project, of which about 388 million
seedlings are for timber plantation establishment and about 36 million for multiple-
43
purpose protection plantation establishment. The total project seedling requirement
would be grown by existing nurseries operated by state FFs, collective FFs, or
specialized households under contract with FFs or county PMOs. Every participating
county would have one central nursery and several smaller nurseries located near
planting sites in order to minimize transport distance and handling of seedlings prior to
planting. It is planned to use 33 central nurseries and 30 smaller nurseries. These have
been inspected and chosen according to detailed criteria and certified for project tree
stock supply. The nurseries’ silvicultural management of each species is prescribed by
project regulations and provides for regulator inspection. All seedlings would conform
to detailed growth standards for each species, including collar diameter, seedling height
and root system configuration. The project would use specified genetically-improved
seed or clones which are the most suitable and best quality available.
The project would finance the nursery-gate production cost of the final seedling, which
would be added into the unit cost for afforestation. It was agreed that 100 percent
counterpart financing would be provided for nursery up-grading and the extension of
four FFs nurseries to increase production and quality of containerized tree stocks.
These will be mostly Eucalyptus and would also include Acacia, Betula, Masson Pine
and Quercus. The expansion is planned to start in 2006 and be completed at the end of
the first year of project implementation. The four nurseries are: Huangmiam FF
nursery, Gaofeng FF nursery, Dongmen FF nursery and Bobai FF nursery. The
extension would include tissue culture, office and nursery equipment (including on-site
irrigation system, tractor and trailors, and plant containers), and civil works (such as
storage sheds, shade houses, cutting beds, growing areas, access ways and offices). It
would also include commissioning and associated training in the use of new equipment.
The total budget for this activity is estimated at 8 million RMB. The detailed design
would be reviewed and approved by the provincial PMOs. However, the provincial
PMOs will provide summary reports with a short description of the design, a list of
items and a budget for each nursery to the Bank as part of following year's work plan. .
(b) Rural Infrastructure Program comprises the construction of forest trails and small
guard/storage sheds by planting entities. It was agreed that trails would be dirt paths no
wider than 1.5 meters, generally constructed along the contour within the planting sites
and sheds would be about 60 square meters, constructed of brick and concrete in line
with local standards for similar construction. The costs of forest trails is included in the
agreed schedule of plantation establishment unit costs.
Component 2: Increasing Ecological Forest Cover (Total Project Cost US$18.67 Million)
The aim of the component is to develop demonstration models under the GoC’s Pearl
River Protection Program that provide not only environmental but also economic and social
benefits. The component would finance: (a) the establishment of about 18,000 ha of multipleuse protection forests; and (b) the promotion of forest regeneration and vegetation
rehabilitation, on a large scale (100,000 ha) in 25 counties of GZAR, through hill closure in the
watershed and karst areas. All the funding resources to finance the multiple purpose protection
11.
44
forest establishment and watershed rehabilitation would be financed from the counterpart
funds.
12.
Several changes to the traditional protection forest technology practiced in China would
be introduced, as follows:

Protection forests are typically established as inviolate islands of conservation in China,
in which economic development activities and local community use of the resource are
severely restricted. By contrast, the component would support the development of
multiple-use management of protection forests which integrate non-consumptive
economic activities—such as the production of timber, fruit and nut plantations, and
medical plants—with afforestation for environmental benefits. Under this approach, the
economic welfare of local communities is maximized, contributing to improved
incentives to manage the forests on a sustainable basis.

The afforestation models used in protection forests have traditionally been based on
large tracts of monoculture. Instead, the component would introduce 16 tree species
which would promote greater biodiversity, reduce the incidence of pests and disease
damage, and promote the development of different canopy levels. Particular emphasis
has been given to integration of conifers and broadleaf species for biodiversity
conservation, and for development of multi-tiered, vertically-stratified canopies to
minimize soil erosion and water run-off. There are eight afforestation models to
improve tree cover and increase species diversity; three economic tree afforestation
models and five mountain/hill closure models of which two have a sustainable
production product. Eight of the sixteen species have production potential while
providing protection and ecological benefits.

Protection forests are typically subject to little management after establishment, which
undermines long-term, sustainable development of the resource. Protection forests
financed under the project will involve periodic tending and thinning to ensure efficient
natural regeneration of the stands throughout the life of the forest.
13.
Two systems will be used to establish protection forests under the component. In the
areas that are completely deforested, afforestation entities will plant a variety of new conifer
and broadleaf species. About 16 species, most of them native species, will be used. In areas
that are denuded but retain a sufficient number of healthy seed-bearing trees, the hills will be
closed to economic activities to allow the forest to regenerate naturally. Some “enrichment”
planting will be required where there are heavily deforested areas. The hill closure system
restricts consumptive use of forest resources (such as clear cutting of trees for fuelwood or
building materials) but permits some controlled use of forests in line with agreed environmental
management guidelines (such as grass cutting, limited fuelwood collection and harvesting the
species that regenerate by sprouting, for which the root will be retained).
14.
The selection of planting sites and species was based on criteria agreed with the Bank
during the project preparation. These criteria include: (a) the degree of erosion hazard of the
sites as estimated by technical staff; (b) potential impact of the site on the pearl river hydrology
45
and the ecological system in the karst areas; and (c) the need for sites to be located either on the
banks of the Pearl River or its affluents and/or within severely degraded karst areas.
15.
The tree and bamboo species were selected largely on the basis of climatic and
ecological suitability to specific site conditions, environmental management objectives, and
social-economic requirements of the afforestation entities for income generation, fuelwood, and
other forest products. The main species are native and include: (a) trees: Pinus massoniana,
Quercus griffithi, Q. acutissima, Schima superba, Liquidambar formosana, Cunninghamia
lanceolata, Zenia insignis, Cryptomeria fortunei, Magnolia officialis, Cinnamomum cassia,
Illicium verum, and Toona sinensis; and (b) bamboos: Dendrocalamus minor, Bambusa
pervariabilis, and Dendrocalamopsis grandis. Eucalyptus will be planted in a few sites outside
the karst areas as part of the BioCarbon pilot because their high initial growth maximizes the
benefits for the farmers.
16.
GFB has prepared a detailed afforestation model for each species which covers
technical silvicultural prescriptions, growth targets, establishment costs, financial and economic
rates of return, and environmental benefits. These models draw on the government’s existing
guidelines for protection forests, the experience from past implementation experience under the
Pearl River Protection Program and previous Bank-financed forestry projects.
17.
Three measures are needed to avoid or minimize potential social impacts of hill closure
on local communities. First, administrative villages will apply on a voluntary basis. The
selection criteria would ensure that project villages are not the better-off villages, that have the
capacity to undertake hill closure without outside assistance, or very poor villages. Although
dependence on hillsides for subsistence agriculture and fuelwood collection is rapidly
decreasing (in particular through the Guangxi biogas extension program), the poorest villages
still have high proportions of households which depend on these activities and should not start
hill closure until a later stage. Second, resource access restrictions will be decided through a
participatory process, designed on the basis of best practice in Guangxi and other provinces,
including internationally-funded projects. Third, hill closure would be linked with the
government’s biogas program which will provide an alternative in solving the potential
problem of lack of fuelwood caused by the restriction of access to forest resources, particularly
to areas closed for natural regeneration. It was agreed that the necessary biogas support would
be included as part of the project activities with the needed budget arrangements.
18.
To better link this component with the Nature Reserves (NR) component and provide a
means to enhance both the ecological environment as well as bring benefits to villages adjacent
to the reserves, the site selection criteria for the areas around the project NRs would include the
following:





located within 5 km of a nature reserve;
cover an area that is greater than 1 square kilometer;
have greater than 30 percent original vegetation cover;
form clusters or corridors to enhance the distribution and dispersal of wildlife; and
demonstrate willingness on the part of both villages and forestry bureaus to participate.
46
19.
BioCarbon Pilot. This component will also pilot the establishment of 4,000 ha of
multiple-use protection forests for carbon sequestration and to test the carbon trade process.
This BioCarbon pilot, the first in China, would provide more incentives for households to
maintain forests on degraded forest areas and thereby sequester greenhouse gases. In order to
ensure unified management measures, unified growth of the plantations, maintain the carbon
sequestered and reduce risk from natural disasters for the 30-year program implementation
period, the pilot program will be largely implemented through cooperative arrangements
between farmers/communities and planting entities (FFs or companies). Although interviews
with farmers and communities by the SA team confirmed the desirability of the above
arrangement, the pilot would also explore these management arrangements to demonstrate the
viability of a community-based forest management approach by providing technical support
and finding mechanisms to reduce management and other risks.
20.
Of the total target area of 4,000 ha of plantations, 440 ha will be directly managed by
individual households and 3,560 ha will be managed through a cooperation arrangements
between farmers/communities and farmers/FFs. Participation in the project would be decided
through a participatory process carried out at the village level. Under the cooperative
farmers/communities and FFs arrangement, the revenue from selling the carbon credit, which
would start to accrue from the second year after plantation to year 10, would be split; sixty
percent would go to the farmers and forty percent to the FFs. For individual farmers, the
income from the sale of the forest products and the revenue from the sale of the carbon credit
would belong in its entirety to the local farmers/communities. The revenue from the sale of
bio-carbon credit would initially go from the BioCarbon Fund to the GFB which will pass it on
to the farmers/ communities and FFs.
Component 3: Improving Nature Reserves Management (Total Project Cost US$ 7.02
million)
21.
The component would have four sub-components: (a) nature reserve planning and
management; (b) conservation management at sites outside the existing NR system; (c)
community relationships with project nature reserves; and (d) monitoring and replication.
22.
The nature reserve planning and management sub-component would finance the
preparation of ecological baseline maps, and the nature reserve management plan development
and implementation. More specifically, it will finance: (a) small amount of civil works; (b)
needed equipment, particularly field equipment; (c) surveys and map development; and (d)
consultant services.
(a) Baseline ecosystems map production. Financing would be provided to support the
preparation of four baseline ecosystems maps for: (a) the Nonggang, Ban Li and Ba Pen
NRs (three sites); (b) the Damingshan/Longshan (two sites); (c) the Mulun NR; and (d)
the Maoershan NR. The maps would include information on the distribution and
diversity of ecosystems within the project sites, along with other information such as
management zones, the local road network and the location of villages. They will be
developed using existing baseline data and information collected during the
management plan preparation process. The modality of using satellite imagery to
47
facilitate the preparation of these maps would also be investigated. Preparation of the
maps would be contracted out to a qualified mapping institute.
(b) Management plan development. Financing would be provided to support the
preparation of management plans for: (a) the Nonggang NR; (b) the
Damingshan/Longshan NRs (which are contiguous); and (c) the Mulun NR. In
addition, the existing management plan for Maoershan NR would be revised to
emphasize an ecological approach to planning. Although the Damingshan/Longshan
reserves would have a single management plan, each NR would have a separate action
plan describing implementation activities. The management planning process would
follow the guidelines laid down in the SFA Developing Guide of Nature Reserve
Management Plan. These guidelines were developed as part of the GEF-financed
Nature Reserves Management Project and are currently being utilized to guide nature
reserves management planning in the Sustainable Forestry Development Project (also
GEF-funded).
Staff from the Ban Li and Ba Pen NRs would attend the project’s planned management
plan training activities because together with Nonggang these areas protect the entire
global population of the Critically Endangered white-headed black leaf monkey
(Trachypithecus poliocephalus leucocephalus). Staff from Ban Li and Ba Pen would
also participate in the preparation of a Species Protection Plan for the white-headed
black leaf monkey. This Plan would incorporate inputs from those universities and
institutes that have existing research programs concerning this primate at these reserves.
The project’s proposed nature reserve management planning process would give
considerable emphasis to identifying options for engaging local communities in nature
reserve management and to improving the flow of sustainable benefits from the reserves
to the surrounding communities. Aside from providing important information, the
planning process would in itself be a means for sharing information and for establishing
a dialogue between the reserve staff and the local communities. Although people living
in and around these reserves are dependent on these resources, and are most affected by
the presence of the reserves, they seldom are consulted or participate in decisions
regarding their management. This has, on occasions, resulted in the alienation of NR
neighbors and in limited support for the objectives of the reserves. Similarly, the lack
of participation of other agencies and stakeholders in nature reserve planning and
management has resulted in increasing outside threats to the reserves and, in some
cases, a general lack of support.
(c) Management plan implementation. The proposed project nature reserves are poorly
equipped to carry out routine patrolling and other field-level management activities. The
sub-component would strengthen the effectiveness of field-level protection systems
based on the needs identified in the nature reserve management plans. Support would be
provided for: (a) guard posts, boundary markers, observation posts, and miscellaneous
equipment for field protection staff; (b) field kits for research and protection staff to
facilitate the collection and storage of field data, including local/Guangxi field
identification guides and a local/Guangxi manual for monitoring biodiversity and
48
resource use for nature reserve management; and (c) improved communications
technology and equipment to improve reserve administration.
Financing would also be provided to support some small civil works and the acquisition
of office equipment and vehicles necessary to improve protection in the NR sites. Civil
works would only be supported in cases where there is an unambiguous link to
demonstrable biodiversity conservation benefits in line with the different objectives
included in the management plans for each of the reserves.
An assurance was obtained during negotiations that expenditures for the construction of
civil works in each of the project NRs would not be eligible for financing from the Loan
or the GEF Grant until such a time when these works are provided for in the reserve
management plan and that such a plan has been cleared by the Bank.
Lastly, a training program would be designed to improve the capacity of all reserve staff
for routine nature reserve management. Management planning and community-based
nature conservation would provide intensive learning opportunities for staff in nature
reserves and the provincial WNRMS. Existing staff and new recruits would participate
in an integrated program of eight in-service training courses designed to cover job
responsibilities. The training would be organized locally by Training Coordinators in
each of the four nature reserve complexes, and would be delivered by expert trainers,
who themselves would be trained with international expert input.
A program of general staff training would be implemented involving all reserve staff to
provide them with enhanced skills needed to carry out their jobs effectively. The
training programs would be tailored to the needs and levels of different job positions,
with separate courses targeting decision-makers, middle-level managers, research and
monitoring staff, community affairs staff, community-based patrol staff, enforcement
staff (forest police) and administrative staff. Training would be based largely on
existing curricula, particularly those developed by the GEF-supported NRMP
(completed) and SFDP (existing), supplemented with additional materials prepared to
cover specific issues relevant to Guangxi, such as local flora and fauna, cave biology
and management of karst protected areas. Most courses would be delivered locally in
the project NRs to provide opportunities for demonstrations and field practice. In order
to support other project components and to provide maximum opportunities for
experiential learning, much of the training would be integrated with the other
components. The training would address the needs for skills and knowledge needed to
accomplish key project tasks and implement innovations, such as biodiversity and social
surveys (including the production and use of the local/Guangxi field guides),
management planning, community extension training and participatory communitybased monitoring. Certain courses would be opened to selected staff from township
forestry stations and village governments. Site visits and discussion forums on specific
themes would be organized to share ideas and lessons between nature reserves. In
addition to a limited number of regional site visits, exchanges between project reserves
would be organized, with the participation of selected local government staff and nonproject nature reserves from Guangxi.
49
Proposed focus topics for exchange of practical experience
Host nature
reserve
Effective management of karst landscape areas for biodiversity Nonggang
conservation
Management of tourism to minimize negative impacts and maximize Damingshan/Long
conservation benefits. Community-based small-scale tourism
shan
Karst and cave survey and mapping techniques
Mulun
(a) Planning and implementation of public conservation education and Maoershan
development of awareness-building materials. (b) Participation of
local communities in patrolling and monitoring
Training courses would also be designed to reach key stakeholders outside of the nature
reserves. An orientation course on biodiversity conservation would be designed and
delivered to staff of the GFB and to key planning units such as the Guangxi Provincial
Development and Reform Committee (GPDRC).
Training would be delivered by expert trainers recruited from local institutions such as
the Guangxi Forestry Academy (Nanning), Guangxi University (Nanning) and Guangxi
Normal College (Guilin). For specialized topics, local research institutes such as the
Institute of Forest Survey and Design (Nanning) and the Guangxi Institutes of Zoology,
of Botany and Social Sciences would be used, as well as Guangxi-based field centers of
various researchers, such as the white-headed black leaf monkey field stations
established by Beijing University and the Southwest Forestry College. Wherever
appropriate, partnerships would be formed with other programs providing relevant
technical assistance and training, such as those sponsored by the project’s other
components and by the Kadoorie Farm and Botanical Garden’s South China
Biodiversity Program. National and international technical assistance would be
provided to the training team, with a particular focus on improving training methods for
in-service training, and updating specialist knowledge (e.g., on park-community
approaches and community-based monitoring of biodiversity and resource use).
The principal purpose of this activity set would be to assist with the development of
appropriate organizational management structures in support of enhanced nature reserve
management. Some of the project NRs (e.g., Longshan) are relatively new. In these
cases, they will be actively recruiting new staff to fill their quotas and assigning them to
newly-created positions. Other project reserves are already fully staffed but are still
constrained by inefficient organizational structure and personnel management. The
project would assist the reserves to increase their institutional capacity with technical
assistance and training in management methods. The project would also strengthen
existing administrative capacity within the WMD of the provincial GFB. The WMD
would have staff designated as responsible for: (a) nature reserve planning; (b)
community-based nature conservation; and (c) training coordination. WMD staff would
receive training and technical assistance, and would then take the lead in identifying
local experts and local trainers to support nature reserve management activities.
50
23.
The Conservation Management of Sites Outside the Existing Nature Reserves System
sub-component aims to enhance the biodiversity outside of the nature reserves and comprises
the following activities:
(a) Cave biodiversity conservation. Cave fauna are animals that have adapted to life in
perpetual darkness and to stable conditions of temperature and humidity in underground
voids. Cave fauna is also of special biological interest because of its endemism which
is higher than that of any other habitat. Guangxi is known to be one of the most varied
karst limestone regions on earth and can therefore be expected to host a rich diversity of
subterranean fauna. The results1 of a preliminary survey of the subterranean fauna of
four proposed project sites, which was conducted during project preparation, confirmed
this expectation. The overall conclusions of the report were: (a) Guangxi’s caves
support one of the richest cave fish faunal assemblages in the world; (b) Guangxi’s cave
beetles include the most highly evolved species (Giraffaenops clarkei) in the world; and
(c) Guangxi’s caves host the richest community of troglobitic (cave-restricted)
millipedes on earth (millipedes being one of the most important group of obligate
subterranean organisms).
The sub-component would support comprehensive biodiversity surveys of karst cave
ecosystems in the Mulun NR and one other locality which would be selected on the
basis of a thorough field assessment of possible options carried out during the course of
project implementation. The biodiversity surveys of the second site would support
recommendations on the feasibility of establishing a new NR specifically for the
management and protection of a representative example of Guangxi’s rich subterranean
fauna.
The preliminary assessment and full field surveys would be conducted by professional
research organizations (such as the Institute of Zoology and the Institute of Botany in
Beijing, or the Institute of Zoology and Institute of Botany in Kunming) assisted by one
or more international specialists with extensive knowledge of Asian karst cave
ecosystems. The project will support exchange visits for two of the national scientists
to visit institutions outside China where karst animal groups are studied. Nature reserve
staff would be trained in cave fauna survey and mapping techniques, and appropriate
equipment would be provided. Recommendations for the enhanced conservation of
project karst cave sites would be developed and (for Mulun) these would be
incorporated into the nature reserve’s Management Plan. Once the project’s surveys
and training activities are completed, support would be provided for the preparation of
guidelines for management of karst and cave biodiversity in Guangxi based on existing
materials from World Conservation Union (IUCN) Vietnam. With funding from the
project, the GFB will organize a provincial workshop to present and discuss the results
with key players involved in karst management in the province to agree on actions to be
taken.
1
Deharveng, Louis 2005 Guangxi Integrated Forestry Development and Biodiversity Conservation Project.
Report on subterranean biodiversity of Guangxi. Unpublished.
51
An assurance was obtained during negotiations that guidelines for karst management
would be developed and submitted to the Bank for comments by March 30, 2011.
(b) Southwest Guangxi Karst Area conservation. The limestone karst of southern China
is the most extensive, best developed and most important in the world and China’s karst
is most extensive in the provinces of Guizhou and Guangxi. A recent survey in
Vietnam of primates found that the only known mainland population of the globally
“Critically Endangered” Eastern Black Crested Gibbon (Nomascus nasutus) persists in a
small patch of karst forest in Cao Bang Province, Vietnam. This forest patch extends
across the border into China, and gibbons were heard by local villagers in China as
recently as 2002. Helen’s Slipper orchid (Paphiopedilum helenae) was recently
discovered on an isolated karst tower in Vietnam near the Guangxi border. It is nearly
extinct in Vietnam as a result of over-collecting. It is not known if the species exists in
China. An endemic species of cat snake (Boiga guangxiensis), known only from
Nonggang, may occur in other nearby habitats, but no information is available about the
biodiversity of these two reserves.
Protected areas adjacent to corresponding protected areas in neighboring countries offer
the possibility of increased benefits for biodiversity at reduced cost as a larger area of
habitat can be protected by sharing the costs. Several NRs exist near the international
border in Guangxi Province. In Trung Kanh District of Cao Bang Province Vietnam,
one district-level NR has been established and one newly-proposed NR is on the
international boundary. However, neither of these reserves appears to be adjacent to
existing reserves in China. Nine Watershed Forest Protection Areas are located
immediately adjacent to the international border in the south-west of Guangxi.
The sub-component would support a rapid biodiversity assessment of the south-west
Guangxi karst conservation area, focusing on existing protected areas and remaining
blocks of unprotected forest habitat with potential for biodiversity conservation. The
results of this assessment would be used to support GFB’s goal of establishing a new
national-level NR in the south-western part of Guangxi. A team comprising specialists
from provincial research institutes and universities and staff of local County and
Prefecture Forestry Bureaus would travel to these sites to assess habitats and compile
preliminary lists of plants and terrestrial vertebrates with technical assistance from
national experts. Before field-work activities commence, the modalities of using
satellite imagery to facilitate these surveys would be investigated. The team would
produce recommendations for improvements in the management of existing NRs, and
for reconsideration of the status of these reserves. Improved maps of the boundaries of
existing NRs would be prepared, and recommendations for adjustment of boundaries
and establishment of a new national-level reserve would be made as appropriate. With
funding from the project, GFB will organize a provincial workshop to present and
discuss the results and to agree on actions that need to be taken.
(c) Watershed forest conservation. As a means to integrate biodiversity considerations
into the broader forest landscape, the sub-component would support a biodiversity rapid
assessment of selected sites in the project’s Increasing Ecological Forest Cover
52
Component. Many of these sites are small and support very little original vegetation,
and so their biodiversity potential is expected to be relatively low. However, some sites
are relatively large, and having been managed for watershed protection purposes, their
original vegetation has been maintained although it is often in a much degraded
condition. Sites would be selected on the basis of the following guiding criteria;
wherever possible they should: (a) be located within five kilometers of one of the
project’s nature reserve sites; (b) cover an area that is greater than one km2; (c) have
more than 30 percent of the original vegetation cover; and (d) form clusters or
‘corridors’ to enhance the distribution and dispersal of wildlife.
The conservation management priorities identified during the biodiversity rapid
assessment would be integrated into the management contract between the village
collective/individual households and the county forestry bureau for each site, with the
overall goal of developing a more holistic and comprehensive approach to sustainable
forest management and biodiversity conservation in areas outside Guangxi’s existing
nature reserve system. There should, therefore, be demonstrable willingness on the part
of both the villagers and the forestry bureau to participate. For monitoring purposes and
to increase local knowledge and interest in conservation, the biodiversity rapid
assessments would be repeated annually. Village and county forestry officers would
form part of the monitoring team, and the biodiversity conservation priorities identified
during the initial assessment of each site would be modified as necessary.
24.
The Community Relationships with Project Nature Reserves sub-component aims to
create an enabling environment to allow nature reserves and communities to solve key
problems together. The goal would be to build the capacity of the project’s nature reserves
staff to work as facilitators. Financing would be provided to support: (a) increasing target
community and local government stakeholders’ understanding of biodiversity conservation and
the threats it faces from their actions by assisting nature reserves to develop and implement a
community conservation education strategy; (b) the provision of training and technical
assistance to communities to empower villagers to address key problems of concern to both the
communities and the nature reserve; and (c) early interventions to decrease the threats from
over-use of the nature reserves’ resources, such as for fuelwood, through targeted applications
of sustainable, practical, culturally-appropriate, and cost-effective measures to reduce use from
the nature reserves. The sub-component would have the following activities:
(a) Local community engagement. It is envisaged that the management planning
process would identify a number of potential activities for engagement of local
communities in nature reserve management that would be further developed and
supported.
In addition, the project would build the capacity of nature reserves to create a
collaborative environment with adjacent communities at all levels. Central to the effort
would be training and technical assistance to a Community Relations Section in each
nature reserve, which would encourage dialogue on conservation with local
communities, organize community and public education, facilitate technical training
courses in selected natural resource management-related topics for communities, and
53
facilitate community access to grants and loans from government and other sources for
activities of mutual benefit to community members and to the nature reserve.
(b) Community conservation education and public awareness. Funds would be
provided for developing and implementing conservation education and public
awareness programs. The programs would incorporate experience gained from the
previous Bank/GEF-financed projects. Nature reserves and provincial WNRMS
community affairs staff would be trained, using technical assistance and field-based
courses, to prepare and implement community conservation education strategies.
Funds would be provided for each nature reserve to implement programs outlined in its
strategies within its own communities. The objective is to experiment with innovative
approaches for informing and educating different target groups within communities
about the functions, ecology, regulations, and problems of nature reserves and
relationship and conflicts of people and nature reserves. The goal would be to build on
existing experience in China while introducing techniques that inform and educate
people consistent with the realities of their lives and local conditions while encouraging
participation in better conserving nature reserves.
Whenever practical, ethnic minority languages would be used in environmental
education, since this is often more culturally appropriate even when no great language
gap exists. Courses would emphasize learning relevant to the local environment by
building on local knowledge, including the history of the local environment and the
unique features of local habitats (such as karst). Courses would extend beyond
awareness-building to encourage community involvement in conservation through
practical activities such as participatory monitoring within the nature reserve, hill
closure in adjacent areas and more environmentally-friendly agriculture with reduced
pesticide and fertilizer use. To facilitate this participation, a Coordination Committee
would be established and linked to each nature reserve protection station. It would
comprise the managers of reserve protection stations, village forest guards recruited
from the communities, representatives from township government and leaders from
administrative villages.
Public education for a broader audience would include dissemination of existing
materials and the design of new educational materials by the NRs with support from
Technical Assistance (TA) and from the provincial Wildlife and Nature Reserve
Management Station. New materials could include a series of local/Guangxi field
identification guides, publications on Guangxi’s karst landscape, wildlife postcards,
posters, postage stamps, textbooks for students and an internet site for Guangxi NRs,
beginning with the project NRs.
(c) Community skills enhancement. NR staff would also organize training of both
community leaders and rural households, focusing on addressing issues that have an
impact on both community livelihoods and nature reserve management. Appropriate
topics for training would be identified through multi-stakeholder planning with the
communities. These might include: (i) approaches to the prevention of wildlife
damage; (ii) fuel conservation and new sources of household fuels; (iii) technical skills
54
from forestry and agriculture for more diversified and sustainable sources of
livelihoods; (iv) skills in enterprise development for community-based, environmentally
friendly tourism; and (v) skills for improved management of household economic
activities. Sources of technical information and trainers would be identified with the
help of project TA and appropriate courses would be organized by the nature reserves’
community affairs section.
