china: sustainable forest development...

E-428VOL. 1

CHINA: SUSTAINABLE FOREST DEVELOPMENT PROJECT

AN ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENTAND ENVIRONMENTAL MANAGEMENT AND MONITORING PLAN

FOR THE SUSTAINABLE FOREST DEVELOPMENT PROJECT

DRAFT EXECUTIVE SUMMARY

SUSTAINABLE VISIONSENVIRONMENTAL AND NATURAL RESOURCE MANAGEMENT CONSULTANTS

VICTORIA, B.C., CANADADECEMBER 8,2000

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CHINA: SUSTAINABLE FORESTRY DEVELOPMENT PROJECTEnvironmental and Social Impact Assessment Report

Draft Executive Summary

TABLE OF CONTENTS

1. INTRODUCTION AND BACKGROUND 3

2. METHODOLOGY 4

2.1 General Methodology 42.2 Analysis of Options 5

3. THE LEGAL AND POLICY FRAMEWORK FOR SFDP 6

4. ENVIRONMENTAL AND SOCIAL CONDITION 7

3.1 Environmental Description 73.2 Social Description 8

5. PROJECT DESIGN: SUSTAINABILITY, OPPORTUNITIES AND RISKS 8

5.1 Social Assessment and Community Consultation 85.2 The Natural Forest Management Component 9

5.2.1 Project Design 95.2.2 Project Sustainability 105.2.3 Project Opportunities 105.2.4 Environmental Risks and Management Strategies 115.2.5 Social Risks and Management Strategies 12

5.3 The Protected Areas Management Component 125.3.1 Project Design 125.3.2 Project Sustainability 135.3.3 Project Opportunities 145.3.4 Environmental Risks and Management Strategies 145.3.5 Social Risks and Management Strategies 14

5.4 The Plantation Establishment Component 155.4.1 Project Design 155.4.2 Project Sustainability 165.4.3 Project Opportunities 165.4.4 Environmental Risks and Management Strategies 175.4.5 Social Risks and Management Strategies 19

5.5 Project Monitoring 20

6. AN ENVIRONMENTAL AND SOCIAL IMPACT MANAGEMENT SUMMARY 20

6.1 Social and Community Impact Management 216.2 Environmental Impact Management 21

6.2.1 Natural Forest Management 216.2.2 Protected Areas Management 226.2.3 Plantation Establishment 22

6.3 Environmental and Social Monitoring 22

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CHINA: SUSTAINABLE FORESTRY DEVELOPMENT PROJECTEnvironmental and Social Impact Assessment Report

Executive Summary

1. INTRODUCTION AND BACKGROUND

1. The last four decades have seen a severe decline in both the area and the quality of thenatural forest estate in China. Forest harvesting has involved ecologically inappropriatesilvicultural systems, harvesting techniques that have resulted in serious ecosystem degradation.and production quotas that took little account of sustainable yield. Triggered by the disastrousfloods that occurred in the Yangtse and Yellow River Basins in 1998, the Peoples' Republic ofChina (PRC) took two decisive initiatives: first, it instituted an immediate ban on logging innatural forests; and second, it launched an ambitious new program (Natural Forest ProtectionProgram or NFPP) to improve natural forest protection and management on 95 million ha ofstate-owned forest in 17 provinces. NFPP has been designed to support: 1) rehabilitation andmore sustainable management and use of natural forests; 2) better management of protectedareas; 3) establishment of plantations to reduce pressure on natural forests; and 4) the economictransition of forest-dependent communities from forest exploitation to more environmentally-sustainable activities.

2. The Sustainable Forestry Development Project (SFDP) is a cooperative proposalinvolving the State Forestry Administration, The World Bank and the European Commission forfunding. SFDP comprises three components: 1) a Natural Forest Management (NFM)Component (the focus of proposed European Commission grant funding); 2) a Protected AreasManagement (PAM) Component (proposed to be funded from Global Environment Facility[GEF] funding); and 3) a Plantation Establishment (PE) Component (proposed to be funded by aWorld Bank loan). NFM will focus on three key NFPP provinces - Sichuan, Hunan and Hainan;PAM will include these three provinces and the adjacent provinces of Gansu, Guizhou, Hubeiand Yunnan; and PE will include the three key provinces plus Hebei, Liaoning, Anhui,Shandong, Henan, Hubei, Shanxi, and Gansu. It must be stressed that NFPP is a major initiativeof the PRC with policies and programs that go far beyond the scope of SFDP. SFDP'sresponsibilities relate only to its own approved programs, not to the overall activities of NFPP.

3. The project has been designated by the World Bank as a Category A Project which hasimplications for the depth of the Environmental and Social Impact Assessment (ESIA), the levelsof public consultation required, and provisions for the public disclosure of the final ESIA report.The World Bank and the European Commission have quite different project approval processes.In the World Bank process, funding is approved after appraisal of a feasibility-level projectdesign. In the European Commission process, funding approval is based on a conceptual projectdesign and final project approval is based on a feasibility design at project inception. Thus thedesign information available to this point for NFM is very general compared to that provided forthe other two components.

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2. METHODOLOGY

2.1 General Methodology

4. During the past decade, serious questions have been raised in many countries about theapplication of "traditional" ESIA processes to broad-scale renewable natural resource planning.Most of these processes have been designed to deal with complex "conistruction" projects withrelatively clearly defined geographical locations and some degree of certainty in impactprediction and quantification. The focus of these processes is on impact identification andanalysis to influence operational project design, planning and implementation. Such processeshave little practical application to broad-scale natural resource planning p'rojects, such as SFDP,for the following reasons:* knowledge of the cause/effect relationship between human activities and changes in natural

ecosystems is so poor that even impact prediction is difficult, let alone impact quantification;* natural resource planning and management activities are usually dispersed across broad, often

complex, landscapes;* traditional ESIAs are conducted at a single point in time (feasibility design) whereas natural

resource management involves continuous planning over many decades;* many of the resources at risk in natural resource management operations (i.e. native biodiversity,

wildlife and aquatic resources) must be managed, and impacts mitigated, at a variety of scales- regional, landscape and site levels; and

* most operational activities, such as infrastructure development, harvesting, planting, and standtending, are small-scale and repetitive, and thus more amenable to management throughsectoral assessments and management guidelines than by traditional ESIA techniques.

