Nepal - Hill Community Forestry Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No.: 19948 IMPLEMENTATION COMPLETION REPORT NEPAL HILL COMMUNITY FORESTRY PROJECT (IDA CREDIT NUMBER 2028-NEP) DECEMBER 13,1999 Rural Development Unit South Asia Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit Nepali Rupee (NRs) 1989/90 US$ 1.0: NRs 28.90 1990/91 US$ 1.0: NRs 31.20 1991/92 US$ 1.0: NRs 42.30 1992/93 US$ 1.0: NRs 45.40 1993194 US$ 1.0: NRs 49.30 1994/95 US$ 1.0: NRs 49.90 1995/96 US$ 1.0: NRs 55.00 1996/97 US$ 1.0: NRs 57.00 1997/98 US$ 1.0: NRs 61.50 1998/99 US$ 1.0: NRs 67.90 WEIGHTS AND MEASURES The metric system is used throughout this report FISCAL YEAR OF BORROWER July 16 - July 15 ABBREVIATIONS AND ACRONYMS CBO Community Based Organization CF Community Forestry CFFI Community Forestry and Field Implementation Project CPFD Community and Private Forestry Division DANIDA Danish International Development Agency DDC District Development Committee DFO District Forest Officer DO Development Objective DOF Department of Forestry ERR Economic Rate of Return FAO Food and Agriculture Organization of the United Nations FSCC Forest Sector Coordination Committee FUG Forest User Group HCFP Hill Community Forestry Project HMGN His Majesty's Government of Nepal ICR Implementation Completion Report IDA International Development Association IP Implementation Progress MED Monitoring and Evaluation Division MFSC Ministry of Forests and Soil Conservation MIS Monitoring Information System MTR Mid-Term Review M & E Monitoring & Evaluation NARMSAP Natural Resource Management Support Project NGO Non Governmental Organization NPV Net Present Value NRs Nepali Rupees NTFPs Non-timber Forest Products ODA Overseas Development Assistance (UK) RTC Regional Training Center SAR Staff Appraisal Report UNDP United Nations Development Program VDC Village Development Committee Vice President: Mieko Nishimizu Country Director: Hans Rothenbuhler Sector Director: Ridwan Ali Team Leader: Ethel Sennhauser  FOR OFFICIAL USE ONLY Table of Contents Preface. .i Evaluation Summary ............................................ i PART I: PROJECT IMPLEMENTATION ASSESSMENT ............................................ 1 A. STATEMENT/EVALUATION OF OBJECTIVES . B. ACHIEVEMENT OF OBJECTIVES 2 C. MAJOR FACTORS AFFECTING THE PROJECT .1 D. SUSTAINABILITY 11 E. WORLD BANK PERFORMANCE .12 F. BORROWER PERFORMANCE .12 G. ASSESSMENT OF OUTCOME .13 H. PLAN FOR FUTURE OPERATION .13 1. KEY LESSONS LEARNED .13 PART II: STATISTICAL TABLES ......................... 17 Table 1: Summary of Assessments .17 Table 2: Related Bank Loans/Credits .19 Table 3: Project Timetable .19 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual .19 Table 5: Project Performance Indicators .20 Table 6: Key Indicators for Project Operation .20 Table 7: Studies Included in Project .21 Table 8A: Project Costs ..22 Table 8B: Project Financing ..22 Table 9: Economic Costs and Benefits .22 Table 10: Status of Legal Covenants .23 Table 11: Compliance with Operational Manual Statements .24 Table 12: Bank Resources: Staff Inputs .24 Table 13: Bank Resources: Missions .25 APPENDICES: A. Mission's Aide-Memoire B. Borrower's ICR C. Co-Financier's ICR D. Financial and Economic Analysis E. Operational Plan for Future Operations F. Map of Project Area- IBRD 21343RI This documnent has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   IMPLEMENTATION COMPLETION REPORT NEPAL HILL COMMUNITY FORESTRY PROJECT (IDA Credit No. 2028-NEP) Preface This is the Implementation Completion Report (ICR) for the Hill Community Forestry Project in Nepal for which IDA Credit 2028-NP for the amount of SDR 23.5 million (US$ 30.5 million) was approved on August 18, 1989, and became effective on May 14, 1990. DANIDA has financed the Training and Extension Component (US$ 6.03 million). UNDP has financed technical assistance to the amnount of US$ 640,000. The Mid-Term Review (MTR) was undertaken in December 1993. Following the recommendations of Mid-Term Review, SDR 13.1 million was cancelled in April 1995 and a further SDR 3.48 million was cancelled in 1998. The Credit was formally closed on June 30, 1999, two years after of the original closing date of June 30, 1997. The last disbursement took place on November 23, 1999, at which time a balance of SDR 0.43 million remained undisbursed and was cancelled. Total disbursements were SDR 6.49 million (28 percent of the original Credit amount). This ICR was jointly prepared by staff from the World Bank and the FAO Investment Center led by Ethel Sennhauser of the Rural Development Sector Management Unit of the South Asia Region. It was reviewed by Ridwan Ali. The report is based on material in the project files, discussions with project staff, government staff, former task team members, other donors and beneficiaries (forest user groups) and on the findings of a joint World Bank/FAO/DANIDA ICR mission which visited Nepal in May/June 19991. The Aide-Memoire of this mission is attached as Appendix A. The Borrower contributed to the preparation of this ICR by providing background data and documentation, preparing a project operational plan, arranging all field visits, and submitting its own completion report which is included as Appendix B. DANIDA, the main cofinancier of the project, contributed by facilitating studies and reports, participating in the ICR mission, and preparing the cofinancier's ICR contribution, which is attached as Appendix C. Other mission members included Ms. Julia Falconer (social forester), Ms. Nathalie Olsen (FAO/CP Mission leader-Economist), Mr. Desmond Chaffey (FAO/CP-Forester), Michael Ollgaard (DANIDA) and Kumud Shrestha (Forester).   IMPLEMENTATION COMPLETION REPORT NEPAL HILL COMMUNITY FORESTRY PROJECT (IDA Credit No. 2028-NEP) Evaluation Summary Objectives and Components 1. The main objective of the Hill Community Forestry Project (HCFP) was to mobilize people and resources in the Hill districts to establish a forest management system which would conserve and expand the forest resources needed to sustain traditional farming systems and livelihoods. The underlying strategy to support the implementation of this community based forest management system was to return the responsibility for the management of these resources to local communities. More specifically, the project was designed to: (i) conserve and stabilize fragile ecosystems and regenerate and expand hill forest resources; (ii) increase the production of fodder, fuelwood and timber needed by local communities; (iii) mobilize and empower community groups to manage and develop forests and (iv) reorient the Department of Forests (DOF) to plan resource allocation and assist these user groups. 2. The SAR envisaged that the implementation of this objective and strategy required: (i) building the capacity of DOF to implement community forestry with Forest User Groups (FUGs), (ii) establishing and training FUGs; (iii) investing in improved forest management and restoration, including the introduction of sustainable management practices and plantation development; and (iv) supporting research in silvicultural improvements and socio-economic analyses to enhance community forestry planning. The MTR adjusted these components by reducing the support for plantations in the forest management component to 17% of the original target and canceling the component on research. 3. Evaluation of objectives and design. The project objective was realistic and appropriate. It was framed under the 1989 Master Plan for the Forestry Sector, and developed from the experiences of pilot efforts supported by other donors. The project was consistent with the Bank's Forestry Sector Policy Paper (1978) and followed the country recommendations presented in the Nepal Forestry Sector Review (1978) and the Bank's Country Strategy Paper (1988/89). Project design, however, presented some shortcomings. On the positive side, the project committed HMGN to a policy and regulatory framework that allowed effective decentralized control of natural resources and a procedure with which to hand over forests. The design also correctly identified training, capacity building and reorientation as important tools to change the role of DOF from controlling forests to supporting local communities to manage them. The design of the community empowerment activities was flexible and built to learn from experience in the sense that it was based on site-specific planning, robust operational procedures, processes and rules of use instead of prescribing a rigid approach to specific investment and activities. However, other forest restoration activities such as the establishment of plantations derived from a more rigid approach and overestimated their role as appropriate mechanisms to promote afforestation and reduce degradation, failing to incorporate the experience of earlier projects which indicated that natural regeneration would have been a more cost-efficient option. This was partly corrected at the MTR by eliminating the subsidies for protecting plantations and phasing out the ones for plantation establishment. Project design also failed to address the risks of relying on other projects to support important aspects of institutional change and did not incorporate a mechanism for donor coordination. This resulted in poor monitoring and evaluation of the project and in the cancellation of the research component. A better donor coordination would have provided, in both cases, an early warning that previous arrangements were breaking down, facilitating potential adjustments. Implementation Experience and Results 4. Support to sector policies. The project assisted HMGN in the implementation of the community forestry component of the 1989 Forestry Sector Master Plan. During preparation, the Bank facilitated a policy dialogue between HMGN and donors and enabled HMGN's adjustments to the legal framework so as to promote its community forestry policy. Conditions of the credit covered the legal status of FUGs and the process of decentralization. Loan effectiveness was dependent on preparation of  Operational Guidelines, as legislation prevailing in 1989 did not provide sufficient incentives for FUGs to participate in community forestry. Credit effectiveness was postponed twice as a number of covenants relating to the review of field and travel allowances of DOF field staff needed anmendment. Despite the important role the Bank played in supporting policy change at the time of preparation, it took a number of years before the Forest Act (1993) and supporting regulations (1995) were actually approved. As a result of these delays, DOF was cautious in the implementation of the new policy during the first years of the project. 5. Accomplishment of institutional objectives. The implementation of this component was satisfactory. The project successfully introduced the policy and procedural framework necessary to establish a user group-based approach to forest management. The policy established the FUG as forest manager and as beneficiary of this management -100% of produce and income from sale of produce went to the FUG, which could freely decide how to use the income derived from this management. As a result of a good incentive framework, more than 6,600 FUGs were established, representing roughly 39 % of the rural households in the project area and involving more than 2.4 million people. By empowering communities the project also implemented a major decentralization initiative. The DOF has decentralized decision-making to a level lower than either the District Development Committee (DDC) or Village Development Committee (VDC) giving to a group of forest users direct control of resources. FUGs are now responsible for planning and implementing the sustainable use and restoration of nearby forests, including the establishment of rules, doing forestry work, sharing benefits equitably, managing committee selection, holding meetings, managing accounts, resolving conflicts, and marketing produce. The institutional development and re-orientation of the DOF at the field level to implement the community forestry program has also been effective. Implementation of community forestry is currently the dominant approach to the management of forests in the Hills, and field staff devotes most of their time to supporting FUG activities to restore and manage forests. The role of DOF has changed radically, from one of policing and direct control over the forest, to one of promoting and facilitating local community efforts to manage forests. Helped by an effective training program and based on a sound legal framework, the attitudinal shift of DOF staff at all levels is significant. As a result, the relationship between DOF staff and communities has improved greatly. 6. A significant oversight in the institutional setting however, has been the poor monitoring of project outcomes and impacts. With the TA provided by UNDP, a Monitoring Information System (MIS) was established at the Community and Private Forestry Division (CPFD), but this system operated primarily as a centralized database to track project physical and expenditure achievements with little application in planning and decision-making. The existence of a parallel M&E program for the whole Ministry at the Monitoring and Evaluation Division (MED) and the weak coordination of the project to this program hindered the efficient monitoring of project impacts, both positive and negative and the quantitative assessment of its outcomes. Nonetheless, despite the poor results in M&E activities, the significant achievement in community empowernent and reorientation of DOF largely justify the satisfactory rating given to the implementation of this component. 7. Forest restoration and management. Achievements under this component were mixed, mainly due to an overemphasis on plantations as an effective means to restore forest vegetation. The undue reliance on plantation development as a strategy for forest restoration was identified and corrected at the MTR. Despite the shortcomings with the plantations, the project helped to bring about a marked improvement in the condition of forests under FUG management. Within the project area, approximately 328,000 ha of national forest land were transferred to FUGs, accounting for 72% of the optimistic scenario projections given in the Forest Master Plan for year 2000. These forests are now largely under sustainable management showing a significant improvement from the unsustainable management prevailing under the pre-project defacto open access situation. Achievements by subcomponent include: * Forest restoration and environmental conservation. Field evidence suggests that the project has had a positive environmental impact as a result of improvements in forest regeneration and condition. FUGs evidently recognize the broader environmental value of their forests, highlighting as major environmental benefits a reduced erosion, improved water availability, biodiversity, conservation and reduced incidence of forest fires. For this reason they often favor excessively strict protection and forego more productive (but still sustainable) forms of forest management. ii  * Management offorests. The project successfully introduced sustainable management practices, specific for each forest site, under the guidance of agreed operational plans, developed by forest users and negotiated with DOF every 5 years. This FUG management system established local rules for restoration, management and harvesting rather than setting forth a plan of investments. The emphasis on management rules and site-specific planning has proven to be a cost-effective means to managing these critical ecosystems. During the life of the project, management shifted from protection to harvesting, and from the single focus on fodder and fuelwood to a more diversified management including timber and NTFPs. * Plantations and Nurseries. At the outset, the project focused on the restoration of degraded forest land through plantation establishment. The MTR recognized that plantation establishment was not necessary for the regeneration of natural forests, and that it was not cost-effective; as a result, the area targeted was decreased to a fifth and subsidies for plantation protection were cancelled. A study completed under the project in 1998 confirmed the field supervision evidence of very high seedling mortality rates, and showed that effective community protection resulted in rapid natural regeneration of indigenous species. As a result, the project changed its approach from one emphasizing plantation establishment to one more supportive of protection and silvicultural treatment to promote natural regeneration. The production of seedlings and the establishment of nurseries to support the plantation program have also been problematic as the SAR plantation target far exceeded demand. To address this, DOF nurseries were cancelled and subsidies for seedling production and plantation establishment were gradually phased out. Despite the declining interest in nurseries and plantations throughout the project, and the low area of plantations established, the impact of the failure of these activities (nurseries and plantations) in the development goals of this component have been limited, as communities realized early in the process that natural regeneration was a more successful mechanism to achieve forest restoration, and increased their efforts in natural forest protection to achieve this. 8. Training and extension. The training component of the project, financed by DANIDA, has been of central importance, underpinning many of the gains in institutional development of DOF and FUG capacity and in improvements to the forest management practices. During project implementation, more than 1,000 officers and 9,500 field staff had attended one or more of the 3,000 training activities supported by this component. In addition to this, several workshops, seminars and study tours were also organized. As a result of this effort, almost every staff of DOF up to ranger level was able to facilitate the identification and formation of FUGs at the end of the project. A strong effort was also given to the direct training of FUGs, with more than 54;000 members participating in some kind of training program. An intense awareness and extension campaign, including weekly radio broadcasts, puppet theatres, documentaries, posters and calendars has not only increased the ability of FUGs to manage their forest but has also kept high the demand for expanding the CF program to new users and villagers. The process was however hindered by frequent transfer of staff, the poor distribution of some training material, especially in remote areas, and the partial staffing of training centers. The poor quality of some of the construction supported by the Bank (West and Midwest RTCs) implied that prescribed building standards were not followed in some cases and that additional resources from DANIDA had to be allocated for repairs. 9. Research to improve silvicultural techniques and socio-economic analysis to improve community forestry planning. The research component of the project was never implemented, mainly because the Forest Research Division was unable to increase its program (and staffing) beyond the level required to implement an on-going ODA funded program. As a result, the component was cancelled at the MTR. It is unfortunate that no alternative approaches were identified to ensure that specific and priority problems emanating from field implementation of the community forestry program were addressed. In particular, it is unfortunate that alternative strategies for assessing the baseline and the socio-economic study were not developed as this affected the evaluation of project impacts and achievements. Summary of Findings, Future Operations and Key Lessons Learned 10. The overall outcome of the project is satisfactory. The project achieved its main objective of establishing a community-based forest management system, accomplished through the empowerment of user groups and the transfer of the management of forest resources to them. This system is likely to be sustainable while the existing policy, regulatory and incentive frameworks remain in place. The project iii  seems to have had a significant impact on the conservation and productivity of the forests in the Hills, on the capacity of DOF and on the lives of local people. 11. Sustainability. Present indications are that the project is likely to be sustainable. The Community Forestry Program has been based on a strong policy and legal foundation on which several thousand FUGs have been created. HMGN's commitment to community forestry is high, and it is currently the dominant approach to the management of forests in the Hills. User groups have received little financial support from the project, and technical assistance has been provided through the existing DOF channels with no additional staffing. 12. Future plan of operation. The Ministry of Forests and Soil Conservation (MFSC) has prepared a plan for the future operation of the project. The maintenance of achieved outcomes and the self- sufficiency of FUG operations will be a primary responsibility of the CPFD of MFSC. A Community Forestry and Field Implementation (CFFI) project of U$6.4 million has recently been included in the on- going NARMSAP program of DANIDA. As the outputs and components under the CFFI project follow the structure of the HCFP, it is important that its future activities build on lessons learned from the design and implementation of HCFP, and ensure that: (i) program sustainability achieved under HCFP will be maintained, and (ii) further investments will focus on new activities to improve the quality of the hand- over and post-hand-over process, and the strengthening of the capacity of government institutions, user groups and private sector service providers. Lessons Learned 13. Reorientation of government institutions. The project has demonstrated that given a favorable policy and legal framework, a government forest department can evolve from one concerned mainly with policing to one that supports local communities to manage forests. 14. Establishment of forest user groups. The empowerment of local communities, the formation of FUG and the transfer of management responsibilities from DOF to local users have proven to be viable mechanisms for sustainable forest management and conservation. Empowerment of communities to manage forests as a group has also strengthened their capacity to act together in other spheres of community development. 15. Restoration of forest ecosystems. Protection and management of natural regeneration has proven to be a more successful mechanism than plantation establishment to restore forest ecosystems. Natural regeneration was adopted by local users because an appropriate set of measures and incentives was in place. 16. Community fund management. The project has demonstrated that FUGs can manage their financial accounts satisfactorily, with adequate community supervision, selecting within the FUG the activities to be supported and openly choosing an independent auditing system. This openness in the allocation of FUG resources strengthens FUG ownership, builds self-reliance and increases the capacity to mobilize other development resources. 17. Project design and implementation. Project design should incorporate mechanisms to ensure effective coordination with parallel programs to which project outcomes are partially linked. For projects based on community participation, design should also be process oriented and based on "rules of use" rather than a predetermined menu of activities. 