Forest Policy and Strategy Note

Home , Fauna of Europe, Forests of Poland

Europe and Central Asia Region

FOREST POLICY AND STRATEGY NOTE

June 2001

ACRONYMS AND ABBREVIATIONS

CEO Corporate Executive Officer ECA Europe & Central Asia ESW Economic Sector Work EU European Union FAO Food and Agriculture Organization FFS Federal Forest Service FSU Former Soviet Union GDP Gross Domestic Product GEF Global Environment Facility GNP Gross National Product GSP Gross Social Product IBRD International Bank for Reconstruction and Development IDA International Development Association IFC International Finance Corporation MEPNR Ministry of Environmental Protection and Natural Resources MIGA Multilateral Investment Guarantee Agency NEAP National Environment Action Plan NGO Non-Governmental Organization OECD Organization for Economic Cooperation and Development OED Operations Evaluation Department PREM Poverty Reduction and Economic Management TEV Total Economic Valuation VAT Value Added Tax WB/WWF Alliance World Bank/World Wildlife Fund

Vice President Johannes F. Linn Sector Director Kevin M. Cleaver Sector Manager John A. Hayward Task Team Leader Marjory-Anne Bromhead

ACKNOWLEDGEMENTS

This Strategy Note was prepared as an input to the Bank’s Forest Policy and Strategy revision. It was discussed within the Bank, and at a workshop in Finland in April 2000, attended by a range of regional stakeholders. It was prepared by the staff of the World Bank’s Eastern Europe and Central Asia Department for Environmentally and Socially Sustainable Development including Marjory-Anne Bromhead, Phillip Brylski, John Fraser Stewart, Andrey Kushlin, Charis Wuerffel and Gerhard Dieterle. The Sector Manager was John A. Hayward and the Sector Director was Kevin Cleaver.

ECA DRAFT FOREST POLICY AND STRATEGY NOTE

Table of Contents

Executive Summary i

Chapter 1: The Diversity of the Region 1 The Baltics, Poland, and Belarus 1 Russia 3 The Danube and the Carpathians 5 The Balkans 6 Turkey and the Caucasus 8 Central Asia ...... 10 Chapter 2: Policy Issues in Forestry in Eastern Europe and Central Asia 13 Economic Growth and Poverty Reduction 13 Governance, Civil Society and Collaborative Forest Management 14 Macro-Economic Adjustment, Economic Policies and Timber Markets 16 Institutional & Legal Framework, Emerging Private Sector & Economic Instruments 17 Sustainable Forest Management and the Role of Plantations 19 Global Issues 21 Crisis Management 22 Progress with the Board Policy & Institutional Reform Agenda 23 Chapter 3: Our Assistance Strategy to the Forest Sector 30 An Emerging Strategy 30 The Baltics, Poland, and Belarus 31 Russia 32 The Danube and the Carpathians 33 The Balkans 34 Turkey and the Caucasus 35 Central Asia 36 Instruments 37 Guarantees 38 Global Environment Facility 38 Economic and Sector Work 39 Partnerships and Alliances 40

Tables in the Text

Table 1 The Baltics, Poland and Belarus 2 Table 2 Russian Federation 3 Table 3 Danube and the Carpathians 5 Table 4 The Balkans 7 Table 5 Turkey and the Caucasus 9 Table 6 Central Asia 11 Table 7 ECA - Biodiversity Conservation & Forestry Projects 41 Table 8 Forestry and Land-Use in ECA 43 Table 9 Forest Industry and Economic Characteristics 44 Table 10 Social and Demographic Characteristics 45 Table 11 Protected Areas: Quantitative Characteristics 46 Table 12 Protected Areas: Qualitative Characteristics 47

Boxes in the Text

Box #1 Turkey - Addressing Poverty Alleviation & Participatory Management – Eastern Anatolia Watershed Rehabilitation Project (1993) 14 Box #2 Albania – Supporting Community Based Forest Management in a Transition Economy 15 Box #3 Belarus - Forest Development Project 17 Box #4 EU Accession and Forestry 17 Box #5 Romania – Valuation of the Forestry Sector 19 Box #6 Poland - The Forest Development Support Project 20 Box #7 Romania – GEF Biodiversity Conservation Management Project (1999) 21 Box #8 Croatia – Forestry and Tourism 23 Box #9 Supporting Improved Public Sector Management & Addressing Private Sector Constraints – Russia Sustainable Forestry Pilot Project 32 Box #10 Romania - Forest Development Project 33 Box #11 Armenia - Natural Resources Mgmt. & Poverty Reduction Project 35 Box #12 Addressing Biodiversity & Forest Conservation Management – Georgia: GEF Biodiversity Conservation Project & Forestry Development Project 36 Box #13 Kyrgyz Republic - Forest & Natural Resources Sector Review 37 Box #14 Russia - Supporting Private Investment in the Forest Sector through Risk Guarantees - Partial Risk Guarantee Facility for Investors in the Coal & Forestry Sector 38 Box #15 Fire Management in the Amur-Sakhalin Ecosystems 39 Box #16 Sharing International Experience with Forest Land Restitution 40

Executive Summary

Introduction

(i) The World Bank is completing a review of its present Forest Policy, developed in 1991, with a view to preparing a revised Forest Strategy and Policy for the Bank. The Bank adopted three parallel approaches in developing the new strategy. First, the Operations Evaluation Department (OED) conducted a review of Bank forestry, biodiversity, and natural resource management lending and non-lending services in the light of the 1991 Policy. Second, a number of analytical papers were prepared addressing issues in the forest sector (see attachment to chapter 2). Thirdly, the Bank is seeking the views of different stakeholders regarding the way it has and should best assist its client countries with improved forest management. It has organized consultations with key experts in each region, from government, academia, and the private sector and non-government organizations. The consultations for ECA took place in Finland in early April.

(ii) The Bank’s forest policy was developed before the Eastern Europe and Central Asia (ECA Region) existed, and before the Bank had established a relationship with most of the countries now in the ECA Region. This note is the first strategic document on the forest sector in the ECA region and served as a background paper to the ECA forest policy consultations. Its objectives are (i) to describe briefly the principal characteristics of the forest sector and evolving forest policies in the ECA countries; (ii) to discuss forest management issues, in particular as these relate to the themes analyzed in the course of the policy review; and (iii) to summarize our evolving assistance strategy in the forestry and forest biodiversity subsectors in the region.

(iii) The paper is intended as a starting point for discussion. We hope that it will generate debate, and help the Bank review and modify its assistance strategy to forestry in the ECA countries in a way that best serves these countries and meets the Bank corporate goals of poverty reduction and balanced economic growth while promoting conservation of biodiversity and sustainable forest management. The following paragraphs summarize the content of the paper.

Forests in the ECA Region

(iv) Chapters 1 and 2 characterize the natural, institutional, regula tory and policy framework of forest management in ECA and discuss the lessons of experience in addressing these through Bank assistance. The region is characterized by its enormous diversity, in terms of ecology, social structure and wealth. Per capita GNP varies from nearly US$ 10,000 (Slovenia) to US$ 300 (Tajikistan). All countries have faced social upheavals since the beginning of the transition to a market economy 10 years ago, and several have faced dramatic declines in GDP, increasing poverty, and war. GDP in Armenia is only 20% of pre 1990 levels, while Poland, in contrast, is preparing for EU (European Union) accession. There are also common elements between the countries. All have had to adapt to the breakdown of formerly centrally planned economies. Most have well educated populations, stable, or even declining populations and relatively good social indicators.

(v) In general, the countries in the northwest and Central Europe have had fewer difficulties adapting to the conditions of a market economy than the south and southeast, assisted partly by geographical proximity and historical ties with EU countries. ii

· The Baltic countries, Poland and Belarus are all heavily forested and forestry and forest industries play an important role in the economy and in exports. In all these countries, forestry also plays an important role in recreation and culture and there is a tradition of public access to forests. All except Belarus have produced new forest legislation since 1990 which stresses the multi-purpose functions of forests, and have established the basis for privatization of activities such as harvesting and processing. In the Baltic countries, over 40% of forestland is being restituted to private forest owners, many of them elderly, and this poses a challenge to sustainable management. Belarus continues to face challenges with moving ahead with basic economic and political reforms.

· Russia has the largest forested area of any country in the world, accounting for 22% of the world's forests and 15% of the global carbon terrestrial pool. There are forest ecosystems of global importance, especially in the Far East and Lake Baikal region. Forestry accounts for 2 million jobs, forests are important for recreation and forest products also provide a supplement to rural incomes. Timber harvests have declined dramatically in the economic confusion since the transition, from 300 Mm3 in 1989 to under 100 Mm3 at present, and timber industries, mostly now privatized, are facing de-capitalization, increasingly obsolescent equipment, and difficulties in adapting to new markets. A more favorable investment environment is crucial to sector recovery. There has been some recovery since the financial crisis of 1998 and a recovery of log exports, though not of processed timber. Resources for forest management have also declined, and there have been increases in fire and pest damage. There are also governance issues. The sector, if well managed, has an important role to play in job creation and economic recovery.

· Forests in the Danube River Basin countries are in general well managed ecologically, and forests play an important role in forest industries and tourism and recreation. The Carpathian forest ecosystems are also rich in biodiversity and contain some of Europe’s most important habitat areas for endangered wild mammals. The Central European countries have in general adapted well to the transition, but land restitution to small private owner poses a challenge to sustainable forest management, especially in Romania. In Ukraine, there are still many policy issues to be addressed including illegal logging. Forest industries are important but the sector has had difficulty adapting to the transition in Romania.

· The Balkan countries are also mostly heavily forested and have a long tradition of good forest management. Forest industry is important in Croatia, Bosnia, and Bulgaria. Rapidly increasing poverty and migration pose a challenge to sustainable management in Albania, as with rising fossil fuel prices populations are turning increasingly to fuel wood. War has destroyed forests in Croatia and Bosnia and left large areas of forests inaccessible due to land mines and prone to pest damage. There are governance issues especially in Albania and Bosnia. Coastal forests are an important tourist asset in Croatia, and mountain forests in Croatia, Macedonia, Bulgaria, and (potentially) Bosnia. Mediterranean Karst areas are subject to increased risk of forest fires and erosion. Slovenia has developed extension and support systems to address forest land restitution; there are similar challenges in Bulgaria.

(vi) In general, this first group of countries can be characterized as "forest rich.” Forests account for 30% or more of land area; there are well-established institutions and a long tradition of forest management. Most of the countries also have established protected area systems. The key challenges include reform of forest institutions to address the transition to a market economy, forest industry reform, forestland restitution, and balancing the timber, ecological and tourism role of forests. All countries need new investments in forest research, forest education and in forest planning. iii

· In Turkey and the Caucasus forests are exceptionally rich in biodiversity and play a key role in watershed protection. In general, the "non-timber" value of these forests is greater than the "timber" value. Forests in Georgia were all protected from harvesting during the Soviet period, and used primarily for recreation. Rural populations depend on forests and woodlands for fuel-wood, fodder, and grazing land. Turkey also has productive high forests, especially in the Black Sea provinces. In all countries forests are state owned, and in all governments are struggling to address issues of policy reform, and an evolution towards increased community management of forests and natural resources. The Caucasus countries have faced dramatic declines in income, increasing rural poverty, and increasing difficulties in governance. Reduced subsidies for oil, gas and electricity have also put pressure on forests in the Caucasus as local populations have harvested fuelwood to meet heating needs.

· The Central Asian countries are in general "forest poor" with forests accounting for less than 15% of land area. Forest management in the upper watersheds of these countries plays a role in flood management and broader water resource management. Forests are also important in sustaining the livelihoods of poor rural communities. These countries face widespread and growing poverty, which contributes also to unsustainable natural resource management, and there has been widespread deforestation since the start of the transition.

The Bank's Past Role in Addressing Key Forest Management Issues

(vii) There are currently five forestry/natural resource management projects under implementation, five under preparation, three forest biodiversity Global Environment Facility (GEF) operations under implementation and five under preparation. Three forest sector reviews are under preparation or recently completed. There are in addition a number of activities addressing sustainable forest management and forest certification funded through grants.

(viii) The Bank's role in forestry in assisting ECA countries address forest management problems has had varied success. In general, the GEF facility has been very effective in helping to establish a dialogue with the counterparts in our client countries, and has in several cases led to broader involvement.

(ix) Regarding the overriding Bank goal of addressing poverty, participatory natural resource management has helped to address poverty and resource use sustainability in the upper watersheds of Eastern Turkey. However to date, the Bank has done little to address the decline of forest industries and the increased unemployment and poverty associated with these. Community forest management has helped address governance, poverty and sustainability issues in Albania. Also with a view to poverty the Bank is now attaching high importance to the social, environmental, economic and institutional consequences of forest restitution. The Bank has a high potential in helping client countries manage such adjustment processes.

(x) The WB/WWF Alliance has undertaken promising initiatives in several ECA countries to promote sustainable forest management and conservation of forests by financing analytical studies, initiating consultative processes, promoting standard setting procedures and developing new market opportunities. Through its Target 2005 program, the Alliance has taken a lead role in promoting certification and has been very active in promoting the process in ECA countries.

(xi) Where countries have faced intractable macro-economic problems, as in Belarus, it has been difficult to help effectively with reform of the forest sector. The Bank is increasingly helping client countries analyze and develop policies for managing forests' broader ecological and iv economic roles. A study estimating the total economic value of forests in Romania helped increase understanding of the overall contribution of forests to the Romanian economy.

(xii) We have assisted Croatia and Bosnia to address forest reconstruction issues after the wars following independence, and we have helped address forest pest outbreaks in Siberia. Restoration of forests damaged by air pollution has also been a feature of our assistance in Poland and Belarus. In Bosnia and Albania, we have taken a lead role in the process of donor coordination. We are successfully managing trust funds of bila teral donors in these countries.

(xiii) We have also addressed the global value of forests through activities aimed at conserving forest genetic resources (in Poland and Turkey) and through forest biodiversity conservation (in Romania and Central Asia). To date, although substantial analytical work has been done, it has not been possible to assist with global carbon sequestration in forests.

An Emerging Strategy

(xiv) Our strategy is consistent with the emerging Bank strategy for forests. Its principal objective are poverty reduction, sustainable use and management of forest resources, industries and institutions for both growth and equity and protection of the global value of forests. Our regional assistance program is directed at helping our client countries meet the objective of achieving sustainable forest development for the benefit of the people of the region as they continue with the transition towards market economies. We would aim to assist them with:

· Overcoming the crisis and achieving economic recovery in the forest sector, including forest industries.

· Establishing a policy, institutional and legal framework which is transparent and provides the basis for sound governance, market-driven investment and sustainable development.

· Ensuring forest management systems which provide for sustainability, involvement of local communities and conservation of key ecosystems.

· Addressing poverty through sustainable natural resource management and recovery of forest industries, within the framework of market economies.

· Restoration of training, education, information and planning systems.

· Addressing commitments to global environment conventions.

(xv) In the "forest-rich" countries our assistance is likely to focus on improved public sector forest management, improved fire and pest management, improved and more transparent multi- purpose management and development of regulatory frameworks and extension support systems for forests which are restituted to private owners or local communities. As an example, the Romania Forestry Project under preparation would aim to assist with forest management issues connected with the ongoing forest land restitution. We will also increasingly be helping our clients to meet international standards of sustainable forest management through developing certification mechanisms. While investment in forest industries is more appropriately carried out by the private sector, we would assist with development of a transparent investment environment. We would work increasingly with the Internationa l Finance Corporation (IFC) and the Private Sector Development Department in this regard. The recently approved Coal and Forestry v

Investment Risk guarantee in Russia is a good example of this type of collaboration. There is substantial potential for further work of this nature, in countries such Russia, Belarus, Romania, Bulgaria and Ukraine. However, deeper involvement will also depend on the overall country dialogue.

(xvi) In "forest-poor" countries, our focus would be rather on participatory watershed and forest management, aimed at poverty reduction and achievement of sustainable rural livelihoods. A project under preparation in Armenia has this objective. Countries where there is potential for further work in this regard include the Central Asia countries and Turkey.

(xvii) We would use a range of lending and non-lending instruments to work with our client country. We would continue to utilize complementarities between the Global Environment Facility (GEF) and IDA/Bank lending in conservation of forest ecosystems. In "forest-poor" countries this would be combined with participatory natural resource management, and in "forest- rich" countries with improved forest ecosystem management. We would work to develop partnerships with NGOs, other funding agencies, and The World Wildlife (WWF)/ Bank Alliance. There is much potential also for the Central European countries to share their experience. As an example, a recent workshop on Forest Land Restitution and Sustainable Forest Management in Romania was jointly funded by the WWF Alliance, German and Finnish bilateral funding. It showed experience in developing frameworks for forestland restitution and certification of forest management between Poland, Latvia, Slovakia, Bulgaria, and Romania.

(xviii) Our assistance will be shaped by the willingness and ability of our client countries to engage in dialogue and borrow IBRD and IDA resources for the forest sector. We would also work within the overall framework of our Country Assistance Strategies and Poverty Reduction Strategies as these are developed.

(xix) We will also seek active coordination and cooperation with the donor community and we will promote a strong role of civil society in forest sector development through applying transparent consultative processes in all Bank operations.

