ASIAN DEVELOPMENT BANK

PPA:BAN 16087

PROJECT PERFORMANCE AUDIT REPORT

ON THE

UPAZILA AFFORESTATION AND NURSERY DEVELOPMENT PROJECT (Loan 956-BAN[SF])

IN

BANGLADESH

September 2001

CURRENCY EQUIVALENTS Currency Unit Taka (Tk) At Appraisal (September 1986) $0.0309 Tk32.27 At Project Completion (December 1995) $0.0245 Tk40.75 At Operations Evaluation (April 2001) $0.0185 Tk54.10

Tk1.00 $1.00

= =

ABBREVIATIONS

ADB CFP CGP EA EIRR FD FENTC FIRR FSP ha LCO m m3 MOEF NGO OEM PBSA PCR PP PPAR PPTA SDR TFF UNDP

Asian Development Bank Community Forestry Project Coastal Greenbelt Project Executing Agency economic internal rate of return Forest Department forest extension nursery training center financial internal rate of return Forestry Sector Project hectare local community organization meter cubic meter Ministry of Environment and Forest nongovernment organization Operations Evaluation Mission project benefit-sharing agreement project completion report project proforma project performance audit report project preparatory technical assistance special drawing rights tree farming fund United Nations Development Programme

NOTES (i) The fiscal year (FY) of the Government ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends. For example, FY1990 begins on 1 July 1989 and ends on 30 June 1990. In this report, $ refers to US dollars.

(ii)

Operations Evaluation Department, PE-571

CONTENTS Page BASIC DATA EXECUTIVE SUMMARY MAP I. BACKGROUND A. B. C. D. E. F. II. Rationale Formulation Purpose and Outputs Cost, Financing, and Executing Arrangements Completion and Self-Evaluation Operations Evaluation ii iii vi 1 1 1 1 2 3 4 4 4 5 5 6 6 7 7 11 12 13 14 14 15 15 15 15 16 16 16 16 16 17 17 17 18 18 20

PLANNING AND IMPLEMENTATION PERFORMANCE A. B. C. D. E. Formulation and Design Achievement of Outputs Cost and Scheduling Procurement and Construction Organization and Management

III.

ACHIEVEMENT OF PROJECT PURPOSE A. B. C. D. Operational Performance Performance of the Operating Entity Economic Reevaluation Sustainability

IV.

ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS A. B. C. Socioeconomic Impact Environmental Impact Impact on Institutions and Policy

V.

OVERALL ASSESSMENT A. B. C. D. E. F. G. Relevance Efficacy Efficiency Sustainability Institutional Development and Other Impacts Overall Project Rating Assessment of ADB and Borrower Performance

VI.

ISSUES, LESSONS, AND FOLLOW-UP ACTIONS A. B. C. Key Issues for the Future Lessons Identified Follow-Up Actions

APPENDIXES

BASIC DATA Upazila Afforestation and Nursery Development Project (Loan 956-BAN[SF]) PROJECT PREPARATION/INSTITUTION BUILDING TA No. TA Name Type 575 1142 Second Community Forestry Upazila Afforestation and Nursery Development2 PPTA ADTA Amount1 ($) 150,000 2,528,859

PersonMonths 20 84

Approval Date 23 Dec 1983 30 Mar 1989

KEY PROJECT DATA ($ million) Total Project Cost Foreign Exchange Cost Local Currency Cost ADB Loan Amount/Utilization ADB Loan Amount/Cancellation KEY DATES Fact-Finding Appraisal3 Loan Negotiations Board Approval Loan Agreement Loan Effectiveness First Disbursement Project Completion Loan Closing Months (effectiveness to completion) ECONOMIC AND FINANCIAL INTERNAL RATES OF RETURN (%) Economic Internal Rate of Return Financial Internal Rate of Return BORROWER EXECUTING AGENCY MISSION DATA Type of Mission Fact-Finding Appraisal Project Administration Inception Review Project Completion Operations Evaluation4

As per ADB Loan Documents 50.4 8.9 41.4 43.5 0.0 Expected Aug 1985 Oct 1986 Nov 1987 28 Mar 1989 31 May 1989 30 Aug 1989 30 Jun 1994 30 Jun 1995 58 Appraisal 22.9 25.8 PCR 28.3 26.1

Actual 46.8 10.6 36.2 40.9 6.5 Actual 15 Apr-5 May 1986 28 Sep-14 Oct 1986 15-17 Feb 1989 30 Mar 1989 1 Jun 1989 31 Oct 1989 6 Feb 1990 31 Dec 1995 15 Apr 1996 74 PPAR 9.3 6.3

Government of the Peoples Republic of Bangladesh Forest Department of the Ministry of Environment and Forest

No. of Missions 1 4 1 13 1 1

No. of Person-Days 84 120 6 196 42 45

ADB = Asian Development Bank, ADTA = advisory technical assistance, PCR = project completion report, PPAR = project performance audit report, PPTA = project preparatory technical assistance, TA = technical assistance. 1 Represents approved amount of technical assistance. 2 Original approved amount is for $1.9 million with supplementary amount for $628,859 approved on 3 April 1995. 3 Three follow-up appraisal missions were made after this mission: 4-9 November 1986, 6-16 October 1987, and 513 October 1988. 4 The Operations Evaluation Mission comprised Mr. Njoman Bestari (evaluation specialist, mission leader), Mr. Berry A. Van Gelder (social forestry specialist, staff consultant), and Dr. Afsana Wahab (community development facilitator, staff consultant).

iii EXECUTIVE SUMMARY In the mid-1980s, the forest area per capita in Bangladesh was among the lowest in Asia, while biomass fuels, including fuelwood and agricultural residues, accounted for more than 80 percent of all energy consumed in the country. The rationale for the Project hinged on the need to address an acute shortage of fuelwood that placed serious pressure on scarce forest resources, and diverted the uses of agricultural residues and animal dung from fodder and manure to fuel. The Project was designed with the following objectives: (i) increase the production of fuelwood, and (ii) enhance the institutional capability of the Forest Department (FD) of the Ministry of Environment and Forest and the local government administrations in implementing a self-sustaining nationwide social forestry program. The project formulation benefited from the design of the earlier Community Forestry Project,1 and, based on experience there, specific improvements were made in the design. The project scope at appraisal included the establishment of woodlot plantations (16,000 hectares [ha]) on degraded public forestland; agroforestry plantations (3,200 ha) on degraded/encroached public forestland; strip plantations (17,750 kilometers) along roads, railways, and embankments of canals and rivers; and block plantations (800 ha) on state-owned vacant land. The Project also included (i) distribution of 70 million seedlings to interested institutions such as schools, offices, and nongovernment organizations; (ii) upgrading of 40 existing forest extension nursery training centers; and (iii) establishment of 346 local nurseries. Additionally, project support activities comprised publicity campaigns, field trials, field resource and socioeconomic surveys, and benefit monitoring. Despite the different names that characterize the sites, features, and configuration of the plantations, tree planting for fuelwood production was widely dispersed and many of these plantations were small. The Project covered 61 of the countrys 64 districts, excluding the Sundarbans and the Chittagong Hill Tracts. Landless and marginal farmers were targeted to receive benefits both in the form of wages paid by FD during the plantation establishment, and fuelwood, intercrops, and a share of the harvests of trees according to benefit-sharing arrangements. The Project was also expected to create capacity for self-sustaining social forestry schemes. FD was designated as the Executing Agency of the Project. The Project was approved in March 1989, following an extended preparation that began in 1983 with a project preparatory technical assistance.2 The Asian Development Bank (ADB) provided a loan of $43.5 million equivalent from its Special Funds. The actual cost of the Project amounted to $46.8 million, compared with the appraisal estimate of $50.4 million, and was financed by the ADB loan ($40.9 million), grant assistance from the United Nations Development Programme ($2.5 million),3 and the Government ($3.4 million). Cost savings were made possible due to the depreciation of the local currency. A total of $6.5 million of the loan amount was cancelled. All project activities were originally planned for completion over six annual planting seasons, with an original loan closing date of 30 June 1995. Activities in the first year were delayed. This delay was compensated by subsequent accelerated implementation, and a loan extension to allow an additional year of planting in 1995. The loan was closed on 15 April 1996. After completion, the management of the project plantations was transferred by

1 2 3

Loan 555-BAN(SF): Community Forestry Project, for $11 million, approved on 3 December 1981. TA 575-BAN: Second Community Forestry, for $150,000, approved on 23 December 1983. TA 1142-BAN: Upazila Afforestation and Nursery Development, originally approved on 30 March 1989 for $1.9 million and revised to $2.5 million on 3 April 1995. This was administered by ADB.

iv FD, on the basis of geographic areas, to two subsequent, still ongoing ADB-financed forestry projects executed by FD.4 The total physical achievements generally exceeded the appraisal targets for plantation areas and seedling distribution. Tree planting was successful, and tree survival rates during establishment were generally high. The tree planting initiatives were highly visible, and responsible for raising the awareness of the population nationwide of the value of tree planting. Along with nationwide nursery development, distribution of seedlings, training, and intensive publicity campaigns on tree planting, the Project promoted tree planting on lands of public institutions and private properties, and encouraged the establishment of private nurseries that have made various tree seedlings available in rural markets. Despite the achievements in tree planting, nursery development, and the distribution of seedlings, the implementation and operation of the project tree plantations have suffered from management deficiencies that have seriously constrained achieving the project purpose. Many of the potential benefits of these tree plantations have not materialized because of inadequate silviculture management of the plantations and delayed harvests. The establishment of the plantations has so far been a tree planting exercise, without yielding significant benefits. FDs management of the operations of the project plantations was weak, as evidenced by the absence of systematic monitoring of plantation conditions, including stocks, age, species, tree survival, and actual growth rates. Benefit monitoring was not undertaken. The land resource and socioeconomic surveys were delayed and their relevance was marginal. The arrangements for benefit sharing between the participants and FD, as detailed in project benefit-sharing agreements, reflect the generally weak position of the participants, with terms and conditions that substantially favor FD. Participants have strong doubts as to whether they would receive the promised benefits from the plantations, and over the relevance and applicability of the existing benefit-sharing agreements. Coupled with uncertain harvest schedules, this has led to impatience and a feeling of resignation among participants, and a potentially hostile social environment developed. While the participants were generally promised a seven-year rotation for the plantations, the absence of time-bound harvesting targets and effective communication between FD and the participants has generated distrust and caused the plantations to suffer from widespread theft. The Project has suffered from shortfalls in benefits, mainly because of organizational and management shortcomings. The shortfalls are attributable to the absence of intermediate outputs from the thinning of tree stands, the failure of intercrops, the poor quality of outputs and their reduced market values, and time lost due to delays in harvests. The financial internal rate of return of total project investments is recalculated at 6.3 percent and the economic internal rate of return at 9.3 percent, well below the rates of return anticipated at appraisal and project completion. The sustainability of reforestation efforts, and the success of collaborative efforts between FD and the participants, depend critically on efficient operation and management of the established plantations, the generation and distribution of benefits, and the reinvestment of revenues for sustained social forestry operations. The near-term sustainability of the Project is rated less likely. First, the traditional role of the FD foresters was conservation and tree planting, and this has contributed to a strong focus on achieving planting targets and reforestation, with inadequate attention to people and their social conditions, and to the commercial aspects of the plantations. Participatory initiatives have been impeded by rigid, top-down, and hierarchical
4

Loan 1353-BAN(SF): Coastal Greenbelt Project, for $23.4 million, approved on 2 March 1995; and Loan 1486BAN(SF): Forestry Sector Project, for $50 million, approved on 21 November 1996.

v practices within FD. Decision making within FD remains highly centralized. Second, the operation and management aspects of the plantation assets require significant improvement. The recommendations of the 1997 project completion report for the development of management plans for the tree plantations have not been implemented. Third, sustainability of social forestry ultimately depends on the participants, considering that they have the most incentive to achieve and retain high returns. Initiatives are required to strengthen the participants organizations, with provisions to decentralize plantation management to local community organizations, in the context of improved benefit sharing. However, major responsibilities are unlikely to be devolved in the near future to these organizations. Fourth, at present, the replanting of the project plantations depends on the Forestry Sector Project (FSP), including the use of the FSP loan proceeds and the establishment of tree farming funds as a mechanism for reinvesting a portion of internally generated revenues. However, the tree farming fund arrangements and their feasibility have not been fully determined. The Operations Evaluation Mission has rated the Project as partly successful and drawn up a number of follow-up actions. First, the requisites for sound plantation management should be reinforced through ongoing FSP initiatives. FD, with continuing ADB support, should give emphasis on harvesting, replanting, and developing appropriate mechanisms and institutional arrangements for self-sustaining operations including increased responsibilities for local community organizations. Consequently, over the next two years, FD needs to make the project plantations its priority, before undertaking new planting schemes elsewhere. ADB should monitor the operations of these plantations until the full first rotation is completed. Second, information for planning, operations, and management decisions is urgently required. FD should develop a functional monitoring system over the next 12 months, to include measurable performance indicators including standing stocks, age distribution, species performance, tree survival, actual growth rates, and market prices of various wood products. FD should undertake systematic assessments of plantation conditions on a sample basis by forest division, and the results of these assessments should be fed into the monitoring system. Third, there are no site-specific plans for pruning, thinning, harvesting, and replanting to reflect the intended purpose of tree planting and output utilization. FD, with support from FSP, should prepare such plans within the next 24 months for the project plantations, indicating a realistically phased plan for thinning, harvesting, and replanting for all areas. These plans should be prepared in the context of an overall management plan for the project plantations, with the objective of achieving sustained benefits through replanting and improved partnership with the participants. Fourth, the replanting of the project plantations for the second rotation, as envisaged under FSP, depends critically on the establishment of tree farming funds (TFFs). Several conceptual issues have not been resolved, including the future management of the plantations and the roles of the local community organizations, ownership of TFFs, and TFF management. Therefore, FD should speed up the development of TFFs in the next 18 months. Finally, FD has not carried out assessments of plantation losses due to thefts. Transparency and accountability between FD and the participants need to be improved by strengthening partnership and benefit-sharing agreements. These assessments should be undertaken within 12 months, to provide reliable information on the remaining stocks and promote cooperative efforts to prevent further losses before harvests.

I. A. Rationale

BACKGROUND

1. In the mid-1980s, the forest area per capita in Bangladesh was among the lowest in Asia, while biomass fuels including wood fuels, animal dung, and agricultural residues accounted for more than 80 percent of all energy consumed in the country. In rural areas where poverty and other conditions permitted few affordable options, people relied almost exclusively on biomass fuels. Consequently, the Government of Bangladesh (the Borrower) became increasingly concerned at the rapid growth in the consumption of biomass fuels and its impact on the countrys fragile ecological balance. This concern was reflected in the Governments fiveyear development plan (1980-1985), which emphasized the need for active forest resources management and tree planting. Accordingly, the Government sought external assistance, including from the Asian Development Bank (ADB), and embarked on reforestation programs to reduce the countrys rate of deforestation. In this context, the Upazila Afforestation and Nursery Development Project (the Project) was prepared, based on the design of the earlier Community Forestry Project1 (CFP). The rationale of the Project hinged on the need to address an acute shortage of fuelwood. This shortage had placed serious pressure on scarce forest resources, and diverted the uses of agricultural residues and animal dung from fodder and manure to fuel. B. Formulation

2. The Project was approved in March 1989, following an extended preparation period2 that began in 1983 with a project preparatory technical assistance3 (PPTA) for carrying out a feasibility study of a social forestry development intervention. In addition to the PPTA, the project formulation benefited from experience drawn from CFP, leading to specific improvements in design features. The Project was the second ADB-financed project in the forestry sector in Bangladesh. C. Purpose and Outputs

3. The Project was designed with objectives and scope similar to those of CFP, and primarily intended to (i) increase the production of biomass fuels,4 and (ii) enhance the institutional capability of the Forest Department (FD) of the Ministry of Environment and Forest (MOEF) and the upazila5 administrations in implementing a self-sustaining nationwide social forestry program. The scope of the Project at appraisal included the following: (i) establishment of fuelwood plantations(a) woodlot6 plantations on 16,000 hectares (ha) of degraded but unencroached public forestland;

3 4 5 6

Loan 555-BAN (SF): Community Forestry Project, for $11 million, approved on 3 December 1981. Completed in December 1987, this first ADB-financed forestry project in Bangladesh was designed to increase the supply of fuelwood in northwest Bangladesh. Major project components included (i) replenishment of homestead woodlots; (ii) establishment of strip plantations along roads, railroads, and canal embankments; (iii) establishment of woodlots on state forestlands; (iv) establishment of pilot agroforestry farms; and (v) institutional and administrative support. After the Appraisal Mission in September/October 1986, three missions were conducted in November 1986, October 1987, and October 1988 to finalize details of project components and organizational arrangements, taking into account the experience and completion of CFP. TA 575-BAN: Second Community Forestry, for $150,000, approved on 23 December 1983. Biomass fuels, as documented in the appraisal report, comprise mainly fuelwood. An upazila is an administrative government unit and was renamed thana on 30 June 1992. Located in the districts of Gazipur, Tangail, Sherpur, Comilla, Mymensingh, and the greater districts of Dinajpur, Rangpur, and Rajshahi, woodlots were defined as tree planting in contiguous blocks of about 20 ha, free of encroachment. In theory, participants could temporarily grow food on unused land until the block was fully planted.

2 (b) agroforestry7 plantations on 3,200 ha of degraded and encroached public forestland; (c) strip8 plantations along 17,750 kilometers of roads, railways, embankments of canals, rivers, and coastal areas; and (d) block9 plantations on 800 ha of vacant land of the Bangladesh Water Development Board or the Lands Administration; (ii) (iii) provision of 70 million seedlings for schools, colleges, mosques, government offices, nongovernment organizations (NGOs), farmers, and others; rehabilitation and upgrading of 40 existing forest extension nursery training centers (FENTCs), and establishment of 346 upazila nurseries to support the planting program and seedling distribution; and organization and implementation of publicity campaigns to increase public awareness of the value of tree planting; simple research trials; and project support, including field resource and socioeconomic surveys, monitoring, and evaluation.

(iv)

4. Despite the different names that characterize the sites, features, and configurations of the plantations, tree planting for fuelwood production in widely dispersed and small areas was a common feature. The Project covered 61 of the countrys 64 districts, excluding the Sundarbans10 and the Chittagong Hill Tracts. Participants, comprising landless and marginal farmers, were targeted to receive benefits in the form of (i) wages paid by FD during the plantation establishment; and (ii) intercrops, fuelwood, and a share of the final harvests of trees according to benefit-sharing arrangements, with separate terms for woodlots, agroforestry, and strip plantations. The Project was also expected to create capacity for self-sustaining social forestry. The participants were anticipated to come from communities in the vicinity. More than 21,000 participants were paid wages for their labor to establish the plantations, and promised a share of the outputs of the plantations with a condition that they were engaged to protect and maintain the forest assets. D. Cost, Financing, and Executing Arrangements

5. At appraisal, the total project cost was estimated at $50.4 million, consisting of about $41.4 million in local currency costs and $8.9 million in foreign exchange. The sources of financing comprised an ADB loan of $43.5 million equivalent from the ADBs Special Funds resources, $5 million from the Government, and $1.9 million in the form of a grant assistance from the United Nations Development Programme (UNDP) for training of participants,

Located in the same districts as the woodlot plantations, the agroforestry scheme allows alley cropping of food crops between rows of trees of wood species under several models that vary in spacing for alley cropping. The agroforestry schemes were defined to comprise tree planting in widely dispersed areas of about 30 ha each. 8 Located nationwide in 61 districts, excluding the Sundarbans and the Chittagong Hill Tracts. In the case of major roads, feeder roads, and railways, one or two rows of trees could be planted on both sides. Depending on space availability, one or more rows of trees were planted on embankments. 9 Depending on the size of land parcels at specific sites, this plantation type resembled woodlot plantations in contiguous areas, with strip plantations on embankments of small parcels of land. 10 Later, ADB financed a project in the Sundarbans, Loan 1643-BAN(SF): Sundarbans Biodiversity Conservation Project, for $37 million, approved on 27 November 1998, to develop a sustainable management and biodiversity conservation system for all Sundarbans Reserve Forest resources, and to reduce poverty among the 3.5 million people living in the impact zone.

