China - Guangxi Integrated Forestry Development and Conservation Project

PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: 36134 Guangxi Integrated Forestry Development and Conservation Project Name Project Region EAST ASIA AND PACIFIC Sector Forestry (100%) Project ID P088964 GEF Focal Area B-Biodiversity Global Supplemental ID P087318 Borrower(s) GOVERNMENT OF CHINA Implementing Agency Guangxi Regional Forestry Department Guangxi Zhuang Autonomous Region China 530022 Tel: 86-771-2809558 Fax: 86-771-2809558 Uffo@Public.Nn.Gx.Cn Government of China Ministry of Finance, Sanlihe China 100820 Tel: 86-10-68551124 Fax: 86-10-68551125 YM.Yang@Mof.gov.cn Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID May 5, 2006 Prepared/Updated Date of Appraisal April 26, 2006 Authorization Date of Board Approval November 14, 2006 1. Country and Sector Background China, the most populated and largest developing country, has long been a forest-poor country. The Government has done a remarkable job in increasing forest cover, mainly through an extensive plantations program, from 13 percent in 1980s to 18.2 percent today. However, the hectare per capita of 0.13 is significantly below the world average of 0.6. The increasing gap between timber supply and demand is a key constraint to sustainable forestry development. Currently, annual timber consumption outpaces supply by approximately 80 million cubic meters. Furthermore, most natural forest habitats have been reduced to small and isolated fragments. This in turn has led to a significant threat to biodiversity, many of which are of global importance. While the launch by the Government of China (GoC) of the Natural Forest Protection Program (NFPP) in 1998 was environmentally beneficial to China, it further widened the gap between timber supply and demand. This and other factors have also led to a significant  increase in the import of timber and wood products from neighboring countries contributing to unsustainable exploitation of those natural forests. To bring the forestry sector under more sustainable management and development, the GoC formulated a "Sustainable Forestry Development Strategy". This strategy focused on "the four shifts", as follows: (i). the shift from harvesting wood from natural forests to harvesting wood from plantation forests; (ii) the shift from deforestation for the purpose of land reclamation to conversion of steep cropland to plantation forest; (iii) the shift from non-funded management of ecological forest to funded management of these ecological forest; and (iv) the shift from giving the public sector the exclusive right to develop forest resources to widening that mandate to include the participation of other social actors. The "four shifts" have brought about a historical and fundamental change in China's forestry sector. To implement the shift from harvesting natural forests to plantations, in 2002, the State Forestry Administration (SFA) designated four areas of the country as key timber production bases/areas to promote forest plantation establishment. Guangxi Zhuang Autonomous Region (GZAR) is one of the areas designated because of its near perfect agro-ecological conditions for producing large quantities of timber. However, GZAR has a wood shortage; the annual timber consumption in the Region is approximately 8.3 million cubic meters, which is more than the annual production which totals only 5 million cubic meters. The growing demands for timber in Guangxi has also increased the pressure on Guangxi's natural ecosystems and threatened its unique biodiversity including one of the largest and most important representatives of karst ecosystem in the world. Inadequate protection from illegal logging and unsustainable use of non-timber forest products have led to loss of natural forests, critical to watershed protection, and extirpation of globally important biodiversity such as the eastern black-crested gibbon (Nomascus nasutus) and tiger (Panthera tigris). Therefore, the GZAR Government has put the effective development, management, and protection of forest resources into a very high priority of the provincial development strategy. GZAR recently launched a number of forestry programs to increase timber production; manage watershed to reduce soil and water erosion; and protect natural forest and biodiversity. These programs include: (i) the Intensively Managed Timber Products Bases Development Program; (ii) the Integrated Management for the Protection Forests in the Upper Reaches of the Pearl River Program; and (iii) the Natural Regeneration of Vegetation on Karst Hill Program. The government also established a system of nature reserves. All these programs will contribute to achieving both the provincial and national goals of managing and developing forest resources in a sustainable manner. During the next five years (2005-2010)and in accordance with its forestry development programs, the GZAR plans to increase timber plantations by 870,000 ha and bring 66,700 ha of watershed areas under effective protection. While GZAR government has taken positive steps towards sustainable forest management, it faces many challenges. For instance, to develop the wood producing sector, the GZAR is relying on its provincial and country level Forest Farms (FF) and a combination of private sector