CHAPTER 1

THE DIVERSITY OF THE ECA REGION

Introduction

1.1 The Eastern Europe and Central Asia region has the largest land-area, and the largest forested area, of any of the Bank regions, covering nine time zones and 27 million square kilometers. It is characterized by its diversity, in terms of ecology, social structure, and wealth. Per capita GNP varies from nearly US$10,000 (Slovenia) to US$300 (Tajikistan). All countries have faced social upheavals since beginning the transition to a market economy 10 years ago, and several have faced dramatic declines in GDP and increasing poverty (GDP in Armenia is 20 percent of pre 1990 levels, and agriculture has increased as a proportion of GDP from 20 percent in 1986 to 45 percent in 1997). There are, however, similarities. All have had to adapt rapidly to the breakdown of the former centrally planned economy and the formation of newly independent states. Most have well-educated populations and stable or even declining populations. In general, the countries in the northwest of the region have had less difficulty adapting to the conditions of a market economy than those further south and east. This paper for convenience divides the regions into six geographical sub-regions. The following paragraphs describe briefly the characteristics of each. Chapter 2 summarizes principal issues with illustrations from individual countries on how these have been addressed with Bank assistance and how this experience has helped us to develop our strategy. Chapter 3 summarizes our strategy for the future.

THE SIX SUB- REGIONS

1.2 We have divided the region broadly into the North-West, comprising the Baltic countries (Latvia, Estonia and Lithuania) , Poland and Belarus; the Danube and Carpathians comprising Ukraine, Moldova, Romania, Hungary, Slovakia and the Czech republic; the Balkans, covering Slovenia, Bosnia, Croatia, Albania and Macedonia; Russia (which because of its size is in a category of its own); Turkey and the Caucasus - Georgia, Azerbaijan and Armenia; and Central Asia, comprising Uzbekistan, Turkmenistan Kyrgystan, Kazhakstan and Tajikistan. Broadly, the north and west of the region can be described as "forest rich,” and the south and south east as "forest-poor.”

The Baltics, Poland and Belarus

Characteristics of the Forest

1.3 These countries, with latitudes from 59 to 40 degrees north, are all heavily forested (see Table 1). All are "surplus" producers of forest products, and in all conifers, especially Scots Pine (Pinus silvestrus) and spruce (Picea excels) predominate. All countries suffered very extensive damage during World War II and there have been major reforestation efforts since then. As a result, forest "age-classes" are “skewed" towards younger groups. This results in relatively high maintenance costs at present, and will lead to an expansion in timber supply within the next three decades. The forests of Poland and Belarus in particular have been damaged by air pollution, and in Belarus in addition up to 37 percent of the forests have been affected by pollution from 2

Chernobyl. In all countries there are extensive wetlands, and the countries have a system of protected areas.

Table 1. The Baltics, Poland and Belarus

GNP Per GDP GNP % of Self Capita Growth Growth Forested Land Sufficiency Ha Per Country Population 1997 86-97 1996 Area Area Ratio Capita (million) (US$) (%) (%) (million ha) (%)

Belarus 10.3 2,150 -4.2 2.8 8.7 36 327.7 0.86 Estonia 1.4 3,330 -4.8 4.0 2.1 46 236.8 1.40 Latvia 2.5 2,430 -8.0 2.6 2.9 45 350.0 1.19 Lithuania 3.7 2,230 -4.9 2.7 2.0 30 157.2 0.55 Poland 38.7 3,590 1.0 6.1 8.7 29 113 0.23

Economic Significance

1.4 Forestry and forest industries play a major role in the economy, in employment and in foreign exchange earnings. In Belarus forestry was 4 percent of GDP in 1990, and forest industries comprised 5 percent of industrial output and 6 percent of employment. In Poland exports average US$350 million per year. For all countries there is a close link between forest management and the health of forest industries. Poland has been one of the most successful economies of Central Europe, and nearly 30 percent of sawn wood production is exported to Scandinavia and Western Europe. The Baltic countries all suffered sharp declines in GDP, but are now recovering. All countries except Belarus are preparing for EU accession (see para. below). Belarus has faced particular difficulties in reaching political consensus to adapt to a market economy.

1.5 There is a tradition of public access to the forests in all countries and they are widely used for recreational purposes including hunting, especially in Belarus and Poland, where especially prized species include the European bison. There are established game management regimes.

Institutions and Policies

1.6 The Baltic countries and Poland have all produced new Forest legislation since 1990, which have redefined forest policy. All policy statements stress the multi-purpose function of forests, and most also have as an objective the increase of forested areas, as cultivation of agricultural land decreases. In all countries the trend is for the regulatory and management functions to remain under state control, and for harvesting and processing activities to be privatized. The public forests are managed by state -owned enterprises, which are financially autonomous but which receive budget allocations for specific purposes (e.g. restoration of pollution damaged forests). The taxation and financial structure of these enterprises needs to be revisited, especially in Belarus. All the countries have a strong tradition in forest research and training. Poland and Latvia have begun to work on certification.

1.7 A feature of the Baltic countries is restitution of part of the forestlands to private owners (up to 45 percent for Lithuania, 43 percent in Latvia and 52 percent in Estonia). Average holdings are very small, averaging, less than 5 ha in Lithuania and 10 ha in Estonia, with most forest owners being elderly. This poses a challenge for sustainable forest management, and forest extension programs have only recently begun. In Poland and Belarus the bulk of the forest will remain under state control. 3

Russia

Characteristics of the Forest

1.8 Russia has the largest forested area of any country. Forests account for 40 percent of the land area, or 764 million ha, an area fifteen times the size of France. Russian forests are 22 percent of the world's forested land and 21 percent of standing timber; they also account for 15 percent of the global carbon terrestrial pool. Eighty percent of Russia's forests belong to boreal forest ecosystems and are characterized by slow growing, commercially valuable timber. Common species include spruce, Siberian spruce, pines including Korean pine and dwarf Siberian pine, white birch, weeping birch, larch, and aspen, the vegetation changing with the climate and longitude, and the richest forests being found at the latitudes of the middle taiga.

Table 2. Russian Federation

GNP Per GDP GNP % of Self Capita Growth Growth Forested Land Sufficiency ha Per Country Population 1997 86-97 1996 Area Area Ratio Capita (million) (US$) (%) (%) (million ha) (%)

Russia 147.3 2,740 - -3.5 764 4.0 134.5 5.98

1.9 In European Russia much of the forest has lost significant watershed and biodiversity value because of 300 years of exploitation. However east of the Urals large areas of old growth forest remains, and includes greater biological diversity than in temperate forests elsewhere in the world. Russia has been classified into 54 ecological zones; the Northern Caucasus, Southern far East, Primorsky and Lake Baikal areas are particularly rich in biological diversity. Russian forests also have important recreational value, especially in the more densely populated areas, and non-timber forest products (especially berries and mushrooms but also game and other products such as fern, ginseng and medicinal plants) are significant.

1.10 Because of declining funding for forest management since 1990, and lack of cost- effective planning, fires and pest outbreaks have increased dramatically, the latest fire outbreak affecting 1.6 million ha in eastern Siberia in 1998. Despite low overall harvesting levels, declining investments have led to increasingly obsolescent and environmentally damaging harvesting methods. The breakdown in law and order and confusion surrounding privatization has also led to a sharp increase in illegal logging. The Russian authorities are aware of these issues and are attempting to address them.

1.11 Russia has an extensive protected area system covering 51 million ha and a long tradition of protected area management. Strictly protected areas (29 million ha) are managed mostly by locally based staff from the Division of Nature Reserve Management in the Ministry of Environmental Protection and Natural Resources (MEPNR); these account for 40 percent of the world's total of IUCN category 1 reserves. National parks (6.4 million ha) are managed mostly by regional units of the Division of National Parks in the Federal Forest Service (FFS); and 'special purpose reserves' or national monuments (44 million ha) are usually managed by the MEPNR or the local primary land-user. In Soviet times monitoring was mostly undertaken by the All-Russian Society for Nature Protection.

1.12 Russia's forests, because of their vast size, play a vital role as a carbon "sink"; a national strategy on greenhouse gas emissions has been prepared and work on development of a regulatory framework for carbon trading is beginning. Improved fire management and more effective forest management (particularly in permafrost areas where natural regeneration is very poor) could play an important role in the carbon “market.”

Economic Contribution

1.13 Before 1989 Russia was second only to USA as an industrial wood producer. Annual wood production averaged more than 300 million m3, accounted for 2 percent of GDP and employed about 2 million people. Since then wood production has fallen dramatically to only 100 million m3 annually, partly because of increasing transport costs from remote forest regions, but partly also because of the confusion surrounding privatization and the economic downturn. Nevertheless, exports average over US$4 billion annually. Many forest enterprises are located in "one-industry towns" in remote areas; about 10 million people are estimated to be dependent on logging and wood processing. There are close linkages in Russia between sustainable forest management and a well-functioning, profitable forest industrial structure. The sector has recovered somewhat since 1998 as Russia’s economy has recovered and countries in East Asia have overcome the recent financial crisis. However, more investment in modern timber processing is needed to increase value added, create jobs, reduce waste and develop more environmentally friendly forest utilization.

Institutional and Regulatory Framework

1.14 Almost all forestland is under federal administration; however, recent forest legislation transfers to the regions the rights and responsibilities of forest management, including responsibility for establishing leasing arrangements. The legislation also calls for certain areas to be set aside for the exclusive use of indigenous peoples. Virtually no forestland is privately owned.

1.15 The 1996 Forest Code defines the overall administrative framework for forest management, with the objectives of utilization, protection, conservation and regeneration; however regional laws and regulations have still to be prepared. The basic structure is that the Federal Forest Service (FFS), with 81 Regional and 1,740 District forest committees, is responsible for resource management. Other organizations, which report to the FFS, include research institutes, technical schools, seed stations and orchards and forest inventory and planning enterprises. The FFS celebrated its 200th anniversary in 1998, and has a long tradition of forest resource management. Logging and wood processing enterprises have mostly been privatized but serious management problems remain; a State Committee for Forest, Pulp and Paper and Woodworking Industries was established in 1996 to help them restructure and promote investment.

1.16 One issue in Russia, as in most Former Soviet Union (FSU) countries, is the system of forest financing. Under the Soviet system 70 percent of funding for forest management was channeled from the federal budget through the FFS, the remainder being transferred through district and regional budgets. Sources of revenue were taxes on timber industries (federal and regional) and forest fees and stumpage (district). Since 1994 federal allocations have declined by more than half, eroding severely the standard of forest management, and leading to (often- excessive) sanitary cutting to gain local revenue. Under the 1996 forest code, up to 40 percent of "minimum" stumpage is to be channeled to the federal budget, the FFS funding largely management and research. The remaining 60 percent is to remain with the regions, to be used largely for regeneration. Lease auction markup fees are to be channeled directly to the district 5 forest offices. Both the method of accounting for management expenditures and the system of forest resource pricing need revision.

The Danube and the Carpathians

Characteristics of the Forest

1.17 The significance of forestry varies widely in this sub-region, which includes the black soils of Ukraine, the Danube plain and delta and the Carpathian mountains, rising to 3000 meters, which span all countries except Hungary (see Table 3). Forests as a proportion of land area vary from 41 percent (Slovakia) to only 11 percent and 16 percent (Moldova and Ukraine). The forests also include a much larger proportion of broad leaf species than in the Baltics. In Romania the forests include an especially rich diversity with broad leafed and mixed forests (mostly beech and oak) comprising 70 percent and conifers 30 percent. The age-distribution of the forests in this sub-region is relatively good, and management regimes have focused on biological sustainability and maintaining diversity. Much of the forests in Slovakia, the Czech Republic, and Romania are managed with watershed protection as the primary objective, and with severe restrictions on harvesting. Both Slovakia and Czech Republic suffer from pollution damage, affecting about 25 percent of the forest, mostly at higher altitudes. While the Czech and Slovak Republics and Ukraine have a system of protected areas, there is at present no such system in Romania.

Table 3. Danube and the Carpathians

GNP Per GDP GNP % of Self Capita Growth Growth Forested Land Sufficiency Ha Per Country Population 1997 86-97 1996 Area Area Ratio Capita (million) (US$) (%) (%) (million ha) (%)

Czech 10.3 5,200 -1.3 3.9 2.6 34 153.3 0.25 Republic Hungary 10.2 4,430 -0.8 1.3 1.7 19 77.0 0.17 Moldova 4.3 540 -10.9 -7.8 0.4 11 n.a. 0.08 Romania 22.5 1,420 -2.7 3.9 6.7 26 175.0 0.29 Slovak 5.4 3,700 -1.4 6.6 2.0 41 243.9 0.38 Republic Ukraine 50.5 1,040 -10.2 -10.0 9.3 16 n.a. 0.18

Contribution to the Economy

1.18 Forests make a significant contribution to the economy in Romania, Czech and Slovak republics; Slovakia has a tradition in the manufacture and export of high quality sawn goods; the wood industry comprises about 13 percent of industrial production, employs 53,000 workers and contributes US$226 millions in foreign exchange earnings. Romania was Europe's fourth largest furniture exporter and among the first ten in the world. However the wood industries have lost former Soviet markets, have been slow to restructure and are still in decline; their financial situation and inability to pay for wood has in turn affected the financial situation of the main forest management organizations. The Czech Republic and Hungary have adapted well to the transition to a market economy and are now preparing for EU accession. Romania has had more difficulties while in Ukraine many basic adjustments remain to be made.

1.19 Non-timber forest products, includin g berries and mushrooms and materials for basket- weaving are important features of the forest economy especially in Romania, while tourism and 6 recreation are also important in Slovakia, Ukraine and the Czech Republic, where there is a tradition of free public access to forests (this tradition makes implementation of national park financing mechanisms such as entrance fees very difficult). Hunting is also important, especially in Romania which includes 60 percent of Europe's bear and 40 percent of its wolf population (the high incidence of these species is an indicator of the health of the forest).

Policy and Institutions

1.20 Forest policy and institutions vary. In Romania, according to the 1996 forest code, a small Forest Department within the Ministry of Waters, Environment and Forests is responsible for policy development while forest management is the responsibility of the National Forest Authority, a financially autonomous parastatal. In Slovakia, following legislation passed in 1997, the forestry department of the Ministry of Land management has overall responsibility for forest management. The forest legislation stresses the principles of ecologically sustainable management, and includes strong regulations protecting forests from conversion to other uses, and detailed regulations on reforestation, improvement fillings, harvesting and wood transportation (this is an issue in much of central Europe where the road density is lower than in Western Europe, resulting often in over-harvesting near the roads and long skidding distances).

1.21 Restitution of forestland is a key feature of forest policy in the Czech and Slovak Republics and Romania. In Slovakia, 55 percent of forestland is being restituted to a total of 500,000 private owners, joint owners, towns, villages and other entities. Restitution to a village or town is a common practice in Central Europe and reflected medieval patterns of common rights of use to forests neighboring towns. Slovakia has combined restitution with a number of restrictions on conversion to other use, and the obligation to manage forests according to a defined management plan. Forest extension and incentive programs are being developed. In Romania, which is facing more difficult economic conditions and a high incidence of rural poverty, the experience with restitution has not so far been positive. Of 300,000 ha restituted in the early 1990s most has been cut down. There are proposals now to privatize as much as two- thirds of forestlands. Experience from Central and Western Europe in combining private ownership with controls and obligations would be helpful for Romania which is preparing a new forest strategy.

The Balkans

Characteristics of the Forest

1.22 The Balkans comprises the former republics of Yugoslavia, Albania, and Bulgaria. The region is mountainous, with forests comprising over 50 percent of land area in both Bosnia and Slovenia (see Table 4). Vegetation varies widely, including Mediterranean, Central Europe and Euro-Siberian and steppe ecosystems; in Croatia broadleafs comprise 84 percent of standing stock, including beech (35 percent) and oaks (Quercus robur, Q. petraea, Q. cerris, and Q. pubescens) 28 percent. In Bulgaria they include high alpine coniferous forests, degraded oak coppice forests and coniferous monocultures. In Albania they include, in addition to coppice and coniferous forest, garrigue and maquis. Traditions of sustainable forest management in the northern Balkans date back to the 18th century. In contrast, a feature of the southern Balkans was the degradation of forestlands before World War II, through excessive harvesting and overgrazing by animals. Since then there have been substantial reforestation programs, and programs to convert degraded coppice in to high forest. In Macedonia, despite this program, 70 percent of the forest is still characterized as degraded, and fuelwood accounts for 80 percent of production. In Albania animal grazing on high Alpine pastures among forests is still a key feature of the rural economy. The countries all have systems of protected areas, though these are under-funded and 7 institutional responsibilities are not always clear. Because of its location at a 'geographical crossroads", the sub-region exhibits exceptional biodiversity.

