Environmental IVAssessment/AnalysisReports ___

Report E 0004

Bhutan-Forestry IIIProj ectEA Category B

Environmental AnalysisJune 1992

This report has been prepared by the World Bank

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DEFT

BY:

RICHARD Z. DONOVANNATURAL RESOURCES SPECIALIST

June 24, 1992

TABLE OF CONTENTS

LIST OF ACRONYMS . . . . . . . . . . . . . . . . . . . . . . 3

I. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . 4

II. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . 62.1 Environental . . . . . . . . . . 62.2 Proiect CompDonents . . . . . . . . . . . . . . . . . 6

III. ENVIRONMENTAL MANAGEMENT & FORESTRY III . ... . . . . . 73.1 Relevance of Proiect to Overall RGOB Policy . . . . 73.2 NGO Consultation . . . . . . . . . . . . . . . . . . 73.3 le'eed fur Formal Environmental Assessme . . . . . .3.4 Environmental Monitoring . . . . . . . . . . . . . . 8

IV. FOREST MANAGEMENT COMPONENT . . . . . . . . . . . . . . 104.1 Relationship to WB Forest Policy . .114.2 Criteria and Process for Defininq Forest Manaeiement

Units ....................... 124.3 Local Participation .. 134.4 Biological Conservation &. . . . . . . . . 144.5 . . . . . . . 144.6 Selection of Silvicultural Strategies . . . . . . . 154.7 Forest Industry in Eastern Bhutan . . . . . . . . . 17

V. SOCIAL FORESTRY COONENTn . - - - - - - - - - - - - - - - 19

VI. AFFORESTATION COMPONENT . . . . . . . . . . . . . . . . . 20

AF.:?ENDIX A - "DRAFT GUIDELINES FOR FOREST MONITORING INEAsTERN BHUTAN: PRINCIPLES AND CRITERIAn . . . .. . . . 21

AP':ENDIX B - ENVIRONMENTAL ASSESSMENT OF INDUSTRIAL FORESTRYOUTSIDE THE EASTERN REGION ... . . . . . . . . . . . . 25

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LIST OF ACRONYMS

ADB Asian Development BankBPPL Bhutan Particleboard and Plywood, LimitedBCCL Bhutan Carbide and ChemicalBETF Bhutan Environmental Trust FundCWG Certification Working GroupEA Environmental AssessmentEIA Environmental Impact AssessmentETF Environmental Trust Fund of BhutanGWMC Gedo Wood Manufacturing CorporationITTO International Tropical Timber OrganizationNES National Environmental Secretariat of BhutanPEA Preliminary Environmental AssessmentRGOB Royal Government of BhutanSDC Swiss Development CooperationTMF Tropical Moist ForestWB World BankWWF World Wildlife Fund, U.S.

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I. EXEUTIlVE SUMMARY

It is the principal finding of this Environmental Assessment(EA), condiucted as part of the Third Forestry Development Project(Forestry III) pre-appraisal and appraisal missions, that theproposed project activities are of the highest governmentpriority in terms of forest conservation and management, andeconomic development. Forestry III is an opportunity fcr theRoyal Government of Bhu tan (RGOB), World Bank (WB) and the SwissDevelopment Corporation (SDC) to cooperate in developingsustainable forestry alternatives for the Eastern Zone of Bhutan.It is particularly izqpco.ta-nt that Forestry III will begin tofocus on the sustainable management of the most threatened ofBhutan's Lorests: broadleaf forests in subtropical, warmtemperate and cool temperate climatic regions.

To ensure that environmental objectives are attained,Forestry III will require periodic environmental monitoring,proposed to be done by the National Environmental Secretariat(NES), using the draft guidelines provided here (Appendix A).

The Forest Management componant of Forestry III will helpmeet existing and future demands for forest products in theEastern Zone as well as begin to confront the conservation offorests on a regional basis. This component should be supportedas currently planned, subject to environmental monitoring by theNational Environmental Secretariat (NES), and incorporation ofmeasures recommended in this EA that address:

o strengthening processes for local participation in forestmanagement and conservation;

o ensuring a balanced emphasis on timber vs. non-timber forestproducts;

o incorporatinn of geomorphological risk assessment techniquesinto forest management planning;

o initiation of critical research on conservation biology andthe management of wildlife resources;

o balancing forest industries development, with an equal(50/50) emphasis on primary vs. secondary processing;

o development of a regional forest conservation and managementstrategy which will provide a plan for natural forestconservation in the Eastern Region; and,

o immediate support an aggressive, applied research programwhich will lead to the development and implementation ofnatural forest management systems for broadleaf forests.

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The Social Forestry component is an innovative and positiveinitiative. Environmental monitoring should focus on:

1) seeking a balance between exotic and native species andemphasizing applied research on the management andutilization of lesser known native species;

2) minimizing or avoiding the use of chemical inputs - to date,little or no pesticides or fertilizers have been used inBhutanese reforestation efforts and the project should seekalternatives which would avoid use of such inputs;

3) careful monitoring of forest products harvesting in villageforests - though such harvesting will take place on arelatively small scale, monitoring is still important; and,

4) ensuring that village forest management plan developmentgives adequate consideration to biological conservation andwatershed management objectives.

The Afforestation component has been designed to encouragerevegetation of public forest lands. As agreed by RGOB and WB,all afforestation efforts should take place only after they havebeen subject to a technical feasability assessment usingguidelines developed by the pre-appraisal mission. For both costand environmental reasons, project monitoring should ensure thata roughly 50/50 balance exists between artificial (planting ordirect seeding) and natural regeneration in all Forestry IIIafforestation.

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II. BACgGROUND

2.1 Environoental Analysis Procens

The consultant visited Bhutan from November 3 to December 4,1991 and May 7-21 as part of the Bhutan Forestry III pre-appraisal and appraisal process. The consultant was responsiblefor conducting environmental analyses of Bhutan Forestry III.The consultant's input focussed on:

a) review of ongoing efforts in forest conservation andmanagement, and related industrial development, by theDepartment of Forests, National Environment Secretariat, the.Bhutan Environmental Trust Fund and other institutions;

b) pointing out deficiencies and suggesting improvements forall project components as described in the preparation andpre-appraisal documents;

c) developing and incorporating appropriate environmentalmeasures into Forestry III (if necessary, a full-scale"environmental program"), including collaboration withrelevant NGOs and other governmental institutions; and,

d) based on proposed activities and results of b) and c) above,determine the need for a more detailed EnvironmentalAssessment, as per WB/IDA environmental guidelines.

