Algeria - Pilot Forestry and Watershed Management Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 19315 IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA PILOT FORESTRY AND WATERSHED MANAGEMENT PROJECT (Loan 3487 - AL) June 30, 1999 Rural Development, Water and Environment Department Middle East & North Africa Region 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 = Algerian Dinar (DZD) Exchange Rate at Appraisal (March 1992) US$1.00 = 22.50 DZD Official Exchange Rates (DZD per US$)' Year Annual Average 1992 21.836 DZD 1993 23.345 DZD 1994 35.059 DZD 1995 47.663 DZD 1996 54.753 DZD 1997 57.707 DZD 1998 58.739 DZD WEIGHTS AND MEASURES Metric System FISCAL YEAR OF BORROWER January 1 - December 31 ABBREVIATIONS AND ACRONYMS A^NF National Forestry Agency2 Agence national desforets ANN National Agency for Nature Conservation Agence National de la conservation de la nature BNEDER National Office for Rural Development Studies Bureau national d 'etudes pour le developpement rural BNEF National Office for Forest Studies Bureau national d 'etudesforestieres DGF General Directorate of Forestry Direction generale desforets FAO/CP FAO/World Bank Cooperative Program Organisation des nations unies pour l 'agriculture et I 'alimentation GEF Global Environment Fund Fonds de 1 'environnement mondial INRF National Institute for Forestry Research Institut national de recherchesforestieres ICR Implementation Completion Report Rapport d 'achevement M&E Monitoring and Evaluation Suivi et evaluation ONTF National Office for Forest Works Office national des travauxforestiers ORDF Regional Forest Development Office Office regional de developpementforestiers PMT Project Management Team Cellule de Gestion du projet Vice President: Kemal Dervis Country Director: Christian Delvoie Sector Director: Doris Koehn Staff Member: Idah Pswarayi-Riddihough 1 Note: 16.5% average annual depreciation in the foreign exchange rate 2 ANF was transformed into the now General Directorate of Forestry (DGF)  FOR OFFICLAL USE ONLY IMPLEMENTATION COMPLETION REPORT DEMNIOCRATIC AND POPULAR REPUBLIC OF ALGERIA PILOT FORESTRY AND WATERSHED MANAGEMENT PROJECT (Loan 3487-AL) TABLE OF CONTENTS Page Preface ................................................................i Evaluation Summary ............................................................... ii PART I: Project Implementation Assessment A. Statement and Evaluation of Objectives ................................................................I B. Achievement of Project Objectives ............................ .................................... 3 C. Major Factors Affecting the Project ...........................;.6 D. Project Sustainability ..................................... ...........................6 E. Bank Performance ................................................................7 F. Borrower Performance ............................................................... 8 G. Assessment of Overall Outcome ..................... .......................................... 8 H. Future Operations ................................................................8 I. Key Lessons Learned ................................................................9 PART II: Statistical Tables Table 1. Summary of Assessments ............................................................... . 11 Table 2. Related Bank Loans/Credits ............................................................... 12 Table 3. Project Timetable ........................................... . .................. 13 Table 4. Loan/Credit Disbursements: Cumulative, Estimated and Actual . . 13 Table 5. Key Indicators for Project Implementation .................................... ....................... 14-15 Table 6. Key Indicators for Project Operation ............................................................... 15 Table 7. Studies Included in the Project .............................................................. . 15 Table 8a. Project Costs ............................................................... 16 Table 8b. Project Financing ............................................................... 17 Table 9. Economic Costs and Benefits ............................................................... 17 Table 10. Status of Legal Covenants ............................................................... 18 Table I 1. Compliance with Operational Manual Statements ............................................... 19 Table 12. Bank Resources: Staff Inputs ............................................. 19 Table 13. Bank Resources: Missions ............................................................... 19 Appendices: A. Mission's aide-mnmoire (French) ......................... ...................................... 20 B. Economic Analysis ............................................................... 25 C. Borrower Contribution to the ICR ............................................................... 27 MAP: IBRD 22755R 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.   IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA PILOT FORESTRY AND WATERSHED MANAGEMENT PROJECT (Loan 3487-AL) Preface This is the Implementation Completion Report (ICR) for the Pilot Forestry and Watershed Management Project in Algeria, for which Loan 3487-AL in the amount of US$25 million equivalent was approved on June 11, 1992 and made effective on March 17, 1993. The loan was closed, as planned, on December 31, 1998. As of March 25, 1999, total disbursements reached US$11.3 million. A cancellation of US$6 million was made in November 1996 and another of US$2.19 million in August 1998. As the recovery of the advance to the Special Account has not yet been made, the total cancellation amounts cannot be accurately stated. The ICR was prepared by Idah Pswarayi-Riddihough, MNSR-E and Christian Lauwers, FAO-CP. The report is based inter alia, on material gathered from project files, supervision reports, discussions with representatives of the World Bank and the General Directorate of Forestry (DGF), as well as on reports prepared by local consultants. Preparation of this ICR began during the Bank's final supervision/completion mission, October 17-23, 1998. The Borrower's contribution is attached as Appendix C of this report. i   IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA PILOT FORESTRY AND WATERSHED MANAGEMENT PROJECT (Loan 3487-AL) Evaluation Summary Introduction Herein, the Pilot Forestry and Watershed Management Project in Algeria is evaluated. The project was designed as a pilot operation to prepare and test activities for replication in a national program for natural resource management on a sustainable basis. The activities selected were identified as priority actions, and were to be implemented within a sector strategy which was to be developed as part of the project. World Bank lending for agriculture to Algeria began in 1975, although, until the preparation of this project, none had been for the forestry sector. Specifically, the Bank has supported the agriculture sector through several projects, including the Cheliff Irrigation Project, Loan 2809; Irrigation Engineering Project, Loan 2978-AL; Mitidja Irrigation Project, Loan 3076, Agricultural Credit Project, Loan 3009-AL; pilot Research and Extension Project, Loan 3216-AL; emergency Desert Locust Control Project, Loan 3017-AL, and the Rural Employment Project, Loan 4143-AL (in progress). With the exception of the Rural Employment Project all the projects are now completed, and they have largely been rated unsatisfactory. The Rural Employment Project, however, is performing well. Project Objectives and Components Project Objectives. The development objective of the project was to strengthen Algeria's forestry sector institutions and, through appropriate pilot activities, develop the policy and technical basis for replication of successful components as part of a national resource management program. To achieve these objectives the project aimed to: (a) assist the Govemment in defining a strategy for the sector; (b) quantify forest resources; (c) develop and test low-cost techniques, including institutional and social aspects, to manage forest resources better and increase productivity, in both commercial wood production and forage production for livestock; (d) develop and test low-cost techniques, including institutional and social arrangements, to increase the productivity of mountain agriculture and reduce erosion in the watersheds, with particular emphasis on reducing sedimentation of dams; (e) strengthen Algeria's capacity to manage its nature conservation program; and (f) strengthen forest, watershed, and nature conservation planning, policies, and institutions through a program of training and technical assistance. Project components. The project included three main components: (a) development of a strategy for the forestry and watershed sectors, including a study of the forestry sector, preparation of simplified management plans of a master plan for the country's major watersheds; (b) pilot forestry development, including nursery development, pilot reforestation, pilot exploitation, related applied research, institutional strengthening, training and technical assistance; (c) pilot watershed management including pilot operations for protection and production, specifically to increase farner incomes and reduce erosion. The project objectives were realistic and achievable had there not been complications arising from the difficult security situation. ii  Implementation Experience and Results Project Objectives. Overall, the project did not achieve its key development objective and does not warrant a satisfactory rating. Project objectives, while quite extensive since they included both the forestry and watershed sectors, were clear and consistent with the Government's program to better protect and manage its natural resources. The project objectives were potentially achievable, though perhaps not in the time period envisaged considering the country's limited institutional, financial and technical capacity. Institutional capacity was further restricted because the technical assistance component could not be implemented, a result of the difficult security conditions. This inability to attract appropriate technical assistance resulted in a loss of implementation momentum. The project was restructured in February 1996, in response to the difficult conditions and was oriented to focus more on institutional strengthening. The project objective changed to: strengthen Algeria's forestry sector institutions and, through appropriate pilot activities, develop the policy and technical basis for replication of successful components as part of a national resource management program. In addition, funds earmarked for the pilot watershed management