Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD3456 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT IN THE AMOUNT OF SDR 3.7 MILLION (US$5 MILLION EQUIVALENT) TO THE LAO PEOPLE’S DEMOCRATIC REPUBLIC FOR THE SCALING UP PARTICIPATORY SUSTAINABLE FOREST MANAGEMENT PROJECT January 21, 2020 Environment, Natural Resources, and the Blue Economy Global Practice East Asia And Pacific 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. The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) CURRENCY EQUIVALENTS (Exchange Rate Effective November 30, 2019) Currency Unit = Lao kip (LAK) LAK 8,865.25 = US$1 US$ 1.3729 = SDR 1 FISCAL YEAR January 1 - December 31 Regional Vice President: Victoria Kwakwa Acting Country Director: Gevorg Sargsyan Regional Director: Benoit Bosquet Practice Manager: Christophe Crepin Task Team Leader(s): Stephen Danyo Page 2 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) ABBREVIATIONS AND ACRONYMS AF Additional Financing BP Bank Policy ha Hectare IDA International Development Association CAP Community Action Plan CEF Community Engagement Framework CFA Conservation Forest Area CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora CoC Chain of Custody CPF Country Partnership Framework DOF Department of Forestry DOFI Department of Forest Inspection ESIA Environmental and Social Impact Assessment FCPF Forest Carbon Partnership Facility FIP Forest Investment Program FLEGT Forest Law Enforcement, Governance, and Trade FLM Forest Landscape Management FMU Forest Management Unit as applied in Production Forest Areas FSC Forest Stewardship Council FM Financial Management GOL Government of Lao PDR GRS Grievance Redress Service IFC International Finance Corporation ISR Implementation Status and Results Report Lao PDR Lao People’s Democratic Republic MAF Ministry of Agriculture and Forestry NDC Nationally Determined Contribution NSEDP National Socio-Economic Development Plan NTFP Non-Timber Forest Product OP Operational Policy PDO Project Development Objective PFA Production Forest Area PSFM Participatory Sustainable Forest Management PtFA Protection Forest Area REDD+ Reducing Emissions from Deforestation and Forest Degradation, Fostering Conservation, SFM, and Enhancement of Forest Carbon Stocks SFM Sustainable Forest Management SMEs Small and Medium Enterprises SUFORD Sustainable Forestry for Rural Development Project SUPSFM (SUFORD-SU) Scaling Up Participatory Sustainable Forest Management Project (also known as SUFORD-SU) TA Technical Assistance TLAS Timber Legality Assurance System VFMP Village Forest Management Plan VFMA Village Forest Management Agreement Page 3 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) VLDG Village Livelihood Development Grant WEN Wildlife Enforcement Network Lao People’s Democratic Republic Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) TABLE OF CONTENTS I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING ........................................ 7 II. DESCRIPTION OF ADDITIONAL FINANCING .................................................................... 13 III. KEY RISKS ..................................................................................................................... 21 IV. APPRAISAL SUMMARY .................................................................................................. 22 V. WORLD BANK GRIEVANCE REDRESS .............................................................................. 30 VI SUMMARY TABLE OF CHANGES ..................................................................................... 31 VII DETAILED CHANGE(S) .................................................................................................... 31 VIII. RESULTS FRAMEWORK AND MONITORING ................................................................... 36 ANNEX 1: DETAILED COMPONENT DESCRIPTION .................................................................. 70 Page 4 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) BASIC INFORMATION – PARENT (LA-Scaling-Up Participatory Sustainable Forest Management - P130222) Country Product Line Team Leader(s) Lao People's Democratic IBRD/IDA Stephen Danyo Republic Project ID Financing Instrument Resp CC Req CC Practice Area (Lead) P130222 Investment Project SEAE2 (9532) EACMM Environment, Natural Financing (8863) Resources & the Blue Economy Implementing Agency: Ministry of Agriculture and Forestry ADD_FIN_TBL1 Is this a regionally tagged project? No Bank/IFC Collaboration No Expected Original Environmental Approval Date Closing Date Guarantee Current EA Category Assessment Category Expiration Date 31-May-2013 30-Mar-2020 Full Assessment (A) Full Assessment (A) Financing & Implementation Modalities Parent [ ] Multiphase Programmatic Approach [MPA] [ ] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Disbursement-Linked Indicators (DLIs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a Non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made disaster [ ] Alternate Procurement Arrangements (APA) Jul 05, 2019 template Page 1 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Development Objective(s) To execute REDD+ activities through participatory sustainable forest management in priority areas and to pilot forest landscape management in four provinces Ratings (from Parent ISR) RATING_DRAFT_N O Implementation 28-Jun-2017 31-Dec-2017 21-Jun-2018 13-Dec-2018 20-Jun-2019 Progress towards achievement of MS MS MS S S PDO Overall Implementation MS MS MS MS S Progress (IP) Overall Safeguards Rating S S MS MS S Overall Risk S S S S S BASIC INFORMATION – ADDITIONAL FINANCING (Additional Financing for Scaling Up Participatory Sustainable Forest Management Project - P170810) ADDFIN_TABLE Urgent Need or Capacity Project ID Project Name Additional Financing Type Constraints P170810 Additional Financing for Cost Overrun, Restructuring, No Scaling Up Participatory Scale Up Sustainable Forest Management Project Financing instrument Product line Approval Date Investment Project IBRD/IDA 11-Feb-2020 Financing Projected Date of Full Bank/IFC Collaboration Disbursement 31-Dec-2021 No Jul 05, 2019 template Page 2 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Is this a regionally tagged project? No Financing & Implementation Modalities Child [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Disbursement-Linked Indicators (DLIs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a Non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made disaster [ ] Alternate Procurement Arrangements (APA) [ ] Contingent Emergency Response Component (CERC) Disbursement Summary (from Parent ISR) Net Source of Funds Total Disbursed Remaining Balance Disbursed Commitments IBRD % IDA 19.00 17.96 100 % Grants 12.83 12.83 100 % PROJECT FINANCING DATA – ADDITIONAL FINANCING (Additional Financing for Scaling Up Participatory Sustainable Forest Management Project - P170810) PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFi n1 SUMMARY (Total Financing) Proposed Additional Total Proposed Current Financing Financing Financing Total Project Cost 39.39 5.00 44.39 Total Financing 39.39 5.00 44.39 of which IBRD/IDA 19.00 5.00 24.00 Jul 05, 2019 template Page 3 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Financing Gap 0.00 0.00 0.00 DETAILS - Additional Financing NewFinEnh1 World Bank Group Financing International Development Association (IDA) 5.00 IDA Credit 5.00 IDA Resources (in US$, Millions) Credit Amount Grant Amount Guarantee Amount Total Amount Lao People's Democratic 5.00 0.00 0.00 5.00 Republic National PBA 5.00 0.00 0.00 5.00 Total 5.00 0.00 0.00 5.00 COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [ ✔ ] No Does the project require any other Policy waiver(s)? [ ] Yes [ ✔ ] No INSTITUTIONAL DATA Practice Area (Lead) Environment, Natural Resources & the Blue Economy Contributing Practice Areas Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks Jul 05, 2019 template Page 4 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) PROJECT TEAM Bank Staff Name Role Specialization Unit Team Leader (ADM Stephen Danyo NRM SEAE2 Responsible) Procurement Specialist (ADM Khamphet Chanvongnaraz Procurement EEAR1 Responsible) Financial Management Siriphone Vanitsaveth Financial Management EEAG2 Specialist (ADM Responsible) Sybounheung Social Specialist (ADM SEAS1 Phandanouvong Responsible) Environmental Specialist (ADM Viengkeo Phetnavongxay SEAE2 Responsible) Alexander Lotsch Team Member Forest carbon SEAE2 Procurement and Financial Alina Phonvisay Team Member EACLF Management Anita Soukhaseum Team Member ACS EACLF Arturo Bolondi Team Member NRM SEAE2 Carmenchu D. Austriaco Team Member Disbursement WFACS Daisy Lopez Zita Team Member Disbursement WFACS Emine Velidedeoglu Team Member Operations SEAE2 James B Carle Team Member Forestry SEAE2 John William Kenneth Parr Team Member Wildlife SEAE2 Environmental operations and Kaysone Vongthavilay Team Member SEAE2 management Konesawang Team Member Market Linkages EEAM1 Nghardsaysone Maria Lourdes Noel Team Member ACS HQ SEAE2 Mei Wang Counsel Law LEGES Nelson Gapare Team Member REDD SEAE2 Souksavanh Team Member Assistant EACLF Sombounkhanh Thao Thi Do Team Member Disbursement WFACS Thongkham Chanthavong Team Member Assistant EACLF Jul 05, 2019 template Page 5 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Thu Ha Le Team Member Law LEGES Werner L. Kornexl Team Member Forestry SEAE2 Extended Team Name Title Organization Location Jul 05, 2019 template Page 6 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) I. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING A. CONTEXT 1. This Project Paper seeks the approval of the Board of Executive Directors to provide Additional Financing (AF) in the amount of SDR 3.7 million (US$5 million equivalent) from the International Development Association (IDA) to the Scaling Up Participatory Sustainable Forest Management Project (SUPSFM, also known as SUFORD-SU, P130222). The AF will scale up selected ongoing activities that can leverage the sector and governance reforms introduced with the updated Forest Law that was enacted in 2019. 2. The proposed AF is accompanied by a restructuring of the SUPSFM Project to: • Revise the project development objective (PDO); • Revise the results framework and monitoring indicators; and • Revise the component names and costs. 3. Country and sector context. Lao People’s Democratic Republic (PDR) has a comparative advantage in natural capital, which has fueled economic growth averaging around 8 percent per annum since 2000. Its natural resource endowment comprises half of the country’s wealth, and the forest sector is a high priority in the country’s ongoing shift to a new economic model informed by its National Green Growth Strategy 2030. Although forest cover declined 3.6 percent between 2005 and 2015 to 58 percent, Lao PDR still has among the highest portion of forest cover among countries in the region, and the value of timber and non-timber forest products is US$10,740 per capita. Two-thirds of the population rely on forests for food, fuel, fiber, and medicine. Effective, sustainable management of forest resources significantly impacts Lao PDR’s economic growth and development prospects, including its goals for poverty alleviation, shared prosperity, livelihoods and job opportunities. 4. Inefficiencies, including overuse, under-budgeting, and unsustainable and unscientific management, have led to a reduction in forest cover, natural wealth, public revenues and development opportunities. In response, the Government of Lao PDR (GOL) has been reforming the sector, including (a) promotion of participatory sustainable forest management (PSFM), (b) third-party certification of forest management and chain of custody, (c) timber legality assurance system, and (d) promulgation of a new Forest Law in 2019 that, among others, opens degraded lands in the state’s Production Forest Areas to commercial plantation investment while also allowing village forestry. Lao PDR’s recent policy reforms, institution-building, and community engagement aim to build a new forest economy to support the people and sectors that depend on it. Since the original project was approved in 2013, new opportunities are emerging for private investors and communities for growth and development from forests, but realizing these opportunities requires good forest governance, investment planning, and risk management. 5. The effective enforcement of logging and timber export bans on unprocessed wood has provided the space for new major policy reforms that strengthen standards and compliance, and can help revitalize the sector. At the same time, the 2016 export ban has reduced the flow of benefits to villages from timber. Local communities have instead pursued alternative livelihoods including non-timber forest products (NTFP), agroforestry, agriculture, as well as illegal timber extraction in some instances. 6. While the sector reforms are promising, long-term sector sustainability also faces challenges from expanding private sector investment in forest plantations and new pulp and paper production facilities; increasing climate risks; fragmentation of government activities and institutions involved in management of the forest landscape; continued Jul 05, 2019 template Page 7 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) forest degradation and loss and accompanying emissions; and a challenging forest governance context due to competing stakeholder and economic interests in the use of the forest landscape. Lao PDR’s forest landscape is composed of diverse forest types, ecosystems, production systems, people, land uses, and infrastructure. The predominant planning units in the forest landscape are the “three forest categories” that define the national forest estate: (a) production forest areas (PFA), which is the focus of the parent project and predecessor projects, (b) protection forest areas (PtFA), and (c) conservation forest areas. See Table 1. Table 1. The Three Forest Categories of Lao’s National Forest Estate Hectares Category (million) Percent Description Managed primarily for production of wood, fiber, fuel and non-timber forest products (NTFPs) in 51 national PFAs total over 3.1 million ha, of which 2.2 million ha (71 Production percent) are forested. Forty of 51 PFAs have been delineated. PFAs are the main area Forest Area 2.2 29 of focus for past and current SUFORD projects, to improve sustainability, limit (PFA) conversion of natural forest, promote regeneration, and increase productivity thereby reducing logging pressure on PtFAs and CFAs. Managed primarily for reducing natural resource and disaster risks to key Protection infrastructure and other assets. There is an estimated total of 8 million ha of national, Forest Area 4.8 51 provincial and district PtFAs, of which 4.8 million ha (60 percent), are forested. Most (PtFA) have not been delineated. Also known as National Protected Areas (NPAs), conservation forests are managed Conservatio primarily for biodiversity conservation in two new national parks, 21 national n Forest 3.5 20 protected areas (NPAs), 66 provincial, and 143 district protected areas, with a total Area area of 4.8 million ha, of which 3.5 million ha (73 percent) are forested. Many have not been delineated. 7. Climate change risks, variability, and mitigation: Lao PDR is highly exposed to climate risks. The mean annual rainfall is projected to increase by 10-30 percent by 2050 in the eastern and southern parts of the country in particular, largely during the wet season. The number of droughts and floods over the last three decades has increased. Five droughts have affected the country over the past 40 years with estimated 188,000 households in Lao PDR facing food security risk caused by drought. Fifteen floods have occurred in Lao PDR from 1970 to 2010. Most recently, Lao PDR experienced widespread floods between July and September 2018 which significantly impacted its people and economy. The combined impact has been severe, affecting over 616,000 people, with 56 lives lost. The post-disaster needs assessment led by the Bank estimated a total economic effect equivalent to 2.1 percent of Lao PDR’s projected GDP for 2018, and 10.2 percent of Lao PDR’s annual budget in 2018, making the 2018 floods the most expensive in the past 10 years. Intact forests are critical natural infrastructure for reducing flood risks, as well as the intensity of drought and landslides. Likewise, forests that remain intact also store carbon and reduce carbon emissions from land use change. 8. A strategic shift in Bank support to the sector: Bank support on forestry has been evolving given the recent sector reforms. The program is building on a first-generation project-oriented approach that has been focused on forest production and reforestation pilots, capacity development, village mobilization and participation on livelihoods, and development of PFA management plans. The next-generation program aims to initiate planning and investment development for a more integrated landscape approach and investment convergence that would not only optimize a Jul 05, 2019 template Page 8 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) range of benefits from production, protection and conservation forests, but also help leverage credible private sector actors to support national development and sector objectives. The proposed AF would support the Government program to pursue this shift, and these initiatives have directly benefitted from a major advisory task delivered between 2017 and June 2019 entitled: Partnerships and Opportunities for a New Green Forest Economy in Lao PDR: Sustaining Forest Landscapes and Livelihoods (P164376) under the Green Growth Advisory Program (P162394, P171011), as well as support for the REDD+1 process, with a complementary REDD+ technical assistance project (P125082) and an emerging Emissions Reduction Purchase Agreement (P165751). B. PARENT PROJECT SCOPE 9. The original project development objective (PDO) of the parent project, Scaling Up Participatory Sustainable Forest Management Project (SUPSFM),2 is “to execute REDD+ activities through participatory sustainable forest management in priority areas and to pilot forest landscape management in four provinces.” The PDO remains relevant, but will be slightly modified for simplicity under the Additional Financing (AF). Please see Section II below. 10. SUPSFM, with financing of SDR 12.7 million (US$19 million equivalent) from IDA Grant (IDA H8520) and US$12.83 million of recipient-executed grant from the Strategic Climate Fund Forest Investment Program, was approved on May 31, 2013 and became effective on August 30, 2013. The project is scheduled to close on March 30, 2020. Total disbursement is 100 percent. The original five-year timeframe was extended by one year (approved on May 25, 2018), followed by a second, seven-month extension (approved on May 21, 2019) that also restructured the project to reallocate funds across disbursement categories and allow time for preparation of this Additional Financing. 11. SUPSFM helps improve the management of forest resources in 41 of the country’s 51 PFAs in 13 provinces, totaling 2.3 million ha and including 1,066 villages. The Project supports inclusive growth by promoting villager participation in participatory SFM and livelihood development in villages in and around the PFAs. The Project also makes a strong contribution to creating a rules-based environment through its support to policy and governance reforms, third- party certification standards, and, in all 18 provinces, enhancing forest law enforcement. 12. The original project components are: Component 1. Strengthening and Expanding PSFM in Production Forest Areas Component 2. Piloting Forest Landscape Management Component 3. Enabling Legal and Regulatory Environment Component 4. Project Management C. PARENT PROJECT PERFORMANCE 13. Progress towards achieving the PDO and implementation progress have both been rated “satisfactory” or “moderately satisfactory” for more than 24 consecutive months. Key performance ratings in the latest Implementation Status and Results Report (ISR) (June 2019) include: progress toward PDO (Satisfactory), project management (Satisfactory), piloting forest landscape management activities under component 2 (Moderately Satisfactory) and the 1 REDD+ refers to reducing emissions from deforestation and forest degradation, fostering conservation, SFM, and enhancing forest carbon stocks. 2 SUPSFM is also known by the client as “SUFORD Scaling Up or SUFORD-SU, and sometimes SUFORD” but this Project Paper will refer to SUPSFM. Predecessor projects supporting the forest sector include the Forest Management and Conservation Project (FOMACOP, 1995-1999), the Sustainable Forestry for Rural Development Project (SUFORD, 2003-2008), and the SUFORD-Additional Financing Project (SUFORD-AF, 2009-2013) Jul 05, 2019 template Page 9 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) policy component (Highly Satisfactory). In addition, there is compliance3 with key loan covenants, including audit and financial management reporting requirements. 