Sri Lanka - Conservation and Sustainable Use of Medicinal Plants Project

Document of The World Bank Report No. 17160-CE PROJECT APPRAISAL DOCUMENT ONA PROPOSED GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND IN THE AMOUNT OF SDR 3.4 MILLION TO THE GOVERNMENT OF THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA FOR A CONSERVATION AND SUSTAINABLE USE OF MEDICINAL PLANTS PROJECT NOVEMBER 6,1997 Rural Development Sector Unit South Asia Region  Currency Equivalents (January 31, 1997) Currency unit-Sri Lankan Rupee (SLR) US$ 1.00 = SLR 57.19 SLR 1 million = US$ 17, 486 Fiscal Year January 1 to December 31 Weights and Measures Metric Unit System Metric Unit = British/US Equivalent 1 centimeter = 0.39 inch 1 meter = 39.37 inches 1 kilometer = 0.62 mile 1 hectare (ha) = 2.47 acres 1 square kilometer (km2) = 0.386 square mile I cubic meter (mi) 3 35.31 cubic meter I liter (1) = 0.264 gallons 1 kilogram (kg) = 2.205 pounds 1 metric ton (m ton) = 2,205 pounds Abbreviations and Acronyms ADB Asian Development Bank BAP = Biodiversity Action Plan BMARI = Bandranaike Memorial Ayurvedic Research Institute CAMC Conservation Area Management Committee CAS = Country Assistance Strategy CBO = Community Based Organization CISIR Ceylon Institute for Scientific and Industrial Research GEF = Global Environment Facility GoSL Government of Sri Lanka LOI Letter of Invitation MIM = Ministry in charge of Indigenous Medicine MoU = Memorandum of Understanding MPCA Medicinal Plant Conservation Area MPRMC Medicinal Plant Reserve Management Committee MFE = Ministry of Forestry and Environment NEAP = National Environmental Action Plan NGO Non-Governmental Organization NPSC National Project Steering Committee NTFP Non Timber Forest Products PA = Protected Area PD Project Director PMU = Project Management Unit PPMC Provincial Project Management Committee SNR = Strict Nature Reserve STAP Scientific and Technical Advisory Panel UNDP = United Nations Development Program VPMC = Village Project Management Committee WHO - World Health Organization Vice President: Mieko Nishimizu Country Director: Roberto Bentjerodt Sector Managers: Ridwan Ali/Michael Baxter Task Managers: Nadim Khouri/Malcolm Jansen  SRI LANKA CONSERVATION AND SUSTAINABLE USE OF MEDICINAL PLANTS PROJECT Project Appraisal Document Table of Contents Page PROJECT DATA SHEET iii BLOCK 1: PROJECT DESCRIPTION ............................ 1 A. Project Development Objectives .1 B. Project Components .1 C. Benefits and Target Population. 2 D. Institutional and Implementation Arrangements. 2 Institutional Arrangements. 2 Implementation Period. 3 Executing Agencies. 3 Project Oversight. 4 Accounting, Financial Reporting and Auditing Arrangements 4 Monitoring and Evaluation .............................................. 4 BLOCK 2: PROJECT RATIONALE .......................................................... 4 A. CAS Objectives Supported by the Project. 4 B. Main Sector Issues and Government Strategy. 5 C. Sector Issues to be Addressed b-y the Project. 6 D. Project Alternatives. 7 E. Major Related Projects .7 F. Lessons Learned and Reflected in Project Design. 8 G. Indications of Beneficiary Commitment and Ownership. 9 H. Value Added of GEF and Bank Support. 9 BLOCK 3: SUMMARY PROJECT ASSESSMENTS ......................................... 10 A. Economic Assessment .10 Economic Analysis .10 Incremental Cost Analysis .10 Fiscal Impact .11 B. Financial Assessment .12 C. Technical Assessment .12 D. Institutional Assessment. .13  E. Social Assessment .............. .................... 13 Socio-Economic Characteristics .13 Indigenous People .14 Social Issues Addresses by the Project .14 F. Environmental Assessment.. 15 G. Participatory Approach .16 H. Sustainability .16 I. Critical Risks .17 J. Possible Controversial Aspects .18 BLOCK 4: MAIN GRANT CONDITIONS .18 A. Conditions for Effectiveness . . .18 B. Other ...18 BLOCK 5: COMPLIANCE WITH BANK POLICIES... 19 LIST OFANN~EXES 1: Project Design Summary 2: Detailed Project Description 3: Estimated Project Costs 4: Incremental Costs and Global Environmental Benefits 5. Financial Summary 6.- Procurement and Disbursement Arrangements 6A. Project Costs by Procurement Arrangements 6B. Thresholds for Procurement Methods and Prior Review 6C. Allocation of Grant Proceeds 7. Project Processing Budget and Schedule 8. Documents in the Project File 9. Statement of Loans and Credits 10. Country at a Glance Map Number IBRD 29161 : Proposed Medicinal Plant Reserves and their Climatic Characteristics  iii INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION South Asia Region Project Appraisal Document Sri Lanka Conservation and Sustainable Use of Medicinal Plants Project Date: October 27, 1997 [] Draft [x] Final Task Manager: Nadim Khouri/Malcolm Jansen Country Manager: Roberto Bentjerodt Project ID: LK-GE-35828 Sector: Agriculture Lending Instrument: PTI: [x] Yes [] No Project Financing Data [] Loan [ Credit [ Guarantee [x] Other (GEF grant) For LoanslCredits/Others: Amount (US$m): 4.57 SDR: 3. 4 million Proposed Terms: [X] Multicurrency [] Single currency Grace period (years): [] Standard Variable [] Fixed [] LIBOR-based Years to maturity: Commitment fee: % Not applicable Service charge: % Financing plan (US$m): Source Local Foreign Total Government 0.41 0.09 0.50 Cofinanciers IBRD/IDA GEF 3.22 1.35 4.57 Other (specify) Other (specify) Borrower: Guarantor: Responsible agency(ies): Estimated disbursements (Bank FY/US$M): 1998 1999 2000 2001 2002 2003 Annual 0.43 0.96 0.99 0.90 0.87 0.42 Cumulative 0.43 1.40 2.38 3.28 4.15 4.57 For Guarantees: Not applicable [] Partial Credit [ Partial risk Proposed coverage: Project sponsor: Nature of underlying financing: Terms of financing: Principal amount (US$) Final maturity Amortization profile Financing available without guarantee?: [ Yes [ No If yes, estimated cost or maturity: Estimated financing cost or maturity with guarantee: Expected effectiveness date: By March 15, 1998 Closing date: June 30, 2003  I  Block 1: Project Description A. Project Development Objectives (see Annex 1 for key performance indicators): 1. The objective of this project is to conserve globally and nationally significant medicinal plants, their habitats, species and genomes and promote their sustainable use in Sri Lanka. B. Project Components (see Annex 2 for a detailed description and Annex 3 for a cost breakdown): Component Category Cost Incl. Y%Of Contingencies lta (US$M) Expansion of in situ 1. Establishment of MPCAs. approximately 2.07 41% conservation: this will include the installation of 2. Baseline data collection. Medicinal Plant Conservation Areas 3. Development of Village Action Plans. (MPCAs) in five areas (Bibile, Ritigala, Naula, 4. Sustainability studies Rajawaka and Kanneliya) where there is active 5. Conservation Strategy for MPCAs collection from the wild. 6. Extension and Education in the MPCAs. Expansion of ex situ 1. Establishment of two new nurseries. approximately 0.48 9 % cultivation and conservation 2. Improve existing nurseries. 3. Research on propagation. 4. Home gardening and plantation research. 5. Dissemination of research results. Information and 1. Promotion of appropriate legal and policy approximately 2.52 50 % institutional support environment through studies and - - recommendations for regulations. 2. Establishment of information network on medicinal plants. 3. Training and mass awareness on medicinal plant conservation. 4. Monitoring and evaluation. 5. Support for project management, coordination and advisory functions. TOTAL 5.07 million 100%  2 C. Benefits and Target Population 2. The project's benefits accrue at both global and local level. Global benefits of this project will include the conservation of rare and endemic medicinal plants. At least 189 species of 1,414 medicinal plants used in Sri Lanka are endemic to the island (or geographically restricted to the Indian sub- continent) including 79 species which are threatened. Even among the non-endemic species found in Sri Lanka, the indigenous populations often represent types that are distinct from those found elsewhere. Conservation of these plants will secure the continued existence of these rare and endemic species of plants. Another global contribution of the project will be the preservation of traditional knowledge on medicinal plants. Practitioners knowledge of plants and their uses will be globally recognized and the source of this knowledge will be easily identifiable. Laboratory research on plants and their uses will also augment existing information on this subject. Research on identification of methods and levels of sustainable extraction will help to improve global knowledge on sustainable cultivation of medicinal plants. 3. Benefits at the local level will include increased choices of livelihood and better income opportunities for people who will be involved in home gardening and plant cultivation. Further, MPCAs will induce a small increase in income for local communities. The project will also broaden people's choices of livelihood by promoting alternative sources of income generation. Management of MPCAs and educational site visits will provide employment to local people. The project's focus on community participation will promote community involvement in resource conservation and more equitable sharing of natural resources and benefits. The project will also clarify the role of the community and governmental agencies in resource management. 4. National benefits of the project will include improved supply of medicinal plants. Improved information will be available on factors which affect the supply of plants and existing sources of knowledge will be compiled and preserved in-country to maximize national benefits. An analysis of market factors will promote greater efficiency in the production of traditional medicine and remove supply side inconsistencies which hinder their availability throughout the year. Further, the project will promote sustainable use of natural resources through managing critically endangered habitats and monitoring its rate of regeneration. The project will also build skills and increase awareness on the importance of conserving medicinal plants. 5. Target Population: The project will work in close collaboration with local people to devise a strategy for the planning and implementation of activities. Through its alternative income generating activities, the project will also target people inhabiting villages close to the five MPCAs. The project will specifically target the growers of medicinal plants and improve their skills through a training and extension program. Additionally, the project will make every effort to include women, poor households and indigenous people in project activities. Practitioners of traditional medicine will also form an important target group and their knowledge of plants and uses will be compiled and preserved. Another target group will be the visitors attracted to the sites who will gain information on plants and whose visits will be a source of income for the local communities. D. Institutional and Implementation Arrangements 6. Institutional Arrangements: A temporary project management unit (PMU) will be established at the Ministry of Health and Indigenous Medicine (MIM). The PMU will be headed by a Project Director (PD), supported by a Program Officer reporting to the Secretary, MIM. The PMU will  3 implement the Project through line departments, provincial councils and other institutions. The implementation of project activities will be the responsibility of the respective cooperating agencies under the overall coordination of the Project Director. As this project involves a diverse set of stakeholders with a substantial involvement at the provincial level, the long term commitment of the provincial administration will be ensured by the MIM entering into a Memorandum of Understanding (MOU) with the Provincial Councils detailing the cooperation and collaboration required, together with the arrangements for disbursement of funds. The Provincial Commissioner of Department of Ayurveda will act as a focal point who will overlap with the PD and the implementing agencies in the provinces. 7. To facilitate the implementation of village based activities, the project will identify and organize Community Based Organizations (CBOs) to participate in the project. The CBOs will be structured to ensure full scale community involvement in the planning and, later, management of the MPCAs. The project will establish a Village Project Management Committee (VPMC) consisting of community representatives and representatives of the concerned State agencies for local planning. An umbrella organization, the Conservation Area Management Committee (CAMC) will oversee the- management of the herbarium, nursery, dispensary and the information center based at each MPCA. It will consist of representatives of the concerned State agencies, the Project Officer of the project management office established for the conservation area, and representatives of the relevant state organizations. The VPMC and CAMC will function in the five MPCAs only, and will be guided by a Provincial Project Management Committee (PPMC) at the provincial level. Comprising of representatives of government agencies and NGOs, the PPMC will meet quarterly to oversee the implementation of project activities including monitoring and evaluation, approve plans of action and other related matters. 8. The project will have a National Project Steering Committee (NPSC) to provide overall guidance for project implementation and to ensure that project activities are consistent with the agreed objectives. The NPSC will also approve annual work plans and budgets for the project. The MIM has suggested that the NPSC will be composed of the Secretaries in charge of Indigenous Medicine, Lands, Agriculture, Plantation Industries, Environment and Forests, the heads of the Departments of Forestry, Wildlife Conservation, the Commissioner of Ayurveda, representatives of the Department of External Resources, participating Provincial Councils, and other relevant institutions, NGOs and parties. Implementation Period: Five years 9. Executing Agencies: The Ministry of Health and Indigenous Medicine will be the principal project executing agency with the Department of Ayurveda in charge of project management. Other agencies directly involved in implementation of project activities include the Forest Department and the Department of Wildlife. The project will link with the following entities (i) Provincial Councils of provinces where MPCAs will be established; (ii) the Agriculture Department's Extension and Communication Center in Peradeniya; (iii) NGOs established in the areas covered by the MPCAs.  4 10. Project Oversight (policy guidance, etc.): Project Oversight will be provided by the National Project Steering Committee. I1. A joint international/national advisory group will meet in years 1, 3 and 5 of the project and will hold workshops in those years to promote a forum for scientific and technical exchange of regional and global importance. 12. Accounting, Financial Reporting and Auditing Arrangements: Disbursement of funds from the PMU will be based on an annual allocation and on an approved program of work. The cooperating agencies will establish separate accounts for the project. These accounts, together with supporting documentation will provide a comprehensive record of project financing and expenditures. Assurances will be sought from the MIM that: (a) project accounts will be maintained and audited annually with sound auditing standards applied by independent and qualified auditors will be submitted to the Bank no later than six months after the closing of each fiscal year; and (c) that the Special Account will be audited annually and an audited statement of the account and the auditor's report will be submitted to the Bank no later than six months after the close of each fiscal year. The formats for accounting reports will be developed and agreed between the PMU, the Bank and the Auditor General. Certification of audit reports will be the responsibility of the Secretary, MIM, who will be the chief accounting officer. Auditing of accounts will be done by the Auditor General of Sri Lanka. Financial progress reports indicating financial and physical progress will be made on a quarterly basis to ensure that up to date accounting books are maintained. The PMU will transfer funds as an imprest, at the beginning of each year to the cooperating agencies on the basis of the agreed workplan. The imprest will be renewed at regular intervals by the submission of statement of accounts for the previous implementation period. 13. Monitoring and Evaluation Arrangements: M&E will be the primary responsibility of Project Officer and staff . However, overall responsibility will lie with the Project Director who will head the Project Management Unit to be set up within the Department of Ayurveda. The M&E findings will be reported to the National Project Steering Committee by the Project Management Unit. The project will also assign a provincial officer for M&E at least on a part time basis. M&E at the community level is critical to the smooth operation of the project. Once project activities are in place, small committees will be formed at the community level, chaired by a person elected by the community itself for this purpose. M&E at the next level will be undertaken by the District Ayurveda Conservation Committees which will select representatives from the communities to monitor project activities. The Ayurveda Conservation Committee through its representation on the Provincial Project Management Committee will link communities at provincial level for M&E. In addition, the project will contract the impact monitoring of activities to an independent multi disciplinary team from an independent research institution or university. Block 2: Project Rationale Latest CAS discussion, May 21, 1996, Document No. 15633-CE. A. CAS Objective(s) Supported by the Project: 14. This project fits the CAS objectives to be pursued jointly by GoSL and the Bank. In particular, the conservation of natural resources is one area of priority of this strategy. Other country strategies that this project will contribute to include: (i) poverty reduction by the potential increase and diversification  5 of home gardening and plantation productivity; and (ii) institutional reform to ensure optimal cooperation and participation of private/public sectors and strengthening of institutions where there are clearly valid roles for them. The project is well integrated in Sri Lanka's NEAP and other related national development plans (in Forestry and Indigenous Medicine mainly) and is one of the areas of priority covered in Sri Lanka's Biodiversity Action Plan (BAP). B. Main Sector Issues and Government Strategy 15. Decreasing populations of medicinal plants is the key issue in the sector. The factors which contribute to this are as follows: 16. Unsustainable collection and cultivation practices: The number and quality of medicinal plants is adversely affected by overharvesting and lack of care to their habitat when collecting plants from the wild. Overharvesting of plants is directly linked to the high demand for Ayurvedic medicines. Currently 60% of the demand for medicinal plants is met through imports. The domestic production which meets the remaining demand, does so through over-exploitation of indigenous plant resources. Since most of the supply for plants is from the wild, this has led to overharvesting of wild populations of species. Nursery capacity and cultivation in home gardens, which has the potential to increase supply of plants and thus take the pressure off wild stocks, is too restricted at present to meet the demand. In addition, increased demand for agricultural land and unsustainable cultivation practices such as shifting cultivation and 'Chena" or slash and burn cultivation destroy plant habitat. As a result about 79 species of medicinal plants are immediately threatened with extinction. 17. Lack of information, awareness and technical skills on medicinal plants and their uses: Since no comprehensive analysis of social and economic causes of plant loss has yet been undertaken, the key causes and effects of plant loss are not clear. Further, the lack of comprehensive and authoritative information on medicinal plants hinders an assessment of their status, implementation of activities necessary for preserving their habitat and monitoring the effect of rehabilitative efforts. At present either the sources of knowledge are contradictory (e.g. several plants are identified under different names and uses by practitioners of traditional medicine) or are scattered and fragmentary. 18. Sri Lanka is fortunate to have a rich stock of indigenous knowledge on medicinal plants due to a large number of practitioners of traditional medicine. However, this important source of knowledge is currently under threat as little effort has been made to understand and document their knowledge. As a result, the death of a practitioner signifies a net loss to the pool of this important source of information. A shortage of skills in ethnobotany is a key reason underlying the loss of this knowledge and hindered effective conservation strategies. 19. Government Strategy: Realizing the value of medicinal plants, GoSL has taken several steps to conserve them, for instance, through formation of medicinal plant gardens and Protected Areas (PAs). Despite the lack of resources and technical expertise, GoSL has taken measures for both in situ and ex situ conservation. In situ conservation is undertaken by various Departments through a system of PAs for which Sri Lanka has reserved 12% of its land area. Managed by the Forestry and Wildlife Conservation Departments, PAs play an important role in conservation through maintaining natural habitats of wild plants and animals. Ex situ conservation has included the formation of medicinal plant gardens and nurseries. The Department of Ayurveda has established three medicinal plant gardens, some with support form the IJNDP, WHO and WWF, and two extension centers. Smaller gardens are maintained at district Ayurvedic hospitals. In addition, a 100 hectare medicinal plant garden has been established at Kataragama which is now under the administration of the Department of Town and Country Planning. Other efforts in this sector include demonstration plots set up by the Forest Department. 