Mozambique - Coastal and Marine Biodiversity Management Project

Document of The World Bank Report No: 19600-MOZ PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT FROM THE INTERNATIONAL DEVELOPMENT ASSOCIATION IN THE AMOUNT OF SDR 4.2 MILLION (US$5.6 MILLION EQUIVALENT) AND PROPOSED GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND IN THE AMOUNT OF US$4.1 MILLION EQUIVALENT TO THE REPUBLIC OF MOZAMBIQUE FORA COASTAL AND MARINE BIODIVERSITY MANAGEMENT PROJECT APRIL 28, 2000 Environment Group Country Department 2 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective April 15, 2000) Currency Unit = Metical MT 1.00 = US$0.0000636 US$1.00 = MT 15717 FISCAL YEAR January 1 - December 31 Vice President: Callisto Madavo Country Director: Philippe H. Le Houerou, Acting Sector Director: Hans Binswanger Sector Manager: Charlotte Bingham Task Team Leader: Indumathie Hewawasam  ABBREVIATIONS AND ACRONYMS ASRDP Agricultural Services Rehabilitation and Development Project CAS Country Assistance Strategy CBD Convention on Biological Diversity CDF Community Development Fund CMBMP Coastal and Marine Biodiversity Management Project COP Conference of Parties CPI Investment Promotion Centre CZMP National Coastal Zone Management Program DAF Department of Administration and Finance (MICOA) DANIDA Danish International Development Assistance DINAGECA National Directorate of Geography and Cadastre DINATUR National Directorate of Tourism DINGA National Directorate for Environmental Management DNFFB National Directorate of Forestry and Wildlife DPICTUR Provincial Tourism Directorate EIA Environmental Impact Assessment EU European Union GEF Global Environmental Facility IBRD International Bank for Reconstruction and Development ICZM Integrated Coastal Zone Management IDA International Development Assistance IDPPE Small-scale Fisheries Development Institute lIP Fisheries Research Institute INIA National Institute of Agricultural Research IUCN International Union for Conservation of Nature LCC Local Coordination Committee MADER Ministry for Agriculture and Rural Development MICOA Ministry for Coordination of Environmental Affairs MOU Memorandum of Understanding MSc Masters of Science NEMP National Environment Management Plan NGO Non-governmental organization NIITC National Inter-institutional Technical Committee NORAD Norwegian International Development Assistance NSC National Steering Committee PCD Project Concept Document PDF Project Development Facility Block B Grant PIP Project Implementation Plan PMG Project Management Group PNFFB National Program for Forestry and Wildlife PODE Mozambique Enterprise Development Project PROAGRI Agricultural Sector Public Expenditure Program PSIA Program Support Implementation Agreement ROCS III Roads and Coastal Shipping Project (III) ROM Republic of Mozambique SAFMAR Maritime Administration SAP Strategic Action Plan SDP Strategic Spatial Development Plan SEACAM Secretariat for Eastern Africa Coastal Area Management SIDA Swedish International Development Agency SPPF Provincial Service for Physical Planning SPPFB Provincial Forestry and Wildlife Service TDA Transboundary Diagnostic Analysis  UEM University of Eduardo Mondlane UJNDP United Nations Development Program UJNEP United Nations Environment Program WB World Bank  Mozambique Coastal and Marine Biodiversity Management Project CONTENTS A: Project Development Objective ............................................................2 1. Background, project development objective and key performance indicators .........2 B: Strategic Context ............................................................3 1 (a). Sector-related Country Assistance Strategy (CAS) goal supported by the Project (see Annex 1) ............................................................3 l(b). GEF Operational Strategy/program objective addressed by the Project ..............3 2. Main sector issues and Government strategy ............................................................4 3. Sector issues to be addressed by the Project and strategic choices ...........................6 C: Project Description Summary .............................................................7 1. Project components ............................................................7 2. Key policy and institutional reforms supported by the Project .................................7 3. Benefits and target population ............................................................8 4. Institutional and implementation arrangements ........................................................9 D: Project Rationale ..1......................................................... 1 1. Project alternatives considered and reasons for rejection: ...................................... 11 2. Major related projects financed by the Bank and/or other development agencies .12 3. Lessons learned and reflected in the Project design ................................................ 12 4. Indications of borrower commitment and ownership ............................................. 14 5. Value added of Bank and Global support in this Project: ....................................... 15 E: Summary Project Analysis ............................................................ 15 1. Economic .......................................... .........5....... 2. Financial ........................................................... 15 3. Technical ........................................................... 16 4. Institutional ............................................................ 16 5. Social: ........................................................... 17 6. Environmental assessment ............................................................ 17 7. Participatory approach ........................................................... 18 F: Sustainability and Risks ........................................................... 19 1. Sustainability ........................................................... 19 2. Critical risks ........................................................... 21 3. Possible controversial aspects ............................................................ 22 G: Main Loan Conditions ........................................................... 22 1. Effectiveness conditions ........................................................... 22 3. Other ............................................................ 23 H. Readiness for Implementation ............................................................. 23 I. Compliance with Bank Policies ............................................................. 23 Annex 1: Project Design Summary ............................................................. 24 Annex 2: Detailed Project Description ............................................................. 28 Annex 3: Estimated Project Costs ............................................................. 34 Annex 4a: Economic Analysis ............................................................. 35  Annex 4b: Incremental Cost Analysis ................................................... 37 Annex 5: Financial Summary ................................................... 45 Investment and Recurrent Expenditures ........................................... 45 Annex 6: Procurement and Disbursement Arrangements ........................................ 47 A. Financial Management - Introduction ................................................... 47 B. Institutional Strengthening ................................................... 50 D. Procurement ................................................... 52 E. Disbursement ................................................... 55 Table A: Project Costs by Procurement Arrangements . ......................................... 56 Table Al: Consultant Selection Arrangements (optional) . ..................................... 57 Table B: Thresholds for Procurement Methods and Prior Review .. 58 Table C: Allocation of Credit/Grant Proceeds .................................... 59 Table DI: GEF Yearly Estimated Disbursements ................................. 60 Table D2: IDA Yearly Estimated Disbursements ................................................... 61 Annex 7: Project Processing Budget and Schedule ................................................... 