(d) Local project greening. Training courses for improving the capacity of village
committees to manage community projects would also be developed and delivered.
Assistance would be provided by the community affairs staff to these village
committees to access non-project funding programs for community - based
conservation, poverty alleviation and small-scale agricultural development. The project
would facilitate access for these villages to grants and loans for environmentally
friendly afforestation available under Components 1 and 2.
Most activities in this set would be based on existing government programs (such as the
provincial Biogas Program) but the project would facilitate distribution to allow
benefits to reach priority villages, targeting either the entire population or the poorest
families in these villages. To achieve selected achievable outputs early and easily, the
project would provide subsidies for priority communities adjacent to each reserve for a
short list of proven technologies that reduce pressure on the nature reserve and that
provide early benefits to the communities. This list would be drawn up by the nature
reserve community affairs staff with input from TAs, choosing those that are most
appropriate to local needs and conditions, cost-effective, culturally appropriate and
practical. Communities and protection stations would select activities for each village
from this short list during a meeting organized by the Coordination Committee.
Potential activities would include: (i) small grants to match government subsidies to
poor households for biogas pools and fuel-efficient stoves; (ii) creation of fuelwood
woodlots; (iii) proven, environmentally-sound effective mitigation measures against
animal damage (such as crop substitution and physical barriers); (iv) paddocks for cattle
and cut-and-carry forage crops; (v) native grass seed for planting beneath trees in
collective forest areas; (vi) waste bins for used plastic and pesticide bottles; and (g)
wireless phone access for village fire prevention teams.
25. The Monitoring and Replication sub-component aims to establish and institutionalize a
scheme at nature reserve level to track progress in reserve management and to guide
conservation action. The sub-component comprises the following activities:
(a) Nature reserve monitoring scheme. The project would facilitate discussions within
GFB and the reserves to agree on objectives, institutional framework and strategy for a
nature reserve monitoring scheme. For each reserve, one key indicator has been
identified during preparation. However, a matrix of key indicators on biodiversity,
resource use, reserve effectiveness and threats would be established as part of the
reserve Management Plan. The scheme would be simple and involve local communities
in and adjacent to the reserves. To foster local ownership and thus the sustainability of
monitoring, key indicator species and habitat types would be identified in a dialogue
55
between the local communities, nature reserve staff and GFB during year one of project
implementation. In addition, experience from other projects suggests that monitoring
by local rangers and community members generates local awareness of conservation
and strengthens existing community-based resource management systems. It can
improve collaboration between local stakeholders and government staff and improve
communication between local stakeholders and authorities. Whenever possible, already
existing guidelines and training materials (e.g. from previous GEF-funded projects in
China and participatory schemes in the Philippines and other countries in the region)
would be adapted to the Guangxi context.
To enhance local ownership, reserve staff will take a leading role in the design of the
scheme. One of the indicators will be progress in management effectiveness measured
annually by reserve staff and community representatives, through completion of the
GEF’s Protected Areas METT. The METT would also examine the inputs provided by
local communities to the nature reserve management planning process. An assurance
was obtained that the results of the METT would be included in the mid-term review
report. Other methods include fixed point habitat photography, patrolling forms
completed during routine patrolling with the help of local/Guangxi field guides, camera
trap surveys managed by local village teams after appropriate training, and participatory
monitoring with focal group discussions in key villages adjacent to each reserve. The
methods would be described in a local/Guangxi reserve monitoring manual. A
mechanism would be established to ensure integration of monitoring information into
management decisions. Findings from the monitoring will be validated with the local
communities and compiled in semi-annual summary reports to the reserves’ decisionmakers and the WMD. In WMD, the China Biodiversity Information Monitoring
System data management system would be used for collating and summarizing
monitoring data from each reserve.
(b) Management plan reviews. Every year each nature reserve would organize a
meeting to assess the implementation of the management plans. The evaluation of the
management plan progress in the last year of the project would serve as a basis for
overall evaluation of the sub-component.
(c) Replication activities. The project would disseminate and promote replication of its
experiences and lessons within Guangxi Province, adjacent provinces and nationally.
For example, the improved biodiversity conservation management planning, community
engagement and participatory monitoring approaches that will be supported in the target
nature reserves will be disseminated as examples of “best practice” and will be
replicated in other nature reserves in Guangxi by the provincial forestry administration.
This will be done by organizing and holding short training sessions/workshops for staff
from other nature reserves in Guangxi during the later years of the project. Replication
in neighbouring provinces will be encouraged by inviting nature reserve managers from
these provinces to the workshops. Nationally, replication will be encouraged by inviting
key staff of the CBPF program to participate in the workshops also, and by sharing the
training and workshop materials with the CBPF Steering Committee and Management
Office.
56
Component 4. Enhancing Institutional and Management Capacity (Cost US$5.06 million)
26.
The GoC and GZAR government are committed to sustainable forest management and
the aim of this component is to contribute towards this goal. Financing from the IBRD Loan,
GEF grant and counterpart funds would be used to implement an integrated institutional and
management capacity building program that would: (a) strengthen the capacity of the provincial
forestry bureau to develop and implement a sustainable provincial forest sector development
and protection strategy (for production, ecological forests and biodiversity) and support priority
policy studies, guidelines, and regulations revision; (b) assist with the implementation of
applied research programs to generate operationally usable technologies to improve
commercial forestry development, ecological forest protection, and biodiversity conservation;
(c) disseminate the research results and (technical) guidelines to GFB staff and beneficiaries,
building the capacity of the project implementation agencies, planting entities and households
on sustainable forest resource management; and (d) establish a simple project monitoring and
evaluation system to monitor project performance, achievement of the project objectives and
environmental and socio-economic impacts.
27.
Forest Sector Strategy, Priority Policy Studies, Guidelines and Regulations
Development. This sub-component would promote the adoption of a sector-wide, integrative
and comprehensive approach to sustainable forest resource management by assisting the
development and implementation of a GZAR forest sector development strategy as well as
priority policy studies and regulation revision.

The sector strategy development would: (a) analyze current Guangxi forestry
resources management, identifying the obstacles and issues for sustainable forest
resource development and protection; (b) explore strategic approaches to forestry
sector development in forest resource base establishment and forestry industry
development; ecological environment protection and improvement, particular the
watershed and karst areas protection; the nature reserve management and
biodiversity conservation; and the technical and policy supporting frameworks; (c)
prepare the Guangxi forestry sector development strategy and action plan which
would be implemented by the Guangxi forestry agencies.

The topics of policy study/guidelines and regulations development would be
identified and carried out during the course of the forestry sector strategy
preparation. The potential studies identified during project preparation include the
following:
(a) Optimizing the selection of timber species, plantation sites and market
outlets by developing an economic model to establish priorities on locations of
plantations for various industries.
(b) Land tenure and use, which would explore the land ownership and land
management right related issues, particularly on land release and cooperatively
management arrangements.
57
(c) Regulation on Guangxi wildlife and plant protection and nature reserve
management.
(d) Guidelines for karst areas management.
(e) Non-public forestry development incentive mechanism and policy.
(f) Compensation policy for ecological forest management.
(g) A detailed GZAR forestry development strategy study plan was reviewed by
the appraisal mission and included in the PIP.
28.
Research and Extension Programs. This sub-component would strengthen the
operational focus of national and provincial research efforts and ensure the timely transmission
of research findings to the field. The program would entail activities that have broader impacts
at the provincial level (e.g., applied research on intensively managing timber plantation,
enhancing ecological forest and karst area protection and biodiversity conservation). The
component would support research on: (a) improved seed selection and breeding for the main
native species; (b) genetic improvement on advanced generation of the main fast-growing
species including disease-resistant clone extension; (c) the restoration of forest and vegetation
techniques and ecological system monitoring for the Pearl River Basin; (d) integrated pest
management for timber plantation management and ecological forest protection; and (e)
methodologies and parameters for biomass and carbon sequestration measurement for the main
tree species in Guangxi. Fifteen demonstration items would be established. These would stress
the use of superior genetic stock combined with appropriate plantation management methods
for both commercial and environment purposes. New disease- and cold-resistant clones would
be included. About 13 new technologies would be extended to the project areas. The key
extension messages include introducing improved planting materials, particularly clones;
nursery management technologies including root cutting, containerized seedlings, tissue culture
technologies and mycorrhizal associations, as well as cost-effective silvicultural techniques.
About 3500 ha demonstration plantation would be established to demonstrate the improved
technologies to the timber plantation and ecological forest management. Lessons learned from
previous Bank-financed forestry projects show that field demonstrations are extremely useful
for new technologies transfer to the planting entities and farmers. A number of support
activities to the extension system would also be established or developed. They are:
information networks, producing and printing technical booklets and video, purchasing of
office and extension presentation equipment.
29.
It would also support with GEF financing a competitive small grant research program to
address both long-term or short-term information requirements for more effective nature
reserve management in GZAR. The emphasis would be on applied research to solve practical
management problems related to three broad themes: (a) nature reserve/people interactions (e.g.
impacts of legal or customary human uses such as grazing and non-timber forest product
harvesting on reserve resources as well as importance of these uses to local livelihoods and
possible realistic solutions); (b) nature reserve management (e.g., zoning and nature reserve
boundary definition with reference to the types and extent of various ecosystems and animal
ranges and realistic expectations of what is possible to implement in practice; impacts and
control of forest fire; tourism); and (c) nature reserve community development (e.g.,
sustainable income-generating opportunities from NTFPs).
58
30.
The project’s nature reserve management plan development process will identify
priority research needs for the Nonggang, Damingshan/Longshan, Mulun and Maoershan
Nature Reserves. Based on the research needs identified in these management plans, a research
proposal for each site would be developed. The cost of the research program at the nature
reserve level is included in component 3.
31.
The research and extension sub-component would be implemented by the TSP, located
in the GFB. The small competitive research grant for biodiversity conservation would be
implemented by the BO.
32.
Training and Technical Services. This sub-component would support the training and
other technical services to disseminate new techniques and project technical and management
guidelines to the project implementation agencies and the project beneficiaries, including
planting entities and households. The existing forestry extension networks at county and
township levels would be used for this purpose. FFs would serve as centers of development in
afforestation technology and plantation management and would transfer the improved
technology to rural communities via demonstration, training and nursery products (seedlings
and areas saplings). This program would support: (a) the provision of training materials for
different audiences including provincial and county staff, FFs and other planting entities and
farmers; (b) the development and implementation of domestic training programs for the project
staff and farmers including the Wildlife Management Division staff and relevant agencies such
as Guangxi Provincial Development and Reform Committee; (c) overseas training for project
staff to learn the effective implementation of forest resources management and biodiversity
conservation; and (d) national and international consultancy services in a variety of technical
areas. A detailed training and technical service plan was discussed during project preparation
and was further reviewed by the appraisal mission.
33.
The proposed training program includes 820 person-days for provincial and county
PMO staff; about 6,440 person-days for the county, township forestry station staff, nursery
managers and FFs; and about 200,000 person-days for the farmers and community heads, and
other county planting entities. This program also includes 2,310 person-days of overseas
training and international consultant services. Training would be aimed at the following
groups: PPMO and PMO management personnel, technicians in PMOs and forest stations,
nursery personnel and farmers. The content of the training would include: (a) project
management systems, techniques and requirements; (b) nursery: guidelines, standards and
techniques; (c) plantation/ecological: techniques, standards guidelines, environmental
protection and integrated pest control; and (d) farmer household support: technology, rural
energy, livestock breeding, family finance and crop cultivation. The training plan for nature
reserve staff and communities surrounding the project NRs is included in component 3.
34.
Monitoring and Evaluation Program. This sub-component would support the
implementation of a comprehensive monitoring and evaluation framework designed to monitor
project performance, process, objective achievement, market change, and environmental and
socio-economic impacts. The monitoring plan would: (a) set up a computerized database to
monitor project process for the afforestation entities who take part in the plantation activities
showing detailed contractual arrangements, as well as loan disbursement and reimbursement
59
schedules. The comparison of economic viability of smallholder forestry versus large-scale
plantations would be an important element in this monitoring system; (b) monitor project
implementation progress; (c) monitor quality and performance of the plantation establishment,
ecological forest management and nature reserve management; (d) evaluate the achievement of
the project objective; (e) measure and assess the environmental and social parameters to ensure
that potential negative impacts would be mitigated; and (f) monitor and validate the BioCarbon
sequestration and accumulate experience on afforestation and reforestation CDM program.
Officials with responsibilities for monitoring will be expected to report both data and its
interpretation and to give recommendations for project adjustments and improvements. An
independent evaluation in the second year of project implementation would assess the main
project risks focusing on the implementation of the EMDP, process framework and project
production and contract arrangements. The project M&E plan was further reviewed and agreed
by the Bank in the project appraisal stage. Key performance indictors to facilitate monitoring
and evaluation during project implementation are described in Annex 1.
60
Annex 4 - Table 1. Table of Counties Participating in the GIFDCP
No.
County
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
Lingyun
Longlin
Napo
Pingguo
Tiandong
Tianlin
Xilin
Tiandeng
Zhongshan
Wuming
Guiping
Longshen
Yongfu
Ziyuan
Bama
Huanjiang
Luocheng
Nandan
Yizhou
Babu
Hezhou
Zhaoping
Wuxuan
Xingbin
Rong'an
Sanjiang
Nanning
Shanglin
Pubei
Cangwu
Cenxi
Chongzuo
Rongxian
Debao
Mashan
Hengxian
Yongning
Fusui
Jiangzhou
Longzhou
Ningming
Xingan
Table 1. Table of Counties Participating in The GIFDCP
TPC (forest farms
EFC (watershed, Karst & multipurpose
TPC
only )
plantations)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
NRMC
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
61
Annex 4 - Table 2: Nature reserve management planning sites proposed
for GEF financing in Guangxi Province
Characteristics
Nonggang NR
Damingshan/Longshan
Project focus
Counties
Nonggang NR
Longzhou, Ningming
Size
101 km2
Population
No people live inside the NR
GEF Justification
The reserve is one of only three that
protect the global population of the
“Critically Endangered” White-Headed
Black Leaf Monkey which numbers
approximately 700 animals (i.e. half
China’s
estimated
giant
panda
population). Nonggang is recognized as
a site of global significance in the
Biodiversity Review of China. It is also
identified as being a ‘Priority
Ecosystem’ in China in the Biodiversity
Conservation Action Plan.
White-Headed Black Leaf Monkey and
other globally threatened animals such
as the Assamese macaque, Asian golden
cat and Asian black bear.
Biodiversity
Subterranean biodiversity
32 taxa collected in Nonggang caves
during project preparation including
two milliped species which represent
first records in China.
Current Status
National Nature Reserve
Main threats
Fuelwood
collection,
vegetation
clearance for agriculture, and fire from
adjoining sugarcane plantations and
community forests.
62
Damingshan and Longshan NRs
Wuming, Shanglin, Mashan, Binyan
(Damingshan); Shanglin (Longshan)
170 km2 (Damingshan); 107 km2
(Longshan). Total: 277 km2
The NRs are contiguous
3,067 people live in Longshan. Half of
this NR including the entire eastern
sector comprises community forests and
agricultural land. There are no people
residing in Damingshan but there is
significant pressure from communities
living nearby
Protect some of the largest southern
subtropical montane evergreen broadleafed forests in China and rare
examples of relatively undisturbed
lowland streams. Damingshan Reserve
is listed as being of national
significance in the 1996 Biodiversity
Review of China. It is also identified as
being a ‘Priority Ecosystem’ in China in
the Biodiversity Conservation Action
Plan.
Fauna includes Francois’ Leaf Monkey
and other globally threatened animals
including a unique assemblage of at
least eight freshwater turtles, six of
which are IUCN-listed as either
Critically Endangered or Endangered.
25 taxa collected in Longshan caves
during project preparation including a
Collembola (provisionally assigned to
the family Bourletielidae) which if
confirmed represents the first ever cave
record for this particular family.
National (Damingshan)
Provincial (Longshan)
Fuelwood
collection,
vegetation
clearance for agriculture and hunting. In
Longshan’s karst areas agricultural runoff contaminates subterranean water
resources, and wetland habitats are
damaged
by
small-scale
dam
construction for fish ponds.
Annex 4 - Table 2: Nature reserve management planning sites proposed
for GEF financing in Guangxi Province
(con’t)
Characteristics
Key interventions
(proposed)
Cultural features
Existing or proposed
programs
Nonggang NR cluster
Damingshan/Longshan
(1) NR Planning and Management: NR management plan development, preparation
of ecological baseline maps, improvement of field level management systems,
provision of a small amount of civil works, research.
(2) Strengthening of NR/local community relationships: Enhanced access to local
government development initiatives, energy conservation, delivery of sustainable
technologies, community conservation education and public awareness.
(3) Training and Capacity Building: In-service training at all levels, building
capacity for training delivery and institutional capacity building.
(4) Monitoring and evaluation: Project management training, regular patrolling to
collect field data and periodic sampling
Zhuang ethnic minority group
Mostly Zhuang. Project site in
Longshan has Yao ethnic minority
group
(1) Guangxi University. Vegetation,
flora and ornithological research and
monitoring project.
(2) Southwest Forestry College.
Francois Leaf Monkey research project
(3) Guangxi Institute of Botany. Flora
and Pseudotaxis chienii research
projects
63
Annex 4 - Table 2: Nature reserve management planning sites proposed
for GEF financing in Guangxi Province
(con’t)
Characteristics
Maoershan NR
Mulun NR
Counties
Project focus
Size
Population
Huanjiang
Mulun NR
108 km2
295 people live in two villages in the
experimental zone of the NR
GEF Justification
Protects a rare example of intact
southern
subtropical
limestone
evergreen mixed deciduous and
broadleaf forest. Contiguous with the
Maolan NR in Guizhou Province.
Together the Mulun and Maolan Nature
Reserve protect the world’s largest and
best preserved limestone forest at
equivalent latitude. Member of the
China MAB Network.
108 species of orchids in 37 genera,
representing the world’s richest orchid
diversity in a karst area. 88 karst caves
have been identified and named. One is
believed to have the most diversified
community of terrestrial cave animals
that has been encountered (in similar
cave habitats) anywhere in East and
Southeast Asia.
Biodiversity
Subterranean biodiversity
Current Status
Main threats
Key interventions
(proposed)
Cultural features
Xingan, Ziyuan, Longsheng
Maoershan NR
170 km2
There are no people residing in
Maoershan but there is significant
pressure from nearby communities.
Preserves a large area of subtropical
evergreen
broadleaf and
mixed
evergreen broadleaf-conifer forest with
large patches of old-growth vegetation.
Member of the China MAB Network.
Listed as being of national significance
in the 1996 Biodiversity Review of
China
The globally Critically Endangered
Giant Salamander Andrias davidianus
occurs as do the globally Endangered
turtle Platysternon megacephalum and
the globally Vulnerable Pelodiscus
sinensis. Other threatened vertebrates
include the globally Vulnerable Asian
black bear, clouded leopard and Asian
golden cat. Threatened birds include
Syrmaticus eliotti, Tragopan caboti and
Oriolus mellianus.
No karst cave systems.
Mulun’s Cave 52 surveyed during
project preparation. Preliminary results
indicate that this cave is probably the
second richest for subterranean
biodiversity in China after Hunan’s
Feihu Dong.
National
National
Fuelwood collection, non-timber forest Bamboo
encroachment,
domestic
product collection and hunting
livestock, and timber harvesting
(1) NR Planning and Management: Including NR management plan development,
preparation of ecological baseline maps, improvement of field level management
systems, provision of a small amount of civil works, research.
(2) Strengthening of NR/local community relationships: Enhanced access to local
government development initiatives, energy conservation, delivery of sustainable
technologies, community conservation education and public awareness.
(3) Training and Capacity Building: Including in-service training at all levels,
building capacity for training delivery and institutional capacity building.
(4) Monitoring and evaluation: Project management training, regular patrolling to
collect field data and periodic sampling
Maonan and Zhuang ethnic minorities
Mostly Han people. Some Yao and
Miao ethic minorities
Existing or proposed
programs
(1) Guangxi Institute of Botany and
Guangxi University. Kmeria
septentrionalis survey and reproduction
project.
(2) Guangxi University. Blind cave fish
survey project
64
(1) South China Agriculture University.
Insect resource survey project.
(2) South China Institute of Botany.
Forest biodiversity monitoring project.
(3) Guangxi Forestry Bureau.
Threatened plants monitoring project.
Annex 4 - Table 3: Data for communities living in or near to project nature reserve sites
Nature
Reserve
Nonggang
Damingshan
Longshan
Mulun
Maoershan
TOTAL
Number of counties (district), village
committees (VC), natural villages (NV) &
population
CounTown
VC
NV
Populaties
tion
Within NR
NV
No. of
people
Main nationalities
2
6
29
66
15,034
0
0
Zhuang
4
8
54
218
310,000
0
0
Zhuang, Han
1
6
16
117
43,233
21
3067
Zhuang, Han, Yao
1
2
6
28
3,231
2
295
3
6
16
52
6,374
0
0
Zhuang, Maonan
Han, Zhuang, Yao,
Miao, Dong
11
28
121
481
377,872
23
3362
65
Annex 4 - Table 4: Nature Reserves in the Southwest Guangxi Karst Biodiversity Area
NR NAME
AREA
(km2)
LOCATION
(County)
ALTITUDE
RANGE
RATING*
Laohutiao
(Nonghua/Nongxin)
Gulongshan
Xialei
Qinglong
Chunxiu
Encheng
Diding
Dizhou
Defu
270
Napo
800 – 1200m
C
297
79
151
79
209
40
121
122
Jingxi, Debao
Daxin
Longzhoux
Longzhou
Daxin
Jingxi
Jingxi
Napo
500 – 800m
500 – 700m
300 – 500m
300 – 500m
400 – 600m
700 – 1500m
700 – 1100m
400 – 1500m
B(A)
B(A)
B(A)
B(A)
B(A)
D
* As assessed in the 1996 Biodiversity Review of China.
‘A’
= Area of global biodiversity conservation significance
‘B’
= Area of national biodiversity conservation significance
‘C’
= Area of local significance
‘D’
= Not suitable for listing as a nature reserve
‘B(A)’ = Area of national significance which could become of global significance if linked with
other NRs nearby
66
Annex 5: Project Costs
CHINA: Guangxi Integrated Forestry Development and Conservation Project
Project Cost Summary
(US$ '000)
Cost
Including
Contingencies
A. Expanding Timber Plantations
County/City implemented plantations
Provincial Forest Farm plantations
Expansion and Improvement of Nurseries
Subtotal Expanding Timber Plantations
B. Increasing Ecological Forest Cover
Watershed protection plus Bio-carbon trade
Watershed protection planting
Closing Slopeland
Subtotal Increasing Ecological Forest Cover
C. Improving Management of Nature Reserves
Provincial NR Management Support
Development & implementation of management
plans
Subtotal Improving Management of Nature Reserves
D. Enhancing Institutional and Management Capacity
Research and Extension
Research Grant
Forestry Strategy /a
Capacity Building and Training
Project monitoring and evaluation
Subtotal Enhancing Institutional and Management
Capacity
Total PROJECT COSTS
Financial Charges During Implementation
Total Costs to be Financed
% of
Total
IBRD
Financing
GEF
`Financing
100,424
69,555
1,118
171,097
49.1
34.0
0.5
83.6
57,921
40,031
97,952
2,613
10,075
5,985
18,673
1.3
4.9
2.9
9.1
-
-
1,669
0.8
-
1,087
5,348
7,017
2.6
3.4
-
3,718
4,805
1,112
316
316
2,972
343
0.5
0.2
0.2
1.5
0.2
49
1,259
240
316
75
54
5,059
201,847
2,750
204,597
2.5
98.7
1.3
100.0
1,548
99,500
500
100,000
445
-
5,250
\a To be implemented by the Guangxi Forestry Research Institute with shared financing from WB loan, GEF, and counterpart
funds
Note:
1. Identifiable taxes and duties are US$ 4.07 million, and the total project cost, net of taxes, is
US$195.8 million. The share of project cost net of taxes is 98 percent.
The project cost estimate includes physical contingencies of 20 percent for all civil works and
10% for the plantation works. Price contingencies for foreign origin goods are applied based
on projected MUV-5 price escalation factors of 2.4 percent for 2006 and 2 percent for each of
the following years. For local inflation, price increases of 1.5 percent per year for all project
years are used. Detailed annual project costs and the breakdown of local and foreign project
costs are available in the project file (COSTAB).
67
Annex 5 - Table A
IBRD Loan Part
Total Project Costs by Expenditure Category
(in US$ million equivalent)
Expenditure Category
Total costs
1. Plantations
157.78
2. Works
3.49
3. Goods
3.81
4. Consultant Services
1.70
5. Training and Study Tour
2.42
6. Front End Fee
0.50
7. Non Bank Financing 1/
27.40
Total
197.10
1/: Increasing Ecological Forest Cover Component, project management overheads cost and commitment
fee would be financed by counterpart funds.
Table B
GEF Grant Part
Total Project Costs by Expenditure Category
(in US$million equivalent)
Expenditure Category
Total costs
1. Works
0.83
2. Goods
0.71
3. Consultant Services
3.64
4. Training and Study Tour
1.19
5. Research Grant
0.3 0
6. Community Livelihood
Seed Grants
0.30
7. Non Bank Financing 1/
0.53
Total
7.50
1/: Incremental operating cost would be financed by counterpart funds.
68
Annex 6: Implementation Arrangements
CHINA: Guangxi Integrated Forestry Development and Conservation Project
Institutional and implementation arrangements
Project management arrangements have been designed on the basis of successful
implementation structures and models tried and proven effective under earlier Bank-supported
forestry projects. In the case of the proposed GIFDCP, a PLG, PCG and PMOs would be
established at the provincial level. The PLG would be chaired by the Vice-Governor
responsible for forestry and would consist of representatives from the forestry, finance,
planning and audit departments. The PCG will be located in the GFB and will be led by the
Director General. It would comprise the relevant Division Chiefs including the leader of the
WMD, PPMO, and Planning/Finance. The PLG and PCG would set the principles and policies
for the project, approve the overall implementation plan, coordinate inter-agency discussions
and resolve major issues during the project’s implementation. The PCG would regularly
undertake reviews of the inter-component cooperation to foster integration and crossfertilization of activities.
1.
2.
The current provincial PMO, which was established to implement the existing Bankfinanced projects, is located in the GFB. It will be responsible for Components 1 & 2, and the
BioCarbon pilot program. It will also provide the financial management and procurement
support Component 3. A BO has been set up in the WNRMS to be responsible for the MNRC
and to ensure that biodiversity concerns are integrated with the activities of the other
components. The WNRMS works closely with the WMD which is responsible for
biodiversity-related policies and regulations. The GFB will be responsible for ensuring close
coordination between WNRMS, WMD and the provincial PMO. The BO would have a
broader mandate to manage those activities included in components 3 and 4 than are financed
by the GEF grant.
3.
