Colombia - Andean Region Conservation and Sustainable Use of Biodiversity Project

Document of The World Bank Report No: 21723-CO PROJECT APPRAISAL DOCUMENT ONA PROPOSED GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND IN THE AMOUNT OF SDR 11.8 MILLION (US$15.0 MILLION EQUIVALENT) TO THE INSTITUTO DE INVESTIGACION DE RECURSOS BIOLOGICOS ALEXANDER VON HUMBOLDT FOR AN ANDEAN REGION CONSERVATION AND SUSTAINABLE USE OF BIODIVERSITY PROJECT February 12, 2001 Environmentally and Socially Sustainable Development Colombia, Mexico & Venezuela Country Management Unit Latin America and the Caribbean Regional Office  CURRENCY EQUIVALENTS (Exchange Rate Effective January, 200 1) Currencv Unit = Colombian Peso COP$1.0 = US$.00044 US$1.00 = COP$2252 FISCAL YEAR July 1, 2000 - June 31, 2001 ABBREVIATIONS AND ACRONYMS CAR Regional Autonomous Corporation (Corporaci6n Aut6noma Regional) CAR Regional Autonomous Corporation of Cundinamarca CARDER Regional Autonomous Corporation of Risaralda CAS Country Assistance Strategy CAS Regional Autonomous Corporation of Santander CBD Convention on Biological Diversity CDMB Regional Autonomous Corporation of the Meseta de Bucaramanga CI Conservation International CONIF National Corporation for Forestry Research (Corporaci6n Nacional de Investigaci6n y Fomento Forestal) COP Conference of the Parties of the CBD CORMACARENA Regional Autonomous Corporation of the Macarena Region CORPOAMAZONAS Regional Autonomous Corporation of the Amazonas region CORPOBOYACA Regional Autonomous Corporation of Boyaca CORPOCALDAS Regional Autonomous Corporation of Caldas CORPONARINO Regional Autonomous Corporation of Nariflo CORPONOR Regional Autonomous Corporation of Norte de Santander CORPORINOQUIA Regional Autonomous Corporation of Orinoquia CORTOLIMA Regional Autonomous Corporation of Tolima CRQ Regional Autonomous Corporation of Quindio CVC Regional Autonomous Corporation of Valle del Cauca DAMA Administrative Department of the environment of the Capital District DNP National Planning Department (Departamento Nacional de Planeaci6n) FIGAU Investment Fund for Urban and Environmental Management (Fondo de Inversi6n para la Gesti6n Ambiental Urbana) GEF Global Environmental Facility GoC Government of Colombia GTZ German Agency for Technical Cooperation IAvH Alexander von Humboldt Institute (Instituto de Investigaci6n de Recursos Biologicos Alexander von Humboldt) Vice President: David De Ferranti Country Director: Olivier Lafourcade Sector Director: John Redwood Sector Leader: Adolfo Brizzi Task Team Leaders: Claudia Sobrevila/Juan Pablo Ruiz  IBRD International Bank for Reconstruction and Development IDB Interamerican Development Bank ILO Intemational Labor Organization INDERENA National Institute for Natural Resources (Instituto Nacional de Recursos NaturalesRenovables y del Ambiente) IUCN International Union for the Conservation of Nature MMA Colombian Ministry of the Environment MoE Colombian Ministry of the Environment MSP Medium Size GEF Project NGO Non Governmental Organization NPAS National Protected Areas System PAD Project Appraisal Document PCD Project Concept Document PCU Project Coordination Unit PLANTE Alternative Development Plan (Plan de Desarrollo Alternativo) PNUMA / UNEP Programa de las Naciones Unidaspara el Medio Ambiente, United Nations Environment Program PRAES Projectos Ambientales Escolares RAC Regional Advisory Committee SINA National Environmental System (Sistema Nacional Ambiental) SPNN National Parks System (Sistema de Parques Nacionales Naturales) TNC The Nature Conservancy TORs Terms of Reference UAESPNN National Parks Administrative Unit (UnidadAdministrativa Especial del Sistema de Parques Nacionales Naturales) UNCTAD United Nations Conference of Trade and Development I JNDP United Nations Development Program UNEP United Nations Environment Program WB World Bank WCS Wildlife Conservation Society WWF World Wildlife Fund   Colombia Andean Region Conservation and Sustainable Use of Biodiversity Contents A: PROJECT DEVELOPMENT AND GLOBAL OBJECTIVE ......................................... .............. 2 IA. PROJECTDEVELOPMENT OBJECTIVE ................................................................. 2 IB. KEY PERFORMANCE INDICATORS ................................................................. 2 B: STRATEGIC CONTEXT ................................................................. 3 IA. SECTOR-RELATED COUNTRYASSISTANCESTRATEGY(CAS) GOALSUPPORTED BYTHEPROJECT(SEE ALSOANNEX1): ................................................................. 3 lB GEF OPERATIONALSTRATEGY/PROGRAM OBJECTIVEADDRESSED BYTHEPROJECT: ........................ 3 2. MAIN SECTOR ISSUES AND GOVERNMENTSTRA TEGY ................................................................. 3 2A. MAIN SECTOR ISSUES ................................................................. 3 2B GOVERNMENTSTRATEGY ................................................................. 5 3. SECTOR ISSUES TO BE ADDRESSED BY THE PROJECT AND STRATEGIC CHOICES .................................... 8 3A. SPECIFIC PROJECT ISSUES ................................................................. 8 C: PROJECT DESCRIPTION SUMMARY ................................................................. 11 1. PROJECT COMPONENTS. ............................................................................ 1 2. KEY POLICYAND INSTITUTIONAL REFORMS SUPPORTED BY THE PROJECT .......................................... 11 3. BENEFITSAND TARGETPOPULATION ................................................................. 12 4. INSTITUTIONALANDIMPLEMENTATIONARRANGEMENTS ................................................................. 12 D: PROJECT RATIONALE ................................................................. 17 1. PROJECTALTERNA TIVES CONSIDERED AND REASONS FOR REJECTION .............................................. 17 3. LESSONS LEARNED AND REFLECTED IN PROPOSED PROJECT DESIGN ................................................. 21 4. INDICATIONS OFBORROWER COMMITMENTAND OWNERSHIP ............................................................. 22 5. VALUEADDED OF BANKAND GLOBALSUPPORTIN THISPROJECT ....................................................... 23 E: SUMMARY PROJECT ANALYSES ................................................................. 23 1. ECONOMIC ................................................................. 23 2. FINANCIAL ................................................................. 24 3. TECHNICAL ................................................................. 24 4. INSTITUTIONAL ................................................................. 25 5. SOCIAL ................................................................. 25 6. ENVIRONMENTAL ................................................................. 26 7. PARTICIPATORYAPPROACH ................................................................. 27 F: SUSTAINABILITY AND RISKS ................................................................. 29 1. SUSTA INABILITY ................................................................. 29 2. CRITICAL RisKs ................................................................. 31 G: GRANT CONDITIONS ................................................................. 32 H: READINESS FOR IMPLEMENTATION ......................... ........................................ 32 I: COMPLIANCE WITH BANK POLICIES ................................................................. 33 ANNEX 1: PROJECT DESIGN SUMMARY ............................ ..................................... 34 ANNEX 1-A: PROJECT TARGETS FOR END OF PHASE 1 ................................................ ........ 40 iv  ANNEX 2: PROJECT DESCRIPTION ............................................................. 41 ANNEX 3: PROJECT COSTS ............................................................. 50 ANNEX 4: INCREMENTAL COST ANALYSIS SUMMARY ........................................................ 53 ANNEX 5: FINANCIAL SUMMARY ............................................................. 59 ANNEX 6: PROCUREMENT AND DISBURSEMENT ARRANGEMENTS ............. .................. 60 ANNEX 7: PROJECT PROCESSING SCHEDULE ..................................... ........................ 67 ANNEX 8: DOCUMENTS IN PROJECT FILES ......................... .................................... 68 ANNEX 9: STATEMENT OF LOANS ............................................................. 70 ANNEX 10: COUNTRY AT A GLANCE ............................................................. 72 ANNEX 11: SOCIAL ASSESSMENT & PARTICIPATORY PROCESS ....................................... 73 ANNEX 12: INDIGENOUS PEOPLES DEVELOPMENT PLAN .................................................. 96 ANNEX 13: MEASURES TO AVOID RESETTLEMENT ............................................................ 105 ANNEX 14: COLOMBIA GEF PORTFOLIO ............................................................. 113 ANNEX 15: GEF BIODIVERSITY PROJECTS IN THE ANDEAN REGION .......................... 116 ANNEX 16: MONITORING AND EVALUATION PROGRAM ................................................. 120 ANNEX 17: SECURITY ISSUES ............................................................. 127 ANNEX 18: SELECTION OF PRIORITY AREAS ............................................................. 129  Colombia Andean Region Conservation and Use of Biodiversity Project Project Appraisal Document Latin America and the Caribbean Regional Office Colombia, Mexico and Venezuela Country management Unit Date: February 12, 2001 Task Team Leader/Task Manager: Claudia Sobrevila and Juan Pablo Ruiz Country Manager/Director: Olivier Lafourcade Sector Manager/Director: John Redwood Project ID: CO-GE-63317 Sector: Environment Program Objective Category: Environmentally Sustainable Development GEF Supplement ID: CO-GE-63317 Focal Area: Biological Diversity Lending Instrument: GEF Grant Program of Targeted Intervention: [ ] YES [X] NO Project [] Loan [] Credit [] Guarantee [X] Grant [] Other [Specify] Financing Data For Loans/Credits/Others: Amount (SDR1 1.8 million) (US$15.0 million equivalent): (GEF Grant) Financing plan (US$m): 30.0 million Source Local Foreign Total Cofinanciers Local Governments (CARS) 8.0 8.0 The Netherlands 2.5 1.5 4.0 GEF 11.5 3.5 15.0 Other local 1.0 1.0 Other donors 1.5 0.5 2.0 Total 24.5 5.5 30.0 Borrower: N/A Recipient: Instituto de Investigaci6n de Recursos Biol6gicos Alexander Von Humboldt Guarantor: N/A Responsible agency(ies): Estimated disbursements (Global 2001 2002 2003 2004 2005 2006 2007 Supplement FY/US$M): Annual 1.5 2.0 3.0 3.0 2.5 2.0 1.0 Cumulative 1.5 3.5 6.5 9.5 12.0 14.0 15.0 Project implementation period: 2001 - 2007 Closing Date: December 31, 2007  A: Project Development and Global Objective la. Project development objective The project development objective is to increase conservation, knowledge, and sustainable use of globally important biodiversity of the Colombian Andes1 (the tropical Andes is considered by many to rank first in the list of biodiversity hotspots2). The project launches, in the Andes, Colombia's National Biodiversity Policy and Proposed Action Plan that has been prepared in the framework of the Convention on Biological Diversity. Specifically, the project will: * support the development of a more representative, effective, and viable Andean protected area system; * identify conservation opportunities in rural landscapes, develop and promote management tools for biodiversity conservation; * expand, organize, and disseminate the knowledge base on biodiversity in the Andes to a wide audience of stakeholders and policy makers, and implement monitoring tools; and, * promote inter-sectoral coordination to address some root causes of biodiversity loss in the Andes. lb. Key performance indicators Key performance indicators related to the project development objective include the following. Additional information is found in Annex 1. * 6 regional active networks of protected areas established in project conservation zones * Participatory management plans for 50% of existing national protected areas within the project conservation zones prepared and implemented * 50% of remaining ecosystem types per ecoregion represented in protected areas. * 4 biodiversity and socioeconomic surveys of different representative rural landscapes for the identification of conservation opportunities completed. * 4 management tools for biodiversity conservation in rural landscapes (e.g. corridors, enrichment of productive landscape matrices and life fence rows) evaluated for biological effectiveness and economic viability. * 2 management plans for 2 threatened species of global importance. * Biodiversity baseline for the Andes region built based on information available. * 8 comprehensive biodiversity assessments filling major knowledge gaps in the Andes. * A biodiversity state-pressure-response indicators system implemented, updated and in use. * A network of Andean biodiversity databases established with at least 15 institutional biodiversity databases systematized and linked to the network. 'For the purposes of this project, the Colombian Andes is defined as the areas encompassing over 500 m in the Eastern, Central, and Western Cordilleras (thus excluding a small number of other high altitude areas such as the Sierra Nevada de Santa Marta or the Sierra de Macarena). 