18. Sustainability and ownership. Community empowerment cannot be accelerated at a pace beyond (i) the capacity of the facilitating institution to manage the expansion and (ii) the rate of learning and behavioral changes required by forest users. Within this pace, an implementing agency may wish to enter into partnerships with experienced NGOs to accelerate the handover process and to handle post- handover capacity building. 19. Training. The reorientation of the DOF to the community forestry concept, policy and regulatory setting was critical for the successful implementation of the program. By investing heavily in training, the process of change in institutional culture in the public service was accelerated. 20. Financing. Community empowerment is achievable without large investments, but requires more important administrative resources and implementation time. Building the capacity of community iv  and government institutions (training and reorientation) seems to be the critical trigger to the user group formation process. 21. Governance: Community based projects can contribute to changing the relationship between people and government and be an important step to improve govemance and strengthen the quality of the services provided by the public sector. 22. Donor co-ordination. A government-led forum, which includes donors, can make a valuable contribution to a policy debate and development. Stakeholders should, however, be aware of the potential fragility of arrangements in which the outcome of one project is partly dependent on the products of another. In cases with a long history of donor assistance, donor exit strategies to move from expanded operational support towards more quality focus activities are needed to promote genuine and long-term sustainability. 23. Monitoring and evaluation. The weakness in monitoring and evaluation meant that ineffective strategies and activities were supported for longer than they should have been, with associated financial costs. Furthermore, it has proven difficult for program managers and policy makers to assess quantitative impacts across the Hills and to identify new constraints and opportunities. As a result, inefficient monitoring led decision-makers to rely on qualitative measures and individual positive and negative observations, which (in this latest case) where often given undue weight. v   NEPAL IMPLEMENTATION COMPLETION REPORT HILL COMMUNITY FORESTRY PROJECT (IDA Credit No. 2028-NEP) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. STATEMENT/EVALUATION OF OBJECTIVES Country and Sector Context l. Forest resources in Nepal have been declining for some time, in large part due to the conversion of forest land to agriculture and to uncertainty over tenure and usufruct. The 1957 decision to nationalize all forest land in Nepal only aggravated this trend, and was reversed in 1977 when control of limited areas of government forest was transferred to Panchayats. The introduction of democratic processes in the early 1990s (and the end of the Panchayat system) has allowed the genuine implementation of participatory approaches to resource management. Community forestry in Nepal arose due to concerns about forest destruction and environmental degradation, combined with a move from centralized to local level participation and management of common property resources. The Bank has supported the policy of transferring management of forests to users since 1980 through a number of forestry projects providing institutional support and training and through a structural adjustment credit in 1987. 2. Project objective. The main objective of the Hill Community Forestry Project (HCFP) as reflected in the Staff Appraisal Report was to mobilize people and resources in the Hill districts to establish a forest management system which would conserve and expand the forest resources needed to sustain traditional farming systems and livelihoods. The underlying strategy to support the implementation of this community based forest management system was to return the responsibility for the management of these resources to local communities. More specifically the project was designed to: (i) conserve and stabilize fragile ecosystems and regenerate and expand hill forest resources; (ii) increase the production of fodder, fuelwood and timber needed by local communities; (iii) mobilize and empower community groups to manage and develop forests and (iv) reorient the DOF to plan resource allocation and assist these user groups. The priority was clearly identified as conservation of forests and reversing the decline in forest degradation, ensuring that production of forest products to meet local needs was maintained and, where possible, increased. 3. Project components and activities. The SAR envisaged that the implementation of this objective and strategy required: (i) building the capacity of the Department of Forest (DOF) to implement community forestry with Forest User Groups (FUG); (ii) establishing and training FUGs; (iii) investing in improved forest management and restoration, including the introduction of sustainable management practices and plantation development; and (iv) supporting research in silvicultural improvements and socio-economic analyses to enhance community forestry planning. The MTR adjusted these components by reducing the support for plantations in the forest management component to 17% of the original target, and by canceling the research component. 4. In addition to this, the project also provided assistance for works including demarcation, construction of houses, office buildings, nurseries and training centers, and provision of equipment such as vehicles, computers and tools for forest management. 5. Special legal covenants promoting objectives. Project covenants related to the objectives included the identification of forest areas to be handed over to communities, the establishment of forest user groups, the disbursement of funds to these groups and the appointment of key staff to training centers, CPFD and the Research Division. 6. Evaluation of project objective. The project objective and underlying strategy were appropriate and realistic as they were built on successful examples of small scale community forestry efforts supported by other donors. The project was Nepal's greatest effort to implement its forestry sector strategy, as described in the 1989 Forest Policy and Master Plan and the 1993 Forestry Act. The goals of the project were also consistent with the Bank's 1978 Forestry Sector Policy Paper which encouraged the implementation of new institutional arrangements to manage village forests involving local organizations 1  and promoted a strong support to rural afforestation, and the recommendations of the 1978 Nepal Forestry Sector Review, which encouraged the implementation of sustainable forest management strategies based on community forestry development and the support to integrate these government policies with operational procedures and capacity building of field staff. The goals also concurred with the Bank's Policy Framework Papers for Nepal (1988/89), which openly supported the 1988 Forest Master Plan and promoted the involvement of local user groups in the management of forest resources. The project was complex and ambitious in the sense that it aimed to promote the implementation of a new forest policy focused on community empowerment, the setting of a new institutional framework and the development of operational procedures for community mobilization, all of them embedded in the political changes of the democratization process and the abolition of the panchayat regime. Technically, however, the project was much simpler in the sense that it covered only one geographical region of the country (the mid-Hills) therefore limiting the social, environmental, cultural and management issues to the ones within this ecological area. The project covered 38 of the 54 districts of the Mid Hills (70%). 7. Evaluation of project design. Project design was mixed, with deficiencies in some of the components. On the positive side, it recognized from the very beginning the importance of establishing the appropriate policy and regulatory environment, making several steps conditions of the Credit. The emphasis on training, capacity building and reorientation, and the underpinning strategy on community empowerment, also proved to be effective. The design of the institutional development and FUGs activities was flexible and built to -learn from experience- in the sense that it was based on site specific planning, founding operational procedures, processes and rules of use instead of prescribing a rigid approach to specific investment and activities. However, other forest restoration activities, such as the establishment of plantations, derived from a more rigid approach that overestimated their effectiveness for promoting afforestation and reducing degradation, and failed to incorporate the experience of earlier projects (Credit 1400-NEP, Credit 1008-NEP) which indicated that natural regeneration would have been a more cost- efficient option'. This was partly corrected in the adjustments introduced at the MTR, which eliminated the subsidies for plantation protection and phased-out the ones for plantation establishment, as incentives to move towards a natural regeneration system. 8. Project design also failed to address the risks associated with relying on other projects to support some important aspects of institutional change. It could have been improved, for example, by developing a framework and mechanism for donor coordination, i.e. allocating resources for lesson sharing workshops, meetings and study tours. The failure to incorporate these coordinating mechanisms had important consequences in the monitoring and evaluation of the project and in the cancellation of the research component. At the time of project preparation, responsibility for M&E was assigned to a monitoring unit (MED) and a program within the Ministry of Forests and Soil Conservation (MFSC) supported by bilateral donors. The SAR describes in detail the M&E process to be followed and the role of MED and the regional staff in it. As reliable and timely information was not being collected, the MTR had very strong recommendations to improve project monitoring. Unfortunately, the linkages of this monitoring to the already existing MED M&E system for the whole Ministry were not strengthened at this time, hindering the implementation of these recommendations.In relation to research, the SAR overestimated the capacity of the Research Unit and MFSC to provide additional staff to implement this component jointly with a stand-alone research program supported by another donor. An improved donor coordination mechanism would have provided, in both cases, an early warning that previous arrangements were breaking down, facilitating potential adjustments. B. ACHIEVEMENT OF OBJECTIVES General 9. Progress in the first two years of the project was slow, in part due to the political changes taking place during 1989/90, which diverted much attention away from the early implementation of the project. After 1992 progress improved rapidly, indicating a growing awareness among communities of the new forest policies, improving ability of field staff to facilitate the hand-over process, and increasing importance placed on the program at the district level. The project was consistently rated satisfactory by It should be noted, however, that the prevailing international thinking still placed emphasis on tree planting strategies. 2  supervision missions for both DO and IP. The credit closing date was extended twice from June 30, 1997 to June 30, 1999 to strengthen post-formation activities that would strengthen sustainability. Physical objectives were largely met. New regulations and operational procedures guiding the program were introduced as required. Covenants were complied with, except those that were made irrelevant due to the modifications introduced at the MTR. Physical Objectives 10. The ICR mission found that the project generally achieved the physical objectives agreed during MTR. Details by component are summarized below. The location of the districts included in the Project is shown on the map in Appendix F (IBRD Map No. 21343R1) 11. Support to sector policies. The project intended to assist HMGN in its implementation of the community forestry component of the 1989 Forestry Sector Master Plan. The project successfully introduced the policy and procedural framework necessary to establish a community-based approach to forest restoration and management. At the time of preparation in the late 1980s, the Bank facilitated a policy dialogue between HMG and donors, and helped HMG to change the legal framework in order to promote its community forestry policy. Credit conditions ensured an appropriate legal status for FUGs and a process of decentralization in forestry decision-making. A further condition, adoption of Operational Guidelines, was set for Credit effectiveness in order to provide field staff sufficient guidance to operationalise FUG participation in forestry. Credit effectiveness was postponed twice as a number of covenants relating to field administration required amendment. Despite the instrumental role played by the Bank during project preparation in policy change, it took a number of years before the Forest Act (1993), and supporting regulations (1995) were actually approved. As a result of these delays, DOF was cautious in the implementation of the new policy and consequently in project implementation. While this did have unfortunate consequences on the fist years of project implementation, it is rather remarkable that such a far-reaching policy shift was achieved in a period of extreme political instability. 12. Accomplishment of institutional objectives. The project aimed to strengthen and re-orient DOF to enable it to identify and establish community groups and to empower community organizations to transfer to them the responsibility for the management of forest areas. Implementation of the component was satisfactory. Its major accomplishments include: * Identification of areas to be transferred to communities. At the beginning of the project, an inventory and mapping exercise identified areas of forest with the potential for community forestry. Maps were prepared for project districts showing accessible forest patches greater than 25 ha which offered a quick picture of district forest resources and potential for community forest. However, DFOs have relied far more on field investigations and discussions with villagers in their identification offorests which could be handed over to FUGs, thus adopting an opportunistic rather than strategic approach. Now, the popularity of the program drives the identification process and DFOs respond to the demand of interested community groups. * Re-orientation of DOF to work with community groups. The institutional development and re- orientation of the DOF at the field level has been tremendous. From an organization which relied mainly on policing tactics to manage forests, the DOF now relies almost exclusively on its partnerships with FUGs and field staff devote most of their time to supporting FUG activities to restore forests in the Hills. The role of DOF has changed radically, from one of direct control, to one of promoting community efforts to manage forests. Helped by a comprehensive training program, sound legal framework and considerable field experience, the attitudinal shift of DOF staff at all levels is significant. As a result, the relationship between DOF staff and communities has been transformed. * Decentralization. The project has successfully implemented a major decentralization initiative. The DOF has decentralized decision-making to a level lower than either the DDC or VDC giving to a community of forest users direct control of resources. The FUGs are responsible for planning and implementing the sustainable use and restoration of nearby forests, including the establishment of rules, doing forestry work, sharing benefits equitably, managing committee selection, holding meetings, managing accounts, resolving conflicts, and product marketing. The role of the VDC and DDC in the implementation of community forestry policy is uncertain and in the future might need clarification as the decentralized political bodies become more effective at delivering development assistance and as the 3  forests become increasingly valued as a local resource. To date, these bodies have not been actively engaged in FUG planning, decision-making or monitoring. * Empowerment of communities to manage forests sustainably. Approximately 6,600 FUGs have been established in the 38 districts supported through the project, exceeding the SAR target. This FUG membership represents roughly 39 percent of rural households, and involves more than 2.4 million people'. The community forestry approach presumes that by empowering people with a vested interest in a resource to work together, forest conditions and forest productivity (thus benefits) will improve. The formation and support of FUGs is guided by several principles: that all users of a forest be included in the FUG and contribute to decision-making, that benefits be shared equitably among all members and that the first priority in forest production be to meet the basic needs of members. The process of FUG formation was piloted before the start of the project and procedures were legally established in DOF operational guidelines agreed during the project. The process entailed: * preliminary discussions and PRA between the community and DOF, formation a group including membership from all households who use the forest and are interested, * preparation of an operational plan with the forest ranger which details the area, the rules of use, the work to be done to improve the condition of the forest, harvesting rules and distribution of benefits, * formal hand-over of the forest to the FUG once the plan is approved, * training by DOF of FUG in forestry and other community works, * forest protection and maintenance by members on a voluntary basis and harvesting and distribution of produce according to plan and as agreed by the group; - regular FUG meetings and reporting to maintain transparency; - revision of the plan after five years to reflect changed forest condition and lessons learnt. Over the past few years supervision missions have consistently been told by FUG members that one of the single greatest impacts of the program has been their empowerment, and this experience has encouraged them to try to work together to solve other village problems. Where community empowerment has been successful, it is a result of participatory planning, involvement of all forest users (often crossing social barriers), an agreed set of objectives and rules of use codified in an approved plan, the formal handing-over of responsibility for plan implementation to FUG, training and field practice, FUG fund management, a clear system of reporting and auditing (to membership and DOF), and results in the form of forest re-growth and local environmental stability. However, the lack of systematic monitoring of social indicators limited the quantification of these benefits and impacts. * Establishment of an incentive framework to sustain community forestry. The experience with the implementation of community forestry suggests that the 1989 policy established an effective incentive framework. The policy established the FUG as forest manager and as beneficiary of this management- 100% of produce and income from sale of produce goes to the group who have devoted their energies to forest restoration and management. This ensures that people have access to an increasing supply of fodder and fuel resources needed to sustain their households.2The policy also clearly stipulates that benefits would be shared equitably between members of the group. Details of benefit sharing arrangements are prescribed in a specific operational plan for the particular forest. There is a clear and direct link between the gains in forest productivity and benefits going to the FUG. At the outset of the program, and also generally in the first few years of FUG formation, the main thrust of forest management was on strict forest protection to promote natural regeneration and use to meet domestic needs only. As confidence has increased, managers are trying to improve the productivity and returns from forests. There remains concern amongst some DOF staff that, as forests improve and income increases, the principles of FUG forestry may be undermined by local elite and sustainability would be eroded. However, to date, this has emerged as a problem in only a few communities. Effective monitoring and transparency in FUG functioning will help to limit this problem. It is evident that the FUG and foresters increasingly see these forests as community assets which require little external support to be sustained. Indeed, as the forests regrow and FUGs are able to sell produce (even if only locally) 'There is a considerable range among Districts, with values ranging between 13 to 89%. 2 In some cases, FUGs have limited access to these essential goods in order to encourage the forests to re-grow; however, as people begin to manage this regeneration, they generally find that quantities of fuel and fodder increase with increased protection and managed extraction. 4  support for the effort increases markedly within the community and the forests become valued not only as a source of needed goods and environmental stability, but also as a source of income to help promote community development. The FUGs are free to decide how to use any income from forest harvesting and in practice it is used in a wide variety of ways: from reinvestment in forestry work (paying watchers, planting), to serving as a revolving credit fund for needy members, to funding a vast array of community development needs (fixing culverts, school teacher salaries, school buildings). Since the project shifted at MTR to focus on managing natural regeneration rather than on tree planting, there has been very little external subvention of FUG effort. The system as it is currently implemented requires very little extemal support, the main inputs come from FUG members, and mainly in the form of labor and changed behavior. The significant contribution from DOF is in technical and moral support to the FUG. The most significant future challenge for DOF to sustain community forestry in the Hills is juggling the demands for "backstopping" by thousands of FUGs. Strategic human resource planning may be required at the District level to allocate support according to the degree of attention required by different FUGs; generally within a few years FUGs have proved able to function with little regular DOF attention. 