PART II - ASSESSING FORESTRY PROJECT IMPACTS ON PEOPLE

The impetus behind the new generation forestry projects is the increasing concerns in developing countries, in donor agencies, and in NGOs about environmental impacts, inequalities in the distribution of the benefits, and lack of sustainability of the positive impacts associated with many of the conventional types of forestry projects. Recognition of the close links between forestry and other sectors has also played a role in how the new generation of forestry projects has shaped up in practice.

With the introduction of an increasing number of important social and environmental objectives, and with the growing importance of non-market uses of forests and trees, comes a need for new strategies and approaches for assessing the potential and actual impacts of forestry projects. New questions need to be asked and new tools need to be developed and used to address those questions. Assessments are needed by project planners and decisionmakers at each stage in the project development process to help them make decisions concerning investment of resources, changes needed in project direction, and policies needed to support activity in the forestry sector.

More realistic impact assessments also are needed to provide the arguments for investment in the new generation of forestry projects. In the days when the main investment was in industrial or commercial types of forestry projects, the nature of the benefits and costs was much clearer to decisionmakers - we were dealing with commercial products that had market prices, and most costs were in market price terms. With the new generation of forestry projects the political constituency has broadened out considerably, and a broader range of impacts are of concern. Forest land managers need to be able to communicate effectively with those who make decisions regarding investment and allocation of funds.

The linkages between effective communication of potential impacts of forestry development and the types of institutional issues mentioned in the previous section are direct and often complex, and also critical to recognize if we are to generate the resources needed to fulfil the potential contributions of the forestry sector sustainable development.

Through practical assessment and communication activities, key government decisionmakers can be made aware of the potential contributions and the past, actual contributions of forestry. In developing these communications, there is need to stress the links between top-down and bottom-up communication, and the links between forestry and people, not just forestry and revenue generation, although that also is important. There also is a need to avoid focusing on physical accomplishment targets, and to stress targets that are more responsive to people's actual needs.

This type of communication needs to be backed up by more than wishful thinking and assumptions. Thus, to develop the type of information needed for such communications, it is necessary first to assess impacts of past forestry activities; to speculate in a systematic fashion on the impacts of new forestry projects and investments; and to accumulate and use the experiences of other, similar countries.

Communications to decisionmakers must stress the following institutional needs and issues that are of relevance in a majority of countries:

• need for supportive legislation; and clear and stable land use policies, and the enforcement mechanisms needed for implementation;

• need for appropriate organizational support and location in the government for forestry and agroforestry; need for incentives for local NGOs and government organizations; need for incentives for local forest officers involved in projects to encourage and reward strong performance;

• need for adequate and secure levels of funding to implement activities, including follow-up funding to sustain key activities initiated and funded by external donors (NGS, bilaterals, and multilateral);

• need for appropriate training, education, and career paths for professionals (and for forestry awareness training for related sectors); need to strengthen local institutions;

• need for development of a responsive research system that addresses the changed role of forestry (and agroforestry), and a system for getting new knowledge into the field; and

• need to develop more systematic, long-term planning mechanisms for forestry that take into account the long gestation periods for most forestry activities and the need for continuity in funding and action.

In developing the arguments for each of the above needs, it is critical that discussion illustrate to the political decisionmakers the positive impacts that can result, and have resulted, from meeting the needs. That is where impact assessment and the discussion in Part II come into the picture.

Part II deals with the impact assessment process and the key questions which need to be answered as this process is applied during project development and implementation. The focus is on the particular aspects that are most relevant to the new generation of forestry projects.

The basic objective in impact assessments is to identify and assess the changes which take place in the welfare of people affected either directly or indirectly by the project. In order to move toward this objective, we need to:

• identify clearly the relevant groups and people impacted;

• decide what impacts on their welfare are important, and, thus, important for the assessment;

• decide what dimensions and measures of welfare are relevant and should be considered; and

• decide what questions about these dimensions of welfare need to be addressed in the assessment.

These four elements are covered in chapter 4. Chapter 5 then goes on to discuss some of the strategic and operational issues involved in designing and developing an effective approach to assessing impacts at different stages in the project development process.

4 Identifying Key Questions About Project Impacts on People

In developing an assessment of the impacts (potential or actual) of new generation forestry projects, it is critical to first identify clearly the range of people impacted, the key impacts on them, and the priority questions about such impacts that need to be addressed by the assessment.

Identifying People Involved In and Impacted By a Project

Decisions made by different people concerning their participation in a project depend on their interests, and objectives, and their understanding of how the project will impact them. To insure achievement of desired impacts and to reduce future conflict in a project, the major project related groups with differing views or agendas must be identified and their interests considered. The most important agendas of key project actors and their likely influence on the project are highlighted in figure 4.1. It is important that people recognize clearly that differing agendas can produce serious conflict situations that can divert the project from stated goals. This initial appreciation of potential conflicts can be followed by explicit discussions of how to resolve them. Just obtaining this understanding can be a major achievement - particularly the recognition that much development work has strong political implications at both macro and micro levels. In addition to identifying groups and their concerns, every effort should be made to involve representatives of the groups in the design of assessments so the results likely to be used effectively (Patton 1986; Weirs and Bucuvalas 1980).

Source: Based on Morss and Honadle 1985: 205-206.

Figure 4.1. Major project groups, their agendas, and potential effects on a project.

Participation from the local people, e.g., indigenous populations and the rural poor, is a key focus in the new generation of forestry projects. Furthermore, there is a heightened sensitivity to those who can be affected negatively or positively through environmental impacts or externalities, e.g., the larger global population affected by deforestation and loss of biodiversity, or the downstream landusers affected by changes in upstream land use. Project decisionmakers should be sensitive to a broad range of potential environmental, social, economic, financial, and institutional impacts on people due to new generation forestry projects see box 4.1).

