Ex-ante Evaluation
1. Name of the ProjectCountry: The People’s Republic of China
Project: Qinghai Ecological Environmental Improvement Project(Loan Agreement: December 21, 2007; Loan Amount: 6,300 million yen; Borrower: The
Government of the People’s Republic of China)
2. Necessity and Relevance of JBIC’s AssistanceEver since the founding of the nation in 1949, China has set land afforestation as one of its basic
policies. As a result, the forest coverage ratio has increased from 8.6% at the time of the founding ofthe nation to 18.2% in 2005. However, because of the severity of natural conditions and deforestation
to meet the rising timber demand, the forest coverage ratio in China remains below the international
average of 30.3% as of 2005. Moreover, desertification caused by excessive grazing and otherman-caused factors has become a serious problem. While the desertification area has tended todecrease since 2000, deserts still account for 18.1% of China’s national land (1.74 million km2 in2004).
In 1999, the government of China announced its “National Ecological Environment Construction
Plan” and adopted a national framework for the next 50 years covering four areas of activity:
afforestation, water utilization, agriculture and environmental protection. Among the plan’s goals areprevention of soil erosion in the upper and middle reaches of the Yellow River and desertification inareas that have turned into deserts and prairies. In the 11th Five-Year Plan (2006–2010), thegovernment continues to focus on implementing projects related to the protection and restoration ofthe natural ecosystem.
In the eastern and southern areas of Qinghai Lake in Qinghai Province, the project site, excess
logging of forests and other human activities have caused a marked reduction in the water resource
recharging capacity and the water and soil retention capacity. Of the 9.87 million ha of land coveredby the project, 2.35 million ha has been affected by soil erosion. In Qinghai Lake, as a result of thereduction of the water resource recharging capacity, the water’s edge receded 3.78 m and the water
volume decreased by 400 million m3 from 1959 to 2004. There is thus an urgent need to improve thewater resource recharging capacity and the water and soil retention capacity in these areas.
Additionally, in the western and southern areas of Qinghai Lake, desertification caused by sandblown into the area from the basin in the western part of the province is becoming a serious problem.
Of the total 7.82 million ha of land, deserts expanded from 1.32 million ha in 1999 to 1.66 million hain 2004. There is thus an urgent need to prevent further desertification in these areas.
Furthermore, grasslands are receding in Qinghai Province due to human activities such as grazing. Of
the 4.67 million ha of grassland covered by the project, 220,000 ha has a bare ground surface, 2.3
million ha has suffered pest damage, and 1.06 million ha has lost its natural vegetation due toabnormal proliferation of weeds. There is thus an urgent need to improve the degraded grasslands inthe area.
This project addresses environmental conservation, one of the priority areas designated in theEconomic Cooperation Program for China prepared by the government of Japan and JBIC’sMedium-Term Strategy for Overseas Economic Cooperation Operations. Thus, JBIC’s support for-1-this project is highly necessary and relevant.
3. Project Objectives
The project aims to improve the forest coverage ratio and vegetation coverage ratio in the peripheryof Qinghai Lake in Qinghai Province by improving the degraded grasslands, preventing furtherdesertification, afforestation and water/soil conservation measures, and thereby contribute to therestoration of the multi-faceted functions of forests and grasslands.
4. Project Description(1) Target Area
10 counties in Qinghai Province(2) Project Outline
The project involves improvement of degraded grasslands, afforestation, construction of related
facilities, procurement of materials and equipment, and training.
(a) Improvement of degraded grasslands: Grass planting, construction of fences to keep livestock
out, measures to control damage caused by field rats and pests1, and construction of livestockcribs(b) Prevention of desertification: Desert closure, forests for wind/sand protection, and control
works to prevent sand dunes from moving(c) Afforestation: Forests for water resource recharge, forests for water/soil retention, and forest
protection and management2(d) Water/soil conservation measures(i) Erosion control work: Building of small-scale sand-trap dams, bank protection work,
construction of erosion protection walls(ii) Support for afforestation of forests for water resource recharge and water/soil retention:
Development of irrigation facilities(e) Equipment procurement, etc: Patrol/work vehicles, monitoring equipment, office equipment,etc.
(f) Training: Training in Japan, experts dispatched from Japan, and training in China concerning
improvement of degraded grasslands and afforestation (techniques for restoration ofgrasslands, techniques for management of grasslands, feeder management, forest management,etc.)(3) Total Project Cost / Loan Amount
8,453 million yen (Yen Loan Amount: 6,300 million yen)
(4) ScheduleMarch 2008–November 2014 (81 months). The definition of project completion is “when the projectis finally accepted by the Qinghai Provincial People’s Government.”
1This involves the use of mousetraps and chemicals to prevent damage caused by field rats, grass- hoppers, caterpillars and the like.
This involves railing the periphery after complementary planting and taking care of forests low in density but with promising
regenerative capability.

