Document of The World Bank FOR OFFICIAL USE ONLY Report No: 67976-CG PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 6.5 MILLION (US$10 MILLION EQUIVALENT) TO THE REPUBLIC OF CONGO FOR A FOREST AND ECONOMIC DIVERSIFICATION PROJECT April 30, 2012 Environment and Natural Resources Management Unit (AFTEN) Sustainable Development Department Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ÿþCURRENCY EQUIVALENTS (Exchange Rate Effective 31 March 2012) Currency Unit = CFA franc BEAC (XAF) XAF 491.98004950 = USD1 USD1.54909001 = SDR 1 FISCAL YEAR July 31 - June 30 ABBREVIATIONS AND ACRONYMS ACS Administrative and Client Support AFD French Development Agency (Agence Française de Développement) AfDB African Development Bank AFMCG World Bank Office - Brazzaville AFTCS Africa Region - Post Conflict and Social Development Unit AFTEN Africa Region - Environment and Natural Resources Management Unit AFTFM Africa Region - Financial Management Unit AFTFP Africa Region - Finance and Private Sector Development Unit AFTPC Africa Region - Procurement Unit AS Auditing Standards Association International Development Association BEAC Bank of Central African States BP Bank Procedures CAS Country Assistance Strategy CBFF Congo Basin Forest Fund CDD Community-Driven Development CFA Central African Financial Cooperation CFAA Country Financial Accountability Assessment CFAF Central African Financial Cooperation (CFA) Franc CIFA Country Integrated Fiduciary Assessment COMIFAC Central Africa Forests Commission (Commission des Forêts d'Afrique Centrale) ii CPIA Country Policy and Institutional Assessment CPIP Country Procurement Issue Paper CPS Country Partnership Strategy CQ Consultant Qualification CWPAA Congolese Wildlife and Protected Areas Agency DA Designated Account DC Direct contracting DCD Directorate of Communication and Dissemination DL Disbursement Letter DRC Democratic Republic of the Congo DSA Debt Sustainability Analysis DSP Directorate of Studies and Planning EA Environmental Assessment ECOFAC Central Africa Forest Ecosystems (Ecosystemes Forestiers d'Afrique Centrale) EMP Environmental Management Plan ESIA Environmental and Social Impact Assessment ESMF Environmental and Social Management Framework EU European Union FAO Food and Agriculture Organization of the United Nations FAO-CP Cooperative Program of the United Nations Food and Agriculture Organization FB Fixed Budget FCPF Forest Carbon Partnership Facility FEDP Forests and Economic Diversification Project FEPD Forest Economy Provincial Directorates FGEF French Global Environment Fund FLEGT Forest Law Enforcement, Governance and Trade FLTU Forest Legality and Traceability Unit FM Financial Management FMU Forest Management Units FSC Forest Stewardship Council FY Financial Year GD General Directorate 111 GDE General Directorate of Environment GDFE General Directorate of Forest Economy GDP Gross Domestic Product GDPPC General Directorate for Public Procurement Control GDSD General Directorate for Sustainable Development GEF Global Environment Facility GEPRSP Growth, Employment and Poverty Reduction Strategy Paper GFDRR Global Facility for Disaster Reduction and Recovery GNI Gross National Income GPN General Procurement Notice GPS Global Positioning System HIPC Heavily Indebted Poor Countries IA Implementing Agency IBRD International Bank for Reconstruction and Development IC Individual Consultants ICB International Competitive Bidding IDA International Development Association IFC International Finance Corporation IFI International Financial Institution IFR Interim Financial Reports IMCC Inter-Ministerial Consultative Committee on conflicting land-uses in natural ecosystems Infoshop World Bank Public Information Center IP Indigenous Peoples IPPF Indigenous Peoples Planning Framework IS Implementation Support ISA International Standards on Auditing ISR Implementation Status Report IT Information Technology LCS Least-Cost Selection LEGAF Africa Region Law Unit LEGEN Environment and International Law Unit LVS Legal Verification System iv M&E Monitoring and Evaluation MIS Management Information System MSDFEE Ministry of Sustainable Development, Forest Economy and Environment NCB National Competitive Bidding NCDRP National Centre for Disaster and Risk Prevention NEAP National Environment Action Plan NEPA National Environmental Protection Agency NFAP National Forest Action Plan NFWIMC National Forest and Wildlife Resources Inventory and Management Center NGO Non-Governmental Organisation NLUP National Land Use Plan NRM Natural Resources Management NRS National Reforestation Service NSDS National Sustainable Development Strategy NTFP Non-Timber Forest Products NTS National Traceability System OHADA Organization for Harmonization of Business Law in Africa (Organisation pour l'Harmonisation en Afrique du Droit des Affaires) OP Operational Policy PAD Project Appraisal Document PAGEF Support to Forest Management Project (Projet d'Appui a la Gestion Forestiere) PAVAP Support to Protected Area Development Project (Projet d'Appui a la Valorisation des Aires Protegees) PDO Project Development Objective PEFA Public Expenditure and Financial Accountability PER Public Expenditure Review PES Payment for Environmental Services PFM Public Financial Management PFS Project Financial Statements PIM Project Implementation Manual PIRI- Congo Integrated Industrial Rehabilitation Project (Programme Integre de Relance CONGO Industrielle) PM&E Planning, Monitoring and Evaluation V PMU Project Management Unit PPA Project Preparation Advance PPR Post Procurement Review PPU Public Procurement Unit PROFOR Program on Forests ProNAR National Program for Afforestation and Reforestation PRSP Poverty Reduction Strategy Paper QBS Quality Based Selection QCBS Quality and Cost Based Selection RAP Resettlement Action Plan REDD+ Reduction of Emissions from Deforestation and Forest Degradation REM Resource Extraction Monitoring RoC Republic of Congo RPF Resettlement Policy Framework SBD Standard Bidding Documents SCFPE Service for Control of Forest Products for Export SDR Special Drawing Rights SEDP Support to Economic Diversification Project SESA Strategic Environmental and Social Assessment SIGEF Forest Management and Information System (Systeme d'Information et de Gestion Forestiere) SME Small and Medium Enterprises SOE Statement of Expenditures SSS Single Source Selection Syscohada OHADA Accounting Standards TA Technical Assistance TAL Technical Assistance Loan TBD To be determined TEC Technical Education College TGCBP Transparency and Governance Capacity Building Project TGCBP II Transparency and Governance Capacity Building Repeat Project TNS Tri-national Sangha Conservation Landscape TOMPRO Project financial management software Vi TOR Terms of Reference TRIDOM Tri-National Dja-Odzala-Minkebe Project TTL Task Team Leader UN United Nations UNDB United Nations Development Business UNDP United Nations Development Programme UNEP United Nations Environment Programme UNIDO United Nations Industrial Development Organization US$ United States Dollar USD United States Dollar VPA Voluntary Partnership Agreement VSAT Very-Small-Aperture Terminal WA Withdrawal Applications WB World Bank XAF Currency Code for the Central African CFA Franc YR Year Regional Vice President: Obiageli Katryn Ezekwesili Country Director: Eustache Ouayoro Sector Director: Jamal Saghir Sector Manager: Idah Pswarayi-Riddihough Task Team Leader: Simon Rietbergen Vii  REPUBLIC OF CONGO Forest and Economic Diversification Project TABLE OF CONTENTS Page I. STRATEGIC CONTEXT ................................................................................................. 1 A. Country Context ......................................................... 1 B. Sectoral and Institutional Context......................................... 2 C. Higher Level Objectives to which the Project Contributes ........... ........ 6 II. PROJECT DEVELOPMENT OBJECTIVE .............................................................7 A. PDO........................................................ 7 B. Project Beneficiaries ........................7...... ...............7 C. PDO Level Results Indicators......................8.... .............8 III. PROJECT DESCRIPTION ......................................................................................... 8 A. Project Components ..................................... ........ 8 B. Project Financing ......................................... ..... 14 Lending Instrument ...................... .................. 14 Project Cost and Financing .......................................... 15 C. Lessons Learned and Reflected in the Project Design..................... 16 IV. IM PLEM ENTATION .................................................................................................. 17 A. Institutional and Implementation Arrangements .................... ..... 17 B. Results Monitoring and Evaluation .................................... 18 C. Sustainability................... ............................. 19 V. KEY RISKS AND MITIGATION MEASURES.................................................... 20 A. Risk Ratings Summary Table .................................. 20 B. Overall Risk Rating Explanation .............................. ...... 20 VI. APPRAISAL SUMMARY ......................................................................................... 21 A. Economic and Financial Analyses .......................... ......... 21 B. Technical .................................................... 23 C. Financial Management........................................... 23 D. Procurement ......................................... ......... 24 Viii E. Social (including Safeguards) ...................................... 25 F. Environment (including Safeguards) .................................. 26 G. Other Safeguards Policies Triggered .................................. 27 Annex 1: Results Framework and Monitoring ....................................................................30 Annex 2: Detailed Project Description ..................................................................................34 Annex 3: Implementation Arrangements ............................................................................. 52 Annex 4: Operational Risk Assessment Framework (ORAF).............................................76 Annex 5: Implementation Support Plan ................................................................................78 Annex 6: Project Preparation Advance ................................................................................ 80 lx PAD DATA SHEET Republic of Congo Forest and Economic Diversification PROJECT APPRAISAL DOCUMENT Africa Region AFTEN Basic Information Date: 30 April 2012 Sectors: Forestry (60%); General agriculture, fishing and forestry sector (40%) Country Director: Eustache Ouayoro Themes: Rural policies and institutions (30%); Biodiversity (20%); Environmental policies and institutions (30%); Land administration and management (20%) Sector Manager/Director: Idah Pswarayi-Riddihough / Jamal EA Category: B, Partial Assessment Saghir Project ID: P124085 Lending Instrument: TAL Team Leader: Simon Rietbergen Does the project include any CDD component? No Joint IFC: No Borrower: The Republic of Congo Responsible Agency: Ministry of Sustainable Development, Forest Economy and Environment Contact: Fidel Nkounkou Title: Directeur des Etudes et de la Planification Telephone No.: +242 055514733 Email: fidelcefdhac@yahoo.fr Project Implementation Period: Start Date: 25 May 2012 End Date: 24 November 2017 Expected Effectiveness Date: 30 September 2012 Expected Closing Date: 30 November 2017 Project Financing Data(US$M) [] Loan [] Grant [] Other [X] Credit [] Guarantee For Loans/Credits/Others Total Project Cost: 32.6 Total World Bank 10 Financing: Total Counterpart 22.6 Financing Gap: 0 Funding: Financing Source Amount(US$M) BORROWER/RECIPIENT 22.6 IDA: New 10 Others Financing Gap 0 Total 32.6 X Expected Disbursements IDA (in US$ Million) Fiscal Year 2012 2013 2014 2015 2016 2017 2018 Annual 0 1.5 2.3 2.0 2.0 1.7 0.5 Cumulative 0 1.5 3.8 5.8 7.8 9.5 10.0 Project Development Objective(s) The project development objective is to increase the capacity of the Republic of Congo to: (i) promote better implementation of its forestry legislation; and (ii) enhance the policy environment for participation of local communities and the private sector in sustainable forest management and reforestation. Components Component Name Total Cost including contingencies(US$ Millions) 1. Capacity building and institutional strengthening of the Ministry of 20.1 Sustainable Development, Forest Economy and Environment 2. Improving the enabling environment for private sector and smallholder 8.6 activities in the forest sector 3. Enhancing the participation of local and indigenous communities in 3.9 forest management Compliance Policy Does the project depart from the CAS in content or in other significant respects? Yes [] No [X] Does the project require any exceptions from World Bank policies? Yes [] No [X] Have these been approved by World Bank management? Yes [] No [] Is approval for any policy exception sought from the Board? Yes [] No [X] Does the project meet the Regional criteria for readiness for implementation? Yes [X] No [] Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Pest Management OP 4.09 X Indigenous Peoples OP/BP 4.10 X Physical Cultural Resources OP/BP 4.11 X Involuntary Resettlement OP/BP 4.12 X Forests OP/BP 4.36 X Safety of Dams OP/BP 4.37 X Projects on International Waters OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X Legal Covenants Financing Agreement Recurrent Due Date Frequency Adoption of Project Implementation Manual approved by Effectiveness the World Bank Appointment to the DSP for Project purposes of an Effectiveness administrative, financial management and accounting X1 specialist, procurement specialist, expert in natural resource management with M&E experience and social scientist with communications experience, each with qualifications, experience and ToRs acceptable to the World Bank CFA Franc 500 million to be deposited in the Project Effectiveness Counterpart Funds Account, to be used exclusively for Project expenditures ToRs for all studies and TA under the Project to comply Ongoing with and pay due attention to the Safeguard Frameworks Each ToRs and to the Recipient's laws on environmental and social aspects Events of suspension: (a) if the World Bank determines Ongoing the Recipient has failed to apply sound environmental or social standards or practices in its management of natural forests and plantations or carrying out of natural forest or plantation related activities; (b) amendment or waiver of the Recipient's forestry legislation so as to affect materially and adversely its ability to perform its obligations under the Financing Agreement or to achieve the Project's objective. Annual work plans for the Project to be prepared by the Yes December I each year Annual Recipient and furnished to the World Bank for approval, and to include all safeguard instruments required pursuant to the Safeguard Frameworks for the activities proposed to be included in the annual work plan. installation of a suitable accounting software; and 3 months after Effectiveness engagement of acceptable external auditors. Team Composition World Bank Staff Name Title Specialization Unit UPI Simon A. P. Rietbergen Senior Forestry Specialist TTL, Forestry AFTEN 055111 Vincent Palmade Lead Economist Private sector development AFTFP 238977 Mohammed A. Bekhechi Lead Counsel Land tenure LEGEN 093023 Nicolette K DeWitt Lead Counsel Legal counsel LEGAF 014500 Clement Tukeba Lessa Kimpuni Procurement Specialist Procurement AFTPC 307841 Bella Lelouma Diallo Senior Financial Management Financial management AFTFM 199396 Specialist Paul Jonathan Martin Senior Environmental Specialist Environmental safeguards and AFTEN 022698 protected area management Antoine V Lema Senior Social Development Specialist Social safeguards and development AFTCS 156795 Marjory-Anne Bromhead Consultant Natural Resources GFDRR 12577 Andre Rodrigues de Aquino Carbon Finance Specialist Carbon finance AFTEN 257732 Halit Sandbank Environmental Analyst Natural resources management/ AFTEN 374471 economics and operations Loic Braune Natural Resources Management Natural resources management AFTEN 244431 Specialist Leoncie Niyonahabonye Office Manager ACS AFTEN 87519 Karine N. Mouketo-Mikolo Team Assistant ACS AFMCG 370480 Non World Bank Staff X11 Name Title Office Phone City Andre Simon Lead Forestry Specialist, FAO-CP +39 06 5705 5310 Rome, Italy Lazare Hoton Economist, FAO-CP +39 06 5705 5664 Rome, Italy Marc Rodriguez Consultant (Social Safeguards Spec.) 1 +243 81 245 9135 Kinshasa, DRC xii I. STRATEGIC CONTEXT A. Country Context 1. The Republic of Congo is classified as a lower-middle income country, with a population of 4.1 million in 2011, nearly 70 percent of which lives in urban areas, and a per capita GNI of over US$2,000. Affected by a civil conflict in the 1990s and sporadic fighting until 2007, presidential elections were held in 2009 and stability has improved. Gross Domestic Product (GDP) growth has recovered reaching up to 8.8 percent in 2010. Growth has been bolstered by high oil prices and expanded production. Oil accounts for almost 70 percent of GDP, 85 percent of government revenue and 90 percent of exports. 2. Oil sector dominance increased during the civil unrest since it was not directly targeted during the fighting, while other businesses were destroyed. Furthermore the high level of indebtedness, as reflected by a debt-to-GDP ratio of 89 percent in 2008, affected capacity to move towards a more sustainable, inclusive growth path. The approval in January 2010 of a full debt relief program under the HIPC initiative contributed to reduction of the debt-to-GDP ratio to 30.3 percent in 2011, helping to facilitate Government efforts to improve growth and social outcomes. Nevertheless, the Republic of Congo still rates 181 out of 183 countries in the 2012 World Bank Doing Business Report, based on existing business regulations, their enforcement, and administrative bottlenecks. Formal sector employment is limited outside the oil sector and government. 3. Economic diversification, private-sector led growth and employment creation are now priorities for the Republic of Congo, whose 2012-2016 Growth, Employment and Poverty Reduction Strategy (GEPRS) includes ambitious objectives in this regard. Strong growth potential has been identified around four major sectors: transport, agriculture, forestry and mining. The Republic of Congo possesses the largest deep-water port in the region at Pointe Noire and has the potential to become a transport hub; it has substantial agricultural land, rich forests, large areas of savannah land suitable for afforestation and considerable mining potential. There are opportunities for growth and poverty reduction from sustainable management of these resources; but poor management would jeopardize long term development. 4. An Economic Diversification Project approved in 2010 aims to promote private sector growth and investment in the non-oil sectors through improving the business climate, institutional and regulatory reforms, establishment of a platform for public-private sector dialogues, drafting of a Small and Medium Enterprise law, capacity building for enhanced access to finance, professional training and promotion of entrepreneurship. The Republic of Congo is also working to improve broad public sector management, for example through a Public Sector Governance and Transparency Program under way. It has also instituted systematic use of medium term expenditure frameworks to improve expenditure planning. The Republic of Congo, because of the structure of its economy, has substantial fiscal space, which provides an opportunity to improve the environment for responsible private-sector led growth and employment generation. The recently completed Growth and employment study showed that, there are only 130,000 formal sector jobs, and more than 80,000 are in government. The forest sector, with 11,000 formal jobs, is the largest private sector employer; there are many more informal sector jobs but no accurate estimates of their number. 1 B. Sectoral and Institutional Context 5. The Republic of Congo lies in the heart of the Congo basin, the second largest area of tropical rainforest in the world after Brazil, and the Republic of Congo's forests cover over 22 million hectares, 65 percent of the land area. With sparse rural population density and nearly 6 hectares of forest per person, the Republic of Congo is one of the most "forest-rich" countries in Africa. In 2010, the forestry sector provided 11,000 direct jobs and 5,000 indirect ones. The sector contributed 4 percent of total export value, which is in a gradual decline given the increased dominance of the oil sector in the economy. The contribution of the forestry sector to the national economy has also declined but some activities are not yet captured by statistics, including bush-meat (which plays a large part in the nutrition of the rural poor), wood for domestic energy and building materials, as well as a range of non-timber forest products, used for food, medicine and other purposes. These activities generate numerous informal jobs. Fuel wood and charcoal are the principal energy source for cooking, in both rural and urban areas. 6. The Republic of Congo is leading the region in a number of indicators related to sustainable forest management. Deforestation rates, at only 0.07 percent per annum, are currently among the lowest in Africa. Over 50 percent of concessions in the Republic of Congo have approved management plans, and it is estimated that by 2012 about 75 percent of the Republic of Congo's 13.5 million ha of production forests will have approved plans. By February 2012, approximately 2.5 million hectares have been certified by the Forest Stewardship Council (FSC), accounting for nearly half of all FSC-certified forests in the Congo Basin. FSC certification provides improved access to European markets, where consumers are increasingly demanding timber from sustainably managed forests. At present, however, local communities derive uneven benefits from forest concessions. They derive more from the larger, better managed concessions in the north of the Republic of Congo, many of which generate significant employment and are FSC certified or in the process of becoming so, and less from the smaller concessions in the more densely populated areas in the south, whose facilities were also harder hit during the period of civil disturbance. 7. With support provided under the Heavily Indebted Poor Countries (HIPC) initiative, the Ministry of Sustainable Development, Forest Economy and Environment (MSDFEE) adopted a number of ambitious policy reforms, aimed at increasing the transparency in the attribution of timber concessions, strengthening environmental and social impact assessment requirements, and giving local people and indigenous communities more of a voice in the establishment of forest reserves and protected areas. MSDFEE is working in partnership with AFD on strengthening the National Forest Inventory, and forest management planning, and with the EU on FLEGT (Forest Law Enforcement, Governance and Trade), timber traceability, and timber tracking. The EU is also supporting an Independent Observer of forestry, implemented by the NGOs Resource Extraction Monitoring and Forests Monitor. The Republic of Congo has also adopted, in early 2010, a new law on the rights of indigenous peoples. 8. The Republic of Congo is not densely populated and has considerable areas of low- productivity savannah lands that are of limited interest for biodiversity conservation, especially in the center and south which could potentially be afforested, to serve regional markets for charcoal and other wood products. Afforestation technologies in these areas generally support mixed tree-food-crop systems which enhance soil fertility, thus also contributing to increased agricultural production (the Republic of Congo, despite abundant agricultural land, currently 2 imports much of its food). The challenge is to create an enabling environment for private sector and small-holder investment and to ensure that the rights of local people are respected and that they share in any benefits. These planted forests could also relieve pressures on natural forests, which are expected to grow as the economy develops, infrastructure and communications improve and the Republic's potentials for mineral resource extraction are realized. The Congolese Government is aware that their capacity at present to address potential impacts of such developments is limited, and aware that a sound enabling environment in these areas will reduce investment risks and increase the attractiveness of the Republic of Congo to responsible, reputable investors. 9. The Republic of Congo also intends to position itself as a provider of environmental services in emerging global markets. It is participating in FCPF (Forest Carbon Partnership Facility), a program to facilitate access to funds under REDD+ (Reduction of Emissions from Deforestation and Forest Degradation), an emerging program which will enable developing countries to be paid for conserving or restoring forests which store carbon and help to mitigate the impact of climate change. It is also participating in a Regional Program implemented through COMIFAC (Central Africa Forests Commission) aimed at enhancing the capacities of the Congo Basins countries on REDD+ issues and on forest carbon stock measurements, in particular. The program is supported by the GEF (Global Environment Facility). The Republic of Congo also has a substantial system of protected areas. Over 12 percent of the land area has been classified as national parks; protected area management and conservation landscapes are supported through the Regional Congo Basin Forest Fund, administered by the AfDB, the EU and the UNDP. But there are challenges in making the Republic of Congo an international tourist destination, and challenges for local communities to derive benefits from national parks. 10. There are opportunities for increasing the contribution that the forest sector makes to the national economy, and to employment in particular, by increasing value added and domestic processing of timber products, and enhancing the value chain of both timber and non-timber products. But this will require capacity building, strengthening the enabling environment for private sector involvement, and enhanced support for transparency and benefit sharing in forest concession management, including an increase in forest area that is FSC certified and has access to European markets. There are also opportunities for the Republic of Congo to benefit as a provider of global public services, specifically in REDD+ and biodiversity. An in-depth strategic study of the socio-economic and environmental potential of the Forest Sector was undertaken in 2007, which highlighted core strategic challenges and opportunities. 11. The Ministry of Sustainable Development, Forest Economy and Environment (MSDFEE) currently has three general Directorates (Forest Economy, Sustainable Development, and Environment), a General Inspectorate, and five departments (for Studies and Planning, International Cooperation, the Forest Fund, the Fund Environmental Protection, and Communications and Extension). It also has six semi-autonomous agencies (National Reforestation Service (NRS); the National Forest and Wildlife Resources Inventory and Management Center (NFWIMC); the Service for Control of Forest Products for Export (SCFPE), the Congolese Wildlife and Protected Areas Agency (CWPAA), the National Environmental Protection Agency (NEPA); the National Centre for Disaster and Risk Prevention (NCDRP); and the National Program for Afforestation and Reforestation (ProNAR). The Ministry's investment budget for 2012 is US$ 19.6 million and its recurrent budget is US$ 45.7 million. This budget reflects the strategic priority of the sector for the economy, and also the strong fiscal position of 3 the government. The primary challenge is thus ensuring that the existing level of public expenditure on forests is managed efficiently and transparently to meet sustainable development and country strategic objectives. Table 1 - Ministry of Sustainable Development, Forest Economy, and Environment - Budget Execution (planned - prior to disbursement - grants and loans excluded) (in US$) 2009 17,028,719 2,973,327 908,740 1,553,271 5,435,337 4,452,412 9,887,749 2010 22,414,196 3,474,024 1,777,811 3,133,697 8,385,532 8,991,951 17,377,483 2011 26,388,962 4,480,093 1,410,763 4,751,713 10,642,569 8,445,370 19,087,939 2012 70,410,616 5,292,290 4,054,193 36,362,191 45,708,675 19,578,853 65,287,528 136,242,494 16,219,733 8,151,507 45,800,873 70,172,113 41,468,586 111,640,698 Chart 1 - MSDFEE Budget (in US$) - Share of Operational and Investment Costs 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 -U Operational Costs 20,000,000 -Investment 15,000,000 - 10,000,000 - 5,000,000 0 2009 2010 2011 2012 4 12. The Ministry is represented at the "D6partement" and District level primarily through the General Directorate of Forest Economy and its associated agencies. The Ministry currently has a staff of about 1300, of whom half are based in Brazzaville and half in the provinces. About 30 percent are within five years of retirement; for forest engineers in the General Directorate of Forest Economy this figure is 42 percent. As the responsibilities of the Ministry have grown and changed, its current staff is increasingly challenged to meet the social, economic and environmental challenges imposed by its responsibilities. There is a need to enhance its capacity substantially in many areas including improved information, monitoring tools for enhanced transparency and implementation of FLEGT, enhanced land use mapping, improved communication with local communities, civil society and the private sector, and more effective approaches for working with local communities. Communities need also to understand their rights better and enhance their planning and negotiations capacity to ensure benefit sharing. 13. The proposed operation will thus seek to enhance the capacity of the government to fulfill its mandate in forestry and selected areas of environmental management, thus also improving the enabling environment for private sector investment and local communities increased involvement. 