Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00006085 IMPLEMENTATION COMPLETION AND RESULTS REPORT LOAN NUMBER 8509-CN ON A LOAN IN THE AMOUNT OF US$150 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE POVERTY ALLEVIATION AND AGRICULTURE-BASED INDUSTRY PILOT AND DEMONSTRATION IN POOR AREAS PROJECT June 26, 2023 Agriculture and Food Global Practice East Asia and Pacific Region CURRENCY EQUIVALENTS Exchange Rate Effective: June 30, 2022 Currency Unit = Chinese Yuan (CNY) CNY 6.70 = US$1 US$1.33 = SDR 1 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS CDF Cooperatives Development Fund COVID-19 Coronavirus Disease 2019 CPC Communist Party of China CPF Country Partnership Framework CPS Country Partnership Strategy DA Designated Account EA Environmental Assessment ERR Economic Rate of Return FIRR Financial Internal Rate of Return FM Financial Management FYP Five-Year Plan GI Geographical Indication ICR Implementation Completion and Results Report IDI Interest during Implementation ISM Implementation Support Mission ISR Implementation Status and Results Report IPRCC International Poverty Reduction Center for China IRI Intermediate Results Indicator METT Management Effectiveness Tracking Tool M&E Monitoring and Evaluation MIS Management Information System O&M Operation and Maintenance PAD Project Appraisal Document PDO Project Development Objective PMO Project Management Office TOC Theory of Change Regional Vice President: Manuela V. Ferro Country Director: Mara K. Warwick Regional Director: Benoit Bosquet Practice Manager: Dina Umali-Deininger Task Team Leader: Wendao Cao Mohammad Imtiaz Akhtar Alvi, Xueming Liu, ICR Main Contributors: Yunqing Tian TABLE OF CONTENTS DATA SHEET .......................................................................................................................... 1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 1 A. CONTEXT AT APPRAISAL .........................................................................................................1 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION ................................................................5 II. OUTCOME ...................................................................................................................... 7 A. RELEVANCE OF PDOs ..............................................................................................................7 B. ACHIEVEMENT OF PDOs (EFFICACY) ........................................................................................8 C. EFFICIENCY ........................................................................................................................... 14 D. JUSTIFICATION OF OVERALL OUTCOME RATING .................................................................... 15 E. OTHER OUTCOMES AND IMPACTS ......................................................................................... 15 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 16 A. KEY FACTORS DURING PREPARATION ................................................................................... 16 B. KEY FACTORS DURING IMPLEMENTATION ............................................................................. 17 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 18 A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................ 18 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 18 C. BANK PERFORMANCE ........................................................................................................... 19 D. RISK TO DEVELOPMENT OUTCOME ....................................................................................... 20 V. LESSONS AND RECOMMENDATIONS ............................................................................. 20 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 22 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 35 ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 37 ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 38 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 42 ANNEX 6. PICTORIAL OVERVIEW OF PROJECT ACHIEVEMENTS ............................................. 45 ANNEX 7. SUPPORTING DOCUMENTS .................................................................................. 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name Poverty Alleviation and Agriculture-based Industry Pilot P133326 and Demonstration in Poor Areas Project Country Financing Instrument China Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency National Rural Revitalization Administration of MARA and People's Republic of China IPRCC of State Council Project Development Objective (PDO) Original PDO The Project Development Objective (PDO) is to develop and demonstrate rural value chains that promote equitable organizational arrangements, participation, and the sustainable increase of income of target households in the Project Provinces. The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 150,000,000 148,313,539 148,313,539 IBRD-85090 Total 150,000,000 148,313,539 148,313,539 Non-World Bank Financing 0 0 0 Borrower/Recipient 145,100,000 131,200,000 131,200,000 Total 145,100,000 131,200,000 131,200,000 Total Project Cost 295,100,000 279,513,539 279,513,539 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 23-Jun-2015 24-Dec-2015 18-Sep-2017 30-Jun-2021 30-Jun-2022 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 22-Jan-2020 68.81 Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Reallocation between Disbursement Categories Change in Disbursements Arrangements Change in Implementation Schedule KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Satisfactory Substantial The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 02-Nov-2015 Satisfactory Satisfactory 0 02 11-Dec-2015 Satisfactory Satisfactory 0 03 15-Jun-2016 Satisfactory Satisfactory 0 04 12-Dec-2016 Satisfactory Moderately Satisfactory 9.00 05 28-Jun-2017 Satisfactory Moderately Satisfactory 10.50 06 12-Nov-2017 Moderately Satisfactory Moderately Unsatisfactory 12.61 07 14-Jun-2018 Moderately Satisfactory Moderately Unsatisfactory 17.69 08 12-Dec-2018 Moderately Satisfactory Moderately Unsatisfactory 30.44 09 11-Jun-2019 Moderately Satisfactory Moderately Satisfactory 44.11 10 27-Nov-2019 Moderately Satisfactory Moderately Satisfactory 55.29 11 02-Jun-2020 Moderately Satisfactory Moderately Satisfactory 86.82 12 12-Jan-2021 Satisfactory Moderately Satisfactory 113.61 13 24-Aug-2021 Satisfactory Satisfactory 126.12 14 29-Mar-2022 Satisfactory Satisfactory 138.40 SECTORS AND THEMES Sectors Major Sector/Sector (%) Agriculture, Fishing and Forestry 36 Agricultural Extension, Research, and Other Support 12 Activities Public Administration - Agriculture, Fishing & Forestry 24 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Industry, Trade and Services 64 Agricultural markets, commercialization and agri- 64 business Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Finance 16 Finance for Development 16 Agriculture Finance 16 Public Sector Management 3 Public Administration 3 Transparency, Accountability and Good 3 Governance Urban and Rural Development 81 Rural Development 81 Rural Markets 21 Rural Non-farm Income Generation 33 Rural Infrastructure and service delivery 27 ADM STAFF Role At Approval At ICR Regional Vice President: Axel van Trotsenburg Manuela V. Ferro Country Director: Bert Hofman Mara K. Warwick Director: John A. Roome Benoit Bosquet Practice Manager: Nathan M. Belete Dina Umali-Deininger Task Team Leader(s): Ulrich K. H. M. Schmitt Wendao Cao ICR Contributing Author: Mohammad Imtiaz Akhtar Alvi The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. China’s economic growth and poverty reduction efforts, over 35 years, have significantly reduced rural poverty. In the 1980s, China introduced the Household Responsibility System which created a rural poverty system under which use rights to farmland were allocated to individual households for long term management. This led to substantial agricultural and rural growth and was one of the most important drivers of poverty reduction. In the 1990s, domestic market reforms and China’s gradual integration into the global economy were the driving forces for China’s industrialization, export-led growth, and urbanization. While 500 million farmers graduated out of poverty and per capita income grew from US$222 in 1980 to US$6,560 in 2013, poverty and underdevelopment in rural areas continued to be a challenge. In 2013, about 83 million people were still living in poverty,1 especially in the western and inland provinces. 2. Key challenges the Chinese poverty reduction and shared prosperity efforts were facing included how to (a) restructure and modernize the agriculture sector toward sustainable and faster productivity growth; (b) reform rural institutions and ensure protection and marketability of land and property rights; (c) diversify agriculture production and create modern agricultural value chains that promote professional farmers and rural income growth; (d) achieve harmonization of rural and urban social security systems; and (e) improve food safety and protect rural land and water resources for food security and environmental sustainability. Promulgation of the Farmer Professional Cooperative Law in 2007 led to a rapid increase in the number of farmer cooperatives from 130,000 in 2007 to 730,000 in 2013. But operational and business principles of the cooperatives such as the governance and management structure, rights of individual members and protection of their economic interest, and distribution of benefits within the cooperatives remained vague. In most cases, the combination of enterprise and farmer model limited the role of the farmer to the producer of raw material without effective links to the value chain and market. In the Central Document 1 of 2013 on rural development priorities, the Government sought to address those issues and bottlenecks and reaffirmed its commitment to farmer cooperative development and to strengthening their role in modernizing agriculture and reducing poverty. 3. In rural China, agriculture was a key sector for economic growth, poverty reduction, and jobs. Improvements in road and transport infrastructure opened new opportunities for agriculture development such as better access to growing urban consumer markets and e-commerce. Increased consumer demand and changed dietary patterns created new value chain opportunities for farmers to shift away from basic commodity production and diversify to high-value products. Reformed regulatory and policy frameworks supported the formation of farmers’ cooperatives and a vibrant commercial enterprise that could provide poor farmers new technologies to increase productivity, add value, and create marketing opportunities. However, challenges coexisted with the opportunities and included poorly organized and scattered household farms, low farm technology and management, limited access to finance, lack of market and price information, and low production levels (which failed to attract 1 Poverty measured by China’s national poverty line1 (CNY 2,300 per year, equivalent to US$377 per year). Page 1 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) investments in upstream processing and marketing). These challenges were particularly acute in the remote mountain areas. 4. China’s agriculture sector policies and the Poverty Reduction Strategy, ‘The Outline for Development-oriented Poverty Reduction for China’s Rural Areas (2011–2020)’, complemented each other in capitalizing on the agricultural potential to speed up rural transformation for poverty alleviation. The strategy provided a renewed road map with emphasis on a development approach characterized by three elements: (a) use of pro-poor value chains to ensure that smallholders, especially poor farmers, actively participate and benefit from the value chains and are able to capture opportunities in the growing domestic urban market; (b) development of specialized farmer organizations and modernization of agriculture through professional cooperatives, fully applied to China’s poverty reduction programs, which in the past was limited to support small-scale and informal mutual funds in poor villages; and (c) expansion of the existing system of geographical poverty targeting of nationally or provincially designated national poverty counties and villages. The strategy introduced the concept of ‘poverty-stricken mountain areas’ and prioritized 14 mountain areas for development investment. 