economic biodiversity development conservation protected areas livelihoods forest values poverty reduction Sustaining FORESTS A Development Strategy THE WORLD BANK Sustaining FORESTS Sustaining FORESTS A Development Strategy THE WORLD BANK Washington, D.C. © 2004 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved. 04 05 06 07 4 3 2 1 The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail pubrights@worldbank.org. Library of Congress Cataloging-in-Publication Data Sustaining forests : a development strategy. p. cm. Includes bibliographical references (p. ) ISBN 0-8213-5755-7 1. Forests and forestry--Economic aspects. 2. Forest policy. 3. World Bank. 4. Sustainable development. I. World Bank. SD393.S87 2004 333.75--dc22 2004043984 Contents v List of Appendixes ix Preface xiii Acronyms and Abbreviations xv Executive Summary 1 The Challenges 1 World Bank's Performance in the Forest Sector 1 Elements of the Strategy 2 Harnessing the Potential of Forests to Reduce Poverty 3 Integrating Forests in Sustainable Economic Development 4 Protecting Vital Local and Global Environmental Services and Values 5 The Importance of Country Ownership 6 Implementing the Strategy: Large Objectives, Modest Beginnings 6 Modifying the Forest Policy 7 Developing Demand:The Global Commons and Economic and Sector Work 8 Catalyzing Engagement and Investment 9 Partnerships 9 Selectivity and Sequencing 10 Expectations, Risks, and Realities 11 Large Tasks and Institutional Constraints 11 Outcomes 11 Risks 12 Monitoring 14 External Advisory Group 14 1. Challenges and Realities in Forests 15 Importance of Forests 15 International Context: Global Conventions and Agreements 16 Global Challenges and Opportunities 17 World Bank Forest Performance, Strategies, and Policies 18 OED Review of the 1991 Strategy and Policy 18 Additional Indicators of Performance 19 vi New Directions in Bank Priorities 20 Links to Other Bank Strategies and Policies 21 Bank Safeguard and Operational Policies 21 Integrating Forest Issues in Poverty, Environment, Rural Development, Gender, and Water Strategies 21 Developing and Implementing the New Bank Approach to Forests 22 The Importance of Country Ownership 22 Developing the Approach 23 Implementing the Strategy 23 2. The Forest Strategy: Proposed Bank Action 25 Principles of Engagement and Comparative Advantage and the Pillars of the Strategy 25 Lessons for Engagement in Forests 25 Comparative Advantage 25 Three Pillars of the Forest Strategy 26 Harnessing Forests' Potential to Reduce Poverty 26 Integrating Forests in Sustainable Economic Development 29 Cross-Sectoral and Macroeconomic Linkages 29 Expanding Nonfarm Rural Activities: Role of Small-Scale Forest Product Enterprises 31 Governance in the Forest Sector: Forest Crime, Corruption, and Regulation 31 Building a Role for Civil Society in Sustainable Forest Management 32 Approach to World Bank's Forest Policy and Sustainable Forest Management 34 Protecting Vital Local and Global Forest Values 37 Evolving Perception of Protected Area Strategies 37 Fostering Markets for Ecological Public Goods 37 Fostering the Linkage between Forests and Climate Change 38 Fostering Linkages between Poverty Reduction and Forest Conservation Strategy 39 CONTENTS Aligning Regional Programs with Corporate Objectives 40 Africa 40 East Asia and Pacific 41 Europe and Central Asia 42 Latin America and Caribbean 42 Middle East and North Africa 43 South Asia 43 3. Implementing the Strategy: Building Effective Partnerships 45 Issues in Implementation 45 Building Effectiveness 45 vii Developing the Partnerships Necessary to Implement the Strategy 46 Donor and National Stakeholder Partnerships 46 Nongovernmental Organization Partnerships 49 Improving Links to the Private Sector 51 Improving Internal Bank Working Relationships and Accountabilities 53 International Finance Corporation and Multilateral Investment Guarantee Agency 53 World Bank Institute 53 Role of the ESSD Forests Team 53 4. Implementing the Strategy: Incentives, Selectivity, and Deliverables 55 Building the Internal Bank Commitment to Forests 56 Increasing Economic and Sector Work 56 Using Partnerships to Leverage Impact 56 Seeking Blended Financing to Address Local and Global Forest Issues 57 Supporting and Strengthening the World Bank/WWF Alliance 57 Increasing Involvement with Private Sector Partners 57 Selectivity 58 Alignment and Selecting Countries for Focus 58 Developing the Focus on More Flexible Lending 58 Expectations and Realities: Risks and Monitoring Progress 59 Institutional Realities 60 Some Potential Broad Outcomes, in Perspective 60 Risks 61 Monitoring the Bank's Role 64 External Advisory Group 65 Notes 66 Bibliography 68 Index 74 CONTENTS BOXES 1.1 Why Forests Are Important 16 1.2 World Bank and Forests 19 1.3 Staff Survey: Effectiveness of 1991 World Bank Forest Policy and Strategy 20 3.1 Functions of the United Nations Forum on Forests 46 3.2 Principles of National Forest Programs 46 3.3 World Bank/WWF Alliance Targets for Forest Conservation and Improved Management 50 viii FIGURE 2.1 The "Pyramid"--A Diagnostic and Planning Tool for Good Forest Governance 35 TABLE 4.1 Appropriate Forest Investments 59 CONTENTS Appendixes ix Note: These appendixes are included on the CD-ROM that accompanies this book. Acronyms and Abbreviations A­vi 1. Management Responses to Operations Evaluation Department Recommendations on Forest Strategy and Policy A­1 2. Forests and Poverty Reduction A­3 3. Integrating Forests in Economic Development A­13 4. Protecting Global Forest Values A­31 5. Regional Strategies and Projections A­37 6. Bank Experience with Strategy and Policy in Forests: Lessons and Incentives A­47 7. World Bank Forest Strategy Consultation Process and Feedback A­53 8. Analytical Studies on Forests A­59 9. Forest Portfolio Data 1992­99 A­63 Notes A­77 BOXES A2.1 Sustainable Livelihoods Analysis A-4 A2.2 Gender in Collaborative Forest Management A-7 A2.3 Hill Community Forestry in Nepal A-8 A2.4 Joint Forest Management in India A-9 A2.5 Participatory Forest Land-Use Planning in Bolivia A-10 A3.1 Cost of Forest Fires in Indonesia A-15 A3.2 Forests of Georgia: Unrealized Potential A-16 A3.3 Paying for Environmental Services in Costa Rica A-17 A3.4 Contribution of Agroforestry Farming Systems to Household x Incomes A-19 Bank-Sponsored Agroforestry Projects in China A-19 A3.5 World Bank Support for Small Enterprise Development in the Philippines A-20 A3.6 Successes and Failures in Bank-Financed Adjustment Operations: The World Resources Institute View A-22 A3.7 Costs of Forest Corruption A-24 A3.8 Forest Law Enforcement in the Mekong Countries A-25 A3.9 Independent Certification A-26 A4.1 Conservation Trust Fund for Papua New Guinea A-33 A4.2 Prototype Carbon Fund A-34 FIGURES A3.1 Pyramid Model for Assessing Progress Toward Sustainable Forest Management (SFM) A-27 A4.1 Bank/GEF Investment in Biodiversity Projects A-32 A9.1 World Bank Commitments for Specific Forest Sector Activities, 1992­99 A-64 A9.2 World Bank Annual Disbursements for Forest Sector and Forest Components of Non-Forest-Sector Projects, 1992­99 A-65 A9.3 Net Change in World Bank Forestry Economic and Sector Work, 1992­95 and 1996­99 A-70 TABLES A2.1 Forest Outputs and Rural Livelihoods A-5 A3.1 Market and Nonmarket Forest Values A-14 A3.2 Bank Initiatives for Diverting Highways away from Biodiversity Reserves A-21 A7.1 Regional Consultation Schedule A-54 A7.2 Principal Issues from Regional Consultations A-55 A8.1 Analytical Studies Topics A-59 APPENDIXES A9.1 World Bank Commitments for Specific Forest Sector Activities by Region, 1992­99 A-63 A9.2 World Bank Annual Disbursements for Forest Sector Projects by Region, 1992­99 A-64 A9.3 World Bank Annual Disbursements for Forest Components of Non-Forest-Sector Projects by Region, 1992­99 A-64 A9.4 World Bank Annual Disbursements for Forest Sector and Forest Components of Non-Forest-Sector Projects by Region, 1992­99 A-65 A9.5 World Bank­Implemented GEF Overall Projects and Forest Projects by Region, 1992­99 A-66 A9.6 World Bank­Implemented GEF Forest Projects by Region, 1992­99 A-66 xi A9.7 Comparison of Forest Sector Lending by Project Type and Region, 1992­99 A-67 A9.8 Net Change in World Bank Forest Economic and Sector Work, 1992­99 A-68 A9.9 World Bank Forest Economic and Sector Work, 1992­99 A-69 A9.10 World Bank Expenditures for Project Preparation, Appraisal, Supervision, and Completion for a Sample of Forest and Forest Component Projects, 1992­99 A-71 A9.11 Completed Forest Sector Projects, 1992­99 A-72 A9.12 Completed Non-Forest-Sector Projects with Forest Components Greater than 75 Percent, 1992­99 A-73 A9.13 Sample of Completed Forest Sector Projects and Non-Forest-Sector Projects with Forest Component of Greater than 75 Percent, 1992­99 A-74 A9.14 Task Manager Specialization for World Bank Forest Sector Projects, 1992­99 A-75 A9.15 Task Manager Current Unit for World Bank Forest Sector Projects, 1992­99 A-75 A9.16 Task Manager Specialization for Non-Forest-Sector Projects with Forest Components of Greater than 75 Percent, 1992­99 A-75 A9.17 Task Manager Current Unit for Non-Forest-Sector Projects with Forest Components of Greater than 75 Percent, 1992­99 A-76 A9.18 Average Number ofTask Managers for Active and Completed Forest Sector Projects with Forest Component of Greater than 75 Percent, 1992­99 A-76 A9.19 Average Number of Task Managers for Active and Completed Non-Forest-Sector Projects with Forest Component of Greater than 75 Percent, 1992­99 A-76 APPENDIXES Preface xiii The World Bank Group consists of closely associated but legally and financially distinct institutions that sup- port development in low- and middle-income client countries. The International Bank for Reconstruction and Development (IBRD) and the International Development Association have a mandate to lend to sovereign governments. They often are referred to as the World Bank. Through its ongoing dialogue with client governments on a wide range of issues and its financial support to the public sector, the World Bank is in a position to support government policy on a wide range of issues. The International Finance Corporation (IFC) promotes sustainable private sector investment to enhance economic growth and improve the lives of the poor. It operates principally through direct or indirect support of private sector projects. The Multilateral Investment Guarantee Agency (MIGA) provides guarantees against certain noncom- mercial risks (primarily political risk insurance) to foreign investors for qualified investments in developing countries. The International Centre for Settlement of Investment Disputes provides facilities for the settlement--by conciliation or arbitration--of investment disputes between foreign investors and their host countries. The five World Bank Group institutions are aligned to the core mission of poverty reduction; therefore, the overall vision, strategic framework, and objectives of this Forest Strategy are shared by the entire World Bank Group. The specific implementation tasks identified in the Forest Strategy document are addressed to the World Bank. IFC and MIGA will implement the Forestry Strategy through their ongoing emphasis on financing/ insuring private sector investments that improve forest management and sustainable outcomes. As for IFC's forestry policy, it should be noted that all of IFC's environmental and social safeguard policies are the subject of a comprehensive review by IFC's Office of the Compliance Advisor and Ombudsman. In addition, any future safeguard policy formulation for the forestry sector needs to be congruent with the findings of that review and consistent with IFC's need to provide clear policy guidance for private sector investments. For these reasons, the World Bank's approach to the Forestry Policy described in chapter 2 of this strategy may not apply in its entirety to IFC. This book is accompanied by a CD containing background materials on how the World Bank's Forests Strat- egy was developed, including the stakeholder consultative process, as well as information on the role of forests in poverty reduction, economic development, and the provision of environmental services that helped to shape the strategy. World Bank safeguard policies relevant to forests and a short video highlighting the strategy's objectives are also included in the CD. Acronyms and Abbreviations xv AFR Africa Region EU European Union CAS Country Assistance Strategy FAO United Nations Food and Agriculture CBD Convention on Biological Diversity Organization CDF Comprehensive Development FPIRS Forest Policy Implementation Review Framework and Strategy CDM Clean Development Mechanism FSC Forest Stewardship Council CEO Chief executive officer FSSP Forest sector strategy paper CEPF Critical Ecosystem Partnership Fund GDP Gross domestic product CFM Collaborative forest management GEF Global Environment Facility CI Conservation International GNP Gross national product CIFOR Center for International Forest Research ha Hectare CGIAR Consultative Group on International HIPC Heavily indebted poor countries Agricultural Research IBRD International Bank for Reconstruction CODE Committee on Development and Development Effectiveness ICRAF International Centre for Research CPF Collaborative Partnership on Forests in Agroforestry CTF Conservation Trust Fund IDA International Development Association EAG External advisory group IFC International Finance Corporation EAP East Asia and Pacific Region IFF Intergovernmental Forum on Forests ECA Europe and Central Asia Region IIED International Institute for Environment and Development ECOSOC United Nations Economic and Social Council IMF International Monetary Fund ENFP Enhanced national forest program IPF Intergovernmental Panel on Forests ESSD Environmentally and Socially ITFF Interagency Task Force on Forests Sustainable Development Vice ITTO International Tropical Timber Presidency (or Network) Organization ESW Economic and sector work IUCN The World Conservation Union IUFRO International Union of Forest Research PRSP Poverty reduction strategy paper Organizations SAR South Asia Region JFM Joint forest management SFM Sustainable forest management LAC Latin America and Caribbean Region TAG Technical advisory group MDGs Millennium Development Goals TNC The Nature Conservancy MIGA Multilateral Investment Guarantee UN United Nations Agency UNDP United Nations Development MENA Middle East and North Africa Region Programme NGO Nongovernmental organization UNEP United Nations Environment NFP National forest program Programme xvi NTFPs Nontimber forest products UNFF United Nations Forum on Forests OD Operational Directive UNFCCC United Nations Framework OECD Organisation for Economic Convention on Climate Change Co-operation and Development UNGASS United Nations General Assembly OED Operations Evaluation Department Special Session for Review and Appraisal of Agenda 21 OP Operational Policy WBI World Bank Institute OPCS Operations Policy and Country Services WRI World Resources Institute PCF Prototype Carbon Fund WWF World Wide Fund for Nature/World Wildlife Fund PROFOR Program on Forests ACRONYMS AND ABBREVIATIONS Executive Summary 1 THE CHALLENGES losses could support expenditures in education and health that will exceed current development assis- More than 150 heads of state have declared that tance to these sectors. halving extreme poverty by 2015 is central to the Forests also are central to maintaining the envi- United Nations' Millennium Development Goals ronmental commons. Nearly 90 percent of terrestrial (MDGs).1 These goals include increasing school biodiversity is found in the world's forests, with a dis- enrollment, reducing child and maternal mortality, proportionate share in the forests of developing expanding health services, eliminating gender dis- countries. Most of the carbon emissions of develop- parities, and improving environmental management ing countries come from deforestation, which for sustainable development. The World Bank sup- accounts for between 10 and 30 percent of global car- ports these goals by emphasizing the social and bon emissions. Unfortunately, the lack of markets for structural dimensions of development, focusing its the national and global environmental services efforts, increasing selectivity, and emphasizing part- offered by forests has contributed to high rates of nerships and transparency. As a result, the Bank is deforestation in developing countries. Growing pursuing global and corporate advocacy priorities forests are a valuable resource not just for their tim- and areas of core competencies. ber and biodiversity values but also for their prospec- A Forest Strategy for the Bank that can make an tive value if a global market emerges for the seques- effective contribution to poverty reduction and tering of carbon from forests. environmental management is central to achieving the MDGs. Forest resources directly contribute to the livelihoods of 90 percent of the 1.2 billion people WORLD BANK'S PERFORMANCE living in extreme poverty and indirectly support the IN THE FOREST SECTOR natural environment that nourishes agriculture and the food supplies of nearly half the population of the The Bank's performance in the forest sector over the developing world. Forests also are central to growth past decade has been unsatisfactory. The World in many developing countries through trade and Bank's 1991 Forest Strategy and 1993 Forest Policy industrial development. However, mismanagement focused largely on environmental issues and protecting of this resource has cost governments revenues that tropical moist forests. They reflected rising interna- exceed World Bank lending to these countries. Illegal tional concern about the rate of tropical deforesta- logging results in additional losses of at least US$10 tion and strongly emphasized the need to preserve billion to US$15 billion per year of forest resources intact forest areas. While the 1991 Strategy recog- from public lands. If captured by governments, these nized the role that forests could play in poverty reduction and the importance of policy reforms in direct assistance, seeking its comparative advantage containing deforestation, its hallmark was a strong and working with clients and partners. Through this commitment not to finance commercial logging in approach, it is expected that the Bank will maintain a primary tropical moist forests. high degree of economic and technical work while In practice, this emphasis on safeguarding forests consulting widely with partners and stakeholders. has meant that little attention was paid to the active Building the Bank's new Forest Strategy has fol- management of natural forests in the tropics and lowed this model of analysis and consultations. A therefore to the poverty-reduction potential of two-year process of analysis and consultation gath- forests. The 1993 Policy led to a generally passive "do ered input from development partners and stake- no harm" stance on natural forests in the tropics. holders around the world, including governments, Interventions designed to more proactively improve civil society in developing and developed countries, economic and environmental management of those industry, forest-dependent peoples, and partner 2 forests often were seen as too costly and risky. What donor agencies and UN bodies (appendix 7). The the World Bank's Operations Evaluation Department process also included broad consultations with Bank (OED) has termed "the chilling effect" permeated task managers and other staff. operations in the Bank Group, including the Interna- These consultations were supported by extensive tional Finance Corporation (IFC) and Multilateral analytical, technical, and economic studies, some Investment Guarantee Agency (MIGA) (Lele and oth- commissioned by the World Bank and others done in ers 2000f). parallel by independent institutions and nongovern- Furthermore, the 1991 Forest Strategy did not mental organizations (NGOs) on a wide range of clearly define implementation mechanisms. As a con- subjects (see appendix 8). Among other things, sequence, countries rich in forest resources have not these studies emphasized the importance of address- received World Bank funding, nor have they benefited ing governance and quantified the costs of poor forest from strong research and analytical sector work (in management and illegal activities for several coun- the Bank, termed economic and sector work, or ESW) tries. The studies also confirmed the close link or engaged in a strong dialogue on Forest Policy and between the livelihoods of the poor and forests and Strategy. The bulk of the US$3.7 billion lent by the helped to refute the largely false notion that the poor World Bank for forests during the 1990s went to are the cause of deforestation in developing countries. China, India, and Eastern Europe. The OED review The studies also identified strategic approaches to for- concluded that the Bank had been "irrelevant" in est issues, including participation and partnerships. slowing deforestation despite its commitment to this From this process, the revised Forest Strategy has objective in its 1991 Forest Strategy. Therefore, the been built on three equally important and interde- World Bank needs to modify its strategy, expand its pendent pillars: policy to explicitly include all forest areas, and refocus the strategy on poverty reduction and economic Harnessing the potential of forests to reduce management, including good governance. poverty Moreover, it is now acknowledged that the Integrating forests in sustainable economic impacts on forests and forest-dependent peoples of development what the Bank does in support of policy reforms and Protecting vital local and global environmental investments outside the forest sector are equal to, or services and values even greater than, its forest sector activities. Nonfor- est interventions, such as rural development and Addressing these three aspects together makes a For- infrastructure programs and projects and economic est Strategy complex and multifaceted. It is not only adjustment measures, must be carefully formulated about growing or protecting trees but also involves a to take account of their influence on forest outcomes. complex interaction of policy, institutions, and incentives. A narrow perspective on forestry--even sustainable forestry--is insufficient. To be effective, ELEMENTS OF THE STRATEGY the strategy demands a multisectoral approach that addresses cross-sectoral issues and takes into The Bank's Comprehensive Development Framework account the impacts of activities, policies, and prac- (CDF) requires the institution to retain a broad diag- tices outside the sector on forests and people who nostic and analytical capability but be selective in its depend on forests for their livelihoods. SUSTAINING FORESTS A DEVELOPMENT STRATEGY Within these three pillars of engagement, the forest issues are not fully incorporated in a broad Bank must be selective in the activities it supports. In assistance strategy, the broader goals of poverty broad terms, the Bank will focus on economic policy reduction will not be met. and rural strategies that embrace both conservation Effectively addressing the poverty issues related of vital environmental services and sustainable use. to forests is not straightforward. Experience has It will provide institutional and policy support for shown that remedial strategies can generate internal community and joint forest management, gover- conflicts. Assistance should be provided judiciously nance and control of illegal activities, building mar- to those dependent on or who live near forests so kets, and financial instruments in support of private that they may develop their abilities to service the investment in sustainable forest conservation and forest products market. If this is not done correctly, management. It will emphasize the development of it could increase competition for the forests, exclude new markets and marketing arrangements for the access to the poorest of the poor to essential forest full range of goods and environmental services avail- products, and disrupt communal systems of man- 3 able from well-managed forests. For the IFC and the agement by groups that traditionally have relied on MIGA, the major focus will be to support private common property forest resources for meeting investments in sustainable forest management essential fuelwood, grazing, and other needs. The (SFM), conservation, and rural forest industries. Bank will need to rely on its partners--particularly civil society--and on pilot operations supported by others to demonstrate feasible approaches that can Harnessing the Potential of Forests then be scaled up to make a significant contribution to Reduce Poverty to social, environmental, and economic objectives. Implementation of the revised Forest Strategy will Within this framework, the Bank's strategy will make a significant contribution to meeting the goals focus on creating economic opportunity, empower- of the Bank's revised Rural Development Strategy. ment, and security for rural people, especially the This strategy refocuses the rural development process poor and indigenous groups. The main instrument to concentrate on improving the well-being of rural will be through policy and institutional strengthen- people and reducing poverty in the widest sense. The ing to ensure that the rural poor are able to manage latter entails much more than increasing the average their natural resources, especially forests, for their income of rural people. It envisions improving the own benefit. It will assist governments in building quality of rural life. The underlying concept for this the capacity to support and regulate community use strategy is a developing world in which of forests and plantations. Special attention will be directed to the welfare of some 60 million indige- Rural residents enjoy a standard of living and a nous tribal peoples living in the rain forests of West quality of life that are not significantly below that Africa, Latin America, and Southeast Asia who have available to urban residents; high levels of dependence on forest resources. Rural communities offer equitable economic Impacts will be reflected in strengthened tenure opportunities for all their residents regardless of rights, improved food security, and spiritual welfare income, status, or gender; among the poorest of the poor through assured Rural communities become vibrant, sustainable, access to essential forest products on which they and attractive places to live and work; depend primarily for subsistence. Rural areas contribute to national development Equally important will be the Bank's support to and the overall economy and are dynamically collaborative forest management systems that are linked to urban areas; emerging in India and many other parts of the world Rural areas adapt to ongoing economic, social, and that have proved to be both beneficial and sus- cultural, and technological change. tainable when managed correctly. Contemporary approaches to Protected Areas include the concepts of Analytical studies and field experience show that the World Conservation Union (IUCN) Category VI forest outcomes are crucial for poverty reduction in which cover "areas containing predominantly natural many of the Bank's client countries. This result is systems managed to ensure long-term protection and true in countries with large forest endowments as maintenance of biological diversity while providing at well as in those with limited forests, although the the same time a sustainable flow of natural products nature and urgency of the challenge may vary. If and services to meet community needs." Using this EXECUTIVE SUMMARY broader definition suggests that community-man- policies and interventions and support reforms aged forests, for example, those in India, also should through adjustment credits and loans. It will also be recognized for their major contribution to the need to examine the nature of those adjustment preservation of biodiversity, carbon sequestration, operations more carefully, in terms of their potential and other environmental services. In support of forest impacts on forests. During the consultative phase in operations, IFC and MIGA have important roles in formulation of this strategy, a number of commen- continuing to support private investments in SFM, tators noted that the proposed new forestry policy conservation, and rural forest industries. In collabora- did not address potential forestry impacts of pro- tion with its client countries and partners, the Bank's grams supported by Bank adjustment lending. primary roles will be Because the time frame for an update of the Bank's adjustment lending policy remained uncertain, To work with client countries to strengthen pol- some suggested that the Bank put in place a trans- 4 icy, institutional, and legal frameworks to ensure parent set of procedures for systematically identify- the rights of people and communities living in ing significant forestry impacts associated with Bank and near forest areas; adjustment operations, analyzing such impacts, and, To ensure that women, the poor, and other mar- if necessary, adopting and implementing appropri- ginalized groups in society are able to take a more ate mitigating measures. active role in formulating and implementing In response to these concerns, the Bank has rural forest policies and programs; developed an approach to deal with development of To support the scaling up of collaborative and com- a new adjustment lending Operational Policy (OP) munity forest management so that local people can in a timely manner and to address potential prob- manage their own resources, freely market forest lems in the intervening period. This approach is out- products, and benefit from security of tenure; lined in chapter 2, in the section on "Integrating To work with local groups, NGOs, and other part- Forests in Sustainable Economic Development." ners to integrate forest, agroforestry, and small The Bank also will support government efforts to enterprise activities in rural development strategies. bring about socially, ecologically, and economically sound management of production forests. In this regard, the Bank also will encourage independent monitoring and certification of forest operations--an Integrating Forests in Sustainable increasingly accepted approach to ensuring good Economic Development forest management. Independent monitoring and The analytical work and consultations have demon- certification will be additional to the Bank's regular strated that forests are one of the developing coun- implementation and safeguard procedures. It will help tries' most mismanaged resources. The reasons are ensure that any direct Bank Group investments in pro- that forests are seriously undervalued, many of their duction forests or indirect support through financial environmental benefits do not enter markets, and intermediaries or forest industries are contributing to poor governance has fueled illegal activities. In addi- improved forest management and more sustainable tion, the impact on forests of policy and investments outcomes, including the protection of biodiversity and in other sectors is not well understood or is disre- ecologically and culturally sensitive areas. garded. Although some level of deforestation is likely In supporting independent certification, the to continue even with strong economic management Bank will not endorse any one particular approach and governance, the rapid rates of deforestation in to certification. Outside the Bank there is an ongo- recent decades are largely a result of the spillover of ing discussion on "mutual recognition" among vari- poor policies in other sectors, including macroeco- ous certification groups that is seeking to harmonize nomic and trade policy, and lack of effective gover- standards and approaches. However, in the absence nance in the sector. of any broad stakeholder consensus on the accept- The Bank will need to focus on helping govern- ability of particular systems, the Bank has adopted a ments improve policy, economic management, and set of principles and criteria to assess the adequacy governance in the forest sector, including forest of different certification systems in relation to recog- concessions policy and allocations. By supporting nized standards of economically, environmentally, applied research and improving economic analysis, and socially sustainable development. These princi- the Bank will assist governments to evaluate their ples and criteria are discussed in chapter 2 of this SUSTAINING FORESTS A DEVELOPMENT STRATEGY report and have been incorporated as a screening areas in situations that can be independently tool in the OP. A key requirement is that the certifi- monitored through a system of independent cation system incorporates reliable and independent verification or certification that meets nationally assessment procedures. agreed and internationally acceptable standards Formal market-based certification systems are finding increasing use in situations where a signifi- cant proportion of forest production enters environ- Protecting Vital Local and Global mentally discriminating domestic or international Environmental Services and Values markets. They are less relevant in situations where the bulk of production will go to nonenvironmen- Implementation of the revised Forest Strategy will tally discriminating domestic markets. In these situ- make a significant contribution to meeting the goals ations, the Bank will work with borrowers to ensure of the Bank's July 2001 Environment Strategy. The independent assessment through an open process of three pillars of the revised Forest Strategy corre- 5 review by the main participants and interest groups spond closely with the main objectives of the Envir- involved or affected by the forest use in question. onment Strategy: improving the quality of life, These evaluations will be based on the standard and improving the quality of growth, and improving the objectives of the operation that will be established quality of global commons. Both strategies recog- with these groups at the outset. nize the importance of cross-sectional issues, main- The Bank has also worked with a number of part- streaming policy dialogue, governance, designing ners to develop diagnostic tools based on a staged interventions with selectivity, and fostering better modus operandi that allows for periodic independent cooperation with development partners. An area of assessment of the progressive steps needed to put in particular concern to both strategies is the protec- place a sound legislative, institutional, and fiscal pol- tion of the vital local and global environmental serv- icy framework for improved forest management. ices provided by forest ecosystems. The Bank's primary roles in supporting the Protected Areas have been the traditional method objectives of the second pillar will be as follows: used to protect biodiversity and other key environ- mental services. At present, more than 600 million To analyze and coordinate policies and projects hectares (ha) of Protected Areas have been estab- to ensure a cross-sectoral approach to planning lished in developing countries. However, while many and implementation of SFM, conservation, and of these areas are economically inaccessible, other development. In this context, the Bank will sup- areas are under increasing pressure from develop- port governments in making policy and institu- ment and illegal activities, including logging and tional reforms to reduce the pressures on forests poaching. Many governments do not have the from activities and interventions in other sectors resources to effectively administer and protect these To support improved governance through reform areas. In addition, other forests outside Protected of inappropriate timber concession and subsidy Areas that are ecologically sensitive and rich in bio- policies and the encouragement of multistake- diversity are under increasing threat. holder involvement in the development and OED noted the inherent difficulty in protecting implementation of Forest Policy and practice forests that are in high demand for a range of fre- To assist governments in containing illegal activ- quently mutually exclusive uses by competing ities and corruption through improved forest groups within society. Although the Bank has gener- laws, regulations, and enforcement ated significant increases in funding for biodiversity To address finance, fiscal, and trade issues related protection and related purposes, this contribution is to the forest sector and forest products to enable dwarfed by the incursions into forests. The problem governments to capture a higher portion of forest of invasive pressures is likely to worsen unless signif- revenues for sustainable social and economic icant additional funds for protection can be made development. The Bank will promote catalytic available from multiple sources, at highly conces- investments in the full range of goods and envi- sional or on grant terms, or unless effective markets ronmental services available from well-managed for the ecosystem values of forests can be developed. forests. These investments will be able to include Because of these difficulties, few countries in sustainable timber harvesting and management, either the developing or the developed world have but only in areas outside critical forest conservation been either willing or able to devote more than EXECUTIVE SUMMARY 10 to 20 percent of their forest areas to strict conser- THE IMPORTANCE OF COUNTRY vation reserves. Given these constraints and the OWNERSHIP likely stresses associated with accelerating climate change and the continued growth in human popula- As will be elaborated upon throughout this paper, a tions and activity, it is clear that the future of forests major reason for adopting the three pillars of strat- and their dependent biodiversity and human popu- egy outlined above is that they encompass the lations is going to be influenced as much--and broader interests that borrower governments and probably even more--by how forests outside strict other local stakeholders have in the management Protected Areas are managed. Thus, improving for- and use of their forests. est management practices in production forests out- The success of the new approach will be com- side strict Protected Areas is an essential component pletely dependent on the development of demand of any strategy to protect vital local environmental for Bank involvement in various ways from govern- ments and other interest groups. It will also depend 6 services and values. The Bank will assist in this area by developing on their willingness to take a leadership role in the and funding mechanisms to ensure that national analytical and consultative work that underpins this parks receive the minimum funding needed for approach, so that the results of this work genuinely effective management and in building and facilitat- develop country-level consensus and commitment ing new markets for forest ecosystem services. The to whatever lending or nonlending activities are increased revenues and incomes that national gov- proposed for that country. The partnerships and ernments and local communities can gain from processes proposed in this strategy to implement the these environmental services can serve as a major new approach have been chosen with a view to their incentive to sustain forests. compatibility with country ownership. The Bank's primary role in implementing the third pillar will be IMPLEMENTING THE STRATEGY: LARGE To assist governments to proactively identify and OBJECTIVES, MODEST BEGINNINGS conserve critical forest conservation areas in all forest types in all borrower countries; The importance of the forest sector to poverty To assist governments to promote the wide-scale reduction, sustainable development, and the main- adoption of responsible forest management prac- tenance of environmental services and values is rec- tices in production forest outside critical forest ognized. The gap between performance and vision conservation areas; needs to be closed. The Bank's effectiveness in forests To develop options to build markets and finance has been declining in some important regions of the for international public goods such as biodiver- world. As pointed out by OED, involvement in the sity and carbon; forest sector is often seen as being high cost and To assist governments to develop measures to risky. To increase engagement and demand on the mitigate and adapt to the anticipated impacts of part of some major client governments, the benefits climate change and reduce the vulnerability of of forest operations need to be demonstrated, the the poorest people to its effects; costs of doing business reduced, and the risks better To assist governments to design, implement, and managed. finance national markets for local environmental The tasks involved in the three pillars are large, services provided by forests; but the potential outcomes for forests, forest- To assist governments to strengthen forest invest- dependent people, and countries with large forest ments, policies, and institutions to ensure that resources are even larger (see page 13 below). The indirect and cross-sectoral impacts of policy and program for the Bank to reengage in the forest sec- investments on high conservation and