14. Current donor support for the forestry sector in the Republic of Congo focuses mainly on forest concession management, timber traceability and protected area management, as can be seen from the table below. Table 2 - Donor Activities in Forest Sector Donor Project Budget Timeline Observations AFD PAGEF EU 5 mn 2009-2014 Support for forest management planning in the south (smaller concessions) and institutional strengthening of the National Forest and Wildlife Resources Inventory and Management Center (NFWIMC). AFD Two full-time EU 0.9 mn 2010-2012 Support for FLEGT, including national Technical Assistants timber traceability system (NTS) and legal timber verification system (LVS) AFD Study on NRS EU 0.12 mn 2011-2012 Study for ProNAR wood energy - looks at restructuring and wood feasibility and risk. energy AFD Setting up lines of TBD 2012-2015 credit for concessionaires to develop forest management plans AFD Contribution to TNS EU 3 mn 2011 TNS = Tri-national Sangha (conservation Conservation Trust landscape that the Republic of Congo shares Fund with Cameroon and CAR) FGEF Support for forest EU 1.5 mn 2010-2013 French Global Environment Fund (Fonds certification Franqais pour l'Environnement Mondial - FFEM) EU Reinforcing timber EU 3.1 mn 2009-2012 Implemented by Soci6t& G6n6rale de tracking Surveillance. RoC government is contributing EU 1 mn 5 EU Independent EU 2.0 mn 2011-2015 Implemented by NGOs Resource Extraction Observatory of Forestry Monitoring (REM) and Forest Monitor EU PAVAP EU 2.5 mn 2008-2010 Creation of National Parks Agency EU ECOFAC V EU 3.7 mn 2005-2010 Odzala National Park management (5th EU program for supporting forest conservation in Central Africa) FAO ProNAR preparation US$ 0.1 mn 2011 Focusing on technical and financial viability studies of different plantation models FAO Support for forest US$ 0.3 mn 2011-2012 inventory Forest Carbon Support for Readiness US$ 3.6 mn 2009-2014 The FCPF grant is managed by the World Partnership Plan and Strategy for Bank and executed by MSDFEE. Facility REDD+ UNDP Support for TRIDOM US$ 3 mn 2010-2015 Cross border conservation landscape the conservation landscape Republic of Congo shares with Cameroon and Gabon (Dja-Odzala-Minkebe) World Bank Forest and US$ 0.6 mn 2007-2010 A policy reform study was followed by the environmental policy adoption of new legislation on transparent reforms under HIPC and competitive concession allocation, environmental impact studies, an Inter- Ministerial Commission established to resolve conflicting land uses. CBFF (Congo Regional protected US$ 50 mn 2011-2015 4 out of the 6 sites are in the Republic of Basin Forest areas project Congo (whole or part), including Lac Tele Fund) and Conkouati. C. Higher Level Objectives to which the Project Contributes 15. The proposed operation will contribute to the goals of the World Bank's Strategy for Development in Africa ("Africa's Future and the World Bank's Support to it", March 2011), which has been widely discussed and endorsed by African stakeholders. This has two pillars: increased competitiveness and jobs; and enhanced resilience and risk management; and one underlying foundation: improved institutional capacity and governance. It is also consistent with the goals of the World Bank's forest strategy endorsed in 2002, which stresses the role of forests in economic development, poverty reduction and provision of global public goods. 16. The proposed operation will contribute to the goals of the Republic of Congo's 2012 Growth, Employment and Poverty Reduction Strategy Paper (GEPRSP), which includes pillars for improved governance, promotion of growth and creation of employment, as well as to the goals of the 2009 Country Partnership Strategy which focuses on "promoting growth and macro- economic stability" and "improving the social environment and integration of vulnerable groups". As stated in the GEPRSP and CPS, a key policy challenge for the Republic of Congo is to use its oil wealth to build a more diversified and competitive economy, thereby improving social outcomes and reducing poverty. The project also builds on the momentum created by the actions taken to complete the HIPC reforms, which include actions for improved, more transparent forest management. 17. Rationale for World Bank Involvement: The World Bank has experience working in post- conflict countries with high level of risk and weak institutions and capacity, warranting intense technical assistance for capacity building, close supervision, and adaptability during project 6 implementation. The World Bank is also well-placed to provide an integrated set of support services to promote improved governance, institutional strengthening, and private sector development, drawing on global sound practices and experience in other countries, and coordinating with other development partners. 18. The World Bank's intervention in the forest sector is particularly important given the ongoing and planned World Bank involvement in promoting overall improved governance and economic growth and diversification in the country, as well as its support to the development of sectors with strong impacts on the forest sector, such as mining and agriculture. The project will support the Government in its effort to strengthen its forestry and environmental institutions, including promotion of more participatory approaches. 19. Moreover, the World Bank has considerable experience supporting governments in the preparation and implementation of large forest and environmental programs which require coordination and integration of projects from several development partners. Strengthening the Recipient's forestry policy and institutions will require close collaboration with other donors working in the forest and related sectors in the country, such as the UN's Food and Agriculture Organization (FAO), the French Development Agency (AFD) and the European Union (EU). Of particular importance in this regard is support to the FLEGT (forest law enforcement, governance and trade) initiative supported by the EU, which will require a considerable enhancement of the capacity of local institutions. In addition, given its extensive experience with environmental and social safeguards, the World Bank is well placed to promote the mainstreaming of social and environmental safeguard instruments and considerations in the governments operations in the sector. II. PROJECT DEVELOPMENT OBJECTIVE A. PDO 20. The Project Development Objective (PDO) is to increase the capacity of the Republic of Congo to: (i) promote better implementation of its forestry legislation; and (ii) enhance the policy environment for participation of local communities and the private sector in sustainable forest management and reforestation. B. Project Beneficiaries 21. Project beneficiaries include employees of the Ministry of Sustainable Development, the Forest Economy and Environment and forest technicians, whose skills are enhanced, private sector and smallholders operating in an improved enabling environment for forest-related investments, and communities in forest management and reforestation concession areas where social responsibility contracts are enforced. 7 C. PDO Level Results Indicators 22. The PDO outcome indicators are: 1. Percentage of timber exports covered by a Forest Law Enforcement Governance and Trade (FLEGT)l legality license (measured annually, based on reports from the Independent Observer for the Forest Law Enforcement Governance and Trade initiative2). 2. Number of forest-related policy reform proposals tabled in the High Level Forum for Public Private Sector Dialogue, (measured annually based on published reports of the High Level Forum) 3. Number of communities having participated in the elaboration of participatory development plans for the community development zones inside forest concessions (number of communities) 4. Direct project beneficiaries (number), of which are female (%) (core indicator). 23. In addition to these PDO indicators, the project will help the government to put in place a sector-wide monitoring framework that will monitor a number of additional indicators on issues the project is trying to influence, but over which it has no direct control, such as the annual volume of private sector investment in forest management, afforestation and reforestation, and environmental services. III. PROJECT DESCRIPTION A. Project Components 24. The project comprises three components: (i) Capacity building and institutional strengthening of the Ministry of Sustainable Development, Forest Economy and Environment; (ii) improving the enabling environment for private sector and smallholder activities in the forest sector; and (iii) enhancing the participation of local and indigenous communities in forest management. 1 FLEGT is the Forest Law Enforcement Governance and Trade initiative spearheaded by the EU. Congo has signed a Voluntary Partnership Agreement with the EU, which has the status of an international treaty, committing the country to implement FLEGT-compliant timber tracking and legality certification systems. 2 The FLEGT timber legality license depends on many elements including companies having approved management plans (with social responsibility contracts), so this indicator also measures environmental and social aspects. 8 Component 1 - Capacity building and institutional strengthening of the Ministry of Sustainable Development, Forest Economy and Environment (US$ 18.2 million, excluding contingencies, of which IDA financing: 5.6 million and RoC counterpart funding: 12.6 million) 25. The project will strengthen the institutional capacity of the Ministry in four critical areas: (i) operational and management capacity; (ii) reinforcement and implementation of the regulatory framework regarding forestry and nature conservation; (iii) environmental management; (iv) sustainable development. Sub-component 1.1 - Strengthening Operational and Management Capacity (US$ 9.5 million, excluding contingencies, of which IDA financin: 2.9 million and RoC counterpart funding: 6.6 million 26. Under this sub-component the project will support: (a) capacity building in human resource and fiduciary management, through upgrading of financial and human resources management systems, training in financial management, human resources management, procurement, utilization of said management systems; and training in results-based management; (b) in-service technical training for MSDFEE's staff in forest policy and its legislative and regulatory framework and strategies for forestry resource and environmental management (including participatory approaches, forest management planning and implementation, social and environmental responsibility contracts, forest product traceability mechanisms, VPA - FLEGT, REDD+ international obligations, environmental services, environmental and social impact studies and risk management); and in-service administrative training for said staff; (c) capacity building of staff of the National Forest and Wildlife Resources Inventory and Management Center (NFWIMC) in forest inventory and data processing, through provision of training and technical experts; (d) development and operationalization, within MSDFEE's department responsible for planning and studies, of a management information system for planning, monitoring and evaluation, and provision of training in the application of this system; (e) further development and improvement of the articulation among forest information and management systems, through a stocktaking of these systems and development and implementation of a plan to operationalize them, improve tools for data collection, train the users and managers of the systems, and train forest engineers and rangers in data collection and processing; (f) strengthening of the MSDFEE's communication capacity, through the: (i) upgrading and maintenance of its website to provide better information on the forestry regulatory framework and forestry activities, and provision of training in the management and maintenance of the site; and (ii) development and implementation of annual communications plans, including information campaigns regarding its activities, notably VPA - FLEGT; and (g) establishment of a functioning national system of traceability of forest products, by: (i) strengthening the capacity of the MSDFEE's staff responsible for forest products traceability to conduct site visits and to operate and maintain computerized timber 9 tracking and legality certification systems; and (ii) provision of training and technical assistance to enterprises on fulfilling VPA-FLEGT requirements and of information sessions to the public on VPA-FLEGT procedures. 27. The project will finance consulting services, refurbishment of existing government buildings, materials, equipment (including inter alia, vehicles, global positioning systems computer hardware and software) and operating costs including those at the decentralized level. Sub-component 1.2 - Strengthening of the Forestry and Nature Conservation Regulatory Framework (US$ 1.4 million, excluding contingencies, of which IDA flnancinz: 0.4 million and RoC counterpart funding: 1 million) 28. The project will support strengthening of the Republic of Congo's forest management and nature conservation regulatory framework, including: (a) review of the forestry legislation, as needed, to assess consistency with the VPA-FLEGT and with sound governance, environmental and social standards (the project will finance expertise needed to review and as necessary revise the forestry regulatory framework), and preparation and implementation of a community and media outreach plan to improve the public's knowledge and understanding of the legislation (as possibly revised to ensure consistency); (b) development in a participatory manner, of manuals detailing the procedures for forest gazetting and de-gazetting; field testing of these procedures; dissemination of the manuals to communities living in forest concession areas and protected areas to increase their awareness of said procedures; and provision of training in their use to staff of the MSDFEE and of local non-governmental organizations; (c) development of appropriate procedures for awarding forest concessions, including design of financial and technical criteria for evaluation of proposed awards, and methods for consultations with affected local communities, and dissemination of these procedures and criteria and provision of training in their application; (d) development and adoption of a regulatory framework (and associated procedures) for taxation of forest activities and products, as well as for tax revenue benefit sharing; and (e) operationalization of an inter-ministerial committee with mandate to address and facilitate resolution of land-use conflicts over natural eco-systems, through the updating of its regulatory framework, as needed; development of suitable operating procedures for the committee, conduct of meetings of the committee, and dissemination of its functions; carrying out of technical studies required to support its deliberations, and consultations with local communities as necessary. 29. The project will finance consulting services, training, materials, equipment, and operating costs. Sub-component 1.3 - Strengthening Environmental Management (US$ 0.8 million, excluding contingencies, of which IDA financinz: 0.25 million and RoC counterpart funding: 0.55 million) 30. The project will support strengthened environmental management through: 10 (a) preparation, adoption and dissemination of an appropriate regulatory framework for the Recipient's environmental legislation, and preparation and implementation of a plan for the wide dissemination of the framework to the public; (b) development of guidelines on the carrying out of environmental and social impact assessments, with a particular focus on the forestry, mining, onshore petroleum, infrastructure, hydro-electric energy and agriculture activities, dissemination of the guidelines, and provision of training to governmental staff and private firms involved in said sectors on the preparation and evaluation of such assessments, as well as in monitoring environmental management plans; (c) carrying out of a feasibility study for an environmental quality monitoring laboratory, and on the basis of the results of said study, establishment of the laboratory through refurbishment of existing facilities and provision of training to laboratory assistants in its operation; and (d) carrying out of such additional environmental studies and assessments related to the forestry sector as may be agreed with the World Bank. 31. The project will finance consulting services, equipment and refurbishment costs. Sub-component 1.4 - Promotion of Sustainable Development (US$ 0.7 million, excluding contingencies, of which IDA financinz: 0.2 million andRoC counterpart funding: 0.5 million) 32. The project will support the newly created General Directorate for Sustainable Development (GDSD) and promote sustainable development within the MSDFEE and other government ministries through: (a) Preparation and dissemination to the public of a national strategy designed to promote sustainable development, and a related action plan for the implementation of the strategy; (b) Carrying out of a program to enhance the capacity of the GDSD to raise awareness among other ministries of emerging sustainable development issues (such as climate change, biodiversity, and soil degradation), and conducting awareness-raising activities on these issues; (c) Carrying out of preparatory studies on forestry and environmental issues, as needed to develop a national land use plan; and (d) Carrying out of studies to enable an active and effective role for MSDFEE on the Inter- Ministerial Consultative Committee (IMCC) on conflicting land-uses in natural ecosystems. 33. The project will finance consulting services and equipment. Sub-component 1.5 - Project Coordination (US$ 5.8 million, excluding contingencies, of which IDA financin: 1.8 million and RoC counterpart funding: 4 million) 34. The project coordination will be integrated in the Department of Studies and Planning (DSP), strengthening the DSP's capacity to plan, coordinate, and monitor the project's activities, as well as developing its capacity and efficiency in planning and monitoring the MSDFEE's activities as a whole, in accordance with its mandate. The project will provide DSP with staff, training and 11 goods (including inter alia vehicles, furniture, small field equipment and maps) required for project coordination. Component 2 - Improving the Enabling Environment for Private Sector and Smallholder activities in the Forest Sector (US$ 7.8 million, excluding contingencies, of which IDA financing: 2.4 million and RoC counterpart funding: 5.4 million) 35. The project will contribute to the definition and establishment of organizational procedures, rules, technologies and socio-economic studies to address knowledge gaps and constraints and assist the government in creating a more favorable environment for appropriate private sector and smallholder investment in forests and agro-forestry. More specifically, the project will support improvement of the enabling environment for private sector and smallholder activities in the sector through: (i) studies on the feasibility of private sector and smallholder plantations; (ii) capacity building in timber processing and value-added chains for small and medium enterprises; and (iii) studies on the prospects for investment in environmental services. Sub-component 2.1 - Afforestation and Reforestation (US$ 1.8 million, excluding contingencies, of which IDA flnancinz: 0.55 million and RoC counterpart funding: 1.25 million) 36. The project will support: (a) carrying out of a diagnostic study to identify constraints to private sector investments in forest and agro-forestry plantations, and to evaluate and recommend environmentally, socially, financially and technically appropriate options for addressing such constraints; (b) carrying out of a study on potential markets for plantation products; (c) carrying out of a study to identify, evaluate and recommend appropriate legislative and regulatory measures designed to facilitate private investment in plantations and development of markets for their products; and conduct of consultation and validation workshops required for the purpose; (d) development of a detailed national afforestation and reforestation program including economically viable plantation models, on the basis of the studies carried out above under this sub-component; (e) development of sound procedures and criteria for consultations with local communities and indigenous peoples to facilitate identification and allocation of land for reforestation by the private sector in a manner designed to respect the land use rights of said communities and peoples; (f) development of appropriate environmental and social guidelines for different plantation types; (g) establishment of a comprehensive data bank of information on plantations, and provision of training to staff in its operation and management, computer hardware and software and cartographic equipment; (h) carrying out of training programs to enhance the skills of the Recipient's staff and non- governmental organizations, in order to facilitate the environmentally, socially and technically sound establishment and management of plantations; 12 (i) carrying out of information campaigns to increase awareness of ProNAR, its activities and related legislative and regulatory framework; (j) strengthening the capacity of the Recipient's staff to coordinate and facilitate reforestation and afforestation activities, through the provision of computer hardware and software, vehicles, small field equipment required for the coordination and facilitation purposes; (k) strengthening the capacity of the Recipient's staff to provide technical assistance to small holder tree planters in savannah zones, through the provision of vehicles and small field equipment; and (1) development of a strategy to protect forested areas against fires and other risks. Sub-component 2.2 - Support to Small and Medium Scale Forest Enterprises (US$ 1.4 million, excluding contingencies, of which IDA financinjz: 0.4 million and RoC counterpart funding: 1 million 37. The project will support: (a) reinforcement of the training program for timber artisans in Pointe Noire and, on the basis of the results of such reinforcement, extension of the training program to Brazzaville, all through the refurbishing, furnishing and equipping of the government's woodworking buildings and technical expertise; (b) carrying out of a participatory study with small and medium wood enterprises in order to elaborate a development strategy for such enterprises. The study will identify, evaluate and recommend (i) potential markets for artisanal production; (ii) opportunities for technical and marketing improvements; and (iii) scenarios for formalizing such enterprises; and (c) design of an environmentally sustainable strategy for the development of endangered non-timber forest products, such as Gnetum africanum and rattan. 38. The project will finance goods, services, and training for this component. Sub-component 2.3 - Environmental Services (US$ 4.6 million, excluding contingencies, of which IDA financin: 1.4 million and RoC counterpart funding: 3.2 million) 39. The project will promote environmental services in the Republic of Congo through: (a) capacity building of private and NGO developers of environmental services projects to develop such projects in compliance with legal requirements and access financing for such projects, and of government agencies to oversee such projects, through provision of training; (b) economic evaluation of environmental services provided by the Recipient's ecosystems and the costs associated with degradation of these ecosystems, and analysis of the potential of environmental services initiatives; (c) information campaigns to raise awareness of environmental services and to inform interested parties on the conditions for accessing funding for environmental services and identify potential project developers; and south-south exchanges to increase the 13 knowledge of government staff, civil society and private entities regarding environmental services initiatives outside the Recipient's territory; (d) technical assistance to local communities in their preparation of environmental services project proposals, including feasibility studies, socio-economic and legal studies, studies on financing mechanisms, and design of monitoring and evaluation tools; and (e) consultations, committee meetings and analytical studies required for the finalization of the Recipient's REDD+ strategy and implementation framework. 40. The project will finance goods, services and training for this component. Component 3 - Enhancing the Participation of Local and Indigenous Communities in Forest Management (US$ 3.5 million, excluding contingencies, of which IDA financing: 1.1 million and RoC counterpart funding: 2.4 million) 41. This component will consist of a program designed to enhance local community participation and benefit sharing in the elaboration and implementation of forest management plans, including: (a) technical assistance to communities in the design of social responsibility contracts and management plans for community development zones within forest concessions, and to enhance capacity of community development councils to conduct negotiations of such contracts and plans; (b) Information campaigns designed to promote awareness of local communities of their rights and responsibilities relating to participation and benefit sharing in forest management, and provision of negotiation skills training to said communities; (c) Training of staff of the Recipient, as well as non-governmental organizations, in forest management planning procedures and negotiations and monitoring of social responsibility contracts and forest management plans; and (d) a study to review and clarify the forest regulatory framework in respect of local community participation, as needed. 42. The project will fund consulting services, training, equipment and operating costs. B. Project Financing Lending Instrument 43. The lending instrument will be a TAL (Technical Assistance Loan). TALs are used to build capacity in entities directly concerned with implementing policies, strategies, and reforms that promote economic and social development. They also build capacity related to public sector reform and to the preparation, implementation, and maintenance of investments. The combination of the capacity building and technical assistance activities with the policy reform elements in the project makes it particularly suitable for a TAL. The only other lending instrument considered, a Specific Investment Loan, was discarded as an option because the current operation does not invest money directly in forest management and reforestation on the ground, but focuses on capacity building and technical assistance. 14 Project Cost and Financing 44. The total project financing requirements are estimated at US$32.6 million, inclusive of price and physical contingencies. In addition to the IDA credit of US$10.0 million, a counterpart contribution will be provided by the Government of the Republic of Congo in the amount of US$22.6 million. All activities will be financed on a constant pro-rata basis by IDA and the Government, contributing 30.7 and 69.3 percent of the cost of each activity, respectively. The IDA financing will be provided in the form of a credit. The IDA terms are the standard blend terms, with 25 year maturity including a 5 year grace period, a 1.25% interest charge, and with principal repayable at 3.3 percent per annum for years 6-15 and 6.7 percent per annum for years 16-25. Table 3 - Project Cost Table Component 1: Capacity Building and Institutional 18,217 5,592 56% Strengthening of the MSDFEE 1.1 Strengthening operational and management capacity 9,551 2,932 29% 1.2 Strengthening and implementation of the regulatory framework 1,437 441 4% 1.3 Strengthening environmental management 784 241 2% 1.4 Supporting the Sustainable Development General Directorate 665 204 2% 1.5 Project coordination 5,780 1,774 18% Component 2: Improving the Enabling Environment for Private 7,799 2,394 24% Sector and Smallholder Activities in the Forest sector 2.1 Afforestation and Reforestation 1,787 549 5% 2.2 Support to small- and medium-scale forest enterprises 1,441 442 4% 2.3 Environmental Services 4,571 1,403 14% Component 3: Enhancing the Participation of Local 3,508 1,077 11% Communities in Forest management Total Baseline Costs 29,524 9,063 91% Physical contingencies 1,091 335 3% Price contingencies 1,959 602 6% Total Project Costs 32,574 10,000 100% Interest During Implementation 0 0 0% Front-End Fees 0 0 0% Total Financing Required 32,574 10,000 100% Project Preparation Advance 45. A Project Preparation Advance has been provided for this project in the amount of US$939,500. Activities that are being financed by this advance comprise mainly capacity strengthening of the MSDFEE's Directorate of Studies and Planning and preparatory studies (see Annex VI for description of PPA activities and implementation arrangements) under Component 1.5 and Components 1.1 and 2.1, respectively. The Project Preparation Advance will be refunded 15 out of the proceeds of the follow on IDA Credit once approved by the Board and the Financing Agreement declared effective. C. Lessons Learned and Reflected in the Project Design 46. The proposed operation takes into account lessons learnt from operations in the Republic of Congo, operations in post-conflict environment, forestry and natural resource operations in Africa, and capacity building operations more broadly, as follows: (i) Project design has taken into account the implementation capacity of Government, especially in post-conflict countries. Project design thus focuses on capacity building for one Ministry, to facilitate coordination and decision making processes. (ii) Project design recognizes that institution-building is a long term process, and focuses on core functions. The project supports the strengthening of operational functions, such as public expenditure management and monitoring, fiduciary functions, information management and communications, at the central as well as decentralized levels. These core functions are a pre-requisite for the Ministry to fulfill its technical missions regarding transparent, sustainable natural resource management, economic diversification and enhancement of environmental services. (iii) Sustained government commitment is key. The project fits within the Government's core strategy of economic diversification and employment creation, and forests have been identified as a core strategic sector in this regard. It is also closely aligned with the other operations in the Country Partnership Strategy, specifically the Support to Economic Diversification Project, which includes support for a Platform for Public-Private Sector Dialogue on Forests, and the Transparency and Governance Capacity Building Project (TGCBP), which includes support for improved public expenditure management. (iv) Simple, realistic results indicators, which can be monitored using existing information systems, have been defined and agreed upon during project preparation. The indicators have been designed with these constraints in mind. (v) Forests provide a mix of local and global public goods, but local benefits are the driver of successful country programs. While seeking to enhance opportunities to contribute to global environmental services, the proposed operation focuses on local socio-economic benefits. (vi) The "core mission" of forest institutions has evolved over the last decade, towards a greater focus on working with local communities to ensure benefit-sharing and participatory approaches to forest management, transparency and sustainability. The proposed operation includes a focus on re-training, communications, extension and participation. (vii) Complementarity and cooperation with other development partners is key to achieving development outcomes. The proposed operation builds on and has been developed in cooperation with prior and ongoing initiatives supported by the World Bank and other development partners, including the Highly Indebted Poor Countries' Initiative (legal reforms concerning forest, environment and land use conflicts), FLEGT (timber traceability, legality certification, independent observation), AFD's and FAO's work on reforestation, and REDD+. 16 (viii) A recent study conducted by PROFOR (Program on Forests) on project completion reports for governance aspects of forest projects highlighted that introduction of information technology systems frequently did not accomplish their objectives for a number of reasons: the forest management information systems were not always sufficiently linked to broader transformation of business management systems, e- government and information dissemination and transparency; and systems introduced were too complex and staff lacked technical capacity to use them. A phased approach preceded by careful study of the business and forest management systems, and thorough training at every step, works best. These lessons are incorporated into the proposed project design. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 47. The project will be implemented through the Ministry of Sustainable Development, Forest Economy and Environment (MSDFEE). Its Directorate of Studies and Planning (DSP) will have overall responsibility for project coordination and will submit annual work plans to be approved by the World Bank. Project coordination is fully integrated in the MSDFEE administrative structure and the Director of DSP is also the Project Coordinator. At the beginning of the project there will be consultant TA to bring the government officials in the DSP up to speed with financial management, procurement, safeguards and monitoring & evaluation, but the government officials will take on full responsibility for these areas as soon as they are ready. 48. The government has nominated a Project coordinator and a deputy Project coordinator. For the fiduciary aspects, the DSP is being assisted during project preparation by the Project Management Unit of the TGCBP II, and during project implementation, it will be assisted by an administrative, financial management and accounting specialist and a procurement specialist recruited to the DSP. The capacity of the DSP will be strengthened by the recruitment of these specialists (both, conditions of effectiveness), as well as the following staff, who will also be recruited before effectiveness: a social scientist with experience in communications (responsible for coordinating social safeguards aspects), and an expert in natural resources management (NRM) with experience in monitoring and evaluation (responsible for environmental safeguards aspects, as well as monitoring and evaluation of project activities and development of the MIS for the MSDFEE overall). 49. The procurement and administrative, financial management and accounting specialists will be hired on renewable term contracts until the World Bank evaluates the Ministry as being capable of independently managing procurement and financial management aspects of project implementation. The social scientist and NRM specialist will each be assigned one or more counterparts from among Ministry staff to be trained by them, in order to build the Ministry's capacity in these aspects of project management. Each counterpart will be trained on part or all of the specialist's responsibilities, depending on the number of counterparts assigned and their skill set, as deemed appropriate by the MSDFEE and acceptable to the World Bank. The social scientist and NRM specialist will be hired on renewable term contracts until Ministry staff are 17 evaluated by the World Bank as satisfactorily fulfilling the requirements set forth in these specialists' TOR and as being capable of independently managing these specialists' responsibilities in project implementation. 50. A project preparation advance has been provided to the Government for purposes of project preparation, for which the Project Management Unit of the Transparency and Governance Capacity Building Repeat Project (TGCBP II) has fiduciary oversight. The Advance also provides training in fiduciary management for staff of the MSDFEE. Further support will be needed, however, in the first years of the project and this is provided for in the form of the abovementioned specialists recruited to the DSP. 51. The technical directors in the General Directorate (GD) of Forest Economy, the GD of Environment, and the National Program for Afforestation and Reforestation will play a lead role in the technical oversight of the project. However the DSP will have overall responsibility for component 1.1; GD Forest Economy for component 1.2, 2.2 and 2.3 and component 3; GD Environment for component 1.3; and the National Afforestation and Reforestation Program (ProNAR) Coordinator for component 2.1. 52. The PPA is also financing preparation of a Project Implementation Manual (the adoption of which is a condition of effectiveness), detailing administrative and financial management, procurement and reporting procedures, preparation of monthly reports, and communications. Computing and internet hardware and financial management software is also provided for under the PPA, together with a minor refurbishment of the MSDFEE electrical circuits to assure safety of the computer equipment. B. Results Monitoring and Evaluation 53. The Department of Studies and Planning will have overall responsibility for planning, monitoring and evaluation. In this regard the project will include development and operationalization of a Management Information System (MIS). This will provide information not only on planned programs and achievement of project development outcomes, but also on overall developments and information for which the Ministry is responsible. Streamlining and operationalization of the planning, monitoring, and evaluation system will initially be implemented in the context of this Project. Subsequently, implementation will be expanded to all Ministry operations. The project aims to have this system applied to 60 percent of Ministry operations during the lifetime of the project. 54. The project will also further develop and improve the articulation among different forest information and management systems. These systems are an important tool in the fight against illegal logging, to further transparency and improve forest governance. The MSDFEE has made considerable investments in such systems, especially in the Systeme d'Information et de Gestion Forestiere (SIGEF) which was established in 2009 in the General Directorate of Water and Forests. Until now, the SIGEF has remained a prototype and has not been deployed nationwide. More recently, a National Traceability System (NTS) has been put in place to help the government comply with the Voluntary Partnership Agreement that the Republic of Congo 18 concluded with the EU3. A Legal Verification System (LVS) will soon complement the NTS. The project will finance international expertise to take stock of progress achieved with the various forest information management systems and for developing a plan for operationalizing key systems, improve tools for data collection, national expertise for training and coaching managers and users of the different forest information and management systems, training for forest engineers and rangers at decentralized level to collect and process data, computer equipment and technical instruments for data collection missions in the field. Close collaboration is planned with the EU-funded NTS project. C. Sustainability 55. The project has been designed for achieving institutional, financial, environmental and social sustainability, as described below. 56. Institutional sustainability: The project is grounded in existing government institutions and strategic objectives and builds on ongoing and recently completed initiatives. It includes substantial capacity building elements, which will enable the MSDFEE to fulfill its statutory obligations. It also builds on existing government commitments, especially regarding FLEGT. 57. Financial sustainability: Government recognizes that sustainable, transparent forest management benefiting local stakeholders is key to attracting responsible long term investment in forests, and key to enhancing value-added and the contribution that forests make to economic development and employment growth, but also to export earnings and government revenues. Government is also committed to providing the investment and operating budgets necessary for the Ministry to fulfill its statutory obligations; the project helps improve the business processes that will make it a cost effective institution. 58. Environmental sustainability: The project should create an enabling environment for improved environmental management in the development process in the Republic of Congo. The basic legislation has been developed but the capacity to implement it is currently insufficient. The project provides support to strengthened capacity for oversight of environmental and social impact assessment in key sectoral ministries as well as the Environment GD, and training for Congolese consulting firms. This capacity building should provide a basis for improved environmental management after the project support ends. 59. Social sustainability: The project aims to improve the enabling environment for increased employment in the sector: with 25 percent of young people in the Republic of Congo without jobs, employment generation is a key social as well as economic priority. The project also aims to improve the enabling environment for participation of local communities, including indigenous peoples, in forest management planning and implementation, and for more broad transparency in the sector. These measures are also aimed at longer term social sustainability of forest activities. ' All countries that have concluded a Voluntary Partnership Agreement with the European Union (EU) under the Forest Law Enforcement Governance and Trade initiative (FLEGT) are putting in place a National Traceability System and a Legal Verification System to ensure that timber exported to the EU is from legal sources. 19 60. The chances of achieving sustainability of operations after World Bank support ends are increased by the expected higher private sector interest in reforestation, enhanced value added processing, the high level of government commitment illustrated by the successful completion of forest and environment reforms under the HIPC initiative, and the substantial government counterpart funding contribution. The substantial fiscal space that the Republic of Congo enjoys also helps to provide a favorable environment. The project is integrated into government core functions and activities to be implemented are grounded in the existing legal and regulatory framework, an additional factor in likely future sustainability. 61. There is growing demand in international markets for the transparency and traceability initiatives that the project supports, which also increases the likelihood that these activities will be maintained. The Republic of Congo's broader diversification objectives regarding transport and mining also increase demand for an environmentally and socially responsible approach if development goals are to be achieved, and the strengthening of environmental management functions will help achieve this. V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table Table 4 - Summary of Project Risk Ratings Stakeholder Risk High - Reputational High Implementing Agency Risk High - Capacity High - Governance High Project Risk Moderate - Design Moderate - Social and Environmental Moderate - Program and Donor Moderate - Delivery Monitoring and Sustainability Moderate Overall Implementation Risk High B. Overall Risk Rating Explanation 62. The overall implementation risk has been rated high, due to the country risk, and due to the implementation capacity of the key implementing Ministry, which does not have experience implementing World Bank operations. However, the project contributes to core country strategic 20 development objectives, mitigating the country risk. The implementation risks are mitigated by the support given through the project to strengthening Ministry fiduciary capacity, consistent with broader initiatives for strengthened public sector management and governance, as supported through the IDA-financed Transparency and Governance Capacity Building Repeat Project. Project design, focusing on capacity building on the one hand, and improving the enabling environment for private sector investment on the other, is regarded as moderate risk. 63. The project is designed to mitigate environmental and social risks in the forest sector, and has been developed in close cooperation with key development partners. It supports enhanced benefits sharing and enforcement of social responsibility contracts in forest concessions, strengthens the voice and access to information of local communities, seeks to enhance the value added and employment creation from existing forest production, and supports transparency and sustainability. However the reputational risk of the proposed operation is regarded as high, because forest sector operations, even those designed to address social and environmental issues, are often regarded as controversial. The risk is somewhat mitigated through support to the Ministry's public information systems and transparency initiatives. The strategic importance of the forest sector and the strong support provided by other development partners also help to mitigate risk, which nevertheless remains high. VI. APPRAISAL SUMMARY A. Economic and Financial Analyses 64. Estimation of the economic benefits of a capacity building project presents particular challenges. Nonetheless, assuming that the project can help the Ministry to reduce the waste caused by inefficiencies in procurement from a current estimate of 25 percent to 5 percent over the five years of the project, and that efficiency gains apply only to the investment budget and half the operations budget, then the project would generate an economic benefit of US$22.9 million over the five years of its implementation (see table 5), more than the entire counterpart funding for the project - which accounts for 70 percent of project cost. This is under the conservative assumption of a flat MSDFEE budget over the duration of the project, whereas in reality the MSDFEE budget, and government budgets more generally, have been going up considerably. Table 5 - Gain to Government Budget from Increase in Procurement Efficiency due to Project Implementation (in million US$ except as marked) Budget (MSDFEE investment budget + half 42.4 42.4 42.4 42.4 42.4 42.4 of operations budget) Procurement inefficiencies (in %) 25% 23% 20% 15% 8% 5% Resulting loss of budget funds 10.6 9.75 8.48 6.36 3.39 2.12 Gain due to project - 0.85 2.12 4.24 7.21 8.48 Total gain from increase in procurement2 21 65. Other direct economic benefits are harder to estimate but therefore not to be discounted. For example, the assistance the project provides in putting in place a timber traceability and legality certification system will make it easier for the government to recover forestry-related fees and taxes. The Independent Observer for the Forest Law Enforcement Governance and Trade initiative estimates that for 2009 (latest year for which complete data are available), the average recovery rate of forest taxes (stumpage fee and concession rent) was only 42 percent. If this recovery rate could be improved to 82 percent over the duration of the project, this would generate an additional economic benefit of approximately US$7 million, and a highly positive rate of return for the project. 66. In addition, the project is expected to have substantial indirect economic benefits. The Republic of Congo's dependence on oil revenues poses challenges due to the volatile and finite character of the resource and, more generally, reliance on the oil sector is problematic for the Congolese economy as this sector has a limited capacity to generate employment and poses an inherent obstacle for improving competitiveness. Diversification of the economy's productive base could be achieved through exploitation of the country's comparative advantages - its geographic position and natural resource endowment - and the encouragement of several key sectors, among them forestry. 67. A principal benefit is expected to be increased value-added from existing timber production, through higher-value production created in-country to serve both domestic and international markets. The project aims to improve the enabling environment for responsible private sector and small-holder investment in improved processing, through further increasing the stability and the transparency of forest concessions (creating an environment conducive to long term investment), and by supporting local entrepreneurs to improve the quality and efficiency of timber products produced for local and export markets. 68. A second "value-added" benefit concerns export markets. Enabling forest concessionaires to comply with FLEGT requirements will allow them to continue to export timber to European markets, where timber commands a price premium over timber exported to other regions. 69. Support to building environmental and social assessment and oversight capacity in core sectors, mining, oil, hydro-electricity and transport should also improve the sustainability and quality of investments in these areas. 70. The project also improves the enabling environment for the Republic of Congo to benefit from emerging global "payment for environmental services" initiatives, specifically REDD+, for storage of carbon in standing forests, and the Clean Development Mechanism, for sequestration through afforestation and reforestation initiatives. 71. The principal fiscal benefits would be two-fold; from enhanced tax revenues from higher value added production, and from improved tax collection through strengthening the government's capacity to implement the Voluntary Partnership Agreement it concluded with the EU under the Forest Law Enforcement Governance and Trade initiative (see above for estimated gains). 22 B. Technical 72. The project follows international good practice guidelines in the interventions supported, given country conditions and capacity. In particular the FLEGT, traceability and certification approaches use international good practice with regard to information management tools. Support to local communities to participate in concession management also uses good practice, emphasizing the government role as a service provider, and the involvement of civil society organizations in participatory forest management. The Republic of Congo has also been an innovator in the use of GPS (global positioning systems) by indigenous peoples, to demarcate areas within concessions to be excluded from timber harvesting. Improved fiduciary management includes support to results-based budget management. With regard to capacity building in MSDFEE, the project also aims to integrate tools for forest management, business management and communications / transparency, in line with emerging international good practice. C. Financial Management 73. As part of the Forestry and Economic Diversification Project preparation, a joint financial management (FM) assessment of MSDFEE was conducted by the World Bank Project team's FM and procurement specialists. This financial management assessment was carried out in accordance with the World Bank Financial Management Manual for World Bank-Financed Investment Operations issued by the FM sector board on March 1, 2010, and comprised a review of the existing FM system, including budgeting, staffing, financial accounting, financial reporting, funds flow and disbursements, internal and external audit arrangements. The assessment revealed some weaknesses and risks in MSDFEE's FM capacity, mainly in the areas of staffing arrangements and capacity, accounting systems, both internal and external auditing, and reporting arrangements. The overall FM risk is deemed Substantial. 74. Due to these weaknesses, and the associated fiduciary risks to the project, the Government of the Republic of Congo, with the concurrence of the World Bank, has decided to use, during project preparation and implementation of the Project Preparation Advance, an existing project management unit which is implementing the Transparency and Governance Capacity Building Project within the Ministry of Finance (PMU). This unit is very familiar with World Bank FM procedures, having managed several World Bank-financed operations since 2002. Subsequently, during project implementation, the Directorate of Studies and Planning (DSP) will include an administrative, financial management and accounting specialist and a procurement specialist, to ensure that the DSP's FM and procurement capacities are sufficient to guarantee the respect of the World Bank's fiduciary standards for Financial Management and Procurement, as evaluated by World Bank FM and procurement specialists. 75. A Project Implementation Manual (PIM), including administrative and financial management procedures, will be prepared and adopted prior to effectiveness. In addition, the existing accounting software will be upgraded (e.g. multi-projects and multi-sites version 9.3 of the TOMPRO and installation of the network). The setting-up of the computerized accounting system is due 3 months after effectiveness. Interim Financial Reports will be prepared every quarter in a format and with content agreed upon with IDA and furnished to the World Bank 45 days after the end of the quarter. 23 76. Overall project funding will consist of an IDA Credit of US$10 million equivalent and US$22.6 million equivalent in counterpart funds provided by the Republic of Congo. These funds will finance all project expenditures on a pro-rata basis and will be managed through two (2) new bank accounts to be opened and maintained by the DSP in a commercial bank acceptable to IDA as follows: (i) a Designated Account in CFAF to receive IDA advances, and to pay for the IDA pro rata share project expenditures; (ii) a Project Counterpart Funds Account in CFAF to receive counterpart deposits and replenishments, and to record payments for the government's pro rata share of Project expenditures. 77. Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits, dated October 15,2006 and updated January 2011, shall apply to the Project. D. Procurement 78. Rules and procedures. Procurement for the proposed project will be carried out in accordance with the World Bank's "Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers", dated January 2011; "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers", dated January 2011, and the provisions stipulated in the Legal Agreement. All procurement of goods under this project will be carried out using the World Bank's Standard Bidding Documents (SBD) or Standard Request for Proposals, respectively, for all ICB for goods and all recruitment of international consultants. For National Competitive Bidding (NCB), while waiting for the World Bank to assess the implementation of the Government's new procurement system (under the procurement code adopted December 2009) based on experience gained from the Government's use of these documents outside the context of this Project, the Borrower will use the WB's SBD for ICB for goods and the WB's Standard Request for Proposals for recruitment of consultants. Annual procurement audits will be carried out throughout the duration of the project. 79. Institutional arrangements. The overall procurement risk, before risk mitigation, is deemed to be Medium. The institutional arrangements for implementation of the project take into account the need to improve capacity in procurement and other fiduciary areas of key Ministry staff involved in project implementation. The Directorate of Studies and Planning (DSP) will be responsible for coordinating and implementing all project activities. The Project Management Unit of the TGCBP II will take responsibility for fiduciary management during project preparation. Subsequently, the DSP's FM and procurement capacities will be strengthened by financial management and accounting and procurement specialists, who will be recruited before effectiveness. 80. Capacity of the Public Procurement Unit (PPU). The PPU in MSDFEE was created in September 2009, but lacks capacity to become fully and effectively operational. PPU procurement officers have worked closely with the TGCBP II PMU during project preparation, and will continue to work with the DSP's financial management and accounting and procurement specialists during project implementation, so as to strengthen their capacity. More details on procurement arrangements are provided in Annex 3. 24 E. Social (including Safeguards) 81. Social benefits: The expected social benefits of the proposed project at local level - including Indigenous Peoples' communities - will comprise: enhanced management of forestry resources at local community level; strengthened participation of local communities in the decision making processes of forest management; enabling forestry resources to become sustainable sources of livelihood for local communities. At the level of commercial forestry (including concession logging and afforestation/ reforestation), the project is expected to create income generating opportunities at local level and reduce potential conflicts between commercial forestry and community land use. At national level, the project is expected to improve concession management and enhance the recovery of forest fees and taxes, as well as the functioning of mechanisms to redistribute forest revenue to local government as mandated by the forest law. 82. Poverty and equity: The main social contribution of the project is: enhancement of social infrastructure provision and forestry-related income generating opportunities for local communities and indigenous peoples and skills enhancement for wood artisans. The social and poverty outcomes of the proposed project will include the following: (a) enhanced government capacity in forestry management; (b) income generating opportunities in community development zones s around forestry concessions and in smallholder or larger-scale reforestation (c) induced development of social infrastructure in community development zones around forestry and reforestation concessions through more equitable social responsibility contracts (d) enhanced management of natural resources and the sources of livelihood for rural populations including the indigenous peoples; (e) enhanced wood processing skills of artisanal wood workers. 83. Participation: The design of the project has been participatory at several levels. Representatives of the national government, regional governments and local authorities, constitute the decision makers that initiated and formulated the design of the project. The preparation of the project, including feasibility studies and preparation of safeguards instruments were carried out in consultation with the national government, regional administrations, local communities, the civil society and development partners such as the Agence Franqaise de Developpement. The World Bank convened a meeting with the Congolese NGOs on 14 October 2011 to discuss the Terms of Reference (TOR) for the Safeguards study, and incorporated comments received during and after the meeting in the revised TOR. A specific national stakeholder consultation was organized with the civil society including indigenous peoples on January 20- 21, 2012, to review, discuss and suggest changes to the Resettlement Policy Framework and the Indigenous Peoples Planning Framework. Likewise, the implementation of the project will be carried out with the participation of the various stakeholders consulted during project preparation. 84. Safeguards: Overall impacts of the project are expected to be positive. The project will not finance new construction or direct investments requiring land acquisition. The project will not finance plantations, but it will support consultations and necessary analyses that will assist the government to develop plantations in an environmentally and socially responsible manner. The project will finance some minor refurbishments of existing government buildings, which should not require an environmental assessment (the impacts will be minor and can be easily mitigated). Should an Environmental Assessment nevertheless be needed it will be prepared according to the 25 ESMF/RPF prepared for the Project (see below). The potential for the project's TA activities to indirectly induce adverse impacts as a result of future investments following from the TA is real, unless the project builds stakeholder capacity. The project therefore provides technical assistance to build capacity in the following areas: (i) resolution of land-use conflicts; (ii) local community and indigenous peoples' participation in decisions on forest gazettment; (iii) preparation and funding of an Indigenous Peoples framework (a necessity, as the Indigenous Peoples are estimated to constitute about 10 percent (300,000) of the population of the Republic of Congo); and (iv) negotiation skills for social responsibility contracts between forest concessionaires and local communities and indigenous peoples. 85. In recognition of the potential impacts of investments emerging from the Project's TA, two social safeguards policies have been triggered, the Indigenous People Policy (OP/BP 4.10) and the Involuntary Resettlement Policy (OP/BP 4.12); and the following social safeguards instruments prepared and disclosed: an Environmental and Social Management Framework (ESMF); a Resettlement Policy Framework (RPF), and an Indigenous Peoples Planning Framework (IPPF). The RPF and IPPF were disclosed in-country on March 19, 2012, and at the InfoShop on March 9, 2012. The Recipient will be required to ensure that the ToRs for all studies conducted and other TA provided under the project are consistent with, and pay due attention to, these safeguard frameworks and the Recipient's safeguard legislation. To this end, the Recipient will provide all ToRs for such activities under the project to the World Bank for its prior approval. 86. If implementation of the project will involve refurbishing (or any other activity) that would require the preparation of a specific safeguard instrument according to the provisions of these safeguard frameworks, the government will prepare the required safeguard instrument - EA, EMP, RAP, IPP (as part of the Annual Work Plan in which the government proposes to include the Project activity in the Project), in accordance with the safeguard frameworks, and transmit it to the World Bank for review. Following the World Bank's approval, the government will adopt and publicly disclose the safeguard instrument, and implement all measures required in the safeguard instrument to be implemented prior to undertaking the activity in question. The government will also ensure the subsequent implementation of the activity in question in accordance with the safeguard instrument and the safeguard frameworks. F. Environment (including Safeguards) 87. The overall environmental impacts of the project are expected to be positive. By supporting implementation of FLEGT and other improvements in the forestry sector enabling environment that would encourage concessionaires to obtain FSC certification, the project aims to support environmentally sustainable forest management. The project will also support the analysis and cross-sectoral reviews necessary to facilitate resolution of over-lapping land-use conflicts, as well as the development of enhanced capacity for environmental assessment in a variety of sectors, expected to include transport, hydro-electric energy, oil, mining, agriculture and industry. 