5. The World Bank-China cooperation in poverty reduction goes back a long way, and the Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project was the sixth such project and marked the third phase (2012 onward) of the partnership. The first phase (1995–2006) promoted multisector approaches to rural poverty reduction and comprised the Southwest Poverty Reduction Project, Qinba Mountains Poverty Reduction Project, and West Region Poverty Reduction Project. The second phase (2005–2011) promoted more participatory and community-driven approaches to rural development and comprised the Poor Rural Communities Development Project and Sustainable Development in Poor Rural Areas Project. The sixth project considered the experience and learning of the first two phases and was consistent with the World Bank Group’s Country Partnership Framework (CPF) for China FY2013–2016 China’s 12th Five-Year Plan (FYP); the Poverty Reduction Strategy (2011–2020;, the Communist Party of China (CPC) document ‘The Views on Promoting Rural Poverty Alleviation through Innovative Mechanism’, issued by the General Office of the Central Committee of CPC and the General Office of the State Council; and the provincial strategies and programs for rural development and poverty reduction of Sichuan, Guizhou, and Gansu Provinces. A key purpose of the project was to assist the Leading Group of Poverty Alleviations and Development of the State Council in operationalizing the next phase of development-oriented rural poverty reduction through commercial agriculture development in Gansu, Sichuan, and Guizhou Provinces. Theory of Change (Results Chain) 6. The project was appraised in 2015 when World Bank preparation did not require an explicit theory of change (TOC). The TOC (figure 1) was developed retrospectively for the Implementation Completion and Results Report (ICR), based on the original project design. Page 2 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Figure 1. Theory of Change Activities Outputs Results Outcomes Component 1: Integrated Value Chain • 415 Legally registered cooperatives Development established. • Establish/strengthen farmer cooperatives • 451 cooperatives received CDF • Establish community-based production support. arrangements • 30 percent cooperatives paying out • Business, management and technical dividends. training and services to farmers, • 85 cooperatives established joint cooperatives, and enterprises through production arrangements with • Agricultural qualified agricultural enterprises enterprises. value chains • E-commerce platforms developed. developed that • Functional business- promote Component 2: Public Infrastructure and oriented cooperatives. equitable Services organizational • Construct road, irrigation and drainage, • 700 kms of Production roads • Productive value chains built/improved arrangements and market infrastructure created. • E-commence platforms established and • Establish communication and information • 64 Agriproducts issued branding • Increased access of participation. infrastructure names or received certification • Develop food testing certification cooperatives to • Advisory services provided to infrastructure & services • Sustainable facilities cooperatives on regular basis to optimize value chains. income increase • Carry out agriculture and market research and support technology transfer of target households achieved Component 3: Research, Training and Extension • Conduct analytical studies on poverty reduction and value chains • 14 analytical studies completed and disseminated • Build value chain development capacity • 40 national/provincial-level of government line agencies and workshop and seminars completed entrepreneurs • Policy and appraisal guidelines for public sector support to rural areas 7. As outlined in the Project Appraisal Document (PAD), the agriculture sector’s potential to stimulate rural transformation and reduce rural-urban inequality was constrained by the large number of unorganized household farms, poorly organized and scattered value chains, low technology and management standards, substandard product quality, lack of marketing, low production volumes, and inadequate public infrastructure and services. The project invested in developing professional farmer cooperatives; aiding partnerships between cooperatives and the private sector for value chain development and marketing; providing public infrastructure, advisory, and extension services; and providing capacity building, training, and research. 8. For the newly created/strengthened cooperatives, project support was expected to (a) enable the adoption of new production standards and technologies; (b) reduce post-harvest losses; (c) improve produce processing and/or packaging; (d) provide better access to services, markets, and information; (e) reduce transaction costs; (f) improve product quality and producer (farm gate) prices; (g) raise production values through market differentiation (for example, product certification and branding); and (h) create economies of scale. These, in turn, were expected to improve productivity, create value addition, increase market opportunities, and create long-term local employment. Page 3 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) 9. The project design relied on critical assumptions that the enabling policy environment for cooperative management and sustainability would continue, farmers would be interested and willing to join the cooperatives, pro-poor cooperatives would be able to prepare and execute their commodity development and marketing plans, and private sector enterprises would be willing for business partnerships with the cooperatives. Project Development Objective (PDO) 10. The PDO was to develop and demonstrate rural value chains that promote equitable organizational arrangements, participation, and the sustainable increase of income of target households in the Project Provinces. Key Expected Outcomes and Outcome Indicators 11. The key expected outcomes were agricultural value chains developed that promote equitable organizational arrangements and participation and sustainable income increase of target households achieved. The four outcome indicators were number of beneficiaries by gender, poverty level and ethnic status; share of project-supported cooperatives making a profit; farm income generated by project activities; and cooperative management effectiveness, measured by the management effectiveness tracking tool. 12. The project covered 134 townships and 537 administrative villages in the three provinces with a total population of 946,000, of which 343,000 were registered as poor and 241,000 belonged to ethnic minorities. The project aimed to reach out to and strengthen the organizational level of at least 40 percent of the total population and at least 50 percent of the poor population residing in the targeted project villages. Components 13. Component 1: Integrated Value Chain Development (Original allocation US$195.7 million, IBRD share US$113 million; Revised allocation US$208.4 million, IBRD share US$125 million; Actual cost at project closing: US$204.2 million, IBRD share US$115.3 million). The component supported (a) farmer cooperative formation and strengthening, development of functional offices, and value addition: provision of financing to agro-enterprises for investments in commercial processing, storage, and packaging of agricultural produce, in partnership with farmer cooperatives; (b) grants to the Cooperatives Development Fund (CDF) for agricultural products and services for value chain development; and (c) technical training and services to farmers, communities, and cooperatives through qualified agricultural enterprises. 14. Component 2: Public Infrastructure and Services (Original allocation: US$66.9 million, IBRD share US$32 million; Revised allocation: US$55.7 million, IBRD share US$20.2 million; Actual cost at project closing: US$59.9 million, IBRD share US$28.6 million). The component supported (a) public infrastructure including construction of production roads, irrigation and drainage infrastructure, and establishment of information and communication technology and (b) public services including development and operationalization of food testing certification facilities and carrying out of agricultural research and technology transfer and studies for market exploration, development, and product marketing. Page 4 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) 15. Component 3: Research, Training and Extension (Original allocation: US$0.7 million, IBRD share US$0.7 million; Actual cost at project closing: US$0.7 million, IBRD share US$0.6 million). The component supported learning and dissemination of project implementation lessons to support the implementation of China’s national poverty reduction strategy through analytical studies; capacity building of government line agencies, entrepreneurs, and public sector institutions; technical assistance and training to farmers and agricultural technicians, including the review and improvement of investment proposals for key commodity value chains; and preparation of policy and appraisal guidelines for public sector support in rural areas. 16. Component 4: Project Management, Monitoring, and Evaluation (Original allocation: US$10 million, IBRD share US$3.8 million; Revised allocation: US$8.6 million, IBRD share US$3.8 million; Actual cost at project closing: US$5.7 million, IBRD share US$3.4 million). The component supported institutional strengthening and capacity building of the PMOs at the county, municipal, and provincial levels. B. SIGNIFICANT CHANGES DURING IMPLEMENTATION 17. A level 2 project restructuring took place in January 2020. It included a revision of PDO indicators and intermediate results indicators, adjustment of component costs, and one year extension to the project closing date. Revised PDOs and Outcome Targets 18. The PDO was not changed. Revised PDO Indicators Table 1. Project Development Indicators PDO Indicator Revision Justification 1. Direct project beneficiaries by End target increased from To reflect the exchange rate gains gender, poverty level and ethnic 470,000 to 500,000 which will benefit more people status 2. Share of project-supported End target reduced from 40 Due to the investment delays and cooperatives making profit in each percent to 30 percent the weak capacity of some project year counties such as Liangshan in a remote area 3. Incremental farm income generated Redefined as Incremental To include newly generated by project activities member household income household income from dividends generated by project activities and labor working for cooperatives (percentage) 4. Cooperative effectiveness, as Redefined as Cooperative To simplify the measurement of measured by METT (percentage of effectiveness, as measured by cooperative effectiveness cooperatives with improved scores) METT (average score) A new PDO indicator No. 5 was Percentage of beneficiaries To capture and monitor added satisfied with the services beneficiaries’ satisfaction level provided by the project Page 5 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Revised Components 19. While the components and activities remained unchanged, estimated component costs were marginally adjusted due to the slightly reduced infrastructure costs and lower project management costs by utilizing more government funds. The overall project cost remained unchanged. Table 2. Project Component Cost (US$, millions) Component Total Cost IBRD Financing IBRD % Financing Original Revised Original Revised Original Revised 1. Integrated Value Chain Development 195.7 208.4 113.0 125.0 57.7 60.0 2. Public Infrastructure and Services 66.9 55.7 32.0 20.2 47.8 36.2 3. Research, Training and Extension 0.7 0.7 0.7 0.7 100.0 100.0 4. Project Management, Monitoring, and 10.0 8.6 3.8 3.8 38.0 44.2 Evaluation Subtotal (rounded off) 273.3 273.3 149.6 149.6 54.7 54.7 Contingencies 16.9 — — — — Financial charges during implementation 4.9 0.4 0.4 8.2 Total (rounded off) 295.1 295.1 150.0 150.0 50.8 50.8 Other Changes 20. The project closing date was extended by one year from June 30, 2021, to June 30, 2022, and the implementation schedule and disbursement estimates were updated. Ceiling of the Designated Accounts (DAs) was increased for Gansu from US$6,000,000 to US$9,000,000 and for Guizhou from US$4,000,000 to US$10,000,000. There was no change to the DA of Sichuan Province. 21. Changes were made to the intermediate results indicators (IRIs) as explained in table 3. Table 3. Intermediate Results Indicators Indicator Revision Justification IRI 1.1: Number of cooperatives End project target of each IRI To reflect that the project would be established and registered legally increased from 300 to 415 able to establish and finance a higher number of cooperatives IRI 1.3: Number of cooperatives having organized management training IRI 1.4: Number of cooperatives with CDF support IRI 1.2: Share of cooperative Redefined as ‘Share of poor To prioritize and monitor that more members to total village households in the poor households join cooperatives population community/natural village that join newly established or improved cooperatives (as share of total archived poor households per community/natural village)’ Page 6 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Indicator Revision Justification IRI 1.5: Share of project End project target reduced from To accurately reflect the Central cooperatives paying out dividends 40% to 30% Government’s poverty targeting policy and make it consistent with the similar ongoing poverty reduction projects IRI 1.8: Number of cooperative End project target increased from Some of the project planned roads members trained, by gender and 100,000 to 150,000 were financed and built by the ethnic minority (person-times, Government cumulative IRI 2.1: Length of End project target reduced from The Government no more production/tractor roads built or 900 km to 700 km considered it a critical investment improved by the project and an efficient way of using the IBRD loan. The funds were used for other interventions IRI 2.2: Number of public markets IRI 2.2 was dropped, and IRI 2.3 The Government no more constructed under the project was renumbered as 2.2 considers it a critical investment and an efficient way of using the IBRD loan. The funds were used for other interventions. IRI 2.4: Person-days of advisory IRI 2.4 was renumbered as 2.3 and In response to the increased services provided to cooperatives end project target was revised demand for advisory services (cumulative) from ‘actual number’ to 100,000 IRI 3.2: Number of End project target increased from More events planned for wider provincial/national 24 to 40 dissemination seminars/workshops completed (cumulative) IRI 4.1: Training (person-times) in End project target increased