Documenet of

The World Bank

Report No. 15768 -- MAI

STAFF APPRAISAL REPORT

REPUBLIC OF MALAWI

ENVIRONMENTAL MANAGEMENT PROJECT

May 14, 1997

Environment and AgricultureAfrica Region

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CURRENCY EQUIVALENTS

Currency Unit = Malawi Kwacha (MK)US$ 1.00 = MK 15 (as of October 1996)SDR 1.00 = US$ 1.44 (as of October 1996)

WEIGHTS AND MEASURES

Metric System

GOVERNMENT FISCAL YEAR

April I - March 31

ABBREVIATIONS AND ACRONYMS

CAS Country Assistance StrategyCURE Coordinating Unit for the Rehabilitation of the EnvironmentDEO District Environmental OfficerDDC District Development CommitteeEAD Environmental Affairs DepartmentEIA Environment lImpact AssessmentEIS Environmental Information SystemsEMA Environmental Management ActEMP Environmental Management ProjectESP Environmental Support ProgrammeGDP Gross Domestic ProductGEF Global Environment FacilityIAPSO Inter-Agency Procurement Services OfficeIPCC Intergovernmental Panel on Climate ChangeMASAF Malawi Social Action FundMOREA Ministry of Research and Environmental AffairsMNR Ministry of Natural ResourcesNEAP National Environmenital Action PlanNCE National Council for the EnvironmentNEP National Environment PolicyNGO Non-Governmental OrganizationSOE Statement of ExpenditureTCE Technical Committee on the EnvironlmenltNRC Natural Resources Committeel,NDP United Nations Development Programme

The preparation of this operation has been the work of many people in Malawi, and has been facilitated by Japanese Trust Fundresources. The World Bank Appraisal mission which visited Malawi in June/July 1996, comprisecl Messrs/Mmes: RobertClement-Jones (Mission Leader, AFTEI), James Coates (Principal Economist, AFTAI), Pickford Sibale (Research Specialist,World Bank Resident Mission, Malawi), Agnes Kavinya (NGO Liaison Officer, World Bank Resident Mission, Malawi), JeriLarson :(Operations Analyst, AFTAI), David Smith (Consultant, NGO Specialist), Robin Le Breton (Consultant, NaturalResources Management Specialist). Project negotiations held in January 1997 also involved Elizabeth Adu (Principal Counsel,LEGAF), Steve Gaginis (Disbursement Officer, LOAAF)3 Jaime Roman (Principal Procurement Officer, AFTSI) and Ella,Bomsby (Task Team,Assistant, AFTEI).

VICE PRESIDENT MR. CALLISTO MADAVOCOUNTRY DIRECTOR MS. PHYLLIS POMERANTZTECHNICAL MANAGER MS. CYNTHIA C. COOKTASK TEAM LEADER MR. ROBERT CLEMENT-JONES

REPUBLIC OF MALAWI

ENVIRONMENTAL MANAGEMENT PROJECT

CONTENTS

Page No.

CREDIT SUMMARY

1. ENVIRONMENTAL SUPPORT PROGRAMME ................................................ 1

COUNTRY BACKGROUND ............................................... IIMPORTANCE OF THE ENVIRONMENT ............................................... IISSUES IN THE ENVIRONMENT ............................................... 2ENVIRONMENTAL MANAGEMENT FRAMEWORK ................................................ 4ENVIRONMENTAL AGENDA ............................................... 7DONOR ASSISTANCE FOR THE ENVIRONMENT ............................................... 8LESSONS LEARNED ............................................... 8RATIONALE FOR IDA INVOLVEMENT ............................................... 9

2. THE ITF CONTRIBUTION TO THE PROGRAM ................................................ 9

OBJECTIVES AND SUMMARY ................................................ 9DETAILED DESCRIPTION ................................................ 10

3. PROJECT COSTING AND FINANCING ............................................... 13

C'OST ESTIMATES ................................................ 13F ..INANCING ................................................. 14PROCUREMENT ................................................ 14DISBURSEMENT ............................................... 1 6ACCOUNTS AND AUDITING ............................................... 17

4. PROGRAM ORGANIZATION AND IMPLEMENTATION ............................................... 17

PROGRAM IMPLEMENTATION ............................................... 1 7MONITORING AND EVALUATION ................................................ 19MID-TERM AND IMPLEMENTATION COMPLETION REVIEW ................................................ 19IMPLEMENTATION SUPPORT PLAN ................................................ 1 9

