Report No. 22890-AL Algeria National Environmental Action Plan for Sustainable Development Staff Sector Assessment Note June 28, 2002 Rural Development, Water and Environment Department Middle East and North Africa Region Document of the World Bank CURRENCY AND EQUIVALENTS Currency Unit = Algerian Dinar US$1 = DA 80.00 FISCAL YEAR January 1 - December 31 ACRONYMS AAA Advisory and Analytical Activities CAS Country Assistance Strategy CEA Country Environmental Analysis CZM Coastal Zone Management EC European Commission EIB European Investment Bank FEDEP Fonds de l 'Environnement et de la D6pollution (environment fund) GDP Gross Domestic Product GIS Geographical Information System GOA Government of Algeria GPG Global Public Goods GTZ German Technical Cooperation IPCP Industrial Pollution Control Project MATE Ministere de I Amenagement du Territoire et de I 'Environnement METAP Mediterranean Environmental Technical Assistance Program MIS Management Information Systems NGO Non-Governmental Organizations PNAE-DD Plan National D 'actions pour I 'Environnement et le Developpement Durable PAP Priority Action Plan SEA Strategic Environmental Assessment SSAN Staff Sector Assessment Note TA Technical Assistance UNCED United Nations Commission on Environment and Development UNDP United Nations Development Program WHO World Health Organization Vice-President Jean-Louis Sarbib Country Director Christian Delvoie Sector Director Letitia A. Obeng Sector Manager Salah Darghouth Task Manager Sherif Arif ACKNOWLEDGEMENT This sector assessment note was prepared by Aziz Bouzaher (Senior Environment & Natural Resources Economist, SASES) in collaboration with Sherif Arif (Regional Environment Coordinator, MNA) on the basis of the National Environment Action Plan for Sustainable Development (PNAE-DD). The Bank PNAE-DD Task Team consisted of Sherif Arif (Task Manager); Aziz Bouzaher; Maria Sarraf Environmental Economist, MNSRE; and Mohammed Bekhechi, Sr. Counsel, LEGENV David Hanrahan, Lead Environmental Specialist, ESSD; Robert Clement-Jones, Sr. Environmental Economist, AFTENV; and Kutlu Somel, Sr. Agricultural Economist, MNSRE served as Peer reviewers for the PNAE-DD. Administrative support was provided by Syvie Creger, Program Assistant, MNSRE. ALGERIA NATIONAL ENVIRONMENTAL ACIION PLAN FOR SUSTAINABLE DEVELOPMENT Staff Sector Assessment Note TABLE OF CONTENTS ACRONYMS ACKNOWLEDGEMENT TABLE OF CONTENTS PREAMBLE I. INTRODUCTION 1 II. PERFORMANCE AND CHALLENGES 1 A. The impacts of decades of centrally planned economic development 1 B. Environmental performance and current challenges 2 1. The key environmental issues 2 2. The development impact of environmental neglect 3 3. The key policy and institutional factors 4 M. NEW VISION AND A STRATEGY FOR SUSTAINABLE DEVELOPMENT 5 A. A new strategic framework (2001-2011) S B. Priority actions and the government's economic recovery plan (2001-2004) 6 1. Strong linkage with the Government Economic Recovery Plan (2001-2004) 6 2. Program cost 7 3. Resource mobilization 7 IV. BANK ASSESSEMENT OF RISKS AND CHALLENGES 7 V. RECOMMENDATIONS 10 A. Bank Strategy 10 B. Implementation Approach 12 C. Short-Term Work Program 13 VI. CONCLUSION 13 PREAMBLE Maghreb Region. The meeting took note of- and strongly endorsed-the high quality standard of the document, and recommended The present report is a staff assessment that it be submitted to the Bank's Board of the of the recently completed national Executive Directors as a GOA Report environmental action plan for sustainable accompanied by a staff sector assessment note development (Plan National d'Actions pour (SSAN) highlighting: I'Environnement et le Developpement Durable, PNAE-DD, January 2002). * The strength of the proposed government policies and activities for The PNAE-DD, an output of the mainstreaming the environment into the Industrial Pollution Control Project IPCP, is country's economic reform and focused on charting a new course for development agendas; environmental management in the country, * The credibility of the consultative based on an objective assessment of past policy process underlying the PNAE-DD, and and institutional failures, a new consensus on the the need for this process to be deepened need for mainstreaming the environment into and institutionalized; economic management and sectoral policies, and * The need for continued strong Bank the implementation of a priority action plan fully support, particularly during the integrated with the government three-year implementation phase of the PNAE- economic revival program. DD; and finally * The need for continuing the policy The PNAE-DD was financed by a grant dialogue on issues where the Bank's fromthe European Commission (EC), and from views may differ with those of the the Swiss Agency for Development and GOA, particularly with respect to the Corporation (SDC), both executed by the Bank role and establishment of new public through the Mediterranean Environment environmental institutions, and the level Technical Assistance Program (METAP). The of financing proposed by the Bank provided substantial assistance, both in Government to implement the PNAE- terms of analytical framework and economic DD. analysis, and in terms of overall strategy formulation and content. In addition, the Bank The present SSAN-which accompanies was instrumental in developing the overall the PNAE-DD report-will be organized as methodological framework and structure of the follow: Parts I, II and m summarize the PNAE-DD, as well as the supervision of findings, vision, and priority action plan put consultants, the countrywide consultative forth in the PNAE-DD. Part IV and V present process, and the drafting of the final report. the Bank staff assessment, and overall recommendation for Bank support to key policy The PNAE-DD went through a formal and investments priorities. Bank review chaired by the MNA region Chief Economist and the Country Director of the I. INTRODUCTION estinated at 5%/6-7% of GDP' or US$230-330 million per year. The scope and magnitude of this cost is likely to offset some of the economic 1. Three decades of direct management by growth gains over time, and could undermine the state of its vast land, oil and mineral the effectiveness of the government economic resources-to support a centrally planned and reformprogram. ambitious social and economic development 4. The GOA is well aware of these issues. program, twenty years after passage of the With Bank assistance, GOA has prepared a country's first comprehensive environmental National Environental Action Plan for legislation, and ten years after the United Sustainable Development (PNAE-DD) tightly