from In response to the increased project management completed by 2,500 to 10,000 demand for training PMO staff at all levels (cumulative) Rationale for Changes and Their Implication on the Original Theory of Change 22. The changes did not affect the TOC. Due to the innovative and ‘learning by doing’ nature of the project design for establishing viable and pro-poor business-oriented farmer cooperatives and developing value chains, the process of project staff internalizing and implementing the new approach took more time than anticipated. The project spent most part of the first three years in mobilizing farmers, forming and training farmer cooperatives, and helping them prepare viable investment and business plans. The cooperatives required more time to complete the agreed investments, fully operationalize their value chains, and start making profit to achieve the project objectives. II. OUTCOME A. RELEVANCE OF PDOs Rating: High Page 7 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) 23. The PDO was aligned with the national priorities outlined in China’s three most recent FYPs : 12th FYP (2011–2015), 13th FYP (2016–2020), and 14th FYP (2021–2025). The plans recommended agriculture modernization and integrated rural development, including development of agricultural value chains led by farmer cooperatives in collaboration with private sector investments. The project was in line with China’s national ‘Outline for Development-oriented Poverty Reduction for China’s Rural Areas (2011– 2020)’, which sought to capitalize on the potential of the agriculture sector to stimulate further rural transformation and modernization. China’s last poverty reduction strategy placed substantial emphasis on a development approach to poverty reduction and sought to achieve a growth rate in rural per capita income above the national average. As stated earlier, three elements characterized it: (a) the use of agriculture value chains to capture opportunities for poverty reduction, emphasizing the complementary roles of public and private sectors (pro-poor value chain approach aimed to ensure that smallholders and poor farmers benefit from the value chains and market access; (b) development of specialized farmer organizations/cooperatives (modernization of agriculture through professional cooperatives is being fully applied to China’s poverty reduction programs, which in the past was limited to support small-scale informal mutual funds in poor villages); and (c) expansion of the existing system of geographical poverty targeting of nationally or provincially designated national poverty counties and villages. The outline introduced the concept of ‘poverty-stricken mountain areas’ with 14 mountain areas prioritized for development investments. The project targeted Wumeng Mountains in Sichuan and Guizhou Provinces and Liupan Mountains in Gansu Province. The project included the abovementioned three elements and promoted a multisectoral development-oriented poverty reduction approach (Chan Ye Fu Pin) in which rural industrialization—agriculture development through farmer cooperatives’ partnerships with agro- businesses—was the key element. 24. The PDO remained highly relevant and fully aligned with the Country Partnership Strategy (CPS) FY2013–2016 for China. The PDO supported the CPS strategic theme two: “Promoting more inclusive development, by geographically focusing on lagging regions and small towns and by supporting policies and demonstration projects that address inequalities.” It contributed to the CPS outcome 2.3: “Enhancing opportunities in rural areas and small towns, by piloting new ways to boost rural incomes and reduce poverty” under the umbrella of the new Poverty Reduction for China’s Rural Areas Strategy (2011–2020) and by promoting inclusive innovation to decrease disparities. The project remained highly relevant throughout implementation and supported two of three CPF FY2020-2025 engagement areas of “promoting greener growth” and “sharing the benefits of growth” and three objectives—2.3: “Demonstrating sustainable agriculture practices and improving food system quality and safety;” 2.4: “Strengthening Sustainable Natural Resource Management;” and 3.2: “Enhancing the quality of early learning and skills development programs.” The PDO indicators were feasible, measurable, and achievable. Data collection and frequency of reporting were clearly defined in the monitoring and evaluation (M&E) methodology. B. ACHIEVEMENT OF PDOs (EFFICACY) Rating: Substantial Page 8 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) 25. The PDO was to develop and demonstrate rural value chains that promote equitable organizational arrangements, participation, and the sustainable increase of income of target households in the project provinces. 26. Key outcomes can be broken down into: a) the development of effective rural value chains2; b) the promotion of equitable organizational arrangements and participation in these value chains; and c) sustained increase in incomes of target households. The first outcome was measured through PDO indicator 4, the average score of project-supported cooperatives in the Management Effectiveness Tracking Tool (METT) - the METT tracked, among other things the cooperatives’ development objective, business plan, inclusion of poor, market information and strategy, enforcement of regulations and production infrastructure. The second outcome, the promotion of equitable organizational arrangements and participation in value chains, was measured through PDO indicator 1, the number of direct project beneficiaries, which had disaggregated targets for women, the poor and ethnic minorities. The third indicator, increased incomes, was measured through PDO indicator 2, the share of project-supported cooperatives making profits, and PDO indicator 3, incremental household income generated by the project. Beneficiary satisfaction with project activities was also measured at the PDO level (PDO indicator 5) to demonstrate how households viewed the support they received. Table 5 shows the achievement against the target for each indicator. Table 4. Status of PDO Indicator Achievement PDO Indicators Baseline Original Revised End Actual Achievement Value End Target Target June 30, Level (%) June 30, 2022 2022 1. Direct project beneficiaries by 0 470,000 500,000 699,163 140 gender, poverty level and ethnic status (number) Female beneficiaries (percentage) 0 40 40 37.10 93 Poor (percentage) 0 30 30 34.70 116 Ethnic Minority (percentage) 0 20 20 29.0 145 2. Share of project-supported 0 40 30 71.20 237 cooperatives making profit in each year 3. Incremental member household 0 25 25 24.50 98 income generated by project activities (percentage) 4. Cooperative effectiveness, as 0 40 40 63.28 158 measured by METT (average score) 5. Percentage of beneficiaries satisfied n.a. n.a. 80 97 121 with the services provided by project (percentage) B.1 Agricultural value chains developed 27. The project overachieved its PDO level target with regard to the development of rural value chains. Despite the long gestation period in mobilizing local households, the project formed 408 legally 2The first step in the creation of rural value chains was the establishment of business-oriented cooperatives, followed by the provision of training, business advisory services and financial and technical support for value chain development and marketing. Page 9 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) registered business-oriented cooperatives (the original target was 300, revised upwards to 415 during the restructuring), a 98.3 percent achievement level of IRI 1.1. The project provided support to strengthen these cooperatives by establishing systems for governance and management such as holding regular cooperative assemblies, appointing a board of directors and supervisors, having transparent fiduciary arrangements, and capacity building of staff. A major achievement was the introduction of an online financial accounting software which was adopted by all cooperatives which improved their financial management (FM), business planning, and decision-making processes, and promoted transparency and benefit sharing with members. METT’s assessed average score of 62.28 was significantly higher than the end target score of 40 (PDO Indicator 4). This demonstrated that the project was able to raise the cooperatives’ management capacity to a much higher level than anticipated at appraisal. To give a few examples of their quality/management capacity, 103 cooperatives in Sichuan Province were regarded as exemplary cooperatives with competent management, large-scale operations, and solid business plans, with Yulong Planting and Breeding Cooperative in Meigu County rated as ‘Model Farmer Professional Cooperative’ as well as ‘Sichuan Province Advanced Collective for Poverty Alleviation’. In Guizhou Province, 21 cooperatives won the titles of ‘demonstration cooperatives’, with 2 at the county, 9 at the municipal, 8 at the provincial, and 2 at the national level. 28. The project-supported a wide variety of value chains. The cooperatives were provided with equipment, quality training, and business advisory services for value chain development and marketing.3 The project guided the cooperatives to carry out market research; consider their comparative advantage and potential niche; select the value chains; and prepare and execute production, business, and marketing plans. The support provided proved to be effective and one by one all cooperatives met the qualification requirements to receive grants from the CDF to develop their selected commodities and value chains (IRI 1.4). Using the CDF funds, in Gansu Province, the cooperatives installed 161,224 sets of production equipment, constructed 14 breeding farms, and purchased production materials such as high-quality seedlings, breeding stock, and organic fertilizer.4 The market linkages formed by the cooperatives were obviously productive as evidenced by the fact that 61.5 percent of members bought their inputs and marketed their products through the cooperatives (against the end target of 60 percent in IRI 1.6). 29. The public infrastructure and services developed through the project played an important role in improving cooperatives’ and value chains’ connectivity and access to the market. The 994 km of roads supported by the project was 142 percent higher than the end target of 700 km (IRI 2.1). The counties reported that the improved roads significantly reduced their travel time, production/marketing cost, and operation and maintenance (O&M) cost. Furthermore, there were spillover effects and nearby farmers and non-member cooperatives also benefited from the improved infrastructure. For example, Wu Meng Ecological Agricultural Planting Cooperative in Nayong County reported that the travel time to the production base was reduced from 3 hours to 30 minutes. This reduced planting costs of more than CNY 1 million (about US$150,000) in 2019 and enhanced travel safety. The road connection also benefited four nearby villages for over 200 farm households. 3 To strengthen 263 cooperatives in Gansu Province, 13,700 m2 of office space was built; 590 computers, printers, and office furniture were purchased; and 9,663 person-days of management, business, and marketing training and 580,000 person-days of farmer training were organized. 4 Similarly, in Guizhou Province, 39 cooperatives built 11,761 m2 of processing plants and installed 116 sets of production and processing equipment. Page 10 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) 30. An important landmark in value chain development was registration of a trademark or brand name as a mark of quality and recognition of the product. The cooperatives succeeded in receiving brand names or registration for 64 products (against the end target of 50): 45 green agriculture, 12 organic, and 7 GI products. Branded and certified products opened new marketing opportunities for the cooperatives in niche domestic and international markets. Some successful examples included Ureta Brand Dongxiang mutton and sheep halal meat marketed by Ecological Breeding Farmers Professional Cooperative in Dongxiang County and Weiyuan County's Potato Seed Township and Wuzhu potato seed trademark in Gansu. The annual turnover of Wuzhu Potato Variety Professional Cooperative was US$1.2 million (CNY 8 million) and the annual income per member was around US$10,447 (CNY 70,000). The cooperative was regarded as a national role model for the development of the potato industry. Guizhou promoted the ‘whole industrial chain development’ model (fine varieties, large-scale and standardized planting, processing, inspection and testing, quality certification, brand creation, packaging design, logistics and transportation, marketing, e-commerce) for multilink, multibusiness, high-value-added agriculture products. Longfeng Yuan Breeding Cooperative in Tongzi County produced high-quality kudzu root varieties, and the cooperative established a factory to produce kudzu root powder, vermicelli and other products under its own registered trademark and brand5 (annex 6). 