Regional Environmental Technical Assistance 5771
Poverty Reduction & Environmental Management in Remote Greater Mekong Subregion (GMS) Watersheds Project (Phase I)

Review of Policies and Institutions related to
Management of Upper Watershed Catchments

Yunnan, China

By

Esa Puustjarvi

CONTENTS

1. Introduction

The review of policies and institutions related to watershed management in the Yunnan province relies on the general analysis framework developed at the sub-regional level, and presented in the regional report of this study. Country reports are presented in a form, which allows for reading them as stand-alone documents. However, a general discussion on the issues and conclusions as well as detailed comparisons at a subregional level can be found in the Regional Report. As the structure of country reports and that of the regional report is largely the same, and the discussion relevant to various issues can be referred to by looking up the corresponding sub-heading.

Topics such as health, education, and gender have been excluded from the scope of this report, as they are covered under other assignments.

2. Socio-economic status

2.1 Yunnan province

About 94 % of the Yunnan province is classified as mountainous, which is reflected by the fact that 39 % of the total land area has slopes steeper than 25 degrees. Approximately one third of the land area is covered with forests.

The current population of the Yunnan province in 40 million people. Population density has doubled since the 1950’s reaching currently a level of 103 people per square kilometre. However, the population growth rate has steadily declined to the present level of 1.3 %/a, which is among the lowest in the GMS subregion. There are 26 ethnic minorities who account for 33 % of total population (Table 3) .

The adult literacy rate in Yunnan province is 63 %. The proportion of school children continuing their education in middle school is 96 %. Reproductive health is on a rather high level by sub-regional standards. The occurrence of maternal mortality is 134 deaths per 100 000 births and for infant mortality 42.6 deaths per thousand children. Road density is 0.18 km per sq. km.

The GDP growth in the Yunnan province has been rapid throughout the 1990’s averaging 8.9 %/a, which is one of the highest figures in sub-regional terms (Table 1). The contribution of agriculture to province’s GDP is 23.8 %, which puts Yunnan in the middle group in the region together with e.g. Vietnam. Industries and services sectors contribute 45.6 % and 30.6 % to the provincial GDP, respectively. GDP per capita in Yunnan is approximately USD 500, which ranks second in the region (Table 3).

Table 1: GDP growth 1990’s in the Yunnan province

Source: Yunnan Year Book, 1991-1998
Yunnan Provincial Government 1998

The incidence of poverty has rapidly reduced. The number of people under official poverty line* has dropped from 16.3 % of total population to 8.3 % in just three years between 1995 and 1998 (Table 2).

Table 2: Incidence of poverty in Yunnan province

Source: Yunnan Poverty Alleviation Office, 1999

2.2 Mekong-Lancang River Basin

Mekong-Lancang River basin accounts approximately or 23 % of the land area in the Yunnan province. The landscape in the Lancang River Basin is even more rugged than elsewhere in the province. 42 % of the land area is under steep slopes. The population in the basin is approximately 7.9 million representing 21 % of total population in the province. Population density at 62 people/sq. km is lower than the provincial average. The proportion of ethnic minorities of total population is higher than on average in the province. They account for approximately half of the population, and are divided into 18 groups.

Indicators show that in terms of socio-economic development the Lancang-Mekong watershed lags somewhat behind the rest of the province. One exception is the adult literacy rate standing at 72 %, which is higher than the provincial average. However, the proportion of school children continuing their education in middle school is 69 %, which is below the provincial average. Road infrastructure in the Lancang river basin is less developed than at the provincial level. Road density in the river basin is only 0.13 km per sq. km (Table 3). GDP per capita in the Mekong-Lancang River basin is clearly below the provincial average at approximately USD 330. The economy of the Mekong-Lancang river basin is also much more dependent on agriculture than that of the Yunnan province. Agriculture contributes 41.8 % to the GDP generated in the River Basin. Industries and service sectors account for 29.3 % and 29.0, respectively.

Table 3: Selected socio-economic indicators in the Yunnan province and Lancang river basin

Yunnan Institute of Environmental Science, 1998
Yunnan Department of Transportation, 1996

2.3. Remote Watersheds

Inequalities between wealthy and poor areas within the province and the Mekong-Lancang river basin are considerable. In the river basin the wealthiest 10 counties (out of 30) have a GDP per capita level of USD 496, whereas in the poorest 10 countries this indice reaches only the level of USD 195. At the two extremes are the county of Dali with a GDP per capita of USD 1084 and the Lancang county, where the GDP per capita stands at USD 136 (Table 3).

However, it should be noted that the remoteness and ruggedness of terrain are not the sole factors explaining lower socio-economic status of the area. In terms of GDP per capita the areas with more than half of their land surface under steep slopes average USD 295. This is below the average levels at the provincial level (USD 503) and in the river basin (USD 333), but it is much higher than the level reached in the 10 poorest counties in the river basin (USD 195). There is no obvious explanation for this difference, as the indices on population density and road infrastructure do not markedly differ. However, it seems that poverty is associated with a prevalence of ethnic minorities in the area. The data shows a rather consistent pattern, where a high proportion of ethnic minorities is correlated with a low level of GDP per capita (Table 3).

On the other hand, it seems that certain "pockets of poverty" seem to persist irrespective of the level of wealth. The Government has designated poverty villages, which are entitled to special support. While the incidence of such villages declines along with higher GDP per capita levels, they do exist even in the wealthiest areas (Table 4).

Table 4: Incidence of poverty villages in the Yunnan province and Lancang river basin

Source: Yunnan Year Book of Statistics, 1998
Yunnan Year Book, 1998
Yunnan Institute of Environmental Science, 1998

3. Status of Environment

The average forest cover in the Yunnan province is 32.2 % of total land area. Dense forest represents 26.5 % and open forest 5.7%. In the Mekong-Lancang river basin forest cover is 39.1 % of total land area, which makes it somewhat more forested than the province on average. The area of unproductive wasteland is high in the whole province. On average more than one fourth of the land area has been denuded. In general, the environment in the Yunnan province is in a very fragile state, as almost 40 % of the area is classified erosion-prone. However, the Mekong-Lancang river basin is less affected than the rest of the province.