Nations Conference on Environment and linked to its medium-term program of economic Development (UNCED Rio Conference, 1992), reforms, and with a strong focus and Algeria's is facing enormous environmental commitment to sustainability and incorporated challenges which have already imposed a heavy herein by rfen.2 Th prepa rati f burden on the well being of its citizens, and way PNAE-DD, the culmination of a 5-year process, has been a vehicle for intensive dialogue with 2. Algeria's current severe environmental GOA on the need for closer coordination with problems are the legacy of the country's key sectors of the economy and for economic and social policies of the past three govestreameng othe envirorment gto the decades. Despite a significant natural resource govuernments overall development agenda. base, and substantial investments in physical and Furthermore, the PNAE-DD has served as an human capital over the years, the country's important vehicle for building bridges with environmental problems are enormous, ranging NGOs and donors and improving the prospects from water depletion (reaching crisis proportion for better donor coordination in support of in certain areas), land and ecological agreed priorities. Finally, the PNAE-DD also degradation, air pollution, toxic and hazardous helps inform the ongoing process of Country agro-mdustrial waste, to environmental hazards Assistance Strategy (CAS). and natural disasters. These problems, mainly caused by the overexploitation of the country's natural resources without due regard to II. PERFORMANCE AND externalities such as pollution, over a long CHALLENGES period of centrally planned management of the economy, were further exacerbated by weak A. The impact of decades of centrally policies and institutions and the inadequacy of planned economic development governance structures. If left unattended now, these problems pose a major threat to (i) human 5. The PNAE-DD has involved major health and the quality of life, (ii) the productivity analytical and preparatory work to assess the and sustainability of natural resources to support current state of the environment and chart a livelihoods and improve the rural economy, and sensible course of action over the next few (iii) the efficient use of resources and the years. One of its major strengths is the clear link competitiveness of key sectors of the economy. it makes at the outset between social and economic policy decisions and the quality of the 3. The social cost of environmental country's environmental resources. The degradation is already quite significant and will continue to increase if policies, institutional and Using 1998 as a reference year throughout investment measures are not provided. The 2R6publique Algerlenne D6mocratique et Populaire: direct health, resource degradation, productivity, Plan National d Actions pour I 'Environnement et le and efficiency impacts have been conservatively Developpement Durable (PNAE-DD), Minist&re de I Am6nagement du Territoire et de I 'Environnement (Jan. 2002) comprehensive assessment of the nature and chemical and other industries) and intensive extent of ecological degradation in Algeria (irrigated) agriculture, was coupled with policies reveals that beyond natural vulnerability factors of massive subsidization to both producers and due to climate, topography, and agro-ecological consumers, and rapid urbanization (particularly location, past development policy and in the coastal areas) to produce considerable management of the economy are central to both degradation of environmental resources and understanding the current sate of environmental increased risk to human health and well being. neglect and how to go from here. B. Environmental Performance and 6. After independence (1962), faced with Current Challenges severe poverty, a largely rural, very young, and fast growing population, taking advantage of its 1. The key environmental issues vastly untapped mineral and hydrocarbon resources and the sharp increase in oil prices in 8. An extensive state of the environment the early 70s, opting for a system of analysis, conducted as part of the PNAE-DD management of the economy based on central process, identified a number of environmental planning and administrative allocation or issues confronting the country, the most critical resources, Algeria embarked on an ambitious of which are: development program aimed on the one hand at employment creation and provision of social * Water resources scarcity. Coupled with services, and on the other hand, at increasing low and highly variable rainfall, the capital investment and enlarging the productive availability of water resources has declined capacity of the economy. Heavy industry, state dramatically over the years reaching barely and collective agriculture, intensive extraction of 400 m3 per capita per year (less than half the natural resources, massive subsidies, and trade indicator of water scarcity: 1000 m3/pc/yr). and exchange rate control, were the key features Water policy, focused almost exclusively on driving economic policy. supply management by national public institutions, with little attention to 7. The social progress these policies sustainability, cost recovery, and operations achieved was considerable3 but short-lived, and and maintenance, has resulted in a situation their real costs are only now becoming apparent. where agriculture uses about 90% mobilized As fiscal resources rapidly shrunk, and the resources, overall water use efficiency is whole approach began to unravel, on the less than 50%, and ground water resources ecological front, the crisis began to unfold as are being rapidly depleted. Furthermore, well. With no attention to any form of credible water quality has been continuously environmental impact assessment of policies, deteriorating, and domestic consumers are programs, and development projects, the faced with severe shortages and low quality intensification of natural resource extraction (oil, of service. Despite considerable investment natural gas, and mineral ores, as well as water, in the sector over the past 20 years, the land, and forest resources) to support the country is facing a crisis of unprecedented development of heavy industry (metallurgical, proportions. 3 In the seventies GNP grew 7.2% per year, * Land and Ecosystem Degradation. household income increased 4% per year, Exacerbated by ecosystem fragility due to unemployment was significantly reduced, and public natural and agro-cliniatic conditions,4 about spending on health and education averaged 15% per two thirds of the usable land area is subject year. In the span of 15 years from 1970 to 1985-nfant mortality was cut in half, life expectancy rose sharply, universal primary school 4 Characterized essentially by seasonal and rapidly enrollment almost doubled, and adult illiteracy was decreasing rainfall from north to south, with only 4% cut by a third., of the country-cssentially the coastal plains- getting over 400mm of rain annually. 