Rwanda - Second Integrated Forestry Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-4510-RW MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 11.0 MILLION TO RWANDA FOR THE SECOND INTEGRATED FORESTPY PROJECT May 6, 1987 This document has a restricted distribution and may be used by recipients only in the performance of their officlal duties. Its contents may not otherwise be disclhsed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Franc Rwandese US$1.00 = RF 83 RF 100 US$1.20 US$1.282 1 SDR The US dollarlRwaneese franc rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 RF 83, the average exchange rate during September-October 1986, at the time of post appraisal. Principal Abbreviations and Acronyms CAT - Centre d'Appui Technique at Gishwati CCCE - Caisse Centrale de la Cooperation Economique (France) GOR - Government of Rwanda GBK - Gishwati-Kigali-Butare project unit FISCAL YEAR Government - January 1 to December 31  FOR OMCIAL USK ONLY RWANDA SECOND INTEGRATED FORESTRY PROJECT CREDIT AND PROJECT SUMMARY Borrower: Government of Rwanda Beneficiary: Ministry of Agriculture, Livestock and Forests Amount: IDA Credits SDR 11.0 Million (US$14.1 !^illion equivalent) Terms: Standard On-lending Terms: Up to 202 of the proceeds of the credit will be -onlent to (i) four project revenue earning entities, namely, The GBK Centre d'Appui Technique (CAT), Veterinary Pharmacy, Beef Fattening Facility, and the Gishwati Dairy to complete investments begun in the first project; (ii) to pasture beneficiaries to complete pasture establishment and herd constitution; and (iii) to other farmers in Gishwati to develop degraded areas of the Gishwati forest. The funds will be on-lent at the IBRD rate for 20 years including 5 years' grace. Beneficiaries of the on-lending will bear the foreign exchange risk. Financint Plan: Total (US$ Million) GOR 6.0 IDA 14.1 Total 20.1 Economic Rate of Return: Rates of return calculated for four components representing 33Z of projects costs range from 16-45%. Staff Appraisal Report: 6586-RW This document has a rctic" distribution and may be used by tecipbnts O11Y in the pe formane of their officW duties. Its contents may not otherwise be disclosed without World Bank authorization. This~~~~~~~~ .oumn ha. etitddsrbto n a eue yrcpet nyi h efrac  MEMORANDUM AND RECOMMENDATIOr: OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO RWANDA FOR THE SECOND INTEGRATED FORESTRY PROJECT 1. The following report on a proposed development credit to Rwanda for SDR 11.0 million (US$14.1 million equivalent) is submitted for approval. The proposed credit would be on standard IDA tenms and would help finance the development of forestry and its integration into the agriculture and livestock farming systems in Rwanda. Up to 20Z of the proceeda of the Credit would be onlent at the IBRD rate for 20 years including 5 years grace to livestock revenue- earning entities and pasture owners in the Gishwati livest'ock component to consolidate investments begun in the first project and to farmers in Gishwati for development of the degraded parts of the Gishwati forest. The beneficiaries would bear the foreign exchange risk. Background 2. Rwanda's population of 6.0 million or 250 persons per km2 makes it the most densely settled country in continental Africa. The high populaticn growth rate of 3.7Z per annum means increasing densities leading to fragmentation of holdings, overgrazing by livestock, soil erosion and severe deforestation to satisfy energy nee-s and open up more land for cultivation. Deforestation threatens watersheds, land and soil resources and degrades the natural resource base upon which development will ultimately depend. The Government of Rwanda (GOR) recognizes the seriousness of the situation and has introduced a number of measures to improve forestry and natural resource management. These measures include (a) the adoption of a policy and action plan to protect the natural forests of the Zaire-Nile Crest; (b) the introduction of a Forestry Law, soon to be promulgated, that sets out the legal framework for future forestry development, strengthens the policing powers of the Forestry Department and establishes a forestry development fund; (c) the initiation of a natio.swide drive to introduce soil protection measures and encourage tree planting. The Government is presently preparing, as part of its 1987-1991 fourth national development plan, a forestry sub-sector plan and investment program that will proviae the basis for coordinated donor support to the forestry sector. 