13. Monitoring and evaluation. A significant oversight in the institutional development setting relates to the poor monitoring of project outcomes and impacts. While the SAR clearly specified a structure and responsibilities for monitoring and evaluation, this was not undertaken satisfactorily, with serious consequences for the quantitative assessment of both the positive and negative impacts of the project. With the TA provided by UNDP, a Monitoring Information System (NMIS) was established within CPFD consisting primarily of a FUG database with information at the district level'. This MIS, however, operated primarily as a centralized database to track project physical and expenditure achievements with little link to program planning and decision-making at any level of implementation. At MTR, it was clear that reliable information was not being collected from participating districts, and rangers, DFOs and regional staff of DOF were made accountable for the collection and transmission of information. Unfortunately, the linkages of this monitoring to the already existing MED M&E system for the whole Ministry were not strengthened at this time, hindering the implementation of these recommendations, and at project completion meaningful indicators of project impact were not yet collected and/or transmitted to CPFD. At the community level, however, participatory monitoring systems were found to be in place, and continuous monitoring of the forest conditions by members of the FUGs are continuously incorporated in the decision making process and the implementation of the management plans. Monitoring of forest conditions and operational plan implementation are a relevant factor when these plans need to be reviewed and updated. The success in the implementation and application of M&E at the local level, however, was not replicated at broader levels of decision-making, hindering the quantification of project impacts and results. 14. The project's financial management system did not receive the indepth attention at appraisal that more recent projects have received since the introduction of OP 10.02. Although the financial management systems put in place serviced the project's basic needs, an improved project management system would have brought benefits in terms of better financial control and improved monitoring of the project's physical and financial progress. 15. Despite these poor results in the monitoring of project activities, the significant achievements in community empowerment and reorientation of the Forest Department largely justify the satisfactory rating given to the implementation of this component. 16. Forest resource management. The project included a component to promote the restoration and sustainable management of forest ecosystems. This component comprised improving the management of existing forests, plantation establishment, and seedling production and distribution. Achievements under this component were mixed, mainly due to an overemphasis on plantations as an effective means to restore forest vegetation. The undue reliance on plantation development as a strategy for forest restoration was identified and corrected during MTR. Despite the shortcomings with the plantations, the project has helped The FUG database includes information on Number of FUGs and households, CF area, participation of women in FUG committees, and constitution of FUG committees. 5  to bring about a marked improvement in the condition of forests under FUG management. Approximately 328,000 ha of national forest land were transferred to FUGs during the life of the project, considerably more than the target established during the MTR1. These forests are now largely under sustainable management showing a significant improvement from the unsustainable management prevailing under the pre-project defacto open access situation. * Forest restoration and environmental conservation. While no comprehensive studies have been conducted, supervision evidence suggests that the project has had a positive environmental impact as a result of improvements in forest condition. This is particularly significant in forests which were degraded at the outset of the project, e.g. one forest showed a 29 percent increase in stem basal area in three years. FUGs evidently value the broad environmental services of their forests. For this reason they often favor strict protection at the outset and forego more productive (but still sustainable) forms of forest management. It is evident that rapid natural regeneration provides considerable boost to motivation within the FUG and this generally is associated with equally rapid impacts on local environment. FUG members have highlighted a number of crucial environmental benefits, including: * Soil and water conservation: Communities associate increased forest cover with reduced soil erosion and improved water availability during the dry season. The reduction in soil erosion and land slips has a direct and appreciable impact on the farming system and food security. Increased availability of water during the dry season reduces the drudgery of water collection and in some locations has prompted changes in cropping patterns. * Biodiversity: supervision evidence suggests that the improvement in forest condition be accompanied by an increase in biodiversity, although some of the species adapted to the more degraded conditions may become less common. Certainly, villagers report significant increases in wildlife populations in community forests. i Forest fire: Under community forestry, the incidence of forest fire has declined, reflecting the emphasis FUGs place on protection. For the future, training programs in fire management are needed, and institutional arrangements to coordinate fire management between nearby clusters of FUGs will be essential since as the forest conditions improve, the risks of catastrophic fires also increases in unmanaged conditions. * Management offorests. The project successfully introduced sustainable management practices specific to each forest site, under the guidance of operational plans. Once a FUG was formed and the plan agreed, this was submitted to the DOF for approval. The approved plan provided the legal basis upon which forests were handed over and entrusted to FUGs. Plans were reviewed regularly by FUG and local forestry staff and new plans negotiated every 5 years. This system of management planning has helped to instil a dynamic approach -- one which builds from site-specific changes in the forest and its use. The FUG management system established local rules for restoration, management and harvesting rather than setting forth a plan of investments. The emphasis on management rules, rather than activities has proven to be a cost-effective means to managing these vulnerable ecosystems. Operational plans were developed in a participatory way, involving all members of a community and especially all users of the particular forest area in decisions over how the forest would be used and managedi2 The process involved users in identifying, mapping and assessing the condition of the forest. Management priorities and rules of use were agreed and negotiated, as were responsibilities of individual members and the functioning of the FUG and its executive committee. Most FUGs relied on the voluntary support of membership for any forestry activities, especially for forest protection. At the outset, FUGs often concentrated on protection to restore the forests and to establish the authority of the group. It was only after a number of years, and considerable support and training by DOF staff, that FUGs introduced activities to improve the productivity of forests. In many areas, thinning and pruning natural regeneration had significant results, improving the condition, productivity and variety in the forest. This managed harvesting helped to increase the volumes of fodder, fuel and small poles coming from the forest. In addition, after a few years The area covered is below the original SAR target of 400,000 hectares but well above figure agreed at MTR of 200,000. The SAR projections overestimated the size of forest which would be managed by a FUG. 2 In some Districts, the failure to identify all concemed forest users, particularly nomadic users has led to problems and conflicts within and between communities. Methods for negotiating use and management rights between sedentary and nomadic communities have since been developed and are now being under implementation. 6  of experience with forest tending and as more people have taken an active interest in the FUG, management priorities have become more diverse and shifted from the single focus on fodder and fuel which was common in the early years of community forestry, to one which encompassed a wide range of non-timber forest products such as medicinal plants and timber. However, very little technical support has been provided up to now on improving the productivity of NTFPs. . Plantation establishment. The project supported the establishment, protection and maintenance of forest plantations as a means to increase forest area and restore degraded forest lands. The project design overestimated the potential for plantations in the prevailing conditions of many parts of the Hills. Several adjustments were introduced during implementation to amend this, as a result of which the project changed its approach from one emphasizing plantation establishment to one more supportive of protection and silvicultural treatment to promote natural regeneration. When HMGN and the MTR recognized that plantation establishment was not a cost-effective mechanism for the regeneration of natural forests, the area targeted was decreased to a fifth, subsidies for plantation protection were cancelled and the ones for plantation establishment were phased out. As a result of this, there was a marked reduction of interest in FUGs for plantation development. Consequently, only 13,166 hectares of plantation were actually established, compared to a SAR estimate of 56,300 ha. A 1998 study supported by the project confirmed that most of these plantations were not successful, corroborating the field supervision evidence of very low seedling survival rates (26%). These low rates were mainly due to (i) poor commitment of FUGs to maintain plantations, (ii) inappropriate use of technology, (iii) unsuitable selection of sites, (iv) inexperienced technical support. The study also showed that effective community protection resulted in rapid natural regeneration of indigenous species, and that this option was achieving better and.more cost-efficient results than plantations. It should be noted, however, that for many FUGs the plantations served as essential "nurse crops" to initiate natural regeneration, and without plantation establishment it would have been difficult to obtain the necessary protection for natural regeneration to occur. - Seedling production (nurseries). The production of seedlings and the establishment of nurseries to support the plantation program have been problematic. The SAR envisaged the production of 117 million seedlings, of which 99 million would be used to establish community plantations, and the remainder would be distributed to farmers for planting on private lands. However, the MTR found that the SAR plantation target far exceeded the demand for plantations by FUGs and consequently reduced the target to 71 million seedlings and shifted the focus from DOF managed nurseries to FUG run nurseries. By the end of 1998 almost 77 million seedlings had been produced (of which 16 million were produced by FUGs). Over the life of the project the subsidy for seedling production has been steadily reduced, and, as a result, interest in nurseries has also declined. However, and despite the reduced interest in nurseries and plantations throughout the project, the impact of the failure of these activities (nurseries and plantations) in the development goals of this component has been limited, as HMGN and the local communities realized early in the process that natural regeneration was a more successful mechanism to achieve forest restoration and increased their efforts in natural forest protection to achieve this. 17. Training and extension. The training component of the project, primarily financed by DANIDA, has been of central importance, underpinning many of the gains in institutional development of DOF and FUG capacity and in improvements to the forest management practices. Discussions on this component are addressed in more detail in DANIDA's contribution to this ICR, attached as Appendix C. Accomplishments of this component include: * Improved capacity of the Department of Forest to impiement community forestry. By the end of June 1998 more than 1,000 officers and 9,500 field staff had attended one or more of the 3,000 training activities related to CF matters. In addition to this, several workshops, seminars and study tours were also organized. As a result of this effort, almost every staff of DOF from the project districts up to ranger level was able to facilitate the identification and formation of FUGs at the end of the project. Courses for rangers included topics such as CF orientation, training of trainers and CF silvicultural management. * FUGs trained in CF. A strong effort was given in this component to the direct training of members of FUGs, with an increased tendency to move training activities nearer to the communities, and even to the users' own forest. By the end of June 1998, 54,000 FUG members had participated in some kind of CF training activity. Frequently attended course types included: CF seminars and workshop (orientation about CF), networking (review and planning) WS and CF silvicultural management courses, study tours 7  to other FUGs. An increased focus on activities for women showed an improved participation by them in FUG activities. The increased awareness and knowledge at the user level has not only increased the ability to manage a self-determined development of the forest, but has also kept high the demand for expanding the CF program to new users and villages. * Enhanced extension efforts: the project has also significantly improved the extension efforts of the DOF, by increased awareness of community needs on the part of DOF staff, and enhanced visibility of the program, particularly amongst the rural communities. Extension activities included the active participation of DOF in weekly radio broadcasts about the program, the implementation of a puppet theatre extension program, and the production of documentaries, telecasts, bulletins, posters, calendars and information pamphlets for FUG members and field staff. * Establishment of training centers. The project gave support to the establishment of 5 regional training centers (RTCs), one in each region of the country. Buildings were constructed with IDA resources, and the operation was coordinated under DANIDA. The RTCs were the primary location for training at the outset of the project, but after MTR when emphasis shifted to district-based training and study tours to build the capacity of FUGs to function as effective forest managers and community institutions, the RTCs activities focused more on training of trainers, rangers and forest guards, and on supporting the planning and implementation of the training of FUGs carried out by staff of the DFOs. 18. Although the implementation of this component was uniformly good throughout the project, and the impact of its activities was remarkable, some issues prevented the achievement of even more significant results. Frequent transfers of DOF staff, especially during the early years, disrupted the training program, affecting continuity in the work with the users and making the training needs assessments redundant. The selection of the participants to the training courses was sometimes hampered by local dominance of elite groups, or ignorance of conflicting requirements due to, for example, the agriculturai calendar. Distribution of training and extension material did not reach some of the trainees, especially in remote areas. Finally, problems encountered at the RTCs included the poor quality of some of the construction, which required repair 2-3 years after completion, and full staffing, which in some cases was not reached (especially for administration staff). 19. Research to improve silvicultural techniques and socio-economic analyses to improve community forestry planning. The research component of the project was never implemented, mainly because the Forest Research Division was unable to increase its program (and staffing) beyond the level required to implement an on-going ODA-funded program. As a result, this component was cancelled at the MTR. It is unfortunate that no alternative approaches were identified during early implementation of the project to ensure that specific and priority problems emanating from field implementation of the community forestry program were addressed. In particular, it is unfortunate that alternative strategies for assessing the baseline and the socio-economic study were not developed, as this affected the evaluation of project impacts and achievements. The cancellation of the silviculture sub-component, however, was less relevant as these technical studies were covered under the ODA program. Co-ordination with Other Projects in the Program 20. The Community and Private Forestry Division (CPFD) of the MFSC was established as the project management unit, and to co-ordinate all multilateral and bilateral community forestry activities in Nepal. In practice, the activities of CPFD have been confined to the 38 districts, with an overall role on policy matters. Despite the good coordination between donors during project preparation (when policy and regulatory reforms needed to be sought), co-ordination between different donor-supported projects during the implementation phase was weaker. While a Forest Sector Co-ordination Committee (FSCC) was established, most exchange of infonnation and experiences between the different projects remained informal. In the case of this project, the collaboration between DANIDA (cofinancier) and the Bank has primarily focused on contact during supervision and review missions. Given the fact that donor coordination had been a constant issue in the development agenda of the country, it was unfortunate that the project did not incorporate in its design specific mechanisms and activities to facilitate formal arrangements for this coordination. This would have facilitated, for example, the identification of potential break down on the expected outcomes of other donor-supported activities (such as M&E and research) which had direct impacts on this project. 8  Economic and Financial Re-evaluation 21. The re-estimation of the economic returns of the project as a whole resulted is an ERR of 18 percent (see Appendix D), which is half the appraisal estimate of 36 percent. The reduced ERR is attributable to (i) offtake from community forests has been less than envisaged at appraisal due to the early adoption of management regimes emphasizing protection rather than management for production (ii) the actual area of forest handed over was 80 percent of the target set in the SAR; and (iii) the SAR did not include the costs of the training and research components in the economic analysis.' The ERR though, remains as high as 18% although only one third of the credit was disbursed because the basic economic analysis at the time of appraisal did not take into account economic returns such as yields from non- traditional forest product or environmental benefits which were considered in the economic analysis at the time of this ICR. This ERR might have been even higher if some quantification could have been done on other relevant benefits such as community empowerment and mobilization, not possible to include at this completion stage due to the absence of baseline studies and data. 22. The re-estimation of economic returns to plantation establishment produces a highly negative net present value of NRs -166 million (the SAR ERR was 21 percent). This is predominantly due to the very low seedling survival rate of 26 percent. It has been costly for DOF to produce and distribute seedlings and to support FUGs to set up their own nurseries. Fortunately, it was soon apparent that investment in plantation establishment had negative returns. 23. The economic and financial analysis (Appendix D) based on hectare activity models evaluates the role of the seedling pricing policy and the financial incentives of the protective and active management regimes. In the absence of the seedling subsidy, it is unlikely that FUGs would consider plantation establishment, moving towards natural regeneration practices. The activity models also indicate that there are strong financial incentives for FUGs to shift from protective to more active management regimes. The NPV of activities in actively managed forests (almost NRs. 20,000 per hectare) is more than three times the NPV of protected forest (roughly NRs. 6,400 per hectare). The fact that FUGs emphasize protection may be due to social factors affecting the behavior of the user group, i.e. fear to be successful in the introduction of sustainable management practices, insecurity of DOF staff to provide "secure" management advise, and, in reduced cases, dominance of local social elites more keen in forest protection. Social Impacts 24. One of the aims of the project was to improve rural livelihoods through improved availability 2 and access to forest goods essential for maintaining farming systems. Unfortunately there has been no systematic monitoring of the social impacts of community forestry, thus both criticism and praise about program impacts are based on evidence from field visits and case studies in a limited sample of villages and mainly biased to those with good access to towns. Nonetheless, the evidence does suggest an overall positive social impact. The transfer of forest to FUGs is promoting community-based institutional capacity and self-reliance and has fostered community initiatives in other spheres, for example in education, water resource management, and access to micro-credit. Specific impacts relate to: * Popularity of FUG forestry: Almost 6,600 FUGs, involving 464,500 households have joined efforts to manage forests. This involvement continues to increase as people see the success and benefits accruing to their FUG neighbors. Keeping up with this increased demand for community forestry is a major problem in some Districts. However, it does suggest that from the perspective of forest users the results of community forestry are positive. * Beneficiaries: Community forestry is grounded in three essential principles of equity: (i) that FUG membership include every interested forest user, no matter their social standing, (ii) all benefits from the forests are distributed equitably among member households; and (iii) first priority of management is for meeting household subsistence needs. The rules of distribution of any benefits and products of the forest are established in the operation plan of the FUG. In approving the plan the DFO tries to ensure that the sharing mechanisms will not put an unmanageable burden on the poorest households in the FUG. At completion, all project costs were included in the economic analysis given the importance of training, extension and institutional support to the success of local level management of forests. 