2 to various forms of land degradation (about 2. The development impact of 12 million hectares in total), including water environmental neglect erosion predominantly in the North, wind erosion in the South, and salinity in the 9. The PNAE-DD demonstrates very irrigated perimeters of the Center and the convincingly and candidly that in a relatively West. Slow but steady deforestation (over short period (30-35 years), Algeria's one million hectares in the 40 years) enviromnental problems have emerged as having continues to be of great concern, a clear link, and in many cases their origin, in desertification continues to threaten more past policy and institutional choices, including, than 8 million hectares of rangelands, and fiscal and incentive systems faced by consumers, even more alarming is the associated loss of producers, and government agencies. biological diversity which is very difficult to estimate. Finally, policy and institutional 10. Furthermore, the strategic and priority failures (including the lack of clarity and activities proposed in the PNAE-DD were complexity of tenure issues, urban land use anchored in an (macro) economic analysis of the policies, non participatory and supply-driven cost of environmental degradation as well as the management processes), incentive structures cost of remediation. This analysis, which by (including agriculture input and output nature-given assumptions, data and subsidies, cereal and livestock production methodology limitations-produces only useful policies), production technologies (favoring orders of magnitude of the true value of conventional tillage, and little soil moisture environmental damages and the benefits of and nutrient conservation approaches), and a remediation, has been instrumental in getting the system of watershed management environmental debate in Algeria over the past (characterized by a top-down and technical two years to focus on fundamental causes and approaches to soil conservation and forest agree on priorities, and to bring to the discussion management), are among the main factors table stakeholders of different persuasions, contributing to the extent and severity of including members of civil society and agencies land degradation. like the ministry of finance, and others. Urban and industrial pollution. In addition 11. The analysis shows that the economic to a fast growing population and rapid, cost of environmental degradation is of the order uncontrolled urbanization, the past focus on of 5% of GDP (about 2% due to health and development of publicly owned and quality of life impacts; about 2% due to the operated heavy industries (e.g., chemical, degradation of the country's natural capital; and and metallurgical) close to fragile about 1% due to impacts on the global ecosystems and population centers, the environment. Moreover, the analysis shows that intensive-and heavily subsidized-use of the social cost associated with inefficiencies in energy sources favoring diesel and leaded resource use, production of goods and services, gasoline in the transportation sector, and the and overall competitiveness, are potentially lack of enforceable requirements for pre- significant. Finally, the analysis shows that treatment of industrial and domestic effluent potential investmnents of the order of 3% of GDP as well as the proper management of solid (about.10 billion DA, or US$140 million) per and hazardous waste, are the main factors year, would be needed for at least the next ten behind the emergence of serious risks to years, in order to achieve environmental quality human health and the quality of life (from consistent with the World Health Organization respiratory and water bome diseases, (HWO) and World Bank guidelines,5 as well as particularly affecting the poor and other Algeria's own emerging environmental vulnerable groups), as well as to the standards. Compared to OECD countries where country's cultural and archeological heritage, and coastal resources. 5 As indicated in the World Bank's Pollution Prevention and Abatement Handbook (1998). 3 the economic impact of environmental capacity for planning, monitoring, and degradation is equivalent to around 1% of GDP, evaluation, and (v) lack of accountability. it is clear the "cost of inaction" is too high and will continue to increase, and the potential * Agriculture and rural development policy: benefits of sound environmental management Focused mainly on productivity increases are substantial. through (administrative) supply management, and lack of conservation 3. The key policy and institutional incentives, agriculture and forest policy, factors coupled with complex land tenure issues, led to a major deterioration of both the quality 12. Underlying all these issues is the lack of of land, vegetative cover, and water an effective policy environment, weak laws and resources, as well as the quality of life of the institutions, insufficient public awareness, rural population. inadequately developed information and analytical systems, and overall poor * Land use policy and urbanization: environmental governance. In addition to Industrial location policy favoring factory identifying these fundamental weaknesses, one siting next to big cities and coastal areas, as of the most important contributions of the well as a lack of any urban and rural PNAE-DD is the emphasis it has put on going development planning or strategy, combined beyond the environmental issues (i.e., the to produce massive rural-urban migration (in symptoms) and identifying the key underlying 1966 less than a third of the population lived causes, which are primarily related to the in urban areas, compared to over 60% policies and institutional failures, and which today), and severe encroachment on natural include: resources. * Population growth: In a span of 40 years, * Industrial development policy: The the Algerian population has increased three- emphasis on development of heavy industry fold (from 10 million at independence in as engine of economic growth, coupled with 1962 to over 30 million today). the lack of land use planning, and the absence of credible environmental impact * Subsidy policy: Until recently, driven by assessment, led to loss of large areas of socio and economic objectives, subsidies- prime agricultural