The environmental indicators show rather modest variation within the province and within the river basin. The main departure from the general pattern is the high percentage of dense forest in the wealthiest counties. In a similar vein the largest proportion of wasteland is found in the poorest counties. This may provide support to the assumption that poverty and environmental degradation are closely linked.

Table 5: Forested and degraded land area in the Yunnan province in 1993

Source: Yunnan Institute of Environmental Science, 1998

Water and soil erosion are serious problems in the Mekong-Lancang river basin. Erosion prone areas account for 28.1 % of total land area, and their extent is increasing. Watershed protection areas represent 7.6 % of total land area. Full records on forest cover in the watershed protection areas are not available, but based on a few examples forest cover is quite high. However, variation is significant ranging from 53.4 % in Deqin to 97.8 % in Jinggu.

The reasons for environmental degradation have not been analysed very systematically, but expert opinion suggests that conversion to agriculture and logging are the main causes. The immediate cause is most often conversion to agriculture either for subsistence production or cash cropping. Logging and road construction accelerate deforestation, as they enable local populations to move into formerly inaccessible forest areas. In some cases logging has also been a direct cause of deforestation. Reportedly, poor harvesting practices such as clear-cutting on steep slopes have triggered land degradation to an extent, which has impeded natural forest regeneration.

Conversion to agriculture can be attributed either to increasing land scarcity for those living in semi-subsistence agriculture or to profit-seeking in commercial agriculture. Land scarcity, in turn, is the result of a number of factors including in-migration, population growth, expansion of hydropower reservoirs etc. In recent times, commercial agriculture may have become a more significant agent of deforestation as its development has been boosted by economic liberalisation.

Fuelwood and other household consumption are indirect causes of deforestation. Even though it is unlikely that they would be carried out to an extent that forest areas would be totally cleared, they reduce the quality and quantity of growing stock and pave the way for eventual conversion to agriculture.

4. Government Policies

4.1. Rural Development Policy

The current policy regarding rural development was formulated in the document "The Decision of the Communist Party of China (CPC) Central Committee on Several Major Issues in Agriculture and Rural Work" adopted at the Third Plenum of the 15^th CPC Central Committee in 1998. The document formulates ten policy objectives and strategies for rural development, which may be summarised in the following manner:

• prioritisation of agriculture in the development of national economy
• stabilisation of policy framework by adhering to the principle of simultaneous development of public ownership and other forms of ownership (management contract responsibility system)
• diversification of economic structure in rural areas
• development of agriculture based on science and education
• enhancing environmental sustainability of agriculture
• development of township enterprises in order to absorb surplus rural labourers
• implementation of family planning in rural areas
• development of local democracy based on Party leadership
• balancing material, cultural and ethical development in rural areas

The policy is based on the common and valid notion that expansion of agricultural production should be accorded priority in developing the rural economies as it has the potential to catalyse the development of industrial and service sectors. However, the proposed policies and strategies are limited to general policy statements and no special reference is made to the development of upland areas or upland agriculture.

4.2. Upland policy

In China there is no upland development policy as such, but as in many areas poverty is concentrated in the mountainous regions the special measures undertaken by the Government to alleviate poverty are in practice focused on the upland areas. Of the counties targeted by the Government’s 87 Poverty Alleviation Programme 84 % were located in the mountainous region.

The most recent Government programme was launched in 1995, when the national government launched a second step of its anti-poverty programme aimed at alleviating poverty before the year 2000. Since the Yunnan province is one of the most important target areas for poverty alleviation programmes in China, the provincial Government has formulated its own policy. The provincial programme is based on the national policy, but it has a specific regional focus on ethnic and ecological issues. References are also made to the significance of socio-political stability in the border areas, and the importance of national unity in addressing ethnic issues.

More specifically the provincial poverty alleviation policy addresses the following issues:

• Integrating poverty alleviation activities with ecological rehabilitation and economic development, particularly income generation
• Increasing infrastructure investment in roads, on-farm development and drinking water facilities
• Strengthening human resource through training, focusing particularly on eradicating illiteracy
• Improving the efficiency of financial investment by strengthening the approach to project planning, which implies that support to the poorest should be priorities
• Promoting new technologies such as chemical fertiliser as well as new crop varieties through strengthening training and extension

Even if the basic elements of the policy are rather general in character, they seem by and large appropriate. However, the effectiveness of the policy depends largely on the modalities of implementation at the sub-sectoral level. To the extent information was available, these issues will be examined in the subsequent chapters. At this point two general remarks are made.

First, in terms of resource allocation there has been a marked shift to prioritise poverty alleviation. In 1996, the provincial Government allocated approximately 0.66 million Yuan RBD (USD million) for poverty allocation, but in 1997 funding almost doubled to 1.2 billion Yuan RBM. This level was maintained in the budget of 1998, where the allocation was 1.06 billion Yuan RBM. As the provincial Government’s total financial expenditure was 31.32 billion Yuan RBM in 1997, the allocation to poverty reduction represents approximately 3.8 % of total budget. Even though budget figures should be interpreted with caution, this appears to be a very high proportion in sub-regional terms. E.g. in Vietnam, which is considered another country giving a high priority to poverty alleviation, poverty alleviation represented 1.6 % of total Government expenditure between 1992-95 (see Vietnam Country Report).

In absolute terms the funding to poverty allocation is even higher, as additional funds are provided both by the central Government and foreign organisations. In 1998, the inputs available from the Central Government was 1.58 billion Yuan RBM, which brings the total of Government funding to 2.65 bill Yuan RBM. Foreign organisations contributed an additional 1.1 bill Yuan RBM.

In order to target the efforts at poverty reduction the Yunnan Government has designated 506 villages eligible for special support from the anti-poverty programme. If the proposed policy is implemented in full, during the period 1995-2000 each of these villages will receive 750 000 Yuan RBM/a for development of farm land and conservation systems. From the year 1999 onwards the Government intends to establish micro-credit schemes worth of 500 000 Yuan RBM/a in each "poverty village" in order to develop plantations and livestock. These allocations are substantial and they have probably been a major reason for the rapidly falling incidence of poverty in the Yunnan province (cf. ch. 0).