PLGs and PMOs would also be established at the county level. In each nature reserve a
PMG would be created directly under the nature reserve director. The PMG would be
responsible for supervision of all aspects of project activities in that reserve. It would report to
the BO of WNRMS. The PMG would include the head of the nature reserve’s Management
Planning Team, the head of the nature reserve’s Community Relationships Team, the nature
reserve’s Training Coordinator, and the nature reserve’s chief financial officer. Technical
advice would be sought from the Forest Survey and Design Institute and the Guangxi Academy
of Forestry as required. The Department of Forest Protection in the SFA would serve in an
advisory capacity to the GFB during project implementation of the nature reserves component.
Management plans for national nature reserves produced by the project would be submitted to
the DNR in Beijing for review and comment of technical aspects.
4.
A TSP has been established within the GFB consisting of members from relevant
research and technical institutes. The TSP would be responsible for identifying and carrying
out the research and extension programs, assisting the Provincial PMO and BO in carrying out
the project monitoring, training and technical services, as well as coordinating relevant
departments and institutions to undertake the forestry strategy, policy study and the regulatory
work
69
Timber Production Arrangements.
5.
The relationships and production arrangements between households, FFs and
communities would be decided through a participatory process carried out at the village level.
This would allow farmers and communities to choose from a menu of options and decide on
whether they wish to manage their plantations by themselves or in cooperation with FFs or
other planting entities. The participatory process and social assessment conducted during
project preparation showed that a large majority of households in remote areas and about half
of households in other areas have a preference for cooperative arrangements with FFs; about
25 percent of the farmers would prefer to take a loan directly from the project and plant on their
own, whereas 75 percent prefer to cooperate with forest farms or other planting entities.
6.
The project entities are state-owned FFs, private planting companies, households groups
and individual households. A survey of the Participatory Planting Design, in which households
or group of households choose the option of obtaining an individual loan from the project and
planting on their own, would be carried out one year ahead of planting time. The other option
available is when the FFs and companies participate in the project planting activities through a
cooperative and contractual arrangement with farmers and communities.
Monitoring and evaluation of outcomes/results
7.
M&E for the project would be based on a simple, inexpensive and sustainable plan.
The provincial and county PMOs, the BO and the nature reserves would monitor the project’s
progress and evaluate the overall project impacts. The M&E system would be designed to
monitor project performance and impact. A detailed M& E plan has been prepared (Annex 3).
It was reviewed at appraisal and agreed to during negotiations. A computerized baseline would
be set up to monitor project implementation progress, the performance of all afforestation
entities (including progress in plantation establishment), detailed contractual arrangements with
households and communities, as well as loan disbursement and reimbursement schedules. The
comparison of economic viability of smallholder forestry versus large-scale plantations would
be an important element in this monitoring system. The GEF’s Protected Areas METT which
was completed during project preparation to establish the baseline status would be used to track
improvement in nature reserve management effectiveness at mid-term and before project
closure.
8.
The project’s progress and outcomes would be measured regularly and the results would
be included in the project semi-annual reports. Under Component 4 of the project, provisions
have been made to build the capacity of project institutions to complete the required M&E
activities.
70
Annex 7: Financial Management and Disbursement Arrangements
CHINA: Guangxi Integrated Forestry Development and Conservation Project
1.
The Financial Management Specialist (FMS) has conducted an assessment of the
adequacy of the project financial management system of the proposed project. The assessment,
based on guidelines issued by the Financial Management Sector Board on November 3, 2005,
concluded that the project meets minimum Bank financial management requirements, as
stipulated in BP/OP 10.02. In the FMS’s opinion, the project will have in place an adequate
project financial management system that can provide, with reasonable assurance, accurate and
timely information on the status of the project in the reporting format agreed with the project
and as required by the Bank.
2.
Funding sources for the project include a Bank loan, a GEF grant and counterpart funds.
The Bank loan proceeds will flow from the Bank into the project Special Account (SA) to be
established at, and managed by, the Guangxi Provincial Finance Bureau (GPFB), to county
finance bureaus (FBs) and then to county PMOs. From there the funds would be delivered
directly to the final beneficiary. For the component to be executed by FFs, the funds will be
delivered from the SA to the provincial PMO and then to the provincial state-owned FFs. The
GEF funds will flow from the Bank into a SA separately set up for GEF grant to be established
at, and managed by the GPFB, and then directly to the nature reserves. Traditional
disbursement techniques will be used, not Financial Management Report (FMR)-based
disbursements given the project’s specific conditions. The counterpart funds will be provided
by provincial, county government, FFs and other beneficiaries.
Audit Arrangement
3.
The Bank requires that project financial statements be audited in accordance with
standards acceptable to the Bank. In line with other Bank-financed projects in China, the
project will be audited in accordance with ISA and the Government Auditing Standards of the
People's Republic of China (1997 edition). The Guangxi Provincial China State Audit Bureau
has been identified as auditors for the project. The annual audit report would be issued in the
name of the Provincial Audit Office.
4.
The annual audit reports of provincial project consolidated financial statements would
be provided to the Bank within six months of the end of each calendar year. This requirement
would be stipulated in the loan agreement. The responsible entity and timing are summarized
as below:
Component
Consolidated project financial
statements
Submitted by
Guangxi
Provincial PMO
71
Due date
June 30 of each year
5.
Output based/Unit Cost Disbursement. To facilitate the full participation of local
labor and promote cost effectiveness and the timely delivery of inputs in the project areas, an
output based disbursement procedure would be used. Disbursement would be made on the
basis of a combination of agreed unit cost disbursement models (Appendix 1 below) and
certification statements by the PPMOs verifying that the plantations have been completed in
accordance with agreed quality standards. Originally, 14 unit cost plantation models were
formulated on the basis of unit cost estimates, including costs of seedlings, fertilizer, labor and
other inputs reflecting the prevailing market situation. These unit cost plantation models were
prepared, reviewed and agreed by the Bank missions. At appraisal, the 14 unit cost plantation
models were consolidated into six unit cost disbursement models to improve transparency and
simplify disbursement. The unit cost disbursement models have been derived by combining
and averaging unit cost plantation models for similar tree species.
6.
Tranching of Disbursement for Plantation Establishment. In order to ease the
burden of project farmers and keep them from having to advance the full funding required for
the establishment of forest plantations, it was agreed that unit cost disbursement would be
undertaken over a three-year period and in five installments. During the first year of plantation,
payment would be made in three installments, the first paid to farmers after they complete the
site preparation, the second after completion of plantation, and the third payment after the side
dressing of fertilizer and tending are completed. During the second year, one single payment
would be made after farmers complete the application of fertilizer side dressing and tending of
the plantation. During the third and last year, the remaining single payment would be made
after farmers complete the application of fertilizer side dressing and tending of the plantation.
7.
Certification of Output-based Disbursement for Plantation Establishment.
Requests by the PPMO for output-based disbursements prepared on the basis of agreed unit
cost disbursement models must be certified by the relevant PMOs before their submission to
the Bank. The certification process would be undertaken as follows. After completing eligible
plantation work, project beneficiary households, farmer groups, village committees or FFs
would report to their respective County PMO on the amount of work completed and claim
reimbursement. The County PMOs would designate forestry inspectors who would visit the
plantation sites to measure/verify the species planted, the area claimed as planted, and the
conformity of the plantation with agreed quality standards. Once the inspectors are satisfied
that the work claims are genuine and to standard, they would certify the reimbursement claims.
The County PMOs would summarize the reimbursement claims in Statements of Expenditures
(SOEs) and forward the certified SOE to the PPMO. The PPMO would review the SOEs and
certifications of the County PMOs and undertake field random checks on a sample of the
claims. Once satisfied that the claims are accurate, the PPMO would consolidate the SOEs,
prepare a Withdrawal Application on the basis of the agreed unit cost disbursement models and
certify the Application before submitting it to the Bank.
72
Guangxi Integrated Forestry Development and Conservation Project (GIFDCP)
Annex 7 - Appendix 1. Unit Cost Disbursement Models
Unit cost
disbursement models
Corresponding plantation
model
Ⅰ
Y-1、Y-5
Consolidated disbursement unit
cost
Tree species
year
Total
1
year
2
60% disbursement rate from
WB loan
year
year
3
Total
1
year year
2
3
Pinus massoniana
Liquidambar formosana Hance
4788
3002 1451
334
2873 1801
871
201
5559
4385 1055
120
3336 2631
633
72
Ⅱ
Y-2、Y-3、Y-4
Cunninghamia Lanceolata (Chinese fir)
Quercus griffinith, Q.acutissima
Betula alnoides Hamilt
Ⅲ
Y-6、Y-8、Y-10
Y-11
Eucalyptus＋Acacia(1) (alternating rows)
Eucalyptus(1) (1250 stems short rotation)
Eucalyptus(3) (1250 stems medium rotation)
Acacia
6358
4250 1054 1054
3815 2550
632
633
Ⅳ
Y-9
Eucalyptus(2) (1666 stems)
7256
4912 1223 1120
4353 2947
734
672
5911
3749 1104 1058
3546 2250
662
635
5533
3129 2404
3320 1877 1442
Ⅴ
Y-12、Y-13、Y-14
Ⅵ
Y-15
Phyllostachys pubescens
Bambusa pervariabilis× Dendrocalamcpsis
grandis
Sinocalamus latiflorus Munro or
Dendrocalamcpsis beecheyanus
Improvement of low yield Phyllostachys
Pubescens
73
8.
Disbursement rates. During project appraisal, it was confirmed that the same
disbursement rates would be used for civil works, goods and services under the Bank loan
and the GEF Grant. The agreed disbursement rates are: 60 percent for plantation
establishment, 50 percent for civil works expenditures, 100 percent of expenditures for
goods (including equipment and vehicles) and 70 percent for services (consultant services,
training and study tours). Details are in the following disbursement table.
9.
Retroactive Financing. Retroactive financing of Loan Categories 1 and 2 and GEF
Grant Categories 1, 2 and 3 would cover eligible expenditures incurred after July 1, 2006
(appraisal was undertaken during the period from June 7 to 11, 2006). The maximum
amount financed would be equivalent to 10 percent of the total loan and grant amounts.
The PMO has agreed to prepare a work and financing plans for retroactive financing to be
submitted to the Bank at negotiations.
ALLOCATION OF LOAN PROCEEDS
10.
Proceeds of the Loan would be disbursed against expenditure categories as shown
in the table below:
Allocation of IBRD Loan Proceeds by Disbursement Category
Amount in
US$ million
1.37
Disbursement
Percentage
50
2. Plantations
94.87
60
3. Goods
2.33
100
4. Consultant Services Training/Study Tours
1.43
70
5. Front End Fee2
0.00
0.00
Expenditure Category
1. Works
TOTAL
100.00
The amounts disbursed are inclusive of taxes for all categories.
2
The Front-End Fee has been waived in its entirety for all projects approved by the Board in FY07
74
Allocation of GEF Grant Proceeds by Disbursement Category
Amount in
US$ million
0.42
Disbursement
Percentage
50
2. Goods and Equipment
0.62
85
3. Consultant Services Training/Study Tours
3.61
70
4. Research Grants
0.30
100
5. Community Livelihood Seed Grants
0.30
100
Expenditure Category
1. Works
TOTAL
5.25
The amounts of disbursed inclusive of taxes for all categories.
Use of Statements of Expenditures (SOEs)
11.
Some of the proceeds of the loan may be disbursed on the basis of SOEs as
indicated in the table below.
Expenditure Category
1. Works
2. Plantations
3. Goods
4. Consultants
5. Training and Study Tours
6. Grant for Research
7. Grant for Livelihood Community Activities
Contracts
All
All
≤ US$500,000
≤ US$100,000 for firms and
≤ US$50,000 for individuals
All
All
All
Designated Account (DA)
12.
Two Designated Accounts (DAs) will be established in the Provincial Finance
Bureau (one for the Loan and one for the GEF Grant). The authorized allocation of DAs
was discussed and determined during negotiations.
13.
The GPFB will be directly responsible for the management, monitoring,
maintenance and reconciliation of the DAs’ activities of the project. Supporting documents
required for Bank disbursements will be prepared and submitted by respective project
implementing entities through county PMOs and Finance Bureaus, and by the provincial
PMO to the provincial Finance Bureaus for final verification and consolidation before
sending to the Bank. For the component executed by the FFs, the supporting documents
75
will be submitted to the provincial PMO directly and then to the provincial Finance Bureau.
For Component 3, the supporting documents will be submitted by the nature reserves to the
BO, and by the provincial PMOs to provincial Finance Bureaus for final verification and
consolidation before sending to the Bank. The flow of the withdrawal applications is as
follows:
IBRD loan
Implementing
entities
County PMOs
and Finance
Bureaus
Provincial
PMO
Provincial
Finance Bureau
World
Bank
GEF grant
The nature
reserves
Provincial
PMO
Provincial
Finance Bureau
World
Bank
Financial Management and Reporting Arrangements
14.
Implementing Entity. A PLG, PCG and PMO would be established at the
provincial level. The PLG would be chaired by the Vice-Governor responsible for forestry
and would consist of representatives from the forestry, finance, planning and audit
departments. The PCG would be located in the GFB and will be led by the Director
General. The current provincial PMO, established to implement the existing Bank-financed
projects, is located in the provincial Forestry Bureau. It would be responsible for managing
Components 1, 2 and 4. It would also provide the financial management and procurement
support to Component 3. A BO has been set up in the WNRMS to be responsible for
managing component MNRC and to ensure that biodiversity concerns are integrated with
the activities of other components. PMOs would also be established at the county level and
the state-owned FFs. For Component 3, a PMG would be established in each of the five
nature reserves and the PMG would be responsible for supervision of all aspects of project
activities in that nature reserve. The organization chart is as follows:
76
PLG
PCG
Provincial
PMO
County
PMOs
BO
PMGs
PMOs in
forest farms
15.
Funds Flow. The flow of IBRD funds would follow the traditional route from the
Bank to the DA set up in the GPFB to county FBs and then to county PMOs. From there,
the funds will be routed directly to the final beneficiaries. For the component executed by
FFs, the funds will be delivered from the DA to the provincial PMO and then to the FFs.
The flow of GEF funds would be from the Bank to the DA set up in the GPFB and then to
the nature reserves directly. The funds flow of counterpart funds will follow the domestic
procedures, depending on the source of funding. The funds flow is as follows:
IBRD loan
The World
Bank
DA managed
by provincial
FB
County FBs
Provincial
PMO
GEF grant
The World
Bank
DA managed by
provincial FB
The nature
reserves
77
County PMOs
Provincial StateOwned Forest
Farms
Implementing
entities
16.
Project accounting staff with appropriate qualifications and work experience are
critical to the successful implementation of project financial management. Based on
discussions, observation and review of educational background and work experience of the
staff identified for financial and accounting positions in the provincial and county PMOs,
the task team noted that most of financial staff recruited should be able to meet the Bank’s
minimum requirements. However, given that about half of the financial staff are new to the
Bank project and that the knowledge of financial staff needs to be updated, financial
management training has been provided by the provincial PMO prior to project
negotiations.
17.
To strengthen the financial management capacity and to achieve consistent quality
of accounting work, a Project Financial Management Manual has been prepared, providing
detailed guidelines on financial management, internal controls, accounting procedures, fund
and asset management, and withdrawal application procedures. The Bank has reviewed the
Manual and found it acceptable; it will be finalized and distributed to all the project
financial staff before loan and grant effectiveness..
18.
Accounting Procedures. The administration, accounting and reporting of the
project will be set up in accordance with the Circular #13: “Accounting Regulations for
World Bank Financed Projects” issued in January 2000 by the MOF. The circular provides
in-depth instructions of accounting treatment of project activities and covers the following:




Chart of account
Detailed accounting instructions for each project account
Standard set of project financial statements
Instructions on the preparation of project financial statements
19.
The standard set of project financial statements mentioned above has been agreed to
between the Bank and MOF. It applies to all Bank projects appraised after July 1, 1998 and
includes the following:







Balance sheet
Statement of sources and uses of funds by project components
Statement of implementation of Loan Agreement
Statement of implementation of GEF Grant Agreement
Statement of special account (loan)
Statement of special account (GEF grant)
Notes to financial statements
20.
Each of the implementing entities would manage, monitor and maintain its
respective project accounting records. Original supporting documents for project activities
would be retained by originating implementing entities. In addition, each implementing
entity would prepare financial statements to be reviewed, approved and consolidated by the
provincial PMO before sending to the Bank for review and comment on a regular basis.
78
21.
Internal Audit. There is no formal independent Internal Audit department for the
project. However, this will not impact the project’s financial management as PMO
management and monitoring, Bank supervision visits, and yearly external audits will serve
as the mechanism to ensure that financial management controls are functioning
appropriately.
22.
Information System. There is no uniform accounting software being used by the
implementing entities, although some implementing entities are using accounting software
for their current activities. It is uncertain at this stage if they can integrate the project
activities into their current system and it is highly possible that the project implementing
entities will manually account for their transactions.
23.
Supervision Plan. A detailed supervision plan for this project will be included as
part of the China Audit Strategy document. This document will take into consideration the
size and FM risk rating of this project.
79
Annex 8: Procurement Arrangements
CHINA: Guangxi Integrated Forestry Development and Conservation Project
A.
General.
Procurement for the proposed project would be carried out in accordance with the World
Bank "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, the
"Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated
May 2004, and the provisions stipulated in the Legal Agreement. The description of the
various items under different expenditure categories is presented below. For each contract
to be financed by the IBRD Loan/GEF Grant, the procurement methods or consultant
selection methods, the need for pre-qualification, estimated costs, prior review
requirements, and time frame would be agreed between the Borrower and the Bank project
team in the Procurement Plan. The first procurement plan covers the initial 18-month period
and will be updated at least annually or as required to reflect the actual project
implementation needs and improvements in institutional capacity.
Plantations and Procurement of Works
Community Participation in Procurement: Neither ICB nor NCB contracts are foreseen
because of nature of the project. Plantation establishment with a total cost of US$157.78
million including land clearance and preparation, seedlings, purchase of fertilizer, planting
of seedling and tending, and forest trails would be implemented through community
participation by communities and beneficiary FFs by utilization of local labor, materials,
equipment and technology. Under community participation, communities/FFs would
mobilize their own village labor or hire labor to implement the plantations in accordance
with the annual plantation plan and technical standards agreed with the county PMO.
Payment would be made against completed and verified actual plantations based on the
agreed unit cost per species per hectare for each county. Implementation and quality of
plantations would be periodically supervised by established technical teams led by the
provincial and county PMOs.
Shopping: Small works with a total cost of US$4.32 million (such as storage sheds,
check/guard posts, fencing and boundary markers) would be procured and awarded through
shopping procedures as specified in paragraph 3.5 of the Procurement Guidelines. These
works estimated to cost less than US$100,000 equivalent per contract would be suitable for
lump sum and fixed-price contracts awarded on the basis of quotations obtained from at
least three local contractors.
Procurement of Goods
A total of US$4.52 million worth of goods would be procured for the project. These would
include: vehicle, motorcycles, office equipment and field kits. The procurement would be
80
done using the Bank’s Standard Bidding Document (SBD) for all ICB and Model Bidding
Documents for NCB agreed by the GoC and the Bank.
(i)
International Competitive Bidding (ICB) All contracts for goods costing
US$500,000 equivalent or more would be awarded through ICB procedures as
specified in the Procurement Guidelines.
(ii)
National Competitive Bidding (NCB) NCB procedures would be used for
procurement of goods costing less than US$500,000 equivalent per contract.
Contracts that are estimated to cost less than US$300,000 may be advertised in a
provincial daily newspaper only.
(iii)
Shopping. Other goods, such as field kits in smaller quantities and available
off-the-shelf, would be procured using shopping procedures with contracts under
US$100,000 equivalent per contract
Selection of Consultants
A total of about US$5.34 million of consulting services would be required and would
include nature reserve management planning, biodiversity survey and protection planning,
institutional and capacity building, and project monitoring and evaluation. Most services
would be provided by individual consultants and some by consulting firms. The consulting
contracts for firms which are expected to cost more than US$200,000 equivalent per
contract would use the Quality and Cost Based Selection (QCBS) or Quality Based
Selection (QBS) in conformity with paragraphs 2.1 through 3.4 of the Consultants
Guidelines. Most consulting contracts for firms are estimated to be under US$200,000
equivalent per contract under this project. The Selection Based on Consultants
Qualifications (CQ) would be used for these contracts. Chinese university, design and
research institutes as a source of consultants may be included in the shortlist if they meet
the requirements specified in paragraph 1.11 of the Consultants Guidelines. In such case,
QBS or CQ would be used instead of QCBS. Short lists of consultants for services
estimated to cost less than US$300,000 equivalent per contract may be composed entirely
of national consultants in accordance with the provisions of paragraph 2.7 of the
Guidelines. Under the circumstances described in paragraph 3.10 of the Consultants
Guidelines, the consultants would be selected and awarded under a sole-source basis,
subject to the Bank’s prior approval. Individual consultants would be selected and contracts
awarded in accordance with the provisions of paragraphs 5.2 through 5.3 of the Consultants
Guidelines. Under the circumstances described in paragraph 5.4 of the Guidelines,
individual consultants may be selected and awarded on a sole-source basis subject to the
Bank’s prior approval.
Training, Workshops and Study Tours
A total of US$3.61 million for training and study tours would be required. Detailed annual
programs will be developed by the PMO during project implementation and included in
project annual work plan for the Bank's review. Actual expenditures incurred in accordance
with the approved detailed programs will be used as the basis for reimbursement.
81
Non-Bank Financing
A total of about US$27.93 million of other costs would be required for the project. These
costs are largely related to: (a) Component 2; (b) the management overhead costs of the
PMOs including plantation site selection, field survey and design, quality checking and
acceptance, and project implementation supervision; and (c) incremental costs including
operating costs and consumables for field surveys, office consumables, field allowance
covering travel costs, and communications for the project BO for GEF Grant management.
Competitive Research Grant under GEF Component
A total of about US$300,000 would be provided as grants to research institutes to carry out
small-scale research programs for nature reserves management and biodiversity
conservation. Proposals for grants would be evaluated on predetermined criteria by a
Research Grant Evaluation Panel established in GFB in accordance with the procedures set
out in the PIP.
Livelihood Community (Seed) Grant under GEF Component
A total of about US$300,000 would be provided as grants to communities adjacent to the
nature reserves for agreed activities such as fuel-efficient stoves and bio-gas outlined in the
PIP. The selection of beneficiaries would be carried out in accordance with the detailed
procedures set out in the PIP.
B. Assessment of the Agency’s Capacity to Implement Procurement
Procurement activities would be carried out by PMOs established at provincial and county
level. The Provincial PMO was established in 1989 with 15 technical, procurement and
financial officers and has adequate experience in the earlier Bank-financed projects. The
county PMOs have also been established with staff of about 3-10 technical officers.
An assessment of the capacity of the Implementing Agency to implement procurement
actions for the project was carried out by the Bank’s Beijing Office in October 2005. The
assessment reviewed its organizational structure and functions, past experience, staff skills,
quality and adequacy of supporting and control systems, and the legal and regulatory
framework. The overall project risk for procurement is low.
C. Procurement Plan
The Borrower has developed a procurement plan for project implementation which
provides the basis for the procurement methods. The plan would be available at the
Guangxi PMO in the GFB and will also be available in the project’s database and in the
82
Bank’s external website. The initial 18 months plan was agreed prior to loan negotiations.
The Procurement Plan will be updated in agreement with the Project Team annually or as
required to reflect the actual project implementation needs and improvements in
institutional capacity.
D. World Bank Prior Review
All contracts: (a) in excess of US$500,000 for goods; (b) for consultant services in excess
of US$100,000 for firms and in excess of US$50,000 for individuals; and (c) all contracts
awarded under single source selection would be subject to prior review by the Bank. All
other contracts would be subject to ex post review by supervision missions, and the post
review
sampling
ratio
would
be
one
out
of
twenty
contracts.
E. Frequency of Procurement Supervision
In addition to the prior review supervision to be carried out from the Bank offices, the
capacity assessment of the Implementing Agency has recommended that procurement ex
post reviews should be conducted once a year.
Annex 8 - Table 1
Thresholds for Procurement Methods and Prior Review
Expenditure Category
1. Works
2. Goods
3. Consultant Services
4. training and Study Tours
Contract value Threshold
Method
(US$ thousands)
NA
>500,000
>100,000 for firms
>50,000 for individuals
All single source consultants
NA
83
Procurement
NS
ICB
NA
Annex 8 - Table C-1
Allocation of IBRD Loan Proceeds by Disbursement Category
See Annex 7 above
Annex 8 - Table C-2
Allocation of GEF Grant Proceeds by Disbursement Category
See Annex 7 above
84
Annex 9: Economic and Financial Analysis
CHINA: Guangxi Integrated Forestry Development and Conservation Project
1. A financial and economic analysis has been carried out for the Component 1 (timber
plantation) and Component 2 (watershed protection) and for the project as a whole. The
method is described below with some of the key figures summarized in Tables 9.1 to 9.5.
Assumptions:
2. Input/Output Prices. The economic analysis is based on the use of market prices for all
tradable products. For most commodities, economic prices are well reflected by the prevailing
financial prices. The economy of China is relatively open and integrated in the world markets,
and market prices are a good indication of opportunity costs. However, future market prices
for timber and industrial wood process are difficult to predict. While most projections indicate
relatively strong prices with an upward trend, a certain level of market risk remains. Following
the principle of a conservative estimate the lowest price prediction scenario is used in the
economic analysis, which suggests a 12 percent reduction in market prices which also takes
into account that the quality produced could be lower than expected. The key prices used in the
analysis for industrial wood and timber and seedlings are shown in Table 9.1.
3. Labor. A large proportion of project investment is in the form of unskilled labor. A cost
of RMB 25 per labor day has been used in the financial analysis. Given the relative level of
unemployment in particular in rural areas, the opportunity cost for unskilled labor is expected
to be only 80 percent of the prevailing financial costs.
4. Land. It is assumed that most of the plantations will be developed on existing marginal
crop lands with low agricultural productivity or on underutilized shrub- and bush-land. The
economic opportunity costs are low and in some cases close to zero. In the economic
analysis the average market value of RMB 300 per ha per year is used as a proxy for the
economic opportunity cost.
5. Global Benefits. In addition to on-site benefits, a range of benefits of a global dimension
are likely to be significant:

Reduction of Greenhouse Gases and Carbon Sequestration. Vegetation and soils
are widely recognized as carbon storage sinks. Sequestration of carbon in terrestrial
ecosystems offers a low-cost means of reducing carbon emissions. The ‘Kyoto
Protocol’ makes provisions for direct human-induced land-use change and vegetationrecovering activities to be considered in relation to each country’s Greenhouse Gases
reduction target. The incremental biomass per hectare, which will be generated over
the next 20 years, is estimated to be between 100 and 450 tons of dry matter. This is
expected to lead to an incremental carbon sequestration equivalent to 180 to 800 ton
CO2-e. It is difficult to estimate the economic damage of global warming. Provisional
estimates of global warming damage under a scenario of doubling CO2 concentration
85


show estimated damage ranging from 0.25 to 2 per cent of the world's GNP for the
year 2030. Using 1 percent of GNP and discounting this damage back to present values
results in global warming damage of US$7 to 18 per ton of fixed carbon. For the
analysis, a low value of US$4 per ton is used as a shadow price for fixed carbon. This
price is close to the currently discussed value for emission trading rights and is also
used in the BioCarbon fund analysis.