land, overexploitation and in the billions of dollars-to both consumers pollution of fresh surface and groundwater and producers (for water, electricity and resources. other energy products, agro-chemical inputs, credit, etc.) have resulted in serious fiscal * Integrated Coastal Zone Management and budgetary problems, inequities among development policy: Because of trade and different income groups, and concomitantly, transportation access as well as availability severe environmental degradation and water and other resources, industrial pressure on natural resources. development, urbanization, and lack of rational land use planning have been the * Water resource management: Despite main reasons for severe environmental significant investments over the years, water degradation of coastal resources, including resource management policy is in serious water and air pollution, solid and hazardous crisis, because of several fundamental waste, and degradation of wetland and problems, including: (i) quasi-exclusive coastal ecosystems. reliance on supply management, (ii) lack of economic pricing and use of efficiency * Legal and Institutional Framework: criteria for cross sectoral allocation, (iii) Despite the enactment of a friamework law lack of an appropriate tariff and cost in 1983, and various reforms over the years, recovery policy, (iv) weak institutional environmental management in Algeria has 4 been consistently weak because of: (i) the environmental policies with overall economic lack of political commitment to credible policy. In this regard, environmental benefits regulations, institutional streamlining, will flow first from the deregulation of the monitoring and enforcement; (ii) the weak economy (started in the late 80s), and which was financial, technical and human resource aimed at dismantling the system of capacity of environmental institutions; (iii) administrative management of the economy, severe governance problems (e.g., including price and fiscal reforms, trade and environment was housed in ten different foreign exchange liberalization, removal of departments of line ministries in the last 20 subsidies, and creation of an enabling years); and (iv) institutional fragmentation environment for attracting foreign private (environmental issues were dealt with in a investment. number of other agencies, including agriculture and fisheries, energy and mineral 15. Based on a vision of sustainable resources, industiy, water resources, development anchored in a thriving market- transport, public health, municipalities, etc.). based economy with efficient institutions and In 2000, the emergence of a Ministry of strong regulatory oversight, the PNAE-DD puts Land Use Planning and Environment forward a four-pronged strategy for getting there (MATE) has opened new perspectives and (more details are given in the document itself): has led to the completion of the PNAE-DD and the emergence of a new vision and a a) Improve human health and the quality of strategy for the enviromnent sector to be a life of the population through: key player in promoting sustainable development in Algeria (section m below). * Reduction in the prevalence of water borne diseases, using better service provision and increased access to water III. NEW VISION AND A STRATEGY and sanitation, and improvements in FOR solid and hazardous waste management; SUSTAINABLE DEVELOPMENT * Reduction in the prevalence of respiratory diseases, through better prevention and control of air pollution A. A New Strategic Framework (2001- from industrial sources, the introduction 2011) natural gas and other of cleaner fuels, and unleaded gasoline. 13. While completing its transition towards a market economy, Algeria has opted for b) Improve the productivity and sustainability sustainable development. The option of a of the country's natural capita, through: market economy is now seen as the key vehicle for achieving both sustained economic growth * Sustainable land and watershed and significant environmental improvements. management, using participatory and The economic reform process, started in the mid community driven approaches, with 80s, and aimed at deregulating the economy and strong linkages to agriculture, rural creating an enabling framework for private employment, rangeland and water sector participation, focused on fiscal, trade, and resource management, price reforms, as well as the elimination of * Institutional reform and system subsidies, and the introduction of cost recovery improvements m the irrigation sector, measures, has been coupled with changes in . Forest conservation including additional incentives structures and the strengthening of forest coverage; and environmental management institutions. * Improved protection of coastal and 14. Therefore, the PNAE-DD points to the "oasis" resources. need for clear articulation between 5 c) Improve resource use efficiency and a) Improvements in human health and the competitiveness of the economy, through: quality of life of the population: * Improved incentive structures for public * Citizens' access to drinking waters, and and private sector operators, particularly quality of service, through through economic pricing, user-based improvements in distribution networks, management approaches, and re-use and tariff reform, private sector participation recycling, and adoption of export- (one pilot concession), institutional friendly environmental management reform of water agencies; systems; * Delivery of sanitation services, through * Rehabilitation and sustainable rehabilitation and management management of water distribution improvements of waste water treatments (including irrigation systems; and plants, pilot concession to the private * Improvements in trade facilitation sector, and institutional reform of the (including improved ports efficiency national sanitation agency; through dredging). * Solid and hazardous waste management, through implementation of the key d) Improve the global environment, through: provisions of the Solid Waste Management Law, particularly in the * On-site biodiversity conservation (e.g., areas of cost recovery, and maintenance natural parks and protected areas); and rehabilitation, and initiation of a contribution to the reduction in green number of studies. house gases through increased * Industrial pollution control, passage of reforestation, and better management of the Environment Law, preparation of oil and gas fields; and environmental impact assessment * Elimination of Ozone Depleting guidelines and regulation, and Substances (both production and implementation of the environment and consumption). pollution abatement fund (FEDEP); Air quality management capacity B. Priority Actions Plan through the introduction of fiscal measures for promotion of clean fuels, 1. Strong linkage with the Government's vehicle inspection, and air quality Economic Recovery Plan (2001-2004) monitoring; and * Environmental govemance, including (i) 16. Because of relevance and timeliness, the setting up 3 new public institutions for priority actions plan (PAP) which emerged from training, information systems, and the PNAE-DD, contributes to the strategic monitoring; and (ii) preparation of a objectives of section A above, and supports the "local environmental charter." implementation of the govenmment's medium- term economic recovery plan ("Plan de la b) Improvements in the productivity and Relance Economique'). The key priority areas sustainabiity of the country's natural of PAP include institutional measures and pilot capital: investments to bring about improvements in public health and vulnerability, with a strong * Improved land management, through: linkage to poverty reduction. (i) initiation of a number of studies and development of a knowledge base on land tenure issues and options, the relationship between natural resource management and poverty, and a master plan for desertification mitigation and 6 adaptation strategies; (ii) increased legislation already on the books, and the participation of the private sector in the introduction of economic and fiscal measures. "fruit trees concession program;" and In this regard, a number of fiscal provisions with (iii) continue the program of rural strong environmental content proposed in the employment; PNAE-DD, have already been implemented by * Improved management of irrigation the GOA in the 2002 Budget Law (Loi de through completion of a tariff study, and Finances). These fiscal measures include: (i) awareness raising among irrigation substantial increase in solid waste collection agencies and farmers; fees, and provision for full cost recovery by * Improved forest management by municipalities within three years; (ii) piloting a joint management and private introduction of a special tax on collection of sector concessions program, and special and hazardous waste, with the strengthening monitoring capacity requirement on the part of industry to acquire through the introduction of remote incineration or proper disposal methods within sensing and GIS techniques; three years; (iii) revision of the existing * Improved biodiversity conservation with industrial pollution charge in order to link it to a special attention to desert ecosystems, the estimated amount of emissions; (iv) through the creation of a new center for introduction of a tax on air pollution from the development of biological resources, industrial sources; and (v) introduction of a tax and strengthening institutional capacity; on dirty fuels and also aimed at promoting the and use of unleaded gasoline. * Protection of coastal resources, through development of new legislation, and 19. Donor collaboration. Because of the initiation of a number of studies on estimated resource needs and the time lag until coastal zone management (CZM). full cost recovery for users is achieved and implementation of the "polluter- pays principle" 2. Program cost are in place, the PNAE-DD proposes a strategic approach to donor collaboration. Donor funding 17. The total estimated cost for would be sought in the short and medium term, implementing PAP-as described above-is would be linked to performance, would be US$320 million per year for three years (which bundled with technical assistance, knowledge is equivalent to 0.69% of 1998 GDP). Of this and experience sharing, and would be phased cost, about one fifth or US$64 million is out over time. earmarked for institutional reform measures, and the rest is either for pilot investments, or for investments where the policy and institutional IV. BANK ASSESSEMENT OF RISKS framework is either well advanced or is already AND CHALLENGES AHEAD in place. Finally, as a strong sign of ownership and commitment to the objectives of the PNAE- DD, GOA has already committed an indicative' ThePNAE-DD is a remarkable achievement... three-year budget allocation of US$400 million (2002-2004). 20. The PNAE-DD results from years of steady-and at times difficult-policy dialogue 3. Resource mobilization between the Bank and GOA. The dialogue focused on the one hand on helping complete, 18. Internal recourses. The implementation modernize, and give credibility to Algeria's of the PNAE-DD, while calling for relatively legal and institutional framework for substantial new financial resources, is premised environmental management, and on the other on more efficient use of public environmental hand, on mitigating some of the most severe expenditures, improvement in enforcement of public health and ecological problems through a 7 high impact Industrial Pollution Control Project6 PNAE-DD moves into the implementation in the Annaba region. phase. a) Priority setting and institutional 21. In the . mist of overall political coordination. Despite strong consultative instability, sluggish economic performance, and and analytical bases, and overall consistency frequent institutional changes, the PNAE-DD is with the Bank Corporate Environment a remarkable achievement; it reflects best Strategy and its MNA Regional practice in terms of economic analysis and Environment Strategy, the PNAE-DD set of strategic thinking about environmental issues, is priorities remain quite ambitious and do not based on one of the most comprehensive take sufficiently into account the absorptive assessments of the state of the environment ever capacity and the fragmentation of local conducted in Algeria, and consolidates many institutions. Although GOA is keenly aware strategic exercises, papers and sector reports of these issues and has taken steps to prepared by a team of local experts and mitigate these risks, the Bank believes that government agencies, as well as extensive in setting up the policy and investrnent consultations with all key stakeholders. measures, it will be desirable to focus in our Furthermore, the PNAE-DD has strong policy dialogue with GOA, on few activities government ownership and support at the that would have the highest demonstrable highest levels. It is an evolving document, environment impact and for which a which constitutes a "marker" and sets out a propitious enabling environment is in place. process underlying a comprehensive and ambitious program anchored in ongoing b) Institutional capacity development. economic and institutional reforms, and aimed at Although the PNAE-DD clearly identified establishing