the world bank forest strategydocuments.worldbank.org/curated/en/482091468766466087/... ·...

2000

The World Bank

www.worldbank.org/html/oed Washington, D.C.

W O R L D B A N K O P E R A T I O N S E V A L U A T I O N D E P A R T M E N T

Uma LeleNalini Kumar

Syed Arif HusainAaron Zazueta

Lauren Kelly

The World BankForest Strategy

Striking the Right Balance

Copyright © 2000

The International Bank for Reconstruction

and Development/THE WORLD BANK

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First edition October 2000

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ISBN 0-8213-4841-8

Library of Congress Cataloging-in-Publication Data

The world bank forest strategy : striking the right balance / Uma Lele . . . [et al].

p. cm. — (Operations evaluation studies)

Includes bibliographical references.

ISBN 0-8213-4841-8

1. Forests and forestry—Economic aspects. 2. Forest policy. 3. World Bank. I. Lele, Uma J.II. World Bank operations evaluation study.

SD393.W65 2000

333.75—dc21 00-043862

Printed on recycled paper.

iii

ix Study Teamxi Foreword, Prefacio, Préfacexvii Acknowledgmentsxix Executive Summary, Resumen, Résumé Analytiquexxvii Glossaryxxxi Abbreviations and Acronyms

1 1. The Challenges of Forest Strategy1 Experience with the 1991 Forest Strategy6 Country Conditions and Forest Strategy

7 2. Bank Group Forest-Related Services and Lending7 Nonlending Services8 Forest Sector Lending9 Consistency of Project Design with the 1991 Forest Strategy10 Performance of Forest and Forest-Component Projects12 Policy and Institutional Reform13 Environmental Adjustment and Sustainable Development14 Poverty and Participation16 Gender16 Safeguards17 Links with the Private Sector18 Biodiversity and Protected Areas18 Bank Group Activities20 GEF Activities

21 3. The Country as Unit of Account in the 1991 Forest Strategy22 Forest-Rich, Forest-Poor, and Transitional Countries26 Market Forces and Deforestation27 Land Conversion and Agriculture28 Forests and Poverty Alleviation29 Institutional Issues29 Land Tenure30 Decentralization30 The Bank’s 1991 Forest Strategy and Forest-Poor Countries31 The Bank’s 1991 Forest Strategy and Forest-Rich Countries

Contents

iv

T h e Wo r l d B a n k F o r e s t S t r a t e g y : S t r i k i n g t h e R i g h t B a l a n c e

33 4. Global Trends and Changes Affecting Forest Policy33 Changes in the Forest Sector36 Changes in the Global Economic Environment36 Changes in the International Institutional Setting38 New Thinking and Policy Experiments38 Changes in Strategy Implementation39 Three Perspectives on Forest Strategy

43 5. Conclusions43 Strategy Implementation44 Effectiveness46 Reconsidering the Bank’s Forest Strategy46 Recommendations

Annexes51 Annex A: Expanded Executive Summary59 Annex B: Methodology of the Review71 Annex C: Portfolio Review Data77 Annex D: Quality Assurance Group Risk Ratings for Active Bank Operations85 Annex E: Operations Evaluation Department Project Evaluations95 Annex F: Country Case Study Data97 Annex G: The Surveys121 Annex H: Study Staff and Consultation Contacts127 Annex I: World Bank Operational Policy 4.36, Forestry129 Annex J: World Bank Good Practices 4.36, Forestry133 Annex K: Implementation of the 1991 Forest Strategy in the IFC’s Projects137 Annex L: Recent World Bank Reviews of Forest Strategy Implementation139 Annex M: Report from Committee on Development Effectiveness

141 Endnotes

145 Bibliography

Boxes2 Box 1.1: Bank Forest Strategy: The 1991 Forest Paper and the 1993

Operational Policy Directive4 Box 1.2: The World Bank’s Forest Strategy at a Glance24 Box 3.1: Brazil: A Case Study in Domestic Priorities versus

International Objectives35 Box 4.1: Three New World Bank Initiatives37 Box 4.2: International Institutions and Agreements Relevant to Global Forests66 Box B.1: FAO Data on the State of the World’s Forests

Tables9 Table 2.1: World Bank Forest Lending Before and After 1991, by Region34 Table 4.1: Expected Increases in Industrial Wood Production and

Consumption62 Table B.1: World Bank Projects with Potential Impact on Forests63 Table B.2: Analyzed Sample of World Bank Projects with Potential Impact

on Forests

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C o n t e n t s

64 Table B.3: Distribution of Scheduled Economic and Sector Work65 Table B.4: Distribution of Unscheduled Economic and Sector Work71 Table C.1: World Bank Economic and Sector Reports, Scheduled and

Unscheduled, All Sectors71 Table C.2: World Bank Lending Operations, by Region72 Table C.3: World Bank Adjustment Lending Operations, by Region72 Table C.4: Primary Program Objectives of Lending Operations73 Table C.5: Environmental Assessment Categories, All World Bank Operations73 Table C.6: World Bank Direct Forest Projects, by Region74 Table C.7: World Bank Forest-Component Projects, by Region74 Table C.8: World Bank Forest and Forest-Component Projects, by Region75 Table C.9: Distribution of Forest-Component Projects, by Sector75 Table C.10: World Bank Lending Operations in 20 Countries with Threatened

Tropical Moist Forests76 Table C.11: Intentions of Forest Sector and Forest-Component Projects77 Table D.1: Relative Risk Ratings for Active Forest and Forest-Component

Projects79 Table D.2: QAG Indicators of Potential Problem Projects79 Table D.3: Risk Ratings Active Agriculture Sector Projects, by Region80 Table D.4: Risk Ratings for Active Environment Sector Projects, by Region80 Table D.5: Risk Ratings for Active World Bank Projects, by Region80 Table D.6: Risk Ratings for Active Forest-Component Projects, by Region81 Table D.7: Risk Ratings for Active Forest Projects, by Region81 Table D.8: Risk Indicators for Active Agriculture Sector Projects, by Region82 Table D.9: Risk Indicators for Active Environment Sector Projects, by Region82 Table D.10: Risk Indicators for Active Forest-Component Projects, by Region83 Table D.11: Risk Indicators for Active Forest Projects, by Region83 Table D.12: Risk Indicators for Active World Bank Projects, by Region89 Table E.1: Overall Performace Ratings, Completed Forest Projects Relative

to Projects in Other Sectors89 Table E.2: Bank Performace Ratings, Completed Forest Projects Relative

to Projects in Other Sectors89 Table E.3: Borrower Performace Ratings, Completed Forest Projects Relative

to Projects in Other Sectors90 Table E.4: Overall Performance Ratings, Completed Agriculture Sector

Projects, by Region90 Table E.5: Overall Performance Ratings, Completed Environment Sector

Projects, by Region90 Table E.6: Overall Performance Ratings, Completed World Bank

Projects, by Region91 Table E.7: Overall Performance Ratings, Completed Forest-Component

Projects, by Region91 Table E.8: Overall Performance Ratings, Completed Forest Projects,

by Region91 Table E.9: Bank Performance Ratings, Completed Agriculture Sector

Projects, by Region92 Table E.10: Bank Performance Ratings, Completed Environment Sector

Projects, by Region92 Table E.11: Bank Performance Ratings, All World Bank Projects, by Region92 Table E.12: Bank Performance Ratings, Completed Forest-Component

Projects, by Region

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93 Table E.13: Bank Performance Ratings, Completed Forest Projects, by Region

93 Table E.14: Borrower Performance Ratings, Completed Agriculture Sector Projects, by Region

93 Table E.15: Borrower Performance Ratings, Completed Environment Sector Projects, by Region

94 Table E.16: Borrower Performance Ratings, Completed World Bank Projects, by Region

94 Table E.17: Borrower Performance Ratings, Completed Forest-Component Projects, by Region

94 Table E.18: Borrower Performance Ratings, Completed Forest Projects, by Region

95 Table F.1: World Bank Lending Operations in the Case Study Countries, 1984–91

95 Table F.2: World Bank Lending Operations in the Case Study Countries, 1992–99

96 Table F.3: Percentage Change in World Bank Lending Operations in Case Study Countries After 1991

Figures8 Figure 2.1: World Bank Forest Lending Before and After 19919 Figure 2.2: Net Change in Bank Forest Commitments10 Figure 2.3: Inclusion of Key Elements of Bank Strategy in Forest Projects

and Projects with Forest Components11 Figure 2.4: Percentage of Active Projects Not at Risk11 Figure 2.5: Completed Projects: Overall Satisfactory OED Performance

Ratings23 Figure 3.1: Relative Forest Area in Forest-Rich and Forest-Poor Countries59 Figure B.1: Relationship of the Study’s Parts71 Figure C.1: Net Change in Economic and Sector Work71 Figure C.2: Net Change in Commitments After 1991, All Lending Operations

vii

72 Figure C.3: Net Change in Commitments After 1991, Adjustment Lending Operations

72 Figure C.4: Net Change in Commitments After 1991, Primary Program Objectives

73 Figure C.5: Net Change in Commitments After 1991 by Environmental Assessment Category

73 Figure C.6: Net Change in Commitments, Bank Forest and Forest-Component Projects After 1991

74 Figure C.7: Net Change in Commitments After 1991, Operations in 20 Countries with Threatened Tropical Moist Forests

74 Figure C.8: Net Change in Commitments After 1991, Bank Forest and Forest-Component Projects, Including GEF

77 Figure D.1: Percentage of Active Projects Not at Risk, in Selected Sectors78 Figure D.2: Percentage of Active Forest Projects Not at Risk, by Region78 Figure D.3: Percentage of Active Forest-Component Projects Not at Risk,

by Region86 Figure E.1: Satisfactory Overall Performance Ratings, Completed Projects86 Figure E.2: Satisfactory Bank Performance Ratings, Completed Projects86 Figure E.3: Satisfactory Borrower Performance Ratings, Completed Projects87 Figure E.4: Satisfactory Overall Performance Ratings, Completed

Forest Projects87 Figure E.5: Satisfactory Bank Performance Ratings, Completed Forest Projects87 Figure E.6: Satisfactory Borrower Performance Ratings, Completed

Forest Projects88 Figure E.7: Satisfactory Overall Performance Ratings, Completed

Forest-Component Projects88 Figure E.8: Satisfactory Bank Performance Ratings, Completed

Forest-Component Projects88 Figure E.9: Satisfactory Borrower Performance Ratings, Completed

Forest-Component Projects

C o n t e n t s

ix

Study Team

Core TeamUma LeleNalini KumarSyed Arif HusainB. Essama NssahAaron ZazuetaLauren KellyMaisha Hyman

Additional MembersMadhur GautamRidley Nelson

ConsultantsArnoldo Contreras-HermosillaKarin PerkinsSaeed RanaCarolyn BarnesMadelyn BlairKavita Gandhi

Brazil Country TeamUma LeleVirgilio M VianaAdalberto VerissimoStephen VostiKarin PerkinsSyed Arif Husain

Cameroon Country TeamB. Essama-NssahJames J. Gockowski

China Country TeamScott RozelleJikun HuangSyed Arif HusainAaron Zazueta

Costa Rica Country TeamRonnie de Camino VelozoOlman SeguraLuis Guillermo AriasIsaac Pérez

India Country TeamNalini KumarNaresh Chandra SaxenaYoginder K. AlaghKinsuk Mitra

Indonesia Country TeamMadhur GautamUma LeleHariadi KartodiharjoAzis Khan, Ir. ErwinsyahSaeed Rana

IFC TeamAfolabi OjumuRafael DominguezCherian SamuelDominique ZwinkelsJohn Gilliland

GEF TeamJ. Gabriel CampbellAlejandra Martin

MIGA TeamHarvey Van Veldhuizen

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ISPREFACIO PRÉFACEFOREWORD

F o r e w o r d

The changing dynamics of theforest sector and the global economyprompted World Bank PresidentJames Wolfensohn to launch theCEO Forum and the World Bank/World Wide Fund for Nature Alli-ance. These initiatives offer the pros-pect of a proactive Bank role thatwould not have been conceivable afew years ago. In parallel, Bankmanagement launched a ForestPolicy and Implementation Reviewand Strategy process through theEnvironmentally and Socially Sus-tainable Development (ESSD) Net-work Vice Presidency. TheOperations Evaluation Department(OED) was asked to contribute anindependent evaluation of the Bank’s1991 Forest Strategy. Accordingly,OED has evaluated implementationof the strategy as outlined in TheForest Sector: A World Bank PolicyPaper (1991), Operational Policy4.36, and Good Practice 4.36 (bothissued in 1993).

The evaluation reviewed lendingand nonlending activities of theWorld Bank Group (InternationalBank for Reconstruction and Devel-opment [IBRD], InternationalDevelopment Association [IDA], In-ternational Finance Corporation[IFC], and Multilateral InvestmentGuarantee Agency [MIGA]) and theGlobal Environment Facility (GEF).The OED team carried out six coun-try studies (Brazil, Cameroon, China,Costa Rica, India, and Indonesia), aglobal review, and six regional port-folio reviews (Sub-Saharan Africa,East Asia and the Pacific, Europe andCentral Asia, Latin America and the

Les mutations en cours dans lesecteur forestier et dans l’économiemondiale ont amené le président de laBanque mondiale, James Wolfensohn, àlancer le Forum des DG et l’AllianceBanque mondiale/Fonds mondial pourla nature. Ces initiatives permettentd’envisager pour la Banque un rôledynamique qui n’aurait pas étéconcevable il y a quelques années.Parallèlement, la direction de la Banquea entrepris un « Bilan de la politiqueforestière et stratégie pour le secteur »,par le biais du Réseau dudéveloppement écologiquement etsocialement durable. Le département del’évaluation des opérations (OED) s’estvu confier la tâche d’établir uneévaluation indépendante de la stratégieforestière de la Banque de 1991. L’OEDa donc évalué la mise en œuvre de lastratégie décrite dans Le secteur

forestier : Document de politiquegénérale de la Banque mondiale (1991),la Politique opérationnelle 4.26 et laPratique recommandée 4.36 (paruestoutes deux en 1993).

L’OED a examiné les activités deprêt et les activités hors prêt duGroupe de la Banque mondiale(Banque internationale pour lareconstruction et le développement[BIRD], Association internationale dedéveloppement [IDA], Sociétéfinancière internationale [SFI] etAgence multilatérale de garantie desinvestissements [AMGI]) et celles duFonds pour l’environnement mondial(FEM). L’équipe de l’OED a effectuésix études portant sur des pays (Brésil,Cameroun, Chine, Costa Rica, Inde etIndonésie), une analyse au niveaumondial et six analyses de portefeuilles

Los cambios en la dinámica delsector forestal y la economía globalimpulsaron al Presidente del BancoMundial, James Wolfensohn, a iniciarel CEO Forum y la Alianza entre elBanco Mundial y el Fondo Mundialpara la Naturaleza. Esas iniciativaspermiten vislumbrar un papelproactivo para el Banco que hubiesesido inimaginable hace algunos años.Al mismo tiempo, la administración delBanco inició un proceso de examen dela ejecución de la política forestal y laestrategia para el sector, a través de lavicepresidencia de la Red sobre elDesarrollo Social y EcológicamenteSostenible. Se solicitó al Departamentode Evaluación de Operaciones (OED)que aportara una evaluaciónindependiente de la estrategia forestaldel Banco para 1991. Por lo tanto,OED evaluó la aplicación de laestrategia conforme se reseña en Elsector forestal: un documento depolíticas del Banco Mundial (1991),Política Operacional 4.36, y PrácticasOptimas 4.36 (ambos publicados en1993).

La evaluación examinó lasactividades de financiamiento y novinculadas con el financiamiento delGrupo del Banco Mundial (el BancoInternacional de Reconstrucción yFomento [BIRF], la AsociaciónInternacional de Fomento [AIF], laCorporación Financiera Internacional[CFI], y el Organismo Multilateral deGarantía de Inversiones [OMGI] y elFondo para el Medio AmbienteMundial). El equipo del OED realizóseis estudios sobre países (Brasil,Camerún, China, Costa Rica, India eIndonesia), un examen mundial, y seis

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Caribbean, the Middle Eastand North Africa, and SouthAsia). IFC, MIGA, and GEFfindings are also incorporatedin this report. The OED studiesanalyzed the interactionsamong the Bank’s Country

Assistance Strategies, economic andsector work, policy dialogue, andBank lending. In addition to forestprojects and projects with forest com-ponents, an attempt was made toassess the impact of adjustment lend-ing operations and the indirectconsequences of Bank operations inagriculture, environment, infrastruc-ture, mining, transportation, electricpower, energy, and oil and gas explo-ration. Over 700 operations werereviewed.

An extensive consultative pro-cess was carried out. Guidance wasprovided by an external AdvisoryCommittee. OED, in collaborationwith various in-country stakehold-ers, held workshops in Brazil,China, and India in November 1999and in Indonesia in April 2000. Theworkshops were designed to allowgovernments and other country-level stakeholders (NGOs, the pri-vate sector, academia, and the like)an opportunity to comment on theircountry’s case studies before thestudies were offered to an interna-tional audience for feedback. OEDplaced the country background pa-pers and the Preliminary Report onthe Internet, after taking into ac-count the comments of the Board’sCommittee on Development Effec-tiveness (CODE) at a meeting heldon December 23, 1999. OED thenheld a Review Workshop in January2000. Forestry experts, environmen-tal activists, industry representa-tives, donors, and governmentpolicymakers met in Washingtonfor two days to discuss the findings

régionaux (Afriquesubsaharienne, Asie de l’Est etPacifique, Europe et Asiecentrale, Amérique latine etCaraïbes, Moyen-Orient etAfrique du Nord et Asie duSud). Les conclusions relatives à

la SFI, l’AMGI et au FEM figurentaussi dans le rapport. L’OED s’estattaché, dans ses études, à analyser lesinteractions entre les Stratégies d’aide-pays, les analyses économiques etsectorielles, le dialogue de politiquegénérale et les prêts de la Banque. Endehors des projets forestiers et desprojets comprenant des composantesforestières, l’OED s’est efforcéd’évaluer également l’impact desopérations de prêt à l’ajustement et lesconséquences indirectes desopérations concernant l’agriculture,l’environnement, les infrastructures,les activités extractives, les transports,l’électricité, l’énergie et l’exploration dupétrole et du gaz. Il a passé en revueplus de 700 opérations.

Ces travaux ont donné lieu à devastes consultations. Un comitéconsultatif externe a suggéré lesgrandes orientations. En collaborationavec diverses parties prenantesnationales, l’OED a organisé desateliers de travail au Brésil, en Chine eten Inde en novembre 1999 et enIndonésie en avril 2000, pour donneraux gouvernements et aux autresparties prenantes nationales (ONG,secteur privé, universités, etc.) lapossibilité de présenter desobservations sur les études de casconcernant leur pays avant qu’elles nesoient présentées à un auditoireinternational. L’OED a placé lesdocuments de référence sur les pays etle rapport préliminaire sur l’Internet,après avoir pris en compte lesobservations formulées lors d’uneréunion du Comité pour l’efficacité dudéveloppement (CODE) du Conseil, le

exámenes de la cartera regional(África al sur del Sahara, Asiaoriental y el Pacífico, Europa yAsia central, América Latina y elCaribe, Oriente medio y Nortede África y Asia meridional). Sehan incorporado a este informe,además, los resultados

obtenidos por la CFI, el OMGI y elFondo para el Medio AmbienteMundial. OED analizó, en susestudios, las interacciones entre lasEstrategias del Banco de asistencia alos países, los estudios económicos ysectoriales, el diálogo de política, y elfinanciamiento del Banco. Además delos proyectos forestales y losproyectos con elementos forestales, seintentó evaluar el efecto de lasoperaciones de financiamiento parafines de ajuste y las consecuenciasindirectas de las operaciones del Bancoen la agricultura, el medio ambiente, lainfraestructura, la minería, eltransporte, la electricidad, la energía yla exploración de petróleo y gas. Seexaminaron más de 700 operaciones.

Se realizó un amplio proceso deconsulta. Un comité de asesoríaexterno tuvo a su cargo la orientación.OED, en colaboración con diversosinteresados pertenecientes a cada país,realizó talleres en Brasil, China y laIndia en noviembre de 1999 y enIndonesia en abril de 2000. Los talleresse diseñaron para permitir que losgobiernos y los interesados a nivel delpaís (las ONG, el sector privado, elámbito universitario, y otros) tuviesenla oportunidad de analizar los estudiosde casos prácticos de su país antes deque esos estudios fuesen presentadospara fines de información ante unaaudiencia internacional. OED publicóen Internet los documentos deantecedentes sobre los países y elInforme preliminar, después de tomaren cuenta los comentarios efectuadospor el Comité del Directorio Ejecutivo

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of the OED review. Com-ments were also receivedthrough the Internet from avariety of stakeholders. TheOED team also briefed Presi-dent Wolfensohn. OED’s Pre-liminary Report, country

studies, and regional portfolio re-views were then discussed in thenine ESSD-organized regional andcountry-specific workshops inwhich OED participated. This finalOED report was presented to CODEin June 2000 (The “Green Sheet”detailing CODE’s comments is in-cluded in this volume as Annex M).

The main conclusion is that theBank has implemented the 1991Forest Strategy only partially, andmainly through an increased num-ber of forest-related components inits environmental lending. Thestrategy sent a strong signal aboutchanged objectives in the forestsector and included a new focus onconservation. However, its ambi-tious goals were not matched bycommensurate means to implementthe strategy. The controversy sur-rounding the policy formulationand implementation—including theban on the use of Bank funds for allcommercial logging in primarytropical moist forests—had a chill-ing effect on innovation. The effec-tiveness of the strategy has beenmodest, and the sustainability of itsimpact remains uncertain.

The country studies and theregional portfolio reviews contrib-uted to OED’s assessment of Bankoperations through the lens of the1991 Forest Strategy, as well as theperspectives of borrowers, Bankstaff, the private sector, and some ofthe CEOs and nongovernmentalorganizations (NGOs) involved in adialogue with the Bank. The ulti-mate purpose of the evaluation is to

F o r e w o r d

23 décembre 1999. L’OED aensuite tenu un atelier desynthèse en janvier 2000, qui adonné à des experts forestiers,des écologistes, desreprésentants des milieuxindustriels, des bailleurs de

fonds et des gouvernants, l’occasionde se réunir pendant deux jours àWashington pour débattre desconclusions de l’examen de l’OED.L’équipe de l’OED a également informéM. Wolfensohn du contenu de sonrapport. Le rapport préliminaire del’OED, les études par pays et lesexamens des portefeuilles régionauxont ensuite été discutés au cours desneuf ateliers régionaux et nationauxorganisés par le Réseau dudéveloppement écologiquement etsocialement durable auxquels aparticipé l’OED. Le rapport final del’OED a été présenté au CODE enjuin 2000 (la « feuille verte »énumérant les observations du CODEfigure dans l’Annexe M au rapport).

La principale conclusion est que laBanque n’a que partiellement appliquéla Stratégie forestière de 1991, et celaprincipalement dans le cadre decomposantes forestières de prêtsenvironnementaux. Elle acommuniqué un message clair sur lerecentrage des objectifs du secteurforestier en faveur de la préservation.Cependant, les moyens mis àdisposition pour réaliser la stratégien’étaient pas à la hauteur de sesambitions. Les controverses qui ontentouré la formulation et la mise enœuvre de la stratégie, notammentl’interdiction d’utiliser des fonds de laBanque pour les activités d’abattagecommercial dans les forêts tropicaleshumides primaires, ont découragél’innovation. L’efficacité de la stratégieest demeurée limitée et la viabilité deson impact sur le long terme reste àdémontrer.

sobre la eficacia en términos dedesarrollo, en una reunióncelebrada el 23 de diciembre de1999. Posteriormente, OEDrealizó un taller de examen enenero de 2000. Un grupo deespecialistas en silvicultura,ecologistas, representantes de la

industria, donantes y encargados de laformulación de políticas se reunió enWashington, D.C. durante dos díaspara analizar los resultados del examendel OED. Además, varios interesadoshicieron llegar sus comentarios a travésde Internet. El equipo del OEDinformó, además, al PresidenteWolfensohn. A continuación, elInforme preliminar del OED, losestudios sobre países y los exámenes delas carteras regionales fueronanalizados en los nueve talleresregionales y específicos de cada paísorganizados por la Red sobre elDesarrollo Social y EcológicamenteSostenible y en los cuales participó elmencionado departamento. El informefinal del OED fue presentado al Comitésobre la eficacia en términos dedesarrollo en junio de 2000 (El “GreenSheet” detallando los comentarios delComité sobre la eficacia en términos dedesarrollo se incluye en este volumencomo Anexo M).

La conclusión principal es que elBanco ha aplicado la Estrategia para elsector forestal 1991 en forma parcial,y principalmente a través de unamayor cantidad de elementosvinculados con el sector forestal, en sufinanciamiento para el medioambiente. La estrategia envió una claraseñal acerca de los cambios en losobjetivos del sector forestal e incluyóun nuevo enfoque de la conservación.Sin embargo, los medios para aplicarla estrategia no guardaban relacióncon sus metas ambiciosas. Lacontroversia respecto de laformulación y la aplicación de la

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help shape the Bank’s roleregarding the forests of itsborrowers at the dawn of anew millennium.

The report identifies sevenelements that would make theBank forest strategy more rel-

evant to current circumstances andstrengthen the Bank’s ability toachieve its strategic objectives in theforest sector:

1.The Bank needs to use itsglobal reach to address bothmechanisms and finances forinternational resource mobili-zation on concessional termsoutside its normal lending ac-tivities.

2.The Bank needs to be proactivein establishing partnershipswith all relevant stakeholders,governments, the private sec-tor, and civil society to fulfillboth its country and globalroles.

3.The focus on primary tropicalmoist forests needs to be broad-ened to encompass all types ofnatural forests of national andglobal value.

4.Forest issues need to receivedue consideration in all of theBank’s relevant sector activi-ties and macroeconomic work.

5.Illegal logging needs to bereduced through the active pro-motion of improved gover-nance and enforcement.

6.The livelihood and employ-ment needs of all the poor needto be addressed, while continu-ing to safeguard the rights ofindigenous people.

7.The Bank needs to align itsorganization and its resourceswith its strategic objectives inthe forest sector.

Les études par pays et lesanalyses des portefeuillesrégionaux ont permis à l’OEDd’examiner les opérations de laBanque dans l’optique de laStratégie forestière de 1991,ainsi que du point de vue des

emprunteurs, du personnel de laBanque, du secteur privé et de certainsdes DG et organisations non-gouvernementales (ONG) qui ontparticipé au dialogue avec la Banque.Cette évaluation a pour but ultime decontribuer à déterminer le rôle quirevient à la Banque s’agissant desforêts des pays emprunteurs à l’aubedu nouveau millénaire.

Le rapport identifie sept élémentsqui permettraient de mieux adapter lastratégie forestière de la Banque auxcirconstances actuelles et aideraientcelle-ci à réaliser ses objectifsstratégiques dans le secteur forestier :

1. La Banque doit mettre à profitses moyens d’action mondiaux

pour résoudre simultanément laquestion des mécanismes et celledes financements, s’agissant de la

mobilisation de ressourcesinternationales de caractèreconcessionnel en dehors de ses

activités de prêt habituelles.2. La Banque doit adopter une

démarche dynamique pour

établir des partenariats avectoutes les parties prenantespertinentes (gouvernements,

secteur privé et société civile)pour remplir son rôle aussi bienau niveau des pays qu’au niveau

mondial.3. La Banque doit élargir son ac-

tion à tous les types de forêts

naturelles ayant une valeur auplan national et mondial.

4. Il convient de tenir dûment

compte des considérationsforestières dans toutes les

política –que incluye laprohibición de utilizar losfondos del Banco para todotipo de explotación forestalcomercial en los bosqueshúmedos tropicales primarios–tuvo el efecto de desalentar lainnovación. La estrategia ha

tenido una eficacia modesta, y lasostenibilidad de su efecto es aúnincierta.

Los estudios sobre países y losexámenes de la cartera regionalcontribuyeron a la evaluación de lasoperaciones del Banco efectuada porOED a través de la óptica de laEstrategia para el sector forestal 1991,como así también las perspectivas de losprestatarios, los funcionarios del Banco,el sector privado, y algunos de los CEOy las organizaciones nogubernamentales (ONG) queparticiparon en el diálogo con el Banco.El fin ulterior de la evaluación es ayudara definir el papel del Banco respecto delos bosques de sus prestatarios alcomienzo de un nuevo milenio.

El informe identifica sieteelementos que harían que la estrategiadel Banco para el sector forestal seamás acorde a las circunstanciasactuales y que fortalecerían lacapacidad del Banco para alcanzar susobjetivos estratégicos en el sectorforestal:

1. El Banco debe utilizar su campode acción en el ámbito mundial

para encarar tanto losmecanismos como las finanzaspara la movilización de los

recursos internacionales encondiciones concesionarias queno se encuentran dentro de la

esfera de sus actividadesnormales de financiamiento.

2. El Banco debe ser proactivo en

la formación de asociaciones contodos los interesados pertinentes,

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Robert Picciotto

Director-General, Operations Evaluation Department

F o r e w o r d

activités sectorielles et analysesmacroéconomiques pertinentes

de la Banque.5. Il importe de réduire lescoupes illégales en promouvant

activement la gouvernance et lerespect des lois et desrèglements.

6. La Banque doit se pencher surles besoins de tous les pauvres enmatière de subsistance et

d’emploi, tout en continuant àgarantir les droits des popula-tions autochtones.

7. La Banque doit harmoniser sonorganisation et ses ressourcesavec ses objectifs stratégiques

dans le secteur forestier.

los gobiernos, el sector privado,y la sociedad civil para cumplir

su papel a nivel de cada país y anivel mundial.3. Es necesario ampliar el

enfoque respecto de los bosqueshúmedos tropicales primarioscon el objeto de abarcar a todos

los tipos de bosques naturalesque tengan un valor nacional omundial.

4. Todas las actividades sectorialesy los estudios macroeconómicospertinentes del Banco deben

tomar en cuenta los temasforestales.

5. Se debe reducir la explotación

forestal ilegal mediante lapromoción activa de mejoras enla gestión de gobierno y la

aplicación de las leyes.6. Es necesario encarar las

necesidades de sustento y empleo

de todos los pobres, al mismotiempo que se protegen losderechos de los pueblos

indígenas.7. El Banco debe adaptar su

organización y sus recursos a los

objetivos estratégicos del sectorforestal.

Director-General, Operations Evaluation : Robert Picciotto

Director, Operations Evaluation Department : Gregory Ingram

Task Manager : Uma Lele

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Acknowledgments

The preparation of this report would not have beenpossible without the support and valuable contributionsof many individuals and organizations. The reportbenefited greatly from advice and intellectual guidanceprovided by an advisory committee of eminent experts:Conor Boyd, Angela Cropper, Hans Gregersen, andEmmy Hafild.

Colleagues both inside and outside the Bankchallenged OED’s work in progress, offered differingviewpoints and inputs, and made constructive sugges-tions. They include: Bagher Asadi, Mark Baird, TulioBarbosa, Cornelis Baron van Tuyll van Serooskerken,Christopher Barr, Christopher Bennet, Eduardo Bertao,Hans Binswanger, Julian Blackwood, Juergen Blaser,Edward Bresnyan, Marjory-Anne Bromhead, PhillipBrylski, Bruce Cabarle, Mark Cackler, Gabriel Camp-bell, Jeff Campbell, Kerstin Canby, Wilfred Candler,Anne Casson, Gonzalo Castro, Kenneth Chomitz,Kevin Cleaver, Luis Constantino, Arnoldo Contreras-Hermosilla, Robert Crooks, Dennis de Tray, PeterDewees, Mohan Dharia, Chris Diewold, James Dou-glas, Navroz Dubash, Hosny El-Lakany, Julia Fal-coner, Gershon Feder, Osvaldo Feinstein, VincenteFerrer-Andreu, Douglas Forno, Rucha Ghate, RobertGoodland, George Greene, Jarle Harstad, John Hay-ward, Peter Hazell, Ian Hill, Gese Horskotte-Weseler,Korinna Horta, William Hyde, Peter Jipp, Ian Johnson,Norman Jones, Lisa Jordan, David Kaimowitz, ChrisKeil, John Kelleberg, Irshad Khan, Robert Kirmse,Nalin Kishor, Odin Knudsen, John Lambert, EdwinLim, Lennard Ljungmann, Tom Lovejoy, WilliamMagrath, Dennis Mahar, Jagmohan Maini, WilliamMankin, Michael Martin, Alex McCalla, Glenn Mor-

gan, Jessica Mott, Gobind Nankani, Ken Newcombe,Ilkka Juhani Niemi, Afolabi Ojumu, Keith Openshaw,Jan Cornelius Post, Idah Z. Pswarayi-Riddihough, V.Rajagopalan, Francisco Reifschneider, Emil Salim, JeffSayer, Ethel Sennhauser, Ismail Serageldin, RobertSchneider, Richard Scobey, Frances Seymour,Narendra Sharma, Susan Shen, TrayambkeshwarSinha, John Spears, William Stevenson, Susan Stout,William Sunderlin, Wilfried Thalwitz, Guiseppe Topa,Hans Verolme, Jeurgen Voegle, Steve Vosti, ThomasWalton, Andrew White, Thomas Wiens.

Country authors served as sounding boards for theexchange of ideas, to solicit input from professionalsand stakeholders, and to develop and test findings.

The team is grateful to colleagues in the Bankcountry offices who helped make the country work-shops a success: John Garrison, Jin Liu, NeusaQueiroz, Elisa Romano, Ricardo L. B. Tarifa, AnisWan, Melanie Widjaja, and Datin Yudha. Specialthanks also go to the Brazilian Corporation for Agri-cultural Research (EMBRAPA) and the Ministry ofEnvironment in Brazil; the Ministry of Environmentand Forest in India; the Ministry of Finance, BadanPengurusan Asrama, the government planning agency(BAPENAS), and the Ministry of Forestry in Indonesia;and the Ministry of Forestry, the State Developmentand Planning Commission, and the Ministry of Financein China.

This report benefited considerably from the diverseperspectives of a truly broad set of commentators. Theconsultation process was facilitated by funding fromthe Swiss Agency for Development and Cooperation ofthe Royal Ministry of Foreign Affairs; the Department

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of Evaluation, Government of Norway; and the Minis-try of Foreign Affairs, Government of Netherlands.OED also held a Forest Strategy Review Workshop inJanuary 2000, involving 60 stakeholders from govern-ments, the private sector, international and nationalnongovernmental organizations (NGOs), internationaland bilateral organizations, the professional commu-nity, and the Bank’s senior management and staff.Detailed written and oral comments from the workshophave been taken into account in this volume. Partici-pants are listed and highlights of their comments arepresented in the Annexes. The comments in theirentirety will be made available on the Internet.

Country workshops were held to discuss deaftcountry case studies in Brazil, China, India, andIndonesia. They involved particpation from stake-holder groups including government officials, NGOs,private sector, academics, and international agencies.In addition, OED participated in eight of the nineregional consultations organized by the Bank’s Envi-ronmentally and Socially Sustainable DevelopmentNetwork (ESSD). The OED team’s regular interactionwith the ESSD forest team (Odin Knudsen, JamesDouglas, Juergen Blaser, Mariam Sherman, and

Kerstin Canby) was useful in ensuring the review’sclient orientation.

Finally, the review team would like to acknowl-edge the contributions of Osvaldo Feinstein, RemaBalasundaram, Elizabeth Campbell-Pagé, JacinthaWijesinghe, William Hurlbut, and Bruce Ross-Larson.

This publication was prepared by the Dissemina-tion and Outreach team of the Partnerships andKnowledge Programs Group (OEDPK), under the guid-ance of Elizabeth Campbell-Pagé (task team leader),including Caroline McEuen (editor), Kathy Strauss(graphics and layout), and Juicy Qureishi-Huq (admin-istrative assistant).

Uma Lele (Task Manager)Nalini Kumar

Syed Arif HusainAaron Zazueta

Lauren Kelly

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RESUMEN RÉSUMÉANALYTIQUE

EXECUTIVESUMMARY

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The Forest Sector: A WorldBank Policy Paper (1991) presenteda comprehensive statement of theBank Group’s forest strategy. To-gether with the associated opera-tional policy, it brought theenvironmental agenda and partici-patory approaches to policymakinginto the mainstream of the Bank’sactivities. It also challenged theBank Group to adopt a multisec-toral approach that would conservetropical moist forests and expandforest cover.

But the strategy has been onlypartially implemented. Although itsent a strong signal about changedobjectives in the forest sector andprovided a new focus on conserva-tion, the effectiveness of the strategyhas been modest, and the sustain-ability of its impact is uncertain.Forest concerns have not been wellintegrated into Country AssistanceStrategies, nor in the Bank’s eco-

En El sector forestal: un

documento de políticas del BancoMundial (1991) presentó unadeclaración integral de la estrategia delBanco Mundial para el sector forestal.Ese documento, junto con la políticaoperacional vinculada con el mismo,incorporó el programa para el medioambiente y los enfoquesparticipatorios de la formulación depolíticas a las actividades principalesdel Banco. Además, instó al Grupo delBanco Mundial a adoptar un enfoquemultisectorial tendiente a la

conservación de los bosques húmedostropicales y a la ampliación de lacobertura forestal.

Pero la estrategia fue aplicada enforma parcial únicamente. Aunqueenvió una clara señal acerca de loscambios en los objetivos del sectorforestal e incluyó un nuevo enfoque dela conservación, la estrategia ha tenidouna eficacia modesta, y lasostenibilidad de su efecto es aún

Le secteur forestier : Document

de politique générale de la Banquemondiale (1991) présentait de façondétaillée la stratégie forestière duGroupe de la Banque mondiale.Accompagné de la politiqueopérationnelle pertinente, il inscrivaitle programme de travailenvironnemental et l’approcheconcertée de la définition des grandesorientations en la matière dans lecadre des activités courantes de laBanque. Il invitait en outre le Groupede la Banque mondiale à adopter unedémarche multisectorielle en vue depréserver les forêts tropicales humideset d’étendre le couvert forestier.

Or cette stratégie n’a été appliquéeque partiellement. Elle a certescommuniqué un message clair sur lerecentrage des objectifs du secteurforestier en faveur de la préservation,mais son efficacité est demeurée limitéeet la viabilité de son impact sur le longterme reste à démontrer. Les questionsforestières ne sont pas bien intégréesaux Stratégies d’aide aux pays ni auxanalyses économiques et sectorielles dela Banque. Enfin, la démarchemultisectorielle envisagée n’a pas étésuivie.

Les prêts accordés au secteurforestier ont augmenté de 78 %, maisils représentent moins de 2 % desprêts de la Banque. Les opérationspurement forestières, qui concernenttraditionnellement des questionsmajeures liées à la politique et à lagestion forestières, plafonnent. LaBanque vient d’incorporer desconditionalités forestières à quelquesprêts à l’ajustement et elle a commencé

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nomic and sector work. Themultisectoral approach envis-aged has not been followed.

Although forest sectorlending has increased by 78percent, it remains less than 2percent of overall Bank lend-

ing. Self-standing forest sector op-erations that traditionally deal withkey forest policy and managementissues have stagnated. The Bankrecently introduced forest sectorconditionality in a few adjustmentloans and has begun to addressissues of governance and corrup-tion. But ensuring national owner-ship of reforms has been far moredifficult. Much of the increase inlending has been in the form offorest components in agricultural orenvironmental projects. But theseoperations have typically been con-fined to the natural resource sectorand have not addressed threats ex-ternal to the forest sector that bringabout forest and biodiversity loss.They have also increased the risk ofthe forest portfolio.

Forest-rich countries, the focusof the strategy, have sought to ex-ploit their forests for legitimate de-velopment purposes, as well as forthe benefit of powerful interestgroups. As a result, the two centralobjectives of the strategy—slowingdown rates of deforestation andincreasing forest cover—have notbeen achieved. Some of the forest-poor countries, in contrast, havebeen ahead of the Bank in address-ing problems of conservation and inincorporating forest concerns inoverall development planning. Inthese countries, the Bank has helpedin the realization of win-win out-comes. The countries have beenable to alleviate poverty while im-proving, or at least minimizing, theloss of forest cover and biodiversity.

incierta. Los temas forestales nose incorporaron en la debidaforma a las Estrategias deasistencia a los países, y a losestudios económicos ysectoriales del Banco. No sesiguió el enfoque multisectorialprevisto.

Aunque el financiamiento para elsector forestal registró un aumento del78%, aún representa el 2% delfinanciamiento total otorgado por elBanco. Las operaciones independientesdel sector forestal que se ocupan,tradicionalmente, de los temasesenciales de la política y la gestión delsector forestal están estancadas. ElBanco introdujo recientemente lacondicionalidad del sector forestal enalgunos préstamos para fines de ajustey ha comenzando a encarar los temasde la gestión de gobierno y lacorrupción. Con todo, ha sido muchomás difícil asegurar la identificaciónnacional con las reformas. La mayorparte del aumento en el financiamientose produjo en forma de elementosforestales incluidos en los proyectosagrícolas o ambientales. Pero esasoperaciones se limitaron, por logeneral, al sector de recursos naturalesy no se han ocupado de las amenazasexternas al sector forestal queprovocan pérdidas de bosques y dediversidad biológica. Además, hanaumentado el riesgo de la cartera delsector forestal.

Los países con gran riqueza debosques, que son el centro de laestrategia, han procurado explotarsus bosques con fines legítimos dedesarrollo, como así también parabeneficiar a grupos de interesespoderosos. En consecuencia, no sealcanzaron los dos objetivosprincipales de la estrategia: ladisminución del ritmo de ladeforestación y el aumento de lacobertura forestal. Por el contrario,

à s’attaquer aux problèmes dela gouvernance et de lacorruption. Mais il s’avèrebeaucoup plus difficiled’assurer l’adhésion nationaleaux réformes. Une grandepartie de l’augmentation des

prêts est due à l’inclusion decomposantes forestières dans desprojets agricoles ouenvironnementaux. Cependant, cesopérations sont généralement limitéesau secteur des ressources naturelles etne concernent pas les menacesextérieures qui entraînent la perte deforêt et de diversité biologique. Deplus, elles ont accru le risque associéau portefeuille forestier.

Les pays aux ressourcesforestières abondantes, sur lesquels estaxée la stratégie, cherchent à exploiterleurs forêts à des fins légitimes dedéveloppement, mais aussi au profitde groupes d’intérêt puissants. Aussi,les deux objectifs principaux de lastratégie — ralentir le rythme dudéboisement et étendre le couvertforestier — n’ont pas été atteints.Certains pays où les ressourcesforestières sont rares, en revanche, ontdevancé la Banque dans ce domaine :ils se sont attaqués aux problèmes depréservation et ont inclus les questionsforestières dans la planificationgénérale du développement. Dans cespays, la Banque a contribué à laréalisation d’objectifs bénéfiques pourtous. Les pays en question ont puréduire la pauvreté tout en inversant,ou du moins en minimisant, la pertede couvert forestier et de biodiversité.En Afrique, cependant, où les pauvressont le plus tributaires de la forêt, tantles activités économiques et sectoriellesque les prêts au secteur forestier ontfortement diminué.

Il ressort de l’examen effectué parl’OED que ces carences et ces résultatss’expliquent par un certain nombre de

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At the same time, however,in Africa—where dependenceof the poor on forests is thegreatest—both forest sectoreconomic and sector workand lending have declinedsharply.

The OED review concludedthat these implementation failuresand outcomes are rooted in a num-ber of limitations of the strategy andthe associated operational policy.

First, the focus on tropicalmoist forests was too narrow. Otherbiodiversity-rich forests that areeven more endangered, more impor-tant globally, and more critical tothe survival of some 300 millionforest-dependent people wereneglected.

Second, while the strategy diag-nosed the problem of externalities, itdid not provide financing mecha-nisms to address the divergent costsand benefits of conservation at thelocal and global levels. At the localand national levels, communities andgovernments, given other pressingdevelopment imperatives and theirlimited ability to bear these costs,perceive the costs of conservationrelative to their benefits to be higherthan does the global community.

Third, the strategy failed toaddress governance issues, whichhave proved to be central—instead,confining itself to the narrow issuesof economic incentive such as thelength and price of concessions.

Fourth, the consultative processwas too narrow. It overlooked theperspectives of important stakehold-ers such as governments, the privatesector, and the civil society, whichwere essential in determining out-comes on the ground.

Fifth, the Bank lacked an internalimplementation strategy and an in-centive structure in terms of staff and

algunos de los países quecarecen de bosques hanencarado los problemas deconservación antes que el Bancoy han incorporado los temasforestales en la planificacióngeneral del desarrollo. En esos

países, el Banco colaboró en el logrode resultados ventajosos. Los paísespudieron reducir la pobreza y, almismo tiempo, mejoraron o, por lomenos, minimizaron, las pérdidas decobertura forestal y de diversidadbiológica. Al mismo tiempo, sinembargo, en África –donde los pobresdependen en mayor medida de losbosques– tanto los estudioseconómicos y sectoriales como elfinanciamiento del sector forestal, handisminuido pronunciadamente.

En su examen, OED llegó a laconclusión de que los errores y lasconsecuencias de la aplicación estánenraizados en varias limitaciones de laestrategia y de la política operacionalvinculada con la misma.

En primer lugar, el enfoque en losbosques húmedos tropicales teníapoca amplitud. No se tomaron encuenta otros bosques con gran riquezade diversidad biológica que correnpeligros aún mayores, que son másimportantes a nivel mundial, y queson de vital importancia paraalrededor de 300 millones de personasque dependen de los bosques para susubsistencia.

En segundo lugar, aunque laestrategia diagnosticó el problema delos efectos externos, no estableciómecanismos de financiamiento paraencarar los costos y beneficiosdivergentes de la conservación en elámbito local y mundial. A nivel local ynacional, las comunidades y losgobiernos, debido a otras necesidadesacuciantes de desarrollo y a sucapacidad limitada para soportardichos costos, consideran, a diferencia

défauts de la stratégie et de lapolitique opérationnelle quil’accompagne.

En premier lieu, la stratégien’aurait pas dû se limiter auxforêts tropicales humides. Ellenéglige d’autres forêts riches en

biodiversité, qui sont encore plusmenacées, plus importantes pour laplanète et plus essentielles à la surviede quelque 300 millions de personnesqui en tirent leur subsistance.

En deuxième lieu, si la stratégie abien diagnostiqué le problème des effetsexternes, elle ne prévoyait pas demécanismes de financement permettantde s’attaquer aux divergences entre lescoûts et avantages de la préservation auniveau local et au niveau mondial. Auxéchelons local et national, compte tenudes autres impératifs de développementet du manque de ressources financières,les coûts de la préservation rapportés àses avantages paraissent plus élevés auxcollectivités et à l’État qu’à lacommunauté internationale.

En troisième lieu, la stratégien’abordait pas les questions degouvernance, dont il apparaît qu’ellesont joué un rôle essentiel, se bornant àtraiter des aspects étroits desincitations économiques, tels que ladurée et le prix des concessions.

En quatrième lieu, lesconsultations ont été trop restreintes.Elles n’ont pas permis de prendre encompte les positions de partiesprenantes importantes telles que lesgouvernements, le secteur privé et lasociété civile, positions qui expliquenten grande partie les résultats concretsobtenus sur le terrain.

En cinquième lieu, la Banquen’avait pas de stratégie d’exécution nide régime d’incitations, au plan desressources en personnel et au niveaude l’administration, pour faire faceaux coûts de transaction élevés de lastratégie forestière. Au contraire, le

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administrative resources tosupport the high transactioncosts of the strategy. Instead,the incentive structure in placeworked against involvement inforest operations.

Sixth, there was insuffi-cient foresight regarding the power-ful forces of globalization andeconomic liberalization that are af-fecting forest outcomes.

And, finally, the Bank adoptedan overly cautious approach in thewake of the controversy that sur-rounded the formulation and imple-mentation of the policy. Thisdiscouraged risk-taking. Opera-tional experience and the President’snew initiatives already go beyondthe Bank’s 1991 strategy.

OED recommends that theBank adopt a dual strategy:

• In its global role, the Bank cancapitalize on its conveningpowers to facilitate partner-ships that mobilize additionalfinancial resources (over andabove improved coordinationof existing country-specific aidflows) for use in client coun-tries, including new financingmechanisms of sufficient mag-nitude to achieve the globalgoals of the revised strategy.

• In its country-level role, theBank can recognize and addressthe diverse realities in clientcountries, using all the instru-ments at its command and stress-ing long-term involvement,partnerships with a range ofconstituencies, learning by do-ing, and the exchange of experi-ences across countries. Thisentails a long-term commitmentby the Bank, with enough re-sources for research, economicand sector work, and consulta-

de la comunidad mundial, quelos costos de la conservaciónson superiores a sus beneficios.

En tercer lugar, la estrategiano encaró los temas de lagestión de gobierno, cuyaimportancia ha quedadodemostrada, y, por el contrario,

se limitó a los temas puntuales de losincentivos económicos, como porejemplo la duración y el precio de lasconcesiones.

En cuarto lugar, el proceso deconsulta fue excesivamente limitado.No tomó en cuenta las perspectivas delos interesados importantes, como porejemplo los gobiernos, el sectorprivado, y la sociedad civil, que eranesenciales para determinar lasconsecuencias sobre el terreno.

En quinto lugar, el Banco carecíade una estrategia interna de aplicacióny de una estructura de incentivos parael personal, y de los recursosadministrativos necesarios parasoportar el alto costo de transacciónde la estrategia. Por el contrario, laestructura de incentivos vigentedesalentaba la participación en lasoperaciones forestales.

En sexto lugar, no se previó enforma suficiente el poder de las fuerzasde la globalización y de laliberalización económica que estánafectando los resultados del sectorforestal.

Y, finalmente, el Banco adoptó unenfoque extremadamente cautelosocuando surgió la controversiaalrededor de la formulación y laaplicación de la política, lo cualdesalentó a las personas que estabandispuestas a tomar riesgos. Laexperiencia operacional del Banco ylas nuevas iniciativas del Presidente yahan superado la estrategia del Bancode 1991.

OED recomendó que el Bancoadoptara una estrategia doble:

régime d’incitations en placeétait de nature à décourager lesactivités dans le secteurforestier.

En sixième lieu, la stratégien’avait pas suffisamment prévula montée des forces de la

mondialisation et de la libéralisationéconomique, qui ont influé sur lesrésultats des opérations du secteurforestier.

Enfin, la Banque a fait montred’une prudence excessive à la suite descontroverses qui ont entouré laformulation et la mise en œuvre de lapolitique forestière, si bien que lesservices de la Banque ont évité deprendre des risques. L’expérienceopérationnelle de la Banque et lesnouvelles initiatives du président vontdéjà plus loin que la stratégie de 1991.

L’OED recommande l’adoptiond’une double stratégie :

• Au niveau mondial, la Banquepeut user de son influence pourfaciliter des partenariats, afin demobiliser des ressourcesfinancières additionnelles (quicompléteront l’amélioration de lacoordination des apportsexistants d’aide à des paysdonnés) à l’intention des pays cli-ents, en particulier à travers denouveaux mécanismes definancement suffisamment biendotés pour que soient atteints lesobjectifs internationaux de lastratégie révisée.

• Au niveau des pays, la Banquepeut prendre en compte lesparticularités des pays clients, enrecourant à tous les instrumentsdont elle dispose et en mettantl’accent sur une action à longterme, sur des partenariats avecdiverses entités, surl’apprentissage sur le tas et surl’échange de données d’expérience

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tive processes complementaryto, but independent of, its lend-ing operations.

OED has identified sevenelements that would makethe revised Bank forest strat-

egy more relevant to current cir-cumstances and strengthen theBank’s ability to achieve its strate-gic objectives in the forest sector:

1.Use the Bank’s global reach toaddress both mechanisms andfinances for international re-source mobilization onconcessional terms outside nor-mal Bank lending activities.Pursue measures such as thePrototype Carbon Fund andother concessional financingmechanisms to compensatecountries that are producingforest-based international pub-lic goods such as biodiversitypreservation and carbon se-questration.

2.Establish partnerships with allrelevant stakeholders to fulfillboth country and global roles.At the same time, the Bankmust recognize the resourceimplications of meeting globalobjectives and using participa-tory approaches.

3.Broaden the focus on primarytropical moist forests to encom-pass all types of natural forests,including temperate and borealforests and other highly endan-gered, biologically rich forests inthe tropics: the cerrados andAtlantic forest of Brazil, tropicaldry forests, and the WesternGhats of India. The revised strat-egy should recognize that natu-ral forests alone need not serveall forest functions. Some impor-tant functions (including meet-

• En su papel a nivel mundial,el Banco puede aprovechar supoder de convocatoria parafacilitar las asociaciones quemovilizan recursos financierosadicionales (además de mejorarla coordinación de los flujos deayuda específica para cada país,

ya existentes) para ser utilizadosen los países clientes, y queincluyen nuevos mecanismos definanciamiento cuya magnitud essuficiente para alcanzar losobjetivos mundiales de laestrategia revisada.

• En su papel a nivel de cada país,el Banco puede reconocer yencarar las diversas realidades delos países clientes, mediante eluso de todos los instrumentos asu alcance y el énfasis en laparticipación a largo plazo, en lasasociaciones con una granvariedad de representados,aprendiendo mediante lapráctica, y en el intercambio deexperiencias entre los países. Estoentraña un compromiso a largoplazo por parte del Banco, conrecursos suficientes para lainvestigación, los estudioseconómicos y sectoriales, y losprocesos de consultacomplementarios de susoperaciones de financiamientopero independientes de lasmismas.

OED identificó siete elementosque harían que la estrategia del Bancopara el sector forestal sea más acordea las circunstancias actuales y quefortalecerían la capacidad del Bancopara alcanzar sus objetivosestratégicos en el sector forestal:

1. Debe utilizar el campo de accióndel Banco a nivel mundial paraencarar tanto los mecanismos

entre pays. Pour cela, la Banquedoit s’engager sur le long termeet consacrer des ressourcessuffisantes à la recherche, auxanalyses économiques etsectorielles et aux processusconsultatifs complétant de

manière indépendante sesopérations de prêt.

L’OED a formulé septrecommandations en vue de mieuxadapter la stratégie forestière réviséede la Banque aux circonstancesactuelles et d’aider la Banque à réaliserses objectifs stratégiques dans lesecteur forestier :

1. Mettre à profit les moyensd’action mondiaux de la Banquepour résoudre simultanément laquestion des mécanismes et celledes financements, s’agissant de lamobilisation de ressourcesinternationales de caractèreconcessionnel en dehors de sesactivités de prêt habituelles.Rechercher des dispositifs telsque le Fonds prototype pour lecarbone et d’autres mécanismesde financement concessionnelspour dédommager les pays quiproduisent des biens publicsinternationaux fondés sur lesforêts, tels que la préservation dela diversité biologique et la fixa-tion du carbone.

2. Établir des partenariats avectoutes les parties prenantes

pertinentes pour remplir son rôleaussi bien au niveau des paysqu’au niveau mondial.Parallèlement, la Banque doittenir compte de ce qu’implique,sur le plan des ressources, laréalisation d’objectifs de caractèreinternational selon des méthodesparticipatives.

3. Élargir son action à tous les typesde forêts naturelles, y compris les

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ing export and urban demand,providing environmental ser-vices, and meeting the employ-ment and livelihood needs ofthe poor) can be served by treeplanting, and its expansioncould also relieve pressure on

natural forests.4.Give due consideration to for-

est issues in all relevant sectoractivities and macroeconomicwork, and support activitiesthat will help protect naturalforests of national and globalvalue. The Bank shouldstreamline efforts to promoteforest conservation and devel-opment and align these effortswith the overall developmentgoals and aspirations of itsclient countries. The synergybetween development and con-servation objectives needs to berecognized and actively pro-moted through tree planting ondegraded forest and non-forestlands, energy substitution, end-user efficiency, research, tech-nology, and dissemination.

5.Reduce illegal logging by ac-tively promoting improved gov-ernance and enforcement oflaws and regulations. This willrequire helping Bank borrowersto improve and implement ex-isting laws and regulations. Themobilization of national stake-holders (especially civil societyand the private sector) to de-mand, implement, and monitorimproved governance practiceswill also be necessary.

