Philippines - Community Based Resource Management Project

Report No. PID6064 Project Name Philippines-Community Based Resource Management (+) Region East Asia and Pacific Sector Natural Resources Management Project ID PHPE34614 Borrower Republic of the Philippines Implementing Agencies Department of Finance (DOF) Contact: Ms. MA. Cecilia Soriano Undersecretary DOF Address: 3/F Executive Tower Central Bank Complex Manila, Philippines Fax: 63-2-5262296 Appraisal Date January 28, 1998 Board Date March 24, 1998 Date of Initial PID January 21, 1998 Date this PID prepared March 3, 1998 Background There are three key issues that pose a challenge to rural development: low growth of the rural economy; high levels of rural poverty; and degradation of natural resources. Agricultural growth decelerated from 5.8 percent per annum in 1970-80 to 2.1 percent per annum in 1980-89 and 2.2 percent in 1990-94. The low growth in agriculture, coupled with limited employment opportunities in non-farm activities, have resulted in a high incidence of poverty--50 percent in rural areas (compared to 36 percent in 1994 for the country as a whole) where half of the country's population of 67.5 million live. Many of the rural people live in upland areas, largely dependent on low-input shifting agriculture, with a high incidence of severely degraded areas and the highest poverty incidence in the country. The Government of the Philippines (GOP) has articulated sustainable development and poverty alleviation as key thrusts of the administration. To achieve these objectives, the Philippine Strategy for Sustainable Development (PSSD) and the Social Reform Agenda (SRA) were adopted to address environmental protection and rehabilitation concerns and to focus on poverty reduction efforts. The proposed project constitutes one of the means to achieve the twin objectives of reducing poverty and natural resources degradation. The twin problems of rural poverty and natural resource degradation: Checking and reversing environmental degradation of forest and coastal ecosystems are major challenges facing the Philippines. Almost 30 percent of the population, or around 18 million people, live in upland areas because of land shortages and limited off-farm rural employment opportunities. Up to 10 million Filipinos are farming on forest land, often with techniques that contribute to very high rates of erosion. Similar environmental destruction has occurred in  coastal areas. Nearly 70 percent of the country's mangrove forests have been destroyed since 1918 due to over-harvesting for fuelwood and sometimes replaced by fish ponds. There is a close relationship between poverty and the degradation and depletion of natural resources severely affecting rural areas which consequently limit rural opportunities in agricultural, forestry and fisheries. Forests and uplands: The uplands are the locus of most remaining forested areas in the Philippines. However, these areas are rapidly diminishing. In 1972, the country had about 10.4 million hectares of natural forest covering about 4 percent of the country's land area. By 1990, this had reduced to 6.16 million hectares. Just under 1 million hectares of virgin forest remains. The key factors contributing to deforestation were destructive logging activities, pest and diseases and fires. This is compounded by pressures from large numbers of immigrants from the lowlands. Lack of knowledge, short-term planning horizons and lack of financial resources cause many of these immigrants to use unsustainable subsistence farming techniques. Lack of land tenure security also hinders access to credit which might finance more sustainable approaches. Coastal Areas: Coastal resources are also suffering from rapid degradation. Approximately 450,000 ha of mangroves are thought to have existed in 1918, but this has dwindled to less than 242,000 ha. Coral reefs are also being adversely affected. Philippine reefs are considerably more stressed in comparison with other reefs surveyed in the Indo-Pacific region. Not all reef destruction is caused by humans, but soil erosion, destructive fishing methods, and coral mining are serious sources of degradation. Past World Bank Support for Decentralization and Natural Resources Management: Significant progress has been made in the Philippines in designing effective interventions to address the problems described above. Particularly important in this has been a number of internationally assisted development projects and programs, including three Municipal Development Projects and the World Bank- supported Environment and Natural Resources Sectoral Adjustment Loan (ENR- SECAL). These projects demonstrate continuing progress in delivering resources for properly designed and well implemented local government projects. The Municipal Development Projects aim to help establish the Municipal Development Fund (MDF) as a revolving fund providing local governments with long-term development financing and strengthening local technical and financial capabilities. While these projects mainly focus on urban areas, the ENR-SECAL, through its Regional Resource Management Projects, strengthens local government's capacity in rural natural-resource management, and improves the capacity of a key national agency, DENR, to provide services and technical support to LGUs. Furthermore, a World Bank-supported Central Visayas Regional Project (CVRP) has demonstrated and introduced appropriate technology for natural resources management in the region