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PROJECT INFORMATION DOCUMENT (PID)	
CONCEPT STAGE	
Report No.: PIDC5038		
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Project Name	Forestry Development Project (P147760)	
Region	EUROPE AND CENTRAL ASIA	
Country	Belarus	
Sector(s)	Forestry (100%)	
Theme(s)	Other environment and natural resources management (65%), Climate change (15%), Water resource management (5%), Biodiversity (5%), E nvironmental policies and institutions (10%)	
Project ID	P147760	
Borrower(s)	The Republic of Belarus	
Implementing Agency	Ministry of Forestry, Unitary Enterprise BellesExport	
Environmental Category	B-Partial Assessment	
Date PID Prepared/Updated	20-Aug-2014	
Date PID Approved/Disclosed	26-Mar-2014	
Estimated Date of Board Approval	27-Mar-2015	
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I. Introduction and Context	
	Country Context	
	After a decade of strong economic growth, Belarus has faced recurring macroeconomic turmoil in recent years. Loose fiscal and monetary policies in 2010 generated a short-term economic recovery but resulted in a widening current account deficit (15 percent of GDP in 2010) and heightened pressure on foreign exchange reserves. This put the economy into a tailspin during much of 2011, leading to loss of control of the exchange rate and sharply accelerating inflation. After a period of multiple exchange rates and severe foreign exchange liquidity constraints, the Belarusian ruble lost close to 70 percent of its value relative to the U.S. dollar and inflation soared to 109 percent in December 2011.

Authorities addressed the crisis through a combination of tightened macroeconomic policies and a new, more favorable energy deal with the Russian Federation. Together, these measures stabilized the economy. Growth declined to 1.5 percent in 2012 (from 5.5 percent the previous year). Inflation was contained but remained high in regional comparison at 21.9 percent during 2012. Strong export growth, especially during the first half of the year, and terms-of-trade gains reduced the current account deficit to 2.8 percent in 2012. But external pressures reemerged during the initial months of 2013, which saw a significant decline in export revenue. 

As of early 2014, macroeconomic environment remains fragile. Imbalances could worsen if macroeconomic policies are loosened prematurely in pursuit of high growth and especially if underlying structural problems—such as declining productivity, loss of competitiveness, and excessive reliance on external financing and cheap energy imports—are not addressed. In step with continued stabilization-oriented macroeconomic policies, structural reforms to reduce the role of the state, transform the state-owned enterprise sector, and promote private and financial sector development and integration into the global economy are crucial for Belarus to realize its growth potential.	
	Sectoral and Institutional Context	
	Belarus is one of the most forested countries in the Europe and Central Asia region (sixth out of 30 countries) with forest cover of 8.1 million ha, accounting for nearly 39% of the territory (in comparison to 18% in 1944). They provide multiple environmental services (e.g. 30 million tonnes of carbon were sequestered last year), raw material to forest industry, employment in the forest and forest products industries, woody biomass for generation of heat and power and non-timber forest products for both commercial production and subsistence consumption by local communities. In 2011, the forestry sector contributed to 2.1% of GDP (1.6% forest industry) and exports amounted to US$ 1.2 billion. Whilst this is good in comparison to most CIS countries, the contribution to GDP is higher in more developed forest based economies e.g. most of Scandinavia and Canada, indicating further potential for growth. All forest is state owned and managed by state institutions (apart from two long term leases).  Belarus’s biodiversity is rich and the country is home to a range of rare and endangered species of wild animals and plants, most notably the European bison, aquatic warbler, greater spotted eagle, serpent eagle, fish-hawk, golden plover, etc. As of January 2010, some 2,612 wildlife habitats were taken under protection (1,653 fauna and 959 flora habitats). The Red Book of Belarus, first published in 1981, contains rare and endangered species and currently lists 188 species of wild animals and 274 species of plants and mushrooms.

Generally the forests of Belarus are well stocked and growing (in both standing volume and area), they are professionally and well managed, and unofficial removals are practically non-existent (estimated at 0.07 to 0.1% of the total harvest). The responsibilities of the state, in terms of forest inventory, forest management planning and monitoring, forest pathology, forest fire prevention management and control etc. are undertaken to as high a standard as possible within the resources available.

Belarus historically relied on imported coal, gas and oil from Russia. Post independence, a large energy efficiency program was and continues to be implemented and has achieved substantial reductions in energy intensity. There is an active program to supply heat and power needs from local fuel resources, principally through expanding the use of wood fuel and peat in boilers and power plants. This is the main driver behind the development of the wood energy sector in Belarus, as biomass will play a crucial role in meeting national targets set at 32% of boiler and furnace fuels (BFF) to be supplied domestically by 2020. 