Table 4. The Balkans

GNP Per GDP GNP % of Self Capita Growth Growth Forested Land Sufficiency Ha Per Country Population 1997 86-97 1996 Area Area Ratio Capita (million) (US$) (%) (%) (million ha) (%)

Albania 3.3 750 -1.9 9.1 1.4 38 77.5 0.42 Bosnia n.a. n.a. n.a. n.a. 2.7 53 n.a. 1.15 Bulgaria 8.3 1,140 -3.8 -10.1 3.3 30 119.7 0.40 Croatia 4.5 4,610 -1.6 6.0 2.5 44 127.0 0.55 Macedonia 2.0 1,090 n.a. 0.8 1.0. 37 n.a. 0.5 Slovenia 2.0 9,680 1.4 3.1 1.1 53 87.8 0.54

1.23 The forests have been greatly damaged by war. Up to 25 percent of Bosnia’s forests is inaccessible because they have land mines (which are very costly to move), 80,000 ha have been destroyed, and it has not been possible to control pest infestations. Croatia's highly sensitive coastal forests, a key feature of the landscape and a coastal economy dependent on tourism, were also burnt and mined. Poverty in Albania has also led to excessive use of the forest for subsistence purposes. In the poorer Balkan countries there are close links between poverty and sustainable natural resource management. In the south and west of the sub-region fire is a hazard in the summer. There has been some pollution damage in Slovenia and Bulgaria, which has also suffered die -back of planted conifers, possibly because they were planted at excessively low altitudes.

Economic Contribution

1.24 The Balkan countries' economies have shown widely varying performance (Table 2), shaped in large part by the extent of civil conflict and political stability. There have been sharp declines in GDP in most of the countries. Forestry plays an important role in several countries. In Bosnia before independence it accounted for 10 percent of gross social product (GSP) with exports of US$250 million annually. Markets have collapsed with the war. Croatia has been able to recover from its conflicts, and forests and forest industries contribute about 4 percent of GDP and 12 percent of exports. In Bulgaria forestry contributes about 2 percent of GDP, with about 30 percent of wood industries exported. About 50 percent of wood industries are now privatized.

1.25 Forestry plays an important watershed protection function in the region, which has been subject to increasingly frequent drought over the last two decades. They are important for recreation and for non-timber forest products including game. In Croatia they play a key role in the tourist industry. Several of the countries, including Slovenia, Macedonia, and Croatia, contain mountain lakes and rivers in forested areas of exceptional natural beauty; the skiing industry has been important in the mountains of Bulgaria and Bosnia, an additional source of economic growth. However there is, especially in Albania, a close link between poverty and sustainable grazing and forest management. The economy is volatile and there is a large rural population (62 percent of total), much of it dependent on subsistence agriculture and pastoralism (the share of agriculture in the economy has nearly doubled from 34 percent in 1986 to 63 percent in 1997). 8

Forest Policy and Institutions

1.26 There have been widely differing policy developments. In all the countries of the Former Republic of Yugoslavia, forestry was organized around autonomous socially owned district-level enterprises, many of which also had non-forest economic activities. This led to under-funding of regeneration and forest management for districts with forests, which were high in amenity but low in timber value. In Croatia, following the 1990 forest law, these have been merged into One State Enterprise, Hrvatske Sume, responsible for management, harvesting, regeneration, law enforcement, and extension, and operating under the Forestry and Wildlife department of the Ministry of Agriculture. The forest emphasizes multipurpose management, with forest being managed for sustainable use and regeneration, protection from degradation, and supply of material to the wood industry. Most timber is sold according to listed prices based on Italian and German import prices, since it is considered that an auction system could not yet function transparently.

1.27 In Bulgaria there are 167 forest districts responsible for management, regeneration, and harvesting, and funded from timber revenues. About 50 percent of forest industry have been privatized. The 1997 Forest Law also emphasizes the multifunctional role of forests. In Albania forests and pastures are state-owned; revenues from harvesting and pasture management is earmarked for forest management (it is not transferred to the treasury). There is a also tradition, enshrined in the law, of communal management of pasture and forest resources

1.28 Restitution is a policy for Slovenia and Bulgaria. In Slovenia, following the 1993 forest Act, 80 percent of forest land has been restored to private owners, in 290,000 holdings averaging only 2.7 ha each. The Forest Act, however (as in Slovakia) regulates forest use among owners, specifying in particular that "the right of ownership to forests shall be exercised in such a manner as ensures their ecological, social and productive functions". Slovenia has developed an extension system to advise forest owners on forest management, and has accompanied this with a system of financial incentives for regeneration, fire and pest management, and road maintenance and wildlife management. In Bulgaria the recent Law on Restitution would restore 16 percent of forests to 1.5 million private landowners with holdings of only 0.4 ha, 55 percent to local authorities through customary right-of-use (47 percent) or ownership (8 percent), and 3 percent to other organizations. A regulatory framework and accompanying package of financial instruments and extension advice needs to be developed in order to implement the new law while assuring sustainable forest management.

Turkey and the Caucasus

Characteristics of the Forest

1.29 In contrast to the Baltic countries and the Balkans, Turkey and the Caucasus are wood deficit countries. The sub-region is mountainous, with altitudes up to nearly 5000 meters, but over much of central Turkey rainfall is 400mm or less, inhibiting the growth of dense forest.

1.30 Gazette forestland in Turkey comprises 20 million ha, or 25 percent of the land area (see Table 5). However because of over-utilization in the past much of this is effectively degraded rangeland, and productive forest covers about 9 million ha. Turkey's climate, topography, and forests are highly diverse, including oak coppices in the southeast, and coniferous high forest along the Black Sea and Mediterranean. Wild relatives of apple, cherry, pistachio, chestnut and many other fruit trees are found. Poplar is widely grown along river valleys. Partly because of 9 degradation of vegetative cover from over-grazing, erosion is a severe problem over much of Turkey. The authorities have begun reforestation and watershed rehabilitation programs working together with local populations, but there is much to be done. Forests in Turkey are vulnerable to fire despite an active control program.

Table 5. Turkey and the Caucasus

GNP Per GDP GNP % of Self Capita Growth Growth Forested Land Sufficiency ha Per Country Population 1997 86-97 1996 Area Area Ratio Capita (million) (US$) (%) (%) (million ha) (%)

Armenia 3.8 530.0 -14.5 5.8 0.38 14 n.a. 0.10 Azerbaijan 7.6 510 n.a. 1.3 1.2. 13 n.a. 0.16 Georgia 5.4 840 n.a. 10.5 3.0 44 n.a. 0.56 Turkey 63.7 3,130 3.9 7.0 20.2 26 79.1 0.33

1.31 Georgia's forests cover 40 percent of the land area and are dominated by deciduous species. They include beech (the dominant species), oak, hornbeam, alder, and chestnut. Coniferous species cover 19 percent of forest area. With altitudes up to nearly 5000 meters and rainfall from 1000 to 4000 meters Georgia's forests, like Turkey's are unusually rich in species biodiversity. Early in the century there was intensive harvesting in Georgia's forests; the forest policy was then revised and since then they have been managed primarily for soil and water protection (72 percent) and recreation (24 percent). Wildlife in Georgia is varied, comprising nearly 600 vertebrate species and including the fauna of Europe, the Middle East, and Central Asia.

1.32 Forests in Armenia cover only 12 percent of the land area and are primarily broadleaf forests. They rich in non-timber products, including wild rose hips, medicinal plants, mint, and mushrooms. Forests in Azerbaijan cover 13 percent of the land area and also comprise largely broadleaf’s. The forests are rich in species diversity, including over 4000 plant species and nearly 300 endemic. They have been managed primarily for watershed and environmental protection. The war with Armenia caused extensive damage to the forests; there has been uncontrolled cutting in disputed areas, and there are over 1 million refugees in Azerbaijan, many of whom use firewood for heating and cooking.

1.33 All countries have a network of protected areas, though in Turkey these cover less than 1 percent of the land area, and in the past have been managed to maximize recreational rather than multi-use of conservation functions.

Economic Contribution

1.34 Per capita GDP has declined drastically in the Caucasus since the break-up of the Soviet Union, and all three Caucasus countries are now IDA eligible. This decline has caused widespread poverty, and the pressure on natural resources associated with poverty; in this case the impact on forests has been particularly severe since subsidized fuel imports from Russia are no longer available, and the countries are no longer able to import timber from Siberia (the previous source of wood for construction and furniture); in Armenia about 50 percent of household energy is now fuelwood and overgrazing and overharvesting have resulted in a 10 percent decline in forest cover over the past decade.

1.35 The Caucasus forests play a key role in watershed protection, biodiversity conservation, and recreation. In Georgia, until 1990, the mountains were a major tourist destination for 10

Russians, with also a wide variety of games. These non-timber values should be the focus of forest management strategies when the economies recover.

1.36 Unique among ECA countries, population growth in Turkey is still rapid, at nearly 2 percent per year; despite rapid inflation the economy has grown and is now over US$3,000 per capita GDP. Forestry contributes directly only about 0.8 percent of GDP; however, its total economic value including the biodiversity, recreational and carbon storage value is many times this. About 3 million rural people (generally the poorest in Turkey) live in and a further 5 million near gazetted forest areas; for them the forests are a source of fuel and fodder, and the Turkish government has developed a number of programs to assist them with income earning opportunities. There is ongoing rural-urban migration and some rural areas are now facing absolute population declines; nevertheless, sustainable, participatory natural resource and watershed management are key elements in the government strategy for gazetted forest areas. There are, in addition coastal forests which contribute to the landscape value of the coastline and the value of the tourist industry.

Policy and Institutions

1.37 The Georgian authorities are working on a New Forest code which would provide for "the preservation protection, restoration, reasonable use, increase of environmental and resource potential of the state forestry resources and its lands". All forestland is state owned, and managed by the State Forest department and its 54 district offices. In common with many other FSU countries, forest revenues are transferred to the central Treasury, which because of its broader budgetary difficulties, is not able to fund forest management adequately. As a result, the Forest Department undertakes "sanitary cuttings" whose revenues it can keep. Georgia is developing a new framework for sustainable management; given the key "public good" function of the forests, the conventional division between the "regulatory" (public) and "management and utilization" (private) may be over-simplistic. In Armenia and Azerbaijan, forests are state -owned; forest legislation has been passed but much remains to be done to implement these policies.

1.38 In Turkey also, most forests are state owned. Forest policy is based on the 1956 forest law and 1982 Turkish constitution, which lay down the basics for multi-functional forest management. The forestry General Directorate, responsible for harvesting and wood sales has in the past been a net contributor to the budget. Since trade liberalization with the EU, timber sales prices have dropped and the forest sector has faced increasing financial difficulties. Turkey is in a transition period between a forest policy and financing mechanism designed for financial autonomy from timber sales, to a forest policy and organization with possibly much lower harvesting levels and much more focus on management for watershed protection with local communities, for biodiversity conservation and for tourism/recreation.

Central Asia

Characteristics of the Forest

1.39 Central Asia is the least forested sub-region of the six. Forestland comprises 10 percent or less of land area in all countries (see Table 6). 80 percent of Turkmenistan is desert. Its "forests" constitute woodlands, including the white saksaul ecosystems of the lowland Karakum desert, the pistachio ecosystems of the foothills of Badghyz and Kopetdagh, and juniper ecosystems in the middle and high mountain belts of Kopetdagh. Pistachio and maple originate from Turkmenistan. Its woodlands are used for grazing and for fruits and nuts, rather than for timber. Turkmenistan has a system of protected areas covering over 3 percent of the land area. 11

Table 6. Central Asia

GNP Per GDP GNP % of Self Capita Growth Growth Forested Land Sufficiency Ha Per Country Population 1997 86-97 1996 Area Area Ratio Capita (million) (US$) (%) (%) (million ha) (%)

Kazakhstan 16.3 1,340 -8.1 0.5 17.4 7 n.a. 1.1 Kyrgyz 4.6 440 -8.4 -7.1 0.8 4 n.a. 0.2 Republic Tajikistan 6.0 330 n.a. -4.4 0.5. 3.5 n.a. 0.1 Turkmenistan 4.7 630 n.a. -2.4 3.8 8 n.a. 0.8 Uzbekistan 23.7 1,010 -1.4 1.6 9.1 22 0.39

1.40 Less than 4 percent of Kazakhstan is covered by forest, but this comprises 10.5 million ha. About 50 percent of Kazakh forests are desert saksaul forests, 17 percent are coniferous, and 33 percent are softwood forests and bushes. There are also wild fruit tree forests in the southeast; the apple has its origins in Kazakhstan. Kazakhstan's forests are vulnerable to fire, pests and illegal cutting. According to some estimates overcutting and grazing has reduced forest area by nearly 2 percent per year between 1990 and 1995. 10 percent of the country's coniferous forests were lost to fire in 1997. Lack of funds for fire management has aggravated the situation. Protected areas comprise 2.6 percent of the forested area. In Tajikistan also only 0.4 million ha of 1.8 million ha of forest fund land are under forest and much of the forest area has been over-used and is eroded. Here too, however, there is an established protected area network covering over 500,000 ha.

1.41 In Kyrgyz Republic also, there has been rapid deforestation in recent decades possibly by 50 percent since 1945. Only 4.2 percent of the land area is under forest cover. The Forest Fund (forest estate) covers 2. 6 million ha but only 0.8 million ha are under forest cover, the remainder being mountainous rangeland. Species include spruce in the northern Tien Shan, pistachio and almond in the Western Tian Shan, and walnuts, apples and maples in the more humid south. The walnut-fruit forests comprise a globally unique ecosystem. Deforestation has been caused largely by excessively large populations of grazing sheep (numbers have declined as subsidies have been removed), but also by local demands for fuelwood and construction wood.

Economic Contribution

1.42 There have been sharp declines in income since the transition, and increasing poverty. Tajikistan in addition has suffered from civil strife and has a large refugee population. Three of the countries are now IDA-eligible. In none of the countries does forestry contribute substantially to GDP but the transition has affected sustainable forest management. The reduced ability to import wood from Siberia to meet local needs has led to increased wood cutting in the central Asian countries, and the reversal to a subsistence level economy has put more pressure on natural resources (in Turkmenistan and Uzbekistan locally produced oil and gas will reduce the pressure on woodlands for fuelwood supply).

1.43 The forests and mountains have a key role to play in protecting the watershed of the Aral Sea Basin, while more broadly maintenance of vegetative cover reduces desertification. These land management issues have yet to be tackled, and siltation from erosion has contributed to shortening the life of dams constructed in the river basin. The mountains also have the potential to be a major tourist destination and have great biodiversity value.

Institutions and Regulatory Framework

1.44 Responsibilities for administration of forestlands have undergone several changes in most Central Asian countries. Forestland and broader community-based rural land management are closely linked in this sub-region, where much forestland comprises scattered woodland, interspersed with rangeland, and where control of desertification is also an issue.

1.45 In Kazhakstan, the committee for Forestry, Hunting, and fishing reports to the Ministry of Agriculture; local management is undertaken by "lezkhozes" operating according to 10-year management plans. Protected areas are also under the administration of the Forestry Committee. Funding for forestry activities has declined drastically, leading to deterioration in management; government policy is to increase forest area and improve forest management, but these goals cannot at present be realized. In Turkmenistan, institutional responsibilities are being changed; as of January 1999 responsibility for forests and biodiversity was to be transferred from the Ministry of Environment to the local authorities. Turkmenistan also has a reforestation program which is under-funded.

1.46 In Kyrgyz Republic, all forest fund lands are publicly owned, but in the past over half has been leased to collectives or state farms or neighboring countries as rangeland. The state department for Forestry and Wildlife has overall responsibility, with 32 "leskhozes" responsible for management at a local level. A New Forest policy is being prepared which would give greater responsibility to local communities in preparing forest management plans. In contrast to several other countries in ECA, there has been substantial fiscal decentralization, and budgeted funds for leskhozes are channeled through regional administrations; because forestry is not regarded as a priority this has led to falls in funding, and to land "mining" to maximize short-term timber and range fodder production on lands which should essentially be managed as "protection forests"..

1.47 In Tajikistan a new Forest Code was passed in 1997; local authorities administer forestry regulations, which are implemented by local State Forest Agencies. The law provides for sustainable forest management but there are difficulties with financing its effective implementation. Forest industrial associations lease the right to procure wood, cut grass and to graze cattle on gazette forestland, through charges fixed by the Government.

CHAPTER 2

KEY FOREST MANAGEMENT ISSUES IN EASTERN EUROPE AND CENTRAL ASIA

2.1 The Bank Forest Policy Review identified a total of 17 thematic issues for analysis, as an input to revision of the Bank Forest Strategy. They are listed in Attachment 2 to this chapter. The tables list every country in the region, and indicate the importance of each policy issue for that country. The issues can be grouped around seven major themes. These are briefly discussed in the paragraphs below, together with examples of Bank-supported operations, which have attempted to address them.

Economic Growth and Poverty Reduction

2.2 In the "resource-rich" countries of Russia, the northwest of the region and the northern Balkans, the main source of forest-related employment has been in forest industries rather than in forestry itself. Their decline has led to unemployment and increasing poverty in small towns frequently dependent on one industry. Although the sector is less "politically sensitive" than coal, employment in forest industries is substantially greater in the coal sector than in Russia. Romania used to be the fourth largest exporter of furniture in the world, labor costs are low and skill levels are reasonable; but with industrial restructuring many of these industries is now experiencing losses. There are strong linkages between recovery of the forest sector, forest industries, and broader economic recovery and poverty reduction.

