Sustaining FORESTS A Development Strategy APPENDIXES THE WORLD BANK Washington, D.C. © 2004 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC 20433 All rights reserved. The material in this work is copyrighted. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or inclusion in any information stor- age and retrieval system, without the prior written permission of the World Bank. The World Bank encourages dis- semination of its work and will normally grant permission promptly. For permission to copy or reprint, and all other queries on rights and licenses, including subsidiary rights, please contact the Office of the Publisher, World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522- 2422, e-mail pubrights@worldbank.org. Contents Acronyms and Abbreviations A-vi APPENDIXES 1. Management Responses to Operations Evaluation Department Recommendations on Forest Strategy and Policy A-1 2. Forests and Poverty Reduction A-3 3. Integrating Forests in Economic Development A-13 4. Protecting Global Forest Values A-31 5. Regional Strategies and Projections A-37 6. Bank Experience with Strategy and Policy in Forests: Lessons and Incentives A-47 7. World Bank Forest Strategy Consultation Process and Feedback A-53 8. Analytical Studies on Forests A-59 9. Forest Portfolio Data, 1992­99 A-63 NOTES A-77 BOXES A2.1 Sustainable Livelihoods Analysis A-4 A2.2 Gender in Collaborative Forest Management A-7 A2.3 Hill Community Forestry in Nepal A-8 A2.4 Joint Forest Management in India A-9 © 2004 The International Bank for Reconstruction and Development/The World Bank A-iii A2.5 Participatory Forest Land-Use Planning in Bolivia A-10 A3.1 Cost of Forest Fires in Indonesia A-15 A3.2 Forests of Georgia: Unrealized Potential A-16 A3.3 Paying for Environmental Services in Costa Rica A-17 A3.4 Contribution of Agroforestry Farming Systems to Household Incomes A-19 Bank-Sponsored Agroforestry Projects in China A-19 A3.5 World Bank Support for Small Enterprise Development in the Philippines A-20 A3.6 Successes and Failures in Bank-Financed Adjustment Operations: The World Resources Institute View A-22 A3.7 Costs of Forest Corruption A-24 A3.8 Forest Law Enforcement in the Mekong Countries A-25 A3.9 Independent Certification A-26 A4.1 Conservation Trust Fund for Papua New Guinea A-33 A4.2 Prototype Carbon Fund A-34 FIGURES A3.1 Pyramid Model for Assessing Progress Toward Sustainable Forest Management (SFM) A-27 A4.1 Bank/GEF Investment in Biodiversity Projects A-32 A9.1 World Bank Commitments for Specific Forest Sector Activities, 1992­99 A-64 A9.2 World Bank Annual Disbursements for Forest Sector and Forest Components of Non-Forest-Sector Projects, 1992­99 A-65 A9.3 Net Change in World Bank Forestry Economic and Sector Work, 1992­95 and 1996­99 A-70 TABLES A2.1 Forest Outputs and Rural Livelihoods A-5 A3.1 Market and Nonmarket Forest Values A-14 A3.2 Bank Initiatives for Diverting Highways away from Biodiversity Reserves A-21 A7.1 Regional Consultation Schedule A-54 A7.2 Principal Issues from Regional Consultations A-55 A8.1 Analytical Studies Topics A-59 A9.1 World Bank Commitments for Specific Forest Sector Activities by Region, 1992­99 A-63 A9.2 World Bank Annual Disbursements for Forest Sector Projects by Region, 1992­99 A-64 A9.3 World Bank Annual Disbursements for Forest Components of Non-Forest-Sector Projects by Region, 1992­99 A-64 A9.4 World Bank Annual Disbursements for Forest Sector and Forest Components of Non-Forest-Sector Projects by Region, 1992­99 A-65 A9.5 World Bank­Implemented GEF Overall Projects and Forest Projects by Region, 1992­99 A-66 A9.6 World Bank­Implemented GEF Forest Projects by Region, 1992­99 A-66 A9.7 Comparison of Forest Sector Lending by Project Type and Region, 1992­99 A-67 A9.8 Net Change in World Bank Forest Economic and Sector Work, 1992­99 A-68 A9.9 World Bank Forest Economic and Sector Work, 1992­99 A-69 A9.10 World Bank Expenditures for Project Preparation, Appraisal, Supervision, and Completion for a Sample of Forest and Forest Component Projects, 1992­99 A-71 A9.11 Completed Forest Sector Projects, 1992­99 A-72 A9.12 Completed Non-Forest-Sector Projects with Forest Components Greater than 75 Percent, 1992­99 A-73 A-iv APPENDIX CONTENTS A9.15 Task Manager Current Unit for World Bank Forest Sector Projects, 1992­99 A-75 A9.16 Task Manager Specialization for Non-Forest-Sector Projects with Forest Components of Greater than 75 Percent, 1992­99 A-75 A9.17 Task Manager Current Unit for Non-Forest-Sector Projects with Forest Components of Greater than 75 Percent, 1992­99 A-76 A9.18 Average Number of Task Managers for Active and Completed Forest Sector Projects with Forest Component of Greater than 75 Percent, 1992­99 A-76 A9.19 Average Number of Task Managers for Active and Completed Non-Forest-Sector Projects with Forest Component of Greater than 75 Percent, 1992­99 A-76 APPENDIX CONTENTS A-v Acronyms and Abbreviations AFR Africa Region GNP Gross national product CAS Country Assistance Strategy ha Hectare CBD United Nations Framework Convention on HIPC Heavily indebted poor countries Biological Diversity IBRD International Bank for Reconstruction and CDF Comprehensive Development Framework Development CDM Clean Development Mechanism ICRAF International Centre for Research in Agroforestry CEO Chief executive officer IDA International Development Association CEPF Critical Ecosystem Partnership Fund IFC International Finance Corporation CFM Collaborative forest management IFF Intergovernmental Forum on Forests CGIAR Consultative Group on International Agricultural IIED International Institute for Environment and Research Development CI Conservation International IMF International Monetary Fund CIFOR Center for International Forest Research IPF Intergovernmental Panel on Forests CODE Committee on Development Effectiveness ITFF Interagency Task Force on Forests CPF Collaborative Partnership on Forests ITTO International Tropical Timber Organization CTF Conservation Trust Fund IUCN The World Conservation Union EAG External advisory group IUFRO International Union of Forest Research EAP East Asia and Pacific Region Organizations ECA Europe and Central Asia Region JFM Joint forest management ECOSOC United Nations Economic and Social Council LAC Latin America and Caribbean Region ENFP Enhanced national forest program MDGs Millennium Development Goals ESSD Environmentally and Socially Sustainable MIGA Multilateral Investment Guarantee Agency Development Vice Presidency (or Network) MENA Middle East and North Africa Region ESW Economic and sector work NGO Nongovernmental organization EU European Union NFP National forest program FAO United Nations Food and Agriculture Organization NTFPs Nontimber forest products FPIRS Forest Policy Implementation Review and Strategy OD Operational Directive FSC Forest Stewardship Council OECD Organisation for Economic FSSP Forest sector strategy paper Co-operation and Development GDP Gross domestic product OED Operations Evaluation Department GEF Global Environment Facility OP Operational Policy A-vi © 2004 The International Bank for Reconstruction and Development/The World Bank OPCS Operations Policy and Country Services UNEP United Nations Environment Programme PCF Prototype Carbon Fund UNFF United Nations Forum on Forests PROFOR Program on Forests UNFCCC United Nations Framework Convention on Climate PRSP Poverty reduction strategy paper Change SAR South Asia Region UNGASS United Nations General Assembly Special Session for Review and Appraisal of Agenda 21 SFM Sustainable forest management WBI World Bank Institute TAG Technical advisory group WRI World Resources Institute TNC The Nature Conservancy WWF World Wide Fund for Nature/World Wildlife Fund UN United Nations UNDP United Nations Development Programme ACRONYMS AND ABBREVIATIONS A-vii A P P E N D I X O N E Management Responses to Operations Evaluation Department Recommendations on Forest Strategy and Policy Table OED recommendation FY03 FY03­04 FY04­05 FY05­06 1. Mobilize concessional Baseline donor Mobilize PROFOR; Measure overall increases Measure increases in resources investments in forests UNFF/CPF cooperative in donor financing donor cofinancing with and cofinancing with activities Bank Bank 2. Develop partnerships Establish PROFOR; Initiate new sector Initiate new sector NFP partnership; private (global and country review/mainstream analyses with partners in analyses with partners in sector cofinancing level) Alliance; develop CEO three countries four countries; Alliance Forum coverage program 3. Broaden focus of OP Complete revision of OP Monitor design and (as for FY03­04) (as for FY03­04) beyond TMF 4.36 to encompass all implementation of new forests; present to Board investments 4. Incorporate forest With PROFOR, begin to In-country analysis of In-country analysis of In-country analysis of issues and action into assess 15 countries as three countries from four countries from two countries from cross-sectoral and initial candidates for selected group for selected group for selected group for macro Bank programs; enhanced forest ESW (to CAS/PRSP input, CAS/PRSP input, CAS/PRSP input, support protection of be focused on CAS, PRSP, inclusion into cross- inclusion into cross- inclusion into cross- global forest values cross-sector activities), sector programs; early sector programs; early sector programs; early utilizing global public investment identification investment identification investment identification goods funds/TORs 5. Address illegal logging Staff training on inclusion Apply LECMP in three Apply LECMP in two via governance and of independent countries, plus continue new countries, plus enforcement inspection provisions of with two countries from integrate three existing revised OP in Bank previous year. programs into Bank sector investments; programs (investment Africa Forest Law activities under Law project, adjustment Enforcement Ministerial Enforcement and operation) Conference Concession Management Program (LECMP) 6. Address livelihood and Apply and monitor Apply and monitor Apply and monitor Apply and monitor employment needs of specific poverty measures poor identified in FSSP 7. Align resources with Sections 3 and 4 of this objectives business strategy apply OED, Operations Evaluation Department; OP, Operational Policy; TMF, tropical moist forests; PROFOR, Program on Forests; ESW, economic and sector work; CAS, Country Assistance Strategy; PRSP, poverty reduction strategy paper; TOR, terms of reference; FSSP, forest sector strategy paper; UNFF, United Nations Forum on Forests; CPF, Collaborative Partnership on Forests; LECMP, Law Enforcement and Concession Management Program; NFP, national forest program. © 2004 The International Bank for Reconstruction and Development/The World Bank A-1 A P P E N D I X T WO Forests and Poverty Reduction WORLD BANK'S COMMITMENT TO POVERTY Bank's Rural Development Strategy starts from the premise that REDUCTION sustainable rural development can make a powerful contribution to advancing four critical goals: Poverty alleviation has long been the World Bank's primary mis- sion. While the 20th century saw great progress in reducing 1. Poverty reduction. poverty, poverty remains a global problem of gigantic proportions. 2. Widely shared growth. Of the world's 6 billion people, 2.8 billion, or almost 50 percent, 3. Household, national, and global food security. live on less than US$2 a day. Of these, 1.2 billion live on less than 4. Sustainable natural resource management in which local people US$1 a day. Six of every 100 infants do not live to see their first sustainably manage soils, water, forests, grasslands, and fisheries. birthday, and 8 of every 100 do not survive to their fifth birthday. The poor lack political power and voice and are extremely vulner- The new Bank Forest Strategy can make a major contribution to able to illnesses, economic dislocation, civil and personal violence, achieving these objectives. To do so, the strategy must approach and natural disasters. forests from a perspective broader than solely income generation. The Bank's World Development Report 2000/2001: Attacking Forests must be placed in the context of better economic manage- Poverty argues that major reductions are possible in all of these ment, more direct governance by those dependent on forests, a dimensions of poverty. The report maintains that the interaction of thriving responsible business sector, and a sustainable livelihoods markets, state institutions, and civil society can harness the forces approach in which improved policy, more responsive institutions, of economic integration and technological and political change to and reduced vulnerability become integral to sustainably reducing serve the interests of poor people and increase their share of soci- poverty. As will be shown below, the forest-dependent poor must ety's prosperity. Attacking Poverty suggests a special focus on three be part of any rural strategy since dependency on forests is so complementary areas: broad and integral to rural life. 1. Promoting economic opportunities for poor people through equitable growth, better access to markets, and expanded assets. FORESTS AND POVERTY REDUCTION 2. Facilitating empowerment by making state institutions more responsive to poor people and removing social barriers that Many of the world's poor depend on forests for their livelihoods. exclude women, ethnic and racial groups, and the socially dis- These forests can play a more significant role in reducing poverty advantaged. and providing increased security for rural people. 3. Enhancing security by preventing and managing economywide Eighty percent of the world's extreme poor--those living on shocks and providing mechanisms to reduce the sources of vul- US$1 or less a day, or approximately 1.2 billion people--depend to nerability that poor people face. some extent on forests (including agroforests and tree crops) for their income or livelihood, including maintenance of soil fertility However, individual actions by countries, the private sector, and and water values. Approximately the same number depend largely communities will not be enough. To induce maximum benefits for on fuelwood for their cooking and heat. One billion people depend poor people throughout the world, global actions are needed to almost entirely on medicines derived from forest plants for their complement national and local initiatives. medicinal needs. An estimated 60 million people depend on down- Despite urbanization, nearly three-quarters of the world's poor stream benefits from forest industries such as sawmills, carpentry, will continue to live in rural areas well into the 21st century. The and handicrafts. Environmental services such as watershed and soil © 2004 The International Bank for Reconstruction and Development/The World Bank A-3 BOX A2.1 Sustainable Livelihoods Analysis Increasingly, national governments and aid agencies are adopting a The poor lack financial resources (cash or savings) but often have an sustainable livelihoods-based approach as a framework for analyzing array of other strengths such as human capital (health and labor), the relationships among forests, people, and poverty alleviation. social capital (family, friends, and patrons), and natural capital Adopting a sustainable livelihoods-based approach will improve the (access to common property resources) that they combine to make targeting of potential entry points for Bank policy intervention. their living. The livelihoods framework can be used as a checklist to A livelihoods approach is simply a way to organize thinking about see how these assets are--or could be--accumulated, transferred, and development planning and implementation. It can be a useful tool for substituted; how they are influenced by shocks and stresses; and what understanding the real blockages that hold people below the poverty changes in policies, institutions, and processes will bring greater ben- line and the opportunities that exist to help them rise out of poverty. efits to the poor. Key: H = Human Capital, N = Natural Capital, S = Social Capital, P = Physical Capital, F = Financial Capital Livelihood Assets Vulnerability H Policies, Livelihood Context Institutions, and Outcomes S N Influence Processes · Shocks and access In · More income or · Trends Structures der · Increased well- · Seasonality P F · Levels of being Livelihood government to · Reduced Strategies · Private achie vulnerability sector · Laws · Improved food ve · Policies security · Culture · More sustainable · Institutions use of natural Processes resource base Sources: Bird 2000; Department for International Development 2000. protection indirectly serve a countless number of rural poor. It is with the policy implications of enhancing the availability of these clear that the United Nations Millenium Development Goals inputs. Clearly, forests provide a broad range of services and are (MDG) global target of reducing poverty by half by the year 2015 impacted by policies and interventions outside the forest sector. cannot be met without significantly addressing the needs, and pro- tecting the rights, of forest-dependent peoples. In fact, the number of extreme poor could increase significantly if forests are not well OPTIONS IN USING FORESTS managed and new forest resources are not developed. FOR POVERTY ALLEVIATION A number of development themes in forests coexist and, in some cases, conflict. These themes include promoting economic Forests can be used to help alleviate poverty, but views differ on how opportunities, facilitating empowerment, and enhancing security this should be done and how poverty should be defined. In the past, (box A2.1). To contribute to poverty reduction, the Bank's Forest poverty was defined as lack of adequate food, income, and other Strategy, along with the strategies of its partners, needs to take into basic needs required to maintain an adequate standard of living. account these potential conflicts and opportunities, the vulnerabil- More recently, the definition of poverty has been broadened to ities of the poor, and the policies and institutions that most affect include lack of assets (natural, physical, financial, human, and them. Different categories of the poor--for example, indigenous social) needed to generate an adequate and sustainable livelihood peoples, forest-dependent poor, and small agroforestry farmers-- (box A2.1). This broader definition recognizes that poverty can have distinct but related challenges and issues. Table A2.1 shows limit the ability of individuals or populations to withstand major the livelihood requirements for forest-dependent populations, stresses and shocks and can compromise the potential for long-term A-4 SUSTAINING FORESTS A DEVELOPMENT STRATEGY Table A2.1 Forest Outputs and Rural Livelihoods Livelihood requirement Relevant forest outputs Comment Subsistence goods Supplement inputs of fuel, food, and medicinal Likely to decline in importance as incomes rise plant products from the farm system; often and supplies come increasingly from purchased important in filling seasonal and other food inputs, or as increasing labor shortages/costs gaps. Forest foods enhance palatability of staple impede gathering activities or divert subsistence diets, provide vitamins and proteins. supplies to income-generating outlets. Farm inputs On-farm trees provide shade, windbreaks, and Trees can become increasingly important as a contour vegetation.Trees/forests also provide low-capital means to combat declining site low-cost soil nutrient recycling and mulch productivity and a low-labor means to keep arboreal fodder and forage, fiber baskets for land in productive use, for example, home storing agricultural products, wooden ploughs, gardens.With increased capital availability and and other farm implements. access to purchased products, trees are likely to be replaced by other materials. Income Many products characterized by easy access to With increasing commercialization of rural use the resource and low capital and skill entry patterns, some low-input, low-return activities thresholds; mainly low-return activities; can grow; others are inferior goods and decline. producing for local markets engaged in part Some are displaced by substitutes; others time by rural households, often to fill particular become unprofitable and are abandoned as income gaps or needs (although they can be labor costs rise. Higher-return activities serving major sources of employment and income for growing demand are more likely to prosper, forest-dwelling populations); generally very particularly those serving urban as well as rural small, usually household based (with heavy markets. As this happens, an increasing involvement of women). Some forest products proportion of the processing and trading provide the basis for more full-time and higher- activity is likely to become centered in small return activities; usually associated with higher rural and urban locations. Gathered industrial skill and capital entry thresholds, and urban as raw materials tend to be displaced by well as rural markets. domesticated supplies or synthetic substitutes. Reduced vulnerability Can be important in diversifying the farm The "buffer" role of forests and trees can household economy (counter-seasonal sources continue to be important well into the of food, fodder, income); also important in economic growth process. However, it is likely providing a reserve that can be used for to decline in importance as government relief subsistence and income generation in times of programs become more effective, or new hardship (crop failure, drought) or to meet agricultural crops, or access to remittance special needs (school fees, weddings). incomes, make it less necessary to fall back on forest resources. Source: Adapted from FAO 2000. income and economic growth. This definition can be used to iden- a limited market. Collective control and management, which is at tify ways in which forests and forest products can help to alleviate the center of many community forest management systems, can poverty in different situations and how well forest-based solutions be threatened by externally initiated trends toward liberalization compare with alternative courses of action. and privatization even when these processes are intended to operate primarily to benefit the poor. Another area of potential conflict is that between state owner- Differentiating the Poor ship of forests and the interests of communal and smallholder pro- Poverty alleviation is a dynamic process. Among the poor are ducers, who frequently are poor. These groups are often excluded, groups who depend heavily on forests for their subsistence and either by policy or through failures in sector governance, from ade- livelihoods. Others, who also live in poverty, have a higher level of quate participation in the commercial use of forests. industrial or artisanal skills and access to markets, so their forest Some conservation groups and policymakers assume that a needs are different. The interests of these two groups can be convergence exists between the interests of the poor, especially potentially in conflict. Increasing the emphasis on building the those heavily dependent on forests for their livelihood, and the poor's participation in market-based use of the forest can exclude protection and preservation of forests for biodiversity and other groups who need to use the forests communally for subsistence. global values. In most cases, the poor will share an interest in main- Assisting those with some skills and access to markets can over- taining an environment that will enable them to maintain their supply those markets, particularly nontimber forest products livelihoods and help them solve major constraints, shocks, and (NTFP) markets, in cases in which they also are supplied by other problems that arise. This interest can lead to major changes groups closer to traditional subsistence patterns. It is essential, to the existing forest landscape that may stabilize production of therefore, to ensure that market opportunities are assessed realis- desired outputs, but are not necessarily conducive to the protection tically and that one group of the poor is not set against another in of all forest values. Where possible, the Bank and its partners need FORESTS AND POVERTY REDUCTION A-5 to focus on involving the poor in production and benefit sharing market liberalization in the forest and other industrial sectors. outside Protected Areas as well as developing ways to finance the This mitigation will be carried out through a combination of participation of the poor in forest protection. ESW, policy dialogue, and policy-based investment programs. For example, these issues encompass expansion of commercial-scale forest and agribusiness operations, mining, and oil exploration operations that may lead to the appropriation or privatization of PROTECTING FOREST ACCESS BY THE POOREST forest resources that the very poor need to continue to be able to OF THE POOR AND INDIGENOUS PEOPLES access as common property. Discourage new highway construction that could negatively Approximately one-tenth of the world's estimated 600 million impact the livelihoods and traditional ways of life of indigenous indigenous peoples are forest dwellers, and they are among the tribal communities. This deterrence will be carried out through poorest, most vulnerable, and powerless groups in developing policy dialogue and Bank involvement in the development of countries. Another 10 to 20 percent of indigenous peoples live near national transportation sector policies. forests and depend on forest resources for a significant part of their Discourage privatization or state acquisition of common prop- incomes. Their tenure rights, in forest areas in particular, tend to be erty resources when these will harm forest-dwelling indigenous insecure. Forest laws often expressly deny the rights of indigenous peoples. The Bank also will discourage badly planned agricul- peoples in forests, deny or limit their rights to wood, and curtail tural settlement schemes and subsidies to agribusiness compa- their usufruct rights to NTFPs. Even their access and residence nies that lead to clearing forests on which the poor depend. In rights may be denied. In some countries, government agencies its involvement in country-level transportation sector planning, force, or condone, the involuntary resettlement of forest-dwelling the Bank will discourage highways and other infrastructure indigenous peoples from forest reserves. It is clear that policy, insti- investments that would expose indigenous peoples to unwanted tutional, and legal reforms that establish and protect these rights entry by others that threatens forest ecosystems of unique and are needed in many countries. high conservation value. The primary concern of most of those who permanently live within forests, particularly indigenous tribal peoples, is to retain access to those forests, especially to the NTFPs that meet essential subsistence needs. For many, rather than as a source of income COLLABORATIVE FOREST MANAGEMENT generation, the principal importance of forest products is their contribution to diversified coping strategies and their function as a Another major element in the Bank strategy to address poverty buffer against hard times. The extensive use of hundreds of non- through its forests engagement is based on CFM, defined as a work- traditional forest products by the poor is a function of their ing partnership among the key stakeholders in the management of poverty and the economic constraints they face. As noted in the forests and tree resources. Key stakeholders include local forest users section above on Options in Using Forests in Poverty Alleviation and state forest departments as well as other actors such as NGOs and table A2.1, well-documented evidence by FAO and other agen- and the private sector. CFM seeks to link SFM with the promotion cies indicates that the characteristics of these products that make of social justice. The central feature of CFM is control over the man- them attractive to the poor make them less attractive as people agement, not just the use, of forest land and resources, with a devo- become less poor. Constraints to the commercialization of NTFPs lution of power to local forest users. From a social perspective, while by forest-dwelling poor people include high transaction costs, much is known about identifying users and defining their rights, declining competitiveness as labor costs rise, and increasing expo- this approach has not yet been widely implemented. sure to competition from alternative products. CFM can have relatively high initial transaction costs but, once Accordingly, the primary focus of Bank support for many forest it is established, can be relatively inexpensive to implement. Plan- dwellers will be on alleviating poverty and ensuring continued ning the development of employment and income-generation access to subsistence supplies. Specific measures through which the possibilities for local people on the basis of sustainable, productive Bank will implement this strategy include: forest management is complex, requiring knowledge of forest product management, the private sector, and local organization. Implement policies spelled out in OP 4.20, which addresses Especially important is the balance between responsibilities and protecting indigenous peoples' rights. benefits, and marketing potential and processes. Emphasis has Within the framework of OP 4.20, give special emphasis to shifted broadly from tree planting to natural forest management support for policy dialogue aimed at legislative reforms that will and to developing a range of participatory techniques to carry this protect the forest land ownership and access rights of the poor- out. The tendency in many past programs has been to place too est of the poor. much emphasis on the local-level organization of CFM rather than To support CFM and sustainable forest harvesting and SFM on the development of strong local and national institutional programs, incorporate measures aimed at reducing the risk of frameworks. Nevertheless, national policy and legislative reform in appropriation of NTFPs on which the poorest of the poor support of CFM, accompanied by institutional strengthening, is depend by more powerful members of the community or out- taking place in a number of countries in Africa, East and South side commercial interests. Asia, Latin America, and a number of countries in transition. Tackle difficult issues, such as how to mitigate the undesirable Policy development is likely to be most effective when based on impacts on forest-dwelling poor societies of globalization and a consultative, broad-based process, drawing heavily from practical A-6 SUSTAINING FORESTS A DEVELOPMENT STRATEGY BOX A2.2 Gender in Collaborative Forest Management In most developing counties, access to natural resources is defined by In a project in Nepal, men met with project planners and gender, with roles and access depending on culture and context. requested hardwood seedlings. When 3,000 seedlings were delivered, Women often are responsible for maintaining fruit trees and collect- all the seedlings died because, in that village, women alone care for ing fuelwood, aerial fodder, and animal bedding, while men are inter- seedlings and they were not informed of the times when the seedlings ested in polewood and timber. In some areas, cutting and planting were being delivered. The women were completely occupied with trees indicate ownership of land, so women are not allowed to engage other tasks during this particular agricultural period. Later, a meeting in such activities. However, for every situation there is a counter with women resulted in several types of seedlings requested by both example in which men collect fuelwood and women wish to be men and women being delivered at a time when women could care involved in timber production and may even own the land. It is quite for them. A timely analysis of the requirements of all groups, includ- important that, in each project area, gender analysis provide simple ing women, could have saved time, money, and seedlings. information as to who uses and has responsibility for which resource Source: World Bank research. and who has or needs access to which products. experience on the ground. Overall, CFM appears to have the great- User Group­Based Approaches est potential where the state and most local people recognize that User groups are formed when local people--the primary users and the status quo is not acceptable and change is needed. Women are traders of forest products--collectively decide on how forest integral to the success of CFM, because they often are responsible resources will be managed and used. It is usually difficult for user for maintaining fruit and fodder trees and collecting fuelwood. groups to effectively control and manage forests without agree- However, often the voices of women are not taken into considera- ment on this use from other community members and without tion in CFM. governmental assistance and assurance of long-term benefits. An overriding issue highlighted in the World Bank 2000/2001 Nepal has demonstrated good progress with this approach in the Development Report is that almost everywhere the voices of women middle hills, where trees are a traditional part of the livelihood are inadequately heard or acted on. Prevailing cultural attitudes systems (box A2.3). Nevertheless, even Nepal has not been able to and forms of local governance mean that decisions are often made develop comparable systems in the lowland Terai, with their more by men, and therefore frequently reflect the views and interests of diverse populations and market-oriented, farm-based livelihood only the male members of households. CFM offers an opportunity systems. It is typical to find conflicts among multiple stakeholders to change this pattern since it can encourage the participation of with different interests in local forest resources. women in local user group institutions. However, their participa- The Bank will give special attention to supporting user groups tion does not necessarily result in their being able to effectively based on the underlying principle that user groups should be given voice their concerns where custom and practice discourage women legal authority to harvest and manage forest resources--even when from engaging in the work of such communal institutions. As a the land remains with the state. The Bank will support policies and result, the needs and constraints that women face with respect to monitoring that assist in preventing domination of the user groups access to forest products and control over tree resources are all too of one product over the needs of other users, control by local elites, often neglected (box A2.2). or politicization of the user group system. The Bank will support policy and legislative reforms needed to implement CFM, giving emphasis to tailoring designs to local needs. The Bank will promote CFM as a means of linking SFM to Joint Forest Management the promotion of social justice and poverty alleviation by ensuring that control over resources is truly collaborative and emphasizes Joint or co-management arrangements with the state have evolved the link between sustainable management and livelihood opportu- over time, and wide variations exist. Common characteristics of nities. The Bank will support programs aimed at empowering JFM include: women's involvement in CFM. Bank support for CFM activities will focus on countries in which it appears that key stakeholders The focus is on land that is intended to be kept under forest cover. have at least a preliminary interest in the approach, providing a The forest is intended for productive management. basis on which to build. Local people have specific rights over forest management deci- Over the years, different forms of CFM have been developed in sions and harvesting of products. different countries. Two of these approaches, user group­based Working partnerships are based on agreements between the approaches and joint forest management (JFM), are described below. local community and the forest authority. FORESTS AND POVERTY REDUCTION A-7 BOX A2.3 Hill Community Forestry in Nepal In 1978 Nepal's government passed legislation transferring substan- Ownership of the land remains with the state, but trees legally belong tial amounts of public forest land in the hilly areas to local commu- to user groups. However, the state reserves the right to take back com- nities. Local management of both publicly and locally owned forests munity forests if the terms and conditions of the handover are not was to be achieved through the panchayats (villages) under agreed met. Management control rests solely with the users of the resource, forest management plans. who develop their own operational plans, set the prices at which the However, the panchayats usually proved to be unsuitable bodies to produce is sold, and determine how surplus income is spent. By June undertake local forest management, because the areas that they admin- 1997, 6,000 user groups were managing 450,000 ha, with another istered seldom coincided with user group boundaries. Although forest 6,000 groups waiting for formal registration. management committees were formed, they rarely functioned as repre- Issues still arise, both within user groups, among them, and with sentative discussion and decisionmaking bodies. Management plans the forest department. Securing access to a forest area from officials designed by the forest department to increase productivity tended to be (who have the power to withdraw the resource) as it becomes increas- technically unacceptable and not understandable to villagers, while ingly valuable is always a concern of the users. Other concerns relate cumbersome bureaucratic procedures discouraged local involvement. to domination by local elites, politicization of the user group system, The system was revised progressively to incorporate features of the and pressures from the forest department for user groups to focus on indigenous control and management systems traditionally practiced by tree planting rather than harvesting. Nevertheless, the Nepal experi- many communities in the middle hill areas. Typically, these systems ence has been encouraging. Recent studies have shown that the con- were based on user groups, rather than whole communities. The user dition of the managed forests in Nepal has often improved with active groups established management rules that were enforced through the user group management. use of forest watchers and included other social sanctions. Sources: Hobley, Campbell, and Bhatia 1996; Gilmour and Fisher 1991; Nepal's 1993 Forest Act formalized this focus on user groups, Shrestha, Kafle, and Britt 1997. progressively devolving more authority and responsibility to them. When the state retains a role, it is able to act as an adjudicator in comanagement and support the process of institutional and policy disputes among stakeholders and can provide technical, financial, change needed to ensure their sustainability. and institution-building support to local bodies. Governments favor this approach, because it enables them to continue to exercise Implementation Weaknesses a regulatory role, which is important when environmental exter- nalities are associated with the use of forests or forest lands. This Bank experiences with collaborative management generally have approach also allows governments to retain control over resources been reported as successful and as having resulted in a greater degree that have direct value to the state--such as timber and forest land. of involvement of rural users. However, collaborative management Box A2.4 describes an important experience with comanagement has not always benefited the poorest of the poor. Some earlier inter- in India. ventions were based on insufficient understanding of the circum- A common weakness in co-management approaches has been stances under which collective management is appropriate and the that the ability to control and manage at the community level realities of the rural populations involved. Experience has exposed erodes or breaks down, or that not all stakeholders with claims serious problems in the ways in which governments have pursued on a resource are represented. The danger then is that devolution devolution of responsibilities for forest management. Accordingly, of full responsibilities and powers to a local body will not result in the Bank's strategy will seek to address some of the inherent weak- a viable or equitable solution if local elites or outsiders capture nesses in current approaches to CFM through ESW and policy dia- effective control of the forest resource. Another frequent con- logue. Some of these weaknesses include the following: founding factor is a lack of policies, laws, and regulations to facili- tate co-management arrangements. Conflicts can be expected to Failure to transfer effective authority. Participation has been arise if it is not clear how co-management is to operate and who primarily a donor objective not always shared by governments of will share in the benefits of this arrangement. Forest departments recipient states that lack incentive to stimulate the rural sector. Cre- that are in charge of the forest areas under comanagement ating enabling environments in which policies and programs truly often are still operating under centralized control. To overcome empower local people to make decisions, to set objectives, and to these weaknesses, forest departments need to be reformed, and have a genuine role in decisionmaking has been difficult. Govern- co-management arrangements need to become an accepted and ments have pursued devolution in forestry when they have seen it as significant part of the business of the reformed forest departments. a less costly strategy for pursuing SFM in periods when central bud- Small or pilot co-management programs do not provide sufficient gets are shrinking. This pattern is reflected in the large number of incentive to bring about this change. The World Bank will joint management programs that insert a significant forest depart- assist governments in scaling up successful programs of forestry ment presence into the arrangements for collaborative