Document of The World Bank FOR OFFICIAL USE ONLY Report No: 81108-BA PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT IN THE AMOUNT OF US$5.58 MILLION FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND TO BOSNIA AND HERZEGOVINA FOR A SUSTAINABLE FOREST AND LANDSCAPE MANAGEMENT PROJECT December 18, 2013 Sustainable Development Department Europe and Central Asia Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank's policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective October 31, 2013) Currency Unit = Konvertible Marka (KM) 1 KM = US$ 0.7034 US$ 1 = 1.4216 KM FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS APCU Agriculture Projects Coordination Unit BiH Bosnia and Herzegovina CPS Country Partnership Strategy CFMC Cantonal Forest Management Company EMF Environmental Management Framework EMP Environmental Management Plan EU European Union FBiH Federation of Bosnia and Herzegovina FDCP Forest Development and Conservation Project FM Financial Management FMIS Forest Management Information System FMPAP Forest and Mountain Protected Areas Project FMU Forest Management Unit FSC Forest Stewardship Council GEF Global Environment Facility ICB International Competitive Bidding IFR Interim Financial Report M&E Monitoring and Evaluation MAFW RS Ministry of Agriculture, Forestry and Water Management MAWF FBiH Ministry of Agriculture, Water Management and Forestry NCB National Competitive Bidding NGO Non-Governmental Organization NTFP Non-Timber Forest Product ORAF Operational Risk Assessment Framework PIU Project Implementation Unit PDO Project Development Objective PEFC Program for Endorsement of Forest Certification POM Project Operational Manual REDD Reducing Emissions from Deforestation and Forest Degradation RS Republika Srpska SFLM Sustainable Forest and Landscape Management SFM Sustainable Forest Management UNFCCC United Nations Framework Convention on Climate Change Regional Vice President: Laura Tuck Country Director: Ellen A. Goldstein Sector Director: Laszlo Lovei Sector Manager: Kulsum Ahmed Task Team Leader: Nathalie Johnson  BOSNIA AND HERZEGOVINA Sustainable Forest and Landscape Management Project TABLE OF CONTENTS Page I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context.......................1......................... B. Sectoral and Institutional Context............................................ 1 C. Higher Level Objectives to which the Project Contributes ................... 3 II. PROJECT DEVELOPMENT OBJECTIVE/GLOBAL ENVIRONMENTAL O BJECTIV E ..................................................................................................................................4 A. PDO/GEO .................................................... 4 B. Project Beneficiaries ......................4...... ................4 C. PDO Level Results Indicators.....................6.... ............6 III. PROJECT DESCRIPTION ............................................................................................. 6 A. Project Components .................................... ......... 6 B. Project Financing ....................8..........................8 C. Lessons Learned and Reflected in the Project Design...................... 9 IV. IM PLEM ENTATION ........................................................................................................ 10 A. Institutional and Implementation Arrangements .................... ..... 10 B. Results Monitoring and Evaluation ................................... 11 C. Sustainability............................................... 12 V. KEY RISKS AND MITIGATION MEASURES........................................................ 13 A. Risk Ratings Summary Table ................................... 13 B. Overall Risk Rating Explanation ............................... ..... 13 VI. APPRAISAL SUMMARY .............................................................................................13 A. Economic and Financial Analysis. .......................... ......... 13 B. Technical .................................................... 15 C. Financial Management ..................... ................ 15 D. Procurement ........................................ .......... 15 E. Social (including Safeguards) ...................................... 16 F. Environment (including Safeguards) ................................. 16 Annex 1: Results Framework and Monitoring .................................................................... 18 Annex 2: Detailed Project Description .................................................................................. 20 Annex 3: Implementation Arrangements ............................................................................. 25 Annex 4: Operational Risk Assessment Framework (ORAF).............................................34 Annex 5: Implementation Support Plan ................................................................................38 PAD DATA SHEET Bosnia and Herzegovina Sustainable Forest and Landscape Management Project (P129961) PROJECT APPRAISAL DOCUMENT EUROPE AND CENTRAL ASIA ECSEN Report No.: 81108-BA Basic Information Project ID EA Category Team Leader P129961 B - Partial Assessment Nathalie Weier Johnson Lending Instrument Fragile and/or Capacity Constraints [ ] Investment Project Finance Financial Intermediaries [ ] Series of Projects [ ] Project Implementation Start Date Project Implementation End Date 31-May-2014 31-May-2019 Expected Effectiveness Date Expected Closing Date 15-Apr-2014 31-May-2019 Joint IFC GEF Focal Area Sustainable Forest No Management/Land Degradation/Climate Change Sector Manager Sector Director Country Director Regional Vice President Kulsum Ahmed Laszlo Lovei Ellen A. Goldstein Laura Tuck Recipient: Bosnia and Herzegovina Responsible Agency: FBiH Ministry of Agriculture, Water Management and Forestry Contact: Danica Cigelj Title: Assistant Minister for Forestry Telephone 387-33-726638 Email: danica.cigelj@fmpvs.gov.ba No.: Responsible Agency: RS Ministry of Agriculture, Forestry and Water Management Contact: Title: Assistant Minister Department of Goran Zubic Forestry and Hunting Telephone 387-51-338345 Email: g.zubic@mps.vladars.net No.: Project Financing Data (in USD Million) [ ] Loan [X] Grant [ ] Guarantee [i ] Credit [ ] IDA Grant [ ] Other Total Project Cost: 5.58 Total Bank Financing: 0.00 Financing Gap: 0.00 Financing Source Amount Recipient 0.00 Global Environment Facility (GEF) 5.58 Total 5.58 Expected Disbursements (in USD Million) Fiscal 2014 2015 2016 2017 2018 2019 0000 0000 0000 Year Annual 0.11 1.17 1.17 1.17 1.17 0.79 0.00 0.00 0.00 Cumulati 0.11 1.28 2.45 3.62 4.79 5.58 0.00 0.00 0.00 ve Proposed Global Environmental Objective(s) A. Proposed Development Objective: To build capacity of forestry sector stakeholders and to demonstrate approaches for sustainable forest and land management through integrated management of vulnerable forest, scrub and pasture landscapes. Components Component Name Cost (USD Millions) Enhanced Planning and Monitoring for SFLM 1.07 Demonstration and Replication of SFLM Techniques in 4.23 Vulnerable Areas Project Management 0.28 Institutional Data Sector Board Environment Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Mitigation Co-benefits % Co-benefits % Agriculture, fishing, and forestry Forestry 80 50 50 Agriculture, fishing, and forestry General agriculture, 20 50 50 fishing and forestry sector Total 100 L I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme % Environment and natural resources Other environment and natural resources 50 management management Environment and natural resources Climate change 25 management Environment and natural resources Land administration and management 25 management Total 100 Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [X] respects? Does the project require any waivers of Bank policies? Yes [ ] No [X] Have these been approved by Bank management? Yes [X] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [X] Explanation: Does the project meet the Regional criteria for readiness for implementation? Yes [X] No [ ] Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X Legal Covenants Name Recurrent Due Date Frequency Project Implementation Units X CONTINUOUS Description of Covenant The Recipient shall cause the Federation and the RS to maintain its respective PIU at all times during Project implementation with resources and responsibilities satisfactory to the World Bank, including procurement and financial management, and with competent staff in adequate numbers. Name Recurrent Due Date Frequency Project Operational Manual X CONTINUOUS Description of Covenant The Recipient shall, and shall cause the Federation and the RS, to duly perform all obligations under the Project Operational Manual in a timely manner and in accordance with their respective terms, and apply and implement, as the case may be, the actions, criteria, policies, procedures and arrangements therein set forth. Name Recurrent Due Date Frequency Federation Subsidiary Agreement By effectiveness or before making any withdrawal under Category (1) Description of Covenant To facilitate the carrying out of the Project, the Recipient shall make part of the proceeds of the Grant, allocated from time to time to Category (1) as set forth on the table in Section IV.A.2 of Schedule 2 to the Grant Agreement, available to the Federation under a subsidiary agreement ("Federation Subsidiary Agreement") between the Recipient and the Federation, under terms and conditions acceptable to the World Bank. Name Recurrent Due Date Frequency RS Subsidiary Agreement By effectiveness or before making any withdrawal under Category (2) Description of Covenant To facilitate the carrying out of the Project, the Recipient shall make part of the proceeds of the Grant, allocated from time to time to Category (2) as set forth on the table in Section IV.A.2 of Schedule 2 to the Grant Agreement, available to the RS under a subsidiary agreement ("RS Subsidiary Agreement") between the Recipient and the RS, under terms and conditions acceptable to the World Bank. Name Recurrent Due Date Frequency Environment Management Framework X CONTINUOUS Description of Covenant The Recipient shall cause the Federation and the RS to carry out their respective parts of the Project in accordance with the EMF. Name Recurrent Due Date Frequency Environment Management Plans X CONTINUOUS Description of Covenant The Recipient shall cause the Federation and the RS to carry out their respective parts of the Project in accordance with the EMF. Name Recurrent Due Date Frequency Environment Management Plans X CONTINUOUS Description of Covenant The Recipient shall cause the Federation and the RS, prior to carrying out any activities under Parts A.II and B.II of the Project, to prepare EMPs in accordance with the EMF, in form and substance satisfactory to the World Bank, and to implement said activities in accordance with the relevant EMP. Name Recurrent Due Date Frequency Land Acquisition and Use of Land X CONTINUOUS Description of Covenant The Recipient shall cause the Federation and the RS to ensure that: (i) no Project activities involve land acquisition; and (ii) if any Project activities require temporary use of land, it shall be done with a request and in consultation with the owners and users thereof. Name Recurrent Due Date Frequency Pesticides and Natural Habitats X CONTINUOUS Description of Covenant The Recipient shall cause the Federation and the RS to ensure that no Project activities involve the use of pesticides or the significant conversion or degradation of critical natural habitats. Name Recurrent Due Date Frequency Terms of Reference X CONTINUOUS Description of Covenant Recipient shall cause the Federation and RS to ensure that any guidelines, reviews and plans with respect to forest roads, to be supported under Parts A.I.(b) and B.I.(b) of the Project are carried out under terms of reference satisfactory to the World Bank and are consistent with, and pay due attention to, international environmental standards and practice, as well as the recipient's own laws relating to environmental and social aspects of the Project. Conditions Name Type Execution, Authorization and Ratification of the Grant Agreement Effectiveness Description of Condition The execution and delivery of the Grant Agreement on behalf of the Recipient has been duly authorized or ratified by all necessary governmental action. Project Agreement Effectiveness Description of Condition A Project Agreement has been executed on behalf of the Bank in either the Federation or the RS on terms and conditions satisfactory to the World Bank. Name Type Subsidiary Agreement Effectiveness Description of Condition For the Entity referred to in paragraph (a) of Section 5.01 of the Grant Agreement, a Subsidiary Agreement has been executed on behalf of the Recipient and the Entity concerned, on terms and conditions satisfactory to the Bank. Team Composition Bank Staff Name Title Specialization Unit Nathalie Weier Johnson Senior Environmental Team Leader ECSEN Specialist Herman Jack Ruitenbeek Consultant Natural Resource ECSEN Economist/Carbon (Consultant) Adam Shayne Lead Counsel Lawyer LEGLE Gabriela Grinsteins Counsel Lawyer LEGLE Jasna Mestnik Finance Officer Finance & Disbursement CTRLA Jose Janeiro Senior Finance Officer Finance & Disbursement CTRLA Nikola Kerleta Procurement Specialist Procurement ECSO2 Lamija Marjanovic Financial Management Financial Management ECSO3 Specialist Josephine A. Kida Program Assistant Program Assistant ECSSD Samra Bajramovic Program Assistant Program Assistant ECSP4 Mirjana Karahasanovic Operations Officer Operations Officer ECSEN Andrew Michael Sr Forestry Spec. Senior Forestry ECSEN Mitchell Specialist Jorge E. Villegas Senior Social Senior Social ECSSO Development Specialist Development Specialist Sanja Tanic Team Assistant Team Assistant ECCBM Esma Kreso Environmental Specialist Environmental Specialist ECSEN Sandra Kdolsky Social Development Social Development ECSSO Specialist Specialist Non Bank Staff Name Title Office Phone City Locations Country First Location Planned Actual Comments Administrative Division BiH Entity Republika Srpska X Federation of X Bosnia and Herzegovina  I. STRATEGIC CONTEXT A. Country Context 1. Bosnia and Herzegovina is a post-war country and, as envisaged in the Dayton Peace Agreement, has evolved into a single sovereign state with a decentralized administrative structure. The State of Bosnia and Herzegovina is the central authority and the Federation of Bosnia and Herzegovina (Federation or FBiH) and Republika Srpska (RS) are its two constituent Entities, which are politically, administratively, and fiscally autonomous. They have different governance structures: the Federation is decentralized, being composed of 10 Cantons with significant fiscal authority and their constituent municipalities. The RS is centralized, with relatively few functions decentralized to its constituent municipalities and no mid- level governments. In most areas of natural resources management, the Entities have responsibility for creating and implementing all relevant laws. The Federation delegates some authority and responsibilities to the cantonal level. The conflict associated with the breakup of the former Yugoslavia, between 1992 and 1995 caused heavy damage to and neglect of natural resources, which lingers today and hence provides a primary rationale for the proposed project. B. Sectoral and Institutional Context 2. Relative to the size of the country, the forest resources of BiH are among the richest in Europe in terms of their extent and variety. As shown in a recently-completed national forest inventory, funded by a World Bank Credit (37790-BA and 37791-BA), BiH has a total designated forest area of 3.2 million ha, covering some 62 percent of the total land area, making it the most forested country in Europe. This compares with 24 percent for pasture land, much of it close to forest areas, and only 10 percent for arable land. In general, forests are considered one of Bosnia's foremost natural resources and, in particular, the rural population (estimated 2 million) considers the forests as an important source of employment (in forest industries), energy (fuelwood for heating, largely from forest residues) and recreation. Forests are also traditionally a source of non-timber forest products (NTFPs), including inter alia mushrooms, berries and herbs. Hunting, mostly quite well-organized, has provided additional revenues, while the beauty of Bosnia's forest and mountain landscapes has, and can, again, provide substantial job opportunities for local people from tourism. Because BiH is a mountainous country, forests also have important watershed protection values, especially for the middle and lower Danube. 