Madagascar - Mineral Resources Governance Project

Report No. 23388 Date ISDS Prepared/Updated: 12/14/2001 Section I - Basic Information A. Basic Project Data Country: MADAGASCAR Project ID: P076245 Project: SECOND MINING SECTOR REFORM PROJECT Task Team Leader: Paulo De Sa Appraisal Date: January 22, 2002 IBRD Amount ($m): Board Date: May 21, 2002 IDA Amount ($m): 35.00 Managing Unit: CMNPO Sector: BD - Decentralization; NN - Mining & Other Extractive Lending Instrument: Specific Investment Loan (SIL) Status: Lending I.A.2. Project Objectives: The overall objective of the project is to assist the Government of Madagascar (GoM) in implementing its strategy to accelerate sustainable development and reduce poverty in Madagascar through: (i) the strengthening of transparency and governance in the management of mineral resources, with special emphasis on small-scale and artisanal mining; (ii) key institutional reforms for the decentralized management of mineral resources; and (iii) the promotion of private investments and value-added in the mining sector. I.A.3. Project Description: The project which would be implemented over a period of five years consists of four components: Component 1 - Strengthening transparency and governance in mining. This component would support measures aimed at improving governance in mining, like the completion of the sector's legal and regulatory reform and its enforcement, with the publication of the remaining diplomas, (arrotes, directives, etc.), as well as programs facilitating the integration of small-scale and artisanal mining in the formal economy, such as the certification of gemstones, and the simplification of marketing channels as a way to fight smuggling and fiscal evasion. A priority would be to support the set-up of Zones d'Activites Economiques Speciales (ZAES) as a way to control the proliferation of rushes for gemstones, avoid the generalized smuggling of output, and mitigate their negative impacts on the environment and the social tissue of affected communities. Component 2 - Key institutional reforms for the decentralized management of mineral resources. This component would support Government's strategy for the building of institutional capacity at a decentralized level with appropriate management and planning tools, through the transfer of competences to the provincial and municipal levels. This would be accompanied by a fiscal reform that would allow the decentralized administration to collect part of the sector's taxes, giving them a direct interest in the monitoring and supervision of these activities. A crucial element of this transfer would be the integration of mineral resources management in the communities' participatory development plans, in order to obtain a fairer share of revenues to the affected population. This would be pursued through further integration with the Community Driven Development strategy aiming at integrating mineral resources management in the participatory development plans, in order to obtain a fairer distribution of revenues to the affected population. This component would also include a robust training program and a communication strategy for the diffusion of the reforms nation-wide.  Component 3 - Promoting private investments and value-added in the sector. Because the investment climate was not conducive to the security of private investments, mining in Madagascar has seldom reached the industrial stage. The geological potential is not known, the artisanal mining methods employed lead to a substantial waste of resources and substantial damage to the environment, and most of the production is smuggled out of the country with little fiscal and economic impact. In order to address this situation, needs to create favourable conditions for private sector investment and develop a track record of successful projects in this sector. Four programs would be contemplated in this component: (i) technical assistance for improving the performance of small-scale and artisanal mining through the establishment of a promotional agency for mining: this activity, aimed at providing decentralized extension services for small-scale and artisanal mining, would build on the pilot projects of integrated management of operations currently being implemented under the MSRP; (ii) support to cutting and polishing of gemstones : this program would be a complement to the previous one, supporting the formalization and promoting the efficiency of value-adding activities for gemstones in the country, essentially through capacity building and training; (iii) strengthening of Madagascar's geoscientific infrastructure and updating of geological information: Madagascar urgently needs to update its basic geological information because it is a powerful tool for private investment promotion and would provide advanced indicators for future potential eruptions of rushes on gemstones; and (iv) a monitoring and evaluation program for the activities of the project. Component 4 - Project coordination and management. Project management would build upon the existing Project Implementation Unit (UCPM) that has shown proven skills in project procurement, financial management and reporting. Components: Strengthening transparency and governance in mining Key institutional reforms for decentralized management of mineral resources Promoting private investments and value-added in the sector Project coordination and management I.A.4. Project Location: (Geographic location, information about the key environmental and social characteristics of the area and population likely to be affected, and proximity to any protected areas, or sites or critical natural habitats, or any other culturally or socially sensitive areas.) Nationwide B. Check Environmental Classification: