Madagascar - Third Environment Program Support Project

Updated Project Information Document (PID) Report No: AB565 Project Name MADAGASCAR - Third Environment Program Support Project Region Africa Regional Office Sector Forestry (90%); Renewable energy (10%) Theme Biodiversity (P); Environmental policies and institutions (P); Other environment and natural resources management (P) Project P074235 Supplemental Project P074236 Borrower(s) GOVERNMENT OF MADAGASCAR Implementing Agency(ies) MINISTRY OF THE ENVIRONMENT, WATER AND FORESTS MINISTERE DE l'ENVIRONNEMENT ET DES EAUX ET FORETS Address: Antananarivo Contact Person: Sylvain Rabotoarison, Minister Tel: 261-20-22-25999 Fax: 261-20-22-30693 Email: minenv@dts.mg OFFICE NATIONAL DE L'ENVIRONNEMENT Address: Antananarivo Contact Person: Jean Chrysostôme Rakotoary, Directeur Général Tel: 261-20-22 25999 Fax: 261-20-22-30693 Email: jcrakoto@pnae.mg Association Nationale de Gestion des Aires Protegées Address: Antananarivo Contact Person: Guy Suzon Ramangason Tel: 261-20-22-41538 Fax: Email: angap@dts.mg Environment Category B (Partial Assessment) Date PID Prepared February 17, 2004 Auth Appr/Negs Date December 18, 2003 Bank Approval Date March 18, 2004 1. Country and Sector Background The reality of rural Madagascar is characterized by widespread, extreme poverty and significant pressure on the country's unique biodiversity and natural resources. Seventy percent of the population is poor. Close to 80% of the poor live in rural areas. Their livelihoods almost exclusively depend on agriculture and related natural resource-based activities, suggesting an intimate linkage between poverty and natural resource degradation. Achievements and Challenges In order to reduce natural resource degradation trends, a National Environmental Action Plan (NEAP) was launched in the late 1980s, which is generally considered one of the most ambitious and comprehensive environmental programs to date in Africa. The NEAP was given legal power by adopting the National Environment Charter and the National Environmental Policy in 1990 (Law 90-033, December 21, 1990). The Plan, recognizes the link between environmental protection and economic development and includes six elements: (i) protecting and managing the national heritage of biodiversity, with a special emphasis on parks, reserves and gazetted natural forests, in conjunction with the sustainable development of their  2 PID surrounding areas; (ii) improving the living conditions of the population through the protection and management of natural resources in rural areas with an emphasis on watershed protection, reforestation and agro-forestry; (iii) promoting environmental education, training and communication; (iv) developing mapping and remote sensing tools to meet the demand for natural resources and land management; (v) developing environmental research capacities for terrestrial, coastal and marine ecosystems; and (vi) establishing mechanisms for managing and monitoring the environment. The NEAP was designed from its inception as a fifteen year investment program divided into three five-year phases. The first five year phase aimed at creating a proper policy, regulatory and institutional framework so as to generate the conditions for genuine country ownership of the environmental agenda which prior to the NEAP used to be set and driven by the donor community. The second phase of the NEAP aimed at consolidating the programs initiated under the first phase by putting the established national institutions firmly in the driver's seat. The third phase, which is currently being launched and supported by the proposed project, is focused on consolidating the varied past efforts and establishing sustainable financing mechanisms for the environment. Major achievements of the NEAP up until to date include: (i) the enactment of enabling legislation for the protection of country’s natural resources and the promotion of proper environmental management; (ii) the set-up of environmental institutions (such as the park service ANGAP) for the implementation of environmental activities and programs; (iii) the development and implementation of community-based approaches for natural resources management; (iv) the emerging evidence of positive field-level impacts in terms of reduced deforestation rates; and (v) the establishment of a platform for sustained donor support and coordination for the environment in Madagascar. At the same time, as indicated in the Bank's Rural and Environment Sector Review (2003), there are numerous areas where the NEAP could improve its track record. The application of policies and regulations remains a challenge due to weak institutional capacity and serious governance problems, particularly in the forestry sector. Resources under the NEAP have been disproportionately invested in parallel structures at the central level, while too little has been invested to strengthen institutional capacity on the ground. Lack of rigorous priority setting has also led to a situation in which NEAP tends to drift somewhere between conservation and rural development, sometimes seeking to fill gaps that other programs such as the PADR now seeks to fill. Consequently, there is the notion that the operational programs of the NEAP have spread themselves too thinly, thereby contributing to the widespread feeling that more could have been achieved than actually has been. The challenge for mainstreaming of the environmental agenda is reflected in: (i) the relatively modest budget allocations for the sector; (ii) the existing limited knowledge and awareness of the Malagasy population concerning environmental issues; and (iii) the slow development of market mechanisms for the valuation of environmental services. This latter point is of particular importance as the third phase of the NEAP is specifically geared towards putting in place sustainable financing mechanisms for the environment. Progress in this field has been limited. Park entrance fees now cover about 7% of ANGAP's costs. ONE has been able to generate some revenues from environmental permit related fees, but these are insufficient to even cover variable costs. However, economic analysis shows that biodiversity conservation, eco-tourism and watershed protection benefits that are associated with environmental investments in Madagascar along the lines proposed under the third phase of the NEAP exceed management and opportunity costs. Consequently, the potential to put in place sustainable financing mechanisms for the environment does exist and the challenge is to find ways and means to increase benefit capture of the environmental institutions concerned. In view of international experience, there is however a need to be realistic about the immediate revenue generating capacity of sustainable financing sources.  3 PID Government Agenda and Strategy Conservation as Guiding Principle for Natural Resources Management. The government of Madagascar has undergone a substantial restructuring in January 2003 that is highly significant for the rural / environmental sector. Key changes have been: (i) integration of economic programs, land use planning, transport and public works into a single ‘super-ministry’ under the vice Prime Minister; (ii) combination of Agriculture with Livestock and Fisheries into a single ministry; and (iii) combination of Waters & Forests with Environment into a single ministry. These changes are important to the rural/environment sector for various reasons: (i) the fusion of economic programs, land use planning, transport and public works will facilitate an integrated approach to national spatial development planning and represent an important opportunity for the sector to incorporate rural and environmental dimensions into national spatial planning; (ii) the combination of agriculture, livestock and fisheries regroups the ‘food producing’ sectors and should facilitate a greater emphasis within the fisheries sector on food security, rural development and poverty reduction as a complement to the established orientation on generating revenues from fisheries exports and licenses; and (iii) fusion of forests and water with environment may be seen as a radical move to create a transformed forests sector oriented towards conservation and biodiversity as opposed to extractive production. This should greatly facilitate the development of conservation programs outside protected areas, improved sector governance and the efficient capture and distribution of benefits from biodiversity. In line with this observation, the President of the Republic announced at the World Parks' Congress in Durban in September 2003, that Madagascar, in line with IUCN norms, would increase the area under effective conservation arrangements (covering forest, wetland and marine ecosystems) from 1.7 million ha to 6.0 million ha. Doing so reflects the GoM's overall strategy adopted under the PRSP (finalized in July, 2003), which, in line with the Millenium Goals, calls for ensuring environmental sustainability so as to consolidate Madagascar’s unique position as a mega-biodiversity country. Indicators of the PRSP reflect that success of the strategy will among other be measured against progress in reducing the actual