In light of the forgoing discussion, environmental and social assessment in natural resourcemanagement should focus less on "scientific" impact analysis, and more on assessing whetherproject design avoids or minimizes environmental and social impacts by: 1) setting clear andappropriate goals, objectives and principles for management activities; 2) ensuring that themanagement activities directed at natural ecosystems are as consistent as possible with theecological processes that created and maintain those systems; 3) ensuring that managementactivities directed at man-made ecosystems "mimic" natural ecological structures and processesso as to increase their stability and resilience; 4) limiting site disturbance and soil degradation; 5)minimizing environmental contamination; 6) incorporating participatory community planningand development programs; 7) providing potential beneficiaries with the skills and informationnecessary to participate effectively in the project; and 8) establishing well-conceivedenvironmental and social monitoring programs.

5. The ESIA for this project has been carried out by Sustainable Visions of Victoria B.C.,Canada in collaboration with the Institute of Forest Ecology, Environment and Protection,Chinese Academy of Forestry to meet the requirement of World Bank Operational Policy 4.01that an environmental and social assessment of the project be carried out by "independent expertsnot affiliated with the project". It is based on: 1) three major field missions in which the EIA

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team traveled independent from the project preparation team but provided advice on potentialenvironmental impacts and suggestions on impact management strategies; 2) a series of projectdesign documents prepared for the three project components by the project preparation teamduring the period May to September 2000; and 3) for the plantation component, a series of sitevisits supplemented by site descriptions and photographs of a selected 10% sample of proposedfirst-year plantation sites. The social aspects of the ESIA ate based on the results of an extensiveSocial Assessment (SA) process which was conducted as part of project preparation. The ESIAconsists of a "sectoral" environmental and social review of SFDP which: 1) describes projectdesign and identifies potential environmental and social risks; 2) assesses the effectiveness ofproposed environmental and social impact management and monitoring strategies; and 3)identifies any residual, outstanding environmental and social issues and recommends measures todeal with these. It also recommends further assessment procedures for specific activities duringimplementation; proposing the application of environmental and social guidelines for simpleractivities, and more detailed environmental and social planning requirements for more complexproposals.

2.2 Analysis of Alternatives

6. A fundamental precept of traditional ESIA processes (including the World Bank'senvironmental assessment policies), because of their focus on "construction" projects, is asystematic analysis of alternatives. An alternatives analysis is an important instrument of impactavoidance for construction projects through critical comparisons of site and route selection,project technologies site layout and operational procedures. Alternatives analysis has, however,limited relevance to an environmental and natural resource planning project such as SFDP.SFDP is a response to, and intended to support, the NFPP. NFPP encompasses a number ofspecific programs which served, in turn, to define the scope of SFDP and limit the range ofoptions considered. Also influencing and guiding SFDP design were the current body ofscientific literature, policy studies, experience gained in previous natural resource projects, andconsultations with other donors and NGOs during project preparation.

7. An important option examined early in project design was whether Government shouldeven consider inviting the World Bank to participate in SFDP. Arguements for participationrelated to the effectiveness of previous Bank projects in information and technology transfer,intersectoral integration, the management of community impacts, and project coordinationinvolving multiple-donors. Arguements against involvement included the compexity of theBank's project preparation requirements and procedures, and the "political" risks, from theBank's perspective, associated with the presence of various ethnic minority communities inproject areas. On balance, it was concluded by the Government and the World Bank that theadvantages of participation outweighed the disadvantages, paticularly given the conclusions that:i) the forestry sector in China requires major reform if remaining natural forests and associatedbiodiversity are to be conserved; ii) there is limited familiarity in Government implementingagencies with sustainable forest management; and iii) NFPP is the most promising forestryreform opportunity to arise in the past 20 years.

8. During project design a number of alternatives were considered jointly by the State

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Forestry Administration and the World Bank relating to the overall scope and organization of theproject. The current project design is predicated on the priorities of improving natural forestmanagement, conserving native biodiversity and enhancing the livelihood of forest-dependentcommunities, and on striking a balance between a project that is comprehensive enough toaddress the important issues and yet not so complex as to impose serious project managementburdens.

9. The NFM and PAM components propose strategic-level natural resource planningprocesses with the explicit goals of improving environmental condition and the welfare of localconmmunities. Analysis of alternatives, in the context of traditional ESIA processes, will occur aspart of management plan development during project implementation after significantpreliminary surveys, research and inventories. For this reason an altematives analysis at thisstage for these two project components is conside'red impactical. Of the three projectcomponents PE is the most like a "construction" project. Even here, however, there is onlylimited scope for alternatives analysis and this falls into five main areas: 1) whether theplantation component should be included at all in SFDP; 2) should the project be limited totimber trees or should it include economic tree crops; 3) whether the project should supportpesticide procurement; and 4) whether pesticides should be procured on a centralized ordecentralized basis. Given safeguards that are already built into the project, these alternatives areconsidered to be largely socially and environmentally neutral and will be dealt with in Section5.4 below.

3. THE LEGAL AND POLICY FRAMEWORK FOR SFDP

10. Development of the ESIA has been guided both by laws and policies of the People'sRepublic of China, and by operational policies of the World Bank. Specific Chinese laws andpolicies consulted include: The Law on Environmental Protection (PRC 1989); The ForestryLaw (PRC 1984, modified 1998); Circular on Strengthening Environmental Impact AssessmentManagement for Construction Projects Financed by International Financial Organizations(NEPA 1993); and Regulations on the Management of Environmental Protection in ConstructionProjects (NEPA 1998). World Bank Operational Policies consulted include: O.P. 4.01Environmental Assessment and Environmental Management Plan; O.P. 4.04 Natural Habitats;O.P. 4.09 Pest Management; Draft O.P. 4.11 Cultural Property; Draft O.P. 4.12 InvoluntaryResettlement; O.D. 4.20 Indigenous Peoples; O.P. 4.30 Involuntary Resettlement; O.P. 4.36Forestry; and B.P. 17.50 Disclosure of Operational Infornation.

