Nepal - The challenges of community participation in forest development : The Hill Community Forestry Project and the Second Forestry Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No 22438 PERFORMANCE AUDIT REPORTS AND THEMATIC OVERVIEW NEPAL THE CHALLENGES OF COMMUNITY PARTICIPATION IN FOREST DEVELOPMENT: HILL COMMUNITY FORESTRY PROJECT (CREDIT 2028 - NEP) SECOND FORESTRY PROJECT (CREDIT 1400 - NEP) June 22, 2001 Sector and Thematic Evaluation Group Operations Evaluation Department 'his 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) (Nepali Rupee to US$): Year Nepali Rupee 1989/90 US$1 28.90 1990/91 US$1 31.20 1991/92 US$1 42.30 1992/93 US$1 45.30 1993/94 US$1 49.30 1994/95 US$1 49.90 1995/96 US$1 55.00 1996/97 US$1 57.00 1997/98 US$1 61.50 1998/99 US$1 67.90 1999/2000 US$1 71.10* * local currency/USS market rate, period average from SIMA database. Abbreviations and Acronyms COs Community organizations IDA International Development CDD Community Driven Development Association DANIDA Danish International Development LSGA Local Self-Governance Act Assistance MFSC Ministry of Forests and Soil DDC District Development Committee Conservation DFID Department for International MTR Mid-Term Review Development M&E Monitoring and evaluation DFO District Forest Officer NARMSAP National Resource Management ERR Economic rate of return Sector Assistance Program FAO Food and Agriculture NGO Nongovernmental organization Organization of the United NTFPs Non-timber forest products Nations ODA Overseas Development Assistance FECOFUN Federation of Community (UK) Forestry Users Nepal PAR Performance Audit Report FD Department of Forests PCR Project Completion Report FUG Forest user group SAR Staff Appraisal Report GTZ German Technical Co-operation SDC Swiss Agency for Development HCFP Hill Community Forestry Project and Co-operation HIMAWANTI Himalayan Grassroots Women's TCN Timber Corporation of Nepal Natural Resources Management VDC Village Development Committee Association UG User group HMG His Majesty's Government of UGM User group management Nepal UNDP United Nations Development ICR Implementation Completion Program Report WATCH Women Acting Together for ICIMOD International Center for Integrated Change Mountain Development Fiscal Year July 16 to July 15 Director-General, Operations Evaluation Mr. Robert Picciotto Director, Operations Evaluation Department Mr. Gregory Ingram Manager, Sector and Thematic Evaluation Mr. Alain Barbu Task Manager Ms. Nalini Kumar FOR OFFICIAL USE ONLY The World Bank Washington, D.C. 20433 U.S.A. Office of the Director-General Operations Evaluation June 22, 2001 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Performance Audit Reports on Nepal Hill Community Forestry Project (Credit 2028 - NEP) Second Forestry Project (Credit 1400 - NEP) and Thematic Overview Attached are Performance Audit Reports on the above projects together with a review of the community forestry program in Nepal. The Hill Community Forestry Project was approved in August 1989 for a credit of SDR 23.5 million (US$30.5 million equivalent). The credit closed in June 1999, two years behind schedule. The total disbursement was SDR 6.48 million (US$9.17 million equivalent). The Second Forestry Project was approved in July 1983 for a credit of SDR 16.7 million (US$18 million equivalent). The credit closed in June 1992, also two years behind schedule with total disbursements of SDR 3.39 million (US$4.34 million equivalent). Both projects supported the government's strategy for community participation in the forest sector, although each had its own specific objectives. The primary objective of the Hill Community Forestry project was to mobilize people and resources in the hill districts of Nepal to establish a forest management system that would conserve and expand the forest resources needed to sustain traditional farming systems and livelihoods. The project helped establish the policy, legislative, and procedural framework crucial to the implementation of a community forestry program in Nepal. Under the project more than 300,000 hectares of forest area in the hills was handed over to more than 4,000 user groups. The Second Forestry project was an ambitious operation for the Terai region designed to manage both the supply and demand of fuelwood, fodder, and other forest products through community participation. On the supply side, the project was to provide funds for equipment, vehicles, staff, civil works, operating expenses, and nurseries to support social forestry (tree plantings outside the forest area) and natural forest management over a period of six years. On the demand side it was to promote energy conservation through distribution of improved stoves. While a large number of trees were planted, inadequate attention to training and capacity building resulted in a target-driven implementation schedule that had negative consequences for the development of genuine community based forestry operations. The audit rates the outcome of the Hill Community Forestry Project as moderately satisfactory versus the ICR rating of satisfactory. The rating is not fully satisfactory because achievements under the major project component-forest resource management-were mixed due to initial over-reliance on plantations as a means of forest restoration. In several cases, the emphasis on achieving targets shortchanged the quality of the user group formation process. In addition, the research component of the project was never implemented. As a result, crucial problems emanating from field implementation could not be addressed. The PAR institutional development impact, sustainability, Bank and borrower performance ratings are the same as in the ICR. 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. 2 The audit rates the outcome of the Second Forestry Project as unsatisfactory, as in the PCR (PCR ratings at that time were provided by OED). The PAR institutional development and sustainability ratings are also the same as in the PCR. The audit rates both Bank and borrower performance as unsatisfactory because of the poor project design and implementation. The PCR does not provide a clear rating for either Bank or borrower performance. While the audit findings served as a springboard for the thematic review, it draws on discussions with donors, civil society, stakeholders and a survey of the literature. Nepal's unique experience offers broad lessons for other countries that have just begun supporting community participation initiatives in forest protection and management. The review offers analysis that is pertinent to community-driven development (CDD), an approach which is currently favored within developing countries by the World Bank as well as other multilateral and bilateral institutions. Community forestry in Nepal illustrates the complex and irreversible changes that CDD efforts may bring about in the social, economic, and political fabric of society. Hence, policymakers need to give careful thought up front to the nuts and bolts of the process and the specifics of benefit sharing arrangements between stakeholders and the implementation strategy. It is of paramount importance that design choices be appropriate to country conditions. Once a process of community participation is initiated there is no turning back and mistakes can be difficult and expensive to correct. There are two specific lessons with respect to community forestry programs. First, there is a need to give particular attention to issues that affect the lives of the poor. In predominantly agricultural economies like Nepal, forest sector development has a major impact on their lives as fuelwood, fodder and other non timber products gathered from nearby forests are an important supplement to their daily labor incomes. Second, far more attention to donor coordination issues is required. Although the support of the international community made it possible for the country to implement its program, the lack of coordination among donors worked to the detriment of both the donors and the country. Attachment Contents Principal R atings ..........................................................................................................................iii P reface ............................................................................................................................................ V The Challenges of Community Participation in Forest Sector Development...........................1 Introduction ............................................. ........... Section I Summary Findings and Lessons ......................... ....... 1 Section II Background ................................... ......... 4 Section III The Success in the Hills .................................... 7 Section IV Challenges of the First Phase ...................................................................... 8 Section V The Second Phase Challenges.......................................................................... 11 Audit Findings For The Hill Community Forestry Project (HCFP) (Credit 2028)........... 23 Overview and Outcome.................................. .......... 23 Findings And Lessons.......................... ..................24 Project Design and Implementation...................................25 Ratings......................................................26 Relevance..............................................26 Efficacy................................................26 Efficiency................................ ..................26 Institutional Development....................................27 Bank and Borrower Performance...............................27 Sustainability............................................ 27 Audit Findings For The Second Forestry Project (Credit 1400) ...................28 Overview And Outcome........................................... 28 Findings And Lessons............................................ 28 Project Design and Implementation................................... 29 Ratings...................................................... 30 Relevance.............................................. 30 Efficacy................................................ 31 Efficiency.............................................................................. 31 Institutional Development............................................................ 31 Bank and Borrower Performance.................................................... 31 Sustainability ................................... .......... 31 Annex A: Basic Data Sheets Pro0................... )............. .............. 33 Annex B: Government's Strategyfor the Terai .................... ......... 37 Annex C: Commentsfrom Government................................38 Bibliography...........................................................41 This report was pre-pared by Nalini Kumar who audited the projects in February 200 1. William B. HurBbut edited the report. Maisha Hyman and Marcia Bailey provided administrative support.  111 Principal Ratings Hill Community Forestry Project (1989-99) ICR PAR Outcome Satisfactory Moderately Satisfactory Sustainability Likely Likely Institutional Development Substantial Substantial Borrower Performance Satisfactory Satisfactory Bank Performance Satisfactory Satisfactory Second Forestry Project (1983-92) PCR* PAR Outcome Unsatisfactory Unsatisfactory Sustainability Unlikely Unlikely Institutional Development Negligible Negligible Borrower Performance Not Available Unsatisfactory Bank Performance Not Available Unsatisfactory * PCR ratings at that time were provided by OED. Key Staff Responsible Department Director Division Chief Task Manager Hill Community Forestry Project Appraisal Shinji Asuanama Chaim Helman Ai Chin Wee Completion Hans Rothenbuhler Ridwan All Ethel Sennhauser Second Forestry Project Appraisal Grant Slade Mr. C.P.R. Nottidge Mr. T. Pritchard Completion Nigel Roberts Tae-Hee Yoon Mr. A. Banerjee  V Preface This report consists of two audits and a thematic overview of the community forestry program in Nepal. The audit element consists of: * A Performance Audit Report (PAR) for the Hill Community Forestry Project (Cr. 2028- NEP) for which a credit in the amount SDR 23.5 million (US$30.5 million equivalent) was approved in August 1989. The project closed in June 1999, two years behind schedule. The total disbursement was SDR 6.48 million (US$9.17 million equivalent). * A Performance Audit Report (PAR) for the Second Forestry Project (Cr. 1400-NEP) for which a credit in the amount SDR 16.7 million (US$18 million equivalent) was approved in July 1983. The project closed in June 1992, two years behind schedule. The total disbursement was SDR 3.39 million (US$4.34 million equivalent). The audit reports were prepared by the Operations Evaluation Department (OED) based on the Implementation/Project Completion Reports, the Staff Appraisal Reports, the Development Credit Agreements, review of Bank files. An OED mission traveled to Nepal in February 2001 where it discussed the projects with Bank staff, relevant government officials, nongovernmental organizations, beneficiaries, donors, consultants and academics. The cooperation and assistance of all stakeholders and government officials is gratefully acknowledged, as is the support of the staff of the World Bank Country Office in Kathmandu. While the audit findings served as a springboard for the thematic overview, the review itself goes beyond the evidence contained in the audits and draws on a survey of the literature and extensive discussions with donors, civil society and other stakeholders. The report also draws on a recent Joint Technical Review of the Community Forestry Program in Nepal, a collaborative effort between the government and its development partners. In addition, the thematic review builds on the research done for the OED Review of the Bank's 1991 Forest Strategy and its Implementation. Community forestry has been under implementation in Nepal for more than two decades. Nepal's unique experience, offers broad lessons for other countries that have just begun supporting community participation initiatives in forest protection and management. The review also offers analysis that is pertinent to community-driven development (CDD), an approach which is currently favored within developing countries by the World Bank as well as other multilateral and bilateral institutions. Following standard OED procedures, the draft report was sent to the borrower for comments before being finalized. Borrower comments were received and are included as Annex C.  Part I The Challenges of Community Participation in Forest Development: A Thematic Review  The Challenges of Community Participation in Forest Sector Development INTRODUCTION 1.1 Nepal is a leader in engaging communities in forest resource protection and management. The country's community forestry program is now more than two decades old and has helped regenerate substantial areas of degraded forests. During these two decades, the implementation of the program has not been smooth. In the absence of precedents, the country has had to learn through trial and error and find innovative solutions to meet challenges as they emerged. Most economic and social indicators put Nepal among the poorest countries in the world, with an estimated 40-50 percent of the population below the poverty line. Yet, in terms of pursuing a strategy of community participation in forest resource management, Nepal has outdone almost every other country. 1.2 This thematic review has a twofold purpose. First, Nepal's unique and long experience, offers broad lessons for other countries that have just begun supporting community participation initiatives in forest protection and management. Second, it offers lessons pertinent to community- driven development (CDD), an approach rooted in community participation. CDD has attracted widespread borrower interest and has been supported by the World Bank as well as other multilateral and bilateral institutions. This Nepalese example illustrates the economy-wide impacts that a process of community participation in resource management has the potential to create. 1.3 Several broad questions are addressed: How has Nepal been able to achieve its success with community forestry? Is its success likely to be sustainable? Is community participation an effective strategy for forest resource management? Why is it, that even in Nepal, the success of community forestry has been confined to the mid-hills and did not spread to the Terai region or the high mountains? What have been the major challenges of the first phase and what are the emerging challenges that the program faces during its second phase? How can the forest resource management effort contribute to poverty alleviation in the country? 