the foundations of sustainable the critical areas where institutional capacity economic development in Algeria. It is quite needs strengthening, the Bank has had remarkable that Algeria, confronting a major extensive dialogue with GOA regarding its economic crisis, nevertheless devoted extensive proposal to set up five new publicly funded efforts to the issue of environmental environment institutions,8 of which two, the sustainability while preparing its new economic solid waste agency and the environment reform program. training center, have already been approved. The Bank's view is that the government's ... But yet, in the Bank's view, while the PNAE overall approach to environmental capacity DD is a solid starting point, it will require building is sound, but that a number of risks continued coordination to ensure effective and issues need to be fully considered, implementation ofpolicy choices... including: (i) the real demand and willingness to pay for the services of such 22. As indicated in the preamble of this institutions; (ii) fiscal and sustainability note, notwithstanding a very positive evaluation implications; and (iii) the alternative of and overall strong support for the PNAE-DD,7 considering first strengthening existing the Bank identified a few areas where further public institutions, universities/research evaluation and continued dialogue with GOA centers, or, even the capacity of the private should lead to additional improvements as the sector. Furthermore, the role of these institutions-especially the solid waste agency-still needs to be clarified, particularly in terns of whether their main 6 Industrial Pollution Control Project (IBRD-4034) 7 The Bank has co-sponsored a lhgh-level donor conference, which was held in June 17-18, 2002 in 8 The proposed new institutions are: solid waste Algeria, to present the results of the PNAE-DD agency, coastal zone management agency, process, to showcase the first elements of its environmental training center, center for implementation, and to seek donor collaboration and environmental information and clean production, and support an agency for biological diversity protection. 8 function should be strategic planning and from being treated separately from regulatory oversight, versus centralized cultural heritage, and its development implementation. International experience should be based on strategic clearly shows that the most efficient way of environment assessment (SEA). delivering local services like water supply, sanitation, and solid waste is through local * Complexity of natural resources utilities, under government regulatory management problems. Having oversight with community participation. identified the central role played by water management and land tenure c) Priority program cost and absorptive issues for the sustainability of natural capacity. Although in overal in agreement resources and people's well being, it is with the strategic objectives and priority nonetheless important, in terms of action areas, the Bank considers the priority actions in the PNAE-DD, to medium-term program proposed by GOA in take into account both the complexity of the PNAE-DD to be overly ambitious both the issues, the political economy in terms of scope and achievability, and in constraints, and lessons learned from terms of the proposed level of financing on-going projects in Algeria and required. Given the slow absorptive globally. capacity and track record of public institutions in Algeria, the proposed * Governance. The PNAE-DD has puts a investment program of US$970 million over great emphasis on the need for three years may not be fully realized. deepening the consultation process, Therefore, the Bank has urged GOA to transparency of environmental closely monitor progress and *make institutions, strengthening local necessary adjustments in the size of the institutions, and public awareness and priority program as the implementation of information dissemination, but was the PNAE-DD unfolds. silent on the question of the local administrative reform and d) Specific thematic and environmental decentralization process-and its issues not adequately addressed. The implications-being considered by the Bank proposes strengthening the PNAE-DD Government as a mean to empower process, as it moves into implementation, in local government and local communities the following areas: on environmental management. * Poverty-environment linkages. In order e) Dissemination and consultation process. to strengthen the conclusions reached on The Bank recommends that the momentum the overall macro-economic impact of gained during the preparation phases of the environmental degradation (which is an PNAE-DD in terms of consultations and expression of welfare loss for current information dissemination should not be lost and future generations), the Bank and should extend to the local level (regions recommends that distributional impact and municipalities) during the upcoming be highlighted more clearly by giving preparation of "municipal/local environment more attention to poverty-environment charters." linkages during specific program design, implementation, and monitoring & evaluation. ... But GOA is already taking appropriate actions to mitigate these risks * Integrated Coastal Zone Management. Although the two are clearly linked, 23. Well aware of these implementation because of the major cross-sectoral issus inolve, CZ woud beefit nsks and past performance issues, GOA views issues involved, CZM would benefit 9 the development of the capacity of key public environment into target policies, programs and institutions, not only as a major factor for projects at the national and local levels to enhancing the (technical and financial) promote sustainable development. This absorptive and delivery capacity of the country, approach requires strong commitment and but also as a catalyst for developing capacity involvement from all departments and levels of within the private sector and non government govermment, including civil society and the entities. In this regard: private sector, and is reflected in the proposed The env.ronment training center is conceived (below) Bank strategy, instruments, and short- as a "very light" institution, serving needs that termn work program for suNn th are not covered by other more formal educational institutions, and targeted at staff of local governments and economic finns. A. Bank Strategy * The solid waste agency will be a planning and 25. The Bank's overall approach for regulatory agency, whose main role will be to supporting the implementation of the PNAE-DD provide technical support and information