Indonesia - Integrating Environment and Forest Protection into the Recovery and Future Development of Aceh Project : restructuring (Vol. 1 of 2) : Main report

Document of The World Bank Report No: 57648-ID RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF INTEGRATING ENVIRONMENT AND FOREST PROTECTION INTO THE RECOVERY AND FUTURE DEVELOPMENT OF ACEH (P098052) GRANT TF056197 AND TF056198 SIGNED ON FEBRUARY 17, 2006 THE LEUSER INTERNATIONAL FOUNDATION AND FAUNA & FLORA INTERNATIONAL October 30, 2010  ABBREVIATIONS AND ACRONYMS AFEP Aceh Forest and Environment Project BAPPENAS National Development Planning Ministry BRR Rehabilitation and Reconstruction Agency for Aceh and Nias FFI Fauna & Flora International LIF Leuser International Foundation MDF Multi Donor Fund for Aceh and Nias NGO Non-Governmental Organization PDO Project Development Objective REDD Reduced Emissions from Deforestation and Degradation TIPERESKA Aceh Forest Sector Restructuring Initiative Regional Vice President: James W. Adams Country Director: Stefan Koeberle Sector Manager: Franz Drees-Gross Task Team Leader: Giuseppe Topa INDONESIA Aceh Forest and Environment Project CONTENTS Page SUMMARY PROJECT STATUS PROPOSED CHANGES ANNEX RESULTS FRAMEWORK AND DRAFT AMENDMENT TO GRANT AGREEMENT ANNEX REALLOCATION OF GRANT ANNEX EXTENSION OF CLOSING DATE Integrating Environment and Forest Protection into the Recovery and Future Development of Aceh - (or Aceh Forest And Environment Project) RESTRUCTURING PAPER SUMMARY The proposed changes in the Aceh Forest and Environment Project (AFEP) are to: a) incorporate a revised results framework for grants to both entities that implement the project (Leuser International Foundation (LIF)/TF056197 and Fauna & Flora International (FFI)/TF056198); and b) reallocate more than 10% of the category allocations in the grant agreement with Fauna & Flora International/TF056198. Revision of the results framework was recommended during both the project mid-term review and the Multi Donor Fund mid-term review. The implementing entities developed and are currently reporting against a revised results framework that is more logical, measurable and reflective of project objectives. There is now a need to formally incorporate this framework in the grant agreements. A copy of the updated framework is attached in Annex 1 along with the draft amendments to the grant agreements with for LIF and FFI. FFI has requested that an amount greater than 10% of a budget category be reallocated to allow the project to expand ongoing activities in the field of community organization; training of teams and support community-based forest monitoring against illegal logging and poaching; forest and agroforestry education and training; and support to local partners in the preservation of livelihood from human/wildlife conflicts; and project management. The draft amendment to the grant agreement for FFI is attached as Annex 2. The option of project extension was raised during the AFEP mid-term review and was developed and endorsed during subsequent supervision missions. Extension will enable the implementing entities to complete critical remaining tasks while prudently expending the remaining resources in their grants. The extension request has the support of the provincial government, the Finance Ministry and the MDF (still to be obtained). The request was approved by the Country Director on June 14, 2010 (see letters in Annex 3). PROJECT STATUS Project progress continues to be satisfactory. This assessment is based on: a) the most recent quarterly progress reports which cover the fourth quarter of 2009 and the first quarter of 2010; b) the key performance indicators for the project results framework covering the period 2006-2009; and c) follow-up by the implementing agencies to the findings and recommendations of the previous supervision mission. Progress toward achieving the Project Development Objective (PDO) is rated as satisfactory. Relevant ratings are summarized below: Overall Implementation Progress Satisfactory Project Management Satisfactory Financial Management FFI: Moderately satisfactory LIF: Moderately unsatisfactory Counterpart Funding Not applicable Procurement FFI: Moderately satisfactory LIF: Moderately unsatisfactory Monitoring and Evaluation Moderately satisfactory PROPOSED CHANGES Revised Results Framework and Indicators A revised results framework was completed and adopted during the October 2009 supervision mission and is presented in Annex 1. The framework has benefited from inputs by the MDF Secretariat and the World Bank mission as well as the start-up of a project-wide monitoring and evaluation officer. It represents a slight modification of