deforestation rate, thereby underscoring that sustainable natural resources management is regarded as a strategic national interest. Renewed commitment to NEAP. The Government recognizes that the strategic approach adopted at the time of the NEAP remains valid today; that is: (i) the time scale of decades; (ii) the process of learning and adapting from stage to stage; (iii) mainstreaming environmental concerns as far as possible into sectorial policies and investments; (iv) creating and maintaining a system of conservation areas which are ecologically representative; (v) ensuring sustainable management of Madagascar's unique terrestrial, coastal and marine ecosystems; and (vii) targeting complementary development activities to reduce pressures on the natural resources base. For this purpose, the Minister of the Environment, Water and Forests has prepared a Letter of Environmental Policy that confirms the GoM's commitment to the NEAP, while at the same time providing an actualized context of the Plan that was put in place more than ten years ago. The Letter lays out an overview of the environmental problems that Madagascar faces today, indicates achievements as well as lessons learned from NEAP's previous phases, presents a sector specific vision for 2015, confirms the design of EP-III, specifies key program implementation principles, details how monitoring and evaluation of results will be achieved, and identifies critical factors for success. The following key messages can be distilled from the Letter. First, although considerable progress has been made, there is a need for sustained efforts to improve biodiversity conservation and sustainable natural resources management. Second, to improve program effectiveness it is recognized that there is a need for greater focus on those themes and geographical areas where the NEAP has a clear comparative advantage, while improving coordination with other sector programs. Third, to set the stage for better results on the ground, the need for greater institutional presence on the ground along with effective participation mechanisms for local stakeholders and civil society is emphasized. Fourth, to improve institutional efficiency and accountability , the Letter stresses the need for result-based implementation mechanisms as  4 PID well as the need for dedicated efforts to improve sector governance. Fifth, the Letter makes the point that law enforcement efforts are a necessary complement of providing incentives and support to improve sustainable natural resources management. Parallel to the GoM's commitment to the NEAP is also its renewed support for the Rural Development Action Plan (PADR), which was launched in 2001. This Action Plan provides the framework for the implementation of the country's rural development policy and coordinates policies and public investment programs as pursued by the participating sector ministries. The GOM is committed to pursue implementation of the PADR as, among other, reflected by its intention to strengthen the role of Regional Working Groups for Rural Development (GTDRs). These Groups, which include representatives from grassroots membership organizations, ONGs, private sector, local government and regional offices of the sector ministries, have been set-up as regional champions to translate the overall orientations of the Plan into concrete actions that are adjusted to the specific agro-ecological conditions of each of the distinguished 23 agro-ecological regions in the country. The importance of the PADR for the NEAP is that the focus of the PADR on increasing rural productivity through agricultural systems intensification, allows the NEAP to focus itself more on core environmental functions and natural resource conservation in areas of high priority biodiversity. Doing so would reduce excessive dispersion of activities as was the case under previous phases of the NEAP. Close coordination between the PADR and NEAP is of crucial importance to achieve the objectives of both, which is the reason why the MAEP and MinEnvEF have signed a specific protocol for this purpose. Overall Focus on Governance Provides Unique Sector Opportunity. The Government's intense focus on improving governance, provides a unique window of opportunity to deal with this issue in the forestry sector in a manner that was not possible previously. In line with this, the Ministry of the Environment Water and Forests (MinEnvEF) has successfully moved forward in carrying-out an Action Plan to improve governance that was agreed under the previous GoM. This Action Plan included among others, the following actions: (i) publication of permits so as to increase transparency; (ii) transfer of 70% of the permit fees to the regions so as to provide better incentives for law enforcement to local stakeholders; (iii) cancellation of permits with fee payment arrears; (iv) measures to enforce fauna management rules adopted under CITES and publication of CITES monitoring reports; and (iv) the use of GPS units to better delineate permit boundaries. As part of the project preparation process, the MinEnvEF has sustained its efforts to improve governance by: (i) keeping collection quota for CITES and non-CITES species at zero in 2002; (ii) banning the export of non-processed precious wood; (iii) cancelling permits of nonpaying holders; (iv) effectuating a moratorium on the allocation of new forest exploitation permits; (v) carrying-out an intensive forest fire and slash-and-burn control program; and (vi) launching initiatives for the auto-regulation of private sector operators. It is agreed that these measures pave the way for the implementation of structural measures to improve governance in the sector that have been included in the design of the program in support of the third phase of the NEAP. Streamlined Sector Institutional Framework for Greater Effectiveness on the Ground. The newly created MinEnvEF has quickly moved forward in developing an institutional vision that reflects the notion of conservation as the guiding principle for natural resources management in Madagascar. In line with this vision, it is envisaged that the MinEnvEF will structure itself in a manner that will enable it to carry out core public sector functions related to policy making and regulatory measures. Core operational responsibilities will be concentrated in specialized semi-public institutions for respectively: (i) protected areas management; (ii) forest ecosystems management; and (iii) application of environmental impact legislation. To improve synergy with other programs notably in the transport, agriculture, tourism, and energy sectors, the institutional structure provides for strong institutional coordination capacity. Last, but not least, the structure includes specific arrangements to operationalize support for sustainable natural  5 PID resources management at the commune level through the creation of a dedicated funding mechanism. 2. Objectives The Government of Madagascar (GoM) adopted an ambitious 15-year investment program in 1989 known as the Madagascar Environment Action Plan (PAE or NEAP) with the following goal: ‘natural resources are conserved and wisely utilized in support of sustainable economic development and a better quality of life”. The Plan was to be executed in three phases (EP I/ II/ III), each with discrete objectives. The first phase of NEAP was initiated in 1991 in the face of a limited conservation baseline with the support of a broad coalition of bilateral donors (Germany, France, Switzerland, USA), international agencies (WB-IDA, UNDP) and NGOs (Conservation International, WWF, Wildlife Conservation Society). Activities in this phase aimed at nurturing policy and regulatory reform and creating the basic institutional framework for protected area management and for ecologically compatible development. The second phase of NEAP, initiated in 1997, expanded the field coverage of conservation activities, while further strengthening institutional capacities, and developing the policy framework to improve conditions for sustainability. The third and final phase of NEAP (EP III)—which will be supported through this project—aims at improving the protection and sustainable management of critical biodiversity resources at the field level, mainstreaming conservation into macroeconomic management and sector programs and establishing sustainable financing mechanisms. IDA/GEF financing is geared towards assisting the GoM in the implementation of selective elements of EP III, for which two subsidiary Development Objectives have been specified: • Development Objective 1: The biodiversity and renewable natural resources of representative eco-regions is conserved and managed on a sustainable footing with active multi-stakeholder participation; and • Development Objective 2: The framework for sustainable environmental management is further strengthened through the incorporation of said management objectives into public policy making and investments. The project is complementary to, and builds upon, support provided by other partners and co-financiers under a sector-wide approach.  