Project Concept Note s7

BULGARIA

BULGARIA FOREST DEVELOPMENT PROJECT

PROJECT BRIEF

EUROPE AND CENTRAL ASIA

Date: February 4, 2004 Team Leader: Gerhard Dieterle Country Director: Anand K. Seth Sectors: Forestry (40%);General agriculture, Sector Manger/Director: Marjory-Anne fishing and forestry sector (40%);Central Bromhead government administration (10%);General Project ID: P033964 public administration sector (10%) Lending Instrument: Specific Investment Loan Themes: Biodiversity (P);Environmental policies and institutions (P);Administrative and civil service reform (P);Participation and civic engagement (P);Land management (S) Environmental screening category: Full Assessment Safeguard screening category: Limited impact Global Supplemental ID: P080377 Team Leader: Gerhard Dieterle Lending Instrument: Specific Investment Loan Sectors: Forestry (40%);General agriculture, Focal Area: B-Biodiversity fishing and forestry sector (40%);Central Supplement Fully Blended?: Y government administrat Themes: Biodiversity (P);Environmental policies and institutions (P) Project Financing Data [X] Loan [ ] Credit [X] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 37.99 Proposed terms: VSL Financing Plan (US$m) Source Local Foreign Total BORROWER/RECIPIENT 8.73 0.00 8.73 INTERNATIONAL BANK FOR 10.99 27.00 37.99 RECONSTRUCTION AND DEVELOPMENT GLOBAL ENVIRONMENT FACILITY 7.75 0.00 7.75 Total: 27.47 27.00 54.47

Borrower: Ministry of Agriculture and Forestry 55, Hristo Botev blvd

1 Sofia Bulgaria 1040 http://www.mzgar.government.bg/MZ_eng/Default.asp

Responsible Agency: Project Preparation Unit 23 Graf Ignatiev Street Floor 2, Apt, 13 Sofia Bulgaria 1000 Tel: 359 2 986 6652 Fax: 359 2 986 0865 [email protected]

Estimated disbursements (Bank FY/US$m) FY 5 6 7 8 9 0 0 0 0 Annual 9.43 8.45 9.90 7.54 2.67 0.00 0.00 0.00 0.00 Cumulative 9.43 17.88 27.78 35.32 37.99 37.99 37.99 37.99 37.99 GEF Estimated disbursements (Bank FY/US$m) FY 5 6 7 8 9 0 0 0 0 Annual 2.62 1.79 1.43 1.15 0.75 0.00 0.00 0.00 0.00 Cumulative 2.62 4.41 5.84 6.99 7.74 7.74 7.74 7.74 7.74 Project implementation period: Start January 1, 2004 End: September 30, 2009 Expected effectiveness date: September 30, 2004 Expected closing date: March 31, 2010 Does the project depart from the CAS in content or other significant respects? [ ]Yes [X] No Ref. Project Brief A.3 Does the project require any exceptions from Bank policies? Ref. Project Brief D.7 [ ]Yes [X] No Have these been approved by Bank management? [ ]Yes [ ] No Is approval for any policy exception sought from the Board? [ ]Yes [ ] No Does the project include any critical risks rated “substantial” or “high”? [ ]Yes [ ] No Ref. Project Brief C.5 Does the project meet the Regional criteria for readiness for implementation? [ ]Yes [ ] No Ref. Project Brief D.7 Project development objective Ref. Project Brief B.2 The Project Development Objective is to increase the contribution of forests to the national economy and to the benefit of rural populations through sustainable management of state, private and communal forests. Global Environment objective Ref. Project Brief B.2 The Global Development Objective is to improve conservation of forest ecosystems through mainstreaming biodiversity into forest management, and through improved conservation of critical ecosystems. Project description [one-sentence summary of each component] Ref. Project Brief B.3.a,

2 Technical Annex 4  Component 1: Strengthen Public Forest Sector Management ($19.19 million total, $15.84 million IBRD, $0.61 million GEF) --The project will support capacity building of the forest administration by assisting in building and strengthening nationwide forest extension and inspection services.  Component 2: Strengthening Capacity of Non-State Forest Owners (Total $2.46 million, IBRD $1.54 million, GEF $0.73 million)--The project will provide support to new private and municipal forest owners by helping to establish a national umbrella organization, the Bulgarian Association of Forest Owners, and support the establishment of owner associations in those regions without owner representation  Component 3: Supporting State Forest Management Transition to Market Economy ($24.06 million total, $19.82 million IBRD, $0.55 million GEF)--The project will finance core investments to enhance and rehabilitate the functions of the forest resource base as well as strategic investments linked to the new National Forest Company to ensure sustainable management of forest and biodiversity resources, including the design and implementation of a GIS based forest information management system, supply chain analysis, business planning, business process re-engineering and human resource development.  Component 4: Strengthening Protected Areas Managed By the Ministry of Agriculture and Forests ($6.49 million total, $4.40 million GEF)--The project will support (i) office and field equipment to improve the effectiveness of the Nature Parks, (ii) an independent annual assessment of the Nature Parks? management effectiveness as a whole, (iii) priority investments and conservation programs in Nature Parks, and (v) preparation of management plans for selected Nature Parks and Protected Sites. This component will also provide counterpart funding of about US$ 1.9 million for an endowment element in a Protected Areas Fund (PAF) that would provide long-term revenue to complement direct budgetary support for protected areas, including Nature Parks.  Component 5: Project Management and Monitoring ($2.26 million total, $1.03 million IBRD, $1.03 million GEF)--The project will finance the establishment of a Project Management Unit (PMU) which will assist the MAF to implement the project.

Which safeguard policies are triggered, if any? Ref. Project Brief D.6  Environmental Assessment  Natural Habitats  Forest  Involuntary Resettlement Significant, non-standard conditions, if any, for: Ref. Project Brief C.7 Board presentation: The borrower:  shall establish, staff, equip and maintain PMU with resources, functions and responsibilities acceptable to the Bank and with staff, whose qualifications, experience and terms of reference shall be satisfactory to the Bank;  The Council of Ministers shall adopt the Restructuring Plan for the National Forest Company, including a costed and phased Action Plan and a Human Resources Development Plan.

3  Parliament shall enact the National Forest Company Law in line with Bank requirements for accountable, efficient and transparent organizations.

Loan/credit effectiveness: None

Disbursement Conditions for Loan Funds:  Disbursement of loan and grant funds for goods and works under components C and D is contingent on the existence of an Implementation Agreement between MAF and NFC defining the terms and conditions for those parts of the project to be implemented by NFC.  Disbursement of GEF funds into the Protected Areas Fund is contingent on (a) an Implementation Agreement between the MAF and the National Trust Eco-Fund, (b) prior transfer of Bulgarian counterpart funds on a 1:1 matching basis and (c) the adoption and implementation of an Operational Manual acceptable to the Bank.  Disbursement of small grant to non-state forest owners is contingent on the existence of a Small Grants Manuals acceptable to the Bank.

Other covenants:  The PMU will prepare a mid-term report by March 31, 2007 highlighting both the progress and constraints in the project implementation at that date. The mid-term report will serve as a basis for a joint MAF and World Bank project mid-term review.  The PMU shall prepare by not later than November 30 of each year a draft annual working plan including the budget and procurement plan, satisfactory to the Bank and the POC.  The PMU will develop a terms of reference and short-list of auditors for the annual audit of the loan and GEF grant.  The PMU shall make sure that all project accounts (SA for the loan funds, SA for the GEF grant funds and sub-account for the counterpart funds) are audited in accordance with International Standards on Auditing, by auditors acceptable to the Bank and audit reports submitted to the Bank within six months after the end of each fiscal year.  The Advisory Council to the NFC shall be established not later than March 31, 2005 with representation and Terms of reference acceptable to the Bank.  The PMU will maintain a financial management system acceptable to the Bank. The project financial statements, SOEs and Special Account will be audited by independent auditors acceptable to the Bank and on terms of reference acceptable to the Bank. The annual audited statements and audit report will be provided to the Bank within six months of the end of each fiscal year.  The Charter of the NFC shall be in place not later than February 28, 2005 with terms and provisions acceptable to the Bank;

4 CURRENCY EQUIVALENTS

(Exchange Rate Effective January 9, 2004)

Currency Unit = Bulgarian Leva BGN BGN 1.70117 = US$1 US$1.266 = EUR 1

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

BAFO Bulgarian Association of Forest Owners CAS Country Assistance Strategy CoM Council of Ministers ERP Enterprise Resource Planning EU European Union FAO Food and Agriculture Organization of the United Nations FMIS Forest Management Information System FSC Forest Stewardship Council GDP Gross Domestic Product GEF Global Environmental Facility GIS Geographic Information System GOB Government of Bulgaria GTZ Gesellschaft fur Technische Zusammmenarbeit ICS Incident Control System MAF Ministry of Agriculture and Forests MOEW Ministry of Environment and Water NARDP National Agricultural Rural Development Plan NFB National Forestry Board of the Ministry of Agriculture and Forests NFC National Forest Company NFPS National Forest Policy and Strategy NGO Non Governmental Organization NTEF National Trust EcoFund NWG National Working group PAF Protected Areas (endowment) Fund PMU Project Management Unit POC Project Oversight Committee PPU Project Preparation Unit RS Restructuring Study of the National Forestry Board SA Special Account SAPARD Special Accession Program for Rural Development of the EU SFA State Forest Administration UNDP United Nations Development Program

Vice President: Shigeo Katsu Country Director: Anand K. Seth Sector Manager: Marjory-Anne Bromhead Task Team Leader: Gerhard Dieterle

5 BULGARIA FOREST DEVELOPMENT PROJECT

CONTENTS

A. STRATEGIC CONTEXT AND RATIONALE...... 8 1. Country and sector issues...... 8 2. Rationale for Bank involvement...... 11 3. Higher level objectives to which the project contributes...... 12

B. PROJECT DESCRIPTION...... 12 1. Lending instrument...... 12 2. Project development objective and key indicators...... 12 3. Project components...... 13 4. Lessons learned and reflected in the project design...... 16 5. Alternatives considered and reasons for rejection...... 17

C. IMPLEMENTATION...... 17 1. Partnership arrangements...... 17 2. Institutional and implementation arrangements...... 18 3. Monitoring and evaluation of outcomes/results...... 19 4. Sustainability...... 19 5. Critical risks and possible controversial aspects...... 20 6. Loan conditions and covenants...... 21

D. APPRAISAL SUMMARY...... 22 1. Economic and financial analyses...... 22 2. Technical...... 24 3. Fiduciary...... 25 4. Social...... 25 5. Environment...... 26 6. Safeguard policies...... 27 7. Policy Exceptions and Readiness...... 29

Annex 1: Results Framework and Monitoring...... 30

6 Annex 1: Results Framework and Monitoring...... 30

Annex 2: Incremental Cost Analysis...... 33

Annex 3: STAP Review and Bank’s response...... 43

7 A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

Country Background: The Bulgarian Government is committed to continue reforms to improve living standards and reduce poverty. The Government's program provides a good framework for achieving Bulgaria's main objectives of growth, poverty reduction and EU accession, and a sound basis for external assistance. In the past few years, the country has continued to make good progress in completing reforms and in the adoption of the EU acquis.

The Bank's group assistance strategy (presented to the Board on May 5, 2002) was designed to support Bulgaria's reform program. The strategy was prepared in close cooperation with partners including the EU, UNDP, EBRD, EIB, IMF and a number of bilateral donors. The overall Bulgaria CAS objectives are poverty reduction and raising of living standards, and support for Bulgaria's efforts towards EU accession. The three main themes of the CAS are: a) promotion of competitive private sector-led growth; b) strengthening of public administration and anti-corruption initiatives; c) mitigation of the social impacts of restructuring and delivering social services more effectively. The Bank aims to support the country in implementing structural policies, institutions and investments for achieving sustained, competitive growth, improved living standards, EU integration and social inclusion.

Forestry Sector: Bulgaria’s forest regime builds on traditional European principles of multi-functional management providing economic, environmental and social benefits on the same area. Bulgarian forests cover 3.91 million ha or circa 34 percent of the national territory. Ownership is 86 percent state, 8 percent private individuals, 5 percent municipalities with the remainder split between religious, schools, co-operatives etc. Approximately 80 percent of forests are in the mountain regions and 85 percent of streams and watercourses in the country originate in forest lands. Broadleaved forests account for 67 percent of forest area, and 56 percent of stand volume and conifers - 33 percent area and 44 percent of volume. Annual harvesting averages some 4.4 million m3 (about 84 percent of what is envisaged in the forest management plans), of which 73 percent is for the forest industry and 27 percent for the local population.

Rehabilitation and increasing the cover of its formerly severely degraded forest resources have been key elements of Bulgaria’s forest policy till today. Bulgaria’s forest cover has been expanded considerably over the last century, especially between 1950 and 1990, mainly with pine plantations. However, in the last 11 years, Bulgarian forests have suffered extensive fires damage with 133,000 ha burnt mainly on previously afforested lands. Illegal activities in forests are significant and continue to cause widespread concern. There is a significant backlog in silvicultural activities and no sign of a turn- around, as financing gaps in the forestry administration continue to widen.

8 Bulgaria is a net exporter of wooden furniture and exports exceed imports by a factor of 2.6 – 2.7. Forestry plays an important role in rural Bulgaria as a provider of employment, recreation, tourism, water and public purpose activities.

Global significance of Bulgaria’s forest ecosystems: Bulgaria is located on the crossroads of three broad bio-climatic regions – the mid-European continental, Eurasian steppe, and Mediterranean –which create a diverse range of transitional climatic conditions. The complex topography of mountain ridges, foothills, lowlands, and plains provides a high degree of variation in habitats from alpine forest belts, lowland grasslands and river plains to the dune communities along the Black Sea coast.

The combination of habitat types and biogeography results in a level of biodiversity that ranks among the highest in Europe, and includes a wide range of relict and endemic plant and animal species (especially in the high mountain forest zone) dating back to the Tertiary and Quaternary periods. Particularly important habitats include various types of dwarf pine forests, beech forests, chestnut forests and the euxine oak forests of the Strandja Mountains. These forest host large populations of large carnivores such as bears and wolves.

Bulgaria operates a network of protected areas, which cover more than 556,303 ha, or 5 percent of the country and combines areas with different types of protective regime, including: (i) strict reserves (55 reserves, 76,978 ha) corresponding to WB/WWF ALLIANCE category 1’ (ii) managed reserves (35 reserves, 4,452 ha) – areas managed for protection purposes; (iii-iv) national parks (3 parks, 193,048 ha) and nature parks (10 parks, 236,973 ha) – territories managed mostly for protection and recreation; (v) nature monuments (426 monuments, 23,153 ha) – protected individual features of nature; and (vi) protected territories (103 territories, 21,700 ha) - areas managed in accordance with the case-specific conservation requirements.

Institutional Arrangements: Management of state forests and the control of all forests is the responsibility of the National Forestry Board (NFB) in the Ministry of Agriculture and Forests (MAF). All key functions of forest management, supervision/control and forest extension are united in one and the same organization. The NFB has recently been restructured from an agency of MAF, with its own budget and resources, to a department of MAF dependent upon the state budget. This change has affected NFB's funding and assets. Revenues from sales of forest products are transferred to the treasury and cannot be directly used as working capital for forest operations. At the same time, annual allocation of state budget funds do not recognize the seasonal nature of forest activities and are not sufficient to carry out management functions adequately. Furthermore, with revenues transferred to the Treasury incentives for efficiency are low. MoEW and its National Nature Protection Service manage through the National Park Directorates and Regional Inspectorates for Environment and Water administer strict reserves, managed reserves, and national parks. MAF through its Division for Protected Areas and Biodiversity manages nature parks, protected territories, and nature monuments.

9 Government’s strategy for forest management: A National Forest Policy and Strategy (NFPS) has been developed over the past months through an open and participatory process and has been approved by the Council of Ministers in October 2003. This sets out the broad development framework for the sector including the role of the state. The strategic vision is -“The Bulgarian forest is a national asset. The resources of the forest ecosystems retain their ecological, social and economic functions for improving the quality of life of people. Forests are professionally managed in a stable forest sector with broad public support and mutual respect and integration of the interests of all stakeholders.” Strategic goals and actions have been identified to address the issues facing sustainable development of the sector (see summary in Annex 1, section 3). Key strategic actions are (i) reform of the National Forestry Board (NFB) with the separation of ownership and supervisory functions, (ii) investment in forest stability and health through silvicultural works – tending of young stands, reforestation, (iii) preserving the biodiversity value of forests, (iv) improving roading infrastructure, (v) increasing the level of sustainable harvesting while addressing illegal activities, (vi) ensuring the delivery of multi-function forestry and (vii) enhancing the contribution to environment and rural development. Innovative approaches form part of the NFPS. Forest certification is defined as a strategic tool to improve national forest management standards and to help to integrate the Bulgarian forest sector into environmentally sensitive Western European markets for timber and timber products. Also, the NFPS identifies the tremendous potential Bulgarian forest can play in securing benefits from marketing of carbon assets in the context of the Kyoto Joint Implementation Scheme and by making use of “Green Investment Schemes.” Currently, a costed and phased strategic action plan to implement the NFPS is being prepared and will be finalized by July 2004.

Building on this, a restructuring study funded by the Government of Bulgaria and a World Bank - administered PHRD grant has identified and developed a model for the future development of the state forest sector. Building on European good practice examples, the basic approach foresees the separation of management and supervisory functions to improve efficiency, transparency and accountability of all institutions involved. Choosing from a number of alternatives which included continuation within an improved State forest administration and the introduction of forest concessions, the Government of Bulgaria has decided to break up the NFB into a new state forest company (NFC) with an essentially commercial mandate and a state forest administration (SFA) with control and supervisory functions as well with an extension service to assist new private and municipal forest owners. The National Forest Company still would have to assure important public good management functions such as the management of Nature Parks, providing recreational services and assisting poor rural populations with fuel wood. However, such functions would be provided in a clear and transparent manner based on contractual arrangement and remunerated from the State budget (see summary in Annex 1, section 4). A restructuring plan, including a costed and phased action plan and a human resources management plan, have been prepared and the legal framework for the implementation of this reform is expected to be finalized by May 2004. This holistic approach to forest sector development is being implemented through the Forest Development Project funded by the World Bank and GEF and completed by EU SAPARD and bilateral Swiss and German donors assistance.