the logical framework that was suggested in the AFEP Mid-term Review. Adjustments have been made to reflect changing realities, e.g. the substitution of BAPPENAS for the BRR, as well as a more realistic view of what the project can accomplish during its duration. Since the October 2009 mission, the implementing entities' Project Coordination Unit shared by the two implementing entities has been able to generate baseline data and annual indicators for each year of project implementation according to the revised framework. This includes the key PDO indicator on deforestation. They are now updating the indicators on a quarterly basis. Reallocation One of the project's two implementing entities, FFI, has requested a reallocation that amounts to more than 10% of a budget category in order to expand and consolidate successful ongoing community based natural resources management and monitoring activities. The requested reallocation has the endorsement of the AFEP Steering Committee, the provincial government, and the Ministry of Finance. The draft reallocation letter is presented in Annex 2. The reallocation will result in transferring resources from some activities listed under Part B.2b of the Project (provisions of facilities and equipment for environmental education and awareness development of environmental and conservation education and awareness programs, and community development initiative ... including provision of facilities and equipment) to Part A.2 of the Project (strengthening forest monitoring and protection systems and procedures). One of the activities under Part B.2, education and livelihood, will be also strengthened. Overall, Project Part B.2 will be reduced in size in that a conservation and awareness center initially planned will not be built as decided at the project Mid Term Review. The proposed changes reflect the adjustments in activities, previously agreed by the World Bank, for delivering essential forest management and community livelihood activities. The reallocation would result in an increase in `Consultant Services' and in `Workshops and Meeting' to enable the completion of FFI's forest protection work (involving community rangers, conservation response units and law enforcement training), education curriculum (with the Education Department) and tree nurseries (with local communities/Mukim). Also from the `Workshops and Meeting' category, additional funds are needed to enable the completion of capacity building that relates to safeguarding local livelihoods from human-wildlife conflict, a principal livelihood threat. All of the above work is in-line with the project's sustainability strategy and will enable the further transfer of roles and responsibilities to local partners. The table in the following page sets out the proposed reallocation on a category-by-category basis. An expansion of project support to REDD during the final stage of project implementation had been initially envisaged and initial agreements had been obtained from the AFEP Steering Committee, the provincial government, and the Ministry of Finance. There has been however a change of plans in September 2010 due to the fact that an external investor has offered to assist the Government of Aceh in REDD-related activities. Safeguard compliance of ongoing project and adequacy of project's safeguard instruments. The Project triggers six safeguards (Environmental Assessment, Natural Habitat, Involuntary Resettlement, Indigenous People, Forests and Cultural Property). A process framework for complying with Bank policies on Indigenous People and Involuntary Resettlement is the main safeguard instrument used by the project. This instrument is being expanded to become an Environmental and Social Management Plan at the time of restructuring. The Project's ISDS is also being updated and sent to the Infoshop along with the ESMF. The project has been operating for 4 years and has spent the vast majority of its resources (over 90%). Its focus has been on (i) community organization and education, (ii) spatial planning; (iii) capacity building of various institutions; (iv) strengthening regulatory frameworks in favor of conservation; (v) issuing small grants for environmentally friendly activities; (vi) creating framework for sustainability at various levels; (vii) helping prevent, detect and prosecute illegal logging and poaching. The project has also assisted the Government of Aceh in organizing surveys and participate in meeting and events related to setting up of a REDD demonstration site. No further support to this activity is envisaged in this ending phase of the project as a donor has been found to finance the full set of Ulu Masen REDD activities. Since