6.Address the livelihood and em-ployment needs of all poorpeople, while continuing tosafeguard the rights of indig-enous people. More attentionneeds to be given to the effectsof the forest strategy on all the

como las finanzas para lamovilización de recursosinternacionales en condicionesconcesionarias que no seencuentran dentro de la esferade sus actividades normales definanciamiento. Debe establecermedidas tales como el Fondo

tipo para reducir las emisiones decarbono y otros mecanismos definanciamiento en condicionesconcesionarias a fin decompensar a los países queproducen bienes basados en losbosques, suministrados por elsector público a nivel mundial,como por ejemplo lapreservación de la diversidadbiológica y la fijación de carbono.

2. Debe establecer asociaciones con

todos los interesados pertinentespara cumplir su papel a nivel decada país y a nivel mundial. Almismo tiempo, el Banco debereconocer las consecuencias quetendrá el cumplimiento de losobjetivos a nivel mundial y el usode los enfoques participatorios,para los recursos.

3. Debe ampliar el enfoque respectode los bosques húmedostropicales primarios con el objeto

de abarcar a todos los tipos debosques naturales, inclusive a losbosques de zonas templadas y losbosques boreales y a otrosbosques tropicales con granriqueza biológica que seencuentran en grave peligro: loscerrados y el bosque atlántico deBrasil, los bosques secostropicales, y los GhatsOccidentales de la India. Laestrategia modificada deberíareconocer que no es necesarioque los bosques naturales seanlos únicos que cumplen todas lasfunciones forestales. Laforestación puede cumplir

forêts tempérées et boréales etaux autres forêts très menacées,riches en ressourcesbiologiques : les cerrados et laforêt atlantique au Brésil, lesforêts tropicales sèches et lesGhats occidentaux en Inde. Il

convient d’affirmer, dans lastratégie révisée, que les forêtsnaturelles ne sauraient à ellesseules remplir la totalité desfonctions forestières. Certainesd’entre elles (telles que satisfairela demande à l’exportation et lademande urbaine, fournir desservices environnementaux etrépondre aux besoins despauvres en matière d’emploi et desubsistance) peuvent êtreremplies par des plantationsd’arbres, dont l’expansion peutégalement atténuer les pressionsexercées sur les forêts naturelles.

4. Tenir dûment compte desconsidérations forestières danstoutes les activités sectorielles etanalyses macroéconomiquespertinentes, et soutenir desactivités qui contribueront àprotéger les forêts naturellesayant une valeur au plan nationalet mondial. Il conviendrait que laBanque rationalise les effortsmenés en vue de promouvoir laprotection et le développementdes forêts et harmonise ces ef-forts avec les aspirations et lesobjectifs de développementgénéraux des pays clients. Ilimporte de reconnaître lasynergie entre les objectifs dedéveloppement et ceux de lapréservation, et de la promouvoiractivement par la plantationd’arbres dans les forêts dégradéeset sur les terres non forestières,par les énergies de substitution,par l’amélioration de l’efficacitéau niveau des utilisateurs, par la

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poor, particularly to the con-flicting needs of different usergroups.7. Realign Bank resourceswith Bank objectives in theforest sector. The Bank’s in-ternal incentives and skill

mix need to be enhanced sothat operational staff feel theyhave the support and confi-dence of Bank managementand country borrowers and ac-cess to the human and financialresources needed to address therisky and controversial issuesof the forest sector. The Bankmust also diligently and rou-tinely monitor compliancewith all safeguard policies inits investment and adjustmentlending.

algunas funciones importantes(entre las que se incluyesatisfacer la demanda deexportación y la demanda ur-bana, suministrar serviciosambientales, y satisfacer lasnecesidades de empleo ysubsistencia de los pobres), y su

expansión podría aliviar, además,la presión sobre los bosquesnaturales.

4. Debe tomar en cuenta los temasforestales en todas las actividadesy estudios macroeconómicospertinentes, y prestar apoyo a lasactividades que ayuden aproteger los bosques naturalesque son valiosos a nivel nacionaly mundial. El Banco deberíaracionalizar los esfuerzos porpromover la conservación y eldesarrollo de los bosques yadaptar esos esfuerzos a losobjetivos generales de desarrolloy a las aspiraciones de sus paísesclientes. Se debe reconocer ypromover activamente la sinergiaentre los objetivos de desarrollo yde conservación a través de laforestación de los bosquesempobrecidos y las tierras sinbosques, la sustitución deenergía, la eficacia de usuario fi-nal, la investigación, la tecnologíay la difusión.

5. Debe reducir la explotación for-estal ilegal mediante lapromoción activa de mejoras en

la gestión de gobierno y laaplicación de las leyes yreglamentaciones. Con ese fin, sedeberá ayudar a los prestatariosdel Banco a mejorar y aplicar lasleyes y reglamentaciones vigentes.También será necesaria lamovilización de los interesadosnacionales (especialmente lasociedad civil y el sector privado)para exigir, aplicar y supervisar

recherche, la technologie et ladiffusion.5. Réduire les coupes illégales enpromouvant activement lagouvernance et le respect des

lois et des règlements. À ceteffet, il faudra aider les

emprunteurs de la Banque àaméliorer et à mettre en œuvre leslois et les règlements existants. Ilsera également nécessaire demobiliser les parties prenantesnationales (tout particulièrementla société civile et le secteur privé)pour qu’ils exigent, appliquent etsurveillent l’application de pra-tiques de gouvernanceaméliorées.

6. Se pencher sur les besoins de tousles pauvres en matière de

subsistance et d’emploi, tout encontinuant à garantir les droitsdes populations autochtones. Ilconvient d’accorder une attentionaccrue aux effets de la stratégieforestière sur tous les pauvres, eten particulier aux besoinscontradictoires des différentsgroupes d’utilisateurs.

7. Consacrer au secteur forestier desressources à la mesure desobjectifs. Il importe d’améliorer lesincitations internes et la gamme decompétences au sein du personnel,afin que les services opérationnelssachent qu’ils jouissent du soutienet de la confiance de la direction dela Banque et des paysemprunteurs, et qu’ils disposentdes ressources humaines etfinancières dont ils ont besoinpour s’attaquer aux problèmesdifficiles et épineux du secteurforestier. La Banque doit aussis’assurer systématiquement et avecdiligence de l’application de toutesses politiques de protection dansses prêts d’investissement et dansses prêts d’ajustement.

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las prácticas de buena gestiónde gobierno.6. Debe encarar las necesidades

de sustento y empleo de todoslos pobres, y al mismo tiempoproteger los derechos de los

pueblos indígenas. Se debeprestar más atención a los efectosde la estrategia del sector forestalen todos los pobres, en particulara las necesidades opuestas de losdistintos grupos de usuarios.

7. Debe adaptar los recursos delBanco a sus objetivos en el sectorforestal. Se deben reforzar los

incentivos internos y lacombinación de especialidadesdel Banco para que el personal

operativo sienta que cuenta conel apoyo y la confianza de laadministración del Banco y de los

países prestatarios y con el accesoa los recursos humanos yfinancieros que son necesarios

para encarar los temas riesgososy controvertidos del sector for-estal. Además, el Banco debe

supervisar en forma diligente yrutinaria el cumplimiento detodas las políticas de

salvaguardia en sufinanciamiento para fines deinversión y de ajuste.

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GLOSSARY

Because this report evaluates the implementation of theWorld Bank’s 1991 Forest Strategy and Policy, it retainsmost of the definitions used in the 1991 report The ForestSector: A World Bank Policy Paper [*]. The sources ofother definitions are: Review of Implementation of ForestSector Policy (World Bank 1994a) [**]; State of theWorld’s Forests (FAO 1999c) [†]; and A Sustainable ForestFuture? (Pearce, Putz, and Vanclay 1999) [‡]; andSustaining Tropical Forests: Can We Do It, Is It WorthDoing? Report of the Discussion Meeting held at GravesMountain Lodge, Syria, VA, October 2–7, 1998 [§].

†AFFORESTATION/REAFFORESTATION: Establish-ment of a tree crop in an area from which it has alwaysor long been absent.

*AGROFORESTRY: Land use system in which woodyperennials are used on the same land as agriculturalcrops or livestock in some form of spatial arrangementor temporal sequence.

BIOPROSPECTING: Identifying commercially ormedically useful chemicals in living organisms.

**BOREAL FORESTS: Forests located in areas withmean annual temperatures of less than -4°C, dominatedby pine, fir, spruce, larch, and birch, and coveringlarge areas of Canada, Russia, and Scandinavia.

*CARBON FIXATION; CARBON SEQUESTRA-TION: The conversion by plants, through photosynthe-sis of atmospheric carbon dioxide, into organiccompounds. Substantially changing forests by clearing,burning, and so on, increases the release of carbon-based gases into the atmosphere, thereby contributingto the greenhouse effect.

CERRADOS REGION: This plateau, covering 21percent of the Brazil’s land area, is the country’ssecond-largest ecoregion after the Amazon. Its habitatsinclude savanna, scrub, grasslands, and dry forest.

COMPREHENSIVE DEVELOPMENT FRAMEWORK(CDF): The CDF is a holistic approach to developmentadopted by the World Bank. It seeks a better balance inpolicymaking by highlighting the interdependence of allelements of development—social, structural, human, gov-ernance, environmental, economic, and financial. It

emphasizes partnerships among governments, donors,civil society, the private sector, and other developmentactors. Perhaps most important, the country is in the lead,both “owning” and directing the development agenda,with the Bank and other partners each defining theirsupport for the country’s plans.

CLEAN DEVELOPMENT MECHANISM (CDM): Ar-ticle 12 of the Kyoto Protocol calls for the establish-ment of the CDM to promote investment in sustainableenergy projects. CDM is intended to encourage invest-ment in sustainable energy projects in the developingworld through investments in technology to reducegreenhouse gas emissions by an investor and a partnerin a developing country. After certification require-ments have been met, reductions in emissions wouldconvert into “credits” for the environmental benefitproduced by the investment, with the value of the creditshared by the investor and the partner.

*CLOSED FOREST: Forest with a stand densitygreater than 20 percent of the area, and where treecrowns nearly contact one another.

*COMMON PROPERTY: Tenure system whereby re-sources are collectively owned and managed and non-owners are excluded from access to the resource.

*CONSERVATION: Rational and prudent manage-ment of natural resources to achieve the greatestbenefit, while maintaining the potential of the resourceto meet future needs.

§CONSERVATION FORESTRY: The application ofverifiable good practices for the management of forestresources, including woodland and trees, in ways thatare ecologically sound, economically viable, sociallyresponsible, and environmentally acceptable andwhich do not reduce the potential of these resources todeliver multiple benefits over time. (See also preserva-tion forestry)

‡CONVENTIONAL LOGGING: Conventional log-ging has come to be viewed as less concerned withforest regeneration through management—frequentlylacking government control—and unsustainable, thatis, not focused on long-term timber supplies.

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*CONVERSION FOREST: Forest assigned for conver-sion to agriculture or other non-forest use.

*COMMERCIAL LOGGING: Extraction of timber inlarge quantities for industrial use or export markets.

COUNTRY ASSISTANCE STRATEGY (CAS): A broaddevelopment framework produced by the Bank incollaboration with the government and other stake-holders and tailored to individual country needs. TheCAS is a central tool of the Bank’s management andBoard for guiding and reviewing the Bank Group’scountry programs and is an important benchmark forjudging the impact of its work.

*DEFORESTATION: Change of forest with depletion oftree crown cover to less than 10 percent. The clearing offorests and the conversion of land to non-forest uses.

*DEGRADATION: Biological, chemical, and physicalprocesses that result in loss of the productive potential ofnatural resources in areas that remain classified asforests. Degradation may be permanent, although someforests may recover naturally or with human assistance.

*DEPLETION: Reduction in forest area or volume as aresult of deforestation.

*DESERTIFICATION: Degradation of the land thatultimately leads to desert-like conditions.

*DESIGNATED FOREST: Forest legally set aside forpreservation or production.

*ECOTOURISM: Nature tourism.

‡ECONOMIC ASSESSMENT: Makes three potentiallymajor adjustments to a financial analysis:

(1) The first modification adjusts financial costsand benefits to reflect shadow prices. A shadowprice, for example, the price of labor or theexchange rate—differs from a financial price inthat it reflects the true opportunity cost of theresources in question.

(2) The second modification adds in all environ-mental and social consequences that affect thewell-being of anyone within the nation.

(3) The third modification constitutes a globalanalysis and would also include the gains andlosses of people outside the country in whichthe forest is located.

ECONOMIC AND SECTOR WORK (ESW): ESW isanalysis that underpins the Bank’s lending operations,informs policy dialogue, responds to country requestsfor specific advisory tasks, and provides policy adviceto the development community.

*EXTERNALITY: A cost (or a benefit) of an economicactivity by one party that is unintentionally imposed on(or received by) another party without compensation(or payment), and leads to inefficiencies in competitivemarkets.

*FARM FORESTRY: People-oriented forestry that iscarried out on private farmlands.

†FOREST: Ecosystem with a minimum of 10 percentcrown cover of trees and/or bamboo, generally associ-ated with wild flora and fauna and natural soilconditions and not subject to agricultural practices.Forests are in two categories:

• Natural forests: forests composed of tree speciesknown to be indigenous to the area.

• Plantation forests: established artificially byafforestation on lands previously non-forestedwithin living memory, or established artifi-cially by reforestation on land that wasforested, by replacement of the indigenousspecies with a new and essentially differentspecies or genetic variety.

FOREST PROJECTS: Projects in the agriculturesector of the World Bank that are classified as forestprojects.

FOREST-COMPONENT PROJECTS: Projects in vari-ous sectors of the World Bank (including environment)that have specific activities or components directlyrelated to forests.

**JOINT FOREST MANAGEMENT (JFM): Thetransfer of a share of benefits from government to ruralcommunities in exchange for implementing agreedforest management programs in state forests.

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‡LOGGING: The process of harvesting timber from aforest, logging has come to be used in the context ofunsustainable cutting, which is cutting that is notfocused on long-term timber supplies.

‡MANAGEMENT: Relates to the management ofresources, inventorying, and yield calculation and tosilvicultural practice (such as timber cutting).

*MARKET FAILURE: A deviation from the conditionsrequired for the efficient allocation of resources by apurely competitive market.

**NON-TIMBER FOREST PRODUCTS (NTFP): For-est products, other than timber, such as fruits, medi-cines, nuts, and bushmeat.

*OPEN ACCESS: Absence of ownership claims overresources, permitting and leading to uncontrolled andexcessive attempts at appropriation and use.

*OPEN FOREST: Forest in which the tree canopy layeris discontinuous but covers at least 10 percent of thearea and in which the grass layer is continuous.

*PRESERVATION FOREST: Forest designated for totalprotection of representative forest ecosystems in whichall forms of extraction are prohibited.

*PRIMARY FOREST: Relatively intact forest that hasbeen essentially unmodified by human activity for thepast 60 to 80 years.

‡PRIVATE GAINS/LOSSES: Refers to the private inter-ests of the stakeholder; that is, what benefits him/her.

*PRODUCTION FOREST: Forest designated for sus-tainable production of forest products.

*PROTECTION FOREST: Forest designated for stabi-lization of mountain slopes, upland watersheds, fragilelands, reservoirs, and catchment areas. Controlledsustainable extraction of non-wood products could beallowed.

‡REDUCED-IMPACT LOGGING: Well-managed log-ging, usually supervised.

*REFORESTATION: The replacement or establish-ment of a tree crop on forestland.

*SECONDARY FOREST: Forest subject to a light cycleof shifting cultivation or to various intensities of logging,but that still contains indigenous trees and shrubs.

*SHIFTING CULTIVATION: Farming systems inwhich land is periodically cleared, farmed, and thenreturned to fallow; synonymous with slash-and-burn orswidden agriculture.

**SOCIAL FORESTRY: A term used to describe a typeof project that was first developed in the late 1970s.Such projects included tree planting carried out as acommunity undertaking, and sometimes farm forestryas well, with a focus on production of fuelwood andpoles. More recently, the term has been used to refer toany kind of forest activity in which poor people are themain beneficiaries.

‡SOCIAL GAINS/LOSSES: Refers to the wider socialperspective; the jurisdiction may be local, national,regional, or global. In theory, local, national, andglobal perspectives on “social” gains/losses may di-verge. National and global agencies should take the“social” standpoint, but it is well known that this is notalways the case.

STAKEHOLDERS: Parties interested in and/or affectedby an activity or policy.

*STUMPAGE OR ROYALTY: Fee or price of standingtrees before logging.

SUSTAINABLE FOREST MANAGEMENT (SFM):Several definitions are in use: *(i) The continuous flowof timber products or other specific goods or services,many of which may be essential for sustaining thelivelihood of indigenous forest dwellers. *(ii) Thecontinued existence of the current ecosystem. *(iii) Thelong-term viability of alternative uses that mightreplace the original ecosystem. (iv) Utilization offorests without undermining their use by present andfuture generations. Different systems of managementare required for each category of forests, depending onthe intended output. (v) A system of forest management

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that aims for sustained yields of multiple products fromthe forest over long periods. **(vi) Management offorests to achieve a continuous flow of forest productsand services of all kinds.

‡SUSTAINABLE TIMBER MANAGEMENT: A forestmanagement system that aims for sustained timberyields over long periods.

*SUSTAINED YIELD: Production of forest productswith an approximate annual balance between netgrowth and harvest.

**TEMPERATE FOREST: Forest located in areas withmean annual temperatures between -3°C and 5°C,dominated by broad-leafed tree species. Temperateforests are characterized by heavy human interventionor conversion into plantations.

*TROPICAL DRY FOREST: Open forest with continu-ous grass cover; distinguished from other tropicalforests by distinct seasonality and low rainfall. Includeswoody savannas and shrublands.

*TROPICAL MOIST FOREST: Forest situated in areasreceiving not less than 100 millimeters of rain in anymonth for two out of three years, with a mean annualtemperature of 24°C or higher; mostly low-lying,generally closed.

WORLD BANK GROUP: For the purpose of this study,World Bank Group refers to the activities of theInternational Bank for Reconstruction and Develop-ment (IBRD), International Development Association(IDA), International Finance Corporation (IFC), andMultilateral Investment Guarantee Agency (MIGA).

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ABBREVIATIONS AND ACRONYMS

AFR – Africa RegionAGR – Agriculture Department (World Bank)APL – Adaptable Program LoanARPP – Annual Review of Portfolio PerformanceATO – African Timber AssociationCAS – Country Assistance StrategyCBO – Community-based organizationCDF – Comprehensive Development FrameworkCDM – Clean Development MechanismCFI – Continuous forest inventoryCGE – Computable general equilibriumCGIAR – Consultative Group on International Agricultural ResearchCIFOR – Center for International Forestry ResearchCODE – Committee on Development EffectivenessDEC – Development Economics Department (World Bank)DFID – Department for International DevelopmentEAP – East Asia and Pacific RegionECA – Europe and Central Asia RegionEIA – Environmental impact assessmentEMBRAPA – Brazilian Corporation for Agricultural Research

(Empresa Brasileira de Pesqisa Agropecuaria)ENV – Environment Department (World Bank)ERR – Economic rate of returnESSD – Environmentally and Socially Sustainable Development (Network)ESW – Economic and sector workFAO – Food and Agriculture OrganizationFI – Financial intermediaryFRR – Financial rate of returnFSC – Forest Stewardship CouncilGDP – Gross domestic productGEF – Global Environment FacilityGNP – Gross national productIADB – Inter-American Development BankIBRD – International Bank for Reconstruction and Development (World Bank)ICR – Implementation Completion ReportICRAP – International Center for Research in AgroforestryID – Institutional developmentIDA – International Development AssociationIFC – International Finance CorporationIFF – Intergovernmental Forum on ForestsIFIA – Intermountain Forest AssociationIFPRI – International Food Policy Research InstituteIITA – International Institute of Tropical AgricultureIPF – Intergovernmental Panel on ForestsIRR – Internal rate of returnIUCN – International Union for the Conservation of NatureLCR – Latin America and the Caribbean RegionLIL – Learning and Innovation LoanM&E – Monitoring and evaluation

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MNA – Middle East and North Africa RegionMIGA – Multilateral Investment Guarantee AgencyNFP – National Forest ProgramNGO – Nongovernmental organizationNRM – Natural resource managementOCS – Operational Core Services (World Bank)OED – Operations Evaluation DepartmentOEG – Operations Evaluation Group (IFC)OP – Operational PolicyPA – Protected areaPAD – Project Appraisal DocumentPAR – Performance Audit ReportPFE – Permanent forest estatePPG-7 – Rain Forest Trust/Pilot ProgramPREM – Poverty Reduction and Economic Management (Network)PSR – Project Status ReportQAG – Quality Assurance GroupRDV – Rural Development Department (World Bank)RUTA – Regional Unit for Technical Assistance (Costa Rica)SAR – South Asia RegionSDC – Swiss Agency for Development and CooperationSDV – Social Development Department (World Bank)SFM – Sustainable forest managementSME – Small and medium-size enterprisesTFAP – Tropical Forest Action PlansTMF – Tropical moist forestUNDP – United Nations Development ProgramWRI – World Resources InstituteWTO – World Trade OrganizationWWF – World Wide Fund for Nature/World Wildlife Fund

All dollar ($) figures are in U.S. dollars.

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11The Challengesof Forest Strategy

ormulation of the World Bank’s 1991 Forest Strategy was prompted by alarming esti-

mates that deforestation was affecting 17 to 20 million hectares a year in the developing

world and that tropical moist forests were shrinking inexorably.1 There was also concern

that the Bank’s lending activities had contributed to these trends.2 With environmental awareness

growing, the Bank crafted and endorsed a conservation-oriented forest strategy. The strategy

explored the complex relationships between such global concerns as biodiversity and climate

change, and such national issues as soil and waterconservation and the protection of indigenous peoples.

The strategy broke new ground in several respects(box 1.1). It reoriented Bank forest operations towardenvironmental sustainability. It was the first compre-hensive sector strategy to bring the conservationagenda into the mainstream of World Bank Groupactivities. It emphasized the strong need to protect andconserve primary tropical moist forests, and identified20 countries that were to be given particular attentionin the Bank’s country assistance because their tropicalmoist forests were threatened. 3 Eventually, the Opera-tional Policy on forestry was classified as a safeguardpolicy (see Annex I).4 This was also the first WorldBank strategy formulated with the active participationof stakeholders outside the Bank. The consultativeprocess focused largely on nongovernmental organiza-tions—it did not secure a broad-based consensus amongdeveloping countries, the private sector, and civilsociety—but it opened the door for multistakeholderconsultations in Bank policymaking.

The strategy assessed the importance of tree plantingto meet the fuelwood and other basic needs of the poor. Italso emphasized the importance of a multisectoral

approach to forest issues, stressing that factors outside theforest sector may be more important in explainingdeforestation than those within the sector. It proscribedBank Group financing of commercial logging in primarytropical moist forests because of uncertainties about thevaluation of forest environmental services, inadequateknowledge of sustainable forest management systems,and the irreversibilities associated with the loss of tropicalmoist forests. The financing of infrastructure projects(such as roads, dams, and mines) that might lead to loss offorests was made subject to rigorous environmentalassessment. The ban on Bank financing of commerciallogging and the independently developed requirement forenvironmental assessments of Bank projects sent a clearsignal that the institution would not be involved inactivities associated with deforestation in primary tropi-cal moist forests.

Experience with the 1991 Forest StrategyThe intent of the 1991 Forest Strategy (box 1.1) is nowgenerally reflected in the Bank’s forest investments.The lessons of experience, and concurrent globaltrends, reinforce its aims. Although some key borrow-ers consulted during this OED review were unaware of

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the Bank’s 1991 Forest Strategy, the environmentalmovement in developing countries is supportive of itsconservation aims and has become far more active.

Experience with the strategy indicates that someof its prescriptions were subject to many interpreta-tions, so that results often differed from expectations.The effects of globalization and liberalization, theunexpected diversity and complexity of forest circum-stances, and the large number of competing interestsproduced more variation in outcomes, and feweruniversally applicable principles, than the framers ofthe strategy expected. The key to successful foreststrategy has proved to be conflict resolution moreoften than simply avoiding harm or seeking to protectthe vulnerable. Important errors of omission included

the neglect of forests that are at least as endangered asthe tropical moist forests—Brazil’s Atlantic forests,forests in the Western Ghats of India, the biodiversity-rich temperate and boreal forests of Eastern Europe,and the tropical dry forests of Africa on whichmillions depend for their livelihoods. In the “newBank,” the central mission of poverty alleviation andsustainable development makes it imperative that theBank’s forest strategy be eclectic, with a focus bal-anced between conservation and development, consis-tent with its mission and the knowledge base currentlyat its disposal. The need for a less constraining, moreproactive strategy is illustrated by the definition ofprimary forests adopted in the 1991 Forest Strategy:“relatively intact forest that has been essentially

BOX 1.1. BANK FOREST STRATEGY: THE 1991 FOREST PAPER AND THE 1993 OPERATIONAL POLICY DIRECTIVE

TPolicy Paper was published inSeptember 1991. This paper(henceforth the 1991 forest paper)represented the initial compre-hensive statement of a new direc-tion for the Bank’s forest strategy.A two-page Operational Policydirective (OP 4.36, produced in1993; see Annex I) reflected thepolicy content of the paper, and aGood Practices summary (GP4.36; in Annex J) provided opera-tional direction to Bank staff.The 1991 forest paper, the OP,and the GP together are the sub-ject of OED’s evaluation.

In today’s Bank terminology,the 1991 forest paper sets out aBank strategy and the OP definesthe policy, although some outsid-ers consider this distinction con-fusing at best. The 1991 forestpaper gave guidance on policydirections, programmaticemphases, and good practices,

and specified the principles andconditions for Bank involvementin the forest sectors of its clientcountries. As the first instance ofsignificant outside stakeholderparticipation in the formulation ofa Bank sector strategy, this docu-ment came to be viewed by theoutside world and many Bankstaff as embodying the new direc-tion of the Bank’s forest strategy.Both the Bank’s Board and civilsociety referred to this document,as well as OP 4.36, when theyasked OED for an independentevaluation of the Bank’s forestpolicy.

The foreword for the 1991 for-est paper was signed by then BankPresident Barber Conable, but theBoard was not asked to—and didnot—comprehensively approve thepaper. It did discuss the paper,however, and endorsed specificprinciples, including the ban onfinancing commercial logging inprimary topical forests; the incor-poration of forestry issues into the

general policy dialogue and Coun-try Assistance Strategy; and thepromotion of international coop-eration, policy and institutionalreform, resource expansion, andforest preservation. The Board alsoendorsed the statement that “intropical moist forests the Bank willadopt, and will encourage govern-ments to adopt, a precautionarypolicy toward utilization . . . Spe-cifically, the Bank Group will notunder any circumstance financecommercial logging in primarytropical moist forests. Financing ofinfrastructural projects . . . thatmay lead to loss of tropical moistforests will be subject to rigorousenvironmental assessment as man-dated by the Bank for projects thatraise diverse and significant envi-ronmental and resettlement issues.A careful assessment of the socialissues involved will also berequired” (p. 19). Finally, theBoard also approved a specificsection on conditions for Bankinvolvement.

he 99-page World Bankpublication The ForestSector: A World Bank

3

T h e C h a l l e n g e s o f F o r e s t S t r a t e g y

unmodified by human activity for the past 60 to 80years.” But most primary forests in developing coun-tries have some human activity. By using so restrictivea definition, the strategy implied the preservation ofprimary tropical moist forests, rather than theirconservation. Extending this definition to boreal andtemperate forests would pose problems for the Bank’sconservation and production activities even in thoseforests.

The 1991 forest paper did identify a fundamentalproblem: national governments (as well as individualsand community groups) often want to realize thecapital found in standing trees when a wider concernfor the global environment dictates the conservation offorests and the protection of biodiversity.5 But the

strategy did not address the implications of theseconflicting priorities or the implicit gap in globalpublic resources. It mentioned only the Global Environ-ment Facility, which has limited resources and nomandate to compensate countries for the potential lossof income from forest protection. The 1991 paper failedto recognize the scale of the public goods dilemma,which requires the global community to pay forestowners to preserve natural forests. A rational solutionto payments for environmental services is required toensure the conservation of natural habitats of interna-tional and national importance. Such payments wouldbe connected to the negotiation of transparent agree-ments based on broadly understood rules that are bothenforceable and enforced.

der controlled sustained-yield con-ditions allows forest managementunder specific conditions (whichthe drafters of the OP thought gavethe Bank some flexibility), the OPraised more questions than itanswered. According to surveyresults, Bank staff do not considerthe OP to be flexible on this point.(Outsiders who reviewed thisreport during the consultation pro-cess considered the shift from“policy” to “strategy” confusing atbest.) The Bank will need a morefocused forest strategy paper and aclear Operational Policy consistentwith the strategy if its future lend-ing and nonlending activities are toresult in improved forest manage-ment practices. This report arguesthat current practices tend to beenvironmentally destructive andsocially inequitable in many coun-tries. What constitutes “sustain-able” forest management remainsunresolved and location-specific,although the debate on forest man-agement has moved on, using some

Both the 1991 forest paper andthe OP emphasize that the Bankwill not finance commercial log-ging in primary tropical moist for-ests. The 1993 OP adds that theBank “does not . . . finance thepurchase of logging equipment foruse in primary tropical moist for-est” (para. 1a). The OP also makesa confusing statement that “in ar-eas where retaining the natural for-est cover and the associated soil,water, biodiversity, and carbonsequestration values is the object,the Bank may finance controlledsustained-yield forest manage-ment” (para. 1f). However, the1991 paper stressed a lack ofagreement on what constitutes sus-tainable forest management andoffered three different definitionsfor it. All three include the man-agement of forests for multipleuses, as distinct from timber pro-duction alone, to which loggingnormally refers (see Glossary).Although this provision in the OPto finance forest management un-

universally agreed-upon criteriaand indicators.

Based on the 1991 strategystatement, the OP also statesthat “the Bank distinguishesinvestment projects that areexclusively environmentally pro-tective . . . or supportive ofsmall farmers . . . from all otherforestry operations.” It goes onto say that “projects in this lim-ited group may be pursued onlywhere broad sectoral reformsare in hand, or where remainingforest cover in the client countryis so limited that preserving it inits entirety is the agreed courseof action.” This report recom-mends that the Bank could moreusefully and proactively workwith stakeholders sympathetic toreform in borrowing countries,rather than waiting for reformsto be put in place before becom-ing engaged in the sector.

4


Uncertain valuations and weak cause-and-effectrelationships make assessing the costs and benefits offorest conservation contentious. The benefits are difficultto measure, value, or capture; occur in the long run; andare global, national, and local. The costs, however, tendto be local and immediate.6 The Bank’s economic andsector work in Costa Rica, for example, found more than60 percent of the benefits of conservation in that countryto be global. Conservation activities are increasinglybeing stressed in developing countries and where suchactivities are of national importance. In China, Colom-bia, and Costa Rica, the governments—on their owninitiative and within their limited means—have alreadybegun to undertake investments in watersheds ofnational importance. However, the internationalcommunity’s willingness to pay for conservation activi-ties in developing countries remains low (Pearce andothers 1999, Annex 2)—and appears to be even lower

than assumed in the 1991 Forest Strategy. The consulta-tive process for this OED study found that manydeveloped country nationals and some internationalnongovernmental organizations tend to consider all thebenefits of conservation to be national or local andquestion the need for grant financing. Others, however,acknowledge that the Bank cannot achieve globalobjectives without such financing.

Deforestation and degradation of natural forestscontinued in many countries throughout the 1990s.Countries with tropical moist forests have continued tolog their forests on a massive scale, often illegally andunsustainably, because of the higher returns to alterna-tive land uses made possible by a synergy amongagricultural technologies, trade liberalization, andinfrastructure investments (see Brazil, Indonesia, andCameroon country studies). The Bank’s decision not tofinance commercial logging in tropical moist forests

BOX 1.2. THE WORLD BANK’S FOREST STRATEGY AT A GLANCE

The goal of the Bank’s forest sector strategy was to address the twin challenges of rapid deforestation,especially of tropical moist forests, and the inadequate planting of new trees to meet the rapidly grow-ing demand for wood products. These challenges were viewed as being connected to five key factors:

• Externalities that prevented market forces from achieving socially desired outcomes• Strong incentives, particularly for the poor, to cut trees• Weak property rights in many forests and wooded areas• High private discount rates among those encroaching on the forests• Inappropriate government policies, particularly concession arrangements.

Five principles were proposed for Bank involvement in the forest sector:• A multisectoral approach• International cooperation• Policy reform and institutional strengthening• Resource expansion• Land use controls (including zoning, demarcation, and controls associated with tenure issues) to preserve

intact forests.

Bank-financed activities were expected to comply with seven conditions:• No Bank Group financing for commercial logging in primary tropical moist forests• The adoption of policies and an institutional framework consistent with sustainability• A participatory approach to the management of natural forests• The adoption of comprehensive and environmentally sound conservation and development plans, with the

roles and rights of key stakeholders, including local people, clearly defined• Basing commercial use of forests on adequate social, environmental, and economic assessments• Making adequate provisions to maintain biodiversity and safeguard the interests of local people, includ-

ing forest dwellers and indigenous peoples• Establishing adequate enforcement mechanisms.

5

does not appear to have made any difference in theextent of logging. In many countries there is as much(or more) illegal logging as legal production. In forestsalready being exploited in an environmentally andsocially unsustainable manner, the Bank has thereforeoften lost the opportunity to improve forest manage-ment. Little progress can be made until the valuation ofstanding trees—and the associated biodiversity, prod-ucts, and services they provide—reflects the “real”value of forests to society, and until institutions ofgovernance are strong enough to control illegal log-ging and to enforce forest management using well-defined criteria and indicators. In many forest-richcountries demand for timber, a major cause of defores-tation, is far more attributable to the processes ofindustrialization, urbanization, and the demand forexports than to fuelwood consumption by the poor. The1991 forest paper did not anticipate these domestic andinternational demand trends and assumed that develop-ing countries would meet their urban needs throughimports from temperate countries.

In addition to analytic and political challenges,implementation of the strategy depends on the incen-tives affecting various actors. Governments oftenderive revenues from forests because, in most develop-ing countries, forests are owned by the state. In somecases, such as China and India, government-mandatedarrangements for marketing and processing forestproducts work against improved forest management.When individuals connected with governments benefitfinancially from such arrangements, as in Indonesia,the outcomes can be at odds with broader socioeco-nomic and environmental goals. Decentralization ofpower from central or provincial governments, withoutpayments for environmental services, leads to defores-tation when local objectives conflict with national orinternational policy goals.

Policy and institutional design is therefore crucialfor forest strategy implementation. If forest sectorstrategies are to be effective, they must suit the specificgeographic, biophysical, demographic, sociocultural,and economic circumstances for which forest interven-tions are designed. The coordination and relativebalance among considerations of forest management,poverty alleviation, indigenous rights, and economicdevelopment depend on agro-ecological circumstances,population densities, levels of development, and politi-cal will. Bank strategy should be flexible enough toadapt to diverse circumstances.

An important issue being debated globally is howto achieve a balance between the developmental andenvironmental roles of forests. The principles of sus-tainable forest management range from the most basic(focusing only on the continuous flow of forest prod-ucts) to the more complex (including the “applicationof verifiable best practices for the management of forestresources, including woodland and trees, in ways thatare ecologically sound, economically viable, sociallyresponsible, and environmentally acceptable and thatdo not reduce the potential of these resources to delivermultiple benefits”).7 The problem is applying theseprinciples when it is difficult to measure and attributecosts and benefits. Different stakeholders value forestsdifferently. Increasingly, for example, people recognizethat real gains could be achieved by the application ofreduced-impact logging techniques, and there is grow-ing consensus in the international forest communityabout parameters to be considered in defining sustain-able forest management (partly because of such initia-tives as the Intergovernmental Panel on Forests and theIntergovernmental Forum on Forests). Many interna-tional and national organizations are in the process ofdeveloping criteria and indicators for such manage-ment. There is considerable disagreement, however,about the nature and extent of differences in the privateand social costs and benefits between conventional andlow-impact logging. Broad agreement has yet to beachieved on either the financial viability and the long-term fiscal implications of promoting reduced-impactlogging or on the incentives needed to promote re-duced-impact logging. These must be worked outcountry by country.

Given so much close scrutiny and the high per-ceived risk to the Bank’s reputation, the Bank has beenreluctant to get involved, not only in the managementof timber production in primary tropical moist forests,which the 1993 Operational Policy restricted, but evenin the management of secondary tropical forests, whichthe policy did not restrict. But the Bank could signifi-cantly help control deforestation and degradation byhelping borrowing countries improve their forest man-agement practices—through improved policies, tech-nologies, and enforcement of regulations—instead ofwaiting for a consensus on sustainable forest manage-ment to develop, especially in the secondary naturalforests. The pertinent question is how and how muchwill a forest be exploited, rather than if it will be, andwho will gain or lose in the process.

T h e C h a l l e n g e s o f F o r e s t S t r a t e g y

6


Country Conditions and Forest StrategyIn the past, forests were viewed as resources to beexploited to facilitate growth, but even some of theearliest analyses of forest use—based on the historicalanalysis of market forces and ignoring externalities—predicted that forest exploitation would go throughseveral phases, leading to managed forests and treeplantations, as economic conditions improved.8 Coun-tries in various phases of development are likely tohave different incentives to manage forests (Hyde1999), a conclusion implicit in the Kuznets environ-mental curve (Panayotou 1995). The Kuznets curvepredicts that at low income levels, economic growthwill put pressure on forests and increase deforestation,but as income grows, deforestation will stop and forestcoverage will increase because of improved govern-ment institutions and reduced dependence on agricul-tural and forest production. Higher incomes lead toincreased demand for environmental and other ecologi-cal services that place value on maintaining forestcover. This has been the experience of several indus-trial economies. Some observers challenge this obser-vation, arguing that the income increases said to beneeded for such transitions are far too high (Stern,Common, and Barbier 1996). The same observers alsonote that there is considerable variability around themean and that it is the median income—which isconsiderably lower than the mean—that matters fordeforestation rates in most developing countries. In anycase, environmental awareness is already growing in

developing countries, and public opinion about theenvironment is changing—even in countries with lowlevels of median per capita income. Many countrieshave begun applying their own environmental protec-tion policies. The governments of the two largest low-income developing countries, China and India, adopteda policy of no logging in natural forests on their owninitiative, India in 1988 and China in 1998, and inBrazil the debate about environmental managementhas become more active.9

Analysis has also focused on differences betweenthe private and social costs and benefits of forests(Shogren and Tschirhart 1999). Because of externali-ties, without public action, including proactive govern-ment policies, market forces would not bring aboutsocially desired outcomes and would therefore encour-age deforestation and the loss of biodiversity. And howdoes one value the irreversible loss of biodiversity, suchas the extinction of species? International and nationalpolicies, including compensation for cross-boundarybenefits, are required if deforestation and loss ofbiodiversity are to be reduced nationally, and thusglobally.

Several questions frame the analysis that follows inthis report. How well has the Bank implemented the1991 strategy? Have forest-rich and forest-poor coun-tries adapted their forest practices to the Bank’s 1991Forest Strategy? What have we learned that makeschanges in the strategy desirable or necessary? How dovarious stakeholders view the strategy?

7

22

T

Bank Group Forest-RelatedServices and Lending

he World Bank Group and the Global Environment Facility (GEF) together committed

$37 billion in 745 approved operations in all sectors during the 1999 fiscal year. Shares

of the total commitments to all activities vary greatly among Bank institutions. The

World Bank share is nearly four-fifths; International Bank for Reconstruction and Development

(IBRD) loans constitute 60 percent of the total, followed by International Development Association

(IDA) credits (18 percent); International Finance Corpo-ration (IFC) financing approvals (18 percent); and GEFgrants and Multilateral Investment Guarantee Agency(MIGA) guarantees (4 percent each). (World Bank2000a, b)

Nonlending ServicesA Country Assistance Strategy (CAS) is a broad develop-ment framework produced by the Bank in collaborationwith the country government and other stakeholders andtailored to individual country needs. The main tool usedby the Bank’s management and Board for reviewing andguiding the Bank Group’s country programs, it is also animportant benchmark for judging the impact of the Bank’swork. Since the mid-1990s, the Bank’s emphasis on the“greening of the CAS” has resulted in improved treatmentof environmental issues, but the forest sector has notreceived much attention. Country teams often fail to viewsectoral issues, including forests, strategically in countrystrategies, even in countries where forest sectors areimportant to the macroeconomy. Even when CASs say theright things about the forest sector, their integration withoperational activities has fallen short, except in a fewcountries. Moreover, the CASs are increasingly developedin close collaboration with the countries and are supposed

to reflect their priorities. Some governments’ nationalobjectives in the forest sector are different from those ofthe Bank, leaving little room for Bank involvement intheir forest sectors. But there are exceptions. Forest sectorissues are addressed in the CAS for Nicaragua, forexample, and linked to project design that emphasizesextensive stakeholder participation in project prepara-tion. Treatment of the forest sector in the CAS has alsobeen relatively better in Cambodia, Indonesia, and PapuaNew Guinea, where forest sector issues have been a partof conditionality in recent stabilization and adjustmentlending by the International Monetary Fund (IMF) andthe Bank, partly because governments had not been keento get the Bank involved in their forest sectors.

Economic and sector work (ESW) underpins theBank’s lending operations, informs policy dialogue,responds to country requests for specific advisory tasks,and provides analytical research for the developmentcommunity. Yet forest-related ESW has declinedsharply, particularly since 1995 (Annex C), the 1991forest paper and GP 4.36 notwithstanding. Sector workon the environment and on natural resource manage-ment has increased significantly, but has not addressedforest-specific policy issues. And the quality of the verylimited forest sector work has been variable. The Latin

8


America and Caribbean Region (LCR) has produced byfar the best ESW (see Brazil and Costa Rica countrystudies and the LCR portfolio review) (ContrerasHermosilla and others 2000 ). Good-quality ESW hasalso been produced in the Europe and Central Asia(ECA) Region (particularly in Russia) and, morerecently, in the East Asia and Pacific Region (see theEAP portfolio review) (Lele and others 2000b). Butintersectoral links crucial to the forest sector havegenerally not received much attention. Although Bankresearch and lending experience document the effects ofagriculture, transportation, and infrastructure projectson rates of deforestation (including their net economic,social, and environmental effects on forest-dwellingpeople), ESW has not adequately addressed theseeffects. The Bank can draw on strong ESW in only afew countries if it is called upon to quickly advisegovernments on forest issues.1 Strengthening the Bank’sanalytic base on forests requires much more explicitintegration of forest sector issues into the Bank’s ESWand more resources need to be devoted to analyticallysound forest sector work. Currently, resources tend tobe tied to specific investment operations; resourcesindependent of investment operations need to be allo-cated for ESW about forests.

Forest Sector LendingThis report considered Bank forest-related activities onall public forestlands, including protected areas, and onnonforest lands, including trees on private farms and

community lands and all forest products and servicesemanating from them—in other words, both natural andplanted forests, large or small, monoculture or mixed,public, private, or community-owned. Viewed this com-prehensively, the 1991 strategy has had a chilling effecton forest sector activities of the World Bank Group, forseveral reasons. Despite the ambitious objectives of theforest strategy, forest sector issues have been inad-equately addressed in the CASs and ESW, and the leveland composition of forest sector lending—which is oftencritical for forest generation and new plantings in forest-poor countries—has been stagnant. Direct forest lending,which has traditionally dealt with forest sector activities,has stagnated. And although forest-component projectshave nearly tripled since 1991, they typically addressissues associated with the conservation and preservationof natural resources, including forests; they have paidlittle attention to forest management issues or to externalthreats to the forest sector. And by themselves, thesecomponent activities are not enough to leverage changesin government policies and institutions and to achievethe wider objectives of the 1991 Forest Strategy.

Even though lending for forests (both forest projectsand forest components of other projects) has increased 78percent—from $1.97 billion before 1991 to $3.51 billionafter 1991 in nominal terms—forest lending as a share ofall lending has remained below 2 percent (figure 2.1).Furthermore, the new mix of forest and forest-componentprojects may have increased the overall risk of the forestportfolio (see “Performance of forest and forest-compo-

FIGURE 2.1. WORLD BANK FOREST LENDING BEFORE AND AFTER 1991

Source: World Bank databases.

1,682 1,722

291

1,790

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Before 1991 After 1991

Commitments ($ million)

41 34

32

94

0

20

40

60

80

100

120

140

Before 1991 After 1991

Number of projects

Forest projects Forest components

9

B a n k G r o u p F o r e s t - R e l a t e d S e r v i c e s a n d L e n d i n g

nent projects,” below). Total forest lending to the 20countries with threatened tropical moist forests—thefocus of the strategy—increased by 36 percent innominal terms after 1991 (to a total of $1.3 billion), butthe projects and components generally avoided workingin the tropical moist forests (Annex C).

IFC lending for forest operations declined after1991, despite an increase in lending to the ECA Region,suggesting that the drop in other Regions that containtropical moist forests has been even larger. The IFC, inanalysis done for this review, was unable to establish ifthe investments it turned down because of Bank policyin tropical moist forests were financed by others(possibly with less environmental scrutiny than in theIFC). OED and Environmental and Socially Sustain-able Development Network (ESSD) consultations forthis review suggest that the Bank sent a less thanencouraging signal to international organizations andlending institutions about its own involvement in theforest sector; the consultations themselves created newexpectations for a more proactive stance by the Bank.

That forest lending in the Africa Region (AFR) alsodeclined (by 47 percent) from its pre-1991 level shouldbe of particular concern, because, next to Asia, Africahas the greatest concentration of poor people, and theforest-dependence of its poor is by far the greatest. Atthe same time, net lending for forests (figure 2.2)increased greatly for the ECA Region. The 1991 forestpaper did not focus on forest issues in the ECA Region,although that Region has by far the world’s largestforest area. Nevertheless, uninhibited by the contro-versy surrounding formulation and implementation ofthe 1991 Forest Strategy, forest lending increased in

ECA by 614 percent as the former Eastern bloccountries started to become Bank members after the fallof the Berlin Wall in 1989 (figure 2.2). The Bank’s EAPRegion had the largest share of lending after 1991.2

Consistency of Project Design withthe 1991 Forest StrategyProject design at entry for both forest projects andprojects with forest components has largely reflectedthe intent of the 1991 Forest Strategy, although someaspects of the strategy have received more attentionthan others (see figure 2.3). At least 70 percent of allprojects were designed to address one or more of thefollowing objectives: poverty alleviation, institutionbuilding, participation, and adoption of new technolo-gies. Roughly half of the projects included significantactivities in policy reform, forest protection, and forestexpansion and intensification. Increasing communityparticipation in forest resource management was espe-cially emphasized in the South Asia Region (SAR) andLCR. International cooperation was addressed in only32 percent of the projects. Cofinancing activitiesincluded donor consultation groups, donor coordina-tion activities, and the incorporation of lessons learnedby donors (see the SAR, AFR, and EAP portfolioreviews). The country case studies provide insights intointeractions between the Bank and other donors in theforest sector at the country level (see the next chapter).Links within the natural resources management sectorwere more frequent than those outside the sector in

TABLE 2.1. WORLD BANK FOREST LENDING BEFOREAND AFTER 1991, BY REGION

1984–91 1992–99(46 countries) (57 countries)

Commit- Commit- No. of ments No. of ments

Region projects ($million) projects ($million)

AFR 33 516 23 272EAP 11 729 35 1,196ECA 3 45 12 319LCR 8 254 29 633MNA 2 69 11 333SAR 16 361 18 759All Regions 73 1,973 128 3,512

Note: Includes forest projects and forest-components ofprojects.Source: World Bank databases.

FIGURE 2.2. NET CHANGE IN BANK FORESTCOMMITMENTS

Note: Includes forest projects and forest components of projects.Source: World Bank databases.

Percent

AFR EAP ECA LCR MNA SAR AllRegions

–47

64

614

149

383

110 78

–200

0

200

400

600

800

10


size “getting the policy and institutional frameworkright” for conservation in project areas. Forest compo-nents address such issues as zoning; the clarification oftenure rights (especially of indigenous populations); theidentification, demarcation, and improvement of pro-tected areas; and the enhancement of environmentalimpact assessment systems in borrowing countries.Forest dwellers often participate in activities related toforest protection and conservation. Conservation issuesare often linked to tenure rights of forest dwellers andindigenous peoples. Neither forest projects nor projectswith forest components deal adequately with externalthreats to forest cover or quality or with such main-stream forest sector management issues as concessionand royalty policies, public forest enterprises, and theactivities of forest ministries and departments. Notenough attention has been paid to improving thecapacity of the forest ministries and departments tomanage public forests, to setting transparent ruleswithin which forest organizations and individuals(including public servants) can operate, and to buildinginformation systems to assess changes in outcomes.

Also, the synergy between forest production andconservation is critical to the design and implementa-tion of an effective forest strategy. Increased emphasison tree planting for production and productivitygrowth (including investment in research and extensionon public forestlands, watersheds, community lands,and private farms) in the Bank’s agricultural and forestsector investments will increase supplies to meet theburgeoning local, urban, and international demandand will meet many of the environmental objectivesforests serve. With the notable exception of China,however, tree planting has received little support inBank lending (see the AFR portfolio review) (Kumarand others 2000c). The Bank has also not done verymuch to support the enforcement of current forestrylaws or to strengthen forest laws and regulations whenneeded, so little progress has been made in reducingillegal logging or setting up the processes to do so.

Performance of Forest andForest-Component ProjectsThe shift in the project mix may have increased therisks of the forest portfolio. The risk ratings of theQuality Assurance Group (QAG) indicate that activeforest projects perform better than projects in theagriculture or environment sector, or the Bank as awhole, in terms of risk (see Annex D for details of risk

project investments. President Wolfensohn’s recent ini-tiatives have given additional impetus to efforts toimprove the Bank’s role in international cooperation(see “Global trends and changes affecting forestpolicy,” below).

The character of forest projects and that of projectswith forest components differ considerably. Forestprojects, usually prepared by the Bank’s agriculturespecialists, tend to support production-related activitiessuch as agroforestry research and extension, improvedland cadastres, tree planting on degraded and privatelands, watershed and forest management, and plan-ning. Forest components, typically prepared by theBank’s environment sector specialists, tend to empha-

FIGURE 2.3. INCLUSION OF KEY ELEMENTS OF BANKSTRATEGY IN FOREST PROJECTS AND PROJECTS WITHFOREST COMPONENTS

Note: Intersectoral links refer to projects with links outside thenatural resource management sector.Source: Annex C.

Participation

Forest expansion/intensification

Forest protection

Treatment ofcountry policies

Poverty alleviation

Introduction ofnew technologies

Institutionaldevelopment

Projects in humidtropical forest

Intersectoral links

Internationalcooperation

0 20 40 60 80 100

Key element of1991 Forest Strategy

Percent of projects

11

ratings). Forest-component projects, however, are mostat risk. QAG evaluated 30 forest and 80 forest-component projects and found that only 3 percent of theforest projects were “at risk,” but 25 percent of theforest-component projects were (figure 2.4).

OED’s ratings for completed forest and forest-component projects (figure 2.5) are generally muchlower than the QAG ratings of active projects. OEDevaluated 37 forest and 31 forest-component projectsfor outcome, sustainability, and institutional develop-ment impact (see Annex E). OED’s ratings of outcomeand sustainability for completed forest and forest-component projects are also generally lower than thosefor projects in the agriculture or environment sector, orfor all Bank projects. OED’s ratings for institutionaldevelopment impact are low in all sectors, but particu-larly low for environment projects and projects withforest components.

Generally, Project Status Reports inadequatelyreport on progress toward achieving project develop-ment objectives. Explanations of forest-related projectperformance ratings often lack substance. Four kinds of

problems are apparent: a weak format, a lack of issue-orientation, inconsistencies, and inadequate follow-up.The format weakness is material, especially because ithas not required tracking of compliance with safeguardpolicies.3 In some cases, information is vague about thestatus of actions for achieving development objectives,or even for making progress on implementation. Inother cases, ratings of project risk and performance areinconsistent with the explanations given of the projectdevelopment objective and the project status ratings.There were no managers’ comments for 76 percent ofthe projects. This helps to explain the relatively highdisconnect between supervision and completion ratingsand between QAG and OED ratings.

There has been some progress in improving themonitoring and evaluation (M&E) of forest-relatedprojects since the introduction of Project Appraisal Docu-ments and logical frameworks. However, substantialchallenges remain in crafting well-defined project objec-tives and verifiable performance indicators that can (a)serve as a basis for agreement and understanding amongkey stakeholders on what the project is expected to


OED-QAG: The marked disparity in ratings between OED and QAG can be explained in two ways. First, ongoing forestprojects may perform better than past forest projects because they have incorporated recommendations and lessons ofexperience. Second, without effective monitoring of development results, ratings for OED criteria (such as effectiveness,efficiency, and institutional development impact) become clear only at project completion.

FIGURE 2.4. PERCENTAGE OF ACTIVE PROJECTSNOT AT RISK

Source: QAG, June 1999.

Percent

97

7583

77 77

0

20

40

60

80

100

120

Fore

st pr

ojec

ts

Fore

st-co

mpo

nent

proj

ects

Agricu

lture

pro

jects

Enviro

nmen

t pro

jects

All Ban

k pr

ojec

ts

FIGURE 2.5. COMPLETED PROJECTS: OVERALLSATISFACTORY OED PERFORMANCE RATINGS

Source: OED databases.

Percent

59

0

20

40

60

80

Fore

st

proj

ects

Fore

st-co

mpo

nent

proj

ects

Agricu

lture

proj

ects

Enviro

nmen

t

proj

ects

All Ban

k pr

ojec

ts

Outcome, satisfactory

Sustainability, likely

Institutional developmentimpact, substantial

27 27

55

32

19

64

40

33

67

50

17

68

46

31

12


achieve; (b) help manage outcomes and impacts withinthe framework of the intended projects; (c) account forprogress toward achievement of the development objec-tive; and (d) address the difference between projectachievements at the end of the project and full impact,which may not be clear until some years later. M&Esystems do not adequately flag projects with seriousimplementation problems, partly because systemic prob-lems inhibit the establishment and functioning of theM&E system. OED’s observations about the status ofM&E in this sector review are consistent with previousOED reports on M&E. When M&E is inadequate, well-staffed supervision missions are vital.

Improving project quality at entry requires layingmore groundwork during project preparation and design.This can be done by clearly linking goals and perfor-mance indicators to impacts and outcomes and, in theprocess, firming up responsibility for the collection,collation, reporting, and use of data. M&E and providingaccess to information at the sector level or higher shouldbe an integral part of project design and of the financialplan. Systematic efforts are also needed to improve thequality of information on the extent of the forest cover andthe amount of employment the project has generated.

Policy and Institutional ReformThe 1991 forest paper identified policy reform andinstitutional strengthening as key principles for futureBank involvement in client countries’ forest sectors. Inaddition to policy dialogue based on ESW, the Bank hasused two approaches: project-based reform and adjust-ment lending–based reform. The effectiveness ofproject-based policy reform depends on correctly iden-tifying issues and persuasively demonstrating theirrelevance. The forest sector is complex andmultidisciplinary, so the choice of policy issues to

address in projects is critical. Moreover, if the assump-tions underlying reform issues do not fit the circum-stances in a given country, the policy advice may notlead to the expected outcomes and its implementationmay be uneven. If a country’s domestic interestsconflict with Bank advice, even after decades oflending for policy and organizational reform, achieve-ments may be negated, as they were in Kenya.

Attention to policy and organizational reform issueshas increased in recent Bank projects in the ECA and EAPRegions. (Rozelle and others 2000; Kumar and others2000a.) Projects in SAR and AFR have given moreattention to organizational development than to policyreform. The experience of large countries such as Indiaand China suggests that the Bank often takes a project-by-project approach toward policy and institutional reform,with mixed results, depending on the countries’ owncommitment to reform. The Bank needs to undertakeproject lending in the context of a long-term, overarchingstrategy toward policy and institutional reform.

Policy and institutional reform through project lend-ing tend to command a lower profile and attract lesscontroversy than adjustment lending. The cycle forproject lending is generally longer than for adjustmentlending, so there is more time for project preparation anddesign, consensus building among stakeholders, andimplementation. Project lending can also deal not onlywith “stroke-of-the-pen” policy reform (such as theremoval of subsidies) but also with reform that requirestime for both organizational and human capacity build-ing. Structural adjustment loans, by contrast, are briefand quick-disbursing and, because they are undertaken ina period of crisis, do not allow the time needed for long-term institution and capacity building, or even forconsensus building. They do help bring previously ne-glected policy and institutional reform issues to the

M&E: In some cases, such as China, it is possible to determine precisely the number of trees and areas planted, the extentof tree growth in planted areas, and the environmental impacts of forest projects on soils, water, and carbon. Even inChina, however, crucial information on projects’ socioeconomic impacts on such things as markets, prices, and incomesis limited, and information about implementation of environmental impact assessments in non-forest projects has tendedto be spotty (see Rozelle and others 2000, table A.17). It is also difficult to quantify from Bank documents the extent towhich projects have actually contributed to new tree planting. Crucial information on the nature of land tenure regimes(whether public, private, community, or collective) is also often limited or lacking altogether in appraisal and supervisiondocuments. Therefore, China’s government has questioned the Bank’s re-estimated rates of returns on completedprojects, a critical element in discussing the interest rates at which poor households can borrow for forest sectorinvestments.