management. A-8 SUSTAINING FORESTS A DEVELOPMENT STRATEGY BOX A2.4 Joint Forest Management in India India's JFM program seeks to enhance environmental stability and border on extensive tracts of degraded forest land, have a relatively benefits to local people. Principal features include setting up village high forest-to-household ratio, contain ethnically homogeneous protection committees, establishing and monitoring management communities that possess local forestry knowledge; and accrue bene- plans by the forest department, and confining local use to grass fits from minor forest products at a relatively early stage. Joint man- and NTFPs. Potentially, this arrangement could also direct a share agement has also been successful in the mangrove forest areas in the of the income from the timber sold by the forest department to south of the state, due to the protection against flooding and erosion local people. resulting from improved management. The results of applying JFM have varied considerably. There have Some of the more frequent problems relate to difficulties in pur- been tangible results in southwest Bengal, where JFM was first applied suing the dual objectives of achieving SFM and enhancing local ben- in the 1970s. This area had suffered from overexploitation that had led efits. Conservation usually means at least temporarily restricting or to depletion of subsistence and income flows and had lowered agricul- prohibiting gathering or harvesting activities that are important to tural productivity. Positive results of JFM have included an increase in some of the poor. The subsequent changes in the composition of pro- fuelwood availability in this area, significant improvement in the local tected forests can have different impacts on different users. Protected environment (reduced erosion and improved water supplies), and a Area management that meets the dual objectives of conservation and reduction in seasonal out-migration, suggesting that incomes from development is a difficult model to implement unless ways are found employment and from sale of NTFPs had increased. These changes to channel the returns from Protected Area management to those appear to have benefited the poor proportionally more, because the who carry the costs. Clearly, management agencies must give priority poor have been able to invest more labor in forest exploitation. to meeting the needs of forest users. As in the case of successful independent management of common Source: World Bank data. property resources, co-management has worked best in villages that The result has often been "participation" that is sometimes Ineffective and inequitable local institutions. Implicit in the pur- more apparent than real. "Participatory" mechanisms emerge that suit of participatory community forestry has been the assumption enable forest departments to create local partners that become that the conditions of homogeneous communities that in the past their proxies, rather than representatives of local users able to chal- often favored collective management still exist, or can be re-created. lenge their actions when necessary. People may acquiesce in such In many situations, the reality is that communities that are inter- circumstances because they have no choice to do otherwise, but nally differentiated by wealth, power, class, gender, and ethnic iden- they are not empowered by them. tity are unlikely to share the same view of how the forest should be In addition, too much decentralization within forestry is managed and used. Among the poor, there can be conflicting inter- effected by decree, administrative order, or permit rather than ests between pastoral and settled users, between the landed and legislation. The rights and authority provided in these ways can be landless, and according to gender. withdrawn or, if challenged, are unlikely to be upheld in law. This The poor need continued access to a common pool biomass outcome further weakens the position of rural people in their deal- resource to help sustain predominantly subsistence-based coping ings with the state. strategies. Increasingly, this need of the poor can conflict with the interests of the better off and with those of outsiders. These latter Restrictions on rights granted to the poor. Another limitation groups may wish to privatize forest output flows in order to bene- results from the widespread practice of transferring only limited fit from the opportunities that increasing commercialization of rights, with the notable widespread exclusion of rights over timber forest products present, or may seek to privatize the land and put and other components of commercial value. Related to this is the it to nonforest uses. practice of restricting participatory forestry to degraded or poorer Frequently, local institutions have proved unable to cope with the forest areas. It has proved difficult to devise more productive forest complexities arising from conflicting claims on the resource. The management systems that avoid disadvantaging the poorest. A case result is likely to be that control over access to the forest resource is in point is that of fuelwood head loaders who have had to give up captured by the more powerful within the community, to the detri- their previous gathering activities but do not share proportionately ment of the poor. This result is more likely when the process of devo- in the new benefits. lution transfers authority to local leadership who pursue agendas that Revenue-sharing agreements, taxation, and regulations requir- focus on their own rather than the community's interests. Devolution ing local producers to sell their produce through state marketing may also transfer authority to local bodies that actually are bodies similarly limit the benefits available to the poor and reduce appointees or extensions of the central government and consequently their incentives to participate in SFM. Access to potential increases more responsive to the latter than to the people they represent. in benefit flows is often limited by regulatory constraints associated To summarize, securing the rights of access of the poor to forest with conservation of the resource. product resources in fractured and conflict-ridden communities has FORESTS AND POVERTY REDUCTION A-9 BOX A2.5 Participatory Forest Land-Use Planning in Bolivia In its 1992 Environmental Law, the Bolivian congress mandated government agencies, colonists, and logging and petroleum compa- that the government formulate national, departmental, and munici- nies. The effort brought together much of the available information pal land-use plans as part of a strategy to decentralize management of on land use, provided a forum for negotiation among different actors, Bolivia's very large forest resources. An implementation decree stated and led to a land-use proposal and implementation plan. Whether it that municipal government should formulate municipal land-use will succeed is still unclear, but most parties involved agree that this plans taking into account resource tenure, other socioeconomic attempt to clarify land ownership and management objectives has considerations, current and potential land use, and existing infra- considerably improved the earlier situation. structure. A regional development plan for Sara and Iichila Provinces Source: "Local Government and Biodiversity Conservation" Biodiversity focused on the northern portions of these two municipalities, Support Program 2000. because this area had multiple long-standing conflicts among proved problematic. Recognition is growing that different ongoing programs, the Bank needs to avoid exaggerated expecta- approaches are needed to address these institutional issues, and tions. Just as there is a danger in trying to achieve too much too understanding is growing concerning the limitations of assuming quickly, there is also a risk of overloading programs directed at alle- that the "community" is always the best vehicle for empowering the viating poverty through forestry. It is important for the Bank to poor. However, at present, it is not clear under which circumstances recognize the limits to how much change can be achieved within the various alternatives that have been put forward are likely to be the framework of forest-oriented programs. more effective. Therefore, the Bank will support continuing research on these issues and through its country assistance programs seek opportunities to test and monitor alternative approaches. ISSUES IN LINKING POVERTY REDUCTION TO LAND-USE AND FOREST MANAGEMENT Shares of the state and the rural poor in forest benefits. One of the more fundamental policy issues that many governments need One of the major issues facing natural forests and the poor is that, to address is their competition with smallholder and community without adequate stewardship and oversight, many natural forest producers for shares of the economic benefits from forest outputs. areas that potentially are of long-term benefit to the poor will not Governments impose taxes and other charges and costs on these survive the pressure of the many interest groups that are compet- outputs. In addition, while providing support to local producers ing for the forest assets. Participatory mechanisms for forest land- through one part of the forestry assistance program, governments use planning need to be integrated in NFPs. These mechanisms are constrain and compete with them through the industrial forestry essential to create opportunities for all stakeholders to state their component of forest department activities. In the short term, the views and to provide a protective legislative framework for local scope for improving the situation probably lies mainly in removing communities to preserve key watersheds, the integrity of forest or relaxing regulatory provisions that reinforce the structural and ecosystems, and other forms of use. scale advantages that the state possesses as a producer of many for- As a basis for clarifying forest land-tenure relationships and for est products. The relationship between forest departments and fostering local ownership and management of forest resources, the small local producers could also benefit from separating the regu- Bank proposes to adopt a landscape-based approach. This latory functions of forest departments from involvement in forest approach may include agricultural land, protected or conserved management and delivery of support services. areas, watersheds, production forests, plantations, common graz- A logical longer-term solution would be to phase out state ing land, and other land uses. production in markets in which smallholder production has a Historically, such zoning approaches have run into problems, comparative advantage. This phase-out also would contribute to largely because of unfortunate experiences with top-down plan- meeting a more fundamental concern that has been raised: that the ning and enforcement. However, as illustrated by some of the more potential for the rural poor to benefit will continue to be limited so successful CFM experiences in India and elsewhere, a participatory long as they are unable to participate in more profitable and and consultative approach can be usefully adopted to designate dynamic production activities. areas for various land uses. Changes in participatory forestry sometimes have been pro- moted by the Bank and other donors ahead of the capacity of Participatory Land-Use Planning recipient governments and forest departments to implement these changes. Where this is so, it will be desirable to pay more attention A good example of participatory forest land-use planning comes to consolidation, moving from promotion to critical analysis, with from Bolivia (box A2.5). There the government is decentralizing more consideration of how best to address distributional weak- forest ownership to provide greater opportunities for municipali- nesses and problems that have arisen. In scaling up support for ties and local communities to become more directly involved in A-10 SUSTAINING FORESTS A DEVELOPMENT STRATEGY decisions about forest land use. The local communities that have much to conserve, since conservation cannot be separated from the most to gain from forest land-use zoning backed up by a leg- social and economic development; nor should it be separated from islative framework that protects their interests are the poorest of the broader management of natural forests for sustainable produc- the poor. Ongoing land-tenure-related conflict resolution between tion and other purposes. local communities and private industrial interests would necessar- ily be part of such an approach. A major weakness of many earlier Timber Production Areas in Natural Forests land-use planning initiatives was the lack of analytical data to assess the socioeconomic and environmental tradeoffs among There is growing recognition that good forest management is crit- alternative land-use options. Such analysis is an area of research ical to sustainable development, particularly in locations in which that the Bank could usefully support. the local or national economy is based directly on the use of forest Outside closed forests, much research has gone into determining resources. Given the extent of the resource in many countries, few the relative merits and drawbacks of privatizing land ownership governments or private sector stakeholders accept that logging and the implications of privatization for effective management of should be banned in all accessible forests. Therefore, the question open woodlands and on-farm tree resources. It is well established is not whether forest operations will occur but whether they will be that patterns of individual private agricultural land ownership done well or poorly. increase incentives for small farmers to plant trees and manage on- The priority to be applied in the larger portion of the world's farm tree resources. On the other hand, there also have been many accessible natural forests is to combine conservation and produc- negative experiences with privatization of common property lands tion goals in the same area. Such an approach needs to be based on that have deprived the poorest of the poor access to essential consensus. Whenever ownership and tenure arrangements permit, fodder and fuelwood. planning and management should be collaborative. While ecological and silvicultural knowledge is far from com- Deforestation plete, there is sufficient knowledge and proven operational experi- ence to manage natural forests, including tropical humid forests, in For many years, the international debate on forests was domi- ways that will maintain forest ecosystems with high levels of social nated by concerns about tropical deforestation, and it remains an and environmental values. The tragedy, however, is that even this issue of great Bank concern. Nevertheless, the Bank's under- available knowledge is frequently not put in practice because of a standing of forest-agriculture land relationships has evolved and lack of interest by operators, lack of skills of various stakeholders, is more flexible than at the time that its 1991 Forest Policy inefficient monitoring by forest services, and a lack of appropriate was published. incentives. Larger economic and governance forces are at the root Not all deforestation is undesirable. Especially when poverty is of these problems. the focus, social and economic pressures make it inevitable that The fact that most forest operations in the tropics are not substantial areas of what is still natural forest will be converted to managed sustainably, even though the techniques for sustainable agriculture and other uses. However, deforestation should be dis- management are known, has led some analysts and government couraged when it is not efficient from an economic viewpoint; it is officials to conclude that such operations cannot be sustainable at nonsustainable because it threatens key biodiversity areas and all. However, at all levels, analyses of existing costs, prices, and broader environmental stability; and it leads to social inequities incentives fail to account for the distortions caused by the rent- and conflicts. seeking behavior of forest operators. Such calculations rarely factor The decisions on where and what to convert and for whose ben- in externalities or the potential impacts on forest value of extend- efit are some of the most crucial in land-use planning. Yet, this ing ownership and tenure to all stakeholders. The calculations decision often is made ad hoc, without effective and transparent virtually never consider the option values of retaining forests or the participatory mechanisms in the decisionmaking process. impact of unsustainable exploitation on forest capital or the total capital of forest owners. In short, the calculations are not appro- Protected Areas priate economic estimations of the returns to SFM. The challenges for the World Bank and the international com- Protected Areas are widely recognized as a cornerstone of any system munity are twofold: for the conservation of biodiversity, but few developing countries can afford, or are willing, to set aside significant areas of commer- cially accessible forests as completely Protected Areas. The interna- 1. To ensure that incentive structures reflect the real preferences of tional community has made only modest attempts to pay for such stakeholders for forest use. conservation. In most developing countries, a significant proportion 2. To build market mechanisms to ensure that global values can of the financial resources to effectively manage forest protection be marketed in a way that will allow national and local forest areas will have to originate from outside the government budget. The owners to benefit from producing them. well-known problem of paper parks is evidence of this. Even when such financing is available, local people must be given a meaningful While there are important national economic and sustainability role in management, including the ability to generate adequate issues at stake, there also are major issues for the poor. The incomes. The World Bank is implementing the various operational poor stand to gain much from the survival and sustainability of programs of the GEF and has set conservation targets for itself natural forests, yet at present have few available ways to make their within its alliance with WWF. The key questions are what and how preferences felt. FORESTS AND POVERTY REDUCTION A-11 Forest Plantations natural forest use. To date, however, plantations have had no dis- cernible global impact on reducing deforestation. The expansion of In recent years, plantations have been a major element in the plantations must be firmly linked to the removal of perverse incen- Bank's forests portfolio, and this trend is expected to continue. tives and market distortions in natural forest operations and to Plantations also are an important means of engaging local com- strong control over illegal operations. In addition, these measures munities in an activity that can be profitable in the relatively short all must be linked effectively to larger rural development and other term, is compatible with their other rural development activities, cross-sectoral forces that may also be the major drivers of undesir- and can act as an economic buffer against adverse agricultural able deforestation. Without all of the linkages, a positive impact on commodity developments. Plantations are also expected to play an natural forests is unlikely. increasingly important role in global fiber supply, particularly cel- In some situations, the establishment of plantations on land that lulose fiber. Small plantation wood lots are already an important already carries natural forest can exacerbate rather than ameliorate source of household income for many of the poorest of the poor. deforestation. Indeed, agricultural and tree crop developers may They are also the only way to avoid massive forest product imports seek access to intact forests to capitalize on the standing timber for countries including Nigeria, the Philippines, and Thailand, value. The standing timber may be more important to them than which have already overexploited their natural forests. the underlying land value. This is especially true if incentives that When considering potential plantation investments, care and encourage tree crop investment include access to forest raw material selectivity are required. In some cases, plantation incentive policies at prices and under rules that are far more liberal than those that have been justified on the grounds that, since they provide an apply to logging operations in the permanent forest estate. alternative source of wood, plantations may ameliorate destructive A-12 SUSTAINING FORESTS A DEVELOPMENT STRATEGY A P P E N D I X T H R E E Integrating Forests in Economic Development o make progress in managing and protecting forests, the T These circumstances have led to the proliferation of perverse World Bank and its partners need to focus on addressing incentives in the sector. These conditions have also distorted major policy, market, and institutional problems to allow internal markets and prices, resulting in a short-term, wasteful, the full value of forests to be realized for the poor and others who and inefficient approach to forests and their use by the vested live in or near forests. National economies can benefit much more interests that have gained control over these resources. than they now do from their forests, and the world at large derives 4. Civil society participation. Greater involvement and sharing in great environmental and biodiversity benefits from them. forest management and use by local communities and others will At the national level, forests have an important role to play in increase the benefits that communities derive from forests and add sustaining economic growth and alleviating poverty. However, this to the overall social value of forests. In addition to the changes potential is often unrealized because of market failures and gover- required in policy and approach, there will also be a need for nance problems that afflict the sector. As a result, forest values are greater transparency and accountability in managing and protect- not taken sufficiently into account by planners and policymakers ing forests, so that the objectives of society as a whole--rather concerned with growth and development. than only the objectives of select groups--can be met. Involving The World Bank needs to focus on five priority areas that will civil society in the monitoring process will also be essential. allow forest values to be taken fully into consideration in private 5. Development of a diverse business sector. To develop a diverse and public decisions. These priority areas are: business sector, sustainable forest enterprises will need to be fully integrated into the national economy. 1. Failure of markets to fully reflect forest values. Because their val- ues are complex and ownership often ill defined or unprotected, These five issues are strongly linked, and they must be forests are not entering markets at their full economic value. In approached in an integrated and coordinated way. Markets must be addition, markets for other environmental services provided by built and institutional structures strengthened to ensure that they forests are incomplete or nonexistent. Global forest values-- operate effectively. Policy in other sectors should take into account particularly the potential of forests to sequester and store their direct and indirect effects on the forest sector and other natu- carbon to reduce global warming and their role as repositories ral resources. Governance must be addressed so that laws and regu- of a major portion of the world's biodiversity--also need to be lations are followed and so that, if markets are not functioning, the reflected in markets. Global recognition of these values will government can intervene neutrally. Civil society must be allowed bring the rewards of managing and protecting forests for these to operate in a manner in which voice, accountability, and trans- purposes into national and local reach. parency become the ground rules. Independent monitoring must 2. Macroeconomic and cross-sectoral impacts. Economic policy- be designed so that trust can be built and progress measured. All of makers tend to undervalue forests in general. As a consequence, these improvements need to be made within the context of a decen- the forest sector often is adversely impacted by policies and tralized structure that is guided by more complete markets. interventions in other sectors as well as by macroeconomic adjustments. While such policies and interventions in other MARKET FAILURE AND THE HIGH VALUE OF FORESTS sectors can have major impacts on forests, assessments of the impacts are usually done either cursorily or not at all. Forests offer more than income flows to the poor. They also generate 3. Governance. Many countries with substantial forest resources value to the national and local environment that is not adequately have been subject to corruption and serious inadequacies in captured in financial flows or prices. Pursuing poverty alleviation how forests have been allocated, administered, and monitored. and even short-term national economic growth at the expense of © 2004 The International Bank for Reconstruction and Development/The World Bank A-13 Table A3.1 Market and Nonmarket Forest Values (US$ per ha) Mexico (Pearce, Costa Rica Indonesia Malaysia Peninsular Malaysia Putz, andVanclay 1999) (World Bank data) (World Bank data) (World Bank data) (Kumari 1994) Timber (market -- 1,240 1,000­2,000 4,075 1,024 value) Nontimber products 775 -- 38­125 325­1,238 96­487 (market and nonmarket values) Carbon storage (non- 650­3,400 3,046 1,827­3,654 1,015­2,709 2,449 market value) Pharmaceutical: 1­90 2 -- -- 1­103 (biodiversity) (nonmarket value) Ecotourism/recreation 8 209 -- -- 13­25 (market and nonmarket values) Watershed 1 -- -- -- -- protection (nonmarket values) Option value 80 -- -- -- -- (nonmarket values) Nonuse value 15 -- -- -- -- (including existence value) --Not available. Source: Adapted from Pearce 1995a. these environmental values would be a loss for current and future to water supply to recreation--at some US$4.7 trillion a year. This generations. The challenge is to build mechanisms to translate these amount is more than a quarter of that year's world GNP of US$18 nonmarket values into market values and tangible income flows and trillion. It was estimated that at least 70 percent of these values to use land policy and protection to ensure that these values have were generated in developing countries. Subsequent comments weight in economic decisions. published in Nature and elsewhere questioned the basis of the esti- A great deal remains to be learned about markets for nonmarket, mation of these aggregate figures by Costanza and others (1997). or nontraded, forest goods and services. Nevertheless, the general Among the criticisms was, first, nonmarketed values from forests view is that allocation and pricing procedures, particularly in larger tend to be site specific; therefore, aggregation, as in the Costanza forested areas, are systematically undervaluing these forest goods and paper, is problematic. Second, the basic usefulness of valuing the services, thereby accentuating the nonsustainability that characterizes stock of forests is questionable since, in the end, what matters is their use. The calculations rarely factor in externalities or the impacts what changes in human well-being result from incremental on forest values of extending ownership and tenure to all stakeholders. changes in the use of specific forest areas. The calculations virtually never consider the option values of retain- There is general agreement that the value of ecosystem ing forest--that is, the benefits of leaving forest resources untouched services from forests that are outside formal markets is signifi- for the present. In short, these calculations are not appropriate cant. It is also generally agreed that much of the land-use deci- economic estimations of the returns to SFM. Thus, there is major sionmaking that drives forest change takes relatively little market failure in the way in which nations with significant forest account of these values. The challenge for policymakers is how resources often deal with the sector. This failure is a result of inade- to bring these values into markets, cross-sectoral decisions, and quate institutional recognition of the values involved. In general macroeconomic policymaking, and into the development of the terms, the real value of natural forests tends to be far higher than that economy in general. reflected in national markets. Forests have a complex array of values; Table A3.1 presents examples of estimates of categories of forest therefore, the effectiveness with which these values become mani- value. The value of forests has five possible components. Their fested is important in economic planning and management. direct-use value includes marketable commodities: timber and nontimber products. Their indirect-use value covers potentially marketable initiatives such as carbon sequestration and watershed Value of Ecosystem Services protection. Forests also have option values, which account for the While extremely difficult to quantify, the economic value of the uncertainty of future events, and bequest values, which reflect their ecosystem services of the world's forests is vast. A 1997 study in the worth to future generations. The final value is cultural and aes- journal Nature estimated the global value of the goods and services thetic: an "existence" value, which includes the value to people of that forest ecosystems provide--from timber to climate regulation knowing that various species or pristine forests exist. Although few A-14 SUSTAINING FORESTS A DEVELOPMENT STRATEGY BOX A3.1 Cost of Forest Fires in Indonesia A detailed study based on radar imagery of land burned in the 1997­98 Only approximately 1 percent of fire incidence in Indonesia dur- fires in Indonesia shows that almost 5 million ha of forest of various ing this period was attributable to natural causes. Escapes from large- types, and close to 4 million ha of agriculture and tree crops, were lost. scale burning for clearing for agriculture and tree crops accounted for The studies calculate the losses to Indonesia of these fires to be 34 percent of all fires, shifting agriculture 25 percent, permanent agri- approximately US$7.9 billion. Most of the losses are due to the loss of culture and transmigration 25 percent, and other causes (including timber, NTFPs, and forest ecological services. Approximately one- malicious intent) the remainder. quarter was loss of agricultural and plantation crops. An additional There is little doubt that if no remedial and preventive measures US$1.4 billion loss is estimated from the impact of the carbon release are taken--primarily to ensure that strong disincentives to all effect. In 1997­98, because of these fires, Indonesia contributed more land users against burning during dangerous periods are effectively to the net addition of greenhouse gases to the atmosphere than did implemented--fire events will recur in Indonesia when the next the entire North American continent. cyclical prolonged dry period arrives. These estimates exclude any quantification of the cost of biodi- Source: World Bank data. versity losses and of severe losses to neighboring countries (Malaysia, Singapore, and Thailand), where damage was due primarily to the protracted heavy haze caused by the Indonesian fires. of these values now enter the marketplace or are considered in solid wood products sector and pulp and paper making, the con- decisionmaking about forests, they can be significant. tribution of the forest products sector as a whole is much larger. If Unless international markets for global forest values are also the processing sector's dependence on raw material supply is not functioning, not all of these values are potentially able to be captured made apparent, economic planners will often be guided by only the at the national level, but many are relevant to national economic value added in the extractive subsector. A poor appreciation of the planners. This relevance becomes most evident when there is an real potential value of forests by decisionmakers can lead to a great obvious deterioration in a major natural resource, as is happening deal of waste and economic inefficiency. today with forests, resulting from human-induced measures. Thus, one way to gain insight into the real value of ecosystem services is to Promoting Sustainable Forest Operations measure the impacts on economic and social indicators in cases in which actual losses have occurred, for example, as a result of some Direct-use value is critical to sustainable development, particularly catastrophic event. Following such events is often when the costs in countries with large forest endowments, in which significant become most apparent to the majority of economic policymakers. In areas of natural forests are likely to be logged during the coming 1997­98, as a result of dry conditions produced by an El Nińo South- decade. It is also key to protecting other forest values and benefits. ern Oscillation oceanic event, major fires swept through the tropical Given the extent of forest resources, it is unlikely that most gov- forests of the Amazon region, Central America, and insular South- ernments would accept that logging should be banned or heavily east Asia (see box A3.1). These fires might be regarded as natural constrained unless they can be convinced that alternative uses of events--and of little consequence in attempting to evaluate the mer- these resources offer considerable and immediately realizable asset its of retaining or converting natural forests. However, much of the value. However, many of the nonmarketed forest values could fire damage that occurred was human-made and policy-driven, in be protected under more careful forest management.1 Thus, the that most wildfires initially were lit by large corporations to establish question is not whether timber exploitation will occur, but whether plantations or other land conversion programs, or by smallholders it will be done reasonably well, or badly. under land-clearance programs sponsored by governments. The fact that most forest operations in the tropics are not sus- The very high costs of ecological disasters in, or closely associated tainably managed, even though the techniques for sustainable with, forests demonstrate a larger reality. The value of forests as a management are known, has led some analysts and government major global ecosphere control agent is enormous, but, as with officials to conclude that such operations cannot be profitable, oceans and other large biomes, this value is appreciated in an eco- given existing costs, prices, and incentives. However, these eco- nomic or social sense only when a major disaster or loss has occurred nomic factors are usually highly distorted by rent-seeking behav- or is immediately foreseen. When these large biomes are damaged as ior. Distortions in pricing and allocation of forest rights that result a result of deliberate activity--usually over a longer time frame--the from governance and related problems undervalue forest-growing costs either are not counted or are significantly underestimated. stock. Highly concessional log prices, which are almost inevitably a factor in a distorted and rent-seeking environment, by definition undervalue the forest. They directly reduce the standing value of Value of Forests in the Formal Sector the resource. They also indirectly encourage extractive processing Measured as a direct proportion of GDP, the share of forestry-- cycles that treat the raw material as an abundant good, with impli- that is, the industry of extracting raw material from the forests--is cations for technical and economic efficiency in the sector as a often relatively trivial. In countries with large value added in the whole. Systematic undervaluation of natural forests in developing INTEGRATING FORESTS IN ECONOMIC DEVELOPMENT A-15 BOX A3.2 Forests of Georgia: Unrealized Potential Georgia's forests occupy some 40 percent of its land area. Much of that for environmental reasons should not be logged) is occurring, this forest is located in the sensitive subalpine zone and serves a valu- with no revenue benefits to government and the people, and with able purpose in ameliorating the incidence of landslides and other much of the proceeds of sales ending up beyond Georgia's borders. natural disasters. Forests also provide fuelwood and many nonwood The official annual harvest of timber is about 200,000 m3, which sells benefits to local inhabitants hard pressed by economic decline. Fuel- for an official stumpage of less than US$10/m3. wood has become particularly vital, as Georgia has lost access to A recent study indicates that by controlling illegal logging, raising cheap fossil fuel supplies from the former Soviet Union, and major fees to approach border prices, and raising timber harvests to envi- problems of deforestation in the subalpine regions are now apparent. ronmentally sustainable levels, the government could increase its Ideally, Georgia should effectively use its valuable productive annual revenues from the sector to at least US$10 million, and possi- forests in areas that can be classified as suitable for sustainable pro- bly double that amount. This amount would exceed Georgia's state duction, so that the overall economic growth potential can be tapped. budget allocation for health care. Unfortunately, the reality is quite different. A significant amount of Source: World Bank data. illegal and uncontrolled commercial logging (some of it in forests countries is a far more important factor in the forests' destruction An ongoing IFC-supported FUNDECOR project in Costa Rica than poverty or trade in forest products. (See box A3.2.) is of special interest. FUNDECOR is a foundation created to promote the conservation and rational use of forest resources Building Markets for Land Stabilization within the Volcanic Central Range Conservation Area. The and Water Catchment Values FUNDECOR/IFC loan agreement was signed in June 1996. Its underlying aim is to protect biodiversity and reduce greenhouse In their natural state not disrupted by human incursions, forests gas emissions. In its first two years, the fund invested US$300,000 stabilize landscapes. The binding action of tree roots slows erosion, to benefit 30 forest owners holding some 1,100 ha. thus reducing sedimentation and protecting rivers, coastlines, and The foundation provides technical assistance and forest advice fisheries. Forests influence the chemistry of groundwater streams to 120 owners of natural forests and 230 farmers involved in refor- and lakes, protecting fish resources. Forests reduce the risks of estation schemes. The project includes developing a wood futures landslides and flooding. They play a central role in the nutrient market that enables farmers to realize returns from young planta- cycle of key elements, such as nitrogen, phosphorus, and potas- tions before the year of harvest, thus improving their cash flows. Its sium. Trees absorb and store nutrients, preventing them from objectives are to reduce the risk that they will change their land use being leached away to pollute waterways. or be forced into unfavorable agreements with logging firms. Increasingly, attention is beginning to focus on ways to create Futures can be sold on wood from both managed natural forests markets for these land stabilization and water catchment protec- and reforested areas. tion environmental services, which society long has undervalued. IFC is also developing an Ecomarkets Project to consolidate In addition to experiences such as in New York, pilot schemes are experimental funding approaches to charging for environmental being developed in a number of developing countries. In Brazil's services. The Ecomarkets Project could have implications for repli- Parana and Minas Gerais states, state revenue-sharing policies cation within Latin America and other regions. reward municipalities that set aside forests for conservation or watershed protection on which the municipalities depend for clean drinking water. In designing forest projects and policy interven- tions, the potential effects of biodiversity loss, the beneficial impact CROSS-SECTORAL ASPECTS AND IMPACTS of carbon sequestration, and other environmental benefits should enter into cost-benefit analysis. Furthermore, because current and Forests provide major ecosystem services that affect a wide range of potential market mechanisms cannot fully account for the full economic activities and ecosystems located outside forest areas. spectrum of forest values, domestic public policy must be designed Moreover, many phenomena that originate outside forests can have to consider and protect these values. Environmental assessments direct and indirect impacts on them. The direct effects of nonforest and safeguard policies must become the routine business practice activities on forests, and vice versa, are often relatively easy to antic- of both governments and donors. ipate and evaluate, so that alternative approaches can be designed to The Bank has had limited experience in attempting to develop achieve the best combination of forest and nonforest benefits. financial mechanisms to pay for environmental services. By far, the The use and management of forests must be seen as an integral most comprehensive experience comes from Costa Rica, in which part of a broader land-use planning issue. Much unwarranted and the Bank Group has been involved in helping to develop a com- undesirable forest loss occurs not because of logging per se but prehensive approach (see box A3.3). because policy and governance failures lead to conversion activities A-16 SUSTAINING FORESTS A DEVELOPMENT STRATEGY BOX A3.3 Paying for Environmental Services in Costa Rica Costa Rica has introduced a series of legislative and fiscal initiatives protecting biodiversity. At first, the public system provided the to increase incentives for smallholders, larger landowners, and private only basis for establishing