3. The main tree species are fir, spruce, Scotch and European pine, beech, and oaks. About 80% of the forests are state-owned, while the remainder is owned by a large number of individual private owners. Nearly three-fifths of the forests can be characterized as production forests (with average standing volumes of 172 m3/ha, suggesting a total growing stock of about 550 million M3), while the rest are not suitable or available for timber harvesting. Forest accessibility is aggravated by a low forest road density of about 7-8 km/1000 ha, compared with four times that in Western Europe. The United Nations Framework Convention on Climate Change (UNFCCC) National Communication (October 2009) states that: "due to activities such as illegal logging, ore mining, construction, forest fires and others, the areas under forest cover have been shrinking rapidly; furthermore, a significant part (i.e., 13 percent - as per the State Forest Inventory, SFI) of the forest cover has been declared mined and has evident damages due to war activities". Overall some 17 percent of the forest areas are classified as low, degraded forests, while an additional area of about 6 percent of the forest estate is classified as underutilized pasture land or bare landscapes, where natural regeneration to a forest structure could take place, given the right conditions. Improved forest management would allow BiH to take advantage of "use" values (from timber and other products) to provide income for local people while at the same time to protect its "non-use" values (associated with watershed protection and global ecosystem values). 1 4. There are large areas of degraded/scrub forest (broadleaf forest that has been cutover irregularly for firewood and probably then grazed or burnt), which have the possibility, with the right silvicultural interventions, to develop into high forest. Moreover, due to changing demographics and living standards, large areas of the countryside, traditionally used for pasture, have been left unutilized. These landscapes are frequently undergoing natural regeneration towards a forest structure by light demanding pioneer species. Left untouched, these areas will eventually develop into natural forests, but over a period of centuries. Through improved management these scrublands and changing bare landscapes have the potential to maximize the contribution to carbon sequestration and storage, while at the same time providing opportunities for local populations for benefit sharing, co-management and rural employment. Also, because of changing demographics and the decreasing livestock population, areas of pasture are no longer grazed and meadows remain uncut, resulting in large unmanaged areas of grassland. Once the grasses cure during the summer months, a fire hazard is created with the potential risk of fires spreading to forest, with the resultant loss of carbon to the atmosphere. While some parts of the pasture are reverting to forests through natural regeneration, other areas, due to the absence of tree seed source and competition from grasses, will require active management to reduce the wildfire risks and encourage carbon sequestration on those sites. 5. Strategic planning exercises were carried out in the RS and the FBiH, as supported by the IDA- financed Forest Development and Conservation Project (FDCP, closed in 2010). Moreover, BiH's forest sector planning to increase its forest product supply to international markets brought about the need to focus on the issues of forest certification. Today, 100 percent of the RS managed forest and 10 percent of the FBiH managed forests have been certified according to Forest Stewardship Council (FSC) standards. Further certification processes are ongoing or planned in the FBiH. Ongoing legislative reviews and policy reforms are also being undertaken at the State level; these are intended to harmonize the policy environment with that of major trading partners such as the European Union (EU). Such reviews are not directly the responsibility of the forestry sector but are done in consultation with relevant stakeholders in both the RS and FBiH. 6. Overall responsibility for forestry in the Federation lies with the Ministry of Agriculture, Water Management and Forestry (MAWF); and in the RS with the Ministry of Agriculture, Forestry and Water Management (MAFW). The Forestry Departments within these Ministries have very limited technical staff, while the Forest Inspection Service is part of a separate Administration for Inspection Issues. The Cantonal Forest Management Companies (CFMCs) in the Federation are in charge of forest management (based on annual management plans) while the Cantonal Forest Agencies are responsible for forest control and protection activities. In the RS these tasks are performed by RS Sume (Forest Enterprise of the RS). In the Federation, the operational forest inventories and the development of forest management plans is the task of the Cantonal Forest Planning Units, while in RS operational inventory and planning is done by a single centralized Forest Planning Center. In the current organization, the CFMCs and RS Sume are responsible for some private, as well as some public good functions of forest management, watershed protection, conservation activities, etc. This setup requires that the provision of the public goods functions are adequately financed, either directly from the budget or from revenues from timber sales or from targeted funds. 7. Forest enterprises in BiH have both experience and budgetary resources to undertake significant levels of afforestation and forest rehabilitation. Moreover, they are under the scrutiny of various audits for certification and internal accountability purposes: the revenues flowing through such enterprises and the activities planned and undertaken are reflected in annual reports. The RS Sume, for example, received FSC certification of approximately 1 million ha of its forests in 2008. Over a recent two year period (2011-2013) in the RS, the RS Sume actively undertook afforestation, rehabilitation, and management activities on approximately 13,100 ha of state lands, of which 2,200 ha was direct afforestation and the remainder was preparation for future afforestation or for assisted natural regeneration; this was completed 2 with an investment of about $12.1 million. The RS Sume three year plan (2013-15) caters for allocations for 3,670 ha of afforestation. Foresters and these enterprises are also well versed in rehabilitation and replanting standards: traditional Republic forestry laws in Yugoslavia required replanting 1.4 ha of land for every 1000 m3 harvested, as a supplement to natural regeneration. C. Higher Level Objectives to which the Project Contributes 8. National Programs and Strategies. Sustainable forestry is high on the agenda of government programs, evidenced primarily through the strong recent push for comprehensive certification under internationally accepted standards such as FSC certification or Program for Endorsement of Forest Certification (PEFC). The standards reflect market demands for sustainably managed forests that respect the financial sustainability of enterprises, and the environmental and social sustainability of forestry operations. The intent is to promote a modernized forest sector that effectively contributes to exports, while also respecting the multi-function nature of the forest estate and the dependency of communities in proximity to the forest estate. Reclamation of degraded lands, and reforestation of lands lost more recently to fire, is thus a priority in national forest management. Historically, forestry was often regarded as a social safety net for vulnerable populations including the elderly, the unemployed, war veterans, and survivors of recent conflicts. While support for these populations was appropriate as a social goal, and their plight remains a target of social programs, it has been acknowledged that in some instances employment of such populations in the forest sector did not alleviate their hardships and in fact contributed to less efficient operations of the forestry estate. The forest sector reforms that remain underway thus seek to correct some of these distortions through different forms of social inclusion, and explicit fiscal arrangements for revenue sharing from forest production. These reforms are intended to improve profitability of operations, thus increasing the size of revenues and benefits available, and to improve transparency of distribution and access to revenues, thus addressing equity issues of importance to government and local populations. For example, current policies still provide explicit incentives to promote value added processing of timber in communities close to the forest estate. Also, while fiscal policies and revenue distribution schemes remain in flux in both the RS and FBiH, of the order of 10 percent of forest revenues are directly released to local government authorities to be used within those communities. 9. BiH signed the Kyoto Protocol in 2007 and ratified it in 2010. In this context, it also notes that any strategy must rely on regional and domestic commitments to adaptation and mitigation efforts within an ecosystem-based approach. Upon its ratification and announcement at the Conference of the Parties (COP 16) in Cancun (December 2010), the Minister of the Ministry of Foreign Trade and Economic Relations (HE Mr Mladen Zirojevic) noted that "there were [recently] massive floods throughout Bosnia and Herzegovina, which have consequences on human health, private properties, agriculture, etc. As a country with economy in transition, Bosnia and Herzegovina can't fight the climate changes on its own and with no support from international community. All future steps that are to be taken to prevail situation like this one, and without raising the issue at the regional level, will be difficult for many countries and sometimes even impossible. ... bearing in mind the strategic interests of Bosnia and Herzegovina ..., we are ready to act together with other countries from the South-East European region, driven by the EU policies towards the cleaner and 'climate friendly' future. ... In an effort to achieve a better effect with regard to the UNFCCC at the national level, Bosnia and Herzegovina supports the synergy of activities of the three Rio Conventions. We especially emphasize the importance of joint activities dedicated to adaptation and mitigation and also believe that human society, at this particular moment, can find all the answers to climate change questions, but only in harmony with nature. All other actions related to the new degradation of ecosystem represent a new factor in the pressures on climate, as a natural phenomenon. Adaptation and mitigation must follow an ecosystem approach." The Proposed Project contributes to this through supporting sustainable forestry activities that add to the carbon stocks and promote mitigation, reducing emissions through providing capacity in fire management and control, 3 and promoting adaptation through piloting appropriate techniques that will increase resilience of forests in the face of climate change hazards. 10. The RS Forestry Development Strategy covers the period 2011-2021. The Strategy, which was financed by FDCP Additional Financing (AF) Project sources, was published in 2012. It gives basic prerequisites for sustainable development of forestry with the main goal to enhance and maintain all forest functions. The strategy lists a wide spectrum of goals and measures for their implementation. Priority goals, as listed in the Strategy are: (i) to develop the forestry sector based on optimal use of all resources and forest ecosystems; (ii) to manage forests based on ecosystem management principles; (iii) to increase the contribution of forestry to rural and overall social development of RS; and, (iv) to ensure the availability of financial means needed for strategy implementation. The FBiH also has an ongoing strategic planning exercise, called the FBiH Forest Program (FP). This consists of 22 planning studies initially financed from FDCP AF Project sources; these were completed at the end November 2010. Each of the 22 studies that make up this planning exercise have had participatory workshops to discuss and refine the findings and actions plans, with continued developments of this program has been funded entirely by Government's own resources. It is expected that the FP will be completed by March 2014; it will be comprised of two documents: (i) the Forest Policy (i.e., the general part in which the main goals, principles and guidelines for sustainable forest management in the Federation will be laid down); and, (ii) a five-year Action/Investment Plan (i.e., the operational part, where objectives will be set out and specific time-bound actions to achieve them, including financing, will be elaborated). The general part of the FP will then need to be adopted by the FBiH Parliament, followed by the Government's adoption of a 5-year Operational Forestry Program. 11. Relationship with Country Partnership Strategy (CPS). The proposed project is fully consistent with the CPS for FY2012-2015 (dated August 30, 2011). The CPS has three main pillars: (i) support economic growth by tackling bottlenecks to faster productivity and competitiveness; (ii) improve social inclusion by strengthening the targeting and fiscal sustainability of social benefits, and improving the delivery of basic public services; and (iii) strengthen the sustainable use of key natural resources, such as water and forests, and improve climate change adaptation. The Project aims to ensure that forests and associated natural landscapes, which are important for the country's economic development, are managed sustainably. Moreover, the project will specifically target those landscapes vulnerable to ongoing degradation or to escalated impacts from climate change such as fire risks. II. PROJECT DEVELOPMENT OBJECTIVE/GLOBAL ENVIRONMENTAL OBJECTIVE A. PDO/GEO 12. The overall Project Development Objective (PDO) and Global Environmental Objective (GEO) is to build capacity of forestry sector stakeholders and to demonstrate approaches for sustainable forest and land management through integrated management of vulnerable forest, scrub and pasture landscapes. B. Project Beneficiaries 13. The direct beneficiaries are the line agencies associated with forestry management in the country; these benefit from institutional strengthening throughout their jurisdictions and include the MAWF, the CFMCs (responsible for economic functions of forest management) and the Federation and Cantonal Forest Administrations (responsible for administrative functions of forest management) in the Federation and the MAFW and the RS Sume in the RS. The indirect beneficiaries are those individuals and communities who are proximate to and reliant on the ecosystem goods and services derived from a 4 better managed forest estate that is also less vulnerable to climate change impacts. These include representative of local communities and agencies (farmers, NGOs, etc.) mostly in rural area. The entire country will benefit from improved forest management as it secures access to markets for sustainable timber that generates important export revenues in a key resource sector. The entire country also benefits to the extent that the resilience of key forestry assets is being strengthened through introducing improved silvicultural and fire protection methods. In effect, the entire country is to some degree potentially vulnerable to increased climate-related hazards; it is impossible at this stage to predict the type, degree, or timing of such hazards hence appropriate adaptation strategies involve enhancing the resilience of the forest estate at risk, and of the various stakeholders and beneficiaries. 14. Those indirect beneficiaries proximate to project activities will benefit in a number of ways. Improved sustainable forest and land integrated management will help to generate jobs in the forest sector, especially in rural areas. Improved, participatory forest management planning will ensure that the needs of local people for forest products are specifically taken into account. In addition, the promotion of sustainable forest and land management, and the planned participatory approach, would aim to combine benefits to local people with sustainable management and ecosystem conservation (e.g., tourism). The locations of the sub-project activities were determined through a process initiated during project preparation activities in early 2013; the eligible activities were chosen by Government through a participatory selection process to ensure a representative distribution geographically of appropriate activities (Annex 2 provides a summary). 