Report No. PIC2898
Project Name              Madagascar-Second Environment Program...
Support Project
Region                    Africa
Sector                    Environment
Project ID                MGPA1537
Executing Agency          Ministry of Environment
National Environment Office
Antananarivo, Madagascar
Contact: Mr Joseph Andriamampianina
Directeur General, ONE
Telephone: (261-2) 9 99
Fax: (261-2) 306 93
Probable Cost             US$180 million
Proposed IDA Credit       US$30 million
Financing Plan            To be discussed with other donors during joint
appraisal expected contributions: GEF, UNDP,
IFAD, USAID, Germany, Norway, France,
Switzerland, Japan, European Union, WWF
Lending Program           FY 97 L
Multi-donor Appraisal     November 1995 and April 1996
Appraisal Date (WB)       June 1996
Negotiations Date         September 1996
Environment Category      C
1.   Background.  The Malagasy economy is mostly natural resource-based.
Madagascar has also been identified by the international conservation
community as one of the ecologically richest countries on the planet.
Nearly seventy five percent of its estimated 200,000 living species are
endemic, i.e. found only on this remarkable island. Unfortunately,
Madagascar is noted not only for its high degree of biological
diversity, but also for increasing environmental degradation. According
to available information, aost eighty percent of the country's original
forest cover has disappeared, or has been severely degraded, mainly
because of slash and burn agriculture. This also results in the loss of
an estimated 200 tons of topsoil per hectare each year. The threats of
deforestation, bush fires, and extensive cropping of marginal lands are
removing the ground cover necessary to keep in place the highly erodible
soils of this unusual land. This degradation threatens not only
biological diversity, but watershed and soil stability vital to the
agrarian economy. Reversing the downward spiral of environmental
degradation would thus mostly benefit the poor, while maintaining
exceptional biodiversity wealth.
2.   Aware of these problems, the Government prepared in 1988 a National



Environmental Action Plan (NEAP), with the support of a group of donors,
international agencies and NGOs led by the Bank. The fifteen years
program foresees a first five-year phase aiming at creating a proper
policy, regulatory and institutional framework, a second phase aiming at
the consolidation of the programs initiated under the first phase, and
a third phase that would achieve the mainstreaming of environment into
macroeconomic management and sector programs.
3.   The first phase program is under implementation.    It has the double
objectives of beginning operations of an urgent nature while
establishing the basis for the overall program, in terms of building
institutions, developing human resources, establishing sound
environmental policies, methods, tools and procedures. It consists of
six components: (i) protecting and managing biodiversity at the level of
fifty Protected Areas, testing concepts such as integrated conservation
and development projects as a means to better conserve biodiversity;
(ii) developing community-based soil conservation and watershed
management mini-projects; (iii) developing land management tools through
mapping and remote sensing; (iv) improving land security through
cadastral operations; (v) promoting environmental sensitization,
education and training, and developing environmental policies and
procedures; and (vi) developing a support program including institution
building, reinforcement of the environmental data base, marine and
environmental research, monitoring and evaluation. Program
implementation has been to a large extent through local and
international NGOs. Despite the fact that progress on many components
has been slower than anticipated initially, most of the projects
objectives are being met. Some 20,000 families are benefiting from over
600 mini-projects for soil conservation work by ANAE (Association
Nationale dActions Environnementales); twenty one national parks and
other protected areas are being established and managed to the extent
that ANGAP's (Association Nationale pour la Gestion des Aires
Protegees) current funding allows; with nearly 200,000 ha surveyed, land
titling has begun to have an impact in and around protected areas; FTM
(National Geographic Institute) has significantly improved its mapping
capacity and produced aerials photographs over 80,000 km2 of protected
areas, and ONE (National Environment Office) has developed activities
in promotion, video production, training, policy formulation and
regulatory framework improvement.