62 Annex 8: Documents in the Project File ................................................... 63 Annex 9: Statement of Loans and Credits ................................................... 64 Annex 10: Country at a Glance ................................................... 65 Annex Ila: Technical Review of Project Proposal ................................................... 67 Annex H1b: Response to STAP Reviewer's Comments ............................................. 71 Annex 12: Biodiversity Matrix ................................................... 74 Map IBRD 30445  Mozambique Coastal and Marine Biodiversity Management Project Project Appraisal Document Africa Region Country Department 2 Date: April 28, 2000 Task Team Leader: Indu Hewawasam Country Director: Michael N. Sarris, Acting Sector Manager: Charlotte Bingham Project ID: P070305 Sector: Environment Program Objective Category: Environmentally Sustainable Development GEF Supplement ID: MZ-GE-31959 Focal Area: Lending Instrument: SIL Program of Targeted Intervention: [ ] Yes [X] No Project Financing Data [] Loan [X] Credit [] Guarantee [X] Grant [] Other [Specify] For Loans/Credits/Others: Amount (US$m/SDRm): US$5.6 IDA Credit US$m 4.1 GEF grant Proposed terms: [ ] Multicurrency [X] Single currency, specify US$ Grace period (years): 10 [X] Standard Variable [] Fixed [ LIBOR-based Years to maturity: 40 Commitment fee: 0.5% less any waiver Service charge: 0.75% Financing plan (US$m): Source Local Foreign Total Government 0.8 - 0.8 IDA 3.8 1.8 5.6 GEF 2.4 1.7 4.1 Total 7.0 3.5 10.6a Borrower: Republic of Mozambique Recipient: Republic of Mozambique Responsible agency: Ministry for Coordination of Environmental Affairs Estimated IDA disbursements (FYJUS$Ma): 2000 2001 2002 2003 2004 IDA Annual 0.97 2.06 1.62 0.84 0.18 Cumulative 0.97 3.03 4.65 5.49 5.67 ROM Annual 0.19 0.19 0.19 0.19 0.08 Cumulative 0.19 0.38 0.57 0.76 0.84 Estimated GEF disbursements (FY/US$Ma): 2000 2001 2002 2003 2004 Annual 1.74 0.49 0.86 0.74 0.28 Cumulative 1.74 2.24 3.10 3.85 4.10 For Guarantees: [ I Partial credit [] Partial risk Project implementation period: August 18, 2000 - December 31, 2004 Expected Effectiveness date: August 18, 2000 Expected closing date: June 30, 2005 a Includes contingencies OSD PAD Form: July 30,1997  Page 2 A: Project Development Objective 1. Background, project development objective and key performance indicators (see Annex 1) Mozambique's coastal zone is unique in the East African Marine Region in terms of the quality, diversity and species richness of its habitats. Apart from Madagascar, Mozambique is the only country in the East African Marine Region with major brackish coastal barrier lagoons. These serve as critical habitat for many coastal and marine species in the Western Indian Ocean. It also supports the most extensive mangrove forests and sea grass beds as well as the best coral assemblages along the mainland of the East African Marine Region. Most of these areas are still in good condition. In addition, Mozambique's coastal waters contain the largest remaining populations of the threatened dugong in the Western Indian Ocean, and it is the only country in the region where all five species of threatened and endangered sea turtles occur and breed. These coastal habitats are critical for the survival of commercially valuable and environmentally unique species. Largely as a consequence of the past two decades of war and political instability which severely restricted most economic activities in the coastal zone, the coastal ecosystems remain in relatively pristine condition. However, establishment of what appears to be lasting peace and the accompanying rapid transition to a dynamic economy has led to equally rapid development. While the biodiversity and the natural beauty of the pristine coast combine for a high potential for supporting sustainable coastal development, this potential is being undermined by inadequate capacity to manage the coastal resources of the country. Although development pressure in Mozambique is increasing rapidly, there is an opportunity to evolve institutional structures, technical capability, and a philosophy of natural resource management that will eventually lead to environmentally and socially sustainable development. The proposed Coastal and Marine Biodiversity Management Project (CMBMP) is a key element of the Republic of Mozambique's (ROM) overarching National Coastal Zone Management Program (CZMP), and in particular its strategy for coastal and marine biodiversity protection and for sustainable use of natural resources. The Project will pilot an integrated approach to achieving sustainable development focusing on two project areas of northern Mozambique. The first area comprises the two northern most coastal districts in the province of Cabo Delgado: Mocimboa da Praia and Palma, which borders Tanzania, and includes a portion of the Quirimbas archipelago. This pilot area comprises approximately 9,500 sq. km, of which 7,000 sq. km, is terrestrial and 2,500 sq. km is marine. The second area comprises the contiguous districts of Nacala-Porto and Mossuril, in the province of Nampula, and encompasses an area of approximately 4,700 sq. km of which 3,700 sq. km is terrestrial and 1000 sq. km is marine. Both these pilot project areas include sites recognized as having globally significant biodiversity, including corals, mangroves, sea grass beds, all five species of threatened and endangered turtles and dugongs. They are also characterized by strong local government commitment to integrating biodiversity protection into local economic development. The development objective of the CMBMP (as one in a series of steps towards developing an integrated coastal zone management process for the entire country) is to test and refine an approach to achieve sustainable economic development of coastal zone resources. This is to be accomplished through a strategic development planning process that balances ecological, social and physical values, with the varying development interests in the coastal zone. Progress toward this objective would be measured by: (a) adoption of strategic spatial development plans by the  Page 3 national, provincial and district authorities in the pilot areas; (b) improved institutional capacity for integrated coastal zone management at provincial and district level; (c) devolution of coastal zone planning to provincial level; and (d) different coastal zone management models tested, including community management and private sector concessions. The global objective of the CMBMP is to ensure the effective protection of globally significant coastal and marine habitats and species. Achievement of this objective is fully integrated into the overall strategic development planning approach being piloted by this Project. Its success will be measured by: (a) establishment of effective protection of key marine and terrestrial conservation areas; and (b) co-management in buffer zones of marine and terrestrial conservation areas consistent with conservation objectives. B: Strategic Context 1(a). Sector-related Country Assistance Strategy (CAS) goal supported by the Project (see Annex 1) Current CAS document number: 17180-MOZ Date of discussion: December 18, 1997 Draft CAS document number: 20327-MOZ Date of discussion: June 1, 2000 Both the current and proposed CASs for Mozambique focus on poverty reduction through sustainable economic growth. They recognize that the prospects for sustainable, poverty-reducing economic growth are closely tied to rapid, broad-based growth, centered on rural development, and coupled with sound management of the natural resource base. This pilot project will contribute to the strategic pillars of these CASs through its focus on: (i) private sector-led growth; (ii) improving governance and empowerment; (iii) increasing human capabilities; and (iv) strengthening development partnerships. In particular, the approach being piloted aims to establish an enabling franework: (i) for minimizing potential environmental and social risks for private enterprise development; (ii) to promote environmentally and socially acceptable development of coastal