15. The global benefits and beneficiaries of this project derive from both the mitigation and adaptation actions inherent in the activities. They contribute in various ways to a number of outcomes associated with outcomes relating to sustainable forestry (SFM/REDD+), land degradation (LD), and climate change (CCM). Specifically, the project contributes to the following GEF Outcomes: * SFM/REDD+ Outcome 1.2: Good management practices applied in existing forests * SFM/REDD+ Outcome 1.3: Good management practices adopted by relevant economic actors * SFM/REDD+ Outcome 2.1: Enhanced institutional capacity to account for GHG emission reduction and increase in carbon stocks * LD Outcome 3.1: Enhanced cross-sector enabling environment for integrated landscape management * LD Outcome 3.2: Integrated landscape management practices adopted by local government units and/or communities * LD Outcome 3.3: Outcome 3.3: Increased investments in integrated landscape management * CCM Outcome 5.1: Good management practices in LULUCF adopted both within the forest land and in the wider landscape * CCM Outcome 5.2: Restoration and enhancement of carbon stocks in forests and non-forest lands, including peatland 16. Concretely, first and probably foremost, Sustainable Forest and Landscape Management (SFLM) will lead to mitigation benefits through improved forest management that generates sequestration benefits, and improved forest and fire management that reduces deforestation and carbon release. It is estimated that, over a twenty-five year time horizon, this corresponds to approximately at least 1.2 million tCO2e on those lands directly addressed through the GEF funding in this project.' Second, I Based on preliminary estimates using the EX-ACT tool Version 4.0.1 developed by FAO (August 2013). The assumptions contemplate net afforestation and rehabilitation on approximately 3000 ha of degraded lands. A wide range of assumptions was tested relating to forest type, climate, soil type, and success and staging of uptake in natural regeneration. The conservative reference case was associated with default growth rates and carbon sequestration values for Eastern European forests in "Cool Temperate Moist Zone on Low Activity Clay Soil 5 institutional strengthening enhances prospects for regional cooperation in fire management response; such responses have already been evident over the past decade among Mediterranean countries and as BiH capacity improves, there will be benefits for its neighbors in terms of potential technology and knowledge transfers as well as, eventually, cooperation in fire management. Third, BiH includes numerous ecosystem types from coastal forests to montane systems in both degraded and untouched conditions; the demonstration activities being conducted within this project may provide lessons and replications not only for BiH but also for neighbors throughout the Mediterranean basin and South-Eastern Europe. Finally, continued enhancement of the information systems being undertaken in this system will fulfill mandates for international reporting to which all countries have access; the information can in turn be used to help inform and improve global strategies for climate change mitigation and adaptation. C. PDO Level Results Indicators 17. The PDO level indicator for the project is as follows: * Total land under improved management (ha). It is expected that - after the five-year project period - at least 3,000 ha of existing state forests will benefit from improved management using SFM techniques. Some of these include vulnerable lands successfully transferred into productive systems; the project will contribute to the afforestation of vulnerable forest lands previously classified as deforested, degraded scrub forests, or unproductive pasture. III. PROJECT DESCRIPTION A. Project Components Component 1. Enhanced Planning and Monitoring for SFLM (US$1.07 million) 18. This component focuses on selected activities through a targeted capacity building effort, building on existing efforts introduced and identified under the FDCP. The component addresses current remaining needs for broad-based institutional support that are aimed at both the productive and non- productive forest areas and landscapes to improve management, production and sustainability. 19. Sub-component 1.1. Forest Certification Support. This sub-component focuses on improving the sustainability of forest management, and community engagement with local people, through implementation of forest management to certifiable standards (e.g., FSC or PEFC) in regions of the country that have not had the resources or capacity to move forward on this important forest certification effort. Certified forests are already in place over an area of 1.652 million ha (of which 1.117 million ha in RS certified in 2008, and 0.535 million ha in FBiH certified through five plans from 2011-13). Some of these lands will require recertification during the project period and this sub-component provides such support. In addition, in FBiH, certification efforts under the project will initially be targeted to priority Types" using FAO defaults within the tool. A reference case with five-year lag (associated with the project investment planting) and fifteen year uptake period on all 3000 ha yielded a gross sequestration of 1.18 million tCO2e. A sensitivity scenario with delayed uptake of 20 years ("Implementation Period" in the FAO tool) to represent assisted natural regeneration, and eventual five years of normal growth ("Capital Period" in the FAO tool) provided an equivalent estimate: 1.16 million tCO2e under the same biophysical conditions. These are treated as the lowest expected values under the reference assumptions. Actual conditions in Bosnian forests will at times yield higher gross carbon values; approximately one-third of forests in Bosnia will either be on higher activity soils, in the "Warm Temperate" climatic zone, or both. Where both of these more productive soil and climate conditions apply, carbon sequestration values estimated by the tool approach 1.6 million tCO2e. The conservative reference estimate (1.2 million tCO2e) is used at appraisal stage, noting that the Project will refine these estimates as it delivers support for incorporating carbon accounting within the FMIS. 6 cantons (Zenica-Doboj, Bosnia-Drina) to realize an additional approximately 200,000 ha of forest land under certification. State level reviews of policy and legislation are already undergoing through existing review processes to ensure that timber exports are in compliance with EU requirements; if needed during this process, the sub-component will facilitate the FBiH and RS in engaging with this process and in reflecting its outcomes in ongoing certification efforts. 20. Sub-component 1.2. Forest Road Strategic Plan. This sub-component will help identify the most urgent forest road rehabilitation projects (to improve both environmental and economic performance and help meet forest certification requirements) through the preparation of a model forest roads master plan and by instigating the adoption of best practice forest road rehabilitation guidelines to minimize environmental impacts, as part of the government's expected efforts to rehabilitate the forest road network in both entities. The resultant best practice guidelines would also ensure environmental/social impact assessments of all road works and support the forest enterprises' certification efforts. It is important to note that the very low road density in the forest estate currently prevents proper forest management, effective fire management, and realization of the full commercial potential of this important national asset. Also, Bosnia is characterized by low rural population densities and negligible forest dependency; unlike most other countries, improved forest access is not expected to result in encroachment or resource extraction by local populations. 21. Sub-component 1.3. Forest Management Information System (FMIS) Enhancements for Mainstreamed Decision-Making. Improving forest management operations through capacity building and localized development of the FMIS was already introduced under the FDCP. Existing centralized and decentralized IT capacity is already in place. This project will improve ability for the FMIS to be used in decision-making through introducing selected information relating to climate change: specifically this includes introduction of carbon stock accounting for mitigation efforts, and introduction of systems to monitor incidence of losses related to fires and pests. Component 2. Demonstration and Replication of SFLM Techniques in Vulnerable Areas (US$4.23 million) 22. As the scrub forest is currently poorly stocked and areas of grassland are only slowly and unevenly converting to forest, there is potential to substantially improve forest/habitat management, which would help BiH's climate change mitigation and adaptation program. The Project would be looking at landscape management in terms of forest, degraded scrub, and unutilized pastures. Eligible land areas also include recently damaged lands from fire or other hazards. The techniques to be demonstrated include already developed sustainable forest practices through undertaking the activities as pilots. This component also caters for selected interventions in local capacity building among community- based stakeholders to facilitate participatory implementation, dissemination of information and results, and awareness building. 23. Sub-component 2.1. Afforestation - Assisted Natural Regeneration and Stand Rehabilitation. These activities will be undertaken consistent with existing management plans in the public forest estate. Support will focus on larger landscape units; these are generally on areas of at least 10 ha but more typically exceed 50 ha in extent. The project meets investment needs as well as operational support for up to 3 years for monitoring and management during the vulnerable periods of the young plants. Activities include: (i) afforestation with native species; (ii) afforestation with new species appropriate to drying conditions or increased fire hazard; (iii) stand management complementing natural regeneration through thinning and weeding; (iv) stand rehabilitation using enrichment planting, limbing, or thinning; (v) forest conversion from coppice forest to high forest; and, (vi) production of seedlings using methods or species appropriate to improved climate resilience. 7 24. Sub-component 2.2. Multi-purpose Forestry Demonstration Techniques. This generally will involve integrated management for vulnerable forest, scrub and unutilized pasture within the forested areas classified as state forests or on private or local community forest and non-forest lands. These will be demonstration activities applied generally to a minimum of 2 ha per sub-project; in addition to capital investments the sub-project support will also provide up to 6 months of operational support if needed. The intent is to undertake innovative activities that improve SFLM while also addressing objectives in some other sector (e.g., energy, water management, agriculture, tourism). Examples of candidate activities include: (i) non-timber forest product (NTFP) harvesting and value added; (ii) hunting and wildlife management complementing forest management; (iii) bio-mass management for energy production; (iv) bio-mass thinning for local use and fire management; and, (v) forest-based tourism. 25. Sub-component 2.3. Fire Management Technique Demonstration and Implementation. This sub-component is intended to engage local communities in implementing appropriate small-scale fire management interventions. While there are no restrictions on land ownership, areas targeted will be those under fire hazard. Preference will be given to activities involving an element of local engagement and participation. Examples of eligible activities include: (i) fuel buildup management (clearing of deadwood before fire season); (ii) training in controlled bums; (iii) creation of defensible space including improvements in access; (iv) innovative water management systems in high risk areas; (v) emergency preparedness drills; (vi) appropriate small-scale fire fighting equipment and relevant training for its use; (vii) glass removal; and, (viii) waste management interventions (dump removal). Areas can be of any size with no minimum or maximum. 26. Sub-component 2.4. Local Stakeholder Capacity Building. This sub-component is intended to provide operational support to existing stakeholders at the local administrative and community level to engage in local participation in the above activities (including afforestation, innovative demonstration projects and fire management). In general, this can include: (i) participatory monitoring; (ii) awareness building relating to local threats or impacts; or, (iii) dissemination of lessons learned from the pilot activities. It is important to note that lessons will also be drawn and disseminated from failed pilots to determine why they did not succeed and to ensure that any errors or deficiencies are not carried forward into future attempts. In the FBiH, for example, this sub-component will specifically facilitate participation of Federal and Cantonal Forestry Administrations. In the RS, this sub-component is expected to permit more direct engagement of communities through media campaigns and awareness building in fire prevention and forest management. Component 3. Project Management (US$0.28 million) 27. Based on past experience and recent discussions with the Entities, the Project will be implemented through the two Entity Ministries responsible for Forestry, namely their mainstreamed implementation units (i.e., FBiH Project Implementation Unit, PIU and RS Agriculture Projects Coordination Unit, APCU). Financing caters for: (i) operational support in project management, financial management, and procurement; (ii) annual audits; and, (iii) project evaluations at mid-term and closing. B. Project Financing 28. The project is entirely a GEF Grant, associated with the financing available for sustainable forestry management, land degradation, and climate change mitigation in the amount of US$5.58 million for project activities. In addition, financing of US$18.4 million will be involved in parallel activities, primarily associated with the reforestation/afforestation efforts as these are conducted as part of the re- investment of cash in the forestry enterprise annual work plans. This funding is regarded as the GEF 8 baseline of the project. The baseline financing will be realized through the RS and FBiH with 50 percent (i.e., US$9.2 million) to each entity. Allocations between components and for specific activities vary somewhat between entity depending on priority and need. 29. Project Cost and Financing Project cost GEF Financing Project Components (million) (million) % Financing 1. Enhanced Planning and Monitoring for SFLM $1.070 $1.070 100% 2. Demonstration and Replication of SFLM $4.230 $4.230 100% Techniques in Vulnerable Areas 3. Project Management $0.276 $0.276 100% Total Project Costs $5.576 $5.576 C. Lessons Learned and Reflected in the Project Design 30. As noted, this Project is part of ongoing forestry related projects in the country. Forestry plays an important role for the economy and well-being of its citizens, and the Bank has continued to be engaged in the sector, building on earlier achievements and the Bank's engagement since the end of the war. Some key lessons from these previous projects are reflected in current project design. 31. First, it is widely acknowledged that issues of governance (including decentralization, local involvement, and sharing of expertise between entities) remain a concern in overall policy implementation in BiH. Forest laws, revenue sharing arrangements, training modalities for forestry officers, and even Forest certification efforts have therefore evolved at a different pace in the two entities, and some issues (such as the Forest Law in the Federation) have not yet been finalized. Notwithstanding these hurdles, both entities have shown strong individual commitments to improving management practices. When governance issues were front and center, they often served to distract the sustainable management agenda. An example of this is the forestry tax share in the RS which is directed towards those communities in proximity to the forest estate: when discussions of reform arise the agenda often becomes overly politicized and hampers local management efforts that potentially provide community engagement in local SFLM initiatives. The team felt it was not wise to make the governance issue (including fiscal and revenue sharing issues) a main focus of this demonstration project given the history and ongoing situation in the country. The practice of local community and NGO involvement in Bosnia is not well established, especially in the forest and natural resource management sector. The project recognizes this limitation; the activities and implementation modalities balance the limited capacity and practice with practical approaches that will not compromise impact and sustainability. 