4. ENVIRONMENTAL AND SOCIAL CONDITION

4.1 Environmental Description

11. The thirteen provinces that are proposed for inclusion in SFDP occupy five majorphysiographic regions of China: the Eastern Lowlands (Liaoning, Hebei, Shandong, Anhui andthe eastern portions of Henan, Hubei and Shanxi); the Southern Mountains and Hills (Hunan and

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Guizhou); the Southwestern Mountains and Plateaus (Sichuan and Yunnan); the LoessMountains and Ordos Plateau (eastern Gansu and the western portions of Shanxi, Henan andHubei), and the South China Insular Mountains (Hainan). These five regions contain six of theseven major forest zones of China. The pattern of forest zonation that repeats with bothincreasing latitude and elevation is: 1) evergreen tropical hardwoods; 2) evergreen sub-tropicalhardwoods mixed with tropical or sub-tropical conifers at higher elevations; 3) mixed temperatemesophytic hardwoods; 4) temperate dry deciduous hardwoods; 5) montane temperatedeciduous hardwoods; 6) montane temperate conifers; and 7) sub-boreal conifers. Only the lastzone is not included in SFDP. Much of the coastal plain of eastern China and many interior rivervalleys and basins were converted from forest to agriculture centuries ago. Nevertheless, asrecently as the early 1960's China still possessed, in its hill and mountain systems, one of therichest and most diverse forest estates in the world. This remarkable forest heritage has beensignificantly depleted in only four decades by inappropriate'silvicultural practices andunsustainable harvesting quotas.

12. If forests are to be managed in a natural manner, the silvicultural system and harvestingmethods must be modeled as closely as possible on the forest's natural disturbance regime.Forest ecologists now divide natural forests into three broad categories (with many inter-gradations between) based on the type and frequency of the natural disturbances that created ormaintained them: disturbance-maintained forests - multi-aged savanna-like forests in dryclimates whose structure is maintained by regular fire; disturbance-driven forests - generallyeven-aged forests in semi-dry climates initiated by periodic catastrophic disturbance; and gapdriven forests - multi-aged forests in moist climates whose structure is maintained by the death ofindividual trees or groups of trees. The most appropriate silvicultural systems for these threetypes are: 1) single tree selection with regular prescribed fire for disturbance-maintained forests;2) patch clear-cutting for disturbance-driven forests; and 3) single tree or small group selectionfor gap-driven forests. Because of China's characteristic summer rainfall regime, forest types ingeneral will be predisposed towards broadleafed species rather than conifers, and the greatmajority of forests will be "gap-driven" in moister areas of the south and at higher elevations,and "disturbance-maintained" in the dry Yellow River basin and the loess areas of northeasternChina. "Disturbance-driven" forests will be relatively rare, restricted perhaps to dry pine types insoutheastern Sichuan and Yunnan, to the sub-boreal coniferous forests of the extreme northeast,and to degraded secondary forests in all zones. The major implication of this is that clear-cutting, the most common method of harvesting in China in the past, is an inappropriatesilvicultural choice for most natural forest types that has led to significant forest degradation.

4.2 Social Description (with particular reference to ethnic minorities)

13. A particular concern in World Bank financed projects is protecting the rights, andimproving the welfare, of ethnic minority and poorer communities. Much of SFDP's emphasis ison remaining areas of natural forest and areas suitable for plantation establishment. Since suchareas will almost invariably be in steeper lands and upper watersheds, many of the affected andparticipating communities are likely to be ethnic minority or poor, or both.

14. These communities are amongst the most affected by the logging ban and NFPP

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restrictions in terms of loss of income, croplands, grazing lands and access to forest productssuch as fuelwood, non-timber forest products and local construction timber. For many of thesepeoples, the natural forest also holds significant cultural and religious values. Generally thesecommunities have limited access to primary education, basic health care and safe drinking water.It has, therefore, been a major design principle of SFDP that these communities are equitablyrepresented in the beneficiaries of the project and that project activities are adapted to theirspecific needs.

5. PROJECT DESIGN: SUSTAINABILITY, OPPORTUNITIES AND RISKS

5.1 Social Assessment and Community Consultation

15. A major element of project design for all SFDP components is a Social Assessment (SA)of affected and participating communities. The SA provides a method for integratingcommunity participation and social analysis into project design and preparation. SA isconducted to ensure that SFDP project preparation and implementation consider the needs,wishes, concerns and capacities of people affected or influenced by project activities. SA collectsinformation from communities with the objectives of ensuring that positive social impacts areenhanced and adverse impacts are avoided or reduced, especially for potentially vulnerablegroups, such as ethnic minorities, poorer socio-economic groups, women, and settlers andsquatters with disputed tenure rights . In order to achieve these objectives, SA teams wereestablished for each of the three project components, and approximately 400 team memberstrained in SA methodologies. These teams carried out participatory rural appraisals, individualhousehold interviews and focus group discussions for representative samples of the beneficiaryhouseholds of the project.

16. In addition to social assessments and community consultation during the design phase,World Bank directives on disclosure of the environmental and social impact assessment requirethat the borrower provide a summary of the draft ESIA report for public review and comment ina form and language that are understandable by affected peoples and in appropriate public placesaccessible to affected groups.

5.2 Natural Forest Management

5.2.1 Project Design

17. The Natural Forest Management (NFM) component consists of two sub-components:1) Natural Forest Management, and 2) Community Development. As noted earlier, this projectcomponent is proposed to be funded by the European Commission. Project design activities todate have been carried out by the SFDP project preparation team but in less detail than for theother two components because of the nature of the EC approval process. World Bankrequirements dictate that NFM be included in the ESIA for the project as a whole, and it is hopedthat the analysis of environmental and social issues in the following sections may assist the EC indetailed feasibility planning and environmental assessment at project inception.

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18. The purpose of the Natural Forest Management sub-component is "to test anddemonstrate an increased range of options for sustainable management of forest resources for avariety of beneficiaries". It is also intended as an opportunity to develop multi-stakeholderresource planning and co-management mechanisms for broader application to natural forest areasthroughout China. NFM focuses on three key provinces: Hainan; Hunan; and Sichuan. Ascurrently designed the NFM Sub-component anticipates the following major activities:

* overall coordination and communication;* forest resource assessment and mapping, forest function classification and forest management

zonation;* yield regulation and control for timber, fuelwood and NTFPs;* policy studies, including resource valuation, market mechanisms and research, and rural energy

analysis;* multi-stakeholder forest management planning on "operable" forest areas;* co-management implementation of the forest management plans;* monitoring and evaluation; and* technical extension and dissemination of experience.