2.3 In those countries where forest restitution to private owners is large-scale (the Baltics, Slovenia and eventually Romania and Bulgaria) poverty among forest owners is part of a broader rural poverty phenomenon. This in turn is linked to an aging rural population, an under- capitalized farm sector, and a fragmented farm and forestland ownership structure, frequently in holdings too small to be managed economically. The longer-term outcome is likely to be similar to that in Western Europe: consolidation of holdings, a decline in the population dependent on farming or forestry, and development of a non-agricultural rural economy.

2.4 Further south and west in the region, the linkages are, rather between forestry, sustainable natural resource management, and sustainable livelihoods. Poverty in the mountains of Albania and in Eastern Turkey is linked to unsustainable management of fragile natural resources. In the Caucasus and Central Asia, where the economic collapse has increased the contribution of agriculture to GDP and the proportion of the population dependent on farming, poverty and increasing "subsistence-level" farming has increased pressure on natural resources. In several countries in the region there has been increased poaching of game species. In Kyrgyz Republic the reduction of sheep populations and increased costs following removal of subsidies, while it reduced employment and increased poverty, has also led to increased grazing near population centers and reduced grazing in high altitude pastures. Box 1 illustrates an approach to alleviating poverty through supporting sustainable natural resource management which has been successful in Turkey.

Box 1. Turkey - Addressing Poverty Alleviation and Participatory Resource Management - Eastern Anatolia Watershed Rehabilitation Project (Cost US$ 115 millions, loan US$ 70 million) 1993

Two principal objectives: Restoring sustainable land-use management to degraded watersheds in three provinces of the Upper Euphrates River Basin; and Increasing the incomes of the local population living in these areas, among the poorest in Turkey. The project introduced two institutional and behavioral innovations: Provincial sectoral agencies (agriculture, forestry and small-scale irrigation) worked together and in an integrated basis in small watersheds; Watershed rehabilitation programs were developed and implemented with the participation of local populations. The project aimed to reach about 400,000 people living in over 50 watersheds Integrated management plans were prepared including improved management and cultivation of fodder, reforestation, soil conservation, improved arable farming and fruit farming construction of ponds for supplementary irrigation bee-keeping and gully protection The project has strong support at both local and national level the approach is being extended to six more provinces in southern and south-eastern Turkey it may be adopted throughout the whole country. The project has benefited from a high degree of local commitment an approach that was cost-effective and could be maintained despite a difficult macro-economic environment It was modest in its objectives and this may also have contributed to its success It is now in its sixth year of implementation. It shows also that a long term commitment to interventions of this type is necessary.

2.5 A further outcome of the transition in Russia has been a deterioration of social infrastructure in communities dependent on wood industries. As was the common practice in Russia, these industries generally operated kindergartens, schools and district heating plants; with the "hiving off" of these non-commercial assets following restructuring and the economic downturn, funding for these facilities is often grossly inadequate.

2.6 Only in Russia are there indigenous peoples as conventionally categorized, though in several countries there are ethnic minorities and socially disadvantaged groups. In Russia aboriginal peoples have special rights established by legislation to "territories of traditional nature resource use by small-in-numbers northern peoples". Given the extent of inter-marriage and close links with more recent settlers, there are problems of definition. In some cases also aboriginal groups have leased the land for intensive logging in order to maximize short term revenues rather than carry on "traditional" sustainable use practices.

Governance, Civil Society and Collaborative Forest Management

2.7 Governance is linked to increasing poverty and disparities in income, and to the general decline in law and order in many countries following the end of socialist regimes. In Russia there has been a growth in illegal timber exports, especially to Finland and Japan. In Albania and the Caucasus, partly because of increasing poverty, there has also been an increase in illegal 15 harvesting, partly for fuelwood as fossil fuel energy prices have increased, partly for cash. Poaching has become a problem also in several countries. There is in some cases collusion by local forest authorities, but forestry staff have seen their salary levels decline drastically and may go for 6 months without being paid; the illegal activities are often survival strategies.

2.8 Environmental NGOs existed during the socialist period, and many played a key role in protected areas management. A development in most ECA countries over the last 10 years has been rapid increase in the number of NGOs and their linkages with the international community. They have helped provide a framework for greater transparency in the forest sector. Many ECA countries now include in their environmental and forest management planning legislation provision for public consultations in the forest management planning process.

2.9 The Central European countries, with active local community organizations and NGOs, have become increasingly vocal in forest management issues, and have begun to move from an "advocacy' to a "partnership" role. In Albania, there is a tradition of community forest and range management which is being built upon; the authorities have been allocating user rights to local communities and management of these forested areas has improved as a result. (See Box 2) In several countries (Romania, Ukraine, Russia, Turkey, and Georgia) there has been increasing NGO involvement in forestry and biodiversity. Participatory watershed management, involving both local communities and provincial rural service agencie s, has worked well in Turkey. Linking forest management to collaborative natural resource management and rural development may be the appropriate strategy in several of the “resource poor” countries of the Caucasus and Central Asia. Forest extension services for private forest owners are being developed in some of the countries with restitution programs.

Box 2. Albania - Supporting Community-Based Forest Management in a Transition Economy (cost US$ 20 million, loan US$ 8 million), effective since 1996

Three Objectives: --restore degraded State-owned forest and pasture areas and promote their sustainable use --promote conservation of natural forest ecosystems; --start transition of the forestry/pasture sector to a market economy , separating commercial from regulatory functions and establishing mechanisms for self-financing of the commercial activities.

In addition to assisting with improving forest management at the local level and reorganizing the forest sector institutions, the project is: · improving trade, marketing and pricing policies to improve revenue · implementing an action plan to reduce illegal harvesting, in collaboration with local governments and the Ministry of Finance Tax Inspection. · supporting community forestry by providing local communities with legal user rights for communal and forest pastures, assistance to improve their management, and with mechanisms to reinvest users fees into improved management training forest specialists in the public and private sector.

Lessons:

Because of broader poverty, law and order and governance issues, it has been difficult to control illegal harvesting and improve forest management on publicly managed land. The component supporting transfer of user rights and management to local communities has however worked very well; user rights have been transferred for 10 years. Local communities have been assisted with development of management plans, and have invested user fees in improving the resource. This component is being expanded.

Macro-Economic Adjustment, Economic Policies and Timber Markets

2.10 Dramatic declines in income have affected the forestry sector in all countries; consumption of paper products in ECA averages only about 10 percent of that in Western Europe. The forestry sectors in Russia, Romania and Belarus have been profoundly affected by the broader macro-economic environment. A complex tax and tariff structure has made potential investors cautious, while in most FSU countries the present forest financing and taxation system, with revenues from the timber sales being transferred to the Treasury while local forest districts keep revenues from thinning to finance operations, has acted as a disincentive to sound forest management. In Russia more broadly there are great difficulties with tax collection, reducing budgetary funds available for all publicly financed activities including forest management. Forest industries in Romania, increasingly under-capitalized, have been unable to pay the forestry organization for timber purchases, in turn reducing the funds available to it for sustainable forest management. In Turkey trade liberalization has lowered the cost of imported timber and reduced the profitability of the forest sector (in the long run this will have beneficial impacts, leading to more focus on the non-timber values of forests).

2.11 Trends in timber markets are important for the timber exporting countries, including the Baltics, Poland, Belarus, Romania, Bulgaria Russia, Croatia, Bosnia and Herzegovina and the Czech and Slovak Republics. While the producers in the west of the region have faced similar market conditions (largely Western Europe), some countries, in particular Poland, the Czech and Slovak republics, Slovenia, Croatia and Estonia have succeeded in restructuring their industries to suit new markets. In all of these countries forest industries have been largely privatized, though most still maintain some price control over timber. Poland’s wood industry is among the forerunners to emerge from the 10-year period of transition and transformations, 1989 to 1999, as indicated by dramatic rises in production and exports. Liberalization of foreign trade in 1995 stimulated exports, mainly to western Europe. In 1999, Poland exported twice as much sawnwood, 8 times more particle board, 9 times more paper and paperboard and 12 times more furniture than in 1989. Russia has severely suffered from the collapse of the of the markets in Central Asia, and also the declining of timber prices resulting from the economic crisis is East Asia. In Russia, holding a share of about 7% of global supply, signs of recovery are visible, mainly as a result of increased domestic demand. However, an uncertain policy environment is an impediment for fast recovery of Russia’s timber industry leading to difficulties in attracting modern and environmentally friendly investment. Illegal logging and trade with timber is an increasing problem especially in Russia’s far East and in Albania causing losses of state revenue and local degradation of forest ecosystems. Certification of forest will become an important factor for ensuring long-term access to environmentally sensitive markets in Western Europe and Northern America. The Forest Stewardship Council (FSC) and the new Pan-European Forest Certification (PEFC) systems are coming on stream and have the possibility of multiplying the forest area certified in Europe within few years. Certification will become increasingly relevant as a communication and marketing tool, in addition to its primary objective of encouraging sustainable forest management. To avoid disadvantages from competing certification systems some countries are aiming to achieve multiple certifications and mutual recognition between certification schemes has become an important issue in international debates. 17

Box 3 illustrates the experience with a forestry project in Belarus, which has adopted a cautious approach to implementing market based reforms.

Box 3. Belarus - Forest Development Project 1994 loan US$ 42 million

The objectives of the project were to support policy and management reform, reverse the declines in wood harvesting and production, increase cost effectiveness of forest management, and expand wood exports and improve forest management, within the framework of a transition to a market oriented sector.

Because of tariff barriers and controls on trade it has been difficult to accomplish the policy objectives. However the project has assisted with fire management and improved silviculture, and is addressing issue of cost effectiveness and budget management in district forest management units. Separations of operational and regulatory functions are also beginning to be addressed.

The link between forest management and recover of forest industries is crucial in Belarus, and the project did not address this. In OECD countries forest management and utilization are frequently integrated, especially in the forest-rich countries. This link existed in the ECA countries until 1990; however as part of policy reform forest enterprises have frequently been privatized and this link has been broken.

2.12 EU accession is important for the Central European countries, the Baltics, Romania and Bulgaria. Structural changes will be linked to broader rural policy directives of the EU.

2.13 At present EU forestry programs are based on the 1989 Forestry Action Program, which provides budgetary support for forest protection, including against atmospheric pollution and fire hazard; improvement of forest industries; support to afforestation within the Common Agricultural Policy program of converting former agricultural land to forest land; development of a forestry communications and information system; protection of genetic resources and research. A 1997 bill on forestry strategy emphasizes links with other sectors, in particular agriculture, environment, industry, and regional development. (See Box 4) EU accession countries are likely to be eligible for resources for rural development and rural landscape conservation, including conservation of forest landscapes.

Box 4. EU Accession and Forestry

An EU Forest Strategy was approved in 1998 by the EU Parliament. It supports (a) utilization of existing legal instruments to ensure adequate technical and environmental standards for forest products and adequate health and quality standards for raw materials and reproductive material; (b) the existing principles of free trade within the EU; (c) eco-labelling ( a form of certification) for forest raw materials, (d) support to forest protection and reforestation; and (e) conservation of biodiversity in forests. Forestry is linked to broader rural and regional development programs on the one hand, and EU trade policies on the other.

Institutional and Legal framework, the Emerging Private Sector and Economic Instruments

2.14 All countries have experienced radical institutional restructuring over the last 10 years. Most have now developed New Forest policies and legislation, reasonably adapted to market conditions. The difficulty will be with implementing the legislation effectively. Many outstanding issues also remain, including the appropriate degrees of decentralization, and decentralization of funds, for forest management. Forest institutions also have had to undergo restructuring; research, before 1990, in general adequately funded and often of very high quality, 18 but not always linked to economic priorities or managed cost-effectively, has suffered in most countries. Funding for the core functions of fire and pest management has declined, as has funding for regeneration or maintenance of forest roads. Developing new institutional arrangements adapted to reduced public sector financing will be a challenge.

2.15 The Baltic countries, Slovakia, Czech republic, and Slovenia are undertaking restitution programs, while similar programs are planned for Bulgaria and Romania. In all of these countries an issue is the small size of forest holdings, mostly well under 5 ha, and frequently "restituted" to an elderly population. The first group of countries has accompanied these programs with a package of regulations and incentives, and, in the case of Slovenia, a forest extension program. In Slovakia regulations protect forests from conversion to other uses and lay down requirements for silviculture and forest management planning. In Slovenia there has been an ambitious forest extension campaign, including farmers' workshops, mass media and "machine circles" to facilitate use of harvesting equipment. The extension programs have been accompanied by a package of financial incentives for silviculture (these costs would be recovered eventually through the tax system at harvest).

2.16 Several countries, especially in central Europe, have gradually privatized harvesting and processing operations while keeping forest ownership in state hands. Many countries, in their policy analysis, are struggling with defining an appropriate relationship between and role of the private and public sectors. This is particularly difficult for forestry because of the "public good" element in sound forest management. Where forestland is privatized, an appropriate regulatory regime, system of incentives and extension system needs to be developed at the same time. Concession policy is being addressed in Russia, whose new legislation permits leases of up to 50 years; the Russian authorities are examining the possibility of linking this to "evergreen leasing" conditions. A further difficulty for private sector involvement includes the use of auctions in economies where markets are not yet open and there is risk of collusion. The approach of Croatia, permitting auctions but with listed minimum prices based on export prices, may be an appropriate compromise.

2.17 In Poland and Latvia work has begun on voluntary forest certification, a "green" market instrument which attracts some west European buyers of timber products, particularly in Britain and Germany. This instrument has been supported by the World Bank/WWF Forestry Alliance, which pursues sustainable management objectives. Certification provides for independent verification that timber and wood products originate from forests, which are soundly managed and utilized. There are several different approaches, but a consensus is emerging on the basic principles of sustainable management.

2.18 As in OECD countries forests are frequently under-valued, with the "direct use" value being accounted for rather than the "indirect use,” option and non-use values. The academic community in ECA has worked on broad evaluations. The issue is to persuade policy-makers, cash strapped and with a short term focus, that it is worth spending public money on activities which may have inter-generation benefits or benefits which are difficult to quantify in cash terms. Box 5 illustrates an attempt in Romania to assess the broader economic value of forests. 19

Box 5. ROMANIA: Valuation of the Forestry Sector

Forests have traditionally played an important role in Romania’s social and economic development, providing a major source of rural employment and income from logging, wood processing and non-timber forest products industries. Despite existing inefficiencies, the forestry sector is still a significant contributor to the Romanian economy. The 1997-export value of forest products was US$860 million, and that the sector’s contribution to GDP was approximately 5%.

The non-pecuniary values of forests are considerably larger than the financial, but traditional accounting methods have masked this. In an endeavor to quantify the importance of Romanian forests, together with the potential losses that could result from restitution of forestlands without appropriate regulatory frameworks for sustainable management of privatized forest land, the Bank commissioned a Total Economic Valuation (TEV) of the Romanian forestry sector1. The TEV indicates that the annual value of all products and services currently provided by Romania’s forests is more than US$3 billion. The capital equivalent of this annual production (using a 5% interest rate) is more than US$62 billion. These estimates would be higher with the inclusion of downstream value added from the existing wood processing industries, and income derived from tourism, education, and research.

This analysis led to greater appreciation of the importance of the sector and its potential to contribute more to the national economy. It also indicated the dangers with restitution in the absence of a phased strategic approach to establishing the institutional arrangements for management of private forests. Following on from the TEV, sector work showed how strategic investments in the public and private sectors, together with necessary adjustments of policy and legislation could increase both the amount of forest resources that are harvested sustainable and the value of their products. The analysis indicated the opportunity for the Bank to play a key role in supporting sector reform, which could increase the contribution of Romania’s forests to the economy, while avoiding the adverse economic, environmental and social consequences that could accompany restitution of forestlands.

2.19 Economic instruments include the range of financial instruments that policy makers can use to shape decision-making. In OECD countries a package of incentives may be granted to private forest owners for regeneration, to take account of long growth periods, and because these benefits will eventually be recaptured through taxation by the public purse at harvest. Public expenditure on fire and pest management is generally justified, as are financial incentives for sustainable watershed management in low-income areas (Turkey and Albania). In much of the FSU the package of financing of public sector forest management, resource taxation and forest industry taxation needs reform. In Russia for example taxes include profit taxes (35%), payroll taxes (40%) and VAT (20%), as well as stumpage and other taxes. However, taxation collection is difficult and evasion widespread.

Sustainable Forest Management and the Role of Plantations

2.20 Most ECA countries' forest policy statements emphasize the importance of sustainable, multi-purpose forest management, and in several the principles of eco-system based landscape management are well understood. Forest land-use planning regimes include forests managed primarily for watershed protection, species conservation, recreation and mixed use as well as for production. Low-impact harvesting adapted to site conditions and with limits on clear felling, maintenance of species diversity and assisted natural regeneration are widespread practices in many countries. Because of other policy issues, however, it is frequently difficult to implement these policies effectively.

1 FORTECH, UK, “Economic Valuation and Reform of the Forestry Sector in Romania”, January 1999.

2.21 Over the region as a whole "managed natural forests" predominate. In Turkey poplar plantations play a key role in construction, and have much higher mean annual timber increments than the natural forest; however, they need moist soils to grow well. Poplar plantations may also have potential in Central Asia but must compete with arable farming or fruit trees for water. Many of the forests of Belarus and north-western Russia are effectively plantations, based on naturally occurring species, and following large-scale replanting after devastation during World War II; for these effective seed farms are key to success. Several countries are beginning to switch from bare root to containerized seedling technology. For production forests a debate in the region continues between advocates of dense pla nting regimes (with natural and pre-commercial thinnings) and advocates of forests planted at lower densities with fewer thinnings and lower maintenance costs.

