Document of The World Bank FOR OFFICIAL USE ONLY Report No. 11666-BHU STAFF APPRAISAL REPORT BRUTAN THIiRD FORESTRY DEVELOPET PROJECT JUNE 7, 1993 rMlL Uf-1ML u LUe-Y Report No.:11666-BHU Type: (SAR) Title: THIRD FORESTRY DEVELOPMENT PRO, Author: VAN WERSCH, H. Ext. :81981 Room:D 9049 Dept.:SA1AG Agriculture Operations Division Country Department I South Asia Region This document has a restiicted distribufton and may be used by edpients only In the performance of ther ofcicul duties. its contents may not othernise be dbdosed witout Wodd Bank autorladou CURRENCY EQUIVALNT NW 1992) Nglrum (NO) - U19.036 US1 - Nu 280 WflCITS AND MEAU%= 1 mtw (a) 1.09 yad d 1 -sun kiomte (m.3) - 100 hb&ar a) are m * 10,000 mm - 2A.4m (se) 1 kiogram g - 2.2 p_ Ob) I rc t ton(mton) 1,000 kg - 2,2051bs 1 lcbk _mt e ) - 35.32 lcukfeet(cuft) 1 cubic mee On") = 2828c ft (for true boa memmualt) 1FierS) = 0.26pgol ABBIEVIATIONS. ACRtONYMS AND LOCALs1 AAC -Annual Aovable CUt AiR -Affemstoetftoatatinn BLC BhW Lvgf Co_fvd DAH - eabetof Animal Heaboanix of Mfinistsy of Agricultu FPO -Di;doa Ift Offieer DOA -Deparqumut of Agicutre of WMIBnt of Ag_cultr DOF -Deparhment of Foresay _ -D Dsngog-Didre Adhrar ERR -Eco_o ic Rae of Retum FAO -Food and Agcutwre Ornd"a of the Unied Natm MRMD -Forest Rmaos M ianqmat Dion of DOF FRR -aUmda Rate of Retur FM -Foret M__ogm Unit GDP -Grom Domestic Product GE? 41 r GOWo -Loc Addio Bbok of 300-1,000 HBomudu GIS .Geora*k Iformdtom Systm IFAD - _taadwal Fund for Agriuturl De _lpaat LCB -Locd C _mpalMre Uiog NEC -Nationa E1knfrwm Comm MAI -M An_nual ot (mm'/yr/b M&E M _oit and Evuao MOA -Midry of Agiculture AuPF -Ma Pi= fwr Frsay Devpo*t MTI -Miniy d Trade ad I _dary NRTI -Natuil Resoure Training Insdtiu P4. -per a_ne PFO -Prject Factin Oie PPD -4Pning and Pol Dicy n o Minitr of Agcultur PY Prc Year RGOD -Roya GovemmntwofllMtan RNR -Rmewal Natural Resore SDC -swim Devipua Cooperation SOB -StatinowntoFpenUb TA -Techn Aseistne TOR -Term of R_ofe UND? -United Nibs Devropue Progrmm Ub 3ALXK Jul I to june30 FOR OMCUL USE ONLY sr Ap4AL B UM3RT lER%D FORESUNRY DEMl]ELOEbUM F1RQ CM MDrANdDPRM=ChS ....RY ......................... v L $EC=X) AMi PROJECNr BAC1KGROUNdD A. Intr duction ........................ ...1 B. M£aroecononmicSetting ............... . 1 IL 2THE FORFQ RY SECMR A. Forest Resourcs ....t ...........................Rc .......... 4 B. Role of Forest Subsector in the Economy . 4 C Demndand Supply ....5 D. GovernmentPolicies .... . 6 E. Forest Legislation.... 7 F. Forestry Istitutions . . . 8 G. M{ai Subsector Isses.... 8 issues............. 9 Remedies .....11 HI Lassons from Past IDA Lending . ..13 L Rationae for IDA Involvement . . ... 14 m. THEROEv A Project Objectives and Scope .......16 B. ProjectrArea . ..16 C. Detailed Project Features ........ . ..17 National Forest ...a..ge..ei.t.. . . 17 Socal Forestry..... 19 Afforestation/Reforestation. ....... .. ...... 22 Institutional Strengeng . . .. . ... . . . ... 22 Environmental Aspects. .........................*..... 24 This project is based on the findings of an appraisal mission wbich visited Bhutau in May 1992, and a post-appraisal mission caed out in October 1992. The appraisal mission comprised Mess. S. Frelberg (Mison Leader), A Baneiee (IDA), R. Donovan, J. Kozub, D. bMer, ?L Stewart (consults) and E Oberhoier (SDC). The post- appraisa mission consisted of Messmr 0. Baykal and HL van Wersch (IDA). This document has a restricted distribution and may be used by recipients onl in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorizatio - D. P1red Coss and Financng .. .............................. 25 E. Procureiment ...... ................ .............. ... 26 F. Disbursenents .. ....................................... 28 0. FinancialM angement,Accounts and Audits ................... 29 Iv. PROJECT ]MPLEMENTAllON A. ProjectOrganizationand Mangement 30 Implementing Reeponsibility ....... . ..... ... ..... 30 Central Level Organization ................................. 30 FieldOrganization ................... 30 Forest Management Plans ............ ............... 31 Extension and Training ................. ... .. ..... 32 Resac .......................... 32 Tecbnical Assistance ....... 32 B. Pzoject Performance Review. . .............. .... 33 MIonitoig and Evaluation ... .. ...... 33 'Mid-Tern Review ..................... .... 33 Furest Sector DonorCoordination Meetings . .... 33 V. DUIINR BENEFI AND BS A. IncrentProdaction ................................ .. .. 34 B. Demand anid Markets ................. ............ 36 Demnand for Wood ........................ 36 The Market for Wood and Wood Products ..................... 36 Pies of Wood Products ............................... 37 C. Project Benefits and Justification.. .......... ..... ..... 38 Financial and Economic Benefits .......................... 38 Financial Adysis ......................... 38 Econonic Analysis ..................................... 39 Sensitivity to Changes in Costs and Benefits .................... 40 Initargble Benefits .............. 40 D. Einvironmental Impact . ......................... ........ 41 E. Impact on Women . . ....................... 41 0. ProjectRisks ......... 41 GV. Poetik .......^***¢-.....-*¢v^00@***J.s 43 YL AQREBEhffMD REAVCHED AdND BUECX)bfUFlADl... 43 3.1 ProjedcCostEstinates .......*..**......................... 25 32 Project FiacxglPln ...................... ........ 26 3.3 P ocreu. .en.Po. f i......... 27 M- 5.1 Expected Timber Yield from National Forest Management Units ..... 34 5.2 emena Production of National Forest Management Units ....... 34 53 Inrement Production from Afforestation/Reforestation . ......... 35 SA Incremental Production from Social Forestry Component ........... 35 5.5 Economic and Finncial Rates of Retum ....................... 40 5.6 Sensitivity of the ERR ................R... ... 40 1. Project Costs Table1: Forest MnagementPlanning ........................... 45 Table 2: Forest Managementmplem .. ................... 46 Table 3: Agroforesaty ..................... 9....*............ 47 Table4: 4Village Forest nagement .. ...................... 48 Table5: Afforestation ....................................... 49 Tble 6: Institutioal Strengtheng - Eastern Bhutan .............. .. 50 Table 7: SsttutionaiStrengtheging - Tbiphu ......g.............. . 51 Table8: SummaryAccountbyProjectComponent ... 52 Table 9. Summary Accounts by Year ........ .................... 53 2. Operational Schedule for Village Forest Maagement Panning .. ....... 54 3. IstutionaSt gningComponent .5........................... S 4. Technical Assistance .......................................... 56 5. Estinmated Schedule of Iisbursnents ........ ............................ 57 6. Key Perf)nmanceInd dicatoro ..................s. ................. 58 7. Supervidon1Plan ............................................. 60 8. Economic and Fiaunia Analysis Table 1: Aggregate Increase of Producdon of Major Forest Products .... 61 Table 2: Estimated Financial and Economic Prices of Logs, Sawnwood and ued ... ......................... .... .. 62 Table 3: Economic Costs and Benefits of Agroforestry and VMage Forest .anagement . ................. . 63 Table 4: Financal and Economic Costs and Benefits of National Forest Management Units .................... 65 Table 5: Fnancial and Economic Costs and Benefits of Afforestation/Reforestation .................... ... 67 Table 6: Combined Economic Costs and Benefits in Eastem Bhutan ......................*. 9*9**9..... 69 9. Selected Doants and Data Avaable in te Project File ............. 71 - iv - Deparment of Forestry ...........Oranztin............. 74 IBRD No. 24019 - Third Forestry Development Project BHUITAN lIRD POREST RY DIMMVXOPMENT PROJ1a Credit and Project Suary lBorrower lKgdom of Bhutan Amount: SDR 3.9 million (US$5.4 million equivalent) ,CoMnacier: Swiss Development Cooperation would provide US$2.7 million equivalent Standard, with a maturity of 40 years Project D~ription: The objective of the project is to support Bhutan's efforts to develop and implement an approach for sustainable protection, masnagement and use of its forest resources in line with its national development priorities. To acbieve this objective, the project would: (a) adopt multiple-use management of forest lands; (b) involve local people in managing the forest to meet their basic requirements, as well Ps in increasing the level of economic activity through social forestry practices; (c) rebabilitate degraded forests to maintain their economic and envronmental benefits; and (d) improve the planning and implementation cacty of government rganizations. The project consists of four components: (i) National Forest Management involving the planning and management of selected forests by the government; (ii) Social Forestry involving rural communities in managing forest areas allocated to them, and improving farm output by introducing tree planting on private lands; (iii) Afforestation/Reforestation involving rehabilitation of degraded forests on government lands; and (iv) Institutional Strengthening including support for improved planning and policy development, training and capacity building of the Department of Forestry (DOF) at the field as well as central leveL Benefits AD1 Riss: The project is expected to increase wood and non-wood producdon, reduce idsiminate felling of trees, uncontrolled grazing and burning, improve the value and productivity of forests, and encourage individual and community participation in the management of forests. The social forestry activities are expected to raise rural incomes by generating sigpificant streams of financial and economic benefits. The project would also provide for institutional strengthening of government entities involved in forestr activities to support a rational oach to forestry planning, strategy and policy formulation, and to strengthen their operational capability. It is expected that the comprehensive approach to forestry development -vi - introduced under the project will lend itself for later replication in other parts of the country. In order to ensure that the Forest M ement, Soial Forestry and Afforestation components take into consideration the appropriate protection of the environment and assure foest sustainability, the project provides for periodic environmental monitoring throughout the implementation of the project. The project is subject to two main risk elements. The first main risk is the possible delay in project implementation due to low absorptive capacity of DOF and the general lack of trained personnel in Bhutan. The institutonal support provided by the project and the human resource planning that went into the prepskration of the project will reduce this risk considerably. Further, the mid-term project review is expected to furnish the necessary feedback information to keep the project mageable and realistic in relation to the limited human resources available within the country. Ihe second risk is a possible poor response by the local population to the projeces initiatives. Since the project emphasizes people's participation in the management of forest resources, success will very much depend upon involvement of local villagers The project wil allocate considerable time and resources for adequate preparation and extension work to educate the public thus substan reducing the risk of poor participation. Egimate Proect Costs: Forei f gn --UST million- A. National Forest Mnagement 1.1 2.0 3.1 B. Socal Forestry 1. Agroforestry 02 0.5 0.7 2. Village Forest Management 03 0.3 0.6 C Afforestation/Reforestation 03 0.0 03 D. Institutional Strengthening 1.0 1.8 2.8 Base Cost 2 9 Physical Contingencies 0.1 0.1 0.2 Price Contingencies 0.7 05 1.2 Total Project Cost la -vii- Finacing Plan: Local EQrB9i ta - US$ milUon Kingdom of Bhutan 0.8 0.0 0.8 IDA 2.6 2.8 5.4 Swiss Development Cooperation Da 2A 27 Total EWm=d Disbus n: IDA Ff M 2 94SE 22 222 2001 = = Us$ million o Anmual 0.4 0.4 12 1.0 1.6 0.5 0.2 0.1 Cumulative 0.4 0.8 2.0 3.0 4.6 5.1 5.3 54 omiic Rate of R : 19% .Man: IBRD No. 24'19 - Tbird Forestry Development Project TlHIRD FOREYI DEVILOMEMM ERJC I. SECIO-R AND PRQJ=C BA1XGL A. Jnluctiou 1.1 Forests are the largest renewable natural resource in Bhutan. The Royal Government of Bhutan (RGOB) has been extremely conscioas of the potential for environmental damage from uncontrolled exploitation of forest resources and unsustainable land use practices. The Government has consistently emphasized conservation and natural resource management in its national development plans and is -..w -'.paring a comprehensive conservation strategy. Nevertheless, increasing humar X ) lvestock populations are beginning to exert appreciable pressure on forest and Land f ;urces in accessible forest areas, especially in eastern Bhutan. While resource degrada,on is not acute at existing population and extraction levels, it can become severe in 20-50 years. In the more populated areas, forests are degrading in quality due to overextraction of vahable species for fuelwood, timber and mior forest products, and uncontrolled grazing by livestock There is a growing demand for construction tmber in urban and rural areas as development activities increase and cash incomes rise. Development is also creating more wood-based industries dependent upon forest resources. And the road network is being expanded, providing greater access to-and pressure on-forests. 1.2 In line with its major concern for rational uanagement of forest and agricultural resources, and for curbing forest degradation and environmental deterioration, RGOB requested IDAXs assistance to implement a third forestry project in eastern Bhutan. While the two previous IDA forestry credits (Credit 1460-BHU and Credit 1900-BHU) were aimed at undertaig afforestation programs and in addressing a serious pest outbreak, the proposed Credit would substantially broaden the scope of IDA!s involvement in the sector. The project would assist RGOB to assess and manage forest resources, rehabilitate degraded forest lands through social forestry and afforestation, improve the viability of farming systems through farm forestry, and ensure the sustained supply of forest products to local inhabitants and wood-based industries. The proposed project would follow a sectoral development approach focusing on all aspects of forestry development in the eastern region of the country, which would be replicable in other areas of Bhutan in due course. B. MacrocconoiSing 13 Bhutan is a small landlocked country covering about 46,600 km2 in the eastem Himalayas. It is bordered on the west, south, and east by the Indian states of Siddrm, West Bengal, Assam, and Arunachal Pradesh, respectively, and on the north by the Tibetan -2- Autonomous Region of China Most of the landscape is mountainous, with elevations ranging from 160 m to 7,600 rn. The total population, of which 95% is rura}, is estimated at 0.6 million and growing at about 2.4% per annum The gross domestic product (GDP) per capita is below US$2001. Overall, the GDP growth rate in the last decade has been satisfactory at 6.3% p.a, well ahead of the annual population growth rate. Bhutan is one of the few countries in Asia that has a shortage of labor and there is virtually no unemployment. Exports have increased tenfold in the 1980s, to 30%o of GDP. Trade with India is essentially free. The bulk of exports go to India and consist mainly of cement, timber and forest products, and fruit crops. Prospects for exports to third countries are limited, but there is increasing potential for trade with Bangladesh and Germany. Imports consist primarily of nonwood fuel, manufactured goods and some basic foods. Although imports have grown rapidly, the current account deficit is now 15% of GDP, down from a high level of 40-60% of GDP in the early 1980s. 1.4 Administratively, the country is now divided into 20 districts (dzongkhas). The District Admninstrations report directly to the Ministry of Home Affauis through appointed District Administrators (dzongdags). 1.5 The agricultural sector is the mainstay of the economy, with farming, animal husbandry and forestry accounting for about 45% of GDP in 1990. Forestry alone contributes about 11% while the manufacturin and minin sectors account for about 8%. Servces, including transport, trade, construction, and government services, account for about 30%, with net rental income contributing 8% of total GDP. Although the majority of Bhutanese are farmers, there has been little development of irrigation and mechanization or adoption of improv;vd farming practices in agriculture. Shortage of skilled agricultural workers and of unskldled rural labor has made it all the more difficult to introduce modem techniques of cultivation in the country. Average farm size is small, 2 ha per household plus access to public or private forests for grazing, gathering fuelwood, fodder and shifting cultivation. The proportion of rural landless households is low, about 2%. Sharecropping or leasing is not yet widespread (about 20%o), but may be expanding due to restricted access to public land. Since the land reform of the 1950s, the statutory limit of 10 ha of arable land per household is strictly enforced. There has also been a steady shift in land use, particularly of broadleaf forests to cultivation and grazing. Livestock continues to be a vital part of the rural economy contributing milk, meat, manure and draft power. But the growing stock of cattle is also presenting serious problems of forest degradation since grazing is not controlled or regulated adequately in Bhutan. 1.6 Through successive five-year development plans, Bhutan has established a network of basic infrastructure and economic and social services. The Government has generally pursued sound economic policies, characterized by prudent macroeconomic management and exemplary emphasis upon protection of the environment and the country's cultural heritage. Bhutan has, however, been dependent upon foreign aid to finance most of its development efforts. The country also faces formidable development constraints 1. Macroeconomic numbers quoted are best estimates available. Some, in particular aggregate forest sector statistics, are approximations. -3 - associated with Its remoteness and rugged topography, limited aacity to plan and implement programs, and a shortage of trained manpower. Bhutau now faces the challenge of achieving modem development, with only its forests and hydropower as natural resources, without jeopardizing its political and economic integrity, culturl traditions, rich natural heritage, and unspoiled eonment. Bhutan's strategy for the future is that development should not occur at the expense of its natural and cultural heritage and should be integrated with environmental conservation. .4- IL TE FORTRY SECIR A. FoestR ces 2.1 Bhutan, for its size, has perhaps the greatest biological diversity of any country in Asia and contains some of the best unspoiled ecosystems in the Himalayas. Located in the upper catchments of Bhutan's major rivers, the fragile mountain habitats of the country have national and international significance. The countrys diverse flora and fauna is the result of its geographic location in the eastern Himalayas, within an area that extends through both the Indo-Malayan (Oriental) and Palearctic biogeographical regions. Some 500 bird species have been recorded and at least 5,000 vascular plants are believed to exdst in the country. A nmmber of mammal species found in Bhutan are threatened with extinction. While RGOB recognizes the need to preserve its unique natural environment and has established protected areas comprising some 20% of the country's total land area, only a few of these protected areas are under effective management. These areas are under threat of habitat modification by uncontrolled forest utilization, livestock grazng and burning practices. The Government's Trust Fund for Environmental Conservation, which was set up in 1991 with assistance from external donors, will provide the financial resources for RGOB to develop and support the institutional capacity for bring the protected areas under effective management The trust fimd was the beneficiary of a Global Environment Faciity (GEF) grant of US$10 million in 1992. 