its beginning, the project has been engaged in helping the GoA authorities enforce the forest law, through a series of capacity building and community organization efforts. The project is also helping contain illegal conversion of forest and peat lands into rubber or oil plantations. To this end, it supports the Government in the review of the legality of concessions issued in the past and which are at times illegal. All activities proposed in the reallocation are in line with the original project development objectives. The proposed reallocation of the resources administered by FFI will enable to consolidate activities that are already part of the original project. There have been eight supervision missions to the project, three of which included social expertise and seven included environmental expertise. No significant environmental and social issues have been documented by supervision missions. And no significant environmental and social issues are outstanding at the time of restructuring. The proposed budget re-allocation does not include new types of activities which would require a change in the original environmental categorization (B). And there is no major change in the project which would alter the overall project risk or demand the preparation of new safeguard instruments. The project has a system to collect complaints and feedback from project beneficiaries and the public at large for which it maintains records and issues responses.  Original Budget 1 Revised Budget Change Item Remarks US$ % US$ % (%) Funds available from cancelling the construction of a conservation and Civil Works 497,000 6.43 94,298 1.22 -81.02 awareness centre Cancelling vehicle purchases after Save Goods 1,669,000 21.61 1,112,327 14.5 -33.35 the Children donated 3 trucks to FFI Increasing the allocation for Community Rangers, Conservation Response Units, Workshop and and law enforcement training and Meeting 757,000 9.80 1,001,316 12.97 32.28 support. Increasing the budget to complete environmental education curriculum in 9 schools, support organization of traditional local governing bodies, Consultant agroforestry production and defense of Services 3,304,000 42.78 3,904,977 50.56 18.1 fields against wild animals. - OIC 1,179,000 15.26 1,324,782 17.15 12.36 A small reallocation from sub-grants to Sub grant 317,000 4.10 285,300 3.69 -10.00 community capacity building Total 7,723,000 100.00 7,723,000 100.00 Extension and proposed workplan Both implementing entities requested in May 2010 that AFEP and their grant agreements be extended at no cost for one year so that the project would end on June 30, 2011 rather than June 30, 2010. The no-cost extension request was approved by the AFEP Steering Committee, the provincial government, the Ministry of Finance, and the MDF. Extension letters were issued by the Country Director on June 14, 2010 (see Annex ) and the project has been formally extended. The rationale for the extension is to allow the project to achieve its objectives while spending its remaining resources prudently. This includes to: i) complete the Ulu Masen management center network; ii) train teams and support community-based forest monitoring against illegal logging and poaching; iii) pay for maintenance to Ultra Light planes; iv) complete forest education curriculum in nine additional schools; iv) complete agroforestry training; v) support local partners in the preservation of livelihood from human/wildlife conflicts; and vi) project management. More information is contained in the workplan presented in the following page. A B M  ANNEX 1: Results Framework and Draft Amendment to Grant Agreement INDONESIA: Aceh Forest and Environment Project Hierarchy of Objectives Key Performance Indicators Data Collection Strategy Critical Assumptions Project Development Outcome/Impact Indicators Project Reports Objective: Environmental services from 1) 95% of forest cover determined by Reports on forest cover using Security situation Leuser and Ulu Masen forest 2006 analysis annually monitored satellite analysis with remains conducive. ecosystems are protected during remains by project end1. (Total forest appropriate ground-truthing the post-tsunami reconstruction area of UM: 697,000 Ha; Total forest process area of LE: 2,028,000 Ha in December 2006.) 2) Multi-stakeholder management Summary of legislation Govt. issues legal framework for Leuser and Ulu Masen Supervision mission reports instruments to managing forests supported by project institute. MSF support end. project 3) The provincial and 7 district Documentation of spatial plans DPRs pass spatial governments adopt spatial plans with plans into law environmental and conservation inputs reflected in maps by project end. Baseline: none currently adopted. 