Documt of

The World Bank

FOR OFFICIAL USE ONLY

MICROFICHE COPY

Report No. P- 5641-TA Type: (PM) ReportN. P-5641-TACOTLEAR, D/ X35083 / J11140/ AF6AG

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

IATERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

OF SDR 13. 2 MILLION

(USD 18.3 MILLION EQUIVALENT)

TO THE

UNITED REPUBLIC OF TANZANIA

FOR A

FOREST RESOURCES MANAGEMENT PROJECT

DECEMBER 23, 1991

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CLIRENY EOUVALN

Currency Unit = Tanzanian Shilling (Tsh)

USD1.0 = Tsh 200 (at time of appraisal)USD1.0 = Tsh 230 (September 1991)

FISCAL YEAR

July 1 to June 30

MEASURES

Metric System

ACRONYMS

ERR Economic Rate of ReturnNORAD Norwegian Agency for Development CooperationTFAP Tropical Forestry Action Plan

FOR OFFICIAL USE ONLY

UNITED REPUBLIC OF TANZANIA

FOREST RESOURCES MANAGEMENT PROJEC

CREDIT AND PROJECT SUMMARY

Government of the United Republic of Tanzania

Beneiaries: Ministry of Tourism, Natural Resources and the Environment;Ministry of Land, Rousing and Urban Development; andsmallholders.

ADIGHat: SDR 13.2 million (USD18.3 million equivalent)

ITuCM: Standard, with 40 years maturity

Financine Plan: IDA USD18.3 millionOther financiers 0.7 millionGovernment 1.9 million

TOTAL USD20.9 million

Rat of Retun: No rate of return has been calculated for the project as a wholesince it supports primarily institutional strengthening and thesebenefits are difficult to quantify. The subcomponent forafforestation has an ERR of 12%.

Staff Anraisal Repr: 9964-TA

IBRD Nos. 22789 & 22790

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

MEMORANDM AND RECOMNDWATIN OF THE PRESIENOF THE INERATIONA DEVE9LOPn T ASSOCIATIO

TO TH EXECUTIV DIRECfORSON A POE CREDIT

TO THE UNITE RB LIC OF TANZANIFOR A FOREST REOURCE MANAGEMENT PROJEC

1. I submit for your approval the following report and recommendation on aproposed development credit to the United Republic of Tanzania for SDR 13.2 million, theequivalent of USD18.3 million, on standard IDA terms with a maturity of 40 years, to helpflonce a project for forest resources management.

2. The Project aims to improve the management of forests and woodlands inTanzania by strengthening the capacity of the institutions in charge of developing andimplementing forest and land policy and increasing the participation of the private sector andlocal populations in the management of natural resources. While preparation of the Projectpreceded the 1991 World Bank Forest Policy Paper, the Project is consistent with itsrecommendations, inter al. to develop zoning and regulations on the basis of naturalresource surveys in forested areas, improve private sector incentives by increasing royaltyfees to reflect the real value of trees, formalize customary land rights for forest dwellers, andstrengthen forestry institutions to enhance their ability to protect designated forest areas.

3. Subsector acrond. Roughly half the area of Tanzania, about 44 million ha,is covered by forests and woodlands. Of this area, about 1.5 million ha are closed forests andmangroves, and about 43 million ha are open woodlands. Forest reserves (which includewoodlands) cover 13 million ha. Plantations occupy about 0.15 million ha. Tanzania'sforests are vital to the country's economic development. The subsector generates about 10%of the country's registered exports and some 730,000 person-years of employment.Tanzania's forests provide for all the country's timber requirements, over 90% of its energyneeds, and supply a range of products including honey, beeswax, tanning extract and fruitsmany of which are exported. Forests also play an important role in protecting soil fromerosion and conserving water and biodiversity. Official statistics indicate that thecontribution of forests to GDP is equivalent to 1%, but when forest products that are normallynot traded, such as woodfuel and tourism earnings attributable to forests, are counted, thecontribution is about fifteen times higher.