1.4 The thematic review is in five sections. Section I pulls together some important summary findings and lessons. Section II provides a background to the forest sector in Nepal. Section III looks at the special circumstances that have allowed community forestry to be successful in the mid-hills. Section IV examines the first phase challenges. Section V explores the second phase challenges. SECTION I SUMMARY FINDINGS AND LESSONS 1.5 The Nepalese experience offers two main findings and three broad lessons for countries embarking on community participation in forest protection and management. For the sake of clarity, the lessons are put in the context of the Nepalese experience though they have implications for other community-driven development activities elsewhere. The audits present more specific findings and lessons for the Bank. Finding 1: Significant success has been achieved in the mid-hills but it has proved difficult to replicate the hill model in other parts of the country because of the differing conditions in those areas. Finding II: Nepal's experience also shows that in fact there are two distinct phases that can be discerned in the implementation of community forestry. Phase I is simply the establishment of the structure for the implementation of community forestry: the building of capacity in the forest -2- department to handle community forestry; formation of user groups; handing over of forests to them for protection and management. Phase II involves integration of the program with other development efforts in the country and a consolidation of gains, a much more challenging task. Lesson 1: Community forestry brings about complex and irreversible changes in the social, economic and political fabric of society. Policymakers need to give careful thought up front to the details: the nuts and bolts of the decision making process, the specifics of the benefit sharing arrangements between stakeholders, and the implementation strategy. Suitability of these factors to country conditions is ofparamount importance. Mistakes can be difficult and expensive to correct. * Nepal's experience illustrates the widespread ramifications of a community forestry program. When community forestry was being promoted in the hills the major objective was protection of a dwindling, degraded resource. At that time it was not anticipated that the forests could rejuvenate and provide significant economic returns. The potential for economic returns from community forestry has understandably made the government cautious about replicating the community based hill model in the rich forest resource in the Terai. * The finality of the decision has added to the government's caution. Once the forests are handed over there is no going back. Handing-over forest resources to the community in the Terai with 100 percent of the current and future benefits going to them means a significant loss of revenue for the government. Currently there is no consensus among the government and other stakeholders on a strategy for the Terai. While this review does not make a recommendation for the Terai, it re-emphasizes the need for all stakeholders to come together to work out a consensus. Given the strong civil society movement, the presence of numerous donors that are small individual players and a government that retains ownership of the forest resource, a facilitator may be needed to bring the parties to the table. * A major issue is the future returns from a previously degraded resource that starts yielding substantial incomes. Is it reasonable for the government to expect that once a resource is rejuvenated it should start contributing toward the development effort of the country, particularly when the country is as poor as Nepal and has limited domestic budgetary resources? Critics argue that the user groups are already contributing by supporting development efforts such as schools and bus shelters in their villages. However, the variation in income among UGs can mean that some villages are able to develop while others are left behind. Is this fair? If not, what is the alternative? Should the UGs be expected to contribute to the central exchequer? There are difficulties in bringing this about given that community forestry currently operates outside the national tax system. Also how is it to be brought about, without conveying to the people that the government is not actually withdrawing its support for community forestry but using it as a means to further its development effort? Lesson 2: Particular attention needs to be given during implementation of the community forestry program to issues that impact the lives of the poorest. In predominantly agricultural economies like Nepal, forest sector development can have a major impact on their lives asfuetwood, fodder, and other non-timber products gathered from nearby forests are an important supplement to their daily labor incomes. * Tackling the challenges of the second phase would not have been easy in any country, let alone Nepal, which is currently grappling with problems of political instability. However, if these challenges are successfully tackled, then community forestry can also become a strong component of a poverty alleviation strategy. So far, although the forest area has regenerated, the benefits to the poor have been limited. -3- * In some cases, while the community as a whole may have benefited, there is evidence that the condition of the poor actually may have worsened. However, adequate attention to the interests of the poor in the drafting of the benefit-sharing arrangements, and in the process of forming executive committees for UGs, may avoid their marginalization. Planners and implementers need to give attention during the early implementation phase to questions like: Where will the landless meet their demand for fuelwood and fodder? What will happen to the income of the headloaders? What can be done to avoid the short-term costs to these sections of society? Are the benefits from community forestry likely to be captured by a few? If so, how can it be avoided? * Specific attention to the research, marketing, trading, and development needs of non-timber forest products can go a long way in ensuring that the poor are not losers in a program of community forestry. Lesson 3: Even though community forestry may be a win-win strategy in the long run, there are major short-run cost implications for the government when using external support. The support of the international community has made it possiblefor Nepal to implement a program of community forestry. But general lack of coordination has worked to the detriment of both the donors and the country. * A distinguishing feature of external support in Nepal has been the presence of numerous donors that have provided relatively small amounts in grant and concessional lending. Between 1971 and 1989, there were 48 distinct forestry projects in Nepal. Of these, three were World Bank-supported projects that provided 60 percent of total funding. Eleven other projects provided less than US$1 million between them. Multi-donor presence in the forest sector has meant that substantial resources have been available to implement the community forestry program. Given the scarcity of domestic resources, it would not have been possible for Nepal to implement community forestry without donor support to bridge the budgetary gap. In addition, it is quite possible that without pressure from international donors, the policy and legal framework for community forestry may not have been established as early as it was in Nepal. * Within the broad national vision, individual donors have supported different aspects of the community forestry program in Nepal depending on their individual priorities. Thus, some donors have given greater importance to promoting policy reform, others to supporting UG identification and formation, and still others to building capacity of the FD. While all aspects of the community forestry program need support, donor agenda and mission, rather than a coordinated, well-planned strategic approach has been the deciding factor. In addition, individual donors have preferred working in particular districts. This has meant that each donor has pushed in a particular area and field and according to its own priorities. This has also put a tremendous coordination burden on the government and stretched its limited institutional capacity. * Lack of coordination for the country has meant that the available resources have been used less efficiently than they might have. Diverse implementation strategies in different districts according to specific donor requirements have often created confusion, especially among field staff who are frequently transferred between districts. The uncoordinated approach has also resulted in some important institutional issues receiving inadequate -4- attention. As an example, support for research to address specific problems emerging from field implementation has fallen between the cracks.' * For the donors, lack of a strategic approach has meant limited leverage. Individual donors have tried to deal with the first and second phase challenges in the context of individual projects with localized successes. Conversely, the synergy and leverage created by their combined strength in the early 1990s facilitated the passing of a policy and legislative framework in support of community forestry. * In recent years there is a broad consensus among donors on the need for greater coordination of their activities. The establishment of the Forest Sector Coordination Committee, a formal committee chaired by the Ministry of Forests and Soil Conservation, is one such serious effort. This has improved the process of donor coordination and created greater awareness among donors about each others' programs. It has also led the donors and the government to come together to identify major bottlenecks as has been done in the case of the joint technical review. However, coordination of donor activities on the ground continues to be limited by their differing geographic foci and conditionality. SECTION II BACKGROUND The Forest Sector in Nepal 1.6 Approximately 80 percent of the total area of Nepal is either hills or mountains, and forests and shrubs occupy approximately 40 percent of the land (HMG 1999). Wide variations in altitude give Nepal a range of forest types from the subtropical to alpine. The forest sector contributes about 15 percent to GDP and meets over 75 percent of the country's total energy requirement. 1.7 Physiologically, Nepal has five zones: the high Himalayas (Himadri), the high mountains (Himachal), the mid-hills, the outer Himalayas (Shivaliks), and the Terai. Together, the Terai and the Shivaliks, account for 27 percent of Nepal's total land area and approximately 35 percent of the forest resources. The Terai is a narrow, fertile, densely populated lowland, predominated by farmlands and industrial communities along the border with India.' The forests in the mid-hills are scattered, intermixed with settlements and agricultural land, not easily accessible, and valued primarily for meeting the livelihood and subsistence needs of the local population. On the other hand, the Terai forests, located in continuous belts often relatively far from settlements, have been a major revenue earner for the state and a source of valuable timber for meeting the needs of the entire economy. Until the 1960s, the Terai was malaria-infested and large areas remained without human settlement. In recent years, however, growing population pressure, agricultural development, and other factors have significantly reduced the forest cover. The estimated total forest area in the 20 districts of the Terai is approximately 560,000 hectares. 1.8 Administratively, forests are the responsibility of the Department of Forests (FD) under the Ministry of Forests and Soil Conservation (MFSC). Organizationally, FD was expanded in 1984 to include 5 regional directorates and 75 district forest offices. The department has three main 1. The Region in its comments notes that each donor implementing the program independently in a different geographical area provided an opportunity to test different arrangements for the implementation of the "community forestry" model. According to the Region this diversity brought lessons of experience and introduced flexibility. The Region agrees that a coordinated forum would have strengthened this sharing of experiences, but notes that a unified model of implementation would not be the solution. 2. The Terai is a subtropical extension of the Gangetic plain and accounts for 60% of the country's total agricultural output. (Hobley 1996) -5- divisions: National Forests, Community and Private Forests, and Planning and Monitoring. The Private and Community Forestry Division is responsible for undertaking initiatives related to community forestry. Timber and fuelwood marketing in Nepal involves both private and public actors. The majority of traded timber and fuelwood comes from the national forests of the Terai region (Mitchell and others 2000). In the past, the Timber Corporation of Nepal (TCN), a wholly government-owned corporation, was largely responsible for harvesting and processing of much of the timber. However, since the Master Plan for the Forest Sector (1989) put emphasis on the privatization of parastatals, the government has significantly cut down the corporation's activities. TCN has a variable record and has been running at a loss for the past few years. In various reports, the World Bank has recommended that the corporation be wound up, as its tasks can be performed more efficiently by the private sector. Community Participation in Forest Resource Management-How Did It Begin? 1.9 Community participation in forest management and protection has a long history in Nepal. From long ago, indigenous systems have managed the country's forest resources, albeit under less population pressure than the present day. In 1957, with the Private Forest Nationalization Act, the government brought all forests under its direct control to ensure their proper use. The 1961 Forest Act provided the legislation to support state administration of the forests. However, the government was not able to control the rate of deforestation. In the absence of indigenous and traditional systems of control, forest guards were unable to protect the forests from indiscriminate felling. Consequently, large areas of forests were lost during the 1950s and 1960s. The failure of state- controlled measures to protect natural resources led to the re-emergence of interest in participatory resource management. 1.10 The government took significant steps to build a sound policy and legal environment to support community forestry. The Panchayat Forest Regulations and Panchayat Protected Forest Regulations were adopted in 1978 and provided for the handing over of limited areas of government forest land to panchayats.? The government forestry sector policy in the Sixth Five- Year plan (1981-85) emphasized community participation in forest resource management. The move toward community participation was strengthened by the Decentralization Act of 1982. However, the practice of handing over forests to panchayats often excluded those forest users who lived outside the administrative area of the panchayat. Hence the concept of user group management (Box 1.1) was adopted by the 1988 amendment of the Panchayat Forest and Panchayat Protected Forest Regulations of 1978. Nepal's Master Plan for the forestry sector (1989) strongly advocated the participation of communities in forest management. It also emphasized the need for reforms in government policies, institutional structures, and legal base to support community forestry. Thus, the 1993 Forest Act, which accords community forest management the highest priority. The act gave legal status to forest user groups (UGs) and recognized them as "autonomous and corporate institutions with perpetual succession" with a right to sell and acquire forest products. The 1995 Rules provide the procedural guidelines for implementation of the Forest Act of 1993. 3. The panchayat form of local government has now been replaced by elected local governments. The panchayat is the equivalent of the present day Village Development Committee which is the lowest political and administrative unit in the country. -6- Box 1.1 The User Group (UG) Approach in Community Forestry: How Does It Work? With User Group Management (UGM), protection of forests no longer remains the sole responsibility of the government. Under current arrangements, the local community is entitled to 100 percent of the benefits flowing from the forests under their protection, though land ownership remains with the government. Hence they have a vested interest in protecting the forests. There is no limitation to the size of the area over which UGM can be applied. The emphasis is on identifying users rather than administrative definitions for local organizations. Both primary and secondary users are included. Primary users are those who regularly use the forest area and have locally recognized rights to obtain all their forest product needs from the forest. Secondary users are those who occasionally use the forest area for a specific purpose or product and are not given full rights by the primary users to obtain all forest products. This approach also enables the incorporation of nomadic users. The work of motivating and forming UGs is done by FD staff working as extension agents. Government authority for handing over forests to users "in perpetuity" has been devolved to the District Forest Officers (DFOs). Two distinct stages need to be completed before a forest can be officially handed over to a UG. First, the users associated with a particular forest area need to be formed and registered as a UG. Second, the UG needs to produce an operational plan, which must be approved by the DFO. The UGs are tightly tied to the operational plan, which defines the area to be managed, contains agreements for protecting it, describes practices for management and harvesting of forests, identifies the areas and species to be planted, and establishes a community forestry nursery if needed. UGs can also register themselves as independent bodies. Surplus income generated from UG-managed forests can be used for development work other than forestry. However, a percentage of the benefits from community forestry are to be directed back into enhancement of the forest resource. 1.11 The Forest Act of 1993 does not limit community forestry to the hills. If forests are accessible, and it is possible for the communities to manage them, community forestry can be applied. As of now, most of the progress has been mainly in the mid-hills. Large areas of the higher mountains are inaccessible to communities to meet their daily needs. Though there have been numerous efforts to identify and establish forest UGs in the Terai, supported through the initiative of donors, little success has been achieved so far (Section V). International Support and Bank Lending for Community Forestry 1.12 Nepal has relied heavily on external support to implement its community forestry program. Currently about 80 percent of the development budget for community forestry comes from donors (DFID Nepal 2000). The objective of protecting the forest cover in the face of a rising population is ambitious. Given the scarcity of domestic resources, it would certainly not have been possible for Nepal to undertake such a massive program through its FD alone. Though in the long run the community participatory effort may work out to be significantly less expensive than a program undertaken by the government alone, there are enormous start-up costs in the form of reduced access to forests for the community (para. 1.40) and resources needed to train the FD staff and community members in participatory resource management techniques (paras. 1.24, 1.47 and 1.49).4 The challenges of the first and second phase also have enormous resource implications (Sections IV and V). 1.13 The Bank is only one of several donors to have provided extensive assistance for community forestry in Nepal. The World Bank's first forestry operation in Nepal, approved in April 1980, was the Community Forestry Development and Training project (Cr. 1008-NEP), under which the Bank financed social forestry in 18 Forest Divisions in the hills covering 340 village panchayats. The Second Forestry Project (Cr. 1400-NEP) was in the Terai (see attached audit). Lessons learned during the first project in the hills helped in better preparation of a follow-on 4. As noted by the background papers to World Bank 2000c. -7- project (the Hill Community Forestry Project, Cr. 2028-NEP, see attached audit), which became effective in May 1990. For a combination of reasons, among them disagreement on the future of the TCN, no other Bank-supported project has been approved in the forest sector. Though considerable preparation was done for a Second Terai Forestry Project, it did not go through. 