2.2 The forests of Bhutan are in two of the country's three physiographical zones, wMth the Northern Zone covered by perpetual snow, glaciers, barren land, and alpine grasslands, at altitudes in excess of 4,000 m. The Central Zone, wbich lies between altitudes of 1,000 m and 4,000 m., contains the important inhabited areas of the country and the major forest areas. Forests between 1,000 m and 2,000 m in humid areas are classified as warm broadleaf forest and contain a mixture of evergreen and deciuuous broadleaf tree species. In the drier areas at this altitude chir pine is common. Cool broadleaf forests are found on moist exposed slopes above the warm broadleaf forests. Evergreen oak forests occur at the same elevation as cool broadleaf forast but on drier sites. Forests above an altitude of 2,500 m consist maily of temperate conifers with some hardwoods. The conifer forests, especially blue pine and spruce, are the main forest ypes of commercial significance in Bhutan. In some accessible areas subtropical and warm broadleaf forests are also of importance. The Southern Zone comprises the foothills of the Himalayas rising to an altitude of about 2,000 m; here the dimate is subtropical and dense forests still exist Forests between 200 m and 1,000 ra, found among the southern foothills, are known as subtropical forests and contain largely tropical species. B. Role of Forest Subsector in the Economy 2.3 Because so many inhabitants of Bhutan depend on them, forest resources play an important role in the conservation of environment quality, the welfare of the rural population and the productivity of agricultural lands. According to a recent estimate from -s - the Master Plan for Forestry Development (MPFD), Bhutan is about 57% forested (2.3 million ha). Previous estimates put forested land at 6096, but the difference has been attnrbuted to a reduced estimate of total land area, now set at 4.04 million ha. A 1983 study bad estimated degraded forest at 147,000 ha, while the recent MPFD estimates the area at 232,000 ha. The forestry sector contributes directly about 11% to gross domestic product (GDP) and generates about 3% of government revenues through forest royalties, sales by the Bhutan Logging Corporation (BLC) and the Department of Forestry (DOF), and excise duties and sales tax levied on timber and wood products. In terms of export value, major forest products (such as logs, sawn timber, and veneer) and minor products (such as resin) account for about 20% of exports, second only to electricity. Furthermore, protection of watersheds by forests has also contributed greatly to the development of hydropower plants. The forest sector is estimated to provide employment to more than 25,000 people, mostly in non-monetized fuelwood collection. Forestry is also of strategic importance because the young and expanding industrial sector is largely dependent on forest resources. Wood processing plants have been established in southern Bhutan and the private sector wood- based industry consists of small sawmills, veneer plants, and enterprises including fuumiture, packing crates, tea chests, broomsticks, matches, pine resin and charcoal manufactri Forests are also a major source for leaf litter, forage and fodder, edible fruits, essential oils (such as lemon grass), and medicinal plants. In addition, the forests are a tourist attraction. C Demand and Supply 2.4 For centuries the people of Bhutan have depended on the forest to satisfy their need for fuelwood, home construction and inputs for their farming systems. Although subject to government rules and regulations, use of Bhutan's forests by households has been traditionally sanctioned as part of customary use rights. Wood demand from monasteries, goveznment offices and, more recently urban centers, schools and government institutions such as the military and police add significantly to the total demand for wood in the country. More than 98% of the domestic household energy demand and over 83% of the national energy balance for all uses is met from fuelwood. Total household sector fuelwood consumption in 1988 was estimated at 1.1 million in3, and all sectors together accounted for about 1.3 million in3. The estimated annual per capita fuelwood consumption of 2.36 m3 in Bhutan is one of the highest in the world. Villagers also depend on the forest for grazing their cattle and for collection of fodder and litter for livestock The MPFD estimates that of the 1.14 million tons of forage potential in Bhutan, about two-thirds comes from forests. All individuals have the right to use government forest land to graze their catde. Most of the land now used for agriculture was originally under forest. Wood demand from road crews is also significant but unquantified, and their right, as well as that of the army and police, to cut unlimited quantities of timber and fuelwood has often resulted in indiscriminate felling of trees along the roadsides. 25 The total sustainable annual allowable cut (AAC) in Bhutan is estimated at about 1.2 million m3/yr (excluding fuelwood) by MPFD with about 560,000 n3 economically accessible. The present annual wood extraction (excluding fuelwood), however, is about 270,000 n3 (1989) of which about 70,000 m3 is exported to India by the DOF through auctions. Domestic sawmils process about 45,000 m3 of roundwood, but this is significantly .6- less than their rated capacity. There is considerable scopet therefore, for increasing the current low levels of extraction and expanding receipts from the sale and export of forest products, provided extrction takes place under a sound forest management and utilization plan. Unfortunately, there is a lack of reliable forest inventory data --pon which to base management plans, as well as a lack of trained manpower to prepare such plans. No estimates for demand and supply of non-wood forest products (such as medicinal plants, essential oils, mushrooms, resins, dyes, and ornamentals) are currently available, but these products are also considered valuable resources. D. fovrmen Policies 2.6 Forest use in Bhutan has occurred long before legal land tenure systems of government forest ownership and control were put in place. Initially, government policy was instituted to ensure an adequate supply of forestry needs for all of its ibihabitants and was the basis for the development of customary user-rights. The policy also included the sustained management of the forestry resources, which has been a cardinal rule for all state- managed forest"y. These concepts were incorporated in the Forest Act of 1969, which declared that aU land in Bhutan not privately owned was to be 'Government Reserved Forests" and its use would be allowed through a system of permits for authorized limited rights. It also led to Bhutan embarking on a program of establishing protected areas of parks, sanctuaries and reserves whose area now totals 970,000 ha. 2.7 By the late 1970s, with increased contacts outside Bhutan, forest industries, especially for export purposes, became attractive as a means of earning foreign exchange. The Gedu mills were established and RGOB considered establishing additional instalations of this type in the southern part of the country but later abandoned the idea. During this period, Government inclination was to develop high value-added industrial production on the basis of intensified utilization of forest resources. During this period it enacted the Land Act of 1979, which went further in defining ownership of land and consolidated and superseded all pre-existing conditions of traditional land use. Furthermore, registration of private lands was limited to a maxium of 25 acres per household for specific operations such as rice or vegetable gardens and all trees on private lands, except that fruit trees planted as orchards belonged to the Govermnent. However, by the late 1980s, it became clear that the sector was unable to fully supply the new forest industries, as no long-range plan had been instituted to assure regeneration of large areas of harvested forests and global conditions had made nations cognizant of the need to institute conservation measures to sustain its natural resources. 2.8 At present, the Government is much more realistic on the need to meet local demand and including supplies to existing industries, while ensuring the sustaiability of its forest resources. The close proximity of the forests to the people, the ruggedness of the terrain, the lack of extensive communication and transport systems makes an effective control of the forest difficult. The Government further recognizes that if forest utilizadon is not conducted through a systematic forest management program, existing resources will continue to deteriorate, especially at locations with relatively high demand. Thus, current policy is to utilize the forest on a sustainable basis, plan for multiple-use utilization, improve .7- and strengthen the efficiency of forestry sector instittutions, and involve and train local people in contributing to appropriate resource utlization and, to a lesser extent, in resource expansion. E. EQr=i LLgislhin 2.9 Tle utilization of forest resources in Bhutan is regulated by several laws and policies, including the Bhutan Forest Act of 1969, the National Forest Policy of 1974, the Land Act of 1979, the 1984 Bhutan Logging Corporation charter, the Forest Policy of 1985, and the Social Forestry Rules of 1990. Under the Forest Act of 1969, Bhutan consolidated numerous directives relating to forest rights, forest products, and royalties. The Act protected the countiys forests by claiming as "Government Reserved Forests" those lands over which no one had permanent, inheritable or transferable rights. Felling of trees, burning of forests by shifting cultivators, hunting and fishing in forest reserves, national parks or wildlife sanctuaries were strictly prohibited and brought under the control of DOF. 2.10 To promote social forestry, the Social Forestry Rules were adopted under the Forest Act in 1990. These rules allow trees planted on private land to remain free of royalty. The rules also let five or more households obtain users' rights to an area of degraded government forest as long as a revegetation and management plan is followed. Royalty rates are then reduced or rescinded. Finally, individuals may apply for leases under the rules with certain conditions. 2.11 In 199l, as part of its efforts to prepare the Master Plan for Forestry Development, Government formulated a revised Forest Policy Statement that emphasizes the necessity for balancing the nation's conservation and economic development goals. It stipulates that forest resources will be managed in a scientific and systematic manner, and that this resource base will be expanded through viable investment programs. It acknowledges the necessity to allocate forest resources to several management regimes, such as protection forests, production forests and community forests, and to clearly delineate these. The policy recognizes the importance of peopWs participation in the management, use and expansion of resources, and calls for multiple-use management in recognition of the realities of the country. The policy also promotes creation of a rational economic environment which would place a correct economic value on forest resources with a view to promoting efficient domestic use as well as industrial development and trade. 2.12 RGOB has taken three significant initiatives toward implementing the new Forest Policy: (a) preparation of a draft Forest and Nature Conservation Act that would replace the Forest Act of 1969; (b) formulation of a program framework for development of the forestry sector; and (c) decision to revise the Social Forestry Rules with a view to more effectively promote community and private forest management. -8- F. EoJInstitutions 2.13 .lfginatry fL AMdW1hure. MOA is the leading government institution responsible for the Renewable Natural Resources (RNR) sector and is responsible for developing RNR sector policies and strategies to be implemented by its departments, which include Forestry, Agriculture, Animal Husbandry, and the Food Corporation of Bhutan. 2.14 D m n= of Foresy. DOF was established in 1959 to manage the country's forests, regulate access to and utilization and protection of the forest resources and enforce restrictions and collect taxes and dues. Its functions also include afforestation, pest management, and wildlife conservation. DOF has four functional divisions as follows: (a) Forest Resources ManagementDivision, (b) Afforestation Division, (c) Wildlife Division, and (d) Research Division, and the Bhutan Forestry Institute. In addition, it has 11 territorial divisions covering together the totality of the country. The territorial divisions are headed by a Divisional Forest Officer (DFO) who supervises three to five Forest Rangers which in turn oversee Forest Beat Officers. Territorial duties include demarcation, forest mnanagement, afforestation, forest protection, wildlife management, watershed management, and extension. 2.15 Bbutan Logging Co nIkm In 1984, RGOB established the Bhutan Logging Corporation (BLC) as a semi-autonomous body to take over logging operations from DOF. BLC administers logging, reforestation, processig, and marketing of timber and other forest products. At present, BLC operations do not extend beyond westem Bhutan, so local extraction and supply of timber in other parts of the countly are the responsibility of DOFs territorial divisions. 2.16 Minist of Trade and Industry. MTI regulates the establishment of wood-based industries, provided DOF determines sufficient forest resources exist to support the proposed industry. The planning link between these two agencies, however, is weak and a proposal has been made to establish a Timber Industry Authority. Such a body could coordinate these matters and avoid industnes being set up without adequate assurance of raw materal supply. G. Main Subsector Issues 2.17 Unlike most developing countries, Bhutan has been able to avoid excessive forest degradation because of its favorable land/man ratio. But growing human and livestock population, economic development and expanding external markets have placed new demands on forest resources. In certain parts of the country, particularly in the eastern region, there is growing pressure on forests for fuelwood, timber and forage. Accessible areas of some forests are being overutilized, with soil erosion problems mounting. This and major policy, institutional, and economic issues constrain the development of the forestry sector in Bhutan. -9- Issues 2.18 Bhutan's constraints to carrying out its forestry policy are: (a) technical, (b) institutional, (c) strategic, (d) legal/procedural and (e) economic. 2.19 The ical s. One of the major constraints to improved forest development is the lack of local expertise, especially of tecbnical competence in the planning and management of forest resources. An increase in trained personnel is urgently needed to strengthen existing institutions in the areas of forestry planning, management, trainng, research, conservation, agroforestry, extension, and engineering. 2.20 Institutional Issues. There are staff shortages in many government forestry operations. These indlude staff in DOF and in the Planning and Policy Division (PPD) of the Ministry of Agriculture at the central government a «l and the Divisional Forest Offices in the various districts of Bhutan. Shortages have beei i acerbated by the loss of staff who have left the country in recent years. Plans to increase scientific forest management, including contacts with local people, will place additional demands on DOF staff. Also, technically qualified and experienced counterpart personnel are needed to work with international specialists provided under various externally-funded projects. Because these shortages limit program implementation and opportunities for transfering expertise to local staf- serious attention must be given to provide both formal education and trmning. 2.21 At present there are multiple systems for forest management/production operations in Bhutan. In the Gedu area, the Gedu Wood Man rn Corporation and Bhutan Board Products Limited have direct responsibility for production, harvesting, sales and profit of forestry operations in the concessions allocated to them. In the Bumthang area, a quasi-corporation conducts forestry operations with Swiss Government grant funds, with RGOB receiving the proceeds net of operating costs. In the Paro and Haa valleys, all forestry production operations are carried out by the semi-autonomous BLC using their own funds. A fourth system is being operated by DOF in other areas using budget funds for operations and with revenues going directly to the Treasury. 2.22 There also exist uncertainties due to the recent decentrization of government activities. At one time, the country was to be divided into four zones, each with a Zonal Administrator in charge of all activities. At present the plan is for governmental administrative responsibilities to be given to the present 20 district (dzonghag) administrations with a view to reduce dependence upon central government and return more authority to local levels. 223 Strategic I. Despite the relatively small size of the country, considerable support has been provided by eternal donors to forestry development programs. Unfortunately, this support has been overly fragmented and lackng in adequate coordination. Many of these programs have been initiated too rapidly without sufficient consideration for the long-range impact on the sector. At present, some ten external donors are providing about US$21.6 million equivalent for forestry development. The multiplicity of international agencies involved has resulted in overlapping mandates, poor coordination, and sub-optimal allocation of resources. Similarly, poor and inadequate coordination among - 10- government ministries and departments has resulted in fragmented programs without any comprehensive overview of the sector as a whole. 2.24 IgaLk=ue& Government, until recently, has been overly conservative and cautious in adopting reforms for sustaining its forests and involving local people. A Clear mandate is needed for the implementing agencies to adopt and pursue new development initiatives. This requires a change in the Forest Act currently in force. 2.25 Statutory government ownership of trees restricts the scope of community and social forestry programs, as well as private involvement in afforestation/reforestation. Charging of royalties for sale of forest products from privately registered land dampens private interest and initiative in farm forestry activities. Amendment of the 1990 Social Forestry Rules is required to resolve these problems to encourage greater community and individual participation in forestry activities. Rigid provisions requiring preparation of management plans for all commercial forest units may delay unduly commercial forest use, particularly in view of the inadequate institutional capacity for preparing such plans. The existing laws on shiftng cultivation, which place a lower limit of 12 years on the fallow period, have resulted in forest degradation Present laws regulate and limit grazing on Government Reserved Forests. A total ban on grazing may not be feasible, but measures to more effectively manage grazing are essential. The existing sitation presents serious conflicts in land use between the interests of sutnable forest management and livestock production. 2.26 conomic Bhutan undervalues its forestry resources because of government intervention in pricing and distribution. A complex allocation and distribution system is in place for fuelwood and timber products. In the allocation of forest resources, traditional use rights (fuelwood and construction needs) are given priority over industial uses and exports. Forest industries therefore suffer from seiious wood supply shortages, which are aggravated by the lack of forest management plans. 2.27 In addition to the dual pricing structure which exsts for domestically used versus exported wood, there is a two-tier pricing structure for urban versus rural use. Unftl the Forest Act of 1969 become effective, use of the forests was free to all. Since then, highly subsidized rates for fuelwood and timber for house constructon have been introduced which are differentiated according to urban or rural use. In some cases rural consumers are required to pay a small royalty for wood extraction. The subsidies and low royalties have resulted in prices that do not reflect the scarcity value of forest resources. This has led to inefficiency in use and misallocation of scarce resources. There have been no recent investments, for example, in efficient logging and sawmill equipment and most loans for equipment to private sector sawmills are non-performing. 2.28 Seedlings being distnbuted by government agencies for agroforestry and horticulture are provided free or at higbly subsidized prices. Because farmers appear prepared to pay the full, non-subsidized cost for seedlings of their choice, this practice needs to be reexamined. Experience within and outside Bhutan shows that free distnbution or subsidized pricing have often resulted in inadequate care of plants, wastage by farmers and - 11 - poor accountability of government departments responsible for production and distribution of nursery stock. It also has prevented or dampened the growth of private nurseries. Re,medies 2.29 TechnicaL-Remedim Provisions need to be made for in-service taining, increased formal training including some training abroad, and specialization in key areas essential to more effective planing, management and utilization of forestry resources on a long-term sustaiable basis. This may be best obtained at existing local and foreign institutions such as the Forestry Institute at Taba and the Natural Resources Training Institute at Lobesa, which offer two-year training courses for foresters and a one-year course for forest guards; at the two-year course in Kurseong, India, for forest rangers; and at the Indira Gandhi Forest College in Dehra Dun, India, for DFO training. 230 mtitutional Remesdie. Government needs to decide who will manage, harvest, process and sell forest and forest products. A clear delineation is required as to the respective roles of the public and prvate sectors (including rural communities) in forest management and utilization. Government has established a special committee to recommend, by December 1993, wbich of the four exsting production management regimes will be selected for future management and utilization of its forests. At negoffations an agreement was reached that RGOB will provide to IDA by August 31. 1994. for its review and comment? a recommendation on the management and operational arranm it intends to adopt for its national forest management units and that the recommendatfon. aking into account IDA's comments? will be iiplenmented no later than July 1. 1995. 2.31 There is also a need to decide on the roles of the central government and the dzonkhags in the administration of forestry resources so that their respective authority and responsibilities may be dearly defined. The implementaton exrience of the Third Forestry Development Project is expected to provide valuable insights in this regard. 