88. To help guide the environmental decision-making processes that will be supported by the project, the environmental safeguard policies triggered are those covering environmental assessment, natural habitats, forests, and physical cultural heritage. Based on the requirements 26 of these policies, an Environmental and Social Management Framework (ESMF) has been prepared for the project. Public consultations on the ESMF have been held on January 20th and 21st and February 27th and 28th, 2012, and the final ESMF has been disclosed in country through the Ministry's website on March 19, 2012 and also through the World Bank Public Information Center (Infoshop). G. Other Safeguards Policies Triggered 89. The safeguards policies triggered are given in the table below. Table 6 - Safeguard Policies Triggered Environmental Assessment X The ESMF developed under the Project will be followed for ensuring OP/BP 4.01 that the ToRs for all studies/TA under the Project in support of the ProNAR and other forestry reforms adhere to the requirements of World Bank safeguard policies. If implementation of the project will involve refurbishing (or any other activity) that would require, according to the provisions of the ESMF, the preparation of an Environmental Assessment (EA) and/or an Environmental Management Plan (EMP), the govemment will prepare the required EA or EMP (as part of the Annual Work Plan in which the govemment proposes to include said activity in the Project), in accordance with the ESMF, and transmit it to the World Bank for review. Following the World Bank's approval, the govemment will adopt and publicly disclose the EA or EMP, and implement all measures required in the safeguard instrument to be implemented prior to undertaking the activity in question. The govemment will also ensure the subsequent implementation of the activity in question in accordance with the EA or EMP, the ESMF, and all other safeguard frameworks prepared for this project. In parallel with this project, the Strategic Environmental and Social Assessment (SESA) to be funded by the 2nd Forest Carbon Partnership Facility (FCPF) grant and expected to be carried out during the life of this project will also serve to identify, avoid, and mitigate the potential negative environmental and social impacts associated with activities to be supported by the final ProNAR or future forest sector reforms by providing guidance and key elements that will contribute to refinement and implementation of the Environmental and Social Management Framework (ESMF) and other key safeguard instruments. The SESA will also influence the final ProNAR design, by ensuring that social and environmental risks are factors in its preparation. Natural Habitats OP/BP 4.04 X The application of this policy seeks to ensure that all options proposed in the ProNAR or other forest sector reforms under the project take into account the conservation of biodiversity, as well as the numerous environmental services and products that natural 27 habitats provide to human society. The Project will not support any activities that involve the conversion or degradation of critical natural habitats. The project will build the capacity of and provide TA to the ProNAR Coordination Unit, and will not finance afforestation / reforestation activities directly. No afforestation / reforestation will be undertaken in critical natural habitats. Overall, future afforestation / reforestation activities that may be implemented following this Project are expected to have positive impacts on natural habitats as degraded land is reforested, new habitats are created, and pressure on natural forests is reduced through commercial plantation activities. The ESMF addresses issues related to natural habitats and potential impacts of the ProNAR and the SESA will be expected to do the same. Forests OP/BP 4.36 X Overall, Project activities are expected to have positive impacts on forests, in that the main goal of the Project is to support better management of the country's forests, while contributing to the well- being of rural communities and thus reducing pressure on natural forests. Potential larger scale impacts of the ProNAR and other forest reforms on natural forests have been considered in the ESMF and are expected to be further assessed through the SESA. The ESMF reflects the requirements of the World Bank's Operational Policy regarding forest management and afforestation / reforestation and the SESA is expected to do the same. Pest Management OP 4.09 X While there is currently little use of pesticides in Congolese plantations, a strategic study to be funded during the first year of project implementation will assess whether this is likely to increase in the future. Depending on the outcome of this study, the project may fund expertise to integrate guidelines consistent with World Bank policy for pest management and pesticide use in plantations into the support that will be provided to the National Afforestation and Reforestation Program Coordination (ProNAR). The SESA will be expected also to address critical issues related to pest management, as necessary. Physical Cultural Resources X This policy is triggered since activities on the ground following from OP/BP 4.11 TA provided under the Project in support of forest reforms or ProNAR activities could promote actions in areas containing sites deemed physical cultural resources by local populations (e.g. holy/secret sites such as sacred groves, sacred forests, etc.). Therefore, though it is not anticipated that the Project will have negative impacts on any such sites, the ESMF includes provisions for mitigative action if actions following from TA provided under the Project were to involve physical cultural resources. The possible existence of any such sites throughout the areas targeted by the ProNAR and other forest reforms, and the corresponding need to trigger this policy, are expected to be thoroughly explored in the SESA as well. 28 Indigenous Peoples OP/BP X It is likely that activities implemented as part of the ProNAR or 4.10 affected by forest reforms for which TA is proposed under the project will take place in areas inhabited by indigenous peoples. To ensure due diligence is exercised, an Indigenous Peoples Planning Framework (IPPF) has been developed, setting out principles and procedures for timely and effective mitigation of indigenous communities' concems. This framework provides for the government to identify indigenous peoples, consult with them properly, and ensure that they participate in, and benefit from the ProNAR and other forest sector reforms. The framework will be required to be reflected in the ToRs for all TA provided under the Project The IPPF will subsequently be refined through the SESA process. An IPP will be prepared as and when necessary. Involuntary Resettlement X This policy aims to avoid involuntary resettlement to the extent OP/BP 4.12 feasible, and to minimize and mitigate its adverse social and economic impacts in cases where resettlement or other involuntary restrictions cannot be avoided. Though the Project will not involve land acquisition/involuntary resettlement, activities following from TA included in the Project are more likely to trigger this safeguard policy in situations involving involuntary restrictions of access to forest management / reforestation areas and the natural resources within. A Resettlement Policy Framework (RPF) has therefore been prepared, establishing the frame of reference for sustainable use of said natural resources. The preparation of the RPF was inclusive and participatory, promoting community ownership and fostering social accountability, thereby contributing to sustainable management of the relevant natural resources. If implementation of the project will involve refurbishing (or any other activity) that would require, according to the provisions of the RPF, the preparation of a specific Resettlement Action Plan (RAP), the govemment will prepare the required RAP (as part of the Annual Work Plan in which the government proposes to include said activity in the Project), in accordance with the RPF, and transmit it to the World Bank for review. Following the World Bank's approval, the govemment will adopt and publicly disclose the RAP, and implement all measures required in the RAP to be implemented prior to undertaking the activity in question. The govemment will also ensure the subsequent implementation of the activity in question in accordance with the RAP, the RPF, and all other safeguard frameworks prepared for this project. In addition, all issues related to land acquisition, involuntary resettlement and restriction of access in the forest sector are also expected to be identified through the SESA process. Safety of Dams OP/BP 4.37 X The project does not involve the construction of or use of existing dams. Projects on Intemational X The project is not involved with nor taking place in intemational Waterways OP/BP 7.50 waterways. Projects in Disputed Areas X N/A OP/BP 7.60 29 Annex 1: Results Framework and Monitoring REPUBLIC OF CONGO: Forest and Economic Diversification Project Results Framework Project Development Objective (PDO):. The project development objective is to increase the capacity of the Republic of Congo to: (i) promote better implementation of its forest legislation; and (ii) enhance the policy environment for participation of local communities and the private sector in sustainable forest management and reforestation. ; Unit of Baseline Cumulative Target Values** Data Source/ Responsibility Description (indicator PDO Level Results Indicators* e Frequency for Data C.) Measure (2011) YR 1 YR 2 YR3 YR 4 YR5 Methodology Collection definition etc.) Indicator One: Percentage of E Percent 0 30 50 70 80 90 Annually This percentage Independent First FLEGT timber timber exports covered by a will be included reviewer legality certificate will be Forest Law Enforcement in the annual issued in March 2013. Governance and Trade (FLEGT) report of the legality license independent observer, FLEGT Indicator Two: Number of E Number 0 0 2 3 4 5 Annually Based on DSP Project studies will lead to forest-related policy reform published reports recommendations for proposals tabled in the High of the High Level reforms that can be tabled Level Forum for Public Private Forum for Public in High Level Forum for Sector Dialogue Private Sector Public Private Sector Dialogue Dialogue. Important synergy with WB SEDP project. Indicator Three: Number of E Number 0 10 50 100 125 150 Annual Project Social science communities having participated documents and and in the elaboration of surveys of local communication participatory development plans communities and specialist in ("plans de gestion") for the NGOs working Directorate of community development zones with them Studies and inside forest concessions Planning Indicator Four: Direct project 2 Number 0 3,000 6,000 9,000 12,000 15,000 Annual TA reports and Social and Project Beneficiaries beneficiaries (number), of which (Percentage) (40%) (40%) (40%) (40%) (40%) attendance lists of communication include staff of the Ministry are female (%) community and specialist in of Sustainable (estimated) civil society Directorate of Development, Forest I_ _ training Studies and Economy and Environment, 4 Those baseline figures and annual targets that are currently unavailable are marked TBD. They will be available by July 31st, 2012. 30 and outreach Planning civil society groups, private activities, sector and smallholder estimates of investors facing an population improved enabling reached through environment for different media, investment, and local ministerial staff communities and registers, local indigenous peoples in forest communities and concession areas where indigenous social contracts are peoples worked implemented. While it is with estimated that the majority of the beneficiaries in the Ministry will be male, local communities beneficiaries will be close to 50 percent female. INTERMEDIATE RESULTS Intermediate Result (Component One): Strengthening of MSDFEE's institutional and operational capacity Government staff trained E] Number 0 150 300 450 600 750 Annual Project DSP forestry Persons trained included documents and specialist under this indicator must be government government employees. records Final number of persons to be trained will be determined in training plan prepared by consultant at start of project implementation. Sustainable Development, E Percentage 72% 75% 80% 85% 90% 95% Annual Annual financial Deputy Project This indicator measures Forestry and Environment and activity Coordinator increased technical capacity Budget Execution (relative to reports of the in programming and budget plans) Ministry planning. Ministry operations which the E Percentage 0% 0% 0% 20% 40% 60% Annual Annual activity Deputy Project This indicator measures the Planning, Monitoring and reports of the Coordinator capacity of the government Evaluation System has been Ministry and to improve PM&E for all applied to (percentage of total Project, PM&E sector activities not just Ministry operations) system those of the project. implementation reports Environmental and Social E] Number, TBD, TBD, TBD, TBD, TBD, Annual Review of GDE Consultant Includes projects in other Impact Assessment (ESIA) Percentage baseli baseli baseli baseli baseli and ESIA sectors which have impacts conducted to international ne + ne + ne + ne + ne + documents on forest. 31 standards and conforming to 0% 5% 10% 20% 40% Monitoring impact will national laws done for new start in second year after projects impacting on forests training in these subjects has been given. It is assumed that there is no conflict between international standards and national laws. Forest concessions awarded E] Number, Annual Based on reports Forestry Allocation of forest through a public bidding Percentage from the Specialist to concessions according to mechanism as required by forest Independent the Project decree 303/2009. law Observer for the Forest Law Enforcement Governance and Trade (FLEGT) initiative MSDFEE expenditures are E Annual Annual assessments will be managed in line with good assessment carried out to ascertain procurement and financial by World increase in government management practices Bank procurement and FM procurement capacity. and FM specialists Intermediate Result (Component Two): Improvement in enabling environment for private sector and smallholder investment and operations Action plans based on project- E Number 0 0 2 0 5 9 Annual Reports of Deputy Project Action plans (or financed studies validated by meetings where Coordinator recommendation papers) stakeholders and adopted by proposals were must be based on project MSDFEE adopted research or activities. Trainees who completed fl Number 0 TBD TBD TBD TBD TBD Annual Training center Forestry woodworking training center reports Specialist programs Investment proposals in forestry E] Number TBD TBD TBD TBD TBD TBD Annual MSDFEE Forestry Baseline and targets will be submitted (disaggregated by registries, Specialist established prior to afforestation, reforestation, consulting firms effectiveness. REDD+, PES) reports SMEs accessing training courses E] Number TBD TBD TBD TBD TBD TBD Annual Training center Forestry Baseline and targets will be at woodworking training center records Specialist established prior to effectiveness. Environmental services project fl Number 0 TBD TBD TBD TBD TBD Annual Survey of firms Forestry Following studies, proposals supported by the submitting Specialist information campaign and project having obtained proposals training in years 1-2. 32 financing Intermediate Result (Component Three): Enhanced participation of local and indigenous communities in forest management Local communities and E Percent (of TBD 0% 30% 60% 75% 85% Annual Survey of Independent Measures the effectiveness indigenous peoples in forest population indigenous reviewer of the project's Information concession areas aware of their older than peoples and local Education and legal and customary rights and 16) communities in Communication activities obligations under the forest code concessions aimed at these stakeholders. Local communities involved in E Number TBD - - 100 - 150 Mid-term Project Independent the elaboration of social and End of documents, reviewer responsibility contracts, Project government and management plans for community community development zones records, NGO and other activities financed by reports, forest revenues communities survey Number of management plans E] Number 0 2 4 6 8 8 Annually Project Independent for community development documents, reviewer zones elaborated and government and implemented with the community participation of local records, NGO communities and indigenous reports, peoples. communities survey Successful community micro- E] Number TBD - - 60 - 100 Mid-term Community Consultant A successful micro-project projects implemented within and End of micro-project is defined as a project Community Development Zones Project documents, which was completed accompanying according to the project NGO documents, plan, and as a result of population which the target population surveys benefited (in economic terms). 33 Annex 2: Detailed Project Description REPUBLIC OF CONGO: Forest and Economic Diversification Project 1. The objective of the Republic of Congo Forest and Economic Diversification Project is to increase the capacity of the Recipient to: (i) promote better implementation of its forestry legislation; and (ii) enhance the policy environment for participation of local and indigenous communities and the private sector in sustainable forest management and reforestation. 2. The project will have a five year implementation period and will be financed through an IDA credit of US$ 10 million equivalent and a counterpart funding contribution of US$ 22.6 million equivalent. Three other IDA-financed projects will complement this Project: the (i) Support to Economic Diversification Project (SEDP), approved in November 2010, which aims to improve the overall investment climate in the Republic of Congo and which focuses on three sectors including forestry; (ii) the Transparency and Governance Capacity Building Repeat Project (TGCBP II) which was approved on February 28th 2012; and (iii) the Professional Skills Development Project, preparation of which has started in FY12. 3. The project comprises three principal components: (i) Capacity building and institutional strengthening of the Ministry of Sustainable Development, Forest Economy and Environment in four critical areas: (a) operational and management capacity; (b) reinforcement and operationalization of the regulatory framework regarding forestry and nature conservation; (c) environmental management; and (d) sustainable development. (ii) Improving the enabling environment for private sector and smallholder activities in the sector through supporting (a) studies on the constraints to and potential of private sector and smallholder plantation investments; (b) capacity building in timber processing and value-added chains for small and medium enterprises; and (c) studies on the prospects for investment in environmental services. (iii) Enhancing the participation of local and indigenous communities in forest management. The project will support strengthening capacity of local and indigenous populations in development and implementation of forest management plans (including benefit sharing), through information campaigns, and training for forest administration staff and NGOs. 34 Component 1 - Capacity Buildin! and Institutional Strenltheninl of the Ministry of Sustainable Development, Forest Economy and Environment (US$ 18.2 million, excluding contingencies, of which IDA financing: 5.6 million and RoC counterpart funding: 12.6 million) 4. The project will strengthen the institutional capacity of the Ministry of Sustainable Development, Forest Economy and Environment (MSDFEE) in three critical areas: (i) operational and management capacity; (ii) reinforcement and operationalization of the regulatory framework regarding forestry and nature conservation; and (iii) environmental management. Sub-component 1.1 - Strengthening Operational and Management Capacity (US$ 9.5 million, excluding contingencies, of which IDA financing: 2.9 million and RoC counterpart funding: 6.6 million) 5. The Ministry and its semi-autonomous agencies lack operational and management capacity at decentralized as well as central levels. The Ministry's semi-autonomous agencies include the National Reforestation Service (NRS), the National Forest and Wildlife Resources Inventory and Management Center (NFWIMC), the Service for Control of Forest Products for Export (SCFPE), and the National Afforestation and Reforestation Program (ProNAR). 6. Human resources: the Ministry's responsibilities have increased, including in areas such as REDD+ and FLEGT, and its staffing and skills mix have not kept pace. Furthermore, 30 percent of the current staff complement of c. 1300 (including decentralized staff and park rangers) are due to retire in 5 years. This percentage is higher for the most senior and experienced staff. To offset this trend, the Government plans to recruit approximately 200 staff per year for the MSDFEE over the next five years. Unfortunately, the current human resources management system does not provide a good assessment of the existing skill set of MSDFEE staff, necessary for an efficient deployment of Ministry personnel and for estimating the Ministry's short- and medium-term recruitment needs, quality- and quantity-wise. The identified weaknesses in this field are linked to the lack of fundamental knowledge and tools of human resource management, of forward-looking planning and management, of monitoring and evaluation systems, and of computerized databases. 7. Fiduciary capacity: A recent report by the European Union underlines the weak capacity of the Ministry as regards financial, procurement and project management, monitoring and evaluation, and enforcement. A Financial Management Assessment of the Ministry, conducted by the project team in November 2011, as part of project preparation, has confirmed these findings. At the same time, recent public sector finance reforms have assigned more responsibility to the Ministry for activity programming and budget planning, as well as for procurement and financial management. MSDFEE's current management systems and practices are incompatible with results-based management approaches, which are crucial for ensuring effective planning and management of investment projects. 8. In order to reinforce the Ministry's operational capacities at the central and departmental levels, the Project will comprise the following: 35 (i) Strengthening MSDFEE's fiduciary and human resource management capacities: The focus will be on financial and human resource management capacities of the Administrative and Financial Departments ("Directions Administratives et Financi&res"), on procurement capacities of the Public Procurement Unit ("cellule de gestion des march6s publics"), and on the capacity for results-based management of MSDFEE's general and technical directorates at the central and decentralized levels, as well as its semi-autonomous agencies, such as the National Reforestation Service (NRS), the National Forest and Wildlife Resources Inventory and Management Center (NFWIMC), and the Congolese Wildlife and Protected Areas Agency (CWPAA). The project will finance: (a) technical assistance for improving the financial and human resources management systems; (b) theoretical and practical training courses in financial management, human resources management, and procurement; (c) information sessions for management staff on the financial and human resources management systems; (d) technical supervisory assistance and national inter-ministerial coaching workshops for results-based management; and (e) computer equipment.. (ii) Strengthening MSDFEE's technical capacity, through in-service training throughout the five year project implementation period for MSDFEE staff both at the central and the departmental levels. The training program will include areas such as forest policy, strategies for forest resource and environmental management, (understanding of the new regulations, participatory approaches, forest management planning and implementation, social and environmental responsibility contracts, traceability mechanisms, international engagements such as FLEGT and REDD+, environmental services, environmental and social impact studies and risk management, operational procedures of the Ministry, etc.). The program will also reinforce capacities of the Ministry's administrative staff, in subjects such as computer use, data processing and filing. The program will be organized in four modules, two administrative and two technical. The project will finance consultants, training, study tours, seminars, equipment, operating costs and teaching materials. (iii) Strengthening the technical capacity of the senior and junior staff in the National Forest and Wildlife Resources Inventory and Management Center (NFWIMC) in forest inventory and data processing. This will be done mainly through practical training and through back-stopping of a specialized 15-person NFWIMC team for multi-resource forest inventory and a team of three people for data processing (2 graduates and 1 data processor). The project will finance: (i) a senior and a junior botanist for monitoring the quality of the inventory teams' work in the field; (ii) transport and lodging costs for the inventory team and for two NFWIMC trainers in the field; and (iii) a computer expert and a forest management expert specializing in data interpretation. (iv) Establishment in the Department of Studies and Planning of a comprehensive Management Information System (MIS) for planning, monitoring and evaluation with the aim of (a) monitoring Ministry activities (including specific project activities); (b) monitoring reform implementation and (c) assessing progress against plan objectives, including analysis of reasons for delay. The MIS will be applied at the outset to planning and monitoring of this Project's activities, and will subsequently be progressively 36 expanded to cover the entirety of MSDFEE's activities. The project will include international consulting services, as part of the DSP, to assist with the design and creation of the MIS, and to assist in training DSP staff responsible for managing the MIS, and other government staff responsible for information collection and processing both at the central level and in the field. The project will also finance training, and equipment (including hardware and software). (v) Further development, and improvement of articulation among, different forest information and management systems. These systems are an important tool in the fight against illegal logging, to further transparency and improve forest governance. The MSDFEE has made considerable investments in such systems, especially in the SIGEF which was established in 2009 in the General Directorate of Water and Forests. Until now, the SIGEF has remained a prototype and has not been deployed nationwide. More recently, a National Traceability System (NTS) has been put in place under the Voluntary Partnership Agreement that the Republic of Congo concluded with the EU. A Legal Verification System (LVS) will soon complement the NTS. The project will finance international expertise to take stock of progress achieved and for developing a plan for operationalizing key systems, improve tools for data collection, national expertise for training and coaching the managers and users of the different forest information and management systems, training for forest engineers and rangers at decentralized level to collect and process data, computer equipment and technical instruments for data collection missions in the field. Close collaboration is planned with the EU-funded NTS project. (vi) Strengthening of MSDFEE's communication program, through upgrading and maintenance of the Ministry web-site and organization of information campaigns regarding the Ministry's activities, including implementation of the FLEGT VPA. The website will include legal and regulatory texts, ongoing forest programs, forest management inventories and plans, results of different missions, records of civil society consultations and consultations with other stakeholders, decisions taken by different working committees, procurements under way, and key sectoral statistics. Communication activities in support of the FLEGT VPA will include support to information campaigns about the VPA FLEGT program and procedures for decentralized services of related ministries (labor, taxes, environment, trade) and for the private sector (industry, SMEs, etc.). The project will finance (a) for the website: expertise for development of the website and staff training for website management, hardware and annual maintenance costs (e.g. purchase of the domain and server space), assistance for establishing IT connection between regional departments and central administration; and (b) information campaigns about MSDFEE activities, including VPA FLEGT (a specific VPA FLEGT communication program is currently under preparation). Preparation and implementation of MSDFEE's annual communications plans will be supported by the social and communications expert of the Directorate of Studies and Planning. (vii) Support to implementation of FLEGT voluntary partnership agreement through establishment of a functioning national traceability system. This will be done by (a) strengthening operational capacities of the Forest Economy Provincial Directorates 37 (FEPD) for conducting supervisory missions and implementing the National Traceability System (NTS); (b) providing financial assistance to the Forest Legality and Traceability Unit (FLTU) to enable it to conduct field visits; (c) provision of consulting services to assist logging companies in fulfilling VPA FLEGT requirements. The project will finance (a) training workshops and informational sessions about VPA FLEGT procedures and enforcement for inspection brigades and staff of the regional departments; (b) equipment (computer hardware, software, VSAT) for 10 departments, as well as 2 four-wheel drive vehicles for the FLTU; (c) refurbishment of offices; (d) office furniture, a vehicle for each of the 10 provincial directorates and a motorcycle and technical instrument kit per brigade ; (e) operational costs for the FEPD (e.g. gas, intemet fees); and (f) 4 field visits per year for 15 FLTU agents; (f) national and international consulting services to support logging companies in fulfilling VPA FLEGT conditions. Sub-component 1.2 - Strengthening of the Forestry and Nature Conservation Regulatory Framework (US$ 1.4 million, excluding contingencies, of which IDA financing: 0.4 million and RoC counterpart funding: 1 million) 9. The Congolese government has been engaged in sustainable forest management for over 35 years. The starting point was Law No. 004-1974 of January 1974, on the basis of which the area was divided into Forest Management Units (FMU). This was followed by the National Forest Action Plan (NFAP), the National Environment Action Plan (NEAP), and, more recently, the Forest Code, Forest Law 16-2000. 10. In 2009 the Government undertook major policy and institutional reforms in the forest and environment sector, in the context of achieving HIPC completion point. Reforms included procedures and regulations for environmental and social impact assessment, procedures for private and state forest gazettment and de-gazettment, procedures for conflict resolution concerning conflicting claims on land use, concessions and forest permitting procedures, and revision of forest taxation systems. Each reform has accompanying regulations which are complex to determine and prepare. Despite the Government's best efforts to improve forest management, there is potential for improvement, especially regarding social issues and the participation of local communities. 11. Priority activities are the following: (i) Review of the forestry legislation, as needed, in order to assess consistency with the FLEGT VPA and with sound governance, environmental and social standards, and national dissemination of the Forest Law (Law No. 16-2000) (as updated if necessary) and associated implementation decrees. The project will finance expertise needed to review and as necessary revise the forestry regulatory framework and support community and media outreach by: preparation of a dissemination plan, of printed (publications, newspaper articles) and audiovisual media, and of distribution contracts with written press and broadcast media (television, national and regional radio). A brigade is a concession inspection unit, there is one brigade per forest concession. Technical kit includes GPS, and other field kit, no weapons. 