However, even though the results are impressive in terms of poverty reduction, the financial outlays have also been substantial, one may ask whether the funds have been effectively spent. In particular, it may be questioned whether the various sector programs have taken full account of implications beyond sector boundaries. Apart from poverty alleviation the national and provincial governments have given priority to issues such as family planning, environmental protection, natural resource management, but it seems that the potential linkages between them and poverty alleviation have received only scant attention.

For instance, heavy emphasis given to infrastructure development as a vehicle for socio-economic development is an example of a strategy, whose full impact may often have been overlooked. While the importance of infrastructure investments - such as road construction in remote watersheds - cannot be denied, they are often implemented as isolated interventions without heed to social and environmental problems that may ensue. Roads may open forest areas for uncontrolled logging, and expose indigenous populations to social pressures by facilitating in-migration and introduction of market economy. Unless all associated benefits and costs are properly identified and evaluated, there is a risk that investment decisions are sub-optimal and that scarce resources are not used efficiently.

5. Agriculture

5.1. Policy

As 94 % of the Yunnan province is classified as mountainous the area suitable for cultivation is limited. The agricultural land accounts for 7.3 % of total land area. According to official statistics, of this, some 15 % are under slash and burn agriculture, mostly in the upland areas. It should be noted, however, that few upland farmers rely solely on shifting cultivation. Instead, the most common arrangement is a combination of swidden fields and some form of permanent agriculture.

In the policy documents that became available there were no direct references to upland agriculture or shifting cultivation. Yet, reducing the swidden area has apparently been one of the main strategies of the Government in the upland area. From discussions with Government officials it may concluded that the principal motivation for pursuing this approach is the adverse environmental effects shifting cultivation is thought to have as well as its limited contribution to economic development.

The fact that farmers have spontaneously transformed their swidden practices suggests that the negative effects may not be as large as depicted in worst-case scenarios. On the other hand, trends that increase land scarcity and continue to undermine the sustainability of swidden systems have not been contained. Planned and spontaneous in-migration to upland areas is probably continuing, and population growth rates among the ethnic minorities are reportedly still high. Given this development and the fact that relieving land pressure is very difficult once it sets in, the continued policy to adjust shifting cultivation towards more land-intensive practices seems justified from an environmental standpoint.

It is not suggested that coping with land scarcity should be the sole responsibility of the agriculture sector or the shifting cultivators. Trends, which aggravate the situation such as in-migration and illegal logging should be seriously tackled, but the policy on agriculture has to be based on the current and foreseeable situation, and land scarcity is undoubtedly one key issue that need to be addressed. However, there may be some scope to revise the implementation strategy.

5.2. Implementation strategy

The Government strategy has emphasised market-based development with infrastructure investments and cash cropping. The expansion of rubber plantations in southern Yunnan and the increase in fruit and vegetable production in other parts of the province indicate that in many places farmers have found these options viable.

However, the environmental impact of intensive cash cropping is somewhat ambiguous. Permanent agriculture has intensified land use, but the high profitability has also driven producers to expand their cultivation. For instance, over the past 40 years about 140 000 ha of tropical forests have been cleared for rubber plantations. Intensification has also increased upstream-downstream conflicts through increased water and pesticide use by upstream farmers^. Road construction, which is an integral element of the strategy, may have been a conduit for increased deforestation.

On the other hand, cash cropping has probably had a positive environmental impact in that it may have slowed down the expansion of unsustainable shifting cultivation. While the area of commercial agriculture may have expanded and caused deforestation, the pace may have been slower than if agricultural production had been based on shifting cultivation, which is by nature an extensive land use. Thus, the net effect of cash cropping could be positive, if a potentially more harmful trend has been contained. Unfortunately, conclusive evidence supporting either view is not available, but based on experiences obtained in other GMS countries this appears plausible.

However, experience from Yunnan and other GMS countries indicates that a successful transition to cash cropping requires substantial resources. Both infrastructure investments and extension capacity are needed to encourage the adoption of alternative practices, and it is unlikely that required resources would be available to all upland areas in the Yunnan province.

Therefore, the present strategy could be complemented with an approach aiming at a more gradual and spontaneous transformation of land use practices. There are indications that when faced with land scarcity local communities are able to intensify agricultural production of their own accord. Thus, the limited resources available to the Government could be spent on ensuring that the conditions conducive to change are in place (e.g. market access, market information, awareness of changes in regulatory framework, demonstrations on available technologies etc.). For technical innovations one could rely largely on the villagers’ capacity to handle change.

By reinforcing the spontaneous adjustment of production methods the shift may not be as rapid as by using more radical approaches. However, it is likely to reduce the risk that the farmers experience, which may, in turn, increase the attractiveness of transformation. It has been suggested that inadequate attention to farmers’ risk-aversion is a major cause of failures experienced in introducing market-based agricultural development in Yunnan. The approach may also prove more cost-efficient, because the extension input, which is required to carry the farmers successfully over a major modification of his/her production practice would be quite large. By concentrating Government resources on creating a suitable regulatory and market environment the required input may be reduced. When resources for technical support are limited, efforts to find alternatives to shifting cultivation are probably more successful, if the transition is gradual rather than abrupt.

6. Forest-based Production

6.1. Reforestation

The present regulations forbid commercial logging in watershed areas, but subsistence use is allowed. Agricultural cultivation on slopes steeper than 25 % is banned. Existing agricultural fields must be returned to forestry use within a transitional period.

Reforestation is a key element of Government’s strategy for forestry and watershed management. The total area of plantations is 2.1 mill. ha, i.e. 19% of the total forest area. A large proportion of the plantations have been established in the past ten years and one third (580 000 ha) has been established in 1996-97. Regarding the Mekong-Lanchang river basin, in 1996, the Government launched a reforestation programme with the objective of watershed protection. The general objective of the programme is "to establish a forest network for ecodefense and to control water and soil erosion". The specific targets of the programme is to reforest 1.26 million ha, of which plantations represent 0.55 mill ha, aerial seeding 0.11 million ha and "hill-close reforestation" 0.6 million ha. As a result forest cover should rise from 24 % to 36 %, and the erosion prone area shrink from 28.7 % to 18 %^.

