Technical Assistance Consultant’s Report Project Number: RETA6204 August 2005 Regional: Mainstreaming Environmental Considerations in Economic and Development Planning Processes in Selected Developing Member Countries (Financed by TASF) Prepared by E. Hay and Ellia Sablan-Zebedy For ADB This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design. ASIAN DEVELOPMENT BANK TA: 6204-REG REPUBLIC OF THE MARSHALL ISLANDS COUNTRY ENVIRONMENTAL ANALYSIS Mainstreaming Environmental Considerations in Economic and Development Planning Processes FINAL REPORT Prepared by: John E. Hay and Ellia Sablan-Zebedy August, 2005 Executive Summary 1. The Asian Development Bank (ADB) uses the country environmental analysis (CEA) as the tool to assist with early incorporation of environmental considerations into the country strategy and program (CSP) for its Developing Member Countries. The CEA provides targeted information necessary for informed decision making on environmental constraints, needs, and opportunities, including those that impinge upon poverty partnership agreements, as appropriate. The focus is on adding value to planned and ongoing development initiatives by reducing environmental constraints and exploiting environment- related opportunities. 2. This CEA for the Republic of Marshall Islands (RMI) describes the environmental issues that are most important to RMI’s development strategy as well as ADB’s role in helping remove the environmental constraints on sustained development. The CEA is directed in part at the policy, program, and sector levels, but the principal focus is on identifying how opportunities and constraints presented by the environment and natural resources of the RMI can be address by way of environmentally sensitive projects in the assistance pipeline. 3. Thus the present CEA for the RMI focuses on the general environment status and trends in RMI, including the role of the environment and natural resources in the economy, the key environmental constraints and opportunities, the policy, legislative, institutional, and budgetary frameworks for environmental management, and principal constraints on, and barriers to, improved environmental management. It also identifies priority improvements in policy, institutional and legislative mechanisms, as well as programs and projects that will help to mainstream environmental concerns into economic development planning. Policies, Budgets and Legal Frameworks 4. The principal policy instrument guiding the sustainable development of the Marshall Islands for the next 15 years is the Strategic Development Plan (SDP) 2003-2018 or Vision 2018. The SDP was prepared in June, 2001 and approved by the Nitijela in October 2001. It links ten major challenges the country has faced over the last 15 years with ten broad national goals and objectives aimed at fostering sustainable economic development. The SDP envisions that a review of the progress of the SDP be carried out after 5 years – the first review should therefore take place in 2007. 5. In addition to the SDP, a set of Master Plans accompanied by Action Plans were to be developed. In order to facilitate their implementation a National Policy Coordination Committee (NPCC) was to be formed, with a mandate to integrate the development policies into national planning and budgeting and advise the Cabinet of its progress. Regrettably, the Master Plans and accompanying Action Plans have not yet been developed, and the proposed NPCC has not yet been established. Instead the National Planning Office was revitalized into the new Economic, Policy, Planning and Statistics Office (EPPSO), which is mandated to monitor and evaluate the progress and development of the country. New priorities and action plans have been established, but the environmental sustainability development priorities as set out in the SDP have yet to be mainstreamed into the current strategic develop plans of Government ministries and agencies. 6. Until recently there had not been a formally appointed Government body tasked to monitor and report on the status of the Millennium Development Goals (MDGs). A National MDG Task Force has yet to be formally established. However, to begin developing a framework for MDG monitoring and reporting, in 2004 EPPSO formed a partnership with the United Nations Development Programme (UNDP) to establish a program office within EPPSO. In addition to other UNDP duties, the UNDP Program Manager is tasked to provide ii assistance to EPPSO to monitor and report on the MDGs, and to provide technical support to the National MDG Task Force, upon its establishment. 7. The RMI has in place a commendably comprehensive and appropriate array of policy, legal, institutional and budgetary frameworks for environmental management and sustainable development. However, despite some recent notable improvements in environmental performance, in many areas and respects practical reality falls far short of the potential the above frameworks allow and should facilitate. For example, land use planning and zoning is effectively non existent, meaning there is ad hoc and often conflicting use of land, with activities often conducted in areas where environmental impacts will be higher than might be the case in other locations. Severe limitations on the Government’s access to land also lead to ad hoc and politically expedient placement of infrastructure. This often delays and increases the costs of provision of services such as water supply, and management of solid waste and waste water. The absence of effective controls on siting and construction of buildings has adverse consequences not only for the environment but also for human health, safety and wellbeing. 8. At the national level, RMI has legislation related to environmental protection, coastal conservation, planning and zoning, management of marine resources, preservation of cultural and historic properties, protection of public health and safety and of endangered species. In most cases the legislation allows for Ministries to pass and enforce regulations, usually on approval of a representative authority or council. In addition to the Environmental Protection Agency (EPA) and the Marshall Islands Marine Resources Authority (MIMRA), other important environmental and resource management institutions have been established by legislation, including the Office of Environmental Protection and Policy Coordination (OEPPC) and EPPSO. In many cases legislation also gives a mandate to Local Government Councils to pass and enforce ordinances. Proposed ordinances are submitted to the Minister of Internal Affairs, who passes them on to the Attorney General’s Office (AG) for final review. The AG’s Office has the responsibility to ensure all Local Government ordinances are consistent with national legislation and regulations. 9. The RMI is party to many international and regional environmental and resource management agreements, one of the latest being the Convention on the Conservation and Management of Highly Migratory Fish Stocks in the Western and Central Pacific Ocean. 10. Since the signing of the Amended Compact of Free Association with the United States in 2003, the National Government has made institutional changes and adjustments in order not only to promote good governance and accountability within its institutions, but also to comply with the Amended Compact Fiscal Procedures Agreement. The Ministry of Finance has been the focus of these reforms. It has upgraded its financial management systems for all of its financial operations and now prepares on a rolling annual basis a Medium Term Budget and Investment Framework to assist the National Government in budget planning. This process has helped to eliminate short-term budgeting and ad hoc financial fixes that have mired the RMI’s development in the past years. In addition to the Framework, EPPSO and the Ministry of Finance are also assisting the various ministries to develop and implement performance-base budgeting. Until 2002 Government ministries and statutory bodies/agencies had utilized traditional line budgeting. 11. Between 2001 until 2003 the National Government negotiated the new Compact agreement. By the end of 2003 the Amended Compact of Free Association with the United States was approved by both parties. The Compact’s amended economic assistance package is a major change in that it involves: 1) financial assistance that is more than the former Compact’s annual grant assistance, and without the injurious 5-year step-downs as experienced during the past Compact’s term; 2) the continued application of various Federal programs and services; 3) a new term of 20 years versus the former 15 years with a new iii trust fund mechanism that will help provide budget stability in the post grant assistance era; and 4) a Compact grant-related fiscal management approach that aims towards accountability and achieving results. 12. The Environment Sector Grant under the Compact is intended to increase environmental protection; establish and maintain conservation areas that achieve sustainable use; support environmental infrastructure planning, design, construction and operation; and involve the citizens of the RMI in the process of conserving the nation’s natural resources. In the past, EPA’s entire core funding has come from the National