4. The most important constraint to the sustained and rational utilization of forestresources in Tanzania is inadequate management. Management weaknesses result from: (i)lack of clarity in the policies ad legislation which guide activities in the subsector; (ii)institutional weaknesses in the organizations in charge of designing, implementing andenforcing these policies; (iii) lack of reliable resource information to establish priorities andguide investment and the development of new policies; (iv) lack of funds (from own-incomesources and from central government) to finance needed activities; and (v) excessive emphasison direct controls and insufficient use of market-based and property rights incentives toencourage the participation of the local population in forest management. Managementproblems contribute to excessive clearance of forests for agriculture and fuelwood extractionin certain pockets of the country. The rate of deforestation is not known with any degree ofcertainty, but it is estimated to be in the range of 300,000 - 400,000 ha per year.

5. Policies and legislation for forest and land management lack coherence and areoften contradictory. Evidence from Tanzania and elsewhere in Africa shows that devolving

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greater control over natural resources to the village level can have a positive impact on theenvironment, equity and development. Preparation for this Project has helped to stimulateand focus debate on ways to give villages greater security of tenure and greater incentives tomanage the forest resources they presently utilize. A policy to demarcate and title villagelands has been in effect since 1987, but its implementation has been slow and ineffective.

6. gnmen Stratey. In view of these limitations to tLe development of theforestry subsector, the Tanzania Tropical Forestry Action Plan (T&FA" was developedfollowing a thorough review of the forestry subsector and related lana issues by theGovernment of Tanzania with supporn from some 20 donors in 1988 and 1989. It identifiesmany crucial technical and policy issues in forestry and indicates the options available forsustained development in the subsector. Its main recommendations incrade, Jntalia. that:information on natural resource use be collected and permanently meaitored; institutions incharge of natural resources be strengthened; emphasis in forest policy be shifted from statecontrol to greater local participation in woodland and forest management; extension andtraining be improved; and market incentives be provided in order to expand tree planting byindividuals and groups. The TFAP has become a mechanism for investment planning anddonor coordination in the forestry subsector. This Project has been designed to facilitateimplementation of the TFAP.

7. Rationale for IDA Involvement. In Tanzania and in other Sub-Saharan Africancountries, IDA has acquired considerable experience in the forestry subsector. Both theTanzania 'FAP and the World Bank's Forest Policy Paper have built on lessons learned andshown the need for a broad approach to forestry that addresses policy and institutional issuesand provides incentives for the participation of the private sector and local populations in themanagement of forest resources. IDA's involvement will be aimed at structural change in theforestry subsecror, consistent with sector-wide agricultural strategies agreed betweenGovernment and IDA. In Tanzania, IDA has been a major actor in assisting Government toreshape the agriculture sector through the Tanzania Agricultural Adjustment Program(TANAA). IDA has also provided leadership in developing together with governmentintegrated sector strategies such as the integrated roads strategy in Tanzania's transport sector.IDA's involvement in the implementation of this Project will ensure institution building,including technical assistance and training to strengthen technical management andGovernment's capacity in policy planning and program development. Other donors arerelying on this IDA initiative for the success of their own future assistance to activities in thesubsector.

8. Pt Oec9 s. The broad objective of the proposed Project is to support theimplementation of TPAP by strengthening the capacity of the institutions in charge ofdeveloping and implementing Abrest and land policies and by increasing the participation ofthe private sector and local populations in the management of natural resources in Tanzania.The Project has three specific objectives: (i) to strengthen institutions in charge of thedevelopment of forest policies and forest and natural resources information; (ii) to support thedevelopment of rural land policies, strengthen crucial governmental and nongovernmentalorganizations in charge of the implementation of these policies, and support theImplementation and monitoring of Government's policy of village demarcation and titing; and(lii) to strengthen regional and district forestry institutions in the Mwanza and Tabora regions.