The programme is very ambitious, and implementing it will be a major challenge. The programme relies on its funding both for Government resources as well as in-kind labor contribution from farmers. The proposed Government budget represents approximately 110 million Yuan RBM/a (USD 14 million/a) on an annual basis. In addition, farmers are expected to provide labour, the value of which is estimated at approximately 120 million Yuan RMB/a (USD 15 million).

The proposed amount of Government funding is substantial, and past experience suggests that it may be difficult to mobilise it in a timely manner. However, a more serious pitfall is the assumption that farmers would volunteer to participate in the programme to the extent envisaged in the proposal. It is understood that in areas that are planned for reforestation the main incentive for farmers is the eventual benefit of soil protection as well as limited access to fuelwood once the plantations mature. Unfortunately, the experience from other countries in the sub-region (e.g. Vietnam) suggests that reforestation conducted in this manner is not particularly successful. The reason is simply that local populations consider alternative land uses, such as grazing, shifting cultivation or sedentary agriculture, to provide higher short-term benefits than reforestation with natural forest tree species.

On the other hand, the Yunnan Government appears aware of the problem, and reforestation programs have been revised in order to address the problem. The so-called "economic forests" may account for up to 30 % of the total area reforested. Species planted in "economic forests" are typically tree-like plants, which provide rapid returns (fruits, edible woody oil, bamboo products etc.). The approach tallies with the experience gained elsewhere in the GMS region, where cultivation of agricultural tree crops such as fruit trees, coffee, tea and rubber has met with more success than reforestation. There is some concern that these crops are not as effective as natural tree species in preventing erosion and soil loss, but research results indicate the disadvantage is insignificant compared to the negative effects bare land would have (cf. Regional Report). The question that remains is whether the area of economic forest can be further expanded. In the most fragile areas reforestation with natural tree species is probably necessary, as they need the best possible protection, but in less critical areas some of the environmental benefits could perhaps be traded off with providing short-term returns to local people.

Regarding areas, where the establishment of "economic forests" is not considered a relevant option, it would be necessary to examine more carefully whether the reasons behind deforestation continue to exert pressure on land and forest cover. Unless the fundamental factors causing deforestation have been eliminated, the newly reforested areas run the risk of being exposed to the same pressures, and undergoing the same process of degradation.

Two alternative strategies would reduce the risk of financial loss. Increased reliance on natural regeneration has been recommended as an option in the northern uplands of Vietnam. It is argued that besides being less costly, natural regeneration develops a stand, which displays higher biodiversity and is better adapted to the natural conditions of the site than artificially reforested sites. Another possibility is a low-cost approach adopted in Sri Lanka, where the objective of restoring full forest cover is relinquished because of the high risk of renewed encroachment. Instead, the principal objective is to restore some form of vegetative cover such as shrub able to reduce erosion. The disadvantage compared to natural forest cover was considered minor compared to the level of cost savings achieved.

6.2. Logging ban

The impact of the logging ban declared at the end of 1998 is difficult to foresee. Theoretically, stopping timber harvesting will improve the environmental status of forests and improve watershed protection. However, as the demand for timber is mainly derived from household use (90 % is used as fuelwood and household construction wood), it is unlikely that the ban can be enforced effectively. The demand for commercial timber will also be difficult to quell - at least in the short run, and there is a risk that much of the harvesting that used to be legal will in the future be done illegally. This would almost certainly deteriorate the quality of forest management. It is highly doubtful, whether the logging ban will be able to reduce logging to a degree, which would offset the negative effects. It would be advisable to carry out a detailed analysis on the possibilities to influence the demand/supply balance in order to assess, whether the present policy is realistic and feasible.

7. Rural Industrialization

The economic reform in China was launched in the rural areas, which provided the rural industries an exceptional opportunity to expand. However, as soon as the economy in urban areas was liberalised, the growth of the industrial sector started to concentrate in urban centres. The expansion of urban economies attracted many rural enterprises to move to large cities, but in many areas rural industries fought back and managed to retain a significant role in the local economy. It is estimated that in 1997 non-agricultural, collectively owned Town and Village Enterprises employed almost 53 million people last year, and surveys indicate that 30% of rural residents earn at least part of their total incomes from them.

Between 1984 and 1990 the gross output from all rural non-farm enterprises (including TVEs and private enterprises) grew more than five-fold. During this period the private enterprises (joint and private) increased their share of gross output from 14.3 % to 34.7 % (Table 6). In the latter half of 1990’s industrial growth in China slowed down. In 1997, there was a general restructuration of the publicly-owned TVE sector in China, which resulted in large layoffs of personnel.

Table 6: Development of Rural Non-Farm Enterprises 1984-1990

Source: Johansson & Ronnas 1995

The contribution of rural enterprises to GNP has been significant in Yunnan, even though it has somewhat lagged behind the national average. In 1992, rural enterprises contributed 21.6 % to regional GNP in the Yunnan province (Table 7). In the early 1990’s the rural industries of the Yunnan province grew rapidly. The gross production value increased approximately 30 %/a between 1991-95.

Table 7: Contribution of agriculture and rural enterprise sector to
GNP in Yunnan province and China PDR in 1992

Source: Kang 1997

The expansion of rural industries has had a positive impact on the rural economies. A case study carried out in the Simao province in Yunnan showed that the proportion of non-farm income was the single most important variable explaining differences in farmers’ income level. The higher the proportion of non-farm income, the higher is the total household income.

Industrial development in the rural areas clearly has potential to extend its benefits to the remote areas as well. However, it should be noted that the people living in the remote watersheds may be able to capture the benefits of industrial development unless special measures are taken. The industries are likely to emerge in larger towns and they do not necessarily have strong backward linkages to remote areas, but depend more on people and endowments in their immediate vicinity.