232 StrategiandLeRgalRemedies. The many donor-assted forestryprograms need to be integrated into an overall national strategy for forestry development. Design of such a strategy wil also require a joint planning effort of all government agencies involved with forestry. RGOB is currently in the process of reviewing and updating its strategy for the forestry sector. RGOB's 1974 Forest Policy envisaged that 60% of land area should be forested and recognized the need for forest demarcation, inventory and preparation of management plans. The revised 1979 policy was more conservafive in its approach to utilizing forest resources and restricted logging by commercial private operators. The preparation of the MPFD, the Forest Policy Statement of 1991, the RNR component of the Seventh Five-Year Development Plan, the Forestry Sector Programme Framework (1992), the Social Forestry Rules (1990) and the draft Forest and Natural Conservation Act of 1992 are evidence of the Government's determination to develop a firm policy and stategy for this sector. The RNR Policy emphasizes sustainable resource development, improvement in rural income and living standards and environmental conservation. The Forestry Sector -12- Program Framework (1992) reiterates RNR policy objectives and provides a coherent and conmprehensive set of investment, policy and institutional program elements for implementation in the medium term. RGOB is maldng effective use of the planning framework for the RNR sector and the Forestry Sector Program Framework to deploy the donor resources in a more rational way than in the past. The number of donors operating in forestry has been reduced, and donors are persuaded to concentrate on a particular region. Thus, the RNR sector in eastern Bhutan will be supported during the Seventh Plan period by three donors: forestry by IDA under the proposed project, agriculture and livestock by the Interonal Fund for Agriculture Development (IFAD), and UNDP for decentralized institutional development with explicit efforts to coordinate among these projects as necessary. 2.33 Further work is required to make the legal framework internally consistent and to facilitate implementation of the new development initiatives in the sector. The Gove'mment is, at present, finalizng revisions in the draft Forest and Nature Conservation Act as well in the Cnmmunity Forestry Rules. The Draft Forest and Nature Conservation Act ana the draft revised Community Forestry Rules have been discussed at negotiations and RGOB has agreed to take IDA's comments into account in finalizing these documents. Adgptio of the revised Communty Fesr Rules. taking into acou IDA!s comments. il be a condition of effectiveness of the Credit. 2.34 Eonoic Remedis. Bhutan needs to rationalize its subsidies on use of forest products, deregulate the distribution of forest products, develop a system for assessing true stumpage, and develop measures to protect the domestic market from the adverse influences of the imperfect markets of neighboring countries. RGOB also needs to reform its pricing structure to reflect market prices and plan for resource uses that wil bring about significant long-term benefits to the forestry sector. With the assistance of the Food and Agriculture Organization of the United nations (FAO), RGOB has recently undertaken a review of its imber pricing and marketing policies with emphasis on logging forest concessions, royalties and processing for different markets for wood. It is anticipated that the Government will institute an appropriate timber pnrcing policy in the near future. A draft action plan for policy reform of forest product pricing and marketing was discussed at negotiations. &A agreement was reached with the Government that an action plan for such reform will be agreed with IDA no later than July 1. 1994, and that the agreed action plan will be subsequently implemented by the Governnt. 235 To reduce the subsidy burden on the Government and to ensure farmers' real interest in growing trees, full-cost pricing of tree seedlings should be introduced gradually and nurseries should be privatized. The principles of a phase-out plan for government seedling production and price subsidies were discussed at negotiations. An ==M was reached that RGOB will send to IDA no later than March 31, 1994. a detailed glan for privatizatfon of seedling production and distribution for IDA!s review and comments, and that the final plan. taking into account IDA's views, will be implementea thereafter but not later than July 1. 1994. - 13 - H. Lessos from Past IDA Lending 2.36 IDA has supported forestry development in Bhutan since 1984 under two projects. The Forestr Deselopment Project (Credit 1460-BHU; US$5.5 million) became effective in 1984. It was designed to support RGOB's efforts to develop DOF's capacity to plan and operate an integrated logging and reforestation program in the context of the country's long-term goal of sustainable management of the forest reserves to ensure the long-term supply to the newly established wood-based industries and to increase export earnings. The Credit was closed on September 30, 1992. In spite of unplanned changes in the project desciption, the project's physical targets were either met or exceeded as were its objectives in developing technical skills. However, the sustainbility of the projects achievements is uncertain due to (a) RGOBs reluctance to sustain afforestation activities without external financing support, (b) lack of a solid commercial basis for ongoing plantation management, (c) failure to involve local people as beneficiaries of the plantation's products and revenues beyond their role as providers of plantation labor, and (d) physical destruction and lack of effective supervision resulting from the civil disturbances in southem BhatanL The proposed Third Forestry Development Project builds on this experience in that it aims at maldng forest development activities in eastern Bhutan financially self-sustaining through insisting on a viable management regime for national forest management units; beneficiary participation through village forest management, as well as involvement in planning for national forest nagement; and rationalizing the economic and financial incentive framework through changes in price policy and forest legislation. 2.37 Thbe Second estry Develpnt Projet (Credit 1900-BHU; US$1.06 million), cofinanced with the Government of Switzerland, became effective in 1988. The project supports RGOBs efforts in salvage logging, pest management and reforestation in pest- affected conifer forests in three districts of western Bhutan. It provides tchnical and management assistance to BLC and DOF. A major insttutional benefit from the project has been the experience gained by DOF in the timely preparation of forest management plans, which serves as the foundation for expanding planned forest management undertaken by the proposed Third Forestry Development Project The project is proceeding according to schedule and expected to be completed at the end of 1993. 238 A forestry component under the Calcium Carbide Pjet (Credit 1596-BHU) aimed at developing a 1,000 ha forest plantation near the plant site of Bhutan Calcium Carbide and Chemicals Limited to provide raw material for charcoal required in the manufacturing process. This component has been unsuccessful for the following reason: RGOB did not allocate the required forest area to the plant, and provided instead a much smaller area located in eastern Bhutan, thus making the plant largely dependent on import of carbon materials from India. 2.39 Through the GEF, the Bank is supporting the establishment and operation of a Trust Fund for Environmental Conservation in Bhutan which will fund bio-dversity programs aimed at strengthening the management of protected forest areas and wildlife preserves. The project became effective on November 5, 1992. . 14- 2.40 The World Bank has tried to learn from the experience gained in its lending for forestry development in general through project completion reports and speial reviews including a recent Operations Evaluation Department review of the Bank's experience in forestry development. Problems of a general nature for all Bank/IDA-funded forestry projects include: delays in project mobilization, institudonal weaknesses, and inadequate local fing. The major lesson to be learned from the ongoing forestry projecs in Bhutan is that to promote sustainable development of forests resources, It is important that forest inventories be carried out in a timely manner and that management plans be prepared that integrate the needs of local people and wood-based industries and of national sector goals. The projects also reveal some of the social and techical issues in afforestation and reforestation, notably problems of grazing, monoculture and high weeding costs. These lessons have been taken into consideration in the design of the proposed project. L Rational for IDA 2.41 IDA's experience with the implementation of the earlier two forestry projects has been positive and provides a good basis for condmiing lending support to Bhutan in this important sector. The forestry sector has perhaps the highest growth potential and its contribution to GDP can be incased considerably. Since IDA initiated assistance to the forestry sector with its first Forestry Development Project, it has played an important role in supporting forestry development and conservation, and has been a major discussant among donors on forestry issues in Bhutam IDA!s role increased with the Second Forestry Development Project, in particular through its key support in the preparation of forest manlagement plans which have set a standard for the sector. RGOB requested IDA to contue its support for forestry development by askig it to prepare a Third Forestry Development Project with a specific focus on easmn Bhutan because of increased pressure on forest resources in that region which has received relatively little development assistance. The project follows the Bank's Forest Policy2 and is fully consistent with RGOB's Sector Strategy and Forestry Sector Programme Framework in that it addresses the following critical issu: (a) sustnability of forest management; (b) peoples participation; (c) private sector involvement; (d) nstitutinalcapaity, (e) conservation and environmenal protection; (f) process of forest policy planig and legislation; and (g) coordination of donor assistance in the sector. 2.42 RGOB has agreed that the project would follow a sectoral approach which would support in the project area all relevant elements of the Forestry Sector Programme Framework, ie. DOFs functional programs (mostly institutional development); DOFs operational programs (conservation and protection, sustainable multiple-use forest management, and community forest management); and MOAMs supporting programs for the RNR sector (strategic plag, policy and legislation, and monitoring and evaluation). Wbile the project would be implemented in eastern Bhutan, its experience could be generalized to other parts of the country. ITe projects strategic importance lies in its objectives which are to assist RGOB in: 2. The Forest Sector. A World Bank Policy Paper, 1991. - 15- (a) defining operational procedures and criteria and investment programs that will help RGOB implement field level activities in the RNR Sector, (b) conserving scarce manpower and other resources by defining priority areas for the most cost-effective interventions; (c) engaging various line agencies, i'e., MOA, DOF, Department of Animal Husbandry (DAH), Department of Agriculture (DOA), and Ministry of Trade and Industry (MTI), and local cmmunities in jointly planned development activities and encouraging integration among RNR sector objectives; and (d) conforming with the Banks Forest Policy3 directives which condition IDA involvement on assistance in (i) adopting policies and an institutional framework to ensure conservation and sustainable use of existing forests and to promote more active participation of local people and the private sector; (ii) adopting a comprehensive and environmentally sound forestry conservation and development plan; (iii) undertakig social, economic and environmental assessments of the forests being considered for commercial utilization; (iv) setting aside adequate compensatory preservation forests to maintain biodiversity while safeguarding the interests of forest dwellers, and specifically their rights of access to designated forest areas; and (v) establisbinginstitutional capacity to implement and enforce the above commitments. 3. Ibid., 14 - 16- III. THE PROJECr A. Project Obctss and Sop 3.1 The broad objective of the project is to support RGOBs efforts to develop an approach for sustainable protection, management and use of its forest resources in line with its national development plans. The project would be fully consistent with the Governments Forest Policy Statement, the RNR sector objectives and the Forestry Sector Progamme Framework, as well as wit the evolving policy and legal framework as described in paras 2.6-2.12. Against this background, the project aims at establishing, in eastern Bhutan, the mechanisms for (a) sustainable forest management for selected government forest areas; (b) involvement of local people in the rehabilitation of degraded forest areas and their subsequent management; (c) integration of trees into farming systems thus improving the viability of the k.-al economy-, (d) introduction of a criteria-based approach to afforestation and reforestation; and (e) strengtheng of the government's capacity for effective and efficient implementation of the above development programs. 3.2 The project would consist of four components: (a) National Forest Manageent involving survey, inventory, planning and management by DOF of selected Government Reserved Forests to ensure a sustainable supply of forest products to meet the needs of the rural population, urban centers and, residually, local forest industries; (b) ScJia Forestry involving the organization of rural communities to improve and manage local forests related to their livelihood, and the introduction of fodder and fuelwood trees on farm lands with a view to improve agricultural output and incomes; (c) Afforestation/Reforestation involving rehabilitation of degraded forests on government lands to increase forest cover, protect watersheds, combat soil erosion and generally improve the productivity of these lands; and (d) Jn=titution[Sal®tbening including support for improved forest sector plannig and policy development in the MOA, and for trning and for capacity-building of DOF at the central and field leveL B. PrQjectArea 3.3 The proposed project would support various program activities in the six districts of Mongar, Lhuntshi, Tashigang, Tashiyangtse, Pemagatsel, and Samdrup Jongkbar, which cover an area of about 11,530 km2 in eastern Bhutan. Like the rest of Bhutan, the area extends from the high mountains of over 7,000 m in the north to the 200 m high foothills in the south that overlook the north Indian plains. Most of the agcultural activities take -17 - place between 1,000 and 2,000 m elevation. Above 2,000 m, settlements are scattered ai. cultivation takes place only in dispersed locations. High-elevation grazing lands in Tashgng and Lbuntshi districts are used by a fairly smal population of transhumant yak herds. The average population density of the area is about 35 persons per km2. 3.4 The project area is not readily accessible and can only be reached by vebicle through steep terrain and it takes between two and three days to reacb Tasbigang District from the capital at Thimphu. Landslides during the monsoon season and heavy snowfall during the winter season can close the road for some time until cleared. Some 233,000 inhabitants, or about one third of Bhutan's total population, are located in the project area, which is administered through District Administrators (dzongdags) located in each of the six districts. Governmental forest activities are administered through three Forest Divisions of the DOF, which are operated by a Divisional Forest Officer and his staff The three Forest Divisions for the project area are located in Mongar, Tashigang and Samdrup Jonkhar. Forest cover of the six districts accounts for about 725,000 ha, or about 63% of the total land area of the region, which is somewhat higher than the estiriated national forest cover of about 57%. Approximately 8% of the area is under permanent cultivation and another 6% is under shifting cultivation. Local ecological conditions vary greatly, and eleven different vegetation zones have been identified in the area. The traditional farming systems depend on close interactions between forests, crop lands, and livestock. Forests provide fodder and leaf litter for animals, which generate compost essential for maintaining soil fertility of agrcultural lands in addition to indirect benefits, such as moisture conservation and erosion controL In this fragile mountain environment, traditional farming systems play a crucial role in providing for the needs of the local population while ensuring proper manag¢ement of land, water, and forest resources. In the more densely populated parts of the project this fragile equilibrium has been disturbed by increased pressure from hIuman and livestock populations on an inel7stic land resource base, thus leading to a degraded forest cover, overgrazed pasture areas, decreased soil fertility of crop lands and reduced per capita food production. In addition, problems of soil erosion and slope instability have become apparent as a result of ovarexterided farming systems and of the expansion of the road network. C. Detailed i.ecFeatures National Forest Management (US$3.1 million) 3.5 The strategy for forest management witbin the project area will be based on the following realities of the project area. Although forests cover about 1.2 mfllion ha within the project area, most parts are economically and even physically inaccessible due to the limitations of the existing road system and ruggedness of the terrain. A considerable portion of the forests are located on very steep slopes and at the heads of critical watersheds. Local demand for fuelwood, timber, fodder and minor forest products has to be met since it is essential for the subsistence of the communities. In the absence of systematic management, the provion of forest products is organized at the convenience of communities, which causes over-utiliztion in areas near settlements. The spatial pattern of this demand is not uniform. It is concentrated in towns and villages, as well as dispersed throughout the project .18 - area, because of the scattered distribution of settlements. There are both local herds, which graze within the viciity of villages and farms, and migrating herds, which roam all over the area The potential of the forests' resources is scanty higher than the regional demand and thus could conti-bute to supplying other regions as well as export markets. While expansion of regional economy through increased resource utilization is therefore possible, the pre- ailing limitations on labor supply, entrepreneurial initiative and executing capacity of the fiorest sector agencies must first be overcome to realize this growth potentiaL RGOB has recently decided to decentalize admiistration and economic development to the district level thus malkng it necessary to devise an effective means of decentralizing forest management and admnistration. 3.6 At appraisal, four areas were selected as the most promising locations to initiate national forest management and udlization in the project area. With a view to epauding the concept of planned forest management to other parts of the project area, an overall resource assessment would be carried out to lay the foundation for a regional perspective forest development program based on the principles of the national forest sector policy. Adequate data in the form of satellite -rageiy and forest type maps4 are available for this purpose. Because of the large potential supply and the concentrated demand for forest products as well as the limited physical access to forests, there is no urgency to bring all forest resources under management plans in the short term. Iherefore, once the regional perspective development plan has been completed, additional forest areas will be selected for forest management units on the basis of their potential contion to the national economy and of DOFs capacity for preparing and implementing management plans for these units. No provision has been made under the project for such additional forest magement units. 3.7 Four management Units have been identified, covering a total effective area of about 21,500 ha, for which management plans will be prepared during the project period. The selection of the sites for these management units was based on the following criteria: (a) areas with low silvicultural and environmental risk; (b) areas that allow different tree species to meet various needs; (c) areas that can be geographica}ly spread out; and (d) areas that are easily accessible to avoid extensive forest road construction. These management units will be scientifically managed on a sustamed yield basis. The project would also support the establishment of DOF depots for distribution of wood to local users. 3.8 In keeping with the Forest Policy Statement which requires approved management plans as a condition for commercial exploitation of the forest, the reserve forests in the project area that have been proposed for national management will be the object of a detailed inventory and the development of management plans under the project. The management plans will take a holistic approach which, besides production of forest products, would take into consideration delineation of protected forest areas, wildl;fe conservation, maintenance of biodiversity, and the nature of social use. The plans wil focus on catering to the needs of the local demand centers which may include towns, villages, sawmills, etc. Practical measures to counteract inappropriate and inefficient use of forest 4. Forest type maps were prepared as a part of the MPFD exercise. - 19- products, along wmth silvicultural practices that ensure natural regeneration, will be developed as part of the plan. When natural regeneration of important species becomes difficult, artificial regeneration will be adopted. In preparing the management plans, pressures from gaig will be taken into account by introducmg rotational grazing and/or pasture development with participation of local com ties, along with measures to ensure adequate supervision and protection. 