PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: PIDA1298 Public Disclosure Copy Project Name Anhui Yellow Mountain New Countryside Demonstration Project (P129563) Region EAST ASIA AND PACIFIC Country China Sector(s) General transportation sector (25%), General water, sanitation and flood protection sector (25%), Other industry (25%), General agri culture, fishing and forestry sector (15%), Sub-national government administration (10%) Theme(s) Rural services and infrastructure (58%), Cultural Heritage (18%), Rural non-farm income generation (10%), Other rural development (9 %), Municipal governance and institution building (5%) Lending Instrument Investment Project Financing Project ID P129563 Borrower(s) People's Republic of China Implementing Agency Huangshan Municipality development and Reform Commission Environmental Category B-Partial Assessment Date PID Prepared/Updated 28-Aug-2013 Date PID Approved/Disclosed 18-Jul-2013, 01-Sep-2013 Estimated Date of Appraisal 30-Aug-2013 Public Disclosure Copy Completion Estimated Date of Board 25-Mar-2014 Approval Decision I. Project Context Country Context Since it embarked on a series of economic reforms starting in 1978, China’s economy has grown at a remarkable annual rate of about 10 percent and more than 600 million people have been lifted out of poverty. But to sustain this rapid pace of development, China still has to address a number of challenges, amongst them the high inequalities in incomes, opportunities, and quality of life that exist between rural and urban areas. In 2010, the average per-capita disposable income among rural residents was less than one third that of urban residents. The Government of China (GoC) is aware of this challenge and has laid out a set of programs and policies in the 12th Five Year Plan (FYP 2011-2015) to try and address it. One of these programs is the “New Socialist Countryside Scheme� (NSCS) which was launched under the 11th FYP, and is aimed at increasing farmers’ incomes, diversifying their employment opportunities, improving their Page 1 of 7 livelihoods and productivity levels, enhancing their living conditions and the overall management of their rural environment, and strengthening their institutions for self-governance within harmonious communities. Public Disclosure Copy The 12th FYP also outlines the guiding principles to establish the new socialist countryside through strengthening rural-urban linkages, integrating infrastructure construction, public services provision and social management, and capitalizing on local comparative resources advantages to promote local economic development. It further encourages the diversification of rural economies away from the primary sector towards industry and services sectors, including the protection and development of tourism resources, where applicable. It gives priority to the preservation of cultural and natural heritage sites, and to famous cities, towns and villages in Chinese history and culture with pilot projects for the protection and utilization of non-physical cultural heritage as well. Sectoral and institutional Context Despite being located in the relatively advanced eastern region of China, Anhui province ranked 26 among all Chinese provinces in GDP per capita in 2010 . Compared to its direct neighboring provinces, Anhui’s per-capita GDP is less 40 percent than that of Zhejiang and Jiangsu provinces. A closer look reveals that the share of the primary sector in Anhui’s GDP is 14% compared to 4.9% and 6.9% for Zhejiang and Jiangsu respectively, and 10% nationally. Meanwhile, the share of the tertiary sector is 33.9% compared to 43.5% and 41.5% for Zhejiang and Jiangsu respectively. More than 40% of Anhui’s labor force is still employed in agriculture, with relatively low productivity levels. In 2010, the average per capita rural income in Anhui ranked 22nd in China, considerably lower than the national average. Against this background, some of the effective measures to help Anhui province catch up include improving agricultural productivity, engaging farmers in higher value-added commodities supply chains, capitalizing on comparative advantage resources to diversify the sources of income for rural Public Disclosure Copy residents, and promoting rural non-farm sector development to create new employment opportunities. For this purpose, the Anhui Provincial Government has been actively implementing the New Socialist Countryside Scheme (NSCS) through a number of schemes such as the “Thousand Villages and Hundred Towns Demonstration Scheme� which aims at “forming new industrial structure, elevating rural households’ living standard, promoting new countryside customs, improving images of countryside, and consolidating governance of rural areas The NSCS has particular implications for Huangshan Municipality. Located at the far Southern end of Anhui province, Huangshan is endowed with beautiful natural environment and abundant Huizhou cultural architecture. It is home to two UNESCO World Heritage sites, including the Yellow Mountain after which the city is named, and is one of the leading tourism destinations in China. It is rich in old ancient buildings dating back to the Ming dynasty. Huangshan’s economy is highly dependent on the tourism sector. In 2010, Huangshan’s tourism revenue represented nearly 65% of its total GDP. Huangshan municipality encompasses three districts and four counties, with more than one hundred towns and around 900 villages spread across a total area of 9,807 Km2. The total population is estimated at around 1.48 million in 2010, with nearly 60 percent of which living in rural areas. More than 42% of the labor force is employed in the agricultural sector, which accounts for 13% of the municipality’s GDP. Meanwhile, the services sector contributes to over 43% of the local GDP Page 2 of 7 but employs less than a third of the labor force. In 2010, the per capita annual disposable income of urban households (CNY 18,669) was nearly three times that of