and marine resources, including the identification of alternative income-generating activities for the rural population; and (iii) to promote stakeholder participation in the development planning process. In addition, the project aims to develop human resource skills and appropriate mechanisms to: (i) enable sound decision-making; (ii) facilitate effective devolution of power and deconcentration of skilled staff from the national to the provincial and local levels; (iii) empower and enable rural communities to negotiate their rights with private sector entrepreneurs; and (iv) establish realistic and workable partnerships between different stakeholders for co-management of coastal and marine resources. l(b). GEF Operational Strategy/program objective addressed by the Project Mozambique ratified the Convention on Biological Diversity in August 1995. The proposed Project fits well with the GEF Biodiversity Operational Strategy and Operational Program 2 on Coastal and Marine Ecosystems. It is in line with guidance from the Conference of the Parties to the Convention on Biological Diversity (COP), which stresses in situ conservation activities of coastal and marine ecosystems. It specifically responds to the Jakarta Mandate endorsed at COP2 by supporting conservation and sustainable use of vulnerable marine habitats and species. The conservation and sustainable use of coastal and marine ecosystems have been identified as national priorities under the national biodiversity strategy and action plan. The Project responds to guidance from COP 3 and COP4 by:  Page 4 * taking an ecosystem approach to conservation through better integration of biodiversity needs into spatial development planning; * involving local communities, including building on local knowledge, strengthening community management for sustainable use and promoting economic incentives such as alternative livelihood opportunities; and * strengthening local and institutional capacity to address environmental issues through intersectoral and transboundary cooperation. The Project seeks to mainstream biodiversity conservation and sustainable use into development planning through the spatial development planning process and the preparation of best practice tender documents for private sector development. It is expected that if this pilot model is shown to be successful the model will be adopted as regular practice by local governments and replicated elsewhere in the Mozambique coastal zone. The key conservation sites which will receive GEF support under the program have been identified as priority sites of global importance in the IUCN Review "A Global Representative System of Marine Protected Areas." The Project will support national efforts which contribute to regional programs in the Western Indian Ocean and promote regional collaboration and exchange of experience. Through providing support for better protection and monitoring of migratory and threatened marine species such as turtles and dugong it will contribute to the objectives of the Bonn Convention. 2. Main sector issues and Government strategy Sector issues: Mozambique's economy is largely natural resource based. These resources are the principal current source of present income and of expected future growth. After a long period of economic stagnation and a dramatic decline of industrial capacity, the Republic of Mozambique is under strong pressure to rapidly deliver income generating activities. The current rapid increase of investor interest in most major sectors including agriculture, tourism, mining, energy and industry, may lead to rapid degradation of the natural resource base unless this development is appropriately managed. Ensuring sustainable utilization of natural resources is therefore a serious and urgent challenge to the country. Environmental Issues: Approximately half of the population of Mozambique is concentrated in the urban centers and rural areas of the coastal districts, largely due to migration during the country's civil war and to the economic opportunities. In urban areas, the resultant pressures on infrastructure and services range from inadequate waste disposal, sanitation and sewage systems to lack of access to safe water. While in rural areas, slash and burn agriculture, devastation of dune forest and overexploitation of fisheries are the more serious issues. Dams constructed for hydropower and irrigated agriculture create major saline intrusions in estuarine areas; they also contribute to coast line regression and the destruction of wildlife habitat. Mozambique's downstream position makes it vulnerable to the pollution-generating activities of its neighbors. The rational utilization of river basins is therefore an issue which requires regional cooperation. While Mozambique is relatively well endowed with forest resources, population concentrations along the coast, around cities and along transport corridors have led to serious deforestation and the resultant environmental impacts. Environmental problems are currently limited in the industry and mining sectors, nevertheless the increasing interest in mining concessions calls for a cautionary approach and a sound and transparent institutional and regulatory framework. The rich and diverse coastal areas and resources present a significant opportunity for tourism development and the generation of substantial revenues. These resources are now being threatened by poorly planned  Page 5 developments which do not sufficiently incorporate community and equity opportunities and heighten the risk of local level conflict. An Environmental Framework Law and a supporting regulatory framework have been established. Government capacity to enforce regulations however, is weak or non-existent. Investments in agriculture, tourism, mining, energy and industry are therefore subject to little management or direction to ensure environmental or social sustainability. At the provincial levels the situation is particularly acute. A clear and transparent regulatory framework with well defined processes for negotiation and agreements is critical for attracting and maintaining private investment. At the present time in Mozambique, poorly defined agreements over the use and management of natural resources have led to delayed investments and ill feeling between investors and local communities. Lack of clear investment procedures and weak enforcement capacity are serious constraints to attracting private investment. Issues specific to the Coastal Zone. Key issues in the coastal zone include: unmanaged coastal development, in particular, illegal tourism operations; unclear user rights; overexploitation of fisheries; loss of supporting coastal ecosystems such as mangroves; lack of community involvement in decision-making and management; limited investment in alternative income earning opportunities for local communities; breakdown of local resource management systems; pressure caused by refugees and resettling populations; weak institutional and limited financial capacity to manage coastal resources; unclear legal framework government certain coastal and marine resources; and overlaps and gaps in institutional mandates and jurisdictions exacerbated by a lack of coordination. The situation is exacerbated by the inadequacy of the current protected area system which, considering the diversity of habitats and the economic importance of the littoral zone, does little to protect and ensure sustainability of these valuable resources. Government Strategy: The need for integrated coastal zone management was one of the top five priority concerns identified in the National Environmental Management Program (1994). This has now led to the development of a draft National Coastal Zone Management Policy and Program (CZMP). The CZMP aims to address coastal zone issues cross-sectorally in an integrated and coordinated manner. The policy focuses on ensuring the sustainable use and conservation of biological and marine resources and in parallel allows for an equitable distribution of the benefits from their use and management among local communities, governmental agencies and development agents. The policy aims to optimize the benefits provided by the coastal zone to