5. BENEFITS AND JUSTIFICATION ................................................ 20

PROGRAM IMPACT ................................................ 20RISKS ................................................ 20ECONOMIC ANALYSIS ............................................... 21SUSTAINABILITY ................................................ 22

6. AGREEMENTS REACHED ................................................ 23

AGREEMENTS REACHED DURING NEGOTIATIONS ................................................ 23CONDITIONS OF EFFECTIVENESS ................................................ 24CONDITION OF DISBURSEMENT ................................................ 24RECOMMENDATION ............................................... 24

ANNEXES

ANNEX 1 ORGANIZATIONAL STRUCTUREANNEX 2 ENVIRONMENTAL SUPPORT PROGRAMME - ROUNDTABLEANNEX 3 ENVIRONMENTAL SUPPORT PROGRAMME - INDICATIVE FINANCING COMMITMENTSANNEX 4 COMMUNITY MOBILIZATION AND ENVIRONMENTAL MICRO-PROJECTSANNEX 5 IMPLEMENTATION SUPPORT PLANANNEX 6 COST TABLESANNEX 7 PERFORMANCE MONITORING INDICATORSANNEX 8 MIDDLE SHIRE LAND DEGRADATIONANNEX 9 PROJECT IMPLEMENTATION PLAN - TABLE OF CONTENTS

REPUBLIC OF MALAWI

ENVIRONMENTAL MANAGEMENT PROJECT

Credit Summary

Borrower: Government of the Republic of Malawi

Implementing Agencies: Ministry of Research and Environmental Affairs, Ministry of NaturalResources, Ministry of Transport (Meteorological Department), otherGovernment Departments, Non-Government Organizations,Communities.

Beneficiaries: Government and Non-Government Organizations, Communities.

Poverty: Not applicable.

Amount ITF/IDA: SDR 8.7 million (US$ 12.4 million equivalent)

Terms: Standard with 40 years maturity

Financing Plan: See Schedule A

Net Present Value: Not Applicable

Staff Appraisal Report: No. 15768 -- MAI

Map: IBRD 24575

Project Identification No.: MW-PA- 1664

I

1. ENVIRONMENTAL SUPPORT PROGRAMME

COUNTRY BACKGROUND

1.1 With nominal per capita income of US$140 (1994), Malawi is one of the poorest countries in theworld. According to the recent Poverty Profile (1995), thirty percent of the population have incomeswhich do not assure basic caloric needs. Malawi's population of about 11 million is growing at about 3.0percent, and population density, at 170 inhabitants per km2, is among the highest in the region. Thepopulation is predominantly rural (85%), dependent largely on subsistence agriculture, with over 55percent having less than I hectare of arable land. Agriculture is mostly rainfed, and is highly susceptibleto climatic variability. Drought has occurred during three of the last four years. Malawi's socialindicators also reflect the level of poverty. Life expectancy is only 45 years, 7 years less than incountries with similar income levels, and appears to be declining due to the impact of HIV/AIDSprevalence which is one of the highest in the world. As much as 59 percent of the population is illiterate.Water and sanitation and rural infrastructure are also inadequate with only half of the population havingaccess to safe water.

1.2 Malawi enjoyed healthy growth during the first years of independence, with per capita incomesincreasing between 1966 and 1980 at an annual average rate of 3 percent. However, during the last 15years, Malawi has suffered from a series of shocks in the form of droughts, increases in oil prices andinterest rates, decreases in tobacco prices (Malawi's major export), and civil war in Mozambique whichsignificantly increased transport costs and brought more than I million refugees. Recent years have seena series of structural adjustment programs aimed at stabilizing the economy and removing impedimentsto growth, including measures to enhance trade, improve agricultural pricing and marketing to increasereturns to smallholders, and most recently to tackle the pressing demand for land reform.

IMPORTANCE OF THE ENVIRONMENT

1.3 Malawi is endowed with a diversified natural resources base which includes some of the mostfertile soils for agriculture in Southern Africa. The country has substantial forest and water resources,and a remarkably rich flora and fauna. If properly utilized, these resources can provide the basis forsustainable development of the country. The total land area of Malawi is 9.4 million hectares. Of this,about 3 million hectares is suitable for rainfed agriculture using traditional methods of management. Atpresent about 50 percent of the total land area is under cultivation, indicating that a significant proportionof marginal land is being exploited. Malawi's forests and woodlands occupy about 35 percent of thecountry's land area. Forest resources are vital in the Malawi economy, providing over 90 percent of thecountry's energy needs in addition to timber and many other non-wood forest products.

