|
|
World Bank
REVIEW OF
IMPLEMENTATION OF THE FOREST This chapter reviews the changing patterns of policy themes in sector work and of resource allocation, project lending. It considers forestry sector work first, noting the recent increase in the quantity of formal sector work and the consistency of the Bank's approach and policy guidance with the basic messages of the policy paper. The analysis then turns to project lending and the ways in which the policy's investment priorities are being interpreted in approaches to specific projects. The chapter concludes by examining some areas where quality could be enhanced and efforts expanded, as well as some process issues.
The policy paper called for intensifying the Bank’s program of country-level forestry sector work, with more emphasis on a multisectoral approach. In its 1991 review of Bank operations in forestry, the operations Evaluation Department (OED) questioned the extent to which sector work had been effective in putting sectoral concerns in the broad concerns of in the broad context of comprehensive land management and intersectoral tradeoffs, in linking sector analysis to the design of lending operations, and in identifying and bringing about change in thc basic obstacles to sectoral performance. Policy issues that the policy paper cited as having major effects on forest resources included the consequences of undervaluation of forests, poorly regulated private sectors, unwise promotion of alternative land uses, and the effects of macroeconomic policy on forests. Recent Bank sector studies have shown that these concerns are justified and have strengthened the case for emphasizing policy reform and institutional change, rather than investment, as the first step toward sustainable forest management. Nine major pieces of forestry sector work (summarized Table 1) have been completed in the last three years, in contrast to only fifteen before 1991.
As highlighted in the policy paper, market and policy failures commonly combine in the forest sector to undervalue the resource base severely, leading to excessive rates of depletion and inadequate investment in tree planting. Bank project work in forestry has established innovative practices for shadow pricing of forest values in appraisal. This work has been extended since 1991 in a number of attempts to inform policymakers of the significance of forest resources and the need to improve fiscal as well as physical management. Table 1.
Sector work in Costa Rica and Nigeria has made major contributions by quantitatively estimating forest values and, in particular, by showing how these values diverge from actual market prices. In Costa Rica, for example, Bank estimates suggest that the total value of the remaining forest area exceeds US$2.3 billion. Of this, 66 percent (US$1.6 billion) now accrues to the global community in the form of environmental benefits such as carbon sequestration and biological diversity without compensation to Costa Rica. In Nigeria, Bank sector work showed that deforestation imposes a cost to the economy of nearly US$5 billion per year. In Brazil, Costa Rica, Indonesia and Malaysian, Bank staff used benefit-cost analysis to understand existing land use patterns and evaluate the implications of various policy options. This work demonstrated both the strength of fundamental economic and policy-induced forces that can drive deforestation and the opportunity, as well as constraints in remote frontier areas, for applying alternative policy instruments. In Brazil, a review of land use practices at the forest frontier underscored the power of the market forces underlying deforestation. For poor farmers, with high discount rates, shifting cultivation is rational. For investors, with lower discount rates, cattle ranching is rational. Changes in land use practices can be sought through a combination of regulations and incentives, based on environmental costs and benefits of different practices. Strict administration of such measures is necessary and administratively demanding, but it is precisely in remote frontier areas that government is weak. In Costa Rica, a review of forest management options found that natural forest management, while marginally profitable, cannot compete financially with fast-growing plantations or pastures. Natural forest management can, however, be competitive economically when environmental benefits are taken into account. Incentives to this effect are now in place. In Malaysia, an economic model of tropical forest management tested the viability of alternative management practices, demonstration the divergences between private and social objectives in forestry, and led to the conclusion that environmentally sustainable forest management can also be economically and financially viable. This forest valuation work has reinforced the analysis the policy paper and justified the need to revise forest revenue mechanisms, compensation practices, and investment priorities. Confidence in forest value estimates is highest where they can be traced fairly directly to transactions involving goods and services in functioning markets, such as for soil conservation and nontimber forest products benefits. As other agencies working in environmental valuation have also found, estimating values for biodiversity, atmospheric carbon sequestration, and certain non-use forest values remains more speculative, but is still helpful in policy analysis (see Box 1). Bank sector work in forest valuation is contributing significantly to debates about the uses of forests and to methodological development. Box 1. Forest Valuation in Madagascar