10 The Government of Bulgaria demonstrates strong commitment to preserving global biodiversity values. Bulgaria is a Party to key relevant international conventions and to a number of important regional conservation agreements including the Convention on Biological Diversity ratified on April 17, 1996. The National Biodiversity Conservation Action Plan adopted by the Government in 2000, which follows the National Biodiversity Conservation Strategy developed in 1994 and approved by the Government in 1998, is under implementation to address conservation and restoration of key ecosystems, habitats, species and their genetic resources, and provide grounds for the sustainable use of biological resources in the country.

2. Rationale for Bank involvement

The Government of Bulgaria has requested Bank support to improve forest management and to protect Bulgaria’s global biodiversity values. The forestry sector is facing challenges related to the transition to market economy, restitution and EU Accession. There have been huge losses from forest fires; the sector is unable to finance management activities thus reducing national and global public good functions. A forestry project addressing institutional reform, private owners, forest fires and incorporating biodiversity conservation in forest management was considered most needed and timely and assessed to have the best chance of success.

The Forest Development Project profits from a unique opportunity to build on a thorough participatory reform process and detailed action plans developed during project preparation. The implementation of these reforms over the coming years can be closely monitored and directly assisted by the project thus increasing tremendously chances for their success and sustainability. The forestry project would complement and interface with the EU PHARE Twinning program for strengthening the institutional capacity of the SFA and the management and business skills of the NFC. The project would also complement the Forestry Measure under the EU SAPARD program targeted at the private forestry sector and facilitate its realignment to identified needs and the maximum draw-down of funds.

The Bank's experience and capacity to (i) raise grants, (ii) bring together donors and stakeholders, (iii) take a broader perspective than other donors, (iv) adapt key elements of solutions implemented elsewhere to local situation(s), (v) network best practice and emerging initiatives, (vi) access carbon finance (Biocarbon Fund) and, (vii) support far- reaching sector reforms affecting institutional structures is a major asset in facilitating the implementation of this project. The Bank is assisting with forest reform processes in several other ECA countries and is bale to bring in an international perspective

11 3. Higher level objectives to which the project contributes

The project would contribute to the Government’s commitment to environmentally sustainable development and the National Agriculture and Rural Development Plan (NARDP) through reform of the state forestry sector, mainstreaming of biodiversity and environmental values in forest management, investment in silvicultural and fire prevention activities, placing of state forestry on a self-funding basis, support for private forest owners and facilitating the development of the wood industry sector.

The project objectives directly respond to the objectives of the CAS in seeking to strengthen public administration and to promote the private sector to allow sustainable management of the forest sector to contribute more to the national economy. The project will strengthen public forest management, strengthen the capacities of private and communal forest owners, and adapt state forest management to a market economy as well as promote biodiversity conservation. The outcomes of the project lead directly to achieving the goals and objectives of the CAS.

The proposed project design is fully consistent with the provisions of the Convention on Biodiversity, with the GEF Operational Strategy and specifically with its Operational Programs 3 (Forest Ecosystems). Indeed, it will support the conservation of rich biological diversity in forest ecosystems of global significance and addresses the Programs’ objectives of (i) promoting conservation and protection of primary and old growth and ecologically mature secondary forest ecosystems in areas at risk, and (ii) ensuring the sustainable use of biodiversity by combining production, socio-economic and biodiversity goals.

B. PROJECT DESCRIPTION

1. Lending instrument

The sector investment project will be financed by a Specific Investment Loan for the equivalent of 38.0 million US Dollars blended with the GEF grant for of 7.75 million US Dollars.

2. Project development objective and key indicators

The Project Development Objective is to increase the contribution of forests to the national economy and to the benefit of rural populations through sustainable management of state, private and communal forests.

The Global Development Objective is to improve conservation of forest ecosystems through mainstreaming biodiversity into forest management, and through improved conservation of critical ecosystems.

12 Project performance indicators include: (a) increased contribution of forests and forest industries to GDP, (b) reduction in forest fires and fire response times, (c) increased area of non-state forests covered by adapted forest management plans, (d) transparent, results- based management systems in place for SFA and NFC, (e) reduction in illegal forest related activities, (f) area of high conservation value forests and functionally related habitats in productive landscape for which actual boundaries have been identified and status has been assessed and (g) management effectiveness of forest nature parks improved to a level of at least 70 percent using WB/WWF Alliance criteria.

3. Project components

Component 1: Strengthen Public Forest Sector Management ($19.19 million total, $15.84 million IBRD, $0.61 million GEF)

The project will support capacity building of the forest administration by assisting in building and strengthening nationwide forest extension and inspection services.

In line with the National Fire Strategy, the project will support various activities aiming at improving the forest fire prevention and management capacities.

The forest administration will be equipped with a modern national database and information system providing the basis for strategic decision making as well as for monitoring and control of forest management by all actors in the forest sector. Capacities of forest professional schools will be upgraded and their training capacities strengthened.

The project will address illegal logging and engage all stakeholders in a strategic dialogue to improve forest governance. It will also help to finalize the draft national forest certification standard prepared by a National Working Group.

As an innovative tool for improving forest financing the project will help to create the capacity within MAF to leverage sustainable financing from Joint Implementation (JI) and Green Investment Schemes. Concrete investment proposals for submission to potential donors would result from this activity.

This component will be mainly financed by IBRD funds but GEF will provide incremental funding under the various activities to enhance biodiversity conservation in forest management planning and forest management. Of special importance will be the identification and mapping of high conservation value forests and habitats without special protection status.

13 Component 2: Strengthening Capacity of Non-State Forest Owners (Total $2.46 million, IBRD $1.54 million, GEF $0.73 million)

The project will provide support to new private and municipal forest owners by helping to establish a national umbrella organization, the Bulgarian Association of Forest Owners.

It will also support the establishment of owner associations in those regions without owner representation. This support will include the development of guidelines for forest management / business plans for municipal and private owners. This component will be mainly be financed by IBRD funds but GEF will provide incremental funds to address conservation and biodiversity management plans in critical habitats and watershed protection areas. This will also include assistance to new forest owners in accessing EU SAPARD funds (EU pre-accession funds). A combined IBRD/GEF funded small grants program implemented through the State Forest Extension Service and the Nature Park Directorates will help strengthen public participation in forest biodiversity conservation and restoration of habitats especially in areas adjacent to protected areas.

Component 3: Supporting State Forest Management Transition to Market Economy ($24.06 million total, $19.82 million IBRD, $0.55 million GEF)

The project will finance core investments to enhance and rehabilitate the functions of the forest resource base as well as strategic investments linked to the new National Forest Company to ensure sustainable management of forest and biodiversity resources.

This will include the design and implementation of a GIS based forest information management system, supply chain analysis, business planning, business process re- engineering and human resource development. Support will be provided for the development of senior management capacity and specialist training for HQ and Region staff. The project will support the cost of an international Co-chief executive for the first three years to ensure access of international best practice approaches and swift implementation of reform agenda.

Insufficient investments into the forest road network in recent years have led to negative effects, such as increased extraction costs and environmental damage through partial over-exploitation, driving with heavy tractors inside forest stands, non-accessibility in case of forest fires etc. Targeted investments by the project would support the (i) development of a national forest road master plan which incorporates environmental and biodiversity aspects (ii) development of a Code of Best Practice for the design, construction and maintenance of forest roads and (iii) upgrading (about 120 km) and construction of forest roads (about 30 km) in pilot areas identified under the master plan including the cost of environmental assessment (see Map 3).

14 The project will support the thinning of some 10,000 ha in the priority regions (see Map 2). The project will also finance reforestation of 600 ha (see Map 1). Under the condition that carbon credits can be obtained the area of reforestation and rehabilitation of burned and degraded land could be significantly enlarged to up to 10,000 ha by attracting investors under “Green Investment Schemes” by selling AAUs form the national carbon budget. Both, thinning and reforestation will generate significant employment opportunities in poor and underdeveloped regions.

The project would also assist the NFC in testing and establishing a pilot certification project in State forests.

Component 4: Strengthening Protected Areas Managed By the Ministry of Agriculture and Forests ($6.49 million total, $4.40 million GEF)

This component will assist, mainly with GEF funding, the strengthening of the system of Nature Parks. The project will support (i) office and field equipment to improve the effectiveness of the Nature Parks, (ii) an independent annual assessment of the Nature Parks’ management effectiveness as a whole, (iii) priority investments and conservation programs in Nature Parks, and (v) preparation of management plans for selected Nature Parks and Protected Sites.

This component will also provide counterpart funding of about US$ 2.0 million for an endowment element in a Protected Areas Fund (PAF) that would provide long-term revenue to complement direct budgetary support for protected areas, including Nature Parks. The project will assist the establishment of the PAF thus stimulating its expansion and revenues with additional resources coming from (i) domestic and international private sector organizations, (ii) Government of Bulgaria (matching contribution up to USD 6 million), and (iii) international multi- and bilateral donors. Through the PAF, the project would support activities in) biodiversity protection, restoration, and monitoring in protected areas. The targeted capitalization of the Protected Area Endowment Fund (PAF) is USD 8 mln equivalent by the end of the third year of implementation and USD 12 mln equivalent - by project completion. Disbursement of GEF grant funds to will be done on a 1:1 basis upon notification of the Government’s payment of the counterpart fund into the PAF account. The Government contribution to the fund should overall exceed GEF contribution at least by a factor of three.

Component 5: Project Management, Monitoring and Inter-sectoral Training Program ($2.26 million total, $1.03 million IBRD, $1.03 million GEF)

To provide project oversight and policy guidance during implementation, a Project Oversight Committee (POC) will be established at the level of the Ministry of Agriculture and Forestry in collaboration with the Ministry of Finance, Ministry of the Environment and the State Forest Administration and National Forest Company.

15 The project will finance the establishment of a Project Management Unit (PMU) which will assist the MAF to implement the project. The PMU will be staffed by a small number project consultants which will assist the MAF PMU director in day to day management of the Project, especially with procurement and financial management. The PMU will ensure continuity and sustainability of project operation in times of institutional reforms and establishing of new structures in the SFA and the NFC.

The PMU will monitor the progress of the project with support of stakeholders, provide quarterly implementation reports and activity plans and will be responsible for dissemination of project results.

The GEF will finance incremental costs for the implementation of the project to ensure coordination of the biodiversity conservation activities under the project. An Integrated Inter-Sectoral Training Program will be implemented to broaden and deepen the biodiversity capacity of forest managers in the public and private sector.

Project Costs *

Indicative Bank GEF Cost Financing % of Bank Financing % of GEF % of Total (US$ (US$ Financing (US$ Financing Component million) million) million) Strengthen Public Forest Sector 1 Management $19.19 35.2% $15.84 42% $0.61 8% Strengthening of Capacities of Non-State 2 forest owners $2.46 4.5% $1.54 4% $0.73 9% Supporting State Forest Management 3 Transition to Market Economy $24.06 44.2% $19.82 52% $0.55 7% Strengthening Protected Areas Managed By the Ministry of Agriculture and 4 Forests $6.49 11.9% $4.40 57% 5 Project Management and Monitoring $2.26 4.1% $0.78 2% $1.39 18% Total Project Costs $54.46 100.0% $37.98 100% $7.68 100% Front End Fee $0.38 $0.38 Total Financing Required $54.84 $38.36 * Approved environmental activities are VAT exempt (also see Section 6).

4. Lessons learned and reflected in the project design

The ICRs of successfully completed projects in Poland, Croatia and Bosnia and Herzegovina illustrate that support for sector reforms have helped to improve forest management and to build consensus for innovative and participative approaches. The project builds on the NFPS process, on the recommendations of the RS and on the extensive consultation during project preparation. Key lessons have been drawn from experience in other countries, including EU member countries, and include: (a) significant benefits can accrue to society, to forest resources and to the economy through the separation of forest ownership/management and supervisory functions, (b) political

16 interference can negate the process of change and endanger the viability of newly formed forest organizations, (c) implementation of restructuring requires extensive consultation and a bottom up approach, (d) forestry is as much about people and relationships as it is about trees, (e) new private forest owners require support to (i) enable them to collaborate, (ii) manage their forests in a sustainable manner and (iii) be aware of their responsibilities, (f) early and continued involvement of stakeholders in project design improves ownership and support, (g) a balanced approach across the sector is more likely to provide sustainability, (h) society places significant value on forestry’s ability to deliver non timber products and services and (i) as long as biodiversity is treated as something separate it will never be integrated into normal forest planning and management.

5. Alternatives considered and reasons for rejection

A without project alternative was rejected in view of the urgent need to address the issues in the sector. Failure to take action through a comprehensive project would result in unsustainable forest management practices, continued degradation of forest and loss of forest and environmental values, both for employment generation in rural areas, biodiversity conservation and watershed protection. A project focused solely on the state administration and state ownership and strengthening of structures was rejected as this approach was considered too narrow and placed at risk the emerging and vulnerable private owners. In most other forestry projects, assistance has been provided with reforms during implementation. This allows for more time to build consensus but often too little time for implementation. In the Bulgaria case the reform process was initiated in parallel to project preparation as there was political support and momentum. The project will help to assist the implementation of the reform over the period of project implementation and will help to ensure transparency and accountability of decision making processes. An implementation calendar for the first six months (see annex 4) and an action plan covering a period of four years have been developed by the Government. A project without investment into the forest roads network was considered and rejected, as without the support from the project, road design and construction practices are unlikely to improve or allow for stakeholder input thus placing at risk environmental values. A project focusing on forestry to the exclusion of the GEF biodiversity component was considered and rejected as unlikely to succeed in the mainstreaming of biodiversity into normal forest planning and management and likely to facilitate non-integrated approaches to protected areas and nature parks.

C. IMPLEMENTATION

1. Partnership arrangements

The project will be implemented in collaboration with a number of directly related and supporting projects. The EU PHARE Twinning will support institutional and capacity building of middle and lower management in the SFA and NFC during 2004. The

17 project’s capacity building will be implemented with an initial focus on those areas outside of PHARE Twining and thereafter building on the joint outcome during the first year. The PMU will co-ordinate capacity enhancement measures with the PHARE implementing agency. The project aims to increase the effectiveness and draw down of EU SAPARD funding under the forestry measure, working closely with the SAPARD agency and the SFA. The WWF will support the finalization and endorsement of the national standard through public awareness and funding of participatory processes, while UNDP will support the pilot certification of state forests through training and awareness raising. In developing an action plan for critically endangered habitats in production forests, the project will integrate with the Natura 2000 system. The project design includes complementarities with the FAO project to strengthen capacity for fire prevention and a joint implementation committee consisting of representatives from PMU, state forest administration and national forest company will be formed to coordinate activities. The German agency GTZ will continue to target private owners and will support the establishment of the national representative body and regional based associations through the provision of technical assistance.

2. Institutional and implementation arrangements

A Project Oversight Committee (POC) will be responsible for providing oversight and assistance in resolving issues associated with project implementation. The Deputy Minister for Forestry in MAF will chair the committee which will be composed of representatives from the MAF/SFA, the NFC, MOEW, Ministry of the Interior non-State forest owners and NGOs. The POC will establish close links with relevant stakeholders and invite their input on a regular basis. The MAF will have overall responsibility for the project, including procurement, disbursement, maintenance of project accounts and coordination of implementation. The annual work plan and procurement plan will be adopted by the POC.

A Project Management Unit (PMU), to be located within the offices of the MAF and separate from the National Forestry Board or its descendents, will manage implementation of the project on behalf of MAF. The current project preparation unit (PPU) will transfer to the PMU. The results of two assessments of PPU capacity have been incorporated into the training plan and support measures for the future PMU but are reliant on the current staff transferring.

Through the PMU, the SFA within MAF and the NFC will be responsible for carrying out project activities at the national level. An implementation agreement between the MAF and the NFC will be established defining terms and conditions for all project activities to be implemented under the responsibility of NFC. The NFC will through its regional representations will be responsible for silvicultural activities and retain its high level of forestry technical knowledge necessary for implementation of forest investments. The internationally recruited Co-chief executive will ensure access to international best practice approaches and transparency in following up on the reform agenda. An Advisory Council to the NFC, composed of important stakeholders involved in its activities, will be

18 established and meet at least every six months for providing strategic guidance to the management of the NFC.

Support to non-State forest owners will be provided on the basis of individual contracts with the emerging extension services in the SFA and with the emerging National Forest Owner Association. The two small GEF funded small grants programs for the promotion of biodiversity in forest management and in protected areas will be established on the basis of a feasibility study to be finalized at the end of year one of project implementation.

Given its inter-sectoral character, the project will be implemented in close collaboration with the Ministry of the Interior (National Service for Fire and Emergency Safety), the Ministry of Energy and Energy Resources (Executive Agency for Energy Efficiency), the Ministry of the Environment (Directorate for Protected Areas) and other national institutions as required. An implementation agreement between the MAF and the National Trust Eco-Fund will be established, defining terms and conditions for the establishment and operation of the Protected Areas Fund.. The project will establish close collaboration and coordination with the forestry and biodiversity donor community and will work closely with UNDP in the field of biodiversity conservation

3. Monitoring and evaluation of outcomes/results

The PMU has already established project monitoring and evaluation procedures acceptable to the Bank, and will furnish the Bank with biannual project progress reports, together with work programs inclusive of detailed monitoring indicators for the following six-month period. Monitoring and evaluation will make use of existing data sources, supplemented by data collection within the project and contracted inspection survey assessments. It will include assessment of forest works, of processes supporting the functioning of the two new organizations, and of project processes used to address biodiversity issues. The evaluation of outcomes will make use of baseline measurements from project preparation, the social assessment, environmental assessment and updated data at mid-term and project completion from the project monitoring system. Where appropriate, realignment of project activities would follow the mid-term evaluation. Lessons learned from implementation of project activities will be recorded in a report prepared by the borrower with the assistance of the PMU. The internationally recruited Co-chief executive will provide progress reports on six-month intervals.