Biodiversity. Not only Component 3, which is directly aimed to protect biodiversity,
but also the Component 2 would contribute to protect, restore or increase biodiversity
in an area considered of global significance for biodiversity. In particular, the
protection of watershed areas or natural re-vegetation is expected to contribute to a
restoration of biodiversity and of the habitat for plants and wildlife. While biodiversity
has a clear economic value expressed by the importance the national and international
society places on it, accepted and agreed quantification methods are not available.
Generally cost-effectiveness methods are used to justify investments in biodiversity.
Long-term Impact on Climate and Rainfall. A restored vegetative cover in barren
limestone areas could have a positive impact on the climate in the region, particularly a
more moderate temperature distribution, increased air humidity and more evenly
distributed rainfall. While such an impact is likely to be positive, this effect would be
very difficult to quantify.
6. Downstream Benefits. In addition to incremental production benefits in the project areas,
the project would have benefits in the downstream areas of the Pearl River watershed resulting
from the re-establishment of a higher degree of tree and other vegetative cover. These
downstream benefits would be far reaching including: (a) lower variability in water flows
through the year and hence reduced severity of down-stream floods, reducing flood damage,
and lowering the need for investment in flood protection works; (b) reduced sediment load in
the river system, which would increase the operational life and efficiency of downstream
reservoirs and irrigations systems. Lower sediment would also reduce the rate of rise in river
beds in the delta areas and hence the need for flood protection measures; and (c) a potentially
higher future-use value for the watershed in terms of drinking water, hydro-power and new
irrigation schemes. While it is difficult to quantify these benefits, the economic analysis uses
the value of the standing timber as a lower reference value of the true economic value. This
is a conservative estimate, based on the assumption that, if the society decides against
harvesting a forest, the forest’s other function (e.g., watershed protection or biodiversity
value) is considered of higher value than the value of the harvested timber.
7. Plantation Pattern. The project would develop 200,000 ha of plantation forests, of
which 90,220 ha would be either of eucalyptus or of a mixture of eucalyptus and other
trees; 98,140 ha would include slow-growing trees, and 11,640 ha would be of various
species of bamboo. Under Component2, 18,000 ha of the protection forests would be
planted, of which 4,000 ha are expected to be used under the BioCarbon trading facility.
The assumptions about the development of the various plantations are shown in Table 9.2.
8. Phasing. The cash flow analysis is generally done for one production cycle (except for
the Y-10 eucalyptus model, which includes one coppice production) for each of the
86
plantation activities and a maximum length of 20 years for the individual activities. For
aggregated cash flow analysis, 25 years are used considering that the project will be
implemented over 5 years.
9. Physical Output. Plantation models are used to estimate physical production under
Components 1 and 2. The project is expected to produce a total of 25.1 million m³ of
timber, 2.9 million tons of fuel wood and 3.6 million tons of bamboo poles, as well as a
range of non-wood forest products such as resin, bamboo sprouts, and various types of bark
or fruits. The incremental sequestration of carbon is estimated at 61.1 million tons CO2
equivalent. Details are shown in Table 9.3.
10. Results:
Economic Rate of Return (ERR): The results of a preliminary rate of return calculation are
shown below. A summary of the overall economic cash is shown in Table 9.4.
Summary of ERR Calculation
Component/Activity
without global
benefits
Timber Plantation
Eucalyptus plantations
Slow growing timber
Bamboo plantations
Watershed Protection
BioCarbon plantations
Watershed plantations (excl. BioCarbon)
Project
with carbon
sequestration
benefits
ERR %
16.7
20.9
14.7
16.0
10.7
11.1
10.6
FRR %
12.2
14.2
11.3
11.3
8.6
7.7
8.8
ERR %
23.8
32.6
184
28.7
16.1
20.6
15.1
16.2
11.9
23.8
FARMOD software is used for data processing and IRR calculations.
11. Sensitivity analysis: Output prices for forestry products are likely to be at least stable.
More likely there will be an upward trend. Therefore the risk that the conservative prices used
in the economic analysis could not be achieved is considered small. A greater uncertainty,
however, is associated with some of the input prices;, in particular, fertilizer costs have shown
significant increases in the past and it uncertain how much they will continue to rise. A
sensitivity analysis is thus carried out focusing on the impact of unexpected increases in
fertilizer costs. Two scenarios are modeled: (a) and increase of 20 percent, and (b) and
increase of 50 percent over the baseline assumptions. The results are shown in the table below.
87
Sensitivity of ERR for Fertilizer Price Increases
Component/Activity
Timber Plantation
Eucalyptus plantations
Slow growing timber
Bamboo plantations
Watershed Protection
BioCarbon plantations
Watershed plantations
(excl. BioCarbon)
Project
ERR without global benefits %
Baseline
16.7
20.9
14.7
16.0
10.7
11.1
10.6
20% up
15.9
19.4
14.4
12.6
9.8
10.8
9.6
16.2
15.4
ERR with global benefits %
50% up baseline 20% up 50% up
14.8
23.8
22.6
21.1
17.7
32.6
30.7
28.1
13.9
18.4
18.0
17.4
7.7
28.7
24.9
19.8
8.6
16.1
15.1
13.6
10.5
20.6
20.2
19.5
8.3
15.1
13.9
12.2
14.3
23.8
22.0
20.5
12. The analysis shows that increases in fertilizer costs have a relatively small impact on the
ERR of the project; even a 50 percent increase brings the ERR down from 23.8 percent to 20.5
percent. All groups of activities would remain economically viable with an ERR over 12
percent. The impact is most significant in bamboo plantations which require large amounts of
fertilizer all thorough the production period. Here, with a fertilizer price increase of 50 percent,
the economic viability without the global benefits would reach a critical stage.
Financial Analysis
13. A financial analysis has been carried out for the project as a whole resulting in a
Financial Rate of Return (FFR) of 11.9 percent, which is relatively attractive and can
compete with alternative investment options. Financial cash flows have also been calculated
for all individual plantation activities. They are shown in Table 9.5. The financial cash flow
analysis for individual plantation activities indicates a significant difference between
eucalyptus plantations and slow-growing timber plantations. From a financial cash flow
point of view, most eucalyptus plantation models would be preferable over slow-growing
timber species. This analysis suggests that private investors and (in particular, smaller
investors), who cannot invest in a mix of plantations will choose faster-growing species
which have an earlier return from which a loan can be repaid. Larger investors and state
farms can, however, also make use of land not suitable for fast-growing species and can
(with a mix of plantations) generate sufficient income for loan repayment. Overall all
timber plantations are financially attractive. This is not necessarily the case for all of the
watershed plantations, for which ecological benefits have a higher importance.
88
China
Guangxi Integrated Forestry Development and Conservation Project
Table 9.1: Financial Prices
Unit
Outputs
Forest Logs (timber plantation)
Pine logs 4-6cm
Pine logs 8-12cm
Pine logs 14-18cm
Pine logs >20cm
Fir logs 4-6cm
Fir logs 8-12cm
Fir logs 14-18cm
Fir logs >20cm
Betula logs 4-6cm
Betula logs 8-12cm
Betula logs 14-18cm
Betula logs >20cm
Liquidambar logs 4-6cm
Liquidambar logs 8-12cm
Liquidambar logs 14-18cm
Liquidambar logs >20cm
Eucalyptus logs 4-6cm
Eucalyptus logs 8-12cm
Eucalyptus logs 14-18cm
Eucalyptus logs >20cm
Acacia logs 4-6cm
Acacia logs 8-12cm
Acacia logs 14-18cm
Acacia logs >20cm
Quercus mixed logs
Schima superba mixed
Liquidambar mixed
Eucalyptus mixed
Cryptomeria mixed
Bamboo poles
Bamboo poles hybrid
Fuel wood
Pine Fuel wood
Fir Fuel wood
Quercus fuel wood
Betula fuel wood
Liquidambar fuel wood
Eucalyptus fuel wood
Acacia fuel wood
Standing volume
Pine timber
Fir timber
Zenia insignis
Cryptomeria
Schima superba
Other forest products
Bamboo sprouts
Pine gum resin
Star Anis dry
Cinnamon bark
Cinnamon leaves
Magnolia officinalis bark
Other benefits
Carbon sequestration (tCO2-e)
Yuan
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
ton
ton
264
384
480
660
360
462
600
780
264
420
540
720
240
336
408
480
286
352
418
495
242
308
440
495
286
384
270
385
300
250
230
ton
ton
m³
m³
ton
ton
ton
160
160
175
175
175
180
180
m³
m³
m³
m³
m³
414
498
492
498
456
ton
ton
ton
ton
ton
ton
1,500
3,500
10,000
6,000
300
4,500
ton
32
Unit
Inputs
Seed and seedlings
Pine Seedling
Fir Seedling
Quercus Seedling
Betula Seedling
Liquidambar Seedling
Eucalyptus Seedling
Acacia Seedling
Bamboo Seedling
Bamboo Hybrid Seedling
Sinocalamus Seedling
Phyllostachys(2) Seedling
Zenia insignis seedlings
Dendrocalamus seedlings
Cryptomeria seedling
Schima seedlings
Illicium verum seedling
Cinnamon seedlings
Magnolia officinalis seedling
Harvesting and Handling
Timber logging
Timber loading/unloading
Timber freight
Fuel wood collection
Fuel wood loading/unloading
Fuel wood freight
Bamboo pole logging
Bamboo hybrid pole logging
Sprout collection
Gum tapping
Gum freight
Star Anis harvesting
Cinnamnon harvesting
Magnolia officinalis harvesting
Mixed logs harvesting
Harvesting design fee
Road maintenance
Labor
Unskilled Labor
89
Yuan
No.
No.
No.
No.
No.
No.
No.
No.
No.
No.
No.
No.
No.
No.
No.
No.
No.
No.
0.15
0.15
0.23
0.3
0.40
0.28
0.26
1.20
2.00
1.50
3.00
0.20
2.50
0.22
0.20
0.50
0.25
0.28
m³
m³
m³
ton
m³
m³
ton
ton
ton
ton
ton
ton
ton
ton
m³
m³
m³
45-50
15
28-32
20-30
15
22-27
75
70
500
1,500
100
4,000
2,100
1,800
95
4
15
day
25
China
Guangxi Integrated Forestry Development and Conservation Project
Project Summary
Table 9.2: Plantation Pattern
1
Timber plantation
Eucalyptus
Y-8 Eucalyptus (1250stems/ha)
Y-9 Eucalyptus (1666stems/ha)
Y-10 Eucalyptus 2-cycles (1250stems/ha)
Y-6 Eucalyptus+Acacia
Sub-total eucalyptus
Other timber
Y-1 Pinus Massoniana
Y-2 Chinese Fir
Y-3 Quercus griffinith
Y-4 Betula alnoides Hamilt
Y-5 Liquidambar formosana Hance
Y-11 Acacia
Sub-total other timber
Bamboo type
Y-12 Phyllostachys pubescens new
Y-15 Phyllostachys pubescens improv.
Y-13 Hybrid Bamboo
Y-14 Sinocalamus latiflorus
Sub-total bamboo type
Sub-total Timber plantation
Watershed protection
BioCarbon
F-1 Pinus+Quercus (BC)
F-2 Pinus+Schima (BC)
F-3 Liquidambar+Pinus
F-4 Liquidambar+Fir
F-5 Eucalyptus
Sub-total BioCarbon
Other Watershed protection
F-1-1 Pinus+Quercus (WS)
F-1-2 Pinus+Schima (WS)
F-6 Zenia+Dendrocalamus
F-7 Cryptomeria
F-8 Zenia+Liquidambar
F-9 Illicium verum
F-10 Cinnamomum cassia
F-11 Magnolia officinalis
F-12 Hybrid Bamboo
F-13 Dendrocalamus minor
Sub-total other watershed protection
Sub-total Watershed protection
Total Project
Hectares over years (cummulative)
2
3
4
5
12,866
5,929
1,024
1,409
21,228
25,732
11,859
2,047
2,819
42,457
41,814
19,271
3,326
4,581
68,992
48,247
22,235
3,838
5,285
79,605
54,680
25,200
4,350
5,990
90,220
14,198
1,939
1,899
3,826
353
878
23,093
28,395
3,878
3,798
7,652
706
1,755
46,184
46,142
6,301
6,171
12,434
1,147
2,852
75,047
53,241
7,271
7,121
14,347
1,324
3,291
86,595
60,340
8,240
8,070
16,260
1,500
3,730
98,140
765
1,294
445
235
2,739
47,060
1,529
2,588
889
471
5,477
94,118
2,485
4,206
1,445
765
8,901
152,940
2,868
4,853
1,668
882
10,271
176,471
3,250
5,500
1,890
1,000
11,640
200,000
360
240
420
180
400
1,600
900
600
1,050
450
1,000
4,000
900
600
1,050
450
1,000
4,000
900
600
1,050
450
1,000
4,000
900
600
1,050
450
1,000
4,000
522
207
824
71
273
419
209
47
162
560
3,294
4,894
51,954
1,045
414
1,647
141
546
838
419
94
325
1,120
6,589
10,589
104,707
1,698
673
2,676
229
887
1,361
681
153
528
1,820
10,706
14,706
167,646
1,959
776
3,088
265
1,024
1,571
785
176
609
2,100
12,353
16,353
192,824
2,220
880
3,500
300
1,160
1,780
890
200
690
2,380
14,000
18,000
218,000
90
China
Guangxi Integrated Forestry Development and Conservation Project
Table 9.3: Overall Estimated Output by the Project
(In '000 Units)
Unit
Total
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Main Production
Pine logs 4-6cm
Pine logs 8-12cm
Pine logs 14-18cm
Pine logs >20cm
Fir logs 4-6cm
Fir logs 8-12cm
Fir logs 14-18cm
Fir logs >20cm
Betula logs 4-6cm
Betula logs 8-12cm
Betula logs 14-18cm
Betula logs >20cm
Liquidambar logs 4-6cm
Liquidambar logs 8-12cm
Liquidambar logs 14-18cm
Liquidambar logs >20cm
Eucalyptus logs 4-6cm
Eucalyptus logs 8-12cm
Eucalyptus logs 14-18cm
Eucalyptus logs >20cm
Acacia logs 4-6cm
Acacia logs 8-12cm
Acacia logs 14-18cm
Acacia logs >20cm
Quercus mixed logs
Other mixed logs
Total timber
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
m³
724.1
2,214.5
4,260.0
2,365.3
133.5
348.6
576.8
459.8
230.9
705.7
1,121.9
813.0
19.8
74.3
57.8
13.2
1,305.0
4,592.1
2,918.8
667.2
68.7
242.3
163.4
32.6
916.3
51.5
-
-
-
-
-
12.8
32.0
19.2
7.1
-
297.4
1,048.0
628.7
121.7
5.6
20.1
12.1
2.4
179.4
-
19.9
13.0
294.3
1,040.3
624.1
121.8
16.2
57.0
38.5
7.7
176.1
-
19.9
13.0
358.1
1,275.9
765.5
152.2
17.6
62.0
41.5
8.3
215.7
-
62.5
41.2
9.7
6.6
24.9
16.3
4.7
17.5
13.6
3.1
146.0
517.2
310.3
60.9
16.0
56.1
39.0
7.8
87.6
0.3
62.5
41.2
9.7
6.6
9.9
6.5
4.7
17.5
13.6
3.1
141.4
505.8
303.4
60.9
8.1
28.5
19.2
3.8
85.4
0.3
78.1
51.5
12.1
8.2
9.9
6.5
5.8
21.8
17.0
3.9
14.7
46.0
71.2
39.9
5.3
18.4
13.2
2.6
23.9
0.4
31.2
20.6
4.9
3.3
2.3
8.8
6.8
1.6
16.7
52.4
81.2
45.4
29.3
0.1
31.2
20.6
10.3
13.2
2.3
8.7
6.8
1.5
13.2
41.3
64.0
35.8
16.3
0.1
5.4
9.9
5.3
16.5
25.6
14.3
6.5
-
6.8
12.4
34.4
153.0
264.0
191.3
5.3
16.5
25.6
14.3
6.5
-
2.7
4.9
34.4
153.0
264.0
191.3
20.1
107.9
479.9
1,002.4
556.6
2.7
4.9
43.0
191.3
330.0
239.1
23.9
30.2
25,076.9
-
-
-
-
-
71.1
2,315.6
2,408.9
2,929.5
1,441.0
1,332.1
450.3
304.6
265.4
83.6
730.2
670.5
3,011.8
91
Bamboo poles
Bamboo poles hybrid
ton
ton
Total bamboo
Pine Fuel wood
Fir Fuel wood
Quercus fuel wood
Betula fuel wood
Liquidambar fuel wood
Eucalyptus fuel wood
Acacia fuel wood
ton
ton
m³
m³
ton
ton
ton
Total fuel wood
Pine timber
Fir timber
Zenia insignis
Cryptomeria
Schima superba
m³
m³
m³
m³
m³
Total standing timber
Bamboo sprouts
Pine gum resin
Star Anis dry
Cinnamon bark
Cinnamon leaves
Magnolia officinalis bark
By Products
Carbon sequestration (tCO2e)
1,835.5
1,743.9
-
-
7.6
0.4
17.6
9.2
33.5
23.8
45.5
46.7
62.4
68.8
77.0
88.6
94.1
101.0
106.0
107.5
114.9
110.7
118.5
111.2
120.1
111.6
120.1
111.6
120.1
111.6
120.1
111.6
120.1
111.6
120.1
111.6
3,579.4
-
-
7.9
26.8
57.3
92.2
131.1
165.6
195.1
213.5
225.5
229.8
231.6
231.6
231.6
231.6
231.6
231.6
905.1
98.9
201.8
243.9
22.5
1,367.1
80.7
-
-
-
-
-
9.3
-
47.5
305.2
8.5
47.5
302.9
19.0
59.3
371.6
21.1
23.8
5.3
150.6
17.4
23.7
5.3
147.3
9.5
6.6
21.4
5.3
2.7
24.3
-
2.6
19.2
-
7.7
-
57.4
7.7
-
57.4
-
213.0
71.7
-
2,920.0
-
-
-
-
-
9.3
361.1
369.4
452.0
197.1
185.8
33.2
27.0
21.8
7.7
65.1
57.4
284.7
300.1
25.6
606.0
38.4
44.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,014.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
ton
ton
ton
ton
ton
ton
416.2
718.5
15.8
8.0
21.4
2.0
-
-
1.9
-
4.4
-
8.7
0.0
-
12.3
0.1
-
16.3
0.2
-
18.9
0.3
-
21.8
0.5
-
23.8
0.7
0.6
1.7
0.2
25.4
0.9
0.6
1.7
0.2
26.1
1.1
0.8
2.1
0.3
26.6
1.2
0.3
0.8
0.1
26.6
1.2
0.3
0.8
0.1
26.6
1.2
-
26.6
55.9
1.2
0.6
1.7
-
26.6
112.3
1.2
0.6
1.7
-
26.6
180.9
1.2
0.8
2.1
-
ton
61,155
58
875
1,779
2,939
3,717
4,555
4,939
4,797
4,500
3,981
3,662
3,315
3,005
2,811
2,625
2,552
2,329
2,165
92
China
Guangxi Integrated Forestry Development and Conservation Project
Project Summary
Table 9.4: Overall Economic Cash Flow (Aggregated)
(In Yuan Million)
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
Main Production
Forest Logs
Fuel wood
Standing volume
-
-
1.74
-
5.73
-
12.18
-
41.45
1.67
-
768.97
64.76
-
804.72
66.26
-
978.26
81.07
-
500.2
2
35.32
-
469.4
3
33.30
-
191.4
1
5.95
-
149.7
7
4.85
-
137.3
6
3.92
-
78.49
1.38
-
Other forest products
-
-
2.86
6.56
13.40
19.30
26.26
31.65
-
-
4.60
12.30
25.58
62.41
859.99
902.62
37.57
1,096.9
0
48.39
583.9
3
52.72
555.4
5
57.04
254.4
0
54.35
208.9
7
55.02
196.3
0
1.85
28.01
56.94
94.03
118.96
1.85
28.01
61.54
106.33
144.54
145.7
6
208.1
7
158.05
1,018.0
4
153.49
1,056.1
1
144.00
1,240.9
0
127.3
9
711.3
2
117.1
8
672.6
3
106.0
7
360.4
6
96.18
305.1
5
26.83
43.27
26.76
96.86
27.23
75.01
32.21
134.44
32.55
104.08
41.69
178.32
13.02
79.63
23.24
115.89
13.02
60.28
20.30
93.61
24.94
4.39
29.33
9.27
1.96
11.24
-
-
-
-
-
93.07
189.93
112.85
247.29
137.29
315.60
73.37
189.26
60.47
154.08
11.49
40.81
3.61
14.85
2.44
2.44
3.41
3.41
2.66
2.66
1.74
1.74
1.01
14.21
2.03
29.13
1.01
3.26
47.19
3.80
3.75
53.46
7.55
4.24
60.98
11.97
4.24
62.02
16.23
4.24
84.22
19.95
3.90
78.92
22.48
3.56
77.40
15.22
31.16
1.55
53.01
4.18
65.18
8.80
81.57
22.22
100.4
292.14
396.83
307.10
409.87
372.70
476.13
23.54
3.13
53.91
202.4
6
283.0
23.72
2.95
49.47
192.1
7
268.3
Sub-total Main Production
By Products
Other benefits
Gross Value Of Production
Production Cost
Investment
Purchased Inputs
Seed and seedlings
Chemical fertilizers
Other inputs
Sub-Total Purchased Inputs
Labor
Unskilled Labor
Sub-total Investment Costs
Operating
Purchased Inputs
Chemical fertilizers
Pesticides
Other inputs
Harvesting and Handling
Sub-Total Purchased Inputs
93
52.34
132.2
1
391.1
4
11.43
270.4
4
673.0
1
368.4 1,388.8 1,145.
7
1
80 1,553.7
10.04
46.63 39.09 51.34
- 123.65
486.0
644.1
8 749.97
6 546.93
864.5 2,185.4 1,829.
8
0
05 2,275.7
89.96
286.2
5
84.01
216.2
2
81.65
754.6
6
74.54
69.29 59.87 58.20
939.1 2,254.7 1,888.
2
0
92 2,333.9
-
-
-
-
-
-
0.77
0.77
1.52
1.52
2.44
2.44
3.41
3.41
2.66
2.66
1.74
1.74
0.77
0.77
23.33
2.77
37.41
23.08
2.74
35.32
22.77
2.71
34.62
22.82
2.69
32.56
74.78
135.9
68.11
128.2
45.78
103.8
22.98
2.62
50.08
322.3
7
398.0
22.90
2.56
85.28
91.79
155.3
22.94
2.68
46.60
226.2
3
298.4
730.05
840.78
-
-
1.52 1.31
1.52 1.31
22.80
2.06
69.82
618.0
4
712.7
22.73
1.61
74.84
673.86
773.04
5
5
0
0
2
2
5
5
19.37
4.33
23.70
306.7
5
309.4
2
309.4
2
401.9
1
18.51
3.96
22.47
290.7
7
292.5
1
292.5
1
380.1
2
17.59
3.60
21.19
176.4
9
177.2
6
177.2
6
183.2
1
17.44
3.53
20.97
156.8
9
158.4
0
158.4
0
146.7
4
16.93
3.48
20.41
148.6
3
151.0
7
151.0
7
135.1
8
16.32
3.44
19.75
123.6
1
127.0
1
127.0
1
16.59
3.42
20.01
318.4
7
321.1
3
321.1
3
433.5
3
4
1
Labor
Unskilled Labor
Skilled labor
Sub-Total Hired Labor
4.70
4.70
9.47
9.47
15.32
15.32
18.61
1.56
20.17
21.95
3.14
25.09
Sub-total Operating Costs
19.92
40.64
68.32
85.35
106.66
209.85
287.93
383.92
274.62
260.74
209.85
287.93
383.92
274.62
Sub-Total Production Cost
OUTFLOWS
Cash Flow
IRR = 23.1%, NPV = 1,011.65
25.54
5.78
31.32
24.66
5.88
30.53
22.51
5.19
27.70
428.15
440.41
503.83
443.00
442.85
507.24
260.74
23.77
5.03
28.80
129.2
5
170.0
6
170.0
6
443.00
442.85
507.24
-208.00 -259.92 -322.39 -168.29 -116.19
38.11
575.04
613.26
733.66
94
89.20
16.56
16.37 14.13 11.93
3.29
3.17
2.61 2.12
19.84
19.55 16.73 14.06
417.8
729.4
8 860.33
5 787.10
419.6
730.9
2 861.10
6 788.41
419.6
730.9
2 861.10
6 788.41
519.5 1,393.5 1,157.
1
9
96 1,545.5
China
Guangxi Integrated Forestry Development and Conservation Project
Project Summary
Table 9.5: Summary of IRRs
FIRR
Timber plantation
Eucalyptus
Y-8 Eucalyptus (1250stems/ha)
Y-9 Eucalyptus (1666stems/ha)
Y-10 Eucalyptus 2-cycles (1250stems/ha)
Y-6 Eucalyptus+Acacia
Average eucalyptus
Other timber
Y-1 Pinus Massoniana
Y-2 Chinese Fir
Y-3 Quercus griffinith
Y-4 Betula alnoides Hamilt
Y-5 Liquidambar formosana Hance
Y-11 Acacia
Average other timber
Bamboo type
Y-12 Phyllostachys pubescens new
Y-15 Phyllostachys pubescens improv.
Y-13 Hybrid Bamboo
Y-14 Sinocalamus latiflorus
Average bamboo type
Watershed protection
BioCarbon
F-1 Pinus+Quercus (BC)
F-2 Pinus+Schima (BC)
F-3 Liquidambar+Pinus
F-4 Liquidambar+Fir
F-5 Eucalyptus
Average BioCarbon
Other Watershed protection
F-1-1 Pinus+Quercus (WS)
F-1-2 Pinus+Schima (WS)
F-6 Zenia+Dendrocalamus
F-7 Cryptomeria
F-8 Zenia+Liquidambar
F-9 Illicium verum
F-10 Cinnamomum cassia
F-11 Magnolia officinalis
F-12 Hybrid Bamboo
F-13 Dendrocalamus minor
Average other watershed protection
ERR excl.CO2
benefit
ERR incl.CO2
benefit
20.6%
18.3%
18.9%
17.2%
18.8%
22.0%
19.5%
19.9%
18.6%
20.0%
33.7%
30.1%
30.8%
36.4%
32.8%
13.5%
11.1%
13.1%
13.1%
12.3%
13.1%
12.7%
15.0%
12.8%
14.4%
15.0%
15.8%
13.9%
14.5%
17.5%
15.1%
27.5%
19.2%
22.9%
27.3%
21.6%
15.5%
16.7%
21.7%
14.0%
17.0%
15.7%
15.9%
17.0%
15.4%
16.0%
24.8%
31.8%
28.8%
29.8%
28.8%
6.1%
7.1%
5.9%
5.9%
10.9%
7.2%
7.7%
9.2%
8.2%
8.2%
18.9%
10.4%
17.3%
15.3%
14.0%
13.9%
34.2%
18.9%
8.9%
10.2%
10.9%
8.0%
10.2%
10.6%
9.8%
8.2%
11.6%
9.8%
9.8%
10.7%
12.2%
10.9%
8.5%
11.0%
12.0%
10.8%
10.0%
8.7%
7.2%
10.2%
18.1%
18.0%
14.6%
15.5%
15.2%
14.3%
12.8%
13.6%
15.9%
14.7%
15.3%
95
Annex 10: Safeguard Policy Issues
CHINA: Guangxi Integrated Forestry Development and Conservation Project
A.