2 This assessment has been made, among others, by Conservation International (1998), Mittermeier (1998), and Myers (1989). 2  * Inclusion of biodiversity considerations in the MoE environmental licensing TORs and on guidelines of infraestrucutre, mining, energy and agricultural projects B: Strategic Context la. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see also Annex 1): CAS document number: 17107-CO Date of latest CAS discussion: October 15, 1997 The CAS identifies protection and conservation of the environment as one of the major themes of World Bank Group assistance noting that the country is listed as one of the worldwide priority areas for conservation of flora and fauna. According to the CAS, "inadequate management of natural resources.. . has led to a growing deterioration as seen by the loss of biodiversity, deforestation .., endangered strategic ecosystems, soil degradation, highly polluted rivers, canals and wetlands." This project contributes to the CAS's strategic focus on sustainable development/protection and conservation of strategic ecosystems; improving the effectiveness of the recently introduced decentralized system for environmental management; and promoting employment opportunities for the poor through environmentally sustainable projects. lb. GEF Operational Strategy/program objective addressed by the project: Operational Program Number 4, Mountain Ecosystems and Number 3, Forest Ecosystems Colombia ratified the Convention on Biological Diversity (CBD) on November 28, 1994. This project is consistent with Colombia's commitments to the CBD, with emphasis on Articles 6 (integration of biodiversity across sectors), 7 (biodiversity identification and monitoring), 8 (in- situ conservation), 10 (sustainable use) and 13 (education and public awareness). With regard to the GEF Operational Program, the project supports the following key elements of the GEF Operational Strategy: Andean Region use of biodiversity, increased awareness, policy reform, capacity building, sectoral integration, and financial sustainability. Specifically, this project supports conservation of biodiversity and sustainable use in montane and forest ecosystems (Operational Programs 4 and 3) as well as the cross-sectoral area of land degradation. The project is fully consistent with the principles of the Conference of the Parties of the Convention on Biological Diversity (COP) as it takes an ecosystem approach to maximize biodiversity conservation under a variety of management regimes and involving a range of stakeholders including local communities, indigenous peoples, non-governmental organizations (NGOs), the private sector, and local, regional and central government agencies. Finally, the project also addresses issues of agrobiodiversity which were endorsed as a GEF Priority by the III Conference of the Parties in Buenos Aires (1996). 2. Main sector issues and Government strategy 2a. Main sector issues Colombia is generally recognized to be one of the five "megadiverse" nations in the world (Mittermeier, 1998). With a total land surface area of 1.14 million kM2, representing about 0.8% 3  of the world's surface area, Colombia is home to about 15% of all known terrestrial species (Table 1-Annex 8). This makes Colombia one of the countries with the highest concentration of species per unit area. The country has the largest number of species of birds and amphibians in the world and ranks high in the number of vascular plants and vertebrates. Colombia also possesses 18 ecoregions (WWF/World Bank report, 1996), the second highest of any country in Latin America. The most recent ecosystem map of Colombia produced for the Humboldt Institute by Etter (1998) identifies 65 ecosystem types. Within Colombia, the Andes are biologically the richest biogeographic region, surpassing even the humid lowland forests of Amazonia. The Andes contain 21 distinct ecosystem types, each of which is remarkably diverse due to great fluctuations in altitude, climate, and geology resulting in geographical isolation, particularly in the valleys and mountainous areas. This has produced very high rates of endemism. Biodiversity in Colombia is still not fully documented. Recently, field surveys in the "Cordillera Oriental" undertaken by the Instituto Alexander von Humboldt indicated that 30% of the 400 recorded bird species were new records for this area, 5 were new for the country and one is probably new to science. Inventories and field surveys are still required to further document the magnitude of Colombia's biodiversity and support stronger priority setting exercises and policy formulation. Of the Andean region, Colombia expereinces the most human intervention. For instance, two thirds of this area is highly impacted by human activities (about 70% of Colombia's population lives in this region) and some ecosystem types are now very rare. A major cause of biodiversity loss is the advance of the agricultural frontier and associated deforestation and soil erosion. Agricultural and animal husbandry practices, logging activities, as well as inappropriate resource use patterns contribute to biodiversity loss and to greater rural poverty. The loss and degradation of natural habitats has endangered the survival of numerous species3. Invasive species also represent a threat to biodiversity, especially in freshwater ecosystems. Social unrest is a critical consideration in biodiversity loss; violence and civil unrest have been endemic in the Andes for over 50 years. Some areas have strong presence of guerrilla organizations or right-wing paramilitary groups while at the same time other regions have expereinced less social and civil unrest. The area encompassing illicit crops production has steadily increased. Land clearing for illicit crops directly affects biodiversity as might the application of herbicides. Financial resources available to reduce biodiversity threats are limited by the current fiscal crisis affecting all central government activities. In fact, current projections indicate that central government spending on environment will continue to be reduced in the foreseeable future. The lAvH estimates that over 240 species of Colombian mammals, birds and reptiles are endangered (9% of the nation's total) and over 550 vascular plants (1.5%). Most of these species are in the Andes region. No data are available on the status of amphibians, fish and invertebrates, although many are likely to be endangered of threatened. This is particularly worrisome for amphibians as the country is home to 609 species (37% of which are endemic), the most of any country in the world. 4  2b. Government strategy i) Institutional aspects: The institutional framework for biodiversity in Colombia is one of the most comprehensive in Latin America and dates back to 1968 when the National Institute for Natural Resources -Instituto Nacional de Recursos Naturales Renovables y del Ambiente (INDERENA) was created. INDERENA was affiliated with the Ministry of Agriculture and was in charge of managing Colombia's protected areas and of carrying out research activities on fauna and flora. In 1993, through Law 99/93, the government created the Ministry of the Environment -Ministerio del Medio Ambiente - (MMA) and launched its decentralization policy for environmental management. Environmental management responsibilities were transferred to the Regional Autonomous Corporations -Corporaciones Aut6nomas Regionales- (CARs). This law also created the National Parks Administrative Unit - Unidad Administrativa Especial del Sistema de Parques Nacionales Naturales (UAESPNN) within MMA, to develop a new approach to manage Colombia's protected areas. UAESPNN initiated a new program called the National Protected Areas System of Colombia that supports different categories of protected areas, from regional to local, and from public or private to collectively owned. In addition, Law 99/93 also created four related research institutes in order to support scientific, technical decision and policy-making processes. These research institutes are conceived as joint ventures involving among others the Ministry of the Environment (as president of the board of directors), Colombia's National Science Foundation, private and public universities, NGOs and CARs. In addition, these institutes are largely governed by more flexible administrative and legal rules as compared to the less flexible legal framework governing most public entities. Within this context, the Alexander von Humboldt Institute - Instituto de Investigaci6n de Recursos Biol6gicos Alexander von Humboldt (IAvH) was created. The mission of the IAvH is to promote, coordinate, and carry out research that contributes to biodiversity Andean Region use. The IAvH began activities in 1995, and took over some of the research functions previously carried out by INDERENA. It has a General Assembly and an active Board of Directors with nine members from diverse sectors that together make decisions on the policies and actions of the Institute. The IAvH has developed research activities in four main programs (biodiversity inventories, conservation biology, use and valuation, and policy and legislation) with two cross- cutting programs for information and training. In addition, strategic alliances with national and international entities have facilitated the forging of common interests and as a result have strengthened research projects. Finally over the last 5 years, the Institute has managed to reduce the percentage of national government contributions in its budget from 95% in 1995 to less than 50% in 1999. Its budget for 1998 was approximately $4.5 million. Under the country's 1991 Constitution, the responsibility for environmental management was passed from the national government to the CARs, of which there are 33 in Colombia and 18 in the Andean region. CARs vary greatly in their access to financial resources, which depend on whether or not they are eligible to receive remittances from the power sector and on the extent of taxable land holdings, since a part of these taxes are passed on to them by the municipalities. CARs also vary greatly in their institutional capacity, as most recently noted in the National Report on Biodiversity4 regarding institutional capacity at the regional and local level. In some instances, CARs have been able to strengthen their management and technical capacity in relatively short periods of time. IAvH has worked closely with some of the CARs, developing 4IAvH, Informe Nacional Sobre el Estado de la Biodiversidad Colombia 1997, Santafe de Bogota, IAvH, PNUMA, Ministerio del Medio Ambiente, 1998 (Vol. 2). p. 232. 5  joint biodiversity assessments and regional planning tools. (See Table 1 Annex 10 for a list of CARs to be considered under the project). ii) Government plans and strategies: The National Biodiversity Policy (MMA, 1997) was developed within the context of the Biodiversity Convention - ratified by Colombia through Law 165/94. At the request of MMA, IAvH led the preparation of the National Biodiversity Report as well as the National Biodiversity Strategy and Action Plan formulation processes. Both projects were supported by GEF through the United Nations Environmental Program (UNEP). The National Biodiversity Policy and the proposed Strategy and Action Plan5 (1 998) concentrate on three lines of action: conservation, equitable and sustainable use, and improved knowledge. In the National Biodiversity Report6 (1998), the Andean region is identified as the leading regional priority in terms of biodiversity Andean Region use. Subsequently, MMA has established biodiversity conservation in the Andean region as a top environmental priority for the National Development Plan. The proposed National Biodiversity Strategy and Action Plan (1998) is a 25-year plan for implementation of the National Policy using the following strategies: i) promotion of conservation through: a) consolidation of the national system of protected areas; b) slowing the loss of biodiversity; and c) restoration of degraded ecosystems, protection of endangered species; and promotion of ex situ conservation; ii) promotion and encouragement of the sustainable and equitable use of biological resources through: a) sustainable management of natural resources; b) development of the economic potential of biodiversity; and c) the assessment of the economic value of biodiversity; and iii) expansion of knowledge base through improvement of scientific information and protection of traditonal knowledge The plans and strategies mentioned above were carried out by IAvH using a highly participatory approach. This has allowed IAvH to step into a leading role for mainstreaming biodiversity Andean Region use in Colombia. IAvH has been asked by MMA to support the formulation of policies for regional and local governments and other sectors of society. The current project will be one of the vehicles to support the implementation of some components of the National Biodiversity Action Plan. LAvH will act as the coordinator and manager for project funds which will be executed by different actors that will be selected with strict criteria of demonstrated institutional capacity. Consistent with the National Biodiversity Strategy and Action Plan, the Ministry of the Environment recently established the National Protected Areas System (NPAS) constituted by the "Sistema de Parques Nacionales Naturales" (SPNN, National Parks) and protected areas of regional and local character including private reserves and establishes an overall system of coordination and policy guidelines. This SPNN marks a significant change from the traditional Colombia Biodiversidad Siglo XXI: Propuesta Tecnica para la Formulaci6n de un Plan de Accion Nacional en Biodiversidad Instituto de Investigaci6n de Recursos Biol6gicos Alexander von Humboldt. Edited by M.C. Fandillo y P. Ferreira. Santafe de Bogot6. IAvH, Ministerio del Medio Ambiente, DNP. 1998. 