32. Second, the demonstration activities build on existing practice and use a portfolio approach to developing small-scale activities in well-targeted areas. This approach was shown in the Forest and Mountain Protected Areas Project (FMPAP) to be both a cost-effective use of scarce resources and an effective means technically for testing more novel approaches to resource management. In FMPAP, the approach permitted testing community engagement for conservation management and tourism development in cooperation with state enterprises. In this Project, the approach is expected to be similarly successful in testing ways of addressing climate change adaptation through (for example) specific activities such as fire management; during project preparation, communities and enterprises expressed a 9 desire to improve access to areas at risk from fire and appropriate thinning will thus be conducted that employs community labor and achieves this outcome. 33. Third, this Project continues in an approach reflecting small changes in value chain improvement and revenue sharing. Past projects have tried to establish the broad institutional capacity (through training, management systems, and certification) that improve forest estate efficiency and access to foreign markets. The next steps will be to improve overall sustainability through equitable social inclusion and community engagement within the broader value chain; much of the resultant sharing will be through employment or enhanced access to incremental benefits (from tourism, for example). The value chain includes both monetized and unmonetized benefits. In BiH, there is already some explicit revenue sharing from forest revenues with local communities through a tax and grant system; these are not the subject of this project and may continue to evolve during the life of this Project. Also, value added opportunities for processing are offered preferentially to front-line communities. While these are simple redistribution systems, they are directly tied to forest resources and provide a mechanism for building on more opportunities for other forest values that are less readily monetized (including ecosystem services). But all of these are premised first on technically successful co-management opportunities, which are thus among the main elements of demonstration activities in this Project. 34. The following were identified by FBiH as lessons learned from implementation of previous projects and were also incorporated during project preparation and design: * Linking public awareness with government policy: As governments change the forest policy framework, it would be useful to link it with public awareness campaigns to help foster better understanding and support. At the same time, these campaigns need to be carefully targeted at specific audiences to improve efficiency. Within this project, Sub-component 2.4 associated with dissemination and local capacity building fulfills this role. * Development of trust and ownership feeling: In all Projects in which fulfillment of development objectives requires a wide consultation process on local and regional levels, timely and close cooperation with representative of regional and local communities (cantons, municipalities, NGOs, farmers etc.) is strongly recommended. This approach eases and accelerates direct communication, strengthens trust and ownership feeling in all stakeholders. Consultations were started during preparation and will continue as part of project implementation especially under the demonstration activities. * Consider specific characteristics of each area and its requirements/demands, and on such basis prepare project design packages for afforestation, multi purpose demonstration techniques, and other types of works. The specific sub-projects under component two have been designed based on this important lesson. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 35. The Project will be implemented in each entity by existing Project Implementation Units (i.e., FBiH PIU and RS-APCU), which have adequate and proven capacity for project implementation, including financial management and procurement. These will in turn oversee technical implementation of the project through the RS Sume and, in FBiH, through the CFMCs and the Federation and Cantonal Forest Administrations. 36. The Bank assesses the PIU and APCU financial management and procurement arrangements as adequate and acceptable. Both PIU and APCU are staffed with qualified officials with experience in the execution of daily project activities. This assessment is based on the following: (i) availability of staff 10 with prior experience in the implementation of Bank - financed projects - Forest Development and Conservation Project (FDCP), Agriculture and Rural Development Projects (ARDP) and Irrigation Development Project (IDP) in FBiH PIU and ARDP, IDP and Neretva and Trebisnjica River Basin Management Project (NTRBMP) in RS PIU; and (ii) experience in preparing withdrawal applications, IFRs and annual project financial statements. B. Results Monitoring and Evaluation 37. A Project Results Framework is provided in Annex 1. The project's M&E reporting will involve implementing agencies and the PIUs as lead and coordinating organizations, complemented by cantonal offices, facilitating organizations, community based organizations, project beneficiaries and other stakeholders as needed. M&E reporting will reflect relevant experience and good practice in BiH and elsewhere, highlighting the roles of different project partners in collecting, processing and disseminating essential project data and results. Output monitoring will take into account limited and variable local capacities. Data collection and reporting formats for field-based partners will aim to capture essential information while being relatively straightforward to implement. Outcome monitoring and project impact assessments will make use of the data collected by field-based partners, as well as specialized data collection and analyses conducted with external technical assistance as needed. Monitoring and evaluation will make use of primary data collected from the project sites and beneficiaries, and will be consistent as much as possible with existing structures in the FMIS. The Project will also report on project performance using the following GEF Tracking Tools: Sustainable Forest Management/REDD+; Land Degradation; and, Climate Change Mitigation. 38. Each PIU will monitor and evaluate the progress of its respective part of the project and prepare Project Reports on the basis of indicators acceptable to the Bank. Each such Project Report will cover a period of six months, and will be furnished to the Recipient not later than forty-five (45) days after the end of the period covered by such report for incorporation and forwarding by the Recipient to the Bank of the overall Project Report. A Project Operational Manual will provide guidance on the roles and responsibilities of project beneficiaries and partners, plus other relevant stakeholders in collecting, analyzing and communicating project data and results. This will build on existing formats prepared under other projects being implemented by the respective PIUs. By producing timely and pertinent information, the M&E system will be a key management instrument aimed at helping decision-making processes and support adaptive management and project implementation. The project is expected to contribute to BiH's mandate to monitor and report on natural resource management both for national and international audiences. 39. While the formal results framework in Annex 1 provides the commitment for monitoring progress on the PDO, it should be noted that specific stakeholders may also choose specific items to monitor within their own areas and these need not necessarily be consistent between entities or across all project sites. The Project in fact might generate multiple results that are of interest locally; local measurement of parameters that are of interest to local stakeholders will be encouraged within the Project through its various demonstration activities. For example, the following were initially identified that are consistent with GEF objectives and overall project structure: 1) Degraded/scrub forests brought under active and sustainable forest management and, where possible, converted to native high forest (area); 2) Unutilized pastures and associated bare landscapes within the forest estate; afforested/reforested and brought under active management to protect important habitats, while creating conditions conducive to natural regeneration (area); 3) Innovative management techniques identified and demonstrated to address better management of vulnerable forest systems (local engagement; area); 11 4) Local rural population engaged in silvicultural and landscape management activities (local engagement; area); 5) Forest production techniques certified to international standards (area); 6) Strategic planning completed to identify future forest infrastructure needs relating to access, protection, and management (plans; area; population affected); and 7) Capacity developed to monitor carbon, and to track hazards associated with climate change impacts on forest landscapes (training; monitoring systems in place; communication). C. Sustainability 40. The forest companies are currently largely self-financing, thus financial sustainability is not a large issue. In the RS, for example, both the 2011 and 2012 financial years showed modest financial operating profits for the forest estate when all transfers (including financial items equivalent to stumpage, royalties, indirect taxes, and fees) are treated as company expenditures. When such transfers (primarily in the form of indirect taxes and fees to municipalities) are excluded from expenditures, the operating profit represents about ~-16 percent of gross revenues. The RS Sume business plans for the 2013-2015 financial years (prepared for certification and internal management purposes) forecast ongoing profitable operations with gross receipts of about US$400 million from the forest estate, of which US$33 million will be transferred to communities and some US$170 million will go to salaries. Forest sector policy is to provide equal access to men and women. In FBiH, financial conditions for timber harvesting operations are similar although in some cantons inclusion of some high operational costs (associated with social programs) made FSC certification difficult initially; FSC includes financial sustainability among its certification criteria. More recently, CFMCs in 2011 showed progress compared to 2010: income was significantly increased, and all companies had positive business and presented profit. The most recent financial year for which accounts are available (2012) shows that all FBiH companies presented profits. As certification efforts increase, it is forecast that the combined annual revenue base from the RS and FBiH will approach US$200 million within the period of this project. Efficient use of available finances remains a focus of RS Sume and the FBiH CFMCs moving forward and part of both the reforestation/afforestation activities and the demonstration activities will be to ensure that cost- effectiveness principles remain in the forefront. Indeed, during the identification of selection criteria for demonstration activities in the FBiH government and participants underlined the importance of using benefit/cost ratio tests for selection of candidate activities. The Project support is thus intended to provide a foundation for identifying appropriate future investments through planning and demonstration. While GEF funds themselves will not be explicitly earmarked for replicating successful models within the timeframe of this project, it is expected that finances available through the RS Sume and the FBiH CFMCs will take a lead in any replication efforts as practical experience with rehabilitation and afforestation increases under this project. 41. A second important dimension for sustainability is the baseline commitment that already exists both in the RS and the FBiH. At project appraisal, commitments were received equivalent to three times the current Project investment for activities such as reforestation, afforestation and rehabilitation in degraded and sparsely forested lands. Each entity has committed US$9.2 million through reinvested cash from current operations into parallel activities over the five year period. On an annualized basis this represents about 2 peercent of forecast revenues from forest enterprise operations for the country as a whole. The ongoing commitment to such investments provides an immediate opportunity to replicate successful techniques in this Project in adjacent lands within the enterprises' ongoing forestry plans. 12 V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table Risk Category Rating Stakeholder Risk moderate Implementing Agency Risk - Capacity moderate - Governance moderate Project Risk - Design low - Social and Environmental low - Program and Donor low - Delivery Monitoring and Sustainability moderate Overall Implementation Risk moderate B. Overall Risk Rating Explanation 42. The overall risk rating is moderate. This is a third forestry project, following the successful implementation of previous projects. Implementation will be done with experienced implementing agencies. The government commitment at both the Country and Entity levels is strong. The main risks in the FBiH are associated with the current absence of forestry legislation and with the sustainability of the forest operations due to decentralized administration and shared responsibility over forestry between entity and cantons. These risks are identified and mitigation measures presented in the Operational Risk Assessment Framework. VI. APPRAISAL SUMMARY A. Economic and Financial Analysis 43. No comprehensive stand-alone economic analysis of the project investments was undertaken beyond the direct impacts within the pilot activities: the project consists essentially of institutional strengthening that will have broad-based benefits, and of demonstration projects that are eventually to be replicated. While some selected partial analyses can be undertaken (provided below), these underestimate the broader social returns because many of the economic benefits remain non-quantifiable (for institutional strengthening and capacity building), are a joint product with other inputs (to the extent that some of the demonstration projects involve scaling up of existing activities but in new areas), or are part of a future investment portfolio that has yet to be defined and will be determined through the eventual pilot activities. The broader social benefits are, however, identifiable on a qualitative basis and include: (i) improved forest productivity and biomass production in currently unproductive areas; (ii) reduced vulnerability and exposure to climate change hazards such as fires and pests; (iii) increased off-site benefits such as management of hydrological function, enhancement of biodiversity, and soil quality maintenance; and, (iv) capturable but mainly immeasurable social co-benefits from improvements in non- timber forest product harvesting and tourism/recreation values. The overall increase in forest productivity is further supported by institutional strengthening that permits both the RS and the FBiH to take 13 advantage of forest certification, which significantly increases the likelihood of expanding exports of wood and wood products into Europe and elsewhere. 