31. Project-supported advisory services were in demand and the project provided 252,983 person- days of services, which was 253 times higher than the end target of 100,000 person-days (IRI 2.3). The research, training and extension services the project provided exceeded their respective targets and validated the pro-poor focus of the project. Wide dissemination and sharing of the lessons of experience for replication and scaling up would support the implementation of China’s National Poverty Reduction Strategy. The number of analytic studies and assessments the project commissioned to improve the project performance and disseminate the project learning and experience was 14 against the end target of 6 (IRI 3.1). The topics included Industry Poverty Reduction Models and Risk Prevention Mechanisms; Operation and Management Mechanism for Farm Cooperative; Sustainable Development Model for Poor Areas; Cooperative-driven Poverty Reduction Mechanism; Study of Coherence from Poverty Reduction Move to Rural Revitalization; and Case Studies of Industry Poverty Reduction. Similarly, 47 provincial/national-level knowledge-sharing seminars and workshops were more than the end target of 40 (IRI 3.2). B.2 Equitable organizational arrangements and participation in rural value chains 32. The project had built-in mechanisms to ensure equitable organizational arrangements and participation of women, the poor and ethnic minorities in value chains. Eligibility criteria for accessing the CDF required the cooperative’s articles of association and implementation plan to contain preferential policies and conditions in favor of poor households. In addition, the cooperatives adopted measures to encourage equitable organization arrangements and participation including: limits on the proportion of shares that non-poor households could hold; to discourage elite capture, the cooperatives’ management posts were voluntary with no salary and benefits; selection of tenure-based cooperative board and management were through ballot to improve equity and governance; and inclusion of women and ethnic 5 Similarly, Xishui, Ma Yang, Dafang, and Qinkou are the recognized brand names for a flourishing high-quality honey business in Guizhou. Yulong Breeding and Planting Professional Cooperative in Meigu County has successfully created two high-quality brand names Lin Mu Yulong for eight commodities (including fresh vegetables, tea, edible oils) and Daliangshan for 10 products including rapeseed oil, walnuts, walnut oil, pepper oil, Dahongpao pepper, and buckwheat flour. Furthermore, walnut is a certified green product, and walnut oil and rapeseed oil have received safety and credit system certification. Page 11 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) minorities to cooperatives’ board and management positions.6 In Sichuan, 103 cooperatives comprised 30,899 rural households of which 13,294 were poor—these households constituted 66.1 percent of all registered poor households in the project villages. 7 The cooperatives active in ethnic minority areas ensured that at least one management position was held by an ethnic minority member.8 As a result of these measures, a higher proportion (82.9 percent) of poor households joined the cooperatives against the end target of 60 percent (IRI 1.2). Further, 25 percent of nonmember poor households indicated that they would like to join the project cooperatives in future. 33. Needs-based training and skills enhancement opportunities benefited more women and poor households than targeted. The project overachieved in terms of the total amount of training and skills enhancement opportunities provided to cooperative members (199,654 person-times compared to the end target of 150,000 person-times (IRI 1.8). The proportion of female and minority members who received training was also higher than targeted by 149 and 148 percent respectively (IRI 1.8). About 80 percent of the recipients of technical and production and management training were from poor households.9 The cooperative model enhanced the members’ production skills, management capabilities, and business acumen and helped small holders, females and minorities overcome the market failure10. For example, in Sichuan Province, the farmers’ successful production systems included 1,706 ha of walnuts, 757 ha of sweet oranges, 428 ha of white konjac, 569 ha of potatoes, 23,000 heads of Simmental cattle, 10,000 chickens, and 202,000 running pheasants. B.2 Sustainable income increase of target households 34. A majority of the cooperatives ran profitable value chains11 and offered attractive prospects to the private sector. In total, 289 out of 408 cooperatives were profitable (71.2 percent against the end target of 30 percent, PDO Indicator 2). Province-wise, in Gansu, 77.2 percent of cooperatives were profitable, followed by 62.5 percent in Guizhou and 59.2 percent in Sichuan. The cooperatives’ ability to attract private investment is demonstrated by more than double the number of private enterprises signing contracts with cooperatives than targeted (217 enterprises against the end target of 100, IRI 1.7). A total of US$208.4 million (CNY1.4 billion) was invested in the comprehensive value chain development, exceeding the end project investment target by 4.9 percent. Modernization of the production process, value addition, product certification, branding, quality control, and use of information technology/e- commerce platforms for marketing all connected the farmers and cooperatives with market trends, and they were able to supply high-quality products. The project promoted a productive partnership ‘company + cooperative + farmer’ model and contract farming along with a stable production/sales relationship for 6 Project Completion Evaluation Report, 2022, International Poverty Reduction Center for China (IPRCC). 7 Similarly, in Guizhou, the 42 cooperatives comprised 41,630 rural household members of which 31,685 were poor households covering 89.8 percent of all registered poor households in the project villages. 8 For example, Jinzhong Modern Agricultural Farmers Professional Cooperative in Zhijin County comprised 329 members including 191 members from ethnic minorities, and out of five directors and five supervisors, two directors and two supervisors were from ethnic minorities. 9 Project Completion Evaluation Report, 2022, IPRCC. 10 It included limited scale of production; information asymmetries regarding small producers’ limited knowledge o f quality control, marketing, and pricing requirements expected by end markets; coordination failures along the value chain; inequality in small producers’ bargaining power with suppliers and buyers to obtain better prices; and producers’ undercapitalizati on and limited access to finance. 11 In total, 289 out of 408 cooperatives were profitable. Province-wise, in Gansu, 77.2 percent of cooperatives were profitable, followed by 62.5 percent in Guizhou and 59.2 percent in Sichuan. Page 12 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) farmers’ integration into the market. Both member and nonmember households diversified their marketing channels through direct sale to supermarkets, online platforms, and exhibitions. E-commerce allowed the cooperatives in remote areas to access remunerative markets that would have otherwise remained inaccessible12. Improved business and higher income enabled the cooperatives to multiply their assets.13 The success of the value chains is demonstrated by the fact that 63 percent of cooperatives were paying dividends to their members against the end target of 30 percent (IRI 1.5). In Sichuan, 38 of the 61 profitable cooperatives paid dividends to their members. In Guizhou, 21 of the 25 profitable cooperatives paid a dividend of US$60 (CNY 397.2) per member to 6,627 members. 35. Incomes of member households have increased sustainably, with 24.5 percent contribution to the incremental increase in the farm income against the end target of 25 percent (PDO Indicator 3). The households’ income increase included both direct and indirect sources. The direct sources included cooperatives providing production materials to members, households providing raw materials and labor to the cooperatives, value chains providing full-time/partial employment opportunities, farmers receiving higher farm gate prices, 14 and dividend income accruing to the members. For instance, the annual turnover of Wuzhu Potato Variety Professional Cooperative in Weiyuan County was US$1.2 million (CNY 8 million) and the annual income per member was around US$10,447 (CNY 70,000)15 (annex 6). 36. The cooperatives accorded higher priority to poor households and offered them more income earning and employment opportunities. Eighty percent of poor households received training in production technology and 81 percent benefitted from production and operation information services. The production materials provided to poor households were either free or at a cheaper rate and on average, each household saved US$465 (CNY 3,116) on these materials. About 56 percent of ethnic minority members obtained their means of production from the cooperatives with a saving of US$507 (CNY 3,397) in production costs. The cooperatives offered product protection price to poor households with the flexibility to sell their produce at a higher price in the market. Any temporary or regular employment opportunities were first extended to the poor households. For example, in Tongzi County of Guizhou Province, employment opportunities were extended to on average 364 people per village. During project construction, poor households’ average income of US$1,240 (CNY 8,307) was 3.4 percentage higher than that of a non-poor household. In 2021, poor households were paid an average dividend of US$30 (CNY 202) per household which was 7.4 percent higher than the average dividend of US$28 (CNY 188) paid to non-poor households.16 In Sichuan, the ratio of cooperatives with preferential equity and dividend allocation to poor households was 42.9 and 41.8 percent, respectively. The total equity capital 12 e-commerce platforms such as Taobao, Jindong, and Pinduoduo helped project cooperatives to buy inputs and sell products valued at US$13 million (CNY 87 million) 13 For example, in Guizhou Province, 39 cooperatives amassed assets worth US$35 million (CNY 240 million), with an average asset value of US$0.89 million (CNY 5.994 million) per cooperative. In Gansu and Sichuan Provinces, the respective average asset value was US$0.47 million (CNY 3.132 million) and US$0.43 million (CNY 2.888 million) per cooperative. 14 Before the project, the price paid by the cooperatives was lower than the market price, and therefore, farmers were unwilling to sell, which led to non-profitability of those cooperatives. With the project support, cooperatives had to display the purchase and sale price to allow more transparent management. It led to more equitable distribution of the benefits (for example, in Weining County). 15 Longfeng Yuan Breeding Cooperative in Tongzi County paid US$53,731 (CNY 360,000) in wages to the farmers in three years, with an average annual household income increase of US$597 (CNY 4,000). 16 Project Completion Evaluation Report, 2022, IPRCC. Page 13 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) was US$22.28 million (CNY 149.33 yuan) with US$721 (CNY 4,832.7) per household. Of that US$14.86 million (CNY 99.5 million) was for poor households with US$694 (CNY 4,643.3) per household. 37. The success of the pro-poor value chain development approach for sustainable increase in member households’ income is evidenced by the fact that the project interventions generated considerable interest, and the number of direct beneficiaries exceeded the end target by 140 percent, with 699,163 members against the end target of 500,000. The project exceeded the end target of poor and minority direct beneficiaries by 116 and 145 percent, respectively (PDO Indicator 1, table 5). Furthermore, an overwhelming majority of 97 percent of the beneficiaries were satisfied with the services and benefits provided by the project against a target of 80 percent satisfaction (PDO Indicator 5). Justification of Overall Efficacy Rating 38. Overall efficacy is rated Substantial. The project successfully demonstrated a value chain development model which promoted business-oriented organizational development (outcome 1), which was equitable and inclusive (outcome 2), and which increased household incomes on a sustainable basis, thereby contributing to poverty reduction (outcome 3). C. EFFICIENCY Rating: Substantial 39. Financial analysis. As specific cooperative-level investment proposals were not available at appraisal, financial net returns of a range of typical farming activities for the proposed value chains were calculated on a household or per hectare basis, following a traditional production-focused approach. At project closing, a financial analysis was conducted, based on the operation of the cooperatives, which adopted a value chain approach instead of the ‘farm/crop models of specific commodities’ approach used at the appraisal stage. Among the 408 project-supported cooperatives, 73 representative cooperatives (18 percent of the total with 32, 20, and 21 cooperatives from Gansu, Guizhou, and Sichuan, respectively) were selected for the analysis based on coverage of major value chains; scope, size, and age of cooperatives; and duration of operation and geographic location. The results show that 90 percent of the cooperatives (66 out of the 73 sampled) are financially viable with a financial internal rate of return (FIRR) above 8 percent (annex 4).17 40. Economic analysis was based on the financial analysis while considering the benefits beyond cooperative revenues. The project strengthened cooperatives’ forward and backward linkages and established a stable production and sales relationship to enhance the farmers’ horizontal and vertical integration. Nonmember farmer beneficiaries were not covered by the financial analysis but the economic analysis shows that nonmembers’ also benefited through increased employment incomes from the extended value chain linkages; farm gate commodity price increases due to the cooperatives’ operations, improved infrastructure, and enhanced capacity and skills; and post-harvest loss reduction due to improved processing capacity and marketing access, particularly for perishable products. The additional benefits for non-members were conservatively estimated at 25 percent of cooperative revenues and varied by size, scope, and value chain (annex 4). The economic rate of return (ERR) was thus based on (a) net benefits from the operations of 73 cooperatives and additional benefits accrued to nonmembers and 17 The discount rate is set at 8 percent for loan approval by local commercial banks for the agricultural sector. Page 14 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) (b) apportioned costs for the 73 cooperatives from other project components related to infrastructure, public services, and project management. The project ERR was estimated at 17 percent, indicating that the project is economically viable and robust.18 41. Fiscal impact analysis. The provincial and county governments provided the counterpart funds. The provincial governments are responsible for loan repayment and the IBRD loan proceeds were given to the project counties as grants. The local governments do not have additional fiscal obligations as cooperatives operate commercially and independently, and infrastructure and O&M costs are borne by the local communities. 