3 community leaders, and selected FD staff.11 FD was designated as the Executing Agency of the Project. After completion, the management of the project plantations was transferred by FD, on the basis of geographic areas, to two subsequent and ongoing ADB-financed forestry projects executed by FD: Coastal Greenbelt Project12 (CGP) and Forestry Sector Project13 (FSP). E. Completion and Self-Evaluation

6. The Project was considered completed on 31 December 1995 and the project completion report14 (PCR) was finalized by ADB in June 1997. The PCR noted that (i) the physical achievements from FY1990 to FY1996 exceeded the appraisal targets for area development and seedling distribution,15 (ii) tree planting had generally been successful, and (iii) tree survival rates were high. Despite the physical achievements in tree planting, nursery development, and the distribution of seedlings, the Project was rated only partly successful for several reasons concerning the operation, management, and sustainability of the plantations. The PCR outlined several major deficiencies. Tree congestion in woodlots, agroforestry, and block plantations, in the absence of thinning of tree stands, had led to less than optimal growth and the discontinuation of intercrops in agroforestry plantations due to shading by the dense trees. The PCR noted the continuing removal of leaves and twigs from the forest floor that jeopardized the long-term fertility of the soil. Decomposition of leaves would provide natural nutrient recycling. The Project was assessed to be deficient in benefit monitoring and in simple field trials to test silviculture parameters. Overall, the PCR objectively identified the major issues facing the Project. It emphasized that the participants had not received major benefits, and that the plantations had not been placed under systematic management. Accordingly, the PCR recommended (i) the development of management plans for the plantations, (ii) that FD fulfill its obligations under the benefit-sharing agreements, and (iii) that ADB review the Project at least annually until the participants received their benefits from the first rotation. While ADB has regularly monitored the operations of the Project, to date FD has not implemented the PCR recommendations. Further capacity-building initiatives have been provided to FD on a continuing basis under CGP and FSP to improve plantation management practices.

11

TA 1142-BAN: Upazila Afforestation and Nursery Development, originally approved on 30 March 1989 for $1.9 million and revised to $2.5 million on 3 April 1995. The grant, which was administered by ADB, financed the services of (i) 84 person-months of international consultants with specialized expertise in training, agroforestry, and communications; and (ii) 14.5 person-months of domestic consultants. ADB was responsible for the recruitment of consultants through the Food and Agriculture Organization of the United Nations. 12 Loan 1353-BAN(SF): Coastal Greenbelt Project, for $23.4 million, approved on 2 March 1995. The development objectives of this project are to protect and improve the coastal environment by increasing tree cover, and to reduce poverty by creating supplementary income opportunities for the poor. The project finances plantation establishment, nursery development, seedling distribution, an awareness campaign, training, and support activities. 13 Loan 1486-BAN(SF): Forestry Sector Project, for $50 million, approved on 21 November 1996. The objectives of the project are to enhance conservation of forests in selected protected areas; increase overall wood production; and institute sustainable management of forest resources through local community participation, capacity building, and policy reform. FSP has a nationwide coverage, including replanting of CFP and the project plantations. 14 PCR: 956-BAN(SF): Upazila Afforestation and Nursery Development Project, June 1997. 15 Achievements included (i) 19,415 ha of woodlot plantations (mainly Acacia auriculiformis, A. mangium, Eucalyptus camaldulensis, Dalbergia sissoo, Swietenia macrophylla, Cassia siamea); (ii) 5,110 ha of agroforestry plantations (mainly A. auriculiformis, A. mangium, E. camaldulensis, D. sissoo with paddy, peanut, and other agricultural crops); (iii) 17,809 kilometers of strip plantations (mainly A. nilotica, E. camaldulensis, D. sissoo, S. macrophylla, and intercropping with Cajanus cajan); (iv) 1,342 ha block plantations (following the woodlot model, including A. catechu, D. sissoo, and Casuarina equisetifolia); (v) distribution of 99 million seedlings to various institutions, government offices, NGOs, private farmers, and interested individuals; (vi) upgrades of 46 FENTCs; (vii) establishment of 345 upazila nurseries; and (viii) training of about 89,000 community leaders, 777 nursery operators, 851 forest rangers, and 514 upazila-level officers.

4 F. Operations Evaluation

7. This project performance audit report (PPAR) is based on (i) the findings of an Operations Evaluation Mission (OEM) that was fielded from 10 to 25 March 2001, and (ii) a desk review of relevant records of the Project. The OEM held discussions with FD staff, consultants of CGP and FSP, representatives of NGOs, domestic observers of social forestry practices, and numerous participants at selected project sites located at Dhaka, Tangail, Mymensingh, and Dinajpur forest divisions. A draft PPAR was sent in May 2001 to FD and the Economic Relations Division of the Ministry of Finance, which represents the Borrower, with a request to provide comments in two weeks. After a follow-up to this request, comments were received from FD. No comments were received from the Borrower, and it is, therefore, assumed that the Borrower does not wish to comment on the PPAR. Comments received from FD and the ADB departments and offices concerned have been considered in finalizing the PPAR. This PPAR is of particular relevance to the ongoing ADB-financed CGP and FSP, considering the nature of issues concerning sustainability and institutional capacity. These issues include common features such as (i) benefit-sharing arrangements between FD and participants; (ii) requirements for replanting, including financing arrangements for reinvestment; (iii) plantation management practices and their implications on sustained operations; and (iv) major requisites for self-sustaining social forestry. II. A. PLANNING AND IMPLEMENTATION PERFORMANCE

Formulation and Design

8. The scope of the Project focused on tree planting and the enabling support initiatives, with the intention to allow the country to produce fuelwood and other intermediate biomass fuel as quickly as possible from the introduction of fast-growing wood species. The project initiatives were highly relevant in the context of (i) the nationwide demands for fuelwood; (ii) the Governments priorities to address the increasing pressure on existing forest resources; and (iii) ADBs strategic development objectives, which were aimed at broadening the productive base of the economy. Biomass fuel (including fuelwood) could not be easily replaced with other fuels as (i) rural households could not readily afford alternative sources of energy such as electricity and natural gas given the socioeconomic conditions of rural Bangladesh, and (ii) electricity and natural gas required capital-intensive investments and specialized distribution networks. Overall, the PPTA, the CFP experience, and the extended period of project processing allowed the Project to be prepared thoroughly with approaches that were envisaged at appraisal to generate self-sustaining social forestry initiatives. 9. The Project was formulated during the implementation of CFP. Based on the CFP experience, design features were improved and incorporated into the Project. While CFP had not fully developed the intended benefit-sharing arrangements with the participants,16 the Project deliberately included initiatives to formalize benefit sharing between FD and the participants. However, in retrospect, the project design underestimated the tasks and the gestation period needed for (i) developing the benefit-sharing arrangements and the required efforts for social and community mobilization, and (ii) the uptake of the emerging social forestry
16

The PCR of CFP (PCR: 555-BAN[SF]: Community Forestry Project, September 1989) concluded that FD did not succeed in developing workable mechanisms for benefit sharing with the participants. The PPAR of CFP (PPA: 555-BAN[SF]: Community Forestry Project, July 1993) confirmed that, although the achievements included the establishment of 4,890 ha of fuelwood plantations, 121 ha of agroforestry lots, and an equivalent of 1,336 ha of strip plantations, the terms of benefit sharing were ambiguous. Under CFP, FD made different promises for benefit sharing that ranged from 10 to 60 percent of harvests for the participants. The PPAR of CFP cautioned that disputes could arise and damage the credibility of the Governments intentions in social forestry because of these ambiguities.

5 concepts by FD. The agroforestry initiatives as piloted under CFP succeeded in developing schemes for alley cropping of food crops, in between rows of trees of wood species, to foster partnership with occupants of the land. Building on the CFP pilot, the design of the Project included agroforestry initiatives for encroached degraded forest areas to avoid alienation of the existing settlers by allowing the occupants of the land to cultivate food crops based on prescribed practices. Nonetheless, the expansion from a pilot scheme into a nationwide application under the Project encountered unforeseen problems in following the prescribed practices. Homestead planting of trees for fuelwood as carried out under CFP was excluded from the project scope because it was evident from the CFP experience that (i) homestead woodlot development was unsuccessful as farmers preferred fruit and multipurpose trees to wood species; and (ii) FD was unable to meet this demand and provide the appropriate extension services, as this was outside its organizational mandate. With the exclusion of homestead woodlots from the Project, initiatives to distribute seedlings of various tree species to institutions and private individuals nationwide were formulated, along with localized nursery development. Other project components (woodlot and strip plantations for fuelwood production) also benefited from CFP. B. Achievement of Outputs

10. Except for strip plantations, the total achievements from FY1990 to FY1996 significantly exceeded the appraisal planting targets (Appendix 1). An area statement of the plantations, as implemented, is shown in Appendix 2. Tree planting was successful, and tree survival rates during establishment were generally high. Tree planting initiatives were also highly visible as showcases for raising the awareness of the population nationwide of the value of tree planting. Along with nationwide nursery development, distribution of seedlings, training, and intensive publicity campaigns on tree planting,17 the Project promoted tree planting on lands of public institutions and private properties, and encouraged the establishment of private nurseries that made various tree seedlings available in rural markets. 11. Despite the achievements in tree planting, nursery development, and the distribution of seedlings, the operation of the project tree plantations suffered from management deficiencies that have constrained achieving the project purpose. The plantations have not generated the expected major benefits because of delayed harvesting and disorganized post-planting management. The project participants have not received significant benefits, apart from wages paid to them by FD during tree planting, leaves and twigs collected from the ground, and shortlived benefits from intercrops under agroforestry schemes. It was impossible to successfully raise food crops in the woodlot and block plantations, as the actual tree planting density (2,900 seedlings/ha) as prescribed by FD would not permit such intercrops. Similarly, intercropping did not materialize in strip plantation areas due to lack of participation, and many strip plantation areas were without enlisted participants. The establishment of the plantations has so far been a tree planting exercise, without yielding significant benefits. C. Cost and Scheduling

12. The actual cost of the Project amounted to $46.8 million, compared with the appraisal estimate of $50.4 million (Appendix 3). Overall, the actual cost was financed by ADB ($40.9 million), UNDP ($2.5 million), and the Government ($3.4 million). Although the Project exceeded its appraisal physical investment targets, cost savings were made possible due to the

17

About 40,000 copies of tree planting booklets, describing basic techniques, were distributed for public awareness, along with nationwide poster and news media campaigns. About 4,000 copies each of general and technical manuals on social forestry were produced and distributed to stakeholders and interested parties.

6 depreciation of the local currency.18 As detailed in Appendix 4, a total of $6.5 million of the loan amount was cancelled ($5 million in June 1994 and $1.5 million at loan closing). All project activities were originally planned for completion over six annual planting seasons, with an original loan closing date of 30 June 1995. The loan became effective on 31 October 1989, four months into FY1990 and after the rainy season. Activities in the first year were delayed. This delay was compensated by accelerated implementation, and a loan extension to allow for an additional year of planting in FY1996. The loan was closed on 15 April 1996. 13. The Project included a field resource survey19 aimed at identifying suitable sites for tree plantations, and a baseline socioeconomic survey20 as a benchmark for monitoring the participants socioeconomic conditions. The recruitment of domestic consultants to undertake these surveys was delayed. Consequently, the field resource survey that began in November 1992 was not completed until June 1993, and its findings were too late to influence much of the site selection. By June 1993, more than 12,000 ha of woodlots and 2,100 ha of agroforestry plantations had been established. Similarly, the socioeconomic survey that started in September 1992 was not completed until July 1993, rendering its findings less relevant for the selection of sites and participants. An impact study that was planned for project completion was not undertaken. D. Procurement and Construction

14. Due to the nature of tree planting, nursery establishment, the distribution of seedlings, and the dispersion of project sites, these activities were largely labor intensive and undertaken on force account administered by FD. The implementation involved more than 2,500 FD staff and thousands of participants who were paid daily wages for limited labor contribution on specific plots. About 70 percent of the local costs for plantation establishment comprised wages for labor, including the participants labor. Small civil works contracts, such as for nursery construction work and the rehabilitation of FENTCs, were awarded to local contractors selected under local competitive bidding procedures, while simple field structures such as nursery sheds were constructed on a force account basis. Materials were procured locally in accordance with the Governments local competitive procedures acceptable to ADB, with the exception of fertilizers, which were purchased locally from the Governments outlets. The performance of contractors and suppliers was generally satisfactory. E. Organization and Management

15. FD was the Executing Agency, and the Project was implemented in accordance with the organizational arrangements designed at appraisal. The National Project Coordination Committee for the earlier CFP was reorganized to cover the geographic areas of the Project, with its main functions to approve annual plans, review implementation, and mediate between FD and other agencies. Project committees at the district and upazila levels were established, with the respective district divisional forest officer serving as the committees secretary. The upazila administrations were initially made responsible as the implementing agencies for the strip plantations, upazila nurseries, and tree planting on lands of local institutions. This upazila responsibility was subsequently transferred to FD, following the recommendations of the Project Midterm Review (March 1992). Tree planting and reforestation were evidently not among the explicit functions of the local administrations. The performance of the upazila administrations
18

In addition, the ADB loan was denominated in special drawing rights (SDR), and the slight depreciation of the dollar against the SDR increased the amount of available loan funds in dollar terms. 19 Designed to gather data on the physical environment, including land use, microclimate, topography, soil conditions, and vegetation. 20 Designed to assess socioeconomic conditions such as land tenure, food requirements, energy consumption, and preferences for crops and tree species.

7 was constrained by (i) lack of interest and accountability, (ii) low priority accorded by the local administrations to the Project, and (iii) cumbersome procedures within the upazila system for accessing project funds. Despite the poor performance of the upazila administrations, the subsequent transfer of responsibility to FD enabled FD to complete the planting program. 16. Most loan covenants were complied with, notably those concerning the establishment of project office and committees; the submission to ADB of quarterly reports, annual plans, and the PCR; umbrella agreements between FD and participating agencies; publicity campaigns; and submission of audited annual financial statements.21 Nonetheless, shortcomings in compliance with the loan covenants were noted in the following areas: (i) no action was taken to review the appropriateness of the one-year renewable participation agreement between FD and the participants for benefit sharing; (ii) the provision for the exclusion of encroached state land for woodlot development was not entirely adhered to; (iii) the land resource and socioeconomic surveys were delayed; (iv) FD did not undertake benefit monitoring and studies; (v) field trials to test silviculture parameters were overlooked; (vi) information exchange with NGOs was inadequate; (vii) project participants were not adequately organized into forestry associations;22 and (viii) the Borrower did not ensure that FD undertook adequate operation and maintenance of the plantations, including specific actions for timely thinning, harvesting, and replanting. III. A. ACHIEVEMENT OF PROJECT PURPOSE

Operational Performance

17. The physical achievements in nursery development, seedling distribution, and tree planting were significant. Public awareness building through publicity campaigns gained considerable recognition from stakeholders, although interaction between FD and NGOs was inadequate. Training initiatives were well delivered to reach community leaders, participants, nursery operators, forest rangers, and selected FD staff (Appendix 5). However, deficiencies in silviculture management and lack of monitoring of the plantations, combined with unworkable benefit-sharing agreements with the project participants, seriously undermined the intended purpose of the plantations and jeopardized the realization of sustained benefits. The intended partnership between FD and participants did not develop, and the plantations had not produced significant benefits for distribution to legitimate beneficiaries. The credibility of the social forestry development is at stake, and delayed harvests and uncertainties over future harvests have led to a situation in which the plantations suffer from thefts and damages. 1. Silviculture Practices

18. The rotation period for the woodlots, agroforestry, strip plantations, and block plantations was planned at appraisal for seven years with fuelwood production as the primary objective, and intermediate benefits were expected to come from the thinning of tree stands at mid-rotation (three to four years after planting). The intended silviculture practices would have generated significant benefits for participants during and at the end of the rotation period. However, the silviculture practices as prescribed at appraisal were not undertaken in all plantation types. Essentially, planted stands have not been thinned and harvested as planned. Intercropping design features could not be implemented and sustained. The dense trees and their crowns caused overshading and led to the discontinuation of alley cropping in agroforestry areas after
21

The PCR recorded compliance; however, the OEM could not locate the audited annual financial statements for FY1993, FY1994, and FY1996 from the archived documents of the Projects Division. On several occasions, ADB followed up with FD concerning government auditors observations. 22 Later under FSP, participants were to be organized into local community organizations, with NGO assistance for group formation and management development.

8 two years. The planting density in woodlots and block plantations did not allow adequate space for other crops. Participation in strip plantations was generally poor, and did not lead to optimal use of the land for food crops and other permissible crops as designed. 19. Given that tree planting was conducted from FY1990 to FY1996, entire plantations would have entered their second rotation by FY2004 if the seven-year rotation rule, as recommended at appraisal, had been adhered to. Instead, FD extended the rotation period in FY1997 from 7 to 10 years. With the exception of the trees established from seedling distribution to the public, a negligible amount of harvesting took place in the project plantations in FY2000 and FY2001. According to FD, the extended rotation period23 was introduced to generate larger benefits from final harvests, as this practice would have allowed the production of fuelwood and higher-priced small sawlogs. The rotation was extended but the thinning operations never materialized. FDs decision reflects unfocused end-product objectives. Sawlog production was not the project objective at the outset, fuelwood was. There are significant inconsistencies between the recommended silviculture practices as presented in the appraisal report and the implementation guidelines as detailed in the project proforma (PP) of FD.24 These inconsistencies and the retroactive decision to follow extended rotation may have led to unclear responsibilities for plantation management. 2. Plantation Management and Benefit Monitoring

20. Overall, FDs management of the project plantations has been weak, as evidenced by the absence of systematic monitoring of plantation conditions, including stocks, age, species, tree survival, and actual growth rates. FD made no sample surveys of plantation conditions, nor undertook benefit monitoring. The land resource and socioeconomic surveys were delayed, and their relevance was marginal. Record keeping of plantation assets and performance was particularly poor,25 and information gathering for management decisions was rarely undertaken. Assessments of tree stands, by tree counting and measuring the wood volumes, were only conducted recently for the preparation of tree auctions of selected plots.26 Such measurements were not sample based, and were restricted to trees that had reached 10 years of age. Nonetheless, these measurements provided FD with some growth and yield estimates. 21. As FD does not obtain its budget funds directly from the sale of forest products, it has no incentive for product planning and harvesting, or for monitoring market prices of fuelwood, poles, logs, and other wood products at various local markets. At present, the fiscal system in the country requires FD and other state-owned land-owning entities to surrender their earnings from the sale of forest products to the state treasury. FD and its divisional offices do not maintain records of past and current wood prices at various market intermediaries, including sawmills. Further, FD has not carried out specific assessments to estimate plantation losses
23

Initiated by FSP, tree rotation was changed from 7 to 10 years to benefit from the enhanced value of larger trees. With 10-year rotation, thinning, and intermediate felling in the fourth and seventh years were recommended to provide intermediate returns and improve the quality and growth rates of the remaining trees to produce small logs. 24 The appraisal design specified woodlot and block planting of 2,500 seedlings/ha based on 2 meters (m) x 2 m spacing, while FDs original PP recommended 2,900 seedlings/ha based on 6 feet by 6 feet spacing. Actual planting followed the PP density specification that was later changed to 2 m x 2 m. However, when the PP was revised in 1994, the recommended planting density was changed to 1,667 seedlings/ha on the basis of 3 m x 2 m spacing, without provision for thinning and without further investment after the first eight years. The revised PP projected that benefits would be generated over 25 years from the eighth year onwards, without specifying requirements for replanting and reinvestments. 25 FD had serious difficulties in retrieving manual records to reconcile the actual areas planted by types of plantations, year, and forest division location. On sites that the OEM visited, records of intercropping with the tree plantations were either absent, or poorly maintained over one or two seasons only. 26 Pre-auction measurements were carried out in 2001, including selected sites in Dhaka Division (40 ha), Tangail Division (603 ha), and Dinajpur Division.

