Uganda - Fuelwood - forestry project feasibility report

'2 m@ E, Joint UNDP/World Bank Energy Sector Management Assistance Programn '. Activity Completion Report No. 053/86 Co.intry: UGANDA Activity: FUELWOOD/FORESTRY PROJECT FASIBILITY MRET X MARCH 1986 A,) Report of the Joint UNDPAVorfd Bank Energy Sector Manaement Assistance Program This document has a restricted distribution. Its contents may not be disdosed without authorization from the Government, the 'UNDP or the Vorid Bank.  MNKRGM SECTOR NANIGEZNT ASS[STANCE PROGRUM The Joint UNDP/World Bank Energy Sector Manaigment Assistance Program (ESMAP), started in APril IQA3, assists countries in imolementine the main investment and policy recommendations of thei Energv Secter Assessment Reports produced under another Joint UNDP/World 'Rank Program. ESMAP provides staff and consultant assistance in formuliting and justifying priority pre-investment and investment proiects and in providing management, institutional and policy support. The revorts produced under this Program provide governments, donors and ootential investors with the information needed to speed up project preparation and implementation. ESMAP activities can be classified broadly into three &coups: - Energy Assessment Status Reports: these evaluate achieve- ments in the year following issuance of the original assessment report and poiAt out where urgent action is still needed; - Project PormuLation and Justification: work designed to accelerate the Dreparation and imolementatio3t of investnent projects; and - fnstitutional and Policy Support: this work also frequentlv - leads to the identification of tetchnical assistance packages. The Program aims to supplement, advance and strengthen the impact of bilateral and multilateral resources alreadv available for technical assistance in the energy sector. Funding of the Program The Program is a major international effort and, while the core finance has been provided by the UNDP and the World Bank, important financial contributions to the Program have also been made by a number of bilateral agencies. Countries which have now made or pledged initial contributions to the programs tnrough the UNDP Energy Account, or through other cost-sharing arrangements with UNDP, are the Netherlands, sweden, Australia, Switzerland, Finland, United Kingdom, Denmark, Norway, and New Zealand. Fuirther Information For further information on the Program or to obtain cooies of completed ESMAP reports, which are listed at the end of this document, e please contact: Division for Global and OR Energy Strategv and Interregional Projects Preinvestment Div. II United Nations Development Energy Department Program World Bank One United Nations Plaza 1818 $ Street, W.W. New York, N.Y. 10017 Wiashington, D.C. 20433  I UCAJIDA 5IMLWOOD/fOuSTRY PROJECT FEASIBILITY REPORT tAlCif 1986 It  ABBREVIATIONS AND ACRONYMS ACFO Assistant Chief Forest Officer CARE Cooperative for American Relief Everywhere, Inc. CFO Chief Forest Officer CIDA Canadian International Development Agency DC District Commissioner DCFO Deputy Chief Forest Officer EAR Energy Assessment Report EASR Energy Assessment Status Report ED Energy Department EEC European Economic Community ESMAP Energy Sector Management Assistance Program FAO Food and Agriculture Organization PD Forestry Department PR Forest Reserve CDP Cross Domestic Product CUP Gross National Product GOU Government of Uganda ICA International Christian Aid IDA Interns mal Development Association IFC International Finance Corporation ILO International Labour Organiza:ion IMF International Monetary Fund IWEFPP Integrated Wood Energy Farming Pilot Project KPW Kreditanstalt fur Wiederaufbau (W. Germany) LWF Lutheran World Federation MAW Ministry of Agriculture and Forestry MLG Ministry of Local Government