Identifying Project Impacts on the Welfare of People

The new generation forestry projects, just like traditional large scale industrial forestry activities, generate physical changes, e.g., change in existing forests, creation of new forests (plantations), changes in erosion rates, increased jobs for people, increases in productivity, and changes in farming systems (e.g., through introduction of agroforestry technologies). When such changes are in the natural environment we generally call them environmental impacts.

These physical/environmental changes in turn lead to social and economic impacts on people. The point to be emphasized here is that: For the basic physical/environmental changes or impacts to have meaning to most decisionmakers, they have to be translated into social and economic terms, i.e., impacts on the welfare of people. This does not lessen the critical importance that should be placed on the basic physical-biological impacts of projects. However, when decisionmakers compare alternative uses of scarce resources, they generally compare the impacts on people, or increases in the welfare of target groups that can be achieved with alternative investments of resources. They have to see physical/environmental impacts in terms of people impacts. Answers to questions about environmental impacts need to be generated before assessing people impacts, because the latter are in most cases a direct result of the former.

Many of the positive environmental impacts associated with sound forest management and agroforestry have been disregarded in decisions because they were not translated into social and economic value terms that have meaning to decisionmakers. Physical changes in the environment due either to natural or human action need to be given high priority in decisions about forestry and agroforestry projects. However, in order to have meaning to decisionmakers, they must be associated with social and economic impacts on people, since the latter are the main, if not the only, impacts considered by most decisionmakers; and environmental change in one area can have totally different social/economic impacts than those created by the exact same environmental change in another area, thus, it becomes difficult to assess their importance for political decisionmaking without knowing their human impact dimensions (see box 4.2).

In sum, environmental impact assessments are a critical part of the project development process, and they provide important information. However, such assessments need to go beyond identifying physical and biological changes, by linking such changes to impacts on the welfare of people.

Welfare impacts are associated with human values; thus, these impacts generally can be assessed in terms of the values attached to them. Box 4.3 provides a classification of the wide array of positive values associated with forests. These values run from monetary measures of market prices associated with direct use of the forest, all the way to qualitative psychological (nonuse) values associated with the mere existence of the forest. In the academic world, a clear distinction generally is made between different types of values, with economists claiming all those that can be expressed in monetary terms. In the real world, the distinction often is not very clear. In most cases, psychological, social and economic values all need to be considered together.

Identifying the Dimensions of Welfare that are of Concern

Which dimensions and measures of welfare changes are of interest to decisionmakers in looking at the new generation of forestry projects? The focus of decisionmakers generally is on three dimensions. They are:

1. The distributional dimension (who gains and who loses, and how is local participation in decisions and benefits increased?). Included are impacts on different project groups, classified in various ways, e.g., by income classes, by regions or location, at different points in time, by gender, age, occupation type and so forth. The classifications that are relevant will depend on the particular project situation and the institutional environment in which it exists.

2. The sustainability or livelihood security dimension (can the positive changes in welfare be sustained over time?). The Brundtland Commission's Panel on Food, Agriculture, Forestry, and Environment developed livelihood security as an integrating concept and defined it as the combination of adequate stocks to meet basic needs, secure access to productive resources, and maintenance of resource productivity on a long-term basis (Food 2000 1987).

3. The economic efficiency dimension, such as changes, in total benefits and costs to the nation or region due to the project, measured in terms of people's willingness to pay for things (which may not be equal to what they actually have to pay for things, as explained below); and the relation between incremental benefits and costs (economic efficiency measures such as rates of return, net present worth, and benefit-cost ratios).

Both monetary and nonmonetary measures are used to assess the extent and significance of these three dimensions of project impacts.

Almost any type of physical/environmental change due to a project can be associated with all three of the dimensions of project impacts mentioned above. For example, if the project creates new employment:

• there will be distributional consequences, e.g., previously unemployed persons get jobs and income; they may gain new status and psychological benefits from being employed and providing for their families; the new outputs produced (goods or services) will affect different groups in different ways, depending on what is being produced; some may lose due to changes involved;

• the changes in employment may contribute to increased sustainability of development, or they may lead to more non-sustainable development, e.g., increased pollution and loss of valuable habitat; and

• there can be economic efficiency gains involved; the nation's overall wealth may increase; or there can be economic losses; or the new jobs may result in significant pollution downstream that kills fish and increases human health problems (this is something that would not show up in the financial accounts, but should show up in the economic efficiency accounts for the project).

The specific types of physical/environmental impacts associated with the new generation of forestry projects, and the questions asked about them, are almost endless. They occur as hierarchies of impacts. Thus, change (an increase) in fuelwood supply (output) can impact employment, which in turn can impact health and food supplies, and so forth, ultimately ending with a change in human welfare/satisfaction for one or more groups.

The impacts and questions about them that will be given priority in any given assessment situation should depend on the circumstances surrounding the project and the interest groups associated with the project. To some, employment may be top priority; to others it may be foreign exchange earnings; while to still others it may be expansion of local empowerment, health improvement, or some other impact such as change in political stability. The choice of impact categories will ultimately be made by those who make decisions, hopefully considering the interests of the diverse stakeholders involved.

In sum, the focus for the new generation of forestry projects is on (1) the distribution of benefits to poor and disadvantaged groups, including the distribution of power or empowerment of local project participants; (2) the environmental sustainability and the contributions to livelihood security of projects beyond their formal lives; and (3) the economic efficiency associated with the use of resources in the project (this is the traditional dimension which has been of interest to decisionmakers, and which remains important in an overall assessment of impacts of new generation forestry projects. In the remainder of this chapter, the relevant questions for impact assessment will be looked at in terms of these three dimensions.