Nost of the consultant's time in Bhutan was spent on fieldtrips to project sites in Eastern Bhutan. The consultant alsomet with staff of the Austrian Forestry Project in Ura, the SwissDevelopment Corporation (SDC)/Helvetas Forestry DevelopmentProject in Buathang, the Gedo Wood Manufacturing Corporation(GWMC), and Taba Research Institute.

2.2 Project Components

Forestry III includes four different project components:

o social forestry,o afforestation,o forest management, and,o institutional support.

Industrial forest activities proposed for Zone IV are discussedunder the forest management component. Industrial forestryactivities originally proposed for outside Zone IV (inpreparation documents) are treated separately in Annex 1.Following is a discussion of the proposed environmentalmonitoring program for Forestry III, in addition to discussion,conclusions and recommendations for each project component.

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III. ENVIRONMENTAL MANAGEMENT & FORESTRY III

3.1 Relevance of Project to Overall RGOB Policy

As discussed in a number of different documents, the RGOB isplacing an emphasis on the conservation of forests, while at thesame time carefully developing forest management units asresources to meet local demand for forest products and thecreation of "sustainable" forest industries. The RGOB is alsoplacing importance on development of the Eastern Region, or ZoneIV, both for its own socioeconomic merits as well as being a testcase for government decentralization and social forestry.Forestry III provides an opportunity to support all of theseefforts.

CoNCLUSIQN - The activities proposed under Forestry III areof the highest government priority. Forestry III is anopportunity for RGOB, WB and SDC to cooperate in developingsustainable forest management alternatives for the mostthreatened of Bhutan's forests, the broadleaf forests of theEastern Zone, as well as other important forest types.

3.2 NGO Consultatiol

Bhutan is among the countries with the fewest number ofnational (i.e. Bhutanese) non-governmental organizations (NGOs)involved in forestry, conservation and grassroots development.As such, there are only a few NGO organizations with whom toexplore relationships. The Royal Society for the Protection ofNature (RSPN) is based in Thimphu and is principally involved instrict conservation and public information activitizs. RSPN willbe involved in some aspects of the BETF. Other than sporadicvisits, it has virtually no presence in Zone IV.

The Women's Association of Bhutan has chapters in somecommunities in the Eastern Region. Forestry III will pursuepossibilities of collaborating with the local Women's Associationchapters for social forestry activities.

At the international level, the most active NGO in Zone IVis Save the Children Foundation, U.K. (SCF-UK), which has a ruralextension program in Pemagatsel, focussing on health and gardens.Forestry III is investigating collaboration with SCF-UK to getassistance in training and supporting forestry extensionists,under the Social Forestry component. The U.S. branch of SCFcurrently has an agroforestry program in central Bhutan which,though relatively new, may provide a valuable experiential basefor social forestry activities.

CONCLUSION - Forestry III is pursuing NGO initiatives withthe groups that appear to be most active in the EasternRegion ("women's associations" and Save the Children, U.K.).

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3.3 Need for Fornal Environmental AssessMent

Based on a review of the WB Operational Directive 4.01(Environmental Assessment), this consultant would classifyForestry III as a Category B project, meaning that a fullEnvironmental Assessment is not needed, but EnvironmentalAnalysis is necessary. Forestry III could be a highly beneficialproject for Bhutan in terms of the environment, and specificallyforest conservation and management, pending incorporation ofadequate environmental monitoring into the project plan andbudget and follow-up on the recommendations made here forspecific project components.

CQNCLUSION - According to WB Operational Directive 4.01,Forestry III is a Category B project, not requiring a fullEnvironmental Assessment, but requiring continuedenvironmental analysis during the remaining phases ofproject development, and the incorporation of environmentalmonitoring into the project plan and budget.

3.4 Environuental Lonitorinq

Environmental monitoring should occur in two ways. First,monitoring of environmental issues should be incorporated intointernal project planning, including general project monitoringand project evaluations. The maintenance of forest cover in ZoneIV, in terms of both quality and quantity, should be an explicitForestry III project objective. Second, environmental audits orreviews must take place each year during the complete projectperiod (Years 1-7).

Environmental monitoring should be directly implemented bythe National Environmental Secretariat (NES). rhe Department ofForestry and Ministry of Trade and Industry should have inputinto the design of the monitoring system.

NES has an official mandate to conduct environmental impactassessments (EIA) but has played a very limited role so far dueto the lack of technical staff and other resources. Ideally, NESshould conduct environmental reviews of all major proposed forestresource development projects (e.g. sawmills, large secondaryprocessing units that will utilize over 1,000 cubic meters ofwood per year), beginning with preliminary assessments and after,if deemed necessary, complete environmental impact assessments.To be effective, NES should be given real force (i.e. "teeth") bystipulating that no forestry development program should beallowed to go ahead without prior, written approval by them andsubject to environmental monitoring, with the ability to shutdown a project when adverse impacts occur. Currently the DOFseems to play the role of environmental watchdog in terms offorestry project approval (e.g. a sawmill operating license). Inthe future, projects should be approved by both the DOF and NES.

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In the short-term, NES will need assistance to:

a) conduct the periodic environmental monitoring tasks asoutlined above, and,

b) train Bhutanese counterparts at NES and DOF to implementenvironmental monitoring in relationship to forestry.

ION - Forestry III should include environmentalcriteria in project monitoring and evaluation. As a pilotactivity for Bhutan, the project should incorporate annualenvironmental audits of forestry activities, to be done byNES. Preliminary guidelines for monitoring have beendeveloped after input from SDC, WB and Bhutanese specialists(see Appendix A - "Draft Guidelines for Forest Monitoring inEastern Bhutan: Principles and Criteria"). To ensure thatforest managers understand their intent and have a role indefining monitoring criteria, these guidelines should befinalized during Year 1 in a workshop sponsored by NES andWB, and attended by DOF forestry staff.