Due to planned investments in the processing sector and the increasing demand for wood energy, the level of production from Belarusian forest in the immediate future needs to be maximized. This can be achieved by: (i) evening out the forest’s age class distribution to ensure a more consistent supply, through a mixture of undertaking regeneration fellings both earlier and later than normal; (ii) increasing the frequency and intensity of selective thinning; (iii) improving the classification of protective and protection forests; (iv) increasing the investment in the rehabilitation of existing and in the construction of new forest roads to improve access to the currently inaccessible growing stock; and (v) increasing the investment in protecting the forest from and adapting to the impacts of climate change. 

The government budget supports maintenance of the state forest/forestry administration body and its territorial bodies, forest regeneration and cultivation, forest conservation and forest fire control, forest protection, seed breeding, forest monitoring, maintenance of the state forest cadaster and forest reserves accounting, and forest management, research works, personnel training, retraining and advanced training, and social functions.

Commercial activities are self-financed. The key sources of revenues include: revenues from sales of timber, normally at auctions, revenues from sales of products (works, services); non-tax payments for short-term exploitation of the forest reserves when selling standing timber; and budget allocations for production of products (works, services) under state orders. Belarus has been making progress in reducing the contribution to the sector from the state budget (in 2001 approximately 70% of forest management costs were paid for from the budget, by 2011 this had reduced to just over 30%).

By 2012, 94 of the 95 State Forest Enterprises (SFEs) were certified to PEFC (Program for the Endorsement of Forest Certification) standards representing 99% of the forest managed by the Ministry of Forestry (MoF). A further five forest entities not subordinated to the MoF had also been certified to PEFC standards. A total of 8.1 million ha are PEFC certified representing more than 86% of the total forest area. Additionally, 47 SFEs have FSC (Forest Stewardship Council) forest management and chain of custody certificates.	
	Relationship to CAS	
	The proposed project is consistent with the World Bank Group Country Partnership Strategy for FY14-17 (CPS FY 14-17). Under CPS Pillar 2: Improved Efficiency and Quality of Public Infrastructure Services, Enhanced and Sustainable Use of Agricultural and Forestry Resources and Increased Global Public Good Benefits, the project will improve the efficiency, quality and sustainability of the use of forestry resources whilst continuing and increasing the provision of global public goods such as the sequestration of carbon. The proposed project also fits with the Environment Strategy (2012-2022) of the World Bank Group which in Europe and Central Asia aims at promoting sustainable forest management, with an emphasis on governance, the role of communities and the private sector, and conservation and environmental services, including carbon sequestration.	
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II. Proposed Development Objective(s)	
	Proposed Development Objective(s) (From PCN)	
	The project development objective is to enhance the sustainable management of forestry assets in targeted project areas, through increasing silvicultural thinning, improving afforestation and reforestation capacity, thereby providing additional employment opportunities, while increasing the provision of global public goods.	
	Key Results (From PCN)	
	PDO outcome indicators include:
1.	Increase in the areas of forest which have received first and second stage silvicultural thinning in project areas;
2.	Increase in project areas in the total amount of woody biomass produced and the proportion from felling waste increased;
3.	People employed in production and processing of forest products (number), disaggregated by gender (core sector indicator Forestry);
4.	Increase in the number and quality of seedlings produced for afforestation and reforestation purposes; and
5.	Amount of carbon sequestered

Intermediate indicators include: 
	
1.	Forest users trained (number), disaggregated by gender and ethnicity (core sector indicator Forestry);
2.	Government institutions provided with capacity building support to improve management of forest resources (number) (core sector indicator Forestry);
3.	Size of forest fires on detection reduced in project areas;
4.	Areas of High Conservation Value Forest identified and managed
	
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III. Preliminary Description	
	Concept Description	
	The proposed project builds on the experience the Bank has in the Belarusian forest sector since the mid-1990s through the first forestry project completed in 2002, the both phases of the Bank implemented EU funded European Neighborhood and Partnership Instrument (ENPI) East Countries Forest Law Enforcement and Governance (FLEG) Program (2008 – 2012, 2012-2017) and the Forest Sector Policy Note completed in 2013. 

The Forest Policy Note identified a number of sectoral issues and also some opportunities for potential collaboration through an investment loan, including the need to: (i) introduce more intensive silviculture to improve stand structure and productivity; (ii) optimize the production of woody biomass utilizing otherwise non marketable production; (iii) improve nurseries to improve reforestation and afforestation capacity and survival rates; and (iv) support the development and roll out of modern forest fire prevention, detection, monitoring and suppression technology. Additionally, the note recommended capacity building and on-going support for the institutional reform process. At the same time there are opportunities for institutional capacity building in areas such as forest monitoring and analysis including the assessment of carbon balance as a result of forestry measures and identification of the potential of forest ecosystems to sequester carbon under different management scenarios.