4. Sustainability

The commitment to overall reform and long-term development of the sector is evidenced by the adoption of the NFPS by the Council of Ministers (CoM) in October 2003. The decision by the CoM to pursue a restructuring option consistent with good practice in several EU member/accession countries like Austria, Ireland, Latvia, Germany (division of the NFB into a SFA with a supervisory and regulatory role and a NFC with a

19 commercial mandate) shows a willingness to undertake the institutional reform that forms an essential element of the project. This approach is expected to have fiscal benefits (see section D) after 3-5 years and lead to a financially stable and independent National Forest Company. The society would benefit from increased tax revenues and from dividends paid from sales of forest products. The Interdepartmental Coordination Council, recommended in the National Forest Fire Strategy and necessary for the forest fire support, has been established. The Ministry of Finance and core government ministries have expressed their full support and have agreed to retroactive financing for a series of activities in 2004. The forestry sector were involved in the design of the project and in the RS. The implementation of the findings of the RS and collaboration with the PHARE Twinning capacity building support will address concerns relating to institutional sustainability. Long-term sustainability is also dependent on the Government’s commitment to provide adequate funding to the SFA to which it is committed to. The project approach will provide the Bulgarian forestry sector with a competitive position and access to environmentally sensitive markets in Western Europe.

5. Critical risks and possible controversial aspects

Risks Risk Mitigation Measure Risk Rating with Mitigation To project development objective Private owners may adopt unsustainable (a) Establishment of private owners directorate M forest management practices within the SFA. (b) Strengthening of extension services. (c) Support for the establishment of private owner associations Political interference in the running of the (a) Appointment of international Co-chief executive. S NFC (b) External recruitment for senior management team. (c) Commercial auditing and accounting (d) Operating, reporting and control procedures in new company. Because of broader budget constraints, Improved forest management should generate S GoB fails to finance public good functions increased fiscal revenue over time of forestry adequately. To component results Resistance to change in SFA and NFC (a) Participatory approach in restructuring study. (b) M No compulsory job losses. (c) Training and capacity enhancement Land owners/users may not accept new The project will support public environmental M restrictions and procedural requirements education and activities to increase public awareness related to biodiversity conservation and on sustainable use of forest biological resources. The sustainable forest management. project will also finance programs, targeted at new forest owners, to support conservation of these stakeholders. Risk Rating – H (High, p>75%), S (Substantial, 50

20 6. Loan conditions and covenants

Negotiations Condition: The borrower:

(i) shall establish and maintain a financial management system, including records and accounts, and prepare financial statements in a format acceptable to the Bank (to reflect sources of funds, operations, expenditures).

Board Conditions: The borrower:

(i) shall establish, staff, equip and maintain PMU with resources, functions and responsibilities acceptable to the Bank and with staff, whose qualifications, experience and terms of reference shall be satisfactory to the Bank;

(ii) The Council of Ministers shall adopt the Restructuring Plan for the National Forest Company, including a costed and phased Action Plan and a Human Resources Development Plan.

(iii) Parliament shall enact the National Forest Company Law in line with Bank requirements for accountable, efficient and transparent organizations.

Conditions for Effectiveness: none

Disbursement Conditions for Loan Funds:

(i) Disbursement of loan and grant funds for goods and works under components C and D is contingent on the existence of an Implementation Agreement between MAF and NFC defining the terms and conditions for those parts of the project to be implemented by NFC.

(ii) Disbursement of GEF funds into the Protected Areas Fund is contingent on (a) an Implementation Agreement between the MAF and the National Trust Eco-Fund, (b) prior transfer of Bulgarian counterpart funds on a 1:1 matching basis and (c) the adoption and implementation of an Operational Manual acceptable to the Bank.

(iv) Disbursement of small grant to non-state forest owners is contingent on the existence of a Small Grants Manuals acceptable to the Bank.

21 Other covenants:

(i) The PMU will prepare a mid-term report by March 31, 2007 highlighting both the progress and constraints in the project implementation at that date. The mid-term report will serve as a basis for a joint MAF and World Bank project mid-term review.

(ii) The PMU shall prepare by not later than November 30 of each year a draft annual working plan including the budget and procurement plan, satisfactory to the Bank and the POC.

(iii) The PMU will develop a terms of reference and short-list of auditors for the annual audit of the loan and GEF grant.

(iv) The PMU shall make sure that all project accounts (SA for the loan funds, SA for the GEF grant funds and sub-account for the counterpart funds) are audited in accordance with International Standards on Auditing, by auditors acceptable to the Bank and audit reports submitted to the Bank within six months after the end of each fiscal year.

(v) The Advisory Council to the NFC shall be established not later than March 31, 2005 with representation and Terms of reference acceptable to the Bank.

(vi) The PMU will maintain a financial management system acceptable to the Bank. The project financial statements, SOEs and Special Account will be audited by independent auditors acceptable to the Bank and on terms of reference acceptable to the Bank. The annual audited statements and audit report will be provided to the Bank within six months of the end of each fiscal year.

(vii) The Charter of the NFC shall be in place not later than February 28, 2005 with terms and provisions acceptable to the Bank;

D. APPRAISAL SUMMARY

1. Economic and financial analyses

The project components were divided into those benefits that could be quantified: forest fires (including rehabilitation of degraded lands), thinning and forest roads, and those where they could not be quantified: support for restructuring, support for technical schools, pilot certification, illegal logging initiatives, support for non-state forest owners and carbon initiatives.

Cost-benefit analysis has been undertaken for all quantifiable benefits, taking into account the “with” and “without” project scenarios. Both scenarios are characterized by a

22 separation of the main functions: economic management functions of the state forests and state control/administrative functions, the economic functions will be located under a State Forest Management Organization (company), while the state control and administrative functions will be under the government (e.g. Ministry). The Nature Park Management will also be transferred to the company1. They do not reflect the status quo. However, in case of absence of project intervention (the “without” project scenario), the general implementation of reforms would be slow and without the necessary means to address key institutional and financial problems. Failure to take action through a comprehensive project would result in unsustainable forest management practices, continued degradation of forest and loss of forest and environmental values, both for employment generation in rural areas, biodiversity conservation and watershed protection. For each of the benefits, the difference between the ‘with’ and “without” scenarios were then taken to be the gross project benefit.

For the forest fire component, a cost-benefit analysis was undertaken based on record for forests damaged between 1990-2002. The gross benefit was estimated as the damage that occurs without the project less the damage that occurs with it. The EIRR of the forest fire component is estimated at 20%, NPV value of just over € 1 million

For the forest thinnings component, a cost-benefit analysis was undertaken for the damage that is being prevented to the forests because of lack of thinning exercises. By taking the average stand composition over time for an average crop of average productivity, the Economic Internal Rate of Return (EIRR) comes to just over 18.5 percent. This gives a total project NPV of € 583,914.

For the forest road components, a cost-benefit analysis was undertaken comparing the road density and access to the crops and accompanying extraction costs in the without scenario with road density and accompanying accessibility to crops and extraction costs in the with project scenario (both for rehabilitation of roads as well as new roads) The value of the production was based on average standing timber prices. The resulting cash flow yielded an NPV of € 3.6 million and an EIRR of 23 percent.

Non-quantifiable benefits. It is not possible to quantify the benefits of supporting the strategic reform of the forest operations. However, in case of absence of project intervention, the implementation of reforms would be slow and without the necessary means to address key institutional and financial problems. Reforms as intended and financially supported by the project will improve transparency and accountability2, increase human resource capacities and therefore, reduce political interference and improve governance through incentives such as competitive remuneration systems. The introduction of a forest management information system and training of the marketing department will establish a more transparent and competitive market system and will increase efficiency and cut costs. Finally the restructuring will enable to protect and enhance the public good functions of forest management by ensuring that the SFA

1 Since costs for those functions would go beyond the normal responsibilities of sustainable forests management practice, they will be delivered on a contractual basis 2 By setting up independent financial accounts for economic management functions

23 monitors and controls all forest operations in accordance with the forest code both in public and private owned forests. This will ensure the protection of vital indirect benefits such as watershed protection and protection of water quality.

Other non-quantified benefits constitute of a substantial reduction of illegal logging activities, improved technical capacity and increased efficiency in the forest technical schools; market access and/or maintaining market share in top end markets due to pilot certification as well as cost savings through reduction of wasteful forest management; increased efficiency, improved forest management and better timber marketing for non state owners; and carbon benefits.

Non-timber and environmental benefits were not quantified. However substantial environmental benefits are to be expected in the following categories: biodiversity conservation (through the strengthening of protected areas), reduced critical habitat destruction, a forest information and monitoring system including biodiversity data, mapping of high conservation forests and incorporation of biodiversity conservation in forest management planning), as well as soil conservation and watershed protection which will result from the afforestation activities. Related to these are landscape benefits likely to result in increased tourism and recreation.

Financial analysis

Fiscal Impact: The Fiscal Impact analysis showed that the net increases in revenues from taxation (income, company, VAT) from increased production due to roads and thinning investments, reduction in the value of loss of state assets from forest fires, and contribution in the form of dividends and taxation from the new forest company were more than sufficient to pay for the cost of the loan over the loan period (17 years).

The estimated Government financial benefits are: the economic benefits from harvestable timber from the reduction in forest fires; the VAT (20 percent) on the benefits (increased value of timber sales) from forest roads plus company tax (20 percent) on profit (15 percent); VAT (20 percent) on the benefits from forest thinnings plus company tax (20 percent) on profit (15 percent); a combined dividend and tax yield from the NFC, once profitable, of 25 percent of profits.

The estimated projected financial cash flow had an NPV of € 2.3 million with the cost of capital set at 12 percent. The project makes sound sense from a financial perspective.

2. Technical

There is no standard IT solution across the NFB and data is held in a variety of formats. The new organizations will require robust yet functional information systems to fulfill their new and demanding roles. The Forest Management Information System (FMIS) and

24 the National Forest Database are designed around standard forest management IT software and hardware solutions incorporating best practice solutions adopted elsewhere and allowing for further expansion and development. Current road design and construction does not adequately recognize environmental values. Forest roads will be designed and constructed in accordance with best practice guidelines to be developed under the project. Draft guidelines incorporating international best practice have already been prepared .

Bulgaria is in pre-accession to the European Union and needs to align itself to European processes. The techniques applied include the High Conservation Value approach and the Rapid Assessment and Prioritization of Protected Area Management (RAPPAM) Methodology, as well as the application of guidelines and indicators from the work of the Ministerial Conference on the Protection of European Forests. Best practice has been applied where possible (small grants program) as has as close as possible adherence to EC Directives. By applying these approaches the management and practice in the forests will allow the authorities to position their policies and operations such that they could apply for European Union budget lines.

3. Fiduciary

The financial management arrangements of the project should be strengthened to meet the Bank’s fiduciary requirements in accordance with OP 10.02. Financial Management prior to Board presentation. For this purpose the PPU should procure the implementation of financial and accounting system able to record project transactions and produce reports for both Bank and statutory reporting purposes.

A Country Financial Accountability Assessment (CFAA) for Bulgaria has been carried out in 2003. The CFAA report concludes that Bulgaria has a well developed system and structure of public financial management that relies heavily on information technology (such as in the area of cash management), and has independent external audits and parliamentary oversight committees. Sound legislation exists to prepare, implement and monitor the state budget. A major remaining issue, from the perspective of using government financial management systems in Bank-financed projects, is the implementation of a single unified Financial Management Information System (FMIS), which is currently in progress. Given the current state of public financial management in Bulgaria, the CFAA assesses both the global fiduciary risk to the government and the overall fiduciary risk to Bank project funds as low.

4. Social

The key project beneficiaries are the resource user groups (rural population living in the vicinity to the forest, forest product gatherers, private and communal forest owners, forest enterprises, eco-tourism operators, hunters, and tourists) as well as the public sector managers (MAF and MoEW), NFC, NGOs and individuals.

25 Both broad and specific social impacts of the project were reviewed in the course of the Social Assessment conducted during project preparation. Overall, the project activities are expected to generate significantly positive social impacts. The project should result in direct rural employment and also significant indirect job opportunities in the forest sector deriving from improved forest management and value added (e.g. in wood- industries and non-timber related activities including tourism). The project should strengthen social capital by supporting the creation of non-State forest owners’ associations and cooperatives and strengthening stakeholders participation in project activities planning and implementation (e.g. through the small-grant program and the design of participatory management plans for Protected Areas). The project should also result in a better understanding by the local people and municipalities of the functions of the forests and Nature Parks and, by extension, by all those working in the forest sector of the multi-functions of forest areas. On another hand, the restrictions on access to forest resources resulting from Nature Parks management plans as well as improved Law enforcement by NFC (including measures to limit illegal logging) may have a negative impacts on some populations’ livelihood. The Government has developed a Process Framework for mitigating these impacts (see section D6). In addition, the project’s activities to curtail illegal logging and corruption in the sector are likely to trigger strong opposition from groups holding vested interests in the sector’s present condition.

Project activities were developed through a highly participatory process, which involved all parties concerned. As part of the development of the NFPS and the RS, the Government has conducted a large number of consultations with all stakeholders. The FDP’s design has relied greatly on expert input from national specialists and as full as possible stakeholder consultation at a thematic and regional level. Twenty-eight workshops were held during preparation. An interactive website has been set up inviting comments and sharing information on the FDP. Full consultations have been undertaken as part of the Environmental Assessment. The Social Assessment included a number of baseline surveys among the public at large, local communities in municipalities with large forest resources, private forest owners and employees of NFB. During implementation, the Project Oversight Committee will establish close links with relevant stakeholders and invite their input on a regular basis. Participatory monitoring will be undertaken (involving a consortium with academia and NGO representation). The PMU will develop a program for information provision, and publish and disseminate the project outputs in a variety of media to appropriate stakeholders and the general public.

5. Environment

The EA conducted as part of project preparation concludes that the overall impact of the FDP is positive. Since internationally adopted principles of sustainable forest management underlie the FDP, the production, ecological and social functions of forests receive equal consideration and ensure long-term sustainable benefits from multifunctional forestry. Analyzing the consequences of the “without project”, the EA concludes that it would represent a threat to the forest resources because of lack of

26 adequate budgetary resources, many of the instruments improving the sustainability of forest management would not exist, and the forest would continue to suffer from high levels of illegal logging; risk of erosion would increase with the establishment of skidding trails without best practices and maintenance, the local economy would benefit very little from the forest resources, etc.

The EA indicates that environmental and biodiversity issues have been well recognized and addressed in the design of the project and mitigation measures have been identified regarding significantly potential adverse impacts. Although the FDP has a correct and appropriate focus and the related environmental impacts are likely to be positive, the EA has identified the need for complementary mitigation and enhancement measures summarized in the Environmental Management Plan (EMP, described in Annex 10) together with responsibilities, schedules, cost estimates and monitoring indicators. A great majority of the suggested measures concern additional specifications of planned actions already included in the FDP and require no or only moderate additional funding, expect for two actions: (i) environmental and safety training of actors in the forest sector, and (ii) funding for Nature Park management through targeted allocations to the National Forest Company from State budget. No additional cost is allocated for the monitoring in the EMP since the FDP includes provisions for such activities.

The timing and the design of the biodiversity component is such that the Protected Areas could fit directly into the Natura 2000 network and their management guidelines conform to the Ministerial Conference for the Protection of Forests in Europe’s agreement on sustainable use of forests.

6. Safeguard policies

Policy Triggered Environmental Assessment (OP4.01, BP 4.01, GP 4.01)  Yes No  Natural Habitats (OP .04, BP 4.04, GP 4.04)  Yes No  Forestry (OP 4.36, GP 4.36)  Yes No  Pest Management (OP 4.09)  Yes No  Cultural Property (OPN 11.03)  Yes No  Indigenous Peoples (OD 4.20)  Yes No  Involuntary Settlement (OP/BP 4.12)*  Yes No  Safety of Dams (OP 4.37, BP 4.37)  Yes No  Projects in International Waters (OP 7.50, BP 7.50, GP 7.50)  Yes No  Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)  Yes No 

Environmental Assessment (EA). The FDP was assigned an environmental category A. Consequently, an independent EA was prepared during project preparation and adopted by the GoB. The EA helped address the safeguard-related and other impacts and its findings were used to refine the project design.

27 Natural habitats. The Project area encompasses critical and non-critical natural habitats and activities which can potentially have an impact on them. Hence, this Safeguard Policy is triggered. The FDP includes a number of activities which will enhance natural habitats conservation (identification of High Conservation Value Forests and action plans for their protection and restoration, training of forest actors, fire management, restoration of critical habitats in Nature Parks, surveillance of illegal logging, etc.). Adequate measures have been incorporated in the project design for forest roads, thinning and afforestation to avoid loss or degradation of natural habitats, including exclusion of investments in protected areas and high conservation value areas. The project will not lead to loss or degradation of critical and non-critical natural habitats. The project is more likely to enhance conservation of natural habitats.

Forest. The Bank’s Policy is triggered since the FDP aims to bring about changes in the management, protection and utilization of natural forests and plantations. The project incorporates measures to strengthen the fiscal, legal and institutional framework. The FDP does not contravene international environmental laws. The project will fund the finalization of the national forest certification standard, the certification of a pilot forest area and training of local assessors. Last, to promote the development of new markets and marketing arrangements for forest-related goods and services, the project includes small grants for the introduction of sustainable patterns for the use of biodiversity (including non-timber forest products) and capacity building to bring carbon credits to Bulgaria.

Involuntary Resettlement. The construction and rehabilitation of access roads is envisaged on state-owned land. Hence, the project does not envisage land acquisition nor expropriations. However, the Involuntary Resettlement policy is triggered due to potential adverse impacts from reduced use of illegally harvested fuel-wood and restrictions of access to forest resources in Protected Areas. While the Social Assessment study and field interviews ruled out the possibility of any households relocating due to the restrictions on illegal acquisition of forest resources, it confirmed that the restrictions of access are likely to result in a negative impact on the livelihood of some population groups living in the vicinity of the forest. The exact location and scale of these activities is not known at this stage. Hence, the Government has developed a Process Framework (see annex 16) which will be applied to identify the scale and nature of the adverse impacts on livelihoods, their mitigation and monitoring in a transparent and participatory manner.

Safeguard related consultations and disclosure. The main stakeholder groups were identified during the inception phase of the EA, and additional groups were invited to participate in the assessment during the whole process. Stakeholder consultation workshops were held on October 13, November 13 and December 17, 2003 and gathered participants from the government, NGOs, academia, donors, and media. A specific consultation meeting was held with 6 local NGOs on December 16, 2003. The draft EA report was made publicly available in Bulgarian and English on December 8, 2003. The requests received from the individual stakeholders and the workshops were taken into account by the project EA team. The final EA report was made publicly available in the

28 Infoshop and in Bulgaria (on the project website) on January 28, 2004. The Process Framework will also be disclosed in the Infoshop and in Bulgaria before appraisal.