Summary of Environmental Issues
1.
Background. The GIFDCP seeks to improve the livelihoods of villagers involved
in forestry activities and forest product enterprises through integrated, demand-driven, and
sustainable management of forest resources, biodiversity conservation and timber
production systems. This will be effected through:
 the establishment of intensively managed timber plantations and the development of
mechanisms that would better link timber production, marketing and processing;
 the demonstration of improved watershed management for environmental
protection, including a carbon sequestration and trade pilot program;
 better management of nature reserves for the conservation of globally important
ecosystems and biodiversity; and
 capacity building and monitoring, training and evaluation program.
2.
The components are integrated and build upon each other to support the Guangxi
government’s desire for sustainable forest development and to generate maximum benefits
to local beneficiaries, the national economy and the environment. The proposed project
period is six years; the plantation activities will be completed in the first four years,
tendering will continue in the final two years, and the biodiversity conservation component
will be executed over five years.
3.
Project Location. The GZAR is located in south China, in the headwaters of the
Pearl River is located south-east of Yunnan and the Guizhou Plateau with mountainous and
hilly topography in the north-west, much of it limestone karst, and flatter, low-lying land in
the south-east. The GZAR has about 50 million people of whom some 80 per cent are
involved in agricultural activities and 38 per cent are ethnic minorities. The project
activities are widely scattered across GZAR; the project plans to involve 46
counties/municipalities in timber plantation establishment, 25 counties/municipalities in the
watershed management component, and five nature reserves in the biodiversity
conservation component.
4.
Natural Conditions. The project areas are located in the northern sub-tropical zone
with a monsoon humid climate with mean annual rainfall between 1,250-1,750 mm. The
mean annual temperature ranges between 17-22oC. GZAR is a biologically-diverse area
much of which falls within the Indo-Burma Biodiversity Hotspot. The limestone karst
areas cover about 38 per cent of GZAR, mainly in the north-west part and have many
range-restricted and threatened species associated with them.
5.
Forest Cover and Nature Reserves. Forest cover in the project counties averages
about 55 per cent, but differs from county to county. The GZAR has 96 nature reserves of
different categories and five of the most outstanding of these have been selected for project
support under the biodiversity conservation component.
96
6.
Public Participation. In order to seek local support, increase transparency and
accountability to the public, reach consensus with various stakeholders, and enhance
ownership of the environmental management elements of the proposed project,
participation of beneficiaries and other stakeholders was of crucial importance in the
environmental assessment process. Methods used included posting of public letters in
project areas, publishing notices in local newspapers, placing notices in government offices
and libraries, organizing meetings and interviews with villagers, holding five general
symposia and two expert symposia (to which NGOs were invited), preparing public
participation questionnaires and consulting with individuals, and receiving many telephone
calls. A total of 1800 questionnaires was sent to a wide range of people. Almost all
respondents believed the project was necessary, although there were concerns over soil
quality, erosion, pests and diseases, biodiversity, and short-term waste management issues.
Constructive suggestions made included developing mixed forests, ensuring that state and
provincial laws were followed, promoting environmentally-friendly fertilizers, providing
training opportunities, taking care when using exotic species, subsidizing those forestry
activities with biological benefits, and clarifying use rights.
7.
Environmental Assessment Report. The EA for the GIFDCP was prepared to meet
the requirements of the Bank, the GoC and the government of GZAR. The GIFCP was
assigned an EA category ‘B’ in the Bank's classification system. To review the project's
likely positive and negative environmental impacts, and the EMMP (covering mitigation
measures, monitoring, and institutional strengthening) built on the work of similar previous
projects in China. The EA was conducted by specialists from the GEPRI, as well as staff of
the Forestry College of Guangxi University in Nanning, with additional help from an
international consultant. The EA has learned from previous Bank-supported forestry
projects in China, especially those that have been implemented in GZAR (the National
Afforestation Project, the Forest Resource Development and Protection Project, and the
Forestry Development in Poor Areas Project), through on-the-ground assessments and a
review of the available monitoring data.
8.
Overall, the project is expected to generate significant environmental benefits
because it focuses on high-priority natural resource management issues. The Plantation
Establishment component should also have positive environment impacts through the
reduction of pressure on natural forests, a decreased demand for imports of forest resources
from outside China, and contributions to local community income. The major potential
impacts of the plantations component on the environment include: degradation of
vegetation and potential soil erosion as a result of temporary land occupation at the
construction sites, as well as site preparation for the plantations; short-term impacts on
native fauna; and pollution/waste management issues at the planting sites. If the mitigation
measures proposed in the EMMP are implemented, the negative impacts during
implementation/construction phases will be minimal.
9.
Potential negative environmental issues arising from plantation development include
those associated with establishing large-scale plantations with few species (some of which
97
are not native to China), selecting the sites for those plantations, and the management of
pests and diseases. The project design has been sensitive to these issues by setting clear
guidelines for an objectively verifiable process of site selection, supporting mainly small
blocks of plantations, increasing the number and variety of tree and bamboo species/clones,
and avoiding any tree species with a history of invasive behavior. Detailed annexes on
Plantation Management and Pest Management (based on the Bank’s previous Sustainable
Forestry Development Project) were prepared as part of the EA. Nonetheless, these will
require careful planning and execution because of the wide coverage and small unit size of
the component.
10.
The components on ecological forests and nature reserves are expected to have
positive environmental impacts, both directly (by protecting some of the most important
remaining natural forests and associated biodiversity in Guangxi), and indirectly (through
protecting key forested watersheds). Any negative environmental issues arising from these
components are expected to be insignificant and easily mitigated.
11.
Environmental Impact Mitigation Measures Mitigation measures have been
proposed to reduce the expected negative environmental impacts of the project. Since the
project sites are scattered throughout the GZAR, effective implementation of the proposed
mitigation measures, if not well organized, could be a major challenge for the project. To
cope with this challenge, the EMMP (including institutional strengthening, reporting, and
environmental training requirements) has been developed and the budget for it is an integral
part of the project. The EMMP envisages the PPMO taking environmental management and
monitoring as part of its core responsibilities through all stages of the project.
12.
In order to ensure the successful implementation of the proposed EMMP and in line
with relevant national environmental regulations, each County-level PMO will appoint one
to three officers (depending on the number and area of plantation blocks) who will have full
responsibility for the successful implementation of the EMMP. The County-level PMOs
will also designate one of their staff to be trained by the project to take the responsibility of
ensuring the adoption of all EMMP activities by the project at the county/farm level. These
staff will be responsible for the preparation of the environment protection materials and
documents related to project implementation for the review of State Environment Protection
Agency (SEPA), the Bank and respective (EPBs). Ultimate responsibility for ensuring that
all activities identified in the EMMP are implemented rests with the PPMO which will
ensure the smooth flow of required environmental reports/data from the counties to the
regional office.
B.
Summary of Social Issues
13.
Involuntary Resettlement. Neither project agencies nor other governmental units
are expected to identify or undertake activities requiring taking of land under this project.
Accordingly, no involuntary population relocation or land acquisition is envisaged.
However, some loss of land or assets by individuals in a community may occur due to
small-scale infrastructure construction (e.g., village roads, storage sheds.) which will be
98
identified through a community-based planning process during project implementation.
Resettlement-related impacts hence cannot be ruled out of the project completely. A Policy
Framework for Resettlement and Land Acquisition has therefore been prepared by the SA
team in accordance with the Bank safeguard policy OP4.12, Involuntary Resettlement, to
establish agreed principles and procedures to be followed in the event that such
development activities requiring land taking are determined during project implementation.
14.
Moreover, in compliance with the policy adequately to address possible adverse
impacts on people’s livelihoods arising from new restrictions on access to resources in the
nature reserves or hill closure areas under the project, a Process Framework for Mitigating
Potential Adverse Impact has been developed by the SA team. The Process Framework will
ensure that project implementation includes a participatory process for local people to avoid
significant restriction impacts under the nature reserve management and watershed
rehabilitation components, select and agree on measures to mitigate those impacts which
cannot be avoided, and resolve any conflicts which may occur.
15.
As agreed, the Borrower will attest that no activities requiring involuntary taking of
land or unnecessary restriction of access to natural resources will be undertaken in this
project without prior acceptance by the Bank of appropriate planning remedies. The GEF
Commission, as the source of grant support, will also attest that it will not provide support
for any activities requiring involuntary taking of land, or activities imposed by government
agencies on villages receiving grant support.
16.
Indigenous Peoples. Guangxi is a Zhuang Minority Nationality autonomous
province-level region. It has ethnic minority people from 54 groups totaling 18 million
people that account for 38 percent of Guangxi population. The Zhuang is more than 15
million people, about 86 percent of ethnic minority people and 33 percent of the total. The
other ethnic minorities account for about 5 percent. In the 42 project counties, nine of these
ethnic minorities are present; they are: the Zhuang, Maio, Yao, Dong, Maonan, Yi, Shui,
Mulao, and Gelao, with a population of 593,000 beneficiaries that account for 34.9 percent
of the total project population. These ethnic minorities ether reside in their own groups or
are intermixed with others (including the Han), and their proportion in local population
differs between the project counties. All nine ethnic minority groups in the project areas can
be defined as indigenous people and their presence invokes the Bank’s social safeguard
policy OP4.10, Indigenous People.
17.
The project SA was carried out in early project preparation and an EMDP was
developed based on the SA findings. Some 28 villages in nine project counties and 18
hamlets in the (then) seven natural reserves (only five nature reserves have been retained
under the project) and adjacent areas, as well as two group companies and three FFs were
surveyed and interviewed by the SA team. Most of the villages/hamlets were inhabited by
multi-ethnic minority groups, including all the nine ethnic minorities covered by the
project. In order to extend project information disclosure and public consultation, a training
workshop on participatory approach and (PRA) was held during the SA exercise, and about
130 representatives from all the originally proposed seven project Nature Reserves, 33
99
project counties, eleven state FFs and four group companies, as well as staff of the PMO
and the Regional Forestry Design Institute attended the workshop.
18.
Trainees carried out four sample village consultations in each of the 42 proposed
counties, and 10-15 household questionnaire interviews in each village. At the end of the
SA fieldwork, a stakeholder workshop was held in consultation with all related government
and technical line agencies in the region. After the workshop, more than 25,000 project
information leaflets were distributed and the sample application forms were sent to the
proposed project communities. During the comprehensive consultation processes, various
views, needs, aspirations and attitudes toward the project components of the multiple
stakeholders, especially those of the primary stakeholder farmers and ethnic groups, were
identified and analyzed to help steer project design.
19.
As the SA indicates, while this project aims to improve the management,
sustainability and environmental condition of Guangxi’s forest resources, it also intends to
enhance project economic benefits to local people and to give them the incentive to
participate in the sustainable management of natural resources. Most of the project areas are
in remote mountains and about half of the areas are located in the nationally/regionally
designated poverty counties that are home to the poorest and most disadvantaged people in
Guangxi Region, including many of ethnic minority groups. Therefore, most of the ethnic
minority groups in the project areas remain vulnerable in terms of poverty incidence and
difficult natural environments, and all of them have expressed willingness to participate in
the project. The EMDP, as one of the result of the SA exercise, therefore sets out the
practical steps that will be taken to ensure that ethnic minority groups have equitable
opportunities to take part in and fully benefit from the project, and that the risks of potential
negative impacts identified are avoided or minimized.
20.
Because of the remaining gap between the ethnic minority groups and mainstream
society, special profiles were prepared for all ethnic minority groups identified in these
areas in order to tailor project design to local ethnic cultures. The profiles describe: (a) the
basic demographic data and locations of the ethic minority groups; (b) their livelihoods and
opportunities; and (c) their cultural traditions and ways of lives. Although there are few
limiting factors that would restrict access of the ethnic minority groups to the project, in
each project component a number of risks of potential negative impact have been identified.
Some of them are specific to ethnic minority people, while others are not specific although
being related to them. Overall, these risk factors especially relate to land tenure and
contractual arrangements in the commercial plantations, and to restrictions in resource
access in the nature reserves and hill closure. A large proportion of ethnic minority people
live in areas that are too remote from the main roads to establish viable plantations; and in
most cases ethnic minority people lack capital and face more difficulties in access to new
technology and information.
21.
In view of their various vulnerable situations, the EMDP commits that all project
activities offer development opportunities to ethnic minority people in the project areas
while mitigating any potential risks. It includes three types of measures for this purpose: (a)
100
one inclusion measure applies to all counties to ensure that isolated ethnic minority
communities are given equal access to apply to the project; (b) general measures apply to
all project villages whether they include ethnic minority people or not, and their purpose is
to ensure that opportunities for positive impact for local people including ethnic minorities
are taken advantage of, such as participatory detailed design and capacity building; and (c)
a number of specific measures in favor of the ethnic minority people’s involvement ensures
attention to (and monitoring of) ethnic minority issues, including culturally compatible
planning, training and supporting activities to local ethnic minority needs.
22.
In the detailed project component design stage for the first year project activities,
the Borrower followed up the SA exercise and fulfilled the EMDP commitments to conduct
the participatory design procedures in all the villages in 20 percent of the project areas, on
the basis of free, prior and informed consultation with local ethnic minority people about
the project nature and impacts. A Participatory Project Design Manual was developed and
farmers’ participation procedures were determined, including village meetings and focus
groups on project component design, technical training and contractual discussion, and
village/household application and decision-making. In particular, each design of the project
components was ensured with cultural and location-specific appropriateness, and all the
procedures were recorded. It is evident that the EMDP helped not only the project design
with special attention to local ethnic minority groups but also its implementation with their
informed participation and broad support.
101
Annex 11: Project Preparation and Supervision
CHINA: Guangxi Integrated Forestry Development and Conservation Project
PCN review
Initial PID to PIC
Initial ISDS to PIC
Appraisal
Negotiations
Board/RVP approval
Planned date of effectiveness
Planned date of mid-term review
Planned closing date
Planned
8/27/2004
9/9/2004
9/9/2004
06/04/2006
08/15/2006
12/14/2006
03/15/2007
06/30/2010
12/31/2012
Actual
8/25/2004
9/15/2004
9/15/2004
06/07/2006
10/10/2006
Key institutions responsible for preparation of the project:
GZAR Provincial Forestry Bureau
Bank staff and consultants who worked on the project included:
Name
Title
Liu Jin
Mohamed Noureddine Benali
Susan Shen
Tom Brummer
Tony Whitten
Zong-Cheng Lin
Josef Ernstberger
Carlos Escudero
Melinda Good
Dong Yi
Shi Jinan
Xiaolan Wang
Hongwei Zhao
Minhnguyet Le Khorami
Task Team Leader
Lead Operations Officer/Co-TTL
Lead Ecologist
Senior Silviculture/Nursery Specialist
Senior Biodiversity Specialist (Safeguards)
Social development Specialist (Safeguards)
Senior Economist
Lead Counsel
Senior Counsel
Financial Management Specialist
Senior Procurement Specialist
Operations Officer
Team Assistant
Program Assistant
World Bank funds expended to date on project preparation:
1. Bank resources: US$ 408,893
2. Trust funds:
US$ 83,000
3. Total:
US$ 491,893
Estimated Approval and Supervision costs:
1. Remaining costs to approval: US$138,605
2. Estimated annual supervision cost: US$130,000
102
Unit
EASRD
EASRD
EASRD
Consultant
EASES
EACCF
Consultant
EACCF
LEGEA
EACCF
EACCF
EASRD
EACCF
EASRD
Annex 12: Documents in the Project File
CHINA: Guangxi Integrated Forestry Development and Conservation Project
A. Government Reports related to the Project:
1. Project Implementation Plan June, 2006
2. Afforestation Models and Financial-Benefit Analysis Models for Timber
Plantation, Ecological Forest Plantation and Watershed Rehabilitation
3. Planting stock development plan (including planting materials and seedling
criteria for major planting species; nursery management guidelines; and nursery
extension plan)
4. Training and extension programs for the Expanding Timber Plantation and
Increasing Ecological Forest Cover Components
5. Guangxi Forestry Strategy and Policy Study Plan
6. Project Monitoring and Evaluation Plan
7. Project Design Document for BioCarbon Pilot.
8. Baseline Methodology and Monitoring Methodology for BioCarbon Pilot
9. Procurement Management Manual
10. Goods and Equipment Procurement Plan.
11. Financial Management Plan
12. Social Assessment Report
13. Social safeguard document, including:
(a)
an Ethnic Minority Development Plan;
(b)
a Land Acquisition and Resettlement Policy Framework; and
(c)
a Process Framework
14. Participatory Project Design Manual
15. Environmental Assessment
16. Protection Guidelines for Plantation Establishment and Management
17. Pest Management Plan
18. Timber Product Market Study Report
B. Bank Staff Assessment:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Identification Mission Aide Memoire September 2004
Mini Preparation Mission Aide Memoire April 2005
Preparation Mission Aide Memoire July 2005
Pre-appraisal Mission Aide Memoire February 2006
Appraisal Mission Aide Memoire June 11, 2006
Procurement Capacity Assessment Report for the Project June 15, 2005
Financial Management System Assessment Report June 15, 2005
Assessment for the State Farm Management Mechanism and Reform Process
Assessment for the State Farm Financial Statement
C. Others:
1. GEF Project Executive Summary
103
Annex 13: Statement of Loans and Credits
CHINA: Guangxi Integrated Forestry Development and Conservation Project
Difference between
expected and actual
disbursements
Original Amount in US$ Millions
Project ID
FY
Purpose
IBRD
IDA
P068752
2005
CN-Inner Mongolia Highway & Trade
Corrid
100.00
0.00
0.00
P075730
2005
CN-HUNAN URBAN DEV
172.00
0.00
P067828
2005
CN-Renewable Energy Scale-up
Program
87.00
P069862
2005
CN - Agricultural Technology Transfer
P071094
2005
P081161
P081346
GEF
Orig.
Frm. Rev’d
Cancel.
Undisb.
0.00
0.00
100.00
0.00
0.00
0.00
0.00
0.00
172.00
7.00
0.00
0.00
0.00
0.00
0.00
87.00
0.00
0.00
100.00
0.00
0.00
0.00
0.00
100.00
2.20
0.00
CN - Poor Rural Communities
Development
100.00
0.00
0.00
0.00
0.00
100.00
0.00
0.00
2005
CN-CHONGQING SMALL CITIES IIP
180.00
0.00
0.00
0.00
0.00
180.00
0.00
0.00
2005
CN-LIUZHOU ENVIRONMENT
MGMT
100.00
0.00
0.00
0.00
0.00
100.00
0.00
0.00
P057933
2005
CN-TAI BASIN URBAN ENVMT
61.00
0.00
0.00
0.00
0.00
55.77
3.32
0.00
P086505
2005
CN-NINGBO WATER & ENVMT
130.00
0.00
0.00
0.00
0.00
130.00
0.00
0.00
P069852
2004
CN-Wuhan Urban Transport
200.00
0.00
0.00
0.00
1.00
188.00
154.20
0.00
P066955
2004
CN-ZHEJIANG URBAN ENVMT
133.00
0.00
0.00
0.00
0.00
121.82
-4.43
0.00
P065463
2004
CN - Jiangxi Integrated Agric. Modern.
100.00
0.00
0.00
0.00
0.00
93.96
13.36
0.00
P065035
2004
CN-Gansu & Xinjiang Pastoral
Development
66.27
0.00
0.00
0.00
0.00
55.26
10.62
0.00
P084003
2004
CN-GEF GUANGDONG PRD URB
ENV
0.00
0.00
0.00
10.00
0.00
10.00
0.40
0.00
P081749
2004
CN-Hubei Shiman Highway
200.00
0.00
0.00
0.00
1.00
167.41
28.41
0.00
P077615
2004
CN-GEF-Gansu & Xinjiang Pastoral
Develop
0.00
0.00
0.00
10.50
0.00
9.50
3.30
0.00
P077137
2004
CN-4th Inland Waterways
91.00
0.00
0.00
0.00
0.46
90.09
6.55
6.04
P075728
2004
CN-GUANGDONG/PRD UR ENVMT
128.00
0.00
0.00
0.00
0.64
120.72
1.26
0.00
P075602
2004
CN-2nd National Railways (Zhe-Gan
Line)
200.00
0.00
0.00
0.00
1.00
186.00
17.00
17.00
P075035
2004
CN - GEF-Hai Basin Integr. Wat.
Env.Man.
0.00
0.00
0.00
17.00
0.00
15.41
2.88
0.00
P073002
2004
CN-Basic Education in Western Areas
100.00
0.00
0.00
0.00
0.00
86.30
36.87
0.00
P040599
2003
CN-TIANJIN URB DEV II
150.00
0.00
0.00
0.00
0.00
139.51
13.28
0.00
P070191
2003
CN-SHANGHAI URB ENVMT APL1
200.00
0.00
0.00
0.00
0.00
177.29
28.29
0.00
P070441
2003
CN-Hubei Xiaogan Xiangfan Hwy
250.00
0.00
0.00
0.00
0.00
89.49
-10.51
0.00
P067337
2003
CN-2nd GEF Energy Conservation
0.00
0.00
0.00
26.00
0.00
14.40
25.10
0.00
P068058
2003
CN-Yixing Pumped Storage Project
145.00
0.00
0.00
0.00
0.00
129.16
1.86
0.00
P058847
2003
CN-3rd Xinjiang Hwy Project
150.00
0.00
0.00
0.00
0.00
80.16
30.16
0.00
P076714
2003
CN-2nd Anhui Hwy
250.00
0.00
0.00
0.00
0.00
207.79
35.79
0.00
P071147
2002
CN-Tuberculosis Control Project
104.00
0.00
0.00
0.00
0.00
65.37
23.57
0.00
P068049
2002
CN-Hubei Hydropower Dev in Poor
Areas
105.00
0.00
0.00
0.00
0.00
60.47
27.47
0.00
P058846
2002
CN-Natl Railway Project
160.00
0.00
0.00
0.00
0.00
24.55
19.55
0.00
104
SF
P070459
2002
CN-Inner Mongolia Hwy Project
P060029
2002
CN-Sustain. Forestry Dev(Natural
Forest)
100.00
0.00
0.00
0.00
0.00
56.32
9.32
0.00
0.00
0.00
0.00
16.00
0.00
11.45
9.40
0.00
P064729
2002
CN-SUSTAINABLE FORESTRY DEV.
PROJECT
93.90
0.00
0.00
0.00
0.00
52.06
14.90
0.00
P058845
2001
P056596
2001
CN-Jiangxi II Hwy
200.00
0.00
0.00
0.00
54.77
30.05
27.82
0.00
CN-Shijiazhuang Urban Transport
100.00
0.00
0.00
0.00
0.00
73.15
64.75
0.00
P056516
2001
CN - WATER CONSERVATION
P056199
2001
CN-3rd Inland Waterways
74.00
0.00
0.00
0.00
0.00
21.97
13.47
0.00
100.00
0.00
0.00
0.00
0.00
54.99
16.49
P051859
2001
CN-LIAO RIVER BASIN
0.00
100.00
0.00
0.00
0.00
0.00
40.70
28.10
0.00
P045915
2001
P047345
2001
CN-Urumqi Urban Transport
100.00
0.00
0.00
0.00
0.00
34.47
34.47
0.00
CN-HUAI RIVER POLLUTION
CONTROL
105.50
0.00
0.00
0.00
0.00
67.54
-37.96
0.00
P045910
2000
CN-HEBEI URBAN ENVIRONMENT
150.00
0.00
0.00
0.00
0.00
83.94
50.94
0.00
P045264
2000
CN-SMALLHLDR CATTLE DEV
93.50
0.00
0.00
0.00
0.00
0.91
0.01
0.00
P049436
2000
CN-CHONGQING URBAN ENVMT
200.00
0.00
0.00
0.00
3.70
125.37
100.07
0.00
P058844
2000
3rd Henan Prov Hwy
150.00
0.00
0.00
0.00
0.00
34.36
29.36
0.00
P058843
2000
CN-Guangxi Highway
200.00
0.00
0.00
0.00
19.70
30.88
36.58
0.00
P064730
2000
CN - Yangtze Dike Strengthening
Project
210.00
0.00
0.00
0.00
0.00
93.03
93.03
-0.27
P042109
2000
CN-BEIJING ENVIRONMENT II
349.00
0.00
0.00
25.00
0.00
256.06
214.18
0.00
P064924
2000
CN-GEF-BEIJING ENVMT II
0.00
0.00
0.00
25.00
0.00
22.67
23.01
13.44
P056424
2000
CN-TONGBAI PUMPED STORA
320.00
0.00
0.00
0.00
100.00
66.97
120.37
0.00
P041268
1999
CN-Nat Hwy4/Hubei-Hunan
350.00
0.00
0.00
0.00
0.00
32.81
32.81
0.00
P036953
1999
CN-HEALTH IX (Shiyong Wang, Backup)
10.00
50.00
0.00
0.00
0.40
25.73
24.88
6.43
P041890
1999
CN-Liaoning Urban Transport
150.00
0.00
0.00
0.00
0.00
5.57
5.57
-2.11
P042299
1999
TEC COOP CREDIT IV
P043933
1999
CN-SICHUAN URBAN ENVMT
P046051
1999
P046564
10.00
35.00
0.00
0.00
0.00
28.63
-18.23
0.00
150.00
2.00
0.00
0.00
0.00
65.20
97.22
38.72
CN-HIGHER EDUC. REFORM
20.00
50.00
0.00
0.00
0.00
3.81
5.41
0.00
1999
CN - Gansu & Inner Mongolia Poverty
Red.
60.00
100.00
0.00
0.00
13.30
11.21
20.80
-12.42
P046829
1999
CN-RENEWABLE ENERGY
DEVELOPMENT
100.00
0.00
0.00
0.00
0.00
2.62
89.62
2.62
P049665
1999
CN-ANNING VALLEY AG.DEV
90.00
30.00
0.00
0.00
0.00
7.36
8.49
-11.51
P050036
1999
Anhui Provincial Hwy
200.00
0.00
0.00
0.00
9.60
5.53
15.13
0.00
P051705
1999
CN-Fujian II Highway
200.00
0.00
0.00
0.00
0.00
39.24
39.24
0.00
P051856
1999
ACCOUNTING REFORM &
DEVELOPMENT
27.40
5.60
0.00
0.00
0.00
14.38
14.29
0.00
P051888
1999
CN - GUANZHONG IRRIGATION
80.00
20.00
0.00
0.00
0.00
14.56
14.93
0.00
P038121
1999
CN-GEF-RENEWABLE ENERGY
DEVELOPMENT
0.00
0.00
0.00
35.00
0.00
18.93
34.38
17.50
P058308
1999
CN-PENSION REFORM PJT
0.00
5.00
0.00
0.00
0.00
0.52
0.50
0.00
P057352
1999
CN-RURAL WATER IV
16.00
30.00
0.00
0.00
0.00
11.19
10.93
10.93
P035698
1998
HUNAN POWER DEVELOP.
