Document of The World Bank Report No: 22743-TA PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT IN THE AMOUNT OF SDR24.6 MILLION (US$ 31.1 MILLION EQUIVALENT) TO THE UNITED REPUBLIC OF TANZANIA FOR THE FOREST CONSERVATION AND MANAGEMENT PROJECT January 25, 2002 Environment and Social Development Unit Africa Regional Office CURRENCY EQUIVALENTS (Exchange Rate Effective September 1, 2001) Currency Unit = Tanzania Shillings (TSh) TSh 1000 = US$1.09 US$1.00 = TSh 917 FISCAL YEAR July 1 -- June 30 ABBREVIATIONS AND ACRONYMS CEPF Critical Ecosystems Partnership Fund LEAT Lawyers Environmental Action Trust CFP Catchment Forest Project LKEMP Lower Kihansi Environmental Management Project CI Conservation Intemational MNRT Ministry of Natural Resources and Tourism CSD Civil Service Department NFP National Forest Program Danida Danish International Development NGO Non-Governmental Organization Assistance DIDC Department of Intemational Development NORAD Norwegian Agency for Development Cooperation, Ministry of Foreign Affairs, Government of Finland DOF Danish Ornithological Foundation PDF Project Development Facility EAMCEF Eastern Arc Mountains Conservation PHRD Policy and Human Resources Development Endowment Fund (Japanese Grant) EC European Commission OP GEF Operational Program EUCAMP East Usambara Conservation Area PFM Participatory Forest Management Management Project FBD Forestry and Beekeeping Division of the PRSP Poverty Reduction Strategy Paper Ministry of Natural Resources and Tourism FCMP Forest Conservation and Management STAP Scientific and Technical Advisory Panel of Project the GEF FRMP Forest Resources Management Project TAFORI Tanzania Forestry Research Institute GEF Global Environment Facility TANAPA Tanzania National Parks Authority GOT Government of Tanzania UNDP United Nations Development Program ICR Implementation Completion Report VFR Village Forest Reserve IFMS Integrated Financial Management System WB World Bank IPG Interagency Planning Group on WCST Wildlife Conservation Society of Tanzania Environmental Funds (Africa Working Group) JFM Joint Forest Management WWF World Wide Fund for Nature LAC Local Advisory Committee Vice President: Callisto E. Madavo Country Director: James W. Adams Acting Sector Manager: Agi Kiss Task Team Leader: Peter A. Dewees TANZANIA FOREST CONSERVATION AND MANAGEMENT PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Global objective 6 3. Key performance indicators 6 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 6 2. Main sector issues and Government strategy 8 3. Sector issues to be addressed by the project and strategic choices 10 C. Project Description Summary 1. Project components 12 2. Key policy and institutional reforms supported by the project 16 3. Benefits and target population 17 4. Institutional and implementation arrangements 1 8 D. Project Rationale 1. Project alternatives considered and reasons for rejection 21 2. Major related projects financed by the Bank and other development agencies 21 3. Lessons learned and reflected in the project design 22 4. Indications of borrower commitment and ownership 23 5. Value added of Bank support in this project 24 E. Summary Project Analysis 1. Economic 24 2. Financial 26 3. Technical 26 4. Institutional 27 5. Environmental 28 6. Social 31 7. Safeguard Policies 32 F. Sustainability and Risks 1. Sustainability 33 2. Critical risks 33 3. Possible controversial aspects 34 G. Main Credit Conditions 1. Effectiveness Condition 34 2. Other 34 H. Readiness for Implementation 35 I. Compliance with Bank Policies 35 Annexes Annex 1: Project Design Summary 36 Annex 2: Detailed Project Description 39 Annex 3: Estimated Project Costs 58 Annex 4: Economic and Financial Considerations 59 Annex 5: Financial Summary 70 Annex 6: Procurement and Disbursement Arrangements 71 Annex 7: Project Processing Schedule 79 Annex 8: Documents in the Project File 81 Annex 9: Statement of Loans and Credits 82 Annex 10: Country at a Glance 84 Annex 11: Environmental and Social Considerations 86 MAP(S) IBRD 31719 TANZANIA Forest Conservation and Management Project Project Appraisal Document Africa Regional Office Environment and Social Development Unit Date: January 25, 2002 Team Leader: Peter A. Dewees Country Manager/Director: James W. Adams Sector Manager: Agi Kiss Project ID: P058706 Sector(s): AT - Forestry, BA - Civil Service Reforrn, BI - Institutional Development, VY - Other Environment Lending Instrument: Specific Investment Loan (SIL) Theme(s): Environment Poverty Targeted Intervention: N Global Supplemental ID: P057234 Team Leader: Peter A. Dewees Focal Area: B - Biodiversity Sector Manager/Director: Agi Kiss Supplement Fully Blended? Yes Sector(s): AT - Forestry Program Financing Data [ ] Loan [X] Credit [] Grant [ Guarantee [ ] Other: For Loans/Credits/Others: Amount (US$m): 31.1 Proposed Terms (IDA): Standard Credit Financing Plan (USSm): Source Local Foreign Total BORROWER 1.10 0.60 1.70 IDA 19.70 11.40 31.10 GLOBAL ENVIRONMENT FACILITY (PLANNED) 1.10 5.90 7.00 NON-GOVERNMENT ORGANIZATION (NGO) OF 0.20 0.00 0.20 BORROWING COUNTRY Total: 22.10 17.90 40.00 Borrower/Recipient: GOVERNMENT OF TANZANIA Responsible agency: MINISTRY OF NATURAL RESOURCES AND TOURISM Forestry and Beekeeping Division Address: P.O. Box 426, Dar es Salaam, Tanzania Contact Person: Prof. Said Iddi, Dr. Felician Kilahama Tel: 255-22-2111602 Fax: 255-22-2130091 Email: tfcmp@intafrica.com Other Agency(ies): Eastern Arc Mountains Conservation Endowment Fund Address: P.O. Box 40832, Dar es Salaam, Tanzania Contact Person: Vincent Shauri Tel: 255-22-2780859 Fax: Email: Estimated disbursements ( Bank FY/US$m): FY ()003 2(u04 2005 21 'i0 2n6 Annual 4.70 6.40 8.30 6.50 5.20 Cumulative 4.70 11.10 19.40 25.90 31.10 Project implementation period: 5 years Expected effectiveness date: 06/15/2002 Expected closing date: 12/31/2007 OCS PAD F R. MS, 20XO A. Project Development Objective 1. Project development objective: (see Annex 1) Background: Forests and woodlands in Tanzania Tanzania is covered extensively with woodlands and forests. The bulk of these resources -- between 30 and 40 million hectares -- are comprised of extensive dry woodlands, primarily of the miombo type, which provide critical wood resources and other forest products both to rural communities and urban centers, and perform important services as watershed catchments and as dry season grazing reserves. Miombo woodlands are typically very resilient, and regenerate freely after disturbance if left alone. Although rates of species diversity and endemicity in miombo woodlands are relatively low, they do provide extensive large mammal habitats (which, in part, support a valuable tourism industry) and are recognized as one of WWF's 'Global 200' priority ecoregions. In contrast, the country's tropical moist forests account for a relatively small percentage of the total. The bulk of the country's forest biodiversity is found in its mountain forests, and in a narrow strip of forests along the coast which in total comprise less than 5 percent of the total forest area. Amongst the most important of these are the Eastern Arc forests, which cover an area of around 5,350 square kilometers spread across 10 separate mountain blocks in Tanzania (and one in Kenya). The Eastern Arc forests represent one of the oldest and most stable terrestrial ecosystems on the continent and are recognized globally as one of 25 biodiversity hotspots, which are characterized by high concentrations of endemic species under considerable threat. The Eastern Arc forests have the highest known number of plant and animal species of any region in Tanzania. Approximately 27 percent of the plant species, 63 percent of the linyphiid spider species, 43 percent of butterfly species, 33 percent of amphibian species, 37 percent of the reptile species, 37 percent of the bird species, and 34 percent of the manimal species found in Tanzania occur in these forests. The Eastern Arc is also characterized by high concentrations of endemic species. Indeed, the Eastern Arc forests are known as one of the most important sites in Africa for endemic birds, amphibians, reptiles, many groups of invertebrates, and plants, and contains one of the highest proportions of endemic species of any region worldwide. There are at least 16 endemic plant genera in the Arc. Twenty of 21 African violet species (Saintpaulia spp.) are endemic to the Arc. Of the known species occurring within the Eastern Arc, approximately 23 percent of montane plant species, 82 percent of linyphiid spider species, 39 percent of the butterflies species, 63 percent of forest dependent amphibian species, 68 percent of forest dependent reptile species, 3 percent of the bird species, and 6 percent of the mammal species are endemic. Pattems of species diversity and endemism in the Eastern Arc have been the subject of extensive research. The fragmentation of the Eastern Arc into multiple forest blocks has contributed to enhancing its endemicity. Most mountain blocks are comprised of a number of fragmented forest patches, which also differ in their species assemblages. Because of its global biodiversity significance, the Eastern Arc is expected to be proposed as a World Heritage Site in the near future. Tanzania's forests and woodlands are extremely important for mitigating the impacts of rural poverty. Recent studies have shown that fully 40 percent of total household consumption in some rural areas is accounted for by forest and woodland products such as firewood, construction material, and wild fruit and other foods (a point noted in Tanzania's Poverty Reduction Strategy Paper). In addition, woodlands are an important source of dry season grazing, reducing households' exposure to environmental risk. Rural households generally use a wide variety of environmental resources from woodlands, and the sizeable - 2 - aggregate value of environmentally-derived income is made up of a fairly large number of smaller individual income sources. In other studies from the region, it has also been shown that there is a negative relationship between aggregate enviromnental income share and total household income, that the poor are more resource-dependent than the rich (though better off households are, in quantitative terms, the most significant users of environmental resources). There is considerable complexity in the factors which determine levels of resource use: different households use different resources for different reasons at different times. Still, the conclusions are inescapable: the rural poor are heavily dependent on resources derived from woodlands, and deforestation and forest degradation poses a significant threat to rural livelihoods. In addition to Tanzania's indigenous forests, there are an estimated 135,000 ha of industrial plantations, dominated by pine and cypress, of which 80,000 ha are under Government control and management. These plantations are a key resource for the production of industrial roundwood, primarily to meet domestic demands. In 1998, the export of forest products amounted to US$6.5 million while imports totalled around US$4.2 million. Wood carvings, blackwood clarinet sets, and logs from natural forests are the most important export products, whereas imports are dominated by value-added products such as paper, paperboard, fiberboard, plywood, and other panels, and high quality sawnwood. Like virtually every major forest area of global importance, Tanzania's forests and woodlands are under growing pressures from population growth and economic development, and because of the need for timber and forest products. Many forested areas have no protected status. The absence of protected status has meant that these forests may be converted, legally, to other uses (primarily agriculture, which tends to be of very low productivity). For forested areas which are under some sort of protected status, there is often substantial political pressure to use them for new settlement -- pressures which are amplified because of encroachment in some areas. It is accepted that formnal protection or reservation is no panacea, though, and recent policy and legal changes have sought to improve the context for locally-based village-level woodland management and protection. Large-scale timber extraction still occurs, albeit illegally because of a moratorium on the felling of high forests established in the early 1990s. Logging has been almost completely stopped in some areas (such as in the East Usambaras). However, there are few incentives - or the capacity - otherwise to reduce or even to monitor the rates of extraction. In practice, District Forest Officers (who are accountable to the local District Administration rather than to FBD) sometimes condone harvesting in high forests. Many Districts make their own decisions about logging, and some have even called for logging in their District forest management plans, irrespective of national policy. Bans on the harvesting of timber from dry woodlands are occasionally enforced, but only on an ad hoc basis. The issue is far less critical in these woodlands because of their resilience, regenerative capacity, and relatively low conservation value. State-managed industrial plantations could ease some of the pressures on indigenous forests, but these have been poorly and ineffectively managed. There are sixteen state forest plantation areas. The bulk are found in Sao Hill (41,600 ha), Meru/Usa, North Kilimanjaro, and West Kilimanjaro, which collectively account for 72 percent of the total area under plantations. The private sector currently operates 55,000 ha of plantations including about 6,000 ha of wattle, teak and softwoods managed by Tanganyika Wattle Company in Njombe District, Escarpment Forest Company in Mufindi District, and Kilombero Valley Teak Company in Kilombero District respectively. - 3 - The state plantation sector accounts for the bulk of all revenues collected by the Forestry and Beekeeping Division (FBD) of the Ministry of Natural Resources and Tourism (MNRT) -- around 46 percent in 1998 -- largely because only a small proportion of the revenue from natural forests (which account for most domestically marketed forest products) is collected. In light of the large inefficiencies and relatively high costs of continuing to manage the state plantation sector, there is a limited economic rationale for continued Government involvement in the sector. It has been estimated that the plantation labor force exceeds that which is needed by 150 percent. Total employment in the Forestry and Beekeeping Division is around 2,150 staff, of which 1,050 are employed in the plantation sector. [In contrast, staffing in the entire Eastern Arc forests, an area covering over 5,000 square kilometers, consists of 8 Forest Officers and 57 Assistant Forest Officers.] The management and conservation of all of these forest resources is widely agreed to be in the country's national interests, but not surprisingly has proven to be an enormous challenge. Of the wooded area, around 10 million ha are Central Government Reserves and 3 million ha are Local Govenument Reserves. The balance, estimated at around 20 million ha, has no protected status. A new category of reserved forest, the Village Forest Reserve, poses much promise for legitimizing community-based woodland management and conservation, but this tenure category has yet to be formally legislated. The Forestry and Beekeeping Division provides overall policy guidance for the forestry sector, and some technical oversight and supervision. For the most part, however, management and protection of all reserves has been highly decentralized, and is primarily the responsibility of District Forest Officers (DFOs) and their staff, who report to local district administrations (with the exception of a number of major catchment forests, which are under the management of FBD). The current institutional structure has been problematic, and badly in need of reform. The fundamental orientation of the institutional structure is toward regulation and enforcement of forest legislation -- roles which were largely appropriate in an earlier context when there were few needs to mediate between the demands of rural people, the state, and the private sector, but which are mostly inappropriate in contemporary Tanzania where forest protection and management can no longer be undertaken independently of the needs of rural communities. In particular, Government has been aggressively searching for more effective ways to support the involvement of communities in forest and woodland management and protection, as the bulk of wooded areas are under their ultimate control. The potential for the involvement of communities in woodland management has been explored and supported through a series of innovative pilots. These experiences have been captured in extensive policy reforms, and legal mechanisms are being drafted which will reinforce the role of communities in this respect. Until recently, the institutional, policy, and legal framework provided only limited scope for supporting forest biodiversity conservation. As a signatory to the Convention on Biodiversity, Tanzania is increasingly recognizing its important obligation to put in place sound mechanisms for forest biodiversity conservation, but is ill-equipped to do so within the prevailing institutional structure. Forest protection was undertaken in the past only to meet the needs of the timber industry, and also for watershed catchment protection. There is a very limited capacity to take on the wider issues associated with biodiversity conservation within FBD, and a widespread recognition that this constraint needs urgently to be addressed. Resources to finance the management of woodlands and forests are tightly constrained, and the sector remains heavily dependent on donors. The more effective collection of revenues from the felling of timber and other forest products, coupled with greater protection from local and government sources, could begin to address the problem. Poor governance in the sector, and the lack of accountability and supervision in the - 4 - field, however, are constraints to doing so. Further, the ability to use these limited resources to finance biodiversity conservation is limited, given the low returns which can be anticipated from these investments. Finally, although donor support has provided badly needed resources for forest and biodiversity conservation and management, this support remains highly fragmented and largely ineffective at addressing Tanzania's national policy priorities. In 1996, it was estimated that the ratio of donor support in the forestry sector to publicly-financed support for forestry was 19 to 1 and that donor resources were largely not being captured by the budget process. This disparity between donor and public funding, and the inefficiencies which in some respect are driven by it, suggests that it is extremely difficult for Government to address its own policy priorities (rather than the donor community's) through the public expenditure program. Past Bank supPOrt for the sector IDA's most recent past support for the sector (through the Forest Resources Management Project, FRMP) was formulated as a first step in addressing Tanzania's forest management challenges as articulated in the 1989 Tanzania Forestry Action Plan, and had three specific objectives: (a) to strengthen institutions in charge of the development of forest policies and natural resources information; (b) to support the development of rural land policies, strengthen crucial governmental and non-governmental organizations in charge of the implementation of these policies, and to support the implementation and monitoring of government's policy of village demarcation and titling; and (c) to strengthen regional and district forestry institutions in Mwanza and Tabora Regions. This project has now closed, and its modest successes provided important lessons and insights about the possibilities and potential for improving forest management. In many respects, the forestry sector is at a critical turning point in Tanzania. A new national Forestry policy was adopted by the Cabinet in 1998, and supporting legislation is being drafted. The policy is innovative and provides substantial scope for developing alternative forest management and conservation regimes and financing mechanisms. Consistent with the on-going civil service reform program, policy recognized the need for substantive institutional reforms in the forestry sector, and has proposed the creation of a new Tanzania Forest Service (TFS). With regard to biodiversity conservation, the new policy commits government to establishing nature reserves in areas of high biodiversity value. Most importantly, however, the policy argues that local institutions and communities should have a central role in forest conservation and management. Policy provided the framework for preparation of the National Forest Program (NFP), which was approved by Government in November 2001, and future Bank support is seen to be entirely mainstreamed into the priorities outlined in the NFP. Development obiectives Building on experience gained through FRMP, and responding to the priorities outlined in the new Forest Policy and the National Forest Program, the objectives of the proposed Forest Conservation and Management Project (FCMP) are to provide the resources to assist Government in policy implementation, in particular by developing a framework for the long-term sustainable management and conservation of Tanzania's forest resources, strengthening the role of individuals, communities, villages, and the private sector in management and conservation of forests, and implementing this framework on a pilot scale. The project's specific objectives are to: (i) support the establishment of a new national forestry institutional framework effectively to support the sustainable management and protection of Tanzania's forest, woodland and industrial plantation resources; (ii) establish the framework for involvement of the private sector in industrial plantation development and management; and (iii) develop the institutional capacity - 5 - within the forestry sector for coordination, financing, and management of biodiversity conservation interventions within Tanzania's forests, in particular in the forests of the Eastern Arc mountains. It is envisaged that this third objective will be implemented in conjunction with support from the Global Environment Facility. Most of the project delivery mechanism for meeting objectives outlined in the third component will be separately Appraised. 2. Global objective: (see Annex 1) The global environmental objectives of the project are to (i) develop and begin to implement an integrated biodiversity conservation strategy for the Eastern Arc Mountains (which account for 40 percent of Tanzania's remaining tropical high forest cover), which will, in turn, strengthen Tanzania's capacity to coordinate and lead forest biodiversity conservation interventions, (ii) support an integrated community-based pilot intervention in a priority conservation area to achieve sustainable impact related to both biodiversity and human development, (iii) irnprove the institutional mechanisms and capacity to undertake forest biodiversity conservation, and (iv) develop, and implement on a pilot basis, a sustainable financing mechanism for conservation activities in the Eastern Arc forests. 3. Key performance indicators: (see Annex 1) The success of the project will be based on the following key performance indicators: (i) a functioning Tanzania Forest Service (TFS) is established with clearly defined service delivery functions and responsibilities with regard to natural forests, woodlands, and industrial plantations; (ii) significant areas of natural forests and woodlands are under effective management as an outcome of partnerships and initiatives with multiple partners (primarily communities and local governments); (iii) a range of mechanisms for improving revenue collection involving partners such as the Tanzania Revenue Authority and/or the private sector are tested and implemented; time-bound forest revenue collection targets are established and achieved; and effective mechanisms for sharing revenues with villages are put in place; (iv) a framework for private sector participation in the management of industrial plantations, is established, including guidelines, incentives, and regulatory, monitoring, and control mechanisms; 3 pilot operations are in place and have been evaluated; (v) an institutional framework consistent with overall civil service reforms is in place which enables Government to undertake forest biodiversity conservation initiatives, in particular in the Eastern Arc Mountains; institutional capacity to do so is strengthened; and (vi) the modalities for the establishment of a sustainable financial mechanism for conservation of the Eastern Arc mountain forests are developed and implemented. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: IDA/R2000-90 Date of latest CAS discussion: 06/15/2000 The principal goal of the CAS is to help Governnent reduce poverty through the promotion of higher growth, and through interventions that build the assets of the poor, reduce their vulnerability, and promote better governance and accountability. The CAS fully recognizes Government's leadership in defining the - 6 - development agenda, and its desire to enter into more productive relationships with its partners in doing so. The FCMP specifically addresses the CAS objectives of supporting sustainable rural development and private sector development through the promotion of off-farm activities and through the management of woodlands and forests by conmnunities and through the establishment of a framework for the involvement of the private sector in industrial plantation management. The establishment of the TFS is consistent with the CAS goal of public sector reform and institution building, to increase the effectiveness of public service delivery and imnprove governance. la. Global Operational strategy/Program objective addressed by the project: The Government of Tanzania signed the Convention on Biological Diversity on June 12, 1992 and ratified the Convention on August 3, 1996. Tanzania is a party to the African Convention on the Conservation of Nature and Natural Resources, the Convention on the Protection of World Cultural and Natural Heritage, the Convention on International Trade in Endangered Species (CITES), and the Ramsar Convention on Wetlands of International Importance. Govermment has placed a high priority on the conservation of biological diversity, and, for example, maintains one of the largest systems of protected areas in Africa. Much of the focus of these efforts, however, has been on wildlife habitat conservation and not on forest biodiversity conservation. The proposed GEF activity, which is to be separately Appraised, is consistent with the GEF Operational Strategy for Biodiversity Conservation, and specifically with the objectives of Operational Programs 3 and 4 on Forest Ecosystems and Mountain Ecosystems. Consistent with these objectives, GEF support will provide finance for the creation and strengthening of participatory and co-management schemes to build support and ownership for biodiversity conservation, develop socio-econornic activities to reconcile biodiversity conservation with hunan needs, identify processes which are likely to have significant adverse impacts on the conservation and sustainable use of biodiversity, and support capacity building efforts while focusing primarily on a mountain tropical forest ecosystem that is at risk. Particular attention will be given to the demonstration and application of techniques to protect highly threatened endemic species; in situ conservation of wild relatives of domesticated plants and animals for the sustainable use of biodiversity; strengthening conservation area networks; and development of sustainable use methods in forestry by combining production, socio-economic, and biodiversity goals. In addition, GEF resources will seek to support sustainable agriculture and land use practices on mountain slopes adjacent to the forests in order to protect representative habitats and to strengthen the network of representative conservation areas in montane forest systems. Activities supported with GEF resources are designed to be replicated, with successful outcomes and lessons learned documented and shared with other GEF funded programs. GEF support is consistent with Article 8 of the Convention on Biological Diversity, which relates to in situ conservation, as it will support protection and management of protected areas in a region of globally important biodiversity, promote environmentally sound and sustainable activities in areas adjacent to protected areas. GEF support will promote the recovery of threatened species through the development and implementation of management and ecosystem protection strategies, and will support maintenance of viable populations of threatened and endangered species within and beyond protected area boundaries. GEF support is consistent with CoP3's emphasis on intersectoral cooperation in natural resource biodiversity conservation, building capacity in local institutions and communities, strengthening the involvement of local people, promoting environmental awareness, and improving the dissemination of information about sites of global importance. GEF support will also help to achieve related goals of reducing poverty in - 7 - forest dependent communities by providing altematives to destruction of biodiversity habitat as a means of securing a livelihood. GEF support is consistent with guidance from the CoP with respect to conservation, management, and sustainable use of threatened and endangered species; strengthening the involvement of communities, and building partnerships at the local and national levels; and promoting cost effective measures to conserve biodiversity, including economic incentives and alternative livelihood opportunities for local communities. 2. Main sector issues and Government strategy: Main sector issues Tanzania's 1998 Forest Policy characterizes the most important priorities and constraints with regard to the sector as being related to the need to: * manage the country's forest resources in respect of its various types (woodlands, high forests, coastal forests); uses (production and protection forests); and legal status (reserved forests, forests/woodlands within national parks, and non-reserved forested land); * manage forest industries and other forest-based activities to contribute to national development and to the equitable sharing of benefits between stakeholders; * conserve the country's unique ecosystems and biological diversity, considering the needs of local populations and appropriate methods of management and use; and * adapt the institutional arrangements and financial and human resource requirements to meet these objectives of forest sector development. More specifically, factors which constrain the effective management of Tanzania's forest and woodland resources include: * weak oversi,ht for forest and woodland management, rooted in problems of accountability and supervision in the current institutional framework. As an outcome, forest exploitation has, in many instances, been subject to few controls or constraints, and has resulted in the movement and settlement of people into reserved forests, and the unsustainable and illegal harvesting of wood for commercial purposes; * an ineffective svstem of decentralized forest administration, which separates the need for enforcement and regulation from the needs of rural communities for forest and woodland products; one outcome of this is the limited emphasis on the role of forestry institutions in service delivery; * inadequate svstems of revenue collection in a decentralized forestry administration, and inadequate mechanisms for ensuring that revenues collected are used, in turn, for forest management or are otherwise returned or shared with villages and communities with a stake in forest protection. Targets set for revenue collection are not clearly rationalized, and though it is estimated that less than 10 percent of revenues which are due from natural forests are actually collected, little thinking has focused on how and with what objective should revenues be collected. Low rates of revenue collection adversely affect recurrent funding of forestry activities, increase the potential for rent-seeking, and encourage rates of consumption which are not consistent with the economic costs of forest exploitation; * inadequate institutional mechanisms for forest biodiversity conservation specifically with the capacity to assess the need for, plan, coordinate, implement and monitor conservation activities; - 8 - * widely disparate systems of tenure over forested lands and related weak incentives to undertake community-based forest conservation, such as in the Eastern Arc forests, with unclear opportunities for closer cooperation with villages to undertake these activities; * limited scope for publicly-financed forest biodiversity conservation (largely because public revenue streams from logging have dried up since a logging ban was put in place) and a heavy dependency on donor assistance to provide irregular support for the sector; * limited effectiveness of the public expenditure program in the forestry sector in meeting national forest policy objectives, and highly distorted financial and technical resource delivery from the donor communtv. Government StrateLv Government's strategy for improving the management of the forest sector is captured in three processes: the forest policy process, which was completed in 1998; the legislative process, which is underway, and is intended to provide the basis for the implementation of the policy; and the process which has led to the preparation of the National Forest Program, which prioritizes a program for future action within the already defined policy framework. The overall goal of Government's National Forest Policy is to enhance the contribution of the forest sector to the sustainable development of Tanzania, and the conservation and management of its natural resources for the benefit of present and future generations. Consistent with this overall goal, the government strategy for doing this is to: * ensure sustainable supplies of forest products and services by maintaining sufficient forest cover under effective management; * increase employment and foreign exchange earnings through sustainable forest-based industrial development and trade; * ensure ecosystem stability through the conservation of forest biodiversity, water catchments, and soil fertility; and * enhance national capacity to manage and develop the forest sector in collaboration with other stakeholders. Government intends to implement its strategy by relying on a diverse set of institutions, including the private sector, local government, specialized 'executive agencies,' and communities or other organizations of people living adjacent to forests. Decentralized forest management will be strengthened and improved by clarifying the role of Villages in forest management and protection, by developing coordination mechanisms between central and local forest administrations, and by ensuring accountability mechanisms are incorporated into institutional change efforts. Functions which would be retained by the Ministry responsible for natural resources would be limited to policy development, regulation, monitoring, and facilitation. Legislation to support implementation of the 1998 Forest Policy is in the process of being prepared. While new legislation will provide a stronger legal basis for policy implementation, tremendous latitude for action is possible within the existing framework (viz. the establishment of Nature Reserves, the scope for village-based forest reserves and management, improved performance with regard to revenue collection, the establishment of specialized 'executive agencies,' and so on). - 9- Following adoption of the Forest Policy, Government launched preparation of the National Forest Program (NFP), which outlines a plan for implementation of the policy. The National Forest Program outlines a four-fold program of forest development in Tanzania: * forest resources conservation and management (in which both biodiversity conservation and participatory forest management feature strongly); * institutional and human resources development; * legal and regulatory development; and * forest industries development. The NFP provides the framework for future public expenditure in the forestry sector, and outlines priorities for donor financing. It has been envisaged that the principal financial delivery mechanism for the National Forest Program is this Forest Conservation and Management Project (FCMP) into which proposed GEF support has been fully-blended. As such, the FCMP has been prepared in close collaboration with the preparation of the National Forest Program, to ensure consistency in approach and objectives, and ultimately, to focus on the strategic provision of resources to assist in the implementation of the NFP. Additional bilateral support for implementation of the NFP is in the process of being mobilized. 