7. Policy Exceptions and Readiness

The terms of reference and technical specification for the retroactive financing period and the first year’s activities are complete and ready. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. The project complies with all applicable Bank policies.

29 Annex 1: Results Framework and Monitoring BULGARIA: FOREST DEVELOPMENT PROJECT

Results Framework PDO and Global Environmental Outcome Indicators Use of Results Information Objective To increase the contribution of forests to the Forests and forest industries contribution to GDP YR1 – YR2 Gauge national economy and to the benefit of rural effectiveness of components populations through sustainable multi- Employment in municipalities adjacent to forest and their interaction. functional management of state, private and areas communal forests. YR3 Determine if project needs refocusing To improve conservation of forest Area of high conservation value forests and ecosystems through mainstreaming protected areas under improved management YR4-YR5 Realign activities biodiversity into forest management, and as required through improved conservation of critical ecosystems. Intermediate Results Results Indicators for Each Component Use of Outcome One per Component Monitoring Component One Component One Component One Strengthened capacity of State Forest Number of illegal activities successfully prosecuted YR2/3 may indicate relation Administration to perform supervisory, in HCVF and other forest areas / Number of illegal to poverty alleviation public function and support functions, activities reported including mainstreaming of biodiversity conservation in forest management planning Number and severity of forest fires in HCVF and other forest areas, in targeted regions YR2 may flag lack of coordination in detection and Number of regulations and guidelines aligned with prevention sustainable management and biodiversity conservation requirements adopted Component Two Component Two Component Two Strengthened capacities of Non-state forest Number and area of non-State forests under YR2-3 low uptake could owners for sustainable forest management, sustainable forest management plans, including reflect procedures too including biodiversity conservation biodiversity conservation complex

Amount of SAPARD funds leveraged under the YR2 – YR3 No realignment Forestry Measure or may indicate capacity shortfall at MAF Number and area of sites with improved YR3 may indicate inadequate biodiversity conservation and sustainable use in grants focus or procedures productive landscape and PAs’ buffer zones too complex Component Three Component Three: Component Three Supporting State Forest Management Area reforested Transition to Market Economy YR1-3 Low % flags Area of forest stand with improved quality and contractor capacity vitality through thinning

Net revenues of the NFC Component Four Component Four: Component Four Conservation of biodiversity in natural Management effectiveness of Nature Parks using YR 1 – 2 incomplete may forests and sustainable management of IUCN criteria. flag technical difficulties biological resources in forested areas strengthened Number of sites with improved biodiversity conservation and sustainable use in PAs Component Five Component Five: Component Five Procurement, monitoring and Number of people whose awareness on the project implementation schedules on track activities has been raised

Number of people whose awareness on biodiversity has been raised

30 Outcome Indicators Baseline YR1 YR2 YR3 YR4 YR5 Frequency and Reports Data Collection Responsibility for Instruments Data Collection Forests contribution to GDP 2003 ------Annually CSO PMU Number of person days of additional Social 1000 3000 3000 2000 1000 Annually NFC, SFA employment in municipalities Assessment adjacent to forest areas Study ongoing Area of high conservation value Study ---- +10% +10% +10% +10% Yearly cumulative report Assessment report PMU forests and protected areas under undertaken improved management YR1 Results Indicators for Each Component Component One: Number of illegal activities Study ---- +5% +10% +15% +20% Annually Statistics from Forest Initial TA, then PMU successfully prosecuted in HCVF undertaken Inspection and other forest areas / number of YR1 Forest Police illegal activities reported Number of forest fires in HCVF and 2003 ---- -7% -10% -12% -15% Annually National statistics PMU other forest areas, in targeted regions Number of regulations and Study ---- 50% 70% 100% Annually National legal PMU guidelines aligned with sustainable undertaken framework and management and biodiversity YR1 administrative orders conservation requirements adopted Component Two: Number of non-State forests under Zero ------10 20 40 Annually Extension Services PMU sustainable management plans, Statistics including biodiversity conservation Amount of SAPARD funds Zero 10% 20% 40% ------Annually SAPARD Agency PMU leveraged under the Forestry Measure Number of sites with improved Zero ---- 10 20 30 40 Annually Final reports from PMU biodiversity conservation and Nature Parks and sustainable use in productive Extension Services landscape and PAs’ buffer zones Component Three: Area reforested (ha) Zero 150 300 500 600 600 Yearly cumulative report Field visits and forest PMU statistics Area of forest stand with improved Zero 1300 3100 5700 8500 10000 Yearly cumulative report Field visits and forest PMU quality and vitality through thinning statistics (ha) Net revenues of NFC (million BGN) Non -3 -2 0 6 12 Annually NFC financial reports PMU applicable

31 Component Four Management effectiveness of Nature 49% 55% 60% 64% 67% 70% Annually Reports from PMU Parks using IUCN criteria contractor Number of sites with improved Zero --- 5 7 10 15 Annually National Trust PMU biodiversity conservation and EcoFund Reports sustainable use in PAs Component Five: Number of people whose awareness Zero 100 100 100 100 100 Annually Final report from PMU on the project activities has been contractor raised Number of people whose awareness Zero 100 100 100 100 100 Annually Final report from PMU on biodiversity has been raised contractor

32 Annex 2: Incremental Cost Analysis BULGARIA: FOREST DEVELOPMENT PROJECT

Overview

The proposed IBRD and GEF co-financed Bulgaria Forest Development Project would support the development and implementation of national policies towards the protection and sustainable management of forests of the highest conservation importance. Activities under the project would address: (i) improvement in the management of the high biodiversity value forests to have biodiversity conservation adequately incorporated in operational practices of the new forest owners and the forest management enterprises, including strengthening the set of relevant national regulatory instruments and implementation of the site-specific conservation measures; and (ii) strengthening nation-wide the network of nature parks and other protected areas instrumental in the protection of endangered and important habitats with the diverse land-ownership and land-use patterns.

Context

Global significance of Bulgaria’s biodiversity and the state of forest habitats

Bulgaria is located on the crossroads of three broad bio-climatic regions – the mid-European continental, Eurasian steppe, and Mediterranean – which create a diverse range of transitional climatic conditions. The complex topography of mountain ridges, foothills, lowlands, and plains provides a high degree of variation in habitats and determines the vertical distribution of life zones, from the alpine forest belts of the high mountain peaks to the dune communities along the Black Sea coast. Diverse rock and soil substrates, hydrological regimes, and aquatic systems, including the Black Sea and the Danube River, contribute to the wide range of habitat conditions. Habitats are very rich in relict and endemic plant and animal species, being the influence of the Tertiary and Quaternary periods. This variation in habitat types and biogeographic influences has resulted in a level of floral and faunal diversity that ranks among the highest in Europe. Natural communities of the country represent habitats for 94 species of mammals, 383 birds, 36 reptiles, 207 species of fish, 16 amphibians, about 27, 000 insects and other invertebrates, above 3,500 species of vascular plants and more than 6,500 non-vascular plants and fungi. Endemic plant species account for about 5 percent of entire flora, while 8.8 percent of non-insect invertebrates and 4.3 percent of insect species are also endemic. Endemic vertebrates include 12 freshwater fishes, 1 amphibian subspecies, 4 reptile subspecies, and at least 4 subspecies of mammals. Rare flora and fauna includes more than 700 vascular plants (many of which are endemics found in the mountain regions), 567 species of non-insect invertebrates, approximately 1,500 insect species, 29 species of fish, 2 snakes, 78 birds (including 16 from the WB/WWF ALLIANCE List of the Globally Threatened Species), and at least 10 large mammal species and subspecies.

Geographically, areas of the highest species richness for all taxonomic groups include the Stara Planina, Pirin, Rhodope (especially its Eastern part), and Strandja mountains; Maritsa and Lom river basins; and the Black Sea coast. The most important habitats of endemic species are located in the Stara Planina, Rhodope, Pirin, Vitosha, Rila and Strandja mountain regions and the Strouma river valley. 33 Although most of the land in Bulgaria has been extensively altered by human use and agricultural production, forested areas cover more than 3.3 million hectares ( 30 percent of the country). The forests are dominated by oaks (Quercus spp.) up to 1,000 m, beech (Fagus spp.) and other broad-leaved trees between 1,000 and 1,500 m, and conifers (primarily Picea abies, Abies alba, and Pinus spp.) in higher elevations up to 2,200 m. Coniferous forests cover about 1.1 million hectares, and broad-leaved forests – 2.2 million hectares. Bulgarian forests represent critical habitats for a variety of endangered and endemic species. Some of the unique forest habitats include: (i) alpine and sub-alpine coniferous forests with meadows, wetlands, peat bogs, and lakes in the high mountains – the Rila, Pirin, Stara Planina, Vitosha, and Rhodope mountains, as well as the Belasitsa, Maleshevska, and Slavyanka mountains; (ii) mature coniferous and beech mountain forests, including the primary forests of fir (Abies alba), spruce (Picea abies), and pine (mainly Pinus peuce, P. silvestris and P. nigra) in the Rila, Pirin, Rhodope, and central Stara Planina mountains; the Mugho pine (P. mugo) scrub forests in the Rila and Pirin montains, and the unique beech (Fagus orientalis) forests of the Strandja mountain; (iii) Oak (Quercus spp.) woodlands and forests, primarily in the lower mountain zones and the adjacent foothills and plains; (iv) riparian forests (primarily Salix, Populus, and Alnus spp.) along the Danube and the smaller rivers (especially the Batova, Kamchia, Ropotamo, Tundzha, and Veleka).

Challenges to conservation and causes of biodiversity loss

Destruction and fragmentation of habitats from the local overexploitation of forest resources and uncontrolled forest fires, degradation of forest habitats as a result of deforestation processes, and direct loss of species from illegal logging and wildlife poaching represent root causes of the forest biodiversity loss in the country. Over the last decades, at least 31 species of vascular plants, 7 invertebrates, 3 fish, 2 snakes, 3 birds, and 2 mammals have become vulnerable or endangered. Since 1990, habitat losses from forest fires amount to 3.5 percent of the total forested area. Examples of threatening processes include: (i) clearing of natural forests for agricultural purposes and for timber, (ii) alterations of mid-elevation forests and the replacement of broad-leaved forests with the coniferous plantations, (iii) illegal gathering, sale, and export of medicinal plants, edible fungi, the rare animals, (iv) excessive poaching and spot hunting pressure on large mammals, waterfowl and birds of prey, which has affected a number of regionally and globally threatened species.

Transition towards market economy and restitution of land have increased considerably the pressure on forest resources. Land restitution, which may affect about 4.6 million hectares or 40 percent of the territory of the country, necessitates establishment of the new administrative, legal and financial arrangements, with respective changes to the current operational practices, to maintain capacity of the state to adequately protect the public interests in private lands. There is also a pressing need to provide guidance and support to the new land owners on the best natural resources management practices, which would ensure sustainable use of biological resources and conservation of the biodiversity.

National operational framework for biodiversity conservation

The Government of Bulgaria demonstrates strong commitment to preserving global biodiversity values. Bulgaria is a Party to key international conventions, including (i) Convention on Biological Diversity (1992), (ii) Convention on the Conservation of the Wild

34 European Flora and Fauna and Natural Habitats (1979), (iii) Convention on International Trade in Endangered Species of Wild Fauna and Flora (1973), (iv) Convention on Wetlands of International Importance as Waterfowl Habitats (1971), (v) Convention on the Protection of the World’s Cultural and Natural Heritage (1972) and etc.; as well as to a number of regional conservation agreements.

National legislation for biodiversity conservation is largely in place and is being strengthened: the Nature Protection Act, the Protected Areas Act, the Medicinal Plants Act, and other important framework and secondary regulations are effective, a number of additional laws are under preparation. The Ministry of Environment and Water (MoEW) takes the lead in the development and implementation of the national biodiversity conservation policy: it formulates the policy, develops main regulations and through its regional inspectorates monitors compliance. MoEW also implements specific conservation programs, oversees operation of the national protected areas network, and manages certain categories of protected areas. The Ministry of Agriculture and Forests (MAF) works towards mainstreaming that policy in the management of nation’s forest and agricultural resources, and through its regional branches manages and controls the maintenance, use, restoration, and protection of forests.

Bulgaria operates a network of protected areas, which covers more than 556,303 hectares, or 5 percent of the territory of the country and combines areas with different types of protective regime, including: (i) strict reserves (55 reserves with the total area of 76, 978.3 ha) – representative areas where no interference with natural processes is allowed (correspond to WB/WWF ALLIANCE category 1); (ii) managed reserves (35 reserves, 4,451.5 ha in all) – areas managed for protection purposes; (iii-iv) national parks (3 parks, 193,047.9 ha) and nature parks (9 parks, 236,972.6 ha) – territories managed for protection, recreation, and sustainable use; (v) nature monuments (426 monuments, 23,153.3 ha) – protected individual features of nature; and (vi) protected sites (103 sites, 21,700.0 ha) - areas managed in accordance with the case-specific conservation requirements.

National forest authorities maintain jurisdiction over the forest resources for all types of land ownership and are directly responsible for the operation of certain categories of protected areas. MoEW and its National Nature Protection Service through the National Park Directorates and Regional Inspectorates for Environment and Water administer strict reserves, managed reserves, and national parks, which land is owned by the state. MAF through its Division for Protected Areas and Biodiversity manages nature parks, which following the restitution might have various land ownership structure, comprising state, municipal, private and other types of ownership. Protected sites and nature monuments, which may also have mixed ownership, are managed by land owners (i.e. for the state forested lands – by MAF). In addition, despite the ownership of the land, and the status of individual protected areas, all forest resources in the protected areas are managed by MAF through its line authorities of the Forest Management Districts. On the operational level, national forest authorities establish and enforce management regimes that regulate land-use pressure in particular habitats and forested areas.

National conservation priorities and the project justification

National Biodiversity Conservation Action Plan adopted by the Government in 2000, which follows the National Biodiversity Conservation Strategy developed in 1994 and approved by the Government in 1998, is under implementation to address conservation and restoration of

35 key ecosystems, habitats, species and their genetic resources, and provide grounds for the sustainable use of biological resources in the country. The following activities have been assigned the highest priority under the plan: (i) strengthening of the national legal and regulatory framework for biodiversity conservation, (ii) building capacity of the relevant governmental agencies and authorities, (iii) establishment and maintenance of the national eco-network, (iv) strengthening the network of protected areas, (v) habitat and species- specific conservation and restoration programs, (vi) further development of the scientific base for the conservation, and (vii) improving public awareness, environmental education, and training in biodiversity conservation. MoEW and MAF are taking the lead among the governmental agencies in implementing and coordinating activities under the Action Plan.

The National Forest Policy and Strategy (NFPS), sets out the broad development framework for the sector. The NFPS confirms the main issues facing the sustainable development of the sector: (i) reform of the National Forestry Board (NFB) with the separation of ownership and supervisory functions, (ii) investment in silvicultural works – tending of young stands, reforestation, (iii) preserving the biodiversity value of forests, (iv) improving roading infrastructure, (v) increasing the level of harvesting while addressing illegal activities, (vi) ensuring the delivery of multi-function forestry and (vii) enhancing the contribution to environment and rural development.

The Strategy for Conservation and Restoration of Natural Floodplain Forests on Bulgaria Danube Islands has been developed in 2001 and is currently under implementation. This strategy is now being accounted for in the regional forest management plans and enforced through the respective forest management regimes.

Significant and successful efforts have recently been made to support implementation of the Strategy and Action Plan. This includes conservation programs funded by bilateral donors, international organizations, and environmental NGOs (including USAID, UNDP, the Government of Switzerland, WWF). However, due to budgetary constraints, these activities have primary focus on the selected individual regions or protected areas. New management plans have been developed, or are being finalized, for the Rila Monastery, Strandja, and Vitosha nature parks. These plans promote sustainable forestry, pioneer mainstreaming of conservation in the regular forest management, and establish acceptable balances for the various types of land use. Management plans for Rila Monastery and Strandja nature parks also account for the regions’ diversified land ownership patterns.

There is a strong need for a comprehensive effort to ensure conservation of the globally significant Bulgarian forest biodiversity values nation-wide and in a holistic manner. With the current progress in Bulgaria towards the economic reform - involving rural development and major changes in the land ownership structure - this need becomes increasingly significant. In particular, there is a growing need for the increased integration of biodiversity conservation in the operation of the national forestry sector, which currently has, and will have in the future, the leading role in the sustainable management and balanced use of forest resources.

Baseline Scenario

A number of programs are operative to support the implementation of the National Biodiversity Conservation Action Plan. The baseline costs will be represented by the resources which will be engaged under these programs to (i) integrate biodiversity

36 conservation in the operation of the national forestry sector; (ii) mitigate and remove the immediate and long-term threats to forest biodiversity locally and nation-wide; (iii) maintain and strengthen the network of forested areas under protection; (iv) strengthen institutions at the national, regional, and local levels for forest conservation; and (v) ensure coordination and management of these activities. Baseline activities include:

 Further development of the national legislation and regulatory framework for the conservation of biodiversity.  Strengthening the capacity of the relevant governmental agencies and authorities (particularly - MoEW and MAF).  Continued operation of the national network of protected areas.  Habitat and species-specific conservation and restoration programs.  Monitoring of ecosystems and species.  Improving public awareness, environmental education, and training in biodiversity conservation.  Initiatives on sustainable forest management supported by the IBRD loan under the proposed Forest Development Project (see below).

Activities of the Forest Development Project (FDP) financed with the IBRD loan, will provide major input to the Baseline. Its contribution to the Baseline will include, the following activities, without which the GEF alternative would not be able to provide the incremental benefit:

 Strengthening public forest sector management: (i) building and strengthening forest extension and inspection services, (ii) building and strengthening a nationwide Forest Fire Management System, (iii) development of a Forest Information and Monitoring System, (iv) control over illegal logging, (v) support for forest technical schools, (vi) identification of critical ecosystems in production forests, (vii) preparation of an action program for protection and management of selected endangered forests and constituent species, (viii) identification of priority measures to strengthen the regulatory framework and development of guidelines and tools to improve forest management practices, (ix) preparation of management plans for Protected Sites.

