0892-C1

Asian Development Bank Forest Sector Investments and Human Welfare in Asia and the Pacific: An Untold Story

Javed H. Mir^[1]

Abstract

This paper briefly describes the Asian Development Bank’s forest sector experience, and outlines the main issues facing the sector in the Asia and Pacific region. These issues include the slow and difficult progress made so far in reducing deforestation, in formulating and implementing policy and institutional reforms, and in upgrading forest sector technology, and how this affects the perceptions and support of both policy-makers and the public for the forest sector. Less recognition has been given to the progress made in instituting and operationalizing participatory forestry, establishing and transferring vegetational assets to the poorest communities, increasing income-generating employment in some of the poorest areas, and enhancing communities’ social capital. This paper argues that to secure the support of society and decision-makers, and to capture the full development and conservation potential of forests and forestry in the region, it is necessary to give equal - if not greater - recognition to the social capital development and livelihood aspects of forestry and to create more awareness of and emphasis on these.

I. Introduction

1. Asian Development Bank’s (ADB's) over-arching objective is to reduce poverty through environmentally sustainable pro-poor growth. About one third of the 900 million poor and vulnerable people in Asia-Pacific live in rural areas, and most of them are forest dependent. ADB recognizes that the region's forests and forestry must make a substantial contribution if the Millennium Development Goals of halving poverty by 2015 are to be secured and sustained, especially among communities that are disadvantaged by their location and/or socio-economic conditions.

2. ADB and other aid agencies have often been publicly criticized for their mixed and often disappointing performance in their forest sector investments. At the center of this criticism has been the region’s unabated deforestation, slow and difficult policy and institutional reform, insufficient participation of local communities in forestry operations, and slow disbursements. Emphasis on these issues has overshadowed the positive results of forest sector assistance in the region, such as the improvement of human welfare, aimed at the poorest people, and environmental security. It is important that we should learn from the lessons of past failures, but it is equally important not to become discouraged by a perceived lack of success. The positive aspects of our forest sector efforts should be viewed as a means of learning lessons and demonstrating how ADB is focused on maximizing the benefits of our forestry investments and projects to improve and enhance their impact on the region’s poor and environment.

II. Forest Sector Investments

3. During 1980-2000 ADB has provided about US$990 million in loans to the forest sector in 11 Developing Member Countries (DMCs). It has provided technical assistance funding of a further US$41 million seven other countries. The distribution of these funds by country and project is summarized in Table 1. An examination of the investment portfolio according to the resource status of the recipient countries reveals that the average loan was substantially larger in the resource poor and transition countries than in resource rich countries.

Table 1: Breakdown of ADB Lending to DMCs for Forestry Sector Projects by Country, Resource Status, and Project

4. ADB has invested the largest proportion of these funds (81%) in establishing plantations for fuelwood, soil protection, and commercial timber production, with the balance divided almost equally between conservation and improved resource utilisation. Plantation investment was expected to result in the creation of more than 1 million ha of new forest resources and provide substantial income for local predominantly poor and disadvantaged communities.

5. It has recently been estimated that, annually, around 2.6 million ha of forest is lost in the 11 countries in which ADB has invested in forests. Hence, it is possible that as much as 35-40 million ha have been lost during the period that these ADB investments have been made. However, 70% of that loss has been in three resource rich countries where the demand for ADB investment has been relatively low. The loss of forest cover in the remaining eight countries amounts to about 770,000 ha annually, and it is in these countries that ADB expects, through its forest sector investments, to create about 900,000 ha of plantation areas. Thus, while the investment appears to have had little or no impact on the loss and conservation of natural forest, it has made a substantial contribution toward compensating for the loss of the forest resources’ future productive potential.

III. Human Welfare and ADB Forestry Investments in Asia Pacific

6. Most past forest projects were designed principally to achieve forest-related objectives, with the main emphasis on the physical targets of areas planted or seedlings distributed. However, when projects are assessed against the development imperatives of good governance, increased land and access security, rural infrastructure and finance, they are found to have had a significant positive impact, particularly in relation to forestland access and tenure security, governance and income generation. Some projects have also had an impact on rural infrastructure, rural energy and rural finance.

7. For instance, in Bangladesh satisfactory progress has been made in legal and institutional reforms. The draft Social Forestry Rules (SFRs) under the provisions of the Forest (Amendment) Act, 2002 have been finalized through a yearlong participatory, multi-stakeholder consultative process. SFRs will provide the appropriate regulatory framework for safeguarding the benefit-sharing arrangements of the beneficiaries. The involvement of Non Governmental Organizations (NGOs) as facilitators in project implementation has helped improve the transparency and accountability of project operations.