42. Implementation efficiency. The one-year extension did not have any negative impact on the implementation efficiency, but rather it allowed to fully complete all planned investments and realize the intended objective of institutional learning and demonstration. Procurement and FM performance were satisfactory. The actual project cost of US$279.5 million, including counterpart funding and disbursed World Bank loan of US$148.3 million, was slightly less than the PAD estimate of US$295.1 million due to cost savings. D. JUSTIFICATION OF OVERALL OUTCOME RATING 43. The overall outcome of the project is rated Satisfactory based on its high relevance, substantial efficacy, and substantial efficiency. E. OTHER OUTCOMES AND IMPACTS Gender 44. A gender-sensitive approach was incorporated into the project design to ensure women’s equal participation and empowerment. The project interventions were designed and executed in due consideration of women’s views, opinions, and participation. As a result, the project investments led to reduced workload and hardship for women19. The project identified women with limited opportunities and exposure and provided them with additional opportunities for employment which not only increased their ability in value chain production and management but also improved their income and enhanced their role in decision-making. In Sichuan Province, for example, women occupied 17 percent (105) of the 615 cooperative management positions. Similarly, women were in leadership positions on the board of directors or the supervision board of 39 operating cooperatives in Guizhou. In conclusion, the project successfully empowered women and enhanced their socioeconomic status by providing them with more economic opportunities, a greater role in decision-making, and increased participation in cooperative affairs and decisions. 18 The discount rate is 6 percent as per the World Bank guideline for public investment projects in China, which is line with the discount rate recommended by the National Development and Reform Commission of China. 19 According to the external independent monitoring report of Huazhong University of Science and Technology, 69.94% members of the surveyed female households (female-headed households) indicated that they used the new/retrofitted roads, irrigation and other infrastructure under the project, and all believed that the infrastructure improved their lives; and that they were satisfied with the production and living conditions. 85 percent of female households believed that sanitation, villager relations, and cultural life have all been improved. Page 15 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Institutional Strengthening 45. Institutional strengthening and capacity building of the Government, cooperatives, and enterprises were essential elements of the project. The project was active in a large area over 27 counties in three provinces and specific institutional strengthening and training plans were carried out for farmer cooperatives across all the counties. Training courses for cooperative members were in high demand, with 199,654 person-times of training provided against the end target of 150,000. As a result of the project efforts, 71 percent of the cooperatives were already profitable against the end project target of 30 percent. Mobilizing Private Sector Financing 46. Strengthening farmer cooperatives as viable business entities in partnership with the private sector was a key element of the project approach to value chain development. The project made concerted efforts in mobilizing private sector financing for the cooperatives as an important indication of a good business rationale and sustainability of value chains through market linkages. At project closing, 217 cooperatives had successfully established business agreements with the private sector, with US$208.4 million (CNY 1.4 billion) of private funds invested in the comprehensive value chain development, exceeding the end project investment target by 4.9 percent. Poverty Reduction and Shared Prosperity 47. The project was designed to reduce rural poverty in response to China’s poverty reduction strategy by capitalizing on the agriculture sector potential for stimulating modernization of agriculture and reducing rural-urban inequality. The project area was, therefore, located in the Wumeng and Liupan Mountains—2 of the 14 poverty-stricken mountain areas prioritized by the Government for poverty reduction and rural development. The project’s eligibility criteria for CDF support to a cooperative required that the cooperative’s articles of association and implementation plan contained preferential policies and conditions for poor households. The project was implemented in 27 counties in three provinces. More than 70 percent of the poor population of these counties was residing in the villages selected for the project; 82.9 percent of the registered poor households joined the cooperatives and benefitted from the project interventions against the end target of 60 percent. Other Unintended Outcomes and Impacts 48. Building a foundation for rural revitalization. The project interventions and cooperatives’ businesses created many job opportunities for young people to work close to home, which increased their household income, enabled them to take care of their families (that is, left-behind children and aged family members), and also built (young) local human resource for rural development. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 49. The project design adopted an integrated development approach, combining infrastructure investment, institutional strengthening, and value chain development for poverty reduction. The Page 16 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) project components complemented each other and the causal relationships between project interventions, intermediate results, and PDO indicators were justified with operational logic. The project benefited from past lessons in value chain and farmer cooperative development. The project was designed to leverage private sector investments, for viability and sustainability of the value chains. Risks to the PDO achievement were well identified, along with the mitigation measures incorporated into the project design. The implementation arrangements were effectively designed with responsibilities clearly defined for the PMOs at all levels. B. KEY FACTORS DURING IMPLEMENTATION 50. A number of factors contributed to the higher-than-expected performance of the cooperatives and agricultural value chains created under the project: (a) partnerships between farmer cooperatives and enterprises facilitated product processing and aggregation, enabling cooperatives to achieve economies of scale and enhance their competitiveness; (b) promotion of climate-smart agricultural technologies in crop and livestock production systems resulted in a greater share of certified or registered organic, green, or geographical indication 20 (GI) products which helped farmer cooperatives fetch premium prices in niche domestic, regional, and international markets and also created incentives for farmers to adopt good agricultural practices as well as for provinces to adopt national certification and registration systems; (c) front-loading of capacity building and skills enhancement of farmer cooperatives improved their operations and profitability; and (d) the accelerated use of e-commerce platforms due to the rapid spread of COVID-19 enabled cooperatives to reach markets they would not otherwise have been able to penetrate. 51. Factors that contributed to an overall successful project implementation experience included the following: (a) adoption of one accounting software by all cooperatives which substantially improved FM, business planning, and financial transparency for benefit sharing and also enabled monitoring of performance and needs in real time; (b) outsourced advisory services and the effective deployment of cooperative facilitators which contributed to the development of cooperatives and helped the cooperatives to diagnose problems, find appropriate solutions, and develop business plans; and (c) a close working relationship between the World Bank task team and the client to address emerging challenges including jointly developing a COVID-19 response action plan to mitigate the effects of COVID-19 and increase preparedness for future emergencies. 52. Outbreaks of African swine fever and COVID-19 had some negative impacts. With the first case of African swine fever in August 2018, the epidemic quickly spread to 26 provinces, including the 3 project provinces. Small household livestock farms in these provinces were particularly badly affected. The project responded by implementing the African swine fever control guidelines to minimize livestock losses and improve preparedness. In December 2019, the COVID-19 pandemic negatively affected project implementation due to travel, transport, communication, and trade restrictions. Additional COVID-related regulations and containment measures on food safety, hygiene, and disease control also affected the movement of farm produce.21 20 GIs are intellectual property rights that serve to identify a product that originates from a specific geographical area and has quality, reputational, or other characteristics that are essentially attributable to its geographical origin. GI Agro product is issued by the Ministry of Agriculture and Rural Affairs in China. 21 The 12th ISM mission Aide Memoire (2020). Page 17 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 53. M&E design was practical, with some shortcomings in the formulation of PDO indicators and IRIs. For instance, equitable organizational arrangements and sustainable increase of income lacked clearly defined measurable indicators. The reconstructed TOC presented a logical path to PDO achievement. IRIs were straightforward and easy to measure, but they were lopsided: 8 for Component 1 alone, compared with 6 for Components 2, 3, and 4 together. Institutional responsibilities for M&E were well defined with the provincial PMO for overall planning, coordination, and M&E implementation; external agencies for independent assessments; and mandatory participation of women, poor households, and ethnic minorities in M&E. M&E Implementation 54. External entities were contracted to undertake independent evaluation of project interventions at three stages: a baseline at project start, a follow-up before midterm, and a final round at completion. The management information system (MIS) to track implementation progress lagged the actual progress on the ground due to delayed data entry. One M&E officer was appointed in each PMO. Some inconsistencies emerged for a few IRIs in the MIS records and ISRs. These were eventually verified and rectified during the preparation of this ICR. M&E Utilization 55. M&E reports were useful to assess the project’s implementation status and progress toward PDO achievement; inform project management on implementation issues that required additional efforts and resources; and review profitability of the cooperatives to assess their financial viability and sustainability. Furthermore, METT was adopted to review cooperatives governance and management effectiveness. The M&E system also helped identify the best practices for replication and scaling up. Justification of Overall Rating of Quality of M&E 56. The overall quality of M&E was rated Substantial. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE 57. All applicable environmental and social safeguards policies were complied with, and the overall performance was Satisfactory. The project was classified as Category B-partial assessment given that proposed interventions were primarily of small scale with any negative environmental impacts readily avoided and mitigated. The following policies were triggered: (a) OP/BP 4.01 (Environmental Assessment) to ensure the identification and mitigation of potential environmental impacts, under which separate environmental management plans for each province were duly prepared, disclosed and implemented; (b) OP/BP 4.04 (Natural Habitats), as a precautionary measure for the natural reserves found close to the project area; (c) OP 4.09 (Pest Management), under which an integrated pest management plan for each province was prepared; (d) OP/BP 4.10 (Indigenous Peoples) under which an ethnic minority development Page 18 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) plan was prepared to ensure that ethnic minorities fully participate and benefit from the project; and (e) OP/BP 4.12 (Involuntary Resettlement) under which a resettlement policy framework for preparation of resettlement action plans was ready, if needed. Capacity-building support and training were provided to strengthen the initially limited safeguards implementation capabilities of PMOs. No major safeguards issues arose during implementation. Financial Management 58. The project FM system throughout implementation was adequate and provided accurate and timely information with reasonable assurances that the IBRD loan was being used for the intended purpose. Financial reporting was in line with the Ministry of Finance regulations and requirements of the Loan Agreement. The need to strengthen the client’s FM capacity was identified and regular guidance, training, and support were provided to the project. All project audit reports came with unqualified audit opinion. The withdrawal procedure and funds flow arrangement were appropriate with well-timed disbursement to the project Procurement 59. The agreed procurement procedures were well followed and complied with. Community participation was introduced to the cooperatives and administrative village committees for providing more flexible procurement procedures and arrangements. Key mitigation measures taken to address risks related to FM and procurement included the following: (a) cooperative advisers were hired to help the cooperatives and village committees in planning and implementation; (b) a Project Operations Manual, including detailed fiduciary procedures for community participation and sample procurement documents, was prepared and circulated; and (c) regular FM and procurement training was provided to the project staff, cooperative advisers, cooperatives, and villages for effective fiduciary management. The mitigation measures worked well, and no significant FM and procurement issues were noted throughout implementation. C. BANK PERFORMANCE Quality at Entry 60. The World Bank’s performance at entry was satisfactory. The project design was in line with China’s national and provincial poverty reduction strategies and plans to demonstrate a successful agriculture-based industry pilot for poverty alleviation. The World Bank team worked closely with the client to ensure a well-structured project design, integrating infrastructure development with institutional strengthening (business oriented professional farmer cooperatives) and value chain development; a robust risk management plan; and coverage of environmental, social, and fiduciary aspects in the project design and in the Project Operations Manual. The project design underestimated the time and effort required to generate the necessary understanding of market-driven approaches for value chain development and to establish farmer cooperatives resulting in the need to extend the project closing date by a year. Page 19 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Quality of Supervision 61. The World Bank performance during supervision was satisfactory. The World Bank team carried out a total of 14 implementation support missions (ISMs). Key elements were regular missions with field visits as well as virtual ISMs due to COVID-19 restrictions, careful review and rating of the project implementation progress, strategic and operational guidance to improve project performance, objective and candid reporting including implementation shortcomings along with appropriate solutions, guidance and support for institutional strengthening especially in fiduciary management and safeguards, and need- based additional guidance. Justification of Overall Rating of Bank Performance 62. The World Bank performance is rated satisfactory as duly endorsed by the borrower’s project completion report. D. RISK TO DEVELOPMENT OUTCOME 63. Continued institutional support and capacity building for farmer cooperatives. Farmer cooperatives are at various stages of development and require further guidance, technical backup, and training to be sustainable. In particular, many have not yet established sustainable sales and marketing channels as they have focused more on investing in the production process than on developing market linkages. The provincial PMO is committed to provide continued management, technical, and business support to the cooperatives, including linking them to markets. The provincial governments issued a directive in August 2022 for the O&M and management of assets created by the poverty reduction programs for sustainability. 64. Cooperatives’ financial sustainability. Many farmer cooperatives were not financially sustainable enough to absorb the market risks. The risk would have been mitigated through private sector linkagess and co-financing arrangements which would have provided the cooperatives with clear business rationale, sound management, and business planning to enhance market competitiveness for longer-term sustainability. The provincial governments have committed to facilitating partnerships between the cooperatives and private enterprises going forward. 65. The lessons and experience from this project have been incorporated into the World Bank- financed China Green Agriculture and Rural Revitalization Program for Results Project (Phase I, P177590, approved in March 2022) in Guizhou and Guangxi; in Guizhou, the same provincial PMO will continue to manage the newly approved project. V. LESSONS AND RECOMMENDATIONS 66. A conducive policy environment and government support are important. China’s agriculture sector policies and Poverty Reduction Strategy 22 (2011–2020) recommendations—to utilize the agricultural potential, that is, development of value chains/agro-industries through professional farmer cooperatives (backed by the Farmer Professional Cooperative Law 2007) to modernize agriculture and 22 The Outline for Development-Oriented Poverty Reduction for China’s Rural Areas (2011–2020). Page 20 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) alleviate poverty—provided a favorable environment for the project. In line with the policy recommendations, the project was a pilot to demonstrate the usefulness of pro-poor value chain approach in ‘poverty-stricken mountain areas. Thus, the project received considerable government attention and support throughout implementation. The 2007 law enabled the cooperatives to seek and receive government funds and services besides the project funds. A well-aligned operation with the government priorities is, therefore, important for its success and replication. 67. Building professional farmer institutions takes time and concerted efforts. Mobilizing farmers and turning them into a functional business group with a profitable value chain that benefits the member households, especially poor and ethnic minority households, require careful training needs assessment and capacity building and business development plans duly supported by technical and advisory services. Implemented needs to proceed at a pace and in a manner according to the knowledge/skills base and absorptive capacity of the target group which is often overestimated. METT proved to be a useful instrument to systematically assess the cooperatives’ maturity level and provide them targeted guidance and support for moving to the next level. 68. Better public infrastructure and services enhance local connectivity and mobility. Farmer cooperatives benefitted from the improved infrastructure and support services provided by the provincial governments to complement the project investments. Improved roads, irrigation and drainage, internet, utilities, quality testing and certification facilities, and extension services improved local farmers’ and cooperatives’ mobility, product processing and value addition, and access to input and output markets; reduced pre- and post-harvest losses; helped achieve economies of scale; and reduced production and transport costs. 69. Effective links to market are important for business success. The cooperatives with plans to develop the entire value chain—from modernizing the production process, value addition, better packaging, and quality control to establishing successful market connections—were able to sell their products at better prices in the niche domestic and international markets and earn higher profits. The key ingredients to this success were business contracts with the private sector to invest in their value chains; registration of the trademark/brand name as a mark of high quality and recognition of the product; quality certification, that is, green product and organic product; and the use of all avenues (traditional wholesale markets, direct sales to supermarkets and businesses, and e-commerce channels) to access local, regional, national, international, and niche markets. . Page 21 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: PDO Level Results Indicators Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 1. Direct project beneficiaries Number 0.00 470,000.00 500,000.00 699,163.00 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 Female beneficiaries Percentage 0.00 40.00 40.00 37.10 Poor Percentage 0.00 30.00 30.00 34.70 ethnic minority Percentage 0.00 20.00 20.00 29.00 Comments (achievements against targets): Page 22 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) The original target was revised during the restructuring. The revised target was 140% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 2. Share of project supported Percentage 0.00 40.00 30.00 71.20 cooperatives making profit in each year. 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 Comments (achievements against targets): The original target was revised during the restructuring. The revised target was 237% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 3. Incremental farm income Percentage 0.00 25.00 25.00 24.50 generated by project activities 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 Comments (achievements against targets): The target was 98% achieved. Remark: The correct name of the indicator should be Incremental member household income generated by project activities, to be in line with the revision during the restructuring. The indicator name was mistakenly not reflected in portal in the ISR following the restructure. Page 23 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 4. Cooperative effectiveness, Number 0.00 40.00 40.00 63.28 as measured by METT (average score) 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 Comments (achievements against targets): The name of the indicator was redefined during the restructuring. The target was 158% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 5. Percentage of beneficiaries Percentage 0.00 0.00 80.00 97.00 satisfied with the services provided by project (%) 25-Dec-2019 30-Jun-2021 30-Jun-2022 30-Jun-2022 Comments (achievements against targets): This was a newly added indicator during the MTR restructuring in 2020. The target was 121% achieved. A.2 Intermediate Results Indicators Component: Integrated Value Chain Development Page 24 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 1.1 Number of cooperatives Number 0.00 300.00 415.00 408.00 established and registered legally 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 Comments (achievements against targets): The original target was revised during the restructuring. The revised target was 98% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 1.2 share of poor households Percentage 0.00 60.00 60.00 81.90 in the community/natural village that join newly 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 established or improved cooperatives (as share of total archived poor households per community/natural village Comments (achievements against targets): The name of the indicator was revised during the restructuring. The target was 137% achieved. Page 25 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 1.3 Number of cooperatives Number 0.00 300.00 415.00 408.00 having organized management training 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 Comments (achievements against targets): The original target was revised during the restructuring. The revised target was 98% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 1.4 Number of cooperatives Number 0.00 300.00 415.00 407.00 with CDF support. 