Final Report - Asian Development Bank

development to improve leisure tourism in the Project Area, to promote tourism and the Project Area as a
tourism attraction, to stimulate growth in local industry through providing goods and services to visitors,
and importantly to promote greater understanding of Daoism as a religion.
65. The Project will support the construction of 18 multi-room villas with five bedrooms for two
people each or a total capacity of 180 people per night. In addition the project will support development
of a restaurant, bathing pool complex, internal utilities and site infrastructure, equipment and vehicles and
staff training programs. Visitation is expected to derive from both over night stays and day visitors with
the development providing the top end of available accommodation in or around Louguantai.
Accommodation occupancy is expected to reach 70% by 2020. Day visitation would start from about
300,000 in 2011 and reach 500,000 in 2023 at which level it would reach operational capacity.
Management of the operation will be undertaken through a commercial management contractor with
substantial experience in the tourism sector. The Shaanxi Tourism enterprise needs to raise private sector
funding for the completion of the hot springs development 14 .
ii) Component Two: Improved Village Livelihoods from sustainable management and
conservation of natural resources
66. Component two will support the implementation of an in-situ zone management strategy
resulting in improved conservation values through increasing forest cover and manipulation of existing
forests to improve their function as wildlife habitat. The in-situ zone supports 4,500 residents that lost
income sources due to policies removing their access to forest products, livestock and agriculture on steep
lands.
67. Financing of in-situ conservation is a core outcome for the Project to ensure finance is made
available after Project completion. The Project will introduce an innovative financing mechanism to
achieve this based on the ex-situ enterprises (component one) supplying funds for in-situ reinvestment.
The propsoed mechanism for this will be a charge against fixed assets including land creating the
additional incentive for increased efficiency in capital utilization. Until assets are valued and final
cashflows are prepared the actual terms of the charge are not defined. For the purpsoe of the feasibility
study a proxy amounting to 8% of forecast net profit is used. Under this system the net profit during the
construction period will be modest as capital is invested. By 2012 the profits involved increase
substantially and will support investment into in-situ conservation beyond the Project Area with an
estimated USD 400,000 being transferred to in-situ in 2012 from the Qinling Botanic Garden, SARC, and
the Hotsprings development.
68. The existing institutional arrangements for land use and the provision of a financing mechanism
are a major risk to the reinvestment arrangement. The Project will support the rationalization of the
institutional and organizational issues (see Component three) to increase the efficiency of the current
management systems and also to provide a more practical option for managing the transfer of funds from
the commercial enterprises to the in-situ zone. It is also recommended that the transfer be considered a
cost of business and not a residual profiut redistribution to minimize avoidance.
Table 5: Projected Financial transfers to the Eco-fund based on 15% of Net Cash Flow (after tax and loan
repayment) - USD `000’s
Source 2012 2013 2014 2015 2016 2017 2018 2019 2020
CNY(0000) 300 338 304 347 390 432 475 518 561
USD (000) 400 451 405 462 519 576 633 690 747
14
It is recommended that prior to ADB approval a Bank Guarantee or letter of credit should be provided to ensure
that financing is available