6 PID 3. Rationale for Bank's Involvement The Bank Group's comparative advantage in biodiversity conservation as well as demand driven rural investment projects, places it in a position to provide strong support to the GoM in implementing the third phase of its Environment Program. Due to its capacity to respond to multisectoral needs in the form of assistance in policy, infrastructure and capacity development all at once, the Bank is uniquely positioned to provide the much needed coordination of the forestry and PA systems in Madagascar. The proposed project covers all these aspects. The Bank possesses considerable experience in Madagascar through its participation in EPI and EPII. Also through policy conditionality in SAC-2, the Bank has been able to address issues of environmental concern as they related to fisheries, forestry and mining. By being the lender of last resort, the Bank has facilitated involvement of other donors in the environmental program, while at the same time assuming a key role in donor coordination, among others through its substantial support to the Multi-Donor Secretariat that was established under EP-II. Although its role as residual financier would be substantially reduced under EPIII, the Bank will be able to continue to provide value-added, particularly in view of its envisaged contribution as a global financial institution to the stated objective of developing sustainable financing mechanisms for the environment and in view of the potential leverage it can provide as a global development institution in advancing the governance agenda in the environment sector. Additionally, both the Bank and GEF provide a significant and influential input to the biodiversity and protected area management activities by focusing upon key sites requiring urgent attention. This is mainly due to the Bank’s increasing experience in, and ability to facilitate long-term, programmatic approaches to biodiversity management, poverty alleviation and sustainable resource use. It will also build upon and enhance the progress Madagascar has made in the areas of policy, legislative and structural reform in the environmental sector as a whole. The Bank is well placed to support on-going efforts in the protected areas management sector in Madagascar, which is by far the most comprehensive and well-developed of the natural resource management sectors, and thus offers the greatest potential for economic and biodiversity conservation success. The Bank is also in a position to use its influence across sectors to support the “environmental mainstreaming” component by assuring that projects and agencies receiving funding in the relevant sectors include biodiversity conservation criteria and actions. The incremental activities supported by GEF will also promote alternative livelihoods, working to support both economic development and sustained protection of natural resources. The project involves multiple stakeholders and is multi donor-financed. The value added of the Bank’s support in mobilizing additional finance from bilateral donors is based on its previous experiences where it has developed strong and positive relationships with international and local NGOs and the donor communities involved in natural resource management. Without GEF and Bank involvement it will be very difficult to consolidate the protected areas system in Madagascar and bring in lessons from other countries and regions.  7 PID 4. Description In order to translate the third phase of the NEAP into operational terms, the MinEnvEF along with donors and other stakeholders have elaborated and agreed on a comprehensive investment program (EP-III). Following a participatory process, a sector-wide approach has been developed comprising the following elements: (i) Letter of Environment Policy that provides the political umbrella and conceptual orientation; (ii) Results Framework that specifies objectives, results and activities, along with corresponding impact, output and input indicators; (iii) agreed Financing Plan with participating donors based on commitments to achievement of specific outputs defined in the Results Framework; (iv) M&E framework under which all stakeholders are committed to define success of their contributions based on agreed impact indicators in the Results Framework; and (v) narrower definition of program intervention areas to reflect the need for greater focus and avoid dispersion of activities. The project would support the third phase of the NEAP, commonly called EP-III. The agreed Results Framework of EP-III is presented in Annex 1A. The goal of EP-III is stated as follows: “natural resources are conserved and wisely utilized in support of sustainable economic development and a better quality of life”. It distinguishes seven results that are stated as: (1) sustainable development activities are developed; (2) forest ecosystems and water resources are sustainably managed; (3) sensitive ecosystems are conserved and made valuable as protected areas and “conservation sites”; (4) the potential of coastal and marine ecosystems is sustainably managed; (5) a positive change in behavior vis à vis the environment is observed; (6) the financial basis for sustainable financing of rational management of natural resources and the environment is established; and (7) better environmental policies and governance are developed. IDA and GEF financing in support of EP III have been carefully programmed and focused to maximize the catalytic role of interventions and assure sustained impact. Activities have been designed taking into account the planned investment in baseline activities by other donors. Accordingly, the proposed project to be financed by IDA and GEF would support selected elements of EP-III by focusing on results (1), (2), and a number of activities under (5), (6) and (7), that will be grouped under the heading of "environmental mainstreaming. Based on this orientation, the project is organized into three components, including: (i) forest ecosystems management; (ii) protected areas management; and (iii) environmental mainstreaming. GEF financing administered by the Bank would be concentrated solely upon component (ii): protected areas management. IDA/GEF financing would not focus on result (1) of the EP-III Results Framework as it is felt that the on-going IDA-financed Rural Development Support Project could assist the EP-III in this field. IDA/GEF financing would also not cover result (4) as it has been agreed that GEF financing administered by UNDP would be concentrated in this area. Component 1: Forest Ecosystem Management (IDA: US$ 18.0 million) 1.1. Governance (US$ 6.0 million): IDA financing would support formulation and implementation of (i) forest zoning, (ii) forest control and (iii) setting up of an information system. IDA financed activities would improve governance in the forest sector by strengthening the concession rights allocation framework and fee collection system and strengthening institutional arrangements for regulatory enforcement, including support to the Forest Observatory (Observatoire du Secteur Forestier, OSF). The project would contribute to the enhancement of forest management at the local level by supporting the formulation and implementation of forest zoning and management plans; activities are expected to reduce threats linked to agricultural practices in the forest sector, decrease illegal forest exploitation by commercial firms and community-enterprises and improve fire management.  8 PID 1.2. Conservation sites (US$ 4.0 million): IDA financing would support the creation and management of conservation sites, setting up economic and regulatory standards and other economic and regulatory tools. Creating conservation sites would allow both the preservation of biodiversity outside the network of protected areas and the maintenance of watersheds. These conservation sites will contribute towards achieving the 2015 goal of maintaining the forest cover at the current level and will focus specifically upon areas outside the PA network to ensure better geographic coverage and a holistic approach to ecosystem conservation. The project would put in place guidelines and provide financial and technical resources for the management of the sites. 1.3. Management transfer (IDA: US$ 4.5 million): The key focus of this activity would be the transfer of forestry management rights to local communities under GELOSE/GCF contracts and maximizing financial benefits for the communities under these contracts guided by sustainable management plans. In particular IDA would fund efforts to accelerate and scale-up such transfer of forestry management rights to provide a utilitarian incentive for improved management. It will also involve improvements to biodiversity product supply chains associated with management transfers (e.g using enhanced carbonization techniques under management transfers included in the household energy related activities). 1.4. Reforestation (IDA: US$ 1.0 million): IDA would provide funding for the creation of Land Reserves for Reforestation (Réserves Foncières pour le Reboisement or RFRs) at the level of communes through the DEGF and eventually through a newly created Support Fund for Communal Environment Management. It would support reforestation and forestry management activities for carbon sequestration purposes and where possible associate itself with food/cash-for-work programs. Activities would also contribute to develop ecological corridors and reduce threats linked to agricultural practices in the forest sector, decrease illegal forest exploitation by commercial firms and community-enterprises and improve fire management. 