3.9 The implementation plan for this component is summarized in para 4.7. After the plans are prepared, the Divisional Forestry Offices will be responsible for implementng them. In principle, operations such as tree felLing, cable crane operation and timber transport will be contracted to private entrepreneurs. However, since sufficient expertise in cable crane operations is not yet available in the private sector, these operations will be carried out by DOF under force account until adequate private sector expertise has developed. Therefore, equipment for the above-mentioned activities will be procured from IDA Credit proceeds. It will be sold to private sector operators when they will take on contractual responsibility for logging operations. Divisional Forest Offices are responsible for log disposal to DOF depots or sawmills. Primary and secondary processing including sawmiing, timber seasoning and joinery and furniture manufacture will be left to the private sector. Under the Institutional Support Component, international technical assistance will be provided to assist DOF with on-the-job trauning in the preparation of management plans, development of operational plans for the extraction of forest resources and organization of training programs for private entrepreneurs in primary and secondazy processing, TA will also assist DOF in ensuring that conservation biology and non-wood forest products aspects will be taken into account in the preparaton of the management plans. 3.10 Meeting the dispersed demand for wood in eastern Bhutan does not create significant damage to forest areas for which management plans will not be available until later, since the needs of scattered households or small hamlets are limited vis-a-vis the large standing vohlme and the regeneration capability of most of the forest stands. However, certain guidelines to regulate forest use in these areas will be developed and enforced to minimiw possible damage to the resource. Enforcement of these rules will be part of the community forestry program and will be handled mainly by seeking a consensus with the rural communities, individual farmers, and migrating herdsmen. Socia Eores (US$1.3 million) 3.11 The Social Forestry Component is complementary to the National Forest Management Component in that it aims at increasing productivity of the forest resources used by local people both in the Government's reserve forest and on farm lands. The objective of Bhutan 's social forestry program is not to reduce the level of consumption of forest products, at least in the short run, but to regulate it and to locally enhance forest productivity in order to contribute to a sustainable resource utilizatin. It also aims to increase farm income (not necessarily cash income) by integrating tree growing into exasting faming systems. Most rural communities are located inside forest areas. In a country with severe ommunication difficulties, it would be irrational to rely solely on a government- controlled system to administer the people 's traditional rights to forest products and to -,20 ensure sustainable forest mgement. Social forestry involves the local people in the process of forest resource management through a system of sharing benefits and responsibilities. Two approaches wull be pursued under this component: (a) village forest management on forest lands that villagers have traditionally depended on for their farming systems, and (b) agroforestry on private la The selection of sites for social forestry activities is based on well-defined criteria such as degree of independence of local economies on forests and forest products; value of protecting existing forests both in terms of tangible and intangible benefits and readiness of people to take responsibilitr; extent of forest degradation, proximity to the proposed forest management units or afforestation/reforestation sites; and willingness and ability of the local people to take control of their natural resources. To ensure an optimal environment for local participation, the social forestry program will =t be target driven, but based on the response to promotion camwgns in areas of greatest potentiaL The modalities of the social forestry program, as it would be supported under project, are in the Government's revised Community Forestry Rules (para 2.33). 3.12 Villae Forest Managment. Its potential lies where a large proportion of the population is still dependent on a subsistence economy which relies heavily on open-access natural resources and where pressures of human and livestock population on the forest are most severe. Under the village forest management approach, villagers will be given responsibility for management of selected forest areas under the technical guidance and supervision of DOF. This approach requires fundamental changes in government policies for allocating and managing forest resources and distnbution of benefits. It also requires a change in the attitude of government agencies and their staff who have been indoctrinated in the notion that they alone are the custodian of the nation's forest resources. Rural communities who have traditionally had access to neighborng forests at their convenience need to accept new responsibilities and adopt appropriate utilization systems. As a part of forest resource assessment and the formulation of the perspective resource management plans (para 3.6), forest areas under severe pressure from the activitues of nearby communities will be identified and promotion of social forestry activities will be concentrated in these locations. During appraisal a number of areas were identified where both the physical and social conditions are favorable for introducing village forest management. These areas will serve as stardng points for activities under this project component. However, the systematic forest resource assessment to be undertaken as part of the project will lead to the identification of additional areas and thus expand the scope for social forestry activities. Project activities in village forest management would include: workshops and training programs for forestry officials and for villagers to create awareness and knowledge of village forest management; provision for contract facilitators to assess local interest in taldng on forest management, and to assist in orgnizin vilage institutions for community forestry, development and implementation of village forest management plans; development of systems for sharing forest produce amongst the beneficiaries; and preparation and distnbution of forest extension materials. 3.13 Vilage forest management requires organization of villagers as a prerequisite for the formal transfer of responsibility for, and control of, forest management and utilizaon, with an emphasis on equitable distribution of benefits among villagers. Ths does not imply that villagers will have open and uncontrolled rights to the forests assigned to - 21 - them. Village forest management will be based on a consensus achieved following thorough deliberation between DOF staff and the villagers on how the forest should be managed, and on adoption of tightly defined procedures including sanctions for non-compliance. Before the forest areas are handed over to the villagers, DOF staff and the villagers will together develop a management plan that is simple and appropriate for the needs of the village and that will help increase productivity of the forest. The steps involved and approximate time involved in village forest management planning are described in a bar chart under Annex 2. As an incentive for community participation, seedlings, ,encing materials, pasture seeds and other necessary inputs will be supplied free of cost by DOF but these subsidies will be gradually phased out (para 2.35). As communities become involved and demonstrate a capability for managing their forests and adhering to the agreed rules, DOF ' s role will shift from protection and control to forest extension and management activities. Since all this involves a high degree of trust between the villagers and DOF staff, the project provides a strong emphasis on improving the extension, communication and technical skills of forest officers. The expatriate social forestry and tainin and extension specialists will provide support to DOF's Divisional Forest Offices in implementing the social forestry activities, traing forestry personnel, developing forest extension materials, and supervisng research activities in social forestry which will be under the direction of the Taba Forestry Institute. It has been agreed that one of the research topics would be the transfer of a few productive forest blocks to village people for full commercial management. Similarly, workshops and study tours are planned for farmers to introduce them to the concept of village forest management and make them aware of their responsibiities and rights. The Village Forest Management Subcomponent can only operate successfully if villagers can share in the proceeds from timber sales. It is expected that under the new Forest and Nature Conservation Act, villagers will be permitted to benefit from sale of timber from forests under their control. 3.14 AgWfget activities to be undertaken under the project include: establishment of nurseries (managed by individual farmers, Village Development Committees and/or schools, monasteries, and Blocks) for production of seedlings; establishment of demonstration nurseries and demonstration planting areas; and preparation and distribution by DOF of extension packages for farm forestry. 3.15 For the Agroforestry Subcomponent, the techniques and the species mix are relatively well known and it is mainly a matter of encouraging private initiative and educating farmers about the opportunities of increasing their on-farm productivity. Agroforestry practices incorporating alley cropping, fodder trees, live fences, contour strips, and small fuelwood lots will be initiated on private land and in shiffting cultivation areas. Improvement of soghing land (privately registered forest land for producing leaf litter and fodder) would also be a part of the agroforestry program. It would also place emphasis on soil conservation practices. To avoid duplication of work and to reduce cost, the project proposes to promote agroforestry as an integral package along with the existing extension programs of the Departments of Animal Husbandry and Agriculture. Farmers will also be encouraged to set up private nurseries for wbich the seeds and polybags wil be supplied by DOF nitially. Costs for seed and materials provided for nursery establishment will be recovered from sales proceeds. To ensure a market for privately-produced seedlings, the project wfll purchase an agreed number of seedlings from private producers in the initial -22 - years. In the event the mnrseries suffer damage beyond the control of the farmer and if confirmed by the forestry staff% the project would compensate for the labor and material inputs. It is expected that private farmer-managed nurseries will produce planting material for a variety of needs such as fuielwood, fodder, timber, and live fencing based on local demand from farmers and village forest ma.6ement program Assistance to farmers in nursery techniques and agroforestry practices would be extended through forestry extension agents, selected from DOF staff. 3.16 Agroforestry wil be given priority over vilage forest management in the initial years as private participation is expected to be easier to achieve since the returns from such operations are more readily apparent. Village forest management, on the other hand, is more complex and dependent on community involvement and decision-making which often proceeds slowly. Therefore, it would be prudent to launch this program only after the necessary forestry staff are trained in the required skills. AfforestationLRefQresalioa (US$03 million) 3.17 Under this component, afforestation/reforestation (A/R) will be considered m areas that meet well-defined objectives and criteria. Typically, this might include environmentally critical areas where natural vegetation has failed, and which are potentially productive and accessible. Location, type of forest establishment and species to be used will be decided as part of the perspective resource management plans (paras 3.6 and 3.12). At appraisal, about 1,900 ha of such areas have been tentatively identified for A/R durng the project period. Besides generating direct economic benefits, the implementation of this program would also offer an opporamity to develop in a real life setting appropriate technologies for seed source selection, seed collection, storage and testing, advanced nursery operations, site selection, site and species matching, planting and tending, grazing managBement and fire control. A/R activities will also be an integral part of social forestry activities. The technology used in these treatment models will be refined based on experience gained during implementation. The ecological and social aspects of a given site- such as soil fertility, weed growth, sheet erosion, absence of seed trees, cattle grazing and annual burning-will be taken into consideration in developing plantation design. Tbe seedlings for artificial regeneration will be developed in government nurseries in the initial years, but once private museries are established, DOF will procure its seeding requirements from them. The methodology to be developed for terrain evaluation under the Forest Management Component will be used for the A/R Component as welL Duringmegoanlm it was agreed that (a) the A/R program for each fiscal year of the project would be agreed with IDA not later than Juy 31 of the preceding year. and (b) that this component will be carried out so as to satisfy one or more of the criteria descrbed above. Institutional Strengtening (US$2.8 milion) 3.18 The project envisages the following support measures to build up institutional capacity in the forest sector: (a) strengthening of MOA/PPD and central DOF in regard to their respective roles under the project; -23- (b) establishment of a Project Facilitation Office (PFO) at Khangma to offer project management services within the project area; (c) strengthening of the existing divisional forest offices at Mongar and Samdrup Jongkhar, (d) establishment of new divisional forest offices at Tashigang and Pemagatsel; (e) provision of facilities and equipment for (a) - (d) above; and (f) technical assistance including training of forestry staff and project beneficiaries. 3.19 Forestry Sector Planning and Policy Formulati The project would strengthen the planning and policy analysis capability of MOA s Planning and Policy Division (PPD) through the hiring of an additional forest economist and through technical assistance. This would enable PPD to better monitor the implementation of forestry programs, to update and refine the medium-term planning framework for the forestry sector, and to undertake policy studies such as follow-up work on wood pricig and marketing. The project would also assist PPD with training abroad, wth some office equipment and with funds to orgamze two donor coordination meetings to review progress of forestry development programs. 3.20 Dspartment of Forestry - Central LeveL The project would support DOF at the central level through incremental staff, short-term foreign and in-country training, and procurement of technical equipment, office facilities and vehicles. In particular, the Forest Resources Management Division (F"MD) would be strengthened with incremental staff and equipment to increase its capacity for preparing forest management plans in the project area and for providing in-service training to selected DOF personnel involved in forestry operations in eastern Bhutan. During the first two years, national forest management plans in eastern Bhutan would be prepared by joint teams of central and regional DOF staff, but under the overall responsibility of FRMD. 3.21 Department of Forestry - Eastern Divisions. The project would finance office construction, equipment and vebicies, salarie. and operating expenses for incremental staff, and other facilities required for project implementation with a view to strengthen DOF s territorial divisions in the project area in their capability to carny out the project 3.22 Infrastructural development would include constmction of the Project Facilitation Office (PFO), a hostel for visiting staff and experts, new divisional offices, range and beat offices and staff quarters. The project wiU also finance the cost of equipment, computers, furniture and other facilities required for effective program implementation. It is envisaged that the PFO will be fully operational within six months of the start of the project The regional forest management plaing celL with initial support from a forest management planning expert, will assume full responsibiity for the preparation of new management plans by the third year of the project Strengthening of the two existing territorial forest divisions will start immediately. The creation of a new divion in Tashigang will commence in project year 2 (PY2) and in Pemagatsel in PY3. A -,24 - negotiations RGOB submitted a tie,b,oind staffing plan for project implementation, and indicateh tat the incremental positions shown in the plan bave been, vapoed (Annex 3). that the individuals to fill these positions have beenidentified and thbat thieyIe X post.ed in agrdance with the tming indicated in the plan. 3.23 Te3bnical Assistane CM n in The project would provide tehnical support for strengthening (a) MOA/PPD in forestry sector planning and strategy and in policy formulation; (b) DOF at the central level; and (c) the PFO in the project area in undertaking forest resource assessments, and preparing forest management plans and social forestry modules, developing operational plans for harvesting forest resources, conducting training and extension activities and research, establishing technical guidelines, planning program development, and monitoring and environmental analysis of project activities (Annex 4). In the first three years of the project, the pioject will provide technical assistance totalling 110 months of internatonal specialists. Thle TA will be provided by an inenationally recruited firm or entity on terms satisfactory to IDA using the Bank's Guidelines for the Use of Consultants. An additional 60 staff months of TA are available for PY4 through PY7, to be allocated in line with the findings of the mid-term project review. RGOB agred at negotiations that based on the outcome of the project Is mid-term review. adequate TA provisions would be madde for the remainder of the project EnuAnmentaMects 3.24 The project provides for continuous environmental monitoring throughout its implementation bby Bhutan 's National Environment Commisson (NEC). This will help to assure that the National Forest Managemen Social Forestry and Afforesta- tion/Reforestation components take into consideration appropriate measures to protect the environment and ensure sustainable resource management. At negoation RGQB aged on (a) the scope and modalities of annual monitoring of the environmental ase of the project. and (b) that NEC would annually monitor the environmental apects of the project in accordance with a memorandum of understanding. to be entered into by NEC and MOA no later than December 31, 1993. and which reflects the scope and modalities for such monitoring sadsfactory to IDA, Under the National Forest Management Component, a regional forest cover assessment will be undertaken with the objective of idenfyig areas where priority should be given in terms of watershed protection and biological conservation. TA in the form of a Conservation Biologist, Forest Resource Assessment Expert and a Non- wood Forest Products Expert will be ptovided to assist and train local staff in these fields. The project will also adopt geomorphological techniques of terrain evaluation in terms of susceptibility to processes of landslides and soil erosion. This will not only help in assessng alipment options for forest access roads but also the relative impact of forest actvities on the landscape. The project would see to the intimate involvement of the local commuiies and especially of women in the protection and responsible management of the forest environment. -25- D. Prjct Costs and Einancing 3.25 kge Coski Total project cost including physical and price conigencies is estimated at Nu 250 million (US$8.9 million) of wbich US$52 milion would be in foreign exchange. Project costs are expressed in May 1992 prices absent of duties and taxes which are nonexstent for Bhutan. Base costs were derived from recent costs in Bhutan for facilities constructon; procurement of equipment and transport; local and foreigl training programs; and TA. Project cost is summarized in Table 3.1, while Annex 1, Tables 1 through 9 present the information in more detail Table 3.1: Prolect Cost Estimates Nu million---- ---US$ million----- z Foreign Local Forein Total Local Erein Total Ecbange A. National Forest NKet. 30.6 57.0 87.6 1.1 2.0 3.1 65.1 B. Social Forestry 1. Agroforestry 4.9 13.2 18.1 0.2 0.5 0.7 72.7 2. Village Forest Mgmt. .Q 10 ..J 0.3 0.6 58.9 Subtotal 11.9 23.2 35.2 0.5 0.8 1.3 66.0 C. Affor./Reforestation 9.7 0.5 10.2 0.3 0.0 0.3 5.1 D. Institutional Strengthening 28.0 49.0 77.0 1.0 1.8 2.8 63.7 Base Cost 80.2 129.8 210.0 2.9 4.6 7.5 61.8 Physical Contingencies 3.8 3.6 7.4 0.1 0.1 0.2 48.7 Price Contingencies 19.2 2.9 32.1 0.Z LI 1. i0.1 Total Project Cost .10 162.0 265.2 5. 