2 The SAR introduction clearly links the transfer of responsibility for forest management to FUGs with the creation of a resource base for "social, economic and environmental betterment in the Hills" (SAR par. 1.1) 9  However, this may be quite difficult to assess and negotiate in practice. There remains concern within the DOF that in some places the elite will dominate the decision-making and gain more than their due from the managed forest, particularly where these forests are now generating income. Another concern is that, when strictly protecting the forest area, the poorest households may suffer as they have few alternative sources of produce. Some argue further that the principal of equally dividing benefits from the forest is having a negative impact in the poorest since they have a disproportionate need for forest goods. Clearly, these are all issues which should be monitored in order to assess the extent of the problem and to develop solutions with the concerned FUGs as they arise. However, the established process of participatory operation planning and review should provide an adequate framework to address these problems on a FUG by FUG basis. The gains achieved through the community forestry program in decentralizing decision-making should not be reversed in an attempt to redress social inequities within the FUG, nor will blanket solutions be appropriate for addressing the myriad situations of thousands of different community groups. * Poverty reduction: the project did not aim to reduce poverty, although it did seek to improve the lives of the rural poor. Nonetheless, as almost 44% of the rural population lives below a subsistence poverty line (and even greater poverty is the norm in remote hill regions where community forestry is targeted), it can be assumed that increased productivity of forests, especially in areas which had become critically degraded, will increasingly benefit the poor: providing greater quantities of subsistence goods, improving local farming conditions, improving the water supply situation, providing goods for sale and credit (through FUG revolving funds) for addressing emergency needs. . Women's involvement in community forestry: Women play a very active role in the use and management of forest resources -forest protection, forest cleaning and other silviculture operations, collection of forest products- and therefore it was assumed that they would be main beneficiaries of the program. However, due to cultural issues in many FUGs, it has been difficult to encourage women to play a central role in FUG decision-making and administration. Women also continue to be poorly represented on the majority of FUG management committees: they represent about 20% of the committee membership, but this varies considerably from groups with 100% representation to groups where no women are represented. There is growing recognition in the DOF, however, that active participation of women improves the quality of forest management and functioning of FUGs. To address this problem, over the past several years training programs have included gender sensitization and efforts are made to involve more women members in training activities. - Relationship between DOF and communities in the Hills: one of the most significant achievement of the project is the fundamental change in the relationship between DOF staff and rural forest users suggesting that the social gains achieved under the project can be sustained and built upon in the future. Environmental Impacts 25. The project was designed with an environmental purpose: the conservation of forest resources in the Hills. As previously discussed in Part B, this environmental objective was substantially achieved. Large areas of formally degraded forests have been re-greened, and the community forestry arrangements have established a FUG-based system for the management of forest resources. At the closing of the project, more than 328,000 ha of forest lands were under sustainable management arrangements, which accounted for 72% of the optimistic scenario projections given by the Forest Master Plan for year 2000-01 for the mid-Hills region . Several pilot studies show increases of forest cover, ranging up to 1 1% in some districts over periods of 15 years. And although much of this increase can be attributed to pine plantations with low biodiversity value, the latest encouragement of natural regeneration (mostly of broadleaf species) is contributing to improve this. There is still uncertainty, however, as to whether community forestry can specifically conserve biodiversity, as CF is driven by the need to obtain sustainable outputs and services to user groups rather than by the need to sustain biodiversity. Some preliminary observations, however, show a quick duplication in the number of plant species after 10-12 years of natural regeneration. In addition, as the focus of most management has been on protection, the quality of existent forests in terms of crown cover and stems per hectare has increased. Community forest management also leads to reduced levels of grazing, reduced incidence of fires and complete control of wildlife poaching. On the negative side, The total area handed over, including other donor programs exceeds 468,000 ha, exceeding the targets established in the Forest Sector Master Plan (453,000). 10  however, complaints about leopard attacks are increasing, as their habitat has been expanded. Finally, as management operations become more relevant, the need for environmental assessments linked to operational plans will need to be promoted, so that harvesting and management procedures would be performed with minimum environmental impacts. C. MAJOR FACTORS AFFECTING THE PROJECT 26. Factors not generally subject to government (implementing agency) control. A significant factor delaying project implementation during the early years was the political developments associated with the democratization process and the abolition of the panchayat system. Its replacement by an elected government however, led to a rapid increase in the level of awareness among rural communities of their rights and powers, increasing the demands for forest hand-over. Another external factor was the fluctuation on the US$/NRs exchange rate. The progressive devaluation of the Nepalese rupee has meant that there have been no constraints on external financing. The initial credit amount of US$ 30.5 million was greater than required, and part of the loan was cancelled at Mid Term Review. A third factor refers to the time needed to implement a new policy/institutional framework. In this case, institutional and social changes required time, regardless of the level of commitment of all stakeholders. Two one-year extensions were approved by the Bank and provided the time needed to achieve major advances in implementation. Finally, the geographical/topographical conditions of the country, especially in relation to difficult accessibility and remoteness have affected the exchange of information and the dissemination of the program to the more distant areas. 27. Factors generally subject to government control. In 1993, the government passed the legislation needed to provide a strong legal framework for community forestry. Delays in issuing the associated regulations until 1995 slowed project implementation. Delays in providing staff and buildings, together with frequent staff transfers have also affected implementation, as has the erratic targeting of staff training. The Regional Training Centers have yet to be effectively incorporated into HMG institutions. The short-lived research component suffered from a lack of HMG resources, as available resources were committed to an existing bilateral project. 28. Factors generally subject to implementing agency control. The weak linkage between field staff and the Center has been a significant factor in project performance. The result has been that the flow of information and guidance from the Center to the field has been deficient, as has that of monitoring information from the field to the Center. An unexpected benefit has been that field staff has been able to take imaginative initiatives, such as the involvement of local NGOs and CBOs. A second area where the MESC could have performed better is in technical support to FUGs encouraging them to carry out more silvicultural operations or to strengthen natural regeneration efforts instead of plantations. 29. Costs. Total project costs equaled US$ 18.7 million, compared with appraisal estimates of US$ 45.4 million. The biggest under-spending resulted in the Forest Resource Management Component as a result of (i) the reduction in the seedling production and plantation establishment targets, and (ii) the low costs of FUG establishment. Project implementation has shown that user group formation and hand-over of forest land required minimal resources which were mainly provided by the communities themselves. In addition to this, the depreciation of the Nepali rupee produced significant savings on domestic costs in all components. At the recommendation of the MTR, SDR 13.1 million of the original SDR 25.3 million (52 percent of the original credit amount) was cancelled in 1995, and a further SDR 3.48 million was cancelled in 1998. An undisbursed balance of SDR 0.43 million was also cancelled. Total disbursements amount SDR 6.49 million, equivalent to 28 percent of the original credit amount. The project has been extended twice from its initial closing date of June 30, 1997. D. SUSTAINABILITY 30. Present indications are that the project is likely to be sustainable. The Community Forestry Program was based on a strong policy and legal foundation, on which several thousand FUGs were created. The CF policy framework is the core part of the Forest Sector Master Plan and the Forest Rules, which have been governing the sector over the last decade. HMGN's commitment to the FUGs formation 11  process and the hand-over of forest lands is high, and it is currently the dominant approach to the management of forests in the Hills, absorbing the large part of DOF staff time. Institutional sustainability, however, could be improved by strengthening DOF's expertise in performance monitoring, budgeting and marketing. 31. At the FUGs level, the incentive framework to participate in community forestry is appropriate, and it is essential that this be maintained to ensure sustainability in the long term. Success with community forestry has led to a series of new problems and opportunities to be addressed in the future, and which will impact the income generation capacity of FUGs. They include the need to develop a marketing information system; to improve the regulatory framework to facilitate transportation of forest products between districts; to remove certain subsidies and price control measures and to ensure an open marketing system; and to strengthen independent non-government organizations that represent the interests of the user groups. Financially, FUGs manage their own accounts and collectively agree on the activities to be supported with their resources. Although currently most of the groups have small balances in these accounts, there are several cases of self-sufficient user groups, especially in the sal forest areas. E. WORLD BANK PERFORMANCE 32. The performance of the Bank was satisfactory, with some shortcomings. The Bank responded positively to HMGN request to implement the 1989 Forestry Sector Policy and Master Plan by supporting the efforts of the Government to develop an appropriate legal, regulatory and institutional framework for the implementation of community forestry. Conditions set at preparation, for example, provided the MFSC with the leverage to push through a set of regulatory changes to be completed before loan effectiveness, The project concept was built on innovative and successful pilot initiatives in community forestry in Nepal and was, in general, consistent with recommendations from previous sector work and projects, with the exception of the plantation and nurseries sub-component. The poor performance of the Bank in the design of the plantation/nurseries activities and the research component was, however, counterbalanced by superior perforrnance in assisting the adoption of crucial regulatory and institutional changes. The Bank could have played a more constructive role in responding to the fragility of the arrangements in which the project was partially dependent on others, such as M&E. Supervision of the project was regular and diligent, with continuity of the supervision team (including the continuous participation of staff resident in Kathmandu) and balanced skill mix, including economists, foresters, institutional experts and sociologists. The MTR made significant and constructive changes to the project. Overall, the Bank showed a high degree of flexibility in terms of adjusting the scope of activities financed in line with implementation experience, as illustrated by the restructuring introduced in MTR and the cancellation of over 70 percent of the Credit. F. BORROWER PERFORMANCE 33. Preparation and implementation. The performance of HMGN was satisfactory, with some shortcomings. During preparation of the project, HMGN was willing to engage in a policy dialogue with donors and to adopt dramatic changes to the legal framework of the forestry sector. HMGN was consistently committed to transferring management responsibility of forest to local communities and showed flexibility in incorporating lessons learned into the project. Implementation performance was strong in the field, and mixed at the central level. Problems were encountered in the expansion of the monitoring information system to incorporate an efficient bottom-up system to measure project outcomes, the frequent transfer of staff that undermined the success of training activities, and some delays in the implementation of the studies funded by the project, which prevented the early identification of problem areas and, in the case of the plantation component, continued financing activities with poor economic returns. Some delays in procurement of vehicles and hiring of consultants were also experienced due to lengthy procurement procedures. 34. Compliance with legal covenants. There was full compliance with all legal covenants. Some covenants became irrelevant due to the modifications introduced at MTR. 12  G. ASSESSMENT OF OUTCOME 35. The overall outcome of the project was satisfactory. The project achieved its main objective of establishing a community-based forest management system, accomplished through the empowerment of user groups through an active training and extension program, and the transfer of the management of forest resources to them. This system is likely to be sustained while the existing policy, regulatory and incentive frameworks persist. The project successfully introduced operational procedures for a user group approach to forest restoration and management and radically altered the role of DOF from policing and direct control to promoting and facilitating community management. These accomplishments more than counter balanced the deficiencies of the plantation sub-component and the research component. Although there is little quantitative information on the impact of interventions on forest condition and on people's livelihoods, proxy indicators developed and monitored over the life of the project, field observations, institutional changes and supervision evidence all suggest that the project had a significant impact on the conservation and productivity of the forests in the Hills, on the capacity of DOF and on the lives of local people. H. PLAN FOR FUTURE OPERATION 36. The MFSC has prepared a plan for the future operation of the project. The maintenance of achieved outcomes and the self-sufficiency of FUG operations will be a primary responsibility of the CPFD of MFSC. A Community Forestry and Field Implementation (CFFI) project of US$6.4 million has recently been included in the on-going NARMSAP program of DANIDA. As the outputs and components under the CFFI project follow the structure of the HCFP, it is important that its future activities build on lessons learned from the design and implementation of HCFP, and ensure that: (i) program sustainability achieved under HCFP will be maintained; and (ii) further investments will focus on new activities to improve the quality of the hand-over and post-hand-over process, and the strengthening of the capacity of government institutions, user groups and private sector service providers. Of particular relevance is the need to ensure that the policy of subsidy reduction, that was enforced throughout the life of the project, is maintained (seedling prices, nursery establishment, plantation establishment) as any attempt to increase these subsidies will undermine the achievements on sustainability reached up to now. I. KEY LESSONS LEARNED 37. Reorientation of government institutions. The project has demonstrated that getting the policy setting and legislation right is important, and that the Bank can play a constructive role in supporting policy changes early in the project cycle. Given a favorable policy and legal framework, a govemment forest department can evolve from one concemed mainly with policing to one which supports local communities to manage forests. The project has illustrated how a forest department can work successfully with local communities directly without the support of non-govemmental intermediaries. However, the capacity of government institutions to support large-scale programs in the long term might be questionable as the demand for post-formation support increases with the expansion of the program, competing with the need to form new user groups. A solution to this could be to strengthen the involvement of private sector providers in post formation support of FUGs, as this demand increases. 38. Establishment of forest user groups. The empowerment of local communities, the formation of FUG and the transfer of management responsibilities from DOF to local users have proven to be viable mechanisms for sustainable forest management and conservation. Empowerment of communities to manage forests as a group has also strengthened their capacity to act together in other spheres of community development, such as improving education, rural water facilities, road access and establishing sustainable financing mechanisms to support agricultural development. Potential boundary conflicts between FUGs can be minimized by forming clusters of groups, to ensure that all the forest in an area is managed by users rather than leaving some areas open access. 39. Restoration of forest ecosystems. Protection and management of natural regeneration has proven to be a more successful mechanism than plantation establishment to restore forest ecosystems. The 13  emphasis on protection suggests that local users value the flow of environmental services of forests, as well as forest products; reduced soil erosion and improved water availability in the dry season have been strong motivating factors for the formation of many FUGs. Local users adopted natural regeneration because an appropriate set of measures and incentives was in place. 40. Community fund management. The project has demonstrated that FUGs can manage their financial accounts satisfactorily, with adequate community supervision, selecting within the FUG the activities to be supported and openly choosing an independent auditing system. This openness in the allocation of FUG resources strengthens FUG ownership, builds self-reliance and increases the capacity to mobilize other development resources. 41. Project design and implementation. Project design should incorporate mechanisms to ensure effective coordination with parallel programs to which project outcomes are partially linked. These mechanisms could include flexibility to adjust project activities, combined monitoring systems and reviews during supervision. For projects based on community participation, design should also be process-oriented and based on "rules of use" rather than a predetermined menu of investment activities, adaptable enough so that each community group can design its own approach to forest management within the frame of agreed rules. 42. Sustainability and ownership. Community empowerment cannot be accelerated at a pace beyond: (i) the capacity of the facilitating institution to manage the expansion; and (ii) the rate of learning and behavioral changes required by forest users. Within this pace, an implementing agency may wish to enter into partnerships with experienced NGOs to accelerate the handover process and to handle post- handover capacity building. Self-sufficiency and sustainability are strengthened by the implementation of site-specific operational plans based on local establishment of responsibilities and rules of use. 43. Training. The reorientation of the DOF to the community forestry concept, policy and regulatory setting is critical for the successful implementation of the program. By investing heavily in training, the process of change in institutional culture in the public service was accelerated. At the local level, building the capacity of the FUGs to manage forest resources and to strengthen skills in areas such as accounting, networking, participatory decision-making and conflict resolution, among others, is the next critical step. 44. Financing. Community empowerment is achievable without large investments, but requires more important administrative resources and implementation time. These issues need to be taken into account in the design of community-based lending programs. Building the capacity of community and government institutions (training and reorientation) seems to be the essential trigger to FUG formation. Site-specific and community-driven forest planning requires flexibility across budget categories to enable a quick, efficient response to needs and opportunities as they develop. Subsidies under the project have not been successful and have resulted in over-investment in uneconomic plantations as FUGs have produced and planted seedlings in order to maximize their financial returns. 45. Governance: Community based projects can contribute to changing the relationship between people and government. The increasing demand of services from empowered communities can also be an important step to improve governance and strengthen the quality of the services provided by the private and public sector. However, this could be accomplished only if this social pressure is complemented with efforts to build the supply capacity, be it through strengthening of the public services or, -preferably, through creation of a framework encouraging private service provision. 46. Donor coordination. A government-led forum, which includes donors, can make a valuable contribution to policy debate and development. Stakeholders should, however, be aware of the potential fragility of arrangements in which the outcome of one project is partly dependent on the products of another. In cases with a long history of donor assistance, donor exit strategies to move from expanded operational support towards more quality-focused activities are needed to promote genuine and long-term sustainability. 47. Monitoring and evaluation. The weakness in monitoring and evaluation meant that ineffective strategies and activities were supported for longer than they should have been, with associated financial costs. Furthermore, it has proven difficult for program managers and policy-makers to assess quantitative impacts across the Hills and to identify new constraints and opportunities. As a result, 14  inefficient monitoring led decision-makers to rely on qualitative measures and individual positive and negative observations, which (in this latest case) where often given undue weight. 15   PART II: STATISTICAL TABLES Table 1: Summary of Assessments A. Achievement of objectives Substantial Partial Negaigble NotApplicable Macro policies L I Fzl Sector policies ES CI v Financial objectives F L LI Institutional development F E LI Physical objectives LI L LI Poverty reduction L mI EL Gender issues mI LI 0I Community empowerment ] LI LI Environmental objectives 13 0 0I Public sector management FI W L Private sector development F L LI Participatory planning systems LI L vI B. Project sustainability Likely Unlikely Uncertain Highly C. Bank performance satisfacto Satisfacto Deficient Identification L LI Preparation assistance L g] L Appraisal L LI1 Supervision v LI 17  Highly D. Borrower performance satisfactory Satisfacto Deficient Preparation II] m E Implementation K] F7 Covenant compliance E E] Operation (if applicable) K] K] Highly Highly E. Assessment of outcome satisfactory Satisfactory Unsatisfactory unsatisfacto (\1) (i) {C) (i) 1 8 0 1 8  Table 2: Related Bank Loans/Credits Loan/credit title Purpose Year of approval Status Preceding operations 1. Cr. 1008-NEP (US$17.0 Aimed to develop community forestry 1980 Closed million IDA Credit) Community in the Hills by involving local Forestry Development and communities (Panchayats) in forest Training Project management and protection. 