1.5. Household energy (IDA: US$ 2.5 million): Activities have been designed for improving the efficiency of energy production (charcoal from biomass). In particular, IDA financing would support an improvement in the technical output of carbonization, decrease in charcoal consumption through scaling-up the use efficient stoves that are eco-labeled and, producing & promoting substitution fuels. IDA would support the introduction of improved fuel wood management utilization practices as well as communication and extension activities aimed at inducing local populations to discontinue unsustainable woodfuel production practices. The project would put in place guidelines and provide financial and technical resources for management of the sites. New financial instruments to uncover and capture the economic benefits of conservation will be established, including recreational uses, hydrological services and carbon markets. IDA would support the promotion of energy alternatives through organizing pilot activities with the aim to facilitate private sector investments in such activities. Component 2: Protected Area System Management (IDA: US$ 13.5 million, GEF: US$ 9 million) The Protected Area network of Madagascar managed by ANGAP aims to consist of 36 Management Units (Unite de Gestion - UG), corresponding to 46 Protected Areas. This component is concerned with supporting 22 UG, corresponding to 27 Protected Areas. The GEF will lend support to 15 UG, while the remaining 7 will be supported by IDA (refer to project files and Annex 16 for sites description, and selection process). The component includes the five following sub-components. 2.1. Reducing Pressures, Capacity building, Awareness and Civil Society involvement around selected PAs (IDA: US$ 0.79 million; GEF: US$ 0.46 million): IDA and GEF would aim to increase participation of local communes in the management of protected areas by strengthening and expanding the mandate of the Regional Orientation Committees (CROs), setting up of COGES/CODEAP (village associations) and their  9 PID capacity building and partnerships with NGOs. It would also provide management, technical and planning assistance, and on the ground support to the program of activities aiming to promote alternative actions for reducing pressures around selected protected areas through (i) actions having direct links with pressures and with conservation targets; (ii) operationalization of decentralized management principles recommended in the manual for management of PRDEAP funds (park entrance fees). 2.2. Enhance complementarity value, alignment and eco-regional representativeness of the Protected Area System (GEF: US$ 1.10 million; IDA: US$ 0.90 million): GEF and IDA resources will finance the implementation of the COAP and the Plan “GRAP” (five-year action plan for management and expansion of existing PA system), aimed at ensuring the representativeness of ecosystems under the national protected area system. Support will be provided to integrate conservation management planning in PAs and support zones at an eco-regional level, such as reclassification of certain PAs, identification and creation of new PAs, and reconfiguration of the boundaries of certain PAs, where warranted to reflect current land uses and ensure ecological integrity. Specifically the activities will be aimed at: (i) status change of 4 protected areas, (ii) reclassification of boundaries of 6 existing protected areas; (iii) creating 1 terrestrial PA and 2 marine parks; and (iv) re-delineating 9 protected areas. 2.3. Conservation Management programs to consolidate the PA system (GEF: US$ 4.58 million; IDA: US$ 3.17 million): The project through IDA/GEF will finance: (i) ecological monitoring and application of measures for conservation of terrestrial and marine ecosystems; (ii) surveillance and control; (iii) setup of conservation infrastructure and operationalisation of zoning; and (iv) targeted research programs aimed at developing a better understanding of practices for biodiversity conservation and management. In order to improve conservation management of the protected area system, project efforts are oriented towards prioritizing actions and developing referential documents. The investments in the PAs will be guided by a participatory management plan, a need-based threat analysis and an extensive stakeholder participation plan. Support is expected to more specifically focus upon activities to remove barriers to conservation and management activities such as capacity building support, planning, targeted research programs, zoning and a contribution to surveillance and control, but also to finance investments to infrastructure and equipment. 2.4. Sustainable use of PAs System and improve governance of ANGAP (GEF: US$ 2.40 million; IDA: US$ 1.60 million): IDA/GEF would provide support to improve recreational facilities including critical visitor infrastructure and services, revise tourism fees to capture the consumer surplus and increase revenues from park entrance fees to stimulate the local (eco)-tourist industry and strengthen guiding services. To improve guide services and harmonize guide status under a standard partnership contract, the following activities will be carried out: open the market for guide services to regional and national service providers and by inciting competition in order to raise local service provision; involve the private sector in tourist guide training and service provision; involve the private sector in guide based training and service provision through the creation of partnership and collaboration with the Ministry of Culture and Tourism in the licensing of professional guides. Project support will focus upon efforts to overcome barriers to the advancement of eco-tourism in existing and new PA sites selected for GEF/ WB support. It is expected that these efforts will focus six Management Units (UG), covering eight protected areas. These barriers include: absence of suitable tourism products, including trails and interpretation facilities; lack of articulation of PAs in tourism markets; and development of protocols and infrastructure to engender responsible tourism. Project support is expected to increase visitation and gate fee returns, contributing to an improvement in ANGAP's financial sustainability. This sub-component will also provide financing for technical assistance and capacity building to further improve ANGAP's governance by focussing on the development and implementation of a cost reduction action plan, improving financial and administrative management, and providing strategic and technical support to prioritize the investments (in particular related to ecotourism) in alignment with the PA management plans and the new business plans, and supporting quality reviews of  10 PID the implementation of the M&E system designed during preparation. Support will also be provided to develop and implement the replication plan. 2.5. Endowment of the new Malagasy Protected Areas and Biodiversity Foundation for long term funding (GEF:0; IDA:US$ 7.50 million): This activity aims to strengthen the national financial capacity to support the PA system over the long-term. The key mechanism will be to contribute to the endowment of the dedicated trust fund to finance a portion of the long-term operational costs of PA management in Madagascar. The Malagasy Foundation for Protected Areas and Biodiversity, to be created under the new Malagasy Foundation Law, will manage the conservation Trust Fund. The Foundation is expected to be created by June 2004, and established initially with pledged seed money from the Government, WWF and CI respectively, and will receive also support from KfW. Other donors have also already expressed strong interest in the Trust Fund. The envisaged IDA contribution in an amount of US$7.5 million is subject to a disbursement condition that covers: (i) the manner in which the Foundation is set-up and operates; and (ii) the establishment of an operational track-record prior to the transfer of IDA Grant resources into the conservation trust fund. In this context it is stipulated that the statues, by-laws and operational manual of the Malagasy Foundation for Protected Areas and Biodiversity will be adopted to the satisfaction of IDA. Stipulated terms and conditions include: (i) clear and transparent criteria for the review and approval of biodiversity conservation proposals; (ii) clear and transparent rules governing the management and oversight of Foundation, and the role of local stakeholders; (iii) establishment of a separate account to receive and manage contributions to an endowment fund to be used to contribute to the financing of the cost of management of the protected areas network and biodiversity conservation; (iv) clear and transparent rules to ensure that funds are applied for the purposes for which they are intended and in accordance with its operational manual; (vi) provision for independent