Report No: AUS0000083 . Georgia Forests, Livelihoods, and Poverty Linkages in the Forest Communities of Georgia Evidence and recommendations from a 2016 household survey . March 12, 2018 Unofficial translation . ENV . © 2018 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution—Please cite the work as follows: “World Bank. {YEAR OF PUBLICATION}. {TITLE}. © World Bank.” All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522- 2625; e-mail: [email protected]. This Georgian version is an unofficial translation of the original report that was published in English in 2018. Forests, Livelihoods, and Poverty Linkages in the Forest Communities of Georgia Evidence and recommendations from a 2016 household survey May 31, 2018 The World Bank Table of Contents Executive Summary 1. Forests and the Georgian development challenge 1 2. Forests in Georgia 7 3. Survey on socio-economic conditions and forest use in rural Georgia 10 3.1 Survey design and implementation 10 3.2 Socio-demographic and employment conditions; income sources 12 3.3 Economic diversification 14 4. Poverty, forest dependecy and their linkages 16 4.1 Poverty incidence and spatial variation 16 4.2 The poverty profile of forest village households 18 4.3 Linkages between forest dependency, livelihoods, and poverty 20 5. Forest access, use and fuelwood 23 6. Statistical analysis – Changes in incomes and distributional impact 27 6.1 Income determination analysis 27 6.2 Assessing the targeting performance of exiting social assistance programs 29 6.3 Distributional impact analysis of policy changes: a simulation 31 7. Conclusions and recommendations 32 7.1 Conclusions from the survey 33 7.2 Vision for a transformational change; Pathways Toward Prosperity 35 Table 3.1 Population and Sample Size by Stratum 11 Table 3.2 Key Socio-demographic Data by Stratum 12 Table 3.3 Household Income by Sources and Participation (past 12 months) 13 Table 3.4 Median Income and Participation Rate by Source by Stratum 14 Table 3.5 Income Diversification: Distribution of Income Sources 15 Table 4.1 Poverty Incidence by Region (relative poverty line, %) 17 Table 4.2 Poor and Better-off Household Comparison: Socio-demographics and Assets 19 Table 4.3 Income Source Diversification 21 Table 4.4 Proportion of Households Negatively Affected by Shocks 22 Table 4.5 Pasture Use and Access 22 Table 5.1 Fuelwood and Other Energy Use by Poverty Status 23 Table 6.1 Income Determination Analysis: Income by Source 28 Table 6.2 Distribution Analysis of Social Assistance Programs: Income Transfer, Social Insurance, and Fuelwood Subsidies 31 Table 6.3 Distributional Impact Analysis of Forest Income Increase 32 Table 7.1 National Forest Concept and P.R.I.M.E. Framework 40 i Figure 3.1 Forest Concentration and Frequency of Natural Disasters 10 Figure 3.2 Location of Sample Villages 11 Figure 3.3 Income Diversification: Distribution of Number of Income Sources 15 Figure 4.1 Comparison of Poverty Ranking Using Two Surveys (2016 forest survey and 2015 Integrated Household Survey (IHS)-based data) 18 Figure 4.2 Income Share Comparison 20 Figure 7.1 Employment and Production in Swedish Forestry 1975–2013 (1975=100) 41 Text Box 1 Social Fuelwood Program 24 Text Box 2 Case: Reducing Fuelwood Dependence through Forest-smart Investment 25 Text Box 3 “Forest Is Not Firewood” 26 Text Box 4 P.R.I.M.E. - Pathways toward Prosperity 38 Text Box 5 Policy Constraints to Private Investments in the Forest Sector 43 Text Box 6 Nature-based Tourism in Georgia 44 Annexes - Methodology - Income determination analysis ii List of Acronyms CEA Country Environmental Assessment CENN Caucasus Environmental NGO Network ENPI-FLEG European Neighbourhood Policy Instrument – Forest Law Enforcement and Governance (Program) EU European Union FSC Forest Stewardship Council GDP Gross Domestic Product GEL Georgian lari GIS Geographic Information System HBS Household Budget Survey HF-HH High Forest Cover and High Natural Hazard Frequency Stratum HF-LH High Forest Cover and Low Natural Hazard Frequency Stratum HH or hh Household(s) IHS Integrated Household Survey IUCN International Union for the Conservation of Nature LF-HH Low Forest Cover and High Natural Hazard Frequency Stratum LF-LH Low Forest Cover and Low Natural Hazard Frequency Stratum MENRP Ministry of Environment and Natural Resources Protection (ex-) NFA National Forest Agency NFI National Forest Inventory NTFP Non-Timber Forest Products P.R.I.M.E. Productivity, Rights, Investments, Markets, Ecosystem PEFC Programme for the Endorsement of Forest Certification PROFOR Program on Forests