of Central Visayas. Lessons Learned: Of the projects discussed above, it is the CVRP that offers lessons that are most relevant for the proposed project. A performance audit of CVRP by World Bank's Operation Evaluation Department (OED; draft March 24, 1997) concluded that the main lessons learned from it were that improving natural resources management is as much an institutional as a technical problem and that this must involve a dynamic process of change and development. The prerequisites are: (a) appropriate technologies; (b) an appropriate policy and legal framework; (c) adequate local decision making - 2 -  powers; and (d) beneficiaries must acquire the ability to operate within this framework by receiving, from the project, the required managerial, political and technical skills Project Description Project Development Objectives: The main objective of the project is to reduce rural poverty and environmental degradation through support for locally generated and implemented natural resource management projects. This would be done through: (a) enhancing the capacity of low-income rural local government units (provinces and municipalities; LGUs) and communities to plan, implement and sustain priority natural resource management projects; (b) strengthening the higher levels of government systems to transfer finance (as financial intermediaries) and environmental technology, and improve implementation of environmental policies; and (c) provision of resources to LGUs to finance natural resource management projects. To achieve these objectives, the project consists of the following three components. LGU Subproject Investments (US$54.3 million): This component would provide eligible LGUs with a mix of grants and loans to finance community-based resource management subprojects on a demand-driven basis. Subprojects would primarily fall into the following categories: upland agriculture and forestry; coastal resources and nearshore fisheries; and small rural infrastructure and livelihood projects related to the above. Most subprojects are expected to be small and within the implementation capabilities of LGUs. Planning and implementation Support (US$6.7 million): This component will provide planning and implementation support to LGUs and their communities in the way of training, provided through DILG and community organizers, and grants for financing project preparation. Specific support would include costs of training including training materials, equipment and allowances, fees for trainers and technical assistance. Initiation of an MDF Rural Window and Project Management (US$5.0 million): For a transitional period of three years, the project would support a project management office, the CBRMO, and the establishment of a rural window of the MDF to channel funds to low income LGUs for financing rural development investments, including CBRM activities. Specific areas of support would include: equipment, salaries of contracted staff, incremental costs of staff seconded from other government agencies, technical assistance and operating costs of running the MDF rural window and CBRMO and its satellite offices. Environmental Technology Transfer and Policy Implementation (US$1.5 million): The component would strengthen mechanisms within DENR and the Department of Agriculture (DA) to support the implementation of locally driven natural resources management efforts, monitor resource trends, provide high quality technical advice and services related to LGU implementation of subprojects, and develop improved mechanisms for national government support to LGUs in forest and nearshore resource management. Specific support would be given for: policy development; training; preparation of extension and educational materials; public information campaigns; research on the transfer of environmental technology and community-based resource management; and implementation of policies and regulations in land and resource tenure access and security. -3-  A Summary of Project Costs Project Costs: The total project costs are estimated to be US$ 67.5 million, of which US$54.3 million would be taken up by subproject investments, with the other components taking up the remaining US$13.2 million. Implementation Arrangements Institutional and implementation arrangements: The project would be implemented by local government units (LGUs) while national agencies would provide assistance in financial intermediation, technical support and project management. The project will be overseen at the National Level by a Technical Review Committee (TRC) located in the MDF of the Department of Finance (DOF). The TRC would coordinate project implementation and approve the project's annual work plans and budgets. Project proposals would be formulated at the community/bBarangay level and would consolidate interventions responding to locally perceived needs identifiedinclude several sub-project proposals in line with the Barangay and Municipal Development Plans. Formulation, prioritization and packaging of subprojects would be supported by a community organizer with certain assistance from provincial government agencies. Subprojects would be appraised and supervised by the CBRMO. Approval of subprojects would be done by the TRC while the subloan packages would be approved by the chairman of the MDF Policy Governing Board, on the basis of delegated authority from the Board. Project Benefits and Risks Benefits and target population: Overall expected benefits include the sustainable enhancement