9. Pt Drt . The Project includes investments over a six-year period to:(a) Strengthen Natural Resources Monitoring and Forest folies (US$ 5.0 millon): This

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component will support collection of national natural resource information and development ofa natural resource information system; development and implementation of improved practicesfor royalty collection and for afforestation based on private sector nurseries and activeparticipation from local people; and preparation of an action plan for the long-term financingof the forestry subsector; (b) Strengthen Land Policies and Institutions (US$ 6.8 million).This component will support the development of land policies and Government's ongoingprogram of village demarcation, titling, and registration; (c) Strengthen Regional andDistrict Forest Services In Mwana and Tabora (US$ 9.2 million). This component willsupport the development of regional forest management plans and associated forest servicereorganization and training. In Mwanza, where most of the forest cover has been lost, themain activities that will be supported relate to extension for reforestation, using techniqueswhich have been piloted successfully by a nongovernmental organization in the region. InTabora, where most of the land is wooded, activities will focus on forest reserve managementand village woodland management, irrtolving the active participation of the local population,and applied research.

10. Protect Sustainability. The development of policies, information resources, andinstitutional capacity in the agencies in charge of natural resource management is geared toensuring the long-term sustainability of forest resources. The study of long-term financing forforestry will establish the recurrent cost implications of all ongoing projects in the subsectorand will help Government develop a long-term financial plan to ensure the financialsustainability of subsectoral activities. The technical assistance to be employed by the Projectwill have precisely defined tasks and will be primarily of a short-term nature.

11. Lesonsa d. One of the lessons learned from previous assistance toTanzania's forestry subsector is that village plantations established and maintained bycommunal labor may not be successful. The proposed Project emphasizes planting byindividuals, households, and schools. The Project also incorporates lessons identified byOED's 1991 report, EQrUsy f pment: A Review of Bank Experience (Report No. 9524)by: (i) emphasizing subsectoral policy development and implementation; (ii) utilizing onlyexisting institutions for project implementation and creating a Project Coordination Committeeto consolidate the activities under the several agencies participating in project implementation;and (i) directly addressing land tenure, land use, pricing of forest products and seedlings,and recurrent cost issues. In accordance with key lessons identified in OED's 1990 report,Free-StandingarbchiAl Assistance for Institutional Developmen in Sub-Saharan Afrc(Report No. 8573), the Project will: (i) provide technical assistance only for clearly identifiedtasks, based on a thorough analysis of subsectoral institutional development issues and detaileddiscussions with Government and other donors; and (i) include detailed terms of reference,with concrete objectives and targets that have been agreed with Government.

12. Agments on Acin: Since the Project was appraised, Government hasaddressed several crucial issues that constituted conditions for negotiations. It has: (i) madeeffective a substantial Increase in forest royalty fees; (ii) made effective a new policy ofcharging for seedlings produced in government nurseries; (iii) appointed a nationalcoordinator for village demarcation and a coordinator for village titling activities; (iv)identified a senior full-time Project Coordinator; and (v) established a Project CoordinationCommittee. Among the time-bound assurances made by Government at negotiations are thatGovernment will: annually review royalty fees and adjust them by at least the rate of inflationfor the previous year; implement recommendations for the establishment of a forest revenuereporting system; make recommendations as to the need for and feasibility of making effective

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the charging of woodfuel fees for tobacco production; complete its activities for theidentification of best practices in forestry; complei, an assessment of the long-term financingneeds of the forestry subsector and thereafter ensure that adequate provision is made in itsbudgets for the financing of forestry subsector activities; complete the demarcation of anagreed number of villages per year; and complete an extension program for Mwanza and aregional forest resource plan for Tabora. The following are to be conditions of effectiveness:(1) The Forestry and Beekee'ag Division seconds one graduate forester each to Mwanza andTaboti; and (ii) The Ministry of Lands, Housing and Urban Development appoints a full-timeDeputy Project Coordinator.