Institutions: According to the new institutional economics, institutions are the rules of the game—whether political,social, or economic—that shape human interaction. Organizations differ from institutions in the same way that rulesdiffer from players. Rules (policies) define the way the game is played (North 1990). Sometimes what Bank projects meanby institutional reform or strengthening is actually organizational reform rather than (policy) institutional reform.

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attention of people at a higher level and can mobilizeinternal constituencies that already support specific re-forms. But conditionality-based lending can also arousenationalist fervor and elicit criticism of unnecessary Bankinterference in domestic affairs, reinforcing resistance,especially from those in government who oppose reformbut are responsible for its implementation.

The Bank’s leverage to get countries to undertakeforest policy reform may appear greater in small, poorcountries than in large, richer countries because thesmall, poor country depends more on Bank resourcesand is less able to overtly resist external pressures. Inpractice, however, the effectiveness and sustainabilityof reform depends on political will, a consensus forreform, and implementation capacity, as experience inCameroon shows. Adjustment lending used to deployforest conditionality has shown mixed results to date(as will be discussed in the next chapter).4

Environmental Adjustment and SustainableDevelopmentThe World Bank’s adjustment lending policy (Opera-tional Directive 8.60, December 1992) explicitly dis-cusses the links between adjustment policies and theenvironment, including forests. The Bank’s support foradjustment lending, which began to take center stage inthe early 1980s, increased 65 percent after 1991,amounting to commitments of $57.1 billion for 378operations, or 30 percent of total lending (Annex C).5

Despite the shift in lending composition and use of themultisectoral approach recommended in the 1991forest paper, only four adjustment loans have directlyaddressed forest issues.6

Do typical Bank macroeconomic and sector adjust-ment loans (with no specific focus on forest sectorreforms) address the loans’ impacts on forests and the

short- and medium-term tradeoffs between economicstabilization and forest sector objectives? And can theBank use adjustment lending—when its leverage withborrowers increases—to achieve the kinds of reform inthe forest sector it is unable to achieve in normal times,as some have argued it should?7

In answer to the first question, the reviewconcludes that the Bank has made little progress inaddressing the impacts of adjustment lending on theforest sector. The issue is complex because the short-term impacts may be adverse, whereas the long-termimpacts—through macroeconomic stabilization,which is essential for sustainable growth—may bepositive. Tracking the impact on the ground is evenrarer. The Bank does not require environmentalimpact assessments for structural adjustment loans,but recommends it as good practice. Several loansrefer to the establishment of national environmentalaction plans, but there is no indication of follow-through or that the plans’ impact is measured. Thelack of an explicit treatment of forests implies thatthere are no short-term tradeoffs between adjustmentoutcomes and forests. Yet policies associated witheconomic crisis and adjustment—such as devalua-tion, export incentives, and the removal of pricecontrols—tend to boost production of tradablegoods, including agricultural and forest products. Indoing so, if there are no mitigatory measures, theyencourage forest conversion. Moreover, the con-strained fiscal situations associated with IMF/Bankstabilization adjustment programs lead to reducedpublic spending on environmental protection andreduce the forest and environment ministries’ al-ready weak capacity to enforce laws and regula-tions. The situation becomes even more complexwhen country-specific realities require repeated

Reform: Government commitment is a key determinant of development effectiveness. In a paper on the design ofconditionality in adjustment lending, Collier and others (1997, p. 1406) assert that the attempt to buy policy changesactually exacerbates lack of government ownership of policies. If donors price reforms, they buy them and governmentssell them, who then owns the reforms? If not the government, the reforms may lack credibility. And if government is toreform, it must design the reform policy, first determining objectives, then choosing appropriate policy instruments.Present donor arrangements undermine this process by specifying the policies governments must adopt to receive aid.

Econometrically analyzing why adjustment programs succeed or fail, using a database of 220 reform programs,Dollar and Svensson (1998) conclude that it is crucial for development agencies to select promising candidates foradjustment support. When a poor candidate is selected, devoting more administrative resources or imposing moreconditions will not increase the likelihood of successful reform. They show that although the World Bank devotes moreadministrative resources to failed programs than to successful ones, those resources have no impact. Because they foundno evidence that any of the variables under the Bank’s control affect the probability of an adjustment loan’s success, theysuggest that the role of adjustment lending is to identify reformers, not to create them. Adding more conditions to loansor devoting more resources to manage them does not increase the probability of reform.

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structural adjustment packages. It is imperative insuch situations to adequately address the environ-mental and social consequences of adjustment.

In answer to the second question, the reviewexamined four adjustment loans with forest-specificconditions, in Cambodia, Cameroon, Indonesia, andPapua New Guinea. These operations sought toachieve such reforms as replacing logging concessionswith forest management concessions, introducing forestmanagement plans, making the concession awardprocess transparent and accountable by introducingtender or auction systems, and lengthening the durationof concessions as a way of increasing incentives forimproved forest management. Other reforms includedintroducing performance bonds and independentinspections to monitor regulatory compliance, replac-ing log export bans or export taxes with royaltieslinked to world market prices, and making royaltiesarea-based rather than volume-based, for administra-tive convenience.

The outcome of these programs is likely to beaffected by the coherence of proposed reforms, theextent to which they address prevailing country reali-ties, the quality of the dialogue linked to governmentcommitment, the Bank’s willingness and capacity touse a truly participatory approach, and institutionalcapacity within the countries to implement reform. Ahistory of poor dialogue between the Bank and its clientcountries about the forest sector explains the Bank’seagerness to use the opening provided by an economiccrisis to push reform in the forest sector. But the risksinvolved in doing so are significant, because thesustainability of promises made under pressure tosecure quick-disbursing assistance is far from certain.An approach to conditionality that cannot elicit realcommitment (let alone build necessary capacity) lackscredibility. If the Bank is to remain in the forest sectorover the long haul, it needs to do three things. First, theBank and the borrowing countries together need todevelop an avowed and broadly known joint commit-ment to Bank involvement. Second, the Bank needs to

develop lending standards based on strong, currentpolicy analysis conducted with the active involvementof nationals. Third, the Bank should encourage thedevelopment of institutional capacity and engage in adialogue with countries to stimulate the countries’ willto implement reform. The current Bank approach toforest sector adjustment lacks both a well-established,broadly understood long-term strategy and a commit-ment of the high-quality staff resources needed to doessential groundwork or to establish rapport with theconstituencies (inside and outside the government) thatmust support reform to ensure its broad domesticownership, transparency, and accountability. The Bankneeds to work toward these goals.

Poverty and ParticipationIn implementing forest strategy, the Bank needs torecognize explicitly the sector’s role in poverty allevia-tion. Forests play an important role in meeting thedirect consumption needs of forest-dependent people.Marginalized populations, ethnic minorities, andwomen make a living from forest activities through thecollection and sale of timber and non-timber forestproducts; through paid work in planting, harvesting,processing, and marketing forest products; and throughproviding services related to ecotourism and recre-ational activities associated with forests andbiodiversity. Forest dependence is particularly high inforest-poor countries, where low-end poverty is oftenconcentrated. And the poor can be important guardiansof biodiversity, which makes the decline in lending toAfrica, where millions depend on forests for theirlivelihood, a matter of concern. How much a commu-nity depends on forest products depends on the condi-tion of the forest, its proximity to the community,access rights, local and external demand, marketopportunities, and alternative income-earning opportu-nities. The poorest households, with little or no agricul-tural land or livestock, tend to be the mostforest-dependent, but they typically have little say indecisionmaking. In addition to improving the prospects

Structural Adjustment Loans: In a World Bank Operational Memorandum dated June 5, 2000, the vice-president ofBank operations issued a clarification of Bank policy on adjustment lending, stating that Sectoral Adjustment Loans(SECALs) “are subject to the requirements of this policy [Environmental Assessment OP 4.01], that is, they are screenedand classified as Category A, B, or C operations.” The memorandum goes on to note that “Adjustment loans otherthan SECALs are not subject to the requirements of OP 4.01,” but “it is good practice for Bank staff . . . to reviewenvironmental policies and practices in the country, take account of any relevant findings and recommendations of suchreviews in the design of structural adjustment programs, and identify the linkages between the various reformsproposed and the environment.”

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for earning a living, participatory development of theforest sector can improve collective decisionmaking,empowering local communities and increasing theirsocial and economic capital. Investment operationslike those the Bank has financed using participatoryapproaches can be helpful not only in building socialcapital but also in identifying areas of policy andinstitutional reform that better meet the needs of thelocal community, increase their voice in decisionmak-ing, and make poverty alleviation programs moreefficient. The consultations for this review, however,revealed that some NGOs oppose any Bank involve-ment in project investments on the grounds that itincreases country indebtedness or involves forest minis-tries or forest departments that are not committed toreforms. Of course, poverty alleviation requires morethan participatory approaches. Access to credit, to landfor tree planting, and to the regenerated production oftimber and non-timber products can greatly increasepoor people’s incomes. But projects strong on participa-tory approaches have demonstrated a need forimprovement in their treatment of such issues asmarkets and prices (which can have impacts on thelives of the poor). The OED review was unable toascertain how forest lending would affect poverty.Baseline data on poverty in forest areas and analyses ofthe extent to which Bank projects improve employmentand incomes—including the relative abilities of forestsand alternative land uses to reduce poverty—are rareboth in ESW in the Poverty Reduction and EconomicManagement (PREM) Network and in Bank projectlending. But given the high incidence of poverty insome of the Bank’s Regions (particularly SAR, EAP, andAFR) and poor people’s dependence on forest resources,there is clearly considerable untapped potential forforest sector lending to address the Bank’s mission ofpoverty alleviation.

Participatory, community-based approaches em-phasizing empowerment have been evolving since the1970s. The Bank’s 1991 Forest Strategy emphasizedgreater involvement of local people in the long-termmanagement of natural forests, and forest projects haveincreasingly adopted participatory approaches in theirdesign. In a majority of projects, both the level andbreadth of participation has increased since 1991(especially after 1994), although these gains varyacross Regions, often reflecting the extent to whichborrowing countries pursue participatory approachesin their own programs (see Annex C). SAR, EAP, and

LCR employ more participatory approaches than otherRegions. The Bank has played an important catalyticrole in operationalizing and scaling up domesticparticipatory approaches in several countries—espe-cially China, India, and Mexico—that were commit-ted, but lacked financial resources for the training andcapacity building needed to put the approaches intopractice. Hands-on approaches have been importantlearning experiences, helping the Bank staff identifypolicy and institutional reforms crucial for improvingincomes and giving more voice to the poorest house-holds. The Bank needs to help governments followthrough on essential reforms more than it has.

Plans for making Bank projects more participatoryhave become more ambitious during appraisal anddesign, but implementation has lagged, because of sixmain weaknesses: the inadequate reflection of social,technical, institutional, and political realities in projectdesign; the weak capacity of grassroots institutions; theBank’s failure to consult with key stakeholders fromcivil society during project preparation and implemen-tation; too little time and too few resources for projectplanners to develop genuine participatory approaches;insufficient expertise in participatory techniquesamong Bank staff and consultants; and the selection ofM&E indicators that failed to link the project’s partici-patory goals to investments to assess impacts on theground. The Bank has also been weak in exchangingexperiences within and across Regions, except throughthe ad hoc efforts of individual task managers. TheBank should draw on the resources of the World BankInstitute by linking the development training of bor-

Women returning with fuelwood. They walk for an hour to anarea where they can find wood. They have to make 2–3 jour-neys a week. Yatenga province, Kalsaka village, Burkina Faso.Photo courtesy of Still Pictures.

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rowers with Bank operations. Because country manag-ers control budgets, the Bank’s network has lacked themandate, instruments, or resources to design andimplement a proactive strategy for the forest sector.

GenderSome of the poorest forest-dependent people are women,but gender considerations have received little attention inthe implementation of the Bank’s 1991 Forest Strategy.8

The key to involving women in forest projects is toidentify their potential role up front. Equally important,project design should minimize the losses women arelikely to have to bear as a result of planned interven-tions—such as having to walk longer distances to gatherfuelwood so that nearby forests can be protected. Involv-ing women in microplanning is an ideal way to deal withthese issues. Such approaches call for drawing on theresources of organizations that specialize in women’sparticipation and are capable of instilling confidence inrural women, understanding and addressing their con-cerns, and ensuring that they play an active role indecisionmaking. But GP 4.36 notwithstanding, the Bank-wide share of projects that state that gender concerns aretheir primary objective is less than 0.5 percent. Projectdesign and implementation has a long way to go ingenuinely involving women. OED’s review of implemen-tation in India shows that although women are encour-aged to participate in committees, there is little monitor-ing of their effective presence. Meetings are scheduled tosuit men, at times when women tend to be cooking. Evenwhen women attend meetings, they rarely participate.The shortage of women qualified to implement projects isalso a problem. Given the complex cultural challenges ofgetting women involved in poverty-oriented forestprojects, the Bank should make extra efforts to engagenationals of borrowing countries experienced in handlingsuch challenges.

SafeguardsOne important commitment of the Bank’s 1991 ForestStrategy was to reduce the negative impact of Bankactivities on the world’s forests and the people whodepend on them. This was to be achieved by using amultisectoral approach that included environmentalimpact assessments and efficiently applied safeguardsto minimize projects’ environmental and social dam-age.9 Safeguard policies include the 1993 OperationalPolicy on forests. These policies are now better incor-porated in project design, but are not systematically

monitored for quality at entry and supervision. Accord-ing to QAG, the Bank’s performance in monitoringcompliance does not meet the 100 percent qualitystandard expected for safeguard policies (World Bank1999, p. 15). Current data systems do not help staffidentify and anticipate potential indirect and long-termforest problems that arise from projects in sectors suchas transportation and infrastructure. These problemscan lead to substantial changes in land use withnegative impacts on forests—although there are severalpositive examples of how environmental impact assess-ment is monitored—for example, in Indonesia’s infra-structure sector (see Gautam and others 2000). Bankdocuments on large public infrastructure projects gener-ally contain little information on whether forest andbiodiversity issues are relevant, especially when theseconcerns are not related directly to project outcomesand sustainability. Even where these issues areaddressed, their treatment is often superficial—forexample, reporting trees cut to build a road rather thanassessing the likely indirect effects on forests caused byincreased road access. But the Bank’s public account-ability for safeguards is improving.10

There has been considerable progress since OP4.36 was issued in 1993. Safeguards for forest andforest-component projects at entry do address topicsrelated to the protection of forests and forest dwellers.Bank projects have responded to the interests ofstakeholders by incorporating planning and implemen-tation tools—including participatory planning, villageplans, ecological zoning, demarcation and land titling,and indigenous reserves—in project design. Moreover,Bank projects in most Regions have been cautiousabout carrying out production activities in tropicalmoist forests, focusing on improved forest managementplans and on the testing and introduction of suitabletechnologies. Projects with significant tree plantingcomponents have generally not been located in or neartropical moist forests.

Implementation of safeguards in forest and forest-component projects is much more difficult. Most difficul-ties arise in projects that address issues of property rightsand the distribution of forest resources (such as ecologicalzoning, or the creation and demarcation of indigenousreserves or protected areas). As a result of safeguards,vulnerable stakeholders have been incorporated in projectdesign, but other key stakeholders, including those mostlikely to cause harm, are often not consulted, usually toavoid criticism that the Bank is being too “cozy” with

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them. The ways safeguards have been applied can thuscontribute to conflicts among interests competing forforest resources—including conflicts between the indig-enous poor and the non-indigenous poor, between thepowerful and the poor, and others—without helping toestablish transparent rules to hold all accountable and tomonitor performance. Also, the Bank’s universal safe-guards often conflict with national legislation and regula-tions. The Bank does not have the capacities it needs in theright places to deal with these complexities, so taskmanagers often try to avoid projects that are likely to besubject to NGO scrutiny and charges by the borrowinggovernment of interference in sovereign issues (see AnnexG). Early attention to safeguard policies and to thedevelopment of country-wide capacity (to ensure domesticownership of a project) is critical to project success. Butthe “do no harm” principle behind the safeguards hasunintentionally increased transaction costs and thereputational risk of investing in projects that could haveadverse impacts on forests and the people living in oraround them.

The increased number of environmental impactassessments (EIAs) since 1991 reflects heightened atten-tion in Bank projects to the indirect environmentalimpact of projects (Annex C). With some notableexceptions, however, these assessments have generallynot focused on issues critical to a particular project, havetypically come too late in the project design process, andhave tended to be superficial about forest-related biodi-versity issues and short of analysis of indirect andregional impacts. Even where assessments have beensatisfactory, it is unclear from available documentationwhether recommendations have been incorporated intoproject design and implementation. The Bank hasrecently recognized these weaknesses, however, and hasimproved the design of the supervision form so thatimplementation can be tracked and monitored.

Links with the Private SectorBank investments in the forest sector have done a poor jobof fostering private sector participation. Public-privatepartnerships in the forest sector of developing countries are

generally limited. Wood industries in these countries areunderfinanced and inefficient, and the lobbying efforts ofpowerful interest groups have influenced public policiesabout royalties, concessions, and trade that benefit someparts of the private sector, at the cost of economicefficiency, social equity, and environmental sustainability.Public and private sector research and extension in forestsector activities have often lagged. The combination ofweak support services and heavier regulation of the forestsector has created incentives for land conversion from forestto alternative uses. However, new opportunities are emerg-ing for increased private investment in the forest sector incommercial plantations, seedling production, reduced-impact logging, ecotourism, certification, and supervisedtimber harvesting in forest reserves. Governments and theprivate sector in borrowing countries appear to be eager forgreater Bank Group participation in the modernization oftheir forest industries and in increased support for silvicul-tural research and extension.11

The Bank is currently involved with the private sectorin the regulation of forest concessions (Cambodia 1999),the promotion of certification and forest management(Honduras 1999), and the privatization of governmentlumbering operations (Croatia 1997). There is amplescope for improving private sector participation bysharing information and exchanging lessons across

Tree nursery, Annapurna Conservation Area Project (ACAP).Ghandrung, Nepal. Photo courtesy of Still Pictures.

Environmental assessment: The World Bank assigns an environmental assessment (EA) category to all its lendingoperations based on the nature of the project. These categories include full EA (A), partial EA (B), no EA required (C),free-standing environmental project (D), and to be decided (T). After 1991 the number of projects that required full EAincreased 871 percent and the projects that required partial EAs, 306 percent. Interestingly, the number of projects withEA undecided declined 73 percent. Free-standing environmental projects also declined, about 20 percent.

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projects, countries, and Regions. Whether private sectoractivity increases will depend mainly on an improvedinvestment climate in the forest sector, the appropriatevaluation of forest resources, the establishment of clearand easy-to-implement rules and regulations, and effec-tive government monitoring and supervision. The IFCreview found that the private sector has no incentive toinvest in forest development as long as a cheap supply oftimber is available from publicly owned forests throughlegal or illegal logging. The Bank Group could work withgovernments and the private and voluntary sector tosupport community-based forest operations and to de-velop progressive, practical policies and information-dissemination mechanisms that ensure the efficient andsustainable use of natural resources.12

Biodiversity and Protected AreasThe 1991 forest paper’s call for attention to biodiversity,not just to timber, has been answered partly through anincrease in Bank financing for biodiversity. Both theBank and the Global Environment Facility projects arehelping to expand protected areas for biodiversityconservation in several countries. Joint Bank-GEFprojects have also tackled important regional initiatives,such as the Mesoamerican Biological Corridor. How-ever, the overall scale of interventions has been insuffi-cient to significantly affect global biodiversity.

There may also have been too much focus oncommunity conservation initiatives and not enough onsuch major threats as pressures on buffer zones, poorlogging practices by concessionaires, road construction,and weak in-country ownership.13 Governments have notadequately enforced the existing laws, rules, and regula-tions designed to protect against biodiversity loss, andprojects have not sufficiently helped improve enforce-

ment. The policy against Bank financing for commerciallogging in tropical moist forests may have hindered evenGEF support for promising experiments in forest manage-ment by local communities and the private sector.Weaknesses in the monitoring of environmental and forestsafeguard applications in infrastructure projects, withoften large but indirect impacts on biodiversity, also needto be addressed. The development community should useits influence to persuade governments to live up to theirinternational commitments on the environment, but it isunclear if biodiversity of global importance can be savedwithout (a) establishing clear global priorities for itsprotection; (b) adequately analyzing the causes of realthreats to its loss; and (c) providing assured, long-termfinancial support for its protection, through arrangementssuch as trust funds; and d) payments for environmentalservices by the gainers to the losers.

Bank Group ActivitiesInternational Finance Corporation (IFC) opera-

tions are typically post-harvest processing activitiesthat use timber or its by-products and are expected tohave a direct impact on forests. The IFC approvedinvestments of $578 million in 65 forest operations in29 countries during the 1992–98 period, a 17 percentdecline in commitments from the period 1985–91. After1991, IFC forest sector lending increased in all Regionsbut LCR and EAP, which contain much of the world’stropical moist forests.

In evaluating the implementation of the 1991Forest Strategy in IFC’s projects (Annex J), the Opera-tions Evaluation Group (OEG) found that the intentionof engaging the private sector in sustainable forestmanagement was unrealistic because more than half ofthe IFC’s projects use government-owned forests, and

Biodiversity: From 1991 to 1999 the Bank undertook implementation of 162 GEF projects; 44 were forest-related, withtotal commitments of $370 million in GEF funding. All dealt with biodiversity. They involved Bank cofinancing of $181million. Contributions of donors and national governments brought total project costs to $1 billion. It is difficult todetermine how much of this was incremental aid to developing countries rather than the diversion of aid resources fromother activities. See World Bank 2000b.

Protected areas: Developing countries have substantially increased the amount of their protected areas but often havedifficulty reaching IUCN standards of full protection because the livelihoods of many poor and indigenous communitiesare based in these areas. Converting protected areas to a higher status (for example, from sanctuaries to completeprotection) creates intense conflicts. Many Bank and GEF efforts to expand protected areas have not been complementedby assistance to governments to help raise fiscal resources or undertake cost recovery to better finance the protectedareas. (There are exceptions, such as the Bank advice through ESW in Costa Rica and the Minas Gerais project in Brazil.)There is much less agreement in the international community about the merits of helping developing countries make theirprotection efforts more effective than about adding to newly protected areas to meet globally established targets. Sinceland values may increase, establishing protected areas may be more costly later, so some argue that as much land aspossible should be brought under protection now, regardless of effectiveness.

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private operators have few incentives to work withlocal people, special-interest groups, or forest dwellersin forest areas the concessionaires neither own norcontractually control. Moreover, because the stumpagefees paid are in some cases lower than the real cost ofmanaging the forests sustainably, the private conces-sionaires have a financial disincentive to encourage themore costly option of sustainable forest management.The IFC encourages its projects to obtain forest certifi-cation, but does not make it mandatory. (Forestcertification comprises both certification that a forest issustainably managed and eco-labeling that enablesconsumers to recognize products made of timber fromsustainably managed forests.) From the perspective ofthe IFC’s clients, certification of forest managemententails cost on a regular basis and is currently expen-sive, creating a dilemma for policymakers and forestproduct companies. At the same time, eco-labeling is arevenue-generating activity that permits premium pric-ing for differentiated products. Eco-labeling is viewedas a marketing tool for exports mostly in developedcountries, and hence currently often irrelevant to forest-based projects whose outputs are sold in domesticmarkets. Because eco-labeling relies on brand aware-ness, it is also irrelevant for projects whose outputs aretraded as commodities. The recent proliferation offorest certification systems has created an unhealthyrivalry for “membership recruitment.” (See Chapter 4for further discussion of these issues.)

According to OEG’s review, the 1991 forest paper ledto fundamental changes in the IFC’s project selection,processing, and monitoring. The strategy’s emphasis onthe ban on commercial logging in tropical moist forestshad a chilling effect on IFC activities. To avoid anyassociation with deforestation, the IFC made a consciousdecision to screen out such operations completely, and hassubsequently turned down several proposals as a result.The IFC has not been able to establish if the projects itturned down were financed by others but, in its main-stream operations, the IFC has not approved a singleforest-based investment in tropical moist forests since the1991 strategy became operational, although two smallinvestments—approved under streamlined review proce-

dures through the IFC’s small- and medium-size enterprise(SME) facilities—financed a company engaged in trans-porting logs harvested under concessions in tropical moistforests. (These two investments were consistent with theletter of the forest strategy but digressed from its “spiritand intent,” and the environmental review procedures inplace at the time failed to detect the inconsistency.) Twoother small investments were in companies whosenonproject operations, or those of their sponsors, involvedlogging in tropical moist forests. IFC has helped establishproject-owned, large plantations, particularly in LatinAmerica and Asia, and ensured that those companies’forest operations rely on government forests and arecarried out in a sustainable manner, in accordance withgood industry practice. The IFC has also supportedseveral projects that rely on wood wastes, wastepaper,and other recycled materials, thus contributing to theconservation of forest resources. The 1991 strategyprovided no guidance about projects using temperate andboreal forests, which comprised all of the IFC’s forest-based operations approved since 1991.

The Multilateral Investment Guarantee Agency(MIGA) was established in 1988 to provide politicalrisk insurance (guarantees) for new foreign directinvestment. It does not participate in project financingor lending. MIGA’s Convention does not envisage ithaving a role in policy interventions in host countries.Until 1999, MIGA had no direct involvement in theforest sectors of its clients. By December 1999 itsportfolio included only two guarantees in the forestsector, one for an existing pulp and paper mill in theSvetogorsk region of Russia, and another for therehabilitation of an existing cocoa plantation in Côted’Ivoire. MIGA also has contracts of guarantee for fourprojects located in forested areas: three mining projects(in Colombia, Guyana, and Papua New Guinea) andone ecotourism project (a rainforest tram in CostaRica). All four projects required full environmentalimpact assessments before approval. MIGA’s proposedguarantees are evaluated for compliance with its ownenvironmental guidelines and the forestry and naturalhabitats safeguards of the Bank Group. On particularlysensitive projects MIGA uses various means of compli-


GEF Logging Policy: GEF’s Interim Guiding Principles for Projects Associated with Logging go far beyond the 1991Forest Strategy. They indicate that GEF will not support logging in any primary forests, not just tropical moist forests,and that GEF financing will not be used to meet baselines for pursuing sustainable forest management, the cost of forestcertification, of improving timber harvesting methods to meet Forest Stewardship Council/International Tropical TimberAgreement criteria, or to finance reduced-impact logging, among other things.

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ance monitoring, including independent environmentalaudits and its own monitoring activities. Two of thethree mining projects located in forested areas weresubject to MIGA’s own environmental monitoringduring the past fiscal year.

GEF ActivitiesThe Bank is one of the implementing agencies for theGlobal Environment Facility (GEF). This gives theBank a unique opportunity to “mainstream” biodiver-sity conservation in borrowing countries’ environmen-tal strategies. Since its inception in 1991, the GEF hasfinanced 44 forest projects through the Bank. GEFgrants for forest projects amount to $370 million, orslightly more than 10 percent of the Bank’s commit-ments to the forest sector, and reflect about 26 percentof the GEF portfolio. Eleven of the GEF forest projectsare jointly financed, involving Bank commitments of$181 million. (For a detailed discussion of GEFactivities see World Bank 2000b.)

A review of GEF activities concludes that the Bank’spartnership with GEF has allowed it to pursue aspects of

the 1991 Forest Strategy that might not otherwise havebeen possible, since few countries are able to borrowIBRD or even IDA funds for biodiversity conservation(see the next chapter). But it would be difficult to showthat these relatively modest interventions in the forestsector have so far significantly helped to mainstreambiodiversity issues into Bank country or sector dialoguesor to address the biodiversity challenge. Mainstreaminglong-term global concerns about biodiversity into theBank’s forest sector lending might be ambitious, consid-ering the many pressing economic and social concernsthe Bank’s borrowing countries face.

There is a greater scope for grants that focus ondemand-driven biodiversity conservation and improve-ments of the countries’ own strategies to address threatsto biodiversity of major importance. But this createsthe dilemma inherent in the GEF’s mandate of support-ing only activities of global importance.

The review recommends expanding the partnershipof the Bank, the GEF, and the private sector, with moreinnovative approaches and greater attention to eco-nomic, livelihood, and sustainability issues.

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33

S

The Country as Unitof Account in the 1991Forest Strategy

ix country studies (of Brazil, Cameroon, China, Costa Rica, India, and Indonesia)

reviewed implementation of the 1991 Forest Strategy in Bank operations to find out how

non-Bank stakeholders in those countries viewed the Bank’s strategy and its implementa-

tion.1 Although the case studies cover only 6 of the Bank’s 181 member countries, those 6

countries account for 44 percent of the world’s population, 27 percent of the world’s forest cover,

31 percent of the Bank’s lending, 59 percent of the Bank’s forest lending, and 45 percent of the

Bank’s forest-component lending. Three of these countries(Brazil, Cameroon, and Indonesia) are forest-rich, andthree (China, Costa Rica, and India) are forest-poor.

The reviews found that:• The forest-poor countries seek World Bank sup-

port for tree planting or regeneration to a greaterextent than do forest-rich countries, which fre-quently shun Bank involvement and show lesscommitment to policy and institutional reform.

• The objective of improving tree cover andmeeting the basic needs of the poor has also beenbetter implemented in the forest-poor countriesthan in the forest-rich countries.

• The interests of the local and global communitylargely coincide in forest-poor countries, buttheir willingness to borrow on IBRD or even IDAlending terms is in question.

• Forest cover is stabilizing or increasing in theforest-poor countries, but degradation of publiclyowned natural forests is still a serious issue.

• Both forest-rich and forest-poor countries haveincreased the areas declared as protected, butmanagement of these areas is a serious problem inall countries because of insufficient public funds.

• Independent of the World Bank strategy, scarci-ties have brought about conservation-orientedpolicies in the forest-poor countries and theforest-poor regions of forest-rich countries (forexample, southern Brazil).

• To forest-rich countries, their “abundant” natu-ral forests represent an important source ofincome generation, employment, governmentrevenues, raw material, and land for alternativeuses. Forests serve important development pur-poses, but exploitation of forest resources is oftento be carried out in a manner that is environmen-tally unsustainable and socially inequitable.

• In forest-rich countries, the interests of the localand global communities tend to stronglydiverge. Without reform to cover the opportunity

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cost of conservation, this divergence puts theBank in the difficult position of promoting adialogue on forestry strategy that can reconcilelocal and global interests.

• However essential policy and institutionalreform is in all countries, the impact of reformtends to be highly location-specific, regardless ofthe country’s forest endowments.

• The Bank’s leverage on policy reform has beenmore limited than the 1991 forest paper assumedit would be. That leverage has been often moreeffectively exercised with long-term involvementin solving practical problems through policyanalysis and investment operations, which helpsbuild confidence and effective partnerships.

• Increased environmental consciousness, even inthe forest-rich countries, provides more opportu-nities for Bank involvement in forest production,development, and conservation activities.

• The development of domestic financing mecha-nisms and constituencies for forest managementoffers promise for national conservation efforts,but that promise remains unrealized. Bankfinancing can support conservation consistentwith national priorities and objectives. Interna-tional mechanisms and global financial transfersinvolving grants—not the deployment of thelimited Bank loans and credits the 1991 ForestStrategy seemed to anticipate—are needed toconserve forests of global value.

• Investment operations based on grants or highlyconcessional terms can substantially improve thesynergy between environmental protection anddevelopment through forest production.

Forest-Rich, Forest-Poor, and Transitional CountriesBrazil’s tropical moist forest—covering 3.7 millionsquare kilometers and representing one-third of theworld’s remaining rainforest stock—is the world’slargest and richest (figure 3.1) (Lele and others 2000c).Brazil also has 5.5 million hectares of the developingworld’s most productive and economically competitiveforest plantations. Population densities in the rainforestare very low, but great disparities in income andwealth in Brazil encourage migration to the Amazon,creating pressure to use forestland for agriculturalexpansion and other activities. Forest loss in theAmazon averaged 13,000 square kilometers annuallyin the 1990s, substantially varying year by year.2 Thereasons for the year-to-year variation in these nationalestimates are ambiguous, and explanations range fromforest fires to macroeconomic difficulties and adjust-ment. Brazil’s Cerrados region and biodiversity-richAtlantic forest are much more endangered than theAmazon, but attention to the Amazon eclipses attentionto conservation in other areas. Subsidies for agricul-tural expansion (to which deforestation in the Amazonwas attributed in the 1980s) have declined, but otherfactors still contribute to deforestation, including agri-cultural expansion, strong urban and industrialdemand for wood products domestically, and invest-ments in extensive transportation networks. Globaliza-tion, trade liberalization, currency devaluation, andtechnological advances have made agriculture andagricultural exports more profitable. At the same time,devolution of power to the state and local levels, thegrowing economic and political influence of loggingand agricultural interests, and forest revenues’ increas-ing value to municipalities and state governments have

Forest-rich and forest-poor: Forest-rich and forest-poor countries were defined by the percentage of total land areareported under forest rather than the absolute size of their forests. Large areas in forest-rich countries can be forest-poor, and forest-poor countries can also have forest-rich regions. The breakdown into forest-rich and forest-poorcategories can shed light on the impact of differences in resource scarcities on forest valuation, incentives, andperceptions within and among countries about forest conservation. Abundance or scarcities together trigger policy andinstitutional behavioral responses that lead to changes from forest-rich to forest-poor or the reverse. Forest-poorsouthern Brazil has many more pro-environmental policies than the forest-rich north. Costa Rica, once forest-rich, isagain in transition, from forest-poor to forest-rich. It was categorized as forest-poor because its forest policies havemore in common with the policies of forest-poor countries than with those of the forest-rich. China is similarlyundergoing a major transition. Although both countries are increasing their forest cover, and planted forests serve manyenvironmental functions, some loss of biodiversity is not recoverable.

Public forestland: Recorded public forestland in Costa Rica and India may be stabilizing, but estimates of land underforest cover are disputed in all countries as there is de facto encroachment on, and degradation of, public land. Much ofthe increase in forest cover in China, Costa Rica, and India has come from trees planted on lands outside the publicforest areas. In China, however, significant planting has been done on degraded state, collective, and community lands,as well as on individual farms.

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T h e C o u n t r y a s U n i t o f A c c o u n t i n t h e 1 9 9 1 F o r e s t S t r a t e g y

intensified political and economic pressure to use thecountry’s forest resources for development. The focus ofthe Bank’s Operational Policy for forestry on ensuringa government commitment to sustainable forest man-agement before Bank investment and on the conserva-tion of tropical forests (see box 3.1 and Annex I) hasproved ill-suited for dealing with the complex pressuresto develop Brazil’s forests. Bank involvement in Brazil’sforest sector has thus been limited except through theRain Forest Trust/Pilot Program (PPG-7) that is pilotinga number of small operations, despite the lack of agovernment policy for the forest sector (box 3.1). Thedebate on the future of the Amazon has grown vigorousas the government has been formulating a forest policy,scheduled to coincide with the country’s five-hundredthanniversary in 2000.3 The participatory process beingused has engaged a variety of stakeholders. Publicopinion favoring protection of the Amazon is strongerthan it was before, but it is too early to predict theoutcome of the debate and its consequences for theAmazon. Brazilian authorities and the private sectorhave also expressed strong interest in modernizing theforest industry in the Amazon and in developingplantation forests in the south as a follow-up to asuccessful project in the state of Minas Gerais.4

Indonesia’s rainforest, also rich in biodiversity, issecond only to Brazil’s in size. About 78 percent of itsterritory is recorded as publicly owned forests,although the precise extent of the forest is a matter ofmuch debate (Gautam and others 2000). The highpopulation density of Java compared with that of theOuter Islands has led Indonesia to encourage bothmigration to, and exploitation of, its forest resources.Indonesia has emerged as one of the largest forestindustrial complexes in the developing world and thelargest exporter of tropical forest products. Indonesianpolicies, believed to have been influenced by the “KKNsystem” (corruption, cronyism, and nepotism), haverecently come under heavy criticism by the Bank andother analysts, both domestic and international.

The Bank supported the country’s now-notorioustransmigration projects until the mid-1980s to relievepopulation pressure on Java. The Bank also contributed tosmallholder tree crop production, which has been bothhailed as one of Indonesia’s success stories and criticizedby some because of the resulting forest conversion andindigenous communities’ loss of access to land. The twoIndonesian forestry projects financed by the Bank in the1980s were fully consistent with the intent of the 1991

FIGURE 3.1. RELATIVE FOREST AREA IN FOREST-RICH AND FOREST-POOR COUNTRIES

Note: Reported amounts, 1995–96.Source: Whiteman, Brown, and Bull 1999.

5,511 1,098

196

1,333650 12

2,946 714

269

7,9932,323 39

0

20

40

60

80

100

Brazil IndonesiaCameroon China India Costa Rica

Percentage of total land area

Forest area Nonforest area

Forest-rich countries Forest-poor countries

(’000 square km)

Forest Strategy, focusing as they did on policy andinstitutional reforms. However, the government asked theBank to withdraw after a blunt Bank report in 1993expressed concern about the rapid rate of deforestation inthe tropical forests and the role policies and institutionsmight have played in it. The Bank did not make the staffreport public, nor did it pursue reform until the economiccrisis in 1997 offered an opportunity to introduce forestsector conditionality in the IMF-Bank stabilization/adjust-ment packages. By mid-2000 there was a markedimprovement in the consultative process among keystakeholders on forest issues in Indonesia, which wasnoted in OED’s case study of Indonesia’s forest sector(Gautam and others 2000), but government commitmentto reforms remains unclear.

Cameroon’s closed-canopy forest covers an estimated15.5 million to 20 million hectares (Nssah andGockowski 1999). The country’s forests (and biodiversity)represent a major part of the Congo Basin, whichaccounts for 80 percent of the remaining tropical moistforests in Africa. Cameroon’s forest sector experience isstrongly linked to developments in the agricultural sectorand in the country’s political economy. Agriculture’s lowproductivity, combined with increased food demand, hasmade expansion of the cultivated area a leading cause ofdeforestation. International logging companies dominatethe development and export of forest resources. The poorperformance of agricultural projects and Cameroon’s

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deteriorating economic condition in the late 1980sprompted the Bank to abandon rural development andvirtually all project lending in favor of adjustmentlending. In the process, the Bank missed an opportunity topromote rural development. Success has also been limitedfor the Bank’s adjustment lending operations and forestsector reforms for several reasons—among them, the poorsequencing and phasing of reforms, the lack of politicalwill, weak institutional capacity, and insufficient consul-tation with domestic and international stakeholders,especially the private companies that have resistedreforms suggested by the Bank. The Bank’s dialogue withthe government and key stakeholders is said to beimproving, some legislative and regulatory changesappear to be taking place, and the Bank’s resolve toremain involved in the sector is reflected in an adjustmentloan and a forest-sector-related agricultural adjustment

loan currently under preparation. It is too early todetermine either government commitment or what impactthese initiatives will have.

What is happening in forest-poor China (Rozelleand others 2000), India (Kumar and others 2000a), andCosta Rica (Velozo and others 2000) contrasts sharplywith events in forest-rich Brazil, Cameroon, and Indone-sia. China, India, and Costa Rica now have progressiveforest policies, and the Bank’s efforts have been drivenlargely by demands articulated by the three countries’national governments. In recent years their overall forestcover has stabilized or improved, although naturalforests continue to degrade and disappear. A third of theworld’s population lives in China and India, includingmore than half the poor people in the world (thoseearning less than a dollar a day)—many of whom,especially ethnic minorities, depend on forest resources

Transmigration in Indonesia: A 1994 OED review of the Bank’s transmigration projects in Indonesia concluded that theprojects had largely succeeded in achieving their narrowly defined resettlement objectives, and most projects had even hadbeneficial impacts on the welfare of the settlers. The Bank’s environmental guidelines were issued after the projects hadbeen appraised. Although the Bank often correctly identified potential negative impacts and proposed mitigationmeasures during appraisal, follow-up during implementation was weak. Individually, adverse environmental impacts ateach site might not have resulted in a major loss of forest or biodiversity; only when the projects are viewed collectivelycan their serious and unmitigable impacts on the forests be appreciated. The OED review also noted that although thesettlers had benefited from the programs and had settled into their new environment, the program had a major negativeimpact—probably irreversible—on the indigenous peoples, particularly the Kubu, who depend on the forest for theireconomic and spiritual livelihood (Gautam and others 2000).

related projects in Brazil, insteadplaying a smaller role as a coor-dinating agency for the $300 mil-lion Rain Forest Trust/Pilot Pro-gram (PPG-7) to conserve theBrazilian rainforest (funded byinternational donors and theGEF).

A recent independent evalua-tion of the PPG-7 by a blue-ribbon panel concluded thatmany interesting ideas have beenpiloted at the micro level (forexample, in agroforestry and fireprevention), but that the PPG-7

failed to articulate the program’sstrategic objectives. The reviewcriticized the program, the WorldBank as its coordinator, and otherdonors involved for failure to agreeon a program strategy, for the par-ticipants’ inability to address fun-damental program issues, forcomplex project design and financ-ing plans, for weak program man-agement, and for slow coalitionbuilding with Brazil’s civil societyand private sector.

Acknowledging that PPG-7 asconceived was almost completelyexternally driven and had theexceptionally ambitious objectiveof containing deforestation in the

Amazon, the external panel stressesthat stronger government owner-ship of the program is essential forits future success. Positive stepshave been taken by getting Brazil’sgovernment actively involved inthe program’s management.

The program has not met itsoriginal ambitious objectives, butit has demarcated more than 39indigenous lands, some extractivereserves now serve as models forconservation and development, and160 demonstration projects in natu-ral resource management havebeen carried out. The result hasbeen a stronger relationshipamong civil society, Brazil’s gov-

ince 1991 the Bank hasmoved away from directinvolvement in forest-

BOX 3.1. BRAZIL: A CASE STUDY IN DOMESTIC PRIORITIES VERSUS INTERNATIONAL OBJECTIVES

S

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for their livelihood. And yet, combined, the two coun-tries have only about 6 percent of the world’s forestland(0.1 hectares in China and a meager 0.007 hectares inIndia per capita). China has 30 million hectares ofplantations that help compensate for the loss of naturalforests. The Bank is helping to establish another 3.9million hectares of forest plantations on collective,community, and individual farmers’ plots through itsforest and forest-component projects. It has also sup-ported the establishment of horticultural trees on asignificant scale. Carbon sequestration from the Bank-financed tree and forest plantations is estimated torepresent roughly 25 percent of China’s annual carbonemissions. India has one of the world’s largest livestockpopulations, which depends heavily on forestlands forgrazing. India also has the largest program of participa-tory forest management for forest regeneration the Bankhas ever supported. In the 1990s the Bank did not followthrough on the social forestry program of the 1980s,which promoted substantial tree planting on communityand private lands, but agricultural intensification hashelped relieve pressure on forestlands in both China andIndia. The Bank has contributed substantially to agricul-tural intensification through investments in irrigation,fertilizer, research, and extension, reducing the rate offorest conversion.5

Costa Rica, a small, middle-income country—with3.5 million people and a per capita GNP of $2,680—has a total forest cover of 1.2 million hectares. It alsohas one of the most progressive forest policies amongdeveloping countries. Legislation has supported suchimportant initiatives as the “polluters-pay principle,”financed by a 5 percent tax on fuels, part of which isused as payments for environmental services to thosewho plant trees or support other forest activities. CostaRican laws require certification of good forest manage-ment. Carbon Tradable Offset Certificates, which weredeveloped for trading carbon internationally, serve as amodel for trading other environmental services. CostaRica has also been active in protecting biodiversity andin bioprospecting (identifying commercially or medi-cally useful chemicals in living organisms). Fortu-nately Costa Rica has well-established property rights,and government policy has favored incentives forprivate owners to increase forest cover. Costa Ricanforest owners have strong organizations that give themtechnical support for reforestation, forest management,and conservation. Costa Rica’s progressive forest poli-cies would not have been possible without a strongnetwork of governmental, nongovernmental, and pri-vate sector organizations capable of adapting to policyinnovations.

ernment, and the Bank. The PPG-7has also helped to stimulate anactive interest in certification andbiodiversity issues.

The World Bank/WWF Alli-ance (box 4.1) has also been drivenby two external institutions. Thepresident of Brazil pledged to setaside an additional 25 millionhectares of forest for protection,but progress on doing so has beenslow. The president’s pledge gener-ated widespread internal debateand criticism from several nongov-ernmental organizations. Thefinancial crisis and budget cuts of1999 raised additional questionsabout relative priorities for

development and environmentalexpenditures. Implementation ofthe alliance pledge has since beenreinvigorated with a $35 millionGEF grant for preparation effortson a larger policy- and strategy-oriented program (under discussionbetween the World Bank and Brazilas this report is being completed).But the government’s fiscal auster-ity program, agreed to with theIMF, considerably limits its desireto undertake new investments.

Several questions remain: willthe international community helpBrazil preserve the rainforest forthe global benefits of preventingclimate change and conserving

biodiversity, as the 1991 forestpaper articulated? And will Bra-zil demonstrate the political willto make long-term investmentsin conservation on the groundsof international externalities,when the private sector andsome municipal and state gov-ernments have strong incentivesto deforest and the national gov-ernment has a strong incentiveto bring the macro-economyback on track? If so, how? (SeeLele and others 2000c fordetails.)

26


The Bank has achieved its greatest impact in CostaRica through its ESW, which influenced Costa Ricanforest policy, even though the Bank did not finance anyinvestment operations in the sector, and even thoughCosta Rica was unable to mobilize many internationaltransfers for environmental services. What happened inCosta Rica’s forest sector shows that if a country iscommitted to conservation activities, the Bank’s ESWcan have considerable impact in a relatively short time.Costa Rica was unwilling to borrow from the Bank forseveral years, wanting to avoid further indebtedness, buta new project was recently approved by the Bank’sBoard (in June 2000). Perhaps the Bank’s new instru-ments—the Learning and Innovation Loans and Adapt-able Programming Loans—will fill an important newniche, helping fill a need for countries reluctant to takeon a large debt burden (see Velozo and others 2000).Costa Rica’s experience in developing successful policiesand institutions for improved forest management needsto be disseminated to the Bank’s other member countries.

None of the three forest-rich countries studiedreceived any direct Bank assistance to the forest sectorafter 1991, although Brazil and Indonesia rank amongthe Bank’s top seven borrowers. The Bank has appliedforest sector conditionality to adjustment lending inIndonesia and Cameroon. China and India, by con-trast, have been the two largest Bank borrowers, bothoverall and for direct loans for forest projects—together China and India have received 59 percent ofthe Bank’s direct forest lending since 1991—but bothoverall and forest sector Bank lending to thesecountries is small relative to the countries’ ownoverall investments. The Bank’s experience in forestsector development in these two countries shows thatit is possible to design programs that produce win-winoutcomes, in both poverty alleviation and environ-mental management. Each country has a strong senseof ownership of its programs, although both lack theinstitutional and financial capacity to accelerate theimplementation of their own programs. The Bank hashad a relatively positive impact on the forest covers ofboth countries through a long-term partnership andmutual learning by doing. The economies of Chinaand India have been more stable than those of forest-rich countries, and their reforms have been moregradual. Forest policy and institutional reforms havebeen brought about through the countries’ own initia-tives, which the Bank supported mainly through long-term project assistance.

The challenges to the Bank’s involvement in theforest sectors of both China and India have increased.This is partly because controversies surrounding thetreatment of ethnic minorities in both countries haveincreased the transaction costs of the Bank’s continuedinvolvement in the sector, while returns are in question.In India, both the Bank’s country department and thefinance ministry have sought more convincing evidenceof the impact of forest projects and the fiscal sustain-ability of forest sector investments before proceedingwith further Bank support in the sector. The future ofthe Bank’s forest programs is even less certain in China,which has one of the most successful Bank-financedprograms—even in production forestry, which yieldshigher financial returns to producers and greatereconomic returns to the country than does the conserva-tion of protected areas. China’s unique form of fiscaldecentralization requires that all provinces, includingthose where there are forests, be fiscally responsible forthe loan repayments to the Bank. In China, perfor-mance on all forest projects has exceeded appraisalestimates for tree plantings and yield growth. Re-estimated rates of return on completed productionforestry projects, for example, are 20 to 25 percent (seeRozelle and others 2000). The government of Chinaquestions the Bank’s estimates, however, and estimatesrates of return to be 10 to 13 percent, because of thehigh risks and variable performance associated withlong-term forest investments and different species’varied performance in differing conditions.6 Now thatChina has “graduated” from concessional IDA lending,its ability to borrow on IBRD terms for investments inthe forest sector is in question. China’s recent loggingban, which has affected many forested provinces, hasreduced provincial incomes. The higher interest rate ofIBRD loans to China has compounded the difficultly forpoor provinces—and the poorest farm householdswithin them—to mobilize the resources to undertakerisky investments and to repay the Bank. This hasdrastically reduced the demand from China’s poorprovinces for Bank loans.

Market Forces and DeforestationThe 1991 Forest Strategy did not fully envisage how muchthe explosive growth in demand for forest and agricul-tural products in both domestic and international marketswould exacerbate forest degradation, deforestation, andland conversion. Globalization, international trade liber-alization, and lower tariffs have made forest-product

27

imports from forest-rich countries cheaper in forest-poorcountries, which has made domestic investment in treesless profitable. China (at $5.6 billion) and India (at $764million) are among the largest importers of woodproducts, and growth in income, population, and urban-ization has increased demand for forest products. Accord-ing to government estimates, China’s 1998 decision to banlogging in natural forests resulted in a decline in China’sdomestic timber supply of 16 million cubic meters a year.Imports—which were slight in the 1980s—have grownmoderately in the past two decades, while exports havefallen. This trend is of regional and even global impor-tance. Without countervailing investments in productionforestry and tree plantations, China’s rising demand forwood products could lead to defiance of the logging banat home and continued exploitation of natural forests bylocal communities, or a surge in imports that exacerbatesdeforestation of natural forests in exporting countries,particularly in the East Asia Region. In India, althoughestimates vary, demand for industrial wood is expected totriple or quadruple from current levels in the next 25years. Increased imports could also accelerate deforesta-tion in countries that sell to India.

By increasing exports of both forest and agriculturalproducts, forest-rich countries have increased pressure onforestlands. Sources of demand have varied. Indonesiahas emerged as the largest exporter of tropical timber inthe world. By contrast, nearly 86 percent of Brazil’s vasttimber is consumed internally, placing Brazil’s per capitadomestic consumption ahead of that of Western Europe.The development of plantations and of alternative sourcesof energy (such as natural gas piped through the recentlyopened Brazil-Bolivia pipeline) have been important inreducing the impact of Brazil’s domestic consumption ofwood products on its natural forests. But the environmen-tal impacts of the substitution of gas for woodfuel arecomplex, and not necessarily benign. Cameroon’s mostly

foreign-owned timber companies have expanded exportsto Europe, making Cameroon the largest exporter oftropical forest products in Africa. These domestic andglobal market considerations must become an integralpart of the Bank’s forest strategy.

Land Conversion and AgricultureContrary to assumptions implicit in the Bank’s 1991Forest Strategy, no universal principles govern theinfluence of land conversion and agriculture on forest-lands. How much agricultural intensification canreduce pressure on forests is highly location-specificand depends on such factor proportions as the rate andnature of technical change and transportation costs.The impact of agricultural productivity growth in landsurplus countries such as Brazil has been to increaseincentives for land conversion, a phenomenon rein-forced by globalization and the liberalization of mar-kets. But in densely populated countries such as Chinaand India, agricultural intensification has helped re-lieve pressure on forestland. Land conversion to ex-


Educating community forestry user group on how to collectfuelwood. Hetauda, Nepal. Photo courtesy of Still Pictures.

Deforestation: Using a computable general equilibrium (CGE) model to determine how the magnitude and impact ofdeforestation in the Brazilian Amazon are affected by changes in policy regimes and technology, Cattaneo (1999) showsthat devaluation shifts agricultural production in favor of exportable products. How devaluation affects agriculturalincentives in different regions depends on migration flows. If migration occurs only between rural areas, a 30 percentdevaluation increases deforestation rates 5 percent. If urban labor is willing to migrate to the Amazon and farm, thedeforestation rate increases 35 percent. San and others (1998) analyzed the short- and medium-term impacts ofstructural adjustment through devaluation on regional production, deforestation, factor markets, income distribution,and trade for the Sumatra region of Indonesia. The study found that devaluation encourages deforestation; exports offorest products as both final products and intermediate inputs for the wood processing industries increase. (See also Leleand others 2000c and Gautam and others 2000.) A recent piece of environmental sector work on Brazil argues thatrainfall determines agricultural production’s potential and may mute some of the effects of improved incentives fromglobalization (see Schneider and others 2000). Technical change, on the other hand, may expand agricultural optionseven in high-rainfall areas. These examples merely demonstrate the complexity and location-specificity of outcomes.

28


pand exports has become a particularly important issuein the three forest-rich countries—Brazil, Cameroon,and Indonesia—that have experienced irregular macro-economic performance, huge pressures on the domesticbudget, and trade imbalances. In the Amazon, landconversion for soybean production and livestock graz-ing is common. Returns to agricultural conversion aresizeable, partly because the forest sector is moreheavily regulated than agriculture. Regulations with-out transparency and accountability, however, increasethe potential for corruption and the cost of managingforestlands. Devaluation in the three forest-rich coun-tries has increased incentives for all exports, but theagricultural exports have increased more than exportsof forest products. The little evidence available onfinancial returns to managed forests suggests thatwithout enforcement (evident in extensive illegal log-ging) and with virtually unrestricted agricultural sec-tors, there is little financial incentive for improved orlow-impact logging to replace alternative uses ofresources available to entrepreneurs.

Cameroon is atypical among the case study coun-tries, but typical of the 80 Bank member countries thathave experienced a decline in per capita income.Cameroon has regressed from being an IBRD borrowerto being an IDA borrower, which makes economicgrowth an urgent necessity. Without improved forestmanagement, Cameroon’s rate of deforestation mightwell have been greater if its economy and exports hadgrown rapidly.

Forests and Poverty AlleviationOur understanding of how forests and poverty interactwould have been greater if the Bank’s investments andESW had characterized the forest-dependence of the poorwith rigorous quantitative information.7 Population pres-sure on the land, the incidence of poverty, and the role offorests in people’s livelihoods vary in the six case studycountries. In Indonesia the number of forest-dependent

people is estimated to be between 1.5 million and 65million, and in India between 1 million and 50 million. Itis difficult to provide meaningful estimates because,unlike estimates of the incidence of poverty, reliable dataare not available and definitions of forest dependencyvary. It is important to distinguish between those whodepend on forest products and services for survival andthose whose livelihoods are improved by forest outputs.There is growing evidence that forest-based subsistenceactivities (low input/low output) do little to help peopleclimb out of poverty and are rapidly abandoned onceincomes begin to grow and better alternatives becomeavailable. And demand-driven forest activities that can bepart of strategies of forest-dependent people for incomegrowth and livelihood usually require certain levels ofskill and capital, which not everyone has. Such issues,which have implications for the forests’ role in povertyreduction strategies, and for program designs that focuson forest management, are not addressed adequately inthe Bank’s projects or ESW.

Moreover, improving the conditions for the poorgenerally and improving the conditions for indigenouscommunities can be conflicting goals. China and (untilthe East Asian economic crisis of 1997) Indonesia, forexample, achieved impressively rapid economicgrowth and substantially decreased the percentage ofpeople living below the poverty line. The records ofboth Brazil and India are less impressive on povertyreduction and improvements in social indicators. But inChina the forested areas lie in mountainous regionsthat contain the majority of the officially designatedpoor provinces, including substantial minority popula-tions. It appears, however, that China’s recent gradua-tion from IDA, the result of its economic growth, islikely to considerably reduce borrowing from the Bankfor forest development in these poor provinces. Indiahas a less impressive record on poverty reduction andimprovements in social indicators than China. Morethan 300 million people live below the poverty line in

Returns to Low-Impact Logging: An extensive literature review on relative returns to conventional and low-impactlogging (Pearce and others 1999) supports the findings of the low relative returns noted by the OED studies of Brazil,Cameroon, and Indonesia. According to Lele and others (2000c): “Protection of Brazil’s Amazon forests beyond theshort term requires an increase in the value of standing forest, an increase in the costs associated with unsustainablelogging practices, and an increase in incentives for and profitability of sustainable (or improved) forest management. Itmust pay to keep trees and other forest products in the forest and improve management practices, and predatoryexploitation of the timber must become unprofitable. In evaluating measures that might address these challenges, it isuseful to distinguish between the processes taking place at and beyond the forest-agriculture frontier. At the frontier,agriculture, logging, and road-building create a mutually reinforcing system of forest conversion. Beyond the frontier,deeper in the forest, illegal logging of higher-value tree species threatens protected areas and the livelihoods of indigenouscommunities and extractivists.”

