Cambodia - Forest Concession Management and Control Pilot Project

Report No. PID8271 Project Name Cambodia-Forest Concession Management and Control Pilot Project Region East Asia and Pacific Sector Agriculture Project ID KHPE60003 Borrower Royal Government of Cambodia Implementing Agency Ministry of Agriculture, Forestry, and Fisheries Department of Forestry and Wildlife Tel: 855 015 836 904 Fax: 855 023 214 282 Date PID Prepared May 12, 1999 Projected Appraisal November 1, 1999 Projected Board Date December 1, 1999 Background 1. Country and Sector Background. The Bank's objective in Cambodia is to promote sustainable development and to help achieve a rapid reduction in poverty. This is to be accomplished through work on five major themes: supporting macroeconomic stability and economic reforms; supporting rehabilitation of critical infrastructure; improving human resources and reducing poverty; and strengthening institutional capacity. Forest policy issues cut across this spectrum--affecting government revenues and environment, and requiring significant enhancements to institutional capacities in the DFW and other agencies related to forestry (Ministry of Economy and Finance [MEF] for revenues, Ministry of Environment [MOE] for environmental management, Ministry of Commerce [MOC] for coordination with forest industry development). Forest sector development has entered a critical stage in Cambodia. Results of the 1997-98 logging season, which included an estimated 3-4 million cubic meters of illegal logging and a continuation of the pattern of grossly inadequate fiscal returns, demonstrate the continuing need for fundamental reforms. The new Government has, since early 1999, embarked upon a far-reaching program to enforce forest law, shut down illegal operations, and to raise forest royalties. The current system for forest concession management envisions the enforcement of regulatory controls on concessionaires but has yet to be thoroughly implemented. Government has been engaged in an intensive examination of forest policy following presentation of a sector analysis by the World Bank, UNDP and FAO in early 1996. That report, Cambodia: Forest Policy Assessment (Report No. 15777 KH ), identified serious weaknesses in the Government's approach to forestry and recommended a strategy involving  development of an improved regulatory and legal framework, re- examination of concession contracts, reform of log and forest products trade policy and other measures. Government undertook a series of technical studies, now nearing completion, to transform these general recommendations to specific programmatic proposals. Key next steps, to which the new Government has expressed a commitment, include a case-by- case review of contracts (likely leading to termination of defaulting concessions), elimination of a system of "log collection quotas", institution of a revised set of procedures and guidelines for forest concession management planning and operations, a moratorium on approvals of new processing investments, preparation of revised forest sector legislation and other measures. 2. Objectives. The overall project development objectives are to demonstrate the implementation of a comprehensive set of forest management and operational guidelines and control procedures in selected provinces and forest concession areas and to establish an effective forest crime monitoring and prevention capability. The LIL will address whether, and how, an effective regulatory framework can be introduced and enforced in the Cambodian forestry sector. While the legislative structure is being established in relation to the Bank's and IMF macroeconomic and structural adjustment assistance, compliance at the field level requires significant behavioral change by many stakeholders and enrichment of the enforcement capabilities of several key agencies. These have been anticipated to the extent possible on the basis of international experience. Learning in the Cambodian context, however is specifically expected to generate better understanding of: Government Commitment: Uncertainty about Government commitment to bearing the largely political costs of reforming forest policies will only be resolved through continuing interaction. Better understanding is needed of how to strengthen and monitor Government commitment and how commitment translates into results in the forest; Private Sector Support: The newly established Cambodia Timber Industries Association supports the proposed project, but the membership of the Association is acknowledged to include enterprises that are not fully committed to sustainable forest management. Moreover, the full costs of sustainable management could include significant reductions in timber supply and could lead to resistance from some concessionaires unless paired with other suitable policy or regulatory reforms which will need to be identified; Monitoring and Supervision Requirements: While the elements of the reformed regulatory system have been defined in detail, the DFW monitoring and supervision requirements will depend, in large part, on concessionaire response. The rate at which concessionaires absorb the innovations that are proposed and are able to adjust operations is not known. Petty and large scale corruption are characteristic of the Cambodian forestry sector and learning is needed to discover how improved regulations can be made effective in the face of extremely low salaries and difficult working conditions. 