20. Despite Sri Lanka's commitment to the sector, its ability to provide increased resources and  6 attention to conservation and sustainable use of medicinal plants is limited due to other political and economic priorities. Consequently, funding for key ministries dealing with the conservation of medicinal plants, such as the Ministry of Forestry and Environment (MFE) and MIM, is expected to maintain current expenditures roughly adjusted for inflation. While conservation of plants through PAs is an important means of addressing plant loss, other factors such as lack of skills, information, improved ex situ conservation, research and methods to increase the supply also merit close attention. Through addressing these concerns, the project will enhance and augment the sector strategy pursued so far and complement ongoing conservation projects by GoSL and donors. C. Sector Issues to be Addressed by the Project: 21. Inadequate Management of Habitats where Medicinal Plants are Found in the Wild: Through creation of five Medicinal Plants Conservation Areas (MPCAs), the project will sustain wild populations of key plant species, monitor their population, harvesting and regeneration patterns and implement programns to conserve threatened species. The MPCAs are situated in areas which host populations of threatened and endemic species and where plant habitat is currently under threat. Management of habitat in MPCAs will be undertaken according to management plans drawn with the aid of participatory planning. Management plans will establish zones for-defining the types of activities that can be carried out without undue damage to plant habitats. The nature and extent of human activities in the plant habitat will be discussed and agreed with local communities. Extension and awareness building activities will train collectors to harvest wild plants without damaging their habitat. 22. Habitat management will also include measures to reduce overharvesting of plants. Management of MPCAs will include enrichment planting to increase plant populations. Enhancement of nursery capacity and support for home gardening and community cultivation of plants will increase the supply of plants and take pressure off wild stocks which are overharvested to meet their high demand. The project will also conduct research to ascertain methods and levels of sustainable cultivation and pilot the results from research in MPCAs. Research will also identify plant uses and characteristics and it is likely that this information will be useful in substituting overused plants with those readily available to reduce the threat to overharvested species. 23. Lack of Knowledge and Awareness on the Conservation of Medicinal Plants: The project will promote mass awareness of the importance of conservation through (i) promoting educational site visits to the five MPCAs; (ii) development of school curricula to include information on medicinal plants; (iii) publishing handbooks and manuals containing information on-plants for the use of practitioners; (iv) conducting research and inventories to better understand the number of plant species, their uses, propagation and cultivation, sustainable levels of cultivation and the possibility of substituting threatened species with those that are widely available; (v) enhancing existing knowledge through compiling existing databases of plants; and (vi) conducting ethnobotanical studies to understand the traditional uses of medicinal plants. 24. Inadequate Technical Skills to Allow the Cost-Effective Conservation of Species. Natural Habitats and Knowledge Related to Medicinal Plants: In addition to the specific training needs identified for the implementation of the in-situ conservation and ex-situ cultivation and conservation components of the project, training in specialized disciplines will be supported under the project. The project will finance some specialized post-graduate level training positions in ethnobotany and sustainable management in suitable institutions outside the country. This training will be available to staff of the  7 Departments of Ayurveda and Forestry, universities and research institutions. 25. Teacher training will also be conducted to include the development of teaching material on medicinal plants and their conservation, discussions and review of materials by curriculum developers for integration into existing syllabi, teacher orientation through seminars and workshops. D. Project Alternatives Considered and Reasons for Rejection 26. Extending and supporting the existing network of PAs to conserve medicinal plants in the wild was the primary alternative to the project. This may have resulted in increased populations of plants in the wild but not addressed the threat to plant populations due to unsustainable use. Current activities by GoSL and other donors in the sector already encompass the conservation of plants in the wild through formation of PAs. Instead, the proposed project manages the threat to wild populations of plants through increasing their supply. The formation of MPCAs to propagat, and cultivate species, building of nursery capacity and conducting targeted research on plants will contribute to increasing the supply of plants without placing pressure on wild stocks. In addition, the project strengthens the policy and legal instruments for the promotion of sustainable use of plants. The project's approach, therefore, consolidates the "gains" made by PAs in conserving plants in the wild and ensures increase in plant populations by addressing the issues of sustainable use. 27. Support to individual components of the project (nursery development, for example) would have increased the supply of plants but not made an overall impact on the demand, supply and usage of plants. Additionally, the larger socio-economic, policy and legal issues would not have been addressed. 28. Other cost effectiveness considerations which have led to the rejection of alternative activities are mentioned below.' 29. The without project alternative would have led to further depletion of medicinal plant populations given the present and projected demand levels. This would mean a permanent loss in the country's stock of natural resources. The project aims to stop the decrease in wild populations of plants and aims to conserve threatened species which would be lost in a "without project" scenario. E. Major Related Projects Financed by the Bank and/or Other Development Agencies (completed, ongoing and planned). Sector Issue Bank Project Latest form 590 ratings (Bank financed projects only) Sustainable forestry, Forest Sector Development Project S enhancement of technical skills (Completed/World Bank) Enhancement of technical skills, Environmental Action I Project S institutional development, (Ongoing/World Bank). awareness building. Training and skills enhancement. Biodiversity Skills Enhancement For a fuller discussion, please see Block 3, section on Fiscal Impact.  8 Program (Ongoing/World Bank and MacArthur Foundation). Other development agencies Community involvement in forest Participatory Forestry Project management. (Ongoing/ADB) Institutional development, Ritigala Community Participatory sustainable cultivation of plants. Program (Ongoing/USAID-Asia Foundation). Skills enhancement Medicinal Plant technical assistance project (Completed/WHO/UNDP) Sustainable cultivation of plants Opanaike Medicinal Plant Nursery Program (Ongoing/GEF Small Grants) Skills enhancement, capacity Wildlife Conservation Project building and expansion of (Ongoing/GEF-UNDP). protected areas Conservation through community Knuckles and Sinharaja Conservation involvement. Program (NORAD/IUCN) F. Lessons Learned and Reflected in Proposed Project Design 30. Consensus on Project Objectives: The project has been sensitive to the need for developing a stakeholder consensus on project objectives. A series of workshops and brainstorming sessions with government agencies, Ayurveda practitioners, research institutions and NGOs were held to clarify key issues and arrive at a common understanding of objectives. This participatory approach will continue during project implementation and local communities will be closely involved in developing management plans aimed at reaching project objectives. 31. Community Involvement and Inclusion of Disadvantaged Groups: The Ritigala Program has provided a recent example of community involvement in the management of natural resources. This lesson has been applied in the proposed project by means of adopting a participatory approach, instead of "top down" planning. Local communities will be fully involved in the planning and implementation of conservation activities around MPCAs. Village level institutions which represent all segments of communities, including women and indigenous people, will be formed to coordinate and plan activities, monitor the impact of implementation activities and mobilize local support. The project also incorporates a strategy for supporting communities in pursuing alternative livelihood strategies which are not damaging to plant habitat. To facilitate community involvement, NGOs and CBOs will be co-opted to discuss and outline with communities their choices on alternative livelihoods, raise awareness on the importance of conservation and disseminate cultivation practices and home gardening. The implementation of alternative livelihood strategies will be based on the active cooperation of local communities and NGOs. 32. Inter-Agency Collaboration: A key lesson learnt and applied by the project is the need for effective interagency cooperation and coordination. Since the project will involve various governmental  9 agencies such as MIM, Department of Agriculture, Department of Wildlife Conservation and the Ministry of Forestry and Environment, inter agency coordination is vital for its success. The project has sought to develop interagency coordinatioti through representation of the concerned governmental agencies in the Project Management Team and the National Steering Committee during the preparation phase. Continuing this approach during the implementation phase, the project will ensure inter-agency collaboration through having representatives from state agencies on VPMCs, CAMCs and PPMCs. In addition, MIM will enter into a MoU with other provincial councils and departments involved in the functioning of MPCAs. G. Indications of Beneficiary Commitment and Ownership 33. GoSL's commitment to and ownership of the proposed project is evident from the proactive role played by MFE and MIM in overseeing project preparation, keen participation in the Biodiversity Working Group and related workshops organized for the project. MIM as the implementing agency has also formed a Project Management Unit and a Steering Committee to guide project development and implementation. GoSL's commitment is also evident from the willingness to review legislation related to Intellectual Property Rights. H. Value Added of GEF and Bank Support 34. GEF support will enable the project to target globally valued and threatened plants for conservation. As a result, MPCAs have been proposed for areas which are rich in threatened and endemic plants but with high levels of extraction. Propagation programs have also targeted threatened and endemic species which have, hitherto, not received adequate attention. Secondly, GEF's support will enable the project to supplement conservation activities with those aimed at promoting sustainable use of plants. Given the demand for Ayurvedic medicine, increasing supply through wider cultivation is necessary to promote sustainable use of plants. However, in accordance with the GEF Operational Strategy which states that "biodiversity and sustainable use must also be achieved outside the designated PAs", the project supplements the activities aimed at increasing supply with policy and legal changes necessary for preventing the loss of globally valued plants. GEF's support for "conservation of biodiversity and its sustainable use" will enable this project to address the reasons for plant loss through a multi faceted approach. Thirdly, GEF support will be instrumental in gaining valuable knowledge of plants through data collection. Targeted research on threatened plants will enrich the activities of the current project but also be valuable for the world at large. Lastly, GEF's support for preserving indigenous knowledge will be valuable in ensuring that the originators of this knowledge are recognized at a global level and are eligible to receive any economic benefits from its commercial use. 35. The Bank will add value to the project through coordinating and ensuring the support of government agencies and donors that have been active in the sector. The Bank has played an active role in developing the NEAP and has supported the Biodiversity Action Plan which was completed recently. This project also extends the Bank's current efforts in the sector such as Environmental Action I Project and Forestry Sector Project which have aimed at conservation and strengthening of environmental institutions.  10 Block 3: Summaay Project Assessments (Detailed assessments are in the project file. See Annex 8) A. Economic [] Cost-Benefit Analysis: NPV=US$ [ Cost [x] Other Assessment (see million; ERR= % Effectiveness (Incremental cost Annex 4): Analysis: analysis) Economic Analysis: 36. As a stand-alone GEF project, the principal economic evaluation criterion to be considered was the "incremental cost" justification as discussed at the end of this section. In addition, the economic analysis included a least cost analysis early in the selection of strategy and investment options. In addition, a systems analysis of the proposed MPCAs is now under preparation to explicate the relationships between medicinal plants, communities and the primary features of their environments. Using the graphic formalism of object relationship modeling, this analysis aims to describe the 'system' of incentives that govern the supply, demand, over- or under-exploitation of medicinal plants within the broad natural and man-made contexts that are of interest to the project. The object relationship model (ORM) developed for the MPCAs will concretely indicate the points of contact between the project and this 'system' and portray how the system should change as a consequence of the project's implementation. As critical elements of the system, the project's primary stakeholders appear in the model. These include collectors of raw materials, processors, farmers and other local households and other outsiders. The ORM should also aid the interpretation of the data to be collected as part of the project. At present, there is little reliable data on the supply or demand of various plants and plant products: the growth and yield studies and the socio-economic surveys to be conducted throughout the project period will be critical for filling this gap. These data will help determine whether a modified system as described in the ORM is indeed sustainable. Only when these data are available, along with a fuller understanding of the pharmaceutical and ecological values of the plants, would it make sense to judge whether the investment costs proposed in the project are high, or not, as compared to the value of maintaining the option of studying the plants in their natural environment. Even if one were to consider all project costs as being related directly or indirectly-to the establishment of the MPCAs, the economic cost of the project would then total less than US$500 per hectare of the MPCAs over the life of the project. Such a cost would not be so great as to require expectations of implausibly high future returns to maintaining the areas' biodiversity - especially by comparison to the pharmaceutical prospecting values that have been estimated for other similar biodiversity 'hotspots'. Pharmaceutical prospecting value, moreover, is not the sole source of the biodiversity value of such areas. Incremental Cost Analysis 37. Incremental costs of the project total US $ 4.57 million and cover the costs of financing the GEF alternative. Operationally, this means that GoSL will provide US $ 0.5 million as counterpart financing for development commitments which would have occurred in the absence of the GEF alternative. These include village economic development activities, civil works for Ayurvedic medicinal centers, drug supplies, staff allowances, taxes and duties which are not eligible for GEF financing. Regarding incremental benefits to the domestic economy, the proposed project is not expected to lead to an increase over the baseline scenario in the overall number of families who will enjoy an improvement in income through participation in village economic development. The proposed project would not add to currently planned development activities: it would influence the prioritization of the location of village development without relevant distributional consequences. The number of villages and households that would be so affected is indeterminate, but for working figures up to 200 villages and 2000 households might participate in village economic devolopment sooner under the proposed project than they would  11 have under the baseline scenario. Also, there is no basis for assuming that the growth in incomes of families within the impact areas of the proposed botanic MPCAs would be higher than could be expected in general for families benefiting from village economic development without the project. Accordingly, the project should not lead to a significant change, from baseline expectations, in the overall level of net employment and should not have special, incremental impacts on any one particular sector of the economy. However, the project will ensure sustainability of income, remove the cyclical nature of income for most families living around MPCAs and increase choices of livelihood. The project could also contribute towards maintaining a certain quality of life by preserving the feasibility of traditional health care options. Fiscal Impact 38. The proposed project is not expected to have significant long run incremental fiscal impacts: as described in Annex 5, the management of the five proposed medicinal plant conservation areas, the project's focus, is designed to be self-financing through the implementation of community participation and the development of educational site visits to the sites. 39. The community-based management strategy of the MPCAs should strongly favor the long-term viability of this key component by developing incentives for surrounding villages to maintain their environmental integrity. This is also an approach that minimizes Government recurrent expenditures: the main recurrent costs are for the O&M of local botanical gardens/nurseries and of local Ayurvedic dispensaries and information centers. These costs are small and within the ability of local communities to support through economic activities that will develop around the MPCAs. As discussed above, several alternatives for the project's design were rejected for their fiscal implications. The botanical gardens established and improved to store genetic material representative of all eco-agricultural zones are intended to provide planting materials and stock at cost to private nurseries. Financed research will verify within the project period the direct applicability of technical options for implementation in the field or on the farm. Capacity building under the project will develop in-country technical expertise to facilitate the replication of activities in other area. Only temporary support is required for project management structures: the project from the start endeavors to implement activities through the multi- disciplinary planning and the strong coordination of existing organizations. 40. The formation of Strict Nature Reserves with vigilant enforcement of non extraction of plants was the primary alternative for the in situ component. This was rejected for being socially disruptive and fiscally expensive. Enclosure would not address the requirements of local inhabitants to supplies of medicinal plants and the recurrent costs following the completion of such a operation would be high and ultimately unsustainable. The present approach seeks to develop incentives for maintaining the integrity of the MPCAs by surrounding populations through their involvement in the joint management of areas. In contrast to enclosures, the recurrent costs of the participatory approach are expected to be modest and associated with essentially private sector activities that would be self-financing. The present approach would also seek to involve NGO assistance where available as a means of using the project's resources to mobilize additional outside resources to participating communities. 41. The ex situ component restricts activities mainly to areas of horticultural research that have a good promise of providing results that can be directed into existing extension networks in the country. The pursuit of a nation-wide promotion of farming medicinal plants through the provision of input or output subsidies would have contravened present directions of national agricultural policy and costly to administer. Morcover, it would have been difficult to justify the use of subsidies to mitigate the risk of farmers learning to cultivate such crops.  