19. Management plan implementation will focus on: 1) survey and design of harvestingaccess; 2) coupe layout and tree marking; 3) engineering works; 4) testing of reduced impactharvesting systems; 5) permanent sample plots for growth and yield and forest conditionmonitoring; 6) erosion assessment monitoring; 7) incorporating monitoring results in currentmanagement practice; 8) testing and demonstration of silvicultural options; 9) domestication andproduction of non-timber forest products; and 10) harvesting and access facilities maintenance.

20. The objective of the Community Development sub-component is to improve thelivelihood and welfare of local communities impacted by the logging ban and by NFPP resourceuse restrictions. This sub-component will have two major vehicles to deliver programs: i) grantfunding for vocational training and village infrastructure improvement, and ii) household creditfor the development of income generating activities. Grant funding is presently proposed for thedevelopment of training facilities and vocational programs requested by villagers, and for anarray of village infrastructure projects. Current proposals for household credit include livestock,horticulture, product processing, and small-scale service industries.

5.2.2 Project Sustainability

21. One of the primary concerns with this project component is the sustainability and broadapplication of management activities. The grant funding is simply "seed money" to attempt toestablish natural forest management practices that can be sustained over the long term and can bedisseminated to other areas. Sustainability will depend at some future point on forest revenuessufficient to offset the cost of inventory, mapping, planning and management. The decision toproceed with the enhanced levels of management envisioned in this project will depend onwhether sufficient operable forest exists, both at a regional scale and within chosen forestmanagement areas, to make management demonstrations financially viable and worthy of

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dissemination. If insufficient operable forest exists management activities are likely to focusmore on forest protection and sustenance use than on forest management and commercialharvesting. Project activities are likely be much less expensive and "technically sophisticated".Given the degraded state of many forest areas and the long-term nature of forest rehabilitationactivities, SFA will have to consider its own time horizon for financial self-sustainability, whichin all probability will extend far beyond the life of SFDP. Under the circumstances, the NFMsub-component should be very carefully sequenced. On forest management areas, broad forestresource inventory and mapping should be carried out, leading to forest function zonation anddelineation of a viable operable forest, before any major decisions on further managementactivities and expenditures. At a broader level, regional reconnaissance surveys should beundertaken to determine whether sufficient operable forests exist in other forest managementunits to justify dissemination of project management experience. This will be particularlyin1portant when considering forest harvesting demonstrations, given that many project forestareas are amongst the last remnants of their types and have very high residual biodiversity.

22. Participatory planning processes are a very valuable resource planning tool, but when theplan is completed some responsible and accountable entity representing the broader good has todeclare that a plan is consistent with laws and policy, issue the necessary use permits, and ensurethat the various stakeholders fulfill their obligations and comply with the agree-to plan. Thisfunction clearly lies with SFA and PFBs, and is essential if NFM experience is to be incorporatedinto day-to-day forest practice; yet there is little mention of it in the project design documents.This project component should make provisions for technical assistance to SFA and PFBs toupgrade their capabilities and skills in the essential areas of management plan development,adjudication and approval, monitoring and enforcement.

5.2.3 Project Opportunities

23. The NFM Component, if well planned and carefully implemented, should lead to a verysubstantial improvement in the condition and extent of natural forests through enhanced forestprotection, rehabilitation and sustainable management practices. Local communities will begiven a significant incentive to protect and sustain forest resources through their involvement inco-management arrangements. The participatory planning process envisaged for the NFM sub-component has great potential to: 1) resolve land use conflicts (such as those between forestrehabilitation activities, tourism, dryland agriculture and domestic grazing); 2) clarify landtenures and resource use rights; 3) ensure greater consultation, fairness and consistency in theapplication of new forest regulations and policies; and 4) alleviate some of the impacts of NFPPand the logging ban through the re-establishment of some level of sustainable harvest of forestproducts (particularly fuelwood and construction timber). Access to community developmentservices, training and household credit could, over the longer term, reduce village dependence,and thus the pressures, on natural forest resources.

5.2.4 Environmental Risks and Management Strategies

24. The current conceptual project design carries with it a number of potential risks that willrequire further clarification and resolution during detailed feasibility planning of the component.

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25. The project documents for NFM place great stress on co-management agreementsdeveloped through "participatory, bottom-up planning processes". Such processes are extremelyvaluable tools in natural resource planning, however, they work best when placed in the contextof broader management goals, objectives, and policies that set the bounds for what is possibleand desirable within a given time frame. The current project documents prescribe no suchbroader context. For example, though the terms "natural forest" and "sustainable forestmanagement (SFM)" are used freely in the project reports, no attempt is made to define whatthey mean. Given this lack of context, the proposed over-all direction of natural forestmanagement activities is unclear.

26. It is recommended that the first step of detailed planning at the inception phase should bethe development of a clear vision of what a natural forest is and what sustainable natural forestmanagement entails. For NFM, the following definitions are suggested:

* Natural forests are forest communities that contain, or may be restored to, most of the principalcharacteristics of native ecosystems, including species composition, stand structure andecological function.

* Sustainable natural forest management is the process of managing permanent natural forest landsto maintain or restore natural forest quality - composition, diversity, structure and ecologicalfunction - while producing the widest possible sustainable array of public benefits.

27. The emphasis in forest management, at least over the short to medium term, should beless on immediate harvesting of forest products and more on forest protection, regeneration, andrehabilitation. Stand management objectives would be developed for each major forest typereflecting a desired future state of stand composition and structure to guide forest management,regeneration and rehabilitation. Activities would focus on succession management to meet theseobjectives through reduced-impact selection cutting, thinning, enrichment planting, enhancednatural regeneration, the gradual elimination of non-indigenous plantings, and the use oftemporary "nurse crops" (plantations or early seral communities) to provide an optimumenvironment for regeneration and early growth of the predominant native hardwood forest types.