29

India. Two-thirds of India’s forest cover lies in tribaldistricts. The incidence of poverty among tribal peopleis high, and efforts to improve conditions have gener-ated considerable conflict between tribal people andother poor people.

Development of the forest sector has helped thepoor in China and India by:

• Creating wage employment in the planting andregenerating of forest areas.8

• Upgrading the skills needed to operate nurseries,graft fruit trees, and manage tree crops.

• Creating assets by either giving the poor rights tothe trees on public lands or the rights to thepublic land itself to help meet subsistence needsfor fuel, food, fiber, and other non-timber forestproducts. When villagers in China were allowedto plant the trees of their choice on previouslyowned public lands, the number of tree speciesincreased from 4 to 16 and the emphasis shiftedfrom timber to fruit trees, on which there arefewer harvesting and marketing restrictions(Rozelle and others 2000).

• Reducing overall risks and diversifying incomesfor the poor by promoting tree planting as part ofagricultural cropping systems.

• Creating social capital by increasing the collec-tive ability of forest-dependent communities toplan, manage, grow, and equitably share com-mon property resources. China is clearly farahead of India in the development of localsocial capital for planning and implementation,mainly because China’s “responsibility system”has virtually decentralized control of publiclands to villages, communes, and individuals.But the recently imposed logging ban is intro-ducing new restrictions on the rights of villagecommunities.

• Many kinds of policy and institutional reformcontribute to poverty alleviation. Productionactivities have received more attention thantenure arrangements, pricing, and markets fortimber and non-timber forest products.

Institutional IssuesInstitutionally the six countries vary from the decen-tralized democracies of Brazil, Costa Rica, and India,to the more state-controlled China. But China is moredecentralized than it appears to be, having given a

strong and active role to its provincial, county, andtownship governments. And community participationbecame more active in the 1980s when China intro-duced its “responsibility system,” based on the devolu-tion of land rights to households. The community forestmanagement programs of China and India differgreatly from each other, partly because rights toforestland or its fruits devolved to communities lessextensively in India than in China. China’s recentcentrally imposed logging ban, however, appears defacto to have taken away some of the property rightsgiven to local communities. Cameroon and Indonesiahave been slower to decentralize and encourage com-munity participation. When the Indonesian governmentnationalized community lands (de facto) in 1967,concessions were awarded to the politically well-connected to maintain their political support (Gautamand others 2000). Devolution is now being introducedin Indonesia as part of political reforms.

States in the six countries differ greatly in governancecapabilities and in capacity to manage the forest sector.Devolution, decentralization, the diverging interests ofmultiple stakeholders, and the likelihood of conflictsamong them, all have implications for governance. Thereare also major differences in the forest sector administra-tions of the six countries. Costa Rica enjoys a highlydiversified set of public institutions and committed NGOsand private associations that interact to address the manymultisectoral functions and equally diffuse costs andbenefits of the forest sector. Cameroon is the weakest ininstitutional capacity, followed by Indonesia and severalstates in the Brazilian Amazon. Even the forest producingstates in western China are institutionally weak in severalrespects. In Brazil rents from forest exploitation aredecentralized and broadly distributed at the local, munici-pal, state, and national levels and among different actors.In Indonesia such rents have been concentrated in thehands of a few who are close to political power, althoughthat situation is changing rapidly. Because Brazil is alsofar richer than Indonesia in its forest resources, and itseconomy is less dependent on forests, unsustainable forestmanagement poses fewer costs and huge benefits fromBrazil’s national perspective—although it entails hugecosts from the global perspective.

Land TenureThe 1991 forest paper stressed secure land tenure as a wayto increase incentives to invest in trees and to reduceincentives for resource mining. But again, how much this


30


proved true varied from place to place. How much tenuresecurity affects land conversion to agriculture, and hencerates of deforestation, is a controversial issue in Brazil(Lele and others 2000c). Some argue that securing landtitle increases smallholders’ access to credit, information,and extension services, thereby facilitating the clearing ofland for agriculture. Others argue that farmers with noaccess to credit cut trees to finance their agriculturaloperations. Either way, the net effect in the short run tendsto be deforestation. The merits of secure land rights forindigenous populations are more generally accepted. Thegovernment of Brazil has considerably accelerated thedemarcation of indigenous reserves—some of it throughBank support—although many external threats lead to thede facto loss of land rights and forest cover.9

The issue in Cameroon and Indonesia is timberconcessions. Until the mid-1980s the Bank consideredcustomary tenure rights in Cameroon an impediment tothe development of “unused” forest resources. It recom-mended overhauling land tenure legislation so thatland expropriation in support of state and privatedevelopment of industrial plantations could becomeoperational (Nssah and Gockowski 1999). Now, how-ever, Bank strategy favors improving Cameroon’s legaland regulatory framework, although both the forestlaw and the implementation decree have failed toprovide an adequate legal framework for planning landuse and integrating forest conservation and productionactivities with agriculture. The prevailing land tenureregime assigned usufruct rights to anybody who clearedand cultivated land in the state-owned forests, whichmake up most of Cameroon’s dense forest. This hasprobably encouraged deforestation. In Indonesia, how-ever, the Bank recommended revenue-sharing withcommunities, but the government was uninterested indevolving rights to communities until democratizationin 1999.

In China, the question of how land tenure hasaffected investment in forests and the protection offorest resources is part of a debate about whether thereforms of the 1980s that gave control of forestlandsto farm households helped or hurt forest manage-ment. After successful reform to decollectivize in theagricultural sector in the early 1980s, leaders in theforest sector sought to further devolve control andincrease incentives to households and forest users.The reforms did not go as far as those in agriculturein the early stages of implementation, but in the pastdecade several innovative programs have been

launched in an effort to improve forest investments.The academic and policymaking communities dis-agree about the success of this movement in terms offorest sector outcomes in deciding the impact of therecent logging ban, but China’s more equitableinitial distribution of land and local power hasensured more socioeconomically equitable outcomes(Rozelle and others 2000).

DecentralizationExperience in Brazil, China, and India shows that,contrary to popular belief and some positive experi-ence, decentralization does not always improve envi-ronmental management. It may even worsen it in theshort and medium term, when local institutions are intheir infancy and checks and balances are limited.Even if local capacity for environmental managementincreases substantially, it may not be an adequatesubstitute for the functions previously performed by thecentral government. The precarious finances of manystates and municipalities is an increasing concern ascountries decentralize. Logging and forest industriesgenerate revenue and employment at several levels,making it possible for local governments to acceptforest concessions. Politically powerful loggers andranchers in Brazil (typically supported by municipaland even state assemblies) compete with small agentsand indigenous people for control of forestland. Na-tional governments may be more concerned aboutnational environmental objectives than their localcounterparts and may pursue policies of conservation—such as China’s introduction of a logging ban—whichare seen as costly at the local level. But nationaleconomic and political interests may also be alignedwith the state and local elite (as in Brazil, Cameroon,and Indonesia). Forest sector reform should addressissues of interest to key stakeholders, such as employ-ment, income generation, and government revenues.Most responses will involve investing in increasedproductivity for all forest products and services—investing, for example, in research, extension, andmarkets, areas the Bank has given less attention than ithas to conservation issues.

The Bank’s 1991 Forest Strategy and Forest-PoorCountriesForest policies in China, Costa Rica, and India weredeveloped independently of the Bank’s strategy, butare consistent with it. India’s 1988 forest policy has

31

several elements in common with the Bank’s strategy.Both emphasize the environmental role of forests andthe subsistence requirements of forest-dependent popu-lations. The Chinese government’s logging ban bringsChina’s policy more in line with the Bank’s foreststrategy. But the immense challenge faced by Indiaand China in implementing their progressive policiescan be better appreciated by looking at the case ofsmaller and richer Costa Rica.

The small amount of ESW the Bank has done inCosta Rica has had a positive impact on governmentpolicies. In its 1993 forest sector review, the Bankestimated that nearly two-thirds of the benefits ofCosta Rica’s forests are enjoyed globally, so theglobal community should compensate Costa Rica forconserving, managing, and planting forests. Fewtransfers have materialized, however, and the coun-try is bearing the cost of its environmental policieslargely on its own. To enable the Costa Ricangovernment to finance such environmental activitiesas the protection of biodiversity, the review sug-gested improving the financial management of na-tional parks. It also recommended deregulatingharvesting in forest plantations and the import andexport of forest products. Some believe that theBank’s policy advice to acquire private land forconservation instead of allowing private landownersto make a living from conservation activities mayhave been counterproductive. Critics also argue thatthe Bank’s policy advice neglected the plantationsector, the development of small private forests, andpost-harvest aspects of forest production—includinghelping Costa Rica attract more private investments.The governments of Brazil and China also stressedBank Group financing for tree planting and post-harvest activities, but the Bank’s financial sectorpolicies since 1991 have brought about a sharpdecline in the Bank’s lending for such specificactivities (World Bank 1998c).


The Bank’s 1991 Forest Strategy and Forest-RichCountriesThe Bank’s services have been less in demand in forest-rich countries than in forest-poor countries. The rea-sons for the Bank’s small role and negligible impacthave been different in each case. In Brazil the govern-ment has viewed the Bank’s focus on saving forestcover in the Amazon as an unnecessary interference inBrazil’s domestic affairs, although this attitude may bechanging as Brazil’s domestic environmental lobbygains voice.10 In Indonesia the domestic plywoodindustry, working closely with the forest department,has resisted reform. In Cameroon the powerful foreign-owned industry working with the parliamentarians hasresisted reform. But the Bank has continued trying toaffect forest outcomes in Cameroon and Indonesiathrough adjustment-related policy conditionality andwith increasingly active donor coordination and con-sultations with stakeholders.

The Bank’s failure to have an impact in the threeforest-rich countries seems to be the result of its“precautionary” strategy (focused on conservation, withno instruments to enable research and experimentationto improve forest management or deal with illegalactivity) combined with weak implementation and theBank’s limited effort to nurture a national consensus forpolicy reform through country dialogue.11 In addition,forest-rich countries—with their forest “surplus,” lowlevels of royalties, and heavy (legal and illegal) log-ging—have had little incentive to use forests efficiently.It is important to increase the value of forests throughstronger enforcement, to create new markets for environ-mental services, or to identify measures to fill the gapbetween the globally and nationally perceived optimalquantities of forest resources through measures such astransfer payments for environmental services. Withoutadditional resources, budget-strapped governments findit difficult to afford stronger enforcement or paymentsfor environmental services.

China’s logging policy: The logging ban also has tremendous short- and medium-term social and economic costs. It hasalready reduced the timber supply and will probably affect the jobs and income of nearly 1.2 million people directly andanother 1.2 million indirectly. In addition to a loss of revenues, the government is anticipating fiscal transfers of about$20 billion over 13 years from the center to the suffering provinces, and perhaps an increase in imports. This ishappening at a time when the Bank’s focus in China’s forests is shifting from production to conservation andbiodiversity and when China is shifting from IDA lending to more costly IBRD lending. Clearly, the forest lendingprogram in China is coming under pressure.

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The impact of the ban on Bank financing forcommercial logging in tropical moist forests has beenmixed. It discouraged the Bank from supporting experi-ments to address “improved and conservation-orientedforest sector management,” but it also reduced the riskof Bank association with illegal, large-scale, andunsustainable logging. The ban has had strategic andsymbolic value, but did not discourage wasteful prac-tices in forest-rich countries, so it was largely irrelevantin containing rates of deforestation—a view shared bykey borrowers and Bank staff (discussed in the nextchapter). More important, the ecological risk aversionassociated with the 1991 strategy had unintendedeffects: It discouraged the Bank from promotingchanged attitudes and helping countries build internalcapacity and, paradoxically, because the Bank was anonplayer, it hindered Bank efforts to give conserva-tion-oriented forest constituencies a voice in theircountry’s internal decisionmaking. If the current ban onBank financing of commercial logging in primarytropical moist forests is extended to the forests ofEastern Europe, where forests are already managed formultiple uses, it could jeopardize promising Bankefforts currently under way and could have a similarlychilling effect on the Bank Group’s future ability tomobilize the private funding needed for continuedresponsible forest management.

In many forest-rich countries, local rent-seekingobjectives in the forest sector may have restricted Bankinvolvement. The 1991 strategy also may have affectedthe demand for Bank services in an increasinglydemand-driven Bank. Without substantial support tocompensate for the fiscal and economic costs ofconservation, governments have been reluctant tointernationalize the forest issue, both because of the

economic benefit they see in exploiting the forests fortheir countries’ industrialization and modernization,and because of the close connection between resourceexploitation and governance issues. In Brazil, as inIndonesia, economic crises and large-scale projects(such as Brazil’s Rondonia Natural Resource Manage-ment Project) have brought these issues to the fore.

It is unclear how the Bank alone can stimulate thedevelopment of internal capacity, transfer skills, andmobilize the financial resources needed for sound forestpolicy without a broadly shared, cohesive, and consis-tent diagnosis of the problems by the internationaldonor community and a broad range of nationalstakeholders. International objectives can differ fromborrower-felt needs and priorities, as they have inBrazil. Until Mr. Wolfensohn’s recent initiatives in theforest sector, the Bank and the donor community hadnot made enough effort to develop a common visionand understanding of borrower needs. The forest sectoris well suited to the Comprehensive DevelopmentFramework (CDF), a “holistic” approach to develop-ment that emphasizes client ownership, the Bank’spartnership with other development actors, better pro-gram design through Bank interaction with all stake-holders, and concrete results. Notwithstanding pastand current differences between the Bank and somegovernments, especially in forest-rich countries, thequestion is, given the current strategy’s ambitious goalsand meager resources, can the Bank harness suchemerging opportunities as presented by increased envi-ronmental awareness, active domestic stakeholders,and active environmental institutions (especiallyNGOs) to improve forest management. This questionwill be addressed in the next chapter.

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44Global Trends and ChangesAffecting Forest Policy

How current is the World Bank’s forest strategy? Some of the technological, institu-

tional, economic, and policy changes that have affected forests since 1991 must be

considered when the Bank’s forest strategy is updated. But some trends are difficult to

document because definitions used for forest data often differ across countries and many national

and international statistics on forest cover are unreliable. Production data are suspect because of

substantial illegal logging. Data inconsistencies within countries over time impede understanding

of the extent, sources, and causes of loss and degrada-tion of forest cover, and efforts must be made toimprove the quality of forest data (Annex B).

The formulators of the updated strategy willcertainly emphasize the building of partnerships, butthey will also have to take into account that past effortsat coordination, including Food and Agriculture Orga-nization (FAO) supported National Forest Programs(NFPs) and Bank-encouraged Environmental ActionPlans, have often not worked. The NFPs, whichsucceeded the Tropical Forest Action Plans in 1985,were supported by the FAO, the World ResourcesInstitute (WRI), and the Bank. In due course, however,the Bank and WRI dropped their support for theseprograms because they were “top-down” and narrow inscope. The NFPs continued as FAO initiatives carriedout by developing country governments with thesupport of several bilateral donors and the EuropeanUnion. The Bank, meanwhile, encouraged countries todevelop Environmental Action Plans, which in many

ways resemble NFPs, but with a broader scope andoften variable treatment of issues in the forest sector.The Bank, FAO, and the donor community have notstreamlined or coordinated their activities to bringabout essential policy and institutional reforms thatreflect the concerns of all stakeholders, especially thepoor. What is clearly needed is a better-coordinatedcountry- and client-driven approach. The collectiveinternational effort being undertaken in Cambodia, ledby the Bank with the active participation of the FAO,U.N. Development Program, and other donors is anexample of successful coordination, albeit at an earlystage.

Changes in the Forest SectorGlobal wood production and consumption is likely toincrease about 26 percent between 1996 and 2010(Whiteman 1999), with increases throughout the devel-oping world, but especially in the Europe and CentralAsia and East Asia and Pacific Regions (table 4.1).

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Production and consumption are in close balancewithin Regions, but there is substantial intraregionaltrade. Demand from China, India, and Japan, forexample, has been met largely by Southeast Asiancountries (Dauvergne 1997). More than a fifth of theglobal consumption of industrial wood is expected tobe concentrated in Brazil, China, Indonesia, and theRussian Federation.

To contain deforestation and the degradation offorest resources, countries need substitutes for productsoriginating from natural forests. Investments in alterna-tive sources of wood—ranging from small-scale treeplanting to forest plantations on degraded lands—arebecoming important. Plantation forests now offer greatpromise for wood production.1 Improved genotypesand recent advances in silvicultural technologies haveled to spectacular yields. Annual growth rates of 20 to30 cubic meters per hectare a year are common onresearch stations in tropical areas and are beingrealized on many private lands. Industrial wood fromone hectare of a plantation can easily substitute for 5 to20 hectares of natural forests (Binkley 1999). Planta-tions not only relieve pressures on natural forests butalso offer reliable supply, uniformity of product, andcompetitive economics. They could potentially satisfymost of the global demand for forest products (LEEC1993). Moreover, plantations provide environmental

benefits, reducing soil erosion, protecting watersheds,conserving biodiversity, and sequestering carbon.Large or small tree planting operations, if conducted inan economically, environmentally, and socially respon-sible manner, could provide the poor with tremendousemployment opportunities, either as tree owners or asworkers on plantations and in post-harvest operations.They can also reduce pressure on natural forests.

Only a decade ago, intensively managed forestssupplied only 7 percent of industrial wood; now theysupply about 26 percent and are expected to supplyabout 40 percent by the year 2040. More than half ofwood production in industrial countries is now frommanaged forests and plantations. Productivity isalready high in plantation forestry in Brazil, which hasa progressive private sector and a strong researchsystem that is funded partly by the private sector. Butthis is not typical in other developing countries, andsmall-scale planters need investment help in all devel-oping countries. Real interest rates tend to be high,making it next to impossible for small farmers toobtain credit. In Brazil and China private companieshave made surprisingly similar suggestions: GiveBank/IFC loans to processing enterprises that enter intopartnership with small farmers for plantation forestry,while government provides research and extensionservices with appropriate environmental and socialimpact assessments in place.2

Investments are being made in industrial plantationsin countries as diverse as Argentina, Brazil, Chile,Indonesia, New Zealand, South Africa, and Uruguay.Discussions of the CEO Forum (box 4.1) suggest thatprospects for potential investments in developing coun-tries are strong if a favorable investment climate isensured (Annex G). The Bank Group institutions—IBRD,IFC, and MIGA—need to work together to encouragemore private capital—on a scale appropriate to thespecific country circumstances—to invest in socially andenvironmentally responsible plantation forestry. TheBank’s experience in Brazil and China offers someimportant lessons about undertaking socially and envi-ronmentally sustainable plantation forestry. The govern-ment of the state of Minas Gerais in Brazil is soconvinced of the merit of the credit extended under aprevious World Bank loan to help small farmers under-take forest plantations that it has converted it into acommercially operated revolving fund. In several devel-oping countries, particularly in the tropics, millions ofhectares of degraded lands are suitable for tree planting.

TABLE 4.1. EXPECTED INCREASES IN INDUSTRIALWOOD PRODUCTION AND CONSUMPTION(1996–2010, MILLION CUBIC METERS PER YEAR)

1996 2010

Production ProductionRegion (consumption) (consumption)

AFR 66 81(59) (72)

EAP 304 421(339) (466)

ECA 380 547(380) (556)

LCR 141 164(131) (143)

MNA 7 10(8) (11)

SAR 31 57(31) (58)

Other 560 593(546) (574)

World 1,490 1,872(1,493) (1,881)

Source: Whiteman, Brown, and Bull 1999.

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G l o b a l T r e n d s a n d C h a n g e s A f f e c t i n g F o r e s t P o l i c y

Investments in plantation forestry in these countries—combined with an increased commitment to bringingnatural forestland under protection, while ensuringproductive livelihoods for forest-dependent communi-ties—can meet urban and export demand, create liveli-hoods, and substantially reduce continued pressures onthe world’s natural forests.

Tree planting operations will succeed in replacingwood from poorly managed and unsustainable opera-tions in natural forests only if tree planting is economi-cally competitive with products originating fromnatural forests. It is crucial to improve governance andto eliminate the perverse incentives, market distortions,and constraints on valuation currently associated withnatural forest operations. To develop economically and

environmentally competitive tree planting operations,it is also necessary to provide clear and secure propertyrights, access to financing, and payment for environ-mental services. In countries such as Costa Rica, wherelegislation has supported such initiatives, tree plantinghas successfully changed the extent of forest cover; incountries without such incentives, tree planting andinvestment in plantations have plummeted.

Developing countries have greatly expanded theirprotected areas in recent years but have not improvedmanagement in existing or new protected areas. Envi-ronmentalists welcome the extension of protected areasas an indication of the countries’ commitment toconservation. Both the Bank and GEF have supportedsuch expansion through project assistance, even before

and sustainable management ofthe world’s forests.

The World Bank/WWF Alli-ance (formally the Alliance forForest Conservation and Sustain-able Use). In April 1998, theWorld Bank and WWF enteredinto an alliance to work withgovernments, the private sector,and civil society to reduce theloss and degradation of all typesof forest worldwide. The alliancepartners propose to worktogether to support countries toachieve the following targets bythe year 2005:

• Establish an additional 50million hectares of protectedforest area, and bring a com-parable area of existing, butpoorly managed, reservesunder effective protection.

• Bring 200 million hectares ofthe world’s production forestsunder independently certifiedsustainable management.

The CEO Forum. This ad hocgroup—which includes 31 repre-sentatives from the World BankGroup, the private sector, civil so-ciety, and governments—was as-sembled in 1997 to consider anddiscuss global forest-relatedissues, especially options for reduc-ing barriers to sustainable forestmanagement by promoting respon-sible investments in forest produc-tion and management. Participantshave agreed that the discussionsshould continue as long as theycontribute to an understanding ofthe issues and to practical initia-tives associated with the preserva-tion and better use of the world’sforests.

Prototype Carbon Fund. Thisinitiative is a response to opportu-nities offered by the mechanisms ofthe Kyoto Protocol for mobilizingnew and additional public and pri-vate resources and technologyflows to member countries. Gov-ernments that signed the Interna-tional Convention on ClimateChange have still not decided

whether to allow payments forcarbon offsets involving forestcreation and conservation, sothe Fund is currently designed tooperate only in the transitioneconomies of Eastern Europe.Learning from that experiencecan be put into practice in devel-oping countries if an agreementon payment for carbon offsets isreached. The Fund’s objective isto explore how market-basedmechanisms could help reducethe global concentrations ofgreenhouse gases and contributeto the sustainable developmentof the Bank’s borrowers. Amajor emphasis would be placedon renewable energy technology.The Fund will support project-based activities that reducegreenhouse gas emissions andenhance carbon sequestration,but the Fund will not beinvolved in “emissions trading”activities.

he World Bank has threenew initiatives toimprove the conservation

BOX 4.1. THREE NEW WORLD BANK INITIATIVES

T

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the World Bank/WFF Alliance. However, the assistancedid not involve analysis of the threats to protected areasfrom economywide and global policies, did not supportthe enforcement of existing laws and regulations, did nothelp build local institutional human and financialcapacity, and did not generate the sustained domesticand international financial resources needed to supportbetter management of existing protected areas, includingbetter treatment of the people living in them. Besides, ahighly restrictive definition of primary forests adopted inthe 1991 strategy essentially banishes human presence oractivity and is not conducive to conservation. It wouldrequire new definitions of primary and secondary forestsmore attuned to the realities in developing countries onthe ground, improved fiscal policies, with transfers frompolluting to greening industries across sectors, theintroduction of fees for parks, greater revenue-sharingwith local communities to increase their stake inprotection, more mobilization of private capital, stron-ger links with local NGOs and research institutions, andthe exchange of information about successful experi-ences within and across Regions. A wealth of experienceexists in the Bank and GEF portfolios, especially in theLatin America Region. Tapping that experience calls forthe multisectoral approach the 1991 Forest Strategyenvisaged. The World Bank/WFF Alliance could addresssuch fundamental issues as incentives and financialresources in its quest to increase protected andsustainably managed forest areas. The World BankInstitute’s link with operations should be strengthened torealize this potential.

Changes in the Global Economic EnvironmentPatterns of global economic growth and incomedistribution are far different today than when theBank’s forest strategy was published. Per capitaincomes in more than 80 countries are lower todaythan they were a decade ago. Only 40 countries havebeen able to maintain an average per capita incomegrowth rate of 3 percent or more during the 1990s.The richest 20 percent of the 174 nations reviewed bythe U.N. Development Program for its 1999 HumanDevelopment Report have enjoyed much of the recentglobal boom. Those countries produce 86 percent ofglobal gross domestic product, whereas the poorest 20percent produce 1 percent. Global exports are simi-larly distributed even though total exports are sub-stantially larger today than 15 years ago. Of the 34countries with the lowest human development indica-

tors (based on income, education, and life expect-ancy), 29 are in Africa (UN 1999a).

Slow or declining growth in developing countriesstems in part from the slow growth in demand forcommodities. Real commodity prices are the lowestthey have been in several decades. Many low-incomecountries that rely on exports of natural-resource–based products to earn foreign exchange must ship evengreater quantities of forest, agricultural, and miningproducts to earn the same revenue. After accounting forthe rapid loss of natural capital, adjustments toeconomic crises by developing countries undermine thesustainability of their long-term export and growthperformance. But increased export growth is crucial tomacroeconomic stabilization in the short and mediumterm and critical for a return to a sustained growth pathfor countries in economic crisis. These issues areseldom addressed in adjustment programs or by theglobal community, which has higher expectations fornatural forest maintenance in developing countriesthan the development needs of those countries dictate.

Increasing population growth in developing coun-tries raises demand for agricultural production andexacerbates pressures on forests. Currently about 1.4billion hectares of cropland meet global food require-ments. The FAO estimates that another 1 billion hectaresof grasslands and 800 million hectares of the world’sremaining forests and open woodlands could potentiallybe converted to crop production. The extent of forestconversion will depend on the level of continuedagricultural productivity growth, although its effects onforest cover will be different among countries.

Changes in the International Institutional SettingMany international agreements reached in recent yearshave profound implications for forest policies andprograms in developing countries (box 4.2). There isincreasing international cooperation on forest issues,but no global legal instrument deals specifically withthe protection and management of forests. And exceptfor the GEF, no new funding mechanism has beeninitiated to implement international initiatives. The“Rio forest principles” adopted at the United NationsConvention on Environment and Development in 1992are a significant step in that direction, but a sharedoperational vision of sustainable development stillneeds to be developed. The Rio forest principles, basedon concepts supported by a broad international consen-sus, cover issues ranging from sustainable development

37

and biodiversity to trade in forest products and interna-tional cooperation. These principles recognize thatcountries have sovereign rights over their forestresources and urges countries to incorporate the prin-ciples in their national forest policy and legal frame-works. The principles encourage governments topromote the development, implementation, and plan-ning of national forest policies and to provide opportu-nities for the participation in that process of interestedparties, including local communities and indigenouspeoples, industries, labor, nongovernmental organiza-

tions and individuals, forest dwellers, and women. ButOED country studies have noted a major gap betweenprinciple and practice in countries that are signatoriesto the agreements. What should be the Bank’s role, ifany, in ensuing adherence to international conventionsthrough its operational mechanisms? This question hasreceived little attention in Bank operations (Gautamand others 2000), but given the Bank’s unique profes-sional and financial resources and its economywideexperience in borrowing countries, it could play amajor role in translating a global vision into action.


U.N. Commission on SustainableDevelopment (CSD) to continuethe intergovernmental dialogueon forest policy at its third ses-sion in April 1995; to implementforest-related decisions of theU.N. Conference on Environmentand Development, nationally andinternationally; and to promoteinternational cooperation infinancial assistance and scientificand trade issues, among otherconcerns.

The IntergovernmentalForum on Forests (IFF) was estab-lished in July 1997 as an ad hoc,open-ended forum under theCSD. IFF has a mandate to pro-mote and facilitate the imple-mentation of IPF proposals.

The World Trade Organiza-tion agreement on trade liberaliza-tion has been at the center of theBank’s structural adjustment pro-grams (now nearly one-third ofBank lending). Removing agricul-tural subsidies in industrial coun-tries and continued liberalizationof agricultural trade in developing

countries would have complexeffects on forest conversion.

The Convention on BiologicalDiversity promotes the establish-ment of national strategies for thesustainable conservation of biologi-cal diversity and their integrationinto sectoral and cross-sectoralplans and policies. Countries agreeto undertake programs to identifyand monitor biodiversity (includingimportant ecosystems and habi-tats), to establish a system of pro-tected areas, and to develop guide-lines for the selection of protectedareas.

The Global Environment Facil-ity (GEF) is a mechanism forfinancing actions to address theloss of biodiversity, climatechange, the degradation of interna-tional waters, and ozone depletion.

GEF-sponsored biodiversityprograms in developing countrieshave been restricted largely to con-servation in protected areas. TheGEF is only now looking intoissues related to the sustainable useof forest ecosystems. Some haveargued that biodiversity is directlyat odds with improved forest man-agement in production forests, an

issue that is also germane to dis-cussions of the Bank’s 1991 For-est Strategy.

The FrameworkConvention on Climate Change(the Kyoto Convention) offerspromise for forests in their roleas carbon sinks. Carbon tradingmay raise financial resources forinvestment in reforestation,afforestation, forest manage-ment, and conservation. Somepeople are concerned that toomuch attention to carbon trad-ing will divert attention fromother forest functions, such assupporting biodiversity andindigenous populations.

The Agreement on Trade-Related Aspects of IntellectualProperty Rights may affectresearch in forest-related bio-technology and could have aprofound impact on the rights toforest genetic material, competi-tiveness in international mar-kets, and the livelihoods offorest-dwelling people.

The Convention on Combat-ing Desertification is relevant toforest-poor countries, principallyin Africa and the Middle East.

he IntergovernmentalPanel on Forests (IPF)was established by the

BOX 4.2. INTERNATIONAL INSTITUTIONS AND AGREEMENTS RELEVANT TO GLOBAL FORESTS

T

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New Thinking and Policy ExperimentsThe idea behind the relatively new practice of forestcertification is to establish a market-based incentiveframework for improving forest management practicesand to provide markets for products generated fromsustainably managed areas.

The World Bank/WWF Alliance promotes im-proved management of 200 million hectares throughcertification. Certification activities are dominated bylarge firms located mainly in industrial countries withwell-established forest policies and institutional frame-works. Demand for certified forest products and theirsupply are concentrated in Europe and North America.Certification could be a powerful instrument for im-proving forest management in developing countries,diversifying the sources of accreditation of forestmanagement (currently monopolized by governments),improving forest management technologies and prac-tices, stimulating capacity building for sound environ-mental management among consumers and producersof forest products, and generally increasing environ-mental awareness. To succeed, however, certificationmust operate in countries that use market-based instru-ments to internalize environmental and social exter-nalities. For certification to be effective, it must havegovernment support and countries must have growingdemand for certified products, national standards forimproved forest management (standards that are com-patible with international standards where exports areinvolved), and an enforcement mechanism to ensurethat the standards are met and the results relayed tomajor stakeholders in a transparent, credible manner.The certification process must also be set up in a waythat enables rural communities to participate actively.In countries with weak institutions, certification couldencourage corruption. Although it has a better prospectin channeling export demand to certified productsthrough value addition than to influence internaldemand in developing countries, the practice couldalso become a nontariff barrier for exports of productsfrom developing and Eastern European countries, if notapplied across the board to timber produced in allcountries. But the certification issue is leading to fargreater debate in forest-rich developing countries aboutimproving forest management than the 1991 strategycould have envisaged (Lele and others 2000).

Several international forest product certificationschemes—including the Forest Stewardship Counciland Pan European Forest Certification—are developing

rapidly, with the help of organized buyer groups,NGOs, and other institutions. National and regionalcertification systems are also emerging in forest-richcountries such as Brazil, Canada, Finland, Ghana,Indonesia, Malaysia, Norway, and the countries of theEuropean Union.

The debate on sustainable forest management hasadvanced considerably since the Bank’s strategy waspublished, but there is no global consensus on how todefine “sustainably managed forests,” partly becauseof the tremendous diversity of conditions in whichforests exist. Each certification scheme has its owncriteria and indicators. Recently the Center for Interna-tional Forest Research sent teams of local and interna-tional experts to eight countries (Austria, Brazil, Cam-eroon, Côte d’Ivoire, Gabon, Germany, Indonesia, andthe United States) to evaluate the validity and useful-ness of the criteria and indicators used by variousgroups. The teams found general agreement on themain components of sustainability, including 6 basicprinciples and about 25 criteria related to policy,ecology, production, and social factors. Indicators andcriteria tend to be site-specific, so that evaluators willprobably need to adapt them to specific site character-istics. The Bank should—without associating itself withany particular certification scheme—support work toestablish criteria and indicators around a common setof principles and to develop broad institutional capac-ity and human capital in borrowing countries.3

The Bank’s recently approved Prototype CarbonFund is an example of the type of experimentation theBank should be promoting to remain at the forefront onenvironmental issues (see box 4.1). This program,which currently operates in transition economies, couldmake a positive contribution to the global environment(once international agreements are in place) withoutattracting the controversy that has threatened othersimilar initiatives. The Fund’s target size would be$100–120 million, with required contributions of $10million for public sector participants and $5 million forprivate sector participants.

Changes in Strategy ImplementationSince the 1991 strategy was formulated, the Bank

has changed in ways that could have implications forthe way it participates in global forums and theoperational support of the forest sectors of developingcountries. With staff levels declining, the Bank’s par-ticipation in forest-related global forums has been

39

haphazard. The Bank has participated in activitiesrelated to the Kyoto Protocol and some important newinitiatives related to climate change, but its participa-tion in the Intergovernmental Panel on Forests andIntergovernmental Forum on Forests, for example, waslimited and unpredictable until two years ago. If theBank is to be proactive in mobilizing enoughconcessional or grant resources to make a difference toglobal forest outcomes, it will need to follow a coherentapproach to involvement in global processes that affectthe forest sector. It will also need to support objectiveprofessional analysis of the extent and causes ofdeforestation in developing countries, with the activeparticipation of stakeholders in those countries.

Many Bank operations staff, including departmentheads, have been relocated from headquarters to theirclient countries to strengthen Bank-client relationshipsand to respond to client-driven demand. The Bank’sown decentralization has led to the adoption of a more

open, consultative stance toward stakeholders in policydialogue, in the preparation of CASs, and in somelending operations. These developments may not havebeen consistent with the expectations of containingdeforestation to meet global objectives as espoused bythe 1991 Forest Strategy.

The Bank’s new emphasis on knowledge is aresponse to technological change and the informationrevolution. Networks of technical specialists in theBank are now expected to facilitate knowledge dissemi-nation; enhance product quality; and provide faster,more effective responses to constraints identified duringproject operations. The electronic revolution hasenabled the Bank to communicate with professionalsand clients throughout the world, particularly inborrowing countries, in a way that was not possibleonly a few years ago. This new orientation is critical tothe CDF and should enhance the Bank’s work onforests, which is often multisectoral and dependsheavily on the transparency and accountability associ-ated with improved governance.4 However, the tre-mendous decline in the number of forest sectorprofessionals may limit the Bank’s effectiveness atseeing forest conservation in the context of broaderglobal, technological, and market considerations.

Three Perspectives on Forest StrategyThis review, in addition to drawing on extensiveinformal consultations with stakeholders, profession-als, and the NGO community in borrowing countries,surveyed several groups through interviews, focusgroups, and formal surveys, including Bank staff whowork on forest issues, participants in the CEO Forum,and members of the World Bank/WWF Alliance. Theformal survey results support many of the conclusionsOED reached through its Regional portfolio analysis,country case studies, and focus group discussions aboutthe Bank’s unrealized potential to play a more activeglobal role.

Bank staff survey. The Bank staff surveyed agreewith the overall thrust of the 1991 strategy but do notbelieve the Bank has effectively helped reduce rates ofdeforestation. They think forest issues are not wellintegrated with the Bank’s broader mission of povertyalleviation and economically and socially sustainabledevelopment, that more attention should be paid to theforest sector in CASs and ESW. The staff believe thepolicy of banning Bank financing of commerciallogging in primary tropical moist forests is irrelevant


Clearcut. Washington State, U.S.A. Photo courtesy of StillPictures.

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and has not affected the rate of deforestation in clientcountries. Many believe that making the Bank policymore flexible than OP 4.36 would better address keyforest management issues associated with logging inprimary tropical moist forests. They also believe Bankperformance in the forest sector should be strengthenedto promote greater protection of natural forests, institu-tional reforms, multisectoral approaches to forestdevelopment, and the planting of new trees.

Staff say that forest-related work within ESSDwould be more effective if forest sector leadership,operational support, and resource flows were consoli-dated. They believe that to convert ideas into activi-ties, the innovative strengths of the EnvironmentDepartment needs to be combined with greater opera-tional support than the Rural Development Depart-ment has traditionally provided. ESSD has recentlyreorganized the forest sector team, first with twoco-managers—one each from the Rural Developmentand Environment departments—but many challengesremain. Every vice-president of ESSD has stressed themanagement challenges of ensuring central leadershipin the forest sector, because the sector straddles manydisciplines and Bank Networks. Staff believe countrymanagers are more likely than staff in other sectors toconsider involvement in the forest sector as entailinghigher transaction costs and lower payoffs than otheractivities, which inhibits responsiveness to the chal-lenges of improving forest management. Reasonsgiven for these perceptions include internal con-straints such as inadequate resources for ESW andproject preparation and supervision; the complexity ofproject design (which for forest activities is inherentlymultidisciplinary and multisectoral); flaws in themanagement structure of the Bank; an inadequateskill mix; and internal technical and budgetary con-straints. External constraints include corruption inimplementing agencies, inadequate appreciation ofkey issues by policymakers in borrowing countries,insufficient implementation capacity, less-than-influ-ential forest and environment ministries, and thecontroversial nature of forest-related policies. Staffbelieve the Bank could become a global leader in suchforest-related issues as climate change, biodiversityconservation, natural resource management, carbonsequestration, and the Clean Development Mecha-nism. With a clear strategy and the right internalincentives and resources, the work of both the GEFand the IFC could increase.

CEO Forum survey. The CEO Forum has in-creased awareness of the Bank’s 1991 Forest Strategy(and its safeguard policy content), especially in theprivate sector. The open discussion of forest issuesbetween private sector and NGO representatives hasrevealed many areas in which their views are similar,and some participants believe that a number of theirviews have converged. Several private sector partici-pants have asked for a broader-based approach topromoting improved forest management and reformsand more attention to the economic aspects of sustain-able development. Others think favoring conservationover sustainable forestry will erode the Bank’s credibil-ity. Most agreed that the policy focus should bebroadened to include all forest types, not just tropicalmoist forests. Members of the forum acknowledged thebenefits from certification, but like the IFC voicedconcern about its costs and benefits, end-users’ willing-ness to pay a premium for certified products, the needto agree on guidelines, problems of third-party monitor-ing, and the possibility that certification could becomea barrier to trade. Some forum members believe theBank is well-positioned to address issues of climatechange, biodiversity conservation, and resource man-agement, although some NGOs disagree. A majority offorum members felt that the role of the GEF and the IFCshould either increase or stay the same, but almost halfof the private sector respondents did not know enoughabout the GEF’s activities to respond.

World Bank/WWF Alliance survey. Respondentsbelieve that the World Bank/WWF Alliance strengthensthe environmental expertise, and uses the comparativeadvantages, of both the Bank and the WWF. Thealliance’s main potential benefits are increased fundingfor conservation activities and increased attention togood practices in improved forest management. Itsdrawbacks include the “top-down” approach it takes,its limited financial resources, and the time of Bankstaff for alliance activities without commensuratebudget support.5 Most WWF staff believe the target ofestablishing 50 million hectares of new forest-protectedareas to be realistic; they are much less certain aboutwhether 200 million hectares can be placed underindependently certified management by 2005.

Bank staff consider both goals to be unrealisticunder current internal and external constraints. Alli-ance members believe fuller integration of the allianceagenda with the Bank’s agenda to be essential. Theystress the importance of developing a longer-term

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vision with clearer regional targets and better commu-nication and reporting. Either more resources should beallocated to the alliance or its clients should be fullyinformed about budget constraints within the Bank andfiscal constraints in the countries, so that expectationsbecome more realistic. Both WWF and Bank staffconsider decentralization, realistic targets, andincreased stakeholder participation important ways tomake the alliance more effective.


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55Conclusions

T his review of Bank activities and changing Bank and international trends supports two

main findings. First, the Bank has implemented its 1991 Forest Strategy but with

significant shortcomings. Second, that implementation has had only a modest impact

on the strategy’s two central objectives: slowing deforestation in tropical moist forests and

planting new trees. The 1991 strategy made Bank activities more conservation-oriented, but it did

not provide for an effective means of implementation.

Despite the Bank’s limited presence in the forestsector—less than 2 percent of its total lending—it couldbe a highly influential global actor. But the task ischallenging: the Bank’s goals are ambitious, yet it hasallocated very limited resources to the sector. Further-more, stakeholders’ expectations are diverse. Forexample, neither the high conservation expectations ofsome NGOs nor the contrasting perspectives of theprivate sector are necessarily shared by the Bank’sborrowing governments. This review concludes that theBank needs to adopt a broad-based strategy thatincludes the views of all stakeholders, more proactivelypursuing the twin objectives of conservation anddevelopment in a financially and fiscally sustainableand socially equitable manner that stimulates genuineborrower demand and simultaneously achieves theBank’s central mission of poverty alleviation.

Strategy ImplementationThe Bank has only partially implemented the 1991Forest Strategy, mainly by increasing the number offorest components in its environmental lending—inprojects that aim to conserve forests, enhance forest-related services, and improve the livelihoods of the

people living in and on the margins of forests. Theprojects’ diverse approaches are consistent with thestrategy’s focus on policy and institutional reform,improvements in forest inventories, forest managementand regeneration plans, and participatory approaches.With the notable exception of China, however, treeplanting and non-timber forest products and serviceshave received much less support in Bank lending. InChina the Bank has successfully supported the expansionof tree cover by nearly 3.9 million hectares through treeplanting on different scales and under a wide array oftenurial arrangements—from involving poor minorityhouseholds on individual, community, and public lands,watersheds, and shelterbelts to large-scale public planta-tions—with significant national and global environmen-tal benefits. However, marketing of timber andnon-timber forest products are issues even there.

Outside the confines of the forest sector, Bankactivities have not paid enough attention to certaincritical factors—often external to the forest sector—that affect implementation of the policy’s centralobjectives. Integration of the principles of the foreststrategy into the Bank’s CASs, macroeconomic policyadvice, and adjustment lending has been limited, and

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adjustment lending has increased substantially since1991. Even where those principles have been inte-grated, the link between these macro efforts and Bankoperations has been weak, a characterization that isnot unique to the forest sector. The 1991 strategy didnot anticipate the powerful effect of macroeconomicpolicies and globalization. And the multisectoralapproach and international cooperation emphasized inthe strategy have not been adequately pursued.

The strategy, along with independently evolvingBank internal policies and processes, such as environ-mental impact assessments and other safeguards, hasprevented operations in sectors such as infrastructurefrom contributing to deforestation. This is a substantialachievement. But sectoral analyses have been spotty inaddressing the impact on forests of non-forest-sectorpolicies. And although safeguards have been applied atappraisal in non-forest-sector lending operations, moni-toring and evaluation of the impacts of those safe-guards has been inadequate.

Direct forest lending (for mainstream activities offorest ministries and departments) has stagnated.Nearly two-thirds of it is concentrated in China andIndia, where it is at risk of decline—in China, becauseof the shift in the Bank’s lending terms; in India becauseof competing demands for borrowed resources. Forestlending has plunged in Africa, where the need for forestassistance is greatest and where the poor are over-whelmingly dependent on forest products and services.Forest sector lending also has not been sufficientlyintegrated into the Bank’s agricultural, rural develop-ment, or poverty alleviation strategies, although someof the world’s poorest people rely on forest productsand services for their livelihood. Prominent among theforest-dependent poor are women, but gender consider-ations have also received too little attention in theBank’s policy implementation. Given the complexcultural challenges of getting women involved inpoverty-oriented forest projects, the Bank should makeextra efforts to consult and engage nationals fromborrowing countries knowledgeable in these issues.

These criticisms notwithstanding, some notewor-thy changes are under way in sectoral analyses andadjustment lending in the East Asia and Pacific Region,and in increasingly sophisticated participatoryapproaches being used in the East Asia, South Asia,and Latin America and Caribbean Regions. Moreparticipatory and phased approaches, including learn-ing by doing, are being incorporated into project

design in the Eastern Europe and Central Asia Region.These are important new pilot approaches to imple-mentation, but it is too early to assess outcomes,effectiveness, and sustainability. The Bank’s challengewill be to integrate the substance of forest sector issuesinto CASs, to better link the CASs to operations, and toprovide the right incentives for scaling up the experi-ments with positive outcomes to achieve more impact.

In addition to its regular operations, since 1991 theBank has launched new initiatives in response to changingglobal circumstances and increasing concerns aboutdeforestation. Initiatives such as the World Bank/WWFAlliance and the CEO Forum seek to increase the dialogueamong stakeholders, to develop a consensus on suchcontentious issues as the role of certification and how todefine “protected areas” and “sustainable forest manage-ment.” However, the new initiatives have not been fullyintegrated into the country or forest sector strategies andtheir sustainability is not assured (see Annex G).

EffectivenessThe effectiveness of the 1991 strategy has been modestwith respect to achieving its two main objectives, andthe sustainability of its impact is uncertain. The rate atwhich tropical moist forests are disappearing has notbeen reduced through Bank efforts, and tree plantingwith Bank financing has occurred on too small a scaleto make a significant impact on global forest cover.The strategy has kept the Bank from getting involved inpolicies and operations that harm forests, therebyabsolving it of “guilt by association.” But the world’sforests, especially the tropical forests, continue todeteriorate and the strategy overlooked temperate,boreal, and tropical dry forests, which are also sociallyand environmentally important.

There are three related reasons for this mixedperformance; they have to do with how the strategy andsubsequent policy were conceived. First, because therapidly changing forces that were reducing forest coverand forest quality were not correctly diagnosed, theremedies suggested were either inadequate or misdi-rected. OP 4.36, the unclear “do no harm” policy, triedto give Bank staff more flexibility in addressing thechallenges of forest management, but responses to staffsurveys indicate that it did not succeed. Second, theconsultative process used to develop the strategy wasnot inclusive enough. It left out key borrowing countryand private sector perspectives, as well as those ofBank staff and managers, many of whom developed no

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C o n c l u s i o n s

sense of ownership of either the strategy or the policy.Some Bank client countries were unaware of the foreststrategy until this OED review. Moreover, the strategyled to a significant loss of the Bank’s internal capacity,as a number of forest specialists left the Bank in theyears after the strategy was announced. Finally, therapid changes since 1991, both globally and in theBank, have made the strategy less relevant.

The strategy’s limitations. The strategy’s focus wastoo narrow—20 countries with tropical moist forests—and neglected other biodiversity-rich types of forest. Andin assuming that poor people were the main cause ofdeforestation in those tropical moist forests, it failed toconsider the role of other actors. The strategy overlookedfundamental governance issues that affect forest sectordevelopment and did not consider forests integral to theBank’s poverty alleviation mission. It focused largely oneconomic solutions, such as the length and price ofconcessions (as incentives for conservation), and onprivate property rights. In reality, a wide range of oftencomplex property arrangements are encountered in forestsector development. The strategy diagnosed the problemof externalities (the divergence of global, national, andlocal costs and benefits) as a factor in deforestation but,except for the small GEF grant program, it did not call formobilizing enough resources to meet the resource gap forconserving forests of global value. It assumed thatgovernments would borrow funds on IBRD or IDA termsto achieve global (or even national) objectives for forestconservation, although they had other, more pressing,priorities.

Disincentives to implementation. Within the Bank,insufficient staff ownership of the strategy, shortcom-ings in human and financial resources, and a lack ofincentives have been obstacles to the strategy’s fullimplementation. Country and task managers and clientgovernments perceive Bank involvement in the forestsector as entailing higher transaction costs andreputational risks than involvement in other poverty-alleviating sectors. Contributing to this perception arethe ambiguous nature of OP 4.36’s conditions for Bankinvolvement in sustained-yield logging, the associatedban on Bank financing of commercial logging in

primary tropical moist forests, and the requirementthat projects may be pursued only where there hasalready been broad sectoral reform. Even though theban was confined to primary tropical moist forests, thecontroversy surrounding any logging in any naturalforest has led to the perception of reputational risk forBank involvement in other forests, including secondarynatural forests in the tropics. Even in client countriesheavily committed to conservation, the costs of dealingwith the Bank in the forest sector are widely viewed asdisproportionate to the potential benefits.

Decreasing relevance. The Bank’s client countrieshave viewed the Bank’s limited funds as being bettersuited to competing uses with quicker payoffs, even forthe objective of poverty alleviation (girls’ primaryeducation, rural electricity, drinking water supply).The returns on long-gestating forest investments areoften not high or quick enough, but the risks tend to betoo high, relative to other possible uses of those funds,to stimulate borrower demand for Bank involvement orinvestments. This has been true not only for treeplanting involving poor households in China—wheredemand for Bank funds has plummeted as interest rateshave increased—but also for medium- and large-scaleplantations in Brazil’s private sector. The 1991 strategydid not adequately acknowledge either the long-termnature (and the short-term costs) of forest-relatedbenefits or their implications for financing. Whether aspart of forest strategy or of financial sector policy,access to finance for tree planting on any scale hasdiminished. Similarly, in retrospect, the strategy under-stated the power of domestic and international marketforces to strengthen the incentives to cut trees or toplace land under alternative uses, increasing deforesta-tion. With or without Bank-financed structural adjust-ment, borrowing countries have often liberalized theireconomies in the context of globalization to takeadvantage of market opportunities that would helpthem maintain or resume growth and alleviate poverty.Liberalization has increased incentives for deforesta-tion in many of the Bank’s client countries, often withadverse impacts on forests and the people who dependon them.

Drawing criticism: The strategy’s definition of “primary forest” and the application of Bank safeguards, particularlythose on indigenous people and resettlement, have added to external criticism, including the threat of inspection panels.These controversies have been significant in forest-rich countries, which have wished to use their substantial naturalforests for financing economic development, but they have also extended to other types of forests and projects.

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Reconsidering the Bank’s Forest StrategyEfforts to promote forest sector objectives, especiallythe conservation and sustainable use of forestresources, must be viewed in the context of currentglobal realities, country circumstances, and the overalldevelopment goals and aspirations of developing coun-tries. The Bank’s strategy needs to be cognizant of, andresponsive to, the inevitable forces of globalization andtheir impact on forests and forest-dependent peoples. Itneeds to be flexible enough to accommodate localcircumstances. It must also recognize the importance ofthe participation of constituencies within specific bor-rowing countries in discussions of activities such as thedemarcation of forest types by function, or tree plant-ing to supplement natural forest resources and services,and of such issues as social justice.

Revising the Bank’s forest strategy and policy—and supporting implementation strategies—shouldenable the Bank to play two synergistic roles.

• In its global role, the Bank would capitalize onits convening powers to facilitate partnershipsthat mobilize additional financial resources(over and above improved coordination of exist-ing country-specific aid flows) for use in clientcountries, including new financing mechanismson a scale large enough to achieve any globalgoals that may be set out in the revised strategy.

• In its country-level role, the Bank would addressthe diverse realities in client countries, using allthe instruments at its command and stressinglong-term involvement, partnerships with abroad range of constituencies, learning by doing,and the exchange of experience across countries.This would require a long-term commitment,with enough resources for ESW and with consul-tative processes complementary to, but indepen-dent of, lending operations.

RecommendationsOED has identified seven elements that would make theBank forest strategy more relevant to current circum-stances and strengthen the Bank’s ability to achieve itsstrategic objectives in the forest sector.

Mobilize financing for global forest services. The 1991Forest Strategy acknowledged the divergence betweenthe global and national (including local) costs andbenefits of conservation. It assumed, however, that

Bank clients would be willing to borrow funds to meetthose objectives. But in the 80 countries with decliningper capita incomes, competition is intense for Bankresources for activities with more immediate benefits. Itwas unrealistic to assume that global environmentalobjectives could be achieved through the Bank’s lend-ing function alone, even though environmental con-sciousness in the Bank’s borrowing countries hasincreased and conservation would produce some long-term national and local benefits. Many of the Bank’slargest borrowers, including the most forest-poor andenvironmentally conscious countries, have indicatedthat they have higher priorities for the use of Bankresources than conservation investments. The 1991strategy produced no momentum toward designing aglobal collaborative effort, nor did it provide mecha-nisms for mobilizing adequate financial resources forsuch an effort. The GEF, while important, is too smallin scale, providing limited, term grants for biodiversityconservation. It has no mandate to offer payments forthe maintenance of forest cover and related environ-mental services.

Recommendation: The Bank should use its globalreach to address mechanisms for and mobilization ofconcessional international resources outside its lendingactivities. These resources should be substantialenough, and on attractive enough terms, to interestdeveloping countries. Support for Bank leadership indeveloping carbon and other markets (certification,ecotourism, water) is not universal, and internationalwillingness to pay for these services is questionable.Given the Bank’s increasing decentralization, the Bankwill need to revisit the matrix management arrange-ment governing forest operations if it is to play a globalrole in advancing or implementing international agree-ments or piloting new approaches.

Forge international partnerships. Implementation expe-rience suggests that the Bank cannot achieve results inthe forest sector alone, even at the national level. It isnearly impossible to do so globally without forgingpartnerships with donors, foundations, the privatesector, civil society, and NGOs. The initiatives intro-duced by the World Bank since 1991 represent a clearbreak from the past, but the Bank needs to widen thescope of its activities—not just at the international levelto successfully scale up, but also at the national andlocal levels to scale down.

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Recommendation: The Bank needs to proactivelyestablish partnerships with all relevant stakeholders toachieve its country- and global-level goals. The Bankand other development partners must increasinglywork together at both international and country levels,in a participatory manner, to improve forest manage-ment in all kinds of forests, aiming to reach a balanceamong environmental, economic, and social objec-tives. This may lead to new agreements and new waysof mobilizing resources, with the Bank as one of manypartners.

Broaden the types of forest covered. The boreal andtemperate forests of the Europe and Central AsiaRegion are a major source of timber, biodiversity,and other forest products and services, includingrecreation and carbon sequestration. Since 1991, thisRegion has seen the greatest growth in Bank forestlending, as countries from the Region with extensiveforests have joined the Bank. Committed to protect-ing old growth forests, the Bank is already support-ing production and conservation activities in manyof these national forests, which have a strongtradition of responsible forest management for mul-tiple uses. Such efforts to improve production effi-ciency in all types of forests should continue, exceptin forests designated for protection by nationalgovernments. It is also important to note thatextending the current ban on Bank financing forcommercial logging in tropical moist forests to theforests of Europe and Central Asia would jeopardizecurrent operations and could have a chilling effect onthe Bank Group’s ability to mobilize much-neededfunding for continued responsible forest managementin this Region. Tropical dry forests are also impor-tant, especially for meeting the fuelwood and liveli-hood needs of the poor, particularly in Africa, whichneeds increased Bank support. Global thinking aboutthe functions of forests has reached the point where itmay now be possible to assign specific functions toindividual forests in a way that both national andinternational goals can be met.

Recommendation: Bank strategy should have a moreeclectic and inclusive approach with a global reach,rather than narrowly focusing on tropical moist forests.Tailoring forest strategy to specific forest types, func-tions, and services would increase the Bank’s globalimpact in the forest sector. A revised strategy should

address the challenges of endangered, biodiversity-richforests in a variety of ecosystems and should promotetree planting.

