In 2006, Sanmenxia municipality in the Henan province of the People’s Republic of China (PRC) witnessed its highest economic growth rate since 1997. Gross domestic product (GDP) rose by 16.5% over 2005. Per capita GDP exceeded both the provincial and national averages. A key factor was the high domestic and export demand for fruits and fruit products. But the gains in general had not been distributed widely or equitably and had come at the expense of the area's natural resources.
At the request of the Government of the PRC, the Asian Development Bank (ADB) approved a $66.7 million loan for the Henan Sustainable Agriculture and Productivity Improvement Project in December 2007. The project was designed to cover poorer areas in Sanmenxia that tended to still be dominated by low productivity cereal crop production and harmful traditional farming practices. Through contract farming with project participating enterprises (PPEs), it aimed to introduce fruit tree crops and high-value vegetable production in these areas. To create additional value-added, fruit processing capacity was to be expanded to export mainly apple juice concentrate and meet the increasing domestic demand for processed fruit products. A biogas program and enhanced agricultural extension services were also incorporated to allow the project to have a holistic approach to promoting the long-term sustainability and profitability of fruit production and processing.
The project had 4 planned outputs: (i) increased farm productivity, (ii) expanded processing capacity, (iii) improved agribusiness support services, and (iv) strengthened project management. A minor change, involving the use of the freed loan proceeds from the cancellation of 1 of the 4 original subprojects, resulted in an increased production area but reduced the geographic and household coverage of the project. The approved change required a 2-year extension in loan closing.
While at completion, the project was found to have met most of its output targets and overachieved in some, it only partially achieved its intended outcome to increase farm and agro-enterprise productivity and incomes in Sanmenxia’s fruit production and processing subsector. As of 2014, it was able to raise the average income of nonpoor fruit farmers by 36% and that of poor farmers by thrice as much, compared with 2006 levels. However, due to the unfavorable market environment, the processing plants were not fully operated, causing lower-than-anticipated PPE productivity and revenue levels. The highest operation level reached in 2011-2016 was less than 60% of the designed capacity. One PPE discontinued its operation in 2015 because of a corporate governance issue, further constricting the project’s potential contribution to increasing subsector productivity and income.
Nevertheless, the project was rated successful at completion by ADB’s East Asia Regional Development. Besides raising farmers’ incomes, it successfully promoted sustainable agricultural practices that yielded environmental benefits such as water savings from reduced irrigation, less pollution, and soil conservation, among others.
The Sanmenxia municipal government was the executing agency. A project management office under the Sanmenxia Municipality Finance Bureau supervised the work of 2 implementing agencies, the Lingbao City Finance Bureau and the Shan County Finance Bureau.