14. Specific Project results include: Forest management plans are available for all Production Forest Areas (PFAs) supported by SUPSFM. Over 108,000 hectares of PFAs have been certified for SFM by a third party for the Forest Stewardship Council (FSC), and an additional 120,000 hectares are targeted for certification. Village Livelihood Development Grants (VLDG) were disbursed to recipients in 666 villages and implementation of livelihoods activities is ongoing although there is a need to strengthen technical extension advice. These grants led to over 21,000 village projects currently under implementation nationally, covering a wide range of activities developed through participatory extension. Full disbursement of forest restoration grants was completed, implementing assisted natural regeneration on 30,000 ha which requires regular monitoring. The capacity for forest law enforcement through the Department of Forest Inspection (DOFI) and collaborating partners has been strengthened although there is a need to engage across law enforcement agencies to accomplish more. The policy environment has improved considerably, especially on how to engage with private companies. As a result, a number of credible international private investors are targeting Lao PDR to promote forest plantations and invest in wood processing facilities. Domestic and smallholder plantations also are facing opportunities. There is more work to do to capacitate government with the knowledge, skills, regulations, and tools needed to ensure sustainability of private investment and secure tangible community benefits. Forest Landscape Management Frameworks have been developed under Component 2 in four provinces, but there is a need to strengthen these and develop Forest Landscape Investment Plans that can be financed by the Bank and crowd in financing from development partners and the private sector. 15. SUPSFM results also include the emergence of nascent public-private dialogues on policy and investment. This coordination has been supported under the global Climate Investment Fund’s Forest Investment Program that is hosted by the Bank, and which finances both SUPSFM and an operation led by the International Finance Corporation (IFC).4 D. RATIONALE FOR ADDITIONAL FINANCING 16. The AF will support the client to continue to strategically recalibrate the sector, advance and enhance the achievements and sustainability of the PDO and outcomes, and strengthen government capacity to facilitate environmental and social sustainability of private investment that is currently scaling up in the country. This focus builds on recent and ongoing policy reforms, such as the 2019 Forest Law, that now encourage commercial forest plantations in degraded production forests as well as village forestry. These reforms can help Lao PDR meet its national forest cover and emissions reduction targets, and AF-SUPSFM is well positioned to continue to support the transition to a sustainable forest sector as a pillar of Lao PDR’s emerging green economy. 17. The AF would also scale up selected activities of the parent project to better achieve the PDO and achieve more, and address a cost overrun due to exchange rate loss. AF-SUPSFM would allow the GOL to maintain and enhance implementation capacity for participatory SFM, forest certification (which has not yet achieved the project target), reforestation, and livelihood development. The AF would also allow the GOL to implement innovative activities such as chain of custody certification; strengthening forest inspection; institutionalizing learning to convene knowledge for use in investment and policy; developing Forest Landscape Investment Plans; and ensuring environmentally and socially 3 The status of IDA-H8520 was reported as “partially complied with” in the ISR of 12, June 2019 due to the fact that the final FLM framework agreements had not yet been submitted to the Bank, however the FLM have been now submitted and received. 4 IFC/FIP Smallholder Forestry Project partners with reputable private timber plantation enterprises. The project also supports local communities that are interested in participating to establish plantation forests via out-grower schemes and agroforestry systems. The project applies a lead- firm theory of change, leveraging ‘first movers’ to pilot best practices and attract more investors. Jul 05, 2019 template Page 10 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) sustainable private sector participation in the sector -- continuing the close cooperation with the International Finance Corporation (IFC) sister project under the Forest Investment Program that is piloting models for environmentally and socially sustainable plantation partnerships with villages. With the new and evolving forest policy reforms, private sector interest is increasing which demands a comprehensive response from the Government to capture the benefits and avoid pitfalls. 18. The AF will allow reforms supported by the parent project to be consolidated and implemented, and for complementary reforms to be added to the project’s results. This support will reduce risks to project outcomes from insufficiently regulated private investment and strengthen the project’s contribution to longer-term objectives on improved livelihoods; poverty reduction and green growth; and climate risk and emissions reduction through sufficient forest cover. In this time of change and increasing pressure, it is strategically important to maintain momentum and reduce the likelihood of stagnation or reversal of the Government’s recent achievements that would be more likely without continued support. 19. Client request. In a letter dated 28 June 2019, the client requested additional financing and an extension of the project implementation period for (a) filling the financing gap to cover foreign exchange rate loss of approximately US$1.5 million; (b) scaling up development impact by consolidating outcomes and achievements of the parent project, while strengthening government capacity to ensure environmentally and socially sustainable private sector investment that can maximize development outcomes and local benefits, (c) setting the stage for convening and leveraging private, public, and donor finance for developing and protecting Lao PDR’s forest landscapes in a more programmatic and integrated manner across forest land uses, by preparing forest investment plans and activities, and building capacity for multi-sectoral actions, and (d) maintaining momentum for ongoing legal, policy and regulatory reforms and their implementation. 20. The AF will be instrumental to facilitate the client’s program to transition to a more strategic convergence of investment that has the potential to generate more durable outcomes, maximize finance for development, and expand programmatically. A potential new IDA-financed Landscapes and Livelihoods Project (P170559/P171406) in the pipeline would continue this transition at scale throughout the forest landscape, not only production forests, becoming effective around the time that the proposed AF closes. The progress in SUPSFM implementation and policy reforms over the past several years now allows leverage of significant scaling up by attracting reputable private investors, while setting the stage for a more strategic and programmatic convergence in priority forest landscapes. This is occurring at a moment in time when serious private investors are considering or have started engaging in large scale investment, and the new 2019 Forest Law, the 2030 National Green Growth Strategy (2019), and the August 2019 Prime Minister’s Decree on promoting commercial forest plantations have been promulgated. More work is needed to advance the policy environment to continue to promote certification and legal timber to help rejuvenate the sector, while reducing risks from the degradation of the full forest estate as private investment ramps up, such as a new privately owned US$500 million pulp and paper factory in southern Laos that began operations in 2017. SUPSFM has started this process and is the only significant operation in place that can deliver on the agenda. 21. Alternatives: Without AF, there is a risk of reduced momentum for strengthening the achievement and sustainability of key project objectives and the continued transformation of the policy environment for SFM. For example, without AF forest certification would stall, which is an important project result that helps establish a system for legal timber throughout the value chain, especially as village forestry is now once again allowed under the new Forest Law. While the Forest Law has been approved, regulations for village forestry and tree plantations are still being developed, and without AF support key principles present in the law may be overlooked or misinterpreted in the regulations which guide activities on the ground. Without AF, the GOL would miss potential opportunities to improve Jul 05, 2019 template Page 11 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) its institutional capacity to leverage and regulate existing and incoming large-scale private commercial plantation investments, to help boost sector revenues, local livelihoods and jobs, green growth, and poverty reduction. The policy and regulatory momentum is taking place now, and private investors are keen to participate. The project, reinforced by AF, is well positioned at this moment to help the GOL capture the expected benefits. Waiting for the potential new landscape operation could mean reduced or lost momentum on the ground and at policy level to implement key reforms. 22. The AF resources are urgently needed considering that the parent project has disbursed ahead of schedule, there are foreign exchange losses, and the additional funds are needed to keep the momentum of initiating field implementation of the new reforms developed under SUPSFM. In the meantime, the project is relying on government staff and staff of related projects in the Department of Forestry (DOF) including the Bank-financed Forest Carbon Partnership Facility support for REDD+ Readiness. A retroactive financing facility is also proposed for this AF to help close the gap. 23. Alignment with World Bank Group (WBG) Country Partnership Framework (CPF) and the WBG Twin Goals. The AF remains consistent with the World Bank Group’s Lao PDR Country Partnership Framework for the period FY2017- 2021(CPF)5, continuing to support CPF’s three focus areas of “(a) supporting inclusive growth, (b) investing in people, and (c) protecting the environment,” as well as Objective 3.1, “Promoting protection of the environment and responsible management of natural resources.” The Project supports inclusive growth and prosperity by reinforcing VLDGs and sector reforms that can stimulate investment in the sector. The AF helps protect the environment by improving management of forest resources and development and implementation of key public policy such as the 2019 Forest Law. As the poorest people in Lao PDR often reside in forests and are dependent on natural resources, the AF will directly contribute to alleviating extreme poverty, which is consistent with the focus of the 8th National Socioeconomic Development Plan (NSEDP) on improved living standards through poverty reduction and implementation of the Sam Sang policy of prioritizing poor villages for development support. 24. Climate co-benefits: The AF is expected to have significant climate co-benefits. Under subcomponent 1B, the AF would enhance SFM activities that reduce climate risks for communities such as flood intensity and erosion by stabilizing soils and providing natural barriers, including reforestation, certification of SFM and promotion of agroforestry through VLDGs. SUPSFM activities are contributing to the country’s (and parent project’s) REDD+ objectives of reduced emissions from forest degradation and loss, as noted in the reduced rate of deforestation.6 As reported in the latest ISR, as of June 2019, an estimated 1.8 million tons of carbon dioxide equivalent (tCO2e) of emissions reductions were registered, largely due to policy reforms and law enforcement capacity supported by project sub-components 3A and 3B that helped reduce forest loss and degradation. New policies have been effectively implemented, such as Prime Minister’s Order No. 15 (2016) on Strengthening the Strictness of Timber Harvest Management and Inspection, Timber Transport and Business, complemented with a national capacity development effort on forest inspection. The AF will strengthen and enhance these efforts. In addition, under the AF, sub-component 2B will support the GOL to build regulatory capacity and identify suitable degraded and barren lands within PFAs for possible private investment in commercial tree plantations. Such private investment can further increase forest cover and net emissions reductions in the coming years, reduce pressure on carbon-rich natural and conservation forest, and help implement the country’s Nationally 5 WBG Country Partnership Framework (CPF) for the period FY2017-2021 (Report No. 110813-LA), discussed at the Board of Executive Directors on April 27, 2017. 6 The deforestation rate in PFAs decreased from 0.30 percent/year in the period 2010-2015 to 0.18 percent/year in 2015-2017. The trend could be observed in reference areas as well (2.5 wide buffer area around PFAs), with a reduction from 0.52 percent to 0.19 percent. This reduction in annual forest loss in PFAs is estimated from 25,196 ha/year (2010-2015) down to 5420 ha/year between 2015-2017. These figures were used as a basis for calculating the emissions reductions. Jul 05, 2019 template Page 12 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Determined Contribution to the United Nations Framework Convention on Climate Change. 25. Gender equality. The parent project and AF can be considered gender-informed, but would not be formally gender-tagged. The parent project has been guided by regular assessments and the Community Engagement Framework that include gender considerations. Gender equality gaps targeted by the AF activities include women’s limited voice in village decision making compared to men, and women’s limited earnings in rural areas compared to men. To help track progress toward greater gender equality, the AF maintains the results indicator “women with increased benefits from interventions.” Results from this indicator so far show that men and women report increased benefits at the same levels. In addition, AF-SUPSFM will contribute to further reducing gender inequalities by strengthening participation of women farmers and female-headed households in SMEs and market linkages activities. 26. Citizen engagement. Engagement has informed preparation, design, and implementation of the parent project, and a Community Engagement Framework (CEF) governs the project, bringing together multiple safeguards instruments, risk reduction measures, and technical approaches to participatory sustainable forest management and livelihoods development. Engagement has also informed the preparation of this AF. Local communities and interested and affected stakeholders will continue to be engaged throughout the project cycle including ensuring that their feedback is received formally through a feedback and grievance mechanism. The parent project includes intermediate indicators to monitor citizen engagement including: “participants who perceive the CEF process is adequate.” In addition, grievance resolution is tracked by the project. The engagement is to both ensure stakeholders are adequately informed but also to take into account their views. The CEF explicitly includes women and ethnic groups. II. DESCRIPTION OF ADDITIONAL FINANCING 27. Summary. The proposed AF includes a level two restructuring to: (a) revise the PDO, (b) revise the results framework to increase some targets and add some intermediate results indicators, and (c) revise some component activities and costs, including financing the completion, continuation, strengthening, or modification of activities. No new villages, districts, provinces or PFAs will be added. The AF will no longer finance civil works or village grants. A. PDO 28. The original PDO is revised for simplicity, precision, measurability, and to more closely align with the components. The revised PDO is “to strengthen participatory sustainable forest management in targeted production forest areas, and forest landscape management in targeted provinces.” The definitions of “participatory sustainable forest management (SFM)” and “forest landscape management (FLM)” remain the same as in the parent project.7,8 B. LOAN CLOSING DATE 7 SFM is an approach to managing forest resources that generates multiple benefits for current and future generations including benefits from reduced forest degradation and deforestation, production for wood and non-wood products, environmental and climate risk reduction, carbon storage, water filtering and other ecosystem services, and other uses. The concept of “participatory” SFM, or PSFM, was coined in Lao PDR in 2001 to highlight the participation of stakeholders and especially local people. Legally, PSFM in Lao PDR refers to Decree No. 59/PM on the Sustainable Management of Production Forests, dated May 22, 2002. 8 FLM refers to, a cross-sectoral and integrated approach to manage natural resource use and conservation across all Forest Categories, anticipate and mitigate environmental impacts from overlapping development activities, plan and monitor climate change mitigation/adaptation efforts, and identify opportunities to reduce poverty. The Forest Landscape Management Area (FLMA) comprises the total area of three Forest Categories and the “good” forests outside them. The FLMA is defined at the provincial and district levels. Jul 05, 2019 template Page 13 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) 29. The closing date of the proposed AF will be August 31, 2021. The total duration of the project will thus be eight years and three months. C. RESULTS FRAMEWORK 30. The table below provides a summary of changes and the rationale for them. Changes include the introduction of one new intermediate results indicator (Component 2) and one new sub-indicator (Component 3), and updated end-of- project targets that reflect existing project achievements and the revised project closing date. All other indicators remain the same; no indicators are dropped. Table 2: Summary of changes to the results framework Indicator Change Rationale PDO Level Indicators Forest area brought under management plans End target Target was achieved and surpassed. The (Hectare (Ha), Corporate). increased from increase matches the actual value from May 975,000 ha to 2019 ISR. AF aims to maintain this 976,211. achievement. People in forest and adjacent community with End target Target was achieved and surpassed. The monetary/ non-monetary benefit from increased from increase matches the actual value from May interventions (Number, Custom). 115,000 to 2019 ISR. AF aims to maintain this 117,400. achievement. People in targeted forest and adjacent End target Same as above. community with increased benefits increased from from interventions-female (Number, 53,000 to 58,700. Custom Breakdown). People in targeted forest and adjacent End target Same as above. community with increased benefit from increased from interventions -Ethnic minority/ 80,000 to 90,500. indigenous (Number, Custom Breakdown). Enhanced carbon storage from improved forest End target Target was achieved and surpassed. Based on protection and restoration (tCO2e) (Number, increased from the actual value from May 2019 ISR, AF aims Custom). 14,227 tCo2e to to further increase this achievement by the 35,000 tCo2e. end of the project. The substantial increase is due to a change in calculation methodology occurred during 2018 Restructuring, as well as the increased contribution to national level emission reduction through more efficient law enforcement. Reduced emissions from deforestation and End target Target was achieved and surpassed. Based on forest degradation (tCO2e) (Number, Custom). increased from the actual value from May 2019 ISR, AF aims 121,407 tCo2e to to further increase the end target by the end 2,000,000 tCo2e. of the project. The substantial increase is due to a change in calculation methodology occurred during the 2018 Restructuring, as Jul 05, 2019 template Page 14 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Indicator Change Rationale well as the increased contribution to national level emission reduction through more efficient law enforcement. Rate of annual forest cover loss in targeted End target Target was achieved and surpassed. The Production Forest Areas (Percentage, Custom). decreased from increase matches the actual value from May 0.23% to 0.18%. 