to will focus on addressing critical constraints and municipalities and local governments, providing the enabling conditions for truly * The centerfor cleanerproduction will operate mainstreammg the environment in both the as an information and technical assistance lending portfolio and the government's policies entity, serving the needs of production and and programs, and will be guided by the key industrial units, on-demand. operating principles of the MNA Strategy, namely: * The coastal zone management conservatory will constitute a forum for dialogue between a) Sharing knowledge. By focusing on four various actors involved in the use and/or areas where the Bank has comparative management of the coastal space, and will advantage and global experience in provide value added in the form of studies and mainstreaming the environment, with the assistance to regional and local governments aim of encouraging policy and institutional regarding their land use and conservation reforms: (i) the use of economic criteria and policies. valuation of externalities, (ii) the linkages between environment and poverty reduction, * The center for biodiversity protection will be a (iii) energy and environment, and (iv) trade national reference and information entity, and environment. This will build on work aimed at the development and conservation of already undertaken as part of the PNAE-DD the country's biological resources. and aimed at improving the prioritization of public sector spending to focus on investments with high environmental V. RECOMMENDATIONS benefits (e.g., water supply and sanitation, solid waste, and land management). In addition, Bank support is expected to further 24. Withi the overall framework of the emhaiz th*niomna eeiso * , . ~~~~~~~~~~emphlasize the environmental benefits of World Bank's Corporate Environment Strategy continued deregulation of the economy, the in the MNA Region, the PNAE-DD will form use of economic and market based the basis of the sector dialogue between the instnunents, trade policy, sound natural Bank and the Government of Algeria. This resource management, and efficient public dialogue will be anchored in the new key operating principles of the overall MiA strategy9 and will focus on mainstreaming flexibility and quick response-are discussed in details in: World Bank: Middle East and North Africa 9 These principles-knowledge sharing, use of high Region Strategy Paper. Draft for discussion, March impact strategic lending, selectivity, partnership, and 10, 2002. 10 expenditures and service delivery with the * Public Sector efficiency and governance highest impact on poverty reduction.'° will be addressed through improvements b) Using high impact strategic lending. By in the management of environmental capitahzing on analytical and advisory institutions and agencies, building on activities planned for FY03-05, three - the ongoing activities of IPCP, which priority sectors in the PNAE-DD with are aimed in part at enhancing the potential for significant contributions to effectiveness of the ministry of poverty outcomes will be supported: environment and land use planning (MATE), and its regional environmental * Water and wastewater, by incorporating inspectorates. Furthermore, through the environmental objectives and Solid Waste Management Project components into the design of both (planned for FY04), the capacity of institutional reforms and investment municipalities will be strengthened both operations. Emphasis will also put on technically and in the area of financial water demand management especially management and cost recovery. Finally, on reducing water consumption and through Rural Employment II (FY03), a improving water conservation and highly participatory EA process will efficiency; ensure that sub-project designs incorporate environmental priorities of * Urban development, by helping improve importance to local communities and the design of urban services (water and stakeholders. sanitation; and solid waste) and traspot pertios. In arale, * Private Sector Development will be throught ioermations. dIs n pand. , enhanced through planned Technical awareness campaigns, local Assistance under METAP and IPCP on awareness campaigns, local environment and trade, environment and communities will be assisted to acquire finance (particularly private sector information knowledge concerming the finance), and environment and negative impacts of poor waste privatization. In particular, as management practices international trade is increasingly * Rural development and management of subject to environmental legal natural resources are and will continue requirements, trade openness must be to be an integral part of our lending accompanied by internal liberalization operations. The ongoing Rural to enable domestic firms to compete Employment Project as well as the with international ones, taking into Second Rural Employment Project account the cost of environmental under preparation have the objective of compliance. Private capital can flow creating rural employment through the only if private investments meet the instruments of natural resource basic criteria of sector creditworthiness management and the protection of the and there is a secure legal framework, a environment sound regulatory regime and an efficient c) Focusing on fundamental challenges. By banking sector to provide finance and c) . .. . , ....... minimize liability exposure. addressing critical constraints in three priority areas: * Water management. As part of the region's water advisory program (FY03- 05) and the planned agricultural strategy (FY04), the Bank will assist Algeria in '° The latter will be developed in the context of the developing a water management policy diagnostic study for poverty strategy and social focused on sustainability of resource use protection to be completed during FY 03. and quality, and economic efficiency and equity; such a policy 'would underpin the further development of introduce strategic environmental strategies for water allocation, municipal assessment (SEA) in the water and energy wastewater and industrial discharges, sectors. and overall water quality management. B. Implementation Approach d) Partnership. By continuing and . . strengthening Bank collaboration with 26. The Bank will use five main tools N Its donors and other partners, particularly in the DDp following areas: a) Priority Setting: Through assisting the * With the five METAP Partners (EC, Ministry of Land Use Planning and EIB, UNDP, Finland and Switzerland) Environment (MATE) as well as key sector and focusing on harmonizing ministries (such as the ministries of water