Source: Kramer ad others (1994)
The forest sector presents a challenging mix of social issues, including conflicts over indigenous peoples' land rights; tenure questions; differences in the distribution of benefits across genders and subpopulations; and the need to bridge different perceptions about the uses of forests among government officials, intended beneficiaries, and other stakeholders. Bank sector work has only recently begun to tackle these and related social issues. The India Forest Sector Study, for example, contains a comprehensive analysis of social issues and considers a wide range of questions related to people's participation in forestry. Sector studies in Argentina, Bolivia and Costa Rica also highlight forest access and tenure rights as key problems. Forestry sector work in several countries, however, needs to address the distributional aspects of alternative policy frameworks. Especially in resource-rich countries, policies favoring commercial utilization or forest conversion tend to benefit people other than local communities and traditional forest users. The Bank has an excellent opportunity to promote reform by highlighting the public purpose of forest development, and by articulating the potential equity and efficiency gains. Systematic application of social assessment, increased use of professional social scientists, and greater reliance on in-country expertise are ways to improve forest sector reviews. This has worked effectively in the recently completed Mexico forestry review, which extensively used stakeholder workshops and policy dialogues to address such social issues as differences in management capabilities across forest user groups, and the need to provide adequate support services to particular target groups who may be disadvantaged on the basis of gender, income and social status, ethnicity. and remoteness of location.
Work in Argentina shows how macroeconomic stability can influence forestry. The review traces poor growth to a history of trade and development policies that effectively taxed forestry, biasing development in the land management and processing sectors. The work also demonstrates how Argentina's history of macroeconomic instability contributed to the loss of natural forests by (a) pushing the rural labor force into marginal agriculture in forest areas, (b) placing a premium on investment in land and cattle as an inflation hedge, and (c) making public funds scarce for protection of native forests and protected areas. Trade restrictions have been a major issue of concern in Cameroon, Ghana, Laos, and Malaysia A particular issue is whether to ban log exports as a way to promote domestic processing and better environmental stewardship. The evidence on the economic costs of log export bans argues compellingly against their imposition, since the gains from export of more finished wood products do not offset the domestic processing costs; moreover, little evidence exists to suggest that export bans contribute effectively to environmental protection (see Crossley forthcoming). Because of the widespread use of bans, however, the issue facing many governments is the formulation of a strategy for freeing trade without unleashing environmentally undesirable side effects. This requires ensuring that adequate safeguards are in place to control logging in the face of strong international timber demands and locally weak systems of forest revenue collection and control. In addition, governments may need assistance in designing programs to help domestic wood processors with the costs of adjusting to international competition . A related issue is whether to subsidize commercial forest plantations, as Chile has done since 1974, to promote exports (whether of logs or processed products). Bank sector work in Argentina examined the transferability of Chile's experience to Argentina and found that thc Chilean miracle is explained more by macroeconomic stability, land tenure security, and natural comparative advantage (when plantations are well managed) than by the modest subsidy offered for plantations on degraded land. This sector work concluded, however, that further analysis of the case for plantation subsidies as a means of remunerating investors for the environmental benefits of plantations was warranted.
An important trend in Bank work is the increased use and development of borrowing country enterprise to analyze national policy issues and develop reform programs. Another trend is to base forest policy dialogue on analyses conducted in the course of country economic and environmental work and discussion of national environmental action plans (NEAPs). In addition, the Bank has put considerable effort into preparing regional forestry strategies (see Box 2). Most active International Development Association (IDA) countries and a number of IBRD borrowers have completed NEAPs, and many of these national action plans are now entering thc implementation stage. Depending on country circumstances, forestry may figure prominently in these plans. The quality of NEAPs produced has varied, but they must be recognized as the first step of a continuing process of building an understanding of the links between macroeconomic and sectoral policies and the environment, strengthening the positive links, and identifying and mitigating any negative links. The preparation of environmental action plans is most successful when it involves those responsible for economic as well as environmental decisionmaking, and has broad stakeholder participation, and where methodologies for identifying policies and priorities are understood and widely accepted. Box 2.