44. A general economic analysis of recent SFM efforts in the country does, however, show the overall importance and relevance of this Project and the contribution that it can make to improving management and to decreasing the vulnerability of forest resources to climate change. Inspection of two years of accounts approved for FSC certification in the country shows that approximately US$120 million of certified income was attributable to the forest estate as direct GDP through sales or exports and that a substantial proportion was attributable to value added or rent capture. The labor share of this is 43.3%, while taxes, forest fees, and transfers to municipalities represent an additional 13.8% of the value. In total, almost 60% of revenues are distributed as salaries or transfer payments, or are retained as operating profit. To put this in perspective of some of the climate change hazards, a notable risk remains that from fire: in 2007 - widely regarded as one of the worst years for fires - 932 fires caused in excess of US$6 million in physical damage and affected some 13,700 ha of forest in FBiH. This physical property damage excludes actual biomass loss of 40,000 m3 of timber and 32,600 seedlings; these forestry assets had a potential market value in excess of US$4 million. 45. Project financial and economic internal rate of return (FIRR >8.5%; EIRR>19.2%). A base case analysis was undertaken to show the impact of project investments assuming capital costs of about US$5.78million over a five year period2 resulting in 3,000 ha of incremental forest production. Using base biomass growth rates over a 25 year period consistent with UN Food and Agriculture Organization's (FAO) forestry models and with export prices into Europe the standing timber at the end of this period has a value of approximately US$49 million at current (2013) market values. This represents a simple real FIRR of approximately 8.5%, assuming no secondary forest products or services accrue during that period. To estimate an EIRR of relevance to climate change mitigation impacts, the carbon sequestration of at least 1.2 million tCO2e over the same 25 year period is included, translating to an annual average value of 48,000 tCO2e/year. Valuing the social opportunity cost of carbon at US$20/tCO2e yields an annual value of US$0.96 million and places the overall EIRR at 19.2%. Additional values associated with indirect use potential (such as tourism, non-timber forest products, watershed services) or with passive uses (existence values) would increase these further.3 In brief, as a stand-alone investment the overall economics are favorable. The cost of the individual pilot projects are included within the above capital costs and these are not evaluated on a stand-alone basis as they are demonstration projects in which some successes and failures are expected; the total portfolio of these efforts contribute to the overall costs and benefits reflected above. 46. Sensitivity analysis results. Financial and economic analyses indicate that the project FIRR is most sensitive to whether timber can access foreign markets and international prices; a 25% discount to 2 This is the total grant amount plus an estimate of in-kind funding from the communities; it excludes the US$18.4 million leveraged commitment of the forest companies as these are attributable to a different land base beyond the 3,000 ha considered here. The in-kind contribution is estimated to be about US$100,000 for each of the RS and FBiH over the life of the project; community contributions are for time dedicated to voluntary training and participatory processes. These in-kind contributions are excluded in the financing plan but reflected in the economic analyses to capture the full social cost of the investment. No studies exist of forest indirect use values and passive use values in Eastern Europe, and available literature suggests they could fall into a range encompassing at least two orders of magnitudes. Literature suggests that they would be in the range of US$16/ha/year (based on Noack for the Caspian forests) and as high as US$4,000/ha/year (based on analyses and reviews by CCGD France for high value forests and coastal ecosystems in Europe). References: (i) Noack F. 2009. Wood pasture, logging and nature conservation in the Caspian forests. Institut fir Volkswirtschaftslehre, Christian-Albrechts-Universitit zu Kiel, Germany; (ii) Commissariat General au Developpement Durable. 2011. Evaluation economique des services rendus par les zones humides, Study No 49. Paris. 14 timber values decreases the FIRR to 7.3%, while non-realization of 50% of the foreign revenue would reduce the FIRR to 5.6%. This confirms that it is important for Bosnia to maintain access to foreign markets through FSC or similar certification. The EIRR calculation has used carbon benefits to reflect a potential service flow but, as noted previously, the carbon estimate conservatively reflects among the least productive regional conditions for the area of interest. At the higher end of the range (corresponding to warmer conditions on more productive soils) the carbon sequestration would approach 1.6 million tCO2e (64,000 tCO2e/year); under these circumstances the EIRR would be 24.7%. B. Technical 47. The project promotes a number of technologies for environmental land management and livelihood strategies. Those associated with afforestation and rehabilitation have already been used in the existing forest estate but will be applied now also to vulnerable lands. Technologies for more innovative smaller scale management are being piloted that will be of a scale appropriate to eventual community management, although at this stage they will be demonstrated on public forest lands. Throughout, the project will build on local knowledge and technologies, as well as relevant international good practice. Thus no significant technical challenge is expected in piloting these approaches. C. Financial Management 48. An assessment of the financial management capacity was carried out by the Bank in September 2013. The assessment concluded that the financial management arrangements in PIU and APCU are acceptable to the Bank and that the overall financial management risk is moderate with the application of the mitigation measures. 49. Both PIU and APCU will maintain a financial management system acceptable to the Bank. The project financial statements, including Statements of Expenditures (SOEs) and Designated Account (DA) Statements will be audited by independent auditors acceptable to the Bank and on terms of reference acceptable to the Bank. The annual audited financial statements and the audit report will be provided to the Bank within six months of the end of each fiscal year. Both PIU and APCU shall also prepare and furnish to the Bank not later than forty five (45) days after the end of each calendar quarter, interim unaudited financial reports for the project covering the quarter, in form and substance satisfactory to the Bank. D. Procurement 50. Procurement for the Project will be carried out in accordance with World Bank Guidelines. Specifically, procurement will be carried out in accordance with: (i) "Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers," dated January 2011; (ii) "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers," dated January 2011; and (iii) the provisions stipulated in the Grant Agreements. The World Bank Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credit and Grants, dated October 15, 2006 and revised on January 2011, would also apply. 51. A procurement capacity assessment was carried out of the two proposed PIUs in November 2013. Both PIUs have prior experience with World Bank-financed procurement procedures, as well as contracting facilitation assistance. The procurement risk is rated as low. No strengthening of procurement capacity is needed to meet project requirements. Details on procurement arrangements are included in Annex 3. 15 E. Social (including Safeguards) 52. In general the project is expected to have positive social impacts through the inclusion of participatory processes in forest management. Industry activities already employ hiring practices that give preference to communities close to forests and provide equal opportunity irrespective of gender. The project will enhance this further by introducing pilot activities that are of a scale appropriate to community involvement (generally < 200 ha) in demonstration projects to improve fire management (including bush thinning, refuse removal, access maintenance, and training in use of specialized equipment). Small-scale projects will also be piloted relating to tourism development and to maintaining multi-function benefits through watershed management. Regions were pre-selected to ensure that they complemented larger scale activities of afforestation and rehabilitation of degraded lands. 53. The Project activities will implicate a number of local communities in the country. Participatory processes will ensure sustainability of project-initiated investments and will give the communities a chance to participate. The promotion of project activities to local communities and public presentations will increase local engagement and community participation in the sustainable forest and landscape management planning and implementation procedures. These promotion activities will aim for public presentations in several project sub-components. Local extension services and community based organizations, and the existing private forest owner association are best placed to facilitate local participation and will be at the core of targeted capacity building activities to train them on how to initiate, foster, and sustain public participation. 54. Gender data will be collected to inform how forestry planning and sustainable management initiatives effect men and women and their communities. When organizing public awareness raising activities, the Project will include women and men - as they might have different needs and opinions about priorities in management planning and implementation procedures, but also in the planned fire management interventions. It is noted that women are already provided equal access opportunities and in many cases gain preferred access to some tasks; nursery and weeding operations in the RS, for example, showed that women represented 65% of the employed work force (160 out of 245). 55. The project will not fund any activities that may result in land acquisition, involuntary resettlement or livelihood displacement. It is important to note that current forest certification guidelines generally require the existence of management plans that also restrict or prohibit such activities. F. Environment (including Safeguards) 56. The environmental impact of the project is expected to be largely positive and no major adverse environmental impacts are anticipated. Two Safeguard policies are triggered by the project: Environmental Assessment OP/BP 4.01 and Forests OP/BP 4.36. The project supports investments in sustainable forest and land management, consistent with existing management plans. The project is expected to increase the adoption of effective forest, land, and water management practices in the project sites and thus contribute to soil and water conservation, and building climate resilience. The project falls under category B - partial assessment, and an Environmental Management Framework (EMF) was prepared by the Client. The EMF includes provisions on mitigation of environmental impacts for the anticipated activities, and includes guidelines for site-specific review of each project site, mostly as related to the development or rehabilitation of forest roads. The EMF also brings in considerations that are embedded in the Forest Management Plans for the project sites, while the template EMPs focus on mitigation of impacts on noise and dust generation, limit uses of machinery, and provide specific provisions on any forest clearing. The EMF was made public within BiH on October 25, 2013. 16 Consultations on the EMF were completed on October 31, 2013 and the document was made available to the InfoShop on November 1, 2013: prior to Project Appraisal. 57. The EMF covers primarily Component 2 activities, and takes into account lessons learned from relevant projects to help ensure that the measures included are within the country's implementation capacity. The EMF provides details on the rehabilitation modalities and on the demonstration projects, and sets out responsibilities for environmental monitoring by project partners that include beneficiaries, facilitating organizations, the PIUs, local authorities/specialists and relevant line ministries. The project does not include any investment in dams, and construction of new canals or head works that will increase water extraction from main sources. The project does not include construction of new roads. The project area does not include parks or sanctuaries or other areas of high biodiversity significance. Within Component 1, the project does include preparation of a roads master plan for the forest estate but does not implement the plan; under BiH legislation an Environmental Assessment of any such plan must be undertaken before it is adopted by Government and provision is made within the Project to facilitate such an assessment. 58. The Forestry OP 4.36 is triggered to reflect the interventions being undertaken within the forest estate. As all of these activities are on state forest lands, however, procedures are already subject to management plans and certification provisions that promote sustainable management of such areas within a forest estate. 17 Annex 1: Results Framework and Monitoring BOSNIA AND HERZEGOVINA Sustainable Forest and Landscape Management Project (P129961) Outcome / Results Indicators Baseline YR1 YR2 YR3 YR4 YR5 Frequency Data Collection Instruments Responsibility for Data Collection and Reports PDO 1. Land area where sustainable land 0 600 1200 2000 2500 3000 Annual Annual reports of RS Sume RS Sume management practices have been adopted as a and Federation Forest FBiH MAWF result of the project (ha) Administration (CORE INDICATOR) Results Indicators for Each Component Component 1: Enhanced Planning and Monitoring for SFLM IO 1.1 Forest Area Certified (million ha) 1.65 1.65 1.65 1.65 1.65 1.85 Annual Internal Forest Company Forest companies Management Systems IO 1.2 Road Access Strategic Plan Completed 0 0 0 1 2 2 Annual PIU/APCU Contract Database PIU/APCU IO 1.3 Key climate change mitigation and 0 0 0 0 3 3 Annual RS: RS Sume Management RS: MAFW adaptation indicators included in FMIS (carbon Systems FBiH: MAWF stock, area lost to fire, area under insect/pest FBiH: Federation Forest attack) Administration IO 1.4 Govt institutions provided w/ capacity 0 3 8 10 13 13 Annual PIU/APCU Reports PIU/APCU building to improve mgt of forest resources (CORE INDICATOR) Component 2: Demonstration and Replication of SFLM Techniques in Vulnerable Areas IO 2.1(a) Area restored or re/afforested 0 300 600 1000 1000 1000 Annual Annual reports of RS Sume Forest companies (CORE INDICATOR) and Federation Forest Administration IO 2.1(b) Area re/afforested 0 300 600 1000 1000 1000 Annual Annual reports of RS Sume Forest companies (CORE INDICATOR) and Federation Forest Administration IO 2.2 Area under enhanced production on state 0 300 600 1000 1500 2000 Annual Annual reports of RS Sume Forest companies lands and Federation Forest I l_Administration 10 2.3 Demonstration subprojects completed 0 0 3 9 15 28 Annual Annual reports of RS Sume Forest companies relating to innovative SFLM methods and Federation Forest Administration IO 2.4 Demonstration subprojects completed 0 0 2 6 10 22 Annual Annual reports of RS Sume Forest companies relating to fire control and Federation Forest Administration 18 19 Annex 2: Detailed Project Description BOSNIA AND HERZEGOVINA Sustainable Forest and Landscape Management Project (P129961) Project Structure 1. The project has two main components: (1) Enhanced planning and monitoring for SFLM; and, (2) Demonstration and Replication of SFLM techniques in vulnerable areas. In addition, each of these components will be supported by a small Project Management element. The total grant allocation approved by the GEF for implementation of this project is US$5.58 million. This amount is split equally between the FBiH and the RS. Allocations between components and for specific activities will vary somewhat between Entities reflecting their priority and need as defined during project preparation and appraisal. For example, forests in RS are currently 100% certified for a five year period but some may require recertification while this project is active; in FBiH some cantons still require support for initial certification. 