R1=MfflEN&T1ON - Conversations with NES indicate that theDanish government, through DANIDA, would be able to fund allconsultancies and other costs related to environmentalmonitoring. A formal agreement should reached between theRGOB, DANIDA and WB to clarify costs and timing ofenvironmental monitoring. The fact that DANIDA will supportsuch an effort does not absolve WB of responsibility forensuring that such monitoring takes place and thatrecommendations generated through monitoring are acted upon.in order to establish and implement the monitoring programoutlined above, it is suggested that DANIDA and NES allocate2 months per year of consultant time during Project Year 1,and 1 person-month of consultant time for each of thefollowing years, a total of 9 person months.

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IV. FOREST MANAGEMENT COMPONENT

In response to increasing pressure on the forests of theEastern Zone (or Zone IV), the forest management component ofForestry III proposes multiple-use management on national forestlands. Forest m?nagement plans in Zone IV would be completed andimplement2d for Kori La, Khaling, Bhangtar, Lingmethang South andLingmethang North, covering approximately 22,700 hectares.

The greatest challenge that Forestry III faces is how toiiRlement forest management on Zone IV's national forest lands.This is particularly urgent for broadleaf forests. According tothe Asian Development Bank (ADB) Master Plan, broadleaf forestsin Bhutan have been reduced by as much as 70% during the last 30years and remain under pressurc. This consultant's impression isthat there is a high level of forest degradation in the southern2/3's of Zone IV, due to border conflicts (making control of woodharvesting difficult, if not impossible), uncontrolled livestockgrazing, and unplanned but permitted forest uses such as fuelwoodgathering, which unfortunately often occur after silviculturalmeasures have taken place as part of forest management.

Most of the consultant's effort focussed on working with thepre-appraisal team to ensure that a sound approach to forestmanagement planning was incorporated into Forestry III. Theelements of a comprehensive approach for forestry planning andmanagement have been provided in documents such as the WB ForestPolicy, the International Tropical Timber Organization (ITTO)Guidelines for the Sustainable Management of Natural TropicalForests, and, the Standards of the newly-developing ForestStewardship Council. The Department of Forestry has been seekinga consistent forest planning and management process. In theory,most of the important elements (e.g. protection of biologicaldiversity, sustained yield production, watershed protection,local participation, reduced impact logging) are coming intoplace. Though there need to be improvements in the planningprocess (suggestions below), the major challenge now is toimplement the plans. The issues related to this component are:

1) WB Policy and the location of the target forest areas;

2) what criteria should be used to determine short- and long-term forest management area boundaries;

3) how to achieve meaningful local participation in forestplanning;

4) how to incorporate biological conservation in planning andmanagement;

5) how to incorporate geomorphological risk assessment as atool for ensuring well-planned forest roads;

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6) ensuring careful selection ot silvicultural strategies; and,

7) maintaining an appropriate balance between primary andsecondary processing in the Eastern region.

A11 of the measures discussed above would be covered byenvironmental monitoring and the "Draft Guidelines for ForestMonitorinc in Eastern Bhutan: Principles and Criteria".

4.1 RelationshiD to WB Forest Policy

Forestry III envisions support for environmentallv sensitivelcgging activities in at least four forest types: subtropicalbroadleaf, chir pine, and both warm and cool temperate broadleaf.According to the definitions in the July 1991 WB Forest Policy,the areas where logging will occur are not "tropical moistForests" or TMFs. Nonetheless, because logging would take placein some areas, a clear rationale for Forestry III involvementmust exist. Based on discussions in Bhutan, the consultantbelieves that such a rationale does exist and is as follows:

a) there is constant, increasing demard for wood for domesticconsumption (e.g. fuelwood and sawtimber) and exportrevenues (e.g. sawtimber for the Indian market);

b) though measures can be taken to control demand or providesubstitutes, these are not likely to have a major impact -finding "sustainable" ways of meeting existina demand aloneis a priority; and,

c) the forest planning that is proposed places a priority onwood production, but gives consideration to other managementobjectives (e.g. wood, biological conservation, non-timberproducts, watershed protection); this approach will generaterevenues and meet demands that are impossible to ignore, aswell as start important initiatives in forest conservation.

Based on the above, the forest management component is anappropriate way to support the development of sustainableforestry on national forest lands in the Eastern Zone of Bhutan.Complementary forest conservation efforts are being made by theRGOB in establishing parks, sanctuaries and other protected areasthrough the BETF (partially funded by WB). The Forestry IIIforest management component provides an environmentallysensitive, production-oriented complement to these efforts.

REC~OHHEKDATIN - With adeqxate safeguards (e.g.environmental monitoring), the Forestry III forestmanagement component has the potential to help the RGOB meetexisting ard future demands on the Eastern Zone's forests.This component should be supported as currently envisioned,subject to the incorporation of the recommendations provided

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elsewhere in this EA.

4.2 Criteria and Process for Defining Forest Management Units

During the field work for Forestry III, many discussionstook place in relation to deciding how the boundaries of existingforest management areas have been determined, and what the long-term process should be. The approach that has been followed sofar in the Eastern Zone delimits forest management areas basedlargely on a calculation of existing demand for forest products(usually wood), i.e. define how much wood is needed, how manyhectares of forest were needed to produce that amount on asustained yield basis, and use the resulting figure to decidemanagement area size and boundaries. In general, this method hasrestricted management areas to between 5-10,000 hectares becausesuch a unit would meet existing demand, and areas much largerthan this are seen to be too difficult to manage, given existingresource and personnel limitations.