Questions Concerning Distributional Impacts

One of the underlying social objectives of forestry projects is to ensure more equity in access to development resources and distribution of the ensuing benefits. Hence, the distributional impacts of the intervention should be studied in detail to ascertain who is and who is not benefitting and also how they are benefitting. Care must be taken to distinguish between the various groups and their differing agendas and needs. This is particularly true in the case of men and women and their differing interests in and access to available resources (FAO 1989c). Women are often in a distinctive tenure position regarding trees and rights in trees. They may or may not have the same rights in land and trees as do men, and may in fact not be allowed to grow certain species of trees or to grow trees at all in certain tenure niches within the family landholding (Bruce 1989).

Women and men use trees for different purposes. For example, in the case of fuelwood, women may be concerned primarily with its availability and collection for domestic use, whereas men may be interested in it primarily as a cash crop. In the case of secondary tree products, women are heavily involved in collecting human food and having fodder for small animals available near the home site. In contrast, men - generally speaking - have little interest in collecting wild food products from natural vegetation. Hence, a decision to restrict access to these resources - as in the case of a nature reserve or national park, will have a more negative, direct impact on women and, indirectly, on the family as a whole (Hoskins 1983).

This also holds for minority ethnic groups and forest-dwelling communities whose interests may have been ignored. Forestry projects must ensure that the rights of these people are respected and their interests integrated into the proposed activities (Ingersoll 1990). Failure to do may cause severe social and political problems in the near term.

Different local groups are dependent on forests and trees in a variety of ways - for subsistence, income generation for subsistence, or for surplus production. The level and degree of dependence varies, though often the poorest are the most dependent. Hence, they may be the most vulnerable to any changes made in the nature of the tree and forest base - whether in terms of use, availability, or access. What is required is a specification of who these groups are and what they are dependent on forests and trees for - forest foods, building materials, medicinal plants, fuelwood, fodder, raw materials for forest-based enterprises, biomass for natural fertilizer, to name some of the more common uses (Peluso 1991).

Specific questions commonly asked in assessments of distributional impacts of the new generation of forestry projects include the following:

Q.1. How are the benefits and costs of the project distributed among different groups?

This boils down to the question of who pays and who gains? Nonmonetary as well as monetary benefits and costs are included. Countries often are concerned with income redistribution effects of public investments, i.e., the equity issue. In most projects, concern centres on different income classes (do poorer members of society receive more benefits than richer members?), regional groups (does region X receive more benefits than region Y?), or cultural groups (does clan A benefit more than clan B?) or on gender (do men benefit more than women?). Intergenerational equity issues might also be of concern (how will future generations be affected; will the next generation reap benefits or costs from the project?). This latter issue is also of direct interest when looking at the sustainability dimension.

Q.2. Specifically, how does the project help disadvantaged people, such as women, the landless, and minorities?

Forestry activities are uniquely positioned to benefit the disadvantaged in rural areas because of the role trees play in the household economy where women's position is crucial, in the rehabilitation of degraded lands which may benefit the landless, and in the livelihood security of forest dwellers who may be heavily dependent on trees and their products. This role is reinforced by the growing awareness of the relationship between environmental degradation and poverty alleviation. Answering this question calls for some careful discrimination and awareness of the various groups living and working in the project area.

This is much more easily said than done since often such groups remain invisible unless the analyst makes a conscious, deliberate effort to talk with them. Those who make brief visits to the countryside have been termed development tourists, since they generally focus their attention on elites, men, the healthy, the users of services, and the adopters of technologies. Excluded are the poor, the women, the sick, the old, the infirm, and the insane (Chambers 1983). One way to counteract this bias is through the Village Dialogue Approach practised in Nepal in the design and implementation of local resource management projects (Messerschmidt 1987). Once dialogue is established between the assessment team and the village as a whole, the team encourages local villagers to divide into homogeneous groups for discussion, e.g., landless grazers, artisans running wood-based enterprises, women, smallholders, and so on, thereby fostering a better understanding of resource issues affecting all levels of local society, while at the same time avoiding co-option by the local elite. When they meet again with the whole village, non-elite members become more outspoken.

Q.3 Who loses as a result of the project and how?

In certain types of projects there are people who lose as a result of the planned interventions. In the past, this has often been the case with land settlement projects - where people were sometimes forcibly moved into areas where other people were already living. It also happens on a smaller scale when new ways of structuring marketing activities may displace the traditional traders or middlemen. In some cases, certain segments of the population may be excluded by conditions introduced by the project. For example, where women play important management and production roles, a project directed toward men - explicitly or implicitly - may place women, and perhaps their children, at risk (Partridge 1984).

In the case of forestry, watershed management has proven problematic on this score. A single watershed may contain a broad diversity of tenurial arrangements, stratified social groups, diverse farming systems, and various land-use patterns (Cernea 1985). Often there are several resources involved since rehabilitation of deforested watersheds demands not only watershed forestry and massive planting of trees but also flood control and soil conservation, using both mechanical and vegetative means. There may be changes in rights to land, in rules of inheritance, in settlement patterns, and the number of inhabitants (Uphoff 1986).

In cases where people have lost as a result of the planned interventions, it is important to know what forms of help or assistance, if any, the project provides to mitigate their losses. Sometimes these eventualities have been taken into consideration in the project design, but often they have not.

Q.4 In what way does the project encourage the equitable distribution of benefits and costs among the local population?

Given human nature and the track record of many forestry projects to date, equitable distribution of project benefits and costs rarely happens of its own accord, particularly where there are various groups and interested parties competing for what are often scarce development resources. For such a situation to occur requires the introduction of mechanisms to establish some consensus on what is equitable, monitor progress, and, where necessary, enforce certain agreed-upon standards of benefit distribution. This may be done in various ways - through the establishment of some representative body such as a committee, a task force, or working group, through the devolution of authority to some local body, or though some form of central mandate. The focus here is on the extent to which the project takes this into consideration, and how successful the measures/solutions are likely to be over the long-term.