4) 50% increase of respondents in target Results of attitude surveys of areas (Teunom, Ulu Masen) agree that population in target areas Communities agree to there is a positive correlation between Baseline is 55% (KAP survey participate, forest cover and hydrological function Teunom, 2006) comparable survey by end of 2008 methods used 5) In targeted2 areas (UM: 10 Mukim; Forest boundary monitoring LE: 30 Gampong)3, at least 95% of reports. Remote sensing Govt. supports secure forest remains at end of project. analysis land tenure 1 Forest cover is used as a proxy for the delivery of environmental services. Direct measurement of environmental services over the timeframe of the project is unrealistic. 2 Target areas: are selected by the IE's based on conservation values and threat levels. Primary target areas are those with high conservation and high threat values. 3 In the Ulu Masen area, the IE usually works at the Mukim level (usually multiple Gampong), while in the Leuser Ecosystem the IE works at the Gampong level. Hierarchy of Objectives Key Performance Indicators Data Collection Strategy Critical Assumptions Component 1: Effective protection and sustainable management of Leuser and Ulu Masen forests Objectives Output Indicators Project Reports Leuser and Ulu Masen Forest 1) Community participation in joint Reports on monitoring Forest edge monitoring, protection systems monitoring activities in target areas at a activities communities agree to and procedures are level (LE: 30 gampong, UM: 10 participate in forest strengthened and implemented. Mukim) at intensity and frequency monitoring activities agreed with communities. Govt. support 2) Logistical support and facilities: Documentation of acquisition and airstrips, airplanes, field stations, infrastructure and equipment operation of equipment as in quantities and timeline microlights specified in project procurement plan. 3) 15 trainees from conservation agency Agency staff staff, receive advanced training in forest Training reports committed to crime prevention and detection, in each improving capabilities of 2007, 2008, and 2009, with target that 25% female employees receive training Sustainable forest and 4) 95% of initial 1000 forest guards MoU, Training and Partner participation ecosystem management contracted by Dinas Kehutanan receive Procurement Report in training institutions developed and training and equipment support by end operational of project, as specified in agreement with Dinas Kehutanan. 5) 2 protocols for Human-Wildlife Conflict management developed and Human-Wildlife Conflict proposed in consultation with GOI protocols agencies by June 2008. 6) Field-level monitoring of target areas at least once every 2 months; 100% of Monitoring Unit reports, Partner agencies UM and LE monitored using remote Project clipping service; GIS committed to sensing every year. unit reports monitoring 7) 6 sub-district zonation/ conservation plans developed, completed and PCU quarterly reports Local communities delivered to local governments through and govt support participatory process by project end. participative spatial planning process; 8) Support and strengthen 3 existing, or willing to incorporate newly created multi-stakeholder bodies/consultation structures for Minutes of meetings, PCU Local stakeholders forest/conservation management. reports committed to participation 9) 10 Mukim (UM) 30 Gampong (LE) local level agreements and legislation regarding FM and conservation in their areas by project end. 10) 4 Proposals/Requests for external Local Legal documents funding completed and delivered by project end. Documentation/ PCU quarterly reports 4 The Strategic Forestry Plan for Aceh will be the culmination of the Forestry Redesign process to begin in September 2007, numbers, role and locations of multi-stakeholder bodies/consultation structures will be informed by this plan. Hierarchy of Objectives Key Performance Indicators Data Collection Strategy Critical Assumptions Component 2: Environmental concerns integrated into Aceh's reconstruction and development planning process Objectives Output Indicators Project Reports Environmental/conservation 1) Draft Spatial planning reports (1 Reports on spatial planning Local govt support considerations integrated into provincial, 7 districts) delivered to local process and outputs participative spatial spatial planning and and provincial governments by project planning process and development planning end with environmental and willing to incorporate conservation inputs reflected in maps. environmental issues 2) 12 press articles/yr in local and/or Environmental and national media (print and/or electronic) Project clippings service conservation awareness and on environmental management and education efforts developed forest protection issues attributable to AFEP. 3) Small grants with total value of $40,000 provided to NGOs with TOR and evaluation reports for appropriate TORs with technical reports sub-grants documenting delivery of sub-grant goals. Community-based forest and 4) Quarterly project bulletins delivered PCU quarterly reports ecosystems rehabilitation for to forest conservation agencies, targeted livelihoods and environmental district governments and schools within services implemented 2 weeks of publication. 