technical, financial and organizational audits to monitor and report on the operations of the Foundation; and (viii) clear and transparent rules governing the disposal of assets of the Foundation in the event of a merger or dissolution. An additional GEF contribution to match IDA, WWF, CI and others contributions towards an endowment fund will be requested at mid-term review following compliance with specific benchmarks and the establishment of a sound track record of the Foundation. Key benchmark indicators include effectiveness of the Board; quality of the Executive Secretariat of the Fund; effectiveness of Asset manager; disbursement conditions of the investments; commencement of grant making activities and; effectiveness of the institutional structure to carry out defined activities under the Trust Fund. The objective of the project is to generate US$ 50 million by the end of EP III. Component 3: Environmental Mainstreaming (IDA: US$ 8.5 million) 3.1 Environmental Information, Education and Communication (IDA: US$ 1.5 million) As far as Environmental Information is concerned, the project will support ONE in the operationalization of Environmental MIS (TBEs) particularly to the regional level, thereby establishing a system of environmental information. As far as Environmental Education and Communication is concerned, IDA will finance a selective number of activities that reflect the comparative advantage of the institutions that are associated with the EP III, including (i) the preparation of educational materials; (ii) providing relevant environmental information on-line and developing environmental information packages and training materials for opinion-makers, EP III target communes as well as the mass-media, (iii) support the DGE in carrying-out environmental training and dissemination activities. 3.2. Environmental Legislation, Policy-Making and Regulations (IDA: US$ 2 million): IDA financing will be available to enable the DGE to carry out a total of 15 strategic environmental assessment (SEAs). This will permit the DGE to ensure the coherence of sector legislation with the environmental legal framework  11 PID as reflected in both national legislation as well as Madagascar’s participation in international conventions and treaties. It will also support the establishment of a unit in the DGE to carry-out upstream environmental analysis of proposed legislation and policy measures. Last, but not least, it would provide capacity building and institutional strengthening for the development of carbon finance transactions in Madagascar, and other sustainable financing mechanisms for the environment in Madagascar, such as payments for ecological services. 3.3. Environmental Compliance (IDA: US$3.0 million): IDA financing will particularly aim to improve the application of MECIE legislation by supporting efforts that would increase the speed of the EIA process, reduce costs, while ensuring minimally acceptable quality. IDA financing will be available to position ONE to effectively assume its role to operate a EIA one-stop-shop for MECIE legislation compliance and put in place a result-based and service-oriented approach. This will entail support for: (i) institutional capacity building aimed at ensuring compliance with ISO 9001 quality standards; (ii) decentralization of the MECIE process by strengthening the CRMs as provincial platforms of information and expertise; and (iii) promotion of environmental auto-regulatory mechanisms such as ISO 14000, MSC, FSC and GAA. 3.4. Environmental Management and Coordination (IDA: US$ 2.0 million): IDA will support the MinEnvEF: (i) to put in place a financial management system that would enable the Ministry to position itself for budget support programs after EP III; (ii) following recommendations from SOATEG, to establish a M&E evaluation system that would enable tracking of EP III results and impacts; and (iii) based on the results of institutional assessment carried out by BIODEV, implement agreed institutional reforms that would strengthen its presence on the ground as well as reinforce its coordination mechanism with other public sector programs and the donor community. In addition, IDA financing would be available to support the institutional strengthening process of environmental units in the sector ministries. Sustainable Development Forest Ecosystems Management Protected Areas Management Marine and Coastal Zone Ecosystems Management Environmental Mainstreaming 5. Financing Source (Total ( US$m)) BORROWER/RECIPIENT ($29.20) US: AGENCY FOR INTERNATIONAL DEVELOPMENT (USAID) ($27.70) FRANCE, GOV. OF (EXCEPT FOR MIN. OF FOREIGN AFFAIRS-MOFA) ($8.10) SWITZERLAND, GOV. OF (EXCEPT FOR FOFEA) ($5.10) IDA GRANT FOR POOREST COUNTRY ($40.00) GERMANY: KREDITANSTALT FUR WIEDERAUFBAU (KFW) ($12.40) UN DEVELOPMENT PROGRAMME ($6.30) NON-GOVERNMENT ORGANIZATION (NGO) OF BORROWING COUNTRY ($11.10) GLOBAL ENVIRONMENT FACILITY ($9.00) Total Project Cost: $148.90 6. Implementation Implementation Period The project would be implemented over a 5 year period from 2004-2009. Project effectiveness is expected by June 1, 2004. A mid-term review would be conducted before December 31, 2006. The project is  12 PID expected to be completed by May 31, 2009. Recipient and Executing Agencies The Recipient of the IDA Grant and GEF Trust Fund Grant to finance the project would be the Republic of Madagascar represented by the Ministry of Economics, Finance and Budget. The Ministry of the Environment, Water and Forests would coordinate execution of the project. The Department of Water and Forests (DGEF) would take a lead role in the execution of the Forest Ecosystems Management component. The Department of the Environment (DGE) would take a lead role as far as the policy and regulatory functions associated with the Environmental Mainstreaming component are concerned, while the National Office of the Environment (ONE) would take direct responsibility for selected items of the environmental mainstreaming agenda, including: (i) environmental information, education and communication; and (ii) operational aspects of reducing transaction costs and improving compliance with EA legislation in Madagascar. The National Association for the Management of Protected Areas (ANGAP) would take a lead in implementing the Protected Areas Management component of the project. Proposed reforestation activities under the project might be channeled through the Fond de Appui a la Gestion Environnementale des Communes (FAGEC), following the intention of the GoM to create this fund. Malagasy Foundation for Protected Areas and Biodiversity A Trust Fund Steering Committee (TFSC) appointed by the Minister of the Environment in 2001 is currently working on the establishment of a Trust Fund for Biodiversity Protection in Madagascar. This prospective trust fund will be managed by the Malagasy Foundation for Protected Areas and Biodiversity which is expected to be operational by July 2004. The Foundation represents one of the pillars of the larger sustainable financing agenda that is pursued under EP-III. The Foundation is expected to lead to mobilization of substantial funding necessary to gradually cover the core costs of the protected areas network and its expansion, selected projects in support zones, and the sustainable development of priority ecological corridors. The proposed Malagasy Foundation for Protected Areas and Biodiversity, would be established as a foundation under a new Foundation Law to be submitted to Congress in April 2004. Although the Foundation would be legally registered in Madagascar, most of its assets would be invested offshore. It is expected that the Foundation would be established initially with pledged seed money from WWF, CI and the GoM under debt-for-nature swap with the Government of Germany. This provides the basis for specific fund-raising activities that address the public and private sector. The project may help operationalize the Foundation by using it as a pass-through once enabling fiduciary conditions are in place. The project would help establishing the Trust Fund for Biodiversity Protection through an envisaged IDA contribution of US$7.5 million to the Foundation. Policy Guidance Overall policy coordination of the NEAP is currently provided by the existing Interministerial Environment Committee (IEC), chaired by the Minister of the Environment. The IEC is guided by independent advice from a consultative National Environment Council. The need for greater integration of the NEAP with other sector programs such as the PADR, PST etc., the strong focus on rural development in the recently completed PRSP, as well as the new ministerial structure that has been put in place since January 2003, has fueled discussions within the Government and donor community to put in place a mechanism for policy guidance that is based on a more holistic view of rural space. Rather than having Interministerial Committees organized along sector lines, this might well lead to a single Interministerial Committee for Rural Development and Environment that works in partnership with the donor community. Proposals along these lines have been developed and it is expected that a final decision will be taken sometime in the Spring