2. Cr. 1400 NEP (US$18.0 Aimed to establish state, private, 1983 Closed million IDA Credit) Second community and agro-forestry Forestry Project plantations, and to improve selected natural forests, in the Terai. 3. Cr. 1727-NEP Rasuwa- Includes a forestry component. 1987 Closed Nuwakot Rural Development Project 4. Cr. 1769-NEP Structural To develop appropriate policy 1987-88 Closed Adjustment Credit (SAC)) environment for Community Forestry program in Nepal. Following operations NONE Table 3: Project Timetable Steps in project cycle Date planned Date actual/ latest estimate Identification (Executive Project Summary) October 1985 Preparation Sept. 1987 FAO/CP Appraisal Nov./Dec.1987, April 1988 Negotiations 21 April 1989 Board presentation 30 May 1989 Signing 8 August 1989 18 August 1989 Effectiveness 14 May 1990 Midterm review March 1993 17 December 1993 Project completion 30June 1997 30 June 1999 Loan closing 30 June 1997 30 June 1999 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual (US$ million) FY90 I FY91 FY92 FY93 FY94 l FY95 FY96 FY97 FY98 FY99 FY00 Appraisal 0.7 13.0 6.0 9.0 12.0 16.0 21.0 26.0 30.5 30.5 30.5 estimate i Actual 0 3.349 4.026 5.059 5.284 7.532 8.413 9.150 9.173 9.173 9.173 Actual as 0 112 67 56 44 47 41 35 30 30 30 percent of percent percent percent percent percent percent percent percent percent percent percent estimate I I I I I ii Date of final November 23, 1999 disbursement 19  Table 5: Project Performance Indicators Component SAR expectation MTR Achievement Institutional support LRMP preparation and block maps (number) 36 36 37 Forest demarcation (km) n/a n/a 2,555 User group formation (number) 4,000 4,000 6,654 Number of households n/a n/a 464,511 Building construction (number) 123 121 113 Forest resource management Area under FUG management (hectares) 400,000 200,000 328,264 Plantation (hectares) 56,300 10,000 13,166 (average stem survival 26 DOF 9,600 0 percent) Community 46,700 10,000 5,200 l_______________ 7,357 Seedling production (m) 117 70.8 77.2 DOF n/a 63.3 61.0 FUGs n/a 7.5 16.2 Number of nurseries n/a 516 473 DOF n/a 68 51 FUG n/a 448 422 Training and Extension Training Centers (number) 5 5 5 DOF regional staff attending training 7,700 nla 9,620 events* FUG members attending district level training events n/a n/a 54,000 Professional level training events 50 n/a 110 Forest Ranger training events 691 n/a 363 Forest Guard training events 652 n/a 298 FUG training events 542 n/a 2,052 Research Research programs (number) 7 0 0 * Staff attended more than one event Table 6: Key Indicators for Project Operation Not Applicable 20  Table 7: Studies Included in Project Purpose as defined Study at appraisal/redefined Status Results 1. Post-formation support for The main purpose of the study was to Complete Completed in 1996 - FUGs.. explore the scope of providing post- The report presents an fonmation support to the established Forest action plan to provide user Groups across Nepal. postformation support to FUGs. Training proposals were introduced in the training program, Recommendations to involve other stakeholders are being tested, but are still at a pilot stage. 2. Preparation of Biomass - Prepare biomass table of 10 middle hill Complete Completed in 1996 Basic table of ten preferred species species of Nepal for first 10 years of information relevant to by FOG in the hills of Nepal. growth. guide yields and harvesting practices established in the - Study and recommend the appropriate operational plans. size of most common mid-hill species at out planting in different physiographic zones. - Study and recommend management techniques for community forests. 3. Simple survey techniques The purpose of the study was to Complete Completed in 1996. for mapping community recommend simple survey techniques Useful document to forests in the hill districts. which can be used to facilitate the mapping facilitate the demarcation of of community forests in the hill districts. boundaries and site monitoring in comnmunity forests 4. An assessment of the The purpose of the study was to assess the Complete Completed in 1996 condition of the forest improvement or degradation of forest Originally planned to resources in the hills. resources in the hills with reference to contribute to the monitoring selected districts. of outputs, provides qualitative data. 5. Production of simple The purpose of the study was to produce Complete Completed in 1996 management guidelines for simple guidelines of five selected NTFP Guidelines were distributed Non-Timber Forest Products species of hill districts in Nepal for use by to field district offices for (NTFP). DFO staff and users,, to enhance them to their implementation. The determine acceptable harvesting levels for document will provide NTFP. guidance in an area with an important need for expert assistance. 6. The rights and The purpose of the study was to review Complete Completed in 1998 - too responsibilities of each party with the FUGs, DFO staff. NGOs and other soon to assess impact. involved in the handing over parties about their rights and of forest to user groups. responsibilities in community forestry specially in the handing over of forests to FUGs and review the process of handing over of forests addressing the equity issues and conflict resolution. 7. Sample survey of forest The purpose of the study was to: Complete Completed in 1998. Low user group plantations. survival rates and quality of - Assess the state ofestablishment ofFUG plantations, as well as the plantations in various ecological zones of good achievements in the districts. natural regeneration, confirmed the reorientation - Evaluate the cost of these plantations of this subcomponent including the costs of FUG contribution. towards this later activity. - Recommend on the basis of the findings for higher survival of plants in future plantations. 21  Table 8A: Project Costs Appraisal estimate (US$M) Actual estimate (US$M) Item Local Foreign Total Local Foreign I Total costs costs costs costs l l Institutional Support 6.86 0.82 7.68 6.27 0.29 6.56 Forest Resource Management 19.31 0.00 19.31 4.34 0.00 4.34 Training and Extension 3.30 4.02 7.32 3.74 2.29 6.03 Research 0.33 0.02 0.35 0.00 0.00 0.00 Total Baseline Costs 29.80 4.86 34.66 14.35 2.58 16.93 Physical Contingencies 0.26 0.31 0.57 Price Contingencies 9.58 0.58 10.16 1.48 Total Project Cost 39.64 5.75 - 45.39 14.35 2.58 18.41 Table 8B: Project Financing Appraisal estimate (USSM) Actual/latest estimate (US$M) Source Local Foreign Total Local Foreign Total costs costs costs costs IDA 30.0 0.55 30.55 8.88 0.29 9.17 DANIDA 2.16 4.69 6.85 3.74 2.29 6.03 UNDP 0 0.51 0.51 0.14 0.5 0.64 HMG 4.33 4.33 2.57 2.57 Forest User Groups 3.15 3.15 Total 39.64 5.75 45.39 15.33 3.08 18.41 Table 9: Economic Costs and Benefits SAR IICR Area of Forest Handed Over 400,000 hectares 328,264 hectares Number of Forest User Groups 4,000 6,654 Increase in local employment 100,000 years (NRs500 million) Increase in Production of Forest Products Fuelwood 30.8 million tons 13.7 million green tons over 30 years over 30 years Fodder 13.6 million tons 15.9 million green tons over 30 years over 30 years Leaf litter not calculated 11.2 million green tons over 30 years Timber and Poles 4.3 Mm5 over 30 7.4 million green tons years over 30 years ERR-Project 36 percent 18 percent Plantation Component 21 percent (NPV = NPV = -NRs 166 l______________________________________ _ |NRs965 million) million 22  Table 10: Status of Legal Covenants Nepal Hill Community Forestry Project Original Revised Covenant type Present fulfillment fulfillment Description of covenant Agreement Section status date date Comments DCA 4.01(a) accounts/audit C Maintain project records and In compliance accounts. DCA 4.01(b)(iii) accounts/audit C Submit unaudited accounts In compliance witbin 6 months after FY. DCA 4.01(b)(ii) accounts/audit C Submit audited accounts In compliance within 12 months after FY. DCA 4.01(c)(iv) accounts/audit C Submit separate audit opinion In compliance on SOEs. SCH 4(1) implementation C 12115/1989 Identify community forestry In compliance areas to be handed to User Groups on maps. SCH 4(2)(a) implementation C Establish User Groups. In compliance SCH 4(2)(b) project funds C Disburse funds to FUGs, as In compliance agreed with IDA. SCH 4(3)(a) implementation NC 12/15/1991 Undertake study on seedling No longer uptake. relevant SCH 4(3)(c) implementation NC 06/15/1992 Implement seedling price No longer policy. relevant. SCH 4(4) sectoral C 12/15/1989 Review Forest Department In compliance travel and field allowance policy. SCH 4(4) sectoral C Implement the findings. In compliance SCH 4(5) implementation C 05/15/1993 Workshop among key staff In compliance and donors to discuss Mid- term Review Report which was completed in January 1994. SCH 4(6)(a) staffing C 12/15/1989 Sanction and appoint key staff In compliance to Regional Training Centers. SCH 4(6)(b) staffing NC Sanction and appoint key staff No longer to Research Division. relevant SCH 4(6)(c) staffing C Sanction and appoint key staff In compliance to CPFD accountant/procurement positions. SCH 4(6)(d) staffing C Sanction and appoint all other In compliance project staff. Status: C - Complied with CD - Compliance after Delay NC - Not Complied with SOON - Compliance Expected in Reasonably Short Time CP - Complied with Partially NYD - Not Yet Due 23  Table 11: Compliance with Operational Manual Statements Statement number and title I Describe and comment on lack of compliance There were no significant deviations from World Bank policies and procedures during implementation Table 12: Bank Resources: Staff Inputs Stage of Actual project cycle Weeks US$ Preparation to 206.4 261,300 appraisal Appraisal 27.9 73,100 Negotiations through 8.2 21,500 Board approval Supervision 239.2 499,400 Completion 15.5 54,400 TOTAL 497.2 909,700 24  Table 13: Bank Resources: Missions Performance rating Stage of Number Specialized Imple Develo project cycle Month/ of Days in staff skills mentati pment Types of year persons field represented on objectiv problems status es Through appraisal a/ Appraisal through a! Board approval Supervision - initial 08/89 summary Supervision 02/90 2 ECON, TM na na na 07190 2 ECON, TM 2 2 07/91 3 ECON, CONS, PROG 3 2 12/911 1 ECON 3 2 04/92 4 FOR, ECON (2) 3 2 administrative, CONS. technical, institutional 06/92 1 na FOR 3 2 04/93 3 na FOR, SOC,FIN 3 2 institutional, technical 09/93 3 3 na Midterm Review 12/93 3 20 FOR, INST, SOC administrative, technical, institutional, implementation 04/94 3 2 06/94 2 FOR, ECON U S na 12/94* na 06/95 na ECON S S 09/95 1 na ECON S S 02/96 4 na AG, PO, ECOL, FOR S S implementation, technical 06/96 1 na AG S S 11/96 2 na AG, TM S S implementation, technical, monitoring 06/97 3 na FOR, ECOL, TM S S Completion 06/98 5 8 weeks ECOL, FOR (2), S S ECON a/ It is not possible to determine details of missions prior to supervisions based on information contained in project files. * Indicates supervision reports not on file. Project ratings and information on missions taken from subsequent supervision reports. na indicates data not available. Key AG agronomist/agriculturalist CONS consultant (unidentified) ECOL ecologist ECON economist FIN financial analyst FOR social forester INST institutional expert PO program officer SOC sociologist TM task manager (expertise unspecified) 25   APPENDIX A HILL COMMUNITY FORESTRY PROJECT Final Supervision / Completion Mission, June 1-10, 1999 AIDE-MEMOIRE 1. A joint World Bank-FAO-DANIDA team' carried out the final supervision/ completion mission for the above mentioned project between June 1 and June 10, 1999. This Aide-Memoire provides a summary of the main findings of the mission, and presents a framework for further processing of the ICR. It is based on field visits, discussions with the Ministry of Forests and Soil Conservation (MFSC), the Ministry of Finance, community user groups and donors working in the sector, as well as on the review of project documentation, other relevant studies and reports. The Project Completion Report dated May 28, 1999 and the Project Operational Plan prepared by MFSC, have been important sources of information. The Aide-Memoire was discussed at a wrap-up meeting held on June 10, 1999, chaired by Mr. R.B. Bista, (Acting) Secretary, MFSC. 2. Evaluation of project objectives and design. The main objective of the project was to mobilize people and resources in the Hill districts to establish a forest management system which would conserve and expand the forest resources needed to sustain traditional farming systems and livelihood in the Hills. More specifically, the project was designed to: (i) conserve and stabilize fragile ecosystems and regenerate and expand hill forest resources, (ii) increase the production of fodder, fuelwood and timber needed by local communities, and (iii) increase the capability of DOF to plan resource allocation and assist local user groups to manage and develop forests (Section VII, A of SAR). To achieve this, the strategy adopted was to transfer management responsibilities for forest resources to the local communities who share their use. The implementation of this strategy required (i) building the capacity of the Department of Forest (DoF) to implement community forestry with Forest User Groups (FUG), (ii) establishing and training FUGs, (iii) investing in improved forest management, including plantation development, and (iv) supporting research in silvicultural improvements and socio-economic analyses to enhance community forestry planning. 3 Overall, the project objective was realistic and appropriate, as it was framed under the Forestry Sector Policy and the Forest Master Plan, and it developed from the experiences of pilot efforts supported by other donors. However, the project as structured overemphasised the role of plantations for forest restoration, and failed to build on experience from earlier projects. The design was weak in monitoring and evaluation, with no clear monitoring framework, and relying for this function on a Unit which was not directly supported through the project. While there were on-going projects by other donors strengthening the capacity of central units in MFSC, the project design failed to address the risks associated with relying on other projects to support critical institutional development requirements. Furthermore, the project design could have instituted a framework and mechanisms for better lesson sharing between projects supported by different donors, e.g. allocating resources for lesson sharing workshops and study tours. 4. Project Achievements * Support to Sector Policies. The project was intended to assist the community forestry component of the Forestry Sector Master Plan of 1989. At the time of preparation, the WB facilitated a policy dialogue between HMG and donors, and supported HMG to adopt changes to the legal framework, E. Sennhauser (Mission Leader), J. Falconer (Social Forester), Nathalie Olsen (FAO-Economist), Desmond Chaffey (FAO-Forester), Michael Ollgaard (DANIDA), Kumud Shrestha (Forester).  which allowed the operationalization of the community forestry policy. Conditions of the credit covered the legal status of FUGs and the process of decentralization. Loan effectiveness was dependent on preparation of the Operational Guidelines as it was felt that the legislation prevailing in 1989 did not provide sufficient incentives for FUGs to participate in community forestry. Credit effectiveness was postponed twice as a number of covenants relating to the review of field and travel allowances needed amendment. Despite the important role the Bank played in supporting policy change at the time of preparation, the new Forest Act was not passed until 1993, and the Regulations to interpret the act were only approved in 1995. The slow pace of implementation in the early years of the project may have been partly due to the uncertainty on the part of DOF on how to implement the new policy in the absence of clear guidelines. 0 Accomplishment of institutional objectives. The project successfully introduced the policy and procedural framework necessary to establish a User Group- based approach to forest restoration and management. The institutional development and re-orientation of the DoF at the field level to implement FUG community forestry program has been effective. Implementation of community forestry is now DOF's central approach to the management of forests in the Hills with most field staff devoting most of their time to supporting forest users in their efforts to restore and manage forests. The role of DOF has changed radically, from one of policing and direct control over forest access, to one of promoting and facilitating local community efforts to manage forests. Through an effective training program and based on a sound legal framework, the attitudinal shift of DOF staff at all levels is significant. As a result, the relationship between DOF staff and communities has improved tremendously. * Improving the capacity of the Department of Forest (DoF) to implement community forestry. The training component of the project, financed by DANIDA, has proved of central importance, underpinning many of the gains in institutional development of DOF and FUG capacity and in improvements to the forest management practices. Five regional training centers were established. At the outset of the project training was concentrated on re-orientation of field staff at these Centers. By the end of June 1998 more than 1000 officers and 9000 field staff had attended activities or been trained in CF related matters2. In addition to training, the project has significantly improved the extension efforts of the DOF, by an increased awareness and enhanced visibility of the program, particularly amongst the rural communities. Extension activities included the active participation of DOF in weekly radio broadcasts about the program, the implementation of a Puppet Theatre extension program, and the production of documentaries, telecasts, bulletins, posters, calendars and information pamphlets for FUG members and field staff. Transfers of DOF staff have been disruptive to the training program; training needs assessments undertaken for annual planning purposes, are pointless when staff are continuously moved around. Moreover, the continuity of the work with FUGs is disrupted. A further difficulty has been that training and extension material is often not distributed to, and used by, actual or potential trainees. * FUG formation and training. Over the course of the project approximately 4,400 FUGs have been established in 38 Districts (and more than 7550 FUGs have been formed in the total Hill areas) thus exceeding the SAR target of 4,000 FUGs. This represents approximately 39% of the potential CF households in these Districts (range between 13 to 89%). The area of forest handed over is approximately 320,000 ha of national forest land, which is below the SAR estimate, reflecting mainly that this estimate assumed that FUGs would manage larger blocks of forest than is actually the norm. MTR reduced this target to 200.000 ha. After MTR, more emphasis has been placed on district-based training and study tours to build the capacity of FUGs to function as effective forest managers and community institutions. After 1995 training of users has focused more on field-based training near or 2 Frequents courses for Rangers are: CF Orientation, Training of Trainers and CF silvicultural management Frequent courses for FGs are: CF Orientation, CF Management and Forest Guard Basic Training 28  in the users' own forest. By the end of June 1998 54,000 FUG members had participated in some kind of CF related activity3. * Forest restoration and management. (i) Plantations: At the outset of the program, forest development had a strong focus on the restoration of degraded forest land through plantation establishment. 12,557 ha of plantation were established under the project (far below the SAR target of 56,000 ha which was adjusted to 10,000 ha at MTR to reflect the change in strategy) although a recent study suggests low survival rates in many of these areas. Over the course of the project, however, effective community protection often resulted in rapid natural regeneration and this experience led to a shift in approach to one which concentrated on protection and silvicultural treatment to promote natural regeneration. (ii) Nurseries: the production of seedlings and the establishment of nurseries to support the plantation program have been problematic. The SAR envisaged the production of 117 million seedlings, of which 99 million would be used to establish community plantations and the remainder, would be distributed to farmers for planting on their private lands. However, the MTR found that the SAR plantation target far exceeded the demand for plantations by FUGs and consequently reduced the target to 71 million seedlings and shifted the focus from Departmentally managed nurseries to FUG run nurseries. To the end of 1998 almost 75 million seedlings has been produced (of which 15 million were produced by FUGs). Over the life of the project subsidy for plant production and plantation establishment has been steadily reduced, and, as a result, interest in plantations and nurseries has also declined. (iii) Operational plans: the FUG management system and the preparation of site-specific operational plans, focuses on establishing local rules for restoration, management and use of forests to ensure sustainability rather than investments per se. The emphasis on management rules rather than activities has proved a highly cost effective means to managing these vulnerable forest ecosystems. At the outset, FUGs often concentrated on protection to try and restore vital environmental services of forest. It is only after a number of years and considerable support and training by DoF staff that FUGs introduced management activities to improve the condition and productivity of forests. Another trend over the project period has been the shift from a focus only on firewood and fodder production to one which emphasizes management for a multitude of products, including NTFPs. - Research to improve silvicultural techniques and socio-economic analysis to improve community forestry planning: The research component of the project was never implemented, mainly because the forest research division was unable to increase its program (and staffing) beyond the level required to implement an on-going ODA funded program. As a result, this component was cancelled at MTR. It is unfortunate that no alternative approaches were identified during early implementation of the project to ensure that specific and priority problems emanating from field implementation of the community forestry program were addressed. In particular, it is unfortunate that altemative strategies for assessing the socio-economic trends and impacts of FUG forestry were not developed. 5. Project outcomes. Despite the project achievements discussed above, it is difficult to assess the outcome of the project. There is little information on the impact of interventions on forest condition and on people's livelihoods and no synthesis of implementation experience. However, the indicators developed and monitored over the life of the project, field observations, institutional changes and supervision evidence all suggest that the project has had major and significant impact on the condition of forests in the Hills, on the capacity of DoF and on local people's lives. 