9 from thefts and other causes. The OEM found no evidence that simple field trials to test silviculture parameters, such as species provenance, growth, and spacing requirements, had been conducted as planned at appraisal.27 3. Selection of Participants

22. It was expected that participants would come from underprivileged sections of village communities, comprising nearby residents who were landless or owned land of less than 1 ha. In the case of woodlots, and block and strip plantations, participants were to be recruited and organized into forestry associations, with benefit sharing agreed between FD and these associations.28 In practice the participants acted as individuals, with separate agreements with FD. For the strip plantations, farmers with agricultural land adjacent to the strips were given priority, while in the case of agroforestry the participants were predominantly occupants of encroached state forestland, with an individual benefit-sharing agreement between each participant and FD. All lands for woodlots, agroforestry, and block and strip plantations were degraded state-owned lands with marginal productive value, although encroached lands were predominantly used by the occupants for growing food crops. The established wood trees became state property under FDs custody. The participants were paid daily wages for labor in establishing the plantations, and allowed to keep outputs from the intercrops, and promised a share of the forest produce provided that the participants maintained and protected the forest assets as prescribed by FD. 23. Participants were not always selected according to the envisaged criteria.29 On a caseby-case basis, FD regarded as necessary the involvement of influential local people.30 FD also faced a problem when a large portion of the plantations had no active participantssome participants had left because they could no longer wait for the promised benefits, and some plantations were established without enough participants in the first place. As FD recently documented, about a third of the project strip plantations under the CGP management were found to be without participants. Similar conditions could be expected elsewhere, although FD had not systematically monitored the beneficiaries and their current socioeconomic conditions. Participants interviewed generally expressed their concerns over (i) irregular communications with FD, (ii) inflexibility in the selection of tree species, and (iii) the absence of regular incomes. 24. The criteria for selection of participants have been modified and improved under the ongoing FSP to allow for more explicit preferences for the disadvantaged. Consequently, the existing participants will not automatically be eligible for the next tree rotation, although they will be considered. The possible exclusion of more affluent participants from the next rotation could trigger social conflict if the existing participants are considered ineligible under the new selection criteria. As future initiatives will be targeted to include the most disadvantaged, flexibility is required to address their needs for livelihood. The poor and disadvantaged do not have the means to simply wait for unpredictable intermediate benefits and harvests.
27

The Forestry Research Institute in Chittagong was unaware of FDs obligation to conduct field trials, although FD was expected to seek appropriate assistance from this institute. 28 In addition, umbrella agreements for the use of designated land were required with the land-owning agencies such as the Bangladesh Water Development Board (for block plantations), and Bangladesh Railway and the Roads and Highways Department (for strip plantations). In the case of seedling distribution to various interested parties, planting was demand based, and the seedlings were delivered to recipients for their own use. 29 The appraisal report recognized that due to the sociopolitical setting in the rural areas, the inclusion of more affluent farmers in the social forestry program was considered necessary, although landless and marginal farmers were the primary beneficiary targets. 30 As an example, the OEM interviewed a participant (Bhaluka, Mymensingh) who claimed that he had been a wood trader for 20 years, participated in a tree auction on 27 February 2001 among five bidders, and won a bid for a 6 ha woodlot valued at about Tk249,000 ($4,600).

10 4. Benefit-Sharing Agreements

25. The arrangements for benefit sharing between the participants and FD were given in project benefit-sharing agreements (PBSAs) separately for agroforestry, woodlots, and strip plantations.31 The PBSAs reflected the generally weak position of the participants, with terms and conditions that substantially favored FD (Appendix 6). The project design did not adequately address these issues at the outset. First, the PBSAs for woodlots and agroforestry were valid for one year, renewable annually on satisfactory performance of the terms and conditions, without specifying the indicators of satisfactory performance (para. 16). This did not provide any measure of security to the participants for the intended duration of the tree rotation. Second, the PBSAs could be unilaterally terminated at the discretion of FD, and the participants could neither claim any compensation from FD nor could they seek remedy from a court of law or an independent arbitration body. In the event of a dispute, final decisions were the prerogatives of FD or MOEF. Third, there were no safeguards against arbitrary decisions by FD, and the PBSAs did not provide the participants with their share in the sale proceeds of harvests if their PBSAs had been terminated prior to harvesting. Fourth, the PBSAs made no provisions for the specific roles of the participants and FD in pruning, thinning, and felling, and for such activities to be undertaken on a timely basis. Fifth, none of the PBSAs specified the involvement of the participants in monitoring the sale of the forest products through the auctions of trees. Continuing initiatives under both CGP and FSP have encouraged FD to improve the benefitsharing arrangements (para. 49). 5. Replanting and Its Implications

26. At appraisal, it was assumed that the Government would provide the financing for replanting of the project plantations, while benefits were projected over four seven-year rotations. FD made suggestions to sustain the plantations by making the second and subsequent rotations largely independent of external funding through reinvestments of the harvests and contributions of the participants. However, there are no existing provisions for FD to retain a portion of the harvest revenues for reinvestment, including replanting. FD is simply a budget-funded department. As felling of trees for final harvests will have to be accompanied by subsequent replanting, financing arrangements for replanting will affect plans and decisions for harvesting. Currently, the replanting of the project plantations is covered under the FSP investment plan. Accordingly, the OEM considers the following aspects to be pertinent to achieving the project purpose. a. Tree Species Ban

27. Establishing the plantation and replanting rely to some extent on fast-growing tree species (footnote 15) with the capability to coppice. The appraisal assumed that full replanting would not be requiredthe species selection was such that part of the species could coppice and did not require replanting, and only 50 percent of the trees had to be replaced after harvest. However, according to FD, several species (including Eucalyptus camaldulensis and Acacia auriculiformis) have been banned in Bangladesh by MOEF. This will have an impact on the replanting required, as the coppices of E. camaldulensis can no longer be expected to save

31

Benefit distribution of harvests was stipulated as follows: (i) woodlotsbeneficiaries (40 percent) and FD (60 percent); (ii) agroforestrybeneficiaries (50 percent) and FD (50 percent); and (iii) strip plantationsparticipants (65 percent), FD (10 percent), and others (25 percent), including land-owning agencies.

11 replanting costs. FD has undertaken no specific technical assessments to address the implications of the species ban.32 b. Replanting Under the Forestry Sector Project

28. The scope of FSP includes a provision to finance the replanting of second-rotation plantations (mainly the plantations established under the Project and CFP). At present, the ADB loan for FSP is envisaged to finance 50 percent of the replanting costs. The remaining 50 percent are to be financed from a portion of the sales proceeds of the final harvests (para. 29). Under this scheme, the Government contributes to second-rotation replanting by using FSP loan funds. According to FD, the delays in harvesting and replanting project plantations were caused by the delayed availability of FSP loan funds, resulting from delays in fulfilling the FSP loan disbursement conditions for field development activities.33 As harvesting of project plantations is unlikely to proceed without a parallel replanting program and its financing scheme in place, the realization of the purpose of the Project hinges on the FSP replanting program. c. Tree Farming Funds

29. Later in 1996 under the FSP, an innovative initiative to establish tree farming funds (TFFs) at local community organization (LCO) level was proposed. TFFs were to finance replanting on a sustained basis, into which 10 percent of harvest revenues would be deposited. However, to date no TFFs have been established, nor has the conceptual design been finalized. TFFs were envisaged to finance 50 percent of the replanting costs to match the FSP loan funds for the full replanting costs (para. 28). While FSP had originally envisaged that TFFs would be set up and operated separately by the participants at LCO level, with the assistance of an NGO, other options have emerged and deviate from the original intention.34 The functioning of TFFs or other means for financing replanting will determine the pace at which harvesting and replanting can realistically be undertaken. Nonetheless, FD has not fully assessed the feasibility of establishing TFFs at LCO (or any other) level.35 The dependence of replanting on TFFs is further complicated by the fact that FD has not estimated potential TFF income and whether such income would be sufficient; this is partly due to the absence of an up-to-date inventory of the plantations. B. Performance of the Operating Entity

30. FD is the operating entity, acting as the custodian of the plantations (except for trees established from seedling distribution). This section focuses on financial reevaluation of
32

FD has not assessed the full implications of the tree species ban on (i) the replacement of tree species, and (ii) the availability of replacement seeds for seedling production. The ban was in response to public pressure, particularly the NGO community, for supposed environmental and health reasons. The plantation harvests had yielded marginal benefits to date, and the income-generating role of the banned species had been discounted in the decision for the ban. FDs proposed replanting provisions under FSP indicate full replanting, rather than reliance on 50 percent regeneration through coppices. 33 The conditions require the Borrower to promulgate an ordinance or introduce a bill in Parliament to implement the recommendations of a task force on legislative reforms (formed by the Government under the project of the Food and Agriculture Organization of the United Nations on Institutional Support to the Master Plan for the Forestry Sector) to establish an appropriate legal, economic, and institutional framework. 34 FD has proposed various options, including the establishment of TFFs at the forest range level within a forest division, requiring the merger of a large number of participant groups with contributions that vary according to actual harvest yields by area. Several issues remain unresolved: (i) relevance of the original LCO concept, (ii) FD involvement in the management of TFFs, (iii) procedures for dealing with the fungibility of funds across participant groups, and (iv) procedures for conflict resolution. 35 The FSP feasibility studies (1999) for new planting and replanting did not cover TFF design.

12 plantation performance. The financial returns of the project investments are calculated to include all outputs before their distribution to legitimate beneficiaries under the benefit-sharing arrangements. The project plantations are expected to fall short significantly on benefits for a number of reasons. First, the Project failed to generate significant intermediate benefits that could have been derived from thinning operations. Second, benefits from intercropping were minimal: (i) the high tree density and overshading due to the absence of pruning and thinning prevented alley cropping in agroforestry areas, (ii) the dense planting configuration prevented participants from growing food crops in the woodlot and block plantation areas, and (iii) intercropping in strip plantations was unsuccessful due to inadequate participation. Third, the absence of thinning, despite the extension of the rotation period from 7 to 10 years, limited the size and the quality features of poles and small logs, thereby significantly reducing their potential market values. Fourth, delayed harvests reduced the time value of expected benefits. Fifth, while the plantations were projected at appraisal to be sustained over four seven-year rotations without reliance on external financing, benefits that can be justifiably attributed to the Project are now limited to one extended rotation; the financial and economic reevaluation is, therefore, based on one rotation. Sixth, the harvest delays undermined the partnership to maintain and protect the plantations, and significant tree losses due to thefts occurred and are expected to continue. Seventh, despite the success in seedling distribution, the effective plantation areas resulting from these seedlings are not expected to exceed 16,500 ha.36 Eighth, the poor performance of the upazila administrations, combined with inadequate participation in maintenance, affected tree survival, created gaps, and reduced the effective strip plantation areas. 31. Since most of the plantation outputs have not been realized and distributed, the legitimate beneficiaries of the plantations have so far gained little from project outputs. However, participants received daily wages (about Tk60/day in 2001 prices) as laborers during the initial period of tree planting. About 70 percent of tree establishment costs were estimated to comprise labor costs, including payments to participants. The Project contributed to rural wage generation that benefited more than 20,000 participants. The project investments are expected to generate a financial internal rate of return (FIRR) of 6.3 percent, based on estimated quantifiable outputs in constant 2001 prices before distribution, and after taking into account a provision of 20 percent for unaccounted losses due to theft before harvests. With the exception of the strip plantation, the FIRRs range from 10 to 15 percent for plantations. The strip plantation has the lowest FIRR (negative) because of reduced benefits and high development costs.37 The FIRR is far below the expected overall FIRR of 25.8 percent at appraisal, and 26.1 percent at project completion. Details of the financial and economic reevaluations are in Appendix 7. C. Economic Reevaluation

32. Tangible outputs from the project investments, including unaccounted harvests and thefts, are estimated at 4.65 million cubic meters (m3) of wood, comprising 1.51 million m3 of fuelwood, 2.06 million m3 of poles, and 1.08 million m3 of small sawlogs over one rotation. These outputs represent an average effective gross yield of 104.7 m3/ha for all plantations, before losses. In addition, leaves and twigs (collected from the forest floor for fuel) are estimated to amount to about 688,000 tons. The economic reevaluation has been conducted
36

The OEM estimated that 6,000 seedlings were required for an effective planting of 2,900 seedlings/ha, taking into account (i) a cull allowance of 10 percent; (ii) 50 percent loss during transport, distribution, and waiting periods before planting; and (iii) 25 percent replacement rates after planting. The levels of quality planting expected from FD cannot equally be expected from the seedling recipients. The OEM estimated the effective planted area to be 16,500 ha, compared with 22,000 ha at appraisal and 29,000 ha at project completion. 37 The financial investment costs for the strip plantations amounted to an average of Tk229,000/ha equivalent in constant 2001 prices, compared with Tk38,400/ha for woodlots, Tk20,100/ha for agroforestry, and Tk25,000/ha for block plantations.

13 using constant 2001 prices and based on the domestic price numeraire. Adjustments have been made for the exclusion of taxes, duties, subsidies, and debt service, and the application of a shadow exchange rate factor of 1.25 to the border prices of traded goods. Given less than full employment in rural areas, a shadow wage rate factor of 0.85 has been used. On this basis, the economic internal rate of return (EIRR) of the Project is estimated at 9.3 percent, far below the expected EIRR of 22.9 percent at appraisal, and 28.3 percent at project completion. The EIRRs for the different project components are estimated at 11.8 percent for seedling distribution, 14.3 percent for woodlots, 18.0 percent for agroforestry, 20.1 percent for block plantations, and a negative 3.5 percent for strip plantations. The detailed economic analyses are in Appendix 7. D. Sustainability

33. The sustainability of the project initiatives and their ultimate objective of creating a nationwide capacity for sustained supply of fuelwood depends on several factors. The major elements include (i) the organizational and institutional arrangements for social forestry, including the participatory processes and the emergence of satisfactory benefit-sharing arrangements; (ii) operations management capability; and (iii) the development of an appropriate modality for sustained reinvestment and replanting. Ongoing FSP initiatives in institutional reforms, management development, and capacity building are relevant factors that have much influence on the project sustainability. Nevertheless, the sustainability of the operations of the project plantations, in the context of social forestry, is rated less likely over the near future for the following reasons. 1. Organizational and Institutional Arrangements

34. The traditional role of the FD foresters was conservation and tree planting, and this contributed to a strong focus on achieving planting targets and reforestation, with inadequate attention to people and their social conditions, and to the management and commercial perspectives of the fast-growing plantations. The participation features of social forestry as practiced require further development, including organizational and management reforms within FD to respond to demands for self-sustaining social forestry. Although such reforms have been initiated under FSP,38 these initiatives have not had much impact on improving the existing partnership between FD and the project participants. FSP initiatives to decentralize plantation management to divisional level have not materialized. Participatory initiatives have been impeded by rigid, top-down, and hierarchical practices within FD. Decision making within FD remains highly centralized. 2. Operation and Management Capability

35. The management aspects of the plantation assets require much improvement. The recommendations of the PCR (para. 6) for the development of management plans for the project tree plantations have not been implemented, although capacity-building initiatives under CGP and FSP have continued to support FD in its management development. ADB review missions for CGP and FSP have repeatedly requested FD to prepare such management plans. As FD is entirely budget funded, and operates as a government department with no authorization to retain revenues, it has little financial incentive to undertake the prescribed plantation management for revenue sharing with participants. The project plantations need to be operated in a disciplined manner to yield high returns from fuelwood and other products. The sustainability of social forestry ultimately depends on the participants and how they are
38

Relevant features that have been proposed include the creation of an FD social forestry wing, decentralization of FD management to divisional level, improvements of participation and benefit-sharing arrangements, the use of NGOs for the development of LCO project participants, and the development of TFFs for replanting.

14 organized, considering that they have the most incentive to achieve and retain high returns. Initiatives are required to strengthen the participants and their organizations, with provisions to decentralize plantation management and decision making to LCOs, in the context of improved benefit sharing that is conducive for maintaining forest cover that yields sustained benefits. Nonetheless, initiatives to devolve responsibilities to LCOs have met resistance from FD, as seen in the formulation of TFFs (footnote 34). 3. Reinvestment

36. The appraisal assumption that the replanting of the project plantations would be largely independent of external funding, through reinvestments of the harvests and contributions of the participants, is rated less likely to materialize soon. At present, the replanting of the project plantations depends on FSP initiatives, including the use of ADB loan funds and the establishment of TFFs as a mechanism for reinvesting a portion of internally generated revenues. However, the TFF arrangements and their feasibility have not been determined. Uncertainties have remained, especially on harvests, distribution of benefits, replanting, and resources required for sustaining the plantations into the second rotation and beyond. IV. A. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

Socioeconomic Impact

37. More than 21,000 participants were each allocated about 1.21 ha (3 acres) of land under the Project, excluding strip plantations.39 Apart from leaves and twigs collected from the forest floor, and wages as hired labor for establishing the plantations, the participants have received only minimal benefits. Participants interviewed by the OEM expressed strong doubts about (i) ever receiving promised benefits from the plantations, (ii) the timing of the expected harvests, and (iii) the relevance and applicability of the existing benefit-sharing agreements. These uncertainties have led to impatience and a feeling of resignation among participants, and developed into a potentially hostile social environment. While the participants were generally promised a seven-year rotation for the plantations, the absence of time-bound harvesting targets and lack of effective communication between FD and the participants have generated distrust. The partnership that requires FD and the participants to safeguard the plantation assets has unraveled. The mutual distrust is reflected through pervasive allegations of thefts of trees. FD field staff and independent observers informed the OEM that thefts over recent years in Modupur, where there had been a long history of deep-rooted concerns over land tenure and claims made by local communities, had caused tree losses of up to 85 percent over 1,810 ha of woodlots.40 FD claimed that losses elsewhere were much lower. 38. The social dimensions of reforestation were not adequately addressed during project implementation. The socioeconomic survey was not completed until July 1993, and did not have much influence on the selection of sites and participants. Gender considerations in the selection of participants were not adequatefemale participation was limited to a spousal role as cosignatory to a PBSA, and cultural norms prevented female-headed households and single/divorced females from becoming independent signatories. Choices for land use, tenure claims in specific areas by minority tribal communities, and the FD-dominated terms of the
39

There is no up-to-date monitoring of participants, and the number of them who have actually remained with the Project is unknown. 40 Although the OEM visited sites in Modupur where trees had been illegally cut, the OEM received no specific figures for losses as FD had undertaken no surveys to assess the remaining stocks. ADB ceased financing of woodlot development in Modupur in 1993. In accordance with the loan covenants (Schedule 6, para. 10), encroached areas were to be excluded from woodlot development.