4.   A Forests Management and Protection Project (IDA Credit 1878-MAG)
was also implemented to: (i) help the FANALAMANGA parastatal develop the
Mangoro industrial plantation to a production level which would allow
profitable exploitation. This component represented the third phase of
the Bank's involvement in the forestry sector in Madagascar; and (ii)
assist DEF (the Waters and Forests Directorate) in programming, forest
exploitation control, assistance to villagers for reforestation, and
expansion and protection of natural reserves. The implementation of the
FANALAMANGA component gave satisfaction during the Project but the
timber sales levels were insufficient to compensate for the poor results
recorded during the first two phases and the ERR calculated the Project
was found to be close to zero. DEF, for its part, experienced great
difficulty in implementing the project, because of both management and
technical deficiencies, and lack of a sector strategy. The situation
improved significantly since the Project's mid-term review in 1992 with
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the reformulation of the Project to focus on forest inventory, the
formulation of a new human resource policy and a new forestry policy.
All activities initiated by the mid-term review and some new ones (the
creation of new protected areas and the management of natural gazetted
forests) were transferred in 1994 under the umbrella of the Environment
Project, and are currently developing satisfactorily. The support to
FANALAMANGA was terminated with the end of Credit 1878-MAG.
5.   Lessons from the First Phase program (EP1). Main strengths include
the effective development of institutions and partnerships, high
visibility and a substantial demonstration effect, both domestically and
internationally, and effective field results (see above). Weaknesses
were a slow and uneven take-off, insufficient program integration,
consolidated monitoring not yet operational, and an as yet insufficient
role given to environment concerns when formulating policies that
require hard choices, whether at national or local level. The most
important lessons which can be drawn from the first phase of the
Environment Program concern institutions, program scope and
sustainability, and the importance of community involvement:
(i) Institutions. The first phase of the environment program
involved the establishment of several new institutions. Building
capacity within these new institutions has taken time -- even more time
than initially anticipated -- and has absorbed much of the efforts of
this program. Although the impact of this work is difficult to measure,
it is clear that key results have been achieved: ONE is well established
in their role as both a coordinating and policy formulation agency;
ANGAP and ANAE have developed a clear vision of their mission and their
business is growing. Now that the various agencies have reached their
cruising speed, clarifying their roles and mandates vis-e-vis Central
Government agencies is essential; this has been spelled out in detail in
a recently produced Manual of Inter-institutional Relationships.
(ii) Program scope. One central idea behind the design of the
first Environment Program was to integrate all activities which support
the environment into a single program -- particularly those activities
concerning biodiversity conservation, soil conservation and policy
development. Although such an integration was only partially achieved,
and the program is seen by outside observers as too imbalanced in favor
of biodiversity conservation in protected areas, it helped foster
priority-setting on a national scale and coordination of donor funding,
as well as creating synergy between closely linked programs (e.g.
improved land security as a means to improve soil, water and
biodiversity conservation). However, another result of integrating all
of these issues into the EP1 was the creation of an operation that was
relatively complex for new institutions to manage. In the second phase,
the rationale for maintaining such an integration is still the same. In
addition, there are further environmental concerns which the Malagasy
would like to address (e.g. improvement of marine and coastal
environment, and improvement of environmental policies and norms in
urban areas), as a follow-up to research and policy formulation under
EP1. In order to maintain the Environment Program within the limits of
the Government's ability to implement it, it will be essential to keep
improving the existing management mechanisms as well as to implement the
decentralization policy provided for under the new Constitution. As
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sectoral programs increasingly take the environment into account,
another challenge will be to determine which are the environment-related
activities that should better be carried out within the context of
sector programs and thus be left out of the Second Phase Program (EP2).
(iii) Sustainability. The financial sustainability of some of the
activities initiated under the EP1 is not clear. This is particularly
the case for the Integrated Conservation and Development Projects which
have been started in some of the Protected Areas, and it is intended to
phase out this approach. Instead, EP2 would expand conservation
activities beyond the selected protected areas into a more regional
approach which better integrates environmental concerns into economic
and sectoral planning. Under its current economic situation, Madagascar
cannot afford to protect its biodiversity patrimony alone. The expected
global benefits lead to necessary cost-sharing with the international
community, hence the opportunity to use GEF resources.