component were re-allocated to finance a program for forest fire protection through: (a) the provision of fire prevention and fire fighting equipment and vehicles; (b) the implementation of a sylvicultural program to clear and clean forests; and (c) the training of DGF staff in modem fire prevention and fire fighting techniques. Project Impact. It will take some time before the full benefits from the project are realized. Moreover, the long-term impact will be influenced by the degree of commitment from the DGF and the participating populations towards maintaining works completed under the project. DGF is clearly aware of the importance of maintaining investments and priority will need to be attached to maintenance activities. Because of the varying degrees of success of different project activities, project impact will be more pronounced for some activities than for others. The most important project impact will be from the capacity building component, mainly through training received, which was achieved in full. The upgraded nursery at Guerbes, although not yet fully functional, will, once it reaches full capacity, produce seedlings that are sufficient to cover the needs of significant re-forestation activities. The watershed management activities, in the long-term, will contribute to the alleviation of erosion. Sustainability. Overall, sustainability of the project's investment is uncertain. The project did not achieve its development objective nor a large part of its project specific objectives, and the quality of project outputs is varied. Sufficient financial resources exist in the DGF to fund maintenance of these activities, and again, with priority setting and maintenance, specific activities supported by the project could be sustainable, such as: (a) the Guerbes nursery; (b) the plantations established; (c) sylvicultural work; (d) the vehicles and equipment procured; and (e) the staff trained. In the case of trained staff, their deployment and provision of incentives to keep them in the public sector will be important to allow them to disseminate to others what they have leamt. Bank Performance. Bank performance is rated satisfactory for identification, preparation and appraisal, but deficient for supervision, mainly because the security situation did not allow Bank supervision missions to support the implementing unit adequately. The need to define a sector strategy and develop low-cost techniques to manage forest resources and watersheds better were clearly identified and given the necessary emphasis. The project represented a priority investment for erosion and land degradation works. The project was well prepared and lessons learnt from agriculture and forestry projects in Algeria and neighboring countries were put to good use. No financial problems were experienced for preparation and both preparation and appraisal were relatively smooth. However, the Bank could have insisted more on having a larger implementing unit, a factor which eventually had an impact on project implementation. Bank supervision missions were, for a long time, carried out from outside the country with a skeleton number of personnel participating, significantly limiting necessary support to the implementing unit. The Bank could have used local consultants/firms to carry out supervision missions at these times. Borrower's performance. Borrower performance is likewise rated satisfactory for identification, preparation and appraisal, but deficient for supervision. The DGF was adequately involved in project preparation, and iii  efficiently organized the Bank and FAO-CP preparation missions. The Government also ensured that there was adequate financing for project preparation. Before the security situation became serious, project implementation was smooth, but it slowed down drastically when these problems started. Problems were also experienced with procurement planning and execution, which also affected the project's implementation. Slow disbursement caused by the cumbersome procedures of the Algerian Development Bank (BAD) affected project implementation, through slow replenishments and delays in paying contractors. However, despite these problems, the Ministry of Finance made necessary funds available to the Project. Economic evaluation. At appraisal, the overall Economic Rate of Return (ERR) was estimated to be 12 percent, based on benefits from the plantation and exploitation components, as those for other activities were not easily quantifiable. Based on benefits from similar activities (plantation and exploitation components), the present estimates are lower, 10.6 percent. This lower ERR is to be expected considering that objectives were only partially attained. This ERR also confirms that the economic viability of the project, judged on completed works, is marginal. For assumptions see Annex B. Future Operations and Key Lessons Learned Future Operations. The DGF's budget is sufficient to sustain the current priority program of reforestation and natural resource management, including soils and employment generation and maintenance works. As a significant number of questions remain to be answered from the pilot operation, it is unlikely that there will be a follow-up forestry project to replicate results from this project. In particular, issues such as: defining a sector strategy, preparation of forest management plans, and development of