28. An approach such as this has real potential to fulfill the goal of improving the "conditionand extent of natural forests" and thus ensure the long-term viability of these globally-significantnatural forest communities. Such a management strategy may also have an important long-termapplication to the protected areas program through the rehabilitation of experimental zones andthe restoration of regional connectivity corridors within reserve "clusters". Nor are theobjectives likely to be solely environmental. Hardwood rehabilitation programs undertaken nowin areas of high growth potential may look like a very good investment in the future, given thatmany countries are currently in the process of liquidating their hardwood forests. China hasmany species that have significant value-added potential for uses such as fine flooring, paneling,moldings, doors, veneer and furniture.

29. Community development activities are unlikely to have major environmentalimplications if adequately planned and carefully implemented. Community proposals for

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increased forest product processing and investments in livestock have the potential to placefurther pressures on the natural forest but these problems should be capable of resolution throughthe participatory management planning process. Minor localized impacts may arise from small-scale village infrastructure and community development activities, and environmental guidelineswill be prepared to deal with these during project implementation when proposals are moreclearly defined.

5.2.5 Social Risks and Management Strategies

30. This project component proposes multi-stakeholder, participatory forest managementplanning and management, and community development proposals that have emerged throughcommunity consultation in the social assessment process. Thus the risk of serious social impactsshould be minimized, and probably more than offset by potential project opportunities.Mechanisms for appeal and conflict resolution have been built into the planning processes forboth sub-components. There is a remote possibility that community-based infrastructuredevelopment might result in involuntary loss of assets. A policy framnework for involuntary lossof assets has been developed for SFDP to establish principles and procedures for, among otherthings, fair compensation.

5.3 The Protected Areas Management Component


31. The Protected Areas Management Component (PAM) supports conservation andimproved management of selected nature reserves containing natural forest biodiversity of globalimportance. PAM will comprise four key sub-components: 1) nature reserve planning andmanagement; 2) community-based nature conservation programs; 3) training and capacitybuilding of government institutions at the provincial and individual nature reserve levels; and 4)project management, monitoring and evaluation.

32. The PAM component is to be implemented in thirteen nature reserves in seven provinces- the three NFM provinces of Hainan, Hunan and Sichuan, plus Gansu, Guizhou, Hubei andYunnan. Gansu and Hubei are proposed for inclusion because they contain nature reserves thatare contiguous with reserves in Sichuan and Hunan, and present opportunities for trans-boundarycoordination of protection within the same ecological zones. The specific reserve proposals areshown in the following table:

PROVINCE RESERVESHainan JianfenglingHunan Badagongshan, HupingshanSichuan Baiyang, Si'er, Piankou, Xiaozhaizigou, and TangjiaheGansu BaishuijiangGuizhou FanjingshanHubei Houhe

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Yunnan Baimaxueshan, Nujiang

33. Four of these reserves (Fanjingshan, Jianfengling, Baimaxueshan and Nujiang) would bemanaged as separate entities and the rest in three "clusters": 1) the Motianlin Cluster comprisingBaishuijiang and Tangjiahe; 2) the Minshan Cluster comprising Baiyang, Si'er, Piankou andXiaozhaizigou; and 3) the Wulingshan Cluster comprising Badagongshan, Hupingshan andHouhe. Common nature reserve zoning in China includes a "core zone" in which onlynationally-approved research is allowed and an "experimental zone", which may or may notinclude human settlement, but in which some sustainable, low-intensity resource uses by localcommunities are permitted. In a few reserves with large human populations in the experimentalzone, a "buffer zone" is being contemplated to protect the core zone through additional userestrictions.


34. The PAM component must address two primary aspects of project sustainability:institutional and financial. Institutional sustainability is being dealt with through acomprehensive program of technical assistance training for government staff and localcommunities. The objective of this training will be to strengthen existing capacity inenvironmental and natural resource management and to develop project management skills inlocal institutions and communities. Financial sustainability for community-based programs isaddressed through "revolving", self-managed Community Conservation Funds linked toimplementation of approved Community Resource Management Plans. The means of ensuringfinancial sustainability for operational activities after the project ends is not a significant issuesince the government already povides the majority of operational funding to these reserves.


35. If well planned and carefully implemented, the Protected Areas Management Componenthas the potential to greatly improve protection and management of thirteen nature reserves ofglobal importance. Local communities will be encouraged to participate in reserve protectionand management activities through co-management demonstrations. The participatory protectedareas planning and the community resource management plans envisaged in this component havethe potential to: 1) build local capacity in resource management and rural development; 2)increase community awareness of the economic opportunities of biodiversity conservation; 3)mitigate wildlife (bear, takin, wild pig and macaque) damage to agricultural crops; 4) supportalternative sustainable livelihoods to reduce impacts on protected areas; 5) ensure greaterconsultation, fairness and consistency in the setting of boundaries and the application ofprotected area zonation; 6) rationalize conflicting resource uses within the experimental zone andadjacent lands outside the reserve; and 7) build partnerships and trust between nature reservesstaff, local government and local communities.


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36. The majority of direct environmental impacts associated with this component areexpected to be positive. Participatory planning provides a real opportunity to deal with many ofthe major threats to these protected areas, i.e. unsustainable fuelwood and NTFP collection,wildlife poaching, fire, overgrazing and illegal logging. Minor negative environmental impactsassociated with reserve infrastructure improvement and increased recreation/tourism will be dealtwith through appropriate environmental prescriptions in reserve management plans.


37. The most significant social impacts relate to community use of forest resources withinreserve areas where use restrictions may be deemed to be necessary. Several reserves containonly state-owned forest lands where unpermitted resource extraction is illegal but may have notbeen strictly enforced in the past. On such areas the enforcement 'of long-existing use restrictionsmay be acceptable. Other nature reserves (particularly in Hunan and Hubei) contain significantcollective forests, some of which have been added to the reserves by unilateral governmentdecision very recently. On many of these latter areas, zoning and use restrictions are currentlybeing applied. All further protected area additions, zoning and use restrictions should now beheld in abeyance, and final boundaries, zoning and use prescriptions should be OUTCOMES ofthe protected area and community development management plans to be undertaken as part ofthis project. Mechanisms for appeal and conflict resolution have been built into both theprotected areas management and the community resource planning processes as part of theProcess Framework for Mitigating Potentially Adverse Livelihood Impacts.