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 Comments (achievements against targets): The original target was revised during the restructuring. The revised target was 98% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 1.5 Share of project Percentage 0.00 40.00 30.00 63.10 Page 26 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) cooperatives paying out 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 dividends. Comments (achievements against targets): The original target was revised during the restructuring. The revised target was 210% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 1.6 Share of cooperative Percentage 0.00 60.00 60.00 61.50 members buying inputs or marketing production 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 through cooperatives Comments (achievements against targets): The target was 103% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 1.7 Number of cooperatives Number 0.00 100.00 100.00 217.00 with production arrangements with 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 enterprise partners Page 27 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Comments (achievements against targets): The target was 217% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 1.8 Number of cooperative Number 0.00 100,000.00 150,000.00 199,654.00 members trained, by gender and ethnic minority (person- 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 times, cumulative). % ethnic minority Percentage 0.00 25.00 25.00 36.90 % female Percentage 0.00 25.00 25.00 37.20 Comments (achievements against targets): The target was revised during the restructuring. The revised target was 133% achieved. Component: Public Infrastructure and Services Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Formally Revised Completion Page 28 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Target 2.1 Length of Kilometers 0.00 900.00 700.00 994.00 production/tractor roads built or improved by the 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 project Comments (achievements against targets): The original target was revised during the restructuring. The revised target was 142% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 2.2 Number of agro-products Number 0.00 50.00 50.00 63.00 receiving brand naming or certification issued under the 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 project Comments (achievements against targets): The target was 126% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 2.3 Persons-days of advisory Text 0.00 Actual number 100,000 252,983 Page 29 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) services provided to 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 cooperatives(cumulative) Comments (achievements against targets): There was no specific number requirement in the original target. The 100,000 was set and agreed during the restructuring. The target was 253% achieved. Component: Research, Training and Extension Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 3.1 Number of analytical Number 0.00 6.00 6.00 14.00 studies completed/and disseminated (cumulative) 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 Comments (achievements against targets): The target was 233% achieved. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 3.2 Number of Number 0.00 24.00 40.00 47.00 provincial/national seminars/workshops 10-Nov-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 completed (cumulative) Page 30 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Comments (achievements against targets): The original target was revised during the restructuring. The revised target was 118% achieved. Component: Project Management, Monitoring and Evaluation Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion 4.1 Training (person-times) in Number 0.00 2,500.00 10,000.00 48,371.00 project management completed by PMO staff at 30-Oct-2014 30-Jun-2021 30-Jun-2022 30-Jun-2022 all levels (cumulative) Comments (achievements against targets): The original target was revised during the restructuring. The revised target was 484% achieved. Page 31 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) B. KEY OUTPUTS BY COMPONENT Objective/Outcome 1: The development of effective rural value chains 1. Cooperative effectiveness, as measured by METT (average score) (target 40% vs. achieved 63.28%) Outcome Indicators 1. Number of cooperatives established and registered legally (target 415 vs. achieved 408) Intermediate Results Indicators Objective/Outcome 2: The promotion of equitable organizational arrangements and participation in these value chains 1. Direct project beneficiaries (target: 500,000 vs. achieved: 699,163 ) Female: target 40% vs. achieved 37.1% Outcome Indicators Poor: target 30% vs. achieved 34.7% Ethinic minority: target 20% vs. achieved 29% 1. Share of poor households in the community/natural village that join newly established or improved cooperatives (as share of total archived poor households per community/natural village (target 60% vs. achieved 81.9%) Intermediate Results Indicators 2. Number of cooperatives having organized management training (target 415 vs. achieved 408) 3. Number of cooperatives with CDF support (target 415 vs. achieved 407) 4. Share of cooperative members buying inputs or marketing production through cooperatives (target 60% vs. 61.5%) Objective/Outcome 3: The sustainable increase of income of target households 1. Share of project supported cooperatives making profit in each year (target 30% vs. achieved 71.2%) 2. Incremental farm income generated by project activities (target: 25% vs. achieved 24.5%) Outcome Indicators 3. Percentage of beneficiaries satisfied with the services provided by project (target 80% vs. achieved 97%) Page 32 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) 1. Share of project cooperatives paying out dividends (target 30% vs. achieved 63.1%) 2. Number of cooperatives with production arrangements with enterprise partners (target 100 vs. achieved 217) 3. Number of cooperative members trained, by gender and ethnic minority (person-times, cumulative).(target 150,000 vs. 199,654) 4. Length of production/tractor roads built or improved by the project (target 700 km, vs. achieved 994 km) 5. Persons-days of advisory services provided to cooperatives (cumulative) (target 100,000 vs. achieved Intermediate Results Indicators 252,983) 6. Number of agro-products receiving brand naming or certification issued under the project (target 50 vs. achieved 63) 7. Number of analytical studies completed/and disseminated (cumulative) (target 6 vs. achieved 14) 8. Number of provincial/national seminars/workshops completed (cumulative) (target 40 vs. achieved 47) 9. Training (person-times) in project management completed by PMO staff at all levels (cumulative) (target 10,000 vs. achieved 48,371) Component 1: Integrated Value Chain Development Key Outputs by Component • 408 farmer cooperatives established/registered legally (linked to the achievement of • 407 farmer cooperatives being invested in agricultural products and services for value chain the Objective/Outcome 1 & 2& development 3) • 199,654 person-times of technical training and services Component 2: Public Infrastructure and Services • Production road constructed Key Outputs by Component • Irrigation and drainage constructed (linked to the achievement of • Communication and information infrastructure and equipment established the Objective/Outcome 3) • Public market facilities (electricity supply, acquisition of goods necessary to facilitate investments under Component 1) Component 3: Research, Training and Extension Page 33 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) • Analytical studies completed • Training and workshops conducted Policy guidelines issued Page 34 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Ulrich K. H. M. Schmitt Task Team Leader(s) Yuan Wang Procurement Specialist(s) Yi Geng Financial Management Specialist Junxue Chu Team Member Wenyan Dong Team Member Chaogang Wang Social Specialist Zhuo Yu Team Member Alejandro Alcala Gerez Counsel Xieli Bai Team Member Xin Ren Social Specialist Yunqing Tian Team Member Aristeidis Panou Counsel Aimin Hao Social Specialist Supervision/ICR Wendao Cao Task Team Leader(s) Yuan Wang Procurement Specialist(s) Fang Zhang Financial Management Specialist Minghe Zheng Team Member Mekbib Gebretsadik Haile Team Member Aimin Hao Social Specialist Page 35 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Aristeidis Panou Counsel Yunqing Tian Team Member Yongli Wang Environmental Specialist Ladisy Komba Chengula Team Member Yan Zhang Procurement Team Wenyan Dong Team Member Junxue Chu Team Member Paavo Eliste Team Member B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY13 25.544 137,254.46 FY14 46.930 247,546.21 FY15 23.145 121,230.34 Total 95.62 506,031.01 Supervision/ICR FY16 16.400 90,597.50 FY17 27.225 137,662.50 FY18 13.730 114,493.52 FY19 13.905 107,081.62 FY20 23.425 135,317.31 FY21 11.150 77,001.61 FY22 11.425 62,143.30 FY23 13.132 89,218.56 Total 130.39 813,515.92 Page 36 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) ANNEX 3. PROJECT COST BY COMPONENT Table 3.1 Project Cost by Component (US$, millions) Component Amount at Approval Actual at Project Percentage of (PAD Estimation) Closing Approval (%) Total (IBRD loan + Total (IBRD loan + counterpart Funding) counterpart Funding) A. Integrated Value Chain 195.7 204.2 105.0 Development B. Public Infrastructure and Services 66.9 59.9 102.4 C. Research, Training and Extension 0.7 0.7 100.0 D. Project Management 10.0 5.7 61.0 Subtotal 273.3 270.1 101.2 E. Contingencies/IDI/front-end fees 21.8 9.4 44.5 Total 295.1 279.5 94.7 Note: IDI = Interest during implementation. Table 3.2 Project Cost by Financer at Appraisal (US$, millions) Amount at Project Counterpart Component IBRD Loan Approval Funding A. Integrated Value Chain 195.7 113.0 82.7 Development B. Public Infrastructure and Services 66.9 32.0 34.9 C. Research, Training and Extension 0.7 0.7 0.0 D. Project Management 10.0 3.8 6.2 Subtotal 273.3 149.6 123.7 E. Contingencies/IDI/front-end fees 21.8 0.4 21.4 Total 295.1 150.0 145.1 Table 3.3 Project Cost by Financer at Project Closing (US$, millions) Component Amount at Project Closing IBRD Loan Counterpart Funding A. Integrated Value Chain 204.2 115.3 88.8 Development B. Public Infrastructure and Services 59.9 28.6 31.1 C. Research, Training and Extension 0.7 0.6 0.1 D. Project Management 5.7 3.4 2.3 Subtotal 270.1 147.9 122.3 E. Contingencies/IDI/front-end fees 9.4 0.4 9.0 Total 279.5 148.3 131.2 Page 37 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) ANNEX 4. EFFICIENCY ANALYSIS Project Benefits 1. The project benefits accrued from improved productivity, value addition, market opportunities, and long-term local employment opportunities. Specifically, these benefits were generated from (a) the adoption of new production standards and technologies; (b) reduced post-harvest losses; (c) improved produce processing and/or packaging; (d) better access to services, markets, and information; (e) reduced transaction costs; (f) improved product quality and producer (farm gate) prices; (g) higher production values through market differentiation (for example, product certification and branding); and (h) advantages from economies of scale. 2. Indirect benefits expected from the promotion of cooperative models include (a) strengthening of producer and marketing groups; (b) improving of quality and reduction in the costs of forward and backward linkages of farmers to markets and value chain operators higher up; (c) local cooperatives managing physical infrastructure investments in a sustainable manner; (d) public and private sector operators delivering quality services in more efficient and targeted ways; and (e) new models of cooperatives and enterprises working together. In addition, the project has contributed to improving the outreach and inclusiveness of the agricultural investments. Financial Analysis 3. As specific cooperative-level investment proposals were not available at appraisal, financial net returns of a range of typical farming activities for the proposed value chains were calculated on a household or per hectare basis at appraisal. At project closing, financial analysis was conducted based on the operations of the cooperatives which adopted a value chain approach. 4. At the cooperative level, investment costs included civil works (land preparation and buildings), equipment, vehicles, training, and technical assistance. Operating costs included variable costs for raw materials and packing materials, utilities, fixed costs for salaries and welfare, office overheads, marketing costs, and maintenance of buildings, equipment, and vehicles. 5. The major assumptions for the financial analysis included the following: (a) In line with prevailing practice for cooperative operations, 20 years of project life was assumed. (b) Investment costs were based on the actual costs incurred, including procurement and installation of additional equipment and training. (c) The residual value of fixed assets is estimated at 5 percent of the book value and considered as a cash inflow at the end of project life. (d) Revenues were derived from the sales generated from operating capacity achieved from the past years and projected values for future sales based on the average prices of past years. (e) The operating costs were derived from the costs of raw materials, labor, utilities, marketing, and administrative expenses. Page 38 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) (f) Capacity utilization for years in operation is that achieved while cooperative management provided future projections. 