38 (ii) Preparing manuals, and conducting information campaigns and training sessions for the application of Order No. 6509/MEF/MATD, 19th August 2009, which determines the modalities of forest gazettment and degazettment. Activities supported by the project include: elaboration of the manual of procedures with field testing; dissemination to local communities and indigenous peoples living in forest concession areas and protected areas and parks, dissemination and training sessions for local authorities, training of Ministry staff and NGOs. The proposed procedures and field tests should be in accordance with the directives of the Environmental and Social Management Framework (ESMF). The project will support consulting services for preparation of the manual of procedures and of dissemination tools, technical equipment for testing of recommended procedures and for practical training, training sessions for provincial directorates staff and local NGOs, and contracts with NGOs for organization of information and awareness-raising sessions among communities located in concessions or bordering national parks and forest reserves. (iii) Operationalization of Decree 2009 - 303, which lays out procedures for award of forest concessions, attribution of titles and forest permits (the forestry commission and the procedure for document review is based on a system of technical, economic and financial criteria): improvement in the evaluation criteria, in particular for plantations; inclusion of financial as well as technical criteria in evaluation of proposals for natural forest concessions; and dissemination of selection procedures to public and private sector actors. Before any forest title allocation, local people need to be consulted to identify and where possible avoid conflicts concerning the concession or the particular bidder involved. The project will finance consulting services for the review and improvement of procedures, development of improved evaluation criteria, and training in the application of such procedures, including preparation of printed and audiovisual materials and distribution contracts with written press and broadcast media. (iv) Operationalization of Law 14-2009 of 30th December 2009 regarding forest taxation, which revised certain provisions of Law 16-2000 of 20th November 2000 on the Forest Code and has been endorsed by the President of the Republic.: Completion of regulations and procedures for implementation of the totality of fiscal provisions foreseen by the law, including stumpage fees and export tax, area tax, export of unprocessed and processed products from natural forests and plantations, distribution of taxes between the treasury and beneficiaries including local government institutions, and export of non-processed wood (quota). The project will finance the expertise necessary for the finalization of these regulations and implementation procedures. (v) Operationalization of the Inter-Ministerial Consultative Committee (IMCC), established by Decree 2009-304 of 31st August 2009, on conflicting land-uses in natural ecosystems (for example mining concessions overlapping forest concessions): improvement of operating procedures (meetings, field visits, studies, relations with property/land commissions and other land-use planning authorities, reference to land-use plan currently under elaboration as a basis for discussions etc.), organization of initial meetings, and dissemination of the Committee's functions. The project will finance consulting services for revision of the decree, or identification of means to overcome obstacles to operationalisation in the current decree's provisions (the Committee was established under the presidency of the Prime Minister, which the Republic of Congo no longer has), 39 improvement of operating procedures, and provision of technical support, technical studies in accordance with the ESMF, consultation meetings with local populations as necessary, and dissemination of the Committee's existence and functions in the media (contracts). Sub-component 1.3 - Strengthening Environmental Management (US$ 0.8 million, excluding contingencies, of which IDA financing: 0.25 million and RoC counterpart funding: 0.55 million) 12. The environment sector in the Republic of Congo is currently undergoing development, in an effort to adapt to new environmental issues and to international commitments related to climate change, biosecurity, the carbon market, access to genetic resources, dangerous chemicals, and the new socio-economic directions identified in the Poverty Reduction Strategy adopted in 2006. This is reflected in the upcoming revision of the National Environment Action Plan (NEAP), supported by UNDP, in a new law and implementation texts under preparation, and in a new decree, signed in 2009, regulating the content of Environmental and Social Impact Assessments, and the procedures governing them. 13. The priority is therefore to support implementation of these new instruments through the following activities: (i) Finalization and dissemination of the new Environment Law's implementations texts, which are in preparation, including development of regulatory texts related to the environmental and social impact studies and guidelines, and their dissemination at the national level. The project will finance national consulting services to support preparation of implementation decrees and regulations in accordance with the ESMF, a dissemination program and the required printed (publications, newspaper articles) and audiovisual media, and distribution contracts with written press and broadcast media (TV, national and regional radio). (ii) Support to operationalization of decree No. 2009-415 of 20 November 2009, establishing the scope, content, and procedures for Environmental and Social Impact Assessments (ESIA): definition of environmental audit procedures for companies predating the 2009 decree, clarification of certain directives such as characteristics of sensitive zones, types of projects subject to Environmental and Social Impact Assessment per category (A, B, C), dissemination at the national level, training for local private sector consulting firms in conducting ESIAs and for managers and specialists of the GDE, GDSD and other selected sectoral ministries (mining, oil, hydro-electric energy, agriculture, infrastructure) in review and evaluation of studies (technical validation). The project will finance consulting services to assist in preparation of environmental audit procedures, clarification of certain ESIA directives sector-specific ESIA evaluation criteria/tools, in accordance with the ESMF, and training materials, media contracts for dissemination of ESIAs, training courses on the ESIA (basic course of 5 days and follow- up course of 3 days, number of trainees to be determined), and field equipment for environment officials in charge of monitoring the implementation of environmental management plans. 40 (iii) A feasibility study for establishment of a laboratory for analysis of key environmental quality indicators, such as air, water and soil pollution, followed by support to establishment of the laboratory. The project will finance consulting services for preparation of the feasibility study, laboratory development plan (using existing facilities), refurbishment and equipment, and training for laboratory assistants (2 week internship at an accredited laboratory in an African country, number of trainees to be determined). Sub-component 1.4 - Promotion of Sustainable Development (US$ 0.7 million, excluding contingencies, of which IDA financing: 0.2 million and RoC counterpart funding: 0.5 million) 14. The General Directorate of Sustainable Development (GDSD), created by Decree No. 2010- 74 of 2 February 2010, the powers and structure of which are described in Decree No. 2010-76 of 2 February 2010, is the technical organ of the MSDFEE responsible for promotion, integration, and application in the different sectors and supervision of sustainable development in the Republic of Congo. 15. In order to reinforce the MSDFEE's role in promotion of sustainable development, the project will finance: (i) Preparation by the GDSD of the National Sustainable Development Strategy (NSDS) and of the accompanying action plan. In order to strengthen the capacity of this recently created general directorate, the project will finance the necessary consulting services for development of this operational strategy for the GDSD, detailing the main areas of intervention, expected results, and required resources (including staff and human capital) and dissemination of the NSDS at national level through the media (preparation of audiovisual supports, broadcasting contracts). (ii) Promotion of environmental and sustainable development issues within other sectors. Sustainable development can only be achieved by close collaboration between the MSDFEE and other sectoral ministries (e.g. mines, agriculture, infrastructure, planning, finance). The project will carry out a program to enhance the capacity of GDSD to raise awareness among other ministries of emerging sustainable development issues (such as climate change, biodiversity, and soil degradation), and assist the GDSD in conducting awareness-raising activities on such issues within other ministries. (iii) Support to staff to enable them to enhance the MSDFEE's participation in the development of the National Land Use Plan (NLUP). The project will support preparatory studies on aspects of the NLUP related to the forestry and environment sectors. (iv) Support for the more effective participation of MSDFEE in the Inter-ministerial Consultative Committee (IMCC) on conflicting land-uses in natural ecosystems. The project will support preparatory studies clarifying the inputs needed from the General Directorates of the Forest Economy, Environment and Sustainable Development, to allow MSDFEE to play an active role in the IMCC. 41 Sub-component 1.5 - Project Coordination (US$ 5.8 million, excluding contingencies, of which IDA financing: 1.8 million and RoC counterpart funding: 4 million) 16. The project coordination will be assured by the Department of Studies and Planning (DSP) - in accordance with the Memorandum ("Note de Service") No. 003047/MDDEFE/CAB/DEP which establishes the organizational and operational framework for the coordination of the Forests and Economic Diversification Project - strengthening the DSP's capacity to plan, coordinate, and monitor the project's activities, as well as developing its capacity and efficiency in planning and monitoring the MSDFEE's work program as a whole, in accordance with its mandate. 17. The project's coordination will be carried out by a small team in the Directorate of Studies and Planning (DSP) comprised of government officials and consultants, including a project coordinator, a deputy project coordinator (both of whom have recently been appointed by the Minister of Sustainable Development, Forest Economy and Environment from among the Ministry's staff), a specialist in administrative and financial management, an expert in natural resources management (NRM) with experience in monitoring and evaluation (who will support the monitoring and evaluation of project activities, as well as development of the MIS for the MSDFEE overall, and coordinate application of environmental safeguards), a social scientist with experience in communication (who will oversee and coordinate social safeguards aspects), and a procurement specialist (who will support the Ministry's public procurement unit until Ministry staff are ready to fulfill this responsibility). The DSP will be supported by short-term external assistance for annual social and environmental audits, and monitoring of safeguards frameworks, as necessary. 18. The above specialists will be recruited to the DSP as conditions of effectiveness. The procurement and administrative, financial management and accounting specialists will be hired on renewable term contracts until the World Bank evaluates the Ministry as being capable of independently managing procurement and financial management aspects of project implementation. The social scientist and NRM specialist will each be assigned one or more counterparts from among Ministry staff to be trained by them, in order to build the Ministry's capacity in these aspects of project management. Each counterpart will be trained on part or all of the specialist's responsibilities, depending on the number of counterparts assigned and their skill set, as deemed appropriate by the MSDFEE and acceptable to the World Bank. The social scientist and NRM specialist will be hired on renewable term contracts until Ministry staff assigned to the DSP are evaluated by the World Bank as satisfactorily fulfilling the requirements set forth in these specialists' TOR and as being capable of independently managing these specialists' responsibilities in project implementation. The project will finance the necessary consulting services, training (including on World Bank safeguard policies), equipment (vehicles, furniture, IT and office supplies), small field equipment (GPS, cameras, binoculars, decameter, general maps and concession maps, ground measuring equipment, etc.), and operational costs of the unit. 19. Monitoring and evaluation: the project's monitoring and evaluation system will be integrated in the MSDFEE's planning, monitoring and evaluation MIS, which will be improved with support from the project. A monitoring and evaluation specialist will be funded by the Project 42 until Ministry staff are ready to fulfill this responsibility. Training and equipment will be provided as part of the strengthening of forest resources management under component 1.1. 20. Communications: the project's support will focus mainly on strengthening the capacity of MSDFEE's Directorate of Communication and Dissemination (DCD) to prepare and implement communication programs regarding the project's activities (media campaigns, awareness-raising sessions, investigations, workshops, etc.). This will be coordinated and supervised by the social specialist in the DSP, who will have expertise in communication, education, and information activities. The website, which will be supported by the project under component 1.1, will be an important tool for communicating about the project's activities and impact. In addition to development of the website, the project will finance preparation of communication programs and tools for the Ministry and the project. The social specialist will organize and monitor their implementation, as well as the preparation of contracts with written press and broadcast media for dissemination of messages, and communication aids (brochures, films, photos, etc.). Component 2 - Improving the enablin$ environment for private sector and smallholder activities in the forest sector (US$ 7.8 million, excluding contingencies, of which IDA financing: 2.4 million and RoC counterpart funding: 5.4 million) 21. The project will support improvement of the enabling environment for private sector and smallholder activities in the sector through supporting (a) studies on the feasibility of private sector and smallholder plantations; (b) capacity building in timber processing and value-added chains for small and medium enterprises; and (c) studies on the prospects for investment in environmental services. Sub-component 2.1 - Afforestation and Reforestation (US$ 1.8 million, excluding contingencies, of which IDA financing: 0.55 million and RoC counterpart funding: 1.25 million) 22. Government has identified forest plantations as a priority for forest sector development and private sector investment in the medium and long term, and in 2011 initiated a National Program of Afforestation and Reforestation (ProNAR). The aim is to facilitate establishment of up to 1 million hectares by 2020. ProNAR aims to provide a framework for planning and coordination of ongoing and future afforestation and reforestation activities, and takes into account both forest sector initiatives (industrial pulp and paper plantations, private and community plantations, non- timber forest products, carbon credits, etc.) and other tree crop initiatives "belonging" to other sectors, in particular agriculture (agroforestry, oil-palm plantations, fruit trees, melliferous species, etc.) and industry. The ProNAR is thus a cross-sectoral program. . 23. Especially promising are reforestation and afforestation efforts for various purposes, including plantations of eucalyptus and other fast-growing tree species, plantations for charcoal production and small-scale agro-forestry for food and energy needs (there are already export 43 revenues from wood chips derived from eucalyptus plantations (US$15 million in 2009) but the sector is underdeveloped), whether or not in combination with carbon credits, among other potential industrial forestry niches. Fiber demands worldwide are increasing and the Republic of Congo is well-placed in principle to produce for export markets. The Republic of Congo also has a comparative advantage for plantations: It is a large, sparsely populated country, with most of the population concentrated in urban areas, so that competition for land is limited; it has 10 million hectares of low conservation value savannah with limited suitability for agriculture but high suitability for plantation - afforesting these areas could enhance the economic value of these areas, contributing to economic growth and job creation, and benefiting surrounding rural communities. Disease and other conditions do not favor livestock. ProNAR management and staff are aware that a key factor in potential plantation development concerns respecting the rights of existing traditional land users. 24. The poor state of infrastructure makes transport of all but the highest value wood products from natural forests to the large cities and/or the port of Pointe-Noire very difficult and expensive. Developing plantations in deforested or severely degraded areas closer to transport hubs and consumer centers would reduce transport costs and increase viability of forestry operations. As mentioned above, export revenues from eucalyptus plantations are already over US$ 15 million. Some of the new plantation investors are focusing first and foremost on charcoal production for Brazzaville and Kinshasa, which are projected to have a growing demand until at least 2030 and where charcoal prices have risen significantly in real terms due to the increasing transport distance as forest resources close-by are depleted. 25. Provided that it is not subject to high taxes and that the government facilitates access to land and medium term financing to the private sector, wood coming out of efficiently and sustainably managed plantations would be competitive against illegally cut wood due to use of high yield productive techniques, lower transportation costs, and higher quality wood products. 26. On the other hand, plantations would not compete with legal timber harvesting as the former's products (chips, charcoal, utility wood) are very different from the latter (high value cabinet timbers). In the longer term, there may even be forest industry synergies between plantations used to produce Medium Density Fiberboard and natural forests producing certified decorative veneers. 27. Whereas good progress has been made on the policy front, many issues - such as governance, institutional strengthening, and taxation - must still be dealt with to secure sustainability of the forest resource base and set the stage for continued economic growth. Improvement on these fronts will also create a more level playing field for plantation investors and ecosystem services initiatives. The project aims to support the Congolese Government in pursuing these challenges during the years ahead. 28. The project will contribute to the definition and establishment of organizational procedures, rules, technologies and socio-economic studies to address knowledge gaps and constraints and create a more favorable environment for private sector and smallholder investment in forests and agro-forestry. The project will also support an incipient process of private investment in forest 44 plantations associating industry and smaller planters and strengthen ProNAR's Coordination to enable it to become a "one-stop shop" facilitating private investment in reforestation. 29. The project will achieve the above through: (i) A diagnostic study concerning the principal constraints to, and facilitating measures for, private sector investment in forest and agroforestry plantations, taking into account, in particular (a) land rights and procedures for respecting the rights of existing land users, and for negotiating benefit sharing and land access agreements and enforcement of social responsibility contracts (including analysis of current procedures and practices - in consultation with the different stakeholders such as the public administration, land owners, civil society, and others - for allocating land to plantations and propose improvements to make them compatible with the needs of different types of investors and with the ESMF); (b) access to finance (credits, subsidies, environmental services such as REDD+ and carbon payments, etc.); (c) access to improved plant material (studies, research), techniques (advising services, research), access to markets, and taxation and regulations adapted to the specifics of plantations. The project will finance the international and national consulting services necessary to conduct this study. (ii) A study on the principal potential markets for plantation products. The project will finance the international and national consulting services necessary to conduct this study. (iii) Carrying out of a study to identify, evaluate and recommend appropriate legislative and regulatory measures to improve the enabling environment for private investment in plantations and development of markets for their products. The project will finance the consulting services necessary for preparation of these proposals and for conducting national consultation and validation workshops. (iv) Development of a detailed National Afforestation and Reforestation Program, on the basis of the four thematic studies funded by FAO and the World Bank, including a study in economically viable plantation models. The project will finance international and national consulting services and operational costs. (v) Development of procedures and validation criteria conforming to the ESMF's guidelines for consultations with local communities and indigenous peoples during identification of and negotiation over potential land plots for private reforestation. This, in order to guarantee respect of local communities' land ownership and usage rights. The project will finance the consulting services necessary for preparation of these tools. (vi) Development of environmental and social guidelines for different plantation types as required by the Environmental and Social Management Framework. The project will finance three months' worth of international expertise for the elaboration of these guidelines. (vii) Establishment of a plantations-related data bank, including information on existing plantations, reforestation project promoters, available land and access conditions, financing provisions, nurseries and available plant material, technical advice providers, market information (supply and demand for plantation timber products). The project will finance the consulting services necessary for establishment of the data bank, training of 45 its managers, IT equipment (hardware and software), and cartographic equipment as necessary (e.g. spot images, color printer). (viii) Training of ProNAR staff for promotion of private plantations; training of NGOs to provide private consulting services and of NRS for providing technical support to different types of planters, including local communities and indigenous peoples, all in order to facilitate environmentally, socially and technically sound plantation establishment and management. Special focus will be put on guaranteeing secure access to land and to potential environmental and social impacts linked to reforestation activities (implementation of safeguard guidelines). The project will finance the preparation and organization of training sessions. (ix) Information and awareness raising campaigns by ProNAR on the Government's afforestation and reforestation activities, their achievements, and incentives and support available for private planters. Dissemination of legal texts on land tenure in relation to plantations will also be included. The project will finance the preparation and implementation of information campaign by means of contracts with written press and broadcast media and communication aids (brochures, films, photos, etc.). (x) Strengthening the operational capacity of the ProNAR Coordination. The project will mainly finance equipment (IT, vehicles), research missions to identify land available for reforestation and negotiate with local communities, and small field equipment (GPS, cameras, binoculars, decameter, general maps and concession maps, ground measuring equipment, etc.). (xi) Strengthening the operational capacity of the NRS for providing technical support to smallholder tree planters in the savannah zones of the Pool and Plateaux Departments. The project will mainly finance vehicles (cars, motorbikes) and small field equipment (cf. PRONAR). (xii) Development of a strategy for protection of forested areas against fire and other major risks. The project will finance a strategic study, as well as a feasibility study for implementation of the different options identified by the strategic study. Sub-component 2.2 - Support to small and medium scale forest enterprises (US$ 1.4 million, excluding contingencies, of which IDA financing: 0.4 million and RoC counterpart funding: 1 million) 30. Despite the importance attributed to development of the forest products sector in the Republic of Congo, the timber processing industry, comprised principally of primary processing (saw-milling and rotary veneer), is insufficiently diversified and too weakly vertically integrated to stimulate harmonious development of the industry. Increasing domestic value added and processing in the timber industry is a government priority. Logs constitute over 60 percent of the value of exports (in 2009, out of US$ 200 million of timber products exports, US$ 120 million was logs, US$ 48 million undried sawn wood, US$ 13 million dried sawnwood, and only US$ 14 million of higher value-added, semi-finished products). Government aims to increase the proportion of harvested timber that is processed locally to 85 percent; but the challenge is to go beyond primary processing to high value semi-finished and finished products. There is also 46 scope for substantially increasing the efficiency and quality of, and reducing waste from, products produced for the domestic market. In order to achieve these objectives, measures are needed to improve the quality and efficiency of local harvesting and processing enterprises. The World Bank-funded Support to Economic Diversification Project (SEDP) aims to strengthen SMEs capacities in different areas necessary to their efficient operation (training, management, business plans, etc.). 31. In the framework of the UNIDO-supported Integrated Industrial Rehabilitation Project (PIRI- CONGO), a study was published in September 2010 on increased wood processing and proposes a prioritized action plan for optimum exploitation of the wood value chain, including a recommendation to create pilot centers for enhanced wood processing. 32. The sub-regional UNEP-GEF project "A balanced approach to sustainable production forest management in the Congo Basin" aims to develop replicable models for reinforcing the artisanal wood sector in the region, with a goal of reducing the pressure on forests and building bridges toward the formal sector. The implementation of its component "Pilot Project in Congo" has started in September 2011 for a period of four years. The project will mainly provide international technical assistance (technical support and training) and basic logistics support (equipment, small wood processing and woodworking tools, and office supplies) to improve the training capacity of the woodworking department of the Technical Education College in Pointe- Noire. This will be done through modernization of training programs and tools, training of trainers and theoretical and practical training of pupils (basic training) and professional artisans (recycling). 33. Non-timber forest products (NTFP) play an important role in the livelihood of the Congolese population. They provide much needed food, medicine, and construction materials. In addition, this informal sector generates many jobs and substantial revenues both in rural communities and in cities, and notably for women. Nevertheless, the NTFPs with the highest demand are at risk of disappearing in the medium term as a result of poor management of natural resources. It is therefore necessary to intervene to improve the situation. Among the products with the highest demand, it is worth noting Gnetum africanum and rattan, which require urgent intervention to slow down the degradation of supply sources. 34. Therefore, the priorities identified for the project are the following: (i) Reinforcement of the training program for timber artisans initiated by the UNEP-GEF project, in order to improve the training and start-up support capacities of the woodworking division of the Technical Education College (TEC) of Pointe Noire, which will benefit recently trained artisans (facilitate paid access to energy, to wood drying kilns, to technical support). This program will be extended to another training institution in Brazzaville starting from the third year of the project and based on results achieved and lessons learned in Pointe Noire. Complementing the UNEP-GEF project, PFDE will finance: (a) in Pointe Noire, a national expert to support and coordinate, oversee the refurbishment of the woodworking buildings in the TEC, equipment (drying kiln, electrical group, classroom furniture etc.) and small woodworking equipment, and (b) in Brazzaville, technical support, refurbishment of buildings and equipment necessary for extending the program to a training institution in the capital. 47 (ii) A participatory study carried out with small and medium wood enterprises to establish a wood SME development strategy covering the following aspects: (a) current and potential markets for artisanal production; (b) opportunities for technical and marketing improvements; (c) possible scenarios for formalizing SME (through reducing administrative red-tape, other possible incentives). (iii) Development of sustainable development strategies for Gnetum africanum and rattan, which are the two most exploited NTFPs in the Republic of Congo and which are endangered due to overexploitation. This will require inventory of the harvesting zones and analysis of the potentialities and constraints of each production chain to develop concrete proposals for their sustainable development (production and marketing management, monitoring, enforcement). The project will finance consulting services to conduct this study, taking into account the FAO-supported NTFP project and the existence of the NTFP Service in the GDFE. Sub-component 2.3 - Environmental Services (US$ 4.6 million, excluding contingencies, of which IDA financing: 1.4 million and RoC counterpart funding: 3.2 million) 35. Given the growing importance of environmental protection and environmental services, both at global and local level, a number of new financial instruments are being created, to promote investments in environmental services such as carbon sequestration, REDD+ (including reduced emissions from deforestation and forest degradation, and conservation of carbon stocks) and biodiversity conservation, for example bioprospection and "biodiversity offsets" for large mining and infrastructure projects. Different types of private sector and community projects are eligible, including afforestation and reforestation projects, agroforestry, natural forest conservation, sustainable wood energy production and conservation concessions. 