techniques for reducing plantation costs are still outstanding. However, the Rural Employment Project could be considered as a follow- up project to the Pilot Forestry and Watershed Management Project, in that a large number of its activities are designed to address a similar central objective of better protecting and managing Algeria's natural resources, specifically its forests and watersheds. The Rural Employment Project has also used lessons learnt from the pilot project to streamline its operations and is performing satisfactorily. It is likely that this project would have a follow-up project in the future. Key Lessons learned. In view of the relatively weak institutional capacity in Algeria, presently compounded by the difficulties in attracting international experience, it is important to design projects that are relatively simple and easy to manage. * Project implementation requires sustained consultations among the project management unit, the Bank, the private sector, and the beneficiary populations. In particular, it is very important, when technical assistance is limited, to have more intensive missions to provide needed assistance. This technique has been found to work well, as exemplified by the Rural Employment Project. * The implementing unit must, from the start, have an adequate skills mix to support project implementation. The failure to recruit an economist, and replace staff that left the unit, greatly reduced the unit's efficacy. * In a country where foreign participation is difficult to attract, the project design and scope must be adjusted accordingly. The project's high dependency on external participation crippled implementation when the security situation became difficult, and it became harder to attract foreign participation. As a consequence, many bids did not receive submissions. * Procurement of goods and services must be required training for the implementing unit, and the Bank must invest in it prior to effectiveness through the provision of more training than that usually disseminated in the launching seminars. * For activities that benefit directly the local populations on communal or private lands, their participation must be actively sought and encouraged in all phases of project activities (from identification, implementation, monitoring and evaluation). This contribution reinforces the sense of ownership needed to motivate eventual maintenance of these works and ultimately their sustainability. iv   IMPLEMENTATION COMPLETION REPORT DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA PILOT FORESTRY AND WATERSHED MANAGEMENT PROJECT (Loan 3487-AL) PART I: PROJECT IMPLEMENTATION ASSESSMENT BACKGROUND 1. In the late 1980s, Algeria recognized that it was faced with serious problems of erosion and land degradation that, in the long run, would undermine its productive potential and would exacerbate the problem of water scarcity. Rapid population growth over the past decades, accompanied by encroachment and forest fires, had led to a steady decline in the area under forests, a subsequent increase in shrubs, and an expansion of agriculture in marginal areas, both in the mountains and the arid areas. In the watersheds, the combination of cultivation and overgrazing had resulted in a loss of vegetative cover and consequent intensive erosion. Not surprisingly, productivity in the upper catchment had started to decline, sedimentation was already significantly shortening the life of dams, and scarce water was being wasted as runoff instead of being used for irrigation or to recharge the aquifers. Action had to be taken to prevent further decline in the area and quality of Algeria's forests, which had the potential to make a significant contribution to the economy, and save scarce foreign exchange used for the import of wood products. 2. The Government and the Bank started discussions on ways to address these problems in the 1980s. The Pilot Forestry and Watershed Management Project, which followed these discussions, was appraised in 1990. Due to the fact that efforts made at that time had not been effective and were too expensive to be replicated on a scale that would make a noticeable impact, it was decided to start with a pilot operation. Political developments in 1991 resulted in processing delays in the project and a Bank mission in February- March 1992 made the final adjustments. A. STATEMENT AND EVALUATION OF OBJECTIVES 3. Project Objectives. The central objective of the project was to develop a long-term action program to protect and manage Algeria's natural resources better, specifically its forests, watersheds and nature conservation areas. The project was to be a pilot operation to prepare and test components for replication in a national program for natural resource management on a sustainable basis. The immediate objectives were to: (a) assist Government in defining a strategy for the sector; (b) quantify forest resources, assess why only a small portion of potential resources is utilized for commercial purposes, and identify constraints preventing forests from contributing more significantly to the economy than they do at present; (c) develop and test low- cost techniques, including institutional and social aspects, to manage forest resources and increase productivity better, in both commercial wood production and forage production for livestock; (d) develop and test low-cost techniques, including institutional and social arrangements, to increase the productivity of mountain agriculture and reduce erosion in the watersheds, with particular emphasis on reducing sedimentation of dams; (e) strengthen Algeria's capacity to manage its nature conservation program; and (f) strengthen forest, watershed, and nature conservation planning, policies, and institutions through a program of training and technical assistance. 