2019 ISR. AF aims to maintain this achievement. Forest area brought under forest landscape End target Target was achieved and surpassed. The management plans (Hectare(Ha), Custom) increased from increase matches the actual value from May 2,680,000 ha to 2019 ISR. AF aims to maintain this 3,380,170 ha. achievement. The substantial increase is due to a change in calculation methodology agreed during 2018 Restructuring. The FLM area has been defined through remote sensing, field checks and consultations with stakeholders. Intermediate Results Indicators by Components Component 1: Strengthening and Expanding PSFM in Production Forest Areas Beneficiaries who receive technical services of End target Target was achieved and surpassed. The adequate quality (Percentage, Custom). increased from increase matches the actual value from May 80% to 83%. 2019 ISR. AF aims to maintain this achievement. VFLC who receive services of adequate Target value Target has not been achieved yet under quality in Forest Management and extended to SUPSFM, so it will be maintained under AF. Village Livelihood Development closing date of the (Percentage, Custom Breakdown). AF. Production groups who receive services End target Target was achieved and surpassed. The of adequate quality in Livelihood increased from increase matches the actual value from May Support (Percentage, Custom 80% to 95%. 2019 ISR. AF aims to maintain this Breakdown). achievement. Participants who perceive the Community End target Target was achieved and surpassed. The Engagement Framework (CEF) process is increased from increase matches the actual value from May adequate (Percentage, Custom). 80% to 97%. 2019 ISR. AF aims to maintain this achievement. Forest area under MoU-PSFM (Hectare(Ha), End target Target was achieved and surpassed. The Custom). increased from increase matches the actual value from May 975,000 to 2019 ISR. AF aims to maintain this 976,211. achievement. Forest area under MoU-VFMA (Hectare(Ha), End target Target was achieved and surpassed. The Custom). increased from increase matches the actual value from May 10,000 ha to 2019 ISR. AF aims to maintain this 10,750ha. achievement. VLD Grants disbursed to villages and under Target value VLDGs are fully disbursed and AF will not implementation (Percentage, Custom). extended to finance new VLDGs. Jul 05, 2019 template Page 15 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Indicator Change Rationale closing date of the AF. Aggregate forest area under certification as a End target End target was increased to match the result of the project (Hectare(Ha), Custom). increased from renewed national target set by the 175,000 ha to Government at 230,000 ha by 2022. With AF 230,000 ha. resources, the national target is expected to be met one year in advance. Forest area under certification (FSC End target End target increase reflects renewed national Forest Management Standard) as a increased from targets, see above. result of the project (Hectare(Ha), 85,000 ha to Custom Breakdown). 112,000ha. Forest area under certification (FSC End target End target increase reflects renewed national Controlled Wood Standard) as a result increased from targets, see above. of the project (Hectare(Ha), Custom 90,000 ha to Breakdown). 118,000ha. Component 2: Forest Landscape Management Number of FLM Frameworks developed Target value The exercise was successfully completed in the (Number, Custom). extended to the 4 target provinces. AF will build on these closing date of the frameworks to produce Forest Landscape AF. Investment Plans. Areas with Forest Landscape Management End target Target was achieved and surpassed. The implementation plans (Hectare(Ha), Custom). increased from increase matches the actual value from May 1,080,000 to 2019 ISR. The AF aims to maintain this 1,110,000. achievement. New indicator. Forest Landscape Investment New indicator. There has been no investment plan developed Plans approved (Number, Custom). End target is 4. to sequence and locate public and private projects within a landscape of different forest and land uses. The investment plans will highlight tradeoffs among land uses within the landscape, to help reduce risks to investment. Component 3: Enabling Legal and Regulatory Environment Reforms in forest policy, legislation or other Target value This being a yes/no indicator, AF aims to regulations supported (Yes/No, Custom). extended to the remain engaged in the policy space and will closing date of the continue to support reform until the AF. additional financing closing date. Investigations of breaches of forestry law and End target Target was achieved and surpassed. Based on wildlife and aquatic law referred to criminal increased from 5% the highly satisfactory performance of this courts (Percentage, Custom). to 10%. component, the target was doubled for AF, also considering the increased inter-agency coordination envisaged under AF that will likely increase the number of successful investigations. New sub-indicator. Investigation of New sub- Despite the highly satisfactory performance breaches of forestry law and wildlife indicator. End under SUPSFM, the last ISR recommended Jul 05, 2019 template Page 16 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Indicator Change Rationale and aquatic law referred to criminal target is 20%. more coordination among law enforcement courts, proportion of which are joint agencies to effectively tackle the still inter-agency investigations widespread wildlife and timber crime in Lao (Percentage, Custom Breakdown). PDR. STEPP field activities resulting in enforcement End target Target was achieved and surpassed. The action (Percentage, Custom). increased from increase matches the actual value from May 80% to 85%. 2019 ISR. AF aims to maintain this achievement. POFIs in compliance with DOFI best Target value Target has not been achieved yet under management practice operating procedures extended to the SUPSFM, so it will be maintained under AF. (Number, Custom). closing date of the AF. D. CHANGES TO COMPONENTS AND COSTS 31. Changes to component costs: A summary of the allocations under the Parent Project and the AF for each component and sub-component are presented in the table below. Table 3. Component Costs (US$) Parent Additional Total Component Name Project Financing Amount (IDA/FIP) (IDA) Component 1. Strengthening and Expanding PSFM in Production Forest Areas 1A: Developing Partnerships to Increase Implementation Capacity - 0 - (completed and not financed under AF) 1B: Community Engagement in PSFM and Village Livelihood - 2,060,000 - Development Sub-total 20,970,000 2,060,000 23,030,000 Component 2. Forest Landscape Management 2A: Developing Methodologies and Frameworks for Forest Landscape - 0 - Management (completed and not financed under AF) 2B: Establishing Forest Landscape Investment Plans - 990,000 - Sub-total 2,000,000 990,000 2,990,000 Component 3. Enabling Legal and Regulatory Environment 3A: Strengthening Legal and Regulatory Frameworks - 510,000 - 3B: Strengthening Forest Law Enforcement and Governance - 920,000 - 3C: Creating Public Awareness for Climate Change and REDD+ - 0 - (completed and not financed under AF) Sub-total 3,380,000 1,430,000 4,810,000 Component 4. Project Management, Learning and Investment Development Sub-total 5,470,000 520,000 5,990,000 Jul 05, 2019 template Page 17 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Total 31,820,000 5,000,000 36,820,000 32. Changes to activities: All four Components remain substantively the same as under the parent project, with some slight name changes. The Project would strengthen implementation of selected existing and modified activities under all four components as presented below. These activities would allow the client to (a) achieve stronger project outcomes, (b) strengthen implementation of activities that contribute to achievement of the existing operation’s PDO, and (c) support the strategic convergence on landscape investment. See Detailed Component Description in Annex 1. Component 1: Strengthening and Expanding PSFM in Production Forest Areas 33. The objective of Component 1 is the same as originally planned, which is to strengthen and expand participatory SFM in PFAs. About 20,600 households have benefited from VLDGs that were distributed in 666 target villages. 34. Summary of progress and changes to Component 1: Completed or on-going activities under Subcomponent 1B (Community Engagement in PSFM and Village Livelihood Development) include (a) delivery of PFA management plans and village forest management plans (VFMP), (b) third-party SFM certification that needs to be scaled up, (c) and implementation of VLDGs (fully disbursed with no further grant support), (d) forest restoration grants covering 30,000 ha (fully disbursed with no further grant support), and (e) establishment and monitoring of permanent sample plots (PSP). These activities have been positively assessed, and based on this assessment, a set of modified or scaled up activities has been defined for support under AF-SUPSFM below. 35. Activity group 1 -- Community engagement in PSFM activities: (a) timber legality assurance system piloting and certification support throughout the value chain;9 (enhanced and scaled up activity) (b) facilitate environmental and social sustainability of private investment opportunities by assessing availability of appropriate lands for forest plantations in barren and severely degraded lands in PFAs (enhanced activity); (c) support for development of VFMPs and agreements (enhanced activity); (d) re-measurement of permanent sample plots to calculate allowable cuts for each PFA (enhanced activity); and (e) systematization of knowledge and forest data in a comprehensive management information system (enhanced activity). 36. Activity group 2 -- Village Livelihood Development activities: (a) Providing technical support to livelihoods production groups as identified in agreed Community Action Plans with participating communities in PFAs and Village- Use Forest areas (enhanced activity), including on extension and monitoring for VLDG implementation, and learning sites for NTFPs and white charcoal; and (b) improve the value chain linkages for selected products with specific producer groups, with special focus on female-headed households and women entrepreneurs/farmers (enhanced activity). No new project funding is planned for the VLDGs. No new project funding is planned for forest restoration grants. 37. Completed activities: The Project would not continue to fund Village Livelihood Development Grants or forest restoration grants as they were fully disbursed under SUPSFM. Sub-component 1A (Developing Partnerships to Increase Implementation Capacity) was designed to be carried out during project year one under SUPSFM, and will not continue to be financed under AF-SUPSFM. 9 Includes: (a) expansion of SFM certification from the current 110,000 hectares to meet the government’s target of 230,000 hectares; (b) if timber harvesting in the SFM certified areas is allowed on an exceptional basis by the Government, the AF will support information campaigns for Chain of Custody (CoC) certification in the supply and value chain; (c) Contribute to the Timber Legality Assurance System (TLAS) process by pilot testing the control mechanism for the supply chain in PFAs. Jul 05, 2019 template Page 18 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) 38. Partially completed activities: Pre-harvest inventories will not continue to be financed under AF, due to the continued logging ban which does not allow commercial logging in PFAs or any other forest category. 39. Dropped activities: All other activities in the original financing agreement or PAD that are not mentioned above are dropped. Component 2: Forest Landscape Management 40. The objective of component 2 is the same as originally planned, which is to pilot forest landscape management. SUPSFM has worked in four provinces, Bokeo, Luang Namtha, Oudomxay and Xayaboury, to support provincial authorities to determine the forest landscape area and position the provincial REDD+ Task Forces as the coordinating bodies for integrating a forest landscape management framework template into the provincial REDD+ Action Plans. 41. Summary of progress and changes to Component 2: Subcomponent 2A (Developing Methodologies and Frameworks for Forest Landscape Management) is discontinued under AF. Under the parent project, subcomponent 2A introduced the concept of forest landscape management and developed frameworks, but more progress will need to be made to identify and convene investments, and improve inter-sectoral coordination to address competing uses of forest land throughout the forest estate. As such, piloting approaches to convene investment and stakeholders remains relevant. The AF will therefore, under Subcomponent 2B (renamed “Establishing Forest Landscape Investment Plans”), build on the current achievements and support provinces and central authorities, to work across sectors to develop practical, simplified investment plans for selected priority landscapes (based on criteria to be agreed) in selected provinces, involving relevant sectors, other development partners, civil society, and the private sector. Therefore, under Subcomponent 2B, the AF support would allow the client to (a) prepare Forest Landscape Investment Plans for priority landscapes in selected provinces10 (enhanced activity); (b) prepare assessments to support landscape investment development including identifying overlapping and adjacent development activities, and minimizing and mitigating impacts of said development activities on selected forest landscape areas (enhanced activity); (c) support dialogue, consultations, and multi-sector platforms on landscapes, land use, and REDD+ (enhanced activity); (d) develop an integrated monitoring framework across land uses in the forest landscape (enhanced activity); and (e) build institutional and leadership capacity for landscape-level action and management (enhanced activity). 42. Completed activities: all activities under Subcomponent 2A are completed and will not be financed under AF. 43. Dropped activities: All other activities in the original financing agreement or PAD that are not mentioned above are dropped. Component 3: Enabling Legal and Regulatory Environment 44. The objective of component 3 is the same as originally planned, which is to improve the legal and regulatory environment for SFM. SUPSFM has provided the Ministry of Agriculture and Forest (MAF) forestry-related departments with technical assistance (TA) in developing the concept for village forest management, the implementation framework for PSFM, the revision of the forest policy framework, and the development of reference emission levels (REL) for REDD+ (Subcomponent 3A). It has also provided financial and technical support to forest law enforcement and combating illegal trade of timber and wildlife (Subcomponent 3B). 10The Forest Landscape Investment Plans will be a component of, or input to, the “Provincial Forest Strategic Plan” as noted in the Forest Law Articles 12 and 13. See Annex 1 for details. Jul 05, 2019 template Page 19 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) 45. Summary of progress and changes to Component 3: Under Subcomponent 3A (Strengthening Legal and Regulatory Frameworks), the AF would (a) continue to support the development of legal and regulatory frameworks for implementation of PSFM and REDD+ at national and sub-national levels and develop frameworks for FLM, as well as policies to ensure that private VLDG investment is environmentally, socially and financially sustainable (enhanced activity); (b) develop technical and legal guidelines for private sector engagement in forest plantation management and other economic activities, and enhance government and stakeholders’ capacity to apply best practices on environmental, social, and financial sustainability (enhanced activity); and (c) support further development of the legal framework for Timber Legality Assurance System (TLAS) implementation via Department of Forestry’s (DOF) Forest Law Enforcement, Governance and Trade (FLEGT) Standing Office (enhanced activity). 46. Under subcomponent 3B (Strengthening Forest Law Enforcement and Governance), the AF would (a) continue to support DOFI and other Borrower agencies to detect, disrupt, and dismantle forest and wildlife related crimes at national and provincial levels, with greater focus placed on strengthening inter-agency cooperation (enhanced activity); (b) continue building capacity for the DOFI Information Management System unit support better use of information for law enforcement (enhanced activity); and (c) build capacity and support for Lao PDR engagement in multi and bi-lateral agreements with regional partners on forest and wildlife law enforcement and compliance with the Convention on International Trade in Endangered Species (CITES) with regards to international trade in flora and fauna (enhanced activity). 47. Partially completed activities: The Project would not continue to fund sub-component 3C (Creating Public Awareness for Climate Change and REDD+) which is now financed under REDD Readiness support projects implemented by DOF. 48. Dropped activities: All other activities in the original financing agreement or PAD that are not mentioned above are dropped. Component 4: Project Management, Learning and Investment Development 49. The objective of component 4 is the same as originally planned, which is to manage and coordinate all project related activities. During SUPSFM the National Project Management Office (NPMO) has coordinated the various activities and implemented an efficient M&E system. It also built capacity for planning and for undertaking analytical work as required to meet overall project objectives and to assess project impact and support learning for sector development. The name of Component 4 has been revised to more accurately reflect the activities on learning and investment development under the Component that go beyond conventional project management. 50. Summary of progress and changes to Component 4: The NPMO will continue to coordinate operational activities but with a greater focus on developing and enhancing investments in the forest estate while consolidating learning from project activities. The AF would therefore finance the maintenance of project management services while also enhancing investment development and learning. Activities under the AF include: (a) Continued operating costs of implementation, coordination, financial management, financial audits, procurement, and M&E (enhanced activity); (b) operating costs for engaging in dialogue with stakeholders and sectors on investment prioritization and development (enhanced activity); (c) institutionalization of knowledge for investment and policy development (enhanced activity); (d) maintain SUPSFM Project Implementation Unit (PIU) Technical Assistance (TA) team to supplement and build institutional capacity on existing topics and emerging new challenges (enhanced activity); and (e) replacement of worn- out pick-up trucks for field supervision used by the Project team (enhanced activity, connected to all components). Jul 05, 2019 template Page 20 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) III. KEY RISKS A. KEY RISKS AND MITIGATION 51. The overall risk rating remains Substantial. The overall risk remains the same as at the time of the parent project approval in May 2013 and the most recent ISR (June 2019). The scope and activities to be financed by AF-SUPSFM are largely a continuation, consolidation, modification, and/or expansion of the original activities, but without village development grants or civil works. The nature of some risks has evolved during the course of implementation as described in Sections I and II and documented in the project ISRs. The key risks and mitigation strategies are summarized below. 52. The Political and Governance Risk is rated High. These risks reflect the existence of vested interests albeit within an institutional framework that is modernizing. Recent efforts by the authorities include the continued enforcement of Prime Minister Decrees on illegal logging and banning timber exports; a new Decree to promote commercial forest plantations; the new Forest Law which opens PFAs to private investment in degraded land; on-going governance reforms in cooperation with the European Union; certification by the FSC of 108,000 ha for SFM; and cancellations of two proposed hydropower dams adjacent to conservation forests. These and other efforts signal a departure from earlier practices and the wish to rely more on a market economy and the rule of law, which can deliver significant pay-offs in the long term. However, possible limitations in the ability to extract rents in the forest sector could affect the quality and pace of reform efforts, slowing down their implementation. SUPSFM and the AF helps mitigate these risks by assisting the Government to design more robust monitoring and accountability mechanisms and strengthening the capacity of MAF in forest management and planning. 