38. The possibility of friction between participating villages and non-participating villages inand adjacent to protected areas has been raised in the SA. Clearly, with limited funding and alimited time frame, the project must set priorities. Initial assistance will be given to thosecommunities most affected by protected area programs or, conversely, those who have the mostdirect impact on natural resources within the protected area. In order to avoid conflicts, decisionsmust be transparent and the reasons for those decisions explained to all of the interestedcommunities. There should also be some reasonable expectation that planning services andcommunity conservation funding may be extended in time to other priority communitiesaccording to well-understood selection criteria.

5.4 The Plantation Establishment Component


39. A major initial design consideration for the Plantation Establishment Component (PE)was whether it should be limited to timber trees or expanded to include horticultural (termed"economic trees" in China) tree crops. The problems of land degradation in China are closelyassociated with the problems of rural poverty and many local and international experts are of theview that the key to promoting sustainable natural resources management is to address theunderlying problem of poverty; any strategies intended to promote sustainable natural resourcesmanagement need to take account of income creation potentials and to structure economic returnsin ways which meet the needs of the participant communities. Timber species offer potentially

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significant returns in the long term and farmer groups in China have a very good track record ofmanaging timber lots and plantations. However, many poor farmers lack the financial capacityto cope with the medium to long term nature of timber production and need access to alternativeforms of production which generate cash flows more closely attuned to their needs. Within thecontext of the project's overall environmental objectives, horticultural tree species offer a goodoption in terms of financial returns, cash flow characteristics and land rehabilitation benefits.The environmental downside is that horticultural crops are more susceptible than timberplantations to insect and microbiological attack and support for horticultural trees could increasethe propensity of project participants to apply biocides including pesticides, fungicides, etc.. Onbalance, and taking account of factors discussed further below, it was decided to supportdevelopment of horticultural tree species provided that: i) a diversity of crops would be offered;ii) crop selection would take account of farmer preferences, site conditions and market prospects,iii) appropriate farmer training and extensi6n services would be provided; and iv) particularefforts would be made to design a pest management plan which supported integrated pestmanagement approaches already being promoted by the State Forestry Administration.

40. The Plantation Establishment Component (PE) as presently designed aims to: i) increaseproduction of wood to meet the growing deficit between domestic supply and demand; ii) reduceharvest pressures on the natural forest; iii) enhance employment and income for forest farms andrural households affected by the logging ban and NFPP use restrictions; and iv) improveenvironmental management of plantations. PE would comprise four sub-components: 1) Timberand fibre crops comprising the establishment of 115,085 ha of commercial timber and wood fibreplantations; 2) economic tree-crops comprising the establishment of 57,940 ha of fruit, nut andmedicinal tree orchards; 3) Pre-commercial thinning on 61,335 ha of existing timber plantationson a demonstration basis; and 4) Technical support services, including i) planting stockdevelopment and improved nursery management, ii) training and extension services, iii) cropstorage, processing and marketing facilities; iv) small-scale rural infrastructure, and v)monitoring and evaluation. The PE Component is proposed to be carried out in 107 counties inthe provinces of Shanxi, Liaoning, Anhui, Shandong, Hebei, Henan, Hubei, Hunan, Hainan,Sichuan and Gansu.

41. Of the total area proposed for timber plantations, 45% is expected to be planted to poplar,8% to pines, 6% to bamboo, 5% to Chinese fir and the remaining 35%, in decreasing order, tobeefwood, black locust, sweetgum, larch, Paulownia and Acacia. Ecomomic tree crops orchardsinclude tree fruits (pear, apricot, peach and apple) 41%, jujube 23%, chestnut 10%, grape 6%,and the remaining 20% to very small areas of walnut, Eucommia, Ginkgo, tea, citrus, prickly ash,pomegranate, winghackberry, Ti-oil tree, rubber, yew, hickory and wicker.


42. SFA has considerable experience in timber plantations derived from previous WorldBank-supported plantation projects and thus sustainability of this type of plantation should beassured. The main uncertainties in project sustainability relate to the tree fruit sector in whichSFA and Provincial Forestry Bureaus do not have extensive experience. Viability of neworchards will depend on new high-producing varieties, a high product quality, low enviromnental

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impact and low production costs. Achieving these will require effective technical extension inareas such as appropriate varieties, tree shape and canopy management, crop loading, fertilizerand irrigation requirements, pest and disease control (IPM), proper harvesting and post harvesthandling, storage and marketing. The PE component contains provision for technical extensionservices to ensure that participating farmers receive the training and information necessary tomake technically-appropriate decisions.


43. The PE Component has the potential to contribute to closing the gap between domesticdemand and supply of wood products, and thus reduce pressures on the natural forest. With theprovision of adequate extension services, the PE component should also lead to realimprovements to the welfare of local communities, p'roviding that: 1) participation is voluntary;2) all relevant households have equal opportunity to participate; 3) there are no changes to landtenure or resource access that will disadvantage communities; and 4) production arrangementsare fair and equitable. The SA, ongoing community consultation programs, monitoring andWorld Bank project supervision during implementation are the main instruments to insure thatthese conditions apply in all plantation areas.


44. The most significant potential environmental impacts associated with the PE componentare related to three main issues: 1) site selection, in particular the possible conversion ofimportant native ecosystems; 2) aspects of plantation establishment and management, such asgenetic and species diversity in project design, soil conservation practices, watershed protectionand water management; and 3) pest management.

Site Selection

45. Previous World Bank-financed projects developed a set of Environmental ProtectionGuidelines for Plantation Establishment and Management. These guidelines prohibit theconversion of natural forest to plantations and target the following categories of sites: 1) poorquality and harvested plantation sites; 2) agricultural lands suitable for plantations; 3) barrenhills and waste lands; 4) shrublands; and 5) lightly stocked woods with a canopy density below20%. They do not, however, provide adequate protection for native shrub and open-forestecosystems in drier climates and drier micro-sites in eastern China which may contain importanthabitats for a wide array of native plants, birds and small mammals.