58.6 3.26 Physical contingencies of 7% have been allowed for civil works, 8.4% for equipment and materials, and 109% for plantation works. Price contingencies are based on projected annual inflation in Bhutan for local costs of 9% in 1993, 7% in 1994, and 5.5% for the rening project years; and for foreign costs of 3.9% throughout the project period. 327 fluandn The proposed financing plan is shown in Table 32. Of the total external financing of US$8.1 million for the project (91% of total project costs), an IDA Credit of US$5.4 million would finance 61% of project cost and be made available to RGOB on standard IDA terms and conditions with 40 years maturty. The Swiss Development Cooperation (SDC) will cofinance, on a parallel basis, US$2.7 million of project cost (30% of total project costs) in the form of a grant which fully covers the projectes TA and training costs. Siging and fulfillment of all conditions precedent to -26 - effectiveness of tbe cofinancing agreement IMtween MC anld RGOB wiLI be a condition gf Credit effectivenss Table 3.2: Proiect Financing Plan (USe million) Categorv RGOB DA Total Civil Works - 0.9 - 0.9 Equipment & Materials - 1.2 - 1.2 Vehicles - 0.9 - 0.9 Plantation Work - 0.7 - 0.7 Training - - 0.9 0.9 Technical Assistance - - 1.8 1.8 Increm. Recurrent Costs LA 1A - 2A T-otal IAZ 54*7L;2 a. Total does not add due to rounding. E hoeurement 328 Procurement arranements for items financed by IDA as well as by SDC would be in accordance with IDA's guidelines. These arrangements are summarid in Table 3.3. -27 - Table 3.3: Procurement Profile (US$ million) Procurement Procedure Prolect Compent 1CB Other lb Total Cos Civil Works 0.8 0.1 - 0.9 (0.8) (0.1) (0.9) Equipment and Materials 1.2 - 1.2 (1.2) (1.2) Vehicles 0.9 - 0.9 - (0.9) (0.9) Plantation Work 0.7 - 0.7 (0.7) (0.7) Training -- °9* 0.99 Technical Assistance - 1.8' 1.86 Increm. Recurrent Costs - 1.6 0.8b 2.4 TOTAL 08 4 3*5 a9 (0.8) (4.5) (-) (5.4) a. - Financed by SDC b. - Financed by RGOB c. - Total does not add due to rounding. Note: Figures in parenthesis are the respective amounts financed by IDA. 3.29 Civil works (US$0.9 million). TMis consists of office bidings and housing located m different part of eastern Bhutan and dispersed over the project perod and would not attract foreigp bidders. Besides, all buiding construction in Bhutan has to adhere to traditional local design standards using wood and other local materials. Hence, civil works in the amount of US$0.8 million equivalent will be procured under lOcal competitive bidding (LCB) procedures. To the extent possible, contracts will be grouped in suitably sized packages to encourage competition. All minor civil works in remote areas valued at US$10,000 equivalent or less, and totaing about US$0.1 million, are expected to be carried out under force account. 3.30 Gogds. Approxmately US$0.9 million worth of vehicles and US$1.2 millon of equipment and materials wil be required for the project. However, they consist of 24 different items, in small quantities, which are needed at various times during the seven-year project implementation period. Even though they have been packaged as much as practical none of the packages would exceed US$100,000. Moreover, because the project is located - 28 - in a very remote area of a smal landlocked country, stdization of equipment is of paramount importance5. Therefore, prudent shopping or direct procurement are considered to be the appropriate methods of goods procurement. 331 Plantation W2oQr (US$0.7 million). As part of the Afforestation/Reforestation Component, plantations would be carried in small areas and scattered all over eastem Bhutan throughout the project period. Therefore, plantation work will not be suitable for competitive bidding but will be caried out by force account by DOF. The project emphasizes local participation, and wherever possible wfll encourage local communities to contribute free labor. Otherwise, plantation work will be done by hired labor drawn from local commnities under the supervision of DOF. This is expected to improve the income levels of the local people and to encourage local participation in forestry activities. 3.32 Technical Assistance (US$1.8 million). This mostly involves services of foreign specialists and will be contracted to a firm or entity on terms and conditions in accordance with the Bank's Guidelines for Use of Consultants. The balance of project cost would consist of imdnng (US$0.9 million) and incremental staff salaries ad operating eM-enses (US$2.4 million equivalent) which, except for staff salaries, wil be procured under standard government procurement procedures. 3.33 All procurement would be undertaken under procedures acceptable to IMA. Bidding packages estimated to cost over US$50,000 for civil works and US$75,000 for goods and equipment and consultant contracts will be subject to the normal IDA prior x . iew. This review is estumated to cover approximately ten contracts including the consultants contracts and about 50. percent of the works and goods by value. Other contracts wil be subject to selective post review. All bidding documents, evaluation reports and related procurement documents would be retained by the implemening units for possible inspection during IDA review missions. F. pisbursements 3.34 The proceeds of the Credit would be disbursed agamst: (a) 95% of expenditures on civil works; (b) 100% of foreign expenditures for directly imported vehicles, equipment, and materials; 100% of local costs (ex-factory); and 85% of local costs of other items procured locally, (c) 95% of expenditures on plantation works; and (d) 62% of expenditures on incremenWal staff slaries and other incremental operating costs. 5. This takes into account lessons learnt from the Second Forestry Development Project (Credit 1900-BHU). -29 - Since the project's development objectives cannot be achieved within the Credit disbursement period, disbursement aginst incremental salaries and operating costs would not be on a declining basis. The proceeds of the SDC grant, wbicb is administered by IDA in accordance with a Letter of Understanding between SDC and IDA, would be disbursed against 100% of expenditures on TA and training. 3.35 The project is expected to be completed in seven years and the Credit proceeds disbursed over seven and one-half years (Annex 5). Disbursement against civil works, vehicles, equipments, training and other services exceeding US$100,000 equivalent will be made on receipt by the Bank of fully documented withdrawal applications. All other disbursements, including those for force account works, will be made against certified Statements of Expenditure (SOE). In order to facilitate disbursements, two special accounts will be established with the Bank of Bhutan in Bhutanese Ngultrums, one to cover the categories funded by IDA in the amount of US$100,000 equivalent, and another to cover the categories funded by SDC in the amount of Swiss frcs 150,000 equivalent. G. Financial Management Accont and Audits 3.36 The project would be adequately staffed with trained accounting personnel who would maintain, in accordance with generally accepted accounting standards and practices, appropriate accounting systems and financial records, to record all transactions relating to the project (including the transactions on the Special Accounts) and to enable the PFO to: (i) ensure compliance with all RGOB I s accounting and financial policies and procedures for the Forestry Management Units and Divisional Forestry Offices responsible for implementing parts of the project; (ii) prepare anmual budgets and forecasts of project activities; and (iii) regularly monitor and report on the financial progress of the project. Details of all project income and ependiture transactions would be submitted monthly by the FMUs and DFOs implemenig the project to the PFO which would consolidate these together with its own transons into project financial statements to be forwarded to MOA by the 20th of the following month. MOA would forward the mont consolidated financial results of all its operations to MOF within 45 days of the end of each month. A senior accounts officer, with experence in IDA project accounting and audit requirements, and disbursement guidelines and procedures, has been appointed to the Project Facilitation Office. 3.37 RGOB ' s audit requirements are the responsibility of the Royal Audit Authority which is considered a qualified and independent auditor for IDA purposes. The audits pertaiing to the project should include the audit certification of: (a) annual project accounts which should take the form of statements of cash receipts and expenditures related specifically to the project, for the most current year and on a cumulative basis; (b) SOEs, to verify that claimed expenditures under the Credit were properly supported, and to confirm IDA's reliance upon SOEs as a basis for disbursing Credit proceeds; and (c) a statement to establish that the year-end balance of the Special Account is proper, and that fnds were properly disbursed for project-related expenditures throughout the period. -30- IV. PROJCI [MZLEMENTTXAIf A. Project Organization and Management hnplementing Responsibilily 4.1 The project will be executed by MOA as an integral part of its Renewable Natural Resources Program In the project area, executive responsibility will lie with the head of MOAXs Project Facilitation Office (PFO) located in Khangma (Tashigang District). The Department of Forestry (DOF) is the main agency responsible for implementing the project through its Divisional Forest Officers in the project area and with support from its central offices in Thimphu. Through its Planning and Policy Division (PPD), MOA will coordinate, monitor and evaluate overall project implementation. Coentral Level Organization 4.2 DOF through its Forest Resources Management, Social Forestry and Afforestation Divisions will formulate annual programs, in collaboration with the Divisional Forest Offices in the project area, and provide technical and administrative back-stopping as weRl as services of their centrally established facilities (e.g, data collection and processing, mapping). The Forest Resources Management Division will be responsible for preparing forest maps, processing remote sensing and ground data, designing and implementing resource inventories, and preparing forest management plans. It will also train field-level staff in operationalizng the management plans. Similarly, the Social Forestry Division will design socioeconomic surveys and carry out data processing and analyses. This division, however, will collaborate closely with the Diional Forest Offices and the Distict Administrations in priorifizing development areas and designing development alternatives for the project's social forestry activities. Field 9rgaxnkaton 43 Project Facilitation Office. The head of the Project Facilitation Office will, under the general guidance of the Deputy Minister of Agriculture, act as the Project Manager for this project as well as for the IFAD-supported First Eastern Zone Agricultural Development Project. In regard to the implementation of the proposed forestry project, he will act on behalf of the Director General of Forestry. He will be assisted by a senior forestry officer who will % the Assistant Project Facilitation Officer. The PFO will be responsible for approving a1 d monitoring all project implementation activities which involve the eastern Bhutan districts. The PFO will also be responsible for institutionalstrengthening of the Divisional Forest Offices within the project area with the assistance of project consultants in forest management, forest engineering, agroforestry, extension and training. After the establishment of the regional Forest Management Division in the PFO as of -31 - January 1994, it will also be responsible for the preparation and implementation of the forest management plans and for monitoring performance of these activities. At negodtations. RGOB confarmed the responsibilites of the PFO in respect to the project. which are acceptable to 19A 4.4 The Ministry of Finance will release funds direct to the PFO which will then be disbursed to the Divisional Forest Offices for implementation of forest actvities in the dzonkhapS (districts). In turn, the Divisional Forest Offices will su'bmit accounts to the PFO Office for compilation and for subsequent submission to the Mnistty of Agriculture (MOA). MOA will check the accounts for authenticity and submit the documents to the Ministry of Finance along with withdrawal applications for reimbursement from IDA. 4.5 In view of the geographical dispersion and relatively sparse coverage of field extension offices of the various RNR line agencies, it has been agreed to formulate integrated forestry, animal husbandry, and agricultural extension messages and to use staff and facilities of each of these agencies to help maximize extension oritreadh Field staff will be provided with short refresher courses in other disciplines outside their normal special7ation to equip them for promotng integrated famin systems-based extension activities in the field. 4.6 Divisional Forest Offices. The Divsional Forest Officers (DFOs) will be responsible for implemenng all project activities within their command areas. However, they will receive support from the central divisions of DOF to undertake specialized operations such as forest inventories, preparation and revision of forest management plans and multi-year operational plans, environmental and socioeconomic surveys, and organizing and implemenng tramining programs. Forest Management Plans 4.7 During the project, it is envisaged that four forest n.anagement plans will be prepared. In the first three years, DOF's Forest Resources Management Division ("RMD) in Thimphu will play a dominant role in preparing the plans for eastern Bhutan. During the first year of the project, a forest maagement cell will be established in the PFO which by the end of third year will develop into a full-fledged regional management divis Plans for the Kori La and Khaling/Wamrong forest management units would be prepared by the Forest Management Division in Thimphu and passed on to the PFO and the respective DFOs for implementation. A Forest Engineering Specialist, along with the DFO and the Forest Management Planning Specialist, will provide the technical assistance in developing operational plans to utilize the forest resources. The plan for the ingmethang unit would be a joint effort with map interpretation, emnmeration design, and data processing being the responsibility of the Forest Management Division at Thimphu and actual enumeration left to the Mongar Division with support and supervision of the PFO. The crew leader would be provided by the central DOF and the other members would be deputed from the Mongar Division. The Lingmethang plan would be written by the Forest Management Planing Specialist in close collaboration with the Forest Management Division in Tbimphu. The Bangthar plan in the Samdrup Jonkhar Division would be completed last. Implementaton of management plans will rest with the respective DFOs. - 32 - tension and Traing 4.8 Training and exeion will be key elements in the successful iplementation of the project. Staff training, both formal and informal, will be conducted by the technical assistance personnel. Countepart training will be carried out on a continuous basis. In addition, a small number of staff will be selected for overseas training of various duration, and study tours will be organized for farmers to observe social forestry programs in neighboring countries. In regard to extension, six existing forestry staff will be selected as extension agents for PY 1-3 and an additional six agents will be recruited for this task in PY 4-6. These agents wvIl carry out extension work for agroforestry and village forest management with due regard for the linkage with aimal husbandry and agricultural extension and vill be provided substantial training to orient them to the concept of social forestry in the context of an integrated farming systems approach. In addition to short-term courses and study tours, the extension agents will receive on-the-job training from the Agroforestry Specialist and the Extension and Training Specialist. Also, facilitators (recrited from among retired RGOB officials and residents of the project area with suitable education and skills) wiU be contracted to assist forestry extension agents with organizing village forest users in preparation for village forest management activities. Extension agents wil work in close coordination with the DAH and DOA staff to ensure integration with other RNR sector activities in the context of the local farming systems. To increase awareness of social forestry among al Government offcials, and to maximize integration wvith other sector programs, workshops wiU be conducted at the PFO, dngWkhl, gewog and village level. Research 4.9 Forestry research, especially adaptive and applied research for forest management, A/F and social forestry programs will be required. A series of field trals and demonstration programs for research on silviculture, ecology, fire protection, species trial, weed control, knowledge gps on social forestry, including the forest needs of the local people, will be undertaken under the direction of MOAMs Forestry Research Institute in line with RGOB's existing research program for the RNR sector, which is satisfactory. Research work associated with the project will always be closely linked to extension and will promote a feedback process among farmers, extension agents and researchers to develop productivity- increasing technologies that are sustanable and acceptable to the local people. A Forestry Research Expert would review the ongoing research work and provide guidance for designing future activities as well as training of counterparts. Technical Assistance 4.10 The nature of the project and the lack of sufficient numbers of qualified personnel within the country necessitate employment of a number of short- and long-term international consultants in various fields of spedalization. Because of the logistical problems associated with working in a remote area and the complex schedule of consultancies linked in time with the implementation plans of project components, a consulting firm or entity with proven experience in broad forest sector development and project management will be contracted to provide the TA services. Overall responsibility - 33 - for establishing the TA function and initii magement of the consultant input will be given to an administrative facilitator fielded by the consulting fim. B. Project mmanc Rri Monitoring and Evaluation 4.11 Project monitoring and evaluation will be the responsibility of MOA/PPD. A Monitoring and Evaluation Specialist will assist MOA in developing the detailed system and format to track project progress in a manner that will facilitate management of the project. Annex 7 provides the key performance indicators which will form the basis for the project monitoring systen. It should be noted that, except for the National Forest Management Component, performance indicators are mostly qualitative in view of the lack of specific quantitative targets for these components. Annual monitoring of the projects environmental impact will be undertaken by Bhutan's National Enviroment Commission in accordance with guidelines agreed with IDA (para 3.24). Mid-Term Review 4.12 IDA and SDC will undertake field reviews of project progress at least once every six months. In addition, Government and the key donors in the forestry sector will meet once in two years to assess the project's contribution to the achievement of the forest sector program goals. New information, changed circumstances, and experiences in the first years of the project may necessitate design adjustments in some of the project components during the latter half of the project implementation period, particularly in the traning and TA needs for PY4-7. A consultancy will be funded under the project to prepare a working document to facilitate a mid-term review of the project. At negotiations. it was agred that a compeensive nmid-tenrneview willbe undertaken byXMOA IDAand SDC, and arnwged by IDA. toward the end of the third year of the prQject Forest Sector Donor Coordination Meetings 4.13 In addition to the above, RGOB will organize once in two years a meeting with forestry sector donors to assess the project's contribution to the achievement of the goals outlined in the Forestry Sector Programme Framework At negotiations. RGOB agreed to convening such meetings. with the ftrst meeting to take place in 1995. -34- V. ERODICIIQMRK= ENEFMTE A 1n,mnlaLwS 5.1 The largest single source of increase in production comes from the four national forest management units. The maturity of the forests-with a combined total area of 23,000 ha., an aggregate gross standing volume of 4.8 million n3 of timber, and an annual allowable cut (AAC) of some 61,000 e -enable the project to get off to a quick start. Table 5.1: Exgected Timber Yield From National Forest Nanagement Units Suggested Expected Annual tnitamea AC UmL3) Sawlog Yield (e) Bangthar 26, 600 6,900 Wamrong* 6, 140 1,350 Khaling* 9, 780 2,150 Yongphula* 5, 550 1,200 Korila East 4, 870 1,050 N. Lingmethang** 4, 410 1,250 S Lingmethang** 4. 