The proposed forestry development project has three main components:

Component 1: Improving silviculture and the sustainability of forest management: 

Sub-component: increasing the intensity of silviculture through thinning of young and middle-aged stands

By 2015, all harvesting operations are to be tendered openly and to include the private sector. However many younger aged thinning operations will not be attractive to the private sector or cost effective for the State Forest Enterprises to tender out. The yield from the thinning of young stands frequently does not cover the cost of actually undertaking the thinning, with the operations being more of a maintenance operation than production. These operations are necessary, and economically justified by the improvement in the quality of the residual stand (through silvicultural selection), and the increase in the residual stand growth and value of later thinnings. Regular and timely thinning also helps maintain stand stability to wind and snow events, and improves the benefits for wildlife by increasing the light hitting the forest floor thereby encouraging an understory which will provide both habitat and food. The machinery required for thinning young stands with smaller size stems is specialized and not currently commonly used in Belarus. 67% of the forested land in the forest fund is currently young or middle aged and requires thinning. 

Changing demographics and lifestyle choices in Belarus means that there is currently and increasingly a lack of people willing to work in the more labor intensive forestry activities. To undertake the early and middle aged thinnings, and to increase the efficiency and productivity, it is proposed to invest in modern thinning machinery. To thin younger aged forests smaller, more maneuverable machines are required than the heavy bigger machines required for final thinnings and selection fellings more traditionally used in Belarus. Use of this machinery will increase the productivity and at the same time improve the health and safety of forest workers. The project will provide training for operators for these tasks, and generate worthwhile skilled and semi-skilled employment thereby helping to increase the prosperity of rural communities. The thinning material generated is likely to be used for either increasing the production of woody biomass, firewood, or pulpwood. Much of this production is currently lost as deadwood within the stands. There are therefore carbon benefits from both the production and increased productivity of the stands.

By supporting the State Forest Enterprises develop the capacity to undertake thinning of the young and middle aged stands, it will also support them shift away from undertaking the more commercial thinning of older stands and selection and final fellings which will be increasingly tendered to the private sector. 

To create the enabling environment for the introduction of this more intensive forest management, standards will be developed and adopted in one of the regions of Belarus.  This will include the development of draft legislative acts for implementation of intensive forest management standards. The project will pilot within one of the region’s participating forest enterprise’s forest the development of management practices to optimize the benefits for biodiversity and also resilience to climate change. Actions could include for example: identifying areas of high conservation value forest and developing appropriate management plans for these areas (which could be for the specific habitat for endangered species such as the European bison and greater spotted eagle); widening of rides, tracks and roads with scalloped edges; creating and managing open areas or glades within the forest; increasing the number of mature and over mature trees left during harvesting operations; increasing the species and age diversity during selective thinning operations; development of reduced impact buffer zones; cultivating and planting of species better adapted to the predicted climatic changes; and managing the forest to optimize the ratio of coniferous to broadleaf species. The potential for the development of recreational and tourism use of the forests will be investigated.

Sub-component: developing the use of woody biomass from logging residues

Currently most of the logging residues (i.e. the tops and branches) from final and selective fellings are simply left in the forest. This creates both a fire hazard and is also wasteful of the calorific value which could be used for energetic purposes. To meet the increasing demand for woody biomass, Belarus needs to maximize all sources of woody biomass.

It is proposed to introduce advanced logging technologies to increase the use of logging residues and to develop the use of modern measuring devices and equipment to enhance productivity and the sustainability of forest management to strengthen their economic and ecological role, and to develop and replicate technologies new to Belarus. This will optimize and rationalize the use of the forest resources and increase the sector’s contribution to the increasing demand for woody biomass. By utilizing production that is currently wasted, and by investing in new machinery and processes, there are both carbon benefits and an increase in rural economic activity. To create the enabling environment, regulatory, legal and technical standards will be developed based on the best international practices.

Sub-component: development of improved forest nurseries for afforestation and deforestation

In Belarus wherever possible, restocking of selectively felled areas is done through the use of natural regeneration. However in some cases this is not the most appropriate approach as sometimes the areas need to be restocked with different species (due to climate change), there is a need to restock damaged areas (wind falls, snow, fire, drying spruce and ash stands etc.), and in some areas natural regeneration may not be successful. There is therefore continuing need for production of good quality seedlings from selected plus trees of known origin of the correct mixture of species. 

To improve the survival rates and increase the efficiency of seedling production it is proposed to modernize four forest nurseries, to produce container grown seedlings of improved quality. It is proposed to increase the proportion of container grown seedlings from currently less than less than 1% of seedling production to 11% by 2017. Increasing the nursery production will also increase skilled and semi-skilled employment opportunities, for both men and women again in rural poor areas.