12 42. Research under the project would not duplicate laboratory facilities already available in the country, and would focus on strictly applied or adaptive research. Investments in bio-technology research were judged as not being cost-effective and requiring substantial financial support over the long term. 43. Under the information and institutional support component, the project will promote policy reforms only in those areas for which legislated regulatory authority has already been established. The drafting of new legislation would require substantially more resources for research and consultation than would the present focus of drafting regulations, and would offer a lower promise of delivered outputs by the time of the completion of the project. Training for departmental capacity building concentrates on individuals and skills most directly supportive of the project's participative strategy for in situ conservation. The project avoids wide-scale general training of staff in environmental awareness concerning medicinal plants to intensify resources on producing a corps of highly qualified professionals in sustainable management. These individuals are likely to have a much stronger and ultimately more pervasive impact on their institutions than broad institution-wide alternatives. The project's development of an information network on medicinal plants favors the use of resources to link existing databases rather than construct a new, independent structure. Considerable resources have already been sunk in the compilation of data at several sites. Linking these sites and facilitating access to them would be a more manageable output to deliver at minimum incremental cost than a wholly new, centralized data bank. B. Financial Assessment (see Annex 5) NPV=US$ million; FRR= % 44. A chief concern of the project is to devise mechanisms for cost recovery. To ensure that this concern is adequately addressed; the project incorporates activities which are able to cover their costs such as botanical gardens, medical and information centers. The recurrent costs associated with these activities are not calculated to be high (estimated at $ 30,000, about 5% of MIM's non-development budget for Indigenous Medicine) and will be financed through user fees and other charges. Enhancement of nursery capacity will also recover its costs through sale of seeds, plants and other related planting materials. Through user fees, charges and other activities, educational site visits also have the capacity to be financially sustainable. Educational site visits will be promoted according to observed demand for use of two MPCAs. The development of educational site visits will first be applied to Kanneliya and Ritigala and the lessons learnt from these (including mechanisms for cost recovery) will guide development of other MPCAs as visit sites. C. Technical Assessment 45. GEF's Scientific and Technical Advisory Panel's (STAP) review of the project concept had indicated that one of the main technical contributions of this project would be in the determination of sustainable levels of harvesting and cultivation of medicinal plants. In addition to addressing Sri Lanka's national priorities, the STAP review indicated that the project "serves GEF's purpose as a meaningful activity to both people in rural areas as well as at institutions in urban centers, and serves as a model that can be propagated elsewhere. Over the next decade, it will become increasingly difficult for the ca. 3.5 - 4.0 billion people world-wide who require native plants for the provision of their primary health care to obtain these essential materials. Unless studies such as proposed in this project are implemented on a significant scale, as we approach the third millennium there will be a severe shortage of plants utilized in primary heath care". 46. Furthermore, the project integrates the following technical aspects that were identified by the STAP review: (i) selection of medicinal plants is based on the degree of exhaustion of these plants in the  13 wild as well as indications of increased demand by local markets; (ii) thorough ethnobotanical and ecological studies are essential for the determination of "sustainable" harvest in the wild; (iii) the project will try to promote the continued flow of economic benefits to local people following the completion of the project; (iv) an external advisory panel is important to guide the project and to help resolve difficulties, refine strategies, make connections with global efforts elsewhere, including sustainable harvesting and the promotion of traditional medicines; (v) within agreed criteria for the protection of intellectual property rights, it will be important to publish all data (negative and positive) resulting from this project; (vi) to keep the focus of the project on sustainable management strategies, the production of data base of medicinal plants will be based on filling the gap from existing data bases rather than an exhaustive and resource-intensive exercise; and (vii) some degree of assistance in inputs and instruction may be required by farmers involved in propagation and cultivation of the medicinal plants, but by the end of the project, no outside assistance would be required by these farmers/home gardeners. D. Institutional Assessment 47. An assessment of the institutions involved in this project revealed the following areas of strengths and deficiencies that were taken into consideration in project design. Areas of Strength: The Ayruvedic Department of MIM has been involved, at a pilot scale, in a number of actions that are directly related to the project. In particular, plant taxonomic work, data management, and interaction with collectors, growers, and processors of medicinal plants are all experiences that will benefit project implementation, especially concerning ex-situ conservation, propagation of processing. For in-situ conservation, the Forest Department, MFE has experience in joint management of forest resources with the private sector (leasing of plantations to private businesses) and local communities (through the Participatory Forestry Project mainly). For participatory village development planning, a number of rural NGOs have field experience that will be sought around the MPCA component. Areas of Institutional Weakness include the key areas of technical and administrative capabilities for sustainable harvesting and cultivation of plants. Weakness of skills in ethnobotany hinder the development of methods, implementation and monitoring of sustainable levels of harvesting. With respect to cultivation of plants, further research needs to be conducted together with skills enhancement for implementing wider propagation of plants and provision of extension services in agriculture sector. Finally, MIM does not have a group to monitor overall project impact. The project will address these institutional deficiencies by: (i) providing technical assistance and training in some key areas; (ii) establishing output-oriented, multi-sectoral, project management committees at the provincial and the MPCA-level; (iii) creating institutional linkages for better inter agency cooperation, (iv) providing international support through the technical advisory committee; and (v) covering the contracting of an external institution for the monitoring and evaluation of overall project impact. E. Social Assessment: Socio-Economic Characteristics 48. Preliminary analysis shows that except for Kanneliya, which has a relatively lower poverty rate and more opportunities for employment, all villages are characterized by high level of poverty, high dependency ratio and low level of literacy. The economy of these villages is largely agrarian and there is a high level of dependence on Non Timber Forest Products (NTFPs). Agriculture is insufficient to meet the subsistence needs of the people throughout the year and poverty is, therefore, intensified during the dry season when there is no agricultural income. The lack of other employment opportunities combined with dependence on subsistence agriculture lead to high levels of poverty increasing people's dependence on forest products and other resources. In particular, land issues are central to poverty since land holdings are small and nearly all land in these villages belongs to the State with limited freehold rights given to  14 local people. 49. All the above mentioned factors indicate that poverty is a major concern in the villages around MPCAs. Since people have little access to land, there is high dependence on the collection of medicinal plants leading to plant loss. The project will address this aspect through home gardening and supporting community plots for cultivation. The project realizes that links between poverty and over exploitation of plants are strong and must be addressed if conservation initiatives are to receive local support. Indigenous People 50. Of the proposed sites, indigenous groups (Veddhas) are found only in Bibile. At present about 35 families represent this group. They are the descendants of displacees from an earlier project in late 1 940s. Their dependence on NTFPs including medicinal plants is very high compared to other villages since they do not rely on agriculture. 51. Project design is tailored to ensure that indigenous people are included in the village development activities and decision making structures. Due to their high level of poverty and dependence on medicinal plants for existence, they will form an important stakeholder group. NGOs with experience of working with indigenous people will be co-opted for working with these groups. Their specific economic and social needs and religious beliefs will be incorporated in developing village based activities. Social Issues Addressed by the Project 52. Project design is based on the premise that sustainability of MPCAs depends on the nature of human interactions with the resources contained therein. As a result the project takes a participatory approach to involving local people in planning and management and will not lead to any resettlement. The specific areas where the project will have an impact are outlined below: 53. Project Impact: If successful, the project will ultimately reduce the seasonal variation of income and dependence on extraction of species in the wild. As noted above, the agricultural economy of many villages is subject to the vagaries of weather. In the absence of off-farm employment on an appreciable scale, seasonal poverty is rampant. This will be achieved through a planned system of cultivation of medicinal plants in home gardens and through their propagation. These activities will enable more people to eliminate seasonal variations in income through involvement in production, processing and other ancillary activities.. In particular, the project will benefit women and female headed households. 54. Secondly, the project will reduce people's dependence on extensive use of land. Home gardening and community plots will make efficient use of land resources, the absence of which has led to encroachments on state land in the past. 55. Thirdly, the project's village based participatory management of resources will create a sense of ownership in the communities. This is envisaged as an essential outcome of alternative income generation activities as people realize the benefits that they can derive from the project. Further, participatory resource planning will resolve land management issues since the process will take into consideration not only conservation needs but also issues regarding community rights, access to land and user rights. The assurance that they are the custodians of natural resources will foster the communities' sense of ownership over forests and their products. 56. Negative Impacts and their Mitigation: With the formation of MPCAs and project implementation, some controls are bound to be placed on people's use of forests, particularly in areas  15 where species are over extracted. This is not likely to be welcomed by people who have had uncontrolled access to species and have extracted them in a destructive way. Awareness programs will be carried out which can change the attitudes of people through realizing that conservation is a sustainable means of assuring a continued income. 57. The proposed activities will also increase the work load of people. However, as economic benefits are felt by communities, households may use more members to increase production. There is the possibility that outside intervention may lead to over extraction of plants, without the consent of local people. This possibility is strong in case the propagation and home gardening of plants does not yield economic benefits for local communities. It is envisaged that community involvement will lead to a greater sense of ownership and establish community rights. Additionally, a local system of marketing will ensure that communities recognize the importance of conservation over and above excessive extraction for short term gains. F. Environmental Assessment: Environment category () A (x) B ()C 58. The project is classified as a "B" category project in accordance with the World Bank's Operational Directive 4.0 on Environmental Assessment because it is not expected to have major adverse environmental impacts. The project is expected to have a highly beneficial environmental impact. No large scale infrastructure improvements are envisaged under project activities to cause negative environmental impacts and adverse impacts are expected to be minimal because all investments are small, ecologically sound, and limited in scope. 59. Project preparation has included an environmental review which confirrned that project activities would produce wide scale beneficial environmental impacts, by improving productivity of PAs and buffer zones, increasing the number of medicinal plants especially those which are threatened and reducing the pressure on wild populations of medicinal plants. Most of the project activities are focused on the conservation of medicinal plants in five MPCAs and are expected to have beneficial results on plant populations. Other activities such as cultivation and enrichment in MPCAs and extension to demonstrate sustainable cultivation are small scale and widely dispersed and are not likely to cause major soil disturbance or exposure. In addition, these activities do not involve the use of agro chemicals or pesticides. 60. Complementary village level investments for alternative income generation activities will also have beneficial impact on the environment as the small scale low impact activities envisaged under this component will reduce people's dependence on wild habitats of plants. Similarly, value added activities will decrease harvesting of plants from the wild by developing incentives for people to sustainably manage existing populations. 61. Activities which are likely to have minor negative impact on the environment have been considered clearly and measures to mitigate adverse impacts have been arranged. For example, the construction of small scale dispensary and Ayurveda health information and treatment centers in each MPCA will take place in the dry season so that the potential for soil erosion is reduced. Structures will be located in the buffer zones and areas around the dispensary will be replanted with medicinal plants to avoid plant loss. Further, the risk of educational site visits causing over use of the MPCAs and pollution is expected to be limited. The emphasis of educational site visits ventures will be their social and environmental benefits to the MPCAs and local communities. Although the project will have no direct impact on the issues of Intellectual Property Rights and other issues related to genetic patenting, it supports the strengthening of legislation and policy so that adequate safeguards are in place to prevent the "piracy" of indigenous knowledge and plants in future. To ensure the protection of indigenous  16 knowledge and plants, GoSL will establish a Committee to develop guidelines and implement controls on information and resources. 62. Further, environmental screening will take place through M&E, which will measure project success and include close review of the ecological impact of the project, beginning with carefully designed and reliable resource mapping and baseline studies. G. Participatory Approach 63. Project identification and formulation has adopted a participatory approach to project preparation. Stakeholders have provided their input to the preparation process through workshops, consultation meetings, brain-storming meetings, and field consultations. Key stakeholders that have been consulted include Ayurveda practitioners, traders, exporters and manufacturers, scientists, policy makers, technical specialists, NGOs, and local community representatives2. Consultations with stakeholders were intended to draw on expertise in the formulation of project activities, to identify constraints and issues needing action, to solicit the views of potential community groups to the concept of the project, to obtain consensus on the objectives of the project and proposed intervention, and to solicit the support of stakeholders in project implementation. 64. Project design entails a participatory approach to implementation and operation. Local communities, NGOs, researchers, local government agencies, and line agencies would collaborate in the implementation of the project at the local level. The long-term sustainability of project investments are premised on the understanding that the operation and maintenance of activities beyond the life of the project, would be devolved to community level institutions that would be established during the project period, at the MPCA level. Participation of various stakeholders at different stages of project preparation, implementation and operation can be summarized as follows (IS = information sharing; CON = consultation; and COL = collaboration. Identification/Preparation Implementation Operation Beneficiaries/Community groups IS/CON COL COL Intermediary NGOs IS/CON COL COL Academic institutions IS/CON COL COL Local government IS/CON COL COL Other Donors IS/COL IS IS Participating State Agencies CON COL COL National Steering Group IS/CON COL COL Advisory Group IS IS H. Sustainability 65. Mechanisms for financial sustainability include the self financing nature of project activities. The costs for maintaining MPCAs, dispensaries and nurseries will be within the reach of the local communities and the self financing nature of these activities will ensure their financial sustainability. 2 Several NGOs and research institutes participated in workshops organized by the project. They included Bandranaike Memorial Ayurvedic Institute, WWF, Environmental Foundation, NAREPP Project, IUCN and Ayurveda Conservation Committee.  17 66. Social sustainability will be assured through involving local people and NGOs in the design and implementation of the project. The project will ensure that the economic benefits from conservation of medicinal plants flow to local communities especially those involved in collecting and cultivating medicinal plants. Representative institutions will be supported at the local level and the clarification of legal rights will contribute to the social sustainability of the project. 67. Through increasing the technical skills and capacity of government agencies, the project will also build a sustainable skill base. Improved local skills will ensure that the technical aspects of the project such as data collection and maintenance, ethnobotanical surveys and monitoring are continued beyond the project's life. L Critical Risks (see fourth column of Annex 1): Project Outputs to Development Objectives (Risk rating 1: lowest, 5: highest) Risk - Risk Rating Risk Minimization Measure Biodiversity conservation 2-3 Public awareness, promotion of educational site visits (especially related to medicinal plants) continues to be valued by society. Property rights are definable and 3-4 Adoption of suitable regulatory framework enforceable In situlex situ conservation will 2-3 Research to identify threatened species of global preserve globally valuable and importance threatened plants. Project Components to Outputs Risk Risk Rating Risk Minimization Measure Appropriate size of a MPCA. 3 Interaction of joint local/international advisory group to review and other country experiences Critical, highly impacting 5 Peer pressure, linkage of project support to verifiable communities are receptive in indicators of compliance/cheating. sufficient numbers to permit effective management planning over the whole of selected sites Enrichment of MPCAs adversely 3-4 frequent monitoring of sustainability studies affects ecological integrity throughout implementation Set of feasible and alternative 3 Detailed socio-economic field surveys that test the village incomes linked to the wider applicability of the experiences of the USAID MPCAs exists. funded Ritigala project prior to project start Continued local interest to 3 Awareness building and educational activities. preserve Ayurvedic knowledge  18 Overall Project Risk Rating Risk Risk Rating Adequate in country technical 3-4 Strong TA inputs, links to external technical capability institutions and training J. Possible Controversial Aspects 68. Through increasing the supply of medicinal plants, the project increases the risk of increasing pressures on wild populations of endangered plants to meet even further increases in demands for Ayurvedic medicine. To manage this risk, the project incorporates targeted research on the uses and characteristics of plants to allow for the opportunity to substitute endangered plants with other plants that are not threatened or easily cultivated. Careful monitoring of plant species in MPCAs and formulation of policy instruments to regulate the use and trade of plants will enable the project to mitigate the risks from further extraction of wild populations of plants. 