 Strengthening the capacity of non-forest owners for sustainable forest management: (i) fostering National Association of Private and Communal Forest Owners; (ii) fostering private and communal forest owners associations; (iii) improving forest management planning, (iv) implementing a small-grant program provided through the Nature Park Directorates, and (v) implementing top-up capital grants provided through the State Forest Administration extension service.

 Supporting State Forest Management Transition to Market Economy: (i) implementation of restructuring plan for National Forest Company; (ii) design of a forest roads masterplan; (iii) reforestation and rehabilitation of destroyed and devastated forest fire sites; and (iv) pilot certification.

 FDP Management and Monitoring.

Baseline activities will generate both domestic and global benefits to biodiversity conservation. However, under the baseline scenario the scope of the program (i) would not be sufficient to address the existing threats in many critical areas of the highest biodiversity and

37 international conservation importance, and (ii) would not provide for the adequate integration of biodiversity conservation in the operation of the national forestry sector, which has become a matter of the highest priority in the current context of economic restructuring and the intensified rural development. Costs and benefits under the Baseline are summarized in the table below.

It is worth mentioning the proposed GEF-financed program (through the UNDP) “Conservation of Globally Significant Biodiversity in the Landscape of Bulgaria’s Rhodope Mountain”, which will establish two nature parks in the Rhodope mountains and support mainstreaming of biodiversity conservation in forestry. Important sustainable forestry initiatives in that region have already been piloted.

1.1.1 Proposed alternative

Although the FDP is expected to improve the general operational efficiency of the sector and is not targeted at strengthening global forest biodiversity conservation per se, it opens a window of opportunity for close integration of biodiversity conservation in the forestry sector activities and practices. Under the alternative scenario, the GEF will finance incremental costs of expanding the national forest sector development program to adequately address those activities, to generate global conservation benefits.

1: Mainstreaming biodiversity in public forest sector management.

GEF will finance incremental costs for the following activities: (i) building and strengthening a nationwide Forest Fire Management System, to cover the cost of protecting critical ecosystems, (ii) development of a Forest Information and Monitoring System, to include biodiversity information management, (iii) control over illegal logging, to reduce illegal logging in ecologically sensitive areas, (iv) support for forest technical schools, to develop a biodiversity curricula, (v) identification of critical ecosystems in production forests, (vi) preparation of an action program for protection and management of selected endangered forests and constituent species, (vii) identification of priority measures to strengthen the regulatory framework and development of guidelines and tools to improve forest management practices, (viii) preparation of management plans for Protected Sites.

2: Strengthen the capacity of non-forest owners to mainstream biodiversity conservation in non-State forest management.

GEF will finance incremental costs for the following activities: (i) forest management plans, to make sure that biodiversity conservation is addressed, (ii) a small-grant program provided through the Nature Park Directorates, to strengthen public participation in forest biodiversity conservation for areas adjacent to the parks, and (iii) top-up capital grants provided through the State Forest Administration extension service, for specific actions aimed at sustainable habitat restoration and biodiversity conservation.

3: Strengthening the capacity of the National Forest Company to mainstream biodiversity conservation in State forest management.

GEF will finance incremental costs for the following activities: (i) design and implementation of a GIS based information management, planning and monitoring system, to cover the incremental costs specific to the management of biodiversity in production forests and Nature

38 Parks and (ii) development of a national forest road master plan, to ensure that biodiversity concerns are included in new roads selection and design.

4: Strengthening the national system of Protected Areas.

GEF support will strengthen the national system of Protected Areas. First, GEF will strengthen the capacity of individual Nature Parks (under the responsibility of the Ministry of Agriculture and Forests) to preserve critical habitats and undertake biodiversity monitoring, through: (i) office and field equipment, (ii) an independent annual assessment of their management effectiveness, (iii) priority investments and conservation programs, and (v) preparation and implementation of management plans. Second, GEF will provide counterpart funding for a Protected Areas Endowment Fund (PAF) that would provide long-term sustainable revenue to complement Government budgetary support for Protected Areas, including Nature Parks for: (i) biodiversity protection, restoration, and monitoring; (ii) infrastructure and equipment; (iii) management plans; (iv) sustainable economic use; and (v) communication and education about biodiversity and protected areas.

5: Project Management and Monitoring.

GEF will finance incremental costs for the project management and monitoring. GEF will support a public awareness/information program and an Integrated Inter-Sectoral Training Program to broaden and deepen the biodiversity capacity of forest managers in the public and private sector.

The proposed alternative would strengthen conservation of forest ecosystems through mainstreaming biodiversity conservation into forest management, and through improved conservation of critical ecosystems. The proposed alternative would to a great extent strengthen national framework for biodiversity conservation, address immediate and long- term conservation priorities and foster a greater public understanding of the needs and ways to preserve global biodiversity values of the country. In addition to the direct global benefits, resulting from the increased protection of the internationally significant forest habitats, the project will establish strategic partnerships with local land owners, land users, and communities, which would greatly contribute to the long-term sustainability of the conservation effort.

Incremental Costs

The estimated Baseline and Alternative project costs are summarized in the Incremental Cost Matrix below. The difference between the costs of the Baseline ($23.52 million) and the cost of the GEF Alternative ($37.88 million) is $14.36 million, of which $7.75 million are GEF costs. This represents the incremental cost for achieving global environmental benefits. A GEF grant of $7.75 million is requested.

39 1.1.2 Incremental Cost Matrix

Component Cost category $ Millions Domestic Benefits Global Benefits Strengthen Baseline 6.25 - Better prevention and - Better protection of Public Forest suppression of fires for selected forested areas of Sector forest production areas; high biodiversity and Management - Reduced illegal logging landscape value; to protect environment - Reduction in damage to and retain commercial internationally important benefits; forests; - Improved professional - Potential for the training for sustainable improved management of forest management; national forests; - Biodiversity - Improved forest conservation addressed management planning for through the forestry the selected areas of high planning instruments in value production forests

GEF 6.87 Same as above Same as above, plus Alternative - Forest fire management, and the Illegal logging surveillance and monitoring would cover key critical forest habitats, - Forest management planning would fully account for global biodiversity value of forest habitats, Incremental 0.62 Costs Strengthening Baseline 1.72 - Improved forest - Improved management of Capacities of management practices in of the selected habitats of Non-State forest non-state owned global value. owners production forests, - Improved management fostered through National of the selected habitats of Association of Private and global value Communal Forest Owners and community based and communal forest owners associations, - Improved forest extension services to encourage priority biodiversity conservation activities in privately owned forests; Forest biodiversity conservation initiatives undertaken by forest owners;

GEF 2.46 Same as above, Same as above, plus Alternative - Forest management planning assistance, improved extension services, and local conservation initiatives address key identified critical forest habitats of

40 Component Cost category $ Millions Domestic Benefits Global Benefits global significance. Incremental 0.73 Costs Supporting Baseline 12.22 - Improved management - Improved capacity of State Forest and sustainability of the production forest to Management national forestry sector perform broad ecosystem Transition to through the functions; Market Implementation of Economy Restructuring Plan for National Forest Company (in particular, institutional support and information systems); - Harvesting damage and fire hazards minimized as a result of optimising forest road network; - Destroyed and devastated forest fire sites reforestated and rehabilitated; - Pilot forest certification program implemented in the selected state forests GEF 12.84 Same as above Same as above, plus Alternative - National Forest Company fully able to manage high biodiversity value forests under protection (including those in nature parks). - The national forest road masterplan fully accounts for the global conservation value of forests Incremental 0.62 Costs Strengthening Baseline 2.18 - Baseline support to the - Basic protection regimes the System of national PA network secured for the selected Protected Areas secured. internationally significant under MAF forest habitats (forest Nature 13.18 Same as above, plus Same as above, plus Parks) GEF Alternative - Improved management for the national protected - Improved planning, areas network in place; monitoring, and management of key - Key specific investment globally significant priorities addressed to forested areas under improve biodiversity protection secured. conservation, sustainable management and long-term income generation in selected protected areas.

Incremental 11.00 of Costs which 4.39 are GEF costs Forest Baseline 1.15 - Management, - Management, development monitoring, evaluation of monitoring, evaluation of program the broader national the broader national management, Forest Development Forest Development monitoring, Program in place. Program in place.

41 Component Cost category $ Millions Domestic Benefits Global Benefits evaluation, and - Coordination under the - Coordination under the stakeholder National BD Conservation National BD Conservation training Action Plan secured Action Plan secured GEF 2.53 Same as above Same as above, plus Alternative - Increased stakeholder awareness and technical knowledge on the conservation of global forest values.

Incremental 1.38 Costs

TOTALS Total Baseline 23.52 Total GEF 37.88 Alternative

Total 14.36 Incremental Costs Total GEF 7.75 incremental Costs

42 Annex 3: STAP Review and Bank’s response

FOREST DEVELOPMENT PROJECT, BULGARIA: CRITIQUE

Professor Norman Myers

INTRODUCTION

FORESTS

BIODIVERSITY Global Environmental Benefits of Biodiversity Conservation

INSTITUTIONAL REFORM AND CAPACITY BUILDING

SUPPLEMENTARY ASPECTS Linkages to Poverty Relief Compatibility of Aims

SUMMATION AND CONCLUSION

REFERENCES AND BIBLIOGRAPHY

APPENDIX 1

43 Critique

FOREST DEVELOPMENT PROJECT, BULGARIA

Professor Norman Myers

INTRODUCTION

This critique evaluates a World Bank/GEF proposed grant of $47.45 million to the Government of Bulgaria for a Forest Development Project (P080377).

Obviously from the title, this is primarily a forestry project. Not so obviously is that it is an important biodiversity project too: as is the case with most countries, the great majority of Bulgaria's wild species occur in its forests. Moreover the country possesses an unusual amount of forest by European standards, plus an unusual amount of biodiversity, including exceptional numbers of endemic species and of threatened species. Thus this critique focuses largely on forestry and biodiversity, together with associated factors such as watersheds and hence irrigated agriculture, fisheries, hydropower and public health insofar as these reflect water supplies of sufficient quantity and quality, much of the water stemming from forested catchments. In turn these further linkages expand the critique's focus to embrace the pivotal point of dynamic interactions between sectors and factors at issue (plus the institutional measures to reflect them). Indeed it is these famous "grey areas" that warrant front-rank attention, even though their complexity means they frequently receive scant attention.

FORESTS

Bulgaria's forests total 3.9 million hectares, and they comprise 34% of the country's land, though just 0.4% of Europe's forests. Natural forests comprise 2.7 million hectares, most of the rest being made up of plantations. Of particular importance among the natural forests are the "high conservation value" tracts of forest, especially those featuring exceptional concentrations of endemic species and facing exceptional threat of deforestation (Project Management (Ireland) Ltd., no date). Such "hotspot forests" include the old-growth forests, some of them 150- 200 years old, are commercially attractive to loggers both licit and illicit. Almost 6% (late 1990s) of the forest expanse enjoys protected status of one sort or another (Government of Bulgaria, 2003; World Resources Institute, 2003).

Of particular significance is that roughly 80% of the forests are located in montane regions, meaning that forested watersheds help with flood control, soil protection, and as sources of water for downstream agriculture, industry and domestic households. At least 85% of streams, rivers and other water courses originate in forestlands (Government of Bulgaria, 2003). The country's renewable water resources amount to only 2700 cubic metres per person per year, or just 30% of the European average; and water withdrawals already exceed half of renewable water available (World Resources Institute, 2003). In short, upland forests play a major part in the supply of hydrological functions and watershed services, yet this exceptional benefit receives little attention in even conceptual terms, let alone its practical implications, in the FDP. In the National Environment Action Plan 2000-2006 (Ministry of Environment and Water, 2001), the section on Water makes hardly any mention of the role of watersheds. The number one water problem seems to be pollution and wastewater. The Plan admits that "river basin management administrative structures have not been established yet" even though

44 "Bulgaria is poor in water resources compared to the other countries of South Eastern Europe", [and it] has the most unfavourable indices for available water resources" (Ministry of Environment and Water, 2001).

As for industrial purposes, annual roundwood production in the late 1990s was substantial (Food and Agriculture Organization, 2003, even though Bulgaria's people consume only 26 kilogrammes of paper per year, compared with 136 kilogrammes for Europe as a whole (World Resources Institute, 2003). In addition, forests are important in Bulgaria's rural areas as a source of jobs (unemployment can be as high as 35%), sport/recreation, and eco-tourism (Government of Bulgaria, 2003).

While the FDP rightly trumpets the unusually large amount of forest remaining, presumably supplying abundant habitat for wildlife species, the Government should be aware that much of the biodiversity cause depends on the sort of forest available. When a forest expanse is split into a number of fragments, this is likely to disproportionately reduce the habitat value. This is because of an "islandizing effect" whereby an ecosystem shrinks below a minimum size to maintain a full stock of species; species' gene pools sink to a level beyond which they cannot maintain genetic viability. It may take several decades or even longer before the species are finally extirpated, but meantime they rank as "living dead." So what counts is not only the amount of forest left but its spatial integrity.

To reiterate a key factor (which can hardly be over-emphasized): forestry offers potential for many multiplier effects, especially through its forward and backward linkages (Myers, 1995 and 1997a). It interfaces with irrigated agriculture through downstream water supplies of sufficient quantity and quality (also reliability and predictability). It interrelates with fisheries insofar as water flows from forested water catchments are usually free of undue siltation, making for healthy fish habitats. Still more important, forestry features powerful linkages with climate, notably global warming. Forest fires and other forms of deforestation can be salient sources of carbon dioxide emissions, which, worldwide, account for about half of global warming processes. Conversely, well managed forests can serve as carbon sinks and thus mitigate and moderate global warming (U.S. Energy Information Administration 2003). Conversely again, a globally warmed world with higher temperatures and drier summers, notably in southern Europe, will mean markedly increased susceptibility to wild fires in forests. These climate factors will surely prove to be so significant in the long run that the climate issue should feature front and centre in several key areas of the FDP document, yet it receives only perfunctory attention as a virtually sub-subsidiary topic.

Plainly, then, the country's forests are crucial for the country's sustainable development, especially its economic growth (which extends far beyond its financial and commercial growth). Equally to the point, the forestry sector has appeared to be unable to attract the finance for what sounds to be a laudable National Forest Policy and Strategy plan, approved by the Council of Ministers as recently as October 2003. Hence the Bank's intervention could supply pivotal support, and not just for forestry per se but for biodiversity conservation, control of wild fires, eco-tourism, rural employment, and various other forms of enlightened forest management. In sum, forestry needs to be "mainstreamed", i.e. accorded the priority attention it deserves by virtue of its (little recognized) place in the Bulgarian economy writ large.

Thus there is a vital need to view the forests as "a multifunctional system incorporating environmental, social, economical, aesthetic and other functions" (Project Management (Ireland) Ltd., no date; see also Government of Bulgaria, 2003). Despite this

45 ultra-inclusive assessment, however, "The regulatory framework in Bulgaria does not cover fully the importance of the forestry system" (Project Management (Ireland) Ltd., no date). As is admitted by the country's National Environmental Action Plan 2000-2006 (Ministry of Environment and Water, 2001), "Projects on forest planning do not take into consideration the special uses of forests" such as the provision of watershed services and wildlife habitats, also their role as carbon sinks. All the more, mainstreaming of forestry should be designated a major priority for policy planners at the most senior level of government.

Much will depend on what transpires for forestry in the wake of Bulgaria's advance toward a market economy, with all that implies for the country's state-owned forests (86% of all forests thus far) and hence for their policy frameworks. There will be all the greater need for institutional reform. While the FDP acknowledges this need, it says little in hard pragmatic terms of how this is to be achieved--by whom, by when, with whose funding of what size, and under whose ultimate aegis? Forestry is often subject to much institutional inertia with proliferant policy blockages, due to lack of general understanding of what forestry have to offer and hence the sector's "marginalist image".

Also with regard to the future is a still greater problem, in fact a front-rank threat: climate change in the form of global warming. The problem was identified fully eight years ago (Republic of Bulgaria, 1996; U.S. Department of Energy, 1997), but the Government seems to have engaged in no broad-scope assessment of what could turn out to be the biggest single factor in the forests' future. True, montane areas, where most forests are located, will not experience the full impact of increasingly hot dry summers, in fact persistent drought conditions of unprecedented severity, that look likely to overtake the lowlands. All the same, the implications for forests, and especially for the biodiversity they contain, could well be significant in the extreme.

With further respect to global warming/forestry, there is the question of tree species provenances in plantations. It is likely that by the time the main tree species approach commercial maturity, they will be experiencing climatic and hence biotic conditions quite different from those to which they have been evolutionarily adapted. Provenances are now available which go part way to meeting this problem. This is a paramount challenge for plantation forestry already, yet few plantation foresters around the world are taking appropriate responsive measures. This is all the more pertinent for Bulgaria in light of the country's biogeographic position in southern Europe, which means that in a globally warmed world it will probably be overtaken by unduly hot and dry summers, leaving forests all the more susceptible to wild fires.

Finally, note that there is likely to be little if any threat to forestry's future through growth of human numbers. (True, population is not so much a threat in itself, rather it becomes problematic in light of people's consumption patterns, the role of technologies, etc.) Within Bulgaria's 111,000 square kilometres (cf. Romania's 237,000 and Greece's 132,000) live fewer than 8 million people (Romania almost 22 million, Greece 11 million). Still more to the point, Bulgaria's population is projected to decline to 6 million in 2025 and 5.3 million by 2050, because of its 0.6% annual decline in numbers and a fertility rate today of only 1.2 children per reproductive woman (United Nations Population Division, 2003). All in all, then, population decline could serve somewhat to relieve population pressures, such as they are, in Bulgaria's rural areas, with putative benefit to the forests' future outlook.

46 BIODIVERSITY

To cite the Bank's Project Appraisal Document (23/12/2003), "Bulgaria is located on the crossroads of three broad bio-climatic regions--the mid-European continental, Eurasian Steppe, and Mediterranean--which create a diverse range of transitional climatic conditions. ... The combination of habitat types and biogeography results in a level of biodiversity that ranks among the highest in Europe, and includes a wide range of relict and endemic plant and animal species (especially in the high mountain forest zone)." As is the case with many other countries, the bulk of Bulgaria's biodiversity is located in its forests.