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(5) Implementation Structure(a) Borrower: The Government of the People’s Republic of China(b) Executing Agency: Qinghai Provincial People’s Government(c) Operation and Maintenance System:
Subproject
Operation and maintenance system
Grassland management station and grassland
Improvement of degraded grasslands
stations of each county
Prevention of desertification and afforestation Forestry Bureau of each county
Water/soil conservation measures
Water Bureau of each county/city(6) Environmental and Social Consideration(a) Environmental Effects / Land Acquisition and Resident Relocation(i) Category: B(ii) Reason for Categorization
This project is classified as Category B according to the “Japan Bank for International
Cooperation Guidelines for Confirmation of Environmental and Social Considerations”(dated April 2002), as this project does not correspond to sectors or regions described in thesaid guidelines as being sensitive to negative impact, and as it is not deemed to have asignificant harmful impact on the environment.
(iii) Environmental Permit
Preparation of the Environmental Impact Assessment (EIA) report related to the project is not
required under the domestic laws of China.
(iv) Anti-Pollution Measures
The project plans to use organic fertilizer and agricultural chemicals that are not harmful tothe environment. Thus, no significant adverse impact on the environment is foreseen.
(v) Natural Environment
The project site is not located in or around sensitive areas, such as national parks, and soadverse impact on the natural environment is assumed to be minimal.
(vi) Social Environment
The project will be implemented on the lands the government or the participants themselves
have the right to use. The project involves neither land acquisition nor resident relocation.
(vii) Other/Monitoring
In the project, the Environmental Protection Bureaus of the province and each county will
monitor the impact chemicals used to control rats and pests have on the natural environment.
(b) Promotion of Poverty Reduction
The poverty rate in the target area of the project (the average of the 10 counties) is 11.2%, which
is higher than the national average of 2.3%. Thus the project is categorized as a poverty
reduction project. Implementing the project in this area is expected to have a direct benefit ofcreating job opportunities and an indirect benefit of reducing damage from floods and sandstorms as well as improving the living conditions.
(c) Promotion of Social Development (e.g. Gender Perspective, Measure for Infectious Diseases-3-including AIDS, Participatory Development, Consideration for the Handicapped, etc.)
Among residents in the target area and those in the neighboring areas who attend the briefing
session for residents that will be held before the project is launched, people who wish toparticipate in this project will be hired as a labor force, and in such a case, the executing
agencies (grassland stations, etc.) are expected to give preference to hiring women and poorpeople.
(7) Other Important Issues
None
5. Outcome Targets(1) Evaluation Indicators (Operation and Effect Indicator)
ProjectIndicator

Grass planting (improvementof severely degradedgrasslands)
Grass planting (improvementof moderately degradedgrasslands)
Construction of fences tokeep livestock out

Area (ha)Rate of vegetation cover after
2 years (%)
Area (ha)Rate of vegetation cover after
2 years (%)
Area (ha)Rate of vegetation cover after
3 years (%)
Area (ha)Reduction rate of burrows
after implementation (%)
Area (ha)Reduction rate of burrows
after implementation (%)
Area (ha)Reduction rate of pests after
implementation (%)
Area (ha)Afforested area (ha)Survival rate after 1 year (%)
Survival rate after 3 years(%)
Area (ha)Measures to control rodents
using rodenticide
Mechanical means to capturerodents
Measures to control pest
damageDesert closure
Forests for wind/sandprotection