MPED Ministry of Planning and Economic Development MPPT Ministry of Power, Posts, and Telecommunications UR Nature Reserve ODA Overseas Development Administration (UK) OFI Oxford Forestry Institute Oxfam Oxford Committee for Famine Relief PP-WP Project File - Working Paper USAID United States Agency for International Development VSO Voluntary Service Overseas WFP World Food Programme WPA Working Plan Areas  April 1985 US$1.00 = Uganda Shillings 600 (Ush) Note: Exchange Rate is assumed to escalate over the five-year life of the project. Average exchange rate is USh 1300 US$1.00  CONVERSION FACTORS metric British/U.S. Squivalents 1 meter (m) 3 3.3 feet 1 cubic meter (m3) 35.31 cubic feet 1 hect&re (ha) 2.47 acres 1 kilometer (km) 3 0.62 miles 1 square kilometer (km2) 3 0.39 square miles (sq. m.) 1 kilogram (kg) 3 2.a0 pounds (lbs) 1 liter (l) 0.26 U.S. gallon (gal) 0.22 British gallon (lmp. gal.) 1 metric ton (m ton or t) 8 2,204 pounds (lbs) Petroleum Products TOE/metric ton a/ m3/metric ton Gasoline 1.03 1.33 Kerosene 1.01 1.22 Auto Diesel 0.995 1.18 Industrial Diesel 0.995 1.09 Fuel Oil 0.956 1.06 LP Gas 1.07 Wood fuels Fuelwood (air-dried) 0.375 1.43 b/ Charcoal 0.773. 1 stare * 1 stacked) fuelwood 0 0.6 m (solid) fuelwood WOOD AND CMRCOAL PROPERTIES X conversion by m3 wood required Z conversion weight per tonne charcoal in energy terms 15 9.52 30 20 7.14 40 25 5.71 50 a/ Tonne of Oil Equivalent (TOE) - 10.2 X 106 KCal - 42.2 x 106 KJoules b/p. Solid  TABLE Of co a Pa8e 3 Intdctio r o d u e t i o n 0 .6....6 ....... 3 The National Economyc..... 0 4 The Role of Forestry in the Economy................ 5 The Woodfuels S e c t o r 5 The Woodfuel Eoo n o m y 8 Other Forest Products..o d u c ts... .................. 8 Forestry's Role in Agricultureicultur.e... ...... 12 Management of the Forestry Sector....................... 12 The Forest Esttate. 12 Past Forest Management 14 Current Status of Forest Management... 17 Forestry, Energy and Public Sector Institutions****#**. 19 The Forestry Department ............... 19 Forestry and Wood Energy Policiesl...... 20 The Involvement of the Bank and Other Donors in Activities Related to the Woodfuel and Forestry Sec t o rs.... 23 III. PROJECT BACKGROUND***.*. **.**.. *****.* *0*0*0* **#*X** 26 Major Policy Issues 26 Project R a t i o n a l e 28 Rehabilitation of che Forestry Department..m.*,*nt.., 28 Peri-urban Plantations........... e............... 28 Social Forestry........................... .... .... 29 Plantation and Natural Forest Management and Development..o.................................. 30 Other Design Considerations..s....o... o..... *0.....0.. 31 Stumpage Rates and Cost Recovery..........,...... 31 Wood Energy for Agro-industries.................. 32 Encouraging the Private Sector c to................. .. 33 Planning and Technical Assistance.............0.. 34 The Project Area ....... 00.0.... .................. 35 Peri-urban Plantation Copne pone 35 Social Forestry Componentm p. o ne.n t **ooo 36 Natural Forest Management Rehabilitation Component... 38 Softwood Plantations Management Rehabilitation0...... 38  IV. THE POET.............* , ....... 40 General Description.. .....o........... ***. ........*** 4Q Detailed Features.41................... . . 41 Peri-Urban Plantation Rehabilitation............. 41 Integrated Wood Energy Farming Pilot Project (IWEFPP) .. ....... 44 Social Forestry Component............................ 46 Natural Forests Management Rehabilitation and Gene Pool Conservation Component ................... 50 Industrial Softwoods Plantation Management Rehabilitation comp on .n. 52 Charcoal Extension 53 Softwood Resource Promotion and Developmentpm.,,*,,, 55 Forest Department Mainagement Rehabilitation********,, 56 Silvicultural and Protection Rose rch...........h.. 58 Utilisation Research............. .. ..... 