6. Status with past agreements. Progress made with actions agreed during the last supervision mission is summarized in Attachment 2. Some progress has been achieved in reducing the stagnation in the hand-over process through the involvement of forest guards, especially in the identification of users. Other mechanisms to address this, such as the employment of consultants and the temporary assignment of additional rangers to priority districts have been difficult to implement. A strategy to address this in a more integrated way, built on the recommendations from the last Aide- 3 Frequent attended course types are: CF Seminars and Workshop (orientation about CF), Networking (Review and Planning) WS and CF silvicultural management courses and studytours to other FUGs 29  Memoire has now been developed and has been included as part of the follow-up activities of this project. For post-hand over support, several mechanisms to strengthen the process have already been tested, such as the engagement of non-forest department rangers and the introduction of a classification system to identify priority post-handover needs. However, the value of these mechanisms is only clear to a limited number of field staff, and a stronger awareness is needed before expanding these mechanisms to further areas and institutionalizing them as part of follow up activities. 7. Coordination with other projects in the programs The CPFD was established not only as the project management unit, but also to co-ordinate multilateral and bilateral community forestry activities in Nepal. In practice, the activities of CPFD have been confined to the 38 districts, with an overall role on policy matters. Co-ordination between donors has been weak. While the Forest Sector Co-ordination Committee (FSCC) was established, much exchange of information and experiences between donors is informal. Despite the fact that DANIDA has parallel financed the training component of the project, the collaboration between DANIDA and the Bank has not been extensive and has focused on contact during supervision and review missions. Co-ordination was greater in the early part of the project, presumably due to donor pressure for legal and policy reforms. 8. Social and environmental impacts. (i) Social impacts. The project did not include an explicit social objective, although the aim was to improve rural people's lives. The strategy of handing over forest to user groups aimed at building community-based institutional capacity and self-reliance. Approximately 464,500 households, roughly 2.4 million people have joined in efforts to protect and manage forests. As noted above, no regular monitoring of social impact was done by the project, thus evidence comes from discussions with beneficiaries during supervision missions and studies in districts supported by other donors. The demand for community forestry continues to grow, suggesting that the majority of the rural populace increasingly appreciates the benefits. CF is underpinned by several critical social principles: that all users of a forest be included in the FUG and contribute to decision making, that benefits should be shared equitably between all members and that the first priority in forest production should be to meet the basic needs of members. The project did not aim to reduce poverty, although it did seek to improve the lives of the rural poor. Nonetheless, as almost 50% of the rural population lives below a subsistence poverty line (and even greater poverty is the norm in remote hill regions where community forestry is targeted), it can be assumed that increased productivity of forests, especially in areas which had become critically degraded, has and will increasingly benefit the poor. The formation and support to UGs has strengthened the capacity of the community to work together for their own development in other spheres (e.g. supporting education, improvement to water systems, and establishing rural credit schemes). Perhaps one of the greatest achievements is the fundamental change in the relationship between DOF staff and forest users suggesting that the social gains achieved under the project can be sustained and built upon. (ii) Women's involvement in community forestry. Women play a very active role in the use and management of forest resources and in the implementation of community forestry-in forest protection, in forest cleaning and other silviculture operations, and in the collection of forest products. However, in many FUGs it has been difficult to encourage women to play a central role in forest management decision making and administration. In average, women represent about 20% of the committee membership, with variations from 0% to 100%. There is growing recognition in the DOF, however, that active participation of women improves the quality of forest management and functioning of FUGs. Over the past several years, training programs have included gender sensitization and efforts are made to involve more women FUG members in training. (iii) Environmental impacts. Again, while no impact studies have been conducted, supervision evidence, field visits and discussions with FUGs all confirm a marked improvement in the condition of forests managed by FUGs, particularly in those which were severely degraded at the outset. One study found significant improvement in forest basal area (29%) after only three years of management. This has led to improved forest regeneration, greater diversity, reduced soil erosion and improved water availability in the dry season. In many places wildlife is increasing and management strategies are likely to be needed in the future. There has been a marked decline in illegal felling, over-grazing and forest fire incidence since the start of community forestry, with most DOF staff reporting little or no illegal activity. It is clear in many areas that FUGs place significant importance on the environmental benefits 30  of good forest condition, often foregoing needed products for strict protection in order to rapidly restore forest cover. 9. Costs. Total project costs as envisaged at appraisal were US$30.5 million. More than 65 percent was allocated to the Forest Resource Management Component. At the recommendation of the MTR, US$ 13.34 million (44 percent of the original credit amount) was cancelled in 1995, and a further US$ 4.87 million was cancelled in 1998. While final disbursement has not yet taken place, estimated expenditure to July 1999 is US$ 9.27 million, equivalent to 30 percent of theoriginal credit amount. The project has been extended twice from its initial closing date of 30 June 1996. Project costs are far lower than initially estimated because (a) seedling production and plantation establishment targets have been reduced, (b) user group formation and hand-over of forest land require few resources not provided by the communities themselves, and (c) the depreciation of the Nepali rupee resulting in significant savings on domestic costs. 10. Performance of the borrower. The performance of HMG has been satisfactory with some shortcomings. During preparation of the project, HMG was willing to engage in a policy dialogue with donors and to adopt dramatic changes to the legal framework of the forestry sector. Despite slow implementation of the project in early years, HMG has consistently been committed to transferring management responsibility of forest to local communities and has shown flexibility in incorporating lessons leamed into the project. Implementation performance has been strong in the field, and mixed at the central level. The lack of an effective monitoring and evaluation system has continued throughout the project, despite consistent efforts to develop such a system. The staffing policy of HMG, in particular frequent staff transfers, has undermined the success of training activities. It would have been better if HMG had completed the study on survival rates in plantations early on in the project (as scheduled), rather than in 1998; a result of this delay was continued financing of the seedling production and distribution activities which the study showed were not cost-effective. 11. Performance of IDA. The performance of the Bank has been satisfactory with some shortcomings. During the preparation process, the Bank, supported HMGN's policy development and the legal reforms needed for the implementation of the community forestry program. Conditionalities at preparation provided the MFSC with the leverage to push through a set of regulatory changes to be completed before loan effectiveness. However, project design failed to take account of lessons leamed in previous projects with regard to the cost-effectiveness of plantation establishment. Supervision of the project has been regular and diligent, and the MTR made significant and constructive changes to the project. The Bank could have played a more constructive role in supporting the establishment of an effective monitoring and evaluation system if the risk assessment of the preparation process had recognized its importance and made provision for monitoring its establishment. Overall, the Bank has shown a high degree of flexibility in terms of adjusting the scope of activities financed in line with implementation experience, as illustrated by cancellation of over 50 percent of the credit, and the two year extension of the date of credit closing. 12. Sustainability. Present indications are that the project is likely to be sustainable. Community forestry in Nepal is underpinned by a strong policy and legal foundation upon which have been created several thousand FUGs. HMGN's commitment to community forestry is high, and is now the Central approach to the management of forests in the Hills, involving most of the time of DOF staff. It seems improbable that this achievement and the associated momentum in the demand for forest to be handed over to communities could be easily reversed and there are no obvious reasons why they should be. Possible threats to sustainability in the longer term could include (i) a break-down in the democratic functioning of Forest User Groups leading to disaffection among community members, (ii) constraints to harvesting and marketing of forest products and (iii) a lack of sufficient professional capacity to support an increasing post-formation demand. HMG can help to address all of these. In the longer term, the question of professional assistance will almost certainly be answered partly from the private sector. More immediately priority should be given to training of Forest Guards. 31  13. Future activities. The mission discussed with MFSC the plan for the project's future operation, and a summary of MFSC's operational plan is attached to this Aide Memoire. The maintenance of achieved outcomes and the self sufficiency of FUG operations will be a primary responsibility of the Community and Private Forestry Division of MFSC. A Community Forestry and Field Implementation (CFFI) project of U$ 6.4 mill has recently been included in the ongoing NARMSAP program of DANIDA. As the outputs and components under this CFFI project follow the structure of the HCFP, the mission strongly recommends that future operations under CFFI capitalize on the lessons leamed from the design and implementation of HCFP, and ensure that (i) program sustainability achieved under HCFP will be maintained, and (ii) further investments will be primarily focused towards new activities to improve the quality of the hand-over and post hand-over process, and the strengthening of the capacity of government institutions, user groups and private sector service providers. 14. Preliminary findings on lessons learned * Institutions: The empowerment of local communities, and the transfer of responsibility for forest management from DOF to communities, has proven to be an effective way to improve the conservation of forest resources. This transfer does not reduce the demand for govemment services, but rather the nature and function of the services changes from policing to facilitation, mediation and provision of technical advice. Experience gained under this project has demonstrated that a reoriented Government institution can be directly responsible for the formation of community groups and for building their capacity, without the need of intermediary facilitators. C Community development. Empowerment of communities to manage forests as a group has strengthened their capacity to act together in other spheres of community development, such as improving education, rural water facilities, road access and establishing sustainable financing mechanisms to support agricultural development. a Forest management practices: Management of natural regeneration has proven to be a more successful mechanism than plantations to restore forest ecosystems. Experience gained under this project has also shown that environmental benefits, particularly the reduction in soil erosion and the improvement in water availability in the dry season, are significant motivating factors for the formation of many FUGs. Potential degradation of national forest areas surrounding CF lands and clustering the hand over process can minimize latent boundary conflicts. * Sustainability and ownership. To enhance the sustainability and institutionalization of CF processes, replication of successful approaches to community empowerment should not be pushed at a pace beyond the capacity of the facilitating institution to manage the expansion. Self-sufficiency and sustainability will also be strengthened by the design and implementation of site specific operational plans based on establishing responsibilities and rules of use as a first priority, rather than focusing on investments and activities. Another critical factor to improve the likelihood of program sustainability has been the phasing out of project subsidies and the reduction of unit costs over the life of the project (especially in plantations and nursery operations). * Training. Experience gained has shown that the reorientation of the DOF to the Community Forestry concept, policy and regulatory setting was critical for the successful implementation of the program, and therefore needs to have the first priority in a training program. Building the capacity of the FUGs to manage forest resources and to strengthen their institutional skills in topics such as accounting, representativeness, networking, decision making and conflict resolution, among others, is the next critical step, and needs to be phased to follow the reorientation program. * Flexibility: Site specific and community-driven forest planning requires flexibility across budget categories to enable a quick, efficient response to new needs and opportunities. 32  * Costs: Community empowerment is achievable without large investments. Building the capacity of both community and govemment institutions (training of local communities and reorientation) has proven to be the most critical activity to trigger the user group formation process. * Donor coordination: Experience gained under this project has shown that a forum for govemment-donor coordination from project preparation to design of a sectoral program has been crucial to the conceptualization of the community forestry policy. The forum is also important for implementation of the program, as projects within the national program need an efficient mechanism to coordinate implementation experiences and share lessons learned. Another important aspect of donor coordination to be considered during project design and monitoring refers to the need for a careful risk assessment of institutional development issues. This is particularly important where the outcomes of some projects are critical for the successful implementation of other projects. When these linkages occur, flexibility is required to adapt project activities to address critical institutional development gaps if other projects fail to address them. * Monitoring and evaluation: Monitoring should be linked to program planning, and not to the auditing & achievement of physical and expenditure targets. The institutionalization of the system is only possible if it serves as a planning tool at every decision making level. 15. Follow-up actions. The ICR completion mission and MFSC have agreed with the following action for furtlher processing of the ICR: 33  Issue Action AgencyResponsible Completion Date Finalize Country Director to Bank End June 1999 Supervision/ICR Aide provide written Memoire confirmation of the Aide-Memoire to the Borrower HMGN's completion Finalize MFSC's MFSC - HMG End August 1999 evaluation completion evaluation, obtain HMGN's clearance and send to the Bank. Review of draft ICR Bank transmits draft Bank, MFSC. Bank to transmit & ICR to HMG. MFSC 1HMG to distribute by distributes draft ICR end September 1999 within HMG for comments and suggestions. Comments on ICR Compile MFSC Mid October 1999 comments/suggestions and send to the Bank. Finalize ICR Update the ICR to Bank Early November 1999 reflect recommendations from all concerned, and submit to print shop Final ICR document The Bank transmits Bank January 2000 the ICR to the Borrower and implementing agencies. 16. Acknowledgements. The mission wishes to thank all members of MFSC for their collaboration and help in the review of project activities both at headquarters and in the field and for their generous and friendly hospitality. 34  Attachment I Project Performance Indicators Component SAR expectation MTR Achievement Institutional support LRMP preparation and block maps (nos) 36 36 37 Forest demarcation (km) n/a n/a 2297 User group formation (nos) 4000 4000 4398 Number of households (nos) n/a n/a 464511 Building construction (nos) 123 121 113 Forest resource management Area under FUG management (ha) 400000 200000 319713 Plantation (ha) 56300 10000 12557 (average stem survival 26%) DoF 9600 0 5200 Community 46700 10000 7357 Seedling production (m) 119 70.8 74.7 DoF n/a 63.3 59.9 FUGs n/a 7.5 14.8 No of nurseries n/a 516 473 DoF n/a 68 51 FUG n/a 448 422 Training and Extension Training Centers 5 5 5 (nos) DoF regional staff attending training events* 7700 n/a 9620 FUG members attending district level training events n/a n/a 54000 Professional level training events 50 n/a 110 Forest Ranger training events 691 n/a 363 Forest Guard training events 652 n/a 298 FUG training events 542 n/a 2052 Research Research programs (nos) 7 0 0 * Staff attended more than one event 35  Attachment 2 Status of Actions Agreed during November 1998 Mission Issue Action Agency Status of Actions Taken since November Responsible 98 Mission Operational FUGs willing to meet the CPFD, It was not possible to identify groups with plans costs of OP preparation, MFSC funds to contribute to the preparation of either from their own their operational plan. The follow-up contributions or VDC program will be addressing this issue funds, will be identified. through (i) the provision of operational plan A non-FD RO will be grants, and (ii) the establishment of a assigned to prepare the mechanism to ensure the availability of OPs, and once approved private rangers to provide the required by the DFO, preparation technical assistance. costs will be reimbursed to the FUGs. Post Guidelines for DFOs as CPFD, Guidelines were distributed to all DFOs. Handover to how the classification MFSC However, further training and awareness is Support will affect the support to needed to complete the classification be given to FUGs will be process, as little improvement has been developed. achieved in the implementation of these guidelines at the district level. Classification guidelines will be redistributed to district offices, together with (i) a detailed explanation of their potential use in planning and management of field staff, and (ii) a request to submit district reports, including the results of the classification process, and the actions to be taken following these results. Procurement The recently procured CPFD, Vehicles were distributed to 7 districts: 2 in seven pick-ups will be MFSC the far west, 1 in the west, I in the middle assigned to districts west and 3 in the central regions. immediately after customs clearance. ICR Prepare borrower's CPFD, A completion report and an operational plan contribution to the ICR MFSC were presented to the Bank, and discussed according to Guidelines during the mission 36  Attachment 3 HILL COMMUNITY FORESTRY PROJECT OPERATIONAL PLAN FOR FUTURE OPERATIONS (Summary) Development objective Improved management of natural resources in the hills of Nepal, based on local participation and using sustainable social, economic and environmental practices. Specifically this will include: a) the continued formation of new FUGs b) continued support to existing FUGs to strengthen their capacity to improve the quality of and benefits from managed forest c) further strengthening of DoF field staff to implement community forestry in 38 districts d) establishment of an effective monitoring system to improve both field level operations and coordination and decision making at the central level Institutional arrangements to maintain the program and improve operational quality Continuation of project operations will continue to be the regular activity of DoF staff, both at the central and field levels. In addition, to further increase the capacity of FUGs and DoF staff, the following activities will be implemented primarily through the NARMSAP program: * build capacity of private service providers to improve the hand-over and post formation * strengthen technical assistance to FUGs in management, marketing and silvicultural operations, among others * improving self-sufficiency of FUGs * strengthening systems of administration and accountability within FUGs e strengthen capacity of Forest Guards for supporting FUGs e strengthen cooperation between FUGs within cluster area Performance indicators a) Formation of new user groups, and continuity of the hand over process: (i) percentage of households in FUGs, (ii) number of FUGs, (iii) numbers of women and disadvantaged group members in committees b) Post-handover support: (i) FUGs' incomes, (ii) number of service agreements between FUGs and private service providers, (iii) numbers of Operational Plans revised, (iv) percentage of FUGs carrying out silvicultural operations, (v) forest benefits (as harvest) (vi) environmental quality c) Strengthening ofDoFfield staff: (i) percentage of DoF staff trained, (ii) civil works, (iii) quantity of field equipment distributed, d) Establishment of an effective M&E system: (i) numbers of districts and range posts using the monitoring and evaluation system agreed, (ii) number of recommendations from monitoring and evaluation reports incorporated in annual plans at district and central levels 37  Focused impact studies needed for further operation Immediate: * achievements of implementation of community forestry in the hills at the national level, particularly changes in forest condition and environmental impact Future: * review of FUG formation experience * new dimension of FUG management: socio-economic factors, links to agricultural production * biodiversity conservation strategy * wildlife management strategy * fire management strategy Plan for monitoring and evaluation 1. Field based monitoring by DFOs: By end of Year 1: * review DFO monitoring systems currently operational . agree common framework with DFOs 2. CPFD monitoring and planning By end of Year 2: * CPFD to take full responsibility for monitoring and planning of community forestry program, based on field level monitoring ( and establish new posts if necessary) . review role and function of Regional Directorates in monitoring process Budget The Operational Plan will be funded largely through HMG normal program funds and partly from the DANIDA-supported NARMSAP. The estimated division of funding is given below. .HMG NARMSAP FY 1999-20000 US 3,3 mill 38  APPENDIX B Project Completion Report Borrower's Submission Hill Community Forestry Project (Credit account 2028-NEP) His Majesty Government of Nepal, Ministry of Forests and Soil Conservation Departnent of Forests 1999   Project Completion Report 1. INTRODUCTION: Hill (Community Forestry Project was initiated in 1989 with an intention to help in implementing the Community and Private Forestry Component of Forestry Sector Master Plan (1988). The project covered 38 hill districts of Nepal. 