Protected Areas. Later, private sector companies to replant forests, improve management of natural forests, interest helped the system become a mixture of public and private and establish biodiversity Protected Areas. reserves. The Protected Area system has grown from only two tracts The most notable shift in public policy occurred in 1995, when, of approximately 2,500 ha in 1950 to more than 120 areas today supported by a World Bank structural adjustment credit, Costa Rica covering 1.2 million ha, approximately 25 percent of Costa Rica's cancelled a series of subsidies and replaced them with a system of land area. payment for environmental services. Under this system, which is Possibilities for financing Protected Area management through financed partially by a tax on fossil fuels, payments are made to for- ecotourism have been a powerful factor in Costa Rica's ability to est owners on the basis of the environmental services the forests pro- attract private sector interest in conservation. In 1997, the country duce, including carbon sequestration, biodiversity, water supply, and had 787,000 visitors who generated US$714 million in income. sustainable production of wood and forest products. Since this Between 1990 and 1997, 38 percent of visitors to Costa Rica visited scheme still is in its early stages, it is too early to judge its likely long- forested national parks. By 1998, tourist revenues had grown to US$1 term impact. In 1997 and 1998, the scheme was used to replant billion. Tourism--much of which is forest based--is now the coun- approximately 14 percent of Costa Rica's deforested area. try's primary source of foreign exchange. Costa Rica's Protected Area system has been an important factor in reversing deforestation and is a practical approach to Source: World Bank data. that result in lower, not higher, returns to the nation in the medium on forests. Conversely, irrigation and other forms of intensification term. In many cases, the returns from agricultural conversion are in nonforest areas, tenure systems and land taxes that recognize the extremely low, and in some cases not even sustainable. The gover- value of retaining forests, and recognition of the territorial rights of nance issue in this conversion is relevant because, very frequently, indigenous groups can have potentially beneficial impacts on forests. the conversion occurs under medium and larger-scale projects rather than as a result of spontaneous subsistence activity. For Rural Development, Forests, and the Poor example, in Brazil, it appears that less than 2 percent of deforesta- tion occurs on farms that are less than 20 ha each. Recognizing that tenure is primarily a political issue, the World The Bank Group invests far more in infrastructure, agriculture Bank must take firm and active stances on agriculture and tenure and rural development, mining, and other sectors--frequently issues. The Bank must support incentives for small farmers to par- near (sometimes in) forest areas--that have significant potential ticipate in conservation, carbon sequestration, and watershed impacts on them, than it does in direct forest projects, including management activities. It should encourage agricultural research conservation and forest protection activities. that focuses on labor intensification in existing farming zones, Large infrastructure developments can remove--or submerge-- natural resource management, and innovations to promote better significant areas of forest, or provide access that, if left unmanaged, forest treatment in agricultural frontier areas that are unlikely to be can lead to loss and degradation of forest resources. Rural develop- supported otherwise. ment and agricultural settlement projects can promote forest The Bank's strategy will give special emphasis to supporting the conversion based on incorrect assumptions that significantly large number of rural poor living within forest margins or outside undervalue forests. Undervaluation is particularly likely if agricul- forests (predominantly agricultural populations) who are able to tural benefits are inflated by subsidized output prices or input costs, access forests, tree stocks outside forests, and trees on farms, and or forest valuations are based on artificially reduced royalty prices who are able to respond to market opportunities. Forestry assis- and inadequate analysis of nonwood goods and services from the tance will be broadly defined so that it encompasses all tree stocks forests. For example, a rural development and intensification pro- and activities based on them. It is in these areas that the Bank has gram may fail to deliver the expected benefits, forcing agricultural the greatest potential to contribute to income generation and communities to encroach on nearby forest land as an alternate poverty reduction in ways that will benefit large numbers of the source of income--as happened in several Indonesian transmigra- rural poor. tion areas in the 1980s. Most of the connections between forestry and rural poverty are Cross-sectoral impacts are complex and diverse, and causal rela- closely linked with activities in agriculture and the rural economy. tions are often indirect. Nevertheless, it seems clear that credit Therefore, the Bank needs to recognize the possible impacts on schemes favoring grazing, agricultural research and technology that forestry that such macro shifts as market liberalization bring about focus on capital intensification in frontier areas, directed agricultural in agriculture. These may include, for example, the shift from pub- settlement, and the perpetuation of uneven land distribution that lic programs to market measures. The resulting impacts on such drives poorer people to forest frontiers often have damaging effects components of rural development as infrastructure and transfer of INTEGRATING FORESTS IN ECONOMIC DEVELOPMENT A-17 technology have until now been seen as the responsibility of the Forest and tree components will be favored where changes public sector. in agriculture involve greater reliance on agroforestry. This can Within the context of rural development and an integrated nat- happen when: ural resource management strategy, analytical studies and identifi- cation of future lending opportunities for Bank assistance will Land, labor, and capital factors favor tree crops. For example, focus on possibilities to: where labor is the limiting factor, multistory home gardens can increase land productivity. Nitrogen-fixing or fodder trees can Adapt forestry interventions to take account of changes being replace purchased fertilizer or animal feed at lower costs to the introduced in agriculture and the rural economy and raise farmer. Research being carried out and tested in pilots in many awareness of the effects that some agriculture and nonforest countries by ICRAF is of special relevance to future Bank work developmental strategies may have in diminishing the potential in this area. of forest-based activities to address poverty. Growth in agricultural incomes leads to increasing local com- Exploit opportunities that rural development interventions cre- mercialization of subsistence goods such as fuelwood and other ate for wider adoption of agroforestry, forest management and forest products. sustainable harvesting, processing, and trading activities. These Improved rural infrastructure gives farmers greater access to opportunities will include, for example, incorporating sustain- markets for forest fruits and other products of trees that can be able forest resource management and agroforestry initiatives in grown as part of farm systems. Bank-supported dryland, water catchment, wasteland reclama- tion, and other Area Development programs. Bank experience In pursuing possibilities for support to agroforestry, the Bank in Burkina Faso, poverty reduction-oriented projects in China, will give special attention to matching production with demand. and the Anatolia Watershed Project in Turkey provide useful Support should focus on providing information about unfamiliar lessons of wider relevance. species and planting configurations and enabling access to a wider Support CFM, building on Bank experiences in countries such menu of species to plant. as India, Mali, Mexico, and Niger. Much has been learned Production will be encouraged by improving access to markets in these countries about how to involve user groups in sustain- and ensuring equitable prices, rather than by subsidizing planting. able harvesting and management of dryland savannah This shift will mean removing or alleviating constraints caused by fuelwood resources. costly controls on private harvesting, transport, and sale of tree Expand nonfarm rural activities with special emphasis on the products; by subsidized competition from state forests and planta- role of forest-based, small-scale enterprises. tions; and by controlled prices for products such as fuelwood. Where costs of establishment or husbandry of agroforests are Agriculture-based developmental impacts. The Bank needs to constraints, use of credit and measures to reduce costs, such as stag- improve understanding both within countries and within the gered planting and interplanting with crops that produce interme- Bank itself of features of agriculture-led development that are diate yields, can help avoid distortions arising from subsidies. likely to have impacts on the role of forests and forest outputs. These include: Agroforestry. Millions of farmers are dependent on agroforestry farming systems as a way to increase and sustain agricultural pro- If rural development is driven by expansion of areas under cul- ductivity; as a source of essential food, fuelwood, and building tivation, the potential for increased forest-based contributions materials; and as a supplemental source of income that buffers to rural livelihoods is likely to be limited, or even negative. It is instability in agricultural income. As forest resources have become equally important to recognize that all deforestation is not increasingly scarce, poor small farmers have become more depen- bad--in some circumstances, deforestation is inevitable as the dent on agroforestry farming systems to sustain their livelihoods. only survival option for the poorest of the poor. Most farmers grow trees to meet household subsistence needs Land titling may be instituted to promote private tenure such as fruit, fuel, fodder, and building materials; to provide on- on farm land to stimulate agricultural productivity. However, farm reserves that can be drawn on when needed; and to obtain the land titling may reduce access to resources that people protective functions trees offer such as shade, windbreaks, contour previously had under the systems of overlapping and interpen- barriers against soil erosion, and recycling of soil nutrients. As etrating rights that have been common, particularly in parts markets for tree products emerge nearby, farmers increasingly of Africa. exploit opportunities to generate additional income by selling their Agricultural technologies, which encourage the removal of trees surplus, or by increasing production to provide a salable margin. in agricultural landscapes, such as tractor cultivation, may Few grow trees primarily as commercial crops, but small woodlots be adopted. often make significant contributions to household incomes. Much Larger-scale plantation-based agribusiness operations that of the spontaneous and largely unrecorded restoration of forest involve indiscriminate clearing of large areas of tropical forest cover in the tropics is a result of the efforts of poor small farmers may take little or no consideration of the risks posed to local (ICRAF 1998). communities by forest fires and the potential destruction of Planting nitrogen-fixing tree species that contribute to soil fer- forest plants and wildlife resources on which the poorest of the tility and to sustained or increased cereal crop yields, and planting poor depend. fodder trees can provide on-farm sources of livestock feed. Such A-18 SUSTAINING FORESTS A DEVELOPMENT STRATEGY BOX A3.4 Contribution of Agroforestry Farming Systems to Household Incomes In Karnataka State in India, between 1984 and 1994, donors provided In the Kolar District, 55 percent of small farmers used tree income substantial support to small farmers to grow trees. The aim was to for "lumpy" expenditure items such as house and well construction, increase fuelwood supplies in rural and semiurban areas. and 40 percent for marriages and education. More than 60 percent of Although the objective was to increase fuelwood, farmers supplied transactions by small farmers were for purposes other than immedi- emerging industrial wood markets. In the absence of trees, dryland ate consumption. The contribution of tree income to the private farming offers little scope for accumulating the type of assets capable and social investments of small farmers was significant: 34 to 86 per- of providing liquidity to meet unforeseen events and large consump- cent of the costs of improving a house and 42 to 84 percent of social tion or investment needs. Farmers say they grow trees, which have low investments. labor requirements, to provide a form of cash reserve and to cushion Source: World Bank data. against risky dryland farming. Bank-Sponsored Agroforestry Projects in China From 1992 to 1999, the Bank financed 13 projects that contained sig- watersheds for dam catchment areas. Poverty alleviation was a major nificant agroforestry-related tree planting, forest management, and theme in most of these projects. Their actual impact on poverty has conservation components. Forest improvement and expansion activ- yet to be quantified. During project design, deliberate efforts were ities included new plantings in wastelands and eroded hillside areas made to link these investments to higher incomes, food availability, plus 551,000 ha of orchards, timber, nontimber, bamboo, mulberry, and sustained agricultural productivity. and tea. These activities were associated primarily with agriculture Source: Rozelle and others 2000. intensification (irrigation or agriculture expansion), usually serving as windbreaks in irrigated areas to prevent soil erosion and protect on-farm trees significantly reduce dependency on purchased activity in terms of the number of people engaged in them. Small- chemical fertilizer and dairy feed. scale forest products processing and trade of forest products are In Sahelian countries, such as Burkina Faso, planting of "live important nonfarm components of the rural economy. These fences" has generated supplies of fuelwood and fodder while activities are available to the landless as well as small farmers, and increasing farm incomes by US$40 per year--a sizable bonus for women are very active participants. farming families whose annual incomes range between US$250 Most of those who can benefit from forest products live outside and US$350. Low-cost, on-farm tree establishment technologies, forests. They tend to live in predominantly agricultural landscapes, such as seed collection and distribution, have been highly success- and for many of them, the forest products that they use come as ful in parts of East Africa and Asia (see box A3.4). much from the farm as the forest. The role of forestry in poverty World Bank reviews of scientific research on the impact of shel- alleviation is large only if the definition of forestry encompasses terbelts have concluded that, in many situations, a combination of sources of forest products that are outside as well as inside forests. reduced wind velocity and increased soil moisture retention can Bank interventions in small rural enterprises have the potential lead to crop yield increases as high as 20 percent (Anderson 1987). to benefit large numbers of people. Large increases in the demand Such on-farm tree planting and management activities fit well with for smallholder and small enterprise commercial activities in the the integrated rural development and dryland management strate- forest sector are likely to occur where the agricultural sector is gies also being pursued by the Bank. buoyant and agricultural incomes are growing. Some of the major Under its new strategy, the Bank will support the scaling up of issues that require consideration include: emerging or already well-proven technologies that will simultane- ously benefit the poorest and make significant contributions to High rates of attrition, particularly among new enterprises, forest landscape restoration.2 The Bank can take advantage of the indicate the need for the Bank and others to focus on interven- vast experience accumulated by ICRAF and CIFOR in this area and tions to encourage entrants to concentrate on the most viable further develop the concept through the emerging Forest Reborn and sustainable kinds and levels of activity. The poorest of those initiative developed jointly by WWF and IUCN, with bilateral engaged in generating income from forest product activities donors and other organizations. tend to focus on low-return product activities that have poor prospects and present particular problems. Encouraging Rural wood-based enterprises. In nearly every country in which increased output of products that are already facing saturated such information exists, small-scale forest product activities are markets is likely to result, at best, in redistribution of income among the three largest categories of nonfarm rural commercial among the poor. In addition, participants may be prevented INTEGRATING FORESTS IN ECONOMIC DEVELOPMENT A-19 BOX A3.5 World Bank Support for Small Enterprise Development in the Philippines An impact evaluation report of Bank support for small-scale and dialogue that was fruitful and helped the economy sustain shocks felt medium industries in the Philippines surveyed some 300 firms and by its neighbors. The repayment record of assisted firms was consid- 17 participating financial institutions. Results of the analysis indi- erably better than that of larger entities. cated that the projects resulted in more middle-income jobs, Source: World Bank data. although jobs in larger firms were more productive. Support for small and medium industries was part of a broader financial sector from moving into alternative activities with better livelihood FOSTERING LINKAGES BETWEEN THE FOREST prospects. It may be more fruitful to help people move into INDUSTRY AND THE RURAL POOR other, more rewarding fields of work, which often may mean moving out of forest product activities. There have been few linkages between commercial-scale forest Because they give high priority to conservation objectives, some industries and the interests of the rural poor. The practices of for- governments have established forest and environmental policies est industries in forests, and the use they make of the resource, and regulations designed to limit rather than encourage the pri- are completely different from those of the rural poor in these vate production and sale of forest products. Such regulation of same areas. output is often favored because it is considered easier than con- The number of people engaged in larger, formal sector forest trolling forest harvesting on the ground, but it can be counter- industries, such as swaddling, wood-based panels, and pulp and productive. Producers may be obliged to sell to government paper production, remains small relative to the numbers of rural marketing bodies, or to traders to whom concessions have been poor who depend on NTFPs and small-scale enterprises for granted. Farmers often are subjected to controls on harvesting, employment. A number of factors will encourage the larger forest transport, and sale of wood and other tree products from their industrial companies to form stronger links with the rural popula- lands--controls often motivated by the need to curb illegal tions in their vicinities. These factors include the trends toward felling from state forests. privatization, devolution of more rights over forest resources to In many countries, governments directly compete in the market rural communities, and the emergence of on-farm tree stocks as an and produce from state forests. Some products are made avail- increasingly important part of the wood and fiber supply. Where able at deliberately subsidized prices because of their impor- these factors already have occurred, the result has been a limited, tance to the poor. Others are sold at effectively below-cost prices but growing, move toward partnership arrangements among com- because the process of setting and collecting royalties fails to panies and farmers and user groups. These arrangements have capture an appropriate share of the economic rent. Either way, included subcontracting wood and fiber production to"out-grower" small private producers are disadvantaged in the market, and tree farmers and joint ventures with communities to generate governments inadvertently may be interfering with shifts from income from ecotourism and wildlife management. An example of subsistence to market economies. such an arrangement is Zimbabwe's Campfire Program. Bank support in this area will focus on fostering partnerships Issues for the Bank Group to consider are how best to support among industry, local communities, and smallholders that provide a range of forest-based enterprise development through enabling access to credit, extension, markets, and skills development. Sup- policy frameworks, supporting market research, and, where port also will be given to strengthening cooperative arrangements needed, microcredit. The Bank Group should encourage legislative that will improve the bargaining position of the rural poor and, and institutional reforms that remove restrictions to the growth of wherever possible, enable them to participate in some of the bene- small-scale enterprises and offer them equitable access to all the fits from downstream processing and trading. For instance, this opportunities that forest resources provide. support could include removal of government subsidies for expan- The Bank has had considerable experience in financing small- sion of industrial capacity in situations in which these are detri- and medium-scale rural enterprises. In early 2000, active rural mental to small-scale producers. As an example, in many countries and microfinance operations under supervision included 185 in which a significant part of the natural forests are administered projects totaling approximately US$7 billion. The rationale for by the state, logs are often sold to large commercial processors at Bank involvement is that rural-based microfinance helps create stumpages that are below the market price. This arrangement employment, build local businesses, develop human capital, fos- discourages smallholders from growing and processing wood for ter market competition, and promote broad-based economic the market and from engaging in sustainable management of participation. forests over which they have some control. A-20 SUSTAINING FORESTS A DEVELOPMENT STRATEGY Table A3.2 Bank Initiatives for Diverting Highways away from Biodiversity Reserves Project Conditionality Bolivia Agriculture Sector credit 2322 (1991) Government to adopt a policy by which no settlement or infrastructure will be created within a 1.5-km radius of any defined reserve area. Costa Rica Agriculture Sector Investment (1992) No settlement or infrastructure to be created within a 10-km radius of reserved areas. Indonesia Roads (1988) Road construction to be preceded by environmental assessment and confirmation that the road will not have a negative impact on forest conservation and other areas of environmental concern. Source: World Bank data. An underlying objective of Bank strategy in this area will be to often encroach on indigenous people's forest areas, with disastrous encourage situations in which most timber or industrial round- consequences. Especially when supporting privatization, the Bank wood requirements of larger forest industries such as pulp and needs to monitor the impacts of its macroeconomic policies on paper are met either from common property, collaboratively man- forests and take into account the maintenance of catchments for aged, or privately owned forest resources. This intervention will hydroelectric projects (see table A3.2 for examples). encourage the development of real market prices for forest output--an approach that has been the major factor in the success Macroeconomic Policy Impacts on Forests of commercially sustainable forest industrial development and for- est management in many European countries, such as Finland and Relatively little analysis has been done on the impact of macroeco- Sweden, and the United States. Experience in these temperate nomic policies on forest outcomes,3 and most of what has been regions provides historical lessons that are relevant to the Bank's done directly addresses the impacts of specific provisions for Forest Strategy. For example, fostering collaboration between forests and forestry that occasionally have been included in these smaller-scale private woodland owners and industrial companies is larger policy frameworks. More so than in the case of cross-sectoral a major focus of the Bank's ongoing forest work in Bulgaria, Roma- impacts, the linkage between large macroeconomic policy changes nia, and several other transition countries of Eastern Europe. and forest outcomes can be difficult to assess. Studies such as that Tree out-grower arrangements and other forms of contractual by Kaimowitz and Angelsen (1998) and also Seymour and Dubash agreements, such as those that have been fostered by earlier Bank- (2000) find that major policy and market shifts sometimes have led supported loans in Argentina, Brazil, and the Philippines, can pro- to unwarranted forest clearing and further impoverishment of vide important links to markets and support for farmers. However, people living in or near those forests. These studies argue that the care needs to be taken to ensure that they are targeted to those able Bank needs to include a wider group of stakeholders when consid- to benefit from these arrangements. Tree out-growing can be espe- ering its interventions in adjustment and large cross-sectoral pro- cially appropriate for smallholders who have sufficient annual grams that can influence forests. Policies with the potential to have income from other sources to secure their ongoing basic needs, major impacts on forests include trade policies that favor extensive freeing up land that they can use for trees. agriculture or tree-crop development but are not supported by Tree growing is likely to be an attractive option if growers have measures to direct this development to open sites rather than an assured market and access to technical advice and inputs. In forested areas. this case, tree crops are a more stable source of income than alter- Across-the-board public expenditure constraints can also native uses of the land. Given these features and the probable need expose valuable forests to exploitation by crippling forest agencies to have land title to be eligible for a loan, tree growing is not likely so that they cannot maintain adequate supervision and monitor- to be feasible for many smaller or extremely poor farming fami- ing. In addition, exchange rate depreciations, reductions in trade lies. It is more likely to be an appropriate activity for the moder- and tariff restrictions, and other macroeconomic measures that ately poor. promote production of tradables or movement of people to forest areas all can have deleterious impacts on forests. The example most Infrastructure and mining. While in many cases responding to commonly cited is the removal of export taxes on palm oil in legitimate economic and social needs, transport and mining projects Indonesia in 1998, which some analysts assert led to rapid increases that traverse forests or improve access to them can cause problems. in deforestation as individuals and companies expanded palm oil Sometimes such projects would not even be economically defensible production in Sumatra and Kalimantan. if the real costs of lost environmental services were taken into Stabilizing or deregulatory policies are capable of contributing account. Decentralization of control over transport projects can lead to environmental as well as economic gains. However, unless spe- to more rapid spread of investments to forest areas, and external cific measures are taken to deal with institutional and other distor- funding of transport projects can make them less manipulatable tions that can result, stabilization may have adverse short-term through budget-cutting mechanisms. Energy and mining projects impacts on the environment. INTEGRATING FORESTS IN ECONOMIC DEVELOPMENT A-21 BOX A3.6 Successes and Failures in Bank-Financed Adjustment Operations: The World Resources InstituteView The 2000 WRI study, The Right Conditions, by Seymour and Dubash, incomplete, and some conditionalities were expressed as specific drew the following conclusions: measures with unrealistic deadlines, rather than as desired outcomes. In Papua New Guinea, the Bank was able to use adjustment lend- Neglect of the social justice agenda in the initial reforms compro- ing to cooperate with progressive forces within the government mised the acceptability of the reforms to key stakeholders, especially bureaucracy to rein in the most destructive forms of logging and hold NGOs. off attempts by vested interests to roll back reforms. In Kenya, a proposed environmental adjustment operation failed In Cameroon, Bank forest conditionalities were essential to the to reach the final point of approval. The project failed to utilize lead- passing of needed laws and decrees. However, there was no institu- ership from the ministry of finance, which might have appreciated tional follow-up to see that the conditionalities were implemented, the value of reforms proposed, and instead relied on the support of and the main ministry involved was incapable of carrying out the line agency officials, who did not. Little access was granted to NGOs reforms. The Bank was unable to overcome strong vested interests in the process, and the weakness of local NGOs themselves was a con- operating in the sector and failed to remain firm on some important tributing factor to failure of the operation to materialize. There were auction conditionalities at a critical time. also problems of lack of support within the country management of In Indonesia, the Bank has achieved some progress in reform of the Bank for the project, and it was poorly timed relative to Kenya's the forestry sector via adjustment conditionality, especially in "stroke election cycle. of the pen" reforms such as eliminating an exporting cartel. However, Source: Seymour and Dubash 2000. the initial package of reforms introduced was inconsistent and Kaimowitz and Angelsen (1998) argue that many situations in environmental concerns low priority. Those authors also believe that which such policies are being introduced are not necessarily win- the incentives for recipients to comply with conditionality--and the win and that, therefore, decisions should not be left to a narrow willingness of donors to impose sanctions if they do not--are not as group of economic policymakers. strong as commonly believed. Adjustment works better when it sup- ports preexisting influential stakeholders, has easily monitorable Structural adjustment lending and forests. Since 1990, adjust- targets, and focuses on removing negative actions, such as removing ment lending as a proportion of total Bank lending has varied remaining subsidies or other adverse measures. These measures within a range of 14 to 53 percent. Since 1992, only three Bank have worked better than specifying government activities, which structural adjustment operations have attempted to directly presuppose the existence of the capacity and the will to implement address forest issues, and one sector adjustment operation dealt these specifications. significantly with forest issues. For adjustment operations that With regard to Bank adjustment work that has included forest have not attempted to deal with forests and the environment in any issues, Seymour and Dubash state that the Bank has recorded some significant way, it is difficult to assess whether such activities have success in this area (box A3.6). However, they argue that the condi- had good, bad, or neutral impacts on forests, and opinion on this tionality has focused on improving forest policies but should have subject varies widely. However, the reservations expressed by some concentrated more on the more important nonforest policies that authors about the possibility of risks to forests under macroeco- affect forests. They suggest that the Bank improve its performance nomic shifts apply equally to Bank operations that have not in this area by building social and environmental considerations attempted to deal specifically with the risk factors. into its adjustment programs and focus on removing inappropriate A Bank study by Guerguieva and Hamilton (2000) found that agricultural credit, trade, infrastructure, energy, mining, and reset- recent adjustment operations in the most environmentally sensi- tlement policies. tive countries did address environmental issues. Adjustment loans in heavily forested countries (Cambodia, Indonesia, Mada- Improving forest outcomes under adjustment operations. gascar, and the Solomon Islands) included conditions to govern A number of practical issues are involved in assessing the environ- granting forest concessions and managing forest resources. mental impacts of specific adjustment operations. Because adjust- Nevertheless, the study noted that the real challenge in this diffi- ment operations are often rapidly prepared and disbursed (although cult sector lies in monitoring, implementing, and enforcing the impact of the changes they bring about may last longer), it is reform conditions. often difficult to calculate with any certainty what impacts specific Adjustment operations that have attempted to deal with environ- measures may have on forest and environmental outcomes. In mental and forest issues have undergone additional analysis. addition, the effects are uncertain and lagged. Seymour and Dubash (2000) argue that there is a basic contradiction However, it is important to minimize the risk of inadvertently in using adjustment as a tool of environmental reform. They say that causing damage to forests or other natural resources and assets. It adjustment is most used, and has most leverage, in times of eco- is therefore important to prepare the necessary research and ana- nomic crisis--the same time at which decisionmakers typically give lytical work in advance, at the country level. A-22 SUSTAINING FORESTS A DEVELOPMENT STRATEGY The Bank is intending to review its current OP on adjustment forestry impacts. In those cases where impacts are likely to be lending, as a beginning on this task. In addition, because the time significant, we envisage a more detailed follow-on review frame for an update of the Bank's adjustment lending policy with a view to assisting governments in developing measures remains uncertain, the Bank needs to put in place a transparent set to help avoid/mitigate them. of procedures for systematically identifying significant forestry 3. In assessing potential adverse impacts on forests, the Bank impacts associated with Bank adjustment operations, analyzing expects to draw on a range of technical expertise and coun- such impacts, and, if necessary, adopting and implementing appro- try knowledge. The Bank is considering calling on the assis- priate mitigating measures. To deal with development of a new tance of the TAG, a multistakeholder group that was set up adjustment lending OP in a timely manner and to address poten- to assist the Bank in developing its Forest Policy and Strat- tial problems in the intervening period, the Bank has developed the egy. The TAG could act as a roster of expertise, from which following approach: specific individuals or groups would be drawn to assist the Bank, on a case-by-case basis at the request of the Bank, by The Bank plans to address the treatment of possible forestry providing input in judging forest impacts of policy reform impacts of programs supported by Bank adjustment operations and possible mitigation measures. as part of the treatment of overall environmental impacts of such programs in the ongoing update of OD 8.60 on adjust- ment lending into a new OP/BP 8.60. This approach will put the GOVERNANCE IN THE FOREST SECTOR: FOREST forestry impacts of Bank-supported reform programs into the CRIME, CORRUPTION, AND REGULATION appropriate context of the full reform program, while avoiding a fragmentation of Bank OP on adjustment lending into a mul- The forest sector, especially in forest-abundant developing countries, titude of sector-specific provisions. is notorious as a center of corruption, strong vested interests--often At the time of writing of this strategy, an issues paper on this involving political and business elites--and lack of transparency in new OP had been posted for public comment and review. An allocating resource rights. Corruption flourishes for a simple reason: initial draft of the OP itself had been prepared on the basis of timber rights provide an extremely valuable reward for services to responses and specific consultations, and presented to the Com- political elites. Besides channeling potential timber revenues away mittee on Development Effectiveness of the Board of Executive from national development efforts, particularly from the people Directors. A new version is currently under preparation. living in and near forests, the low prices at which these concessions are For the period until the new OP/BP 8.60 is in place, the Bank often granted encourage waste, unsustainable management, forest intends to establish a set of transparent arrangements for the "mining," and conversion to croplands. By underpricing their forest treatment of forestry impacts associated with Bank-supported resources, governments themselves lose important tax and royalty adjustment operations--including systematically identifying revenues. Politically motivated and protected concessions usually possible significant forestry impacts associated with Bank exclude local populations, especially indigenous forest dwellers, from adjustment operations, analyzing such impacts, and, if neces- using and benefiting from the forests. Official forest agencies are sary, adopting and implementing appropriate mitigating mea- impoverished and corrupted to prevent effective monitoring sures. A three-pronged approach is planned, beginning with and enforcement. pilots focused on cases with clear forest linkages that may pro- Persistent, very low resource rental capture by governments and vide useful lessons with broader applicability. This three- the communities living in or near forest areas and nontransparent pronged approach is described below. resource allocation procedures are strong indicators of major for- est governance problems. Other indicators include market cartels 1. The Bank will continue implementing the good practice and other distortions; inadequate forest conservation and protec- advice in the current OP on adjustment. This good practice is tion measures; significant and organized illegal activity including summarized in the Operational Memorandum "Clarification timber theft, misrepresentation of volumes, species, or the quality of Current Bank Policy on Adjustment Lending" of June 5, of log harvests; poaching; and commercial-scale encroachment of 2002: ". . . it is good practice for Bank staff, in preparing agricultural or other activities on lands designated as permanent appropriate assistance programs, to review environmental forest zones. Usually, poor governance is also reflected in unclear policies and practices in the country, take account of any and conflicting tenure or mandates over forest lands and the sys- relevant findings and recommendations of such reviews in tematic exclusion of local peoples from decisionmaking affecting the design of structural adjustment programs, and identify forest lands. the linkages between the various reforms proposed and the environment. If there are negative linkages, it is good practice Illegal Logging and Corruption to devise specific measures to counteract the possible negative effects, or explain how mitigation is being achieved elsewhere By far, the area of greatest concern for many governments is the within the Bank's Country Assistance Strategy." cost of illegal logging and forest-related corruption. The costs for 2. Building on this good practice, the Bank plans to put in place Indonesia, Papua New Guinea, Ghana, and Russia are summarized a process whereby Regional Vice Presidencies will work in box A3.7. with ESSD and OPCS to screen forthcoming adjustment The World Bank could use its involvement in the formulation of operations--as early as possible during program preparation-- CASs and NFPs to support legislative and institutional reforms for specific policies supported by the operation with possible that will help make forest law enforcement more effective and INTEGRATING FORESTS IN ECONOMIC DEVELOPMENT A-23 BOX A3.7 Costs of Forest Corruption The annual volume of logs illegally removed from the forests of efficient log export inspection system. This system is believed to have Indonesia is estimated to be on the order of 60 million m3. This vol- raised annual export tax receipts by approximately US$20 million. ume implies government revenue losses, even at relatively low official In Ghana, in 1995, 11 foreign-based forest products companies royalty levels, of some US$1 billion a year. The costs to Indonesia in were implicated in fraud and other malpractice that cost the economy terms of timber and other forest values squandered in these poorly about US$50 million a year. controlled and unsustainable operations are far higher. In 1994 the Russian government collected only US$184 million in In Papua New Guinea, in the early 1990s, losses of timber values logging revenues from forest operations, compared with the esti- through mechanisms that misrepresented log shipment volumes and mated potential value of US$900 million to US$5,500 million for the