13. Impat o nvirnmeni. The Project is expected to have a beneficial impact onthe environment. Virtually all Project components are designed to promote sound resourcemanagement. An environmental assessment of the proposed Project focusing on the Taboraand Mwanza regional components, carried out in June 1990, concluded that the Project willhave no significant adverse impact on the environment.

14. Poverty Alleviation and Other Proaram Obectives. In assisting in thedevelopment o; policy, the Project will take into account the basic food and energy needs ofthe poor. In its forest management activities in Mwanza and Tabora, the Project will attemptto reconcile the needs of the poor who benefit from fuelwood, beekeeping, grazing, andgathering of foodstuffs and medicine with the uses and needs of the non-poor such as saw-millers and commercial charcoal producers. The Project is designed to help villages managetheir forests in ways that benefit the community as a whole. The Project will assist D12281s r developMet by providing extension and training in the cultivation of seedlings toprivate nurseries. Village demarcation supported by the Project is expected to strengthenproperty rights over individually planted trees and communally owned village woodlands.Village demarcation should encourage the use of negotiated contractual agreements to governaccess to forest resources. Wmen will benefit under the Mwanza and Tabora components ofthe Project through increased training in the management and use of forest resources,including tree planting, nutritional aspects of forest products, the development of forest-related income generating activities, and increased involvement in decision-making aspects ofvillage woodland management. The land policy studies will examine the role of women andrecommend ways to alleviate the constraints to their efficient use and management of land.

15. ngefits. The Project will strengthen the policy, information and institutionalbase for managing Tanzania's forest and land resources in an economically, socially andecologically sound manner. The Project will generate quantifiable benefits fiom threesources: (i) improved management of some 450,000 ha of forests on a pilot basis; estimatesbased exclusively on the reduction of the incidence of forest fires in the Project area suggestan economic rate of return (ERR) for this activity of about 13%; (ii) more effective andintensive forestry extension services in two regions will allow an increased production ofprivately grown firewood and poles with an estimated ERR of 12%; and (iii) an Improvedrevenue collection system will yield revenue increases in the range of 50-150%. The Projectalso will generate non-quantifiable benefits from three main sources: (i) the new naturalresource information and monitoring system will enable Government to prioritize investmentsbased on a better knowledge of alternative interventions; (l) the development andimplementation of forest policies will increase the participation of local people In themanagement of forest resources, encourage the planting of trees, and provide incentives forappropriate uses of the forest resource; and (ii) the preparation of national land policies andimproved village demarcation will improve security of land tenure, provide incentives for

-5-

village management of natural resources, and contain incipient tendencies towards inequalityand landlessness.

16. Rlai& The primary risks to the Project are delays in the formulation andimplementation of policies and delays in the strengthening of the forest services. Governmentalready has indicated its commitment to minimize these risks by requiring enforcement ofhigher forest fees, introducing prices fi fedlings, and appointing a national villagedemarcation program coordinator and a national coordinator for village titling. Given theuncertainties concerning the demand among villagers for forestry extension and thedemarcation and titling of villages in Mwanza and Tabora, the Project will take a phased pilotapproach, initiating forestry extension activities on a small scale and expanding themgradually once experience has been gained. This modest intervention is justified, despite theexisting uncertainties, by the high environmental costs that will arise if no intervention wereattempted to promote afforestation in the already deforested region of Mwanza and to limituncontrolled deforestation in Tabora.

17. Reommendation. I am satisfied that the proposed Credit complies with theArticles of Agreement of the Association and recommend that the Executive Directorsapprove it.