2.22 In general foresters in the ECA region are well trained and silvicultural skills compare well with those in OECD countries. The challenge, rather, is to integrate cost effective with technically sound management in a resource-constrained environment. Box 6 illustrates experience with a broad-based forestry program in Poland.

Box 6. Poland - The Forest Development Support Project (1993 – 98) US$ 335 Million; Loan Amount US$146 Million

The loan had three objectives: (a) Supporting environmentally sound forest management, through reforesting areas damaged by atmospheric pollution; and afforestation of abandoned cropland. (b) Improving the efficiency of forest management , through :demonstrating methods of increasing biomass and faster growth improving pest control; introducing mechanical harvesting and transportation; and supporting reduced density of new forest plantation, and increased thinning and pruning regimes. (c) Strengthening forest institutions and finance, including more precise planning and supervision by district forestry organizations and creating a trading and pricing department; supporting the transfer of forest operations to private operators; supporting forestry research and seeds production; and supporting expansion of parks and protected areas. Lessons: there were three main lessons from the project: · In countries with strong traditions in forestry production and with a clear development programs and implementation capacity, the benefits of project support lie in the introduction of modern technologies and institution strengthening than in expanding forest production · The introduction of forest establishment and management innovations in place of traditional procedures must be supported by hard evidence of their technical, financial, environmental and economic advantages. · The design of institutional development activities should emphasize financial and economic sustainability, both for public and private sector enterprises . 21

Global Issues: Carbon Sequestration and Biodiversity Conservation

2.23 All of the FSU countries have an extended system of protected areas. However, since the transition, there has been a serious decline in the funding available for their management. The staff of protected areas in Russia (whose network is over 50 million ha) go unpaid for six months or more. Although Romania's forests are well managed to conserve biological diversity, it does not have such a system and fragile areas are under threat from grazing and tourism pressures. Other threats include pressure for tourist or urban development, particularly in Turkey and Bulgaria. In many countries also there is still much progress to be made in involving local communities in protected area management, and in moving from a "command" to a "participatory" system of land management. Many countries (Romania, Turkey, Georgia, Kyrgystan, Croatia) have unique ecosystems outside protected areas, within the forest production landscape; in general the central European countries have developed forest management systems which take account of these biodiversity values. The challenge will be to maintain this on privatized land on the one hand, and to balance conservation and development goals as pressure for tourism and urban development builds up on the other. In Romania, for example, forest biodiversity is threatened by the impending land restitution. Box 7 illustrates a recent Biodiversity Project for Romania; dialogue on this project also helped to build ownership for broader forest policy reforms.

Box 7. Romania - GEF Biodiversity Conservation Management Project (1999) Cost: US$ 8.8 million

Natural temperate forest ecosystems cover 27% of Romania's land area. More than half of the forests were managed for conservation objectives, and include some of the largest tracts of undisturbed forest remaining in Europe. There is a full range of European forest fauna, and rich and varied meadow and wetland ecosystems and, above the treeline, alpine ecosystems with a high degree of endemism. These ecosystems are under threat with the breakdown of central controls, and changes and uncertainties in regulations and forest management planning adapted to the emerging market economy and private ownership structure. Rural poverty is widespread, putting additional pressure on natural resources for fuel and grazing.

The project supports participatory planning and sustainable management of natural forest ecosystems and associated landscapes at three demonstration sites in the Carpathian Mountains, and replication of these approaches to other conservation sites.

It supports strengthening of the legal and regulatory framework for biodiversity conservation, institutional strengthening in biodiversity planning and monitoring, implementation of management plans, pilot eco- tourism and bison reintroduction programs, and public support for biodiversity conservation.

A focus of the project has been a broad participatory approach to project design and implementation; by ensuring stakeholder "empowerment", the project aims to secure local commitment to sustainable ecosystems management. 22

2.24 The role that the forests play in carbon fixation is linked to their size; valuation studies even in countries like Turkey with only 9 million ha of forest have indicated that the carbon fixation value of the forests may outweigh other values. Russia, with 764 million ha of forest and 15 percent of the worlds carbon stored in forests, overshadows all other regions in the role it plays in global carbon fixation. Substantial analytical work has been undertaken on global carbon values and expectations have been raised. However, the Prototype Carbon Fund still has modest funding for carbon fixation in forests; until there is progress towards resolving broad political differences between the US and Europe with regard to implementing the Kyoto Protocol, the ECA countries will not benefit much from these initiatives. GEF does not presently consider carbon sequestration eligible under the Climate Change program, though its new operational program 12 does permit funding for broader eco-systems rehabilitation

Crisis Management

2.25 The major crises since the transition have been the destruction caused by war, in Bosnia, Croatia, Armenia, Azerbaijan, and Tajikistan. In Poland, Belarus and to some extent Bulgaria forests have suffered from air pollution damage, and in Belarus contamination from Chernobyl has been an additional problem. Russia, (partly) because of the funding crisis, suffered a catastrophic pest outbreak in 1996 and in 1998 forest fires affected 1.6 million hectares in the Russian far East. Bosnia is also suffering from increased pest infestation, since the forests are still contaminated by land mines they are not accessible for pest monitoring and prevention. So far it has not been possible to organize operations to salvage dead wood from this loss. However, the Bank was able through reallocating funds from the Environmental Management Project, to help mitigate the pest outbreak in Krasnoyarsk, Russia and a major element of the Forestry Project under preparation will address fire prevention and management. Wind and storms have also caused serious damage in Europe. The severity of the weather may be linked to climate change, and damage may also have been aggravated by past planting programs which included fast growing species ill adapted to local conditions. Most forest authorities are now returning to greater use of indigenous trees. Box 8 illustrates a project in Croatia which addresses forest reconstruction following the war of independence. 23

Box 8. CROATIA - Forestry and Tourism

The Coastal Forest Reconstruction and Rehabilitation Project (US$ 40 millions loan) was designed to help restore and protect forestlands in the coastal zone of Croatia that were destroyed by the war. It became effective on July 31, 1997. The objectives of the project are to (i) enhance landscape and recreation values of the region and thereby help restore tourism to its pre-war level; (ii) restore the environmental role of coastal forests, by protecting soil and waters and initiating restoration of natural vegetation; (iii) address the problem of forest fire that is a crucial threat to coastal areas; and (iv) develop the knowledge base for improved management and protection of coastal forests.

Coastal forests are an integral part of the image of Croatia for tourists, and devastation of coastal forests has decreased the attractiveness of the coastline for tourists.

The project is supporting reconstruction activities, including reforestation and silvicultural works on both public and private land. It is also helping to improve fire management for coastal forests, including fire prevention measures, road-side cleaning and forest thinning, fire-fighting roads and equipment for fire- forecasting and improved detection. For suppression of forest fires, the project is providing fire -fighting equipment, including a seaplane air-tanker, initial attack airplanes, fire-fighting vehicles and a communication system. It is also supporting forestry research and institutional strengthening of public enterprises responsible for managing Croatia’s forests.

Project experience so far has shown that damaged vegetation (both from war and forest fires) heals by natural regeneration better than manual reforestation. Consequently, the reforestation program under the project has been reduced. Government is considering how to reallocate project funds to other activities, which meet the project objectives. The project will be completed in December, 2001.

Progress with the Broad Policy and Institutional Reform Agenda

2.26 In order to provide an illustration of overall progress with reform, we have prepared a summary which indicates progress with the different elements of sustainable forest and biodiversity management by our client countries. (See Attachment 2 to this chapter). The matrix following the table provides an explanation to it. It needs to be emphasized that constructing a table of this kind involves many simplifications. Furthermore, sequencing varies by country; some countries may have advanced far on forest land restitution, but still face difficult governance problems, while others may have sound protected area management but little transparency or public involvement. Nevertheless, the table does provide some useful comparisons. The table and its explanatory chart also provide some broad guidelines also as to the appropriate next steps of our client countries as they move forward with reform of natural resources policies, and of the role of our assistance and that of other donors in this process.

Attachment 1 Page 1 Thematic Issues

Baltics, Poland and Belarus Danube and Carpathians Poland Lithuania Latvia Estonia Belarus Ukraine Moldova Romania Czech Repub. Slovakia

Market Trends X X X X XX - - X X X Macro Economic Adjustments X X X X XXX XXX - XX X X Sustainability of Resources and Services XX X X X XXX NA NA XX - - Governance - - - - X NA NA XX - - Collaborative Forest management X X X X X NA NA XX X X Poverty X X X X X NA NA XX X X Carbon X X X X X X - X X X Private Sector involvement XXX XX XX XX XXX NA NA XXX X X Institutional and Legal Framework XX XXX XX XX XXX NA NA XXX - - Role of Plantations X X X X XX NA NA - - - EU Accession XXX XXX XXX XXX - NA NA XX XXX XXX Forest Industry XXX XX XX XX XXX NA NA XXX XX XX Land Restitution - XXX XXX XXX - NA NA XXX XX XX Biodiversity Conservation X X X X X NA NA XXX XX XX Crisis Management XXX - - - XX NA NA - - - External Impaction Forests X - - - X NA NA X X X Indigenous Peoples* ------Economic Instruments X X X X XXX NA NA X X X Economic Valuation X X X X X NA NA XXX XX XX

XXX Very important XX Significant X Of some importance - Little or no importance

* Several countries have ethnic minorities and disadvantaged groups. These are not included here in the definition of "indigenous peoples". 25

Attachment 1 Page 2

The Balkans Russia, Turkey and the Caucasus Albania Bulgaria Macedonia Croatia Bosnia Slovenia Russia Turkey Georgia Armenia Azerbaijan

Market Trends - XX - XX XX X XXX XX - - - Macro Economic Adjustments XX XX X X XX X XXX X XX XX XX Sustainability of Resources and Services XX XX X X XX X XX XX XX XXX XXX Governance XXX X X X X X XX X XX XX XX Collaborative Forest management XXX X X X X X X XX XX XX XX Poverty XXX X X X XX X X XX XX XXX XX Carbon X X X X X X XXX X X - - Private Sector involvement XX XX X XX XX X XXX XX X - - Institutional and Legal Framework XX XX XX X X X XXX XX XX X X Role of Plantations X X - - - - X XX - - - EU Accession - X - X - XXX - X - - - Forest Industry X XX - XX XX X XXX XX - - - Land Restitution XX XX - - - XX - - - - - Biodiversity Conservation XX XX XX XX XX XX XX XXX XX X X Crisis Management XX X X XX XXX X XX X XX XX X External Impaction Forests XX XX XX XX XX X X XXX X X X Indigenous Peoples ------X - - - - Economic Instruments X XX X X X X XX XX X X X Economic Valuation X X X X X X XXX XXX XXX X X

Attachment 1 Page 3

Central Asia Turkmenistan Tajikistan Kazakhstan Kyrgyz Rep.

Market Trends - - - - Macro Economic Adjustments - - - X Sustainability of Resources and Services XX XX XX XX Governance XX XX X X Collaborative Forest management XX XX XX XX Poverty XXX XXX XX XXX Carbon - - - - Private Sector involvement X X X X Institutional and Legal Framework XX XX XX XX Role of Plantations X X X X EU Accession - - - - Forest Industry - - - - Land Restitution - - - - Biodiversity Conservation X X XX XXX Crisis Management X XX XX XXX External Impaction Forests XX XX X X Indigenous Peoples Economic Instruments Economic Valuation 27

Attachment 2 Page 1 STATUS OF SUSTAINABLE NATURAL RESOURCE MANAGEMENT IN ECA

Forests Biodiversity Water Land Total score Poland, Baltics, Belarus Belarus 3 5 4 4 16 Estonia 7 7 6 7 27 Latvia 7 6 6 6 25 Lithuania 6 6 5 5 22 Poland 7 6 6 6 25 Danube and Carpathians Czech Rep. 8 7 7 7 29 Hungary 8 7 7 8 30 Moldova 5 5 5 6 21 Romania 5 6 6 6 23 Slovakia 8 8 8 8 32 Ukraine 4 5 4 4 17 The Balkans Albania 4 4 7 6 21 Bosnia 4 3 5 5 17 Bulgaria 5 7 5 5 22 Croatia 4 5 6 6 21 Macedonia 6 6 6 6 24 Slovenia 8 6 6 8 28 Turkey and the Caucasus Armenia 3 4 5 3 15 Azerbaidjan 4 4 5 3 16 Georgia 4 5 5 6 20 Turkey 4 4 6 6 20 Central Asia Kazakhstan 4 2 4 4 14 Kyrgyz Rep. 4 5 5 3 17 Tajikistan 2 2 4 2 10 Turkmenistan 2 2 2 2 8 Uzbekistan 2 4 4 3 13 Russia 5 6 4 5 20 28

Attachment 2 Page 2 STATUS OF SUSTAINABLE NATURAL RESOURCE MANAGEMENT IN ECA

Framework for Improved Forest Framework for Improved Framework for Adequate Water Framework for Adequate Land Management Ecosystems Biodiversity Resource Management Management Management 1-2 -Regulatory, management, harvesting and -No established protected area -Investment decisions made on narrow -Land, production, inputs, technologies processing functions are state-owned and management or land classification production maximization objectives managed by the state, under same organizational structure; system -No adequate water pricing -Modern soil/moisture conservation -All forest land managed and utilized by the -No biodiversity strategy and -Centralized institutions & approach to practice not practiced state. information base on ecosystems/species decision making, with little -Widespread erosion and soil mining -No public discussion of management plans not developed accountability or community -Crop husbandry and range management -Forests managed to maximize timber -No signature of international involvement poorly linked with maintenance of yields rather than for sustained multiple use conventions -Ecological value of water not ecological functions and soil capability -Poaching of rare species considered -No land use planning -Little involvement of civil society in -River basin planning does not -Research focused on production ecosystems management consider multi-sectoral and maximization rather than longer term -Little biological resource management downstream impacts maintenance of productivity and fertility in the production landscape -Research narrowly focused with little -No cadastre registration -Poorly managed gene banks, weak regard for improving efficiency links with in-situ conservation 3-4 -Separation of regulatory and management -Strategy completed and international -Planning considers downstream -Some land privatization but inadequate from harvesting and processing. conventions signed impacts on salinity/ecosystems, technical services in soil fertility -Forest activities state-owned but some -Protected areas system managed for -Political pressure to maximize management, move to commercial management. research or recreation with little investment continues -Inadequate use of inputs, use of -Some environmental civic groups active community involvement -Debates on pricing regulatory inappropriate machinery continues -Multiple use forest planning accepted in -Database exists but fragmented and not framework begin -Poor range and pasture management legislation publicly available -Some piloting of decentralized -Research into land capability but results -Inadequate funding for protected area approaches to operation and fragmented system from state budgets maintenance of irrigation & municipal -Production landscape managed with water /wastewater systems little regard for biological resources -Data-systems maintained. 29

Attachment 2 Page 3 5-6 -Privatization of harvesting and wood -Environmental groups, active in PA -Progress with decentralization and -Farm support services include some processing management formation of effective water user support in soil fertility and erosion control -Public forest organizations are accountable -Alternative approaches to PA funding associations management for sound forest and financial management discussed -Investments begin to account -Private market developing for inputs -Community-based natural resource and -Ecosystem management approach and ecological, watershed, drainage and -Demonstration programs for improved watershed programs beginning local participation developing in PA salinity impacts land management system -Coordination between water resource -Research on-going into improved crop -Public discussion of and research into institutions and some cooperation on nutrient, range and pasture management biological resource conservation in integrated water use production landscape -Water monitoring systems shared between institutes 7-8 -Forest land restituted -Functioning protected area system with -Integrated, inter-sectoral approach to -Adequate fertility/land management -Private/community rights to manage forest emerging multiple sources of public and water use with river-basin planning, support services and input availability, land supported by government; private funding and local management with public accountability for key -Incentive system & programs under way -Transparent forest leasing arrangements -Effective biodiversity information and water institutions in biological resource conservation in linked to sustainable management education programs -Water pricing covers operational and production landscape -Transparent, multi-purpose forest land-use -Public accountability of protected area maintenance costs --Decentralized approach to sustainable planning programs -Decentralized, participatory water land management with cooperation -Timber price reforms under way and -Adequate regulations, legislation in management between users and community functioning forest resource taxation system place and enforced -Integrated water monitoring systems involvement -Emerging land care programs and in place and used by management -Research and information systems widely partnerships with agriculture -Adequate farmer support system for shared -Support for gene banks & live improved water management in place collections 9-10 -Full Public accountability for forest land- -Civil society broadly involved in -Public accountability in water -Soil managed to control erosion and use planning ecosystems management resource management and investment, maintain fertility and production levels -Transparent pricing system for timber, and -Policies and programs under -Water pricing reflects costs -Carrying capacity of pasture and range NTFP implementation for biodiversity adequately increased, agricultural run-off at -Adequately financed, transparent, public conservation in production landscape -Integrated approach incorporates acceptably low levels forest regulatory institutions -Community participation in protected externalities in investment decisions, -Farm practices allow for biodiversity in -Forest inventories and management plans area management and effective funding -Full decentralized responsibility for production landscape publicly available mechanisms water management -Integrated crop protection systems in -Harvesting and processing privatized and -Incorporation of biodiversity values in -Adequate river basin, water quantity place accountable to clear rule of law public sector management and and quality monitoring in place with -Land capability and land use information -Certification/chain of custody systems investment decisions information publicly available systems available to public functioning and providing independent -Information systems in place and -Cadastre in place and used in land verification of sustainable forest widely shared with local and markets management international community -Gene banks maintained and widely used CHAPTER 3

OUR ASSISTANCE STRATEGY TO THE FOREST SECTOR

An Emerging Strategy

3.1 Our Forestry and Biodiversity assistance program to the region will be directed at helping our client countries meet the following broad objectives:

· Supporting policies and institutions which are market driven and transparent

· Supporting sustainable forest and biodiversity management, with involvement of local communities

· Crisis management and economic reconstruction

· Addressing commitments to global forest conventions

· Supporting training, education, information access and planning systems

3.2 The problems associated with the transition will take many years to address and poverty has grown rapidly in many of the ECA countries. Our future strategy will, therefore, attach higher priority than in the past to poverty alleviation. In the forest-rich countries this is likely to be best achieved by supporting reforms which increase the contribution that sustainable forest management and forest industries make to public revenue generation and to job creation. In the forest-poor countries the focus is likely to be, rather, on improved forest and natural resource management and income generation within the broader rural economy. These improvements require in turn price, fiscal and regulatory policies which value forest resources appropriately, which ensure efficient resource mobilization, and which provide clear governance and control over forest resources.