3. The first IDA-assisted forestry project was d-signed to develop the institutional capacity for forest policy formulation in Rwanda, to initiate a reforestation program to provide fuelvood and industrial wood for the country and to develop livestock and agriculture in the Gishwati forest area in western Rwanda in such a way as to limit livestock and human encroachment and conserve forest resources. With other donors, principally Switzerland, the project has assisted GOR to lay the groundwork for forestry policy formulation, and has achieved physical targets for plantation and pasture establishment. It has, however, been less successful in limiting livestock and human encroachment in the Gishwati forest and, due to the poor sites of the urban fuelvood plantations, up to 30% may not be commercially productive. The project has had limited impact on farm-level integration of forestry, agriculture and livestock activities because of inadequate attention to extension. Poor managerial and technical decisions by the project unit on the operations of livestock revenue earning entities have adversely affected their financial viability. An important aspect of this management has been the centralization ef decision-making in the project  - 2 - coordination unit in Kigali (GBK project unit) somewhat removed from the daily management of activities in Gishwati. In addition, the involvement of influential people as pasture owners in the Gishwati livestock component has politicized its management. The proposed second project would assist GOR to correct these environmental and management problems by supporting the Implementation of Government's Natural Forest Conservation and Management Action Plan, a major objective of which is to strengthen the protection of the natural forests. Forest protection activities would complement those of other donors - CCCE France, European Development Fund, and Swiss Aid who are also assisting GOR to implement the Action Plan. With regard to management, the project would support the decentralization of decision-making on the Gishwati pasture and dairy activities. It would institute higher levels of cost recovery for pasture investments and promote private sector management of pasture and dairy activities. Intensified delivery of extension services would also be supported. 4. Proiect Objectives. The proposed project would build on lessons learned and experience gained in the first project and on policy developments in the forestry sector to (a) support the Implementation of new measures to protect and conserve Rwanda's remaining natural forests of the Zaire-Nile Divide; (b) promote farm forestry as a cost effective means of increasing fuelvood supplies; (c) consolidate investments in plantations and pastures made in the first project; and (d) continue to reinforce the capacity of the Ministry of Agriculture to plan, supervise and monitor forestry sector programs. The project would assist the Ministry to better integrate project activities into the normal ministry structure and, where suitable, transfer management of these activities to the private sector. 5. Prolect Description. The proposed project ould be Implemented over a six-year period including a one-year build-up phase. Project activities would compriset (a) protection and conservation of the Nyungwe sad Gishwati natural forests through the development of buffer plantations, an ecological inventory and a natural resources monitoring and evaluation program; (b) support to agroforestry and rural afforestation through the strengthening of seedling production and distribution, establishment of a rural afforestation monitoring and evaluation program and training of higher level foresters and other forestry workers; (c) integrated forestry, agriculture and livestock development in Gislwati including consolidation of investments in pastures and industrial plantations made in the first project; development of an additional 2,000 ha of protection plantations on denuded slopes; a land use study and support for new approaches to land management; and intensification of extension services around the forestg (d) maintenance of fuelwood and pole short rotation plantations developed in the first project; (e) applied forestry and livestock nutrition research; and (f) pilot pasture rehabilitation in the Mutara region. Total project cost is estimated at US$20.1 with a foreign exchange component of US$8.5 million or 42S. Proposed IDA financing amounts to US$14.1 million (70Z of project costs). A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursement and a disbursement schedule are shown in Schedule B. A timetable of key project processing eveL%s and the status of Bank Group operations in Rwanda are given in Schedules C and D respectively. The Staff Appraisal Report, No. 6586 RW dated May 6, 1987 and including a map of Rwanda is also attached. A Project Preparation Facility of US$1.5 million (to be refinanced under the Credit) has been arranged to facilitate start-up of project activities.  -3- 6. Rationale for IDA Involvement. Agriculture is the mainstay of the Rwandese economy and its development has received strong IDA support. A primary objective of IDA's agricultural strategy for Rwanda is the development of a national approach to sectoral problems, by improving the policy framework and investment strategy, including investment planning and management. To this end, IDA has recently financed two operations in extension and research which address key national issues of agricultural services. The proposed project would support the implementation of new national policy measures for forest protection and promotion of agroforestry. This would be fully consistent with Bank group strategy on zorest conservation and wildlands management. Furthermore, the project would provide a major impetus to efforts to promote private sector participation in economic activities in Rwanda. 7. Agreed Actions. During negotiations agreements were reached with GOR on: (a) the composition and terms of reference of the project management committee; (b) completion of the wood pricing and marketing study by February 1, 1988 and preparation and prompt implementation of an acceptable action plan on wood pricing; (c) completion of the livestock subsector study by December 31, 1987 and development and prompt implementation of a milk pricing policy with the objective of promoting efficient milk production and marketing; (d) phasing out of the GBK project unit by December 31, 1992; (e) a five-fold increase in the level of cost recovery from beneficiaries of pastures developed in the first project and recovery from the liveatock revenue earning entities of all proposed investments in the entities in the second project and an average 40 percent of funds invested in them in the first project; (c) completion of the Gishwati land use study by February 29, 1988 and preparation and prompt implementation of an acceptable action plan on the future use of the degraded parts of the Gishwati forest. Prior to credit effectiveness GOR would: (a) reduce the personnel of the GBK project unit, and that of tie Gishwati livestock revenue-earning entities by about 252; (b) revise former pasture rental contracts and assure that all beneficiaries of pastures developed in the first project have signed the new contracts providing for a four-fold increase in rentals; (c) develop an acceptable pricing mechanism for milk; (d) create the Nyungwe project unit and employ a unit director, an ecologist and a forester. As a condition of disbursement for expansion of the Gishwati dairy beyond 5,000 liters per day processing capacity, GOR would present an acceptable action plan to improve dairy processing and marketing countrywide. 8. Justification. The project is justified by the economy-wide ecological and hydrological benefits from the protection and conservation of two of Rwanda's remaining tropical high-altitude natural forests; institutional development benefits from improved ministry level planning, monitoring and evaluation of forestry sector programs; the production of an incremental 2.4 million m3 of fuelwood and industrial wood valued at US$45.3 million and the incremental production of meat and dairy products valued at $0.7 million per annum at full development; the generation of about 9,000 mant years of rural employment over the project investment period and wide distributicn of benefits, covering over 75,000 farm families most of them in absolute poverty. An overall economic rate of return has not been calculated for the project because the bulk of investments (67%) are in activities where benefits are difficult to quantify such as natural forest protection. Rates of return have, however, been calculated for four activities (33% of project cost4 for which benefits are more readily quantifiable. They range from 16% for the Gishwati new plantation development to 452 for pasture maintenance. The financial rate of return for farmers engaged in posture activities is 652. Farmers participating in and adopting extension  -4- recommendations, would experience an average yearly income increase of about $132 or 22Z of family income by project year 7. The project would be sustainable after the investment period because revenues from wood sales in the forest plantations and cost recovery from pasture beneficiaries and revenue-earning entities would, on average, more than cover post project recurrent costs. 9. Risks. The major project risk is related to Government's commitment to implement the management reforms proposed for the Gishwati component in the face of probable political pressure. The Government has shown its com itment by having already begun measures to carry out these reforms. Another area of risk relates to the capacity of the Forestry Department to provide adequate technical supervision of the natural forest protection and conservation component. To minimize this risk a full time ecologist would be engaged to assist In supervision cf these activities, and to train Rwandese foresters to carry on after the project veriod. The project would require substantial supervision from the Government and IDA to monitor the effectiveness of implementation. Monitoring and evaluatior. have been built into project design to generate the information necessary for s supervision. 