69. The project has been sensitive to the risk of uncontrolled access to genetic material and has ensured its local ownership. The project has made stringent efforts to ensure that a local consensus is achieved for information sharing on medicinal plants. Further, the draft regulations concerning standards, trade, property rights and land use will clarify and strengthen local ownership rights. The project has also made maximum use of local research institutions to gather information and conduct research. Further training will enhance local ability to preserve and patent genetic material as an indigenous natural resource. Block 4: Main Grant Conditions A. Conditions for Effectiveness: (a) MIM shall have selected consultants for operational support to assist in the implementation of the project. B. Other MIM shall: Project Management I (a) establish a Project Management Unit and provide the agreed level of staff and technical assistance (Management) for its functioning no later than March 15, 1998; I (b) by March 15, 1998, confirm to the World Bank that all organizational and inter-agency coordination arrangements (with Provincial Councils, Wildlife and Forestry Departments, and other entities, as appropriate) are in place and operational, as per the MOUs agreed to at appraisal, and covering planning, implementation, research, study, and monitoring and evaluation activities; Project Implementation 2 no later than March 15, 1998, ensure that the technical assistance (Operations) contract for operational support is finalized and key Consultants have started support to field activities according to the agreed Technical Assistance schedule of all project activities;  19 3 implement the project according to a Project Implementation Plan satisfactory to the Bank and agreed at appraisal as the same may be revised from time to time in consultation between GOSL, other stakeholders and the Bank; 4. maintain polices and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with benchmarks and indicators satisfactory to the Bank, the carrying out of the Project and the achievement of the objectives thereof; 5. prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, by January 15, 2000, a report integrating the results of the monitoring and evaluation activities performed on the progress achieved in carrying out of the project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the project and the achievement of the objectives thereof during the period following such date; and 6. review with the Bank, by April 15, 2000 or such later date as the Bank will request, the report on monitoring and evaluation activities and thereafter, take all measures to ensure the efficient completion of the project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Bank's views on the matter. Block 5: Compliance with Bank Policies [x] This project complies wth al 1applicable Bank policies. [][The following exceptions to Bank policies are recommended for approval: The project complies with all other applicable Bank policies.] Nadim Khouri erto Bentjerodt Task Manager: Country Manager:  20 ANNEX 1 Page 1 SRI LANKA Conservation and Sustainable Use of Medicinal Plants Project Project Design Summary Narrative Summary Key Performance Indicators" Monitoring and Supervision Critical Assumptions and Risks CAS Objective (CAS Objective to Bank To conserve the natural resources of Mission) Sri Lanka. Stop or reduce deforestation. International environmental World Bank/ GEF continue organizations. to support biodiversity Stop or reduce threats to conservation. plant and animal species. Research reports. Other political and economic Improved land use. Government research and priorities for Sri Lanka analysis. remain unchanged. Project Development Objectives: (Development Objectives to CAS Objective) Conservation of globally and Declining threats to plants Reports of international nationally significant medicinal plants, and increased populations of environmental watch Other enviromnental their habitats, species and genomes species (especially organizations (IUCN Red projects are successfully and promotion of their sustainable use. threatened species). Data Book etc, national implemented; statistics (Forestry Dept., MFE etc.); report of Ministries, NGOs and local independent monitors. people cooperate in the implementation of environmental projects; GOSL continues to regard environmental conservation as a priority. Project Outputs (Outputs to Development Objectives) 1. A viable participatory 1.1 Village harvest of 1. PMU reports of management system for medicinal species within sustainability sustainability studies; Biodiversity conservation, plants operating in MPCAs. limits defmded by Village sampling by especially related to Action Plan in 30% of independent technical medicinal plants, continues villages by mid-term and monitors at mid-term to be valued by society. 100% by project end. and completion. Property rights are definable 2. Increased production of selected 2.1 Increase in number of 2. PMU research reports. and enforceable. medicinal plants species on farms medicinal plants for which and in home gardens. cost-effective propagation & Candidates for training are cultivation techniques are appropriately selected and available; 25 species trials afterwards placed to realise completed by mid-term, 50 the effective use of skills. species trials by project end. Baseline and targeted values should be shown, with the latter divided into values expected at mid-term, end of project and fulIl impact.  21 ANNEX I Page 2 2.2 Increase in number and diversity of medicinal plants being propagated and grown in Dept. Ayurveda nurseries; production increased by 25% by year 3 and 50% by project end. 2.3 Increase in the number of farmers using propagation and agronomic information generated by the project; increase of 25% over the baseline by mid-term and 50% by project end. 3. Enhancement of knowledge on 3. 1 Guidelines developed 3. PMU/independent farm medicinal plants and capacity and implemented for the surveys before and building for their management protection of traditional during project and sustainable use. knowledge and plant interventions including resources related to project copping pattems, yield activities. samples, etc.), PMU documents, functional 3.2 Recommendations database and output developed for strengthening documentation. legislation and regulations related to conservation and use of medicinal plants. 3.3 National database for medicinal plants established and functioning; data from over 500 species entered by project mid-term and over 1000 species by project end. 3.4 Increase in number of schools and students _ - exposed to educational materials produced by the project. 3.5 Increase in the number of persons with enhanced skills in medicinal plants; local training of over 25 staff by project mid-term and over 100 staff and post- graduate and/or placement training for 5 specialists by project end. Project Components Input US$ 5.07 million total (Components to Outputs) cost including contingencies t. Expansion of in situ conservation.  22 ANNEX I Page 3 1.1 US$ 2.07 million total. PMU project procurement Lack of iiiformation on the 1.1 Selection and demarcation of 10,000 -12,000 ha (1,000 ha and disbursement viable size of a MPCA. five botanical reserves in the areas of minimum per MPCA), documentation. Bibile, Ritigala, Naula (or Dolukanda) constituting five MPCAs, Adequate attention to key Rajawaka and Kanneliya. identified, established and PMU semi-annual project technical design and enriched within framework implementation reports; management concerns. of participatory management documentation as output of planning involving local project activities. Critical highly impacting communities. communities are receptive in Documentation of WB/GEF sufficient numbers to permit 1.2 Technical advice and supervision missions effective management 1.2 Community organization and training provided on medical inspecting field work. planning over the whole of management planning for botanical plant cultivation, processing selected sights. reserves (including existing and marketing. Project mid term and Kataragama reserve). completion studies Guidelines to ensure that site according to agreed specific interventions do not 1.3 Awareness of he WB/GEF technical TORs. adversely affect ecological 1.3 Enrichment planting of MPCAs linkages between integrity are implemented. (where necessary). biodiversity and Ayurvedic PMU training records. medical practice promoted Set of feasible and in communities. Reports ofjoint alternative village incomes local/international advisory linked to reserves exists. 1.4 Promotion of alternative village 1.4 Portfolio of activities group. incomes linked to maintaining the researched, tested, supported Continued interest to integrity of MPCAs. and adopted within preserve transmission of cooperating villages. Ayurvedic knowledge Research on the sustainable through apprenticeship, use of medicinal plants in acquired knowledge and MPCAs conducted using in surveys etc. part local participation. Ethnobotanical studies Set of criteria guiding executed. information access is implemented by MIM. 1.5 Village training. 1.5 Adaptive farm research Site specific research conducted to demonstrate Sustained interest of key technicaUfinancial viability institutions (MIM, of cultivable species. Provincial Councils, Forest Dept, MFE, NGOs to pursue project objectives). 2. US$ 0.48 million total. 2. Expansion of Ex Situ cultivation. 2.1 Two new botanical 2.1 Strengthened protection of genetic gardens/nurseries reservoirs. established, 3 existing gardens/nurseries improved by end of project. 2.2 Research on propagation 2.2 Research in agronomy of selected of plants representative of species. Promotion of cultivation of agro-ecological zones medicinal plants for harvest and trade. conducted. Home garden and plantation research completed. Research results disseminated through existing extension networks.  23 ANNEX I Page 4 3. USS 2.52 million total 3. Information and Institutional support. 3.1 Draft regulations regarding standards, trade, 3.1 Promotion of appropriate legal and property rights and land use. policy environment. Quality standards and control measures developed. 3.2 Training of departmental 3.2 Database development. staff, professional education Departmental capacity building and mass awareness campaigns by end of project. 3.3 Support to temporary 3.3 Installation of multi disciplinary Project Management Unit in capacity to implement present MIM, project coordination environmental project. committees at national and provincial levels and joint local/international advisory Igroup.  24 ANNEX 2 Page 1 Detailed Project Description 1. The objective of the project is to secure the active conservation of globally and nationally significant medicinal plants, their habitats, species, and genomes. This is to be achieved through the following project components and activities: Component I:Expansion of In-situ Conservation of Medicinal Plants:($ 2.07 million) A. Establish Medicinal Plant Conservation Areas 2. The foundation for in-situ conservation activities will be the identification and establishment of medicinal plant conservation areas' (MPCA) in regions where there is active collection of medicinal plants from the wild. The MPCAs are associated with a core conservation zone where the primary focus of the project is the elimination of human activities that have a negative impact on the conservation of medicinal plants. Surrounding the core zone are sustainable use zones and areas where the cultivation of medicinal plants is possible. The outer boundary of the MPCA is established based on a number of considerations including access to selected communities, agreement of villagers, availability of land for MPCA facilities, plant cultivation, and village development activities. The implementation of project activities will be in accordance with the existing legislation governing each conservation area. 3. The project will establish MPCAs in five sites from key biogeographic zones: (1)Bibile- savannah grassland/intermediate zone in the Uva Province, (2) Ritigala-monsoon forest/dry zone in North-Central Province, (3) Naula-montane forest/intermediate zone in the Central Province, and (4) Rajawaka-evergreen forest/intermediate zone in the Central Province, and (5) Kanneliya- lowland rainforest/wet zone in the Southern province. In addition to these five sites, some project activities relating to in-situ conservation of medicinal plants will also be implemented in the existing conservation area at Kataragama. 4. To ensure the active participation of all segments of the community in the project, the first step in the establishment of the MPCA will be village mobilization. Social mobilizers working at the MPCA level will be contracted by the project to initiate the discussion about project objectives and to start organizing at the village level. A local sociologist will also be contracted to work at the PMU level, and an international sociologist will be contracted to design an initial workplan and to provide training to the social mobilizers.The provision of the sociologist and social mobilizers will be part of a comprehensive contract to provide technical assistance to the PMU for the implementation and supervision of project activities in the five main medicinal plant areas. 5. Village level activities will be coordinated by a Village Project Management Committee (VPMC) which will be set up by the project, except in those cases where other relevant local institutions already exist. Each VPMC will include at least one representative The medicinal plant conservation areas will be associated with core conservation zones (i.e. forest reserves, strict nature reserves, sanctuaries or other forest categories that contain significant populations of medicinal plant species) and will also include contiguous traditional use zones, buffer zones, private lands, and/or village lands that influence use patterns within the core forest areas.  25 ANNEX 2 Page 2 from each household in the village. The executive council of the VPMC will include representatives of each relevant village level organization (e.g. women's organization, youth organization, etc.), medicinal plant collectors and traders, medicinal practitioners, and other members selected through village consensus. Typically, the executive council of the VPMC will include 10-12 members, the appropriate state functionaries (e.g. beat forest officer and local agriculture worker), and project staff. The social mobilizers and PMU sociologist will play a key role in setting up the VPMC. 6. The project will set up a parent organization for each MPCA comprised of two representatives from each VPMC, representatives from relevant state organizations and NGOs, and the MPCA project officer. The parent organization, called the Conservation Area Management Committee (CAMC), would serve as the MPCA management office and would oversee the management and implementation of all project activities in the conservation area. 7. An important task in the early stages of the project will be the construction of a detailed base map for each of the MPCAs. The base map should show villages, roads, rivers, topographic features, existing land-use zonation (e.g. boundaries of forest reserves, sanctuaries, buffer zones, etc.) and vegetation cover with as much precision as possible. All information should be spatially referenced and controlled using standard cartographic techniques. If possible, the cartographic information from each MPCA should be compiled and stored as separate layers as part of a Geographic Information System (GIS). The project will supply funds for the execution of this mapping work which will be performed by specialists in the Department of Forestry. Once a preliminary version of the base map is available, it will be circulated to each of the villages in the MPCA to field check the mapping units and to incorporate the observations and corrections of each community. The review and revision of the base map should be completed by the middle of the first year of the project. B. Baseline Data Collection 8. Soon after the VPMCs have been established, two separate, yet interrelated, surveys will be conducted. A socio-economic survey of local households will document income distribution within the community and will assess the importance of medicinal plants in the overall health care and economic condition of the village. Basic demographic data on the structure and dyngmics of the community will also be collected. These studies will be designed by an expert sociologist from the PMU in collaboration with the social mobilizers and the local PMU sociologist working at the MPCA level. A training workshop will be conducted to present and field test the survey methodology before initiating field activities to insure that comparable data are collected from all of the MPCAs. Follow-up surveys will be conducted each year for the duration of the project to monitor any changes in the social and economic conditions of the villages that might occur as a result of project activities. 9. Preliminary information on the medicinal plants used in each village will be collected by an ethnobotanical survey. The basic objective of this survey is to provide an annotated list of medicinal plants ranked in order of local importance and frequency of use; general information on associated non-timber forest products (NTFPs) of importance will also be collected at this time. Although detailed information on the plant use and the preparation of medicinal compounds will = be collected in these preliminary surveys, all data collection procedures will closely adhere to the guidelines for Intellectual Property Rights established by the Ministry of Indigenous Medicine. The surveys will be designed by an ethnobotanical expert working  26 ANNEX 2 Page 3 together with an ayurvedic specialist at the PMU level. The implementation of these surveys will be carried out in each village by a specialized team including a botanist, an ayurvedic specialist, a para-forester2, and local student assistants. The technical and support personnel for the teams (i.e. the botanist and the student assistants) will be contracted locally by the project and trained by the ethnobotanist in the appropriate survey methods. The results from these surveys will undoubtedly suggest topics and/or species that merit further investigation (e.g. collection and preparation procedures, use of different species for similar ailments, pharmacology of selected taxa, comparative studies between villages, etc.). These topics will be addressed in subsequent ethnobotanical research carried out each year in the MPCA by representatives of the Bandranaike Memorial Ayurvedic Research Institute (BMARI) and the Department of Ayurveda working closely with local ayurvedic practitioners. The collaboration of an ethnobotanical expert will be solicited to assist with the design and analytical phases of this research. The ultimate goal of the work is to salvage and preserve critical indigenous knowledge about medicinal plants before it is lost. 10. A basic objective of the in-situ conservation component is to assess the degree to which local communities impact natural populations of medicinal plants in the associated core conservation zones (e.g. forest reserves) of each MPCA. Plant populations that are intensively exploited for medicine will clearly be more severely impacted than those that are exploited only on an infrequent or casual basis. Given this consideration, data collection will be prioritized for those plant species that are of greatest importance to the community from a medical, economic, and cultural standpoint. Using the results from the socio-economic and ethnobotanical surveys as a guide, a selection of sample species will be conducted. This exercise will produce a short list of priority medicinal plants (approximately 15 - 20 taxa) in each village. The selection process should involve full participation of the village3 with particular attention afforded to the input of local ayurvedic practitioners and commercial collectors of medicinal plants. The results from each village will then be compiled to create a master list of priority species for the entire MPCA. 11. Given a listing of the medicinal plant species of greatest local importance, the next critical step is to quantify the actual distribution and abundance of each of these species within the forest. These data, which lay the foundation for a viable strategy of conservation and sustainable use, will be collected in a quantitative resource inventory. The MPCA base map will be used to layout a systematic, stratified sample of the existing forest area. Data will be collected along parallel, 1 Om-wide transects of variable length depending on the configuration of the forest. The transects will be spaced at intervals of 200m to provide an overall sample intensity of 5%. Care should be taken to orient the transects at right angles to the topography to maximize the amount of environmental variability encountered. Two sets of data will be collected along the transect. First, the number of individuals of each of the priority species will be carefully counted and recorded, and measurements of plant size will recorded where appropriate (e.g. diameter measurements will be recorded for tree species; height measurements 2 A para-forester is a local villager who is knowledgeable about medicinal plants and who has been trained in the methodologies of ethnobotanical survey, forest inventory, and the collection and processing of herbarium specimens. This village specialist will play an important role in all aspects of the in-situ conservation components of the project. He will receive a stipend from the project for his training and participation in project activities. The social mobilizers will facilitate and moderate this participation.  27 ANNEX 2 Page 4 will be recorded for poles, shrubs, and larger herbaceous plants). The data will be tallied at 20m intervals along the transect to provide discrete, 10 X 20m sample units. Second, a running list of all the medicinal plants encountered along the transect will be recorded to construct a complete list of the medicinal plant resources found within the core conservation zone. Replicate herbarium specimens of each species will be collected, identified, and deposited in herbaria at the University of Peradeniya and the BMARI. 