3.3 A vision for the forest sector in the ECA region, which we would hope to help our client countries achieve, could include the following broad “outcomes”:

· Economic recovery in the forest sector, overcoming the present crisis in many countries

· Improved and sustainable natural resources management and regeneration of forest resources, benefiting a wide range of stakeholders and society at large

· Conservation of biodiversity, and of the economic, environmental and social functions of forests

· Market oriented and privatized harvesting, processing, marketing and trading, according to transparent regulations, within a competitive environment

· Adequate education, training, and information, both to forest managers and to the public at large, regarding sustainable forest management.

· An adequate governance framework for forestry

The following paragraphs summarize the possible shape of an assistance program to the six sub- regions identified in section 1, within these five broad objectives.

The Baltics, Poland and Belarus

3.4 These countries are all rich in forest resources and net exporters of forest products. We have assisted these countries with development of broader economic policies, which maximize the contribution of forests to the economy. In the Baltics and Poland overall Bank assistance is likely to decline as these countries prepare for EU accession The Baltics also have access to concessional funding from the Scandinavian countries. There is, however, much that these countries can offer other countries in the region in sharing experience with transition issues. In particular, Poland has moved fast with establishing independent certification of forest management, and forest industries have been successful in creating value added and establishing themselves in export markets. In Latvia, certification has also moved forward. Over 40% of forestland has been restituted to private forest owners and a forest extension service developed to assist the new owners with forest management. The forest organization is also moving ahead with institutional reforms to establish itself as a commercially autonomous organization.

3.5 Our broader economic work may wish to address EU accession issues as these relate to forestry, together with the adequacy of forest resource taxation systems in these countries.

3.6 We hope, in these countries, to facilitate exchanges with other countries in the region, through workshops and through cooperation with other partners. In the "fast reforming" countries there is also scope for IFC and MIGA supported operations

3.7 In Belarus our assistance has been restricted by broader difficulties with the country dialogue on policy reform. Forestry and forest industries remain important to the economy and to employment growth, however. While our on-going forest operation has had limited impact in achieving broader sectoral reforms, it is helping with improved fire management and pollution monitoring, seed production and district forest enterprise management and is maintaining dialogue on broader reform issues. We have also completed a GEF biodiversity project in Belarus. When the overall policy environment improves, support for broader institutional and policy reforms will be possible. The Bank should also support recovery of the wood processing industries, through IFC operations, a financial sector operation or a broader forest investment risk guarantee operation (see below). We should also pursue the potential for a second GEF biodiversity project.

· Work with partners to exchange experiences with other ECA countries · Help client countries maximize the contribution of forests and forest industry to economic recovery · Help client countries with EU accession issues as these relate to forestry · Support forest sector reform in Belarus

3.8 In summary, we would aim in this sub-region to help sustainable forest management and utilization in Belarus contribute to poverty reduction and economic growth, and to facilitate exchanges of experience between the Baltic countries and Poland, and other ECA countries, on forest policy reform.

Russia

3.9 The importance of forestry both to the Russian economy and to the broader global economy is now well understood. A sector study was completed in early 1997, Russia is a key partner in the WWF/Bank alliance and in the CEO ad hoc forum. The recent Country Assistance strategy focuses on poverty reduction, recovery of economic growth and improved public sector management. We will continue to support these partnerships and to work with other local and international partners in the forest sector. We also plan to support a forestry loan which, if successful, would help with recovery of the sector. In Russia, we are also working on creating an environment for encouraging private sector investment in forest utilization; this is key to sector recovery. The Investment Risk Guarantee Facility (see below Box 14) is an instrument well adapted to Russian and ECA conditions. We will also work ore broadly on assisting our clients with maximizing the fiscal contribution of forestry, within a broader economic recovery. There is also scope for the IFC greatly to expand its role. It is presently involved in one pulp mill in Northwest Russia and the participation to date has been successful.

3.10 Russia 's GEF portfolio is growing. We are considering a GEF operation to support fire management in fragile forest ecosystems. This would complement the Bank loan, which is focused on commercially accessible forests. A follow up to the present Biodiversity project, which would focus on supporting regional networks of protected areas, under primarily regional management, is in the early stages of discussion. We would work closely with other GEF partners in these areas.

Box 9. Supporting Improved Public Sector Management and Addressing Private Sector Constraints Russia sustainable forestry pilot project : US$ 74 million, loan US$ 60 million

· Focuses on three pilot regions of Khabarovsk, Krasnoyarsk and Leningrad · Three objectives: improving sustainable public sector management in forestry improved enabling environment for private investment in forest utilization replication of policy reforms and improved management to other regions · Policy reforms supported include forest leasing to improve transparency and permit long-term leases conditional on sustainable resource management, improved forest resource taxation and sector financing development of regional regulations, pilots certification and fire insurance systems · Improved forest management including improved & more transparent forest inventory and management planning improved forest information management improved fire and pest management improved regeneration · Enabling environment for private sector investment supports training in business management, marketing and harvesting and processing techniques to forest enterprise managers and employees. · Constraints Difficult political and economic environment Achieving "results on the ground" may be the best approach

In summary, we plan to

· Assist with policy and fiscal reform and improved public sector management · Support the contribution of forestry and forest industry to economic recovery and poverty reduction 33

· Support the contribution of forests to the global biodiversity and climate change mitigation agenda

The Danube and the Carpathians

3.11 This sub-region, like the first sub-region, has both "slow reformers" (Ukraine) and "fast reformers" (Hungary and the Czech Republic). Central Europe is unlikely to expand its program with the Bank over the next five years; as for Poland and the Baltics, there is scope for sharing experience with other countries in the region.

3.12 Both Romania and Bulgaria have significant forests and forest industries, both export oriented. Both countries also have rich and varied ecosystems which are under threat from pressures on sustainable resource management due to increasing rural poverty and the need to maximize short term cash earnings on the one hand, and pressures from tourism and hunting on the other. Both are also in the process of restituting a substantial proportion of forestland to private owners and communes, and there is a risk that if the process is not well managed, the long-term contribution that forests make to the economy will suffer.

3.13 In Romania we began our dialogue with a NEAP and a joint forest sector review with FAO in 1992, and supported a GEF biodiversity project in the Danube Delta. We built on this relationship to help the authorities prepare a biodiversity strategy and identify and prepare a second GEF biodiversity project focusing on forests. We then supported a study, which illustrated the importance of forestry to the Romanian economy within a comprehensive development framework, and the need to manage the reform process carefully. A lending operation under preparation will support institutional reforms to accompany forest land restitution and commercialization of the National Forest Authority (see box) The GEF project is linked with the loan in that it supports protected area management within the broader context of sustainable natural resource management, and increasing the contribution that forestry can make to the broader rural economy.

Box 10. Romania - Forest Development Project

A Forestry Project is under preparation. Its objectives are to improve sustainable forest management through: Clarifying and rationalizing the role of the state with regard to regulation and management of state-owned forestlands; Developing improved methods of forest resource value assessment, taxation and management financing Developing and implementing a strategy for forestlands to be restituted to private owners and communes which defines the new owners' obligations. Providing support services to new forest owners and helping them to form associations and develop knowledge of sustainable forest management practices Developing new approaches to planning and construction and maintenance of forest roads Developing new approaches to financing protected areas within forests Developing regulatory mechanisms to assure long term supplies, at appropriate prices, of sustainable harvested timber to forest industries Assisting forest industries to become more competitive through establishing advisory services

3.14 In Romania lack of access to capital for medium and small-scale forest enterprises remains a critical problem.

3.15 In Ukraine we are, as in Belarus, in a "waiting" situation. Since supporting a small GEF operation in the Ukrainian Carpathians we have not been involved in the forest sector. With 9 34

million ha, Ukraine has the third largest forested area of any country of the region and forestry is important to the rural economy especially in the north and west. A planned Environmental Strategy update should provide the opportunity for renewed dialogue with the forestry organizations.

Our partners are likely to be the EU, bilateral donors (e.g. Germany in Bulgaria, France in Romania), European and local NGOs, and forest industry. We would:

· Support forest land restitution and the institutions to make this work · Support policy and institutional reforms to improve forest management and revenue potential · Support recovery of forest industry · Support improved conservation management and contribution of forest ecosystems to economic recovery

3.16 Romania, Bulgaria and Ukraine all have the potential for being "focus countries" if we pursue the overall objective of poverty reduction and restoration of economic growth through sustainable forest management.

The Balkans

3.17 The Balkans are already a focus area for forestry; we have loans ongoing in Bosnia, Croatia and Albania, all aimed at economic recovery. In Albania, we have an additional focus on governance and poverty-oriented community forestry. We are likely to concentrate on improving ongoing portfolio performance. Given the importance of the resource base in Bosnia, we should support maintenance of forest quality through species diversity. There may also be scope for a guarantee operation in Bosnia. In most of these countries timber products make a significant contribution to exports. In Albania there is potential for further support for community-based forestry and broader range and natural resource management in the context of rural poverty reduction. Support to participatory resource management is especially important in countries where official institutions have been weakened by the conflict and there is little respect for formal authority. In Macedonia we supported a NEAP and a Biodiversity Strategy which highlighted the importance of forest ecosystems but there has been no investment or GEF support to forestry.

3.18 In Bulgaria we supported a Forest Sector Review in 1995, but there was no follow up to this. The Bank has not supported a GEF forest Biodiversity operation. Forestry is included in the present dialogue with the Min istry of Agriculture following the recent Country Economic Memorandum, and Bulgaria will be one of the key participants in the upcoming workshop on certification and land restitution. This should provide an opportunity to re-establish dialogue. Should this be fruitful and consistent with the country assistance strategy, we may provide broader support for the forest land restitution process and for reform of forest institutions through a lending operation, similar in scope to the proposed Romania Forest Project, and possibly combined with a GEF-supported operation to fragile forest eco-systems. The objective, again, would be to ensure that forestry contributes to economic recovery.

3.19 The Balkan mountains are one of Europe's most diverse ecosystems; they are already important for summer and winter recreation, and there will be increasing pressure on them as their economies recover and diversify. There is scope for a series of national ecosystems protection projects, financed with GEF support , and promoting regional cooperation. 35

In summary we should:

· Support community-based forestry and natural resource management in Albania and Macedonia · Support the contribution of forestry to broader economic development in tourism, recreation and forest industry, in Croatia, Bosnia and Bulgaria · Support forest land restitution and institutional reform in Bulgaria · Support through GEF improved conservation management of the Balkan forest and mountain ecosystems in most countries of the sub-region.

Turkey and the Caucasus

3.20 In Turkey and the Caucasus improved forest and natural resource management are closely linked to rural poverty reduction and development of the rural economy more broadly. In Turkey we have for several years supported participatory watershed rehabilitation in poor provinces of Eastern Turkey. This approach remains valid and is likely to be replicated in follow- up project covering a substantial portion of the country, which is in the early stages of preparation. In Armenia also a project under preparation is likely to adopt a similar approach.

Box 11. Armenia - Natural Resources Mgmt. and Poverty Reduction Project (GEF/IDA Project)

The project, under preparation, aims to improve natural resource management in the Lake Savan Watershed by designing and implementing, in micro - watersheds, improved forest, range, and agricultural land management practices. The project would also strengthen capacity at central and local level for improved natural resource management, provide support to community-based income generating activities through a small grants scheme. It would also improve forestry and protected area conservation management, and would be funded jointly by IDA and the GEF.

Project design has evolved from addressing implementation of the National Environmental Action Plan broadly, to addressing rural poverty in one area of Armenia through a package of measures to improve NRM

3.21 The sub-region is highly diverse. In Turkey we have recently completed a Forest Sector Review, which recommends that the Forest Authorities move away, in many forest districts, from a focus on timber production to considering the broader multi-functional role of forests, in recreation, tourism (for more affluent urban populations), in watershed protection and biodiversity conservation (for "public good" benefits) and in sustainable livelihoods through range, fodder and fuelwood management (for poor rural populations). In Georgia, on the other hand, where the focus during the Soviet period was on protection, we are exploring with our clients the broader role that forests could play in economic development, through further development of carefully managed tourism, or through increased (though limited) harvesting.

In summary we would support · Community based natural resource management programs to address rural poverty · Policy reforms and programs to utilize sustainable the full value of forests for recovery and economic development · Biodiversity conservation in the "global biodiversity hotspots" of Turkey and the Caucasus 36

Box 12. Addressing Biodiversity and Forest Conservation Management: Georgia: GEF Biodiversity Conservation Project and Forestry Development Project (both under preparation)

· Objectives: Conservation of globally significant Caucasian forest ecosystems; establishment of ecologically effective protected areas; integrate biological conservation into forest management and utilization; strengthen institutions; increase contribution of forestry to the Georgian economy; improve monitoring and public awareness · Strategic linkages between forestry and environment are key in Georgia: The GEF project developed in parallel with the Forestry Development Project (IDA credit of $20 million) new Forest Code of Georgia regulates forest management on both "usable" and "protected" forestlands. The two projects have a common goal of improved ecosystem planning and management, and share a geographic area ("laboratory zone" in the Central Caucasus forests) with parallel social assessment and economic valuation for both projects

· Strong links with other activities: National Environmental Action Plan (IDF grant) Biodiversity Strategy and Action Plan (GEF grant) Integrated Coastal Zone Management Project (IDA credit and GEF grant) Black Sea Environment Program (GEF grant) Cultural Heritage Project (IDA credit) Public Promotion of Sustainable Forest Management (WWF-World Bank Alliance) and links with other aid agencies (e.g. USA and Germany)

Central Asia

3.22 The sub-region is poor in forest resources and forested area is 8% or less of total land area. Poor water management is the principal problem in the lower watershed countries (Kazakhstan, Turkmenistan and Uzbekistan). Kazakhstan nevertheless has a substantial areas of woodland and forest (17 million ha) which have suffered from over-harvesting and devastating fires in the years since the transition. There is likely to be scope for an improved natural resource management project, which combines improved soil and moisture conservation on farmland with better maintenance of vegetative and woody cover on range and forestland. In Tajikistan and Kyrgystan (the "upper watershed " countries) there are serious issues of watershed management and sustainable rural livelihoods, linked also to ecosystems conservation.

A priority in all of these countries has been to address deterioration in irrigation infrastructure, vital for the rural economy and for exports.

3.23 In the sub-region our intervention in forestry and in broader natural resource management has so far been very limited. A small regional biodiversity project for Central Asia was approved in 1999. A Forestry and Natural Resources review is planned for Kyrgystan; a similar review planned for Kazhakstan may be dropped because of resource constrains. In the region, we will need over the longer run to focus on

· Undertaking operationally focussed sector work on improved land management · Community-based natural resource management programs which address rural poverty · Developing the GEF portfolio to address de-certific ation, ecosystems and watershed management issues as a complement to IDA/GEF funding

Box 13. Kyrgyz Republic Forest and Natural Resources Sector Review

The recent Strategy for Rural Growth and Poverty Alleviation in Kyrgyz Republic identifies improved natural resource management as a strategic objective, together with agricultural growth and poverty alleviation. The proposed study would address the constraints on sustainable resource management, building on work on livestock management, and addressing broad demands on forest land, for fuel-wood, fodder, food, agriculture, watershed protection, biodiversity conservation, and recreation. It would also examine the organization of the forest sector, and the scope for local production, versus imports, of timber products. Taking in to account recent work on developing participatory forest management by other donors, it is likely to examine the scope for further support, through lending, or a combined IDA/GEF operation, to community based watershed management in hilly and mountainous areas.

Similar work for Tajikistan is in the early planning stage

Instruments

Lending

3.24 Lending will be shaped by the willingness of our client countries to engage in dialogue or to borrow on IBRD terms for activities in forest management which may have only long term benefits, and by competing claims for resources both within our client countries and within the Bank.