2. Table A2.1 provides a summary of the cost allocation. Table A2.2 provides a breakdown by entity to reflect two implementing agreements. Location 3. Given the limited scope of the project and the specific objectives of piloting and demonstrating a variety of promising techniques and technologies, the criteria for site selection and specific proposals are important. In the RS, the development of the criteria and final site selection is a joint effort between the RS Sume and the MAFW and is driven largely by the annual operating plans of the RS Sume. In the FBiH, the MAWF developed a framework for eligible activities that was distributed to all Cantons to solicit preliminary project proposals. An evaluation committee was established consisting of one representative each from the MAWF, Forest Institute, CFMCs and Cantonal Forest Institute. The committee received all proposals and made its selection prior to appraisal (September 2013).4 A summary of these is provided in Table A2.3. Component 1. Enhanced Planning and Monitoring for SFLM (US$1.07 million) 4. This component focuses on selected activities through a targeted capacity building effort, building on existing efforts introduced and identified under the FDCP. The component addresses current remaining needs for broad-based institutional support that are aimed at both the productive and non- productive forest areas and landscapes to improve management, production and sustainability. 5. Sub-component 1.1. Forest Certification Support. This sub-component focuses on improving the sustainability of forest management, and community engagement with local peoples, through implementation of forest management to certifiable standards (e.g., FSC or PEFC) in regions of the country that have not had the resources or capacity to move forward on this important forest certification effort. Certified forests are already in place over an area of 1.652 million ha (of which 1.117 million ha in RS certified in 2008, and 0.535 million ha in FBiH certified through five plans from 2011-13). Some of these lands will require recertification during the project period and this sub-component provides such 4 There was considerable interest in the programs; cantons in FBiH developed 44 potential sub-projects covering over 53,000 ha costing about US$6.0 million. A subset of these was eventually selected as consistent with project goals and providing a representative selection for demonstration activities. 20 support. In addition, in FBiH, certification efforts under the project will initially be targeted to priority cantons (Zenica-Doboj, Bosnia-Drina) to realize an additional approximately 200,000 ha of forest land under certification. State level reviews of policy and legislation are already undergoing through existing review processes to ensure that timber exports are in compliance with EU requirements; if needed during this process, the sub-component will facilitate the FBiH and RS in engaging with this process and in reflecting its outcomes in ongoing certification efforts. 6. Sub-component 1.2. Forest Road Strategic Plan. This sub-component will help identify the most urgent forest road rehabilitation projects (to improve both environmental and economic performance and help meet forest certification requirements) through the preparation of a model forest roads master plan and by instigating the adoption of best practice forest road rehabilitation guidelines to minimize environmental impacts, as part of the government's expected efforts to rehabilitate the forest road network in both entities. The resultant best practice guidelines would also ensure environmental/social impact assessments of all road works and support the forest enterprises' certification efforts. It is important to note that the very low road density in the forest estate currently prevents proper forest management, effective fire management, and realization of the full commercial potential of this important national asset. Also, Bosnia is characterized by low rural population densities and negligible forest dependency; unlike most other countries, improved forest access is not expected to result in encroachment or resource extraction by local populations. 7. Sub-component 1.3. Forest Management Information System (FMIS) Enhancements for Mainstreamed Decision-Making. Improving forest management operations through capacity building and localized development of the FMIS was already introduced under the FDCP. Existing centralized and decentralized IT capacity is already in place. This project will improve ability for the FMIS to be used in decision-making through introducing selected information relating to climate change: specifically this includes introduction of carbon stock accounting for mitigation efforts, and introduction of systems to monitor incidence of losses related to fires and pests. Component 2. Demonstration and Replication of SFLM Techniques in Vulnerable Areas (US$4.23 million) 8. As the scrub forest is currently poorly stocked and areas of grassland are only slowly and unevenly converting to forest, there is potential to substantially improve forest/habitat management, which would help BiH's climate change mitigation and adaptation program. The Project would be looking at landscape management in terms of forest, degraded scrub, and unutilized pastures. Eligible land areas also include recently damaged lands from fire or other hazards. The techniques to be demonstrated include already developed sustainable forest practices through undertaking the activities as pilots. This component also caters for selected interventions in local capacity building among community- based stakeholders to facilitate participatory implementation, dissemination of information and results, and awareness building. 9. Sub-component 2.1. Afforestation - Assisted Natural Regeneration and Stand Rehabilitation. These activities will be undertaken consistent with existing management plans in the public forest estate. Support will focus on larger landscape units; these are generally on areas of at least 10 ha but more typically exceed 50 ha in extent. The project meets investment needs as well as operational support for up to 3 years for monitoring and management during the vulnerable periods of the young plants. Activities include: (i) afforestation with native species; (ii) afforestation with new species appropriate to drying conditions or increased fire hazard; (iii) stand management complementing natural regeneration through thinning and weeding; (iv) stand rehabilitation using enrichment planting, limbing, or thinning; (v) forest conversion from coppice forest to high forest; and, (vi) production of seedlings using methods or species appropriate to improved climate resilience. 21 10. Sub-component 2.2. Multi-purpose Forestry Demonstration Techniques. This generally will involve integrated management for vulnerable forest, scrub and unutilized pasture within the forested areas classified as state forests or on private or local community forest and non-forest lands. These will be demonstration activities applied generally to a minimum of 2 ha per sub-project; in addition to capital investments the sub-project support will also provide up to 6 months of operational support if needed. The intent is to undertake innovative activities that improve SFLM while also addressing objectives in some other sector (e.g., energy, water management, agriculture, tourism). Examples of candidate activities include: (i) non-timber forest product (NTFP) harvesting and value added; (ii) hunting and wildlife management complementing forest management; (iii) bio-mass management for energy production; (iv) bio-mass thinning for local use and fire management; and, (v) forest-based tourism. 11. Sub-component 2.3. Fire Management Technique Demonstration and Implementation. This sub-component is intended to engage local communities in implementing appropriate small-scale fire management interventions. While there are no restrictions on land ownership, areas targeted will be those under fire hazard. Preference will be given to activities involving an element of local engagement and participation. Examples of eligible activities include: (i) fuel build-up management (clearing of deadwood before fire season); (ii) training in controlled bums; (iii) creation of defensible space including improvements in access; (iv) innovative water management systems in high risk areas; (v) emergency preparedness drills; (vi) appropriate small-scale fire fighting equipment and relevant training for its use; (vii) glass removal; and, (viii) waste management interventions (dump removal). Areas can be of any size with no minimum or maximum. 12. Sub-component 2.4. Local Stakeholder Capacity Building. This sub-component is intended to provide operational support to existing stakeholders at the local administrative and community level to engage in local participation in the above activities (including afforestation, innovative demonstration projects and fire management). In general, this can include: (i) participatory monitoring; (ii) awareness building relating to local threats or impacts; or, (iii) dissemination of lessons learned from the pilot activities. It is important to note that lessons will also be drawn and disseminated from failed pilots to determine why they did not succeed and to ensure that any errors or deficiencies are not carried forward into future attempts. In the FBiH, for example, this sub-component will specifically facilitate participation of Federal and Cantonal Forestry Administrations. In the RS, this sub-component is expected to permit more direct engagement of communities through media campaigns and awareness building in fire prevention and forest management. Component 3. Project Management (US$0.276 million) 13. Based on past experience and recent discussions with the Entities, the Project will be implemented through the two Entity Ministries responsible for Forestry, namely their mainstreamed implementation units (i.e., FBiH PIU and RS-APCU). Financing caters for: (i) operational support in project management, financial management, and procurement; (ii) annual audits; and, (iii) project evaluations at mid-term and closing. 22 Table A2.1 Allocation of Funding BiH Sustainable Forest and Landscape Management Project (SFLMP) PDO: To build capacity of forestry sector stakeholders and to demonstrate approaches for sustainable forest and land management through integrated management of vulnerable forest, scrub and pasture landscapes. Sub- Component Component Cost Cost Component 1 - Total Enhanced Planning and Monitoring for SFLM 19.2% Sub-component 1(a) Forest Management Plan Certification Support 295 Sub-component 1(b) Forest Road Strategic Plan 535 Sub-component 1(c) FMIS Updating, Maintenance and Reporting 240 Component 2 - Total Demonstration and Replication of SFLM Techniques in Vulnerable Areas 75.9% Sub-component 2(a) Afforestation - Assisted Natural Regeneration & Stand Rehabilitation 2560 Sub-component 2(b) Multi-purpose Forestry Demonstration Techniques 390 Sub-component 2(c) Fire Management Technique Demonstration & Implementation 965 Sub-component 2(d) Local Stakeholder Capacity Building 315 Component 3 - Total Project Management 4.9% Sub-component 3(a) Operational Support (staffing and op costs) 200 Sub-component 3(b) Audit 40 Sub-component 3(c) MTR and Closing Reviews 36 Table A2.2 Allocation of Funding by Entity BiH Sustainable Forest and Landscape Management Project (SFLMP) Sub- Component Component FBiH Cost cost Component 1 - FBiH Enhanced Planning and Monitoring for SFLM 7(% Sub-component 1(a) Forest Management Plan Certification Support 160 Sub-component 1(b) Forest Road Strategic Plan 250 Sub-component 1(c) FMIS Updating, Maintenance and Reporting 140 Component 2 - FBiH Demonstration and Replication of SFLM Techniques in Vulnerable Areas 75% Sub-component 2(a) Afforestation - Assisted Natural Regeneration & Stand Rehabilitation 1085 Sub-component 2(b) Multi-purpose Forestry Demonstration Techniques 370 Sub-component 2(c) Fire Management Technique Demonstration & Implementation 355 Sub-component 2(d) Local Stakeholder Capacity Building 290 Component 3- FBiH Project Management 5% Sub-component 3(a) Operational Support (staffing and op costs) 100 Sub-component 3(b) Audit 20 Sub-component 3(c) MTR and Closing Reviews 18 Sub- Component Component RS Cost cost Component 1- RS Enhanced Planning and Monitoring for SFLM 19% Sub-component 1(a) Forest Management Plan Certification Support 135 Sub-component 1(b) Forest Road Strategic Plan 285 Sub-component 1(c) FMIS Updating, Maintenance and Reporting 100 Component 2 - 85 Demonstration and Replication of SFLM Techniques in Vulnerable Areas 76% Sub-component 2(a) Afforestation - Assisted Natural Regeneration & Stand Rehabilitation 1475 Sub-component 2(b) Multi-purpose Forestry Demonstration Techniques 20 Sub-component 2(c) Fire Management Technique Demonstration & Implementation 600 Sub-component 2(d) Local Stakeholder Capacity Building 35 Component 3 - RS Project Management 5% Sub-component 3(a) Operational Support (staffing and op costs) 100 Sub-component 3(b) Audit 20 Sub-component 3(c) MTR and Closing Reviews 18 23 Table A2.3 SFLMP Summary of Locations of Core Activities '0 j A g Q Canton/Location FSC Certification - New / FSC Certification - Extension/Recertification SFLM Silviculture - Thinning, Fire Access & Fire Breaks VV V 6 SFLM Afforestation - Forest Fire Sites, Degraded/Bare Land Sites V 6/ V V 4 SFLM Affrestation- La nd scape SFLM Afforestation - Nursery Upgrades for Adaptive Species/PlantingV SFLM Rehabilitation of Waste Depots /V SFLM Ideniffication of High Conservation Value Forests Forest Tou rismn Site Management Forest ToLur ISM Partnership Support Forest Fire G ear and Training Watershed Management (including dissemination) 24 Annex 3: Implementation Arrangements BOSNIA AND HERZEGOVINA Sustainable Forest and Landscape Management Project (P129961) Project Institutional and Implementation Arrangements 1. BiH represented by the Ministry of Finance and Treasury will be the recipient of the GEF grant and will transfer funds to the FBiH and RS for the purpose of financing Project Expenditures. In the FBiH the project will be managed by the Ministry of Agriculture, Water Management and Forestry and in the RS the project will be managed by the Ministry of Agriculture, Forestry and Water Management. The Project will be implemented in each entity by existing Project Implementation Units (i.e., FBiH PIU and RS-APCU), which have adequate and proven capacity for project implementation, including financial management and procurement. These will in turn oversee technical implementation of the project through the RS Sume and, in FBiH, through the Cantonal Forest Management Companies (CFMCs) and the Federation and Cantonal Forest Administration. Financial Management, Disbursements and Procurement Financial Management 2. The overall financial management risk for the project is moderate before mitigation measures, and with adequate mitigation measures agreed, the financial management residual risk is also rated moderate. Budgeting and Counterpart Funding Arrangements 3. In the PIU, at every year-end, the Director and the Procurement Specialist prepare an activity plan for the coming year. This activity plan is then submitted to the Finance Manager, who finalizes the budget and enters it into the accounting system. 4. The APCU prepares annual plans based on detailed procurement planning. Existing FM staff in the APCU has adequate capacity for planning and budgeting in terms of human resources, availability of quality information and IT system. The PIU and APCU prepare budgets for all Project components for each Entity separately. The budgets are entered in the accounting software and actual versus planned information is analyzed and explained. Budgeting and accounting in both PIU and APCU are appropriate. Accounting and Maintenance of Accounting Records Information systems 5. Both PIU and APCU have an acceptable project accounting software for the project implementation arrangements. The software has the necessary features to produce the required reports and maintain a trail of transactions in verifiable manner. 6. Additional accounting policies applied to the Project adhere to the following principles: 25 * Cash accounting as the basis for recording transactions; * Reporting in the currency of the grant; * Quarterly IFRs prepared; and * All GCF reflected in the financial reports. 7. The PIU and APCU will prepare quarterly IFRs which include Sources and Uses of Funds, Uses of Funds by project Activity, Statement of Financial Position, Designated Account Reconciliation Statement and Statement of Expenditure (SOE) Withdrawal Schedule. 