Lewis T. PrestonPresident

Attahments

Washington, D.C.December 23, 1991

Schedue A

1. Estimated Costs and Financing Plan

Proiect CosM 1w

-USD Million-

PEw Cm nents Foreign Local Total % ofTotal

Strengthening Natural Resources Monitoring 3.1 1.2 4.3 24and Forest Policies

Strengthening Land Policies and Institutions 3.5 2.3 5.8 33

Strengthening Regional and District Forest 5.6 2.2 7.8 43Services in Mwanza and Tabora Regions

Total Ba Co 12.2 5.7 17.9 100

Physical Contingencies 0.3 0.2 0.4 2

Price Contingencies 1.7 0.9 2.6 14

Total Project Costs 14.2 6.8 20.9 116

jl Excludes duties and taxes.

Financing Plan

-USD Million-

Foreign Local Total

IDA 13.5 4.8 18.3

OTHER FINANCIERS' 0.7 0-01 0.7

GOVERNMENT OF TANZANIA 0.0 1.9 1.9

TOTAL 14.2 6.7 20.9

11 NORAD is at an advanced stage of preparation of its support for a Natural ResourcesInformation Center.

Tabl 4: PROCURMNT AND DISBURSMENTS(USD Millions)

Project Element ICB LCB OTHER N.A. CO- TOTALFINANCIER COST

PROCEDURE

Civil Works 1.16 0.07 1.22(0.94) (0.07) (1.00)

Vehicles 1.43 0.08 0.08 1.59(1.43) (0.08) (0.08) (1.59)

Equipment & Materials 2.97 0.26 0.20 0.41 3.84(2.97) (0.26) (0.20) (3.43)

Technical Assistance 8.25 0.17 8.42(8.25) (8.25)

Training & Workshops 1.62 0.12 1.75(1.62) (1.62)

Incremental Operating Costs 4.12 0.01 4.13(2.44) (2.44)

TOTAL 5.55 0.41 10.15 4.12 0.71 20.93(5.33) (0.41) (10.15) (2.44) (18.33)

g: Numbers in parentheses represent IDA financing.

Allocation and Disbursement of IDA Credit

MTNRE MlUbIJl ]Q

Million Disbursement Million DisbursementPercentage Percentage Million

(a) CIvd Works 0.8 100 of foreign, - - 0.875 of local

(b) Vehicles, Equipment 2.5 100 of foreign 2.0 100 of foreign 4.590 of iocal 90 of local

(c) Tochnical Assistance 5.2 100 1.4 100 6.6(d) Training Studies 0.8 100 0.4 100 1.2(e) Operating Cost 1.3 100 1.0 100 2.3(1) Reandug of PPF 0.7(g) Unallocated 2.2Total 18.3

Esdatd IDA -Diabomemtschdl

-USD millions-

IDA FY 92 93 94 95 96 97

Annual 4.2 4.9 2.7 3.0 1.9 1.6

Cumulative 4.2 9.1 11.8 14.8 16.7 18.3

Schedule C

United Republic of Tanzania

Forest ResoucesManagemen ProJec

Timetabl of Key PEctw Rocssng Activities

(a) Project Preparation Time: 2 years

(b) Project prepared by: Government with assistance from FAO/CP and IDA

(c) First IDA Mission: March 1990

(d) Appraisal Mission Departure: September 1990

(e) Date of Negotiations: December 9-13, 1991

(f) Planned Date of Effectiveness: May 31, 1992

(g) List of Revelant PCRs and PPARs: Sao Hill Forestry I (PPAR #4548)Sao Hill Forestry, Phase II (in process)

Schedule DPage 1 of 2

liii tIe: 10/04/91 at 13.19...7

tt Of u* ro.. 0Sre. .w in TANZIAPF *2 suumery Sestenant 0f i.own and 104 Credits

<Löf data en o 8/30/91 MIS data s of 10/0/91)

Inu r UsP mitit fon(tos tntelations)

Lown e ~i*cot Urdis- Ct-singCrodit ko. Yr norrPrpo an A toa u Date

....... .... ..... .... .... .........