all stakeholders and minimize the conflicts between alternative uses. Specifically, the program aims to (i) strengthen coastal zone management capacity and coordination within and across sectors, at national and local levels; and (ii) protect and maintain the productivity and biological diversity of coastal and marine ecosystems. Its approach emphasizes the participation of local people in the planning and management of coastal resources. This program has been designed around four major themes: (i) coastal landuse and development planning; (ii) resource management; (iii) research, training and environmental awareness; and (iv) institutional and legal aspects, including intersectoral coordination. Other programs with complementary objectives include: * National Program for Forestry and Wildlife (PNFFB), which outlines the social, ecological, and economic objectives for terrestrial and aquatic biodiversity conservation, including: (i) improved protection, management and sustainable use of terrestrial and marine conservation areas; (ii) increased community participation in terrestrial and marine resource management and conservation; and (iii) protection and conservation of globally important terrestrial and marine species. This program forms a core component of the multi-donor funded Agriculture Sector Public Expenditure Program (PROAGRI). CZMP will implement part of the coastal and  Page 6 marine strategy, focusing on northern Mozambique. It is led by the National Directorate for Forestry and Wildlife (DNFFB) which has principal responsibility for implementing biodiversity conservation in Mozambique; and National Biodiversity Strategy and Action Plan, prepared and now being implemented by relevant responsible institutions in collaboration with the Ministry for Coordination of Environmental Affairs (MICOA). The strategic goal is "the conservation of biological diversity and the maintenance of the ecological systems and processes taking into account the need for sustainable development and a fair and equitable distribution of the benefits arising from the use of biological diversity." 3. Sector issues to be addressed by the Project and strategic choices The Project, in keeping with the CZMP goals, will test an approach that marries biodiversity conservation with social and economic development in two pilot project areas in northern Mozambique. Specifically, it will: * test and refine mechanisms for integrating economic development aspirations of provincial government and local communities with the requirements of biodiversity conservation at the provincial and district level. This will be accomplished through development of a strategic spatial development planning process; - test institutional arrangements for devolving coastal and marine resource planning and management to the provincial and local levels; * pilot mechanisms to bring selected globally significant ecosystems and species under effective protection, including developing and implementing participatory management plans, and piloting mechanisms for their sustainable financing; * develop participatory processes for development and implementation of local natural resource management plans outside official conservation areas, including capacity building, the identification of viable and acceptable alternatives to current detrimental practices, and testing mechanisms for establishing partnerships (for example public-private sector) for management and sustainable use of these resources; * increase knowledge and capacity for management of globally significant ecosystems and species, particularly through gathering of baseline data and establishment of a monitoring system to assess the ecological and social sustainability of different natural resource management and conservation strategies; * heighten public awareness and understanding of biodiversity conservation and sustainable use concerns, particularly among decision-makers and resource users, including understanding of current threats, possible solutions and current and future social, economic and development options; and * assist clarification of the policy, institutional and legal framework for coastal and marine biodiversity conservation and management, including furthering definition of respective roles and responsibilities of government, NGOs, communities and private sector stakeholders and definition of conservation classification system (for protected areas and species). The Project will initially focus on four districts in northern Mozambique. The criteria for selection of these sites emphasized: the presence of globally significant biodiversity and rich cultural heritage values; high economic development potential, provincial and district government commitment to the goals of environmentally and socially sustainable economic development; and a local population interested in participating in the proposed development process. The Project will improve the ability of the provincial and local governments to make strategic choices concerning integrated coastal zone management. The experience gained through its  Page 7 implementation should provide a framework for other provinces and districts to follow. The "demonstration effect" should encourage the use of social, ecological, and economic planning tools within the spatial development-planning context to arrive at sustainable district development plans. This would include choices such as the extent of private sector participation in conservation management, the role of communities, and the most effective training mechanisms. It is anticipated that the most important means of disseminating lessons learned during this pilot phase will be through adoption of the process, in an improved and expanded form, under the long-term CZMP. C: Project Description Summary 1. Project components The Project proposes a multi-pronged approach designed to support sustainable development. It comprises five mutually reinforcing components designed to develop and pilot mechanisms for: (a) strategic spatial planning that fully integrates conservation with regional development: (b) establishment and strengthened protection of key terrestrial and marine conservation areas and initiation of conservation-oriented community activities in and around these areas; (c) establishing best practice for environmentally and biodiversity-friendly economic development; (d) capacity building and public awareness raising of key government and non-government stakeholders responsible for biodiversity protection; and (e) institutional arrangements for devolving coastal and marine resource planning to the provincial and local levels. This pilot Project represents part of a long-term national coastal zone program that is attracting multi-donor funding. If successful, the activities piloted under this Project would subsequently be adopted and replicated more broadly through the entire coastal zone. Indicative % of IDA % of IDA GEF % of Cost Total Financing Financing Financing GEF Components (US$M) (US$M) (US$M) Financing Spatial Development Plan 1.7 18 1.5 88 0.2 12 Biodiversity Conservation and Sustainable 3.6 37 0.2 5 3.4 95 Community Development Sustainable Private Sector Development 1.3 13 1.2 92 0.1 8 Training and Public Awareness 0.7 7 0.7 100 Project Management and M&E 2.4 25 2.0 83 0.4 17 Total Financing 9.7a 100 5.6 57 4.1" 43 'Excludes US$0.84M ROM contribution in kind b Includes US$0.35M PDF Grant 2. Key policy and institutional reforms supported by the Project The Project is designed to develop and test mechanisms to support implementation of the national coastal zone policy and program. Specifically it will test processes and procedures for deconcentrating and devolving strategic planning, decision-making and resource management to the provincial and local levels. The experience gained through this pilot Project will be used to inform policy and institutional reforms to be implemented more broadly, particularly. through the application of the National Forestry and Wildlife policy and program, National Land Policy, law and regulations and the National Tourism Policy and Strategy.  