Q.5 How does the project affect local empowerment and participation in development?

Despite the wide agreement on the need for popular participation in development projects if they are to succeed, most projects are still not planned from the beginning with a strong participatory approach. For example, rural organizations are a key element both for participatory planning and for the sustainability and continuity of the project once implementation begins. Yet such organizations are often regarded with apprehension by decisionmakers who may view them at best as a nuisance and at worst as a threat to their power. Yet such organizations, whether formal or informal, can play a key role in sustainability. As such, it is important to know what role they play in the project and what impact the project has on them.

The fact that people take advantage of the resources and services offered by the project - on terms dictated by the project - does not necessarily mean they are actively involved with what happens. The focus here is on the ways in which local people are to be involved in project design and implementation, monitoring and evaluation - the extent to which they are to be empowered to sustain project benefits.

What is required is an assessment of the capability and willingness of the local groups and organizations to undertake the activities of the project, together with the identification of the principal constraints in fulfilling their present mandates. With a view towards sustainability, the assessment should also identify possible mechanisms for local management of project activities. Equally important are the functional linkages with other organizations and institutions involved with the project. Such linkages at all levels - forward and backward, horizontal and vertical - are important for the provision of political support and for obtaining access to information and resources.

Q.6. In cases where project success depends on groups being involved financially in the project, is that involvement financially acceptable (profitable) for them?

Do key private groups have sufficient financial incentive to participate? What are the cost and benefit flows to private investors or to participating farmers and landowners? (If they do not find the project attractive enough, then it may be necessary to consider providing incentives or subsidies.)

Q.7. What are the budget impacts of the project for different agencies and/or groups?

Does the project stay within budget limitations for the different groups involved? What funds will be needed to cover operating expenses? When will funds be required to support the project (outflows) and when can receipts (inflows) be expected? What are the recurrent cost requirements in the future, e.g., for road maintenance, forest management costs? The whole question of cash flow and ability to maintain it is relevant here and also in looking at likely sustainability impacts.

Q.8 How does the project affect foreign trade and foreign exchange flows? How does the project impact other sectors and the financial stability in the country or region?

This question relates to the foreign exchange impacts and the distributional question of how the project affects other sectors such as agriculture, transportation, and so forth.

In countries with a large net outflow of foreign exchange, this question may be of critical importance, and may influence decisions on foreign exchange expenditures in projects and on the levels of subsidies and tariffs. Other impacts of interest here are those that the project has on the stability of regional income and jobs. For example, a nature tourism project may be highly seasonal in terms of benefits and may involve a great deal of instability in terms of income flows in that sector.

Questions Concerning Sustainability and Livelihood Security Impacts

Livelihood security is key for better understanding the role that the three broad types of forestry projects - industrial development, rural development, and environmental sustainability projects - can play in the lives of local people. As mentioned, the Brundtland Commission's Panel on Food, Agriculture, Forestry, and Environment developed livelihood security as an integrating concept and defined it as the combination of adequate stocks to meet basic needs, secure access to productive resources, and maintenance of resource productivity on a long-term basis (Food 2000 1987).

In normal professional usage, poverty is a synonym for deprivation and is measured in terms of flows, whether of income or consumption. No account is taken of stocks or assets and their role in maintaining the household at some basic, acceptable standard. Nor has much attention been paid to what people do with these stocks and assets when productive opportunities start diminishing. Yet those who are defined as falling below the poverty line have developed various adaptive strategies for survival which may vary by season and location. Even in conditions of moderate poverty, many households invest off-farm. If this is insufficient, then they will seek support from their extended kin. Should this in turn prove insufficient, then they will begin to dispose of their productive assets, such as smallstock, or seek a loan from a local merchant. Increasingly, trees are regarded in the same way as livestock. In the case of Haiti, for example, crop failure is so frequent and the market for wood and charcoal so secure, that farmers prefer to leave their trees as a bank against future emergencies (Murray 1987).

In such a situation, the conventional development approach is to try to assure farmers employment, a job, training, or an asset that will provide for all or almost all their needs. But a more viable alternative may be to strengthen their existing strategies, in which productive assets often play a key role (Chambers and Leach 1987). A common, perhaps universal priority expressed by rural people is the desire for an adequate, secure, decent livelihood which provides for physical and social well-being and this includes security against sickness, early death, and impoverishment. But once basic survival is secured, under safe and secure conditions, there appears to be a strong propensity to stint and save when the opportunity arises and take the long view - for example, the sacrifices parents will make to invest in their children's education or the extraordinary tenacity with which farmers will struggle to retain rights in land. Providing people with the necessary base on which to build and create for the future is a prerequisite for good stewardship (Chambers 1989).

In practice, this means that development interventions should concentrate on assisting local people to develop their productive resources and, in cases where these resources are limited or insufficient, assisting them to create new resources. Possibilities include:

• secure rights of ownership and usufruct of assets, including sale and inheritance;

• transform small-scale tenancy and sharecropping into inheritable rights to land;

• allocate degraded forest land to poor households for growing trees and, where appropriate, for growing crops and raising livestock; and

• reinforce livelihood strategies by supporting diversification, including nonagricultural activities.

These findings are partially corroborated by a recent report, part of a larger study financed by AID to address natural resource management (NRM) in the Sahel (Shaikh et al. 1988). The report focuses on a host of on-farm agricultural production practices that show promise for sustainable agricultural growth in Gambia, Mali, Niger, and Senegal. The emphasis was on what works and a total of 70 successful NRM initiatives - many small-scale and localized - were visited.