approaches and providing technical resources and energy) in setting their own assistance in environment and trade, environmental priorities and in improving environmental assessment, coastal zone their environment management capacity. management, solid waste, and water Particular attention will be given to building quality management; a local capacity for understanding linkages between poverty and environment, energy * With bilateral and other institutions and and environment,, trade and environment and partners of Algeria, through the the economic evaluation of environmental International Conference for the externalities. Env1ronment, planned by GOA for June 17-18, 2002 with the support and b) Strengthening Due Diligence Capacity. collaboration of the Bank, and aimed at Through assisting GOA in strengthening its disseminating the PNAE-DD, overall capacity in the area of environment showcasing the initial results of its and social assessment. In particular, implementation, and engaging other strategic environment assessment will be donors to assist Algeria in implementing introduced through a structured learning its short-term PAP. program aimed at building in-country capacity for upstream integration of e) Responding flexibly and quickly. By environmental considerations in the building on the momentum and the "space" planning and sectoral decision making created by the PNAE-DD process, the Bank processes. would stay the course of its dialogue with GOA on issues related to overall c) Integrating Environment into Bank's environmental sustainability and Instruments. Through primarily supporting implementation. In this regard, the MNA the environmental priorities of the PNAE- region Business Plan for FY03-05 has DD through the CAS, AAA work, and already provided a total amount of program and project design in water and US$150,000 for supporting the policy wastewater, and urban and rural dialogue on institutional development, development. mainstreaming tools and help establish a NEAP monitoring and evaluation capacity d) Capacity Building. Through strengthening in the country. Additional resources from the capacity of key sector ministries, local the Environment Mainstreaming Fund (GPG govermments, and municipalities in technical funds) will be allocated, as appropriate, to and managerial matters, as well as policy develop an in-country capacity to assess planning and evaluation, and management poverty-environment linkages, prepare a information systems (MIS). country performance analysis (CEA) and 12 e) Private Sector Development: Through VI. CONCLUSION IPCP (ongoing) and future water management and urban development projects, the enabling environment for 27. The success of implementing the PNAE- private sector participation will be enhanced DD will require more than the proposed Bank through development of a realistic and assistance, which, although highly targeted and enforceable environment protection law, a catalytic, is quite modest compared to the scope workable system of environmental and severity of environmental problems in assessment (EA), realistic and predictable Algeria. In the end, GOA needs to be in the environmental standards and guidelines to driver's seat and maintain political commitment provide support for sustainable private and a sustainable reform program on which sector development. much of the environmental improvements will depend. This will require time, patience and C. Short-Term Work Program perseverance. After all, Algeria is publicly committed to sustainable development. 25. The Bank's work program in However, because environmental sustainability environment for FY 03 consists of: requires a long-term view and an integrated systematic approach, its greatest benefits will a) Mainstreaming the environment into the happen in the longer term. It would be CAS; shortsighted to try to justify the continuation of Bank's assistance based only on its expected b) Providing input in the diagnostic study on immediate tangible benefits, important as these poverty and social protection and the may be. Since the GOA and the Bank are agricultural strategy; committed to environmental sustainability, Bank assistance should therefore continue to be a c) Initiating 1-2 follow-up activities of the long-term, forward-looking program that would PNAE-DD such as establishing the an office help build the country's capacity by providing in MATE for the implementation, knowledge and the best intellectual and monitoring and follow-up of the NEAP and professional resources available to assist in initiating policy dialogue with MATE and addressing priority emerging and longstanding the donors on institutional development; environment issues. 28. Since the early 90s, the Bank has been d) Contmiumig the imrplementaton the major environent policy interlocutor in focusing primarily on the imnprovement Of the legl .ramework, the establishment of Algeria. Its presence is needed now even more the legal fi.amework, the stabhshment Of than in the past to play its catalytic role of integrated pollution control and the addressing the root causes of inadequate operation of the National Environnent and environmental management and in integrating Pollution Control Fund; environmental concerns into decision making e) Completing the preparation of the Second and the management of the economy, providing Rural Employment Project which would be tools for environmental policy analysis and implemented in 2003 linking project preparation to investment. Through the Bank's association in the PNAE- f) Preparing the Solid Waste Management DD process, significant outcomes can be Project; and achieved, including: more effective environmental policy at national and local level; g) Continuing the METAP activities in the improved efficacy and coherence in the use of field of environment assessment, environmental expertise; increased capacity of fild ofenviro nment assessment, integratedcoenvironmental institutions, effective due envronmen mand trande i d casta diligence in the implementation of environment zone management. and solid ~and social safeguards; multiplier effects due to management. 13 synergies between different environmental challenge that the Bank has accepted to assume programs financed nationally or with other in order to help Algeria improve the quality of donors; and dissemination of lessons learned and life of the Algerian people now and in the future. best practices from similar experience elsewhere. Accompanying Algeria in the process of environmental sustainability is a 14 1As 0 edAj IV 068ZZ :'ONYodea DNIDVWI _-a, ~ 4-, 9.. I", v, , .~~~~~~ ,4.Cl'iii'........ ':.:3':X1ir . ']LtdSt%iD_.