Direct Bank lending is likely to focus on: (i) in forest-rich countries improving public sector forest management (policy reform, improved fire and pest management, testing improved management technologies (e.g. regeneration, roads), research and resource assessment, forest regulation, extension systems for restituted forests, training and public awareness). ii) In the forest-poor countries, participatory watershed and forest management with a focus on poverty alleviation, sustainable rural livelihoods and decentralization of decision making. iii) Investment in forest utilization (forest industry) is likely to be by the private sector through commercial financing, IFC or guarantee operations (see below). However, the Bank should help Public Forest Owners create the conditions for assuring a reliable (long-term), appropriately priced supply of raw material from sustainable managed forests to the industry. iv) In forest-rich countries, as our dialogue with forestry institutions develops, there will be increasing scope for including forest policy conditions in broader rural adjustment and program lending. Such operations are presently under preparation in Turkey and Bulgaria. 38

Guarantees

3.25 Program investment risk guarantees can act as a powerful market-based mechanism for both for encouraging private investment, and for encouraging governments to create a regulatory environment favorable to private investment. The Pilot Forestry Project under preparation in Russia aims to improve public sector management in forestry, and supports a much bigger operation to encourage private sector investment in the forestry sector, the Forest Investment Risk Guarantee Operation, also under preparation.

Box 14. Russia - Supporting Private Investment in the Forest Sector through Risk Guarantees - Partial risk guarantee facility for investors in the coal and forestry sector ( US$ 200 Million)

· Objectives Encouraging socially, commercially and environmentally sustainable private sector development of forest industry in Russia by offering guarantees to insure potential investors against non-commercial risks (such as changes in the tax or import tariff regime) It would lead to increased economic activity and employment in a key sector previously employing over 2 million people and still accounting for about US$ 4 billions of exports It could also contribute to poverty reduction, since forest industries are generally located in lower income small towns and rural communities. · Project description Establishment of a Guarantee Agency Unit authorized to issue guarantees on behalf of Russian government Eligibility criteria: transaction for sale, leasing, and import/export of forest-related goods Credit not equity or long-term debt is eligible Risks covered include deprivation of property, limitations on foreign exchange transfers, imposition of new taxes, war/civil disturbance · Instrument includes environmental and social safeguards consistent with Bank policy. · Potential benefits · Recovery of Russian wood industry · Incentive for improved public sector management; with sector reforms. Recovery of investment at no cost to the government; if reforms waiver, then investors would call on the insurance policy at substantial fiscal cost Facility is a "self-regulating" market instrument.

3.26 The risk guarantee illustrates the link between forestry and broader recovery of the economy; the policy reforms supported under the project increase the chance that investors will have the confidence to take advantage of the protection offered by the Guarantee scheme and will invest in the sector. The Forestry project is, in bankers' language, a "letter of comfort.” Guarantees have the advantage that a well-functioning banking system in the client country is not essential. A broader guarantee operation is in effect in Bosnia. Guarantees may have scope in other countries embarking on reform, with important forest sectors (such as Romania).

Global Environment Facility

3.27 ECA has one of the biggest GEF biodiversity portfolios in the Bank, although the present pipeline is weak. GEF has frequently provided us with the opportunity to start working in the forest sector on conservation management, and then to move on to broader areas of reform, In Poland, Turkey, Romania, the Central Asian Republics, Georgia and Belarus our assistance 39

started through GEF and is now broadening to the forestry/natural resource management sector. Most of our GEF projects have focused on protected area management. Some of our projects have focused on national capacity building and strategy development with some funds allocated directly to protected area management, on conservation management of specific sites. All of these projects emphasize participation of local communities and other concerned stakeholders in the development and implementation of conservation management programs.

3.28 We hope to broaden our GEF assistance in three ways:

(i) Through increasingly combining forestry and GEF biodiversity operations (as in the Armenia Natural Resources Project under preparation) in order to match loan/credit funds for project activities with local benefits with those which have global benefits;

(ii) Through promoting complementarily between GEF and Bank operations (as in the Georgia Biodiversity Grant and Forest Development Credit , or the Russia Forestry Loan and the proposed GEF Grant for Fire management in fragile ecosystems);

Box 15. Fire Management in the Amur-Sakhalin Ecosystems

A project in the early stages of preparation would aim to improve fire management in the fragile, globally significant forest ecosystems of the Pacific Far East. These ecosystems are designated as a "global hotspot" including some of the most unusual temperate forests in the world, with a high level of endemism among flora and invertebrates, and an unusual assemblage of large animals; the Amur tiger, Amur leopard, musk deer and Himalayan bear share the same habitat as the brown bear, reindeer and salmon. The Federal Forest Service is responsible for fire management in economically accessible forests; but in protected areas and forests which are not designated for commercial harvesting responsibilities are less clearly defined, and there are severe funding shortfalls.

The project would bring together the environmental protection agencies, the forest service and local communities to design and implement an effective fire management strategy which would protect these vulnerable ecosystems and build on the approaches developed for the economically accessible forests under the Forestry Loan.

(iii) by providing assistance to NGOs and local communities, using the medium-size grant window, which has been little used to date in ECA. Medium size grants can be administered by central governments, regional or local governments, NGOs or academic institutions, as long as they are able to keep accounts and implement programs effectively,

Economic and Sector Work

3.29 Through economic and sector work we can work with client countries to agree on priorities for reform. The Russia Forest Policy study was completed in 1997; sector work has recently been completed in Turkey and Romania and is on going in the Kyrgyz Republic. Increasingly forestry reform is linked to broader public sector reforms; in Russia forest taxation reforms are linked to broader reforms in the tax regime; in Turkey forest reform is linked to broad institutional reform in the forestry ministry, with a move away from production oriented forestry towards forest land use planning to maximize non-timber values and rural development opportunities.

3.30 A focus of forestry ESW is also likely to be the links between successful forest management and broader economic and sector reforms, between an enabling policy environment for forest industry development and sustainable forest management (in the forest-resource rich countries), and between sustainable natural resource management and rural poverty (in the forest- resource poor countries).

Partnerships and Alliances

(a) We will need to continue to work closely, as we have in the past, with other institutions including NGOs, multilateral and bilateral agencies involved in the forest sector, supporting in particular exchanges of experience between ECA countries, and between relevant OECD and ECA countries. The EU is also an increasingly important partner.

(b) We will also take advantage of new opportunities for collaboration, for example, those presented by the World Wildlife Fund/World Bank Forestry Alliance, which support targets in sustainable forest management. (Specifically, it pursues the goal of having 200 million hectares of production forest certified as being sustainable managed by 2005, and an additional 50 million ha of protected areas gazetted also by 2005).

(c) We will also work closely with other departments, particularly the private sector development department as regards supporting an enabling environment for private sector investment, and PREM (Poverty Reduction and Economic Management) department as regards linking sound forest development with broader economic policies and poverty reduction programs.

3.31 To some extent we have been "opportunistic' rather than "strategic" in our approach, and this may have been appropriate. Because of the "externalities” and long term benefits of forest management, a mix of concessional and Bank financing is often necessary to help client countries, and this reinforces the need for partnership. Nevertheless, in the larger countries also (such as Russia, Ukraine and Turkey) international financing can play only a limited role. Financial support for reform must come largely from internally generated funds.

Box 16. Sharing International Experience with Forest Land Restitution

The Bank, with funding from the WWF Alliance, Finnish, and German trust funds, has supported workshops in Romania to share recent experience with forestland restitution. Participants have included Romania, Bulgaria, Slovenia, Slovakia, Latvia, and Germany. The workshop examined:

The legal, institutional and policy requirements for successful restitution; Models for organization of non-public forest owners; Advisory and service functions for non-public forest owners Alternative incentive and regulatory schemes to ensure sustainable forest management by new owners The implications of certification on alternative approaches to certification

The workshops, in addition to sharing experience, are helping participants, especially in Romania and Bulgaria to formulate alternative policy options to address restitution.

Table 7. ECA - Biodiversity Conservation & Forestry Projects Active Project Board / RVP Loan/Grant Total Project Project/Concept Name Status Approval WB support Amount Cost Country (US$ million) (US$ million) Russia Russian Biodiversity Conservation On-going 5/30/96 GEF 20.1 26.0 Federation Sustainable Forestry Pilot Preparation 6/99 IBRD 60.0 100.0 Baltics/Belarus/Poland Belarus Forestry Development On-going 5/26/94 IBRD 41.9 54.7 Poland Forestry Development Closed 7/29/93 IBRD 146.0 355.4 Danube/Carpathians Czech Republic Biodiversity Protection Closed 1/19/93 GEF 2.0 219.4 Romania Biodiversity Conservation On-going 5/27/99 GEF 5.5 8.2 Management Forestry Development Preparation 2001 IBRD 20.0 25.0 Forestry Sector Review (FSR) Completed 92 and 98 IBRD 0.2 0.2 and Forestry Note Slovak Republic Biodiversity Protection Closed 9/16/93 GEF 2.3 2.3 Essential European Grasslands Preparation 2/15/00 CEO GEF 0.75 1.1 (Medium Size Grant) Endorsement Balkans Albania Forestry On-going 04/16/96 IDA 8.0 17.0 Bosnia Forestry On-going 6/12/98 IDA 7.0 20.2 Croatia Karst Ecosystem Preparation 2001 GEF 3.5 4.0 Coastal Forest Reconstruction On-going 12/11/96 IBRD 42.0 67.0 Caucasus/Turkey Georgia Forest Biodiversity Preparation 2000 GEF 8.7 10.2 Conservation Forestry Development Preparation 2000 IDA 20.0 22.5 Turkey In-situ Gene Conservation Closed 2/19/93 GEF 5.1 5.1 42

Table 7. (Cont…) ECA - Biodiversity Conservation & Forestry Projects Active Project Board/RVP Loan/Grant Total Project Project/Concept Name Status Approval WB support Amount Cost Country (US$ million) (US$ million) Turkey con’t… E. Anatolia Watershed On-going 3/11/93 IBRD/GEF 82.1 121.0 Biodiversity & Natural Preparation 2000 GEF 8.2 11.4 Resource Management Forestry Sector Review Completed 1/15/2000 Natural Resource & Identification 2001 IBRD 100.0 130.0 Forestry Management Armenia Natural Resources & Preparation 2001 IDA/GEF 16.0 17.0 Poverty Alleviation Central Asia Regional (Kyrgyz Transboundary Biodiversity Approved 6/99 GEF 10.2 13.6 Republic, Kazakhstan, Uzbekistan) Kyrgyz Republic, Forestry Sector Review Planning IBRD/IDA Kazakhstan Regional Initiatives WWF Alliance Activities in Romania, Georgia and Russia Forestry Policy Review Natural Resource Management Review

Table 8. Forestry and Land-use in ECA Total Forest land as % of Growing Net annual “Ratio of self-sufficiency” Forest Land country total area stock increment (how much more or less a area country produces than it needs) 1000km2 Mln ha % m3 per ha Mln m3, over bark % Baltics, Poland Belarus 207.6 8.7 36 147 24.9 237.7 and Belarus Estonia 45.1 2.1 46 127 7.3 236.8 Latvia 64.6 2.8 45 159.2 13.7 350.0 Lithuania 65.2 2.0 30 164 11.8 157.2 Poland 323.3 8.7 29 165.1 44.8 113.3 Danube and Czech Rep. 78.9 2.6 34 234 20.4 153.3 Carpathians Hungary 93.0 1.7 19 n.a. n.a. 77.0 Moldova 33.7 0.4 11 n.a. 0.9 n.a. Romania 238.4 6.3 26 212.6 34.6 175.0 Slovakia 49.0 2.0 41 181 11.7 243.9 Ukraine 603.7 9.3 16 n.a. 20.0 n.a. The Balkans Albania 28.7 1.4 38 57.3 77.5 77.5 Bosnia 51.1 2.7 53 n.a. n.a. n.a. Bulgaria 110.9 3.3 30 110 119.7 119.7 Croatia 88.1 2.5 44 121 127.0 127.0 Macedonia 25.7 1.0 37 n.a. 52.1 52.1 Slovenia 20.3 1.1 53 n.a. 87.8 87.8 The Caucasus, Armenia 29.8 0.38 14 119 0.1 n.a. Russia and Azerbaijan 86.6 1.2 13 n.a. n.a. n.a. Turkey Georgia 69.7 3.0 44 153 4.0 n.a. Russia 17,075.4 771,109.0 45 106 830,010.0 134.5 Turkey 774.8 20.2 26 n.a. 18.1 79.1 Central Asia Kazakhstan 2,717.3 17.4 7 n.a. 3.3 n.a. Kyrgyz Rep. 198.5 0.8 4 n.a. n.a. n.a. Tajikistan 143.1 0.5 3.5 15 n.a. n.a. Turkmenistan 488.1 3.8 8 3 0.1 n.a. Uzbekistan 447.4 n.a. n.a. n.a. n.a. n.a. Source: Forest and Forest Industries, Country Fact Sheets, FAO 1997 44

Table 9. Forest Industry and Economic Characteristics (1997 - FAO) Roundwood Sawnwood (+sleepers) Paper and paperboard Fuelwood and charcoal production production product-n exports product-n exports product-n exports product-n exports 1000 m3 1000 m3 1000 Mt 1000 m3 Baltics, Belarus 17,585 894 1,545 295 131 3 809 0.1 Poland and Estonia 5,796 2,902 650 661 54 57 1,100 78 Belarus Latvia 8,962 3,307 2,700 2,170 16 8 2,902 1 Lithuania 5,150 778 1,250 964 29 25 1,145 2 Poland 21,561 523 5,910 997 1,640 417 1,706 221 Danube and Czech Rep. 13,496 3,306 3,393 1,419 772 382 616 170 Carpathians Hungary 3,601 977 262 184 410 161 1,914 214 Moldova 406 .2 30 .3 n.a. 5 356 n.a. Romania 13,750 58 1,861 1,242 324 102 3,913 57 Slovakia 5,945 1,185 767 401 525 209 339 258 Ukraine 10,088 479 N.a. 243 261 55 1,846 14 The Balkans Albania 409 29 4 13,499 44 0 346 26 Bosnia 40 41 20 255 n.a. 3 n.a. 17 Bulgaria 3,059 264 253 205 149 14 1,197 56 Croatia 3,091 456 642 402 393 128 1,047 n.a. Macedonia 774 2 40 63 21 0.3 616 n.a. Slovenia 2,209 329 510 395 430 722 547 111 Russia, Armenia n.a. 0.1 n.a. 0.1 n.a. 0 n.a. n.a. Turkey and Azerbaijan n.a. 0.2 n.a. 3 n.a. n.a. n.a. n.a. the Caucasus Georgia n.a. 45 n.a. 7 n.a. 0 n.a. n.a. Russia 83,968 18,723 19,500 4,800 3,332 1,434 20,778 92 Turkey 18,050 10 4,268 114 951 29 8,277 n.a. Central Asia Kazakhstan 315 5 n.a. n.a. n.a. 0.2 315 n.a. Kyrgyz Rep. n.a. 0.5 n.a. 0.9 n.a. 0.2 n.a. n.a. Tajikistan n.a. n.a. n.a. 0 n.a. 0 n.a. n.a. Turkmenistan n.a. n.a. n.a. 0.1 n.a. 0 n.a. n.a. Uzbekistan n.a. 0.3 n.a. n.a. n.a. n.a. n.a. n.a. Source: FAO Forestry statistics:http://apps.fao.org/cgi-bin/nph-db.pl?subset=forestry 45

Table 10. Social and Demographic Characteristics Population Area of forest % of rural GNP per per capita population capita Millions Ha % US$ Baltics, Belarus 10.3 0.86 28 2,150 Poland and Estonia 1.4 1.40 26 3,330 Belarus Latvia 2.5 1.19 27 2,430 Lithuania 3.7 0.55 29 2,230 Poland 38.7 0.23 36 3,590 Danube and Czech Rep. 10.3 0.25 34 5,200 Carpathians Hungary 10.2 0.17 35 4,430 Moldova 4.3 0.08 48 540 Romania 22.5 0.29 43 1,420 Slovakia 5.4 0.38 40 3,700 Ukraine 50.5 0.18 30 1,040 The Balkans Albania 3.3 0.42 62 750 Bosnia 3.8 1.15 58 2,200 Bulgaria 8.3 0.40 32 1,140 Croatia 4.5 0.55 43 4,610 Macedonia 2.0 0.50 80 1,090 Slovenia 2.0 0.54 74 9,680 The Armenia 3.8 0.10 31 530 Caucasus, Azerbaijan 7.6 0.16 44 510 Russia and Georgia 5.4 0.56 42 840 Turkey Russia 147.3 5.98 23 2,740 Turkey 63.7 0.33 31 3,130 Central Asia Kazakhstan 16.3 n.a. 40 1,340 Kyrgyz Rep. 4.6 n.a. 61 440 Tajikistan 6.0 0.08 68 330 Turkmenistan 4.7 1.12 55 630 Uzbekistan 23.7 n.a. 55 1,010 Source: Forest and Forest Industries, Country Fact Sheets, FAO 1997 46