6Informe Nacional Sobre el Estado de la Biodiversidad Colombia 1997, Santafe de Bogota, IAvH, PNUMA, Ministerio del Medio Ambiente, 1998. 6  restrictive and exclusionary approach that is inherent in Colombian laws predating the 1991 Constitution. The SPNN focuses on the social dimensions of conservation and seeks to improve the effectiveness of conservation in protected areas by involving local communities and incorporating a diversity of methods such as collaborative management. It explicitly recognizes the conflicts created by the restrictive nature of the laws, arguing for transitional mechanisms that recognize that people are living in and depending on the parks and surrounding areas and that this is not necessarily incompatible with conservation of ecosystems. One of the important objectives of the policy is to contribute to solving conflicts over the occupation and use of protected areas and buffer zones, including those related to the overlapping areas of parks and communally titled lands of indigenous and black communities. The MMA developed a "National Strategyfor the Conservation of the Andes" in August 1999 that presents a well-structured coordinated program approach for the Andes. This document describes the rationale, complementarity, linkages and thematic and geographic differences among all the different GEF investments in the Andes region. The strategy demonstrates the cooperation and coordination between the Implementing Agencies and the Colombian Government in early project design and preparation. Biodiversity actions as described above are fully backed by the current administration through The National Development Plan ("Plan Nacional de Desarrollo 1999-2002"). Within the Plan, recognition is given to sustainable development and proper management of natural resources and contains a Strategic Plan for the Environment ("Projecto Colectivo Ambiental") with three main objectives: (i) conservation and restoration of priority areas within strategic eco-regions; (ii) promotion of environmental sustainability of economic sectors; and (iii) promotion of sustainable regional and urban development. Several programs are being carried out to support the objectives of the Strategic Plan for the Environment, some of which have some relation with the objectives of the proposed project. These include: (i) Water Program: strengthening legislation and institutions to optimize sustainable use of water; (ii) Biodiversity Program: seeking consolidation of the national protected areas system, and promotion of the Biodiversity Strategy and Action Plan; (iii) Forest Program: seeking the establishment of 160,000 ha of protective and productive forest; (iv) Productive Systems Sustainability Program: seeking the establishment of a research program to identify alternatives including substitution of illegal crops, establishment of incentives and mechanisms for reconversion and ecotourism; and (v) Green Markets Program: promoting the research of biodiversity-friendly goods and services, including supply, demand, barriers and opportunities; and, promoting such goods and services and commercialization and coordination of the implementation of the Clean Development Mechanism. All these programs are to be implemented with resources from the Ministry of Environment, a credit from the Inter-American Development Bank (IDB), the Regional Autonomous Corporations, the Fondo Nacional de Regalias, the Plan Colombia, Plante, the National Environmental Institutes (SINA) research institutes (including IAvH), International Bank for Reconstruction and Development (IBRD) credit, and IBRD-(Investment Fund for Urban and Environmental Management)FICAU credit among others. Other government policies with an impact on Andean Region use of biodiversity include: a) the Plan Verde that provides incentives and resources for reforestation and restoration of natural forests; b) the National Forests Policy that seeks the consolidation and strengthening of national forests and regulates the use of plants within the forests; c) the National Water Policy that seeks 7  the conservation of headwaters and their ecosystems; and d) the Rural Development Policy that seeks entrepreneurial development in rural areas while seeking the sustainable use of natural resources. Indigenous groups have been recognized by the government as key players in the management of biodiversity areas. In the past 5 years, indigenous territories have been demarcated and the regulations around these territories have been supporting many aspects of self-detennination for each ethnic group. In fact, the Colombian Constitution recognizes the compatibility of indigenous management of the territory and conservation objectives. Private reserves are also starting to play an important role in biodiversity conservation, particularly because they have been legally recognized. However, there are limited incentives for private landowners to set aside land for conservation purposes. A regulation has been drafted which would provide for tax and fiscal incentives to promote private reserves and is in the process of being approved by the Ministry of the Environment. 3. Sector issues to be addressed by the project and strategic choices 3a. Speciflc project issues An Integrated National Protected Areas System. Protected areas are the most important mechanism for biodiversity conservation. Although any protected area conserves biodiversity, it is important to move forward from isolated strict conservation areas towards systems of protected areas, based on an ecoregional perspective, in order to allow the conservation of biodiversity processes that take place at larger spatial and temporal scales. Today, particularly in the Andes, protected areas and corridors systems can only be achieved using different conservation categories. For the Andes in particular, protected areas under different categories within the Colombian National Parks system (Sistema de Parques Nacionales Naturales), today cover 7% of the region. In addition, some Autonomous Regional Corporations have begun the establishment of regional reserves. At the municipal level, no experience in protected areas establishment and management exists, but there is a great interest and potential for the establishment of municipal protected areas. Private efforts to create protected areas have also born fruit and the "Asociacion Red de Reservas de la Sociedad Civil" counts today over 200 private reserves in the Andes Region. Finally, areas under land management categories declared by the state, such as Forest Reserves, can also be important parts of such systems. The current project addresses the need to develop an integrated system with a variety of protection categories at regional and local levels. Representativity and effectiveness ofprotected areas. An estimated 7% of the Andean area is under some sort of protection regime (there are 29 national parks and over 60 regional parks in the Andes). However, a recent analysis7 documents serious gaps in representativity of ecosystems at the NPAS and rapid processes of transformation of critical habitats, led by agricultural activity throughout the region. It is therefore urgent that actions be taken to ensure that critical habitats and unique ecosystems underrepresented and or under threat be identified and afforded protection. The project addresses the issue of representativity and the urgency of the pace of transformation. This will be achieved through the consolidation and improved management of protected areas and the designation of new areas protecting critical habitats and Etter et. a], 1999, Report on Representativity and Transformation of Ecosystems in the Andes. 8  ecosystems not yet adequately protected. Component 1 of the proposed project intends to result in a "Protected areas system more representative, effective and viable". Andean Region use in intervened areas. The project will address the issue of Andean Region use of biodiversity in rural landscapes through a component specifically designed to promote biodiversity friendly practices and to promote goods and services compatible with sustainable use of biodiversity. The rural landscapes component will support activities to promote markets for biodiversity friendly goods and services and implement incentives for sustainable use. Lack of awareness. This issue is addressed through the inclusion of a component to expand the knowledge base and activities designed to promote awareness. The project also includes activities geared to promote sound decision making and planning on issues affecting biodiversity in the context of the environment and agricultural sectors. Poor sector coordination. Regional planning has not traditionally intemalized biodiversity concerns and many farming practices used currently have not been biodiversity friendly. Many sectors of the Colombian economy have a tremendous, if unintended, impact on biodiversity. This is particularly true for sectors such as transportation, energy, and agriculture. There is an urgent need for national leadership on coordinating all environmental investments in the Andean region to maximize their effectiveness and working with non-environmental sectors to mitigate their impacts on biodiversity. Finally, common to all the problems of the sector, there is a pervasive lack of good knowledge on biodiversity and how to use and disseminate such knowledge to decision-makers. The project will promote the inclusion of biodiversity conservation goals in development strategies. 3b. Strategic Choices a) Project Strategy and Phasing: The current project is one of the vehicles designed to support the implementation of some key components of the National Biodiversity Action Plan (1998). The IAvH has been designated by the Ministry of Environment as the umbrella organism to coordinate and manage project funds and activities, however, most of the project will be implemented regionally and locally. The project has been designed as a comprehensive program for the Conservation of the Andes of Colombia. It includes protecting some of the few key ecosystems left in the Andes. The selection of these key ecosystems was done through a very strategic approach of biodiversity priorities, threats and social concerns. The project has been prepared in a participatory way to promote leverage of other resources and to have a multiplicative effect. The project requires a high coherence and consistency due to important number of players such as the CARs (Regional Autonomous Corporations), regional National Parks Administrative Units (UAESPNN - the Park Service), NGOs, universities in addition to productive and community organizations. There is an inherent risk to the ambitious goals of the project. Other risks are the innovative aspects of the proposed project (decentralization, biodiversity conservation in modified landscapes, etc.), institutional complexities, and limited capacity in some of the areas. Reducing its size was considered during preparation but was discarded due to the loss of ownership and key features in project design. The strategic and comprehensive approach would also be lost. In order to reduce the risks of developing too large a project, it was agreed that the project will require 6 years to be completed and that it would be implemented in two phases. The first phase (3 years) has been designed to implement conservation actions in 5 critical zones where 9  assurances of success are most likely and to initiate the building blocks for the remaining zones (See next section for details on selection of these zones). At the end of the first phase, and before fully undertaking actions in the remaining zones, a mid-term review mission would be carried out to determine if pre-determined benchmarks have been met to warrant expansion of the project activities to new areas. The list of targets for the end of Phase 1 have been prepared and are described in Annex 1-A. The targets are an integral part of the Grant Agreement between the Bank and IaVH. b) Project Scope: Several components of the project will have a region-wide focus while other components will be focused geographically. The region-wide activities will focus on the entire area of the Colombian Andes since they will look at sectoral issues, monitoring tools and scientific information that is needed across the region. This will apply to Component 3 Monitoring and Knowledge Management, and Component 4 Sectoral Integration. Components that involve on-the-ground investments shall be geographically focused. This is a function of the limited resources of the project and the undesirability