Ex-ante Evaluation
1. Name of the ProjectCountry: People’s Republic of China
Project: Henan Province Afforestation Project(Loan Agreement: June 23, 2006; Loan Amount: 7,434 million yen; Borrower: The Government of thePeople's Republic of China)
2. Necessity and Relevance of JBIC’s AssistanceHenan Province, where this project is to take place, has a population of 97.17 million and a surface
area of 166,000km2. The province is located in the central region of China, and is situated in a climatezone that straddles the border between the subtropical and temperate zones of the northern hemisphere.
Some 44% of the province’s surface area is hilly or mountainous, and it lies in the upper andmidstream reaches of four major rivers—namely, the Yellow River, Yangtze River, the Huai River, andthe Hai River. In 2004, Henan’s forest coverage was 16.2%, placing the province 21st out of 31
provinces in the nation, and below the national average of 18.2%. This shortfall is said to result fromexcessive deforestation to cope with the increased demand for lumber and to expand cultivated land
areas. Soil erosion is occurring from mountain slopes on which the ground surface has been exposeddue to excessive deforestation, and on account of the resulting silting of river beds and dammed lakes,
the functionality of river banks and damns is reduced. As a result, flood damage in the region isincreasing. In the 71 counties that constitute the project’s target area (population: 51.76 million people;
surface area: 96,000km2, equivalent to the population and surface area of South Korea), some 140
million tons of eroded soil are discharged annually. In addition, on account of extensive exposure of
the ground surface in plain areas as well, roads and cultivated lands are buried by sandstorms, andbecause forests no longer serve to sufficiently block winds, cultivated lands suffer damage such as soil
erosion under strong wind conditions (In the 71 counties that constitute the project’s target area, theannual economic loss stemming from such natural disasters has risen to 26.6 billion yuan—roughly
350 billion yen—annually). In 2003, repeated heavy rains led to extensive flooding, with the result that35.87 million people in the province suffered damage, 73 people died, and 420,000 buildings
collapsed. Economic losses reached 18.2 billion yuan (approx. 250 billion yen).
This project corresponds to the activity of environmental conservation, a priority area stipulated both in
the Economic Cooperation Program for China by the Japanese Government, and in the Medium-Term
Strategy for Overseas Economic Cooperation Operations by the JBIC. Thus, JBIC’s assistance for thisproject is highly necessary and relevant.
3. Project Objectives
By implementing afforestation in 71 counties of Henan province, this project aims to control strong
winds in plain areas and soil erosion from mountainous regions, and thereby help to reduce damage inthe region from natural disasters such as sandstorms and floods, and thus improve the area's livingenvironment.

4. Project Description(1) Target Area
71 counties of Henan Province(2) Project Outline
To conduct afforestation, provide the associated materials and machinery required, and provide training
in the above-described area.
(3) Total Project Cost/Loan Amount
11,444 million yen (Yen Loan Amount: 7,434 million yen)
(4) Schedule
Expected to run August 2006-end of September 2011 (62 months)(5) Implementation Structure(a) Borrower: The Government of the People’s Republic of China(b) Executing Agency: Henan Provincial People’s Government(c) Operation and Maintenance System: Same as (b) above.
(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” (established April
2002). This categorization is assigned because, when taking the sector, project, and regional
characteristics into account, the work is not expected to have a significant harmful impact on theenvironment.
(iii) Environmental Permit
The drawing up of an Environmental Impact Assessment (EIA) report was not obligatory for thisproject under the civil laws of China.
(iv) Anti-Pollution Measures
Because measures such as the comprehensive management of potential damage from diseases andinsects will be adopted, this project is not expected to pose a significant burden on theenvironment.
(v) Natural Environment
This project is designed to improve the natural environment by planting native tree species inregions subject to flood damage and soil erosion. As such, the project is expected to have minimal
adverse impact on the natural environment.
(vi) Social Environment
Because the participants in this project will be reforesting land to which they already haveownership rights, there is no need to acquire land or relocate residents.

(vii) Other/Monitoring
In this project, the Henan Province Forestry Bureau will monitor the extent to which saplings takeroot.
(b) Promotion of Poverty Reduction
Some 3.0% of the population (1.34 million) in the project’s target area live in poverty. This figure
exceeds the national average of 2.8%. The benefits expected by conducting afforestation activities
in the region include a reduction in flooding and sandstorm damage as well as improved living
environments (25 million people are expected to benefit). Should those living in poverty wish toparticipate in the project, it is felt that more stable income will be obtained by raising the ratio ofincome-generating forests and lumber forests relative to that of shelter forests.
(c) Promotion of Social Development (e.g. Gender Perspective)None.
(7) Other Important Issues
None.
5. Outcome Targets(1) Evaluation Indicators (Operation and Effect Indicators)
Indicators
Baseline(2004)
Area planted for shelter forests (ha)*Area planted for incoming-generating
forests (ha)*Area planted for lumber forests (ha)*Target (2011 after
completion of project)
163,610
11,880-18,700

Newly planted areas (ha)**-131,840

Percentage of trees taking root (%)**-85

Accumulative area of afforestation(m3/ha) ***Forestation rate (%) ****

3853

18.4

20.1

Forest coverage rate (%) ****6070

Soil erosion area (km2) ****

33,30030,000

Soil erosion volume (t/km2 per year)
0.32
0.26
****
*The target comprises the target area for afforestation in this project.
** The target comprises those areas newly planted under this project (excluding the areas where thenurturing of mountain-cover forests, forest improvement, and the nurturing of small saplings andyoung trees take place).
*** The target area comprises the areas where the nurturing of mountain-cover forests, forest
improvement, and the nurturing of small saplings and young trees take place.
**** The target comprises the entire project target area (71 counties).

(2) Economic Internal Rate of Return (EIRR): 24.5%(a) Cost: Project costs (excluding taxes), operation and maintenance costs(b) Benefit: Revenue from lumber and fruit/nut/berry sales, reduction in flood damage(c) Project life: 40 years
6. External Risk Factors
A reduction in the rate of planted saplings taking root on account of large-scale drought, and a resultant
reduction in project efficacy.
7. Lessons Learned from Findings of Similar Projects Undertaken in the Past
Based on supervision of afforestation projects in the past, we have learned that it is desirable to obtain
the agreement of the other party’s government in question beforehand regarding who will bear the lossof saplings that wash away in heavy rains after planting. For this project, the Henan Provincial People’sGovernment has agreed to provide financial support to those participants recognized as having suffereddisaster,
8. Plans for Future Evaluation(1) Indicators for Future Evaluation(a) Planted area (ha)(b) Percentage of trees taking root (%)(c) Accumulative area of afforestation (m3/ha)(d) Forestation rate (%)(e) Forest coverage percentage (%)(f) Soil erosion area (km2)(g) Soil erosion volume (t/km2 per year)(h) EIRR (%)(2) Timing of Next Evaluation
After completion of project