protection tor therefore begins modestly, recognizing that time areas are minimized; and effort will be needed to build the institutional To ensure that Bank investments and programs capacity and the expanded demand from borrowers in the forest sector and other sectors that could for Bank involvement to a level that will be on a scale potentially harm protected forests and natural with the broad goals. In its early stages, it is based on habitats are implemented according to the Bank's analysis and consultative work, linked to Bank and operational policies and safeguards. national forest program (NFP) priorities, and is SUSTAINING FORESTS A DEVELOPMENT STRATEGY strongly supported by partnership arrangements. By changing the OP, the Bank recognized the Later developments will depend on outcomes of reality that few countries in either the developed or these activities and will proceed in the directions the developing world have been willing or able to identified by client countries. devote more than 10 to 20 percent of their forest To achieve even these modest initial measures, the areas to strict Protected Areas and that, irrespective Bank will need to undertake a number of specific of any actions by the World Bank, most accessible internal measures: (a) updating its OP framework; and commercially valuable forests around the world (b) strengthening analysis to ensure that the Bank's will continue to be used for timber production ability to adequately consider forest impacts and sooner, in all likelihood, rather than later. The Bank issues in Country Assistance Strategies (CASs) and also recognized that, frequently, the incentives for poverty reduction strategy papers (PRSPs) is enhanced; nonsustainable logging are strong for both govern- and (c) increasing enhanced loans and credits in the ments and the private sector. Very often, the real sector, based on a country's demand and readiness to choice available is not between doing logging and 7 invest in sustainable forest conservation and manage- doing something less invasive and damaging to the ment. The objective will not be to necessarily have forest, especially when these alternatives have not stand-alone forest operations, but to integrate forest been developed to large-scale market viability. issues in the broad agenda of country dialogue, poverty Rather, the choice is between doing logging reason- reduction strategies, and economic support. ably well or doing it destructively so that conversion Implementation of the proposed approach has of the logged-over site to other nonforest uses significant implications for the Bank. Steps that will becomes almost inevitable. The pace and proximity need to be taken include of agricultural and other forms of development can also influence this decision, but in any event it is Modifying the 1991 Forest Policy to focus on essential that the questions of what forests are used protecting environmentally and culturally critical for, and by whom, are considered rationally when forest areas and permitting more proactive sup- making it. port of SFM (the new OP was approved by the The Bank believes it has significant comparative World Bank's Board of Directors on October 31, advantage in proactively assisting its client coun- 2002); tries to improve the quality and sustainability of Developing demand through knowledge sharing forest operations; address illegal logging; direct and country-driven ESW; more of the benefits from forestry toward local Working with borrower governments to catalyze communities; and ensure that logging operations engagement and economically viable, environ- are carried out in a manner that minimizes their mentally sustainable, and socially responsible impact on biodiversity, water catchment, and investments by the Bank, other donors, and the other forest environmental functions. Under no private sector; circumstances will the Bank Group invest in non- Building and strengthening partnerships; sustainable commercial logging or logging in envi- Applying selectivity and sequencing to the Bank's ronmentally or culturally critical forest areas, and engagement, based on the principles outlined in this is reflected in the new OP. chapter 4 (see especially table 4.1). Revisions to the Bank's (OP 4.36), discussed in chapter 2, will permit the Bank to become more proactive in both identifying and protecting critical forest conservation areas and in supporting Modifying the Forest Policy improved forest management in production forest One of the most controversial issues relating to the outside these areas. These revisions will retain many Bank's operations in the forest sector is the impact of the strengths of the current OP 4.36 and expand of the Bank's current 1993 Operational Policy on its effectiveness by using new initiatives in third- Forestry (OP 4.36). In reviewing this policy, the party certification and monitoring that have been OED, most participants in the regional consulta- developed since the previous OP was adopted in tions, the World Bank sector boards, and the Envi- 1993. This new approach requires all forest harvest- ronmentally and Socially Sustainable Development ing and management operations financed by the (ESSD) Council recommended that the current World Bank to be monitored through independent Forest Operational Policy be modified. assessment and certification. These third-party EXECUTIVE SUMMARY monitoring and evaluation systems have been devel- in poverty reduction and sustainable development. oped through various initiatives and organizations The Bank will need to do the following: involving civil society and the private sector. The risks associated with this approach are discussed Provide the analytical support for effectively inte- under the general section on risks toward the end of grating forest conservation and management in this summary. CASs and into broader poverty reduction and eco- In addition, all Bank-supported forest harvesting nomic development programs being prepared by and management operations are required to con- Country and Sector Departments. Where there is form to existing Bank policies, including, especially, appropriate support by borrower governments and OP 4.01 (Environmental Assessment), OD 4.20 Bank Country Departments, ESW will be undertaken (Indigenous People) to be superseded by OP 4.10 both to identify the opportunities for sustainable for- (Indigenous People), OP 4.04 (Natural Habitats), est development and conservation and to determine the potential impacts on forests and forest-dependent 8 OP 4.11 (Cultural Property), and OP 4.12 (Involun- tary Resettlement). The implementation of this full peoples of nonforest sector activities contemplated by complement of operational policies will provide the the Bank through investment, adjustment, and broad bases for ensuring that forest operations meet the poverty reduction programs. For the most part, this high standards demanded by many stakeholders in ESW will be sponsored by Country Departments, the sector. Monitoring by government bodies, the supported by partnerships and, in some cases, Bank's own supervision, and independent third par- cosponsored by sector units responsible for design of ties will provide the necessary assurances that forest the broad programs. This approach is intended to be operations are benefiting forest-dependent peoples demand driven: it will rely on expression of needs as while contributing to economic growth and poverty defined by borrowers and Country Departments. The reduction. Although shortfalls in implementation larger question of how Bank management and the have occurred in the past, the Bank has strengthened Board will ensure that these larger programmatic its capacity to meet the high standards that it has investments take specific account of natural resource imposed on its operations. These standards continue issues and outcomes in their design is not addressed to set the benchmark to which other organizations in any detail here; that will be dealt with in specific in development strive to achieve. discussions at the Board on the possible conversion of OD 8.60 (Adjustment Lending) to an OP, or a revision Developing Demand: The Global Commons of it in its present format. and Economic and Sector Work Develop and maintain an enhanced forest sector The Bank has recognized forests as a global environ- lending portfolio in the Bank. An increased ESW mental commons and has elevated conserving and program is indispensable for lending. It will need to managing forests well to be one of its global priorities. be leveraged by strong interaction with borrower To meet this priority, the Bank is committed to countries, donors, and other stakeholders with improving both the level and effectiveness of its common interests in the forest sector. This empha- engagement in forests and increasing and strengthen- sizes the country ownership focus of the Bank's new ing diagnostic and analytical work within the Bank on approach in this sector, without which it is unlikely forest sector issues. Unfortunately, forest ESW has that any significant change in either the forest sector declined precipitously in the Bank in recent years. The portfolio or forest conservation and development new strategy proposes increasing ESW as a primary outcomes will result from this work. instrument for enabling the Bank to reengage more While the normal ESW budget of the Bank will effectively with borrowers and other partners in forest finance most of the sector work, some of these incre- conservation and management. This will lead to mental activities may be financed through corporate increased interest in and commitment to sustainable programs aimed at developing the organization's conservation, management, and development of the focus on global public goods. As discussed later, forest sector on the part of borrowers, other stake- knowledge-building partnerships with other private holders, and elements of the Bank itself. Incorporat- and public organizations, including the Program on ing timely and accurate analysis of the importance of Forests (PROFOR), also will contribute to the forests into economic and social outcomes will be enhanced knowledge of the forest sector and cross- fundamental to the Bank's achieving its broader goals sectoral impacts. SUSTAINING FORESTS A DEVELOPMENT STRATEGY Catalyzing Engagement and Investment governments and developed with the participation of all stakeholders. These NFPs will address investments For the Forest Strategy to be successfully imple- and policies within the forest sector but also account mented, sufficient financing will need to be made for activities outside the sector that may impact the available to assist countries to realize their national success or failure of forest operations and policies. forest objectives for both development and conser- Over the next five years, funding for forest activities in vation. This financing will need to be available on countries willing to commit to NFPs or like processes blended terms, ranging from investment funds at will be expected to increase significantly. The dis- market rates through to concessional terms, includ- bursement of these funds will be handled in parallel ing grants. To achieve blended terms, the Bank will but coordinated programs to support countries in need to work together with other donors including realizing their forest-related objectives. the Global Environment Facility (GEF), bilateral development assistance agencies, NGOs, civil soci- Partnerships ety, and the private sector (including "green" private 9 investment funds) to create the right blend of lend- Partners, including a number of important donors, ing and grant financing from multiple sources. already have indicated their willingness to work To catalyze this financing strategy, the Bank will together, both analytically and financially, to realize have to be prepared to raise its own profile and par- the objectives of better forest conservation and ticipation and to make available its own loans and management at both the country and global levels. credits to finance forest operations in close coopera- Working with its partners, the Bank will need to tion with other institutions and entities. The pro- assist in developing a framework for policy and posal presented in this Forest Strategy is that the investments. In many countries, the Bank already is Bank will support additional lending for the sector operating within CDFs to establish the overall devel- by centrally defraying the costs of preparing forest opment and policy agenda for a country. The pro- projects and programs incurred by Regions and posed NFPs will rest within the umbrella of the CDF Country Departments. The longer-term objective and form the bases for partnerships in the countries. will be to lower the presently high transaction costs This proposed Forest Strategy argues that additional of forest operations by bringing more countries to a Bank investment in fostering partnerships in the situation where they can absorb more programmatic three following areas will be essential to underpin its assistance in this sector. This approach will be imple- own efforts to raise engagement in forests and con- mented under country programs, based on the tribute to building coordination and agreement on interest and commitment of borrowers, and Coun- priorities for investments and policy reform: try Departments' willingness to commit to incre- mental lending from their own resources, after some Partnerships with other donors. An existing initial encouragement through corporate funding to forests donor partnership, PROFOR, has moved to cover the higher initial costs of preparing invest- the Bank from its previous location in the United ments in this sector. Attention will be given to the Nations Development Programme (UNDP), which issue of how best to provide incentives for the Bank's because of rationalization of the UN system has Country Departments to initiate lending in difficult decided to reduce its direct involvement in forests. sectors in which the issues are important to develop- PROFOR is an analytical, knowledge-building pro- ment and the Bank's mission but the risks and costs gram, focused on forests and forest-dependent peo- tend to be higher than the norm. ple, and supported by a group of bilateral donors. It As noted, incremental Bank lending needs to be has strong linkages to the NFP process, and therefore supplemented by other sources of finances. The moti- to country-managed development of priorities and vation and coordinating framework will be based on strategies for forest-based development. The princi- a shared agenda for forests, so that all groups are able pal PROFOR donors have strongly supported to focus their inputs on the same basic set of objec- moving PROFOR to the Bank. They see major tives in the sector. In many countries, this framework advantages in linking the country-led analytical and will be provided by enhanced NFPs. It is important to knowledge-disseminating capacity PROFOR can note that this concept has been developed through an provide to the Bank's comparative advantages: an extensive intergovernmental process which, among ability to analyze broadly across sectors and at the other things, has stipulated that NFPs must be led by macroeconomic level; to establish and maintain EXECUTIVE SUMMARY a dialogue with senior political and economic poverty reduction and economic sustainability out- decisionmakers; to apply a range of lending and comes from forests. At the same time, other partners nonlending instruments to reform and develop- will be able to use their comparative advantages and ment; and to convene public, private sector, and civil financing capabilities to participate in the develop- society stakeholders for these and other related ment of a broad, cohesive program in forests in purposes. The move to the Bank will also enable major forest countries. Importantly, the Bank will PROFOR to draw on the knowledge and expertise of maintain a small, independent technical advisory other research and policy bodies, including those in group (TAG) to help monitor implementation of the the Consultative Group on International Agricul- strategy and provide advice on any potentially con- tural Research (CGIAR) system, with which the troversial proposals for Bank investment support. Bank has close relationships. The result of these partnerships is to bring to the forest sector both knowledge that is widely shared 10 Partnerships with NGOs. The World Bank/World and accepted and financing that is blended from Wide Fund for Nature (WWF) Alliance for Forest public and private sources. Combining knowledge Conservation and Sustainable use is a well-developed and sufficient financing at a spread of terms and rates partnership for sustainable forest conservation and will provide powerful incentives to bring forests into use. However, the Alliance requires additional sup- the mainstream of sustainable development and to port to increase its ability to draw on the strengths of assist in maintaining their environmental services to each institution and to mainstream dialogue on countries and the globe. Exceeding a threshold of important issues, including independent certification knowledge and financing will be the most critical and monitoring of forest operations. Another major step to reverse the negative outcomes of increasing NGO partnership is the Critical Ecosystem Partner- poverty and environmental degradation that often ship Fund (CEPF) with Conservation International, accompany the exploitation of forest resources. which supports the protection and management of particularly important areas of biodiversity. Each Selectivity and Sequencing partnership is time bound, with the Bank's contribu- tion highly leveraged in terms of resource flows. Raising the level of engagement of the Bank will need to proceed in a measured and prioritized man- Partnerships with the private sector. The CEOs ner, particularly given the shortcomings of the past Forum, chaired by the World Bank president, has ini- identified by OED in its thorough review of the tiated a dialogue among leading forest companies, Bank's forest operations. Selectivity and focus across NGOs, and the Bank. Through plenary meetings and countries will be important, as will linking specific working groups, it has debated major issues such as forest interventions with country assistance priori- managing forests sustainably and controlling illegal ties and programs. Two steps are envisaged in this forest operations. In Africa, it has led to a draft code process. of conduct that could have significant implications An initial selection of countries on which to for how responsible logging companies conduct busi- focus incremental ESW and potential follow-up ness in the region. The CEOs Forum needs to widen investments will need to be made. Obviously, its contacts in the private sector, especially to intensify regional and country teams and their client govern- the dialogue with some large institutional investors ments will be the primary actors in this process. In that have expressed interest in working more closely this selection, between 6 and 8 countries are con- with the Bank on investments in SFM in some key templated for major focus, with perhaps 10 more for Bank client countries. The new Forest Strategy will some additional attention. If the Forest Strategy is build on the CEOs Forum to strengthen its engage- approved and the additional resources are provided ment with responsible investors in the private sector. through various sources, preliminary analyses by IFC and MIGA are crucial to this engagement. Bank Regional staff indicate significant potential for Together, these partnerships will enable the Bank expansion in lending for forest activities and policy to apply more effectively its multisectoral approach, interventions, well beyond levels projected under convening power, and access to economic decision- business-as-usual assumptions. Obviously, in makers as well as its instruments, such as adjustment practice, a sequenced approach to expansion will be lending, the guarantee instrument, CASs, and other required, so that progress on sector analysis, interna- approaches to the central objective of improving tional cooperation, the establishment of rational SUSTAINING FORESTS A DEVELOPMENT STRATEGY sector objectives and priorities, and the receptivity (not necessarily always understood or anticipated) of the borrower in each case could be assessed. from all sources will always remain considerably As each country will be at a different level of readi- larger than financing going directly into the sector ness--with public commitment, institutions, and from donors and multilateral lenders. It is essential, policy at various stages of development--it is impor- therefore, that the Bank and its partners adopt tant to prioritize the type of engagement. In the main approaches that will help generate demand for sus- text (chapter 4, table 4.1), a hierarchy of engagement tainable but economically viable activities from bor- is suggested, including the types of activities and rowers and other stakeholders and assist in providing associated estimates of the transaction costs per dol- the means to create an enabling environment for lar lent.As noted earlier, the high transaction costs for these forms of forest use. This, in addition to grant- forest operations will require higher-than-normal based funding to support the necessary protection of budgets for the Bank to prepare investments in this forests that should not be subjected to any form of sector. The analytical and consultative processes that large-scale production, will offer the best prospects 11 will be financed under this strategy through increased for success at a scale comparable to the size of the ESW and the leveraging of ESW through donor resource and its current problems and issues. partnerships will lead to better-designed projects with higher and more specific benefits to the com- Outcomes munity and country. The knowledge base will be built through sector work, experience from projects, and It is useful to consider the magnitude of impacts that learning through monitoring. Once this knowledge could result from an effective international program base exists and sufficient agreement emerges from to address the Rio Forest principles, and subsequent NFPs on the priorities and basic reforms needed, intergovernmental agreements on what is needed in transaction costs can be reduced to levels more con- forests, to gain some appreciation of the importance sistent with or even below other Bank operations. of the task. On the basis of some previous commit- ments by governments and other stakeholders made through these processes, and figures on the scale and magnitude of the forests' potential contribution to EXPECTATIONS, RISKS, AND REALITIES development and environmental protection dis- cussed earlier in this paper, it is reasonable to suggest Large Tasks and Institutional Constraints that a significant and well-directed effort among The Bank must acknowledge, clearly and unambigu- donors, NGOs, the private sector, and borrower ously, that the tasks implicit in the three pillars of country governments and stakeholders should aim this strategy are extremely large, while the institu- to have some meaningful impact on the scale of tional and human resources that can be brought to forest-related problems over the next 5 to 10 years. bear on them within the Bank in the short term are The following individual goals are suggested as rea- constrained. Some additions to the present staffing sonable for the international community and other base (see section on Expectations and Realities: Risks major stakeholders as a whole: and Monitoring Progress, in chapter 4) may be made soon, but, even with these, the Bank will need to rely Poverty. Improve the livelihoods of 500 million on its partnerships, and also on the success of a cat- people, most of whom are poor and dependent alytic approach, to play a significant role in achiev- on forest and tree resources, primarily through ing the desired objectives. community forest management and development of In the particular case of the forest sector, this is agroforestry. almost an inevitable situation. The reality is that the This number, while large, is less than half the flow of funds from private and other sources into number of poor people estimated to be dependent forests in the developing world (and in many to some significant extent on forests for their liveli- instances these funds will be focused on unsustainable hood. This can be regarded as a subset of the MDG and even quite destructive practices) will continue to on poverty reduction. dwarf whatever financing the donors and multilateral lending agencies as a group can bring into this sector. Governance. Strengthen the institutional capacity Moreover, the flow of funds into cross-sectoral or to reduce the losses from illegal logging by US$5 bil- economywide activities that can have major impacts lion per year and improve the management of forest EXECUTIVE SUMMARY concessions to increase government revenues by the Bank's borrower countries, it would seem reason- US$2.5 billion per year. able to aim at bringing 10 to 15 percent of this area As noted in chapter 1, the estimated losses from under improved standards of forest management failure to collect appropriate royalties and taxes from within a 10-year period. Fulfilling this aim, along with legal forest operations are costing governments about continued rapid progress in developed country certi- US$5 billion annually. Illegal operations probably fication, would achieve the target by then. cost them a further US$10 billion in lost revenues. Recovery of half the amounts currently lost through Risks improvements in the capacity of governments and other stakeholders to collect revenues, raise more The final section of chapter 4 discusses the main reliable sources of financing for forest operations, risks of adoption of this strategy for the Bank and and control illegal operations would represent a sig- the mitigating measures that have been incorporated 12 nificant achievement, if not eliminating the problem to deal with these risks. In brief, these are as follows: entirely. The Bank's experience in forest governance reform in Cameroon (see Essama Nssah and Gock- Modifying the Forest Policy. Revising the OP, espe- owski 1999) is indicative of the significant level of cially to alter the broad-based ban on Bank support improvement that can be obtained in this field for logging in primary tropical moist forest to more through a cooperative effort between government carefully targeted approaches, has been interpreted and other stakeholders to apply the right measures. in some quarters as "opening the floodgates" to Bank support for unsustainable and destructive practices. Protection and conservation. Bring 50 million ha This is untrue, and the realities of the Bank's inten- of forests into new Protected Areas and improve the tions in this regard are discussed at length in this management of 50 million ha of currently Protected paper and will also be reproduced in a Questions and Areas. Answers paper that accompanied the proposed revi- These protection outcomes derive principally sions of the OP when it was publicly posted. This issue from commitments governments themselves have is discussed extensively in chapter 2 of this paper, made in recent years, finalized into"stretch"targets as which makes it clear that the intention of modifying outlined by World Bank President Wolfensohn at the the policy in this area was to ensure that the Bank United Nations General Assembly Special Session becomes an effective player in the management of (UNGASS) for Review and Appraisal of Agenda 21 in forests in an appropriate manner and to utilize vari- 1997. A recent midterm review of progress with the ous new approaches that will allow this to happen. World Bank/WWF Alliance for Forest Conservation There has been no financing of unsustainable logging and Sustainable Use indicates that there has in fact by the Bank in Regions where the ban in the previous been significant progress with these targets, and it is policy did not apply (since it applied only in primary likely they will be exceeded within the original 2005 tropical moist forest). There is in fact no indication of time frame set by the president. borrower demand for Bank financing of such activi- ties. Bank support for commercial harvesting activi- Sustainable forest management. Bring 200 million ties, in any event, is restricted in the new policy to ha of global forests under SFM that is independently situations where there will be independent validation verified and certified. This target is also one of the of agreed standards in forest operations. "stretch" goals enunciated by the Bank president at the 1997 UNGASS meeting. Credibility of program. There is some risk that Progress with this objective is likely to be slower some observers will conclude that expectations cre- than anticipated in 1997. However, the area of forest ated by the large tasks listed under the three pillars of under certification has expanded exponentially since strategy, and the international community's overall then, from virtually nil to about 27 million ha world- Forest Policy objectives (discussed immediately wide. About 9 million ha of this total is in Bank above), cannot be achieved through the modest borrower countries, of which some 3 million is in program of reengagement that is proposed in this tropical forest. Given that there are on the order of strategy, and that there is therefore a major credibil- 600 million to 800 million ha of natural forest that ity gap. A related risk is that borrowers may not already are, or will soon be, under some form of con- demand the assistance that could be made available tractual or informal intent for production activities in in this sector. SUSTAINING FORESTS A DEVELOPMENT STRATEGY As noted above, the reality is that the flow of ance with these policies. If investment in forests funds from donors and multilateral lenders into becomes more highly demanded as a result of this forests, for management and protection purposes, new approach, the Bank will need to consider cor- will continue to be dwarfed by investments in porate support for the higher preparation and activities that may have damaging impacts on supervision costs involved, to maintain the momen- forests. The Bank will need to continue to commu- tum of reengagement. nicate the view that the only available approach is a It is encouraging to note that at the time of catalytic one, aimed at building an enabling envi- writing, the Environmental and Rural Sector ronment for sustainable use and effective protec- Boards in the Bank had initiated a program to hire tion of forests. This will aim at providing an appro- more natural resource specialists in the Bank, and priate enabling environment for financial support it is significant that the Regions have requested for sustainable forest conservation and manage- that an emphasis be given to hiring staff qualified ment from other sources. So far as country demand to deal with forest issues and programs under this 13 is concerned, it is emphasized throughout this initiative. strategy that the ESW-led approach, and its partic- ular focus on developing consensus and analytical Partnerships. The approach adopted in this strat- support within countries for necessary reforms, is egy is heavily dependent on new partnerships, espe- the best means to develop country ownership for cially PROFOR, and these carry reputational and this approach. institutional risks for the Bank. This risk will be further minimized by (a) ensuring As detailed in chapter 4, a number of specific that analytical work and other ESW are concentrated measures will be negotiated with the PROFOR on building momentum and consensus for reform, donors, prior to establishment of the five-year pro- not on analysis for its own sake, with flexibility so that gram in the Bank, to clarify accountabilities, respon- resources can quickly be rechanneled to more prom- sibilities, and continuity of support for this initiative. ising prospects if the dynamic for change is not build- The risks of a program aimed at these outcomes ing; and (b) working closely with partners early in the are considerable, but manageable. It should also be analytical process so that understanding and confi- pointed out that the risks to the Bank of not adopt- dence through which investments will be successful ing a more proactive stance toward forests are also could be built jointly, through strong interaction with considerable: There has been a strong expectation borrowers and other stakeholders. among most stakeholders that the Bank will re- engage in the sector and will revise its policy to allow Insufficient incentives. There is a risk that the this to be done effectively. There is increasing inter- measures proposed for reengagement in this strategy est and attention being paid to the general issue of may not contain sufficient incentives to overcome the impacts of nonforest investments on forests, and internal Bank reluctance to engage in this sector, as at the very least the Bank must have an approach exemplified in the "chilling effect" identified by that will allow some of the relevant issues, and off- OED, and the high transaction costs that are docu- setting measures, to be analyzed and made ready for mented in this paper for forest investments. timely incorporation into the design of these large One of the reasons for pursuing a relatively investments: the reputational consequences of inad- modest and cautious reengagement is to allow staff vertent damage will be high. and managers to reduce their exposure to risk while Therefore, within the Bank there is now a major re-engaging, first through the ESW approach, and requirement for increased attention to quality and then to investments if and when the necessary com- compliance, not just of forest operations but of all mitment from stakeholders is built up. The revised investment programs that could indirectly impact for- OP will provide a new and proactive atmosphere for est resources. The costs are equally manageable, even forest engagement, and the emphasis on independ- under tight budget constraints: the increased budgets ent assessment and certification in this new proposed for the program in forests proposed above approach to the management of forests also pro- will amount to less than 0.1 percent of the Bank's vides collateral monitoring of requirements of other overall budget. Critical, however, will be putting in safeguard policies, since these will enter the criteria place the necessary incentives to address difficult and indicators for such assessment. Again, this will issues and manage risks and costs. Meeting this chal- lower the risk of unforeseen problems with compli- lenge is possible but requires some bold approaches to EXECUTIVE SUMMARY how the Bank does business. It also requires the devel- adjustment, and broad programmatic lending and the opment of support from governments, the private inclusion of forest topics in broader ESW and CAS sector, and civil society working in partnership to development work programs. Monitoring will include achieve these results. A program that addresses eco- indicators of inclusion of forests in CASs and PRSPs. nomic priorities, addresses the well-being of the poor, seeks the voices of all stakeholders, and is open and Selectivity and sequencing. Effective disbursement transparent in its operation will be essential. and implementation of the incremental activities proposed, in the time frame outlined, will be a major Monitoring factor here. The balance of activity types and progress toward the lowering of overall costs of Monitoring of implementation will be an essential doing business in the sector, through a movement of ingredient of success. The monitoring of the Bank's country situations being addressed up through the program will focus on four indicators: 14 hierarchy of engagement as illustrated in table 4.1, will be a major factor for evaluation. Using table 4.1 Developing demand. The effectiveness of incre- as a model, indicators of types of engagement and mental analytical and consultative activities will be costs will be recorded. monitored in the focus countries. Criteria will Although these indicators are important to track include the alignment of NFPs and like processes progress, effective monitoring will involve external with the major pillars of engagement put forward in stakeholder and technical advisers working with this strategy, the establishment of working partner- both Bank senior management and Committee on ships at the country level with other donors and Development Effectiveness (CODE) engagement. major local stakeholders, and the degree of owner- Without some form of accountability that pene- ship and consensus on major elements of reform in trates to the country level and teams, monitoring the sector, including the development of interest and will be an empty exercise. Management will bear the participation by major agencies of government in responsibility to see that the overall objectives of the the agenda. Monitoring will be through analysis of Forest Strategy are being realized. programs and focus groups. External Advisory Group Building sector engagement. The test of this compo- nent will come later in the program, in the form of ini- External assessment will be built into the evaluation tiating the preparation of investments that have process, continuing the approach used during the resulted from the ESW activities supported. In addi- preparation of the forest sector strategy paper tion to normal Bank quality-at-entry and perform- (FSSP). Stakeholders will be consulted at every stage. ance indicators, an important criterion will be the Specifically, an ad hoc external advisory group assessment of the degree of parallel financing or cofi- (EAG) will be formed, utilizing the former TAG nancing by donor partners and the private sector that formed to assist the Bank with development of the emerges as a result of collaborative activities. Estab- new strategy and policy as a roster for selection on lishing a baseline at the beginning of the program will an as-needs basis. Small teams (8 to 10 members) be an important measure to allow assessment of this would be formed for specific tasks, comprising factor. Working with the Collaborative Partnership on individuals from major stakeholder groups (client Forests (CPF) will provide a base for monitoring governments, civil society groups, academic and financial flows. The amount and direction of financing private sector interests, and major donor partners) flows to the forest sector in countries engaged in forest represented on the former TAG. The EAG process programs that are consistent with the three pillars of would be formulated in fiscal year (FY) 2003, in time this strategy will be an indicator of implementation. to allow selected group(s) to assess design, relevance, and progress of the activities for implementation Impact of broader involvement on forest outlined below, with a specific objective of advising outcomes. It also will be necessary to evaluate the on implementation matters related to the Bank's OP impact of the knowledge and analysis generated and the overall aims of the strategy as set forward through this strategy on Bank activities originating in the FSPP. In addition, the EAG will regularly outside the forests sector: the identification and incor- advise the president of the World Bank regarding its poration of critical forest issues into cross-sectoral, view of the status of the forest program. SUSTAINING FORESTS A DEVELOPMENT STRATEGY C H A P T E R O N E Challenges and Realities in Forests 15 IMPORTANCE OF FORESTS tenance than do many others. There is considerable potential for the poor to benefit much more from all mportant progress has been made in improving I types of forest use, but this will occur in fact only if overall living standards in a significant number the right policies, institutions, and implementation of developing countries. Over the past 40 years, capacity to include them are in place. child mortality rates in developing countries have In general, forests provide support for nearly dropped by more than half, and malnutrition rates half of the 2.8 billion people living on US$2 or less have declined by almost one-third. Despite these a day. Thus, forests can--and must--take a far positive trends, poverty persists in many countries: larger role in meeting the United Nations 2000 1.2 billion people live on less than US$1 a day; Millennium Development Goal of halving extreme 2.8 billion people live on less than US$2 a day. poverty by 2015. A World Bank Group Forest Mounting evidence demonstrates that poverty-- Strategy must give priority to poverty reduction, especially in rural areas--can be reduced only by while also focusing on lowering the wider risks sustainably managing natural resources both for the of environmental degradation, biodiversity loss, income they generate and for the environmental and global warming. To meet these priorities, the services they provide. The forests of the world are Bank's strategy must focus on people as well as one of the most important of these natural trees. It must participate in bringing local, national, resources. and international stakeholders together to make The link between forest outcomes and poverty decisions as to how forests are to be protected and may not always be direct, or even evident in some used. The strategy also must recognize that forests cases. The economic benefits of forests are fre- are always a part of larger economic, environmen- quently undervalued, and they also often bypass the tal, and governance systems that must work poor, because of existing tenure and participation together for the goals of poverty reduction, sus- conditions. Undoubtedly, in some cases, the poor tainable economic development, and environmen- would benefit from removal of forests and conver- tal protection to be met. sion to land uses to which they have more access, Global agreements and initiatives require the and in some of these cases, this conversion would be World Bank to bring forest issues more deeply into justified from a broader economic and environmen- the poverty reduction and sustainable development tal perspective as well. However, decisions on these agendas. The 1992 Rio Earth Summit process has matters must recognize the longer-term implica- closely linked environmental concerns with sustain- tions of change to natural systems, especially for the able development. New financing instruments are poor, who typically depend more upon their main- emerging that can considerably change the land- BOX 1.1 Why Forests Are Important Forests cover 33 million square kilometers--26 percent mates that the potential value of forests to that econ- of the Earth's land surface. They fulfill major economic omy is closer to 15 to 20 percent of GDP. Nationally functions, help maintain the fertility of agricultural and regionally, forests provide important watershed, land, protect water sources, and reduce the risks of soil management, pollination, and pest management natural disasters such as landslides and flooding. functions that usually are not captured by markets, in The world's forests are home to at least 80 percent of addition to timber and nontimber forest products. remaining terrestrial biodiversity and are a major car- For many peoples, forests also are an important part bon sink that mitigates climate change. of their cultural and religious heritage and practice. 