rural households (CNY 6,716) Public Disclosure Copy The NSCS, implemented since 2006, has led to significant development of Huangshan’s economy and to the improvement of the living conditions in rural areas. The total revenue from the rural economy has almost doubled between 2005 and 2010, and the per capita annual net income of rural households has increased from CNY 3,185 to CNY 6,716. Around 165 villages have been included in the provincial program “A Thousand Villages and A Hundred Towns Demonstration Scheme�. Over 4015 kilometers of rural roads have been constructed or upgraded and about 73% of the rural population has been covered with piped water supply with safe and reliable water sources. The agribusiness sector has also grown at a fast rate with the tea industry generating more than CNY 4.6 billons in total revenue in 2010. However, there are still remaining challenges that the Huangshan Municipal government (HMG) is facing to further develop the rural economy, enhance the living conditions of rural households, and preserve the cultural and natural assets of the region. Investments in infrastructure are insufficient to meet the needed demand, especially for roads, water, and sanitation. Only about 30% of the villages have good sewerage systems and wastewater treatment works. Many of the cultural heritage assets and ancient buildings are neither well preserved nor put to adaptive use, due to shortage of funding. Agriculture productivity remains low and the integration of farmers in high value commodities supply chains has not yet been fully achieved. Employment opportunities in the non-farm sector are limited. Tourism infrastructure and services in the villages are not developed. Finally, the capacity and skill-sets of the institutions and stakeholders involved is in need of improvement. These constraints have undermined the potential of villages to draw on their endowments to develop tourism and create new employment opportunities and income sources. In fact, out of the 23.1 million tourists (measured by person-times) that visited Huangshan in 2010, the average stay was only 1.57 days. The current rural income is still too heavily dependent on agriculture and remittances from migrant workers. Public Disclosure Copy Recognizing these constraints, the HMG has put greater emphasis on the NSCS in its 12 FYP in parallel with the national and provincial programs. It has proposed to increase infrastructure investments in “water, electricity, road, gas and housing�, implement safe drinking water projects that cover a 341,400 rural population, upgrade the village power grid system, improve the safety facilities for rural roads, and accelerate the development of modern high value-added agriculture and agribusiness. In parallel, HMG has initiated a five year cultural heritage conservation program (2009-2013) under the name of “A Hundred Villages, A thousand buildings� (HVTB) aimed at protecting 1,065 ancient Hui Style buildings scattered across 101 villages with an estimated investment of CNY 6 billion. The HVTB includes both a preservation and utilization components. The preservation component consists of preparing protection and utilization master plans, preserving original village layout, remains of ancient buildings, family temples and gardens, protecting ancient trees and countryside sceneries, putting Hui-style façade onto non-traditional buildings and protecting intangible cultural heritage assets. The utilization component develops ancient villages into attraction sites with various features such as Hui-style culture experience, fishing holiday resort, photo-shooting and drawing spots, and agro-tourism. Meanwhile, some ancient buildings are to be transformed into art studio, folk-style hostels, restaurants, museums, bookstores, etc. Page 3 of 7 Finally, the HMG has formulated a comprehensive tourism development strategy with the objective of reaching 50 million person-times of tourists and 50 billion Yuan in tourism revenue by 2015. Under this agenda, 500 villages are expected to be directly involved in the tourism industry and Public Disclosure Copy 3000 rural households are expected to operate family-run hostels/restaurants by 2015. To achieve this goal, HMG plans to improve the overall village environment and invest in basic infrastructure and facilities including roads, water and power supply, sanitation and signage. It also plans to build up tourism management capacity and strengthen relevant institutions such as establishing countryside tourism cooperatives, regulating business activities at tourism sites, and standardizing tourism-related services. C. Rationale for Bank involvement The Bank is well positioned to play a key role in helping HMG in its efforts to promote rural countryside development. Building on lessons learned from a number of similar projects that were successfully implemented in China and elsewhere, the proposed project provides an opportunity to demonstrate new approaches to regional development which integrate infrastructure upgrading with cultural heritage conservation, and enhancing economic opportunities in rural tourism and modern agriculture. The Bank has directly been involved in supporting the new countryside development agenda promoted by the GoC through a number of projects such as the Ningbo new countryside development project (FY 2009) and Chongqing Urban and Rural Integration Project (FY 2010). Furthermore, quite a rich experience has been gained from a number of cultural heritage protection and conservation projects such as the Gansu cultural and natural heritage protection and development project (FY 2008), the Guizhou cultural and natural heritage protection and development project (FY 2009) and the Shandong Confucius and Mencius cultural heritage protection and development projects (FY 2011). The Bank has also recently published a report on “Conserving the past as a foundation for the future: The China-Bank partnership on cultural Public Disclosure Copy heritage