The other approach, advocated by this consultant, suggeststhat the boundaries of forest management units be based on anumber of criteria including extent of existing forest cover,watersheds, and conservation priorities, as well as demand forforest products. Existing resource and personnel limitationsshould not limit the amount of forest to be put under protection(i.e. management). Government resource limitations presumablywill always exist. Rather than follow traditional methods ofkeeping forest protected (which haven't worked well anyway),alternative strategies must be considered. Indeed the governmenthas already decided to place greater reliance on local people tomanage and protect existing forest. Thus, emphasis should beplaced on identifying areas that should stay under forest coverand management strategies developed that take into considerationlimited resources, with the philosophy of gradually intensifyingmanagement of all the forest in the area over a period of years.In such an approach, the existing RGOB management units in theEastern Zone (which tend to be identified for wood productionp.zrposes) could form a nucleus for larger forested blocks.

From a conservation viewpoint, it is important that thedynamics of deforestation in Eastern Bhutan be recognized.Broadleaf forests are being rapidly degraded and no sustainablealternatives are readily apparent. Based on experience, thisconsultant is convinced that a strategic effort to conserveremaining forest cover needs to take place now. If such aneffort doesn't occur now, the RGOB will be forced later on intothe position of many other countries, making vast expenditureslater on to restore forest cover. By altering the managementstrategy now, and more effectively teaming up government staffand local people, Bhutan can perhaps avoid the path that othercountries have been forced into.

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TON - The boundaries of existing, identifiedforest management units should be re-examined during themanagement planning process to ensure that, to the extentpossible, they meet a variety of criteria and not just wooddemand. Other criteria include watershed protection,biological conservation, and socioeconomic realities (i.e.relationship to community uses).

ON - During Project Year 2, Forestry III shoulddevelop a strategic plan for forest conservation in Zone IVwhich considers watersheds, biological conservation, anddemands for other timber and non-timber forest resources.To do this, a Forest Resource Assessment Specialist shouldbe contracted to work with zonal and central level forestrystaff to develop the strategy. Terms of Reference for thisspecialist are included as Appendix B.

4.3 Local Participation

It is clear that there is increasing competition for forestresources in Bhutan. The forest is valued as a resource forsawtimber, fuelwood, animal fodder (through grazing for yak,cattle and sheep), medicinal and ornamental plants, and othersubsistence or cash crops (e.g. shittake mushrooms). Because ofdemands on the forest, forest planning and management willrequire negotiation between competing interests such as localfarmers, loggers, environmentalists, merchants, livestockherders, and government forestry specialists. For management tobe successful, effective participation of these parties in forestplanning and manaaement must take place. Experience elsewhereindicates that this will probably be a crucial determinant as towhether sustainable forest management and what environmentalimpacts will occur.

At the request of other members of the appraisal team, andBhutanese foresters, the following is a suggested process forincorporating local people into the forest management planningand implementation process.

PROCESS FOR LOCAL PARTICIPATION IN MANAGENENT PLANNING

SteR #1 - With the assistance of other government agency staffand NGOs, Forestry III staff identify local leaders (both men andwomen, different age groups, different occupations) living incommunities in or around proposed forest management units.

Step #2 - Using a semi-structured guide that interviewersmemorize (i.e. they are not filling out in form in theinterview), local leaders are interviewed with a focus on gettingtheir observations and suggestions as to forest-related problems,calut!0lons and opportunities.

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Step #3 - Based on the above interviews, project staff organize a1 day workshop with the same leaders to give them feedback fromthe interviews (i.e. present what the leaders said), and help thelocal leaders develop a strategy for implementing solutions thatmight be incorporated into forest management planning; NOTE: if amanagement area is large, the unit might be divided into sectorsand various workshops might take place;

SteR #4.- After analyzing the above information, project staffcollaborate with the local leaders in organizing a regionalworkshop, inviting the public to attend, to present and discusswhat has evolved out of the smaller workshops; NOTE: localleaders, not just project staff, should be involved in presentingthe information.

All of the above occurs during the management planning. Once adraft plan has been developed, using this input, it can bepresented in another regional workshop (as per Step #4 above).In other situations, this process has been implemented, over a 6month period, covering areas as large as 60,000 hectares withpopulations around 15-20,000 people. The first time is timeconsuming. Once an established process for participation exists,and staff are trained in the process, it can move more quickly.A similar process can be used to update management plans as well.

4.4 Biological Conservation & Wildlife

Forestry III has incorporated wildlife management andconservation as part of the planning and management process forforest management areas. The Environmental Trust Fund, partiallyfunded by WB, may undertake some complementary field research inthe region during the coming years. However, Forestry III mustinclude specific resources to conduct applied biologicalresearch, on a plan by plan basis, for each management area.Unfortunately,

- Wildlife assessments should take place for eachmanagement area, coordinated when appropriate with BETFactivities. Each management area should be the subject ofprimary level wildlife data collection (surveys of plants andanimals and interviews with local peop'le and government staff)done through a combination of short-term consultants (minimum of1 person-month of senior consultant time per management area foreach of the five proposed management areas) and the use of UnitedNations volunteers. Terms of reference for a conservationbiologist to assist in this process are included as an appendix.

4.5 Geomorphologv and Forest Road Planning

The planning and construction of forest roads haveconsistently been major environmental issues in forestmanagement. The Austrian Forestry Project in Ura has done

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exemplary planning and design of forest roads, with a viewtowards erosion control. Forestry III should take advantage ofthis experience and incorporate similar measures. This meansthat during management plan preparation, the area would besubjected to a land classification procedure usinggeomorphological techniques. The objective of these techniqueswould be to produce in map form a classification of the terrainin terms of its susceptibility to processes of mass wasting(landslides) and soil erosion. The primary use of thisclassification would be in assessing alignment options for accessroads which can cause the greatest environmental disturbance.This process also allows the relative impact of other forestactivities on the landscape to also be assessed. The assessmentis comprised of three phases:

1) preparation of a base map to a suitable scale from SPOTimagery negatives, preliminary interpretation of existingaerial photography, and, transfer of interpreted informationonto the base map;

2) field study of the plan area to confirm or modify asnecessary the preliminary interpretation; and,

3) finalisation of the base map and preparation of thematicmaps and accompanying guidance notes.