The interventions with the greatest impact were found to be those that resolved the problems of the local population - rather than those of the environment per se. Precisely because environmental degradation now visibly threatens local production systems and their capacity to survive, farmers have turned to NRM to accomplish two things: first, to protect the soil and water resources on which their production depends; and second, to provide new opportunities for income, such as pole production, orchards, gardens, fuelwood, and fodder sales.

Specific questions commonly addressed in assessments of sustainability and livelihood security impacts of the new generation of forestry projects include the following:

Q.9 What are the impacts on livelihood security - with a primary focus on resource control and income generation?

The focus here is on the positive effects of the planned interventions on the lives of the local population, with an emphasis on the more productive long-term aspects. From a social perspective, development interventions should concentrate on assisting local people to develop their productive resources and, in cases where these resources are limited or insufficient, assisting them to create new resources, in this way providing a more favourable context for improved stewardship of the natural resource base. What is required here is a specification of how the benefits discussed in question 2 have contributed to livelihood security and vice versa.

If trees and forests are to be managed on a sustainable basis, then the key is local participation in management - if not outright local control of the resources in question, often through some system of communal or joint management (see also chapter 3). There is increasing interest in and recognition of the role of common property resources (CPRs) in the form of forests, woodlands, and wastelands and the extent to which they satisfy local needs for forest foods, products, and fuelwood. There is also an acceptance that such common management of local tree resources is in a state of crisis, thanks to privatization, encroachment, and government appropriation (Arnold 1991a). One solution to this has been the introduction of joint management systems where responsibility is shared between the local population and the respective forestry department. This has been implemented most notably in the hill regions of India (Poffenberger 1990). The basic sociological principle is to create a clear link between a well-defined small group and a well-defined tract of forest land that is to be protected or planted, with the active support and involvement of the forest department, particularly in defining and protecting the boundaries of the CPR area against outside use and encroachment. Members of the group need to perceive a clear correlation between their contributions and the returns they get (Cernea 1989).

Where such increased control over local resources is not possible, the focus should be on employment generation as a result of the planned interventions. Commercial plantations can provide both direct and indirect employment opportunities for some rural people. Forests, on the other hand, provide a source of income and employment for many families who depend on money earned from gathering, selling, and processing forest products to buy food and other basic necessities. For the poor, and also for women, they are often one of their only sources of cash income. The particular products involved vary from region to region depending on markets, local traditions, alternative means of employment, and the types of forest resources available in the area (FAO 1989b).

Q.10 Are the benefits sustainable over time?

The focus here is on the benefits that should be sustained once external assistance, or the formal project, ends. This may include all the benefit flows or, more likely, certain specific benefits. Ways in which sustainability is to be achieved should be outlined and the analysis should include information on specific measures undertaken by the programme to provide the necessary economic and political security for both individuals and institutions to pursue sustainability on their terms. Information should also be included on the obligations and responsibilities of each of the respective parties for achieving sustainability. Finally, the analysis should briefly identify the key constraints to achieving objectives.

In assessing the Agroforestry Outreach Project in Haiti, in preparation of a second phase, sustainability became a major issue, especially when viewed within the developmental context at that time when the central government had effectively refused responsibility, leaving the NGOs to their own devices, often heavily dependent on external funding. During the assessment, it became apparent that farmer training and institutionalizing local demand were the most important and relevant points, given the prevailing institutional and political situation in Haiti (Lowenthal 1991). Project participants in several regions were already experimenting with the on-farm propagation of project trees, on their own, with little or no direct stimulus from the project. This spontaneous development - though clearly a result of project interventions in the broadest sense of that term - obviously bodes well for the long-term sustainability of relatively large-scale agricultural tree-planting beyond the life of the project.

In Haiti, farmers understand that trees are a production crop, one that can be farmed and incorporated into improved farm management practices. As a result, there is a large, unmet demand for seedlings, by both new planters and repeaters. The continued stimulation of a strong, permanent demand by the rural, hillside farmer for hardwood seed and seedlings, including hedgerow species, is the bottom line of sustainability for the second phase. If such a demand continues after project completion, the project will have achieved something few other projects have been able to do in Haiti - create an environment where farmer demand will become an important force in shaping the type of assistance and extension that is directly relevant to his needs.

Q.11 What are the budget and financial sustainability (recurrent cost) implications of the project?

A common cause of non-sustainability of project benefits introduced by an outside agency or group is the lack of ability or unwillingness of local entities to sustain the recurrent costs which are needed to keep project activities going, e.g., road maintenance costs. During the life of the project, the budgetary capacity of the local organizations needs to be built up and developed so that it will be in place when the formal project is terminated.

Questions Concerning Economic Efficiency Impacts

The third dimension of welfare deals with the overall relationship between the costs and the benefits associated with the project. As in the case of the financial questions asked earlier, e.g., in the section dealing with the distributional dimension of welfare impacts, economic efficiency assessments use monetary units as the measure of impact. Question 6 is dealing with financial efficiency (profits, or the difference between market priced costs and returns) of private project participants. There are two significant differences between economic and financial efficiency measures.

They relate to:

(1) what costs and benefits (or positive and negative impacts) are included in the assessment; in the financial analysis, only direct market traded costs and returns are considered, while in the economic efficiency analysis, as many as possible of the non-market costs and benefits (negative and positive impacts) also are valued and included in the assessment.

(2) how those costs and benefits (impacts) are valued; financial analysis always uses market prices; the economic efficiency analysis uses best estimates of people's willingness to pay for goods and services. In economic analysis, market prices often are adjusted to more accurately reflect social or economic values. These prices are referred to as accounting or shadow prices. For example, if there is significant structural unemployment, and a project employs otherwise unemployed labourers, then in the economic efficiency analysis we might apply a labour value lower than the ongoing wage to reflect a lower opportunity cost for such labour that otherwise would be unemployed.