53. The Macroeconomic risk is rated Substantial. Fiscal slippages and failure to control debt build up and to address financial sector risks can cause instability and undermine the Government’s appetite for maintaining forest sector reforms post-project, but there is little risk to Project investment activities. Risk mitigation is being undertaken by the Government via an ambitious macroeconomic stabilization program, with support of the Green Growth Development Policy Operation series and a financial sector program supported by the Bank. More broadly, the forest sector reforms supported by SUPSFM and the AF should eventually help increase revenues from sustainable private sector investment in commercial plantations and related downstream industries. 54. The risk related to Institutional Capacity for Implementation and Sustainability is rated Substantial. Institutional capacity for project implementation continues to be a concern and is anticipated to lessen over time based on SUPSFM experience. This risk will be managed at project level through (a) continued focused capacity development activity, (b) close implementation support, (c) encouraging the continued use of international expertise contracted by the client to enhance client implementation, and (d) leveraging the strong policy and investment dialogue. Long-term sustainability objectives face challenges due to expanding private sector investment in forest plantations for pulp and paper production; increasing climate risks; fragmentation of government activities and institutions involved in management of the forest landscape; and a challenging forest governance context due to strong competing stakeholder and economic interests in the use and conservation of the forest landscape. This risk will be mitigated in some areas through project activities to prepare Forest Landscape Investment Plans with involvement of stakeholders, and to continue to build institutional capacity and develop suitable policies that promote sustainability. 55. The Fiduciary risk is rated Substantial. Under SUPSFM, financial management and procurement management have been carried out moderately satisfactory to date. Nevertheless, the control environment and implementing Jul 05, 2019 template Page 21 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) capacities, along with perceived governance risks, require continuous and sustained technical assistance and implementation support. 56. The Environment and Social risks are raised from Moderate to Substantial. Although the AF has only TA activities, the combined environment and social risk rating is substantial and the project remains Category A due to continued concerns over rural land use, forest management, engagement with private sector for possible future involvement in the sector (not part of the project financing plan), and staff turnover which has affected client capacity. Many of the parent project activities are continued, consolidated, scaled up or and modified under AF-SUPSFM and the project area remains the same, although (i) no new village grants are planned as all have been fully disbursed under the parent project, and (ii) there is no timber harvesting supported by the parent project and AF. The nature of the environmental and social risks remains the same, and therefore the safeguard policies triggered at the time of original parent project approval remain the same. The implementation of the parent project to date has only involved minor restrictions of access to natural resources, based on a process of free, prior and informed consent, as well as inclusive process of forest and land use planning and conservation agreements with participating villages. Community-driven VLDGs have been fully disbursed under the parent project and no new grants will be provided under AF-SUPSFM, which will provide scaled up and enhanced extension support for alternative livelihood development compatible with SFM. The consultation and FPIC process will be further strengthened through training and developing facilitating skills for the project staff and village forest management and development teams. The risk will continue to be mitigated through the continued and enhanced extension support and technical assistance for continued implementation of existing VLDG- financed activities, and the updated safeguards instruments. The last ISR rated these risks as moderate, reflecting the success of the project in mitigating these risks, which is partially reflected by the fact that 97 percent of beneficiaries indicate satisfaction with the CEF. 57. The Stakeholders risk rating remains Substantial. International commercial forest enterprises are scaling up investment in Lao PDR, and this presents both a risk and an opportunity to the country and specifically the forest estate and the people dependent on forest resources. The success and sustainability of forest plantations requires good management of social and environmental risks. The risk will be mitigated partially through the Project by strengthening government capacity to facilitate credible investors committed to environmental and social sustainability objectives, enhanced regulation of the sector, continued enforcement of illegal timber cuts and exports, improved access to information and knowledge, supporting out grower schemes and better extension for smallholders, and developing Forest Landscape Investment Plans that include commercial firms where relevant. In addition, the Bank and IFC teams have been aligning support for consistent policy messaging; this approach will continue to help generate goodwill and trust among stakeholders. Beyond the Project, recent policy reforms such as the Decree on Environmental and Social Impact Assessment, will help regulate the sector, promote sustainability, and involve the public. IV. APPRAISAL SUMMARY A. Economic and Financial Analysis 58. The Economic and Financial Analysis of the parent project remains relevant. Assessments since then help illuminate the changing context for Additional Financing. 59. SUPSFM has been financing several activities to support the management of 41 of the state’s 51 PFAs and the communities that depend on these forests including: participatory SFM for timber production, forest certification, NTFPs, forest restoration, VLDGs, and policy development which has driven comprehensive sector reform and improved Jul 05, 2019 template Page 22 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) governance – although communities have not received revenues from timber due to the effective logging ban (local use excepted). The AF continues these activities; however, no new forest restoration grants or VLDGs will be provided although extension support will be enhanced. 60. Financial efficiency: In terms of forestry revenues to communities and government, SUPSFM is likely financially and possibly economically inefficient mainly due to the impact of the logging ban. Since there has been no legal harvesting since 2011, the overall returns from SUPSFM’s community PSFM activities are questionable even without carrying out a detailed analysis; simply the intended main benefits flows have not been realized but the costs have remained the same or possibly increased due to enhanced budget for patrolling and law enforcement. However, the PSFM approaches developed can be viable under specific conditions which can be specified in general terms (see calculations below). 61. Rationale for public investment and World Bank value addition: The sector has undergone deep changes since the beginning of SUPSFM, with a series of legislative, policy, regulatory and institutional reforms that are set to transform the sector in the future. If the logging and export bans have had a negative impact on the timber industry and the related benefit sharing project outcomes, the bans also gave the necessary time to design and discuss the needed reforms, and help protect the resource base until viable management regimes can be put in place. The process is not complete yet, and the government continues to support sustainable practices on the ground, such as third-party forest management certification, while engaging the private sector in future new investments. Under the new 2019 Forest Law, PFAs have been opened for commercial and smallholder private timber plantations in degraded areas, and village forestry has been authorized for local communities. A new 2019 Decree on Promoting Commercial Tree Plantations (PM/247) also adds further impetus. These major changes will transform the landscape, and as such will require careful implementation and wide roll out to ensure sector sustainability. In this matter, the Bank’s convening power with stakeholders will be valuable asset to provide technical support to the government, communities, and investors. 62. In June 2019 the Bank delivered a detailed economic assessment of forestry production models under the Green Growth Advisory Program for Lao PDR (P162374). This assessment concluded that meeting the growing international demand for “good wood” through SFM would be highly profitable for planted forests and natural forest management. Based on data from current investors in Lao PDR, internal rates of return for Lao PDR’s main forest production models (smallholder teak, industrial and out grower eucalyptus, participatory SFM) were 6-24 percent, which is internationally competitive. Returns for SFM in particular were the highest at 24 percent, up from a base case of 14 percent. However, as mentioned above, the project support for PSFM can only have positive returns if, when and where the logging ban is lifted. With the authorization of village forestry in the 2019 Forest Law, there is an opportunity to apply lessons learned in PSFM under the parent project to assist the client to articulate the framework for implementing village forestry. 63. The results based on market costs and prices indicate that all of them have large economic returns based on land expectation value (LEV) and internal rate of return (IRR), indicating that forestry opportunities in Lao PDR are promising—among the best in the world, which is a perspective backed up by credible private investors consulted during the assessment. The approach of SFM applies across all forests and forest categories and across landscapes in all geographic and climatic regions and ecological zones in Lao PDR. At the same time, the social and cultural, environmental and ecosystem services and economic sustainability needs to be considered in the SFM scope. This assessment focused on the production purposes of SFM, which primarily involve modified or degraded natural forests in PFAs, plantation forests and trees outside forests. These forests produce wood, fiber, fuel, non-wood forest products, and provide a wide range of ecosystem services. 64. Financial and economic analyses provide useful information about prospective returns to forest owners from Jul 05, 2019 template Page 23 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) four production forest models: eucalyptus industrial plantation (company); eucalyptus out grower plantation; smallholder teak plantation; and participatory SFM in native forests. Using an assumed and conservative 8 percent discount rate for the capital budgeting criteria, the results in the table below suggest that forest investment returns for all four types of forest management can be quite attractive; the estimates are similar to returns calculated in China and Vietnam, and greater than most other regions in world. However, realizing this potential will take dedicated, conscientious and persistent efforts by all actors in the forest products value chains, from the forest to the mill and export point to global markets. It also will require good in-country processing or export to higher value-added markets. Developing practical and successful field skills and broader institutional capacity will be a challenge for Lao PDR, although the AF for SUPSFM aims to address this challenge. Table 5. SFM Scenarios, in U.S. dollars11 Eucalyptus Eucalyptus Smallholder Teak Participatory Industrial Outgrower Scenario Plantation SFM Plantation Plantation LEV IRR LEV IRR LEV IRR LEV IRR Base Case $6,282 22% $5,801 61% $2,383 13% $603 14% Potential Situation $2,500 15% -$563 6% $5,000 18% $2,440 24% Base Case + Carbon $6,703 22.9% $6,192 69% $3,225 16% $1,645 33% ($5/tCO2e) 65. Payments for carbon storage and emission reductions can be a viable add-on for improving afforestation, forest management and restoration. At a price of US$512 per tCO2e the added carbon payment returns were found to increase LEVs from about US$500 to US$1,000 per ha for the four different management regimes. SUPSFM has already led to a claimed 1.8 million tCO2e of emissions reduction as of May 2019, which at a hypothetical US$5/ton would be US$ valued at US$9 million. Including this carbon price to the internal rate of return for SFM brings it up to 33 percent. The AF is anticipated to support further emission reductions to a revised total target of 2 million tCO2e by project closing. Factoring in the shadow price of carbon (SPC),13 project benefits would amount to over US$8.2 million in the low SPC estimate (US$41/ton) and US$16 million (US$80/ton) in the high SCP estimate just during implementation.14 If considering the entire economic life of the project (assumed to be 10 years), the prospective returns from SCP amount between US$120 million (low SCP) up to US$240 million, assuming annual net emission of -300,000 tCO2e in line with SUPSFM results. See table 6 for a SCP economic analysis over the economic life of the project, comparing scenarios with low SCP, high SCP, and current World Bank Carbon Fund prices. Table 6. SCP economic analysis over project lifetime Project Reforestation, Enhancement of SFM, certification of SFM, agroforestry, policy development, forest Activity law enforcement, identification of tree plantation sites. Baseline -1,800,000 tCo2e (i.e. 1,800,000 tCo2e emission reductions) from SUPSFM 2014 to 2018. 11 World Bank 2019. Partnerships and Opportunities for a New Green Forest Economy in Lao PDR: Sustaining Forest Landscapes and Livelihoods. 12 Carbon Fund starting price for the Emission Reduction Program. 13 World Bank 2017. Shadow Price of Carbon Guidance Note. 14 Carbon Pricing Leadership Coalition 2017. Report of the High-Level Commission on Carbon Pricing. Commission chairs: Stiglitz, J.E. and Stern, N., supported by World Bank Group, ADEME, French Ministry for the Ecological and Inclusive Transition. Jul 05, 2019 template Page 24 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) GHG Project gross emissions: -300,000 tCo2e/ year (i.e. 300,000 tCo2e emission reductions) emissions Project net emissions: -300,000 tCo2e/ year Economic lifetime: 10 years (2020 to 2030) Shadow Price 2020 2030 2040 2050 of Carbon Low SPC in 40 50 63 78 (SPC) US$/tCo2e High SPC in 80 100 125 156 US$/tCo2e Results ERR NPV Without SPC (CF price) 300% US$15,000,000 With low SPC 2400% US$120,000,000 With high SPC 4800% US$240,000,000 Interpretation The ERR increases with inclusion of SCP in the economic analysis because the project is estimated to reduce GHG emissions during its economic lifetime compared to a do nothing scenario. It is worth considering that the GOL is preparing an emission reduction purchase agreement (ERPA) with the World Bank’s Carbon Fund until 2025, at a starting price of US$5/tCo2e. Emission reduction from SUPSFM and AF-SUPSFM would in principle generate a maximum return of US$7,500,000 irrespective of SCP. 66. VLDGs financed, among others, NTFPs and agroforestry activities. Regarding these activities, the parent project invested US$1.4 million (35 percent of VLDG funding), 75 percent of which was in the northern provinces.15 Cardamom, white charcoal, forest tea and broom weed were the more popular choices, and especially cardamom production expanded considerably due to high demand from both domestic and Chinese markets. According to Phouthoum Village Authorities, Oudomxay, with the introduction of an improved variety from China, villagers could make US$5,500 /year per ha. With a low input cost in terms of seeds and labor, and relative short-term returns (2-year time from seed to harvest), cardamom in some areas has become more economically attractive than other traditional livelihoods such as livestock raising. In addition, growth under shade has a direct contribution in reducing pressure on natural forest and improving efficiencies in existing land use.16 The parent project has collected a series of best practices in NTFPs and agroforestry, and the AF will disseminate them by promoting village-to-village learning and knowledge sharing to maximize the potential for income generation while increasing forest cover. 67. Regarding VLDGs, a wide variety of activities were funded under SUPSFM, which differed based on geographic location and individual preferences. A total of about 770,000 people (more than 10 percent of the entire population of the country) live in villages where SUPSFM activities are implemented. About 30 percent of them (more than 200,000 people) have benefited from about 20,600 individual VLDGs distributed to households17. In most cases, VLDGs were disbursed through small loans in revolving funds managed by a village committee (US$8,000 per village), which increases the financial sustainability of the intervention by re-investing the proceeds in new activities and new people. A project survey of SUFORD-AF (P064886) villages, most of which continued support from SUPSFM, demonstrated that VLDGs had a positive impact on household incomes, with the majority of recipients who claimed “a bit more” (44 percent) or “much more income” (42 percent) as a result of the loans; 11 percent registered “no change in income” while only 2 percent of households reported a “decrease in income” as a result of the loans.18 Looking at the (baseline) poverty status of 15 A Case Study of the Lao PDR Forest Investment Program, World Bank 2019. 16 Direct communication. SUPSFM Social Safeguard Mission, July 2019. 17 Draft Borrower Completion Report, SUPSFM 2018. 18 DOF 2017. SUFORD-AF Village Livelihood Development Grant (VLDG) Assessment in Vientiane, Sekong and Attapeu Provinces, Lao PDR. Jul 05, 2019 template Page 25 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) households, it emerged that poorer households were less able to benefit from the loans than medium and (especially) better-off households. Less than 50 percent of poor households reported that they were able to get good or very good benefits from the loans, while this ratio was around 80 percent for medium and 95 percent for better-off households19. This finding prompted the design of AF- SUPSFM to focus on enhancing extension services to address barriers to more equally distributed returns. 68. An independent poverty impact assessment being carried out by the Poverty Global Practice for SUPSFM and comparator projects around the world (P167044)20 examines the contributions of SUPSFM to welfare improvement through its VLDG and PSFM activities. The assessment found that SUPSFM was successful in diversifying income generating activities. The additional income was mostly spent to fulfill households’ needs such as food, housing or medical expenses. Further additional income was earned through forest restoration activities. In addition, despite not being directly advised by SUPSFM project staff, VLDGs at the village level have been implemented through a revolving fund, which brought benefits to a wider range of people by increasing social cohesion, financial security, sharing good practices, increased knowledge about micro-fund management, savings and financial management. The assessment identified existing barriers to long term positive impacts of VLDGs. Notably, weaknesses in targeting with the exclusion of the poorest in some instances, might lead to potential welfare decline. Furthermore, both design and implementation of VLDGs should be strengthened both in the choice of livelihoods options, identified as top-down and not enough linked to markets, as well as in follow up technical assistance provided after the disbursement of the grants, reported as insufficient by the report. Under AF-SUPSFM these lessons have been incorporated, with specific activities promoting extension and technical support including market linkages. Building capacity of district staff to deliver highly and more timely extension support to villagers will be also financed under AF-SUPSFM. 69. The parent project estimated in 2017 that over 9,000 people were able to lift themselves out of poverty during the SUPSFM period by taking advantage of the grants issued in the last years of the predecessor SUFORD-AF (also known as SUFORD II - P108505) implementation in 2010-2012.21 Before the grants were distributed, the poverty rate was almost equal among those who would receive the grants and those who did not. Three years later the poverty rate was five percentage points lower among those who received the grants. 