B (Partial Assessment) Comments: The project will contribute to the improvement of management of the mining sector, particularly with regards to small-scale and artisanal mining and the development of special economic zones. Torwards this end, an Environmental Management Plan will be developed which identifies measures to be taken to ensure that these mining activities proceed in an environmentally and socially sustainable manner. To ensure that the appropriate measures are incorporated in the proposed project, the latter has ben classified as a B. -2-  C. Safeguard Policies Triggered Policy Applicability Environmental Assessment (OP/BP/GP 4.01) Yes Forestry (OP/GP 4.36) No Natural Habitats (OP/BP 4.04) No Safety of Dams (OP/BP 4.37) No Pest Management (OP 4.09) No Involuntary Resettlement (OD 4.30) No Indigenous Peoples (OD 4.20) TBD Cultural Property (OP 4.11) No Projects in Disputed Territories (OP/BP/GP 7.60)* No Projects in International Waterways (OP/BP/GP 7.50) No *By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Section II - Key Safeguard Issues and Their Management D. Summary of Key Safeguard Issues. Please fill in all relevant questions. If information is not available, describe steps to be taken to obtain necessary data. II.D.la. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts. While the project itself does not raise new safeguard issues, potential environmental and social issues will have to be addressed effectively in the Environmental Management Plan (to be prepared) to ensure that the reforms planned for the sector are successful. II.D.lb. Describe any potential cumulative impacts due to application of more than one safeguard policy or due to multiple project component. N/A II.D.lc Describe any potential long term impacts due to anticipated future activities in the project area. N/A II.D.2. In light of 1, describe the proposed treatment of alternatives (if required) N/A II.D.3. Describe arrangement for the borrower to address safeguard issues Capacity building to Central and Provincial Governments will be provided under to project to adress any safeguard issues that might arise from development of the mining industry in the country. The Borrower will prepare an Environmental Management Plan as part of the proposed project which will be disclosed at the Infoshop and in the country. II.D.4. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. The reform of the mining sector has been discussed at length at various occasions and in several rounds of public discussions with different stakeholders. The National Council of Mines (a sort of embrionary Chamber of Mines) has been closely associated with MSRP implementation and will be deeply involved in project preparation. Small-scale and artisanal miners -3 -  and a certain number of mining associations have been directly involved in the implementation of the small scale mining pilot projects under the MSRP. They will be directly associated with project preparation. A number of selected villages will prepare their own plans for mineral resources; the methodology was developed and is being tested under the MSRP, with full collaboration of the villagers. A few NGO's and private firms participated to provide training and carry out studies. They will be involved in the discussions during preparation, mainly from the environmental and social areas. E. Safeguards Classification. Category is determined by the highest impact in any policy. Or on basis of cumulative impacts from multiple safeguards. Whenever an individual safeguard policy is triggered the provisions of that policy apply. I S1. - Significant, cumulative and/or irreversible impacts; or significant technical and institutional risks in management of one or more safeguard areas [XI S2. - One or more safeguard policies are triggered, but effects are limited in their impact and are technically and institutionally manageable 1 S3. - No safeguard issues I SF. - Financial intermediary projects, social development funds, community driven development or similar projects which require a safeguard framework or programmatic approach to address safeguard issues. F. Disclosure Requirements Environmental Assessment/Analysis/Management Plan: Expected Actual Date of receipt by the Bank 12/20/2001 Date of "in-country" disclosure 1/14/2002 Date of submission to InfoShop 1/24/2002 Date of distributing the Exec. Summary of the EA to the ED (For category A projects) 1/29/2002 Resettlement Action Plan/Framework: Expected Actual Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Indigenous Peoples Development Plan/Framework: Expected Actual Date of receipt by the Bank Not Applicable Not Applicable Date of "in-country" disclosure Not Applicable Not Applicable Date of submission to InfoShop Not Applicable Not Applicable Pest Management Plan: Expected Actual Date of receipt by the Bank Not Applicable Not Applicable Date of "in-country" disclosure Not Applicable Not Applicable Date of submission to InfoShop Not Applicable Not Applicable Dam Safety Management Plan: Expected Actual Date of receipt by the Bank Not Applicable Not Applicable Date of "in-country" disclosure Not Applicable Not Applicable Date of submission to InfoShop Not Applicable Not Applicable If in-country disclosure of any of the above documents is not expected, please explain why. Signed and submitted by Name Date Task Team Leader: Paulo De Sa 12/13/01 Project Safeguards Specialists 1: Edeltraut Gilgan-Hunt/Person/World Bank 12/13/01 Project Safeguards Specialists 2: -4-  Project Safeguards Specialists 3: Approved by: Name Date Regional Safeguards Coordinator: Serigne Omar Fye 12/13/01 Sector Manager/Director: James P. Bond 12/12/01 For a list of World Bank news releases on projects and reports, click here - 5 -