The preparation and implementation of the first plan unit wouldbe used as a focus of field study for other forestry staffearmarked for other units, and would form the basis forpreparation of a field manual explained through a workshop.Terms of reference for the consultant specialist to assist theRGOB in initially conduct this work and training Bhutanesespecialists to do so are attached to this document.

REECOHHENATION - Geomorphological risk assessment should beincorporated into forest management planning as per the AustrianForestry Project in Ura.

4.6 Selection of Silvicultural Strategies

The forest management activities suggested in Forestry IIIwill include management of chir pine forests, warm temperatebroadleaf forests, cool temperate broadleaf forests, andsubtropical broadleaf forests. From a silvicultural perspective,the chir pine forests are probably the easiest of these foreststo manage. The major question regarding chir pine forests is howto manage them in terms of fire and lemon grass production. Whenfire is controlled, there is prolific natural regeneration ofchir pine. The main issue which needs to be resolved is to findout the most favorable regime for using prescribed burning forlemon grass production, but in a way which doesn't retard thegrowth of chir pine seedlings. It appears that after anywhere

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from 4-7 years of growth, young chir pine can withstand fire withminimal negative effects. But applied research needs to takeplace to clarify this.

The management of broadleaf forests in Bhutan, of any type,is not as easy as the chir pine forests. Broadleaf forests arethe target of wood harvesting which, according to the informationwhich this consultant has seen, is not sustainable. Most of thecurrent operations either: a) ignore the fact that the broadleafforest is gradually being degraded, b) accept forest degradationas a reality given the paucity of silvicultural alternatives andthe need for satisfying short-term demands, c) suggestclearfelling, followed by reforestation with local or exoticspecies (e.g. Gedo Wood Manufacturing Corporation, GWMC) as thesolution, or, d) suggest enrichment planting with either local orexotic species (e.g. Cupressus sp. on cool temperate broadleafstands) as the solution.

As can be noted from the above, natural regeneration hasusually been ignored or discarded as a silvicultural alternativefor the management of broadleaf forests. Natural regeneration inthe broadleaf forests has been plagued throughout Bhutan by theuse of these forests for livestock grazing. Uncontrolled grazingwill continue to eliminate any opportunity for naturalregeneration to be tested as a way of regenerating valuablebroadleaf forests or species (e.g. Ouercus sp. or Castanopsissp.) in national forest lands. Currently, the only documentedresearch on natural regeneration in broadleaf forests is beingdone, on a very small scale, by the Taba Research Institute inthe subtropical forests of the Gedo region. The difficultiespresented by the absence of experience with natural regenerationtechniques are compounded by the basic absence of information onforest ecology for almost all of Bhutan's forests. Withoutapplied research on natural regeneration, and basic forestecology, most projects will probably continue to follow the pathstaken by either GWMC (clearfelling of subtropical broadleafforest, followed by very high cost reforestation withpredominantly local species) or the RGOB (Cupressus sp.enrichment planting in cool broadleaf forest). Either of thesetwo strategies will change the ecological structure of therelevant forests, resulting in reduced biological diversity.

RECQMMENflAIIN - Forestry III should support applied researchwhich will determine how many years young chir pine naturalregeneration needs to be protected before prescribed burning canbe utilized for encouraging lemon grass production.

RECOMNENDATION - It is imperative that Forestry III immediatelyundertake an applied research program to develop natural forestmanagement systems for warm temperate, cool temperate andsubtropical broadleaf forests. The focus of this work should beto research ways of obtaining high quality natural regeneration

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(e.g. through the use of silvicultural measures and/or grazingcontrol). This work should capitalize on the Taba ResearchInstitute experience in the Gedo region. In additior, ForestryIII should support research in forest ecology for all foresttypes in Zone IV (e.g. literature searches, permanent plots), inparticular the ecological role and potential uses of species suchas Svmplocus sR. and DaphneDhylum so..

4.7 Forest Industry in Eastern Bhutan

In the initial preparation document prepared by Swedforest,not enough emphasis had been placed on secondary (vs. primary),value-added processing. The proposed industrial componentinitially favored increased primary level processing capacity(i.e. sawmills development), without adequately analyzingpossibilities for supporting gradual, but immediate, improvementstowards higher quality primary processina and increased "valueadded" secondary processing (joinery, furniture, etc.). From anenvironmental perspective, the suggestions for the Eastern Zone(Chapter 5) from the latest "Draft Bhutan Forestry III IndustrialForestry Component, Report from Final Preparation Mission" (June1992) are an improvement. More detail has been provided in thereport and more emphasis has been placed on secondary processing.

However, this consultant still has concerns regarding theactivities proposed by Swedforest, though more in terms ofpractical implementation than environmental impact. For example,there is no discussion of the possibilities of improving existingmills. Also, Swedforest believes that only (this author'semphasis) "one year will be required for procuring the sawmillsand establishing the organization" (p.65). Contrary to the majorpricing policy issues that remain to be addressed in Bhutan, andthe RGOB's stated emphasis on meeting local needs first, thereport also states that "all [lumber] sales will be at bestpossible prices, e.g. export prices" (p.65). Because somepractical alternatives seem to be ignored, plans are notpresented for the process of setting up the sawmills orestablishing the central processing unit, and some assumptionsunsupported, this consultant still questions the realism of theSwedforest proposals.

The environmental issues presented by the Swedforestproposals for the Eastern Zone are:

o ensuring appropriate size, number and phasing of thesawmills to be acquired; and,

o ensuring that adequate emphasis is placed on secondary(value-added) processing.

As per discussions with other members o the appraisal team, thefinal choice of sawmill type will ultimately be made by the

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entrepeneurs who will own and manage them. Forestry III willsupport only the use of mobile sawmills (where there is roadaccess), which utilize roughly 2800 cubic meters of logs peryear, or portable sawmills (where there is no road access) whichutilize under 600 cubic meters of logs per year. The Swedforestproposes that 6 mobile sawmills be purchased, but no number ofpertabie sawmills is suggested.

RZQQEMBa2H2ON - To ensure that the demand for raw materialdoesn't outstrip forest management capabilities, final approvalof sawmill purchase should be given by NES and the Department ofForestry.