Table 11. Protected Areas: Quantitative Characteristics Sub-region Country Protected Areas Protected Areas As % of land area 1000 Ha % Baltics, Poland Belarus 875 4.2 and Belarus Estonia 536 11.9 Latvia 822 12.9 Lithuania 645 9.9 Poland 2,929 9.4 Danube and Czech Rep. 1,280 16.2 Carpathians Hungary 649 7.0 Moldova 51 1.5 Romania 1,090 4.6 Slovakia 1,060 75.6 Ukraine 899 1.5 The Balkans Albania 102 3.6 Bosnia 27 0.5 Bulgaria 500 4.5 Croatia 396 7.0 Macedonia 181 7.1 Slovenia 120 5.9 The Caucasus, Armenia 213 7.2 Russia and Azerbaijan 478 5.5 Turkey Georgia 195 2.8 Russia 51,668 3.0 Turkey 1,290 1.7 Central Asia Kazakhstan 1,337 2.7 Kyrgyz Rep. 693 3.5 Tajikistan 587 4.1 Turkmenistan 1,980 4.1 Uzbekistan 818 1.8 Sources: To access Environmental Data Sheets please use WB InfoShop Website: www.worldbank.org

Table 12. Protected Areas: Qualitative Characteristics Protected areas by Threats to nature and biodiversity Bank/GEF Type of intervention type supportive programs Baltics, Belarus - National parks - Lack of resources and need for alternative Yes Biodiversity Protection Project (closed): the objectives are: Poland and Protected - Nature reserves financing mechanisms for administration of a) institutional support to Belovezhskaya National Park, Belarus areas the protected areas. Council of Ministers and Committee of Ecology to enable them - Significant adverse impacts from water to carry out its biodiversity conservation management activities; 1000 Ha: and air pollution on forests and wildlife b) investment in programs to preserve endangered forest 875 % of land habitats. ecosystems through pilot investments in air and soil monitoring area: 4.2 equipment, land planning and etc. Forestry Development Program: the program objectives include: a) sector policy reform: adjustment of forest enterprises in accordance and prepare them for future privatization; b) production support: implementation of intensified silviculture, creation of seed facilities introduction of efficient harvesting practices; c) forest fire protection: provision of adequate protection against forest fires and prevention of the spread of radionuclide contamination through forest fires; d) forest ecology: policy for the preservation of biodiversity and species mix; e) institution building: professional training in forestry and business; preparation for operations with an open market economy; forestry research planning of forestry higher education reforms; and f) technical assistance to forest resource management and planning. Estonia - National parks - Illegal cutting of forests. No - Nature reserves - Spawning and living conditions of many Protected - Landscape fish species have declined due to sea water areas 1000 reserves pollution. - Nature park - Degradation of semi-natural coastal Ha: ecosystems due to declining traditional 536 agricultural activities. % of land area: 11.9 48

Latvia - State reserves - Illegal cutting of forests. No - Biosphere reserve - Need for greater protection of sensitive Protected - National park coastal ecosystems. - Culture/historic areas 1000 preserve Ha: 822 % of land area: 12.9 Lithuania - National parks - Environmental damage from oil extraction Yes WWF Alliance workshop: training seminar with WWF - Regional parks and exploitation of deep mineral resources. Finland under WWF Alliance Protected - Reserves - Threats t o natural habitats and areas 1000 biodiversity, especially fish. - Excessive timber felling. Ha: 645 - Need for greater protection of sensitive % of land coastal ecosystems. area: 9.9 Poland - National parks - Degraded forests and habitats as a result of Yes Forestry Development: project objectives are: - Nature reserves pollution a) institutional support to the MENRF to enable it to carry out Protected - Landscape parks - Baltic Sea coastal ecosystem degradation its biodiversity conservation management activities including areas 1000 and obligations for improvement of the establishment of facilities for ex-situ conservation of genetic international waters. material in the Sudety forests of Southwest Poland and for a Ha: 2929 - Obligations for ODS phase-out and biodiversity protection program for Bialowieza Primeval Forest % of land greenhouse gas reduction (BPF) ecosystem of Eastern Poland; and area: 9.4 b) investment in programs to preserve endangered forest ecosystems for biodiversity conservation through provision of funding for pilot investments in air and soil monitoring equipment, a forest gene bank and related archival nursery equipment. Danube and Czech Rep. - National parks - Increasingly detrimental effect of air Yes Czech Republic Biodiversity Protection (closed): the Carpathians - National nature pollution on spruce and pine forests in objective is to protect and strengthen forest and related Protected reserves Northern Bohemia ecosystem biodiversity by: - Protected - Loss of biodiversity due to damage to a) protect three representative ecosystem-zones containing areas 1000 landscape areas habitat and planting of monoculture forests alpine meadows, lowland forests, and wetland and mountain Ha: - Natural areas forests; 1280 - Biosphere b) support the activity of three transnational biodiversity % of land reserves protection networks; area: 16.2 c) developing system of financially sustainable biodiversity protection. 49

Hungary - National parks - Lake Balaton is polluted with agricultural No - Landscape and livestock wastes and endangered by Protected protection regions overexploitation for recreation and tourism. - Nature - The Sajo River ecosystem is exhibiting areas 1000 conservation areas some signs of eutrophication due to Ha: 649 significant pollution with industrial % of land effluents. area: 7.0 - Forest damage due to acid rain Moldova - Scientific - Sustainable forest management practices No reserves have been abandoned due to severe Protected - National parks economic circumstances - Landscape - Significant wetland areas have been areas 1000 reserves drained Ha: 51 - Limestone quarries and dredging river % of land beds for sand have degraded river banks and area: 1.5 changed dramatically the fish population Romania - Nature reserves - Deforestation and unsustainable wood Yes Romania Danube Delta Biodiversity: the objective is to - Nature parks harvesting from restitution of forest lands, contribute to conservation of biodiversity within Delta, Protected areas - National parks and breakdown in field enforcement strengthening the capacity of Danube Delta Biosphere Reserve 1000 Ha: systems Authority and Danube Delta Institute to monitor and manage 1090 - Threats to priority biodiversity protected areas effectively, working with local community % of land area: conservation sites due to the absence of an groups to ensure sustainable resources use and restore some 4.6 effective protected area system. wetlands to their natural conditions. - Defoliation of tree species susceptible to Integrated Biodiversity Conservation and Protected Area industrial pollution, including acid rain Management: The primary objective of the proposed project is the sustainable conservation of the biological diversity and ecological integrity of Romanian mountain, forest and meadow ecosystems that are of international importance. Forestry Sector Review and Forestry Note: the objective is to assess needs for reforms of the sector with particular focus on restoring financial and environmental sustainability, and poverty alleviation. Slovakia - National parks - Significant damage to forests due to Yes Biodiversity Protection Project (closed): the objectives are: - Protected industrial air pollution, especially in the a) to initiate a range of activities including development of Protected landscape areas vicinity of smelters and iron mines. management techniques for key biotypes (forest, wetlands, and - Loss of flora and fauna due to damaged alpine meadows); areas 1000 habitat and loss of fish in polluted rivers b) to develop revenue generation mechanisms for the protected Ha: area system; 1060 c) to provide support for project management coordination at % of land the national and zonal levels area: 75.6 50

Ukraine - Natural reserves - Immediate environmental threats (soil and Yes Ukraine Danube Delta Biodiversity: the objective is to protect incl. biosphere and water contamination) due to the possible and enhance the Ukrainian portion of the delta ecosystems, Protected areas natural reserves, leakage from the "sarcophagus" of the contributing to conservation of biodiversity within the delta. national natural damaged unit Ukrainian Transcarpathian Biodiversity Protection: the 1000 Ha: 899 parks, limited - Long term impacts on human health and objectives of the projects are: % of land area: access areas, the environment still need to be addressed a) to incorporate this part of the project as an add-on to the 1.5 natural proposed Slovak Biodiversity Protection Project; monuments, b) to support the Ukrainian portion of overall trilateral effort arboretum parks, (Ukraine, Poland and Slovak) to protect habitat fragments, stop parks - monuments species lost and upgrade habitat management of the garden and c) Develop and implement the legal, institutional and park art, botanical administrative interventions to achieve long-term protection of gardens, zoos, the area in the country as well as in two other countries. regional landscape Wetlands: parks, protected grounds. The Balkans Albania - Strict nature - Habitat loss and deterioration Yes Forestry: The three principal objectives are: Reserves/Scientific - Intensive land use a) restore degraded state-owned forest and pasture areas and Protected areas Reserves - Pollution promote their sustainable use; 1000 Ha: - National Parks - Forest overharvesting b) promote conservation of natural forest ecosystems; and 102 - Nature - Gravel extraction from riverbeds and sand c) take the initial steps in the transition of the forestry/pasture % of land area: Monuments extraction sector to a market economy, separating commercial from 3.6 - Managed Nature regulatory functions and establishing mechanisms for self- reserves/ species financing of the commercial activities. and habitat management area - Landscape/Seascap e protected area - Protected area of multiple use Bosnia - Strict Reserves - Inadequate forest management as well as Yes Forestry: the objective of the Forestry Project for Bosnia- - National Parks acid rain (due to air pollution ) have caused Herzegovina is to resume sustainable management and Protected areas - Nature Parks damage to the forests protection of Bosnian forest resources in order to 1) ensure the 1000 Ha: - Primeval - An assessment of the war-related sustainability of the rapid recovery of the wood harvesting and 27 Reserves environmental damage and strategies for wood processing sectors; and 2) control the potential % of land area: remedy will be needed environment impact of this recovery. 0.5 51

Bulgaria - National parks Environmental degradation due to unsafe No - Botanical environmental management policies Protected areas reserves 1000 Ha: - Reserves 500 - Forest reserves % of land area: - Biosphere 4.5 reserves - World heritage sites Croatia - National parks Highly sensitive coastal forests were burnt Yes Coastal Forest Reconstruction: The main objective of the - Nature Parks and mined during war conflicts. project is to restore and protect forest land in the coastal zone of Protected areas - Strictly protected Croatia in order to enhance the landscape and recreation values 1000 Ha: nature reserves of the region and thereby contribute to restore tourism to its pre- 396 - special reserves war level. Other objectives are to: % of land area: (botanical, a) restore the environmental role of coastal forests destroyed by 7.0 geomorphologic, the war, by protecting soil and water, and initiate the restoration hydrologic, and of the natural vegetation; etc.) b) address the forest fire problem; and c) develop the knowledge base for improved management and protection of coastal forests. Macedonia - strict natural - Lake Ohrid is polluted with wastewater No reserves discharges and agricultural runoff Protected areas - national parks - About 38 percent of the arable land is 1000 Ha: - monuments of severely eroded due primarily to poor 181 nature/ landscapes grazing practices % of land area: with natural - Harvesting timber in protected areas 7.1 features - natural reserves/managed reserves - protected landscape

Slovenia - National park - Moderately damaged forests due to acid No - Nature parks rain, agricultural development, and tourism. Protected areas - Regional parks - Endangered freshwater and wetland 1000 Ha: ecosystems due to industrial construction 120 and waste, transportation, and tourism % of land area: 5.9 52

Russia, Armenia - State reservations - Degradation of internationally significant No Turkey and - Nature Preserves biodiversity the Caucasus Protected areas - Pressure on a range of habitats, including 1000 Ha: forests, rangelands and wetlands 213 - Key habitats, especially wetlands, % of land area: underrepresented in existing protected areas 7.2 Azerbaijan - State reserves - Uncontrolled incursion into protected No - State protected areas for subsistence use Protected areas areas - Forest resources are exploited at 1000 Ha: unsustainable levels 478 % of land area: 5.5 Georgia - National park - There are some problems with lead Yes Forestry Biodiversity Conservation: The objectives are: - Protected areas smelters and a thermal power plant. The big a) develop a strategic action plan with Georgian authorship that Protected areas - Nature reserves air pollution problems are likely to be due will serve as a vehicle for future project implementation, 1000 Ha: to increased transport. funding acquisition, and facilitate sustainable protection and 195 - Given the importance of tourism and management of biodiversity through the development of cross- % of land area: recent problems with illegal logging, sectoral programs. 2.8 conservation and forestry management b) integrate the country's unique biological and cultural activities seem more important than landscapes and resources, an approach exemplified in the abatement activities current WWF National Park Planning program. c) raise public awareness of the value of protecting biodiversity, through the national workshop and an advertising campaign. d) the first National Report for submission to the CoP will be prepared. Forestry Development Program: the objectives of the first phase are: a) fill the gaps in the assessment of the current economic, policy, legal, financial and institutional framework within which the forest sector currently operates; and b) formulate and agree upon a program of actions which will create enabling environment for the sustainable management, protection and use of Georgia’s forest resources. 53

Russia - National parks Environmental degradation due to unsafe Yes Biodiversity Conservation: the objectives are: - Nature environmental management policies a) assess the current status of biodiversity in Russia and its Protected areas sanctuaries or conservation, 1000 Ha: partial reserves b) outlines some of the measures needed to sustain its 51668 - National hunting biodiversity over the long term, such as strengthening % of land area: reserves protected areas. 3.0 - Nature c) assist the Government of Russia to strengthen biodiversity monuments conservation strategy in the country. Sustainable Forestry Pilot: the project objectives are: a) establish sustainable forest management practices in three pilot regions of Leningrad Oblast, Krasnoyarsk Kray and Khabarovsk Kray. Achievement of these objectives would be measured by adoption of improved forest management plans, completion of forest inventories, and implementation of improved forest fire and pest control systems. b) support to rationalization of forest enterprises by regional governments. Achievement of these objectives would be measured through completion of industry viability analyses, enterprise social asset rehabilitation and transfer to local communities, and technical assistance and training for restructuring of forest enterprises. Turkey - National parks - Degradation of coastal and marine Yes In-situ Gene Conservation (closed): revitalizing - Nature parks ecosystems due to discharges of industrial commercially important species: crops and timber species. Protected areas - Natural waste Protected Area and Sustainable Natural Resource 1000 Ha: monuments - Harmful effects of growing tourism Management: The project objectives are: 1290 - Natural reserve without adequate infrastructure a) establish effective participatory systems for sustainable % of land area: areas - harmful fishing practices conservation and natural resource management at four pilot 1.7 - Special protected - Forests degraded due to harmful farming sites selected from each of Turkey's four main biogeographic areas and wood fuel practices, unclear property zones; rights, and institutional constraints b) build the national capacity and public support to catalyze - Ecologically insensitive development replication of this experience to develop a nationwide network projects, detrimental resource policies, and of protected areas; lack of effective government policies c) improve the legal and regulatory framework for biodiversity contribute to the problem conservation and explore opportunities for mainstreaming biodiversity conservation in forest planing and management. Forestry Sector Review: the objective is to assess needs for reforms of the sector with particular focus on restoring financial and environmental sustainability, and poverty alleviation. 54

Central Kazakhstan - National parks - Loss of soil fertility due to erosion and salinity. Yes Regional Transboundary Biodiversity: the project objectives Asia - Strict nature - Lack of resources and administrative capacity are: Protected areas reserves for management of protected areas has resulted in a) strengthen and expand the strict nature reserves network in 1000 Ha: 1337 - Ramsar wetlands the limited scope of protected areas and the West Tien Shan to conserve unique plant and animal % of land area: 2.7 sites unauthorized hunting and trading of endangered communities; species b) identify alternative and sustainable income-generating activities for local communities and other stakeholders to reduce pressure on the reserves; c) strengthen local and national capacity through education and training; d) raise public awareness of biodiversity values and increase participation in biodiversity conservation; e) establish regional (Transnational) coordination and cooperation mechanisms for biodiversity conservation activities to strengthen management capacity. Kyrgyz Rep. - National parks - Fragile forests due to improper forest and range Yes Regional Transboundary Biodiversity: same as above - Strict nature land management in the past, as well as illegal Forestry Sector Review: TIJEN Protected areas reserves exploitation of forests for firewood and 1000 Ha: 693 - Ramsar wetlands construction. % of land area: 3.5 sites - Extensive overgrazing reduces natural forest - Biosphere regeneration. reserves - Rapid loss of wildlife due to excessive hunting and habitat fragmentation/destruction Tajikistan - Nature Land degradation due to overacting and grazing. No reservations Protected areas - Nature refuge 1000 Ha: 587 - National park % of land area: 4.1 Turkmenistan - Strict nature - Limited water availability and No reserves poor sanitation facilities and practices result in a Protected areas - Ramsar wetlands high incidence of water borne diseases; 1000 Ha: 1980 sites - Oil pollution problems (present and potential); % of land area: 4.1 - Biosphere - Environmental problems in the Caspian Sea. reserves Uzbekistan - National parks - De-certification of the Amu Darya delta has led Yes Regional Transboundary Biodiversity: same as above - Strict nature to the disappearance of water and near water Protected areas reserves biological populations. 1000 Ha: 818 - Nature conservation objectives are often % of land area: 1.8 compromised due to management deficiencies and scarce funding. Sources: Countries’ National Environmental Action Plans, Protected Areas in Eastern and Central Europe and the USSR, IUCN 1990 Biodiversity Conservation in Transboundary Protected Areas, National Research Council 1996, WB Web Environmental Data Sheets: http://eca/ecsre/envcopg/default 55

E. GAIL LEE P:\!UNITS\ECSSD\BROMHEAD\RUSFOR\FORSTRAT\ForStra1c.doc June 12, 2001 5:25 PM