36. The Republic of Congo has shown great interest in the promotion of environmental services, especially through its strong engagement in the REDD+ process. It is the role of the GDSD and the national REDD Coordination to facilitate access to environmental services funding mechanisms for private and public entities. The project will support reinforcement of the national framework for promotion of environmental services (including through the ongoing national REDD+ preparation process), and provide support to national entities interested in developing bankable projects targeting environmental services funds and markets. It will fund the following activities: 37. The project will help facilitate access to financing mechanisms for environmental services through: (i) Capacity building for technical support agencies (GDSD, National REDD Coordination, private consultants and NGOs, to develop and oversee the processing of project applications to various financing mechanisms/sources for environmental services. The project will finance consulting services for environmental services project developers and government agencies, in order to enhance their capacity to access different types of financing instruments and their criteria and conditions as well as comply with the legal framework, and provide training to enhance their skills in preparation of feasibility studies and project design documents. 48 (ii) The project will finance an economic evaluation of the environmental services provided by the Republic of Congo's ecosystems (including watershed protection, carbon sequestration, ecotourism), and the costs associated with the degradation of these ecosystems, as well as an analysis of the potential of environmental services promotion initiatives (e.g. carbon, biodiversity, and water-related services). (iii) Strengthening national awareness and knowledge of potential environmental services, as well as ways to access this financing through information campaigns, to promote investment opportunities and disseminate financing conditions. The project will finance national and departmental level campaigns, through written and audiovisual means and media support (brochures, films, photos etc.) to inform interested stakeholders on the conditions for accessing environmental services funding mechanisms and identify eligible project developers. Finally South-South exchanges are foreseen for successful project promoters, government staff and members of civil society to gain knowledge of environmental services initiatives elsewhere. (iv) Support to communities in preparation of environmental services project proposals (feasibility studies, including legal, economic, social studies, consultations with local populations, co-financing possibilities, monitoring and evaluation design). (v) Finalization of the REDD+ Readiness strategy. The project will provide complementary financing for (a) REDD+ stakeholder consultation; (b) decentralization of the REDD+ process through support through Departmental REDD Committees; (c) analytical studies to support the preparation of the national REDD+ strategy and its implementation framework. Component 3 - Enhancing the participation of local and indi$enous communities in forest mana$ement (US$ 3.5 million, excluding contingencies, of which IDA financing: 1.1 million and RoC counterpart funding: 2.4 million) 38. The Congolese Forest Law of 20 November 2000 established the notion of participatory forest management. It recognizes the customary use rights of local communities and indigenous peoples, and their right to participate in the management of protected areas and forest concessions. Indigenous peoples' rights have been reinforced recently by the Law 5-2011 on the promotion and the protection of the rights of the indigenous peoples in the Republic of Congo. But the effectiveness of this participation leaves much to be desired. Local people's representatives don't know their rights and responsibilities and are not sufficiently associated with the gazettment of forests and the management of protected areas and forest concessions, apart from limited information efforts and consultation meetings. 39. Regarding forest management plans, local participation is limited at present to consultations through socio-economic evaluation studies, village consultations and departmental workshops where forest management plans are validated. Local communities generally do not participate in the implementation of management plans or the details of preparation and implementation of social responsibility contracts; these are often decided through negotiations between the local 49 administrative authorities and forest concessionaires, without necessarily reflecting local communities' priorities. 40. The 2000 Forest Code foresees the demarcation and formal establishment of community development zones within forest concessions. According to the << National Directives for Sustainable Development of the Natural Forests of Congo >>, community development initiatives are centered around village lands, with tree-based and other natural resource based activities that can contribute to local economic development and poverty reduction. They include natural and planted forests, agricultural land, and fallow land, fishing and hunting areas. Natural and planted forests can be assimilated into village forests and local community development initiatives. The management plans frequently identify community development zones on maps, but these are often not demarcated on the ground and no management plans have been prepared for these zones. Two community councils have been created by ministerial decree for the two forest concessions with certified forest management plans - however no management plans have been elaborated for the community development zones. 41. There are at present four types of financial benefit for local populations (a) any allocations communities might receive from the 50 percent of the area tax destined for regional development; (b) eco-tourism revenues; (c) local development funds created by forest enterprises, financed through voluntary contributions levied on harvested timber volume (200 CFAF/m3) and intended to support local village development initiatives; and (d) a Fund of the community development zone funded by a 1000 CFAF/m3 contribution from a timber enterprise having been invited by the communities to harvest within that zone in response to illegal logging incursions from Cameroon. Of these four, only (a) is enshrined in the 2000 Forest Code. The area tax is paid directly to the Treasury, but these funds are currently not reallocated from Central Government to local authorities as foreseen by law, but transferred to the Roads Fund. Two enterprises have established local development funds; but funds are currently poorly utilized because viable village programs have not been put forward and because of a lack of technical support for the micro-projects that have been funded. Departmental decrees define the organization and functioning of the local development funds. 42. The project will assist the government in operationalizing the provisions of the Forest Code regarding participation and benefit sharing of local populations in development and implementation of forest management plans. 43. The Project will support the following activities to enhance the involvement of local populations in the management of forest resources: (i) Assistance to local and indigenous communities (a) in the design of social responsibility contracts, and management plans for the community development zones in concessions, taking into account the different agrosilvopastoral needs of forest communities; and (b) to enhance capacity of community development councils to conduct negotiations of such contracts and plans The project will finance international and national consultants' services, awareness raising campaigns by NGOs, field equipment (GPS, cameras, binoculars, measuring devices, general maps and concession maps) and operating costs. (ii) Information campaigns to raise awareness on the part of local communities and indigenous people living in forest concession areas of their rights and responsibilities 50 regarding forest resource management, and negotiations procedures for expressing their needs and priorities and for defending their rights. The project will finance consultants' services to elaborate information programs including multilingual brochures, photos, contracts with local media (especially rural radio), and contracts with NGOs to organize awareness raising events in priority areas. (iii) Conceptual and practical training for the central and local forest administrations and NGOs with responsibility for working with local forest populations in forest management planning procedures and negotiations and monitoring of social responsibility contracts and forest management plans, including mechanisms to enhance the participation of specific target groups such as women, indigenous peoples, youth. (iv) A study to review and clarify the forest regulatory framework in respect of local community participation, as needed. 51 Annex 3: Implementation Arrangements REPUBLIC OF CONGO: Forest and Economic Diversification Project I. Project Institutional and Implementation Arrangements A. Project Administration 1. The project will be implemented through the Ministry of Sustainable Development, Forest Economy and Environment (MSDFEE). Implementation arrangements were developed with Government during project preparation, and are fully aligned with government line-agency responsibilities. The Department of Studies and Planning (DSP) of MSDFEE will have overall responsibility for project coordination and implementation. The Minister has nominated a Project coordinator and deputy coordinator. For the fiduciary management aspects, the DSP is being assisted during project preparation by the Project Management Unit of the TGCBP II (Transparency and Governance Capacity Building Repeat Project), and subsequently, during project implementation, will dispose of an administrative, financial management and accounting specialist and a procurement specialist. These measures will help to build the capacity of the Public Procurement Management Unit of the MSDFEE. 2. During project preparation, a project preparation advance was provided to the Government for which the Project Management Unit of the TGCBP II (Transparency and Governance Capacity Building Repeat Project) has fiduciary oversight. The Advance also provides training in fiduciary management for staff of the MSDFEE. Further support will be needed during implementation, however, and this is provided for in the form of an administrative, financial management and accounting specialist and a procurement specialist who will be recruited to the DSP as conditions of effectiveness. In addition, an expert in natural resources management (NRM) with experience in monitoring and evaluation (to be responsible for M&E and coordination of environmental safeguards aspects) and a social scientist with experience in communications (to be responsible for coordination of social safeguards aspects) will be recruited to the DSP as conditions of effectiveness. 3. The procurement and administrative, financial management and accounting specialists will be hired on renewable term contracts until the World Bank evaluates the Ministry as being capable of independently managing procurement and financial management aspects of project implementation. The social scientist and NRM specialist will each be assigned one or more counterparts from among Ministry staff to be trained by them, in order to build the Ministry's capacity in these aspects of project management. Each counterpart will be trained on part or all of the specialist's responsibilities, depending on the number of counterparts assigned and their skill set, as deemed appropriate by the MSDFEE and acceptable to the World Bank. The social scientist and NRM specialist will be hired on renewable term contracts until Ministry staff assigned to the DSP are evaluated by the World Bank as satisfactorily fulfilling the requirements set forth in these specialists' TOR and as being capable of independently managing these specialists' responsibilities in project implementation. The technical directors in the GD of Forest Economy, the GD of Environment, and the coordinator of the National Program for 52 Afforestation and Reforestation will take on responsibility for the technical supervision of project implementation. 4. Component 1.1 concerns strengthening the operational and management capacity of the MSDFEE, and includes activities to strengthen fiduciary, management, monitoring and evaluation, human resources and technical capacity of the ministry, as well as its capacity to manage information and disseminate forest related information and Ministry activities to the public (enhanced transparency). The Department of Studies and Planning will have overall responsibility for fiduciary management of the project, and overall project coordination and results monitoring. It will also have responsibility for overall training coordination. The project will support the establishment in the Department of Studies and Planning of a system of planning, monitoring and evaluation with the aim of (a) monitoring Ministry activities; (b) monitoring implementation of reforms and (c) assessing progress against plan objectives, including analysis of reasons for delay. 5. The PPA (Project Preparation Advance) is also financing preparation of a Project Implementation Manual (which will be elaborated and adopted as a condition of project effectiveness), detailing administrative and financial management, procurement and reporting and computing hardware procedures, preparing monthly reports, and communications. Computing and internet hardware and financial management software is also provided for under the PPA, together with a minor refurbishment of the MSDFEE electrical circuits to assure the safety of computer equipment provided. 6. The Department of Studies and Planning will have responsibility for feeding content to the Ministry website (part of component 1.1). This will require close cooperation with other GDs and units of the Ministry, in order to allow for "just-in-time" information dissemination and to meet standards of transparency across the range of MSDFEE activities. 7. The relevant technical GDs will have oversight for more specialized training under Component 1.1: GDFE will organize training in forest regulations, forest concession management requirements, traceability and FLEGT. 8. GDFE will have responsibility for operationalization of the Forest management information system (also part of component 1.1), which aims to provide "just in time" information on all aspects of the forest, forest management and forest revenue process and will be essential for the implementation of the Forest Law Enforcement Governance and Trade (FLEGT) initiative, also under the responsibility of GDFE. GDFE will also support implementation of the FLEGT voluntary partnership agreements (VPA) through its Forest Legality and Traceability Unit and the National Traceability System, which will also be strengthened through the project. 9. With regard to component 1.2 Strengthening of the Forest Legal and Regulatory Framework, the GDFE (General Directorate of Forest Economy) will have responsibility for dissemination of the updated Forest Law. GDFE will have responsibility for dissemination and operationalization of Decree 6509 on forest gazettment and degazettment, as well as Decree 2009-03 on procedures for forest concessions and Law 14-2009 on forest taxation. These activities will require close 53 collaboration with local authorities, private enterprises, civil society and local populations in the concession areas. 10. With regard to the operationalization of the Inter-Ministerial Consultative Committee (IMCC) on conflicting land-uses in natural ecosystems (e.g. mining concessions on areas allocated as forest concessions) by Decree 2009-304, 31st August 2009, the Ministry of Economic Planning and Land Use Planning will be delegated the authority for implementation of the decree, so that the modus operandi for the implementation is consistent with the current government structure, which no longer has a Prime Minister. 11. The GD for Environment will have technical responsibility for implementation of component 1.3, including (with the assistance of the Directorate of Planning and Studies) dissemination of the New Environment Law and development of implementation decrees, and operationalization of decree number 20090415 on environmental and social impact assessment, and training in ESIA for private sector consulting firms and sectoral ministries (mining, transport, energy, oil, agriculture, industry), and preparation of the feasibility study and oversight of establishment of the environmental laboratory. 12. The GD for Sustainable Development will have technical responsibility for implementation of component 1.4. 13. The ProNAR (National Program for Afforestation and Reforestation) Coordination will have primary technical responsibility for implementation of Component 2.1 studies concerning private investments in plantations. It will work closely with local communities, NGOs and the private sector during the development and review of the diagnostic studies, as well as with the GD of Forest Economy to which it reports. 14. The Directorate for the Development of Forest Industry ("valorisation industrielle") under the GD of Forest Economy will have responsibility for Component 2.2 Support to Small and Medium scale forest enterprises, in close collaboration with the Project to Support Economic Diversification, and the Platform for High-Level Public-Private Dialogue that has been established under it. 15. The Director of Studies and Planning will have primary responsibility for the design of the studies on component 2.3 capacity building on environmental services projects. It will work closely with the GD of Forest Economy in this regard, since most staff at decentralized level are in the GD of Forest Economy. 16. The GD of Forest Economy will have technical responsibility for component 3 Enhancing the Participation of Local Communities in Forest Management; but a considerable amount of the work will be contracted out to NGOs. 54 II. Financial Management, Disbursements and Procurement A. Financial Management 17. As part of the Forestry and Economic Diversification Project (FEDP) preparation process, a Financial Management assessment has been conducted at the Ministry of Sustainable Development, Forestry and Environment (MSDFEE) level. The financial management (FM) assessment was carried out in accordance with the World Bank FM Practices Manual issued by the FM Sector Board on November 3, 2005 as revised in March 2010. In this regard, a review of the FM existing system (budgeting, staffing, financial accounting, financial reporting, funds flow and disbursements, internal and external audit arrangements) has been carried out. The assessment of the FM capacity of the MSDFEE revealed some weaknesses and risks mainly in the areas of staffing arrangements and capacity, accounting systems, both internal and external auditing, and reporting arrangement. Due to the weaknesses and the fiduciary risks associated to the project, an existing PMU, which is implementing the Transparency and Governance Capacity Building Project within the Ministry of Finance, is providing assistance to the RoC government during project preparation. This PMU is very familiar with the World Bank FM procedures, having managed some World Bank-financed operations since 2002 (e.g. P073507 and P101981). Subsequently, during project implementation, the Directorate of Studies and Planning (DSP) will be strengthened by the recruitment of an administrative, financial management and accounting specialist and a procurement specialist, to ensure that the DSP's FM and procurement capacities are sufficient to manage project-related transactions in line with World Bank standards 18. A Project Implementation Manual (PIM) including the administrative and financial management procedures will be prepared and adopted by effectiveness. Finally, the existing accounting software will be upgraded (e.g. multi-projects and multi-sites version 9.3 of the TOMPRO and installation of the network). The setting-up of the computerized accounting system is due 3 months after effectiveness. Interim Financial Reports (IFR) will be prepared every quarter in a format and content agreed with IDA and furnished to the World Bank 45 days after the end of the quarter. 19. The overall project funding will consist of IDA US$ 10.0 million equivalent and US$ 22.6 million equivalent counterpart funds provided by RoC. These funds will finance all project expenditures on a pro rata basis and will be managed through two (2) new bank accounts to be opened and maintained by the DSP in a commercial bank acceptable to IDA as follow: (i) a Designated Account in CFAF to receive IDA advances, and to pay for the IDA pro rata share of project expenditures; (ii) a Project Counterpart Funds Account in CFAF to receive counterpart deposits and replenishments, and to pay for the Government's pro rata share of eligible expenditures. Country issues 20. The RoC is gradually emerging from a decade of political instability, conflict, and mismanagement of public finances. It has enjoyed considerable economic growth in recent years, though it still depends too narrowly on the oil sector. The country reached the HIPC completion point in 2009, but its institutions are still weak. Structural reforms have been launched in the 55 areas of economic governance, public expenditure management, and transparency. The ongoing Transparency and Governance Capacity Building Repeat Project (as well as the first Transparency and Governance Capacity Building Project which preceded it), financed by the World Bank, is helping the country strengthen capacity in public administration and tackle corruption and mismanagement. The integrated fiduciary assessments (Country Financial Accountability Assessment, PEFA, Country Procurement Assessment Report, and Public Expenditure and Financial Accountability) conducted in 2006 and 2007 reports outlined significant public finance management weaknesses-mainly in budgeting preparation and control, accounting, reporting, internal and external controls, and human resources. 21. Although there is cause for cautious optimism (significant improvements have been made in public finance management and oil revenue management through the TGCBP, as well as other donor-financed projects), it will take a long time for these reforms to yield substantial improvement in the management of public funds. Given the fragility of the fiduciary environment, the Government has requested to use a ring-fenced approach to implement this project, similar to the other World Bank-financed Projects in the country. Risk Assessment and Mitigation 22. The following risk identification worksheet summarizes the significant risks with the corresponding mitigating measures: Table 7 - Risk Identification Worksheet Inherent risk SS Country levelH NoeBeodtecnrlfthNH According to questions 13 and 16 project. The government is of the CPIA, the Republic of committed to a reform program Congo is a high risk country from that includes the strengthening the fiduciary perspective. of the PFM, An ongoing IDA- The IFA PERandthe EFAfinanced PFM Reform project is The CIFA, PER and the PEFA bigipeetdbti reports outlined PFM weaknesses unielmnied ut ic at central and decentralized enough to ipactethetproposed government levels as well as project Use of pDAoFM sector ministries level in term of proc s se fo this governance and public funds project. management.project. Entity level S Relying on a dedicated FM team Y S The assessment of the key at the DSP and use of IDA FM ministries during the CFAA, requirements is critical for the PEFA and particularly the mitigation of fiduciary risk of MinFin as well as the Ministry of this project; the adoption of a Forestry revealed internal control PIM, (including a FM weaknesses and weak fiduciary procedures manual) by environment effectiveness will mitigate internal control weaknesses. Project level S The DSP will strengthen ex-ante N S 56 RFunds may be used for Mother thanO andex-lpost control of activitiesPR the intended purposes; delays in implemented/managed by the reporting system and auditing implementing entities. The scope due to the weak capacity of the of audit will include review of fiduciary team are expected. expenditures incurred at all levels. FM staff will be recruited on ToRs acceptable to IDA and training and hands on advice to staff during project implementation. Control Risk S S Budgeting M Annual work plan and budget Y (only for the M (i) Weak capacity at the required each year and subject to PIM) implementing entities to prepare approval by IDA. The project and submit accurate work FM Procedures Manual program and budget; (ii) weak (included in the PIM) will define budgetary execution and control; the arrangements for budgeting, and (iii) weak monitoring leading budgetary control and the to some overrun expenditures. requirements for budgeting revisions. Annual detailed disbursement forecasts and budget required. IFR will provide information on budgetary control and analysis of variances between actual and budget. Accounting S (i) The project will adopt the Y (hiring of S Poor policies and procedures, OHADA accounting system. the lack of qualified accountancy Accounting procedures will be administrative, staff. documented in the manual of financial Delay in keeping reliable and procedures; (ii) The FM management auditable accounting records. functions will be carried out by and accounting qualified consultants specialist) (individuals); (iii) an administrative, financial management and accounting specialist will be recruited on competitive basis; an integrated computerized accounting system will be set up and will be maintained by the fiduciary team. Internal Control S Adoption of a PIM (including Y (adoption of S Internal control system may be an FM Procedures Manual) and the PIM) weak due to weak FM capacity of training on the use of the manual IA; Insufficient safeguards and by the consultant recruited for controls may result in misuse of this purpose. funds and impact the implementation of the project. Funds Flow S (i) Payment requests will be Y (hiring of an S (i) Risk of misuse of funds; (ii) approved by the FM Manager administrative, 57 Rdelays in doisbursements of funds 0 prior to Edisbursement of funds toRfinlancialR to IA and beneficiaries; and (iii) contractors or consultants; management delays in the release of (ii) The ToRs of the External and accounting government contributions (e.g. Auditors include physical specialist) mainly the subsequent tranches verification of goods, services after initial deposit). acquired; (iii) administrative, financial management and accounting specialist will be recruited before project effectiveness and capacity of DSP will be strengthened during project implementation period; and (iv) The RoC to release US$ Y (initial counterpart funds 500 million deposit of CFAF as initial deposit before counterpart effectiveness and subsequent funds) tranches according to agreed upon time schedule confirmed in the Financing Agreement Financial Reporting M (i) A computerized accounting N M Inaccurate and delay in system will be used. submission of IFR to the WB due (ii) IFR and financial statements to delays from lAs or weak formats agreed during capacity of the FM team. negotiations. Auditing S (i) The project's institutional N S No auditing arrangement in arrangements allow for the place; the national audit capacity appointment of adequate is weak and not reliable. Delay external auditors (independent in submission of audit report or auditors) and the ToRs will qualified opinion and delays in include physical verification and the implementation of audit specific report on finding of reports recommendations, physical controls of goods, and services acquired or delivered. (ii) Annual auditing arrangements will be carried out during the project implementation period in accordance with ISA. Governance and Accountability S (i) The TOR of the external Y (for the S Possibility of circumventing the auditor will comprise a specific PIM) internal control system with chapter on corruption auditing; colluding practices as bribes, (ii) FM procedures manual abuse of administrative positions, (included in the PIM) approved mis-procurement etc, is a critical before project effectiveness; (iii) issue. Robust FM arrangements (qualified individual FM staff recruited under ToRs acceptable to IDA, quarterly IFR including budget execution and monitoring; and (iv) Measures to improve transparency such as 58 M E M O i~providin,g information on thePR project status to the public, and to encourage participation of civil society and other stakeholder are built into the project design. 23. The overall residual risk rating is deemed Substantial. 24. Governance and Accountability: the risk of fraud and corruption within project activities is high given the country context, inherent risks of activities. However, the proposed fiduciary arrangements will help mitigate such risks. Nonetheless, the following measures are envisaged to further mitigate the risk of fraud and corruption: Financial Management Action Plan 25. The Financial Management Action Plan described below has been developed to mitigate the overall financial management risks. Table 8 - Financial Management Action Plan FM staffing Recruitment of a financial management, DSP By effectiveness Yes administrative and accounting specialist Accounting Installation and configuration of the DSP Three months Yes(i software accounting software for the project after effectiveness FM procedures Revision of the FM procedures manual DSP By effectiveness Yes manual to be included in the PIM Counterpart Payment of the first tranche of the DSP By effectiveness Yes funds government contribution Reporting Agree on the format and content of DSP Negotiations No (IFRs) Unaudited Interim Financial Reportings (IFRs) External Selection of an external auditor DSP Three months Yes(') auditing after effectiveness (1) The actions required 3 months after effectiveness are included as covenants in the Financing Agreement. 26. Implementing entity: An existing Project Management Unit (PMU) - the TGCBP II PMU - within the Ministry of Finance with significant experience in IDA-financed projects is handling Financial Management and Procurement during project preparation under the Project Preparation Advance. During project preparation, an Accountant has been transferred from the Ministry of Forestry to the PMU to receive training. The Directorate of Studies and Planning (DSP) will 59 handle FM aspects during Project implementation. It will be reinforced by a procurement specialist and an administrative, financial and accounting specialist who will be recruited through a competitive process as conditions of effectiveness. They will be trained on the use of World Bank procedures as well as project's software. 27. Budgeting: Annual work plans and budgets and detailed disbursement forecasts will be consolidated into a single document by the DSP, and will be submitted to IDA for approval no later than December 1 of the year preceding the year covered by the work plan. The DSP will monitor its execution with the accounting software in accordance with the budgeting procedures specified in the manual of procedures and report on variances along with the quarterly interim financial report. The budgeting system needs to forecast for each fiscal year the origin and use of funds under the project. Only budgeted expenditures will be committed and incurred so as to ensure the resources are used within the agreed upon allocations and for the intended purposes. 