Foster sustainable development objectives. The pow-erful forces of globalization and economic liberaliza-tion have intensified pressures for forest productionand land conversion, challenging the goal of “sus-tainable development.” Rapidly growing domesticand international demand for forest and agriculturalproducts has a synergistic relationship with poorgovernance. Managed-production forests, tree plant-ing, and tree plantations can reduce pressure onnatural forests set aside for preservation. Togetherthey offer the potential for “win-win” outcomes, withbetter yields and more conservation. The debate onprudent forest management to maintain theresource’s potential into the future has advancedconsiderably since 1991. The improved, or low-impact, management of natural forests is recognizedas holding the potential to increase the efficiency offorests’ multiple functions and services. Certificationis an important instrument for encouraging betterpractices. A number of experiments are currentlyunder way on certification (including some associ-ated with the World Bank/WWF Alliance), butdeveloping countries have little experience with thisinstrument. Moreover, although it may be possible toagree on uniform international criteria for all pro-cesses and types of forest, uniform indicators areunlikely because of the diversity of forest types,values, and functions. So it would be unwise for theBank to endorse a specific certification standard. TheBank must actively entertain alternative methods ofcertification, provided they meet generally acceptedcriteria and indicators and are adapted to circum-stances in specific developing countries. Little isknown about the economic and financial returns toimproved or low-impact forest management. Whatevidence there is suggests that current returns toconventional logging—legal or illegal—are so highthat investments in improved management cannot bejustified without substantial additional research andexperimentation to demonstrate its feasibility underhighly diverse tropical forest conditions. In any case,widespread illegal extraction makes it pointless forentrepreneurs to invest in improved logging or treeplanting. This is a classic case of concurrent govern-ment and market failure.


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Recommendation: The Bank Group should ensure thatforest concerns receive due consideration in its macro-economic work and all relevant sectors and shouldsupport activities that will help protect natural forestsof national and global value. The Bank should explic-itly cover approaches to these issues in its CASs andstructural adjustment lending. It should increase sup-port for quality ESW by providing resources (indepen-dent of lending operations), it should support researchand extension, and it should establish guidelines,criteria, and indicators for improved forest manage-ment. Through partnerships, the Bank should also helpcreate public and private capacity for widespreadapplication of improved forest management and treeplanting (through small, medium-size, and large com-munity, private, and public plantation forests as appro-priate in particular circumstances and with due envi-ronmental and social impact assessments in place).

Curtail illegal logging through improved governance.The pervasiveness of illegal logging is a joint outcome ofhigh economic returns and poor enforcement of laws andregulations. Poor governance, corruption, weak enforce-ment capacity, and political alliances between the rulingelite and some parts of the private sector all play a partin deforestation by permitting illegal logging and theenvironmentally destructive and socioeconomically in-equitable exploitation of natural capital. Successfulconservation, preservation of biodiversity, and improvedforest management all require reducing and controllingillegal logging. Increasing forest productivity and pro-viding alternative sources of timber and other forestproducts will also reduce the returns to illegal logging.Institutions that improve governance, productivitygrowth, and tree production are classic and globalpublic goods and merit public investments. Each re-quires long gestation periods and entails the risk thatresults might not be achieved or might be reversed.Fortunately, the movement toward democratization andthe emergence of active civil societies are paving theway for greater transparency and accountability.

Recommendation: A revised and strengthened foreststrategy should aim to reduce illegal logging byactively promoting improved governance and enforce-ment of laws and regulations. This would entailhelping governments improve implementation of exist-ing laws and regulations and, where necessary, chang-ing them, improving government enforcement capac-

ity, and diversifying sources of monitoring to activelyinclude civil society. Improved governance cannot beachieved by the forest sector alone, but the forest sectorcan take the lead in bringing it about.

Apply a more inclusive definition of “the forest-dependent poor.” Depending on how “dependence” isdefined, as much as a quarter of the world’s poor maydepend on forests for their livelihoods. Many, but notall, of the forest-dependent poor are indigenous people,a group to whom the Bank’s forest strategy and relatedsafeguards paid special attention. The 1991 strategystressed the importance of reducing poverty to relievepressure on forests, and promoting tree planting as away to meet the fuelwood needs of the poor, but didnot recognize the importance of developing the forestsector as a means of alleviating poverty among allforest-dependent people. Bank-financed projects inChina, India, and Mexico demonstrate the substantialpotential that forest development—through communityparticipation—holds for generating employment, in-comes, and social capital. Forest development andforest policy should become more prominent elementsin the Bank’s poverty alleviation strategy.

Recommendation: Given the Bank Group’s povertyalleviation mission, a revised forest strategy shouldinclude elements that directly address the livelihoodand employment needs of all poor people, whilecontinuing to safeguard the rights of indigenous people.A revised strategy should also acknowledge the fre-quent conflicts between the interests of the indigenouspoor and those of the non-indigenous poor. To betteraddress the needs of the forest-dependent poor, theBank should encourage grassroots investigations intocomplex land rights and other rights. It also needs tomonitor the impacts of macroeconomic and otherchanges, and develop safety nets for those likely to beharmed by Bank-supported activities.

Adjust internal Bank incentives and reporting systems.The forest strategy’s emphasis on “doing no harm”increased public accountability, made the challenges ofinvolvement in the forest sector more complex, raisedtransaction costs (without raising the resources to dealwith them), and was seen as increasing the reputationalrisks for Bank Group involvement in the forest sector. Allthese costs, plus the costs entailed in a more country-driven orientation, were higher than the 1991 Forest

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Strategy envisaged. Against this reality, the frameworkof internal Bank incentives is currently tilted againstforest operations, and the Bank’s capacity in the forestsector has declined. Some skills, such as for assessing theimpact of global, macroeconomic, and technologicalchanges on forests, were always in short supply andremain so. These and other factors discussed in thisreport have made Bank managers risk-averse. Countrymanagers also tend not to be motivated to incur the risksand transaction costs associated with complex, contro-versial forest operations. The Bank has not provided theresources needed to track the progress of forest opera-tions (locally or globally) and is weak on monitoringcompliance with safeguard policies.

Recommendation: To be credible, the Bank must eitheralign its resources with its objectives in the forest sectoror scale down its objectives. The Bank’s internalincentives and skill mix for forest sector operations

need to be enhanced through a more evenly balancedmatrix management structure so that operational stafffeel that they have management’s support and confi-dence. Staff should also have access to the necessaryquality human and financial resources—if necessary,independent of lending operations—to address riskyand controversial issues in the forest sectors of theirclient countries. If the revised strategy includes specificinternational forest goals, it should provide for thespecific financing mechanisms and arrangementsneeded to achieve those goals. The Bank must dili-gently and routinely monitor compliance with allsafeguard policies in its investment and adjustmentlending, adhere strictly to the requirement for environ-mental impact assessments in its sectoral adjustmentoperations (introduced in May 1999), and considerintroducing a requirement for environmental impactassessments in adjustment operations where such im-pacts are likely to be significant.


ANNEXES

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ANNEX A: EXPANDED EXECUTIVE SUMMARY

In 1991 the World Bank published The Forest Sector: AWorld Bank Policy Paper, a comprehensive statementof the World Bank Group’s forest strategy.1 This paperbrought the environmental agenda into the mainstreamof the Bank’s activities and challenged the Bank Groupto adopt a multisectoral approach that would conservetropical moist forests and expand forest cover. It alsoinitiated participatory and consultative processes instrategy formulation. Parts of the strategy outlined inthe 1991 paper became the basis for Operational Policy4.36 and Good Practices 4.36, both issued in 1993. Twoprevious evaluations of the forest strategy—the 1994Review of the Implementation of the Forest SectorPolicy by the (then) Agriculture Department and the1996 Forestry Portfolio Review by the AgricultureDepartment and the Quality Assurance Group—con-cluded that it was too early to assess the impact of theforest strategy. So this report is the first comprehensiveevaluation of the Bank’s forest strategy.

The Bank has implemented its 1991 Forest Strategyonly partially, and mainly through an increased num-ber of forest-related components, especially in environ-ment sector lending. Although the strategy sent a strongsignal about changed objectives in the forest sector andincluded a new focus on conservation, its implementa-tion has fallen short.

Direct lending for the forest sector was not well-enough incorporated into the Bank’s rural develop-ment or poverty alleviation strategies, even thoughmany poor people and minorities in borrowingcountries rely greatly on forest products and servicesfor their livelihoods. The strategy and safeguardpolicies helped shift Bank-financed investmentsaway from the kinds of projects that had previouslycontributed to deforestation, but they also inhibitedrisk-taking. Furthermore, the multisectoral approachand international cooperation that the forest strategyemphasized were not actively pursued. There wasonly limited integration of the forest strategy intoCountry Assistance Strategies (CASs), macroeco-nomic and sectoral analyses, and adjustment, infra-structure, and agriculture lending. In addition, rapidglobalization, technological changes, and gover-nance issues in the forest sector, as well as changes inthe Bank itself over the past decade, have renderedthe 1991 strategy only partially relevant. At thesame time, initiatives introduced by World Bank

President James Wolfensohn, such as the CEO Forumand the World Bank/World Wide Fund for Nature(WWF) Alliance, went beyond the prescriptions ofthe 1991 strategy.

The effectiveness of the 1991 strategy has beenmodest, and the sustainability of its impact is uncer-tain. The strategy had several inherent limitations.

First, it focused narrowly on 20 tropical moistforest countries and neglected other biodiversity-richtypes of forest that are even more endangered, moreimportant globally, or more in need of conservation.Second, while it diagnosed the problem of externalities,it did not encourage development of a mechanism formobilizing grant or concessional funding to compen-sate those who conserve forests of global value,implicitly assuming that governments would borrowBank funds to achieve global conservation objectives.Third, the strategy failed to address governance issuesbeyond economic solutions such as the length and priceof concessions as incentives for conservation. Fourth,its consultative process was not broad enough to elicitownership among key stakeholders and governmentofficials in borrowing countries. Moreover, the Bankhad no implementation strategy and devoted too fewresources to deal with the high transaction costs ofBank involvement in the sector. Fifth, the strategyinsufficiently diagnosed the powerful impacts of glo-balization and economic liberalization—factors exter-nal to the forest sector—on rates of deforestation andon forest-dependent people. These limitations, com-bined with the Bank’s cautious approach, had a chillingeffect on Bank involvement in improving forest man-agement, particularly in forest-rich countries, and evenin those regions of forest-poor countries that use theirforests for economic development.

A revised Bank forest strategy and policy—and aBank implementation strategy—should enable theBank Group to play two synergistic roles:

• In its global role, the Bank would capitalize onits convening powers to facilitate partnershipsthat mobilize additional financial resources(over and above improved coordination of exist-ing country-specific aid flows) for use in clientcountries, including new financing mechanismson a scale large enough to achieve the globalgoals set out in the revised strategy.

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• In its country-level role, the Bank would recog-nize and address the diverse realities in clientcountries using all the instruments at its com-mand and stressing long-term involvement, part-nerships with a range of constituencies, learningby doing, and the exchange of experiences acrosscountries. This would require a long-term com-mitment by the Bank, with enough resources forresearch, economic and sector work, and consul-tative processes complementary to, but indepen-dent of, its lending operations.

OED has identified seven elements that would makethe Bank forest strategy more relevant to current circum-stances and strengthen the Bank’s ability to achieve itsstrategic objectives in the forest sector:

1. The Bank needs to use its global reach toaddress mechanisms for and mobilization ofconcessional international resources outside itslending activities. Measures such as the Proto-type Carbon Fund and other concessional fi-nancing mechanisms should be pursued tocompensate countries that are producing forest-based international public goods such as biodi-versity preservation and carbon sequestration.

2. The Bank needs to be proactive in establishingpartnerships with all relevant stakeholders tofulfill both its country and global roles. At thesame time, it must recognize the implications,in terms of additional resources, of meetingglobal objectives and of using participatoryapproaches.

3. The focus on primary tropical moist forestsneeds to be broadened to encompass all types ofnatural forests, including temperate and borealforests and other highly endangered, biologi-cally-rich types of forest: the Cerrados regionand Atlantic forest of Brazil, the tropical dryforests of Africa, and the Western Ghats ofIndia. The revised strategy should recognizethat natural forests alone need not serve allforest functions. Some important functions (suchas meeting export and urban demand, provid-ing environmental services, and meeting theemployment and livelihood needs of the poor)can as easily be served by tree planting, theexpansion of which could also relieve pressureon natural forests.

4. Forest issues need to receive due consideration inall of the Bank’s relevant sector activities andmacroeconomic work, and the Bank shouldsupport activities that will help protect naturalforests of national and global value. Efforts topromote forest conservation and developmentshould be streamlined and aligned with theoverall development goals and aspirations of theBank’s client countries. The synergy betweendevelopment and conservation objectives needsto be recognized and actively promoted throughtree planting on degraded forest andnonforestlands, energy substitution, end-user effi-ciency, research, technology, and dissemination.

5. Illegal logging needs to be reduced by activelypromoting improved governance and enforce-ment of laws and regulations. This will requirehelping Bank borrowers improve, implement,and enforce existing laws and regulations. Itwill also require that national stakeholders(especially civil society and the private sector)demand, implement, and monitor improvedgovernance practices.

6. The livelihood and employment needs of allpoor people should be addressed, while continu-ing to safeguard the rights of indigenous people.More attention needs to be paid to how theforest strategy affects all poor people, andparticular attention should be paid to theconflicting needs of different user groups.

7. The Bank needs to align its resources with itsobjectives in the forest sector. The Bank’sinternal incentives and skill mix need to beenhanced so that operational staff feel they havethe support and confidence of Bank manage-ment and country borrowers and access to thehuman and financial resources needed toaddress the risky and controversial issues of theforest sector. The Bank must also diligently androutinely monitor compliance with all safe-guard policies in its investment and adjustmentlending.

Key FindingsPatterns of forest sector lendingAt $3.51 billion in the 1992–99 period, overall forestsector lending was 78 percent higher in nominalterms than in 1984–91. As before 1991, it was justbelow 2 percent of total Bank lending for the period.

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Direct lending for the forest sector has stagnated. Thegrowth in total forest lending is explained almostexclusively by the increase in forest components of non-forest-sector projects. The integration of forest sectorlending into the environment and natural resourcemanagement sector has been a positive development.These projects are largely responsive to the intent of the1991 Forest Strategy and support protected areas andbiodiversity conservation, zoning, indigenous people’srights, and community participation. But investmentsthat directly address mainstream issues in the forestsector (involving long-term policy and institutionalchanges needed to improve the management of forestproduction or regeneration on public lands) have beenhobbled by low borrower demand, high transactioncosts, and the fear of public controversy through “guiltby association” with poor forest practices of publicforests in borrowing countries.

Mixed results from Bank policiesThe Bank strategy’s cautious approach to forest man-agement and its ban on Bank financing of commerciallogging in primary tropical moist forests has beenstrategically and symbolically important. The Bankhas not been associated with (or criticized for) wastefuland illegal deforestation and degradation, as it wasbefore 1991. The Bank has also been more cautious infinancing major infrastructure investments that arelikely to harm forests.

Environmental impact assessments have improvedprojects at entry. The implementation of safeguardpolicies, while imperfect, has increased Bank account-ability to a civil society that increasingly participatesin environmental and social monitoring. This processhas also increased the sensitivity of developing countrygovernments to environmental concerns. Indeed, agrowing number of stakeholders in borrowing countriesnow look to the Bank for assistance in improving theirdomestic capacity to ensure implementation of theirown safeguard policies. These are all important processachievements and developments.

It is essential to apply “do no harm” policies toBank lending. But implementing these policies has beenlargely irrelevant to the rates of deforestation. Relativereturns to conventional logging and alternative land useshave been high. The synergistic relationship of thecountries’ own infrastructure investments, developmentsin agricultural technology, and market pressures toconvert land to other uses, stemming from the powerful

impacts of economic liberalization, globalization, tech-nological change, and devaluation have all been keyfactors. Moreover, the do-no-harm approach has madethe Bank Group wary of getting involved in experimentsto improve forest management, to address illegal log-ging, or to improve the interface with forest industries,even though borrowers are strongly urging the BankGroup to help them modernize their antiquated forestsectors. Hence, the Bank has often lost the opportunity toimprove the management of forests that are alreadybeing exploited in an environmentally and sociallyunsustainable manner.

Containing deforestation in tropical moist forestsThe 1991 strategy had the dual objectives of conserv-ing tropical moist forests and planting trees, but Bankinfluence on containing rates of deforestation in tropi-cal moist forests has been negligible in the 20 countriesidentified for Bank focus.

The 1991 strategy underrated the “developmental”function natural forests serve in forest-rich countries.Developing countries need to increase incomes,employment, and exports to meet their developmentobjectives. Countries rich in forests but poor in capitaland budget resources have tended to use their naturalcapital to create and sustain livelihoods and to financedevelopment, thereby producing a conflict betweennational interests and global environmental objectives.

Devolution of power to the local level has in-creased pressure on forests in situations where powerrelationships are unequal and where the income,employment, and revenue needs of local governmentsand their politically powerful constituents increase thatpressure. Sustainable development and devolution maybe necessary or desirable in the long run, but many ofthe costs of forgoing the financial and economicbenefits of forest exploitation are local and immediate,while the environmental benefits of forest conservationare national and global—and even where they arelocal, are either long-term or accrue to groups withonly a limited voice in local governance. The situationcan improve only if countries develop broad-basedparticipatory institutions that offer equal voice to localconstituencies, especially the vulnerable, and only ifthey can find the resources to forgo the short-termexploitation of forests.

Forest-rich countries have tended to exploit theirresources inefficiently. In many countries illegal log-ging in natural forests accounts for at least half of the

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total timber supply, and wastage through conventionallogging, processing, and transport is reported to be ashigh as 70 percent of the total harvest.

The Bank strategy adopted the ban on financing forcommercial logging on the defensible grounds of uncer-tain valuations of forest environmental services, inad-equate forest management systems, and irreversibilitiesassociated with forest loss. But poor governance, corrup-tion, and political alliances between various segments ofthe private sector and ruling elites, combined withminimal local and regional enforcement capacity, haveplayed a part in environmentally damaging and socio-economically inequitable exploitation of natural capital.

Bank strategy should address these issues throughincreased and improved partnerships with local govern-ments, civil society, and the progressive private sector,rather than assuming that the absence of Bank Groupfinancing for commercial logging in primary tropicalmoist forests will somehow reduce deforestation.

The poor have been less a source of deforestationand forest degradation in the forest-rich countries thanthe 1991 strategy assumed. A much stronger factorappears to have been the growing domestic demand forwood energy in industry, for timber in construction,and for tropical forest products for export to interna-tional markets. To contain deforestation and degrada-tion, countries need substitutes. For example,investments in environmentally friendly alternativesources of energy, and tree planting could help reducedemand for wood energy from natural forests. Withoutsuch investments, and without adequate finances tocompensate countries that incur costs to achieve globalenvironmental objectives, deforestation and forest deg-radation will continue.

Financing mechanismsThe 1991 strategy recognized the need for internationaltransfers to underwrite conservation of global value,but failed to generate the momentum needed to estab-lish adequate mechanisms or finances for that purpose.There is little borrower demand for Bank funds tofinance pure conservation, through protection of exist-ing natural forests, primarily because short-termdomestic economic or social returns to conservationare limited, even in countries where environmentalconsciousness and awareness of environmental ser-vices—such as ecotourism—have increased. Demandhas also declined for the expansion of forest cover bytree planting, which could serve many forest functions

and could help relieve pressure on natural forests. Thelong time needed for tree growth (when there is no cashflow and when risks are high), combined with tightcredit, high domestic interest rates, and the continuedsupply of timber from natural forests, has thwarteddemand for investments either in small-scale treeplanting or in plantation forests. Whether the cause hasbeen resistance to plantations on environmental andsocial grounds or financial policy reform restrictingdirected credit to specific activities, tree planting hasbeen neglected. Grant resources provided by the GlobalEnvironment Facility are too small relative to the need.Difficulties in measuring and valuation persist, butenough is now known for the global community tomove ahead with tree planting and with measures toprovide financial support for the conservation of forestsof global and national value. Unless adequate compen-sation is provided for those involved in forest conserva-tion, forests will continue to shrink until scarcitiesbecome acute enough to elicit policy and marketresponses. Until adequate resources are available toprovide such compensation, the Bank should resistpressures to exhort governments to achieve globalobjectives that cannot be justified solely on the basis ofcountry benefits and borrower demand.

Changing country policiesBank leverage through policy conditionality is morelimited than popularly believed, even though environ-mental awareness among borrowers has increased. Afew of the new International Monetary Fund (IMF)stabilization and Bank adjustment packages haveincorporated forest sector conditionalities, but at thesame time, stabilization and adjustment policies haveplaced caps on government spending, including spend-ing for enforcement. Proponents argue that IMF andBank conditionality helps bring forest policy to theattention of high-level policymakers. Indeed, useful“stroke-of-the-pen” reforms have been achieved in afew countries facing financial crisis. But externallyinduced reforms without domestic commitment andstrong domestic champions tend not be sustainable.External pressure to achieve policy reform during aperiod of government weakness lacks legitimacy and,over time, may even solidify resistance. What is neededis a long-term, comprehensive political-economyapproach based on nurturing domestic ownership ofreforms and using all the instruments at the Bank’sdisposal, including lending, Country Assistance Strate-

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gies (CASs), and economic and sector work (ESW). In along-term strategy that combines analysis, constitu-ency building, and resource monitoring, adjustmentlending with specific forest conditions can have alegitimate place in specific countries—but it is not apanacea.

The treatment of environmental and social impactsin the Bank’s rapidly expanding adjustment lending is amore disconcerting matter. Macroeconomic adjustmentis often essential to sustain economic growth andalleviate poverty, but its short- and medium-termimpacts on forest cover and quality—and on the livesof forest-dependent people—can be devastating. TheBank needs to better understand the potential impactsof its adjustment lending—by encouraging and support-ing research—and to consistently apply safeguardpolicies to all its lending.

To develop a framework of mutual responsibilityand accountability for improved forest management,the Bank needs high-quality research and ESW at thecountry level. During project preparation and imple-mentation, the Bank should build borrowing countries’capacity for forest management and forge long-termlinks with domestic constituencies that can conductanalysis, stimulate reform, and ensure its sustainabil-ity. This “constituency-building” approach contrastssharply with the “conditionality” approach set forth inOP 4.36 and calls for a truly multisectoral, long-termeffort, as is intended in the Bank’s ComprehensiveDevelopment Framework (CDF). It also requires moreresources. Internally, the Bank has often failed toincorporate forest concerns into its CASs or to effec-tively link CAS pronouncements with its operations.Under the current conservation-oriented forest strategy,in an increasingly country-driven and decentralizedBank, borrowers in forest-rich countries have beenreluctant to include forest concerns in their ownpriorities for Bank support (which is part of the reasonthe sector gets little attention in CASs). With a fewrecent exceptions, forest issues have not been empha-sized in ESW, even in countries where forest sectors areeconomically important.

Improving tree cover, sequestering carbon, andprotecting biodiversity in other forestsAlthough the 1991 forest paper focused on tropical moistforests, Bank operations have rightly outpaced thatstrategy. The greatest growth in forest lending has beenin the management of public forests in Eastern and

Central Europe, the Bank Region with the world’s largestforest cover. The boreal and temperate forests in thatRegion represent a major source of timber, biodiversity,forest products, and forest services, including recreationand carbon sequestration. Committed to protecting oldgrowth forests and uninhibited by the 1991 ForestStrategy’s restriction on financing commercial loggingin primary tropical moist forests, the Bank is supportingproduction and conservation activities in many of thesemultiple-use forests. Such efforts to improve the produc-tion efficiency of all types of forests should continue,except in forests national governments designate asprotected. Boreal and temperate forests and other foresttypes in the Bank’s borrowing countries have their ownmanagement, conservation, and biodiversity issues thatneed to be addressed. But the treatment of these issueshas been eclipsed by the 1991 strategy’s focus on tropicalmoist forests. The Bank and the Global EnvironmentFacility support them only through small operations.

The Bank’s forest strategy must proactively learnfrom the experience of its borrowers, rather thanremaining top-down and externally driven. Some forest-poor developing countries are ahead of the Bank in theirforest policies and innovative approaches. Some of themare developing national sources of financing for environ-mental actions of national interest. The spread ofdemocratization and increasing demands for transpar-ency and accountability, as well as vibrant nongovern-mental organization (NGO) movements in the Bank’sborrowing countries, have collectively increased oppor-tunities for impact. The Bank’s convening power, itspolicy advice, its lending, and the prestige of itsassociation are important in countries beginning tocommit to improving forest sector management. Forestcover is stabilizing in China and India, for example,where the Bank is helping to operationalize participa-tory approaches to forest management. In Costa Rica, amultisectoral approach to policy advice facilitated theimplementation of far-reaching reforms and nationalfinancing mechanisms. In Brazil, Cameroon, and Indo-nesia, where the Bank has had difficult relations in theforest sector, dialogue has now opened up both withinthe countries and between the countries and the donorcommunity. This opening-up has increased the likeli-hood that reforms generated by constituencies withinthese countries will have broad ownership. In contrastdespite a long-term Bank presence, in Kenya, manydomestic and donor accomplishments have been lost forlack of government commitment.

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Need for a poverty focusMost of the population that lives in and around forestsis among the poorest and often includes indigenousminorities. Estimates vary widely, depending on theconcept of forest dependence used, but this populationmay include as much as a quarter of all poor. Nearlyfour-fifths of the forest-dependent poor are in Africa,East Asia, and South Asia. How the loss of forest cover,forest degradation, and tree planting affect these peopledepends on the nature of their forest dependence.Knowledge about the nature of their dependence iscrucial to the judicious design of interventions. Some ofthe poorest forest-dependent people are women, forexample, but gender considerations have not receivedmuch attention in the implementation of the Bank’sstrategy. Given the complex cultural challenges ofgetting women involved in poverty-oriented forestprojects, the Bank should make extra efforts to consultwith and engage nationals of borrowing countries whoare knowledgeable in these issues. Bank-financedprojects should involve the entire spectrum of forest-dependent people.

While many of the forest-related poor are indig-enous, even larger groups of non-indigenous peoplehave benefited from government land policies that havesometimes arbitrarily withdrawn land rights from onegroup and assigned them to others. The Bank’s 1991strategy underestimated the complexities of local cir-cumstances and the need for location-specific solutionssuited to the political, cultural, legal, and economiccontext. Bank projects have often tried to tailor theBank’s universal forest and safeguard policies to spe-cific country conditions, but frequently the net effecthas been increased transaction costs and criticism fromboth borrowers and outside observers. Even in coun-tries with large amounts of forest lending, forests havenot been an important element of the Bank’s strategyfor poverty alleviation.

Fortunately, noteworthy changes are under way insectoral analyses and adjustment lending in the EastAsia and Pacific Region, and in increasingly sophisti-cated participatory approaches in East Asia, SouthAsia, Latin America, and Eastern Europe. Projectdesign has improved through the use of phased andmore participatory approaches, including learning bydoing. These important new pilot approaches need tobe promoted, but it is too early to assess their outcomesor sustainability. The Bank’s challenge will be tointegrate forest sector issues more substantively into

CASs and to provide the right incentives for pilotingnew approaches, and then scaling up those withpositive outcomes.

The success of large programs in forest-poor Chinaand India (representing 60 percent of the Bank’s directforest sector lending) suggests that through a combina-tion of policy and institutional reforms and investmentsit is possible to achieve win-win outcomes—greaterpoverty reduction and an improved environment. Yetsuch investments are rarely made in Africa, wheremillions of poor people are forest-dependent. Theinvestments in China and India show that forestregeneration and tree planting through communityparticipation can offer substantial economic benefits tomillions of poor households in forest-poor countries,while increasing forest cover, sequestering carbon, andreducing pressure on natural forests. But it takes a longtime to develop and nurture community organizationalstructures, establish new rules of the game, and attainlegal, environmental, organizational, and financialsustainability. Moreover, the risks to those investmentsare high given the conservative attitudes of most forestdepartments and the extreme poverty and remotenesstypical of forested regions.

Can other donors provide the much-needed invest-ments in forest-poor countries while the Bank contributesthrough ESW and policy dialogue? Some environmentalNGOs strongly oppose any Bank investment operations inthe forest sector, either because they increase theborrower’s indebtedness or because they benefit forestministries and departments uncommitted to reform.2

Good ESW is necessary and adjustment lending can playa role in specific cases, but only in exceptional cases areboth sufficient to achieve impacts on forest cover andquality on the ground. The Bank’s presence—including itsinvestments—is crucial to its convening power and itsability to view forest development in a macroeconomicand multisectoral context. Besides, ESW is increasinglytied to lending activities, and few donors or governmentscan scale up approaches to participatory forest develop-ment to the level the Bank can. Through a hands-onapproach, the Bank learns from and gains the trust andconfidence of local stakeholders, enabling it to be acredible partner in local and national problem solving.Yet demand from finance ministries for InternationalBank for Reconstruction and Development (IBRD) or evenInternational Development Association (IDA) financing isslackening—even in countries with successful forest sectoroperations—because of competing demands on Bank

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funds from other poverty-reducing sectors that attract lesscontroversy and criticism and have lower transactioncosts than the forest sector, such as health and primaryeducation. Moreover, fiscally strapped developing coun-tries with declining per capita incomes are rarely in aposition to borrow resources for participatory forestmanagement; they have other, more urgent developmentpriorities.

Without additional grant or concessional assistance,governments are unlikely to be interested in long-termBank involvement in the risky forest sector. And interna-tional willingness to provide grant funds appears to beweaker today than when the forest strategy was formu-lated in 1991, despite growing environmental awarenessin developing countries. To mobilize concessional re-sources, the Bank needs to work effectively with donors,with U.N. agencies, with the private sector, and withNGOs. The Bank has become more active in forgingpartnerships in the past few years, but the record oninternational cooperation has not been as strong, eitherbecause donor and Bank agendas differed, or because theBank chose to go it alone.

Toward an effective forest strategyThe Bank needs to articulate its future role in globalforest partnerships and support that role with resourcescommensurate with the challenge. The Bank’s internalincentives currently tilt against forest operations. Theloss of forest staff after adoption of the 1991 ForestStrategy sent a negative signal to operational staff.What incentives do country managers have to incur therisks and transaction costs associated with complexand controversial forest operations? The Bank lacks theinstruments and, increasingly, the skills to implement aforward-looking forest sector strategy. Resources totrack the progress of forest operations (globally orlocally) are lacking, and arrangements for monitoringsafeguard policy compliance are weak. Should budget-ary resources for the forest sector be made available—even with low borrower demand—to meet globalobjectives? Without a clear operational policy consis-tent with the intentions of the revised strategy—and animplementation strategy to meet the policy goals—theBank would be unwise to promise global results thatexceed the sum of its country operations.

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ANNEX B: METHODOLOGY OF THE REVIEW

The OED Review of the World Bank’s 1991 ForestStrategy and its Implementation consists of two compo-nents: First, a review of all lending and non-lendingactivities of the World Bank Group (IBRD, IDA, IFC,and MIGA) and the Global Environment Facility (GEF)that are pertinent to the implementation of the foreststrategy; second, six in-depth country case studies(Brazil, Cameroon, China, Costa Rica, India, andIndonesia). The relationships of the study’s variousparts are shown in figure B.1. The Portfolio Review ofBank and GEF activity was done by OED. The IFCreview was done by the Operations Evaluation Group(OEG) of the IFC, and the MIGA review was done bythe Office of Guarantees of MIGA.

This was done to discern whether there has been anysignificant change in the pattern of Bank lending sincethe forest strategy became effective.

Investment Lending OperationsThe examination of the Bank’s forest sector lendingactivities had three major components:

• Direct Forest Projects: Projects listed in theBank’s databases under the “forestry” subsectorwhose parent sector is agriculture.

• Forest-Component Projects: Projects listed insubsectors other than “forestry” that also con-duct forest-sector-related activities. Forest-com-ponent projects are generally listed in othersubsectors of agriculture and environment,including natural resource management.

• Forest-Impact Projects: All lending operations invarious sectors and subsectors that have potentialindirect (positive or negative) impacts on forests.

Projects with Impacts on ForestsThe major sectors with forest-impact projects are agri-culture, including agriculture sector adjustment lending;transportation; mining; oil and gas; and electric powerand energy. Application of safeguards in these sectorswas examined both for their content relative to theintentions of the 1991 Forest Strategy and their applica-tion during project preparation, approval, and imple-mentation. The specific safeguards examined for compli-ance were OP 4.36 (Forestry), OP 4.04 (NaturalHabitats), and OP 4.01 (Environmental Assessment). Allimpact projects in the case study countries were identi-fied and analyzed for the application of forest-sector-related safeguards. Because of the sheer number of suchprojects Bank-wide, however, the portfolio analysisconsidered only a sample of impact projects.

The method used to identify impact projects wastwofold. First, all Bank Group projects in subsectors witha potential impact on forests were identified. In theagriculture sector, for example, all projects involvingagricultural extension, agricultural adjustment, agricul-tural credit, agro-industries and markets, annual crops,irrigation and drainage, livestock, other agriculture,perennial crops, and agricultural research were identified.In the electric power and energy sector, projects in thedistribution and transportation and the hydroelectric

Sequence of the ReviewAll Bank activities in the forest sector were addressed in amultisectoral context. For analytical purposes the reviewconcentrated on the following groups of countries:

• Six case study countries• Twenty tropical moist forest countries• Countries with Bank forest projects after 1991• Countries with forest-component projects after

1991• Countries with GEF forest projects• Countries with forest projects before 1991• Countries with forest-component projects before

1991.

The Bank’s lending activities in the forest sectorwere examined in two eight-year periods, the periodbefore implementation of the forest strategy (1984–91)and the period after implementation began (1992–99).

FIGURE B.1. RELATIONSHIP OF THE STUDY’S PARTS

World BankPortfolio Review

IFC

GEF

CountryCase Studies

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power subsectors were considered. Projects were alsoidentified in the oil and gas sector, in subsectors such as oiland gas transportation and exploration. In the transporta-tion sector, projects were identified in such subsectors ashighways, railways, other transportation, and ruralroads. Finally, all projects in the mining sector wereconsidered. A total of 389 projects were identified, withtotal commitments of $30.6 billion (table B.1). In the nextstep, 20 percent of these projects were randomly selectedto ascertain their impact on forests. The distribution ofthese 78 projects by sector, subsector, and Region ispresented in table B.2.

Adjustment LendingIn its review, OED addressed forests and adjustment intwo ways:

• It reviewed a sample of 34 structural and agricul-tural adjustment loans and credits in an effort toevaluate whether and how forest issues wereaddressed. Specifically, the review ensured that ithad covered macroeconomic and agriculture sectoradjustment loans and credits in the post-1991period, in (1) the six case study countries, (2) the 20countries the 1991 Forest Strategy identified ascontaining threatened moist tropical forests, and(3) the 19 countries to which the Bank has madedirect forestry project loans and therefore hasknowledge of their forest sectors.1

• It reviewed in depth the three countries(Cameroon, Indonesia, and Papua New Guinea)for which the IMF and Bank adjustment loansincluded specific forest-related conditionality.

In reviewing the adjustment lending, OED askedfour questions:

• Were forests mentioned at all in the loan/creditdocument?

• Was there a discussion of the links betweenadjustment reforms and forests?

• Was there a forestry component in the loan/credit?• Was there loan/credit conditionality related to

forests?

Safeguard PoliciesThe Bank’s safeguard policies were examined, particu-larly in investments in sectors with a potential impacton forests—such as irrigation, power, transport—and in

sectoral and macroeconomic lending. Safeguards wereexamined for two categories of Bank operations: (1)projects whose activities could have an impact onforests and (2) projects or project components thatdirectly target forest management or tree planting.Projects in the first category were examined to assesstheir compliance with safeguards addressing forest andenvironmental issues (OP 4.36, Forestry; OP 4.04,Natural Habitats; and OP 4.01, Environmental Assess-ment). Projects in the second category, because theyhad explicit forest-related goals, were examined forapplication of the four safeguards concerning forestsand local dwellers (OP 4.36, Forestry; OP 4.04,Natural Habitats; OP 4.01, Environmental Assess-ment; and OD 4.30, Indigenous Peoples).

Participation IssuesThe OED team developed a two-category evaluativeframework to determine the extent of participation inBank projects after 1991. Projects were rated for levelof participation and breadth of participation. A five-scale ranking was used to determine the level ofparticipation:

0 = No participation1 = Information sharing (one-way

communication)2 = Consultation (two-way communication)3 = Collaboration (shared control over decisions

and resources)4 = Empowerment (transfer of control over

decisions and resources).

For breadth of participation, projects were ratedusing a 5-scale ranking system:

1 = Extremely limited participation2 = Limited participation3 = Moderate participation4 = High participation.

Each forest project during the two periods (1984–91 and 1992–99) was examined for the followingattributes:

• Participation in project stages: Inclusion instated project objectives; use during projectdesign; and (where it is possible to examine) useduring implementation and evaluation.

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• Indicators: Inclusion of participatory indicatorsin monitoring and in supervision missions.

• Methods: Social assessments; beneficiary assess-ments; needs assessments; surveys; participatoryrural appraisals; advisory groups; informal inter-views; focus groups; workshops.

• Stakeholders: Communities/local rural resourceusers; community-based organizations/coopera-tives/local institutions/associations; local NGOs;international NGOs/research institutions; indig-enous peoples; women’s groups; local/district/state/government representatives; commercialprivate sector.

Monitoring and EvaluationThe quality of monitoring and evaluation (M&E) plans atproject entry was evaluated for all forest projects and for asample of forest-component projects approved between1992 and 1999. The review of M&E during implementa-tion was based on a desk study of a random sample ofeight projects (four forest and four forest-componentprojects). Projects were chosen using a stratified randomsample to cover each of the Bank’s Regions and to ensurethe inclusion of projects that had received performanceratings of “unsatisfactory” in the Project Status Reports(PSRs). PSRs were included to better understand howeffective M&E was at identifying project problems.

The M&E review focused on the following:

• Clearly stated objectives, specific to projectinterventions, with well-defined and appropriateindicators

• Clearly stated mid-level outputs and/or indicatorsof outputs, and lower-level progress indicators

• M&E arrangements, including specific officeresponsible for various activities

• Information, frequency of project M&E reports,and use of the information

• Institutional strengthening focused on establish-ing information systems or databases or expand-ing research findings for the forest sector.

The rating done for this review was based on keypromises in the appraisal documents. The reviewlooked for clear statements of what the project expectedto achieve by the time it was completed and forunambiguous and appropriate indicators for thoseachievements. Statements about outputs and/or theirindicators were expected to specify outcomes of lower-

level outputs and processes that were germane toachieving the project objective. The review also consid-ered whether the document contained clearly specifiedprogress indicators—that is, a series of lower-levelactions completed in a chain of linked events to permitkey stakeholders to monitor progress. Based on thesecriteria, appraisal documents (Staff Appraisal Reportsor Project Appraisal Documents) were rated as follows:

1 = Highly satisfactory2 = Satisfactory3 = Marginally satisfactory4 = Unsatisfactory.

Country Assistance Strategies and economic andsector work were reviewed in different degrees of depth.

Non-lending ServicesOED’s review of the Bank’s non-lending services in-cluded an analysis of multisectoral policy and dialogue,Country Assistance strategies (CASs), and economic andsector work (ESW). Table B.3 and table B.4 show thebreakdown, by Region, of CASs, economic reports, andsector reports for sectors relevant to forestry (agriculture,forestry, energy and mining, environment, naturalresource management, infrastructure and urban devel-opment, and transportation). A significant component ofthis review was to analyze these documents in terms ofthe way they directly or indirectly (for example, throughpolicy reforms in their sectors) related to the treatment ofthe forest sector. The ESW, both scheduled and unsched-uled, was also analyzed.

Country Assistance StrategiesThe relevant “population” for this review consisted of 274potential CAS reports when all forest, forest-component,and GEF projects (both before and after 1991) wereconsidered. But the review concentrated on strategies forthe case-study countries (30), for tropical moist forestcountries (another 48 CASs), for countries with directforest lending (another 61), and for countries with lendingfor forest-component projects (another 80) after 1991 for atotal of 219 strategies in 65 countries.

It is important to note that this was a review of theCAS documents as opposed to a review of theeffectiveness of assistance to the countries, which isaddressed in the country case studies and the portfolioreview. The evaluative framework specified the fol-lowing elements:

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t Str

ate

gy

: Str

ikin

g th

e R

igh

t Ba

lan

ce

TABLE B.1. WORLD BANK PROJECTS WITH POTENTIAL IMPACT ON FORESTS (1992–99)AFR EAP ECA LCR MNA SAR All Regions

Commit- Commit- Commit- Commit- Commit- Commit- Commit- No. of ments No. of ments No. of ments No. of ments No. of ments No. of ments No. of ments

Sector Subsector projects $M projects $M projects $M projects $M projects $M projects $M projects $M

Agriculture Ag. extension 12 293 2 23 2 79 1 25 3 70 20 490Ag. adjustment 22 707 1 50 7 1,072 6 999 4 92 40 2,920Ag. credit 3 149 2 272 8 136 2 345 1 121 16 1,023Agro-industry & marketing 5 58 9 380 1 15 1 65 16 518Annual crops 2 35 1 50 3 85Irrigation & drainage 8 304 4 311 9 243 9 909 11 1,033 6 530 47 3,330Livestock 4 81 1 12 5 93Other agriculture 10 107 4 232 7 337 5 150 6 518 1 11 33 1,355Perennial crops 1 70 1 70Research 7 244 2 27 3 222 1 14 2 74 15 581

Total 73 1,978 12 935 46 2,279 28 2,719 25 1,868 12 686 196 10,465

Electric Distribution power and & transmission 7 200 10 920 8 844 4 451 1 54 3 530 33 2,999 energy Hydro 5 177 2 101 3 419 2 312 2 415 14 1,424Total 12 377 12 1,021 11 1,263 6 763 1 54 5 945 47 4,423

Mining Mining & other extractives 8 102 1 35 6 1,941 5 345 20 2,423

Total 8 102 1 35 6 1,941 5 345 20 2,423

Oil and gas Oil & gas transportation 1 30 3 380 3 211 1 60 1 121 9 801Oil/gas exploration 3 107 1 11 5 1,311 1 100 1 180 11 1,709

Total 4 137 4 391 8 1,522 2 160 2 301 20 2,510

Transpor- Highways 18 1,539 9 930 21 2,259 18 3,193 4 244 3 397 73 8,562 tation Other

transportation 2 32 2 130 2 268 2 57 1 24 9 511Railways 2 36 3 316 5 352Rural roads 2 85 2 83 3 63 7 580 1 58 4 506 19 1,374

Total 24 1,692 13 1,143 29 2,906 25 3,773 7 359 8 927 106 10,799Grand total 121 4,286 42 3,525 100 9,910 64 7,600 35 2,441 27 2,858 389 30,621


63

An

ne

xe

sTABLE B.2. ANALYZED SAMPLE OF WORLD BANK PROJECTS WITH POTENTIAL IMPACT ON FORESTS (1992–99)

AFR EAP ECA LCR MNA SAR All Regions

Commit- Commit- Commit- Commit- Commit- Commit- Commit- No. of ments No. of ments No. of ments No. of ments No. of ments No. of ments No. of ments

Sector Subsector projects $M projects $M projects $M projects $M projects $M projects $M projects $M

Agriculture Ag. extension 3 79 3 79Ag. adjustment 4 73 1 50 2 52 1 75 1 30 9 281Ag. credit 1 4 1 15 1 95 3 113Agro-industry & marketing 1 6 2 51 3 57Irrigation & drainage 2 27 1 58 1 13 2 90 2 295 1 285 9 768Livestock 1 20 1 12 2 32Other agriculture 2 12 1 5 2 21 1 23 1 42 1 11 8 114Research 1 15 1 15

Total 15 235 3 113 9 163 5 283 4 367 2 296 38 1,458

Electric Distribution power and & transmission 2 97 2 236 2 81 1 65 1 250 8 729 energy Hydro 1 10 1 35 1 300 1 65 4 410Total 3 107 2 236 3 116 2 365 2 315 12 1,139

Mining Mining & other extractives 1 13 1 800 1 40 3 852

Total 1 13 1 800 1 40 3 852

Oil and gas Oil & gas transportation 1 105 1 105Oil/gas exploration 1 2 1 16 1 100 3 118

Total 1 2 1 105 1 16 1 100 4 223

Transpor- tation Highways 3 363 2 244 4 297 3 295 1 35 13 1,234

Railways 1 20 1 120 2 140Rural roads 1 55 1 8 2 137 1 58 1 273 6 530

Total 4 383 3 299 6 425 5 432 2 93 1 273 21 1,903

Grand total 24 740 9 753 20 1,519 13 1,120 7 560 5 884 78 5,576


64


TABLE B.3. DISTRIBUTION OF SCHEDULED ECONOMIC AND SECTOR WORKInfra -

Natural structureCountry resource & urban

Assistance Economic Agri- Energy & Environ- manage- develop- Transpor- Strategy report culture Forestry mining ment ment ment tat ion

Total reports (#) 368 1,060 277 24 120 65 9 288 97

Scheduled reports 536 140 17 69 24 4 127 53

Africa 117 105 43 3 16 3 31 10

East Asia and Pacific 49 97 26 3 14 5 2 34 18

South Asia 23 69 13 3 9 17 3

Europe and Central Asia 66 107 26 4 22 8 1 19 10

Middle East and North Africa 26 50 12 2 3 12 5

Latin America and Caribbean 87 108 20 4 6 5 1 14 7

Case study countries 30 85 21 4 13 4 1 33 16

Tropical moist forest countries 69 125 37 6 16 4 1 31 10

Countries with Bank forest projects (after 1991) 83 154 40 5 14 6 41 19

Countries with Bank forest-component projects (after 1991) 169 295 71 10 32 8 1 77 32

Countries with GEF forest projects (after 1991) 139 231 55 10 32 8 1 70 28

Countries with forest and forest-component projects, including GEF (after 1991) 230 358 90 13 44 12 1 92 38

Countries with Bank forest projects (before 1991) 110 205 54 8 25 6 1 61 21

Countries with Bank forest-component projects (before 1991) 82 146 32 4 24 2 39 17

All countries with forest and forest-component projects (before 1991) 146 245 63 9 32 6 1 69 24

Total reports, without double-counting (before and after 1991)a 274 397 103 15 52 12 1 96 38

a. Includes Bank and GEF forest and forest-component project countries, case study countries, and 20 moist tropical forest countries,but each report is counted only once.

65

TABLE B.4. DISTRIBUTION OF UNSCHEDULED ECONOMIC AND SECTOR WORKInfra -

Natural structureresource & urban

Economic Agri- Energy & Environ- manage- develop- Transpor-report culture Forestry mining ment ment ment tat ion

Total reports (#) 1,060 277 24 120 65 9 288 97

Unscheduled reports 524 137 7 51 41 5 161 44

Africa 209 61 2 28 18 1 60 17

East Asia and Pacific 53 10 4 6 1 20 4

South Asia 55 9 3 1 21 6

Europe and Central Asia 78 24 1 9 4 1 27 9

Middle East and North Africa 30 13 2 20 4

Latin America and Caribbean 99 20 4 5 12 2 13 4

Case study countries 49 8 1 7 1 18 4

Tropical moist forest countries 96 15 9 5 23 4

Countries with Bank forest projects (after 1991) 140 24 7 6 42 9

Countries with Bank forest-component projects (after 1991) 248 55 2 26 16 87 23

Countries with GEF forest projects (after 1991) 216 47 1 23 12 74 19

Countries with forest and forest-component projects, including GEF (after 1991) 308 69 2 28 14 106 26

Countries with Bank forest projects (before 1991) 180 47 2 17 13 53 15

All countries with Bank forest-component projects (before 1991) 140 27 2 15 4 41 12

All countries with forest and forest-component projects (before 1991) 250 59 3 21 15 69 17

Total reports, without double-counting (before and after 1991)a 387 88 4 37 19 124 32

a. Includes Bank and GEF forest and forest-component project countries, case study countries, and 20 moist tropical forest countries,but each report is counted only once.

A n n e x e s

66


• The valuable aspects of the object of evaluation• The range of values that could be assigned to

those aspects• An aggregation formula• A decision rule for determining an overall

judgment.

The CAS review focused on the treatment of sixissues:

(1) Environmental issues in general(2) Specific forest sector or biodiversity issues(3) Institutional development(4) Stakeholder involvement(5) Mechanisms for monitoring and evaluation(6) The multisectoral approach.

The OED team saw the way these issues arediscussed in a CAS as a reflection of the degree towhich the country team viewed forest sector issuesstrategically. Therefore the ratings should be consid-

ered in the context of the Bank’s overall approach tothe forest sector in a country context and not inisolation. The ratings were established as follows. Forissues No. 2, 3, and 4:

0 = the issue was not mentioned.1 = the issue was mentioned but not elaborated

upon.2 = there was an elaborated discussion of the issue

or it was considered a priority.3 = goals or instruments were set for dealing with

the issue.

For environmental issues in general, there wereonly two possible values: 0 if not mentioned and 1 ifmentioned. Similarly, for M&E, 0 means there was nosystem to monitor outcomes in the sector and 1 meansthere was such a system. For the multisectoralapproach, 0 means a multisectoral approach for theforest sector was not explicitly advocated in the docu-ment and 1 means such an approach was advocated.

quarter of the world’s landarea—about 3.5 billion hect-ares—and forested area dimin-ished 0.3 percent a year between1990 and 1995. The FAO esti-mates that nearly 97 percent ofthis forested area is in a naturalstate, but natural forests are rap-idly being changed into semi-natural forests and plantations.This transition has alreadyoccurred in Europe, where 85percent of the forests are nowsemi-natural. The shift is occur-ring rapidly in many developingcountries.

The FAO states that onlyhalf of the natural forested areain the world is available for

wood production; the rest islegally protected or harvesting isnot economically viable (for lackof transportation links, markets,or other infrastructure or becauseof regulations or physical inac-cessibility). Some of the land maybe unavailable because of lowproductivity, but the FAO consid-ers as much as 82 percent of thenatural forest in South Americaunavailable because of physicalinaccessibility. The OED countrystudies challenge these estimates,because there is so much illegallogging and because governmentshave increased their investmentsin infrastructure.

The FAO says that in addi-tion to forested area, there areanother 1.7 billion hectares cov-ered with woody vegetation that

contributes substantially to thefuelwood supply. The FAO esti-mates that 75 to 80 percent of theroundwood harvested in the EastAsia and Pacific Region and asmuch as 91 percent of that har-vested in the Africa Region isused for fuelwood, although theproduction and consumption offuelwood are poorly tracked,because they occur largely in theinformal sector.

FAO estimates of removalsfrom natural forests are also verylarge. Official concessions or pro-duction statistics account for halfor less of total (including export-import) consumption. But planta-tion forestry, which represents only3 percent of the world’s forestedarea, provides most of the woodsold to industry.

ccording to the Food andAgriculture Organization(FAO), forests cover a

BOX B.1. FAO DATA ON THE STATE OF THE WORLD’S FORESTS

A

67

A n n e x e s

Simple summing of the ratings was adopted foroverall ratings, which range from 0 to 12. The decisionrule was that treatment was considered:

Unsatisfactory for any rating less than or equal to 6Satisfactory if greater than 6 and less than or

equal to 9Highly satisfactory if higher than 9.

Overview of the Country Case StudiesThe country case studies were intended to complementthe desk portfolio reviews. Their purpose was to bringan in-depth understanding of developing countries’forest sectors and to provide the OED study withnational perspectives from a range of stakeholders. Sixcountries were selected for in-depth study, three forest-rich, and three forest-poor. The vast differences in thesix countries selected for the case studies, and the extentof the Bank’s presence, are apparent from the resourceendowments, the size and the pressure of population onthe land, country policies and institutions, and the rates

at which forest cover, policies, and institutionalarrangements have changed.

Each country study was a collaborative effortbetween in-country authors, who have considerablefield research experience in the case study countries.The OED team benefited from field visits and fromwide-ranging discussions with government officials,Bank staff, and numerous other stakeholders in thecountry. Detailed draft terms of reference were devel-oped to explore certain issues common across coun-tries and others specific to certain countries. Thecountry case studies tried to address some issuescommon to many countries as much as possible byusing similar databases and methodologies. They alsoaddressed issues specific to those countries and ex-plored the Bank’s interface with countries on thoseissues. The point was to explore the extent to whichthe Bank’s 1991 Forest Strategy could provide theflexibility needed to deal with quite divergent countryrealities.

The country studies asked two key questions:

cover estimates with a “GlobalForest Resources Assessment 2000”(FRA 2000) initiative, currently inprogress.

The OED review found majordifferences between authenticatednational estimates and FAO esti-mates of forest cover and loss—both levels and trends—incountries as important as Braziland Indonesia. To ensure analyti-cal rigor, the country studies drewalmost exclusively on nationaldata and on the literature thatassesses the validity of such data.

If the international communityis serious about addressing issuesof forest degradation, it must pro-vide financial support to help bud-get-strapped developing countriesconduct forest inventories, as sug-gested in the 1991 Forest Strategy.

However, this will require ahuge long-term commitment anddeveloping countries areunlikely to buy in to such aninventory until the internationalstance on the extent, sources,and causes of changes in the for-est cover—and their implicationsfor resource planning and imple-mentation—become less combat-ive and more inclusive of issuesthe developing countries face.Without a mutually shared vi-sion and a strategy that demon-strates greater political acumenand a fuller understanding ofpractical realities, including theinternational resource transfersrequired to achieve global objec-tives, the global community willachieve few useful results.

The OED study findings castconsiderable doubt on the reliabil-ity of these estimates. First, thediversity of forest sector concepts,definitions, classifications, andmeasurements is bewildering.Second, most developing countriesface financial and technologicalconstraints that do not allow themto measure forest sector perfor-mance adequately. So nationalassessments of changes in forestcover and forest quality may notbe reliable enough for sound cross-country comparisons. The FAOcombines national forest, demo-graphic, and income data toproject current and future rates ofdeforestation, so the reliability ofthe FAO projections is question-able. However, the organization isimproving and updating its forest

68


• What do we know about the sources and causesof deforestation in each country?

• How did the Bank Group (World Bank, IFC, andMIGA) and GEF interact with each other and—considering the full gamut of instruments avail-able to the Bank Group—with the factors affect-ing processes of change in the forest cover?

Data SourcesThe overall portfolio review for the Bank was a deskreview, based on the Bank’s information systems and staffinterviews. A variety of in-house data sources were used,such as the Quality Assurance Group’s “Projects at Risk”database, OED’s project evaluation database, the AnnualReview of Portfolio Performance (ARPP) database, thePlanning and Budgeting Department’s (PBD) database,Project Appraisal Documents (PADs), Staff AppraisalReports, Project Status Reports (PSRs), Project Comple-tion Reports (PCRs), Implementation Completion Reports(ICRs), and Project Performance Audit Reports (PPARs).For data on the state of the forests in the case studycounties, OED relied almost entirely on national data andthe literature. FAO data, the accuracy of which isdebatable, were used only when nothing else was avail-able (see box B.1).

Process of the StudyThe highly participatory process used in the study wasimportant for reaching conclusions and presenting differ-ent viewpoints. The review consulted widely withgovernments, development agencies, NGOs, and theprivate sector. The OED design paper was translatedinto Portuguese, French, Mandarin, Spanish, andBahasa (languages of five of the six case study countries:Brazil, Cameroon, China, Costa Rica, and Indonesia).The country studies and the main report were translatedbefore the OED and ESSD regional workshops.

Process-related components of the review aredescribed next.

Advisory CommitteeAn advisory committee of four counseled OED on itsreview from the beginning. The committee met threetimes, offering comments and advice on the designpaper, on the selection of countries for the case studies,on preliminary findings from the portfolio review, onthe overall consultation plan for the study, and on thefinal report. Committee members were in regularcontact with the OED team.

WorkshopsEntry workshop. An entry workshop on the OEDreview was held on December 18, 1998, at World Bankheadquarters in Washington, D.C. The purpose of theworkshop was to solicit comments on the substance ofthe issues the OED team proposed to address and on themethodology proposed to ensure that the review’soutput would be as relevant as possible to the ongoingESSD Forest Policy Review and Implementation Pro-cess. Participants in the workshop included the co-chairand executive secretary of the Intergovernmental Fo-rum on Forests, bilateral donors, members of OED’sadvisory committee, authors of country case studies,and World Bank Group staff and managers.

Internal reviews. OED’s preliminary report wasdiscussed with Bank staff and management at aworkshop on December 15, 1999, and at a meeting ofthe World Bank Executive Board Committee on Devel-opment Effectiveness (CODE) on December 23, 1999.