70. It is too early to quantify the efficiency of SUPSFM forest restoration work. More information will be available only after the permanent sample plots have been re-measured after 3-4 years. However, there is some evidence available to suggest that natural regeneration is likely a viable approach while planting is too costly. B. Technical 71. SUPSFM has contributed to the modernization of the forest sector in Lao PDR by mainstreaming REDD+ activities and principles of participatory SFM in national policies and practices. Many of the original objectives have been met, demonstrating the technical soundness of the SUPSFM approach and the effectiveness of the institutional set up within MAF. However, emerging challenges and opportunities, especially concerning commercial plantations and village forestry have shown the need for more support to implement the new forest law and other recent policies. As such, the AF will scale up the ambition of SUPSFM by intervening in key areas where the improved policy environment allows for 19 SUFORD Village Development Activities Impact Assessment Report, 2012. 20 World Bank 2019. Welfare and Forests. An assessment of the FIP contribution to SUFORD-SU project in Lao PDR. 21 DOF/SUFORD-SU 2017. SUFORD-AF Village Livelihood Development Grant Assessment in Vientiane, Sekong and Attapue Provinces, Lao PDR. This study assessed performance of the SUFORD interventions from 2010-2012 and post-project effects. There was a total of 32,572 grant-receiving households in the project area, so the number of benefiting households was 1628 (5 percent x 32,572). Multiplying this with the average household size, 5.6 people, the number of individual beneficiaries can be estimated at 9120. Jul 05, 2019 template Page 26 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) further support to enhance institutions, policies, regulations and plan the next generation of environmentally and socially sustainable investment in the forest landscape. 72. The AF would continue the process of third party certification of forest management; in addition, it will support preparation of third-party certification for the whole timber value chain (Chain of Custody) and implementation of the emerging new Timber Legality Assurance System. Together these actions would help position Lao PDR to improve the sector’s competitiveness in profitable export markets while complying with the provisions of the 2016 export ban on unprocessed wood, enacted after the approval of SUPSFM. 73. The new Forest Law approved in June 2019 has new provisions that were not present at the time of SUPSFM approval, notably (among others) the opening of PFAs for commercial tree plantations and the authorization of village forestry at the local level after years of banning logging of certain tree species. While these legal provisions present new opportunities for various stakeholders in the sector, they also pose significant risks for the sustainability of the natural resource base and the government capacity to effectively enforce the new law. As such, the AF will support the regulatory capacity of the government in this critical phase, by providing focused technical assistance to relevant institutions in the roll out of the law and drafting of implementing guidelines or regulations for commercial tree plantations and village forestry. 74. VLDGs have been fully disbursed through provincial and district authorities, but some shortcomings have been observed in some settings in the capacity of villages to effectively maintain some investments. The AF would therefore strengthen the capacity of extension service providers to ensure that beneficiaries have adequate technical support during implementation of existing VLDGs, based on the recommendation of the survey on service delivery. 75. The SUPSFM objective to pilot forest landscape management in four provinces coordinated under provincial REDD+ Task Forces, was achieved with the creation of Provincial REDD+ Action Plans that are typical of FLM activities including forest restoration, expansion of agroforestry, SFM and conservation across the forest estate. The AF would build on these, expanding both spatially to other landscapes and methodologically, by generating investment plans that also include investment opportunities for nature-based tourism, village forestry, and commercial forest plantations within the landscape. This is necessary because there is continued work needed to increase the understanding of benefits from integrated landscape approaches and to operationalize its implementation in locally appropriate ways. 76. Knowledge and learning have been central to SUPSFM, having driven the sector policy reforms and new opportunities to leverage good private sector development for SFM and to potentially renew village forestry with evidence-based approaches. A wealth of documents, reports and data have been generated during implementation. This wealth of knowledge however is not systematized and easily accessible. In addition to few new assessments on emerging topics, the AF will finance the digitalization of all resources currently stored in different divisions at national and provincial level and systematize this information in a user-friendly platform which could inform future public and private investment in the forest sector. C. Financial Management 77. Financial management. For continuity and to minimize disruptions, the Finance Division of DOF will remain responsible for project FM. They will continue to be supported by two national consultants: a part-time senior FM consultant and a full-time junior consultant. To improve and sustain capacity of DOF staff, the senior part-time consultant will also include delivery of training in specific topics such as the preparation of Interim unaudited Financial Reports (IFR), consolidation of financial data and preparation of Withdrawal Applications to DOF staff on a face to face Jul 05, 2019 template Page 27 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) basis. This is to be part of the TOR and performance indicator of the senior part-time consultant. The Financial management Manual will be revised to include, among others, controls and systems on monitoring commitments and remaining funds and assigning DOF finance staff to take responsibility for monitoring and reporting of the status of commitments and remaining funds. An acceptable FM manual is already in place. The revision is to enhance the controls and monitoring of remaining funds. The financial reporting and audit requirements remain unchanged. Quarterly IFRs will be submitted to the Bank no later than 45 days after each quarter end. The project will be required to submit status of overall remaining funds with the quarterly IFR. The audit report and management letter will be submitted to the Bank no later than six months after each fiscal year end and subject to disclosure as per the Bank’s policy on Access to Information. 78. Disbursement. The AF will use the same USD-denominated Designated Account at the Bank of Lao PDR that has been used for the original financing. The ceiling for the AF is fixed at US$1 million. The AF will be disbursed against one category including Goods, Works, Non-consulting Services, Consulting Services, Training and Workshops and Incremental Operating Cost. Disbursement methods and other disbursement arrangements would remain unchanged from the original financing. 79. Retroactive financing. The project will provide retroactive financing for any eligible expenditure prior to project effectiveness. Expenditures under retroactive financing will be eligible if dated on or after November 1, 2019, and the total amount available is up to a maximum is 20 percent of the total financing provided under the AF. Withdrawals up to an amount not to exceed SDR 740,000 (equivalent to 20 percent of the Financing proceeds) may be made for payments made by the Recipient on or after November 1, 2019, for Eligible Expenditures as described under the Financing Agreement. D. Procurement 80. The Bank’s procurement guidelines, dated January 2011 and revised July 2014, are being applied under the parent project (P130222), whereas the AF, being prepared after July 2016, will follow the World Bank Procurement Regulations for Investment Project Financing for Borrowers, dated July 2016, and revised November 2017 and August 2018. Training was provided to DOF in June 2019 on the Procurement Regulations. Over 87 percent of the project funds will finance Components 1, 2 and 3 which include continued community engagement in PSFM including certification, monitoring, reforestation, and village forest management planning; extension, monitoring and maintenance of activities already financed by the parent project via VLDGs; development of Forest Landscape Investment Plans; implementation of forest law enforcement and governance, and other technical assistance and capacity building. There will be no large and complex contracts, as the procurement approach will not be as complex as the current practice. The Procurement Regulations and harmonized standard bidding documents and request for quotations will be used for works and goods, national market approach and request for quotations packages. The procuring entity under the project will be the DOF. DOF staff currently handling procurement for the parent project will be handling procurement under the AF as well. To ensure the procurements under the AF will be implemented effectively, a local procurement consultant will be hired to assist and train the DOF staff. The AF will use Systematic Tracking of Exchanges in Procurement (STEP) to manage the procurement plan and transactions. 81. DOF submitted a draft Project Procurement Strategy for Development to the Bank to inform fit-for-purpose procurement arrangements in the procurement plan for the AF and operating context for the project. The strategy includes an assessment of client capacity and experience to carry out procurement and market assessment for key contracts under the project. The strategy was reviewed and approved by the Bank, and the procurement plan was developed based on the strategy and submitted to the Bank. Jul 05, 2019 template Page 28 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) E. Social (including Safeguards) 82. No new safeguard policies are triggered for the AF-SUPSFM. Under the parent project, SUPSFM, a Community Engagement Framework (CEF) was prepared and effectively applied in accordance with World Bank Operational Policy OP/BP 4.10 Indigenous People and OP/BP 4.12 Involuntary Resettlement. These instruments remain applicable for AF- SUPSFM. As in SUPSFM, the AF also triggers OP/BP 4.12 to ensure that natural resource access does not disproportionately affect any group within the community and are offset by viable alternative options to ensure that the household livelihood in project villages are maintained or enhanced. OP/BP 4.10 is applied in AF-SUPSFM to ensure that all ethnic groups will continue to be engaged in a culturally appropriate way to ensure broad community support. The CEF includes an Ethnic Group Planning Framework, Access Restriction Process Framework and a Resettlement Policy Framework. A series of safeguard assessments were carried out, including Impact Assessment of Village Livelihood Development Fund (VLDF), Customary Tenure among Ethnic Groups, which found good CEF implementation and SUPSFM has been and is in compliance with CEF policy requirements and processes. Key areas identified to be improved are to strengthen ethnic group consultation and engagement and more systematic support to strengthen VLDF implementation and management to improve sustainability of the VLDF. The CEF has been updated to reflect the scope of the AF, and lessons learned from safeguard implementation by the parent project. F. Environment (including Safeguards) 83. The parent project was assessed as Environmental Category A at approval, and assessment that also applies to the AF because many of the parent project activities are enhanced, consolidated, or scaled up under AF-SUPSFM and the project area remains the same, although (i) no new village grants are planned, as all have been fully disbursed under the parent project, and (ii) there is no timber harvesting supported by the parent project and AF. Even though AF- SUPSFM finances only TA type activities, the nature of the environmental and social risks remains the same, and therefore the safeguard policies triggered remain the same (OP/BP 4.01 Environment Assessment, OP/BP 4.04 Natural Habitats, OP/BP 4.36 Forests, OP 4.09 Pest Management, and OP/BP 4.11 Physical Cultural Resources). The likelihood of environmental impact has been identified, and mitigation measures have been developed and implemented, during the implementation of parent project. No significant adverse or cumulative environmental impacts have been experienced, and the Bank assessed performance to be satisfactory. 84. Environmental safeguard issues associated with AF-SUPSFM remains the same as for the parent project. The main concern is related to SFM where forest landscape management was piloted. There are issues related to village livelihood development and SFM in the project target areas that may cause negative impacts on wildlife and non-timber forest products (NTFPs). Assessments of biodiversity and wildlife values were undertaken as part of participatory land use planning processes. The AF-SUPSFM project area continues to be the same as the parent project, where the region is environmentally fragile with steep slopes, significant biodiversity and habitats, and High Conservation Value Forests. Rain-fed upland agricultural fields, fallow land, and forests characterize the landscape. Shifting cultivation based on controlled burning is a dominant, but low-margin, land use in these provinces and contributes significantly to household food security as well as forest loss and degradation as population grows. 85. The existing safeguard instruments applied under the parent project have been updated and will be applied under AF-SUPSFM; these instruments include (i) an Environmental Management Plan (EMP) and (ii) a Community Engagement Framework (CEF) which includes an Ethnic Group Planning Framework, a Process Framework for access restrictions, and a Resettlement Policy Framework. In addition, AF-SUPSFM will help strengthen the field presence of technical support staff and coordination mechanisms using GoL institutions functioning as technical service centers. Adequate funds will continue to be allocated for Borrower capacity building and implementation support in safeguards Jul 05, 2019 template Page 29 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) (EMP and CEF) implementation and compliance monitoring. CEF, EMP and the Environmental and Social Impact Assessment (ESIA) Executive Summary have been updated and consultations were held on September 19, 2019, with the ESIA further revised. The ESIA was disclosed on the Bank’s external website on November 1, 2019; the EMP and CEF were disclosed on the Bank’s external website on October 28, 2019. 86. DOF has a good overall track record of working with the Bank over the last 15 years to implement early predecessor projects and the parent SUPSFM project and has gained increased experience with and knowledge of the Bank’s social and environmental safeguard requirements. However, as noted during the recent safeguard implementation by SUPSFM, the Implementing Agency will continue to need technical assistance to meet safeguard requirements due to limited resources and recent staff turnover, especially as the sector implements ambitious sector reforms that can potentially reduce poverty and drive economic growth while reducing pressure on natural forest and protected areas. The World Bank Safeguard Specialists will provide strategic inputs and support to the Project Management Unit in DOF and its consultants, both national and international. As during past implementation, partnerships with civil society organizations may be established and maintained to implement some technically specialized activities and initiatives. In addition, the proposed AF will continue to facilitate coordination and experience- sharing among staff and consultants in DOF working on a possible Emissions Reduction Purchase from the World Bank Forest Carbon Partnership Facility to ensure cross-fertilization of ideas, dissemination and adoption of approaches. V. WORLD BANK GRIEVANCE REDRESS 87. Communities and individuals who believe that they are adversely affected by a World Bank supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate GRS, please visit http://www.worldbank.org/en/projects- operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org Jul 05, 2019 template Page 30 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) VI SUMMARY TABLE OF CHANGES Changed Not Changed Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Disbursements Arrangements ✔ Procurement ✔ Implementing Agency ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ APA Reliance ✔ Other Change(s) ✔ VII DETAILED CHANGE(S) PROJECT DEVELOPMENT OBJECTIVE Current PDO To execute REDD+ activities through participatory sustainable forest management in priority areas and to pilot forest landscape management in four provinces Jul 05, 2019 template Page 31 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Proposed New PDO To strengthen participatory sustainable forest management in targeted production forest areas, and forest landscape management in targeted provinces COMPONENTS Current Component Name Current Cost Action Proposed Component Proposed Cost (US$, (US$, millions) Name millions) 1: Strengthening and 20.97 Revised 1: Strengthening and 23.03 Expanding PSFM in PFAs Expanding PSFM in PFAs 2: Piloting Forest Landscape 2.00 Revised 2: Forest Landscape 2.99 Management Management 3: Enabling Legal and 3.38 Revised 3: Enabling Legal and 4.81 Regulatory Environment Regulatory Environment 4: Project Management 5.47 Revised 4: Project Management, 5.99 Learning, and Investment Development TOTAL 31.82 36.82 DISBURSEMENT ARRANGEMENTS Change in Disbursement Arrangements Yes Expected Disbursements (in US$) DISBURSTBL Fiscal Year Annual Cumulative 2013 0.00 0.00 2014 122,990.00 122,990.00 2015 224,490.00 347,480.00 2016 258,590.00 606,070.00 2017 372,985.00 979,055.00 2018 544,475.00 1,523,530.00 2019 784,405.00 2,307,935.00 Jul 05, 2019 template Page 32 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) 2020 992,750.00 3,300,685.00 2021 1,128,160.00 4,428,845.00 2022 571,155.00 5,000,000.00 SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Latest ISR Rating Current Rating Political and Governance ⚫ High ⚫ High Macroeconomic ⚫ Substantial ⚫ Substantial Sector Strategies and Policies ⚫ Substantial ⚫ Moderate Technical Design of Project or Program ⚫ Substantial ⚫ Moderate Institutional Capacity for Implementation and ⚫ Substantial ⚫ Substantial Sustainability Fiduciary ⚫ Substantial ⚫ Substantial Environment and Social ⚫ Moderate ⚫ Substantial Stakeholders ⚫ Substantial ⚫ Substantial Other Overall ⚫ Substantial ⚫ Substantial LEGAL COVENANTS2 LEGAL COVENANTS – Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Sections and Description Section I. Implementation Arrangements A. REDD+ Arrangements 1. The Recipient shall maintain throughout implementation of the Project, a National REDD+ Taskforce to periodically review the implementation performance of the Project, coordinate REDD+ related activities, and carry out technical research related to REDD+ with membership, functions, responsibilities and resources satisfactory to the Association. 2. The Recipient shall maintain throughout implementation of the Project a REDD+ Division under DOF with membership, functions, responsibilities and resources satisfactory to the Association. Section I. Implementation Arrangements B. Project Arrangements 1. The Recipient shall maintain throughout implementation of the Project with a mandate, terms of Jul 05, 2019 template Page 33 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) reference, composition and resources satisfactory to the Association: (a) a National Project Steering Committee chaired by the Vice-Minister of MAF, to provide policy guidance and enhance inter-ministerial coordination and with representation from, inter alia: (i) ministries including MAF, MoNRE, MOF, MPI, MoIC; (ii) DAEC and NAFRI; (iii) LFND and LWU; and (iv) PPSC and DPSC; (b) a NPMO which shall be responsible for, inter alia: overall project coordination and management, at the national and province level including financial management, procurement, monitoring and reporting; implementation of national level Project components related to policy, legal issues, and forest sector monitoring; the NPMO shall have a national Project manager, and adequate finance and procurement staff; (c) a PPMO in each province with the PAFO chief as the provincial Project manager; the PPMO shall be responsible for, inter alia, the management and implementation of Project work plans, organizing capacity building activities, financial arrangements, coordination, and monitoring; (d) a DPMO in each Project District with the DAFO chief as the District Project manager; the DPMO shall be responsible for, inter alia, the management and implementation of Project work plans at the grassroot level, coordinating field staff, and NPAs and LFND and LWU; and (e) a PPSC and DPSC in each province and Project District chaired by the provincial vice governor, and district governor respectively, with membership from, inter alia, local level departments and divisions. Section I. Implementation Arrangements D. Safeguards 1. The Recipient shall ensure that the Project is carried out with due regard to appropriate health, safety, social, and environmental standards and practices, and in accordance with the Safeguards Instruments. Section I. Implementation Arrangements C. Project Management 1. The Recipient, through MAF shall: (a) maintain the NPMO with a mandate, terms of reference and composition acceptable to the Association; (b) maintain an appropriate accounting system satisfactory to the Association, and deliver training to all finance staff; and (c) recruit an external auditor with terms of reference satisfactory to the Association. 