60 Creditss o 814.27

C191ITM 19m TANIA GuAI ST AE & MILL 43.00 9.42 12/31/91(0)CIG5-TAM 1im TA2MIA UCATION VII 25.00 1.05 12/31/9001)C12290-TM 198 TANZIA FSTRY II 12.00 3.35 12/31/900R)C137C0.TAN 195 TAN IA 9FII FLHPPA*t 18.00 .24 12/31/1(mCI^YOTAM 1986 TA~2IA POM IV 35.00 .77 12/31/91(4)C1530-TA 1m TZIA TS RTm. 27.00 2.31 0/3092O m

C4O.TAM im TANAIA PETfi .ECTu.T.A 8.00 3.57 10/31/91(R)C14P0-TAM 19 T~NAIA 904R EMU ./~0RGT 40.00 1.76 12/31/91()

C~UM-TAR 196 T2IA R~A s RE~B. 50.00 23.21 06/30/92C18100-TA 1967 TZIA TELEC.II 23.00 3.75 06/30/92(R)CIM8I0-TAN 19 T~2AIA AM.EMMP s RtH. 1 30.00 25.02 06/30/%C19690.TAMS 199 TAZMIA IN.TRM Å0JUS.CR. 135.00 33.40 12/31/91CA)C19700-TAN 19 TAN2IA NATL.A.A LIV.Rgs, 8.39 6.88 03/31/97C19940.TAN 1989 TZANiA AOIC. EWT. 18.40 13.0& 03/31/97C20500-TAN 19 TAusMIA rmE CRs 25.10 21.67 06/30/9C2090.Ta 190 TANZMIA POTs 1lNIITION 37.00 36.90 06/30/97C20M-TA 1990 TANZ~IA NALTH & MIJTRITIM 47.60 44.41 06/30/%C21160-TAN(S 1990 TANZMIA MoIC. ADJus~WNT 200.00 104.62 06/30/92C21379.TAM 1990 TAlZAIA E MU PANMN RO A 36.30 37.20 12/31/%C21490-TA 1990 TANDIA 1 1 1 180.40 175.10 06/30/98C2020-TAN 1991 TANZMIA P T~ EMB 44.00 44.89 12/31/97C^2670TM 1991 TAlNZAIA RAIuTin MEKTuCItI 76.00 74.73 12/31/99C22910-TM 1992 TAUKMIA U8a EC§M 00. 11.20 11.46 12/31/93

TOTAL rusr Crodits a 25 1,132.30 678.76

19 7 u<s) closed 313.06

Att ~1osd for TANZAIA

TOTAL rter Lomns u 0

TOTAL 313.06 1,946.57of Mlh repeld IM.96 42.18

TOTAL held by ed 1 IA 15.11 1,904.39Am~ sold .09

of hafth resid .09

TOTAL adliud 678.81

Nots:

#uNt yft 9ff~t1¥.6Met vet f1i emTota Apr~d, f~amtme, ad ttanedfr botane rqresen hactive ad imstivt Loan and Credits.

(<) iasIts foramtty revlad Ctlsirw et.(<) indlcates SL/MCL LeMs and Credits.

Ifte Net A0p and n* ~ems ae h~stefst ¥4us, all othtrs are us et vetiu.

Tho einfr, tffletv*, and Ctsiun detes ae bsed I~ the Ln D~rtm offical da and are mot tekfrs th Task aut fl (*.

Schedule"Page 2 of 2

IFC STATEMENT OP INVESTMENTSTANZANIA

(as of August 31, 1991)

Original Commitment Hold by IFC (inl undisbursed)(USD Million)

Project Sector IFC Part'n Loan Equity Total

Amboni Limited Agribusiness 4.38 0.99 2.38 2.38

Highland Soap & Allied General Mfg. 1.74 0.33 0.33Prod. Ltd.

Mufindi Tea Co. Ltd. PoodlAgribusiness 2.80 2.80 2.80

Tanganyika Sisal Agribusiness 2.00 2.00 2.00Spinning Company

Zanzibar Limited* Tourism 2.80 1.20 0.20 1.40

*Approved. Not yet committed.

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