To recap the basics: The country possesses 3572 vascular (or "higher") plant species, of which 320 (seems unduly high) species are reportedly confined to Bulgaria, making them endemic; and at least 59 species are considered to be threatened or endangered (endemic species are, by their very nature, unusually susceptible to extinction threat). As for vertebrate species, the country harbors 94 mammals, with 0 endemics and 13 threatened; 383 bird species with 0 endemics and 12 threatened; 36 reptile species with 0 endemics and 1 threatened; 16 amphibian species with 0 endemics and 8 threatened; and 207 fish species with an unknown number of endemics and 8 threatened species (Ministry of Environment and Water, 2001; see also World Resources Institute, 2003; World Conservation Monitoring Centre, 1999; United Nations Educational and Scientific Organization, 2003). Note that these statistics reflect current knowledge, and some may be on the (very?) low side--an indication of the lack of "priority profile" that has long hampered conservation in Bulgaria.

Even though the country comprises only 1% of Europe's land area, it possesses more biodiversity than Great Britain (twice as large an expanse) or Germany (three times as large). Its 383 bird species comprise 77% of Europe's total (Government of Bulgaria, 2003). The country features one of the seven most powerful European endemic floral speciation centres. Endemic species amount to three fifths as many as in the entire Balkan region (Government of Bulgaria, 2003; Project Management (Ireland) Ltd., no date). On many counts, then, Bulgaria ranks as a European epicentre for biodiversity--a factor that should be brought out more strongly in the FDP document.

Protected areas in 1999 comprised 127 parks, reserves and other conservation units, or roughly 1 in 100 for the whole of Europe. Their aggregate area amounted to 556,300 hectares (1 in 220 of Europe's), or 4.5% of the country's land area (4.7% of Europe's). It contained only two protected areas of over 100,000 hectares (cf. 212). As concerns protected areas ranking as parts of Global Agreements, Bulgaria now contains 17 Biosphere Reserves (139 in Europe), two World Heritage sites (28) and 10 Wetlands of International Importance (632). Probably the most striking news of all is that since 1991 the protected areas network has almost doubled (Government of Bulgaria, 2003; Project Management (Ireland) Ltd., no date).

As a measure of Bulgaria's eminent position as a biodiversity-rich country, note that Romania, well over twice as large, possesses slightly fewer vascular plant species, 3406, and far fewer endemics, 41. As for vertebrates, it contains 462 species, by contrast with Bulgaria's 736; none are endemic in either country. Some 74 of Romania's listed species are considered threatened, way below Bulgaria's 101.

So much for the essential statistics of Bulgaria's biodiversity. Plainly it is important to Bulgaria's future, as to the region's future too. Equally plainly it is not receiving the kinds and amounts of support it deserves from the government. Key question: how to mainstream the biodiversity cause? Answer: see the suggestions under Forests above. There is need for a

47 broad-scale effort to educate all government officials that (a) biodiversity is not just about watching birds at the weekend or shooting an occasional deer, rather it is a self-renewing resource of potentially large value that can be exploited in sustainable fashion; and (b) it tends to be accorded Cinderella status in government circles (not just in Bulgaria). The issue of mainstreaming is primarily a policy challenge and hence amenable to policy responses; that is to say, it is not e.g. a technical problem that lies outside current human ingenuity. It deserves to be addressed both systematically and systemically--as is being attempted through a revised version of the FDP document (ref. phone call Washington/Oxford late on December 30th). As an indication of the present parlous situation, note that few forest inventories include biodiversity assessments of any but the most basic and elementary sorts (Government of Bulgaria, 2003; Project Management (Ireland) Ltd., no date).

Moreover the linkages problem bedevils the situation, as it does for forests. "Bulgaria possesses a considerable potential of economic valued animal and plant species, ... [yet] there is no co-operation with the agriculture and other economic sectors for development of activities for protection of the biodiversity" (Ministry of Environment and Water, 2001). Indeed there seems to be a fundamental lack of understanding of what is the principal cause of biodiversity loss, viz. habitat loss due to the decline of forests' quantity and quality. To this writer's knowledge, there are very few countries in the world where the number one problem is not habitat loss, yet in Bulgaria the main threats to biodiversity are thought to be pollution and over-hunting, plus a few invasions by alien species (Ministry of Environment and Water, 2001). True, this was the understanding reported in the year 2000, and things may have changed a bit by today.

Global environmental benefits of biodiversity conservation

Biodiversity ranks as one of the chief purposes of the GEF, and with particular respect to the global environmental benefits accruing from conservation of biodiversity (principally the preservation of wildlife species). Key question: What are the global benefits from biodiversity conservation as interpreted by the COP of the CBD that will result from the proposed intervention? Expert analysts have spelled out the many values associated with species preservation, not only ecological and economic values in present-day terms but in the sense of "option" and "existence" values for the longer-run future.

There is much evidence that we are well into the opening phase of a mass extinction of species, which is a problem unlike virtually all our other environmental problems in that it is irreversible within conventional time horizons. We are surely impoverishing the biosphere, with all that entails for the biosphere and humankind's outlook (no less), for a period of at least five million years or a period twenty times longer than humans have been a species (Myers and Knoll, 2001). In principle, then, there is exceptional global benefit in preserving species.

All this applies notably to Bulgaria since it possesses a species total that is disproportionately large in relation to the country's land area. As noted above, preservation of species will be largely achieved by increased conservation of Bulgaria's forests. In addition, there are further global benefits in that Bulgaria's forests, unduly extensive for a small country, will, if conserved, supply carbon sinks and thus contribute to GEF efforts as concerns climate change. Conversely, of course, if Bulgaria's forests continue to be subject to unusually frequent and large fires, that will contribute to build up of CO2 in the global atmosphere.

48 The December 23 letter from Michael Nelson lists a number of specific biodiversity points to which reviewers are asked to supply answers. It does not seem to fit well with this critique's "flow" for the answers to be inserted here, so they are set out in Appendix 1.

INSTITUTIONAL REFORM AND CAPACITY BUILDING

This topic is often dealt with in an "along the way" manner, looking at e.g. the inputs of local communities. Important as these can be, this critique considers that institutional reform, together with a particular form of capacity building, are so central to the project's purposes that they deserve a section on its own.

Many governments now understand the basic need to recognize the many complex and dynamic interactions between forestry and biodiversity. This is a long standing issue (Myers, 1993), and indeed the generic issue of linkages was identified by Maurice Strong during the run-up to the Rio Earth Summit as one of the most important while one of the thorniest questions in the whole environmental arena. Regrettably, few governments--whether North, South, West or East, with whatever political orientation and at whatever stage of socioeconomic advancement--seem able to devise the institutional measures that reflect these multiple linkages. This is due not only to the complexity of the many factors involved, but to the traditional division of government functions into discrete ministries, which in turn leads to "political empires" and thus to turf rivalries--precisely the opposite of the collaborative spirit that is at a premium for intersectoral activities. This is an age-old problem (Myers, 1993), and it seems to prove as intractable to the Government of Bulgaria as to other governments around the world, including the most "advanced" (Gercheva and Shoumkova, 2002; Government of Bulgaria, 2003). There is all too little material in the voluminous documentation for the present FDP project to indicate that the Government of Bulgaria has yet to get to grips, even in conceptual terms, with a challenge that is as crucial as it is perplexing.

To illustrate the nature of the challenge: the writer participated in the late 1980s in a World Bank project in the Philippines, directed at Natural Resources Management. It entailed ministries and departments of forestry, agriculture, fisheries, biodiversity, water resources, hydropower, coastal zones and human settlements. Because of the intrinsic character of linkages, it was to serve as a kind of flagship project for the Bank's environmental efforts. Immediately a key question arose: Which institution should be responsible for overseeing the linkages challenge and making sure that ministries concerned would become concerted? After examining all kinds of possibilities, the project report finally proposed a new Czar-type body answering directly to the country's President in order to rise above the roadblock of ministerial territoriality. Unfortunately the nascent body was perceived as a "new kid on the block" that lacked the day-to-day political leverage to enforce coordination among long established ministries and departments, whereupon the "process" proved to be little improvement upon the previous situation.

Lesson to be learned: the Government of Bulgaria should address the problem head on by instituting a mechanism with sufficient power to assert its authority over all participant parties. This will be a tough measure indeed, and needs to be spelled out with all due force in the FDP, even though the present version of the document makes hardly a mention of the problem, let alone spells out the necessary initiatives. There seems to be a good way to go. In the National Environment Action Plan 2000-2006 (Ministry of Environment and Water, 2001), we read about the policy imperative to "create institutional framework for carrying out strategic EIAs, including legal basis and administrative capacity", yet this writer has come

49 across little in the way of specific concrete measures envisaged (after reading 300 pages of background literature).

SUPPLEMENTARY ASPECTS

I have preferred to direct my attention to the lengthy list of project activities envisaged and to evaluate their worth, rather than to assess the line-by-line items of the project budget. In any case I feel I am not in a position to appraise the scale and scope of the main budget components, whereas Bank staffers are presumably expert at that. By extension I have not looked at e.g. credit conditions, loan guarantees, disbursement mechanisms, legal concerns and fiduciary matters. I am a systems ecologist and an environmental economist, and that's as far as it goes.

Linkages to poverty relief

Bulgaria is among the poorest countries in Europe. Its per-capita GNI in 2002 was PPP $6840, only a little over half as much as Hungary's and below such (so called) developing countries as Brazil and Malaysia. A principal plank in the government's policy platform is poverty relief, and hence the challenge should be prominent in the FDP document, complete with specific examples of linkages between forestry and/or biodiversity vis-a-vis poverty. Surprisingly, there is only marginal mention, with few illustrations to demonstrate the substantial interactions both present and prospective. A remarkable lacuna.

Compatibility of aims

On page 4 of the Bank's Project Appraisal we read that the FDP aims to "ensure the sustainable use of biodiversity by combining production [presumably of wood] [and] socioeconomic goals." Easier said than done. Does biodiversity conservation have to entail "use"? Or, since an ethical rationale is sometimes employed to underpin biodiversity conservation (e.g. justice to future generations over five million years), can that qualify as a form of "use"?

Moreover many countries and governments with abundant forest resources have proclaimed that they are committed to sustainable use--or sustainable economies, sustainable societies, sustainable futures, etc. I have worked with these challenges in Brazil, British Columbia, DR Congo, Germany, India, Philippines and several other leading countries/regions, and I regret to say that I can hardly think of a single one that comes close to sustainability (in fact many are still moving away from sustainability). This is not to say that their intentions are questionable, except for those that practice corruption on a grandiose scale (and Bulgaria sounds to be far from exempt). Rather it is to say that the challenge is formidable. Sustainability is a new concept, and intersectoral linkages--they lie at the heart of the forestry cause--are a new form of mechanism. Just these two problems are problematic enough.

SUMMATION AND CONCLUSION

Bulgaria is richer in its forests and its biodiversity than most other countries in Europe, especially those of similar size. The government seems to be aware of this remarkable biotic wealth, and to this end (among others) it has presented an ambitious project proposal to the GEF.

50 There are several strengths to the FDP document:

1. It makes a sound-ish case for both forestry and biodiversity, demonstrating that Bulgaria is unusually well endowed with both.

2. It highlights the imperative of mainstreaming biodiversity and hence of forests. This implicitly recognizes that both sectors have not enjoyed the policy prominence they deserve in Bulgaria's efforts to achieve sustainable development.

3. It appears to accept that a policy demarche to enable biodiversity and forests to make their proper full contribution to Bulgaria's future must be much more than a case of "the same as before only more so and better so." The Government should seize this opportunity to adopt a radical reorientation of policy toward both sectors, especially as concerns the many interlinkages between the two, and between them jointly and the rest of Bulgaria's development sectors.

At the same time, there are several weaknesses in the FDP document:

1. There is next to no mention of two factors that should receive extensive treatment, viz. forestland watersheds and climate change/global warming. Both of these will prove strategically important for the future of Bulgaria's forests and hence for its biodiversity.

2. In an increasingly integrated world, the phenomenon of linkages--intersectoral, interdepartmental, etc.--will become ever-more important. This should be addressed in detail, and in both conceptual and applied terms. Special emphasis should be directed to the key question of how to articulate linkages through institutional dispositions.

3. Initiatives arising from this last item will help with a prime goal of the FDP, viz. to "mainstream" not only biodiversity but forestry as well. Both sectors are subject to the same unfortunate process: lots of observers, notably government officials, urge that they are so important that they need to be mainstreamed in a manner that puts them at the heart of government policy across the board. After all, both forestry and biodiversity interact with numerous other sectors, and these relationships need to be formalized through explicit institutional measures (Myers, 2002 and 2003). Yet when all is said and done, there is much more said than done. In certain respects, indeed, the two sectors tend to be increasingly marginalized, as witness the declining budgetary support accorded by several major governments and U.N. agencies. The Government of Bulgaria should give careful thought to this problem, and demonstrate that it is taking specific actions to turn the problem into an opportunity.

4. The document does not appear to give enough credit to the value of Bulgaria's forests through their mere existence, e.g. as key elements in watershed functions and as carbon sinks.

All in all, I consider the document's overall thrust to be reasonably on target toward a singularly important purpose. But in its present form it does not altogether do justice to its cause, nor does it yet substantiate funding support of the sizeable scale in question. Too many aspects are not dealt with in sufficient depth, and too many are all but omitted from more than cursory examination. I suggest that another 20% of time and effort could make the document 40% better, whereupon it would be much more likely to serve its purpose in its full scope.

51 REFERENCES AND BIBLIOGRAPHY

Food and Agriculture Organization. 2002. Forestry Sector: Country Profiles. Food and Agriculture Organization, Rome.

Gercheva, D. and T. Shoumkova. 2002. Country Reporting on a National Assessment and Consultation Process for WSSD. Government of Bulgaria, Sofia, Bulgaria.

Government of Bulgaria. 2001. National Strategy for the Environment and Action Plan 2000- 2006. Council of Ministers, Republic of Bulgaria, Sofia, Bulgaria.

Government of Bulgaria. 2003. State of the Environment 2003. Government of Bulgaria, Sofia, Bulgaria.

Ministry of Environment and Water (Bulgaria). 2001. National Strategy for the Environment and Action Plan 2000-2006. Ministry of Environment and Water, Sofia, Bulgaria.

Myers, N. 1993. Environment and Development: The Question of Linkages. BioScience 43: 302-309.

Myers, N. 1996. The World's Forests: Problems and Potentials. Environmental Conservation 23(2) 156-168.

Myers, N. 1997a. Our Forestry Prospect: The Past Recycled or a Surprise-Rich Future? The Environmentalist 17: 233-247.

Myers, N. 1997b. The World's Forests and Their Ecosystem Services. In G.C. Daily, ed., Nature's Services: Societal Dependence on Natural Ecosystems: 215- 235. Island Press, Washington D.C.

Myers, N. and four others. 2000. Biodiversity Hotspots for Conservation Priorities. Nature 403: 853-858.

Myers, N. and A. Knoll. 2001. The Biotic Crisis and the Future of Evolution. Proceedings of National Academy of Sciences (USA) 98: 5389- 5392.

Myers, N. 2002. Biodiversity and Biodepletion: The Need for a Paradigm Shift. In T. O'Riordan and S. Stoll, eds., Protecting the Protected: Managing Biodiversity for Sustainability: 46-60. Cambridge University Press, Cambridge, U.K.

Myers, N. 2003. Conservation of Biodiversity: How Are We Doing? The Environmentalist 23: 9-15.

National Association of Municipalities in the Republic of Bulgaria. 2002. Subnational Statistical Capacity Building Action Plan. National Association of Municipalities in the Republic of Bulgaria, Sofia, Bulgaria.

Project Management (Ireland) Ltd. No date. Documents headed Bulgaria Forest Development Project, Project Preparation No. PE-PO33964, and entitled "Analysis and impact assessment of the applied forest management practises on forest biodiversity", "Inventory and Assessment of Forest Habitats in Bulgaria", "Identifying Forest Areas of

52 Conservation Significance", "Approaches and Guidelines for Development of Management Plans for Forest Areas of High Conservation Importance", "Use of Non-timber Forest Resources", "Institutional Analysis of the Nature Parks", "Rehabilitation of High Conservation Value Forests", "Regulatory Framework for Management of the Nature Parks-- Opportunities and Restrictions", "Assessment of the Effectiveness of Nature Parks Management", and "Ecotourism Development".

Republic of Bulgaria. 1996. National Strategy for Conservation of the Forests and Development of the Forestry in the Republic of Bulgaria. Republic of Bulgaria, Sofia, Bulgaria.

United Nations Development Programme. 2003. Human Development Report 2003. United Nations Development Programme, New York.

United Nations Development Programme. 2003. Biodiversity Enabling Activities in Bulgaria. United Nations Development Programme, Sofia, Bulgaria.

United Nations Educational, Scientific and Cultural Organization. 2003. Biosphere Reserves. Man and the Biosphere Programme: List of Biosphere Reserves. United Nations Educational, Scientific and Cultural Organization, Paris, France.

United Nations Population Division. 2003. World Population Prospects: The 2002 Revision. United Nations, New York.

U.S. Department of Energy. 1997. Bulgaria: Climate Change Country Study. U.S. Department of Energy, Washington DFC, U.S.A.

U.S. Energy Information Administration. 2003. Country Analysis Briefs. U.S. Department of Energy, Washington DC.

World Bank. 2001. World Bank/OECD/CDE Joint Project on Subnational Statistical Capacity Building. The World Bank, Washington DC, U.S.A.

World Bank Group. 2001. Bulgaria Forest Development Project: List of NGOs. World Bank, Washington DC, U.S.A.

World Conservation Monitoring Centre. 1999. National Protection Systems: Protected Areas Database of the World Conservation Monitoring Centre. World Conservation Monitoring Centre, Cambridge, U.K.

World Resources Institute. 2003. Earth Trends 2003. (www.wri.org)

December 31st 2003 Norman Myers

53 APPENDIX 1

Specific biodiversity points raised in the December 23 letter of Michael Nelson: "How far do GEF activities and approaches help to maintain biodiversity and other diversity of biological resources in the four ecosystems at issue in the case of Bulgaria?" See my main text.

"Regional context: what is the regional importance of the area of intervention from a conservation perspectives? Can also refer to the transboundary aspects of an intervention in a single country, e.g. when an ecosystem extends across two or more countries, hence demanding a management link between the contiguous parts of the ecosystem." See my main text.