6. The cash flow analysis for FIRR calculation of one black chicken cooperative in Guizhou Province is shown in table 4.1 as an example.23 Table 4.1. Cash Flow Analysis for Chishui Jimao Black Chicken Raising Cooperative in Guizhou Province (CNY, ten thousands) Cash Flow Analysis for Chishui Jimao Black Chicken Raising Cooperative in Guizhou Province ( In 10,000 Yuan) 2019年 2020年 2021年 2022年 2023-27 2038 Capacity Uitilzation (%) 0 60 70 90 90 90 1.Cash inflow 0.0 67.5 76.6 84.5 84.5 99.4 1.1 Chicken Sales 0.0 67.5 75.0 82.5 82.5 82.5 1.2 chick waste as fertilize 1.6 2.0 2.0 2.0 1.3 Fixed Assets Residual 14.9 2. Cash outflow 110.0 209.2 21.2 47.4 47.4 47.4 2.1 Investment cost 110.0 188.0 0.0 2.2 Operating cost 0.0 21.2 21.2 47.4 47.4 47.4 3. Net Cashflow -110.0 -141.7 55.5 37.1 37.1 52.0 内部收益率 12.8% （FIRR) 净现值(FNPV) (IC=8%)： 76.7 7. Among the 408 project-supported cooperatives, 73 (18 percent of the total with 32 from Gansu, 20 from Guizhou, and 21 from Sichuan) were selected as a representative sample for analysis. The selection criteria included (a) major value chains such as crops (rice, wheat, and corn), livestock (pig, chicken, and sheep), vegetables, medicinal herbs, tea, and fruits; (b) large, medium, and small farmer cooperatives; and (c) different length of operations and geographic locations. The results showed that the 90 percent of cooperatives (66 of the 73 cooperatives) were financially viable with an FIRR of 8 percent.24 8. The primary reasons for seven cooperatives with less than 8 percent FIRR were poor marketing of the products and weak management skills. It implied that the cooperatives required further guidance and support to market their products and become financially viable. The 66 financially viable cooperatives’ profits varied from 8 to 21 percent, depending on the selection of value chains, product quality, branding, and market links. Furthermore, older cooperatives which started early and had more time to enhance their management, financial, technical, and business capacity performed better than the cooperatives which started late. Economic Analysis 9. Justification of public financing for cooperative development. The project addressed several market failures related to the barriers to entry, stakeholder diversity, weak organizational structures, and limited knowledge and information about the poor households. Many project counties invested public funds to support the cooperatives in production, processing, and marketing of their value chains. In many 23 Detailed FIRR calculations for 73 cooperatives (Excel files) are available in the project file. 24 Local commercial banks adopt 8 percent as discount rate for loan approval for agriculture sector projects. Page 39 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) cases, the support was provided irrespective of the cooperatives’ value chains’ relative competitiveness and market demand, and it led to market distortions and continued dependency on public funds. 10. The project, however, directed its funds and support establishing sustainable organizational and institutional systems and addressing only true market failures (not general issues of insufficient competitiveness). It allowed the private sector and markets to work more effectively and increase long- term competitiveness, with an exit strategy from long-term public subsidies. The World Bank support for the project added value by (a) helping to understand the roles of stakeholders and the rationale for using public funds for value chain investments; (b) optimizing the use of funds without distorting markets; (c) ensuring sustainability; and (d) maximizing effectiveness by taking a macro view of the project. 11. The economic analysis was based on the financial analysis while considering the benefits beyond cooperative revenues. As the project strengthened forward and backward marketing linkages and established a stable production/sales relationship to enhance the farmers’ horizontal and vertical integration, the beneficiaries included nonmembers as well. The additional benefits included (a) increased employment incomes from the extended value chain linkages; (b) farm gate commodity price increases for nonmembers due to the operations of the cooperatives and improved infrastructure and capacity building; and (c) post-harvest loss reduction for nonmembers due to increased processing capacity and marketing access, particularly for perishable products. Those beneficiary externalities generated by the cooperatives vary by the size, scope, and value chain. The additional benefits were conservatively estimated at 25 percent of cooperative revenues.25 12. The project-level ERR was based on (a) net benefits from the operations of the 73 cooperatives, plus additional 25 percent of their revenues, and (b) apportioned costs for the 19 cooperatives from total project costs. The project ERR was estimated at 17 percent, indicating the project is economically viable and robust.26 13. The ICR ERR could not be compared with the ERR at appraisal as two different methodologies were used. As stated earlier, specific cooperative-level investment proposals were not available at appraisal, and financial net returns of a range of typical farming activities for the proposed value chains were calculated on a household or per hectare basis, following a traditional production-focused approach. Financial analysis was conducted based on the operations of the cooperatives which adopted a value chain approach rather than the farm/crop models of specific commodities used at the appraisal stage. 14. No sensitivity test was conducted, as significant but not readily quantifiable benefits such as (a) environmental/health benefits of good agriculture practices and (b) incremental benefits of better resource use and improved service delivery were not included in the ERR calculation. Furthermore, as stated in the financial analysis, the output prices were conservatively estimated and the cooperative investment costs were actual, which did not give rise to more variations to be assumed. 25 According to survey by the government ICR teams on representative cooperatives, incremental on-site employment generated 10 percent income increase compared to the situation where no cooperatives were established; farm gate prices increased by about 25 percent for both cooperative members and nonmembers due to the increased agro-processing capacity, and reduced post-harvest losses are estimated to be between 10 and 20 percent. 26 The discount rate is 6 percent per the recent World Bank’s guideline for projects in China, which is line with the discount rate recommended by China’ National Development Commission. Page 40 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Fiscal Impact Analysis 15. The provincial government was responsible for the loan repayment and the World Bank loan proceeds were allocated to the project county as grants. The provincial and county governments provided the counterpart funds. The local governments did not have additional fiscal obligations after the project completion as cooperatives were operating commercially and independently and the infrastructure works’ O&M costs were borne by the local communities. Implementation efficiency 16. The one-year extension did not have any negative impact on the implementation efficiency, but rather it allowed to fully complete all planned investments and realize the intended objective of institutional learning and demonstration. The procurement and FM performance were generally satisfactory. The actual project cost of US$279.5 million including counterpart funds and fully disbursed World Bank loan of US$148.3 was less than the PAD allocation of US$295.1 million due to the cost savings through competitive bidding. Page 41 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS International Poverty Reduction Center in China IPRCC Letter (2023) No. 45 May 24, 2023 Feedback on the Implementation Completion and Results (ICR) Report for Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project Dear World Bank project management team, We have received and carefully reviewed the Bank’s Implementation Completion and Results (ICR) report for Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (hereinafter referred to as the Project). We think the ICR report is objective, truthful, and comprehensive. We agree with the "Satisfactory" overall outcome rating of the Project and the "Satisfactory" overall performance of the World Bank. We would like to take this opportunity to express our heartfelt gratitude to the ICR preparation team for their efforts in producing this report. We would also like to extend our sincere thanks to the Bank’s project management team for their strong support in ensuring the smooth implementation of the Project. Since the identification of the Project, we have maintained a close, friendly, and productive cooperation with the Bank’s team. We commend the Bank team's diligent work ethic, professional competence, and pragmatic spirit, which were strong guarantee to the successful completion of the Project and the achievement of its intended objectives. We very much look forward to continuing our collaborative efforts with the Bank and the relevant project management team in the upcoming launch and implementation of the Green Agriculture and Rural Revitalization Program - Phase II, and more extensive and in-depth cooperation with the Bank in the field of rural revitalization. Kind regards. International Poverty Reduction Center in China (Stamp) Page 42 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Page 43 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Page 44 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) ANNEX 6. PICTORIAL OVERVIEW OF PROJECT ACHIEVEMENTS 1. The project adopted a pro-poor value chain approach to ensure that a large number of small-scale farmers, especially poor and ethnic minority farmers, join the cooperatives and benefit from participating in the value chains. The project supported a considerable number of agriculture-based industries such as apple, potato, Chinese medicinal materials, cattle, and sheep in Gansu Province; kiwi fruit, spice pepper, konjac, silkworm, chicken, sheep, beekeeping, and so on in Guizhou Province; and walnut, potato, cattle, sheep, and chicken in Sichuan Province. The following pictures show some selected value chains and products. Wujiang Fukang Prickly Ash Planting Farmers Professional Cooperative in Guizhou Province has a total of 113 household members, including 95 from extremely poor households. A total of 78 of the registered members are women and all households’ members belong to ethnic minorities. The cooperative received CDF of US$650,000. The funds were mainly used for building a processing unit, a fresh prickly ash pepper production line, a dried pepper production line, a pepper powder production line, a packaging line, and a pepper oil production line as well as for capacity building, marketing, branding, and certification. The pepper oil is popular, and the cooperative is profitable. Page 45 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Page 46 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) In Yongjing County of Gansu Province, farmers have a tradition to grow Bai He Chinese Herb-Lily Bulb. The project financed 15 lily farmer cooperatives, including 3,840 farmer members of which 2,210 members were poor houses. The project supported lily plantation, processing, cool storage, branding, packaging, and marketing as well as business development training. 2. The project helped the farmer cooperatives develop 64 new agro-product brands, of which 12 certifications are for organic products, 45 green products, and 7 GI products as well as many brand names and quality management system certificates. The following pictures show some of these certifications. Sanheshenyuan Cooperative in Guizhou Province received the quality management system certificate for its Tianma Product - Chinese tradition herb. Page 47 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Chishui Puhui Cooperative in Sichun Province has received the organic certificate for its sweet orange products. Page 48 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Page 49 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Yulong Cooperative in Sichuan has received a series of certificates for its walnut products, including green food certificate, quality management system certificate, and branding name of ‘Linmu Yulong’. Page 50 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) In Huanxi County of Gansu Province, the project financed 15 sheep cooperatives. They successfully received GI products certificate, branding name, and high-quality products certificate. Page 51 of 52 The World Bank Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) ANNEX 7. SUPPORTING DOCUMENTS • Aide Memoires, Implementation Support Missions 1 to 14, Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326), he World Bank • Audit Reports, Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project, International Bank for Reconstruction and Development • Briefing note, April 17, 2023, Meeting with Vice Governor, Guizhou Province • Case Studies, 2022, Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project, Gansu Provincial Rural Revitalization Bureau Foreign Cooperation and Exchange Center, Research Group of Northwest Normal University • Country Partnership Framework (2019), for the People’s Republic of China, for the Period FY2020- 2025, International Bank for Reconstruction and Development • Country Partnership Strategy (2012), for the People’s Republic of China, for the Period FY2013-2016, International Bank for Reconstruction and Development • Implementation Status and Results Reports, Sequence Nos. 1-15, Poverty Alleviation and Agriculture- based Industry Pilot and Demonstration in Poor Areas Project, The World Bank • Project Agreement, 2015, Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326), Between IBRD and Gansu Province, Gansu Province and Guizhou Province • Project Appraisal Document, 2015, Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project, Agriculture Global Practice, The World Bank • Project Completion Evaluation Report, 2022, Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project, China International Center for Poverty Alleviation • Restructuring Paper, 2015, Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project, The World Bank • Wrap-Up meeting of the World Bank Poverty Alleviation and Agriculture-based Industry pilot and Demonstration in Poor Areas Project, April 18, 2023, China International Center for Poverty Alleviation, Guizhou Provincial Rural Revitalization Bureau Project Center, International Poverty Reduction Center in China, Project Center, Guizhou Provincial Rural Revitalization Bureau Page 52 of 52