Page 8 3. Benefits and target population The benefits of this pilot Project will accrue at global, regional, national and local levels. Global and regional benefits Mozambique's coastal and marine ecosystems are globally and regionally significant. The Project will contribute to: * the sustainable conservation of globally significant faunal and floral species and assemblages within and outside formally protected areas; * significant expansion of knowledge regarding distribution, life histories and conservation status of important plants and animals and of local indigenous knowledge; * the improved protection of marine turtles and dugongs and their supporting habitats, complementing similar initiatives elsewhere in the region (e.g., IUCN/UJNDP's Conservation of Western Indian Ocean Sea Turtles project); * practical models for guiding participatory biodiversity management elsewhere in Mozambique and the region; * piloting of a sustainable development model that fully integrates social and conservation considerations into the traditional economic development paradigm; and * improved regional collaboration, particularly as relates to transboundary biodiversity conservation issues. National and local benefits The conservation and sustainable use of coastal and marine biodiversity and related ecosystems, and the equitable sharing of benefits from their use, are fundamental to socioeconomic development and poverty alleviation both locally and nationally. The Project will help: * reduce the loss and degradation of Mozambique' s coastal and marine ecosystems by building national and particularly local capacity to, and engaging local resource users in the management of, these resources and by increasing the area under protection; a increase the direct and indirect economic and financial benefits derived from sustainable use of coastal and marine resources, including fishing, tourism and protection against flooding and erosion; * provide alternative income generating opportunities, particularly for communities; * develop practical models in which local communities can participate in the design and implementation of management activities; * clarify and prioritize measures to improve the policy and institutional framework for resource management in general and coastal and marine biodiversity in particular, to be adopted and implemented during the second phase program; and * test mechanisms for establishing public-private and other partnerships for management and sustainable use of coastal and marine resources, given foreign private sector interest in tourism investments. Target population: The anticipated target population includes: residents of the four pilot districts: Mocimboa da Praia, Palma, Nacala-Porto, and Mossuril, particularly local communities in the vicinity of protected areas or key habitats of targeted species and local resource users such as fishermen; selected government resource managers and decision-makers at all levels; the private sector; and NGOs.  Page 9 4. Institutional and implementation arrangements Implementation period: 4.5 years. Implementation Project Institutional Coordination and Implementation Arrangements: The overall coordination and management of the CMBMP will be the responsibility of MICOA. The CZM project management team will be headed by a project manager who will be supported by a full time consultant project advisor, a finance and procurement administrator and an administrative secretary. At the provincial/district level, coordination will be facilitated through local coordination units formed for this purpose. These local coordination units will consist of representatives from technical line ministries, district government, and other local leaders. Two field coordinators, one for each province, will be appointed to work closely with and support the local coordination units and field-based teams from relevant agencies providing technical support. Coordination within and between the various technical teams working on the Project components will also be strengthened through regular assistance provided by internationally and regionally contracted advisors (including planning, social/participation, marine and terrestrial conservation, project management experts). A major aim of this Project is to devolve responsibility for planning and implementation of environmentally and socially sustainable development to the provincial and district governments through adoption of district-level spatial development plans. Successful spatial development planning is, by its nature, a local process. Institutional weaknesses at the local level requires that technical design of key components initially be supported through relevant central government agencies, including fNIA, DINATUR and DNFFB. The provincial and local representatives of these organizations will play a principal technical role in project execution. As the value of spatial development planning is proven, the responsibilities of these local technical organizations will increase, requiring deconcentration of staff from Maputo to the regions. As there are multiple players involved in coastal zone management, the Project will specifically support costs of coordination meetings and consultative workshops to foster information exchange and collaboration between the different agencies involved. This is necessary for coordinated coastal zone planning and development. The lessons learned from pilot projects will feed back to the National Steering Committee (NSC) and to the Govemment's Sustainable Development Council once created, for adoption at the national policy level. Ministerial oversight of the CMBMP will be provided by the NSC, which includes the provincial governors. Technical guidance will be provided by the National Inter-institutional Technical Committee, which includes technical line ministries, the staff of agencies that are represented at the provincial/local levels. At the local level, implementation of the program will be coordinated via analogous provincial/district inter-institutional groups, with the additional representation of other local authorities. Funding Arrangements: External funding will be channeled to MICOA, as the responsible agency for the Project. MICOA will channel funds based upon agreed work plans and budgets to other key implementing agencies. MICOA will be responsible for gathering information from all participating agencies, be responsible for preparation of project progress reports, operating the Special Accounts, and undertake all procurement actions.  Page 10 Financial Management Funding for project activities will be allocated to MICOA's budget from two sources: (i) IDA and (ii) from the GEF. Funds will be channeled to the implementing agencies in Maputo to undertake the prescribed activities, to MICOA's provincial offices for provincial-level activities in the two provinces in which project activities will be undertaken, and to District Administration offices in each of the two pilot districts. The financial responsibility rests with the Finance and Administration Department of MICOA. Due to the scale of activities envisaged under CMBMP resulting in a significantly larger work program and budget, a CMBMP Finance and Procurement Section (CMBMP/FPS) will be established in.MICOA, and will be responsible for ensuring that financial management and reporting for CMBMP is carried out in a manner acceptable to all parties. The CMBMP/FPS will report directly to the Finance and Administration Department of MICOA. This section will be supported by an external financial management systems consultancy and training. At provincial level, two consultants will be engaged by the Project, one in each provincial MICOA office, to assist MICOA's provincial representative manage and account for project funds for provincial level activities. These two consultants will oversee the disbursement of funds to the two district administration offices for the Project's activities in the pilot sites, and will supervise two bookkeepers at these offices. The bookkeepers will be existing district administration staff who will take on this additional responsibility. Memoranda of understanding between MICOA and the other implementing agencies will include the description of a process for preparing a program of work and budget, and for accounting