1.14 Currently, DANIDA, SDC, AusAid, USAID, GTZ, and DFID are the major donors supporting the forest sector. DANIDA's National Resource Management Sector Assistance Program (NARMSAP), is supporting building of national capacity in natural resource management. Initiated in 1998, it has also taken over from where the Bank-supported Hill Community Forestry project (Cr. 2028) ended in 1999. Government of Australia support for the forest sector in Nepal began in 1966. Since 1997, the Nepal-Australia Community Resource Management Project has been supporting the development of sustainable community resource management systems in two districts. DFID has supported the forest sector in Nepal since 1979 and now proposes to support a 10-year livelihood and forestry program approach to help improve the livelihood of rural poor in Nepal. SECTION III THE SUCCESS IN THE HILLS 1.15 Though lack of baseline data makes it difficult to quantify success, community participation in forest resource management has led to significant regeneration of degraded forests in Nepal. About 15 percent of the forest area has been brought under community management, primarily in the mid-hills. Current data show that while the rate of deforestation has slowed in the mid-hills to about 0.2 percent per annum, the forests in the Terai are being depleted at an annual rate of about 1.3 percent. Analysts argue that the grass-root social capital built in the form of forest UG capacity to protect and manage forest resources is also an indicator of the success of the program (ICIMOD, 1999b). Currently more than 10,000 UGs are protecting about a million hectares of forest lands in the country. 1.16 Ex-post analysis shows that community forestry in the mid-hills succeeded because of the simultaneous occurrence of five factors. First, in the 1970s, when community forestry began, there was considerable debate worldwide about the deteriorating condition of Nepal's forests and the seriousness of the situation."' These views about the crisis, and the rapid visible degradation of the hill forests, made the government eager to take urgent action to control deforestation. 1.17 Second, the government did not consider the forest resources in the mid-hills of major commercial value as most of them were degraded and were not easily accessible. Hence the government was willing to hand over forests to the people for protection and management. Moreover, since there was little inflow to the state exchequer from these forests, there was also little expectation of future economic returns to the government from these forests. Given the poor transport and communication situation in the hills, the scattered nature of the forests, and the 5. "In the 1970s, public awareness grew regarding deforestation and its side-effects in developing countries. This received publicity in the Nepali media as well. Eric Eckholm, in his book Losing Ground, painted an alarming picture of the degradation of the mountain environment in Asia, Africa, and Latin America. In South Asia, for instance, increasing flood damage in Bangladesh was thought to be a direct consequence of the deforestation in the Nepal Himalaya. This relationship later gave birth to the theory of Himalayan Environmental Degradation. This simplistic cause and effect theory attracted a great deal of academic and media followers and generated international investment interest in afforestation." Panos Institute 1999. 6. An "energy sector study" Energy Research and Development Group, Tribhuvan University 1976, had estimated that the remaining accessible forests in the Hill regions will disappear within 12 years and those of the Terai region within 20 years unless steps were taken by HMG to resolve this problem. A World Bank Forestry Sector Review (1978) for Nepal had recommended that His Majesty's Government (HMG) forestry development strategy give priority to a national rural afforestation program which should aim at establishing 640,000 ha of village woodlots in the Hills and 400,000 ha in the Terai over the next 20 years. -8- limited government staff, the government was convinced that protection of the hill forests needed the cooperation of the people. 1.18 Third, the people in the hills realized that if they were to conserve their fragile environment, it was essential to protect the forests. They had witnessed first hand the consequences of deforestation-landslides, erosion, drying streams, soil degradation, to name a few. Hence there was willingness to come together to protect the resource. The old stable settlement patterns (footnote 45) and the scattered nature of the forests made it easier to identify UGs to which specific responsibility for a particular forest area could be given. 1.19 Fourth, the international development community at that time was supporting experimentation with participatory efforts. In the late 1970s and 1980s, participation had become the favored approach for all rural development. Multilateral and bilateral donors, including the World Bank, were willing to provide the needed budgetary resources in support of a program of people's participation in forestry. 1.20 Finally, had the crucial policy, procedural, and legal changes not been introduced, the community forestry program in Nepal would not have been where it is today. Given the favorable environment for community forestry, the eagerness of the government to pursue participatory resource management strategies, and the scarcity of domestic resources available to support the program, there was an opportunity for the World Bank and other donors to "push" for policy and legal reforms in support of the program. It is quite possible that, given the unstable political situation prevailing in the country at that time, without pressure from international donors, the policy and legal reforms in support of community forestry may not have come through as quickly as they did. Hence the need and desire of the country to protect its forests converged with the efforts of the donors. SECTION IV CHALLENGES OF THE FIRST PHASE 1.21 The major focus in the early years was on identification and formation of UGs and handing over of forest land to them for protection and management. Though this may sound simple, in practice it was a challenging experience. UGs could be formed only if there were clear policies, laws, and procedures to support their formation and existence. In addition, the FD, the main implementing agency, had to have the capacity to undertake the whole UG formation exercise. Then again, since rights to forest land can be unclear, creating disputes, conflict resolution mechanisms had to be developed. The attached audit of the Hill Community Forestry Project shows how the implementation of a Bank project was adversely affected by some of these challenges. 1.22 Formation of UGs is essentially a process of building grass-roots social capital. Researchers have stressed the importance of allowing sufficient time for building the spirit of community participation at the grass-roots level. In some cases UGs became defunct a few years after they were formed. One important reason has been the lack of sufficient time to build grass-roots capacity. FD staff are generally allotted annual targets for UG formation and these targets do not allow staff the flexibility of devoting more time to groups that may need more assistance. Often the pressure to make decisions quickly to fulfill preset targets limits the consultation process undertaken and can result in actual users being left out."Though the UG formation process in Ramche may not be 7. "The following is adapted from SOS Sahel, but ......the issue of the pace or rate of change is relevant to all stakeholders: * The move from passive to active involvement takes time. * Building positive working relationships between stakeholders cannot be hurried. * Shared forest management combines both short and long term benefits which can be tangible or intangible. * Stakeholders need time to understand and adapt to their changing role in resource management." ODA 1996. 8. The Region in its comments acknowledges that target orientation in project implementation was an issue in the Bank's forestry projects in Nepal and will perhaps continue to be an issue because disbursements are tied to the targets of the cost -9- typical, it is certainly not rare (Box 1.2). Inadequate time devoted to UG formation can result in an institution with which few users can identify. Sometimes donor projects are to be blamed as they push for physical target achievements. This is often because their monitoring system views progress in terms of number of groups formed and not in terms of the quality of the group.' This was one of the implementation shortcomings of both the Hill Community Forestry (para. 2.3) and the Second Forestry (para 2.16) projects. Box 1.2 Ramche UG: A Target Driven Exercise? The Ramche UG of 137 households in Dhankuta District in the hills, was formed in 1991. The UG was formed by a ranger with the help of staff from the Pakhribas Agricultural Center and without FD staff visiting each household. According to standard principles (Box 1.1), the operational plan should be written after the FD staff has had an opportunity to establish an understanding with all users. However, in this particular village, the plan was prepared by the ranger and endorsed by users at the General Assembly. Since it was prepared by the ranger, the operational plan is largely a reflection of the views of FD staff. The Executive Committee in Ramche consists largely of village elite who make decisions on behalf of the group. Although several meetings have been held, several members are ignorant of the operational plan preparation process. They are reported to be aware that a new committee had been formed and the general perception is that the forest had been "closed" by the committee. Several of the poor are reported to have been adversely affected by the closing of the forest: "All the poor members of the group interviewed felt that utilization rules were too rigid. For example, users were allowed to collect most forest products only in a specific season. One Tamang women, for example, with no land expressed that since the formation of user group, all her traditional sources for forest products were effectively closed. She was depending solely on twigs and dry branches for cooking. There was no provision in the regulation to increase the allocation for such poor households. She would get an average of five Bhari (one bhari is equal to 30 Kg of green weight of wood) of fuelwood in a year, equal to that received by wealthier members of the group." Source: Information on Ramche is from Pokharel (1997) 1.23 Clear policies, laws, and procedural guidelines to implement community forestry. Clear policies, laws, and procedures are crucial to building trust between the communities and the FD. Even though the concept of UGM was adopted in 1988, implementation was slow in the early years as a supportive framework was missing (Audit Report Hill Community Forestry Project, para. 2.6). Analysts observe that FD staff were themselves unclear on how to proceed with the actual implementation. Donor pressure (para. 1.20) led to the passing of the Forest Act of 1993. The procedural clarifications on the implementation of the act followed with the Rules in 1995. As a result, identification of UGs and handing over of forests began in much more earnest after 1995. The 1993 legislation and the 1995 Forest Rules continue to be the major legislation regulating the forest sector, though with the passage of time there are several contradictions that have emerged between forestry and later legislation (para. 1.37). 1.24 Development of capacity in the FD to support the UG formation process. A major and expensive challenge has been turning the FD around from playing a policing role that involved protecting the forest resourcesfrom the people to working with the people in forest protection and management-a 180 degree change in direction. A number of donors, including the Bank, provided resources for reorienting the FD toward its new role-the design of both the Hill Community tabs and not to outcomes or goals. According to the Region, change in this perception will only be possible if Bank processes are changed to create disbursement categories related to outcomes instead of inputs. 9. The India Country Study on Alleviating Poverty through Forest Development carried out as part of OED's Forest Strategy Review noted "Monitoring and evaluation indicators in projects are also ill suited to measure achievement in project objectives. In current projects, while project objectives stress the achievement of results, indicators are designed to measure quantitative progress." Kumar and others 2000. - 10 - Forestry and Second Forestry projects provided for training of FD staff (see attached audits).o The change in attitude of the FD was not achieved overnight. It took time for staff to accept the concept of people's participation. In the Second Forestry project, the limited experience within the FD to implement community forestry and inadequate training contributed significantly to project failure (see attached audit). It also took time for the people to accept the FD as their ally. Though FD staff appear to have accepted the fact that they cannot protect the forests without the participation of the people, yet it remains unclear how deep is the conviction among them that the people have total right over the resources that they protect. Given that the land ownership remains with the government, it would not be surprising if, at least subconsciously, some of the old values persist. 1.25 A much-discussed problem has been the shortage of staff to handle the demand for UG formation and operational plan drafting. In the Hill Community Forestry Project, a shortage of FD field staff hindered project implementation (see audit). Though UGs were being formed at a rapid pace, drafting of operational plans could not keep pace because there were simply not enough staff. As a result, the formal hand-over process was delayed despite the readiness of the groups to go forward. 1.26 Development of tools for conflict analysis and resolution. Conflicts were a major challenge in the first phase since there was little capacity and experience with conflict resolution in the country. Conflicts in the early years of implementation are reported to be broadly of two kinds-those within a UG, and those between UGs. Within-UG conflicts are said to have occurred because of incorrect identification of users, inadvertent omission of some users, dissatisfaction with the benefit-sharing procedures and lack of agreement about leadership in a group." Secondary and nomadic users (Box 1.1) were easily missed in the user identification process. Moreover, it was natural for some members of the UG to be more active in forest protection than others. It was also natural for the more active members to be dissatisfied with the equal benefit-sharing criteria generally followed in a UG. In some groups, conflicts arose because two or more individuals vied for leadership of the group. In a village society, acquiring the chairmanship of an organization like the UG can have tremendous implications for the social status of individuals (ICIMOD 1996b). Conflicts between UGs have arisen because of lack of agreement over the boundary of a particular forest area or because two UGs have staked their claims to the same forest area. Forest ownership reportedly is still contested in several areas in Nepal (Hobley 1996). 1.27 The International Center for Integrated Mountain Development (ICIMOD) has played a valuable role in studying conflicts through case studies, thereby building capacity in the country to understand and resolve conflicts. ICIMOD findings have been disseminated through workshops. Availability of a mediator in which the UGs have faith is crucial in a conflict situation. Experience shows that UGs generally depended on the FD for conflict resolution, though minor cases of conflicts related to violation of rules and similar problems are also solved by the forest UG committees themselves (ICIMOD, 1999b). However, given the shortage of FD staff, the need for the development of other conflict-resolving intermediaries who are trusted by UGs has been noted. Though local elected institutions have played some role in the past, given their increasingly important political status (with the passing of the Local Self Governing Act in 1999), they may 10. The Region in its comments on the capacity of the Forest Department notes that the community forestry program provided an opportunity to identify alternative institutional mechanisms to meet the demand from FUGs. Third parties (like private rangers, NGOs) could be involved, once the groups were mature and had sufficient resources to voluntarily hire independent service providers. The Region notes that this was tried during the last years of implementation of the Hill Community Forestry Project, but there was insufficient time to further explore this issue. 11. "The (forest department) field staff investigates within the village, by discussion or by checking to determine the real users of a particular forest. But a low caste person or a disadvantaged person may miss the chance to be included in the users' group, as low caste people do not usually speak out in a community dominated by higher castes. As a result, when a users' group is formed such persons are excluded, and, at the time of benefit sharing conflicts may surface." ICIMOD 1996b. have a much more crucial role to play. However, while using local political bodies as intermediaries, there is a need to ensure that the interests of the weakest do not get sacrificed, especially when the conflicts arise because the weaker sections in the village feel that they have been wronged by the elite, who may also be the leaders of the village institutions. SECTION V THE SECOND PHASE CHALLENGES 1.28 Nepal has come a long way in implementing community forestry. The renewed forest cover in many hill areas has reached maturity, bringing the country as it were to a second phase of community forestry. Though this phase has brought its own specific challenges, political instability and poor governance are major cross-sectoral challenges in Nepal." As in other sectors, corruption and weak implementation result in wastage of resources available for the implementation of the community forestry program. It is comforting to note, however, that the notion of community forestry itself is now strongly entrenched in the minds of the hill people. The hill people have seen what loss of forest cover can mean for their fragile ecology, and they have a genuine appreciation of the externalities that result from an improved forest cover. 