3. Sector issues to be addressed by the project and strategic choices: Sector issues addressed by the project The project is designed to address a number of pressing sectoral issues. In particular, the project will support Government's efforts to move forward with * substantive institutional reform to reduce problems associated with the current institutional structure, building on the strengths inherent in decentralization while strengthening centralized structures which can provide important service delivery functions to districts requesting them. The new Forest Policy and the National Forest Program clearly articulate the problems posed by the current institutional structure, and pose a series of options for addressing these institutional constraints, including the creation of a service-oriented forest management agency, the more active involvement of the private sector in plantation management, and a better-defined basis for community-based forest and woodland conservation and management. Among other things, the project will focus on developing service-delivery standards, and on introducing the institutional tools and mechanisms for ensuring these standards can be met. In particular, the project will focus on developinsz and implementing service standards to supMort village-based forest and woodlands management and conservation by building upon some of the initiatives piloted by the FRMP (as well as through other interventions), in particular ngitiri management, Joint Forest Management, the establishment of Village Forest Reserves, and through several pilot initiatives focusing specifically on community-based forest conservation in a selected priority area of the Eastem Arc forests. * In addition, institutional reforms are expected to focus, as well, on addressing the need for an institutional framework for forest biodiversity conservation (also to be separately Appraised). It is envisaged that the project will provide resources for the establishment of a capacity within the institutional structure for forest biodiversity conservation. - 10 - * improved financial and procurement management, particularly through revenue collection and monitoring, which focuses on the relationship between improved revenue collection and forest management. The basis for revenue collection will be rationalized, and mechanisms for revenue sharing at the village level will be defined and implemented. Alternative institutional mechanisms for revenue collection, and the monitoring of revenue flows, will be developed and implemented. These activities will build on the revenue collection pilots launched by FRMP. There are important synergies between prospects for improved revenue collection and proposed institutional reform. It is envisaged that improvements in financial and procurement management will contribute substantively to developing a framework for longer term public expenditure, complemented by donor support, for the sector, with the idea that a credible institutional framework with strong service delivery objectives will help bring about a stronger sector-wide approach to forestry. In addition, the project intends to pilot, in part with separately Appraised GEF financing, a sustainable financing initiative which focuses on the generation of resources to finance forest biodiversity conservation. Within the constrained fiscal framework in Tanzania, there are almost no public sector resources to make these types of investments in the absence of a financial retum. * fuller involvement of the private sector in industrial plantation management is envisaged both to improve efficiency, productivity, and revenues from these particular resources, but also to reduce the fiscal burden of continued public sector management of a sector which should be commercially viable on its own. * improving the framework for planning and implementation of biodiversitv conservation initiatives through the separately Appraised GEF-funded Conservation of the Eastern Arc Mountain Forests Component. Building this capacity will be done in conjunction with other proposed institutional reforms in the forestry sector and result in forestry sector institutions at the central, district and partnership levels having greater institutional capacity to provide oversight and monitoring of the whole Eastern Arc ecosystem. Stratei-ic choices Government has already made a number of strategic choices which are laid out in policy and in the National Forest Program, particularly that the status quo with regard to forest management is not acceptable. These choices form the basis for the proposed intervention, and indeed are widely regarded as critical to the outcome of both the project and the future of forest management and conservation in Tanzania: * Government has decided to establish a specialized 'executive agency' with clearly defined roles and tasks, and with a mandate for bringing about improvements in forest and woodland management through multiple institutional and service delivery mechanisms. It is envisaged that the Tanzania Forest Service (TFS) will be constituted with specific service delivery functions and performance targets. Responsibilities for forest policy, legislation, and planning are to remain with a sectoral department of the Ministry of Natural Resources and Tourism. * Government has committed itself to more fully involving the private sector in industrial plantation management, and envisages their eventual operation on a more commercial basis through lease, concession, or joint management arrangements, with the objective of improving financial and economic returns from plantations through more cost-effective operational management. - 11 - * Government is seeking to mnaximize the benefits of forest and woodland management to the large rural populations dependent on them, by creating and supporting tenure and local control mechanisms which support village-based management. * Consistent with its obligations as a signator to the C'onvention on Biodiversity, Government has integrated conservation objectives into its wider forest policy framework, and intends to implement these objectives through the institutional mechanisms posed in policy (through Government institutions, villages, the private sector, or specialized agencies). C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The Tanzania Forest Conservation and Management Project will have three components. Supporting institutional change and improvin_ service delivery This component will assist the government with the design and establishment of the Tanzania Forest Service (TFS), as a specialized 'executive agency' as defined by the Executive Agencies Act (1997), and consistent with the wider and on-going national program of civil service reforn. It is envisaged that the Tanzania Forest Service will, among other things, have responsibility for bringing about improvements in the protection and management of natural forests and the development and management of industrial plantations (including promoting the private sector to take on these tasks). The concept is that an agency with a national mandate will eventually be established. Technical assistance will be provided to work with FBD and the Civil Service Department (CSD) and other relevant government agencies to design the structure and functions of the agency and to draw up the necessary implementation plans and guidelines for establishment of the agency, including the formulation of business and staff recruitment plans. This component will also provide support to build on experience from previous operations, and upon the opportunities posed by the new Forest Policy, and planned legislation. Three sub-components of this activity are envisaged: (i) Establishment of the Tanzania Forest Service, focusing on the phased-in introduction of the new executive agency, with clearly defined roles, functions, performance standards, and monitoring. This sub-component would provide resources to manage the change process, to strengthen the capacity for administration and management, to rationalize and to strengthen the capacity for tasks related to policy, planning, and legislation (which would remain with the Ministry), and would support a badly-needed program of investments in infrastructure, including headquarter and field facilities for the TFS. Complementary support will be provided by GEF to improve the capacity for the conservation and management of forest biodiversity, particularly in the Eastern Arc forests (described in the third project component). (ii) Improving service-delivery mechanisms for participatory forest and woodland management, in particular, support for the establishment of Village Forest Reserves, woodland management by individuals and communities (ngitiri), and Joint Forest Management, building on experiences piloted in earlier operations. This sub-component which will focus on facilitating the expansion of community based forest management activities, is envisaged to be supported by the Government of Denmark. - 12- (iii) Improving revenue collection from forests and woodlands, to meet the dual objectives of improving the capacity of the TFS to become self-financing, and of ensuring that revenues are reinvested at the local level in forest protection and management through local institutions. This component will develop alternative revenue collection mechanisms, and monitoring systems to improve rates of collection. A mid-term review would determnine outstanding issues and provide recommendations for improving the efficiency and effectiveness of the TFS. A further evaluation will be undertaken prior to project completion and, as well as determining the degree of achievement and success of the TFS, will develop lessons for the future. Private sector involvement in the management of industrial plantations The project will provide resources to develop and implement a framework for the involvement of the private sector in the management of existing industrial plantations as well as to strengthen the potential for the development and management of new plantations. This would include an analysis of the technical and financial feasibility of the industrial plantations with reference to existing and potential markets as well as the formulation of steps and guidelines for the private sector's involvement. Multiple mechanisms for the involvement of the private sector will be developed and implemented on a pilot basis, and are expected to include leasing or concession arrangements, joint forest management, and co-management. Consistent with policy, the objective is eventually to introduce fully commercial plantation management, building on information and experience gained through project activities. Four sub-components are envisaged: (i) Improving the plantation resource information base and management planning capacity. This sub-component will provide resources to develop the information needed to allow for the identification and selection of priority sites and for designing pilot activities. The sub-component will finance aerial photography, interpretation, mapping, and indicative inventories of around 40,000 ha of state-owned plantations; a rapid socio-economic assessment which identifies key stakeholders, their concerns, and expectations and any mitigating steps which might be needed; the development of a plantation database for management purposes; preparation of basic guidelines to guide plantation management and to establish parameters for monitoring commercial plantation operations; preparation of basic growth and yield tables for key species relying on existing data; preliminary estimates of growing stock and allowable cut; and capacity building of staff in selected areas to build capacity to undertake these tasks. (ii) Strengthening institutional support services for private sector involvement. This sub-component will support the creation of an enabling institutional and market environment for private sector involvement in plantation development and management. It will provide resources for the design and implementation of a communication strategy; the development of a plan of action with agreed principles and clear objectives for private sector involvement; strengthening the capacity within MRNNT or within the planned forest agency to handle PSI; the development of legal procedures and instruments for tendering to ensure transparency and consistency with Government guidelines and with social and environmental safeguards; the preparation of model information memoranda, leases, model contracts, and transparent bidding assessment procedures, as well as community and environmental action plans where they are needed; prepare recommendations on an improved log sales system; an action plant for improving forestry taxation and the investment - 13- environment for plantation forestry; and study tours and staff training to increase an understanding of the principles surrounding private sector involvement. (iii) Pilot alternative management of selected industrial plantations. Three pilot activities are envisaged under this component: the development of leasing or concession arrangements for involving the private sector in plantation management; the development of co-management arrangements where responsibility for plantation management is shared between Government and a partner (for example, a village or a company); and designated community management for a plantation area where responsibilities and control are assumed by a village. The project will provide resources to establish boundaries of each pilot area, to carry out rapid inventories or aerial surveys as needed, to prepare legal documentation as needed, and to carry out stakeholder surveys and assessments where communities will be involved or otherwise affected by the program. (iv) Monitoring and evaluation. The project will place a strong emphasis on the monitoring and evaluation of performance under the pilot operations. The project will provide resources to establish a mechanism for monitoring and evaluation; to determine performance indicators for the pilot operations; to implement a regular monitoring process which reports against quantitative and qualitative performance indicators; and to provide feedback to MNRT to modify mechanisms and procedures on the basis of results from the pilot operations. Eastern Arc forests conservation and manaaement This third component of the program, which is largely to be financed by GEF (and possibly with bilateral sources) has been jointly developed and implemented by the World Bank and UNDP working with Government and other partners with interests in the forestry sector. The GEF-fmanced elements of this component will be separately Appraised. This component will support institutional reform, strategy development, pilot community-based conservation, and the development of sustainable financing for tropical high forest conservation in Tanzania. The main global environmental objective of this GEF activity is to promote the sustainable conservation and management of the Eastern Arc forests. The GEF activity is expected to have four sub-components, the first two of which will be implemented by the World Bank: (i) Institutional reforms for forest biodiversity conservation, in particular of the Eastern Arc forests at central, district and local partnership levels to incorporate specific responsibilities for biodiversity conservation, oversight, monitoring and coordination. Such reforms will be linked with other reforns and institutional restructuring proposed for the forestry sector as a whole, which are to be financed by IDA. The GEF implementing agency for this sub-component would be the Bank; (ii) Mechanisms for sustainable financing of biodiversity conservation, will be developed including the establishment of the Eastern Arc Mountains Conservation Endowment Fund (EAMCEF). It is envisaged that a pilot endowment trust fund will be established by the project, with GEF resources. The EAMCEF's initial operations and programs will be co-financed by IDA. The GEF implementing agency for this sub-component would be the Bank. Two additional components are to be implemented by the UNDP and are complementary to the Bank-implemented activities: - 14 - (iii) Development and preparation of an integrated Conservation Strategy for the Eastern Arc Mountain Forests using a broad-based participatory process, with a focus on institutional capacity building, and which considers links to other sectoral activities, such as agriculture, water, land, and energy. A wider dialogue on the impacts of sectoral activities on forest biodiversity conservation in the Eastern Arc will be developed amongst the key institutions involved in sectoral activities. Mapping and baseline activities will be undertaken as part of the Strategy development, and will include an assessment of the multiple tenure regimes found in the forests of the Arc. The GEF implementing agency for this sub-component would be UNDP. (iv) A forest conservation intervention through government and community partnership initiatives which will be undertaken at priority sites in the Uluguru Mountains - one of the most important mountain forest blocks in the arc. Firm linkages will be established with partners (other donors, NGOs, Community-based organizations, govermment agencies, etc.) The GEF implementing agency for this sub-component would be UNDP. A Project Brief for the full GEF activity has been prepared and was approved by the GEF Council in December 2001. GEF-financed activities will be subsequently Appraised. IDA-fmnanced activities, however, have been Appraised. Proiect Administration and Manaeement Finally, the project will finance the costs of administration and management of the project components, in a manner consistent with World Bank guidance with respect to accounting, financial management, and procurement. Indicative Bank r, of GEF % of Component Sector Costs of financing Bank financing GEF (USSM) Total (USSMt financing (USSM) financing A. Supporting Institutional Civil Service 0.0 0.0 0.0 Change and Improving Service Reform Delivery 1. Establishment of the 14.20 35.5 13.40 43.1 0.00 0.0 Tanzania Forest Service 2. Improving revenue 4.00 10.0 3.70 11.9 0.00 0.0 collection from forests and woodlands 3. Improving service delivery 8.40 21.0 8.10 26.0 0.00 0.0 mechanisms for participatory forest and woodland management B. Private Sector Involvement PSI 3.40 8.5 3.30 10.6 0.00 0.0 in the Management of Industrial Plantations C. Eastern Arc Forest Other Environment 0.0 0.0 0.00 0.0 Conservation and Management 1. Eastern Arc Mountains 9.00 22.5 2.00 6.4 6.75 96.4 Conservation Endowment - 15- Fund 2. Improving Institutional 0.30 0.8 0.00 0.0 0.25 3.6 Support Services for forest biodiversity conservation D. Project Administration and 0.70 1.8 0.60 1.9 0.00 0.0 Management Total Project Costs 40.00 100.0 31.10 100.0 7.00 100.0 0.00 0.0 0.00 0.0 0.00 0.0 Total Financing Required 40.00 100.0 31.10 100.0 7.00 100.0 Note: Indicative costs exclude an estimated $ 4.5 million in bilateral and other financing needed to support implementation of the Eastern Arc conservation component, most of which will be required to establish and manage the Eastern Arc Mountains Conservation Endowment Fund. Costs to implement the UNDP components of this activity are expected to total S 5 million, but these are excluded from these estimates. Proposed Bank financing incorporates $600,000 in Project Preparation Facility resources. 2. Key policy and institutional reforms supported by the project: The project will directly support key policy reforms which have already been introduced through the new Forest Policy. These include the creation of a more effective forest management agency, the more active involvement of the private sector in forest plantation management, greatly strengthened support for the establishment of local forest and woodland management and protection regimes, and the development of an improved capacity to undertake tropical high forest conservation and management. With regard to the latter, the policy explicitly recognizes the role Tanzanians should play in the conservation and management of forests and woodlands. The policy also spells out the need for integrated strategic processes for forestry activities, including the implementation of broad-based conservation initiatives. The project will support policy reforms through: (i) The establishment of a pilot, autonomous TFS that will be responsible for supporting and improving indigenous forest management and plantation management, including management of public woodlands, by working with multiple stakeholders. This intervention is also in line with Government objectives under the Civil Service Reform Program. The TFS will have a strong service-delivery orientation, focusing on its role in encouraging individuals, communities, villages, and the private sector in undertaking woodland and forest conservation and management. The capacity to undertake financial and procurement management will be greatly strengthened, with the objective of establishing a more transparent framework for public expenditure management; (ii) The development of a framework to promote and oversee the involvement of the private sector in industrial plantation development and management; (iii) Continuing efforts to foster and support more effective conservation and management of commnunity and private woodlands, the establishment of Village Forest Reserves, as well as the management of government woodlands by adjacent communities by ensuring that direct benefits go to cornmunities with management and protection responsibilities; and (iv) The involvement of communities and other partners in the conservation and management of tropical high forests, in partnership with key stakeholders with interests in biodiversity conservation, as well as through support for the establishment of a sustainable financing initiative which ensures long-term access to resources to invest in biodiversity conservation. - 16 - 3. Benefits and target population: Proiect benefits Reform of Forestry institutions The reform of forest institutions in Tanzania is expected to improve their capacity to function as service delivery institutions, particularly to provide communities services related to the establishment of Village Forest Reserves, the strengthening of traditional natural resource management strategies (such as ngitiri management), and the adoption of locally appropriate tree cultivation and management strategies. In addition, these reforms are expected to complement -- and to strengthen -- the role of local government by improving the effectiveness of forest revenue collection, by strengthening local accountability for natural resources, and by developing transparent mechanisms for sharing revenues with villages and communities. Finally, a more effective institutional structure will more generally contribute to the long-term sustainable management of forest and woodland resources in Tanzania, with significant impacts on the poorest groups and communities because of their heavy dependence on woodlands to meet demands for consumption. The establishment of an 'executive agency' is expected in the longer term to reduce the financial burden of existing forestry institutions on the public budget. Private sector management of industrialplantations The involvement of the private sector in industrial plantation management is expected to reduce the financial and institutional burden of plantations on the public sector, and is expected to lead to improvements in the efficiency of production and management. A clearer long term commitment to the private sector with respect to plantation development will improve the climate for investment and reinvestment in the wood products and processing industry, and will lead to greater employment and income generating opportunities. Eastern Arcforests conservation and management While the biodiversity of the Eastem Arc Mountains is of extraordinary international significance and locally is of great value for mitigating the impacts of poverty, the value of these forests to the national economy, primarily through water and energy production, is of great national importance. The Eastern Arc forests cover several major catchments which collectively provide water for all of the nation's coastal communities (including Dar es Salaam with its population of 3 million). These mountain forests feed more than 22 rivers, including the Sigi, Ruvu, Ruaha, Kihansi, and Rufiji. The Uluguru catchment, for example, provides the main source of drinking water to both Morogoro town and Dar es Salaam. Hydroelectric energy production is similarly heavily dependent on maintaining the integrity of these forests. Nearly 70 percent of Tanzania's electricity is generated from sources derived from the Eastern Arc forests. The idea of collecting environmental rents, especially from the energy and water sectors, has been tabled in a general way a number of times. These proposals, however, are somewhat disconnected from an understanding of the tenuous - indeed, highly precarious - financial position of service delivery institutions such as the Tanzania Electricity Supply Company (Tanesco) and the Dar es Salaam Water and Sewerage Authority (DAWASA). While the capturing of environmental rents may seem to be a good idea in the abstract, the current public expenditure framework suggests that this would be unrealistic in the short term. - 17 - Other environmental services captured by the macro-economy associated with the Eastern Arc forests impact positively on agricultural production and also result from timber harvesting (both through the legal and illegal felling of trees used in construction and to make furniture and charcoal). More recently a small ecotourism industry has developed. There are some indications of a growing trade in threatened species of insects and reptiles. Accordingly, there is a strong need for sustainable use of forest products for these purposes and activities such as tourism which maximize the non-destructive uses of forests. Project beneficiaries The project is primarily intended to benefit rural households which are dependent on woodlands and forests to meet consumptive demands, and job seekers who are able to find employment in a revitalized forest industry (based on sustainable plantation production). The project is expected to develop lessons from innovative pilot activities and as a result of institutional development which will have potential benefits for the vast majority of the country's population. Direct benefits which will accrue to communities through the project include improved consumption and income through the use and sale of forest products obtained from sustainably managed resources, and an improved environment associated with enhanced forest conservation and protection. National benefits of biodiversity conservation are expected to accrue as a result of watershed catchment protection, which in turn will yield significant benefits in terms of long-term hydroelectric energy production and urban water supplies. 4. Institutional and implementation arrangements: Government of Tanzania The National Forest Program provides the overall framework for project implementation. The project is the primary mechanism for mobilizing finance for implementation of the NFP, which will be complemented by other donor initiatives which are in the process of being mobilized. Three coordination mechanisms are envisaged: * Consistent with the objectives of developing a sector-wide approach toward forestry investment, the National Forest Program Steering Committee will have overall oversight for ensuring that project activities are implemented in a manner which is consistent with the NFP. The members of the Project Preparation Working Group (which provided oversight during preparation) have been incorporated into the NFP Steering Committee, which may choose to constitute a smaller FCMP working group more closely to follow project implementation. The NFP Steering Committee is constituted of representatives from MNRT, the Ministry of Finance, the President's Office (Planning and Privatization), the Policy and Planning Division of MNRT, the Division of Forestry and Beekeeping, and several donor representatives. The Steering Commnittee has been broadened and includes the President's Office (Regional Administration and Local Government), the National Land use Planning Commission, the Vice President's Office (Environment Division), Sokoine University of Agriculture, and the Private Sector Foundation. * At the working level, project oversight and management will be the responsibility of a Senior Forestry Officer, to be appointed by the Permanent Secretary, and supported by procurement and financial management specialists within the administrative framework of MNRT. FBD will be responsible for implementing activities to be financed with IDA resources, and has already put in place financial management and procurement systems to assist in project implementation. - 18- FBD already has extensive experience in these areas, through implementation of FRMP. It is envisaged that FBD is currently not 'LACI capable,' but that a time-bound plan for implementation of LACI requirements will be prepared. Financial management and procurement specialists will be fully engaged in the development of this plan as members of the Quality Assurance Team. * The Forestry Advisory Group was established by FBD, consistent with its policy objectives of ensuring better overall coordination at the national level, and will be consulted in an advisory capacity about the scope and objectives of the proposed investments. The Forestry Advisers Group is comprised of representatives from the donor conununity with interests in forest sector development, as well as the NGO and academic community. Bilateral donors such as Danida (Denmark), DIDC (Finland), SIDA (Sweden), GTZ (Germany) and NORAD (Norway) have been supporting various types of pilot activities in the forestry sector at district level. In addition, DIDC has supported the development of the NFP. Through the NFP Steering Committee and the Forestry Advisory Group efforts will be made to make use of the experience gained and to coordinate donor support related to the NFP. The aim will be to gradually develop and strengthen a sector wide approach in the forestry sector adapted to the specific needs and complexities of the sector. Coordination between GEF Implementing! Agencies The proposed Eastern Arc forest conservation and management component (for which GEF-financed activities will be separately Appraised) is an unusual opportunity for collaboration between two GEF Implementing Agencies. As such, UNDP and the World Bank have different comparative advantages. The World Bank has been at the forefront as a financier of Government's efforts at civil service reform, and will take the lead with regard to financing and supervision of institutional activities, in particular, the development and establishment of the TFS, and institutional reforms leading to better forest conservation. In addition, the Bank has a comparative advantage in the area of sustainable financing, and will be responsible for these aspects of the GEF-financed activities. UNDP's strengths are primarily in the area of capacity building and technical assistance. In this role, UNDP will be responsible for development of the Conservation Planning sub-component of the GEF financed Eastern Arc activity, and of the pilot conservation activities in the Uluguru Mountains. In terms of financial arrangements for implementation of GEF activities, the Implementing Agencies have presented a single joint GEF proposal to the GEF Council, and, after Appraisal and Board presentation, will request the GEF Secretariat to make two separate disbursements: through UNDP for $5 million, and to the World Bank for $7 million. Thereafter the lAs will follow their own intemal project management processes. For example, UNDP will prepare an Operational Project Document with TORs for key consultancies and institutional contracts together with FBD and the UNDP Country Office, with detailed budgets and a workplan. Following approval by the GEF Council, Bank implemented activities will be separately Appraised and, after Board approval, the Bank will prepare a GEF Grant Agreement which clarifies the modalities for funds management (including arrangements for procurement and disbursement) by Government. The Agencies will work together through the NFP Steering Committee and will be responsible for the preparation of joint reports setting out progress in project preparation. Financial Mananement A financial management assessment was carried out during Appraisal mission which indicated that the Ministry's Finance Department and staff have adequate financial management systems which can provide, with reasonable assurance, timely information on the status of the project as required by the borrower and - 19 - IDA. The government financial management system and controls over public finances have recently been updated and strengthened under the Integrated Financial Management System (IFMS) using computerized accounting software (the so-called 'Platinum' system). A satisfactory project Accounting and Financial Management Manual describing the accounting system, procedures, internal controls, chart of accounts and roles and responsibilities of the key staff responsible for IDA finances has been prepared. The Ministry has wide experience in implementing IDA projects and in managing IDA funds from the previous Forest Resources Management Project and various PHRD, PPF, and GEF resources. Therefore, the project financial management system is adequate for the project to be presented to the Board. A review of accounting and financial management systems concluded that, while FBD has extensive experience in working with Bank procurement and disbursement, it is currently not capable of complying with new Loan Administration Change Initiative (LACI) Guidelines. An action plan was agreed during Appraisal which should bring FBD to LACI compliance. Agreed action plan: * Before the project is declared effective, an additional Ministry-qualified accountant will be deployed on a full-time basis to assist the current project accountant in the project financial matters; and * The project will be reassessed for LACI compliance when a LACI compatible financial reporting format acceptable to the Bank has been prepared (based on the revised LACI guidelines). Provided the above steps are taken, it is envisaged that project should be LACI compliant within 18 months from the date of project effectiveness. The decision to adopt to the periodic report based disbursement procedures will be made in consultation with a Bank Financial Management Specialist who will: * review experience to date with the quality of withdrawal submnissions, operation of the Special Account, SOE submissions and documnentation retention in the field, and the general effectiveness of project management and accounting staff; * ensure that the Special Account has been reconciled and any outstanding issues resolved; * review supervision reports to assess implementation progress and issues; * review any available audit information, as well as any other financial reports, with a view to forming an opinion on the reliability of project accounts; and * review the PMR format designed to be used in conjunction with the Platinum computerized accounting package. Audited financial statements will be prepared and submitted within 6 months of the close of each Fiscal Year. The Terms of Reference for the Audit are included in the Accounting and Financial Management Manual. Audits remain the responsibility of the Controller and Auditor General. Additional costs which must be incurred to complete the audit will be covered by the proceeds from the Credit. There are no deviations from standard disbursement arrangements regarding eligibility, funds flow, disbursement percentages, nor are there any special considerations regarding the use of Statements of Expenditure (SOEs) or the Special Account. Annex 6 describes proposed Disbursement Arrangements in greater detail. - 20 - D. Project Rationale 1. Project alternatives considered and reasons for rejection: A follow-on project from the FRMP was considered, involving a continuation of activities related to woodland management and community forestry within Mwanza and Tabora regions with expansion to other regions. However, it became apparent in the last two years of FRMP that forest management and conservation, as well as village and community-based forestry would not succeed within the existing institutional structure and that major institutional reforms were necessary for any future forestry interventions to be successful. It had been hoped that the piloting of at least some aspects of a forestry executive agency could have been undertaken in the latter stages of FRMP, but proposed pilots were never implemented. The original project concept also did not include action on plantations. It was felt that any institutional reform related to forest management and conservation should include all forest resources, and the adoption of specific policy guidance favoring the role of the private sector in plantation management provided an excellent context for including this aspect into the project. Incorporation of a lands component, similar to that under FRMP was also considered. This was rejected as it was felt that any further investment in lands should be undertaken as a stand-alone project activity. These choices were intensively discussed amongst various stakeholders. The project concept was developed through a consultative process, and proposals for project preparation were an outcome of a strategic planning workshop held in June, 1999. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Latest Supervision Sector Issue Project (PSR) Ratings t(Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) Forest and woodland management Forest Resources Management S S Project Biodiversity conservation; lake Lake Victoria Environmental S S ecosystem management Management Project Biodiversity conservation Lower Kihansi Environmental Management Project Other development agencies Catchment protection and biodiversity East Usambaras Catchment conservation Forestry Project (DIDC); Forest sector planning National Forest Program (DIDC); Catchment protection and Natural Resources Management community-development; forest policy and Buffer Zone Development and legislation Program (GTZ); - 21 - Biodiversity conservation and Udzungwa Mountains Forest community development; Management and Biodiversity Conservation Project (Danida); Village-based woodland management Community-based Natural Woodlands Management Project; UTUMI (Lindi) Woodland Management Project (Danida); Catchment protection Catchment Forestry Program (Norway); Biodiversity conservation Reducing Biodiversity Loss at Crossborder Sites in East Africa (GEF/UNDP) IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: Preparation of this project was delayed until the Implementation Completion Report for the Forest Resources Management Project was completed, in order to incorporate lessons learned into project design. A number of activities under FRMP were pilot activities, including those related to Joint Forest Management, the participation of individuals and communities in the management of woodlands, forestry extension, forest revenue collection and monitoring, and regional planning and administration of forestry activities. As the ICR notes, valuable lessons were learnt during project implementation and were highlighted in several evaluations undertaken prior to project completion. Lessons learnt from FRMP and applied to the design of FCMP are as follows: (i) the concept of strengthening traditional systems of woodland management (ngitiri) is fundamentally sound and has good replication potential throughout the country. The most important aspect of the program has been the support it has given to people to act to halt the disappearance of remaining woodland, and to bring as many pockets of woodland as possible under rehabilitation. This has been accomplished by working with villagers as the logical, long-term guardians of forest resources to protect and conserve these resources themselves, at little cost to government, and through socio-legal mechanisms which they themselves control and maintain according to their own interests. (ii) Community involvement in Joint Forest Management of government forest reserves can lead to an improvement in the condition of reserves, and to a sharp reduction in the threats they face. The approaches piloted by FRMP could, however, be strengthened particularly in regard to more fully transferring decision making responsibilities to the communities involved. (iii) More generally, dry woodland management poses good opportunities because of the resilience of the woodland to harvesting, the cost-effectiveness of relying on natural regeneration with minimal silvicultural treatments, and because of the few risks to the environment posed by sustainable management of dry woodland ecosystems. (iv) Farmers are apt at adopting simple technologies that are based on the use of inexpensive local material, such as the improved wood stoves. Higher-tech approaches are not needed and are difficult to disseminate through extension. (v) Project identification and preparation benefited from both the resources which were put into the effort, but also from the longer term iterative process of project design, and the linkages which - 22 - were established with sectoral strategies, such as the Tanzania Forestry Action Plan. Indeed, experience with the project suggests that there can be significant project implementation benefits when project identification and preparation is bolstered by strategic studies, action-oriented research, and ESW. (vi) Weaknesses in project performance were often linked with inadequacies in the prevailing institutional mechanisms for forest management in Tanzania. These place responsibility for forest management within a decentralized institutional structure, without adequate mechanisms for ensuring there is technical, administrative, and management oversight. Problems of governance in the sector are linked to these weaknesses, and future investments will likely be jeopardized in the absence of institutional reforms. The ICR noted that the problem is widely recognized in Government, and that the Ministry has made a commitment to launching a reform process which seeks to address these systemic weaknesses. (vii) Technical assistance may sometimes be delivered more effectively if individual consultants are selected on the basis of professional competence and experience. The packaging of consultancies into larger packages during the tendering process limited Government's flexibility in finding qualified individual consultants, though some efficiencies were gained. However, consequent deficiencies in performance were difficult, time consuming, and costly to rectify. Technical supervision of advisory services needs to be strengthened and supported. (viii) A Project Coordination Unit may facilitate implementation of project activities, but may have little overall impact on increasing institutional capacity. In the case of FRMP, a PCU was justified on the basis of the need for coordination between multiple institutional partners, but provided little scope for the technical oversight needed in the sector. Payment of project allowances may encourage project staff to work diligently. Given public spending constraints, this approach is not sustainable in the long-term. 4. Indications of borrower and recipient commitment and ownership: Since 1996 the Bank has maintained a dialogue with MNRT and FBD on the conceptualization and design of a future forestry investments that would build on achievements and lessons from FRMP, but which would consider the forestry sector within Tanzania as a whole and address current important issues. A letter requesting Bank support for a further forestry project was received by the Bank from MNRT in 1998 and the Government's own concept paper was completed and sent to the Bank in 1998, following several discussions between the government stakeholders and Bank officers. The project as designed incorporates the Government concepts, but further preparation was delayed until the ICR for FRMP was completed. Government has also seen that any future project would require the support of a new policy for forestry and to this end it has, over the last two years, vigorously pursued the formulation and eventual adoption of the new Forest Policy (March, 1998) and is continuing to push for the required legislative changes to support the new policy. The overall framework for public expenditure and donor support to the forestry sector is set out in the National Forest Program, which has been prepared to guide the implementation of the new forest policy. Both the NFP and the National Forest Policy provide important guidance in establishing priorities which will be captured in the Biodiversity Strategy and Action Plan, which is under preparation. FCMP is the principal financial delivery mechanism for the National Forest Program, and proposed GEF support has been fully blended into this IDA operation. Additional bilateral support for implementation of the NFP is in the process of being mobilized. - 23 - 5. Value added of Bank and Global support in this project: The involvement of the Bank would allow valuable lessons and initiatives started under the previous FRMP and other donor projects to be put into effect and a scaled-up approach to forest management and conservation taken under FCMP. These include a more effective institutional approach to forest management and conservation as well as the application of improved participatory approaches to forest management and the involvement of the private sector as the key manager in industrial plantations. The participation of the GEF and the establishment of a sustainable financing mechanism for ongoing conservation of the Eastem Arc Mountain Forests, and, eventually, other endangered areas of biodiversity in Tanzania makes it possible for an integrated and participatory intervention to safeguard one of the world's most important ecosystems. Added value from the Bank's perspective comes from its global experience in the design, implementation and financing of biodiversity conservation and GEF projects. The GEF involvement makes possible a conservation programn that would otherwise have been difficult to achieve. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): O Cost benefit NPV=US$ million; ERR = % (see Annex 4) O Cost effectiveness 0 Incremental Cost * Other (specify) The institutional reforms which FCMP seeks to support through the National Forest Program are intended to help to establish a new institutional framework, which is primarily oriented toward improving service delivery functions: facilitating villages to establish Village Forest Reserves, strengthening the capacity for the management of strategic forest reserves which are being maintained in the national interest, improving the financial sustainability of forest management interventions, other local conservation and protection measures, and strengthening the role of the private sector in industrial plantation management. The current constraints in the forest sector in Tanzania call for a comprehensive approach to the development of a sector-wide approach toward forest conservation and management. Public financing of woodland and forest conservation and management is justified both from the perspective of their role in mitigating the impacts of poverty as well as from the perspective of the environmental value of forests and woodlands as watershed catchments, which maintain water flows to urban areas and to hydroelectric generating facilities. Other environmental benefits from forest and woodland conservation and management accrue because of the value of carbon sequestration. [An Incremental Cost Analysis has been prepared for those components of the project which specifically focus on conservation of Eastern Arc Mountains forest biodiversity (to be financed by GEF), and this will be reviewed separately when these activities are Appraised.] A separate analysis of the industrial timber plantation sector was prepared which sought to estimate the value of the industrial timber plantation resource, and the economics of project interventions, and this is summarized in the Annex. Poverty impacts. Tanzania's woodland and forests are extremely important for mitigating the impacts of rural poverty. Recent studies have shown that fully 40 percent of total household consumption in some - 24 - rural areas is accounted for by forest and woodland products such as honey production, firewood, construction material, and wild fruit and other foods (a point noted in Tanzania's Poverty Reduction Strategy Paper). In addition, forests and woodlands are an important source of dry season grazing, reducing households' exposure to environmental risk. Rural households generally use a wide variety of environmental resources from woodlands, and the sizable aggregate value of environmentally-derived income is made up of a fairly large number of smaller individual income sources. There is considerable complexity in the factors which determine levels of resource use: different households use different resources for different reasons at different times. Still, the conclusions are inescapable: the rural poor are heavily dependent on resources derived from forests and woodlands, and deforestation and forest degradation poses a significant threat to rural livelihoods. FCMP is designed in part to increase the capacity of villages to manage woodlands. It derives from experience with pilot and other operations across Tanzania, which suggested significant scope for improving the effectiveness of this approach toward village-based management. As such, FCMP is seeking to facilitate the development of local management schemes through cost-effective interventions which serve primarily to inform villages and communities of policy and legal changes which underpin their rights over local woodland resources. Environmental values and the national economy. While the biodiversity of the Tanzania's tropical high forests is of extraordinary international significance and locally is of great value for mitigating the impacts of poverty, the value of these forests to the national economy, primarily through water and energy production, is of great national importance. The Eastern Arc forests, for example, cover several major catchments which collectively provide water for all of the nation's coastal communities (including Dar es Salaam with its population of 3 million). These mountain forests feed more than 22 rivers, including the Sigi, Ruvu, Ruaha, Kihansi, and Rufiji. The Uluguru catchment, for example, provides the main source of drinking water to both Morogoro town and Dar es Salaam. Hydroelectric energy production is similarly heavily dependent on maintaining the integrity of these forests. Total installed electric generating capacity in Tanzania (maximum annual firm energy) is 1323 GWh (1:60 year reliability). Hydroelectricity accounts for 720 GWh (54 percent) of the total. Of the 6 hydroelectric stations (Mtera, Kidatu and Lower Kihansi in the Rufiji Basin, and Nyumba ya Mungu, Hale, and New Pangani Falls on the Pangani River), only 2 (Mtera and Kidatu) have seasonal storage capacity. The rest are 'run-of-the-river' facilities which depend on more or less constant river flow, which, in turn, is dependent on the integrity of watershed catchments and the forests found there. Other environmental services captured by the macro-economy associated with Tanzania's forests impact positively on agricultural production and also result from timber harvesting (both through the legal and illegal felling of trees used in construction and to make furniture and charcoal). More recently a small ecotourism industry has developed. There are some indications of a growing trade in threatened species of insects and reptiles. Accordingly, there is a strong need for sustainable use of forest products for these purposes and activities such as tourism which maximize the non-destructive uses of forests. Carbon sequestration. Simply because of their very great extent in Tanzania, miombo woodlands in particular have great potential for adding to the growing carbon dioxide content of the atmosphere, or helping to reduce it. A well stocked hectare of miombo woodland can sequester 200 to 300 tons of carbon. Various sources place the economic value of sequestered carbon at $5 to $10 per ton, and so there are considerable benefits to be gained by conserving miombo, by increasing rates of sequestration, or by limiting future losses. For example, against miombo stocks of around 30 million ha in Tanzania, stocked at a rate of 150 tons of carbon per hectare, an increase in carbon sequestration of a tenth of a percent over the life of the project would yield around US$ 22 million in global environmental benefits. - 25 - 2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) Considering the extent of the asset, public funding for forestry is generally inadequate and irregular. Over the last 10 years, budgets to the Forest and Beekeeping Division have been increasing in nominal terms -- growing four-fold from 1993/94 to 1999/2000 -- though have remained roughly constant when inflation is taken into account. In 1999/2000 FBD's recurrent expenditure was around TSh 2.3 billion (US$ 2.9 million at the then prevailing exchange rate). Out of this TSh 1.3 billion came from the Treasury and covered staff salaries; TSh 980 million was from revenue collected and retained by FBD and was used for forest operations. This sum is intended to provide for the management of around 13 million ha (averaging about US$ 0.22 per ha). Outside of specific donor-financed activities, development and recurrent costs are partly financed by retained revenues, which currently total around 56 percent of all revenues collected from the sale of timber and other products from central govemment Forest Reserves. For the most part, FBD relies on District staff (rather than FBD staff) to collect revenues, with the exception of the plantation sector, which accounts for around 40 percent of total revenues collected. In 1999/2000, revenues from Central Government Forest Reserves (including plantations) totalled roughly TSh 2 billion (around US $2.5 million at the exchange rate which prevailed at the time). FBD total recurrent and development expenditures in 1999/2000 (including a proportion of, but not all, donor-financed expenditure) totalled around TSh 5.6 billion. Financing of the forestry sector by the donor community peaked in 1991/92, when donor spending accounted for 90 percent of all spending in the forestry sector. Currently, it is estimated to account for around 68 percent of all spending in the forestry sector. It is difficult to compare the efficiency of public vs. donor spending because of the highly distorted impact of heavy investments in relatively expensive technical assistance to manage donor financed projects. The bulk of donor assistance, however, is not mediated by the budget process. As much as 60 percent of donor investments in forestry are not captured by the budget. In this environment, arguably, donor resources are financing donor priorities, rather than the priorities outlined in Tanzania's forest policy. It is widely agreed that the donor community needs to focus its priorities in a manner which is more carefully aligned with Government's. The National Forest Program poses a mechanism for doing this. The development of a sector-wide approach to financing of the forestry sector is a longer term objective of FCMP. Investments in improving financial management, procurement management, overall institutional management, and in meeting service delivery standards are intended to establish the institutional framework for a sector-wide approach. Fiscal Impact: Improvements in the framework for royalty collection are expected to strengthen the overall financial sustainability of the Tanzania Forest Service. FCMP proposes to change the overall framework, and to develop the means for returning revenues to villages and other forest managers. 3. Technical: Miombo woodland management options are being developed and tested by the Tanzania Forest Research Institute (TAFORI), and some experience in this area was also gained as a result of FRMP. These findings will be more fully developed, and research recommendations to improve woodland regeneration will be - 26 - implemented through the project. Lessons with regard to the involvement of communities in forest management, gained from FRMP and other donor-assisted efforts, have been incorporated into the project's design. Collaboration with other research initiatives through the Center for International Forestry Research, and with WWF will be strengthened. 4. Institutional: Institutional reform comprises a central element of this project. The formation of the Tanzania Forest Service has already been through initial processing within the context of the Civil Service Reform Program and the Executive Agency Program, and it has been recommended that the TFS be established as a 'self-starter,' with the assistance of the CSD. The structure, staffing, and functions, of the TFS, as well as links with the MNRT, FBD and district administrations remain to be determined, and these planning steps will feature prominently during project implementation. 4.1 Executing agencies: The project is to be executed by the Ministry of Natural Resources and Tourism. Close cooperation during implementation is expected with the Institute of Resources Assessment and its Tanzania Natural Resources Information Center, Sokoine University of Agriculture, the Civil Service Department, and TAFORI. Local government will also be a critical partner during implementation. Implementation of GEF-financed institutional reform activities is also to be executed by the Ministry, but in close collaboration with other local organizations, the Eastern Arc Mountains Conservation Endowment Fund, and other groups active in conservation in Tanzania. The Eastern Arc Mountains Conservation Endowment Fund is expected to implement the sustainable financing initiative with IDA and GEF resources. The EAMCEF is a Non-Governmental Organization established by a deed of trust under the Trustees' Incorporation Ordinance (Cap 375) which has been registered with the Administrator General of Trustees. An Inaugural Board has been established and is comprised of representatives of the public sector, the private sector, and environmental NGOs. 4.2 Project management: It is envisaged that FBD is currently not 'LACI capable,' but that a time-bound plan for implementation of LACI requirements will be prepared. Financial management and procurement specialists will be fully engaged in the development of this plan as members of the Quality Assurance Team. Modalities for the management of the planned Eastern Arc Mountains Conservation Endowment Fund will be developed during project preparation. The development of these modalities is likely to continue during project implementation. It is not envisaged that the Trust will be fully operational until the third year of project implementation. 4.3 Procurement issues: Procurement and Disbursement issues are summarized in Ainex 6. - 27 - 4.4 Financial management issues: A Financial Management Capacity Assessment was completed in conjunction with the Appraisal Mission and is in the project files (Financial Management Assessment, Ministry of Natural Resources and Tourism, October 25, 2001). There are no significant financial management risks faced by Tanzania which are expected to impact the project. The recently completed Country Financial Accountability Assessment (CFAA) indicated that Government has established a sound financial management and accounting system to handle public accounts. Already there has been an on-going special training program in place since July 2001 for government accountants, auditors, Permanent Secretaries and Members of Parliament on the control and management of government funds and properties which is based on new legislation. The main issues of the existing public sector system that can be drawn from the CFAA which are relevant to the project include: (i) non-compliance with statutory rules and regulations and record management; lack of sustainable technical capacity and Information Technology (IT) strategy to manage Government's Integrated Financial Management System (IFMS); lack of culture of accountability and enforcement of internal controls on the public fimances; (ii) lack of independency of public national audit office; ineffective internal auditing. In order to address the above gaps, there are on-going institutional capacity building activities underway to strengthen the public accounting system. With respect to audit compliance and FBD/MNRT audits for FRMP, these were consistently clean. Audits for the PPF-financed activities and the PHRD grants are up-to date, and clean. There are no audit reports outstanding under this sector. There are no major financial risks for this project. The additional support of a qualified accountant from the Ministry is important to ensure that qualified financial staff are adequate for handling project accounts, for ensuring there is capacity building within the Ministry in financial management. Building on past experience with implementation of PHRD/GEF/PPF-financed activities, banking arrangements are expected to be satisfactory. Audited financial statements (project, SOEs, and Special Account/ PMR) will be prepared and submitted within 6 months of the close of each Fiscal Year. The Terms of Reference for the Audit are included in the Accounting and Financial Management Manual. Audits remain the responsibility of the Controller and Auditor General. Additional costs which may be incurred to complete the audit will be covered by the project. Documentation with respect to SOE/PMR expenditures will be retained by the Ministry at the Ivory Rooms. 5. Environmental: Environmental Category: B (Partial Assessment) 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. The project has been classified as Category B with respect to its expected environmental impacts. The project is not expected to result in any significant negative environmental or social impacts. An analysis of Environmental and Social issues related to the project was carried out during project preparation and is included as Annex 11 to this Project Appraisal Document. Preparation of the analysis - 28 - was launched during the February 2001 stakeholder workshop convened in Dar es Salaamn which reviewed the project formulation and the key issues which were emerging during the preparation process. The analysis was completed during the June 2001 Technical Mission, where the preliminary findings were discussed and agreed with Governnent. The key issues related to environmental and social safeguards are summarized here: * Adequacy of implementing institutions to address environmental management - OP/BP 4.01. Although there are significant shortcomings in the national environmental management and regulatory framework have been highlighted, the forest sector has a strong assortment of provisions to address virtually all potential environmental concerns that which arise as a result of this project. These are specifically contained in the relevant forest sector policy, National Forest Program, and draft revisions to forestry legislation. In aggregate, Tanzania's forest policy framework is one of the most constructive and forward looking in Africa. * Financing commercial logging operations or the purchase of logging equipment for use in primary tropical moist forests - OP/GP 4.36. Consistent with the Bank's current Forest Policy, the project will not finance any activities which lead to the logging of high forests. The project will be supporting commercial operations only in plantation forests. These forests consist of eucalyptus, cypress, pine and teak - most of which were established over the last 30 years. The current standing crop has a history going back decades on land that was never covered by tropical moist forest, but was primarily grassland. The sixteen plantation forest blocks covered by the project will continue to undertake silvicultural practices including harvest and replanting. Participatory forest management plans will allow for expansion of village and community based plantation woodlots, but only with management plans that ensure protection of sensitive, biologically important and watershed catchinents. * Use of a sector-wide approach for forest management - OP/GP 4.36. The National Forest Policy, National Forest Program, draft forestry legislation, and technical guidelines all constitute essential components of a solid sector-wide approach to the forest sector in Tanzania. All of the Bank's policy commitments in this regard have been addressed by GOT and include: adoption of policies and a legal institutional framework for forest management; adoption of an appropriate forestry conservation and development plan; use of social, economic and environmental assessments of commercial forests; setting aside compensatory preservation forests; and establishment of institutional capacity to implement and enforce these commitments. * Protection offorest areas that are considered critical natural habitats and preservation and sustainable use offorests of high ecological value - OP/GP 4.36, OP/BP 4.04. The project proposes to support a number of activities within its three components that will adhere to forest sector provisions for identification, protection and management of critical habitats. These include, in particular, catchments and the Eastern Arc Mountain Forests. The sustainable management of dry woodlands, however, is expected to be an outcome of project implementation. Ultimately, the environmental benefits of this approach are expected to be substantial, and will provide significant opportunities for increasing the viability of managed miombo woodlands. Miombo woodlands are unusual in the extent to which they are extremely resilient to harvesting, and regenerate readily. Once miombo woodlands have been harvested, research has shown that regeneration is actually enhanced by the tillage of soils, suggesting that the management of settlement in woodland areas may be an effective woodland management strategy -- resulting in higher yields and better overall productivity -- than outright miombo conservation or selective harvesting. Forest management plans to be promoted by FBD will contribute to increasing the viability of these woodlands. The participatory forest - 29 - management approach advocated in the project also provides for local communities and forest users to identify and manage ecologically important forest areas based on their own needs. * Stakeholder consultation including the private sector and localpeople in forest management - OP/GP 4.36. Provisions for continuing stakeholder consultations are made in the three project components. For National Forests, Local Authority Forests, Village and Community Forests, and Private Forests, the basic premise for future sustainable use is the development of forest management plans that are defined by a stakeholder involved process. FCMP has specified particular provisions for ensuring that all stakeholders, from the private sector to local people, are included in the development of forest management plans. * Avoid or minimize involuntary resettlement as it applies in particular to encroachment in forest reserves - OP/BP 4.12 The problem of encroachment in reserved forests has been a long-standing one, and accompanied the move to a more open economy which took place in the early 1990s. Government has put in place various mechanisms to limit the problem of encroachment, including boundary demarcation, increased patrols, voluntary resettlement, and the development of benefit sharing schemes for communities living in buffer zones around reserved forests. Proactive strategies, such as the potential for the establishment of Village Forest Reserves offer perhaps the best opportunities for bringing communities and people living in forested areas into forest protection and management schemes. Experience has shown that reservation as a Government forest, as such, is amongst the most costly and least effective mechanisms for limiting damage to woodlands and forests. MNRT has developed a set of detailed guidelines for community based forest management which define methods for defining forest reserve boundaries, identifying encroachment problems, consulting with offenders and establishing fines and provisions for getting such offenders off designated lands. The Land Act also contains specifications for ensuring that peoples rights are duly respected and that in cases where land appropriation is required, due compensation is provided. Measures for appeals and investigations are also defined. Government reiterated during preparation that involuntary resettlement would not be carried out in conjunction with any project implementation activity. Government has also agreed that in the unforeseen event that involuntary resettlement becomes necessary in the course of project implementation, a detailed resettlement plan to be completed and subject to IDA review well in advance of any resettlement actions associated with any of the project components. 5.2 What are the main features of the EMP and are they adequate? The project's Category B rating does not require preparation of an Environmnental Management Plan. The Environmental Analysis, however, recommends that an environmental and social safeguards checklist should be incorporated into the Guidelines for the establishment of Village Forest Reserves, that detailed socio-economic studies should be carried out in the pilot industrial plantation areas affected by private sector involvement once these are identified, and that the impact of the Participatory Forest Management component and other project activities on the integrity of tropical high forests should be monitored. 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: September 1, 2001 The Environmental Analysis of the project has been completed and is included as Annex 11 to this Project Appraisal Document. - 30 - 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? The environmental rating for the project was based on the results of consultations during workshops in June 1999 and February 2001. The findings of the Environmental Analysis were discussed with Government and with key stakeholders during the June 2001 Technical Mission. 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? The development of an improved institutional capacity to screen and monitor projects related to the forestry sector for their environmental impact is expected to be an outcome of the proposed institutional reforms, and the establishment of the Tanzania Forest Service. The project includes provision for building this capacity in the proposed TFS. A safeguard monitoring plan has been developed, and is outlined in Annex 11, to ensure that safeguard provisions are adequately implemented and sustained. The monitoring program will be further developed, and will indicate how well each of the components is implementing the key provisions defined previously. The monitoring plan will define indicators for measurement, methods to be used, frequency of measurements, detection limits, and monitoring responsibilities. The plan will be implemented within the overall context of institutional reforms in the Forestry and Beekeeping Division. The plan will include a description of how reviews of selected issues of concern will be undertaken. The safeguard indicators and monitoring plan will be incorporated into overall project monitoring and evaluation. MNRT will be the ultimate GOT information focal point. The Bank will include in the project supervision plan the participation of an environmental specialist in selected missions, the Mid-Term Review and in the Implementation Completion Report. This specialist will review progress in implementation of the project safeguard provisions. 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. The democratizing impact associated with the establishment of Village Forest Reserves has been significant in Tanzania, and will continue to be so during the course of project implementation. The project will have social impacts as a result of the participation of rural communities and families in the conservation and management of woodlands as well as in the development of the forest conservation strategy, and in the implementation of pilot activities, in the Eastern Arc Mountain Forests. These actions should yield positive social benefits. However, all this will require a high degree of social interaction with the relevant communities, and project management will need to be sensitive to this requirements. The approaches to participatory management of the woodlands should also take note of the recommendations from the evaluation ofjoint forest management and ngitiri registration under FRMP and from experiences in other projects with related activities. 6.2 Participatory Approach: How are key stakeholders participating in the project? Key stakeholders are primarily communities with interests in woodland and forest conservation and management. The central feature of the Participatory Forest Management sub-component of the - 31 - Institutional reform component seeks to strengthen the involvement of these stakeholders in forest and woodland management. With respect to the GEF component, preparation of the conservation strategy for the Eastem Arc will require extensive consultation with communities and local governments in order to seek to develop a consensus about conservation and management of the forests of the Arc. Implementation of the Uluguru Community-based conservation component will be carried out in conjunction with several strong local NGOs. The Eastem Arc Mountains Conservation Endowment Fund (EAMCEF) has already been constituted as an NGO, and will be the primary implementing agency of the sustainable financing subcomponent of the project. Key partners working with the EAMCEF are represented on its Board and are prescribed in its Deed of Trust. These include WWF Tanzania, the Wildlife Conservation Society of Tanzania (WCST), Songas, and an academic/research institution (to be identified). 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? Implementation of the Community-based pilot forest conservation activities and management of the EAMCEF will be undertaken in the close cooperation with NGOs and other Civil Society organizations. Potential collaborators may include CARE Tanzania, the Tanzania Forest Conservation Group (TFCG), Tanzania Association of Foresters (TAF), WWF Tanzania, and WCST. Delete the rest from CARE/TZ up to (among others). 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? Strong institutional support and capacity building will feature in the institutional reform process, with a particular emphasis on building the capacity to undertake participatory forest management. 6.5 How will the project monitor performance in terms of social development outcomes? Social development outcomes will be monitored as a regular part of the project supervision process. 7. Safeguard Policies: 7.1 Do any of the following safeguard policies apply to the project? Policy Applicability Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) 0 Yes 0 No Natural Habitats (OP 4.04, BP 4.04, GP 4.04) 0 Yes 0 No Forestry (OP 4.36, GP 4.36) 0 Yes 0 No Pest Management (OP 4.09) 0 Yes * No Cultural Property (OPN 11.03) 0 Yes 0 No Indigenous Peoples (OD 4.20) 0 Yes * No Involuntary Resettlement (OP/BP 4.12) 0 Yes * No Safety of Dams (OP 4.37, BP 4.37) 0 Yes 0 No Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) 0 Yes 0 No Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* 0 Yes 0 No 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. The project complies with the applicable safeguards policies. Compliance is reviewed in Section E.5. - 32 - F. Sustainability and Risks 1. Sustainability: The project's sustainability is dependent on four key elements: (i) The successful establishment of a TFS. Success would include effectively functioning forest/woodland management and protection operations in forest reserves within designated districts and villages. (ii) Adequate collection of forest revenues to sustain the TFS with benefit sharing arrangements with Villages. There is considerable potential to improve rates of revenue collection, well above current levels (estimated at around 10 percent of the revenues which are due). (iii) The development of a sustainable mechanism for financing biodiversity conservation, including guidelines for the establishment and management of trust funds and other financial mechanisms. (iv) Acceptance by Government at the highest level of principles of sustainable forest management and biodiversity conservation, to complement village-based forest management. Such acceptance would need to be translated into active support for the activities such as those under FCMP. 2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1): Risk Risk Rating Risk Mitigation Measure From Outputs to Objective There is continued strong support for M Service delivery orientation is incorporated in introducing institutional reforms which institutional change proposals; Performance focus on service delivery functions and monitoring mechanisms are developed and mechanisms; implemented. The need for revenue to sustain the M The potential for revenue sharing is more fully institutional structure can be balanced developed; project coordinates with fiscal with the need for communities to retain decentralization initiatives. benefits from forest and woodland management; Encroachment issues are adequately S Encroachment issues were reviewed during considered. project preparation. GOT intends to address encroachment through participatory forestry, improved boundary marking, border patrols, and other initiatives. Government maintains its commitment to M Potential revenue benefits are expected to be the involvement of the private sector in significant. industrial plantation production; Biodiversity conservation remains a N Catchment protection as an outcome of forest priority for Government action. biodiversity conservation has significant national value. From Components to Outputs Management and staff of sectoral S Focus on performance monitoring is intended to institutions internalize the change process; build new institutional behaviors; Service delivery mechanisms can be fully N Project builds on pilot activities already articulated; completed in FRMP and through other - 33 - interventions; Communities and individuals have interest M Experience with pilot initiatives suggest villages and capacity to undertake forest and will have strong interests in community-based woodland management; woodland and forest management; Land tenure reforms strongly supportive of local natural resource management. Private sector has capacity to undertake S Risk assessments will be carried out as part of plantation management, and markets can project preparation; support these investments; Community interests in biodiversity N Project design is intended to focus on ensuring conservation can be tapped; long term sustainable use of forests; Co-financing for sustainable financing M Phased implementation of Endowment Fund mechanisms can be mobilized. depends on donor co-financing. Resistance to professional and S Project will work with established mechanisms institutional change limits effectiveness of already in place for institutional reform through reform process the CSD. Overall Risk Rating M Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: Private sector involvement in plantation production, while mandated in policy, has not been undertaken in Tanzania. Multiple stakeholders with competing interests require that adequate consultations are undertaken before moving forward with this component. Village-based approaches to the conservation of ecologically sensitive areas will require adequate safeguards to ensure that villages protect these habitats. There is considerable skepticism amongst conservation NGOs that villages have the capacity to take on forest biodiversity conservation. G. Main Credit Conditions 1. Effectiveness Condition * the Borrower has adopted the Project Implementation Manual, in form and substance satisfactory to the Association; * the Borrower has established a financial management and accounting system acceptable to the Association; and * the Borrower has appointed to MNRT a Project Accountant with terms of reference, qualifications, and experience acceptable to the Association. 