partnerships/concessions. The FFs are the primary vehicle for implementing the public sector's forestry policy, however they have been constrained by financial weakness and structural shortcomings. GZAR government recognizes these constraints and is taking measures to  restructure these FFs in line with the national program of State Forest Enterprise (SFE) reform. Although GZAR is an important region for protection of the Pearl River Watershed and karst biodiversity, the province lacks sufficient resources, technical and institutional capacity, and effective models for the protection of the ecological forests and forest nature reserves set aside to protect valuable biodiversity. The government has also managed the three forest types of production, protection and conservation forests separately, thus missing opportunities to enhance long term sustainability of the sector as a whole. This project, which would focus on a single- province, provides an opportunity to promote an integrative and comprehensive approach to sustainable forest resource management and biodiversity conservation by supporting technical and institutional improvements of all three forest categories of production forests; ecological forests; and forest nature reserves. 2. Objectives The overall project development objective is to significantly improve the effectiveness of forest management and institutional arrangements in timber production, watershed protection and nature reserves management. Progress towards the attainment of this objective would be measured by monitoring: (a) timber production efficiency such as planting survival and plantation growth rates under different institutional and partnership arrangements between forest farms and communities/households, as well as individual households and (b) the increase in the vegetation cover in targeted watershed areas. The global development objective of the project is to strengthen and improve the management effectiveness of biodiversity conservation. Progress towards the achievement of these objectives would be measured by monitoring how well the five project nature reserves are being managed, how well biodiversity conservations are integrated into watershed protection, and how institutional capacity to deal with biodiversity conservation is improved. CAS document number: 25141-CHA Date of latest CAS discussion: December, 2002 The proposed Project would contribute to support forest resources management priorities of China including ecological forest protection, biodiversity conservation and timber plantation expansion. The proposed project is highly relevant to the Bank's Country Assistance Strategy (CAS) for China and fits well within its goals of: (a) "Improving efficiency and sustainability of the use of natural resources" by promoting sound natural resource management practices and value addition through appropriate technologies, training and modern management experience; (b) "Reducing growing disparities and improve income in disadvantaged sectors and regions in China by focusing on generating income opportunities for disadvantaged rural farmers in poor regions. GEF Operational Strategy/program objective addressed by the project: China ratified the Convention on Biological Diversity (CBD) in January 1993. The project is consistent with the GEF Operational Strategy, particularly strategic priority BI (Catalyzing Sustainability of Protected Areas) in that it will enhance the sustainability of Guangxi Province's nature reserves system and strengthen the management of five nature reserves of global  biodiversity significance with a total area that exceeds 650 km2. At selected sites outside these nature reserves biodiversity management would be promoted through the integration of specific habitat and wildlife conservation recommendations into forest protection contracts for important watershed management areas. These sites would be located near to the project nature reserves and to enhance their connectivity potential they would form clusters or corridors. The project will therefore contribute to GEF strategic priority BII (Mainstreaming Biodiversity in Production Landscapes and Sectors). The project will also make the strategic contribution to the development of China /UNDP/GEF Partnership Program's objective of integrating biodiversity into investment decision-making at the provincial level and demonstrate how biodiversity conservation can be mainstreamed into forest management at this level. The project conforms to the national Biodiversity Conservation Action Plan (1994) which was prepared with support from the GEF Pre-Investment Facility during the GEF Pilot Phase in China. The Action Plan identified two of the project areas as centers of China's biodiversity. The conservation of Guangxi's unique and rich biodiversity is also listed as a priority in several national biodiversity strategies, including the WWF-supported Biodiversity Review of China (1996) and China's Biodiversity: A Country Study (1998). 3. Rationale for Bank Involvement The proposed Guangxi Integrated Forestry Development and Conservation Project (GIFDCP) is designed to support GZAR government in achieving its objective of sustainable management of forest resources and biodiversity conservation. The rationale for and value added of the World Bank (WB) involvement is as follows: