Tanzania - Eastern Arc Forests Conservation and Management Project (GEF)

Report No. PID8932 Project Name TANZANIA-Eastern Arc Forests Conservation (@) and Management Project (GEF) Region Africa Regional Office Sector Forestry (96%); Central government administration (4%) Project ID P057234 Borrower(s) GOVERNMENT OF TANZANIA Implementing Agency MINISTRY OF NATURAL RESOURCES & 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 Eastern Arc Mountains Conservation Endowment Fund Address: P.O. Box 40832, Dar es Salaam, Tanzania Contact Person: Vincent Shauri Tel: 255-22-2780859 Fax: 255-22-2780859 Environment Category B Date PID Prepared February 4, 2003 Auth Appr/Negs Date September 27, 2001 Bank Approval Date March 27, 2003 1. Country and Sector Background 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 oversight 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 system 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 systems 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; 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 community. Government Strategy 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; - 2 -  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). 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. 2. Objectives 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 -3 -  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 mammal 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. Patterns 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 - 4 -  environmental risk. Rural households generally use a wide variety of environmental resources from woodlands, and the sizeable 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 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 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 formal 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 - 5 -  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. 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 Government 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 - 6 -  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 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. - 7 -  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 objectives 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 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. 3. Rationale for Bank's Involvement 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 Eastern 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 program that would otherwise have been difficult to achieve. 4. Description The Tanzania Forest Conservation and Management Project will have three components. -8-  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 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. (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 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. 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 -9-  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 MRNT 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 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 - 10 -  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 management 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. 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 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; (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: (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, government 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-financed activities, however, have been Appraised.  Project Administration and Management 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. A. Supporting Institutional Change and Improving Service Delivery 1. Establishment of the Tanzania Forest Service 2. Improving revenue collection from forests and woodlands 3. Improving service delivery mechanisms for participatory forest and woodland management B. Private Sector Involvement in the Management of Industrial Plantations C. Eastern Arc Forest Conservation and Management 1. Eastern Arc Mountains Conservation Endowment Fund 2. Improving Institutional Support Services for forest biodiversity conservation 5. Financing Total ( US$m) BORROWER/RECIPIENT $1.70 IBRD IDA $31.10 GLOBAL ENVIRONMENT FACILITY $7.00 NON-GOVERNMENT ORGANIZATION (NGO) OF BORROWING COUNTRY $0.20 Total Project Cost $40.00 6. Implementation 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 Committee 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, - 12 -  and has already put in place financial management and procurement systems to assist in project implementation. 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 community 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 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 IAs will follow their own internal 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 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 - 13 -  preparation. Financial Management 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 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 submissions, operation of the Special Account, SOE submissions and documentation 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. - 14 -  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. 7. 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. 8. Lessons learned from past operations in the country/sector 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. - 15 -  (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 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. 9. Environment Aspects (including any public consultation) Issues 10. Contact Point: Task Manager Nathalie Weier Johnson The World Bank 1818 H Street, NW Washington D.C. 20433 - 16 -  Telephone: 202-473-3765 Fax: 202-473-8185 11. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. - 17 -