28. Accounting policies and procedures: The RoC is a member of the Organisation pour l'Harmonisation en Afrique du Droit des Affaires (OHADA), hence adheres to its accounting standards (Syscohada), in line with the international accounting standards. Hence Syscohada accounting standards will apply to this project. An integrated financial and accounting system will be put in place and used by the DSP. The Project code and chart of accounts will be developed to meet the specific needs of the project and documented in the Project Implementation Manual; the existing software (TOMPRO) will be customized to accommodate the accounting system of the project. 29. Internal control and auditing: A Project Implementation Manual (PIM) reflecting the financial management procedures already in place is under preparation. The completion and approval by IDA of the new PIM will be a condition for Project effectiveness. 30. Financial Reporting: The DSP will record and report on project transactions and submit to the World Bank Interim Financial Monitoring Reports (IFRs) no later than 45 days after the end of each calendar quarter. At a minimum, the financial reports must include the following tables with appropriate comments; (i) Sources and Uses of Funds; (ii) Uses of Funds by Project Activity/Component and comparison between actual expenditures and budget; (iii) Special account activity statement; and (iv) Note to the IFR. At the end of each fiscal year, the project will issue the Project Financial Statements (PFS) comprising: (i) a balance sheet; (ii) a statement of sources and uses of funds; (iii) accounting policies and procedures; and (iv) notes related to significant accounting policies and accounting standards adopted by management and underlying the preparation of financial statements. These PFS will be subject to annual external audits as described below. 31. External audit: The assessment of the "Cour des Comptes", the Supreme Audit Institution during the PEFA and CIFA exercises revealed a need for improvement of its capacity and could not be used to audit the project accounts. Therefore, the Recipient will be required to recruit a qualified, experienced, and independent external auditor on approved terms of reference three months after effectiveness. The Cour des Comptes may participate in the selection process of the external auditor. The external audit will be carried out according to either International Standards on Auditing (ISAs) or Auditing Standards (ASs) and will cover all aspects of project activities 60 implemented and include verification of expenditures eligibility and physical verification of goods and services acquired. The report will also include specific controls such as compliance with procurement procedures and financial reporting requirements and consistency between financial statements and management reports and field visits (e.g. physical verification). The audit period will be on annual basis and the reports including the project financial statements submitted to IDA and the Cour des Comptes six months after the end of each fiscal year. 32. The project will comply with the World Bank disclosure policy of audit reports (e.g. make publicly available, promptly after receipt of all final financial audit reports (including qualified audit reports) and place the information provided on its the official website within one month of the report being accepted as final by the team. 33. Conclusion and Supervision Plan: Supervisions will be conducted over the project's lifetime. The project will be supervised on a risk-based approach. It will comprise inter alia, the review of audit reports and IFRs, advice to task team on all FM issues. Based on the current risk assessment which is M-I (substantial) the project will be supervised at least twice a year and may be adjusted when the need arises. The ISR will include a FM rating of the project. An implementation support mission will be carried before effectiveness to ensure the project readiness. To the extent possible, mixed on-site supervision missions will be undertaken with procurement monitoring and evaluation and disbursement colleagues. B. Disbursement arrangements and flow of funds 34. Flow of funds - designated account: The overall project funding will consist of IDA US$ 10.0 million equivalent credit and US$ 22.6 million equivalent in counterpart funds provided by RoC. These funds will finance on a pro rata basis all expenditures and will be managed through two (2) new bank accounts to be opened and maintained by DSP in a commercial bank acceptable to IDA as follow: (i) a Designated Account in CFAF to receive IDA advances, and to pay for IDA's pro rata share of eligible project expenditures; (ii) a Project Counterpart Funds Account in CFAF to receive counterpart deposits and replenishments, and to pay for the government's pro rata share of eligible expenditures. Interest income received on the Designated Account will be redeposited into the Designated Account. The ceiling of the Designated Account will be set at CFAF 300 million which will be disbursed upon effectiveness following receipt of the initial withdrawal application from the Recipient. Additional advances to the Designated Account will be made on a monthly basis against withdrawal applications supported by Statements of Expenditures (SOE) or records and other documents as specified in the Disbursement Letter (DL). The flow of funds is summarized in the chart below. 61 Chart 2 - Flow of Funds IDA Government of the aRepublic of Congo A A C C C C N Designated Counterpart Funds N T Account (CFAF) Account (CFAF) T A A B B I I L L I I T T Y Financing of transactions in CFAF or other currencies (US$ or Euro) Y 35. Disbursement arrangements (disbursement methods): Given the high risk environment, the report-based disbursement will not be applicable by default. Therefore, upon project effectiveness, transaction-based disbursements will be used as for other ongoing projects. An initial advance up to the ceiling of the DA (CFAF 300 million) and representing four months forecasted project expenditures paid through the DA will be made into the designated account and subsequent disbursements to the DA will be made on a monthly basis against submission of SOE or records as specified in the DL. The other methods of disbursing the funds (reimbursement, direct payment and special commitment) will also be available to the project. The minimum value of applications for these methods is 20 percent of the DA ceiling. The Recipient's authorized staff will have the option to sign and submit Withdrawal Applications (WA) electronically using the eSignatures module accessible from the World Bank's Client Connection website. 36. Evaluation for Report Based disbursements: After the first year of implementation, the option to disburse against submission of quarterly unaudited IFR (also known as the Report- based disbursements) could be considered subject to the quality and timeliness of the IFRs submitted to the World Bank and the overall FM performance as assessed in due course. In the case of the use of the report-based disbursement, the DA ceiling will be equal to the cash forecast for two quarters as provided in the quarterly unaudited Interim Financial Report. If and when IFRs are used as the basis of disbursements, the contents and format will be revised to include disbursement-related information. 62 37. Counterpart funding: The government is committed to supporting the project with US$ 22.6 million equivalent in counterpart funds. Yet the risk of delay in releasing counterpart funds in a timely manner (e.g. P106851: Health project; P084317: Basic Education Support; and P095251: Agricultural Rehabilitation project are currently facing some delays in payments of the government contributions) may jeopardize the implementation of the annual work program. The Counterpart funding for FEDP was included in the government budget for 2012 and an initial deposit of 500 million CFA Francs will be made before effectiveness. The remaining contributions will be provided as follows, in accordance with the following schedule:. Table 9 - Schedule of Counterpart Funds Deposits CFA Francs 500,000,000 Effective Date CFA Franc 1,500,000,000 March 31, 2013 CFA Franc 1,500,000,000 September 30, 2013 CFA Franc 1,500,000,000 March 31, 2014 CFA Franc 1,500,000,000 September 30, 2014 CFA Franc 1,500,000,000 March 31, 2015 CFA Franc 1,300,000,000 September 30, 2015 CFA Franel1,000,000,000 March 31, 2016 CFA Franc 1,000,000,000 September 30, 2016 38. Table of eligible expenditures and taxes: Funds will be disbursed in accordance with project categories of expenditures as shown below. As all expenditures will be jointly financed by IDA and government counterpart funds on a pro rata basis, IDA's pro rata share has determined the percentage of eligible expenditure to be financed for each category. The financing is inclusive of taxes as per the current Country Financing Parameters approved for the Republic of Congo. The table of eligible expenditures for this credit is as follows: Table 10 - Eligible Expenditures 1 Goods, Works, Services, Training and 9,711,580 30.7% 63 C. Financial management conditions and covenants 39. Following are the FM effectiveness conditions and covenants: a) FM effectiveness conditions: * Adoption of a Project Implementation Manual acceptable to the World Bank, including accounting, administrative and financial procedures; * Deposit of at least five hundred million CFA Francs (CFAF 500,000,000) into the Project Counterpart Funds Account; * Employment of an administrative, financial management and accounting specialist whose qualifications, experience and terms of reference shall be satisfactory to the World Bank. b) Financial covenants * Installation and configuration of the project accounting software 3 months after effectiveness. * Recruitment of an external auditor - 3 months after effectiveness. c) Other FM standard covenants * IFRs will be prepared on a quarterly basis and, submitted to the World Bank 45 days after each quarter. * Annual detailed work program and budget including disbursement forecasts will be prepared each year by beginning of December. * The overall FM system will be maintained during the project's entire life in accordance with sound accounting practices. D. Procurement General 40. Applicable guidelines: Procurement for the proposed project will be carried out in accordance with the World Bank's "Guidelines: Procurement of Goods, Works and Non- consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers", dated January 2011; "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers", dated January 2011; and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements and time frame are agreed between the Borrower and the World Bank in the Procurement Plan. The procurement plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 41. Procurement documents: Procurement will be carried out using the World Bank's Standard Bidding Documents (SBDs) or Standard Request for Proposals, respectively for all International Competitive Bidding (ICB) for goods and international recruitment of consultants. For National Competitive Bidding (NCB), while waiting for the World Bank to assess the implementation of 64 the new procurement system based on experience gained from the Government's use of these documents outside the context of this Project, the Borrower will use the WB's SBD for ICB for goods and works and the WB's Standard Request for Proposals for recruitment of consultants. National procurement system and ongoing reforms 42. The main recommendations of the 2006 Country Procurement Issue Paper (CPIP) were to (i) prepare and approve a public procurement code, (ii) carry out a survey of the existing capacity on procurement, (iii) make a needs assessment of the institutional and human capacity requirements for public procurement in the country, (iv) prepare an action plan for the procurement reform and (v) implement the new procurement code in accordance with the agreed action plan. All these recommendations have been implemented. 43. Indeed, the Government has finalized the major actions to implement the new procurement code and the said code is already being applied by Government since September 2009. The most important steps achieved to date include the following: (i) the draft national procurement code finalized and approved by the national authorities; (ii) The staff of the GDPPC (prior reviewing institution) is already in place, (iii) the board of the regulatory body is nominated by the government, the private sector and the civil society as recommended by the new provisions, (iv) the standard bidding documents are reviewed and approved by the procurement reform committee and (v) an action plan for the training of main actors has been properly implemented. In March 2012 an independent audit is expected to be conducted in the purpose of verifying the extent to which the rules are respected by the contract authorities. 44. Conditions to use of the national procurement code: Once the new procurement code and its implementation have been reviewed and found satisfactory to IDA, the new code will be applicable for all contracts which are not advertised internationally. If any exceptions to the procurement code will be needed in order to be acceptable to the World Bank, the said exceptions will be notified to the Government prior to the use of the code. Any time modifications in the national procurement system are brought by the Government, the exceptions will be updated accordingly. 45. Advertising procedure: General Procurement Notice (GPN), Specific Procurement Notices (SPN), Requests for Expression of Interest, and results of the evaluation and contracts award should be published in accordance with advertising provisions in the following guidelines: "Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers", dated January 2011; "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers", dated January 2011. Procurement Methods 46. Procurement of Goods, Works, and Non consultancy services: Goods procured under this project will include: Computer equipment; office furniture; and accounting software. Works or non consultancy services procured under this project will include refurbishing, workshops and training in the region and abroad. Procurement will be done under ICB or NCB using the World Bank's Standard Bidding Documents for all ICB. 65 47. Shopping: Small value goods and works may be procured under shopping procedures. 48. Direct contracting: Direct contracting may be used where necessary if agreed in the procurement plan in accordance with the provisions of paragraph 3.7 to 3.8 of the Procurement Guidelines. 49. Selection of Consultants: Consultancy services will include advisory services, feasibility studies, and environmental and social impact studies. The selection method will be Quality and Cost Based Selection (QCBS) method whenever possible. Contracts for specialized assignments estimated to cost less than US$ 100,000 equivalent may be contracted through Consultant Qualification (CQ). The following additional methods may be used where appropriate: Quality Based Selection (QBS); Selection under a Fixed Budget (FB); and Least-Cost Selection (LCS). 50. Least-Cost Selection (LCS) may be used for selecting consultants for assignments of a standard or routine nature, such as audit services, where well-established practices and standards exist. 51. Single Source Selection (SSS) may be employed with prior approval of the World Bank and will be in accordance with paragraphs 3.8 to 3.11 of the Consultant Guidelines. 52. All services of Individual Consultants (IC) will be procured under contracts in accordance with the provisions of paragraphs 5.1 to 5.6 of the Guidelines. 53. Short lists of consultants for services estimated to cost less than the equivalent of US$ 100,000 per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. However, if foreign firms express interest, they will not be excluded from consideration. 54. Training, workshops, seminars, and conferences: Training activities will comprise workshops and training in the region and abroad, based on individual needs as well as group requirements; on-the-job training, and hiring consultants for developing training materials and conducting training. All training and workshop activities will be carried out on the basis of approved annual programs that will identify the general framework of training activities for the year, including: (a) the training envisaged, (b) the criteria for selection of personnel to be trained (and personnel if known), (c) the selection methods of institutions or individual conducting such training, (d) the institutions conducting the training, if already selected, (e) the duration of the proposed training, and (f) the cost estimate of the training. Attendance at relevant project workshops and seminars will be treated as training and will need advance World Bank's no objection. 55. Operating Costs: The operating costs will include reasonable expenditures for office supplies, vehicle operation and maintenance, communication and insurance costs, banking charges, rental expenses, office and office equipment maintenance, utilities, document duplication/printing, consumables, travel cost and per diem for Project staff for travel linked to the implementation of the Project, and salaries of contractual staff for the Project, but excluding salaries of officials of the Recipient's civil service. 66 Procurement implementation arrangements 56. An existing Project Management Unit PMU - the TGCBP II PMU - within the Ministry of Finance with significant experiences in IDA-financed projects is managing procurement during project preparation under the Project Preparation Advance. The Directorate of Studies and Planning (DSP) will manage procurement during Project implementation. To strengthen its capacity, a procurement specialist and an administrative, financial and accounting specialist will be recruited to the DSP through a competitive process as conditions of effectiveness. They will be trained on the use of World Bank procedures as well as project's software. 57. The institutional arrangements for the implementation of the project have taken into account the need to improve the procurement capacity and other fiduciary areas of staff from the Ministry of Sustainable Development, Forest Economy and Environment. The DSP will be responsible for coordinating and supervising all project activities. 58. Since September 2009, a Public Procurement Unit (PPU, "Cellule de Gestion des Marches Publics") has been established within the MSDFEE but it is not yet fully operational because it lacks capacity. So, PPU procurement officers will work closely with TGCBP II team during project preparation, in order to strengthen their capacity. After managing the PPA the PPU should be able to better support MSDFEE and all staff involved in project implementation on procurement matters. 59. In addition to his daily responsibilities, the procurement specialist to be recruited as a condition of effectiveness will provide the following services: (i) develop and strengthen the capacity on procurement for all staff in MSDFEE involved in the implementation of the project, (ii) coach and mentor the national procurement specialist of the PPU, (iii) reinforce the integrity and internal review of the procurement process, (iv) oversee and advise on procurement related matters, (v) ensure the quality of procurement activities, (vi) draft no objection requests for all procurement decisions subject to prior review for the Project Coordinator. The procurement specialist will have specific performance criteria in his TOR to measure procurement quality and delay and how knowledge is transferred to staff in the line ministries. 60. Midterm Review: A mid-term review is planned to assess the capacity of all State entities involved in the project execution. The midterm review report will integrate the results of the procurement activities performed during the period preceding the date of such report and will set out the measures recommended concerning the use of the national procurement code for the remaining activities of the project if the implementation of the national code has been determined to be satisfactory to the World Bank. Assessment of risks and mitigation measures 61. The risk factors for procurement performance include the country context and the low procurement capacity of the Ministry of Sustainable Development, Forest Economy and Environment (MSDFEE). In terms of the sector and country context, the CPIP and the experience of other IDA- and IFI-funded projects indicate that procurement for the project is likely to involve the following risks: 67 (i) A weak governance environment, weaknesses in accountability arrangements, and an overall lack of transparency in conducting procurement processes creates significant risks of corruption, collusion and fraud. (ii) The administrative system as it operates in practice creates opportunities for informal interference in the procurement process by senior officials - creating opportunities for waste, mismanagement, nepotism, corruption, collusion and fraud. (iii) Government officials likely to be involved in project procurement through tender committees and the national control system ensuring that the rules are respected and able to handle complaints from bidders may not be familiar with procurement procedures. (iv) The control and regulatory systems are not fully operational and independent. 62. The overall project risk for procurement is Medium before risk mitigation. Measures to mitigate the risks 63. The following strategy has been developed to mitigate procurement risks identified: (i) To mitigate the risks of collusion, fraud, corruption, waste and mismanagement, implementation arrangements will be geared towards achieve a high level of transparency in project implementation. (ii) To mitigate risks related to the low level of capacity both at the DSP level and in the MSDFEE more generally, all proposed procurement decisions at a given threshold (to be determined) will be subject to mandatory review by a contract committee composed of members proposed by the Ministry but any staff involved in evaluation and contract award processes should be excluded. (iii) The MSDFEE's publicly accessible website will include all relevant information to facilitate transparency and integrity of implementation, including the following: Project Appraisal Document and Financing Agreement; advertisements; funding proposals; terms of reference for all activities; contract awards; progress reports from implementing entities; a procedure for handling complaints satisfactory to the Word Bank; and complaints received and action taken. (iv) All consulting contracts costing above US$ 200,000, ICB contracts for goods or works will be published in the UNDB online and on the World Bank's external website, in accordance with World Bank Guidelines; (v) A project launch workshop will be conducted for the MSDFEE staff and relevant staff of all other entities involved in project implementation; (vi) For all procurement, the PIM includes procurement methods to be used in the project along with their step by step explanation as well as the standard and sample documents to be used for each method; (vii) The MSDFEE, in close relation with its DSP, will create a data base of suppliers of the required goods and works, and consultants (firms and individuals). The database will also include information on current prices of goods. 68 Table 11 - Schedule of Risk Mitigation Action Plan to be carried out 1 Procurement Plan for the first 15 PMU Before negotiations Finalized during months prepared and agreed with the negotiations World Bank 2 Update its project record DSP Expected within 6 To better keep management system. months after project procurement effectiveness (not a documents and covenant) reports 3 Training of Ministry Staff (at least DSP Within a year after To improve project two) on World Bank procurement project effectiveness staff skills in World procedures in specialized institutions (not a covenant) Bank's procurement 4 A maximum period of 15 days after PMU/DSP Ongoing (not a To be maintained bids opening is allowed for contract covenant) during the whole life award signature, in order to avoid of the project delays and reduce the scope for I corruption Implementation readiness 64. The following actions were initiated/carried out during the preparation of this project: (i) A detailed Procurement Plan for the first 15 months of the project has been prepared and was finalized prior to negotiations. (ii) The General Procurement Notice (GPN) will be prepared and advertised locally and in the United Nations Development Business (UNDB) online and the World Bank's external website after Board approval. (iii) The selection of consultants for studies for all major components has been initiated and is expected to be completed by the project effectiveness. (iv) The most important procurement activities for the critical contracts of the first year are initiated and completed at the stage of contract award but without signed contracts. Fraud, coercion, and corruption 65. All procuring entities, as well as bidders, suppliers, and contractors, shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraph 1.16 and 1.17 of the Procurement Guidelines and paragraphs 1.23 and 1.24 of the Consultants Guidelines. Frequency of Procurement Supervision 66. In addition to the prior review supervision to be carried out from World Bank offices, the capacity assessment of the implementing agency has recommended (i) supervision missions every six months to visit the field, and (ii) at least one annual post procurement review (PPR). Missions in the first 18 months shall include a World Bank Procurement Specialist or a specialized Consultant. 69 Procurement Planning 67. The Borrower developed a draft procurement plan for project implementation, which provides the basis for the procurement methods. This plan will be finalized and approved by the World Bank during negotiations. It will be available in the project's database and on the World Bank's external website. The Procurement Plan will be updated annually or as required to reflect the project implementation needs and improvements in institutional capacity. Procurement methods and World Bank Review requirements Table 12(a) - Procurement methods and World Bank review for Goods, Works, and Consulting Services (a) International Competitive US$ 500 or more All contracts Bidding (ICB) (b) National Competitive Bidding All contracts estimated below the ICB The first two (NCB) threshold and above shopping ceiling contracts (c) Shopping Below US$ 50 Post review (d) Direct contracting (DC) N/A All contracts Table 12(b) - Procurement methods and World Bank review for Contracts for Consulting Services (a) Selection based on quality and cost N/A All contracts estimated above (QCBS) US$ 100 (b) Selection Based on the Consultants' 100 All contracts estimated above Qualifications (CQ) US$ 100 (c) Individual Consultants (IC) N/A All contracts estimated above I_ I US$ 50 (d) Single Source Selection (SSS) IN/A IAll contracts 68. The approved procurement plan will determine procurement methods and the contracts to be submitted to World Bank review and no objection 70 Procurement planning Table 13 - List of contract packages to be procured following ICB and direct contracting for goods, works and non consultant services 1 Global computer 500,000 ICB No No Prior 09/2012 system (hardware and software) 2 Field equipment 500,000 ICB No No Prior 12/20 12 3 Vehicles 920,000 ICB No No Prior 09/20 12 69. ICB contracts estimated to cost the equivalent value of US$ 500,000 or above per contract for goods, works or non consultant services and all direct contracting will be subject to prior review by the World Bank. Consulting Services Table 14 - List of consulting assignments with short-list of international firms 1 Firm to evaluate operational 747,000 QCBS Prior 09/2012 and management capacity (financial and human resources in MSDFEE) 2 Conception of MSDFEE 169,000 CI Prior 09/2012 Training program 3 FLEGT Advisor 120,000 CI Prior 03/20 13 4 Support for elaboration of 286,000 CI Prior 11/2012 forest legal texts 5 Administrative, Financial 100,000 CI Prior 09/2012 Management and Accounting Specialist 6 Procurement Specialist 100,000 CI Prior 09/2012 7 Monitoring and Evaluation 100,000 CI Prior 09/2012 Specialist 8 Social Scientist 100,000 CI Prior 09/2012 9 Study for PME 145,800 CI Prior 03/2013 development strategy 71 10 Study of forestry 145,800 CI Prior 03/2013 information systems 11 Firm to design dialogue 659,000 QCBS Prior 12/2012 process and preparation of training program for supporting local and I indigenous communities 70. Consultancy services estimated to cost the equivalent value of US$ 100,000 and above for firms and the equivalent value of US$ 50,000 and above for individuals and all Single Source Selection of consultants (firms and individuals) will be subject to prior review by the World Bank. III. Environmental and Social (including safeguards) 71. The project development objective is to increase the capacity of the Republic of Congo to: (i) promote better implementation of its forest legislation; and (ii) enhance the policy environment for participation of local and indigenous communities and the private sector in sustainable forest management and reforestation. Therefore, the overall environmental and social impact of the project is expected to be positive. Project activities to promote and strengthen FLEGT and voluntary, independent forest management certification, are expected to contribute to a more sustainable environmental and forest management and higher benefits for local communities working in the forest sector. The project also aims to: a) support consultations and associated analytical works to help the inter-ministerial committee to resolve conflicts between over- lapping land-uses; and b) enhance the capacity for environmental assessment in a variety of sectors, including but not limited to transport, hydro-electric energy, oil, mining, agriculture and industry. 72. In addition, the project also aims to strengthen the natural resources management capacity of forest communities, including indigenous peoples, to enhance their participation in the design of forest management plans and the negotiations of social responsibility contracts. The project will also help to improve the dissemination of indigenous peoples' rights and responsibilities with regard to land management, including forests. The Republic of Congo is the first country of the Congo Basin to have adopted a law promoting and protecting the rights of Indigenous Peoples. More broadly, by focusing on providing an enabling environment for small and medium-scale forest product enterprises, the project is expected to facilitate the participation of a broader range of stakeholders in natural resources based socio-economic development dialogue. Project investments in information dissemination and transparency are expected to ensure broader civil society engagement in forestry. A. General Safeguards Aspects 73. Although this Project is limited to technical assistance and will not finance or include actual forestry investments, follow-on investments that are likely to be developed on the basis of this technical assistance are likely to trigger safeguards issues. In addition, the Project will include 72 some minor refurbishing of offices which may trigger the environmental or social safeguards. Consequently, the following instruments have been prepared, and on the basis of which TORs for the Project TA will be prepared, and any refurbishing triggering the safeguards will be carried out: * An Environmental and Social Management Framework (ESMF) that defines the overall scope of the intervention and the generic mitigation measures to implement as well as details the overall requirements for ensuring Policy(ies) compliance, essentially the Environmental Assessment policy (4.01), Forest (4.36), Natural Habitat (4.04) and Physical Cultural resources (4.11). * A Resettlement Policy Framework (RPF) that defines the process through which people potentially affected by either physical involuntary displacement or economic displacement will be accommodated and compensated. * An Indigenous Peoples Planning Framework (IPPF) that will address particularly the issue of the impacts of the project on indigenous groups and how these issues will be mitigated particularly through consultation and participation. B. Environmental Safeguards 74. The Environmental and Social Management Framework reviews in detail the likely environmental and social impacts of the project, and provides a comparison between the local environmental regulations and policies with that of the World Bank and finally provides details screening procedures as well prescriptions in terms of capacity building and monitoring and evaluation. 