5) 500 teachers trained (including 50 trainers) and provided with PCU quarterly reports environmental and conservation curriculum materials 6) 1200 eco club members in 12 target districts by end of 2009. PCU quarterly reports 7) Completion of a conservation education and awareness facility in PCU quarterly reports, Banda Aceh by end 2008. completion report 8) 50 nurseries established and operational as small businesses in target PCU quarterly reports, areas by project end. evidence of sales 9) 5,000 ha replanted / restored with level of community involvement and PCU quarterly reports, choice of plantings as agreed with community planning reports, communities by end of 2009. maps 10) Livelihood enhancement activities designed and launched in 5 districts and PCU quarterly reports, areas identified in advance (e.g. areas community planning reports, with forest threats from local activities). maps 11) 1 sustainable funding mechanism framework for forest management developed with govt. by project end PCU quarterly reports, funding (UM) disbursement mechanism and forest management action plan Hierarchy of Objectives Key Performance Indicators Data Collection Strategy Critical Assumptions Component 3: Project implementation support is effective and transparent Objectives Output Indicators Project Reports Project governance liaison and 1) PCU staffed (minimum 2 persons) PCU workplan Local government reporting processes and functional during project. support project. strengthened 2) Quarterly results monitoring reports submitted to key stakeholder agencies PCU quarterly reports, Project recruits staff within 4 weeks of end of each quarter. Supervision mission reports 3) Information to MDF/World Bank provided upon request . Project reports 4) Annual work plans submitted to Partner Agency by mid-December 2007, Internal planning, monitoring 2008, and 2009. Project annual workplans and evaluation functioning 5) 100% of annual financial audits have positive outcomes. Financial management, External auditor reports procurement, and safeguards 6) Annual reports submitted to Steering oversight strengthened Committee and WB by 31st January of each project year. PCU reports, supervision mission reports 7) 90% of community complaints regarding project implementation made through the project complaints handling PCU reports unit and addressed as per complaints handling protocol.  Annex 2 A The World Bank 1818 H Street N.W. (202) 473-1000 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS Mr. Rahmat Waluyanto Director General of Debt Management Ministry of Finance Jalan Lapangan Banteng Timur 2-4 Jakarta 10710 Mr. Said Mustafa Provincial Secretary, Government of Aceh Provincial Government Office Jalan Teuku Nyak Arief No. 219 Banda Aceh, Indonesia Jamal Gawi Chairman of Board of Directors Leuser International Foundation Plaza Gani Djemat 6th Floor Jl. Imam Bonjol No. 76-78 Jakarta 10310 Indonesia Dear Messrs. Waluyanto, Mustafa and Gawi, Re: Indonesia Multi-Donor Trust Fund for Aceh and North Sumatra Integrating Environment and Forest Protection into the Recovery and Future Development of Aceh Project (TF056197) Amendment to the Grant Agreement We refer to the Grant Agreement signed and countersigned on February 17, 2006 on behalf of the International Development Association (the "Association") and the Republic of Indonesia, the Government of Aceh and Leuser International Foundation (the "Recipient"), respectively, as amended to date. We also refer to final version of the mid-term review (September 24, 2008) that recommended modifications to the results framework as well as the Aide-memoire of the supervision mission (October 30, 2009) that indicated agreement on a revised results framework and related project performance indicators. Accordingly, the Association accedes to you request and proposes to amend the Grant Agreement as follows: The table in Schedule 4 to Annex 1of the Grant Agreement is amended as follows to reflect the revised Project Performance Indicators:  Project Performance Indicators