2. The Recipient, through MAF, shall ensure that the Project is carried out in accordance with the arrangements and procedures set out in the Project Operations Manual (provided, however, that in the event of any conflict between the arrangements and procedures set out in any of the said Manual and the provisions of this Agreement, the provisions of this Agreement shall prevail); and shall not amend, abrogate or waive any provision of the said Manuals and Guidelines unless the Association has provided its prior no-objection thereof in writing. 3. In carrying out the Project, the Recipient, through MAF, shall prepare and furnish to the Association for its review and comments, draft regulations and administrative instruments on forest sector policy reform, which draft regulations and administrative instruments shall include the principles of PSFM and REDD+ implementation, the establishment of FLM Framework Agreements, including benefit sharing and conflict resolution mechanisms, all under terms of reference satisfactory to the Association, and thereafter, taking into account the Association’s views and comments thereon, approve and disseminate such regulations and administrative instruments in a manner and substance satisfactory to the Association. 4. In carrying out the Project, the Recipient, through MAF, shall maintain in each PAFO of each participating province a financial management system satisfactory to the Association. Jul 05, 2019 template Page 34 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Conditions Jul 05, 2019 template Page 35 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) VIII. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY: Lao People's Democratic Republic RESULT_NO_PDO Additional Financing for Scaling Up Participatory Sustainable Forest Management Project Project Development Objective(s) To strengthen participatory sustainable forest management in targeted production forest areas, and forest landscape management in targeted provinces Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 To strengthen participatory sustainable forest management in targeted production forest areas (Action: This Objective has been Revised) Forest area brought under management plans (CRI, 0.00 975,000.00 975,000.00 976,211.00 Hectare(Ha)) Rationale: Action: This indicator has been Revised Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. People in forest and adjacent community with monetary/ non-monetary 0.00 50,000.00 150,000.00 117,400.00 benefit from interventions (Number) Action: This indicator has Rationale: been Revised Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. Jul 05, 2019 Page 36 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) RESULT_FRAME_TBL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 People in targeted forest and adjacent community with increased benefits 0.00 53,000.00 53,000.00 58,700.00 from interventions- female (Number) Rationale: Action: This indicator Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. has been Revised People in targeted forest & adjacent community with increased benefit from interventions - 0.00 80,000.00 80,000.00 90,500.00 Ethnic minority/ indigenous (Number) Rationale: Action: This indicator Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. has been Revised Enhanced carbon storage from improved forest protection and restoration 0.00 14,227.00 14,227.00 35,000.00 (tCO2e) (Number) Rationale: Target was achieved and surpassed. Based on the actual value from May 2019 ISR, AF aims to further increase this achievement by the end of the project. The Action: This indicator has been Revised substantial increase is due to a change in calculation methodology occurred during 2018 Restructuring, as well as the increased contribution to national level emission reduction through more efficient law enforcement. Reduced emissions from 0.00 24,282.00 48,563.00 72,845.00 97,125.00 121,407.00 2,000,000.00 deforestation and forest Jul 05, 2019 Page 37 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) RESULT_FRAME_TBL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 degradation (tCO2e) (Number) Rationale: Action: This indicator has Target was achieved and surpassed. Based on the actual value from May 2019 ISR, AF aims to further increase the end target by the end of the project. The been Revised substantial increase is due to a change in calculation methodology occurred during the 2018 Restructuring, as well as the increased contribution to national level emission reduction through more efficient law enforcement. Rate of annual forest cover loss in targeted Production 0.27 0.23 0.23 0.18 Forest Areas (Percentage) Rationale: Action: This indicator has been Revised Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. and (to strengthen) forest landscape management in targeted provinces (Action: This Objective has been Revised) Forest area brought under forest landscape 0.00 2,680,000.00 2,680,000.00 3,380,170.00 management plans (Hectare(Ha)) Rationale: Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. The substantial increase Action: This indicator has been Revised is due to a change in calculation methodology agreed during 2018 Restructuring. The FLM area has been defined through remote sensing, field checks and consultations with stakeholders. PDO Table SPACE Jul 05, 2019 Page 38 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Intermediate Results Indicators by Components RESULT_FRAME_TBL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 Strengthening and Expanding PSFM in Production Forest Areas Beneficiaries who receive technical services of 0.00 80.00 80.00 83.00 adequate quality (Percentage) Rationale: Action: This indicator has Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. been Revised VFLC who receive services of adequate quality in Forest Management and 0.00 80.00 80.00 80.00 Village Livelihood Development (Percentage) Rationale: Action: This indicator Target has not been achieved yet under SUPSFM, so it will be maintained under AF. has been Revised Production groups who receive services of adequate quality in 0.00 80.00 80.00 95.00 Livelihood Support (Percentage) Jul 05, 2019 Page 39 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) RESULT_FRAME_TBL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 Rationale: Action: This indicator Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. has been Revised Participants who perceive the CEF process 0.00 80.00 80.00 97.00 is adequate (Percentage) Rationale: Action: This indicator has Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. been Revised Forest area under MoU- 0.00 975,000.00 975,000.00 976,211.00 PSFM (Hectare(Ha)) Rationale: Action: This indicator has Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. been Revised Forest area under MoU- 0.00 5,000.00 10,000.00 10,750.00 VFMA (Hectare(Ha)) Rationale: Action: This indicator has Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. AF aims to maintain this achievement. been Revised VLD Grants disbursed to villages and under 0.00 100.00 100.00 100.00 implementation (Percentage) Rationale: Action: This indicator has been Revised VLDGs are fully disbursed and AF will not finance new VLDGs. Aggregate forest area under certification as a 0.00 175,000.00 175,000.00 230,000.00 Jul 05, 2019 Page 40 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) RESULT_FRAME_TBL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 result of the project (Hectare(Ha)) Rationale: Action: This indicator has End target was increased to match the renewed national target set by the Government at 230,000 ha by 2022. With AF resources, the national target is expected been Revised to be met one year in advance. Forest area under certification (FSC Forest Management 0.00 85,000.00 90,000.00 112,000.00 Standard) as a result of the project (Hectare(Ha)) Rationale: Action: This indicator End target increase reflects renewed national targets, see above. has been Revised Forest area under certification (FSC Controlled Wood Standard) as a result 0.00 90,000.00 90,000.00 118,000.00 of the project (Hectare(Ha)) Rationale: Action: This indicator End target increase reflects renewed national targets, see above. has been Revised Forest Landscape Management (Action: This Component has been Revised) Number of FLM Frameworks developed 0.00 4.00 4.00 4.00 (Number) Jul 05, 2019 Page 41 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) RESULT_FRAME_TBL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 Rationale: Action: This indicator has The exercise was successfully completed in the 4 target provinces. AF will build on these frameworks to produce Forest Landscape Investment Plans. been Revised Areas with Forest Landscape Management 0.00 1,080,000.00 1,080,000.00 1,080,000.00 implementation plans (Hectare(Ha)) Rationale: Action: This indicator has been Revised Target was achieved and surpassed. The increase matches the actual value from May 2019 ISR. The AF aims to maintain this achievement. Forest Landscape Investment Plans 0.00 4.00 approved (Number) Rationale: Action: This indicator is There has been no investment plan developed to sequence and locate public and private projects within a landscape of different forest and land uses. The New investment plans will highlight tradeoffs among land uses within the landscape, to help reduce risks to investment. Enabling Legal and Regulatory Environment Reforms in forest policy, legislation or other regulations supported No Yes Yes Yes Yes Yes Yes (Yes/No) Rationale: Action: This indicator has This being a yes/no indicator, AF aims to remain engaged in the policy space and will continue to support reform until the additional financing closing date. been Revised Investigations of breaches of forestry law 0.00 4.00 5.00 10.00 and wildlife and aquatic Jul 05, 2019 Page 42 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) RESULT_FRAME_TBL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 law referred to criminal courts (Percentage) Rationale: Action: This indicator has Target was achieved and surpassed. Based on the highly satisfactory performance of this component, the target was doubled for AF, also considering the been Revised increased inter-agency coordination envisaged under AF that will likely increase the number of successful investigations. Investigation of breaches of forestry law and wildlife and aquatic law referred to criminal courts, 0.00 20.00 proportion of which are joint inter-agency investigations (Percentage) Rationale: Action: This indicator Despite the highly satisfactory performance under SUPSFM, the last ISR recommended more coordination among law enforcement agencies to effectively tackle is New the still widespread wildlife and timber crime in Lao PDR STEPP field activities resulting in enforcement 0.00 80.00 80.00 80.00 80.00 action (Percentage) POFIs in compliance with DOFI best management 0.00 17.00 18.00 18.00 18.00 practice operating procedures (Number) IO Table SPACE Jul 05, 2019 Page 43 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Monitoring & Evaluation Plan: PDO Indicators Mapped Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Definition This indicator measures the Production Forest Area where government-approved PSFM plans prepared with support from the project are under implementation. The project aims to meet the target by preparing PSFM plans Annual Annual Report for Production Forest Forest area brought under management starting year DOF Areas inside the project plans 3 area. No other forestland areas such as Protection Forests will be covered by PSFM plans, as they are excluded from project scope. Methodology & limitations The total area under PSFM plans is determined by summing up the areas provided in Jul 05, 2019 Page 44 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) individual PSFM plans prepared with support from the project. The number of beneficiary households is derived from project records. The beneficiaries are limited to people who receive direct benefits from Village Livelihood Development Grants. This makes the benefit The number of people in more tangible and the households implementing measurement can be Annual People in forest and adjacent community village sub-projects with done in a more precise starting year Annual Report DOF with monetary/ non-monetary benefit funds available from Village manner. First 4 from interventions Livelihood Development measurement is done in Grants provided by the year 4, which is when project. the first VLD Grants became available, and at close. The number of people is estimated by multiplying the number of beneficiary households with the average number of people in rural households according to 2015 census. The Jul 05, 2019 Page 45 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) number of beneficiaries will by cumulative until the maximum number of beneficiaries allowed by the available funds is reached. Thereafter the number of beneficiaries is expected to remain largely unchanged since they continue to benefit each subsequent year. The theory of change of the project centers on the need for both benefits fro PSFM and alternative livelihoods that can reduce pressure on forest and land. The number of beneficiary households is derived from project The number of female in records. The number of households implementing Annual people is estimated by People in targeted forest and adjacent village sub-projects with Annual starting year multiplying the number DOF community with increased benefits funds available from Village Report 4 of beneficiary from interventions-female Livelihood Development households with the Grants provided by the average number of project. people in rural households according to 2015 census. The Jul 05, 2019 Page 46 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) number of beneficiaries will by cumulative until the maximum number of beneficiaries allowed by the available funds is reached. Thereafter the number of beneficiaries is expected to remain largely unchanged since they continue to benefit each subsequent year. The theory of change of the project centers on the need for both benefits from PSFM and alternative livelihoods that can reduce pressure on forest and land. The number of beneficiary households The number of people is derived from project (ethnic minority/ records. The number of indigenous) in households People in targeted forest & adjacent Annual people is estimated by implementing village sub- Annual community with increased benefit starting year multiplying the number DOF projects with funds Report from interventions -Ethnic minority/ 4 of beneficiary available from Village indigenous households with the Livelihood Development average number of Grants provided by the people in rural project. households according to 2015 census. The Jul 05, 2019 Page 47 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) number of beneficiaries will by cumulative until the maximum number of beneficiaries allowed by the available funds is reached. Thereafter the number of beneficiaries is expected to remain largely unchanged since they continue to benefit each subsequent year. The theory of change of the project centers on the need for both benefits from PSFM and alternative livelihoods that can reduce pressure on forest and land. The potential to enhance carbon storage Enhanced carbon storage is estimated based on (i.e., removal of carbon theoretical models of from atmosphere and MRV Report biomass growth and storage in biomass) from Baseline and Enhanced carbon storage from improved and NPMO carbon sequestration in DOF, NPMO improved forest protection closing. forest protection and restoration (tCO2e) assessment agroforestry sub- and restoration (i.e., projects established with planting, regeneration) in funds from VLD Grants. Production Forest Areas Based on the available covered by the project. models the sequestration with all Jul 05, 2019 Page 48 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) agroforestry sub- projects under implementation is established at 2,500 tCO2e per month. The total sequestration is established by multiplying the monthly sequestered amount by the average duration of agroforestry sub- projects and percentage of sub-projects that are under implementation at the time of estimation. The average duration and percentage of sub-projects under implementation are estimated by project staff drawing on project records. Methodology & Reduction of emissions limitations from deforestation in the REDD MRV The emissions from Production Forest Areas Baseline and Reduced emissions from deforestation Report and forest degradation are DOF targeted by the project, closing. and forest degradation (tCO2e) NPMO study established by and from forest estimating changes in degradation in the entire the volume of illegal country. logging and the Jul 05, 2019 Page 49 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) associated emissions due to more efficient law enforcement. The amount of illegal logging is established by working backwards from the changes in customs statistics in key export countries (Vietnam and China) to theoretical logging sites. The proportion of the change attributable to SUFORD-SU (40%) is assumed to be proportionate to the amount of funds provided by the project of the entire forest law enforcement budget in the country in 2016, which is when the key piece of legislation the Prime Minister’s Order No. 15 (PMO 15) on Strengthening the Strictness of Timber Harvest Management and Inspection, Timber Transport and Business was issued. Jul 05, 2019 Page 50 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) The amount of emissions is estimated using standard conversion factors. The emissions are estimated to occur fully at time of harvest following an established international practice (committed emissions). The amount is estimated to be 4.5 million tCO2e nationwide, of which SUFORD-SU’s contribution is established at 1.8 million tCO2e (40 %, see above). The emissions from deforestation are estimated by establishing the reduction in forest area by remote sensing and multiplying it by average carbon content (as per available literature) in the deforested areas. The potential increase of forest area is excluded from the analysis due to lack of reliable assessment Jul 05, 2019 Page 51 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) methodologies. The assessment will be carried out in the first half of 2018. The achievement will be assessed in a PFA Forest Cover Change The rate of annual forest Closing Forest Cover Assessment to be Rate of annual forest cover loss in cover loss in Production DOF (year 5) Assessment conducted in the 1st half targeted Production Forest Areas Forest Areas targeted by of 2018 establishing the the project. rate of annual forest loss during 2015-2017. This indicator measures the area under plans for Forest Landscape Management (FLM) in Bokeo, Luang Namtha, Oudomxay and Xayaboury provinces. FLM The forest landscape refers to all forest management area will Annual management and land use be defined through Forest area brought under forest starting year Annual Report DOF activities done in the FLM remote sensing, field landscape management plans 4 area in a manner where checks and consultations activities impacting across with stakeholders. management entities are conducted in a coordinated manner. The Forest Landscape Management Area (FLMA) comprises the total area of three Forest Jul 05, 2019 Page 52 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Categories and the “good” forests outside them. The FLMA is defined at the provincial level. The three Forest Categories include Production Forest Areas (PFA), Protection Forests (PF) National Protected Areas (NPAs), Protection Forests at