of the environmental, social and productive conditions in selected areas of the Philippines through interventions in Regions V, VII, VIII and XIII. The total rural population in these four regions is around 1.8 million families (or over 10 million people) of which around 0.9 million families have incomes below the poverty line. The project targets around 125 municipalities (40% of over 300 municipalities), with a total population of more than 700,000 people. Virtually all of the LGUs are in the poorest classes of municipalities (Class IV, V, VI), such as Masbate (with a rural poverty incidence of 83.4%), Agusan del Sur (70.8%) and Sorsogon (68.3%). Project investments will focus primarily on the uplands and coastal areas, where poverty incidence is highest. For instance, fishermen and forestry workers, at 76.7% and 82.69 respectively of the rural population, are among the poorest in rural Philippines. Besides, poverty incidence in the uplands is, at 61%, considerably higher than the rural average of 54%. Economic and Financial Assessment: Economic returns will result from the LGU subprojects. As these are demand driven and evolving over time, it is difficult to predict the exact rates of return at this stage. Besides, many of the benefits are intangible, stemming from long term environmental improvements in and outside the project areas, implying that rates of returns are necessarily conservative. The Economic Internal Rates of Return (EIRR) for possible CBRM packages are estimated at 28%. The rates of return include expenses for community organizers as well as the overheads from the local government building capacity and the environmental technology components. The financial rate of return (FRR) of the project's natural resources and income generation activities has been estimated at 11 to 73%. Poor upland farmers and coastal fishermen are the prime beneficiaries of the project -4 -  interventions. For instance, a farmer targeted for micro-watershed development could see his income more than double. Besides net income, the farmers and fishermen would benefit through improved training, better organization and greater linkages with the outside world. In all cases, except artificial reefs, the financial indicators are satisfactory. Artificial reefs, if selected have other benefits, such as creation of social group formation, that would also help the mangrove replantation and fish sanctuaries, and could therefore be acceptable, as long as measures are taken to combat overfishing. Social Assessment: The project targets the LGUs in the poorest classes of municipalities (Class IV, V, VI). The benefits will be distributed to all members of the households but the project will have a greater impact on women. It is widely accepted that the weight of poverty falls heavily on women; in poor households they often shoulder more of the workload than men, are less educated, and have less access to remunerative activities. The earlier CVRP project had demonstrated the increased access to resources for women This project will ensure that this access continues and will take additional steps to widen the scope of resources. Due to the demand-driven nature of the project and the planning at the barangay and/or sub-barangay level, beneficiaries are expected to be fully involved in taking charge of the development of their own community. The COs will also help to ensure that the voice of all groups will be represented in the community plans. Information from the social and economic profiles as well as gender analysis obtained for each participating community at the beginning of the sub-project will be used to help communities plan their projects so that all will benefit and no one group will be unfairly burdened. Extra attention in planning and implementation will be provided to communities with indigenous groups. The government department for indigenous affairs and the Office of the Southern Cultural Communities will be consulted and all efforts will be made to recruit and train COs from the same cultural groupings. Project staff, particularly those from regional offices, will be provided training on development for indigenous populations. It is not anticipated but should it occur, land acquisition, demolition of structures and displacement of persons would be kept to a minimum. Sub-project proposals that would require demolishing houses or acquiring productive land should be carefully reviewed and their adverse impacts minimized through alternative designs and/or alignments. Proposals that require more than minor expansion along rights of way would be reviewed carefully and the affected persons appropriately compensated Participation: The project framework is to promote community-based planning, implementation and management of natural resource subprojects which would have both short term and long term gains. The emphasis at the beneficiary level, therefore, is to develop strong community action which would realize these gains. Community organizing for CBRM deals with the social preparation and community organizing processes which are necessary as soon as project requests from municipalities are provided with the green light to develop detailed project proposals. COs, who will be provided by municipalities, will be trained by the project to work with communities to identify their needs, priorities, strengths, opportunities and resources to prepare and implement viable subprojects. The COs will be fully engaged in data collection and conduct of social