2. Other [classify according to covenant types used in the Legal Agreements.] - 34 - H. Readiness for Implementation D 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. 0 1. b) Not applicable. 1 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. 1 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. 0I 4. The following items are lacking and are discussed under loan conditions (Section G): 1. Compliance with Bank Policies 1 1. This project complies with all applicable Bank policies. O 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. Peter A. Dewees Agi Kiss 4 James W. Adams Team Leader Sector Manager 'ountry ManagerlDirector - 35 - Annex 1: Project Design Summary TANZANIA: Forest Conservation and Management Project Key Performance Data Collection Strategy Hierarchy of Objectives Indicators Critical Assumptions Sector-related CAS Goal: Sector Indicators: Sectorl country reports: (from Goal to Bank Mission) Improving environmental Better woodland and forest Forest sector ESW * Stabilizing forests and quality conservation and management improving livelihood by communities and sources for local people individuals help alleviate poverty in a significant way Promoting poverty reduction Increased private sector Baseline and monitoring * Private sector has through private sector growth investments in forest reports and ESW capacity to manage management and industry forests, and markets are accessible Civil service reform Improved performance of Performance monitoring * Reforms are sustainable forestry institutions reports GEF Operational Program: Forest Ecosystems Operational Program Promoting in-situ Extent of forests brought Baseline and monitoring * Government maintains conservation by relying on the under community-based reports commitment to involvement of communities conservation principles of Biodiversity Convention Promoting sustainable use Forest cover loss is slowed GIS and aerial surveys; mechanisms for biodiversity household consumption conservation surveys Promoting cost-effective Conservation measures are Sectoral expenditure reviews conservation measures financially sustainable Project Development Outcome I Impact Project reports: (from Objective to Goal) Objective: Indicators: To assist Government in Forest and woodland cover is Quarterly monitoring reports * Government remains implementing its new policy, brought under effective committed to the by developing a framework management by communities Household surveys objectives of the for the long-term sustainable and individuals in project National Forest Policy management and conservation areas Supervision mission reports and of the National of Tanzania's forest resources, Forest Program strengthening the role of Private sector is involved in Evaluation mission reports * Government remains individuals, communities, plantation management (mid-term and final) committed to supporting villages, and the private sector participatory forest in management and Mechanisms for forest conservation and conservation of forests, and biodiversity conservation are management implementing this framework more fully established on a pilot scale - 36 - Key Performance Data Collection Strategy Hierarchy of Objectives Indicators Critical Assumptions Output from each Output Indicators: Project reports: (from Outputs to Objective) Component: The project is expected to: (i) establish a new national New institution is in place Annual work programs and * Continued strong forestry institutional with improved capacity for forward budgets support for reforms framework effectively to implementing policy which focus on service support the sustainable objectives, improved financial Performance monitoring delivery functions and management and protection of sustainability, and with a reports and service delivery mechanisms Tanzania's forest, woodland greater focus on service surveys * Encroachment issues are and industrial plantation delivery adequately resolved resources; Project supervision reports during project design (ii) establish the framework Private sector is involved in * Continued commitment for involvement of the private plantation development and to involvement of the sector in industrial plantation management private sector development and management; and (iii) develop the institutional Institutional structure and capacity within the forestry capacity is in place, backed up sector for coordination, by sound consultative financing, and management management planning, and of biodiversity conservation financial mechanisms, to interventions within undertake community-based Tanzania's forests, in conservation of forest particular in the forests of the ecosystems Eastern Arc mountains. - 37 - | | Key Performance Data Collection Strategy Hierarchy of Objectives Indicators I Critical Assumptions Project Components / Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) 1. Reform of forestry US$ 25.2 million (IDA) Progress and disbursement * Management and staff institutions reports of sectoral institutions a) Establishment of the internalize the change Tanzania Forest Service process b) Improving revenue * Service delivery collection from forests mechanisms can be fully and woodlands articulated c) Improving service delivery * Communities and mechanisms for individuals have interest participatory forest and capacity to and woodland undertake forest and management woodland management 2. Private sector US$ 3.3 million (IDA) Progress and disbursement * Private sector has manannement of industrial reports capacity to undertake plantations plantation management a) Improving the plantation and markets can support resource information base these investments and management planning capacity b) Strengthening institutional support services for private sector involvement c) Pilot alternative management of selected industrial plantations d) Monitoring and evaluation 3. Eastern Arc forests US$ 7 million (GEF) Progress and disbursement * Political support for conservation and US$ 2 million (IDA) reports biodiversity management conservation is a) Eastern Arc Mountains maintained Conservation Endowment * Community interests in Fund biodiversity b) Improving Institutional conservation can be Support Services tapped for forest biodiversity * Co-financing for conservation sustainable financing mechanisms can be mobilized 4. Proiect administration US$ 0.6 million (IDA) Progress and disbursement * Project activities are and management reports mainstreamed into the operations of the Ministry - 38 - Annex 2: Detailed Project Description TANZANIA: Forest Conservation and Management Project This Annex is condensed from the Working Papers which describe each project component more fully, and which comprise part of the Project Implementation Plan. Project costs include IDA and GEF financing (where appropriate), and all contingencies and counterpart financing. By Component: Project Component 1 - US$26.70 million Supporting institutional change and improving service delivery This component will assist the government with the design and establishment of the Tanzania Forest Service (TFS), as a specialized 'executive agency' as defined by the Executive Agencies Act (1997), and consistent with the wider and on-going national program of civil service reform. It is envisaged that the Tanzania Forest Service will, among other things, have responsibility for the protection and management of natural forests and the development and management of industrial plantations (including promoting the private sector to take on these tasks). Initially, the agency will be established on a limited basis with clearly defined regional responsibilities and coverage, although the concept is that an agency with a national mandate will eventually be established. Technical assistance will be provided to work with FBD and the Civil Service Department (CSD) and other relevant government agencies to design the structure and functions of the agency and to draw up the necessary implementation plans and guidelines for establishment of the agency, including the formulation of business and staff recruitment plans. This component will also provide support to build on experience from previous Bank-financed operations, and upon the opportunities posed by the new Forest Policy, and planned legislation. Three sub-components of this activity are envisaged: (i) Establishment of the Tanzania Forest Service, focusing on the phased-in introduction of the new executive agency, with clearly defined roles, functions, performance standards, and monitoring. This sub-component would provide resources to manage the change process, to strengthen the capacity for administration and management, to rationalize and to strengthen the capacity for tasks related to policy, planning, and legislation (which would remain with the Ministry), and would support a badly-needed program of investment in infrastructure. (ii) Improving revenue collection from forests and woodlands, improving the capacity of the TFS to become self-financing, and to ensure that revenues are reinvested at the local level in forest protection and management through local institutions. This component will develop altemative revenue collection mechanisms, and monitoring systems to improve rates of collection. (iii) Improving service-delivery mechanisms for participatory forest and woodland management, in particular, support for the establishment of Village Forest Reserves, woodland management by individuals and communities (ngitiri), and Joint Forest Management, building on experiences piloted in earlier operations. This sub-component will be implemented in conjunction with community-based forest management activities which, it is envisaged, will be supported by the Government of Denmark. - 39 - A mid-term review would determine outstanding issues and provide recommendations for improving the efficiency and effectiveness of the TFS. A further evaluation will be undertaken prior to project completion and, as well as determining the degree of achievement and success of the TFS, will develop lessons for the future. The three sub-components are described here in further detail: Establishment of the Tanzania Forest Service (US$14.2 million) The rationale for the establishment of the Tanzania Forest Service has been clearly established both in policy and in the National Forest Programn (NFP). The project intends to finance a process which leads to the establishment of the TFS. The process of establishing an Agency is defined by guidelines and criteria outlined by the Civil Service Department. The design of this subcomponent adheres closely to these criteria. Four sets of activities will be financed under this sub-component. Change management The project will provide resources to launch the process of change management in FBD, including the establishment and operation of an Implementation Team, training to assist the Ministry in managing the process of change, development of an organizational structure consistent with the functions of an Agency which are envisaged in policy, and human resource actions to ensure that staff deployment and remuneration is consistent with broader principles of the change process. Central to the process of change management will be a series of stakeholder consultations with FBD staff, as well as with the private sector and local government to clarify the Agency's primary service delivery functions. Capacity building for administration and management Fragmented donor financing for the forestry sector, through stand-alone interventions with their own support services and processes, has limited their effectiveness in addressing national forest policy concems. More effective deployment of donor assistance through the Ministry will depend on robust procurement and financial management processes being in place. The project will provide resources to improve the capacity of the Ministry and the Agency to handle financial and procurement management, largely focusing on training in the use and application of new nationally accepted procurement processes and financial management packages. In addition, the project will finance an assessment of the Agency's Information Technology requirements, and will prepare a program of investment in improving IT services which respond to institutional needs and requirements, including financial management. Strengthening policy and planning services The Ministry will retain core responsibilities for strategic planning and policy development. The project will provide resources to improve this capacity, while providing scope for wider stakeholder consultation about policy formulation. Related to the process of change management is the question of how the Ministry's remaining functions will be rationalized. Capital investments in infrastructure Ministry staff in Dar es Salaam currently occupy multiple office premises, some of which have been occupied for as long as 40 years, with little new investment in infrastructure. The delivery of core services is constrained by this fragmentation, and is compounded by the problem of shuttling between offices and coordinating internal staff placement. The long standing need for improved infrastructure was recognized during the preparation of FRMP, and though finance for civil works was provided under that project, - 40 - delays in procurement prevented the construction of new facilities. FCMP will finance the construction of new office facilities for headquarters and Ministry staff to address these constraints. In addition, the project will finance an assessment of regional and district infrastructure needs, and will provide modest support for this infrastructure as an outcome of this assessment. These investments are to be undertaken in a manner consistent with the wider mission of the TFS, as well as with the on-going program of local government reform. Improving revenue collection from forests and woodlands (US$4. 0 million) This sub-component will provide resources for the design and implement a coherent forestry revenue strategy to increase net revenues. These revenues need to be retained and transferred in a way that service provision activities and enforcement can be successfully implemented. Three sets of activities are envisaged under this sub-component. IMproving non-tax revenue administration The output of this activity would be an improved non-tax revenue administration system. The activity would support a redesign of licenses or transit passes to make forgery, multiple use and other abuses more difficult, a cleaning up of the funds transfer system, an investigation into the use of penalties and infornants, and several meetings to discuss the results. This component is considered a "stop-gap" approach to temporarily improve financial administration until the results of the pilot reforms can be incorporated. The project would finance audits of revenue collection in 25 key Districts which would be carried out by external (local) auditors and auditors within FBD. The audits would collect informnation on the accounting of financial docunents (registers, receipt books, licenses, and transit passes) and would cover checkpoints in an effort to reconcile originals and duplicates. Financial transfers would be reconciled with headquarters records. The results of the Audits would be written into a reporting framework, and a presented at a workshop which would focus on key elements of the systems' design and its strengths and weaknesses. On the basis of the workshop and the audit results, a system of funds transfer would be designed, which would cover relevant information which would be submitted by districts. The information would likely include (but is unlikely to be limited to): revenue by product (charcoal, registration fees, timber, etc.) and revenue from each forest. As an outcome of the consultation process, key documents would be redesigned to minimize evasion, fraud and forgery: felling licenses, Transit passes, and others. Penalties for non-compliance with the regulatory framework would be reviewed and revised. Stricter deterrent penalties would be developed and introduced. Studies would also assess estimated central government and district revenue losses due to improper record keeping and study the feasibility of intensified auditing. Based on results from the audits and workshops, a simplified MIS would be developed which tracks forest royalties by product (charcoal, timber, fuelwood) and forest reserve. Redesigning a revenue collection system Fundamentally, however, the revenue collection system requires a complete overhaul and redesign to complement a production based system of taxation to either a transport or market based one. Experience has shown that a new system, which should be introduced on a pilot basis, should be transport based, and royalties will be paid at the Regional or District level for a "Transport License" or "Transport Time Pass." - 41 - Under this system, a parallel system of "extraction fees" will exist and these will be entirely retained by the manager of each forest. As best as possible, current royalty levels (rates) will be maintained, but this will require a breakdown between "extraction fees" and "transit fees." Two pilot operations are envisaged: one in Dar es Salaam which is specific to a single product and market (charcoal), and a second in Mwanza, which covers multiple products and product delivery systems. Monitoring, seizure and confiscation may be carried out by FBD but also by other "partners" such as TRA, Local Governments, and the traffic police. The cooperation of these partners and the terms of the agreement will have to be worked out before the pilot can commence. Transit revenues will have to be shared with Local Authorities on an agreed upon basis. New legislation (Rules) will have to be passed dictating rates and coverage. An intensive promotional and informational campaign will be necessary as long as the penalties for non-compliance are high. The pilots will address the following issues: penalties are substantially increased and are awarded to well specified individuals; points of taxation are substantially lowered; multiple taxation is reduced; the system is simplified so that costs of compliance are minimized; other partners are involved in either monitoring or collection. The pilot will be implemented in 2 stages. First, fixed transport licenses will be designed and implemented in the "catchment" area. If the system is successful, a second expansion stage would be implemented. Based on an evaluation of the pilot systems introduced in Mwanza and Dar es Salaam, FBD would hold a wide-ranging workshop to establish the parameters or framework of the new system, and then would introduce the new system. Centralizing revenue collection and accounting In terms of revenue collection, the advantages of working within the structure of the Tanzania Forest Service will be that revenue collectors can be better remunerated; revenue collectors (and supervisors) will be more directly answerable to the TFS; and a system of performance targets, increased incentives and improved contracting can be introduced. Centralizing revenue collection and separating it from other service delivery functions of the TFS will have profound cost implications. These are difficult to predict since they are contingent upon the ultimate revenue system design, itself an unknown and an output of the project's other activities. With these caveats in mind, following the informational stages of the pilot, a consultant will develop contracts, incentives and performance targets for revenue collectors during the pilot period. Cost implications, in terms of hiring (salaries) and equipment is made and a budget is prepared to move to a centralized mode of hiring for revenue collection. During the planning stage, projected budget and revenue targets will be prepared based on the pilot exercise. The project will provide for the purchase of required vehicles and equipment to handle the new revenue collection regime. In addition, the project will seek to develop mechanisms for returning revenues collected to comrnunities. This will be developed in conjunction with the PFM component of the project, which will monitor the expansion of Village Forest Reserves. - 42 - Governance, information and social marketing This activity will focus on providing improved information about the objectives and approaches toward improving revenue collection, to build wider support for forest conservation and management through these types of pricing interventions. Public awareness of the impacts of the revenue collection system will be quite important. In order to improve public awareness, the project will finance various public information activities geared towards developing wider-spread acceptance of the improved revenue collection system. The project will finance a media service company to prepare informational material focused on the extent of the illegal forestry sector in Tanzania, and the costs the sector is imposing on the economy. The activity should also focus on building support for interventions through key entry points into the industry, for example, through the army. Improving Service-delivery mechanisms for participatoryforest and woodland management (US$8.4 million) It has become clear since the adoption of forest policy reforms in Tanzania in 1998, which lay the framework for a new approach to forest conservation and management, that the institutional framework for service delivery with respect to participatory forest management is extremely weak. While the new forest policy is innovative and will have far reaching impacts, there is limited capacity at the central, district and local levels to deliver on its objectives in this respect. One of the objectives of the project, then, is to support an institutional reform process which builds the capacity for service delivery to extend participatory forest management dramatically and to recover lost ground in activities which have lacked adequate facilitation and support. Activities supported by FCMP will be launched within the prevailing institutional framework. Service delivery responsibilities will become a key feature of the new institutional framework which is to be introduced. FCMP will explore options for commencing financial support to districts and villages through government channels, in the spirit of the Local Government Reform Program. The overall objective of this sub-component of the institutional reform activity is to provide the framework to bring as much unreserved forest and woodland as possible into the reserved category under clear local owner-management and to assist adjacent communities in participating directly in the management of National and Local Authority Forest Reserves. This is designed greatly to enhance both conservation and local level empowerment and livelihood support. A core Participatory Forestry Management Support Unit (PFMSU) will be established within FBD, in the first instance, to form the institutional foundation and center of responsibility for ensuring that services are delivered. The unit will be headed by a Coordinator, assisted by a Lead Facilitator and a Resources and Monitoring Specialist. This small team will be supported by an adviser, recruited by FBD. In due course, should a service-oriented Executive Agency be formned, then the PFMSU would ideally move into that framework, in order to gain from institutional and administrative efficiencies and the flexibility which such agencies can provide. In line with LGRP, the primary role of the PFMSU will be to promote and facilitate the adoption of PFM by regions, districts and forest-adjacent communities. Due to the magnitude of the task ahead (i.e. a large scale promotion of PFM), the PFMSU will only to a limited extent deliver services directly to local communities. The main strategy for achieving the sub-component objective will be the 'facilitation' (implying the provision of a host of services ranging from advice, guidance and technical assistance to training, extension and general capacity building, etc.) of PFM, both towards the local governments and towards the forest adjacent communities deciding to enter into JFM arrangements or to set up and manage VFR's. Facilitation - 43 - of PFM will be done by the PFMSU, assisted by different 'assistant facilitators' at the national, regional, district and local levels, and in collaboration with and via the regional and, in particular., the district authorities. It follows that there will be different categories and levels of 'facilitation' services adapted to different sets of circumstances and levels. Five sets of activities are envisaged: Mobilization and support The core of the program will provide support for existing PFM initiatives, and will develop the capacity for rapid extension into new initiatives. The project will initially work with a limited number of PFM initiatives in selected districts. The initiatives and districts will be selected based on the probability for creating early successes, which can be expected to boost the expansion of the program and the adoption of PFM practices by other communities and districts. A first activity will be to carry out an assessment to determine where to focus service interventions. The service interventions to be offered will focus on 'facilitation' of PFM through a range of support activities aiming at building up local capacity to facilitate introduction and implementation of PFM in various types of forest reserves, in line with FBD's recently published 'Guidelines for Participatory Forest Management. Facilitation services will work from a common menu of approaches based on an understanding of the evolving legal framework, and tailored closely to fit local conditions and concems. The PFMSU will use its own facilitator and a number of assistant facilitators (individuals, institutions, NGO's, CBO's, etc.) on short-task centered assignments, to work with district staff in helping them restructure or deliver PFM facilitation in the selected villages. Over time, the more successful of these district level staff (DFOs and DCFOs) and the assistant facilitators deployed by the program will add to the growing cadre of expert practitioners in Tanzania, in tum able to provide facilitation support to less experienced foresters. As experience accumulates and capacity increases the program will gradually be expanded into other districts. Priorities for the expansion will be set according to criteria such as demand by communities and district authorities for PFM, district capacity (particularly regarding the DFO's office), motivation, districts targeted for local government reform, the urgency of forest loss and degradation, and the existence of appropriate bodies to assist in PFM facilitation (e.g. NGO's, CBO's, companies, institutions, individuals, etc.). Efforts will aim to help villagers put Village Forest Reserves in place or to introduce village-based approaches into the management of National and Local Authority Forest Reserves, including those earmarked for catchment protection. Facilitation will include assistance to communities in formulating formal by-laws based on informal community rules or through other mechanisms. As a national unit, PFMSU will have a special role in ensuring clear procedures for registration and for training of district council staff to facilitate this. In other instances, communities will need to be assisted in restructuring their management arrangements, developing forest use protocols, and in zoning and boundary marking methods, as well as in strengthening systems for accounting for income from fines and fees and so on. There will be cases where the PFMSU will assist villages directly but in general the assistance will be channelled through locally based 'assistant facilitators'. By the end of the second year of implementation it is expected that foresters in around 25 districts will have their capacity to undertake PFM facilitation improved, through assisted 'learning-by-doing' and that their supporting District Councils will also have been successfully assisted better to plan and route at least some - 44 - level of continuing support to PFM. Also by the end of the second year a number of JMA's (20 - 30) will have been developed in selected Local Area Forest Reserves and National Forest Reserves. With the enactment of the new Forest Bill it is possible that this number could increase more rapidly than currently foreseen. As far as Village, Community or Private Forests within village lands are concerned a significant number of forest-adjacent villages and/or communities will have been assisted to initiate, consolidate, refine or expand efforts towards creating forest reserves and towards bringing their forests under management. At the end of the program, capacity will have been built at various levels as a result of PFM facilitation. At the regional and district levels a general capacity (primarily within the DFOs office but also extending to other departments) to actively support forest adjacent communities in the process of establishing and managing VFRs will have been created. The focal point for facilitation of PFM in general will have been shifted from the national to the regional, district and local levels, involving different types of 'facilitators', such as local government officials, NGOs, CBOs, companies, institutions, organizations and individuals. Furthermore, villages and community groups should be actively soliciting the assistance of these local 'facilitators'. At the village level, PFM is being practiced in different types of Forest Reserves in accordance with the spirit of the PFM guidelines by FBD. PFM bodies have been established within the village govemment system and forest managers (whether individuals or community groups) are networking with each other, exchanging experiences, knowledge and ideas. There is a basic understanding within communities engaged in PFM of the principles, requirements and potential benefits to be derived from the system, and there is general acceptance among the different groupings in the local community of the objectives of and approach to the management of the reserved forests. The sub-component's other four sets of activities will be geared primarily toward providing support services for facilitation, for networking and information sharing, and for monitoring. Legal. technical and environmental guidance This activity will backstop facilitators and new village forest managers with the right legal, technical, and environmental guidance with respect to village-based forest and woodland management. In particular, strategies for dealing with particular environmental and social concerns associated with PFM -- for example, in catchment forest areas, areas of high biodiversity, or in areas where settlement may pose special problems -- will be developed. The objective will be to find ways of balancing national (and global) needs for environmental services with local needs for forest products. Legal aspects are being addressed at the overall level through the NFP where a major aim is the harmonization of rules, procedures and regulations to facilitate the achievement of the program objectives for the sector. Legal matters in connection with the introduction and implementation of PFM will therefore have to be seen in the overall context of the NFP. There will, however, be a need for legal guidance and support to PFM specific issues encountered on the ground, in connection with actual forest management by communities. Legal guidance will therefore include not only practical guidelines (pamphlets, radio programs etc.) but also legal support on the ground. Such direct legal support may take the form of e.g. contracting of legal assistance and mediation aimed at ensuring villagers' rights to establish and manage various types of Forest Reserves. Cross-sectoral collaboration and training of key district officers from other departments (land use; planning etc) will be required to ensure that land rights of villagers are ensured. Particular attention will have to be made to potential and actual conflicts over forest resources e.g. between settled farmers and - 45 - pastoralists and to gender specific forest management issues.An important function of the PFMSU will be to offer clear and reliable guidance about how people may act to secure and manage forests of interest to them in fully sustainable ways In addition, PFMSU will have an important function to play in ensuring that all those involved in facilitating this development are quite clear as to the technical options and legal parameters available, and are fully able to access information about the best ways to launch and sustain the process. They also need to know the kind of issues that will likely need to be addressed by both themselves as facilitators and by new village level forest managers. Through the project, Guidelines will be produced which can be readily used by all PFM actors. They will designed to be action-oriented, short, sharp, clear and in Kiswahili (as well as English). From time to time it will be productive to prepare guidelines which target a particular audience, for example, for facilitators or for those designed to assist new local level forest managers. Presentation will vary accordingly. PFM is an entirely voluntary. Although proposed forest legislation makes it clear that government is obliged to provide good advice to assist in implementing the approach, people are under no obligation to accept this advice. There are, of course, exceptions. The current Forest Ordinance and proposed forest legislation set out parameters providing for forest access and use. Proposed legislation describes the procedures for how a community may declare and manage a Village Land Forest Reserve or Community Forest. Should a community wish to do this, it will need to follow the procedures for declaration and regulation set out in legislation. Local participation in management of Government Forests is by joint agreement, which is also provided for in proposed legislation. The production of training material will be the responsibility of the Resources and Monitoring Specialist working directly with the Facilitator. Guidelines will be derived directly from field experience and through consultative processes, shaped as necessary by silvicultural, biodiversity, marketing, financial management, legal or other parameters as are appropriate. Particularly where there is a range of opinions as to best ways forward, or where practitioners have found solutions difficult, the content of guidelines will be defined through broad consultative processes with local actors. Where special technical or legal issues arise, the PFMSU will seek to develop the most appropriate information for dissemination. Guidelines on planting trees on farm, stimulated by natural forest protection, is a likely demand. Management practices to stimulate production of preferred species in production forests may also be developed into Guidelines. Checklists and steps towards identifying, zoning and protecting areas of high biodiversity value within forests, may be developed. From time to time the PFMSU will produce and disseminate pamphlets that are produced jointly with other sector interests or departments. This particularly includes drawing up guidelines on beekeeping and the management of wildlife in forested areas. Local government capacity building This activity will be focused on working with the local government reform process to build capacity both to manage a wider program of PFM through local government, to develop ways of mediating national and local concerns over the use of woodland and forest resources, and to strengthen local govermment capacity for facilitating local environmental management initiatives. The immediate objectives of this activity are to raise local awareness of PFM policies and