1.29 In-country consensus on the major objective of community forestry-basic needs of the community or more-is an important second phase challenge. Currently the full potential of community forestry is not being utilized. Initially the dominant idea was protection of forest resources and meeting the basic needs of the people. Given the rapid rate of deforestation and the degraded nature of forest resources at that time, this was a reasonable goal. Accordingly, the UG operational plans emphasized forest protection. Currently, most UG income comes from non-forest sources such as fees and fines, and income from sale of forest products has been limited (Unasylva 2000). However, circumstances have changed significantly. Since the forest cover has regenerated, many community-managed forests are now capable of meeting more than the basic needs of the communities. But because the UGs are closely tied to their operational plans, the commercial potential of these forests is rarely realized even though at the national level the government sees an important role for community forestry in poverty alleviation." Several factors are responsible for this situation. 1.30 Lack of consensus continues among policymakers and FD staff on whether it is actually desirable to promote community forestry for commercial purposes. Some staff are concerned that commercial exploitation may come at the expense of meeting the basic needs of the community and may increase the degradation pressure on nearby national forests (para. 1.39). Policymakers fear that once cash enters the system the motivation of the elite to monopolize the benefits will increase (ODI 1999). Lack of clarity has resulted in unclear directions and contradictory messages to field level staff.'4 In addition, numerous government restrictions on transportation, marketing of forest products, and subsidies and price controls continue. Individual field staff interpret government circulars and the simultaneous existence of government restrictions according to their own 12. "Between 1994 and early 2000 there have been nine different governments (including six coalitions), and not withstanding strong declarations of intent, there have been no coherent overall drive to promote economic development." World Bank, 2000b 13. The goal of the government's current 9th Five Year Plan (1997-2002) is sustainable poverty alleviation through broad based growth. The plan visualizes a broader role for community forestry beyond meeting the basic needs of the community to making available raw material for industry and increased employment and income opportunities for the poor. 14. A government circular in December 1999 put a ban on green felling for commercial purposes. This circular was later repealed and was replaced by another that allowed selling of timber provided that extraction is not in excess of the annual increment and at prices which are not less than the government fixed minimum stumpage fee. This circular requires that FUGs revise their operational plans so that they reflect growing stock inventory and annual increment and annual allowable cut. However since the FUG members do not have the expertise to make forest resource inventories or assess annual increments, in reality it has meant a prohibition on sale. - 12 - understanding, creating a situation whereby there are different opportunities for UGs in different districts. Hence some UGs have been able to get substantial incomes from the sale of forest products (like medicinal plants), while others have been barred from making any profits. 1.31 If community forestry is to serve only the basic needs objective, then the expectations from community forestry need to be toned down even in government documents (footnote 13). However. if there is agreement to realize the commercial potential of community forestry, then the challenge is to ensure that the commercial objective does not conflict with the basic needs objective and shift degradation pressure onto the national forests. Other obstacles to meeting the commercial potential will also have to be tackled: support and training of UGs, contradictions in policies and laws (para. 1.37), poor marketing opportunities, are few examples. Given the shortage of domestic resources for these activities, perhaps there is a role for donors to play. The need is for the country to be in the driver's seat with the donors contributing according to their comparative advantage. 1.32 More sophisticated conflict resolution mechanisms are required. The second phase conflicts are of three basic kinds: those between UG members and non-members; between UGs and the FD; and between UGs and other grass-roots institutions. 1.33 Analysts note that when non-UG members see that the value of the protected forest has become substantial, they desire a share of the profit. They then try and stake a claim to UG membership. Their entry into the UG at this late stage is resisted by the UG members, leading to conflict. Whether or not the non-members succeed in becoming members depends on several extraneous factors, including their political and economic clout. 1.34 The second kind of conflict can arise for one of two reasons. It can arise simply when UGs violate operational plans or it can arise because of the complex institutional arrangement that underpins community forestry in India and Nepal as noted by the OED Forest Strategy Review." The violation of operational plans can happen because enterprising UG members want to take advantage of the commercial potential of the maturing forests. This can also happen if UGs feel that rules are being applied discriminately as noted earlier, or they simply feel frustrated by the restrictions imposed on them. The experience of the Jalbire Women's Group (Box 1.3) is an example of an UG that tried to take advantage of the economic opportunity from community forestry with the consent of the local FD staff, but their efforts were frustrated by vested economic and political interests. The second kind of conflict in this category is much more challenging. Analysts note that the institutional arrangement (land owned by the government but managed by the UGs) leaves room for conflict between FD and UGs. How much authority should the FD have to interfere in UG activity? The legislation provides for FD re-control if there is evidence that the community forests are not being adequately managed. Studies have shown that in UGs where this happened (Lalitpur, Gorkha districts), UG members have seen it as "overbearing government control." 1.35 It is obvious that in those cases where the FD itself is a party to the dispute it is not possible for them to be a part of the solution as was the case in most first phase conflicts. Also, during the second phase, as the economic benefits from community forestry become greater or are perceived to become greater, there is danger of local conflicts becoming politicized through interest group politics. The changing nature of the conflicts raises new challenges in terms of the need for more developed resolution strategies and new mediators in which all affected parties have faith. Increasingly, organizations like the Federation of Community Forestry Users Nepal (FECOFUN) 15. In Nepal, as in India, though forest land remains under government control, responsibility for protection and tianagement is transferred to the communities. The OED country study on India noted that this is an institutionally demanding strategy (Kumar and others 2000). - 13 - have begun playing a role in conflicts between the FD and UGs.1 Unfortunately, FECOFUN is seen by some as a political organization and not a true representative of grass-roots UGs. The potential for FECOFUN, with its network of support from grass-roots organizations, to work with the government to find solutions for second phase conflict solutions is tremendous. Box 1.3. Jalbire Women's Community Forest Group The conflict between the Jalbire Women's Community Forest Group and the FD illustrates how vested interests can politicize a simple conflict and lead to a breakdown of local conflict resolution mechanisms. The group, which protects a forest area of about four hectares, was formed in 1989, and is a part of Gorkha district in Nepal's western development region. The conflict arose because the user group in January 1992 violated its operational plan provisions and harvested more timber than allowed for in the plan. The local forestry staff, encouraged by the regeneration in the forest, encouraged them to do so. However, when the group decided to get a better price for their product by selling it in Kathmandu instead of the local market, local timber contractors felt threatened, mobilized public opinion against them, and the violation of the plan was reported to the center. Under normal circumstances the dispute could have been easily resolved. The publicity escalated the simple conflict beyond local conflict-resolution mechanisms. The central FD took two years to make its final decision (April 1994). The women were not allowed to sell the cut wood during that time. Approximately 25 percent of the cut wood decayed, leading to substantial loss of income for the group. This not only negatively affected their morale but, in a male dominated society, resulted in tremendous loss of face and status for an enterprising group of women. "The dilemma for the officials at the center was whether or not to take the community forest back from the users' group and revert it to a national forest, hence losing the confidence of other forest user groups in the district and possibly jeopardizing the community program in the district. At the same time, the officials were undecided about whether or not to take action against the district forest staff for prescribing a silvi-cultural operation which was technically sound and being practiced in another district. The users' group demanded hand-over of the timber seized on the grounds that they had acted upon the advice of the district forestry staff. This conflict dragged on for almost a year." Source ICIMOD, 1996a and b. 1.36 The potential for the third kind of conflict has been created with the passing of the Local Self-Governance Act (LSGA) of 1999 which made all forests within the administrative boundary of a Village Development Committee (VDC) its property." By extension, this gives the VDCs, and the DDCs unchallenged authority over UGs. The Forest Act of 1993, however, did not provide for a role for VDCs/DDCs in community forestry. When the Forest Act was drafted, ownership of forests rested with the central government. Fortunately, to date, VDCs and DDCs have played little role in UG planning and decision making. As long as leaders of a UG are also members or leaders of a VDC, the situation can be under control. However, this is often merely coincidental (ICIMOD 1999b). Hence when the two institutions have different leadership, the potential for conflict is tremendous. Studies report that in several villages UGs have more funds than the VDCs and hence greater political clout. Rich UGs have also contributed funds for village development works such as schools, roads, bus shelters, drinking water schemes, and village temples. Another problem is the different physical boundaries associated with UGs and VDCs. While the administrative boundary of a VDC is a village, UG membership can come from several villages (Box 1.1). If a VDC claims 16. FECOFUN Nepal was founded in 1995, to mobilize and articulate the interest of user groups by increasing awareness and by strengthening them in a coordinated manner and to link forest users from all parts of the country and represent their interests at the national level. 17. Administratively, the country is divided into five development regions and 75 district development committees (DDCs) which are further divided into over 3,900 village development committees (VDCs) on the basis of the population. A VDC is the lowest political and administrative unit. Over the years, a number of donors have provided support for capacity building at the local level. However though the legal structure in support of decentralization is in place in the country, there is still little understanding of the legislation and its implications for the local level (World Bank, 2000a). - 14 - right over the returns from a particular forest within its administrative boundary, UGs from another village may object." 1.37 Contradictions in laws and policies can seriously handicap implementation in the future. Though some analysts still argue that the major problem is lack of adequate implementation of existing policies and regulations, the need to iron out and harmonize the contradictions with policies and legislation in other sectors is paramount. As an example, there are inconsistencies between the Forest Act and other acts, such as LSGA (as already seen above) the Land Act, the Nepal Mines Act, the Public Roads Act, the Electricity Act, and the Water Resources Act (Mitchell and others, 2000)." 1.38 Two biodiversity-related issues are also raised here. Analysts note that despite the fact that biodiversity conservation is high on both the government's and international community's agenda, little attention has been given to biodiversity in operational plans of UGs. Non timber forest products, which include rare medicinal plants, are still not covered by UG operational plans. Moreover, there are no clear guidelines for action when livelihoods are threatened by wildlife (leopards and wild boars have hunted down domestic animals and destroyed crops). In community forests, UG members are allowed to collect dead wood and leaf litter which are part of the habitat of several plants and micro-organisms thereby negatively impacting biodiversity conservation. So far, training programs are reported to contain little on the importance and potential of biodiversity conservation in community forestry. (Nepal Biodiversity Action Plan 2000). Though these issues may appear trivial, they can hinder progress on both biodiversity conservation and community forestry development. 1.39 Community forestry may degrade national forests. Researchers note that the protection of community forests has often promoted degradation of nearby national forests as the local population tries to make alternative arrangements for meeting its immediate fuelwood and fodder need.2" This is especially true in the case of the poorer households as they have no private trees and are forced to travel to non-protected areas (Hobley and Shah 1996). Depletion of government- managed forests close to community-managed forests has been observed in several areas and has been a cause of major concern for the FD.' A two-pronged strategy in the long run could help to deal with this challenge. First, some researchers favor a strategy that balancesprotection with active forest management as it would ensure that a major part of the requirement for fuelwood and other 18 The Region correctly identifies the need for a clearer understanding of the thinking amongst FUGs about a more formal institutional linkage with the local bodies before further advances are made on the decentralization agenda. According to the Region similar experiences in India have shown that while the user groups welcome informal associations with local bodies, they are often reluctant to a more formalized approach. 19. Thus according to the Forest Act 1993, any material within a national forest is a forest product. However according to the Nepal Mines Act (1966) whether in private or national forest is governed by the Nepal Mines Act. Similarly, the government has the authority to acquire land for development under the Public Roads, Electricity and Water resources Acts by making provisions for compensation. However it is not clear how this would work out in the case of community forestry when ownership of the land remains with the government but usufruct rights are held by the user groups (Joint Technical Review, 2000 k). 20. "....so far success has been concentrated mainly in the middle hills. Open access to community forests is controlled. As the result, some community forest users go to lower high altitude forests to gather forest products. Use of high altitude forest without restriction by mid-hill users is also a reason for the degradation of high altitude forests." (Joint Technical Review, j). 