(iv) Community involvement. Another very clear lesson learned in
the course of the first phase, is the importance of working with the
communities affected in the preparation and implementation of any
activity. The ownership created when communities are involved increases
the pace of implementation, the positive impact on the environment and
the sustainability of this impact. This is now widely recognized in the
country, and it is anticipated that all future programs will rely
heavily on local participation, particularly through the transfer of
management responsibilities to local communities.
6. Program Objectives. The objectives of the program are to reverse
current environmental degradation trends and to promote sustainable use
of natural resources, including soil, water, forest cover and
biodiversity. Another key objective is to create the conditions for
environmental considerations to become an integral part of macroeconomic
and sectoral management of the country. The program would be the second
phase of implementation of the NEAP. It would continue and strengthen
activities already launched under the first phase and initiate work in
new areas where environment problems are important, as described below.
Depletion of Madagascar's natural resource base can be reduced by
changing the enabling policies, institutions, incentives, and other
conditions so that resource users have the authority to manage their own
resources, and the responsibility and incentives to do so in a
sustainable manner. Environmental outcomes are the by-product of land
use management and production decisions. In the absence of a land
management and agricultural production policy, there is no viable
resource conservation policy, because how people manage land and
production options determines what they do with the forest. Therefore,
the environmental strategy needs to increase the emphasis on rural
development and smallholder land management on farmland and open access
lands, especially in the areas where population pressure is the
greatest, which are often far from the protected forests and parks,
requiring strong sectoral links from the protected areas to the regional
growth poles. The EP2 would complement the activities undertaken under
several agricultural programs (extension, research, irrigation,
livestock) that also aim at improving the management of natural
resources at farm level; more generally, it would be a key part of a
global development strategy that combines macro-economic stabilization,
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structural reform and the promotion of private sector investment and
export-led growth.
7.   Program Description. Although the Environment cannot be considered
to be a sector (it is rather a dimension of problems that spans across
all sectors), the Program described in this brief is part of a new
generation of investment operations that follow an integrated sector
approach, i.e. a SIP ( Sector Investment Programs). This approach, which
aims at improving the effectiveness of public expenditures, has the
following main characteristics:
It covers all or most priority activities related to the
environment
It is prepared by local stakeholders
It is supported by all donors active in the environment in
Madagascar
It minimizes reliance on international long-term consultants
It involves common implementation arrangements
8.   The program will essentially pursue, improve and expand the
priority activities that have been initiated under EP1 by incorporating
the lessons learned while minimizing new components. In addition, a
process of problem analysis with a regional and local perspective was
developed as part of EP2 preparation, together with work on the
formulation of a number of key policies, namely decentralization and
local management of natural resources, particularly forests, as well as
on the need for mechanisms to promote synergy - both between EP2
activities and more generally with other development programs. In
particular, the realization that biodiversity cannot be isolated from
other environmental concerns has led to the development of a
regional/local approach to biodiversity conservation under EP2 that
would be complemented by agricultural and other income generating
activities that also aim at improving the management of natural
resources at the local level. This approach would be implemented within
a context which fosters better integration with the ongoing
decentralization process, rural development efforts and regional growth
pole activities with a spatial definition beyond the narrowly defined
peripheral zones of the protected areas. The design of the program takes
into account the outcome of all this work. The program is now defined as
three sets of components, corresponding respectively to field
operations, strategic activities and support activities, as follows:
Field operations would fall under two categories:
Specialized sub-sector activities, corresponding to about two third
of program cost, would be geared towards improved management of
natural resources, including soil, water, forest and biodiversity,
and would include:
* Sustainable soil and water management; US$ 43.5 million (ANAE:
30.5; Ankarafantsika: 7.3, already financed; other watersheds:
5.7): Following the model developed under the EP1, ANAE would
continue its decentralization process, expand its regional
coverage and implement about 4,000 micro-projects under EP2. The
focus would be on demand-driven, low-cost and locally adapted
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intervention that can contribute to spontaneous adoption of
improved practices by other farmers (multiplier effect). In
addition, specific watershed management operations would be
developed, either in cases were major investments need to be
protected (e.g. Ankarafantsika and the Marovoay Plain) or on a
small scale pilot basis (continuation of the work undertaken
with FAO support on four watersheds in the Antananarivo Region).