090 1.050 Total 61, 440 14,950 M Managed as a single management unit under the name Khaling ** Managed as a single management unit 5.2 Wood production from the National Forest M ment Component starts with about 3,395 mi3 of logs and 89 mn3 of f&elwood in PY2, and quicky reaches 7,500 e3 of logs and 1,128 m3 of fuelwood in PY7. In PYIO the aggregate increase of logs and fuelwood reaches about 10,000 m3 and 6,000 ni3, respectively, and continues to rise until it stabilizes at about 19,000 m3 and 22,000 i3, as shown below. Table 5.2: Incremental Production of National Forest Nanagement Units Grazing/ Lemon- Fuelvood Timber Fodder grass Year lm3) (m3) (ton) (ton) 1 0 1,061 0 0 5 760 7,305 -177 -8 10 6,004 9,939 -177 -11 15 6,867 10,849 -177 -13 20 12,416 13,540 -177 -16 25 13,781 14,176 -177 -18 30 21,031 16,846 -177 -21 35 21,737 17,694 -177 -23 40 22,408 19,323 -177 -26 -35 - 53 The Afforestation/Reforestation (A/R) Component is based on a 40-year rotation. It would begin to produce a incremental volume of 650 m3 of logs in PY20, wbich would increase to 3,100 m3 in PY25. Incremental fuelwood production would start by PY10 with 438 mi3, reach about 3,200 m3 per annum in PY20, and increase thereafter. Table 5.3: Incremental Production from Afforestatio eforestation Grazing/ Fuelvood Timber Fodder Poles e(M3) (mS) (ton) (Q000) 1 -65 0 -53 -0 5 -348 0 -831 -2 10 438 -325 131 -3 15 2,561 -750 451 -2 20 3,171 650 555 5 25 7,255 3,100 555 27 30 4,764 750 545 4 35 9,666 6,010 338 14 40 4,764 3,000 300 1 45 10,648 24,040 124 3 5.4 The Social Forestry Component is expected to produce only incremental quantities of firewood and fodder during the first 20 years, with incremental timber production stardng thereafter. Incremental forage and fodder production would amount to about 3,200 tons by PY7 and would rise to 7,700 tons in PY10. No incremental fuelwood production is expected until PY11 with a small incremental uantity of 723 m3, increasing to 4,000 mn3 in PY15 and reaching a peak of nearly 20,000 m in PY35. Table 5.4: Incremental Production from Social Forestry Component Fuelwood Timber Forage Milk Calves Cows Yxar Wm.) (mJ, (ton) ('000 1) (No.? (No.) 1 -70 0 -9 0 0 0 5 -3,588 0 867 430 182 424 10 -2,081 0 7,753 5,151 -102 -320 15 4,089 0 8,218 5,542 114 34 20 4,097 0 8,104 6,604 450 144 25 10,876 18,000 8,178 7,004 594 656 30 8,906 0 8,234 7,562 980 726 35 19,635 12,000 8,654 7,380 814 584 40 11,011 0 8,867 7,711 852 878 45 7,336 144,384 5,616 5,033 272 144 46 3,727 144,384 2,810 2,640 144 260 -36 - B. Demand and Markets Demand for Wood 5.5 Studies carried out under the MPFD indicated that the annual allowable cut from the natural forests of Bhutan is about 1.2 million m3 (excluding fuelwood), which is about 4-5 times the current national consumption of about 200,000 in3. Actual extraction is about 270,000 m3/year and the surplus timber is exported to India. Sales to India are conducted through auctions. India, as a wood-deficit country, constitutes a huge market for Bhutan's forest products. However, RGOB regulates the quantity and quality of timber offered for export in order to provide adequate wood to the domestic market. 5.6 There are no significant wood imbalances at the regional and sub-regional levels. Most of the population (about 96%) are in the rura sector and they satisfy their demand for forest products by direct access to the nearby forest areas and carrying out felling and extraction operations themselves. The main supply of wood for urban markets comes from the operations of the Bhutan Logging Corporation in western Bhutan and, to a lesser extent, from DOF operations in the Bumthang area of central Bhutan. However, forest industries, espeally those established to cater to export markets, are facing chronic raw material shortages due to the system of government price control and wood allocation and the low level of organized forest utilization. Exceptions are the plywood and the particle board industries in Gedu and the calcium carbide industry at Phuntsholing which obtain their raw material from forest concessions allocated to them by RGOB. Sawmills, most of which are privately owned, rely on government allocations and practically all operate significantly below their rated capacities. 5.7 Annual fuelwood consumption is estimated at 1.4 million i3. Only about 10- 15i% of the fuelwood is supplied through the market system and the rest is gathered directy by the farmers and villagers for own consumption. The Market for Wood and Wood Products 5.8 Domestic and international trade in wood and forest products in Bhutan is in its infancy. Markets for wood and f-rest products are still rudimentary and oriented toward local demand and subsistence rather than nationally integrated. They are not formally linked by prices or quality to those of international trading partners. Bhutan's natural comparative advantage in international trade is handicapped by long distances and high transport costs to external markets With the exception of export of inferior quality logs and poles and sawnwood blocks to India (about 50,00-80,000 m3 p.a.) in excess of local consumption and the incipient export of specialized products, such as broom handles to Germany and lemongrass oil and Shitake mushrooms to Europe and Japan, most of Bhutan's wood and other forest products are sold in national markets, usually in the district and zone in which they are produced. -37 - 5.9 Because of the small domestic market, there are reiatively few sawmills in BhutanL All except three are in western Bhutan. Of these three, only one operates at near full capacity (about 2,000 nin p.a.). Thus, eastern Bhutan is under a great handicap in obtaining sawnwood, because of high transport costs relative to the low value of timber. Prices of Wood Products 5.10 gg. Prices, distribution and allocation of primary and processed wood are controlled by the Govermnent This system has been mainained to serve two key objectives: to provide low-cost wood to people and to export only surplus wood. Wood prices are determined at different levels for urban, rural and industrial consumers. Rural people pay the lowest price; only Nu 9/in for standing trees and about Nu 420/m3 for purchases from depots. Urban log price is about Nu 1,000/m3, which includes a higher stumpage (about Nu 180/n3), direct and fixed production costs. Industry is charged between Nu 2000/m' and Nu 5,000/m3 based on the average of the previous yeas)' auction prices. All three categories of consumers are heavily subsidized. First, stumpage values are set at a low level to ensure an affordable rate for rural logs. Second, industiy receives high-quality logs but pays a price based on low-quality logs sold to Indian buyers. Moreover, once the log price for industry is set, it remains constant for about two years. A recent study by FAO estimates the economic price of logs at about Nu 7,000/r3. Based on this figure, stupage value of an average-quality log would be about Nu 1,800/n3 which is about ten times the current royalty charged to urban consumers. 5.11 Sawnwm d. Although industry is allowed to purchase logs, the processed wood- mainly sawnwood-is also allocated, distributed and priced by Government. Because of this control there are no wholesale or retail outlets or sale depots for sawnwood outside the control of RGOB. 5.12 Fuewood. The fuelwood market in Bhutan can be divided into two segments: rural and urban. Rural people are allowed to collect fuelwood for their own consumption from the state forest primarily by using dead or dying trees. f this supply is not sufficient, each household is allowed to cut three to four green trees. In either case, users do not pay any fee to the Govermnent Fuelwood is sold in urban markets. Felling, harvesting, transport and delivery of fuelwood are carried out by contractors who operate with governmer . permits awarded on the basis of bids. Contractors charge individual urban consumers at the bid price and in return pay RGOB a stumpage fee which is Nu 12/in for hardwood and Nu 5/mr for softwood. In addition they pay an excise tax of 5% and a collector's tax of 1%. Current prices for fuelwood delivered in Thimphu vary between Nu 400 and 500/rn. 5.13 As explained in the context of the economic issues ficing the sector (para 2.34), the proposed project supports RGOBs intention to revise its price and market policies for wood and wood products. More appropriate timber pricimg would significantly improve the financial returns to primary and secondary wood processing, in addition to generating considerable additional government revenue. -38 - C eB enefitsandugtifati FIMWgial ad Econonic Benefits 5.14 In general the project is expected to increase wood and non-wood production, reduce indiscriminate felling of trees and uncontrolled grazng and buming, improve the value and productivity of forests, and encourage individual and community participation and management of forests. With technical assistance and resources provided by the project, the technical and managerial capabilities of DOF in Thimphu and In eastern Bhutan wfll be strengthened. As a result, new jobs will be created, rural incomes will rise as a result of social forestry, and significant streams of financial and economic benefits will be generated. However, net incremental employment will be smalL 5.15 Excluding the additional DOF personnel employed during project implementation, the unpaid work (about 550 person-years p.a.) for agroforestry and 420 years p.a. of volunteer labor for village forestry, the project will create about 260 new jobs, including some 140 jobs to help guard and maintain village forests and grazing areas, 75 permanent jobs in the national forest management units (FMUs) and about 45 seasonal jobs for A/R. Since Bhutan is near a state of full employment and even experiences labor shortages, some of the new jobs (especially with the FMUs) may even require migrant labor. At present, because of labor shortages, Bhutan imports both unskilled and skilled labor from neighboring countries. 5.16 One of the most significant benefits, for which only an approximation is possible, is the higher level of real and imputed income at the farm and village level as a result of agro and village forestry. Agroforestry is expected to raise the net value of firm production by about Nu 30,000 p.a., for about 550 farms with an average of three adults each. In return for unpaid labor on village forest maagement in 140 villages, about 1,200 households would benefit if each village achieved the projected estimate of a net increase in the value of output of about Nu 75,000 pa- This is roughly equivalent to a farm income supplement of about Nu 2,500 per household. There {s also the intangible benefit from changing to a pattern of land use in which agriculture coexists with forest, and farm land is used to establish small plots of trees for both fuelwood and forest. Financial Analysis 5.17 Financial benefits were estimated only for the National Forest Management and the Afforestation/Reforestation components Financial returns were not estimated for the Social Forestry Subcomponents (agroforestry and village forest management) because these do not require a large outlay or allocation of scarce financial resources by RGOB or the cofinanciers. Social forestry is highly integrated in the agricultural activities of the beneficiaries, and involves transactions that do not enter the project cost or benefit streams. 5.18 Based on financial project costs (as budgeted or at market prices) for investment and recurrent costs, phs physical contigencies when appropriate, but less the cost of short- term technical assistance which will be provided as a grant from SDC, the National Forest Management and A/R components generate acceptable financial rates of return (FRR): -39 - 10% for the former and 9%o for the latter. The lower rate for A/R is due in part to the lack of revenue from royalties for the first 20 years. If royalties were revised upward by RGOB, as recommended by IDA and expected under the wood pricing and market policy reform, the FRR would be higher ficanomig Analysi 5.19 The economic costs and benefits were based on the following assumptions and adjustments: (a) Because the price of unskdlled and rural labor is presently undervalued, as evidenced by the difficulty in finding Bhutanese workers at less than Nu 40- 45 per day as compared with the official wage of Nu 25 per day, a shadow wage rate of Nu 40 has been adopted in order to reflect the scarcity of labor. (b) Stumpage values of logs and fuelwood were adjusted to compensate for the underpricing of wood through present government administrative regulations. Using the price of Malaysian sawnwood and the price of Bhutanese wood sold in Delhi as references, an economic stumpage value for logs of Nu 775 per m3 was adopted as comparefd with the actual value of Nu 279 per m3. The stumpage value of fuelv .od was raised from Nu 180 to 343 per n3. The replacement cost methu was not used because it does not reflect the 'su costs and biodiversity of Bhutan's mature and productive forests. (c) The costs of investment and inputs were adjusted by 0.72, which reflects the 0.80 Standard Conversion Factor applicable to lidia plus a 10% correction for transaction costs because of the real difference in exchange rates between the Indian Rupee and the Bhutanese Ngultrum vs-a-vs the US doLar. (d) The costs of institutional strengthening of MOA/PPD were excluded for two reasons. First, they are not specific to the directly productive components of the project; and, second, institutional support expenditures for DOF activities in eastern Bhutan are already considered as a cost for implementing the three directly productive components. Replacement of equipment and recurrent costs for forest management planning and implementation, and A/R were camed on to the fortieth year. 5.20 The following assumptions were made for the without and wih project benefit streams of timber. In the without project cas. ie., annual removals under unmanaged conditions, the benefit stream is assumed to diminish to an insignificant level after 40 years due to degradation of the forest resource. In PY 40, the net present value of standing timber is assumed to approach zero. In the with tject caa the benefit stream will be the annual harvest as prescribed by the management plan plus the standing stock in PY 40 which will be larger than the initial stock. -40 - 5.21 With the foregoing adjustments and assumptions, the economic rate of return for the project as a whole would be 19%6, with that of individual components varying between 13% and 29%o. The ERRs and Fs are summarized below. Table 5.5: Economic and Financial Rates of return Em Em Project as a whole 19X National Forest Management Component 13X 101 Afforestation/Reforestation Component 131 9X Social Forestry Component 29X Sensitivity to Changes in Costs and Benefits 5.22 The ERR is only slightly sensitive to increases in costs, reduced benefits and time delays in achieving benefits, or a combination of two of such eventualities. Thus, an increase in project costs of 10% reduces the ERR by only 1%, and a 20% decrease in benefits reduces the ERR by only 2% largely because the foregone production of the early years is also delayed. The possible effects on the ERR of these and other eventualities is shown below: Table 5.6: Sensitivitv of the ERR Base rate 191 10 increase in costs 181 201 decrease in benefits 171 Two-year delay 141 Two-year delay and 201 less benefits 131 Intangible enefits 5.23 The above analysis takes into consideration only the quantifiable benefits. There are several other indirect benefits. The A/R programs targeted primarily in the high demand centers will satisfy some of the timber and fuelwood requrements and thereby (a) slow down natural forest degradation; (b) protect the water sources of small vilages and towns; and (c) prevent soil erosion and damage to agricultural land. Further, it is expected to generate greater public interest and pardicpation, both of which are key elements in the conservation and development of forest resources in a country. The benefits from the nstitutional Support Component are greater than the scope and duration of the project. Since it is an intangible benefit mostly in the form of enbanced public administration efficiency and technical sdills in conducting forest inventories, the value of such benefits in eastern Bhutan cannot be quantified. - 41 - D. EnvironmentaUl mIct 5.24 The project will reinforce RGOB's commitment to conservation of the country's natural forests and their biodiversity. The project will not only maintain and increase the existential value of eastern Bhutan's foresty assets, but it will also dearly demonstrate that sound forest management is synonymous with sound resource conservation, as more regeneration is allowed, and grazng and the extracton of firewood and other forest products are controlled. In the forest management units, natural regeneration will be enhanced and biodiversity maintained; in the A/R areas and through vilage forest management, watershed protection will be enhanced; through agroforestry, grazing and fuelwood pressure on national and village forests will be reduced and soil erosion will be controlled. The impact of these benefits cannot be realistically estimated except by monitoring during project implementation and thereafter. E. Imp= on 5.25 In Bhutan, women's legal status and their status within the household are good compared to most South Asian countries. Women and men are treated equally by law and daughters can inherit their parents' property. Womenes access to education, however, is limited, and only 10 percent of women are literate (compared with almost 35 percent for men); and, partly as a result, all extension workers are male and most of the training for improved methods of agriculture and technology has been directed to men. There are chapters of the Women's Association of Bhutan in eastern Bhutan and the project will actively pursue collaboration with the local Women's Associadon chapters to ensure a greater impact of women, especialy in the social forestry activities of the project. F. Fiscal Suainabii 5.26 With the exception of the Institutional Strengthening Component, all project components are expected to be financially self-sustaining, as reflected in the financial rates of return estimated. The institutional costs, including incremental staff salaries and benefits, and travel and daily allowances, would amount to about US$160,000 per annum at the end of the project implementation period. These will have to be borne in full by RGOB but appear reasonable in the light of substantial increase in the level of forestry activities, and their associated benefits, generated by the project Furthermore, it is expected that, following completion of the project, population growth and economic development in the project area will generate an additional demand for wood and wood products beyond the level provided by the project, thus requiring an expansion of forest management activities which wil justify maintenance of at least the staffing levels prevailing at the end of the project. G. Ejct Risks 5.27 The project is subject to two major risk factors. The first is the potential delay in project implementation due to the weak absorptive and implementation capacity of DOF -42 - and lack of trained personnel in Bhutanx Although the project does not address the human resource constraint in a comprehensive manner (because major human resource development programs are the subject of ongoing and planned astance programs by the Government of Switzerland and the European Communes, respectively), the institutional support provided by the project and the human resource planning that is part of project preparation will reduce this risk considerably. Besides, every attempt is being made to keep the project manageable and realistic in relation to the limited human resources available within the country. Also, the projects mid-term review is epected to fiuish the necessary feedback information for conections in project desig and implementaton. 5.28 The second risk factor is poor response by the intended beneficiaries, espedaly to the Social Forestry Component The project will pay much attention to people's participation in the management of forest resources. In particular, the success of the Agroforest1y and the Village Forest Management Subcomponents will depend largely on local involvement. Since community management of forests is rather a new concept in Bhutan, it is not clear how this will be received and translated into action by the people. Therefore, the project envisages a slow and steady adoption of this idea and will allocate a signcant amount of time and resources for adequate preparation and extension work to educate the public, so that their commitment is ensured. .43 - VI. AGRE}iMEN1S RELACHED AND RCNAI? 