Table 4.1 summarizes the differences by the steps in the assessment process.

The term financial analysis is used to describe the type of analysis that is concerned only with actual monetary flows from (cost) and to (return) specific individuals or groups of individuals within society - farmers, private firms, public corporations, and others. In that sense it is a measure of distributional impacts. Financial analysis deals only with those goods and services for which people pay or are paid, e.g., for labour, capital, land. Financial analyses always have to be done from a specific point of view, e.g., that of a government agency, private firm or individual, cooperative, etc. Thus, financial impacts fall into the general category of distributional impacts discussed earlier.

Economic efficiency analysis, on the other hand, is concerned with the costs and benefits to society as a whole, regardless of who pays and who gains. That's why it is not considered under distributional impacts. It deals with benefits measured in terms of what society is willing to pay for goods and services, and costs in terms of the opportunity costs involved, e.g., the values of the opportunities foregone when a resource is used for one purpose rather than its next best use that actually would have occurred. These concepts are valid regardless of whether or not money actually is paid for a good or service. (A much more detailed discussion of financial and economic assessment is provided in Gregersen and Contreras [forthcoming].)

In general terms, one question is asked in the assessment of economic efficiency impacts:

Q.12 Does the project involve an economically efficient use of the nation's resources?

In other words, do the benefits to the nation, or to the relevant subunit of the nation, exceed the costs of the project, when both are appropriately valued? If there is some way of making more efficient use of the nation's resources, then the answer is “no.” Thus, we have to ask: could we eliminate any of the separable components of the project and get higher net benefits; or could we obtain the same benefits with lower cost or with less use of resources? When a main project objective is to increase the aggregate economic benefits (goods and services) derived from the use of the country's limited resources, then the economic efficiency question becomes a central one of concern to public decisionmakers.

Table 4.1. Relationship between steps in a financial and an economic efficiency analysis.

If both financial and economic efficiency questions are being asked, they generally are dealt with together, since both have much in common in terms of information requirements and procedure. The steps in a financial analysis are more straightforward to carry out and clearer in concept. Therefore, assessments generally start by answering the financial questions related to financial profitability for given groups and then the results of this step are used as a starting point for the economic efficiency analysis.

Economic efficiency (or financial efficiency, for that matter) generally is measured in terms of returns, or benefits, per unit of cost. One of the problems encountered when doing economic impact assessments for the new generation of forestry projects is the fact that different groups of people have different ideas concerning the numeraire that is appropriate to use. Thus, for some it may be returns per unit of capital, for others returns per unit of labour; for still others it may be returns per hectare of forest (see box 4.4).

Different groups, e.g., commercial loggers, environmentalists, slash and burn farmers, etc., have different perspectives on forest values. Environmentalists have an interest in total present and prospective use and nonuse values. They generally are interested in value of the forest in terms of area, or on a per hectare basis, i.e., total value of a given forest area.

The other groups that attach positive value to the forest are interested mainly in the partial values, or benefits, that accrue directly to them as consumers and producers of forest products, or as forest dwellers. Commercial producer groups may be interested in the net value of their products per unit of capital investment. Subsistence groups might be interested in value of outputs which they can get per unit of labour input, which often is their scarce resource and thus provides their yardstick for value. Finally, there is the group that values mainly the land on which the forest grows.

A complicating factor for decisionmakers trying to sort out the different groups and the various impacts on them is that most individuals in society fit in more than one group, e.g., in both the environmental group and the commercial consumer or producer group. Thus, individuals who lobby for protection of the forest also consume outputs from the forest, almost without exception, and thus fit in the commercial producer/consumer group. Reconciling the different value perspectives of the two groups thus involves coming to grips with the overlapping roles and value perceptions of individuals within the groups. But that is a problem that affects decisionmaking quite beyond the task covered in this paper, namely that of developing the value measures to use in decisionmaking.

Several conclusions emerge from the discussion in this chapter on value perspectives:

1. There is no one absolute measure of economic value for a forest and the land on which it exists. All economic values are relative in terms of points of view adopted and in terms of supply and demand conditions facing the different groups using the forest. Value perceptions can change rapidly over time.

2. The various points of view are not for the most part complementary, and often the value perspectives involved are in direct conflict.

3. These conflicts in points of view and in value perspectives create problems in terms of knowing how best to develop values for decisionmaking. Each group with a different point of view likely will attach a different set of values to the competing potential outputs from, or uses of, a given piece of forest. Further, decisionmakers need to consider the claims and value perspective of those who want to clear the forest and use the land for other purposes. Thus, in terms of decisions, there will be need for hard choices among value perspectives.

No particular point of view or set of values is the right one - other than in the eyes of each of the interest groups. In order to understand the different values, one needs to apply a variety of assessment techniques. The following chapter reviews in highly summary fashion the main techniques available and their potential usefulness in actual field situations.

Concluding Comments

Obviously, there may be other questions, or variations on the twelve discussed above, that are relevant in specific cases, or to specific groups. However, based on experience, if the above questions are addressed adequately, then the decisionmaker can be fairly sure that s/he has addressed the main issues related to distributional, sustainability, and efficiency impacts of the new generation of forestry projects.

5 Planning Assessments

The previous chapter laid out the major types of questions of concern in assessing the potential or actual impacts of the new generation of forestry projects. In the present chapter, issues associated with assessment design are discussed. Before deciding on the specific method and technique to use in answering each of the relevant questions, it is important to consider:

• the need for adequate specification of questions to be answered in the assessment;

• the stage in the project development process at which the questions are being asked; and

• the technical and institutional constraints on the overall assessment.