of 2004. Consolidation of the intersectoral arbitrage functions, currently carried out by the IEC,  13 PID should be ensured within the new structure. Project Oversight A Joint Committee, consisting of relevant government agencies and donors, presided by the Minister of the Environment, Water and Forests and co-presided by a representative of the EP-III donor community, would be responsible to coordinate program activities under the third phase of the NEAP. Rather than coordinating inputs and resources as was done under EP-II, the Joint Committee would: (i) ensure that government and donor investments are defined and implemented in close relation to the agreed results agreement of EP-III; and (ii) monitor progress towards the agreed results of EP-III. Project Management A Project Implementation Support Unit (PISU) would be responsible to assist ONE, DGEF, DGE and ANGAP in the execution of the project at the operational level. The Unit would be established within the Ministry of the Environment, Water and Forests. The PISU would consist of a team of dedicated professionals with relevant disciplinary backgrounds for the purposes of the Project. They would include a coordinator, procurement and financial management specialists, an internal auditor, as well as M&E specialists. The PISU would have the following functions: (i) consolidate annual operating plans and ensure their execution once approved; (ii) elaborate semestral monitoring reports with approved annual operating plans as reference; (iii) elaborate and propose modifications to project manuals and guidelines; (iv) coordinate execution of approved procurement plans; (v) arrange for the contracting of the external auditors of the project; (vi) manage a system of result-based disbursements from the Special Account to ONE, DGEF, DGE and ANGAP based on results agreements of these institutions with the Minister of the Environment, Water and Forests; (vii) ensure compliance with agreed norms and procedures specified in the Grant Agreement; and (viii) interact with the World Bank regarding all project related themes, including the preparation and presentation of reports and no-objection requests and the coordination of all supervision missions. In case other donors would decide to directly transfer resources through MinEnvEf in support of EP-III, it is understood that the PISU could play a similar role to assist in the implementation of it. Procurement Technical aspects of the procurement process (drafting TDRs, technical specifications etc.) would be the direct responsibility of the executing agencies. On its turn, the PISU would be responsible for carrying-out the procurement process, following Bank guidelines and procedures. Accounting, Financial Reporting and Auditing Arrangements The Ministry of the Environment, Water and Forest would be responsible for all financial management aspects of the Project with assistance from the PISU. During the project preparation process a financial management assessment has been conducted in accordance with OP/BP 10.02 and Financial Management Sector Board Guidelines in order to: i) determine whether these entities have acceptable financial management arrangements (accounting and budgeting systems, internal controls, reporting and auditing); ii) define the required support to the Ministry of the Environment and the Ministry of Water and Forests to effectively assume all required financial management functions. Based on this assessment an action plan has been agreed that would bring the financial management capacity of the Ministry of the Environment and the Ministry of Water and Forests in line with Bank requirements. Funds Flow (see Annex 6B) The flow of funds from IDA, GEF, the government and other donors is presented as follows :  14 PID World Bank Government Other Donors (Counterpart Funds) IDA Grant GEF PISU - Special Account IDA Grant - Special Account GEF - Project Account - Other accounts Foundation : Trust Fund FAGEC: Manager Community Env. - Accounts/Interest from Capital Mgmt Support - EP3 funds account Fund ONE DGEF/ DGE ANGAP ANGEF Communes Contractors, Suppliers of Goods and Services Monitoring and Evaluation A M&E system has been developed as part of the project preparation process with available PHRD resources. Operational responsibility of monitoring and evaluation arrangements of project activities would be the responsibility of the implementing agencies. The PISU would be responsible to integrate M&E results at the EP-III program level and differentiate according to financing source. The Joint Committee would meet at least once a year to monitor program development and to reorient the program as needed. ONE would play an important role in providing the PISU with environmental data and information as part of its responsibility to prepare Tableaux de Bord Environnementaux at different levels (national, provincial, regional). External reviews to assess the outcome of the M&E scheme will be carried out at least once a year. A mid-term evaluation will be undertaken to evaluate progress and recommend mid-term  15 PID corrections. A final evaluation similar to that at mid-term will be performed relative to the output and outcome performance indicators, to evaluate the impacts of and lessons learned from the entire duration of the 15-year NEAP. Details about the M&E system are provided in Annex 15. Donor Coordination Rather than a joint program, as was the case under the second phase of the NEAP, the third phase would be supported by a series of parallel projects financed by IDA/GEF, UNDP/GEF, USAID, FAC, KfW, GTZ, Tany Meva, WCS, WWF and CI. Doing so would enable a more direct linkage between financing source and results on the ground, while avoiding the need for coordination among donors at the activity and input level, which has proven to be difficult under EP-II. To ensure a Sector Wide Approach, a joint GoM-donor results framework has been developed that lays out the expected outputs of EP-III. Participating donors in EP-III have committed themselves to organize their investments in such a manner that they would contribute to the realization of these outputs. At the same time, participating donors have agreed to be held accountable for the contribution of their investments to the expected results of EP-III by having their programs subject to EP-III's common M&E system. The Joint Committee would provide a joint GoM-Donor platform to discuss progress of EP-III based on the agreed results framework, while the Donor Secretariat (SMB), set-up under EP-II, would continue to play an important role to ensure smooth functioning of the Joint Committee. Although the Sector Wide Approach focuses on coordinating efforts at the output level mainly, the establishment of the Trust Fund for Biodiversity Protection by the Madagascar Protected Areas Foundation, as well as the envisaged FAGEC, provides an opportunity for donors to pool their resources for a common goal in a significant manner as it is envisaged to raise US$50 million for the trust fund by the end of EP-III. Intervention Area With the aim to better focus activities as well as to better take into account efforts of other public sector investment programs (notably those under the PADR and PST), the geographical intervention area of EP-III has been defined following a formal prioritization process. Prioritization criteria include: (i) biodiversity importance; (ii) threat levels; (iii) expected costs and benefits; (iv) opportunities for local collaboration; and (v) intervention areas of other public investment programs. Based on these criteria, EP-III will concentrate its field-based activities in 530 communes, covering a population of about 4.9 million people (41% of Madagascar total population) and an area of 32 million ha (55 % of total territory). The Protected Area network of Madagascar managed by ANGAP aims to consist of 36 Management Units (Unite de Gestion - UG), corresponding to 46 Protected Areas. The IDA and GEF contribution to ANGAP's protected area system will be selective under EP-III. It will support a total of 22 UG, corresponding to 27 Protected Areas. The GEF will lend support to 15 UG, while the remaining 7 will be supported by IDA (refer to Annex 16 for site description, and selection process).  