opportunities; to provide a positive support environment in the local government sector; and to build the capacity of District Forestry Officers and other relevant District Officers to facilitate and support villagers to become forest managers. -46 - The project will prepare clear and simple public information about PFM approaches and the opportunities available for villages to be involved in the protection and management and regulation of forests in their areas. Different arrangements available to them in respect of both reserved areas (such as National and Local Authority Forest Reserves) and in respect of unreserved forests within village areas will be set out. Supporting national policy and legal provisions will be indicated. Information will be presented in short pamphlets in English and Kiswahili which will be distributed to information officers, local authorities and other agencies. Press and radio services will be encouraged to produce articles and programs on current developments. Rural local governments (district councils) in particular are regarded as the main platform from which PFM will be launched and sustained. District Forestry Officers are regarded as the key actors and facilitators which require the support of their Executive Directors, Planning Officers and Council bodies. The project will provide resources for a series of workshops to which District Executive Directors, Council Chairnen, Planning Officers and other key players will be invited. Representatives from the Ministry of Local Government, the Local Government Service Commission and Local Government Reform Program will be closely involved. The objective will be to inform them fully of forest policy and national forest management plans with respect to PFM; provide case studies and general guidelines including presentations by one or two districts already practicing PFM; assist them in identifying in broad terms the priority areas for action in their respective districts; work through with them the level of personnel and support implications; and to identify and prioritize critical constraints to action and discuss how these may be overcome. Service agreements will be made between the FBD/TFS and respective districts specifying 1) obligations and targets of the district in terms of forest and forest biodiversity management and 2) needs and requirements for facilitation and support including proposed contracts for tendering and provision of services by the TFS. The service agreements will be based partly on district annual work plans and, at a later stage, on District Forest Plans (in accordance with the NFP). Personnel and resource constraints are likely to be the most common and severe constraint identified. Over the project period and with the assistance of the Director/Chief Executive Officer and Permanent Secretary, the project will work with the Local Government Reform Program, and with the Local Government and Civil Service Commissions to find ways by which councils may be better staffed in these areas. As the LGRP is consolidated and expanded Districts are also expected to have their access to other resources (apart from staff) improved. The PFMSU will work actively with the CSD to identify ways in which the project can support ongoing efforts to strengthen local government capacities in support of PFM. Coordination and exchange One of the strengths of recent efforts to support PFM has come from efforts to exchange information and ideas amongst practitioners, as well as amongst villagers. The process of establishing community-based or partnership forest management is a highly dynamic development process involving changed institutional and government-people relationships. An annual meeting will be convened to bring together PFM facilitators and practitioners to compare notes, learn from each other, and to gain a sense of support and shared commitment. This will also allow progress to be monitored and consensus reached as to priorities for PFMSU and other agencies. The project will also provide resources to enable facilitators to visit a range of sites where PFM is underway. -47 - At the village level, as well, much has been gained already by exchanges facilitated between villages. Many new Village Forest Managers have suggested that they should be assisted to form a Village Forest Managers Association both as a mechanism of disseminating and receiving information from each other and as a forum through which their interests may be promoted. There has also been great interest in being able to meet together periodically. The project will provide resources for four activities in this regard: First, there will be an effort to make it possible for village forest managers to meet together regularly to share experiences, learn from each other and to prioritize problem areas and support needs. This also offers an important opportunity for technical advisers and monitoring staff to collect first-hand information on progress, problems, needs and impacts. Second, the project will assist in establishing a Village Forest Management Newsletter. Needs for local newsletters should be considered. Third, the project will provide resources to enable groups of village level forest managers to visit selected PFM developments as an on-site learning activity. This would likely be undertaken in conjunction with facilitator cross visits. Fourth, the project will explore how village forest managers may be assisted to form themselves into a formal interest group association. Finally, at the national level, the PFMSU will develop the capacity to function as a clearing house and contact point for PFM activities throughout the country, providing a forum through which knowledge and skills may be productively shared and utilized. Linkages with other activities will evolve initially through cooperation in the provision of facilitation support from the first year of the project, and through other supporting activities, such as those linked to local Government capacity development to support PFM development. Secondly, projects will be directly represented in the annual practitioners conference. More task-specific forums will be developed as necessary, often led by one or other project (such as RIPS, MEMA, LAMP, NRBZ, UTUMI, EUCAMP, CFP, HASHI and HADO.) Further links will be established with the wildlife, beekeeping, environmental and other sectors of Government and NGOs in the sector. In light of the commencement of the new land laws of Tanzania, PFMSU will establish close links with the Ministry of Lands, Housing and Urban Development to assist it to develop with pilot villages, clear guidelines for tenure related aspects which directly support creation of Village, Community and Private Forests. Monitoring and feedback In light of the extensive investments which are envisaged in PFM, a strong monitoring capacity needs to be more clearly established better to inform policy and program development at national, district and village levels. There will be a need for PFMSU to have up to date information on specific developments and progress in general, and in a fully accessible form. Such information will be useful to other agencies, including villages, but will be essential for forward planning and for devising fully appropriate guidelines and support systems. To achieve this, the project will assist PFMSU to put in place a simple system for collecting and compiling sharply focused information about PFM developments throughout the country to identify where central responses or actions are needed. At the same time, neither time nor resources should be wasted on detailed studies and reports which have no links with action needs. A critical first task of the Resources and Monitoring Specialist will be to establish a set of minimum information points and indicators which may be developed for use by all local PFM actors. A time-efficient means of receiving this information will be to request participants to the annual working conference to complete and bring with them these simple forms. At the macro level, Tanzania's extensive forest and woodland resources clearly play a central role in providing resources for rural and urban household consumption, and for mitigating the impacts of poverty. PFM seeks more fully to integrate local forest and woodland management efforts with local needs and -48 - concerns. The development of a better understanding of the linkages between poverty and natural resource management was highlighted in the PRSP as a central issue of concern. Although these linkages are widely speculated upon, the development of analytically sound and empirically rigorous household-based information is badly needed. The project will provide resources to support a five-year program of applied household monitoring and assessment better to inform policy about these linkages. With respect to the specific impacts of PFM, a critical aspect of forest management planning and implementation is to be able to know if the regime itself is working as planned and the effect it is having upon the local forest and upon local development systems, organization and local livelihood. The Resources and Monitoring Specialist will work closely with other members of the PFMSU team to refine simple monitoring indicators and processes which villagers can easily adopt and use on a sustained and regular basis. Monitoring activities will also be used to inform FBD/TFS management about how best a scheme can be designed to ensure that revenues collected by FBD are returned to villages which have undertaken new woodland management responsibilities. Useful project key performance indicators will have to be developed, including both indirect and direct indicators. Indirect monitoring indicators are in fact already routinely identified in the preparation of village forest management plans but on the whole there is little systematic assessment of these. Therefore, such indicators such be collected and assessed in a systematic manner better to inform the PFM process. Direct key performance indicators will have to be established during the inception of the PFM component. Such indicators must relate directly to the level, type and magnitude of capacity for PFM facilitation (in a broad sense) that have been built at the local, district, regional and national levels. Performance indicator targets will be, inter alia, the number of 'facilitators' (local government officers, NGOs, CBOs, companies, institutions, individuals) capable of facilitating PFM and actively engaged in PFM processes with villages and local communities; the degree to which the FBD guidelines on PFM are being adhered to and the degree to which field experience is being fed-back into the FBD/TFS; the number of VFRs being established or requests being submitted to the district authorities for endorsement; and the number of JMAs being entered into. Project Component 2 - US$3.40 million Private sector involvement in industrial plantation management The project will provide resources to develop and implement a framework for the involvement of the private sector in the management of existing industrial plantations as well as to strengthen the potential for the development and management of new plantations. This component will provide the resources to assess the technical and financial feasibility of the industrial plantations with reference to existing and potential markets as well as the formulation of steps and guidelines for the private sector's involvement. Multiple mechanisms for the involvement of the private sector will be developed and implemented on a pilot basis, and are expected to include leasing arrangements, joint forest management, and co-management. Four sub-components are envisaged: - 49 - Improving the plantation resource information base and management planning capacity (US$0.3 million) This sub-component will provide resources to develop the information needed to allow for the identification and selection of priority sites and for designing pilot activities. The sub-component will finance aerial photography, interpretation, mapping, and indicative inventories of around 40,000 ha of state-owned plantations; a rapid socio-economic assessment which identifies key stakeholders, their concerns, and expectations; the development of a plantation database for management purposes; preparation of basic guidelines to guide plantation management and to establish parameters for monitoring commercial plantation operations; preparation of basic growth and yield tables for key species relying on existing data; preliminary estimates of growing stock and allowable cut; and capacity building of staff in selected areas to build capacity to undertake these tasks. An exhaustive mapping and inventory exercise is not envisaged. Strengthening institutional support services for private sector involvement (US$1.3 million) This sub-component will support the creation of an enabling institutional and market environment for private sector involvement in plantation development and management. It will provide resources for the design and implementation of a communication strategy; the development of a plan of action with agree principles and clear objectives for private sector involvement; the establishment of a PSI unit within MNRT; the development of legal procedures and instruments for tendering to ensure transparency and consistency with Government guidelines; the preparation of model information memoranda, leases, model contracts, and transparent bidding assessment procedures, as well as community and environmental action plans where they are needed; prepare recommendations on an improved log sales system; an action plant for improving forestry taxation and the investment environment for plantation forestry; and study tours and staff training to increase an understanding of the principles surrounding private sector involvement. Pilot alternative management of selected industrial plantations (US$1.6 million) Three pilot activities are envisaged under this component: the development of leasing arrangements for involving the private sector in plantation management; the development of co-management arrangements where responsibility for plantation management is shared between Government and a partner (for example, a village or a company); and designated community management for a plantation area where responsibilities and control are assumed by a village. The project will provide resources to establish boundaries of each pilot area, to carry out rapid inventories or aerial surveys as needed, to prepare legal documentation as needed, and to carry out stakeholder surveys and assessments where communities will be involved or otherwise affected by the program. Pilot private company involvement in plantation management Government has indicated that its preferred approach toward involving the private sector in plantation management, is to develop the option of leasing pilot plantation areas with either an upfront or part payment for the current crop. For these forests, an open bidding process is recommended, whereby the private sector would be invited to bid (following the preparation of bidding criteria and bid evaluation documentation), offering either their total offer price at the outset or an initial payment with a series of deferred payments for the balance of the offer price. The Govemment would in documentation for inviting bids, need to indicate its preferences and how it will evaluate and rank bids. Assuming a successful bidding and negotiation process, management of these plantations will be progressively assumed by the private sector on a pilot basis. - 50 - The pilot will develop a gradual process of transferring management of selected state plantations to private company management using leasing mechanisms appropriate in the Tanzanian conditions. It will commence with a single pilot plantation (most probably Sao Hill) and then drawing from lessons learned during the pilot phase, move onto further plantations (possibly Mtibwa, Longuza and Meru/Usa) if this is judged to be appropriate. The purpose is to improve the productivity of plantation management, increase sustainable wood supply, and reduce the financial burden on government. The project will provide resources to demarcate and map plantation boundaries; to identify and map areas to be excluded such as critical watersheds; to carry out a more detailed valuation of the pilot area to set a benchmark for tendering; to prepare for bidding/tendering, including consultations, investment information memorandums, and lease/ contract legal documents. Special attention will be given in the tendering process to accommodate the needs of small saw-millers, for example, by parcelling a portion(s) into small enough tendering packages for a range of small millers to bid, or by requiring bidders to otherwise be responsive to the needs of small processors. The project will provide resources to undertake bidding, bid evaluation, contract negotiations and transfer to the private sector. Pilot co-management of industrial plantation Co-management refers to a partnership between the state, the private sector, and organized villagers for the management of a designated plantation to supply wood to the market and sustain the flow of benefits fairly shared by the management partners. The term "partnership" means that each partner has decisions to make and execute, which should be defined in a Joint Management Agreement. A Joint Management Committee will be established to provide this forum. The Agreement will explicitly address the issue of benefit and cost sharing amongst the management partners, through a transparent and consultative decision making and planning process. Pilot co-management of an industrial plantation should be considered as an option in areas, where there is good commercial plantation potential, population pressure on land is high, communities are already using the forest, and where inputs from conmmunities can actually help in reducing plantation management costs and protecting the plantation from fire and encroachment. Plantations such as North Kilimanjaro, Shume/Magamba, West Kilimanjaro, Kawetire and Buhindi are some of the candidates for piloting a co-management approach to commercial plantation management. Shume/Magamba already has a pilot underway, from which lessons may be learnt. The project will provide resources to conduct consultations with all stakeholders to agree on issues and cooperation principles; to undertake participatory planning of the co-management concept, including allocation of management and control rights, local conflict resolution management systems as well as benefit and cost sharing arrangements; participatory preparation of an action plan to proceed with co-management and village organizing and capacity strengthening as needed. The project will provide assistance to demarcate and map plantation and village and sub-village boundaries and to divide the pilot plantation area into management areas by village or sub-village. A detailed forest resource inventory will be undertaken to provide the basis for a detailed valuation of the plantation to set benchmarks for auctioning or tendering or other negotiations with a private sector partner. The project will provide assistance in preparing legal documents (possibly including bidding/tendering, investment information memorandums, pro forma contracts, outlining conditions of co-management), and will support the development of contract mechanisms for transfer to a co-management structure. In addition, the project will provide assistance in the development of forest management systems and related - 51 - training/operational manuals, building as much as possible on already existing material, and will provide training for trainers, staff and villagers in organizational, technical, financial and market aspects of co-management. Pilot designated communitv plantation management This activity will develop and implement community-based plantation management systems for a pilot plantation which cannot be managed commercially either by private companies or by the state but which has potential to provide benefits to local communities. Joint forest management has already been piloted in parts of Ruvu (since 1998/99), Rubare, Ukaguru, Rondo, Kiwira, and Matogoro. FBD has recently decided to turn Matogoro into a catchment forest so it cannot be used for production purposes in the future. Designated management refers to recognition and empowerment of organized villagers as managers of a plantation or part of a plantation in order to sustain the flow of mainly industrial wood but also fuelwood, as well as other forest products and services mainly to the benefit of the villagers but also the rest of the country, based on a long-term lease arrangement. Under this concept, villages or sub-villages would be managing the plantation reserve on a pilot basis on behalf of Govenmment in accordance with a regulatory framework and a contract. Rights and responsibilities will be defined in a Joint Management Agreement, which will be negotiated and entered into by the two parties to the agreement. The roles, functions and responsibilities of each partner should be clearly defined in the Agreement, including what the designated manager can independently decide and execute, what needs approval by the state, and how the benefits and costs should be distributed. The need for mutual consultation and transparency should also be specified together with monitoring and control as part of the Agreement. The adoption of a designated management model also implies certain responsibilities and changes in the roles of the various stakeholders. Villagers are not to just use the forests but they are to manage it sustainably, with guidance from a district forest officer. Some of the most important roles and responsibilities are: to protect the forest, to prepare a simple plan to manage the forest, manage the forest according a management plan or Village Assembly approved by-laws, enhance the value of forest through stand improvement and reforestation, fell and sell trees, collect non-timber forest products, and pay all the necessary fees (e.g. an annual lease fee). The forestry officers will have to become more service-oriented and focus onfacilitation. Their main functions would be to provide a supporting policy and regulatory framework and extension services to villagers; to facilitate and guide villagers in their forestry development activities; to assist in forest management planning; to approve the plans; to monitor village forestry and be responsible for overall regulation. The project is expected to provide resources to conduct consultations with all stakeholders to agree on key issues; facilitate participatory preparation of an action plan and negotiation of a management contract based e.g. on long-term lease; strengthen village organizational capacity e.g. through Village Management Committees based on existing village institutions (continuous activity or process); undertake participatory demarcation and mapping of the plantation and village and sub-village boundaries; undertake participatory forest resource assessment, including wood, environmental and other resource services; introduce simple forest management practices building as much as possible on already existing knowledge and accumulated experience; train trainers, and villagers in organizational, technical, financial and market aspects of plantation management and setting up a simple audit system; assist in the development of by-laws; assist villagers in the preparation of simple forest management plan(s) and annual operation plans (by village or sub-village); support management plan implementation by village or sub-village; develop participatory monitoring, evaluation and auditing; and prepare an action plan for expanding the (refined) co-management model to other selected plantations. - 52 - For forests where partial or full community involvement through co-management or full participatory forest management arrangements, the choice of mechanism will follow the social assessment and social action planning process planned for each forest. Monitoring and evaluation (US$0.2 million) The project will place a strong emphasis on the monitoring and evaluation of performance under the pilot operations. The project will provide resources to establish a mechanism for monitoring and evaluation; to determiine performance indicators for the pilot operations; to implement a regular monitoring process which reports against quantitative and qualitative performance indicators; and to provide feedback to MNRT to modify mechanisms and procedures on the basis of results from the pilot operations. The monitoring and evaluation system will focus specifically on determining identifiable performance indicators for each pilot operation; implement a regular and periodic monitoring process to report against quantitative and qualitative performance indicators which consider both the effectiveness of private sector management as well as the extent to which lease conditions are being met, and will provide feedback information to management to improve or otherwise modify the pilot approach. Project Component 3 - US$ 9.30 million Eastern Arc forests conservation and management This third component of the program, which is largely to be financed by GEF (as well as with IDA and bilateral sources) has been jointly developed and implemented by the World Bank and UNDP working with Government and other partners with interests in the forestry sector. This component will support institutional reform, strategy development, pilot community-based conservation, and the establishment and operation of a sustainable financing mechanism for tropical high forest conservation in Tanzania through the Eastern Arc Mountains Conservation Endowment Fund (EAMCEF). The main global environmental objective of this GEF activity is to promote the sustainable conservation and management of the Eastern Arc forests. The GEF activity is expected to have four sub-components, the first two of which will be implemented by the World Bank: (i) Institutional reforms for forest biodiversity conservation, in particular of the Eastern Arc forests at central, district and local partnership levels to incorporate specific responsibilities for biodiversity conservation, oversight, monitoring and coordination. Such reforms will be linked with other reforms and institutional restructuring proposed for the forestry sector as a whole, which are to be financed by IDA. The GEF implementing agency for this sub-component would be the Bank (GEF financing of US$ 275,000); (ii) Mechanisms for sustainable financing of biodiversity conservation, will be developed including the establishment of an Eastern Arc Mountains Conservation Endowment Fund. It is envisaged that an endowment trust fund will be established by the project, with GEF resources. The GEF implementing agency for this sub-component would be the Bank (GEF financing of US$6.75 million) which will co-finance the establishment and initial operations of the EAMCEF (IDA financing of US$2 million). Two additional components are to be implemented by the UNDP and are complementary to the Bank-implemented activities: - 53 - (iii) Development and preparation of an integrated Conservation Strategy for the Eastern Arc Mountain Forests using a broad-based participatory process, with a focus on institutional capacity building, and which considers links to other sectoral activities, such as agriculture, water, land, and energy. A wider dialogue on the impacts of sectoral activities on forest biodiversity conservation in the Eastem Arc will be developed amongst the key institutions involved in sectoral activities. Mapping and baseline activities will be undertaken as part of the Strategy development, and will include an assessment of the multiple tenure regimes found in the forests of the Arc. The GEF implementing agency for this sub-component would be UNDP. (iv) A forest conservation intervention through government and community partnership initiatives which will be undertaken at priority sites in the Uluguru Mountains - one of the most important mountain forest blocks in the arc. Firm linkages will be established with partners (other donors, NGOs, Community-based organizations, government agencies, etc.) The GEF implementing agency for this sub-component would be UNDP. A Project Brief for the full GEF activity is in preparation and is expected to be submitted to the GEF Council for approval during the December 2001 Council meeting. GEF-financed activities are to be Appraised following Council approval. While GEF support is expected to be integrated into the overall program of IDA support to the forest sector in Tanzania, explicit IDA co-financing is envisaged for the EAMCEF. This sub-component is described here in detail: Eastern Arc Mountains Conservation Endowment Fund (US$9.0 million) The establishment of the Eastem Arc Mountains Conservation Endowment Fund (EAMCEF) is intended to begin to address the need for a long-termn sustainable approach to funding the conservation of forest biodiversity. Endowment Funds have typically been established when public resources for biodiversity conservation are constrained, when other support has been inconsistent or irregular, and when there is a strong enabling framework for their establishment. Inadequate and poorly targeted public and donor resources for forest biodiversity conservation in the Eastern Arc has meant that there is a limited view of long-term resource requirements and financing needs. Most efforts to develop sound forest biodiversity conservation programs in the Eastern Arc have suffered from the 'feast-or-famine' five-year project cycle: a period of raised expectations and increased resource flows followed by the departure of staff, and constrained finances. Even the best designed initiatives have failed, ultimately, to create the mechanisms for longer-term financing. Indeed, if there is any single 'lesson leamed' from donor financing, it has been that their impacts are much more likely to be short term, rather than long term. The financial sustainability of donor assisted forest biodiversity conservation projects has been a longstanding concern. Government ultimately pays the price when financial sustainability is not assured. The EAMCEF provides an important opportunity to build on synergies in donor support. Endowment Funds rely on several sources of financing: resources for establishment and initial operations; programmatic resources; and the capital endowment. GEF Guidelines require that the institution responsible for the Endowment Fund should be privately constituted, and that the capital endowment is managed off-shore to meet certain investment standards. The revenues from the capital endowment are used on a perpetual basis to finance programmatic and operational expenses. It is expected that GEF will finance the capital endowment ($6.5 million) once particular performance benchmarks have been achieved. IDA resources (US$2 million) are required to finance establishment, initial operations, and programmatic expenses. Additional bilateral and multilateral resources are in the process of being mobilized. - 54 - Preparatory work A feasibility study was prepared and concluded that the policy and institutional framework would support the establishment of an Endowment Fund in Tanzania, and could be justified on the basis of the biodiversity values found in the Eastern Arc. The feasibility study recommended that an Endowment Fund working group should be established, that a profile of the fund should be prepared, and future work should focus on further development of the design of the fund and should support a study tour to another endowment fund site. Because of the proposed nature of the Endowment Fund as a privately-managed institution, the Bank sought Government's agreement to support its establishment on these terms. MNRT has strongly endorsed its establishment, has agreed that its initial operations should be co-financed with IDA resources, and has argued that it is consistent with the national policy objective of seeking to involve a wider group of stakeholders in forest conservation and management through a diverse range of approaches and instruments, outside of the influence of the public sector. An Endowment Fund specialist was subsequently employed by FBD and resulted in the formal establishment of the Eastern Arc Mountains Conservation Endowment Fund (EAMCEF). A deed of trust under the Trustees' Incorporation Ordinance (Cap 375) has been prepared and registered with the Administrator General of Trustees. As such, the Eastem Arc Mountains Conservation Endowment Fund has now been legally constituted as a Non-Govemmental Organization. An Inaugural Board has been established and is comprised of representatives of the public sector, the private sector, and environmental NGOs. The Deed of Trust requires that the Board of Trustees is to be constituted in a manner so that there is expertise in conservation in the Eastern Arc Mountains, forestry, academia/research, law, business and financial matters, community development, and the work of local and intemational conservation NGOs. The Founding Board has been constituted of representatives from the Forestry and Beekeeping Division of the Ministry of Natural Resources and Tourism, the National Environment Management Council (NEMC), the Lawyers Environmental Action Trust (an environmental NGO), WWF Tanzania, and Songas (a private company with interests in off-shore gas field development). Four additional members of the Board are to be appointed according to terms specified in the Deed of Trust. The Deed requires the appointment of four additional Trustees who shall represent a reputable NGO which has the objective of supporting community-based conservation and natural resource management, a representative from the academic/research community from a national institution, and two members representing comnmunities in the areas of operation of the Endowment. The Deed also provides for the establishment of Local Advisory Committees (LACs) in the areas of EAMCEF operation, and that these will be constituted of representatives from Village Environmental Committees. LACs will be constituted to provide guidance and advice to the Board. Collectively, these various mechanisms provide for representation of diverse interests in the conservation and management of the Eastern Arc. Thematic and geographic coverage. The preparatory work which underpinned the establishment of the EAMCEF focused developing the mechanisms for fnancing three key priorities: community-based conservation; applied biodiversity research; and protected areas management. The design of the fund has been responsive to these three priority areas. - 55 - Because of the great extent of the Eastern Arc and the concern that the EAMCEF should be seen to have a sustained impact in the short term, the Fund is expected to operate, in the first instance, across a limited geographic range, primarily in two or three Mountain blocks of the Eastern Arc forests. These were established as an outcome of the ranking exercise which was undertaken during preparation. In the first instance, support is to be provided for activities in the Uluguru Mountains, the Udzungwa Mountains, and in the East Usambara Mountains. In the medium-term, once a track record has been established for operation of the EAMCEF in priority sites, programs are expected to be extended into other mountain blocks, such as the Malundwes, Mahenges, Rubehos, and Ukagurus, but this will depend on additional (probably substantial) capitalization of the fund, and its success in delivering expected outputs. Phased Support. Support for establishment and operation of the Fund will be phased. Phase I, which is expected to last three years, will build the capacity within the EAMCEF and its partners to carry out their respective roles in the management of the Endowment Fund and the coordination and implementation of the activities described above. A modest unallocated fund for technical programs will allow EAMCEF to address early needs and to gain experience in program planning and implementation. At the end of year 3, an assessment of the achievement of the agreed indicators of institutional capacity and readiness will serve to trigger the release of the endowment capital from GEF into the Fund. During year 4, the endowment will earn interest and these funds will finance Phase II, the implementation phase, which will begin at the start of year 5. Assistance from the GEF is requested to provide the initial endowment capital of US $6.5 million for the EAMCEF, as well as US$0.25 million for the three-year start-up phase. Assistance from IDA is required for the three year start-up phase and for operational and programmatic support. GEF support is needed to support 5 major activities (including capitalization of the Endowment Fund itself). IDA support will be provided to finance the first 4 of these activities (but will not be used to capitalize the Endowment Fund). (a) Endowment Administration. The Endowment Fund Secretariat will be established in Morogoro and will consist of an Executive Director, three Program Officers, an Accountant, a Secretary, and support staff. These individuals will be the only full-time employees of EAMCEF. The Secretariat will be responsible for (i) developing the program content for each of the three priority areas of support (Community-based conservation, applied biodiversity research, and protected areas management); (ii) working in collaboration with FBD and suitable NGOs to implement activities in these three priority areas; (iii) submitting annual work plans and budgets to the EAMCEF Board for approval; (iv) disbursing approved funds and ensuring that proper disbursement, procurement and supervision procedures are followed; (v) maintaining financial records and accounting/reporting; and (vi) ensuring ongoing monitoring and evaluation of all work receiving EAMCEF funding. Other activities which will be undertaken by the Secretariat include, communications and education and fund raising. (b) Applied Biodiversity Research. Under this component the EAMCEF will support research which strengthens an understanding of the extent and value of biodiversity and ecosystem health in priority geographic sites, and which can help to reduce the impacts of human pressures on the ecosystem and its biological resources. Research will be undertaken in the context of overall efforts to improve the management of the Eastern Arc forests in a way which maintains and increases their contribution to local and national economic development. GEF support will specifically ensure that biodiversity conservation is a clear focus of targeted research initiatives which are linked with forest management and conservation, along with other important objectives such as maintaining water supplies and providing sustainable supplies of valuable timber and non-timber products. - 56 - (c) Participatory Forest Conservation. The objective of these activities is to increase the share of the benefits from forest conservation and management to local communities and to ensure that these continue on a sustainable basis. These activities are fully consistent with Government's policy for participatory forest management (including co-management) of forest reserves and forests on customary land. GEF funds will support training, workshops and technical assistance to help mobilize these stakeholders and enhance their knowledge and skills to become effective forest management partners. (d) Protected Forest Reserve Management activities should strengthen the capacity of FBD or other institutions with jurisdiction over forest reserves. Improving forest ecological and economic viability will be of paramount importance. Priority forest management activities for funding under the Endowment Fund would include improvement of staff capabilities (e.g. training, skills development of reserve staff), forest management and ecotourism infrastructure (e.g.; trails, access roads, ranger stations, etc.), conservation education, management planning, and others. Where appropriate, activities should include a training component. (e) Establishment of the Conservation Endowment Fund. The purpose of the Conservation Endowment Fund is to provide sustainable in-country funding for biodiversity conservation of the Eastern Arc Forests, in the context of ecologically sustainable development. The EAMCEF Fund will be established as the long-term financing mechanism to support these activities. In order to assess progress in meeting the objectives of IDA and GEF support, a Midtern Review will be carried out at the end of the third project year to assess performance with respect to meeting particular benchmarks and indicators. Indicators which will trigger release of the Endowment Fund from GEF include the following: (i) successful establishment and functioning of the Secretariat (i.e. key positions in the Secretariat have been filled, audits have been completed and are clear, an acceptable 2 year work plan is developed); (ii) finalization of the Financial, Operations, and Management Manual which defines and clarifies procedures and operations for the EAMCEF and its approval by IDA; (iii) establishment and functioning of the Endowment Fund Board (i.e. regular Board meetings, appointment of four new Board members, application of the procedures for Board members); (iv) development and launching of the fund raising strategy; (v) grant making activities have begun (proposals solicited, competitive selection procedures followed, grants awarded and pilot activities are under implementation); (vi) at least one Local Advisory Conimittee has been established; (vii) documented adherence to the policies, procedures and principles set forth in the Deed of Trust; (viii) documented significant co-financing for the EAMCEF. A project agreement will be prepared between Government and the EAMCEF which clarifies respective responsibilities for IDA and GEF fimds and project management. Project Component 4 - US$0.70 million Project Administration and Mana2ement Finally, the project will finance the costs of administration and management of the project components, in a manner consistent with World Bank guidance with respect to accounting, financial management, and procurement. - 57 - Annex 3: Estimated Project Costs TANZANIA: Forest Conservation and Management Project Local Foreign Total Project Cost By Component US $million US $million US $million A. Supporting Institutional Change and 0.00 0.00 0.00 Improving Service Delivery 1. Establishment of the Tanzania Forest Service 6.50 5.30 11.80 2. Improving Revenue Collection from Forests 2.20 1.00 3.20 and Woodlands 3. Improving Service Delivery Mechanisms for 5.50 1.60 7.10 Participatory Forest and Woodland Management B. Private Sector Involvement in the Management 1.70 1.20 2.90 of Industrial Plantations C. Eastern Arc Forests Conservation and Management 0.00 0.00 0.00 1. Eastern Arc Mountains Conservation 2.10 6.90 9.00 Endowment Fund 2. Improving Institutional Support Service for Forest 0.20 0.00 0.20 Biodiversity Conservation D. Project Administration and Management 0.50 0.10 0.60 Total Baseline Cost 18.70 16.10 34.80 Physical Contingencies 1.60 0.80 2.40 Price Contingencies 1.80 1.00 2.80 Total Project Costs' 22.10 17.90 40.00 Total Financing Required 22.10 17.90 40.00 Local Foreign Total Project Cost By Category US $million US $million US $million Civil Works. 