* Multiple-use Forest Ecosystem Management; US$ 29.9 million: New
forestry policies have been formulated under the EP1, through a
decentralized and highly participatory consultation process. The
resulting strategy is to give back responsibility to local
communities for the management of natural resources. Under EP2,
a number of gazetted forests and community forests would be put
under sustainable management. The process would include the
following steps: (i) completion of the national ecological
forestry inventory, and identification of new protected areas
(300,000 ha); (ii) completion of on-going pilot forest
management schemes (180,000 ha); (iii) participatory formulation
of management plans, involving neighboring communities and the
Forest Service (400,000 ha); and (iv) implementation phase, i.e.
management of the forest for multiple use, in accordance with
the management plan (150,000 ha under EP2, continuation under
EP3). In order to ease pressure on the natural forest, the
program would also encourage farmers and private enterprises to
plant more trees, through land use planning and technical
advise. Implementing such a program would also require
reorganization as well as significant capacity building of the
Forestry Service (DEF).
* National Parks and Ecotourism; US$ 43.1 million (including
several ICDPs - Integrated Conservation and Development Projects
- already under implementation): In continuation of the work
already developed under EP1, the objectives during the EP2 would
be to: (i) complete the establishment of the network of
protected areas (40 areas, 21 of which already well advanced
under EP1); (ii) ensure proper conservation; (iii) promote
ecotourism development; (iv) carry out applied research
programs; (v) promote environmental awareness and strengthen
environmental education. The network would be made of eleven
National Parks or Integral National Reserves, and twenty nine
other protected areas, for a total of 1.4 million hectares.
ANGAP would progressively take over direct management of the
network. This would require a change in the formal mandate of
ANGAP. The ICDP approach would be progressively replaced by the
generic regional support mechanisms presented below.
* Marine and coastal environment; US$ 12.2 million: work would
proceed in parallel at three levels: (i) national level:
formulation of coastal zone management policies, legal framework
and master plan; (ii) formulation of action plans at regional
level; and (iii) design and implementation of management plans
at local level, initially in the Nosy Be and Toliara areas. The
activities would be coordinated by a steering committee (ECOMAR)
and managed by a small unit within ONE.
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* Urban Environment; (cost included in other components): the
urban environment activities included in the program are
presented here for clarity, but are actually included under
other components described below. The activities would include:
(i) the integration of environmental concerns into urban
development policies, including the updating of the Urban Code;
(ii) support to urban management activities by communities and
local Governments. A Steering Committee would be established to
pilot urban-related activities; its secretariat would be within
ONE.
Generic mechanisms at regional and local level to support
regionalization of programming and local management of natural
resources, through the following three components:
* Support to Local Natural Resource management and Land tenure
security; US$ 9.3 million: institutional support to local NR
management would include setting-up the appropriate legal and
regulatory framework, training environmental mediators, and
capacity building of the land-tenure administration (Direction
des Domaines). Transfer of methodology and procedures to direct
sub-sector components would be through actual transfer of
management right at the level of 100-200 village communities.
* Support to regional programming and spatial analysis; US$ 4.3
million: support would be provided to EP2 Regional Programming
Committees (RPCs), in the form of visiting experts and full-time
secretariat, both for program management and for technical
analytical work (e.g. watershed management, ecological
corridors, urban environment problems).
* Regional Fund for Environmental Management; US$ 9.3 million:
such a fund would offer a mechanism to finance environment
management activities on a demand-driven basis; sub-projects
sponsored by local governments or private organizations would
have to fall within the priorities of the RPCs, and to match
pre-defined eligibility criteria. Some of the activities that
were initially proposed as sub-sector components (i.e. watershed
management, urban environment) would fall under the generic
mechanism of the Fund.