16 More than 1.6 billion people depend to varying While extremely difficult to quantify, the eco- degrees on forests for their livelihoods. About 60 nomic value of the ecosystem services of the world's million indigenous people are almost wholly forests is vast. A 1997 study in the journal Nature esti- dependent on forests. Some 350 million people who mated the global value of the goods and services that live within or adjacent to dense forests depend on forest ecosystems provide--from timber to climate them to a high degree for subsistence and income. In regulation to water supply to recreation--at some developing countries, about 1.2 billion people rely US$4.7 trillion a year, more than one-quarter of that on agroforestry farming systems that help to sustain year's world gross national product (GNP) of US$18 agricultural productivity and generate income. trillion (Costanza and others 1997). The authors esti- Worldwide, forest industries provide employment mated that at least 70 percent of these values are for 60 million people. Some 1 billion people world- generated in developing countries. Subsequent com- wide depend on drugs derived from forest plants for ments published in Nature and elsewhere questioned their medicinal needs. the basis used to estimate these aggregate figures by In the 1990s, forests were lost at the rate of 15 mil- Costanza and others. Among the criticisms were, lion ha to 17 million ha per year, and in some coun- first, nonmarketed values from forests tend to be site tries up to 2 to 3 percent of forest cover was lost per specific; thus, aggregation, as used in the article, is year (United Nations Food and Agriculture Organi- problematic. Second, the basic usefulness of valuing zation [FAO] 2000). In some countries in the Asia- the stock of forests is questionable since what matters Pacific region, forest destruction is responsible for 2 ultimately are the changes in human well-being that to 5 percent per decade of global biodiversity losses, result from incremental changes in the use of specific with inestimable losses to ecosystem stability and forest areas. human well-being. Deforestation also accounts for However, there is general agreement that the up to 20 percent of the global greenhouse emissions value of forest ecosystem services that are outside for- that contribute to global warming. Mismanagement mal markets is significant. It also is generally agreed of woodlands in humid and subhumid tropical coun- that relatively little account is taken of these values in tries significantly contributes to soil losses equivalent much of the land-use decisionmaking that drives for- to 10 percent of agricultural gross domestic product est change. The challenge for policymakers is to bring (GDP) per year. these values into markets, cross-sectoral decisions, Forests are consistently and seriously underval- and macroeconomic policymaking and into the ued in both economic and social terms. For example, development of the economy in general. in Indonesia, official data show that forests con- Sources: Costanza and others 1997; FAO 2000. tribute 1 to 2 percent of GDP, whereas the Bank esti- take advantage of new financing opportunities to scape for financing of goods such as biodiversity and manage their forests. carbon, both of which are integral to forests and their management. The World Bank is prepared and obligated to assist its borrowers to meet their com- mitments under international conventions and to SUSTAINING FORESTS A DEVELOPMENT STRATEGY International Context: Global Conventions debate that underlies the Protocol but has taken up and Agreements the role of testing the market for some of the flexible mechanisms to ensure that this debate is informed The legal and international framework that governs by practical experience. In addition, a Bank represen- forest issues has advanced and broadened since the tative has chaired the scientific panel examining the last Bank Forest Strategy was issued in 1991, bring- evidence on global warming. Because of both the ing forth additional concerns and providing new potential resource flows from markets in carbon and opportunities. The World Bank Group's new Forest the need for its clients to adapt to possible climate Strategy must be consistent with and support this change, the Bank has a strong role to play regarding emerging international framework. climate change, especially in the forest sector. Rio Earth Summit. The 1992 Declaration of Forest Principles at the Rio Earth Summit affirmed that GLOBAL CHALLENGES states have sovereign rights over their natural 17 AND OPPORTUNITIES resources, but also recognized that forests are a global public good that provides ecosystem services Many studies have drawn attention to the formidable of global value and significance, such as biodiversity global challenges presented by forests. These studies preservation, carbon sequestration, and nutrient underscore the point that the forest sector represents and hydrological cycling. Throughout the 1990s, one of the most challenging areas in the development forests became a topic of increasing concern, con- of community and global public policy. tention, and cooperation in diplomatic circles and in Despite significant resource flows, international the global marketplace. In October 2000, through concern, and political pressure, the potential of the Economic and Social Council of the United forests to reduce poverty, realize economic growth, Nations (ECOSOC), the international community and be valued for their contributions to the local and created the United Nations Forum on Forests global environment has not been fully realized. (UNFF), a new international body that will provide A combination of market and institutional failures a platform for high-level policy discussions and has led to forests failing to contribute as significantly cooperation. The Bank is obligated to assist its to address these issues as would be possible under clients to meet the commitments and international good economic and technical management. Instead, conventions arising from the Rio Earth Summit. the forest sector often demonstrates the failure of markets and governance to capture its full value. Kyoto Protocol. The United Nations Framework Convention on Climate Change's (UNFCCC) 1997 Failure of governance. Forests often have been Kyoto Protocol created three "Flexible Mechanisms" disregarded in economic policy and have been to mitigate climate change. Two of these relate to plundered for short-term gain and, frequently, the Bank's client countries. The first, "Joint Imple- then removed and replaced by less valuable and less mentation," allows parties within the "Appendix 1" sustainable activities. Such loss with degradation countries (developed countries and countries in eco- often has been at the expense of national econ- nomic transition) to transfer or acquire emission omies and rural people who depend on forest reduction units from any other party. This mecha- resources for their livelihoods. Despite their des- nism could play an important role to support SFM in perate need for fiscal resources for development, countries in economic transition. The second mech- governments have failed to capitalize on the value anism, the "Clean Development Mechanism of their forest resources. World Bank estimates (CDM)," regulates greenhouse gas emission trading place the annual revenue loss to governments from between industrial countries and developing coun- failure to collect taxes from forest concessions at tries. The role of forests in CDM has yet to be fully more than US$5 billion. In addition, the annual defined; however, the protocol holds out the possibil- market value of losses from illegal cutting of forests ity of integrating forest management and conserva- is placed at over US$10 billion. tion with a particular emphasis on reforestation and afforestation activities. This integration could mobi- Need to integrate forests in the fight against rural lize substantial resource flows to developing coun- poverty. To realize the international commitment tries. The Bank is not directly engaged in the political to halve the number of people living in absolute CHALLENGES AND REALITIES IN FORESTS poverty by 2015, increased prosperity must be To maximize its potential to address these chal- brought to rural areas, in which the majority of the lenges, the Bank will have to focus its efforts--both poor live. In many developing countries, rural those specific to forests and those it undertakes more poverty cannot be reduced unless forest resources broadly that can impact forests and forest peoples-- can be sustainably developed and better used. on the roles of forests. Bank activities must facilitate Broadly defined, forest resources include dense forests' role in reducing poverty, must integrate forests, open woodlands, agroforestry, smallholder forests in sustainable economic growth, and must woodlots, and commercial-scale plantations. How- protect the local and global environmental and ever, rural strategies often have neglected forests, cultural values that forest ecosystems provide. In because the latter are mistakenly viewed as outside making these efforts, the Bank will need to function the mainstream of agricultural development. at both the country and global levels. Most impor- tantly, its contribution will need to be built on 18 Need to deal with conflict in resolving forest partnerships, consultation, and participation. issues. Forest Policy has become one of the most Unfortunately, despite its visible economic and controversial and heated issues in development. To political presence in many key forest countries, to use forests for poverty reduction requires a strong date, the Bank has not always been able to rise to institutional framework--and an effective legal these challenges. and regulatory environment--in which the rights of specific groups among the poor are recognized and protected, while opportunities to develop sustain- WORLD BANK FOREST PERFORMANCE, able forest businesses are provided to these people STRATEGIES, AND POLICIES and other groups. Such a framework often has been lacking. Dealing with these issues puts a premium These values of forests and the institutional and on participation, conflict resolution, and an institu- market failures in managing the sector have not tional structure attuned not only to the technical gone unrecognized in World Bank strategies and and economic issues in forestry but also the policies, although the emphasis and remedies have inevitable conflicts. evolved over the years, guided by major policy papers published in 1978 and 1991 (box 1.2). Failure of markets to capture environmental services of forests. Forests deliver some products-- OED Review of the 1991 Strategy and Policy primarily lumber and fuelwood--through markets. However, many of forests' other contributions to the In a 1999­2000 review of the Bank's 1991 policy, the environment, biodiversity, and the stability of the OED lauded the Bank's ambitious goals and the global climate are not recognized in terms of strong signal the policy had sent about the Bank's financial values and, therefore, go unrecognized in new emphasis on conservation. However, OED markets. Although rarely estimated, the indirect found that implementation of the strategy had fallen consequences for a nation's economy and environ- far short of these goals and that the logging ban and ment of this undervaluation are likely to be even controversy about the policy had had "a chilling more devastating as local people lose their sources of effect" on new forest initiatives. OED asserted that fuelwood and fodder and the protection that intact the Bank's direct forest lending had stagnated, forests offer their water and soils. "hobbled" by low borrower demand, high transac- tion costs, and fear of public controversy. OED Need to account for global values from forests. termed the effectiveness of the strategy "modest" Globally, forests are one of the world's most man- and called for a new policy that would "make the ageable sinks for carbon and the home of most of Bank Forest Strategy more relevant and strengthen the planet's terrestrial biodiversity. Because these the Bank's ability to achieve its strategic objectives in values contribute to the world's well-being, they are the forest sector." OED called for the Bank to inte- not only local values. Climate change will have wide- grate forests more closely in its overall mission of spread consequences for both the poor and the rich. reducing poverty and to bring forest strategies into A world without significant diversity of life has neg- rural development programs. ative economic consequences and will impoverish OED also recommended that the Bank take a the lives of all people. much more active role in forest-related activities, SUSTAINING FORESTS A DEVELOPMENT STRATEGY BOX 1.2 World Bank and Forests The World Bank financed its first forest operations-- and its implications for biodiversity loss, global in then Yugoslavia and Finland--in 1949. The early warming, and environmental degradation triggered projects financed the purchase of timber equipment. a revision of the Bank's policy. The ensuing Forest The Bank's approach evolved from a focus on indus- Policy paper, "The Forest Sector" (World Bank trial operations to social forestry and agroforestry, 1991e), recognized poverty reduction, policy reforms then to an emphasis on conservation. Prior to the aimed at containing deforestation, and resource publication of its 1978 Forestry Sector Policy (World expansion as themes. At the same time, the policy Bank 1978), the World Bank Group had supported paper strongly emphasized preserving intact forest forestry primarily by investing in log extraction oper- areas and included a Bank commitment not to 19 ations, pulp and paper mills, and technical assistance finance commercial logging in primary moist tropi- for species trials and by strengthening forestry insti- cal forests under any circumstances. The broad goals tutions. Forest-related lending was ad hoc and lacked of the 1991 strategy were to prevent or significantly overall appraisal of the potential of forests to con- reduce deforestation and to stimulate plantations tribute to economic development or environmental and creation of additional forest resources. The strat- protection. In addition to the role that forest indus- egy argued that the existence of major externalities tries play in creating employment and generating arising from forest use and a range of perverse poli- incomes, the 1978 policy paper reflected growing cies and incentives were leading to exploitative and awareness of the ecological functions of forests and unsustainable use of natural forests by a range of their contributions to agricultural productivity and stakeholders--including the poor, who were seen as enhanced rural incomes. a major cause of forest destruction. During the 1980s, rising international concerns Source: World Bank data. about the escalating rate of tropical deforestation extending its reach by mobilizing additional conces- United Nations' efforts to unite governments to sional resources for the sector and forming partner- achieve better forest management. ships with national and global stakeholders. The OED's analysis included a survey of Bank staff department also contended that the Bank should involved in forest issues. The survey found that staff broaden its role away from concentrating on moist tended to agree with the overall aims of the 1991 tropical forests to encompass all types of natural and policy but saw problems in its specifics and did not planted forests and that conservation efforts should believe that the Bank had succeeded in its major aim be streamlined and linked to national development of reducing deforestation (box 1.3). goals. OED called for the Bank to mainstream its Appendix 6 (on CD) adds detail to OED's data forest activities by giving them more weight in and summarizes the history of the Bank's forest macroeconomic analysis and paying greater atten- portfolio from 1992--when the new strategy and tion to forest issues in its other sector operations. policy began taking effect--until 1999. The "chill- The department advised that the Bank should pro- ing" effect identified by OED is evident: over the vide its staff adequate resources and incentives 1992­99 period, direct Bank investments in forest "to address the risky and controversial issues of the management in the tropics either declined or forest sector." It also pointed out the impact that remained static at fairly low levels. Appendix 1 sum- national governance issues have on forests-- marizes the responses to OED's recommendations particularly regarding illegal logging--and recom- that are embodied in this revised strategy. mended that the Bank mobilize national stakehold- ers to improve and monitor governance. Finally, Additional Indicators of Performance OED called for the Bank to continue its involvement at the global level through participation in the Appendix 9 shows strong regional differences in investment in forests and in specific responses to CHALLENGES AND REALITIES IN FORESTS BOX 1.3 Staff Survey: Effectiveness of 1991 World Bank Forest Policy and Strategy The Bank's OED survey of staff concerning the 1991 whose costs have been relatively high. This past Forest Policy found that: experience reflects the reality that, in many situa- tions, politically difficult land use and social and The ban on Bank financing of commercial environmental issues have had to be addressed in logging in primary tropical moist forests had no the course of project design. impact in these areas. A more flexible policy that Staff also identified exogenous reasons for mana- encouraged the Bank to enter this realm (on the gerial reluctance to become engaged in forests. correct side) would have been more effective. These reasons included the high levels of corrup- 20 Forest sector issues were not well integrated in the tion often present in the sector and inadequate Bank's broader mission of poverty reduction and appreciation of the sector and its issues by policy- economically and socially sustainable develop- makers in client countries. The latter was exacer- ment. Performance in the sector would be bated by the low status and influence of forest and improved by promoting more focus on natural environment ministries in most cases. resource protection, institutional reforms, and The Bank could and should become a global multisectoral approaches to forest development leader in forest-related matters, such as climate and plantations. change, carbon and the Clean Development Country managers saw forest sector involvement as Mechanism, biodiversity conservation, and natu- high cost, low return, and risky. Apart from the ral resources management. A clearer strategy and institutional risk factor, the staff believed that there incentives, with the necessary resources, would were internal Bank reasons for this managerial atti- allow better use to be made of GEF resources. tude. These reasons included inadequate resources Source: World Bank 2000g. ESW, project preparation, and supervision--all of sector issues. The data also indicate that the Bank's Bank managers to engage in the sector. Some of this forest portfolio in general is in decline. Disburse- difference reflects the fact that forest projects tend to ment trends show a decrease since 1995, and the be smaller than average, and some preparation Bank's forward pipeline implies a continuing decline costs are largely fixed regardless of project size. in forest sector projects, unless the priority given to Nevertheless, the bulk of the difference is due to the forests changes. Very few forest projects are in prepa- complexity and high transaction costs of dealing with ration for Africa or Latin America, and problems consultations and safeguards in this sector. Clearly, exist elsewhere as well. ESW in the forest sector, a there is a need to deal with these costs through major prerequisite in building a portfolio pipeline, seeking greater efficiencies, selectivity, and reduction fell from US$3.2 million in 1992 to US$870,000 in in the average costs of forest lending operations. 1999. This decline has been general across all regions. Staff turnover and high costs also have been con- New Directions in Bank Priorities tributing factors to this decline. An average of 3.2 task managers has been engaged in each forest project, As elaborated in chapter 4, the Bank has finalized the from preparation through close. It is well known and selection and definition of its global priorities and is recognized in the Bank that a high turnover of task in the process of better aligning global corporate managers throughout a project is undesirable for priorities with country program goals. Forests are continuity and good supervision. The average cost of included in the top five issues singled out as integral preparing and supervising a forest loan is approxi- components of the Bank's new global priorities: the mately 1.6 percent of the value of the loan; the Bank environmental commons. project loan average is on the order of 1.1 percent. The principles underlying the strategic approach This added budgetary cost has been a disincentive to to these priorities include effectively mapping them SUSTAINING FORESTS A DEVELOPMENT STRATEGY into country programs, applying realistic stretch tar- Integrating Forest Issues in Poverty, gets for individual priorities, and developing the Environment, Rural Development, Gender, action programs and cost estimates to do so. These and Water Strategies principles are adopted for forests in this strategy. In The Bank will need to continue and further exploit the strategic approach to the global priorities, the its comparative advantage to influence nonforest need to centrally budget and finance these priorities is sector policies that impact forests. It also will need to recognized as an incentive for implementation at the proactively seek opportunities to integrate the main country level. Chapter 4 gives specific attention to this elements of this new Forest Strategy into the Bank's aspect of implementation of the new Forest Strategy. broader poverty reduction, rural development Sector strategies are to focus on the priorities and the (including integrated natural resources manage- needed programs and targets to achieve them. CASs ment), environment, gender, and water strategies. are to be aligned with the priorities, and sector boards In December 1999, the Bank and the IMF are to monitor implementation. To ensure alignment endorsed a new framework for poverty reduction. 21 with its global priorities, the Bank will need to apply a This framework requires the preparation of PRSPs multisectoral approach to forests and integrate forest as a basis for providing funding from the Bank and priorities and issues in its broader CDF and its major IMF, as well as debt relief under the Heavily poverty reduction initiatives, such as PRSPs. Indebted Poor Countries (HIPC) initiative. Recently, there was intensive dialogue within the Bank con- LINKS TO OTHER BANK STRATEGIES cerning how to ensure that these PRSPs incorporate AND POLICIES and quantify environmental determinants of poverty dimensions. The results of this dialogue will Bank Safeguard and Operational Policies be vital in forming a real link between forest out- For the Bank to implement a genuinely multisectoral comes and broad Bank activities aimed at poverty approach to forests, it would have to address the pol- reduction. Chapters 2 and 3 and appendixes 2 and 3 icy, institutional, and structural issues in broader non- provide some quantification of the economic forest sector programs that have particular influence importance of forests and their relationships to large on forests and integrate forest outcomes in these pro- numbers of rural poor. In the formulation of target grams. The current review of OP 8.60, which governs country PRSPs, it will be important that the strategy the implementation of structural adjustment pro- and implementation plan for forests provide oppor- grams, will be of particular relevance in this regard. tunities to factor forest information in the broader Also relevant are the provisions of environmental proposals for poverty reduction. assessment embodied in OP 4.01, which require that The rural development and natural resource impacts of any proposed activity on the natural framework that has been developed focuses on the environment, human health and safety, and social two highest global good priorities for which the aspects are taken into account, referencing Opera- Bank's Vice Presidency for ESSD has responsibility: tional Directive (OD) 4.20 (Indigenous Peoples), (1) environmental sustainability and protection of and Operational Policies 4.11 (Physical Cultural the environmental commons, which includes Property, forthcoming), 4.12 (Involuntary Resettle- atmosphere (climate change and ozone depletion), ment), and 4.04 (Natural Habitats). OP 4.04 in par- bio-diversity, forests, food and water security, and ticular requires that the Bank not support projects land management; and (2) long-term social sustain- that, in its opinion, involve the significant conver- ability, with emphasis on the empowerment of poor sion or degradation of critical natural habitats. In people, voice, engaging civil society in dialogue, cases in which conversion or degradation of non- community-based development, and managing pre- critical natural habitats is necessary, the project must and postconflict situations. The approaches and include mitigation measures acceptable to the Bank. issues raised in this proposed Forest Strategy are These mitigation measures include minimizing fully consistent with these broader priorities. This habitat loss, for example, strategic habitat retention congruence will make integration of forest issues and postdevelopment restoration, and establishing and concerns in larger rural development programs and maintaining an ecologically similar Protected relatively straightforward, so long as the investment Area. The Bank accepts other forms of mitigation in linking the programs and strategies is made at the measures only when they are technically justified. field level. CHALLENGES AND REALITIES IN FORESTS Similarly, this proposed strategy is consistent Gender analysis has already been incorporated as with the three basic objectives of the Bank's environ- part of social assessments that are now routine ment strategy: (1) improving people's quality of life during the preparation stage of forest projects. by focusing on enhancing livelihoods and reducing The World Bank's Water Resources Sector Strat- environmental health risks and the vulnerability of egy focuses on the role that effective water resources the poor to natural disasters (such as deforestation- development and management play in sustainable induced landslides and forest fires); (2) improving growth and poverty reduction. Improved water the quality of growth, with special emphasis on resource management (such as watershed projects in helping countries to develop a better policy, regula- degraded environments) is a major focus of the tory, and institutional framework for sustainable emerging Strategy and is shared with the Forest Sec- economic growth and on strengthening environ- tor Strategy. There is a growing program in water- mental safeguard systems; and (3) improving the shed management in the Bank portfolio at present, 22 quality of the global commons through approaches and this will necessitate closer programming and that include special financing mechanisms to com- working relationships between forests and water- pensate countries for the incremental costs they shed technical and operational staff in the Bank. incur to protect the global commons. Strong links between the Forest Sector Strategy and As outlined in the Bank's "Integrating Gender the emerging Water Resources Sector Strategy will into the World Bank's Work: A Strategy for Action" ensure a sharing of common issues. dated January 2002, one of the main components of the World Bank's strategy for changing gender pat- terns, which are potentially costly to growth, poverty DEVELOPING AND IMPLEMENTING THE reduction, and human well-being, is to work with NEW BANK APPROACH TO FORESTS client countries to prepare periodic, multisectoral country gender assessments. Country gender assess- The Importance of Country Ownership ments are designed to analyze gender dimensions of development across sectors--including rural devel- One of the major requirements of an effective reen- opment and forest management--and to identify gagement by the Bank in forests in its borrower gender-responsive actions. As pointed out in numer- countries will be commitment by the borrower, and ous international reports, the sustainable use of other major local stakeholders, to the objectives and forests requires the participation of all rural popula- means proposed by the Bank to do so. This might be tions, including women. Although women's needs seen by some as a major constraint on the speed at often differ from those of men, many programs tend which a reengagement can proceed, from the low to overlook women's specific needs regarding base that has been produced by the Bank's virtual forestry--often because policymakers lack adequate absence from the sector in some countries. In fact, it data, information, and methodologies to address is seen here as an opportunity in these countries them. The lack of gender awareness constrains the to engage in a dialogue and an analytical process sustainable use and management of forests and for- involving country stakeholders before a return to est ecosystems in many places throughout the world. sectoral investments is implemented, through a con- Under the new Forest Strategy, Bank staff will work certed ESW activity. Thus, the implementation strat- to ensure that country gender assessments are appro- egy for the Bank's reengagement in forests proposed priately designed to help identify gender dimensions in this strategy emphasizes enhanced ESW initially, of forestry and rural livelihoods in individual coun- which will allow this dialogue with governments tries. Likewise, forestry-related analytical and advi- and other stakeholders to commence or, where it is sory services will incorporate gender issues as part of already in progress, to develop. Moreover, a focus on its analysis. Together, these can be used to develop developing consensus at the country level through priority policy and operational interventions that country-driven dialogue and analysis of major sector respond to these assessments. At the project level, as issues and priorities will also open the way for incor- identified in the Forest Strategy (e.g., Box A2.2), poration of sectoral concerns and measures that gender analysis will be an important tool to provide result in larger Bank investment activities, instead of simple information on resource use, responsibility, these inputs being either introduced through a top- perspectives, and needs and therefore serves a critical down-only approach or ignored completely. role in the quality of forest investment design. SUSTAINING FORESTS A DEVELOPMENT STRATEGY A major reason for adopting the three pillars of Difficulties inherent in assisting one category of strategy outlined earlier in this chapter is that they poor people living near forests without inadver- encompass the broader interests that borrower gov- tently worsening the situations of other groups; ernments and other local stakeholders have in the Controversy that surrounds the use of the con- management and use of their forests, by comparison cept of SFM as a basis to engage in operations in with the more restricted focus that arose, in some natural forests; cases, from the previous Bank 1991 strategy and Limitations on present approaches in the Bank to 1993 policy in this sector. This is a deliberate choice, incorporate forest issues and activities in larger recognizing that the success of the new approach will cross-sectoral and macroeconomic programs; be completely dependent on the development of Constraints on the Bank and other funding demand for Bank involvement of various types by agencies to finance protection of forests, as governments and other interest groups, and that this compared with the magnitude of competition will be forthcoming only if these stakeholders see for forest areas; 23 reality and relevance in the broad strategic approach Options available to leverage the impact of these the Bank adopts. The approach set out in this strat- limited financial resources. egy relies on stakeholders' willingness to take a lead- ership role in the analytical and consultative work Finally, chapter 2 summarizes some projections of that underpins this approach, so that the results of future activities to support forests that the Bank this work genuinely develop country-level consensus could consider, in the context of an expanded pro- and commitment to whatever lending or nonlending gram of involvement in the sector. activities are eventually proposed for that country. The partnerships and processes proposed in this Implementing the Strategy strategy to implement the new approach have been chosen with a view to their compatibility with coun- Selectivity. Implicit in the discussion of the strategy try ownership. In the case of the new PROFOR ini- is the principle of selectivity in Bank activities in tiative, for example, it will be of central importance forests. Country ownership will be a broad criterion that activities it sponsors are determined by criteria in this determination. The specific activities dis- relating to the Bank's own broad poverty and sus- cussed in chapter 2 indicate a refocusing of Bank tainable development agenda with its borrowers, activities in this portfolio on poverty reduction, with since these are now broadly defined by countries the resulting increased emphasis on forest resources themselves through the CAS process, and then and forest-dependent people. In addition, the need increasingly refined in design by countries through to integrate forest activities and issues in larger PRSPs and other mechanisms. Equally, however, cross-sectoral and broad economic programs will PROFOR will have close links to the NFP approach. progressively move the forest portfolio toward a This process was designed and approved through more programmatic and less specific, project- extensive intergovernmental dialogue on forests over oriented approach. How the Bank, borrower govern- recent years; it therefore already has strong political ments, and their partners should develop the forest ownership by countries that participated in that portfolio, and in what way, also is discussed in process, and its design requires that individual coun- chapters 2, 3, and 4. Chapter 4 makes an argument try governments must take ownership of an NFP for for selective engagement based on country commit- it to progress. ment and readiness for support. This engagement could range from basic policy dialogue to large-scale programmatic lending. Developing the Approach Chapter 2 sets out the strategic pillars for the Bank's Developing partnerships. As discussed in chapter new Forest Strategy. In the process, it considers some 3, the World Bank has formed partnerships with potential difficulties or conflicts that need to be other institutions--in part through an interagency addressed when considering approaches. These task force on forests and now through a newly challenges include formed Collaborative Partnership on Forests in sup- port of the new UNFF. The Bank also is building a specific partnership to work on forests with bilateral donors (PROFOR). In addition, the Bank has CHALLENGES AND REALITIES IN FORESTS formed partnerships with NGOs--including the Bank, and the World Bank Institute (WBI)--will WWF, Conservation International, and other civil work on the basis of a unified strategy to implement society groups--and is further exploring closer rela- internationally supported and financed technical tionships with large, international, private sector support and economic analysis. investors interested in following a sustainable devel- opment approach to forests. Financing the new strategy and leveraging impact. These partnerships are an important part of the As noted at the outset of this chapter, forests Bank's new strategy. They will enable the Bank to presently are regarded as an important element in build on its comparative advantages in addressing one of the Bank's new global priorities: the environ- forest issues through a broad spectrum of cross- mental commons. Significant changes in approach sectoral strategies and policies. The partnerships to the sector are expected to result from this status. will permit the Bank to collaborate closely with The financing strategy proposed in chapter 4 is 24 national governments and other groups that will be based on: more able to take up some of the specific technical, capacity, and knowledge development activities Encouraging the development of blended financ- needed for an integrated forest intervention. ing arrangements from multiple sources to reduce the overall financing cost to client coun- Coordinating across the Bank. Preparation of this tries of overall forest and environmental services. revised Forest Strategy involved close collaboration Developing blended financing would lead the between the ESSD Forest Team, which is responsible Bank, donors, and the private sector to more for its preparation, and Regional sector operational closely coordinate their support. These funds staff and managers (chapter 2). The IFC also was a would go to countries willing to implement participant in the strategy preparation. Chapter 3 national programs of SFM, Forest Policy reform, argues that it is important that this level of coopera- and improved governance and institutions. The tion and coordination be maintained in the future. IFC will continue to invest in private sector com- The World Bank Group must follow the same strate- panies that are willing to operate in accordance gic path to encourage sustainable development of with internationally accepted criteria for SFM the forest and forest industry sector. Its several insti- and are committed to independent certification tutional arms--the International Development of their operations. For all projects involving the Association (IDA), IFC, MIGA, International Bank utilization of forest products or the protection or for Reconstruction and Development (IBRD)/World enhancement of environmental services, the SUSTAINING FORESTS A DEVELOPMENT STRATEGY C H A P T E R T WO The Forest Strategy: Proposed Bank Action 25 n effective Bank Forest Strategy must con- A The Bank will help build and respect ownership. sider all activities, current and potential, Governments and people must own the policies that can influence forest and related social, and interventions that will make their forests more economic, and environmental outcomes--rather viable. This ownership can be built only through than focusing only on forestry activities