21. "Community forests have also increased pressure on national forests. Degraded land in the vicinity of villages are more productive after being taken over and protected as community forests, but users still go to government owned forests located on the ridges for fuel and fodder. Recent surveys in two districts, Sindhu Palchowk and Kavre in central Nepal, where a much acclaimed Australian funded forestry programme is involved, have shown remarkable results. While forests near villages are showing vigorous growth, there has been a rapid decline of government owned forests on the higher mountains where the ecology is even more fragile and regeneration slower. If this trend continues and spreads to other parts of Nepal, high mountain forests could be in serious jeopardy." Panos Institute 1999. - 15 - basic products is met from the community forests. However, active management will only be possible after the forest cover has regenerated to a significant level in the first place. Second, a strategy that emphasizes community forestry on forest land along with social forestry, that is, agro- forestry and tree plantations on non-forest lands may be able to reduce pressure on national forests as it would create other sources of fuelwood and fodder supply that the poor could draw on (Kumar and others 2000). - 16 - Box 1.4. Forest Regeneration, Do the Poor Lose? First, the equitable benefit sharing criteria does not allow for the greater dependence of the poor on the forest resource. Table 1.1 shows that the dependence of the poorest on community forests for fuelwood is the greatest, yet equitable sharing gives the maximum benefits to those who are least dependent. Another study done in the Dolaka and Ramechhap districts of central hills of Nepal supports this finding (Upreti 2000). Table 1.1 Comparison between Fuelwood Received from Community Forests and Household Needs (Kgs.) Fuelwood Household Economic category Rich Medium Poor Total Required 4500 4500 4500 Required From Community Forests 250 1400 2250 Received from Community Forests (plantations) 400 400 400 Percentage Difference +60 -71 -82 Received from Community Forests (natural forests) 800 800 800 Percentage Difference +220 -43 -64 Note Based on a headload of 50 kgs. Source: Timila (1999). Second, Analysts note that as the forests become richer, the elite and the powerful groups in villages begin questioning the access of the marginalized groups to the forests (Hobley and Shah 1996). The Implementation Completion Report (ICR) of the Hill Community Forestry Project noted that there was concern among FD staff that as forests improve and incomes increase the community forestry effort may be undermined by local elites. Given that the power structure in the village is dominated by the elite (who often also dominate user groups), the poor find it difficult to challenge decisions made to their detriment. The poor also find it difficult to challenge the decisions made by the elite as they are otherwise dependent for their labor incomes on farms owned by the elite (ICIMOD, 1999b). Malla (Unasylva, 2000) further notes that the usual practice regarding timber and poles from community forests is to distribute the products through an auction or tender system. Though the price at which the product is sold is lower than the market, the poorest members of the forest UGs can usually not afford to compete with the wealthier households. A recent study by ICIMOD (1997) shows that conflicts over community forest resources often are manifestations of deeper divisions based on class, caste, and other factors. Third, community forest management rules themselves weigh against the weaker sections. A large proportion of the poorest are dependent on no timber forest products. However, the importance given to production of timber and wood of better quality in operational plans of UGs often results in herbs and other plants of medicinal value being neglected (Unasylva 2000). A report prepared under the Nepal-UK Community Forestry Project (1994) notes three reasons why: a) NTFP harvesters are mainly women and children from poorer households with less political power and leverage to influence community decisions; b) the NTFPs may be harvested in such small quantities that they may not require community protection; and c) the emphasis in community forestry is more toward fuelwood, fodder, and timber rather than NTFPs. Fourth, the poor also loose out in UG-supported village development schemes. Such schemes often require local contributions in cash or labor. The wealthier sections of the community are able to make their contribution in cash, but the poorest are often able to afford contributions in labor only. This takes them away from income-earning activities and negatively impacts their livelihood (Unasylva, 2000).a Thus, for several reasons, the identification of the poor with the community forestry program is likely to be less than that of the better-off sections of the community. This is confirmed by surveys undertaken by ICIMOD.b a. "The irony of this is that since the poorer households often work in a nearby market center on a higher wage rate than in the village, their labor contribution may end up costing them more than the amount paid by members of wealthier households." (Unasylva, 2000) b. "Surveys have shown that literate and relatively well-to-do users are the ones who have some understanding of current community forestry policy. Experience has shown that many villagers, especially those belonging to disadvantaged groups, think that the community forests were handed over to the FUGC members, who are often the village elite. They use the term "samiti ko ban " (committee's forest) rather than "samuha ko ban" (group's forest)." ICIMOD, 1999b. - 17 - 1.40 The forest has regenerated in several areas, but the benefits to the poor have been limited.22 More than 90 percent of the population of Nepal lives in rural areas and forests are important to their livelihoods. There is significant evidence in the literature to show that the dependence of the poorest sections of the rural community, the landless and the marginal, is greater as forest products are a major part of their survival strategies. The onset of community forestry, especially in degraded areas, requires that the forests be brought under some form of initial protection and UGs put restrictions on their use. Yet these restrictions (which may be in the form of limited or controlled access) often adversely affect the poorest who are likely to depend on the forest on a daily basis-for example, blacksmiths may depend on the forest for their supply of fuel." In other cases, bringing an area under protection has forced some groups to change their way of life-head loaders (those who earn their income by selling fuelwood in nearby markets) may have to find employment as laborers (ICIMOD 1999b).24 1.41 A regenerated forest cover also does not mean an increased daily flow of forest products to the community." Neither does it mean that the poor benefit automatically (Box 1.4).?6 Notwithstanding the negative experience so far, supporters note that community forestry does have a tremendous potential to make a substantial contribution to the lives of the poorest. However, the impact of community forestry on their lives is not clearly understood and more research is needed (Joint Technical Review 2000h). But, attention to those issues that directly affect the poor- production, marketing, harvesting, and local processing of NTFPs-can have a significant beneficial impact.27 In addition to neglect of NTFPs in operational plans of UGs (Box 1.4), development of fair marketing opportunities for NTFPs has been neglected by policymakers. This is despite value of NTFPs as a supplementary source of income for millions of poor, landless households in off season months when there is little demand for farm labor. Community-based small-scale collection, processing units, and cottage industries located close to the source of collection also have the potential to generate substantial returns through reducing cost of 22. It was not possible for this review to undertake a user group level survey that could assess the impact on the poor through normal impact validation procedures of comparing villages with and without. The evidence here is based on a survey of available literature and interviews with UG members, FD staff, academics and NGOs. 23. "For instance banning the extraction of fuelwood from a CF may severely compromise the livelihood outcomes of the Kami (blacksmith)-whose dependence on forest products is very high. ......What appears to be straight trade-off between social and environmental sustainability, is in fact a trade-off between short term benefits that favor the poor and long term benefits (in the form of enhanced timber supply) that are of interest to the wealthy. The poor tend to have very low asset levels and are less able to substitute wood from private land for any fuelwood supply they've lost. They are forced to substitute their only asset-human capital-and take up wage labor to pay for fuelwood, this will detract from childcare and food collection and will reduce their access to other opportunities." Joint Technical Review 2000 h). 24. There are instances where the negative impact on the poorest has been avoided through the specific and timely action of some UGs themselves. But such instances are rare. An example is a UG in Myagdi district where the UG members realized that closing the forest would have a disproportional negative impact on the poor. Hence they responded with a goat keeping scheme directed towards the poorest which provided credit for the purchase of animals and special access to the forest for fodder (Joint Technical Review, 2000 h). 25. A Forest Resource Assessment and Socio-Economic study was undertaken under the Nepal UK Community Forestry Project in four districts in the Koshi Hills of Nepal. Most of the forest in the study area could be regenerated through coppicing. The study shows that there was an overall improvement in the condition of the forests under community protection. However, because of the strict enforcement of protection, the flow of products from the forest areas to the communities seems to have declined indicating that access to forest products in many UGs has not improved with protection. The study also shows that protection is likely to result in increase in the long run availability of timber but this will be at the expense of the short term needs of the users for fuelwood and other products. The study notes that this may have a disproportionate impact on the poorest. Nepal -UK Community Forestry Project 1998c 26. IFAD has been supporting a Leasehold Forestry and Forage Development Project in Nepal since the early 1990s under which blocks of degraded forest land are leased to groups of poor households. Leasehold forestry is a variation of community forestry in which an attempt is made to directly increase the resource base exclusively for the poor. 27. One estimate notes that in certain cases nearly 50 percent of the average annual household income is derived from NTFPs (Edwards, 1995). - 18 - transportation and increasing returns to locals (Joint Technical Review 2000, c). Training in NTFP production, processing, and marketing is a potential area of support from donor agencies. 1.42 Researchers note that changes in the basic guidelines for implementing community forestry can go a long way in creating a pro-poor environment. Benefit-sharing in accordance with dependence, greater voice for the poor in decision making and special schemes to ensure that the poorest do not loose out in the initial years of protection (for example see footnote 24) could improve the position of the poorest." Overall, increasing the awareness of the field-level FD staff through training and provision of clearer guidelines on handling equity issues in the UG formation and post-handover support phases is likely to have a major beneficial impact.29 Box 1.5. Chhatiwan Community Forest "Four thousands hectares of rich sisoo-khair-sal forest on the bank of the Karnali River in Kailali District has officially been handed over to 1,600 households (hhs) mostly from Kailali District (Chhatiwan Community Forest). Most members of this UG are immigrants from the hill district of Accham, who came some decades ago. The local people we talked to estimated that prior to this handover a substantial number of people from 11 different villages (the total population of these villages is between 44 and 66 000) on the Southern side of Karnali used to also benefit from these forests. These people were predominantly Tharu ethnic communities in the Rajapur area of Bardiya District on the other side of the Karnali River. With the exception of a few households they have not been included in the UG. The few that were included lived along the river on the other side and were considered to provide effective protection against encroachers. The Southern bank of Karnali virtually had no forests because they are surrounded by the Royal Bardiya National Park to the east, India to the south and the Chhatiwan forest to the west. Previously they had used the forest on the northern bank of the Karnali when the current of the mighty Karnali calmed down in the post-monsoon period and they were able to cross. Being excluded from this forest has been a serious blow on their traditional use right and they are presently trying to rectify this situation. They have complained to the district administration, claiming that the forest used to be under their jurisdiction, but as a poor ethnic group, they have little hope of winning. Also the District Forest Office (DFO) has already formalized the handover which means they have to do battle not only with the officially recognized UGs but also with the DFO, a government entity. The DFO that was responsible for this handover has been posted to another district so was not available to answer questions. However, the new DFO felt this was clearly a case of political pressure having been exerted by those who received the forest." Source Baral and Subedi, 2000. 1.43 Women's participation continues to be limited.2' Women in Nepal have the primary responsibility for meeting the fuelwood and fodder needs of the family. While noting that the data on gender relations in the Hindukush Himalayas is inadequate, Gurung (Unasylva 1999) emphasizes that mountain women bear a greater proportion of household and farm responsibilities than men or even the women in the plains." Hence when a forest area is brought under protection in the hills, the adverse impact on the women, who then have to walk longer distances over uneven terrain, is even larger. Current forestry legislation (1993 Act) in Nepal does not include any gender- 28. The Region in its comments notes that since the Hill Community Forestry Project (Cr.-2028) was one of the first community projects implemented in the region it provides interesting lessons on the short term impacts on the poor and equity considerations. 29. The Region in its comments endorses the recommendations provided by the audit. 30. The need for suitable action to enhance the participation of women in community forestry was identified as a key issue in the 1999 Workshop of Participatory Forest Management organized by ICIMOD (ICIMOD, 1999a). 31. "The back breaking chores of carrying water, fodder and fuelwood up and down steep mountain slopes are undertaken daily, consuming large portions of the women's time and energy." (Unasylva, 1999). - 19 - specific policies, though the Master Plan of 1989 did propose a quota for women members in the executive committees of UGs (ICIMOD, 1999a). 1.44 Researchers note that in the past, attention to participation of women in UG activities was limited because the largely male FD staff found it difficult to communicate freely with them. In addition, the shortage of staff and the emphasis on achievement of targets made it difficult for staff to spend more time per UG-a strategy they would have to follow to consciously reach out to women. Another factor was the limited number of female extension staff in the FD (Pokharel, 1997). Supporters of community forestry argue that, over time, the burden on women decreases as protection rejuvenates previously degraded forest lands and brings fuelwood and fodder closer to their doorstep. They also argue that women have started playing an increasing role in UG activities and this has contributed to improving their social status within their families. They cite the women's-only UGs as examples of progress. 1.45 Though women's participation in UG activities has increased over the years, it is small in comparison to their contribution to forestry activities. Though attempts have been made to increase their membership in UG committees it does not necessarily ensure an increase in their rights or benefits."'" Given the hierarchical nature of society in Nepal, women continue to have a limited voice and still feel inhibited in expressing themselves in mixed gatherings.34, 35 Limited women's participation is not just true for the forest sector. Despite the provision in the LSGA (1999), women representation and participation in VDCs has also been limited. Increasing the participation of women will require considerable effort from FD staff. Non-government organizations (NGOs) can make a valuable contribution.6 1.46 A two-pronged approach could be successful. First, further attempts can be made to directly increase their participation in UG activities through training. Second, and simultaneously those activities that directly contribute to the well-being of women could be promoted. Thus, since women play a major role in harvesting and processing of NTFPs, they would benefit tremendously from improved marketing and processing facilities. In all this debate, it is important to remember that the extent of women's participation and involvement in UG activities is a reflection of their position in Nepalese society. Community forestry, in so far as it empowers women, can help improve their social status but it is unreasonable to expect that it would radically transform gender relations. 32. "Thus far, the focus has been to involve more women in the forest users' groups for planting, maintaining, and managing the forest, while little attention has been paid to how much benefit and control women gain through these programs." ADB, 1999 33. "Women in the Western Hills of Nepal have been involved in the management of 'community forests' but despite this, they have not benefited equally. The participatory methodologies which have recently gained popularity emphasize the mobilization of women and the disadvantaged (the poor and occupational/lower caste) yet in reality they are excluded from the planning and decision making process." ITTO, 1998. 34. Many factors constrain women's participation in community forestry. When asked why they are not interested in serving on committees, rural women respond that they can spare too little time from domestic chores. The social norms, in which women are discouraged from speaking publicly and interacting with male members of society and professional staff, also limit women's participation. This is compounded by the prevailing high illiteracy rate among women. As such, most of the women members of the FUG have no option but to agree to what the men decide in FUG meetings." ICIMOD, 1999b. 35. "Women in villages still covered their heads and hid their faces when they had to come before men or elders. They could not talk openly with men. When some women made efforts to undertake development and work for people's welfare or, in short, when women stepped out of the house, they were bound to be misunderstood. In villages people still believed that women could not make any decisions by themselves." ICIMOD 1998. 36. NGOs have played an active role in increasing the awareness among women about UG activities and promoting their participation The Himalayan Grassroots Women's Natural Resources Management Association (HIMAWANTI) and Women Acting Together for Change (WATCH) are some examples of NGOs that have played an active role in promoting women's participation in community forestry. -20 - 1.47 Build FD capacity to meet continuously increasing expectations. Peoples' participation in forest protection and management has radically changed the expectations from the FD. Under community forestry, FD staff are not expected to police the forests. Instead they provide extension service and advice to the UGs in forest protection and management. Often the expectation for advice is beyond forest sector issues. FD staff participate in conflict resolution and support other UG-supported development activities in the villages. This is a 180 degree change in job description for department staff, who are being called on to deliver results in areas where they have had little experience. Moreover, the demand for the kind of advice changes with the length of time that the UG has been protecting the forest." Hence training constantly needs to be re-oriented according to the evolving needs of the UGs. Though donor projects have provided considerable training to FD staff, there is a long way to go." FD staff are still not adequately equipped to deal with several issues of post-handover support." Moreover, there is still no consensus on when it is reasonable to expect UGs to meet their post-handover needs through their own efforts and by paying for services from NGOs and private sectors. 