Strategic activities; US$ 10.0 million: would include two components:
(i) formulation and transfer of environmental policies, strategies and
instruments (sector policies, urban environment policy, transversal
strategies such as prevention and mitigation of natural catastrophes,
planning tools, economic instruments) and (ii) making environmental
impact assessment operational by setting up environment units at the
level of all sector ministries.
Support activities; US$ 18.5 million: such activities would take the
form of free-standing components only to the extent that they cannot
be incorporated into the main components listed above; this set would
include five components: research, communication-education-training,
geographic instruments, environmental information system, and program
coordination and management, including monitoring and evaluation.
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9.   Program size, cost and financing. Significant adjustments to the
scope of the program and to the size of some components were introduced
as a result of the December 95 and April 96 multi-donor missions: the
scale of the watershed management and of the forest management
components was significantly reduced on the basis of less ambitious
targets; the scope and cost of the urban component and of the proposal
on prevention of natural catastrophes were cut down; most support
activities were also scaled down; the marine component was broadened
up, and Regional Fund was introduced. Total program cost is now
estimated at US$ 180 million (including taxes and contingencies). Such
a cost is comparable to the cost of EP1 (US$ 150 million, most of it net
of taxes). The level of pledges made by the different donors who
participated to the pre-appraisal missions is US$ 105-110 million, in
addition to US$ 15.5 already financed. Assuming that Government would
finance about US$ 35 million (5 million taxes, 8 million net-of-tax
financing, and 22 million through tax exemption against external
grants), the financing gap stands at US$ 20- million. Some of it would
be covered by additional financing expected from some donors (e.g.
Japan, Norway), and the rest by scaling down the program. The country's
commitment to such a large program would need formal confirmation, in
the form of a 'program-law'. The law would be presented to the
Parliament during its Autumn 96 session.
10.  Program Implementation.    The first phase program worked primarily
as a set of coordinated but independent projects. Under the second
phase, program integration would leap forward through the consolidation
and strengthening of the annual programming and budgeting process, as
well as the consolidation of the monitoring system. On the other hand,
there would be no attempt at this stage to consolidate disbursement or
procurement procedure between donors.
11. Implementation will be carried out by the various line agencies
that were set-up during the first phase. High level policy guidance will
be entrusted to a National Environment Council, under the Presidency of
the Republic. Policy level coordination will be the responsibility of an
Interministerial Environment Committee, also under creation; the
Commissary General for the Environment (CGE), within the Ministry in
charge of the Environment (currently the Ministry of Agriculture) will
chair the Committee on behalf of the Prime Minister. Operational level
coordination will be carried out by ONE. There need to better define the
border line between the EP2 and other programs as well as to seek
synergy between such programs would be addressed through the
regionalization of the annual programming process and the proposed
Regional Fund. All the implementation arrangements, including monitoring
and evaluation and the corresponding indicators, would be spelled out in
an implementation manual, currently under preparation. The mission is
satisfied with these arrangements, that incorporate the lessons of the
first phase (see para 5. above).
12. Disbursements would be in line with project implementation
practice, that is a set of eligible payments for particular goods and
services, based on an annual programming and budgeting process that
would be participatory and decentralized, and include systematic
beneficiary assessment. Major procedures for program management will be
spelled out in an Implementation Manual that will be reviewed during
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negotiations and formally adopted as a condition for credit
effectiveness. At field level, all activities would be managed with
strong local participation. Monitoring systems are being put in place
under EP1, including a consolidated 'dashboard' that would provide key
indicators on the status of environmental resources and on the impact of
the program; the systems are expected to be fully operational before the
beginning of the EP2.