Provincial and District Levels as well as Protected Areas at Provincial and District Levels. “Good” forests are defined as areas with (i) a clearly detectable canopy in aerial photographs, and (ii) no signs of large-scale shifting cultivation or deforestation since 2000. In addition, small unconnected forest patches surrounded by other land uses (fallow, agriculture, shifting, etc.) are excluded. “Pilots” refers to planning FLM in the first four provinces. Jul 05, 2019 Page 53 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) ME PDO Table SPACE Monitoring & Evaluation Plan: Intermediate Results Indicators Mapped Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Percentage of the direct beneficiaries among the village population who perceive that they receive The indicator will be technical services of measured by conducting Year 5 and Perception- Beneficiaries who receive technical adequate quality. Direct a perception-based DOF closing based survey services of adequate quality beneficiaries include survey among project members of the Village beneficiaries. Forest and Livelihood Committee, and those who receive VLD Grants. Percentage of VFLCs who perceive that the project The indicator will be has delivered services of VFLC who receive services of measured by conducting adequate quality in Forest Year 5 and Perception- adequate quality in Forest a perception-based DOF Management and Village closing based survey Management and Village Livelihood survey among selected Livelihood Development. Development VFLCs. Percentage of production The indicator will be Production groups who receive Perception- groups who receive Closing measured by conducting DOF services of adequate quality in based survey services of adequate a perception-based Livelihood Support quality in livelihood survey among selected Jul 05, 2019 Page 54 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) support. Relevant VFLCs. production groups include those which have as members one or more villagers benefiting from VLD Grants provided by the project. Perception-based survey among villagers who Percentage of participants have participated in the who perceive the CEF process. The survey Community Engagement sample shall include Framework (CEF) process is Beneficiary Year 5 and representatives from Participants who perceive the CEF process adequate. Participants perception DOF Closing Village Forest and is adequate refer to all villagers who survey Livelihood Committee have participated in various and population groups stages of the CEF process. such as women, and This indicator serves as the ethnic minorities, if CE indicator. present in the village. MoU-PSFM refers to PSFM The area under MoUs- Forest Management PSFM is established Agreement signed between based on reports Annual Annual Report DOF Forest area under MoU-PSFM the villages (located fully or provided by Provincial partially inside PFAs) and Forestry Sections. Under the government. The area the restructuring, refers to the portion of tbaseline has been set at Jul 05, 2019 Page 55 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) village territory that is zero and the target has inside PFA boundaries. been reduced to account MoU is the instrument for the inaccessibility of selected by the some areas for security government to strengthen reasons (see PDO 1). tenure in Production Forest Areas. Methodology & limitations The MoU -- which is the Village Forest Definition Management Agreement (VFMA) -- is MoU-VFMA refers to the instrument selected Village Forest Management by the government to Agreement signed between strengthen tenure in the villages and the village forests. The government. The area target was reduced Division of Village refers to the portion of Annual Annual Report because after the Forest area under MoU-VFMA Forestry and DOF. village territory allocated mapping done by as Village Forests inside or SUFORD-SU the area of outside PFAs comprising Village Use Forests in Village Use Forests, Village and around the PFAs of Protection Forests and the two pilot provinces Village Protected Areas. turned out to be significantly less than the original target. Measurement will be done in year 5 and at close because Village Forest Management Jul 05, 2019 Page 56 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Plans, which are the basis for preparing VFMAs, became available only towards the end of year 4. VFMAs cannot be signed unless the Village Forest Management Plans are available. The area under MoUs- VFMA is established based on reports provided by Division of Village Forestry and DOF. VLD Grants disbursed to villages and under implementation. Each village receives one VLD The proportion of Grant which is divided funding in sub-projects among several village sub- Annual under implementation is VLD Grants disbursed to villages and projects. Disbursement starting DOF Annual Report estimated based on under implementation refers to releasing VLD year 4 reports provided by Grant funds to villagers for provincial authorities. implementing their sub- projects. They are considered to be under implementation once the villagers have started to Jul 05, 2019 Page 57 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) spend funds. The percentage indicates the proportion of village sub- projects under implementation compared to the total number of proposed village sub- projects. VLD Grants are funds provided under the project for village livelihood development. Total forest area under The forest area meeting certification as a result of the FSC requirements is technical or financial determined through support provided by the audits by a third-party project. Forest area refers certifying body. Before to 3 zones inside PFAs: audits the certificate production forest, HCV holder, in this case DOF, zone, and the Village Use declares the area they Annual Forest. Forest certification propose for certification. Aggregate forest area under certification starting DOF is a mechanism for forest FSC Report After completing the as a result of the project July 2018 monitoring, tracing and audit, the certifying labeling timber, wood and body confirms whether pulp products and non- the area meets the timber forest products, requirements. The where the quality of forest confirmed area of management is judged certified forest is against a series of agreed sourced from the audit standards. The standards report. applied in Lao PDR are the Jul 05, 2019 Page 58 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) FSC Forest Management Standard and the FSC Controlled Wood Standard. FSC Forest Management Standard certification confirms that a specific area of forest is being managed in line with the FSC Principles and Criteria (https://us.fsc.org/en- us/what-we-do/mission- and-vision). FSC Controlled Wood Standard confirms that wood products do not originate from unacceptable sources (https://us.fsc.org/en- us/certification/controlled- wood). Total forest area under The forest area meeting certification as a result of the FSC requirements is technical or financial determined through support provided by the audits by a third-party Annual Forest area under certification (FSC project. Forest area refers certifying body. Before starting FSC Report DOF Forest Management Standard) as a to 3 zones inside PFAs: audits the certificate year 4 result of the project production forest, HCV holder, in this case DOF, zone, and the Village Use declares the area they Forest. Forest certification propose for certification. is a mechanism for forest After completing the monitoring, tracing and audit, the certifying Jul 05, 2019 Page 59 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) labeling timber, wood and body confirms whether pulp products and non- the area meets the timber forest products, requirements. The where the quality of forest confirmed area of management is judged certified forest is against a series of agreed sourced from the audit standards. The standards report. applied in Lao PDR are the FSC Forest Management Standard and the FSC Controlled Wood Standard. FSC Forest Management certification confirms that a specific area of forest is being managed in line with the FSC Principles and Criteria (https://us.fsc.org/en- us/what-we-do/mission- and-vision). FSC Controlled Wood Standard confirms that wood products do not originate from unacceptable sources (https://us.fsc.org/en- us/certification/controlled- wood). Total forest area under Annual The forest area meeting Forest area under certification (FSC certification as a result of starting the FSC requirements is DOF Controlled Wood Standard) as a result FSC Report technical or financial year 4 determined through of the project support provided by the audits by a third-party Jul 05, 2019 Page 60 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) project. Forest area refers certifying body. Before to 3 zones inside PFAs: audits the certificate production forest, HCV holder, in this case DOF, zone, and the Village Use declares the area they Forest. Forest certification propose for certification. is a mechanism for forest After completing the monitoring, tracing and audit, the certifying labeling timber, wood and body confirms whether pulp products and non- the area meets the timber forest products, requirements. The where the quality of forest confirmed area of management is judged certified forest is against a series of agreed sourced from the audit standards. The standards report. applied in Lao PDR are the FSC Forest Management Standard and the FSC Controlled Wood Standard. FSC Forest Management certification confirms that a specific area of forest is being managed in line with the FSC Principles and Criteria (https://us.fsc.org/en- us/what-we-do/mission- and-vision). FSC Controlled Wood Standard confirms that wood products do not originate from unacceptable sources Jul 05, 2019 Page 61 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) (https://us.fsc.org/en- us/certification/controlled- wood). FLM framework at the provincial level comprises (i) the conceptual plan for managing the FLM area, (ii) map defining the FLM area, and (iii) organization coordinating FLM management by involved entities following on the national REDD+ strategy. The target in each province is met once the conceptual Reporting is based on Annual Annual Report DOF Number of FLM Frameworks developed plan and the FLM map are DOF reports. available, the organization to be in charge has been identified, and the conceptual plan and the FLM map have been introduced to the representatives of the organization. The provincial FLM framework is based on an overall FLM framework template. Forest landscape (as Annual The information is Areas with Forest Landscape DOF defined under PDO starting Annual Report collected from entities Management implementation plans indicator 2) covered by 2018 managing land units Jul 05, 2019 Page 62 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) implementation plans. inside Forest Landscape These may include annual Management area. plans, general long-term plans or short-term operational plans depending on the planning approach in the involved entities. This indicator measures the approval of simplified Forest Landscape Investment Plans. The process leading to approval will include multi- stakeholder consultations at national and landscape level, agreed coordination arrangements, Project Annual Forest Landscape Investment Plans identification of investment completion Annual Report. DOF. Report. approved opportunities, policy . reforms and priority practices that would enable private and public investments to complement one another. The Forest Landscape Investment Plans will be a component of, or input to, the “Provincial Forest Strategic Plan” as noted in Jul 05, 2019 Page 63 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) the Forest Law Articles 12 and 13. The Landscape Investment Plan will be endorsed by PAFO, DOF and ideally approved by the Provincial Governor. Description of reforms in forest policy, legislation or other regulations supported by the project. Support comprises Information collected Reforms in forest policy, legislation or Annual DOF formulation of proposals Annual Report through project reports. other regulations supported for policies, legal acts or guidelines, conducting relevant analyses, and contributing to relevant working groups. Data will be collected from DOFI records. The original related indicator (now replaced with this indicator in the Percentage of May 2018 restructuring) Investigations of breaches of forestry law investigations of breaches Annual Annual Report did not capture the DOFI and wildlife and aquatic law referred to of forestry law and wildlife salient points of criminal courts and aquatic law referred to investigative activity. It criminal courts. referred only to Forestry Law and excluded the Wildlife and Aquatic Law which is a critical area of enforcement carried out Jul 05, 2019 Page 64 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) under SUFORD-SU. Also, it did not distinguish between the types of investigative "conclusions". Administrative procedures are considerably easier to conclude than cases referred to criminal courts, which are considered more important in that they typically deal with more serious breaches. Accordingly, the indicator scope has been broadened to cover activities related to Wildlife and Aquatic Law. At the same time, it has been given a sharper focus by limiting it to cases that reach criminal courts. The outcome of the court cases is left out of the indicator scope as the project is not directly involved and cannot contribute to the outcome. Jul 05, 2019 Page 65 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) This sub-indicator Investigation of breaches of forestry measures the proportion of DOFI to coordinate and law and wildlife and aquatic law investigations conducted Closing Annual Report record Lao-WEN and P- DOFI, Lao-WEN, P-WEN referred to criminal courts, jointly by different law WEN operations. proportion of which are joint inter- enforcement and agency investigations intelligence agencies. Methodology & limitations Share of human resources Data will be collected involved in activities from DOFI records. In resulting in enforcement the past, forest law action; figure based on enforcement was DOFI internal evaluation emphasizing crime report finalized in April prevention through 2019. Enforcement education. During activities include detection, SUFORD-SU, a new disruption, dismantling, strategy putting more STEPP field activities resulting in Annual Annual Report DOFI discouragement, and emphasis on enforcement action ultimately prosecution. enforcement has been Field activities refer to adopted by DOFI. activities undertaken by Enforcement activities provincial and district staff. include detection, Enforcement includes disruption, dismantling, patrolling but excludes discouragement, and education and ultimately prosecution. administration. Under SUFORD-SU the main tool for enforcement is STEPP (the Strategic and Jul 05, 2019 Page 66 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Tactical Enforcement Patrol Program) which is implemented through systematic patrolling. To indicate whether the proposed shift towards enforcement is taking place, the indicator measures the proportion of human resources dedicated to patrolling as opposed to education and administration. Compliance will be assessed based on DOFI evaluation audits done separately for each province on a monthly Definition basis. The annual score is the average of POFIs in compliance with DOFI best Number of provinces (out monthly scores during Annual Annual Report DOFI management practice operating of the total of 18 the fiscal year. The procedures provinces) that pass the evaluation is done by DOFI annual compliance the DOFI Information audit. Management Division whose initial assessment is endorsed by DOFI Director General. The evaluation is done on a scale from 1 to 5 where Jul 05, 2019 Page 67 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) 1 indicates full compliance and 5 poor performance. An average score of 4 or higher indicates failure to pass the audit. Evaluation covers eight areas of work including 1) Patrol Activity, 2) Timber Seizures 3) Wildlife Seizures, 4) NTFP, 5) Land illegally cleared, 6) Equipment, 7) Investigations, 8) Community Education Activity. In addition, the quality of written reports is evaluated. The limitation of the indicator is that it captures compliance with procedures but not the direct outcome. ME IO Table SPACE Jul 05, 2019 Page 68 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) Jul 05, 2019 Page 69 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) ANNEX 1: DETAILED COMPONENT DESCRIPTION Component 1: Strengthening and Expanding PSFM in Production Forest Areas 1. The objective of Component 1 is the same as originally planned, which is to strengthen and expand participatory SFM in PFAs. Under SUPSFM, about 20,600 households have benefited from individual VLD grants that were distributed in 666 target villages. 2. Activities under Subcomponent 1A (Developing Partnerships to Increase Implementation Capacity) were designed to be carried out during project year one under SUPSFM. The AF would not continue to fund activities under this sub-component, although capacity development activities are integrated into other components. 3. Activities under Subcomponent 1B (Community Engagement in PSFM and Village Livelihood Development) financed under the AF are organized into two groups of activities: (a) Community Engagement in Participatory Sustainable Forest Management Activities; (b) Village Livelihoods Development activities. 4. Community Engagement in Participatory Sustainable Forest Management activities: (a) Timber legality and certification support [enhanced and scaled up activity]: (i) Expansion of SFM certification from the current level of 108,408 ha to 230,000 ha in line with the target set in the GOL Green Growth Development Policy Operation. The expansion will target the Savannakhet and Khammouane provinces where the current certified area lies as well as Bolikhamxay and Vientiane provinces where additional areas suitable for certification have been identified. Besides scope (area) expansion, regular annual audits will be conducted in January 2020 and 2021. (ii) If timber harvesting in the SFM certified areas is allowed on an exceptional basis by the Government, the AF will support information campaigns for Chain-of-Custody (CoC) certification in the national wood industry with a focus on those companies that were awarded a CoC certificate during SUFORD AF (2009-2013) (linked to component 3). (iii) Contribute to the Timber Legality Assurance System (TLAS) process by pilot testing the control mechanism for the supply chain in PFAs and also to support the implementation of timber legality systems of salvage timber from conversion forests. The work will be conducted in close coordination with the lead agency for TLAS development, the FLEGT Standing Office (linked to subcomponent 3A). (b) The project will help ensure that private sector investment opportunities are environmentally and socially sound by financing assessments to identify appropriate land in PFAs that is suitable for forest plantations; in the Lao context these lands in PFAs would be barren and degraded lands, Jul 05, 2019 template Page 70 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) locations where there is community interest and buy-in, and areas where there is assurance that plantations will not replace traditional livelihood activities and not result in clearing natural forests. [enhanced activity] (c) Support for selected Village Forest Management Plans (VFMPs): The project has developed VFMPs that have been approved by district authorities for 31 villages in Bokeo and Luang Namtha provinces and focus will be on preparing Village Forest Management Agreements. The project will support the maintenance and management of selected sites and develop them into learning sites suitable for training and awareness raising and potential future village forest investment. [enhanced activity] (d) The re-measurement of sample plots will continue. The project has established around 30 Permanent Sample Plots in each province most of which have already been remeasured once. Each assisted natural regeneration site also includes sample plots that will be measured in selected locations to compare forest regeneration, growth and yield in forests with and without assisted natural regeneration to calculate annual allowable cuts for each PFA. [enhanced activity] (e) Data, information, mapping and knowledge products generated over the last years will be systematically compiled, digitized and integrated in a management information system that would allow the Government to access and use the data for forest management and investment development. It would also allow the Government to provide selected data sets to interested private