12. The basic inventory procedure in each MPCA will be designed by an inventory specialist contracted by the project working in collaboration with representatives from the Department of Forestry and/or Department of Wildlife. Training sessions will be held at both the MPCA level and the village level to insure that all participants are clear on the mechanics of the inventory methodology. Inventory crews will be composed of para-foresters, ayurvedic specialists, village data collectors, and student field assistants that have been contracted by the project from local institutions or universities. Representatives from the Department of Forestry (or from the Department of Wildlife in the case of Ritigala) and a contract botanist will operate at the MPCA level and circulate among village crews during the inventory operations. The inventory specialist contracted by the project will return after all field activities are completed to assist in the compilation and analysis of the inventory data. The results from this work will provide the most detailed ecological accounting of medicinal plants ever conducted in Sri Lanka. A full set of the inventory data will be deposited with the Department of Forestry for their use in developing comprehensive management plans for the forest reserves associated with the MPCAs. C. Development of Village Action Plan 13. The forest inventory will document the current status of the medicinal plant resource base in each MPCA, and it will be an invaluable tool in assisting the MPCA villages to make informed decisions about future actions that need to be taken to conserve these resources. Quantitative evidence of dwindling stocks in the forest provides a strong incentive for opening a dialogue about forest conservation. Under the direction of the social mobilizers, village-level planning workshops will be held to present and discuss the results from the inventory and to assess local needs. During this workshop, a preliminary action plan for the management and sustainable use of medicinal plants at the VPMC level will be formulated. These plans should provide broad operational guidelines for zoning local habitats and for defining the types of actiVities that could be implemented in each habitat, and should include an assessment of the medicinal plant species that are in greatest danger of over-exploitation in the area. The preliminary village action plan should also list the perceived informational needs of the community as related to medicinal plant conservation (e.g. technical assistance on the propagation, care, and processing of certain species, periodic market updates, alternative income generation opportunities, etc.). The planning workshop will be assisted by a conservation planner (PMU level) contracted by the project working in collaboration with various members of the VPMC. 14. An important component of the preliminary village action plan will be prescribed extension activities and the cultivation of medicinal plants. The selection of species for propagation will depend on a number of factors including level of endangerment, subsistence 4The village para-forester should play a key role in this phase of the workshop. Other members of the inventory crews should also be encouraged to share their observations.  28 ANNEX 2 Page 5 use, and market demand. The emphasis would be on species found to occur in low densities in the forest. The cultivation of species in home gardens, agroforestry fields, buffer zones5, and degraded areas will help maintain the genetic stocks of valuable medicinal species and should eventually relieve the pressure on wild populations within the forest. Local cultivation, on both small and large scale, can also enhance the supply of raw materials for subsistence use and marketing, and, in conjunction with local processing, can form the basis of small enterprises with income generating capacity for local communities. Technical support and extension for this activity will be provided by the local agricultural officer and an extension horticulturist contracted by the project. The information center established in each MPCA (discussed below) will be the primary source of information on the identification of local species, propagation, harvest, processing, and value-added technologies. Planting stock for the cultivation initiative will be produced by the nursery facility established in each MPCA (discussed below); supplemental material will be produced, as necessary, by the villages themselves in simple nurseries. 15. To further respond to the technical needs of the villages in the MPCA, adaptive on- farm research will also be conducted by the project. This work will be designed and carried out by an extension horticulturist/agronomist contracted by the project working in collaboration with the VPMC and selected villagers. The species and cultivation practices examined in these studies will be selected based on discussions with villagers. Village-level research activity will continue for the duration of the project, with new species and new cultivation techniques being examined each year. The results from this research will go directly to the information center for dissemination to all of the villages in MPCA. To provide a more comprehensive picture of farming activity at the village level, a local farming system expert will be contract by the project to conduct a detailed village assessment. The objective of this research is to assess how the cultivation of medicinal plants fits into the overall agricultural scheme of the village and to make recommendations on the intensification and improvement of local agricultural practice. Conserving medicinal plants and then cutting down the forest to grow food are clearly conflicting concepts that need to be resolved at the village level. 16. The promotion of financial stability for ayurvedic practitioners and medicinal plant collectors will be addressed in the project by investigating different alternative income generating strategies that could be developed at the village level. Several promising alternatives will be assessed including value-added activities, improved marketing and better access to price information, eco-tourism, and post-harvest handling and processing. For example, by drying a fruit crop in the village rather than in a central factory, or by grinding it rather than selling it whole, transport costs are reduced and additional income could be obtained by the villagers. These studies will be carried out by an inter-disciplinary team of specialists (e.g. marketing specialist, value-added expert, quality control expert, etc.) contracted locally by the project. 17. Along these same lines, a village development fund will be established to provide financial assistance to selected communities for establishing medicinal plant gardens, setting up It is hoped that the Forest Department will complete the delineation and demarcation of Traditional Use Zones within the forest reserves of each MPCA during the early phases of the project. Once this is accomplished, the enrichment planting of medicinal plants in these areas can also be initiated. The Forestry Department will be responsible for implementing approved enrichment planting in designated forest area.  29 ANNEX 2 Page 6 small-scale, demonstrative processing facilities, and for encouraging the development of local enterprises. The primary objective of the fund is to facilitate the creation of alternative income opportunities for those communities who are currently dependent on MPCA resources for their livelihood and to promote viable substitutes to currently destructive activities. The village development program will be financed by channeling funds from existing government projects operating in the vicinity of the MPCAs. The Project Officer will work with other government agencies to direct such resources to the project areas. 18. The implementation of the preliminary village action plan will be reviewed annually and revised as necessary to best fulfill project objectives and the needs of the community. Although the appraisal will be coordinated by the social mobilizerand will be assisted by the conservation planner from the PMU, the actual management decisions will be made by the villagers at an annual meeting convened expressly for this purpose. In this manner, the preliminary village action plan will be continually refined during the project as communities become increasingly involved in the cultivation, conservation, and sustainable use of medicinal plants in the MPCAs. D. Sustainability Studies 19. The project will undertake quantitative growth and yield studies of the priority medicinal plant species selected in each MPCA. Representative individuals of each species will be located in the forest, plotted on the base map, permanently labeled, and the particular resource of interest harvested (e.g. leaves, fruit, bark, etc.), weighed, and recorded. Although exact 6 sampling procedures will vary according to the life form of the species , the basic objective is to- derive an estimate of the quantity of harvestable resource available from each individual. To simulate the actual harvest of the resource, local collectors should be employed in this fieldwork Replicate individuals or plots should be sampled for each species, with at least five trees per diameter class being sampled for each tree species. The sample plants are left for a period of one year and then re-harvested. The amount of harvestable resource obtained during this sampling period represents the annual yield of each species. Multiplying this result by the number of individuals per hectare encountered in the resource inventory provides an estimate of the annual harvest volume per hectare of each species. Expanding this product by the total area of forest yields the total volume of medicine by species in the entire MPCA. From a management standpoint, this is an extremely important piece of data. The project will contract an inventory specialist to assist in the design of the growth and yield studies in each MPCA and to conduct initial training workshops. Annual data collection activities will be conducted by field crews composed of a para-forester, a botanist, a representative of the Forestry Department and student field assistants. These are the same crews that were contracted by the project to assist with the collection of inventory data. 20. The next step in the sustainability studies is to assess the existing harvest level of each species at the village-level. This type of research is fraught with methodological problems. For the purpose of the project, recording qualitative estimates of the harvestable volumes of different species collected over the course of a year is sufficient. These data will be recorded by the para- forester living in each village with assistant from the social mobilizer, as necessary. . Whenever a 6 The harvest of a herbaceous plant will necessarily be different from that of a shrub which will also be different from that employed for a large tree.  30 ANNEX 2 Page 7 new bundle of plant material is brought into the villages, the para-forester will record the date, the species, and the approximate volume.. Over time, it may be possible to enlist the help of other villages in the monitoring process, or, under ideal conditions, to have the collectors themselves keep a cumulative record of their harvest activity throughout the year. 21. By comparing the current yield estimates with data on community collection rates, sustainability assessments can be generated each year. These assessments will provide a good indication of the impact that local communities are having on the forest and will be of great value in deciding which species merit increased cultivation as part of the village action plan. The data on annual harvest levels are also an important indicator for testing a key hypothesis of the project, i.e. that increasing the supply of medicinal plant through cultivation will decrease the demand on wild stocks and enhance conservation. If village harvest levels decrease notably throughout the life of the project, there is a good chance that this hypothesis is valid in the context of the MPCAs. E. Conservation Strategy for Medicinal Plant Conservation Areas 22. The individual community action plans will be compiled and expanded to develop an overall conservation strategy for each MPCA. Using the quantitative information on medicinal plants obtained from the resource inventory, the qualitative information on other forest resources obtained in the ethnobotanical surveys, and the results from the socio-economic studies, a preliminary conservation plan will be designed for each area. The plan will contain recommendations for the conservation and sustainable use of forest resources and for increasing village participation in the conservation process. Given the existing data and the objectives of the project, the primary focus of this document will be on medicinal plants. The conservation strategies for the MPCAs will be developed by the conservation planner from the PMU working in collaboration with the Department of Forestry. As with the village action plans, the MPCA conservation strategies will be reviewed and revised annually to reflect the input of new data from the sustainability studies and the on-farm research. The conservation strategies will be submitted to the Department of Forestry to be included as part of their overall management planning for each forest reserve. F. Extension and Education in the Medicinal Plant Conservation Area 23. An Ayurveda dispensary will be established in a selected community of each MPCA. Each will contain an ayurvedic physician and an assistant that will be supported by the project. The dispensary will also house a simple production and processing facility equipped by the project for processing plant material and preparing herbal medicines. An information center, for the building of public awareness in traditional knowledge, medicinal plant identification, cultivation, and use, and market information will be established as part of the dispensary. Extension materials produced by on-farm research and the information component (see below) of the project will be disseminated through the information center. The government will be responsible for the estimated recurrent costs of maintaining the dispensaries and information centers in each MPCA.. 24. The dispensary and information centers will serve as sites where apprenticeship training of future traditional healers will take place, becoming in effect the classrooms for  31 ANNEX 2 Page 8 communication of the traditional knowledge from the older generation of healers to the younger. The project will encourage the continuation -of the "guru-kula" system of apprenticeship, and include compensation for healers who are teaching students. Support for five students a year in each MPCA will also be offered by the project. The selection of students will be coordinated by the CAMC. 25. To provide a continual source of high-quality planting materials for the villages in the MPCA, a medicinal plant nursery will be established as part of the information center and dispensary facility. The nursery will be designed and managed by an agronomist from the PMU working with a local support staff that have received training in nursery operation and maintenance. The selection of plant species to be propagated will be based on the planting needs of local villages, and nursery stock will be periodically changed to reflect the annual adjustments in the village action plans. The project will also support the establishment of a medicinal plant garden at each information center as a way of increasing awareness about different plant species and the ways that they can be incorporated into different management systems7. All plants will be labeled with information about local name, scientific name, habitat, as well as brief use infornation. Component II: Expansion of Ex-situ Cultivation and Conservation: (S 0.48 million) A. Establish Two New Nurseries 26. The project will support the development of new nurseries in the two biogeographic zones where no nurseries currently exist. One of the nurseries will be established at Miriswatte in the Western Province, the other near Galle in the Southern Province. The establish of these nurseries will involve several discrete steps. Within the two regions selected, the Department of Ayurveda will first identify, acquire and demarcate the sites for nursery development. The administrative and legal aspects of this land transfer must be completed early during the first year of the project. Given the availability of suitable land, the next task is to design the nursery. This activity will be directed by the Department of Ayurveda in collaboration with the PMU agronomist that has been contracted. Based on the design specifications, land preparation will start and the necessary infrastructure developments such as irrigation systems, fencing, and plant shelters will be implemented. These activities will be funded by the project. Once the nursery is established, a comprehensive program of germplasm collection and planting will be initiated. The Department of Ayurveda will organize annual collecting expeditions and all of the new germplasm will be planted, multiplied, and made available for distribution to interested parties. B. Improve Existing Nurseries 27. The Department of Ayurveda currently has three nurseries that produce medicinal planting material at Bathgoda, Girandurukotte and Pattipola. The project will provide support to expand the production of planting stocks by these nurseries and to improve existing facilities so 7 Different sections of the medicinal plant garden will display different planting schemes including small, single plantings of herbaceous plants, diverse mixtures of species for home gardens, and multi-storied agroforestry systems including herbs, shrubs, and trees.  32 ANNEX 2 Page 9 that they become repositories of the mother plants from different provenances and other selected stock of value. Infrastructure developments (e.g. improvements to water systems, drainage, plant shelters, etc.) and the annual collection of germplasm and planting will be financed using project funds. The nursery improvements will be coordinated and implemented by the Department of Ayurveda. It should be noted that the objective of the nursery enhancement component of the project is not to fulfill the planting needs of the entire country, but to support the maintenance of important germplasm and planting materials which can supply other private and public sector nurseries. C. Research on Propagation 28. Lack of technologies for the mass propagation is one of the most serious constraints to widespread cultivation of medicinal plants in Sri Lanka. To meet this need, the project will support research to develop simple techniques for propagating selected important taxa of medicinal plants. The selection of species and research design will be coordinated by a senior agronomist contracted by project. The selection of species for study will be based on several criteria: degree of endangerment in the wild, actual or potential market value, and availability of existing information. Sequential sets of experiments will be conducted for the duration of the project. A first group of species will be selected, the experimental design implemented, and the data collected until all treatments have been assessed. A new set of species will then be selected and a new series of studies will start. At the completion of each experimental phase, the analysis and preparation of results will be undertaken and annual reports of the research results will be provided to the project for distribution. The agronomists responsible for conducting the propagation research (as well as the home garden and plantation studies described below) will be contracted locally by the project. D. Home Garden and Plantation Research 29. The project will also support research focused on field planting techniques. The research will consist of a series of carefully designed experiments in home gardens and farmer's fields to test various parameters related to the cultivation of medicinal plants as an important component of a local farming system. Research would be geared toward intercropping medicinal plants in plantation of estate crops such as rubber and coconut. The results of this adaptive research coupled with, detailed economic analyses of recommended management packages will form the basis for providing these technologies to the end user. 30. As with the propagation studies, the home garden research will follow a strict protocol. The selection of study species will be based on degree of endangerment, local demand, and market value. The research design, which will vary according to the farming system being analyzed, will be coordinated by a senior agronomist contracted by the project. The selection of study sites will also vary with the species and farming system being studied. To enhance the usefulness of the results, some-of the research will be carried out in the home gardens and agroforestry fields of the MPCA. The home garden research will be initiated early during the  33 ANNEX 2 Page 10 8 second year of the project, and data collection will continue for at least three more years Annual reports of research results will be submitted to the project for distribution. E. Dissemination of Research Results 31. The project will support the dissemination of the results from the propagation and home garden research to farmers and the general public through existing extension channels (e.g. agriculture and forestry networks). The research findings will be grouped by species and prioritized based on the current demand/need for information. A series of technical bulletins will be prepared each year for the medicinal plant species afforded the highest priority. The project will prepare the technical bulletins in-house, but may contract a research publicist to assist in the preparation and final publication of these materials. Component 3- Information and Institutional Support: (S 2.52 million) A. Promotion of Appropriate Legal and Policy Environment Through Studies and Recommendations for Regulations 32. The legislative framework in Sri Lanka does not specifically address the status of medicinal plants and the traditional knowledge related to them. To address this issue, the Government of Sri Lanka has initiated a participatory process to define "strategies to regulate access to indigenous knowledge and other information resulting from the implementation of the medicinal plants projects". This process has resulted in agreement on a two-step strategy. 