species, fictitious third-country invoicing, and false invoicing were timber harvested in that year. rampant. The government closed one common pathway to transfer Source: World Bank data. pricing in the mid-1990s when it established an independent and socially just. Guidelines for future Bank involvement in forest law investments will also help countries develop and implement enforcement activities are being developed. socially just forest law enforcement strategies and transparent The effectiveness of the Bank's efforts to combat illegal activities management processes. in the forest sector will depend on the cooperation of member gov- Nevertheless, illegal forestry activities are a global problem that ernments and the development of significant new partnerships will also require international solutions. Efforts must address the with other stakeholders. To raise public awareness of this issue, the sources of the problem in all countries: producers of illegal prod- Bank, in collaboration with partners, will support economic and ucts, middlemen, and consumers. In line with its anticorruption sector analysis and other processes to highlight the local, national, initiative, the Bank will initiate dialogue with other international and international costs of illegal activities and corruption in the organizations such as FAO and ITTO and international NGOs such forest sector to senior decisionmakers and stakeholders in client as Transparency International, Global Witness, and Global Forest countries. Watch. It will also coordinate with governments and the IMF on The Bank could also finance monitoring programs that support trade policy and measures to increase transparency in government SFM planning and help identify the extent of problems. These pro- operations such as customs. Finally, the Bank will also seek to grams, along with deeper analysis on the underlying incentives to strengthen civil society involvement in in-country anticorruption forest management, will provide valuable input to governments as programs. they develop NFPs or strategies. By supporting such processes, the Although its experience in this area is limited, the Bank has Bank will be signaling its own long-term commitment to help received encouraging responses from governments such as those of develop and support well-designed interventions that are backed Cambodia and Indonesia to Bank-supported forest law enforce- up by political will. ment initiatives (box A3.8). In line with its anticorruption objective, the Bank is initiating dialogue with countries and regions to foster collaboration of Reforming Timber Concession Policies national governments, local people living in and near forest areas, private industry, NGOs, donors, and other stakeholders. These dia- Rigorously designed regulatory frameworks for timber concessions logues will embrace a wide range of measures aimed at detecting, promote economic development, sustainable forest use, and envi- preventing, and suppressing illegal forest activities, with particular ronmental protection. Forest concessions in both tropical and emphasis on strengthening civil society and key actors such as the temperate countries have not often yielded an equitable distribu- judiciary and law enforcement branches and national forest man- tion of economic benefits, and intensive exploitation of forests agement agencies. Initiating constructive dialogue will require frequently has led to the unnecessary loss of both timber and non- thoroughly documented analysis of the negative social, environ- timber values. Many forest-rich countries need to reform their mental, and economic impacts of illegal activities. This analysis concession policies to improve allocation of concession contracts, will contribute to NFPs and independent certification processes require better management by concessionaires, and establish effec- and underscore the importance of these issues during the Bank's tive oversight by government or independent agencies. dialogues with client countries, the development of CASs, and While several countries have set up transparent concession structural adjustment or policy-based lending. award bodies--such as Ghana's Timber Rights Evaluation Com- Bank lending operations--including its support for NFPs-- mittee--the participation of civil society on these committees is could also support specific policy reforms and investments funda- often lacking. Tender and auction systems have also been intro- mental to SFM planning that make illegal activities more difficult. duced in many countries. These investments include activities such as regular inventories, Contract operational plans that explicitly define the environ- boundary markings, and monitoring and evaluation systems. Such mental and social responsibilities of concessionaires can promote A-24 SUSTAINING FORESTS A DEVELOPMENT STRATEGY BOX A3.8 Forest Law Enforcement in the Mekong Countries Forest crime (illegal logging, arson, and smuggling of timber and interests, conservation groups, and government ministries to discuss endangered species) is a major problem across Southeast Asia and is strategies, technologies, and legislative measures to improve law particularly severe in Cambodia. In 1997 illegal forest activities were enforcement. so serious that the IMF suspended a support program largely because In conjunction with the larger World Bank effort to review the of the government's failure to collect revenues from the logging forest practice code in Cambodia, the dialogue leading up to the sym- industry. The IMF reported that, in 1996, as a result of illegal logging, posium had played a role in the government's January 1999 decision the government lost revenues of more than US$100 million, an to stem rampant logging in the country by canceling 12 concessions amount equivalent to more than one-third of total budget revenue covering more than 2 million ha of tropical forests and to introduce that year. A subsequent government study estimated that if current a strong forest regulatory system and a more transparent bidding logging trends continued, the commercial potential of Cambodia's process for timber concessions. Cambodia launched a campaign to forests could be decimated within five years. contain wildlife poaching in its national parks and, in collaboration Following a partially World Bank/WWF Alliance­funded dia- with Lao PDR, Thailand, and Vietnam, established more effective logue with governments of Cambodia and Thailand, and parallel cross-border control and forest-product distribution monitoring discussions undertaken by Bank staff in the Lao People's Democratic systems. With help from Britain's Department for International Republic (PDR) and Vietnam, in June 1999 the Cambodian govern- Development, the World Bank, UNDP, and FAO, Cambodia has since ment hosted a Mekong Basin Symposium on Forest Law Enforce- established a Forest Crime Monitoring Program. ment. With support from a Netherlands grant to the World Bank, the Source: World Bank data. symposium convened representatives of local communities, business more satisfactory management of concessions. To be effective, these greater transparency and accountability in managing and protect- plans need to be legally binding and should be jointly developed by ing forests to meet the objectives of society as a whole, rather than concession holders and affected communities. To increase govern- only the objectives of powerful elite groups. Involving civil society ment oversight of concessionaires, new laws in Indonesia, Malaysia, in the monitoring process will be essential to this. the Philippines, and Russia mandate that concessionaires deposit There are two major issues for the Bank to consider here: performance bonds. When inspections carried out by forest officials find noncompliance, fines are deducted. However, much remains to 1. What practical means are available to involve civil society in be done to implement these regulations in the field. monitoring forest operations? To promote environmental protection, concession award 2. What broader forest landscape planning approaches might be processes need to take into account national environmental laws, as used to involve civil society in decisions to be made in this area? in Zambia's Forest Act. In some countries, environmental manage- ment plans are developed in lieu of forest concessions, as is hap- Certification and Independent Assessment: A Vehicle pening to a limited extent in Indonesia and Papua New Guinea. for Enhanced Civil Society Involvement Nontimber and environmental values can be incorporated in the new laws and enforced through improved supervision and inspec- One of the more significant forest developments of the 1990s was tion procedures. the emergence of independent third-party monitoring of forest Policy changes need to be coupled with addressing the technical operations (box A3.9). These systems reflected growing interna- competency of forest officials, eliminating corruption in field tional recognition that centralized control and management of for- operations, and involving local communities and their local gov- est resources by weak government forest services had failed to stem ernment representatives in forest planning and management, escalating deforestation or ensure SFM. In many cases, forest certi- including the concession award process. Governments also need to fication has also become a powerful agent for broader civil society take advantage of growing opportunities to engage independent participation in forest management and planning. third-party certification bodies in monitoring forest harvesting Until the late 1990s, the FSC was the main body promoting inde- and management operations. pendent third-part assessment of forest operations and the perfor- mance of forest companies. Since then, a number of competing schemes have emerged. Essentially, all of these reflect a growing civil BUILDING A ROLE FOR CIVIL SOCIETY society concern to be more directly involved in decisions about how IN SUSTAINABLE FOREST MANAGEMENT and by whom forests will be managed--and for whose benefit. A number of specific issues arise in relation to the Bank's Greater involvement and sharing in forest management and use by involvement in certification: local communities and others will raise the level of benefits they derive from forests--and the overall social value of forests. In addi- Under the principles and criteria set out above, the Bank has tion to changes in policy and approach, there is also a need for accepted the principle of independent monitoring of forest INTEGRATING FORESTS IN ECONOMIC DEVELOPMENT A-25 BOX A3.9 Independent Certification Independent certification is emerging as an important tool to identify Second, an independent body must validate that these standards are and promote improved forest management practices. This is a process being met in field practice. under which a third party audits the performance of forest manage- Management practices will vary considerably from one country or ment to determine if it meets broadly accepted environmental, social, region to another. In some situations, market benefits will encourage the and economic standards. Independent certification provides an certification of forests and labeling of products through an internation- opportunity to send clear and transparent signals about forest man- ally accepted system.Elsewhere,supportive public policies will be needed agement to stakeholders, whether they are consumers, governments, to create conditions and incentives for managing to meet internationally investors, or local communities. accepted standards. In other settings, such as parts of South Asia, alter- Independent certification requires, first, defining forest manage- native nonmarket systems of verification may be needed to ensure that ment standards--through the participation of all major stakeholders-- high standards of forest management practice are being followed. that are compatible with globally applicable principles that balance economic, ecological, and equity dimensions of forest management. Source: World Bank data. operations. However, the Bank has not endorsed any particular for assessing certification firms, and it is evident that these will certification system but will assess particular approaches in require that due weight be given to track record when relation to their compliance with these principles and criteria. formulating a choice. The Bank recognizes the ongoing "mutual recognition" debate In projects involving certification in which the Bank is invest- in the international community to harmonize acceptable stan- ing, it will need to take responsibility for decisions on the crite- dards and approaches and expects that these principles and ria to be employed in certification, and also for ensuring that criteria will contribute to these discussions. these are then applied appropriately in the field. This will be There is some debate on the issue of whether a fixed time limit supported by material in the Sourcebook and in other material should be applied to achievement of certification. The new on what the standards and norms are, derived from the growing Operational Policy will require the negotiation and disclosure international literature on this subject. Moreover, it is almost of a time-bound action plan acceptable to the Bank wherever certain that any project in which the Bank was intending to be support is given to improving operations that do not yet meet involved with forest operations and certification will be the requirements of an acceptable certification standard. assigned Environmental Category A. This means it will require There is an issue of how firms suitable for certification should be an advisory panel, as required in the Environmental Assessment selected; in particular, the weight that should be given to a OP, and in cases involving certification this panel would include proven track record in certification when selecting firms. It expertise on certification, and thus would allow for indepen- would not be advisable to insist that any firm wishing to com- dent evaluation of the scheme being considered. pete for a certification contract should necessarily have a track The question of adding chain-of-custody requirements to certi- record, because this would exclude new firms from entry, even if fication has been raised. Chain of custody is a valid and useful they had clear capability and access to experienced staff. It might activity, which serves the purpose of verifying the origins of also result in a virtual monopoly for some existing certification wood and allows for control over illegal logging operations. The firms or agencies in some locations, and the Bank has consis- Bank has used chain-of-custody log tracking in places such as tently tried to avoid this outcome by ensuring that objective Papua New Guinea where underreporting and other corrupt standards of performance and process became the criteria for practices were issues, and where it was possible to attain cover- evaluation, not mere existence: this also relates to the first issue age at all export points. However, the need for this, and its prac- raised above--the need for the Bank to avoid endorsing a par- ticability, should be assessed on a case-by-case basis; it will not ticular firm or agency. There is also the question of country always be possible to attach chain-of-custody activities. One fac- capacity building or ownership. If client countries or regions tor in the decision will be the extent of coverage of all forest develop systems that clearly meet all the performance standards operations intended under the investment being considered. we require, then giving a priori mandatory preference to estab- Certification can be applied on the concession or field operation lished outside bodies/systems would potentially inhibit country level, and it will address the issue of illegal removals from those ownership for good forest practice and the transparency of operations. Chain of custody relies heavily on sufficient coverage robust certification processes. However, selection of firms to to be able to stem the tide of illegal timber in aggregate, and undertake certification under Bank-financed projects will be therefore demands heavy and broad investment to achieve. subject to standard due diligence provisions under the procure- ment guidelines requiring that assessment of capability of firms Many controversies remain about the merits, cost-effectiveness, to be included for consideration is carried out. More generally, political acceptability, and impact on forest management of these the forthcoming Sourcebook will provide criteria and guidelines alternative approaches.However,there is now widespread recognition A-26 SUSTAINING FORESTS A DEVELOPMENT STRATEGY FIGURE A3.1 Pyramid Model for Assessing Progress Toward Sustainable Forest Management (SFM) Verification of SFM Audit, certification, or participatory review undertaken Extension Promotion of SFM to consumers and stakeholders undertaken Instruments Coherent set of "carrots and sticks" for implementation in place Policies Forest policies, standards for SFM, and legislation in place Roles Stakeholder roles and institutions in forestry and land use negotiated and developed Foundations Property/tenure rights and constitutional guarantees Market and investment conditions Mechanisms for engagement with extrasectoral influences Recognition of lead forest institutions (in government, civil society, private sector) Source: International Institute of Environment and Development. by many governments and industrial companies that independent forest owners and user groups to combine law enforcement and field certification provides a useful mechanism for assuring consumers inspections with forest extension and training. Combining these and environmentally concerned citizens that the forest products they functions will help all groups comply with the law and ensure the purchase are derived from forests that have been certified as being active participation of key forest stakeholders with law enforcement. managed under high standards of sustainable management. A key The Bank should actively seek opportunities to foster national World Bank/WWF Alliance global target is to achieve 200 million ha forest harvesting and management standard-setting processes that of independently certified production forests by 2005. involve all stakeholders. Through its Alliance with WWF, the Bank In some field situations, it will be possible to proceed straight to is supporting such initiatives in 15 Bank member countries. A cen- independent third-party certification of forest harvesting and tral tenet of this strategy is that the Bank no longer can afford to go management operations, as has already happened in many devel- it alone in this work. One of the potentially most productive uses oped countries.4 In other cases, it will be necessary to put in place for Bank resources will be to develop partnerships with national clearly defined legislative and forest administrative institutional governments, local communities living in and near forest areas, policy frameworks before independent third-party certification of NGOs, and industry to build capacity for multistakeholder forest forests can be meaningfully applied. In such cases, provision needs monitoring institutions. to be made to ensure that acceptable improvements are being made Private industry has responded to public concerns about forests during a transition period before full certification is achieved. by formulating codes of conduct and acceptable management Real progress toward acceptable and sustainable forest manage- practices that are gaining wide acceptance among forestry corpo- ment will require commitment by national governments to put rations, particularly in the industrial countries. Dialogue continues truly multistakeholder-based, independent forest monitoring and on possibilities for mutual recognition among these largely self- evaluation arrangements in place within specified time frames. The regulating and more independent and transparent third-party main functions of such multistakeholder representative arrange- monitoring mechanisms.5 ments will be to conduct periodic, systematic analyses of progress Forest management, for both exploitation and conservation toward defining acceptable national standards for SFM, completing objectives, depends critically on matters far from the forest itself. It essential legislative and institutional reforms, and monitoring field depends on the extent and quality of the enabling policy, legal, and performance against these newly defined norms and standards. institutional conditions--on good forest governance. In an effort The Bank can help build sustainable management systems by to introduce a simple but robust means for stakeholders to work supporting the development of national standards for certification together in assessing and planning these key enabling conditions, and chain-of-custody schemes. The Bank could also support private the World Bank introduces the "Pyramid"(figure A3.1), which was INTEGRATING FORESTS IN ECONOMIC DEVELOPMENT A-27 developed in the framework of the World Bank/WWF Forest whether and under what conditions the Bank should engage in the Alliance. The objective of the Pyramid is to offer a framework to larger forest management issue. stimulate participatory assessment and target setting in forest governance at the country level. The concept behind this analytical Sustainable forest management. While the conservation of criti- framework is that some elements of good forest governance are cal natural forest areas is a key priority for the Bank, the Bank rec- common to a wide range of nations. By grouping these elements in ognizes the reality that the majority of forests around the world several tiers of complexity, the Pyramid can serve as a country-level that are accessible and commercially valuable will be used for tim- planning tool in forest management. In multistakeholder ber production, in all likelihood, sooner rather than later. The Bank processes, the tool can be used to assess the status of forest gover- has no interest in accelerating this likelihood and acknowledges nance using a scoring system to identify what is working, what is that the incentives for these operations are usually very strong for missing, and what needs to be done for different elements of forest both governments and the private sector. governance. The tool is intended to fill the "forest governance gap" However, the Bank is prepared to use its influence to improve between assessing and accelerating field-level progress in SFM, and the quality and sustainability of these operations and to direct a international policy, assessment, and reporting. By filling this more equitable share of the resulting benefits toward local com- gap, stakeholders' capabilities to deliver national governance-- munities living in and near forest areas. Very often in this sector, and potentially improved international forest governance--can the real choice available is not between doing logging and doing be improved. something less invasive and damaging to the forest, especially when To assess the governance situation in Bank client countries prior these alternatives have not been developed to large-scale market to a forest operation, Bank task managers are interested in using viability. Rather, the choice is between doing logging reasonably this tool to analyze the elements of forest governance and in prior- well or doing it very destructively, so that conversion of the logged- itizing strategic areas for cooperation with these countries on for- over site to other uses becomes almost inevitable. est sector issues. Piloting countries include Kazakhstan, Armenia, The term "sustainable forest management" is useful at a broad and Cambodia. conceptual level since it conveys an intention to retain a viable, The individual tiers of the Pyramid are seen as mutually functioning forest on a given site in perpetuity. However, the term reinforcing and not necessarily so rigidly linked as to form pre- can be problematic for policy purposes because there is no formal conditions. The Pyramid concept acknowledges different stages definition of the concept to which all the major stakeholder groups and approaches in building improved forest management. It have agreed and that can be applied across all forest types and avoids forcing the pace with unsustainable solutions beyond situations. For example: the absorptive capacity of the governments and communities involved. It also helps identify milestones to acknowledge incremental gains in places in which forest governance problems In the Bank's 1991 Forest Strategy document, SFM is defined as are greatest. the use of forests without undermining their use by present and future generations. Different systems of management are required for each category of forest depending on the intended Implications for the Bank's Forest Policy output. European Council Regulation (EC) No 3062/95 of December 20, Independent certification. The Bank's endorsement of the prin- 1995, on operations to promote tropical forests, Article 2, ciple of independent certification or verification of forest harvest- defines SFM as: "The management and use of forests and ing and management operations has significant implications for its wooded land in a way, and rate, that maintains their biodiver- Forest Policy. Throughout the consultative process leading to the sity, productivity, regeneration capacity, vitality and their development of this revised strategy, controversies continued potential to fulfill, now and in the future, relevant ecological, about the implications and impact of the Bank's 1991 logging ban economic and social functions, at local, national, and global in primary moist tropical forests. On one hand, it was argued that levels, without causing any damage to other ecosystems." the ban sent a signal to national governments that the Bank was not prepared to condone unsustainable logging in tropical forests. On the other hand, as OED concluded, the ban had a "chilling These definitions illustrate the range of views on how this con- effect" on Bank involvement in production forests. As a result, the cept should be defined. The first has the advantage of simplicity Bank missed many opportunities to influence national forest poli- and recognizes the vital importance of linking the form of man- cies in ways that could have led to improved governance and agement to the output intended from the particular forest. How- improved conservation and development outcomes through more ever, it offers little precision as to what should be retained under a sustained resource flows fostered by improved technologies and sustainable program. The second definition has the advantage of institutional approaches. more precision in what is desired but lacks the flexibility to be An important outcome of the regional consultations (appendix 2) adapted to particular forest types, locations, and purposes. and discussions among the Bank and leading conservation The debate as to what should comprise the definition of SFM can- agencies--including WWF and IUCN--was the Bank's decision to not be resolved here. Of course, there is a profound difference endorse independent certification as a key tool for effective forest between retaining a forest for a single major purpose--for example, conservation and management. Independent certification is water catchment protection--and managing a forest to retain its full thought to be a promising pathway to resolve the dilemma of range of ecological and social values, as occurs under multiple-use A-28 SUSTAINING FORESTS A DEVELOPMENT STRATEGY forest arrangements. Yet, both these situations are variants of SFM. approach to forests. The cross-sectoral approach addresses policy, This reality suggests that the definition of sustainability must be institutional, and structural issues in broader, nonforest sector adapted to local conditions, forest types, needs, and locally deter- programs that have particular influence on forest ecosystems and mined management priorities. Definitions designed for field applica- forest-dependent people, and integrates forest concerns in these tion under conditions in which some form of use is in process, or programs. The policy should note that all such Bank investment imminent, are most useful. and sector adjustment lending activities that impact forest areas The approach proposed for Bank policy is that, in each particular and/or affect forest peoples are subject to the application of the case, local stakeholders must be consulted and agree on what is to be relevant Bank safeguards, in particular, the environmental assess- sustained in the forests in question. This question must be posed ment provisions embodied in OP 4.01, which require that impacts among a broader set of questions relating to how the forest should of the proposed activity on the natural environment, human be used, by whom, and for what purposes. These questions are ones health and safety, and social aspects are taken into account, refer- in which existing Bank safeguards in the areas of environmental encing OD 4.20 (Indigenous Peoples), and OP 4.11 (Cultural assessment, indigenous peoples, resettlement, natural habitats pro- Property), OP 4.12 (Involuntary Resettlement), and OP 4.04 tection, and cultural property also must be applied. Standards, crite- (Natural Habitats). OP 4.04 requires the Bank to abstain from ria, indicators, and methods of assessment must be developed that supporting projects that, in its opinion, involve the significant will ensure that the agreed sustainability objectives are met. conversion or degradation of critical natural habitats. In the defi- nitions accompanying OP 4.04, critical natural habitats are Where should sustainability be pursued? The 1993 Bank Forest defined as existing Protected Areas and areas officially proposed Policy, OP 4.36, attempted to address the Bank's involvement in by governments as Protected Areas, areas recognized as protected forest operations by precluding the Bank from any direct involve- by traditional local communities, and sites that maintain condi- ment in logging operations in a defined category of forest (in that tions vital for the viability of these Protected Areas. The critical case, primary tropical moist forest) and then requiring govern- natural habitats are also defined in listings developed by authori- ments to make generic commitments to the pursuit of SFM. The tative sources on the basis of evaluations of factors such as species OED review, and further analysis done for this 2002 strategy, richness; the degree of endemism, rarity, and vulnerability of showed that this approach was ineffective and counterproductive component species; representativeness; and integrity of ecosystem to the broad goal of improving forest outcomes in the forests of processes. Wherever feasible, Bank-financed projects in all sectors most concern. As noted earlier, one major consequence of this pro- are sited on lands already converted, that is, excluding any lands vision in the 1997 policy was that, although the Bank has major that were specifically converted in anticipation of the project in commitments to the achievement of improved and more sustain- question. The Bank does not support projects involving the sig- able forest management in natural forests, in actuality, the Bank nificant conversion of any natural habitats6 unless there are no has not been present in important forest areas in which this goal feasible alternatives for the project and its siting and unless com- should be pursued. prehensive analysis demonstrates that overall benefits from the Interpretations of the intent of this provision varied widely-- project substantially outweigh the environmental costs. Where both inside and outside the Bank. Some saw it as a very narrow pro- habitat conversion or degradation becomes necessary, the project vision confined to the exclusion of actual financing of logging must include mitigation measures acceptable to the Bank. Such equipment or other inputs for operations in primary tropical moist measures include minimizing habitat loss, for example, through forests. Others believed it meant that the Bank should avoid any strategic habitat retention and postdevelopment restoration, and involvement in forest management that involved logging by other establishing and maintaining an ecologically similar Protected parties in tropical forests in general. The 1993 OP 4.36 definition of Area. The Bank accepts other forms of mitigation measures only primary tropical moist forests was questioned by both ecologists and when they are technically justified. foresters. The policy did not make clear what was really intended The provisions on dialogue and consultation as prescribed in under this definition for the great majority of natural forests. the Natural Habitats OP 4.04, the Resettlement OP 4.12, and the As noted above, the alternative to generic policy prescriptions Indigenous Peoples OD 4.20 also apply in the case of forests. based on rigid definitions is to adopt a more flexible approach that Under these OPs, the Bank encourages borrowers to maintain an will rely on decisions made by stakeholders at the country and local open dialogue with stakeholders from the earliest stages of proj- levels on what forest is to be protected, used sustainably, or con- ect development and to provide stakeholders with appropriate verted for other purposes, and by whom. In such an approach, the information and opportunities to take an active role in planning, Bank would involve itself in production aspects of forest opera- designing, implementing, monitoring, and evaluating projects. tions but only in noncritical forest habitats where governments The Bank anticipates and engages with the borrower in an itera- require that such operations are achieving progress toward poverty tive learning and refinement of the policy environment through alleviation, criteria for sustainability, protection of local people's ongoing dialogue and continuous feedback from stakeholders land tenure rights, and adoption of recognized standards of sound during project implementation. Attention will be given to the governance. The following provisions would frame an acceptable delineation of forests of particular social and cultural signifi- policy approach for the Bank to adopt in this area: cance. In particular, utilizing the provisions of OD 4.20, the To deal with the impacts of broad economic and cross-sectoral Bank will address the rights and usage access of indigenous activities on forests, the Bank is promoting a cross-sectoral forest dwellers. INTEGRATING FORESTS IN ECONOMIC DEVELOPMENT A-29 A P P E N D I X F O U R Protecting Global Forest Values s was presented in appendix 3, forests provide high-value A During the 1990s, the Bank, in close partnership with the GEF, services nationally and globally. The challenge is to build invested US$1 billion in environmental projects, of which approx- these values into markets and the decisionmaking imately US$380 million was invested in biodiversity protection in processes of governments and other institutions. Appendix 3 delin- forest environments. Since 1997­98, funding for biodiversity has eates the Bank's strategy for incorporating some of these values in fallen off dramatically (figure A4.1). This downturn could be cycli- national programs. Appendix 3 notes that there also is a need for cal, or it may indicate a longer-term decline in funding. The decline global programs based on the same principles of markets and local warrants careful monitoring. On a more optimistic note, it is and national stakeholder participation. Such global programs will apparent that today governments in more countries recognize the help ensure that global forest values, such as biodiversity and car- importance of establishing and maintaining Protected Area sys- bon sequestration, are valued properly in domestic programs. tems. For example, in the Latin America region, during the last Appropriate valuation will require building international markets decade, the average land area covered by Protected Area designa- for these services and securing concessional funding flows for con- tion rose from 5 to 12 percent. servation and protection. The World Bank has an important role to The Bank's commitment to preserving biodiversity was implicit play in facilitating these requirements. in its April 1998 decision to adopt World Bank/WWF Alliance year 2005 targets of increasing global Protected Areas by 50 million ha and bringing an additional 50 million ha of existing Protected PROTECTING BIODIVERSITY THROUGH MARKET Areas under effective management. Substantial progress toward the MECHANISMS AND FUNDING first target has already been achieved. The second is proving more elusive, largely due to a combination of poor governance and Forests contain at least two-thirds of Earth's terrestrial species. policy failures that underlie developmental and other threats to Although the greatest diversity occurs in the tropics, the wealth of Protected Areas. species, wherever it occurs in the world, is heavily dependent for In recent years, numerous attempts have been made to develop habitat on primary forests. Forests can be grown successfully in market-based financial mechanisms aimed at providing payments monoculture or limited-species range associations for some from the international community for environmental services to purposes. However, the maintenance of significant areas of plant developing countries--especially to forest-dependent peoples diversity ensures a sufficiently wide range of tree species to buffer for the global biodiversity value of their forests. International forests and helps ensure their function in regulating landscapes sources of grant financing exist, and there have been experiments from disruption by pests, diseases, and the normal vagaries of cli- with leveraging these further via debt-for-nature swaps. Other mate. The biotic diversity of forests is the base for selecting and experiments have involved realizing the biodiversity values of breeding plants and animals for a range of environments and forests via ecotourism, pharmaceuticals, gene pool activities, and human uses. This genetic bank is drawn on to strengthen the yield other noninvasive forms of extraction. Initiatives are under way and resistance of food crops and for materials of medicinal, phar- that focus on creating new international financing instruments maceutical, and industrial value. The evidence is that people have to support forest biodiversity protection, such as the Critical tapped only a fraction of the potential of this genetic resource. At Ecosystems Protection Fund. the same time, this genetic resource is under constant threat. Scien- Some concessional financing is developing, and the private sec- tific assessments have suggested that 10 percent of the world's tree tor has some interest in buying conservation concession rights to species (approximately 8,700 of the between 80,000 and 100,000 large blocks of forest. These concession rights are leases at "market" species known to science) are under imminent threat of extinction. rates and provide a direct incentive for conservation. Ideally, the © 2004 The International Bank for Reconstruction and Development/The World Bank A-31 FIGURE A4.1 Bank/GEF Investment in Biodiversity Projects Biodiversity Funding All Sources FY88­99 500 450 Cofunding 400 RFTF 350 IBRD 300 IDA 250 GEF millions $200 150 100 50 0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Bank Approval FY (FY99 data preliminary) Note: To date, the international flow of funding for forest biodiversity has been modest compared with the demand for the more immediately salable products from forests, or from the land (in converted form) on which forests are located. The intrinsic valuation placed on biodiversity by national governments in the Bank's client group, and by many of the stakeholders living in or near the forests, is far lower than that ascribed to it by the global international community as a whole. This gap highlights the importance of linking payments for the global value of biodiversity with other mechanisms, such as payments for carbon sequestration, and the need for concessional sources of funding to establish and maintain conservation and Protected Areas. Source: World Bank 2000h. funds generated from these concessions are used for social devel- funding needed to meet their needs. The Bank also can remove opment and poverty alleviation in the areas surrounding the Pro- impediments to private investment in ecologically friendly enter- tected Areas. This use can be facilitated by directing the funding to prises such as ecotourism. In addition, the institution can assist social and conservation development funds that are dedicated to governments to establish the legal mechanisms to develop conces- providing services to the people in areas surrounding the parks and sion leasing for conservation and the funding mechanisms to to maintaining the management of the parks. direct the benefits to local peoples for social development. Estimates of the amount of private international funding avail- Another potentiality for the Bank is to help develop financing able for such concessions funding range into the billions of mechanisms to support conservation- and protection-based activ- dollars. The Nature Conservancy generated US$700 million to ities. The Bank has supported the development of appropriate acquire and protect habitats in the United States and elsewhere. regulatory and market structures to facilitate the actual delivery of Facilitating such leases in developing countries could generate a environmental services, as in the Ecomarkets Project of Costa Rica. significant flow of funds to compensate governments and local The Bank is exploring a range of ways to create effective markets peoples for the foregone timber rights to these areas. In some for ecosystem services, including tradable rights approaches. cases, sustainable or selective logging can go hand in hand with An example of this approach is the use of dedicated trust funds the conservation of biodiversity.7 to support specific objectives. Used correctly, such trust