40 1.48 Analysts also argue that training alone is not enough to increase the responsiveness of the FD. There are other constraining factors that need attention-monitoring and evaluation capacity, supervisory methods, and issues of posting and transfer of staff. " As the experience of the Hill Community forestry and Second Forestry projects show, institutional concerns related to travel allowance and transfer policies for staff, recruitment, and monitoring and budgetary issues have had a major impact on the implementation of the community forestry program. In the past, frequent transfer of FD staff hindered project implementation. In addition, weak infrastructure support for field staff negatively affected their motivation to travel to the field. Though considerable progress is reported in addressing these issues, much remains to be done. District Forest Offices continue to be seriously understaffed in comparison to the need for post-handover support to UGs. Monitoring of program performance continues to be weak as is the coordination between various departments of MFSC in planning and implementation of activities. 1.49 Build UGs capacity to deal with the challenges of a maturing community forestry program. The capacity of the UGs to sustainably manage the forest resources under their protection continues to be limited. As an example, the UGs are not yet equipped to utilize the 37. The Region in its comments notes the difference between groups formed at different stages of project implementation. It notes that groups formed at the beginning were more unstable and immature than the ones formed at the end and questions whether this is a reflection of improvements in the orientation process. Given the time and resource limitations, OED is not in a position to explore this issue further. 38. A Training Wing was established under the MFSC in 1980 with support from USAID to provide systematic in service training to staff. The Department of Forests also operates five Regional Forestry Training Centers covering the 38 hill districts. 39. "Presently the post-formation hand over support is reported to have suffered due to: * inadequate number of forestry field staff in DFO. The number of posts available in DFOs has been found to be unable to cope with the growing number of FUGs functioning at operational level; * lack of appropriate organization and efficient management of the available manpower for the implementation and proper monitoring of CF; * little physical facilities and incentives for the staff in the field to make the best use of their existing motivation, commitment and effort in CF; * little know-how regarding type and kind of post-formation support to be provided; * absence of NGOs in the local/district level to provide post-formation support." (Karki and Tiwari 1999) 40. The Region in its comments emphasizes the need to build linkages with private sector providers (NGOs, private rangers and forest guards). 41. ......some DFOs who were experienced in the project area and also enthusiastic to translate community forestry principles into practice were transferred to the Terai District for policing work." Pokharel, 1997. -21- commercialization opportunity, were it an accepted part of the government strategy (para. 1.29). Managing forests for sustainable utilization rather than protection will also require strengthening of UG skills in office management and record keeping.42 The high level of illiteracy has limited UG members' active roles in group activities. This has implications for decision-making and equity and works to the detriment of the poor and the vulnerable. In addition, currently, most UGs lack the skills to adequately exploit NTFPs. 1.50 The persistent shortage of qualified FD staff to assist UGs in upgrading their skills and other post handover activities is already noted. Though some qualified NGOs have now emerged, there is a shortage of professional organizations to fill the gap. Though networking, study tours and other experience sharing mechanisms can play a major role in augmenting UG capacity, the resource implications of these activities are enormous. Donors have provided and continue to provide considerable resources for supporting such activities. 1.51 Research continues to receive limited attention. There is little provision to address particular problems that arise during implementation even in the case of trees and timber (see also audit of Hill Community Forestry Project). Most of the sisoo plantations under the Second Forestry Project have been destroyed by disease (para. 2.25). Though the government's National Conservation Strategy of 1988 highlighted the importance of establishing appropriate policies and regulations for the sustainable extraction of medicinal plants, research on NTFPs has been hampered by a lack of funds (Nepal Biodiversity Action Plan 2000). In addition systematic research on indigenous tree species for development of agro-forestry has also been inadequate (Nair, 1999). Social and agro forestry have tremendous potential to supplement community forestry in meeting the basic needs of the community. 1.52 Partnership opportunities are rarely exploited. Currently, several government and non- government organizations are involved in community forestry. However, there is no clear division of responsibilities or roles among them. As an example, NGOs, government, and academic institutions are all involved in training UGs. Similarly, several organizations are involved in conflict resolution activities. There is no coordination mechanism to ensure minimization of duplication and sharing of experiences to avoid wastage of scarce resources. There is a need for the NGO effort to be made complimentary to the government effort and for each organization to work in the field of its comparative advantage. Given that FD has limited financial and human resources, researchers note the importance of partnerships in finding solutions to critical problems. In addition, there is need to give thought to the relationship between FD and other departments that work at the field level in the rural space. Land management activities like building of check dams, gully plugs have implications for forestry, but generally fall within the purview of the Soil Conservation department. When these activities are supported by UGs how are they to be coordinated? 1.53 Reluctance to Extend Community Forestry to the Terai. So far, the government has been reluctant to promote community forestry in the Terai." 4The richness of the forest resource and the complex settlement pattern in the region makes identification of UGs a much more complex 42. The Region in its comments also emphasizes the need for rural credit and banking, improvement in the management of the FUG funds, increased transparency and healthier financial management. 43. It is unfortunate that no other form of forest management has been promoted in the Terai. The current policy is a non active forest management and allocates dead, decaying and fallen trees for removal to TCN (Skarner, 1999). Though the government has prepared several plans (largely with donor aided technical assistance) for the scientific management of the Terai forest resources, none has been implemented completely. As a consequence, there has been a steady decline in those forest resources through uncontrolled conversion to agriculture, encroachment, uncontrolled felling and grazing. 44. The Region endorses the government's cautionary approach and notes that cautiousness comes from handing over well established stocks which are in many cases of great value and are ready to be harvested, to communities which have not contributed yet to their protection. - 22 - task.45 Even where forests have been handed-over to communities, social anomalies are reported. These include inequitable and unfair distribution of land and benefits (Box 1.5). Another problem that critics raise, and that complicates matters in the Terai, is that handing over forest lands to users might mean legitimizing the encroachers. Thus condoning illegal settlements and encouraging future encroachment. 1.54 Unfortunately no immediate consensus seems to be emerging among the various stakeholders about the right strategy for the Terai. Several NGOs believe that the FD is not willing to give up control over the Terai forests because of their economic value and the government proposal is against the spirit of the 1993 Forest Act." The NGOs and community representatives are interested in extending the hill model of community forestry to the Terai. According to them, given the settlement patterns, it may be difficult to identify users, it is still not impossible to do so, provided a careful process is followed. However, given the differing forest conditions and the reported social anomalies, the government considers a modified strategy (with a modified law) also based on community participation, to be more appropriate. Some other non-government analysts have also raised doubts about the appropriateness of the hill model for the Terai. The Joint Technical Review notes that one option is to maintain a common legal framework with sufficient room to allow for adaptation in implementation approach according to the specific requirements of a particular area. Still others support a strategy for integration of forest sector management with wider land use planning for the Terai. 1.55 The latest government concept of forest management for the Terai, Churia Hills, and Inner Terai has become an emotionally charged issue between various stakeholders (see Annex B for proposed Government strategy for the Terai). There is no doubt that the economic value of the forest resource in the Terai is far greater than that of the hills.47 Though the government has been supportive of community forestry for more than two decades and the program essentially implies shared responsibility, there is still a reluctance to give other stakeholders a share in the decision making on the future of the Terai. The government's ad hoc circulars and instructions and their varied interpretation by local staff have conveyed contradictory messages to civil society organizations and supporters of the community forestry program who see them as indications of the withdrawal of government commitment to the community forestry program.43 45. In the hills the settlement patterns have been stable, the communities are homogenous and there is limited encroachment by outsiders. The scattered nature of the forests make it easier to identify user groups. In the Terai on the other hand, extensive in-migration has created heterogeneous populations and since all users of forests do not live in their proximity, it is not easy to identify users. 46. "It is clear that the DOF (FD) wants either to manage these forests themselves by cutting indigenous hardwood trees and planting soft-wood, or to give these forests on lease to industries, companies or wealthy powerful individuals." N Kaji Shrestha 1999. 47. "A cubic foot of timber in the Terai is worth Rs. 400-500, whereas in the less accessible hills the figure is closer to Rs. 50-60. The difference is due to a combination of species (a good specimen of sal is said to fetch Rs. 50,000), and accessibility." (ODI 1999). 48. A recent article published in a Science and Environment Fortnightly notes "...a recent government circular threatens to bring the story of Nepal's community forest management (CFM) to an abrupt end. Aimed at the Terai region, where the government has shown reluctance in promulgating CFM, the circular was to stop commercial logging. But forest bureaucrats have asked communities all over the country to stop all forest related activities. (Center for Science and Environment 2000.) Part II Performance Audit Reports Hill Community Forestry Project (Credit 2028-NEP) Second Forestry Project (Credit 1400-NEP)  - 23 - Audit Findings For The Hill Community Forestry Project (HCFP) (Credit 2028) OVERVIEW AND OUTCOME 2.1 The primary project objective was to mobilize people and resources in the hill districts of Nepal to establish a forest management system that would conserve and expand the forest resources needed to sustain traditional farming systems and livelihoods. Four components were to contribute towards achievement of this objective: an institutional support component to strengthen and Proet outcom r build the capacity of the Department of Forests (FD) to implement moderately satisfactory. The community forestry; a forest resource management and restoration project helped establish the component; a training and extension component to communicate His policy, legislative andprocedural Majesty's Government's strategy to FD staff and forest communities; framework to implement a and a research component to help generate improved silvicultural program of communityforestry techniques for conservation, increase the productivity of forest in Nepal. resources and provide socio-economic information on resource utilization to enable better planning. In addition, the project provided assistance for construction of houses, office buildings, nurseries and training centers. 2.2 Overall the picture on achievement of results is mixed. The project helped establish the policy, legislative and procedural framework crucial to the implementation of a community forestry program in Nepal. It also helped build trust between the FD and the communities involved in forest protection and management. The training component of the project, mainly financed by DANIDA, made a significant contribution in re-orienting the FD towards community forestry and building capacity of UGs to protect forests. A large area of forest in the hills (more than 300,000 ha) was handed over to more than 4000 UGs identified and formalized during the project. Though the number of UGs formed were in excess of the Staff Appraisal Report (SAR) target, and there was substantial regeneration of forest cover in community forests, degradation of nearby national forests is reported because of the emphasis on protection as a strategy (para. 1.39, thematic review). It is also difficult to assess how much of the regenerated forest cover can be attributed to the project, since monitoring of outcomes and impacts was poor. 2.3 Achievements under the major project component -forest resource management-were mixed due to initial over-reliance on plantations as a means of forest restoration. In several cases, the emphasis on achieving targets also shortchanged the quality of the UG formation process.49,50 49. "The Operational Guidelines for the Community Forestry Development Program, published by the DOF, clearly sets out the procedures for developing an OP for the forest area managed by each FUG. The Guidelines have not been fully utilized as priority has been given to FUG formation and hand over of forest areas. Thus, in practice, the Range Officer takes a lead role in preparing the OP. Boundary demarcation is based on compass traverses, and OP maps contain few locally recognized landmarks. The forest area is divided into compartments, which are not always related to forest condition or the size of the forest area, and the boundaries between the compartments are frequently arbitrary. In general silvicultural prescriptions focus on protection, and management for timber production in the long term, rather than utilization to meet the immediate needs of the communities, particularly the needs of the women for fuelwood. In addition, it appears that the limited time available to meet targets means that consultation with communities is often curtailed, resulting in a poor understanding by the FUG of the geographic and management implications of the OP." Supervision Mission February 1996 Aide Memoire 50. "The OPs are not always understood by many FUG members......In addition many FUGs do not appear to be fully aware of their rights to all types of forest produce, such as medicinal plants and resin, as well as fuelwood, timber and grasses, in the area of forest for which they are responsible." Supervision Mission Aide Memoire May 1997 - 24 - In addition, the research component of the project was never implemented. As a result, crucial problems arising from field implementation could not be addressed. The quality of some of the construction under the project is also reported to be poor. The project's contribution in preparing UG members to exploit forest resources under their protection for sustainable economic returns was also limited. 2.4 The project's primary contribution was in increasing the awareness for forest protection among the hill communities and accelerating the process of bringing substantial forest land adjacent to villages under community protection, a process which had begun in Nepal much before the arrival of the Bank project. On balance therefore, project outcome is rated moderately satisfactory versus the ICR rating of satisfactory. FINDINGS AND LESSONS Lesson 1 Achieving forest regeneration through community-driven development is only the first phase. An important second phase is to ensure equitable management and distribution of benefits. The Bank has been one of the largest donors in the forest sector in Nepal. Unlike most other donors, which have worked in a few districts at a time, it has been active in several districts at the same time. In addition, the Bank is active in several other sectors in Nepal. Hence, the Bank has a comparative advantage in addressing cross sectoral issues that affect the working of all departments. If benefits from community forestry are to go beyond simple forest regeneration and are to contribute to the development of Nepal, then it is essential that the country is provided support in dealing with the second phase challenges. Through its cross sectoral presence and the use of a combination of lending and non-lending instruments that it has at its disposal, the Bank could support the government's efforts in this direction. Lesson 2 Not all the challenges and problems in implementation of a program of community participation can be visualized upfront. Hence the importance ofan efficient monitoring and evaluation system to make mid course corrections as and when required. Timely diagnosis of problems can help countries resolve challenges more readily and efficiently. Failure to develop an efficient monitoring and evaluation system contributed to an inefficient use of resources in the Hill Community Forestry Project. Lesson 3 The dependence of the poor on forests is great and forest sector development should be a part of the Bank's poverty alleviation strategy in countries like Nepal. Hence, in addition to increasing/regenerating forest cover, development objectives should be framed at least partly in terms ofpoverty alleviation. Understandably, the substantial availability of grant resources from other donors has made HMGs' government reluctant to borrow Bank credit for the forest sector. However, given the importance of forest sector development to poverty alleviation, the Bank could 'push' for forest sector i;sues as a part of its overall poverty alleviation strategy. -25 - PROJECT DESIGN AND IMPLEMENTATION 2.5 As designed, the project was complex. Implemented over 7 years in 38 hill districts, its estimated project cost was US$45.39 million of which the IDA share was to be US$30.55 million. DANIDA was to contribute US$6.85 million for the Project design was complex. training and extension component, UNDP US$0.51 million for technical Implementation was slow to assistance, the government US$4.33 million, and UGs $3.15 million. The begin with. IDA credit was approved in August 1989 and became effective in May 1990. Credit effectiveness was postponed twice as a number of covenants related to field administration needed amendment. Total project cost on completion were US$18.7 million and total IDA disbursements equaled US$9.17 million. Approximately 70 percent of the credit was canceled because of the substantial under-spending under the largest project component (forest resource management) and depreciation of the Nepali rupee. Mid term review was undertaken in December 1993. The project was extended twice from its initial closing date of June 30, 1997 and closed in June 1999. 