conservation� (FY 2011). II. Proposed Development Objectives The project development objective (PDO) is to improve the quality of services and income generating opportunities available to rural households in selected villages of Huangshan municipality. This would be achieved by investing in: (i) upgrading infrastructure services, (ii) restoring and preserving the existing cultural heritage assets, and (iii) promoting high value-added agriculture and countryside tourism. III. Project Description Component Name Infrastructure Improvement Comments (optional) This component aims at improving the infrastructure services in project villages by financing sustainable priority investments in rehabilitating and expanding infrastructure facilities. Component Name Cultural Heritage Conservation Comments (optional) Page 4 of 7 This component aims at restoring, preserving, protecting and, where practicable, adaptively reusing a number of old buildings for social, cultural, village environment, and tourism development. Component Name Public Disclosure Copy Enhanced Economic Opportunities Comments (optional) This component aims at increasing and diversifying households' income, and stimulating village economies by promoting the development of high value-added agriculture and rural tourism. Component Name Institutional Support Comments (optional) This component supports and develops the capacity of institutions to implement the project and to sustainably manage, operate and maintain its outputs. IV. Financing (in USD Million) Total Project Cost: 145.19 Total Bank Financing: 100.00 Total Cofinancing: Financing Gap: 0.00 For Loans/Credits/Others Amount Borrower 0.00 International Bank for Reconstruction and Development 100.00 Local Govts. (Prov., District, City) of Borrowing Country 45.19 Sub-borrower(s) 0.00 Total 145.19 V. Implementation The project will be implemented over a period of 5 years in 68 villages of Huangshan municipality Public Disclosure Copy across three districts and four counties. Huangshan Municipal Development and Reform Commission (DRC) is the lead implementing and coordinating agency for the project. It is a resourceful department that enjoys strong municipal government support, and assistance from provincial and central agencies. It also has the ability to draw on all line bureaus and technical agencies to get them involved in project preparation and implementation. The Huangshan Municipal DRC has set up a Project Management Office (PMO) that will be in charge of overall project management, coordination, and monitoring. At the county/district level, project implementation will be carried out by the local county/district PMOs set up within the respective DRC offices and the local PIUs established at the townships/village levels. The PMOs will report to their respective Project Leading Groups (PLGs), established at the municipal and county levels, consisting of representatives from the various line departments and technical experts. The Municipal Project Leading Group is set-up and headed by the Executive vice mayor of Huangshan Municipality government, and includes officials from Municipal DRC, Finance bureau, Environmental Protection bureau, Agriculture bureau, tourism commission, and planning bureau. Similar structure is followed at the district/county level. Technical agencies including Cultural commission, Tourism, Environment Protection, Transportation, Agriculture, Water Resources, Land and resources, Planning, and Finance will be involved in project planning and implementation. These departments will help provide material and Page 5 of 7 technical guidance at the municipal and county level to facilitate project implementation. For example, the cultural commission will help communicate with state/provincial Cultural Relics Bureaus and gain their support for historical building protection, obtain the necessary plans Public Disclosure Copy approvals, participate in the conservation works for ancient houses, and provide technical support. The Water Resources Bureau will assume the responsibility of planning and design for river works, and irrigation and drainage infrastructure works. The tourism commission will be responsible to guide project stakeholders to help develop market based village level tourism. Finally the transportation bureau will be responsible for providing necessary guidance, approvals, and technical support for rural roads constructions. Village committees and associations will be trained to operate and maintain village assets created under the project. They will further be involved in facilitating the implementation and the monitoring of project activities, particularly those related to cultural heritage, agriculture, and tourism development. Linkages will be forged between village committees and associations on one hand, and PIUs and private sector operators to help implement and monitor project activities. Women are expected to play a key role within the different organizations, by contributing and benefiting from project investments. VI. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 ✖ Natural Habitats OP/BP 4.04 ✖ Forests OP/BP 4.36 ✖ Pest Management OP 4.09 ✖ Physical Cultural Resources OP/BP 4.11 ✖ Indigenous Peoples OP/BP 4.10 ✖ Involuntary Resettlement OP/BP 4.12 ✖ Public Disclosure Copy Safety of Dams OP/BP 4.37 ✖ Projects on International Waterways OP/BP 7.50 ✖ Projects in Disputed Areas OP/BP 7.60 ✖ Comments (optional) VII. Contact point World Bank Contact: Rabih H. Karaky Title: Senior Economist Tel: 473-0585 Email: rkaraky@worldbank.org Borrower/Client/Recipient Name: People's Republic of China Contact: Mr. Yao Licheng Title: Director Tel: 861068551124 Email: yaolicheng@mof.gov.cn Page 6 of 7 Implementing Agencies Name: Huangshan Municipality development and Reform Commission Contact: Ding Shili Public Disclosure Copy Title: Deputy Director Tel: 05599-2355872 Email: hsshxmb@126.com VIII. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop Public Disclosure Copy Page 7 of 7