"Scope for replicability of the project: could the intervention be replicated elsewhere on the bases of experience and learning?" Yes, in certain other countries of the Balkan peninsula, subject to variations in biodiversity endowment (Greece is richer, others are generally poorer or much poorer than Bulgaria). Other variations can include: policy commitment at the highest levels of government, and at all relevant subsidiary levels; general societal interest; adequate track record in conservation (not just of wildlife); demonstration that the institutional capacity is sufficient for a start and offers marked scope for expansion.

"Sustainability of the project: what is the potential for continuation of the changes the project aims to achieve? How will the project's activities and impacts be sustained after the completion of the project?" Promising prospect in terms of official interest, but less positive in terms of policy orientation; a key factor will lie with intersectoral linkages, which the government seems to recognize in principle but shows scant sign of turning into practice (especially in the Monday- morning world).

"Secondary issues: linkage to other focal areas. Is the project consistent with the operational strategies of other focal areas, and will it avoid negative impacts in focal areas outside the focus of this particular project? What activities can be designed (meaning, are they feasible and cost effective?) of a type that will contribute to global environmental benefits in other focal areas, especially in the cross-sectoral area of land degradation? For instance, will it sequester carbon and minimize land degradation, both with opportunities for biodiversity conservation? Activities with respect to international waters may offer scope to integrate aquatic biodiversity components. That is to say, has the project taken into consideration impacts on other focal areas?" See my extended treatments of linkages and associated issues. On CO2 emissions and carbon sinks (forests), see main text.

"Are there linkages to other programmes and action plans at regional or subregional levels?" See main text for lots of instances.

"How far will the GEF intervention interact with and generally support other on-going initiatives? In addition, there may be other beneficial or damaging environmental effects; for instance, could the management of a protected area generate other ecosystem services both

54 to local communities and the region as a whole? Could eco-tourism lead to negative impacts?; or could harvesting of biological resources be sustainable or excessive?" See main text for a partial answer. I am not sufficiently acquainted with e.g. "other on-going initiatives" nor with eco-tourism. I have not had time to Google for information, and the documents sent offer little guidance.

"Stakeholder involvement: A centrally important factor in the operational programme, especially insofar as Bank/GEF activities are intended to promote community-based management of biodiversity, the co-management of resources--and to do this through contracts or negotiations with governments that define each stakeholder's responsibility in managing the resource, and the devolution of management to local groups and NGOs. How far are partnerships with stakeholders appropriate to local conditions and be based on local expertise?" I don't know enough about the NGO component of governance in Bulgaria, except that there are many bodies or branch offices of substantive NGOs (at least, they sound that way) with prime interest in biodiversity, threatened species and wildlife in general (World Bank Group, 2001). There is also mention of international NGOs that in 2000 were reported to have totalled just over 2000 (surely too high a total?) or 1.7% of all such INGOs in Europe.

"Are there sound plans for facilitating the flow and exchange of technical information between communities and stakeholders? Are participatory schemes adequate? What conflict issues are there, and how are they being dealt with?" Regret, can't respond.

"Capacity building: Capacity building efforts to promote the preservation and maintenance of indigenous and local communities, knowledge, innovation, and practices relevant to conservation of biodiversity with their prior informed consent and participation." See main text.

"Crucial need: stronger institutions, together with well-trained staff." See main text.

"Does the project direct enough attention to capacity building? Is there sufficient human capacity to tackle the issues?" Yes, certainly; and probably No.

"Innovativeness of the project: In what respects can the project's approaches be considered innovative?" Seems to be rather conventional in its approach, though not any worse for that. Bulgaria's biodiversity is uniquely rich in the Balkans.

"Biodiversity: scientific and technical soundness of the project, e.g. tenure systems, local technical knowledge, local leadership on conservation measures (NGOs) enforcement and monitoring, sustainable use. Deal with NGOs and certain other factors under Degree of Involvement of Stakeholders." See main text for partial response. I could not dig out information on technical items such as land tenure in the time allowed.

"1. Is there sufficient ecological and technical information available to give the project a sound scientific base?"

55 Yes, for the most part. But note a severe lack of basic statistical data: totals for plants, mammals, etc., diverge markedly from one source to another.

"2. Have all threats to the ecosystem been considered?" No, not by a long way. The biggest threat of all, global warming, is merely mentioned in passing.

"3. Does the type of ecosystem management proposed require further research?" Yes, especially as concerns watershed functions.

"4. Is there a need to develop indicators to achieve the objectives?" Yes, indeed; much of the situation seems fuzzy, so monitoring especially through indicators will be vital.

"5. Will appropriate monitoring be put in place?" Could be; should read "Absolutely will be."

"6. Will the approach taken in the project proposal achieve the objectives of conserving biodiversity?" Yes and no; see main text.

"7. What are the risks and constraints associated with the approach?" See main text. Main roadblocks: partial lack of basic information; lack of understanding of institutional shortcomings, notably intersectoral linkages and how they should be handled.

"8. Is there any area weakness, gap in the project?" See my Summation and Conclusion.

"9. Are there are controversial aspects about the project?" See main text on sizeable lacunae in knowledge and understanding.

"10. Does the project introduce incentives that may lead to over-harvesting (in the case of a sustainable use project)?" I don't see any, but could arise during implementation.

"11. How will the drops in revenue as a result of conservation measures be compensated?" Conservation could/should increase economic advancement, albeit not all benefits will be in commercial/financial terms. Need to devise ways to take formal explicit notice of intangibles and incommensurables.

"12. Are there legal instruments aspects that should be dealt with?" I do not know enough about law.

"13. How will the model of sustainable use outlined in the project be developed?" Looks okay on paper, but that is generally the case. All manner of problems could arise along the road of implementation.

"14. How effective will the proposed model be in the local situation?" Prospects are positive, subject to shortcomings listed above.

56 "15. Is there evidence that the project offers the best long-term solutions?" Such evidence as is available or could be dug out during a highly compressed work schedule suggests that the project offers a GOOD prospect--but the best?

57 RESPONSE TO COMMENTS FROM STAP REVIEWER

(including Annex on interventions in Protected Areas)

------Main Questions raised by the STAP Reviewer

1. What are the global benefits from biodiversity conservation that will result from the project interventions?

Answer by TT: The revised PAD will clarify these. In particular it will (a) describe in more detail the global significance of Bulgarian forest biodiversity; and (b) explain how the project interventions, including in particular fire management, improved forest management planning including conservation of HCVF forests and ecological corridors, and improved governance, will protect that biodiversity. The revised PAD will also include a table of GEF funded project interventions in the main nature parks, including their area, particular ecological features and values, main threats, planned GEF interventions and the global benefit of GEF interventions (see annex to response).

2. How will the project address institutional reforms and intersectoral linkages?

Answer by TT: Institutional reform is an integral part of project design. In particular the project supports structural reforms to clarify the responsibilities and financing for state forest management. Forest management functions will be executed by a new State Forest Management Company separated from the State Forest Service which will be strengthened by considerably strengthened by the project. An extension service for new private forest owners will be established and capacities of the forest inspection service will be increased. Protected area management under the authority of the Ministry of Agriculture and Forestry will be significantly strengthened. The institutional reform process is based on broad participation, about 50 background studies are available. Inter-linkages between sectors and departments will be achieved through representation in supervisory committees, membership in the Board of the National Forest Company and the National Trust Eco-Fund. The Ministry of Environment share co-responsibility for the implementation of GEF-funded and carbon-related activities.

3. Does the project have linkages with climate change / global warming?

Answer by TT: First, many project activities will directly contribute to climate change mitigation namely reforestation of burnt areas, forest fire management, improved management (thinning). All these activities will result in CO2 emission reductions. In addition, There is an opportunity to build on previous World Bank studies and pilot projects relating to forest carbon. The project will build on this previous experience and support the creation of a small facility within the MAF to prepare concrete forest-related emission reduction investment proposals for submission to potential carbon buyers under Joint Implementation (JI) and Green Investment Schemes. This small facility would also be tasked with raising awareness of forest stakeholders on forest-related climate change issues.

Second, the project addresses the adaptation of forests to climate change. The project is in line with the recommendations of the National Communication on Climate Change. An increased capacity of forest to adjust to varying conditions – including increased temperatures and catastrophic events (e.g. fire, insect outbreaks, storms) associated with climate change – can be achieved in particular through: (i) preserving biodiversity and flora and fauna genetic resources through a well managed network of Protected Areas and ecological corridors, (ii) improving the resistance and vitality of forest stands through timely thinning and favoring mixed species adapted to local conditions in reforestation and thinning activities and (iii) increasing the share of deciduous trees in reforestation. All of these activities are included in the project design. In addition, the development of the forest fire management system will help address the increased risk of forest fire.

58 4. Does the project address watershed protection issues?

Answer by TT: Yes -- this aspect will be brought out more clearly in the revised project document. The PAD will highlight the watershed protection aspect of project interventions and that the forest management regime specifically incorporates watershed management concerns.

5. How does the project address poverty reduction?

Answer by TT: The reforestation and thinning activities will provide direct rural employment opportunities. The more significant impacts, however, will be from improved forest management and value added in the forest sector leading to better timber utilization in wood industry on the one hand, and increased job opportunities from non-timber values of forests including tourism.

6. How does the project address improved governance and corruption?

Answer by TT: The institutional reforms will support more transparent financing, financing and management information systems. Accompanying the project are also improvements in the timber auctioning systems. And the project supports introduction of certification regimes, and transparency and multi-stakeholder participation in forest management planning. An analytical study on illegal logging will be undertaken in the initial phase of the project and an action plan to address illegal logging and governance issues will be developed.

7. How does the project support a forest management regime which incorporates landscape values?

Answer by TT: In a number of ways, through identification of HCV forests and ecological corridors, through regeneration focusing on native species, through incorporating watershed protection and nature parks in forest management planning. The PAD will reflect these points more explicitly in the revised draft.

8. Did the project analyze and address in sufficient depth all the background problems and root causes for losses of biodiversity in Bulgaria?

Answer by TT: The project was prepared with systematic consultation and support of all stakeholders in Bulgaria, including environmental NGOs from the various regions in Bulgaria. 16 background studies covering all major aspects of nature protection, biodiversity conservation and protected areas management have been prepared and taken into account in the Project planning documents. They are listed in the Project Brief document attached to this submission package.

59 Annex 4: Detailed Project Description BULGARIA: FOREST DEVELOPMENT PROJECT

Component 1: Strengthen Public Forest Sector Management ($19.19 million total, $15.84 million IBRD, $0.61 million GEF)

The project will support capacity building of the forest administration at headquarters and regional levels by assisting in building and strengthening nationwide forest extension and inspection services. Support will focus on policy, legislation and governance, management of change, standard operating procedures financial management and training and extension materials as specified in the RS. Capacity building at district level is addressed under the PHARE Twinning program and covers training on enforcement of laws and forestry use regulations as well as on extension services to private and municipal forest owners. The project will also finance office equipment and logistical support for forest extension and inspection services.

In line with the National Fire Strategy, the project will support (i) a community education and awareness campaign, (ii) the development of a fire danger rating and early warning system, (iii) provision of fire trucks and fire fighting and safety equipment, (v) purchase of radio equipment, (v) training, and (vi) a fire study exchange in the Mediterranean region. Activities will be coordinated with the FAO project on strengthening capacity for forest fire prevention. The GEF will contribute incrementally (10 percent) to the forest fire support as there will be global benefits from reduced critical habitat destruction.

The new state forest administration will require a sound basis for decision-making, for monitoring and control and facilitating the development of the sector. A modern national database and information system is required. The project will support system design and implementation, data conversion, hardware, software and installation roll out to regional and district offices. It will support improved planning, monitoring and control for biodiversity and high value conservation thereby justifying the incremental GEF support (10 percent).

The project will address illegal logging through: (a) a pilot surveillance project; (b) a detailed study on the extent of illegal logging and corruption including forest surveillance; and, (c) implementation of measures to reduce illegal activities based on study recommendations. The GEF will provide incremental support (10 percent) in order to reduce the negative impacts of illegal logging on globally significant biodiversity.

The draft national forest certification standard prepared by a National Working Group (NWG) has not achieved Forest Stewardship Council (FSC) endorsement. The process has stagnated due to lack of funds. The project will fund the finalization of the national forest certification standard.

There are 15 Professional Technical Schools for forestry but equipment is outdated and there is a lack of focus on commercial/entrepreneurial and skills development. The project will support the refurbishment of classrooms, teacher training and the purchase of technical publications. Supporting schools will improve the long term viability and sustainability of the industry thereby increasing the value and improving the utilization of wood resources.

60 To enhance the mainstreaming of biodiversity conservation in forest management planning the project will support: (i) the identification of the actual boundaries of high conservation value forests and habitats that are adjacent and functionally related to these forests; (ii) the development of costed action plans for the protection and restoration of these areas and key constituent species; (iii) the development and dissemination of guidelines and tools for integrating biodiversity conservation into forest management; and, (iv) the recommendation of amendments to the forest management legislation and NFC statutes to take account of biodiversity and landscape conservation. GEF and IBRD will jointly fund this activity.

Forest-related climate change initiatives have an immense potential to bring sustainable financing to Bulgaria – in particular through marketing carbon credits under the Joint Implementation (JI) Mechanism - but the there is a lack of capacity in JI understanding and in identifying future potential forestry JI projects. Eligible JI forestry activities could enable the thinning and tending of young stands, the reforestation of degraded or burned areas etc for many years to come. This would be of benefit to both state and non-state private owners. The project will support the Bulgarian forest administration in building JI capacity and in developing a JI project pipeline for forestry and wood energy.

Component 2: Strengthening Capacity of Non-State Forest Owners (Total $2.46 million, IBRD $1.54 million, GEF $0.73 million)

The new private and municipal forest owners need coordination and a lobbying voice. The project will support the establishment of a national umbrella organization, The Bulgarian Association of Forest Owners (BAFO). Funding will reduce on a sliding scale over the project. GTZ will contribute to the establishment of BAFO.

The emergence of owner associations is at an early stage. The project will support the establishment of owner associations in those regions without owner representation. The project will support the development of guidelines for private forest management / business plans for municipal and private owners. Specific support will be provided to include conservation and biodiversity management plans over and above forest management plans as some private forests are located in critical habitats and watershed protection areas and thereby justifying incremental support by GEF (30 percent).

Application procedures under the SAPARD (EU pre-accession funds) Forestry Measure 1.4 are extremely daunting for private owners. Without changes there is a risk of not achieving targets of accessing funds. The project will support (a) a needs assessment of private owners, (b) a review and realignment of the SAPARD Forestry measure targeted at improving its relevance and accessibility to private owners and owner associations and (c) support in the preparation of funding applications.

A small-grant incentive program to (i) strengthen public participation in forest biodiversity conservation and for (ii) specific actions aimed at sustainable habitat restoration and biodiversity conservation (e.g. introduction of sustainable patterns for the use of non-timber forest resources; promotion of sustainable eco-tourism development). will be provided by the project. This program is aiming (i) in areas adjacent to Nature Parks, at providing incremental support to the biodiversity and conservation management and (ii) at sustainable habitat restoration and biodiversity conservation (e.g. introduction of sustainable patterns for the use of non-timber forest resources; promotion of sustainable eco-tourism development) in non-

61 State forest areas. This program will be implemented under the overall responsibility of the State Forest Administration’s extension service.

Component 3: Supporting State Forest Management Transition to Market Economy ($24.06 million total, $19.82 million IBRD, $0.55 million GEF)

The priority is the implementation of the restructuring study and development of human resources required to sustainably manage state forests and public purpose functions. The project will finance the design and implementation of a GIS based management information, planning and monitoring system, including the incremental costs specific to the management of biodiversity in production forests and also the Nature Parks provided by GEF funding. The project will support specific strategic actions from the RS including supply chain analysis, business planning, business process re-engineering and human resource development. Support will be provided for the development of senior management capacity and specialist training for HQ and Region staff in marketing, financial management and training / facilitation skills. General capacity building is addressed under the PHARE Twinning program. Lastly the costs for the services of an international co-chief executive will be provided, for 3 years (until EU accession). Specific biodiversity and conservation management planning assistance will be provided for the 10 Nature Park directorates, with the costs provided by GEF (component 4.1.2).

There are about 27,000 km of forest roads in Bulgaria. The low road density of 7.9 m/ha (compared to a mean road density of 45 m/ha in commercial forests and 9 m/ha in protection forests in Austria) is leading to increased extraction costs and environmental damage through partial over-exploitation, driving with heavy tractors inside forest stands, non-accessibility in case of forest fires etc. The project would support the development of a national forest road master plan (FRMP) incorporating environmental and biodiversity concerns in the design and investment prioritization, thereby justifying incremental support by GEF (10 percent). The FRMP will be subject to a separate Strategic Environmental Impact Assessment.

The project will also support (i) development of a Code of Best Practice for the design, construction and maintenance of forest roads and (ii) upgrading (about 120 km) and construction of forest roads (about 30 km) in pilot areas identified under the master plan including the cost of environmental assessment. NFB priority regions for forest roads are shown on Map 3 [to be included at a later stage].

Due to budget shortfalls in recent years, the thinning of young stands, mostly coniferous, has been neglected, putting at risk the significant state investments in these plantations. Less than 30 percent of first and second phase thinnings are being undertaken. The project will support the thinning of some 10,000 ha (equivalent to 10 percent of 2004-10 thinning program) in the priority regions of Kardjali, Blagoevgrad, Bourgas, Schumen, Stara Zagora, Lovech and Kustendil. Stands have been selected according to criteria developed and agreed during project preparation. In addition to increasing the future value of these forests, thinning will generate significant local employment opportunities. The forest regions where thinning will be supported by the project are shown on Map 2 [to be included at a later stage].

Recent forest fires have destroyed large areas in the South East of the country. The rehabilitation program for 2002-2006 is 12,000 ha. The project will fund reforestation (site preparation, planting and cleanings in years one and two) of 600 ha in the Sliven, Bourgas and

62 Kardjali regions. Areas for reforestation were selected according to criteria developed and agreed during project preparation. This activity is expected to provide significant local employment opportunities. Map 1 [to be included at a later stage] shows the forest regions where reforestation will occur.