8. The PIU and APCU will maintain Project accounts and will ensure appropriate accounting of the funds is provided. The formats of the IFRs have been agreed and confirmed. Financial Management Manual 9. The PIU and APCU have an acceptable financial management manual (FMM) for the ongoing projects such as ARDP, NTRBMP and IDP. The manuals contain details about the accounting procedures applicable, internal key controls performed (i.e., reconciliations, authorizing procedures), budgeting, fixed assets records, details pertaining to the accounting software (i.e., back up procedures, restricted access, transaction recording). The FMMs are being regularly updated. 10. Internal audit departments are existent in both Ministries, however both are in an early stage of development and thus no reliance on their work would be placed. Back up 11. In the PIU, back-up of project accounting data is done on a regular basis (weekly and daily) and it is stored on servers, FM manager's PCs, and/or removable drives. The removable memory drives are stored in PIU premises. 12. In the APCU, the back-up is done on the APCU server on a daily basis. In addition to the back-up saved on server, the RS APCU should make regular back-ups on CDs or USB drives. Internal Controls and Internal Audit 13. The PIU and APCU have adequate internal controls for the project, including regular reconciliation of bank accounts, adequate segregation of duties, proper accounting policies and procedures and monthly reconciliation of disbursement summaries with accounting records. Designated Accounts reconciliation statements and Client Connection figures will be reconciled monthly with the accounting records. IFRs will be reconciled on a regular basis with the accounting data. The IFRs will be reconciled on a regular basis with the trial balance out of which they are prepared, including the relevant bank statements. Evidence of the reconciliation made will be kept in project records. The PIU and APCU will maintain, print and store all back up documentation (trial balance, bank statements, journal entries etc.) for the quarterly IFRs in a file. Further details on the internal controls are contained in the FM manuals. Periodic Financial Reporting 14. The PIU and APCU will prepare and furnish to the Bank not later than forty five (45) days after the end of each calendar quarter, IFRs for the project covering the quarter, in form and substance 26 satisfactory to the Bank. There are no overdue IFRs currently for the ARDP, NTRBMP and IDP implemented by either PIU and/or APCU. The latest submitted IFRs covered Q2 2013 were found acceptable and as such submitted timely to the Bank. External Audit 15. The PIU and APCU will be responsible for the timely compilation of the annual project financial statements for the independent external audit. Project financial statements (including SOE and DA activities) will be audited by an independent auditor acceptable to the Bank. Each audit of the Financial Statements shall cover the period of one (1) fiscal year of the Recipient, commencing with the fiscal year in which the first withdrawal was made under the Grant. The terms of reference for the audit have been agreed with the Bank, and are attached to the Minutes of Negotiation. In addition, the auditors are expected to deliver management recommendation letters in relation to the project. Each management recommendation letter will identify internal control deficiencies and accounting issues, if any. The audit reports, audited financial statements and management recommendation letter will be delivered to the Bank within six months of the end of each fiscal year. The audited Project Financial Statements will be made publicly available in a timely fashion and in a manner acceptable to the Bank. 16. All project audits in Bosnia and Herzegovina are covered by an umbrella agreement with one audit firm. The audit for CY 2010 to 2012 was conducted by the audit firm Deloitte doo Sarajevo. Currently, the selection process is running for the years 2013 to 2016. There are no overdue audit reports currently for the entire BiH portfolio of projects. In addition, the projects currently implemented by the PIU (ARDP, IDP) and APCU (ARDP, NTRBMP and IDP) have received unmodified audit opinions and no material issues were noted in the Auditor's reports or management recommendations letters. Disbursements 17. There will be two Designated Accounts (DA) opened for the Grant proceeds, namely one for each Entity. The DAs will be opened in the commercial banks acceptable to the World Bank. Grant funds will flow from the World Bank to the Designated Accounts and then from Designated Accounts to contractors on the basis of the approved invoices. There will also be a possibility to use special commitments (in case of goods imported) or direct payments methods from World Bank to contractors for larger payments as indicated in the Disbursement Letter. The project FM personnel will prepare the application for withdrawals to be submitted to the Recipient, who will forward it to the Bank and the payment orders for suppliers. Such procedure is described in detail in the FM chapter of the Project Operational Manual. 18. Disbursement from the Grant Account will follow the traditional method, either through reimbursement, direct payment to suppliers, issuance of the Bank's Special Commitment, payments from and replenishment of the DAs with the use of Statement of Expenditures (SOEs) or with full documentation. Withdrawal applications for the replenishments of the DAs will be sent to the Bank on a quarterly basis. 19. Supporting documents for SOEs, including completion reports and certificates, will be retained by the PIU and APCU and made available to the Bank during project supervision. Disbursements for expenditures above the SOE threshold levels will be made against presentation of full documentation relating to the expenditures. The reimbursement of expenditures from the DAs may be made on the basis of certified SOEs, based on the SOE thresholds defined in detail in the Disbursement Letter. The ceiling and authorized allocation for the DA will be defined in the project Disbursement Letters. The DAs will be denominated in USD. 27 Withdrawal of the Proceeds of the Grant: Category Amount of the Grant Percentage of Allocated Expenditures to be (expressed in USD) financed (1) Goods, works, non-consulting 2,787,879 100% services, consultants' services, Training and Incremental Operating Costs under Part A of the Project (2) Goods, works, non-consulting 2,787,879 100% services, consultants' services, Training and Incremental Operating Costs under Part B of the Project TOTAL AMOUNT 5,575,758 Procurement 20. Results of the procurement risks assessment: The PIUs have been established within the FBiH Ministry of Agriculture, Water Management and Forestry and RS Ministry of Agriculture, Forestry and Water Management, and the Bank procurement specialist has conducted an assessment of the procurement arrangements available in the PIUs. 21. The PIU's procurement officers have prior experience with World Bank-financed procurement procedures, as well as contracting facilitation assistance. No strengthening of procurement capacity is needed to meet project requirements. Given the procurement capacity of the PIUs, the overall Project risk for procurement is low. 22. Procurement for the Project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Loans", dated January 2011, "Guidelines: Selection and Employment of Consultants by World Bank Borrowers", dated January 2011, and the provisions stipulated in the Legal Agreements. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame will be agreed between the Recipient and the Bank project team in the Procurement Plan. The Procurement Plan would be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 23. A General Procurement Notice (GPN) will be published early in the 2014 issue of Development Business announcing goods, works and consulting services to be procured, and inviting interested eligible suppliers and consultants to express interest and to request any complementary information from the Recipient. 24. Specific Procurement Notices (SPN) would be published in the on-line edition of the Development Business for all International Competitive Bidding (ICB) contracts, and in the printed edition at the option of the Recipient. For goods to be procured through ICB, individual bidding opportunities would also be advertised in a major local newspaper on the same (or within five) day(s) of the on-line publication. The local advertisements would be written in English and, at the option of the Recipient, would also be in the local language. For consultants' contracts above US$300,000, 28 SPN/Request for Expression of Interest will be advertised in the online edition of the Development Business, and in at least one major national newspaper of wide circulation (in the national and English languages). Civil servants are eligible to be hired as individual consultants or as members of a team with financing under the Grant provided they are on leave of absence without pay and they have not been working for any of the Beneficiary Agencies immediately prior to taking leave of absence. 25. Procurement of goods: Goods procured under this Project include: Information Technology (IT) comprised of off-the-shelf hardware and software, furniture, small equipment (including office equipment), printing material, vehicles, and forestry/nursery equipment. All Goods procurement will be done using the Bank's Standard Bidding Document (SBD) for all ICBs. All goods would be grouped, to the extent possible, to encourage competitive bidding. The following methods of procurement would be followed: * ICB: Computer equipment and software, office equipment, furniture, small equipment (including office equipment) under the Project for contracts above US$200,000 equivalent per contract would be procured using International Competitive Bidding (ICB). Bid documentation would be prepared using latest version of the Bank Standard Bidding Document (SBD) for the Procurement of Goods. * NCB: All goods under the Project for contracts below US$200,000 equivalent per contract would be procured using NCB procedures and bidding documents for procurement of goods satisfactory to the Bank. * Standard shopping procedures would be used for readily available off-the-shelf goods, including office and computer equipment for all project beneficiaries, minor IT equipment, and for small print runs of publicity materials. All items would have standard specifications, estimated to cost less US$100,000 equivalent per contract. This procedure would be based on obtaining and comparing price offers from at least three suppliers from at least two different countries in accordance with a paragraph 3.5 of Procurement Guidelines. The regional sample format for shopping "Invitation to Quote" dated June 2011 would be used. In addition, for the procurement of IT technology, it would be mandatory for the shortlist to be drawn, inter alia, from the companies registered on the ECA Regional shopping web site: www.worldbank.org/shop-it; * Direct contracting: Where certain goods are available only from a particular supplier or in cases where compatibility with existing equipment so requires goods may be procured under direct contracting (single source) with prior approval from the Bank (in accordance with a paragraph 3.6 of the Procurement Guidelines). 26. Procurement of works: Forest road rehabilitation, afforestation with native and new species appropriate to drying conditions or increased fire hazard; stand management complementing natural regeneration through thinning, weeding; stand rehabilitation using enrichment planting, limbing, or thinning; forest conversion from coppice forest to high forest; and, small building construction/renovation. To the extent possible, contracts for these works will be grouped into bidding packages estimated to cost more than: US$2,000,000 equivalent and procured following International Competitive Bidding (ICB) procedures, using relevant Bank-issued Standard Bidding Documents for procurement of works. Contracts for works which cannot be grouped into larger bidding packages and estimated to cost less than US$2,000,000 equivalent per contract may be procured using NCB procedures, and bidding documents for procurement of works satisfactory to the Bank. 27. Selection of consultants: The majority of consultancy services would be procured as short-term targeted individual consultant inputs or small inputs where a local and foreign adviser would work together. Where feasible, however, these may be combined into lager tasks with the benefits of backstopping support. Short-lists of consultants for services estimated to cost less than US$100,000 29 equivalent per contract may be composed entirely of national consultants, in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines and with the prior agreement of the Bank. The following procurement procedures would be used for selection of consultant services: * Quality and Cost Based Selection (QCBS) procedure, as described in Section II, paragraphs 2.1 to 2.35 of the Consultant Guidelines would be used if necessary for assignment under all components of the Project; * Least Cost Selection (LCS) procedure would be used for selection of an auditor to carry out audits of the financial statements of the Project. The shortlist should comprise only firms selected from the Bank's list of eligible firms; * Selection under a Fixed Budget (FBS) may be used for assignments related to public relations and institutional campaigns. In accordance with paragraph 3.5 of the Consultants Guidelines, the Request for Proposals shall indicate the maximum available budget and a firm would be selected that offers the best quality technical proposal within that available budget; * Selection Based on Consultants' Qualifications (CQ) would be used for contracting firms for certain assignments under all components of the Project for which the value of the assignments is estimated to cost less than US$300,000 equivalent per contract. Shortlists will be drawn up in response to an advertisement in the national press or Development Business; * Individual Consultants (IC): many specialized activities, where specific skills are needed for short period of time, at scattered intervals and which would not be practical to package with the assignments for consulting firms described above, would be best served through the recruitment of individual consultants (both foreign and national) to assist in capacity building and institutional strengthening within all components of the Project, and to assist the PIU in various technical tasks. Selection of individual consultants would be carried out in accordance with Section V of the Consultant Guidelines. Individuals would be selected based on their qualifications for the assignment, by comparing the CVs obtained in response to an advertisement in the national press or Development Business; * Sole Source (SS): Consultants and training services may be hired under sole source contracts with the prior approval of the Bank, in accordance with paragraphs 3.8 to 3.11 of the Consultants Guidelines and following the agreed Procurement Plan. 28. Training activities: The Grant would finance training programs, including training workshops, study tours and local training. Expenditures related to such training activities include: means expenditures incurred in connection with training, workshops, seminars and study tours, and other training activities not included under goods and service providers' contracts, to be carried out under the Project, including fees, travel costs and per-diem allowances for the trainers and travel costs and per-diem allowances for the trainees, cost of training materials, space and equipment rental, and other related expenditures; all such expenditures shall be based on plans adopted by the PIUs and satisfactory to the Bank, which shall include proposed budgets and terms of reference. 29. The PIUs would be expected to prepare a training plan with the Bank every year. This plan would define the agreed procedures that would be used for procurement of various training services. The estimated budget, list of participants and draft agenda for each training event would be subject to Bank's prior review. However, this may be done through the Annual Plan. Expenditure items for training activities, including study tours, would be reported under a statement of expenditures. The status of the 30 training plan would be included as part of the quarterly progress reports, and would be updated and/or modified as may be mutually agreed between the units and the Bank. 30. Incremental operating costs mean reasonable incremental expenses incurred on account of Project implementation, management and monitoring, including office supplies, publication of procurement notices, vehicle operation, office and equipment maintenance and repair, communication, translation and interpretation, travel and supervision costs, and other miscellaneous costs directly associated with Project, but excluding salaries of officials and employees of the Recipient. 