2. OBJECTIVES: The objectives of the project as reflected in the Staff Appraisal Report, 1989 (Report No 763 lb-Nep) were to; 1) Establish a system to conserve and expand forest resources to sustain traitional farming systems of Nepal. 2) Form the Forest User Groups (FUGs) to protect, manage arid utilize the forests in vicinity. 3) Train the forestry staffs with an intention to provide technical and material assistance to enable FUGs to properly manage the existing forests and establish and maintain new plantation in the degraded areas. 3. DESIGN 3.1 Component In order to achieve the above objectives the following four components were envisaged; a) institutional support component b) Plantation establishment and management component c) Training and extension component d) Research component A brief introduction of the components is given below: a) Institutional Support Component: This component intends to strengthen the Forest Department's organization to identify and establish about 4,000 FUGs and transfer management for 400,000 ha. Of forest. b) Plantation, Establishment and Management Component: This component involves the establishment of 56,300 ha. Of forest and the distribution of 18 million seedlings for private planting. c) Training and Extension Component: This component included the training and extension activities required for making aware of Community Forest Policies to the Forestry Department staffs and the communities. It also included the packages for improving the technical and management capability of both the Department and the Communities to managed forest resources. This component was implemented with the co-financing of DANIDA Community forestry Training Project (CFTP). d) Research Component: This Component was designed to assist the Department of Forest and Plant Resources (DFPR) for improving the silvicultural techniques to conserve and increase productivity, socioeconomic information on resource utilization for better planning. 41  Project Completi on Report 3.2 Project Completion: The project was implemented during 1989- July 1999. Based on progress report of Hill Community Forestry Project, July 1999, the major achievement of the project is summarized as Box 1. BOXI - Block mapping in 37 hill districts - Formation of 6,654 User Groups - Preparation of Operational Plan 5,739 no, and hand-over of 328,264 hectare forests to the local communities as Community Forests. - 2297 kilometers of forest demarcation. - Production of 61,005,004 seedlings through DFO nursery and 16,232,024 seedling through the FUG nursery. - 13,166 hectare of plantation. - Construction of a total of 113 buildings - Production of 5,800,000 seedlings at central level for private distribution The detail project achievements is shown in table 1, as indicators of project implementation. 42  Project Completion Report Table 1: Indicators for Project Implementation (based on progress reports till July 1999) Target Implementation Indicator SAR MTR Progress 1. Preparation of LRMP and Block Maps (Sets) 36 37 2. User group formation 4,000 6,654 3. Seedlings production/ Distribution distribution a) Com. For. 99.1 million b) Private pl. 17.8 million 3. 1. DFO nursery 119 million 61.0 million 3.2. FUG nursery 123 million 16.2 million 4. Building construction 123 113 5. Plantation establishment 56,300 ha 10,000 ha. 13,166 ha. 6. Transfer of forest lands to 400,000 ha 200,000 ha 328,264aha. user groups 7. District Level 7.1. Forest demarcation As per need 2,555 km 7.2. Training, Workshop and As per need 3,113 study tours 8. Central Level As per need 5.8 million 8.1. Seedlings production and distribution 8.2. Ceremonial plantations 16 times 8.3. Extension program As per need 8.3.1. Calendar 300 thousand 8.3.2. Advertisements 141 times 8.3.3. Diary production 55 thousand 8.3.4. Poster/pamphlets 300 thousand 8.3.5. CF bulletin 4,500 8.3.6. Audiovisual programs 8.3.6.1. Documentary films a) Production b) Telecast 8.3.6.2. Telespot production 8 8.3.6.3. Radiospot production 23 53 62 9. Accountant training As per need 8 10. Regional level Training, As per need 461 workshop and study tours a: Source - FUG database record available at MIS (July 16, 1999) Besides the above physical achievements, the project supported several studies in various aspects of Community forestry. A list of studies included in the project is given in Annex 1. 43  Project Completion Report 4. PROJECT COSTS The estimated project cost at the time of appraisal was about US$ 45.39 million of which US$ 30.55 million (23.5 million SDR) was proposed as IDA credit (about 67% of the total project costs). The estimated total project cost at the time of credit closing on July 31 st, 1999 will be about 6.6 million SDR or 28% of the original estimate. A total of 16.58 million SDR was cancelled from the original IDA credit agreement as per the recommendation of the midterm evaluation mission. The disbursement status of IDA credit no 2028 NEP as of July 16, 1999 is included in Annex 2. 5. PROJECT BENEFITS The project was expected to conserve, stabilize, regenerate and expand hill forest resources and promote long-term forest management. It was also expected to increase production of firewood, fodder and timber needed by the communities. The project is expected to fulfill the local need of forest products in 38 hill districts of Nepal. Besides, the direct benefit that may accrue through the increased availability of forest products, a considerable amount of indirect benefit may occur through improved natural environment. 5.1 Implementation and Operational Experiences The project was implemented as per the SAR except for plantation establishment, transfer of forestland and silviculture and research component. Nevertheless, the aim of institutionalizing Community Forestry was achieved. Presently, 4,540 FUGs are managing 3,28,264 hectares of community forests with 4,80,353 households as beneficiaries in the project area (MIS as per July 16, 1999). 5.2 Implementation experiences The project was implemented with a combined effort of local villagers, organized as forest user groups and the forestry staffs. The Supervision Mission along with the co-operation of Bank's resident office and headquarter created conducive environment for timely and successful completion of the project. The recommendation and suggestions provided by the supervision missions assisted in smooth implementation. The main recommendation of mid- term review mission (MTR, 1993) is included as Annex 3. H1MG/N and Ministry of Forest and Soil Conservation (MFSC) specially deserves credit for timely formulating and implementing Forest Act and Rules and providing operational guidelines and instructions on various aspects of Community Forestry. Furthermore, MFSC made timely decision on most of the recommendations made by the supervision and review missions. MFSC also supported to conduct workshop to discuss the issues raised by MTR, and arranged academic level training for DFOs to enhance their capabilities. The Forest Department assumed overall implementing responsibility while delegating a part of monitoring and implementing responsibilities to the Regional Directors and District Forest officers. 44  Project Completion Report The Community and Private Forestry Division, Project Management Office, carried out the coordinating activitics and ensured support in Maps - Planning data - Technical assistance - Research and other inputs - Liaison with other Ministries, Department and Divisions for the timely allocation of budget. Furthermnore, CPFD co-ordinates in training and extension with other bilateral agencies. CPFD expedited project activities by monitoring progress and reporting the concerned agencies, maintaining and supervising accouts, procurement and disbursement and timely hiring specialists as per the projects requirement. Community Forestry Training Project (CFTP), a Danida co-financed project satisfactorily implemented Training and Extension component and its performance is highly appreciated. However, the most important contribution towards achieving the project objective came from the DFO field-staffs, and the Forest User Group themselves. The FUG contributions in establishing plantations alone in FY 2048/49 - 2053/54 is estimated at NRs 3,26,23,817 (minimum). It does not include their direct contribution in forest protection. 5.3 Operational Experiences One of the valuable experiences is related with the project design. At design, it was assumed that the management of natural forest by User Groups might depend on: * Readiness of communities to assume role in management. i Responsiveness of FD staffs to relinquish control. * Effectiveness in extension services in promoting changes in utilization and management However, the operational experience of this project shows that; * Communities are enthusiastic in assuming important role in forest management, often a role traditionally assumed. * With proper training and orientation, FD staffs accepts User Groups as an important stakeholder in forest management. * Effectie extension services can promote changes in utilization patterns and management. The successful completion of the project has also defied earlier doubt regarding the ability of User Group to ensure proper protection arrangements in the community forests. However, it has proved that "Community Forestry being a learning process demands improvements in project design, learning through the stories -- be it a successful or a failure". Another important experience is related with plantation establishment. A study was carried out to assess the rate of success a plantation in the project area and the summary of the report is included (Annex 4). all plantations were regularly surveyed under the cxisting monitoring system and the survival rates were reported. However, a comprehensive and separate study 45  Project Completion Report on FUG plantations and contributions on plantations required the nomination of a consultant service. The procedural mismatch, between the Bank and HMG for hiring consultants, delayed the study. Nevertheless, the study was carried out and some important decisions were made. 6. MAJOR FACTORS AFFFCTING THIE PROJECT 6.1 Factors not Generally Subjected to Control Inadequate database at preparation stage adversely affected project design, also hampering supervision and monitoring of the activities. The devaluation of currency and subsequent major changes in the exchange rates consequently, affected the actual costs of the project from the one, anticipated in SAR. Consultant service for Management Information System (MIS) was not availed due to the procedural matter of DANIDA. The requirement of higher percent of allocation of HMG fund (matching fund) for civil works and constructions created a problem for resource allocation to the government. 6.2 Factors Generally Subjected to Control The decision regarding the involvement of consultants in preparing operational plan of Community forests was delayed till the whole attempt was aborted. 7. PERFORMANCE OF BORROWER The project will be completed in July 1999 with almost all targets achieved. The mid-term review mission reduced the overall new plantation areas to represent more realistically what is required and what can be achieved through FUGs. A total indicative figure of 10,000 ha was proposed for budgeting purpose only. IDA provides a credit of US$ 30.55 to cover Institutional Support, Forest Resource Management and Research Component of the project, DANIDA provided a grant of US$ 8.4 rmillion covering the Training and Extension Component and UNDP provided US$ 0.9 million for Technical Assistance part of an ongoing project. HMG/N's contribution was equivalent to approximately US$ 4.6 million. However, despite commitment and support from the donors the research component of the project could not materialize. As a result, this component was cancelled at MTR. A comparison between the project achievements or the assessment of overall progress against targets of indicative project activities as outlined in the Staff Appraisal Report (SAR) by using indicators is provided in Table 1. The activities were regularly monitored, by using the formats that were approved by HMG / Nepal, throughout the project period. The performances were regularly reported to the concerned Ministry, and finally to the National Planning Commission. The project besides obliging to the established HMG' s M&E, also reported the Bank as per SAR and often as per the later's request. It is clearly reflected in the following paradigm: The project initially focused towards the establishment of plantations but later emphasis was laid on the management of existing natural forests. Even in plantation establishment, the emphasis of the project shifted away from DFO nurseries to FUG operated nurseries beyond July 1993. This shift in management paradigm has a profound effect on project costs. Almost all project targets were achieved except the one related with plantation establishment at an expected cost amounting nearly one fourth of the original estimate. 46  Project Completion Report 8. PERFORMANCE OF THE BANK The Bank's performance in the over all execution of the project is very positive. The Bank's consent providing two extensions of the project period had been very crucial in consolidating the progress made so far in the field activities. The performance of the Bank is highly appreciated as it maintained a fine working relationship with the co-financier i.e. Danida. It helped in smooth implementation of project's activities specially the Training and Extension component. The overall performance of the bank was satisfactory except for the following anomalies; =' The Bank's disbursement policy against civil-work (SAR, 1989 pp 28) gave a tough time for a resource constrained' borrower to allocate the matching fund. It was a main hurdle for failing to achieve the targeted construction of the building. > Lack of TA component in Bank's credit, further with an abrupt discontinuation of TA part from UNDP in 1992, has to some extent influenced the projects achievements which otherwise may have been more effective and efficient. .. The mid-term and supervision mission lacked Borrower's representation and for that, often recommendations tended to be one sided. Some examples of recommendations, to drop silviculture research component (MTR, 1993 pp 20), inability to compare project achievements against as outlined in SAR (MTR, 1993 pp 13), unaccounted seedlings and hastily and improperly formed FUGs (MTR, 1993 pp 18), inactive role of forestry staff in mitigating conflects (MTR, 1993 pp 27), authenticity of MIS (MTR, 1993 pp 21) etc. => The Bank's procurement procedure was found to be very cumbersome because of which procurement process takes quite a long time affecting the procurement activity. 9. LESSONS LEARNED It is possible to mobilise people and the resources in the hill districts to establish a forest management system. The system assists in conserving and expanding the forest resources needed to sustain traditional farming systems and livelihood in the hills. However, prior to such an endeavour (involving technological innovation or management regimes) that disrupts traditional uses the altemative participatory institutions are to be in place. People's involvement in the management of existing forest through participatory institutions (through state sponsored) substantially mitigates environmental degradation. Thc management of existing forest rcsources is important as the Plantation alone is not the solution of "environmental degradation" in Nepal. * With appropriate training and extension, the capability of the Forestry Staffs can be enhanced for assuming thc facilitators' roles. Furthermore, with training and technical assistance the Forest User Groups (FUGs) can be enabled to protect, improve, arid maintain existing forests, or establish forests, even, in the degraded areas. The operational plan for community forests should be simple and easy to understand, as the local people are going to implement it. 47  Project Completion Report * The FUGs should have the right to decide how to manage and utilise their respective forests. This entitlement will give them the necessary incentives to manage their forest properly, besides, ensuring that the resource is not depleted. The Forest Department must provide technical assistance including post-formation support, as it ensures smooth management. The existing district forest staffs, alone cannot provide all the support needed due to the lower number and availability (as they are also engaged in other protection-related works). The present arrangement of employment of private rangers by the FUGs for post-formation support can be a viable option but it needs further observation. Hence, the possibilities of the post-formation sup[ort to the FUGs through NGOs and CBOs need to be explored. * Handing-over forests to the Forest User Groups alone may not be sufficient to benefit the poor and the disadvantaged people within the forest User Group. The implementation arrangement and FUG uptake-needs should be closely monitored in order to ensure that the poor and the disadvantaged people get a substantial benefit from the community forests. The income generation activities are to e carried out for benefiting the poor and the disadvantaged people of the communities. Furthermore, the awareness about Community Forestry Policies and legislation among women in Forest User Groups need to be aroused. * The Operational Plans, for regulating resource utilisation, should be simple and easy to understand. The Forest Department should assist FUG with extension advice about appropriate forest management techniques and formulate Plans, clearly stating the objectives and the implementation arrangements. The capability of Forestry Staffs should be enhanced mainly in the forest management aspects. * The implementation of different components of the Project through different Departments and Institutions demand a close co-ordination. There should be an adequate institutional and legislative reform for creating a conducive environment for such a co-ordination. 48  Project Completion Report Hill Community Forestry Project PROJECT OPERATIONAL PLAN (An action plan for the future operation phase of the project) Hill Community Forestry Project was initiated in 1989 with the following objectives; i) Establish a system to conserve and expand forest resources to sustain traditional farning systems of Nepal. ii) Form Forest User Groups (FUGs) to protect, manage and utilize the forests in vicinity. iii) Train the forestry staffs with an intetion to provide technical and material assistance, to enable FUGs to properly manage existing forests and establish and maintain new plantation in the degraded areas. The project has been successful in materializing objectives in a satisfactory way, as is evident from the achievements stated in the project completion report (PCR). DANIDA significantly contributed especially in achieving the third objective of the project as a co- financier. Moreover, training facilities were also provided to the FUGs to enhance the utilization and management aspects. Community and Private Forestry Component (CPFC) under NARMSAP, a DANIDA supported programme, will continue the training and extension related activities of HCFP till FY 2002/03. Other IDA supported activities such as formation and post formation support to FUGs, establishment of plantations and related works, and civil works and constructions is proposed to be continued by the Community Forestry Field Implementation Component (CFFIC) under NARMSAP from FY 1999/2000 to 2002/2003. An appraisal mission has already visited Nepal in this connection and the process is almost at final stage. 49   Studies included in the Project Annex-I STUDY PURPOSE IMPACT 1. Preparation of simple guideline for the 'fhe main purpose of the study was to explore the scope of providing post-formation support to The guideline identified the areas in which the Post-formation support to the FUGs the established forest user Groups across Nepal. FUGs need to be supported for the smooth * Review of available literatures/reports/recommendations of seminars/workshops implementation of community forest * Identification and analysis of the support needs of the existing FUGs using PRA tools management plan. Furthermore, it helped to * Designing aisd translation of the post formation support plan into simple Nepali language streamline various post-formation supports to benefit FUGs. DFO staff and users being provided by the different community * Listing the support that can be provided to or being provided by DOF and other similar forestry projects. projects * Recommendation of what and how the support could be provided by DOF 2. Preparation of Bio-mass table often * Prepare bio-mass table of 10 middle hill species of Nepal fbr first 10 years of growth The Bio-mass table prepared for 13 preferred preferred species by FUG in the hills of * Study and recommend the appropriate size of most common mid-hill species at out species, in the hills, gave an estimate of yield Nepal planting in different physiographic zones that can be extracted from the community * Study and recommend management techniques for community forests forests in a sustainable way. It pTovided an impetus for technical backstopping for preparing the management plans for the community forests. 