4.90 1.30 6.20 Goods and Equipment 2.00 2.80 4.80 Consultants' Services 4.80 4.40 9.20 Training 4.60 2.50 7.10 Operating Costs 5.80 0.40 6.20 Conservation Endowment Fund 0.00 6.50 6.50 Total Project Costsl 22.10 17.90 40.00 Total Financing Required 22.10 17.90 40.00 Identifiable taxes and duties are 1.3 (US$m) and the total project cost, net of taxes, is 31.5 (US$m). Therefore, the project cost sharing ratio is 98.73% of total project cost net of taxes. - 58 - Annex 4: Economic and Financial Considerations TANZANIA: Forest Conservation and Management Project Summary There is an enormous disconnect between the policy objectives which are described in Tanzania's 1998 National Forest Policy, and the prevailing institutional framework which is supposed to deliver on these objectives. The Policy framework (and the National Forest Program which was developed in response) describes the role of the public sector as one which is primarily oriented toward cost-effectively delivering services to the country -- services which should facilitate the role of the private sector, communities, and other stakeholders in conserving and managing Tanzania's forest resources, or which manage and protect forests of strategic national and global importance on behalf of the nation. The existing and outdated institutional framework removes most responsibility from stakeholders who are most dependent on these resources, and places it in the hands of district govemments which lack the capacity for maintaining oversight or for managing forest resources with village (or national) interests in mind. At the national level, the Forest and Beekeeping Division's responsibilities are largely regulatory, and it has limited specific service delivery functions. The institutional reforms which FCMP seeks to support through the National Forest Program are intended to help to establish a new institutional framework, which is primarily oriented toward improving service delivery functions: facilitating villages to establish Village Forest Reserves, strengthening the capacity for the management of strategic forest reserves which are being maintained in the national interest, improving the financial sustainability of forest management interventions, and other local conservation and protection measures. Economic Considerations The current constraints in the forest sector in Tanzania call for a comprehensive approach to the development of a sector-wide approach toward forest conservation and management. Public financing of woodland and forest conservation and management is justified both from the perspective of their role in mitigating the impacts of poverty as well as from the perspective of the environmental value of forests and woodlands as watershed catchments, which maintain water flows to urban areas and to hydroelectric generating facilities. Other environmental benefits from forest and woodland conservation and management accrue because of the value of carbon sequestration. A separate Incremental Cost analysis has been prepared for those components of the project which specifically focus on conservation of Eastem Arc Mountains forest biodiversity (to be financed by GEF), and this will be reviewed separately when these activities are Appraised. Finally, the economic rationale for involving the private sector in industrial plantation management is also reviewed. In addition to examining this wider rationale for public financing, the Forest Conservation and Management Project was also analyzed in terms of its rationale for cost-effectiveness and financial sustainability. Poverty impacts Tanzania's woodland and forests are extremely important for mitigating the impacts of rural poverty. Recent studies (Monela et al, 1999) have shown that fully 40 percent of total household consumption in some rural areas is accounted for by forest and woodland products such as honey production, firewood, construction material, and wild fruit and other foods (a point noted in Tanzania's Poverty Reduction - 59 - Strategy Paper). In addition, forests and woodlands are an important source of dry season grazing, reducing households' exposure to environmental risk. Rural households generally use a wide variety of environmental resources from woodlands, and the sizable aggregate value of environmentally-derived income is made up of a fairly large number of smaller individual income sources. In other studies from the region (cf. Cavendish, 1999) , it has also been shown that there is a negative relationship between aggregate environmental income share and total household income, that the poor are more resource-dependent than the rich (though better off households are, in quantitative terms, the most significant users of environmental resources). There is considerable complexity in the factors which determine levels of resource use: different households use different resources for different reasons at different times. Still, the conclusions are inescapable: the rural poor are heavily dependent on resources derived from forests and woodlands, and deforestation and forest degradation poses a significant threat to rural livelihoods. As such, forests and woodlands are inextricably linked to the social and economic fabric of the communities living adjacent to them. Stakeholder processes and studies (undertaken during project preparation) confirmed the importance of these forests to livelihoods and the linkages between effective forest management, conservation, and poverty reduction. These studies identified both the benefits associated with conservation (primarily related to water) and the costs associated with changing current practices. These costs include the potential loss of livelihood for residents engaged in timber felling, charcoal production, and agriculture (taking place within forest boundaries) and potential economic adversity for current users of those forest products - such as urban dwellers dependent on charcoal for fuel and poles for construction and women engaged in local brew making. Indeed discussions with community groups, foresters, and govemment officials undertaken during project preparation demonstrated convincingly that virtually all livelihoods in the communities adjacent to forests are dependent in some way and to varying degrees on forest resources. These findings underscore the importance of developing comprehensive strategies to address socio-economic issues associated with forest and woodland conservation and management in Tanzania. FCMP is designed in part to increase the capacity of villages to manage woodlands. It derives from experience with pilot and other operations across Tanzania, which suggested significant scope for improving the effectiveness of this approach toward village-based management. As such, FCMP is seeking to facilitate the development of local management schemes through cost-effective interventions which serve primarily to inform villages and communities of policy and legal changes which underpin their rights over local woodland resources. Environmental values and the national economy While the biodiversity of the Tanzania's tropical high forests is of extraordinary intemational significance and locally is of great value for mitigating the impacts of poverty, the value of these forests to the national economy, primarily through water and energy production, is of extreme national importance. The Eastem Arc forests, for example, cover several major catchments which collectively provide water for all of the nation's coastal communities (including Dar es Salaam with its population of 3 million). These mountain forests feed more than 22 rivers, including the Sigi, Ruvu, Ruaha, Kihansi, and Rufiji. The Uluguru catchment, for example, provides the main source of drinking water to both Morogoro town and Dar es Salaam. - 60 - Hydroelectric energy production is similarly heavily dependent on maintaining the integrity of these forests. Total installed electric generating capacity in Tanzania (maximum annual firm energy) is 1323 GWh (1:60 year reliability). Hydroelectricity accounts for 720 GWh (54 percent) of the total. Of the 6 hydroelectric stations (Mtera, Kidatu and Lower Kihansi in the Rufiji Basin, and Nyumba ya Mungu, Hale, and New Pangani Falls on the Pangani River), only 2 (Mtera and Kidatu) have seasonal storage capacity. The rest are 'run-of-the-river' facilities which depend on more or less constant river flow, which, in turn, is dependent on the integrity of watershed catchments and the forests found there. Other environmental services captured by the macro-economy associated with Tanzania's forests impact positively on agricultural production and also result from timber harvesting (both through the legal and illegal felling of trees used in construction and to make furniture and charcoal). More recently a small ecotourism industry has developed. There are some indications of a growing trade in threatened species of insects and reptiles. Accordingly, there is a strong need for sustainable use of forest products for these purposes and activities such as tourism which maximize the non-destructive uses of forests. The idea of collecting environmental rents, especially from the energy and water sectors, has been tabled in a general way a number of times. These proposals, however, are somewhat disconnected from an understanding of the tenuous - indeed, highly precarious - financial position of service delivery institutions such as the Tanzania Electricity Supply Company (Tanesco) and the Dar es Salaam Water and Sewerage Authority (DAWASA). While the capturing of environmental rents may seem to be a good idea in the abstract, the current public expenditure framework suggests that this would be unrealistic in the short term. Carbon sequestration Simply because of their very great extent in Tanzania, miombo woodlands in particular have great potential for adding to the growing carbon dioxide content of the atmosphere, or helping to reduce it. In the event that substantial areas of miombo are cleared for cereal crop production in southern Africa, 6 to 10 billion metric tons of carbon could be released. If, on the other hand, woodlands are managed to maximize carbon storage, a similar amount could be taken up. In either case, about half of the change in carbon stocks occurs in the soil, and the rest in above-ground biomass. Net annual primary production in miombo woodlands is around 10 tons per ha. The annual increment of woody biomass is usually no more than 3 to 4 percent in mature stands. These rates, which define the upper limit of the strength of the sink, could be higher in an atmosphere higher in carbon dioxide, but an increase in net primary productivity of greater than 15 percent is unlikely. A well stocked hectare of miombo woodland can sequester 200 to 300 tons of carbon. Various sources place the economic value of sequestered carbon at $5 to $10 per ton, and so there are considerable benefits to be gained by conserving miombo, by increasing rates of sequestration, or by limiting future losses. For example, against miombo stocks of around 30 million ha in Tanzania, stocked at a rate of 150 tons of carbon per hectare, an increase in carbon sequestration of a tenth of a percent over the life of the project would yield around US$ 22 million in global environmental benefits. The main techniques for increasing carbon uptake in miombo is the reduction in fire frequency. Experiments in many parts of Africa have shown that woody biomass and soil carbon both increase if fires are excluded. Permanent fire exclusion is virtually impossible in the strongly seasonal miombo climate, but a reduction in frequency is probably achievable at reasonable cost. This would simultaneously increase carbon dioxide uptake and decrease the emission of methane and ozone precursors. The carbon-storage - 61 - benefits of miombo management can be extended by harvesting the timber sustainably, and either converting it to long-lived products such as furniture, or by using it as an energy source in place of fossil fuels. Industrial plantation production The sixteen industrial forest plantations in Tanzania are under the control of the Forest and Beekeeping Division. Plantations are organized as projects managed by Forest Project Managers, who report directly to the Forest Development Division of the FBD in Dar es Salaam. Organizationally plantation projects have little to do with the district and regional forestry organizations. The plantations are under central FBD management that in the past has also provided all the funds needed to operate the plantations. Around 1,060 persons work in the plantation projects on FBD's payroll. Most plantation staff are forest assistants. Many state forest plantation projects are seriously overstaffed; e.g. in Sao Hill and North Kilimanjaro the labor force could be cut by 50 percent. In the mid-1990s a forest revenue retention scheme was introduced allowing the MNRT to keep 70 percent of its royalties and other forest revenue collected from while 30 percent still need to be submitted to the Treasury. MNRT retains 20 percent of the 70 percent for financing its own administration, and 80 percent (i.e. 56 percent of the original total revenue) is allocated to the FBD to use for managing central government forest reserves, including plantations. The central government, through Treasury, still pays all the salaries of plantation project staff. Each year Forest Project Manager must prepare and submit an Annual Plan of Operation with a budget to FBD that allocates funds back to the field. Actual disbursements from the central government to the projects have usually been 30-50 percent of what has been budgeted by the plantation management. Despite this, plantation projects are under-funded and cannot fully take care of their management responsibilities such as replanting, thinning and pruning. Investing in the upgrading of machinery or expanding plantations is for the most part out of the question. The total collected revenue from government plantations in 1999/00 was TSh 945.0 million. Revenue collection has more than doubled since 1995 in nominal terms. The revenue increase is mainly due to the increase in royalty rates and other fees. It also reflects the fact that many plantations have reached maturity increasing the annual allowable cut opportunities. The share of plantation related revenue of total forest revenue was 46.1 percent in 1999/00. Unfortunately, it is difficult to get reliable and detailed enough data on log removals to allow assessing the efficiency of revenue collection from state plantations. Demands for sawnwood The demand for domestic logs is driven very much by changes in the domestic sawmilling sector because there is only very little intemational trade in logs and sawnwood from Tanzania and the Southern Paper Mills (SPM) has not been operating since 1997. Sawmilling represents currently about 90 percent of total industrial wood consumption. Most sawmills are very small, producing less than 1,000 m3 per year. In the last 5-10 years the number of mobile sawmills has mushroomed. In fact, due to their large number their aggregated production volume is likely to equal, or even exceed, that of traditional sawmills. In addition, pit sawing is still common in some areas, but there are no statistics about production levels. Mobile sawmills and pit sawyers supply to the local market and are increasingly producing sawnwood to regional markets and to Dar es Salaam, Mwanza and other major cities. Domestic prices for sawnwood range between TSh 60,000 and TSh 100,000 per m3 depending on the quality/dimension and market. The demand for sawnwood is expected to increase between 4 to 6 percent a year during the coming decade amounting to an average annual increase of 12-16,000 m3. Sustainable long-term supply of sawlogs from industrial plantations is estimated at about 540-600,000 m3/year. - 62 - At present, there is a considerable surplus of sawlogs, although locally the industrial capacity e.g. in the North can exceed the sustainable supply. In Sao Hill, over-aged plantations have reached 3,300 ha, which could provide, if the markets allowed, 1.3 million m3 of logs (0.7 million m3 sawlogs) immediately to the market. On the other hand, due to a very uneven age structure of plantations, the long-term supply of sawlogs will decline unless new planting and replanting schemes are quickly initiated. Most of the current log supply is of not very good quality. Rapid expansion of exports and domestic industrial expansion concentrating on more value-added products may offer the only alternative to optimize the utilization of these valuable resources and avoid wasting past investments. Investments into modernizing, and in a way, into restructuring the forest industry sector are desperately needed. Small, mobile sawmills can be quite efficient and definitely have a role to play especially in producing low-medium quality sawnwood for the local markets. However, increasing reliance on small, mobile sawmill operators may devalue the forest plantations. These mills are not interested in producing quality products, value-added production and exports, and neither do they have the necessary capital to invest into forest management. Pulpwood demand Domestic demand for pulpwood will very much depend on the future of the Southern Paper Mills (SPM) in Mufindi. It is an integrated pulp and paper mill with a capacity of 60,000 t/year. It is the only paper mill of sizeable capacity in the country. SPM consumed 150,000 m3 - 200,000 m3 of pulpwood per year after it started operating in the mid-1980s. At full capacity, its annual wood demand could reach a theoretical maximum of 360,000 m3 although 300,000 m3 may be a more realistic figure. However, it has been closed since 1997 leaving considerable pulpwood resources unutilized, and thus endangering the financial viability of the Sao Hill plantation and the past investments. SPM is one of the companies in the list of companies to be privatized by the Presidential Parastatal Reform Commission. If the mill were reopened it would greatly facilitate the marketing of pine and eucalyptus, improve the profitability of sawmilling, and thus enhance the value of the Sao Hill plantation. Privatization negotiations are going on with a foreign investor but no sale has been yet agreed. Intemational markets for softwoods Export of logs and sawnwood (both hardwoods and softwoods) from Tanzania to overseas markets has been quite limited in the past. In 1998/99 log and sawnwood exports were 3,897 m3 and 8,066 m3, respectively. Irrespective of who will be managing the industrial plantations - be it private sector or state - it will be essential to expand exports from this current low level. This is necessary to: * Make use of all available wood that cannot be absorbed by the domestic market; * Increase the value of plantations by creating a market for quality wood; * Increase competition in the roundwood market resulting in more efficient pricing; * Generate foreign exchange as required by the new national Forest Policy. The key softwood lumber markets from a Tanzanian point of view are Middle-East, Egypt, China and East Asian markets, including Vietnam. Egypt imports annual almost 2.5 million m3 of sawn softwood, most of it from Europe but also from fast-growing Pinus radiata plantations e.g. in Chile. China due to its size, provides another important market. Rapid economic growth, large annual increases in absolute population combined with introduction of logging restrictions, have caused China to increasingly rely on imported wood and forest products to meet increasing demand. - 63 - Softwood lumber markets are very competitive, especially for commodity (structural and packaging) lumber, because of rapidly increasing supply of wood from fast growing plantations in New Zealand, Australia, South Africa and Chile. Increasing supply and competition is anticipated to keep markets under ongoing price pressure. However, the size of pine export market is so substantial that it should be possible for Tanzanian producers to expand exports if: * Prices are competitive; * Quality and dimension requirements are met; * New added value products are developed; * Consignments are large enough and regular supplies (long-term supply contracts) can be secured; * Local industries become more active in their marketing efforts. Markets for teak The global teak supply is projected to increase to some 10 million m3/year by 2030 from the current 4 million m3. Africa is a growing source of teak logs and lumber. The current teak plantation are in Tanzania is estimated to at 5,000 ha, but by 2010 the total area covered by teak will be close to 15,000 ha mainly because of the expansion of plantations. The domestic market of teak is limited but export opportunities are good. Wood from thinnings and low quality sawlogs can be sold locally but all quality sawlogs or sawn teak timber can potentially be exported to the overseas market. The biggest future markets for teak logs and sawn timber are expected to be India, Thailand, China and Westem Europe. Vietnam may also offer export opportunities. The future market is that of increasing supplies of plantation grown teak and decreasing supply of natural teak. This is likely to keep teak log prices relatively stable but still high enough to provide attractive revenues. Prices for teak logs vary considerably based on quality. Plantation grown teak fetches low prices relative to natural teak from Burma. Prices in India are US$ 400 - 700 per m3 for Indian and African plantation teak (Table 3.2). Potential value of Sao Hill plantations A series of models were developed to evaluate the value of the Sao Hill plantations. Three different scenarios were calculated to estimate the potential value of Sao Hill using the following set of assumptions: Scenario 1: Market for pulpwood assumed. The sales volume is assumed to be maximum 315,000 over bark (equalling to the maximum capacity of the mill). Pulpwood priced at 14 US$/m3 at mill gate. Scenario 2: No market for pulpwood. Only 50 percent of the annually available pulpwood is utilized (mainly by small sawmill operators), who are assumed to pay a stumpage of 5 US$/m3. Scenario 3: No market for pulpwood. This is the current trend (business as usual scenario) that assumes no improvement in the quality of management over time and that the prices obtained by the seller (i.e. the Government) are based on current royalty and LMDA levels. The estimates of plantation value range from US$ 2.3 million (Scenario 2) to US$ 12.5 US$ million (Scenario 2), indicating the great impact the future of the Southern Paper Mills will have on the plantation value. Plantation value in Scenario 1 could be even higher, if sawmills were able to sell slabs and other waste wood to the pulp and paper mill and thus increase their profitability and wood paying capability. It is important to note that valuation assumed that markets can be found for most of the sawlogs. This is not - 64 - realistic in short term, because of inadequate domestic demand and inadequate experience in meeting the needs of export markets. The main conclusion that can be derived from the valuation exercise is that the management of Sao Hill plantation can be financially profitable and that the plantation has a positive net present value. Another conclusion is that if plantation wood is valued using existing royalties, Sao Hill would lose money (Scenario 3). The government has been underselling its assets over the years. The current royalties, even combined with the LMDA, are so low that the government cannot recover all the costs that it would have to incur if it were to manage all the plantations efficiently and sustainably. The main factors reducing the value of Sao Hill are: * Remote location about 600 km from the main market and export port; * Difficulties in finding markets for pulpwood and waste from sawnwood production; * Uncompetitive transportation systems; * Forest industries with inappropriate and outdated machinery, which reduces wood paying capability; * Domestic markets that do not pay attention to quality. It needs to emphasized that although the estimated prices may appear low, under the current situation they should be regarded as maximum estimates. The lack of competition in the forestry sector and political and other risks are likely to reduce the bid values. Whatever measures can be taken to attract the interest of foreign investors is likely to increase the value of forest plantations. Plantation value estimates were not found to be sensitive to variations in the discount rate as is normally the case with plantation project with long gestation periods. This is explained by the large volume of mature logs immediately available for harvesting as long as there will be a market for all this wood. Under Scenario 1 the following values were obtained: USS 10.8 million (18 percent), US$ 12.5 million (15 percent) and USS 14.7 million (12 percent). The corresponding figures under Scenario 2 were US$ 2.1, US$ 2.3 and US$ 2.6 million. Sensitivity analysis indicates that plantation value depends crucially on the price of wood. A 20 percent reduction in wood price would make Sao Hill financially unviable. All measures, which will reduce harvesting and transport costs, can thus be expected to enhance plantation value. Maybe the best way of maximizing the value of Sao Hill is to improve marketing and concentrate on producing quality logs based on differential production and pricing. At present, the wood prices are more or less the same irrespective of quality: low quality wood dominates consumption, and only small quantities are exported. Financial benefits of PSI Enhanced private sector involvement will bring a number of benefits, most of them of economic and fiscal ones. Many of the benefits will not be immediately realized, but will accrue over time through improved efficiency in production and increased investment by the private sector. It is difficult at this stage to precisely quantify the benefits. The actual benefits will depend very much on the way the entire PSI process in the plantation sector is handled and to what extent the Government can increase competition, e.g. through foreign investment, and improve the overall investment and market environment for forestry. The implementation of the proposed PSI program is expected to provide the following benefits: * Eased budgetary pressure on Government; * Greater certainty of tenure and wood supply to encourage both new processing investment and investment in new plantation forests; - 65 - * Improved management of plantation forests, including undertaking arrears of silviculture; * Better recognition of the needs and aspirations of local communities as stakeholders and future joint forest owners in plantations where land pressure is an issue; * Liberalization of forest product markets, through the elimination of state subsidies and market price distortions through opening them up to greater competition; * Greater certainty and new career options for staff currently employed by FBD; * Attraction of possible foreign investment and technology to the sector; * Increased export earnings; * Reduced pressure on indigenous forests for the supply of timber products; * Revenue generation for Government during the divestment process. The main financial benefits to the Government from implementing this component will the savings in the costs. At present the Government is not making any net profit out of plantation management but it is spending more than it is earning (especially if you include all the capital costs). Annual plantation-related labor costs alone were estimated to be more than TSh 800 billion or US$ 1 million in 1998/99. During the same year an additional TSh 263 million was allocated by FBD for operational costs. In contrast, the annual plantation revenue during the same year was only TSh 681,445,550 or US$ 0.85 million. There is not enough data on the forest plantation resources, management costs and forest product markets to allow proper valuation of plantations and to estimate the value private sector would be prepared to pay for their management. Sao Hill, the most important plantation in the country, was used as a case study to derive initial benefits from privatization. A high real discount rate of 15 percent was adopted to allow for the high capital costs and investment risk in Tanzania. Depending on the market situation (especially for the pulpwood, which again is linked to the future of the Southern Paper Mills), the estimated economic value of Sao Hill (32,300 of established plantations) ranges between US$ 2.3 million and 12.5 million. If the Government were able to capture the lowest estimated value, i.e. US$ 2.3 million, the total sub-component investment cost of 2.7 million would be almost entirely covered. However, it must be accepted that transferring state plantations under private management will take years, and full benefits from it cannot thus be realized immediately. Without any changes in the log pricing, plantation management will not be financially viable. Sao Hill would have a negative net present value under the existing royalty system and assuming that adequate flmds were invested in maintaining the growing stock. This is a hypothetical calculation, because the FBD is actually not investing enough in forest management, and consequently the growing stock is in reality declining because of neglect, fire damage, and inadequate replanting. The real "without a project" scenario would include estimates of current benefit and costflows as well as depreciation offorest capital. This type of analysis was not possible given the existing data. However, an initial attempt was made to estimate the "with and without" project scenarios, to be able to assess incremental benefits. Benefits from improved management Improved resource information base and increased private sector involvement will improve management efficiency and plantation productivity. An attempt was made to quantify the possible impacts of these improvements in terms of wood growing costs for new plantations. The (compounded) costs savings for pine were US$ 3-4 per cubic meter, or 20-22 percent of total costs, including the establishment, annual maintenance and overhead costs over the entire rotation. The savings are mainly due to reduced wastage and improved yields. Under the current (business as usual scenario) costs were estimated at US$ 16-17 per m3 (over bark) and under the new scenario US$ 13 per m3 at 15 percent, and US$ 8 and US$ 11 at 12 percent discount rate. - 66 - * Improved rent recovery. The introduction of a more competitive log sales system will results in more efficient and fair pricing. It will result in maximum 20 percent (see the above text) increase in revenue per harvested cubic meter. However, in some cases prices are expected to drop in relation to current combined and LMDA levels. Assuming that annual cut is 350,000 m3 and that 250,000 m3 of that would be priced 3 USS/m3 higher, and 100,000 m3 US$ 3 lower per cubic meter, a net annual benefit estimate of US$ 750,000 can be derived. * Impact on poverty alleviation and employment. Plantation forests are located in rural areas, and provide thus benefits to the rural populations. Villagers would continue enjoying the same benefits as before e.g. in terms of access to fuelwood. Improving profitability of tree growing, better markets and increased private sector investment will in the long term create new employment opportunities both in the plantations and the wood-based industries. Enhanced PSI in the plantation sector can initially lead to increased unemployment, because of rationalizing the existing labor force in the sector and because of the lead-time for increased follow-on private sector investment. * Impact on environment. Although it is accepted that plantation forests are generally planting exotic species on monocultural regimes, their impacts on the environment will be positive. It is planned that environmentally sensitive areas are excluded from the PSI process already during the planning stage. The environmental assessments during the planning stage will also concentrate on protecting any areas of indigenous biodiversity; assessing harvesting, road construction and management practices to ensure that soil erosion potential is minimized and water values are enhanced; and ensuring that any use of chemicals in plantation management is in accordance with internationally accepted codes of practice. It is expected that certain plantations or parts of a plantation will be classified as catchment forests or buffer zone forests based on explicit criteria. The most critical ones will be entirely excluded from the PSI process. The possible dual function forests will have additional environmental guidelines for their management. Overall the existing State owned plantation forests area and any expansion of such forests under private sector ownership will be small in relation to the natural forest area (currently plantation forests cover 160,000 ha to 200,000 ha compared with the 33.6 mill ha of natural forest). Their impact on construction wood supply however is major, with the most recent survey estimating that plantation wood is supplying over 50 percent of construction timber in Dar es Salaam and Arusha. Plantation forest wood supply, with its lower cost, continuity/ certainty of supply, and increasing market acceptance, is having an important impact on eroding the market for illegally cut natural forest timbers and thus assisting in the preservation of natural