such as pro- knowledge, participation, and consultations. With duction or conservation. However, the Bank must be its partners, the Bank must help bring knowledge selective in its engagement, seek its comparative to bear and be open in supporting the voices of advantage, and build on the pillars that set the base the people. for its activities. The Bank will operate in partnership. The Bank has neither the financial resources nor the staff to PRINCIPLES OF ENGAGEMENT meet the objectives of this strategy on its own. AND COMPARATIVE ADVANTAGE Specializing in its comparative advantage will enable AND THE PILLARS OF THE STRATEGY the Bank to concentrate on its strengths without dif- The Bank's impact on forests is determined not only fusing its resources, while drawing on and comple- by its direct investments in forests and forest-related menting the strengths of its partners. activities but also by its investments in other activi- The Bank's commitment to address forest issues ties that have indirect effects on forests and forest- will be long term and of a sufficiently large scale to dependent peoples. As a consequence, its nonlend- enable change to materialize. The foundations of ing activities, analysis, dialogue, and safeguard sustainable management of forest resources are good policies take on increased importance. In addition, governance and institutions. Building these founda- to have impact on the ground, the Bank must follow tions will take time. the principles that underlie the CDF. These princi- ples--partnerships, ownership, and a framework for Comparative Advantage engagement in the sector that defines the roles and The new Forest Strategy relies on the Bank Group to requirements for progress--all will be fundamental focus on its strengths. The Bank Group has compar- to success. ative advantage in the forest sector in five areas: Lessons for Engagement in Forests 1. Cross-sectoral analysis, dialogue, and investments. Bank experience in the forest and other sectors The Bank has the ability and means to operate suggests several principles that need to apply to its across sectors with both policy dialogue and new strategy: investment programs. Its economic and technical work emphasizes linkages across sectors, with the These three aspects must be addressed together. This macroeconomy, and with trade. necessity makes the Forest Strategy complex and 2. Economic policy and country dialogue. The Bank's multifaceted. It is not simply about growing or pro- leadership in country policy dialogues and assis- tecting trees but is a complex interaction of policy, tance strategies gives it the capability to foster institutions, and incentives. A narrow perspective on dialogue and influence policy. This dialogue has forestry--even sustainable forestry--is insufficient. expanded to include support to good governance To be effective, the strategy demands a multisectoral and combating corruption. approach that addresses cross-sectoral issues and 3. Convening power. The Bank is capable of bringing takes into account impacts on forests and forest- together stakeholders and donors to discuss dependent peoples that originate from activities, important issues and to set objectives for assis- policies, and practices outside the sector. tance strategies. As the chair of the consultative 26 groups for most countries, the Bank has the responsibility to work with governments and HARNESSING FORESTS' POTENTIAL donors as they formulate their investment pro- TO REDUCE POVERTY grams and policy agendas. This convening power allows the Bank to be catalytic in bringing forth Economic growth alone cannot combat poverty new and experimental programs and agendas. effectively. More focused interventions are required 4. Scaling up and mainstreaming projects and that address opportunity, empowerment, and secu- programs. Through its ability to bring support rity and that acknowledge the potential conflicts through large loans and grants to projects and inherent in addressing the different groupings of programs, the Bank has the means to scale up poor people who depend on forests in differing ways. and mainstream successful projects and pro- A broader livelihood approach must be taken that grams. In doing this, the Bank can encourage and places forests--productive capacity, institutional and support meaningful policy reforms and institu- legal structures, market access, and tenure--in the tional changes. The Bank Group also can bring broader context of rural development. Priority areas into play a multitude of financing and guarantee for Bank action will include: instruments to support the engagement of many different stakeholders, including civil society and Promoting policy, institutional, and legal frame- private enterprise, and can address issues such as works that ensure that the rights of indigenous political and regulatory risk. and other forest-dependent peoples and commu- 5. Working with the private sector. The focus will be nities are protected on aligning public sector interventions and pri- Empowering women, the poor, and marginalized vate sector objectives. Through its focus on the groups to take a more active role in formulat- enabling environment for environmentally, ing and implementing rural forest policies and socially, and economically responsible invest- programs ments, catalytic investments by IFC, and the Supporting the scaling up of collaborative guarantees provided by MIGA, the Bank Group forest management so that local communities has an important role in stimulating appropriate can manage their own resources, rehabilitate and private sector activity in the forest sector. protect forests, market forest products, and benefit from security of tenure. The emphasis here will be on involving small farmers. A princi- Three Pillars of the Forest Strategy pal mechanism will be much closer integration of The Bank's Forest Strategy will be based on three forest activities and investments in broader rural equally important and interdependent pillars: development programs Working with local groups, NGOs, the private 1. Harnessing the potential of forests to reduce sector, and other partners to integrate forest and poverty agroforestry farming systems into rural develop- 2. Integrating forests in sustainable economic ment strategies development 3. Protecting vital local and global forest environ- Appendix 2 (on CD) summarizes some past experi- mental services and values ences of attempts that have been made by the Bank SUSTAINING FORESTS A DEVELOPMENT STRATEGY and other agencies to incorporate poverty-reduction vatization of forest resources that the very poor concerns in forest strategies and national development continue to need to access as common property plans. Appendix 2 highlights some of the more diffi- cult issues and lessons learned from these experiences. Sharing by the state and the rural poor in forest benefits. One of the more fundamental policy Ensuring participation of the poorest. Although issues that the Bank will need to address is competi- most rural households are poor in absolute terms, tion between smallholder and community produc- there are considerable variations in levels of wealth ers for their shares of the economic benefits from among the rural poor, even in individual communi- forest outputs. Governments impose taxes and other ties. This variation usually means that only the better charges and costs on forest outputs. In addition, endowed, or politically more powerful, are able to state forest agencies often support local producers take advantage of the more rewarding forest produc- under one program and subsidize state-run opera- tion opportunities that are available. Moreover, all tions, or large corporate activities that compete 27 too often, their advancement is at the expense of the unfairly with local producers, under another. In the poorest, who may easily find themselves excluded short term, the scope for improving the situation from access to the resources on which they rely. As probably lies primarily in removing or relaxing reg- the intention of the new Bank Forest Strategy is to ulatory provisions that reinforce the structural and help the poorest as well as those better able to bene- scale advantages that the state possesses as a pro- fit from assistance, care will be taken to structure ducer of many forest products. The relationship Bank support to reach all segments of rural society. between forest departments and small local forest users also could be improved by separating govern- Protecting access by the poorest to nontraditional mental forest departments' regulatory functions forest products. A primary focus of Bank support from delivery of forest support services. for many forest dwellers will be reducing poverty In the longer term, a logical solution in some and ensuring continued access to subsistence sup- situations will be to phase out state production in plies. Specific measures through which the Bank will markets in which smallholder production has a seek to implement this strategy include: comparative advantage. This shift also would con- tribute to meet a more fundamental concern that Implementing the policies spelled out in OP 4.10 has been raised: the potential for the rural poor to (when approved by the Board) to protect indige- benefit will continue to be limited so long as they are nous peoples' rights. Within that framework, unable to participate in the more profitable and special emphasis will be given to support policy dynamic production activities. dialogue aimed at legislative reforms that will protect the forest land ownership and access Integrating forest activities focused on the very rights of the poorest poor in rural development strategies. Implemen- Supporting collaborative forest management tation of the revised Forest Strategy will make a (CFM), improving forest harvesting and man- significant contribution to meeting the goals of the agement programs, and incorporating safe- Bank's revised Rural Development Strategy. This guard measures aimed at minimizing the risk of strategy refocuses the rural development process to more powerful members of the community or concentrate on improving the well-being of rural outside commercial interests appropriating people and reducing poverty in the widest sense. The nontimber forest products on which the poor- latter entails much more than increasing the average est depend income of rural people. It envisions improving the Through a combination of ESW, policy dialogue, quality of rural life. The underlying concept for this and policy-based investment programs, tackling strategy is a developing world in which difficult issues such as how to mitigate undesir- able impacts of globalization and market liberal- Rural residents enjoy a standard of living and a ization in the forest and other industrial sectors quality of life that is not significantly below that on poor forest-dwelling societies. These impacts available to urban residents; include expanding commercial-scale forest and Rural communities offer equitable economic agribusiness operations, mining, oil exploration opportunities for all their residents regardless of operations that may lead to appropriation, or pri- income, status, or gender; THE FOREST STRATEGY: PROPOSED BANK ACTION Rural communities become vibrant, sustainable, Bank-supported International Centre for Research and attractive places to live and work; on Agroforestry (ICRAF) research can significantly Rural areas contribute to national development reduce poverty by providing low-cost inputs from, and the overall economy and are dynamically for example, nitrogen-fixing fodder trees that reduce linked to urban areas; the dependency of poorer farmers on purchased Rural areas adapt to ongoing economic, social, fertilizer or animal feed. cultural, economic, and technological change. Fostering linkages between the forest industry and Special attention will be given to incorporate sustain- rural poor. The Bank will foster partnerships able forest resource management and agroforestry between industry and local communities and initiatives into Bank-supported dry land, water smallholders to provide access to credit, extension, catchments, wasteland reclamation, and other rural markets, and skills development. It also will seek to 28 development programs. Past Bank experience in strengthen cooperative arrangements to improve the Burkina Faso (community-based natural resources bargaining position of the rural poor and enable management programs), Turkey (Anatolia Watershed them to participate in the benefits from downstream Project), and China (poverty reduction­oriented processing and trading. These improvements could projects) provides useful lessons of wider relevance. include removing government subsidies to expand- Regarding the interests of the poorest of the ing industrial capacity that impinges on small-scale poor, the arguments in favor of joint and collabora- producers--as happened with rattan production tive management have become more prominent as it in Indonesia. has become apparent that user communities and An underlying objective of Bank strategy in this institutions often are unable to take responsibility area will be to encourage situations in which the for control and management unaided. Governments bulk of timber or industrial roundwood require- also have favored joint management, because trans- ments of larger forest industries such as pulp and ferring management and protection responsibilities paper are met from common property, or collabora- to the community level can help offset reduced tively managed or privately owned forest resources. budgetary resources available to forest departments. For example, fostering collaboration between small, However, such forms of local management run private woodland owners and industrial companies the risk of the state's continuing to exert too much is a major focus of ongoing Bank-supported strate- control. gies in Bulgaria, Romania, and several other transi- While, in general, Bank experiences with collabo- tion countries of Eastern Europe. rative management have been reported as successful Tree out-grower arrangements and other forms and have resulted in a greater degree of involvement of contractual agreements such as those fostered by of rural users, this involvement has not always bene- Bank loans in Argentina, Brazil, and the Philippines fited the poorest of the poor. Some earlier interven- can provide important links to markets and support tions were based on insufficient understanding of the for farmers, but care needs to be taken to ensure that circumstances under which collective management is they are targeted at those able to benefit from them. appropriate and of the realities of the rural popula- Growing can be especially appropriate for small- tions involved. Experience also has exposed serious holders who have sufficient annual income from problems in the ways in which governments have other sources to secure their ongoing needs and land devolved responsibilities for forest management. they can use for trees that is not needed for food Accordingly, the Bank's strategy will seek to address crop production or for other more basic needs. Tree through ESW and policy dialogue some of the inher- growing is likely to be an attractive option in these ent weaknesses in current CFM approaches. These circumstances in which the features of an assured weaknesses include failure by governments to trans- market and access to technical advice and inputs fer effective authority, restrictions on rights granted make tree crops a more stable source of income than to the poor, and ineffective and frequently inequi- alternative uses of the land. These features and the table local institutions. probable need to have title to their land to be eligible Emphasis will be given to situations in which land, for a loan indicate that tree out-growing is unlikely labor, and capital availability favor multistory "home to be feasible for many smaller or extremely poor gardens," which increase land productivity. In such farming families. It is more likely to be an appropri- situations, agroforestry systems as demonstrated by ate activity for the moderately poor. SUSTAINING FORESTS A DEVELOPMENT STRATEGY INTEGRATING FORESTS IN SUSTAINABLE (appendix 3). Closer linkages will need to be devel- ECONOMIC DEVELOPMENT oped with agencies such as ICRAF and the Center for International Forest Research (CIFOR), which The element, integrating forests in sustainable eco- have considerable experience in designing and nomic development, focuses on capturing the large implementing these options. current and potential asset value of forests (outlined The Bank will seek opportunities to support in appendix 3) and proposes that this asset needs collaborative forest management, in particular, to be well managed to yield sustainable economic building on past Bank experiences in countries such growth. Good management of the forest resource as India, Mali, Mexico, and Niger. Much has been includes controlling illegal activities, promoting learned in these countries about how to involve user effective participation, and managing strong cross- groups in sustainably harvesting and managing dry sectoral and macroeconomic linkages with forests. land savanna fuelwood resources. A key concern is to prevent any significant con- 29 Cross-Sectoral and Macroeconomic version or degradation damage to critical habitat Linkages area, including all critical forest areas. The funda- mental guidance given to Bank staff and clients is The Bank must have an appreciation of how its that in assessing the significance of change they must actions and investments in other sectors, or at the take a precautionary approach (see OP 4:04, Natural macroeconomic level, will impact forests and forest Habitats, paragraph 1). peoples. It then must act on this information to In assessing the significance of any change likely to incorporate measures to offset or minimize the be induced by a particular investment operation, impacts. At present, in the Bank, the level of integra- key considerations include the intensity and scale of tion of major forest concerns in the design of larger the operation. Furthermore, the acceptability of any adjustment and cross-sectoral activities is relatively change will be determined by the environmental, low. The priorities for Bank engagement in this area social, and managerial context of the forest or habitat will be as follows: area concerned. In some countries, official guidance suggests that loss or inability to reproduce of 1 percent Cross-sectoral approaches. Policies and projects of any species would be considered "significant." need to be analyzed and coordinated to ensure a However, this does not take into consideration the cross-sectoral approach to planning and implemen- variation between species in terms of reproduction tation of SFM and forest conservation and develop- rates, or the ability of the population to recover fol- ment. The Bank's strategy will give special emphasis lowing impacts (Treweek 1999). In some park and to supporting the large number of rural poor living wildland management settings, systematic planning within forest margins or outside forests (predomi- frameworks for assessing the acceptability of change nantly agricultural populations) who are able to are available (see McCool and Cole 1997). access forests, tree stocks outside forests, and trees This issue will be addressed in greater detail, and on farms, and to respond to market opportunities. in the form of guidelines for determining signifi- Forestry assistance will be defined broadly to cance in a specific context, in the forthcoming encompass all tree stocks and activities on which Sourcebook for implementation of this strategy, they are based. and consideration will also be given to whether any The Bank will invest more in analyzing the revision of existing definitions of "significant" need potential impacts on forests of large programs in to be amended in various OPs. rural development and infrastructure.2 In this strat- egy, a major task for Bank operations staff and man- Macroeconomic impacts. Relatively little analysis agement will be to develop the necessary linkages has been done in the Bank on the impact of macro- and processes to ensure that when large rural pro- economic policies on forest outcomes. Furthermore, grams are under consideration, forest issues are fac- most of what has been done directly addresses the tored in. Most of the poor who live in or near forests impacts of specific provisions for forests and are associated with some form of agriculture and are forestry that occasionally have been included in significantly dependent on nearby forests for aspects these larger policy frameworks. The current revision of their livelihood. The broad patterns of develop- of the Bank's OD on adjustment operations will ment that occur should preserve this balance consider such impacts and issues. In the meantime, THE FOREST STRATEGY: PROPOSED BANK ACTION careful attention will be paid to policies with the adjustment operations, including systematically potential to have major impacts on forests, including identifying possible significant forestry impacts trade and tariff policies favoring extensive agricul- associated with Bank adjustment operations, ture or tree crops and overall public expenditure analyzing such impacts, and, if necessary, adopt- reduction (appendix 3). ing and implementing appropriate mitigating During the consultative phase in formulation of measures. A three-pronged approach is planned, this strategy, a number of commentators noted that beginning with pilots focused on cases with clear the proposed new forestry policy did not address forest linkages that may provide useful lessons potential forestry impacts of programs supported with broader applicability. by Bank adjustment lending. Because the time 1. The Bank will continue implementing the frame for an update of the Bank's adjustment lend- good practice advice in the current OP on ing policy remained uncertain, some suggested that adjustment. This good practice is summarized 30 the Bank put in place a transparent set of proce- in the Operational Memorandum "Clarifica- dures for systematically identifying significant tion of Current Bank Policy on Adjustment forestry impacts associated with Bank adjustment Lending" of June 5, 2000: ". . . it is good prac- operations, analyzing such impacts, and, if neces- tice for Bank staff, in preparing appropriate sary, adopting and implementing appropriate miti- assistance programs, to review environmental gating measures. policies and practices in the country, take In response to these concerns, the Bank has account of any relevant findings and recom- developed the following approach to deal with mendations of such reviews in the design of development of a new adjustment lending OP in a structural adjustment programs, and identify timely manner and to address potential problems in the linkages between the various reforms pro- the intervening period: posed and the environment. If there are nega- tive linkages, it is good practice to devise The Bank plans to address the treatment of pos- specific measures to counteract the possible sible forestry impacts of programs supported by negative effects, or explain how mitigation is Bank adjustment operations as part of the treat- being achieved elsewhere within the Bank's ment of overall environmental impacts of such Country Assistance Strategy." programs in the ongoing update of OD 8.60 on 2. Building on this good practice, the Bank adjustment lending into a new OP/BP8.60. This plans to put in place a process whereby Regional approach will put the forestry impacts of Bank- Vice Presidencies will work with ESSD and Oper- supported reform programs into the appropri- ations Policy and Country Services (OPCS) to ate context of the full reform program, while screen forthcoming adjustment operations--as avoiding a fragmentation of Bank OP on adjust- early as possible during program preparation-- ment lending into a multitude of sector-specific for specific policies supported by the operation provisions. with possible forestry impacts. In those cases At the time of writing of this strategy, an issues where impacts are likely to be significant, the paper on this new OP had been posted for public Bank envisages a more detailed follow-on review comment and review. An initial draft of the OP with a view to assisting governments in develop- itself had been prepared on the basis of responses ing measures to help avoid/mitigate them. and specific consultations and was presented to 3. In assessing potential adverse impacts on the Committee on Development Effectiveness of forests, the Bank expects to draw on a range of the Board of Executive Directors. A new version is technical expertise and country knowledge. The currently under preparation. Public consultation Bank is considering calling on the assistance of meetings were held in London, Washington, D.C., the TAG, a multistakeholder group that was set and Amman, Jordan. Further meetings are sched- up to assist the Bank in developing its Forest Pol- uled in Dakar, Dar es Salaam, Mexico City, Seoul, icy and Strategy. The TAG could act as a roster of Warsaw, and South Asia. expertise, from which specific individuals or For the period until the new OP/BP8.60 is in groups would be drawn to assist the Bank, on a place, the Bank intends to put in place a set of case-by-case basis at the request of the Bank, by transparent arrangements for the treatment of providing input in judging forest impacts of pol- forestry impacts associated with Bank-supported icy reform and possible mitigation measures. SUSTAINING FORESTS A DEVELOPMENT STRATEGY Expanding Nonfarm Rural Activities: Role institutional reforms that will help make forest of Small-Scale Forest Product Enterprises law enforcement more effective and just. The Bank is developing guidelines for its future In nearly every country in which such information involvement in forest law enforcement activities exists, small-scale forest product activities are Finance monitoring programs that support SFM among the three largest categories of nonfarm rural planning and help identify the extent of problems. commercial activity in terms of numbers of people Along with deeper analysis on the underlying engaged in these activities. Bank interventions in incentives to forest users and managers, these pro- this area have the potential to benefit large numbers grams will provide valuable input to governments of people. as they develop NFPs or strategies The Bank will target its assistance to small, Initiate dialogue with countries and regions to wood-based enterprises to help the rural poor suc- foster collaborative partnerships among national cessfully engage in processing and trading. The governments, local people living in and near for- Bank will support 31 est areas, private industry, NGOs, donors, and other stakeholders to more effectively monitor Market research and improved marketing and control forest use. These partnerships strategies; will include a wide range of measures aimed at Provision of micro credit (as a component of detecting, preventing, and suppressing illegal more broad-based Bank support for small-scale forest activities. The partnerships will give partic- enterprise development); ular emphasis to strengthening civil society and Technical and business management training; key actors such as the judiciary, law enforcement ESW aimed at identifying regulatory and other branches, and government forest management constraints to small-scale wood enterprises. agencies. The Bank also will initiate dialogue with other intergovernmental organizations, such as Governance in the Forest Sector: Forest the FAO and International Tropical Timber Crime, Corruption, and Regulation Organization (ITTO), and international environ- Examples in appendix 3 show the costs and the mental NGOs, such as Global Witness and Global pervasiveness of crime and corruption in the forest Forest Watch, which work in this area sectors of many countries. Persistently low resource rents and nontransparent resource allocation proce- Although experience in this area is limited, govern- dures are strong indicators of the potential for major ments, including in Cambodia and Indonesia, already forest corruption and governance problems. Addi- have given encouraging responses to Bank-supported tional indicators include market cartels and other forest law enforcement initiatives. As a result, similar distortions; inadequate forest conservation and pro- activities are being planned in other regions. tection measures; significant and organized illegal activity including timber theft, misrepresentation Reforming timber concession policies. The Bank of volumes, species, or the quality of log harvests; will promote the use of rigorously designed regula- poaching; and commercial-scale encroachment of tory frameworks for timber concessions to enhance agricultural or other activities on lands designated the contribution of planned forest use to economic as permanent forest zones. Poor governance also and social development and environmental protec- usually is reflected in unclear and conflicting tenure tion. Forest concessions in both tropical and temper- or management mandates for forest lands and the ate countries often have not yielded an equitable systematic exclusion of local peoples from decision- distribution of economic benefits. In addition, inten- making that affects forest lands. sive exploitation of forests frequently has led to the degradation of the forest resource and the unneces- Illegal logging and corruption. By far, the greatest sary loss of both timber and nontimber values. forest concern for many governments is the cost of Policy changes will have to be coupled with address- illegal logging and forest-related corruption. In this ing the technical competency of forest officials, area, the World Bank will take these actions: eliminating corruption in field-level operations, and involving local communities and their representatives Use its involvement in formulating CASs in forest management, including the concession alloca- and NFPs (chapter 3) to support legislative and tion processes. The Bank will encourage governments THE FOREST STRATEGY: PROPOSED BANK ACTION to take advantage of growing opportunities to engage needs to be based on consensus. In addition, wher- independent third-party certification bodies in ever ownership and tenure arrangements permit, performance-based monitoring of forest harvesting planning and management should be collaborative. and management operations. Ecological and silvicultural knowledge is incom- plete. Nevertheless, sufficient knowledge is available and proven for all major forest types, including trop- Building a Role for Civil Society ical humid forests, for natural forests to be managed in Sustainable Forest Management in ways that will maintain high levels of environ- Sustainable forest management issue. Recognition mental, economic, and social value. However, even is growing that effective forest management is criti- this available knowledge frequently is not put into cal to sustainable development, particularly for local practice because of a lack of appropriate incentives or national economies that are based significantly for forest users and inefficient monitoring by forest 32 on the use of forest resources. Given the extent of services. Larger economic and governance issues the resource in many countries, few governments or often are at the root of these problems. community stakeholders accept that logging should What the Bank should and should not do in be banned in all accessible forests. Therefore, the key forests stimulated considerable controversy, both questions in most countries are where logging inside and outside the Bank, while and after the 1991 should occur and how well it will be managed. strategy and the 1993 policy were developed. These In a land-use planning context, the major chal- issues remain contentious. lenge is to ensure that extractive activities such as A complicating factor has been the continuing, logging take place in areas in which the benefits of still unresolved, and, at times, highly emotional the activities outweigh any social or environmental debate over definitions of SFM. It is a given that costs that they may engender. A priority here is to many national governments of forest-rich tropical ensure that areas of special conservation value or countries, such as Brazil, Cameroon, and Indonesia, social significance are conserved in culturally appro- will continue to sanction harvesting operations in priate forms of Protected Areas. However, few coun- significant areas of their primary tropical forests. tries have been able to afford to allocate more than Therefore, the regional consultations leading up to 10 to 20 percent of their forest areas for this purpose. formulation of this strategy voiced considerable Thus, there is a growing consensus among ecologists agreement for the Bank to become actively involved and resource management specialists that biodiver- in promoting more sustainable forms of use in sity cannot be adequately conserved by Protected forests outside formally Protected Areas. Support for Areas alone. this type of activity was seen as essential if the Bank This reality has proved to be the case in North is to be a meaningful actor in the struggle to contain America, which arguably has the world's best-funded socially, ecologically, and economically damaging and most extensive national park­wilderness conser- forest activities that reduce forests' potential to vation system. The capacity of Protected Areas to contribute to sustainable poverty reduction. protect biodiversity is likely to be even less in tropical As an interim step, pending a clearer interna- areas with their higher levels of habitat differentia- tional consensus on this issue, the Bank has agreed tion, disjunctive species distributions, low aerial with leading international conservation agencies population densities of many species, and high that it will encourage the widespread use of interna- endemism. In addition, IUCN global data indicate tionally agreed criteria and indicators for SFM. that some 85 percent of existing Protected Areas have These criteria include those defined by the ITTC, human populations living either inside or immedi- discussed in the Intergovernmental Panel on Forests ately adjacent to the reserve. Therefore, the long-term (IPF), Intergovernmental Forum on Forests (IFF), future of biodiversity will depend just as much on and embodied in the principles and criteria of bod- sympathetic management of productive, humanized ies such as the Forest Stewardship Council (FSC). landscapes as it will on the balanced selection and The Bank worked with WWF and a wide range of management of traditional Protected Areas. forest sector stakeholders to design a set of princi- A key part of this process, which will need to be ples and criteria for certification systems to move applied on a larger portion of the world's accessible forest management toward SFM. These principles natural forests, is to combine conservation and pro- and criteria are set out in the World Bank/WWF duction goals in the same area. Such an approach Alliance 1998 "Guidance Note for Improved Forest SUSTAINING FORESTS A DEVELOPMENT STRATEGY Management and Certification Target: Achieving exclude new firms from entry, even if they had the Independent Certification of 200 Million clear capability and access to experienced staff. It Hectares of Well Managed Production Forests by the might also result in a virtual monopoly for some Year 2005."3 It would be divisive and potentially existing certification firms or agencies in some misleading to suggest that SFM can be defined locations, and the Bank has consistently tried to unambiguously and then assumed to be always avoid this outcome by ensuring that objective attainable within the time frame of a given interven- standards of performance and process became tion. Rather, this strategy will emphasize improving the criteria for evaluation, not mere existence. forest management along the lines of the pyramid This also relates to the first issue raised above-- approach described below. This approach has been the need for the Bank to avoid endorsing a par- developed by the World Bank/WWF Alliance to ticular firm or agency. There is also the question support the Alliance's global target for SFM: to of country capacity building or ownership. If achieve 200 million ha of independently certified client countries or regions develop systems that 33 production forests by 2005. clearly meet all the performance standards the A number of specific issues arise in relation to the Bank requires, then giving a priori mandatory Bank's involvement in certification: preference to established outside bodies/systems would potentially inhibit country ownership for Under the principles and criteria set out above, the good forest practice and the transparency of Bank has accepted the principle of independent robust certification processes. However, selection monitoring of forest operations. However, the of firms to undertake certification under Bank- Bank has not endorsed any particular certification financed projects will be subject to standard due system but will assess particular approaches in diligence provisions under the procurement relation to their compliance with these principles guidelines, requiring that assessment of capability and criteria. The Bank recognizes the ongoing of firms to be included for consideration is "mutual recognition" debate in the international carried out. More generally, the forthcoming community to harmonize acceptable standards Sourcebook will provide criteria and guidelines and approaches and expects that these principles for assessing certification firms, and it is evident and criteria will contribute to these discussions. that these will require that due weight be given to There is some debate on the issue of whether a track record when formulating a choice. fixed time limit should be applied to achievement In projects involving certification in which the of certification. The new OP will require the nego- Bank is investing, it will need to take responsibil- tiation and disclosure of a time-bound action plan ity for decisions on the criteria to be employed in acceptable to the Bank wherever support is given to certification, and also for ensuring that these cri- improving operations that cannot currently meet teria are then applied in the field appropriately. the requirements of an acceptable certification sys- This will be supported by material in the Source- tem. Because of the wide range of circumstances book and in other material on what the stan- likely to be encountered in different enterprises and dards and norms are, derived from the growing in different countries, selection of an arbitrary time international literature on this subject. More- limit for all cases would not be advisable. Timing over, it is almost certain that any project in should be determined on a case-by-case basis dur- which the Bank was intending to be involved ing project preparation with full disclosure. The with forest operations and certification will be forthcoming Sourcebook will address the subject of assigned Environmental Category A. This means how an acceptable time frame for achievement of it will require an advisory panel, as required in certification standard operations should be deter- the Environmental Assessment OP (OP 4.01), mined in each individual case. and in cases involving certification this panel There is an issue of how firms suitable for certifi- would include expertise on certification, and cation should be selected; in particular, the weight thus would allow for independent evaluation of that should be given to a proven track record in the scheme being considered. certification when selecting firms. It would not The question of adding chain-of-custody require- be advisable to insist that any firm wishing to ments to certification has been raised. Chain of compete for a certification contract should neces- custody is a valid and useful activity, which serves sarily have a track record, because this would the purpose of verifying the origins of wood and THE FOREST STRATEGY: PROPOSED BANK ACTION allows for control over illegal logging operations. to stimulate participatory assessment and target set- The Bank has used chain-of-custody log tracking ting in forest governance at the country level. The in places such as Papua New Guinea, where concept behind this analytical framework is that underreporting and other corrupt practices were some elements of good forest governance are com- issues and where it was possible to attain coverage mon to a wide range of nations. By grouping these at all export points. However, the need for this, elements in several tiers of complexity, the Pyramid and its practicability, should be assessed on a case- can serve as a country-level planning tool in forest by-case basis; it will not always be possible to management. In a multistakeholder process, the tool attach chain-of-custody activities. One factor in can be used to assess the status of forest governance the decision will be the extent of coverage of all using a scoring system to identify what is working, forest operations intended under the investment