The first consideration is needed so that the assessment is set up to answer the right questions. Too often, an assessment is started without having specified in detail what the end product should look like, i.e., what type of answers are wanted. Without adequate specification, wasted effort can result.

The second consideration is needed for two reasons. First, the same questions generally are relevant at each stage in the project development process, but the approaches to answering them will be different (appropriate techniques do not depend only on the type of question asked, but also on the stage, e.g., whether we are dealing with ex ante or ex post situations). Thus, at the early stages, the questions are asked ex ante; at later stages, after the project is being implemented, the same questions often are asked in an ex post sense, i.e., did the project in fact have the impacts that were initially expected. The second reason to explicitly consider project stages is that duplication in effort can be avoided in the later stages if one consciously remembers that the same questions need to be addressed over the life of the project. Thus, for example, there is potential to develop common data bases that can be built up during the project process.

The third consideration is important so that (1) limited resources can be allocated properly to answering each of the priority questions; (2) timing and intensity of efforts can be adjusted to reflect needs and resource constraints; and (3) decisionmaker concerns for credibility and reliability can be taken into account (e.g., making the assessment transparent enough to be accepted).

In the remainder of this chapter, each of the three considerations is explored further.

Need to Clearly Specify Each Question Being Addressed

Decisionmakers may ask a question without specifying enough detail for analysts to provide answers. In that case, the analyst will have to elicit specification. For example, if the decisionmaker merely asks, what is the financial worth of the project? the analyst will have to find out financial worth from whose point of view? and what is the measure of financial worth the decisionmaker wants? Similarly, an economic efficiency analysis can be carried out from the national, the regional, or the local point of view. The point of view needs to be specified, since the information required and the results generated will be different for different points of view.

In the case of income distribution questions, there is a need to be quite specific about which groups are of interest and to whom they are of interest. For example, what do we mean when the question is asked: What are the benefits to low income people? How shall we define low income in the assessment? Some interaction between decisionmaker and analyst may be necessary early on in order to reach agreement on these types of points.

When proposing that an economic impact assessment be conducted, decisionmakers sometimes neglect to consider the perspectives or questions of all groups involved. Groups control resources and must decide whether to commit these resources to a given project and how much to commit. The assessor has to keep this in mind when defining the full array of questions. For example, a project can be extremely attractive from a national economic efficiency point of view, but if it is not also financially attractive to all private entities which have to commit resources to it, then it will not be undertaken as planned.

A financially unattractive project can be made financially attractive if the government (the public) provides subsidies (incentives). Whether or not such subsidies are considered justifiable in a socioeconomic context depends directly on their required magnitude in relation to the economic surplus associated with the project (economic benefits minus economic costs, appropriately adjusted). Similarly, analyses which show that a project appears to be more attractive financially than economically may provide some indication of the desirability to tax the groups involved.

The introduction of planned interventions implies that changes will occur and that benefits will result which can have an impact at various levels - household, community, national, and regional/international (FAO 1989a). The analysis should propose ways to monitor and measure the planned benefits of such interventions. This means moving beyond questions related to outcomes, number of nurseries established, technicians trained, or volume of wood harvested, and on to questions regarding impacts they will have, specifically what benefits will result in relation to the chosen dimensions of welfare. This calls for identifying simple, key indicators of impacts which can be used in answering questions.

For example, a favoured indicator of social status in the rural areas of the Third World is house type. In its crudest form, the number of tin roofs is used as a measure of the relative affluence or poverty of families or villages, either at one time or over time (Chambers 1985). But this has its limitations. In the case of the Provincial Area Development Programme in central Java, Indonesia, two sets of indicators were compiled for the relative prosperity of beneficiaries (Soetoro 1979). The first set focused on the standard items of material wealth that could be observed in and about the household compound, particularly the type of materials used in the construction of the walls, windows, floor, and roof. The second list concentrated on the perceptions of a particular group of villagers about who was and who was not prosperous. Although the first set was more amenable to quick checks by an outsiders, the second set - which is displayed in table 5.1 - drew more heavily on the knowledge and values of the local population.

Table 5.1. Poverty indicators in central Java.

Source: Soetoro 1979.

This second approach has the following three advantages (Honadle 1982):

1. It has a higher probability of being continued as a yardstick after external project assistance is withdrawn because it is rooted in the local context.

2. It improves the likelihood that locally defined social categories will not be overlooked by technical staff.

3. It mobilizes local knowledge, articulates it, and begins a process of basing analytical categories on rural perceptions.

Assessment at Different Stages of the Project Process

Decisionmakers and those impacted by projects, need answers to the various questions mentioned in chapter 4 at different stages of the project development process. This process involves the four main phases of identification, preparation, implementation, and follow up. Figure 5.1 illustrates the phases. The kinds of questions asked depend upon whether they are being asked about a potential or proposed project, about an existing ongoing project, or about a completed or past project.

Impact assessments are done at all stages in the project development and implementation process. Because assessments are designed to answer specific kinds of questions, an assessment at one stage of the project process may differ in some particulars from assessments conducted at other stages.

Although specific questions do vary with the project stage, there are many similarities in the types of questions that need to be answered at the different stages. Furthermore, similar assessment methods are used at each stage of the project development process, and require similar kinds of information. However, the means for obtaining information, and the level of detail required, may vary from one stage to another. Some of these differences can be illustrated by looking at the process of financial assessment.

At the project identification stage, rough estimates of costs and returns may be sufficient to determine whether or not potential projects are acceptable for further consideration. At the project preparation stage, considerably more detail and more precision may be needed to evaluate alternative project designs. At both stages, data on costs and returns are estimates of future events. There is considerable uncertainty associated with any such estimates, and it must be recognized that the results of assessments at these stages are based on estimates of future events which can never be known with certainty.