Country workshops. OED held four multi-stake-holder country workshops between November 1999 andApril 2000. The India Country Workshop was hosted byIndia’s Ministry of Environment and Forests with activeinput from the World Bank’s country department (No-vember 1, 1999). The China Country Workshop, hostedby the State Forestry Administration (SFA) and WorldBank country office, was held on November 5, 1999.OED held a workshop in Brazil in collaboration with thegovernment of Brazil, the Brazilian Corporation forAgricultural Research (EMBRAPA), and the World Bankcountry office on November 18–19, 1999. The IndonesiaWorkshop, co-hosted by the International Center forForestry Research (CIFOR) and the U.K. Department forInternational Development (DFID), was held on April25, 2000. The workshops were designed to allowgovernments and other country-level stakeholders (suchas representatives from NGOs, the private sector, andacademia) an opportunity to comment on their country’scase study before the studies were offered to an interna-tional audience for feedback. The workshop participantsdiscussed both the Bank’s involvement in the forest sectorand the underlying diagnosis and implementation of thecountry’s forest strategy and its relation to the Bank’s1991 strategy.

The Cameroon case study (translated into French)and the Costa Rica study (translated into Spanish) weresent for comments to a wide range of stakeholders.Comments about these case studies have been publishedtogether with the final case study reports.

69

OED Forest Strategy Review Workshop. Forestryexperts, environmental activists, industry representa-tives, and government policymakers met in Washing-ton, D.C., on January 27 and 28, 2000, to discuss thefindings of the preliminary OED review and to contrib-ute ideas to a new strategy being prepared by the WorldBank’s Environmentally and Socially SustainableDevelopment (ESSD) Network. The workshop trig-gered a discussion among participants, who exploredhow to bridge competing perspectives and how tofacilitate partnerships to support conservation and thesustainable and equitable use of forest resources.Summary proceedings of the workshop are being issuedas a supplement to the main OED report. Whereappropriate, OED reflected comments made or submit-ted at the workshop in its final report.

Web-Based Consultations and Information SharingOED’s design paper was posted on an OED website inJanuary 1999 to elicit comments from a wider interna-tional audience. Also posted on the web were theproceedings of the entry workshop held in December1998, a matrix summarizing comments made at thatworkshop and OED’s responses, and a summary ofmeetings with NGOs and a matrix with OED’sresponses.

The draft synthesis report and draft country casestudies were placed on the web in January 2000.OED has also issued updates on the forestry study onthe Internet every two months, to inform interestedstakeholders.

NGO ConsultationsOED’s first briefing/consultation with NGOs washeld on January 29, 1999, to discuss the study designpaper. Subsequently several meetings were held withNGOs, and OED also participated in meetingsorganized by ESSD.

Focus Group SessionsBank staff and managers working in the forest sectorwere invited to a series of focus group sessions in thelate winter/early spring of 1999. The sessions were heldto gather insights on specific issues from country andsector managers, lead macro- and sector economists,forestry and forest-related task managers, and special-ists involved in addressing issues related to the forestsector. The sessions were facilitated by Madelyn Blair

of Peleri, Inc. Five focus group sessions were heldbetween January and March 1999. Preliminary find-ings of the focus group sessions, which were attendedby a small number of staff, were statistically validatedthrough a staff survey.

Staff SurveyQuestionnaires were sent to 100 World Bank Groupstaff associated with the Bank’s Forestry Community ofPractice. The focus of discussions included, but was notlimited to, the development of Country AssistanceStrategies as well as other sector work and lending tosectors that could have an impact on forests. Opinionsexpressed are reflected in the context of affiliationswith particular Regions and Networks, but individualresponses were kept anonymous.

CEO Forum QuestionnaireAs part of its review, OED also issued a surveyquestionnaire to all members of the CEO Forum. Thesurvey, which sought to gauge awareness of the Bank’sforest strategy at the company level, asked if memberswere familiar with the 1991 Forest Strategy before theCEO Forum was formed. At the time the survey wasissued (April 1999), the official Forum membership was31. Membership in the CEO Forum was designed toinclude “various stakeholder groups whose activities,one way or another, are critical to the present andfuture management of the world’s forests.” Thesestakeholder groups include leading industrialists, headsof NGOs, and members of government ministries andinternational organizations. The Forum was created topromote the discussion of the options for reducingbarriers to sustainable management in forests, mainlyby promoting responsible investors’ participation inproduction and management of these forests.

World Bank/WWF Alliance QuestionnaireOn May 3, 1999, the WB/WWF Alliance questionnairewas sent to 47 World Bank and 46 World Wide Fund forNature staff members. Staff members from both organi-zations were identified through the Alliance CountryTeam List, which designates the coordination of coun-try and regional contact staff members. Members of theAlliance steering committee—all but a few of whomwere also assigned country or regional coordinatingresponsibilities—were also sent the questionnaire andincluded in these totals.

A n n e x e s

71

A n n e x e s

ANNEX C: PORTFOLIO REVIEW DATA

TABLE C.1. WORLD BANK ECONOMIC AND SECTORREPORTS, SCHEDULED AND UNSCHEDULED,ALL SECTORS (NUMBER)

Netchange

Report type 1992–95 1996–99 (%)

Country Assistance Strategy 179 189 6Economic report 533 527 -1Agriculture 173 104 -40Forestry 18 6 -67Energy & mining 69 51 -26Environment 20 45 125Natural resource management 3 6 100Infrastructure & rural development 158 130 -18Transportation 49 48 -2


FIGURE C.1. NET CHANGE IN ECONOMIC ANDSECTOR WORK (1992–95 TO 1996–99)

6

–1

–40

–67

–26

125

100

–18–2

–100

–50

0

50

100

150

Count

ry

Assista

nce S

trateg

y

Econo

mic

repo

rt

Agricu

lture

Fore

stry

Energ

y &m

inin

g

Enviro

nmen

t

Nat

ural

reso

urce

man

agem

ent

Infra

struc

ture

& ru

ral

deve

lopm

ent

Trans

porta

tion

Percent

FIGURE C.2. NET CHANGE IN COMMITMENTSAFTER 1991, ALL LENDING OPERATIONS

Percent

–7

74

122

22

–4

–22

27

–40

–20

0

20

40

60

80

100

120

140


TABLE C.2. WORLD BANK LENDING OPERATIONS, BY REGION1984–91 1992–99 Change in commitments

Commitments CommitmentsRegion No. of projects ($M) No. of projects ($M) $M Percent

AFR 683 23,362 589 21,685 -1,677 -7EAP 312 30,045 363 52,317 22,272 74ECA 132 15,060 414 33,425 18,366 122LCR 357 38,955 472 47,570 8,616 22MNA 171 11,073 150 10,578 -496 -4SAR 264 30,451 187 23,760 -6,691 -22

All Regions 1,919 148,946 2,175 189,336 40,390 27


72


FIGURE C.4. NET CHANGE IN COMMITMENTSAFTER 1991, PRIMARY PROGRAM OBJECTIVES

Percent

65

2

80

30

–92

67

–100–120–100–80–60–40–20

020406080

100

Econo

mic

man

agem

ent

Enviro

nmen

tally

susta

inab

le de

velo

pmen

t

Pove

rtyre

ducti

on an

d

hum

an re

sour

ce d

evelo

pmen

t

Priva

te se

ctor de

velo

pmen

t

Misc

ellan

eous

socia

l obj

ectiv

es

Gende

r analy

sis

Not

stat

ed

TABLE C.3. WORLD BANK ADJUSTMENT LENDING OPERATIONS, BY REGION1984–91 1992–99 Change in commitments

Commitments CommitmentsRegion No. of projects ($M) No. of projects ($M) $M Percent

AFR 132 8,221 149 8,097 -124 -2EAP 15 3,486 23 12,008 8,522 244ECA 18 4,004 83 15,483 11,479 287LCR 62 13,510 81 15,882 2,372 18MNA 17 3,264 18 2,591 -673 -21SAR 21 2,126 24 3,033 907 43

All Regions 265 34,611 378 57,092 22,482 65


FIGURE C.3. NET CHANGE IN COMMITMENTSAFTER 1991, ADJUSTMENT LENDING OPERATIONS

Percent


–2

244

287

18

–21

4365

–50

0

50

100

150

200

250

300

350

TABLE C.4. PRIMARY PROGRAM OBJECTIVES OF LENDING OPERATIONS1984–91 1992–99 Change in commitments

Primary program No. of Commitments No. of Commitmentsobjective projects ($M) projects ($M) $M Percent

Economic management 399 37,879 586 62,575 24,696 65Environmentally sustainable development 766 56,343 623 57,366 1,023 2Poverty reduction and human resource development 397 25,280 665 45,455 20,175 80Private sector development 199 17,907 291 23,315 5,409 30Miscellaneous social objectives 11 1,298 1 100 -1,198 -92Gender analysis 7 315 9 526 211 67Not stated 140 9,925 -9,925 -100

Total 1,919 148,946 2,175 189,336 40,390 27


73

TABLE C.6. WORLD BANK DIRECT FOREST PROJECTS, BY REGIONChange

1984–91 1992–99 in commitments

Total Commit- Commit- Total No. of No. of project ments No. of No. of ments project

Region countries projects cost ($M) ($M) countries projects ($M) cost ($M) $M Percent

AFR 16 17 811 426 3 3 78 53 -373 -88EAP 5 9 1,876 723 4 6 1,059 578 -145 -20ECA 1 1 95 35 5 5 352 245 210 600LCR 3 3 200 103 4 5 124 86 -17 -17MNA 2 2 150 69 3 4 1,387 221 152 220SAR 5 9 614 327 4 11 673 540 213 65

All Regions 32 41 3,746 1,682 23 34 3,672 1,722 40 2


TABLE C.5. ENVIRONMENTAL ASSESSMENT CATEGORIES, ALL BANK OPERATIONS1984–91 1992–99 Change in commitments

Environmental assessment No. of Commitments No. of Commitmentscategory projects ($M) projects ($M) $M Percent

Full environmental assessment 17 2,659 165 26,819 24,161 909Partial environmental assessment 171 15,366 695 61,136 45,770 298No environmental assessment 893 67,584 1,075 84,118 16,534 24Free-standing environmental project 21 1,802 18 1,124 -678 -38To be decided 817 61,536 222 16,139 -45,397 -74

Total 1,919 148,946 2,175 189,336 40,390 27


A n n e x e s

FIGURE C.5. NET CHANGE IN COMMITMENTSAFTER 1991 BY ENVIRONMENTAL ASSESSMENTCATEGORY

Percent

909

298

24

–38 –74–200

0

200

400

600

800

1,000

Full

envir

onm

enta

l

asse

ssmen

t

Parti

alen

viron

men

tal

asse

ssmen

t

No

envir

onm

enta

l

asse

ssmen

t

Free

-stan

ding

envir

onm

enta

l pro

ject

To b

e dec

ided

FIGURE C.6. NET CHANGE IN COMMITMENTS,BANK FOREST AND FOREST-COMPONENTPROJECTS AFTER 1991

Percent


–47

64

614

149

383

110 78

–200

0

200

400

600

800

74


TABLE C.8. WORLD BANK FOREST AND FOREST-COMPONENT PROJECTS, BY REGION1984–91 1992–99 Change in commitments

Commitments CommitmentsRegion No. of projects ($M) No. of projects ($M) ($M) Percent

AFR 33 516 23 272 -244 -47EAP 11 729 35 1,196 467 64ECA 3 45 12 319 274 614LCR 8 254 29 633 379 149MNA 2 69 11 333 264 383SAR 16 361 18 759 398 110

All Regions 73 1,973 128 3,512 1,539 78


TABLE C.7. WORLD BANK FOREST-COMPONENT PROJECTS, BY REGION1984-1991 1992-1999

Forest ForestForest compo- Forest compo-

Total component Total Total compo- nentNo. of Project commit- nent commit- project commit- nent commit-

No. of cost cost ments costs ments No. of No. of cost ments costs mentsRegion countries projects ($M) ($M) ($M) ($M) countries projects ($M) ($M) ($M) ($M)

AFR 15 16 547 281 188 90 14 20 1,536 718 464 219EAP 1 2 385 152 14 6 6 29 6,687 3,189 1,506 618ECA 2 2 340 220 18 10 5 7 431 282 115 74LAC 4 5 580 360 213 151 14 24 2,359 1,351 855 547MNA 5 7 1,526 346 146 113SAR 5 7 2,004 931 43 34 3 7 492 322 322 219

All Regions 27 32 3,856 1,945 477 291 47 94 13,032 6,209 3,408 1,790


FIGURE C.7. NET CHANGE IN COMMITMENTSAFTER 1991, OPERATIONS IN 20 COUNTRIES WITHTHREATENED TROPICAL MOIST FORESTS

Percent

–34

347

–42

181

8

–13 –9

–100

0

100

200

300

400

Fore

stpr

ojec

ts

Fore

st-co

mpo

nent

proj

ects

Agricu

lture

oper

atio

ns

Enviro

nmen

t oper

atio

ns

Adjus

tmen

t

lendi

ng o

pera

tions

Inve

stmen

t

lendi

ng o

pera

tions

Tota

l len

ding

oper

atio

ns

FIGURE C.8. NET CHANGE IN COMMITMENTSAFTER 1991, BANK FOREST AND FOREST-COMPONENT PROJECTS, INCLUDING GEF

Percent


–28

73

717

194

383

123 97

–200

0

200

400

600

800

75

TABLE C.10. WORLD BANK LENDING OPERATIONS IN 20 COUNTRIES WITH THREATENEDTROPICAL MOIST FORESTS

1984–91 1992–99 Change in commitments

No. of Commitments No. of CommitmentsProject projects ($M) projects ($M) ($M) Percent

Forest projects 15 774 11 512 –262 –34Forest-component projects 9 174 28 779 604 347Agriculture operations 153 14,461 98 8,396 –6,065 –42Environment operations 12 824 26 2,316 1,492 181Adjustment lending operations 64 14,079 78 15,143 1,064 8Investment lending operations 500 56,339 455 48,831 –7,509 –13

Total lending operations 564 70,419 533 63,973 –6,445 –9


TABLE C.9. DISTRIBUTION OF FOREST-COMPONENT PROJECTS, BY SECTOR1984–91 1992–99

Forest Forest Total component Total component

No. of commitments commitments No. of commitments commitmentsSector projects ($M) ($M) projects ($M) ($M)

Agriculture 18 599 75 47 3,759 887Electric power and energy 5 845 15 3 251 7Environment 4 223 168 43 1,952 863Finance 1 75 22Industry 1 9 1Public sector management 3 194 9Social 1 248 32

Total 32 1,945 291 94 6,209 1,790


A n n e x e s

76 Th

e W

or

ld B

an

k F

or

es

t Str

ate

gy

: Str

ikin

g th

e R

igh

t Ba

lan

ce

TABLE C.11. INTENTIONS OF FOREST SECTOR AND FOREST-COMPONENT PROJECTS (AFTER 1991)Forest Intro-expan- Institu- Inter- duction

Humid sion/ Inter- tional national of new tropical Policy intensifi- Forest Poverty Partici- sectoral develop- cooper- tech-

Region Projects forest reform cation protection alleviation pation links ment ation nologies

Forest sector

AFR 3 1 2 1 3 2 1 1 3 2 3EAP 6 1 4 3 3 3 4 0 5 2 6ECA 5 5 5 3 2 2 2 5 1 5LCR 5 5 1 3 4 5 1 5 1 5MNA 4 4 1 2 3 4 0 4 2 2SAR 11 2 6 7 10 11 11 11 1 11Subtotal 34 4 26 18 24 25 27 4 33 9 32

Forest component

AFR 20 1 12 7 10 16 18 6 19 11 18EAP 29 9 8 24 7 24 18 1 20 16ECA 7 3 1 4 3 4 4 7 5 6LCR 24 11 19 6 17 18 21 6 23 11 22MNA 7 5 5 3 3 6 4 6 1 2SAR 7 1 4 3 3 6 5 1 7 4 6Subtotal 94 22 51 46 44 70 72 22 82 32 70

Grand total 128 26 77 64 68 95 99 26 115 41 102

Percent 100 20 60 50 53 74 77 20 90 32 80

Note: Humid tropical forest: Projects that address issues related to tropical moist forests in the 20 countries identified in the 1991 Forest Strategy.Policy reform: Includes both direct reform in laws, policies, and regulations, and activities such as ecozoning, inventories, regional diagnostic studies, and national plans for forest and biodiversity conservation that provide information for policymaking.Forest expansion/intensification activities: Refers to activities that enhance production, such as agroforestry, plantations for fuelwood, timber, crop trees (rubber, oil palm, and fruit trees), silvicultural treatments, preparation/implementation of forest management plans, and promoting natural regeneration.Forest protection: Interventions intended to preserve intact natural forest areas or conserve biodiversity through the system of protected areas. Includes ecological zoning, biodiversity inventories, policy and regulation related to protected areas, and expansion and/or improvement of management of protected areas.Poverty alleviation: Covers activities such as granting/enforcing tenurial rights; income-generation projects; sharing benefits of the forests with local communities;social investments such as building roads, hospitals, or schools; building skills of villagers; or supporting local organizations.Participation: Refers to the involvement of stakeholders (national, regional, local) in appraisal and implementation. Includes information sharing, consultation, creation of advisory committees, and stakeholder collaboration in implementation.Intersectoral links: Projects that link forest management with other sectors such as energy, tourism, and infrastructure. Includes only projects with links outside the natural resource management sector.Institutional development: Includes institutional reforms, support to local community institutions, development of government agencies responsible for forest management through training, creation of new units, and establishing environmental information systems.International cooperation: Includes cofinancing projects with other donors, participation in consultative groups, coordination of activities with other donors, and incorporating lessons learned from other donor projects.New technologies: Includes introduction and adaptation of new or improved technologies to enhance production, planning, or information management.

77

A n n e x e s

ANNEX D: QUALITY ASSURANCE GROUP RISK RATINGS FOR ACTIVE BANK OPERATIONS

The Quality Assurance Group (QAG) maintains adatabase of all active World Bank projects, thatidentifies whether a project is at risk (that is, an actualproblem project or a potential problem project) or notat risk. Project risk assessments are based on:

• The extent to which development objectives areachieved through implementation performance,as reported by Bank task managers duringproject supervision, typically every six months.

• The extent to which conditions agreed to duringproject design and negotiations are being metduring implementation.

• Whether any unanticipated domestic factors(such as macroeconomic or political problems)or external shocks (such as climate or terms oftrade) are affecting project performance.

The factors used to determine project performanceand risk status are effectiveness delays, compliancewith legal covenants, management performance, avail-ability of counterpart funds, procurement progress,environment and resettlement, slow disbursements, ahistory of past problems, risky country, risky subsector,and economic management.

QAG reported that of the Bank’s 1,775 active lendingoperations with total net commitments of $124.81 billion,as of June 1999, 77 percent of the projects were rated notat risk. Active operations include 30 forest projects withcommitments of $1.68 billion and 80 active forest-component projects with total project commitments of$5.3 billion (table D.1). The percentage of forest projectsnot at risk is far higher, and the percentage of forest-component projects not at risk is lower than for projects inthe agriculture sector, environment sector, or the entireBank portfolio (figure D.1).

The regional breakdown shows that only the ECARegion has any forest projects at risk, and only one ofthe five forest projects in the ECA Region is at risk(figure D.2).

The regional distribution for forest-componentprojects, in contrast, shows that only 55 percent of theprojects in the LCR Region and 71 percent in the AFRRegion are not at risk. But none of the forest-component projects in the ECA and MNA Regions is atrisk (figure D.3).

The OED ratings for closed forest projects tend tobe substantially lower than the QAG ratings for activeforest projects. This disparity can be explained by thedifferent methodologies used by QAG and OED. QAGcombines self-assessment by project staff and potentialproblem ratings by supervision staff. The potentialproblem ratings are based on 12 “flags,” 3 of which areexogenous—that is, unrelated to the characteristics of

TABLE D.1. RELATIVE RISK RATINGS FOR ACTIVE FOREST AND FOREST-COMPONENT PROJECTS (JUNE 1999)Active projects Actually at risk Potentially at risk Not at risk

Net Net Net Net commit- No. of commit- No. of commit- No. of commit-

No. of ments projects ments projects ments projects mentsProject type projects ($M) (%) (%) (%) (%) (%) (%)

Forest 30 1,683 3 2 97 98Forest component 80 5,295 16 8 9 9 75 83All agriculture 268 18,061 12 10 5 3 83 87All environment 96 5,094 14 11 9 10 77 79All World Bank 1,577 124,809 15 16 7 6 77 78

Source: QAG.

FIGURE D.1. PERCENTAGE OF ACTIVE PROJECTSNOT AT RISK, SELECTED SECTORS


Percent

98

83 8779 78

0

20

40

60

80

100

120

Forest Forestcomponent

Allagriculture

Allenvironment

All Bank

78


the operation. Several other measures are drawn fromsources other than the project task manager. OED, onthe other hand, conducts an independent evaluation ofcompleted projects. The ongoing forest projects mayactually be performing better than past forest projectssimply because they have incorporated lessons learnedand OED recommendations.

“Projects at risk” is an important criterion under-pinning the Portfolio Improvement Program (PIP)launched by the Bank in 1996. The PIP aims to promotesubstantial improvement in the Bank’s portfolio perfor-mance. It complements other Bank portfolio manage-ment instruments by targeting management attention tothe projects, sectors, and countries with the most severeperformance problems and where intensified attentioncan be expected to have a high payoff. The concept of“projects at risk” was developed as a tool to targetmanagement attention to projects considered to have a

high risk of failure on completion based on leadingindicators known to be precursors of future problems.This work is being closely coordinated with the AnnualReview of Portfolio Performance (ARPP).

Actual Problem Projects: Projects with an unsatis-factory or a highly unsatisfactory rating for SummaryImplementation Progress and/or Summary Develop-ment Objectives on the latest Project Status Report.

Potential Problem Projects: Projects that are associ-ated with at least 3 of 12 leading indicators of futureproblems (see table D.2).

A comparison of QAG ratings by Region for allBank projects, as well as for all projects in theagriculture and environment sectors and for all forestprojects, and forest-component projects is presented intables D.3 through D.7. Significant risk factors associ-ated with these sectors are presented in tables D.8through D.12.

FIGURE D.2. ACTIVE FOREST PROJECTS NOTAT RISK, BY REGION


Percent

100 100

80

100 100 100

0

20

40

60

80

100

120

AFR EAP ECA LCR MNA SAR

FIGURE D.3. ACTIVE FOREST-COMPONENTPROJECTS NOT AT RISK, BY REGION


Percent

7179

100

55

100

88

0

20

40

60

80

100

120


79

A n n e x e s

TABLE D.2. QAG INDICATORS OF POTENTIAL PROBLEM PROJECTSProject flag Description

1. Long effectiveness delays The elapsed time between Board presentation and effectiveness is more than ninemonths for investment, and more than three months for adjustment andemergency operations (this flag is turned off three years after Board approval).

2. Poor compliance with legal covenants Compliance with legal covenants rated unsatisfactory or highly unsatisfactory inthe last Project Status Report.

3. Project management problems Management performance rated unsatisfactory or highly unsatisfactory in the lastProject Status Report.

4. Shortage of counterpart funds Counterpart fund availability rated unsatisfactory or highly unsatisfactory in thelast Project Status Report.

5. Procurement problems Procurement progress rated unsatisfactory or highly unsatisfactory in the lastProject Status Report.

6. Poor financial performance Financial performance rated unsatisfactory or highly unsatisfactory in the lastProject Status Report.

7. Environmental/resettlement problems Environmental/resettlement rating of unsatisfactory or highly unsatisfactory in thelast Project Status Report.

8. Significant disbursement delays Disbursement delays of 18 months or more for investment operations or 6months or more for adjustment and emergency operations.

9. Long history of past problems Unsatisfactory rating on implementation progress and/or development objectivesfor two or more consecutive ARPPs in previous years (turned off after projectrestructuring).

10. In a risky country In a country with a high “failure” rate (in which the percentage of projects closedin the previous five years and rated unsatisfactory by OED is over 50 percent, orin which the share of commitments associated with these unsatisfactory projects ismore than 33 percent).

11. Poor macroeconomic setting Located in a country with weak macro management (Development EconomicsDepartment country risk ratings—three-year average of less than 3 on a scale of1 to 5).

12. In a risky subsector In a subsector with a historically high “failure” rate (in which the percentage ofprojects closed in the previous five years and rated unsatisfactory by OED is over50 percent, or in which the share of commitments associated with theseunsatisfactory projects is more than 33 percent).

TABLE D.3. RISK RATINGS, ACTIVE AGRICULTURE SECTOR PROJECTS, BY REGION (JUNE 1999)Active projects Actually at risk Potentially at risk Not at risk

Net commit- No. of Commit- No. of Commit- No. of Commit-

No. of ments projects ments projects ments projects mentsRegion projects ($M) (%) (%) (%) (%) (%) (%)

AFR 66 1,565 12 13 14 13 74 74EAP 55 7,191 9 2 4 2 87 96ECA 38 1,413 13 35 87 65LCR 46 3,053 9 6 2 1 89 93MNA 28 1,473 18 24 82 76SAR 35 3,366 14 13 3 2 83 84All Regions 268 18,061 12 10 5 3 83 87

Source: QAG.

80


TABLE D.4. RISK RATINGS FOR ACTIVE ENVIRONMENT SECTOR PROJECTS, BY REGION (JUNE 1999)Active projects Actually at risk Potentially at risk Not at risk



AFR 16 266 13 29 19 21 69 51EAP 20 1,852 10 9 90 91ECA 15 349 7 23 7 7 87 70LCR 29 1,536 21 10 14 25 66 65MNA 6 255 33 32 67 68SAR 10 836 10 6 90 94All Regions 96 5,094 14 11 9 10 77 79

Source: QAG.

TABLE D.5. RISK RATINGS FOR ACTIVE WORLD BANK PROJECTS, BY REGION (JUNE 1999)Active projects Actually at risk Potentially at risk Not at risk



AFR 392 14,711 19 16 15 15 66 68EAP 287 34,636 13 11 3 2 83 88ECA 303 21,637 17 30 8 15 76 55LCR 322 28,333 11 10 4 4 84 86MNA 122 6,976 16 18 3 1 81 81SAR 151 18,516 16 15 4 4 80 80All Regions 1,577 124,809 15 16 7 6 77 78

Source: QAG.

TABLE D.6. RISK RATINGS FOR ACTIVE FOREST-COMPONENT PROJECTS, BY REGION (JUNE 1999)Active projects Actually at risk Potentially at risk Not at risk



AFR 17 580 18 22 12 7 71 71EAP 24 2,574 17 5 4 1 79 94ECA 6 251 100 100LCR 20 942 30 18 15 38 55 45MNA 5 169 100 100SAR 8 779 13 6 88 94All Regions 80 5,295 16 8 9 9 75 83

Source: QAG.

81

A n n e x e s

TABLE D.7. RISK RATINGS FOR ACTIVE FOREST PROJECTS, BY REGION (JUNE 1999)Active projects Actually at risk Potentially at risk Not at risk



AFR 3 53 100 100EAP 5 783 100 100ECA 5 202 20 20 80 80LCR 4 60 100 100MNA 2 96 100 100SAR 11 489 100 100All Regions 30 1,683 3 2 97 98

Source: QAG.

TABLE D.8. RISK INDICATORS FOR ACTIVE AGRICULTURE SECTOR PROJECTS, BY REGION (JUNE 1999)Percentage of projects

Risk indicator AFR EAP ECA LCR MNA SAR All Regions

Number of projects 66 55 38 46 28 35 268

Effectiveness delays 11 2 20 18 3 9Compliance with legal covenants 2 4 5 2 17 4Management performance 9 13 5 2 14 9 9Counterpart funds 18 11 8 13 11 11 13Procurement progress 12 9 16 2 7 11 10Financial performance 14 11 8 4 7 6 9Environment/resettlement problems 3 14 3 3Slow disbursements 30 16 11 20 25 26 22History of past problems 11 7 3 7 11 14 9Risky country 44 4 24 7 4 14 18Risky subsector 11 5 18 2 4 7Economic management 30 29 21 13 25 11 23Golden rule 8 5 2 3

Source: QAG.

82


TABLE D.10. RISK INDICATORS FOR ACTIVE FOREST-COMPONENT PROJECTS, BY REGION (JUNE 1999)Percentage of projects



Effectiveness delays 18 25 10Compliance with legal covenants 12 5 13 5Management performance 6 21 15 13 13Counterpart funds 6 17 17 25 20 15Procurement progress 12 21 13 10Financial performance 18 13 33 10Environment/resettlement problemsSlow disbursements 12 17 17 25 25 18History of past problems 8 15 6Risky country 41 4 33 30 20 38 25Risky subsector 18 4 5Economic management 29 38 17 25 40 28Golden rule 5 1

Source: QAG.

TABLE D.9. RISK INDICATORS FOR ACTIVE ENVIRONMENT SECTOR PROJECTS, BY REGION (JUNE 1999)Percentage of projects



Effectiveness delays 13 5 7 17 33 11Compliance with legal covenants 3 10 2Management performance 13 5 10 17 20 9Counterpart funds 6 10 20 21 13Procurement progress 13 7 33 30 8Financial performance 6 15 27 8Environment/resettlement problems 5 3 2Slow disbursements 25 20 20 31 50 20 26History of past problems 5 7 14 10 7Risky country 63 7 28 17 30 24Risky subsectorEconomic management 25 30 40 21 17 24Golden rule 3 1

Source: QAG.

83

A n n e x e s

TABLE D.11. RISK INDICATORS FOR ACTIVE FOREST PROJECTS, BY REGION (JUNE 1999)Percentage of projects



Effectiveness delays 25 50 7Compliance with legal covenantsManagement performance 20 50 9 10Counterpart funds 25 9 7Procurement progress 40 25 10Financial performance 25 3Environment/resettlement problemsSlow disbursements 33 40 20 9 17History of past problems 33 27 13Risky country 67 20 9 13Risky subsectorEconomic management 33 20 20 9 13Golden rule 33 3

Source: QAG.

TABLE D.12. RISK INDICATORS FOR ACTIVE WORLD BANK PROJECTS, BY REGION (JUNE 1999)Percentage of projects


Number of projects 392 287 303 322 122 151 1,577

Effectiveness delays 10 5 6 17 11 4 9Compliance with legal covenants 6 4 4 5 7 10 6Management performance 10 8 8 10 12 10 9Counterpart funds 14 9 13 13 7 7 11Procurement progress 11 11 10 4 10 15 10Financial performance 12 11 12 6 7 11 10Environment/resettlement problems 2 2 1 3 5 1 2Slow disbursements 32 21 31 25 23 30 27History of past problems 9 3 5 7 7 10 7Risky country 49 2 16 18 7 19 21Risky subsector 13 10 11 12 11 9 11Economic management 38 34 36 16 26 10 29Golden rule 3 2 3 2 1 2

Source: QAG.

85

A n n e x e s

Evaluation CriteriaThe Operations Evaluation Department (OED) evaluatesthe development effectiveness of completed operations byexamining their technical, financial, economic, social,and environmental aspects and rating their outcome,sustainability, and effect on institutional development.OED also evaluates the performance of the Bank, theborrower, and the implementing agencies. The evaluationprocess is based on the same criteria and policies that areused to judge new operations.

OutcomeA satisfactory outcome means that an operation hasachieved most of its major goals efficiently. A projectwith an unsatisfactory rating may still provide signifi-cant benefits even though it failed to meet one or moreof its major objectives. To evaluate outcome, com-pleted operations are analyzed from three perspectives:

Relevance: Evaluators determine whether thegoals of the operation were consistent with country andsectoral assistance strategies and whether the designwas appropriate to one or more of the core World Bankgoals of reducing poverty, protecting the environment,developing human resources, or fostering growth in theprivate sector.

Efficacy: Evaluators review the operation’s effectsand compare them with its goals, whether physical,financial, institutional, or policy related.

Efficiency: Evaluators assess outcomes in relationto inputs, looking at costs, implementation times, andeconomic and financial results. Where practicable, theevaluators re-estimate the economic rate of return inrelation to a minimum threshold of 10 percent.

SustainabilitySustainability is based on the probability—at thetime of evaluation—that the achievements generatedor expected to be generated in the operational planwill be sustained. To assess sustainability, evaluatorsexamine borrower commitment; the policy environ-ment; institutional/management effectiveness; andeconomic, social, technical, financial, institutional,and environmental viability. Sustainability differsfrom economic justification in that it focuses onfeatures that contribute to the durability of theoperation relative to the project’s expected useful lifeand its likely resilience to external shocks andchanging circumstances.

Institutional development impactInstitutional development impact is improvement in theability of a country to use its human, organizational,and financial resources effectively. Evaluators assessthe institutional development progress achieved, orexpected, because of the operation. Not all operationshave institutional development goals, but many dependon institutional change to achieve a lasting impact ondevelopment. Examples of such change includestrengthening, eliminating, or reforming specific agen-cies; supporting regulatory or legal reforms; andsupporting education and training.

PerformanceOED analyzes Bank performance at each stage of theproject cycle. It also considers several other dimensionsof performance:

Borrower performance is evaluated in terms of thepolicy environment created for the project; the level ofcommitment of the government and of key institutionsassociated with the project; the provision and reliabil-ity of domestic funds for the operation; and theadministrative procedures used and the quality ofdecisionmaking.

The performance of implementing agencies israted on such elements as the quality of managementand staff associated with the project; the use andeffectiveness of technical assistance, including training,advisers, and contractual services; the adequacy ofmonitoring and evaluation systems; and the extent andquality of intended beneficiaries’ participation, includ-ing their contribution to the project’s outcome.

Exogenous factors include changes in prices andworld market conditions; natural disasters; civil disor-der and armed conflict; and actions of partners whoare independent decisionmakers—for example,cofinanciers, NGOs, contractors, and suppliers.

OED Evaluations of Completed Bank OperationsOED evaluated a total of 1,590 Bank operations thatexited the portfolio between 1992 and 1998. Theseprojects had net commitments of $113.6 billion (1996dollars). Figure E.1 shows that ratings on overallperformance for the completed forest and forest-compo-nent projects are poorer than those for projects in theagriculture and environment sectors, and poorer thanthose for aggregate Bank projects. Moreover, thesatisfactory ratings for outcome tend to be higher than

ANNEX E: OPERATIONS EVALUATION DEPARTMENT PROJECT EVALUATIONS

86


the likely ratings for sustainability. The substantialrating for institutional development is the lowest ratingacross all sectors.

Satisfactory Bank performance ratings for com-pleted forest and forest-component projects are com-pared with those for projects in other relevant sectors infigure E.2. Across all sectors, “satisfactory” ratings forBank performance at identification tend to be higherthan the ratings during supervision. In contrast,appraisal ratings are the lowest. The ratings for theenvironment sector projects seem to be the lowest atidentification and appraisal. The Bank performance inforest and forest-component projects is comparable toperformance in the agriculture sector.

Borrower performance ratings tend to be lowerthan Bank performance ratings in all sectors. Interest-ingly, the ratings for completed forest-componentprojects are the highest for all stages, while forestproject ratings are comparable to ratings for projects inthe agriculture sector. Borrower preparation ratings arehigher across all sectors, whereas implementation andcompliance ratings are comparable (figure E.3).

FIGURE E.1. SATISFACTORY OVERALLPERFORMANCE RATINGS, COMPLETED PROJECTS

Source: OED data, 1992–98.

Percent

59

0

20

40

60

80

Fore

st

proj

ects

Fore

st-co

mpo

nent

proj

ects

Agricu

lture

proj

ects

Enviro

nmen

t

proj

ects

All Ban

k

proj

ects




27 27

55

32

19

64

40

33

67

50

17

68

46

31

FIGURE E.2. SATISFACTORY BANKPERFORMANCE RATINGS, COMPLETED PROJECTS


0

30

60

9078

Identification, satisfactory

Appraisal, satisfactory

Supervision, satisfactory

49

62

84

52

74

82

58

68

42 42

83 82

63

72

Percent

Fore

st

proj

ects

Fore

st-co

mpo

nent

proj

ects

Agricu

lture

proj

ects

Enviro

nmen

t

proj

ects

All Ban

k

proj

ects

FIGURE E.3. SATISFACTORY BORROWERPERFORMANCE RATINGS, COMPLETED PROJECTS


0

30

60

90

54

Preparation, satisfactory

Implementation, satisfactory

Compliance, satisfactory

46 49

81

6568

5853 51

67

50

58

68

53 54

Percent

Fore

st

proj

ects

Fore

st-co

mpo

nent

proj

ects

Agricu

lture

proj

ects

Enviro

nmen

t

proj

ects

All Ban

k

proj

ects

87

A n n e x e s

OED Evaluation of Completed Forest ProjectsOED has evaluated 37 forest operations with netcommitments of $1.0 billion that exited the portfolioduring 1992–98. The regional distribution of theoverall performance ratings (consisting of ratings foroutcome, sustainability, and institutional developmentimpact) shows that forest projects in the SAR and EAPRegions performed much better than those in the AFRor MNA Regions (figure E.4).

The Bank performance ratings at project identifica-tion and appraisal were also best in LCR, followed bySAR and EAP. However, satisfactory supervision rat-ings were lowest in the LCR. Bank performance waspoorest overall in the AFR Region (figure E.5).

Borrower performance ratings were far lower thanBank performance ratings across all Regions. Borrowerperformance in the SAR and the EAP Regions was muchbetter than in AFR or LCR (figure E.6).

The OED evaluation of 31 forest-componentprojects with net project commitments of $1.2 billionshows that projects in the EAP Region performed thebest, and projects in SAR and AFR were the poorest

FIGURE E.6. SATISFACTORY BORROWERPERFORMANCE RATINGS, COMPLETED FORESTPROJECTS


0

30

60

90


No

proj

ects

40



Compliance, satisfactory

20 20

75

63

75

33 33 33

50 50 50

67

78 78

Percent

FIGURE E.4. SATISFACTORY OVERALLPERFORMANCE RATINGS, COMPLETED FORESTPROJECTS


0

20

40

60

80

100

AFR EAP ECA LCR SAR

No

proj

ects

40




20 20

75

50

3833

0

33

50

0 0

89

33 33

Percent

MNA

FIGURE E.5. SATISFACTORY BANKPERFORMANCE RATINGS, COMPLETED FORESTPROJECTS


0

20

40

60

80

100

120


No

proj

ects

73



Supervision, satisfactory

3340

75

63

88

100

67

0

50 50

100

89

56

89

Percent

88


performers. As with forest projects, the satisfactoryoutcome ratings were much higher than the ratings forsustainability and institutional development impactacross all Regions (figure E.7).

Bank performance for forest-component projectswas best in the EAP Region, followed by SAR and LCR.In the AFR and MNA Regions Bank performance wasnot as good (figure E.8).

Borrower performance for forest-componentprojects was exceptionally good in the ECA and LCR,followed by the EAP Region. Borrower performancewas weakest in SAR and AFR (figure E.9).

An overall comparison of OED ratings by Regionfor all Bank projects, for projects in the agricultureand environment sectors, for forest projects, and forforest-component projects is presented in tables E.1through E.8.

FIGURE E.7. SATISFACTORY OVERALLPERFORMANCE RATINGS, COMPLETEDFOREST-COMPONENT PROJECTS


0

20

40

60

80

100

120


31

8 8

100100

7867 67

17

100

0 0

25

0 0

Percent

100

33 33


Sustainability, satisfactory


FIGURE E.8. SATISFACTORY BANKPERFORMANCE RATINGS, COMPLETEDFOREST-COMPONENT PROJECTS


0

20

40

60

80

100

120


69

46

69

100

75

100

83

50

83

100

0 0

100

50

75

Percent

100

67 67



Supervision, substantial

FIGURE E.9. SATISFACTORY BORROWERPERFORMANCE RATINGS, COMPLETEDFOREST-COMPONENT PROJECTS


0

20

40

60

80

100

120


77

46 46

100

75

100

100

100

100

100

0

100

50

25 25

Percent

100

100

100



Compliance, substantial

89

A n n e x e s

TABLE E.3. BORROWER PERFORMANCE RATINGS, COMPLETED FOREST PROJECTS RELATIVETO PROJECTS IN OTHER SECTORS

Evaluated Preparation Implementation Complianceprojects satisfactory satisfactory satisfactory

Commit- No. of Commit- No. of Commit- No. of Commit- No. of ments projects ments projects ments projects ments

Project projects ($M FY96) (%) (%) (%) (%) (%) (%)

Forest projects 37 1,000 54 68 46 47 49 56Forest-component projects 31 1,200 81 83 65 74 68 80All agriculture projects 410 20,671 58 60 53 63 51 61All environment projects 12 364 67 68 50 48 58 70All World Bank projects 1,590 113,592 68 74 53 63 54 63


TABLE E.2. BANK PERFORMANCE RATINGS, COMPLETED FOREST PROJECTS RELATIVETO PROJECTS IN OTHER SECTORS

Evaluated Identification Appraisal Supervisionprojects satisfactory satisfactory satisfactory


Project projects ($M FY96) (%) (%) (%) (%) (%) (%)



TABLE E.1. OVERALL PERFORMANCE RATINGS, COMPLETED FOREST PROJECTS RELATIVETO PROJECTS IN OTHER SECTORS

Evaluated Outcome Sustainability ID impactprojects satisfactory likely substantial


Project projects ($M, FY96) (%) (%) (%) (%) (%) (%)



90


TABLE E.4. OVERALL PERFORMANCE RATINGS, COMPLETED AGRICULTURE SECTOR PROJECTS, BY REGIONEvaluated Outcome Sustainability ID impactprojects satisfactory likely substantial


Region projects ($M FY96) (%) (%) (%) (%) (%) (%)

AFR 146 4,020 53 62 32 32 27 28EAP 65 4,032 83 86 66 67 45 40ECA 24 2,067 83 92 71 75 54 65LCR 55 4,712 64 72 44 62 38 41MNA 43 1,739 60 65 28 45 30 36SAR 77 4,102 68 63 26 31 27 33All Regions 410 20,671 64 72 40 51 33 39

Source: OED data, 1992–98.Note: ID = institutional development.

TABLE E.6. OVERALL PERFORMANCE RATINGS, COMPLETED WORLD BANK PROJECTS, BY REGIONEvaluated Outcome Sustainability ID impactprojects satisfactory likely substantial





TABLE E.5. OVERALL PERFORMANCE RATINGS, COMPLETED ENVIRONMENT SECTOR PROJECTS, BY REGIONEvaluated Outcome Sustainability ID impactprojects satisfactory likely substantial



AFR 3 72 33 35EAP 2 50 50 60 50 60ECA 1 19 100 100 100 100 100 100LCR 6 224 83 91 67 76 17 30MNA — — — — — — — —SAR — — — — — — — —All Regions 12 364 67 76 50 60 17 23


91

TABLE E.7. OVERALL PERFORMANCE RATINGS, COMPLETED FOREST-COMPONENT PROJECTS, BY REGIONEvaluated Outcome Sustainability ID impactprojects satisfactory likely substantial



AFR 13 258 31 21 8 6 8 4EAP 4 272 100 100 100 100 75 58ECA 3 253 100 100 33 10 33 10LCR 6 258 67 84 67 90 17 26MNA 1 50 100 100 — — — —SAR 4 108 25 26 — — — —All Regions 31 1,200 55 73 32 45 19 21


TABLE E.8. OVERALL PERFORMANCE RATINGS, COMPLETED FOREST PROJECTS, BY REGIONEvaluated Outcome Sustainability ID impactprojects satisfactory likely substantial



AFR 15 391 40 55 20 9 20 38EAP 8 209 75 79 50 37 38 33ECA — — — — — — — —LCR 3 82 33 48 — — 33 48MNA 2 40 50 47 — — — —SAR 9 277 89 92 33 49 33 15All Regions 37 1,000 59 69 27 25 27 30


TABLE E.9. BANK PERFORMANCE RATINGS, COMPLETED AGRICULTURE SECTOR PROJECTS, BY REGIONEvaluated Identification Appraisal Supervisionprojects satisfactory satisfactory satisfactory





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TABLE E.10. BANK PERFORMANCE RATINGS, COMPLETED ENVIRONMENT SECTOR PROJECTS, BY REGIONEvaluated Identification Appraisal Supervisionprojects satisfactory satisfactory satisfactory

Commit- No. of Commit- No. of Commit- No. of Commit-No. of ments projects ments projects ments projects ments


AFR 3 72 33 35 33 35 67 72EAP 2 50 50 60 50 60 50 60ECA 1 19 100 100 100 100 100 100LCR 6 224 33 31 33 31 100 100MNA — — — — — — — —SAR — — — — — — — —All Regions 12 364 42 39 42 39 83 89


TABLE E.11. BANK PERFORMANCE RATINGS, ALL WORLD BANK PROJECTS, BY REGIONEvaluated Identification Appraisal Supervisionprojects satisfactory satisfactory satisfactory





TABLE E.12. BANK PERFORMANCE RATINGS, COMPLETED FOREST-COMPONENT PROJECTS, BY REGIONEvaluated Identification Appraisal Supervisionprojects satisfactory satisfactory satisfactory



AFR 13 258 69 75 46 42 69 76EAP 4 272 100 100 75 58 100 100ECA 3 253 100 100 67 28 67 28LCR 6 258 83 92 50 58 83 91MNA 1 50 100 100 — — — —SAR 4 108 100 100 50 56 75 76All Regions 31 1,200 84 93 52 46 74 72


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TABLE E.15. BORROWER PERFORMANCE RATINGS, COMPLETED ENVIRONMENT SECTOR PROJECTS,BY REGION

Evaluated Preparation Implementation Compliance projects satisfactory satisfactory satisfactory



AFR 3 72 33 35EAP 2 50 50 60 50 60 50 60ECA 1 19 100 100 100 100 — —LCR 6 224 83 78 67 56 100 100MNA — — — — — — — —SAR — — — — — — — —All Regions 12 364 67 68 50 48 58 70


TABLE E.14. BORROWER PERFORMANCE RATINGS, COMPLETED AGRICULTURE SECTOR PROJECTS,BY REGION






TABLE E.13. BANK PERFORMANCE RATINGS, COMPLETED FOREST PROJECTS, BY REGIONEvaluated Identification Appraisal Supervisionprojects satisfactory satisfactory satisfactory



AFR 15 391 73 82 33 37 40 52EAP 8 209 75 79 63 50 88 84ECA — — — — — — — —LCR 3 82 100 100 67 80 — —MNA 2 40 50 47 50 47 100 100SAR 9 277 89 97 56 42 89 87All Regions 37 1,000 78 86 49 45 62 66


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TABLE E.16. BORROWER PERFORMANCE RATINGS, COMPLETED WORLD BANK PROJECTS, BY REGIONEvaluated Preparation Implementation Compliance projects satisfactory satisfactory satisfactory





TABLE E.17. BORROWER PERFORMANCE RATINGS, COMPLETED FOREST-COMPONENT PROJECTS,BY REGION




AFR 13 258 77 86 46 31 46 38EAP 4 272 75 58 100 100 100 100ECA 3 253 100 100 100 100 100 100LCR 6 258 100 100 100 100 100 100MNA 1 50 100 100 — — 100 100SAR 4 108 50 56 25 26 25 26All Regions 31 1,200 81 83 65 74 68 80


TABLE E.18. BORROWER PERFORMANCE RATINGS, COMPLETED FOREST PROJECTS, BY REGIONEvaluated Preparation Implementation Compliance projects satisfactory satisfactory satisfactory



AFR 15 391 40 55 20 9 20 38EAP 8 209 75 92 63 78 75 92ECA — — — — — — — —LCR 3 82 33 48 33 48 33 48MNA 2 40 50 47 50 47 50 47SAR 9 277 67 76 78 79 78 58All Regions 37 1,000 54 68 46 47 49 56


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sTABLE F.1. WORLD BANK LENDING OPERATIONS IN THE CASE STUDY COUNTRIES, 1984–91

Forest-Adjustment Investment Agricultural Environment Forestry component

Total lending lending lending lending lending lending lending

Commit- Commit- Commit- Commit- Commit- Commit- Commit-Country/ No. of ments No. of ments No. of ments No. of ments No. of ments No. of ments No. of mentscategory projects ($M) projects ($M) projects ($M) projects ($M) projects ($M) projects ($M) projects ($M)

World Bank lending 1,919 148,946 265 34,611 1,654 114,336 464 29,282 15 889 41 1,682 32 291

Brazil 72 10,599 3 1,155 69 9,444 28 3,540 4 263 1 49 2 125Cameroon 14 733 1 150 13 583 7 232 — — — — 1 1China 85 9,913 1 300 84 9,613 25 3,024 — — 3 404 2 6Costa Rica 5 270 2 180 3 90 1 26 — — — — — —India 97 20,242 — — 97 20,242 29 4,544 4 459 3 224 3 17Indonesia 79 10,482 4 1,200 75 9,282 20 1,642 — — 2 54 — —

Total country lending 352 52,239 11 2,985 341 49,254 110 13,008 8 722 9 731 8 149

Percent, overall Bank lending 18 35 4 9 21 43 24 44 53 81 22 43 25 51


TABLE F.2. WORLD BANK LENDING OPERATIONS IN THE CASE STUDY COUNTRIES, 1992–99Forest-

Adjustment Investment Agricultural Environment Forestry componentTotal lending lending lending lending lending lending lending


World Bank lending 2,175 189,336 378 57,092 1,797 132,243 336 22,912 106 5,899 34 1,722 94 1,790

Brazil 66 9,349 3 1,760 63 7,589 15 978 8 936 — — 4 231Cameroon 18 817 10 626 8 192 2 38 — — — — — —China 125 22,066 — — 125 22,066 28 5,404 13 1,707 3 550 15 305Costa Rica 5 212 1 100 4 112 1 41 — — — — — —India 80 15,202 4 1,450 76 13,752 21 2,661 3 360 8 460 3 179Indonesia 84 10,742 4 2,400 80 8,342 14 1,208 4 198 — — 7 88

Total country lending 378 58,389 22 6,336 356 52,053 81 10,330 28 3,201 11 1,010 29 803

Percent, overall Bank lending 17 31 6 11 20 39 24 45 26 54 32 59 31 45


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TABLE F.3. PERCENTAGE CHANGE IN WORLD BANK LENDING OPERATIONS IN CASE STUDY COUNTRIES AFTER 1991Forest-

Adjustment Investment Agricultural Environment Forestry componentTotal lending lending lending lending lending lending lending


World Bank lending 13 27 43 65 9 16 -28 -22 607 564 -17 2 194 515

Brazil -8 -12 — 52 -9 -20 -46 -72 100 256 -100 -100 100 85Cameroon 29 11 900 317 -38 -67 -71 -84 — — — — -100 -100China 47 123 -100 -100 49 130 12 79 — — — 36 650 5,018Costa Rica — -21 -50 -44 33 25 — 58 — — — — — —India -18 -25 — — -22 -32 -28 -41 -25 -22 167 106 — 958Indonesia 6 2 — 100 7 -10 -30 -26 — — -100 -100 — —

Total country lending 7 12 100 112 4 6 -26 -21 250 344 22 38 263 440

Percent, overall Bank lending 13 27 43 65 9 16 -28 -22 607 564 -17 2 194 515


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As part of the consultative process for this review, OEDsought input from members of the World Bank’sForestry Community of Practice as well as fromparticipants in two of the Bank’s new initiatives—theCEO Forum and the WB/WWF Alliance—designed toenhance the conservation and sustainable managementof the world’s forests. A summary of conclusions fromthe survey results is incorporated in Chapter 4 of thisreport. This annex provides background informationand aggregate findings from the three independentlyconducted surveys.

The Staff SurveyOED held a series of focus group sessions in latewinter/early spring 1999 to gain insights into specificissues as seen by country and sector managers, leadmacro and sector economists, and task managers andspecialists involved in addressing issues related to theforest sector. When the sessions ended, results of themeetings were compiled and prepared by the facilita-tor, Madelyn Blair of Peleri, Inc. The ideas expressedby some participants in the sessions required statisticalvalidation. So in July 1999 OED sent a questionnairebased on the preliminary focus group findings to 100Bank staff who belong to the Bank’s Forestry Commu-nity of Practice. OED received 40 responses, or a 40percent response rate.

ANNEX G: THE SURVEYS

The CEO Forum QuestionnaireOf the 31 industry, NGO, and government ministryrepresentatives who belong to the CEO Forum (see box4.1 in the main report), to all of whom surveyquestionnaires were sent, OED received 15 responses—for a 48 percent response rate.

The WB/WWF Alliance QuestionnaireA WB/WWF Alliance questionnaire was sent to 47World Bank and 46 WWF staff members; OED re-ceived 20 responses from Bank staff (for a 43 percentresponse rate) and 14 from WWF staff (for a 30 percentresponse rate). The overall response rate was 37percent.

In many cases, Bank staff working on WB/WWFAlliance issues are located within the Forestry Commu-nity of Practice, so the Bank Staff Survey and WB/WWF Alliance responses reflect some overlap ofopinion, (seven Bank staff responded to both the WB/WWF Alliance Survey and the Staff Survey). Staffmembers who were gracious enough to return both setsof questions gave OED feedback on policy questionsand also gave their opinion about the objectives andprogress of the alliance. All respondents surveyed wereassured anonymity.

Survey results follow.

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THE OED STAFF SURVEYSample Size: 100Responses: 4 0Response Rate: 40%Date Sent: July 1999Received: July–September 1999

I. General Information(Some staff provided more than one response perquestion.)

Region(s) of expertiseAFR 12EAP 12ECA 10LCR 13MNA 10SAR 3Blank 4

TitleEnvironment (specialist, economist, adviser) 9Natural resources management (economist, specialist) 8Forestry (specialist, adviser, officer) 6Manager (sector, knowledge, task) 7Biodiversity specialist 2Operations analyst 2Communications specialist 1Consultant – economics and financial analysis 1Ecologist 1Socio-economist 1Swiss Secondment 1No answer 5

Network affiliationPrimaryEnvironmentally and Socially Sustainable Development Network 92.5% (37)Blank 7.5% (3)

SecondaryPoverty Reduction and Economic Management Network 5% (2)Operational Core Services Network 2.5% (1)Blank 92.5% (37)

Family affiliationPrimaryEnvironment Department 45% (18)Rural Development Department 25% (10)Social Development Department 10% (4)Blank 20% (8)

SecondaryEnvironment Department 17.5% (7)Rural Development Department 25% (10)Social Development Department 7.5% (3)Environment Department/ Social Development Department 2.5% (1)Energy, Mining, and Telecommunications Department 2.5% (1)Blank 45% (18)

Do you have any experience working outside theBank Group in the past 10 years?Yes 77.5% (31)No 20% (8)Blank 2.5% (1)

What is your disciplinary background?Economics (business, natural resources management, forest, and political economist) 15Forestry (technical specialist, ecologist, policy and science) 12NRM (economist, socio-economist) 4Ecology (ecologist, tropical ecologist) 3Agriculture (agriculturist, agricultural engineer) 3Anthropologist 3Environment (environmental scientist, environmental technical specialist) 2Energy (renewable energy engineer, scientist) 2Biodiversity (technical specialist) 2Communication 1Veterinarian 1

Please indicate the type of forestry-related Bankexperience you have.Project preparation 31Project supervision 28Economic and sector work 18Participation in CAS preparation 15Policy dialogue with borrower(s) 21Othera 15a. Regional forest policy development, environmental assess-ment review, environmental action plan, BAP, training portfolioanalysis, knowledge management and research, NRM strategy,donor coordination, GEF work, WB/WWF Alliance.

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For the country or countries you currently workon, are forestry-related issues adequately reflectedin the CAS?Yes 25% (10)No 42.5% (17)Partially 7.5% (3)Blank 25% (10)

Do you think adequate analytical work—for example,economic and sector work—underpins the Bank’soperations?Yes 50% (20)No 22.5% (9)Varies by country 5% (2)Blank 22.5% (9)

A n n e x e s

How do you rate the Bank’s performance with respect to following?HS S U HU NA

i. Promoting planting of new trees in client countries 0 30% (12) 50% (20) 7.5% (3) 12.5% (5)

ii. Protection of natural forests 0 32.5% (13) 47.5% (19) 10% (4) 10% (4)iii. Policy reforms that impact on forests 0 42.5% (17) 37.5% (15) 10% (4) 10% (4)iv. Institutional reforms that impact

on forests 0 32.5% (13) 47.5% (19) 12.5% (5) 7.5% (3)v. Multisectoral approach to forest

development 2.5% (1) 27.5% (11) 45% (18) 17.5% (7) 7.5% (3)vi. Borrower capacity building 0 40% (16) 45% (18) 7.5% (3) 7.5% (3)vii.Consideration of forestry-poverty

interactions 2.5% (1) 27.5% (11) 37.5% (15) 20% (8) 12.5% (5)

HS: Highly Satisfactory; S: Satisfactory; U: Unsatisfactory; HU: Highly Unsatisfactory; NA: Not Available.