of spreading these investments over large geographical areas, particularly considering that the Andean Cordillera represents 25% of the national territory and harbors a tremendous variety of biological, cultural, and institutional environments. For more geographically localized investments (Component 1 and to some extent Component 2), specific conservation zones have been selected (See next section). c) Selection of Priority Zones: During early preparation, the IAvH carried out a detailed selection process using different sources of information (See Annex 8). The first study used was done by IAvH andidentified twenty one different ecosystem types in the Andean Region based on the preliminary map of natural ecosystems of Colombia (Etter, A., 1998)(See Annex 8). These units were considered the starting point of the prioritization exercise. The ecoregions maps of Colombia prepared by the World Wildlife Fund/World Bank (WWF/WB) in 1997 and later revised by WWF- Colombia in 1999 were overlaid with the Andean Ecosystems. The selection process also used the results of the Universidad Javeriana's study which includes climatic, topographic and soil data amongst others to generate a map of potential ecosystems ( Etter, A. et al, 1999). Another important input into the selection process was the MMA's "National Strategy for the Conservation of the Andes" that describes all the thematic and geographic investments by GEF in the Andes region. This allowed the preparation team to sort out certain areas already covered by other investments. The final analysis excluded areas with low viability and major social unrest, where significant investments are already taking place and with weak institutional capacity. As a result, a set of 11 candidate zones encompassing a representative sample of the Andean ecosystems and biodiversity were identified (See Map). Of these zones, five have been selected for Phase 1 (Table 1 - Annex 10). These zones include: 1) the Northeastern Paramos and Moist Forests, 2) the Alto Putumayo, 3) the Dagua-Calima-Paraguas Corridor, 4) the Altiplano Cundiboyacence, and 5) los Nevados Parks and neighboring coffee area. For Phase 2, given social unrest considerations and that additional biological and ecosystem losses will continue to be documented during Phase 1 implementation, the IAvH will select 3 to 5 of the remaining 6 zones by the time of the mid-term review. The six candidate zones for Phase 2 are: 1) the Cuchilla de los Cobardes and Chicamocha Canyon; 2) the la Rusia Paramo and Quercus Forest of Santander, 3) the Patia Valley and neighbor western Andes Chain mountain forests; 4) the Carare-Op6n region; 5) the Tatacoa desert and; 6) the dry forests of the 10  C: Project Description Summary 1. Project Components. For a detailed overview of the project description and components, see Annex 2. The cost table below presents the financing plan for the project. Indicative Costs Indicative Costs (US$M) (US$M) Component PHASE 1 Entire Project % GEF for entire GEF Total GEF Total projectl Project Conservation Areas 3.22 7.27 5.56 12.53 44.0 Andean Region use of Biodiversity in 2.80 5.53 4.30 8.47 51.0 Rural Landscapes Knowledge base & monitoring 1.82 3.25 3.10 5.60 55.0 Sectoral Integration 0.30 0.40 0.50 0.86 58.0 Project management 0.77 1.27 1.54 2.54 0.61 TOTAL 8.91 17.72 15.00 30.0 N/A The six years' project contains five components: 2. Key policy and institutional reforms supported by the project During the implementation of the project, the component on Sectoral Integration will aim to identify policy and institutional reforms that would support the project objectives, and to the degree possible, the project will support such changes. Examples of likely reforms to be supported by the project includes: modifications or clarifications of government policy and the legal framework, including the creation of economic incentives for conservation activities (currently under study by the National Government with new regulations to be defined); and, more flexibility concerning how conservation objectives can be achieved in protected areas including buffer zones surrounding national parks. A preliminary review of the current framework of incentives for biodiversity conservation indicates that there is a comprehensive set of instruments on the books but their application has been inconsistent. Given the current social and institutional complexities in rural areas in Colombia, it was agreed that an analysis should be undertaken of opportunities in project areas to implement, in a consistent manner, appropriate incentives for biodiversity Andean Region use. The analysis of these opportunities will be done in parallel with the other technical studies (in particular the socio-economic analysis) and aim to incorporate the right tools when required. Accordingly, an activity involving the identification, design, and implementation of appropriate incentives regarding sustainable management of rural landscapes has been added.  3. Benefits and target population The tropical Andes, because of the combination of high diversity and threats, is a global priority for biodiversity conservation. Arresting the loss of biodiversity in this area will result in important global and national benefits. Aditionally, Colombia will benefit from improvements in the management of its natural resources through the new management tools to be developed and disseminated to other government sectors (Components 2 and 4). The project will also directly benefit rural populations and indigenous peoples through support for more sustainable use of biological resources. Bearing in mind that the project will intervene in prioritized conservation zones, some benefits (especially economic) will concentrate on specific geographic places and populations. A list of the target populations in the conservation zones is presented in Annex 10 - Table 1. The project's investment in the creation and dissemination of knowledge will be of value to decision- makers but is also of great benefit to the scientific community both globally and nationally. As a result of the project, there will also be a series of indirect benefits related to agriculture and land management, such as prevention of soil erosion, pollination, as well as direct potential benefits accruing from bio-prospecting, ecotourism and use of biological resources. These will primarily benefit local constituencies in the affected areas, providing potentially improved and more sustainable incomes for rural populations. 4. Institutional and implementation arrangements The project is designed to build upon the already existent institutional strengths of the entities involved. Nevertheless, the new conceptual, methodological and operative contributions constitute a motivation to change or consolidate already ongoing changes and inter-institutional relations. Institutional sustainability of the project will be a key consideration. That is to say, the permanent adoption of the project's objectives by the institutions involved in a long term strategy to diminish the technical, financial and organizational dependence upon international cooperation projects. Under this approach, the project will aim its institutional efforts to: a) guide and inform the main stakeholders about the distribution of responsibilities, motivation and organizational forms; b) increase the organizational capacity of the institutions in shared leadership, cooperative participation, participatory design and conflict resolution; c) adapt existing external abilities, increasing the technical confidence and cost-effectiveness of project results; d) design a realistic structure of tasks and activities, taking into account a participatory planning framework, adequate duration, flexibility and a follow-up and self-evaluation system. Implementation Period The grant is expected to be implemented over a six year period and has been divided into two phases - each phase lasting 3 years. At the end of Phase 1, during the mid-term evaluation, the triggers/targets agreed between IaVH and the Bank would be subject to an independent evaluation and judgment would be used by Bank Management on whether to proceed to phase 11 or not. The triggers/targets are an integral part of the Grant Agreement between IaVH and the Bank. 12  Executing Agency: Instituto Alexander von Humboldt (IAvH) The Instituto Alexander van Humboldt (IAvH) will execute the project. (for a full description of the IAvH, please refer to section 2b). A letter sent in September 2000 by the Minister of Environment and Focal Point for the GEF designated full responsibility of the project to the IAvH. The IAvH General Director will be responsible for entering into legal agreements with the Bank and other project donors and will act as the official liaison for the project. The IAvH Director will also give general directives for the project, as well as approve and follow-up on the Annual Operating Plans. For other project matters, the lAvH director will be assisted as follows: A) IAvH General Assembly . In accordance with the Institute's by-laws, this Assembly is composed of 18 members from the Ministry of Environment, the National University of Colombia, Colombia National Sciences Foundation (Colciencias), Regional Autonomous Corporations (CARs), Non Government Organizations and Public and Private Universities. The Assembly meets once a year and determines the directives and policies of the Institute and selects the Annual Fiscal Auditing. For project purposes, the Assembly will oversee the overall auditing of the project to ensure that it is in compliance with the agreement entered into with the Bank. B) IAvH Board of Directors. In accordance with the Institute's by-laws, the Board of Director has 9 members. This Board is chaired by the Minister of the Environment and includes members of private and public universities, NGOs, CARs and the Colombian National Sciences Foundation (Colciencias). For project purposes, the Board will oversee monitoring and evaluation of the project. It meets several times a year and will be responsible for project follow- up. C) Tripartite Committee: In addition to the support from IAvH's Assembly and Board, the IAvH director will work closely with Bank and co-financier staff to approve the annual POAs and supervise project implementation (see section below on Project Supervision). Project Coordination Unit The IAvH will establish a project coordination unit (PCU), whose core staff will be a National Coordinator (NC) under the supervision of the General Director of the Institute, an Assistant and a Secretary. The National Coordinator will be responsible for the day-to-day operations of the project such as planning and report writing, coordinating the selection of beneficiaries and, supervising administrative and financial activities as well as technical monitoring and evaluation. The PCU's responsibilities will also include the development of inter-regional, inter-institutional and inter-sectoral relations to give support regional and local project activities. The PCU will include the Thematic Unit (TU), the Regional Unit (RU), the Institutional Unit (IU) and the Financing and Administrative Units (discussed under the Financial management section, below) to support implementation of different aspects of the project. Currently, the IAvH already has a National Coordinator, a Financial Administrator and various Technical Coordinators which will continue working for the project. A. Technical Experts: The Thematic Unit (TU) will operate with four experts, each in charge of the four main project components (Conservation Areas, Biodiversity in Rural Landscapes, Knowledge Base and Monitoring, Sectoral Integration). These experts will have a technical background in the main topic of the component they will be responsible for and they 13  will prepare the Annual Operating Plans and the bi-annual technical reports. In addition, they will ensure conceptual and methodological coherence among all activities and the integrity of the project and providing feedback to regional coordinators and the PCU. B. Regional Links: For Components 1 and 2, the Regional Unit (RU) will operate with 3 professionals who will ensure the coordination among the national office and the local activities in order to keep regional actors infonned about the evolution of the project at national and inter- regional level and to foster the required support for the participatory design and implementation of the Annual Operational Plans. These professionals will be required to have experience in the region they will act and demonstrated abilities to work with many different actors. They will keep in close rapport with the technical experts. These regional staff will ensure the implementation of the Annual Operational Plans agreed. They will establish regional teams under the lead of a relevant regional entity, in many cases the Regional Autonomous Corporations (CARs). Representatives of the CARs, Non Governmental Organizations, regional universities, the National Direction of the National Natural Parks Unit, and members of the PCU (see below for description of the PCU), among others, will form part of both teams. The tasks and local activities of the project will be carried out through local and regional organizations such as NGO's, universities, local associations, CAR's, Regional Units of UAESPNN, through co-operation agreements and contractual figures. All stakeholders will evaluate their own results and will form part of the project's information, follow-up, control and monitory system. C. Institutional Expert: The Institutional Expert will be in charge of organizing, implementing and evaluating a training and development program for the development of the biodiversity institutional capacity in the Andes. The institutional expert will also be in charge of strengthening the national, regional and local networks of actors related to the project. Project Management Successful project management will be contingent on: (a) effective decentralized execution of the project; (b) timely financial evaluations; (c) adequate informnation for decision making processes; (d) participatory processes with all the relevant actors and stakeholders; (e) timely responses to changes in the context of the project; (f) efficient relations and operative processes with GEF and the Government of the Netherlands. The participatory decision-making structure aims to increase the management capacity of the stakeholders in the five regions of the project (Phase 1) through the implementation of shared leadership principles. A full description of project activities is spelled out in the Operational Manual. Yearly project management will be governed by Annual Operating Plans (POAs), which will include a statement of specific objectives for the year, a description of the activities, expected outputs, monitorable indicators, detailed estimated budgets and a procurement plan. POAs will be prepared by the PCU for the project as a whole (GEF, the Netherlands, CARs and other donors), indicating the source of financing in the budget. Those CARs approached by IAvH during project preparation have responded very favorably with letters of intent to pledge cooperation and financial resources. Resources provided by CARs, as counterpart financing, will be executed directly by them in there area of jurisdiction. The Netherlands8 and other donor contributions of counterpart financing will be executed s The Netherlands has submitted a letter of intent and the full proposal is expected to be approved and signed with 14  directly by IAvH. Mutual responsibilities and obligations regarding project implementation and investment financing will be presented on a yearly basis through the POAs for review and approval by the IAvH, the Dutch Embassy in Colombia and the World Bank in September. The full description of all administrative procedures, including how to plan, prepare, select, procure, contract, finance and supervise project activities will be spelled out, as a condition of effectiveness, in the Operational Manual, which will guide the PCU in the implementation of the project. The IAvH will submit to the Bank bi-annual progress reports tracking physical and financial performance targets by March 31 and September 30 of each year. Twice a year after receipt of the progress reports, the Bank, the IAvH and the Dutch Embassy, assisted by independent consultants, would conduct a mission to jointly review progress made against objectives and monitoring targets. Program Monitoring and Evaluation. The IAvH would be responsible for ensuring that project results and impacts are monitored throughout the life of the project. The preparation team has agreed to use a participatory approach and the use of independent consultants to carry out the monitoring and evaluation functions of the project. Performance monitoring indicators are included in the Operations Manual and in Annex 14. As specific activities are developed in the POAs, corresponding performance indicators will be agreed upon. The PCU will annually visit sites where activities are taking place to review specific indicator performance and to make suggestions on how to improve project performance. A self-evaluation mechanism will be applied through participatory processes with project stakeholders. Self-evaluation is considered a key element of the project as the participants become evaluators rather than objects of evaluation. This mechanism will also allow for the analysis and discussion of both measurable results and working processes in addition to facilitating the systematization of conclusions and learned lessons, turning into a valuable planning and adjustment instrument, and can be used periodically without incurring in further expenditures in terms of human, technical and financial resources. The evaluation by project stakeholders will also play the role of peer evaluation, which has been considered one of the most effective evaluation mechanisms in project with a variety of stakeholders. The results of these evaluations will be an integral part of the biannual review by Bank and donors. Mid-Term Review. The Bank and the IAVH will not later than the 36th month after the Effective Date, undertake an in-depth review of the progress of the Project to evaluate the Project's implementation arrangements and its on-the-ground effectiveness based on the targets set forth in Annex I A of this document. For that purpose, the IAVH will , not later than one month before the date of such review, prepare, contract out an independent evaluation to consultants acceptable to the Bank under terms of reference satisfactory to the Bank, and furnish to the Bank, a report on the progress in the carrying out of all components of the Project, the achievement of such targets, and on lessons learned therefrom. Financial Management Administrative and Financial Staff: A Financial Administrator is already appointed for the project with high qualifications and will be responsible of the financial and administrative IAvH before Grant Effectiveness. 15  aspects of the project such as ensuring that the Operational Manual is followed, contracting services and goods, monitoring financial transactions and reporting, etc. (see Financial management below for more details). This Financial Administrator will be assisted by two new staff in charge of procurement and in financial management, two additional outside accountants and one secretary which is already part of the IAvH staff. Accounting and Financial Arrangements: Accounting and financial management of project resources will be under the responsibility of the PCU. The PCU will be responsible for project administration, signing contracts, authorizing payments, disbursing funds, supervising contracts technically, administratively and financially, consolidating project accounts and information, budgeting, preparing financial reports, establishing internal controls, contracting out independent audit for the project. Project accounting and management will start with the submission of SOEs. A year after project initiation and after installing an integrated project financial system acceptable to the Bank, the PCU shall prepare and submit to the Bank quarterly project management reports (PMRs) linking project expenditures to key monitoring indicators of activities carried out during each quarter. The formats and basis to produce those reports would be in accordance with the Bank Financial Management Manual and LACI procedures. In addition to project management reports, external audits of project financial statements and IAvH statements will be required on an annual basis (see below for more details). Operational, financial and audit procedures are being speIled out in the Operational Manual and will be a condition of Grant Effectiveness. Counterpart CARs' and the Netherlands's funding will be managed independently from the GEF funds. These funds are financial resources and not in kind. The role of the PCU with respect to counterpart funds is to ensure their yearly budgeting in the POAs and to report the activities carried out for the project and funds utilized during the year The CARs have already submitted a commitment letter spelling out their contributions towards the project. The Netherlands has also submitted a letter of intent and the full proposal will be approved and signed with IAvH before Grant Effectiveness. The IaVH is also required to present signed Cooperation Agreements with the CARs participating in the project on a yearly basis stating clearly their financial contribution to the project. Procurement: The full description of the procurement arrangements and plan have been discussed with the IAvH and are included in the Operational Manual and in Annex 6 of the PAD. The PCU will be responsible and would follow Standard Bank Procedures for all Project Procurement, and ensure their enforcement in procurement by beneficiaries. A three-year procurement plan and all procurement procedures are being included in the Operational Manual which is a condition of Grant Effectiveness. Procurement would include consultant services, goods and equipment. Disbursements: A Special Account shall be established in a Commercial Bank acceptable to the Bank. The account will be managed by IAvH. The IAvH, will be responsible to regularly submit withdrawal applications, supported by the appropriate documentation according to Bank disbursement procedures. The GEF grant would be disbursed against eligible expenditures as shown in Schedule C Annex 6. Disbursements would be made on the basis of full documentation for all expenditures made under contracts requiring prior review by the Bank (Schedule B-Annex 6). For all other expenditures, disbursements would be made against SOEs for which supporting documents would be maintained by IAvH and the beneficiaries and would be available to the Bank and to the independent auditors for review.. After the first year, it is anticipated that project financial monitoring mechanisms agreed with PCU will enable GEF 16  funds to be disbursed on the basis of PMRs linked to expected project activities during such quarter. Retroactive financing will be authorized for an amount up to SDR 390,000. Taxes are not eligible and they will be paid from the counterpart funds. Financial System: The PCU has agreed to install an integrated financial system to monitor the financial and physical activities of the project. The integrated financial system would include planning, internal controls, accounting, project monitoring and financial reporting. The project chart of accounts would be structured accordingly assuring that project investments will be accounted by components and categories established in the PAD. This will be done before Grant Effectiveness. The project accounting and financial system would gather processed and accounting data in order to produce accurate financial information. The accounting and financial system would be linked with others project monitoring systems assuring reliable information. Auditing Requirements: The PCU within the IAvH will be responsible for preparing combined financial statements for the project as a whole. The project account will be audited annually; consequently, an annual audit report of project accounts, and a separate opinion with respect to the Statements of Expenditures and the Special account will be prepared by independent auditors acceptable to the Bank, in accordance with International Standards on Auditing and the guidance provided in the "Guidelines and Terms of Reference for audits of Project with Financing by the World Bank in the Latin America and the Caribbean Region: (the guidelines). The auditors will be selected before the beginning of each year to be audited. The PCU will submit to the Bank a certified copy of the agreed audit report no later than four months after the end of each year. TORs for all audits should obtain the Bank's no objection. TORs for the first year Auditors are a conditon of Grant Effectiveness. Operational Manual: The functions and responsibilities of the project management would be governed by the Operational Manual, which would include, among other aspects, project procedures, financial guidelines, annual POA cycle, criteria for selecting beneficiaries, staffing and assignment of staff responsibilities, supervision of beneficiaries, flow of funds, special account, budgeting, auditing, reporting as well as procurement and disbursement procedures. The Project Operational Manual will be a condition of Grant Effectiveness. We received a draft Operational Manual during negotiations. Detailed procedures for selecting beneficiaries on the diverses components have been included. The Manual will also contain the model contracts or "convenios"that will be used to disburse funds to implementers/ beneficiaries. The IAvH will submit for Bank approval detailed activities of each component in the yearly POA. For components 1 and 2 which involve activities on the ground, before selecting the implementers/beneficiaries, the IAvH will strictly apply the eligibility criteria for environment and social safeguards. (See Annex 11, 12 and 13). Specifically, the eligibility criteria that only project activities with no conflicts in land tenure and land use will be financed will be strictly followed. The Bank will monitor that these rules are followed during supervision. D: Project Rationale 1. Project alternatives considered and reasonsfor rejection Government execution. An alternative to the project design consisted of a project executed