15 PBSAs affected the partnership between FD and the participants. While the project areas were defined as state forestland or state-owned land, security of land tenure as a motivating force for participants was not fully understood at appraisal, as reflected in the annual renewal of the PBSAs. B. Environmental Impact

39. The Project generated positive environmental impacts. First, tree cover was reestablished on underutilized land and degraded forestland. Second, tree planting on roadsides and waterway embankments, including coastal areas, stabilized erosion-prone areas and served as windbreaks to reduce wind-induced soil erosion and as protection against storms. Third, the awareness building and publicity campaigns encouraged private initiatives for tree planting on private property, homesteads, and farms. The increase in tree cover will also have a positive impact on carbon sequestration. Nonetheless, the thefts in Modupur have had negative environmental impacts, considering that the sites were previously forested, albeit degraded, with coppices of Sal trees. The thefts have left large blocks of land barren without tree cover. Observers claimed that the degraded Sal forests would have produced coppices to reforest the areas naturally. The Government banned several tree species in response to reasons deemed related to health and the competing uses of water during the dry season. However, the justification for the ban and its implications have not been fully assessed (para. 27). C. Impact on Institutions and Policy

40. FD went through a significant learning process to cope with an emerging strategy that was focused on social forestry. For the implementation of the Project nationwide, FD had to engage more than 2,500 staff, including retaining CFP personnel, representing 20 percent of total FD personnel. Despite the CFP experience, the new social forestry approach and the augmented nationwide targets placed tremendous pressures on FD. The associated UNDPfinanced TA 1142-BAN (footnote 11) specifically provided training (Appendix 5) and consulting services for the Project, including the delayed land resource and socioeconomic surveys. The TA produced numerous training materials, handbooks, and guidelines related to nursery development, communications, participatory agroforestry, and forestry extension. These outputs were used for skills development of FD staff and other target groups. Nevertheless, project personnel were inadequately prepared to implement new practices apart from planting trees to meet the physical targets. Social mobilization and its requirements for building a successful partnership with communities did not receive adequate on-the-job application. The training and advisory services under TA 1142-BAN, however, increased awareness for change within FD, and spawned support for institutional reforms, albeit at a slow pace, under FSP. V. A. Relevance OVERALL ASSESSMENT

41. The rationale and purpose of the Project were sound and highly relevant, taking into account the demand for fuelwood, and the need to arrest the countrys rate of deforestation. The development strategy, focusing on social forestry and emphasizing participatory approaches and reorientation of FDs practices, has remained relevant. But this strategy has been ineffective, as project implementation has focused more on planting trees than on the required partnership with people in the community. Despite the management problems associated with the plantations (paras. 18-24), the Project, in the context of its intended purpose, is rated relevant.

16 B. Efficacy

42. The Project has established standing trees. The absence of site-specific plans for thinning, harvesting, and replanting, and the poor performance in silviculture management, underscore the uncertainties surrounding the achievement of project purpose. The widespread theft of trees reflects the ineffective management of the reforested areas under the existing partnership agreements with the participants (para. 37). The Project has not developed the institutional capacity within FD and local administrations for self-sustaining social forestry, including its operations management requirements. The unintended change in plantation management practices (paras. 18-19) has altered the composition of end productsthe OEM has estimated that fuelwood represents only a third of project outputs. Overall, the achievement of project purpose, to increase the production of fuelwood, is rated less efficacious. C. Efficiency

43. The Project has suffered from serious shortfalls in benefits, which were caused mainly by organizational and management shortcomings. The shortfalls stemmed primarily from the absence of intermediate outputs, the failure of intercrops, poor quality and reduced prices for poles and small logs, and delayed harvests (para. 30). The estimated FIRR of 6.3 percent (para. 31) and EIRR of 9.3 percent (para. 32) are significantly lower than the rates of return calculated at appraisal and project completion. Consequently, the Project is rated less efficient in terms of its achievements as measured against the use of inputs, and as compared with appraisal expectations. D. Sustainability

44. The Project is rated less likely to be sustainable considering (i) the uncertainties over harvests and the faltering partnership with participants, and (ii) the uncertain arrangements for replanting (paras. 33-36). Further, FDs slow reorientation to improve its management practices and realign its approaches to become more socially oriented has had little impact on the operations of existing plantations. The sustainability of the project initiatives depends on the success of the ongoing FSP in instituting the necessary reforms and management improvements, and in reestablishing trust with participants on the basis of improved and enforceable partnership agreements. E. Institutional Development and Other Impacts

45. The Project has brought little institutional development impact (para. 40). Institutional aspects were mainly dealt with through training and advisory services provided under TA 1142BAN. Organizational and management development has been limited, and the training initiatives for FD staff were mainly of a technical nature, and were insufficiently focused on operations management. Nonetheless, the project initiatives have heightened awareness of the strengths and weaknesses of past and present institutional arrangements for social forestry, and contributed to the mobilization of general support for the ongoing FSP institutional initiatives. While the social impacts have been undesirable (paras. 37-38), the Project has generated favorable environmental impacts, albeit with some deficiencies (para. 39). F. Overall Project Rating

46. Based on the above five performance evaluation criteria, the Project is rated partly successful.

17 G. Assessment of ADB and Borrower Performance

47. ADB provided significant resources to the Project, from preparation to implementation. The appraisal was thorough, although the project design inadequately addressed the benefit sharing. ADB provided timely inputs to FD during frequent review missions. However, the OEM confirmed the PCR findings that ADB review missions paid insufficient attention to socioeconomic considerations, including arrangements concerning the participants. Attention to the management of the plantations, despite the CFP experience, was also inadequate. However, ADB followed up on the PCR recommendations and has continued to provide advice to FD through CGP and FSP. Overall, the performance of ADB is rated satisfactory. While the Borrower has generally complied with the loan covenants, it suffered from major shortcomings, most notably insufficient attention to ensuring that FD provided adequate management, operation and maintenance of the plantations, including specific actions for timely harvests, benefit distribution, and replanting. Shortcomings in plantation management by FD were evident: among others, it did not implement the PCR recommendations. Overall, the performance of the Executing Agency is rated less than satisfactory. VI. A. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

Key Issues for the Future

48. FD owes its management tradition to a custodial forestry approach. The switch from a custodial to a people-oriented approach for social forestry activities has been slow. Prevalent views among FD foresters have constrained participatory initiatives.41 Lack of dialogue between FD and participants and the continuing uncertainties on benefit distribution have reinforced the perception among participants that FD was primarily interested in the recovery and control of lands with custodial reforestation objectives. The features of the participatory approaches require much improvement, and the trust of the participants needs to be reestablished. 49. Improvements to benefit sharing have been made under FSP, with the intention of replacing previous PBSAs nationwide.42 However, the existing PBSAs for the Project have not been replaced. In addition, these improvements have not incorporated several features desired at FSP appraisal.43 For example, no arbitration mechanism has been set up, leaving FD to have final decisions on disputes and the unilateral authority to terminate the PBSAs; and benefit sharing in the event of premature termination has remained undefined. The PBSA terms could be further improved to (i) allow more accountability and predictability, (ii) permit participants to invest and own the trees, (iii) allow participants to monitor harvests and auctions, (iv) provide specific performance criteria for renewal or termination, and (v) allow an independent arbitration process for the settlement of disputes. 50. As felling of trees for final harvests will have to be followed by replanting, financing arrangements for replanting will affect plans and decisions for harvesting. FD currently has little
41

Khan, Niaz Ahmed. 1998. Interviews with the Sahibs: Bureaucratic Constraints on Community Forestry Programmes in Bangladesh. Journal of World Forest Resource Management. Vol. 9: 73-93. These views include (i) land-use decisions for social forestry should remain under government control and the prerogatives of FD, (ii) the main role of foresters is to protect forests for the Government, and (iii) local people are the main causes of deforestation. 42 Notably, the improvements included (i) extending the agreement to match the rotation period with an automatic renewal on satisfactory fulfillment of the conditions; (ii) defining the timing for thinning and harvesting, and the obligations of FD and the participants in this context; (iii) recognizing spousal rights and accepting them as cosignatories, and allowing inheritance by designated heir in the event of death; and (iv) using an NGO to assist in social preparation, group formation, and administration. 43 Report and recommendation of the President: 1486-BAN(SF): Forestry Sector Project, October 1996, Supplementary Appendix B: Social Forestry Participation and Benefit Sharing Agreements.

18 financial incentive to undertake prescribed plantation management for revenue generation. At present, the government contribution for the replanting of project plantations is derived from the FSP loan. A suitable modality needs to be developed for FD and participants to retain the revenues both for sustained reinvestment and to serve as performance incentives. B. Lessons Identified

51. The social forestry initiatives have been hindered by social issues concerning the selection and eligibility criteria for participants, land tenure security for participants, roles and obligations of the parties involved, ownership of trees, and benefit sharing of the forest assets developed. The importance of conducting thorough social assessments prior to physical implementation is evident, for such critical social issues could have been anticipated and measures designed to minimize undesirable effects. 52. Despite the CFP experience, the development of PBSAs has been disappointing. The credibility of the social forestry initiatives has been jeopardized by unfulfilled promises to participants. Community participation cannot be taken for granted through the engagement of participants as wage laborers for investment purposes without clear mechanisms for participatory social mobilization and organizational development, and the establishment of workable mechanisms for realizing, distributing, and reinvesting the benefits of the investments according to the project purpose. As social forestry initiatives are increasingly targeted to benefit the most disadvantaged, flexibility is required to address the needs for livelihood. The poor and disadvantaged do not have the means to wait for unpredictable benefits and harvests (paras. 23-24). Future development initiatives should include broader provisions for investments to enhance livelihood opportunities and downstream employment for supplemental income in the areas within and adjacent to the plantations and forestlands. 53. The sustainability of the reforestation efforts depends crucially on the success of the partnership between FD and the participants, efficient operation and management of the established plantations, the generation and distribution of benefits, and the reinvestment of revenues for sustained social forestry operations. C. Follow-Up Actions

54. Continuing efforts under CGP and FSP for FD to adopt the basic principles of social forestry (including FSP loan covenants that require legal and institutional reforms in the forestry sector) offer remedial opportunities to address the shortcomings mentioned above. Highly relevant are efforts to improve benefit sharing and plantation management, and to develop TFFs. The credibility of the social forestry initiatives depends on whether the existing plantations can in fact generate and distribute benefits to participants. FD, with continuing ADB support, should give emphasis on harvesting, replanting, and developing mechanisms and institutional arrangements for self-sustaining operations. Over the next two years, FD needs to make the project plantations and CFP plantations its priority, before embarking on new planting schemes elsewhere. ADB should monitor the project plantations until the first rotation is completed. 55. FDs management of the plantations is weak. Information necessary for planning and management decisions is lacking. Overall capacity building for an improved monitoring system that includes price monitoring and analysis is required. FD should make efforts to develop a functional monitoring system over the next 12 months, taking into account performance measures including stocks, age distribution, species performance, tree survival, tree growth rates, and market prices of wood products. FD should undertake systematic assessments of plantation conditions on a sample basis by forest division.

19 56. FD has not carried out specific assessments to estimate plantation losses due to theft. Transparency and accountability need to be improved between FD and the participants by improving partnership and benefit-sharing agreements. FD and the participants should undertake these assessments within 12 months to provide reliable information on the remaining stocks and promote cooperative efforts to prevent further losses before harvests. 57. The Project does not have an operational management plan based on an inventory of the established forest assets, including age distribution and site-specific schedules for trees to be replanted. There are no operational plans for site-specific pruning, thinning, harvesting, and replanting to reflect the intended purpose of tree planting and output utilization.44 FD, with support from FSP, should prepare such plans within the next 24 months for the project plantations, indicating a realistically phased plan for thinning, harvesting, and replanting. These plans should be consistent with the objective of achieving sustained benefits through replanting and improved partnership with the participants. 58. The replanting of the project plantations for the second rotation depends on the establishment of TFFs.45 Several conceptual issues have yet to be resolved, including future management of the plantations and the role of LCOs, ownership of TFFs, prudential rules for TFFs, TFF management and their responsibilities to LCO members, and LCO membership size. The role of FD in TFFs has yet to be clearly defined. The participants have not been consulted on TFF initiatives. The provisions for making TFFs feasible need to be developed by FD, with FSP support and in consultation with the participants. The TFF initiatives will inevitably bring changes to the existing participation agreements and the role of participants. FD should develop TFFs in the next 18 months.

44

Under CGP management, the preparation of pruning and thinning plans began, and FD approval for thinning of project strip plantations with identifiable beneficiaries was obtained in April 2001. Plans for the remaining strip plantations were still being prepared. Actual thinning operations in 2001 were expected to be limited, considering the late preparation and approval of the plan, and the timing of the monsoon season. 45 Although the TFF framework and its operational design can be formulated in the near future, the actual harvesting and replanting will depend on the time and resources available to establish LCOs.

20

APPENDIXES Number Title Page Cited on (page, para.) 5, 10

Comparison of Physical Achievements under the Project at Appraisal and As Implemented Area Statement of the Project Plantations Project Costs and Financing Plan Allocation of Loan Proceeds and Disbursement Training Delivery Main Features of the Project Benefit-Sharing Agreements Financial and Economic Reevaluation

21

2 3 4 5 6 7

22 23 24 25 26 27

5, 10 5, 12 6, 12 7, 17 10, 25 12, 31

21 Appendix 1 COMPARISON OF PHYSICAL ACHIEVEMENTS UNDER THE PROJECT AT APPRAISAL AND AS IMPLEMENTED
Component 1990 Woodlots (ha) Appraisal a PCR b PPAR Agroforestry (ha) Appraisal a PCR b PPAR Strip Plantations (km) Appraisal a PCR b PPAR BWDB Block Plantations (ha) Appraisal a PCR b PPAR Seedling Distribution (000) Appraisal a PCR b PPAR FENTC Upgrades (number) Appraisal a PCR b PPAR Upazila Nurseries Constructed (number) Appraisal a PCR b PPAR 1991 1992 Fiscal Year 1993 Total 1994 1995 1996

1,300 550 551

2,000 2,024 1,983

2,800 2,860 2,845

3,200 2,877 2,851

3,200 3,800 3,811

3,500 4,624 4,591

2,680 2,703

16,000 19,415 19,335

370 40 48

480 539 538

560 406 409

560 447 466

600 750 722

630 800 800

2,128 2,128

3,200 5,110 5,111

1,170 0 146

1,600 1,543 866

2,800 2,860 1,078

3,530 438 594

4,180 3,579 3,576

4,470 5,476 4,981

3,913 3,855

17,750 17,809 15,096

80 0 0

120 4 11

120 65 38

160 107 78

160 500 460

160 370 244

296 258

800 1,342 1,089

14,900 9,000 9,000

8,800 11,000 11,000

10,300 11,000 11,000

11,800 8,000 8,000

12,000 20,000 20,000

12,000 20,000 20,000

20,000 20,000

69,800 99,000 99,000

16 0 0

24 22 22

0 3 3

0 0 0

0 9 9

0 9 9

3 3

40 46 46

50 0 0

75 270 270

100 73 73

121 0 0

0 1 1

0 1 1

0 0

346 345 345

BWDB = Bangladesh Water Development Board, FENTC = forest extension nursery training center, ha = hectare, km = kilometer, PCR = project completion report, PPAR = project performance audit report.
a b

As reported in the PCR. As provided by the Forest Department to the Operations Evaluation Mission.

22 Appendix 2 AREA STATEMENT OF THE PROJECT PLANTATIONS

Forest Division Dhaka Type of Plantation Woodlot Agroforestry Strip Plantation Woodlot Agroforestry Strip Plantation Woodlot Agroforestry Strip Plantation Woodlot Agroforestry Strip Plantation Strip Plantation Woodlot Agroforestry Strip Plantation Block Plantation Woodlot Agroforestry Strip Plantation Woodlot Agroforestry Strip Plantation Block Plantation Strip Plantation Block Plantation Strip Plantation Woodlot Strip Plantation Block Plantation Strip Plantation Strip Plantation Strip Plantation Block Plantation Strip Plantation Strip Plantation Block Plantation Strip Plantation Block Plantation Strip Plantation Strip Plantation Block Plantation Strip Plantation Block Plantation Strip Plantation Block Plantation Strip Plantation Strip Plantation Woodlot Agroforestry Strip Plantation Block Plantation Unit 1990 ha ha km ha ha km ha ha km ha ha km km ha ha km ha ha ha km ha ha km ha km ha km ha km ha km km km ha km km ha km ha km km ha km ha km ha km km ha ha km ha 40 0 21 202 0 0 61 0 0 0 0 0 0 136 20 0 0 92 12 0 20 16 0 0 0 0 0 0 0 0 0 115 0 0 0 0 0 0 0 10 0 0 0 0 0 0 0 0 551 48 146 0 1991 122 147 0 526 44 0 769 146 0 0 40 0 0 202 81 91 11 202 40 55 162 40 66 0 49 0 62 0 90 0 269 119 0 0 1 19 0 16 0 24 0 0 0 0 5 0 0 0 1,983 538 866 11 1992 132 65 0 784 41 0 1,211 202 0 38 12 0 0 279 61 118 8 299 20 144 102 8 85 24 106 0 85 0 139 0 43 198 70 0 2 41 0 28 0 10 0 0 7 6 2 0 0 0 2,845 409 1,078 38 Fiscal Year 1993 1994 258 32 0 939 81 0 1,072 184 0 0 0 0 0 243 59 45 8 203 61 44 136 49 54 60 34 0 16 0 36 0 61 61 71 0 0 28 8 20 0 116 0 0 2 2 3 0 3 0 2,851 466 594 78 440 61 98 1,200 282 122 1,500 208 34 0 0 74 93 385 100 319 34 150 30 405 109 41 333 300 400 100 247 27 400 0 187 458 27 5 16 65 0 51 0 149 15 8 6 10 19 3 46 12 3,811 722 3,576 460 Total 1995 650 110 519 1,650 352 717 1,474 208 150 0 0 234 534 450 90 198 36 300 20 456 57 20 158 96 190 55 362 10 465 0 146 385 105 30 71 35 0 61 17 0 23 0 14 10 33 0 101 24 4,591 800 4,981 244 1996 600 585 396 600 1,000 419 930 460 47 20 0 153 254 258 25 100 15 200 48 361 70 10 210 52 179 50 245 25 204 61 209 346 93 5 66 16 0 101 75 156 28 0 24 0 35 0 98 115 2,703 2,128 3,855 258 2,242 1,000 1,034 5,901 1,800 1,258 7,017 1,408 231 58 52 461 881 1,953 436 871 112 1,446 231 1,465 656 184 906 532 958 205 1,017 62 1,334 61 915 1,682 366 40 156 204 8 277 92 465 66 8 53 28 97 3 248 151 19,335 5,111 15,096 1,089

Mymensingh

Tangail

Comilla

Sylhet Dinajpur

Rangpur

Rajshahi

Bogra Pabna Faridpur

Kushtia Jessore Patuakhali Bhola Bagernat Pirojpur Barisal Noakhali Laxmipur Feni Chittagong Cox's Bazar Total

ha = hectare, km = kilometer. Source: Data as provided by the Forest Department to the Operations Evaluation Mission.