II. The Bank’s 1991 Forest Strategy(a) the prevention of excessive rates of deforestation by expanding efforts toward the conservation, protection, and management of the

world’s remaining forests and woodlands, especially tropical moist forests and(b) to ensure adequate planting of new trees to meet the rapidly growing demand for fuelwood, fodder, building poles, and other products

and to ensure that adequate tree cover remains in rural areas for protection of soil and water resources.

Do you think adequate analytical work—for example,economic and sector work—underpins the Bank’s forestpolicy dialogue?Yes 27.5% (11)No 42.5% (17)Varies by country 7.5% (3)Blank 22.5% (9)

Do you agree or disagree with the two most crucial challenges facing the forest sector as stated in the WorldBank’s 1991 Forest Strategy?

SA A D SD NA

i. The thrust of statement(a) quoted above 35% (14) 47.5% (19) 10% (4) 0 7.5% (3)

ii. The thrust of statement(b) quoted above 20% (8) 57.5% (23) 15% (6) 0 7.5% (3)

iii. The emphasis on the conservation of tropical moist forests 17.5% (7) 45% (18) 27.5% (11) 2.5% (1) 7.5% (3)

iv. The Bank has contributed toward slowing down the rates of deforestation 0 20% (8) 50% (20) 15% (6) 15% (6)

SA: Strongly Agree; A: Agree; D: Disagree; SD: Strongly Disagree; NA: Not Available.

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IV. Internal Constraints on Strategy ImplementationPlease indicate if you agree or disagree with the following statements about constraints within the Bank.

SA A D SD NA

i. Relative to other sectors, countrymanagers perceive forest projects toentail higher “transactions cost” butlower payoffs (i.e, smaller size, slowerdisbursement rates, etc.). 32.5% (13) 45% (18) 5% (2) 0 17.5% (7)

ii. This perception has led to loweroperations than would otherwise havebeen the case. 35% (14) 47.5% (19) 7.5% (3) 0 10% (4)

iii. The current forest policy hascontributed to these perceptions. 17.5% (7) 37.5% (15) 30% (12) 0 15% (6)

iv. Internal budgetary resources areinsufficient to conduct high-qualityeconomic and sector work. 35% (14) 37.5% (15) 15% (6) 2.5% (1) 10% (4)

v. Internal human capacity is insufficientto carry out adequate economic andsector work. 30% (12) 47.5% (19) 12.5% (5) 2.5% (1) 7.5% (3)

vi. Past projects have performed poorly. 7.5% (3) 37.5% (15) 25% (10) 0 30% (12)vii. The complexity of the design of lending

operations given their inherent multi-disciplinary and multisectoral nature. 7.5% (3) 47.5% (19) 15% (6) 2.5% (1) 27.5% (11)

viii. The task managers are not adequatelyqualified to handle forest-relatedoperations. 12.5% (5) 27.5% (11) 45% (18) 0 15% (6)

ix. The forest sector staff have insufficientvoice vis-à-vis the country managers. 22.5% (9) 47.5% (19) 12.5% (5) 0 17.5% (7)

x. Poor matrix management. 20% (8) 37.5% (15) 10% (4) 0 32.5% (13)xi. The resources for project preparation

are inadequate. 20% (8) 30% (12) 27.5% (11) 0 22.5% (9)


Do you agree or disagree with the following issues regarding OP 4.36, which were raised by some of you during thefocus group discussions?

SA A D SD NA

i. The policy of not financing commerciallogging is irrelevant as it has notaffected the rate of deforestation inclient countries. 7.5% (3) 62.5% (25) 22.5% (9) 5% (2) 2.5% (1)

ii. The OP provides sufficient flexibilityto address the key issues related tothe logging of primary tropicalmoist forests. 2.5% (1) 22.5% (9) 57.5% (23) 7.5% (3) 10% (4)

iii. The OP has contributed to meeting theBank’s objective of sustainableforest management. 0 12.5% (5) 65% (26) 5% (2) 17.5% (7)

iv. Bank operations and policy dialoguesince 1991 have helped reduce loggingactivities in client countries. 2.5% (1) 10% (4) 45% (18) 32.5% (13) 10% (4)


III. Bank Financing of Commercial LoggingThe Bank does not finance commercial logging operations or the purchase of logging equipment for use in primary tropical moist forest.In borrowing countries where logging is being done in such forests, the Bank seeks the government’s commitment to move towardsustainable management of those forests and to retain as much effective forest cover as possible. Where the government has made thiscommitment, the Bank may finance improvements in the planning, monitoring, and field control of forestry operations to maximize thecapability of responsible agencies to carry out the sustainable management of the resource.

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A n n e x e s

V. External Constraints to Strategy ImplementationPlease indicate if you agree or disagree with the following constraints that are external to the Bank.

SA A D SD NA

i. Corruption in implementing agencies 35% (14) 40% (16) 17.5% (17) 0 7.5% (3)ii. Inadequate appreciation of key issues

by policymakers 17.5% (7) 57.5% (23) 20% (8) 0 5% (2)iii. Insufficient implementation capacity 32.5% (13) 55% (22) 5% (2) 5% (2) 2.5% (1)iv. Insufficient voice of forestry ministry

vis-à-vis finance ministries 20% (8) 50% (20) 15% (6) 10% (4) 5% (2)v. Availability of cheaper and more

flexible sources of funds 12.5% (5) 27.5% (11) 40% (16) 2.5% (1) 17.5% (7)vi. Controversial nature of the forest-

related policies resulting in high levelsof scrutiny by nongovernmentalorganizations 15% (6) 52.5% (21) 20% (8) 2.5% (1) 10% (4)

SA: Strongly agree; A: Agree; D: Disagree; SD: Strongly Disagree; Not Available.

Which Family do you think should have primary responsibility for the forest sector?RDV 32.5% (13) Cross-cutting matrix 7.5% (3)ENV 10% (4) Create a separate family to govern NRM 2.5% (1)SDV 2.5% (1) Doesn’t matter 5% (2)RDV/ENV 12.5% (5) No answer 17.5% (7)RDV/ENV/SDV 10% (4)

VI. Network LeadershipBased on your implementation experience of the 1991 Forest Strategy, where does the leadership on the followingaspects of forest sector operations come from?

RuralDevelopment EnvironmentDepartment Department None Other NA

i. Intellectual leadership 15% (6) 10% (4) 25% (10) 22.5% (9) 27.5% (11)ii. Operational support/cross support 25% (10) 15% (6) 10% (4) 25% (10) 25% (10)iii. Innovative ideas 10% (4) 25% (10) 10% (4) 20% (8) 35% (14)iv. Resources to operationalize

innovative ideas 2.5% (1) 20% (8) 20% (8) 20% (8) 37.5% (15)v. Quality control 10% (4) 12.5% (5) 32.5% (13) 15% (6) 30% (12)

Please rate the following with respect to the Network leadership.HS S U HU NA

i. The division of Forest SectorManagement between ENV and RDV 0 10% (4) 32.5% (13) 30% (12) 27.5% (11)

ii. Intellectual leadership on ForestSector Issues 0 30% (12) 32.5% (13) 12.5% (5) 25% (10)

iii. Knowledge management/disseminationof best practices 0 37.5% (15) 37.5% (15) 7.5% (3) 17.5% (7)

iv. Operational support/cross support 2.5% (1) 25% (10) 30% (12) 2.5% (1) 40% (16)v. Leadership for operationalizing

innovative ideas 0 15% (6) 47.5% (19) 7.5% (3) 30% (12)vi. Resources for operationalizing

innovative ideas 0 12.5% (5) 45% (18) 15% (6) 27.5% (11)vii. Peer review process 2.5% (1) 25% (10) 37.5% (15) 5% (2) 30% (12)

HS: Highly Satisfactory; S: Satisfactory; U: Unsatisfactory; HU: Highly Unsatisfactory; NA: Not Available.

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VII. Bank Leadership in ForestsDo you consider the Bank to be a global leader inforest-related matters?Yes 27.5% (11)No 60% (24)Blank 12.5% (5)

Should the Bank be a global leader inforest-related matters?

Yes 45% (18)No 25% (10)Depends on issues 2.5% (1)Blank 17.5% (7)

VIII. Other IssuesIn general, do you think that the Bank’s safeguardpolicies help or hinder forestry projects?Help 40% (16)Hinder 22.5% (9)Both 7.5% (3)Blank 30% (12)

Based on your experience, how do you rate thecompliance with forest-related safeguard policies inthe Bank’s operations that impact on forest?Highly satisfactory 2.5% (1)Satisfactory 50% (20)Unsatisfactory 12.5% (5)Highly unsatisfactory 0Blank 35% (14)

Do you think forest-related issues are sufficientlyintegrated in the Bank’s agriculture sector ESWand strategy?Yes 22.5% (9)No 57.5% (23)Blank 17.5% (7)Depends on country 2.5% (1)

Do you think there is sufficient integration of forestsector issues in the Bank’s work on poverty reduction?Yes 7.5% (3)No 75% (30)Blank 17.5% (7)

Do you believe that the GEF’s role in the forest sectorshould…Increase 57.5% (23)Stay the same 25% (10)Decrease 2.5% (1)Blank 15% (6)

Do you believe that the IFC’s role in the forest sectorshould…Increase 57.5% (23)Stay the same 25% (10)Decrease 2.5% (1)Blank 15% (6)

Based on your implementation experience, please indicate if you agree or disagree that the Bank is well positionedto provide leadership on the following global strategic issues in a policy and operational context.

SA A D SD NA

i. Forest sector 22.5% (9) 42.5% (17) 22.5% (9) 5% (2) 7.5% (3)ii. Climate change 12.5% (5) 52.5% (21) 7.5% (7) 2.5% (1) 15% (6)iii. Biodiversity conservation 20% (8) 52.5% (21) 15% (6) (0) 12.5% (5)iv. Desertification 5% (2) 42.5% (17) 20% (8) 5% (2) 27.5% (11)v. Natural resource management 20% (8) 57.5% (23) 7.5% (3) 2.5% (1) 12.5% (5)vi. Carbon sequestration and the

Clean Development Mechanism 20% (8) 35% (14) 20% (8) 2.5% (1) 22.5% (9)


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THE OED SURVEY OF THE CEO FORUMSample size: 3 1Responses: 1 6Response rate: 52%Date Sent: April 20, 1999Received: May 3, 1999–October 5, 1999

Were you familiar with the World Bank’s foreststrategy before the CEO Forum was formed?Yes 69%No 31%– 42% of the private sector respondents said “no.”– 100% of the NGO respondents said “yes.”

How would you describe your current familiarity withthe 1991 strategy?Very familiar 25%Somewhat familiar 75%Not familiar 0%– 75% of the NGOs said “somewhat familiar.”

Do you believe the conservation focus of the foreststrategy should continue?Yes 69%No 31%– 100% of the NGOs said that the conservation focus

should continue.– 58% of the private sector respondents said the focus

should continue.

Private Sector Comments:• More broad-based approach to promoting sustain-

able forest management and sector reforms.• The 1991 strategy did not sufficiently include the

economic aspects of sustainable development.Emphasizing conservation as opposed to sustain-able forestry will exacerbate the problem andcontinue to cause problems for the Bank withrespect to credibility.

• Sustainable logging on a commercial scale isessential in development and good conservationand should not be ignored.

• The strategy should be made clear by dividing theforests into three parts:Conservation Forests – The Bank must help thestates to define the areas and to protect them with along-term view.Production Forests – The Bank must finance theresearch and help the operators in sustainablemanagement.Conversion Forests – In agriculture, the Bank mustfinance research and aid to reduce shifting cultiva-

tion. Plantations are very important, but up to nowit seems unclear if plantations should be cultivatedin tropical moist forests or only in secondary forestsor savannas.

Should the Bank’s focus be directed toward theconservation of tropical moist forests?Yes 50%No 44%No response 6%– However, the majority (75% NGOs and 55% of the

private sector) noted that all forest types should becovered.

Private Sector Comments:• While tropical moist forests are essentially impor-

tant, the conservation of forests worldwide is nec-essary. The issue should be addressed globally.

NGO Comments:• Tropical moist forests may be the most critical, but

is isn’t useful to suggest that conserving one kind offorest addresses the need to conserve other kinds.Although most tropical moist forests are in poorcountries, which is the Bank’s main target, otherforest types exist which also need conserving inBank client countries.

• It would be useful to address conservation needs inother threatened forest ecosystems, and the Bankshould consider broadening its strategy to cover allforest types.

• The strength of the Bank’s commitment to directconservation efforts should increase relative torelated activities.

What are your views of the commercial logging banin Operational Policy 4.36?– The OP was criticized both for making too many

exceptions to the policy and for not making enough inlight of the assessed need for Bank involvementpromoting sustainable forest management.

– Half of the private sector responses specifically advisedthe Bank to retain a presence in tropical moist forests.Yet this presence should be encouraged only if a highstandard of sustainable forest management can beachieved. Also, to meet local and national stakeholders’needs, clearer definitions are needed to determine exactlywhat “as much forest cover as possible” means.

Private Sector Comments:• The policy handicaps the Bank in its efforts. A lot of

emerging and developing countries need the cash

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that comes from developing resources whereas theyhave very little other sources. The Bank had noclout to moderate conditions under which theseareas are logged. The Bank can help countriesmove toward sustainable forest management if it isinvolved. This is a limiting factor in the Bank.

• We think every country has the right and obligationto use its resources in a reasonable manner toprovide for the well-being of its population. Thatobligation includes the preservation, conservation,and utilization of the forest resources under aneffective national forest policy that is itself part ofthe country’s land resource allocation and develop-ment programs. The Bank’s policy of banningparticipation in commercial logging activitiesmerely shifts funding to other, often less respon-sible, sources. It removes the Bank and its directinfluence from areas that most need its assistance toachieve complete and sustainable developmentprograms. It is inconceivable to actually expect thatall of a poor country’s primary forests can or will bepreserved. However, the most important aspect ofmaintaining appropriate forest ecosystems is toprovide ecological, social, and economic alterna-tives to deforestation that address underlying causesof the phenomenon.

• Most of the tropical countries have land-use-planning in the sense that parts of the forests arecompletely protected (national parks) and otherparts are earmarked for production. Part of theseproduction forests are primary tropical moist for-ests. Especially in these forests where timber har-vesting takes place in connection with or withoutthe timber industry special attention.

NGO Comments:• The Bank should seek the governments’ commit-

ments to the conservation of biodiversity by creat-ing a functioning protected-area network beforeseeking a commitment to manage timber supplysustainably. The protection of biological diversitymust be in itself an objective. Attempts to improvethe planning, monitoring, and field growth of evensecondary forests should proceed, but should not bethe primary means of protecting biodiversity.

• Exceptions to the policy should only be allowed 1)for operations which have made a clear commit-ment to seek Forest Stewardship Council (FSC)-based certification and where there is a reasonable

chance of this being achieved and 2) for commu-nity-based operations operating on a small scale.

• Financing commercial logging that is consistentwith maintenance of high levels of ecologicalintegrity may be good policy unless the blanketprohibition is needed because the bank is unable toexercise good judgment or penalize bad manage-ment and policy.

Do you see different roles for the small-, medium-, andlarge-scale timber producing countries?Yes 81%No 0Don’t know 19%

Private Sector Comments:• Different sale opportunities/product line opportuni-

ties in different countries. Also, optimum resourceallocation.

• Programs must be differentiated to take care ofall these categories. Out-grower programs areimportant.

• Small companies manufacture specialty items bet-ter than large. They can handle smaller scales. Interms of tree planting, large companies tend to haveeconomies of scale which tend to give them advan-tage. Where you can generate scale economies,there is some advantage to size.

• Small timber producers usually are nationals of theconcerned tropical country. Their main role cannot beindustrialization and downstream processing due tolack of funds and expertise. A small timber producercan supply his production to the local industry. Asmall timber producer cannot establish a manage-ment plan. He will not be able to manage his forestsustainably in the sense of a 30-40 year rotation.Small producers cannot give a guarantee for long-term employment. Due to lack of education, they areusually unable to train employees. The populationdoes not find a permanent “home” and has to look fora new place (including shifting cultivation) when thesuitable trees in a small concession have beenharvested. Small producers: especially when theyhave bought the rights of using the forest on auctiontend to “cut out and get out” method, which is exactlycontrary to what is necessary.

• Large-scale companies have good possibilities forsocially and environmentally more demanding andlong-lasting development projects.

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• Training can be done at the appropriate scale forlarge loggers using heavy equipment and smallfamily operations that still need to apply goodplanning and management.

• The often more visible role of the large manufactur-ing company is in fact only part of the forest-basedenterprise. Especially in solid wood products, thereis an absolute need for small to medium- sizeproducers who can adapt to local scale and circum-stances, and these often are the most entrepreneur-ial business units. In a world in which the tendencyis toward outsourcing of many services and parts ofthe manufacturing process, it is becoming common-place for third party businesses to provide the roadconstruction, harvesting and transportation andmany of the silvicultural services related to forestbusiness. A high level of quality practices andprograms are necessary to provide benefits to allintended groups, to instill a feeling of responsibilityfor the forest in all who benefit from it, to accountfor concerns about equity, and to minimize distor-tions caused by those few who, inevitably, don’tcomply with the rules. These are all necessarycomponents of building credibility for the projects.

• We are having industry provide materials forlogging operations being done by subcontractors(smaller companies). The timber industry is aglobal market and on a global scale; one mustdiscuss export. There are not enough local marketsto sustain this (export) industry. First-grade exportquality goes toward international export. Oneneeds to understand regional sources and politics ona global level. Smaller companies can concentrateon logging operations under contracts of biggercompanies or if they are industrial then they needgood relations with three or four steady clients.

NGO Comments:• Although roles vary from place to place, in general

small- and medium-scale producers focus on sup-plying local markets with products involving littlecapital investment, such as rough-sawn boards.Large-scale producers generally focus on exportmarkets and more capital-intensive production(e.g., plywood, veneer, furniture, etc.)

• Large-scale producers are able to engage in land-scape-based planning and management. Smaller-scale producers need to group together to do this.Also, there are various other economies of scale

which give commercial advantages to large-scaleproducers. Small-scale producers often benefit froma wide range of other goods/services.

From the perspective of your organization, do you seea benefit in pursuing certification?Yes 56%No 31%Depends 6%Don’t know 6%

Is certification an effective tool for assessing specificstandards of forest management?Yes – given certain criteria 63%No 13%Yes and no, depends 25%

Is certification feasible given the current knowledge offorest management?Yes 44%No 13%Yes and no, sometimes 31%No response 6%

Is certification likely to be more successful intemperate than tropical forests?Yes 63%No 32%Don’t know 6%

Is certification likely to promote “sustainable forestmanagement?” Please clarify your perception ofsustainable forest management.Yes 38%No 31%Depends on definition of sustainable forest management 19%Too early to tell 6%No answer 6%– Most members of the CEO Forum noted some benefits

from certification but had a number of concerns aboutthe costs and benefits and the willingness of end-users topay significantly more for certified products, aboutcertification becoming a barrier to trade, about problemsof third-party monitoring, and about establishing ageneral agreement on guidelines.

Private Sector Comments:• As a tool, certification can serve as a motivator of

excellence by identifying and recognizing those whoexcel in meeting standards of excellence. . . . In ourexperience, forestry certification schemes have not

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been the principal driver of improved forestry prac-tice. It is effective in providing motivation and as amodel, but it is too complicated a concept to reach themajority of forest owners in societies where themajority of forestland is owned by private individu-als. Existing schemes are similar in terms of actualrequirements; they differ in ideological agendas. . . Incountries where there is little statutory or regulatorycontrol and less general agreement about acceptablemanagement practices, forest certification may beable to identify those forest enterprises that areproperly meeting their responsibility for managingthe forest resource. There is controversy about certifi-cation in the temperate regions (evidence that theprocess is not yet mature enough). Many forests thathave been certified in many regions come nowhereclose to our corporate standards.

• Certification does not touch on the real factors ofdeforestation in the tropics. Insensitive marketsrepresent more than 95 percent of tropical woodproduction. Certification doesn’t concern govern-ments and cultivators, but only exporters to a fewcountries. Good management by all stakeholders—foresters, farmers, hunters—under the control of astrong administration has a greater effect on tropi-cal forests than the good management of a fewEuropean companies who are already working incertifiable conditions.

• The FSC’s criteria and indicators for certifyingtropical natural forests are unrealistic and discrimi-nating to tropical countries. There is not a singlehectare of certified natural forests in West andCentral Africa for the time being. If there arerealistic criteria and indicators which leave thetropical country and its governments the sover-eignty to accredit certifiers and use their owncriteria and indicators (ATO - African TimberAssociation, CIFOR - Center for International For-estry Research), certification is feasible. The levelof a sort of minimum criteria should be compara-tively easy to reach by concession holders andtimber industry. Criteria and indicators shouldallow a step-by-step process and set realistic targetswhich can be reached in a certain period of time.The monopoly of FSC and unrealistic criteria/indicators are a handicap in the certification pro-cess of tropical countries.

• The controversy about forest certification is primarilypolitical in that it involves issues of ideology, control,

financial advantage and starkly differing perceptionsof what problems it is intended to solve and whether itcan solve them. On the technical level, verification offorest practices to a particular standard is eminentlyfeasible, if the standard is generally agreed upon. Inthe developed countries, where there is a well-developed framework of forest technology, laws andregulations, land use history, etc., it is entirelypossible to define “generally accepted forest prac-tices” that serve as a basis for certification. Much ofthis is potentially useful for forests in temperate andboreal developing countries. Some of it is equallyuseful in the plantation forests of the SouthernHemisphere. However, tropical rainforest forestry isin its infancy, it is largely confined to extraction offurniture-grade hardwoods, there is little silvicultureand forest management as such, and there is littlebasis to establish agreed standards that have anypractical technical basis.

• Certification can only influence those forests thatproduce products into a market that requires it. Itwill have no impact where the reasons for defores-tation or degradation of an area are related topopulation expansion and agricultural or fuelneeds. It is easy to certify temperate forests incountries with more than 200 years of forestresearch and sustainably managed forests. Forestsin Northern Europe, for instance, have been man-aged sustainably for two centuries. Forestry intemperate zones (meaning rich industrial countries)cannot be compared with forestry in tropical zones(poor developing countries).

NGO Comments:• (Not in tropical forests)—Sustainable forest man-

agement is presumably targeted (at a minimum) atsustained timber yields.

• Sustainable forest management is a long-term goalwith ecological social and eco-dimensions. Itsprecise formulation will depend on what forestgoods and services society wishes to “sustain.”Certification can be a tool to promote this goalunder appropriate circumstances.

• Sustainable forest management = ecologically com-patible forestry—pursuit of management that pro-tects biodiversity while permitting economic devel-opment. This could involve well-managed timberproduction and/or activities such as ecotourism orothers.

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Do you believe carbon markets can help in forestconservation?Yes 75%No 13%Depends 13%– The NGO community unanimously believes that carbon

markets can help in forest conservation.

Private Sector Comments:• The Kyoto Protocol to the United Nations Frame-

work Convention on Climate Change has somuch uncertainty associated with it that the forma carbon market can take is strictly speculative.It is difficult to see how a carbon sequestration reserve of existing forest will provide thebenefits needed to sustain a population that isusing the area to meet their basic needs. This isespecially true if the expectation is for “perma-nent” storage.

• The current concept of a base date and thelimitations of the “Kyoto Forest” provide suchsignificant disadvantages to the developed coun-tries that it is difficult to see how they can ratifythe treaty as currently conceived. At a recentmeeting jointly sponsored by the Subsidiary Bodyfor Scientific and Technological Advice (SBSTA)and the Intergovernmental Panel on ClimateChange (IPCC), it was evident that several coun-tries are just beginning to analyze the impacts ofthe current understanding on their own econo-mies. However, regardless of the governmentalcontext or political mechanism, forest planta-tions are an ideal way to increase the forest areafor greater carbon sequestration. A study inBrazil, for example, indicated that significantreforestation with tree plantations of areas ear-lier converted to pasture and low-grade farmlandwould make a significant contribution to carbonsequestration while providing a long-term basefor industrial wood. Similar opportunities existthrough the Southern Hemisphere. A massivereforestation effort in India, parts of China, inSub-Saharan Africa and Madagascar, wouldhave enormous implications for carbon seques-tration as well as for soil stability, local fuel andconstruction, and social improvement.

• It depends on whether funds created by carbonmarkets can be invested in tools of improved forestmanagement which neither developing countriesnor the private sector can finance.

Do you believe the climate change negotiations willresult in clear guidelines for formulation of carbontrading markets?Yes 19%No 25%Don’t know/unclear so far/not anytime soon 50%No response 6%

Should the World Bank play a role in the developmentof carbon markets?Yes 81%No 13%Not sure 6%

In what ways can the World Bank and the privatesector work together. . .

. . . to meet the demand for forest products?• The World Bank can support educational efforts,

information exchange, designed to spread sustain-able forest management practices more broadly ona national and international basis. Also, researchon trends in forest product markets.

• For all objectives, develop programs to demon-strate sustainable forest management/low impactlogging. Also, develop forest plantations in“logged-over” areas.

• Lending of good projects in non-OECD countries.• IFC could finance projects. The World Bank could

improve the inventory climate and can play apositive role to motivate companies to followsustainable forest management methods.

• By helping to establish the right environment forprivate sector investment in forest plantations (e.g.,by providing concessional loans or by restrictingnon-plantation wood supplies by placing old-growth forests off-limits in protected areas).

. . . to help conserve primary forests?• Education is critical here. These are public lands

and the support of the public and the local commu-nity is vital to their preservation. Efforts at buildingcoalitions that are broad in scope and purposeshould be encouraged.

• Countries should set aside conservation areas; therest of a country’s area should be used economi-cally without destroying it. Identify and protectprivate protected areas and collaborativelyencourage governments to protect forests on pub-lic lands. Increase funding for protected areacreation and management.

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. . . to maintain biodiversity?• Fund studies that promote sustainable forest manage-

ment with the focus of maximizing biodiversity andmake sure this information is widely available toindustry so the principles can be broadly adopted.

• By understanding that sustainable management ofprimary forests is also possible, in connection withfull conservation.

• Increase funding for protected area creation andmanagement.

. . . to sequester carbon?• Bring the players together and define the terms of

this market.• The World Bank could possibly help to develop

carbon trading rules.• Promote timber products and housing schemes.• Fund studies to gain a complete and accurate

understanding of carbon sequestration and developincentives to accomplish this.

. . . to achieve other objectives?• Work with governments to assure progressive, but

practical, and enforceable policies that encourageimproved forest management.

• Drive governments to good governance throughcooperation with private industry. Where IFC isfinancing industry, the World Bank has a tool topromote discussion between governments, industryand the Bank. It seems as if the World Bank isignoring the timber sector.

• Identify ways to develop and maintain standards ofsustainable forest management through indepen-dent certification and other ways of verification.

• The World Bank (or IFC) could finance the improve-ment of state agencies, but also finance and worktogether with professional organizations that havepedagogic functions, like IFIA. The development ofbetter methods in reduced-impact logging; communi-cations and awareness of the private sector to improvethese methods and pilot projects such as: forestmanagement plans, environmental impact studies,low-impact logging, local processing with higherimpact value, taxation and forest policy, and role ofthe forest industry in rural development.

• Sector reforms/investment climate, institutionaldevelopment, HRD, financing, etc.

What contributions, in your opinion, has the CEOForum made in the areas mentioned in thisquestionnaire?– The majority (60%) note a positive contribution.– The rest believe that the Forum’s contributions are

unclear (27%) or limited (13%).

Private Sector Comments:• Essential discussion and information exchange

forum, but a more active role is needed.• There is some indication of convergence between

the views of the NGOs and the CEOs, which is verypositive. We have to go further by replacing theForum with working groups that combine NGO/CEO/Private Sector/Bank, and the like.

• The CEO Forum is the first move of the World Banktoward better understanding between the Bank andthe private sector as “motor” for development ingeneral and in special for forest management,industrialization, education, creation of jobs, fightagainst poverty, etc.

• It has made a small group of industry CEOs moreaware and better informed about the objectives ofthe World Bank and the “mindset” of its leader-ship. It has provided the foundation for a smallgroup of companies and NGOs to initiate alimited (and somewhat superficial to date) dia-logue on certain aspects of sustainable forestry.However, those actions have helped to foster aframework in which a broader dialogue cancontinue among the industrial, private forestowner and NGO communities, and that is aworthwhile accomplishment.

• Relatively little, so far.• None yet, it is a talking shop.

NGO Comments:• Unclear as yet, as working groups are still in

progress.• Brought together different sectors for exchange of

views/made some progress through the workinggroups.

• Brought key parties together for important discussionand awareness raising of each others’ perspectives.

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Do you believe that the IFC’s role in the forest sectorshould . . .Increase 56%Decrease 0Stay the same 6%Don’t know 25%Depends on focus 13%– The NGO community felt that IFC’s role should “staythe same” or should be increased in situations where ituses good ecological judgment.

Private Sector Comments:• IFC’s role should increase in non-OECD countries

and in some newly established members of OECD.• IFC knows the forest sector and understands invest-

ment climate in emerging markets.• The IFC should support commercial plantations.• It is my impression and experience that the IFC has

more or less pulled out of investments in the forestsector. IFC and also MIGA could play a better andmore constructive role for developing the forest sectorand timber industry in a sustainable way in the future.

• IFC could finance some special cooperation like:professional training to promote specialists in forestinventory, sustainable management, logging,sawmilling, etc. Or, the financing of equipment ofnational interest like main roads (e.g., CentralAfrica-Douala) and railways (Congo, RD Congo,Cameroon, etc.)

NGO Comments:• The IFC should not be involved in forestry projects

in the humid tropics, nor should they be lending forprojects such as roads and pipelines having signifi-cant negative impacts on tropical forests. Rather,the IFC should increase lending for plantationdevelopment on degraded land and to conservation-friendly commercial development activities.

Do you believe that the GEF’s role in the forest sectorshould . . .Increase 44%Decrease 0Don’t know 38%Stay the same 6%Depends on focus 6%No response 6%– 50% of the private sector respondents were not able to

answer the question, usually for lack of knowledgeabout the organization.

– 66% of the NGO community supported an increase inGEF activity.

– The other respondents noted that while some areas ofGEF involvement could be heightened, its work shouldbe “confined to projects whose conservation andenvironmental benefits are beyond question, such asfunding protected areas through a trust fund.”

Private Sector Comments:• GEF should increase its financial involvement in

natural resource management projects, changes inoperational practices, and (especially) financing agri-culture and animal breeding, which have to beintegrated into forest management, industrial devel-opment with fast-growing population in connectedvillages. This issue has been completely neglected upto now, at least in West and Central Africa. It isabsolutely necessary to combine logging operations,timber industry (result = fast growth of villages) withagriculture and animal breeding projects.

• GEF should become more involved in programs todemonstrate and teach sustainable forest manage-ment/low-impact logging.

• GEF should increase activity in non-OECD coun-tries or newly established members of OECD.

Based on your knowledge of the Bank, do you believethe Bank is well positioned to address global strategicissues such as the role of forests in climate change,desertification, biodiversity conservation, andresource management?

– Overall, 73% of all respondents felt that the World Bankis well positioned to address the issues of climate change,biodiversity conservation, and resource management.

– 60% of all respondents felt that the Bank is wellpositioned to address desertification.

– The NGO community was critical of the World Bank’srole in addressing these global issues.

NGO Comments:• The Bank should primarily play a “facilitator’s” role

in issues related to forests and climate change and forbiodiversity concentrate more on providing grants toprivate sector partners and in helping to fund imple-menting agencies in developing countries.

• The Bank has difficulty with multi-country pro-grams and is therefore not well positioned toaddress any of these issues.

• While the Bank could address biodiversity con-servation and resource management, it is notwell equipped to address climate change anddesertification.

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THE OED SURVEY OF THE WB/WWF ALLIANCESample Size: 9 3Responses: 3 4Response Rate: 37%Date Sent: May 3, 1999Received: May – September 1999

In what capacity and in what countries are you involved in the WWF-World Bank alliance? On average, how manyhours a month do you dedicate to the Alliance?

Bank WWF

Hours HoursTitle per month Title per month

AFR Task manager/natural Regional point person 40 resource management specialist 2Task team leader/forests LS 16 Program officer 15Bank regional manager 10 Country team member 8–12Senior environment economist 2

EAP Region coordinator 5 Regional point person 50Resident mission in China less than 5Task manager minimal

ECA Biodiversity specialist 2 Director 1Forest officer (ECA Program) 20Forest officer (Mediterranean Program) 10Forest officer (Russia) 8–12

LCR Biodiversity specialist 0 Forest coordinator over 100Senior economist 8 Conservation director 4Senior forest specialist 5 Forest officer 30Task manager/economist 0.5 Technical director 6Regional manager 0 Country team member 3Senior natural resource management specialistSector leader 2

SAR Task manager less than 5 Program officer 5–10Task manager 35–40Senior environment specialist 0Forestry specialist 2Senior anthropologist in social development department 0

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A n n e x e s

From your perspective, what are the reasons for the partnership between the World Bank and the WWF?Bank WWF

Response Frequency Response Frequency

Partnership exists to combine the 15 WWF ensures that environmental and 6strength and expertise of both conservation issues are accorded theorganizations (to utilize the comparative desired importance by key actors,advantage of both institutions). players, and decisionmakers.

An association with an environmental 5 An opportunity for WWF to influence 5NGO, given the controversial nature of WB agenda and programs related toforest management, is good public protected areas and the forest sector.relations for the Bank.

Partnership affords WWF the 3 Additional funding for WWF. 1opportunity to attempt to influence theBank’s forestry portfolio in that it realizesthat the Bank’s management does notgive it enough attention.

WWF will benefit from increased funding 2 An exploratory attempt to conciliate 1possibilities and that the institution will two frequently opposed view:gain more clout through association. development and conservation.

What are the benefits of the Alliance?

Bank WWF

Responses Frequency Responses Frequency

Synergy, shared goals, and blending 3 Increase in funding for conservation 4of cultures activities

No benefits 3 Increased attention to conservation and 4sustainable forestry issues and thepromotion of constructive uses ofresources

Provide most funds, money from the 3 Synergy and the establishment of a 3center for forestry activities, an increase common frameworkin resources

Increase representation of key 2 Allows WWF more direct access to 2stakeholders in Bank operations World Bank staffPromote forest conservation and best 2 The chance for the World Bank to have 2practices in forest management more influence over the private sector

and to have more non-typical WorldBank activities

Political clout 1 The Alliance targets now to be 1“attacked” from both directions

Raise awareness on social, economic and 1 No benefits 1environmental benefits of managementand conservation forests

Provide a medium for governments to 1 In practice, hard to say at this point, 1assume their responsibility of forest except that governments may be takingmanagement more notice of forest conservation

issues if the Bank’s name is associated

Propaganda 1

More visibility to forestry with 1Bank managers

No answer 2

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What are its drawbacks?

Bank WWF


The Alliance is top down. 5 The level of motivation and 2commitment from the WB staff to makethe Alliance work is much lower thanWWF. Lack of staff time.

The cultures and objectives of WWF and 5 WWF is giving credibility to the Bank 2WB are not perfectly matched. with little guarantee of effective action

on the part of the Bank. For WWF, closeassociation with the WB, if not wellexplained, could pose some problems interms of image, particularly due to pastnegative environmental impacts of WBprojects worldwide.

No drawbacks. 4 Overloading an already stretched system. 1

Modest funds are too small to be cost- 2 Lack of “buy-in” by other partners. 1effective for Bank staff.

False expectations. 2 Turf Matters—coordination difficulties. 1

• Differences in financing mechanisms. 1 Institutional cultures, roles, and physical 1• Differences in sectoral interests. 1 distribution of staff are very different.• New alliances are next to useless unless

they come with new funding and that 1was the problem with the WB/WWFAlliance.

• Not enough attention given to interests 1of indigenous people.

• No “buy in” amongst clients or within 1the Bank. Seen as Bank giving in toFSC agenda and WWF agenda. 1

Insufficient emphasis on addressing 1“paper parks” relevant to the target ofcreating new protected areas.

Do you believe the goal of establishing 50 million hectares (125 million acres) of new forest protected areas is arealistic target?

Bank WWF


Yes 8 (40%) Yes 12 (86%)No 12 (60%) No 0Don’t know 0 Don’t know 1 (7%)No answer 0 No answer 1 (7%)

Is progress toward the realization of this target likely to be made in temperate forests?

Bank WWF


Highly likely 0 Highly likely 3 (21%)Likely 14 (70%) Likely 7 (50%)Unlikely 1 (5%) Unlikely 1 (7%)Highly unlikely 0 Highly unlikely 0No answer 5 (25%) No answer 3 (21%)

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Do you believe the goal of bringing an additional 200 million hectares (500 million acres) of the world’s forests underindependent certification by the year 2005 is a realistic target?

Bank WWF


Yes 6 (30%) Yes 9 (64%)No 11 (55%) No 4 (29%)No answer 3 (15%) No answer 1 (7%)

Is progress toward the realization of this target likely to be made in tropical forests?

Bank WWF


Highly likely 0 Highly likely 6 (43%)Likely 7 (35%) Likely 3 (21%)Unlikely 4 (20%) Unlikely 0Highly unlikely 4 (20%) Highly unlikely 1 (7%)No answer 5 (25%) No answer 4 (29%)

A n n e x e s

From your perspective, how do your next-in-line managers view the Alliance?

Bank WWF


Highly desirable 1 (5%) Highly desirable 5 (36%)Desirable 2 (10%) Desirable 3 (21%)Somewhat desirable 5 (25%) Somewhat desirable 5 (36%)Undesirable 5 (25%) Undesirable 0No answer 2 (10%) No answer 1 (7%)Managers don’t have an 5 (25%)

opinion/ uninterested

Is progress toward the realization of this target likely to be made in tropical forests?

Bank WWF


Highly likely 0 Highly likely 3 (21%)Likely 7 (35%) Likely 7 (50%)Unlikely 4 (20%) Unlikely 2 (14%)Highly unlikely 4 (20%) Highly unlikely 0No answer 5 (25%) No answer 2 (14%)

Is progress toward the realization of this target likely to be made in temperate forests?

Bank WWF


Highly likely 1 (5%) Highly likely 8 (57%)Likely 12 (60%) Likely 3 (21%)Unlikely 1 (5%) Unlikely 0Highly unlikely 0 Highly unlikely 0No answer 6 (30%) No answer 3 (21%)

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Which additional key stakeholders within the Bank, in your opinion, need to be involved in the Alliance to ensure itssuccessful implementation?

Bank WWF


Country directors 5 Country directors/desks 5ENV and RDV sector managers 2 Regional offices/desks 4Vice presidents 2 Bank operational staff 3All TMs working on GEF 2 Vice presidents 2Middle-level managers 2 Task managers 2Environment department 2 Biodiversity Thematic Group 1The Regions 1 Environment 1Regional management 1 Regional directors 1Social Development Family 1 Resident representatives 1Operational VPs 1 RDV 1Natural resource task team 1External relations managers 1Technical managers 1Private sector groups 1Fundraisers 1In the EAP Region: the RVP and the

sector manager responsible for “regional initiative 1

Biodiversity Park Project and Forestry Project 1IFC 1

Who, in your view, are currently the stakeholders of the Alliance within the Bank?

Bank WWF


Env anchor/staff 8 Env and Social Policy Division 4RDV Family (Forestry) 6 Wolfensohn 3Wolfensohn 4 Forestry Division 3Ken Newcombe 2 Country management units 2Select TTLs 1 GEF coordinating staff 1A few naïve TMs 1 Regional point people 1External affairs 1 LCR staff 1None 1

115

Which additional key stakeholders outside the Bank and WWF need to be involved in the Alliance to ensure itssuccessful implementation?

Bank WWF


Local NGO networks, national 7 National governments 5(client) NGOsGovernment agencies responsible for 6 Local communities 4forest managementIndigenous groups 2 Private Sector dealing with forest 4

resourcesLocal communities 2 Indigenous groups 3Academia 2 International NGOs 3Other NGOs 2 International organizations/ 2

AID agenciesInternational NGOs (WRI, IUCN) 1 Women’s organizations 1Ministers of Planning 1 Research institutions/forestry schools 1Ministers of Finance 1 National forest administrator 1National governments 1 Ministers of Finance 1Ted Turner 1 Small business 1Politicians 1 Local governments 1Bureaucrats 1 The EU MEDA/ SMAP 1

FUNDECOR, CODEFORSA 1

Do you think that there is currently adequate involvement of key in-country Stakeholders in the Alliance?

Bank WWF


Yes 0 Yes 1 (7%)No 18 (90%) No 12 (86%)No answer 2 (10%) No answer 1 (7%)

A n n e x e s

Who, in your view, are the current stakeholders outside the Bank and WWF?

Bank WWF

Responses Responses

International donor community Ministry of EnvironmentDFID Ministry of AgricultureDanida GovernmentsNetherlands Academic and research instituteUNDP International Development AgenciesFAO International Cons. and Dev., NGOsIUCN International organizationsUNEP FSCUNIDO Forestry Organizations: Soc. of Tropical ForestersGovernments NoneSome Forestry Departments Industry/ private sectorNone Local NGOsIndustry National NGOsSocial groups Local communitiesEnvironmental NGOsAfrica: Cameroon and MadagascarConsultants involved with certificationIndigenous communitiesTribal communitiesPrivate sector

116


In what ways is the Alliance contributing to the WWF’s institutional mission?

Bank WWF

Responses Responses

Political clout The alliance will help WWF deliver its forestconservation strategy.

Fundraising The Alliance targets are linked with WWF Forest for Lifecampaign targets.

A way to add value to WWF’s Forest for Life Campaign and Additionally, alignment with the Bank is allowing us to beother global initiatives partners in the development of much larger projects, whose

success could significantly improve the prospects forbiodiversity conservation and sustainable resourcemanagement directly, as well as modifying national policies.

In some countries, WWF is being taken off-task when asked The Alliance has facilitated government commitment toto address poverty alleviation and sustainable forestry creating new protected areas but has contributed very littleinstead of protected area management. in terms of actual implementation.No answer or “don’t know” (50%) No answer (7%)

In what ways is the Alliance contributing to the Bank’s institutional mission: “poverty alleviation and sustainabledevelopment”?

Bank WWF


Too early in the game to tell. 4 Alliance targets are conducive to bothmission goals. 2

People are mainly lost in Alliance debates. 4 The certification target is relevant tosustainable development. 2

Only marginally contributing to the Biodiversity conservation is a long-termBank’s mission. 2 requirement for sustainable development 2It is unclear if it contributing to it. 2 Certified forests should contribute to

more competitive forest productsindustries, improve labor practices, andaddress human rights issues. 1

Alliance is not contributing to the Bank’s 1 No tangible ways yet. 1overall mission.No appreciable contribution of the 1 Where the Alliance helps realize 1Alliance in South Asia. sustainable forest use, local people

should benefit and their standards ofliving should be improved. The benefitsare less direct with regard to forestprotected areas, but effects such aswatershed protection and biodiversityconservation are significant.

Developing more inclusive partnerships 1 Protected areas are a key to biodiversity 1with those concerned with sustainable conservation and a key component ofmanagement of natural resources. sustainable development.Certification is contributing to the WB 1 Sustainable natural resource 1mission because it should ensure management is a prerequisite forsustainability and higher income for creating the enabling environment forthe poor. the Bank mission.To the extent that certification is broadly 1 In the Mediterranean region, the fight 1defined, can increase transparency and against desertification and theaccountability on the part of the resource conservation of water resources aremanagers we are contributing to both of both related to forest conservation andthese goals. are fundamental for poverty alleviation.

117

Is certification likely to promote “sustainable forest management”? Please briefly identify what you understand by“sustainable forest management.”

Bank WWF


Yes 11 (55%) Yes 9 (64%)No 3 (15%) No 1 (7%)Maybe 1 (5%) Too early to tell 3 (21%)No answer 5 (25%) No answer 1 (7%)

Is certification likely to be more successful in temperate than tropical moist forests?

Bank WWF


Yes 10 (50%) Yes 9 (64%)No 7 (35%) No 1 (7%)Depends (Depends entirely on markets 1 (5%) Depends 0and whether temperate wood marketsare demanding such a system.)No answer 2 (10%) No answer 4 (29%)

Can certification be applied as an instrument of Bank forest strategy (that is, as a term of conditionality and as a toolfor risk management)?

Bank WWF


Yes 10 (50%) Yes 12 (86%)No 9 (45%) No 0Maybe 1 (5%) Maybe 0No answer 0 No answer 2 (14%)

Which type of timber producer is more likely to be more receptive to certification?

Bank WWF


Small 2 (10%) Small 1 (7%)Medium 3 (15%) Medium 2 (14%)Large 10 (50%) Large 8 (57%)No answer 4 (20%) No answer 2 (14%)Small and large 1 (5%) Small and large 1 (7%)

Given the diverse conditions among regions and countries, do you believe that sufficient conditions and incentivescan be created to achieve a certification standard which will be compatible with globally applicable principles?

Bank WWF


Yes 8 (40%) Yes 13 (93%)No 7 (35%) No 0Not relevant 1 (5%) Not relevant 1 (7%)Undecided 4 (20%)

A n n e x e s

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What three key constraints are you facing in the implementation of the Alliance?Bank WWF

Responses Responses

Funding/high transaction costs for small WB/WWF Lack of clarity on who should be counterpart contact—portfolio. lack of coordination, communication/ lack of information

in the Bank/ lack of well-defined management structure.

Limited human resources/expertise to WWF and Bank. Funding/inadequate resources/ staff/ technical support.Lack of team building/absence of country-based activities Different modes of operation/types of projects/ lack ofand partnership/ lack of in-country demand and policy strategy/ lack of consensus on forestry policies.understanding.Insufficient involvement of regional management and CD’s. Lack of Bank staff commitment/ lack of Bank acceptance

of Alliance.WWF’s own priorities/ lack of WWF interest locally/ WWF Unclear procedural steps in how to become involved innational agency not agreeing with proposal. current initiatives, or implement in the field, difficulties in

establishing working relations in the field.Lack of decisions on key technical and implementation Lack of commitment on both sides to targets/inadequateissues/highly centralized decisionmaking. policies to support the two targets.Time. Government position/weak government forest service.Lack of information. Time.Government foot-dragging. Position of radical NGOs.Lack of other stakeholders to assist with targets. Largely unknown in-country (Bolivia).Overcoming other NGO resistance.No consensus on “independent certification.”No clear procedures on how to have a project consideredan “Alliance project.”

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What key lessons have you learned since the Alliance was started?

Bank WWF

Responses Responses

I must better prioritize my time and avoid Where there are committed individuals on both sides,unfunded mandates. the Alliance has a greater chance of working to achieve

mutually agreed goals. Where there is commitment ofonly one part, no.

Don’t try to stretch money—money doesn’t stretch. The WB staff are too busy to participate in the Allianceeveryday activities.

New initiatives require an initial investment of faith, time, Communication channels within WWF cannot be relied on.and resources that the Bank is not always ready to make.

Managing expectations can be difficult as managing outputs Clarity at conceptual and operational level is a prerequisiteand outcomes. for developing a viable program; locate the decisionmaking

points as close to the ground as possible.The WWF has its own agenda, it is not interested in Bank’s It is a lot more time-consuming if there is not moreagenda except to influence it. “Partners” seem to be job- coordination among WWF-WB at high and regional levels.hunting in the Bank.None. Funding is a prerequisite, but not by itself sufficient to

achieve success.Need to bring local forest dwellers and those that surround Financial resources are a secondary issue for success offorests into the discussions as key participants. joint initiatives.More education for the Alliance will help government There is a big problem of funding activities (the mechanismagencies to better understand the Alliance. is still not working efficiently).Bring other NGOs into an Alliance project. Need to Other stakeholders need to be brought into the Alliance atenhance impact by creating partnerships. the planning stage.”WWF is not one partner but several (country offices, “Fine words butter no parsnips.” It was disappointingWashington and Gland). that President Wolfensohn did not attend the Yaoundé

Summit, which would have added clout and credibility tothe Alliance.

The Alliance is hampered by its construction around two Certification may be a hard concept to explain in apartners who are largely external where forest conservation developing country context. It may be easier to focusis concerned. initially on the best forest management practices that lead,

increasingly, to sustainable management.Too top- down. Get an assistant or else never get involved Governments of the African region have the final say. Thein an initiative that came from top-down and lacks strong commitment from government is crucial.admin back- stopping. Bank management is not alwaysready for the implementation policies and initiatives decidedupon by the president.Focus on smaller number of (larger) initiatives. The two resources CAN pull together their resources and

strengths to achieve the targets.It will take time for the two organizations to learn to worktogether.

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Do you have suggestions to modify, adapt or strengthen this initiative?

Bank WWF

Responses Responses

Streamline access to funds/commitment of adequate Other targets should be identified.resources/ or advise clients that there is not any significantfunding available, false expectations lead to dispointedclients and overworked task managers.Decentralization with individual country focus. We need to do a better sell of the Alliance at the

regional level.Need long-term planning. Both targets need to be clarified, and, if possible, broken

down to the regional levels.Task managers in both organizations need to share a felt A vision for the future is needed: what happens after theneed for the Alliance. targets are met?Hold more workshops to introduce the Alliance. Communications and reporting lines should be more clearly

defined, and should be observed by all levels of bothorganizations.

Focus on the goal of forest and other natural resourcedevelopment. Support and “buy-in” by other partners.Regionalize 97 percent of contact between the parties and What does the Alliance mean for countries where only oneget rid of the big ambitious targets. of the organizations is active?Give some thought to Miombo woodlands and other A centralized team or pool of persons/experts that couldforest types in S. Africa region. It is vital to reinforce SADC travel to various countries trying to implement the Allianceforestry and biodiversity institutions and form wider and could facilitate/lobby for initial efforts/workshopspartnerships (IUCN, SASUG, etc.). regarding forest protected areas and certification/SFM

would be useful.Place greater responsibility on our client countries. The Alliance materials should be translated in to the

country languages.Open it up to other national and international organizations. Set aside specific grant funds to implement protected area

targets.We should not continue to spend any more effort until a All actors need to internalize alliance goals and objectives ifreview of value-added of such partnership to both WB and mainstreaming of alliance is to be achieved. It has to be fullyWWF country programs addressing sustainable forest integrated and accepted by the WB.management.

More interest for cooperation in the Med area.

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Study StaffCore TeamUma Lele, Task ManagerSyed Arif HusainMaisha HymanLauren KellyNalini KumarB. Essama NssahAaron Zazueta

Additional MembersMadhur GautamRidley Nelson

ConsultantsCaroline BarnesMadelyn BlairArnoldo ContrerasKavita GandhiKarin PerkinsSaeed Rana

Authors of Supporting StudiesBRAZIL: “Forests in the Balance: Challenges ofConservation with Development”Evaluation Country Case Study Series

Uma Lele, OEDVirgilio Viana, Professor of Forestry, Universidade deSão PauloAdalberto Verrisimo, EMBRAPA, AmazonStephen Vosti, Visiting Scholar, Department of Agriculture and Resource Economics, University of California, DavisKarin Perkins, Consultant, OEDSyed Arif Husain, Consultant, OED

CAMEROON: Forest Sector Development in aDifficult Political Economy: An Evaluation ofCameroon’s Forest Development and World BankAssistance

Boniface Essama Nssah, OEDJim Gockowski, scientist (agricultural economist), International Institute of Tropical Agriculture, Cameroon

ANNEX H: STUDY STAFF AND CONSULTATION CONTACTS

CHINA: From Afforestation to Poverty Alleviationand Natural Forest ManagementEvaluation Country Case Study Series

Scott Rozelle, Associate Professor, Economics, University of California, DavisJikun Huang, Chinese Academy of Agricultural SciencesSyed Arif Husain, Consultant, OEDAaron Zazueta, Consultant, OED

COSTA RICA: Forest Policy and the Evolution ofLand UseEvaluation Country Case Study Series

Ronnie de Camino, President, Tropical Natural Resources, Inc. (RNT)Olman Segura, Professor, Universidad NacionalLuis Guillermo AriasIsaac Perez, consultant with IDB

INDIA: Alleviating Poverty Through ForestDevelopmentEvaluation Country Case Study Series

Nalini Kumar, OEDN. C. Saxena, Secretary to Government of India, Rural Development Department, New DelhiY. K. Alagh, Member of Parliament (Upper House), IndiaKinsuk Mitra, Natural Resources Management Coordinator, Winrock, Inc.

INDONESIA: The Challenges of World BankInvolvement in ForestsEvaluation Country Case Study Series

Madhur Gautam, OEDUma Lele, OEDHariadi Kartodiharjo, Faculty of Forestry, Bogor Agricultural University, Institut Pertanian Bogor, Darmaga, IndonesiaAzis Khan, Researcher, Agency for Research Development, Indonesian Ministry of ForestryIr. Erwinsyah, Associate, Industrial Based Forestry Management, NRM Program, USAIDSaeed Rana, Consultant, OED

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GEF Report: Financing the Global Benefits ofForests: The Bank’s GEF Portfolio and the 1991Forest Strategy

J. Gabriel Campbell, ConsultantAlejandra Martin, Consultant

IFC Report: “OEG Review – Implementation of the1991 Forest Strategy in IFC’s Projects”

Afolabi Ojumu, CEXOERafael Dominguez, CEXOECherian Samuel, CEXOEDominique Zwinkels, Consultant, CEXOEJohn Gilliland, Consultant, CEXOE

Advisory Committee MembersConor Boyd President, Weyerhaeuser Forestland InternationalAngela Cropper Chair, Editorial Committee, World Commission on Forests & Sustainable DevelopmentEmmy Hafild Director, WAHLI Chair, Indonesian Working Forum (NGO/community organization)Hans Gregersen Chair, CGIAR Impact Assessment and Evaluation Group Professor, College of Natural Resources, University of Minnesota

List of Nongovernmental Organizations (NGOs)BriefedAfrica Resources TrustAGIR ICI, FranceBank Information CenterBiodiversity Action NetworkBionetCampagna per al Reforma della Banca Modiale, ItalyCenter for International Environmental LawCenter for Tropical Forest Science/Smithsonian Tropical Research InstituteCentre pour l’Environnement et le Developpement, CameroonConservation InternationalConsumers Choice CouncilCousteau SocietyEnvironmental Defense FundEvergreen IndonesiaFern, BelgiumForest Peoples Programme, UKForest Stewardship CouncilGreenpeace InternationalGlobal Forest Policy ProjectIndian Institute of Bio Social Research and DevelopmentIndonesian Ecolabeling InstituteIndonesian Forum for Environment/Friends of the Earth IndonesiaInstitute for Global Environment StrategiesInternational Institute for Energy ConservationInternational Union for Conservation of Nature and Natural ResourcesIUCN-NetherlandsIUCN-WashingtonJapan Center for a Sustainable Environment and SocietyPolitical Economy Research CenterRainforest Action NetworkRainforest Foundation, UKRamkrishna Mission LokashikshaThe Knowledge InitiativeUnion of Concerned ScientistsW. Alton Jones FoundationWorld Economy, Ecology and Development, GermanyWorld Rainforest Movement, UruguayWorld Resources InstituteWorld Wide Fund for Nature/World Wildlife Fund

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LIST OF BILATERAL/MULTILATERAL INSTITUTIONS AND CONTACTSBilateral/multilateral institution Contact

Center for International Forestry Research (CIFOR) Jeff Sayer ([email protected])David Kaimowitz ([email protected])Reider Persson ([email protected])Ravi Prabhu ([email protected])

Empresa Brasileiria de Pesquisa Agropecuária (EMBRAPA) Francisco Reifschneider ([email protected])Food and Agriculture Organization (FAO) Michael Martin (Michael [email protected])

Lennart Ljungmen ([email protected])Arnoldo Contreras ([email protected])

Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ) Cornelis Baron van Tuyll van Serooskerken ([email protected])

International Union of Forest Research Organizations (IUFOR) Jeff Burley ([email protected])

International Center for Research in Agroforestry (ICRAF) Pedro Sanchez ([email protected])Tom Tomich ([email protected])Erick C. M. Fernandes ([email protected])

Intergovernmental Forum on Forests (IFF) Ilkka Ristimäki ([email protected])Jagmohan Maini ([email protected])

International Food Policy Research Institute (IFPRI) Steve Vosti ([email protected])

International Institute of Tropical Agriculture (IITA) Lukas Brader ([email protected])

Regional Unit for Technical Assistance (RUTA, Costa Rica) James Smyle ([email protected])

Swiss Agency for Development and Cooperation (SDC) Theo Weiderkehr ([email protected])

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MAJOR MEETINGS/WORKSHOPS/REVIEWS

December 18, 1998 Entry Workshop – OED Review of the World Bank Group’s 1991 Forest Strategy and Its Implementation (First Meeting of the Advisory Committee)

January 29, 1999 NGO Workshop

April 26–27, 1999 Second Meeting of the Advisory Committee for the OED Review of the World Bank Group’s 1991 Forest Strategy and Its Implementation

June 29, 1999 One-Stop Review – Costa Rica Case Study Draft

July 27–28, 1999 Two-Day Forestry Retreat:

• One-Stop Review meetings for Brazil, Cameroon, China, and India reports

• Presentations on the Portfolio Reviews for ECA and LCR regions

• Progress Report on Indonesia country study

• Findings of the IFC and GEF reviews and the WWF questionnaires

• MIGA contribution to the OED Review

• Update on the OED Review outline

November 1–2, 1999 India Country Workshop – New Delhi, India

November 5, 1999 China Country Workshop – Beijing, China

November 18, 1999 Brazil Country Workshop – Brasilia, Brazil

November 22–23 Third Meeting of the Advisory Committee for the OED Review of the World Bank Group’s 1991 Forest Strategy and Its Implementation

December 15, 1999 Briefing for Bank Staff

December 23, 1999 CODE Seminar

• Briefing for Mr. James Wolfensohn

January 27–28, 2000 Forestry Review Workshop

April 25, 2000 Indonesia Country Workshop – Jakarta, Indonesia

February–May 2000 Regional Consultations – ESSD

June 2000 Report to CODE for Final Review

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INDICATORS FOR ENVIRONMENTAL MANAGEMENTAssessment of CIFOR criteria and indicators

Goal Intervention point

Sustain-Principle, criterion, indicator Efficiency Equity ability Stand Institution Policy

Policy, Planning and Institutional Framework AreConducive to Sustainable Forest Management

There is sustained and adequate funding for the X X X X management of forests.