by the Government of Colombia with the support of third party agencies. However, it was considered 17  preferable that the executing agency be independent of the central govermnent budget, in view of the current financial difficulties and the difficulties associated with routing resources through the government budget. Period of execution and phasing of the project. Consideration was given to a longer period of execution and a possible APL approach in view of limitations in institutional capability. A two phase, six-year project was finally selected as a feasible alternative. The project would be implemented in eight to ten different zones by regional entities under agreement with the IAvH on a more or less parallel track. During the first phase, the project would target its investments in five zones. Regional vs. local coverage. A project covering only part of the Andes region was considered. However, the government has decided to assign a strategic, umbrella role to this initiative, requiring therefore that it deals with regional issues for the entire Andes. In the same vein, an alternative was considered to restrict the project to a single biogeographical unit as for example cloud forests or paramos. This alternative, being supported through some parallel activities supported in Colombia by the GEF, would not have provided the level of support required to address the issue of rapid loss of habitat and biodiversity in the Andes region as a whole. Conservation only approach. Consideration was also given to a simpler thematic focus restricted to conservation (e.g., strengthening of the NPAS). However, as the National Biodiversity Plan clearly states, given the state of intervention in the Andes, a more comprehensive approach that includes agrobiodiversity (rural landscapes) is required to increase the effectiveness of the activities proposed. at the country level. Security and illegal crops issues. Careful consideration was given to evaluate whether investing biodiversity conservation funds in Colombia has a high risk of being wasted due to the insecurity and to the illegal crops issues. After discussions with the Government, international NGOs working in Colombia and bilateral donors, it became clear that conservation work can be effective in Colombia as long as a balanced investment approach is taken. The IAvH submitted a strategy to deal with insecurity issues. The main key of this strategy include: I) The project has taken multiple themes approach including investing in research and policy at the national level and investing in local areas not affected by the insecurity and illegal crops issues. 2) The selection of conservation zones carried out during preparation has focused heavily in avoiding high risk areas and therefore, ensuring project success even in the local areas investments. 3) Project design has taken into account the lessons learned from conservation actors that have been able to successfully implement conservation projects in many areas in Colombia for several consecutive years. . 4) A flexible response has been included where the project design allows the Conservation Zones to be monitored for security issues and to move out of a Zone to another at any time without loosing the objectives of the project. The IAvH has built in mechanisms in project execution where the local entities and NGOs that can work most effectively at the local level are selected. One of the selection criteria is their success in operating safely in areas. 18  5) The project has designed a monitoring system that will be able to tell IAvH where the risks are in real time. 6) And finally, the project is designed to move in gradually and firmly to one Zone, but it will be able to make tough decisions of pulling out of a Zone, if needed. For a full description of security issues and how the project has been taking them into account is described in Annex 17. 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 and prepared Develop the policy, institutional and Natural Resources S S technical base for sustainable natural Management (Loan No. 3692) resource management within decentralized framework, with emphasis on forestry sub- sector and Pacific Coast region Develop operational capacity to canry out an Magdalena Medio Regional S S ambitious ten-year, community led, multi- Development Project/LIL sectoral development program in one of the (Loan No. 4371) most conflictive regions of Colombia Develop methodology for establishment and Peasant Enterprise Zones for S S operation of "zonas de reserva campesina" Peace Project/LIL (Loan No. for areas of colonization affected by 4363) violence, illicit activities, and degradation of natural resources Provide matching grants for investment Rural Development S S projects to be carried out by municipalities Investment Program (Loan and communities in order to increase No. 3250, completed) incomes and living standards of rural communities Andean Region development of the Sierra Andean Region Use of Nevada de Santa Marta Biodiversity in Sierra Nevada de Santa Marta (GEF grant and Bank LIL under preparation 19  Promotes a strategy for the sustainable use of Sustainable use of S S biodiversity in the westem slope of the Biodiversity in the Westem Serrania del Baud6 in a joint effort between Slope of the Serrania del governmental institutions and civil society, Baudo" (Medium-sized and for the benefit of the local communities Project under implementation). Community Based Management for the Naya Community Based Conservation Corridor (Medium size GEF Management for the Naya project under preparation) Conservation Corridor (Medium size GEF project under preparation) Supports the establishment and demarcation of indigenous territory as a strategy for Conservation of Mataven natural resources conservation. It is working Forest (Etnollano) (Medium on the creation and management of the first size GEF project under "Indigenous National Park" in Mataven preparation) forest in the Amazon. Other development agencies - Indigenous consultation on the sustainable development plan for the Sierra Nevada de Santa Marta (implementation) - Conservation of paramos and high-andean forest biodiversity in the Macizo Colombiano (GEF project under preparation) - Biodiversity conservation in the Macarena Special Management Area (GEF project under preparation) UNDP Government of the Netherlands - Consolidation and institutionalization of the conservation strategy for the Sierra Nevada de Santa Marta (implementation) Government of Spain - Biocommerce Initiative GTZ - Checua river watershed erosion control project. WWF - Planning for the Northern Andes Ecoregion TNC - Western Andes Chain Program IUCN - Sustainable Use Initiative for the Northern Andes Region IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 2a) Linkages with World Bank portfolio. The World Bank has supported a natural resources management project (Loan 3692 Natural Resources Management). This US$ 65 million project (US$ 39 million lent by the Bank, US$ 7.10 million from the Netherlands and the rest from the 20  government), started in 1994 and is expected to close in December 2000. Its main objective is to develop policies and mechanisms that would help arrest the ongoing degradation of natural renewable resources in Colombia. The main components include: (i) support for the development of a national forest policy and of a strategy for natural resource management in the Choc6 Region, including actions such as ecological zoning; the establishment of an environmental monitoring system for four ongoing forest use projects; and titling and demarcation of indigenous reserves and of Afro-Colombian communities; (ii) in the western Highlands, protection and rehabilitation of selected watersheds; (iii) investments in the improved management of national parks and buffer zones; (iv) strengthening of programs and institutions for forestry/environmental education, training, research and pilot projects; and, (v) the strengthening of the regional park system through a Dutch grant. Project implementation has proved satisfactory to date. It was the first phase of a longer-term program and has generated the policy, institutional, and technical base for future forest management and land titling investments in the Choc6 Region. Although a different environmental and socioeconomic region from the Andes, experience and lessons learned will prove of great use to the current project, in particular those related to watershed management. 2b) Collaboration with Other GEF Implementing Agency. The MMA developed a "National Strategy for the Conservation of the Andes" in August 99 that presents a well structured coordinated program approach for the Andes. This document describes the rationale, complementarity, linkages and thematic and geographic differences among all the different GEF investments in the Andes region. This document is an evidence of cooperation and coordination between the Implementing Agencies and the Colombian Government in early project design and preparation. A summary of this strategy developed through consultatiors and meetings between the MMA, coordinators of the projects in the Andean Strategy and the GEF implementing agencies World Bank and UNDP is presented in Annex 14 and 15. Due to the range of GEF biodiversity initiatives in Colombia the GoC with IA collaboration has taken important steps to define a coherent program approach in order to optimize resource allocation, ensure synergies and complementarities within the GEF biodiversity window and maintain overall coherency with national priorities, policies and plans. For a summary of this process and a presentation of the Colombia GEF portfolio please refer to Annex 14. Other important initiatives related to the project are the WWF program for the northern Andes region, TNC project for the Eastern Andes Chain (Colombian and Venezuela) and the IUCN Northern Andes Sustainable Use Initiative to which the project has been in contact during preparation through the IAvH, which in all cases is a Colombian partner of these initiatives. Additionally, the IAvH is implementing the Biocommerce Initiative for Colombia with financial and technical support of the UNCTAD and the Government of Spain which will be of great support for the Rural Landscapes Component. 3. Lessons learned and reflected in proposed project design Limited Institutional Capacity in the Government Project resources cannot be tied to inefficient disbursement procedures and project execution should be in the hands of agile and efficient institutions. The project uses an executing agency that would avoid bottlenecks in terns of capacity of implementation and budgetary authority. 21  The implementation and administration responsibilities will be with the executing agency, the IAvH, and no funds will be channeled through the central government's budgetary system. Protected Areas/Conservation Approach Effective biodiversity conservation requires a regional approach. The project seeks a conservation area approach that includes landscape management. Given that parks as islands of conservation are not socially nor ecologically sustainable, the project will establish conservation areas of varying types (IUCN categories I-VI), with sustainable, long-term management plans. Varied local conditions require a tailored approach to specific protected areas. The project will incorporate local conditions in the design and management activities. With support from the PDF Block B, public participation has contributed to processes appropriate to the local context. Effective management of conservation areas requires a participatory approach. Conservation activities will only work in the Colombian sociopolitical context if there is social consensus. Therefore the project seeks participatory management of protected areas. The participation strategies will accommodate local biophysical and socioeconomic particularities, depending on the region and zone. Economic Incentives/Development Plans Biodiversity concerns need to be incorporated to broader political and socio-economic frameworks. The project will assist in a major effort to incorporate biodiversity considerations into sectoral planning. This project, therefore, utilizes economic and other incentives as a conservation strategy, through reciprocal benefits agreements and the generation of local benefits. Project Implementation/Monitoring The project must be flexible during implementation. It needs to be evaluated regularly and adjustments need to be made to the components and strategies. The fact that the project is designed in two phases will provide for this flexibility and possibility of learning from one phase to the next. The participation strategy needs to be one of the most flexible activities Better efficiency and effectiveness during execution require an adequate monitoring and evaluation system. The project will make efforts in the acquisition and expansion of the knowledge base and development of methodologies for monitoring and to construct appropriate indicators, and, in accordance with similar GEF projects in Colombia, will monitor the application of the national biodiversity policy and the contribution of the projects. 