The most likely industries to emerge in the upland areas are those related to agro-processing and tourism. There are three principal ways in which the remote watersheds could benefit from their development: augmented demand for agricultural products originating from remote watershed, increased involvement of upland people in trade and engagement in wage labour.

The past development of rural industries in China has probably benefited the remote watersheds in the sense that the increased demand for agricultural products has enabled them to fetch higher prices and increase production volume. However, it is unlikely that upland people would have been able to participate in and derive benefits from the increased trade of agricultural products. It is probable that the principal beneficiaries are the middlemen of trade originating from the lowlands and industrial towns. Lack of technical and language skills has probably barred the entry of upland people to industrial wage labour.

One example of measures that could be taken in order to avoid the exclusion of upland people from the benefits of industrialisation, is to encourage the upland people to carry out joint marketing of their products. Another possible measure benefiting the upland people is to enhance their access to employment opportunities available in rural towns. To this end, those willing to outmigrate to nearby towns should be provided with skills needed in the urban economy.

It is important to realise that diversification of the economic base in the remote watersheds does not happen in isolation, but it is intrinsically tied to economic development taking place in the rural towns and the surrounding countryside. It should be noted that it is not only the infrastructure but also the industrial structure in the surrounding areas, which lay the foundation for developing economic activities in the remote areas. Therefore, it is essential that efforts to catalyse market-oriented development in the remote watersheds is planned to coincide with other activities encouraging economic development such promotion of rural industrialisation in the nearby urban areas.

8. Population Movements

The latest resettlement programme in the Yunnan province was launched in 1997. By now, in 11 resettlement areas established in 8 counties the area of developed land extends to 6 667 ha. The 40 000 people settling these areas originate from areas considered unsuitable for subsistence agriculture. The Provincial Government has plans to resettle a total of 300 000 people by the year 2000. Relocation of upland people is undertaken with the twin objectives of relieving pressure on natural resources in the upland areas and providing the settlers with better living conditions. However, there was no information available to indicate whether the programmes have been successful.

In China, voluntary migration from rural to urban areas has been gradually accelerating since the beginning of the reform period at the end of 1970’s. The proportion of rural population has dropped from 80 % in 1979 to 71% in the late 1990’s. The urban "pull" has been very strong, even though migration has been strictly regulated. It is estimated that 100 million people are currently living as migrants in large cities, many of them illegally .

Voluntary outmigration may have beneficial effects in the upper watersheds by relieving population pressure. Most of the negative effects of population movements are associated with migration to mega-cities or other agricultural areas. Therefore, a more advantageous scenario might be one, where the migrants would have an opportunity to settle in urban or semi-urban areas in the proximity of their upland settlement. While the negative consequences of outmigration such as social and cultural disruption are there, and to some extent unavoidable, the positive elements of voluntary migration should be seen as an opportunity to seize.

One of the advantages of an "upland town" scenario is that settlers would be able to maintain much of their social networks owing to the physical proximity to their former settlement area. From the perspective of ethnic minorities it would provide the migrants with an improved opportunity to protect their cultural identity, as the limited size of rural towns would probably ensure that they represent a fairly large portion of the population. The migrants could play a crucial role in forming a "social bridge" between the upland communities and majority populations and in breaking their social and economic isolation.

As opposed to many GMS countries, the rural industrial sector in China is vigorous and provides a large number of employment opportunities in the rural areas (cf. ch. 7). However, in practice, upland people’s access to the job market may be limited, and special measures are needed in order to enhance their opportunities to participate in the industrial labour market and to avoid the migrants drifting to low-paid casual labour. It is especially the ethnic minority people that are likely to be hampered by lacking social network and skills needed in urban environments. In order to facilitate their access to upland towns it would be necessary to provide them with appropriate training including language training for the minority people. On the other hand, the social and cultural environment can also be improved in order to make the "upland town" scenario more attractive. For instance, preservation of cultural integrity for ethnic minorities could be further supported by appropriate policy measures such as introduction of bilingualism.

9. Land Tenure

In China, state will retain ownership of all land, but various tenure arrangements granting user rights to private people have been experimented with extensively. The ownership of agricultural land is held by collectives, but its management is based on a household-based tenure system, household responsibility contract. The stability of the system has been endorsed in the agricultural policy, and no changes are foreseen. Considering upland agriculture, it is worth noting that agricultural holdings are generally rather small, and unsuitable for farmers practising shifting cultivation. Even if this option were available, the relatively high area-based tax on agricultural land makes it uninteresting for the shifting cultivators to formalise their claim to the area. On the other hand, the tenure system for forest land has made a provision for shifting cultivation (see below).

Forest land is either in state or collective ownership, which account for 33 % and 67 % respectively (Table 8). State forests are designed either as production forests or natural reserves. The former are managed by State Forest Farms and the latter directly by Government departments. State Forest Farms carry out their activities independently, more or less on a commercial basis. In principle, they are expected to pay royalties to the Government, but in practices only limited amount have been disbursed to the provincial treasury. The recently introduced logging ban will undoubtedly bring about changes in their status.

Table 8: Ownership of forest land

Source: Department of Forestry

Tenure arrangements regarding collectively owned forests have undergone many phases. The Lianghshan Daohu policy, which constitutes the basis for the present arrangement was launched in the early 1980’s. Under this system the collective forests/forest lands could be leased to each farm household as Freehold Hill Land and Contracted Hill Land.

The areas leased as Freehold Hill Land were typically deforested areas or shrublands. In Southern Yunnan land under shifting cultivation as well as grasslands were also leased under this arrangement. The areas were leased without charge based on the number of family members and available labour. The area under Freehold Hill Land system can be inherited. Any use except full clearing is allowed. Commonly found crops include agricultural tree crops, fast growing tree species etc. Typically, the species planted yield benefits in the short term.

The system of Contracted Hill Land was designed to protect and maintain existing forests. The lease agreement is negotiated between the farmer and the collective. Typically, the contracts define farmers’ rights and responsibilities including the benefit he/she is to derive from managing the forest area. Initially, the contract period was relatively short, 10-20 years, but later the maximum period was extended to 70 years in order to encourage long-term investments (Table 9).