33. The first step will be to develop guidelines for ensuring the confidentiality of information for incorporation in employment contracts for staff, consultants and institutions involved in data collection under the project. These guidelines will be developed by the Department of Ayurveda in close consultation with the committee established for this purpose, before the award of employment contracts under the project. The Department of Ayurveda will implement these guidelines and supervise their fulfillment by all actors involved in the collection of data under the project. 34. This will be followed by the preparation of guidelines for collection, processing, storing and access to information under the project. These guidelines will include the following considerations: (1) procedures for approving requests for data collection, (2) the conditions against unauthorized disclosure of the information gathered, (3) the recording of the source of information so as to ensure the respect of any right related to such data, (4) procedures for obtaining the permission of source person and/or community for collection of data, (5) specific procedures for granting access to the data, (6) approval procedures for granting data access to third parties; (7) approval procedures for request for information from foreign entities and/or persons and conditions for repatriation of any benefits arising from data use to Sri Lanka and/or the source of the data by foreigners, (8) conditions for mandatory joint partnership with local research institutions for foreign entities requesting access to the data or a permnit to collect data. 8Given the inherent value of this research, it is hoped that data collection will continue beyond the life of the project.  34 ANNEX 2 Page I 1 35. The project will finance the preparation of these guidelines by providing local technical assistance and workshop support to obtain consent of representatives of all stakeholders involved in medicinal plant conservation and sustainable use. These guidelines will be prepared and enacted by the end of the first year of project activities. The Department of Ayurveda will appoint a "Committee" to review all applications for access to medicinal plant data and to advise on all issues dealing with access to the medicinal plant data. It is also proposed that all such procedures including the application and approval of requests will be made public. 36. The second step will be to undertake a study related to the development of comprehensive legislation dealing with the protection of medicinal plants and the traditional knowledge related to them, including intellectual property rights (IPRs). This long-term commitment aims at establishing an adequate legal regime to safeguard the traditional knowledge and ensure that benefits from the use of this knowledge will accrue to the stakeholders involved in the conservation and sustainable use of the medicinal plant resources and the traditional knowledge related to them. The current "Advisory Committee" comprised of representatives of ministries and various NGOs will review all IPR issues and will draft reports and advisory papers to the Government for consideration. In order to ensure the participation of all stakeholders involved, the project will assist in the funding of the study (national technical assistance support) and workshops to define this long-term policy and related legislation. In addition, the project would provide support for consultation with the World Intellectual Property Rights Organization and workshops on this important theme. The output of this exercise will be recommendations to the MIM for new and improved legislation for the protection of medicinal plant genetic resources and their products and traditional knowledge on medicinal plants. B. Establishment of information network on medicinal plants 37. A large volume of information on medicinal plants based on floristic and phytosociological studies is available in the country. This informnation is scattered in floras, books on medicinal plants, the National Herbarium, relevant post-graduate theses, data bases in the National Conservation Review, and Wetland Project site reports. These data sources will be searched to pull together information on medicinal plant species as they occur in their natural habitats, to improve the level of information collected for this section to supplement the information available at the BMARI, of the Department of Ayurveda. Although a database exists at the Department of Ayurveda, it is still rudimentary 38. The project will also support the establishment of an information management system at the Department of Ayurveda in order to organize existing data and those generated through this project into a data base with the wide range of information necessary for medicinal plant conservation, including botanical and local names, distribution and ecology, chemical characteristics, and market information. The data base will be established at BMARI, and will consist of data sets compiled by different institutions and agencies. These datasets have been set up independently within each program (NCR, Wetland Project, National Herbarium, etc.) under the management of the relevant institution to serve internal needs. Information contained within the data base will be accessible on the basis of procedures to be drawn up by the Department of Ayurveda. As part of the information development program, the Department of Ayurveda will investigate ways in which access to information contained within the system can be controlled and managed to ensure that benefits resulting from any commercial use are equitably shared with practitioner's association, communities, BMARI and other groups which have contributed information. The data processing and information services center at BMARI will facilitate the  35 ANNEX 2 Page 12 establishment of databases at relevant institutions by providing technical support, training and ensuring compatibility between different databases. C. Training and Mass Awareness on Medicinal Plant Conservation 39. In addition to the specific training needs identified for the implementation of the in-situ conservation and ex-situ cultivation and conservation components of the project, training in specialized disciplines will be supported under the project. The Project will finance a very limited number of specialized post-graduate level training positions (master's degrees) in ethnobotany, sustainable management, etc. in suitable institutions outside the country. The project will also support the placement of local staff in short-term specialized technical training attachments in suitable institutions outside the country (e.g. Kew Gardens, United Kingdom; Central Institute of Medicinal and Aromatic Plants in Lucknow; Darwin Botanical Gardens, Northern Territories, Australia; etc.). In addition, participation at international meetings and study tours, and extensive local training will be financed under the project. This training will be available to staff of the Departments of Ayurveda and Forestry, universities and research institutions, local communities and other participating institutions. The local training component will be managed by the Department of Ayurveda, who will contract individuals and institutions to conduct the local training, where necessary. The Technical Assistance (Operational Support) consultants will assist the Department of Ayurveda in identifying institutions and in the placement of participant trainees in international courses. A training plan defining the nature of training, number of people to be trained, training institutions, and training schedule will be prepared by the Department of Ayurveda, following a training needs assessment, prior to the commencement of the project. 40. Although enviromnental matters have steadily increased in importance as part of the formal education system, medicinal plants do not feature prominently in environmental education at present. However, by reaching the more then 10,000 schools in the country, perceptions of and activities relating to medicinal plants can be significantly affected. Medicinal plant curricula developed as part of this project will be designed to supplement traditional subject areas such as agriculture, botany, biology, social studies, etc., and will be built into the teacher training programs. Teacher training would be contracted to a national level NGO, and would include the development of teaching material, discussions and review of.materials by curriculum developers for integration into existing syllabi, teacher orientation through seminars and workshops, publication of material, and evaluation of the program. The project will also provide technical assistance support for the review and improvement of the existing curricula of the Institute of Indigenous Medicine. 41. The project would also support the development of social publicity programs and materials for public television and radio. The preparation of these materials will be contracted by the Department of Ayurveda to a qualified communication specialist or institution. 42. There is a tremendous need for educational materials for use in the training and upgrading of the skills of Ayurvedic and other physicians, and this project will endeavor to produce such materials through the activities of the BMARI. In addition, a manual covering the 208 most widely used species of medicinal plants will be prepared, with sections on the botany, traditional uses, medical uses, clinical studies, biological activity and chemical composition, supplemented with black and white line drawings of the plants. It is expected that the publication will be in multiple language versions, in order to have as wide an impact as possible, including at  36 ANNEX 2 Page 13 the international level, as it would also be useful to the worldwide community of Ayurvedic and other physicians whose practice involves the use of herbal materials. 43. The traditional knowledge found in the hundreds of old manuscripts written on palm leaves by practitioners of Ayurveda have not been interpreted, thus a valuable source of information remains untapped. Some of the palm leaf manuscripts at BMARI are up to 700 years old, containing a plethora of ancient wisdom on plant use for diseases of humans and domestic animals. To date some 100 of these manuscripts have been transcribed and published by BMARI, and the project will endeavor to transcribe and interpret, using specialists contracted for this phase of the work, a manageable number (about 50) of the 500 old manuscripts housed: within the BMARI, and will promote the study of these and other old manuscripts. An expert group on ethno-medicinal studies will be commissioned by the Department of Ayurveda to oversee the project. Digitization of the original materials will be undertaken, in order to safeguard the information and make it more widely available without risking the fragile manuscripts themselves. D. Monitoring and Evaluation of Project Achievements 44. In addition to the regular progress monitoring which will be undertaken by the Department of Ayurveda, the project would support impact monitoring to assess the ecological and socioeconomic impacts of the project so as to determine whether there is agreement with those anticipated. Impact monitoring would also assess the effectiveness of project institutions and processes in meeting project objectives. Impact monitoring would be contracted by the Department of Ayurveda to a multi-disciplinary team from an independent research institution or university. The monitoring of project impact would be based on a conceptual framework to be developed at the beginning of the project. The framework would embrace medicinal plant values in the MPCAs, anticipated changes, sampling methods, analytical methods, mechanisms for feedback and project adjustment, and roles and responsibilities for monitoring. Monitoring would be done at periodic intervals through a consistent set of measures or indicators that reflect values for which the MPCAs are being managed, the control and mitigation of threats to the conservation areas, and the effectiveness of institutions and processes. This is further discussed in the Project Implementation Plan. E. Support to Project Management, Project Coordination and Advisory Functions 45. The implementation of the project will require very specific arrangements for project management, coordination and advisory support. These arrangements would facilitate the smooth operation of the project and would be established as a temporary measure for the life of the project. These are discussed below: 46. Project Management: The Ministry in charge of the subject of indigenous medicine (Ministry of Health and Indigenous Medicine - MIM) will be responsible for project execution, and will work in close collaboration with the relevant government agencies, provincial councils, NGOs and communities. A project management unit (PMU) will be established within the MIM for management of the project. The PMU will be headed by a Project Director, reporting to the Secretary, MIM. The PMU will implement the project through the line agencies, provincial institutions, and local community institutions, as appropriate. 47. In addition to the Project Director, the PMU would include core staff comprising a  37 ANNEX 2 Page 14 Program Officer, Administrative Assistant, Accountant and Support Staff (typist, driver, etc.). The PMU would be located at Colombo. 48. The implementation of project activities will be the responsibility of the respective cooperating agencies, under the overall coordination of the PMU. Since the project will involve a substantial involvement of the provincial councils in the implementation of activities in the MPCAs, the long-term commitment of the respective provincial administration will be ensured by MIM entering into a Memorandum of Understanding (MOU) with the relevant Provincial Councils (represented by the Chief Secretary) detailing the cooperation and collaboration required. Memoranda of Understanding will also be negotiated with other key participating agencies like the Department of Forestry and Wildlife Conservation. 49. The project will support the staffing and functioning of the PMU to provide logistical, administrative and financial support services for various activities to be undertaken by the participating government agencies, NGOs, community organizations, and individuals. 50. Project Coordination: Since there is a diverse set of stakeholders involved with the project, coordination arrangements are needed at the national, provincial and local levels. At the MPCA level, the Medicinal Plant Conservation Area Management Committee (CAMC) will guide and oversee the implementation of activities. Provincial Project Management Committees (PPMCs) will be established at each of the provinces where the MPCAs are located. These committees will be chaired by the Chief Secretaries of the respective participating provinces and will include representatives from the state and provincial agencies and NGOs who are directly participating in the conservation area programs. These committees will oversee the implementation of project activities, including monitoring and evaluation, approve plans of actions and work programs and other related matters. The Project Officer of the relevant MPCA will serve as the convener of this committee. 51. At the national level, the existing national project steering committee on medicinal plants (NPSC) with some additional members, will provide overall policy and strategic guidance for project implementation and to ensure that project activities are consistent with the project objectives. It will also approve annual work plans and budgets. This Committee is chaired by the Secretary, Ministry in charge of the subject of indigenous medicine. The Project Director will serve as the convener of the NPSC. 52. Project Advisory Group: This technical group of international and local scientists will interact regularly (during the first, third and fifth years of the project) at international workshops to be supported under the project to share experiences on similar types of projects. This group will review the technical aspects of the project.  38 ANNEX 3 SRI LANKA Conservation and Sustainable Use of Medicinal Plants Project Estimated Project Costs (US $: million) Project Component Local Foreign Total -S--------------------- $ million- 1. Expansion of in situ conservation of medicinal plants 1.59 0.97 2.56 2. Ex situ conservation and cultivation within the project context 0.24 0.18 0.43. 3. information and institutional activities within the project context 0.93 0.67 1.60 Total Baseline Cost Physical Contingencies 0.11 0.06 . 0.17 Price Contingencies 0.20 0.11 0.31 Total Project Cost 3.07 2.00 5.07  - 39 ANNEX 4 Page 1 SRI LANKA Conservation and Sustainable Use of Medicinal Plants Project Incremental Costs and Global Environmental Benefits 1. The objective of the GEF alternative is to secure the active conservation of globally and nationally significant medicinal plants, their habitats, species and genomes. The proposed project aims at furthering Sri Lanka's overall strategy for natural resource conservation by advancing the implementation of international cooperation to conserve biodiversity. Specific outputs of the proposed project include: (i) A viable and participatory management system for medicinal plants operating in prime natural habitats and peripheral areas; (ii) Comprehensive identification of culturable medicinal plant species and establishment of best practices for their propagation and cultivation; (iii) A sustainable system for the collection and preservation of information on medicinal plants, including ethnobotanical information. The Country Context and Broad Development Goals 2. Sri Lanka is actively pursuing a strategy of rapid economic development, in which the private sector will have a substantial role, through the expansion of its infrastructure and the growth of industry. The transformation of subsistence agriculture is a complementary objective to the country's development strategy, focusing on the improvement of land productivity, crop diversification and the realization of export-oriented comparative advantage. The Govermnent are aware that the pursuit of rapid, decentralized, economic growth might occasion the degradation of natural resources, which would ultimately disturb the growth process itself, and have acknowledged the need to incorporate sufficiently aspects of environmental sustainability into the execution of its development strategy. At the same time the Government wish to maintain a balanced approach towards environmental protection that integrates environmental concerns into the development process without hampering development itself. Formally, one way to strike this balanced approach is to discuss openly developmental and environmental agendas in the vetting of development projects at various levels in Government. MFE have made considerable progress in institutionalizing this dialogue within Government. 3. The operational effectiveness of such a dialogue, however, will depend upon in-country capacity for environmental analysis and management. The Government has undertaken several measures over the past few years to strengthen the institutional capacity of the public sector to assess the implications of sustainable environmental management, but further institutional strengthening will represent a considerable additional burden on the present allocation of resources available to the Government. Further allocation of resources to institutional strengthening would come chiefly at the expense of other social and developmental priorities. The current compromise is to accept that, in view of the increasing pressures on land and the lack of institutional capacity for environmental management, some degradation will be inevitable and that existing institutional capacity should be used to the greatest extent to limit the breadth and degree of irreversibility of the damage.  40 ANNEX 4 Page 2 Baseline 4. At present, several government agencies implement activities that can be regarded as contributing to the conservation of medicinal plants or to their sustainable use. They are the Department of Ayurveda, the Forest Department, and the Department of Wildlife Conservation (MALF). In the absence of GEF facilities, Sri Lanka would be expected to continue some allocation of capital expenditures for medicinal plant conservation through these agencies, but the commitment of resources would continue to be low, as in the example of the MFE, in view of more pressing domestic environmental priorities of flood control, forest protection, solid waste management, development of drinking water and sanitation. Even among these high priority areas, the actual utilization of funds for capital and recurrent expenditures has been somewhat erratic over the last five years. The pattern of the utilization of funds over the last six years suggests that the current trend for actual expenditures by the MFE is to maintain present spending levels roughly adjusted for inflation. While resources to the division are not expanding in real terms, it is doubtful, in view of currently underfunded commitments, that there would be significant changes in the allocation of funds specifically for the benefit of medicinal plants. 