6.1 The following agreements have been reached: (a) RGOB will provide to IDA by August 31, 1994, for its review and comment, a recoendation on the management and operational arrangements it intends to adopt for its national forest management units and that the recommendation, taking into account IDA's comments, will be implemented no later than July 1, 1995 (para 2.30); (b) an action plan for pricing and marketing policy reform, agreed with IlDA, will be implemented no later than July 1, 1994 (para 2.34); (c) a detailed plan for privatization of seedling production and distribution will be sent to IDA no later than March 31, 1994 for its review and comment, and that the final plan, taking into account IDA's views, will be implemented no later than July 1, 1994 (para 235); (d) the A/R program for each year of the project will be subject to review and confrmation by IDA no later than July 31 of each preceding fiscal year, and that this component will be carried out so as to satisfy one or more of the agreed criteria (para 3.17); (e) based on the outcome of the project's mid-term review, adequate TA provisions will be made for the remainder of the project implementation period (para 3.23); (f) NEC will anmally monitor the enviromental aspects of the project in accordance with a memorandum of understanding, satisfactory to IDA, entered into by NEC and MOA no later than December 31, 1993 (para 3.24); (g) the Project Facilitation Officer will be responsible for approving and overseeing all field activities to be carried out under the project, that he wll act as the project manager, and that he will be assisted by an assistant project facilitation officer who will be a senior forestry officer (para 4.3); (h) a comprehensive mid-term project review will be undertaken by MOA, IDA and SDC, and arranged by IDA, no later than December 31, 1996 (pam 4.12); and (i) no later than the end of 1995, and every other year thereafter, the Government will convene a meeting of the key donors involved in the forestiy sector to assess the project's contribution to achieving the objectives of the Forestr,y Sector Programme Framework (pam 4.13). - 44 - 6.2 The following will be conditions of Credit effectiveness: (a) the adoption by the Government of the revised Community Forestry Rules, takdng into account IDA!s comments (para 2.33); and (b) the signing and fillment of all conditions precedent to the effectiveness of the cofinancing agreement between SDC and RGOB (para 327). 6.3 With the above agreements and conditions, the proposed project constitutes a suitable basis for an IDA Credit to the Kingdom of Bhutan of SDR 3.9 million (US$5.4 million equivalent) on standard IDA terms with a maturity of 40 years. ises "in Mws nt Uumgst POWs,9 we It .9 ost NrAle" unit5 Ctot klt emop totto '95us V - ---------- &Aoatv U,4-00 *u ages IsK 9001969 If1.1st 59 3 K 9 4 9 9 399V 9 fi 904.1 93 9 5 9 01 9 99 sa4 c.l.1gEdostsoO =4lqw.418 us. 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I.t.t 3361.4 4443. 3333.1 31031.9 3093. 1333. 341.S 30039.0 93.3 30.0 33.3 43.0 309. 330.0 6.0 10.6 3.......... vo#.os3s0.p.t,.tvto3 se.Um .Iz*3 3. for VA 3130 fo.t310.twO. 3. 3. la.406 taI tyOof .gr.1hr STt ad WHIMStqO f t sAOgoMs. .40 3qc3399sol ofe3 bo elau usnmd bw .4.1.33060 4S Ul3p Nolift S3 =eo 40= 601s0t to u de- sd seatM hrmosy. .10 cm" 4o3M9of ...3303M. sIt Cost. Oesed by 3030. 3*311993 V31$ Detailed Cost Umt, "Af cost 1.3.3, Imelooire Cart ipa ncin lot.3. Incdt*i" cA#447004.cla sinw333v 8WOOD us s*oo i33 9 94 9 96 6200 g foist. of99 9 94 95 96 9f 90 199 It.to Os94 9 96 91 Os of91.3.3 A. Wcdui*tw*3 ftoaM#ns. do. P316ulaftI Tr to 65 la 70 120 320 M3 IS0 743 MO4 IN0. I 332.7 323.0 33.3 21. S00.4 323.1 3413.2 3.6 4.0 4.3 1.9 *.3 MO. It.0 80.6 POm3.31am Tell 5 0 03 10 10 Sze 9I0 IS0 593 .00 0.0 74.1, 60.9 93.3 360.9 176.1232.3 62.0 0.0 . 3.1 33 .3 6C0 6.3 6.3 29.6 plordstion Tr.4 a. 0 65 M0 10 920 110 445 0.0 00 00 736 0. 6 30. 101.2 560.9 *.o e.g 2.9 3.a . .7 60 3. IgmIelk. It's 5.~~i 0 0 0 a3 61 10 920 335 0.20 0.0 0.0 0.0 17.1 3o.5 30.5 11.3 94.3 0.0 0.0 0.0 0.0 0.1 0.1 1.3 IA P3wa4et3m Ut' Do 0 0 0 0 0 65 l0 i3n 0.20 0.0 0.0 01.0 0.0 0.0 39.3I 33.7 40.1 0.0 0.0 0.0 0.0 0.0 0.? 00 C.5 Plantation 9. . 0 0 0 63 63 0. 20 0.0 0.0 6.0 0.0 0.0 0.0 30.A 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 I.Nodt%lOslct .637 JOG~0. 101.4 201.1 '13.9 S33.1 103. 635. 3030.S 3.6 6.1' 10 .0 306 1.6 23.3 29.5 105.4 9luntote3l 3, De It t0 t0 320 340 M3 sit 352 3.60 30. 33.a 34.1 442.9 45. M3. 30y.9 3393.3 3.3 3.3 3.3 33.6 39.3 MI. 20.310 M3 Plmt.lka 79.3 00~~f 0 10 30 30 30 340 340 430 .300 3.6 Is.7 14. 3 03.0 32. 23.4 0. 0.0 0.3 0.3 0.3 6.6 0.3 0.3 24.6 l16iOniotl irt* Do 0 0 30 30 30 320 340 M9 0.90 0.0 0.9 33.2 33.9 32. 330.5 M9. 389.0 0.0 0.0 0.4 0.4 0.4 S.1 7.0 33.9 913.33..o fT's No 0 0 0 l0 to 30 Sa0 330 01.10 0.0 0.0 0.0 3.6 2.0 2.9 31.3 415- 0.0 0.0 0.0 0.3 0.3 0.3 3.8 3.6 93m3.t3stell fr4 0 0 0 0 30 30 s0 s0 0.20 0.0 0.0 0.0 0.0 2.0 3.9 3.3 0.6 0.0 0.9 0.0 0.0 0.3 0.3 0.3 0.3 plsantat1af Isis No 0 0 0 0 0 fi0 30 20 0.20 0.0 0.0 0.0 0.0 0.0 3.9 331 60 00 0 .0 0.0 0.0 0.0 0.3 0.3 0.2 Plantatlan ie.6 to 0 0 0 3 30 0.10 . .0 0.0 0.0 0.0 0.0 0.0 3.3 5.3 0'.0 0.0 0.0 0.0 0.0 0.0 0.3 0.3 C. IMIpe1o..3056 44.01 59.6 473.9 741.4 931.4 3047.6 3333.3 3.5 1.0 3.3 36.9 36,1 33.3 311. 339.3 Ihodat-pa0303 It 0 3% 20 so 940 3u0 343 63 1.60 0.0 333.3 33.0 797.3 I346,9.5 1169.3 364.6 6044.4 0.0 4.1 5.4 0.5 S2.3 03.3 30.7 231.9 plant.43tn It-S 5 0 0 Is 25 340 MO 430 3.40 0.0 0.0 36.0 45.9 334.7 30.3 345.4 013.3S 0.0 0.0 0. 3.0 1.3 . 310. 33.3 J0.1 Plants,2Ion WI, 0 0 0 Is so IS0 26 3.30 0.0 0.0 0.0 35.6 44.9 3SU.5 319.0 oo. I 0.0 0.0 0.0 0.9 3.6 5.4 M00 3. 93.ntatIm ft*3 9.~s 0 0 0 0 Sol as s0 370 0.20 0.0 0.0 0.0 0.0 4.3 f1. 34.5 33.0 0.0 0.0 0.0 0.0 0.3 0.5 10.9 ".11 Piantsttm 1t44 S. 0 0 0 30 35 40 0.10 0.0 0.0 0.0 0.0 9.0 4.4 1.1 33.0 0.0 0.0 0.0 0.0 0.0 0.3 0.5 0.4 pia.,tettom 79-S Me 0 0 a 0 a 0 is So 0.70 0.0 0.0 0.0 0.0 0.0 0.0 4.6 4.6 0.0 0.0 0.0 0.4 0.0 0.0 6.3 0.3 D 0. tq.15034ad lm6 333tSo 0. 3. 6. . 613.3 2337.4 3303.7 14s3.6 0.0 4.? 9.5 33.0 39.0 19.3 03.3 306.3 06.6eat 79.3 3653. 34.3 695 3.0 11.9 03.3 86.1 437.5 3.3 3.3 3.3 3.0 3.0 3.9 3.9 36.3I 3. 1563n170 Pa. 2 3 2 3 2 2 3 34 30.00 33.0 33.0 34.8 36.4 31.0 39.3 33.0 304.8 0.6 00 0.9. 0.9. 3.0 3.0 3...6.6 1,036 368.9c430.8 .9 9 81. 3033.9 5903.3 439.3 U464.6 6.6 33.0 24.9 66.3 309.0 343.8 V1.J 330.6 '3. 3t.s#4nt mdii 3 Uatwa3 taguweotlan 33935 luwIog 40049.6 .31.3. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ sO- -- _~9. ... .. . 04- - '34 Itsauksmd t Osiwut rqomresIu wic obptbug lawwIwig . 430 t..smtw $04 I 69uri3631 no 414oam wtomms 643g.. o.itatoAst mdi s 5.1133.1.4 30t31A,e sitbag law 70. Unit Costs kalad bv 300.0 3136 lo3133 t11111011 ttastted Cat Itztf st *A Cos toe* = Wtaisa *m ftor arme n ,,,,S ,,,,, ~~~et,,,,Z , ,,,ff , ,,,f,,,§,,,,t , ,,w,,, VW-Goo,,,,,,n , ,_,,, a,, VC, ,S ,ht, $,~~~~~~~~~~~~vl inrillt tltt os9 f ' 4 n 9 s 0 I 4 a 0 f f i ------------------- ....... .................................................................... ........................... ........... ....................... a 0 0 0 0 0 1~~~~~iei it e00 46-1 ea t*A 64 .e . e.e sit *. "S.: 41 ^.r 6.r Hlt e.e ll o* @ . * * ** ....... ..... .....**^*.... sr* "2t nn $2 t 2t ! a *t$tl : "- "^§ttss,. t"".#el4"'"tott)t"41 t,-' ',', .', ',.... ....... ...... ................... .... ^ ~ ~ ~ U % % t t t $ | 1 | e ae-t X.- "-* 4t-t ^ t 4 4 | A l t o.$ A X 1 2J .6 A 41.7 fI 26 04 0.4W. "|took-or.* 4 2 2it " two cob 'Mt t*s .0 t2 A 611.4 06 24 0t .0 6.0 a 44 4 SIMA 111.41 W W^X *er ; "I. ;242 2 "tis : ttt *@ *t e .X.e;". 0t 449 col otZ t a A A1 . I . . 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U Weel 01 Sett t 4 6 t 6 t z or M : 80 1.1 - .H .2 I 1 6 . sam is- 04 S ot 0 96 a is ' s 4t IS 04 a is _f tt 0 t*_ n ft IS is ar ," r,_* ..__........... _ -~~ j j t j | * * X l"S | | a :S t 24 * | s | tS g m. * B a-, :: " S I' SH isne tFt; n"; nii; "i "i ^i n".; ;i; ni ;2; 4ft ii.i i^; iri 25ii~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~o Se 2 S a OSo4" ' t e i'. | | i | i | ~~~~~~~~~~~~~~~~~t mor , 5It H L'u i § ,t , 'l LO lS.:Kit titi4 iOaS gem- " I S t i 3 1 1 M." 4a t 44.2M MA 7tj 3. 04 i4. S. I a ts- ,[J} _Wow _m* Awe 1 OIL .4 No "A MA KA 4.0 :1 LfJa ***00e*@**at*4ss*J a* a I t I I n"""*XX* Jn***tS*t4 a4*¢ 21= K t .. t , ,, "l ''XJ £Sa " M a. _| tq X X a 3 * * a D t @ t ra t* |~~~~~~~~~~~~~~~II a trt W st am 1;0 a S tarata4lE .....#J ..... ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~ ~.... .... ........ ........ .. 6 "_ n t t t t t t t t "S "~~~~~~~~~~131.4 n eOIJrnt ;W; 4r8 MAs WA nsJ 41 a 0 a . 1St 16A *FA OPA ' tw } ! ! ! ! ! ! '. §s tXts Fj wt3i iti i' stt.6 GA : OA 64t tr.i 2.J i 3A t OAi 01.1 L ft~ ~ 01 a s z.| m f.4 i . LO fiD ii sis fta IL H 6.6 0.2~*>tt......... . **$,,t, ,,,a-!..!,,t ............W .W!.t._z ta_.!_t,,#,&,U, t t. Z4t nt. t ta t.S tF- 4 ZtJ tt t na ta tat tvt n* anHe L n4w Fttt. tt, . tilt tttt*ttt W ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4"' ==t_le , _ . S:L t"t,~~~~~~~~~~~~~~~~~~~~~~~~~~~~M ' . 0t.t tt d 05.0 #A THIRD FORESTRY DEVELOPUEhT PROJECT Table 8: Summary Accouit by Project Ccponent mu x 1000 villtage Physical Price forest Forest tratitut Contingencies Contingencies t _ana Afforest Agrc-For Nanegeme .Strengt ---...... nt ation estry nt honing Total I Mount X Arount 1. INIS OSTS .................... A. Civtl Work 7800.0 0.0 0.0 0.0 13100.0 20900.0 7.0 1470.0 14.9 3108.7 8. Equipment ondWeterials 16507.0 340.0 3072.5 125.0 98140.0 29684.S 8.4 2501.4 8.4 2518.7 C. Ptantation Work 3056.7 9731.5 0.0 1440.0 0 0 14228.2 10.0 1422.8 31.0 "417.2 0. Vehicles 8090.0 0.0 160.0 1240.0 11530.0 22460.0 0.0 0.0 9.4 2106.3 E. Training 6990.0 140.0 5946.5 8300.0 350.0 21726.5 2.8 608.6 13.6 2946.4 F. Technicel Assistance 19800.0 0.0 3600.0 4500.0 18000.0 45900.0 0.0 0.0 9.8 4517.4 Tet ta INSUE4T COSTS 62243.7 10211.5 142t9.0 15605.0 52820.0 1SS099.2 3.9 6002.9 12.6 19614.6 It. RE-URRE COSTS ....................................._ A. Incremental Salaries 965.6 0.0 1980.0 720.0 16711.0 29036.6 O.S 153.6 22.3 6489.5 B. Other operating Costs 1S480.5 0.0 1886.5 794.0 7508.0 25869.0 S.0 1303.9 23.2 5991.5 ._ __._......._._ ...._._____....___....__....__.................................................. Total REOJC T COSTS 25306.1 0.0 3866.5 1S14.0 24219.0 54905.6 2.7 145T.5 22.7 12480.9 Totdt ASEkLIE COSTS 87S49.8 10211.5 18085.S 1719.0 77039.0 210004.8 3.6 7460.5 1S.3 32095.6 Phsical Contingenifes 3485.4 1021.1 999.5 203.4 1751.0 7460.5 Price Continencies 13208.3 3232.0 2631.3 2517.2 10506.8 32095.6 3.8 1229.2 ;.:. _ ..........._. .................................................................................... Totol PROJECT cosTs 103O.4 14464.6 21716.3 19839.6 89296.8 249560.8 3.S 8689.7 12.9 32095.6 Taxs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Foreign Exhange 64543.7 692.S 1S389.4 11010.7 56.5 146319.8 2.7 3981.5 Values Stcled by 1000.0 3/91993 12:4? CO 8NUT*3 TNIRD FORESh IT DWLOPNET PMOJECT Tatle 9t Suuary Accsouta bV Year totals Inctwluding Contingencies US S .. . ... .. . .... ... . ........... .. ... ... ... .............. ......................... .. ..... ....... ....... 93 94 95 96 97 98 99 Totat 1. INVESTHEWT COSTS .....,..._._........ A. Clvil Uorks 108750.0 173458.6 188641.8 173098.3 110057.3 70934.4 85011.5 90.951.9 8. Equipment and Hateriata 615392.9 62025.6 52942.7 246698.1 33828.5 87126.3 148581.8 1246595.8 C. Plantation Work 4675.0 23660.3 46278.8 99469.9 150173.3 188389.8 204072.0 716719.1 0. Vehicles 335357.1 92542.6 107830.1 13347.2 38661.5 227480.? 62150.2 877369.4 E. Training 52560.7 212227.4 257115.3 73176.1 137876.8 121152.3 48804.1 902912.8 F. Technical Assistance 310714.3 517039.4 210210.2 182007.0 2N4747.4 275072.6 40828.6 1800619.7 ........ ... .... .. .. ..... ....... ..... ...... ... ... ... ... .. .. ..... ....... ........... .................. ... ... .... Total INVESTHEUT COSTS 1427450.0 1080953.8 863018.8 87796.7 73534s.0 970156.0 589448.3 6454168.6 I1. RECURRENT COSTS .......... ............._ A. incremental Salaries 69319.6 142791.5 165189.9 201220.4 216684.2 230716.9 248352.8 1274275.3 8. Other Operating Costs 49077.7 118299.7 149130.9 163792.8 218964.9 235294.6 249880.8 1184441.5 . ........ .......... ;...... . .. .... ... . ....... .......... .. ..................... ....................................... ... Total RECURRENT COSTS 1183 7.3 261091.2 314320.8 365013.1 435649.1 466011.6 498233.6 2458716.7 Total PROJECT COSTS 1545847.3 81342045.0 117M339.6 tl52809.8 1170994.1 1436167.5 1087681.9 8912885.3 1 .................. ...................................................................___.__ ..... __._._.................._______.____.___.............................................. _--__....... ___.____........._-v__4 2/16/1993 11:21 t I; r OHmUTAN FOESm rKOJECr- OrErATOt SaiEWULEf ,:OLLA3 EORET MAIAGEfrLANNING Qtr L.994 QtO2.1994 _ Or3,1994 Qtr4. t9B4 r. 1995 Qtr2.15 S, Qt5 m Qt4.19 IW tJ4an. DIr Jan | r I F. ma Nov | an J Mar U* .hjn 11|l5O I 1 L I 5tE sEtEVTON 5w _ 2 DEBIN 00CONOMCSURVEY 6w 3 5OECJONMSURVEY 12W 4 ESTADUSII USEItGIWI 12. 5 ORGANSE USER GROLW 4w _M.r O VLAGTE RAN G . 7 W.AGE 79AO4342 ? f 0 DESMGN fE I 3ETOY' 4w ... 9 TllWE (SURVEY/,_I .Y) ow tO FOREST RNENt>OY 1 12w tt DESI6N DATA MROCESSI Aw 12 DATArROCEOG 4w 13 WA"I ARTWRATORYMAHAGEMEW fLAN 12w Am 14 5(6LOISSIWITN .ULEGB 4wI _ . ., . __ _- . _ 91~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~________ tE FKALU OAKTIlAl>TOORY B UtTO MAAOMs nA w 4111 i--TRAW4G (lNUdlMNTTO) ' --'-_ _ _ _ __ 17 IRA*N(fANLMATA 2 1w I r'ageI The Char IIuaowtooe saTeqwe anw the Aartimu of ovento fore a #vn tvllag - 55 - . . ~~~~~~~ANNEX 3 THID FORESTRY DEVELOPMENT PROJECT Institutional StrensthegMngn C=monent YEARWISE BREAK UP OF INCREMENTAL STAFF REQUIREMENT IN EASTERN BHUTAN PDLMHA 1993 1224 1995 1296122712981229 2TOTL Economist 1 - 1 Forest Ranger 1 - - - - - 1 Foresters 3 . . . . 3 Draftsman 1 - - - - - 1 Computer Operator 1 - - - - - - 1 PFO - Khangma Assistant Director 1 - - - - - 1 DFO 1 - - - - - 1 Forest Ranger (Engineering) 1 - - - - - 1 Forest Ranger (Inventory) 1 - - . . . 1 Forest Ranger (Research) 1 - - - - - - 1 Research Assistant 2 - - - - - - 2 Forest Guards (Asst. Engineer) - 1 1 - - - 2 Data Processor - - 1 - - - 1 Cartographer 1 - - - - - 1 Accountant - 1 1 - - - 2 Steno 1 - - 1 - - - 2 Clerks 2 - - - - - - 2 Drivers 2 3 - - - - - 5 Peon 1 - - - - - - 1 Computer Operator 1 - - - - - - 1 DIVISIONAL FOREST OmFICER DFO - - 1 1 - - I 2 Foresters 2 - - 2 - 1 5 Forestry Extension Officers (FG) 6 - - 6 * _ , 12 Range Officers - 2 2 - - - - 4 Forest Guards - 33 2 2 - 1 38 Depot Officers - 1 2 - - - 1 4 Depot Guards - 1 1 1 - - 1 4 Drivers - 7 5 - - - - 12 UDC (Upper Division Clerks) 1 - - _ _ 1 LDC (Lower Division Clerks) 1 2 - _ _ _ 3 Peons - 1 1 - - - 2 TOTAL 120 a. 2 nos. available NOTE: 1. Accountants for Divisional Forest Offices are already in place. 2. Community Forest Management facilitators, winch operators and other machine operators are casual/temporary positions and do not require government sanction for appointment/engagement. BHUTAN THIRD FORESTRY DEVELOPMENT PROJECT Technical Assistance (Staff Months) Phase 1 Phase II Sub- Sub- SPECIALIZATION Yrl Yr2 Yr3 total Yr4 Yr5 Yr6 Yr7 total TOTAL M1inistry of Agriculture-PPD & DOF Forestry Planning and Policy Economist-PPD 3 3 3 9 3 3 3 3 12 21 Mid Term Review Consultants 3 3 - 3 Sub-Total 3 3 6 12 3 3 3 3 22 Eastern Bhutan - DOF o Administrative Facilitator 8 8 8 Forest Management Planning Expert 6 12 6 24 24 Forest Engineer 4 8 4 16 4 4 20 Agroforestry Expert 4 8 4 16 4 4 20 Forestry Extension & Training Expert 4 6 4 14 4 4 18 Sawmill Training Specialist 6 2 8 8 Joinery Training Specialist 9 9 9 Forest Research Expert 4 2 2 B 2 2 1 5 13 Monitoring Expert 4 1 1 6 2 2 8 Conservation Biologist 3 3 3 3 6 Forest Resources Assessment Expert 6 6 - 6 Non-Timber Forest Products Specialist 3 3 3 3 6 Sub-Total 40 43 21104 37 A 1 42 146 TOTAL Al A6 a 116 40A 4 i 54 170 - 57 - BHUTAN ~ ~ ~ ~ ~~~ANE THIRD FORESTRY DEVELOPMENT PROJECT Estimated Schedule of Disbursements IDA Fiscal Year Cumulative Percent of and Ouarter Disb=sqMnrg Disbursements Credit Disbursed FY94 - 1 0.1 0.1 1 - 2 0.1 0.2 3 - 3 0.1 0.3 5 - 4 0.1 0.4 6 FY95 - 1 0.1 0.5 8 - 2 0.1 0.6 10 - 3 0.1 0.7 12 - 4 0.1 0.8 14 FY96 - 1 0.3 1.1 18 - 2 0.2 1.3 22 - 3 0.4 1.7 28 - 4 0.3 2.0 34 FY97 - 1 0.3 2.3 38 - 2 0.2 2.5 42 - 3 0.3 2.8 46 - 4 0.2 3.0 50 FY98 - 1 0.6 3.6 60 - 2 0.6 4.2 70 - 3 0.2 4.4 74 - 4 0.2 4.6 85 FY99 - 1 0.1 4.7 87 - 2 0.2 4.9 91 - 3 0.1 5.0 93 - 4 0.1 5.1 94 FYOO - 1 0.0 5.1 94 - 2 0.0 5.1 94 - 3 0.1 5.2 96 - 4 0.1 5.3 98 FY01 - 1 0.0 5.3 98 - 2 0.1 5.4 100 -58 - AN=E 6 Page 1 BHITAN 3H=R EORESMR DELVELOPMEN T ESl Keoy Performance Indicatrs Sagona oemst Management Q=monent (i) Completion of management plans and approved by Government as against the annual work program; (ii) Operational plans prepared for each management unit as against the annual work program; (iii) Volume of timber and fuelwood harvested, transported and sold from each management unit as against that prescribed by the management plan; (iv) Disposition of timber and fuelwood sold by category of buyer; (v) Quality of forest road construction and harvesting operations as against standards set in management plan village Fe Management Cponent (i) Progression of user groups formed and of village forest areas assigned to user groups; (ii) Progression of village management plans approved; (iii) Quality of village forest management as against standards set in management plans; (iv) Number of user groups trained. AWrfOneSal Componen (i) Progression of private mnrseries established; (ii) Progression in production of seedlings (by species) and seedling sales to farmers; -59.- ANNEX 6 Page 2 (Mii) Progression of phasing out of government nurseries; (iv) Survival rates of seedlings planted (to be detennined by sampling); (v) Quality and growth performance of survving seedlings (L sample). AfforstatioEeaton Compoent (i) Determination of whether sites selected meet the criteria agreed to under the project; (ii) Actual achievement vs. planned target for the year (under different models); (iii) Survival rates of seedlings planted (by species and site category); (iv) Quality and growth performance of survving seedlings. Insal Strengthening Cmpnt (i) Staff sanctioned and in post as against agreed project staffing plan; (ii) ConsIlttrnts personnel in field as against contractual obligation; (iii) Progress of civil works as against anmual program target; (iv) Progress In procurement of equipment and materials as against annual program target. Einanaa Perfrmance (i) Anmnal budget request, approved budget allocation and amount actually utilized (ii) Annual disbursements as against disbursement projection. - 60 - ANNEX THIRD FORESTRY DEVELOPMENT PROJECT Supervislon Pta Tentativw Dates Pain Activity Staff/Corsultant _rson-kMfts FY94 October 1993 Project startup; Task Manager 2.5 reporting proedures Forester 2.5 procurement; anmtal Social Forester 2.5 inplementatfon calendar Financial Expert 2.5 April 1994 Supervision mission; Task Manager 2.5 review samusl work program Forester 2.5 Forest Engineer 2.5 fin October 1994 Supervision mission Task Manager 2.5 Forester 2.0 Social Forester 2.5 April 1995 Supervision mission; Task Mnager 2.5 Review anmual vork Sociat Forester 2.5 plan Forest Engineer 2.5 FY96 October 1995 Supervision mission Task Manager 2.0 April 1996 Supervision mission; Task Manager 2.5 Review ansal work Social Forester 2.5 program fli October 1996 Mid-term review mission Task Manager 3.0 on progress & problems Forester 2.5 spoefeilly trafning & TA Social Forester 2.5 Enmironrentalist 2.5 April 1997 Detalted implementation Task Manager 3.0 review mission For ster 2.5 Social Forester 2.5 Forest Engineer 2.5 FY98 October 1997 Supervision misson Task Manager 2.0 April 1998 Supervision mission Task Manager 2.5 Revfew of anmtal work plan Forester 2.5 Environmentalist 2.5 October 1998 Supervision mission Task Manager 2.0 April 1999 Supervision mission Task Manager 2.5 Forester 2.5 October 1999 Supervision mission Task Manager 2.0 April 2000 Supervision mission; Task Manager 2.5 start project coupletion Forester 2.5 report Social Forester 2.S Environmentalist 2.5 - 61 - aHutAN Table I THtRO RES3AY OEVELOPuENT POJ5ECr AGa3REGA7Ec 3JCRASE OF PROUCUTO OF MAJOR FOREST PRODUCTS rZTAL VC;vuE GOSS VALUE OF WCREASE I > iodderi yT:AR F..ea 7-n*e Fo-age Ilk 1FuoIwow r.we Mik Lmon- Aesi Fww Fibrsn Caves Caw" (in3) (13) (tou)(000) rta(° NuS 1 -135 1.061 -62 0 .30 306 0 a J 0 0 3 a 2 -566 3.395 -181 0 .125 981 0 -1 0 0 0 3 -50 7.047 *2s4 36 -187 2.037 265 t1 0 3 0 a 14 .-2.039 7.17? -355 -49 -449 2.074 t.t93 .1 0 1 1 28 138 5 -3.176 735 .142 399 2.111 3.443 .1 0 1 1 48 176 a -S.130 7.430 374 916 *1.129 2.147 t t 0 1 1 91 424 7 *6.837 7.553 i.S9 -1-4 2.183 13.462 .1 0 1 1 t10 418 a .5.080 7.63 3.767 . -1.118 2217 =173 .1 0 1 1 I,74 7 9 *3.269 7.790 5.941 4 227 .7 19 2.251 33J14 *1 0 1 2 t 586 10 _360 3.614 7.7C7 -=.!SI 959 .779 41208 .1 31 3 2 -3 *220 11 7467 *.= 5.273 S. A! 1643 2.910 4£56 -1 31 3 3 *51 -320 12 9.250 'O.180 S.440 ;.748 I SU 2.942 45 1 31 3 - 4 *7 .538 .3 :.930 0.0 840e 5.6331 2.185 2.901 45.064 -1 31 3 : -38 -366 14 St.459 ':3.145 5.442 5.480 2.521 2.332 .3*7 -1 31 4 4 -2 -82 I5 t3.517 '0.099 8.492 5.542 2.974 2.919 4434 .2 31 : 4 78 .44 S6 14.074 '0.951 9.549 5.657 3. 3.105 4:52 -2 31 4 S 57 34 17 11.674 ' 1.051 8.552 S.8 2.612 3.194 43J14 -2 31 4 9 93 196 *8 t2.429 11.149 8540 -.#8t 2.734 3222 47.052 -2 31 5 17 105 102 19 12.985 11246 8.s19 6220 27 3.250 49.762 -2 31 5 41 137 -62 20 19A683 14.190 8.482 .604 4.330 4.101 S6 -2 62 7 83 145 -92 21 21.6 17.67M 8.457 6.7C6 4.767 5.108 54.124 -2 62 8 133 225 144 22 22.37 17.866 8.499 8.917 4.9" 5.163 5536 -2 82 a 176 292 288 23 26.60 25.004 8.S33 7.0 58 5.8e 7.226 568.U -2 62 a 176 276 410 24 2a5s 25.691 8553 7.079 G6.22 7.415 563 -2 a2 178 336 52 25 31.911 3526 8a547 '.04 7.021 10.195 58em -2 62 8 176 297 758 28 29.165 33.670 8.55 7.109 6.416 9.7n1 5.o7 -2 62 a 176 297 656 27 23346 14.342 .567 7.257 5.136 4.145 58.139 -2 62 a *77 380 704 29 23871 14.422 8.582 7.301 S.2S 4.166 5849 -2 62 9 177 293 84 29 24.399 1.5o0 8a597 7.500 5.311 4.191 &0.=0 -2 82 9 177 375 610 30 34.701 179 8.02 7.52 7.634 5.0CM 6A4 3 221 10 177 401 773 31 366 2022 8.681 7.643 7.937 5.766 61.148 -3 357 11 179 490 726 32 36.009 20.780 755 7.504 6.362 6.005 60033 -3 493 11 179 441 796 33 4382 27553 8.764 7.447 9.642 7.963 59.72 *3 901 11 179 486 714 34 47.84 29.24 8.63 7.393 10.2 8.6S6 59.161 -3 1.343 t1 179 457 644 35 51.037 35.704 .815 7.380 1122 10.318 59.O41 .3 1.821 11 179 476 69 36 44.672 31.SU 9.011 7.491 9J?2 9.41 59.31 43 1.821 11 IS0 407 584 37 34.909 17.29 8.953 7.5#1 7.860 5.152 50.44 43 1.821 11 i80 353 854 38 35.412 17.894 8.968 7.62 7.791 5.171 61020 ;t 1321 11 160 423 840 39 35*13 :75 8.978 7.S73 7.901 .5.190 681.3 43 1.82t 12 160 396 692 40 381J3 223 8990 7.711 8.400 6.451 61.67 *: 1.821 12 180 386 974 41 16345 28464 9258 7764 3.598 S.226 6 0 1.600 1 161 425 873 42 16.065 29264 .8 7.6 3534 8.457 61.154 0 1.464 1 16 415 720 43 20251 89.192 8.446 7.302 4.455 25.467 58.415 0 1326 1 164 352 536 44 19.630 93.792 7.021 5353 4319 27.10 0.26 0 9 1 t 279 S20 45 -7.934 *e8.424 5.740 5.033 3.956 48.65 40.266 0 4768 1 32 t10 232 3.727 '".384 2.810 2.640 820 41.727 21.124 0 0 0 90 135 144 < I > FxcwuaeVW e .1 fOatg.89 um*uae In MUUt mIN am oste -62- 8 Table 2 SHUIAk T14IRO FORESTY oEVo rpt4N PRwEcr ksmto iassmulaws. Fuse a ftos Sew wor _ _ Fuawc (Nu/23) SAW4WOOO si i tLO EUIVALENT FUELWOOO <2C Fit_suo E@OUfl Pf_SiI isosm, Fiu. isv_ pnses pruosm arise e ne Ortewa Nil Pronctm 109923 Fp to amunsawnw in USS 36 In Ngnrua. 