REVIEW OF IMPLEMENTATION OF THE FOREST
SECTOR POLICY
December 5, 1994

index

4. FUTURE PRIORITIES

The problems facing the world community in the forest sector have grown during the three years since the issuance of the policy paper, but are now becoming more clearly understood as the diverse values of forests have become more widely recognized. This review considers that the Bank's current forest policy remains valid and provides suitable directions for continued work in the sector. Further improvements can be made in Bank work on forests by changing the relative emphasis given to different aspects of the work.

The Future of Forests

Analysis of the early implementation experience shows that the prescriptions in the policy paper were well founded, namely: reorient the institutional and incentive framework for forest resource decisionmaking; make people and the environment, not industrial wood production, the primary concerns of forest policy; and adjust the pace and scale of investment to the evolving capacity of public and private institutions. If these prescriptions are followed, forests will continue to provide significant environmental, social, and economic benefits in the next century.

Deep conflict and controversy will not go away. Pressures on the limited resource base will continue to mount, increasing the difficulty of meeting demands for environmental services and forest products. In the future there will be less natural forest and more plantations of exotic, fast-growing species. Governments will be intensely involved in the forest sector, but mainly as regulators and facilitators, as agents of development serving forest dependent people, and as effective custodians of parks and protected areas. And while much forest conversion will have taken place, many natural forest areas will be under management for multiple products, including biodiversity conservation, tourism and recreation, industrial timber, watershed protection, wildlife, and other nontimber forest products.

If this future vision is not realized in a forest sector that combines accountability, scientific resource management, and economic discipline, developing countries will not have a productive and sustainable forest resource. Significant forest values will be lost to both local and global communities. The remaining forest will be greatly diminished and subject to increasing degradation; biodiversity will be lost and more forest-dwelling people will bc displaced; the sector's foreign exchange earnings will have largely disappeared in many currently exporting countries; industrial wood products will be obtained in costly processed form from the industrial countries; and rural energy needs will be met from agricultural residues and wastes, thereby impoverishing the land base and the people dependent on it even more. Such downside effects of poor forest management underscore what is at stake for the world's forests and forest-dependent peoples.

Priorities for the Bank

Given the directions set by the forest policy, the magnitude of what is at ~e for the world's forests and forest-dependent peoples, and the areas where further improvements can be

made in Bank work, the Bank should increasingly concentrate its activities on the following four priorities.

Target the Use of Forest Resources to Reduce Poverty.

If properly taxed, regulated, and managed, forests could contribute more to reducing rural poverty. The Bank's first priority in the forest sector is to help use the sector's resources in an effective attack on poverty. Governments should support innovative institutional arrangements and financing mechanisms that can deepen participation and directly enhance the livelihoods of people and communities living in or near forests. These efforts should be pursued as part of a broad approach to rural development and poverty reduction to create the conditions for sustaining forest resources based on community benefits. The Bank should also pay greater attention to develop national capacities for rehabilitating and sustainably managing large areas of secondary forests, which could become more valuable assets for low-income people.

As indicated in the policy paper and as demonstrated in recent Bank-financed projects, many investment opportunities and mechanisms are available for Bank support to the use of forest resources for the poor. In addition to extractive reserves, joint forest management is a promising way in which the Bank can help promote use of forest resources for the poor. Joint management transfers a share of benefits from government to rural communities in exchange for implementing agreed management programs. Watershed management will typically benefit a wide array of watershed inhabitants, and can be targeted to provide special benefits to the rural poor through employment in establishing and maintaining watershed management works, and through improving productivity on steeply-sloping forest margins by contour bunding and cultivation. While the Bank can provide the financial capital needed to expand these activities, governments must take lead in directing more forest benefits to the poor. Such leadership entails support for addressing the needs of indigenous peoples. It also entails incorporating gender -specific roles in forest management and redirecting forest administrations from being simply resource custodians for narrow sectoral interests to acting as agents of sustainable development.

Reconcile Conservation and Utilization.

Bank investment in the sector as a whole can and must be a positive force to reform forest management so as to promote environmentally sound forest utilization. Bank action can help ensure that the reform of forest management practices is approached with the sense of urgency demanded by the continued loss and deterioration of forest resources. The Bank will retain requirements that make most forestry lending conditional on government commitment to sustainable and conservation-oriented management Where governments make commitments, the Bank will support both conservation and improved utilization as well as regulation of forest use. These latter activities are controversial, yet improved use and regulation of forests are necessary complements to forest conservation. The pursuit of improved we and regulation may require policy and institutional changes, but will also require improved information and managerial practices by regulators and users alike. Hence research and resource inventories including land-use assessments will be needed. These kinds of activities warrant public so expenditure and Bank support. The Bank Group will continue, however, not to finance commercial logging in primary moist tropical forests.

To complement its operations, the Bank will help to facilitate an active dialogue on the conservation/utilization issue among borrowing countries, other international organizations, and the donor community, and thereby help translate commitments under the Convention on Biological Diversity, the International Tropical Timber Agreement, and other international frameworks into specific targets.

Promote Increased Investment through Policy and Institutional Reform.

The Bank's work in the sector, while directly contributing to investments that warrant public expenditure, must also help set the stage for market-driven responses to needs and opportunities. Reforming policies and institutions is the essential step in this process and the Bulk will continue to play an advocacy and supporting role in this respect. This includes support for the legal and regulatory frameworks necessary to assure that a private sector strategy will be consistent with poverty reduction and environmental protection. Direct participation in the private sector strategy will be provided by IPC. Where environmental, social, or other considerations require more direct public sector involvement in forest production, the Bank may finance government managed undertakings while simultaneously pressing for reforms to expand private and community-based participation.