funds can A recent study conducted by Conservation International has be a powerful incentive for additional investment in these activi- demonstrated that tropical parks have been effective in protecting ties, and, potentially, also can operate as an effective vehicle for ecosystems and species within their borders.8 They have been par- disbursing the funds generated under external compensatory ticularly effective in preventing land clearing, the most serious arrangements discussed above. threat to biodiversity. This success has taken place despite the fact In many countries, the Bank already is financing community that 70 percent of the parks had people living in them, and just development programs that could benefit from such additional over 50 percent had contested ownership of some part of their funding. The Bank also can facilitate the markets for debt-for- areas. Nearly 70 percent of the parks were accessible by either nature swaps and help seek bilateral concessional funding consis- major road or river. Clearly, parks can function as biodiversity tent with agreed NFPs. Through its convening power with the havens even with the presence of people. However, it was found private sector and foundations, the Bank can help bring together that park effectiveness correlated directly with basic management concerned parties to fund conservation parks and seek innovative and direct compensation to local communities. This finding internal and external funding mechanisms. MIGA and the Bank suggests that even modest increases in funding could increase the also can provide full or partial risk guarantees against failure to ability of parks to protect biodiversity. honor contracts or the imposition of arbitrary regulatory change. The World Bank's comparative advantage is not in directly These could help reduce the political risk on the conservation con- financing parks, although the GEF has an important role to play cessions financed by international investors. here. In its country dialogues on investment and expenditure However, the Bank's most important role is to ensure that for- programs, the Bank can help governments develop policies and est policies and cross-sectoral programs and policies, including funding mechanisms to ensure that parks receive the minimum investments in infrastructure, do not directly or indirectly harm A-32 SUSTAINING FORESTS A DEVELOPMENT STRATEGY BOX A4.1 Conservation Trust Fund for Papua New Guinea In December 2001 the GEF approved US$15 million of grant-based other groups. New nominations for the board will be taken at funds to support the establishment of a Conservation Trust Fund regular intervals. Government ministries will have two seats on (CTF) in Papua New Guinea. The CTF will be a component in a this nine-member board and will be free to bring landowner- major new forestry and conservation project being financed under based projects to the CTF for financing. However, the government Bank lending, supported by the GEF funds. An international NGO, has agreed to take no direct role in the receipt or management of The Nature Conservancy, has worked closely with local NGOs and the funds that the CTF collects and disburses. other civil society groups to design and establish the CTF. The CTF 2. The CTF has been set up to operate in perpetuity. It will use the will support conservation-oriented projects at the local level. These bulk of the initial GEF funds to finance an endowment that will projects will be implemented primarily by landowner groups that will establish a perpetual income stream. Part of the administrators' work with NGOs and others to develop financially and technically responsibilities will be to raise additional funds from donors, the viable alternatives to large-scale logging or other resource projects in private sector, and other sources to enlarge the endowment. their areas. The CTF fills a major need in Papua New Guinea: acces- Specific donors will be able to earmark some of their funds for sibility to investment finance for clan groups who wish to develop specific purposes. their resources in a conservation-based and sustainable way. To date, 3. The CTF will be professionally managed, externally audited, these groups have had few alternatives but to accept large, externally and transparent in its operations and reporting. A detailed consti- financed operations on their lands. In many cases, these operations tution, operations manual, and deed of establishment will have not benefited the landowners. enshrine these principles. The design of the CTF is innovative and interesting in several Source: World Bank 2001f. ways: 1. The operation of the CTF will be overseen by an independent board of management, selected from civil society, church, and high-conservation-value areas. The Bank also can help develop the Three types of activities in forests can be considered within the market for carbon sequestration, which can be directly linked to climate change framework: carbon sequestration, emissions avoid- restoring and protecting forests. ance, and carbon substitution. Forestry projects are likely to be more cost-effective than other options in offsetting carbon emis- sions. Such projects could have a significant impact on sustainable FACILITATING THE BUILDING OF MARKETS development in many of the Bank's client countries. Taking into FOR FOREST CARBON account the considerable uncertainties and controversy that prevail in this area, the Bank needs to consider the perceived value of forests New possibilities to capture the value of forests' ecological service offered within the framework of the UN Convention on Climate have surfaced within the framework of the UN Convention on Cli- Change. As the 1997 Kyoto Protocol comes into effect, it will help mate Change. These possibilities are based on the capacity of develop markets for carbon credits from forestry through new forests to sequester carbon and hold it over long periods. plantings and restoration. While the final details are yet to be nego- Although some dispute remains on the nature and extent of tiated, the protocol envisions a system under which sequestered global climate change, consensus is growing that emissions of green- carbon would be credited against CO2 emissions. Those credits house gases need to be reduced. The bulk of global carbon emissions would be tradable across national boundaries, creating a new market. comes from fossil fuel consumption in industrialized countries. The If such arrangements are eventually extended to Avoided Defor- Bank has programs and an OP that give high priority to the reduc- estation, especially tropical deforestation, it also will reduce loss of tion of carbon emissions from industrial and domestic energy use. biodiversity and other local environmental services, such as water- However, deforestation and subsequent land-use change also are sig- shed protection. Preventing deforestation can yield multiple nificant. In the tropics, forest loss causes 10 to 30 percent of global environmental benefits. The economic consequences of climate carbon dioxide releases. Afforestation is regarded as an efficient change are expected to fall disproportionately on the poor. Climate means of sequestering atmospheric carbon. Moreover, existing nat- change will greatly affect the tropics through reduced rainfall and ural forests and forest soils are very large stores of carbon. Keeping higher temperatures. Food production in these regions is likely to such forests intact or sustainably managing them could partially mit- suffer. Although some adaptation is possible, the poor are unlikely igate climate change--while providing new revenue streams for to have the means to increase the use of fertilizers or water to national and local economies. It is evident that, in the near future, sustain their productivity. Natural disasters such as flooding and forests will have a major role in storing carbon to help mitigate cli- landslides often affect the poor most of all and plunge them more mate change. The Bank will need to take a role in the development deeply into poverty. and facilitation of the market systems that will realize forests' poten- As the Kyoto Protocol has to date failed to recognize Avoided tial to fulfill this function. Deforestation as an element of the CDM, there will be far less PROTECTING GLOBAL FOREST VALUES A-33 BOX A4.2 Prototype Carbon Fund In 1999 the World Bank Group pioneered the PCF to advance sus- entities and US$5 million each from 17 major private companies. The tainable development through real emissions reductions purchase PCF invests in renewable energy and energy efficiency improvements deals to help identify the most efficient market rules, methodologies, that reduce greenhouse gas emissions as compared with business-as- and business procedures to create a market in project-based emis- usual outcomes. These emissions reductions will be independently sions reductions. This market will be created under the Joint Imple- verified and certified and transferred back to the fund's investors in the mentation and CDM mechanisms of the Kyoto Protocol. form of emissions reduction certificates rather than cash. The PCF was established in April 2000, and by the end of 2001 had Source: Prototype Carbon Fund 2001. subscriptions of US$10 million each from 6 governments and public external financing for forest carbon activities in the short run. often conserve rather than overuse the resources that they manage. Nonetheless, it is imperative that the international community Approaches to SFM should not be based on assumptions of a fund forestry activities that reduce net carbon emissions. In the mutually reinforcing "downward spiral" of poverty and forest long term, the world's interest in abating greenhouse gas emissions degradation that can be halted only by limiting or preventing use is likely to remain strong, and forests should play an important of the forests by the poor. role. This interest suggests that, sooner or later, market-like mech- Through ESW, policy dialogue, and support to Protected Area anisms will be created to encourage forest-based carbon storage or programs, the Bank will seek to promote improved understanding abatement. In anticipation of this developing market, in 2000, the of the linkages between human activity, landscape change, and Bank was catalytic in establishing the PCF (box A4.2). preservation of biodiversity. Much of what ecologists and foresters The Bank acts as the intermediary in helping to negotiate fair might consider to be degradation or depletion of a forest resource and reasonable prices for both buyers and sellers of emissions can be considered as transformation and even improvement of the reductions financed by the PCF. Developing countries and their resource by those who depend on it for their livelihoods. public and private entities benefit by acquiring cleaner technolo- The poor face their own environmental problems, and these gies and making them more profitable than their fossil fuel alter- need to be addressed separately from environmental policies seek- natives. Industrial country investors gain by paying a lower price ing to satisfy concerns about global values. To address these local for emissions reductions than is available inside their own compa- concerns means moving away from macroscale approaches and nies or countries. policies to a more situation-specific focus. This shift requires The PCF places the Bank and its partners in a pivotal position developing an understanding of the protective mechanisms that to further the development of pilot forest-related carbon schemes. local users have adopted and the resources that they value and seek The options offered through the PCF, which also could embrace to conserve. Recent Bank-supported initiatives in Costa Rica social issues, are quite promising. Although at present the applica- exemplify moving in this direction. tion of the PCF to forests is limited to the Eastern European region, Notwithstanding continuing and legitimate global concerns the fund could significantly increase incentives to effectively man- about tropical deforestation, scientific evidence from CIFOR and age and conserve forests. While the Bank certainly has a role in other Bank-supported CGIAR research centers suggests that tropi- developing such prototype funds, in the future, the Bank should cal rainforests are more robust and better able to absorb and refrain from operating these markets. Other institutions, both pri- recover from use than was acknowledged in the past. Much of the vate and public, could have the mandate to carry these markets remaining tropical forest genetic resources exists in managed land- forward. scapes rather than in Protected Areas. It may be logical to focus more conservation efforts on sustainable management of what is in use. Many of these locally managed resources have high levels of FOSTERING LINKAGES BETWEEN POVERTY biodiversity. ALLEVIATION AND FOREST CONSERVATION The Bank is advocating a change in approach to conservation. This new approach would recognize the importance of forest uses The concerns with biodiversity conservation that have shaped so to poverty alleviation as well as the importance of biodiversity con- much of GEF, Bank, and World Bank/WWF Alliance assistance to servation. The conservation objectives for forests that are of value forests have focused primarily on global conservation values. These to local people appropriately could shift from being exclusively concerns reflect predominantly Northern concepts and donor pre- protective. Sustainable systems can be encouraged that produce occupations and have, in some situations, constrained the pursuit livelihood benefits in ways that are as environmentally sensitive as of forest uses that can alleviate poverty. Future Bank strategy will possible. For example, some landscapes found in parts of Southeast be based on the recognition that forest degradation and depletion Asia maintain a patchwork or mosaic of agricultural and agrofor- are not necessarily consequences of poverty. They can be as readily est systems that, while less species rich than forests, do preserve precipitated by rising incomes. In addition, the actions of the poor much more biodiversity than either plantations or clearance for A-34 SUSTAINING FORESTS A DEVELOPMENT STRATEGY crop agriculture. The Bank-supported Meso-American Biological ecosystems for present and future generations, (b) exclude Corridor is one example of this approach. exploitation or occupation inimical to the purposes of designation This change in focus is implicit in the evolving perceptions of of the area, and (c) provide a foundation for spiritual, scientific, Protected Area strategies that are being pursued by a number of the educational, recreational, and visitor opportunities, all of which key conservation partners of the Bank, including WWF and Con- must be environmentally and culturally compatible. servation International. Category III: Natural monument: Protected Area managed mainly This change in emphasis is in line with previous IUCN efforts for conservation of specific natural features. Area containing specific to develop an approach to the categorization of Protected Areas natural or natural/cultural feature(s) of outstanding or unique that recognizes possibilities for combining conservation with value because of their inherent rarity, representativeness, or aes- sustainable human use. IUCN employs a basic definition of a Pro- thetic qualities or cultural significance. tected Area:"An area of forest especially dedicated to the protection Category IV: Habitat/Species Management Area: Protected Area and maintenance of biological diversity, and of natural and associ- managed mainly for conservation through management intervention. ated cultural resources, and managed through legal or other effec- Area of land and/or sea subject to active intervention for manage- tive means."9 ment purposes to ensure the maintenance of habitats to meet the This definition embraces the "universe" of Protected Areas. All requirements of specific species. categories must fall within this definition, although in practice the Category V: Protected Landscape/Seascape: Protected Area man- precise purposes for which Protected Areas are managed differ aged mainly for landscape/seascape conservation or recreation. Area considerably. For example, along with more traditional conserva- of land, with coast or sea as appropriate, where the interaction of tion aims, Protected Areas also can embrace the maintenance of people and nature over time has produced an area of distinct char- cultural and traditional attributes, education, scientific research, acter with significant aesthetic, ecological, and/or cultural value, and tourism and recreation. Within the overarching definition, and often with high biological diversity. Safeguarding the integrity IUCN subdivides Protected Areas into six categories: of this traditional interaction is vital to the protection, mainte- Category Ia: Strict nature reserve/wilderness protection area man- nance, and evolution of such an area. aged mainly for science or wilderness protection. Area of land and/or Category VI: Managed Resource Protected Area: Protected Area sea possessing some outstanding or representative ecosystems, geo- managed mainly for the sustainable use of natural resources. Area logical or physiological features, and/or species, available primarily containing predominantly unmodified natural systems, managed for scientific research and/or environmental monitoring. to ensure long-term protection and maintenance of biological Category Ib: Wilderness area: Protected Area managed mainly for diversity, while providing a sustainable flow of natural products wilderness protection. Large area of unmodified or slightly modified and services to meet community needs. land and/or sea, retaining its natural characteristics and influence, The basis of the categorization is by primary management without permanent or significant habitation, which is protected objective, and assignment to a category is not a commentary and managed to preserve its natural condition. on management effectiveness. Although national names for Category II: National park: Protected Area managed mainly for Protected Areas may vary, the categorization system is interna- ecosystem protection and recreation. Natural area of land and/or sea tional. While all categories are important, they imply a gradation of designated to (a) protect the ecological integrity of one or more human intervention. PROTECTING GLOBAL FOREST VALUES A-35 A P P E N D I X F I V E Regional Strategies and Projections here is potential for more activity by the Bank in the for- T Indicate how regional priorities can be expected to contribute est sector, and one of the aims of this strategy is to produce to the implementation of the three main elements of the Forest the conditions for this to happen. However, it should be Strategy. noted that the projections given in this appendix are illustrative. Tentatively identify possible opportunities for the IFC to support They represent the range of medium-term possibilities for Bank sustainable forest-based industrial enterprise development. reengagement in the sector, as estimated by regional operational staff. The high-end figures in the ranges should not be interpreted Early reviews suggest the possibility of increased levels of directly as goals or targets. They represent what could occur on a reason- forest-related investment during 2003­2006. Actually achieving this able expansion pathway in the portfolio, if the necessary conditions potentially increased level of lending in this time frame would assume are realized. very strong Bank regional commitment to reengage in support for In recent years, the Bank has been quite active in supporting forests, the prospect of incremental Bank resources, and strengthened forest-related programs in the East Asia and Pacific (EAP), Europe Bank staff capability for Bank forest-related economic sector work. and Central Asia (ECA), and South Asia (primarily in India) Increased forest lending would also depend heavily on the new PRO- Regions. However, its involvement in Africa (AFR), Latin America FOR and on Bank partnerships with other donors, conservation and the Caribbean (LAC), and the Middle East and North Africa agencies, policy research institutions, and the private sector. It would (MENA) Regions has been marginal. Regional work plans for a also assume that national governments will be willing to borrow from five-year period (2002 to 2006) identify possibilities in specific the Bank Group. Whether that will be the case will be strongly influ- countries and types of activity that reflect the three key elements of enced by how successful the Bank proves to be in mobilizing incre- this revised strategy. These regional work plans indicate a possibil- mental resources and in blending its own investment with those of ity to at least double and possibly triple current levels of Bank and the other donors, technical assistance agencies, and the GEF. other external development agency support. The specific programs identified in these preliminary regional In developing the regional strategies for 2002­2006, a conscious strategies focus on more obvious possibilities for investment in effort was made to integrate the Bank's forest-related initiatives forest sector activities. Additional work will be aimed at developing and the Bank's more broad-based Poverty Reduction, Rural Devel- more in-depth regional business plans to identify possible nonfor- opment, Natural Resources Management, and Environment Strate- est sector investment programs. Additional work also will explore gies and to maximize the synergies among them. The regional possibilities of addressing threats to forests from agricultural, strategies summarized in chapter 2 and described more fully in this transportation, energy, industrial, and developmental interests appendix are intended to: through a combination of cross-sectoral linkages, safeguard poli- cies, and adjustment lending. Reflect concerns and suggested directions for future Bank involvement that emerged from the regional stakeholder repre- AFRICA sentative and TAG consultations carried out during the prepa- ration of the revised Forest Strategy. Strategy Overview Build on past Bank forest-related country programs and expe- The AFR Regional Forest Strategy will be closely integrated in riences with special reference to integrating forest conservation broader Bank regional development strategies that focus on: and development concerns in more broad-based Bank- supported Poverty Reduction, Rural Development, Natural Investing in people, especially in poverty reduction, education, Resource Management, and Environment Strategies. and health. © 2004 The International Bank for Reconstruction and Development/The World Bank A-37 Improving governance and capacity building through during the lean season and other times of hardships. Emphasis also institutional development and anticorruption programs, will be placed on: community-driven development, and a new Partnership for Capacity Building. Opening possibilities to create structured frameworks for the Increasing competitiveness and diversifying economies through poor to become partners with external investors in sustainable ESW and new lending. timber harvesting and forest management. Reducing aid dependence and debt and strengthening partner- Creating long-term employment opportunity and sharing ships through the framework agreements with countries, benefits. including the HIPC debt initiative, the CDF, and PRSPs. Establishing local hunters/wildlife management associations. Undertaking other forest-based income-generating activities. The AFR Region strategy is shifting from traditional projects toward programmatic operations that emphasize policies, institu- 2. Integrating Forests in Sustainable Economic tional capacity, and partnerships, and are based on broad consul- Development tation, country ownership, and political understanding and At various times throughout the past decade, forest-related activities support. Targeting in this way will enhance the quality and impact have accounted for at least 10 percent of the GDP of 19 African of operations. nations and for more than 10 percent of the national trade of at least With respect to the three main themes of the revised Bank For- 10 African nations. These include countries such as Gabon, Republic est Strategy, the AFR Region's approaches follow. of Congo, and Sudan, which have profoundly different levels of income and forest resource endowment. African forests are econom- 1. Forests, Poverty Alleviation, and Sustainable ically relevant to both forest-rich and forest-poor countries. Because Livelihoods of governance difficulties, the share of economic benefits is highly skewed to favor vested-interest groups, usually depriving the state and Over 70 percent of the population of Sub-Saharan Africa (SSA) the rural people of their fair shares of benefits. Governance issues in lives in rural areas, with the majority dependent on forests and Africa cover a wide spectrum, including lack of information systems, woodlands for their livelihoods. As much as 20 percent of the obsolete institutional structures, and imbalances in the distribution daily livelihood needs for many rural families come directly or of power. Often, corruption is the most glaring example of poor gov- indirectly from forests. Forest products (either timber or non- ernance, reducing economic efficiency and the state's effectiveness. timber) also provide at least 20 percent of the disposable income The first step toward integrating forests in sustainable economic used by landless and poor African families to pay for school fees development in Africa will be to improve governance. Bank inter- and meet other family needs. Woodlands and forests supply ventions will include improving core functions of government forest approximately 60 percent of all energy utilized in SSA. They institutions. These interventions will be directed at integrating forest supply building material and cooking fuel for approximately conservation management in decentralization processes through 80 percent of all African families, including all of the rural popu- community empowerment and privatization, tackling politically dif- lation. The majority of the rural poor who benefit from forests ficult issues such as timber concession reform and land and tree are agricultural populations living on forest margins or in agri- tenure issues, and improving revenue collection. Public information, cultural areas in which open woodlands or agroforestry farming transparency, participation, and partnerships will be used as instru- systems are prevalent. ments to ensure that the broad-based, self-sustaining support for the The regional strategy will focus on integrating forests and environmental governance agenda is developed and maintained. biodiversity-related dimensions in broader Bank-supported rural development policies and lending. This integration will take 3. Protecting Global and Local Forest Values different shapes in different countries, including forest-related dimensions of other rural initiatives or self-standing operations. In Africa is home to 25 percent of the remaining world's rainforests forest-poor countries, interventions will include: and contains 20 percent of the world's biodiversity hotspots. The Democratic Republic of Congo, Madagascar, and South Africa are Integrating tree management and tree planting in packages listed among the world's 17 "mega-diversity" countries. Central made available to small farmers. African forests alone store over 23 billion tons of carbon, rendering Protecting the interests of the landless and the poor in the these forests a critical buffer against global climate change. The bio- management of woodlands through self-promoting incentive diversity resources and the biomass that Africa harbors are impor- programs that use preferential taxation as incentives to local tant world assets. The main strategic challenge to protect these participation. global values in Africa's poor economies is that global, national, and Supporting local small-scale forest enterprise development, local interests often differ, especially in the short term. including woodland management and tree planting in local Bank interventions will help rectify the potential conflicts investments promoted by community-based programs and among long-term global objectives and short-term national and social funds. local priorities and create opportunities for more effective non- lending international resource transfers dedicated to conservation. In forest-rich countries, the emphasis will be to protect traditional The Bank will stress the importance of economic and market-based and modern rights and continued access to forest resources by instruments to internalize externalities--to show how meaningful, those who depend on forest products for subsistence, especially economically important benefits can be accrued from sustainable A-38 SUSTAINING FORESTS A DEVELOPMENT STRATEGY management. The Region will give priority to developing markets forests in the rural economy and their potential role in poverty for environmental services and certification. It also will systemati- alleviation and community development. It seeks to involve user cally seek to mobilize concessional financing for conservation and groups in the formulation of management plans, as well as in the other interventions that entail global environmental dimensions benefits of forest resource use. Forest resource expansion programs and benefits. Finally, the Region will seek ways to reward countries strongly emphasize creating opportunities to involve local commu- and local communities that engage in the production of forest- nities and small-scale farmers. based global environmental services. Global initiatives such as transboundary parks and Protected Areas will be used as instruments to foster subregional integration, 2. Integrating Forests in Sustainable Economic harmonize environmental policies, and create peer pressure among Development African nations to hold to the commitments they made in the frameworks of international environmental conventions including The regional strategy focuses on improved governance through biodiversity, desertification, and climate change. institutional reform. It recognizes that a broad, reform-based program of involvement and investment in the forest sector can- Status of Bank Involvement not proceed under constraints of an unreformed tenure and Contrary to growth trends in Bank lending as a whole, the AFR without participation. The Bank will need stronger policy analy- Region's forest-related portfolio has been declining for over 15 years sis leading to better-crafted conditions for policy-based lending and is now considered to be too small to be meaningful. Current and stronger approaches in dealing with key economic ministries operations consist of 3 forest-biodiversity operations, 12 forest- and agencies. East Asia has not yet quite lost the opportunity to biodiversity components of broader operations, and no forest sec- use forests as a sustainable engine of growth, but it has greatly tor work. The combined World Bank and GEF forests/biodiversity reduced its potential in this regard, due to the dominance of spe- portfolio in Africa is approximately US$180 million, with annual cial interests in the sector. Altering ownership and control disbursements below US$30 million, or 1 percent of total spending arrangements through land-tenure reform and other means has for the Region. become an important tool to support improved natural resources Main operations in the pipeline include sectoral forest opera- management. tions for joint Bank and GEF financing in Benin, Cameroon, A decentralization strategy in the countries of the Region Gabon, and Tanzania. A sectoral operation in Côte d'Ivoire has an focuses on developing accountable and financially autonomous uncertain future. A forest component proposed for a Structural local governments to implement natural resource management Adjustment Credit is being developed for Congo-Brazzaville, as is projects. That strategy puts in stark contrast the local preferences a study on forests, including a technical assistance project in the for natural resource management efforts as compared with Central African Republic. alternative public investments, such as roads and water supply. However, before venturing into this area, the Bank strategy calls for Future Potential a realistic appraisal of the reform prospects. It expresses concern that decentralized approaches are not necessarily the best way to The AFR has developed a draft implementation plan for forests deal with the interconnectedness of natural systems, such as water- and biodiversity and has identified priority countries for lending sheds, and the potential unwillingness of central governments to and nonlending services. Of various scenarios developed in this decentralize. plan, the recommended option proposes a gradual increase in the The regional strategy gives special emphasis to the use of uncon- portfolio in which the Region would support a critical mass of ventional lending instruments and cross-sectoral considerations. Bank and GEF forest-biodiversity-related lending, grants, and ESW Increased reliance on the structural adjustment instrument has by FY06. This critical mass would include 8 forest biodiversity become apparent in the Bank's involvement in several countries in operations, 14 forest biodiversity components of broader rural the region. This involvement has altered not only the Bank's own development or integrated natural resources management opera- pattern of engagement in the sector but also its relationships with tions, and 5 pieces of ESW. other stakeholders in the sector. The Bank has access to guarantee operations that it could apply to underwrite policy reform and EAST ASIA AND PACIFIC stability in cases in which other investors and participants need these conditions to maximize their own effectiveness in the sector. Strategy Overview Interest is growing in targeted debt relief as a variant on more general debt-for-nature swaps in which the Bank could play an In terms of the Bank's revised Forest Strategy, the EAP Regional increasingly significant role in East Asia. Forest Strategy will focus on the three main themes. The regional strategy stresses coordination with key partners, including NGOs. This coordination could lead to more 1. Forests, Poverty Alleviation, and Sustainable effective donor cooperation that would reduce costs and raise Livelihoods effectiveness. Sufficient goodwill and interest from major Forests are central to the lives and welfare of the region's rural stakeholders could result in a strong consensus for reform in the population. Poverty is concentrated disproportionately among major forest countries--and, in the process, reduce the risk of forest-dependent populations who often are socially and culturally debilitating adversarial situations developed during program marginalized. The regional strategy recognizes the importance of implementation. REGIONAL STRATEGIES AND PROJECTIONS A-39 3. Protecting Global and Local Forest Values In other nonlending services, the Region, jointly with the WBI, is supporting a major multicountry initiative to strengthen forest The regional strategy emphasizes the importance of working with law enforcement and to control illegal logging; assisting policy partners. The Bank has some possible advantages as a broker of studies undertaken by the China Council for International Coop- potential additional sources of financial flows to the sector (the eration on Environment and Development Task Force on Forestry carbon market, additional grant sources for biodiversity and other and Grasslands; and participating in World Bank/WWF Alliance global assets, a focus on targeted private sector investment in nat- activities in sustainable forestry. ural resource-friendly investments). It recognizes that effective There are opportunities to expand this program through addi- safeguards are needed to protect the interests of local communities tional lending. However, these opportunities are limited by absorp- and the environment. tive capacity in some of the countries in which the Bank is already To summarize, the major global issues on which the Bank will active, by a lack of client interest and difficulty in agreeing on need to focus in defining its role in forests include poverty allevia- fundamental sector issues in others, and, in a few cases, by limited tion, effective participation, deforestation, cross-sectoral issues, budget and availability of specialized staff. valuing forests and market failure, and governance. Dealing effec- Particularly widespread in the region are timber revenue systems tively with these areas in East Asia carries major implications for that undervalue timber, protectionist forest-industry policies and the Bank and the manner in which it engages in the forest sector. log export restrictions that promote excessive processing invest- A comprehensive, sectorwide approach to assistance will be ment, nonexistent or ineffective environmental impact assessment most effective. A major implication for the Bank in moving toward procedures, weak and abused forest management planning and a more comprehensive, programmatic approach to the sector will harvesting regulations, and ill-conceived reforestation funding be a need to focus on the governance issue in the sector and, in some mechanisms. Across the region, inadequate compensation of civil cases, in the country generally. The key to improved targeting of service foresters provides a continuing and corrupting disincentive Bank interventions begins with in-depth ESW that embraces analy- to good governance and forest management. As opportunities for sis of how forest and nonforest sector policies are likely to influence Bank involvement emerge, the future regional strategy will continue the welfare of forest-dependent communities and the health and to give special emphasis to these politically difficult issues. quality of forest ecosystems. The regional strategy argues that addi- In Cambodia, forestry is central to the government's macroeco- tional commitments to sector work will need to be made. nomic program, and the sectoral reform program is a focus of the planned macroeconomic assistance program of the Bank and the Status of Bank Involvement IMF. Proposed policy conditionality includes enactment of a Sub- In the decade from 1990 to 2000, the Bank supported seven Decree on Forest Concession Management, which defines roles forestry projects with a total investment of US$788 million and responsibilities for concession management and supervision (approximately 7 percent of total regional lending). In collabora- and sets out the key principles to guide concession operations. tion with GEF, it financed an additional US$134 million in grant- A recent Bank-led multidonor review of production forestry in based biodiversity projects. The Bank has successfully supported the Lao PDR proposed actions in three key areas: improving pro- the establishment of plantations in China and Vietnam. Through duction forest management and use, increasing community partic- ESW, it has identified major policy issues and problems in Cambodia, ipation in forest management, and controlling illegal logging. It Indonesia, Malaysia, Papua New Guinea, and the Philippines. It has will be difficult for the Laos government to immediately launch a vigorously addressed issues of corruption and improved law fully effective enforcement program, but it could initiate activities enforcement in Cambodia. In Laos, it has worked on the viability that could lead fairly quickly to a meaningful law enforcement of village and community management of natural forests. effort. A program to control illegal logging needs to incorporate Bank involvement has been controversial. Governments some- prevention, detection, and enforcement activities. times have resented outside interference in the sector. The Bank has In Indonesia, the Bank and other key donors used their con- been caught amid a combination of civil society pressures for vening power to develop an intensive consultative process in greater transparency, protection of local community interests and which government agencies, donors, and many civil society policy reforms, long-entrenched centralized government institu- groups participated. Opportunities exist for the Bank to work on tional approaches, and powerful vested industrial interests. issues such as developing more equitable participatory decentral- ization policies; rationalizing the timber industry; improving forest governance including law enforcement; and developing Future Potential outcome-based standards for SFM. Currently, there is no Bank The EAP Region has an active, ongoing pipeline of forest invest- lending in the forest sector, although recent adjustment operations ments as an outcome of an active program of ESW linked to sub- addressed major forest issues. Future possibilities for investment, stantive Forest Policy dialogue in six countries and to specific sectoral adjustment, or structural adjustment as well as poverty forestry-linked structural adjustment operations in Cambodia, programs for forest-dependent people may arise. However, the Indonesia, and Papua New Guinea. Forest and natural resource Bank will need to wait for the political situation to stabilize before management issues are recognized in virtually every CAS. pursuing them. In addition to specific forestry operations and loan covenants, a In Mongolia, with Bank assistance, the government recently robust agriculture and rural development portfolio of loans and completed a Land Reform Plan to address issues of property rights credits and rigorous application of environmental and social to, and use of, all categories of land. The prime minister made it reviews covers the entire lending portfolio. clear that land reform within the existing legislative framework is A-40 SUSTAINING FORESTS A DEVELOPMENT STRATEGY an urgent priority of his government. He also made it clear that the 3. Protecting Global and Local Forest Values approaches to rangeland co-management to be supported under In forest-poor countries, the focus will be on conserving areas the project form an important part of that overall national strategy. rich in biodiversity while ensuring economic benefits for commu- Poverty alleviation is being addressed through the National nities. In forest-rich countries, emphasis will be placed on increas- Poverty Alleviation Program. This program initially focused con- ing benefits from biodiversity to local communities and supporting cern on the urban poor, but, increasingly, the government recog- the contribution of forests to climate-change mitigation. nizes that rural poverty is becoming serious and that supporting rural livelihoods is the major priority. Other Critical Regional Issues In 1995 the Forest Authority of Papua New Guinea adopted a Logging Code of Practices to minimize environmental disturbance To address other critical issues, the ECA Region's Forest Strategy and a new forest permit system to replace the fragmented and com- will include support for official institutions that have been weak- plicated set of individual timber agreements. The government of ened by conflict, and for participatory resource management, Papua New Guinea is reexamining its forest development strategy training, education, information access, and planning systems. to ensure more equitable sharing of benefits among landowners, and recently completed contracted studies on landowner benefits Status of Bank Involvement and domestic processing. The Forest Authority has requested Within the region, five forestry/natural resource management World Bank assistance to respond to the downturn in commercial projects are under implementation and five are under preparation, forestry by providing assistance to broaden the type and scope of while three forest biodiversity GEF operations are under imple- forest management activities, including capitalizing on the benefits mentation and five are under preparation. Three forest-sector of standing forests. reviews are under preparation or were recently completed. A num- The Bank's Board recently approved a US$17.3 million loan, ber of additional activities are addressing SFM and forest certifica- coupled with a US$17 million GEF grant, to Papua New Guinea to tion, funded through small grants provided mainly through the support SFM, more effective involvement of landowners in resource World Bank/WWF Alliance. Total past Bank/IDA/GEF investments management and decisionmaking, improved environmental assess- in completed projects were US$155 million. Support to ongoing ment and enforcement, and a conservation trust fund to support projects totals approximately US$206 million, and US$235 million landowner initiatives in conservation and sustainable use. is tentatively allocated for projects under preparation. ESW has been undertaken in Bulgaria, Romania, Russia, and Turkey and is ongoing in the Kyrgyz Republic. Increasingly, EUROPE AND CENTRAL ASIA forestry reform is linked to broader public sector reforms. In Russia, forest taxation reforms are linked to broader reforms in the Strategy Overview tax regime. In Turkey, forest reform is linked to broad institutional reform in the forestry ministry. To maximize nontimber values and The ECA Regional Forest Strategy will focus on the three primary rural development opportunities, forest reform is moving from themes of the Bank's revised Forest Strategy. production-oriented forestry toward more broad-based forest land-use planning. 