Malawi - Second Wood Energy Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15724 PROJECT COMPLETION NOTE MALAWI WOOD ENERGY II PROJECT (LOAN 2670-MAI) JUNE 3, 1996 Energy and Infrastructure Operations Division Southern Africa Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Malawi Kwacha US$1 = 15Malawi Kwacha (as at May 1996) FISCAL YEAR April 1 - March 31 FOR OFFICIAL USE ONLY PROJECT COMPLETION NOTE REPUBLIC OF MALAWI WOOD ENERGY II PROJECT 1. This is a Project Completion Note for the Wood Energy H project (Loan 2670- MAI). The Loan Agreement for an amount of US$ 16.7 million was signed on July 10, 1986, and the unutilized balance of US$ 15,922,942.48 was canceled on March 13, 1989. 2. Background. The Project was developed following the recommendations of the 1984 Forestry sub-sector study and drew lessons from the ongoing Wood Energy NRDP II (National Rural Development Program) project. In July 1984, the Government of Malawi requested that the Bank consider financing a second phase wood energy project as part of a long term wood energy program. Accordingly, the Government with the assistance of the Food and Agriculture Organization and the conceptual guidance of the Bank carried out project preparation activity. The Bank appraised the proposed project in July 1985, and the Board approved an IBRD loan of US$ 16.7 million on March 25, 1986. 3. Objectives. The Wood Energy H project was designed to reduce the gap between sustainable fuelwood supply and demand through support for institutional development, wood production and conservation, research and training and through a policy package designed to encourage private fuelwood production. 4. Description. The project was to have included the following main features: (i) developing policy instruments and incentives to encourage tree planting on a national basis; (ii) increasing fuelwood production through tree planting by small farmers and through establishing a limited number of Government plantations in ecologically fragile areas; and (iii) reducing fuelwood consumption by introducing more efficient charcoal kilns and household stoves. The project was also to have included components to support institutional development, and research and training. Its significant policy orientations were: increases in fuelwood prices, expanded forestry extension and revenue collection activities, provision of incentives for tree planting, and a redefinition of the Government's role in fuelwood production to emphasize the encouragement of private tree planting. 5. The project was estimated to cost US$19.6 million, of which US$16.7 million was an IBRD loan, approved by the Board on March 25, 1986. The Loan Agreement was signed on July 10, 1986, and was declared effective on December 23, 1986. 6.. Expected Benefits and Risks. Smallholder woodlots (17,000 ha) and Government plantations (6,000 ha) to be established under the Project were to have produced 230,000 cubic meters of wood annually, thereby reducing the current fuaelwood supply/demand deficit. Substantial savings in annual fuelwood consumption were also anticipated from the introduction of more efficient charcoal production technologies and This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. 2 charcoal cooking stoves. The principal risk envisaged was associated with the implementation of a comprehensive and new policy packages given the limited human resources and institutional constraints. To minimize this risk, the Project was to have provided institutional strengthening of the Forestry Department and training coupled with close monitoring and evaluation of the various components. Annual review of implementation, and mid-term review after three years of Project implementation with a view to taking corrective action were incorporated in the design of the Project. 7. Lessons Learned. Both the Bank and the Borrower strongly supported the objectives of the project. However, Malawi's external debt situation had deteriorated such that neither the Bank nor the Government considered it prudent to continue financing Wood Energy II under IBRD terms and conditions. Advantage was therefore taken of the appraisal of the Energy I project in 1988, towards which IDA resources were earmarked. The Wood Energy II components were reappraised by a Bank mission, some changes were made where appropriate, costs updated, and its revised version with no change in the objectives of the project was included as an important component (under the heading Wood Energy) of the Energy I project. The Board approved Energy I on March 14, 1989. 8. In anticipation of the approval of the Energy I Credit, the Government requested cancellation of the Wood Energy II Loan by telex dated February 9, 1989. By then only US$777,057.52 equivalent of the loan was disbursed, of which 13.7% was used for civil works, 23.8% for vehicles and office equipment, and 44.8% for salaries, wages and allowance. The balance of US$15,922,942.48 equivalent was canceled on March 13, 1989. None of the major objectives of the Wood Energy II Project have been achieved. However an ICR is under preparation for the successor Energy I project which closed on February 28, 1996. The achievements of the objectives of the Wood Energy II will thus be dealt with in the ICR of the Wood Energy component of the Energy I project. 3 ANNEX BASIC INFORMATION Project: Malawi, Wood Energy II Project Estimated Cost: US$19.6 million Loan Amount: US$16.7 million Borrower: The Republic of Malawi Implementing Agency: The Forestry Department, Ministry of Forestry and Natural Resources Time Taken to Prepare the Project: 12 months Project Appraisal: July 1985 Negotiations: February 10-14, 1986 Board Presentation: March 25, 1986 Loan Signing: July 10, 1986 Effectiveness Declaration: December 23, 1986 Loan Closing: March 13, 1989   IMAGING Report No: 15724 Type: PCN