Policy and planning are based on recent and accurate X X information.

Effective instruments for intersectoral coordination on X X X land use and land management exist.

There is a permanent forest estate (PFE) adequately X X X X protected by law, which is the basis for sustainable management, including both protection and production forest.

There is a regional land use plan or PFE which reflects X X X X X the different forested land uses, including attention to such matters as population, agricultural uses, conservation, environmental, economic and cultural values.

Yield and Quality of Forest Goods and Services Sustainable

Management objectives clearly and precisely described, X X X X X documented, and realistic.

Objectives are clearly stated in terms of the major X X functions of the forest, with due respect to their spatial distribution.

A comprehensive forest management plan is available. X X X X X

Maps of resources, management, ownership, and X X inventories available.

Silvicultural systems prescribed and appropriate to forest X X X type and produce grown.

Yield regulation by area and/or volume prescribed. X X X

Harvesting systems and equipment are prescribed to X X X match forest conditions in order to reduce impact.

The management plan is effectively implemented. X X

Pre-harvest inventory satisfactorily completed. X X

Infrastructure is laid out prior to harvesting and in X X accordance with prescription.

Reduced-impact felling specified and implemented. X X

Skidding damage to trees and soil minimized. X X

An effective monitoring and control system audits X X X X management’s conformity with planning.

Continuous forest inventory (CFI) plots established and X X X measured regularly.

Documentation and records of all forest management X X X activities are kept in a form that makes it possible for monitoring to occur.

Worked coupes are protected (e.g., from fire, X X X X encroachment, and premature reentry).

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INDICATORS FOR ENVIRONMENTAL MANAGEMENT (CONT’D)Assessment of CIFOR criteria and indicators

Goal Intervention point

Sustain-Principle, criterion, indicator Efficiency Equity ability Stand Institution Policy

Tree marking of seed stock and potential crop trees. X X

Maintenance of ecosystem integrity

Processes that support and maintain biodiversity of X X X X forest ecosystem are protected or enhanced.

Endangered plant and animal species are protected. X X X

Interventions are highly specific, selective, and are X X confined to the barest minimum.

Canopy opening is minimized. X X

Enrichment planting, if carried out, should be based on X X indigenous, locally adapted species.

The capacity of the forest to regenerate naturally is ensured. X X X X

Representative areas, especially sites of ecological X X X importance, are protected or appropriately managed.

Corridors of unlogged forests are retained. X X

No chemical contamination to food chains and ecosystem. X X X

Ecologically sensitive areas, especially buffer zones along watercourses, are protected. X X X X

No inadvertent ponding or waterlogging as a result of forest management. X X

Soil erosion is minimized. X X

(Implied) Forest Management Maintains Fair Intergenerational Access to Resources and Economic Benefits

Stakeholders’/forest actors’ tenure and use rights are secure. X X X X X

Tenure/use rights are well defined and upheld. X X X X X X

Forest-dependent people share in economic benefits of forest utilization. X X X X

Opportunities exist for local people/forest-dependent people to get employment and training from forest company. X X X

(Implied) Stakeholders, Including ForestActors, Have a Voice in Forest Management

Stakeholders/local populations participate in forest management. X X X X

Effective mechanisms exist for two-way communication related to forest management among stakeholders. X X X

Forest-dependent people and company officials understand each other’s plans and interests. X X X

Forest-dependent people/stakeholders have the right to help monitor forest utilization. X X X

Conflicts are minimal or settled. X X X X

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ESSD REGIONAL CONSULTATIONS, FEBRUARY–MAY 2000Region/country Consultation dates Location

Africa 3 to 5 May 2000 Johannesburg, South AfricaBrazil 15 to 16 March 2000 BrasiliaEast Asia and Pacific 26 to 28 April 2000 SingaporeEurope and Central Asia 3 to 5 April 2000 Joensuu, FinlandLatin America and Caribbean 3 to 5 May 2000 Quito, EcuadorNorth America 23 to 24 March 2000 Washington, D.C.South Asia 17 to 19 April 2000 Rajendrapur, BangladeshWestern Europe 10 to 11 April 2000 Zurich, SwitzerlandMiddle East and North Africa 23 to 25 February 2000 Tunis, Tunisia

ESSD FOREST POLICY IMPLEMENTATION REVIEW AND STRATEGY PROCESS: LIST OF ANALYTICAL STUDIESTopic Responsible party Date

Challenges and recommendations: Contribution to the World IUCN/WWF 30 March 2000Bank’s Forest Policy Implementation Review and Strategy

Forest product market developments: the outlook for forest Adrian Whiteman, July 1999product markets to 2010 and the implications for improving Christropher Brown, Gary Bullmanagement of the global forest estate

Beyond sustainable forest management: opportunities and C. Lennart, S. Ljungman, December 1999challenges for improving forest management in the R. Michael Martin,next millennium Adrian Whiteman

Towards sustainable forest management: an examination of Arnoldo Contreras-Hermosilla July 1999the technical, economic and institutional feasibility ofimproving management of the global forest estate

Forests and sustainable livelihoods: Current understandings, Gill Shepherd, Mike Arnold, September 1999emerging issues and their implications for World Bank Forest and Steve BassPolicy and funding priorities.

Forest carbon: A discussion brief on issues, project types, DECRG/Kenneth Chomitz May 1999and implications for the World Bank’s Forest Policy Strategy

Corrupt and Illegal Activities in the Forestry Sector: Current Debra J. Callister May 1999understandings, and implications for World Bank Forest Policy

Indigenous peoples and forests: Main issues Marcus Colchester November 1999

Recent experience in collaborative forest management Intercooperation/Jane Carter May 1999approaches: A review of key issues

The World Bank and non-forest sector policies that David Kaimowitz and May 1999affect forests Arild Angelsen

Valuing forests: A review of methods and applications Joshua T. Bishop July 1999in developing countries

Plantations: potential and limitations P. D. Hardcastle October 1999

Notes on forestry legislation and enforcement FAO February 2000

Non-industrial private forest ownership/ Indufor Oy November 1999privatization processes

Institutional and legal framework for forest policies in ECA Birger Solberg and April 2000region and selected OECD countries—a comparative analysis Kazimierz Rykowski

Indigenous peoples, forestry management and Jason W. Clay, Janis B. Alcorn, January 2000biodiversity conservation and John R. Butler

Certification of forest management and labeling Markku Simula and September 1999of forest products Indufor Oy

The right conditions: The World Bank, structural adjustment, Frances Seymour andand forest policy reform. Navroz Dubash March 2000

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September 1993These policies were prepared for use by World Bankstaff and are not necessarily a complete treatment ofthe subject.

Note: This document is based on The Forest Sector:A World Bank Policy Paper, 7/18/91, and also comple-ments the following Bank guidelines: OD 4.01, Envi-ronmental Assessment; OD 4.20, Indigenous Peoples;OD 4.30, Involuntary Resettlement ; and OMS 2.36,Environmental Aspects of Bank Work. Staff should alsoconsult OD 14.70, Involving Nongovernmental Orga-nizations in Bank-Supported Activities; OPN 11.02,Wildlands ; and OPN 11.03, Management of CulturalProperty in Bank-Financed Projects. Questions may beaddressed to the Director, Agriculture and Rural Devel-opment Department.

Bank [“Bank” includes IDA, and “loans” includecredits] involvement in the forestry sector aims toreduce deforestation, enhance the environmental con-tribution of forested areas, promote afforestation,reduce poverty, and encourage economic development.In pursuit of these objectives, the Bank applies thefollowing policies:

(a) The Bank does not finance commercial loggingoperations or the purchase of logging equipmentfor use in primary tropical moist forest. In borrow-ing countries where logging is being done in suchforests, the Bank seeks the government’s commit-ment to move toward sustainable management ofthose forests, as described in para. 1(d) below, andto retain as much effective forest cover as possible.Where the government has made this commitment,the Bank may finance improvements in the plan-ning, monitoring, and field control of forestryoperations to maximize the capability of respon-sible agencies to carry out the sustainable manage-ment of the resource.

(b) The Bank uses a sectorwide approach to forestryand conservation work in order to address policyand institutional issues and to integrate forestryand forest conservation projects with initiatives inother sectors and with macroeconomic objectives.

(c) The Bank involves the private sector and localpeople in forestry and conservation managementor in alternative income-generating activities. The

Bank requires borrowers to identify and consult theinterest groups involved in a particular forest area.

(d) The Bank’s lending operations in the forest sectorare conditional on government commitment toundertake sustainable management and conserva-tion-oriented forestry. Such a commitment (whichmay be reflected in specific conditionalities; seeGood Practices 4.36 for examples) requires a clientcountry to:

(i) adopt policies and a legal and institutionalframework to (a) ensure conservation and sus-tainable management of existing forests, and (b)promote active participation of local people andthe private sector in the long-term sustainablemanagement of natural forests (see paras. 19–20of OD 4.01, Environmental Assessment);

(ii) adopt a comprehensive and environmentallysound forestry conservation and developmentplan that clearly defines the roles and rights ofthe government, the private sector, and localpeople (including forest dwellers) (see OD 4.20,Indigenous Peoples);

(iii) undertake social, economic, and environmen-tal assessments of forests being considered forcommercial use;

(iv) set aside adequate compensatory preservationforests to protect and conserve biological diver-sity and environmental services and to safeguardthe interests of forest dwellers, specifically theirrights of access to and use of designated forestareas; and

(v) establish institutional capacity to implementand enforce these commitments.

(e) The Bank distinguishes investment projects that areexclusively environmentally protective (e.g., manage-ment of protected areas or reforestation of degradedwatersheds) or supportive of small farmers (e.g., farmand community forestry) from all other forestryoperations. Projects in this limited group may beappraised on the basis of their own social, economic,and environmental merits. However, they may bepursued only where broad sectoral reforms are inhand, or where remaining forest cover in the clientcountry is so limited that preserving it in its entirety isthe agreed course of action.

ANNEX I: WORLD BANK OPERATIONAL POLICY 4.36, FORESTRY

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(f) In forest areas of high ecological value, the Bankfinances only preservation and light, nonextractiveuse of forest resources. In areas where retaining thenatural forest cover and the associated soil, water,biological diversity, and carbon sequestration val-ues is the object, the Bank may finance controlledsustained-yield forest management. The Bank fi-nances plantations only on nonforested areas (in-cluding previously planted areas) or on heavilydegraded forestland.

The Bank does not finance projects that contraveneapplicable international environmental agreements.

Annex A to Operational Policy 4.36, Forestry:The following definitions apply in this statement:

(a) Primary forest is defined as relatively intact forestthat has been essentially unmodified by humanactivity for the previous 60 to 80 years.

(b) Tropical moist forest is generally defined as forest inareas that receive not less than 100 mm of rain in anymonth for two out of three years and have an annualmean temperature of 24°C or higher. Also included inthis category, however, are some forests (especially inAfrica) where dry periods are longer but high cloudcover causes reduced evapotranspiration.

(c) Carbon sequestration refers to the process wherebyforested areas retain a revolving but stable store oforganic carbon in their biomass. Clearing, burning,or otherwise substantially altering the forest in-creases the net release into the atmosphere ofcarbon-based gases that contribute to the green-house effect.

(d) The term local people describes the broad group ofpeople living in or near a forest, with somesignificant level of dependence upon it. The termincludes forest dwellers, indigenous forest-adjacentpopulations, and recent immigrants.

(e) Sustainable management of natural forests meanscontrolled utilization of the resource to producewood and nonwood benefits into perpetuity, withthe basic objectives of long-term maintenance offorest cover and appropriate reservation of areasfor biodiversity protection and other ecologicalpurposes.

(f) A natural forest is an area in which the cover hasevolved naturally so as to provide significanteconomic and/or ecological benefits, or one that issufficiently advanced in regeneration and recoveryfrom disturbance as to be judged in near-naturalcondition.

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May 1993IntroductionThis statement gives guidelines1 for implementing theBank’s operational policy on the forest sector.

Bank2 lending in the forest sector emphasizes thedevelopment of forest resources to provide for a sustain-able stream of direct or indirect benefits to alleviatepoverty, advance the status of women, and enhancecommunity income and environmental protection. Bankforest sector policy now recognizes that, in most cases,progress across this range of objectives requires a pro-gram approach to the sector, rather than a discrete projectapproach. Ongoing investments and existing forest poli-cies, often developed piecemeal, tend to involve excessivepublic intervention in the sector. A program approachrequires a consistent sector policy that builds on favorablemacroeconomic policies, promotes links between theforest sector program and project design, and recognizesthe relationships among forest, people, and culture. Theprogram approach therefore requires (a) sufficient Bankinvolvement in the forest sector to allow a dialogue onsector strategy and policy reform; (b) strong linkagesbetween the forest sector program and project design andthe broader macroeconomic dialogue; and (c) involve-ment of a wide range of government agencies andinterested parties outside of government to ensure broadconsensus on reform priorities.

Country Economic and Sector WorkIt is essential to the sectorwide strategy for forestrydevelopment that country economic and sector work(CESW) be as highly developed as possible prior to thestart of major lending in the sector. Alternatively, whenresource constraints are severe, CESW may be carriedout during the early stages of project identification andpreparation. In such cases, special efforts are requiredto ensure that analysis of sector issues is not lost amongproject design concerns. Bank staff should obtainexplicit recognition of the joint policy reform andinvestment preparation effort from government, andespecially from their counterparts in coordinatingagencies outside the forest sector (e.g., ministry offinance, planning commission).

Economic workThe Bank’s country economic work (especially thecountry economic memorandum) assesses the macro-economic policies likely to affect the forest sector. The

ANNEX J: WORLD BANK GOOD PRACTICES 4.36, FORESTRY

forest sector policies advocated during project prepara-tion will grow out of those put forward in the countryeconomic memorandum, the national EnvironmentalAction Plan, and the Consultative Group process3

(where Consultative Groups are an appropriate mecha-nism), and as structural or sector adjustment inputs.4

CESW gives special attention to the macroeconomicpolicies that are likely to affect resource use and theenvironment. In this category are policies governing:

(a) administered resource pricing, in which the gov-ernment influences the flow of resources by usingnonmarket interventions to promote domestic pro-cessing or similar objectives;

(b) revenue sharing among different levels of govern-ment and among public and private sectors andlocal communities;

(c) criteria used to identify and appraise public invest-ments in agriculture and infrastructure that affectthe management of forestland;

(d) institutional budgets and funding procedures, andthe general incentives for rent seeking in theeconomy;

(e) general trade and industry, especially policies thatdetermine which exportable natural resources areto be processed domestically;

(f) energy, especially the potential for fuelwood substi-tution and for improving efficiency of energy usewhere nonsustainable fuelwood gathering is aserious problem; and

(g) the incentive framework for channeling investmentresources to the most efficient users of funds, espe-cially the private sector, including small farms,communities, tribes, and women’s groups.

Sector workForest sector lending requires a strong sector workbasis. Sector work in advance of detailed project designhelps integrate forest sector aims and objectives withwider economic and environmental concerns. Thesectoral topics covered vary from one country toanother. The policy areas that may need to be investi-gated include the following:

(a) Resource pricing and methods of sale. Measuresrelated to the recovery of economic rent and torevenue collection mechanisms can be incentives toobserve environmental and management prescrip-

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tions—for example, (i) using performance bondsrather than difficult-to-enforce penalty clauses; (ii)using resource assessment rather than extractedvolume measurement to encourage efficiency inoperations; and (iii) incorporating in the conces-sion agreement requirements to finance specifiednature conservation and community involvementactivities. Sector work should aim to quantify theeffect of prices on rates and on levels of forest use,the distributional impacts of price changes, and theeffect of pricing mechanisms on public and privatesector risk bearing.

(b) Forest industry policies. Policies of state interven-tion to stimulate the development of industry basedon forest resources or to increase value added in theforest sector should be assessed. Quotas, tariffs,and overvalued foreign exchange rates on forestproduct imports can artificially increase privatefinancial returns on forest exploitation, establish-ing incentives to exploit forest resources more thanis economically efficient or physically sustainable.Conversely, log export bans and taxes can reducethe private financial value of forestry activitiesbelow their economic value, leading to inefficien-cies in log use and reduced investment in forestry.Where appropriate, alternative policies to encour-age the growth of efficient and competitive value-added operations and to achieve equity objectivesshould be presented.

(c) Forest resource information. Sector work shouldassess the government’s database, procedures formanaging and analyzing data, inventory pro-grams, and the adequacy of public access toinformation, including data on forest productprices. Recent studies emphasize the economicimportance, particularly to the poor, of nontimberforest products (e.g., nuts, fruits, and medicinalplants), but information on these products is rarelyavailable or analyzed. The Bank encourages gov-ernments to develop resource monitoring systems(including natural resource accounting).

(d) Human resource development. Sector workshould assess (i) the availability of skills in bothgovernment and the private sector, and (ii) theadequacy of personnel policies (including staffrotation systems and opportunities for specializa-tion), compensation and field allowances, and thesystems for delivering training to farmers andforest workers.

(e) Research. Sector work should assess the forestryresearch program, focusing especially on the bal-ance of research between and among variousareas—natural and man-made forests, forest man-agement and forest products (including nontradi-tional forest products), social and economic as-pects, and ecological and technical areas. TheBank encourages the development of internationalresearch links with member institutions of theConsultative Group on International AgriculturalResearch, the International Union of Forestry Re-search Organizations, and national forestryresearch systems.

(f) Resource mobilization. Sector work should assessthe adequacy and efficiency of funding mecha-nisms for public and private forestry operations,including credit arrangements and earmarking offorestry revenues. Such mechanisms should ensurethe availability of funds for regeneration, forestprotection, and investment in other sectors of theeconomy.

(g) Participation and role of private sector. Sectorwork should examine the division of responsibilityamong the different levels of government,parastatals, local communities, and the privatesector. It should consider the scope for devolvingresponsibility for land management and directlyproductive investment to local communities andprivate firms while focusing government efforts onregulations and technical assistance.

(h) Environmental framework. Sector work should ex-amine the legal and institutional basis for ensuringenvironmentally sustainable development of the for-est sector. The government should have in placeadequate provisions for conserving protected areasand critical watersheds and for establishing environ-mental guidelines and monitoring procedures.

Project ProcessingNo special procedures are required for the processingof forestry projects. However, forestry projects, espe-cially those pursuing broad program objectives,present special analytic issues that need to be taken intoconsideration throughout the project cycle. Normally,although the borrower “owns” the reform program andis responsible for preparation and implementation, theBank needs to supply guidance and support for commu-nication among government agencies and nongovern-mental organizations (NGOs).

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Identification and preparationAs has been indicated, Bank projects normally evolvefrom a program of CESW and an agreed reformagenda. In the absence of completed CESW, theidentification process should provide for assessment ofthe fundamental policy issues facing the sector. Projectsshould aim to enhance environmentally sustainabledevelopment while taking into account limits onabsorptive capacity and management control.

The Bank may consider financing a broad range ofinvestment activities in or related to the forest sector.Several possible areas for investment are described below.

Preservation and management of intact forest areasThe Bank may support initiatives to expand forestareas allocated as parks and reserves and to instituteeffective management and enforcement in new andexisting areas. The Bank stresses approaches to man-agement of protected areas that consider the welfare offorest-dwelling people and incorporate local peopleinto protection, benefit sharing, and planning.

In tropical moist forests, the Bank adopts, andencourages governments to adopt, a precautionarypolicy toward use. The Bank emphasizes support toprograms that involve institutional development, forestprotection measures, and nonforest income-generatingprojects that aim primarily to preserve tropical moistforests. The Bank makes special efforts to supporteconomic development in poor, densely populatedareas around such forests or in forest encroachers’areas of origin. The Bank also supports amelioratingenvironmental damage in temperate and boreal forests,directing its investments toward programs to rehabili-tate and reforest degraded forestland and to reduceindustrial pollution and conserve energy.

Resource expansion and management intensificationThe Bank may finance projects to create additionalforest resources or to expand and intensify the manage-ment of areas suitable for sustainable production offorest products. The Bank promotes rural people’sparticipation in tree planting and conservation ofindigenous woodlands.

The key to increasing forest investment is abalance among economic incentives, security of tenure,motivation, and technical assistance. The Bank directsspecial efforts toward agroforestry technologies thatcan improve soil fertility, conserve soil moisture, andincrease crop and livestock yields. It may encourage

cash crop tree farming in rural areas where suchfarming does not impair local people’s access toessential fuelwood and fodder supplies. The Bankemphasizes developing market intelligence and mar-keting systems for cash crop tree farming and forassisting small-scale wood-using enterprises in ruralareas. To reduce pressure on the existing forest resourcebase, the Bank may support the establishment ofplantations outside areas of intact forest, where suchactivity is socially, environmentally, and economicallyacceptable. The primary target areas for new plantingare potentially productive degraded forests, waste-lands, forest fallows, shrublands, and abandoned farm-lands. The interests of communities that depend onsuch areas must be considered in setting target areas.

Institutional reform and strengtheningThe Bank recognizes the critical need to restructureforestry institutions, improve training and equipment,and introduce greater accountability and higher perfor-mance standards into the public sector. It may supportthe use of private sector contractors and consultants asauditors and monitors, and more rigorous intersectoraloversight by ministries of agriculture, environment,planning, finance, and so forth.

Forestry research and developmentThe Bank may support forestry research and technol-ogy development, both as project components and asfree-standing projects. Provision for dissemination ofresults and for technology transfer should be madeduring preparation.

Improved processing and demand reductionThe Bank may support direct interventions to encour-age conservation and the use of more efficient technolo-gies, including research and training to improve thefuel efficiency of household stoves. In addition, theBank may support research and investment in newtechnologies to reduce industrial demand for wood andto better match industrial demand with availableresources—for example, retooling and upgrading topermit processing plants to use small logs and woodresidues.

Resource assessmentThe Bank may support forest resource assessmentsthrough surveys, inventories, and mapping. Emphasisshould be given to the application of Geographic

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Information Systems and other recent advances ininformation technology for project planning, monitor-ing, and evaluation.

Environmental assessmentBank staff ensure that the borrower conducts anenvironmental assessment (see OD 4.01, Environmen-tal Assessment).

AppraisalDuring appraisal the Bank ensures the overall viability ofthe proposed project. In particular, appraisal of forestryprojects needs to focus on five areas: economic and policyframework, institutional arrangements, technology, envi-ronmental protection, and local participation.

Economic and policy frameworkAppraisal should ensure that the project is consistentwith the policy reform priorities identified throughCESW and that adequate provisions are made formarketing (particularly by the rural poor) and procure-ment. In particular, the Bank must ensure that proce-dures for land acquisition and forestland designationreduce inappropriate clearing for agriculture and thatpressures from grazing and other uses are taken intoaccount. The Bank should ensure that the borrower iscommitted to a policy of sustained resource manage-ment through the application of scientific forest man-agement systems.

Institutional arrangementsAppraisal establishes that all policy initiatives have anidentified legal and regulatory basis; that agencieshave the capability to fund, review, and monitor—and

enforce compliance with—the planned initiatives; andthat interagency responsibilities and coordinatingmechanisms are established. The Bank ensures that theroles of the public and private sectors in projectimplementation are clearly defined.

Technology to increase productivityProjects should employ high-quality technology appro-priate to local conditions and comparable to bestpractice in other agricultural subsectors such as treecrops. The Bank seeks to ensure that technologicalimprovements introduced by projects are disseminatedthroughout the sector.

Environmental protectionEnvironmental guidelines for forest managementshould provide for adequate attention to soil andmoisture conservation; protection of watersheds,streams, and waterways; maintenance of adequateareas to conserve biodiversity; species mix in planta-tions; and pest and fire control.

Local participationLocal communities and NGOs should participate inproject design, and the project’s legal and financialmechanisms should be adequate to secure their partici-pation in the project. The Bank considers proposedstaffing patterns to ensure that field staff have appropri-ate skills and training to work effectively with localpeople. For example, since women are usually the maincollectors of fuelwood and forest products, especiallyfor domestic use, women may be especially effective asextension workers and as workers in such activities asnursery management and seedling distribution.

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The following document, published here with permis-sion, is the Executive Summary of the report preparedby the Operations Evaluation Group of the IFC for thisreview.

BackgroundIn 1991, the Bank issued a forest paper1 (1991 forestpaper) that set out its strategy for intervention in theforest sector and other sectors affecting forests. Theforest paper focused special attention on the conserva-tion of primary tropical moist forests (TMFs), and itsobjectives were to reduce deforestation and increaseplanting of trees in order to expand forest cover. In1993, the Bank issued Operational Policy 4.362 (Bank’sOP 4.36) that reflected the policy content of thestrategy and introduced Good Practices 4.363 (GP 4.36)to provide staff with direction on implementing thestrategy.

Since the 1991 forest paper was written primarilyfor Bank and IDA operations, it provided limited andunclear guidance for IFC operations. In recognition ofthis fact, the IFC issued a memorandum to its Board4

(1991 forest memorandum) to clarify how the 1991forest paper would be applied to its operations, includ-ing a commitment that all the IFC’s projects wouldconform with the “spirit and intent” of the 1991 forestpaper. When the Bank’s OP 4.36 was introduced in1993, the IFC adopted it automatically for its forestoperations. The 1991 forest paper, the 1991 forestmemorandum, and the Bank’s OP 4.36 are collectivelyreferenced as the “IFC forest strategy” in this paper,and implementation of the strategy in the IFC’s opera-tions is the subject-matter of this evaluation.

This study is based on (i) a review of all the forest-based investments approved by the IFC during FY85–98 to identify the changes induced in IFC operations ona “before/after strategy” basis; (ii) a review of selectednon-forest infrastructure projects supported by the IFCin FY92–98 which potentially have impacts on forests;(iii) a review of selected financial intermediary invest-ments approved in FY92–98 to assess evidence ofadherence by the intermediaries and their IFC-fundedsub-projects to the requirements of the forest strategy;and (iv) case studies on a sample of 14 forest-basedcompanies visited to assess their on-the-ground resultsfrom the perspective of the 1991 Forest Strategy’sobjectives. The sampled projects in the case studies

ANNEX K: IMPLEMENTATION OF THE 1991 FOREST STRATEGY IN THE IFC’S PROJECTS

were broadly representative of the regional distributionof the IFC’s portfolio at the end of FY98 of forest-basedprojects that relied on local resources.

In the context of the WBG’s review of its foreststrategy and policy, the purpose of this study is toanswer the following questions: (a) how effective wasthe 1991 Forest Strategy? (b) what were its impacts onthe IFC’s projects? (b) how adequate was the IFC’simplementation of the strategy in its operations? and(c) what are the lessons from the IFC’s experience toguide strategy revision and future operations? Inaddition, the study reviews the IFC’s OP 4.36, approvedin 1998, to establish its coherence with the foreststrategy.

This study complements the Operations EvaluationDepartment’s (OED’s) evaluation of the Bank’s experi-ence under its forest strategy.

Main FindingsEffectiveness of strategyBased on the findings of the portfolio review and casestudies, the intention of the forest strategy to engage theprivate sector in sustainable forest management is notattuned to realities on the ground. Part of the reasonhas to do with economics: over half of IFC projectsapproved since 1991 use government-owned forests,and the stumpage paid in some of the cases studied islower than the real cost of managing the forestssustainably. Hence the private concessionaires have afinancial disincentive to encourage the more costlyoption of sustainable forest management. Part of thereason has to do with the manner in which forestconcessions are operated. A concession that is not fixedto a specified area in the forest does not put any part ofthe forest under the control of individual privateoperators. In the absence of such delimited areas ofcontrol, private operators will generally not acceptcontractual responsibility for sustainable managementof the forest. Part of the reason has to do withownership of the forest: in general, private operatorsare not given the contractual right to managesustainably forests that belong to government. The casestudies found that governments want to retain owner-ship and management control of the forestlands forvarying reasons. In Sub-Saharan Africa, land tenurearrangements discourage or prohibit ownership byforeigners, whereas many of the forest-based compa-

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nies are controlled by foreign investors. In one Asiancountry, the forests belong to farm collectives orga-nized under the country’s political structure and are notavailable for foreign ownership. In Eastern Europe,forests are considered to be part of national endow-ments that should be preserved in the hands of the state.Reinforcing the status quo within these cultural andlegal frameworks are powerful vested interests, who inmany cases are enabled by the lack of transparency andaccountability to extract private gain from the state’scontrol of the forest resources.

The forest strategy implied a commitment by theIFC project companies to work with the local people,interest groups and forest dwellers in forest areas, andthat has proven to be unrealistic. Lacking ownership orcontractual control over the forests, private operatorsdo not welcome— and have no incentive to accept—this responsibility and the strings attached in the formof entanglement in local law enforcement and politics.

Impact of the strategyThe 1991 Forest Strategy did not induce reforestationand increased tree planting in IFC projects. Theprojects that engage in tree planting need to do so forcommercial reasons, to create a sustainable and eco-nomically optimum raw material resource for theiroperations. Similarly, IFC projects that reforest har-vested areas do so to ensure the long-term sustainabil-ity of their capital-intensive manufacturing operations.

However, the 1991 forest paper created a height-ened awareness of the environmental sensitivity andvalue of natural forests as ecosystems, particularlyTMFs, and has led to fundamental changes in projectselection, processing, and monitoring by IFC. Theforest sector also featured importantly as a driver of thesteps taken by the IFC during the past three years tostrengthen its policies, procedures and staff resources tomeet environmental requirements.

The focus of the forest strategy on TMFs neglectedother forest types with differing biodiversity situationsand issues. In particular, the strategy did not provideguidance specifically relevant to projects utilizingtemperate and boreal forests, which comprised all ofthe IFC’s forest-based operations that were approved inthe post-strategy period.

The strategy’s strong emphasis on the ban oncommercial logging in the TMFs had a chilling effecton the IFC. In order to avoid any association withdeforestation, the IFC made a conscious decision to

screen out this type of operation completely, andsubsequently turned down several proposals submittedto it. Thus, those proposals were denied the valuablecontribution the IFC could have made through its at-entry structuring role, including measures to ensuresustainable resource and environmental management.The study could not ascertain whether any of theseprojects were implemented without IFC financing.

Strategy implementationOverall, the IFC’s operations approved since FY92have been consistent with the twin objectives of theforest strategy of abstaining from activities which addto the loss of TMFs and encouraging reforestation. TheIFC has diligently upheld the prohibition againstfinancing commercial logging in TMFs, and in itsmainstream operations it has not approved a singleforest-based investment in this category since thestrategy became operational. However, two smallinvestments—approved under streamlined review pro-cedures through the IFC’s small- and medium-sizeenterprise (SME) facilities—financed a companyengaged in transporting logs harvested under conces-sions in TMFs. While these investments were consistentwith the letter of the forest strategy, they digressed fromits “spirit and intent,” and the environmental reviewprocedures in place at the time failed to detect theinconsistency. In addition, two other small investmentsalso approved under the facilities were in companieswhose non-project operations, or those of their spon-sors, involved logging in TMFs.

The IFC has contributed to the establishment ofproject-owned large plantations, particularly in LatinAmerica and Asia, which comprise about 40 percent ofpost-strategy approvals and are managed sustainably.Even in countries where the forests are owned bygovernments, IFC staff ensured that forest operationsthat supplied IFC projects were carried out in asustainable manner and in accordance with goodindustry practice. The IFC has also supported severalprojects that rely on wood wastes, wastepaper andother recycled materials, thus contributing to conserva-tion of forest resources.

In addition, the IFC has undertaken special initia-tives that supported forest conservation and sustainablemanagement. In 1991, the IFC sold its 58,000 hectaresparcel of land in Paraguay (acquired in a foreclosure)for the creation of a nature reserve in perpetuity. Since1995, the IFC has been administering a $16 million

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grant from the Global Environmental Facility (GEF) tosupport SMEs promoting climate change initiativesand sustainable use/conservation of biodiversity.

In its financial intermediary (FI) investments, theIFC has not generally required its borrowers to reporton the sub-projects they assisted and, as a result, IFCdoes not know about the possible involvement of thesesub-projects in the forest sector. On the basis of a filereview, the study could not ascertain the extent towhich IFC-supported FIs and their sub-projects incountries with threatened TMF are conducting theiroperations in a manner consistent with the foreststrategy. Since 1994 IFC has been training the FIs onenvironmental risk management, including sessions onthe IFC’s forest strategy and its prohibition againstfinancing commercial logging in the TMFs. In the IFC-specific environmental and social safeguard policiesthat were approved by the Board in July 1998 andwhich define the current framework, special require-ments were developed for FI projects, and environmen-tal requirements and review procedures were specifiedfor sub-projects according to a tier classification.

However, there have been process weaknesses inthe implementation of the 1991 Forest Strategy by IFC.Specifically, the IFC did not (a) disseminate the foreststrategy to staff to ensure their familiarity with theobjectives and relevant requirements; (b) reflect thestrategy in its operations manual or provide staff with amanual similar to the Bank’s GP 4.36; (c) put clearscreening/appraisal guidelines in place for processingforest-impacting projects; nor (d) for relevant projects,include explicit covenants in the investment agree-ments to commit its project companies to their expectedresponsibility under the IFC forest strategy.

Forest certificationForest certification, which operates as an association offorest areas certified to be sustainably managed, canpromote the aims of the forest strategy because itenables consumers to recognize products from suchforests. However, certification has tended to serve as amarketing tool for exports and is, thus, not relevant formany forest-based companies whose products sell in thedomestic markets or trade internationally as commodi-ties. In fact, certification is unpopular among forest-based companies that do not own their forest resourcesand are not responsible for management of the forests.The recent proliferation of certification schemes iscreating an unhealthy rivalry for “membership recruit-ment.” IFC does not insist on forest certification butencourages its projects to obtain it.

IFC’s new forest paperIFC’s OP 4.36 was introduced in July 1998 and, bydesign, was “harmonized” with the Bank’s version.Parts of the document are vague and can be misinter-preted unless the reader is aware of and acquires agood understanding of the 1991 forest paper. But amajor shortcoming of the IFC’s OP 4.36 is that it doesnot contain any reference to the forest paper, unlike theBank’s 1993 version from which it was derived, and thesource and objectives behind its policy content aretherefore missing.

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The 1994 Agriculture Department ReviewThis review acknowledged considerable progress butconcluded that deforestation continues apace in devel-oping countries, forests remain seriously undervalued,and interventions in the sector remain controversial.

It recommended four priorities:

• Target poverty reduction. Help countries useforest resources to reduce rural poverty based ona participatory approach.

• Reconcile conservation and forest use. Stimulategovernment commitment to sustainable and con-servation-oriented forest management whileavoiding financing commercial logging in pri-mary moist tropical forests.

• Support policy and institutional reforms to pro-mote private investment. Conduct those reformsin a manner consistent with the objectives ofpoverty reduction and environmental protection.

• Pay more attention to the impact of nonforestactivities on forests. In particular, incorporateintersectoral linkages in country assistance strat-egies and country economic and sector work.

ANNEX L: RECENT WORLD BANK REVIEWS OF FOREST POLICY IMPLEMENTATION

The 1996 Agriculture Department/QAG ReviewThis review identified generic implementation issues in16 projects and developed strategies and approaches fordealing with them. It identified two fundamental causesof poor performance in the forest sector: inadequateborrower commitment to the necessary policy andinstitutional reforms and inadequate project design.

The review recommended that the Bank:

• Review policies and procedures to ensure thatpriorities are set in accordance with the impor-tance of the resources involved and the tractabil-ity of the problem.

• Establish a clear link between forest issues andcountry assistance strategy and structural adjust-ment loan processes and broaden the dialogue toinclude civil society.

• Develop a strong knowledge base to underpinthis strategy.

• Redeploy scarce technical and operational stafffamiliar with forest issues flexibly and judiciously.

• Develop new action-oriented partnerships with theprivate sector and donor and NGO communities.

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ANNEX M: REPORT FROM COMMITTEE ON DEVELOPMENT EFFECTIVENESS (CODE)

OED: A Review of the World Bank’s 1991 Forest Strat-egy and Its Implementation, and OEG Review—Imple-mentation of the 1991 Forest Strategy and IFC’s Projects

The Committee met on December 23, 1999 to discussthe OED preliminary report A Review of the WorldBank’s 1991 Forest Policy and Its Implementation(CODE99-96), prior to the Report’s consultations withexternal stakeholders. A Green Sheet was issued(CODE99-101). The Committee met again on July 10,2000 to consider the final report (CODE2000-70) whichincorporate the results of the GEF and IFC reviews andof external consultations, and clarifies all statementsregarding policy. The Committee also discussed theOEG Review: Implementation of the World Bank’s1991 Forest Policy in IFC’s Projects (CODE2000-67);the IFC Management Response (CODE2000-73); andESSD’s “Update on Preparation of the Forest Strategy,”which provides an update on the development ofManagement’s forest strategy and outlines some of theissues and directions that are emerging from theprocess so far.

Following the CODE Report on both meetings.The Committee welcomed the OED report and

appreciated the highly participatory and comprehen-sive nature of the report and the widespread externalconsultations that had taken place. The Committeeagreed that although the Bank broke new ground in1991 by emphasizing conservation—a laudable goal—Bank involvement in the sector since then has beenconditioned mainly by “safeguard” issues, i.e. the banon Bank financing of logging, protection of the environ-ment associated with infrastructure projects and ofindigenous people. This produced a chilling effect andled to less proactive Bank involvement than wouldhave been desirable. As a result, the Bank had had littleeffect in terms of reducing the rate of deforestation,significantly improving forest cover or protectingbiodiversity. It welcomed the multisectoral and multi-stakeholder approach proposed by OED.

The Committee focused on the following majorissues:

Bank’s Role: Many directors supported the Bankplaying a more active, synergetic role in the forestsector at both the country and global levels in view ofthe importance of the sector for poverty reduction, theglobal public goods dimensions, and the significant

value added that the Bank has provided in cases whereit has a substantial involvement in the forest sector.However, others asked whether the Bank had a com-parative advantage in this sector, and commented thatgiven its financial and institutional limitations, andreduced internal capacity, the Bank Group should beselective in its objectives and its role. The Committeeagreed that it would be important to continue thisdiscussion in the context of reviewing the forthcomingforest sector strategy.

Synergy between Development and Conservation:The Committee recognized the critical relationshipbetween development and conservation. It thereforesupported the need to broaden the strategy to includecountry concerns such as poverty reduction, energy useand substitution and incentives for sustained forest-management at the national and individual level. Inthis context, the Committee agreed that conservationshould be broadened to encompass all natural foresttypes and that both indigenous and other local people,especially the poor, should be the focus of Bankinterventions, and congratulated OED for the treatmentof gender issues.

Governance and Capacity Building: Committeemembers supported the focus on more effective countryenforcement of logging restrictions and improved gov-ernance, and agreed that the Bank should support theseactivities within an overall framework that includessound forest management and poverty reduction. Somemembers also endorsed the point made in the Reportthat, to be effective, forest strategies must fit thespecific geographical, biophysical, demographic, so-cial, cultural and economic circumstances for whichforest interventions are designed and called attention tothe implications of this point to the design of a newBank policy in this area.

Financing Mechanisms: The Committee recog-nized the importance of concessional and grant financ-ing for the forest sector in view of the long-term andrisky nature of many forest sector investments. Whilesome members supported the idea, others expressedreservations about the proposal for a global compensa-tion mechanism to pay countries simply for positiveinternational externalities of forest conservation,funded with consessional resources. They were alsoconcerned that such a mechanism would be difficult toimplement, that compensating countries or people just

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for keeping forests could create an incentive for rentseeking, that it would be ineffective in the absence oflocal capacity to enforce compliance with loggingrestrictions and redundant where such capacity exists.

Bank’s Organization and Instruments: Many mem-bers agreed that if the Bank is to play a larger role, itshould build up a critical mass of skills and resources,improve internal coordination, develop a better moni-toring system on compliance with safeguards, andpromote a holistic approach through increased treat-ment of forest issues in CASs, CDFs, and ESW. TheCommittee agreed that conditionalities in adjustmentloans were not always sufficient in promoting effectiveforest sector reforms and could set back nationalownership of reforms. There was a need to explorefurther the balance of lending to forest sector incomparison to lending for forest policy in sector andadjustment loans, and lending for forest as a compo-nent of agricultural or other types of investmentsincluding APLs. Some members noted that IFC’s workdepended on economic and financial incentives for theprivate sector, and, that while sharing the objectives forsustainable forest development, different approachesmay be needed.

Compliance with Global Agreements and Interna-tional Processes: The Committee stressed the need foreffective coordination with other global partners, suchas the Bio-diversity Convention, Food and AgriculturalOrganization, the U.N. International Forum on Forests,World Wide Fund for Nature, Interagency Task Forceon Forests, as well as with the emerging framework ofthe Kyoto Protocol which does not allow for carbonsequestration activities in developing countries.

IFC and Forestry: The Committee welcomed theOEG review and appreciated recent efforts to increaseawareness of IFC staff. An important finding of thereview was that IFC in its mainstream operations hadupheld the forest strategy’s prohibition against financ-ing commercial logging in tropical moist forests. Inaddition, within IFC environmental awareness hadbeen heightened and project environmental reviewprocedures and policies had been strengthened. Otherfindings included the lack of consensus within IFCregarding the applicability of the 1991 forest paper to

its operations; the lack of definition of key terms in the1991 forest memorandum; and the difficulty in realiz-ing the goals of the 1991 forest paper on the ground. Asa result the impact of the forest strategy had beenlimited and several shortcomings would need to beaddressed in the revised strategy, including moreclarification on financial intermediaries; increasingawareness about the strategy among IFC staff andclient companies; addressing the needs of SMEs; andimproving tracking compliance in projects of financialintermediaries. Management looked forward to arevised strategy and noted that OEG’s findings andrecommendations will have major implications for itswork.

Development of New Bank Group Strategy: Mem-bers agreed with OED’s recommendations for thedesign of a new Bank Group forest strategy, andwelcomed the broadening of the discussion to includethe IFC, MIGA and GEF. In this context, speakers notedthat the Bank Group’s role in forestry was, to a largeextent, unrealized, and looked forward to the develop-ment of a new strategy. Speakers generally agreed thatthe Bank Group should rely on effective partnershipsand its convening power, and, at the same time,develop clear proposals for moving forward in certainareas such as illegal logging, forestry management andsafeguards. Speakers proposed that the new foreststrategy examine how forest issues could be main-streamed into Bank work such as CASs, CDF and APLsand other lending instruments.

Next Steps: OED and OEG will proceed withpublication of the final reports, taking into account thecomments made at both the meetings. Managementwould continue to brief CODE on concrete issuesrelating to the development of the Bank Group strategy,with a target completion date of December 2000.

Jan PiercyChairperson

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ENDNOTES

Chapter 11. In this paper “1991 Forest Strategy” refers to the World

Bank paper on forests (World Bank 1991a), Operational Policy(OP) 4.36, and Good Practices (GP) 4.36 (see box 1.1).

2. An OED evaluation of approaches to the environment inBrazil (World Bank 1992b) and a 1989 audit of a forestry project inCôte d’Ivoire (Loan 1735) raised several environmental concerns.

3. The 20 countries are Bolivia, Brazil, Cameroon, CentralAfrican Republic, Colombia, Congo Democratic Republic, CongoRepublic, Côte d’Ivoire, Ecuador, Gabon, India, Indonesia,Madagascar, Malaysia, Mexico, Myanmar, Papua New Guinea,Peru, Philippines, and Venezuela.

4. Safeguard policies are directives to ensure that Banklending operations do not harm people or the environment. Inaddition to Forestry (OP 4.36), these policies are EnvironmentalAssessment (OP 4.01), Natural Habitats (OP 4.04), Pest Manage-ment (OP 4.09), Involuntary Resettlement (OD 4.30), IndigenousPeoples (OD 4.20), Cultural Property (OPN 11.03), Safety ofDams (OP 4.37), Projects in International Waterways (OP 7.50),and Projects in Disputed Areas (OP 7.60).

5. Some of the external benefits from forests—for example,reducing soil erosion, desertification, or degradation of water-sheds—accrue to the countries in which the forests are located.Other benefits spill over national boundaries and affect theinternational community by reducing the rate of loss of biologicaldiversity and the rate of change in the global climate, forexample.

6. For the Brazilian Amazon, the Bank’s 1991 forest sectorpaper did acknowledge an estimated value of carbon in undis-turbed forests of $375 to $1,625 per hectare, while current landprices ranged between $20 and $300 per hectare. The benefit ofsaving 21 million hectares of forest ranged from $750 million to$3.2 billion, whereas the cost of acquiring the forest ranged from$420 million to $600 million (Schneider 1992). This divergence incosts and benefits at different levels is borne out in subsequenteconomic and sector work in Brazil.

7. World Bank workshop on sustaining tropical forests,sponsored by the Environment and Rural Development depart-ments, held at Graves Mountain Lodge, Syria, Virginia, 2–7October 1998.

8. Using the pattern of forest development first articulatedby von Thunen, Hyde argues that the relative levels of forestvalue, agricultural land value, and protection costs will determinelevels of secure agriculture, managed forestry, open-access agri-culture, degradation, and deforestation. Consequently, countrieswould go through several stages of forest exploitation, includingopen-access agriculture, permanent agriculture, managed for-estry, and enforceable conservation.

9. A recent national opinion poll on proposed changes tothe Forest Code, released by the Brazilian environmental organi-zation Instituto Socioambiental (Socioenvironmental Institute)and partner groups, found that, of the 503 people interviewed, 88percent believe that the protection of Brazil’s forests shouldincrease, not decrease, and 90 percent believe that increasingdeforestation in the Amazon to establish agricultural lands will

probably not reduce hunger. When questioned about the restora-tion of fragile areas to prevent siltation, landslides, or floods, 87percent stated they believe that property owners who deforestshould be fined and forced to restore the vegetation.

Chapter 21. The OED Brazil forest sector study found the best

treatment of intersectoral issues, but much of that work wascarried out in the early 1990s. A recent piece of ESW in Brazil isalso of high quality. The India country study noted that, despitetwo decades of lending, forest sector work has not addressed keychallenges in the forest sector such as resource mobilization andreform of the forest departments. In China, where the Bank hashad the largest lending program in forestry, there has been nosector work.

2. See Annex tables C.6 and C.7 for a complete breakdownof regional forest commitments by forest and forest-componentprojects.

3. As this report was being completed, the form for ProjectStatus Reports was revised to include a section on “Compliancewith Safeguard Policies,” a welcome development in line withOED’s recommendation.

4. Developments in Cameroon since preparation of thepreliminary OED report are said to have grown more promising.

5. Adjustment lending accounts for 37 percent of totallending in the Africa Region (see Africa portfolio review, Kumarand others 2000c, and Cameroon country study, Nssah andGockowski 1999, for details).

6. In an earlier review of Structural and Sector Adjustmentfor 1980–92, OED observed that adjustment measures, which aredesigned to have economic effects, may also affect the environ-ment through the reallocation of the resources they engender. Thiseffect may be positive or negative.

7. This section is based on analysis in Lele and others2000d. See also Seymour and Dubash 2000.

8. FAO data show that of the estimated 1.3 billion peopleliving in poverty, more than 70 percent are women. The number ofrural women living in absolute poverty has risen almost 50percent over the past two decades.

9. The review examined compliance with four safeguardsfor the forest and forest-component projects: OP 4.36, Forestry;OP 4.04, Natural Habitats; OP 4.01, Environmental Assessment;and OD 4.20, Indigenous Peoples. Projects with a potentialimpact on forests in the transportation, agriculture, electricpower and energy, and mining sectors were examined for compli-ance with three safeguards: OP 4.36, Forestry; OP 4.04, NaturalHabitats; and OP 4.01, Environmental Assessment.

10. The Bank has begun to use external stakeholders tomonitor the implementation of safeguards. The Chad-CameroonPipeline, recently approved for Bank financing, has established anadvisory group of independent international experts to monitorthe project’s social and environmental safeguards. The advisorygroup findings will be discussed by the senior management andBoard of the Bank Group and then made public.

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11. Results of workshop discussions in Brazil and China.

12. In several countries, small enterprises in the informalsector process large quantities of forest products, including tim-ber. Improving the investment climate for the private sector as awhole will require due consideration of the needs of these smallenterprises.

13. Biodiversity loss is a major issue in several countries, butit is not clear whether it is high on the agenda of governments thatface many other developmental challenges (see Africa portfolioreview, Kumar and others 2000c).

Chapter 31. This section is based on the six country studies carried

out by OED and the outcomes of discussions involving a range ofstakeholders, held during country workshops in Brazil, China,India, and Indonesia.

2. These national estimates are considerably lower thanthose of the FAO.

3. The National Environment Council (CONOMA) ap-proved the proposal of a forestry law in March 2000, which wassubsequently slotted to be presented to the National Congress bythe Ministry of the Environment. This draft law resulted fromnumerous meetings attended by organizations representing anarray of stakeholder groups. A Committee of the Chamber ofDeputies had presented an alternative version of this proposedlegislation to the Ministry of the Environment. The Chamber’sversion differed from CONOMA’s proposal considerably. Accord-ing to the chamber’s proposal, for example, legal reserves in theAmazon region and the Cerrados region would occupy 50 percentand 20 percent of the territories, respectively, whereas in theCONOMA project they would occupy 80 percent and 35 percent,respectively. On May 17, 2000, the National Congress shelved theChamber’s bill in accordance with President Henrique Cardoso’spledge to oppose any reduction in the legally protected Amazonreserve area.

4. The Government of Brazil is interested in involving smalland medium-size producers, whose activities in the forest sectorwould be subject to environmental impact assessments.

5. The 1970 Nobel Prize winner Norman Borlaug has said,“if we tried to produce the 1997 world cereal harvest using theprevailing 1960s technology, we would have needed 1.7 billionhectares of land, instead of the 700 million hectares currently inuse today” (Muganda 2000).

6. Responses to the OED draft report at the workshop inBeijing November 5, 1999.

7. The Bank’s latest ESW in Brazil, about factors thatinfluence land use changes, is sound analytical work. So is thestudy of Cambodia’s forest sector, which estimated governmentrevenues lost through illegal logging.

8. The Bank-financed National Afforestation Project inChina significantly raised the incomes of 12 million people.

9. Zoning and demarcation, among the most intenselypolitical of issues, are particularly important challenges (Maharand Ducrot 1998).

10. Ironically, some of the best diagnoses of the economicand political causes of tropical deforestation were conducted byWorld Bank staff working on Brazil forestry issues. And some ofthe most important lessons the World Bank has learned about theeconomics and politics of deforestation have been through projectexperience in Brazil. But these lessons have not led to a sustainedproductive dialogue with the Brazilian government on the futureof the Amazon.

11. The government of Brazil indicated to the OED missionthat the Bank’s current strategy failed to meet Brazil’s nationalgoals of production in the forest sector.

Chapter 41. Plantations include single and multispecies plantings and

agroforestry on all scales.

2. Workshops in Beijing, China, on November 5, 1999, andBrasilia, Brazil, on November 18, 1999.

3. Workshop participants in Brazil stressed the importantrole the Bank can play in helping Brazil develop criteria andindicators for sustainable forest management.

4. The final report of the World Commission on Forests andSustainable Development, released in 1999, emphasized the need tomake bold political decisions and develop new civil society institu-tions to improve governance and accountability for forest use.

5. This conclusion is strongly supported by the countrystudies of Brazil, India, and Indonesia.

Annex A1. World Bank Sector Policy Papers of the 1990s are now

considered Strategy Papers in the Bank. Operational Directivesprovided to the staff in the form of Operational Policies areconsidered the “policy” (see box 1.1 for details). Therefore, thisreview refers to the 1991 paper as either the “forest paper” or“the paper” and to its contents as the “forest strategy.”

2. Based on comments of some NGOs on the OED reportduring ESSD consultations. Their support for Global Environ-ment Facility activities, which often channel funds throughNGOs, however, suggests that they may not be opposed toinvestments as much as to channeling funds through forestministries and departments with questionable commitment toreform.

Annex B1. Loans/credits beginning July 1991 were examined.

Where available, Implementation Completion Reports and Per-formance Audit Reports were also reviewed, though they werenot included in the analysis.

Annex G1. Carbon sequestration refers to the process whereby

forested areas retain a revolving but stable store of organiccarbon in their biomass. Clearing, burning, or otherwise substan-tially altering the forest increases the net release into the atmo-

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sphere of carbon-based gases that contribute to the greenhouseeffect (World Bank OP 4.36). New initiatives such as the CleanDevelopment Mechanism (CDM) are in the process of beingdeveloped. CDM can be seen as a partnership for organizing,structuring, and financing initiatives (involving north-south col-laboration) to deal with global problems of climate change. CDMintroduces the idea of “certification” as a means of evaluatingcollaborative programs.

Annex J1. These guidelines are based on OP 4.36. Both OP 4.36 and

GP 4.36 are based on The Forest Sector: A World Bank PolicyPaper (The World Bank, 1991a).

2. “Bank” includes IDA, and “loans” include credits.

3. See OD 14.30, Aid Coordination Groups.

4. Specific coordination problems may arise when forestryis a responsibility of state governments within a federation. Itmay be necessary to broaden the scope of the policy dialogue toencompass participation at both state and national levels.

Annex K1. World Bank 1991. The Forest Sector: A World Bank

Policy Paper, was originally considered by the Executive Direc-tors on July 18, 1991.

2. World Bank Operational Manual: Operational Policy4.36 - Forestry.

3. World Bank Operational Manual: Good Practices 4.36 -Forestry.

4. “IFC Forestry Projects” (IFC/SecM91-119).

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FORESTRY EVALUATION COUNTRY CASE STUDY SERIES

Brazil: Forests in the Balance: Challenges of Conservation with DevelopmentCameroon: Forest Sector Development in a Difficult Political EconomyChina: From Afforestation to Poverty Alleviation and Natural Forest ManagementCosta Rica: Forest Strategy and the Evolution of Land UseIndia: Alleviating Poverty through Forest DevelopmentIndonesia: The Challenges of World Bank Involvement in Forests

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The World Bank InfoShop serves walk-in customersonly. The InfoShop is located at:

701 18th Street, NWWashington, DC 20433, USAE-mail: [email protected] number: (202) 522-1500Telephone number: (202) 458-5454

All other customers may place their orders throughtheir local distributors.

Ordering by e-mailIf you have an established account with the WorldBank, you may transmit your order by electronic mailon the Internet to: [email protected]. Please in-clude your account number, billing and shippingaddresses, the title and order number, quantity, andunit price for each item.