59 Tra rnini n i ng....... ..... ............... ......... ... 59 Technical Assistatce ...................... . 60 Project Costs and Phasing...................... 61 V. ORGANIZATION AND MANAGEMENT.............. 63 Introductiont r... .... .e..ot u c ti............on. .. . 63 Management.e.... ......e ..... . ... ... . .... .o..... 63 Forest Department...p.a r t m e nt... ....... ... ...... 63 VI. PRODUCTION, MARKETS, AND PRICIS...........C 69 Production ....... ;*ooooee**te*ooo*oo 69 Production from Peri-urban Plantations and INEF?P.... 69 Production from Social Porestry 71 Production from Natural Forests and Softwoods Plantation Management Rehabilitation........ 73 Markets ~~~~~~~~~~~~~75 Markets for Puelwood, Charcoal, and Construction Pls....... 75 Markets for Sawntimber...... . .e. ..... e ........... 76 VII FINANCIAL ANALYSIS ....................................... 82 Cost Recovery and Recurrent Expenditures ....... 82 Financial Rates of Rtt u r n 86 VIII. BEN?FITS AND JUSTIFICATION FA.... 89 Project Benefiti...... 89 Economic Analysis .............. . 90 A s s u a p t i o n s ~~~~~~~~~~90 Estimated Economic Rates'of Return to Components..... 93 Economic Returns to the Project...................... 95  ANNXES 1. Peri-Urban Fuelwood/Forestry ......... 96 2. Social Forestry ................ * 106 3. Natural Forest Management Rehabilitation..................... 117 4. Industrial Softwoods Plantation Rehabilitation....litation. 126 5. Charcoal Extension. ..... ............oo oe... ..*..* *. o .*.. 135 6. Softwood Resource Promotion and Deve1opmentlo pment........... 136 7. Forestry Department Management Rehabilitation..tation....... 140 8. Fuelwood/Forestry Project Cost Summary..o....,.o.....o..... 149 9. Economic Analysiso.ooo . .......... *0o**o........... .* o..o 158 PROJECT FILE WORKING PAPERS 1. Peri-Urban Fuelwood/Forestry 2. Expanded Social Forestry Program Appendix 1: Options for the Administration of Government Social Forestry Responsibilitieb 3. Energy from Charcoal and Fuelwood 4. Natural forest Management Rehabilitation 5. Nature Reserves and Gene Conservation 6. Industrial Plantation Management Rehabilitation 7. Forest Industries 8. Softwood Resource Promotion and Development 9. Sociological Survey for Rural Tree-Growing 10. Forestry Department Management Rehabilitation Appendix 1: Silviculture and Protection Research 11. Civil Works 12. Forest Inventory 13. Economic Analysis 14. Terms of Reference for Technical Assistance Bibliography MAP IBRD 19234: Fuelwood Forestry Project  SUMMAY 1. The need for action in the Ugandan forestry subsector was first identified by the World Bank in the Joint UNDP/World Bank Energy Sector Assessment Program Report of July, 1983. I/ This report highlighted the increasingly serious depletion of fuelwood resources, on which the great majority of Uganda's population are dependent for their domestic energy needs. A report published in August, 1984, under the Joint UNDP/World Bank Management Assistance Program (ESHAP) 2/ endorsed the recommendations on forest resource development contained in the earlier report, and itself emphasized this area as a priority for technical assistance. 2. Fuelwood consumption in Uganda was estimated to be 13.6 million tonnes in 1983, well above the sustainable yield of 10.9 million tons (excluding non-energy uses). With the decline through the 1970's in resources available to the Uganda Forestry Department (FD) to implement forest management programs, encroachment in natural forests has been severe. The sawmilling industry, once the basis of a flourishing domestic and export-oriented wood products industry, is currently operating at about 151 of its 1969 capacity, following ownership, management, and foreign exchange difficulties through the 1970's. Recognizing these difficulties, the Covernment of Uganda (GOU) requested ESMAP support to prepare a detailed Forestry project prep*ration document with particualar reference to the country's fuelwood energy needs, based on the recomsendations of a World Bank Forestry Project Identification Mission undertaken in December, 1984. Subsequently, an eight-man team of consultants was fielded in April/May, 1985, under ESMAP, with financial support from the Canadian International Development Agency (CIDA). 