10. Recommendation. I am satisfied that the proposed credit wou~ co eply with the Articles of Agreement of the Association and recommend that t. e Executive Directors approve the proposed Credit. Barber Conable President Attachments Washington, D.C. Hay 6, 1987  -5- Schedule A RWANDA SECOND INTEGRATED FORESTRY PROJECT Estimated Project Costs Local Foreign Total -US$ million Natural Forest Protection 2.1 2.5 4.6 Conservation Agroforestry and Rural Afforestation 0.8 0.8 l.6 Integrated Forestry, Agriculture 6.9 3.7 IO.5' and Livestock Development Applied Research 0.1 0.2 0.3 Mutara Pilot Pasture Rehabilitation 0.1 0.3 0.4 Total Baseline Costs 10.0 7.4 17.4 Physical Contingencies 0.4 0.3 0.7 Price Contingencies 1.2 0.8 2.0 TOTAL PROJECT COSTS 1/ 11.6 8.5 20.1 Financing Plan Government 6.0 - 6.0 IDA 5.6 8.5 14.1 Total 11.6 8.5 20.1 . 1/ Includes direct taxes of about US$1.0 million ar.d PPF expenditures of US$1.5 million.  Schedule B Page 1 of 3 PROCUREMENT PROCEDURES 1/ Category ICB LCS Other Not APplicable 21 Total Cost USS MILLION I. Civil Works - 3.01 3.63 - 6.64 (2.12) (2.68) (4.80) II. Vehicles & Equipment 1.31 1.22 0.33 (2.86) (1.24) (1.14) (0.31) - -(2.69) III. Technical Assistarce - - - 1.71 1.71 - - - (1.71) (1.71) IV. Training & Studies 1.34 1.34 1.29 1.29 V. Operating Costs 6.05 6.05 (2.11) (2.11) VI. Refunding PPF 1.5 1.5 (1.5) (1.5) TOTAL COSTS 1.31 4.23 12.85 1.71 20.1 (TOTAL IDA) (1.24) (3.26) (7.89) (1.71) (14.1) 1/ Figures in parenthesis are the respective amounts financed by the Association. 21 Includes TA Services to be obtained in accordance with IDA guidelines.  -7- Schedule B Page 2 of 3 NYUIG'WE Component Proceeds of the IDA Credit Credit amount % of expenditures Category USS ,o be financed I. Civil works 1,280,000 70X II. Vehicles & equipment 640,000 'i0% foreiSn; 90Z local III. Technical Assistance 1,190,000 100% IV. Training and Studies 240,000 100% fo.reiag; 902 local V. Operating Costs (excluding salaries & p.d.) 445,000 60% VI. Refunding of PPF 71,000 VII. Unallocated 174,000 Total 4,040,000 DGF Component Proceeds of the IDA Credit Credit amount 2 of expenditures Categpory USS to be financed I. Civil works 62,000 70% II. Vehicles & equipment 403,000 100% of foreign expenditure 902 of local expenditure III. Technical Assistance 186,000 100% IV. Training and Studies 886,000 100% foreign 90% of local expenditure V. Operating costs (excluding salaries p.d.) 107,000 60% VI. Refunding of PPF 68,000 VII. Unallocated 78,000 Total 1,790,000  Schedule B Page 3 of 3 GBK Project Unit Component Proceeds of the IDA Credit Credit Amount Z of expenditures Category USS to be financed Civil works A. Kigali Butare 220,000 B. Gishwati Plantations 618,000 C. Gishwati Pastures I 233,000 D. Gishwati Pastures II 1,060,000 70% E. Extension 812,000 F. Mutara 50,000 II. Vehicles & equipment A. Kigali Butare 231,000 B. Gishwati Plantation 306,000 l: Gishwati Pastures 263,000 100% of --creign D. Extinsion 390,0A0 expenditures E. Mutara 262,000 90% of local expenditures. III. Technical Assistzance A. Gishwati 303,000 B. Extension 32,000 100% IV. Training and Studies A. Extension 147,000 100l of Foreign B. Mutara 4,000 Expenditures and 90% of local expenditures. V. Operating Costs A. Kigali Butare 349,000 B. Gishwati Plantation and pasture 840,000 C. Extension 266,000 60X D. Mutara 47,000 VI. Refunding of PPF 1,361,000 VII. Unallocated 476,000 Total 8,270,000 Estimated Disbursements: (US$ Million) IDA fiscal year: 1988 1989 1990 1991 1992 1993 S-------- U S million --------------- Annual 1.70 1.85 2.60 3.20 3.00 1.75 Cumulative 1.70 3.55 6.15 9.35 12.35 ..10  Schedule C RWANDA SECOND INTEGRATED FORESTRY PROJECT Timetable of KRey Project Processinz Events (a) Time taken to prepare: 12 months (b) Prepared bys Government with FAO-CP Assistance and IDA input (c) Appraisal Miss4.on Departure: April 29, 1986 (d) Post-Appraisal Mission Departure: September 23, 1986 (a) Negotiationss: April 20-25, 1987 (f) Planned Date of Effectiveness: January 31, 1988 (g) List of Relevant PPARs: None  -10- Schedule D Page THE STAT3S OF BANK GROUP OPERATIONS IN RWANDA A. Statement of IDA Credits (As of March 31, 1987) Amount US$ million Credit No. Fiscal Borrower Purpose (less cancellations) -_ _ _ __ _ _IDA Und.21 (Twelve credits have been fully disbursed)l/ 107.24 1057-RW 1981 Rwanda Telecommunications 7.50 .58 1126-RW 1981 Coffee/Fooderops 15.00 2.24 1217-RW 1982 Technical Assistance 5.00 2.09 1250-RW 1982 Fifth Highvay 25.90 7.35 1263-RW 1