1. Forests, Poverty Alleviation, and Sustainable Livelihoods Future Potential The main priorities will be recovering sound forestry and forest To date, the Bank has done relatively little in the ECA Region to industries in forest-rich countries; managing forests for sustainable address the decline of forest industries and associated problems of rural livelihoods and income generation and assessing and explor- increased unemployment and poverty. ing nontimber values in forest-poor countries; and engaging civil In countries that have faced intractable macroeconomic prob- society through collaborative forest management by supporting lems, as has Belarus, it has been difficult to help effectively with sustainable forest and biodiversity management with the involve- forest sector reform. A study estimating the total economic value of ment of local communities. forests in Georgia and Romania increased understanding of the overall contribution of forests to the national economies of those countries. 2. Integrating Forests in Sustainable Economic Program investment risk guarantees can act as a powerful market- Development based mechanism both for encouraging private investment and for Forests will be integrated sustainably in economic development encouraging governments to create a regulatory environment favor- through macroeconomic adjustment and economic policies. able to private investment. A pilot forestry project under preparation These policies will include EU accession issues as they relate to in Russia aims to improve public sector management in forestry. It forestry; transparency, governance (focusing on public sector will support a much larger forest investment risk guarantee opera- forest management and financing), and improved investment tion, which is designed to encourage private sector investment. There environment for forest industries; institutional and economic is potential to expand the use of this instrument elsewhere. issues in newly privatized land; and improved forest manage- In the Central Asia subregion, Bank intervention in forestry and ment, protection, and regeneration, including fire protection and in broader natural resource management so far has been very watershed management. limited. A small regional biodiversity project for Central Asia was REGIONAL STRATEGIES AND PROJECTIONS A-41 approved in 1999. A forestry and natural resources review is forests argues that a large majority of people living on less than US$1 planned for Kyrgystan. A similar review planned for Kazakhstan per day depend significantly on forests for their livelihoods. It also has been held up because of resource constraints. maintains that, to alleviate poverty in many of the countries of the Analytical work is under way to assist Eastern European coun- Region, forests must be a critical element in any realistic strategy. tries to address global carbon issues. In time, this analysis could The regional strategy calls for (a) promoting policy, institu- lead to pilot operations appropriate for support by the Bank- tional, and legal frameworks to ensure that the rights of indigenous managed PCF. In view of the strategy's priorities and specific regional forest-dependent peoples and communities are protected; issues, forest and biodiversity assistance will be directed toward: (b) empowering poor and marginalized groups to take a more active role in formulating and implementing rural forest policies Supporting policies and institutions that are market driven and and programs; (c) supporting tenure security and CFM, so that transparent and that create opportunities to involve local com- local communities can manage and directly benefit from their own munities in sustainable forest and biodiversity management. resources and the marketing of their forest products; and (d) work- Improving governance, especially through support to govern- ing with local groups and governments, NGOs, and other partners ments for law enforcement and crisis management. to integrate forest, agroforestry, restoration of secondary forests, Supporting economic reconstruction and forest restitution. and small enterprise activities in rural development strategies with special reference to their potential to contribute to sustainable The Bank has immediate opportunities to undertake ESW in sev- improvements in livelihoods. eral countries of the region, working in close partnership with several other donors and NGOs. Priority countries for ESW 2. Integrating Forests in Economic Development include Belarus, Bosnia, Croatia, and Ukraine. The Region also has The regional strategy focuses on (a) analyzing and coordinating recommended that forest-related strategies be taken into consider- policies and projects to ensure a cross-sectoral approach to planning ation as an integral component of natural resource management- and implementation of SFM and forest conservation; (b) supporting related ESW in Kazakhstan, the Kyrgyz Republic, Tajikistan, improved governance through reforming inappropriate timber Turkmenistan, and Uzbekistan. concession and subsidy policies; (c) containing illegal activities and Future forest-related ESW will analyze the links between sus- corruption through improved forest law enforcement and inde- tainable natural resource management and rural poverty (in the pendent and institutional oversight; (d) addressing finance, fiscal, forest-resource-poor countries); between an enabling policy and trade issues related to the forest sector and forest products, to environment for forest industry development and SFM (in the enable governments to capture a higher portion of forest revenues forest-resource-rich countries); and between broader economic for economic development; and (e) promoting catalytic investments and sector reforms and forest conservation strategy for containing in sustainable harvesting and forest management, in situations that threats to protected forest areas. Problems associated with eco- will be, or have been, independently verified or certified. nomic transition have been severe, and poverty has grown rapidly in many countries of the ECA Region. These problems imply a need for cross-sectoral and economywide engagement to ensure 3. Protecting Global and Local Forest Values that broad fiscal, price, and regulatory policies allow appropriate The regional strategy will give special emphasis to providing GEF valuation of forest resources, efficient resource mobilization, and and Bank support for improved management and expansion of clear governance and control over forest resources. Protected Areas; helping to build markets for international public goods, such as carbon sequestration and biodiversity (bioprospect- ing); and assisting governments in designing, implementing, and LATIN AMERICA AND THE CARIBBEAN financing national and local markets for environmental services provided by forests. These environmental services include stable Strategy Overview water supply and quality, risk and disaster vulnerability manage- The LAC Region's Forest, Biodiversity, Rural Development, and ment (landslides and fires), and biodiversity, habitat, and land- Natural Resource Management Strategies fit well with the three scape amenities (to support ecotourism and recreation). The main elements of the Bank's revised strategy for forests. The LAC regional strategy also will focus on strengthening forest and invest- strategies reflect many of the difficult issues that representatives of ment policies to ensure that the indirect and cross-sectoral impacts the different stakeholder groups who participated in the Bank's of policy and investments on conservation value and protection LAC Region forest consultations perceived as being important for areas are minimized and that the Bank's sectoral and cross-sectoral the Bank to address. The LAC strategies also respond to OED's crit- investments and programs do not directly or indirect harm forests icisms of past Bank performance. of high conservation value as defined through local and national consultations. 1. Forests, Poverty Alleviation, and Sustainable Livelihoods Status of Bank Involvement Forests are especially important to the rural poor of the LAC Region. Demand and expectations for Bank involvement in the sector have The 40 million indigenous people in LAC are concentrated in increased. The Strategic Forum 2000 identified forests as one of the forested areas, and a high proportion of the other rural poor reside Bank's four key priorities. However, LAC has experienced a decline in these areas. The revised strategy for the Bank's involvement in in lending in the sector, with the notable exception of the increase A-42 SUSTAINING FORESTS A DEVELOPMENT STRATEGY in GEF funding. ESW also has declined in the sector since the The Bank has done very little forest-related ESW in the region, publication of the 1991 Forest Policy Paper. The Bank supports with the notable exception of Brazil. Through Bank-supported only four ongoing forest projects in the region: in Argentina, Costa research, analytical studies, sustained policy dialogue, and studies Rica, Mexico, and Nicaragua. Another five natural resource man- undertaken by a G7 Pilot Rain Forest project, much progress has agement projects located in Brazil, Colombia, Ecuador, Guatemala, been made in developing strong collaboration with both govern- and Peru include specific forest-related components. In addition, ment and the NGO community. At the time of writing, the seven Bank- or GEF-supported projects are aimed at either more government of Brazil was in discussion with the Bank for a loan to effective management or the establishment of new Protected Areas. finance creation of 50 million ha of certified public forests Bank support for ongoing forest projects amounts to approxi- (national, state, and municipal production forests), promotion of mately US$120 million. community and small-farmer plantation forestry, and strengthen- ing of the government's institutional capacity in the forest sector, especially in forest monitoring and control. Key countries for more Future Potential in-depth forest-related ESW include Bolivia, Peru, and República Possibilities have been identified for wider replication of the posi- Bolivariana de Venezuela. tive lessons learned from an ongoing poverty-oriented project in Costa Rica has been highly successful in mainstreaming conser- Mexico and a watershed area development project in Colombia, vation at economywide and micro levels. With support from the both of which have demonstrated the potential of Bank-supported Bank, the government removed subsidies that were expanding forest activities to contribute to poverty alleviation and sustainable agriculture and ranches at the expense of forests and, over a livelihoods. Other countries of the region in which there are decade, developed a series of financial incentives (for example, possibilities to undertake similar initiatives include Ecuador, Certificate for Forest Payment in Advance, Certificate of Forest El Salvador, Guatemala, and Paraguay. Management, Payment for Environmental Services). These pay- As mentioned in the OED's review of Bank-related experience, ments, extended to lower-income farmers, made it financially pos- the Bank has missed many opportunities to influence the rapid sible and profitable to reforest. The Payment for Environmental expansion of unsustainable logging in the region and to assist gov- Services recognized and rewarded owners of forests for externali- ernments in improving forest governance and the quality of forest ties. These, together with many other legal, regulatory, and institu- management. Parts of Brazil, Bolivia, Peru, and the Guyana Shield tional measures, have made Costa Rica a model for integrating countries have significant areas of high-value forests that have been conservation and development. under increasing pressure for commercial exploitation in recent Given that Costa Rica is not considered representative of the years by logging companies from North America and Southeast Asia. complex political economy environment prevailing in other LAC As the Bank has been attempting to do in countries (including countries, how to transfer this model to other countries is far from Cambodia, Cameroon, and Indonesia) in other regions, there is obvious. The Region will take a proactive approach to identify potential to develop equitable timber taxation systems, concession possibilities for wider replication. It would also be worthwhile to contracts, and regulatory systems that could make commercial replicate the experiences of environmental management, forest exploitation safe for forests and people. A dialogue has been initi- monitoring, and law enforcement initiatives from the Brazil Matto ated to introduce improved timber concession and SFM in Peru. Grosso PPG7 Natural Resources Policy Project. The Bank also has good possibilities to contribute to SFM and The draft regional business plan for forests explores possibilities reforestation by extending past experiences in Argentina, Brazil, and for a continuation and expansion of the above-mentioned Bank Nicaragua (from projects in Minas Gerais and the Brazilian Ama- forest-related activities in the period FY02­06. The plan recom- zon) to other countries of the region such as Bolivia and Honduras. mends a substantial engagement in forest-related sector work to be The Bank has worked closely with the GEF to support programs carried out in close association with local stakeholder groups, to expand Protected Areas throughout this region with a major other donors, and NGOs. It proposes widening the geographic focus on preserving biodiversity. GEF and the Bank have provided coverage of existing projects and further testing the many useful les- approximately US$165 million to expand and/or improve manage- sons learned from past experience in other countries of the Region. ment of Protected Areas in this region. The support of the WWF through the Alliance has been particularly helpful. Commitment made by the presidents of Brazil and Peru to support setting aside MIDDLE EAST AND NORTH AFRICA new Protected Areas will add an additional 35 million ha to the region's existing 97 million ha of Protected Areas and national Strategy Overview parks already supported by the Bank and GEF. The Bank also has strongly supported a Meso-American Biodiversity Corridor pro- In the MENA Region, forestry cannot be treated in isolation from gram covering extensive tracts of unique forest ecosystems in natural resource management. Forests and woodlands are impor- Panama and other countries in Central America. tant landscape elements in the region and have a particular role in Cross-sectoral linkages have included several environmental, sustainable rural development and poverty alleviation. The overall rural development, transportation, and energy sector and/or min- regional strategy emphasizes policy and institutional reform to ing sector projects that have incorporated specific forest conserva- position forests in a wider context of sustainable natural resource tion measures. These experiences possess great potential for wider management. This objective includes addressing impediments to replication and could contribute to redressing developmental and optimal forest use and conservation and to poverty alleviation other threats to Protected Areas such as illegal logging. through collaborative forest land/watershed management and REGIONAL STRATEGIES AND PROJECTIONS A-43 multipurpose resource creation, in particular, tree planting, to sus- improved forest resource management. All of those projects have tain livelihoods. been completed. The MENA Region's approach to the three main elements of the Bank's revised strategy follows. Future Potential 1. Forests, Poverty Alleviation, and Sustainable Many different stakeholders participated in a review of Bank forest Livelihoods policies and past performance. Based on their recommendations, the Region has identified the following areas as potentially impor- Rural people residing in and around forest lands generally are among tant for future Bank support: the poorest in the region.Some countries,such as Algeria and Tunisia, are tackling poverty by increasing the employment created by forests by including local community participation in reforestation, conser- Creating an enabling policy environment for collaborative for- vation, and other rehabilitation activities. The regional strategy est and forest land management, sustainable natural resource focuses on stakeholder incentives and an integrated approach to local management, and poverty reduction. participation at all levels. Implementing institutions generally are Reviewing existing forest policies to renew popular interest in inadequately staffed or trained to deal with participation issues. The forest operation. In terms of tenure reforms, in some countries, strategy emphasizes increased attention to reducing duplication and the maintenance, operation, and all related rights are state con- to building synergies, particularly with NGOs. trolled. As an example, the government has mandated that trees planted or forests managed on communal and/or private land cannot be harvested without government approval. 2. Integrating Forests in Sustainable Economic Developing participatory land management and watershed pro- Development tection systems that are needed in countries that are extremely Of all the regions supported by the Bank, MENA has the fewest for- resource poor. est resources. Commercial timber production does not play a Improving forest governance. Forest governance is an important major role in the region, and wood resources are limited. However, issue. Revenues from timber sales or other forest products gener- forest products do generate significant additional sources of ally are transferred directly to the treasury and reallocated without income for communities living in and around forests. consideration to the amount of revenue generated by these agen- A favorable trend toward comprehensive development planning cies. Implementing agencies do not have any incentive to reinvest has been under way in the region, and the role of the forestry sec- in the forest, because they do not get increased budget allocations. tor within overall economic and social development is being rec- Illegal harvesting is done primarily for individual consumption of ognized in national development plans. products such as firewood, building materials, and nontimber The regional strategy focuses on fostering cross-sectoral links. It products, and rarely for commercialization. These issues are best recognizes that to achieve improved forest land management, other handled by local participation in forest management. sectors need to be involved, especially agriculture and water. Water Increasing private sector participation in forestry activities. scarcity is a major factor in the region, and forests play a crucial Currently, private sector involvement is limited. Reasons vary, role in stabilizing upland watersheds. but it is likely that companies are unable to compete with govern- ment agencies, whose operations are heavily subsidized. Policy changes are needed to encourage private sector participation, 3. Protecting Global and Local Forest Values including providing incentives to encourage investments. The ecological, economical, and social potential of different activ- Assessing the value of forests and forest functions. The regional ities in the region aimed to counteract global warming (including consultation on the Bank Forest Policy put special emphasis on carbon sequestration, carbon avoidance, and/or carbon substitu- valuation of forests and forest functions, including, for exam- tion) has not been estimated. Regionally, the carbon sequestration ple, forest resources in ecological and social "hot spots" that values could be high, but further research is needed. There is grow- merit special Bank attention. ing attention to ecotourism. Protected Area networks are still under construction, but not all key biodiversity has been protected It has been proposed that one element of future regional ESW should or represented within the networks. Unprotected biodiversity is be a stronger emphasis on including linkages among forestland man- threatened and, in many cases, runs the risk of being lost. The agement and broader economic and rural sector reforms, economic development of participatory approaches to biodiversity conserva- instruments, watershed services, and grazing on forest land. tion is a major challenge. Possible strategic elements for a future lending program in the MENA forest sector include improving public sector forest man- agement in Maghreb and the Islamic Republic of Iran. Status of Bank Involvement Finally, forest and forest land-use development should be car- Earlier Bank-financed projects in Algeria, Morocco, and Tunisia ried out through partnerships with all stakeholders on planning, supported various approaches to sustainable land use in upland design, implementation, and monitoring. Partnerships also need to watersheds with a special focus on the problems of how to deal be fostered with other agencies that are involved in the sector in the with uncontrolled grazing and upland soil erosion as well as different countries. A-44 SUSTAINING FORESTS A DEVELOPMENT STRATEGY SOUTH ASIA 3. Protecting Global and Local Forest Values The Regional Forest Strategy will prioritize testing options to pay Strategy Overview communities for environmental services of global value such as The South Asia Region's Forest Strategy is firmly integrated in biodiversity and activities relating to climate change. It will support broader regional rural development and natural resource man- increasing governments' capacity to negotiate in international fora, agement strategies that focus on both empowerment of the rural such as in the climate change, biodiversity, or desertification con- poor and sustainable use. The objectives of those broader strate- ventions, with special emphasis on activities that will benefit poor gies are, first, increasing benefits to the rural poor through rural communities. The Strategy will support the establishment of empowering them; ensuring that they control natural resources environmental taxation and user charges to ensure that forest through rights to ownership, access, management, or usufruct; industrial polluters, downstream processors, and users internalize and maximizing the value of the resources through efficient mar- the full costs of resource depletion, degradation, and contamina- kets. Second, the broader regional rural and natural resource man- tion. The strategy will continue to support more effective manage- agement strategies aim to provide environmental services for all ment of Protected Areas. sectors of society through a managed viable system of sustainable use, increased productivity, and improved conservation of natural Status of Bank Involvement resources. Since 1992, the Bank has funded six state-level, sectorwide projects The South Asia Strategy aims to foster more efficient func- in India to strengthen the forest sector development strategies of tioning of input (land and credit) and output markets (trade, individual state forest departments. This program has focused on agroprocessing, and rural industries). This improved efficiency the states of Madhya Pradesh, Uttar Pradesh, Maharashtra, Andhra will include greater participation of the private sector in produc- Pradesh, West Bengal, and Kerala. The emphasis in the forest sec- tive undertakings in rural areas. The South Asia Strategy also tor has shifted toward preservation and regeneration through JFM, seeks the reorientation of public sector institutions in the agri- in which villagers cooperate to protect forests in exchange for a culture, water, forestry, energy, health, education, finance, and share in the usufruct and final harvest. This is an institutionally infrastructure sectors. The aim is to achieve more effective challenging strategy, because ownership of forest land remains delivery of services, especially to the poor, while ensuring the sus- with the state while communities are involved in its protection and tainable use and management of natural resources, such as fish- regeneration. Under these Bank-funded Indian programs, JFM has eries, coastal areas, and forests--especially in environmentally been expanded. fragile areas. Since 1991, the GEF has provided funding for biodiversity conservation and climate change projects. The World Bank has 1. Forests, Poverty Alleviation, and Sustainable administered 70 percent of the GEF allocations to India. A Bank- Livelihoods supported ecodevelopment project has targeted interventions to Within the above framework, the Forest Strategy will give special conserve biodiversity in seven globally important Protected Areas. emphasis to creating an enabling environment (policies, laws, and The Bank also has supported forest research, education, and exten- institutions) to support the World Bank's overarching objective of sion, with special emphasis on improved planting stock and poverty reduction. The Forest Strategy will continue to strengthen strengthening research capacity. community participation and empowerment through establishing During the latter half of the 1980s and early 1990s, the Bank and strengthening community management institutions. It will financed a series of forest-related projects in Bangladesh, Nepal, build and improve returns to the community natural resource base Pakistan, and Sri Lanka. Currently, the Bank does not have any through increased forest productivity and JFM. Finally, it will seek ongoing forest programs in these countries. opportunities to reduce the vulnerability of the rural poor by securing access to forest resources and diversifying the community Future Potential asset base. Building on past experience, the Bank's current lending program includes expansion of JFM in the state of Andhra Pradesh in 2003. 2. Integrating Forests in Sustainable Economic Expansion of JFM in Madhya Pradesh will be considered in 2004 Development or 2005. Possibilities are being explored to expand JFM-based The major elements of the Bank's involvement will include activities into several other states. improved governance aimed at removing policy distortions and The future regional strategy proposes more systematic incorpo- regulations that reduce the value of the natural resources to com- ration of forest initiatives in watershed and wasteland area develop- munities, and ensuring adequate payment, in cash or services, for ment programs. To ensure longer-term sustainability, it will focus the provision of environmental services to noncommunity mem- on possibilities to build the capacity of communities in watershed bers. Also important will be public sector reform leading to and wasteland areas to take responsibility for planning and imple- responsive, accountable, and fiscally sound institutions for natural menting projects and maintaining the community assets created. resource management. The Bank's involvement also will foster the Special attention will be given to indigenous technical knowledge of development of efficient markets and competitive private sector how to manage local vegetation and to the inclusion of traditionally producers of natural resource products and assets. marginalized groups, including women and the landless. REGIONAL STRATEGIES AND PROJECTIONS A-45 The Bank has opportunities to play a more proactive role in In Bhutan, a recent Bank overview lays out a potential three- helping the government of India to address certain significant legal pronged strategy focused on (1) community-based forest resource and institutional policy constraints to progress. India has a management; (2) possibilities to integrate SFM, revenue genera- network of preservation/Protected Areas primarily established in tion, and environmental conservation; and (3) increased private situ to conserve flora and fauna and to study the dynamics of sector investment. natural populations under undisturbed conditions. In 1970, the The Region's natural resource management strategy in Pakistan program had 10 national parks and 127 sanctuaries occupying identifies possibilities for Bank support to institutional develop- some 2.5 million ha. It has grown substantially since then, and by ment and investment in community JFM-based forestry. 1997 the total coverage increased to 83 national parks and 447 In Sri Lanka, the Bank's strategy will focus on, among sanctuaries covering a total area of more than 15 million ha. In other things, supporting improved governance and reform of total, approximately 4 percent of India's land area has been set organizational arrangements for land titling and related services aside for parks and sanctuaries. The Bank and GEF can play an and fostering growth of the nonfarm economy through support to ongoing role by assisting the government of India to develop effec- rural small- and medium-scale enterprises. Both types of activities tive management of Protected Areas and to contain threats to could open possibilities for the Bank to reengage in poverty- them, such as wildlife poaching and agricultural encroachment. oriented forest conservation and development programs. As of January 1998, a total of US$142 million was programmed for India under the GEF. The future strategy to the year 2003 includes a specific provision for additional GEF support. SUMMARY Specific examples of past Bank cross-sectoral interventions have included provision for compensatory afforestation in Andhra The following are conclusions from this brief overview of the Pradesh and Orissa States in situations in which forest lands were Bank's regional forest-related strategies: lost because of reservoir and canal construction. There also has been a mitigation plan to minimize the negative impact of a power In the ECA and EAP Regions, and in India, the Bank has had transmission line in Andhra Pradesh State. substantial involvement in areas that are highlighted in the A 2000 OED review highlighted the importance of incorporat- revised Bank strategy. The Bank has learned much from both its ing in Bank agriculture strategies measures to improve agricultural positive and negative experiences that can provide a solid plat- productivity, including greater dependency on agroforestry in arid form on which to build its future support. and semiarid zones (Kumar and others 2000b). Also important in Recent Bank involvement has been severely constrained in the transportation, mining, and transmission line projects are specific AFR, LAC, and MENA Regions. This constraint is partly a provisions to avoid culturally important tribal forest lands or reflection of the low priority given to forest issues in national unique forest ecosystems. development plans. However, in AFR and LAC, there seems Rising industrial forest product demands can be met from little doubt that the 1991 prohibition on the Bank Group's domestic sources, but only if the area under tree cover and its pro- providing finance for commercial logging in primary moist ductivity are substantially increased. The government alone does tropical forests under any circumstances has significantly not have the human and financial resources to meet the domestic deterred the incorporation of forest-related activities in CASs. requirements. Bank Group­supported ESW could usefully focus In a few countries whose national plans historically gave the on restructuring and improving the efficiency of forest industries. forest sector low priority, Bank-supported analytical studies The desired results would be to achieve greater domestic self- helped to pinpoint weaknesses in governance and potential sufficiency in paper and paperboard supply and to enable local areas for policy reform and to raise both government and public communities and smaller farmers to take advantage of India's awareness of the need for remedial action. rapidly growing markets for industrial round wood. Forest administrators, environmental officials, NGOs, local In Nepal, the Bank's broad rural development strategy will communities, and other stakeholders in many Bank client focus on four interrelated priorities: (1) human capital develop- countries are highly aware of the potential of the Bank and ment, (2) property rights reform, (3) increased participation, and other donors to assist in addressing problems relating to the (4) decentralization to local communities. The strategy mentions three key elements of the Bank's revised strategy. Financial and the potential for Bank support to the government of Nepal in staff resources are necessary to carry out the forest-related developing sustainable community-based forest land-use policies ESW required to provide a sound basis for the development of in the Terai region. country strategies and Bank forest-related programs. A-46 SUSTAINING FORESTS A DEVELOPMENT STRATEGY A P P E N D I X S I X Bank Experience with Strategy and Policy in Forests: Lessons and Incentives OPERATIONS AND EVALUATION DEPARTMENT remedies suggested were either insufficient or misdirected. The sub- VIEW ON POLICY AND IMPLEMENTATION sequent and unclear"do no harm"policy, OP 4.36, attempted to pro- vide Bank staff with more flexibility to address the challenges of for- In 2000 the World Bank's OED reviewed the Bank's forest portfolio. est management, but staff surveys indicate that it did not succeed. The review argued that although, after 1991, the overall size of the Second, the consultative process by which the strategy was portfolio grew, one impact of the 1991 Bank Forest Strategy and developed was insufficiently inclusive. In particular, it omitted the subsequent policy had been a "chilling effect" on Bank investment perspectives of borrowing countries and the private sector, as well in forests. This effect was especially notable in activities related to as those of Bank staff and managers, many of whom did not have the management of forests, as opposed to pure protection and bio- a sense of ownership of either the strategy or the policy. The strat- diversity conservation activities in the tropics. The OED review egy led to a significant loss of the Bank's internal capacity, because maintained that the Bank policy restricting it from supporting a number of forest specialists left the Bank in the years after the commercial logging operations in primary tropical moist forests strategy was announced. Furthermore, some Bank client countries made the Bank wary of getting involved in all forest activities. These were not aware of the 1991 Forest Strategy until the current OED activities included improving forest management, addressing illegal review. Third, the rapid changes in conditions affecting forests and logging, and improving the interface with forest industries even development assistance, both in the world and in the Bank, since though the policy can be interpreted as allowing them. 1991 have made the strategy less relevant. The strategy narrowly focused on 20 countries with moist trop- EFFECTIVENESS ical forests and neglected other biodiversity-rich forest types. Even for tropical moist forests, it assumed the poor to be the main cause The effectiveness of the 1991 strategy has been modest in terms of of deforestation and failed to consider the role of other actors. The achieving its two main objectives: (1) international cooperation, strategy overlooked fundamental governance issues influencing and (2) policy reform and institutional strengthening. Further- forest sector development. It also did not consider forests as inte- more, the sustainability of its impact is uncertain. The rate at gral to the Bank's poverty alleviation strategy. The focus was largely which tropical moist forests are disappearing has not been reduced, on economic solutions, such as the length and price of concessions and while tree planting has had some discernible impact on global as incentives for conservation, and on private property rights. In forest cover, the Bank has had a significant role in this in only one reality, a wide range of often very complex property arrangements country: China. The 1991 strategy succeeded in preventing the are encountered in forest sector development. The strategy diag- Bank from getting involved in policies and operations that nosed the problem of externalities--the divergences among global, adversely affect forests, thereby absolving it of "guilt by associa- national, and local costs and benefits--as a factor in deforestation. tion." However, the state of the world's forests, particularly tropical Nevertheless, except for the small GEF grant program, it did not forests, continues to deteriorate. In addition, the 1991 strategy had call for mobilizing additional resources on a scale that would meet little to say about other environmentally and socially significant the resource gap needed to conserve forests of global value. The forests, such as the temperate, boreal, and dry forests. implicit assumption was that governments would borrow funds at Three interrelated reasons underlie the mixed performance of the IBRD or IDA terms to achieve global (or even national) forest con- 1991 strategy, and they relate to its premises and genesis and subse- servation and indigenous peoples' objectives. quent policy. First, the strategy's ambitious objectives were not Insufficient ownership of the strategy, shortcomings in human matched by a correct diagnosis of the rapidly evolving causes that and financial resources, and a lack of incentives have been internal were reducing forest cover and forest quality. Consequently, the Bank obstacles to fully implement the strategy. Bank country © 2004 The International Bank for Reconstruction and Development/The World Bank A-47 managers, task managers, and client governments perceive that and the overall development goals and aspirations of developing there are high transaction costs and reputational risks in Bank countries. The Bank's strategy needs to recognize and respond to involvement in the forest sector, particularly when compared with the inevitable forces of globalization and their impacts on forests other poverty-alleviating sectors. The factors contributing to this and forest-dependent peoples. It needs to be flexible to suit local cir- perception include the following aspects of OP 4.36: cumstances. It also must recognize the role and participation of constituencies within particular borrowing countries on issues such A generally negative attitude toward logging in primary tropical as the demarcation of forest types by function, tree planting to sup- forests. plement natural forest resources and services, and social justice. The associated ban on Bank financing of commercial logging in A revised Forest Strategy and Policy--and implementation primary tropical moist forests under any circumstances. strategy--should enable the Bank