3/ 11 Joint UNDP/World Bank Energy Sector Assessment Program, Uganda: Issues and Options in the Energy Sector, July, 1983. 2/ Joint UNDP/World Bank Energy Sector Management Assistance Program (ESMAP), Uganda: Energy Assessment Status Report, August, 1984 3/ Overall guidance for the fieldwork and report preparation was provided by Mr. John Spears (Senior Forestry Adviser). The Mission comprised the following Consultants: Messrs. A. Finch (Mission Leader), B. Armitage (Forestry Specialist), C. Bengough (Prefabricated Housing Specialist), P. Dewees (Forest Economist), J. Easton (Forest Industries), .I. Keen (Sawmill and Equipment Maintenance), E. May (Forester), J. Zerbe (Charcoal Specialist). Technical and economic advice was provided by Messrs. Mikael Grut (Energy Forester) and J. Besant-Jones (Energy Economist), and Ms. Marjorie-Ann Bromhead (Economist). Messrs Ziad Alahdad (Energy Planner) and Albab Akanda (Researcher) contributed to the preparation of the final report.  - if - 3. The Project is aimed at developing a number of alternative approaches to increasing fuelwood supply in an integrated way, ranging from peri-urban fuelwood plantation development, pilot schemes for encouraging farmers to take up woodfuel farming on government-controlled forest lands, a social forestry program to encourage farmers to plant fuelwood trees, and improved protection and management of natural forests. A secondary, but very important, objective of the Project is to help shift the emphasis in sawmilling away from natltral hardwood forests and to make more effective use of the already established softwood plantations in Uganda. In time, this should relieve pressure on the hardwood forests. The interrelationships of the various components are illustrated in Chart 1. 4. The main elements of the Project proposed for external financing compriseS (a) Rehabilitation of 10,877 ha of existing peri-urban fuelwood/pole plantations to meet urban fuelwood and charcoal demand; (b) An Integrated Wood Energy Farming Pilot Project (IWEFPP), a program for encouraging private farms to take up woodfuel farming on government-controlled forest lands under leasehold arrangements which would involve 100 farmers in a 500 ha scheme; (c) A social forestry program in rural areas to encourage the planting of fuelwood trees by farmers, and to promote agro- forestry approaches to encourage planting of fuelwood, fodder, fruit, timber, and soil enriching species; (d) improved protection and management of natural forests and softwood plantations to ensure the preservation of Uganda's unique rain forests and wildlife habitats and to concentrate timber production in existing softwood plantations, and to accelerate production of fuelwood and charcoal through more intensive forest management on 15,000 ha of cut over forest; (e) Protection of areas of important environment value as nature reserves, and for gene pool conservation and protection of water catchments;  Chart I UGANDA FOMRSTRY/FUELVOOD PROJECT Natural Peri-urban Agro Forestry Rain Forest a/ Fuelwood d/ (Social) e/ | Sawmlls // IaAgro-I dustry: Savannah hi Tea, Tobacco h harcoalt | F Softwood Plantations cJ Iotwo I IaI FOREST OEPARTMENT TECHNICAL BACKSTOPPING PROTECTON, IOONTROL OF HARVESIONG, PLANTATION MANAGEMENT EXTENSION |HPT FORESTRY |