P*E~~ATMN E I- Project staff and NES should annually reviewinvestments in primary and secondary processing equipment andtraining to ensure that a relatively equal balance exists betweenthe them.

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V. SOCIAL FORESTRY COMPONENT

The social forestry component has two subcomponents: on-farmagroforestry and village forests. In general, this component iswell conceived and has positive environmental implications. Bystressing the education, training and participation of villagersand government staff in agroforestry and the development ofvillage forest management units, broad-based forest conservationand management is being encouraged.

In spite of the above, there are activities in the socialforestry component that will need to be monitored from anenvironmental perspective. These issues are incorporated intothe environmental monitoring program. The issues include:

a) ensuring that species selection for agroforestry work placesadequate emphasis on the use of native (vs. exotic)species -- native species typically have a greater value interms of wildlife conservation and are less of a threat asbiological pests;

b) minimal and/or careful use of chemical inputs (e.g.fertilizers or pesticides) in tree nurseries or outplantings- Bhutanese nurserics have traditionally minimized the useof such inputs and, for environmental reasons, Forestry IIIshould be careful to consider all ramifications beforeproposing or funding any such inputs;

c) giving ample consideration to watershed management andbiological conservation as management objectives for villageforest plans; and,

d) ensuring that harvesting techniques in village forests arejust as carefully planned and implemented as harvestingactivities in the Forest Management component.

RECONJIENDATION 19 - The Social Forestry component is aninnovative and positive environmental initiative.Environmental monitoring program should focus on: 1) speciesselection, 2) the potential use of chemical inputs, 3) thequality of forest products harvesting in village forests,and 4) ensuring that village forest management plandevelopment gives adequate consideration to biologicalconservation and watershed management objectives.

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VI. AFFORESTATION CONPONENT

The afforestation component has been a challenge for theForestry III pre-appraisal. At times, the RGOB proposals havetended to take a "green the hillsides" approach, i.e. proposingtree planting without clear objectives and/or for the sake ofshowing visible forestry results. In some cases, theafforestation techniques proposed were inappropriate or mistakengiven the specific management objective. For example, treeplanting for watershed protection purposes was proposed in areaswhere prolific natural regeneration existed and already was amore effective soil erosion measure than a tree plantation. Inanother case, RGOB foresters proposed slope stabilization treeplantings for areas undergoing severe, mass movement (e.g-slumps, landslides, etc.) caused by poor road design or bad roadconstruction. In such cases, erosion problems were already sosevere that revegetation through afforestation would have hadlittle or no impact and would be a poor expenditure of resources.

In response to this, the pre-appraisal team and Bhutaneseforestry specialists developed guidelines for deciding when andwhere afforestation was appropriate, and with which techniques.From an environmental perspective, the main issue will be tomonitor the implementation of these guidelines to ensure thatafforestation is used appropriately and that a balance existsbetween natural regeneration and tree planting.

RECOMEN .TTON IS - Prior to implementation, allafforestation efforts should be evaluated using theguidelines which have been developed. Project monitoringshould ensure that a roughly 50/50 balance in investments inplanting (artificial regeneration) and natural regenerationtakes place.

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APPENDIX A - DRAFT GUIDELINES FOR FOREST MONITORING IN EASTERNBHUTAN: PRINCIPLES AND CRITERIA"

BACKGROUND

To date there has been no broadly accepted set of evaluationcriteria applicable in all of the different conditions underwhich forest management takes place in Bhutan. As a minimumacceptable interim measure, the criteria detailed below assessthe sustainability and impacts of forestry operations and are tobe used for independent forest monitoring by the NationalEnvironment Secretariat (NES), with support from World Bank,DANIDA, and agencies of the Royal Government of Bhutan. lhesecriteria are based on the following broad principles: 1)maintenance of environmental functions, including watershedstability and biological conservation, 2) sustained yieldproduction of all forest products, and 3) positive impact on thewell being of local communities. The evaluation criteria are inaccord with relevant forest management guidelines issued by theIUCN and the ITTO. However, the criteria require -flexibility inapplication.

In utilizing the criteria below, two biases should beexplicitly noted. The first is in favor of conditions andactivities that maintain natural forest; this reflects the factthat natural forests managed for sustained timber production canalso provide numerous other benefits (watershed protection,conservation of biological diversity, various non-timber forestproducts), and that these multiple benefits can safeguard theforest from competing land uses. The second bias reflects thevital role local communities have to play in sustainable forestmanagement; thus conditions and activities that involve orotherwise benefit local communities are considered especiallyfavorable. The assumption is that communities must understandand support the objectives and processes of forest management forit to be successful. If local support doesn't exist, manegementwill fail and destructive environmental practices will occur.

EVALUATION CH1ECKLIST

I. General

a. Name of management unit:b. Location:c. Size:d. Type of forest:e. Ownership: (government, company, community, other)f. Managed by: (government, company, community, other)g. Year in which logging operations began:h. Do operations include road building:i. Principal mode of timber extraction (mechanical or manual):j. Is annual allowable cut set by area or volume:

21

k. Are areas of exceptional biodiversity known to exist invicinity:

1. What local communities are involved with/affected byforestry activities:

For each of the following criteria, indicate the number whichmost applies:

0 = not applicable1 = strongly unfavorable2 = more unfavorable than favorable3 = more favorable than unfavorable4 = strongly favorable

II. Natural Forest ma'agemert

a. Completed management plan is being followed (whether innational or village forest areas).

b. Management unit boundaries are reasonable in terms ofwatershed protection and biological conservation.

c. Wildlife taken into consideration in management plan andpractices.

d. Planning maps and forest work plan are available at adequatescale (e.g. 1:5,000 to 1:15,000 scale).

e. H-arvesting rate, felling cycle and rotation length have beenset and are being followed within conservative limits asindicated by the mean annual increment which determines theannual allowable cut.

f. Rationale behind silvicultural prescriptions is well-documented and reasonable, attempts to maintain thestructure of the natural forest, and prescriptions are beingadhered to in the field.

g. Every effort been made to minimize the construcftion and/orlength of logging roads.

h. For logging roads, topographic maps have been prepared wellbefore road construction that detail areas specified forall-weather harvesting or dry-weather only, locations ofextraction roads, loading ramps, main skidtrails, drainagestructures, and protected areas.

i. Road system has been pre-planned using geomorphological riskassessment techniques, placing roads generally on ridges orside slopes under 20-25 degrees.

j. Trees to be harvested are pre-marked accordinglv.