Over the last eight years, many countries have prepared tropical forestry action plans. Frequently, however, these plans contained a set of forestry project proposals without sufficient grounding in sound analytical work, nor was there much participation in the planning process. Notable exceptions were in Chile, and the Ethiopia Forestry Action Program which was supported by the Bank among others. The latter represents a good model for donor support to forestry action planning, both in terms of its country-led, consultative process and its multisectoral approach. Initiated by the former government of Ethiopia, the program took three years to come to fruition, but ownership is clearly in Ethiopian hands. Sound analytical work was undertaken that identified needed policy reform measures and, subsequently, desirable investments. Ownership was such that government implemented some of the proposed measures before the plan was formally adopted.
In assessing forestry sector work undertaken h the last three years, four changes are striking:
But, as indicated above, progress on the treatment of social issues has been insufficient. In addition, the linkage between sector work and project design is improving, notably in Argentina, India, and Mexico. In other cases, sector analysis and dialogue during project design, even without formal sector work, have helped bring about policy changes and design improvements, notably in Belarus, China, and Poland. There are yet other cases where formal sector work: bas not been effective and project design is in abeyance. In Malaysia, the government has reviewed the national forestry policy and amended the National Forestry Act, and established a National Committee on Sustainable Forest Management to map out plans and strategies toward attaining sustainable forest management by the year 2000; but the government has not yet undertaken needed policy changes in areas such as forest revenue systems, land allocation criteria, and public participation. In Indonesia, extensive sector work and policy dialogue on forestry and related matters has been undertaken, not only with the government, but also with representatives of the private sector, nongovernmental organizations (NGOs), communities, and other interest groups. This dialogue has gone well beyond formal forestry sector work, emphasizing the linking of forestry sector matters to macroeconomic and other sectoral policies. Awareness of the importance of sustaining natural forests is increasing rapidly in Indonesia and some positive developments have taken place, most notably the decision to establish an independent institute to inspect and monitor forest operations for sustainability in the field. By contrast, the government has not so far implemented other desirable measures, such as making significant increases in royalties for standing timber, which would have positive effects on sector efficiency and sustainability of the resource, as well as a more immediate effect on Public revenues. These latter cases illustrate the difficulty of crafting politically viable reform programs. Although analysis confirms the availability of many win-win policy options, strongly vested interests that benefit from existing policies will resist change. Further compounding this problem is that officials of the agencies responsible for reform often have strong personal motives for resisting change because of the rent-seeking opportunities created by distorted policies. This has necessitated broadening the audience for analytical work on forests to include others interested in forest policy, including the staff of planning and finance agencies and of NGOs. Experience shows that this could be a long-term process and suggests that the policy of conditioning support for most forestry projects on commitment to sustainable and conservation oriented forestry may be insufficient (see Chapter 4).
Before the Bank adopted the 1991 forest policy it had committed USS2.6 billion for ninety seven for y projects. Since that time, an additional twenty three projects (ten Bank and thirteen IDA) have been approved with total new loan commitments of USS1.6 billion (see Table 2). Currently, twenty four projects are under active preparation that could amount to USS1.2 billion in new lending. Bank lending for forestry consists of both free standing forestry projects (about 90 percent) and forestry components of agriculture and other projects. Of the twenty three projects approved in FY92-94, fourteen are in the humid tropics. This reflects the emphasis in the policy paper on humid tropical forests, but is more a consequence of individual country assistance strategies than of any deliberate intent. But only three projects are in the dry tropics, whereas fuelwood is the single most important forest product worldwide and is produced principally in dry tropical forests. This inconsistency is, however, more apparent than real. Since most dry tropical forests are used for agriculture as well as livestock, projects in such areas are better designed as natural resources management operations with forestry as one among several components, rather than as free-standing forestry projects. This lesson was learned during the 1980s and is showing up in the lending statistics (actual and projected) for the 1990s. Table 2.