13. Supervision of program implementation. Program implementation would
be supervised jointly by donors twice a year, one in spring focusing on
implementation, and once in autumn focusing on programming for the
following year. Under EP1, the full time presence of a staff member at
the Resident Mission has proven to be a key factor in smooth program
implementation. For the EP2, it is proposed to maintain a similar
arrangement, with the difference that several local donor
representatives (e.g. USAID, France) have expressed interest in
participating to the financing.
14. Participatory approach to Program Processing. The process of
formulating the second phase program is being carried out entirely by
Malagasy agencies. The initial participatory process, during the period
June-December 1994, resulted in the preparation of an identification
report that was discussed at the December 94 meeting of the program's
Steering Committee (COS: Comite d'Orientation et de Suivi). Detailed
preparation work was completed in November 1995. It included
participatory processes to set priorities in biodiversity management and
erosion control. In addition, a beneficiary assessment has been carried
out to evaluate the first-phase activities involving local populations
(i.e. land titling, micro-projects for erosion control, integrated
conservation and development operations), and the conclusions were used
as an input into appraisal. A multi-donor pre-appraisal mission took
place in June-July 1995, and full program appraisal took place end-
November 1995, involving ten donors, four international NGOs and all
Malagasy agencies, and a follow-up multi-donor mission took place in
March-April 1996. Proposals for Bank and GEF participation to the
Program were defined during the missions. The preparation documents have
been updated by the Malagasy, and a multi-donor follow-up mission is
scheduled for mid-June 1996. Strong emphasis is being put on
participatory preparation and appraisal, integration of activities into
one single program to ensure proper balance between components, and
compatibility with the country's overall PIP. Full attention is also
being given to the need for proper economic analysis and risk
assessment, in line with the latest recommendations of OED and the
Africa Region.
15.  Rationale for IDA Involvement.    The Country Assistance Strategy
for Madagascar was discussed by the Executive Directors on July 12,
1994, and a progress report was discussed on April 18, 1996. The Bank
Group's overarching objectives in Madagascar are to help the government
promote private sector-export-led growth, attack poverty, improve
natural resource management, build local capacity and improve project
implementation. The proposed project is consistent with the country
strategy and contributes to meeting most of the foregoing objectives.
The Bank has played a leading role since 1987 in the formulation and
implementation of the NEAP. Continued involvement is essential to
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sustain the Government's commitment to difficult and critical changes in
its public investment program, including by promoting the transition
from projects to programs, and to mobilize the support of other donors.
The Bank has also a key role to play in helping the country to mobilize
GEF financing in relation with the global nature of the benefits that
are expected from improved biodiversity protection. Proposals for IDA
and GEF financing were specified at the time of joint program
appraisal. GEF funding would be focalized on some specific components,
namely National Parks, Multi-purpose Forest Eco-systems Management, and
Capacity Building for Support to regional programming and spatial
analysis. IDA would act as the lender of last resort, with the
appraisal and supervision process focusing on the program as a whole and
the use of IDA resources being defined through the annual programming
process on the basis of the coverage and availability of other donor
financing.
16. Processing of the program within the Bank. Two multi-donor mission
appraised the program in November-December 1995 and March-April 1996.
Pre-mission departure meeting took place in November 95 and February
1996. The three key issues that were identified to be looked at during
the preparation/appraisal process were: (i) institutional implementation
capacity in relation to program scope and overall size; (ii) economic
rationale and justification; and (iii) fiscal constraints and financial
sustainability. Conclusions are presented in paragraphs 9/10/11, 19 and
17 respectively. It is now proposed to carry out a formal Bank appraisal
mission as part of the multi-donor follow-up mission mentioned in
para. 14, which is scheduled for mid-June 1996. Agreement on the overall
financing plan and pre-negotiation of the IDA contribution to the
financing of the program would take place in Madagascar as part of the
same mission. Conditionalities would include (i) the finalization and
formal adoption of the Program Implementation Manual and of the Manual
of Procedures of the Regional Fund, and (ii) the official creation of
the National Environment Council and the Interministerial Environment
Committee (para. 10).
