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 i 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