what is missing, and what needs to be done for dif- being considered. Certification can be applied on ferent elements of forest governance. The tool is 34 a concession or field operation level, and will intended to fill the "forest governance gap" between address the issue of illegal removals from such assessing and accelerating field-level progress in operations. Chain of custody relies heavily on suf- SFM and international policy, assessment, and ficient coverage to be able to stem the tide of ille- reporting. By filling this gap, stakeholders' capabili- gal timber in aggregate, and therefore demands ties to deliver national governance that supports heavy and broad investment to achieve. Guide- local forest governance--and potentially improves lines on the decision to apply chain of custody will international forest governance--can be improved. be included in the forthcoming Sourcebook. To assess the governance situation in Bank client countries prior to a forest operation, Bank task man- The Bank believes that, in many countries, greater agers are interested in using this tool to analyze the involvement of local communities and other key elements of forest governance and in prioritizing stakeholders in forest management and planning is strategic areas for cooperation with these countries needed to produce equitable outcomes and raise the on forest sector issues. Piloting countries include overall social value of forests. In some cases, the need Kazakhstan, Armenia, and Cambodia. for greater transparency and accountability at the The individual tiers of the Pyramid are seen as local level will require the use of local stakeholder mutually reinforcing and not necessarily so rigidly assessment as an alternative to third-party assess- linked as to form preconditions. The Pyramid con- ment of commercial-scale operations. cept acknowledges different stages and approaches The Bank will encourage national governments in building improved forest management and avoids to develop standards for natural forest management forcing the pace with unsustainable solutions and forest restoration that are locally relevant and beyond the absorptive capacities of the governments meet internationally recognized principles and crite- and communities concerned. It also helps identify ria for SFM. The institution also will provide sup- milestones that acknowledge incremental gains in port to national governments to create representa- places in which forest governance problems are tive, multistakeholder, and independent forest greatest. In addition, it helps encourage policy dia- monitoring bodies. logue aimed at eliminating those constraints. The "Pyramid"--a diagnostic and planning tool Approach to World Bank's Forest Policy for good forest governance. Forest management, and Sustainable Forest Management for both exploitation and conservation objectives, depends critically on matters far from the forest To respond to OED's recommendations, the con- itself. It depends on the extent and quality of the cerns raised by many in the external and internal enabling policy, legal, and institutional conditions-- consultations, and the analytical studies on advances on good forest governance. In an effort to introduce a in understanding forest issues, it was necessary to simple, but robust, means for stakeholders to work modify the 1993 Forest Policy, OP 4.36, in both together in assessing, and in planning, these key scope and clarity. OP 4.36 also needed revision to be enabling conditions, the World Bank introduces the consistent with this revised strategy. "Pyramid" (figure 2.1) which was developed in the Since the 1992 Rio Earth Summit, the interna- framework of the World Bank/WWF Forest Alliance. tional community has agreed that the international The objective of the Pyramid is to offer a framework forest dialogue must transcend discussion solely of SUSTAINING FORESTS A DEVELOPMENT STRATEGY FIGURE 2.1 The "Pyramid"--A Diagnostic and Planning Tool for Good Forest Governance Verification of SFM Audit, certification, or participatory review undertaken Extension Promotion of SFM to consumers and stakeholders undertaken Instruments Coherent set of "carrots and sticks" for 35 implementation in place Policies Forest policies, standards for SFM, and legislation in place Roles Stakeholder roles and institutions in forestry and land use negotiated and developed Foundations Property/tenure rights and constitutional guarantees Market and investment conditions Mechanisms for engagement with extrasectoral influences Recognition of lead forest institutions (in government, civil society, private sector) Source: Mayers, Bass, and Macqueen 2002. tropical forests to focus on all forests in all countries. targets for the achievement of SFM that the Bank's In addition, especially since the advent of the Bank's president presented to the Special Rio+5 Session of major engagement with the Eastern European and the General Assembly of the United Nations in 1997 Central Asian countries, temperate or boreal forests and that the Bank and WWF, its partner in the have become major elements in the Bank's forest Global Alliance for Forest Conservation and Sus- lending program. However, OP 4.36 focused prima- tainable Use, have adopted as one of the major rily on tropical moist forests. In addition, OP 4.36 objectives of that partnership. was issued before the approach to independent As noted elsewhere in this paper, the target of assessment of the quality of forest operations on the 200 million ha under SFM by 2005 will be difficult to basis of performance-based certification was devel- achieve in any event--especially given the restrictions oped. Independent certification is becoming the OP 4.36 has applied to some of the activities neces- industrial standard for improved forest manage- sary to achieve the target. The longer the blanket ment. OP 4.36 was silent on certification. restriction on financing logging operations in tropi- Furthermore, and as demonstrated by OED, cal moist forests under any circumstances remained OP 4.36 had a "chilling effect" on Bank Group in place, the more difficult this sustainability goal involvement in virtually all aspects of tropical forest became.4 This prohibition on Bank involvement in management. This reduced Bank involvement cre- financing commercial harvesting "in any circum- ated a particular difficulty in relation to the major stances" was justified at the time it was adopted given THE FOREST STRATEGY: PROPOSED BANK ACTION that the vast majority of tropical forest harvesting itoring of all prospective and ongoing operations for practices were demonstrably unsustainable.5 How- compliance with these standards. ever, in the current situation, a viable policy must Major underlying arguments for the new policy allow for circumstances in which such involvement approach were, first, that the Bank needs to recognize demonstrably would improve conservation and in its policy the reality that many forests around the development outcomes. OP 4.36, as it was, inhibited world that are accessible and commercially valuable the Bank, particularly the IFC, from assisting coun- will be used for timber production--sooner, in all tries and the private sector to improve their forest likelihood, than later. Under the new policy, the Bank operations or, for that matter, from engaging in a will commit to avoid at all costs financing commercial meaningful dialogue on SFM. In consultations on logging in critical natural habitats and other nonsus- this subject, several client countries indicated their tainable forms of commercial-scale logging. However, reluctance to engage with the Bank in this area when it will be prepared to use its influence and financial 36 the Bank takes such a prohibitive stance on financing, resources to help improve the quality and sustainabil- regardless of the quality of the forest operation. ity of commercial operations outside these critical The new forest OP redresses this weakness and forest areas and ensure that a more equitable share of enables the Bank to more proactively promote desir- the benefits from commercial activities is directed able forest conservation and development outcomes. toward local communities living in or near forest The new policy should prevent the financing of areas. Very often, the real choice available in this sec- commercial logging operations in critical forests in tor is not between logging and doing something less all major forest types, not just primary tropical invasive and damaging to the forest, especially when moist forest. It also ensures that no Bank financing these alternatives have not been developed to large- will be provided to logging operations, in any type of scale market viability. Rather, it is between doing log- forest, in which these operations do not meet accept- ging reasonably well, or doing it very destructively so able standards of sustainability, as verified through that conversion of the logged-over site to other uses certification processes. becomes almost inevitable. In addition, as noted ear- The new policy will help the Bank to achieve the lier, the Bank will require all projects involving the major objectives it has set in this strategy, by provid- utilization of forest resources to include an evaluation ing a clear operational framework based on rigorous, of the prospects for new markets and marketing performance-based independent certification and arrangements for all the goods and services that can consistent application of the Bank's overall safeguards be produced from well-managed forests. This will policy framework. It will signal to the forest commu- help to ensure better market-based incentives for nity that the Bank is supportive of well-managed good forest practice and more sustainable and con- forest operations that conform to recognized interna- servation-oriented patterns of forest land use. tional certification standards. Second, as discussed earlier in this chapter, since the previous Forest Policy was adopted in the early Risks and issues. The new, more proactive policy 1990s, powerful citizen-driven certification and inde- that enables the Bank to become involved in the pendent monitoring procedures have emerged. These sustainable management of production forests car- processes are helping to ensure that, increasingly, large ries some risk. However, there also were major repu- commercial-scale logging and forest industrial opera- tational risks for the Bank in retaining the previous tions around the world are being subjected to and policy, which did not explicitly address the issue of accepting close scrutiny and systematic assessment of the temperate forests at all. The policy was criticized their impact on both people and forests. In partner- severely by many stakeholders and interested parties ship with the WWF, the Bank has committed to a outside the Bank as being a major factor in the global target of 200 million ha of independently certi- Bank's failure to make a significant contribution to fied, well-managed forest by 2005. This fact should forest conservation and development. Critics also help to allay the fears of some environmentally con- saw the 1993 policy as failing to meet the challenge cerned groups that, by revising its OP on forests, the of mobilizing the considerable potential contribu- Bank would merely be opening the flood gates to a tion of forest conservation in the attack on poverty massive expansion of nonsustainable logging. and economic and social underdevelopment. Third, recognition is growing around the world of A further implication of adopting the new policy the complementarity of forest conservation and sus- approach proposed above is that it will require mon- tainable forest-use strategies at the landscape level. SUSTAINING FORESTS A DEVELOPMENT STRATEGY Governments of leading forested countries such as unless significant additional funds at highly conces- Brazil, Canada, and Malaysia have adopted forest sional or grant terms blended from multiple sources land-use "zoning" strategies that allow for a contin- can be made available for protection, or effective uum of (a) totally Protected Areas; (b) multiple-use markets for the ecosystem values of forests devel- forests in which overriding concerns for protection of oped, the problem is likely to worsen. It is important biodiversity and other environmental benefits are to bear these facts in mind when considering the integrated with continued harvesting of those Bank strategy in this area. numerous forest products that are essential for sub- This larger funding problem is not always apparent sistence and local use; and (c) production forests in when protection activities are being considered.Unlike which independently certified, sustainable timber the Alliance sustainability target discussed above, harvesting embraces the goals of preservation of vital achievement of the Alliance 2005 target of 50 million forest environmental functions.6 Such an integrated, ha of new Protected Areas is well on the way to real- ecosystem-based approach drives the mix of conser- ization. Through the Critical Ecosystem Partnership 37 vation and sustainable management objectives Fund, another major effort is under way to set aside defined in the World Bank/WWF Alliance for Forest important biodiversity hot spots. However, if these Conservation and Sustainable Use. The new Forest efforts are to lead to protection across the board in Policy enables the Bank to become a more proactive remaining natural forests, and not only in selected partner in addressing the urgent need to assist client areas, perceptions of Protected Areas that would give countries to achieve better conservation and devel- high priority to setting aside discrete wilderness areas opment outcomes with their forest resources. and biodiversity reserves and excluding them from all forms of human use will have to evolve. There are signs that this change in perception is happening. It is PROTECTING VITAL LOCAL AND GLOBAL now widely recognized that local communities and FOREST VALUES forest-fringe farmers can play a key role in biodiversity preservation. There is a trend toward a wider defini- The third major pillar of the revised strategy is to tion of Protected Areas that embraces the concepts of protect vital global and local environmental services IUCN Category VI: "areas containing predominantly and values that come from forests. This pillar focuses natural systems managed to ensure long-term protec- on the problem that domestic and international tion and maintenance of biological diversity while markets and individual incentives do not account providing at the same time a sustainable flow of natu- for these externalities, despite their importance for ral products and services to meet community needs." sustaining rural incomes, economic growth, and Adopting and promoting the expansion of IUCN ecosystem protection. There also is insufficient Category VI Protected Areas have major implica- international financing to offset these tendencies at tions for the Bank's revised strategy. These changes the national level. suggest the possibility that large areas of commu- nity-managed forest, such as those in India and many other parts of the world, also will be recog- Evolving Perception of Protected Area nized as making major contributions to the preser- Strategies vation of biodiversity, carbon sequestration, and One of the problems identified by OED is the diffi- other environmental services. culty inherent in protecting forests in high demand for a range of--frequently, mutually exclusive--uses Fostering Markets for Ecological by competing groups within society. In cooperation Public Goods with the GEF, the Bank has generated significant increases in funding for biodiversity protection and A second key element for the Bank in expanding related purposes (chapter 3 and appendix 4). Never- the potential to protect forests, discussed further in theless, the scale of this contribution is dwarfed chapter 3, is helping to facilitate and build new markets by the incursions being made into forest areas-- for forest ecosystem services. These services include including forests that ideally should be protected from invasive use. Moreover, Bank client govern- Services of local and national significance, ments do not, by and large, wish to borrow funds for including watershed, soil, and other environmen- forest protection. The reality, therefore, is that, tal sustainability purposes; THE FOREST STRATEGY: PROPOSED BANK ACTION Global forest common goods, including Fostering the Linkage between Forests biodiversity--already the subject of debt-for- and Climate Change nature swaps--and conservation concessions; Climate change is projected to significantly alter the Carbon, potentially a much larger and more composition and possibly the productivity of all lucrative source of funding for the retention types of forests, but particularly in the tropical and of forests. boreal latitudes. Such alterations are due to changes Developing such markets is an important factor in in the mean, variability, and extremes of tempera- enabling countries to recognize, and then realize, the ture and precipitation, coupled with an increase in real value of their forests. The increased revenues disturbance regimes, that is, pest outbreaks and fires. and incomes that national governments and local Nevertheless, forests and forestry can play a major communities can reap from these environmental role in mitigating greenhouse gas emissions and in services can serve as major incentives to sustain preparing client countries to adapt to today's climate 38 forests--rather than to cut or burn them for short- variability and long-term climate change.7,8 term returns. However, these long-term uses will The economic consequences of climate change become attractive to national decisionmakers only are expected to fall disproportionately on developing when reliable market mechanisms are in place. countries and, within these countries, on the poor. The two major opportunities in this area that the Climate change will have its greatest negative impact Bank will pursue are: in the tropics and subtropics, with higher tempera- tures, increases and decreases in total rainfall, more Helping to build and finance markets for interna- heavy precipitation events, more El Nino­like condi- tional public goods, such as carbon and biodiver- tions, and an increase in tropical cyclone wind and sity. Major potential appears to exist for use of precipitation intensities. These changes are likely to the guarantee instrument. In September 2000, lead to, among other things, an increase in floods, the Bank approved an experimental Partial Risk droughts, and landslides, which often affect the poor Guarantee to encourage international private most of all and exacerbate their already inadequate investment in Russia's forest products sector living conditions. Climate change is expected to through a guarantee arrangement between the exacerbate inequities in health status and access government and the Bank. This instrument will to adequate food, clean water, and other resources. underwrite the risk that adverse and unpre- Although some adaptation is possible, developing dictable policy changes pose for private investors countries, especially the poor within developing in the Russian economic environment. In this countries, are unlikely to have the institutional, tech- case, it is a potentially powerful approach for nical, and financial means to adapt. building the partnership between the Bank and The role of forests in reducing and preventing the private sector. In other circumstances, it risks and vulnerability from natural disasters at the could be an equally powerful approach to under- local level is well known and does not require a new writing commitment to sequestration or protec- agenda. For example, reforestation can help avoid tion zones, when combined with grant-based landslides, avalanches, and flash floods in headwater financing for these purposes streams. Forest products and tree crops are less Taking advantage of a considerably underused vulnerable to weather hazards and often provide a opportunity by assisting governments to design, cushion for the poor in times of food shortage. In implement, and finance the start-up of effective the present strategy, adaptation measures involving national markets for environmental services pro- forestry are considered an integral part of the pro- vided by forests. A number of options have been posed poverty reduction strategy. explored, by the Bank and others, including Of a more controversial nature is the use of financing regulation, environmental services forests' capacity to sequester carbon and hold it over payments, tradable rights development systems, long periods. While the bulk of global carbon emis- disincentive systems, and financing innovation sions come from fossil fuel consumption in indus- (World Bank 2001c). All of these approaches trialized countries, deforestation and subsequent have been applied successfully to protect or pre- land-use change also are significant, especially in serve aspects of the forest ecosystem that would the tropics. In the tropics, forest loss causes between otherwise be in jeopardy 10 and 30 percent of the global CO2 releases. SUSTAINING FORESTS A DEVELOPMENT STRATEGY Afforestation and reforestation are regarded as effi- emissions. This necessity suggests that sooner or cient means to sequester atmospheric carbon. More- later market-like mechanisms are likely to be created over, conserving and sustainably managing existing to encourage forest-based carbon storage or abate- natural forests and forest soils, which are large stores ment. Hence comes the motivation for the World of carbon, can significantly reduce greenhouse gas Bank to take a pioneering role in the field of "carbon emissions. Arrangements for the first commitment forestry" and to engage continuously in developing period (ending 2012) under the Kyoto Protocol and improving equitable and environmentally allow afforestation and reforestation but not defor- responsible forest carbon markets and adaptation estation to be eligible activities under Article 12 of measures in forestry. the Kyoto Protocol, that is, the CDM.9 These allowances, and their potential longer-term exten- Fostering Linkages between Poverty sion to areas such as avoided deforestation, have the Reduction and Forest Conservation potential to provide new revenue streams to local Strategy 39 economies for forest protection and forest manage- ment services. Industrialized countries, including The concerns with biodiversity conservation that those with transitional economies, already are have shaped so much of GEF, Bank, and World allowed to meet their obligations by trading carbon Bank/WWF Alliance assistance for forests have been using afforestation, reforestation, and avoided defor- primarily about global conservation values. They estation activities under Article 6, Joint Implementa- reflect predominantly Northern concepts and donor tion. Hence, forests could have a major role in preoccupations and, in some situations, have con- climate mitigation in the near future, and the Bank strained the pursuit of forest uses that can alleviate could take a leadership role in developing and facili- poverty. The Bank's revised strategy is based on the tating equitable market arrangements that will recognition that forest degradation and removal enable this to happen. are not necessarily a consequence of poverty. They The Intergovernmental Panel on Climate Change can be precipitated just as readily by rising incomes. special report, "Land Use, Land-Use Change, and In addition, the poor often conserve rather than Forestry" (2000), specifies the role of forests and overuse the resources that they manage. Therefore, forestry within the climate change framework. approaches to SFM should not be based on assump- Forestry projects are likely to be as, or more, cost- tions of a mutually reinforcing "downward spiral" of effective in offsetting carbon emissions than other poverty and forest degradation that can be halted options and could have a significant impact on sus- only by limiting or preventing use of the forests by tainable development in many of the Bank's client the poor. countries. Taking into account the considerable Through ESW, policy dialogue, and its support to political uncertainties and controversy that prevail, Protected Area programs, the Bank will promote the Bank needs to consider the perceived value of improved understanding of the linkages among forests offered within the framework of the United human activity, landscape change, and biodiversity Nations Convention on Climate Change. As stated preservation. Much of what might be considered by earlier, some forestry activities are already eligible ecologists and foresters to be degradation or deple- under the CDM, and their eligibility will stimulate tion of a forest resource can be considered by those the development of international markets for car- depending on it for inputs in their livelihood sys- bon credits from forestry through new forest planta- tems to be transformation and even improvement of tions and forest restoration. However, procedures the resource. have yet to be negotiated. To the extent that longer- There is, therefore, a need for greater appreciation term trading might reduce deforestation, especially among external stakeholders that the poor experi- tropical deforestation, it also will reduce loss of bio- ence their own environmental problems, which need diversity and other local environmental services, to be addressed separately from environmental poli- such as watershed protection. cies seeking to satisfy concerns about global values. In the long run, the world's interest in abating To address these local concerns, the Bank will seek greenhouse gas emissions is likely to remain strong, opportunities to combine global macro initiatives and forests can and should play an important role. with a more situation-specific focus. Such linked ini- Thus, it is imperative that the international commu- tiatives should reflect the protective mechanisms that nity fund forestry activities that reduce net carbon local users themselves adopt and the attributes of a THE FOREST STRATEGY: PROPOSED BANK ACTION resource that they value and seek to conserve. As an reap the highest benefits for poverty reduction and example, recent Bank-supported initiatives in Costa sustainable development. It is likely that incremental Rica are moving in this direction. assistance to individual task managers through the Because a large part of the remaining tropical Bank's system of Networks will be needed to achieve forest genetic resource exists in managed land- this emphasis. scapes rather than in formally Protected Areas, it This linked approach implies both a need for will be logical to focus more of the international more focused and timely ESW and a strong prefer- community's conservation effort on sustainable ence for integrating forest issues and activities in management of what is in use. Many of these larger cross-sectoral or economywide programs locally managed resources have high levels of bio- wherever possible. The operational Regions of the diversity. However, in developing these arguments, Bank have given considerable thought to these it needs to be stressed that the Bank is not advocat- issues. As part of the Forest Strategy development 40 ing downgrading the importance of biodiversity process in the Bank, each Region assessed its previ- conservation. Rather, its concern is to better focus ous programs and framed its own Forest Strategy for its approach on effective conservation. In recogni- discussion in the Regional consultations. Following tion of the importance of forest uses for poverty those consultations and the development of the reduction, conservation objectives for forests of three pillars of strategy and the financing proposal value to local people appropriately could shift from presented here, each Region prepared an outline of a predominantly protective orientation toward its current portfolio and reviewed the issues involved encouraging sustainable systems of producing in building a program consistent with the three livelihood benefits in as "environmentally benign" a strategic pillars. way as possible. This shift can be made, for exam- At this stage, the real prospects for increased ple, by encouraging options that result in land- investment in forests have yet to be assessed. In scapes such as those found in parts of Southeast particular, willingness to borrow will be influenced Asia that maintain a patchwork or mosaic of agri- by investments made in ESW (defined broadly to cultural and agroforestry systems. While less include consultative work) and the extent to which species-rich than forests, such landscapes preserve the Bank succeeds in the strategy of drawing donor much more biodiversity than the alternatives of grant-based assistance and focused investment plantations or clearance to crop agriculture. The from the private sector into the forest portfolio Bank-supported Meso-American Biological Corri- (chapter 4). Further work will need to be done with dor is one example of this approach. the Regions to expand their portfolios, based on country demand among other factors. ALIGNING REGIONAL PROGRAMS Africa WITH CORPORATE OBJECTIVES More than 70 percent of the population of Sub- The key challenge to improve the Bank's perform- Saharan Africa (SSA) is rural and depends on forests ance in forests along the lines described in this chap- and woodlands for its livelihood. As much as one- ter is to link global priorities with the country initia- fifth of the daily livelihood needs for rural families tives of its Regional departments. The best approach comes directly or indirectly from forests, including to this task is improving coordination among Coun- 20 percent of the disposable income used by the try Departments and Regional sector units, Regional landless and poor families to pay for school fees and operational units, and the groups in the Bank meet other family needs. Woodlands and forests responsible for establishing and maintaining exter- supply approximately 60 percent of all energy nal partnership arrangements, special funding ini- (including industrial) used in Africa, as well as tiatives, safeguard policy application and monitor- building materials and domestic energy for about ing, and knowledge management. 80 percent of all Africans and the totality of the The Bank's operational units face severe budget rural population. constraints and will need to find cost-effective At various times throughout the past decade, mechanisms to add these ingredients to their normal forest-related activities have accounted for at least workloads. Choices will have to be made on how to 10 percent of the GDP of 19 (forest-rich and forest- focus budget and staff time on activities that can poor) African nations and for more than 10 percent SUSTAINING FORESTS A DEVELOPMENT STRATEGY of the national trade of 10 nations. Because of poor Integrating forests in sustainable economic devel- governance, the share of economic benefits remains opment. Forests will be integrated in sustainable highly skewed in favor of vested-interest groups, economic development primarily through interven- often depriving the state and the rural people of tions in governance. These include improving core their fair share. functions of government forest institutions, privati- From a global biodiversity perspective, Africa is zation, integration of forests in decentralization home to 25 percent of the world's remaining rain- processes, fighting corruption, and empowering forests and contains 20 percent of the world's bio- communities. To ensure that broad-based, self- diversity hot spots. Four African countries feature sustaining support coalesces around the environ- among the world's 17 "mega-biodiversity" countries. mental governance agenda, politically difficult issues The Central African forests alone store more than such as concessions and taxation reforms, tree 23 billion tons of carbon, making them a critical tenure, and improved revenue collection will be buffer against global climate change. tackled using public information, independent 41 Contrary to overall growth trends in the Bank's observers, participation, and partnerships. portfolio for Africa as a whole, the Africa Region's Progress will be measured by successfully imple- forest-related portfolio has been declining for more menting institutional and policy reforms and than 15 years. Current operations are of good qual- improvements, increasing employment opportuni- ity, but the Bank's overall intervention is considered ties and fiscal forest revenues to the state and local too small to have a meaningful effect. communities, increasing transparency, and reducing Bank support to the Africa Region is shifting corruption. from traditional projects to programmatic opera- tions that emphasize policies, institutional capacity, Protecting global and local forest values. Bank and partnerships and that are based on broad con- interventions will help reconcile long-term global sultation, country ownership, and national and local environmental goals with short-term national eco- political understanding and support. nomic needs and local priorities. While promoting market-based instruments to demonstrate that Poverty reduction. A strategy will focus on inte- environmental services, certified products, and grating forests and biodiversity-related dimensions processes indeed can accrue economically impor- in broader Bank-supported rural-development tant benefits, the Bank also will create opportunities policies and lending. In forest-poor countries, for direct international resource transfers dedicated interventions will emphasize tree management and to conservation. Global initiatives such as trans- tree planting as part of policy and technology pack- boundary parks and Protected Areas will be used to ages designed to help small farmers and generate spearhead subregional integration through the har- income for the landless poor in the management of monization of environmental policies and imple- woodlands. In forest-rich countries, the emphasis mentation of environment-related conventions will be on protecting rights (traditional and mod- (biodiversity, desertification, climate change). ern) and continued access to forest resources by Progress will be measured by the flow of funds into those who depend on forests for subsistence, espe- successful protection activities and the emergence of cially during the lean season. Emphasis also will successful ecosystem market development programs. be placed on creating frameworks enabling the poor to become partners with external investors in East Asia and Pacific sustainable timber harvesting and to establish local hunters/wildlife management associations to The Bank's forest program is approximately 7 percent use wildlife and other nontimber forest products of total lending in this region: in relative terms, sig- sustainably. nificantly larger than in other regions. In most cases, Progress will be measured by the number and a sectorwide approach is being taken, strongly inte- performance of new operations and programs inte- grated with rural development and natural resources grating forests in broader Bank activities (especially management programs. A major Bank concern in the community-driven development, natural resources natural forest component of its program has been the management) and social monitoring of the poor's prevalence of the concession system of management, access to forests and of poor communities' partici- which has produced great pressure on the resource pation in forest management and use. and social and environmental problems in many THE FOREST STRATEGY: PROPOSED BANK ACTION places. Governance issues are at the core of this the impacts of changes in resource ownership, espe- problem. In addition, the rapid trend toward decen- cially the restitution issue in some countries; and tralization in the countries of the region will have major needs for upgrading, training, and education consequences on managing the complicated, inter- throughout the region. connected natural resource systems that will not necessarily be positive. Poverty reduction. The primary focus will be recovery of forests and forest industries that have Poverty reduction. The focus is on the role of forests fallen into major disrepair and have contributed to a in the broader rural economy, community develop- major intensification of poverty, and more effective ment, and user groups'participation in forest manage- engagement of civil society in collaborative forest ment. Resource expansion has been and will remain a management. major activity and will continue to advance toward Progress will be measured by success in the revi- 42 management by communities and small farmers. talization of forest activities and industries and Progress will be assessed by the presence of for- social assessment of the poor's engagement in forest est issue activities in larger cross-sectoral programs, management and protection. community ownership, and management of new resource projects. Integrating forests in economic development. Close attention will be given to the impacts of Integrating forests in economic development. macroeconomic reforms and adjustment, including Major activities are being undertaken to address measures taken under European Union (EU) acces- governance. These activities are focused principally sion; transparency and governance; improved on illegal logging operations, primarily in Cambodia investment climate for environmentally responsible and Indonesia. Policy analysis and reform are being and socially beneficial forest industries; major priva- pursued, especially in China, given its rapid change tization issues in the sector; and improved forest in regulatory and institutional structures. Land management and protection, including investments tenure reform is a particularly important issue in in fire and watershed management. natural resources management in general through- Progress will be assessed by monitoring inclusion out this region. The application of Bank instruments of major forest issues in adjustment, PRSPs, and CAS such as guarantee operations could be considered. In preparation, as well as in governance and public sec- addition, the incorporation of forests and natural tor reform programs. Forest industry development resource issues in structural adjustment and other and forest management outcomes will be tracked. broad economic programs and operations have been and are being implemented. Protecting global and local values. The focus will Progress will be measured by developments that be forest-poor areas and direct contributions for help address the illegal log trade, introduction of protection and conservation activities, especially policy and regulatory reforms, changes in forest land those involving the poor. In forest-rich regions, tenure, and treatment of forest issues in broad eco- the focus will be to develop effective markets for nomic interventions. ecosystem services to generate greater national and local benefits. Protecting global and local values. The focus will Progress will be monitored in terms of incremen- be to develop additional grant-based financing, tal GEF and other grant-based financing for protec- work more effectively with partners, and apply the tion and conservation activities and evidence of safeguards to achieve protection results. developing markets for ecosystem services. Progress will be measured by the development of financing for Protected Areas and safeguard Latin America and the Caribbean monitoring. In recent years, the forest portfolio in this region has declined; yet, significant potential exists to invest in Europe and Central Asia forests. The Latin America and the Caribbean region Primary issues of concern in forests in this region (LAC) contains the largest remaining areas of tropi- are the weakening of forest institutions and indus- cal moist rain forest, and the dependence of local tries through rapid political change and conflicts; and poor communities on forests of all types is high. SUSTAINING FORESTS A DEVELOPMENT STRATEGY A major joint paper by the World Bank and Imazon Poverty reduction. The priorities are to increase in Brazil indicates that, in 83 percent of the Amazon employment of the poor in reforestation, increase forest, using land for agriculture yields low returns conservation and rehabilitation activities, build and has limited potential, so that, from the national stakeholder incentives to manage resources sustain- economic point of view, sustainable management ably, and develop local participation in these of forests is a much preferable use of the Amazon processes. (Schneider and others 2002). Progress will be measured by social assessments of the poor's participation in forest activities. Poverty reduction. Some 40 million indigenous people--the majority of them poor--are concen- Integrating forests in economic development. The trated in forest areas in the LAC region. The Bank's priorities are to incorporate forest issues in compre- strategy is, with governments, to develop the policy, hensive development frameworks; develop linkages institutional, and legal bases to protect indigenous to forests in cross-sectoral