3. Simple survey techniques for mapping The purpose of the study was to recommend simple survey techniques that can be used to The study facilitated in increasing the community forests in the hill districts facilitate the mapping of community forests in the hill districts. efficiency of forestry staffs with an additional * The efficiency of various surveying tools compared advantage in accuracy of the survey * Extensive consultation with forestry professionals regarding surveying techniques * An appreciable literature review A detail curriculum designed for training on surveying and mapping techniques 4. An assessment of the condition of the The purpose of the study was to assess the improvement or degradation of forest resources in An assessment of the condition of forest forest resources in the hills the hills with reference to selected districts resources in one of the hill districts of Nepal * Determination of the maps, air photos anid other remote-sensing tools for the hill districts found a substantial increase in the areas of of Nepal forest resources due to the successful * Comparison of LRMP maps with the most recent ones and determination of changes in implementation of the Community Forestry forest condition in Lalitpur district Programme * A comment on thie methodology used, pattems of forest change observed and wider application of the study and comparison of tle results with other studies 5. Production of simple managemenit rhe purpose of the study was to produce simple management guidelines of five selected The guidelines of Non-Tinber Forest Product guidelines for Non timber Forest Products NTFP species of hill districts in Nepal for use by DFO staff and users, to enhance them to (NTFP) established the NTFP as an important (NTFP) determine acceptable harvesting levels for NTFP forest resource of the community forest. * Review experiences and literatures with regards to NTFP utilization in Nepal and India Besides the conventional forest products such * Interview of users, DOF staff and NC,O in selected hill districts as firewood, fodder and timber. It helped in * Development of NTFP harvesting guidelines in consultation with the DOF staff, NGOs facilitating the management of NTFP in and User Groups community forestry  6. The rights and responsibilities of each The purpose of the study was to review with the FUGs, DFO staff, NGOs and other parties The study pinpointed the gaps in awareness of party involved in the handing over of about their rights and responsibilities in community forestry specially in the handing over of community forestry policies and legislation forest to user groups forests to FUGs and review the process of handing over of forests addressing the equity issues among the FUGs. It enabled the Project to and conflict resolution narrow down the gap in the awareness * Review of literature and experience relating to hand-over of community forests programme * Recommendation on the changes necessary in handing over process and the role of private firms and NGOs in such processes * Instances of conflicts in community forestry related with handing over issues and ways to mitigate them with suggestions on legal aspects 7. Sample survey of forest user group The purpose of the study was to: The study found that: plantations * Assess the state of establishment of FUG plantations in various ecological zones of the I. Species selected were not site specific districts 2. The nursery technique was poor * Evaluate the cost of these plantations including the costs of FUG contribution 3. The plantation technique was substandard * Recommend on the basis of the findihigs for higher survival of plants in future Based on the reco fmendations more an plantations was given on the quality of plantations with an * Identification and location of all established FUG plantations (from 2048/49 - 2053/54) emphasis on the management of natural forest * Field surveys of the representative areas to assess their establishment and productivity However, the study found that FUG plantations by recording site conditions, cstablishment practices, percentage survival and growth by are comparatively cost effective than the species Departmental. Nevertheless, the study reported * The reasons of low seedling survival with recommendations to improve seedling a satisfactory condition of the private survival and growth through post-establishment case. Furthermore, the assessment of plantations. survival rate of the seedlings distributed by DOF/DFOs * The condition of natural regeneration under plantation forests managed by FUGs  Annex-2 HILL COMMUNITY FORESTRY PROJECT Estimated Project Costs and disbursement status Cat No Descnption Original Credit Canceled as of After First Canceled as of June Net Credit Disbursed as of Balance Requested Actual Expend Estimated Requested Total Expend Amount Aprtl 1995 Cancellation 1998 Amount 3-4) July 16, 1999 (undisbursed) for to July 1998 Expend (FY for by July 1999 Credit Amount (5-6) Disbursement (6+8) 1998199) Disbursement (9+10) (1-2) (Up to FY as of _3 - 4 . 5 7 i1997/98) (1998/99) 1 2 3 4 5 6 7 8 -9 tO It1 12 Unall Unallocated 2,350,00000 1,350,000 00 1,000,000 00 1,000,000 00 - - I Goods 210,000 00 (470,000 00) 680,000 00 347,000 00 333,000 00 165,720 79 167,279 21 95,504 53 261,225 32 13,337 00 274,562 32 2 Works 890,000 00 (450,000 00) 1,340,000 00 925,000 00 415,000 00 285,437 31 129,562 69 17,213 17 302,650 48 10,567 00 313,217 48 3 User Group Formataon anpd Technical Support 4,100,000 00 3,320,000 00 780,000 00 83,000 00 697,000 00 564,282 98 132,717 04 - 564,282 96 111,345 00 40,649 22 675,627 96 4 Forest Dept Seddling Production + Plantation Establishment 7,590,000 00 3,590,000 00 4,000,000 00 3,000 00 3,997,000 00 3,847,254 39 149,745 61 - 3,847,254 39 104,842 00 26,043 07 3,952,096 39 5 FUG SeediBng U, Pomduction and Plantation Establishment 8,130,000 00 5,730,000.00 2,400,000 00 941,000 00 1,459,000.00 1,181,096 42 277,903 58 57,104 14 1,238,200 56 152,048 00 1,390,248 56 6 Travel + Field Allowance 80,000 0 0,00000 0- - - -0 7 Consultant Service 150,000 00 (50,000 00) 200,000 00 101,000 00 19,0C00 18,496 03 503 97 18,496 03 18,496 03 Special Account 631,676 93 (631,676 93) _ - Total 23,500,000 00 13,100,000 00 10,400,00000 3,480,000 00 6,920,000 00 6,693,964 03 226,035 17 169,821 84 6,232,109 74 392,139 00 66,692 29 6,62i,248 74 Note 1 SDR = US $ 1.40 1 US $ = NPR 68.00   Annex-3 Recommendations made by Mid-term Review I. Planning and staff management training at executive level. 2. Briefing to DFO and AFO on training content and subsequent implementation. 3. DANIDA's district level training priority to regional level-endorsed. 4. TOR on CF activities with emphasis on CF. 5. DFO's close monitoring of FUG formation process through monthly meetings. 6. FUG networking W/S. 7. Forest Management demonstrations in CF as an impetus. 8. Wide spread distributions of CF related rules and regulations. 9. Stability in staffing especially in relation to frequent transfer. 10. NGO's good undbrstanding of legal rights and responsibilities of FUGs 11. Basic field equipment to forestry staffs. 12. Finding for temporary range posts. 13. Increased TA/DA for enhancing field staffs' role as extensionist and give post formation support. 14. Standard system of monitoring FUG activities, linked with TA/DA release. 15. Trimestral report to CPFD and RD should contain report based on ranger's monthly report. 16. Annual submission of updated status of FUGs in the district to CPFD. 17. Fund availed for a regular district level verification of CF activities by regional staffs. 18. A computer assistant from TA component at CPFD to input data and MIS based on information from trimestral and annual reports. 19. A management analyst (on contract) for implementing proposed monitoring and MIS use. 20. District annual workplan and budget should be based on range level or VDC level planning exercise. 21. A flat rate payment per hectare for plantation establishment (after successful plantation) and to be phased out over the project period. 22. No new subsidies for plantation after FY 1993/94 23. Subsidies for nursery establishment and seedling production by FUGs as per the contracts. 24. DFO Nursery at district and range level only for demonstration training and research prepared with a limited seedlings distribution. Seedling production only through FUG nurseries. 25. A total indicative figure of 10,000 ha is proposed for plantation only for budgeting purpose. The original project target is drastically reduced to represent the requirement and potentiality of FUGs. 26. A total of US$ 12-15.0 million be cancelled from the original IDA credit agreement. 55  --------------- - ---------- -------------------  Annex-4 Sample Survey of FUG Plantations Forest Research and Survey Centre (FRSC) undertook a sample survey of FUG plantations in Mill Community Forestry Project area and submitted a report to CPFD, Department of Forests. 1. Purpose of Study The study mainly aimed to; * Assess the state of establishment of FUG plantations in various ecological zones. * Evaluate the cost of these plantations (including costs of FUG contribution) and * Recommend on the basis of the finding for higher survival of plants in future plantations. According to the terms of references, the specific objectives of the study were to; 1) Identifv and locate all established FUG plantations (FY 2048/49-2053/54) 2) Select plantations representative of the various ecological conditions and regions in the middle hills with at least a 5% representation of total plantations. 3) Conduct field surveys of selected plantations to assess the establishment and productivity by recording; * Site condition e Establishment practices * Percentage survival by species * Growth by species 4) Access the reason for low seedling survival 5) Calculate the cost of establishment including the cost of FUGs contributions. 6) Make recommendations to improving seedling survival and growth rate through post establishment care. 7) Study of natural regeneration under plantation forest managed by FUGs. 8) Assess survival of seedlings distributed by Department of Forests, District Forest Offices. 2. Findings 2.1 Plantation Failure and its Causes The study found that nearly half of the plantations have below 20% survival and only about 8% of plantations have more than 50% survival. Furthermore only 1.4% of the total sampled FUG plantations have a 100% survival. The main problems associated with plantation were'. Natural calamities, Lack of technology and Institutional aspects. However, the negligence in the part of management specially with site selection have also lead to failure in certain sites. However, the study found that nearly 60% of the FUG plantations had natural regeneration. Moreover, the study reports that most of the broad leaf species succumb to harsher situation within the first year of planting. The poor growth in plantation is attributed to the plantations even without the site clearance and in majority of cases either only one weeding after 57  planting or none at all. The survey also estimates an average success rate of 73% and 47% for the survival of DFO distributed seedlings for private plantations in low and middle hills respectively. 2.2 Cost of Establishment, and FUG Contributions The subsidy programs before FY 2051/52 plantations had a sharing ratio of 80% and 20% in DFO and FUG contributions respectively. Plantations established in FY 2048/49, 2049/50 and 2050/51 were done remaining within the standard norms of MFSC. The revised subsidy effective from FY 2051/52 subsidized plantations with NRs 2000/ha with addition of free seedling (NR 1/Seedling) and poly-bags if the nursery was being run by the FUG. The plantations in following FY 2052/53 and 2053/54 subsidized with NRs 1000 and NRs 500 respectively. Free seedling and poly-bags were still availed. Based on the standard norms of MFSC, a hectare of plantation require 87 to 133 man-days thus with NRs 50/day labor rate, cost of these plantations range from NRs 4,350 to 6,650. On the basis of above estimate a conservative calculation of the contribution of FUG to the plantations in the stated years is NRs 3,.26,23,817/-. 3. Recommendations for Future The study recommended the followings as necessities for a successful plantation in future; 1) Subsidy scheme to suit the socio-economic status of the FUGs in various ecological zones of the country. 2) Information to establish plantation in poor, exposed and denuded sites spreading all over the country. 3) Effective awareness building mechanism in the DFO and FUG Institutions. 4) Planning in FUG plantation activities. 4. Conclusion The survey concluded that the decision to cease subsidy on plantations was premature. In addition to the issue of subsidy, the study, also recommended to improve the planning process. The assessment of site conditions prior to plantation establishment and the need of suitable training package in plantation establishment and management was stressed in the study. The dissemination of success story in plantation establishment is also recommended by the study for the benefit of FUGs in plantation management. The study also emphasized on the need of promoting natural generation as a cost-effective means of forest management. 58  APPENDIX C Implementation Completion Report Co-Financier's Submission Hill Community Forestry Project (Credit Account 2028-NEP) Community Forestry Training Project (1989-1998) DANIDA This report contains restricted information and is for official use only Ref. No.: 104.NEP.4 (CFTP) ABBREVIATIONS APTO Assistant Programme Training Officer, Programme Training Officer (Danida) Bank World Bank CFTP Community Forestry Training Project (CPFC from July 1998)  Hill Community Forestry Project - ICR (DANIDA) CPFC/D Community and Private Forestry Component/Division Danida Danish International Development Assistance DFO District Forest Office/Officer DOF Department of Forest (also FD - Forest Department) DSCO District Soil Conservation Office/Officer DKK Danish Kroner FG Forest Guard FUG Forest User Group FY Fiscal Year (from approx. 16 July to 15 July) HCFP Hill Community Forestry Project HMG His Majesty's Government of Nepal MIS Management Information System (for FUGs and Employment/Training) NARMSAP Natural Resource Management Sector Assistance Programme RTC Regional Forestry Training Centre (Official HMG name), Regional Training and Extension Centre (NARMSAP Programme Document name) RTA Regional Training and Extension Advisor, Regional Programme Advisor (Danida) RTO Regional Training Officer (HMG) SAR Staff Appraisal Report of 10 May 1989 SLC School Leaver Certificate (Qualification needed for entrance to University, an exam taken after passing the class/grade 10 examination) NOTES Professional Titles in Nepal: Officer Holder of BSc Forestry from Tribhuwan University or higher degree from abroad employed as Civil Servant by HMG or other institution (academic forest professional) Ranger Holder of at least ISc Forestry from Tribhuwan University employed as Civil Servant by HMG or other institution (forest technician) Forest Guard Presently only the ability to read and write is needed for this job, but increasingly people with SLC or even higher education are employed as FGs Instructors Rangers working as trainers at the RTCs Naike Person trained to care of a nursery Heralu Person employed to care and watch a forest Peon Office helper (only simple read and write needed) 1. INTRODUCTION The Hill Community Forestry Project (HCFP) started in 1989. The Project was defined in the Staff Appraisal Report (SAR) of 10 May 1989. Danida agreed to co-finance the Training and Extension Component with a grant to HMG of DKK 32,704,000 (USD 4,240,000)1. The component was implemented from 1990 to 1998 under the name Community Forestry Training Project (CFTP) and from July 1998 the Danida support has continued through Year 1999 was financed under NARMSAP in an additional amount of USD 1.79 mill) 60  Hill Community Forestry Project - ICR (DANIDA) the Community and Private Forestry Component (CPFC) and the Community Forestry Field Implementation Component (CFFIC) under the Natural Resource Management Sector Assistance Programme (NARMSAP). The Bank invited one representative from Danida to participate in the Final Supervision/Completion Mission from 01-10 June 1999. The present document is the co-financiers submission to the Implementation Completion Report (ICR) from the World Bank and only includes the CFTP. It is to be read as supplementary information to the Aide- Memoire of 10 June 1999 and the Borrower's Submission attached to the World Bank ICR. Further reference is made to the Summary and Lessons Learnt chapter of the Project Completion Report of the Community Forestry Training Project prepared by Danida in 1999 attached as an annex to this paper. 2. OBJECTIVES During the life of the CFTP the formulation of the objectives were changed to mirror the actual situation. The bulk of the grant has been spent under the objectives formulated in 1993 as follows: Development Objective People and resources in the Hill districts mobilised to establish aforest management system, which would conserve and expand the forest resources, needed to sustain traditionalfarming systems and livelihood in the Hills Immediate Objective Improved technical and managerial capabilities of both DOF staff and communities involved in Community Forestry to undertake Community Forestry in the Hill districts 3. DESIGN The CFTP started with a Regional Training Officer (RTO) employed by His Majesty's Government (HMG) and a Regional Training and Extension Advisor (RTA) from Danida located in each Regional Directorate. This set-up proved difficult to operate and from 1993 Regional Forestry Training Centres (RTC) were established in each of the five regions under CPFD in either rented buildings or in existing HMG offices. The Headquarters of CFTP was established in the office of the Community & Private Forestry Division (CPFD) of the Departrnent of Forests (DOF), where it remains until today. From the onset of NARMSAP the RTAs are working as Regional Programme Advisors with responsibility for Danida's support to RTCs, DFOs and DSCOs. In the beginning of 1999 the RTCs were transferred back to the Regional Directorates. The RTCs were never fully staffed by HMG to carry out the tasks assigned in the SAR and Review-Mission Documents. Thus the post of accountant is still missing to make the RTCs fully operational as HMG institutions. Consequently Danida allowed CFTP to hire the necessary staff. The staff situation by the end of CFTP at the RTCs were (generally) as follows: .~n . . . .=HMG Danida Regional Training Officer/Advisor I I (Assistant) Programme Training Officers (APTOs) 0 3 Instructors/Extension Organisers (Rangers) 3-5 1-2 l Assistant Programme Administrative Officer 0 1 |Administrative Staff/Typist/Office Assistant 2 0-1 Driver I Peon/Guard 3-5 0-1 The RTCs arrange training for the Department of Forest (DOF) field-staff at regional level. The training for Ranger and Forest Guards is planned based on training need assessments carried out by the RTO, APTOs and on requests from DFOs. Increasingly also staff from Department of Soil Conservation and Watershed Management are among the trainees. The RTCs support the planning and implementation of the training of users carried out by the staff of the DFOs. 61  Hill Community Forestry Project - ICR (DANIDA) The RTA and the Danida staff assist in the planning and implementation of both training programmes. The RTA is solely responsible for the allocation of all funds used at regional and district level for CFTP. This set-up minimised RTAs free capacity for technical assistance, as he was caught up with a heavy administrative workload. Because RTO did only have a minimal budget mainly for salaries, no financial staff and through unclear Terms-of- Reference for the RTO the RTC were defacto perceived as Danida Training Centres. NARMSAP is in the process of separating the Danida and HMG administration, and in the Western and Far-western Regions separate NARMSAP Programme Offices have been set up. The SAR envisaged the Training and Extension co-ordinator to work under the supervision of UNDP chief advisor for six years. UNDP withdrew its support to the HCFP in 1992. The Regional Training and Extension Advisors were initially postings for 3 years, but Danida extended the CFTP and the employment of Advisors several times until the Project was absorbed by NARMSAP. 4. PROJECT ACHIEVEMENTS The baseline study and the socio-economic study mentioned in the SAR were never done, and it is therefore difficult to quantify the effect of the Project on community forestry development in the Project area. However, a qualitative assessment of the effect can be done in many cases, and it is the opinion of the Project that the immediate objectives, improved technical and managerial capabilities of both DOF staff and communities involved in community forestry to undertake community forestry in the Hill districts has improved satisfactorily to make an excellent platform for further follow-up by HMG, supported by NARMSAP in the futureCFTP was the component responsible for training the DOF staff and for assisting DOF staff in training users in the aspects of community forestry required to implement the HCFP-components in the field. Almost 5000 active FUGs have been formed in the Project area, and although it is not possible to trace this fact as resulting from the one or other component - or for that sake to HCFP the overall result of the Project is most encouraging. The reality of self- determined and successful FUGs in Nepal must be seen as a result of a synergetic process carried through by many stakeholders during the last 20 years. The achievements of CFTP has been described in details in the Project Completion Report (June 98) and summarised in the Aide-Memoire (June 1999). Including the data from s't and 2nd trimestre of Fiscal Year 2055/56 (1998/1999) presented in NARMSAP Progress report No 2 the achievements in training and extension are: Tf1r~~..cateor AR Tage Aceved Pricipnt 4l:ay Officers - Overseas Training 3 39 56 Officers - National Training 50 110 1114 Rangers - National BsC stipends 20 20 _ _ _ _ _ _ _ _ __ _ _______________________ -------------- ----- - -------- -- __ -__ _ _ __ - -_ - ------ -------- - _______-____--_-___--______ Rangers - Overseas Training 7 5 Rangers - National Training 691 _ 363 4961_ 52000 Forest Guards, Heralus and Naikes 652 298 4665 65000 Forest UserGroups 542 2052 54094 175000 Leaders, Volunteers, Teachers, 963 263 4767 14000 Women Development Officers, Schoolchildren, Motivators, etc Note: Most HMG staff has participated in more than one type of training. Through more than 3000 workshops, seminars, study tours and training events CFTP has increased the technical capacity of DOF staff, other stakeholders and development workers, and the awareness and functionality of the FUGs has been considerable improved. More than 9,500 Rangers and FGs have received training. The number is higher than the number of staff as many of the approximate 2000 staff several has participated in more than one course. The training has decisively increased the capability of the DOF staff able to facilitate the identification and formation of FUGs. Specifically at 62  Hill Community Forestry Project - ICR (DANIDA) Ranger level many staff members are now able to assist the FUGs with advisory service regarding silvicultural operations. A marked change in attitude of the DOF staff has been observed in the Project area during the implementation period. From the role of policing the forest act, rules and regulations the staff has changed more towards being facilitators in the processes related to community forestry. That development is far from finished, but the change has been remarkable. Almost 55,000 users have participated in some kind of training or extension activity. The number does not include several thousands spectators of puppet shows, drama group performances and visitors to other extension activities. FUGs' committees are generally informed and partly trained on Community Forestry policy and procedures. Some FUGs are trained in carrying out forest management. Through increased focus on activities for women, a change to more participation in FUG by women can be observed. Co-ordination with other donors in the sector has improved through the Project period, but should be intensified. CFTP staff and advisers participated in several working groups under the Forest Sector Co-ordination Committee (FSCC) - a formal committee chaired by the Ministry of Forests and Soil Conservation (MFSC), as well as various ad hoc working groups in the sector. A number of manuals, training guidelines and session plans have been produced by CFTP, mainly for internal purposes. Approximate 50 officers have received 6-8 week training in Community Forestry and extension in Denmark, and five officers have completed their MSc financed by Danida. At the Institute of Forestry (IOF) NARMSAP is supporting 37 students with scholarship in the Bachelor of Forestry course. The first batch supported since 4 year will finalise their BSc in summer 1999. 5. COSTS The following table shows a breakdown of the 32.7million Danish Kroners equivalent to 326.8 million Nepali Rupees occurred by CFTP during 10 years of activities. DKK '000 _anidaAlloc*tion A=ta; |itur- Variance __-- ___--- _:_- _ __KK__f 1