to play two synergistic roles: The overly ambitious and sometimes ambiguous preconditions for Bank involvement in sustainable and conservation-oriented 1. In its global role, capitalize on its convening powers to facilitate forests, such as the requirement that "projects may be pursued partnerships that mobilize additional financial resources (over only where broad sectoral reforms are already in hand." and above improved coordination of existing country-specific aid flows) for use in client countries, including new financing Even though the prohibition on support for logging in Bank policy mechanisms on a scale that would achieve the global goals set was confined to primary tropical moist forests, the controversy out in the revised strategy. surrounding any logging in any natural forest has led to the per- 2. In its country-level role, address the diverse realities in client ception of reputational risk for the Bank in other forests, including countries using the entire set of instruments at its command secondary natural forests in the tropics.10 Even in client countries and stress long-term involvement, partnerships with a broad set that are strongly committed to conservation, the transaction costs of constituencies, learning by doing, and exchange of experi- of dealing with the Bank in the forest sector are widely perceived to ence across countries. This role entails a long-term commit- be too high relative to the potential benefits. ment, with sufficient resources for ESW and consultative The Bank's client countries have viewed limited Bank funds as processes independent of lending operations. having other competing uses with quicker payoffs, even in the area of poverty alleviation. Girls' primary education, rural electricity, and drinking water supply are examples of such competing uses. MAJOR ISSUES AND RECOMMENDATIONS The returns on forest investments that involve long gestation often are perceived as being not high or quick enough relative to alter- OED has identified seven elements that would make the Bank's nate uses of funds to stimulate demand for Bank involvement or Forest Strategy more relevant to current circumstances and investments in forests. This trend has been true not only for tree strengthen the Bank's ability to achieve its strategic objectives in planting involving poor households in China, where demand for the forest sector (Lele and others 2000f, pp. 46­49). Bank funds for forests has plummeted as interest rates have increased, but also for medium- and large-scale plantations in the 1. Mobilize financing for global forest services. The 1991 Forest Policy private sector in Brazil. The 1991 strategy did not sufficiently acknowledged the divergence between the global and national acknowledge the long-term nature of forest-related benefits, nor (including local) costs and benefits of conservation. However, it their short-term costs, nor therefore their implications for financ- assumed that Bank clients would be willing to borrow funds to ing. The reluctance of both Bank operational managers and bor- meet those objectives. Yet, in the 80 countries with declining per rower governments to consider forest projects as Bank investments capita incomes, the competition is intense for Bank resources for depressed the demand for the sort of analytical and consultative activities with more immediate benefits. Environmental con- work in the sector that may have pointed the way to opportunities sciousness in the Bank's borrowing countries has increased. for worthwhile options for investment, thus perpetuating the cycle Nonetheless, even with the growing recognition of some long- of decline in interest in forest sector activities. term national and local benefits of conservation, attempting to In the view of OED, the power of prevailing domestic and inter- achieve global environmental objectives through the Bank's lend- national market forces to magnify the incentives to cut trees or to ing function alone is unrealistic. Many of the Bank's largest bor- place land under alternate uses also was underestimated as a stim- rowers, including the most forest-poor and environmentally con- ulus to deforestation. In the context of globalization, to take advan- scious, have indicated that they have higher priorities for the use tage of market opportunities in order to maintain or resume of Bank resources than conservation investments. The 1991 strat- growth and alleviate poverty, borrowing countries often have egy produced no momentum toward the design of a global col- proceeded to liberalize their economies with or without Bank- laborative effort, nor did it provide mechanisms to mobilize ade- financed structural adjustment. Liberalization has increased defor- quate financial resources. The GEF, while important, is small estation incentives in many of the Bank's client countries, often relative to the magnitude of international expectations. Besides, with adverse impacts on forest-dependent peoples. the GEF provides limited, term grants largely to conserve biodi- versity. It has no mandate to offer payments to maintain forest Reconsidering the Bank's Forest Strategy cover and related local environmental services. Efforts to promote forest sector objectives, particularly the conser- Recommendation: The World Bank Group should use its vation and sustainable uses of forest resources, must be viewed in global reach to help develop mechanisms for, and the mobilization the context of current global realities, country circumstances, of, concessional international resources outside its lending activities. A-48 SUSTAINING FORESTS A DEVELOPMENT STRATEGY These resources need to be on a large enough scale and have attrac- should include fragments of endangered, biodiversity-rich forests tive enough terms to interest developing countries. Support for in a variety of ecosystems as well as promote tree planting. Bank leadership in developing carbon and other markets (certifi- 4. Foster sustainable development objectives. Powerful forces of cation, ecotourism, water) is not universal, and the international globalization and economic liberalization have intensified pres- willingness to pay for these services is in question. Given the sures for production and land conversion, challenging the goal increasingly decentralized Bank, the Bank will need to revisit the of "sustainable development." These pressures stem from internal matrix arrangement governing forest operations if the rapidly growing domestic and international demand for forest Bank is to play a global role in brokering or implementing inter- and agricultural products and their synergetic relationship with national agreements or establishing pilot efforts. poor governance. Managed-production forests, tree planting, 2. Forge international partnerships. Its implementation experience and plantations can reduce pressure on natural forests set aside suggests that the Bank alone cannot achieve results in the forest for conservation. Together they offer the potential for "win- sector, even at the national level. Achieving results on the global win" outcomes, with better yields and more conservation. Since level is nearly impossible without forging partnerships with 1991, the debate on prudent forest management to maintain the donors, foundations, the private sector, civil society, and NGOs. resource's potential for future needs has advanced considerably. The initiatives introduced by the World Bank since 1991 repre- Improved or low-impact management of natural forests is rec- sent a clear break from the past. However, the Bank needs to ognized to potentially increase the efficiency of the multiple broaden the scope of its activities not only at the international functions and services that forests produce. level to scale up successfully but also at the national and local Certification is an important instrument to pursue improved levels to scale down. practices. Although a number of experiments are under way on Recommendation: The Bank needs to proactively establish certification, including some related to the World Bank/WWF partnerships with all relevant stakeholders to achieve its country- Alliance, developing countries have little experience with this and global-level goals. The Bank and other development partners instrument. Furthermore, while uniform international criteria increasingly need to work together at both the international and are possible for all processes and forest types, uniform indica- country levels in a participatory manner. The goal is to improve tors are unlikely given the diversity in forest types, values, and forest management in all kinds of forests, aiming to reach a bal- functions. Therefore, it would be unwise for the Bank to ance among environmental, economic, and social objectives. This endorse a specific certification standard. The Bank must enter- collaboration also may lead to new agreements and ways of mobi- tain alternate methods of certification, provided they meet gen- lizing resources in which the Bank has a role as one of the partners. erally accepted criteria and indicators and are adapted to the 3. Broaden the types of forest covered. Since 1991, countries from circumstances of diverse developing countries. the ECA Region with extensive forests have joined the Bank. Besides the challenges of certification, little is known about This Region has seen the greatest growth in Bank forest lend- the economic and financial returns to improved or low-impact ing. Its boreal and temperate forests are a large source of tim- forest management. What evidence exists suggests that current ber, forest products, biodiversity, and other forest services, returns to conventional logging--legal or illegal--are so high including carbon sequestration and recreation. Committed to that investment in improved management cannot be justified protect old-growth forests, the Bank already supports produc- without substantial additional research and experimentation to tion and conservation activities in many national forests that demonstrate its feasibility under highly diverse tropical forest have a strong tradition of responsible forest management for conditions. Moreover, widespread illegal extraction makes it multiple uses. The Bank should continue such efforts to pointless for entrepreneurs to invest in improved logging. Such improve the production efficiency of all types of forests, rampant illegality is a classic case of concurrent government except forests designated for protection by national govern- and market failure. ments. It is also important to note that if the current ban on Recommendation: The Bank Group should ensure that forest Bank financing for commercial logging in tropical moist concerns receive due consideration in its macroeconomic work and forests is extended to the forests of Eastern Europe, the ban all relevant sectors and should support activities that will help pro- will jeopardize current operations and may have a chilling tect natural forests of national and global value. The Bank should effect on the Bank Group's ability to mobilize much-needed treat approaches to these issues explicitly in its CASs and struc- funding for continued responsible forest management in this tural adjustment lending. It should increase support for quality Region. Tropical dry forests, too, are important, especially for ESW by providing resources independent of lending operations; meeting the fuelwood and livelihood needs of the poor, par- support research and extension; and establish guidelines, criteria, ticularly in Africa, which needs increased Bank support. and indicators for improved forest management. Through partner- Global thinking about the functions of forests has reached a ships, the Bank also should help to create both public and private point at which it may be possible to assign specific functions capacity for widespread application of improved forest manage- to specific forests in a manner that can achieve both national ment and tree planting. It should create this capacity through and international goals. small, medium, and large community; private; and public planta- Recommendation: The Bank's strategy should take a more tion forests as appropriate in particular circumstances and with eclectic and inclusive approach with a global reach, rather than a due environmental and social impact assessments in place. narrow focus on tropical moist forests. Tailoring the Forest Strat- 5. Curtail illegal logging through improved governance. The perva- egy to specific forest types, functions, and services would increase siveness of illegal logging is a joint outcome of high economic the Bank's global impact in the forest sector. A revised strategy returns and lack of enforcement of laws and regulations. Poor BANK EXPERIENCE WITH STRATEGY AND POLICY IN FORESTS: LESSONS AND INCENTIVES A-49 governance and political alliances between some parts of the pri- accountability, but increased the complexity of the Bank's vate sector and the ruling elite, corruption, and low enforcement involvement in the forest sector. This approach increased trans- capacity all play parts in deforestation by permitting illegal log- action costs, without adequate resources to deal with them. The ging. These factors lead to environmentally destructive and reputational risks for Bank Group involvement in the forest sec- socioeconomically inequitable exploitation of natural capital. tor also have turned out to be higher than assumed in the 1991 Success in conservation, biodiversity preservation, or improved Forest Strategy. Against this reality, the internal Bank incentive forest management requires the reduction and control of illegal framework is tilted against forest operations, so the Bank's logging. Increased forest productivity and alternate sources of capacity in this sector has declined. Some skills, such as assess- timber and other forest products also will reduce the returns to ing the impact of global, macroeconomic, and technological illegal logging of natural forests. Institutions for improved gov- changes on forests, always were in short supply and remain so. ernance, productivity growth, and tree production are classic These and other factors discussed in the OED report have made public and global goods and merit public investment. Each Bank managers risk averse with regard to involvement with entails long gestation lags with the risk that results will not be forests. Country managers are not adequately motivated to achieved or could be reversed. Fortunately, democratization and incur the risks and transaction costs associated with complex the emergence of active civil societies are paving the way for and controversial forest operations. Resources also are lacking greater future transparency and accountability. to track the progress of forest operations, whether locally or Recommendation: A revised and strengthened Forest Strategy globally, while arrangements for safeguard policy and compli- should aim to reduce illegal logging by promoting improved gover- ance monitoring remain weak. nance and enforcement. This promotion would entail helping Recommendation: To ensure credibility, the Bank must either governments to improve implementation of existing laws and align its resources with its objectives in the forest sector or scale down regulations and, where necessary, to change them; improving its objectives. The Bank's internal incentives and skill mix for forest government enforcement capacity; as well as diversifying the sector operations need to be enhanced through a more evenly bal- sources of monitoring to proactively include civil society. Improved anced matrix management structure. This improved balance will governance cannot be achieved by the forest sector alone, but the facilitate operational staff's feeling that they have the support and forest sector can lead the change. confidence of Bank management and the access to the necessary 6. Apply a more inclusive definition of the forest-dependent poor. quality human and financial resources, independent of lending A large number of the world's poor depend on forests for their operations where necessary, to address the risky and controversial livelihoods. Estimates of the numbers of forest-related poor in issues of the forest sectors in their client countries. If the revised strat- developing countries vary widely, depending on the definition egy incorporates specific international forest goals, it should have of "dependence." Many of the forest-related poor are indige- specific financing mechanisms and arrangements attached to nous peoples, a group receiving special attention in the Bank's achieving those goals. The Bank must diligently and routinely mon- Forest Strategy and related safeguards. The 1991 strategy itor compliance with all safeguard policies in its investment and stressed the importance of reducing poverty to relieve pressure adjustment lending, adhere strictly to the requirement (introduced on forests while promoting tree planting to meet the fuelwood in May 1999) for environmental impact assessments in its sectoral needs of the poor. However, that strategy did not recognize the adjustment operations, and consider introducing a requirement for importance of forest-sector development as a means to alleviate environmental impact assessments in all adjustment operations. poverty of all forest-dependent people. Projects funded by the Bank in China, India, and Mexico demonstrate the substantial Views of Bank Staff scope that forest development offers as a means of generating employment, incomes, and social capital through community Of particular interest are OED's results from a survey of Bank staff participation. Forest development and Forest Policy should involved in forest issues on their attitudes to the 1991­93 strategy become more prominent elements of the Bank's poverty allevi- and policy. OED reports that staff tended to agree with the thrust ation strategy. of the 1993 policy but did not believe that the Bank had succeeded Recommendation: Given the poverty alleviation mission of the in its major aim of reducing deforestation. The survey's major Bank Group, the revised Forest Strategy should include elements findings were as follows: that directly address the livelihood and employment needs of all poor, while continuing to safeguard the rights of indigenous In particular, staff believe that the ban on Bank financing of peoples. A revised Forest Strategy also should acknowledge the fre- commercial logging in primary tropical moist forests has had quent conflicts of interest between the indigenous poor and the no impact on deforestation or degradation in these areas and nonindigenous poor. To better address the needs of the forest- that a more flexible policy that encouraged the Bank to enter dependent poor, the Bank should encourage grassroots fact-finding this realm (on the right side) would have been more effective. investigations to improve understanding of the complex land and Staff believe that forest sector issues are not well integrated with other rights, monitor impacts of macroeconomic and other the Bank's broader mission of poverty alleviation and economi- changes, and develop safety nets for those likely to be adversely cally and socially sustainable development, and that perfor- affected. mance in the sector would be improved by promotion of more 7. Adjust internal Bank incentives and reporting systems. The 1991 focus on natural resource protection, institutional reforms, mul- Forest Strategy emphasized "do no harm" and increased public tisectoral approaches to forest development, and plantations. A-50 SUSTAINING FORESTS A DEVELOPMENT STRATEGY Staff believe that country managers tend to regard forest sector having resulted from projects designed pre-1992. In this case, it involvement as high cost, low return, and risky. Apart from the can be seen that the general pattern of disbursement in the sec- political risk factor (the "chilling" effect), the staff assess that tor rises until 1995, then it begins to decline. It is probable, there are internal reasons for this managerial attitude. These although not verifiable, that 1995 also marks the zenith of dis- reasons include inadequate resources for ESW, project prepara- bursement from projects designed just prior to 1992. tion, and supervision--all of which tend to demand more in On the basis of the prior point, assuming other conditions this sector--and the complexity of project design. remain consistent, it is reasonable to project that without pol- Staff also hold the opinion that exogenous reasons exist for icy and strategy changes, a continued decline for forest invest- managerial reluctance to become engaged in the sector. These ment in the Bank's portfolio can be expected. Some specific reasons include the high levels of corruption often present in pipeline evidence supports this projection: very few forest the sector and an inadequate appreciation of the sector and its projects are in the pipelines for the Africa and LAC Regions. issues by policymakers in client countries. These factors pre- As observed in the OED report and elsewhere, the government sumably are exacerbated by the low status and influence, in of China has indicated to the Bank that it will be unwilling to most cases, of forest and environment ministries. borrow from the Bank for forest sector investment at IBRD Staff expressed a view that the Bank could, and presumably rates, which now apply to that country, and, as will be appar- should, become a global leader in forest-related matters, such as ent from the tables, China is a major factor in the Bank's climate change, carbon and the CDM, biodiversity conserva- global forests portfolio. tion, and natural resources management. A clearer strategy and There has been a major downward trend in Bank expenditure incentives, with the necessary resources, would facilitate better on ESW in the forest sector since 1992, from US$3.2 million in use of the GEF and the IFC in the forest sector. that year to US$870,000 by 1999. This has been a general trend across all Regions. Given the importance of ESW in developing the analytical base, and the commitment of stakeholders to forests on which subsequent lending is developed, it also seems ADDITIONAL INDICATIONS FROM THE BANK reasonable to assume that this declining ESW in forests presages FOREST PORTFOLIO DATA a subsequent decline in forest lending. The CASs developed since 1992 have given relatively little atten- As part of this strategy development project, further research into tion to the forest sector. Based on the criteria developed to rate the Bank forests portfolio data was carried out. This additional the efficacy of inclusion of forest issues in CAS documents, research summarizes the history of the portfolio from 1992--the most--including those for countries that have large forests and year that aspects of the new strategy and policy can be expected to important forest sectors--are rated unsatisfactory. have begun to take effect--to 1999. The turnover of Bank task managers in forestry projects and A number of observations can be drawn from these tables. other projects with forestry components seems high, certainly higher than is desirable. The data show an average of 3.1 task Obviously, the sum of forest investments rose significantly post- managers per project. As is well known and recognized in the 1991. However, this increase does not detract from the argu- Bank, a high turnover of task managers through the life of a ment that a chilling effect has been operative. The major gains project is undesirable, from a continuity and supervision point in the portfolio have come in large investments in China and of view. Part of the reason the figure is high in this sector prob- India, which are not influenced by the restriction in the 1991 ably is due to the rapid decline since 1991 in Bank staff with strategy and 1993 policy on Bank involvement in logging in pri- technical specialization in the forest group of disciplines, mary tropical moist forest. A second gain came from the addi- including ecologists, biologists, and social scientists with tion to the portfolio of the ECA Region, which was virtually extended specialization in forest issues. Whatever the merits nonexistent as a Bank focus before 1991 and, again, was unaf- and causes, these reductions have meant that the staff who fected by the restrictions in the 1991­93 strategy and policy. A were managing forest sector projects and programs at the third increase was the addition of the GEF component to forest beginning of the decade have left the Bank and have had to be investment--again, not present prior to 1991 and not at all replaced by others. focused on production in natural forests. The average size of forest projects in the Bank is relatively small Establishing a trend over time from the available disbursement when compared with its investments in some other major sec- data is somewhat difficult, given, first, the lumpiness of forest tors. Some costs of preparing a Bank project are unaffected by sector investments--most of which are relatively small by Bank the overall size of the loan involved. However, in comparison standards, but some of which, especially those in India and with other sectors, forest projects tend to have relatively high China, are very large. A second difficulty is attempting to define costs in areas such as participatory design and compliance with the precise nature of components, especially the forest compo- Bank safeguards. Therefore, the overall cost of preparation of a nents, of nonforestry projects, which have been the dominant Bank loan in the forest sector typically will be high per unit of form of forest investment after 1992. A third impediment is the funds lent or per loan unit. The data show that the costs of fact that disbursements are lagged from the date of approval of preparing and supervising a forest loan amount to approxi- a project. The latter observation can be dealt with by eliminat- mately 1.5 percent of the value of the loan, as compared with an ing or discounting some part of disbursements post-1992 as average of 1.1 percent Bankwide. BANK EXPERIENCE WITH STRATEGY AND POLICY IN FORESTS: LESSONS AND INCENTIVES A-51 THE ADJUSTMENT INSTRUMENT AS APPLIED SUMMARY: LESSONS FROM BANK PERFORMANCE TO FORESTS IN THE FOREST SECTOR As noted in chapter 2, the impact of adjustment lending operations The information reviewed above and elsewhere in this document, in the aggregate on forests and other natural resources is not well gleaned from Bank and other sources, indicates that Bank researched and is the subject of some disagreement in recent liter- operational managers evince a major diminution of interest and ature on the subject. willingness to engage in the forest sector. The reasons are summa- rized as follows: It does seem to be generally agreed that, where relatively little The chilling effect noted by OED has been a factor in tropical attention has been paid to forest and other natural resource countries and has led to a view in the Bank that working in issues in the design and monitoring of a structural adjustment forests is a politically risky endeavor for the Bank. However, the program operating across a broad range of economic, trade, decline in forest ESW, and the relatively marginal attention to and fiscal policies, the adjustment program runs a risk of caus- forest issues in CAS documents, has been significant across trop- ing significant unintended and unanticipated damage to natu- ical and nontropical forest countries alike. Some cases in the ral resources. ECA Region indicate that political issues associated with highly divergent views among different environmental and social More is known about the Bank's experiences with the deliberate groups are a factor in the forest sectors of those countries as well. use of the adjustment instrument to promote sustainability, con- There is a general lack of economic perspective on the forest sec- servation, and needed reforms in sector governance in forests. tor, that is, a lack of recognition of its role as a provider of envi- Conclusions that can be drawn are that: ronmental services; as a locus of major interaction between the poor and natural resource use; and as an important factor in economic growth and sustainability, even in the most conven- The time frame of preparation of adjustment operations is, tional and narrow sense. In brief, forests' economic and social by necessity, usually short. Adjustment lending is an emer- potential is highly undervalued by economic policymakers, and gency measure designed to alleviate major financial or eco- this undervaluation appears not to be significantly countered or nomic crises. Unless much is already known about issues and offset by those in the Bank who deal most closely with forests. developments in a sector such as forests before an adjust- The transaction costs of dealing with the forest sector in the ment operation is contemplated, it is unlikely that the neces- Bank are demonstrably high. No specific allowances for these sary research and sector analysis can be completed in the higher costs are made in the design and allocation of Bank preparation time frame. As a result, the optimal and highest budgets. In addition, no particular measures--such as positive priority conditionality choices for the sector often cannot incentives for greater attention, or institutional penalties for be made. failing to attend to the issue at a certain level, where criteria The time frame of disbursement of adjustment loans limits indicate this is necessary--are in place. their applicability as comprehensive instruments of reform in the forest sector. Often, the time frame needed to implement For these reasons, it is unlikely that operational managers vol- major reforms in forests--for example, in the manner of untarily will allocate any greater attention or resources to the sec- awarding concessions and then monitoring results of this and tor in the near future than they have in the recent past, unless pol- other reforms in field operations--is far longer than ever icy shifts produce a change in this attitude, or meaningful would be contemplated under a single adjustment operation incentives or inducements alter this situation. Moreover, it is likely of one, or even two or three, tranches of disbursement. Adjust- that a major morale problem exists among operational staff closely ment loans do have great effectiveness in establishing stroke- associated with the forests portfolio, for reasons evident from the of-the-pen reforms, and these can be extremely necessary, as portfolio information cited above. These staff also will need to be has been demonstrated in the cases of Papua New Guinea and given some incentive to be more expansive, and less risk averse, in Indonesia. their approach to the sector. A-52 SUSTAINING FORESTS A DEVELOPMENT STRATEGY A P P E N D I X S E V E N World Bank Forest Strategy Consultation Process and Feedback he World Bank's Forest Policy Implementation Review T Operations Evaluation Department and Strategy (FPIRS) process was designed to solicit input In 1999­2000 the OED conducted an independent review of the and advice from a range of stakeholders so that the revised World Bank's 1991 Forest Policy. The purpose of the review was to strategy would be grounded in transparency and engagement with assess World Bank performance in the forest sector and learn interested parties. Appendix 7 outlines the main elements of the lessons of experience as an input to the World Bank's proposed FPIRS process and summarizes the feedback from the FPIRS Forest Strategy. OED engaged stakeholders in the review. To regional consultations. minimize transaction costs, the OED and FPIRS teams have shared data and information bases and, to the extent possible, both have participated independently in international consultative fora. OBJECTIVES Role of IUCN--The World Conservation Union The main objectives of the consultation process were to: As part of the FPIRS process, a limited partnership with IUCN was Listen to and consider views of all key forest-related constituen- established. The role of the IUCN has been to support the World cies and ensure that they have reasonable opportunity for Bank in developing and implementing a review process that involvement in the policy review and strategy development remains transparent and open to all interested parties. Separate process. from its role in advising the World Bank on the consultation Identify the broader set of issues that impact forest resources in process, IUCN has provided substantive inputs to the review. The Bank client countries and related sectors, including considera- substantive input of IUCN is independent of the World Bank and, tion of alternatives for addressing these issues. therefore, falls outside the World Bank­IUCN limited partnership Assess stakeholder perspectives on the Bank's comparative agreement. advantage. Contribute to building consensus on a global strategy that involves all stakeholders in preserving and managing forests COMPONENTS in the contexts of sustainable development and poverty alleviation. The consultation process has consisted of the following: Communications ORGANIZATION Throughout the process, an FPIRS website--www.worldbank.org/ forestry Forest Policy--was established, maintained, and used World Bank ForestsTeam by the World Bank to post meeting summaries, reports, and other Within the Bank, the FPIRS has been managed by a joint team documents related to the consultation meetings. The site contains from the Rural Development and Environment Departments, a moderated discussion forum in which interested groups and which are in the Bank's ESSD Network. This ESSD Forests Team is individuals were encouraged to take part. The World Bank also working internally to link with colleagues in the Bank's Regions established and maintained an e-mail account for those wishing and Resident Missions. The NGO and Civil Society Unit and NGO to provide comments or requiring additional information: specialists also are being drawn on for additional assistance freview@worldbank.org. The information collected through the and advice. website and the e-mail account has been fed systematically into the © 2004 The International Bank for Reconstruction and Development/The World Bank A-53 Table A7.1 Regional Consultation Schedule Region Location Dates AFR Johannesburg, South Africa May 2­5, 2000 EAP Singapore April 26­28, 2000 ECA Joensuu, Finland April 3­5, 2000 LAC Brasilia, Brazil March 15­16, 2000 LAC Quito, Ecuador May 3­5, 2000 MENA Tunis,Algeria February 23­25, 2000 South Asia Rajendrapur, Bangladesh April 17­19, 2000 North America Washington, D.C., United States March 23­24, 2000 Western Europe Zurich, Switzerland April 10­11, 2000 review process. Regular FPIRS updates have been sent out to indi- reflected a diversity of views, particularly on controversial issues. viduals and groups both inside and outside the Bank. These These findings formed the basis for the discussions in the Phase updates also have been posted on the FPIRS website. Two Consultations. A series of nine regional stakeholder consulta- tions were convened (table A7.1) to assess and provide feedback Country and Regional Stakeholder Consultations on the above findings and the initial impressions that emerged (table A7.2). These consultations were convened with a broad range of Specifically, the consultations sought to resolve differences in stakeholders who were invited to comment on and participate in the views and examine the World Bank's role in terms of (a) areas in development of the strategy. The meetings were held in three phases: which the World Bank should focus its efforts and (b) areas in which the World Bank should work in partnership with others. Full Phase One: Stakeholder issues documents and meetings. The reports from the consultations are available on the FPIRS website. primary purpose of the first phase was to gather and distill stake- Table A7.2 summarizes the feedback from the regional consulta- holder perceptions of key issues and options. To supplement tions. The regional consultations were facilitated by IUCN. discussions, a number of papers were shared widely prior to the meetings mentioned below. These papers included both World Phase Three: Draft strategy consultations. The input and Bank documents and those submitted by other stakeholders. The feedback from the consultations were reflected in the draft strategy Phase One process is outlined as follows: discussion documents prepared by the World Bank. The draft documents also took into account OED's country case studies and 1. A series of regional assessments of the Bank's performance in additional findings from its review. This draft document has been the forest and related sectors were conducted by the Bank's widely disseminated and discussed with key stakeholders, includ- Regional Vice Presidencies. ing with the TAG described below. 