17. Program sustainability. The financial sustainability of protected
areas is a major issue. In the long run, the combination of income from
eco-tourism (entrance fees to parks, royalties on private activities
that benefit from the existence of a park, etc.) with the revenue from
capital investment (e.g. through a trust fund or foundation such as the
one recently established in the country) should be sufficient to ensure
such a viability. In the short to medium term, external financing will
be required. Given the nature of ANGAP's activity, there is a clear case
for applying some GEF funds to this part of the EP2. Financial
sustainability of forestry operations would come from a decrease in the
need for Government intervention together with an improvement in
recovery of stumpage fees and other levies.
18.  Program Objective Categories.    Natural resources management.
Poverty alleviation. Institution building.
19. Program Benefits. Long term sustainable growth of the country
cannot be achieved in the absence of proper management of its natural
resources, and the cost of inaction would be higher than the cost of the
program. The program would combine concrete actions with short term
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measurable benefits with long term undertakings (e.g. policies,
education) to ensure sustainability. Direct beneficiaries would include
communities affected by the soil conservation schemes and the
development activities of the conservation projects (protected areas,
forest management, coastal management). Most beneficiaries would be
within the poorest segments of the population. Induced benefits would
come from the introduction of improved environmental impact analysis and
mitigation measures for public investment, as well as from private
investments in ecotourism facilities and services that would be induced
by the program. An economic analysis of the program is being finalized.
Given the program approach and the fact that most field activities would
be demand-driven, it is not possible to forecast the exact nature of the
various interventions. Instead, several models have been developed that
demonstrate that key activities (ANAE mini-projects, forest management
and protected areas) can be economically justified under a fairly wide
range of initial conditions. On the other hand, indirect benefits on
reduced downstream siltation have not been quantified, and they are in
most cases considered substantial, so that total return would be in fact
higher. In addition, given Madagascar exceptional biodiversity, it is
safe to state that global benefits much exceed the cost of the program,
and that the issue is only one of cost-effectiveness and financial
sustainability; this is discussed in para. 17. The implication is that
the various agencies would need to closely monitor costs as well as to
perform economic modeling on an on-going basis in order to ensure that
their work results in the greatest possible impact.
20. Risks. There are strong interactions between environment
degradation, population increase and economic stagnation, including the
stagnation of agriculture, so that the impact of the environment program
would be limited in the absence of significant progress on the other
fronts. Madagascar's future can be seen within two extremes. First,
with continued 'muddling through', the prognosis is devastating -- net
capital inflows will shrink rapidly, import capacity will be impaired,
GDP per capita will continue to fall and poverty will rise rapidly
creating the real possibility of social explosion. The second scenario
for Madagascar's future could materialize if the government can overcome
internal differences and reticence toward comprehensive reform, and
formulate and implement a transparent and credible economic reform
program that would lead to a foreign investment rebound and lay the
basis for export-led growth. Based on experience in other countries,
adoption and maintenance of a credible reform program from 1996 onward
could elicit major new flows of foreign investment by about 1999, with
growth accelerating toward the levels of fast-growing developing
economies within about a decade.
21. Policies that discriminate against agriculture have a direct impact
on incentives for deforestation and shifting cultivation; more generally
speaking, the incentive framework for agriculture development (e.g.
rural infrastructure and access to markets, availability of social and
financial services) determines land use intensification and thus has a
direct influence on natural resources management practices; such issues
are being addressed under the on-going structural adjustment dialogue as
well as under various sector projects. Policies that discriminate
against tourism development (e.g. visa regime, air transport monopoly)
would also affect the program negatively, because ecotourism is a major
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potential source of income from protected areas. Other risks are related
to the potential political instability; in particular, policies that
would affect the institutional set-up would compromise program
implementation.
Contact Point:       Public Information Center
The World Bank
1818 H Street N.W.
Washington D.C. 20433
Telephone No.: (202)458-5454
Fax No.: (202)522-1500
Note: This is information on an evolving project. Certain components
may not necessarily be included in the final project.
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