23 Appendix 3 PROJECT COSTS AND FINANCING PLAN Table A3.1: Project Costs: Appraisal Estimate and Actual ($'000) Item Appraisal Estimate Total Foreign Local 1,947 487 1,115 63 1,228 323 396 13 707 120 1,174 1,397 8,970 14,411 1,951 8,215 649 3,723 3,573 3,833 29 209 881 3,982 0 41,456 16,358 2,438 9,330 712 4,951 3,896 4,229 42 916 1,001 5,156 1,397 50,426 Actual Local 11,006 1,307 8,003 409 5,843 4,746 1,867 84 1,326 0 1,648 0 36,239

Foreign 1,372 448 1,258 56 2,272 487 308 42 0 1,210 2,101 1,023 10,577

Total 12,378 1,755 9,261 465 8,115 5,233 2,175 126 1,326 1,210 3,749 1,023 46,816

Woodlot Plantations Agroforestry Plantations Strip Plantations Block Plantations on Unused BWDB Land Seedling Distribution Forest Extension Nursery Training Centers Upazila Nurseries Publicity and Field Research Training Consultants Project Support Service Charge Total

BWDB = Bangladesh Water Development Board. Source: PCR: 956-BAN(SF): Upazila Afforestation and Nursery Development Project , June 1997.

Table A3.2: Financing Plan: Appraisal Estimate and Actual ($ million) Item Appraisal Estimate Foreign Local Total 0.0 0.8 8.1 8.9 5.0 1.1 35.3 41.4 5.0 1.9 43.5 50.4 Actual Local 3.4 1.3 31.5 36.2

Foreign 0.0 1.2 9.4 10.6

Total 3.4 2.5 40.9 46.8

Borrower-Financed UNDP ADB-Financeda Total

ADB = Asian Development Bank, UNDP = United Nations Development Programme. Figures may not tally due to rounding. Source: PCR: 956-BAN(SF): Upazila Afforestation and Nursery Development Project , June 1997.

24 Appendix 4 ALLOCATION OF LOAN PROCEEDS AND DISBURSEMENT ($)

Category Original Allocation Last Amount Revised Cancelled Allocation Net Amount Available Amount Undisbursed a Balance Disbursed

A.

Foreign Exchange Woodlot Plantations 01-A Plantation Establishment and Maintenance 01-B Equipment 01-C Buildings 01-D Building Maintenance Agroforestry Plantations 02 Plantation Establishment and Maintenance Strip Plantations 03 Plantation Establishment and Maintenance BWDB Plantations 04 Plantation Establishment and Maintenance 05 Seedling Distribution Forest Extension Nursery Training Centers 06-A Buildings 06-B Vehicles Upazila Nurseries 07-A Buildings 07-B Vehicles 08 Publicity and Field Research Project Support 09-A Buildings 09-B Vehicles 09-C Equipment Subtotal (A) B. Local Currency Woodlot Plantations 10-A Plantation Establishment 10-B Equipment 10-C Building 10-D Building Maintenance 10-E Staff Salaries 10-F Plantation Maintenance Agroforestry Plantations 10-G Plantation Establishment 10-H Staff Salaries Strip Plantations 10-I Plantation Establishment 10-J Staff Salaries BWDB Plantations 10-K Plantation Establishment 10-L Staff Salaries 10-M Seedling Distribution Forest Extension Nursery Training Centers 10-N Buildings and Maintenance 10-O Staff Salaries Upazila Nurseries 10-P Buildings 10-Q Vehicles 10-R Staff Salaries 10-S Publicity and Research Project Support 10-T Buildings 10-U Vehicles 10-V Equipment and Maintenance 10-W Unallocated Subtotal (B) 11 12 Service Charge Unallocated

1,053,000 81,000 386,000 153,000 407,000 923,000 53,000 1,030,000 181,000 106,000 267,000 78,000 11,000 15,000 280,000 744,000 5,768,000

1,142,016 89,647 414,114 168,119 447,044 1,011,264 57,970 1,263,515 207,545 172,725 289,269 84,957 12,667 44,250 661,322 991,583 7,058,007

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

1,142,016 89,647 414,114 168,119 447,044 1,011,264 57,970 1,263,515 207,545 172,725 289,269 84,957 12,667 44,250 661,322 991,583 7,058,007

836,995 80,990 393,395 60,692 448,166 1,257,516 55,826 2,272,296 219,472 267,819 284,401 23,929 41,503 35,683 755,276 1,309,862 8,343,821

305,021 8,657 20,719 107,427 (1,122) (246,252) 2,144 (1,008,781) (11,927) (95,094) 4,868 61,028 (28,836) 8,567 (93,954) (318,279) (1,285,814)

7,613,000 27,000 900,000 114,000 1,088,000 62,000 1,149,000 201,000 4,818,000 576,000 392,000 50,000 2,603,000 793,000 1,248,000 781,000 107,000 1,743,000 20,000

8,241,807 30,365 963,370 126,091 1,430,643 68,353 1,264,448 220,334 5,712,348 919,851 431,875 55,016 4,274,691 1,139,354 1,758,449 846,090 116,591 1,913,548 23,918

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

8,241,807 30,365 963,370 126,091 1,430,643 68,353 1,264,448 220,334 5,712,348 919,851 431,875 55,016 4,274,691 1,139,354 1,758,449 846,090 116,591 1,913,548 23,918

7,195,632 26,611 917,921 45,785 1,496,047 637 1,275,548 31,405 6,601,957 1,401,055 409,393 0 5,843,045 1,461,622 2,134,588 853,204 35,192 881,887 84,263

1,046,175 3,754 45,449 80,306 (65,404) 67,716 (11,100) 188,929 (889,609) (481,204) 22,482 55,016 (1,568,354) (322,268) (376,139) (7,114) 81,399 1,031,661 (60,345) 92,905 35,138 6,414 2,992,067 1,967,874 515,647 272,185 1,469,892

156,000 449,736 0 449,736 356,831 90,000 282,319 0 282,319 247,181 135,000 244,644 0 244,644 238,230 10,659,000 7,992,067 5,000,000 2,992,067 0 35,325,000 38,505,908 5,000,000 33,505,908 31,538,034 1,397,000 978,000 1,538,583 272,185 0 0 1,538,583 272,185 1,022,936 0

43,468,000 47,374,683 5,000,000 42,374,683 40,904,791 Total BWDB = Bangladesh Water Development Board. a Cancelled at loan closing date of 15 April 1996. Source: PCR: 956-BAN(SF): Upazila Afforestation and Nursery Development Project , June 1997.

25 Appendix 5 TRAINING DELIVERY

Trainees 1990 1. Community Leaders, etc. (five-day session at FENTC/upazila nurseries) Target As Implemented Extension Officers of Department of Agricultural Extension (one week at FENTC/upazila nurseries) Target b As Implemented Nursery Operators (one month at FENTC/upazila nurseries) Target As Implemented Foresters/Rangers (one month at FENTC/upazila nurseries) Target As Implemented Senior Forest Department Staff (two-week overseas study tour) Target As Implemented Senior Forest Department Staff (six-month training program in Thailand) Target As Implemented Senior Forest Department Staff (three-week social forestry course) Target As Implemented Senior Government Officers (annual seminar) Target c As Implemented Upazila Agricultural Officers Target As Implemented
a

1991

Fiscal Year 1993 1992

Total 1994 1995

0 0

5,000 286

10,000 18,774

15,000 41,417

20,000 13,022

20,000 15,505

70,000 89,004

2.

250

400

750

1,100

1,500

4,000

3.

0 0

185 50

208 300

240 300

260 127

260 0

1,153 777

4.

0 0

82 60

122 200

180 350

180 241

180 0

744 851

5.

0 0

4 0

4 0

4 5

4 5

4 0

20 10

6.

0 0

0 0

2 0

2 0

0 4

0 0

4 4

7.

0 0

10 0

25 50

25 50

25 10

25 0

110 110

8.

30

30

30

30

30

150

9.

0 0

0 514

0 0

0 0

0 0

0 0

0 514

FENTC = forest extension nursery training center. Includes farmers, teachers, and social workers. b Not implemented; training refocused on upazila agricultural officers (see item 9). c Not implemented. Sources: PCR: 956-BAN(SF): Upazila Afforestation and Nursery Development Project , June 1997; and Food and Agriculture Organization of the United Nations. 1996. Thana Afforestation and Nursery Development Project . Terminal Report. Rome, Italy.
a

26 Appendix 6 MAIN FEATURES OF THE PROJECT BENEFIT-SHARING AGREEMENTS

Terms and Conditions Eligibility criteria Agroforestry Woodlot Plantation Strip Plantation

Local, agricultural laborers, landless, and poor farmers Jointly by Forest Department (FD) and nongovernment organizations (NGOs) One year (renewable)

Local, agricultural laborers, landless, and poor farmers Jointly by FD and NGO

Local, agricultural laborers, landless, and poor farmers Jointly by FD and NGO, and by FD when there is no NGO

Participant selection authority

Duration of contract Termination and relevant terms

One year (renewable)

Rotation period to be decided by FD (renewable) FD can unilaterally terminate with two months notice. Participants cannot claim compensation in case of eviction/termination; no recourse to legal remedy; FD can modify terms arbitrarily.

FD can unilaterally terminate: one-month notice by FD, and three months by the participant. Participants cannot claim compensation in case of eviction/termination; no recourse to legal remedy; FD can modify terms arbitrarily. Fuelwood, fast-growing trees, fruit trees, food crops, animal fodder, legumes, honey bees Sites selected by FD, state forestland

FD can unilaterally terminateon the spot termination. Participants cannot claim compensation in case of eviction/termination; no recourse to legal remedy; FD can modify terms arbitrarily.

Allowable cultivation and sites

Fuelwood, fast-growing trees, and interim cash crops in unutilized spaces Sites selected by FD, state forestland Prescribed by FD, with handheld implements; no sheds or shelters are allowed 40 percent

Fuelwood, fast-growing trees, road sides; land along railroads; and river and coastal embankments

Mode of cultivation

Prescribed by FD, with handheld implements; temporary shelters may be erected 50 percent

Prescribed by FD, with handheld implements; no sheds or shelters are allowed 65 percent

Participants' share at maturity Land ownership

State forestland

State forestland

Other government landowning agencies None Wage for planting/filling, first thinning, share of forest produce, and all agricultural crops Decision of the Ministry of Environment and Forest is final; no recourse to arbitration No provision

Revenue tax Benefits to participants

None Wage for planting/filling, first thinning, share of forest produce, and all agricultural crops FD decision is final; no recourse to arbitration

None Wage for planting/filling, first thinning, share of forest produce, and all agricultural crops FD decision is final; no recourse to arbitration

Dispute resolution

Inputs for agricultural crops

FD to provide participants in the first year

No provision

27 Appendix 7, page 1 FINANCIAL AND ECONOMIC REEVALUATION A. Methodology and Assumptions

1. The financial and economic viability of the Project was reassessed using essentially the same methodology used in the appraisal and project completion reports (PCRs), except for the difference in the unit of account. The economic analyses of the appraisal had measured project effects at the world price level in national currency (taka [Tk]) by using a standard conversion factor of 0.8 to revalue nontraded goods at their world price level. The PCR has also used the world price level, and the standard conversion factor of 0.8 to revalue nontraded goods at their world price level. However, the PCR measured all project resource effects in dollars. The revaluation for this project performance audit report (PPAR) uses a unit of account based on the domestic price level in the local currency (domestic price numeraire), with conversion of border market price values of traded goods using a shadow exchange rate factor of 1.25. However, whichever unit of account is used, the economic internal rates of return (EIRRs) will be the same. The PPAR uses the domestic price numeraire because a large portion of the inputs and outputs of the Project comprises nontraded goods and services. 2. The financial and economic analyses were conducted in 2001 constant prices. Financial prices were converted into economic prices by adjusting for the exclusion of taxes, duties, subsidies, and debt service charges, and the application of a shadow exchange rate factor of 1.25 to the border prices of traded goods. Given a situation of less than full employment in the rural areas, a shadow wage rate factor of 0.85 was used in the analysis. 3. Yield estimates and assumptions of various plantations, and their comparisons with those of the appraisal and PCR, are detailed in Table A7.1. The PPAR yield estimates for woodlots, agroforestry, block, and strip plantations were based on pre-auction tree-by-tree measurements conducted by the Forest Department (FD) over more than 600 hectares (ha) in early 2001. Due to the specific characteristics of the domestic markets for wood, the pre-auction estimates by FD indicated product differentiation in favor of poles and small-diameter logs. Compared with the PCR yield estimates, the PPAR yield estimates1 allow for a greater proportion of the wood products to be used as poles and sawlogs. Allowing for an extended rotation period, the PPAR yield estimates are not significantly different from the yield estimates of the appraisal. Beyond 10 years of age, yields were assumed to stagnate, and no production increases could be expected from delays in harvest beyond the10-year rotation. As confirmed by the PCR, the continuing removal of leaves and twigs from the forest floor has affected the long-term fertility of the soil. The decomposition of leaves is a major source of natural nutrient recycling. The PCR yield estimates, for strip plantations and the seedling distribution, were significantly higher than the PPAR yield estimates. 4. Although FD had not carried out specific assessments of unaccounted losses including from unauthorized harvests, the PPAR has assumed a provision of 20 percent of unaccounted
1

For the PPAR, based on the pre-auction measurements, the small sawlogs were estimated to have a minimum diameter of 14.5 centimeters (cm), although on average the small logs were not expected to be much larger than the minimum size. The domestic markets cater to these small-diameter logs at discounted prices for local construction. Similarly, due to quality features, the poles are specific for the domestic markets, possessing an average diameter of 19 cm at breast-height, and an average length of 5.5 meters (m). In fact, FD has categorized the wood products as small sawlogs and poles, based on girth sizes that are much smaller than their conventional norms, to meet specific demands of the local markets for low quality small logs and poles for construction purposes. Without this reclassification, much of the small sawlogs and poles of the project plantations would simply qualify as fuelwood at significantly lower prices. On the other hand, the small logs were assumed by the PCR to be of larger diameter ranging from 19 cm to 40 cm. However, the PCR did not provide an indication for the diameter and length of the poles.

28 Appendix 7, page 2 losses before harvests based on the Operations Evaluation Missions (OEM) observations and discussions in the field. These unaccounted losses were taken into consideration in estimating the wood yields for the PPAR. The losses due to thefts were not specifically quantified and documented by FD and the participants. Thefts reduce the financial value of anticipated harvests to legitimate recipients of benefits. In economic terms, thefts of trees do not necessarily cause economic losses, although the benefits accrue to unauthorized recipients. Unaccounted harvests/losses were included in the estimation of benefits for the purpose of estimating the economic benefits, while such losses would reduce the financial benefits to legitimate beneficiaries. 5. The intercrops in the agroforestry areas had largely failed, and their production was limited to the first two years of the plantation establishment. In general, these intercrops were estimated to be equivalent to the low-intensity crops that would have continued in the case without the Project. The OEM estimated that the intercrop benefits from agroforestry had offset the opportunity costs of the degraded forestland in terms of former food crop cultivation. Food crops could not continue to grow mainly due to overshading after the second year of the plantations. These encroached lands, prior to the establishment of the plantations, were used by occupants for growing food crops, albeit at marginal levels. Although the PCR had assumed that intercrops would continue to generate incremental returns, the OEM could not confirm that such crops had been sustained. During the extensive field interviews, Project participants had complained that they could no longer grow food crops. Although permissible, intercropping in woodlots had not occurred primarily because of the tree planting density of 2,900 seedlings/ha. Similarly, intercrops in strip plantations had largely failed due to lack of participation. 6. The projected harvests and their output volumes for all plantation types, including from the trees out of the seedling distribution, are presented in Tables A7.2 and A7.3. In the absence of site-specific harvesting plans, and given the delays in harvesting that have occurred to date, the PPAR has assumed a rotation period of 10 years with delayed harvesting of over 10-yearold trees in 2002 and 2003. With the ongoing and continuing capacity-building efforts under the Asian Development Bank-financed Coastal Greenbelt Project and the Forestry Sector Project (FSP), the harvesting of 10-year-old trees is expected to be on schedule after 2003. Given the staggered age distribution of the existing plantations, the overall harvest (with the exception of the seedling distribution) was projected to commence in 2002 and end in 2006. 7. In estimating the effective areas of the trees established by the distribution of seedlings, the OEM estimated that 6,000 seedlings were required for an effective base supply of 2,900 seedlings/ha. This assumption is based on (i) a cull allowance of 10 percent; (ii) 50 percent loss during transport, distribution, and waiting periods before planting; and (iii) 25 percent of replacement rates after planting. The discipline for quality planting expected from FD cannot be equally expected from the recipients of the seedlings. The effective planted area for the seedling distribution was estimated at 16,500 ha, significantly less than the areas assumed at appraisal (22,000 ha) and at project completion (over 29,000 ha). 8. As in the PCR, strip plantations were recorded in kilometers (km) and converted into hectare equivalent, assuming an average of 4.76 km/ha based on an average line-to-line spacing between strips of 1.5 m, 1.4 row strips/km, and a line spacing of 2.5 m between trees along the row. An adjustment factor of 0.75 was applied to account for failed areas and existing gaps in the strips due to inadequate maintenance. 9. Tangible outputs from project investments, including unaccounted harvests, were estimated at 4.65 million cubic meters (m3) of wood, comprising 1.51 million m3 of fuelwood, 2.06 million m3 of poles, and 1.08 million m3 of small sawlogs over one rotation. These outputs represent an average effective gross yield of 104.7 m3/ha for all plantations, before losses. In

29 Appendix 7, page 3 addition, leaves and twigs collected from the forest floor for fuel were estimated to amount to about 688,000 tons. At appraisal, the Project was envisaged to produce 19.5 million m3 of wood over four tree rotations in 30 years. While at appraisal, the plantations were projected to be sustained over four seven-year rotations in 30 years without reliance on further external financing, benefits that can be justifiably attributed to the Project are now limited to one extended rotation of 10 years. For the purpose of estimating the financial and economic returns on project investments, the PPAR has assumed an investment period of one rotationfuture replanting and investments are included in the investment plan of the ongoing Asian Development Bank-financed FSP. The PCR had also assumed that the project benefits would be derived from one rotation. 10. The OEM could not confirm the PCR assumption that the harvesting of branches (prunings) had taken place or had been organized by FD. The PPAR has taken into account the collection of leaves and twigs from the forest floor, as observed, as part of project benefits, but not the harvesting of the branches of the trees (prunings). The Coastal Greenbelt Project and FSP initiatives had in fact encouraged FD to develop pruning and thinning plans, but so far FD has not undertaken such activities. 11. The OEM recognized, that under normal circumstances, tree coppices after harvests would generate significant savings in the replanting costs for the subsequent rotation in a multirotation period. Such coppices and their benefits were recognized at appraisal, but were not taken into account by the PCR. However, the major coppicing species (Eucalyptus camaldulensis and Acacia auriculiformis) have been banned in Bangladesh. The current replanting plans under FSP have indicated full replanting of wood trees at a density of 2,500 seedlings/ha. Further, under normal circumstances, the establishment costs for the second rotation would be reduced, considering the extent of land preparation that had been conducted for the first rotation. However, when full replanting is undertaken, the potential savings from the reduced land preparation due to the earlier investments for the first rotation may be offset, if not exceeded, by the costs of clearing up the roots and stumps of the banned species at replanting. FD had generally acknowledged that the species ban would need to be reviewed because of its economic implications. However, the plan for the review by FD and its options for the Ministry of Environment and Forest to consider were uncertain at the time of the OEM. Accordingly, the PPAR has taken the decision to exclude the residual benefits of coppices and potential savings in replanting costs from the financial and economic analyses of the Project. 12. Assumptions for domestic inflation, manufacturing unit value index, exchange rates, and price conversion indices from current terms to constant 2001 prices are detailed in Table A7.4. The actual financial Project costs in current terms (Table A7.5) were converted into financial and economic costs in constant 2001 prices in the local currency (Table A7.6). 13. Because of the quality features and characteristics of the project outputs, the financial and economic stumpage values of fuelwood, poles, and small-diameter sawlogs were derived from the prevailing market prices in major rural markets (Table A7.7). The values of these outputs in domestic market prices reflect the consumers willingness to pay. Domestic prices for fuelwood, poles, and small sawlogs have been relatively stable in constant terms. Given the quality features and their utility which suit domestic low-cost construction purposes, the prices for poles and the undersized small sawlogs do not follow the price trends of internationally traded hardwood (such as Malaysian Meranti). The quality features of the project outputs are best fitted for the domestic markets, and generally considered as nontradable goods in economic terms. The PCR and PPAR have differed significantly on the prices for sawlogs, poles, and fuelwood. The PCR did not indicate its financial price derivation (adjustments for marketing costs, transport, handling, felling, cutting, and local haulage costs) from market prices