3. Description. -2-  The project comprises 4 components: A. Forest Planning and Inventory Component. This component will support preparation, in cooperation with concerned concessionaires, of detailed long and short-term forest management plans. This will include conduct of the necessary field surveys and inventories, assessment of management constraints, biodiversity and social issues, and risks of timber theft. The resulting plans will set harvesting prescriptions and define other conditions for further operations. This component will finance acquisition of satellite imagery, aerial photography, conduct of field inventories, training and technical assistance. B. Concession Regulation and Control Component. This component will strengthen the capacity of the Forest Management Office (FMO) of the DFW and the provincial forestry offices of Kratie and Kampong Thom to oversee concession operations and to ensure that operations are in compliance with plans and conditions established under the Forest Planning and Inventory Component. It will finance acquisition of equipment, vehicles, training facilities and programs, and technical assistance. C. Forest Crime Monitoring and Prevention Component. This component will strengthen the capacity of the DFW's Legal and Litigation Office (LLO) and the Ministry of Environment to systematically and regularly monitor illegal logging and to launch effective prevention activities. It will introduce systematic data collection and analysis techniques, provide equipment and contractual services, training and technical assistance. The component will assist concessionaires, provincial forestry offices, national parks and protected areas managers and affected communities with design and implementation of timber theft prevention plans and will disseminate information on the Government's forest crime prevention program using media, training programs and other mechanisms. D. Project Management and Institutional Strengthening Component. This component will establish a Project Management Unit (PMU) in the DFW. The PMU, which will be developed from the Secretariat of the National Committee for Forest Policy, will provide overall coordination for the project, manage procurement and contracting, and be responsible for project monitoring and evaluation. 4. Financing. Total Project costs are estimated at approximately $5.1 million, of which IDA will finance approximately $4.6 million 5. Implementation. The project will be implemented by the DFW in cooperation with local government and concessions. Under the Forest Planning and Inventory Component DFW will provide concessionaires in the project area with concession planning services (see E.2 below) provided to retain the services of technically qualified professional forest planning experts. These consultants will, under contract and management of the respective concessionaires, design and undertake inventories, analyze data and -3 -  prepare concession management plans in conformity with guidelines and codes of practice already prepared by the DFW. The Concession Regulation and Control Component will be conducted under arrangements similar to existing practice for the supervision of concession operation. With the assistance of project-financed technical assistance, DFW will review long- and short-term management and operational plans submitted by concessionaires, conduct field inventories and other investigations to verify data supplied by the concessions, issue permits and authorizations for concession operations, monitor and report on compliance with plans and permit conditions, and ensure resolution of compliance problems. Unlike current practice salaries and allowances of DFW supervisory staff will be paid by the DFW and not by concessionaires. An inter-ministerial committee including MOE and DFW will be responsible for the Forest Crime Monitoring and Prevention component. The PMU will manage procurement and will coordinate training and technical assistance arrangements. 6. Sustainability. The project is specifically designed to enhance the sustainability of forest concessions in Cambodia. Forestry can be an integral part of Cambodia's overall development. It should contribute in significant and observable ways to resolving the country's critical development challenges: reducing poverty, military demobilization, reducing corruption, improving governance, and protecting the environment. Looking ahead, a sustainably managed forest sector in Cambodia will have: A significantly smaller forest area (on the order of around 4 million ha versus over 7 million today) under industrial concessions; A wood industries sector based on forest exploitation that yields fair and significant returns to the national treasury and where local processing will be driven to internationally competitive standards through wood trade policies that permit log and processed wood exports; A system of parks and protected areas designed to provide effective protection to all of the ecological zones and types and to protect the country's high biodiversity, endemism and endangered species and associations; and A substantially stronger community and farm forestry subsector, receiving quality support services from Government and the private sector. 7. Lessons Learned from Past Operations in the Country/Sector. Past projects in the forestry sector in Cambodia have been limited in scope and removed from actual, specific land and forest management activities. These have produced valuable guidelines and recommendations for the control of field operations, they have only been implemented sporadically and inconsistently. This project has been designed to operationalize a full package of innovations and recommendations covering planning, social issues and technical controls. Experience elsewhere has shown the importance of community invovlement in the development and implementation of management plans, integration of reforms to forestry revenue systems, appropriate land allocation and intersectoral oversight. Local ownership of projects has been shown to be critical and detailed sector assessments have been - 4 -  completed to build a concensus with Government and the private sector. In related sectors in Cambodia, especially agriculture and environment, the limited planning and operational capacity of government has been recognized, as has the need for clear lines of project management and control. 8. Poverty Category. 9. Environmental Aspects. The Project's Environmental Assessment Category is 'B'. Concession operations present significant impacts on the environment. The proposed regulatory regime to be piloted under the project seeks to anticipate and manage these impacts by requiring attention throughout the planning and operational cycle. The system is intended to ensure that at the large scale planning level particularly fragile areas are excluded from concession operations and that harvesting operations are conducted to minimize adverse impacts at the site or "coup" level. The proposed system is to synchronized with the national environmental impact assessment requirements. 10. Program Objective Categories. Environmentally Sustainable Development 11. Contact Points: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Wlliam Magrath Task Manager (202)458-1911 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the Infoshop week ending October 22, 1999. - 5 -