By the end of 1983, 14 million hectares of hill land representing 36.5 % of the total land area in Yunnan had been leased. Of this amount, 6.3 million ha as Contracted Hill Land, 7.7 million ha were leased as Freehold Hill Land. The latter category includes 2 million ha of grassland and 0.8 million hectares of areas under shifting cultivation.

Table 9: Comparison between Free Hold Hill Land and Contracted Hill Land

Source: Ting 1996

In 1994, in order to increase efficiency in using the land resource and to promote afforestation, the Yunnan Government introduced the system of auctioning off hill/mountain waste land i.e. Freehold Hill Land (Sihuang Paimai). Local farmers are given preference, but if they opt out, the auction is opened to outsiders. Unless the area sold through auction is afforested within two years, the user right is cancelled.

Between 1993-1996 the Government auctioned user rights to approximately 60 000 ha of hill/mountain waste land for the value of 42.5 million Yuan RBM (USD 5.2 million). The average price per hectare was 708 Yuan RBM (USD 86). Approximately 90 % was bought by local farmers, and 10 % by outside interests including local and foreign businessmen, enterprises and government agencies. By end of 1998, 52 % of the auctioned are had been afforested. The proceeds from the auctions have been allocated to social activities.

Another form of non-state tenure introduced in the Yunnan province is the "Village of Forestry Stock and Co-operation". In this model the land asset is mainly in the hands of village committee and produces co-operatives. The majority of the timber stock is possessed by private shareholders, the majority of whom are local farmers (Box 1).

Box 1: Forestry Stock and Co-operation System in Yunnan

Arrangements for land tenure in the Yunnan province are generally efficient, and they display a great deal of innovative thinking, especially as regards non-state tenure. Placing existing forest under Contracted Hill Land system takes advantage of the possibility to combine social control with public law enforcement in protecting the forest resource. In a well-stocked forest the benefits are substantial and they are shared between the contractor and the community members. As individual attempts to obtain personal gain from the forest would reduce the benefits available to everyone else, the community members have a high interest to ensure that everyone abides by the agreed rules. They also have an interest to fend off external intrusion.

By not requiring afforestation with natural tree species the Free Hold Hill Land system acknowledges the farmers’ need for short-term benefits. The approach is in line with the experience gained in other GMS countries, where restoring vegetative cover on barren land has been most successful, when the farmers have been allowed to plant crops yielding short-term benefits such as fruit trees, coffee, tea and rubber. There is some concern that such crops are not as effective as block plantations in preventing erosion and soil loss, but it should be noted that the disadvantage is insignificant compared to the negative effects bare land would have or the cost of unsuccessful reforestation (cf. Regional Report).

Auctioning of Freehold Hill Land has proved to be a rather controversial scheme. It was devised in order to ensure that individual gaining access to land have the interest and ability to make the necessary investments in restoring the vegetative The experience has yielded mixed results. Auctions were apparently a workable means of land distribution in areas such as central Yunnan, where economy is developed and commercial transactions are commonplace. In areas, where people have little exposure to market economy, the auction system may have benefited mainly the wealthy or otherwise well-placed individuals, who were able to take advantage of the new opportunities. The poorer farmers had limited resources to participate in the auction, and their disadvantage was increased by the fact that the auction area had often been common grazing land, which they lost access to.

In sum, it appears that auction system is best suited in areas, where land is not the only productive asset people possess, and where the economy and credit market are developed to a degree, which allows people make real choices between investment options. Where land remains the main productive asset available to the local people, the most vital issue is to secure its equal distribution at the outset. This was the intention of the original form of Free Hold Land distribution, but it was somewhat skewed by the auction system.

The experience gained with the original system shows that the market mechanism will eventually work to increase the efficiency of land use, even if, initially, the leading principle of land distribution is equality rather than efficiency. Transferability of tenure has led to the emergence of a real estate market, which has gradually increased the concentration of land assets in the hands of those individuals, who have resources and capability to develop them further. It should be noted that concentration of land assets after the initial distribution based on equality should not be seen as something negative. If the terms of trade are fair, it does not necessarily lead to gross inequalities in income distribution.

The experiment with Joint Forest Stock Companies illustrates well the two-pronged strategy of the Chinese Government toward forest land tenure. One on hand, the model relies on market mechanism to guide management decisions regarding the timber stock. On the other hand, the strategy attempts to rein in the market forces by maintaining land tenure largely in collective hands. In the Chinese authorities’ assessment, the main advantage of the model is the co-ordinated management of a large forest area, and the efficiency of the system brought about by the market mechanism. Lacking a closer scrutiny of the model it is difficult to assess, whether the mechanism works appropriately, but the basic principles, from which the approach is derived, are sound. Reliance on market mechanism as an incentive to individuals is combined with a collective control over the long-term sustainability of forest management.

10. Institutional Framework

10.1. Government capacity

The number of Government agencies involved in watershed management is large. The principal agencies and their mandates are summarised in Table 10

Table 10: Principal Government Agencies involved in watershed management

Source: Zhou 1998

The principal agencies involved in upland development at the central level of administration are the Planning Commission, Environmental Protection Bureau, Forestry Department, Water Conservancy Bureau and Agriculture Department. However, their mandates are unclear, and as barriers between administrative sectors in China are very high, co-ordination of activities is generally rather poor.

The principal implementing agencies are the Forestry Department, Agricultural Department and Water Conservancy Bureau. Regarding number of staff and the operational budget available to them, the capacity is at least reasonable (Table 11 and Table 12).

The key issue is whether the current functions of the present administration are appropriate in the sense that they support Government’s policies. It is probable that in terms of staff and budget allocations the situation is satisfactory. The possible weakness of the administration is its limited capacity to implement people-centred development policies. While the technical competence of the staff may be adequate, they are seriously lacking in skills such as participatory planning, extension techniques, communication etc (cf. ch.5.2). The need for this skills, of course, hinges on the extent to which the Government wishes to introduce these approaches into its development strategies. Provided that the shift towards more participatory development approaches takes place, a substantial effort will be required in order to improve the administration’s capacity in this field.