profiles of the community, gender analysis, facilitation of participation and collective action, leadership identification and training, group formation and/or strengthening, and monitoring of project activities. The pool of COs can be from existing (and qualified) municipal staff or be - 5 -  hired by the municipality from local NGOs if both parties so agree. Environmental Aspects: The Project has EA-category B. The project is expected to yield major positive and direct environmental benefits, particularly in: (a) improved management of upland and forestry resources indicated by a reduction in deforestation, increased vegetation cover and reduced soil erosion; (b) improved coastal and nearshore fisheries resources indicated by an expansion in mangroves and a reversal of the decline in catches of fisheries; and (c) improved infrastructure in support of management of upland, coastal and nearshore natural resources as indicated by improvements in rural roads, water supply and sanitation facilities, small irrigation systems and other small scale infrastructure. The project is also expected to create awareness while at the same time educating beneficiaries on the proper management of natural resources which would benefit the environment as well as provide a sustainable source of income. Sustainability: Project sustainability would be enhanced by at least three actions. First, as the LGUs would be borrowing funds to implement their projects and since they and the communities would be contributing equity to the subprojects, their sense of ownership is expected to be strong, thereby enhancing the chances of maintaining and sustaining the investments. This sense of ownership and commitment is further strengthened by the fact that the subprojects will be generated, planned and implemented by the beneficiary LGUs and communities. Second, the project would support the development of institutional and human resource capacity that would continue project operations after the project is completed. Third, project implementation will involve line agencies which should support the project operations once the project is completed. Risks: There seem to be four critical risks associated with the project. First, the risk of inadequate demand for project funds reflected in lack of an adequate flow of well prepared and bankable projects. This risk is perceived to be low, given the following: (i) the project has been preceded by demand assessment combined with project promotion, through consultations with LGUs, which indicate that there is significant demand for the project; (ii) the project will be supported by technical assistance which will assist in building capacity for project identification, preparation and implementation; and (iii) eligibility criteria together with lending terms have been designed in a flexible manner so as to be used to influence demand, but within prudent limits, during project implementation. Second , the risk of inability of beneficiary groups to repay the loan portion of financing. This risk is minimized through financial appraisal and ability to repay assessment and provide smaller loans. Third, the risk of possible delays in subproject start- up. This risk is perceived to be low, because the momentum in demand will be sustained by proceeding with the processing , financing and implementation of subprojects, ahead of the main project, through utilization of a PHRD grant and retroactive financing from the World Bank loan. Fourth, the risk of disruption of subproject preparation and implementation by the three year term of office of elected LGU officials. This risk is minimized through project support for TA and training for institutional strengthening. The stronger the institutions, the greater the chances for the bureaucracy to resist adverse political influences on project implementation. This combined means that the overall project risk rating is "low": the probability of a successful implementation is good given the GOP's strong commitment, skilled staff, and the clearly defined criteria/rules/procedures/ conditions for subproject - 6 -  implementation at local level. Contact Point: The InfoShop The World Bank 1818 H Street NW Washington DC 20433 Telephone No.: (202) 4585454 Fax No.: (202) 522-1500 Note: This is information on an evolving project. Certain activities and/or components may not necessarily be included in the final project. Processed by the InfoShop week ending March 6, 1998. -7-  ANNEX Environmental The project has been designed to support locally based investments in a range of environmentally desirable activities including water supply, nearshore fisheries, forestry and upland agriculture as well as small scale infrastructure related to these activities. These interventions have been thoroughly tested in earlier projects and their environmental impact has been overwhelmingly positive. Procedures for sub-project preparation and approval have been designed to ensure local consultation and compliance with national and local environmental guidelines and standards. Some investments, particularly road and trail renovation could have environmental impact, but because of the small-scale and disbursed nature of sub-projects to be supported under the project, it is unlikely that significant environmental problems will arise. Support under the project for the Department of Environment and Natural Resources will produce and disseminate technical material on environmentally sensitive planning and implementation. - 8 -