investments, especially in 43 peoples' rights and access to forests; empower poor rural development and water management; and and marginalized groups; develop tenure security; undertake additional ESW on the linkages between and integrate agroforestry and secondary forest forest land management and broader economic, restoration activities involving the poor in rural rural, watershed and grazing policy, and institu- development programs. tional reforms. Progress will be measured by implementation of Progress will be measured by the presence of forest policy and legal reforms and social assessment of out- issues and activities in large development programs. comes and by increases in engagement of the poor in forest aspects of larger cross-sectoral programs. South Asia Increasingly, the focus in South Asia is better use Integrating forests in economic development. of major inputs for rural development (especially Increased emphasis will be given to integration of land and credit) and development of better markets forest management in major cross-sectoral pro- (trade and agroprocessing issues), as well as public grams; governance and illegal operations issues; sector institution reform (agriculture, water, forests, development of awareness of the link between broad energy, health, finance, and infrastructure), particu- economic reforms in trade and fiscal areas to forest larly to achieve better service delivery to the poor. outcomes; and catalytic investments in SFM. The forest program is closely tied to this broad Progress will be measured by the presence of for- approach to rural development and has the follow- est issues and activities in cross-sectoral programs, ing objectives: (a) to increase benefits to the rural developments in governance and illegal removals, poor through empowerment, ensuring that they and field investments in SFM. control natural resources through rights to owner- ship, access, management, or usufruct and maximiz- Protecting global and local values. The focus will ing the value of the resources through efficient be Bank involvement in GEF and other grant-based markets; and (b) to provide environmental services support to Protected Areas, the building of markets for all sections of society through a managed viable for ecosystem services, and evaluation of cross-sec- system of sustainable use, increased productivity, toral impacts on forest areas. and improved conservation of natural resources. Progress will be assessed by the initiation of The forest program will operate through rural devel- functioning Protected Areas, evidence of ecosystem opment and natural resources management pro- service market development, and ESW on cross- grams on issues such as empowerment of the poor, sectoral impacts. SFM, and improved local community control over natural resources use, rights, and markets. Middle East and North Africa Forests in the Middle East and North Africa region are Poverty reduction. Building on a long history of scarce but vital for watershed protection and land- engagement in community forestry in South Asia, the scape outcomes. For this reason, forests need to be Bank will continue to emphasize creating an enabling thoroughly integrated in natural resources manage- environment for poverty reduction, improving com- ment and sustainable rural development as a whole. munity participation and institutions, increasing THE FOREST STRATEGY: PROPOSED BANK ACTION returns to forest activities (through productivity and Protecting global and local values. South Asian joint forest management), and reducing vulnerability governments have emphasized the interests of poor by securing access and diversifying ownership of the rural communities in international fora, such as resource asset base toward the poor. those on the climate change, biodiversity, and deser- Progress will be measured by continued social tification conventions. The regional strategies' and implementation assessment of joint forest man- emphasis on poverty reduction and sustainable agement activities. livelihoods provides further backing to this stance and supports meaningful action in the field. These Integrating forests in economic development. The actions may include the conservation of biodiversity focus will be on improving governance (especially, in mixed-use forest settings, adding rigor to fiscal correcting major distortions in incentives and mar- and poverty impact analysis, strengthening partici- kets that reduce the value of the forest resource and patory performance monitoring, and more effec- 44 experimenting how to adequately pay communities tively addressing the impacts of nonforest activities for providing ecosystem services), reforming the on forest areas. public sector (including responsiveness, accounta- Progress will be assessed by the further develop- bility, and fiscal soundness of institutions), and ment of mixed-use forest management systems that developing efficient markets and competitive private successfully address local livelihood as well as global sector producers in the sector. biodiversity and global warming concerns, and as well Progress will be assessed by the policy and insti- as the development of cost-effective assessment and tutional reforms designed and adopted, perform- monitoring systems that meet adaptive management ance of local forest product and ecosystem service requirements, document local and global impacts, markets, and changes in relative private sector and and more effectively address land-use management public sector roles in forestry-related activities. and social and environmental assessment needs. SUSTAINING FORESTS A DEVELOPMENT STRATEGY C H A P T E R T H R E E Implementing the Strategy: Building Effective Partnerships 45 ISSUES IN IMPLEMENTATION Building Effectiveness Building the Bank's effectiveness to achieve the The new Forest Strategy proposed here will require objectives discussed in this document will require special emphasis on implementation. In its review of the 1991 Forest Strategy, OED not only was critical of its content but also was particularly concerned about Addressing the global challenges and realities for the failure in implementation. OED recommended forests and the Bank's role; then refocusing the that, to fulfill both its global and country roles, the Bank on engagement in the sector on the basis of Bank be proactive in establishing partnerships with all the priorities embodied in the three pillars of the relevant stakeholders; that it align its resources with revised strategy (chapters 1 and 2); its objectives in the forest sector; and that it use its Addressing the major cross-sectoral and macro- "global reach" to address mechanisms for, and mobi- economic linkages and sector policy issues lization of, international concessional resources out- (chapter 2); side its lending activities (see appendix 1 for a specific Developing the necessary partnerships with response to OED's recommendations and appendix 6 donors and other stakeholders to leverage coor- for the full text of those recommendations). dinated efforts being made in forests; Implementation of the proposed strategy will Attending to the internal Bank institutional emphasize selectivity in areas of focus so that issues and incentives so that these will (within a resource use will more closely match objectives and prudent and realistic framework) encourage partnerships that generate effectiveness both inter- rather than work against the overall directions of nationally and in client countries and mobilize the proposed Forest Strategy. financing both externally and internally. In addition, the content of the strategy is built around Bank strengths: analytical capacity and ability to convene This chapter will discuss the development of the part- multiple stakeholders. Although implementation nerships that will be needed to maximize the Bank's will remain a major challenge requiring innovation effectiveness in forests, and it will introduce impor- and facing risks, the rewards in reducing poverty and tant internal institutional issues. The internal incen- more effectively preserving environmental services tive implications related to these topics will be dis- will be significant. cussed in chapter 4. DEVELOPING THE PARTNERSHIPS At the global level, the Bank should continue to NECESSARY TO IMPLEMENT participate in fora that enable it to work in partner- THE STRATEGY ship with other organizations of global reach and within the framework of international agendas. The Donor and National Stakeholder UNFF should provide a useful core framework. The Partnerships UNFF was created under the Economic and Social Council of the United Nations in October 2000, after Past failures by the donor community to effectively a 10-year process of intensive discussions among address deforestation and related issues are partly a governments. UNFF's objectives are to "promote the reflection of the fragmentation of individual donor management, conservation, and sustainable devel- priorities. They also are related to the reluctance of opment of all types of forests and to strengthen long- some governments and donors to engage in policy term political commitment to this end" (box 3.1). dialogue on politically sensitive issues such as the 46 UNFF offers an intergovernmental platform for pol- negative social and environmental consequences of icy dialogue through which difficult issues, such as powerful vested interests. Therefore, this strategy good governance in the sector, can be reinforced by should give major emphasis to working with a broad intergovernmental commitment and effec- national and local partners on strong, consensus- tive monitoring and progress assessment. It offers an based agendas. When vested interests and very large intergovernmental forum in which countries can put financial gains are at stake, the potential to leverage forward their pledges and accomplishments in SFM. solutions depends on the agreement of all the major It is a forum through which the Bank can support stakeholders on a shared strategy for forests. Lever- the international commitments of its client countries aging solutions also depends on developing the to promote the implementation of IPF/IFF Proposals necessary consultation and dialogue with actors at for Actions while working closely with other institu- all levels to ensure that the agreed strategy can and tions, particularly in the areas in which the Bank has will be implemented. Donors in particular will need a comparative advantage. to agree on the broad objectives of their engagement In parallel, and supportive of the UNFF, is the in forests. Even more importantly, donors will need newly formed CPF, which will contribute substan- to agree on the specific steps and investments to be tively to the work program of the UNFF. CPF con- made through a carefully developed engagement sists of major multilateral organizations such as the strategy. To succeed, this dialogue and approach will World Bank, other UN agencies, research organiza- require the strong support and ownership of gov- tions, and other forest-related organizations.10 CPF's ernments and other stakeholders. Building this role will encompass facilitating and promoting dialogue and consensus will be one of the major coordinated and cooperative action, including joint challenges of the partnerships. BOX 3.1 Functions of the United Nations Forum on Forests The ECOSOC resolution assigns the following Enhance cooperation as well as policy and pro- functions to the UNFF: gram coordination on forest-related issues. Foster international cooperation. Facilitate and promote the implementation Monitor and assess progress at the national, of the Intergovernmental Panel on Forests/ regional, and global levels. Intergovernmental Forum on Forests Proposals Strengthen political commitment for the manage- for Action as well as other actions that may ment, conservation, and sustainable development be agreed. of all types of forests. Provide a forum for continued policy development Source: United Nations 2000. and dialogue. SUSTAINING FORESTS A DEVELOPMENT STRATEGY programming and submissions of coordinated an organizing mechanism for governments, donors, proposals, and facilitating donor coordination. The NGOs, and the private sector to work together CPF will submit coordinated inputs and progress on sector matters and the linkages to broader eco- reports to the UNFF and undertake periodic reviews nomic and environmental issues. This collaborative of its effectiveness. The World Bank will continue to approach will amount to an enhanced NFP. Where it take reporting responsibility in the specific fields in is possible to achieve, it could be a productive mech- which it has recognized comparative advantages. anism to align, select, and prioritize donor activities The Bank already is operating within comprehen- in the forest sector. The collaboration could have a sive development frameworks that establish the over- longer-term objective of improving the performance all development and policy agenda for a country. of donor programs in forests, thus enhancing the The concept of NFPs with governments and willingness of donors to raise their future contribu- other stakeholders has been developed through tions to the sector. However, it must be emphasized recent major intergovernmental dialogues on that, at this stage, the Bank probably could use this 47 forests: the IPF and the follow-up IFF, which were approach only on a highly selective basis. the forerunners of the UNFF. These processes have Two major aspects of developing and enhancing the potential to develop strong political commit- NFPs are a challenge for the Bank and its partners: ment to reform and development of the forest sec- (a) integrating cross-sectoral approaches in NFP tor. In the field, an NFP is convened by a govern- formulation and implementation processes; and ment, supported by a group of donors, and based on (b) coordinating Bank programs and priorities consultation with a broad group of stakeholders. with broader donor programs. NFPs will need to be The purpose of an NFP is to develop a consensus on comprehensive, covering forest issues ranging how forests are to be used, by whom, and for what; from cross-sectoral policies and investments in and then to implement that agreement. forest management to establishing and sustaining The Bank could become involved in this process Protected Areas. The implementation of these NFPs in selected countries in which the potential exists will require blended financing from multiple to develop and refine programs that are highly com- sources ranging from funds at commercial rates to patible with the Bank's CDF. The Bank could provide funds at highly concessional terms. BOX 3.2 Principles of National Forest Programs Principles of NFPs were determined at the fourth Appropriate participatory mechanisms that session of the IPF in 1997. They include should involve all interested parties Decentralization, where applicable National sovereignty and country leadership; Empowerment of regional and local government Consistency with national policies and interna- structures consistent with the constitutional and tional commitments; legal frameworks of each country Integration with the country's sustainable devel- Recognition and respect for customary and opment strategies; traditional rights of, among others, indigenous Partnership and participation; peoples, local communities, forest dwellers, and Holistic and intersectoral approaches. forest owners Secure land tenure arrangements Establishment of effective coordination mecha- In addition, at the same session, the IPF adopted the nisms and conflict resolution schemes following specific elements to be considered during the development and implementation of NFPs: Source: United Nations 1997. IMPLEMENTING THE STRATEGY: BUILDING EFFECTIVE PARTNERSHIPS The PROFOR Initiative. The analytical work that adjustment operations; and major cross-sectoral will underlie NFPs is critical to the implementation programs in rural development, natural resources of the proposed strategy. Since knowledge is an management, and infrastructure. important public good, it requires being developed Total donor support for PROFOR is expected to in partnership and shared among stakeholders. One be in the range of US$13 million to US$15 million important means by which the Bank could pursue over five years. This amount would permit a dedi- this objective would be to host a multidonor part- cated group of experts to support Regional staff nership on forests. in ESW and the development of sector programs An existing donor forests partnership-- through NFPs. In their support to improved NFP PROFOR--which has been moved from its previous processes, the PROFOR team would focus on four location at UNDP to the Bank, is a possible mecha- critical thematic areas: nism.11 Bringing the PROFOR arrangement closer 48 to the Bank enhances the focus on three aspects of Building institutional, legal, and policy structures NFPs that closely match the Bank's interests: cross- to enhance the contribution of forests to sustain- sectoral policies, governance, and financial instru- able livelihoods. ments. The PROFOR donors strongly favor moving Building and reinforcing the relationship it to the Bank because this would enable the PRO- between improved governance and forest sector FOR analytical resources to combine with the Bank's development. strengths in analytical and sector work and country Assembling the institutional and legal framework dialogue. PROFOR will supplement the World for national financing strategies for sustainable Bank's operations in ESW and support governments forest sector development, including analyzing in their policy reforms and planning. Specific provi- innovative financing mechanisms for all the sion will be made for Bank Regional operational goods and services that can be produced from staff to work with PROFOR both on the definition well-managed forests. of priority countries and tasks and then on imple- Analyzing the cross-sectoral and macroeconomic mentation of the work program. The terms of refer- effects of policy interventions and investments ence and objectives for PROFOR would ensure that on forests. each supporter obtains value from the arrangement. To ensure key stakeholder representation, an over- Other international arrangements. As outlined sight committee would be established to guide activ- earlier, successful implementation of enhanced ities and monitor progress. The Bank will need to NFPs will require the active participation of all provide an effective linkage between the PROFOR stakeholders through a consultative process. Consul- program and the Bank's sector portfolio and to tation should be ongoing throughout implementa- manage ESW, identification, and preparation activi- tion. It will be necessary to bring together national ties so that major improvements in coordination and international research and technical groups. The result from the process. main international collaborative research organiza- Activities sponsored by the PROFOR Initiative tions will be CIFOR, ICRAF, the European Forest will be based on the three objectives listed in Institute, FAO, and ITTO. In addition, research and chapter 2: (1) harnessing the potential of forests to technical support will be sought from international reduce poverty, (2) integrating forests in sustainable NGOs such as IUCN, WWF, World Resources Insti- economic development, and (3) protecting vital local tute (WRI), and International Institute for Environ- and global forest environmental services and values. ment and Development (IIED). The PROFOR team will work closely with Bank oper- ational staff, client governments, and other stake- Collaboration with FAO. FAO is establishing an holders to select the specific analytical and knowledge Implementation Facility to provide technical sup- activities to be carried out. The team would ensure port to strengthen in-country capacity for develop- that this analytical work is integrated and coordi- mental work on NFPs. It will be important for the nated with broader cross-sectoral and economywide Bank Group and FAO to work together and with interventions. Opportunities would be sought to other major partners on this initiative, using their incorporate the results of enhanced sector analysis respective comparative advantages. For the past and consultation, and the issues they raise, in Bank 30 years, the Bank has had a strong collaborative CASs, business plans, and forthcoming PRSPs; partnership with FAO, especially through the par- SUSTAINING FORESTS A DEVELOPMENT STRATEGY tially Bank-financed FAO/IBRD Cooperative Pro- linkages between GEF's focal points and projects. The gram, which has played a key role in supporting GEF has been a close partner of the Bank in helping to Bank in-country agriculture and forest-related sec- develop the Bank's forest and biodiversity portfolio, tor studies and project identification/preparation which amounts to about US$380 million in more activities. The PROFOR Initiative would provide an than 50 countries. important vehicle in which the two agencies could collaborate. For the focus group of countries, work- ITTO. An active dialogue is ongoing about the ing closely with the government and other stake- possibility for closer collaboration between the Bank holders, PROFOR would use the resources and com- and the ITTO. This intergovernmental organization parative advantages of the partners to formulate a is itself undergoing reform. It has adopted a series of consultative and analytical process in each country. targets that fit well with some aspects of the Bank's This process then would form the basis of an NFP. own programs, including (a) a 15-million-ha Pro- The government would be in a position to identify tected Area target by the year 2003 for transbound- 49 issues and priorities and a comprehensive request ary protection areas in the tropics; and (b) a forest for an NFP to support the broad-based program of management target of bringing 500 forest enter- reform and development. prises under ITTO's Criteria and Indicators scheme by the year 2003. This second target includes the CGIAR. Through its support to the CGIAR system, establishment of an independent monitoring sys- the Bank has developed strong partnerships with the tem. A third target is a total of 10 million ha of Indonesia-based CIFOR and Kenya-based ICRAF. restored forest ecosystems by the year 2003. The emerging research results of these and other CGIAR centers will be integrated in Bank-supported Nongovernmental Organization in-country sector work. Partnerships Other research institutions. The Bank has a global World Bank/WWF Alliance. In 1998 the Bank role in sharing knowledge and supporting research on joined forces with WWF to form the World forest issues. While the Bank has limited comparative Bank/WWF Alliance to promote both the conserva- advantage in forestry and the technical aspects of for- tion of forests and SFM. This partnership has est management, it can be a vehicle to produce and embraced the World Bank's goal of ensuring sustain- share knowledge in the areas of cross-sectoral impacts able livelihoods for forest-dependent poor and as well as economic and policy analysis. The Global indigenous peoples and was founded to achieve Forest Information Service, coordinated by the Inter- three global targets by 2005 (box 3.3). The Alliance national Union of Forest Research Organizations will be an important partnership in implementing (IUFRO) and FAO, has the potential to support these the Bank's Forest Strategy and Policy. The Alliance's activities. Although not supported directly by the ambitious targets challenge not only the Bank and Bank, the work of several other specialized technical WWF, but also other actors--governments, busi- and/or policy research institutions has enhanced ness, conservation groups, local communities, and Bank staff understanding of forest-related issues, con- aid agencies--to take action to reduce the loss and straints to progress, and potential solutions. These degradation of forest resources. institutions include, for example, IUFRO, the Euro- The partnership strives to achieve its goals and pean Forest Institute, the Iwokrama International objectives through strengthening policies and insti- Centre for Rain Forest Conservation and Develop- tutions and bringing together stakeholders to facili- ment, WRI, and IIED. Periodically, the Bank also has tate their work: building capacity for improved drawn on its linkages with universities that are pursu- management and providing the framework for inde- ing research on topics of mutual interest. pendent certification of forest management both in market and nonmarket contexts. GEF. The GEF brings together more than 165 mem- The Alliance is moving into implementation of ber governments, development institutions, and the its Protected Areas and forest management targets. It scientific community as well as a wide range of is doing this through pursuing: nongovernmental and private sector organizations to work toward the common goal of global environmen- Activities in key forest countries in which the tal protection. It facilitates technical and information Alliance works with governments, NGOs, and the IMPLEMENTING THE STRATEGY: BUILDING EFFECTIVE PARTNERSHIPS BOX 3.3 World Bank/WWF Alliance Targets for Forest Conservation and Improved Management Targets for 2005: legally Protected Areas. Many of these legally Pro- tected Areas exist only on paper, without effective 50 million ha of new forest Protected Areas. protections on the ground. Hence, the targets would A comparable area of existing but highly threat- increase the global current area under IUCN protec- ened forest Protected Areas secured under effec- tion categories I­III by more than 25 percent. tive management. Improved forest management targets. These targets A global target of 200 million ha of production aim at improving the overall biological, social, cul- 50 forests under independently certified sustainable tural, and long-term equity and economic outcomes management. of existing forest utilization operations. Targets would be achieved through a range of approaches The initial global targets for forest conservation from large-scale landscape analysis to local projects. and improved forest management were designed to Achieving these targets would mean demonstrably be significant considering the scale of the problem improved management in approximately 30 percent but also had to be achievable within a reasonable of production forests worldwide. time frame (seven years). Source: World Bank/WWF Alliance 1999b. Conservation targets. Of the 3,300 million ha of forests remaining on Earth, only 6 percent are in private sector to develop programs and projects mainstream dialogue on important issues, including that can bring about commitment and change at independent monitoring and certification of forest the scale required by the global targets. operations. Activities designed to enhance integration of the Alliance targets and activities with "upstream" Other NGO partnerships. Other NGO partner- investments. These investments are aimed at gen- ships also are being developed and will need to erating future interventions and resources to be strengthened. improve forest management and facilitating key Forest Trends is a Washington-based NGO cre- stakeholder groups within countries. These ated in 1998 with support of the World Bank and the groups are expected to develop and apply stan- MacArthur Foundation. Forest Trends grew out of dards for forest management certification and the earlier multistakeholder, Bank-supported Forest assess and improve the effectiveness of Protected Market Transformation Initiative. Forest Trends has Area design and management. brought together a potentially influential coalition through its board of directors of Northern and Through the Alliance, WWF and the World Bank are Southern private sector entities and NGOs actively committed to finding ways to achieve more than engaged in the forest sector. either organization could accomplish indepen- Forest Trends focuses its work in two strategic dently. By combining the World Bank's financing directions. One is to develop markets for forest operations, access to policy dialogue, convening ecosystem goods and services and SFM that will lead power, private sector partnerships, and analytical to healthy and expanding forest ecosystems and sus- capacity with WWF's knowledge of conservation tainable livelihoods for forest-dependent peoples. science, local field presence, large technical skill base, The other is to improve the efficiency of forest public trust, and market influence, the Alliance is a product use and the development of alternative mechanism formed to tackle forest management sustainable sources of fiber to take the pressure off issues much more broadly. It will require additional natural forests. Forest Trends has increased private support and partners to maximize its ability to sector understanding of forest carbon market draw on the strengths of each institution and to opportunities and the challenges of creating a SUSTAINING FORESTS A DEVELOPMENT STRATEGY market in forest carbon offsets to support forest con- in situations in which the environment for responsi- servation and sustainable use. Forest Trends also has ble investment is not favorable. convened industry leaders, analysts, and advocates to evaluate and promote dialogue and investment in CEOs Forum on Forestry. In 1998, the president of nontimber forest goods and services. the World Bank initiated the CEOs Forum on Forestry, a dialogue originally initiated with the chief Critical Ecosystem Partnership Fund (CEPF). The executive officers (CEOs) of large forestry firms CEPF is a major new source of international funding from around the world. This arrangement has since directed primarily to nongovernmental, community, expanded to include retailing and production firms and grassroots organizations. Within 21 "hotspot" and some major international and Southern NGOs. ecoregions, it seeks to engage all stakeholders that The forum has become an important vehicle can best contribute to solutions for biodiversity through which the Bank and others can exchange conservation. The CEPF is a partnership among views and develop ideas on how to approach forest 51 Conservation International (CI), the GEF, the issues, to partner more effectively with the private MacArthur Foundation, and the World Bank. sector in its programs, and to more actively incorpo- Closer collaboration between the Bank and the rate the private sector in Forest Policy dialogue with IUCN is being developed. The IUCN has been a national and international stakeholders. As a direct major partner with the Bank in developing the result of the CEOs Forum, working groups on revised Forest Strategy and Policy. Closer coopera- specific issues and regions have been initiated. The tion with IUCN could greatly strengthen the Bank's CEOs Forum Africa Working Group has become a approaches to collaborative forest management, major initiative in the Congo Basin, bringing achievement of SFM and Protected Area targets, and together major international forest companies, strategies to more effectively contain forest fires. international and local NGOs, representatives from The revisions proposed in this strategy for a more science, and the African Timber Organization. The integrated approach to forest conservation and group focuses its work on codes of conduct, bush development are highly compatible with the priori- meat poaching, reduced-impact logging, biodiver- ties outlined in the Forest for Life Strategy jointly sity conservation in forest concession areas, and developed by IUCN and WWF. issues in sector governance and timber trade. The Possibilities also are being explored for developing Forest Dialogue Group, another spin-off of the collaboration with The Nature Conservancy (TNC), CEOs Forum, seeks to maintain a global dialogue on a leading conservation agency, which has been col- important issues in forest development among laborating closely with the Bank in developing inno- industry, NGOs, forest owners, and forest workers vative financing approaches for forest conservation. associations. Collaborative possibilities also are being explored with a WRI-sponsored initiative, Global Forest Need for additional partnerships. A new partner- Watch, which is an independent network of national ship with the private sector, civil society, and gov- and local organizations engaged in monitoring and ernments needs to be established for forest carbon. mapping logging, mining, road building, and other All forests store carbon, and this carbon is released developments that impact forests in major forested when they are disturbed or burned. Up to one-third regions of the world. of greenhouse gases being emitted into the atmos- phere are estimated to come from biomass burning, clearing, and related activities. Protection of threat- Improving Links to the Private Sector ened forests and reduction of the impacts from log- Participation of the international private sector is ging and agricultural development are potentially especially important to produce favorable forest out- important ways of increasing the contributions comes. International flows from private interests to of forest lands to carbon emissions. In addition, forest operations and forest-using industries dwarf the creation or enhancement of new carbon sinks the combined flows from multilateral development through tree planting has been suggested to offset banks, donor agencies, and NGOs. There are major some greenhouse gas emissions. opportunities to leverage more private sector invest- The clear potential to reduce emissions from for- ment into sustainable forest activities, or related est lands and to use forest lands to sequester carbon investments (for example, in processing), especially stored in the atmosphere has led to considerable IMPLEMENTING THE STRATEGY: BUILDING EFFECTIVE PARTNERSHIPS interest from some countries and companies in spon- activities in developing and transitional economies soring forest conservation and management projects catalyzed by largely private sector finance. PCF to offset their carbon emissions. However, while these resources are still modest in terms of the scale of offset projects could provide useful funds for forest required demonstration activities. Therefore, a "pro- conservation and management, they remain contro- totype forest carbon" or "sinks" fund embracing versial. Many environmentalists fear that offset proj- partnership with NGOs, industry, and governments ects might encourage bad forestry practices, for seems warranted to extend "learning by doing" in example, by providing incentives to replace natural creation of Protocol-eligible carbon assets from forests with fast-growing exotic species. It also is clear forestry in an environmentally and socially responsi- that forests alone can never be more than a relatively ble way across a representative range of potentially small but still significant part of an overall solution to reforested landscapes and contexts. However, the the greenhouse gas problem and that early actions to Bank's role should be catalytic only. Once sound 52 reduce the fossil fuel emissions from industrialized performance benchmarks are in place and these nations at their sources remain essential. markets have attracted private sector participation, The enhancement and improved management of the Bank's role will have been completed. "carbon sinks," including afforestation, reforesta- More generally, the Bank needs to consider the tion, and forest conservation, are eligible activities expanded opportunities for interaction with the pri- under the Joint Implementation provision of the vate sector that are presented by increased private Kyoto Protocol. At the resumed Sixth Conference of sector interest in investment in forests in Bank client the Parties in Bonn, July 2001, Parties to the countries. For example, a number of very large insti- UNFCCC agreed that afforestation and reforestation tutional investors are becoming interested in sup- activities also were eligible activities for the achieve- porting responsible forest investments both in the ment of emissions reductions under the Kyoto Pro- large remaining natural forest areas of the world and tocol. The Parties decided that applicable rules in plantation activities. Institutional investors cite would be agreed at the Ninth Conference of the Par- the findings of studies indicating that returns to ties to the UNFCCC in 2004. The volume of certified forest investments are countercyclical to equities emissions reductions achieved through afforestation markets movements and therefore a useful hedge. and reforestation to meet UNFCCC obligations of They recognize the option values of forests, namely, the industrialized countries in the first commitment that contrary to virtually all other commodities period of 2008­2012 is five times 1 percent of their traded internationally, the real price of forest output individual emissions reductions obligations under has a long-term tendency to rise. There also are the Protocol. The door is now formally opened to strong possibilities that the potential markets for using the carbon-offset trade to stimulate reforesta- carbon sequestration and other environmental tion and afforestation activities, but not as an incen- goods and services from these forests will grow. tive to avoid deforestation. Nevertheless, applied Because of the institutional origin of the funds sensitively to environmental and social concerns, they invest, the interest of these firms is firmly in the these eligible forest asset creation activities under area of sustainable investments and social responsi- the Kyoto Protocol can support improved forest bility. Many governments have a strong interest in management in developing countries.12 Through such investors entering their forest sectors. These public­private partnerships and with its experience investors bring management strength and access to in implementing the Prototype Carbon Fund (PCF), reliable international funds, and, ultimately, they the Bank will contribute to the Parties' review of the affect the credit standing of the countries in which rules governing afforestation and reforestation activ- they invest. What often is lacking in some countries ities in the CDM. with large forest potential is reasonable political risk The Bank's PCF is able to invest up to 10 percent security and the means to address problems or con- of its subscribed capital--about US$15 million--in straints with the investment-enabling environment. Kyoto Protocol­eligible carbon sequestration activi- The Bank could have a major role in developing this ties in transitional economies and developing potential, largely through its capacity to address countries. These PCF carbon purchase activities issues of the investment-enabling environment in will enable the Bank to pioneer environmentally, forest sectors. That is, the Bank could address some economically, and socially responsible investment in of the risk factors that presently inhibit these desir- forest conservation, management, and restoration able forms of development. SUSTAINING FORESTS A DEVELOPMENT STRATEGY The Bank Group and its partners are in a good with the private sector and its contacts in the private position to address some of these difficulties because sector, especially to intensify the dialogue with they have some very large institutional investors that have expressed interest in working more closely with the Access to government economic decisionmakers Bank on investments in SFM in some key Bank on the basis of long association under existing client countries. lending and other programs; Access to the guarantee instrument, which could be employed in creative ways to combine reducing IMPROVING INTERNAL BANK WORKING the exposure of potential investors to policy risk RELATIONSHIPS AND ACCOUNTABILITIES with private underwriting of commercial risk; The means to incorporate specific policy reforms International Finance Corporation and and undertakings needed to attract responsible Multilateral Investment Guarantee Agency 53 private investors to the forest sector into larger economic restructuring and reform programs, Two institutions of the World Bank Group, the IFC such as those being developed under structural and the MIGA, offer additional important instru- adjustment, poverty reduction, or other broad ments for drawing the international private sector economic reform interventions; into investing in SFM in Bank client countries. Field presence to include specific forest activities Clearly, to implement this strategy, a closer working in larger rural development or natural resources relationship between the IFC and IBRD/IDA needs management programs that could gain the atten- to be sought. The ESSD Forests Team would have tion and support of important local stakeholders a role in bringing this about by building a closer and political figures resulting in positive forest relationship with forest-oriented staff in IFC. outcomes. MIGA could have a larger role in forests through its ability to insure private investors against political Clarifying and supporting a framework to attract and catastrophic risk. appropriate private sector investment in the forest and forest industry sector