and reporting on the application of project funds. Annual workplans and budgets would be prepared and agreed with the Project Management Group before being submitted to the National Steering Committee for approval. Detailed workplans and budgets would be prepared quarterly, reviewed by the Provincial Steering Committee and form the basis of advances to implementing agencies. The financial management system for the CMBMP will be developed in two phases. In Phase I, a short-term consultant will be retained to prepare and advise on the (i) Project's Financial Procurement Procedures Manual; (ii) format and content of the Project's quarterly and annual financial statements, including accounting policies and standards; (iii) format and content of the Project's Cash Flow Forecast; and (iv) format and content of the monthly Status of Funds report. This consultant will also put in place the Project's Financial Management System (FMS), including manual and computerized accounting systems. Phase I will be completed by Effectiveness. Phase II will build on the system and manual prepared during Phase I, refining the procedures to permit Project Management Reporting (PMR) as described in the LACI Handbook, September '98. For the short to medium-term, existing disbursement procedures as outlined in the World Bank's Disbursement Handbook will be followed. These include Direct Payment, Reimbursement and Special Commitment. All Project accounts and financial management functions will be subject to the normal MICOA internal audit procedures. In addition, a relevantly qualified, experienced and independent Auditor will be appointed to audit the expenditures financed under the IDA Credit and GEF Grant (including the PDF Grant) under terms of reference acceptable to the Bank. These external auditors will be appointed by Project Effectiveness. Audited accounts and statements will be submitted to the Bank within six (6) months following the end of each Mozambican fiscal year.  Page I 1 Monitoring and Evaluation (M&E): Monitoring and evaluation of progress and impact will be through a dedicated and detailed monitoring plan. The monitoring plan will specify the key indicators/data needs and sources, who will collect the data and how frequently. MICOA will contract independent consultants to refine and finalize the M&E plan. Consultants will also be responsible for evaluating and consolidating monitoring data into semi-annual monitoring reports. These reports will form the basis of the semi-annual Project review meetings. It is expected that the Bank supervision missions will correspond with these semi-annual review meetings. In addition, the consultants will conduct independent mid-term and end-term beneficiary assessments within the pilot areas. These will serve as the basis for mid-term and completion reviews, respectively. The M&E program can only be prepared once all significant areas requiring conservation actions and the relevant social issues have been identified. This information is expected to be available one year after Project Effectiveness. D: Project Rationale 1. Project alternatives considered and reasons for rejection: Scope of Intervention: The Project was originally planned to be principally focused on the conservation of biodiversity in protected coastal zone areas, the establishment of buffer zones and the preparation and implementation of management plans. However, this approach was subsequently considered to be too narrow in scope as it did not address the more fundamental question of how to best integrate and prioritize terrestrial and marine biodiversity and conservation values with the economic development aspirations of the local communities and other interests within the coastal zone. Consequently, the Project design was modified to this more holistic concept and will pilot the use of this strategic development planning process. Level of Intervention: The sheer length of Mozambique's coastline means that it would be impractical to attempt to manage it from the capital. The project team therefore decided the priority and focus of this pilot Project be on learning how to increase capacity for coastal zone management at the provincial and district levels and create a working example of sustainable economic development that could be used as the basis for national policy. Location of Intervention: Altemative areas assessed for targeting interventions included coastal areas in the southern part of the country. These sites were considered inappropriate for interventions under this pilot project mainly due to a combination of the: (a) absence of globally as well as nationally significant biodiversity; (b) presence and involvement of other donors; and (c) significantly weak potential for demonstrating early successes that could be replicated along the rest of the coastline. Since the main Project objective is to create a successful economic development model that institutionalizes the need to protect biodiversity, sustainably "use" (including non-use) natural resources, and integrate local communities in economic development planning, the pilot areas selected are in Cabo Delgado and Nampula Provinces. These areas are in the far north of the country, and are areas in which the Project can be implemented without undue pressure from existing developments and development proposals. These selected priority sites have also been identified based on criteria that include globally and nationally important biodiversity values, including: * Nacala-Mossuril (seagrass beds, turtle nesting beaches, fringing coral reefs, nesting seabirds); and * Northern Quirimbas Archipelago (coral reefs, seagrass beds, sea turtles nesting beaches, tern colony).  Page 12 Within the pilot areas, priority will be given to areas identified to be of global biodiversity significance and communities in the vicinity of these areas. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned) Sector issue Project Latest Supervision (Form 590) Ratings (Bank-financed projects only) Implementation Development Progress (IP) Objective (DO) Bank-financed Biodiversity management Transfrontier Conservation Areas S S Project Natural resource management PROAGRI N/A N/A Rural Rehabilitation (Credit 2479-MOZ) S S ASRDP (Credit 2337-MOZ) National Water Resource Management I S S (Credit 39015-MOZ) S S Rural Infrastructure ROCS III (FY0 1.) . N/A N/A WB/SIDA SEACAM capacity building program N/A N/A Other development agencies Netherlands/NORAD/UNDP National Environmental Management Program Implementation Strategy (NEMP-PSIA) NORAD/IUCN Macrodiagnostic of coastal zone DANIDA Coastal Zone Management Project Frontier Mozambique/DANIDA Quirimbas Archipelago Marine Research Program EU Bazaruto Multiple Use Resource Management Project UNEP/UNDP Environmental Law and Institutions IJNDP Network Creation and Integrated Planning on Natural Resource Management (COMRES) NORAD Mecufi Natural Resource Management Project IFAD/OPEC/ROM Angoche/Moma-Nampula Artisanal Fisheries Project IUCN/UNDP Conservation of Western Indian Ocean Sea Turtle Populations UNEP/GEF Preparation of a TDA and SAP for the Western Indian Ocean marine and coastal environment (under prep.) IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory), N/A (Not Applicable) 3. Lessons learned and reflected in the Project design Drawing on the experience of the Bank's Mozambique portfolio, in particular the Transfrontier Conservation Areas project, as well as the Bankwide biodiversity and coastal zone management portfolio and regional and local natural resources management initiatives, the following key needs for  Page 13 successful project design and implementation have been identified and incorporated into project preparation and the proposed project design: * Government commitment to the Project and ownership of its underlying principles and rationale has been ensured through an open and supportive dialogue with government; * Inter-agency coordination will be promoted by linking Project implementation to existing institutions: the Sustainable Development Council (being created), NIITC and provincial level local coordination committees, and by forging agreements, and where necessary policies and legislation, that