Control work to prevent sanddunes from moving
Afforestation (forests forwater/soil retention)

Afforested area (ha)Survival rate after 1 year (%)-4-Baseline(at project
launch )Target (2014, atproject
completion)–
3,916 ha25% or lower
50–60%–50–60%8,310 ha70%

–60–70%35,828 ha
85%––334,196 ha
90% or higher––

356,840 ha
90% or higher––

259,374 ha
90% or higher––––

36,651 ha
3,823 ha70% or higher
65% or higher–

2,500 ha––14,913 ha
70% or higherAfforestation (forests forwater resource recharge)

Forest protection andmanagement

Survival rate after 3 years(%)
Afforested area (ha)Survival rate after 1 year (%)
Survival rate after 3 years(%)
Area (ha)–65% or higher–––

674 ha70% or higher
65% or higher–

24,289 ha(2) Number of Beneficiaries
Approximately 1.92 million(3) Internal Rate of Return (Economic Internal Rate of Return)
Based on the following conditions, the economic internal rate of return (EIRR) of the project is 8.2%.
[EIRR](a) Cost: Project cost, operation and maintenance expenses(b) Benefit: Restoration of grassland, prevention of desertification, forestation, flood prevention(c) Project Life: 40 years
6. External Risk Factors
Occurrence of natural disasters
7. Lessons Learned from Findings of Similar Projects Undertaken in the Past
From the evaluation results of an afforestation project carried out in the Philippines, there have beencases where it became necessary to adopt detailed guidelines concerning the operation andmaintenance of subprojects at the project implementation stage. Thus, it has been learned that thearrangement and method of implementation should be developed at the project planning stage. In thisproject, the executing agency (Qinghai Provincial People’s Government) is expected to provide theguidelines, and the concerned parties will be thoroughly versed in them through domestic training.
In addition, the evaluation results of the same project carried out in the Philippines demonstrate thatwhen programs successfully improve the livelihood of residents who participate in afforestation
projects, it tends to lead to higher income for beneficiaries, increased organizational strength ofneighborhood community associations, and even to operation and maintenance activities appropriate
for forest conservation. A lesson learned from this is that programs designed to improve people’s
livelihood should be adopted in a similar afforestation project. In this project, the important thing is toensure that those who participate in the vegetation improvement program in the lands over which
individuals have the right of use be given the incentive to operate and maintain the project after it isimplemented. Of the areas targeted by the project, the lands over which individuals have the right ofuse are basically grasslands. The fact that long-term operation and maintenance of the project will
directly impact the livelihood of the participating residents themselves will provide the necessary
incentive to convince local residents to participate. Additionally, efforts will be made to ensure theproject’s smooth operation and maintenance by monitoring and undertaking educational activities.
8. Plans for Future Evaluation-5-

(1) Indicators for Future Evaluation(a) Grass planting (improvement of severely/moderately degraded grasslands): Area (ha), rate ofvegetation cover after 2 years (%)(b) Construction of fences to keep livestock out: Area (ha), rate of vegetation cover after 3 years(%)(c) Measures to control rodents using rodenticide, mechanical means to capture rodents,
measures to control pest damage: Area (ha), reduction rate of burrows/pests after
implementation (%)(d) Desert closure, control work to prevent sand dunes from moving, forest protection andmanagement: Area (ha)(e) Forests for wind/sand protection: Afforested Area (ha), survival rate after 1 year (%), survival
rate after 3 years (%)(f) Afforestation (forests for water/soil retention, forests for water resource recharge): Afforested
Area (ha), survival rate after 1 year (%), survival rate after 3 years (%)(g) Economic internal rate of return (%)(2) Timing of Future Evaluation
At project completion-6-