2.6 The project correctly identified the need for training, capacity building and reorientation, but was weak in the design of the forest resource management and research components. While over-dependence on plantations as a strategy grossly overestimated the resources needed to establish community forestry, inadequate appreciation of the capacity of the FD resulted in non- implementation of the research component." Project implementation was slow in the early years due to several factors: the uncertain political situation in the country; inadequate planning and monitoring of project activities by implementing agencies; delays in approval of the legal and procedural framework for the establishment of community forestry; and lack of incentives for FD staff to hand over the management of national forests to local communities.52 Shortage of FD staff to deal with the UG formation and formalization process, frequent staff transfers and weak coordination with other donors as well as other related government departments when implementing project activities (soil conservation, livestock, etc.) also had a negative impact on project implementation. Supervision reports note that there was a constant backlog of operation plans that required preparation prior to hand-over to UGs and additional range officers had to be posted to priority districts to reduce the backlog. In addition, there was a constant shortage of FD staff to provide post handover support in silvi-cultural practices to UGs.-" 51. "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. " ICR. 52. "...the new Forest Act was passed by the government only in 1993, five years after the Master Plan, and the Regulations to interpret the Act came only in1995. This meant that community forestry development had to proceed under a blanket of uncertainty in the first half of the project period. The DOF system was to some extent uncertain how to implement the policy, and the administration of community forestry development without firm guidelines resulted in variations in implementation between Districts, depending on the District Forest Officer and his staff's perception of the policy and their attitude towards community forestry." DANIDA contribution to ICR. 53. "Although DFOs have been instructed to utilize FGs (Forest Guards) it is clear that most advice still stems from the ROs and their limited number means that there is a serious shortfall in the provision of post handover support." Aide Memoire Supervision Mission May 1997. -26- RATINGS Relevance Relevance and efficacy are rated substantial. But 2.7 Relevance is rated as substantial. The project provided support for the Efficiency is rated as government strategy for protection and management of forest resources in the modest. mid-hill region. It was also consistent with the Bank's overall and country sector strategy. Efficacy 2.8 On balance, efficacy -the extent to which the objectives were achieved -is rated as substantial even though monitoring of outcome and impact was poor. A significant area of forest was brought under UG management (more than 300,000 hectares) and the project helped establish the policy, legal and procedural foundation crucial for the implementation of a program of community forestry in Nepal. Efficiency 2.9 Overall project efficiency is rated as modest for two reasons. First, the over-emphasis on plantations as a strategy in the early years, even though corrected later, resulted in a considerable waste of resources.4 A Forest Research and Survey Center sample survey of UG plantations found that the survival rate was below 20 percent in nearly half the plantations. 2.10 Second, the recalculated economic rate of return (ERR), is lower than the appraisal estimate, even though it attempts to capture the environmental benefits. The ERR at the Implementation Completion Report (ICR) stage was estimated to be 18 percent. At appraisal the rate of return was calculated at 36 percent taking into account only the direct costs and benefits from forest management. The training and research components were excluded from the analysis because the primary benefits from these components (institution building and human resource development) were considered difficult to quantify. 2.11 In contrast, the calculations at the ICR stage attempted to quantify even benefits from the environment like reduction in downstream sedimentation, in flooding and carbon sequestration. The ICR attributes the drastic reduction in ERR from the appraisal estimate to three factors a) lower off-take from community forests than envisaged at appraisal because of the greater emphasis on protection; b) inclusion of training and research costs; c) lower actual area of forests handed-over. The audit notes that the calculations at the ICR stage are based on an economic value of fixed carbon of US$20 per ton. The recently closed Maharashtra Forestry Project in India takes the value of carbon at US$10 per ton in its rate of return calculations. Given the fact that the valuation of carbon per ton is a debatable issue, it would have been appropriate for the ICR to explain on what basis the value of US$20 per ton was chosen, particularly when the ICR itself notes that estimates of the economic value per ton of fixed carbon range from US$10-70. It is also not clear why the valuation of other environmental benefits is done at US$2 per hectare per year. It would be fair to note, however, that calculations at the audit stage show that if the benefit stream in the ICR calculations is taken to only consist of direct benefits (the incremental off-take calculations from regeneration and plantations only) even then the ERR is above 10 percent-an acceptable rate. 54. "Verbal reports and limited data on plantations established by FUGs indicate low seedling survival rates. Mission observations suggest that this is due to adverse site conditions, poor seedling quality, inappropriate choice of species, absence of soil conservation measures and poor planting practice, all pointing to a lack of technical advice or supervision by DOF staff" Aide Memoire Supervision Mission February 1996. - 27 - Institutional Development 2.12 On balance, Institutional Development is rated substantial, as in the ICR. One of the major project achievements was building trust between the FD staff and the communities engaged in forest protection and management. There is still a long way to go on several fronts: in developing UG capacity for sustainable forest management of forests; shortage of FD staff continues to be a major constraint for post-formation UG support; numerous restrictions in terms of government regulations on transportation and marketing of Institutional development is rated timber continue. Even so, the audit gives the project achievements substantial. Project achievements in in contributing to the establishment of a policy, legal, and contributing to the establishment of a procedural framework and in transferring substantial management policy, legal andproceduralframework responsibility to grass root communities a high enough weight to and in transferring substantial support a substantial rating. management responsibility to grass root communities warrant a substantial Bank and Borrower Performance rating. 2.13 On balance, both Bank and Borrower performance is rated satysfactory but only marginally so because of the weaknesses in project design. The ICR rates both Bank and Borrower performance as satisfactory. Bank performance was poor in designing the forest resource management component. There was also inadequate appreciation of the importance of the research component. When it was realized that the government capacity to implement the research component was limited, the component was canceled at mid-term review instead of attempts being made to identify alternative approaches for its implementation." Moreover, M&E problems were not addressed despite persistent observations by supervision missions. In addition, weak linkages between field staff and the center and the government policy of frequent staff transfer negatively affected project implementation. Sustainability 2.14 Sustainability is rated likely, as in the ICR. Since project closing in 1999, DANIDA has continued to provide support for project activities through the Community and Private Forestry Component and the Community Forestry Field Implementation Component of its NARMSAP project. As for the community forestry program, the ICR notes "The system is likely to be sustainable while the existing policy, regulatory and incentive frameworks remain in place." The audit goes even beyond this statement to note that the system of forest protection by UGs is so strongly entrenched in the hills of Nepal that even minor modifications in policy and law are not likely to affect it. As noted in the thematic review, there is no danger that the people will stop protecting the forests. The people have realized only too well that they cannot afford not to protect as the terrain in the hills is extremely fragile. However, if community forestry is to be an effective poverty alleviation strategy, then it is crucial that the second phase challenges be addressed. 55. This shortcoming is acknowledged by the ICR. -28- Audit Findings For The Second Forestry Project (Credit 1400) OVERVIEW AND OUTCOME 2.15 The project was an ambitious operation for the Terai region designed to manage both the supply and demand of fuelwood, fodder and other forest products through community participation. On the supply side, the project was to provide funds for equipment, vehicles, staff, civil works, operating expenses and nurseries to support social forestry (tree plantings outside the forest area) and natural Project outcome was forest management over a period of six years. On the demand side it was unsatisfactory. to promote energy conservation through distribution of improved stoves. It was to also provide civil works and other support for training of FD staff, forestry research and M&E. 2.16 The project was able to meet a large part of its physical planting targets, particularly for nursery establishment and seedling production. Numerous trees were planted along canal banks, roads, in institutional and demonstration woodlots and on panchayat lands. Unfortunately, the inadequate M&E makes assessment of outcome difficult. Targets for natural forest improvement and agro-forestry fell far short of those at appraisal and performance of farm forestry was unsatisfactory despite the fact that most of the land in the Terai is privately owned. Inadequate attention to training and capacity building resulted in a target-driven implementation schedule which had severe negative consequences for the development of genuine community forestry. Most of the plantations were established by FD staff using hired labor. On balance therefore, overall project outcome is rated as unsatisfactory, as in the PCR. 2.17 The project was to support a first phase of community forestry in the Terai. During the project's lifetime community participation evolved from the panchayat to the UG approach in Nepal (para. 1.9 thematic review). Under the project, UG identification and formation began towards the end of the project period. But the limited experience which the FD had in implementing community forestry resulted in mores stress on number of groups formed rather than development of ability within them to maintain plantations. In addition, the project closed before the 1993 Forest Act and the 1995 Forest Rules came into effect. Hence, even though UGs were being formed, without the policy, legal and procedural framework little was achieved. FINDINGS AND LESSONS Lesson 1: Technical assistance and sound M&E are particularly important in a project that is experimenting with and promoting new ideas. It is crucial that this is recognized both by the Bank and the Borrower and that adequate provisions are made for the timely and smooth implementation of these components. The crucial technical assistance and M&E components were given inadequate attention in the project. As a result, both the Bank and the Borrower were not equipped to handle the project. While development of a strategy of community participation was essential they had little prior experience with the necessary tools and training to make participatory development a success. Hence it is not surprising that little genuine community participation was achieved. Lesson 2: The blind incorporation ofproject ideas and components from other areas is a recipe for failure. Even worse results can follow if ideas that have not yet been successfully tried out in the first place are hastily transplanted to other areas with completely diferent socio-economic conditions. -29 - The design for the Second Forestry Project was borrowed from the hill project (Cr. 1008) and not adapted to suit conditions in the Terai. In addition, components which had not been tested successfully even in the hills were blindly incorporated. An example is the stove component which allegedly failed because the stove design was not suitable for the socio-economic conditions in the Terai. However, the PCR for the hill project (Cr. 1008) raised concerns about the acceptability of the stove even in the hills." PROJECT DESIGN AND IMPLEMENTATION 2.18 The credit was appraised in November 1982, became effective in 1983, and was closed in June 1992, two years behind schedule. Total project cost at appraisal was US$24 million of which the IDA share was to be US$18.0 million. The amount of IDA credit was reduced in 1985 to US$16 million as co-financing through an EEC grant became available for the Technical Assistance component. The credit amount was further reduced in 1990 because of low physical achievement and substantial depreciation of the Nepalese Rupee. Total IDA disbursements were US$4.3 million. 2.19 The project was over-ambitious in scope and poorly designed. Project implementation was poor and difficult. Though the project became effective in 1983, key project The project was activities began only in 1986. As already noted, project design was borrowed from the poorly designed and hill project and was unsuitable for forestry in the Terai where socio-economic over ambitious in conditions were very different. The inadequate attention to the crucial technical scope. Project assistance component-which was to provide assistance in re-orienting the FD implementation was towards promotion of community participation-is obvious from the ad hoc poor and difficult. arrangements made to finance it and its poor design."'"Although the location of the Terai Community Forestry Project Unit headquarters in Hetuada district facilitated access to project areas, it made coordination with various government departments at Kathmandu, crucial to project implementation, extremely difficult. Several government departments and ministries had a crucial role to play in project implementation-the Ministry of Finance, Departments of Agriculture, Livestock Development and Animal health, Ministry of Forests and Soil Conservation, Ministry of Panchayat and Local Development, Survey 56. " despite the large number of its distribution under the project and apparent advantages, it has not been widely accepted by local communities. independent studies on the performance of stove programs in the country indicate that as much as 40% of the stoves distributed under various projects were abandoned during the first year of their distribution the main problems of the stoves distributed under the project were their high breakage rate and unsuitability for local cooking requirements." PCR Credit 1008, page 6. 57. Though the project was approved in July 1983, in November 1983 a decision was taken to finance the TA component by an EEC grant. The Bank credit amount was then reduced to $16.0 million. FAO was to execute the TA as it had prior experience with the TA component of the Bank supported Community Forestry Development and Training Project. This reallocation of responsibilities led to delay and the TA component did not become operational until November 1985. The full momentum was not attained until 1988-89. Apart from the initial delay, EEC funding for TA came to an end in December 1989. As planned the credit was to close in June 30 1990. Initial planning did not provide for the EEC financed TA component to cover the entire project period. When the decision to extend the project by 2 years, one year at a time, was finally taken things became extremely complicated. There followed a series of short term arrangements with multi donor involvement which disrupted whatever momentum had been achieved. 58. FAO's semi annual report for the period September 1986 to February 1987 contains a discussion paper which had comments on the design, of the Technical Assistance component. Commenting on the afforestation targets the paper noted that "a) The fundamental statistical data and information from which the targets ought to be derived are not available. It is difficult to understand how targets were formulated at all without having this basic information; b) The approach to the implementation of the targets must be described as scattered mosaic operations and are not integral parts of communal, district or regional development plans they should; c) The targets are not structured and do not take into consideration in the way they should the specific needs, requirements and conditions of the geographic units they are meant to be for. ....." -30- Department. Location of project headquarters at Hetuada made things particularly difficult since apart from the distance, even telephone communication between Kathmandu and Hetuada was poor at that time. 2.20 Further, the delayed fielding of the mid-term review (mid 1988), which identified major design problems and inconsistencies in the institutional framework, did not allow for sufficient time to turn the project around. In addition, though the FD had little prior experience in implementation of community forestry schemes in the Terai yet the project area was extended in 1988-1989 from 13 districts in central and eastern Terai to 20 districts to also cover western Terai." This extension of project area took place despite poor project performance being noted by the mid-term review. 