Move Beyond Forestry.

The Bank has responded, largely through the environmental assessment process, to the challenge to anticipate and mitigate possible harmful effects on forests by projects in other sectors. In addition, it has given more prominence to forest issues in its agricultural sector work and country economic work. Yet the main burden of forest policy implementation has fallen on forestry operations, which account for less than 3 percent of total Bank lending.

Experience is beginning to suggest that the policy of conditioning tort for most forestry projects on a commitment to sustainable and conservation-oriented forestry may be insufficient. The relatively small sums involved in forestry projects, and the limited influence and commitment of forestry agencies to the far-reaching changes that are needed, indicate that forestry alone cannot accomplish the Bank's forest policy goals. Increasingly, therefore, the audience for analytical work on forests has been broadened beyond forestry professionals to include others interested in forest policy, including planning and finance agencies and nongovernmental organizations. Broader and deeper analytical work on forests, and related work such as national environmental action plans are permitting thc incorporation of the intersectoral linkages needed for progress h the forest sector in country assistance strategies in an increasing number of countries.

Next Steps

While the directions taken in sector work and in lending during the last three years are clearly positive, some areas for improvement have been indicated. Thus sector work should continue to focus on the policy reform agenda, but should pay more attention to social issues; neglected stakeholders (women and indigenous people); and effective participation in decisionmaking and its corollary, institutional reform. Similarly, project work should continue to seek to reconcile conservation and utilization, but should pay more attention to targeting poverty generally, and neglected stakeholders in particular. In moving beyond forestry, the Bank should give even more prominence to forest issues in agricultural sector work and country economic work to incorporate the intersectoral linkages needed for progress in the forest sector in country assistance strategies.

Beyond improving the focus of sector and project work and the pursuit of intersectoral linkages, specific actions must be taken to correct past shortcomings and to enhance systematic learning from experience in the following areas:

• Performance indicators. As for other sectors, the Bank has developed indicators of forestry project performance and has outlined indicators of sector performance in the FY94 Annual Review of Portfolio Performance. These indicators, especially the latter, can be much improved and could bc used by many other institutions. During FY95, the Bank will work with a network of other interested institutions to improve the indicators, and hopes to inculcate a sense of ownership by others who may choose to use them.
• Project monitoring. Key indicators have to be selected for each project, so that monitoring can concentrate on them. Some good practices for indicator selection and subsequent monitoring arc emerging in Bank-financed and other projects. These practices need to be assessed, codified, and disseminated. The Bank will initiate this work during FY95 as part of the network on indicators and with the Forestry Advisers Group.
• Sustainable moist tropical forest _nt. The Bank is completing a review of management experiences in Southeast Asia and Queensland, Australia. This review will be available by March 1995 and will be submitted for international debate, initially with the Forestry Advisers Group, then more widely, including the International Tropical Timber Council. The main intent is to provide operational guidance to staff and borrowers, but the review will also propose targets for measuring progress toward attainment of commitments under, for instance, the International Tropical Timber Agreement.
• Sustainable temperate and boreal forest management. The Bank will participate in initiatives of the U.S. Forest Service and others to agree on guidelines for sustainable management, and will subsequently provide operational guidance to staff and borrowers. The boreal forests of Siberia will be examined as part of the Russian Federation Forest Policy Review scheduled for completion in October 1995.
• Application of the precautionary approach. Good precautionary practices are emerging in all Ends of forests, in Bank-financed operations and in others, and best practices need to be distilled. This will be a fruitful area for international collaboration among the many interested parties. The leadership of such collaboration could be vested in one of several parties, to be determined in the framework of the review of progress of Agenda 21, Chapter 11, Combating Deforestation, to be completed in April 1995.
• Nontimber forest products. Since these products do not figure prominently in 8anlc financed (or other) projects, the Bank commissioned a review of the technical and managerial aspects of such products, which will be issued as a technical paper in December 1994. Work recently started on examining thc scope and constraints for marketing nontimber forest products in Asia, and exporting them from Asia. This work is scheduled for completion in March 1995 and, together with the technical paper, will generate ideas for potential project components. The International Tropical Timber Organization, among others, has also sponsored work on nontimber forest products. All this work needs to be collated and further pursued in a center of excellence, for which leadership will likely be determined in the framework of the review of progress of Agenda 21, Chapter 11.
• Institutional reform. A structured learning program is planned to start in March 1995 to identify factors that help or hinder institutional change, and to examine promising ways of fostering ownership and commitment to effect significant change. Starting with theory and best practices in the management of public sector entities, the program will concentrate on (a) first-hand insights into the genesis and implementation of examples of forestry institutional reform through "live case" projects presented at regular intervals by Bank task managers, (b) the reforming institution's assessment presented by the respective national project managers, and (c) other agency and stakeholders approaches to and lessons from forestry institutional reform.
• Guidelines for Improved environmental assessment for forestry projects. While environmental assessment procedures are reviewed biannually, a detailed survey is now under way of current practice (both within and outside the Bank) in the environmental assessment of forestry projects. This review will form the basis for an Environmental Assessment Sourcebook Update on Forest Resource Management, scheduled for December 1994.

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