Historically, Bank-financed forestry projects have consisted of activities in the following areas: (a) resource expansion; (b) resource management, including watershed management and harvesting; (c) national parks and protected areas; (d) forest tenure; (e) institutional support; (f) technology development and transfer; (g) training; (h) wood industries; and (i) policy reform and studies. In response to the new directions proposed by the policy paper, as well as the trends and heightened challenges during the last three years, the composition of Bank lending for forestry has undergone a significant transformation. Figure 1 illustrates the rapid growth in total forestry lending during the last three years, and the changing emphasis on environmental and social concerns in contrast to industrial lending, as well as the growth in lending for social forestry following the 1978 policy paper. *** The changing patterns of investment in Bank-financed forestry projects during the last decade are shown in Table 3 and further summarized in Figure 2. For the last three years, the largest increases in the share of project costs were for protective and restorative activities. Parks and protected areas received substantially more resources than previously, with their share of project costs rising from 5 to 11 percent, while the share of watershed management rose from 3 to 16 percent. The share of project costs for components aimed at improving the livelihood of poor populations living in and around forest areas also rose dramatically. From 0.7 percent of costs in FY84-91, investment in alternative livelihood activities grew to 14 percent in the last three years. The largest decreases in the share of project costs were for resource expansion (9.5 percentage points), road construction and maintenance (9.1 percentage points), policy reform and studies (8.6 percentage points), and forest protection (4.4 percent points), but some of thc lending statistics can be misleading as noted in the following paragraphs. Annex 1 details the planned allocation of spending in all Bank-financed forestry projects approved in FY 84-94. While it is too early to make any assessment of development impact, these changes in the planned allocation of spending amount to a significant step toward the directions proposed in the policy paper. *** Table 3.
Source: World Bank data An important characteristic of recent forestry lending is more comprehensive and integrated project designs, as advocated in the policy paper and recommended in the OED review. Earlier Bank-financed projects in the sector tended to focus on single products, such as fuelwood, or on single investments, such as selected plantations or other specific operations. In India in the 1980s, for example, a series of social forestry projects focused primarily on fuelwood and fodder production, which often involved creating separate organizational arrangements for social forestry. Starting with the Mahanshtra Forestry Project in FY92 and followed by the West Bengal and Andhra Pradah Forestry projects, all have been based on a preparation process that identified policy and resource constraints affecting performance in forestry subsectors, including energy, industrial wood, parks and protected areas, and agriculture and soil conservation. By reaching across the entire sector, thus projects increase the Bank's ability to address fundamental reforms in the sector and help promote thc efficient allocation of resources. Similarly, comprehensive sector-wide projects are under implementation in Bangladesh, Belarus, China, Colombia, Indonesia, Lao PDR, and Poland. Other preparation efforts that attempt to take a broader approach to a range of sectoral issues are under way in Albania, Argentina, Ecuador, Indonesia, Nepal, Nigeria, and Slovak Republic. In Africa, the "nexus" concept (Cleaver and Schreiber 1993) is being used to identify ways of consolidating a range of concerns into a coherent program may include multiple projects or may result in comprehensive projects covering several sectors.
As Table 3 shows, resource expansion has been the largest single component of the Bank's forestry portfolio during the last ten years, accounting for a quarter of total Bank forestry investments (IJS$1.6 billion) and representing the equivalent of more than 3.3 million hectares of forest plantations. These efforts included support to commercially-oriented plantations, community plantations, nursery establishment aimed at rural households and communities, compensatory plantings established in conjunction with infrastructure projects, and other r planting operations. Experience has shown that even though fuel is the major form of wood use in developing countries, producers tend to favor small diameter building poles with higher market value. In China, where nearly one-third of Bank-financed plantations have been implemented, management is primarily for small diameter industrial wood with fuelwood as a by-product. The share of forestry lending for resource expansion has fallen from 32 percent for FY84 91, to 23 percent during the last three years, but the annual dollar amount has still increased by 12 percent. In addition to the increased emphasis that the policy paper places on other aspects of the sector, the relative decline in plantation lending is related to limited absorptive capacity for resource expansion in the Bank's largest borrowers (China and India) and to increased awareness of the weaknesses of government-executed planting program. Contracting out work: hitherto done on force account by forestry departments will relieve the capacity limit and, provided it is properly supervised, can also generate efficiency gains. Although the policy paper highlighted the close connection between deforestation and the need for new investment, experience has shown the disappearance of forests and demands for new plantings to be spatially separate. Plantation establishment and farm forestry have been most successful in areas that have already experienced severe forest depletion. Most Bank –supported tree planting is directed at land that has been deforested or otherwise degraded (China, India) or at abandoned agricultural land (Poland). While policies in some countries induce the conversion of natural forests to plantations, the Bank avoids investments in plantations that could displace intact natural forests.