10.244 oratara voer 2000 sdt mm totaysari awon oI In USS 394 In Ngunams. ll.03Z promatea rate at mrtwass oatrew gt of dawye sawn wood (1902-20051:2% LESS TRANSPORT COSTS sea Feqnt 1.400 Customs orec.ssw 280 Overan *suqt to New 1.120 Ovqnana freiht to pon :.240 ta,nshpwi at boro Ss Sawmeng i* West@ 127 BOROER PRICE ESTIMATES ass 30% Guamyofaterensn oraerra.wanmat ICIF _(C,I` or 6.707 Pnes to nasoan mama tool. 4Ii sIMo,(23) 4.7r0 5.OO3 Pnce to oem. rmnt 2.14 4.23 Preoutst mnux -c& 45% eaWowooc1. 38% slab a offauW 250 17% watet sawoust 73 Sbtotal 214 Lss5 Savmugu¶g oasis 45> 9 1.600 LESS LaWng Costs 646 484 23 220 n O Truwpon to sawmdit 13 249 a3 113 6 43 whgd , . 62 62 26 26 26 20 Sub-total 84 794 374 361 311 226 Stumoage vau* 613 1.75 279 m 311 343 Awaa toyalt teverag toe I Cum rotndw_o. 57 20 or stanoaro royaltyX uro wen o..c6o BecaUst S gs tr ao Bil We nee _M_$M trac saw WOo muse OeSna us wee tot uumrAoa 4ounasomsn. C2-Onty huewood a c vo a l d b es t r w tot_ bw msyaw. c3a Prom Wortd 1a1. Commod Pnee Ttnes defftd Sy lbt M tMwiawnn Vea (ULM Index tO 1092 - 205 wnsuwmi m e t"I rase we c42vaAue ot I (noe) oust mm of s trom 2.s (I)o qp lo. -03. incsuces osoresson. umwanse. ener. NMMaW.WiOu and labor at ditemwa rte 00ewoms0 42xamase mu Iiusae wfts <63 Cataycon sawnwdto gd b e o t oftotosunMultiotitwas ated 4own by tree SCF (.73 Osae mere are no ateauefes 80CUL rla- Kootwomc Costs mad bSl tits oat gofotostry sod Village Forset th) sAnt (B'009} I 2 3 4 6 a 7 6 0 10 of 2 13 2 64 ti to I7 to is 20 COSTS k,vs6_t 1.674 4.3t0 1i.0 t,3s5 0.72 2,356 726 0 0 0 0 0 0 0 rtmtcasts 26 30 406 we9 60 M 300 xo 240 too 120 a0 260 360 TOTAL 3.026 4.087 1.776 2.016 2.329 3,10? 1.086 300 240 ISO 620 60 200 360 0ENEFITS CH4PI FOREST ZOE 9 *23 ns Sys ass 1,749 3.073 6.5s 2.A0 6I.2 tea6.e7 617tt t11 66 t50 64 66,0s 5.5ss is.620 16.400 18.049 IOXAOLEAF FOREST ZONE -54 .300 407 .731 .429 460 1.424 * 6.861 11.437 16.462 16.722 65.ss3 t4.003 1a.7st 63.46 64.24 64.042 04.25S 16.250 17.*93 TOTAL 40 42 42 .40 48 2.t66 ,470 0.280 U4.024 I .308 20.400 10.623 18.370 I0.0 16.6t4 27.306 66,006 17.162 t0.262 20.264 NET NEFtTS -3.074 *6.0o0 .9.402 -2.475 *-I.0 -43 2,406 7s060 13.704 10,218 20.37s 19.062 te0.0s0 6.62 166.54 17.J06 6.006 17.112 t8,25a 20.as4 Ecuifta" of t.eawm 3WS VILLAGE FORMET MA_M COST" kwtn _w 2.662 2as0 26 t.40 2.002 2.406 t.00 o 0 0 0 0 0 0 0 lecwTw 603 062 a2 222 6 an 77 636 as a6 s Gs Go6 6 a so0 TOTAL 2365 4.i23 202 5.676 2t20 2.00 .1609 06 s 00 00 900 0s 0s BENEFITS CHUMEFOREUTZONE a .279 .1.075 1.6.00 46,74 .2.06S 4,608 .1261 tt.002 66,416 tS.297 64US2 64.065 4.920 M5AP7 t6.640 64,602 64.690 14,029 65.6t4 OADLEArF FOREST ZONE 0 *ss .752 463 460 040 1.260 0.87 26.60 28.336 W6S6 26.022 20.43? 26,s60 2M0.0 2s.376 20.706 29.676 292M 20.606 TOTAL 0 * -6.27 -4.022 43,554 *a,t20 .2.826 4,046 26.67 25,212 2s.203 24.081 24,760 24,004 25A.41 25.s09 25,48 2a.6s2 25.310 95.407 NET SENEFATS .2,265 .4.60S .4.606 .3,408 .6,22 .4,724 4.060 4.643 2t.572 2S.863 2s,o05 24.800 24,00 24.S98 26.467 25,fi6 25.406 25.612 25,270 25.407 sCawii6iI0ua6od106_m 20% _t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'t . . . .. " 16 %3Q*16 mIM vomna D CtWOI vaoecT SOCIAL F Economic Costs ed BDnt it. oat Aototostry and Village Fo."t .tmungamut (1thOOO) 21 22 23 24 25 26 21 a 29 30 31 32 33 34 35 30 37 30 39 40 COSTS TOTAt tlENEFATS CHIRPINE FOREST ZONE 18.683 1.31 109.674 20,t93 t9.7e0 20.541 20.700 20.819 n2.,6 22U042 23,413 23.100 22,?1t 22e,64 22.234 22.131 10.7s8 20.990 21.14 21.261 SROADtEAF FOREST ZONE 1t.09a 16.413 1t.27s 19.2 19.403 20.841 20.869 *1.201 22.513 23.2n3 24,060 23.640 23.454 23.t90 22.02 22.760 21.238 2 .StO 22.024 35.054 TOTAL 21,12? 21,719 22,499 22.911 22.513 23.660 23.090 24.149 25,129 20.503 27,310 28.06? 26.535 26.365 2ssoo 25.e03 24.153 24.425 24.00 36.334 NET 3ENEFITS 21.127 *1,719 22,499 22.97 22,513 232.6 23,600 24,149 25.m 26,503 27.318 28.868 26.6s3 26.365 25.90 25.00 24,103 24.425 24.e07 36.334 Ecba ct #ales d ium VILLAGE FORE STST COSTS cots F.taM.0 cosl, TOTAL BENEFITS CORE FOREST ZONE 1.0.64 10,300 18,030 17.502 19,02 t4s39 14,180 14,007 14.055 14,233 14,402 14.453 15.225 15.202 10.321 10,203 13.49 3.012 MA,W10 .3.t91 PROADLEAF FOREST ZONE 20.680 29,213 30,609 3t,194 32,403 32.54t 30,418 30,159 20,780 29.890 30,30t 29,956 30,464 30,60 32,422 32.09 3t,011 31,369 31.558 31.50- TOTAL 26,116 28.157 20.005 27.906 29.945 29,631 2s5.31 25,362 25,197 25.350 25,736 2s.540 20,3n3 20.417 28.0t4 20.21? 2sa14 26.023 26.K33 25.s0e NET BENEFITS 30.178 20.157 20.0Cs 27.060 29094S 29.931 25.631 25,382 25.197 25.35B 25.730 25.s40 28,31 20.470 20.014 20.2n1 25.74 25.023 26.133 25.00 . .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ sXw OIhtfAM THSM FOREOTR O6VELOPME6Kr PAtOECT IIAaoda1 &W Eosmic Costs sad BeoWt. of Nadoga Fornsl ManagmowtWUn , 2 8 4 6 0 7 0 S t 1 I1 12 IS3 14 1 6 0 17 16 to 20) FINANciALOO067 AND 8214275 8 bwalmsn 3.116 see 406 26 26 1.878 go 0 1.05 1.080 000 0 0 0 0 gm0 0 a 1.080 1.060 PAscuet II N 612 6as 82 502 03 632 082 0 612 612 eab-tod 3.82V 1.482 1.204 71 ?#0 2.06 710 0 I.60 1.0s0 06 0 0 0 a 06 0 a 1,68 1.050 IAPLEMEWATION kNsowrmel 11,610 3,2I 3,610 7jSO 2.004 2.005 4660 1.100 2.310 1.730 1.160 1.160 1.160 1.180 1.1,0 1.100 01610 1,160 1.160 1.168 PAsourratsos so6 an2 7 783 1.024 1,064 1.174 1.176 1.176 1.176 1,176 1.176 1.176 t.176 1.176 1.176 1.175 t1,11 1,176 1.176 Sob-Omd 11M2 4.412 4.426 7,609 8.100 $.M1 6,124 2,366 8.4U 2.06 2.28 2,22 2.32 2.=2 MS2 2*6 2.36 2US 2*6 2.226 TOTAL 0067 16.461 6,404 5,713 $.60 3.616 6,176 0.443 2.866 6.07 8.066 3.30 2.226 2.32266 2 32.66 2.= M 2.06 2.3 3087 3.37 1VC4C82MBALVALUE00UTFUT<2 83afln 217 470 4a 460 SM3 611 6SW Me 637 72 740 748 76 704 M 77 70 704 601 1.06 KoiSsEasI 136 234 Sm 213 247 261 266 26 264 " s 306 SMnS 27 376 s6 3 0 see0 on50 on0 WaffVa 171 204 SM 306 O1t 310 822 82 3 463 460 450 408 473 477 402 487 401 480 SM sub-tmm 688 1,804 1.026 1.42 1.00t 1.07 1.00? 1.116 1.102 1.546 1.08 IN*7 1.506 1,012 1.820 1.044 1.060 1,37 1.06 2174 egflli 0 0 a63 an 710 727 766 76 618 1,401 1,427 1.452 I.47 1,602 1.626 1.66 1.67 SAN0 1,610 2.303 IL UngnWmg 106 07 101 106 l0 112 116 11S 121 100 260 211 244 247 206 263 266 260 28 V12 OL Lmoftw1? 0 10 107 110St? i 114 117 120 124 202 243 240 246 262 6 266 201 204 20? 277 sk*-toli 2121 197 204 210 21 SM0 23 M 244 401 481 467 as 406 6 5 LI Sir 06 8 648 ROYA1.TM9 <3 64 20M 440 406 464 602 52 529 657 96? 000 1.013 1.030 1.04 0.063 1SAM 1.00 MIS1 1.126 1.66W15 TarAL 64 1.410 1.073 1.716 1,763 1.80 1,0 1.8022 1,364 2.900 2.030 We07 3.110 3.168 *.13 3.8 8.27 2.200 3.346 4.28 lt FINANCM. 82*0EF57 (24,660 (4,064 (.640 P.6094 p.056) (k.37) KG,04 (4M (3. 1I2 (1,061) (206 76 734 822 872 (40) 04 604 (642 06 ECOOWOWM000STANDIENEFT 8 005784 bwulwmwl SA66 6.21 1.794 20 26 1.00 20 0 1.0 1.06 SM 0 0 0 a Om 0 0 1.06 1.00 bmantmsUw SM 444 474 616 616 61 16 GI 0 612 612 Nub-told $.07 3.70 2.266 Gm 636 1,62 Su 0 1,68 1.06 go 0 a 0 0 SM a 0 1I5M 1.050 IAPLEMENATIION hwwlnuaFcl e.40 0.50 6.006 SAN0 4,150 4.13 3.M2 1.120 2.310 1,720 1.160 1.150 1.160 1.160 1,160 1.160 1.160 1.160 1.100 1.160 RoffboInoosh 46? 1.07 1.64 2,17. 3.063 M 3.42 ,273 1.176 1.176 1,176 1.17r6 1,176 1.176 1,176 1,176 1,176 1.176 1,176 1.176 1.176 Nab-told. 8.063 601 7.03 0.086 7,1 7.2 77?~ 0.A0 2.M366343 2.900 2.386 2.326 2.326 2.82 2.3 2623 2.226 3.1 2*6 2*6 1OTALO08t 12.84 11,70 03,08 0.2 7,146 6.738 7.146 2.366 6,047 83096 3,306 2.32 2.22 2.326 2.32 3.27 2.2 V.22 3.86 3.27 vNC101NSIALVMAtE0oP UVOIT<'21. Kh*'g. Koula Wmd vlwmg 1.07 2.642 2.50? 2.201 3,044 3.00 3,140 3,200 8.26 4,42 4.43 4,632 4,630 4.827 4,673 4,718 4,76 4.60? 4.361 $.21 to ' 99g4Jj5f ~~ ~~~~0 0 1,67 1,067 2.037 2.117 2.106 2.27 2.343 43020 4.064 4.107 4.20 4,600 4,379 4.44 4,615 4.602 4,643 .6,24 0 . S. and SC. anmla 0 666 SM SM 62 6so 0 686 704 1,161 S.370 1.206 1,416 1,43 1,450 1,48 IA4N S,60 1.616 1,64 0b1,I.'j TOTAL 2.06 3.44 6.307 A 6,64 6,0 6sm 8,008 0167 6.0 0.607 O,06 10.00 10,234 10.333 160032 10,M 1076 106M 11,016 14.42 S.- 1421 C0#4OU38804H1I8S (10.667 0,321) (3.90 (2,660) V.040) (2,038 (1,14 8.502 1,26 6.SM2 0.063 7.77 7,010 0.043 6.17 7.260 0346 6,60 7,120 11,00OD Ememla eamts 04 eabi 16% .Cs Eacto hwsstmoat kg saw.ellgmed Ia" a.v opwoisiLo. -MO kbdudh lbs atonslod ineomoald Idsb 04 Ibbs bs0o17 on lbs 408 VWa. 4> Aousebg toyslllof c Nu. OD per ad IUTtAN Tl2IRD Fo0 ESTOUEOPlEN PRtCbECT Phactad SoaomsOaw nd bn.Io an N Foerst tu_aento Units 21 22 23 24 26 2 27 2 20 so 34 22 S3 24 35 38 27 s0 so 40 FWMMCAL OOrSAtADSEM W1 bwmimmt 660 0 0 0 0 960 0 0 1,6 11.060 - a 0 0 060 2 a a 0 Wha,otmt 6t2 Oub4w 660o 0 0 0 0 66 0 t,852 1,860 60 0 0 0 0 O8 0 0 0 0 APEMBITATTIO *_aI a> 1.18 1.180 1,t60 t0.1 1.10 .50 t,160 1.160 1,460 1.1t0 1.80 t60 t,160 1.,t0 t.60 t,160 4,180 4,460 S.N60 1.0 R.mntuIcume# 1,t76 4,7S 1.,75 1.176 1.t78 t,176 4,476 t,t76 t,t76 1.17S l,t7S 1.t75 t.,75 1.t7S 4,t?6 1.176 t,116 1t,76 *,176 1.176 10"1 2.32$ 2 M2U 2.6 26 .2Z5 U2 U2S U2 326 2326 2,22S 22 L2S 2,26S 2.26 U26 22 22S 22S TOTAL COSTO 27 x2 22 km k.27 2 U2S 2 2 2 326 k2 2.6S 8 2 2.326 21226 2.226 IT8~~~~~~~~~~~~~~~~~~~~~~~ 2INCIMENTAL VALUE OFOUt'U Kha24o 4,027 1.044 1,S0 11.056 1A04 *.0 I077 4 1.04 0 4.300 1.38 1.272 1.372 4.364 .30 4.36 4,401 IAN 1,412 178.07 KolEa t 64 613 6as 620 62 M 60 612 666 60 6074 677 600 N as60 es 61 60 07.7 tW g o62 046 66o 0a6s en s7 o 6o 674 642 640 40 063 8f6 66 664 66W 676 674 11.,462 Seab-WId 2.466 t22 2. 2,2t6 2212 2.2o 2.20 2.272 2.257 2.O0 2s7e0 2.803 2.606 2.Z0 t 2,024 2 Z0 6 6 2.ses 20 3270,7 0.43421w 2.234 AM362 2.374 2.366 2.4,4 MU4 2z0 2.476 2OM8 ,2 3.4" t.34? 362 3360 2.sW %2417 3.43 0.482 0,460 400.38 Lbvtlm"g 3s6 s62 266 367 270 372 276 27 370 442 446 4s6 407 460 602 804 606 o0n B0 176,0o . Lkapto2 260 280 WI 274 277 279 282 64 387 464 462 604 607 600 6St 612 616 617 646 473.626 Sb-told 725 724 738 744 746 754 M6 M 76 0 66 ss; ss 6 1,004 4,06 1.011 4.04 1,021 4.226 1,020 3409,035 uAO MJESa 4,010 1,434 1,040 14.86 .677 1.0182 706 .70 t.7s z2272 2.266 2.6 2.s41 2.362 ts6 2.378 26 2.402 2.444 z6t04 TOTAFL 46 4 880 4,x03 41.0%6 4.67 4,7S2 4,?72 4.7o7 4M 6, 6007 0. 6,263 6.282 31 3240,38 0,6 6, s ,42114,47,742 NET FINANCIAL BE2iF 2S 11.260 02,2 2.276 2.312 2.046 40.444 2.4 042 2.32 2.7a2 306 3,20 2.666 .6180 .066 4s,04 4.071 4,6 4,466,647 Fbto td Me _d CONNTS3 hawaImsot 060 0 0 0 0 e60 0 0o 060 ,060 06o 0 0 a 0a 60 0 0 0 0 f N ^aw4w col612 S8b_otI 60 0 0 0 0 6so 0 o621t,060 060 0 0 0 0660 0 0 0 0 WM LEENTATION w.m4 C> 14.0 4,460 1.460 4.160 1.460 1.480 4,180 1.460 ,1.60 4.460 4.160 4,480 4.460 1.460 4,460 4.160 45t60 1.160 4,o60 o.0S0 rn.omosu 1.476 4,476 1.476 1,476 1.176 1,176 1.176 4.476 4.476 1,176 1,476 4.476 1.176 1,176 1.,76 1,176 1.176 4,476 .1176 1.476 SubO-old 2532 S 2.326 2.226 226 2.326 2.1626 2.6 2.326 2326 2.326 2.226 2.322 2.326 2.226 2.26 6 ,2 % 228 226 2.226 TOTAL COSTS .276 2.826 z23Xs 2.226 .6261 32 2.2 22 2,607 3.276 S2.6 2.226 22 .22 2326 2,276 2.3O 2.26 2226 2.26 INOFIENTUA. VALUE OF OUTPU Kh ,gKwIbawdWV g 0,2123 2226 0.6 0.406 0,446 8,46 60. 80 0366 00 6.222 8,27 811 2,247 82 2,417 6,461 8.406 2.610 .8664 4.062.062 small_ 6.616 0.762 6,24 0.276 0.636 6.06 7,062 7,444 7.,6S 0,400 0.840 9,566 9,040 .M8 ,764 0.0 OA67 0.67 0,667 1.347.661 06 S. and IL LInnWg 2.062 2.097 ait2 2127 2.142 2.168 2.474 2.486 2t196 2.60 2.678 2.907 2,e4e 2.893 2.606 2.908 2.a31 20 2.684 .004,730 TOTAL 16,064 45.173 45,t22 16,40 ts,623 46,2 808 1.749 t6A2 46,067 22.2 20.392 20.73 20,876 20.077 24.077 21.475 21.72 24,267 24,462 3.430,x22 14 NET ECONOMIC SE4EFIT94> 11.773 2."642 12.067 13.0e4 Witt6 12.32 13.424 4804 42.06 16.912 17.,17 18,446 48.662 18.663 40.762 4.604 t4.47 10.043 40,27 3,4o.00 E., ruled _ of_am (aapga.d .g)SVW5dp sSWW" M91POP" eV am~ O W Po"*a eq muwVwUePUPASS 03 5w5 MIS 56S met " e e"all t1 swi e" so mis (it" Om (es O' i9t( (mci (VW (st) (em) un"Mmosuoloaaw eWe mrs as" 9sees ms ineW's ' i.etsi Ws on (am1 ( se se uo (st bed (sg (e) Ww L 1w1 LWS art 5e5I tis aw go mO e se $ got (isd (no) ago (s) ha Em1) Id o _ -sviasap tess tat art set tmili awl m as us em at au Id tis (LIa) bue) hd hn) Ci o _ p $Om s (got) (Sol) bts) la se St as (so (eo (via bmo (m (asto Cue) se (ad C, bed, Ems) usw 1-lew pmu_ NY 55 5*san on an on o es on ee ex on ee on an on W ow. sos eo tim Ws WLoo sec ao as e us em seo sne m m em em am 5 0 5 5 * 5 stum eaowuin o e 0 a0 0 0 0 5 0 S S 5 nt w ten @ti g ms Ottm ae s ausm"s ea a aWl 4u. L ss ou GUs egm sco se " t as (t) se ) (mus beM (w) (i (m i s oh eL eowl Ls IL amVs oas*r uo otts mm toe (MO (MO o o ) (o ) o bo ao ) (So WADIL o 0 5 0 5 0 5 0 0 5 0 5 5 5 0 0 0 5 5 0 (11uj,,vAoN sON u sas ses Su m mm aen oec n mc W w o n tobId O i bE t) * 3 e VONpm mu us em us eV t mS Se a ama " *E (s d Cs) a sow-GP M us (so) Cm (so) go ms. em (ea) (usa) (goa) Cm. (st) Cot) (me) a (ass) (mu (noa (g) Eat) wesaseslqpms on em . onee ose emn se e sn e s em an ean set ems Lore usa em t see ut W0Olf se onse e e ee on at s se e se 505 an an 05 0 0 0 * u a O _ o * 0 0 s e * o * o e e au's Om's Int* 9W& em an aseasss on a Ia aSt m tt m t aat a1 Ous u s A 9 9 t 8 a a u_uguop.a~muvpweussp wmoqwmpssmmj NYU, TMOITWO0W3)PM F M 21 22 MM US 20 2J 2 20 so $ 23 g o 88 so p s a 40 *86.8t.6 o 0 0 0o 0o 0 0 00 o 0 o o 0 0 0 o o0 0 0 TRtAL 6 o mo MO M m M m MO se0 ae0 MO Mo MO M M 360 MO MO Nm0d lssW_Mt 70? 7t 1 740 JIM (15) (fi) 1.014 US? 1.60 1.743 1.020 t2 3472 1., 1,66 1.6 SA .83162 2.912 2.671 _.Sding t,2i 1.411 1.416 *, * 1.01- t,OtO 1010 ,.01 I101 1.160 1.8I0 1.002 1,612 61 Ste SW 1i5 68 1.0 low 2.t1e _sw ldmpgsm.ibsn_0 J.211 1.4 SA 1... 1.016 1.010 1.016 1.010 I.76 1.t0 1.0 102 1.612 616 SI6 61 6$0 010 000 1.23 X163 R0VAL110411. in 236267 601 1"4 0 so 60 10 164 tO 414 5O 564 229 6o s0 ZO 275 MS TOTAL 36 30 O.6 3 2.161 20? 3.107 Sa4 3.0 4.622 $U 6060 4.66 3.860 3SI4M u.37 .062 6.34 6.06 7.401 NETINAMI1LEDWITS 30U UP 056 16 1.021 1.717 3t74? 3.10 3466 4.182 4,s00 .30 4.249 .609 3.04 3.016 4.722 504 60 7.041 rawo uENEIS __wwnrm 0 0 00 0 0 0 0 0 0 a 0 0 0 0 0 0 0 0 0 fgtfb o a" MM M O MO M MO M M: MI M1 MO MO MOl MO M M 30 MO MOM O M TOTAL M sO M MO so M Mo M MS M M0 o M M o MO MS MO MOMO MO SW MO OENEMO Wsaed RS.6.SUW 60 0 "2 1.1690 16 4 (14 6e7 0 S.07 1.000.116 2748 3.132 1.69 1.800 1.809 .06 2.004 2.00 3.626 a*m1Seed L .410 3735 2.37 %1 3t46 2.14 2.145 s.14t 9.207 3t L66 2.012 2. 2s.60t 1.719 1.719 1.710 1.71 3.1406 VW $."1 N 4dsnow ihea R410 3736 L66? .. 146 u146 .145 .146 2327 2.W7 306 L.012 Z0 2.601 1.70 1.719 1.719 1.71t .140 t2?7 3.60e TOTAL 616 02 6.64 ... 4. 4;27 4272 4.? 62 6 ?1 7.01o 7.40 6,60 6.614 6.s7 .,320 G.m 347 7.2s 7.U0 t1.2o NEI EOOSSNOS T 5.E6 0012 6,64 *-- 3 a,st2 3.012 4.017 I M 6106 7,560 6.246 6,104 4.066 4,MO 4.,066 017 6,901 7. ,o.m 00 @. LA Leas n aass £sVas gs 'ss u,ls wo'w aac s siesw in's Uc ee05(1(stO Ll) ('et (wai W8Qait) (LWn (uWe'l SiilUS_ St*ts senWn NO" W's uW fi" nW aW 11011V SWs iSW2 wts st aes at's MIS suit its's IMgS $0a JIua couooogi ooa3 su's i' go" sWe sws : s cst' US' ass's enwe ml*s se9ti's title wA19' "sW 1sA's giel OWN 1 'a S " Ssooo_a muin $t m I fin p A u I "I OR w4 _ p am q= 3 swgs mur *wv; "sVW sn,9 LIM' NV"' Qss's Oswsig MS twigs ies,L usc' (eta's) (ss*, (aaWO jet's (esi (lers). bael'd Szn:moeuou =AMe ssL'ss caas' MLsi soloe sis'ss UV&5 hitVI aitVP an"U 1555 Ott," mu' iant "Isa et as se's (Lsw WeW "Wa (WI 1Sn HMsm 1OWoogWjo, 0% 0~~ a a a a us ut "ss sta sa em siC us' sfl "s's sic' es' owes "In' *iswo@SwOw wiVJL Es's ass's USI "et1 it's' eaVI WVGV 11 on on Ott (ISO (we (sams (sag's (OpsL (SoVI) (gu (lip) eus) a1hN39*I1PPuomisw swe air ow' son so's Wt'S ls' xt# eg's oswl so (to0 Iu wsz 6nea (s (sOm) ("9. 0 Sw fS mN sNMouowiok US In an Ogu 0US Son cot 0eain 05C Un on UVI oWl AVI SW Os 56 U oi.500R000 wjoa pWctL eA1' 5W' iWe S ' Ut' We oi s UL WS MS 9Ws as' bts't) (eWs (aWs jam'd (ee* (WV (uWaL siu m o uamo jm foc's sic'ts sac's sass twat sa's Sc' swat c's 009 Gm( 4U's US'S Air 53s S' US'S *ul' MIS an' iSLI anO *i3OmoIiOOwJO1 SLa'S 535 UAVI 55O *WI USA'S t 55551 ~~~~~~~~~~~~~~~~~~~~~~~~~~owle s "¢on son Sw% e ova o5 l z-z w vtwwvmwb ig ns 55 0) SI SI 51 5) SI SI 81 SI OS 0 5 A~~~~~~~Ut' OM 5WS 5t 5C9 5M' 1WSUm OR et As Os9" t et IlUSt 1N ' Wl I 9) - 88$1 I 103109d NN V13AnH3s AOS e~~~~~~~~~~Wnc ez Mr r ze seez r t z sSOsfO -70-- ~ANN 8 Table 6 Page 2 S g s 3! - e-X 15 | 1 i fi 12 0 E3 !C4 2 3 N Cf a ; °3 i !3 ! ~ ~ ~ ~ d |3 C ! |g g}f 3 t; g e e Z X ; ; S %~~~ II I @he3 a 02 2 32 2 22 2 ON 5 0 x tff a B9 ~fa 3 *0 * 3 N I II a e} | g I. ei .5 3 . | 3 3' 4 f 3 1~~~~ @3 i 31 1 1.01§1!10 - 71 - ANNEX 9 Page 1 THIRD FORESTRY DEVELOPMENT EROJEC1 Selected Documents and Data Available in the Project File 1. The Forest Sector. A World Bank Policy Paper. September 1991. 2. Women in Development: Bhutan. Asian Development Bank, November 1989. 3. An Overview of the Forestry Sector of the Kingdom of Bhutan (Draft). Thomas R. Waggener, Forest Sector Economist. January 23, 1992. 4. Environmental Analysis of the World Bank Bhutan Third Forestry Project. Richard Z. Donovan, Natural Resources Specialist. June 24, 1992. 5. Bhutan Forestry III Project. Industrial Forestry Component. Swedforest Consulting. June 1992. 6. Bhutan Forestry m Project. Assessment of Industrial Forestry Component. Michael Stewart, Forest Industry Specialist. May 1992. 7. Forestry m Project. Social Forestry Component. Preparation Mission Report. May 24, 1991. 8. Forest Legislation. Report to the Royal Government of Bhutan. Barry Spergel. FAO. July 1, 1991. 9. Forestry HI Project Preparation Study. Roadbank Stabilisation Component Engineering Geology Ltd./Crouch Waterfall & Partners. December 1990. 10. The Forest: A Protective Heritage. PPD/MOA/RGOB. Country Paper presented to the Tenth World Forestry Congress. Paris. September 16-26, 1991. 11. Soil and Land Capability Survey. Bhutan. Tashigang and Mongar Districts. Project RAS 79/123. FAO. Sinclair Knight & Partners Pty. Ltd/Acil International Pty. Ltd./Coffey & Partners Pty. Ltd. July 1983. 12. First Eastern Zone Agricultural Project. Draft Appraisal Report and Working Papers. EFAD. December 1991. 13. Government Legislation on Land and its use in Bhutan. RGOB. 1991. -72- Page 2 14. The Bhutan Forest Act. His Majesty's Goverment of Bhutan. MinigL of Tmade InIstries, oErst and Mines. 1969. 15. Bhutan Forest Act of 1991 16. Bhutan - Review of Forestry Legislation. Barbara Lausche, ENVAP. World Bank. April 30, 1992. 17. Social Forestry Rules. Royal Government of Bhutan, Department of Forestry, Ministry of Agriculture. 1990. 18. Social Forestry Plan for Bhutan. Gary C. King. Ministry of Agriculture, Department of Forest, FAO. June 1991. 19. Manual of Forestry Orders (up to March 1987). Department of Forestry, Ministry of Agriculture, Royal Government of Bhutan. 20. Seventh Plan (1992-1997). Forestry Sub-sector. Tashigang, Mongar, Tashi Yangtse, Samdrup Jongkhar and Lhuntshi Dzongkhags (Districts). Department of Forestry, Mi'iistry of Agriculture. 21. Forestry Workshop. RGOB/Helvetas. Volumes L and IL Nov. 27, Dec. 1, 1990. 22. National Accounts Statistics for Bhutan: 1980 to 1987. Dr. Ram N. LaL, Central Statistics Office, Planning Commission, RGOB. 1990. 23. Discussion Paper for Project Coordination Meeting for Forestry Sector Development. Department of Forest. RGOB. July 1989. 24. First Eastern Zone Integrated Agricultural Project. Preparation Report IFAD. May 1991. 25. Merging Top-Down and Bottom-Up Planning and Development Strategies. Report on the Zone IV Workshop. UNDP and Zone IV Administration. May 6-7, 1991. 26. The Forest-Based Industries of the Kingdom of Bhutan, Their Current Status and Development Strategy for the Seventh Five-Year Plan. UNIDO. Vienna. 1990 27. Seventh Plan for the Renewable Natural Resources Sector-Forest Sub-Sector (Review Draft). RGOB. Thomas R. Waggener, UNDP/FAO. March 3,1992. 28. Master Plan for Forestry Development. Main Report and Implementation Programmes. RGOB. DANIDA/ADB/JAAKKO POYRY. August 15 & October 9, 1991. - 73 - ANNE 9 Page 3 29. Bhutan. Problems and Policies. Dr. H.N. Misra. Heritage Publishers. New Delhi. January 1988. 30. Forestry Research in Bhutan. Bhutan Forestry Institute. WJ. van Ijssel. FAO Workshop June 14, 1991. 31. Forestry Research in Bhutan: An Assessment and Suggestions. Jay M. Hughes. FAO. October 16,1991. 32. Bhutan. Recent Economic Developments. South Asia Country Department 1, World Bank. February 28, 1992. 33. Forestry Programme Framework Volumes I, II & III. RGOB. Miistry of Agriculture, Department of Forestry. October 1992. - 74 - THIRD FORESTRY DEVLOPMENT PROJECT Departast of Forestry Organization Gowl BHUTA LOGGIN LPJ [tj& & Dmo Lo La DivisoOiv. 0 l Oieclor I I patr |im- Aff tore| Sarbh _ _ mow_ _ Proe_ (G . Taba Chitang rhnipu WanFi Researb h DiVIdo Divisin l l ivois on | }n i Divisio I~~~~~~~~~~~~~~~~~~~ -ae 11' 1 DsHan ipIaw*ion t Dw Io I Im SPECIAL PROJECTS P Afprstationg |WILOUFE RANGES | Coreslervto - I ~~Phipoo Ranlge . Mawer Plan 1 Manas Range I__ t Ioad RaFe cdak%WSZA2 ISRD 2401 5 DD00 1102 0'bo Z0 _I PHYSICAL RELIEF IN METERS B H U TAN THIRD FORESTRY DEVELOPMENT PROJECT 0 9 04l: tEl *ooo :3ROJEC MEA O D5 508111JS M. <)*REsT "MAGMENT UNTlFMUI 'S2 UNPAVeDRO ROADS 0T0ON. COORALIO D J1* IONAL CWITALS ;OTHER TOWNS t < f 080* 2 C X,P>, o_, RIVERS ~~2 , \ C t ) t \- f 2 0 0 X 2 _ I~~~~~~~~~~~~~~~~~~~~~NTERNATONALDOUNDAR1ES Gm 0 .,111Cr 0 BOLNOHAJG OES t U HANG 3_3<~~~~T ' 1\ WANG IPHODRANG ~ ~ ~ ~ ~ ~ ~ (~AM R~ -DA-_X_VIllec_=_e _DAIi ~~~~~~~~89W 0011 30? ROD' 120 92 0 n30 J 09AAT I$4