1  4. Project Components. To achieve its overall objectives, the project, which was to be implemented over a period of five years; included the following components: * Development of a strategy for the forestry and watershed sector: (i) a study of the forestry sector, including an estimation of the existing commercially exploitable resource, and an analysis of the reasons for low demand for local wood when the aggregate demand for wood is so high; (ii) the preparation of simplified management plans on 60,000 ha of fast-growing forest and 15,000 ha of mixed forest and maquis; and (iii) the preparation of a master plan for the country's major watersheds; * Pilot forestry development: (i) pilot reforestation on 4,300 ha whose objective would be to increase yields and survival rates and to reduce unit costs by the introduction of improved techniques; the Guerbes forest nursery would be upgraded to produce 2 million improved seedlings a year; (ii) pilot exploitation operations of about 1,000 ha of eucalyptus of various ages under various conditions to test the possibility of reducing logging costs; and (iii) related applied research, institutional strengthening, training and technical assistance to support the plantation and exploitation components; * Pilot watershed management: in two different areas, pilot operations for protection and production, specifically to increase farmer incomes and reduce erosion; this would comprise an analysis of the problem, the development and adoption of appropriate low-cost techniques, extension, on-farm investments, social infrastructure, the construction of structures where appropriate to control runoff and control erosion in ravines, related applied research, institutional strengthening, training and technical assistance; - Nature conservation: (i) support for a National Institute for Forestry Research (INRF) research unit on protected areas; and (ii) provision of in-service training, bursaries and equipment; - Support activities: (i) the strengthening of the National Forestry Agency (DGF) with equipment, training, and technical assistance for project management and monitoring and evaluation purposes; (ii) strengthening of INRF to improve planning of research activities and diffusion of research results; and (iii) provision of equipment, essentially vehicles and spare parts, for DGF. 5. Project Costs. At appraisal, total project costs, including contingencies, were estimated at DZD 995 million (US$37.5 million) of which US$19 million (51 percent of project costs) would be in foreign exchange. Financing included a Bank loan of US$25 million and a Government contribution of US$12.5 million, including US$6.8 million of taxes and duties. The loan was therefore to finance about 80 percent of total project costs, excluding taxes and duties, or 100 percent of the foreign exchange component and about 33 percent of local costs. This high percentage financing was agreed on in view of the fact that the project was to make a unique contribution to environmental protection, local population participation, and human resource development. 6. Evaluation of Objectives. Project objectives, while quite extensive since they included both the forestry and watershed sectors, were clear and consistent with the Government's program to protect and manage its natural resources better. The project objectives were potentially achievable but not in the time period envisaged considering the country's limited institutional, financial and technical capacity, in spite of the fact that a large training and technical assistance component had been included for this purpose. Furthermore, problems associated with the security situation in the country were not foreseen, and consequently jeopardized project implementation. 7. The project was restructured in February 1996, with a stronger focus on institutional strengthening. The project objective was modified to: strengthen Algeria's forestry sector institutions and, through appropriate pilot activities, develop the policy and technical basis for replication of successful components as 2  part of a national resource management program. In addition, funds were reallocated from the pilot watershed management component to finance a program for the protection of forest fires through: (a) the provision of fire prevention and fire fighting equipment and vehicles; (b) the implementation of a sylvicultural program to clear and clean forests; and (c) the training of the staff of the DGF, in modem fire prevention and fire fighting techniques. During the restructuring in 1996, the loan proceeds for the forest sector strategy and the watershed management components were cancelled. 