IV. Results: The Bad News and the Good News.

8. A number of concerns were examined in a series of case studies carried out recently by ADB in Bangladesh, Pakistan, the Philippines and Sri Lanka as part of the Bank’s review of its forest sector policy. Monitoring of disbursement levels and the progress toward achieving physical targets suggested that many of the forestry projects were rated as partially satisfactory. Although overall performance was no worse than in other sectors, the underlying causes of the under performance were largely related to governance and institutional arrangements.

9. Many of ADB’s forestry investment projects suffered delays in the early years and had to be re-scheduled and sometimes altered in scope. Often delays were caused by cumbersome procedures, lack of local management experience and shortcomings in design where there had been a failure to anticipate the time and financial resources needed for implementing the institutional reforms. However, normal project monitoring and review generally resulted in the problems being identified so that most projects were at least partially reformulated during implementation. The lessons learned from this experience were gradually incorporated into the design of later projects in the Philippines and other DMCs.

10. Most ADB forestry sector projects initiated from the mid-1980s were concerned with establishing plantations and recognized the need to involve local communities, however, the institutional constraints, such as land-tenure arrangements, and upgrading beneficiaries technical and supervisory competences were not fully addressed in Project design. As such, the investment sometimes resulted in benefiting those already relatively well off, rather than the poorest people. Project delays were often related to uncertainty on the intended beneficiaries’ behalf regarding tenure security and arrangements for benefit sharing.

11. Based on this early experience, project design was gradually improved so that communities and civil society had more influence on sector policies and management, and project design and implementation. This greater influence led to improved livelihoods, especially among the poor and most vulnerable, through sharing of produce and/or incomes. Active participation in the implementation of projects helped to improve beneficiaries skill base, and provided the means for greater empowerment among disadvantaged communities, and women. Participatory project planning and implementation approaches focused on improving transparency and accountability of project implementation agencies and operations. These benefits of social capital development and empowerment are not valued in monetary terms when appraising projects. In the long term, the sustainability and impact of ADB's sector investments on human welfare and environmental security will be determined as much by how successful ADB's sector investments are in enhancing the social capital and governance structure of the sector, as by increased forest area and productivity. It is for this reason that ADB has endeavored to continue to focus on providing an enabling policy, regulatory, and technological infrastructure that will enhance the human welfare impact of forests and forestry investments.

12. ADB has achieved many positive outcomes with its forest sector approach. These include the Community Forestry Development Project, the second ADB-assisted Forestry Project in Bangladesh implemented by the Forest Department, between 1981 and 1987. The Project was implemented in 23 districts in 7 Forest Divisions of north-western Bangladesh. A total of US$8.68 million was used, of which US$5.28 million was an ADB loan. The Project provided for 594 new staff positions to the FD of which 21 could be officers and rest filed staff. Although these institutional strengthening targets were not achieved, the project generated employment of about 3 million man-days of unskilled and semi-skilled work in its operational area. Before the Project began, Forest Department personnel saw local communities as adversaries, often holding them responsible for forest degradation and loss. Now most of the Forest Department field personnel recognize the value of local community cooperation and assistance.

13. The third project funded by ADB in Bangladesh was the Upazila Afforestation and Nursery Development Project. This Project enabled FD personnel to broaden their experience and learn new technical skills in social forestry, and took the FD to every Upazila (district), which means that now the FD has an establishment and/or contact at every Upazila. One of the Project’s major objectives was to set up a self-sustaining social forestry program to be implemented by the FD and the Upazilla administration.

14. The Project provided for the recruitment of 2,283 personnel, including 36 officers in the FD. The Project generated about 23 million man-days of unskilled and semi-skilled employment in its operational areas. Eucalyptus from this project is largely being used as construction wood to make rafters, ties, purlins, and house posts. Auriculiformis from this Project is largely being used for furniture making. These two species have become popular among the local participants since they fetch high prices. Further employment is generated in manufacturing the wood products.

15. A sharing mechanism that was suggested in the Project was not fully operationalized as a result of questions regarding financing the costs of the second rotation crop. Tree Farming Fund (TFF) to be administered and managed by the beneficiary groups is an instrument for making social forestry a self-sustaining and profitable enterprise. The principle is to keep a part (in this case 10% of the sale proceeds) of the yield to meet the cash needs of raising a second rotation crop with the assistance of the participants.

16. The Bangladesh Forestry Sector Project (FSP) has started making a difference in peoples’ lives. In one case, 761 beneficiaries have received more than US$400,000 (averaging US$540 per beneficiary) as their share of agroforestry and woodlot plantation sale proceeds. This has allowed these landless and poor households to replace thatched roofs on their houses with corrugated tin sheets, buy cattle for plowing, and lease land to increase their food security. These beneficiaries have also put aside about US$75,000 for establishing and maintaining second rotation plantations. Estimates indicate that an initial investment of about US$160,000 on these plantations had yielded net revenue of US$400,000 to the Government. Clearly, FSP has the potential to put FD on course to sustainable forest management and sector development, and to deliver maximum benefits to the poorest people.