Table 11: Staffing in agencies involved in implementing watershed management

Source: Chen, L. 1999

Table 12: Budget of 1998 for agencies involved in implementing watershed management

Source: Chen, L. 1999

10.2. Intersectoral co-operation

The administrative boundaries between sectors are quite high, and much in the vein of other GMS countries, inter-sectoral co-operation is notoriously cumbersome. At the national level there is no formal body specifically responsible for co-ordinating the activities related to watershed management, nor has any one agency been designated as a Lead Agency responsible for co-ordination within watersheds. In practice, the only co-ordinating body is state planning committee, but as watershed management is quite peripheral to their principal tasks, even policy co-ordination is quite weak let alone activity or budget co-ordination.

Most of the main central ministries have provincial services, which are responsible for rural development. The provincial technical services are organisationally divided into sections associated with sub-sector responsibilities. The services are directly under the control of their respective central ministry, but are partly funded from the provincial government and their activities co-ordinated by the office of the governor of the province. Thus their activities are somewhat influenced by the provincial government priorities, but reportedly the influence regarding inter-sectoral co-ordination is very limited.

The most basic and lean approach to inter-sectoral co-ordination is the establishment of inter-sectoral co-ordination committees with representation from key sectors. The approach is being applied in Thailand. While the model carries some merit, the key problem is a lack any authoritative power over activity co-ordination and resource allocation. Another weakness of the systems is the low capacity to deal with the upstream-downstream conflicts.

Devolution of authority to provincial level is the second principal model presently used in the GMS countries. It brings decision-making closer to the field level increasing flexibility and staff motivation, and, in principle, this should be conducive to inter-sectoral co-operation. Problems become more tangible and the small size of units facilitates exchange of information. While this approach carries considerable merit the experience in Yunnan shows that a decentralised structure does not automatically bring about inter-sectoral co-ordination. The administrative barriers between sectors are high even at the provincial level. In addition, decentralisation does not do away with a need for central co-ordination e.g. to resolve conflicts between provinces competing for resources.

Another possible approach to inter-sectoral co-ordination, which a few GMS Governments are presently studying, entails the establishment of a basin-wide authority to manage all natural resources in the area. The advantages of a basin-wide management system include the ability to address all issues related to water resource management in a comprehensive manner. Many of the existing systems e.g. in Malaysia and Western countries are self-supportive in the sense that they generate revenue by levying charges on water use, part of which are then ploughed back to basin development. It is this feature, which has been considered particularly advantageous for the management of upper catchments. It would provide a mechanism for transfer of funding from lowlands to upland areas in return for the benefits upland protection provides downstream. Also, all other aspects of upstream-downstream conflict such as water allocation, pollution etc. could be effectively addressed by the management system.

In an appropriate context the advantages of the system are significant, and the concept has been found workable elsewhere. However, it may be advisable to proceed cautiously since basin-wide management structures are rather intricate systems requiring high institutional capacity. Any management method should be kept as lean as possible even at the cost of not achieving full co-ordination.

The degree to which conflicting interests are encountered in the area is perhaps the main criterion determining the need to develop special structures for watershed management. A basin-wide structure is probably most pertinent in situations, where issues of water allocation and upland-downstream conflict are severe problems. The Yellow River water basin is one of the areas in China, where the approach has been found workable.

In Yunnan there are probably some areas such as the Upper Nanpan River Basin in the south of Yunnan and the Dianchi Lake in the Kunming Basin, where the conflicts have exacerbated to a point where this model might become relevant. Even though the administrative machinery in Yunnan is heavy, it has a rather high capacity. Therefore, the development of a basin-wide model may be a relevant option in the most critical areas, and it should be explored further. At the central and country levels the establishment of an authoritative body for inter-sectoral co-ordination coupled with strengthening the authority of provincial Governments in terms of inter-sectoral co-ordination might be sufficient measures.

10.3. Patterns of Participation

China has a long history of centralised decision-making, and the present planning approaches are deeply rooted in this tradition. This applies both to policy formulation and and implementation of field projects. For instance, the recent decision to ban logging was made in an administrative fashion, where consultations with stakeholders and the background analyses on the possible implications were very limited. This may pose problems for the implementation of the ban, as it may simply not be possible for all those using timber, especially the local population needing it for household use, to abruptly change their practice. A more extensive dialogue with the representatives of various stakeholders and examination of various ramifications might have led to a more workable solution.

At the field level the use of participatory approaches is limited to the few international development projects. In the Government administration "participation" is often interpreted as a (labour) contribution to various activities the local Government plans and manages. Even if there is a dialogue between the "participants" and the Government, it may amount to the Government "convincing" or "educating" the local population about the advantages of Government-planned activities.

The Government staff often refer to the time-consuming nature of participatory planning, and the difficulties it poses to implementation. The point is correct in that with the present vogue of participatory methods in international development work, the participatory processes have been used indiscriminately to solve all types of planning problems regardless of their significance. As a result both the authorities and village participants have expressed frustration, as the concrete benefits are not proportionate to the amount of time expended on the process.

However, there is no doubt that participatory methods are appropriate in many planning situations. A case in point is the Government’s reforestation scheme, which the local population is often reluctant to contribute to. Typically, the reasons for their reluctance are related to the long wait for benefits to materialise, and the loss of grazing areas. Unless these problems are solved in a participatory process, where there is readiness on both sides to accommodate each other’s interest, it is unlikely that the results will be sustainable. A key element is to win recognition to the notion that local people have a major role to play in forest use and management, and that they have to find the proposed activities worth engaging in.

The participation of non-governmental organisations in development activities is a new phenomenon in China. There is a large number of academic organisations such as the Chinese Environment Society, Ecology Society, Forestry Society etc., which have a role in guiding scientific research, monitoring and dissemination of information. However, they not assumed an active role in programme execution. In the Yunnan province there are a few international organisations NGOs (e.g. WWF) assisting the Government to implement field programs. Local NGOs are embryonic and they are still developing a niche for themselves. One of the newly established NGOs is Man and Nature Foundation, which is carrying out activities related to awareness raising on environmental conservation.