SSR Soviet Socialist Republic SWIFT Survey of Well-being via Frequent Tracking TSA Targeted Social Assistance iii Acknowledgments This study has benefited from the contributions of a large number of forestry and poverty analysis specialists both inside and outside the World Bank. The work was done under the overall guidance of Mercy Tembon, Country Director for Georgia, at the World Bank, and Valerie Hickey and Ruxandra Floroiu, Practice Managers at Environment and Natural Resources Global Practice. The task team leader was Tuukka Castrén (Senior Forestry Specialist). The project team got tremendous advice and support from Sarah Michael (Program Leader) and Darejan Kapanadze (Senior Environmental Specialist) at the World Bank country office in Tbilisi. The team also wishes to thank peer reviewers Javier E. Baez, Cesar Cancho, Dij Chandrasekharan, Reem Hajjar and Klas Sander as well as all the other colleagues who provided comments and advice during the study. Achieving the results would have been impossible without the active contribution from colleagues in the Georgian forest administration. The team is particularly grateful for the feedback received from Karlo Amirgulashvili (Ministry of Environmental Protection and Agriculture) and Natia Iordanishvili (National Forest Agency) and other staff in the Ministry. The field survey was conducted by a consultant team from UDA Consulting led by Hakan Demirbuken. Limin Wang helped with data analysis and in drafting the report. Financing for the project was provided by the Program on Forests (PROFOR) managed by Werner Kornexl. PROFOR is a multidonor partnership managed by a secretariat at the World Bank. iv Executive Summary A. INTRODUCTION i. Georgia is a lower-middle-income country with a population of just below 4 million. The country has seen an approximate 25% decline in population since the country regained independence in 1991. Georgia’s demographic challenges have major implications for its poverty reduction and economic development. Sustained poverty reduction over the past decade shows that the poor have benefited considerably from the government’s social policies as well as from new economic opportunities. However, development has had its toll on the environment and progress has not resulted in improved environmental governance or better management of natural resources. Forest degradation, air pollution and other, often ‘hidden,’ environmental costs remain a drain in the national economy having cost approximately 7.4% of GDP in 2012. ii. Forest coverage in Georgia is estimated at 2.82 million hectares (ha) accounting for about 40% of the land area. The forests are predominately state-owned and most of them are not currently under efficient, systematic management. The current forest cover is not fully known because the national forest inventory (NFI) has not been updated since the early 1990s. Despite the lack of precise statistics, forest and land degradation are believed to be a serious problem. The forests in Georgia are highly diverse with more than 400 tree species. Further, forests are generally located in steep and inaccessible terrain. The forest sector’s contribution to GDP is small at about 0.4%, but the true value is likely higher due to the large size of non-market fuelwood production, other unreported forest extraction, and non-monetized environmental services. iii. The Georgian government has recently made significant progress in developing a series of forest sector policy initiatives that develop an integrated approach to address the major problems that concern rural development, land use, and sustainable management of forest resources. The National Forest Concept was developed in 2013. It aims to establish a sustainable forest management system to improve the social and environmental function of the forests. The new policy emphasizes the role of local communities in forest management and aims at improved coordination across sectors including energy, tourism, and agriculture/livestock production. The policy also emphasizes market access and private sector involvement in forest production and conservation. B. SURVEY ON SOCIO-ECONOMIC CONDITIONS AND FOREST USE IN RURAL GEORGIA iv. Making forests an effective tool for economic and social development in rural areas requires a thorough understanding and data on both the people and communities using forests as well as on the forests themselves. In 2016, the World Bank conducted a large-scale household survey in Georgia with a particular focus on better understanding the significant of forests for rural households.