4. Indications of borrower commitment and ownership The central government has committed its support in a number of ways: endorsement of the project by the GEF focal point (the Minister of Environment), participation in all preparation missions for the project, dedication of IAvH staff to prepare and coordinate all aspects of the project, identification by the Government of biodiversity conservation in the Andes as one of the top ten environmental priorities of the country (National Development Plan). 22  Through its 1991 Constitution, the Republic of Colombia has effectively decentralized the responsibility for environmental management to the Regional Autonomous Corporations. Ownership of the project by the CARs is critical to the project's success. Every CAR that has been approached by IAvH during the preparation of the project has responded very favorably with pledges of cooperation and financial resources. The US$8.0 million of formal counterpart funds from the CARs is the most striking indication of their ownership of the project. During the pre-appraisal mission, the IAvH provided the Bank with copies of letters of intent to participate in the execution of the project indicating the counterpart funds that they will allocate to the project.. The Parks Unit has also confirmed its participation. Resources provided by CARs as counterpart financing will be executed directly by them in their jurisdiction area. Mutual responsibilities and obligations regarding project implementation and investment financing will be presented on a yearly basis through the POAs that the Bank will review and approve in September each year. 5. Value added of Bank and Global support in this project As an implementing agency of the GEF, and a committed lender in the environment sector, the World Bank has an active biodiversity portfolio in Latin America and the Caribbean. The Bank brings its experience within this sector to bear on this project. Specifically in Colombia, the Bank has been supporting the Natural Resources Management Project (including protected area components in the Choco) for many years and has a number of other GEF biodiversity projects now under preparation (see section D2). Beyond experience in the natural resource management sector, the World Bank also brings to this project its experience in social sectors. In Colombia the Bank is executing a project in the Magdalena Valley directed at helping with development and conflict resolution in rural populations. Finally, the Bank's extensive investment in Colombia, in sectors as varied as transportation, agriculture, and energy, provide potential access to some of the key non- environmental sectors this project aims to influence through the Sectoral Integration Component. The value added of global support with GEF resources resides in the fact that GEF resources are critical for supporting the global incremental costs of biodiversity conservation in globally significant ecosystems and for providing a platform for strengthening national coordination in the sector, as a complement to regional action at the field level. E: Summary Project Analyses 1. Economic Incremental Costs. Project activities that will yield global benefits and generate incremental costs are eligible for GEF financing. To calculate the incremental costs of the project, an estimate of the baseline expenditure was made to establish the current and planned amount of funding for Andean Region use of biodiversity in the selected sites in the Andes region as well as for national level planning, during the life of the project. The difference between the cost of the baseline scenario (US$ 128.93 million) and the cost of the GEF alternative (US$ 158.93 million) is estimated at US$ 30 million. This represents the incremental cost of achieving global environmental benefits through establishing new protected areas, strengthening policy and legal frameworks for protected area management, developing mechanisms for Andean Region use of 23  biodiversity and natural resources in rural landscapes, and strengthening local and national capacity for conserving globally significant biodiversity. Co-financing for the GEF alternative from international and other local donors is estimated at US$ 15.0 million. The Regional Autonomous Corporations have committed to mobilizing US$ 8.0 million toward the GEF alternative; these will cover recurrent and investment costs for the conservation areas, rural landscapes and sectoral integration activities. The contribution from the CARs has been written in the GEF/Bank-IaVH grant agreement and will be provided on a yearly basis over the life of the project. The Netherland Embassy has committed US$ 4.0 million to IaVH for the first phase of the project. The signing of the Netherland - IaVH agreement is a condition of grant effectiveness of the GEF/Bank-IaVH grant agreement. NGOs and other organizations will contribute US$ 1.0 million as matching funds to the grants they will receive from the GEF project. Finally, US$ 2.0 from other donors will be sought during the life of the project. The GEF grant contribution would be US$ 15.0 million (see Annex 4 for the detailed Incremental Cost Analysis). 2. Financial Fiscal Impact. The project would not directly result in an increase or decrease in revenues to government. Moreover, the protected areas would develop capacity to generate and retain funds through introduction of visitor fees and other income earning activities that will reduce pressure on the national budget. Tourism generated as a result of the project will also help increase Colombia's tax base as a result of increased spending by consumers and foreign visitors. Mechanisms to provide for the project's long term sustainability have been otherwise provided for in project design in a number of ways: (i) development of revenue generating activities, such as ecotourism, bio-commerce, non-wood forest product development, etc.; (ii) investigation and implementation of recurrent funding mechanisms such as taxes and levies on production from natural resource exploitation and the creation of a fund for the areas to provide long-term financing for biodiversity conservation and local community participation; (iii) design of the project to ensure that it will not create an additional burden on public expenditure by identifying maintenance and additional costs within current budgetary allocations (part of baseline). The contributions by the CARs and IAvH will cover some salaries and expenses of staff working on the project as well as providing offices and other administrative support. 3. Technical Technical studies. Seven technical studies have been contracted by the IAvH with PDF-B financing and one study has been financed through the WWF-World Bank Alliance. The results of these studies have been used to assist in the design of the project. All the teams leading the studies met with the IAvH and Bank representatives to review the results as a group. The studies address: i) institutional arrangements; ii) socio-economic assessment; iii) design of a system of indicators; assessment of representativity and transformation of Andean ecosystems under protection; iv) design of an education and awareness program; v) review of productive systems in the Andes and assessment of sustainability; vi) review of sustainability mechanisms for proposed project activities; and vii) regional cooperation plan. All technical studies have been concluded and the results have been integrated in this project document. 24  There are no other technical issues requiring special attention. It could be noted that some of the work to be carried out in the component on Andean Region Use of Biodiversity in Rural Landscapes is expected to lead to some innovative and technically interesting management tools. 4. Institutional Institutional issues in the environmental management sector are particularly complex in Colombia due to the decentralization of environmental functions to the CARs. A study on the institutional issues was carried out during preparation and resulted in the institutional arrangements described before. Discussions during project preparation resulted in a strong recommendation by the Ministry of Environment to designate IAvH as the executor of the proposed project. A letter from MOE was received in September 2000 to that effect. Under the terms of the recommended structure, the project would be highly decentralized in its execution. Regional activities would be the responsibility of local actors such as the CARs, University, NGOs, associations, etc.. who would enter into collaborative agreements with the IAvH. Likewise, the Parks Unit, through the corporation recently announced by Minister Mayr, would also enter into a collaborative arrangement with the IAvH. The Bank met with a few CARs and discussed the institutional arrangements. These are spelled out in the section on institutional arrangements. 5. Social A social assessment (SA) and participatory consultations have been completed for the project. Spanish versions of the full SA are available in the project files. The assessment was based on a review of literature, including recent reports such as "Economia y sociedad rural en los Andes colombianos", "Procesos socioecon6micos que actuian como actores de presion sobre la biodiversidad andina en Colombia" and "Conflicto agrario y medio ambiente". Interviews with experts were also carried out wherever information gaps existed. Finally, national and regional consultations were carried out during preparation to verify the outcomes of the social analysis. The social assessment was carried out at two levels. The first level is the whole Andean Region. For this level of analysis, the overall socio-economic analysis was carried out, and the main social issues and the institutional context identified. With this information at hand, the preparation team carried out national level consultations to select the project intervention zones. The major factors used to select the project zones were the socio-economic issues and the biodiversity. This analysis is presented in Annex 11 (social assessment) and Annex 18 (biological analysis). Once this level of analysis was concluded, detailed socio-economic information was gathered for each major project zone. In addition, regional consultations were carried out in selected project zones. The results of the regional consultation process identified the key social issues for each project zone and deterrnined the key activities that would be supported by the project to address these social issues. The results of this analysis are presented in Table I at the end of Annex 11. A detailed summary of the socio-economic assessment is presented in Annex 11. Annex 11 includes: 1) a socio-economic profile of the Andes Region, 2) identification of the main social issues, 3) a description of the institutional context, 25  4) description of the national consultations and participatory process, 5) how social issues have been taken into account in the selection of project zones. 6) description of the regional participatory process carried out during preparation. 7) how social issues have been taken into account in each project zone (Table 1). 8) formulation of a participatory framework during project implementation. The project pays special attention to the Indigenous People. The IAvH carried out consultations with the Indigenous People in the project zones and has completed an Indigenous Peoples Development Plan (IPDP) (see Annex 12). The project will not have any resettlement as indicated in Annex 13. In sum, the following overall issues have been identified for the project: * The selection of project zones was based on socio-economic data, issues of violence, and other social criteria; * The project will not have negative social impacts on the populations in the project areas; * There will be no resettlement in the creation of new protected areas (see Annex 13). * The project has a clearly defined participatory focus. * The project's local activities are being designed through a phased participatory approach (macrozones integrated plans and protected areas management plans) that aims at involving key stakeholders at a local level described in more detail Annex 11. 