300.00
0.00
0.00
0.00
161.90
4.62
166.52
3.51
P003619
1998
CN-2nd Inland Waterways
123.00
0.00
0.00
0.00
37.00
7.80
44.80
7.80
P003614
1998
CN-Guangzhou City Transport
200.00
0.00
0.00
0.00
20.00
86.45
106.45
86.45
P003606
1998
ENERGY CONSERVATION
63.00
0.00
0.00
22.00
0.00
19.20
15.40
0.00
P003566
1998
CN-BASIC HEALTH (HLTH8)
0.00
85.00
0.00
0.00
0.00
23.09
20.29
0.00
P003539
1998
CN - SUSTAINABLE COASTAL
RESOURCES DEV.
100.00
0.00
0.00
0.00
2.06
38.52
40.58
3.38
105
P046952
1998
CN - FOREST. DEV. POOR AR
100.00
100.00
0.00
0.00
0.00
6.42
-92.01
7.99
P051736
1998
E. CHINA/JIANGSU PWR
250.00
0.00
0.00
0.00
86.00
21.06
107.06
17.97
P045788
1998
CN-Tri-Provincial Hwy
230.00
0.00
0.00
0.00
0.00
15.14
15.14
0.00
P040185
1998
CN-SHANDONG ENVIRONMENT
95.00
0.00
0.00
0.00
1.40
10.18
11.58
0.51
P036414
1998
CN-GUANGXI URBAN ENVMT
72.00
20.00
0.00
0.00
13.48
50.29
63.17
4.75
P003637
1997
CN-NAT'L RURAL WATER 3
0.00
70.00
0.00
0.00
0.00
0.41
3.62
3.20
P003650
1997
TUOKETUO POWER/INNER
400.00
0.00
0.00
0.00
102.50
22.56
125.06
22.56
P044485
1997
SHANGHAI WAIGAOQIAO
400.00
0.00
0.00
0.00
0.00
50.10
50.10
49.65
P036405
1997
CN - WANJIAZHAI WATER TRA
400.00
0.00
0.00
0.00
75.00
10.57
85.57
10.57
P034618
1996
CN-LABOR MARKET DEV.
10.00
20.00
0.00
0.00
0.00
3.40
5.49
0.00
P003594
1996
CN - GANSU HEXI CORRIDOR
60.00
90.00
0.00
0.00
0.00
68.25
67.43
2.05
P003639
1995
CN-SOUTHWEST POVERTY
REDUCTION PROJECT
47.50
200.00
0.00
0.00
0.01
0.15
24.21
24.21
P003596
1995
CN-Yangtze Basin Water Resources
Project
100.00
110.00
0.00
0.00
1.92
0.08
4.47
4.47
P003540
1994
CN-LOESS PLATEAU
0.00
150.00
0.00
0.00
0.00
0.00
-0.68
0.00
P003632
1993
CN-ENVIRONMENT TECH ASS
0.00
50.00
0.00
0.00
0.00
0.38
0.95
0.63
10,822.07
1,222.60
0.00
186.50
706.84
Total:
106
5,040.28
2,586.98
336.07
CHINA
STATEMENT OF IFC’s
Held and Disbursed Portfolio
In Millions of US Dollars
Committed
Disbursed
IFC
IFC
FY Approval
Company
Loan
Equity
Quasi
Partic.
2002
ASIMCO
0.00
10.00
0.00
0.00
2003
Anjia
0.00
2.00
0.00
0.00
2004
Antai
40.00
0.00
0.00
2003
BCIB
0.00
0.00
2005
Babei
11.00
5.00
1999/00/02
Bank of Shanghai
0.00
2002
CDH China Fund
2003
CSMC
2004
Equity
Quasi
Partic.
0.00
10.00
0.00
0.00
0.00
2.00
0.00
0.00
30.00
30.86
0.00
0.00
23.14
11.60
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
5.00
0.00
0.00
24.67
0.00
0.00
0.00
24.67
0.00
0.00
0.00
7.15
0.00
0.00
0.00
2.03
0.00
0.00
0.00
8.92
0.00
0.00
0.00
8.92
0.00
0.00
CUNA Mutual
0.00
12.00
0.00
0.00
0.00
1.47
0.00
0.00
1998
Chengdu Huarong
5.16
3.20
0.00
5.47
5.16
3.20
0.00
5.47
1992
China Bicycles
4.50
0.00
0.00
0.00
4.50
0.00
0.00
0.00
2004
China Green Ener
20.00
0.00
0.00
0.00
11.50
0.00
0.00
0.00
2004
China II
28.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2004
China Re Life
0.00
1.54
0.00
0.00
0.00
1.54
0.00
0.00
1994
China Walden Mgt
0.00
0.01
0.00
0.00
0.00
0.01
0.00
0.00
2004
Colony China
0.00
16.07
0.00
0.00
0.00
3.47
0.00
0.00
2002
Darong
10.00
1.50
0.00
8.00
6.67
1.50
0.00
5.33
1994
Dynamic Fund
0.00
5.64
0.00
0.00
0.00
3.99
0.00
0.00
2005
Fang Xin SHMT
6.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2005
Fang Xin Limited
0.00
5.00
0.00
0.00
0.00
5.00
0.00
0.00
2005
Fang Xin SHDX
3.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2005
Fang Xin SHPM
3.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2005
Fang Xin SZFX
3.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2004
Fenglin
19.00
0.00
6.00
18.00
12.45
0.00
6.00
11.62
2003
Great Infotech
0.00
3.22
0.00
0.00
0.00
2.52
0.00
0.00
2005
HiSoft Tech
0.00
4.00
0.00
0.00
0.00
3.00
0.00
0.00
2002
Huarong AMC
9.00
2.51
0.00
0.00
9.00
0.49
0.00
0.00
2004
IB
0.00
52.18
0.00
0.00
0.00
52.18
0.00
0.00
2002
IEC
0.00
0.00
20.00
0.00
0.00
0.00
0.00
0.00
2004
Jiangxi Chenming
60.00
12.90
0.00
0.00
30.00
12.90
0.00
0.00
1998
Leshan Scana
2.92
0.00
0.00
0.00
2.92
0.00
0.00
0.00
2001/05
Maanshan Carbon
11.00
1.00
0.00
0.00
0.00
0.00
0.00
0.00
2001/05
Minsheng Bank
0.00
2.80
0.00
0.00
0.00
2.79
0.00
0.00
2001
NCCB
0.00
26.58
0.00
0.00
0.00
26.46
0.00
0.00
1996/04
Nanjing Kumho
34.00
2.23
0.00
0.00
34.00
2.23
0.00
0.00
2001
New China Life
0.00
13.21
0.00
0.00
0.00
5.83
0.00
0.00
2005
New Hope
0.00
0.00
45.00
0.00
0.00
0.00
0.00
0.00
107
Loan
1995
Newbridge Inv.
0.00
0.39
0.00
0.00
0.00
0.39
0.00
0.00
2005
North Andre
15.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1997
Orient Finance
0.00
0.00
4.76
5.95
0.00
0.00
4.76
5.95
2003
PSAM
0.00
1.93
0.00
0.00
0.00
0.00
0.00
0.00
2003
SAIC
12.00
0.00
0.00
0.00
5.00
0.00
0.00
0.00
2000
SEAF SSIF
0.00
3.95
0.00
0.00
0.00
1.29
0.00
0.00
2004
SIBFI
0.00
0.08
0.00
0.00
0.00
0.08
0.00
0.00
1998
Shanghai Krupp
24.50
0.00
0.00
52.49
24.50
0.00
0.00
52.49
1999
Shanxi
12.61
0.00
0.00
0.00
12.61
0.00
0.00
0.00
2002
Sino Gold
0.00
4.00
0.00
0.00
0.00
4.00
0.00
0.00
1995
Suzhou PVC
0.00
2.48
0.00
0.00
0.00
2.48
0.00
0.00
Wanjie High-Tech
12.19
0.00
0.00
0.00
12.19
0.00
0.00
0.00
2004
Wumart
0.00
3.90
0.00
0.00
0.00
3.90
0.00
0.00
2004
X Colony China
0.00
0.84
0.00
0.00
0.00
0.17
0.00
0.00
2003
XACB
0.00
19.94
0.00
0.00
0.00
3.25
0.00
0.00
2004
Xinao Gas
25.00
10.00
0.00
0.00
25.00
10.00
0.00
0.00
1993
Yantai Cement
1.53
0.00
0.00
0.00
1.53
0.00
0.00
0.00
2003
Zhengye-ADC
15.00
0.00
0.00
7.00
11.59
0.00
0.00
5.41
2002
Zhong Chen
0.00
5.00
0.00
0.00
0.00
5.00
0.00
0.00
275.84
87.36
126.91
239.48
211.76
10.76
109.41
Total portfilio:
387.41
Approvals Pending Commitment
FY Approval
Company
2005
BCCB
2005
Babei Silk Tie
2005
2004
Loan
Equity
Quasi
Partic.
0.00
0.06
0.00
0.00
0.00
0.00
0.00
0.01
BioChina
0.00
0.01
0.00
0.00
CCB-MS NPL
0.00
0.00
0.00
0.00
2005
Changyu Group
0.00
0.02
0.00
0.00
2004
Chenming LWC
0.00
0.00
0.00
0.16
2004
China Green
0.00
0.00
0.01
0.00
2005
Fang Xin SHDX
0.00
0.00
0.00
0.00
2005
Fang Xin SHMT
0.01
0.00
0.00
0.00
2005
Fang Xin SZFX
0.00
0.00
0.00
0.00
2005
Five Star
0.00
0.00
0.01
0.00
2002
Huarong AMC
0.02
0.00
0.00
0.00
2002
IEC
0.00
0.00
0.01
0.00
2005
MS Shipping
0.02
0.01
0.00
0.00
2004
NCFL
0.00
0.00
0.02
0.00
2003
Peak Pacific 2
0.00
0.01
0.00
0.00
2004
SIBFI
0.00
0.00
0.00
0.00
2002
SML
0.00
0.00
0.00
0.00
2002
Sino Mining
0.01
0.00
0.00
0.01
2005
Vetroarredo
0.01
0.00
0.00
0.00
2002
Zhong Chen
0.00
0.00
0.00
0.03
0.11
0.05
0.21
Total pending committment:
0.07
108
Annex 14: Country at a Glance
CHINA: Guangxi Integrated Forestry Development and Conservation Project
P O V E R T Y a nd S O C IA L
P R IC E S a nd G O V E R N M E N T F IN A N C E
C hina
19 8 3
19 9 3
2003
D o m e s t ic pric e s
P o pulatio n, mid-year (millio ns)
1,288.4
(% change)
GNI per capita (A tlas metho d, US$ )
1,100
Co nsumer prices
4.5
14.7
GNI (A tlas metho d, US$ billio ns)
1,411.6
Implicit GDP deflato r
1.1
14.6
A v e ra ge a nnua l gro wt h, 19 9 7 - 0 3
G o v e rnm e nt f ina nc e
(%oopulatio
f GDPn, includes
current grants)
P
(%)
0.8
Current
23.0
13.7
Labo
r forevenue
rce (%)
0.9
Current budget balance
..
2.2
M o s t re c e nt e s t im a t e ( la t e s t ye a r a v a ila ble , 19 9 7 - 0 3 )
Overall surplus/deficit
-0.7
-0.7
P o verty (% o f po pulatio n belo w natio nal po verty line)
5
Urban
39
T R A Dpo
Epulatio n (% o f to tal po pulatio n)
Life expectancy at birth (years)
71
19 8 3
19 9 3
Infant
mo rtality
30
(US$ millio
ns) (per 1,000 live births)
Child
10
To tal malnutritio
expo rts (fonb)(% o f children under 5)
22,226
91,744
AFo
ccess
n)
75
o d to an impro ved water so urce (% o f po pulatio2,853
8,399
Illiteracy
Fuel (% o f po pulatio n age 15+)
4,666
4,1099
Gro
ss primary enro llment (% o f scho o l-age po pulatio
n)
114
M anufactures
12,606
75,078
ale
114
ToMtal
impo rts (cif)
21,390 103,959
Female
114
Fo
od
3,122
2,206
Fuel and energy
111
5,819
KE Y E C O N O M IC R A T IO S a nd LO N G - T E R M T R E N D S
Capital go o ds
3,988
45,023
19 8 3
19 9 3
Expo rt price index (1995=100)
41
81
GDP
ns)(1995=100)
227.4
431
.8
Impo rt(US$
pricebillio
index
69
88
Terms
o f mestic
trade (1investment/GDP
995=100)
60
93
Gro
ss do
33.8
43.3
Expo rts o f go o ds and services/GDP
8.3
17.1
Gro
ss do
mestic
34.5
41.8
B A LA
NC
E o f savings/GDP
P A YM EN T S
Gro ss natio nal savings/GDP
1935.1
83
1941
9 3.8
(US$ millio ns)
Current acco unt balance/GDP
1.7
-2.1
Expo rts o f go o ds and services
24,804 102,643
Interest payments/GDP
0.2
0.6
Impo rts o f go o ds and services
22,545
111,776
To tal debt/GDP
4.2
19.9
Reso urce balance
2,259
-9,133
To tal debt service/expo rts
10.1
9.4
P
resent
Net
inco value
me o f debt/GDP
1,158..
-1,284..
P
resent
value
o f debt/expo rts
Net
current
transfers
51..1
1,172..
Current acco unt balance
19 8 3 - 9 3 19 9 33,928
-03
(average
gro wth)
Financingannual
items (net)
GDP
Changes in net reserves
GDP per capita
M e mrts
o :o f go o ds and services
Expo
Reserves including go ld (US$ millio ns)
S
T nversio
R UC T UR
E o
f t heloEcal/US$
C O N O) M Y
Co
n rate
(DEC,
9.5
7.9
6.8
-1,233
8.6
-2,695
7.6
15.6
..
2.6
19 8 3
-9,245
2002
11,012
8.3
-1,767
7.6
29.4
27,336
8.0
19 9 3
(% o f GDP )
E X T E R N A L D E B T a nd R E S O UR C E F LO WS
A griculture
33.0
19.9
19 8 3
19 9 3
Industry
44.6
47.4
(US$ millio ns)
M anufacturing
36.5
34.5
To tal debt o utstanding and disbursed
9,609
85,928
Services
22.4
32.7
IB RD
4
4,549
IDA co nsumptio n
67
5,1
60
P rivate
51
.3
45.2
General go vernment co nsumptio n
14.1
13.0
To tal debt service
2,691
10,166
Impo rts o f go o ds and services
7.5
18.6
IB RD
3
544
IDA
1
38
19 8 3 - 9 3 19 9 3 - 0 3
Co
mpo
sitio
n
o
f
net
reso
urce
flo
ws
(average annual gro wth)
Official grants
73
272
A griculture
4.2
3.4
Official credito rs
623
4,61
5
Industry
11.9
10.4
P anufacturing
rivate credito rs
363
8,21
7
M
11.5
10.3
Fo reign direct investment
6
27,51
5
Services
191
0.7
8.2
P o rtfo lio equity
0
3,818
P rivate co nsumptio n
11.0
7.1
Wo
rld
B
ank
pro
gram
General go vernment co nsumptio n
9.7
8.5
Coss
mmitments
438
2,31
5
Gro
do mestic investment
9.2
9.3
Disbursements
71
1,845
Impo
rts o f go o ds and services
9.9
13.4
P rincipal repayments
0
248
East
A s ia &
P a c if ic
2002
1,855
1,080
-0.8
2,011
-0.6
Lo we rm iddle inc o m e
2003
2,655
1,480
1.2
3,934
2.2
China
D e v e lo pm e nt dia m o nd*
Inf la t io n ( %)
4
Life expectancy
2
0
98
1.0
18.3
1.1
1.0
-3.3
..
40
2 0 069
2
32
15
325,565
76
14,623
10
8,372
111
297,085
112
295,203
111
5,237
0.9
18.7
1.2
1.3
-2.5
..
50
69
2003
32
438,22811
81
17,533
10
11,110
112
403,560
113
412,760
111
5,959
19,285
137,030
2002
78
1,266.1
86
90
40.4
28.9
43.4
2 043.2
02
29,214
192,869
2003
82
1,4195
2.3
86
44.4
34.3
47.0
2 047.6
03
2.8
365,395
0.3
328,013
13.3
37,383
7.9
12.8
-14,945
41.8
12,984
3.2
485,003
0.3
448,924
13.7
36,079
7.2
-7,838..
17,634..
35,422
2 0 0 3 2 045,875
03-07
40,085
9.1
-75,507
8.4
26.8
297,735
8.3
2002
71,148
7.7
-117,023
7.0
12.3
416,208
8.3
2003
15.4
2002
51.1
35.4
168,337
33.5
11,254
9,423
43.4
13.2
30,596
25.9
2,981
180
2002
14.6
2003
52.3
39.3
193,567
33.1
10,657
10,31
4
40.4
12.6
37,064
31.8
2,690
219
2003
311
2.9
-1,206
9.8
-4,550
10.0
53,074
7.5
..
6.3
7.0
1,058
13.7
2,020
27.5
2,502
..
2.5
-3,092
12.6
-1,769
17.0
55,507
6.6
..
6.6
5.5
1,250
19.8
1,61
6
24.8
2,459
109
99
00
01
02
03
-2
GNI
-4
per
capita
Gro ss
primary
GDP deflator
CPIllment
enro
E xpo rt a nd im po rt le v e ls ( US $ m ill.)
500,000
A ccess to impro ved water so urce
400,000
300,000
China
200,000
Lo wer-middle-inco me gro up
100,000
0
97
98
99
00
01
02
03
E c o no m ic ra t io s *
Exports
Imports
Trade
C urre nt a c c o unt ba la nc e t o G D P ( %)
Do mestic
savings
5
Investment
4
3
2
Indebtedness
1
China
0
97
98
99
00
01
02
Lo wer-middle-inco
me gro
up
03
G ro wt h o f inv e s t m e nt a nd G D P ( %)
30
20
C o m po s it io n
o f 2 0 0 3 de bt ( US $ m ill.)
10
A: 10,657
0
98
99
00
B: 10,314
02
01
03
D: 5,335
GDP
GDI
G: 72,967
E: 25,149
G ro wt h o f e xpo rt s a nd im po rt s ( %)
40
30
20
10
F: 69,145
0
98
A - IBRD
B - IDA
C - IM F
99
00
01
Exports
D - Other multilateral
02
03
E - Bilateral
Imports
F - Private
G - Short-term
Annex 15: Incremental Cost Analysis
CHINA: Guangxi Integrated Forestry Development and Conservation Project
OVERVIEW
1. Despite having excellent agro-ecological conditions for timber production and rich forest
biodiversity, China’s GZAR is rapidly losing forest cover and its biodiversity is
increasingly threatened. The major cause of these inter-related problems is that annual
timber consumption (7.8 million m3) significantly exceeds sustainable annual timber
production (5 million m3). Inadequate capacity for, and outdated methods of, nature reserve
management and sub-optimal integration of forest management and biodiversity
conservation plans and actions are also contributing to the loss of biodiversity
2. The goal of the project is to address the twin problems of unsustainable forest
management and increasingly threatened biodiversity. Its objective is to improve the
effectiveness and integration of management and institutional arrangements for timber
production, watershed protection and nature reserves management. This will be achieved by
establishing and implementing technically and institutionally viable, integrated and
replicable forest and nature reserve management systems and processes. Project activities
will be grouped into four inter-linked components: (a) Expanding Timber Plantations; (b)
Increasing Ecological Forest Cover; (c) Improving Management of Nature Reserves; and
(d) Enhancing Institutional and Management Capacity.
3. Monitorable indicators of the achievement of its global environment objective include:
(a) management effectiveness of five targeted nature reserves improved; (b) number of new
areas with high biodiversity value identified and set aside for conservation; and (c) number
of nature reserves where abundance and conservation status of biodiversity has improved,
based on the implementation of integrated management plans, improved collaboration
between reserve staff and local communities, and participatory monitoring.
Context and Broad Development Goals
Context
4. The GZAR is located on the southern frontier of China and neighboring Vietnam.
Guangxi straddles the Tropic of Cancer, and thus spans the north tropical and southern and
mid sub-tropical climatic zones, with elements of each in its flora and fauna. The terrain
slopes generally from north-west to south-east but the topography and geology are complex,
with ranges of mountains and karst hills interspersed with lowlands bisected by numerous
rivers. Elevations range from sea-level at Beihai to the 2,141 meter peak of Maoershan, the
highest peak in southern China. Guangxi supports a wide variety of forest and wetland
ecosystems, including many broadleaf forest formations and mangrove forests.
110
5. These complex conditions mean that Guangxi is particularly rich in native fauna and
flora. Surveys have recorded over 8,350 species of vascular plants belonging to 1,717
genera and 288 families. Some 890 species of terrestrial vertebrates have also been
recorded. This makes Guangxi the third richest province in China for biodiversity (after
Yunnan and Sichuan). Despite this importance, Guangxi has not received the same forest
management and conservation attention as those two provinces, even though GZAR
supports a denser human population. The result has been that most natural habitats have
been reduced to relatively small isolated fragments, and this in turn has lead to a large
proportion of its fauna and flora being threatened.
Taxon
Vascular plants
Mammals
Birds
Reptiles
Amphibians
Fish
China’s total
Guangxi’s total
Proportion (%)
27,142
581
1,244
376
284
3,862
8,354
166
483
157
84
700
30.8
28.6
38.8
41.8
29.6
18.1
6. The GZAR is a particularly important area for limestone forests, especially in the
tropical and southern sub-tropical zones. Karst limestone covers about 38 percent of the
land area of Guangxi. Limestone forests in tropical China occur mainly in southern Yunnan
Province and southwest GZAR while subtropical limestone occurs in a narrow north-south
band in Guangxi, Yunnan, Guizhou and Chongqing. Because of the great diversity of
edaphic conditions and complex topography of limestone regions, vegetation types on
limestone are extremely diverse and rich in endemic and restricted-range taxa. For example,
of the 669 plant genera recorded in Nonggang Nature Reserve, only 371 are shared with the
limestone forests of Xishuangbanna in southern Yunnan, 465 km away. Most species found
in seasonal rainforest on limestone are also found in non-limestone areas, but many species,
termed calcicoles, are restricted to or selective for limestone areas. In the Nonggang Nature
Reserve for example, 20 percent of the plants species are characteristic of limestone areas
while 13 percent of the flora species are exclusively found on limestone.
7. Karst regions also support underground limestone ecosystems that are particularly rich
in unique biological types. Much of this fauna is poorly known, but preliminary surveys
suggest an extremely rich fauna of specialized species (such as bats, fish and insects). Many
of these species have extremely restricted distributions, such as the six species of blind cave
fish known only from the underground waters of Guangxi. Despite their global
significance, these karst-dwelling species and their rare and unique ecosystems have
received very little conservation attention.
Development Goals
8. Since the late 1970’s, the GoC has been implementing an aggressive program of reforms
and interventions that have resulted in rapid rates of economic growth. Investment in
China’s physical infrastructure has mushroomed, which has led to the development of
111
considerably improved systems of transportation, energy and other services that have
improved overall competitiveness. Economic policy reforms in the context of general
domestic and international trade liberalization have created enhanced incentives for private
sector investments. Increased social sector spending in health, education and basic water
and sanitation requirements have targeted the amelioration of poverty and, in the political
field, institutional reforms have been directed at the stream-lining of existing government
institutions and to the devolution of decision-making authority to local governments. All of
these development initiatives are being actively supported by multilateral and bilateral
agencies, as well as by international NGOs.
9. Guangxi is one of China’s poorest provinces with a large number of ethnic minorities. In
line with national priorities, provincial government spending is focused principally on
economic development and poverty alleviation. In the forestry sector, funding is inadequate
and most is used for production-oriented activities and increasing the timber supply through
plantations and improved watershed management initiatives. Although it is recognized that
the maintenance of Guangxi’s biodiversity – the individual species as well as the habitats
that support them – could be an important feature of the province’s overall development
strategy, there is currently limited effort and incentive to enhance its conservation status.
Baseline Scenario
Scope
10. Much of Guangxi’s remaining biodiversity is located in a network of nature reserves
that cover 6.5 percent of the province’s land area. However, a large rural population which
uses the resources of these areas for their subsistence needs surrounds all of the nature
reserves. Direct threats to the forests of the province’s nature reserves take the form of
agricultural encroachment, logging, fuelwood collection and livestock grazing. Other
associated factors which have had a negative impact include fire, hunting, and harvesting
and trade in particular species of wild animals and plants. Despite a strong commitment to
biodiversity conservation, few if any of Guangxi’s nature reserves are able to control these
threats effectively.
11. Under the baseline scenario, the GZAR government will take the following steps to
help address its timber supply deficit and to rehabilitate some of its natural forests and
watersheds: (a) establish approximately 200,000 ha of fast-growing, high-yield timber
plantations, and expand and improve its tree nurseries to produce high-quality planting
materials through the introduction of superior genetic materials and management
technologies (cost US$171.10 million); (b) establish approximately 18,000 ha of multipleuse forests, rehabilitate 100,000 ha of natural vegetation on Guangxi’s karst hills, and
develop a pilot BioCarbon fund plantation (cost US$18.67 million); and (c) improve the
management of forest plantation of nature reserves ((US$7.02 million); (d) strengthen
production and ecological forest management capacity and applied commercial forest
management research programs and disseminate their results (cost US$ 5.06 million).
112
12. The Guangxi government recognizes that its protected areas are important for ensuring
the effective functioning of essential ecological processes and life-support systems on
which human survival and development depend. It also recognizes that they protect species
and populations that are highly sensitive to human disturbance. However, without new
approaches to nature reserve management and closer integration of commercial, ecological
and nature reserve planning and management, the baseline forest management activities
will not halt the deterioration of natural forest habitats and the biodiversity of Guangxi’s
nature reserves.
13. Under the Baseline Scenario its nature reserve management initiatives can be grouped
into three sets of activities: (a) Nature Reserves Planning and Management which includes
some modest management plan development and implementation (e.g., Maoershan), field
level management systems (such as patrolling), and investment (civil works, equipment,
vehicles); (b) Nature Reserve Relationships with Local Communities which includes
limited community conservation education and public awareness activities conducted in
local villages; and (c) Training and Capacity Building which involves general staff training.
Under the baseline scenario, no action will be taken to conserve biodiversity in ecological
forests or to integrate conservation considerations into forest development plans to promote
sustainable forest conservation and management.