establish clear definitions of roles and responsibilities of the involved institutions; * Early consultation with key stakeholders, including a clearly defined participatory process, helped outline the roles and responsibilities of different players (government, local communities, academia, private sector, NGOs); * Human and institutional capacity constraints in government, local communities and NGOs were, to some extent, addressed during Project preparation through collaborative partnerships with research institutions, NGOs and other donors. A strong emphasis on both short- and long-term capacity building at both the national and local levels is included in the Project itself. The purpose is to create a critical mass of scientific and management expertise, which should allow future, more ambitious, natural resource management activities to be implemented in the coastal zone of Mozambique. * Legal andpolicyframework formalizing the government's commitment to devolve responsibility for management of natural resources to local governments and resource users and the development of incentives to complement command and control mechanisms will be supported by the Project. - linkages between biodiversity and coastal zone planning will be promoted within the context of the environmentally and socially sustainable strategic development planning processes being developed through the Project. These processes aim to integrate biological and ecological values as well as social values and aspirations into traditional planning processes, thus linking economic development directly to sustainable "use" (which in some cases might be limited or non-use) of natural resources. e adaptability to changing dynamics of the country's development processes and threats to Project objectives will be ensured through adoption of an action-learning approach. This includes piloting management strategies, providing flexibility to adapt and adjust project activities to reflect emerging lessons and changing local needs and priorities, and working towards a programmatic approach to incrementally expanding pilot level strategic development planning; * economic alternatives will be developed for communities that directly use and exploit natural resources; * reliability of counter-part funding commitments will be enhanced by having a transparent dialogue with government on incremental recurrent costs, and keeping these costs to a minimum. * financial sustainability of biodiversity conservation and sustainable use of natural resources is a central focus of the Project. Different modalities for ensuring financial sustainability will be developed and tested under the Project. Particular emphasis during implementation will be on catalyzing private sector participation in conservation management in the context of participatory and equitable management plans and the development of financing mechanisms to cover recurrent costs. * The Project also has the objective of developing a model for the preparation of environmentally and socially relevant commercial bidding documents. The bid documents to be prepared by experts funded under the Project will incorporate biodiversity protection requirements and the aspirations of the local communities within technical specifications to be met by those preparing proposals. * Private sector investors are expected to take significant comfort from the tender process being piloted, since the tender will be based on internationally recognized business and legal practices,  Page 14 and introduce transparency into the investment process in Mozambique. The objective being to develop a "win-win" scenario where the private sector is given the opportunity to invest in a commercially attractive venture within a framework where potential risk and return could be calculated. Local environmental values and the well-being of the local communities should also be protected under this process since the anticipated commercial return to the investor would not be possible without this protection. 4. Indications of borrower commitment and ownership The Republic of Mozambique is strongly committed to tackling the challenges presented by its extensive 2,700 km coastline. As one of the top five priority concerns in the National Environmental Management Program, coastal zone management is being tackled through several mutually re- enforcing initiatives, including: * preparation of a National Program for Coastal Zone Management (CZMP) and policy; * creation of a Coastal Zone Management Unit (CMU) within MICOA, charged with leading the CZMP development process, including coordination of other relevant government and non- government stakeholders in the process; * establishment of an inter-institutional technical-level working group on coastal management, chaired by MICOA. This group oversees the preparation of the CZMP, is informed of all on- going government activities in the coastal zone, and serves as a forum for inter-ministerial coordination and conflict resolution; * the proposed creation of a high level National Commission for Sustainable Development, an advisory group to be linked directly to the Council of Ministers (to which the current inter- institutional technical working group will serve as the secretariat for coastal zone issues); * completion of a macro-diagnostic exercise for the coastline; and e preparation of the CMBMP to test mechanisms to address concerns regarding quality of coastal and marine ecosystems and biodiversity. Mozambique's commitment to coastal zone management concerns is further emphasized by holding several national and regional workshops, and hosting the regional institution for coastal zone management capacity building - SEACAM. The ROM has actively sought and received support from its international partners for developing a comprehensive ICZM program for the nation. DANIDA is supporting ICZM policy development process, while NORAD supports macro-diagnostic exercises in order to advance the knowledge base pertaining to coastal and marine issues. This Project, supported by IDA and GEF is addressing spatial development planning and the conservation of coastal and marine ecosystems on a pilot basis as part of a comprehensive program spearheaded by the Government. ROM is being proactive in coordinating the different activities in an effort to maximize synergies and ensure that national as well as local priorities are addressed. It is the ROM's intention that lessons learned from the IDA/GEF pilot initiative will strengthen the policy and program development and also provide a replicable model for implementation of a 15-20 year coastal zone management program. Commitment to the proposed CMBMP is high. Responding to their joint concerns for quality of coastal and marine ecosystems and biodiversity, a group of institutions formed an inter-agency team to identify, prepare and subsequently implement this initiative. Project ownership is strong at both central and provincial levels. Participatory logframe and planning workshops held in Maputo were followed by workshops for provincial and district level stakeholders. Meetings have been held with the Governors of Cabo Delgado and Nampula Provinces, community dialogues initiated through public meetings in these two Provinces, and a Government-approved Project Concept Note was  Page 15 prepared and transmitted to the Bank. Building on these, the ROM, with support from the GEF, has continued to actively pursue Project preparation. 