17. In the Philippines, the ADB-assisted Prosperidad Reforestation Project is a Community-based Forest Management Agreement (CBFMA) project between the DENR and the People’s Organization (PO) representing three barangay (village) associations in Prosperidad, Agusan del Sur. Project success has been attributed to the strong human capital development that accounted for more than half of the total Project cost. The PO members felt empowered by the new knowledge acquired from training and their eventual success in getting tenure security although strong personal leadership of the PO chairman also played an important role. Pro-poor growth was manifested in the Project’s potential income, estimated at US$5,200 per member but its realization depended on plantation maintenance and post-project wood processing for which no capital has been yet raised. There was also the problem of cash flow during the waiting years, and alternative sources of income had to be resorted to.

18. The policy and institutional reform implications of this Project were

• high investment given to community organizing and capacity building was worthwhile;

• land and resource tenure security is a necessary and effective incentive for communities to commit to long-term forestry efforts;

• alternative livelihood is critical and institutional capacity building important, particularly for establishing linkages with other support groups and agencies and projects;

• the potential of forestry projects for poverty reduction is high, but there is a need to support post-project maintenance and product processing.

19. ADB-assisted forestry projects in Bangladesh have brought the following benefits (although only a small number of them have cash value).

• A timber resource of more than 5 million m³ has been added in the forestry sector.

• The reassertion of sustainable forest management over encroached FD lands through a participatory approach. The easing of tensions between the encroachers on FD lands and FD field staff and, ultimately, fewer confrontations, leading to enhanced tree cover.

• The FD has learned to seek successful gradual entry to land owned by others for growing trees and has established access to all the country’s Upazillas.

• The FD National Forest Policy and the Forest Act and Rules have been enacted and incorporate Social Forestry aspects, and the long-awaited institutional reorganization of the Forestry Administration achieved.

• The projects generated vast employment opportunities (millions of person-days) for unskilled and semi-skilled rural workers, thereby improving their economic condition.

• The value-added aspects of using wood produced under these projects for construction, furniture making, charcoal making, etc. generated work opportunities as well as better living amenities.

• Capacity building of FD staff and officers, with many receiving training in-country and abroad. FD personnel were motivated to work with communities, NGOs, and other agencies in what is hoped will bring sustainability in forest management in the long run.

V. Lessons Learned and the Way Forward

20. The four countries that were the subject of the recent review of projects account for about two-thirds of the total ADB investment in the forest sector. Most of the findings in these countries are equally applicable to Lao PDR, Nepal and Viet Nam, and are likely to apply also in the region’s remaining countries where significant poverty, especially in upland rural areas, will justify further investment. The experience has shown that investment in forestry can make a substantial positive contribution to the general policy areas that can have the greatest impact on reducing poverty. Future project design must be concerned with enhancing the Quality of Life for the poorest communities, and should add appropriate indicators to the usual physical targets. It is likely to strengthen governments’ commitments to investing in the forestry sector if the kind of social benefits described in this paper could be fully valued and projects’ contributions to building social assets evaluated.

21. On a broader scale, global human welfare needs will be better addressed by enhancing the capacity of DMC investments in forest areas of high global significance by accessing international funding sources, such as Global Environmental Facility (GEF) and other bilateral and civil society funding. At the same time, this should address the livelihood and human welfare needs of local communities as well as conservation of biodiversity and ecosystems of regional and global significance, such as ADB forest sector investments in the world's largest remaining mangrove forest ecosystem in the Sundarbans, in Bangladesh and India. Regional and global human and environmental welfare will be enhanced by putting forests and forestry at the service of improved human welfare including increasing the capacity of the region's forests for carbon sequestration. Farmers, communities and the commercial private sector have an important role to play in protecting and sustainably managing the remaining natural forests, and meeting the increasing wood deficit by increasing plantation areas and improving productivity.

VI. ADB’s Contribution to Strengthening the Future Role of the Forest Sector

22. The new forest policy framework under discussion between ADB and stakeholders seeks to accelerate and deepen the impact of its sector investments on human welfare and environmental improvement. The overarching goal of improving human welfare through reducing poverty and improving environmental sustainability will depend heavily on economic growth. This in turn must be based on good governance and will need to be supported by efforts to provide new sources of income, protect and enhance the rights of women and other disadvantaged groups. ADB endorses “best practice” forestry as stated in the Bank’s Policy on Forests (March 1995). The new approach focuses on further integrating sustainable forestry with social development and poverty reduction.

Bibliography

ADB 1999. Quality of Life in Rural Asia. Hong Kong: Oxford University Press for ADB.