30 Appendix 7, page 4 to stumpage prices. The PCR has used Malaysian Meranti (hardwood) as a basis for deriving the economic import parity prices for sawlogs at a 33 percent discount. Given that the project outputs are of quality features that best fit the localized markets, the OEM considered that the PCR assumption for deriving the economic prices of small sawlogs based on hardwood (Malaysian Meranti) was not appropriate for the PPAR. The quality features of the wood outputs of the project plantations are such that they will not benefit from the higher prices of larger-sized woods and quality as assumed by the PCR. 14. For comparison purposes, the OEM has also estimated the economic price of fuelwood in the case when it is perfectly substitutable with kerosene, to assess the sustainability of rural market prices for fuelwood at retail points (Table A7.7). In the case of the PCR, the stumpage price of fuelwood was assumed at a level that amounted to be equivalent to the retail price of kerosene in energy equivalent. Adjusting for felling, transport, and marketing costs, the implicit retail PCR prices of fuelwood in energy equivalent would have been at least 50 percent higher than the retail price of kerosene. Under normal circumstances, the retail prices of fuelwood could not be expected to exceed the retail prices of kerosene significantly, for the consumers would act rationally in their choices of energy options. Additionally, the collection of leaves and twigs from the forest floor are labor intensive, and retail prices at the rural markets for leaves and twigs have included collection and transport costs. Therefore, at the point of collection or on the forest floor, these leaves command financial values that are significantly less than their retail prices. For reference, the following table summarizes the PCR and PPAR prices for wood products. Table A7.1a: Comparison of Wood Prices Between PCR and PPAR at Stumpage and Point of Collection Basis
Item Small Sawlogs 3 per m $139a at sawmills Tk3,800 $70.24 $134.00a Poles 3 per m Fuelwood 3 per m Leaves per ton

PCR Financial market prices PPAR Financial market prices PCR Financial stumpage/point of collection PPAR Financial stumpage/point of collection

Tk2,200 $40.66 $63.00b

Tk1,300 $24.03 $20.00b $16.00

Tk2,390 $44.18 Rangec $143.00 $157.00 Tk2,446 $45.21

Tk1,110 $20.52

Tk390 $7.21

Tk500 $9.24

PCR Economic stumpage (world price numeraire) PPARd Economic stumpage (domestic price numeraire)

$50.00

$16.00

$13.00

Tk1,166 $21.55

Tk446 $8.24

Tk500 $9.24

= no data available, m3 = cubic meter, PCR = project completion report, PPAR = project performance audit report. a The PCR did not indicate the derivation of the stumpage price of small sawlogs from the reported average prices of various wood species at local sawmills. b The PCR did not provide the derivation of stumpage prices of poles and fuelwood from their retail market prices. c The PCR derived the economic stumpage price of small sawlogs of the project outputs from Malaysian Meranti (hardwood) on an import parity basis, at a discount of 33 percent for quality adjustment, rather than using the domestic market prices of wood products of quality features specific to the Project. d The derivations of financial and economic stumpage prices are shown in Table A7.7.

31 Appendix 7, page 5 B. Rates of Return

15. The base case financial internal rates of return (FIRRs) were calculated for woodlot plantations (Table A7.8) at 9.8 percent, agroforestry plantations (Table A7.9) at 14 percent, block plantations (Table A7.10) at 15.2 percent, and strip plantations (Table A7.11) at negative 7.1 percent, and seedling distribution (Table A7.12) at 10.4 percent. Excluding debt service, the combined project investments including non-plantation costs for publicity, training, consultants, and project support, are expected to generate an FIRR of 6.3 percent (Table A7.13). This FIRR takes into account the total estimated benefits after the losses from unaccounted harvests. This FIRR is far below the expected overall FIRR of 25.8 percent at appraisal, and 26.1 percent at project completion. Like in the case of the appraisal and PCR, the FIRR provides a measure of financial returns on the total investments before the distribution of benefits to legitimate beneficiaries. With the exception of the strip plantations, the FIRRs range from 10 to 15 percent. The strip plantations have the lowest FIRR (negative) because of reduced benefits and high development costs. The financial investment costs for the strip plantations amounted to an average of Tk229,000 in constant 2001 prices per ha equivalent, as compared with Tk38,400/ha for woodlots, Tk20,100/ha for agroforestry, and Tk25,000/ha for block plantations. The development cost of the strip plantations was considered excessive during the midterm review (March 1992) of the project implementation. 16. The reduced FIRR is due to a number of reasons, including the following: (i) The Project failed to generate intermediate benefits that could have been derived from thinning operations. More significantly, appropriate pruning and thinning operations would have allowed the remaining tree stands to produce larger-sized sawlogs and poles to gain higher prices for improved quality features. Significant differences in the output prices used are dominant reasons for the reduced rates of return as compared with those of the PCR (paras. 13-14). The delays in harvest have undermined the partnership to maintain and protect the plantations. Significant tree losses due to unaccounted harvests have occurred, and are expected to continue because of the unraveling partnership between FD and the project participants. Intercrops had largely failed and not generated incremental returns: (a) the tree density and its crown cover had prevented alley cropping for agroforestry, (b) the tree configuration had prevented participants from growing food crops in the woodlot and block plantation areas, and (c) intercropping in strip plantations had been unsuccessful. Delayed harvests of mature trees have prevented the timely realization of benefits and reduced their time value. Despite the commendable success in seedling distribution, the effective plantation areas from the distribution of seedlings are expected to not exceed 16,500 ha (para. 7). Despite FDs success in completing the strip plantation target, the earlier less than satisfactory performance of the upazila administrations combined with the inadequate participation for maintenance had affected tree survival and created gaps, and reduced the effective strip plantation areas.

(ii) (iii)

(iv)

(v) (vi)

(vii)

32 Appendix 7, page 6 (viii) Apart from the above considerations, shortfalls in benefits from the appraisal estimates also stem from the reduction of the analyzed period from four to one rotation; and forgone benefits that the appraisal had otherwise assumed to derive from savings in replanting costs due to coppices for a multi-rotation time framework under normal circumstances (para. 11).

17. Adjusting for economic prices, and adding the unaccounted harvests to the benefit stream, the EIRRs were calculated for woodlot plantations (Table A7.14) at 14.3 percent, agroforestry plantations (Table A7.15) at 18 percent, block plantations (Table A7.16) at 20.1 percent, strip plantations (Table A7.17) at negative 3.5 percent, and seedling distribution (Table A7.18) at 11.8 percent. The EIRR for the entire Project was estimated at 9.3 percent, far below the expected EIRR of 22.9 percent at appraisal, and 28.3 percent at project completion. 18. The comparison of FIRRs and EIRRs with those of the appraisal and the PCR are shown in Table A7.20. The sensitivity of the rates of return to declines in yields and prices, losses before harvests, and delays in harvest is shown in Table A7.21. In the event, losses before harvests could be avoided from 2002, the Project FIRR would rise from 6.3 percent to almost 7.2 percent. 19. The OEM has acknowledged that there are other benefits that have not been quantified. Tree planting on roadsides and waterway embankments, including in coastal areas, have stabilized erosion-prone areas and served as windbreaks to reduce soil erosion. However, considering that site-specific conditions were not monitored, and there were no reliable samples of with and without project conditions, these benefits were excluded from the EIRR calculations.

Table A7.1: Yield Estimates of Various Plantations

Plantation Type Leaves and Twigs (kg/ha) Year 1 Year 2 > Year 3
a

Thinning 3 (m /ha) Year 3-4 15 5 6-15 15 15

Seven-Year Rotation (m /ha) Fuelwood Poles Small Logs Total

10-Year Rotation (m /ha) d e Total Fuelwood Poles Small Logs

Woodlot f Appraisal PCR g PPAR Agroforestry h Appraisal PCR g PPAR Strip Plantations i Appraisal PCR g PPAR Block Plantations j Appraisal PCR g PPAR Seedling Distribution k Appraisal PCR l PPAR
a

500 500 500 500 500 500

1,000 1,000 1,000 1,000 1,000 1,000

2,000 2,000 2,000 2,000 2,000 2,000

3

60 20 24-60 60 n.a. 60

30 10 12-30 30 30

90 30 36-90 90 90

93 36 40 29 124 36 93 36 138 33

3 53 1 33 4 53 3 53 5 43

24 20 11 28 32 24 24 20 47 29

120 109 52 89 160 113 120 109

33

190 104

= not calculated, ha = hectare, kg = kilogram, m = cubic meter, PCR = project completion report, PPAR = project performance audit report. The PPAR confirmed the PCR assumptions on leaves and twigs collected from the forest floor of woodlots, block plantations, and the plantations from the seedling distribution. No harvests were conducted on the basis of a seven-year rotation. Both the PCR and PPAR assume a 10-year rotation. Small logs and poles are sold in the local markets for construction purposes. The quality features of these logs and poles do not qualify them as internationally tradable goods. For the PPAR, poles were estimated to have an average breast-height diameter of 19 centimeters, length of 5.5 meters, and a form adjustment factor of 0.7. For the PPAR, small sawlogs were estimated to have a minimum diameter of 14.5 centimeters, although on average the small logs were not expected to be much larger than the minimum size. Poles were not differentiated from small logs. The PPAR yield estimates were based on pre-auction measurements in 2001 by the Forest Department in Dhaka Division (40 ha), Tangail Division (603 ha), and Dinajpur Division. An estimate of 20 percent of losses has been added to the pre-auction measurements to account for earlier unaccounted harvests. Agroforestry benefits were envisaged to include additional benefits from sustained food crops, bamboo, and produce from fruit trees. Different assumptions were used for main and feeder roads, embankments, and railways. Poles were not differentiated from small logs, and yields were assumed to be the same as those of woodlots. Poles were not differentiated from small logs, and yields were assumed to be the same as those of woodlots with 2,500 seedlings/ha. Estimated to have the average yields of the fuelwood and poles of the woodlots and agroforestry, but with 20 percent additional sawlogs.

b c

d e

f g

Appendix 7, page 7

h i j k l

Table A7.2: Projected Harvests

Item Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Woodlot Plantation Planted areas, first rotation (ha) Year 2 trees (ha) Year 3 and older trees (ha) Year 7 and older trees (ha) Year 10 and older trees (ha) Estimated losses/unaccounted harvests (ha) Fuelwood (m3) Poles (m3) Small sawlogs (m3) Total fuelwood, poles, logs (m3) Authorized harvest areasa (ha) Year-end balance of first rotation (ha) Production from authorized harvests Leavesb (ton) Fuelwood (m3) Polesc (m3) Small sawlogsd (m3) Total fuelwood, poles, logs (m3) Agroforestry Plantation Planted areas, first rotation (ha) Year 2 trees (ha) Year 3 and older trees (ha) Year 7 and older trees (ha) Year 10 and older trees (ha) Estimated losses/unaccounted harvests (ha) Fuelwood (m3) Poles (m3) Small sawlogs (m3) Total fuelwood, poles, logs (m3) Authorized harvest areasa (ha) Year-end balance of first rotation (ha) Production from authorized harvests Fuelwood (m3) Polesc (m3) Small sawlogsd (m3) Total fuelwood, poles, logs (m3)

19,335

551 1,983 2,845 2,851 551 1,983 2,845 551 2,534

3,811 2,851 5,379

3,867 140,179 203,018 77,340 420,536 15,468

4,591 2,703 3,811 4,591 2,703 8,230 12,041 16,632 19,335 19,335 19,225 551 2,534 5,379 8,230 11,931 551 2,424 110 397 3,995 14,377 5,786 20,822 2,204 7,932 11,984 43,130

18,828 16,125 4,872 569 20,626 29,873 11,380 61,879

551 2,534 5,379 8,230 12,041 16,632 19,335 19,335 19,335 19,225 18,828 18,259 378,787 560,715 812,070 309,360 1,682,145 276 1,543 4,508 9,339 15,515 22,567 30,025 35,967 38,670 38,670 38,450 37,656

18,259 18,259 7,154 570 20,670 29,936 11,404 62,009 2,027 15,662

15,662 15,662 8,368 762 27,630 40,016 15,244 82,889 4,557 10,343

10,343 10,343 7,640 918 33,285 48,206 18,364 99,854 3,049 6,376

6,376 6,376 6,376 541 19,597 28,382 10,812 58,790 3,673 2,162

2,162 2,162 2,162 0 0 0 0 0 2,162 0

36,518 31,324 20,686 12,752 4,325 73,486 165,184 110,519 133,139 78,387 106,428 239,232 160,062 192,822 113,526 40,544 91,136 60,976 73,456 43,248 220,458 495,552 331,557 399,417 235,161

34

5,111

48

538 48

409 538 48

466 409 586

722 466 995

800 722 1,461

2,128 800 2,183 48

2,128 2,983 586

5,111 995

1,022 29,388 33,222 28,111 90,720 4,089 48 117,553 132,886 112,442 362,881 586 995 1,461 2,183 2,983 5,111 5,111 5,111

5,111 1,461 48 10 276 312 264 852 5,101

5,101 2,173 576 108 3,094 3,497 2,959 9,550 4,994

4,994 2,866 878 82 2,352 2,659 2,250 7,260 4,912

4,912 4,912 1,262 93 2,680 3,029 2,563 8,272 469 4,350 13,478 15,236 12,892 41,606

4,350 4,350 1,422 144 4,152 4,693 3,971 12,816 700 3,506 20,125 22,750 19,250 62,125

3,506 3,506 1,378 160 4,600 5,200 4,400 14,200 578 2,768 16,606 18,772 15,884 51,262

2,768 2,768 2,768 426 12,236 13,832 11,704 37,772 640 1,702

1,702 1,702 1,702 0 0 0 0 0 1,702 0

18,400 48,944 20,800 55,328 17,600 46,816 56,800 151,088

Appendix 7, page 8

ha = hectare, m3 = cubic meter. Based on a rotation period of 10 years. Site-specific harvesting plans were not prepared by the Forest Department. Accordingly, estimates were made by the Operations Evaluation Mission for late harvesting of mature plantations to occur in 2002 and 2003, after which the harvesting of 10-year old trees was expected to be on schedule. Provisions for losses/unaccounted harvests of mature trees were assumed at 20 percent for woodlots, agroforestry, and block plantations due to uncertain social conditions as caused by unsatisfactory benefit-sharing arrangements. These losses were assumed to have occurred from 1999. b Based on conservative yields of mainly leaves, including twigs, of 0.5 ton/ha (year 1), 1.0 ton/ha (year 2), and 2.0 ton/ha (year 3 onwards). c Poles were estimated to have an average breast-height diameter of 19 centimeters, length of 5.5 meters, and a form adjustment factor of 0.7. d Small sawlogs of a minimum diameter of 14.5 centimeters.
a

Table A7.2: Projected Harvests (cont'd.)

Item Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Block Plantations Planted areas, first rotation (ha) Year 2 trees (ha) Year 3 and older trees (ha) Year 7 and older trees (ha) Year 10 and older trees (ha) Estimated losses/unaccounted harvests (ha) Fuelwood (m3) Poles (m3) Small sawlogs (m3) Total fuelwood, poles, logs (m3) Authorized harvest areasa (ha) Year-end balance of first rotation (ha) Production from authorized harvests Leavesb (ton) Fuelwood (m3) Polesc (m3) Small sawlogsd (m3) Total fuelwood, poles, logs (m3)

1,089

11

38 11

78 38 11

460 78 49

244 460 127

258 244 587

258 831 11

1,089 49

1,089 127

218 7,895 11,435 4,356 23,686 871 11 20,878 31,581 45,738 17,424 94,743 6 49 30 127 99 587 406 831 836 1,089 1,547 1,089 1,920 1,089 2,178 1,089 2,178

1,089 587 11 2 80 116 44 239 1,087 2,178

1,087 829 47 8 276 399 152 827 1,079 2,174

1,079 1,079 117 16 566 819 312 1,697 9 1,055 2,158 319 462 176 957

1,055 1,055 553 92 3,335 4,830 1,840 10,005 93 870 2,110 3,364 4,872 1,856 10,092

870 870 612 49 1,769 2,562 976 5,307 368 453 1,740 13,340 19,320 7,360 40,020

453 453 453 52 1,871 2,709 1,032 5,612 195 206 906 7,076 10,248 3,904 21,228

206 206 206

206 0 413 7,482 10,836 4,128 22,446

35 Appendix 7, page 9

Table A7.3: Projected Harvests of Strip Plantations and Seedling Distribution

Item Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Strip Plantations Planted areas, first rotation (km) 15,096 Planted areas, first rotationa (ha) 2,379 Year 2 trees (ha) Year 3 and older trees (ha) Year 7 and older trees (ha) Year 10 and older trees (ha) Estimated losses/unaccounted harvests 476 Fuelwood (m3) 17,245 Poles (m3) 24,975 Small sawlogs (m3) 11,298 Total fuelwood, poles, logs (m3) 53,518 Authorized harvest areasb (ha) 1,903 Year-end balance of first rotation (ha) Production from authorized harvests Fuelwood (m3) 68,979 Polesc (m3) 99,900 Small sawlogsd (m3) 45,193 Total fuelwood, poles, logs (m3) 214,071 Seedling Distribution Seedling distribution ('000) 99,000 Planted areas, first rotatione (ha) 16,500 Year 2 trees (ha) Year 3 and older trees (ha) Year 7 and older trees (ha) Year 10 and older trees (ha) Projected harvest areasf (ha) 16,500 Year-end balance of first rotation (ha) Production Leavesg (ton) 288,750 Fuelwood (m3) 536,250 Polesc (m3) 701,250 Small sawlogsd (m3) 470,250 Total fuelwood, poles, logs (m3) 1,707,750 ha = hectare, km = kilometer, m3 = cubic meter.
a

146 23

866 136 23

1,078 170 136 23

594 94 170 159

3,576 563 94 329

4,981 785 563 423

3,855 607 785 607 986 1,771 23 159

2,379 329

2,379 423 23 5 167 242 109 518 2,374

2,374 982 155 27 989 1,433 648 3,070 2,347

2,347 1,739 297 34 1,231 1,783 807 3,822 2,313

23

159

329

423

986

1,771

2,379

2,379

2,379

2,313 2,313 357 19 679 983 445 2,106 128 2,166 4,624 6,697 3,030 14,351

2,166 2,166 774 113 4,085 5,916 2,676 12,678 211 1,843 7,640 11,065 5,005 23,710

1,843 1,843 1,236 157 5,690 8,241 3,728 17,658 451 1,235 16,340 23,665 10,705 50,710

1,235 1,235 1,235 121 4,404 6,378 2,885 13,667 628 486 22,760 32,963 14,912 70,634

486 486 486 0 0 0 0 0 486 0 17,615 25,511 11,541 54,666

9,000 11,000 11,000 1,500 1,833 1,833 1,500 1,833 1,500

8,000 20,000 20,000 20,000 1,333 3,333 3,333 3,333 1,833 1,333 3,333 3,333 3,333 3,333 5,167 6,500 9,833 13,167 16,500 1,500 3,333 5,167

36

1,500 750

3,333 2,417

5,167 5,750

6,500

16,500 6,500 1,500 1,500 9,833 13,167 16,500 16,500 16,500 15,000

15,000 8,333 1,833 1,833 13,167

13,167 9,833 1,833 1,833 11,333

11,333 11,333 1,333 1,333 10,000

10,000 10,000 3,333 3,333 6,667

6,667 6,667 3,333 3,333 3,333

3,333 3,333 3,333 3,333 0

0 0 0 0 0 0 0 0 0 0

9,167 13,333 18,000 24,667 29,667 33,000

33,000 30,000 26,333 22,667 20,000 13,333 6,667 48,750 59,583 59,583 43,333 108,333 108,333 108,333 63,750 77,917 77,917 56,667 141,667 141,667 141,667 42,750 52,250 52,250 38,000 95,000 95,000 95,000 155,250 189,750 189,750 138,000 345,000 345,000 345,000

Strip plantations were recorded in km and converted into ha equivalent, assuming an average of 4.76 km/ha based on an average line-to-line spacing between strips of 1.5 meters, 1.4 row strips/km, and a line spacing of 2.5 meters between trees along the row. An adjustment factor of 0.75 is applied to account for failed areas and gaps in the strips due to inadequate maintenance. Based on a rotation period of 10 years. Site-specific harvesting plans were not prepared by the Forest Department. Accordingly, estimates were made by the Operations Evaluation Mission for late harvesting of mature plantations to occur in 2002 and 2003, after which the harvesting of 10-year-old trees was expected to be on schedule. Provisions for losses/unaccounted harvests of mature trees were assumed at 20 percent due to uncertain social conditions as caused by unsatisfactory benefit-sharing arrangements. These losses were assumed to have occurred from 1999. Poles were estimated to have an average breast-height diameter of 19 centimeters, length of 5.5 meters, and a form adjustment factor of 0.7. Small sawlogs of a minimum diameter of 14.5 centimeters. Converted into area planted in ha, assuming 6,000 seedlings/ha due to seedling cull allowance of 10 percent from a base of 2,900 seedlings/ha, 25 percent replacement, and 50 percent loss during seedling distribution. Based on a rotation period of 10 years, without late harvesting beyond 10 years of age. Based on conservative yields of mainly leaves, including twigs of 0.5 ton/ha (year 1), 1.0 ton/ha (year 2), and 2.0 ton (year 3 onwards).

