ICRR 10165 Report Number : ICRR10165 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: C2294 Project ID : P003556 Project Name : Tarim Basin Project Country : China Sector : Irrigation & Drainage L/C Number : C2294 Partners involved : None Prepared by : George T. K. Pitman, OEDST Reviewed by : Susan Stout, OEDST Group Manager : Roger Slade Date Posted : 08/03/1998 2. Project Objectives, Financing, Costs and Components : Objective : To expand irrigated area for crop production, improve agricultural services and promote livestock development in southern Xinjiang Region, one of the poorest and least developed areas in China . Financing and Costs : Total project costs at appraisal were US$ 212 million of which US$125 million were to be financed by an IDA Credit approved August 1991. Actual total costs were US$226 million of which IDA financed US$128 million due to appreciation of the SDR. The Credit was fully disbursed and closed December 1997. Components : Irrigation and drainage improvement and expansion over 200,000 ha in the Yerqiang and Weigan river basins; Hydropower development of 21MW capacity in the Yerqiang basin; Development of agricultural and livestock support services; Restoration of the Tarim River ecosystem; and Upgrading of a hailstone suppression unit including radar and cloud seeding equipment . 3. Achievement of Relevant Objectives : With two minor exceptions, all the objectives were either met or exceeded . Good progress enabled canal lining and drainage to be expanded at mid -term term review (lining from 736 to 1076 km, drainage from 834 to 906 km) and even these revised targets were exceeded . Investment in agricultural extension services and seed farms exceeded SAR targets . The animal husbandry component exceeded investment targets except for the reduction in the number (from 54 to 31) of artificial insemination/breeding stations because of the success of the prefecture government's own program . All components of the Tarim river restoration project were completed, as was the hailstone suppression unit . The hydroelectric unit and switching yard was constructed as planned. 4. Significant Achievements : Farm family incomes increased in constant terms by 64 percent in Yerqiang and 72 percent in Weigan. Eighty percent of agricultural benefits accrued to the poorer farmers (Uygurs). 3 Crop production improved because canal lining saved 940 million m of water that reduced waterlogging and enabled expansion of irrigation by 73,000 ha and supply of additional water to 113,00 ha of low-yield and stable areas; drainage improvements lowered the watertable and reduced soil salinity over 300,000 ha. Hail damage was reduced by about 90 percent. Land use shifted towards higher value crops (e.g. cotton). Crop yields increased 20-47 percent in stable areas, 68-118 percent in low-yielding areas. Free markets for grain are in operation and account for 95 percent of incremental production sales . There was a marked increases in sheep production enabled by better extension services, crop residues and by-products - but this was offset by a fall in goat production due to a decline in cashmere prices . Government increased competitively bid civil works because of significant costs reductions and better quality . Farmers are paying full costs of veterinary services, and part of the irrigation and drainage costs . Tarim River Basin Management Bureau established . ERR ) 33 percent compared with 34 at appraisal . ICR Economic Rate of Return (ERR) 5. Significant Shortcomings : Few. Few . Wate r charges need to be increased . Despite an increase by 600 percent by 1991, a further increase of 400 Water percent is required to meet the covenant that all O&M and a portion of capital costs will be repaid . This target is now set for end of 1999. Number of livestock shelters and wells are less than 60 percent SAR targ ets - but farmers prefer cheaper and locally designed wells/shelters The hailstone suppression unit is institutionally misplaced . Its O&M costs are too expensive for county government and significant positive externalities argue for prefecture level O&M . Counterpart funding was a problem primarily because of the multiplicity and mix of center /prefecture/county funding, but centralization in 1994 solved this problem. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Satisfactory Satisfactory ICR rating appears to take no account of water charge shortfall or problems with sustainability of hailstone suppression unit. Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : Farmers respond to financial and free market incentives even in centrally managed economies . 8. Audit Recommended? Yes No Why? To determine (a) how the project fared given the transition to a market economy, (b) the success of the Tarim river basin ecosystem interventions (c), has dependence on the state diminished? and (d) sustainability of O&M. 9. Comments on Quality of ICR : Balance could be improved . More on impacts and institutional development would balance a picture that is dominated by physical input/output data. Revised economic analysis is summarized only and no way to check validity.