Watershed management has been an important element of the Bank's forestry portfolio, with major early operations in Colombia, India, Indonesia, and the Philippines. The National Watershed Management and Conservation Project was an important departure from previous Bank strategy in watershed management in Indonesia. Rather than focusing on the treatment of selected geographical areas, the project aimed at helping the government strengthen its national system of soil conservation and watershed management. Contingent on effectively implementing institutional strengthening measures—such as research and development, land and management information systems development, and human resource development—the project provides time slice support to the government's ongoing national program. By building on the existing institutional structure, the objectives are to help improve the overall public expenditure program and to provide linkages to the nationwide soil conservation programs. Other watershed management projects include the Algeria Pilot Forestry and Watershed Management Project, the China Loess Plateau Rehabilitation Project, and the Multiple Use Protection Forest component of the China Forest Resource Development Project.
As highlighted in the policy paper, poverty is a key factor in forest destruction and resource degradation. One of the fastest growing dimensions of Bank forestry project work is the inclusion of components specifically intended to provide forest users with sustainable alternative sources of livelihood. Prior to 1991, Bank-financed forestry projects included negligible alternative livelihood efforts. In the last three years, however, alternative livelihood investments have amounted to US$356 million, or 14 percent of project costs. Alternative livelihood activities are particularly important components in projects that take broad and varied approaches to forestry, such as the National Resource Management projects in Rondonia and Mato Grosso in Brail, and in Mali. The projects in Brazil support the creation, demarcation, and protection of six extractive reserves totaling 3.5 million hectares; the marketing and processing of native rubber, Brazil nuts, and other forest products; the provision of land rights; and research to identify new products with market potential. In addition, the projects provide health services to Amerindian communities and protect indigenous land rights in areas covering about 4.7 million hectares. They also promote agroforestry development activities on deforested sites. In addition, the Mato Grosso project includes the provision of socioeconomic infrastructure and services. By focusing these investments in areas in which deforestation has already taken place, the project is designed to discourage further forest encroachment. These projects are complex and challenging because they address profound social and political problems. As implementation will be difficult, the Bank has made special provisions for intensive supervision. The Mali project supports a community approach to natural resource management approach that include investments in soil and water conservation, forest rehabilitation, and rangeland restoration as well as social services, infrastructure, and other productive investments with direct and immediate effects on communities' way of life. The latter activities are contingent upon (a) the demonstration of strong demand and a commitment to maintenance by communities; (b) the lack of other sources of financing; and (c) the presence of a technical agency, NGO, or other project that can provide technical backstopping that will ensure sustainability. Several Global Environment Facility (GEF) projects focus on enhancing community livelihood as a means of controlling encroachments into conservation sites. These include the use of locally established livelihood funds (Philippines, Uganda); partnerships between government, NGOs, and the private sector (in ecotourism and marketing of nontimber products in Cameroon, India, and Uganda); and the application of nature zoning and social mapping (Brazil).