46. To strengthen this aspect of the guidelines, the ESIA team visited over 30 proposedplantation sites and developed a project screening process utilizing a standard written sitedescription and photographs of proposed plantation sites. The first step in this process was thepreparation of a screening table placing all proposed first year plantation sites in five landcondition categories: 1) harvested or low quality plantations; 2) agricultural land; 3) bare landand exotic weed species; 4) disclimax vegetation (i.e. vegetation types that are atypical of a

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particular climate zone); and 5) natural vegetation. Next a 10% sample (about 300 sites) wasselected for initial screening, focusing on bare/weedy sites and disclimax vegetation in hilly ormountainous counties. It was reasoned that any sites containing important natural habitats wouldmost likely occur in these areas through mis-identification, since the screening table showed nosites in the natural vegetation category. Finally the completed screening reports were reviewedto identify potential problem sites requiring further study.

47. Though there were some problems of inconsistent categorization and reporting, thisinitial sample does provide useful information. It appears that approximately 57 proposed sitesin the sample would require further evaluation by plant ecologist/wildlife habitat specialistsengaged by participating provinces to verify the validity of screening results and to decide: 1)which areas should be protected from plantation conversion; 2) which areas should be allowedfor plantation establishment; and 3) how much of the natural vegetation in the latter should beconserved for in-plantation biodiversity conservation.

48. Screening reports, including photos, should be prepared and evaluated for all of theplantation sites proposed for the first year in categories 3) bare land and weed species, 4)disclimax vegetation, and 5) natural vegetation. Agriculture and plantation sites need not beincluded in further screening and evaluation. Those sites identified as of potential concernshould be evaluated by plant ecologist/wildlife specialists for a decision on plantationconversion. A similar process should be followed for all subsequent years, prior to theconimencement of plantation establishment operations. Screening reports should be maintainedin project files by PMOs and made available to World Bank supervision teams.

49. The site selection criteria in the guidelines were also strengthened in the area of sitesuitability, prescribing that no plantations will be permitted on slopes exceeding 35 degrees andthat slopes between 30 and 35 degrees will require reduced planting densities to limit sitedisturbance from planting and harvesting and to retain protective ground cover.

Plantation Management

50. The Enviromnental Protection Guidelines for Plantation Establishment and Managementreferred to in the last section have been revised in the areas of plantation design (streamprotection prescriptions, and increased structural and genetic diversity to enhance plantationhealth and biodiversity conservation), plantation establishment (site preparation), tending(weeding and thinning), soil and watershed protection, integrated pest control, fireprevention/control, harvesting, and monitoring and evaluation (both compliance andeffectiveness monitoring programs). These guidelines will provide a basis for individualplantation development plan preparation, plan approval and compliance monitoring by countyand provincial PMOs and PMC.

Pest Management

51. There were two major issues relating to pest management that were raised by World Bankstaff early in project design: 1) should the project facilitate the procurement of pesticides; and 2)

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if pesticides were to be procurred, should procurement be centralized or decentralized. Optionsconsidered and final decisions on these two issues were as follows.

52. The need for procurement of pesticides under the project is uncertain although the designincludes provision for such procurement if the need arises as determined through an SFAadministered pest monitoring and forecasting system. Where pest numbers are expected toexceed pre-determnined Economic Threshhold Levels (ETLs), prescribed pesticides are procuredand distributed through local offices of the forestry bureau to the farmers. Pesticides areprocured in advance based on projections made on the basis of monitored pest levels and otherrelevant factors such as weather patterns. If SFDP does not finance pesticides, the SFA andpossibly even the farmers themselves, will unilaterally procure them. Given this, there arebasically two considerations favoring SFDP financing: i) it would provide an element ofassurance that pesticides proc'ured through the project would fall within FAO Hazard CategoriesII or III, as is required by the Bank's pesticide policy; and ii) it would represent a form of shortterm production credit that may not otherwise be available and which could make a majorcontribution to the long term viability of the farmers investment in orchard development.

53. As noted above, pesticide procurement would be undertaken on a needs basis asdetermined by pest monitoring and pest forecasting systems which already exist. There are twooptions available for carrying out the procurement; centralized and decentralized. Centralizedprocurement would entail the preparation of pesticide demand schedules by county ForestryBureaus which would be collated by the PMC in Beijing, subjected to International CompetitiveBidding (ICB) procedures, procured, delivered, and then distributed back down to the relevantForestry Bureaus. The attraction of this option is that it provides the Bank and PMC with a veryeffective method of monitoring the types of pesticides actually procured to ensure compliancewith Bank pesticide procurement policies. The disadvantage is that the process would be so slowas to be of no practical value; a period of 6 to 12 months could elapse between the pesticideneeds assessment and delivery, by which time, the pest outbreak generally would have run itscourse and the damage would have been done. Pesticides would then have to be stored forpossible use in a subsequent season (creating hazards associated with leakage, etc.) and it ispossible that some procured chemicals might never be used, creating an additional disposalproblem. Decentralized procurement, under which the individual counties procure their ownsupplies, has the advantage of expediting delivery of pesticides. The disadvantage is that itwould make compliance (and fiduciary) monitoring much more difficult, requiring reliance onrandom audits during supervision missions. It was concluded, however, that the decentralizedoption would be preferable from an environmental point of view, even though it would benecessary to ensure that random spot checks are carried out as a normal part of supervision andcompliance monitoring.

54. As part of project design a comprehensive Plantation Pest Management Plan wasprepared, following an integrated pest management approach. This draft plan was found to betoo general and is currently under revision. An improved version is expected to be available forreview during project appraisal.


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55. Early in project design the following principles were established to minimize socialimpacts in the PE component: 1) participation must be voluntary; 2) all relevant householdsmust have equal opportunity to participate; 3) there must be no changes to land tenure orresource access that will disadvantage local communities; and 4) production arrangements mustbe fair and equitable. The social assessment process carried out during the design of the PEcomponent has had success in insuring compliance with the first three principles, and subsequentfollow up investigations by the social assessment specialist have determined that the risk ofunfair production arrangements in PE has now been minimized. As an additional safeguard,procedures have been established to ensure transparency in production arrangements, and thesewill be closely monitored during World Bank supervision missions.

56. In the very unlikely event that the development of storage and marketing infrastructureresults in involuntary loss of assets, a policy framework for involuntary loss of assets has beendeveloped for SFDP to establish principles and procedures for, among other things, faircompensation.

5.5 Project Monitoring

57. The fundamental goal of SFDP are: 1) to improve the quality and extent of natural foreststhrough enhanced management and protection; 2) to assist in the economic transition of forestdependent communities impacted by the logging ban and NFPP use restrictions; and 3) improveenvironmental quality in project areas. Within this broad intent of SFDP, three general types ofmonitoring are relevant.