R.yilsd Draft 3Jf 24. 1992

k. Future harvest trees have been marked prior to felling.

1. Non-timber forest products have been taken intoconsideration, prior and subsequent to felling.

m. At least 75 percent of marked crcp trees undamaged byharvesting operations, as determined by post-logginginventory within 6 months after harvest.

n. Sustained yield is beinq monitored by an established,adequate network of representative, permanent, continuousinventory plots.

O. In-migration and other activities (e.g. fuelwood cuttinc,grazing, mining) along logging roads is controlled.

p. Impact of logging on stream flow sedimentation.

q. No timber harvesting within 10 m of stream courses.

r. No timber harvesting with skidders on slopes exceeding 30%slope.

s. No cable yarding on slopes exceeding 75% slope.

t. Directional felling used whenever possible (i.e. treesfelled parallel to direction of skidding).

u. No road fill slopes reaching stream courses.

v. Front end of logs lifted off ground during mechanicalskidding.

w. Road surfaces well drained, culverts large enough to avoidponding, water bars installed where road abandoned.

x. Logging- camps well located and impacts contrciled.

IV. Social Forestry

a. Species selection for reforestation is well-documented andwith local community input.

b. Native species are emphasized.

c. Biological and watershed conservation objectives areconsidered in village forest management planning.

d. Careful, discriminate use of cheiical inputs (fertilizersand herbicides) in tree nurseries or outplanting.

Ruvimad Drujt s:~ 24. 1992 23

V. Afforeion

a. Roughly equal emphasis is being given to naturalregeneration and tree plantinq as afforestation techniques.

b. Prior to reveqetation, site-specific analysis of theproposed afforestation technique is conducted using criteriadeveloped under Forestry III.

VI1. it_ Intrci

a. Local communities have an opportunity to participate in (nojust review) all forest management activities (e.g. settingmanagement objectives, planning, inventories, harvesting).

b. Local communities' traditional rights to own, manage or useresources (fuelwood, sawtimber, and non-timber resources) inthe forest have been considered.

c. Boundaries are recognized by communities and readilyavailable in a map form.

d. Community access to forest resources is being monitored andregulated with their collaboration.

a. Any proposed major forestry operations (e.g. logging)described to communities in public meetings in advance.

f. Employment offered first refusal by local communities underprevailing wages and other benefits.

g. Document other benefits to local communities.

Rawllud lafat Jun. 24. 19 24

APPENDIX B - ENVIRONMENTAL ASSESSMENT OF INDUSTRIAL FORESTRYOUTSIDE THE EASTERN REGION

SARY

This consultant's concerns about proposed industrialforestry activities outside the Eastern Region, as articulated inthe "Preliminary Environmental Analysis", were that:

a) the proposed modern sawmill for the Chumi Valley nearBunthang presents a number of environmental issues thatcannot be easily or confidently resolved; undertaking suchan effort would also likely divert resources away from theindustrial forestry challenges awaiting the project in theEastern Zone; and,

b) the proposed interventions in the Gedo region did not placeadequate emphasis on the need for drastic changes in thecurrent forest resource =-nagement strategy for industriesin the region; the main issue was (and continues to be) thatthe current strategy far long-term wood fiber supply isextremely unlikely tc be successful and is ecologicallyunsound.

This consultant continues to have these same concerns. Theproposal for a modern sawmill in the Chumi Valley ignores policyissues that restrict more efficient and higher quality woodprocessing in Bhutan (e.g. the nature of the export market toIndia, as addressed in the Waggoner pre-appraisal report).Rather than encouraging gradual, private sector-motivatedimprovements in wood processing efficiency, the proposed sawmillrepresents a top-down approach is suggested which is unrealistic,has proven ineffective in other countries, and naively assumesthat existing wood industries can be shut down and that amplewood resources can be easily obtained from the forest.

The proposed interveations in the Gedu area make some sense.The suggestion by Swedforest, to conduct a 3 month consultancy toidentiAy potential concession areas would seem appropriate, butother drastic measures must be considered: 1) the RGOB shouldsupport much intensified natural forest management and plantationresearch in the region; and 2) the RGOB must consider that"downsizing" of one of the operations as an alternative.

Bnunthang modern Sawmill Proposal

In the document it is suggested that the four differentsawmills in the Bumthang area join forces to purchase and operatea modern, more efficient sawmill. A number of importantquestions must be asked. First, though the existing sawmillowners might be interested, the consultant continues to be quiteskeptical of a venture that would propose much higher quality

Rewise Draft J- D4. 1992 25

sawmilling in a business environment that inhibits ordisincentives higher quality primary processing. Withoutaddressing broader policy issues first, major investments in alarge, modern sawmill would seem quite risky.

Second, at an operational level, it still seems unlikely(and risky to assume) that four independent sawmill owners would"'dump" their existing low-risk, commercially lucrative, Indian-made horizontal bandsaw mills and merge their operations, even ifthe new modern sawmill was financed with ultra-concessionaryfinancing and both raw material and markets were guaranteed.

From a conservationist point of view, there also seems to bea naive assumption in the preparation document that, through thegreater efficiency promised by a modern sawmill, either a) such amodern sawmill would reduce or "freeze" the total amount of rawmaterial needed from the forest, or b) there is more than enoughraw material out there to supply such a mill. In fact, thisconsultant believes that a larger mill would ultimately requiremore raw material to make it commercial than all of the currentoperations combined (i.e. the owners would want it to operatemore than one shift). This might again put the Bhutanese in thesituation of having to respond to great private sector pressurefor wood supply, just as they are currently being forced to do inthe Gedo region and other parts of Bhutan. if the RGOB wishes toencourage higher quality processing, the consultant once againsuggests a conservative, business-like approach that combines achange in government policies (as per the Waggonner report) withinvestment incentives for more efficient processing withtechnical assistance.