will facilitate IFC's role in World Bank Institute financing new investments and investors in sustain- The WBI has the capacity to bring awareness and able forest operations. IFC has the capacity to training to policymakers in developing countries. finance a wide range of operations from large By focusing on the thematic areas of forests and investors to medium-sized enterprises through loans poverty, governance and economic management, or equity investments made directly or through and local and global markets, WBI can help lay the financial intermediaries. IFC's investments in pri- groundwork for the solid implementation of a new vate sector, sustainably managed forestry and forest Forest Strategy and Policy. WBI also can help coun- industry projects have demonstrated and will con- tries that wish to embark on Forest Policy reform tinue to demonstrate the financial viability of inde- programs. In countries in which programs and proj- pendently certified, sustainable private sector ects are being prepared, WBI can work in parallel forestry operations. with the Bank to support the intensive consultation The Bank Group could follow a threefold strategy and dialogue processes that will be needed to ensure to develop this potential. First, it would raise its own that understanding and feedback on forest initiatives profile within the framework of NFPs. Second, it are broadened and that constituencies for change would develop a sharper focus on the interests of are developed. forest-dependent people, improved forest manage- ment, and effective protection of forest resources in Role of the ESSD Forests Team critical forest regions. To achieve this, the Bank Group would need to invest in partnership-based The integration of forest-focused staff and resources consultative processes. Third, it would emphasize from the Environment and Rural Development bringing the message of the value of forests to all Departments of the ESSD Vice Presidency into a single stakeholders. forests anchor team in 1999 has provided a basis for There is a need for the Bank to deepen both the coordinating policy and some global tasks for forests. range of activities supported through its interaction The expanded activities implied for the Bank forest IMPLEMENTING THE STRATEGY: BUILDING EFFECTIVE PARTNERSHIPS program in the new sector strategy suggest that the Alliance, and manage other major international major priority tasks for this team are partnership arrangements To take major responsibility, through the sector To be instrumental in improving coordination with boards and by other means, for monitoring and IFC, MIGA, WBI, and GEF. However, to achieve advising Regional forest teams in the Bank on this, the team must broaden its mandate beyond implementing the new strategy. To do this effec- the IBRD/IDA forest community and develop spe- tively, the team will need to develop partnership cific strategies to engage with these groups arrangements with the Quality Assurance Group To coordinate with PROFOR and assist in fulfill- To advise the Regions in applying and monitor- ing its objectives, support the World Bank/WWF ing the new OP on forests 54 SUSTAINING FORESTS A DEVELOPMENT STRATEGY C H A P T E R F O U R Implementing the Strategy: Incentives, Selectivity, and 55 Deliverables he Bank's strategic approach to forests T result is that overall transaction costs of engagement needs to be integrated in country programs in forests are higher than the average for Bank through developing and costing interven- budget allocations. These higher transaction costs tions that can lead to meaningful levels of achieve- and higher risks must be balanced against the ment consistent with country priorities. Such importance of forests to reducing poverty and to the integration will need to be consistent with the Bank's delivery of vital environmental services both locally organizational structure and decisionmaking. Spe- and globally. cial incentives may be necessary to ensure that the The Bank must find strategic ways to leverage its strategic objectives are achieved. finance and use its influence to address global and Decentralization of Bank decisionmaking, with country issues in the forest sector while recogniz- its focus on demand-driven priorities established at ing the importance of country ownership and the country level, has implications for the institu- acknowledging the higher costs associated with tion's engagement in the forest sector. On the one managing projects and programs in important but hand, decentralization is highly compatible with the sensitive sectors such as forestry.13 The approach to emphasis in this strategy on integrating forest issues implement the strategy proposed in this document and activities in broader economywide and cross- is based on the following: sectoral programs and strategies and achieving Adapting the new approach to global and corporate country ownership. On the other hand, decentral- priorities being developed in the World Bank to ization may strengthen the tendency already appar- enhance the commitment and resources devoted to ent in some countries to avoid proposing and the incremental PROFOR outlined in chapter 3. borrowing for projects and programs with more Using incremental budget resources for ESW, thus risks and higher transaction costs, but whose impor- enabling country teams to incorporate potential for- tance to economic and environmental sustainability est impacts more adequately into CASs, PRSPs, and is substantial and whose benefits to the poor are cross-sectoral and economywide measures under high but possibly less immediate. This outcome is consideration by the Bank. In the medium term, the especially likely in cases in which forest projects also funds will underwrite the (relatively higher) costs of are perceived by Bank country teams and managers preparing and supervising incremental investment to involve intensive management of external rela- in forests. ESW and analytical work will be front- tions. The average size of forest projects in the Bank loaded in the program to build the foundations is relatively small, but some project preparation for increased investments in the forest sector and to costs are fixed; and safeguard compliance costs are heighten awareness inside and outside of the Bank higher in this sector than in many others. The net of forest issues. Using this enhanced level of commitment by the in the World Bank's forest program has declined Bank to leverage additional donor funds and precipitously. A major objective of the new strategy stronger participation by other partners. These would be to rebuild ESW in forests and forest- funds and participation will be channeled into related work to a level close to that which prevailed better-aligned programs of assistance for the forest at the beginning of the 1990s, for a defined period, sectors in selected client countries. Enhanced fund- after which it is assumed that client demand will ing and stronger participation by the Bank and lead to higher allocations for this purpose that will other partners also will provide an opportunity to be made autonomously through the normal coun- coordinate donor analytical work more effectively try budgeting process. Under the broader goal of and to make better use of the comparative knowl- having forests take their place in an enhanced edge and analytical strengths of the major partners. World Bank commitment to environmental com- The funds will involve support for some donor and mons, the two specific objectives of increased forest 56 NGO partnership initiatives that already are well ESW are the following: advanced in conceptual design and the formation of other initiatives that are less well developed. To provide the knowledge base and analytical Especially important will be strengthening rela- support to effectively integrate forests in develop- tionships in client countries with compatible ment programs and to link policies, projects, and private sector investors (or potential investors) in programs in other sectors to forest outcomes. forest management and protection and forest Besides establishing the importance of forests in industry development. poverty reduction, sector work will determine the Developing and maintaining an enhanced forest potential impacts on forests and forest-dependent sector lending portfolio in the Bank. An increased ESW peoples of forest and nonforest sector activities program is indispensable, to be leveraged by stronger contemplated by the Bank through investment, interaction with borrower countries, donors, and adjustment, and broad poverty reduction pro- other stakeholders with common interests in the grams. It will establish the alternative paths by forest sector (see section on Selectivity below). which policy, institutions, and management of forest resources can be improved. To develop the analytical and consultative bases BUILDING THE INTERNAL BANK needed to build awareness and demand for for- COMMITMENT TO FORESTS est investments. Sector work will provide the bases for effectively integrating forest programs Raising the Bank's engagement in the forest sector in CASs and PRSPs not only by creating knowl- will be initiated through incorporation of forest edge of forest outcomes but also by building issues, where these are relevant and important, government and public support for engage- well upstream in PRSP and CAS discussions so that ment. For sector work to build this awareness Country Departments can undertake the necessary and demand, it must be participatory and follow-up analysis in a timely fashion. The basic widely discussed. objective of analytical work is to raise awareness of the potential and importance of dealing effectively with forest outcomes. As demand results from Using Partnerships to Leverage Impact this process, additional resources could be commit- Donor partnerships to boost the ESW program. ted to increase lending and nonlending activities in As discussed in chapter 3, hosting PROFOR will the sector. strengthen the Bank's international role in the forest sector. A primary spin-off of this multidonor part- Increasing Economic and Sector Work nership will be the addition of analytical outputs for The primary means to initiate the process of build- country forest sectors that would well exceed the ing analysis, awareness, and then demand for forest capability of any one of the partners to develop investments and for incorporation of forest issues alone. Since the externalities of this sector work are in larger programs through the CAS and PRSP high, it is expected that all donors, including the processes would begin with an enhanced commit- Bank, would contribute to the common effort of ment to focused ESW. As noted in chapter 1, ESW building knowledge through analysis. SUSTAINING FORESTS A DEVELOPMENT STRATEGY Seeking Blended Financing to Address Local extensive sector analysis and stakeholder consulta- and Global Forest Issues tion. It will enable the application of the principles of selectivity and alignment across the activities of a Forests are part of the environmental commons group of participating financiers, rather than those and, as demonstrated in chapter 2, offer many of the Bank alone. It will improve the focus of inter- externalities to both local people and the wider ventions and lower reputational and institutional national and international community. Besides risk in the sector for all involved by ensuring more addressing poverty and economic development, participation by stakeholders early in the commit- improving the quality of forest operations will gen- ment cycle. In addition: erate benefits through securing future productivity, maintaining watershed quality, preserving biodi- versity, and sequestering carbon in the environ- The Bank will gain leveraging impact for its mental commons. Many client countries have financing, and other donors will gain the impact of argued that, because some of these key benefits are coordinated policy reform and strong linkage of 57 global benefits, the countries that provide them sector issues with broader economic frameworks. must be compensated through concessional fund- Opportunities will increase for private sector ing mechanisms. In its review of the 1991 Forest participation in responsible forest investments Policy, OED discussed and agreed with this view. from the reduced risk expected to result from In addition to the need for concessional the improved policy and enabling environment resources, forest operations will need financing of and the more unified stakeholder approach to sufficient magnitude to make a difference. Isolated the sector. forest projects will not always bring sufficient bene- Clients will gain from efficiencies and streamlin- fits to stakeholders to warrant their interest in ing in the sector programs they are planning and conserving forest cover. Financing from other expected to implement. donors, the private sector, and NGOs will be needed to supplement government and Bank investments. Supporting and Strengthening the World This program of investment from various sources Bank/WWF Alliance will need to be coordinated and have a unified The Bank has been supporting the World Bank/WWF strategic focus. Alliance through trust funds, the Development Grant To leverage the impact of its own increased com- Facility, and some Bank budget funds raised through mitment to forests, the Bank will seek the active the ESSD Network. It is necessary to ensure that the participation from donors and responsible private trust fund support continues: some commitments to sector investors. This financial participation will the Alliance are time bound and will terminate at the help develop a shared agenda, enabling all groups to end of FY02. There also needs to be adequate support focus their inputs on the same basic set of objectives in ESSD to manage this Alliance and in the Regions to in the sector within the framework of enhanced continue support for operational staff to dedicate NFPs. The disbursement of these funds will be han- some of their time to act as Regional coordinators. dled in parallel--no centralized fund is proposed-- Some prospects for expanding this initiative to focus using coordinated programs to support countries more on the use of forest conservation and manage- in realizing their NFPs. Financing partners already ment for sustainable poverty reduction, to involve a have indicated their willingness to work together broader group of NGO partners, and to involve the both analytically and financially to realize these GEF more directly are under consideration by the objectives. Alliance Steering Committee. The advantage of this arrangement is that partic- ipating donors would be relying on a single strategic Increasing Involvement with Private Sector approach: one that would emulate a grant-and-loan- Partners based instrument to client countries. This approach should lead to greater focus and cohesiveness in For forest management to improve, responsible pri- investment strategy. All stakeholders will benefit vate investors who are willing to support SFM need from this approach, because it is based on develop- to be brought into the sector and logging enterprises ing assistance programs that focus on priority that participate in destructive and sometimes rogue improvements, with a strong emphasis on necessary and illegal forest operations need to be shut down. IMPLEMENTING THE STRATEGY: INCENTIVES, SELECTIVITY, AND DELIVERABLES If governments, the Bank, and its partners work be applied and also to prioritize the specific forms of together to develop a positive enabling environment involvement to gain the most impact. for long-term and sustainable private sector invest- ments in natural resources, responsible and environ- Alignment and Selecting Countries mentally conscious investors that are interested in for Focus supporting SFM and conservation can be brought The task of building engagement will consist of into the sector. The potential to attract such bringing selected candidates from among these investors is likely to increase as mechanisms are potential investments through the CAS and PRSP developed for investments in forest-based carbon processes, then into the project identification and through which afforestation, reforestation, and pre- concept development processes, and on into the serving standing natural forests can be made more Regional pipelines. financially attractive. The essential items needed to realize a selected 58 At present, the Bank's main interaction with the program of investments from this range of possibil- private sector on a multilateral basis is the CEOs ities are the generation of Bank and borrower com- Forum, in which private enterprises meet together mitment to increased investments and partnerships with leading NGOs and representatives from other with donors and others to create blended financing organizations. As in the case with the Africa Working and attractive rates of return. If a decision is made Group of the CEOs Forum, collective action can to proceed with the strategy proposed in this docu- bring about codes of conduct that better meet inter- ment to rebuild Bank engagement in forests, the national standards of forest management. Working first step will be to select a group of client focus together through dialogue, third-party oversight, countries in which the Bank is (or will be) engaged and encouragement of responsible institutional in developing CASs, PRSPs, and/or significant nat- investments can change the landscape of private ural resources or adjustment operations and in investment in production forests from nonsustain- which forests are important in terms of both the able practices to sustainable management and con- environment and poverty reduction. Approxi- servation. Indeed, a major priority of this revised mately 15 countries in this category will be identi- Forest Strategy is to allow the Bank to play a signifi- fied, and initial evaluation of the prospects made. cant role in helping what are all too rare examples of As indicated by the evaluation, six to eight coun- good forest management practice become private tries will be identified to receive more intensive and sector norms rather than private sector oddities. direct support. Abandoning the partnership with the private sector can lead only to the continuation of the current Developing the Focus on More Flexible widespread patterns of economically inequitable, Lending socially destructive, and environmentally irresponsi- ble exploitation of the world's forests. One of the medium-term implementation objectives The IFC has many individual investments in of the Forest Strategy is to move toward more flexi- various private sector companies. Drawing on these ble programmatic lending to assist borrowers to contacts will open another avenue by which the implement their forest programs with lower transac- Bank Group could expand its involvement with tion costs. Under this strategy, the Bank will adopt the private sector. Maintaining the CEOs Forum, a different approach depending on the readiness contacting potential new members, and expanding of countries to proceed with their enhanced NFPs efforts through the Forum to generate specific (table 4.1). In some countries, the Bank will be able field investments will require additional budgetary to participate only in country dialogue and to do ini- support for the Forum and increasingly shared tial sector work. At the other extreme, lending will be responsibility. low cost with heavy reliance on government com- mitment to implement agreed forest programs. Facilitated by increased ESW, this approach is SELECTIVITY expected to lower lending costs and improve loan effectiveness in the forest sector. Given the limits on both Bank resources and capac- Once the knowledge base has been built through ity, it will be necessary to be selective as to where the sector work, project experience, and learning efforts to increase Bank engagement in forests are to through monitoring, the Bank can proceed to more SUSTAINING FORESTS A DEVELOPMENT STRATEGY Table 4.1 Appropriate Forest Investments Category of client forest situation Type of involvement Cost/implementation implications Category 1: Completed (or well Adopt longer-term, more flexible Bank: Lower budgetary costs; advanced) enhanced National approach to support the sector. 0.75 to 1.0 percent of funds lent as Forest Programs (ENFPs); Continue adjustment lending and preparation and supervision costs. demonstrated capacity to use guarantees where needed. Client: Lower risk status for private implement forest programs; and sector borrowing; higher leveraging of adequate policy and institutions, grant funds for protection and related including fiduciary oversight and purposes. good governance. Category 2: Government and other Major participation in ENFP Bank: Medium budgetary cost: major stakeholders committed to development. Follow-up investments 1 to 2 percent of funds lent (depending 59 (or in early stages of involvement for scaling up piloted approaches to on proportion of sector lending in) ENFPs or equivalent national national scale via project investment adjustment present in portfolio). sector strategy development; policy lending and adaptable program Client: Reduced risk perceived by and institutional reforms and loans. Intensification of donor potential private sector lenders; higher strengthening still needed. technical assistance in field prospects of Bank and other operations and monitoring and institutional loans being successful. evaluation. Possible use of sector adjustment instruments and guarantee mechanisms to stimulate scaling up of appropriate investments in the sector. Category 3: Significant interest ESW and other investment in Bank: Higher cost, 2 percent-plus on among stakeholders and reformist dialogue and sector analysis, lending amount due to continued up- elements in government in forest investment in institution building front dialogue/ESW costs. sector management and and piloting feasible approaches to Client: Limited exposure to lending in development; major policy and management, protection and relatively poor implementation institutional issues unresolved. improved participatory approaches environment; opportunity to build a (via learning and innovation loans). strategic approach and a strong Possibly some incorporation of constituency for reform. basic policy reforms in planned structural adjustment operations. Category 4: Government ESW and other inputs to support Bank: Limited lending to governments commitment and awareness on initiation of dialogue and basic at this stage; limited inputs into basic major sector issues weak or not sector analysis; outreach and sector analysis, dialogue/watching brief present; other stakeholders poorly consultation to build sector activities. organized or in major conflict; constituency groups in-country. Client: Basic awareness building, initial major economic and social Strategic support through IFC and stakeholder contacts. difficulties present. the World Bank/WWF Forest Alliance for NGOs and catalytic private or community operators prepared to meet international norms of good forest management practice. ESW, economic and sector work; IFC, International Finance Corporation; WWF, World Wide Fund for Nature; NGO, nongovern- mental organization. EXPECTATIONS AND REALITIES: RISKS flexible forms of lending at lower transaction costs. AND MONITORING PROGRESS Table 4.1 indicates how this progression will take place and how the cost of lending will change with A primary message of the consultations done for each step of increase in country ownership and this strategy is that, to make a difference in the for- commitment. est sector, the Bank must become more engaged. IMPLEMENTING THE STRATEGY: INCENTIVES, SELECTIVITY, AND DELIVERABLES The ultimate beneficiary of the Bank's renewed specialists in the Bank, and it is significant that the engagement in the forest sector through this strat- Regions have requested that an emphasis be given to egy will be the poor and the global environmental hiring staff qualified in forest areas. The time frame commons. In the earlier of the initial five years of over which increased engagement in the sector occurs, the strategy's implementation, the focus will be pri- and the nature of that engagement, will depend on marily analytical work and implementing the finan- specific Regional and Country circumstances. The cial partnerships with donors, NGOs, and the pri- Bank's commitment to reengage in the sector will itself vate sector in focus countries willing to progress on raise the confidence of other donors, NGOs, and pri- forest issues. vate sector investors that the Bank is willing to imple- ment its Forest Strategy. Bank engagement will follow its comparative advantage in policy and institutional Institutional Realities strengthening and scaling up successful programs of 60 It is acknowledged here that the tasks involved in the forest management and conservation. three pillars of strategy discussed in this paper are very large, that the potential outcomes for forests Some Potential Broad Outcomes, and forest-dependent people and countries with in Perspective large forest resources are even larger (see the Broad Outcomes section below), and that these large It is useful to consider the magnitude of impacts that expectations could cause some reputational risk for could result from an effective international program the Bank (this specific issue of risk is discussed to address the Rio Forest principles, and subsequent under the Risks section below). The reality is that intergovernmental agreements on what is needed in any feasible program for the Bank to reengage in the forests, to gain some appreciation of the importance forest sector must begin modestly, recognizing that of the task. On the basis of some previous commit- time and effort will be needed to build both the ments, and figures on the scale and magnitude of institutional capacity and the expanded demand forests' potential contribution to development and from borrowers for Bank involvement. In its early environmental protection discussed earlier in this stages, reengagement in the forest sector must be paper, it is reasonable to suggest that a significant based on analysis and consultative work, linked to and well-directed effort among donors, NGOs, the Bank and NFP priorities, and supported by partner- private sector, borrower country governments, and ship arrangements. Later developments will depend stakeholders could aim for the following large goals on outcomes of these activities and will proceed in over the next 5 to 10 years: the directions indicated by country commitments. This caution is due largely to the reality that a re- Poverty. Improve the livelihoods of 500 million engagement in this sector will take time to build from people, most of whom are poor and dependent on the present low human and technical resource base forest and tree resources, primarily through com- available in the Bank. At the time of writing, the Bank munity forest management and development of had 25 operational staff who could be classified as agroforestry. being engaged in forest work for more than 50 per- This number, while large, is less than half the cent of their time. Of these, approximately one-third number of poor people estimated to be dependent to are located in the field. A further five staff members some significant extent on forests for their livelihood. work in the ESSD Forests Team, and the equivalent of three more are in the Development Economics Unit Governance. Strengthen the institutional capacity and WBI. More than half of these people are regular to reduce the losses from illegal logging by US$5 bil- staff; the remainder are appointed on various consul- lion per year and improve the management of forest tancy contracts, and some are in the process of con- concessions to increase government revenues by version to regular status. A further 12 staff work more US$2.5 billion per year. specifically on biodiversity and conservation issues, which overlap forest areas to a significant extent. As noted in chapter 1 of this paper, the estimated Eventually, an increase in resources focused on losses from failure to collect appropriate royal- forests will be essential. At the time of writing, the ties and taxes from legal forest operations is cost- Environmental and Rural Sector Boards in the Bank ing governments about US$5 billion annually. had initiated a program to hire more natural resource Illegal operations probably cost them a further SUSTAINING FORESTS A DEVELOPMENT STRATEGY US$10 billion in lost revenues. Recovery of half 10 to 15 percent of this under improved standards the amounts currently lost through improve- of forest management within a 10-year period. ments in the capacity of governments and other Fulfilling this aim, along with continued rapid stakeholders to collect revenues, raise more reli- progress in developed country certification, would able sources of financing for forest operations, achieve this certification target. and control illegal operations would represent a significant achievement, if not eliminating the The reduction of poverty through mechanisms that problem entirely. simultaneously improve the global environmental An example from recent Bank experience cited in commons benefits all stakeholders. However, it is the current World Development Report 2000/ reiterated here that to achieve these goals will require 2001: Attacking Poverty relates to significant the concerted and coordinated efforts of all stakehold- reforms in governance and revenue collection ers. This proposed strategy indicates a possible path that have occurred in Cameroon, through a for the Bank to play a significant part in that (albeit 61 cooperative effort over a number of years with limited resources) through a catalytic approach: between the government and the Bank, in the building partnerships and knowledge and increasing context of structural adjustment operations. the blended financial flows to developing countries While the process is not yet complete, it has led to needed to realize the potential contributions of significant gains in transparency, revenue yield, forests to sustainable conservation, development, and participation by communities, and compliance poverty reduction. with proper forest management procedures. Risks Protection and conservation. Bring 50 million ha of forests into new Protected Areas and improve The most immediately obvious risk for the Bank in the management of 50 million ha of currently adopting the new strategy proposed in this paper Protected Areas. was the necessity to modify the 1993 Forest Policy, These protection outcomes derive principally OP 4.36, a move that was deemed necessary to from commitments governments themselves have achieve the aims of this strategy. This risk was espe- made in recent years, finalized into "stretch" targets cially high if the replacement of the present broad- as outlined by President Wolfensohn at the UNGASS based ban on Bank financing of logging activities in meeting in 1997. There has in fact been significant all of the primary tropical moist rain forest with progress with these targets, and it is likely they will more closely targeted provisions were to be seen as actually be exceeded within the original 2005 time simply "opening the floodgates" to Bank support for frame set by the president. destructive and unsustainable logging operations in these forests. Sustainable forest management. Bring 200 million ha of global forests under SFM that is independently This issue has been extensively discussed in verified and certified. This "stretch" target was also chapter 2 of this paper. It is made clear in that one of the goals enunciated by the Bank president at discussion that the intention of modifying the the 1997 UNGASS meeting. policy in this area was to ensure that the Bank becomes an effective player in the management Progress with this objective is likely to be slower of forests in an appropriate manner and utilizes than anticipated in 1997. However, the area of for- various new approaches that will allow this to est under certification has expanded exponentially happen. There has been no financing of unsus- since then, from virtually nil to about 27 million tainable logging by the Bank in Regions where ha worldwide. About 9 million ha of this total is in the ban in the 1993 OP does not apply (since it Bank borrower countries, of which some 3 million applies only in primary tropical moist forests). is in tropical forest. Given that there are on the There is in fact no indication of borrower order of 600 million to 800 million ha of natural demand for Bank financing of such activities. forest that already are, or will soon be, under some Bank support for commercial harvesting activi- form of contractual or informal intent for pro- ties is, in any event, restricted in the new policy to duction activities in the Bank's borrower coun- situations where there will be independent vali- tries, it would seem reasonable to aim at bringing dation of agreed standards in forest operations. IMPLEMENTING THE STRATEGY: INCENTIVES, SELECTIVITY, AND DELIVERABLES The new OP utilizes new developments in inde- the approach outlined in this paper emphasizes the pendent assessment and certification of forest catalytic role of the Bank and other donor partners operations to ensure that any operations sup- in the forest sector: the objectives must be to pro- ported in any way by the Bank will be significant mote an enabling environment that will encourage improvements over the norm, in any given situa- the right kind of investment to ensure that the tion. The approach will also provide an ongoing three pillars are addressed effectively; to utilize the mechanism by which performance in the objec- Bank's influence to draw the right kind of private tive of improving the social, environmental, and sector financing into the sector; and to increase its sustainable development objectives of forest own abilities to incorporate forest and forest peo- operations are in fact being met. This will have a ples issues effectively into its own broader-based strong collateral effect on the compliance with investments with its borrower countries. other safeguard policies, since in the area of natu- 62 ral habitats, indigenous people, and cultural sites, A related risk is the possibility that insufficient inter- the requirements of the Forest Policy specify in a est and commitment will arise in borrower countries, forest context the requirements of these other as a result of the inputs proposed here, to generate safeguards, and therefore would incorporate the major changes and reforms necessary and the these in criteria and indicators for forest opera- demand for investments needed to achieve them. tions under some form of independent assess- Two basic approaches to mitigation of this risk are ment or certification. embedded in the overall approach proposed: It is made clear in this strategy that the large majority of stakeholders who were consulted in The nature of the ESW proposed is directly all regions of the world on the issue of the Bank's focused on this issue: the Bank and other part- policy and its approach were strongly in favor of ners will work directly with borrower govern- the Bank, adopting the policy measures now in ments and other local stakeholders to identify the the new OP (included on the CD), as an essential real economic and environmental opportunities part of its reengagement in the sector, which that forests offer, the costs of developing these many saw as long overdue. opportunities, and the costs of ignoring them. This will help ensure that the real situation is A major risk for the Bank in the approach outlined clearly understood by all major stakeholders and in this strategy paper is in the large gap that many allow all to focus on the priorities and realities will perceive between the tasks needed to achieve involved in managing and protecting the forests significant progress with the three pillars outlined in and the interest of forest people. chapter 1 as well as with the international commu- The catalytic nature of the involvement outlined nity's Forest Policy objectives, on the one hand, and above, as it applies to the private sector, will have the fairly cautious and modest measures proposed particular application to mitigating this risk. The for the Bank to initiate its reengagement in forests, Bank will utilize its convening power to bring on the other hand. new financiers into the sector in borrower coun- tries, including external and large-scale "green" It is essential that the Bank should acknowledge investors, and local investors, who to date have not only the size and urgency of the task in forests, been reluctant to enter this sector given its per- but also the limitations that apply to its own capac- ceived problems of governance and nontrans- ity to deal with these, at least in the immediate and parency in many cases. near-term future. Even when combined with the most optimistic projections of what other multi- A parallel risk to that of commitment by borrowers lateral banks and donor agencies might bring to and other stakeholders exists internally in the Bank this sector, the total flow of resources will continue among managers and staff within the Bank, as a result to be dwarfed by the flow of private sector funds of the "chilling effect" on direct involvement in forests into the sector (much of which is presently focused resulting from the 1993 Forest Policy that OED has on inappropriate and unsustainable use of forests), identified, and the perceived high transaction costs of and also the flow of all funds into other parts of the dealing with this sector, which is connected to the economies of important forest countries--which need to comply with other safeguard policies. The risk has potentially large impacts on forests. This is why is that the reluctance to deal with the more difficult SUSTAINING FORESTS A DEVELOPMENT STRATEGY aspects of the sector created by these constraints may There is, as always, a significant risk for the Bank be too strong and entrenched to be overcome by the inherent in entering into new partnerships. The measures proposed in this strategy. First, it needs to be essential risks are (a) that accountabilities and roles acknowledged here that the overall package of safe- for all parties to the arrangement will not be clearly guard measures the Bank applies to investments and enunciated and negotiated at the outset, leaving the other programs that involve natural forests are likely likelihood that the activities and outcomes may not to lead to more effective and sustainable projects. be agreed upon later, or that the Bank, as host organ- Equally, however, there is little doubt that, under pres- ization, will need to absorb more responsibility than ent conditions, meeting the demands of these safe- it can manage; (b) that parties' priorities and capac- guards in project design and implementation can ities may change during the course of the partner- be onerous and expensive. This is due in large part to ship program, leading to the possibility that they will the nature of forests, which are a complex of compet- not continue to meet their agreed obligations and ing goods and services, often further complicated responsibilities; and (c) that the parties to the part- 63 by unresolved and frequently contentious issues of nership may have widely differing interpretations of access, ownership, and rights among various group- its role and function. ings in society. The approach outlined in this paper Two issues remain to be addressed in this discus- will provide some effective mitigation of the problem sion of risk: of continued risk aversion to direct involvement in First, an effective communication strategy will be forests within the Bank in three ways: essential, to ensure that the development and imple- mentation of this strategy are clearly enunciated and The new OP underpins a new, proactive attitude understood, and the constraints and realities are rec- to engagement in natural forests by the Bank, ognized from the outset. As a first measure, the post- and, if adopted, will send a clear signal to both ing of this strategy and the draft revision of the OP Bank staff and borrowers that this is the case. for public review will be accompanied by a compre- This will directly address the "chilling effect." hensive questions-and-answers paper, which will As noted under the discussion of the risks associ- explain in depth the reasons for adoption of certain ated with adoption of this new policy, an impor- measures and decisions that may prove controver- tant collateral effect of the independent assessment sial, and which will also explain the reasons for and certification measures proposed as part of the adoption of a gradual scaling up of reengagement new OP will also assist in identifying compliance and a catalytic approach, as discussed above. A sec- issues in the other important safeguards that apply ond important element in the communication strat- to forest protection and use. This will provide egy will be the proposed EAG for implementation of some assurance to staff and managers that a com- this strategy: in addition to providing independent petent and continuous process of assessment of advice on implementation issues, this body will compliance