16 PID 7. Sustainability Institutional sustainability: The NEAP has supported successive iterations of capacity building, reflecting the evolution of conservation needs and opportunities over the past decade. Institutional capacities to perform a broad array of conservation functions have been developed, evidenced amongst other in the establishment of a national management system for protected areas. Individual capacities have been strengthened across a range of conservation management disciplines. An underlying policy and legislative framework for conservation has been put in place. Notably, a framework has been established to transfer usufruct rights and management responsibilities for natural resources to local communities, addressing a key determinant of habitat destruction, rooted in open access to common property resources. Communities now have a utilitarian incentive to better protect and manage natural resources. In the medium-longer term, the clarification of these rights and the strengthening of incentives through the development of market-oriented management models is expected to put a break on population in-migration to the forest edge. NEAP interventions have demonstrably reduced threats to biodiversity. EP II has made a start in moving towards environmental sustainability. There is emerging evidence that environmental degradation in areas covered by EP II is notably slower than elsewhere. According to the most recent figures provided by Conservation International, based on analysis of NASA satellite imagery, the area under natural forests in 2000 was 8.9 million ha or 8.6% less than in 1990. Deforestation in protected areas (1.9%) was however significantly lower than in ordinary forest reserves (12.9%). For the ten year period between 1990 and 2000, the rate of habitat clearance in core protected sites supported under NEAP has been around 1.9%, which is considerably less that the mean of 8.6% for the country as a whole. However, it is accepted that further support is needed to address conservation needs at the larger landscape level, where anthropogenic pressures on ecosystems remain high. Accordingly, a further iteration of capacity support for institutional development, policy reform and training and knowledge management will be provided under EP III. In particular, targeted support will be provided under EP III from IDA, USAID and others to strengthen management of the forest sector, and introduce new regulatory tools and management systems to improve the instruments already developed for forest conservation. GEF support will be targeted at further maturing operational capacities for protected area management, at selected sites, which will act as a nucleus for further management innovation, as necessary to improve sustainability. Community level management capacities for sustainable natural resource management would be strengthened through the development of improved models for integrated resource management. Asymmetries in current capacities between regions and institutions will be addressed through the improvement of communications systems, and knowledge management. Collectively, these interventions are expected to compound gains under earlier phases of NEAP, and improve prospects for assuring the sustainability of conservation interventions. Financial sustainability: Economic analyses undertaken during EP II have identified substantial derivative domestic benefits from conservation. These include dividends from the development of unrealized recreational tourism, the maintenance of vital hydrological service functions, and sustenance of other environmental goods and services. Many conservation sites are expected to yield a positive financial internal rate of return on investment, were these benefits to be monetized. Park entrance revenues, although still modest in absolute terms, have shown steady growth and are increasingly important for ANGAP as well as communities located in buffer zones of protected areas. EP III aims to accelerate and broaden the move towards financial sustainability through the following measures. First, a trust fund, to be managed by the Madagascar Protected Areas and Biodiversity Foundation, will be established which would provide assured and long-term financing for protected areas in Madagascar. Second, revenues from the tourist sector are also considered an important source of  17 PID sustainable financing. Third, MinEnvEF aims to complete restructuring of the concession fee system under which most of the revenues will be channeled to communities, thereby providing greater incentives for the collection of concession fees. Fourth, the National Office of the Environment will implement a strategy for higher cost recovery of its environmental impact assessment review fund. Fifth, the development of new sustainable financing mechanisms would be explored under EP III, covering, among other, carbon sequestration, bioprospecting rights, non-wood forest products, and others Results to date include progress in development of a marketing and business plan for ANGAP and revision of the entry fee system for flagship parks, reconstruction of the concession fee system through MinEnvEF including greater decentralization for management and use of funds, and preparation of a strategy for higher cost recovery of ONE’s environmental impact assessment review fund. It is recognized that the prospect of effectively putting sustainable financing mechanisms for the environment in place depends strongly on the ability of EP III to: (i) generate success on the ground; (ii) address existing governance problems; and (iii) communicate its results and achievements to relevant stakeholders and the general public. Financial sustainability over the long-term would be secured and is based upon four pillars, namely a cost reduction strategy and action plan, an increased management efficiency index, sufficient fund raising to contribute to the endowment and leveraging donor financing. In this context, Madagascar has created an exceptionally strong economic incentive for communities surrounding protected areas to protect and conserve the PAs. A full 50% of park entrance fees are shared with these local communities. During EP III, greater emphasis will also be placed on mainstreaming improving/developing sustainable, replicable natural resource management models that become self-financing. Clear opportunities exist for improved models that generate economic benefits and incentives while conserving biodiversity and ecosystem functions. EP III would support the development of economically and ecologically sustainable models for small scale enterprises, such as non-timber forest products; community plantations; and sustainable harvesting of fisheries, forests and wetlands (mangrove management), that can contribute to poverty reduction and rural development. It will also support the development of markets for environmental services. A portion of the takings from tourist visa fees could be earmarked from the fiscus for the management of Protected Areas and ancillary conservation operations. Opportunities for introducing water user fees will be explored, where there is demonstrable ability and willingness to pay. Other measures to raise funding to finance the public service delivery capacity of the State will be pursued, such as the dedication of a portion of debt forgiveness under the HIPC scheme to the environment sector. Financial instruments to recover rent from natural resource management will be developed. Recognizing that owing to the leakage of global benefits some protected areas are unlikely to be viable if justified solely in terms of the domestic cost-benefit calculus, IDA will support the operationalisation of the Trust Fund, to help provide predictable financing to defray local costs. These interventions are expected to result in improved prospects for assuring the financial sustainability of NEAP following the cessation of EP III, culminating in the reduction of reliance on external assistance. Overall, it is expected that EP III's emphasis on participatory implementation mechanisms and community empowerment, on putting in place an improved M&E system, on its intent to address governance issues in the forestry sector heads-on, and on its support for environmental education and dissemination of environmental information, would generate an enabling environment to achieve its sustainability objective.  18 PID 8. Lessons learned from past operations in the country/sector As part of the EP-II completion process, considerable efforts have been invested to assess performance as well as distill lessons learned from EP-II. For this purpose, a detailed matrix has been prepared that links EP-II Results and Impacts, Lessons Learned and Gaps to Expected EP-III Outcomes (copy in Project Files). The most important lessons are the following. Streamlined Program Approach. Under EP1 the implementation of the NEAP had taken the form of a number of separate donor-driven projects without obvious linkages between each other. EP-II instead was largely based on the proposals developed initially by the implementing agencies (AGEX) of EP1, on a multi-donor appraisal and negotiations process, and on the establishment of a donor coordination mechanism in the form of a Multi-Donor Secretariat. The key mechanisms of the program were: (i) an annual consolidated programming and budgeting process, through periodic multi-donor meetings; and (ii) a consolidated monitoring and evaluation system. In retrospect, the system had the benefit of promoting close collaboration between AGEX and between donors, but also proved overly time consuming, as well as ill-adapted to the way of working of bilateral donors as indicated by a QAG Review in 2000 as well as the draft EP-II ICR. A possible solution to this problem could have been to structure EP-III according to the more recently established Rural Development Action Plan (PADR). The PADR is a reference framework, which permits grouping of different interventions that share a common focus and common intervention principles. However, it lacks an explicit coordination mechanism and commonly agreed outputs that would enable linking the contribution of