31. Procurement Plan: The Recipient, at appraisal developed a Procurement Plan for the first 18 months of project implementation. The procurement plan provides the basis for the procurement methods. This plan has been agreed between the Recipient and the Bank Project Team at the Negotiations, and is available at the PIUs. It will also be available in the Project's database and in the Bank's external website. The Procurement Plan will be updated by the Bank Project Team, at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Updated Procurement Plans will be submitted to the Bank for its approval. General: * Bank's approval date of the Procurement Plan: November 8, 2013. * Date of General Procurement Notice: estimated January 2014. * Period covered by this Procurement Plan: 18 months. Goods, works and non-consulting services: * Prior review threshold: procurement decisions subject to prior review by the Bank as stated in Appendix 1 to the Guidelines for Procurement: Procurement Method Prior Review Threshold Comments US$ equivalent ICB (Goods) > 200,000 All subject to prior review ICB (Works) packages > 2,000,000 All subject to prior review NCB (Goods) <2,000,000 First two works contracts subject to prior review NCB (Works) packages < 2,000,000 First two works contracts subject to prior review (Non-Consultant Services) < 2,000,000 First two works contracts subject to packages prior review Direct contracting* - All subject to prior review * all contracts subject to justification. * Reference to (if any) Project Operational Manual: POM. * Any Other Special Procurement Arrangements: none. * Summary of the procurement packages planned during the first 18 months after project effectiveness (including those that are subject to retroactive financing and advanced procurement). Selection of consultants: * Prior review threshold: selection decisions subject to prior review by the Bank as stated in Appendix 1 to the Guidelines Selection and Employment of Consultants: 31 Prior Review Selection Method Threshold Comments (US$ equivalent) Competitive Methods (Firms) QCBS > 300,000 All subject to prior review Competitive Methods (Firms) LCS Any amount First contract subject to prior review Competitive Methods (Firms) CQ < 300,000 First two contracts subject to prior review Individual Consultants (IC) > 50,000 All subject to prior review Individual Consultants (IC) < 50,000 First two contracts subject to prior review Single Source (Firms and - All subject to prior review Individuals)* ToRs for Consulting Contracts All methods All subject to prior review /values * all contracts subject to justification Note: QCBS = Quality and Cost-Based Selection; LCS = Least-Cost Selection; CQ = Selection based on Consultants' Qualifications. * Short list comprising entirely of national consultants: short list of consultants for services, estimated to cost less than US$100,000 equivalent per contract, may comprise entirely of national consultants, in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. * Any other special selection arrangements: none. * Consultancy Assignments with Selection Methods: * Other: Ex-post review: All other contracts below Bank's prior review threshold are subject to Bank's selective ex-post review. Periodic ex-post review by the Bank would be undertaken during regular supervision missions. Procurement documents, such as bidding documents, bids, bid evaluation reports and correspondence related to bids and contracts would be kept readily available for Bank's ex-post review during supervision missions or at any other points in time. * Record keeping: The PIUs will maintain complete procurement files which would be reviewed by Bank supervision missions. All procurement related documentation that requires Bank prior review would be cleared by Procurement Accredited Staff and relevant technical staff. No packages above mandatory review thresholds by the Regional Procurement Manager (RPM) are anticipated. Procurement information would be recorded by the PIU and submitted to Bank, as part of the quarterly IFR and annual progress reports. Environmental and Social (including safeguards) 32. The environmental impact of the project is expected to be largely positive and no major adverse environmental impacts are anticipated. An Environmental Management Framework (EMF) was prepared by the Client and was made public within BiH on October 25, 2013. Consultations on the EMF were completed on October 31, 2013 and the document was made available to the InfoShop on November 1, 2013. 32 33. The EMF covers primarily Component 2 activities, and takes into account lessons learned from relevant projects to help ensure that the measures included are within the country's implementation capacity. The EMF provides details on the rehabilitation modalities and on the demonstration projects, and sets out responsibilities for environmental monitoring by project partners that include beneficiaries, facilitating organizations, the PIUs, local authorities/specialists and relevant line ministries. Overall responsibility for the implementation of this EMF stays with the Project Implementation Units. Monitoring & Evaluation 34. Each PIU shall monitor and evaluate the progress of its respective part of the project and prepare Project Reports on the basis of indicators acceptable to the Bank. Each such Project Report shall cover a period of six months, and shall be furnished to the Recipient not later than forty-five (45) days after the end of the period covered by such report for incorporation and forwarding by the Recipient to the Bank of the overall Project Report. A Project Operational Manual will provide guidance on the roles and responsibilities of project beneficiaries and partners, plus other relevant stakeholders in collecting, analyzing and communicating project data and results. This will build on existing formats prepared under other projects being implemented by the respective PIUs. By producing timely and pertinent information, the M&E system will be a key management instrument aimed at helping decision-making processes and support adaptive management and project implementation. The project is expected to contribute to BiH's mandate to monitor and report on natural resource management both for national and international audiences. 33 Annex 4: Operational Risk Assessment Framework (ORAF) BOSNIA AND HERZEGOVINA Sustainable Forest and Landscape Management Project (P129961) Stakeholder Risk Rating Moderate Risk Description: Risk Management: The key risk is the issue with 1- The risk is real and not in project hands. However, the project the absence of a Forestry law team will work with stakeholders and offer help, as it has done in the in the FBiH. The Forestry law past. has been cancelled and the 2- For community level demonstration activities, candidate sub- new law has not yet been put projects will be selected prior to project effectiveness. in place. Absence of the law Resp: Stage: Recurrent: Due Date: Frequency: Status: was bridged by the Government Decree, which is Client Implemen w 4/15/14 In no longer in force. While tation Progress promulgation of the law is not on the critical path of any project activities, work required to put it into place could prove to be a distraction to implementing partners. There is also an associated risk that if the FBiH Government fails to reach consensus on a Forestry law it could be used as an excuse to delay implementation of decisions on selected community-focused initiatives. Thpeeti g lso n c iated nldigfiuiay Capacity Rating IModerate Risk Description: Risk Management: The government institutions Forestry experts to complement the Ministry/Pi staff capacity, as have limited number of skilled needed. and specialized personnel, and If assessed that additional FM or Procurement capacity is needed, project there is an issue of absorption funding will be ensured to support engagement of short-term consultants capacity and staff retention, and or training. which may pose a moderate Resp: Stage: Recurrent: Due Date: Frequency: Status: risk. i the FBHstrict poiisBoth Implement CONTINU Not Yet government selation OUS Due aiming to reduce the size of the public sector prevents new x staff recruitments even if vacancies exist. 34 This is the third forestry project with experienced implementing agencies. The majority of existing financial management, procurement and monitoring and evaluation staff would be retained and the existing financial management operational manual adapted. However, there is a slight possibility that additional FM and procurement staff may be needed in the peak times due to the volume of work handled by APCU/PIU. Governance Rating Moderate Risk Description: Risk Management: Agencies apply non-technical Project sites will be selected based on pre-determined selection criteria, criteria to select the sites and thus avoiding preferential treatment based on non-technical beneficiaries for politically considerations. more attractive areas, lowering PDO achievement. Project will help to further promote application of the Corporate Governance in cantonal forest Governance Action Plans, as introduced under the FDCP. management companies not as Resp: Stage: Recurrent: Due Date: Frequency: Status: per the OECD standards. Both Implement x CONTINIO Not Yet ation US Due Design Rating Low Risk Description: Risk Management: Limited areas of degraded The project will be highly selective in the site selection criteria and their forests in some areas, and application to all proposed sites in order to ensure fair process in the site limited interest on the part of selection. the private sector to get For key objectives related to project areas the focus will be on public involved. lands with which existing organizations have some experience in forest management. Resp: Stage: Recurrent: Due Date: Frequency: Status: Both Both x CONTINIO In Progress US Social and Environmental Rating Low Risk Description: Risk Management: The project does not An EMF has been prepared and EMP guidelines and checklists included 35 anticipate any significant in the EMF. Criteria will be selected and applied to all proposed sites negative impacts, given the during project preparation. planned activities of the project. On the contrary it will Promotion of project activities to local communities and public support improved presentations. management of natural Resp: Stage: Recurrent: Due Date: Frequency: Status: resources and help increase Client Both x CONTINIO In Progress participation of local us communities in forest management. Competition among local communities to be selected for inclusion in the project may occur. An Environmental Management Plan (EMP) will be prepared. Limited interest and capacity of local NGOs and CSOs to ensure local participation. Program and Donor Rating Low Risk Description: Risk Management: Good relations have been built Based on the history of excellent cooperation it is important to continue with USAID supported close coordination and exchange of information as well as complement forestry projects and it is each other's activities whenever possible. expected to continue with expetdn to d codinwi Resp: Stage: Recurrent: Due Date: Frequency: Status: cooperation and coordination Both Both X CONTINIO In Progress of projects activities. The US relationship can of course deteriorate, but the risk is low. Project will explore SIDA interest in limited participation. Delivery Monitoring and Rating Moderate Sustainability Risk Description: Risk Management: Weak capacities within the Project teams in both Entities will have one assigned staff in charge of project teams in both Entities monitoring and evaluation. to timely monitor Resp: Stage: Recurrent: Due Date: Frequency: Status: implementation of project Client Implement x CONTINIO In Progress activities. ation US Overall Implementation Rating Moderate 36 Risk Risk Description: Based on the successful implementation of the previous forestry and protected areas projects in the BiH the rating on implementation risk is moderate. 37 Annex 5: Implementation Support Plan BOSNIA AND HERZEGOVINA Sustainable Forest and Landscape Management Project (P129961) 1. The strategy for implementation support (IS) was developed based on the nature of the project and its risk profile. Its aim is to make IS to the client more flexible, efficient, and focused on the risk mitigation measures defined in the ORAF and to support the achievement of the PDO and GEO. 2. Procurement. IS for procurement will include: (a) providing training to beneficiary entities (e.g., RS Sume and CFMCs) through a procurement system centrally managed by the PIU and the APCU; (b) reviewing procurement documents and providing timely feedback to the Procurement Specialist; (c) providing detailed guidance on the Bank's Procurement Guidelines to the Procurement Specialist who has focused on ensuring procurement readiness of first year contracts; and (d) monitoring procurement progress against the detailed Procurement Plan, which will be updated every six months (or as required) to reflect project implementation needs and improvements in institutional capacity. 3. Financial Management. IS will also review the project's financial management system including, but not limited to, accounting, reporting and internal controls. 4. Environmental and Social Safeguards. Compliance with environmental and social safeguards will be the primary responsibility of the PIUs with one staff specifically tasked to monitor compliance. Depending on the specific pilot activities, a site-specific Environmental Management Plan will be prepared and cleared by the World Bank environmental specialist. The PIU staff have adequate experience and capacity related to World Bank social and environmental safeguards based on implementation of previous World Bank projects. The Bank team will provide guidance to the PIUs to address any issues as they may arise. 5. Audit. External auditors are expected to identify any internal control deficiencies and accounting issues. The audit reports, audited financial statements and management letter will be delivered to the Bank within six months of the end of each fiscal year. The audited Project Financial Statements will be made publicly available in a timely fashion and in a manner acceptable to the Bank. 6. Monitoring and Evaluation. The PIU and APCU has developed M&E capabilities from working on other World Bank projects, and an outcome and results monitoring framework has already been agreed. M&E will be based on both survey and administrative data sources. A mid-term review will be carried out to assess overall progress. Lessons learned, recommendations for any improvements, and stakeholder feedback will be used in restructuring the project if necessary. The results of the M&E activities will be fed back into the implementation process as improved practices. 38 Time Focus Skills Needed Resource Estimate First twelve Refinement and initiation of the Sustainable forest $75,000 months pilot activities practitioner and natural resource economist Administration of the pilot activities and coordination FM and procurement with the forest management companies (RS Sume and CFMCs) Information specialist; Effective implementation of Carbon accounting capacity building efforts specialist 12-60 months Effective implementation Project management; $70,000peryear project activities Operations experience; strategic thinking; Evaluation of demonstration environmental economics; pilot activities to determine success and failure and opportunity for replication Skills Mix Required Skills Needed Number of Staff Weeks Number of Trips Comments Team Coordination Operations Experience To be adjusted Sustainable Forestry according to Carbon Accounting 10-14 per year total across 2 trips per year for implementation progress Monitoring the team core team and emerging issues and Procurement needs Financial management Communication Specialist 39 IBRD 32436R1 16' To Zagreb 18, To Osijek To Zagreb To Zagreb C R 0 A T I A To Vinkovci Danube .y* p POSAVINATo Osijek - * To Glina POSAVINA Bosanska To Belgrade Bos Gradigka 9 Boanoski 45- F450 CoEi D rE ec[r E I. 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