with important safeguards is built into serve as a conduit to interest groups for information the operation of a project and will provide timely on the status and effectiveness of the program, and warning of possible problems, so that these can be in this way will serve a valuable transparency role. dealt with effectively. Second, when evaluating the risks and mitigating While no specific lending targets are proposed in measures as discussed above, it must be borne in this strategy, it is recommended (in the Business mind that there would also be major risks for the Strategy attachment) that when interest, commit- Bank in maintaining the status quo in its previous ment, and demand for further engagement in the Forest Strategy and Policy: Bank are built through the enhanced ESW pro- gram proposed, the Bank will need to consider As noted above, certain stakeholders will regard the use of corporate funds, if necessary, to reduce any variation of the broad-based ban on support the incremental cost burden that preparation and for logging activities in the tropical moist forest supervision of projects based on forests incur for as an "opening of the floodgates" (and in fact this Country Departments. While it will remain a group will press for an extension of this ban to decision for Bank management at the time cover all old growth forest in nontropical areas, whether and how this assistance will be provided, as a minimum condition). However, the 1993 it has some precedent in the Bank, in the form of Policy, even if extended in this particular way, was central funding of global public goods initiatives. criticized by the majority of stakeholders and IMPLEMENTING THE STRATEGY: INCENTIVES, SELECTIVITY, AND DELIVERABLES interested parties outside the Bank as being a sig- there is little alternative to this: so far as the very vis- nificant factor in the Bank's perceived withdrawal ible challenges now presented by forests and forest- in recent years from major areas of the sector. In dependent people to the Bank are concerned, these circumstances, the best approach to manag- attempts to preserve the status quo will provide no ing this risk is not to adhere to the status quo but refuge from political controversy and criticism. to develop a proactive policy that engages stake- holders with the Bank in defining acceptable for- Monitoring the Bank's Role est outcomes and then monitoring activities to As will be apparent from the above discussion, ensure that they are achieved. It is certain that a the Bank can expect to encounter major difficulties much larger group of stakeholders, including inherent in attempting to contribute effectively some important international environmental to large tasks and objectives with limited resources NGOs, agree with this approach and will regard by relying on catalytic activities and strong 64 any move by the Bank to circumscribe or mini- partnerships--but it has little alternative but to mize its proactive reengagement in this sector as embark on this approach. For a decentralized insti- a major failure of will. tution such as the Bank, joint engagement is even Certainly, this would prejudice the possibilities of more difficult when global priorities are involved. a growth in borrower demand for Bank involve- However, joint engagement is essential to success in ment in forests, since the interpretation would be the forest sector and other sectors where effective that the Bank continues to have limited interest engagement of the Bank and other partners is indis- in this sector. pensable to achieving the MDGs. The strategy calls for an enhanced commitment Monitoring and reviewing progress will therefore to ESW and proposes a major partnership to be an important activity for this strategy, since it assist in implementing that. Among other things, will make it possible to assess whether measures this will allow forest issues and impacts that and activities are correctly focused and adequate. might be of relevance to larger Bank programs Monitoring implementation of the strategies for the being considered to be considered in a timely increased engagement proposed for the Bank will be manner. Without this, there are possibilities that based on the following performance indicators: Bank nonforest sector activities might inadver- tently cause deleterious impacts on forests and Developing demand. The Bank will monitor the forest peoples that could have been avoided with- effectiveness of incremental analytical and consulta- out prejudicing the basic aims of the investment, tive activities in the focus countries. Criteria will had the right offsetting measures been designed comprise the alignment of these activities with the into the process. major pillars of engagement put forward in this The partnerships proposed for inception or strategy and with NFP activities and objectives; the expansion in this strategy will build linkages establishment of working partnerships at the coun- among the Bank and the private sector, the donor try level with other donors and major local stake- community, and major NGOs. In each case, this holders; and the degree of ownership and consensus will lead directly to benefits from coordination on major elements of reform in the sector, including and shared knowledge that are not present (or are the development of interest and participation by present to a more limited extent) in present major agencies of government in the agenda. arrangements. Given the high levels of activity from all quarters in the forest sectors of Bank Building engagement. The test of this component borrower countries, the partnerships proposed will come later in the program in the form of initiat- will certainly lower the risk of overlapping initia- ing the preparation of investments that have resulted tives; poor sequencing of respective donor, NGO, from the ESW activities. In addition to normal Bank and private sector initiatives; and discontinuities quality-at-entry and performance indicators, an in the assistance provided that has characterized important additional criterion will be the assessment this sector in recent years. of the degree of parallel financing or cofinancing by donor partners and the private sector, which emerges None of these approaches will be easy to implement, as a result of collaborative activities. Base lining at the and all will require an ongoing commitment by the beginning of the program will be an important management and the Board of the Bank. However, measure to allow assessment of this factor. SUSTAINING FORESTS A DEVELOPMENT STRATEGY Impact on forest outcomes of broader involve- EAG that is intended to support implementation of ment. It also will be necessary to evaluate the the new strategy would be intensively engaged in this impact of the knowledge and analysis generated exercise as well. through this strategy on Bank activities originating outside the forest sector: the identification of critical External Advisory Group forest issues; their incorporation in cross-sectoral, adjustment, and broad programmatic lending; and External assessment will be built into the evaluation the inclusion of forest topics in broader ESW and process, continuing the approach used during the CAS development work programs. preparation of the FSSP. Stakeholders will be con- sulted at every stage. Specifically, an ad hoc EAG will Selectivity and sequencing. Effective disbursement be formed, utilizing the former TAG formed to assist and implementation of the incremental activities the Bank with development of the new strategy and proposed, in the time outlined, will be a major policy as a roster for selection on as as-needs basis. 65 factor. The balance of activity types and progress Small teams (8 to 10 members) would be formed for toward lowering overall costs of doing business specific tasks, comprising individuals from major in the sector through a movement of country situa- stakeholder groups (client governments, civil society tions being addressed up through the hierarchy of groups, academic and private sector interests, and engagement, as illustrated in table 4.1, will be a major donor partners) represented on the former major factor for evaluation. TAG. The EAG process would be formulated in FY03, in time to allow selected group(s) to assess design, Mid-term evaluation. Provision for a specific mid- relevance, and progress of the activities for imple- term review is included in the Business Plan for this mentation outlined below, with a specific objective of strategy. The objectives and terms of reference for advising on implementation matters related to the this will need to be carefully designed to concentrate Bank's OP and the overall aims of the strategy as set evaluation on ESW as well as whatever investment forward in the FSPP. In addition, the EAG will regu- implementation is in progress. The mid-term review larly advise the president of the World Bank regard- should be carried out by OED, and the proposed ing its view of the status of the forest program. IMPLEMENTING THE STRATEGY: INCENTIVES, SELECTIVITY, AND DELIVERABLES N OT E S 66 1. The Millennium Development Goals affirm the certification systems must be consistent with the international community's commitment to free following criteria: individuals from the dehumanizing conditions of abject poverty. The United Nations (UN) announced Institutionally and politically adapted to local the goals in September 2001 following extensive conditions consultations among the UN Secretariat, Goal oriented and effective in reaching objectives International Monetary Fund (IMF), Organisation Acceptable to all involved parties for Economic Co-operation and Development, and the World Bank. These targets and indicators Based on performance standards defined at the represent the harmonization of the International national level that are compatible with generally Development Goals agreed at various global accepted principles of sustainable forest conferences and summits of the preceding decade management with the UN Millennium Declaration adopted in Based on objective and measurable criteria September 2001 by 147 heads of state. Based on reliable and independent assessment www.imf.org/external/np/sec/nb/2001/nb0190.htm Credible to major stakeholder groups (including 2. An example is the recent study by Schneider and consumers, producers, and conservation NGOs) others (2002 [English], 2000 [Portuguese]), Certification decisions free of conflicts of interest "Sustainable Amazon: Limitations and Opportunities from parties with vested interests for Rural Development." This study shows that Cost-effective 83 percent of the area of the Amazon is unsuitable for agriculture and ranching and that continuation Transparent of these activities in forests will result in extremely Equitable access to all countries low returns from this type of land use, as well as permanent loss of the forest areas. 4. See discussion of the conditions for World Bank 3. See World Bank/WWF Alliance for Forest involvement regarding the preservation of intact Conservation and Sustainable Use 1998. The Alliance forest areas in "The Forest Sector." (World Bank believes that a common set of principles should 1991e, pp. 19­20, 65­66.) underscore any standard for improving the 5. A 1989 ITTO study found that less than 1 percent management of both natural and planted forests. of commercial operations in tropical forests globally These principles include compliance with all relevant met reasonable operational standards for laws, documented tenure and use rights, respect for sustainable forest management. See Poore and indigenous peoples' rights, respect for community others 1989. relations and workers' rights, encouragement of 6. To illustrate: In 1998 the government of Brazil multiple benefits from the forest, containment of the announced its intention to develop a mosaic of environmental impacts of forest use, rigorous forest conservation areas in the Amazon within which some management planning, active monitoring and 50 million ha of national forests under sustainable assessment, and the maintenance of critical natural harvesting and management operations will form a forest areas. The Alliance believes that credible buffer around a network of national parks and SUSTAINING FORESTS A DEVELOPMENT STRATEGY indigenous reserves covering approximately and implementing Forest Policy planning and two-thirds of the Amazon forest region. implementation processes that more effectively 7. Mitigation is defined here as human intervention to address local needs and national priorities and reflect reduce the sources of greenhouse gases or enhance the internationally agreed principles for NFPs. It also their sinks. promotes the use of NFPs as a basis to enhance cooperation in the forest sector. At the international 8. Adaptation is defined as the ability to adjust to level, PROFOR generates and promotes knowledge of climate change (including climate variability and NFP processes and critical thematic issues related to extremes), to moderate potential damages, to take NFPs--notably, livelihoods, governance, and advantage of opportunities, or to cope with the financing strategies--among client countries and consequences. international organizations. 9. The two major flexible mechanisms under the Kyoto 12. Even in the absence of this agreement, carbon Protocol are Joint Implementation (JI), which deals trading is taking place using developing country with carbon emission trade in the "Appendix 1" forests as sinks. This activity has become policy for countries, and the CDM, which deals with carbon some corporations ahead of any formal international emission trade between Appendix 1 countries and agreement on mechanisms. 67 developing countries. The role of forests and forestry still needs to be specified in the CDM framework. 13. It is axiomatic that, to succeed, a strategy for building the Bank's engagement and effectiveness in forest 10. The CPF is composed of all former members of the outcomes will need to be: Interagency Task Force on Forests (ITFF), along with some other organizations. Current members include the United Nations Framework Convention on Implemented through country teams and Biological Diversity (CBD), CIFOR, FAO, ICRAF, programs, beginning with the clear reflection of ITTO, IUCN, United Nations Convention to Combat intentions and priorities in CASs, PRSPs, and Desertification, United Nations Department of business plans. Economic and Social Affairs, UNDP, United Nations Activated under the management of Regional Vice Environment Programme (UNEP), UNFCCC, and Presidents, who will hold the responsibility to link the World Bank. outcomes under the newly adopted Bank global 11. PROFOR was established in 1997 in response to the issues with country programs. proposals for action of the IPF to promote SFM and Demand driven with sufficient attention and related public and private sector partnerships and resources devoted to dialogue and incentives to thus to enhance forests' contribution to sustainable attract the interest of borrower governments, livelihoods. At the national level, PROFOR's other major stakeholders, and Bank Country collaborative work supports countries in developing Departments to invest in the forest sector. NOTES B I B L I O G R A P H Y 68 The word processed describes informally reproduced Boscolo, Marco, and Jeffrey R. Vincent. 1998. "Promoting works that may not be commonly available through Better Logging Practices in Tropical Forests: A Simulation Analysis of Alternative Regulations." libraries. World Bank, Development Research Group, Washington, D.C. African Regional Workshop. 1998. 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Gland, Switzerland. 73 BIBLIOGRAPHY I N D E X 74 Note: Page numbers with the prefix A­ are in the high-value forests in, A-43 Appendixes, found on the CD-ROM that accompanies participatory forest land-use planning in, this book. A-10­11 Bosnia, economic and sector work in, A-42 A Brazil Adjustment lending, A-22, A-40, A-52 Bank loans in, 28, A-21, A-48 Africa. See also individual countries deforestation in, A-17 forest projects in, 19 economic and sector work in, A-43 World Bank's Forest Strategy and, 40­41, A-37­39 forest land-use "zoning" strategies adopted in, 37 African Timber Organization, 51 forest management in, A-43 Agroforestry, 40, A-18­19 harvesting operations in, 32 contribution of, to household incomes, A-19 high-value forests in, A-43 Algeria, Bank-financed projects in, A-44 natural resource management projects in, A-43 Alliance for Forest Conservation and Sustainable Use. revenue-sharing policies in, A-16 See World Bank/WWF Alliance Bulgaria Argentina Bank-supported strategies in, 28, A-21 Bank forest projects in, A-43 economic and sector work in, A-41 Bank loans in, 28, A-21 Burkina Faso forest management in, A-43 Bank experience in, A-18 Armenia, Pyramid used in, 34, A-28 natural resources management programs in, 28 Asia, tree establishment technologies in, A-19. planting "live fences" in, A-19 See also individual countries C B Cambodia Bangladesh, Bank-financed projects in, A-45 adjustment lending in, A-22 Belarus forest law enforcement in, 31, A-25, A-40 economic and sector work in, A-42 illegal logging in, 42, A-25 macroeconomic problems in, A-41 importance of forestry in, A-40 Benin, joint World Bank and GEF financing in, A-39 major policy issues and problems in, A-40 Bequest value, A-14 Pyramid used in, 34, A-28 Bhutan, Bank-financed projects in, A-46 structural adjustment operations in, A-40 Biodiversity, protecting through market mechanisms timber taxation systems and, A-43 and funding, A-31­33 Cameroon Bolivia adjustment lending in, A-22 forest management in, A-43 forest governance reform in, 12 harvesting operations in, 32 Costa Rica joint World Bank and GEF financing in, A-39 Bank forest projects in, A-43 timber taxation systems and, A-43 Bank-supported initiatives in, 40, A-34 Canada, forest land-use "zoning" strategies adopted Ecomarkets Project and, A-32 in, 37 paying for environmental services in, A-16, A-17 Carbon. See Forest carbon Côte d'Ivoire, joint World Bank and GEF financing CDM (Clean Development Mechanism), 17 in, A-39 Center for International Forest Research (CIFOR), 29, Country ownership, 6, 22­23 48, 49, A-19, A-34 CPF (Collaborative Partnership on Forests), 14, 23, Central African Republic, technical assistance project 46­47 in, A-39 Critical Ecosystem Partnership Fund (CEPF), 10, Central America. See also individual countries 37, A-31 forest fires in, A-15 functions of, 51 Meso-American Biological Corridor and, A-43 Croatia, economic and sector work in, A-42 75 Central Asia. See also individual countries Bank projects in, A-41­42 D Bank's forest lending in, 35 Deforestation, 1, 16, A-11, A-17, A-33 World Bank's Forest Strategy and, 42, A-41­42 avoided, A-33­34 CEOs Forum on Forestry, 10 Direct-use value, A-14, A-15 African Working Group of, 51, 58 Forest Dialogue Group and, 51 functions of, 51 E initiation of, 51 EAG (external advisory group), 14, 63, 65 CEPF. See Critical Ecosystem Partnership Fund East Africa, tree establishment technologies in, A-19. Certification, 4­5, 33­34, A-25­28, A-49 See also individual countries CGIAR (Consultative Group on International East Asia and Pacific region, World Bank's Forest Agricultural Research), 10, 49, A-34 Strategy and, 41­42, A-39­41. See also individual Chain of custody, 33­34, A-26 countries China Eastern Europe, countries of agroforestry in, A-19 Bank-supported strategies in, 28, A-21. See also Bank-financed projects in, 2, 28, A-18, A-47, individual countries A-50, A-51 World Bank's forest lending in, 2, 35 money for forests lent to by World Bank, 2 Ecomarkets Project, A-16, A-32 plantations established in, A-40 Economic development, integrating forests in, 2, 4­5, policy analysis and reform in, 42 26, 29­37, 41, 42, 43, 44, A-13­29, A-38, A-39, A-41, poverty reduction projects in, 28, A-18 A-42, A-44, A-45 tree planting in, A-47, A-48 Ecosystem services. See Environmental services China Council for International Cooperation on Ecuador Environment and Development, A-40 future forest projects possible in, A-43 CI (Conservation International), 10, 23, 51, A-32, A-35 natural resource management projects in, A-43 CIFOR (Center for International Forest Research), 29, El Salvador, future forest projects possible in, A-43 48, 49, A-19, A-34 Environmentally and Socially Sustainable Clean Development Mechanism (CDM), 17 Development (ESSD) Council, 7, 30, 57, A-53 Climate change, 17, 18, 38­39, A-33 ESSD Forests Team and. See ESSD Forests Team Collaborative forest management, 27, 28, A-6­10 Environmental services Collaborative Partnership on Forests (CPF), 14, cross-sectoral aspects and impacts of, A-16­20 23, 46­47 failure of markets to capture, 18 Colombia, natural resource management projects paying for, A-16, A-17 in, A-43 protection of, 2, 5­6, 26, 37­40, 41, 42, 43, 44 Congo, Democratic Republic of, as "mega-diversity" value of, A-14­15 country, A-38 water catchment and, A-16 Congo, Republic of, forest-related activities in, A-38 ESSD. See Environmentally and Socially Sustainable Congo Basin, CEOs Forum's initiative in, 51 Development Council; ESSD Forests Team Conservation International (CI), 10, 23, 51, A-32, A-35 ESSD Forests Team, 24, 60 Consultative Group on International Agricultural role of, 53­54, A-53 Research (CGIAR), 10, 49, A-34 Europe and Central Asia region, World Bank's Forest Corruption, forest-related, A-23­24. Strategy and, 42, A-41­42. See also individual countries See also Illegal logging European Forest Institute, 48, 49 INDEX European Union (EU), A-41. See also individual countries poverty reduction and, 2, 3­4, 11, 17­18, 26­28, macroeconomic reforms and adjustment in, 42 39­40, 41, 42, 43­44, 60, A-3­12, A-17­20, A-38, "Existence" value, A-14 A-39, A-41, A-42, A-44, A-45. See also Poverty External advisory group (EAG), 14, 63, 65 realities in, 15­24, 60 rural poor and, A-20­23 F sustainable livelihoods analysis and, A-4 FAO. See United Nations Food and Agriculture tropical dry, A-49 Organization value of. See Forest value(s) Finland World Bank's 1992-99 portfolio data regarding, commercially sustainable forests in, A-21 A-63­77 forest operations in financed by World Forest Stewardship Council (FSC), 32, A-25 Bank, 19 Forest Trends, 50 Forest carbon, 17, 18, 39, 51­52 Forest value(s) bequest, A-14 76 markets for, A-33­34 Forest Dialogue Group, 51 direct-use, A-14, A-15 Forest management, 3­4, 29, 32­37, 61 estimates of categories of, A-14­15 civil society and, 32­34, A-13, A-25­29 "existence," A-14 collaborative, 27, 28, A-6­10 in formal sector, A-15 gender in, A-7 indirect-use, A-14 joint, A-7­8, A-9 market failure and, A-13­16 Pyramid and, 34, 35 need to account for, 18 sustainable. See Sustainable forest management option, A-14 Forest Market Transformation Initiative, 50 protection of, 2, 5­6, 26, 37­40, 41, 42, 43, 44, Forest plantations, A-12 A-31­35, A-38­39, A-40, A-41, A-42, A-44, A-45 Forest Policy Implementation Review and Strategy water catchment and, A-16 (FPIRS), A-53­57 FPIRS (Forest Policy Implementation Review and Forests Strategy), A-53­57 access to, by poor and indigenous peoples, A-6 FSC (Forest Stewardship Council), 32, A-25 adjustment lending and, A-22, A-40, A-52 agroforestry and. See Agroforestry G analytical studies on, A-59­61 Gabon carbon and. See Forest carbon forest-related activities in, A-38 certification and, 4­5, 33­34, A-25­28, A-49 joint World Bank and GEF financing in, A-39 chain-of-custody log tracking and, 33­34, A-26 GEF. See Global Environment Facility challenges in, 15­24 Gender climate change and, 17, 18, 38­39, A-33 in collaborative forest management, A-7 conflicts regarding, 18 patterns in, 22 corruption and. See also Illegal logging, A-23­24 Georgia, forests in, A-16, A-41 deforestation and. See Deforestation Ghana global challenges and opportunities presented illegal logging in, A-23, A-24 by, 17­18 timber concession policies in, A-24 illegal logging and, 1, 11­12, 31, 42, A-23­24, A-25, Global Environment Facility (GEF), 9, 37, 43, 51, 54, A-40, A-43, A-49­50 57, A-34, A-41, A-43, A-46, A-47, A-48, A-51 importance of, 15­17 Conservation Trust Fund for Papua New Guinea infrastructure and, A-21 and, A-33 integrating in sustainable economic development, functions of, 49 2, 4­5, 26, 29­37, 41, 42, 43, 44, A-13­29, A-38, investment in biodiversity projects and, A-31, A-32, A-39, A-41, A-42, A-44, A-45 A-39, A-40, A-45 land titling and, A-18 Protected Areas and, A-11, A-31, A-43 land-use planning and, 37, A-10­11 World Bank implemented overall and forest-related macroeconomic policy impacts on, A-21­23 projects, 1992-99, A-66 management of. See Forest management Global Forest Information Service, 49 mining and, A-21 Global Forest Watch, 31, 51, A-24 natural, timber production areas in, A-11 Global Witness, 31, A-24 outputs of, rural livelihoods and, A-5 Governance plantations and, A-12 failure of, 11­12, 17, 31­32, A-13 INDEX goals regarding, 60­61, A-38, A-49­50 International Bank for Reconstruction and Pyramid and, 34, 35, A-27­28 Development (IBRD), 24, 49, 53, 54, A-47, A-51 World Bank's revised Forest Strategy and, 11­12, International Centre for Research on Agroforestry 31­32, 60­61, A-23­25 (ICRAF), 28, 29, 48, 49, A-18, A-19 Great Britain, A-25 International Development Association (IDA), 24, 53, Guatemala 54, A-41, A-47 future forest projects possible in, A-43 International Finance Corporation (IFC), 2, 24, 36, natural resource management projects in, A-43 54, A-51 Guyana Shield countries, high-value forests in, A-43 Ecomarkets Project and, A-16 private investments in forests supported by, 3, 4, 10, H 26, 53, 58 Heavily Indebted Poor Countries (HIPC) initiative, 21 International Institute for Environment and HIPC (Heavily Indebted Poor Countries) initiative, 21 Development (IIED), 48, 49 Honduras, forest management in, A-43 International Monetary Fund (IMF), A-25 77 new framework for poverty reduction endorsed I by, 21 IBRD (International Bank for Reconstruction and World Bank coordination with, A-24, A-40 Development), 24, 49, 53, 54, A-47, A-51 International Tropical Timber Organization (ITTO), ICRAF (International Centre for Research on 31, 48 Agroforestry), 28, 29, 48, 49, A-18, A-19 collaboration with World Bank and, 49, A-24 IDA (International Development Association), 24, 53, International Union of Forest Research Organizations 54, A-41, A-47 (IUFRO), 49 IFC. See International Finance Corporation IPF (Intergovernmental Panel on Forests), 32, 46, 47 IFF (Intergovernmental Forum on Forests), 32, 46, 47 Iran, Islamic Republic of, Bank-financed projects IIED (International Institute for Environment and possible in, A-44 Development), 48, 49 ITTO. See International Tropical Timber Organization Illegal logging, 1, 11­12, 31, 42, A-23­24, A-25, A-40, IUCN. See World Conservation Union A-43, A-49­50 IUFRO (International Union of Forest Research Imazon, 43 Organizations), 49 IMF. See International Monetary Fund Iwokrama International Centre for Rain Forest India Conservation and Development, 49 agroforestry in, A-19 J Bank-financed projects in, A-45­46, A-50, A-51 forest management in, 3, 4, 29, A-9, A-10, A-18 Joint forest management, A-7­8, A-9 money for forests lent to by World Bank, 2 K Protected Areas in, A-46 Indirect-use value, A-14 Kazakhstan Indonesia economic and sector work in, A-42 adjustment lending in, A-22 forestry and natural resources review planned CIFOR (Center for International Forest Research) for, A-42 based in, 49 Pyramid used in, 34, A-28 environmental management plans in, A-25 Kenya export taxes on palm oil in, A-21 adjustment lending in, A-22 forest fires in, A-15 ICRAF (International Centre for Research on forest law enforcement initiatives in, 31 Agroforestry) based in, 49 future of forest projects in, A-40 Kyoto Protocol, 17, 39, 52, A-33­34 harvesting operations in, 32 Kyrgystan, forestry and natural resources review illegal logging in, 42, A-23, A-24 planned for, A-42 major policy issues and problems in, A-40 Kyrgyz Republic, economic and sector work in, rattan production in, 28 A-41, A-42 structural adjustment operations in, A-40 timber concession policies in, A-25 L timber taxation systems and, A-43 Land titling, A-18 value of forests to, 16 Land-use planning, 37, A-10­11 Intergovernmental Forum on Forests (IFF), 32, 46, 47 Lao People's Democratic Republic Intergovernmental Panel on Forests (IPF), 32, 46, 47 forest law enforcement in, A-25 INDEX forest management goals in, A-40 Netherlands, A-25 village and community forest management in, A-40 NFPs. See National forest programs Latin America. See also individual countries NGOs (nongovernmental organizations), World Bank Ecomarkets Project and, A-16, A-32 partnerships with, 10, 26, 49­51, 56, 57, 60, 64 forest projects in, 19 Nicaragua Protected Areas in, A-31 Bank forest projects in, A-43 rain forests of, people living in, 3 forest management in, A-43 Latin America and Caribbean region, World Bank's Niger, forest management in, 29, A-18 Forest Strategy and, 42­43, A-42­43. See also Nongovernmental organizations (NGOs), World Bank individual countries partnerships with, 10, 26, 49­51, 56, 57, 60, 64 North America, national park-wilderness conservation M system in, 32. See also individual countries MacArthur Foundation, 50, 51 O 78 Madagascar adjustment lending in, A-22 OED review of 1991 Forest Strategy, 2, 5, 6, 10, 13, as "mega-diversity" country, A-38 18­19, 20, 45, 57, 62, 65, A-29, A-42, A-46, Maghreb, Bank-financed projects possible in,A-44 A-47­52, A-53 Malaysia Forest Policy Implementation Review and Strategy forest land-use "zoning" strategies adopted in, 37 (FPIRS) and, A-53­57 losses in, from Indonesian forest fires, A-15 major issues and recommendations and, A-48­51 major policy issues and problems in, A-40 management responses to, A-1 timber concession policies in, A-25 survey of Bank staff and, 20, A-50­51 Mali, forest management in, 29, A-18 Option value, A-14 MDGs (Millennium Development Goals), 1, 11, 15, 64, A-4 P Meso-American Biological Corridor, 40, A-35, A-43 Pakistan, Bank-financed projects in, A-45 Mexico Panama, Meso-American Biological Corridor and, A-43 Bank forest projects in, A-43, A-50 Papua New Guinea forest management in, 29, A-18 adjustment lending in, A-22, A-40 Middle East and North Africa region, World Bank's chain-of-custody log tracking used in, 34 Forest Strategy and, 43, A-43­44. See also individual Conservation Trust Fund for, A-33 countries environmental management plans in, A-25 MIGA. See Multilateral Investment Guarantee Agency future forestry projects in, A-41 Millennium Development Goals (MDGs), 1, 11, 15, illegal logging in, A-23, A-24 64, A-4 major policy issues and problems in, A-40 Mongolia, land reform in, A-40­41 Paraguay, future forest projects possible in, A-43 Morocco, Bank-financed projects in, A-44 Partnerships Multilateral Investment Guarantee Agency (MIGA), 2, additional, need for, 51­53, 64, A-49 24, 54 developing, 7, 9­10, 23­24, 25, 64 private investments in forests supported by, 3, 4, 10, leveraging impact with, 56 26, 53, A-32 national stakeholder, 46­49 with NGOs, 10, 26, 49­51, 56, 57, 60, 64 N with other donors, 9­10, 46­49, 51, 60, 64 National forest programs (NFPs), 6, 9, 11, 14, 31, 48, with private sector, 10, 26, 51, 57­58, 60, 64 49, 53, 57, 60, 64, A-10, A-23­24, A-32 risks and, 13­14 principles of, 47 PCF (Prototype Carbon Fund), 52, A-34, A-42 purpose of, 47 Peru Nature, 16, A-14 economic and sector work possible in, A-43 The Nature Conservancy (TNC), 51, A-32 forest management in, A-43 Conservation Trust Fund for Papua New Guinea high-value forests in, A-43 and, A-33 natural resource management projects in, A-43 Nepal Philippines Bank-financed projects in, A-45, A-46 Bank loans in, 28, A-21 gender as issue in seedling care in, A-7 Bank support for small enterprise development hill community forestry in, A-8 in, A-20 INDEX major policy issues and problems in, A-40 goals regarding, 61 timber concession policies in, A-25 promoting, A-15­16 Plantations, forest, A-12 World Bank's 1993 Forest Policy and, 34­37, A-29 Poverty World Bank's 1991 Forest Strategy and, A-28 differentiating the poor and, A-5­6 Sustainable livelihoods analysis, A-4 goals regarding, 3, 11, 15, 17, 21, 60, A-3, A-4 Sweden, commercially sustainable forests in, A-21 rural, forests and, A-20­23 sustainable livelihoods analysis and, A-4 T World Bank's commitment regarding, A-3, A-34 Private sector, World Bank partnerships with, 10, 26, Tajikistan, economic and sector work in, A-42 51, 57­58, 60, 64 Tanzania, joint World Bank and GEF financing in, A-39 PROFOR. See Program on Forests Thailand Program on Forests (PROFOR), 8, 9­10, 13, 23, 55 forest law enforcement in, A-25 initiative of, 48 losses in, from Indonesian forest fires, A-15 79 Protected Areas, 3, 12, 32, 37, 39, 40, 41, 42, 43, 47, Timber concession policies, reform of, 31­32, A-24­25 49­50, 51, 61, A-17, A-31, A-34, A-39, A-43, A-46 TNC. See The Nature Conservancy functions of, 5­6, A-11, A-29, A-35 Transparency International, A-24 Prototype Carbon Fund (PCF), 52, A-34, A-42 Tropical dry forests, A-49 Pyramid, 34, A-27­28 Tunisia, Bank-financed projects in, A-44 illustrated, 35, A-27 Turkey Anatolia Watershed Project in, 28, A-18 R economic and sector work in, A-41 Turkmenistan, economic and sector work in, A-42 Rain forests, people living in, 3 The Right Conditions (World Resources Institute), A-22 Rio Earth Summit (1992), 15, 17, 34­35, 60 U Romania Ukraine, economic and sector work in, A-42 Bank-supported strategies in, 28, A-21 UNDP (United Nations Development Programme), economic and sector work in, A-41 9, A-25 forests in, A-41 UNFF. See United Nations Forum on Forests Russia United Nations economic and sector work in, A-41 Development Programme (UNDP) of, 9, A-25 forest taxation reform in, A-41 Economic and Social Council (ECOSOC) of, 17, 46 illegal logging in, A-23, A-24 Food and Agriculture Organization (FAO) of. See private investment in forest products of, 38 United Nations Food and Agriculture timber concession policies in, A-25 Organization Forum of, on Forests (UNFF). See United Nations S Forum on Forests SFM. See Sustainable forest management Framework Convention of, on Climate Changes Singapore, losses in, from Indonesian forest fires, A-15 (UNFCCC), 17, 39, 52, A-33 Solomon Islands, adjustment lending in, A-22 General Assembly Special Session (UNGASS) of, 12, South Africa, as "mega-diversity" country, A-38 35, 61 South Asia, World Bank's Forest Strategy and, 43­44, Millennium Development Goals (MDGs) of, 1, 11, A-45­46. See also individual countries 15, 64, A-4 Southeast Asia. See also individual countries United Nations Development Programme (UNDP), agricultural and agroforestry systems in, 40, A-34­35 9, A-25 forest fires in, A-15 United Nations Food and Agriculture Organization rain forests of, people living in, 3 (FAO), 16, 31, A-25 Sri Lanka, Bank-financed projects in, A-45 World Bank's collaboration with, 48­49, A-24 Sudan, forest-related activities in, A-38 United Nations Forum on Forests (UNFF), 23 Sustainable economic development, integrating forests CPF and, 23, 46­47 in, 2, 4­5, 26, 29­37, 41, 42, 43, 44, creation of, 17, 46 A-13­29, A-38, A-39, A-41, A-42, A-44, A-45 functions of, 17, 46 Sustainable forest management (SFM), 29 United States, commercially sustainable forests in, A-21 civil society's role in, 32­34, A-13, A-25­29 Uzbekistan, economic and sector work in, A-42 INDEX V developing demand and, 7, 8, 14, 64 elements of, 2­6 Venezuela, Repµblica Bolivariana, economic and engagement and, 7, 9, 64 sector work possible in, A-43 expectations and, 11­14, 59­65 Vietnam external advisory group (EAG) and, 14, 63, 65 forest law enforcement in, A-25 financing of, 24 plantations established in, A-40 global conventions and agreements and, 16­17 W governance and, 11­12, 31­32, 60­61, A-23­25 implementation of, 3, 5, 6­11, 23­24, 45­65 WBI. See World Bank Institute institutional constraints and, 11 West Africa, rain forests of, people living in, 3 internal Bank's commitment to forests and, 56­58 Wolfensohn, James, 12, 35, 51, 61 investment and, 7, 9, 59 World Bank leveraging impact and, 24 adjustment lending by, A-22, A-40, A-52 links of, to other World Bank strategies and policies, 80 diverting highways away from biodiversity reserves 21­22 and, A-21 monitoring and, 14, 64­65 July 2001 Environment Strategy of, 5, 21­22 outcomes and, 11­12, 60­61, 65, A-22­23 Forest Policy Implementation Review and Strategy partnerships and. See Partnerships (FPIRS) and, A-53­57 pillars of, 2­6, 22­23, 26­40 1993 Forest Policy of. See World Bank's 1993 Forest poverty and, 2, 3­4, 15, 21, 26­28, 39­40, 41, 42, Policy 43­44, 60, A-3, A-34, A-38, A-39, A-41, A-42, forest portfolio of, 1992-99 data regarding, A-63­77 A-44, A-45. See also Poverty 1978 Forestry Sector Policy of, 19 proposed Bank action supporting, 25­44 Forest Strategy of. See World Bank's 1991 Forest realities and, 15­24, 60 Strategy; World Bank's revised Forest Strategy risks and, 12­14, 36­37, 61­65 internal commitment of, to forests, 56­58 selectivity and, 7, 10­11, 14, 23, 58­59, 65 investment in biodiversity projects and, A-31, A-32 sequencing and, 7, 10­11, 14, 65 new framework for poverty reduction endorsed by, 21 World Bank/WWF Alliance, 10, 12, 35, 37, 39, 54, performance of, in forest sector, 1­2, 18­21 A-25, A-34, A-35, A-40, A-41 priorities of, new directions in, 20­21 functions of, 49­50 Prototype Carbon Fund (PCF) implemented by, 52, Pyramid and, 34, 35, A-28 A-34, A-42 supporting and strengthening, 57 revised Rural Development Strategy of, 3, 21, 27­28 targets of, 33, 50, A-11, A-27, A-31 strategy of, for changing gender patterns, 22 World Conservation Union (IUCN), 3­4, 32, 37, 48, Water Resources Sector Strategy of, 22 51, A-35 World Development Report 2000/2001: Attacking Forest Reborn initiative and, A-19 Poverty and, 61, A-3, A-7 role of, A-53 World Wide Fund for Nature (WWF) and. World Development Report 2000/2001: Attacking See World Bank/WWF Alliance Poverty (World Bank), 61, A-3, A-7 World Bank Institute (WBI), 24, 54, 60 World Resources Institute (WRI), 48, 49, 51 functions of, 53 2000 study (The Right Conditions) by, A-22 World Bank's 1993 Forest Policy, 32 World Wide Fund for Nature (WWF), 23, 32­33, 36, failures of, 36 48, 51 focus of, 1­2 Alliance for Forest Conservation and Sustainable modifying, 7­8, 12, 61 Use and. See World Bank/WWF Alliance sustainable forest management and, 34­37, A-29 Forest Reborn initiative and, A-19 World Bank's 1991 Forest Strategy, 32 WRI. See World Resources Institute consultation process and feedback and, 2, A-53­57 WWF. See World Wide Fund for Nature effectiveness of, A-47­48 focus of, 1­2 Y global conventions and agreements since, 16­17 Yugoslavia, forest operations in financed by World OED review of. See OED review of 1991 Forest Bank, 19 Strategy survey of Bank staff regarding, 20, A-50­51 Z sustainable forest management and, A-28 World Bank's revised Forest Strategy Zambia, timber concession policies in, A-25 country ownership and, 6, 22­23 Zimbabwe, Campfire Program and, A-2 INDEX . Ninety percent of the world's 1.2 billion people living in extreme poverty obtain at least part of their livelihood from forests. Forests in developing countries support up to 90 percent paper of the world's terrestrial biodiversity. However, mismanagement and misuse of forests result in wasted expenditures, loss of livelihood, and damage to the environment. friendly Sustaining Forests: A Development Strategy charts a path for the World Bank's proactive ly engagement in the forest sector to help attain the goal of lasting poverty reduction tal without jeopardizing the environmental values essential to sustainable development. onmen The World Bank's Forests Strategy is built on three guiding pillars: harnessing the potential vir of forests to reduce poverty, integrating forests into sustainable economic development, en on and protecting the vital local and global environmental services and values provided by forests. The strategy emphasizes government and local ownership of forest policies and ted in interventions, development of appropriate institutions to ensure good governance, and the Pr mainstreaming of forest concerns into national development planning. The strategy also aims to support ecologically, socially, and economically sound management of production forests by ensuring good management practices through the use of safeguard procedures and independent monitoring and certification. This book is accompanied by a CD containing background materials on how the strategy was developed, including the stakeholder consultative process, as well as information on forests' role in poverty reduction, economic development, and the provision of environmental services that helped to shape the strategy. World Bank safeguard policies relevant to forests and a short video highlighting the strategy's objectives are also included on the CD. In implementing this strategy, the World Bank will build and strengthen its partnerships with governments, forest-dependent people, the private sector, nongovernmental organizations, and other donor agencies. Sustaining Forests: A Development Strategy will be of interest to all institutions that share the World Bank's goal of promoting improved forest conservation and management at both the country and global levels. TMxHSKIMBy357552zv":&:=:&:; THE WORLD BANK ISBN 0­8213­5755­7