1. Implementation monitoring determines the progress in program implementation againstestablished "benchmarks" (i.e. number of activities undertaken, number of plans completed,areas treated, number of clients served, cost of delivery, number of people trained, etc).

2. Compliance monitoring measures performance against environmental standards, regulations,permit conditions or plan commitments.

3. Condition monitoring measures environmental or social condition in relation to long-termmanagement goals/objectives, and when measured in "time-series" determines trends incondition.

58. "Implementation monitoring" prescriptions are currently the most fully developed inSFDP because they relate directly to project supervision. The need for "compliance monitoring"has been acknowledged by all three project components; to ensure compliance withcommitments made through participatory resource management plans in NFM and PAM, toenforce environmental standards and approved plans in PE, and to protect importantenvironmental and natural resource values in all project areas.

59. "Condition monitoring" programs are presently the least developed in the project, and yetthis is the only form of monitoring that can demonstrate that programs as implemented and

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complied with have been effective in achieving the overall SFDP goals described above.Condition monitoring programs are presently described only in conceptual terms and will bemore fully developed during project implementation.

6. AN ENVIRONMENTAL AND SOCIAL IMPACT MANAGEMENT SUMMARY

60. The stated goals of the SFDP project, as noted above, are to improve: 1) the extent andquality of natural forests; 2) the livelihood and welfare of local communities impacted by thelogging ban and NFPP use restrictions; and 3) general levels of environmental management inthe forestry sector. Not surprisingly, given the predominant environmental and social themes ofSFA, environmental and social management and monitoring proposals are already fullyintegrated into project design. The objective of this section of the report is to extract andsummarize those proposals, which constitute the project's "environmental and social impactmanagement plan".

6.1 Social and Community Impact Management

61. A major element of project design for all SFDP components has been a SA of affectedand participating communities which provides a method for integrating community participationand social analysis into project design and preparation. SA has been conducted to ensure thatSFDP project preparation and implementation consider the needs, wishes, concerns andcapacities of people affected or influenced by project activities. SA has collected informationfrom communities with the objectives of ensuring that positive social impacts are enhanced andadverse impacts are avoided or reduced, especially for potentially vulnerable groups, such asethnic minorities, poorer socio-economic groups, women, and settlers and squatters withdisputed tenure rights.

62. The processes and procedures established in the SA during project preparation provide afirm basis for on-going community consultation in the multi-stakeholder participatory planningprocesses and co-management agreements proposed for project implementation.

63. Community support in the form of funding assistance and training/technical extensionarrangements in all three components has great potential to improve and diversify the livelihoodsof local communities.

64. Several mechanisms have been established to protect the rights of local communitiesduring SFDP planning and implementation. Dispute resolution procedures have been built intothe implementation of NFM and PE planning processes and, in the unlikely event that small-scale infrastructure development results in involuntary loss of individual assets, a policyframework has been developed to establish principles and procedures for, among other things,fair compensation. For PAM, mechanisms for-appeal and conflict resolution relating to protectedareas zoning and use restrictions have been established in a "Process Framework for MitigatingPotentially Adverse Livelihood Impacts". In the unlikely event of loss of land or other assets,the World Bank's policy on involuntary loss would apply in the same way as with the NFM and

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PE components.

6.2 Environmental Impact Management Plan

6.2.1 Natural Forest Management

65. NFM sets, as its primary goal, improvement in the condition and extent of natural foreststhrough enhanced forest protection, rehabilitation and sustainable management practices.Through multi-stakeholder participatory forest management planning and direct involvement inco-management agreements, local communities will be given a significant incentive to protectand sustain forest resources. Management planning will stress forest protection, regeneration,rehabilitation, use zonation, and established levels of sustainable use for all forest products.

6.2.2 Protected Areas Management

66. The participatory protected areas planning and the community resource managementplans envisaged in this component have the potential to build local capacity in resourcemanagement and environmental protection, increase community awareness of the economicopportunities of biodiversity conservation, and build partnerships and trust between NR staff,local government and local communities. Participatory planning also provides a real opportunityto deal with many of the major threats to these protected areas, i.e. unsustainable fuelwood andNTFP collection, wildlife poaching, fire, overgrazing and illegal logging. Minor negativeenvironmental impacts associated with reserve infrastructure improvement and increasedrecreation/tourism will be dealt with through appropriate environmental prescriptions in reservemanagement plans.

6.2.3 Plantation Establishment

67. The most significant potential environmental impacts associated with the PE componentare related to three main issues: 1) site selection, in particular the possible conversion ofimportant native ecosystems; 2) aspects of plantation establishment and management, such asgenetic and species diversity in project design, soil conservation practices, watershed protectionand water management; and 3) pest management. The first two issues are dealt with through"Environmental Protection Guidelines for Plantation Management" that establish a site screeningprocess to flag natural communities for further evaluation, and environmental standards forplantation silviculture. Pest management issues will be dealt with through a Plantation PestManagement Plan that: 1) promotes a range of pest management strategies; 2) stipulatesacceptable pesticides.and procedures for their procurement, storage, distribution and application;and 3) proposes training programs in the safe handling and use of pesticide products byindividual farmers or licensed practitioners.

6.3 Environmental and Social Monitoring

68. Social compliance monitoring programs will relate primarily to ensuring fair plantationand orchard production arrangements. Social condition monitoring will focus on project

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participation rates and measures of beneficiary satisfaction obtained through selected householdcase studies and regular participatory rural appraisals.

69. Environmental compliance monitoring programs have been designed into all three projectcomponents: to ensure compliance with commitments made through participatory resourcemanagement plans in NFM and PAM; to enforce pesticide procurement procedures,envircnmental standards and approved plans in PE; and to protect important environmental andnatural resource values in all project areas. Environmental condition monitoring will be morefully developed during project implementation and is likely to include the following parameters:1) indicators of forest ecosystem condition and diversity, and GIS-based land use/land conditionmapping in the natural resource management aspects of the NFM and PAM components; and 2)fertilizer and pesticide use, indicators of plantation diversity, and simple indicators of ecosystemand product health in the PE component.

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