5. Department of Ayurveda. Current development plans for the department specify the establishment of an Ayurvedic complex at Karagoda in Matara district. These plans include the establishment of an Ayurvedic hospital, a herbarium, a drug factor, a training unit and a research unit with a standardization and quality control central laboratory, a botanical research unit and a slinical research unit. By extending the availability of Ayurvedic medicine these activities would also aim to popularize an awareness of their value to Sri Lankan society, and so strengthen a national consensus to give the conservation of medicinal plants a more prominent status among the country's environmental priorities. Although extending an appreciation of Ayurvedic practices and developing the knowledge base of the medical system's use of plants have a role to play in securing a sustained effort at conserving medicinal plants, these activities physically do not entail the conservation of plant habitats or the determination, in the interests of operations for the management of habitats, of their sustainable use. The development plan for MCPCLGIM has earmarked a total of Rs 154 million ((US$ 2.83 million) in current terms, beginning in 1997 through to the end of 2000, for the Karagoda complex. Incidentally, the department also has plans to establish 63 Ayurvedic hospitals in 19 administrative districts at a cost of Rs 614.8 million ($ 11.32 million) over the period of 1996 to 2000. 6. Forest Department. The Forest Department's main activities involve the development and management of plantation forests as well as the conservation and management of natural forests. Naturally in many instances protected forests incorporate medicinal plant habitats. In these sites, the policing operations of forest management, although perhaps not primarily aimed at the production of non-timber forest products, would also in principle benefit the integrity of at-risk plant populations. The Forest Department, moreover, can be expected in the future to undertake as part of its management operations in such areas some cultivation, conservation and extension specifically directed toward medicinal plants. In the plantation forests as well, the Forest Department can be expected to be more active in ex situ cultivation of plants. Based on average Forest Department investments in period of 1995-1997, it is possible to identify that one percent of the current department's budget, or about Rs. 1.4 million ($ 25,783) per year in 1996 terms, would be utilized under the categories of the conservation and management of forests, and forest research, education and extension services primarily for the conservation management of medicinal plants.  41 ANNEX 4 Page 3 7. Department of Wildlife Conservation. The mandate of the Department of Wildlife Conservation extends to the protection of flora and to carrying out research to ascertain rare plant populations. The department also is charged with providing national park services for tourism. In as much as park areas also encompass medicinal plant habitats, the wildlife department particularly can be expected to allocate resources that enhance the potential contribution of medicinal plants to the tourism value of some park areas. The current level of expenditure by the department on conservation services is estimated at about Rs. 1.3 million ($ 23,941). In the absence of the GEF opportunity, the department would have been expected to maintain this level of expenditure. 8. To a much lesser extent a few other institutions have been involved in activities related to the conservation of medicinal plants in areas of interest to the present project. These include the Ceylon Institute of Scientific and Industrial Research and the Town and Country Planning Department. 9. Ceylon Institute of Scientific and Industrial Research (CISIR). The Ceylon Institute of Scientific and Industrial Research has been conducting studies on medicinal plants over the past several years. The institute at present spends about Rs. 100,000 ( $1,841) per year on medicinal plant research. Although the institute might be expected to continue this level of finding, the current state of medicinal plant supplies does not justify an expansion of research expenditure in this area. 10. Town and Country Planning Department. The Town and Country Planning Department was involved in the establishment of the medicinal plant garden at Kataragama and presently maintains it. In the absence of the GEF alternative, annual expenditures by the Town and Country Department on the garden would likely to amount to Rs 1.5 million ($27,624). Global Environmental Objective I1. As a consequence to the current course of action, regarded as the baseline, Sri Lanka will probably preserve ex situ a very limited number of the most commonly used medicinal plants. The plants that would most likely survive would be those which are presently cultivable and have demonstrated an adequate profitability relative to other farm production. Given the present pressures of agricultural and other competing demands on the use of land, and the present level of institutional capacity, catastrophic loss of habitat areas will likely continue and gravely diminish the quality of in situ biodiversity over the next ten to twenty years. The GEF alternative would aim to install sufficient institutional capacity in Sri Lanka to increase the probability that a wider spectrum of medicinal plant species would be preserved over the long term. GEF Alternative 12. As part of this capacity strengthening, the GEF alternative would undertake the establishment of botanical reserves in areas representative of the country's agri-ecological zones to institutionalize the in situ conservation of medicinal plants and to establish operating procedures defining their sustainable use. 13. In an effort to reduce the pressures of populations adjacent to the areas enclosing the botanical reserves, the GEF alternative would actively link the development of village incomes outside forest areas to preservation of the integrity of the reserves. This type of village  42 ANNEX 4 Page 4 development would be a targeted channeling of resources that are planned to made available for regional development initiatives in the central northern and southern areas. The establishment of the botanical reserves under the GEF altemative would also tie into ongoing plans to expand the provision of Ayurvedic medicine in rural areas. The GEF alternative would add other functions to the currently planned medical centers, allowing them to serve as facilities providing training not only in Ayurvedic practice, but also in adding value to the cultivation or processing of medicinal plants or in activities associated with the conservation of plants in the reserves. 14. The GEF alternative would accelerate research on the propagation of plants ex situ and expand agronomic research of those species that may be suitable for production on farms or in plantation forests. The GEF alternative would also intensify current efforts to expand knowledge of the botany of medicinal plants and their use in Sri Lanka. Resources would be committed to raising local and international public awareness of the position of medicinal plants in Ayurvedic culture to encourage the development of eco-tourism, which would aid the sustainability of the conservation efforts. System Boundary 15. The primary impact of the'GEF alternative, implemented in the period of 1998-2002, is to increase the number of medicinal plant species that would be preserved over time in Sri Lanka, both in situ and ex situ. The GEF alternative would achieve this in installing the institutional capacity for a specialized form of environmental management which is not high among Sri Lanka's development priorities. The local population would benefit from the option of continued availability of a wide range of medicinal plants that would have been lost without the project. This domestic benefit may partly take the form, in the short run, of relatively less expensive health care, and, in the long run, of patented pharmaceutical products. The country may also realize additional international as well as domestic eco-tourism. Domestic Benefits 16. In terms of village development, the GEF alternative should achieve the same level of domestic benefits as would have been achieved under the regional development plans now in preparation for the central northern and southern areas of the country. The chief difference of the GEF alternative is that some of the funds that would have been committed for communities typical of those impacting medicinal plant habitats would now be directed for the development of alternative village incomes that would contribute to the easing of population pressures upon forest areas. The benefits from incremental eco-tourism are not expected to be large, but would offset the recurrent operational and opportunity costs of maintaining the botanical reserves. 17. In terms of the avoided loss of plant species, Sri Lanka should realize some value in preserved biodiversity as mentioned in the preceding section. The domestic benefit of the foregone loss in biodiversity value of medicinal plants provides an incentive for continued public participation in the proposed project. Costs 18. The baseline activities undertaken by the institutions described above and the GEF alternative can be grouped into the following categories: in situ conservation; ex situ cultivation; research, education, training and extension; and village development. The GEF alternative  43 ANNEX 4 Page 5 would expand current in situ conservation through the establishment of botanical reserves, and would involve village social organization, the development of village-based management plans, reserve enrichment and investments to improve the management of the forests hosting medicinal plant habitats. The total cost of in situ conservation under the GEF alternative is estimated at US$0.99 million, as compared to US$0.26 million over the project period1. In the present context, ex situ cultivation refers to physical investments in nurseries and gardens. As noted earlier, the Government have already made significant commitments to the financing of such types of infrastructure. The GEF alternative would make additional investments to expand the capacity of such 'gene banks', providing approximately US$2.81 million over the project period as compared to a baseline estimate of US$ 2.76 million. Rather than add much more to already planned investment in gardens or herbaria, the GEF alternative would provide resources to encourage and facilitate ex situ cultivation on farms and other areas through intensified research, education, training and village extension. The GEF alternative would provide (incrementally) approximately US$ 0.30 million for research on the propagation of medicinal plants, home garden and plantation cultivation and the dissemination of research results to existing provincial extension networks. The GEF alternative would also provide approximately US$ 50,000 to enhance the education and eco-tourism potential of the existing botanical garden at Kataragama. Village extension and education would also be key elements affecting the sustainability of the botanical reserves that would be established under the GEF alternative, and would incorporate existing commitments to expand Ayurvedic medical facilities into rural areas. The GEF alternative would provide approximately US$ 1.13 million in incremental resources for education and extension in villages about the reserves, financing, among other activities, medicinal plant farming, product processing and marketing. The GEF alternative would augment other research, capacity building and institutional strengthening, identifying approximately US$ 0.83 million for sustainability studies and other research set within the proposed botanical reserves, and approximately US$ 1.07 million for the promotion of changes in legal and regulatory policy influencing the conservation or cultivation of medicinal plants, the development of a national survey and information network of medicinal plant botany and use, the undertaking of line agency capacity building and training, the development of quality standards and the promotion of quality control, and general public education. In total, the GEF alternative would allocate for research, education, training and extension approximately US$ 20.74 over the project period as compared to US$ 17.43 of the baseline. Village economic development, which is programmed in more than one regional development plan, does not change in total under the GEF alternative. The GEF alternative would ensure that programmed resources would be directed to villages that are stakeholders of the proposed botanical reserves and would be linked to their participation in maintaining the integrity of the reserves. These resources for village economic development amount to approximately US$ 0.27 million. Finally, the GEF alternative would enhance project management capacity and project monitoring and evaluation with the commitment of approximately US$ 0.48 million over the project period. Domestic costs from planning documents here and elsewhere were converted to US dollar equivalents using the following mid-year exchange rates (Rs/US$): 1998 1999 2000 2001 2002 60.86 64.48 67.07 69.75 72.54  44 ANNEX 4 Page 6 19. Total financing requirements of the GEF alternative, including contingencies, over the period of 1998-2002 would amount to about US$ 25.29 million as opposed to a baseline US$ 20.72 million. The present value of the GEF alternative, using a LIBOR rate estimated at 5.15 percent, totals approximately US$ 21.80 million. Incremental Cost Matrix 20. The total incremental cost of financing the GEF alternative is estimated at US$ 4.56 million (see Table A). Operationally, this would mean that the Government would provide counterpart financing of about US$ 0.5 million for development commitments that would have occurred in the absence of the GEF alternative. These commitments include US$ 0.27 million for village economic development, and other funds for the civil works of Ayurvedic medical centers, Ayurvedic drug supplies, staff allowances, taxes and duties. FRAMEWORK OF PRIVATE INCENTIVES AND COSTS TO SOCIETY 21. The following tables are presented to lay out a framework for the collection of data during the implementation of the project that should clarify the long-term losses to society that would occur in the absence of action versus the incentives to individuals to realize short-term economic returns. The figures required should represent net present economic values discounted at the opportunity cost of capital, which is estimated at 12 percent. 22. The first table presents an organization of data showing the average net benefits to individuals per hectare of conservation area from activities that either directly involve the physical use of medicinal plants, or affect plant habitat conditions. Average Net Benefits to Individuals (US$/ha of Conservation Area per Stakeholder) Threats small plant commercial plant local household payments to third Total per ha collector collector parties Excessive Plant to be quantified to be quantified probably not to be quantified based on row Extraction applicable values ....................................... ............................................................................................I................................................................ .......................... Forest Product to be quantified to be quantified based on row Collection2 values ~~~~~~.............. ................................... ....................................................... ...................................... ...... Land Conversion 403. probably <25% of probably < 500 other benefits Table elements: Excessive Plant Extraction: collection of raw materials from plants in excess of sustainable yields. Forest Product Collection: harvesting of timber, fuelwood and other products that might disturb plant populations. Land Conversion: clearing of land for agricultural use. Small Plant Collector: collector of small quantities of raw materials for local household use. Commercial Plant Collector: collector operating on contract to gather raw materials in bulk. Third Parties: individuals receiving payments from others carrying out the activities at the left of the table. 2 Assuming that extraction does not lead to the denuding of areas. 3 Estimated on basis of US$50 net profit per hectare from subsistence farming discounted 12 percent over thirty years.  45 ANNEX 4 Page 7 23. The second table presents the net losses to society from excessive plant extraction, forest product collection and land conversion. Net Losses to Society (US$/ha of Conservation Area) Threats Tourism Sustainable Ayur. Intellectual Biodiversit Forest Other Total Harvesting Medicines/ Property y Products Pharnaceutical Rents s Excessive to be to be to be quantified to be non- relation of to be based on Plant quantified quantified quantified quantifiable plants to quantified row Extraction products values unknown ....... ........................................................ ........ .................................................................................................. u w............. Forest to be probably probably probably based on Product quantified insignificant insignificant insignificant row Collection values ..................... ....... Gw............... Wi........... ............i.6.................... 1~.............................................................................. ........... .... iw Land to be to be to be quantified to be non- to be to be based.on Conversion quantified quantified quantified quantifiable quantified quantified row values Table Elements: Tourism: local incomes derived from site visits to the conservation areas plus travel cost evaluations. Sustainable Harvesting: long-term incomes to collectors observing prudent harvesting and best practices. Ayurvedic Medicines/Pharmaceuticals: benefits of continued supplies of traditional medicines and of keeping open the option for pharmaceutical prospecting. Intellectual Property Rents: public incomes derived from the licensing of pharmaceutical developed from medicinal plants. Biodiversity: the local and global ecological value of maintaining the gene pool of medicinal plants. Forest Products: incomes from sustainable harvests of timber, wood and other products  46 ANNEX 4 Page 8 Table A: Incremental Cost Matrix Cost US$ Compone Category Million Domestic Benefit Global Benefit nt In Situ Baseline 0.26 Limited preservation of unrepresentative Cultivation (Govt sample of surviving species; severely restricted development resources for medicinal alternatives. priority) with GEF 0.99 Preservation of representative samples of Preservation of unique pool of genetic Alternative species in each major ecological zone through information of potential, future medicinal the establishment of botanical reserves; value. improved scope for popularizing medicinal alternatives. incremental 0.73 Ex Situ Baseline 2.27 Continued cultivation of current set of known Cultivation (Govt cultivable species development priority) with GEF 2.81 Expansion of number of cultivable species; Preservation of unique pool of genetic Altemative expansion of cultivation over baseline; reduced information of potential, future medicinal pressure on species in situ; improved scope for value. I popularizing medicinal alternatives. Incremental 0.54 Research, Baseline 17.43 Efficiency and long-term effectiveness of the Education, (Govt implementation of local rural development Training & development initiatives. Extension priority) with GEF 20.74 As above with emphasis & additional efforts Improved long-term sustainability of global Alternative targeting the sustainable use of botanical efforts through increased local capacity for reserves established under the project. biodiversity conservation, enhanced local appreciation of the preservation value of domestic resources & the equitable definition of intellectual property rights. Incremental 3.31 Village Baseline 0.27 Promotion of local income opportunities. Development (Govt development priority) with GEF 0.27 Promotion of local income opportunities linked Sustainability of conservation efforts Alternative to medicinal plant cultivation and the in situ through the enhanced local appreciation of integrity of habitats. the preservation value of domestic resources. Incremental 0.00 Project Baseline 0.00 Management (Govt & M&E development priority) with GEF 0.48 Capacity to coordinate & implement resource Increased capacity for the management of Alternative management project activities. biological reserves. Incremental 0.48 Total Baseline 20.72 rural development & continuation of ayurvedic traditions. with GEF 25.29 Same as baseline except substantially larger Considerably improved likelihood of Alternative number of medicinal plants conserved & potentially globally significant habitats, cultivated; enhanced capacity to sustain species & genomes conserved; enhanced conservation initiatives (including improved operational experience of projects opportunities for eco-tourism). involving intellectual property rights. Incremental 4.56  47 ANNEX 5 SRI LANKA Conservation and sustainable Use of Medicinal Plants Project Financial Summary Years Ending (Cufrency: US $) million implementation Period Operational Period 1998 1999 2000 2001 2002 Project Costs Investment Costs 1.58 0.86 0.92 0.81 0.79 Recurrent Costs 0.02 0.02 0.02 0.02 0.03 Total 1.60 0.88 0.94 0.83 0.81 Financing Sources (% of total uroiect costs! Total IBRD/IDA Co-financiers