A directive of the forest policy was that the Bank would not finance commercial logging in primary moist tropical forests. This policy has been strictly observed in Bank and International Finance Corporation IFC) operations. Prior to adoption of the policy, Bank financing of tropical logging had in any case been rare. The Bank had financed commercial logging operations in Congo (FY83), Guyana (FY79) and Myanmar (FY74, 81, 84), but has not undertaken such financing since the mid-l98Os. The IFC has not undertaken investments in wood industries with a component of selective logging in moist tropical forests since FY87. IFC's investments in the pulp and paper sector have never been based on tropical forest resources. For a summary of IFC investments in forest-based industries see Box 3. The Bank has sought to apply a precautionary approach to the harvesting and utilization of forest resources, especially in moist tropical forests. In Asia, the Bank has pursued an aggressive approach to strengthening the forest regulatory framework in Bangladesh, Indonesia, Lao PDR, Papua New Guinea, and Sri Lanka. Thc Bank has supported the preparation of inventories, management plans, forest revenue reforms, and concession supervision and other measures aimed at promoting more conservative and environmentally sound exploitation in these counties. In Africa, the Bank is promoting precautionary utilization in Cameroon, Côte d'Ivoire, and Gabon. In Cote d'Ivoire, thc Forestry Sector Project supports natal forest reserve inventories, and the executing agency has set conservative thresholds for timber stocks and the presence of seedlings of commercial species. Below these thresholds, logging is not authorized. Most of the areas inventoried have been classified as in abeyance for logging purposes, whereby no logging will be allowed until thc threshold values have been reached. In Latin America, the Colombia Natural Resource Management Project was completely redesigned to provide a more appropriate basis for regulating utilization and other aspects of the sector. The Bank has supported harvesting operations in projects where environmental conditions ensure that these activities will not damage primary forests. In China, the large Bank-financed Da Xing An Ling Forest Fire Rehabilitation Project enabled salvage operations following the 1987 forest fire (amounting to US$193 million out of total project costs of US$498 million). In Belarus and Poland, the Bank is financing a shift to more environmentally-friendly harvesting systems that will reduce damage to soils and remaining trees, reduce fuel consumption, and increase work safety. These changes are integral to controlled harvesting, in Belarus, of areas affected by the radioactive downfall from the Chernobyl accident, and to intensified silviculture and improved methods for restoring areas damaged by air pollution in Poland. Box 3.
Annual Average (constant
1992 US$) a/ Includes round wood, saw milling, plywood, particle board, and medium density fiber board. b/ Includes pulp, paper, newsprint, packaging, printing and writing paper, industrial paper, one operation in tissue (Jordan), and one plantation (Thailand). c/ Includes one usually large operation (US$1.5 billion) in Brazil in FY89 for pulp and printing and writing paper.
The policy paper emphasized the special role of government in setting aside and protecting national parks and protected areas. Bank support to facilitate the efforts of governments in this work has grown rapidly. Lending has risen from US$156 million in FY84-91 to US$282 million in FY92-94, increasing from 5 to 11 percent of project costs (Table 3). A major example of the Bank promoting forest protection is the Kenya Protected Areas and Wildlife Services Project, which is intended to help establish a legal, institutional, and financial framework for wildlife resources management. Investments under the project total US$124 million for institutional support and technical assistance, rehabilitation of park infrastructure, community-based wildlife extension services, and other measures. These are planned to reverse serious threats to the country's biodiversity, provide important watershed management benefits, contribute to the incomes of people living around parks, and develop and sustain the wildlife tourism subsector. A smaller but potentially important example is the Extractive Reserves Project in Brazil, that is funded by the special Rain Forest Trust Fund. This project simultaneously supports protected area designation and promotion of sustainable practices by the indigenous people. Source: IFC data a/ Includes round wood, saw milling, plywood, particle board, and medium density fiber board. b/ Includes pulp, paper, newsprint, packaging, printing and writing paper, industrial paper, one operation in tissue (Jordan), and one plantation (Thailand). c/ Includes one usually large operation (US$1.5 billion) in Brazil in FY89 for pulp and printing and writing paper.
The policy paper emphasized the special role of government in setting aside and protecting national parks and protected areas. Bank support to facilitate the efforts of governments in this work has grown rapidly. Lending has risen from US$156 million in FY84-91 to US$282 million in FY92-94, increasing from 5 to 11 percent of project costs (Table 3). A major example of the Bank promoting forest protection is the Kenya Protected Areas and Wildlife Services Project, which is intended to help establish a legal, institutional, and financial framework for wildlife resources management. Investments under the project total US$124 million for institutional support and technical assistance, rehabilitation of park infrastructure, community-based wildlife extension services, and other measures. These are planned to reverse serious threats to the country's biodiversity, provide important watershed management benefits, contribute to the incomes of people living around parks, and develop and sustain the wildlife tourism subsector. A smaller but potentially important example is the Extractive Reserves Project in Brazil, that is funded by the special Rain Forest Trust Fund. This project simultaneously supports protected area designation and promotion of sustainable practices by the indigenous people. Box 4.
Table 4.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