75. In particular, the ESMF identifies the environmental and social expertise that the DSP will need to successfully manage the project. This expertise includes an expert in natural resources management who will be in charge of environmental safeguards for the project and who will work in close coordination with the social scientist to ensure compliance with the World Bank Safeguards policies as well as national regulations. The ESMF proposes a detailed professional profile for this specialist as well as a description of the main responsibilities. Recruitment of this specialist is a condition of effectiveness under the Project. 76. A particular emphasis of the ESMF is on raising awareness and increasing capacity. Target groups have been identified and activities defined to address these aspects. For instance awareness raising activities will be conducted in the local communities. 77. Capacity strengthening training will target the DSP team but also local consulting companies as well as contractors. 78. The ESMF includes recommendations for a number of capacity building measures, which are included in the project. The cost of implementing these capacity building measures is in the order of US$ 2.530 Million (most of this amount is already included in the estimates for the capacity building and technical assistance contracts to be financed by the project). 73 C. Social Safeguards 79. In order to address the requirements of the two "social" policies (i.e. Indigenous People OP/BP 4.10 and Involuntary Resettlement OP/BP 4.12) the following respective safeguards instruments were prepared: an Indigenous Peoples Planning Framework and a Resettlement Policy Framework. 80. The Resettlement Policy Framework indicates that it is primarily the activities that may follow on from the TA implemented under component 2 of the project that justified the triggering of the policy (sub-component afforestation and reforestation as well as sub-component environmental services). The RPF clarifies under which conditions detailed RAPs will have to be prepared, consulted upon and implemented. The RPF also presents a comparison of the requirements in case of involuntary displacement of people as set forth in the Congolese regulatory framework and in the World Bank policy. There are several points of convergence but the main differences remain significant, in particular regarding the recognition of the rights of squatters, resettlement support, and monitoring and evaluation. On all these aspects, the World Bank approaches and procedures are recommended to take precedence (and would do so for any refurbishment under the Project requiring a RAP and any other investments covered by other World Bank-financed projects). 81. In order to help the government implement these recommendations, the RPF provides a detailed discussion on the different types of compensations depending on the nature of the impact on affected population and it is made clear that land acquisition in the context of the project is highly unlikely. Compensation to be paid as part of activities that may follow on from the TA implemented under component 2 of the project will be monetary in nature as most of the situations will be related to loss of access to forest resources or loss of access to areas that used to be cultivated. Detailed tables with the compensation for loss of crops are, for instance, provided in the RPF. 82. The RPF includes recommendations for a number of capacity building measures, which are included in the project. The amount estimated in the RPF to be set aside for studies is US$100,000 equivalent. 83. A credible grievance-redress process is described that should allow for a fair and rapid process towards resolving claims and disputes. 84. The second instrument, the Indigenous Peoples Planning Framework, assessed the potential impacts of investments following from the TA provided under the proposed project of the indigenous communities in the area of influence of the project. The IPPF clarifies the consultation/participation process with the IP in order to solidify their rights and for this purpose mandates the implementation of the following activities: * Strengthening the capacity of IP organizations for the full participation of indigenous peoples in forest management and in sharing the benefits they are entitled to. * Review of the current legal framework in order to ensure that the IP rights are embedded, and/or proposed revised legal texts. 74 * Communicate on Law No. 05-2011 dated February 25, 2011 related to the promotion and protection of IP rights of the Republic of Congo in accordance with the principles contained in Operational Policy 4.12 of the World Bank. * Build MSDFEE capacity to apply in practice the principles contained in this Law. * Build capacity for survey and cartography of IP territories. * Promote definition of IP territories as sensitive areas in accordance with the Law so that they are covered systematically in Environmental and Social Impact Assessment. 85. The budget estimated for the implementation of these activities is US$500,000. 86. Given that the Project will mainly cover technical assistance and studies that may lead, outside the Project, to investments, it is not possible to require the implementation of these safeguard frameworks in any investments that follow from the technical assistance and studies. Instead, the Recipient will be required to ensure that terms of reference for any technical assistance or studies carried out under the Project are consistent with and pay due attention to the above environmental and social safeguard frameworks prepared for the Project, and the Recipient's own laws relating to the environment and social aspects; and in drafting any laws or regulations under the Project, due attention must be given to these policies and laws. In addition, the World Bank would have the right to suspend any undisbursed amount of the Financing if it determines that: (a) at any time before the Closing Date, the Recipient has failed to apply sound environmental or social standards or practices in its management of natural forests and plantations or carrying out of natural forest or plantation related activities. 75 Annex 4: Operational Risk Assessment Framework (ORAF) REPUBLIC OF CONGO: Forest and Economic Diversification Project Stage: Board 1. Project Stakeholder Risks Rating Hih Many of the benefits are intangible (ecological as well as Risk Management: The project plan will include a strategic communication component, and the governance-related benefits) and very hard to quantify in project team will include expertise to enable it to proactively respond to criticism and reach out to monetary terms. Some environmental or social advocates the public and development partners domestically and abroad. (international and national) may oppose parts of the Project. In addition, the operation may generate excessive expectations and Status: Not Yet subsequently attract criticism to the World Bank. Resp: Client Stage: Imp Due Date: Due 2. Implementing Agency Risks (including fiduciary) 2.1. Capacity Rating: High Description : the MSDFEE still has limited capacity, with Risk Management: capacities especially weak in the areas of financial management, A major early investment in MSDFEE's fiduciary management capacity is planned. It has already planning and budgeting capacity, program implementation, started with an initial training session on procurement and will continue throughout the project enforcement, and monitoring and evaluation. MSDFEE also has preparation and implementation phases, placing special focus on their Department of Studies and no experience with World Bank funded projects, and limited Planning (DSP). experience with managing donor-funded projects overall. Consultants will be hired to assist MSDFEE and develop their capacity regarding communication and participatory, inclusive consultations with stakeholders. Special emphasis in these processes/activities will be placed on indigenous peoples. Status: Not Yet Resp: Client Stage: Imp Due Date: Due 2.2. Governance Rating: High Description : Risk Management: Overall weak governance may undermine Project efforts and/or Improving forest sector governance through capacity strengthening, institutional strengthening, and Project results: the ProNAR and other forest sector reforms can support of forest sector reforms is an integral part of project design. only succeed in a context of good governance, where tenure is The Project will endeavor to build governance-enhancing measures and structures into the design of clear and permanent, and legislation governing business the ProNAR. transactions, fiscal regime, and labor is comprehensive, The Project will also rely on continued support to multi-stakeholder participation and transparency transparent, and respected. Continued decentralizing reforms in the process of forest sector reform and ProNAR design. may generate conflict between the central forest administration and local government and undermine Project impacts. Resp: Client Stage: Imp Due Date: 76 3. Project Risks Moderate 3.1. Design Rating: Moderate Description : The size of the project, the weak procurement Risk Management: and FM capacity in the IA team and the counterpart funding of FM risks under each of the FM topics will be identified and mitigated. In addition the supervision 69.3 percent of the project by the government result in strategy will include joint missions with M&E and procurement teams, in-depth reviews of substantial exposure to these risks. expenditures and physical verifications of activities funded. The World Bank FM team will provide appropriate support to the FM staff of the project for the duration of the project. The Recipient will be required to deposit counterpart funds in amounts and at intervals agreed with the World Bank. Resp: World Bank Stage: Imp Due Date: Du 3.2. Social & Environmental Rating: Moderate Description : The project mostly finance TA and studies. Risk Management: However, the trainings and the advisories may lead to later An ESMF, RPF, and IPPF have been prepared for the project. The ESMF includes tools to assess impact. the impact of later actions that the government may implement. Due ate:Status: Not Yet Resp: Client Stage: Imp Due Date:Due 3.3. Program & Donor Rating: Moderate Description: There are significant links and some Risk Management: Close on-going communication and coordination will be maintained with the interdependencies between the activities and objectives of this donor community and management of other related initiatives in the country. Project and those of other ongoing and planned initiatives in the country such as TGCBP II project, FCPF SESA and EU FLEGT The Project will collaborate very closely with the World Bank -financed FCPF REDD Readiness initiative. There is a risk of lack of timely donor coordination, Grant which funds the preparation of the SESA. due to some interdependencies. Resp: World Bank Stage: Imp Due DateYet Resp Wold ank tag: Ip Du Dae :Due 3.4. Delivery Monitoring & Sustainability Rating: Moderate Description : Lack of implementing agency capacity, adequate Risk Management: Project strengthening of government capacity to implement HIPC and other governance, and/or political will (see previous sections). The forest sector reforms will increase likelihood of reform process continuing. Project's results depend on the government continuing to implement the forest sector reform agenda, as well as on the Special emphasis will be put on strengthening MSDFEE's monitoring and reporting capacity. institutional strengthening of the MSDFEE and associated structures. Without these, there is a risk that the Project lacks The Project will emphasize strong government buy-in from the onset. adequate sustainability. MSDFEE's weak monitoring and reporting capacity could Status: Not Yet affect the quality of project implementation. Due [4. Overall Risk Implementation Risk Rating: High Comments: 77 Annex 5: Implementation Support Plan REPUBLIC OF CONGO: Forest and Economic Diversification Project I. Strategy and approach for Implementation Support 1. The strategy for Implementation Support (IS) has been developed based on the nature of the project and its risk profile. It aims to provide timely and efficient implementation support to the client, while at the same time implementing the risk mitigation measures defined in the ORAF. 2. Procurement. Implementation support will include: (a) advisory support to the procurement team based in the Directorate of Studies and Planning (DSP); (b) reviewing procurement documents and providing timely feedback to the DSP, including guidance on the World Bank's Procurement Guidelines; and (c) monitoring procurement progress against the detailed Procurement Plan. 3. Financial management. Supervision will review the implementation of the project's financial management arrangements, including but not limited to, accounting, reporting and internal controls. 4. Anti-Corruption. The World Bank team will support implementation by the Recipient of activities agreed for strengthening anti-corruption measures in the sector. II. Implementation Support Plan 5. The Task Team Leader and Forestry Specialist of the Project is based in Europe, the FM Specialist is based in the Kinshasa office, while the Procurement Specialist is based in Brazzaville. The Operations and M&E Specialist is based in Washington. Formal supervision and field visits will be carried out twice annually. Detailed inputs from the World Bank team are outlined below: 6. Technical inputs. The team leader will ensure that technical inputs are provided concerning forestry, environmental impact assessment, forest legal and regulatory framework, social safeguards and institutional development 7. Fiduciary requirements and inputs. Training will be provided regularly by the World Bank's financial management specialist and procurement specialist to enhance project implementation. The team will also help stakeholders to identify capacity building needs to strengthen their financial management capacity and to improve procurement management efficiency. The procurement specialist will be based in the country office to provide timely support. Formal financial management supervision will be carried out quarterly, while procurement supervision will be carried out on a timely basis as required by the client. 78 8. Operation. An operations officer, based in DC, will provide overall guidance and M&E support to the team. 9. Staff skill mix required is summarized below. Table 15 - Required staff skill mix TTL/Forestry Specialist 8 3 Trips could be reduced to 2 in 2nd ya Procurement Specialist 5 0 Brazzaville-based FM Specialist 5 4 Kinshasa-based Social Safeguards 4 1 Kinshasa-based Specialist Operations Specialist 5 1 DC-based Environmental Lawyer 4 1 First year only Institutional Development 5 2 Kinshasa-based Specialist Environmental Specialist 4 2 Kinshasa-based 79 Annex 6: Project Preparation Advance REPUBLIC OF CONGO: Forest and Economic Diversification Project 1. The Republic of Congo received an IDA advance of US$ 939,500 to finance preparation activities for the Republic of Congo Forestry and Economic Diversification Project. As designed, the PPA focuses on key activities which will provide a sound technical basis for the design and implementation of the project. Implementation Arrangements 2. The Department of Studies and Planning (DSP) within MSDFEE will be in charge of the overall coordination and of the administrative aspects of the project, namely procurement and financial management. It will be assisted by MSDFEE's Government Procurement Management Unit. The Coordinator and Deputy Coordinator have been assigned by the Minister, from within the Ministry's staff. 3. Given the limited capacity of the MSDFEE, fiduciary management of the Project Preparation Advance will be assured by the Project Management Unit of the World Bank-funded Transparency and Governance Capacity Building Project (TGCBP II), located in the Ministry of Economics, Finance and Budget, which will also help to simultaneously build the capacity of MSDFEE in these areas. Activities to be financed through the PPF Advance 4. The PPF advance will finance the activities of short term individual consultants and consulting firms who will be recruited to support project preparation, as well as the purchase of goods necessary for the effective functioning of MSDFEE. The expected period of PPA implementation is 8 months. 5. The activities to be financed include the following (a table including a detailed list of activities / expenditures and related budget is attached to this request): (a) Strengthening the capacity of the Project Management Unit. Recruitment of consultants to assist MSDFEE's Department of Studies and Planning (DSP) with the drafting of the Project's procedural manual, administrative and financial management, procurement, preparing the Project, finalizing the TORs, preparing monthly reports, and communications. Computing and internet hardware and financial management software will also be purchased for the Project Management Unit. PPA funds will also be used to recruit a specialist to conduct an assessment of MSDFEE's electrical installations and to refurbish MSDFEE's electrical circuit. The majority of the cost of the electrical refurbishment will be due to purchase of required materials and the firm hired to purchase these materials will also be hired for their installation in order to maintain continuity of responsibility. In addition, this electrical refurbishment will require very small physical adjustments to an existing government 80 facility, entirely on government-owned land, and will therefore not trigger the resettlement policy. (b) Safeguard studies. Recruitment of a consulting firm to assist DSP in preparing the following safeguard documents, including conducting required consultation processes: i. Environmental and Social Management Framework (ESMF), which will include application of requirements of World Bank's policies on Natural Habitats, Physical Cultural Resources, and Forests. ii. Indigenous Peoples Planning Framework (IPPF). iii. Resettlement Policy Framework (RPF). (c) Institutional and capacity strengthening of MSDFEE. Recruitment of a consulting firm to conduct an analysis of the institutional strengthening and capacity building needs of MSDFEE and its subordinate structures. (d) Operationalization of the National Program for Afforestation and Reforestation (ProNAR). Recruitment of a consulting firm to carry out a set of studies on the feasibility and operationalization of the National Program for Afforestation and Reforestation (ProNAR). Table 16 - Activities / Expenditure Items and Allocated Budget 1. Strengthening the capacity of the Project PPA 372,000 Management Unit. a. Recruitment of a consultant to assist Consultant with working 6 months PPA 20,000 MSDFEE's Department of Studies and Planning knowledge of project (DSP) in drafting the Project's procedural management, including manual, including administration, financial administration, financial management, and procurement. management, and procurement, and experience with WB projects and procedures. b. Recruitment of an administrative and FM specialist 1 year PPA 16,500 financial manager to assist DSP. (renewable for Project implementation) c. Recruitment of a procurement specialist to Procurement specialist 1 year PPA 16,500 assist DSP. (renewable for Project implementation) d. Recruitment of a consultant to provide DSP Forestry expert with 1 year PPA 60,000 with technical assistance necessary for experience in institutional (renewable for preparing the Project, finalizing the TORs, and reforms and reforestation, as Project 81 preparing monthly reports. well as project management. implementation) e. Recruitment of a consultant to assist DSP Information, education, and 1 year PPA 16,500 and the Project Management Unit with communication specialist (renewable for communications (including preparation of Project communication tools and consultations). implementation) f Communication tools and dissemination. N/A N/A PPA 27,500 g. Recruitment of a specialist to conduct an Electrical installation 2 weeks PPA 15,000 assessment ofMSDFEE's electrical professional. installations. h. Refurbishment ofMSDFEE's electrical TBD TBD PPA 40,000 circuit. i. Purchase of computing and internet N/A 2 months PPA 160,000 hardware andfinancial management software for Project Management Unit. 2. Institutional and capacity strengthening PPA 110,000 of MSDFEE. a. Recruitment of a consulting firm to Consulting firm with 3 months PPA 70,000 conduct an analysis of the institutional experience in organizational strengthening and capacity building needs audit and institutional of MSDFEE and its subordinate structures strengthening of forest (updating the review of the structure and administrations, as well as in functioning of forest and environment the environmental and sector institutions carried out by the World sustainable development Bank in 2007 in preparation for the HIPC sectors. The team should initiative in the Republic of Congo). include: an expert in institutional organization, experienced with forest administrations; a forestry expert; and an environmental expert, with experience in climate change issues and environmental services. b. The above consulting firm will also assist (See above) N/A PPA 40,000 with the organization of consultations on the capacity and capacity building needs of MSDFEE, including any necessary translations. 3. Operationalization of the National PPA 122,500 Program for Afforestation and Reforestation (ProNAR) - (Part I). a. Recruitment of a consulting firm to carry Consulting firm with 3 months PPA 122,500 out a set of studies on the feasibility and experience in management of operationalization of the National Program forest plantations and private for Afforestation and Reforestation sector support. The team (ProNAR). These studies / reports could should include: a forestry include: expert (experienced in forest 82 i. (a) A study of the institutional plantations); an expert in structure and environment of plantations, indtraneomist identifying and analysing the operational scia n prist capacities (in terms of their potential and spotrl inacing constraints) and objectives of different actors in taxat anaeselt the sector (planters / investors, supporting to he fe r etra services) and proposing incentivizing measures eirental expert, for removing the main barriers identified. eializenfancingeof (b) An assessment of the structural, evi en services institutional, regulatory, technical, economic, related to forest plantations; a and fiscal conditions necessary to attract and rural sociologist, with encourage private investment in afforestation / experience in land issues and reforestation and the means to create / improve socioeconomic surveys in a the enabling environment. rural environment; and a (c) A review to assess the various legal expert specialized in (combinations of) instruments that the tenure issues. government might use to facilitate access to plantation finance: long term credit lines in banks with subsidized interest rates; partial credit guarantees, performance-based matching grants (cf the Uganda Sawlog Production Grant scheme); support to microfinance institutions (for small plantation holders); venture capital finds; and possibly others. ii. (a) An assessment of key forest product markets (international, regional and domestic) for their accessibility to different types of growers, the types of plantations which could satisfy their demand, and their development potential. Products assessed will include, but will not be limited to: charcoal, fuelwood, chips for pulp and/or biofuels, essential oils, carbon sequestration and more traditional markets such as solid and reconstituted wood products for building. These assessments will be refined and extended in scope during project implementation. (b) Analysis of the relationship between managed natural forests, plantations, and illegal logging operations (in terms of economic, social and environmental impacts as well as products, markets - competing, complementary, etc. - and economic viability); including exploration of the possibility of formalizing the informal / illegal sector.s 3. Safeguard studies. PPA 230,661 a. Consultants will be hired to assist the DSP Consulting firm with 3 months PPA 220,661 in preparing the following safeguard documents, experience in environmental including conducting required consultation and social safeguards in the processes: forestry sector. ie Environmental and Social 3 months PPA Management Framework (ESMF), which will include application of requirements of World Bank's policies on Natural Habitats, Physical Cultural Resources, and Forests. 83 ii. Indigenous Peoples Planning 3 months PPA Framework (IPPF). iii. Resettlement Policy Framework 2 months PPA (RPF). b. Translations of Project Information Translator(s) 2 weeks PPA 10,000 Document for consultations. 4. Procurement and Financial PPA 22,332 Management (TGCBP II) TGCBP II Management Unit Procurement and N/A TBD (based on PPA 22,332 Financial Management services + operating gov. capacity) costs Other Operational Costs (including N/A N/A PPA 82,007 Total I 1 1 939,500 Table 17 - Type of expenditures eligible for financing under the PPA (1) Goods, Consultants' services, and Operating costs 6995010 TOTAL 939,500 Disbursement Arrangements 6. To facilitate the implementation of these activities, the Recipient will open a Designated Account (DA) in a commercial bank acceptable to IDA, under the management of the Project Management Unit of the TGCBP II, which is currently staffed with a coordinator, an administrative and financial officer, a procurement specialist, a monitoring and evaluation specialist, and an accountant. The PPA proceeds will be deposited to the DA upon request from the TGCBP II Project Management Unit and replenishments of the DA will be made on the basis of Statements of Expenditures (SOEs). Documentation supporting expenditures claimed against SOEs will be retained by the Project Management Unit of the TGCBP II and will be available for 6 "Operating Costs" means the reasonable costs of the following expenditures incurred in carrying out the Activities, which shall have been agreed with the World Bank: (i) advertisements for consultants published in domestic and international media; (ii) communications expenditures for telephone services, videoconferencing, internet access, translation, publishing, and dissemination; and (iii) vehicle operation and maintenance costs, public transport and taxi cab fares, and car rental expenses; (iv) office supplies and related printing costs; and (v) organization of workshops, including rental of facilities and preparation and distribution of training materials, but excluding consultant services. 84 review. The Project Management Unit of the TGCBP II may also request direct payments to suppliers for eligible expenditures or seek reimbursement from the PPA account for expenditures prefinanced by the Recipient. The minimum value of all such applications must be equivalent to 20 percent or more of the DA ceiling which has been set at CFAF 50 million. Detailed disbursement arrangements are provided in the Disbursement Letter. Financial Management Arrangements 7. The fiduciary aspects of the PPA will be managed by the Project Management Unit of the TGCBP II, an existing government PMU located within the Ministry of Economics, Finance and Budget, and very familiar with World Bank FM procedures. The FM performance of TGCBP II was rated Moderately Satisfactory following the last supervision mission of May 2011 and there are no overdue audit reports at the time of the preparation of this PPA. The external auditor expressed an unqualified audit opinion on the TGCBP II 2010 accounts. The FM team of the TGCBP II will be in charge of the FM aspects of the PPA, including preparation of quarterly financial reporting and final accounts of the PPA and will manage the Designated Account and the preparation of withdrawal applications. 8. Audit: A single audit of the PPA accounts and activities will be carried out along with the first audit under the project; this audit will be carried out by the Project's external auditor to be recruited. In accordance with its audit guidelines, the World Bank will maintain the right to require an audit of the PPA where need arises. Procurement Plan 9. The expenditures subject to procurement will be goods, which will follow the World Bank's Procurement Guidelines, and consultants' services, which will be consulting firms or individual consultants, as designated, and the engagement of which will follow the current World Bank Consultant Guidelines procedures. 10. For procurement of goods the following procurement methods may be used: (A) International Competitive Bidding; (B) National Competitive Bidding, using World Bank Standard Bidding Documents or Standard Bidding Documents acceptable for the World Bank; (C) Shopping; and (D) Direct Contracting. 11. For the procurement of consultants' services (both Firms and Individuals) the following consultants selection methods may be used: (A) Quality- and Cost-based Selection; (B) Least Cost Selection; (C) Selection based on Consultants' Qualifications; (D) Single-source Selection of consulting firms; (E) Selection of Individual Consultants; and (F) Single-source procedures for the Selection of Individual Consultants. 12. A procurement plan for the activities to be financed by the PPA (herewith attached) has been prepared and approved by the World Bank Procurement Specialist in the Republic of Congo Brazzaville country office. The Procurement Plan shall specify the circumstances under which the above mentioned procurement and consultants selection methods may be used. 85 Other 13. Board presentation of the project is scheduled for May 2012, the estimated signing date is late June 2012, and effectiveness is expected by the end of September 2012. Consequently, the refinancing date will be September 30, 2012. 14. The Republic of Congo is now on "hardened" IDA terms as its GNI per capita has exceeded the IDA GNI per capita cutoff for more than two consecutive years (ref. OP 3.10 Annex D). Because the Republic of Congo is an IDA-only country with a per capita GNI above the operational cutoff, it does not qualify for IDA Grants (or PPF Grants), even though the latest DSA rates its risk of debt distress as moderate (ref. BP 14.10 Annex BI). 15. The Government has confirmed its commitment to the Project and readiness to undertake the proposed preparation activities, as indicated in its letter dated April 13, 2011, requesting this advance. 86 IBRD 33390 14°E 6°E 18°E C EN RÃ…, A,R I C A N 4°N ÄR E P U AL I C'ý 4N CONGO CAMEROON ~ Bjärlo Bétou0 Ebolowo NooLIKOUA LA N 2°N SouainkéLIKOUALA Ouésso Impfondoo ~1 Epéna Sý NGHA Loa ré W E S T'ER N GA BO N ýkU-V-77 0°Etoumbi 0. BoouéCUVETTE Owand KOUyo~, LUrong. Lk Lake Ewo . nTumba Mossak.O lambaréné okoyo PLATEAUX 3 Gambma 2bS 0- DEMOCRATIC 2-S REPUBLIC lake -- Ngoae Dtambala OF CONGO Mai-Ndombe N- IA RI MossÃ¥na¡o Pi Pate al gbé 0 20 40 60 80 100 Kilometers Makab6ana, POOL L7- Sibiti 20 40 60 8 100 Miles OUIL LOS 4SN Dolisie a.dingou BR ILLE 7p 18°E BOU E NZ Aäl Kayes Kn