2. A series of analytical studies on key topics were commissioned A TAG was formed to seek more focused input from individu- to provide input to the strategy development process. These are als able to contribute to the understanding and resolution of listed in appendix 8. issues and the formulation of the revised strategy. The TAG con- 3. Certain key countries with substantial forest resources or par- sists of representatives drawn from each of the FPIRS regional ticularly noteworthy lessons of experience were identified for consultations, experts from around the world selected through an more detailed study and meetings. These countries were Brazil, open nomination process, and World Bank staff. The TAG met Cameroon, China, Costa Rica, India, and Indonesia. OED June 26­28, 2000, and again January 8­10, 2001. The TAG meet- conducted this work, and the reports are available on the FPIRS ings had two major objectives. The first was to provide strategic website. and technical guidance to the World Bank on draft documents 4. In addition, meetings on forest and environmental issues that related to the revised Forest Strategy and Policy. The second objec- were occurring were used as opportunities to present the FPIRS tive was to help build consensus on a global strategy that would and seek input from participants through side meetings or extra involve all stakeholders in preserving and managing forests in the sessions. Separate "experts" meetings also were organized to contexts of sustainable development and poverty alleviation. seek input on specific analytical studies commissioned as part of the FPIRS. Phase Two: Consultations. The findings from the Regional assessments, analytical studies, and OED and feedback from stakeholder issues meetings were compiled. The findings A-54 SUSTAINING FORESTS A DEVELOPMENT STRATEGY Table A7.2 Principal Issues from Regional Consultations Poverty reduction Poverty alleviation Poverty alleviation is an essential goal for World Bank forest operations. SFM is necessary to reduce rural poverty. SFM should include approaches such as collaborative/community-based forest management, agroforestry techniques, secure access to resources and microcredit, and greater attention to NTFPs. Collaborative management Community-based management should continue to be encouraged, including strengthening community participation in project preparation, implementation, and monitoring. More resources also should be devoted to capacity building for both governmental institutions and local communities. Tenure Several of the consultations considered issues related to tenure and access rights. In particular, participants at the LAC and EAP meetings suggested that, to foster SFM and conservation, the Bank should help clarify property and use rights.Also suggested at the EAP meeting was that the Bank should require legal recognition of indigenous peoples' rights as a precondition to any lending operations. Women's empowerment Empowerment of women and other disadvantaged groups was a key theme at the South Asia consultation, at which empowerment was seen as a necessary precondition for effective participatory approaches to forest management and poverty alleviation. Indigenous peoples A few consultations called specific attention to indigenous peoples' issues. In general, these meetings urged the Bank to do a better job of implementing its existing safeguard policy on indigenous peoples. Representatives of indigenous peoples at both the ECA and EAP meetings called on the Bank not to subsume indigenous peoples' issues under the general category of rural poor. Landscape approach A few of the regional consultations recommended an integrated, landscape-level approach to forest management and dealing with cross-sectoral land-use planning.At the AFR meeting, participants indicated that a landscape-level approach provides an adequate framework for dealing with land-use planning and tradeoffs between management and conservation priorities. Integrating forests in sustainable economic development Cross-sectoral impacts The Bank needs to pay greater attention to forest impacts from its operations as well as from outside actors.The Bank is viewed as having a comparative advantage relative to any other institution to deal with cross-sectoral impacts on forests; therefore, the Bank should have greater integration of forest sector issues in its CASs and ESW. Governance Governance issues and the Bank's role were discussed in all the Regional consultations.The main messages focused on two related aspects: (1) the Bank should facilitate institutional reform and local participation, including local capacity building. Issues of transparency, accountability, and responsibility were seen to apply to all stakeholder groups. (2) Some consultations focused on corruption and illegal activities and suggested potential institutional, legal, judicial, and policy reforms. It also was recognized that the Bank will have to take a broad, multisectoral approach to governance and corruption issues. Logging ban The Regional consultations gave conflicting messages regarding the logging ban, but, clearly, it is an important issue to all. In the meeting on LAC in Brazil, constituents supported the removal of the logging ban, whereas the AFR, ECA, and Western Europe meetings reached no consensus on whether to continue or stop the logging ban.There was general agreement that the Bank should not finance logging in high-conservation-value forests. Should logging be allowed, policies should be clarified and coupled with a proactive strategy, revised internal incentives, and staff training to overcome the "chilling effect" resulting from the prohibition in the 1991 Forest Policy. Participants also suggested that the 1991 Bank Forest Policy, for example, the logging ban, focused too narrowly on the forest sector and should address potential impacts from any sector. Structural adjustment Adjustment lending can have significant impacts on forests. Several Regional meetings recommended that the safeguard policies be applied explicitly to structural adjustment loans. Some consultations also expressed the need for the Bank and its client governments to build local constituencies for reform to enhance borrower ownership of adjustment loans. Monitoring and evaluation The meetings stressed the need for effective monitoring and evaluation. Several of the consultations called on the Bank to develop better indicators and monitoring techniques to measure the impacts of both forest sector interventions and cross-sectoral influences. Certification of timber harvesting A few of the Regional consultations, particularly LAC, addressed the issue of certification and suggested that the Bank should support independent certification and, in some instances, cover the costs of certification. (continues on next page) WORLD BANK FOREST STRATEGY CONSULTATION PROCESS AND FEEDBACK A-55 Table A7.2 (Continued) Protecting global and local forest values Expansion and management of Protected Areas Several of the consultations explicitly addressed conservation and Protected Areas.At the MENA meeting, stakeholders supported the shift in Forest Strategy focus from conservation to poverty alleviation, so long as conservation concerns continue to figure prominently in any new policy or strategy. Other consultations called for the provision of additional financial resources for conservation, particularly the establishment and maintenance of Protected Areas. Concessional financing To further conservation or poverty alleviation objectives, several consultations advocated increased concessional financing for the forest sector. For example, the EAP meeting suggested that, within some IBRD countries, certain sectors, projects, or geographic regions should be eligible for concessional financing on the merits of their need for poverty alleviation benefits. Global Alliance The Global Alliance with WWF came up at a few meetings. Some participants at the North America meeting questioned whether the Alliance's certification target could be seen to promote logging in primary tropical moist forests. However, in general, the participants at that meeting felt that the Alliance was consistent with the 1991 Forest Strategy.At the ECA meeting, some participants questioned how the Alliance targets could be justified in terms of the Bank's poverty alleviation mandate. Other National economic concerns Global versus national interests Several of the consultations touched on the new strategy's balance between global versus national concerns and proscriptions. Participants indicated that the Bank should adopt a general policy that would spell out universally applicable principles but not be too proscriptive in a global-level strategy. Rather, the policy should be flexible enough so that the details of the strategic approach can be adapted to each set of national circumstances. Debt reduction Several of the consultations pointed to external debt servicing as an underlying cause of forest loss and degradation. In addition, specific calls were made for debt relief for Indonesia and Russia, including consideration of debt-for-nature swaps and debt-for-mill swaps in Indonesia. Forest markets and trade A few of the regional consultations touched on the role of forest markets and international trade. These meetings suggested that the Bank could play a role to support the development of transparent markets for forest products and services, as well as to disseminate information about markets and prices for forest products. Valuation Several consultations took up the topic of valuation, although with somewhat mixed messages.The MENA meeting indicated that the new policy should accommodate nontraditional economic values of forests, although at the AFR meeting, valuation proved controversial.The South Asia meeting indicated that the Bank should help develop better tools to evaluate the commercial as well as social and economic values of forests.The EAP meeting suggested that the Bank has a role to play in sharing experiences with valuation and the development of markets for environmental services. Desertification Desertification was a major issue raised at the MENA meeting.The meeting recommended that desertification should be a key factor in determining the Bank's Forest Strategy in the Region. World bank operational concerns Long-term commitment Several Regional consultations observed that planning and implementation time horizons in the forest sector are longer than in many other sectors. Several meetings, particularly in South Asia, suggested that the Bank should adopt greater continuity and long-term commitment to forest sector engagement. Internal World Bank issues Several Regional consultations raised concerns about the internal management of the Bank. In general, there were questions about whether the Bank's commitment to the forest sector was deep enough to bring about the necessary institutional changes to implement a new Forest Policy and Strategy more effectively than the 1991 Forest Strategy had been implemented. Specific issues raised included changing staff incentive structures, enhancing capacity and budgets to enable staff to assess cross-sectoral impacts on forests, ensuring congruence between project objectives and indicators for monitoring, and ensuring mechanisms to enhance the accountability of task managers and country directors. A-56 SUSTAINING FORESTS A DEVELOPMENT STRATEGY Table A7.2 (Continued) Social concerns Multistakeholder consultations Several of the regional consultations indicated that the Bank should use its convening power at all levels to ensure broad participation. Suggestions included convening donor coordination fora, national processes to monitor project and policy development and implementation, and local processes. It was noted widely that, for stakeholders to engage effectively in these processes, capacity building would be needed. Restitution Restitution was raised as an issue only in the ECA Region, where there was support for a Bank role in capacity building and institutional strengthening to deal with the consequences of ongoing forest restitution in Central and Eastern Europe. Decentralization Decentralization was a key issue at the AFR consultation.The main messages were that decentralization carries risks and that the Bank may have an important role in building management capacity at subnational levels. Natural resources concerns Reforestation/restoration Several consultations indicated that the Bank has a role to play in supporting forest restoration as part of a poverty alleviation strategy, as well as in maintaining and restoring essential ecological services provided by forests. Plantations Several Regional consultations discussed plantation issues, but tended to voice divergent messages from within each. For example, some EAP meeting participants called on the Bank to provide concessional funding to establish plantations to benefit the private sector, while other participants at the same meeting called on the Bank to screen any plantation activities to ensure that they benefited indigenous peoples.The LAC meeting suggested that the Bank should develop a detailed set of guidelines, explore options, and compile best practices on plantations.The North America meeting indicated that plantations have a role in the Bank forest portfolio, so long as governance issues, community benefit sharing, and social and environmental safeguards were adequately dealt with. However, a few participants at the ECA meeting argued that plantations should not be a principal focus of the Bank's Forest Strategy. Nontimber forest products Several regional consultations indicated that the 1991 Forest Strategy did not give adequate attention to NTFPs. Participants suggested that the Bank's new strategy should pay more attention to NTFPs as part of a sustainable rural livelihoods approach. SFM, sustainable forest management; NTFP, nontimber forest products; LAC, Latin America and the Caribbean Region; EAP, East Asia and Pacific Region; ECA, Europe and Central Asia Region; AFR, Africa Region; CAS, Country Assistance Strategy; ESW, economic and sector work; IBRD, International Bank for Recon- struction and Development; WWF, World Wide Fund for Nature. WORLD BANK FOREST STRATEGY CONSULTATION PROCESS AND FEEDBACK A-57 A P P E N D I X E I G H T Analytical Studies on Forests series of analytical studies were commissioned and car- A would improve the Bank's effectiveness and comparative advantage ried out on key issues related to forests and forest peoples in reaching its objectives of poverty reduction and sustainable to inform the FPIRS process (table A8.1). These studies development through improved forest management and forest encapsulate current knowledge and views on the crucial issues and protection. The studies were reviewed and discussed at the questions surrounding forest conservation and management. New Regional consultations and by the FPIRS TAG and have provided work was commissioned in cases in which sufficient information much of the intellectual basis for the Bank's revised Forest Strategy on a topic was not available. Priority was given to information that and Policy. Table A8.1 Analytical Studies Topics Theme Commissioned and relevant background papers 1. Poverty and forests · Poverty as a cause of deforestation, or deforestation as a cause of · Underlying Causes of Deforestation and Forest Degradation: Report poverty? on the African Regional Workshop on the Underlying Causes of Deforestation and Forest Degradation, October 26­29, 1998 · Impact of forest policies and interventions on the poor (1/19/99) · Integrating the poor in the management of forests · Global Workshop on Addressing the Underlying Causes of · Sharing the benefits of forest use with the poor Deforestation and Forest Degradation, January 18­20, 1999 (1/28/99) · Best practices in poverty alleviation and forest programs and projects · Forests and Sustainable Livelihoods (10/13/99) 2. Sustainability of forest resources and services · Prospects for more sustainable forest management (tropical, · Sustaining Tropical Forests: Can We Do It? Is It Worth Doing?-- temperate, and boreal) and locations in which techniques for Appalachian Meeting (10/2/98) improved forest management should be applied · Sustainable Forest Management Issues Paper (3/8/99) · Economics and finance of improved forest management · Sustainable Forest Management:A Review of the Current · Technical issues of improved forest management Conventional Wisdom (3/8/99) · Forest sustainability in forest-poor countries · Technical Consultation on Management of the Forest Estate (5/27/99) · Threats to already endangered forest ecosystems · Forests and Land-Use Issues:The Bank's Role in Sustainable Forest Management (10/14/99) · A Sustainable Forest Future? (7/15/99) · What Options for the Sustainable Management of Tropical Forests? (10/25/00) 3. Role of plantations · Trends in extent and productivity of forest plantations, product · Plantations: Potential and Limitations (11/18/99) supply and demand (continues on next page) · Environmental and social impacts © 2004 The International Bank for Reconstruction and Development/The World Bank A-59 Table A8.1 (Continued) Theme Commissioned and relevant background papers · Financial and economic issues relating to investment in forest plantations · Ownership and management arrangements 4. Valuation of forests goods and services · Lessons learned from the application of valuation methods · Environmental and Economic Accounting for Forestry: Status and Current Efforts (3/8/99) · Application of valuation in Forest Policy · Valuing Forests:A Review of Methods and Applications in Developing · Asset valuation of timber and forest land Countries (9/3/99) · Socioeconomic valuation 5. Economic instruments · Review and evaluation of Forest Policy instruments · Certification of Forest Management and Labeling of Forest Products (7/12/99) · Forest taxation and concession regulation including performance bonds · Economic Instruments for Tropical Forests:The Congo Basin Case (2/17/00) · Land-use policies and regulation of land use · Economic Instruments,Tax Policies, and Land Tenure (2/12/99) · Forest certification 6. Structural adjustment and forests · Assessment of direct and indirect impacts of adjustment policies, · The World Bank's Non-Forest-Sector Policies That Affect Forests including potential for adjustment to be used as a tool to improve (5/25/99) incentives for more appropriate forest management · The Right Conditions:The Bank, Structural Adjustment, and Forest · Political-economic aspects of adjustment and impact on forests Policy Reform* (4/6/00)*An independent study by the World Resources Institute 7. Forest markets and trends · Patterns and trends for supply and demand for forest products, · Future Developments in Forest Products Markets (3/8/99) including timber and NTFPs, on global, regional, national, and local · Forest Futures: Population, Consumption, and Wood Resources levels (10/29/99) · Identification and prospects of markets for forest goods and service · Selected Forest Products Trade Issues (10/2/00) · Economic and policy instruments for market development 8. Carbon and forests · Technical issues surrounding carbon sequestration and the · Harnessing Carbon Markets for Tropical Forests (4/4/00) development of carbon markets · Forest Carbon:A Discussion Brief on Issues, Project Types, and · Evaluation of the potential of carbon markets on the conservation of Implications for the World Bank's Forest Policy Strategy (4/4/00) forest resources · Economics of carbon and forests · Constraints and conditions necessary to develop carbon markets 9. Impacts on forest resources · Synopsis of underlying causes of deforestation/forest degradation · Underlying Causes of Deforestation and Forest Degradation: Report on the African Regional Workshop on the Underlying Causes of · Impact of macroeconomic policies Deforestation and Forest Degradation, October 26­29, 1998 · Impact of multisectoral policies, including agriculture, transportation, (1/19/99) and mining · Global Workshop on Addressing the Underlying Causes of Deforestation and Forest Degradation, January 18­20, 1999 (1/28/99) 10. Governance issues · Benefits sharing, incentives, and disincentives for forest management, · Notes on Forestry Legislation and Enforcement (2/4/00) decentralization issues · Corrupt and Illegal Activities in the Forestry Sector (3/15/00) · Role and perspectives of forestry services and institutions, · Institutional and Legal Framework for Forest Policies in ECA Region stakeholder involvement and Selected OECD Countries:A Comparative Analysis (4/6/00) · Corruption issues, including impacts of vested interests; rent-seeking · Legislative Issues in the Forest Sector (11/5/00) and perverse incentives; legislative approaches; illegal logging; and concessions management · Linkages among forest institutions, civil society, and private sector A-60 SUSTAINING FORESTS A DEVELOPMENT STRATEGY Table A8.1 (Continued) Theme Commissioned and relevant background papers 11. Collaborative forest management/rural development forestry · Institutional development and organizational arrangements · Recent Experience in Collaborative Forest Management Approaches: A Review of Key Issues (5/13/99) · Appropriate instruments, circumstances for resolution, and promotion of participatory approaches · Collaborative forest management in countries in economic transition 12. Indigenous peoples and forests · Assessment of the impacts of large-scale forest production and · Discussion Note: Indigenous Peoples and Forests: Main Issues clearing operations on the welfare of indigenous groups (4/19/99) · Quantitative and quality analysis of the areas of remaining forest · Indigenous Peoples, Forestry Management, and Biodiversity needed to protect the social and cultural assets of groups Conservation (2/18/00) continuing to live in forest areas · Hunting of Wildlife in Tropical Forests: Implications for Biodiversity and Forest Peoples (9/15/00) 13. Priorities for conservation and biodiversity · Assessment of global, regional, and country needs for forest · Biodiversity Conservation in the Context of Tropical Forest protection and conservation Management (9/1/00) · Technical, economic, and social aspects of alternative strategies for forest protection · Assessment of global needs for forest protection and preservation 14. Private sector involvement in improved forest management · Private sector partnership arrangements with government and local · Non-Industrial Private Forest Ownership/Privatization Processes communities (3/2/00) · Financial flows · Private sector provision of forest goods and services (for example, private sector conservation "ranches") 15. Forest crisis management · Effects and lessons from forest fires · The Bank: Mitigating Natural Disasters through Effective Forest and Non-Forest-Sector Policies (10/5/00) · Strategies to combat natural resource disasters NTFPs, nontimber forest products. ANALYTICAL STUDIES ON FORESTS A-61 A P P E N D I X N I N E Forest Portfolio Data, 1992­99 T he following 24 tables and 9 figures illustrate various trends Commitments to forest sector activities, by subcategory of and developments in the World Bank's activities in the for- activity. est sector from 1992 through 1999. These data are referred Annual disbursements for forest and forest-component to in a number of places in the main text and the appendixes. In projects. particular, the overviews in chapter 1 and appendix 6 discuss the GEF projects: overall and forest related. performance and internal incentives of the Bank's engagement in Forestry ESW. forests following the issuance of the Forest Strategy and Policy in Expenditures on preparation, appraisal, supervision, and 1991 and 1993, respectively. completion for forest and forest-component projects. Appendix 9 provides data on the following: Completed forest and forest-component projects. Task manager specialization and turnover in forests projects. Table A9.1 World Bank Commitments for Specific Forest Sector Activities by Region, 1992­99 Commitments AFR EAP ECA LAC MENA SAR All regions Forest sector activities (US$M) (%) (US$M) (%) (US$M) (%) (US$M) (%) (US$M) (%) (US$M) (%) (US$M) (%) Forest sector management 36.6 68.9 24.3 4.2 28.4 11.6 18.4 21.5 7.2 6.0 41.5 7.7 156.5 9.6 Production forestry 3.4 6.4 177.7 30.8 50.4 20.6 13.1 15.3 41.5 34.4 127.8 23.7 413.8 25.5 Research, training, technology, 1.2 2.3 50.3 8.7 23.4 9.5 11.9 13.9 4.6 3.8 67.4 12.5 158.8 9.8 and extension Ecodevelopment and 1.5 2.9 20.1 3.5 5.2 2.1 13.1 15.3 1.0 0.8 70.2 13.0 111.1 6.8 Protected Areas management Participatory forest -- -- 67.6 11.7 0.9 0.3 7.2 8.4 -- -- 55.4 10.3 131.0 8.1 management, indigenous peoples, and NTFPs Forest inventory (GIS/MIS) -- -- 2.3 0.4 -- -- 5.7 6.6 -- -- 14.2 2.6 22.2 1.4 Forest protection and -- -- 54.8 9.5 67.8 27.7 14.2 11.8 51.9 9.6 188.7 11.6 rehabilitation Farm/agro/urban forestry -- -- -- -- -- -- 6.1 7.1 -- -- 31.8 5.9 37.8 2.3 Project administration 2.5 4.7 11.2 1.9 4.2 1.7 1.6 1.9 3.4 2.9 18.8 3.5 41.7 2.6 Nonforest activities 7.9 14.8 169.5 29.3 64.7 26.4 8.5 10.0 48.6 40.3 61.0 11.3 360.3 22.2 All activities 53.2 100.0 577.7 100.0 244.9 100.0 85.6 100.0 120.5 100.0 540.0 100.0 1,621.9 100.0 --Not available. AFR, Africa; EAP, East Asia and Pacific; ECA, Europe and Central Asia; LAC, Latin America and the Caribbean; MENA, Middle East and North Africa; SAR, South Asia Region; NTFPs, nontimber forest products; GIS, geographic information systems; MIS, management information systems. Source: World Bank data. © 2004 The International Bank for Reconstruction and Development/The World Bank A-63 FIGURE A9.1 World Bank Commitments for Specific Forest Sector Activities, 1992­99 Nonforest activities Project administration Farm/agro/urban forestry Forest protection and rehabilitation Activities Forest inventory (GIS/MIS) Participatory forest management, indigenous peoples and NTFP Ecodevelopment and protected areas management est-SpecificroF Research, training, technology, and extension Production forestry Forest sector management 0 50 100 150 200 250 300 350 400 450 Commitments (US$M) Table A9.2 World Bank Annual Disbursements for Forest Sector Projects by Region, 1992­99 Annual disbursements (US$M) Region 1992 1993 1994 1995 1996 1997 1998 1999 AFR 31.5 42.4 36.6 35.9 48.7 30.0 9.2 6.5 EAP 166.2 150.2 85.0 103.3 129.8 79.2 74.3 82.2 ECA -- -- 11.5 21.4 38.7 35.4 12.0 8.7 LAC 1.9 8.0 6.1 14.4 0.3 0.5 4.3 6.5 MENA 5.0 7.9 5.6 19.2 16.0 10.7 7.9 13.0 SAR 60.0 37.5 16.1 41.0 38.5 58.0 60.6 73.6 All Regions 264.6 246.0 160.9 235.2 272.0 212.8 168.3 190.5 --Not available. AFR, Africa; EAP, East Asia and Pacific; ECA, Europe and Central Asia; LAC, Latin America and the Caribbean; MENA, Middle East and North Africa; SAR, South Asia Region. Source: World Bank data. Table A9.3 World Bank Annual Disbursements for Forest Components of Non-Forest-Sector Projects by Region, 1992­99 Annual disbursements (US$M) Region 1992 1993 1994 1995 1996 1997 1998 1999 AFR 4.5 15.0 17.6 21.1 29.6 25.2 22.8 21.2 EAP 2.7 9.2 15.4 80.1 59.8 67.2 50.4 31.1 ECA 1.5 0.2 2.1 4.2 5.3 9.1 6.4 6.6 LAC 7.2 28.5 50.8 126.0 62.1 66.7 86.6 65.0 MENA -- 2.8 0.9 0.5 2.5 2.0 9.9 8.5 SAR 2.8 1.1 9.0 11.3 16.0 20.3 23.7 26.7 All Regions 18.6 56.9 95.8 243.3 175.3 190.4 199.7 159.2 --Not available. AFR, Africa; EAP, East Asia and Pacific; ECA, Europe and Central Asia; LAC, Latin America and the Caribbean; MENA, Middle East and North Africa; SAR, South Asia Region. Source: World Bank data. A-64 SUSTAINING FORESTS A DEVELOPMENT STRATEGY Table A9.4 World Bank Annual Disbursements for Forest Sector and Forest Components of Non-Forest-Sector Projects by Region, 1992­99 Annual disbursements (US $M) Region 1992 1993 1994 1995 1996 1997 1998 1999 AFR 36.0 57.4 54.2 57.0 78.3 55.2 32.0 27.7 EAP 168.9 159.4 100.4 183.4 189.6 146.4 124.7 113.3 ECA 1.5 0.2 13.6 25.6 44.0 44.5 18.4 15.3 LAC 9.1 36.5 56.9 140.4 62.4 66.2 90.9 71.5 MENA 5.0 10.7 6.5 19.7 18.5 12.7 17.8 21.5 SAR 62.8 38.6 25.1 52.3 54.5 78.3 84.3 100.3 All Regions 283.2 302.9 256.7 478.5 447.3 403.2 368.0 349.7 AFR, Africa; EAP, East Asia and Pacific; ECA, Europe and Central Asia; LAC, Latin America and the Caribbean; MENA, Middle East and North Africa; SAR, South Asia Region. Source: World Bank data. FIGURE A9.2 World Bank Annual Disbursements for Forest Sector and Forest Components of Non-Forest-Sector Projects, 1992­99 300 250 243.3 199.7 200 190.4 US$M 175.3 159.2 150 100 95.8 Disbursements 56.9 50 18.6 0 1992 1993 1994 1995 1996 1997 1998 1999 World Bank Annual Disbursements for Forest Sector Projects and Forest Components of Non-Forest-Sector Projects, 1992­99 600 500 478.5 447.3 403.2 400 368.0 US$M 349.7 302.9 300 283.2 256.7 200 Disbursements 100 0 1992 1993 1994 1995 1996 1997 1998 1999 Source: World Bank data. FOREST PORTFOLIO DATA, 1992­99 A-65 Table A9.5 World Bank­Implemented GEF Overall Projects and Forest Projects by Region, 1992­99 Total no. of GEF grants No. of GEF GEF grants Total no. of GEF grants GEF projects GEF grants No. of GEF for forest forest for forest Region GEF projects (US $M) (%) (%) forest projects projects (US $M) projects (%) projects (%) AFR 29 156 20 14 15 100 34 27 EAP 19 276 13 25 5 65 11 18 ECA 43 258 30 24 8 46 18 12 Global 5 96 3 9 -- -- -- -- LAC 32 176 22 16 12 113 27 30 MENA 10 54 7 5 -- -- -- -- SAR 6 79 4 7 4 47 9 13 All Regions 144 1,094 100 100 44 370 100 100 --Not available. GEF, Global Environment Facility; AFR, Africa; EAP, East Asia and Pacific; ECA, Europe and Central Asia; LAC, Latin America and the Caribbean; MENA, Middle East and North Africa; SAR, South Asia Region. Source: World Bank data. Table A9.6 World Bank­Implemented GEF Forest Projects by Region, 1992­99 Total no. of GEF grants No. of GEF GEF grants for No. of GEF GEF grants for Region GEF projects (US$M) forest projects forest projects (US$M) forest projects (%) forest projects (%) AFR 29 156 15 100 52 64 EAP 19 276 5 65 26 24 ECA 43 258 8 46 19 18 Global 5 96 -- -- -- -- LAC 32 176 12 113 38 64 MENA 10 54 -- -- -- -- SAR 6 79 4 47 67 59 All Regions 144 1,094 44 370 31 34 --Not available. GEF, Global Environment Facility; AFR, Africa; EAP, East Asia and Pacific; ECA, Europe and Central Asia; LAC, Latin America and the Caribbean; MENA, Middle East and North Africa; SAR, South Asia Region. Source: World Bank data. A-66 SUSTAINING FORESTS A DEVELOPMENT STRATEGY 372 365 746 233 806 on.igeR 1,267 3,789 ojects pr Commitments (US$M) siaA All of. South 38 40 20 41 10 22 ojects 171 No pr SAR, (%) ica;rfA 5 6 27 13 15 -- 10 thro N ommitments C ojects (%) and pr fo. ojects 39 31 40 29 -- 81 East 26 le sector No pr idd M estrof A, 56 46 74 MEN GEF 100 113 370 Commitments (US$M) bbean;i fo. Car 5 8 4 15 12 ---- 44 ojects the No pr and ica er (%) 59 49 02 73 48 27 47 mA 99­ Latin ojects Commitments (%) C, pr 1992 of. 53 73 53 LA 59 70 32 55 ojects No pr sia;A alr Region, component Cent and estroF 47 219 624 548 113 219 and 1,797 ypeT Commitments (US$M) peoruE oject fo. 7 7 7 20 29 24 94 ojects ECA, Pr yb No pr cific;aP and 14 46 67 11 52 67 43 Lending (%) siaA Commitments (%) East, Sector ojects pr of. 8 EAP estroF ojects 15 25 12 30 50 19 No pr ica;rfA sector of estroF 35 86 AFR,;y 578 245 121 540 1,622 cilitaF Commitments (US$M) Comparison fo. 3 6 5 5 3 11 33 ojects No pr nmentoriv data. Bank En A9.7 rldo A W ableT C Regions ailable.va Region AFR EAP EC LA MENA SAR All ot Global, ce: --N GEF Sour A-67 Table A9.8 Net Change in World Bank Forest Economic and Sector Work, 1992­99 1992­95 1996­99 Net change No. of Direct cost No. of Direct cost No. of Direct cost Region reports (US$'000) reports (US$'000) reports (%) (%) AFR 5 1,131.5 -- -- (100) (100) EAP 3 438.1 1 77.4 (67) (82) ECA 2 214.9 3 654.3 50 205 LAC 8 1,238.1 -- -- (100) (100) MENA -- -- -- -- -- -- SAR 1 220.7 2 144.8 100 (34) All Regions 19 3,243.2 6 876.6 (68) (73) --Not available. AFR, Africa; EAP, East Asia and Pacific; ECA, Europe and Central Asia; LAC, Latin America and the Caribbean; MENA, Middle East and North Africa; SAR, South Asia Region. Source: World Bank data. A-68 SUSTAINING FORESTS A DEVELOPMENT STRATEGY cost 000)' -- -- ect 445.8 914.9 404.9 366.8 509.8 1,477.7 4,119.9 Dir (US$ egionsr All ts of. 2 4 3 3 3 10 -- -- 25 No eporr cost 000)' ect -- -- -- 48.3 96.5 220.7 365.5 Dir (US$ SAR ts on.igeR of. -- 1 -- -- 1 ---- ---- 1 3 No eporr siaA South cost SAR, -- -- -- -- -- -- ect 000)' Dir ($ ica;rfA MENA ts of. htro -- ---- ---- -- -- -- -- -- ---- N No eporr and East cost le 000)' -- -- -- ect 323.2 914.9 idd 1,238.1 M C Dir (US$ AL A, ts MEN of. -- 4 4 ---- ---- -- -- ---- 8 No eporr bbean;i Car cost 000)' the ect 96.6 -- -- -- 118.3 241.0 413.3 869.2 and 99­ A Dir (US$ ica EC er ts 1992 of. ---- 1 -- 1 1 -- -- 2 5 mA No eporr ork, Latin W C, LA cost 000)' ect -- -- 77.4 -- 228.7 209.4 515.5 sia;A Sector Dir (US$ alr EAP and fo. ts Cent 1 1 -- 1 1 ---- ---- -- 4 and No eporr Economic peoruE cost estroF 000)' -- -- ect 217.1 627.7 286.6 ECA, 1,131.5 Dir (US$ AFR cific;aP Bank fo. ts 1 3 ---- 1 ---- -- -- ---- 5 and orld No eporr siaA W data. East, Bank EAP A9.9 completed ailable.va rldo W ableT earY 1992 1993 1994 1995 1996 1997 1998 1999 otalT ica;rfA ot ce: --N AFR, Sour FOREST PORTFOLIO DATA, 1992­99 A-69 FIGURE A9.3 Net Change in World Bank Forestry Economic and Sector Work, 1992­95 and 1996­99 250 205% 200 150 100% 100 50% centreP 50 0 AFR EAP ECA LAC MENA SAR ­50 ­34% ­67% ­100 ­82% ­100% ­100% ­150 No. of reports Total direct cost AFR, Africa; EAP, East Asia and Pacific; ECA, Europe and Central Asia; LAC, Latin America and the Caribbean; MENA, Middle East and North Africa; SAR, South Asia Region. Source: World Bank data. A-70 SUSTAINING FORESTS A DEVELOPMENT STRATEGY as 4.56 1.15 0.66 3.14 2.19 1.21 1.57 of Cost % commitment costs otalT 000)' 956.5 546.4 Cost ($ 2,301.5 1,459.0 2,035.5 2,792.9 10,091.8 fo. eeks 940.2 461.3 288.3 556.9 238.9 No w 1,100.8 3,586.4 as 0.13 0.06 0.02 0.05 0.16 0.07 0.06 on.igeR of Cost % commitment siaA estroF Completion 000)' 68.1 71.0 30.1 30.0 40.0 South of Cost ($ 159.7 398.9 fo. SAR, eeks 4.9 7.6 25.5 17.8 10.0 41.1 No w 106.9 Sample ica;rfA a orf htro N as 2.11 0.46 0.34 1.16 0.79 0.50 0.66 of and Cost % commitment vision East le Completion Super 000)' 580.4 500.5 754.0 198.7 idd Cost ($ 1,065.3 1,151.3 4,250.2 M A, and fo. eeks 63.7 No w 405.6 175.9 130.0 258.7 521.8 MEN 1,555.7 vision, valo bbean;i Super as 1.18 0.33 0.18 0.13 0.48 0.23 0.31 Car ppra of d the Cost % commitment and boar to Appraisal, 000)' 82.6 ica 597.7 413.1 257.9 120.4 535.4 er Cost ($ 2,007.1 mA fo. Appraisal eeks 95.0 34.3 39.7 No w 235.9 137.5 184.0 726.4 Latin C, eparation, Pr LA as sia;A 1.13 0.31 0.12 1.80 0.75 0.41 0.53 oject alr Pr ppraisala of Cost % commitment to Cent orf es 99­ 000)' and 570.4 394.5 168.0 187.3 946.5 Cost ($ 1,168.9 3,435.6 1992 eparation Pr fo. peoruE eeks 58.4 273.2 130.1 256.3 125.5 353.9 No w 1,197.4 ECA, Expenditur ojects, Pr Bank cific;aP 50.5 64.8 25.0 126.5 146.0 230.7 643.5 oject 000)' and orld Pr commitments ($ W siaA data. Component fo. 3 2 1 2 1 4 ojects 13 East, A9.10 estroF Bank No pr EAP A W ableT C Regions ica;rfA rldo and Region AFR EAP EC LA MENA SAR All ce: AFR, Sour FOREST PORTFOLIO DATA, 1992­99 A-71 000)' 956.5 546.4 624.2 Cost 1,303.1 1,062.1 otalT (US$ of. eeks No w 508.5 288.3 238.9 421.5 230.3 000)' 2.2 30.1 40.0 32.0 Cost (US$ 127.7 Completion of. eeks 0.7 4.9 8.5 No w -------- 10.0 -------- 32.6 -------- 000)' -- -- Cost (US$ 512.2 500.5 198.7 467.7 229.7 275.0 vision Super of. eeks -- 63.7 -- 87.3 No w 156.7 130.0 207.1 101.2 000)' ion.geR ough valo -- -- 73.1 Cost (US$ 464.6 257.9 120.4 190.7 108.0 thr siaA ppra d fo. South boar eeks 95.0 -- 39.7 68.1 -- 38.4 21.1 Appraisal No w 179.5 SAR, 000)' to -- -- ica;rfA Cost (US$ 324.1 168.0 187.3 371.7 158.8 252.4 thro N eparation ppraisala fo. Pr eeks 58.4 -- -- 58.1 and No w 171.6 125.5 137.8 101.6 East le idd oject 18.3 26.1 25.0 77.4 34.0 58.0 Pr loan (US$M) 146.0 124.0 M A, MEN ojectrP 25.5 29.0 37.4 89.0 39.0 67.3 cost (US$M) 188.0 142.0 bbean;i 99­ mpletion.oc Car h fo. a 3 3 2 2 4 3 3 3 the oug 1992 No task thr managers and ica alvo er ojects, Pr Fiscal eary 1992 1994 1992 1992 1992 1994 1992 1995 mA appr oject Latin pr C, Sector LA omfr ces estroF elopmentv sia;A De and and oject, name Resour y y y y Pradesh y y Pradesh y alr pr Bengal onment ya jectorP estroF Management estrroF estrroF vir En estrroF atershed W Maharashta estrroF Andhra estrroF est W estrroF Madh estrroF the Cent for and Completed y peoruE data. managers Countr anzaniaT olandP Haiti Algeria India India India India task Bank ECA, A9.11 of rldo A W ableT C ailable.va ica;rfA Region AFR EC LA MENA SAR SAR SAR SAR ot umber ce: N --N AFR, a. Sour A-72 SUSTAINING FORESTS A DEVELOPMENT STRATEGY 4.7 14.1 18.1 46.4 70.0 60.0 54.9 74.3 14.7 estroF component commitment (US$M) estroF (US$M) 5.2 24.4 35.9 95.0 17.8 oject 400.0 250.0 110.0 116.1 component pr cost estroF 82.1 98.8 80.7 100.0 100.0 100.0 100.0 100.0 100.0 component (%) 000)' -- -- -- 632.5 365.9 386.9 385.1 taloT Cost (US$ 1,072.1 1,650.4 fo. eeks w -- -- -- No 255.3 177.7 353.1 108.2 168.9 488 000)' 0.3 30.5 35.4 45.3 25.7 29.7 -- -- Cost (US$ 99­ fo. Completion eeks 5.7 0.1 7.5 No w 10.6 14.2 12.1 -- -- ---- 1992 000)' cent,reP vision Cost (US$ 348.1 205 380.1 200.3 146.5 607.5 178.9 75 Super fo. eeks No w 43.6 64.1 ---- ---- 134.2 114.7 132.3 194.6 126.2 than ough valo 000)' 0 67.5 65.6 94.4 82.6 thr ppra Cost (US$ 318.7 163.6 eater d Gr fo. eeks 0 00 00 boar 32.8 23.6 34.6 34.3 56.4 Appraisal No w 102.9 to 000)' 59.9 66.5 on.igeR 186.4 328 155.7 163.6 Cost (US$ 1,013.2 siaA Components eparation ppraisala fo. Pr eeks 77.7 23.9 24.3 70.4 ---- ---- 56.4 No w 105.8 185.9 South estroF SAR, 4.8 oject 14.1 18.1 56.5 70 60 55 92 14.7 Pr loan (US$M) mpletion.oc with bbean;i h oug ojectrP 5.3 24.4 35.9 59 17.8 Car thr ojects cost (US$M) 487 250 110 143.8 the Pr alvo fo. and a 4 3 4 2 3 4 4 3 3 ica appr No task managers er mA oject pr est-Sectorro Fiscal eary 1992 1993 1994 1994 1993 1994 1995 1993 1994 Latin omfr C, ces y LA of oject, Non-F II edit pr name Resour vation Industr Cr cific;aP the onment ques ojectrP vir atershed elopmentv onment for vir and Management Natural En W Conser Rubber Smallholders De Authority En echnicalT Assistance Agricultural Sector Inpar Rubber Balochistan Natural Completed siaA y data. ysia East, managers Countr Benin Ghana Indonesia Mala Bolivia Honduras enezuelaV task Bank India Pakistan EAP A9.12 of rldo W ableT C C C ailable.va ica;rfA Region AFR AFR EAP EAP LA LA LA SAR SAR ot umber ce: N --N AFR, a. Sour FOREST PORTFOLIO DATA, 1992­99 A-73 2.2 0.3 32.0 -- 30.1 40.0 30.5 35.4 45.3 25.7 29.7 -- 127.7 Cost (US$'000) Completion of. eeks 0.7 8.5 4.9 5.7 0.1 7.5 32.6 -- 10.0 10.6 14.2 12.1 -- No w 1992­99 cent, erP Cost (US$'000) 512.2 467.7 229.7 275.0 500.5 198.7 348.1 205 380.1 200.3 146.5 607.5 178.9 vision 75 Super of. eeks 87.3 63.7 43.6 64.1 than No w 156.7 207.1 101.2 130.0 134.2 114.7 132.3 194.6 126.2 ion.geR siaA eater ough Gr valo 0.0 73.1 67.5 65.6 94.4 82.6 Cost (US$'000) 464.6 190.7 108.0 257.9 120.4 318.7 163.6 South thr of ppra d SAR, of. boar 0.0 ica; Appraisal eeks 68.1 38.4 21.1 95.0 39.7 32.8 23.6 34.6 34.3 56.4 No w 179.5 102.9 frA thro Component N to 59.9 66.5 est 324.1 371.7 158.8 252.4 168.0 187.3 186.4 328 155.7 163.6 and Cost (US$'000) 1,013.2 orF East eparation ppraisala le with of. Pr idd eeks 58.1 58.4 77.7 23.9 24.3 70.4 56.4 No w 171.6 137.8 101.6 125.5 105.8 185.9 M A, ojects MEN Pr 4.8 4.7 oject 18.3 34.0 58.0 25.0 14.1 18.1 56.5 70.0 60.0 Pr loan (US$M) 124.0 146.0 ibbean; Car est-Sector 5.3 oject 25.5 39.0 67.3 37.4 24.4 35.9 17.8 the or Pr cost (US$M) 142.0 188.0 487.0 250.0 110.0 and ica Non-F of. a 3 4 3 3 3 2 4 3 4 2 3 4 3 merA and No task managers Latin mpletion.oc C, h ojects LA Pr Fiscal eary oug 1992 1992 1992 1995 1994 1992 1992 1993 1994 1994 1993 1994 1994 sia;A thr alr alvo Sector Cent appr y II est edit orF y and y estr vation Cr oject Management estr orF Smallholders peo pr estr atershed Natural ces orF orF y elopmentv W of Authority echnicalT urE Conser Sector Natural omfr name Pradesh De and Resour y y ces Industr ECA, Bengal oject, ya onment Completed est estr estr oject est vir atershed elopmentv onment pr vir of Pr orF Maharashta W Madh orF orF Management Resour En W Rubber De En Assistance Agricultural Balochistan cific;aP the for and y Sample siaA ysia data. Countr anzaniaT India India India olandP Algeria Benin Ghana Indonesia Mala Bolivia Honduras Pakistan East, managers task Bank EAP A9.13 of rld ica; A Wo ableT C C ailable.va frA Region AFR SAR SAR SAR EC MENA AFR AFR EAP EAP LA LA SAR ot umber ce: N --N AFR, a. Sour A-74 SUSTAINING FORESTS A DEVELOPMENT STRATEGY Table A9.14 Task Manager Specialization for World Bank Forest Sector Projects, 1992­99 Task manager specialization No. of task managers No. of projects No. of projects (%) Agricultural economist/specialist 7 8 24.24 Biodiversity specialist 1 1 3.03 Ecologist 1 1 3.03 Economist 3 3 9.09 Environmental economist/specialist 3 5 15.15 Forestry economist/specialist 4 7 21.21 Natural resource economist/specialist 4 7 21.21 Social scientist 1 1 3.03 Total 24 33 100.00 Source: World Bank data. Table A9.15 Task Manager Current Unit for World Bank Forest Sector Projects, 1992­99 Task manager current unit No. of task managers No. of projects No. of projects (%) Country Office 2 3 9.09 Environment 4 5 15.15 Environment and Socially Sustainable Development 5 7 21.21 Rural Development 11 16 48.48 Social Development 2 2 6.06 Total 24 33 100.00 Source: World Bank data. Table A9.16 Task Manager Specialization for Non-Forest-Sector Projects with Forest Components of Greater than 75 Percent, 1992­99 Task manager specialization No. of task managers No. of projects No. of projects (%) Agricultural economist/specialist 7 8 30.77 Agronomist 1 2 7.69 Anthropologist 1 1 3.85 Ecologist 2 2 7.69 Economist 2 2 7.69 Natural resource economist/ specialist 11 11 42.31 Total 24 26 100.00 Source: World Bank data. FOREST PORTFOLIO DATA, 1992­99 A-75 Table A9.17 Task Manager Current Unit for Non-Forest-Sector Projects with Forest Components of Greater than 75 Percent, 1992­99 Task manager current unit No. of task managers No. of projects No. of projects (%) Country Office 4 4 15.38 Environment 5 5 19.23 Rural Development 13 13 50.00 Social Development 2 2 7.69 Transport 1 1 3.85 Finance, Private Sector, and Infrastructure 1 1 3.85 Total 26 26 100.00 Source: World Bank data. Table A9.18 Average Number of Task Managers for Active and Completed Forest Sector Projects, 1992­99 Active projects Completed projects All projects Average Average Average No. of no. of task No. of no. of task No. of no. of task Region projects managers projects managers projects managers AFR 2 3.0 1 3.0 3 3.0 EAP 6 1.7 6 1.7 ECA 4 2.8 1 3.0 5 2.8 LAC 4 1.3 1 2.0 5 1.4 MENA 2 2.5 1 2.0 3 2.3 SAR 7 3.1 4 3.3 11 3.2 Total 25 2.4 8 2.9 33 2.5 AFR, Africa; EAP, East Asia and Pacific; ECA, Europe and Central Asia; LAC, Latin America and the Caribbean; MENA, Middle East and North Africa; SAR, South Asia Region. Source: World Bank data. Table A9.19 Average Number of Task Managers for Active and Completed Non-Forest- Sector Projects with Forest Component of Greater than 75 Percent, 1992­99 Active projects Completed projects All projects Average Average Average No. of no. of task No. of no. of task No. of no. of task Region projects managers projects managers projects managers AFR 5 1.6 2 3.5 7 2.1 EAP 3 2.0 2 3.0 5 2.4 LAC 6 2.0 3 3.7 9 2.6 MENA 1 1.0 -- -- 1 1.0 SAR 2 1.5 2 3.0 4 2.3 Grand total 17 1.8 9 3.3 26 2.3 --Not available. AFR, Africa; EAP, East Asia and Pacific; LAC, Latin America and the Caribbean; MENA, Middle East and North Africa; SAR, South Asia Region. Source: World Bank data. A-76 SUSTAINING FORESTS A DEVELOPMENT STRATEGY N OT E S 1. See Putz and others 2000. " . . . From a biodiversity maintenance benefits from the forest, containing the environmental impacts of perspective, natural forest management is preferable to virtually all forest use, rigorously planning forest management, actively land-uses other than complete protection. Forests that are carefully monitoring and assessing, and maintaining critical natural forests. managed for timber will not replace Protected Areas as storehouses The Alliance also believes that credible certification systems must of biodiversity, but they can be an integral component of a be consistent with the following criteria: conservation strategy that encompasses a larger portion of the landscape than is likely to be set aside for strict protection." Institutionally and politically adapted to local conditions. 2. Forest landscape restoration refers to restoration of ecosystems Goal oriented and effective in reaching objectives. (including forest rehabilitation) that incorporates the basic principles Acceptable to all involved parties. of sustainable livelihood approaches. Based on performance standards defined at the national level that 3. See Guerguieva and Hamilton 2000; Kaimowitz and Angelsen 1998; are compatible with generally accepted principles of SFM. Seymour and Dubash 2000. Based on objective and measurable criteria. 4. In developed countries, approximately 80 million ha of production Based on reliable and independent assessment. forests so far have been certified under various schemes: 21 million Credible to major stakeholder groups (including consumers, under FSC, 4.3 million under the Canadian Standards Association, producers, and conservation NGOs ). and 32 million by the recently introduced Pan-European Forest Certification Scheme. Adoption of independent certification in Bank Certification decisions free of conflicts of interest from parties client countries has been slow (only approximately 9 million ha to with vested interests. date) partly because of difficulties in meeting currently defined Cost-effective. minimum standards of certification. In some countries, such as Transparent. India, subsistence users and local markets are not likely to demand Equitable access to all countries. green labels. There are also strong preferences for developing local standards to assess the acceptability of management approaches 6. This aspect of the policy covers all natural habitats, not solely natural based on use of locally developed performance indicators. habitats considered to be "critical natural habitats." 5. Debate continues on the political acceptability and cost-effectiveness 7. See note 6. of different schemes. A serious knowledge gap is the actual impact of 8. Bruner, Rice, and da Fonseca 2001. these systems on forest management and analysis of their respective merits and shortcomings. Independently conducted research on these 9. IUCN and the World Conservation Monitoring Centre 1994. aspects is an activity that the Bank could usefully support through its 10. The 1991 strategy's definition of "primary forest" and the country lending operations. The World Bank/WWF Alliance for application of Bank safeguards, particularly those concerning Forest Conservation and Sustainable Use believes that a common set indigenous peoples and resettlement, have added to external of principles should underscore any standard for improving the criticism, including the threat of inspection panels. Although management of both natural and planted forests. These principles significant in forest-rich countries, which wished to use their include complying with all relevant laws, documenting tenure and substantial natural forests for financing economic development, use rights, respecting indigenous peoples' rights, respecting these controversies also have extended to other types of forests community relations and workers' rights, encouraging multiple and projects. A-77