Government 9.9% Central Local User Fees/Beneficiaries GEF 90.1% Others Others Others Others Total  48 ANNEX 6 Page 1 SRI LANKA Conservation and Sustainable Use of Medicinal Plants Project Procurement and Disbursement Arrangements Procurement A. Works * Package of Works: Due to the small size of these contracts (less than US $ 40,000) and as these are geographically scattered, these can be awarded by inviting bids from at least three qualified contractors in the area of the project site. * Procurement of Schedules: Detailed procurement schedules for works is presented in the Project implementation Plan. * Design and Specification: The design and specification of building to be constructed will be prepared by MIM and approved by the Bank. * Bidding Documents: Simplified bidding documents based on the Bank's Standard Bidding Documents for Procurement of works (Smaller Contracts, January 1995) and adjusted to satisfy requirements that are acceptable to the Bank and already agreed with GoSL will be used and contracts will be concluded following procedures acceptable to the Bank. In general, works under the project will be small and geographically scattered, and are not likely to be of interest to outside bidders. * Land: MIM will enter into an MOU with Provincial Councils and Forest Departments to acquire land for works. B. Goods, Equipment, Machinery, Supplies, Vehicles * Procurement Packages: Convenient procurement packages have been defined for each category of goods, machinery, equipment and vehicles, and agreed with the Bank. Competitive Bidding is not expected to be required due to the size and propriety nature of the packages. The packages will include field equipment for planned studies under the project, processing equipment for village information centers, some office equipment for village information centers, dispensary equipment, fencing, planting materials for botanical reserves and gardens, training equipment whose use will be coordinated at the national level, office and other O&M (except for vehicles), and items to be purchased for village development activities. The goods procurement account does not include items that may be purchased or rented under the contracts for studies or research that are described below. * Procurement Schedule: Detailed procurement schedules for all packages have been provided in Project Implementation Plan. * Design and Specification: The design and specification for goods for National Shopping procedures will be prepared by MIM and approved by the Bank.  49 ANNEX 6 Page 2 Invitation Documents: Standard bidding documents agreed with MIM and based on the Bank's Standard Bidding Documents for Procurement of Goods, January 1995, will be used and contracts concluded using procedures acceptable to the Bank. Contracts for other goods, including special equipment, which can be grouped together to make large packages will be procured following international shopping procedures. Items or groups of items estimated to cost less than the equivalent of US $ 25,000 for each contract will be procured following International and/or National Shopping Procedures up to an amount of US $ 350,000 calling for at least three quotations from reputed suppliers. All transport under the project will be hired locally as necessary. C. TA, Training, Studies & Services * Procurement Packages: Consultants services will include both internationally and locally recruited consultants. The contract packages shall consist of: (i) an operations support contract to assist the PMU in implementing various project activities -- primarily those in the MPCAs; and (ii) a number of small local contracts for carrying out studies/surveys and the preparation of training and educational materials. Local and international training for staff and officers of MIM will be based on detailed plans that will be prepared by MIM. These plans will outline the areas of study, the number of personnel to be trained, training institutions and the years in which training will take place. Local training will be arranged by MIM and procured using National Shopping procedures. Where the purchase of materials for training is required, items will be grouped, if feasible, into appropriately sized packages to facilitate national shopping. Stipends for students studying under Ayurvedic trainers at the medicaVinformation centers established by the project may be paid by Force Account. There will be five bundles of contracts to execute studies, research and other professional services under the project: (i) plant propagation & on-farm research, agricultural systems study, home garden and plantation research; (ii) ethnobotanical surveys, medicinal plant inventory in the MPCAs, growth and yield studies in the MPCAs; (iii) database design and development; (iv) monitoring and evaluation; and (v) development of training and educational materials. Bundles (i) and (ii) involve a number of different tasks and may be carried out as one or more contracts. Items (iii) and (v) will likely be submitted as single contracts. Monitoring and evaluation, as it includes the costs of an advisory group involving experts abroad, will consist of one contract for actual M&E activities in country and then possibly several ad hoc arrangements defined under a Memorandum of Understanding with participating institutions to cover travel and subsistence expenses of convening advisory group members. Bidding procedures for the studies will be similar to those established for contracted research under other Bank projects in Sri Lanka. Miscellaneous services include the rental of office and building space, the rental of computers and other equipment, the purchase of professional office services for word processing, report production and replication, etc. These will be procured through National Shopping procedures. Procurement Schedule: Detailed procurement schedules for all TA inputs and studies have been provided in the Project Implementation Plan.  50 ANNEX 6 Page 3 * Design and Specification: All TORs for TA and studies will be drafted by MIM and approved by the Bank. * Bidding Documents: Consultants will be recruited following the Bank's Guidelines, Selection and Employment of Consultants by World Bank Borrowers, January 1997 and using the Bank's Standard Form of Contract for Consultants Services, June 1995. Consultants will be hired through normal quality and cost based Bank procedures. A request for sole sourcing of the TA contract to the IUCN has been received from MIM and approved by the Bank. The Bank approved the sole sourcing request after fulfillment of the following conditions: (i) receipt of a formal request from GoSL containing IUCN's understanding with a regional and international entity of excellence in the areas covered by the draft TORs; and (ii) assurance of financial management expertise. Sole-sourcing is decided on fair technical grounds and is awarded to an entity that has the best expertise to provide technical assistance. All studies will also follow the Bank's guidelines defined for the selection and employment of services and use the standard Bank form of contract established for consultants services. Training expenditures and other services, to the extent that they can be packaged will be documented as appropriate for National Shopping procedures (see section C above). D. Miscellaneous Procurement Packages: Miscellaneous procurement items include: land surveys and labor for improvements in the botanical reserves and gardens; project management personnel at the reserves; and staff allowances. The labor required for land improvements at the reserves may be grouped accordiig to specific tasks and arranged through local Direct Contracting. Project management personnel for the reserves will be hired through Direct Contracting. Staff allowances are not financed by GEF under the project. * Procurement Schedule: Detailed procurement schedules for all packages have been provided in the Project Implementation Plan. * Design and Specification: MIM will consult with the Bank regarding the methodology and documentation of the data of the land surveys to be conducted over the proposed sites of the botanic reserves. * Bidding Documents: The land surveys for the five botanical reserves may be grouped to form one package that may be documented as appropriate for National Shopping (see section C above). E. Prior/Post Review As most contracts will be below the threshold amounts, the Bank will review only the first two contracts to ensure compliance with the Bank's thresholds and Standards Bidding Documents for Procurement. Contracts will be subject to post review by the Supervision missions on a selected basis. As regards Consultants Services, contracts in excess of US $ 100,000 for firms and US $ 50,000 for individuals will be subject to prior review, but TORs in respect of all contracts, irrespective of amounts, will be subject to the Bank's prior review.  51 ANNEX 6 Page 4 Table A: Project Costs by Procurement Arrangements (in US$ million equivalent) Pruwurenmert Method Consulting * Other Services N.B.F. Tetal A. Works 1. Civil Works 0.18 - - 0.18 (0.15) (0.15) B. Goods 1. Vehicle 0.15 - - 0.15 (0.12) (0.12) 2. Machinery & Equipment Purchase and Rental /b 0.14 - - 0.14 (0.14) (0.14 3. Materials /c 0.46 0.15 0.40 1.0 (0.46) (0.14 (0.58) C. TA, Training, Studies & Services 1. Institutional Development TA Operations - 1.40 - 1.40 (1.40) (1.40) TA Management /d 0.13 - - 0.13 (0.13) (0.13) 2. Local Training /e 0.15 - - 0.15 (0.15) (0.15) 3. Development of Educational Materials - 0.14 - 0.14 (0.14) (0.14) 4. Specialised Extenal Training - 0.29 - 0.29 (0.29) (0.29) 5. Studies/Research/Service Contracts Propagation Research, On-Farm Research, Agricultural Systems Study, Home Garden and Plantation Research 0.38 - 0.38 (0.38) (0.38) Ethnobotanical Surveys, Medicinal Plant Inventory, Grwth and Yield Studies 0.14 - 0.14 (0.14) (0.14) Database Design and Development - 0.14 - 0.14 (0.14) (0.14) Monitoring & Evaluation - 0.07 - 0.07 (0.07) (0.07) 6. Misc Services /f 0.19 - 0.03 0.22 (0.19) (0.19) D. Miscellaneous I. Labor for Improvements in Reserves & Gardens /g 0.14 - - 0.14 (0.14) (0.14) 2. Project Management Personnel /h 0.38 - - 0.38 (0.38) (0.38) 3. Staff Allowances /i - - 0.01 0.01 Total 1.93 2.70 0.44 5.07 (1.90) (2.70) - (4.57) Note: Figures in parenthesis are the respective amounts financed by GEF \a Includes some new & existing botanic garden & nursery structure village dispensary office/processing rooms \b Includes medical information center processing office, dispensary equipment; fencing for gardens. \c Includes planting materials; items for village workshops & meetings; items for village development activities; office garden & infonmation center O&M \d Staffing of PMU. \e Village study tours, employment of Ayurvedic trainers, village apprentice stipends and village para-forester stipends, local staff training. \f Includes cartography, the rental of space, computers & other equipment; report production & replication; office services; village staff for information centers; ola manuscript transcription, research publication, chemical analysis. \g hnplemented by FD. \h Staffing of offices in the five project areas. \i TADA to be provided as Government contribution.  52 ANNEX 6 Page 5 Table B: Thresholds for Procurement Methods and Prior Review (US$: million) Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review 1. Works Civil works Local Shopping First two contracts 2. Goods Vehicles Local Shopping First two contracts Machinery International Shopping Materials and Local Shopping consumable 3. Services Consulting Services International Selection 100,000 for firms and 50,000 for individuals 4. Miscellaneous Local Shopping Force Account Note: IS: International Shopping ICB: International Competitive Bidding  53 ANNEX 6 Page 6 Table C: Allocation of Grant Proceeds (US $: million) Expenditure Category Amount in US$million Financing Percentage 1. Works 162,600 85 % 2. Goods 982,100 100% of foreign expenditures; 100% of local expenditures (ex- factory cost) and 85% of local expenditures for other items procured locally. 3. Services 3,276,100 100% 4. Unallocated 151,900 TOTAL 4,572,700  54 ANNEX 7 SRI LANKA Conservation and Sustainable Use of Medicinal Plants Project Project Processing Budget and Schedule A. Project Budget (US$000) Planned Aotual (At final PCD stage) N/A 157 B. Project Schedule Planned Actl (At final PCD stage) Time taken to prepare the project (months) 30 (approx) First Bank mission (identification) 02/27/1995 Appraisal mission departure 09/07/1997 Negotiations 09/20/1997 Planned Date of Effectiveness By 03/15/1998 Prepared by: Ministry of Health and Indigenous Medicine with consultancy assistance from International Union for the Conservation of Nature (Sri Lanka). Preparation assistance: PDF (Block B) grant of US $ 320,000. Bank staff who worked on the project included: Malcolm Jansen (ASUEN), Nadim Khouri (SASRD), Sumith Pilapitiya (SASRD), Mohammed Bekhechi (LEGEN), Jose P. Correia da Silva (LEGSA), Vimala Abraham (LOAAS), Hung Kim Phung (LOAAS). Geraldine B. Burnett (SASRD) Bank consultant staff included: Barry Deren (Economist), Michael Balick (Ethnobotanist), Charles Peters (Forester/Conservation Specialist), joined the Appraisal mission Salma Omar-Chowdhury (Social Scientist)  55 ANNEX 8 SRI LANKA Conservation and Sustainable Use of Medicinal Plants Project Documents in the Project File* A. Project Implementation Plan B. Bank Staff and Other Assessments 1. Background report on environmental analysis for the project: (a) Threatened medicinal plants of Sri Lanka. (b) Commonly Used Medicinal Plants of Sri Lanka (c) Heavily Used Medicinal Plants of Sri Lanka (d) Selection of sites for establishment of MPCAs 2. Environmental Review 3. Social Assessment. (a) Report on Indigenous People 4. Technical reviews from GEF's Scientific and Technical Advisory Panel. S. Economic Analysis: (a) Considerations for the Conservation and Sustainable Use of Medicinal Plants (b) Working Paper: Economic Analysis C. Other *Including electronic files.  56 ANNEX 9 page 1 Status of Bank Group Operations in SRI LANKA IBRD Loans and IDA Credits in the Operations Portfolio (As of September 30, 1997) Differn between expected Original amount in USS and actual Project Loan or Fiscal mlllioDs disbursementl ID Credit No. Year Borrower Purpose IBRD IDA Cancell. Undisbursed Orig Fnn Revd Number of Closed Loans/Credits: 71 Active Loans LK-PE-10498 C29380 1997 GOSL ENERGY SERVICES DELIVERY 24.20 22.93 23.92 LK-PE-10513 CN0140 1997 GOSL ENVIRONMENTAL ACTION 14.80 13.80 13.94 LK-PE-10526 C29820 1997 GOSL HEALTH SERVICES DEV 18.80 17.54 18.49 LK-PE-10517 C28800 1996 GOSL PVT. SECTOR INFRAS. DE 77.00 71.65 76.23 LK-PE-42263 C28370 1996 GOSL TELECOM REG. & PUBL. 15.00 12.23 12.92 LK-PE-42266 C28810 1996 GOSL TEACH ED& DEPLOYMEN 64.10 58.33 62.09 LK-PE-10467 C27570 1995 GOSL COL. ENVIRON. IMPROVE. 39.00 29.30 34.11 LK-PE-10409 C24420 1993 GOSL COMMUNITY WATER SUP 24.30 7.16 7.63 LK-PE-10419 C24840 1993 GOSL PRIVATE FINANCE DEV. 60.00 9.26 6.21 LK-PE-10420 C24950 1993 GOSL COLOMBO URB. TRANSP. 20.00 9.65 9.39 LK-PE-10386 C22970 1992 GOSL POWERDISTRIBUTION 50.00 31.62 29.63 LK-PE-10398 C23800 1992 GOSL 2ND AGR. EXTENSION 14.34 7.98 7.64 LK-PE-10363 C21830 1991 GOSL 3RDROADS 42.50 11.52 10.67 LK-PE-10368 C22310 1991 GOSL POVERTYALLEVIATION 57.50 9.21 12.26 21.04 11.55 LK-PE-10373 C22490 1991 GOSLICEB TELECOMS II 57.00 24.33 25.34 25.34 LK-PE-10378 C22600 1991 GOSL IRRIG. REHAB. 29.60 14.90 13.99 TOTAL 0.00 608.14 9.21 354.46 373.24 36.89 Active Loans Closed Loans Total Total disbursed (IBRD and IDA) 234.60 1438.39 1672.99 Of which repaid 0.00 168.73 168.73 Total now held by IBRD and IDA 598.93 1222.20 1821.13 Amount sold 0.00 3.59 3.59 Of which repaid 0.00 3.59 3.59 Total undisbursed 354.46 - 6.63 361.09 a. Actual disbursements to date minus intended disbursements to date as projected at appraisal. Note: Disbursement data are updated at the end of the first week of the month:  57 ANNEX 9 Page 2 Sri Lanka - Statement of IFC Investments Committed and Disbursed Portfolio As of September 30, 1997 (In US$ Millions) Committed Disbursed IFC IFC I I I I FYApproval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1980/84/85/86 Lanka Orix 10.00 0.00 0.00 0.00 2.00 0.00 0.00 0.00 1981 Lanka Hotels 0.00 0.64 0.00 0.00 010M 0.64 0.00 0.00 1988/95 Union Assurance 0.00 0.98 0.00 0.00 0.00 0.98 0.00 0.00 1992 CKN Fund Mgmt. 0.00 0.06 0.00 0.00 0.00 0.06 0.00 0.00 1992 Pyramid Trust 0.00 0.25 0.00 0.00 0.00 0.25 0.00 0.00 1993/94 Lanka Cellular 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1996/97 Asia Power 10.00 2.27 0.00 10.00 0.00 2.27 0.00 0.00 1997 Packages Lanka 0.00 1.11 0.00 0.00 0.00 1.11 0.00 0.00 Total Portfolio: 20.00 5.31 0.00 10.00 2.00 5.31 0.00 0.00 Approvals Pending Commitmnent Loan Equity Quasi Partic 1996 ASIA POWER 0.00 0.00 2.50 0.00 1997 LOFAC 1.50 0.26 0.00 0.00 Total Pending Commitnen 1.50 0.26 2.50 0.00  58 A.7NNEX 10 Page 1 Sri Lanka at a glance 8128197 POVERTY and SOCIAL Sri South Low- _ Lanka Asia Income Development diamond* Population mid-1996 (millins) 18.3 1,264 3,229 GNP per capita 1996 (USS) 740 380 500 Life expectancy GNP 1996 (biiions US$) 13.8 481 1,601 Average annual growth, 1990-96 Population (%) 1.3 1.9 1.7 GNP Gross Labor force (%) 2.0 2.1 1.7 p Iross Most recent estimate (latest year available since 1989) capita enrollnent Poverty: headcount index (% of populabton) 22 . Urban population (% of total population) 22 28 29 Life expectancy at birth (years) 72 61 63 Infant mortality (per 1,000 live biOhas) 16 75 69 Accestosafe wabr Child malnutrition (% of children under 5) 36 .. .. Access to safe water (% of population) 57 63 53 Illiteracy (% of population age 15+) 10 50 34 Sri Lanka Gross primary enrollment (% of school-age population) 105 98 105 L Male 106 110 112 Low-Icome group Female 104 87 98 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1975 1985 1996 1996 GDP (billions USS) 3.8 8.0 12.9 14.0 Econokratim' Gross domestic investmenVGDP 15.8 22.2 25.7 24.2 Openness of economy Exports of goods and senricesiGDP 27.5 26.0 35.9 Gross domestic savlngs/GDP 8.1 10.2 15.3 15.5 Gross national savingslGDP 9.7 15.5 19.8 19.9 Current account balance/GDP -2.9 -7.0 -5.0. -3.9 Interest paymentslGDP 0.5 1.9 2.1 1.8 Savings Investment Total debtWGDP 21.5 59.2 49.6 45.2 Total debt servicelexports 26.1 16.5 7.3 Present value of deWVGDP . .. 43.1 . Present value of debWexports .. , 99.5 *- Indebbdness 1975-45 19o-9S 1996 1996 1997-05 (average annual growth) - Sn Lanka GDP 5.3 4.8 55 3.7 4.9 I GNP per capita 3.7 3.0 4A 1.8 3.7 Low-income group Exports of goods and servIces 4.7 9.3 11.5 8.7 7.2 STIRUCTURE of tfh ECONOMY 1975 1985 1095 199S (% of GOP) Gr99 rates of outiA and inveabat I%) Agricuture 30.4 27.7 23.0 22A 15 Industry 26.4 28.2 25.1 25.2 1. Manufacturing 20.1 14.7 15.7 18.2 Services 43.2 46.1 51.9 52.4 7 Private consumption 82.6 79.5 72.9 .. el 22 3 .4 o 5 General govemment consumpton 9.3 10.2 11.8 . GDI --*-GDP Imports of goods and services 35.0 38.0 48.3 .-.GI-G 1975-85 1986-96 1995 199o (average annual gwth) Grwth rats of ods wnd hbpt (%) Agrkulture 4.3 21 3.3 -4.6 1s Industy 5.1 5.7 7.7 6.0 - Manufacturing 4.3 7.8 9.2 6.5 10 Services 8.6 5.1 5.1 5.8 Private consumpton 6.1 4.4 7.1 .. Generalgovemmentconsumption 5.2 3.7 -1.1 .. 12 93 94 95 is Gross domestic invesment 12.5 2.6 0.5 .. -4 Imports of goods and servAes 13.2 6.1 6.0 6.4 ExportB . Impors Gross natinal product 5.4 4.3 5.9 3.1 Note 1996 data are prelminary smats Fgures In Italics are for years other than thosespecfed. The diamonds show four key ndkators In the oountry On bodl) compared with Its Income-group average. If data are missing, the diamond will be hncompiete.  ANNEX 10 Page 2 Sri Lanka PRICES and GOVERNMENT FINANCE 1975 1985 1995 1996 Domestic prices Inflation (% change) 30 Consumer prices 6.6 1.5 11,5 16.8 20 Implicit GDP deflator 5.4 0.6 8.4 12.1 10. Govemment finance (%/ of GDP) Current revenue .. 22.3 20.7 20.3 91 92 93 94 95 99 Current budget balance .. 2.2 -2.0 -2.4 GDP def. -O--CPI Overall surplus/deficit .. -11.7 -10.1 -9.5 TRADE 1975 1985 1995 1996 (millions US$) Export and import levels (mill US$) Total exports (fob) .. 1,333 3,798 4,097 s,ooo Tea .. 442 480 616 Other agricultural goods .. 94 348 346 Manufactures .. 233. 2,854 2,991 4,000 Total imports (cif) .. 1,948 5,312 5,416 Food21 72 0 200 Fuel and energy 404 321 324 Capital goods .. 382 1,188 1,202 Export price index (1987=100) .. 96 121 124 90 91 92 93 94 95 go Import price index (1987=100) .. 86 155 160 o Exports * Imoorts Terms of trade (19S7=100) .. 111 78 78 BALANCE of PAYMENTS 1975 1985 1995 196 (millions US$) Current acceunt balance tO GOP nraiO 1%) Exports of goods and services 632 1,561 4,841 5,039 o Imports of goods and services 804 2,296 6,064 6,209 . | | 92 93 94 95 9| Resource balance -172 -734 -1,223 -1,170 -2 Net income -18 -127 -277 -248 Net current transfers 80 443 853 869 Current account balance, be-fore official capital transfers -110 -419 -647 -549 |U Financing items (net) 84 304 632 562 Changes in net reserves 26 115 15 -13 -4 Memo: Reserves including gold (mill. USS) 57 472 2,066 2,011 Conversion rate (/ocal/IUS$) 7.0 27.2 51.3 55.3 EXTERNAL DEBT and RESOURCE FLOWS 1975 1985 1995 1996 (millions US$) Composition of total debt, 1996 (mill. US$) Total debt outstanding and disbursed 815 3,540 6,407 6,346 IBRD 36 61 49 40 G A IDA 39 397 1,463 1,516 F 535 B B Total debt service 169 320 608 704 614 1516 IBRD 6 9 12 11 IDA 0 3 19 20 Composition of net resource flows S' Official grants 56 151 174 Official creditors 61 297 317 Private creditors -22 44 15 .. D Foreign direct investment 0 26 63 .. E -581 Portfolio equity 0 0 61 .. 3627 World Bank program Commitments 30 137 39 156 A - IBRD E - Bilteral Disbursements 19 79 106 104 B - IDA D - Other multilateral F - Private Principal tepayments 3 5 15 16 C - IMF G - Short-term Net flows 16 74 92 88 I_1 Interest payments 3 8 16 15 Net transfers 14 66 76 73 Development Economics 8128197  -10- 810: 811- 812 1 1 -0