Figure 5.1. The project development process.

At the project implementation stage, attempts will be made to measure the costs and returns that have occurred, monitor ongoing expenditures and receipts, and estimate those that are likely to occur. Here, time and funds may or may not allow adequate observations to be made to determine true costs and benefits. It may be difficult to obtain information about past costs and benefits from existing records, which may or may not be available, complete, accurate, and in a form useful to the analyst. Since the project is not yet complete, estimates must also be made of future costs and benefits with all of their associated uncertainties. Record keeping systems need to be considered early in the project development process in order to support assessment work in later phases.

After project completion, costs and benefits must be estimated from evidence existing in records, if they are available, or estimated from observations of current conditions. The longer the time span since project completion, the less the likelihood that records of project activities and results will be available.

One of the difficulties in obtaining and coordinating information at various stages of the project process is that the assessment at each stage of a project often is isolated from assessments at other stages. Thus, an analyst at a later stage may have little or no information available from assessments of the same project at earlier stages. Information is costly to obtain, and every effort should be made to use it effectively and efficiently. Project impact assessment should be viewed in a systems context within the project development process. Plans should be made to link assessment activities throughout the project process as closely as possible, but without compromising the independence and verification functions of some types of assessments.

Regardless of the stage in the project development process, designing an assessment should be an iterative process. Decisionmakers propose questions they want answered and suggest funding and time constraints for the proposed assessment. Technical personnel determine which assessment methods could be used to answer the questions, and whether the data and information required by the methods are available or could be obtained within the funding and time constraints specified. It may not be possible to answer all of the proposed questions in the detail desired with the funds and time available. If so, then the decisionmaker may have to change the questions and/or the constraints; or it may be necessary to change the assessment methodology to arrive at a feasible compromise.

During the project identification and preparation phases the actual assessment activity also should involve an iterative process. One does not want to waste a great deal of resources on detailed assessment of options or alternatives that will be discarded by the next stage in the project development process. Rather, decisionmakers and analysts can start with initial rough designs of potential projects and do a quick overview appraisal of those potential designs. Such appraisals may use rough estimates of inputs and outputs, and of feasibility and desirability, with detail sufficient only to weed out those projects that clearly are not feasible or not desirable.

For example, in a project to produce industrial roundwood in plantations, one might first examine potential species to be planted and determine which species would produce wood in a form acceptable to the industry, and which would be suited for potential sites available for planting. Those not suitable could then be eliminated from further consideration. At the next iteration, one could classify suitable species with regard to the potential costs and benefits from growing them as roughly high, medium, or low. All other things being approximately equal, high-benefit/low-cost species are likely to be more desirable than species with medium or low benefits and medium or high costs. After an initial rough analysis of alternatives, the decisionmaker and analyst are in a good position to reject the least desirable ones. Those that survive this initial assessment then can be used in a more detailed design, and a more detailed assessment, using more precise data and information. This type of interaction of design and appraisal that progresses through increasingly detailed and sophisticated design and analysis stages is a useful approach to impact analysis.

Technical and Institutional Constraints on Assessments

The previous paragraphs have laid out some of the fundamental factors to consider in designing an assessment strategy and approach. In choosing a particular empirical approach to assessing or answering the various impact questions asked, not only the technical merits of different approaches should be considered, but also the objectives involved and the criteria used in judging the usefulness and the credibility of an assessment (figure 5.2). The most technically defensible assessment approach should produce results which meet the needs of the decisionmaker, and not produce results too late to be used, nor cost too much to be acceptable.

In choosing the approach to be used in an assessment, one must weigh carefully the technical factors, the purpose and primary use of the assessment, its usefulness in terms of timeliness and relevance, and the likely credibility of the results. This latter point is important, although sometimes overlooked. If assessment results are going to be used to justify future or past project activities to others, then one must be concerned with how these other people will view the results of the assessment. If the reputation of the analysts is suspect, if the results are not easily understood, if there is a high level of uncertainty and controversy over the data and information used and/or produced by the analysis, if the results are not in agreement with information available from other sources, and if they are not acceptable to the project advisors, the assessment, however well conducted from a technical standpoint, is likely to be useless in achieving objectives.

In sum, in deciding on an approach and how the assessment is going to be carried out, project planners and decisionmakers should recognize the practical limitations imposed on assessments by

• the questions to be answered about the project;

• the funding and time constraints imposed on the assessment process;

• the capabilities of those making the assessments, and the constraints under which they must work;

• and the availability of data and information required by the proposed assessment methodologies.

There are many ways to conduct assessments and many techniques that an analyst can choose from - ranging from a review of existing information to producing an in-depth case study. However, irrespective of the specific technique or techniques practised, certain practical steps can be outlined which will help to make the approach as straightforward as possible. The first is to establish priorities and identify information needs. The questions that must always be borne in mind are: Who is going to use this information and for what purpose? Answering these two questions should determine what to ask and how to present the results.

Depending on the type of forestry project and the stage it has reached in its evolution, those directly involved should specify what information is needed, why it is needed, and who will use it. Also relevant is how much it will cost to collect, process, analyze, present, together with how long it will take. To make this process easier, Chambers (1981) has championed the practice of optimal ignorance and appropriate imprecision. The former refers to the minimum information required to make reasonable decisions; the ability to determine just what this level is comes with experience. The latter refers to the fact that, while imprecision is not a virtue, saving time and money is. The degree of precision depends largely on the nature of the questions asked. For example, in a project to promote watershed management, more precision might be desirable on information about individual incentives than, say, information on available technologies.

Figure 5.2. Factors affecting the choice of approach in assessing impacts of forestry projects.