forests. Financial Considerations Financial issues with respect to the forestry sector were reviewed as part of the Forest Resources Management Project (FRMP, 1996), during preparation of the National Forest Program (Salmi, 2000), and as part of preparation of this project (Kobb, 2001). Public funding for forestry is generally inadequate and irregular. Over the last 10 years, budgets to the Forest and Beekeeping Division have been increasing in nominal terms -- growing four-fold from 1993/94 to 1999/2000, though have remained roughly constant when inflation is taken into account. In 1999/2000, FBD's budget was around TSh 2.5 billion (US$ 3.2 million at the then prevailing exchange rate), but this only covered salaries and did not finance either recurrent or development expenditures. Outside of specific donor-financed activities, development and recurrent costs are partly financed by retained revenues, which currently total around 56 percent of all revenues collected from the sale of timber and other products from - 67 - central government Forest Reserves. For the most part, FBD relies of District staff (rather than FBD staff) to collect revenues, with the exception of the plantation sector, which accounts for around 40 percent of total revenues collected. In 1999/2000, revenues from Central Government Forest Reserves (including plantations) totalled roughly TSh 2 billion (around US S2.6 million at the exchange rate which prevailed at the time). FBD expenditures from the budget allocation plus revenues retained in 1999/2000 totalled around TSh 3.6 billion (US$ 4.7 million). Financing of the forestry sector by the donor community peaked in 1991/92, when donor spending (estimated at US$ 24 million) accounted for 90 percent of all spending in the forestry sector. Currently, it is estimated to account for around 68 percent of all spending in the forestry sector. In 1999/2000, donor spending which was captured by the budget process totalled TSh 7.75 billion (around US$ 10 million). It is difficult to compare the efficiency of public vs. donor spending because of the highly distorted impact of heavy investments in relatively expensive technical assistance to manage donor financed projects. The bulk of donor assistance, however, is not mediated by the budget process. As much as 60 percent of donor investments in forestry pass are not captured by the budget. In this environment, arguably, donor resources are financing donor priorities, rather than the priorities outlined in Tanzania's forest policy. It is widely agreed that the donor community needs to focus its priorities in a manner which is more carefully aligned with Govemment's. The National Forest Program poses a mechanism for doing this. The development of a sector-wide approach to financing of the forestry sector is a longer term objective of FCMP. Investments in improving financial management, procurement management, overall institutional management, and in meeting service delivery standards are intended to establish the institutional framework for a sector-wide approach. Improvements in the framework for royalty collection are expected to strengthen the overall financial sustainability of the Tanzania Forest Service. FCMP proposes to change the overall framework, and to develop the means for returning revenues to villages and other forest managers. References Acres International (2000). Power System Master Plan. 2000 Update prepared for the Tanzania Electric Supply Company. Cavendish, W. (1999). Poverty, inequality and environmental resources: quantitative analysis of rural households. Working Paper 1999.9. Oxford, Center for the Study of African Economies, University of Oxford. FRMP (1996). Long-term financing of forestry. Report prepared for the Forest and Beekeeping Division. Hartley, D. and Kaare, S. (2001). Institutional, Policy, and Livelihood Analysis of Communities Adjacent to Uluguru Mountains Catchment Reserves, Eastern Arc Mountains. Dar es Salaam, CARE Tanzania. Kobb, D. (2001). Improving forestry revenue collection in Tanzania. Report prepared for the World Bank. - 68 - Monela, G.C., G.C. Kajembe, A.R.S. Kaoneka and G. Kowero. (1999). Household Livelihood Strategies in the Miombo woodlands of Tanzania: emerging trends. Report prepared for the Center for International Forestry Research. Ogle, A. and Katila, M. (2000). Involvement of the private sector in industrial plantations development and management. Report to the Forestry and Beekeeping Division. Salmi, J. (2000). Study on financing in forestry. Report prepared for the National Forest Program. Scholes, R. (1996). Miombo woodlands and carbon sequestration. In, Campbell, B. (1996). The Miombo in Transition: Woodlands and Welfare in Africa. Bogor (Indonesia), Center for International Forestry Research. Wild, Robert (1998). A Framework for the Development of a holistic strategy for the Eastern Arc Mountains of Tanzania. Dar es Salaam, CARE Tanzania. - 69 - Annex 5: Financial Summary TANZANIA: Forest Conservation and Management Project Years Ending June 30 IMPLEMENTATION PERIOD . Year 1I Year 2 I Year 3 I Year 4 1 Year 5 I Year 6 | Year 7 Total Financing Required Project Costs Investment Costs 4.7 6.4 15.0 6.5 5.0 Recurrent Costs 0.2 0.4 0.5 0.6 0.7 Total Project Costs 4.9 6.8 15.5 7.1 5.7 0.0 0.0 ,Total Financing 4.9 6.8 15.5 7.1 5.7 0.0 0.0 Financing IBRD/IDA 4.7 6.4 8.3 6.5 5.2 Government 0.1 0.3 0.3 0.2 0.1 Central Provincial Co-financiers Global Environment 0.1 0.1 6.6 0.1 0.1 Facility Others 0.0 0.0 0.3 0.3 0.3 Others Others Others Others Total Project Financing 4.9 6.8 15.5 7.1 5.7 0.0 0.0 Main assumptions: Assumes that the Eastern Arc Mountains Conservation Endowment Fund is capitalized at the end of the third project year, and generates revenues which can be used by the EAMCEF Board. -70 - Annex 6: Procurement and Disbursement Arrangements TANZANIA: Forest Conservation and Management Project Procurement General Public procurement procedures in Tanzania are in the process of reform. In February 2001, new procurement legislation was passed by Parliament and was subsequently signed into law by the President (The Public Procurement Act, No. 3 of 2001). The Bank contributed substantially to the development of the new legislation. Supporting regulations have been drafted and are under review by the Bank. The new Act applies to all procurement undertaken by public institutions, except for financially independent parastatal organizations and for defense procurement. The Act specifies several tender boards with responsibility for procurement, tender evaluation, and contract award in accordance with pre-determined thresholds. The tender boards include: the Central Tender Board (CTB) under the Ministry of Finance; Ministry Tender Boards (MTB) under each ministry; Independent Departmnent Tender Boards (IDTB) under each independent department of the government; Regional Tender Boards (RTB) under each region; District Tender Boards (DTB) under each district; Parastatal Tender Boards for every goveming body of the parastatal organization; and Local Government Authority Tender Boards (LGATB) under each council. Except for LGATB, thresholds of the remaining tender boards are prescribed in the Regulations and subject to review on annual basis by the Minister responsible for Finance if need arises. The Bank intends to provide assistance in implementing the new procurement legislation and regulations through the planned Accountability, Transparency and Integrity Project. Procurement capacity Procurement in this project will be mainstreamed within the structure of the Ministry of Natural Resources and Tourism. A Procurement Capacity Assessment was carried out and concluded that the Overall Procurement Risk is Average. In conjunction with this assessment, the Bank has recommended, and it was agreed, that: (i) the Ministry (Forestry and Beekeeping Division) should retain the Procurement Specialist currently contracted by the Ministry or should recruit a new one with equivalent qualifications and experience or higher; (ii) the Ministry should prepare Internal Instructions articulating the new Regulations to assist procurement staff who will deal with procurement for FCMP to enable them to carry out procurement in an efficient manner; (iii) the Ministry should use IDA's Standard Bidding Documents and Standard Form of Evaluation for ICB and NCB (with modifications) procurement; and (iv) the Ministry should use IDA's Standard Requestfor Proposals and Standard Form of Evaluation for the selection of Consultants. To ensure that there is continued capacity building in the area of procurement, the Procurement Specialist, the secretary to the Ministry Tender Board (MTB), and other project procurement staff will receive further training in procurement, in particular, IDA procurement procedures, to enhance their skills. Procurement Plan MNRT has prepared an overall procurement plan to cover the entire project period. The Ministry has also prepared detailed procurement plans for the first project year. The first year procurement plan includes relevant information on all goods, works, and consulting services expected to be procured, and their - 71 - estimated cost; type of contract; procurement/selection method as well as timing in the procurement process. The procurement plan will be updated on annual basis in conjunction with preparation of the Annual Work Program and Budget. Procurement Implementation Arrangements Procurement will be carried out using existing MNRT structures. FBD will be responsible for day to day procurement. Procurement at the department level will be carried out by a Procurement Specialist contracted by the Ministry. The Procurement Specialist will be responsible for, among other things: (i) preparation of the GPN; (ii) preparation of SPNs; (iii) draft bidding documents and RFPs; (iv) draft contract documents; and (v) contract administration and management. In recruiting and employing consultants, the unit or section in need of the consultant will be responsible for drafting TORs and will coordinate with the Procurement Specialist for further processing. The MNRT Director of Administration and Personnel (DAP), through the Supplies Officer Incharge will be responsible for pre-screening all procurement documents prior to forwarding to the MTB for approval or award of contracts. The Supplies Officer Incharge will be assisted by another Supplies Officer, who will be assigned to the office of the DAP specifically to deal with procurement of activities related to this project. A Procurement Evaluation Committee will be constituted on an ad hoc basis to evaluate bids and proposals. The Procurement Specialist will be secretary and member of the Committee. Procurement financed under the project will comprise the recruitment of consultants services and training, office equipment, vehicles, civil works, and operating costs. The Procurement Specialist, with Ministry oversite, will be responsible for ensuring that procurement for works and goods is carried out in accordance with the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (dated January 1995 and revised in January and August 1996, in September 1997, and January 1999) and that consultancy services financed by IDA are procured in accordance with the Bank's Guidelines for the Selection and Employment of Consultants by World Bank Borrowers (dated January 1997, and revised September 1997 and January 1999). A General Procurement Notice has been published in United Nations Development Business (UNDB) and includes a description of required services or goods, the client agency, and the budgeted cost. This notice will be updated every year during the execution of the projects until all contracts and assignments have been procured. In the case of contracts which are expected to cost more than $200,000 equivalent, Specific Procurement Notices will be issued in UNDB, and will be advertised in the national, regional, and/or international press. To the extent possible, procurement arrangements have been designed to respond to the need for flexible use of procurement methods. A detailed Procurement Plan, based on the inputs identified in Project Implementation Plan, has been prepared, and will be revised annually during preparation of the Annual Work Program and Budget. Whenever possible, procurement items will be consolidated into appropriately-scaled contracting packages with a value of $150,000 and over. To complement a LACI compatible financial management system, FBD will also implement a procurement management and monitoring system. The system should be designed in order to: (i) estimate cash forecasts for withdrawals under the LACI system, and to (ii) monitor physical progress of outputs against contracts committed. Most procurement of goods, works, and services will be carried out by FBD. Procurement will be managed by the Ministerial Tender Board, in line with the regulatory framework established by recent legislation. - 72 - Aggregate values for NCB or other non-ICB procurement methods for goods and works are limiting and cannot be exceeded without the Bank's prior 'no objection.' The Ministry will maintain a tracking system to monitor such procurement in order to alert the Bank in a timely manner when this may occur. Prior review thresholds are indicated in Table B of this Annex. Civil Works Civil works contracts will include infrastructure for Forest Department Headquarters, and minor civil works and building rehabilitation as required at regional and district levels. The Ministry will first carry out an infrastructure needs assessment before launching regional and district infrastructure programs. Civil works costing less that $50,000 per contract (up to aggregate total not exceeding $200,000) will be procured on the basis of quotations obtained from three (3) qualified domestic contractors in response to a written invitation. The invitation shall include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to the Association, and relevant drawings, where applicable. The award shall be made to the contractor who offers the lowest price quotation for the required work, and who has the experience and resources to complete the contract successfully. Civil works costing more than $50,000 but less than $150,000 (up to an aggregate total not exceeding $250,000) will be procured on the basis of NCB. Civil work costing greater than $150,000 will be procured through ICB. Prequalification will be required for all ICB contracting. The contract for construction of headquarters building, estimated to cost about US$ 5.0 million equivalent will be awarded on the basis of International Competitive Bidding (ICB) using Bank Guidelines and Bank Standard Bidding Documents for Smaller Works, (January 1995, with corrigenda Nos. I to 4) and modified to meet project needs. Contracts for district infrastructure not exceeding US$ 150,000 equivalent will be awarded on the basis of National Competitive Bidding (NCB) procedures acceptable to IDA. This would include advertising the works, public opening of bids, clearly stated evaluation criteria and award of contract to the lowest evaluated bidder. Foreign bidders, if interested would not be precluded from participation. The new Public Procurement Act provides for this requirement. The civil works contracts will be supervised by consulting firms selected in accordance with Bank Guidelines. The Bank's Standard Bidding Documents for Works and Goods and the Standard Bid Evaluation Forms would be used for International Competitive Bidding (ICB) procurement. Since the government has not prepared Standard Bidding Documents that could be used for National Competitive Bidding (NCB) as per the new Act, IDA's Standard Bidding Documents for Works and Goods and the Standard Bid Evaluation Forms would be used for NCB procurements as well with necessary modifications. Goods Individual contracts for goods with an estimated value of less than $30,000 will be procured using local or international shopping, for an aggregate not to exceed $ 400,000 based on comparing price quotations from at least three suppliers in response to written invitation. Individual contracts for goods more than US$ 30,000 per contract and less than $150,000 per contract will be procured through National Competitive Bidding procedures for an aggregate not to exceed $400,000. The first three of these contracts will be subject to prior review. For contracts estimated to cost $150,000 and above, International Competitive Bidding will be used. Individual units of office equipment (individual fax machines, pnnters, and laptop computers) as well as individual vehicles may be purchased through the Inter-Agency Procurement Services Office (IAPSO) of the United Nations with an aggregate value not to exceed $300,000. - 73 - Consultants' services and training Services for all components of the project, including studies, technical assistance, and the supervision of works, which require the recruitment of consulting firms or individual consultants will be procured in accordance with the Bank's Guidelines for the Selection and Employment of Consultants by World Bank Borrowers. The cost of audits will also be financed by the Credit. The Bank's Standard Request for Proposals; Forms of Contracts as needed (lump-sum, time based, and/or simplified contracts for short-term assignments and individual consultants); and Sample Form of Evaluation Report for the selection of consultants would be used. Individual consultants contracts and consulting firms contracts below the threshold of US$50,000 and US$ 100,000 respectively may be awarded on the basis of qualifications and experience in accordance with Bank guidelines. For these contracts, prior review will be required of all TORs, proposed budgets, contracts, and consultant qualifications. Sole sourcing may be allowed on an exceptional basis and with the prior agreement with IDA, subject to the conditions outlined in the Guidelines. Prior review will also be required of all single-source consultancies, regardless of their value. Contracts for individual consultants below US$ 50,000, and for consulting firms below US $100,000, will be subject to post-review. Prior review will be required for individual contracts above US$50,000 and above US$100,000 for firms. With regard to workshops, training, study tours and field expenses, prior review of all activities will be required, including proposed budget, agenda, participants, location of training, and other relevant details. Incremental operating costs Incremental operating costs are defined to mean building, equipment, and vehicle maintenance costs, fuel, office supplies, building rental charges, utilities, and telecommunications costs, and the costs of Project support staff, but excluding salaries of officials of the civil service (which are, in any event, not eligible for IDA financing). For most activities, however, prior review will be limited to contracts above the thresholds stated above. IDA may request prior review of bid documents, evaluation methods and contracts for which they require more detailed information. Similarly, any request for no objection will be formally replied by IDA. Post review Procurement actions not subject to prior review as described above will be subject to post-review. This is to allow for efficient disbursement of funds while assuring transparency and consistency with these procedures. All documentation used for the procedures of contracting , recruitment of consulting services, evaluation and award shall be retained for subsequent examination by independent auditors and IDA supervision missions. Frequency of procurement supervision missions Once every six (6) months (including special procurement supervision for post-review/audits). The overall procurement risk assessment is rate average. The following steps are designed to mitigate procurement risk: - 74 - Action Deadline Responsible The Ministry of Natural Resources and On board/before effectiveness Borrower Beekeeping to retain the Procurement Specialist currently contracted by the Ministry or recruit a new one with equal qualifications and experience or high. Prepare Intemal Instructions articulating the Within one year of Borrower New Public Procurement Act and Regulations. implementation Training of staff, who deal with procurement. Prior to or at time of launching IDA/Borrower the project and continuous thereafter Detailed draft Procurement Plan for the first By negotiations Borrower/IDA year IDA's prior review of the first three contracts Early days of implementation IDA below thresholds stage Use of IDA Standard Bidding Documents Life of the Project Borrower for NCB procurements Procurement methods (Table A) Table A: Project Costs by Procurement Arrangements (US$ million equivalent) Procurement Method Expenditure International National International Local Consulting From UN Conservation Total Category Competitive Competitive Shopping Shopping Services/ Agencies Endowment Bidding Bidding Training Fund /b A. Civil Works 4.4 1.9 6.3 (4.0) (1.7) (5.7) B. Goods 1.4 1.4 0.5 0.9 0.5 4.7 (1.3) (1.3) (0.4) (0.8) (0.4) (4.2) C. Consultants' 9.3 9.3 Services (9.2) (9.2) D. Training /a 6.9 6.9 (6.6) (6.6) D. Operating 6.3 6.3 Costs (5.4) (5.4) E. Conservation 6.5 6.5 Endowment (0.0) (0.0) Fund /b Total Project 5.8 3.3 0.5 7.2 16.2 0.5 6.5 40.0 Costs, by method of Procurement ... amounts (5.3) (3.0) (0.4) (6.2) (15.8) (0.4) (0.0) (31.1) financed by IDA, Figures in parenthesis are the amounts to be financed by the IDA credit. All costs include contingencies. \a Includes workshops, training, and study tours, as well as consultancies which are geared toward capacity building. \b Comprised of GEF financing, to be separately Appraised. - 75 - Prior review thresholds (Table B) Table B: Thresholds for Procurement Mlethods and Prior Review Expenditure Category Contract value Procurement method Contracts subject to prior review A. Civil Works /a < $50,000 Quotations (up to an aggregate first three contracts value of $200,000), awarded on the basis of quotations obtained from three qualified national contractors >= $50,000 but NCB for an aggregate not to All < $150,000 exceed $250,000 >= $150,000 ICB All B. Goods < $30,000 Local or Intemational None Shopping, for an aggregate not to exceed $400,000 ___ _ >= $30,000 but NCB, for an aggregate not to first three contracts subject < $150,000 exceed $400,000 to prior review >- $150,000 ICB All Individual units of IAPSO. Individual contracts not none office equipment, to exceed S30,000 for an furmiture, vehicles aggregate not to exceed $300,000. C. Consultants' Services >= $50,000 for Individual Qualifications. Sole All and Training (including individuals sourcing may be allowed, Audits) subject to clauses 3.8 - 3.11 of Guidelines. >= $ 100,000 for QCBS All firms < $50,000 for Individual Qualifications. Sole TORs, budget, individuals or sourcing may be allowed, qualifications, contract < $100,000 for firms; subject to clauses 3.8 - 3.11 of Guidelines. Workshops, training, Acceptable national practice All study tours D. Incremental operating All operating costs Local shopping None costs and field expenses - 76 - Disbursement Allocation of credit proceeds (Table C) All disbursements of IDA funds will be handled in a manner which is consistent with the World Bank's Disbursement Handbook, and as described in the Development Credit Agreement. Funds will be disbursed over 5 year period, planned to begin in June, 2002. The Completion Date will be June 30, 2007 and the Closing Date will be December 31, 2007. As part of project preparation an Accounting and Financial Management Manual was prepared, and has been incorporated into the Project Implementation Manual. Five disbursement categories are envisaged: civil works, goods and equipment, consulting services, training, and operating costs. Table C: Allocation of Credit Proceeds Expenditure Category Amount in US$million Financing Percentage 1. Civil works 5.10 100 percent of foreign expenditures; 90 percent of local expenditures 2. Goods 4.10 100 percent of foreign expenditures; 90 percent of local expenditures 3. Consulting services and audits 8.50 100 percent 4. Training 6.00 100 percent 5. Incremental operating costs 4.90 90 percent 6. Refund of Project Preparation 0.60 Amount due pursuant to Advance Section 2.02 (b) of the Development Credit Agreement 7. Unallocated 1.90 Total Project Costs 31.10 Total 31.10 Summary of the financial management assessment: A financial management assessment was carried out during Appraisal mission which indicated that the Ministry's Finance Department and staff have adequate financial management systems which can provide, with reasonable assurance, timely infornation on the status of the project as required by the borrower and IDA. The government financial management system and controls over public finances have recently been updated and strengthened under the Integrated Financial Management System (IFMS) using computerized accounting software (the so-called 'Platinum' system). A satisfactory project Accounting and Financial Management Manual describing the accounting system, procedures, internal controls, chart of accounts and roles and responsibilities of the key staff responsible for IDA finances has been developed. The Ministry has wide experience in implementing IDA projects and in managing IDA funds from the previous Forest Resources Management project. Therefore, the project financial management system is adequate for the project to be presented to the Board and the project is ready for implementation. A review of accounting and financial management systems concluded that, while FBD has extensive experience in working with Bank procurement and disbursement, it is currently not capable of complying with new Loan Administration Change Initiative (LACI) Guidelines. Two actions must be completed in order to become LACI-compliant: - 77 - * Before the project is declared effective, an additional Ministry-qualified accountant should be deployed on a full-time basis to assist the current project accountant in the project financial matters; * The project will be reassessed for LACI compliance when a LACI compatible financial reporting format acceptable to the Bank has been prepared (based on the Revised LACI guidelines). Once FBD is assessed to be LACI capable, the Credit Agreement will be amended to reflect that disbursements are to take place on the basis of Project Management Reports thereafter. In this event, it envisaged that the project will adopt streamlined disbursement procedures once LACI Guidelines have been met. The decision to adopt streamlined disbursement procedures will be made in consultation with a Bank Financial Management Specialist who will: * review experience to date with the quality of withdrawal submissions, operation of the Special Account, SOE submissions and docurnentation retention in the field, and the general effectiveness of project management and accounting staff; * ensure that the Special Account has been reconciled and any outstanding issues resolved; * review supervision reports to assess implementation progress and issues; * review any available audit information, as well as any other financial reports, with a view to forming an opinion on the reliability of project accounts; * review the PMR format designed to be used in conjunction with the Platinum computerized accounting package. Audit arrangements: Audited financial statements (project, SOEs, and Special Account/ PMR) will be prepared and submitted within 6 months of the close of each Fiscal Year. The Terms of Reference for the Audit are included in the Accounting and Financial Management Manual. Audits remain the responsibility of the Controller and Auditor General. Additional costs which may be incurred to complete the audit will be covered by the project. Documentation with respect to SOE/PMR expenditures will be retained by the Ministry at the Ivory Rooms. Use of statements of expenditures (SOEs): All applications to withdraw proceeds from the Credit will be fully documented, except for expenditures for incremental operating costs, training costs, and contracts with a value of $30,000 or less for goods and equipment, $50,000 or less for civil works, $100,000 or less for consultants services (firms), $50,000 or less for consultants services (individuals), for which reimbursements or replenishments to the Special Account may be made against Statements of Expenditure (SOEs). Supporting documentation will be retained by the Government and will be available for inspection and review as requested by IDA Supervision Missions and by project auditors. Special account: It is envisaged that a single Special Account, acceptable to IDA, will be established. The authorized allocation of this account will be US$ 1,000,000, though the balance will be maintained at $500,000 until total disbursements have exceeded SDR 5 million. Requests for replenishment of the Special Account will be submitted to IDA every month until submission of quarterly PMRs commences. Each replenishment request will accompanied by an up-to-date bank statement and a reconciliation statement. The size of the authorized allocation may be revised once experience with LACI-compatible disbursement and financial management procedures is gained. - 78 - Annex 7: Project Processing Schedule TANZANIA: Forest Conservation and Management Project Project Schedule Planned Actual Time taken to prepare the project (months) . . First Bank mission (identification) 01/01/2000 Appraisal mission departure 10/01/2001 Negotiations 12/11/2001 Planned Date of Effectiveness 06/15/2002 Prepared by: The project was prepared by the Forestry and Beekeeping Division of the Ministry of Natural Resources and Tourism under the direction of a Project Preparation Working Group. The PPWG comprised, Dr. Felician Kilahama, Assistant Director of Forestry, Group Leader Mr. J. Musokwa, Project Implementation Specialist Dr. G. Monela, Associate Professor of Forest Economics, Sokoine University of Agriculture Dr. P. Yanda, Director, Tanzania Natural Resources Information Center, University of Dar es Salaam Dr. I. Aloo, Forestry and Beekeeping Division Ms. Amina Akida, Forestry and Beekeeping Division Ms. T. Mbaga, Forestry and Beekeeping Division Mr. Matthew Mndolwa, Tanzania Forest Research Institute The PPWG has employed various consultants to provide assistance during preparation. These have included: Prof. R. Ishengoma, Human Resources Development Specialist, Dean, Faculty of Forestry, Sokoine University of Agriculture Alan Ogle, Private Sector Forestry Specialist, Groome Poyry Marko Katila, Private Sector Forestry Specialist, Jaako Poyry Fortune Charumbira, Institutional Change Specialist, Consultant Ray Victurine, GEF Trust Fund Specialist, Cascadia Consulting Prof. R. Malimbwi, Forest Management Specialist, Professor of Forest Mensuration and Management, Faculty of Forestry, Sokoine University of Agriculture Liz Wily, Community-based Natural Resources Management Specialist, Consultant Barney Laseko, Financial Management Specialist, Consultant O.Mkungu, Accountant N.G. Sem, Procurement Specialist In addition, the Bank provided further preparation assistance, Toshifumi Serizawa (Natural Resource Management Specialist), SADC Food Security and Rural Development Hub, Harare Dan Kobb (Governance and Revenue Specialist), Consultant Ken Green, Social and Environmental Safeguards Specialist, Consultant Marc Daudon, GEF Trust Fund Specialist, Cascadia Consulting - 79 - Melissa Moye, GEF Trust Fund Specialist, Consultant Kithinji Kiragu, Institutional Reform Specialist Assistance to prepare GEF/UNDP financed activities was provided by a team with CARE/Tanzania. Preparation assistance: The project was prepared with resources made available from a PPF, a Policy and Human Resources Development Trust Fund and with a PDF/B Grant from the Global Environment Facility. Bank staff who worked on the project included: Name Speciality Peter A. Dewees Lead Environmental Specialist, Task Team Leader, AFTES Ladisy Chengula Rural Development Specialist, AFTRI Pascal Tegwa Procurement Specialist, AFTQK Mercy Sabai Financial Management Specialist, AFTQK The Project was Appraised in October, 2001. In addition to these staff, the Banks team was comprised of Kithinji Kiragu (Institutional Change Specialist) Jyrki Salmi (Sector Program Specialist, Consultant to the National Forest Program) Campbell Day (Forest Management Specialist, Consultant to Norad) Margrethe-Holm Anderson (Participatory Forest Management Specialist, Danida) Per Rasmussen (Participatory Forest Management Specialist, Consultant to Danida). The Government of Tanzania team was comprised of: Dr. Felician Kilahama (Forestry and Beekeeping Division) George Mbonde (Assistant Director, Forest Development) G.P. Mashurano (Assistant Director, Forest Utilization) I.Y. Mnangwone (Assistant Director, Research, Training, and Statistics) D. Kihwele (Assistant Director, Beekeeping) Stephen Mariki (Coordinator, National Forest Program). - 80 - Annex 8: Documents in the Project File* TANZANIA: Forest Conservation and Managemenit Project A. Project Implementation Plan Project Implementation Manual Annex 1. Improving Service Delivery through Institutional Reform: Establishment of the Tanzania Forest Service. Annex 2. Improving Service Delivery for Participatory Forest Management Annex 3. Improving the Financial Sustainability of Forest and Woodland Management Annex 4. Involvement of the Private Sector in the Development and Management of Industrial Plantations. Annex 5. Eastern Arc Mountains Conservation Endowment Fund, Financial, Operations, and Management Plan Annex 6. Accounting and Financial Management Manual B. Bank Staff Assessments Pascal Tegwa, Procurement Capacity Assessment, Ministry of Natural Resources and Tourism, October 16, 2001; Mercy Sabai, Financial Management Assessment, Ministry of Natural Resources and Tourism, October 25, 2001 C. Other Ministry of Natural Resources and Tourism (1998), National Forest Policy; Ministry of Natural Resources and Tourism (2001), National Forestry Program; Daniel Kobb, Improving Forestry Revenue Collection in Tanzania, 20 February 2001; Marko Katila and Alan Ogle, Involvement of the Private Sector in the Industrial Forest Plantation Development and Management, 16 February 2001; Wily, L.A. and P.A.Dewees. From users to custodians: changing relations between people and the state in forest management in Tanzania. World Bank Policy Research Working Paper No. 2569. March 2001; Eastern Arc Mountains Conservation Endowment Fund (2001). Trust Deed of the Eastern Arc Mountains Conservation Endowment Fund. March 20, 2001. *Including electronic files - 81 - Annex 9: Statement of Loans and Credits TANZANIA: Forest Conservation and Management Project 03-Jan-2002 Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA GEF Cancel. Undisb. Orig Frm Rev'd P002797 2002 TZ SONGO SONGO GAS DEV. & POWER GEN. 0.00 183.00 0.00 0.00 1a4.33 0.00 0.00 P071012 2002 Pnmary Education Development Program 0.00 150.00 0.00 0.00 150.67 0.00 0.00 P073397 2002 Lower Kihansi Environmental Management 0.00 6.30 0.00 0.00 5.98 0.28 0.00 P065372 2001 SOCIAL ACTION FUND PROJECT 0.00 60.00 0.00 0.00 50.16 3.67 0.00 P069982 2001 Regional Trade Fac. Proj. - Tanzania 0.00 15.00 0.00 0.00 14.68 1.88 0.00 P049838 2000 PRIVATIZATION 0.00 45.90 0.00 0.00 35.22 15.91 0.00 P050441 2000 RURAL& MICRO FIN SVC 0.00 2.00 0.00 0.00 1.52 1.30 0.00 P057187 2000 FIDP 11 0.00 27.50 0.00 0.00 19.33 13.96 0.00 P058627 2000 Health Sector Development Program 0.00 22.00 0.00 0.00 16.68 -0.08 0.00 P060833 2000 PUBLIC SERV REF PROG 0.00 41.20 0.00 0.00 31.00 -7.10 0.00 P002822 2000 TANZANIA PSAC I 0.00 190.00 0.00 0.00 113.29 -67.68 0.00 P047761 1999 TAX ADMINISTRATION 0.00 40.00 0.00 0.00 26.49 14.60 0.00 P002804 1998 AGRIC RESEARCH 0.00 21.80 0.00 0.00 10.13 4.10 0.00 P002789 1996 HUMAN RESOURCE DEV 1 0.00 20.90 0.00 0.00 3.43 0.46 0.00 P046837 1997 LAKE VICTORIA ENV. 0.00 10.10 0.00 0.00 6.08 0.79 0.00 P038570 1997 TZ:RIVER BASIN MGM.SMAL 0.00 26.30 0.00 0.00 8.74 6.55 0.00 P002753 1997 NAT EXT PROJ PH.I 0.00 31.10 0.00 0.00 7.50 10.30 1.68 P046872 1997 LAKE VICTORIA ENV 0.00 9.80 9.80 0.00 0.65 0.30 0.00 P002758 1996 URBAN SECTOR REHAB 0.00 105.00 0.00 0.00 25.93 18.44 0.00 P002770 1994 ROADS If 0.00 170.20 0.00 0.00 109.36 119.15 41.49 P002757 1991 RAILWAYS RESTRUCTURI 0.00 76.00 0.00 11.26 5.68 14.97 3.86 Total: 0.00 1254.10 9.80 11.26 828.81 151.81 47.03 - 82 - TANZANIA STATEMENT OF IFC's Held and Disbursed Portfolio OCT-2001 In Millions US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1996/99 AEF A&K Tanzania 0.21 0.00 0.00 0.00 0.21 0.00 0.00 0.00 1997 AEF Aquva Ginner 0.68 0.00 0.00 0.00 0.68 0.00 0.00 0.00 1998 AEF Blue Bay 1.45 0.00 0.00 0.00 1.45 0.00 0.00 0.00 2001 AEF Boundary Hil 0.20 0.00 0.00 0.00 0.20 0.00 0.00 0.00 1996 AEF Contiflora 0.35 0.00 0.00 0.00 0.35 0.00 0.00 0.00 1998 AEF Drop Zanziba 0.32 0.00 0.00 0.00 0.32 0.00 0.00 0.00 1997 AEF Hort. Farns 0.30 0.00 0.00 0.00 0.30 0.00 0.00 0.00 1998 AEF Maji Masafi 0.32 0.00 0.00 0.00 0.32 0.00 0.00 0.00 1996 AEF Milcafe 0.18 0.00 0.00 0.00 0.18 0.00 0.00 0.00 1994 AEF Moshi Lthr 0.00 0.19 0.00 0.00 0.00 0.19 0.00 0.00 1999 AEF Musoma Fish 1.50 0.00 0.00 0.00 1.50 0.00 0.00 0.00 1997/99 AEF Pallsons 0.33 0.00 0.00 0.00 0.33 0.00 0.00 0.00 1995 AEF Tanbreed 0.70 0.00 0.00 0.00 0.70 0.00 0.00 0.00 1996 AEF Zainab Grain 0.76 0.00 0.00 0.00 0.76 0.00 0.00 0.00 2000 AEF Zan Safari 0.70 0.00 0.00 0.00 0.70 0.00 0.00 0.00 1997 DATEL 0.00 0.48 0.00 0.00 0.00 0.48 0.00 0.00 1994 Eurafrican Bank 0.00 0.73 0.00 0.00 0.00 0.73 0.00 0.00 1996 IHP 0.94 0.60 0.00 0.00 0.94 0.60 0.00 0.00 2000 IOH 2.50 0.00 0.00 0.00 2.50 0.00 0.00 0.00 2000 NBC 0.00 10.00 0.00 0.00 0.00 3.44 0.00 0.00 1993 TPS (Tanzania) 6.13 0.87 1.04 0.00 6.13 0.87 1.04 0.00 1991/97 TPS Zanzibar 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.00 1994 Tanzania Brewery 0.00 6.00 0.00 0.00 0.00 6.00 0.00 0.00 1998 Tanzania Jubilee 0.00 0.29 0.00 0.00 0.00 0.29 0.00 0.00 1994 ULC Leasing 0.38 0.95 0.00 0.00 0.38 0.76 0.00 0.00 Total Portfolio: 17.95 20.14 1.04 0.00 17.95 13.39 1.04 0.00 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic 2001 AEF 2000 Indust 1.60 0.00 0.00 0.00 2000 NBC 30.00 0.00 0.00 0.00 1998 TTCL 0.00 0.00 20.00 0.00 Total Pending Commitment: 31.60 0.00 20.00 0.00 - 83 - Annex 10: Country at a Glance TANZANIA: Forest Conservation and Management Project Sub- POVERTY and SOCIAL Saharan Low- Tanzania Africa income Development diamond' 2000 Population. mid-year (millions) 33.7 659 2,459 Life expectancy GNI per capita (Atlas method, US$) 270 480 420 GNI (Atlas method, USS billions) 9.1 313 1,030 Average annual growth, 1994-00 Population (%) 2.6 2.6 1.9 Labor force (%) 2.6 2.6 2.4 GNI Gross per I primary Most recesnt estimate (11atest year available, 1994-00J aia>4 erlmn capita / enrotlment Povertv (% of population below national poverty line) 51 Urban Dopulation (% of total population) 33 34 32 Life expectancy at birth (years) 45 47 59 Infant mortalitv (per 1, 0001lve births) 85 92 77 Child malnutrition (% of children under 5S 31 .. .. Access to improved water source Access to an improved water source (% of population) 54 55 76 Illiteracv (% of population a.qe 15+) 24 38 38 Gross primary enrollment (% of school-ase population) 67 78 96 -Tanzan,a Male 67 85 102 Low-income group Female 66 71 86 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1980 1990 1999 2000 Economic ratios' GDP (US$ billions) 4.3 8.8 9.0 Gross domestic investment/GDP .. 