different interventions to explicitly defined program results and outcomes. In light of this, EP-III has been developed as a sector-wide program approach with the following characteristics. First, the program is based on overall policy guidance provided by the Minister of the Environment, Water and Forests through a specific Letter of Environmental Policy. Second, the program is based on a commonly agreed Results Framework that defines objectives, results and activities along with corresponding impact, output and input indicators. Third, participating donors agree to measure the success of their contributions to EP-III based on the commonly agreed program impact indicators, while being committed and prepared to be held accountable for the financing of a set of specific outputs included in the Results Framework. Fourth, arrangements for pooling of resources under the approach have been set-up through the Madagascar Foundation for Protected Areas and the Fonds de Appui de Gestion Environnemental Communale. Fifth, the program will deploy a result-based monitoring and evaluation system and organize information flows to capture the outputs of the various program contributions financed by participating donors that together will make up EP-III. Improved Coordination with other Programs. In order to better integrate the environmental program with the country's overall development and for the sake of pursuing environmental mainstreaming, EP-III would seek to enhance coordination with other sector ministries and investment programs. For this purpose, MinEnvEF has already signed a protocol with MAEP to ensure coordination with the large Bank-funded rural development operation (PSDR) for sustainable development activities in protected areas buffer zones and eco-corridors. Similarly, MinEnvEF will seek coordination with the Ministry of Culture and Tourism, Ministry of Energy, and the Ministry of Education through specific agreements to ensure appropriate complementarity and synergy in respectively PA visitor infrastructure development, domestic energy and environmental education. More specifically, these agreements will cover five domains: (i) division of responsibilities: this could be based on the type of activity (e.g. regarding energy, EP III will deal with fuel wood, charcoal and the like, while rural electrification should be left to the Energy program) or geographical location (EP III has identified priority areas of intervention corresponding to some of the key objectives); (ii) complementarity: when several operations deal with the same activity (e.g. supporting the formulation of Communal Development Plans), they should make sure that their coverage will complement each other; (iii) synergy: crop intensification in an area might decrease pressure on a nearby Park; (iv) duplication: avoiding having several major operations undertaking very similar activities in support of the  19 PID same beneficiaries; and (v) conflict management: arising as a result of the availability of credits versus grants, or varying levels of beneficiary participation. Last but not least, EP-III would launch a tavy and forest fire monitoring program aimed at effectuating cross-sectoral conditionality for public investment eligibility based on the effectiveness of agreed control measures at the commune level. The MinEnvEF will coordinate application of the results of this monitoring program with other relevant sector ministries and investment programs, including PST, FID etc. Emphasis on Performance-based Implementation Mechanisms. EP II was implemented by the environment agencies established by the program including ONE, SAGE, ANGAP, and ANAE, and by line departments (Water and Forests, Land Registration) and other public agencies (FTM, the Geographic Institute; CFSIGE, a training institute), under the coordination of ONE and the oversight of the Environment Ministry. During the restructuring of 2001, the number of project agencies was reduced from seven to four. At the same time, ONE has been re-structured to focus on its core functions. The review of the lessons emanating from the various structures established during EP I and EPII is near completion. Key findings pertinent to the implementation and sustainability of EP III include: (i) the transfer of control over natural resources to communities has been a critical tool for putting an end to de facto open access and for empowering communities to control access to “their” natural resources, this confers with the experience in Mahajanga under the Energy Sector Development Project (completed); (ii) a key weakness in EP II design was the false assumption that there were natural resource management systems ready for transfer to communities. Resources were not targeted towards the development of pilot systems and lessons learned in sustainable use from other countries have not been properly exploited; (iii) the potential for commercially-oriented natural resource management that generates incentives for sustainable use and that contributes to poverty alleviation, has been frequently ignored. Most transfers have been for noncommercial usufruct rights only; and (iv) support to participatory planning has resulted in a unique dynamism that contributes to good governance, brings civil society into the decentralization process and brings divergent groups together to confront common environmental/natural resource problems. Based on the lessons of EP-II and the call for more flexibility and for the participation of more agencies, EP-III will therefore be implemented by a larger number of entities (AGEX, local governments, communities, NGOs, service providers, etc.) under a system of result agreements between MinEnvEF and implementing agencies, along with performance monitoring by the PISU. Explicit Measures to Address Governance. Governance issues have seriously hampered achieving positive outcomes in the forestry sector during the EP-III. They also have had a negative impact on the image and credibility of the program. Lessons from EP-II demonstrate that governance issues can not be left unattended. It was only late in the EP-II implementation process that governance issues were dealt with in more explicit terms and moved towards the center of the sector dialogue. Action plans to deal with specific governance issues were agreed, which led to partial successes concerning fee collection from logging permits, moratorium on the delivery of CITES collection and export permits, etc. However, rather than dealing with forest governance issues in a responsive mode through action plans as was the case under EP-II, EP-III proposes to follow a more structural and pro-active approach, consisting among other of the following elements: (i) improving institutional checks-and-balances by spinning-off operational forest management functions into a specialized organization and keeping only policy-making and regulatory and control functions within DGEF; (ii) expanding forest zoning coverage as a mean for better informed and more transparent decision-making; (iii) transferring forest management functions to communes under GELOSE/GCF arrangements, whereby they directly benefit financially from sustainable management practices; and (iv) strengthening watch-dog functions of OSF so as to ensure constant pressure for better governance on all parties involved in the sector.  20 PID 9. Environment Aspects (including any public consultation) Issues : A full environment assessment (EA) for the Environment Program phase 3 has been carried out by recruited local consultants. This study provides a systematic analysis of all potential biophysical and social impacts associated with the implementation of program and activities generated under EP 3. The EA includes: (i) a diagnostic of each sub component (forestry, protected areas and environmental mainstreaming activities) in terms of policy, institutional, regulations, conventions relevant to environment preservation; (ii) an analysis of project impacts on social aspects and the environment; (iii) propositions of mitigation measures to limit these impacts, and (iv) the establishment of an environmental management plan. The EA methodology is based on documentation and technical analysis and a consultation of concerned stakeholders in each sub-component.The analysis has highlighted the fact that under the project no major effects/impacts related to displacement of population are foreseen. Major effects/impacts in category 2 are recorded in activities related to the creation and classification of protected areas and conservation sites, as well as in eco-tourism development actions. For the specific case of the Mikea Forest, a strategic framework (see annex of the EMP) has been prepared to serve as a basis for the elaboration of an Indigenous Peoples Development Plan. Such IPDP should be developed by and for the Mikea people and will define the program and activities that Mikea consider as beneficial for them in terms of social, economic and cultural development. 10. List of factual technical documents: 11. Contact Point: Task Manager Martien Van Nieuwkoop The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: 261-20-22-56000 Fax: 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project.