Appendix 7, page 10

c d e

f g

Table A7.4: Domestic Inflation, Manufacturing Unit Value Index, Exchange Rates, and Price Conversion Indices to Constant 2001 Terms
Item Annual average exchange rates for $1.00a Exchange rate ratio: 2001 to current year National consumer price index (1985/86=100) Domestic inflation-fiscal year July-June:1989=1988/89 Domestic inflation (estimated, calendar year basis)b Local inflation factors: 1990=1.00, end year Local inflation factors: 1990=1.00, mid-year Local inflation multipliers: to constant 2001, mid-year Manufacturing unit value (MUV) indexc MUV factors: 1990=1.00, end year MUV factors: 1990=1.00, mid-year MUV multipliers: to constant 2001, mid-year
a b c

Unit Tk

1988

1989

1990

1991 36.596 1.478 147.7 8.28% 6.41% 1.0641 1.0321 1.6799

1992 38.951 1.389 154.4 4.54% 3.63% 1.1027 1.0834 1.6003

1993 39.567 1.367 158.6 2.72% 3.00% 1.1358 1.1192 1.5490

1994 40.212 1.345 163.8 3.28% 6.10% 1.2050 1.1704 1.4813

1995 40.278 1.343 178.4 8.91% 7.79% 1.2989 1.2520 1.3848

1996

1997

1998

1999

2000

2001

% %

31.733 32.270 34.569 1.705 1.676 1.565 121.1 131.3 136.4 1.06% 8.42% 3.88% 4.74% 6.15% 6.08% 1.0000 1.0000 1.7338

41.794 43.892 46.906 49.085 52.140 54.100 1.294 1.233 1.153 1.102 1.038 1.000 190.3 195.1 208.7 227.3 235.1 245.7 6.67% 2.52% 6.97% 8.91% 3.43% 4.50% 4.60% 4.75% 7.94% 6.17% 3.97% 4.50% 1.3586 1.4231 1.5361 1.6309 1.6956 1.7719 1.3288 1.3909 1.4796 1.5835 1.6633 1.7338 1.3048 1.2465 1.1718 1.0949 1.0424 1.0000 -4.38% 1.16% 0.51% 0.36% 1.1399 1.1531 1.1590 1.1632 1.1660 1.1465 1.1561 1.1611 0.9998 1.0168 1.0084 1.0040 -2.64% 5.88% 1.1325 1.1991 1.1478 1.1658 1.0156 1.0000

3.34% 2.23% 4.31% 1.0000 1.0223 1.0664 1.0000 1.0112 1.0443 1.1658 1.1529 1.1163

-0.29% 3.65% 8.17% 1.0633 1.1021 1.1921 1.0648 1.0827 1.1471 1.0948 1.0767 1.0163

Average of the year, Bangladesh Bureau of Statistics. The 2001 exchange rate is an estimate based on actual rates in April 2001. An average of the actual fiscal year inflation rates.

37

Unit value index in dollar terms of manufactures exported from the G-5 countries (France, Germany, Japan, United Kingdom, and United States), weighted proportionally to the countries' exports to developing countries.

Source: Commodity Markets and the Developing Countries. World Bank, various issues.

Appendix 7, page 11

Table A7.5: Financial Project Costs in Current Terms (in $'000)

Item Foreign Exchange Costsa Woodlot Plantations Agroforestry Plantations Strip Plantations Block Plantations Seedling Distribution Forest Extension Nursery Training Centers Upazila Nurseries Publicity and Field Research Training Consultants Project Support Service Charges Subtotal a Local Costs Woodlot Plantations Agroforestry Plantations Strip Plantations Block Plantations Seedling Distribution Forest Extension Nursery Training Centers Upazila Nurseries Publicity and Field Research Training Project Support Service Charges Subtotal Total Project Costs
a

1990

1991

1992

1993

1994

1995

1996

Total

184 35 8 126 28 1 0 0 43 260 2 687 1,111 110 40 325 725 3 0 13 168 0 2,495 3,182

359 77 20 4 146 187 27 0 0 304 533 33 1,691 2,414 224 125 30 375 1,130 103 0 180 465 0 5,046 6,736

199 54 77 5 154 22 86 0 0 375 188 84 1,244 1,772 155 539 37 397 517 355 0 329 105 0 4,207 5,451

329 52 399 13 541 49 84 0 0 412 331 139 2,349 1,950 155 2,491 93 1,391 559 487 0 486 330 0 7,941 10,290

67 19 298 8 501 51 40 0 0 16 191 234 1,427 1,232 58 1,901 60 1,289 666 410 1 47 161 0 5,824 7,251

234 211 447 26 798 150 65 41 0 59 597 336 2,964 2,528 605 2,832 191 2,052 1,148 468 83 262 419 0 10,588 13,552

0 0 9 0 6 0 7 0 0 0 0 194 215 0 0 76 0 14 0 40 0 10 0 0 140 355

1,372 448 1,258 56 2,272 487 308 42 0 1,210 2,101 1,023 10,577 11,006 1,307 8,003 409 5,843 4,746 1,867 84 1,327 1,648 0 36,240 46,816

38 Appendix 7, page 12

The annual expenditures and their categories are based on the Asian Development Bank's disbursement records. The government financing of these expenditures is included in these financial project costs.

Table A7.6: Project Costs, Constant 2001 Prices (in Tk'000)

Item Financial Costs Woodlot Plantations Agroforestry Plantations Strip Plantations Block Plantations Seedling Distribution Forest Extension Nursery Training Centers Upazila Nurseries Publicity and Field Research Training Consultants Project Support Service Charges Total Economic Costs Woodlot Plantations Agroforestry Plantations Strip Plantations Block Plantations Seedling Distribution Forest Extension Nursery Training Centers Upazila Nurseries Publicity and Field Research Training Consultants Project Support Total
a

1990

1991

1992

1993

1994

1995

1996

Total

78,184 8,821 2,859 0 27,464 45,216 234 0 761 2,699 26,492 131 192,860

170,773 18,580 8,956 2,071 32,146 81,148 8,013 0 11,043 18,974 61,849 2,089 415,642

122,444 12,896 38,285 2,587 34,064 33,596 27,320 0 20,538 22,619 17,933 5,085 337,366

138,986 12,569 176,275 6,433 117,282 37,192 34,872 0 29,762 24,428 39,831 8,215 625,847

77,295 4,573 130,599 4,037 105,977 42,625 26,726 69 2,809 955 20,724 13,645 430,034

153,889 45,351 182,519 12,060 158,318 72,273 29,644 6,917 14,611 3,266 56,180 18,497 753,524

0 741,571 0 102,791 4,583 544,076 0 27,189 1,089 476,339 0 312,050 2,537 129,345 0 6,986 545 80,070 0 72,940 0 223,010 10,483 58,144 19,239 2,774,511

39

68,139 8,083 2,514 0 25,667 41,315 223 0 685 3,373 29,593 179,593

147,506 17,107 7,779 1,780 29,936 77,110 7,797 0 9,939 23,717 67,303 389,974

103,970 11,829 32,918 2,218 31,582 30,708 26,399 0 18,484 28,273 20,120 306,501

120,604 11,495 152,485 5,515 108,711 34,498 33,135 0 26,786 30,535 42,711 566,474

64,003 4,188 112,914 3,463 98,343 39,400 24,860 70 2,528 1,194 22,547 373,510

129,683 41,684 157,940 10,350 147,026 67,929 27,921 7,016 13,150 4,082 62,046 668,826

0 633,905 0 94,385 3,899 470,449 0 23,326 1,012 442,276 0 290,959 2,411 122,746 0 7,087 491 72,063 0 91,175 0 244,320 7,813 2,492,690

Appendix 7, page 13

Based on the domestic price numeraire, adjustments to economic prices include the removal of local taxes, duties, and subsidies on local currency costs; the exclusion of debt service; the application of a shadow exchange rate factor of 1.25 to the border prices of traded goods; and a shadow wage rate factor of 0.85. Labor costs were estimated to amount to 70 percent of the local costs of plantation establishment. Local cost items were identified to consist of nontradable goods and services. Foreign exchange cost items comprise tradable goods such as imported equipment, vehicles, and major inputs, including consulting services.

40 Appendix 7, page 14 Table A7. 7: Estimated Financial and Economic Stumpage Values of Project Output (prices expressed in 2001 constant terms)
Item Financial Prices Fuelwood Retail price at major rural markets Less marketing margin Less transport and handling to marketsa Less tree felling, cutting, and on-site haulage costsb Estimated stumpage value at market prices Polesc Retail price at major rural markets Less marketing margin Less transport and handling to marketsa Less tree felling, cutting, and on-site haulage costsb Estimated stumpage value at market prices Small sawlogsd Retail price at major rural markets Less marketing margin Less transport and handling to marketsa Less tree felling, cutting, and on-site haulage costsb Estimated stumpage value at market prices Economic Pricese Fuelwood Retail price at major rural markets Less marketing margin Less transport and handling to marketsa Less tree felling, cutting, and on-site haulage costsb Estimated stumpage value at market prices Comparison with the estimated economic price of kerosene Kerosene, CIF Chittagong (April 2001), financial price, $34.10/barrel Kerosene, CIF Chittagong (April 2001), economic price, adjusted for SERF Wholesale and retail profit margins Transport and distribution costs Estimated economic retail price of kerosene Estimated economic retail price of kerosene Estimated economic retail price of kerosene Financial retail market price of kerosene Economic value of fuelwood, if perfectly substitutable for kerosenef Retail financial price of fuelwood at rural markets Polesc Retail price at major rural markets Less marketing margin Less transport and handling to marketsa Less tree felling, cutting, and on-site haulage costsb Estimated stumpage value at market prices Small sawlogsd Retail price at major rural markets Less marketing margin Less transport and handling to marketsa Less tree felling, cutting, and on-site haulage costsb Estimated stumpage value at market prices Factor Unit Amount

20.0%

Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3

1,300 260 300 350 390 2,200 440 300 350 1,110 3,800 760 300 350 2,390

20.0%

20.0%

Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 $/mt Tk/mt Tk/mt Tk/mt Tk/mt Tk/kg Tk/l Tk/l Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3 Tk/m3

1,300 260 287 308 446 250.00 16,906.25 1,352.5 2,200.00 20,458.75 20.46 17.56 18.00 1,343 1,300 2,200 440 287 308 1,166 3,800 760 287 308 2,446

10.0%

cm = centimeter; m3 = cubic meter; mt = metric ton; kg = kilogram; CIF = cost, insurance, and freight; l = liter; SERF = shadow exchange rate factor.
a

c d e f

The distance to markets is about 20 kilometers, with transport/handling costs of Tk20/ton/km. Labor costs were assumed to amount to 30 percent of the total transport and handling costs. Based on unit rates paid by wood buyers to local laborers in Mymensingh forest division. These rates were estimated to comprise 80 percent labor content. The poles are generally of an average breast-height diameter of 19 centimeters and length of 5.5 meters. The small sawlogs are of a minimum diameter of 14.5 centimeters and specific for local markets. In domestic prices, with labor costs adjusted with the shadow wage rate factor of 0.85. 1 kg of kerosene = 10,000 kilocalories; 1 kg of fuelwood = 3,500 kilocalories; thermal efficiency of kerosene = 40 percent; thermal efficiency of fuelwood = 10 percent; and specific gravity of fuelwood = 0.75.

Table A7.8: Financial Internal Rate of Return, 2001 Constant Prices, Woodlot Plantations
Item Total Year 1 1990 Year 2 1991 Year 3 1992 Year 4 1993 Year 5 1994 Year 6 1995 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Estimated production Leaves and twigs (ton) 378,787 560,715 Fuelwood (m3) Poles (m3) 812,070 Small sawlogs (m3) 309,360 Total fuelwood, poles, logs (m3)1,682,145 Farmgate value of production Leaves and twigs (Tk'000) Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000) Investment Costs (Tk'000) Net Benefits (Tk'000) Estimated FIRR (%) Estimated NPV, at 12% (Tk'000)

276

1,543

4,508

9,339 15,515

22,567 30,025 35,967 38,670 38,670 38,450 37,656

36,518 31,324 20,686 12,752 73,486 165,184 110,519 133,139

4,325 78,387

106,428 239,232 160,062 192,822 113,526 40,544 91,136 60,976 73,456 43,248 220,458 495,552 331,557 399,417 235,161

189,393 218,679 901,398 739,370 2,048,840

138

771

2,254

4,669

7,757

138

771

2,254

4,669

7,757

18,259 15,662 10,343 6,376 28,660 64,422 43,102 51,924 118,135 265,548 177,669 214,032 96,900 217,815 145,733 175,560 11,283 15,012 17,984 19,335 19,335 19,225 18,828 261,954 563,446 376,847 447,892

11,283 15,012 17,984 19,335 19,335 19,225 18,828

2,162 30,571 126,014 103,363 262,110

741,571 78,184 170,773 122,444 138,986 77,295 153,889 1,307,269 -78,046 -170,002 -120,190 -134,317 -69,538 -142,605 15,012 17,984 19,335 19,335 19,225 18,828 261,954 563,446 376,847 447,892 262,110 9.8% -94,804

m3 = cubic meter, FIRR = financial internal rate of return, NPV = net present value.

41

Table A7.9: Financial Internal Rate of Return, 2001 Constant Prices, Agroforestry Plantations
Item Total Year 1 1990 Year 2 1991 Year 3 1992 Year 4 1993 Year 5 1994 Year 6 1995 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Estimated production 132,886 Small sawlogs (m3) 112,442 Total fuelwood, poles, logs (m3) 362,881 Farmgate value of production Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (TK'000) Total (Tk'000) Investment Costs (Tk'000) Net Benefits (Tk'000) Estimated FIRR (%) Estimated NPV, at 12% (Tk'000) 45,846 147,503 268,736 462,086 102,791 359,295 14.0% 14,648 8,821 -8,821 18,580 -18,580 12,896 -12,896 12,569 -12,569 4,573 -4,573 45,351 -45,351 5,256 16,912 30,812 52,980 7,849 25,253 46,008 79,109 6,476 20,837 37,963 65,276 7,176 23,088 19,088 61,414 Fuelwood (m3) Poles (m3) 117,553 13,478 15,236 12,892 41,606 20,125 22,750 19,250 62,125 16,606 18,772 15,884 51,262 18,400 48,944 20,800 55,328 17,600 46,816 56,800 151,088

Appendix 7, page 15

42,064 111,890 72,328 192,392

52,980

79,109

65,276

72,328 192,392

m3 = cubic meter, FIRR = financial internal rate of return, NPV = net present value.

Table A7.10: Financial Internal Rate of Return, 2001 Constant Prices, Block Plantations
Item Total Year 1 1990 Year 2 1991 Year 3 1992 Year 4 1993 Year 5 1994 Year 6 1995 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Estimated production Leaves and twigs (ton) Fuelwood (m3) Poles (m3) Small sawlogs (m3) Total fuelwood, poles, logs (m3) Farmgate value of production Leaves and twigs (Tk'000) Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000) Investment Costs (Tk'000) Net Benefits (Tk'000) Estimated FIRR (%) Estimated NPV, at 12% (Tk'000)

20,878 31,581 45,738 17,424 94,743

30

99

406

836 1,547 1,920 2,178

2,178

2,178

2,174

2,158 319 462 176 957

2,110

1,740

906

413

3,364 13,340 4,872 19,320 1,856 7,360 10,092 40,020

7,076 7,482 10,248 10,836 3,904 4,128 21,228 22,446

10,439 12,317 50,769 41,643 115,168 27,189 87,980 15.2% 5,237

15

50

203

418

774

960 1,089

1,089

1,089

1,087

3 2,071 -2,068

15 2,587 -2,572

50 6,433 -6,384

203 4,037 -3,834

418 12,060 -11,642

774

960 1,089

1,089

1,089

1,087

1,079 124 513 421 2,137

1,055 870 1,312 5,203 5,408 21,445 4,436 17,590 12,211 45,108

453 206 2,760 2,918 11,375 12,028 9,331 9,866 23,919 25,018

774

960 1,089

1,089

1,089

1,087

2,137

12,211 45,108

23,919 25,018

m3 = cubic meter, FIRR = financial internal rate of return, NPV = net present value.

42

Table A7.11: Financial Internal Rate of Return, 2001 Constant Prices, Strip Plantations
Item Total Year 1 1990 Year 2 1991 Year 3 1992 Year 4 1993 Year 5 1994 Year 6 1995 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Estimated production Fuelwood (m3) Poles (m3) Small sawlogs (m3) Total fuelwood, poles, logs (m3) Farmgate value of production Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000) Investment Costs (Tk'000) Net Benefits (Tk'000) Estimated FIRR (%) Estimated NPV, at 12% (Tk'000) 26,902 110,889 108,011 245,802 544,076 -298,275 -7.1% -275,261 2,859 -2,859 8,956 38,285 176,275 130,599 182,519 4,583 -8,956 -38,285 -176,275 -130,599 -182,519 -4,583 1,803 7,434 7,241 16,478 2,980 6,373 12,282 26,268 11,963 25,586 27,224 58,226 8,876 6,870 36,588 28,317 35,639 27,582 81,103 62,769 68,979 99,900 45,193 214,071 4,624 6,697 3,030 14,351 7,640 16,340 11,065 23,665 5,005 10,705 23,710 50,710 22,760 17,615 32,963 25,511 14,912 11,541 70,634 54,666

Appendix 7, page 16

16,478

27,224 58,226

81,103 62,769

m3 = cubic meter, FIRR = financial internal rate of return, NPV = net present value.