Bulgaria needs to start preparing now for the export of increased timber products based on volume targets outlined in the NFPS. The project would fund (a) a certification scoping study in a pilot forest area to identify corrective action requirements and (b) technical assistance to implement corrective actions, (c) assessment of pilot area for certification and (d) training of local assessors.

Component 4: Strengthening Protected Areas Managed By the Ministry of Agriculture and Forests ($6.49 million total, $4.40 million GEF)

This component will assist, mainly with GEF funding, the strengthening of the system of Nature Parks through improved management, planning and control and through targeted investments for critical species conservation programs and infrastructure.

The project will support (i) office and field equipment to improve the effectiveness of the Nature Parks, (ii) an independent annual assessment of the Nature Parks’ management effectiveness as a whole, (iii) priority investments and conservation programs in Nature Parks, and (v) preparation of management plans for selected Nature Parks and Protected Sites.

Nature Park Area (ha) Main Ecosystem Features Shoumensko 3292 High canopy beech and hornbeam forest with some Plateau plantations of pines and false acacia Zlatni Pyassatsi 1320 Mixed humid deciduous forest, with lianas in coastal stands and submediterranean shrub species on the dry slopes Roussenski Lom 3259 Mid-European deciduous forest (oriental hornbeam), with shrub and steppe formations Vitosha 26606 Mixed deciduous and conifer forest belts leading up to alpine pastures with lakes and bogs Vrachanski Balkan 30129 Mixed deciduous and conifer forest belts with karstic cliffs and screes Strandja 116136 Highly diverse mixed deciduous forests with sub- Mediterranean features ranging from coasts to hills, with some wetlands, rivers and pastures Sinite Kamani 11380 Mixed deciduous (mainly beech) forests with secondary steppe and dry calciphilic herbaceous communities; siliceous rocky outcrops Rila Monastry 27370 High alpine meadows, mixed conifer and deciduous forests; particularly rich in fungi species (162) Bulgarka 21772 Beech and mixed deciduous forest, with highland pastures and meadows Persina 21762 Danubian wetlands, flood meadows and riverine forests and river islands

63 Nature Area Main Ecosystem Features Main Threats Planned GEF Interventions Global Benefit of Park (ha) and Values GEF Intervention Strandja 116,13 Highly diverse mixed Lack of proper interaction with  Provision of basic office and  Enhanced capacity to 6 deciduous forests with sub- the local regional Inspectorate site management manage high Mediterranean features of the MOEW (RIEW) equipment conservation value ranging from coasts and Poaching, especially in the  Staff participation in forest ecosystems dunes to hills, with some rivers integrated training effectively wetlands, including riverine Tourism development along programme  Reduction of external forests, rivers and pastures; the seaside  GIS-based management impacts on high unique vegetation of South- Construction especially along information system conservation value Euxinian type; river estuaries; the seaside and construction installed, including forest ecosystems highly preserved rivers; sea of power stations along the biodiversity monitoring e.g. visitor cliff ; Important Bird Area Veleka river programme disturbance, fires and (IBA); important site for the hunting herpethofauna and the Unsustainable forest practices  Implementation of small  Development of mammal fauna – the felling cycle in the grants programme in local forests of the highest communities intrinsic understanding of the conservation value to be  Investment in critical concepts and improved infrastructure for visitor practices related to Lack of a GIS to support the management management of the territory mainstreaming  Biodiversity survey and biodiversity in to Abandonment of agriculture monitoring: Threatened general forest lands vascular plants; fungal management Insufficient funds to carry out diversity in forests and  Conservation of infrastructure projects rational use; integrated threatened species concerning visitors’ safety and research and monitoring of and critical habitats information services Trirechie area; publication Lack of conservation action of handbook plans for species and habitats  Preservation of critical of high conservation value – habitats: Fire prevention Egyptian vulture, otter, and and control forests of the South-Euxinian  Critical species protection: type Egyptian vulture Neophron percnopterus; fish fauna of River Rezvaia, otter 64 Nature Area Main Ecosystem Features Main Threats Planned GEF Interventions Global Benefit of Park (ha) and Values GEF Intervention population monitoring and conservation action plan development Vrachanski 30,129 Mixed deciduous and conifer Poor interactions with the  Provision of basic office and  Enhanced capacity to Balkan forests – especially beech RIEW site management manage high forest on limestone and Lack of a GIS to support the equipment conservation value Austrian pine forests with management of the territory  Staff participation in forest ecosystems karstic cliffs and screes; high Insufficient funds to carry out integrated training effectively floral and invertebrate fauna infrastructure projects programme  Reduction of external endemism; potential IBA concerning visitors’ safety and  GIS-based management impacts on high information services information system conservation value Goat grazing within the installed, including forest ecosystems highland sections and in biodiversity monitoring e.g. visitor forests programme disturbance, fires and hunting Lack of fire management  Implementation of small system grants programme in local  Development of Lack of conservation action communities intrinsic understanding of the plans for species and habitats  Preparation of management concepts and of high conservation value – plan predatory birds, wolf, bats practices related to  Investment in critical mainstreaming infrastructure for visitor biodiversity in to management general forest  Biodiversity survey and management monitoring: Birds, wolves  Conservation of Canis lupus and bats threatened species and critical habitats Rila 27,370 High alpine meadows, primary Lack of proper interaction with  Provision of basic office and  Enhanced capacity to Monastery conifer and deciduous forests local partners, the church site management manage high characterized by high floral authorities of Rila Monastery – equipment conservation value endemism; habitat diversity; the largest land owner  Staff participation in forest ecosystems habitats of large carnivores Lack of coordination of integrated training effectively and chamois; highland activities with the Rilan programme  Reduction of external meadows with circus lakes National Park  GIS-based management impacts on high

65 Nature Area Main Ecosystem Features Main Threats Planned GEF Interventions Global Benefit of Park (ha) and Values GEF Intervention Poaching in forests information system conservation value Unsustainable forest practices installed, including forest ecosystems especially in the valuable high biodiversity monitoring e.g. visitor stemmed stands programme disturbance, fires and Insufficient funds to carry out  Implementation of small hunting infrastructure projects grants programme in local  Development of concerning visitors’ safety and communities intrinsic information  Investment in critical understanding of the Potential threat biodiversity infrastructure for visitor concepts and losses due to species’ management practices related to mainstreaming extinction  Critical species protection: biodiversity in to Lack of conservation action Alpine newt Triton alpestris; general forest plans for species and habitats yew Taxus baccata, grey management of high conservation value wild tobacco Ligularia glauca, wild rhubarb  Conservation of Rheum rhaponticum and threatened species rose-root Radiola rosea and critical habitats Vitosha 26,606 Mixed deciduous and conifer Poaching, especially chamois  Provision of basic office and  Enhanced capacity to forest belts leading up to sub- Tourism development site management manage high alpine pastures with bogs; especially skiing and illegal equipment conservation value high invertebrate endemism, construction for recreation  Staff participation in forest ecosystems high floral diversity, esp. purposes integrated training effectively mosses; large carnivores Insufficient funds to carry out programme  Reduction of external habitat infrastructure projects  GIS-based management impacts on high concerning visitors’ safety and information system conservation value information services installed, including forest ecosystems Habitats loss in the historical biodiversity monitoring e.g. visitor aspect programme disturbance, fires and hunting Lack of fire management  Implementation of small system grants programme in local  Development of Lack of conservation action communities intrinsic understanding of the plans for species and habitats  Investment in critical concepts and of high conservation value – infrastructure for visitor practices related to capercaillie, chamois, riparian management

66 Nature Area Main Ecosystem Features Main Threats Planned GEF Interventions Global Benefit of Park (ha) and Values GEF Intervention alder communities  Biodiversity survey and mainstreaming monitoring: Suslik Citelus biodiversity in to citelus general forest  Critical species protection: management Capercaillie Tetrao  Conservation of urogallus and Balkan threatened species chamois Rupicapra and critical habitats rupicapra balkanika  Preservation of critical habitats: Fire prevention and control; rehabilitation of the riparian alder communities Bulgarka 21,772 Beech and mixed deciduous Lack of a general  Provision of basic office and  Enhanced capacity to forest, with highland pastures management plan site management manage high and meadows; important Poaching in forests equipment conservation value carnivores and predatory birds Tourism development  Staff participation in forest ecosystems habitat s especially plans to develop integrated training effectively skiing in the highland sections programme  Reduction of external Unsustainable forest practices  GIS-based management impacts on high – clear cuts in the remaining information system conservation value primary beech forests installed, including forest ecosystems Lack of coordination with the biodiversity monitoring e.g. visitor Central Balkan National Park programme disturbance, fires and hunting and common action with them  Implementation of small Insufficient funds to carry out grants programme in local  Development of infrastructure projects communities intrinsic understanding of the concerning visitors’ safety and  Preparation of management concepts and information services plan practices related to  Investment in critical mainstreaming infrastructure for visitor biodiversity in to management general forest management

67 Nature Area Main Ecosystem Features Main Threats Planned GEF Interventions Global Benefit of Park (ha) and Values GEF Intervention  Conservation of threatened species and critical habitats Persina 21,762 Danubian wetlands, flood The agricultural and land use  Provision of basic office and  Enhanced capacity to meadows and riverine forests practices destroying the site management manage high and river islands; IBM inside typical habitats and the equipment conservation value poaching; the construction of  Staff participation in forest ecosystems ditches integrated training effectively Lack of proper interaction with programme  Reduction of external local partners  GIS-based management impacts on high Poaching along the wetland information system conservation value Unsustainable management of installed, including forest ecosystems the poplar coppices practices biodiversity monitoring e.g. visitor Insufficient funds to carry out programme disturbance, fires and hunting infrastructure projects  Implementation of small concerning visitors’ safety and grants programme in local  Development of information services communities intrinsic understanding of the Habitats loss in the historical  Investment in critical concepts and aspect infrastructure for visitor practices related to management mainstreaming biodiversity in to general forest management  Conservation of threatened species and critical habitats Sinite 11,380 Mixed deciduous (mainly Poaching on birds and illegal  Provision of basic office and  Enhanced capacity to Kamani beech) forests with secondary logging site management manage high steppe and dry calciphilic Construction for recreation equipment conservation value herbaceous communities; purposes  Staff participation in forest ecosystems siliceous rocky outcrops; the Unsustainable forest integrated training effectively Sinite Kamani themselves are practices, especially programme  Reduction of external unique mountain rocky cliffs; management of coppices  GIS-based management impacts on high

68 Nature Area Main Ecosystem Features Main Threats Planned GEF Interventions Global Benefit of Park (ha) and Values GEF Intervention potential IBA Insufficient funds to carry out information system conservation value infrastructure projects installed, including forest ecosystems concerning visitors’ safety and biodiversity monitoring e.g. visitor information services programme disturbance, fires and Habitats and species loss due  Implementation of small hunting to under grazing grants programme in local  Development of Lack of conservation action communities intrinsic plans for species and habitats  Investment in critical understanding of the of high conservation value – infrastructure for visitor concepts and birds of prey as well as the management practices related to mainstreaming geological complex  Critical species protection: biodiversity in to Birds of prey general forest management  Conservation of threatened species and critical habitats Shoumensk 3,292 High canopy beech and Tourism development and  Provision of basic office and  Enhanced capacity to o Plateau hornbeam forest with some construction for recreation site management manage high plantations of pines and false purposes equipment conservation value acacia Unsustainable forest practices  Staff participation in forest ecosystems – coppice forests management integrated training effectively Insufficient funds to carry out programme  Reduction of external infrastructure projects  GIS-based management impacts on high concerning visitors’ safety and information system conservation value information services installed, including forest ecosystems Lack of conservation action biodiversity monitoring e.g. visitor plans for species and habitats programme disturbance, fires and hunting of high conservation value  Implementation of small grants programme in local  Development of communities intrinsic understanding of the  Preparation of management concepts and plan practices related to  Investment in critical mainstreaming

69 Nature Area Main Ecosystem Features Main Threats Planned GEF Interventions Global Benefit of Park (ha) and Values GEF Intervention infrastructure for visitor biodiversity in to management general forest management  Conservation of threatened species and critical habitats Roussenski 3,259 Mid-European deciduous Insufficient funds to carry out  Provision of basic office and  Enhanced capacity to Lom forest (oriental hornbeam), infrastructure projects site management manage high with shrub and steppe concerning visitors’ safety and equipment conservation value formations; remarkable information services  Staff participation in forest ecosystems canyon system, unique for Habitats loss integrated training effectively Bulgaria; rock cliffs; rocky Lack of conservation action programme  Reduction of external monasteries that are World plans for species and habitats  GIS-based management impacts on high Heritage Site; IBA; high of high conservation value information system conservation value importance of bats Unsustainable agriculture installed, including forest ecosystems practices biodiversity monitoring e.g. visitor Improve management of key programme disturbance, fires and hunting habitats and species – enlarge  Implementation of small the Park to cover the CORINE grants programme in local  Development of site; ensure protection of communities intrinsic understanding of the black stork and cave bats  Investment in critical concepts and infrastructure for visitor practices related to management mainstreaming  Critical species protection: biodiversity in to Black Stork Ciconia nigra general forest and cave bats management  Conservation of threatened species and critical habitats Zlatni 1,320 Mixed deciduous forest, with The draining of the former  Provision of basic office and  Enhanced capacity to Pyassatsi lianas in coastal stands and humid forests, connected also site management manage high submediterranean shrub with the extinction of the equipment conservation value species on the dry slopes; lianas  Staff participation in forest ecosystems

70 Nature Area Main Ecosystem Features Main Threats Planned GEF Interventions Global Benefit of Park (ha) and Values GEF Intervention threatened flora Pollution integrated training effectively Tourism development and programme  Reduction of external construction for recreation  GIS-based management impacts on high purposes, especially of roads information system conservation value Insufficient funds to carry out installed, including forest ecosystems infrastructure projects biodiversity monitoring e.g. visitor concerning visitors’ safety and programme disturbance, fires and information services  Implementation of small hunting Habitats loss in the historical grants programme in local  Development of aspect – loss of the humid communities intrinsic forests  Preparation of management understanding of the Poor interaction with the local plan concepts and practices related to stakeholders and the large  Investment in critical mainstreaming owners of tourism facilities infrastructure for visitor biodiversity in to management general forest management  Conservation of threatened species and critical habitats All Parks 263,02 Most extensive and diverse Inappropriate forest  Establishment of  Long-term support for 6 mixed broadleaf and management practices, Protected Area Endowment protection and evergreen forest ecosystems accidental / deliberate fires, Fund sustainable in western Europe with a wide intensive tourism, illegal management of high range of unique plant hunting and plant collecting, value conservation associations and endemic fragmentation and isolation in forest ecosystems in species populations the wider landscape Europe for Poor staffing and inadequately biodiversity, carbon trained staff and equipment to storage and climate ensure proper law amelioration enforcement Lack of biodiversity monitoring and information management systems

71 Nature Area Main Ecosystem Features Main Threats Planned GEF Interventions Global Benefit of Park (ha) and Values GEF Intervention Lack of GIS based management Development poses serious challenge – especially construction The conservation role of the Parks Administrations as a part of the future Forest Company remains ambiguous and vague

72 This component will also provide counterpart funding for an endowment element in a Protected Areas Fund (PAF) that would provide long-term revenue to complement direct budgetary support for protected areas, including Forest Nature Parks. The project will assist the establishment of the PAF thus stimulating its expansion and revenues with additional resources coming from (i) domestic and international private sector organizations, (ii) Government of Bulgaria (matching contribution up to USD 6 million), and (iii) international multi- and bilateral donors. The PAF will build on the National Trust Eco Fund (NTEF) set up in 1996. Through the PAF, the project would support activities in: (i) Biodiversity protection, restoration, and monitoring; (ii) Protected areas infrastructure and equipment; (iii) Management plans for protected areas; (iv) Sustainable economic use of protected areas; and (v) Communication and education about biodiversity and protected areas. A detailed list of interventions in Nature Parks is attached to this Project Brief including an assessment of the biodiversity values, risks and incremental benefits.

The GEF grant overall contribution to the endowment capital is estimated at USD 1.9 million equivalent. It is expected that the capitalization of the Fund will reach USD 8 million equivalent by the end of the third year of implementation and USD 12 million equivalent – by the project completion. Financing of the endowment capital of the PAF with GEF resources will be conditional upon the availability of counterpart contributions from GoB, private sector and other donors, which should together exceed GEF input at least by a factor of three (also see Section 6 below).

Component 5: Project Management, Monitoring and Inter-sectoral Training Program($2.26 million total, $1.03 million IBRD, $1.03 million GEF)

To provide project oversight and policy guidance during implementation, a Project Oversight Committee (POC) will be established at the level of the Ministry of Agriculture and Forestry in collaboration with the Ministry of Finance and the State Forest Administration and National Forest Company.

The project will finance the establishment of a Project Management Unit (PMU) which will assist the MAF to implement the project. The PMU will be staffed by a small number independent consultants which will assist the MAF PMU director in day to day management of the Project, including a monitoring and evaluation and financial management expert, two procurement specialists reducing to one after the third year, a forestry specialist with procurement skills, a biodiversity specialist, a financial manager, a secretary/translator and a driver/assistant. The PMU would be supported by additional consultant services if necessary. In line with Bank policy to streamline PMU staffing and structures, the project would facilitate the development of synergistic approaches to procurement and financial management if and when the Bank Rural Development project becomes operational.

The PMU will monitor the progress of the project, and provide quarterly implementation reports and activity plans in a format acceptable to the Bank. While the PMU will make random field

73 inspections, monitoring of forest investments (thinning, roads and reforestation) will be contracted to a consortium that includes academia and NGO representation.

The GEF will finance incremental costs for the implementation of the project to ensure coordination of the biodiversity conservation activities under the project with the other governmental and donor-funded conservation initiatives in the country. In particular, the grant would finance critical technical, procurement, financial management and other expertise and resources to complement activities.

As the project progresses, a wide range of biodiversity and conservation outputs will be generated that should be published and disseminated in a variety of media to appropriate stakeholders and not least the general public. The PMU Biodiversity Officer will develop and coordinate a program for information provision, in collaboration with the MAF, National Forest Company, Nature Parks and relevant NGOs. The second aspect of this activity is to implement an Integrated Inter-Sectoral Training Program to broaden and deepen the biodiversity capacity of forest managers in the public and private sector.