Costs of the baseline Nature Reserve Management Program
14. Under the baseline scenario, the GZAR government would maintain management
activities at the project’s proposed nature reserve sites at historical levels (based on
expenditure trends over the last six years). For the project period (2006-2011), the GZAR
Government confirmed that these expenditures would be US$4,900,000. In addition, in
some of the proposed nature reserve sites, research projects will be financed under a range
of local university programs (US$200,000). There are no donor programs in any of the
project nature reserves. The total cost of the baseline nature reserve management activities
is therefore estimated to be US$5,100,000 as summarized below:
Project NR
Nonggang
Damingshan
Longshan
Mulun
Maoershan
TOTAL
Anticipated GoC
expenditure during
project period
(US$ million)
Anticipated research
institute expenditure
during project period
(US$ million)
0.79
1.23
0.14
1.32
1.42
4.90
0.01
0.08
0
0
0.11
0.20
Benefits
15. Under the baseline scenario, most nature reserve expenditure would be directed
towards salaries and the construction of buildings and protection stations. Comparatively
113
few resources would be expended on important applied nature reserve management
activities, such as the development and application of ecological planning tools, community
liaison work, and staff capacity development. Research at the project’s proposed sites
would be conducted mostly by professional scientists with very limited involvement of
nature reserve staff, and the results of this research would be little used to modify existing
management regimes. Thus, although implementation of the Baseline Scenario will result in
some improvement to the protection and management of global biodiversity at the target
nature reserves, the limited expenditure levels and the traditional way the resources would
be allocated not result in significant, sustainable, long-term conservation benefits. In
addition, opportunities to promote biodiversity conservation through more integrated forest
plantation and natural forest planning and investments would be foregone. As a result,
much of Guangxi’s rich biodiversity would continue to be adversely effected by weak
nature reserve management, timber and fuel-wood harvesting, overgrazing and associated
vegetation disturbance, illegal hunting, and habitat loss and fragmentation. Without GEF
support, a unique, strategically valuable and replicable opportunity to demonstrate
integrated forest management and biodiversity conservation at the provincial level, for the
benefit of the China Biodiversity Partnership Framework, would also be lost.
Global Environmental Objective
16. Nine percent (55 species) of the animals and 16 percent (82 species) of the plants that
are red-listed by IUCN for China occur in the project’s nature reserves.
Red-listed animals by IUCN Category
EX
EW
CR
China,
4
1
38
mainland
Vietnam
0
0
17
Taiwan
0
0
4
Hong Kong
0
0
2
Macao
0
0
0
GIFDCP NRs
0
1
7
EN
104
VU
188
LR/cd NT
9
168
DD
121
Total
633
46
28
9
1
4
81
47
22
4
8
4
5
0
0
2
73
36
14
1
1
316
182
80
20
55
95
62
33
14
32
NB Data for Guangxi does not include a limited number of invertebrates and fish
Red-listed plants by IUCN Category
EX
EW
CR
China,
3
1
73
mainland
Vietnam
0
0
25
Taiwan
0
1
12
Hong Kong
0
0
2
GIFDCP NRs
0
1
5
EN
171
VU
199
LR/cd NT
5
45
DD
19
Total
516
37
39
1
17
83
27
3
38
1
1
0
2
14
7
0
1
191
96
7
82
31
9
1
18
17. In the national context, 40 species of Guangxi’s plants are now listed as “first-class
state protected” and an additional 69 species are listed as “second-class protected”. Habitat
114
loss and hunting have lead to similar threats to the fauna and, of the terrestrial vertebrates,
26 are “first-class protected” and 116 are “second-class protected”. Several formerly
widespread species, such as the eastern black-crested gibbon (Nomascus nasutus) and tiger
(Panthera tigris), are now presumed to be extinct in the province. However, Guangxi still
supports a number of endemic species found nowhere else such as the white-headed leaf
monkey (Trachypithecus poliocephalus leucocephalus) and the Guangxi cat snake (Boiga
guangxiensis). The global environmental objective of the GEF Alternative is to improve
and strengthen the overall management and conservation of these important biodiversity
resources in GZAR.
GEF Alternative
Scope
18. With GEF assistance for addressing the global biodiversity objective identified above,
the GoC would be able to undertake a more effective program of protected area
management that would generate both national and global benefits. Under the Baseline
Scenario outlined above, the principal GoC emphasis is on timber supply enhancement and
capital-intensive nature reserve infrastructure development. The major focus of the
incremental activities would be to emphasize the ecological and social aspects of protected
area planning. The GEF Alternative would establish a more scientific and integrated
approach to management of the project nature reserve sites which specifically addresses
management capacity constraints and issues related to the impact that: (a) local
communities have on nature reserves; and (b) nature reserves have on local communities.
The emphasis would be on community outreach and helping communities to find other
sources of local development funding. It would also promote the conservation of globallysignificant karst ecosystems that are currently outside the nature reserve system. In
addition, it would integrate biodiversity conservation planning with commercial and natural
forest management planning. Specific interventions would include:
Project sub-component
Nature Reserves Planning
and Management
Interventions
(a) baseline ecosystems map production; (b) management plan development; and
(c) management plan implementation and nature reserve staff training
Conservation Management of
Sites Outside the Existing
Nature Reserve System
Community Relationships
with Project Nature Reserves
(a) cave biodiversity conservation; (b) Guangxi/Vietnam transboundary
conservation; and (c) watershed forest conservation
Monitoring and Evaluation
(a) nature reserve monitoring scheme; (b) management plan reviews; and (c)
replication activities
Enhancing Institutional and
Management Capacity
(a) forest sector strategy, priority policy studies, and guidelines/regulations
development; (b) research and extension programs; (c) training and technical
services; and (d) project monitoring and evaluation program
(a) local communities’ engagement in nature reserve management; (b)
community conservation education and public awareness; (c) community skills
enhancement; and (d) local project greening and training of village committees
115
Costs
19. Total expenditures under the GEF Alternative Scenario are estimated at US$12.60
million, detailed as follows:
Project sub-component
Nature Reserves Planning and Management
Conservation Management of Sites Outside
the Existing Nature Reserve System
Community Relationships with Project
Nature Reserves
Monitoring and Evaluation
Enhancing Institutional and Management
Capacity
TOTAL
Additional Cost in US$ million
2.84
1.80
1.83
0.50
0.48
7.50
Benefits
20. The project would: (a) have a positive global benefit by conserving biodiversity in five
sites of acknowledged international significance for biodiversity conservation purposes; (b)
benefit local communities living around the project’s nature reserves by enhancing
community skills and facilitating access to programs that address threats to the nature
reserves; and (c) strengthen the capacity of human resources and biodiversity conservation
sector institutions.
Incremental Costs
21. The difference between the cost of the Baseline Scenario (US$5.10 million) and the
cost of the GEF Alternative (US$12.60 million) is estimated at US$7.50 million, of which
US$5.25 million would be supplied by GEF financing and US$2.25 million from the GoC,
as confirmed by the GZAR Government. This represents the incremental cost for achieving
sustainable global environmental benefits.
116
Annex16: Scientific & Technical Advisory Panel Roster Review
CHINA: Guangxi Integrated Forestry Development and Conservation Project
Endorsement
1. The project would be an important attempt at integrating forestry management and
biodiversity conservation at the provincial level while promoting participatory management
and monitoring; it would include an innovative BioCarbon pilot and as designed shows
strong evidence of participatory design and GoC commitment. The proposed GEF
component has clear incremental benefits in enabling nature reserve protection and
biodiversity conservation within the overall landscape management approaches; actions
proposed are strategic and replicable, and likely to make an important contribution to
biodiversity and endangered species protection in the region. The reviewer considers the
GEF component as globally and regionally important, and well conceived, and strongly
recommends its support.
Key issues
A. Scientific and technical soundness of the project
2. The project would be a first attempt at a provincial-level integrated planning approach
across production and protection forests, using landscape ecology approaches to include the
human population and populated areas within overall forest and land management
strategies. It would be a new venture for Bank support to the forest sector in China, which
has previously concentrated on national-level policy development and has relied heavily on
self-driven replication. This holistic approach to sustainable forest and biodiversity
management is in line with GoC policies for sustainable development and management of
forest resources and involvement of communities in natural resource management. The
project focus is in line with GoC policies for expanding timber and forest plantation and
management in the GZAR.
3. A key issue in rolling out Agenda 21 and in the planning of forestry interventions within
this project is the integration of forestry goals within general socio-economic planning for
the GZAR. Forestry is high on the agenda of the GZAR. The extent to which project
planning and implementation review is meshed (and prioritised) within socio-economic
development planning of the GZAR is not entirely clear3, but the Assumptions and Risks
analysis and PMO structure would appear to ensure adequate consultation at all planning
levels.
3
Industrial development planning of the GZAR is mentioned only once (PAD p.28), but no major
industrial development is planned that is likely to impact on the project.
117
4. Component 1 (non-GEF) of the project focuses on the establishment of a large area of
timber plantations, not pulpwood plantations, although the latter will also be required in the
future if the GZAR is to develop ‘several paper mills’ (Project brief p.28). Considerable
effort has been expended in project design in determining appropriate planting approaches,
requirements for nurseries, new technologies, financing tools, etc. The planting will be
undertaken by many smallholders, under various financial mechanisms but primarily
through partnership agreements (Project brief p.21), as a requested and sensible means for
smallholders to minimise their own financial risks.
5. Component 2 (non-GEF) focuses on improvement of forest cover in karst areas. Project
interventions to increase the area of protection forests with ultimate long-term benefits for
carbon sequestration and biodiversity are sound and funded entirely by GoC. The
component includes a BioCarbon fund pilot plantation, which is excellently conceived and
will provide valuable regional experience, including testing the market approaches for
wider scale environmental benefits from carbon trading. There mare likely to be additional
benefits of connectivity through mixed-species planting between natural forest areas,
referred to in the project proposal, although this is a long-term benefit that will be linked to
development of a mature forest structure and microclimate in these connecting corridors.
6. Component 3 (GEF) is important in that it aims to establish protected area management
as an integrated part of the landscape management strategies, rather than set-asides. It aims
to develop approaches that will enable local communities to interact with the protected
areas and obtain some benefits from them, and also extends biodiversity protection
principles outwards from the protected areas into the wider landscape. The latter is
expressed both in terms of improving forest cover (Component 2) and in defining new
protected areas where there is a high biodiversity value or occurrence of endangered
species. The landscape level interventions of the project also give scope for integrating
biodiversity protection in other forms of forest management – especially where the
biodiversity concerned is underground and therefore where the critical factor is the control
of local climate and water regimes through establishing and maintaining forest cover above
ground. (Some of the component 3 activities in surveying cave fauna are at first sight a
little divergent from the rest of the project, but this can be considered in the above light and
Reviewer agrees with the decision to adopt the single project approach rather then
separating off cave conservation into a different project: Project brief p.12).
7. Component 4 (part GEF) is designed to develop the capacities needed among
stakeholders at all levels to adopt the integrated management and production technologies
proposed, and to institutionalise them within stakeholder organisations. The areas of
training indicated within the proposal appear comprehensive, but Reviewer has some
reservations concerning the proposed M&E system and its institutionalisation post-project.
The envisaged local staff contribution to environmental impact monitoring and mitigation,
expressed as a major challenge to the project, appears minimal (Project brief p.85) – but on
the other hand this may be sufficient (based on previous experience) and there is little point
in establishing monitoring structures that are unsustainable post-project.
118
8. An over-arching theme of the project is that forestry approaches envisaged will assist in
forest protection and conservation by a) improving livelihoods of the rural poor to reduce
the need to generate additional income by dubious means and b) supplying a market for
timber that would otherwise be supplied through illegal wood extraction. Environmental
education and various other interventions to help lessen reliance on natural resources, such
as on-farm NTFP production perhaps are also designed to reduce the need or inclination to
exploit wild biodiversity resources. The project documents have not quantified actual
threats on wild timber and biodiversity resources, but generally these threats are
considerable and fuelled by a very large urban market in south China4. Ethnic minorities in
particular, who are less easily reached by project benefits, can be expected to respond
primarily to continuing opportunities to market forest products illegally rather than to
project aims unless project efforts are successful in mainstreaming these remote
communities (which seems quite unlikely). Adequate monitoring and enforcement of
linkages between project benefits, and community conformance to project and GZAR rules,
is crucial in this respect as the high monetary value of biodiversity products in particular is
hard to resist, should opportunities arise. Project experience to date is that it is quite
difficult to develop a linkage mechanism between receiving project benefits and
monitoring/enforcement of rules, and for different parties to agree on such a mechanism.
The NORDECO-type participatory monitoring mechanisms suggested for this project are
perhaps the most appropriate system to attempt to establish this vital link.
B. Identification of global environmental benefits
9. The global environmental benefit is foreseen as an enhanced enabling environment for
biodiversity conservation and management. This would be achieved through improved
management capacity and a reduction of conflict in the use of biodiversity resources
between stakeholders. The GIFDCP provides livelihoods alternatives through development
of the forest sector. Incremental benefits of GEF support are expected to be enablement of
active conservation programmers through providing the background (baseline) information
required for management decision making, the training required to make and enact these
decisions, and some level of financial support for field operations.
10. In effect the enabling environment for conservation is improved and the GZAR staffs,
which are currently provided only basic salary and some infrastructure, are provided with
the means to take advantage this. Much of the biodiversity and forest resources of the
target area are currently unmanaged or provide only domestic benefits unrelated to
environmental protection – the project provides the opportunity for these areas to begin
providing measurable global benefits.
11. The importance of this approach in this location is clear. The region is extremely rich
in biodiversity and so far has received less attention than neighboring regions of similar
importance (Project brief p.97). The GZAR has two Centers of Plant Diversity and two
4
See World Bank, 2005, The illegal and unsustainable trade in animals and plants in East Asia: why
the World Bank should care. A. Grieser Johns and J. Thompson. Available online at
www.worldbank.org/biodiversity
119
Endemic Bird Areas defined by WWF, Birdlife, IUCN, etc. There are also important
aspects of trans-boundary conservation through synergy with Vietnamese initiatives in
biodiversity conservation (Project brief p.47) – some of these initiatives likely to be
supported through WB-GEF support for the up-coming Vietnam Conservation Fund.
C. How does the project fit within the context of the goals of GEF
12. The project is rooted in principles of GEF OP#3. It focuses on integrated and
sustainable management of timber production, watershed protection and set-aside (nature
reserve) forests as a tool towards poverty alleviation and livelihood improvement.
Landscape (especially karst landscape) and biodiversity conservation (including cave
systems) are integrated within the overall approach as a necessary component to achieving
sustainable management of the overall ecosystem and ultimately in conferring various
environmental and social benefits. The above relates specifically to GEF Operational
Strategy Priority BII, and is an important model in this respect. Furthermore, the inclusion
of the BioCarbon pilot in the overall GIFDCP is an opportunity for biodiversity
conservation implications of carbon sequestration plantations and set-aside forests also to
be explored within the context of Priority BII.
13. At the protected area level, the intervention also relates specifically to GEF Operational
Priority BI and again provides model approaches for wider replication. The project is also
in line with planning outputs of previous GEF interventions in China and strategy
documents produced by WWF and others (Project brief p.8).
D. Regional context
14. The project is restricted to GZAR but has wider implications for China as a whole and
has aspects of trans-boundary conservation with Vietnam. Its specific focus is necessary to
pilot an integrated landscape approach in depth and Reviewer supports the decision not to
take a wider national-level approach in this respect (Project brief p.12). The target nature
reserve areas are wholly in need of support and GEF intervention here assists with
realisation of national-level biodiversity conservation strategies and with priorities of ecoregional approaches.
E. Replicability of the project
15. A key feature of the project as a whole is to pilot means of small scale timber
plantation and management systems as a livelihoods improvement approach which also
addresses a supply-demand gap that is heavily impacting on natural forests. There are
concerns as to the efficiency of quality control and monitoring systems for plantations
spread in small lots over a very wide area, but if the project manages to address some of
these inherent problems it will provide widely applicable models of small-holder plantation
approaches consistent with the local absorptive capacity for new technologies.
120
16. Specific GEF interventions in piloting of national-level management planning
approaches and their integration with communities around the nature reserves, and capacity
building to achieve this should also be replicable. Any success developing local-level
community-driven planning processes that link delivery of donor project and Government
programme benefits around nature reserves with achievement of conservation objectives for
the reserves would be particularly important to replicate.
Reviewer notes and supports the intention for a wider dissemination of capacity building
during some project trainings (Project brief p.15 and p.43).
F. Sustainability of the project
17. GIFDCP interventions are carefully designed to be consistent with local needs,
absorptive capacity and environmental concerns, all of which are likely to ensure
sustainability of approaches if the support of Government is maintained. Institutionalising
of approaches is likely, given the stakeholder support expressed (Project brief p.14). The
extent to which benefits reach remote communities, particularly of ethnic minorities, is
perhaps a cause for concern since these communities may be a focus of illegal activities
during and post-project.
18. While GEF interventions are designed to be cost-effective and replicable, the
sustainability of implementation of management plans is questionable, since these appear to
be dependent to some extent on further external (national or international) support postproject. Means of prioritising and funding basic operational activities need to be defined
post-project. As an intention of the project is to identify further potential protected areas,
which will also require GZAR funds, already in short supply, this shortage of operational
funding could be exacerbated. (See specific comments.) A focus of the GEF intervention
should perhaps be to develop means of re-focusing existing funds, perhaps through reevaluation of priorities through the Guangxi protected area system as part of a provincial
protected area planning exercise.
Secondary issues
G. Linkage to other focal areas
19. The project as a whole focuses on reversing land degradation through forest
development, for land cover and biodiversity protection, and for livelihood improvement.
There is a clear link with the focal area ‘climate change’ in that reforestation and forest
protection increases carbon sequestration – inclusion of a BioCarbon pilot emphasises this
link.
H. Linkage to other programmes and action plans at the regional or sub-regional level
20. The GIFDCP has been developed through a comprehensive consultation process and is
in line with all relevant aspects of PRCs Sustainable Forestry Development Strategy and
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other central Government instruments (Project brief p.27). It is also in line with GZAR
plans to increase timber plantations by 870,000 ha and bring 667,000 ha of watershed areas
under effective protection. Model forestry approaches to be used in GIFDCP have to some
extent been developed by previous and on-going projects and programmes such as SFDP.
21. GEF interventions apply tools and lessons learned from previous GEF projects at
national level and selected provinces, notably NRMP (Project brief p.31-32). Site selection
and overall focus is consistent with the goals of the GoC Biodiversity Conservation Action
Plan. Conservation objectives are also linked to WWF and FFI action plans, particularly
for nature reserves and key species such as primates, and to regional action plans for karst
landscape conservation in particular.
I. Other beneficial or damaging environmental effects
22. Environmental issues are discussed and potential environmental impacts are adequately
summarised in the project proposal (Project brief Annex 10).
23. The key issue for the project as a whole is the extent to which project benefits
generated by GIFDCP reach the more remote communities who are most proximate and
rely to the greatest extent on natural resources from the key nature reserves. Successful
execution of project capacity building initiatives, strengthened control of the nature reserves
and better enforcement of legislation would result in reduced access and potential hardship
for already marginalised communities. The project clearly aims to support these
communities through a variety of appropriate instruments, but may need to clarify at an
early stage more precisely how these benefits will be delivered or facilitated by the project
on an individual community basis. Experience from elsewhere in the region is that it is
hard to develop financial benefits for communities adjacent to protected areas at a level that
compensate for a closure of access to valuable (if illegal) resources.
24. Concerning the plantation programme, the species mix for planting appears to have
been very well researched. It is several times stated that GZAR presents near ideal agroecological conditions for timber production, so it might be said that the use of Eucalyptus
and perhaps some other species which are most useful in harsh environmental conditions
could be considered as over-emphasised. Reviewer understands, however, that Eucalyptus
will not be planted on karst and not in mixed species plantings, which is acceptable in
environmental terms.
J. Degree of involvement of stakeholders in the project
25. The involvement of stakeholders in project design, aimed at ensuring that project goals
meet local stakeholder needs, has been exhaustive.
26. Plantation component institutional arrangements are complex, with PMO direction and
management by FFs in line with their restructuring to private entities and with an aim to
improve their currently very low contribution to development of the forest sector. A large
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number of households will be involved in joint partnership arrangements with FFs for
establishment of plantations on their own land (their preferred option). The focus of the
project on development of participatory forest management mechanisms will ensure the
continuation of this large-scale involvement.
27. Remote communities in the vicinity of nature reserves, to remote to be easily engaged
in timber plantation work, will be facilitated to engage with Government programmes and
Component 2 activities supporting forest rehabilitation. The capacity of the envisaged
‘community co-management committees’ will need to be created, as they do not currently
exist.
Alignment of these new committees with existing village planning and
administration structures, as proposed, will ensure that various activities undertaken by the
village are coordinated – and this forms the basis for a mechanism to ensure linkage
between development benefits coordinated by the project and the achievement of
conservation goals as set jointly by the village and the nature reserve authority.
K. Capacity building aspects
28. The project pays considerable attention to capacity building which will be extremely
complex due to the number of stakeholders involved. Capacity building initiatives are
clearly presented, however, and appear comprehensive. Reviewers only comment relating
to GEF component would be that project should ensure adequate attention is paid to
community liaison and deployment skills for nature reserve guards (including ‘forest
police’ – mentioned once, Project brief p.45), and particularly that attention be paid to
experience from other countries which face the common problem of patrolling large areas
with few staff and which have long ago determined that central and unpredictable
deployment and the management skills for this are very important (see Specific comments).
L. Innovativeness of the project
29. The project as a whole is highly innovative in China in representing a provincial level
in-depth sector-wide approach to forestry, where GoC programmes are used as the basis for
integrating the management of production and protection forests, with overall themes of
watershed protection, livelihoods development and biodiversity conservation. Considering
both livelihoods development and biodiversity conservation priorities across an entire
landscape presents problems in terms of the legal basis for co-management and extractive
use of protection forests and nature reserves, the incorporation of biodiversity
considerations into production forestry and overall land use planning, inter-departmental
responsibilities, jurisdictions and financial support. However, lessons learned in this
project will be of major importance in guiding similar holistic approaches.
30. The mechanisms proposed for small-scale plantation development, management and
monitoring are to a large extent tried and tested (although the species mixes envisaged are
perhaps innovative) and use existing Government structures. The main variations of the
project are a particular effort at stakeholder involvement in planning the financing
mechanisms and distribution of benefits (i.e. joint partnership arrangements with FFs).
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Quality control and environmental monitoring will be difficult, however, due to the wide
distribution and small size of individual forest plantation lots and some innovative
mechanisms remain to be developed here.
31. The BioCarbon pilot is of major significance and approaches adopted here will provide
guidance for similar initiatives throughout the region.
32. The landscape focus of the project on karst is in itself highly innovative and its
consideration of below ground biodiversity even more so. Technical aspects of support
planned for nature reserves to a large extent put into practice planning and management
models developed under previous programmes. The primary innovative aspects mentioned
here concern the engagement of local communities and definition of benefits to support this
process. Reviewer’s opinion is that management planning models proposed are perhaps not
innovative enough and need to more forcibly address the issue of linkages with Government
planning and financing processes. There are risks here in that nature reserve managers will
not see good reasons to adopt management processes and activities that are project-driven
and not requested by Government, and this should be addressed at policy level by relevant
stakeholder organizations.
M. Specific comments on Project Brief
33. p.5 (Alternatives considered and reasons for rejection.) Last point.
This is entirely valid, but the enabling environment also extends away from the immediate
physical environment to the socio-political environment and the project as a whole will
need to address this through consultative processes and policy adjustment at higher levels to
achieve aims of GEF component. The project appears able to do this through its
management structures and should ensure this happens. Common problems are not always
solvable at the level of interaction between the nature reserves and local communities.
34. p.14 (M&E)
Reviewer emphasises the importance of not only ‘integrating biodiversity conservation
initiatives into forest resource and land management’ but in ensuring feedback through the
M&E system to ensure that land use is actually decided on the basis of both conservation
values and production potential.
35. p.44, (Management plan implementation)
Reviewer strongly recommends Guard Post construction (provision of equipment, etc.) be
dependent on a staff deployment analysis. There is a regional tendency to distribute Guards
in small numbers in different guard posts with individual patrolling areas, rather than
organise a centrally deployed guard force that can be much more unpredictable in its
management activities. A lesson learned elsewhere is that unpredictability is as important
as capacity in apprehending forest violators.
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36. p.49 (Community conservation education and public awareness)
The programme as elaborated here seems rather unfocussed and needs a consultation
process at an early stage in implementation to determine the most useful approaches and
methods to be applied.
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Bank Task Team's Responses to STAP Reviewer Comments
A. KEY ISSUES
1. SCIENTIFIC AND TECHNICAL SOUNDNESS OF THE PROJECT:
The Reviewer believes that the project is scientifically and technically sound. He finds that
the GEF-funded Component and activities are important in that it aims to establish
protected area management as an integrated part of the landscape management strategies,
rather than set-aides. It aims to extend biodiversity protection principles outwards from the
protected areas into the wider landscape. The landscape level interventions also give scope
for integrating biodiversity protection in other forms of forest management, especially
where the biodiversity concerns is underground and therefore where the factor is the control
of local climate and water regimes through establishing and maintaining forest cover above
ground. He queried the extent to which project planning and implementation review mesh
with socio-economic planning for GZAR and expressed some reservation about the M&E
system and its institutionalization post-project.
The project will assist in the development of provincial-level forest sector development and
conservation strategy. This strategy would be approved by the provincial government and
therefore will need to consistent with the provincial socio-economic development plans.
The overall project M&E system will be implemented through existing government
structures and staff at different levels supplemented by participation of local communities
in the case of the nature reserves. Not establishing new or parallel systems will ensure
continuation of the monitoring post-project.
2. IDENTIFICATION OF GLOBAL ENVIRONMENTAL BENEFITS:
The project area is extremely rich in biodiversity and so far has received less attention than
neighboring regions of similar importance. Much of the biodiversity and forest resources of
the area are currently unmanaged or provide only domestic benefits unrelated to
environmental protection. The project provides the opportunity for these areas to begin
providing measurable global benefits.
The Task Team agrees.
3. HOW DOES THE PROJECT FIT WITHIN THE CONTEXT OF THE GOALS OF
GEF:
The project focuses on GEF OP#3 (Forest Ecosystems) but also fits within the context of
GEF Operational Strategy Priorities BI and BII.
The Task Team agrees.
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4. REGIONAL CONTEXT:
The project is restricted to Guangxi but has wider implications for China as a whole and has
aspects of trans-boundary conservation with Vietnam. In addition, the project fits with
priorities of eco-regional approaches.
The Task Team agrees.
5. REPLICABILITY OF THE PROJECT:
The project activities are replicable. For instance, GEF interventions in piloting
management planning approaches and their integration with communities around the nature
reserves, and capacity building to achieve this can be replicated in other areas. A key
feature of the project is to pilot means of small scale timber plantation and management
systems as a livelihoods improvement approach which also addresses a supply-demand gap
that is heavily impacting on natural forests. The reviewer is however concerned with the
efficiency of quality control and monitoring systems for plantations spread in small lots
over a very wide area, but if the project manages to address some of these inherent
problems it will provide widely applicable models of small-holder plantation approaches
consistent with the local absorptive capacity for new technologies.
The Task Team agrees that the project activities are replicable. With regard to quality
control and monitoring of plantation lots, there is already experience with this from a
previous project on forestry development in poor areas, and no major issues on M&E have
been identified with regard to working with small holders.
6. SUSTAINABILITY OF THE PROJECT:
All the proposed project interventions are consistent with local absorptive capacity to assist
sustainability. As an intention of the project is to identify further potential protected areas,
which will require government funds, shortage of government operational funding for
protected areas could however become a constraint. The Reviewer suggests that the GEF
intervention should develop means of re-focusing existing funds, perhaps through reevaluation of priorities through the Guangxi protected area system as part of a provincial
protected area planning exercise.
The Task Team agrees that the project activities can be sustained and that re-focusing of
existing government funds could further assist sustainability. The Forestry review under
Component 4 will include a provincial protected area planning exercise to rationalize the
provincial protected area (PA) system. Degazetting low value PAs would free up funds for
other more important sites.