At the same time the legal and regulatory framework will be updated and an equal opportunity training program will be implemented to ensure technical and nursery staff can operate the new equipment. 
As part of this component instruments will be introduced which will include considerations of gender and other vulnerable groups, to engage beneficiaries and civil society participation in policy formulation and in monitoring the implementation of the project, thus contributing to enhancing transparency of the MOF and improving responsiveness of forestry enterprises to the needs of beneficiaries.

Component 2: improving forest fire prevention, monitoring, detection and suppression
 
To reduce the incidence, extent and severity of forest fires three main interventions are proposed: 
•	Prevention through increasing public awareness and education, improving fire danger and hazard ratings and informing the public through work with mass media, and prevention activities through creation of mineralized strips and clearing logging residue and other fire hazards within compartments and cleaning compartment boundaries and road edges
•	Improving fire detection and monitoring through establishment of video surveillance with specialized software, improving communications
•	Improving suppression activities through provision of forest fire-fighting equipment and training, and improving the network of water points. 

The local authorities and CSOs will be involved in the information dissemination and awareness activities as well as in the monitoring of the fire protection measures at the local level. The awareness and information campaigns will also have a specific gender focus.

Component 3: Forest management information system and capacity building

Sub-component: improvement of the forest management information system and forest management capacity

Under this sub-component software tools, application of modern metering devices and equipment in the process of forest surveying and inventory operations will developed. This will contribute to improving the accuracy of the data collected and will hence improve information on the availability of timber resources in the country. This sub-component will include the development of a web-based interface to allow for sharing of information at different levels (through password protection where necessary) and will increase transparency and access to data for different stakeholders. This sub-component will develop and integrate a geo-information system-based map and database of potential forestry carbon objects/projects based on the National Forest Geo-information System and Forest Cadastre. This will also include development of the capacity to monitor and report on the greenhouse gas accounting of the forestry sector. As part of this sub-component, a methodology will be developed which will determine how forest management plans can be adapted to address the issues and consequences of climate change. 

Sub-component: development of and training in the use of advanced technologies 

This component will include development of the training and production facilities at the State Institution for Further Adult Education “Republican Center of Competence for Forestry Managers and Specialists”. All training undertaken will be equally available to both men and women. 

Sub-component: developing the rational use of radioactively contaminated forest 

This component will include the development and maintenance of a decision support system “Radioactive Contamination of Forests. RadFor”, to be performed by the State Institution “Bellesozaschita” in partnership with forestry enterprises, as well as improvement of the system of protective measures and optimization of radiological monitoring activities in the forest fund.	
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IV. Safeguard Policies that Might Apply	
	Safeguard Policies Triggered by the Project	Yes	No	TBD	
	Environmental Assessment OP/BP 4.01	X			
	Natural Habitats OP/BP 4.04		X		
	Forests OP/BP 4.36	X			
	Pest Management OP 4.09	X			
	Physical Cultural Resources OP/BP 4.11		X		
	Indigenous Peoples OP/BP 4.10		X		
	Involuntary Resettlement OP/BP 4.12		X		
	Safety of Dams OP/BP 4.37		X		
	Projects on International Waterways OP/BP 7.50		X		
	Projects in Disputed Areas OP/BP 7.60		X		
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V. Financing (in USD Million)	
	Total Project Cost:	48.67	Total Bank Financing:	46.00	
	Financing Gap:	0.00		
	Financing Source	Amount	
	Borrower	0.00	
	International Bank for Reconstruction and Development	46.00	
	Global Environment Facility (GEF)	2.67	
	Total	48.67	
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VI. Contact point	
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	World Bank	
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	Contact:	Andrew Michael Mitchell	
	Title:	Sr Forestry Spec.	
	Tel:	473-3060	
	Email:	amitchell3@worldbank.org	
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	Borrower/Client/Recipient	
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	Name:	The Republic of Belarus	
	Contact:	Pyotr P. Prokopovich	
	Title:	Deputy Prime Minister	
	Tel:	375172226913	
	Email:	contact@government.by	
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	Implementing Agencies	
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	Name:	Ministry of Forestry	
	Contact:	Mikhail M. Amelyanovich	
	Title:	Minister, Ministry of Forestry	
	Tel:	375172004605	
	Email:	mlh@mlh.by	
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	Name:	Unitary Enterprise BellesExport	
	Contact:	Dmitrij Kondratov	
	Title:	Deputy Director	
	Tel:	375172591798	
	Email:	kondratov.d.v.@gmail.com	
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VII. For more information contact:	
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	The InfoShop	
	The World Bank	
	1818 H Street, NW	
	Washington, D.C. 20433	
	Telephone: (202) 458-4500	
	Fax: (202) 522-1500	
	Web: http://www.worldbank.org/infoshop