The mode of work for the local NGOs will have to grow out of a dialogue with a Government. One option found workable elsewhere in the GMS region is for the NGOs to assume a role as a mediator between the upland people and formal Government structures and private corporations, which have interests affecting the upland area. Upland people, especially the ethnic minorities, are often rather unaccustomed to carry out formal negotiations, communicating their ideas to officials, and dealing with legal matters. Many members of the NGO community have the requisite skills as well as ties with upland communities, and provided that they win acceptance from all parties, they could play a valuable role in fostering further dialogue on upland development matters.

11. Principal Conclusions and Recommendations

11.1. General

Restoring degraded environment is one of the priority areas for the Yunnan Government in terms of rural development. In watershed management this is indicated by the extent of reforested areas, which represent one fifth of the total forest area. Future plans are similarly ambitious. However, while the degradation of environment is a serious concern, it may be advisable to review the premise on which the strategy is based. Environmental degradation is often only a symptom of people’s problems with their livelihood, and unless this root cause is addressed, problems may re-emerge and make futile the effort expended on restoration. It is recommended that the social and income-generation elements of development strategies be accorded increased emphasis in the watershed areas. In practical terms this could mean e.g. that reforestation projects would substantially increase areas to be cultivated with agroforestry or agricultural tree crops (economic forests) and that infrastructure investments would be coupled with a substantial input of technical assistance to local people.

Accompanying this change it would be necessary to decentralise and re-orient the relevant administration in order to increase its capacity to implement people-centred development. There is still limited recognition of the fact that under any development scenario local people will be major decision-makers regarding the use of natural resources in catchment areas. Reforms are particularly needed in forest administration, which is much focused on forest management and enforcement. The key strategy for revamping the forest administration is to assign it a more significant extension function, and to provide staff with necessary training. Use of participatory planning methods should be increased substantially but judiciously in order to ensure that they target issues warranting the use of time and resources.

Strengthening links with the urban areas, especially upland towns, is another possible avenue for relieving land pressure in remote watersheds. Relaxing the present regulations on migration would probably induce spontaneous migration from the remote areas. While this would undoubtedly have some negative implications especially in social terms, they could be mitigated if it were possible attract the migrants to stay in the upland towns. This would reduce the congestion in large cities, and it would probably be more advantageous in social terms, as it would reduce the physical distance and facilitate maintaining the social networks migrants have with their former community in the remote areas. The migrants could also play a crucial role in forming a "social bridge" between the upland communities and majority populations and in breaking their social and economic isolation.

The vigorous development of rural industries and employment in Yunnan provides a promising opportunity for the implementation of this strategy. However, the industries in upland towns do not necessarily have strong backward linkages to the remote watershed, but depend more on people and endowments in their immediate vicinity. In order to ensure that such links develop with the remote watersheds special measures are required. Training, technical assistance and credit facilities to people living in remote areas are required in order to ensure that they are able to fully participate in increased trade and benefit for the opportunities opening up in the job market for industrial and service sectors.

Arrangements for land tenure in China PDR have been innovative and versatile especially as regards non-state tenure of forest land. However, the pace of change has been so rapid that it has eroded confidence in the stability of the system, and therefore the main emphasis must be placed on consolidating the existing models. The array of alternative tenure arrangements is adequate, but they should be targeted more carefully, as the conditions within the Yunnan Province are highly varied. In particular, caution should be exercised in introducing market-based options such as auctioning in those upland areas, where the local people are still somewhat unfamiliar with the functioning of the market mechanism, and also lack financial resources to fully participate in market-based development.

11.2. RETA 5771

Given the link that apparently exists between poverty and environmental degradation in Yunnan it is recommended that the thrust of the development efforts made by RETA 5771 be placed on socio-economic development in the villages. To the extent possible, the measures of environmental management – restoration of vegetation cover – should be designed in a manner, which accommodates the local people’s needs for short-term benefits. In particular the appropriateness of large-scale reforestation programmes should be reviewed from this perspective.

Even though the issue could not be investigated thoroughly, it appears that the development potential held in fostering linkages between upland towns and remote watersheds has not been fully tapped in the Yunnan province. Therefore, it is recommended that the option of including components focusing on (i) rural industrialization in the upland towns and (ii) strengthening the rural-urban link be explored when formulating RETA 5771.

If sedentarization of shifting agriculture is considered appropriate and necessary in the project area for RETA 5771, it is recommended that in the remote areas the project adopt an approach building on a spontaneous transformation of swidden practices towards market-oriented agriculture. RETA 5771 would act primarily as a facilitator to development process in view to ensure that the environment in which the farmers operate is conducive to change (e.g. securing access to markets) and that they are aware of and able to address issues affecting their environment (e.g. large-scale development plans, availability of Government support). Technology transfer would be implemented as appropriate, but it would not constitute the main element of the strategy, which would rely more on farmers’ capacity to adapt his/her practices.

The development of land tenure systems in China has undergone many rapid changes, and future efforts need to focus on consolidating the existing arrangements. One of the most recently introduced options for non-state tenure has been the establishment of Joint Forest Stock Companies in which both the collectives and individual farmers have a stake. Even though the details of the arrangement are not known, the option of including the further development of the model in the scope of RETA 5771 might be explored in the design phase of the project.

As regards the overall scope of technical interventions by RETA 5771, the experience shows that full-fledged integrated rural development projects have often had difficulty in delivering a sustainable impact. While technical issues can be tackled at the project level in a fairly comprehensive manner, institutional problems are usually more deeply rooted and require reforms beyond the project area. Attempts to address them simultaneously at all fronts are susceptible to be ineffective. A better approach might be to identify 1-2 sectors (e.g. among the above-mentioned options), which have the highest potential to become "engines" of village development in the project area, and concentrate the efforts on their development. "Integrated activities" such as preparation of village development plans would be undertaken, but the thrust of the effort would be on the selected priority areas.