26.1 15.3 17.7 Trade Exports of qoods and services/GDP .. 12.6 13.6 14.7 Gross domestic savinqs/GDP .. 1.3 3.3 8.7 Gross national savinqs/GDP .. 5.9 2.9 8.6 Current account balance/GDP .. -17.9 -12.3 -9.2 Domestic Interest Davments/GDP .. 1.1 0.7 1.4 Investment Total debt/GDP .. 151.2 91.9 78.7 savings Total debt service/exports 23.5 34.2 15.7 15.3 Present value of debt/GDP .. .. 53.1 29.1 Present value of debt/exports .. .. 373.5 189.2 Indebtedness 1980-90 1990-00 1999 2000 2000-04 (average annual qrowih) GDP .. 2.9 3.6 5.1 6.2 T Tanzania GDP per capita .. 0.1 2.4 1.3 4.0 Low-income group Exports of qoods and services .. 9.3 18.6 18.4 1 7 STRUCTURE of the ECONOMY 1980 1990 1999 2000 Growth of investment and GDP (%) (% of GDP) 2x Aqriculture .. 46.0 44.8 45.1 T.. Industrv .. 17.7 15.4 15.8 a_ Manufacturing .. 9.3 7.4 7.5 0_ Services .. 36.4 39.8 39.1 -x 9 6 97 98 99 ox Private consumption .. 80.9 89.8 84.8 a -20 General qovernment consumption .. 17.8 6.9 6 6 -G DI d GDP Imports of goods and services .. 37.5 25.6 23.8 1980-90 1990-00 1999 2000 Growth ot exports and imports I%) (average annual growth) Agriculture .. 3.2 4.2 3.4 s- Industrv 3.1 5.4 7.2 25 Manufacturing .. 2.7 3.8 4.6 Services .. 2.7 5.4 5.8 . 29 9 Private consumption .. 2.2 5.2 -0.9 25 General qovernment consumption .. 2.5 -1.5 5.0 .5O Gross domestic investment .. -1.4 -1.5 7.5 - E.ports O-imports imports of qoods and services .. 0.9 8.7 0.1 Note: 2000 data are preliminary estimates. The diamonds show four kev indicators in the countrv (in bold) compared with its income-group averaqe. If data are missinq, the diamond will be incomplete. - 84 - Tanzania PRICES and GOVERNMENT FINANCE 1980 1990 1999 2000 Inflation (%) Domestic prices (% change) 40 Consumer prices 30.2 35.8 7.9 5.9 ImOlicit GDP deflator .. 20.2 10.3 5.4 20 Government finance 10 (% of GDP, includes current .rants) 0 I Current revenue .. 11.4 10.6 10.7 95 95 97 98 99 00 Current budqet balance .. -1.1 0.5 -0.5 - GDP deflator - CPI Overall surplus/deficit .. -3.8 -3.3 -5.8 TRADE 1980 1990 1999 2000 Export and import levels (USS mill.) (US$ mnitions) Total exports (fob) .. 352 541 600 2,000 Coffee .. 85 77 84 Cotton .. 75 28 38 no90* Manufactures .. 73 22 34 Total imPorts (cif) .. 1.297 1.631 1,592 1.000 Food .. 59 200 176 s Fuel and enerqv 174 104 95 Capital qoods .. 540 710 770 0 94 95 00 97 98 99 00 Export price index (1995=100) .. 75 84 83 Import price index (1995=100) .. 92 84 85 *E.ports M Imports Terms of trade (1995=100) .. 82 99 98 BALANCE of PAYMENTS 1980 1990 1999 2000 Current account balance to GDP I%) EUSs miloons) Exports of qoods and services 6 73 519 1,195 1,32 7 ,14 Imports of goods and services 1,221 1,557 2,244 2,146 _ _ _ 1 l1 Resource balance -548 -1.038 -1.049 -819 -* Net income -14 -186 -66 -43 " I 'll Net current transfers 22 461 34 35 Current account balance -540 -764 -1.081 -827 20 Financing items (net) 474 748 1,223 1,176 Chanqes in net reserves 66 16 -143 -348 -30 Memo: Reserves includinq gold (US$ millions) ,, 124 776 950 Conversion rate (DEC, local/US$) 8.2 195.1 744.8 800.4 EXTERNAL DEBT and RESOURCE FLOWS 1980 1990 1999 2000 (USS millions) Composition of 2000 debt (US$ mill.) Total debt outstandinq and disbursed 5.322 6.438 8.053 7.104 IBRD 198 243 16 11 G:625 A 11 IDA 242 1.250 2.594 2.593 F. 86 Total debt service 161 179 196 213 A b. IBRD 20 44 8 6 B. 2,593 IDA 2 14 43 51 Composition of net resource flows Official qrants 485 677 737 763 E 2795 Official creditors 219 208 177 111 Private creditors 99 4 -13 -11 Foreign direct investment 0 0 183 193 c:324 Portfolio equity 0 0 0 0 D 670 World Bank program Commitments 109 537 159 272 A - IsRD E - Bilaterai Disbursements 69 187 199 142 B- IDA D - Other multilateral F - Prvate Principal repayments 5 32 30 37 C - IMF G - Short-term Netflows 64 155 169 105 Interest payments 17 26 21 20 Net transfers 47 129 148 85 Development Economics 9/24/01 - 85 - Additional Annex 11 Environmental and Social Considerations TANZANIA: Forest Conservation and Management Project INTRODUCTION The project has been classified as Category B with respect to its expected environmental and social impacts. The project is not expected to result in significant negative environmental or social impacts. The project will support the implementation of a series of participatory forestry management activities, which government has endorsed in its National Forest Program, which are intended to bring about the proper management of Government Forest Reserves, industrial plantations, forests on village lands, and community and private forests. As part of this process, provisions will be made to bring about sound forest management, and when required, the preservation of critical biodiversity habitats. In particular, areas classified as catchment forest that are important for watershed protection and the Eastern Arc Montane Forests will be targeted for priority protection and conservation. Environmental risks are associated with well-known and documented forest management constraints - encroachment into forest reserves, difficulties in implementing practical sustainable forest management plans and sometimes ineffective traditional government forest management polices and regulatory measures. Furthermore, the project will support Government initiatives more fully to involve the private sector in the management in industrial forest plantations. Social and economic impacts will be assessed for all plantation forests which are expected to be directly affected by this component of the project, consultations will be undertaken with all stakeholders. Special attention will be directed at small sawmillers to ensure they are adequately protected during project implementation. An additional benefit of the involvement of the private sector is that the creation of an expanded investment climate could introduce new sawmilling technologies including opportunities to use currently discarded mill waste. LEGAL AND REGULATORY FRAMEWORK FOR SOCIAL DEVELOPMENT AND ENVIRONMENTAL MANAGEMENT A national environmental regulatory and policy framework has been evolving during the last several years. Currently, two independent agencies oversee environmental assessment and review processes, the National Environment Management Council (NEMC), a semi-autonomous statutory body, and the Division of the Environment (DOE) of the Vice-President's Office. The National Environmental Policy (NEP) of 1997 provides guidance for environmental assessment procedures, including EIA requirements. These provisions are primarily concerned with development projects and their potential impacts on the biological and physical environment. However, it is important to point out that currently there is no comprehensive legislation to implement the NEP policies and there is no empowerment of NEMC or of DOE to make EIA requirements legally binding. The national capacity for management and implementation of environmental assessment requirements is still limited, particularly in light of the nearly complete lack of a regulatory framework. There are no clearly defined institutional responsibilities for EIA review, approval and enforcement, and an EIA regulatory framework is usually only introduced on an ad hoc basis in a few protected areas such in the national parks, marine parks and game reserves. Unfortunately, there is no effective co-ordination and collaboration among environmental and sector agencies, such as FBD, in this regard. - 86 - Policies and regulations with respect to Table AII.I: Objectives of draft Forest Legislation environmental assessment related to forest and biodiversity are based on the National Forest Policy * encourage and facilitate the active citizen involvement of 1998 and the National Forest Program of 2001. in the sustainable planning, management, use and There are plans toformalize a* regulatory framework conservation of forest resources through the There are plans to formalize a regulatory framework deeomn of .niiuladcomnt hs in proposed changes to forestry legislation. These instruments will provide GOT with a comprehensive . ensure ecosystem stability through conservation of sector framework with the objective of bringing about forest biodiversity, water catchments and soil fertility; sustainable forest management and protection, and which recognizes multiple uses and interests in these resources to the lowest possible level of local resources. management consistent with national policies; Draft forest legislation, which describes the . ensure the sustainable supply of forest products and objectives and instruments for managing forest lands, services by maintaining sufficient forest area under outlines the need for a well defined and efficient, effective and economical management; outlines the need for a well defined and comprehensive forest management plan for each . enhance the quality and improve the marketability of forest reserve and private forest. Such management forest products and regulate their export; plans should include: * promote coordination and cooperation between the forest sector and other agencies and bodies in the * a description of the biological, public and private sectors; environmental, economic, geological and cultural resources of the forest, and an . facilitate greater public awareness of the cultural, inventory of resource uses; economic and social benefits of conserving and invseentor * . . increasing sustainable forest cover by developing * a statement of the economic, environmental programs in training, research and public education; and social objectives to be achieved in the and management of the forest; * a description of the surrounding areas and a enable Tanzania to play a full part in contributing villages and their interaction with the forest; towards and benefiting from international efforts and a c i f a s l wmeasures to protect and enhance global biodiversity. * a description of the areas of land within the forest reserve in which it is proposed to Source: Ministry of Natural Resources and Tourism. establish local user zones to facilitate local Forest Bill (draft). 2001 communities obtaining benefits from the forest reserve; * a description of the local communities residing in the vicinity of the forest and their relationship to the forest, including their forest resource use; * in respect of forests other than village land forest reserves, an for the involvement of the communities and management of the forest resources; * provisions regulating commercial forest exploitation including afforestation and reforestation; * provisions directed to forest conservation and preservation, including wild animals and wild plants; * proposals for forest including a management plan; and * an identification of financial and human resources needed to implement the management plan including forest use charges and fees between the various authorities and persons likely to be involved in the management of the forest. - 87 - A key provision of the draft forestry legislation addresses EIA requirements for any Table AI].2: Classiication of Forests in proposed development in forest reserves, draft Forest Legislation private forests, or sensitive forest areas Nationalforests including watersheds. The law clarifies that all * forest reserves; parties, persons, or organizations in the public . nature forest reserves; or private sector, must prepare and submit to . forests on general land other than unoccupied or unused the FBD Director an environmental impact village land which are not reserved and of which the right of assessment of the proposed development from occupancy or a lease has not been granted to any person or independent consultants selected from a list y; approved by GOT. Local authorityforests * local authority forest reserves; The list of development activities subject to . forests on general land other than unoccupied or unused environmental assessment includes: village land which are not reserved and of which the right of occupancy or a lease or a license has been granted, to the local authority; * commercial logging and forest industry exceeding five hectares; Village forests * mining developments; . village land forest reserves which are declared or gazetted; ' mining.developments; . community forest reserves created out of village forests; * road construction or the laying of * forests which are not reserved which are on village land and pipelines; of which the management is vested in the village assembly; * the construction of dams, power Privateforests stations, electrical or Piaeoet . forests on village land held by one or more individuals telecommunication installations; under a customary right of occupancy; * the construction of a building or group a forests on general or village land of which the right of of buildings for purposes other than occupancy or a lease has been granted to a person or persons the management of a forest reserve on or a partnership or a corporate body or a Non-Governmental an area of land exceeding one hectare Organization or any other body or organization. or such area as may be prescribed; and * agricultural, aquacultural or horticultural development on an area of land exceeding five hectares or such area as may be prescribed. LAND TENURE AND SOCIAL ISSUES Comprehensive revisions to Tanzania's land legislation were recently enacted by Parliament, comprised of the Land Act of 1999 and the Village Land Act of 1999. These laws define modern constructs of customary land rights and if and how compensation is to proceed when land is expropriated. Tanzanian legislation is emphatic in declaring that any person whose right of occupancy, recognized long-standing occupation, or customary use of land is revoked or otherwise interfered with to their detriment by the State is entitled to compensation as defined by full and fair pay. Furthermore, the Land Act sets out detailed terms for compensation under the following considerations: market value of the real property, disturbance allowance, transport allowance, loss of profits or accommodation, cost of acquiring or getting the subject land, any other cost loss or capital expenditure incurred to the development of the subject land, and interest at the market rate. A significant portion of the Village Land Act details how people may secure their customary land rights. The customary land right may be registered and titled to an individual, spouse, clan, group or to an entire community. The process of adjudicating, registering and issuing title deeds over village land is devolved to the community, and elected Village Councils become the Land Manager through an elected Land Committee. - 88 - These modern forest and land laws provide the framework for the rights of citizens to create their own reserves, to manage central and local Government reserves and to sustain customary and granted access and use rights. Within this regulatory framework are specific rights and processes available to individuals and/or groups affected by the declaration of national forest or local forest reserves for proper compensation based on well-defined consultation and investigation procedures. Other legislation provides for mitigating social and economic impacts which might be an outcome of the loss of employment by current employees of FBD (a possible impact of involving the private sector in management of industrial plantations). GOT has been engaged in numerous privatization procedures during the past decade and has established transparent provisions for reducing the civil service work force under such initiatives. The Parastatal Sector Reform Commission (PSRC), responsible for these undertakings, has established norms for determining what will happen to the work force, how many and what jobs would be redundant. At the same time, terms for retrenchment, separation and redeployment are defined. ENVIRONMENTAL AND SOCIAL SAFEGUARD ISSUES The key safeguard issues which require evaluation in this project are summarized here. The applicable safeguards are defined in OP/BP 4.01 Environmental Assessment, OP/GP 4.36 Forestry, OP/BP 4.12 Involuntary Resettlement and OP/BP 4.04 Natural Habitats. This section summarizes the important triggers and mechanisms in the project for achieving these policy objectives. The adequacy of implementing institutions to address environmental management - OP/BP 4.01 Although the shortcomings of a national environmental management and regulatory framework have been highlighted, the forest sector has a strong assortment of provisions to address virtually all potential environmental concerns that which arise as a result of this project. These are specifically contained in the relevant forest sector policy, national program and draft law. In aggregate, Tanzania's forest policy framework is one of the most constructive and forward looking in Africa. Financing commercial logging operations or the purchase of logging equipmentfor use in primary tropical moistforests - OP/GP 4.36 The project will not be financing any commercial logging in natural forests. The project will be supporting commercial operations only in plantation forests. These forests consist of eucalyptus, cypress, pine and teak - most of which were established over the last 30 years. The current standing crop has a history going back decades on land that was never covered by tropical moist forest, but was primarily grassland. The sixteen plantation forest blocks covered by the project will continue to undertake silvicultural practices including harvest and replanting. Participatory forest management plans will allow for expansion of village and community based plantation woodlots, but only with management plans that ensure protection of sensitive, biologically important and watershed catchments. Use of a sector-wide approach forforest management - OP/GP 4.36 The National Forest Policy, National Forest Program, draft forestry legislation, and technical guidelines all constitute essential components of a solid sector-wide approach to the forest sector in Tanzania. All of the Bank policy commitments have been addressed by GOT and include: adoption of policies and a legal institutional framework for forest management; adoption of an appropriate forestry conservation and development plan; use of social, economic and environmental assessments of commercial forests; setting - 89 - aside compensatory preservation forests; and establishment of institutional capacity to implement and enforce these commitments. Protection offorest areas that are considered critical natural habitats and preservation and sustainable use offorests of high ecological value - OP/GP 4.36, OP/BP 4.04 The project proposes to support a number of activities within its three components that will adhere to forest sector provisions for identification, protection and management of critical habitats. These include, in particular, catchments and the Eastern Arc Montane Forests. Miombo woodlands, an important and widely distributed and relatively abundant forest ecosystem, and will continue supplying woodfuel and other forest supplies to adjacent communities. Unlike other more fragile forest types, miombo woodlands are resilient to sustainable harvesting due to their regenerative capacity. Forest management plans to be promoted by FBD will contribute to increasing the viability of these woodlands. The participatory forest management approach advocated in the project also provides for local communities and forest users to identify and manage, based on their own needs, ecologically important forest areas. Stakeholder consultation including the private sector and local people in forest management - OP/GP 4.36 Provisions for stakeholder consultations are evident across the three project components. For National Forests, Local Authority Forests, Village and Community Forests, and Private Forests, the basic premise for future sustainable use is the development of forest management plans that are defined by a stakeholder involved process. FCMP has specified particular provisions for ensuring that all stakeholders, from the private sector to local people, are included in the development of forest management plans. Avoid or minimize involuntary resettlement as it applies in particular to encroachment in forest reserves - OP/BP 4.12 MNRT has developed a set of detailed guidelines for community based forest management which define methods for defining forest reserve boundaries, identifying encroachment problems, consulting with offenders and establishing fines and provisions for getting such offenders off designated lands. The Land Act also contains specifications for ensuring that peoples rights are duly respected and that in cases where land appropriation is required, due compensation is provided. Measures for appeals and investigations are also defined. Lastly, the Government has reiterated that involuntary resettlement would not be carried out in conjunction with any project implementation activity. Government has also agreed that in the unforeseen event that involuntary resettlement becomes necessary in the course of project implementation, a detailed resettlement plan (including any compensation for lost livelihood) would be completed and subject to IDA review well in advance of any resettlement actions associated with any of the project components. Other issues The project will finance the construction of a new HQ building for FBD. The proposed construction site is a parking area under the immediate control and use of the FBD at the so-called 'Ivory Rooms' facility. No resettlement is envisaged as an outcome, though a bus stop will be relocated to an adjacent location to allow access to the new building. - 90 - IMPLEMENTATION OF PROJECT ENVIRONMENTAL AND SOCIAL SAFEGUARDS Participatory forest management A national strategy and program for participatory forest management has been developed which addresses key safeguard issues. These measures constitute a comprehensive approach to sustainable forest management and multiple resource use, including preservation of critical forest and special biologically important areas. The emphasis in recent GOT policy and legislation is that central ministry control is no longer the only administrative process. Government decentralization has continued over the years to the extent that local participation in management and administration of forest resources is a principal objective. Overall, the essential ingredients of participatory forest management in Tanzania are that it: * reflects priorities within the sector for community based forest management; * balances the need for protection, resource extraction and sustainable use; * acknowledges that specific forest uses requires stakeholder inputs; * identifies critical forest habitats requiring strict protection; * provide for the community and other stakeholders to undertake that protection; * makes provisions for national and local management; * allows for joint forest management between government and local communities in certain cases. The project will support the enabling framework for the establishment of Village Forest Reserves under the management of local Village Councils (as well as other private and community forest constructs as defined in policy). Simply because of their much greater extent, these Reserves will be established primarily in miombo woodlands. Miombo is characterized by (among other things) its rapid regenerative capacity, and low biodiversity. Miombo tends to be found in relatively flat areas, and virtually all miombo in Tanzania has been heavily modified by human use. The literature suggests that the extensive areas which are now miombo, in central Tanzania, were under cultivation 150 years ago, prior to the Ngoni invasions. Much miombo which was cleared during the establishment of Ujamaa villages in the 1960s is has been rapidly regenerating, and accounts for significant new areas of woodland. The establishment of VFRs in miombo woodland areas is unlikely to pose any significant environmental risk, or any risks which cannot be mitigated through natural regeneration. The establishment of VFRs in forests of more significant ecological important is consistent with the GEF Operational Strategy for Biodiversity Conservation, and specifically with the objectives of GEF Operational Programs 3 and 4 on Forest Ecosystems and Mountain Ecosystems. Consistent with these objectives, the project will provide finance for the creation and strengthening of participatory and co- management schemes to build support and ownership for biodiversity conservation, develop socio- economic activities to reconcile biodiversity conservation with human needs, identify processes which are likely to have significant adverse impacts on the conservation and sustainable use of biodiversity, and support capacity building efforts while focusing primarily on a mountain tropical forest ecosystem that is at risk. Government's Guidelines for the establishment of VFRs emphasize the need to raise awareness at the local level about the potential for multiple resource use, provide guidance for the identification of specific management use zones, recommend the development of a protection process when it is required, clarify that VFRs will have legal status, and also outline conflict resolution procedures. Establishment of VFRs is a decision taken by the village, and social impacts are determined by the village, and compensated within the framework of the village's operation. Government is responsible for providing technical support for resource use zoning and mapping, and for providing a generic safeguards checklist for all new -91- forest reserve areas - Village Forest Reserve, Community Forest Reserve, Village Forest management Area- which are thought to contain critical ecosystems. The project will provide specific support for implementation of all of these measures. Involvement of the private sector in industrial plantation management The large forests of Tanzania include natural forests and plantations which cover only a fraction of the total forest area of 33.6 million hectares. The total area of forest plantations is relatively small and comprises both state-managed industrial plantations and village, farm and private company plantations. State plantations are distributed within 16 plantation areas. Sao Hill is the most important plantation area, followed by Meru/Usa, North Kilimanjaro and West Kilimanjaro plantations. These four plantation areas cover altogether more than 80 percent of the growing stock in state-managed plantations. Sao Hill alone covers about 50 percent of the total state plantation area. Many individual forest plantations under state control were established without clear management objectives. In the early 20th century and later in the 1950s trees were planted mainly to provide long term timber supply, to act as buffer zones for natural forests and to protect watersheds. Plantations were established for industrial purposes in the 1950s and 1960s but only on a small scale and without linking management to the development of forest industries. Larger scale industrial plantation development started only in the mid-1970s when the Sao Hill plantations were greatly expanded to provide raw material for the proposed paper mill at Mufindi. Farmer and community tree planting has taken place throughout the country but particularly in Central and West Tanzania e.g. in Njombe and Mufindi districts. Forest plantation by the private sector is a relatively new development in the country with several operations initiated in the 1990s by the Commonwealth Development Corporation and more recently by private Norwegian investors. Specific measures that address safeguard concerns are highlighted below. Table A.11.3: Elements of the EL4 Process for Plantations in ELAfor designatedplantations Environmentally Important Habitats Objective: The project proposes to support the * Ensure that environmental issues are considered as part of involvement of the private sector in industrial plantation management plan. plantation management through three pilot * Ensure that environmental impacts are reduced or schemes (private management of a selected minimized. industrial plantation, co-management of an * Solicit feedback from affected stakeholders industrial plantation which brings an industrial Actions: plantation with multiple stakeholders under * Review the current biophysical status of the plantation. commercial management, community-based * Assess the potential environmental impact to critical or plantation management for areas which cannot sensitive habitats associated with the management plan. be managed commercially either by private * Identify mitigation or protection measures, companies or by the state but which have Party Responsible for Mitigation: potential to provide benefits to communities.) * Leaseholder Pilot areas are to be identified during the early * TFS with Technical Support from regional Catchment and stages of project implementation. Forestry Officers Verification: Proposed pilot areas will be inventories and * Environmental Assessment Statement/Report map. The result will be the demarcation and * Environmental audit/inspection by TFS establishment of plantation boundaries, including identification and mapping of areas to be excluded from cutting such as critical watersheds and areas containing important natural habitats. A - 92 - standard assessment and documentation process will be developed to accomplish this objective. When appropriate, mitigation or protection measures will be identified and implemented. Socio-economic studies There has been some concern that the involvement of the private sector will have serious economic impacts on small sawmillers and on plantation-adjacent communities. The sawmilling industry is an important source of employment and revenue generation for local communities. Wood products are sold for building material, poles and other associated enterprises such as furniture making. Each pilot plantation will develop general socio-economic information to portray the social, economic and social service instruments within surrounding communities. The information to be collected will include: * Community/village profiles that include population statistics, demographics, overview of labor force, employment opportunities and services; * a description of each small to medium sawmill including equipment, labor force, daily volume of production, sources of wood supply, clients and or end product markets; * a summary of sawmill operator issues regarding supply and /or production problems, opportunities and potential solutions; and * an overview of economic situation in each community. The information will be incorporated into any social impact mitigation plans, as relevant, for individual plantation areas posed for PSI. Stakeholder participation in plantation management The project will support the adoption of participatory plantation management. This will require an acceptance of certain responsibilities and changes in the roles of the various stakeholders in forest management. The village, the state, and the private sector will have to cooperate and work with each other if participatory or joint forest management is to succeed. The following actions will be undertaken to facilitate success: * clarify through contractual arrangement as appropriate the respective roles of communities, state and industry in forest management and protection; * establish mechanisms to ensure that the expectations of respective partners regarding plantation management is understood by everyone; * strengthen the organizational and technical capacity of villagers in resource management; * integrate plantation management related activities with other village land uses and development activities; * recognize traditional/customary rights and possible claims to land based on traditional village boundaries (if such situations exist); * develop local conflict resolution mechanisms for situations requiring consideration of different stakeholder objectives. Encroachment in plantation or other reservedforest areas and issues with respect to involuntary resettlement Government has established several mechanisms to reduce the problem of encroachment in reserved forest lands, including boundary demarcation, patrols, voluntary resettlement and the implementation of benefit sharing schemes for communities living in buffer zones around the forests. Many of these measures have also been applied to plantation forests as well. However, a shift to having non-forest - 93 - Department staff involved in some of these sensitive matters will require establishing good lines of communication between the plantation operators and local community stakeholders. The Government has confirmed that involuntary resettlement will not be carried out in conjunction with any activity in this project, and such policy is expected to be applied in the plantation forest lands. Many of the plantation forests have individuals living on the border, and at times, within the forest who as Forest Department employees serve as forest guards. Each plantation management plan will identify such individuals and indicate how these persons will be effected during the privatization process. Production waste management An issue related to the development of industrial operations around plantation areas which could benefit from project activities relates to the accumulation of commercial wood-based wastes. It is common practice in many sawmill operations to dump and/or burn these byproducts, resulting in deleterious environmental impacts and inefficient use of woody biomass. Use of this biomass for alternative products such as blocks, fuel and or other products is uncommon. Several operators expressed the desire for technical assistance to help identify viable alternatives to these practices, and looked to the project for providing possible solutions from experts outside the country. Eastern Arc Conservation and Management: catchment forests and critical and sensitive habitats Specific activities will be undertaken, with GEF support, within the Uluguru mountains which are both "catchment forests" as defined by recent legislation and high mountain forests of unique biodiversity value. As such, this component of the project will have the challenge of applying the new GOT joint forest management policy, which recognizes the involvement of local communities or NGOs in the management and conservation of forests and forest lands. The project will strive to meet the needs of different stakeholder groups in this region through a combination of initiatives that will ensure protection of the Catchment Forest Reserves, especially those areas with high biodiversity and hydrological values. It is anticipated that some degree of resource use will occur but that this will be balanced with conservation and protection. Other issues MONITORING AND SUPERVISION An outline safeguard monitoring plan has been developed to ensure that safeguard provisions are adequately implemented and sustained. The monitoring program will be further developed, and will indicate how well each of the components is implementing the key provisions defined previously. The monitoring plan will define indicators for measurement, methods to be used, frequency of measurements, detection limits, and monitoring responsibilities. The plan will be implemented within the overall context of institutional reforms in the Forest and Beekeeping Department. The plan will include a description of how reviews of selected issues of concern will be undertaken. A simple and pragmatic collection of monitoring indicators is provided below. The safeguard indicators and monitoring plan will be incorporated into the overall project monitoring plan as described in the PAD. Consequently, the MNRT will be the ultimate GOT information focal point. The Bank will include in the project supervision plan the participation of an environmental specialist in selected missions, the Mid-Term Review and in the Implementation Completion Report. This specialist will review progress in implementation of the project safeguard provisions. - 94 - Table A11.4: Monitoring Compliance with Environmental and Social Safeguards Componentl Safeguard Issue Monitoring Indicator Responsibility Frequency Sub- for Monitoring component and Mitigation Institutional * Encroachment * Community FBD Annual survey/report reform: problems in complaints to FBD Participatory specific forests * Claims filed against Forest * Resource use and FBD Management extraction without * Legal actions against stakeholder citizens by FBD consensus Involvement * FBD employees * Grievances filed FBD monitors Annual survey of the private not provided against FDB or mill performance of sector in adequate owner private sector Parastatal Sector industrial compensation * Mill closures, worker partners Reform Commission plantation * Small mill layoffs, sale of Reports management operators operations experience * Management plans Socio-economic economic completed and survey and downturn reviewed privatization reports * No logging of high for pilot plantations forests Conservation * Modification or * Number of FBD and NGO Catchment Forestry and deforestation of unauthorized partners Project Reports Management critical habitats incursions into of the Eastern protected forest zones Uluguru Mountains Arc Mountain * Forest change as Biodiversity forests detected through Conservation Project aerial photography or Reports other remote sensing - 95 - MAP SECTION A U G A N-DA / '
Группа Всемирного банка · Project Appraisal Document
Tanzania - Forest Conservation and Management Project
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