5. Value added of Bank and Global support in this Project: The Project has been designed to fit solidly within the GEF Operational Program on Coastal and Marine Ecosystems, a priority area for the first, second and third Conference of the Parties to the Convention on Biological Diversity. Thus, the Bank, as a GEF implementing agency, is able to bring incremental grant resources from the GEF to assist Mozambique in tackling coastal and marine biodiversity issues of global environmental concern. These would include both ecosystem and species protection as well as increasing capacity for sustaining this protection over time. The Bank also adds value through its extensive experience in policy and institutional reform as well as technical experience gained directly and in partnership in the design and implementation of biodiversity, coastal zone management, and sustainable development projects. It is also well placed to support on-going Mozambican efforts to develop a long-term national coastal zone management program due to its increasing experience in and ability to facilitate long-term, programmatic approaches to biodiversity management, poverty alleviation and sustainable resource use. This provides a missing critical element in the implementation of a coherent coastal zone management policy. In supporting this Project, both the Bank and GEF are playing an important catalytic role by developing and piloting approaches that will underpin the subsequent implementation of a long-term CZMP. This program is expected to be multi-donor financed. Through the experience generated in preparation and implementation of this pilot Project, particularly at the institutional level, the Bank and GEF will bring added value to the efforts of other donors. E: Summary Project Analysis 1. Economic L.a. Cost-Benefit Analysis: As the Project is essentially a learning and pilot exercise to test and refine a framework for development, it does not lend itself to traditional cost-benefit analysis and calculation of rates of return. The Project itself and broader adoption of lessons learned will have medium- to long-term implications for the Coastal Zone Management Program, the development of coastal resources and the resulting economic impact. With the Project's activities centered on planning and facilitating investment in the coastal zone from communities, and private and public sectors, the economic benefits derived from these investments will be significant. l.b. Incremental Costs The incremental costs associated with global benefits are estimated at US$4.1 I million. See Annex 4 for details. 2. Financial External financing of the Project will be through an IDA credit (US$5.6 million) and a GEF grant (US$4.11 million). Community Micro-Enterprise Viability: The nature of the micro-projects will be identified at the end of the strategic development planning exercise, as part of the detailed management planning activities and as an output of participatory community needs assessments. Thus, the exact nature of  Page 16 these enterprises is not known and can take many forms (conservation activities, improved artisanal fishing, ecotourism services). One of the criteria for approval of support to specific projects would be a case-by-case financial analysis that demonstrates the financial viability of the activity, and estimates the changes in family/household incomes that may be expected. 3. Technical It is recognized that the innovative approaches being piloted are ambitious, particularly in the context of a limited pool of experienced people, lack of sound information and the inherent complexities of participatory planning. For these reasons, the size of the pilot areas was kept small enough to ensure that biodiversity/conservation and social studies could be undertaken in a thorough manner. Similarly, while the responsibility for production and approval of the SDP remains firmly with the government, this first pilot phase will involve a fairly high level of expert technical assistance. Specialized technical advisors will be contracted under the Project to provide regular guidance and technical quality assurance to the implementing institutions and teams, particularly in the areas of strategic development planning, tender preparation and promotion, social assessment and participation, and biodiversity conservation and management. A strong element of capacity building has been built into the design, both through on-the-job training by technical advisors and specific consultancies, and opportunities for specialized targeted training so as to start building capacity for implementation of integrated coastal zone management in subsequent phases of the CZMP. 4. Institutional a. Executing agency: MICOA has managed the PDF B preparation grant and therefore has experience with Bank procurement and consultant contract guidelines. Nevertheless, as the staff of the coastal zone unit is small, and there are a number of implementing agencies to be coordinated, the Project will support a fulltime financial and procurement officer and administrative assistant. The financial system of the Ministry was assessed and found to be operating at internationally acceptable standards. b. Project management: Implementation of the integrated approach promoted by this Project will rely on coordinated and collaborative approaches from a large number of stakeholders. All stakeholders have actively participated in the preparation of the Project and thus the institutional mechanisms for ensuring this have evolved during the course of preparation of the CZMP and the Project itself. These are functioning well at the central level. It is recognized that these coordination bodies are weaker at the local level. The strengthening of local level institutional structures will be a targeted output of the Project itself. It is also recognized that experience and capacity among the implementing agencies at all levels is weak. Building this capacity is a long-term process. As indicated above, the Project will support long- term technical advisors to provide technical guidance and assistance to the key implementing agencies. Skill transfer will be a key element of their terms of reference, thus commencing the process of building capacity for implementation of subsequent phases of the CZMP; it will focus predominantly at assisting local level implementation. In keeping with lessons learned from previous Mozambique experience, periodic inputs from these advisors will be favored over full time, residential support.  Page 17 5. Social: The major social issues faced by the Project: local decision-making structures and authority at community and district Government level are unclear; * poor coordination of sectoral activities involved in coastal zone management; * low capacity of government for regulation or protection of endangered species such as dugongs and sea turtles; * attitudes concerning conservation dependent on levels of individual and family income; * increasing pressure from artisanal fishermen from Mozambique and Tanzania on marine fauna; * illegal hunting safaris operating in the region with endangered big game species targeted; * increasing pressure on Provincial governments to grant concessions to tourist operators; * selective logging of hardwood trees from forests and woodlands; * indiscriminate exploitation of shells and corals for the curio trade; and * large-scale destruction of mangroves for salt production. Each of these issues has been addressed as part of Project design, which includes a more detailed social assessment at the larger macro scale, leading into a participation process to identify broad community boundaries as one input into the strategic development plan. Further social analysis will be undertaken in detailed management areas, including a needs analysis, an inventory of local resource use and community preparation for the selection and implementation of community based micro- projects. Gender: Significant gender issues were identified in the preliminary rapid social assessment in relation to household responsibility, privileged access to and control over resources and benefits, access and control in matters of income, ownership of property, prestige and education. The participatory approaches used to capture community input into the strategic development plan and detailed conservation area planning will be structured to directly promote participation of this target group. These issues will also be taken into account during design of micro-project eligibility criteria and operational procedures. 6. Environmental assessment Environmental Category []A [X] B []C The Project will have a number of direct and indirect positive impacts on the biophysical and socioeconomic environment. These include: * the formulation and adoption of strategic development plans by provincial and district governments. This will give decision-makers a means of allocating landuse in an environmentally sustainable fashion;