8. Evaluation of Risks. The Staff Appraisal Report identified four areas of risk. The first was related to the economic and political environment in which the project had to be implemented as Algeria was moving from a centralized economy to a more decentralized and market-oriented economy. Given the Govemment's commitment to the overall economic reform program at that time, this risk was considered minimal. The second risk concerned the new organizational set-up in the sector, in which Govemment had replaced the Department of Forestry with the ANF (which eventually became DGF) and regional development offices (ORDFs). The issue was clarified by the letter of intent, submitted by the Government as a condition of negotiations. The third area of risk was related to the quality of the studies. This risk was minimized by the employment of consultants. Before the security problems began, recruitment was timely. The risk associated with the failure of technical assistance to come to Algeria, in the event of worsening security conditions was unforeseen and the heavy dependence of the project on intemational technical assistance subsequently affected implementation. The fourth risk was related to weak monitoring and evaluation. Emphasis was placed on the use of technical assistance to mitigate for this problem and had the procurement of technical assistance not been problematic, it would have been adequate. B. ACHIEVEMENT OF PROJECT OBJECTIVES 9. General. The project has not achieved its central objective of "developing a long-term program to protect and manage Algeria's natural resources" better. The main project objectives have not been met; the project components that intended to prepare management plans for the quantification and management of forest resources, develop and test low-cost techniques, strengthen forest, watershed and nature conservation planning and policies were not implemented, mainly due to the security situation. It nevertheless has made significant contributions in terms of institutional development, particularly in training where the original training objectives were surpassed. 10. The implementation of this project can be divided into four different phases: (a) project start-up, which was smooth, with consultants visiting Algeria according to schedule and efficiently supporting the Project Management Team; (b) the period from 1994, when the security conditions worsened, consultants' visits were suspended, and the pace of implementation slowed down. There was nevertheless hope that the security situation would improve and that the previous pace of implementation would be restored; (c) the period between 1996 to 1997, when very little was being achieved with the exception of training; and (d) in 1998, when the pace of implementation increased again, but it was already too late to attain a notable proportion of the targets. 11. Development of a Strategy for the Forestry and Watershed Sector. The three studies included in this component were not realized, mainly because of the security situation, which did not allow consultants to participate. 3  12. Pilot Forestry Operations. The main forest operations included nursery development, pilot plantations, pilot exploitation, related applied research and sylvicultural treatments, the last component having been introduced in 1996 when the loan was restructured. * The Guerbes nursery has been partially upgraded, and although all the equipment has arrived, it still needs to be installed in order to produce the 2 million seedlings a year, as envisioned during preparation. The nursery produced 300,000 seedlings in 1998. An added advantage of the nursery is that it has cut the time needed to raise seedlings in the nursery by two months. The seedling quality appears good. The actual costs of upgrading the nursery exceeded the appraisal estimate by about 40 percent. This difference is due to the fact that nursery materials were imported over a 6 year period (1992-1998), between which there was a 16,5% average annual depreciation in the foreign exchange rate. * Out of the 4,300 ha of plantations which were planned at appraisal, only 307 ha were planted by the end of the project, and an additional 200 ha were to be completed in the 1998/99 rainy season. The proportion of plantations realized is partly due to the fact that the bulldozers, fitted with special land-clearing rakes, were delivered late, and also, the nursery was not able to provide the required quantity of seedlings as had been targeted. DGF plans to complete the plantation. The quality of plantations established under the project appear promising. Actual expenses amount to only 25 percent of the appraisal estimates. This is not surprising considering that only 7% of the appraisal estimates were established. * The pilot logging operation was not implemented due to the security situation which did not allow the required technical assistance to develop this component. Some equipment was nevertheless procured and some training was organized for a total cost of less than 2 percent of the appraisal estimate. * The plantation and exploitation components of the project were due to be supported by a program of adaptive research. That program was to be carried out by INRF, in the research stations at Guerbes, Jijel, Tizi Ouzou and Bainem. INRF staff benefited from 16.5 months of external training and some equipment purchased for the stations in Guerbes and Bainem. A limited number of trials were established at these two stations and, on the whole, the impact is limited. Actual costs amount to less than 10 percent of the appraisal estimate. Again, the low utilization of funds is as a result of the limited achievement of projected targets.