Table A7.12: Financial Internal Rate of Return, 2001 Constant Prices, Seedling Distribution
Item Total Year 1 1990 Year 2 1991 Year 3 1992 Year 4 1993 Year 5 1994 Year 6 1995 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 1996 1997 1998 1999 2000 2001 2002 Year 14 2003 Year 15 2004 Year 16 2005 Year 17 2006

Estimated production Leaves and twigs (ton) 288,750 Fuelwood (m3) 536,250 701,250 Poles (m3) 470,250 Small sawlogs (m3) Total fuelwood, poles, logs (m3) 1,707,750 Farmgate value of production Leaves and twigs (Tk'000) Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000) Investment Costs (Tk'000) Net Benefits (Tk'000) Estimated FIRR (%) Estimated NPV, at 12% (Tk'000)
a

750

2,417

5,750

9,167

13,333

18,000 24,667 29,667 33,000

33,000 30,000 26,333 22,667 48,750 59,583 59,583 43,333 63,750 77,917 77,917 56,667 42,750 52,250 52,250 38,000 155,250 189,750 189,750 138,000

20,000 108,333 141,667 95,000 345,000

13,333 108,333 141,667 95,000 345,000

6,667 108,333 141,667 95,000 345,000

144,375 209,138 778,388 1,123,898 2,255,798 917,734 1,338,063 10.4% -67,831

375

1,208

2,875

4,583

6,667

375

1,208

2,875

4,583

6,667

16,500 15,000 13,167 11,333 19,013 23,238 23,238 16,900 70,763 86,488 86,488 62,900 102,173 124,878 124,878 90,820 9,000 12,333 14,833 16,500 208,448 249,603 247,769 181,953 3,626 8,707 14,833 16,500 208,448 249,603 247,769 181,953

9,000 12,333 14,833 16,500

10,000 6,667 42,250 42,250 157,250 157,250 227,050 227,050 436,550 433,217

3,333 42,250 157,250 227,050 429,883

72,913 121,306 -72,538 -120,098

94,979 189,346 175,328 260,235 -92,104 -184,763 -168,661 -251,235

436,550 433,217

429,883

m 3 = cubic meter, FIRR = financial internal rate of return, NPV = net present value. Includes direct costs, upazila nurseries, and costs of the forest extension nursery training centers.

43

Table A7.13: Financial Internal Rate of Return, 2001 Constant Prices, The Project
Item Total Year 1 1990 Year 2 1991 Year 3 1992 Year 4 1993 Year 5 1994 Year 6 1995 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 1996 1997 1998 1999 2000 2001 2002 Year 14 2003 Year 15 2004 Year 16 2005 Year 17 2006

Estimated production Leaves and twigs (ton) 688,415 Fuelwood (m3) 1,315,078 1,791,844 Poles (m3) 954,669 Small sawlogs (m3) Total fuelwood, poles, logs (m3) 4,061,590 Farmgate value of production Leaves and twigs (Tk'000) Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000) Total Investment Costsa (Tk'000) Net Benefits (Tk'000) Estimated FIRR (%) Estimated NPV, at 12% (Tk'000)

1,026

3,965

10,288

18,604

29,254

41,403 56,238 67,554 73,848

73,848 70,628 66,163 61,343 48,750 59,583 59,583 135,240 63,750 77,917 77,917 185,490 42,750 52,250 52,250 94,642 155,250 189,750 189,750 415,372

53,433 304,646 419,585 212,247 936,479

35,759 265,138 363,485 189,925 818,549

20,325 289,708 398,499 204,872 893,079

4,738 152,428 205,201 105,733 463,361

344,207 512,880 1,988,947 2,281,659 5,127,693

513

1,982

5,144

9,302

14,627

513

1,982

5,144

9,302

14,627

36,924 35,314 33,082 30,672 26,717 19,013 23,238 23,238 52,744 118,812 70,763 86,488 86,488 205,894 465,740 102,173 124,878 124,878 226,193 507,271 20,701 28,119 33,777 36,924 228,872 269,916 267,684 515,503 1,118,540

20,701 28,119 33,777 36,924

17,879 10,162 103,404 112,986 403,469 442,334 453,922 489,643 978,674 1,055,126

2,369 59,447 227,773 252,701 542,290

Appendix 7, page 17

2,774,511 192,860 415,642 337,366 625,847 430,034 753,524 19,239 2,353,182 -192,347 -413,659 -332,222 -616,545 -415,407 -732,823 8,880 33,777 36,924 228,872 269,916 267,684 515,503 1,118,540 978,674 1,055,126 6.3% -708,906

542,290

m 3 = cubic meter, FIRR = financial internal rate of return, NPV = net present value. Includes non-plantation costs such as publicity, training, consultants, and project support.

Table A7.14: Economic Internal Rate of Return, 2001 Constant Prices, Woodlot Plantations
Item Total Year 1 1990 Year 2 1991 Year 3 1992 Year 4 1993 Year 5 1994 Year 6 1995 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 1996 1997 1998 1999 2000 2001 2002 Year 14 Year 15 Year 16 Year 17 2003 2004 2005 2006

Production (including unaccounted harvests) Leaves and twigs (ton) Fuelwood (m3)

378,787

276

1,543

4,508

9,339 15,515

22,567 30,025 35,967 38,670 38,670 38,450 37,656

36,518

31,324 20,686 12,752 192,814 279,248 106,380 578,441 143,804 208,268 79,340 431,411

4,325

700,894 Poles (m3) 1,015,088 386,700 Small sawlogs (m3) Total fuelwood, poles, logs (m3 2,102,681

3,995 14,377 20,626 94,156 5,786 20,822 29,873 136,364 2,204 7,932 11,380 51,948 11,984 43,130 61,879 282,467

152,736 78,387 221,204 113,526 84,268 43,248 458,207 235,161

Farmgate value of production Leaves and twigs (Tk'000) Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000)

189,393 312,248 1,183,084 945,675 2,630,401

138

771

2,254

4,669

7,757

138

771

2,254

4,669

7,757

11,283 15,012 17,984 19,335 19,335 1,780 6,743 5,390 11,283 15,012 17,984 19,335 33,248

19,225 6,405 24,267 19,398 69,295

18,828 9,189 34,816 27,830 90,663

18,259 41,946 158,932 127,039 346,176

15,662 10,343 6,376 85,899 64,065 68,044 325,463 242,736 257,813 260,152 194,026 206,077 687,176 511,169 538,310

2,162 34,921 132,315 105,763 275,161

Investment Costs (Tk'000) 633,905 Net Benefits (Tk'000) 1,996,495 Estimated EIRR (%) 14.3% Estimated NPV, at 12% (Tk'000) 100,471

68,139 147,506 103,970 120,604 64,003 129,683 -68,002 -146,735 -101,716 -115,935 -56,246 -118,400 15,012 17,984 19,335 33,248 69,295 90,663 346,176

687,176 511,169 538,310 275,161

m3 = cubic meter, EIRR = economic internal rate of return, NPV = net present value.

44

Table A7.15: Economic Internal Rate of Return, 2001 Constant Prices, Agroforestry Plantations
Item Total Year 1 1990 Year 2 1991 Year 3 1992 Year 4 1993 Year 5 1994 Year 6 1995 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 1996 1997 1998 1999 2000 2001 2002 Year 14 Year 15 Year 16 Year 17 2003 2004 2005 2006

Production (including unaccounted harvests) Fuelwood (m3) Poles (m3) Small sawlogs (m3) Total fuelwood, poles, logs (m3 Farmgate value of production Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000) Investment Costs (Tk'000) Net Benefits (Tk'000) Estimated EIRR (%) Estimated NPV, at 12% (Tk'000) 65,462 193,598 343,721 602,782 94,385 508,397 18.0% 47,618 8,083 -8,083 17,107 -17,107 11,829 -11,829 11,495 -11,495 4,188 -4,188 41,684 -41,684 123 1,378 364 4,076 646 7,236 1,132 12,690 1,048 3,098 5,501 9,647 7,198 21,288 37,795 66,281 10,815 9,447 13,648 21,805 31,985 27,939 40,364 64,485 56,787 49,605 71,663 114,489 99,587 86,991 125,675 200,778 146,941 166,108 140,553 453,601 276 312 264 852 3,094 3,497 2,959 9,550 2,352 2,659 2,250 7,260 16,158 18,265 15,455 49,878 24,277 27,443 23,221 74,941 21,206 23,972 20,284 65,462 30,636 48,944 34,632 55,328 29,304 46,816 94,572 151,088

Appendix 7, page 18

1,132 12,690

9,647

66,281

99,587 86,991 125,675 200,778

m3 = cubic meter, EIRR = economic internal rate of return, NPV = net present value.

Table A7.16: Economic Internal Rate of Return, 2001 Constant Prices, Block Plantations
Item Total Year 1 Year 2 Year 3 1990 1991 1992 Year 4 1993 Year 5 1994 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Production (including unaccounted harvests) Leaves and twigs (ton) Fuelwood (m3) Poles (m3) Small sawlogs (m3) Total fuelwood, poles, logs (m3) Farmgate value of production Leaves and twigs (Tk'000) Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000) Investment Costs (Tk'000) Net Benefits (Tk'000) Estimated EIRR (%) Estimated NPV, at 12% (Tk'000)

20,878 39,476 57,173 21,780 118,429

30

99

406

836 1,547 1,920 2,178

2,178

2,178 80 116 44 239

2,174 276 399 152 827

2,158 2,110 885 6,699 1,281 9,702 488 3,696 2,654 20,097

1,740 906 413 15,109 8,947 7,482 21,882 12,957 10,836 8,336 4,936 4,128 45,327 26,840 22,446

10,439 17,587 66,635 53,263 147,923 23,326 124,598 20.1% 13,756

15

50

203

418

774

960 1,089

1,089

3 1,780 -1,777

15 2,218 -2,203

50 5,515 -5,466

203 3,463 -3,260

418 10,350 -9,932

774

960 1,089

1,089

1,089 36 135 108 1,367

1,087 123 465 372 2,046

1,079 1,055 870 453 206 394 2,984 6,731 3,986 3,333 1,493 11,308 25,503 15,101 12,629 1,193 9,039 20,386 12,071 10,095 4,160 24,385 53,490 31,611 26,264

774

960 1,089

1,089

1,367

2,046

4,160 24,385

53,490 31,611 26,264

m3 = cubic meter, EIRR = economic internal rate of return, NPV = net present value.

45

Table A7.17: Economic Internal Rate of Return, 2001 Constant Prices, Strip Plantations
Item Total Year 1 Year 2 Year 3 1990 1991 1992 Year 4 1993 Year 5 1994 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Production (including unaccounted harvests) 124,875 Small sawlogs (m3) 56,491 Total fuelwood, poles, logs (m3) 267,589 Farmgate value of production Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000) 38,412 145,542 138,149 322,103 74 282 267 623 441 1,670 1,585 3,696 549 2,362 5,223 9,814 12,101 7,847 2,079 8,951 19,791 1,973 8,496 18,786 4,600 19,809 43,801 37,186 45,851 29,733 35,297 43,522 28,223 82,297 101,474 65,803 Fuelwood (m3) Poles (m3) 86,223 167 242 109 518 989 1,433 648 3,070 1,231 5,303 11,725 22,030 27,164 17,615 31,905 39,340 25,511 14,433 17,797 11,541 68,369 84,301 54,666 1,783 7,680 16,981 807 3,474 7,682 3,822 16,457 36,388

Appendix 7, page 19

Investment Costs (Tk'000) 470,449 2,514 7,779 32,918 152,485 112,914 157,940 3,899 Net Benefits (Tk'000) -148,346 -2,514 -7,779 -32,918 -152,485 -112,914 -157,940 -3,899 Estimated EIRR (%) -3.5% Estimated NPV, at 12% (Tk'000) -217,517 m3 = cubic meter, EIRR = economic internal rate of return, NPV = net present value.

623

3,696

4,600 19,809 43,801

82,297 101,474 65,803

Table A7.18: Economic Internal Rate of Return, 2001 Constant Prices, Seedling Distribution
Item Total Year 1 1990 Year 2 1991 Year 3 1992 Year 4 1993 Year 5 1994 Year 6 1995 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 1996 1997 1998 1999 2000 2001 2002 Year 14 2003 Year 15 2004 Year 16 2005 Year 17 2006

Estimated production Leaves and twigs (ton) 288,750 Fuelwood (m3) 536,250 701,250 Poles (m3) 470,250 Small sawlogs (m3) Total fuelwood, poles, logs (m3) 1,707,750 Farmgate value of production Leaves and twigs (Tk'000) Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000) Investment Costs (Tk'000) Net Benefits (Tk'000) Estimated EIRR (%) Estimated NPV, at 12% (Tk'000)
a

750

2,417

5,750

9,167

13,333

18,000 24,667 29,667 33,000

33,000 30,000 26,333 22,667 48,750 59,583 59,583 43,333 63,750 77,917 77,917 56,667 42,750 52,250 52,250 38,000 155,250 189,750 189,750 138,000

20,000 108,333 141,667 95,000 345,000

13,333 108,333 141,667 95,000 345,000

6,667 108,333 141,667 95,000 345,000

144,375 238,899 817,307 1,149,996 2,350,578 855,981 1,494,597 11.8% -7,934

375

1,208

2,875

4,583

6,667

375

1,208

2,875

4,583

6,667

16,500 15,000 13,167 11,333 21,718 26,544 26,544 19,305 74,301 90,812 90,812 66,045 104,545 127,777 127,777 92,929 9,000 12,333 14,833 16,500 217,064 260,134 258,300 189,612 3,423 8,910 14,833 16,500 217,064 260,134 258,300 189,612

9,000 12,333 14,833 16,500

10,000 48,263 165,113 232,323 455,698

6,667 48,263 165,113 232,323 452,364

3,333 48,263 165,113 232,323 449,031

67,205 114,843 -66,830 -113,634

88,689 176,343 162,603 242,875 -85,814 -171,760 -155,936 -233,875

455,698

452,364

449,031

m 3 = cubic meter, EIRR = economic internal rate of return, NPV = net present value. Includes direct costs, upazila nurseries, and costs of the forest extension nursery training centers.

46

Table A7.19: Economic Internal Rate of Return, 2001 Constant Prices, The Project
Item Total Year 1 1990 Year 2 1991 Year 3 1992 Year 4 1993 Year 5 1994 Year 6 1995 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 1996 1997 1998 1999 2000 2001 2002 Year 14 2003 Year 15 2004 Year 16 2005 Year 17 2006

Production (including unaccounted harvests) Leaves and twigs (ton) Fuelwood (m3) Poles (m3) Small sawlogs (m3) Total fuelwood, poles, logs (m3) Farmgate value of production Leaves and twigs (Tk'000) Fuelwood (Tk'000) Poles (Tk'000) Small sawlogs (Tk'000) Total (Tk'000) Total Investment Costsa (Tk'000) Net Benefits (Tk'000) Estimated EIRR (%) Estimated NPV, at 12% (Tk'000)

688,415 1,509,784 2,064,493 1,075,774 4,650,051

1,026

3,965

10,288

18,604

29,254

41,403 56,238 67,554 73,848

73,848 70,628 66,163 53,188 78,123 84,068 70,089 103,783 112,630 45,327 63,833 66,838 168,604 245,739 263,537

61,343 53,433 159,834 343,847 220,256 475,040 109,365 235,979 489,455 1,054,866

35,759 20,325 310,482 327,815 427,693 449,799 217,393 231,305 955,569 1,008,919

4,738 152,428 205,201 105,733 463,361

344,207 672,609 2,406,166 2,630,804 6,053,787

513

1,982

5,144

9,302

14,627

513

1,982

5,144

9,302

14,627

36,924 35,314 33,082 30,672 26,717 17,879 10,162 2,369 23,695 34,804 37,452 71,206 153,184 138,320 146,042 67,907 81,689 120,960 131,270 256,708 553,659 498,477 524,241 239,162 110,848 156,104 163,453 267,453 577,086 531,635 565,656 258,569 20,701 28,119 33,777 36,924 253,156 347,181 365,258 626,039 1,310,646 1,186,311 1,246,101 568,006

20,701 28,119 33,777 36,924

Appendix 7, page 20

2,492,690 179,593 389,974 306,501 566,474 373,510 668,826 7,813 3,561,096 -179,080 -387,992 -301,357 -557,171 -358,883 -648,125 20,306 33,777 36,924 253,156 347,181 365,258 626,039 1,310,646 1,186,311 1,246,101 568,006 9.3% -344,196

m 3 = cubic meter, EIRR = economic internal rate of return, NPV = net present value. Includes non-plantation costs such as publicity, training, consultants, and project support.

47 Appendix 7, page 21 Table A7.20: Comparison of Estimated Financial and Economic Internal Rates of Return (in percent)
Item FIRR Woodlot plantation Agroforestry plantation Block plantation Strip plantation Seedling distribution Total project EIRR Woodlot plantation Agroforestry plantation Block plantation Strip plantation Seedling distribution Total project Appraisal PCR PPAR

21.3 43.6 26.5 25.6-50.1 35.3 25.8

24.9 26.3 29.6 8.5 47.4 26.1

9.8 14.0 15.2 (7.1) 10.4 6.3

17.8 24.2 17.6 24.9-47.7 28.2 22.9

28.3

14.3 18.0 20.1 (3.5) 11.8 9.3

= no data available, EIRR = economic internal rate of return, FIRR = financial internal rate of return, PCR = project completion report, PPAR = project performance audit report.

Table A7.21: Sensitivity of Rates of Return to Declines in Yields and Prices, and Delays in Harvests (in percent)
Item Base Case PPAR 10% Yield Decline 5% Price Decline No Furthera Tree Losses from 2002 3-Year Delayb of Harvest from Base Case

FIRR Woodlot plantation Agroforestry plantation Block plantation Strip plantation Seedling distribution Total project EIRR Woodlot plantation Agroforestry plantation Block plantation Strip plantation Seedling distribution Total project

9.8 14.0 15.2 (7.1) 10.4 6.3

8.8 12.9 14.0 (8.0) 9.1 5.2

9.3 13.5 14.6 (7.5) 9.8 5.8

11.2 15.7 17.3 (5.4) 7.2

8.0 10.9 12.2 5.7

14.3 18.0 20.1 (3.5) 11.8 9.3

13.1 16.9 18.8 (4.5) 10.5 8.1

13.7 17.4 19.5 (4.0) 11.2 8.7

12.1 14.8 16.9 8.4

= not calculated, EIRR = economic internal rate of return, FIRR = financial internal rate of return, PPAR = project performance audit report. a Under this scenario, unauthorized harvesting or unaccounted losses cease to occur in 2002. The plantation from the seedling distribution is not affected by this scenario. In addition, this scenario does not affect the EIRR, for the EIRR captures all benefits including unauthorized harvests. b The base case assumes a 10-year rotation, with major harvests commencing in 2002 and ending in 2006. The base case accounts for delayed harvesting of over 10-year-old trees in 2002-2003 only, thereafter the harvest of 10-yearold trees is assumed to be on schedule. This sensitivity case postpones the base case harvests by three years for woodlots, agroforestry, and block plantations. This scenario is unlikely to affect the strip plantations and the seedling distribution. Accordingly, this case does not apply to these plantations.