investors and other public sector projects. [enhanced activity] 5. Village Livelihood Development (VLD) Activities: (a) The current extension, monitoring, and learning activities will be enhanced to support the village projects funded with the VLDGs. To maximize effectiveness, the focus will be on the most popular products so that extension activities can reach a large number of participants. As such, technical support would be enhanced and would continue to be provided to livelihoods production groups as identified in the agreed Community Action Plans (CAPs) with participating communities in PFAs and Village-Use Forest areas, specifically on extension and monitoring for VLDG implementation, and learning sites for NTFPs and white charcoal; No new funds would be directed to the VLDGs. There are three specific activities [enhanced and scaled up activity]: i. To the extent feasible, extension will be combined with farmer-to-farmer exchange visits so that the training could be arranged on field sites where the farmers demonstrate best practices, which will help ensure that the VLD funds already distributed under SUPSFM (100 percent have been disbursed) generate recurrent benefits. ii. Sites for NTFP cultivation and processing will be identified and will receive financial support to become learning/extension sites for training and orientation to showcase best practices and lessons learned. The project will support the maintenance and management of selected sites for training and awareness raising. iii. Learning sites for May Tiew (Cratoxylum cochinchinense and C. formosum) white Jul 05, 2019 template Page 71 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) charcoal plantations in Bolikhamxay and Vientiane provinces to showcase best practices, lessons learned and manage selected sites for training and awareness raising. (b) Improve the value chain of selected products by working with specific producer groups, establishing the link to interested SMEs, private initiatives, buyers and investors to establish productive partnerships. Collaboration with the Bank-financed Lao PDR Competitiveness and Trade Project is envisaged to enable synergies and greater impact. Joint action will be sought with Pillar C in that project, the “Business Assistance Facility,” under that project as relevant. The facility is now set up and active, and is designed to provide free-of-charge advisory services to address business operations and market access challenges, and to provide matching grants for 50 percent of the external technical service costs to stimulate growth and transformation for SMEs. Special attention will be given to the participation of female-headed households and women entrepreneurs/farmers in market linkage activities. [enhanced activity] Component 2: Forest Landscape Management 6. The objective of component 2 is the same as originally planned, which is to pilot forest landscape management. SUPSFM has worked in four provinces, Bokeo, Luang Namtha, Oudomxay and Xayaboury, to support provincial authorities to determine the forest landscape area, and position the provincial REDD+ Task Forces as the coordinating bodies for integrating a forest landscape management framework template into the provincial REDD+ Action Plans. 7. Under AF, this component will build on the existing frameworks to finance the development of Forest Landscape Investment Plans. This work will set the stage for expected programmatic follow-on investments such as the Landscape and Livelihood Project (P170559), and the upcoming Emission Reduction Purchase (P165751) under the Bank’s REDD+ Forest Carbon Partnership Facility (FCPF), as well as private sector participation to support maximizing finance for development. The component will build on the ongoing relationship built among MAF/DOF, the Bank, IFC and private investors, and a sister project with the Burapha company supported by IFC under the Forest Investment Program. Participation by other partners will be sought. 8. Through the process of preparing the Forest Landscape Investment Plans, the component will seek to consult with and bring relevant stakeholders and decision makers together to agree on suitable coordination arrangements, investment opportunities and policy reforms and priority practices that would enable private and public investments for priority investments to take place and complement one another. Landscapes would be selected based on existing frameworks and the potential for public and/or private investments to create opportunities for building natural capital and green job opportunities, for example from forest plantations, nature-based tourism, or forest-friendly agriculture. 9. Activities under subcomponent 2A (Developing Methodologies and Frameworks for Forest Landscape Management) have been carried out under SUPSFM. The AF would not continue to fund activities under this sub-component and will focus on Subcomponent 2B (renamed “Establishing Forest Landscape Investment Plans). 10. Activities under Subcomponent 2B: Establishing Forest Landscape Investment Plans: Jul 05, 2019 template Page 72 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) (a) Prepare Forest Landscape Investment Plans in selected landscapes, building on achievements in Sub-component 2A including the Landscape Management Frameworks developed under SUPSFM in four provinces and centrally. The Forest Landscape Investment Plans will be a component of, or input to, the “Provincial Forest Strategic Plan” as noted in the Forest Law Articles 12 and 13.22 Forest Landscape Investment Plans will be endorsed by PAFO, DOF and ideally approved by Provincial Governor. The content for the Forest Landscape Investment Plans would be enhanced by the set of activities described below [enhanced activity]. (b) Assessments to support landscape investment development [enhanced activity]: (i) Assessment of forest land uses will be carried out across all forest categories in the selected landscapes to identify potential suitable industrial and smallholder forest plantation areas, high conservation value forests, infrastructure development plans, and land use in buffer zones to support investment dialogue with stakeholders. (ii) Assessment identifying overlapping and adjacent development activities, and minimizing and mitigating impacts of said development activities on selected forest landscape areas. (iii) Assessment of cross-sectoral policy issues related to forest landscape coordination, to identify conflicting regulations and legislation and possible reforms. (iv) Assessment of current institutional settings and management structures of different forest types and identify possibilities for improvement to guarantee better institutional coordination including (1) Division of tasks between central, provincial, district, commune and village-level institutions; (2) Institutional arrangements for different forest land-uses; (3) Management arrangements at the Forest Management Unit (FMU) level [i.e., cross district PFAs, conservation forest areas (i.e. protected areas) and protection forest areas]. (v) Assessment of gender inequalities and actions to address them, including recommendations for project design. (c) Support dialogues, consultations, and coordination platforms on landscape investment and land use [enhanced activity]: (i) Consultations will be undertaken with the various stakeholders involved in planning, preparation and implementation of large-scale projects having significant impacts on the forest landscapes. e.g. nature-based tourism, industrial forest plantations, large wood industries sector investments like pulp mills and other economic activities and priority investments. The consultation process would assess existing master plans, sector plans and identify how these will affect and benefit all forest land-uses in the forest landscape. (ii) As a result, specific investment actions can be defined in and around different forest types (PFAs conservations forests (or national protected areas), protection forests) within the broader landscape that would minimize negative social and environmental impacts on forests and natural capital and enable priority economic activities to be implemented in a 22According to Article 13, main components of Provincial Forest Strategic Plans are as follows: 1. Overall situation of the works on forest and forestland such as development of policy for forest and forestland, situation of management, preservation, development, promotion and utilization of forest and forestland, important roles of forest and forestland for national socio- economic development and climate change; 2. Challenges and directions for development of forest and forestland; 3. Policy, action plan, projects and priority implementation plan for forest and forestland; 4. System for implementation, monitoring and evaluation. Jul 05, 2019 template Page 73 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) sustainable way. (iii) Establish a coordination platform between sectors and development partners to identify synergies and complementary activities in priority forest landscapes and to improve impact of aggregated investments frameworks and pilot in one strategically important forest landscape (For example, Khammouane province faces pressure, and opportunities, from new forest plantations and pulp mill investments, designation of conservation forest areas as potential national parks status or world heritage sites, PFAs with forest management certification and national and provincial protection forest areas). (iv) Technical coordination with the REDD Project Management Unit in DOF through consultancies and operating costs to ensure that REDD objectives are reflected in SUFORD and forest sector programs and that an anticipated 2020 Emissions Reduction Purchase Agreement will continue to be supervised effectively by DOF in its critical early implementation period. (d) Develop an integrated monitoring framework across land uses in the forest landscape. [enhanced activity] (e) Build capacity for landscape-scale action through leadership training for landscape champions in critical public institutions and management structures that can serve to advance forest landscape planning and management approaches in Lao PDR. [enhanced activity] Component 3: Enabling Legal and Regulatory Environment 11. The objective of component 3 is the same as originally planned, which is to improve the legal and regulatory environment for SFM. As such, SUPSFM has provided MAF departments with technical assistance in developing the concept for village forest management, the implementation framework for PSFM, the revision of the forest policy framework, and the development of reference emission levels (REL) for REDD+. It has also provided financial and technical support to forest law enforcement and combating illegal trade of timber and wildlife. The AF will build upon this work to achieve more by financing enhanced and scaled up activities under the two existing subcomponents 3A and 3B. 12. Subcomponent 3A: Strengthening Legal and Regulatory Frameworks. This work will continue as well as the development of regulations for timber revenue sharing that could support forest economies if and when the country’s logging ban is lifted. If the logging ban is lifted, the GOL will need to have a clear roadmap in place on how to proceed to guarantee that participatory SFM will generate benefits for communities, private initiatives and the overall economy (jobs, revenues) in a sustainable manner. This roadmap would help attract reputable CoC certified companies and define a common vision for the moment when the logging ban is lifted. Linked to Component 3, the AF will finance enhanced and scaled up activities under Component 1B to support operationalizing the country’s emerging timber legality assurance system (TLAS), especially where it touches on PFA management and salvage logging in conversion forests. 13. Activities under Subcomponent 3A include: (a) Continue legal, policy and regulatory development and inter-agency dialogue for SFM, interagency law enforcement collaboration, and the enabling environment for suitable private Jul 05, 2019 template Page 74 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) investments with social and environmental benefits. [enhanced activity] (b) Develop technical and legal guidelines for private sector engagement in forest plantation management and other economic activities to enhance the capacity of government, private stakeholders, and communities to apply best practices on environmental, social, and financial sustainability [enhanced activity]: (i) Define and develop guidelines, and deliver training to relevant government institutions on how to engage with the private sector in PFAs (public-private partnerships or auction platform), that would support the GOL to partner with reputable companies and that control mechanisms can be enforced. (ii) Develop a set of technical, legal and institutional requirements for private companies, addressing such topics as chain-of-custody certification, other market-based certification, technology transfer, capacity building, community consultation and participation, disclosure, grievance redress, ESIA implementation, timber registration, and trading of carbon credits, etc.. (iii) Develop recommendations for a benefit sharing mechanism that are compatible with the Presidential Decree 1 (2012) on sharing of revenues from timber harvesting in the PFAs. (c) DOF would be supported in developing the legal framework for TLAS via DOF’s FLEGT Standing Office assisting MAF and MOIC in developing key policy reforms [enhanced activity]: (i) Revising relevant MAF regulations (0962, 0112, 2155, 2157) for controlling the supply chain in conversion areas and production forest. (ii) Revising MAF regulations for tree plantation management. (iii) Revising MAF regulation for harvesting enterprises, and (iv) Revising MOIC regulations (1726, 0336) for auction procedures. 14. Subcomponent 3B: Strengthening Forest Law Enforcement and Governance. This subcomponent component is designed to strengthen the administration of forest law enforcement by supporting the GOL in achieving its stated goal to achieve Rule of Law status, and to meet its international obligations, including CITES, and to enhance accountability, transparency and reporting standards of the Department of Forest Inspection (DOFI) and all 18 provincial offices of forest inspection. 15. Significant financial and technical support has been provided to forest law enforcement by strengthening the capacity of DOFI to plan and implement field operations, collaborate with partner agencies, and enhancing the capacity to conduct investigations and manage data. Support was also provided to DOFI for enforcement and implementation of the prime minister’s orders to strengthen enforcement of the logging ban and laws to combat the illegal trade in timber and wildlife. The AF will assist DOFI in strengthening collaboration with law enforcement partners, such as the environmental police and customs, in enhancing and fully implementing existing activities to promote the transition to intelligence-led law enforcement and deliver effective provincial, national and international forest and wildlife law enforcement outcomes. 16. Activities under Subcomponent 3B include: Jul 05, 2019 template Page 75 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) (a) Continue to support DOFI and Lao WEN agencies to strengthen inter-agency cooperation to detect, disrupt, dismantle and prosecute forest and wildlife related crimes at national and provincial levels [enhanced and scaled up activities] including: (i) Continue to implement developed systems and provide ongoing technical support to strengthen forest law enforcement. Develop clear mandates to act and implement supporting actions to detect, disrupt, dismantle and prosecute criminals. Monthly allocations to Provinces will be linked to performance indicators. (ii) Continue to support DOFI, and other law enforcement agencies to review the mandate of relevant policy to strengthen interagency cooperation to detect, disrupt, dismantle and prosecute forest (and wildlife) related crime. (iii) Continue support to DOFI to hold regular quarterly meetings of Lao-WEN to strengthen interagency cooperation to detect, disrupt, dismantle and prosecute forest (and wildlife) related crime. (iv) Continue to support DOFI, and the broader Lao-WEN network of which DOFI is a key part, to hold cooperation events in at least two provinces (activities, meetings and workshops) to understand interagency mandates, activities and cooperation. This will permit an understanding of the detection mechanisms and strengthen the informant networks and enforcement activities, perhaps with incentives, at the landscape level. (v) Continue to support forest law enforcement action on the ground. Emphasis will be on encouraging DOFI to work in concert with other law enforcement agencies. Develop clear mandates to detect forest related crime including clarifying the modes of detection, the role of the informants’ networks, inter-agency law enforcement collaboration and implement supporting actions to prosecute criminals. Monthly allocations to Provinces will be linked to performance indicators, from detection through to prosecutions. (vi) Continue building DOFI capacity, but also ensure that interagency law enforcement training is promoted at central, provincial and even district level. Training will be operationalized by focusing on learning by doing, with an emphasis on advanced techniques. (b) Continue building capacity for the DOFI Information Management System by revitalizing the implementation and use of law enforcement systems and tools to improve information collection and development of intelligence capacity within DoFI. It is important that the Information Management System is harmonized with the law enforcement systems of other law enforcement agencies, particularly the Division of Combating Natural Resource and Environmental Crimes (known as the Environmental Police), as well as with inventories. [enhanced activity] (c) Build capacity and support for Lao PDR to engage in multi- and bi-lateral agreements with Cambodia, China, Myanmar, Vietnam and Thailand, including collaboration through the Association of South East Asian Nations’ Wildlife Enforcement Network and CITES compliance, Jul 05, 2019 template Page 76 of 77 The World Bank Additional Financing for Scaling Up Participatory Sustainable Forest Management Project (P170810) which includes timber species. [enhanced activity] 17. Activities under subcomponent 3C (Creating Public Awareness for Climate Change and REDD+) have been carried out under SUPSFM which is now financed under REDD Readiness support projects implemented by DOF. The AF would not continue to fund activities under this sub-component. Component 4: Project Management, Learning and Investment Development 18. The National Project Management Office (NPMO) will continue to coordinate the various activities and implemented an efficient M&E system. The procurement program has been completed including civil works, goods and consultant services. During Additional Financing routine activities will continue as well as supporting investment prioritization and development. Activities include: (a) Continued project operating costs, coordination, management and fiduciary accountabilities including safeguards, financial, and procurement management, monitoring and evaluation, reporting including the completion report, and implementation support visits to provinces and districts by central level staff. [enhanced activity] (b) Operating costs (workshops, travel, information management) for engaging in dialogue with stakeholders and sectors on investment prioritization and development. [enhanced activity] (c) Dedicated learning to convene knowledge and institutionalize what has been learned and put that knowledge into action via new investment and policy. [enhanced activity] (d) The current PIU team will be maintained to supplement and build institutional capacity. International consultants will focus on policy and investment concept development, monitoring and documentation, while the national consultants mainly assist in field implementation. It is envisioned that a contract will be maintained for Indufor to carry over this TA support from the parent project to the AF period. [enhanced activity] (e) Maintain and reinforce continued supervision by replacing the worn-out pick-up trucks (6) used by the Project team. The current repair cost is high because of the high mileage on each truck (± 300,000 km). The National Consultants, each of whom oversees 3-6 provinces, will unavoidably be traveling long distances, and it is foreseen that procuring new vehicles is the more economical option. It is envisioned that these trucks will be transferred to the anticipated new Landscapes and Livelihood Project (P170559/P171406) at the end of the AF implementation period. [enhanced activity] Jul 05, 2019 template Page 77 of 77