- Forestry III should not support the constructionof a molern sawmill in the Chumi Valley because: a) currentpricing policies make such a venture very risky, b) it isunlikely existing sawmills can or would be shut down, c) anoverly optimistic assessment of forest management capabilitieshas been made, and d) the amount of time, technical assistanceand training needed to correct the above problems are beyond thecapacity of the Forestry III project.

Concession Mar.aaement Proposal for Gedo

The swedforest document proposes assistance for improvingforest management for wood processing industries in the Geduregion, including Gedu Wood Manufacturing Corporation, BhutanBoard Products, Ltd. and Bhutan Carbide & Chemicals, Ltd. Due totime limitations, this consultant visited on the GWMC operationsin November 1991.

As discussed in the PEA, the current forestry operations atGWMC are not sustainable. Large non-contiguous clearcuts(minimum of 50 hectares each) in broadleaf forests are being done

Raud Draft JUM 24. 192 26

with cable yarding systems; areas are then reforested withpredominantly native species. On the positive side, soildisturbance through logging is minimized because, with one veryvisible exception along the road to Phuntsholing, harvestingtakes place on relatively gently slopes and using appropriatelogging technology -- cable yarders loaned to private loggingcontractors by GWMC Also, GWMC should be applauded for thereforestation it has done; replanting is roughly on schedule andthey have attempted to utilize species native to the region.

However, the current clearfelling by GWMC is clearly a "lastresort". The "selection cum improvement" natural forestmanagement system previously used by GWMC was not providingeither the volume or quality of wood they needed or at anacceptable cost. The selection cum improvement system alsodidn't appear to be promising silviculturally because, unlike theareas currently being fenced and reforested, cattle grazing inlogged areas was not controlled, eliminating potentially valuablenatural regeneration.

This consultant does not see the current reforestation asthe medium- or long-term answer to GWMC wood supplies. Already,GWMC staff are projecting that the maintenance of the currentplantations will have to continue far into the future, muchlonger than originally projected and at a higher cost.Ultimately, the consultant believes that such costs may prove toomuch for GWHC to bear, potentially leading towards plantationabandonment. Based on informal observations made by thisconsultant and a World Bank forester on the pre-appraisal team(A. Banerjee), it would appear that the reforestation effort isalso hampered by a very limited applied research effort that hasnot adequately considered applicable experiences from similarregions in nearby India or elsewhere.

Experience from similar forests elsewhere would indicatethat the clearcuts are a problem biologically. The areas whereharvesting occurs are areas where selective logging has takenplace previously; some disturbance had already occurred. Also,so far, the clearcuts are not contiguous and the logged areas arenot being cleared after for agriculture or human settlements.However, no one h4s sy=tematically studied the ecology of theseforests and we are almost completely ignorant of the biologicalconsequences of the current logging. Clearcuts of this size insubtropical or warm temperate broadleaf forests elsewhere havehad negative biological consequences.

From either biological or silvicultural viewpoints, neitherGWMC, RGOB or anyone else is conducting sufficient research tohelp understand the consequences, or alternatives, for thecurrent operations in the Gedo region. Through the Taba ForestryResearch Institute, some extremely important initial work onnatural regene'r'' * u v. ( _ir e hc , c. o_+A,v0-

PAVLM*d DrtM Z_M 24, 1992 27

this is a small effort and needs to be expanded. The consultantis not aware of any applicable biological research either plannedfor or currently being conducted in the region.

Ultimately, in the Gedo region, the RGOB faces a difficultsituation that is representative of the challenges that it willconfront in virtually all the other broadleaf areas of Bhutan,indeed in all forest areas, if the current policies continue.Industries have been established at such a scale as to beuntenable in comparison to their "sustainable" raw materialsupply. Understandably, once established, the industries placegreat pressure on the government to provide raw material. In thecase of Gedo, because the goverrment encouraged and facilitatedthe development of the facilities, it feels it must help. Yet ithas no "sustainable" answer in terms of forest management in thebroadleaf areas other than high cost, probably unsustainablereforestation, and other alternatives aren't being developed.Support for the Taba Institute research on natural regenerationmight provide results, but this will take time.

Given the type of forest, the inability to ensuresustainable production, and complicating social and economicfactors (e.g. controlling grazing in natural forest), it ispossible that the combined fiber demands of GWMC, BCCL and BPPLare just too much for the region. The only viable solutionswould appear to be: a) downsizing one of the three operations, b)a resurgence in natural forest management efforts by thecompanies with RGOB assistance (which will require larger blocksof forest over a long period of time than under the currentclearfelling system, thus more fencing, more managementcomplications, etc.); c) bringing fiber at a higher cost fromother sources throughout Bhutan; or, d) a more productivereforestation scheme, with a concommitent acceptance thatclearfelling is unavoidable to meet the wood fiber demands.

The government has said it wants both "sustainable forestry"and private sector development. The question is not whether ornot industrial forestry development will occur or whether RGOBshould be involved. It is a question of what role the RGOBwishes to play. Forestry III should be an effort that focuses on"sustainable" industrial develoDment in Zone IV and should notdilute its focus by taking on initiatives outside that region.

RECOMMENDATION - The situation in Gedu is a difficult one for theWorld Bank and RGOB. As initial supporters of industrialforestry development in Gedu, it would seem appropriate that theRGOB and WB collaborate in seeking an answer to forest managementproblems in the region. The suggestion by Swedforest, to conducta 3 month consultancy to identify potential concession areaswould seem appropriate, but it is only a start. Two othermeasures must be considered. First, the RGOB should design andseek support for continued natural forest management and

flvS.d Draft _ a 24. 1992 28

plantation research in the region. Second, the RGOB mustconsider that ultimately, it may have to restrict raw materialsupply to one of the three operations, ultimately leading towardsa "downusizing" of one of the operations. Drastic measures areneeded. Unless addressed now, the current operations willcontinue to be a problem for the government.

R d Dtt J 24, 1992 29