2.21 Project implementation was further handicapped by inadequate borrower commitment which is visible in the shortfall in appointment of crucial field level staff,60 frequent transfers, lack of identification of suitable planting and forest improvement areas in advance,' several irregularities in procurement62 and procedural rigidities. Untimely release of funds by the government also led to delay and failure in achieving objectives." The budget was released in trimester allotments which were not available on time and frequently upset the work program of DFOs. 2.22 Poor donor coordination also limited overall implementation capacity and was responsible in a big way for the unsatisfactory performance of the project. User group training was supported by DANIDA, progress on the research front required coordination with the ODA assisted forest research division, there was FAO, UNDP, EEC involvement in the TA component. However, coordination among the activities of the several donors was poor and it forced the Nepalese government to use scarce staff and resources on several fronts at the same time to deal with the administrative costs. RATINGS" Relevance 2.23 Relevance is rated as modest even though the project was an outcome of HMG's concern regarding the degradation of the environment and the pressing need for forest products and was 59. Early Project documents noted "Although the mission decided that in view of the funds allocated to the project in the lending program, only the districts in the eastern Terai could be included in the project, the FD pressed for complete coverage of the Terai and assured that neither lack of staff nor lack of HMG funds would be constraints to the successful implementation of the larger project." (Identification Mission Mar 17 1982) 60. "This project became effective on Nov. 30 1983. Since then no action has been taken by the Government to commence implementation. In spite of clearly stated covenants (Section 3.05 and 3.06-c) neither the senior project officer nor the project coordinator have been appointed. There is no budget provision for 1983-84 FY nor there is a budget proposal for 1984-85." (May 1984 supervision mission) 61. Improved management on 35000 ha of existing forests and bringing 5,900 ha of degraded forest land under agro forestry practices were two project targets. Comprehensive resource surveys were needed for this without which implementation of the agro forestry program and prescription of appropriate silvicultural practice treatments for improved forest management could not be done satisfactorily. Such surveys which required the cooperation of the Survey Department were not undertaken till very late. 62. Project files reveal that guidelines were violated in the procurement of motorcycles and spare parts. "This project has a history of procurement violations, in spite of the fact that South Asia procurement specialist X has four times met with project officials in the last year to advise them on IDA procurement guidelines." (Internal memo Mar 26 1987) 63. "The mission is convinced that unless HMG improves the whole system of budget release, forestry development work of good quality cannot be carried out." (Aid Memoire Annex 1 July 1990) 64. PCR ratings at that time were provided by OED. -31- recommended by the Bank." The Terai possibly has the worst rate of deforestation in Nepal and the population pressure continues to degrade the remaining forest resources (the Terai accounts for about 14 % of Nepal's land area but 45 percent of the population). Migration from the hills to the Terai which began in earnest in the early 1960s after the eradication of malaria (para. 1.7 thematic review), continues to be a major factor in increasing the pressure on the forests. Although the basic objective, to increase supplies of fuelwood and other forestry products, was sound, lack of capacity to handle community participation led to unrealistic project design and contributed to limited relevance. Efficacy 2.24 Efficacy-the extent to which the objectives were achieved-is also rated as modest. Though a large number of physical targets were met, the project design was poor and there were major shortcomings. In addition, because of a poor M&E there is little evidence to link project inputs with outcomes. Efficiency 2.25 Efficiency is rated as modest. At appraisal the Economic Rate of Return (ERR) was calculated at 27% based on 84% of project costs. The Project Completion Report (PCR) notes that lack of a proper M&E system makes it impossible to re-estimate the ERR. However, using SAR assumptions on growth and yield rates and actual costs and estimated benefits, the PCR gives an indicative estimate of ERR at 12 percent. Even the 12 percent appears to be an overestimate given the poor performance of the sisoo plantations in the Terai. Sisoo was one of the main species planted under the project and most sisoo plantations have been affected by disease. Little progress was made on research to deal with such diseases. Institutional Development 2.26 The institutional development impact of the project is rated as negligible, as in the PCR. Given the target-driven implementation schedule, little genuine participation was achieved. The project, however, created awareness and support for tree plantation and protection in the Terai. Bank and Borrower Performance 2.27 Both Bank and Borrower Performance are rated unsatisfactory because of the poor design and implementation. The PCR on the other hand does not provide a clear rating for either Bank or Borrower Performance. Though a total of 15 supervisions were fielded at appropriate intervals, shortcomings in project design were not corrected. Inadequate borrower commitment made implementation difficult. Sustainability 2.28 Project sustainability is rated as unlikely, as in the PCR. The project was implemented at a time when both the Bank and the Borrower had limited experience with the community forestry approach. In these early years, little attention was given to the actual involvement of communities and the project followed a target-driven approach. Moreover, there were little funds available to DFOs on project closing to provide post-handover support to the user groups. Though the project 65. A World Bank Forestry Sector Review (1978) recommended that HMG forestry development strategy give priority to a national rural afforestation program in the Hills and in the Terai over the next 20 years. During the first phase, under the Community Forestry Development and Training project (Cr. 1008-NEP) the Bank financed social forestry in 18 Forest Divisions in the Hills covering 340 Village Panchayats. The current project was the second phase of a national forestry program recommended in the Review. - 32 - was seen as the first phase of a long term (20 year) program which would eventually cover the whole Terai and expand its activities within each individual district, no other Bank supported forestry project was approved for the Terai. - 33 - ANNEX A Basic Data Sheets NEPAL - HILL COMMUNITY FORESTRY PROJECT (IDA CR. 2028-NEP) Key Project Data Appraisal Actual or current Actual as percent of estimate estimate appraisal estimate Total project costs (amounts in US$ 45.4 18.41 40.5 million) Credit amount 30.55 9.17 30 Cofinancing 7.36 6.67 90 Cancellation 25.8 - Date physical components completed June 30, 1997 June 30, 1999 - Economic rate of return (%) 36 18 50 Project Dates Original Actual Identification October 1985 Preparation September 1987 FAOICP Appraisal November/December 1987, April 1988 Negotiations April 21,1989 Board Presentation May 30, 1989 Signing August 8, 1989 August 18,1989 Effectiveness November 16,1989 May 14, 1990 Project Completion June 30, 1997 June 30, 1999 Project Closing June 30,.1997 June 30, 1999 Staff Inputs (staff weeks) Total Up to Appraisal 206.4 Appraisal to Board 27.9 Board to Effectiveness 8.2 Supervision 239.2 Completion 15.5 Total 497.2 Cumulative Estimated and Actual IDA Disbursements FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 Appraisal 0.7 3.0 6.0 9.0 12.0 16.0 21.0 26 30.5 30.5 30.5 estimate 7Actual 0 3.349 4.026 5.059 5.284 7.532 8.413 9.150 9.173 9.173 9.173 Date of Final Disbursement November 23, 1999. -34 - Mission Data Stage of Project Cycle No. of Persons and SpeclaW Performance Rating Types of MonthYear Number Specialty Implementation Development Problems Progress Objective Identification/Preparation: a/ Appraisal/Negotiations: a/ Supervision 02/90 2 ECON, TM na na na 07/90 2 ECON, TM 2 2 07/91 3 ECON, CONS, PROG 3 2 12/91* 1 ECON 3 2 04/92 4 FOR, ECON(2), CONS 3 2 administrative, technical, institutional 06/92 1 FOR 3 2 04/93 3 FOR, SOC, FIN 3 2 institutional, technical 09/93 3 3 12/93 MTR 3 FOR, INST, SOC administrative, technical, institutional, implementation 04/94 3 2 na 06/94 2 FOR, ECON U S 12/94* 06/95 1 ECON S S 09/95 1 ECON S S implementation, 02/96 4 AG, PO, ECOL, FOR S S technical 06/96 1 AG S S 11/96 2 AG,TM S S Implementation, S S technical, monitoring 06/97 3 FOR, ECOL, TM S S ICR 06/98 5 ECOL, FOR (2), ECON S S 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 AG=agronomistlagriculturalist CONS=consultant; ECOLzecologist; ECON=economist; FIN=financial analyst; FOR=social forester, INST=institutional expert; PO=program officer, SOC-socologist; TM=task manager (expertise unspecified). Other Project Data Borrower/Executing Agency: Follow-on Operations Operation Credit no. Amount Board date (US$ million) None - 35 - Nepal - Second Forestry Project (IDA Cr. 1400-NEP) Key Project Data Appraisal Actual or current Actual as percent of estimate estimate appraisal estimate Total project costs (amounts in US$ 24 11.00 45.83 million) Credit amount (amounts in US$ million) 18.00 4.34 23.88 Cofinancing 2.20c - Cancellation a, b 17.75 - Date physical components completed - Economic rate of return (%) 27 12 44 a/ Cancellation of SDR 1.85 million (US$2 million) due to the EEC cofinancing which was approved in November 1985. b/ A further SDR 8 million (US$10 million) was cancelled in June 1990. Total IDA disbursements amounted to SDR 3.39 million (US$4.34 million), and the undisbursed balance of SDR 3.46 million (USS4.91 million) was cancelled on December 11, 1992. The revised Credit amount in US Dollars equivalent was substantially higher due to depreciation of the US Dollar against the SDR (19% from US$1.08 = SDR 1.0 in 1983 to the average of US$1.28 = SDR 1.0 during 1984-1992). c/ Includes EEC, FAO/TCP and UNDP grant funds. See Part Ill Table 5b PCR Project Dates Original Actual Identification Feb-March 1982 Preparation June-July 1982 Appraisal November 1982 Negotiations May 9, 1983 Board Presentation June 20, 1983 July 12, 1983 Signing September 1, 1983 Effectiveness November 30, 1983 Project Completion June 1989 December 31, 1991 Project Closing June 30, 1990 June 30, 1992 Staff Inputs (staff weeks) Total Up to Appraisal 68.0 Appraisal to Board 33.0 Board to Effectiveness 4.1 Supervision 86.2 Completion 2.0 Total 191.3 Cumulative Estimated and Actual Disbursements (US$million) FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 Appraisal 0.80 4.10 7.50 10.30 13.50 17.10 18.0 Revisedal 6.70 9.00 1200 15.00 16.00 Revisedb/ 8.50 9.25 Actual _ 0.05 1.29 1.47 1.53 1.58 2.64 3.02 3.23 4.34 Actual as% of Appraisal- 1 19 16 13 11 17 36 35 47 Revised Estimates I I I I I _ Date of Final Disbursement: December 11, 1992 -36- Mission Data Stage of Project Cycle No. of Persons and Specialty Performanceb Rating Types of Month/Year Number Specialty" Implementation Development Problemsc Progress Objective Identification/Preparation: 8 E(2), F(4), S(2) 02-07/1982 Appraisal/Negotiations: 4 E, F(2), S Supervision 05/1984 1 F 3 M 11/1984 1 A 3 F 05-06/1985 2 B, F 3 M, T 11-12/1985 1 B 2 F, M 04/1986 1 B 3 F, M 07-08/1986 2 F(2) 3 F, M 12/1986 11 B 3 F, M 10/1987 1 F 3 F, M 05/1988 1 F 3 F, M 10-11/1988 2 E(2) 3 F, M, T 07/1989 1 F 3 F, M 11/1989 1 F 2 F 7/1990 1 F 2 F 02-03/1991 3 A, F, S 3d 03/1992 2 F, M 3d F ICR at A=agriculture; B=management; E=economic; F=forestry; l=institutional; M=M&E; S=sociology. b/ Performance Rating: 1 =problem free or minor problems; 2=moderate problems; 3=major problems. cl Type of Problems: F=financial; M=management; T=technical d/ Project ratings were adjusted by CPPR missions Other Project Data Borrower/Executing Agency: Follow-on Operations Operation Credit no. Amount Board date (US$ million) No other forestry project followed for the Terai -37- ANNEx B Government's strategy for the Terai The key points of the Ministerial Concept paper I. Contiguous large block of forests now existing in the Terai and the Churia hills will be delineated, gazzetted and managed as national forests. 2. A collaborative forests management system will be adapted for the Terai. 3. Since the present stock of timber in the Timber Corporation of Nepal depots and the collection of fallen trees from forests and settlement areas is able to fulfill the present demand, green trees as such will not be felled for commercial purposes, at least for next five years. 4. The barren and isolated forest land of the Terai, inner Terai and the Churia hills will be made available for handing over as community forests. A community forest operational plan will be prepared and forest product will be utilized based on annual increment and prescribed guidelines relating to the marketing of forest products. 5. The churia hills will be managed as a protected forest as they are geologically very fragile. 6. 25 percent of the income of the income of the government managed will be provided to local governments (VDC and DDCs) to implement local development activities. The remaining 75% of the income will be collected as government revenues. 7. 40 percent of the selling price of the surplus timber from community forests to be provided to the government. Source: HMGN concept paper (April 2000). -38- ANNEx C COMMENTS FROM GOVERNMENT Draft Project Performance Audits and Thematic Overview of Hill Community Forestry Project (Credit 2028-NEP) and Second Forestry Project (Credit 1400-NEP) 1. The lessons learned from the implementation of Hill Community Forestry project on the community-driven development (CDD) (para 1.2) is useful for agriculture sector too. 2. It is rightly accepted (para 1.7) that "the forests in the mid-hills are scattered, intermixed with settlements and agricultural land, not easily accessible, and valued primarily for meeting the livelihood and subsistence needs of the local population". But the opportunities provided and threats posed to agricultural sector and hence to the livelihood of the people from this project are not explored. 3. It is acknowledged that (para 1.26) "secondary and nomadic users were easily missed in the user identification process". But its effects on the livelihood of such people particularly on food security are not delineated in the report. It is widely believed that the development of community forestry threatened the livelihood of nomadic mountain people who used to transport food on the pack animals and food security of the people living in remote mountain areas in Nepal. If it is true, the report may draw some lessons and suggest mitigation measures. -39- Annex C COMMENTS FROM GOVERNMENT His Majesty's Government National Planning Commission Secretariat (Agriculture and Forestry Division) Singha Durbar Kathmandu, Nepal Ref. No. July 5, 2001 Mr. Alain Barbu, Manager, Sector and Thematic Evaluation Group Operation Evaluation Department, The World Bank, 1818 H Street N.W. Washington D.C. 20433 USA Fax: 202-522-3123 Re: Nepai-Rill Community Forest Project (Credit 2028-NEP) Secod Forestry Prpoject (Credit 1400-NEP) Draft Project Performance Audits and Thematic Overview Dear Mr. Barbu, This is with reference to your letter addressed to Hon'ble H.S. Tripathi, Member National Planning Commission dated May 23, 2001. Please find enclosed herewith a copy of the Comments made by National Planning Commission secretariat,Agriculture and Forestry Division on the above mentioned Report. Thanking you. Yours' Sincerely, (Shiva Kumar Thapa) Section Officer -40 - Comments from National Planning Commission Secretariat Agriculture and Forestry Division on Draft Project Performance Audits and Thematic Overview of World Bank Assisted Forestry Projects in Nepal First of all I would like to congratulate Ms. Nalini Kumar and her team from World Bank (WB) for their hard work in preparing Draft Project Performance Audits and Thematic Overview on WB assisted forestry projects in Nepal. I thank you for mentioning in this draft "Audit Plus" report about governments commitment towards its natural forest protection and management. As governments resources are too scant to conserve the eco-system of global significance, its very much appreciated that WB came forward to assist in the noble task of forest resources conservation. There is no doubt that Nepal has already gained much experience in implementing community forestry (CF) program. This is one of the successful concepts that has been translated into action specially in the mid-hills of Nepal. The results of the launching of CF programs towards forests and environment conservation and raising the economic status of rural poor (the user/beneficiary) are encouraging and very much visible. Specially I am concerned with the issues the auditors from WB has raised regarding deforestation and forest degradation in the Terai region. Terai has some difficulty in applying CF model and its handing over to Forest User Groups (FUGs). It would have been better if the report could have listed down some of the reasons for this forests degradation. Of course other issues raised in the report such as- importance of technical assistance, and sound M&E system, inconsistencies due to blind incorporation of project ideas, faulty project design and implementation, sustainability issue, issue of poor donor coordination, and the issue of developing poverty indicators for all CFUG projects, so as to grow CF-poverty links- are very genuine, I am confident that based on experiences of second forestry project, if the project design be improved according to felt needs and socio-economic characteristics of Terai region and implementation be smooth and co-ordinated on the part of both donor and borrower (i.e. the government) the implementation of CF model in the Terai region will be substantially easier. -41- BIBLIOGRAPHY Acharya, D. P. et. al. 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