6. Environmental a. Environmental issues: Major: There is no major adverse environmental impacts expected as a result of this project. Other: Minor environmental impacts might be expected from some on-the-ground investments. b. Environmental category: [ ] A [x] B [] C c. Justification/Rationale for category rating: The Category B is designed to be entirely positive from an environmental standpoint, particularly by promoting Andean Region use of biodiversity. The project was based on a sound biological and environmental analysis of the current opportunities and threats in the Andean Region. See Annex 18 (biological) and 11 (social) for details. Component 2 will support activities in sustainable development area, but these will be screened for environrmental safeguards before any investments are made. The environmental criteria are spelled out in the Operational Manual. d. Status of Category A assessment: N/A e. Proposed actions: Procedures for environmental impact assessments have been developed during project preparation and are spelled out in the Operational Manual. g. Status of any other environmental studies: N/A 26  h. Local groups and NGOs consulted: Consultations on this project have taken place within the context of the Environmental Alliance for the Andes and during project preparation activities. The project's local activities are being designed through a phased participatory approach that aims at involving key stakeholders at a local level. A summary of the consultations and participatory approach followed during project preparation and the strategy for project implementation is presented in Annex 11. i. Resettlement The Recipient has been informed about the Bank's requirements to have a policy framework applicable to involuntary human resettlements arising from any other donation-financed subproject. The Recipient has responded by stating clearly that no resettlement will occur under the project. The Recipient has submitted an Annex as part of negotiations clearly explaining the safeguards they have taken in the design of the project to avoid at all cost resettlement. A summary of the measures to avoid resettlement is included in Annex 13. The Recipient will screen any activities of the project for potential resettlement issues and will decline financing activities that could present such cases. The project contemplates the creation of a National Park to protect the Cerro Patasco. This mountain is not been occupied by people. The local people (Cofanes) living next to it have asked for the creation of this park. (see Annex 12 on IPDP). The rest of the areas contemplated in the project are conservation easements in private lands and regional reserves with legal rights for people to live in them. Furthermore, the new legislation of the National System for Protected Areas has developed a wide range of categories of protected areas enabling people to live and using resources to support their livelihood and therefore avoiding any needs for resettlement. The project has set as the main eligibility criteria for supporting project activities related to private conservation easements or regional reserves, that they do not impact the land tenure and land use situation of local people. These eligibility criteria are an integral part of the Operational Manual which rules the project. Proposals for these activities will be submitted to the IAvH coordination unit and will clearly describe the current situation around resettlement issues. IAvH will only select proposals with no resettlement issues and proved to be solvent. The project was also designed to carry out activities in rural landscape with local people living around parks. These activities represent an incentive to improve the livelihood of people. So, in no way will project activities decrease people's livelihood, totally on the contrary, it will improve it. j. Borrower permission to release EA: []Yes [ No [x] N/A k. Other remarks: 7. Participatory Approach a. Primary beneficiaries and other affected groups: This project is being prepared under a strong participatory approach (Annex 11). The current project has benefited from the participatory exercise carried out by the IAvH to prepare the National Biodiversity Action Plan. This plan, prepared over the last year with GEF/UNEP enabling activities funds, is the basis of the current project design and involved approximately one hundred experts from the academic, government and NGO sectors. With PDF Block B 27  funds, efforts have been concentrated to identify the priority areas and potential partners at national and regional levels. At the national level, consultations have included the Ministry of Environment, the National Parks Unit, the Environmental Alliance for the Andes (12 national and international institutions), well known experts and NGOs. Once the priority regions were selected, consultations at the regional level have been carried out with all CARs of project phase 1 zones, the private reserves network, regional universities and environmental and social NGOs working locally. In addition, participatory mechanisms and processes have been designed for project implementation as summarized in Annex 11 and these will continue to be carried out at the national, regional and local levels. Some of these mechanisms include: i) Coordination and participation mechanisms at regional decision making level; ii) Consolidation of sectoral action policies; iii) Participation strategy for each of the components of the project; iv) Indigenous peoples development plan; and, v) Application of gender focus in the conservation strategy. Because of the scope of the project, having national, regional and local activities, the list of beneficiaries and stakeholders is presented in Table 1 of Annex 11. A summary list is presented below. Indigenous communities: Cofanes (ZIO organization). Non-Indigenous communitiesl Campesino Organizations: Several organizations have already been contacted and include: the Association of Farmers Development (Asociaci6n para el desarrollo campesino) and the Farmer's Association for the Sustainable Development of Northern Boyaca (Asociacion Campesina para el desarrollo sustainable del norte de Boyaca). NGOs: A database of over 400 social, environmental and education NGOs working in the Andes was collected during project preparation. A large number of them will be beneficiaries of project activities during implementation. The NGOs consulted during the project design phase are: The Nature Conservancy, Conservation International, WWF-Colombia, Pro-Sierra, the Civil Society Natural Reserves Network. b. Other key stakeholders: Other key stakeholders are municipal and departmental governments as well as CARs within project zones (See Table 1 in Annex 11). Also national level institutions such as environment, transport, agriculture and mines and energy ministries, National Planing Department, Parks Unit. 8. Checklist of Bank Policies a. This project involves (check applicable items): 28  [x] Indigenous peoples (OD 4.20) [ ] Riparian water rights (OP 7.50) (BP 7.50) (GP 7.50) [] Cultural property (OPN 11.03) [ ] Financial management (OP 10.02) (BP 10.02) ] Environmental impacts [ ] Financing of recurrent costs (OMS 1.21) (OP 4.01) (BP 4.01) (GP 4.01) [x] Natural habitats [ ] Local cost sharing (OP 4.01) (BP 4.01) (GP 4.01) (OP 6.30) (BP 6.30) (GP 6.30) [x] Gender issues (OP 4.20) [ ] Cost-sharing above country three-year average (GP 6.30) (OP 6.30) (BP 6.30) [ ] Involuntary resettlement (OD 4.30) [ ] Retroactive financing above normal limit (OP 12.10) (GP 12.10) [x] NGO involvement (GP 14.70) [ ] Disputed territory (OP 7.60) (BP 7.60) (GP 7.60) [x] NGO involvement (OP 4.36) [ ] Other (provide necessary details) b. Describe issue(s) involved, not already discussed above: F: Sustainability and Risks 1. Sustainability The project will promote integration of biodiversity concerns with other sector policies and it will work towards intersectoral coordination that takes biodiversity and sustainable resource use into consideration. This will help influence the investtments of the country, complementing and redirecting resources towards Andean Region use of biodiversity. Joint financial efforts of different sectors to promote Andean Region use will generate a larger positive impact on biodiversity. * Each component of the project will attempt to put in place self-financing mechanisms to recover the initial investment and/or to make the project financially viable in the long term. These mechanisms will include those that generate income for local communities and for public and private organizations involved in biodiversity conservation. * The project will design, adapt and promote incentives and other economic instruments for sustainable agricultural production (such as compensation for environmental benefits and services) when appropriate and feasible. Pilot projects will be undertaken in project sites in order to implement and test these instruments. * The project will put in place ecotourism programs in protected areas where appropriate. Income generated from service fees and concessions will be used to maintain the protected areas and to promote Andean Region use of biodiversity in areas in and around protected areas. * The project will aim at making use of the Clean Development Mechanism once it becomes available. * The project will identify barriers to sustainable use of natural resources and will attempt to remove these barriers. 29  * The project will promote bio-commerce through facilitating the use of capital funds such as Banco Verde, Latin American Biodiversity Venture capital fund and Environmental Enterprises Assistance fund. For financing in the medium term, the project will establish a fund to support biodiversity-friendly resource use projects and a fund-raising mechanism that will attempt to channel funds from international sources such as Iniciativa de las Americas, ECOFONDO, Iniciativa de Bosques, Biodiversity Venture Capital Fund, resources from Spain, Germany, the Netherlands as well as the Clean Development Mechanism; national sources such as Fondo Nacional de Regalias (conservation areas and micro-catchments),; regional sources such as municipalities, NGOs and CONIF. * The project will contribute to the reduction of uncertainty and costs and implicit risks in sustainable environmental investments and the creation of new markets by providing information, funds, and institutional and technical assistance as well as training and educational programs. * The project will encourage the investigation of international markets for new products in agro-forestry and silvicultural systems using mechanisms such as CCI (Corporacion Colombia International). * The participatory nature of the project will ensure social sustainability of project activities. It will also assist the peace process and the efforts to reconstruct of the damaged social fabric in Colombia by creating democratic, decentralized and efficient institutions, generating employment through participatory and alternative agricultural sector development, and therefore ultimately reducing poverty. * Institutional sustainability will be further ensured through capacity building in existing institutions that are responsible for or involved in Andean Region use of biodiversity at the national, regional and local levels. 30  2. Critical Risks Risk Risk Rating Risk Minimization Measure Violence H Focusing project activities on areas where violence has a low impact on conservation activities Unforeseen land development: - Formal (i.e. development plans) M Sound selection of project areas through overlays and public participation in agreement with development plans Areas of high incidence of illicit crops - Informal M will not be part of project Political support N Active participation of GoC in project design and implementation Long-term financial sustainability not achieved M Project will establish sources of funds: i) CARs have long-term financing; ii) a fundraising unit will be established Legal rights of people to use biodiversity N Project based on incentives infringed Land tenure issues unresolved M Project will not buy land; project will define criteria for Fund and accommodate land tenure issues in the field Lack of stakeholder interest (i.e. producer M Project will target identified groups and associations, sectoral agencies, decision makers) present benefits of changed practices Intersectoral accords ineffective M Follow-up, monitoring and evaluation. Project will initiate publicity campaign and disseminate information about accords among interest groups Corruption N Close supervision Technical and institutional capacity inadequate H Project activities dedicated to for initiation of rural landscape transformation developing this capacity Local media not sufficiently engaged M Program to target local media Productive landscape systems compatible with M Project investigating alternative income biodiversity conservation not existent generating activities Unwillingness of producers to participate in H Funding sources being developed; productive landscape transformation public involvement being sought; incentives being assessed 31  Risk Risk Rating Risk Minimization Measure Overall Risk Rating S Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) G: Grant Conditions The main grant conditions are summarized in the table below. Conditions of Effectiveness PCU * TORs, list of qualifications and criteria for evaluation and selection for key PCU staff; * All PCU key staff selected ________________ [not in the Grant Agreement] * [this is part of the PCU key staff] Financial * progress satisfactory to the Bank in the Management, Audits carrying out of the Financial Action Plan [not in the Grant Agreement] Grant Agreement Signed between IAvH and the Netherlands Cooperation Signed (amount specified US$500,000 Agreements CARs equivalent) for 5 macrozones Operational Completed Manuals H: Readiness for implementation 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. 1. b) Not applicable. X 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. X 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. X 4. The following items are lacking and are discussed under grant conditions (Section G): 32  I: Compliance with Bank Policies 1. This project complies with all applicable Bank policies. X 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. _ _ _ _ _ _ _