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B. SECONDARY ISSUES
7. LINKAGE TO OTHER FOCAL AREAS:
The reviewer describes that the project as a whole focuses on reversing land degradation
through forest development, for land cover and biodiversity protection, and for livelihood
improvement. In addition, he describes linkages to the climate change focal area.
The Task Team agrees.
8. LINKAGE TO OTHER PROGRAMMES AND ACTIONS PLANS AT THE
REGIONAL OR SUB-REGIONAL LEVEL:
The reviewer believes that the project links well with other programmes and action plans
including for instance all relevant aspects of China’s Sustainable Forestry Development
Strategy and other central Government instruments. He also describes that GEF
interventions apply tools and lessons learned from previous GEF projects at national level
and selected provinces. Site selection and overall focus is consistent with the goals of the
Government Biodiversity Conservation Action Plan, and conservation objectives are also
linked to WWF and FFI action plans and to regional action plans for karst landscape
conservation.
The Task Team agrees.
9. OTHER BENEFICIAL OR DAMAGING ENVIRONMENTAL EFFECTS:
The reviewer believes that potential environmental impacts are adequately considered in the
project proposal. However, the key issue for the project as a whole is the extent to which
project benefits reach the more remote communities who are most proximate and rely to the
greatest extent on natural resources from key nature reserves. The project clearly aims to
support these communities but may need to clarify at an early stage more precisely how
these benefits will be delivered or facilitated by the project on an individual community
basis. .
The Task Team agrees. The Community Relationships with Nature Reserves Sub-component
aims to work with local communities to solve key problems which will include community
skills enhancement.
10. DEGREE OF INVOLVEMENT OF STAKEHOLDERS IN THE PROJECT:
The involvement of stakeholders in project design, aimed at ensuring that project goals
meet local stakeholder needs, has been exhaustive.
The Task Team agrees.
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11. CAPACITY BUILDING ASPECTS:
The project pays considerable attention to capacity building. Capacity building initiatives
are clearly presented and appear comprehensive. The project should ensure adequate
attention is paid to community liaison and deployment skills for nature reserve guards as
well as experiences from other countries facing common problems of patrolling large areas
with few staff.
The Task Team agrees. The project will use curriculum developed under previous GEFfinanced Nature Reserves Management Project which includes modules for forest guards.
The curriculum built on international experiences of FFI, WWF, WCS, etc.
12. INNOVATIVENESS OF THE PROJECT:
The project as a whole is highly innovative. Four examples are provided. The Reviewer
felt that proposed management planning models are not innovative enough and therefore
need to link with government planning and financing processes.
The management planning process proposed is based on experiences of the two previous
GEf-financed biodiversity projects in China of what worked and did not work. The
proposal to develop an overall strategic management plan for the reserve which includes
details of the baseline conditions, management strategy and objective, and proposed
zonation and management activities, and an operational management plan which includes
detailed budget specifying one-time and recurrent expenditures is one key lesson learned to
better link with government’s own planning and budgeting process.
C. SPECIFIC COMMENTS
13. ENABLING ENVIRONMENT EXTENDS BEYOND IMMEDIATE PHYSICAL
ENVIRONMENT:
The reviewer pointed out that common problems are not always solvable at the level of
interaction between the nature reserves and local communities.
The task team agrees. The Community Relationship Subcomponent will also support
facilitation and fostering of closer working relationships between nature serves, local
communities and district and provincial government.
14. INTEGRATING FINDINGS FROM MONITORING INTO DECISIONMAKING:
The Reviewer emphasizes the importance of not only “integrating biodiversity conservation
initiatives into forest resource and land management” but in ensuring feedback through the
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monitoring and evaluation (M&E) system to ensure that these two considerations are given
appropriate weighting in deciding land use options.
The Task Team agrees. The importance of using data from monitoring to give
recommendations for project adjustments and improvements will be emphasized in the
description of the M&E Programme (Component 4).
15. STAFF DEPLOYMENT ANALYSIS
Reviewer recommends Guard Post construction (provision of equipment, etc.) in Nature
Reserves be dependent on a staff deployment analysis. He describes a regional tendency to
distribute Guards in small numbers in different guard posts with individual patrolling areas,
rather than organize a centrally deployed guard force that can be much more unpredictable
in its management activities.
The Task Team agrees. Preparation of a Staff Deployment Analysis will be included as part
of the training plan.
16. COMMUNITY CONSERVATION EDUCATION AND PUBLIC AWARENESS
As written, the program seems to be unfocused and there is a need for a consultation
progress at an early stage of implementation to determine the most useful approaches and
methods to be applied.
The Task Team agrees. A situation analysis and conservation education/public awareness
plan will be developed during year 1 of implementation.
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Annex 17: Line of Credit Arrangements
China: Guangxi Integrated Forestry Development and Conservation
A.
Proposed Financing of Project Component 1 - Expanding Timber Plantation
1.
Under the proposed project, two groups of final beneficiaries would use
project/Bank loan funds. The first group is made up of provincial FFs. These are stateowned enterprises under the supervision of the GFB. The management team and boards of
the FFs are appointed by the GFB. Their role is to manage state-owned forest plantations
on behalf of the Government. In return, the FFs receive fees to cover their costs. The FFs
have also been serving as development centers for afforestation technology and plantation
management. New technology is disseminated from the FFs to rural communities via
demonstration programs, farm-community joint afforestation projects and nursery products
(seedlings and saplings). Additionally, the farms provide community services (schools and
hospitals). It is anticipated that implementation of the afforestation program of the FFs
under the project would be financed by project funds (Bank loan and counterpart funds) in
the form of budget transfers. Under this arrangement, Bank loan funds would be passed on
to the FFs via the GFB to plant forests. The cost of these plantations would be recovered by
the GFB. The incremental forest plantation assets financed by the project would be owned
by the Provincial Government and could be disposed off at will. There would be no line of
credit or on-lending for the afforestation work to be implemented by the FFs.
2.
The second group of final beneficiaries is made up of farm households (HHs),
communities and informal farm entities/associations. Project funds/Bank loan would be onlent to these beneficiaries for the purpose of establishing new forest plantations. It is
expected that project households would plant about 34 percent of project plantations,
communities would plant about 22 percent and informal farm entities would plant a little
less than 5 percent. The line of credit (LOC) provisions of OP 8.30 would apply to the onlending of project funds that would be made available to this latter category of project
beneficiaries.
B.
Present Status of Credit Services and Proposed Intermediation Arrangements
Existing Financial Institutions:
3.
During the course of project preparation, the task team met with representatives of
the four financial institutions that provide financial services or have an impact on the
agricultural/rural sectors in the project areas. These institutions are the China Development
Bank (CDB), The Agricultural Bank of China (ABC), the PRC’s Central Bank Office in
Guangxi and the Rural Credit Cooperative (RCC) System. These institutions confirmed
that:
(a) Long-term credit for the establishment of forest plantations was not available to
households.
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(b) The CDB and the Agricultural Development Bank offer long-term credit for forest
plantation establishment only to solvent FFs and forest companies.
(c) The rural finance system in China is heavily regulated by the People’s Bank of China,
particularly with regard to interest rate charged by financial institutions. Bank lending
terms are approximately as follows: loan maturity varies from about 5-15 years, with one
(ABC) to three (CDB) years of grace and a commercial interest rate of between 5.76
percent (ABC) and 6.12 percent (CDB).
(d) During the past five years, the combined efforts of CDB and ABC were only able to
partially satisfy the demand for financing afforestation activities. The lack of sufficient
financing is a constraint on the growth and development of the forestry sector in Guangxi.
(e) When they meet certain criteria, large borrowers are able to obtain interest subsidies
from one of the following three sources: (i) the infrastructure subsidy for the CDB loans – a
3 percent discount over a period of three years for ten-year loans; (ii) the desertification
subsidy for commercial loans – a 2 percent discount over a period of three years for tenyear loans; and (iii) the poverty alleviation subsidy - a 2.76 percent discount over one year
for long-term loans.
(f) The Rural Credit Cooperative System (RCC) is the only officially-licensed provider of
financial services to rural households and at present it offers only short-term loans. There is
no intention on the part of RCCs to finance medium - to long-term loans to the forest sector.
Credit Intermediation by Government Institutions
4.
Over the past fifteen years, Guangxi benefited from three Bank-financed forestry
projects. In the absence of a functioning banking system in the projects’ areas and in order
to provide the credit needed to establish forest plantations, the Bank and the GoC agree to
use a combination of FBs and the MoF disbursement system (Finance Bureaus) to
intermediate sub-loans for the three Bank-financed projects. Under this arrangement, most
of the Bank loan proceeds were passed on to various FFs as budget transfers with
provisions for future cost recovery. In some instances, Bank funds were used by FFs to
enter into share-cropping contract arrangements under which the FFs contribute the cost of
afforestation and the households contribute land and labor. This has worked well in the
past, and both the FF and households benefited. The implementation of this budget
transfer/cost recovery scheme was implemented by the PPMO and County PMOs, which
were part of the Forestry Bureau. The PPMO/PMOs’ role was to plan the overall project
design and oversee the implementation of its activities on behalf of the Forestry Bureau.
The role of the PPMO/PMOs also included, inter alia, appraising, disbursing and recovering
the cost of the capital investments under the three projects. Currently, there is no overdue
cost recovery from the FFs to the Forest Bureau and onward to the Finance Bureau.
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Alternatives Considered and Proposed Arrangement
5.
As indicated above, the project will only provide a line of credit for the second
group of final beneficiaries which includes the households, communities and small-size
private entities. Under the present circumstances, none of the existing financial institutions
(CDB, ABC, and RCCs) are equipped or interested in providing credit to these clients for
forest plantation. Some ABC and RCC agencies work with households, community groups,
etc., but only for the provision of seasonal (less than one year) credit. Because of past
lending practices, many RCC branches are insolvent and some are illiquid. In addition, the
ownership structure of the RCC system is ambiguous. Even though the RCC system is in a
restructuring program, it would currently not meet the minimum prudential requirements to
qualify as a financial intermediary for the purposes of on-lending Bank loans under the
Bank’s OP 8.30.
7.
In view of the fact that existing financial institutions are neither equipped for nor
interested in providing the credit services required by project households, communities and
small entities, it is proposed to continue having the Forestry Bureau and its PPMO/PMO
network manage the project’s afforestation line of credit. The PPMO and PMOs are
government institutions whose primary activity is not on-lending ODA funds. The
PPMO/PMOs network and Finance Bureaus are not considered to be commercial financial
institutions and there is no intention to convert them into banks. They have been selected
for this activity as a transitory measure because there is no viable commercial financial
system that could perform this task adequately. Recently, the Bank has carried out a rural
finance study in China. It is hoped that future efforts by the GoC with assistance from the
Bank and other donors would lead to greater involvement of commercial banks in financing
rural development. Active engagement and discussion have been carried out between the
Bank’s financial sector and rural sector with the key government agencies to explore
options of future investment in the sector.
C.
Institutional Arrangements and Credit Management Procedure
7.
As in other Bank-supported sector investment projects, this project is not designed
as a vehicle to address financial sector issues in China, and the government agencies
involved in the on-lending of loan proceeds are not commercial financial intermediaries as
defined by OP 8.3; the evaluation of commercial financial intermediaries typically required
by OP 8.30 is neither possible nor necessary. However, the procedures used by the
government-administered system for appraisal, monitoring and collection of sub-loans has
been evaluated by the Bank. The Bank has financed three forestry projects in the Province,
and there is no overdue payment from the FFs to the Finance Bureau as a request of the
effective risk mitigation method. Without the permit issued by the FB, the tree growers and
sub-loan beneficiaries cannot harvest or sell the forest plantations funded by the project.
Under the project, a PMO has been set up within the FB which will be responsible for
making the loan and collecting the repayment. As a result, at harvest and sale, the
repayment of the sub-loans is deducted by the buyer of the timber from the sale price, paid
directly to the Forestry Bureau/PMOs network or the tree growers (sub-loan beneficiary), or
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repayment is effected using the harvested timber to make an “in-kind” repayment directly to
the Forest Bureau/PMOs network. The PPMO has developed a credit management system
and procedures to ensure that the credit line is properly managed and monitored. The credit
management procedures have been documented by the Forestry Bureau in the PIP. The
credit management procedures cover the terms and conditions of loans, appraisal criteria
and process, disbursement, collection, monitoring procedures, recording and reporting
norms. These procedures and all attached forms have been reviewed by the Bank; it has
been agreed that PPMO will use local banking specialists to make further improvements
before the project starts to implement.
Institutional Arrangement
8.
The PPMO would be responsible for all aspects of project administration, including
program management, procurement, financial management, supervision of PMOs, issuing
the PIP (including the credit management procedure), and monitoring and evaluation. The
33 project county PMOs would be the focal points managing the project in each county,
which includes appraising the application of the final beneficiaries, disbursing, on-lending
and collecting the repayment of sub-loans.
9.
Households interested in project plantation activities can either apply for sub-loans
individually or as part of community groups. In either case, the proposed arrangements
would be as detailed below.
Credit Management Procedure
Loan Application and Approval Procedures
10.
When an interested party wishes to obtain a loan, he/she contacts the village
government and requests to be listed among the potential end-borrowers. For the
borrowing farm households, the formation of a joint-liability borrowing group would be
encouraged. Each of the group members would fill out a loan application form, which
would contain information related to the activity and level of loan financing required;
equity contribution, if any; basic household information including income; indebtedness to
formal and informal credit sources; household assets and loan security. The written
requests would then be communicated to the county PMOs which would conduct both
technical screening and an assessment of the credit-worthiness and debt repayment
capability of the farmer. The farmers would submit: (a) a list of assets to be used as
collateral in addition to the plantation; (b) existing income details of the borrowing
households. If the farmer is determined to be credit worthy and meets all of the other
criteria for planting the trees, he/she be listed as an end borrower. An on-lending contract
be signed between the household and the County Forest Bureau. The contract, a copy of
which is kept by the farmer, would define the amount of the loan, the interest to be paid and
the repayment schedule, as well as the penalties for late repayment.
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11.
The County Participatory Design Group (representatives from village, township and
county PMO) appraise and approve loan applications with a value up to RMB50,000. The
Review Committee (representatives from county PMO, Finance Bureau aided by a banking
specialist) appraise and approve loan applications with a value between RMB50,000 and
RMB300,000. Any loan application valued at more than RMB300,000 would need to be
submitted to the Provincial PMO for final approval after its successful appraisal by the
Review Committee.
Selection Criteria of Project End-Borrowers
12.
A set of selection criteria for sub-borrowers has been agreed. These include: (a)
the communities, households and afforestation entities would voluntarily participate in the
project; (b) the proposed plantation site has to meet the specific soil and climatic
requirement for certain species, and be relatively close to the main roads; (c) is willing to
use the existing forest land as collateral; (d) equal opportunity would be given to minority
ethnic groups to participate in the project activities; and (e) the household selection process
would be transparent and would be undertaken through a participatory approach based on
the above selection criteria.
It was further agreed that in selecting project beneficiaries the following criteria be used by
the PMOs and County Finance Bureaus: for households applying for project sub-loans, the
households should have: (a) experience and skill in establishing and maintaining
production forest plantation; (b) sufficient labor power; (c) the ability to repay their subloans, based on their projected household cash flow, credit history, current debt load,
current household income status, and co-signatories/guarantors.
Loan Default Risks, Credit Monitoring and Collection of Loans
13.
To improve loan collection and repayment and in order to reduce default risks, the
Guangxi Government plans to enforce the following rules: (a) The Forest Bureaus will
continue to control the harvesting of forest plantations by issuing tree-cutting permits, and
will keep itself informed of all sales of forest trees planted with sub-loans; in most cases,
sub-loan repayments would be collected through the purchaser of the standing timber, who
would pay the amount owed by the farmer directly to the relevant forest bureau; (b) the
contracts with end-borrowers prohibit the unauthorized sale of all trees before their
corresponding sub-loan is fully paid; and (c) sub-loan collection rates will be used to
evaluate the performance of the Finance and Forest Bureau staff in charge of sub-loan
recovery. The PPMO plans to develop a Project MIS system, which would be used to
manage and monitor the project sub-loans and other on-lending aspects. The system would,
inter alia, monitor sub-loan appraisal dates and amounts, disbursement dates and amounts,
recovery dates and amounts, overdues, default and breach of obligations and the main
reasons for their occurrence, remedies taken, and debt write-offs. Key loan portfolio
quality indicators such as collection rates will also be included. The monitoring system
would be computer-based within each county Forest Bureau.
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14.
The staff from both Finance and Forest Bureaus would receive credit management
training, especially on loan assessment and administration with emphasis on long-term
loans, delinquency management, collections and monitoring. When necessary, the PPMO
would hire banking specialists to help appraise the creditworthiness of large end-borrowers.
Flow of Funds
15.
The Provincial Finance Bureau would on-lend loan proceeds to the County Finance
Bureau which takes the credit risk on behalf of the County government. The County
Finance Bureau then on-lends to County Forest Bureaus which in turn lends to final
beneficiaries. Since in most counties the RCC has established the credit score and rating
system for each rural household, the County Forest Bureau can use the system to help make
sound decision on the debt repayment capacity of the borrowing households. In addition,
the PPMO has developed the appraisal criteria and term sheet to be included in the credit
management procedure. The On-lending Agreement will be signed between the endborrower and the County Forest Bureau. Township Forest Station staff, with help from
Finance Station staff, would be responsible for making the contractual agreements with
beneficiaries and would also be responsible for the collection of interest and loan repayment
and for monitoring the cost-recovery performance.
16.
The flow of Bank loan funds would follow the traditional Ministry of Finance route
as described by the chart below.
The World
Bank
SA
managed by
GPFB
Provincial
Forest Bureau
Provincial
State-Owned Forest
Farms
Communities
County Finance
Bureau
County Forest
Bureau
Farm households
17.
The recovery of loans would follow a similar flow, but in reverse. Repayment is
received by the county Finance Bureaus and passed on to the provincial Finance Bureaus.
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Essentially, it is the Forest Bureau that will bear the credit risk of on-lending. All funds
repaid to the Provincial Finance Bureau will be returned to the budget, and there will be no
revolving fund facility.
D.
Proposed Project On-lending Terms to Final Sub-borrowers
18.
Interest rates in China are controlled administratively by the Central Bank. They
have recently moved from a fixed interest rate regime to operating within specified interest
rate bands. These interest rate bands vary by industry. There is one potential interest rate
anchor for on-lending to final sub-borrowers under this project. Both CDB and ABC make
medium-term loans to legal entities for financing plantations of one type of fast-growing
forest tree. These loans have a 3-15 year maturity and the annual interest rate is in the
range of 5.76 percent - 6.12 percent. The GoC considers forestry development as an
important measure to improve the ecological environment. As forest plantation
establishment has a relatively low financial rate of return with long harvest rotation, the
GoC applies a preferential policy to promote the development and growth of forest
resources. Recently, the MOF and the Ministry of Forestry issued a joint-regulation which
provides rebates on interest rates paid by tree-planting entities on their loans from the
domestic financial intermediaries.
19.
Based on the above analysis of the prevailing interest rates for similar loans, the
GoC has proposed that the interest rate on on-lending to the households under this project
would be the same as that of CDB and ABC’s. There is also a political dimension to the
Provincial governments’ request to set the proposed interest rate to the households. The
GoC is concerned with the growing divide between rural and urban incomes and has
instructed all Provincial governments to adopt policies that support farm incomes. The
Guangxi provincial government is concerned that it would be seen to be exploiting farmers
if it borrows funds at the IBRD rate and on-lends funds at a higher rate. The initial proposal
of the Provincial government was to on-lend at the IBRD rate, without a mark-up. During
project preparation, through a process of analysis and negotiation, and in the absence of any
reference rate for medium - to long-term loans in the project area to farm households, it was
agreed that the interest rate would be administratively set. The interest rate to be charged to
beneficiaries of project sub-loans would take into account all costs associated with the
Bank’s loan, plus the relevant operating costs and a provision for credit risk. As such, it is
agreed that a minimum 2 percent spread will be added to the Bank’s loan cost to the GoC to
cover the operating cost of government staff and risk provision. This was the highest rate
that the Guangxi provincial government was willing to accept. This interest rate would
apply to all end-borrowers. The end-borrower will receive the loan in local currency and no
foreign exchange risk would be passed on to the beneficiary households.
20.
It was agreed that sub-loan repayments be based on financial models for the various
tree species to be planted under the project, taking into consideration estimated cash flows
and the fact that end-borrowers would have other sources of income that could be used to
repay their sub-loan obligations. Although there are more than ten types of forest tree
species, these would be grouped in three categories to simplify on-lending procedures.
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Each category would have a different maturity and repayment schedule. The financial
analysis of the tree models shows that the financial viability of these plantations was
sensitive to short repayment and grace periods. While the loan principal will be collected
based on the following proposed repayment schedule, the interest incurred on each sub-loan
will be collected semi-annually:
Type of plantation
Eucalyptus Species
Bamboo, Quercus, Acacia
Chinese Fir, Pine, broad-leaf
Species
Grace Period
Principal Repayment Period
6
6
6
One balloon payment at the end of year 7 .
Payment over 6-year period between years 7-12
Payment over 12-year period between years 7-18
21.
The PPMO has developed the following draft standard templates with assistance
from banking specialist: (a) Loan Application Form; (b) Loan Appraisal Form with
evaluation criteria (one for the household and one for the entity); (c) On-lending Agreement
with detailed loan term and repayment schedule based on above-mentioned proposal; and
(d) Loan Repayment Record including the detailed information regarding the beneficiary,
the detailed repayment schedule and actual collection information. These forms have been
attached to the draft PIP.
22.
At the wrap-up meeting of the pre-appraisal mission with the central government
agencies in Beijing, representatives of the National Development and Reform Commission
(NDRC), the decision-maker of national capital investment on behalf of the central
government, informed the Bank mission that the on-lending interest rate to the endborrower should be passed on as the World Bank rate to the Government without any markup. This is based on NDRC Decree 28 “The Provisional Guidelines for Investment Projects
Funded by International Financial Institutions and Foreign Government Loans" which
became effective on March 1, 2005. Article 24 of this Decree states “When loans are to be
repaid or guaranteed by governments at local levels, the same terms offered by foreign
lenders should in principle be passed on to the borrower. Should adjustment of terms be
required to hedge against risks of foreign debt, the on-lending agency shall obtain a prior
endorsement by NDRC.” In addition, a mark-up on the cost of World Bank loan to endborrowers in the rural countryside is perceived as a deviation from the current government
policies, particularly vis a vis the very recent “Report of the Work of the Government”
made by the Prime Minister asking for the building of a new socialist countryside. In this
report, the GOC calls for making all necessary efforts to stabilize, improve and strengthen
government support to rural development. Both the NDRC and Ministry of Finance
insisted that the project’s on-lending rate to the end-borrowers should be the same as the
Bank’s rate to China without any mark-up. The Bank’s team had several round of
discussions with NDRC and MOF explaining the pricing principles that reflects adequate
coverage of costs and risks. Finally, Bank rate plus 2 percent spread is the maximum onlending rate which was accepted by both central and local governments.
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Annex 18: Operations Arrangement Models for Plantation Establishment
Guangxi Integrated Forestry Development and Conservation
1.
The project operation/contractual arrangements are decided through a participatory
process carried out at the village level, reflecting the preference of the farmers and
communities through consultation with them. The main afforestation entities are provincial
forest farms, country-level forest farms/small scale planting entities, communities and
households. Forest farms will use 53.6% of the WB loan for afforestation activities,
communities would use about15% and households 30.5%.. The community and individual
households would participate in the planting activities separately and the forest farms would
largely cooperate with farmers and communities in carrying out the plantation
establishment activities under different production and contract arrangements, which would
bring more benefits to farmers.
2.
Currently, there are at least four types of contractual arrangements: (a) contract
with profit sharing at harvest; (b) contract with mix of annual payments and profit sharing
at harvest; (c) contract with guaranteed amount at harvest; and (d) contract to lease the land
with annual payments. The mission reviewed the different contractual arrangements, and
confirmed that the menu of options would remain open to the farmers. These options have
been included in the project information leaflet and disseminated to villages and
households. The details of the contractual arrangements, such as inputs and benefit sharing
as well as risks would be included in the Participatory Project Design Manual as part of the
PIP. This participation/consultation process would ensure that farmers make an informed
choice.
3.
The five contractual arrangement models are summarized as the following:
a.
Model one: Contract with profit sharing at harvest.
Under this
arrangement, farmers and forest farms are the joint partners, where local farmers
will contribute lands and labors. Local forest farms will invest in planting activities,
provide technical inputs and manage the plantations during the project period. The
contractual arrangements will be made between the farmers/communities and the FF on the
plantation establishment and management responsibilities, inputs and benefit sharing. The
farmers and forest farms will share the income from forest products based on their inputs.
In almost cases, the forest farms will pay farmers’ labor inputs as soon as the job is done to
ensure their short-term income.
b.
Model two: Contract with mix of annual payments and profit sharing at
harvest. This contractual arrangement is largely as the same as the model one. The
difference is that as the forest production has relative long rotation, the forest farms
would pay part of the benefits from the final product to farmers as an advance annually
during the project period, in order to increase the farmer short-term income for their
livelihood needs.
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Model three: Contract with guaranteed amount at harvest.
Under this
arrangement, the farmers will contribute lands and labors and forest farms will
c.
invest in planting activities, provide technical inputs and manage the plantations during the
project period. The contractual arrangements will be made between the farmers and the
forest farms on the inputs and benefit sharing. The farmers and forest farms will share the
income from forest products based on their inputs. However, the farmers’ sharing should be
guaranteed by fixed amount of logs or timbers according to their sharing at harvest.
According to this arrangement, forest farm would take the natural and investment risks and
ensures the farmers’ benefits. The farmers, who have more chance to work out side of the
rural areas and the householders with less labor, prefer this arrangement.
d.
Model four: Contract to lease the land with annual payments. This model is
most welcome by the households, which live in the economic backwards and remote
areas with plenty of land and less population. The farmers would receive the
annually land use payment and the amount of payment is depend on the quality and
location of the lands. The forest farm will pay farmers on land use annually and
labor inputs as soon as the job is done by cash. The forest farm will manage
plantation and benefit from timber products. Under this arrangement, the farmers
can get quick income from annual payments and there is no management risk to
farmers.
4.
The project promotes a variety of joint partnerships where small farmers would not
simply rent their land, but would be full partners sharing in the profits of the afforestation
venture. However, a large number of households prefer the prevailing practice of contract
with annual payments by leasing the land to forest farms for plantation establishment. The
project would improve such contract compared to the current practice of long-term land
leasing. First, the contract will include a clause for arbitration to help resolve disputes
which may arise between households and forest farms. Second, the contract will offer two
options to allow for increase in land rental fee during the contract period which ranges. The
first option would allow for the adjustment of rental fee after first cultivation based on the
current timber price. The second option would be increasing rental fee by agreed percentage
every five years until end of the contract period. The percentage would be negotiated and
agreed upon before the contract is signed or each five year.
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Maps
CHINA: Guangxi Integrated Forestry Development and Conservation Project
See maps IBRD Nos. 34708, 34734, 34735 in attached PDF file.
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