1.4 The surface water resources of Malawi comprise a network of river systems and lakes covering20 percent of the country's territorial area. Surface water is totally dependent on rainfall, with the riversystems drying up to a large extent in the dry season. Malawi contains some of the world's mostimportant wetland ecosystems, including the shoreline plains of Lakes Malawi, Chiuta and Chiulwa, adiversity of dambo ecosystems, and the marshes of the Lower Shire River. The country's electricity isderived almost exclusively from a series of hydroelectric schemes on the Shire River, and is vulnerableto prolonged drought which can cause the level of Lake Malawi to fall with lower flows into the ShireRiver. Lake Malawi has a rich biodiversity with 500-1000 endemic species of fish, and its fish catchesprovide 70 percent of the animal protein consumed in the country. Endowed with a rich flora and fauna

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Malawi has five National Parks and four wildlife reserves accounting for 11 percent of the country'sarea, and in 1980 established the world's first fresh water national park at Lake Malawi.

1.5 The Government of Malawi has become increasingly concerned about the deterioration of thecountry's environment, and the associated loss of natural resources. A participant in the Earth Summit in1992, Malawi subsequently launched the preparation of a National Environmental Action Plan (NEAP)which was adopted in late 1994. Malawi's new Constitution, adopted in May 1994, reflects thecommitment of the country to address its environmental problems. Chapter III, section 13 (d) calls uponthe State:

"To manage the environment responsibly in order to:

(a) prevent the degradation of the environment;

(b) provide a healthy living and working environment for the people of Malawi;

(c) accord full recognition to the rights of future generations by means of environmentalprotection."

ISSUES IN THE ENVIRONMENT

1.6 The National Environmental Action Plan identified nine key environmental issues: soil erosion,deforestation, water resources degradation, high population growth, depletion of fish stocks, threats tobiodiversity, human habitat degradation, climatic change and air pollution. The underlying causes ofenvironmental degradation in Malawi are poverty and the growing imbalance of population to landresources. Traditional land use practices that once helped preserve the integrity of natural resources areno longer able to cope with the additional stresses placed upon them. With very limited access to land,the poor place heavy demands on the natural resources base for subsistence and survival, and generallylack the resources to intensify agricultural production. Forest products of all types (including charcoal,fuelwood, bushmeat) are one of very few sources of cash income for the rural poor. The poor andespecially poor women are particularly vulnerable to the degradation of natural resources which providesupplementary foods, medicines, water, and fuel. Women play a critical role as custodians of theresources and educators of children. One quarter of the households in Malawi are headed by women.About 42% of these female headed households cultivate under 0.5 hectares of land, and endure theproblems of the smallholder sector, such as limited land holdings, declining agricultural productivity andlow earnings and difficulties unique to women farmers. These include limited access to agriculturalextension services, differentials in wage rates for agricultural labor and more household tasks such asgathering wood and water.

Land

1.7 Soil erosion is one of the principal types of land degradation, posing a threat to soil fertility, cropproduction, food security and sustainable agricultural production. In Malawi, soil erosion is a majorcause of siltation with potentially disastrous consequences for hydro-electricity production. A lack ofreliable data and monitoring systems make it difficult to do a thorough quantitative analysis of theimpacts of land degradation and estimates vary considerably. The NEAP does single out soil erosion asthe first among nine important environmental issues.

Forest Resources

1.8 The rapid expansion of agriculture from the mid 1970s has led to extensive deforestation,estimated at an annual rate of about 3.5 percent. Total forest cover is estimated to have declined by

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about 40 percent during the period 1970-90. Although clearing for agriculture has been the main sourceof deforestation, this has been exacerbated by the increasing demand for woodfuels and timber products.The legal and policy framework in the forestry sector has also contributed to uncontrolled exploitation ofwoodland and forest resources. With all rights to these resources vested in the State, local communitieshave lacked the appropriate incentives to manage and protect them. Weak public sector institutions suchas the Forestry Department, reinforced by often antagonistic, "command and control" policies, have ledto high levels of distrust between communities and public authorities.

Water

1.9 Although total water resources in Malawi are considered adequate to meet the needs of thegrowing population, these resources are becoming increasingly degraded through sedimentation,biological contamination and effluents. Silt loads in surface water runoff leads to significant problems inwater quality, including turbidity, increased suspended solids, water flow problems and water treatmentcosts. As indicated above, high sediment loads have caused siltation of rivers and reservoirs, requiringcostly dredging to maintain water and electricity production.

1.10 Almost 50 percent of all illness in Malawi is attributed to water borne diseases. As a result ofinadequate sanitation facilities and other sources of organic pollution, the bacteriological condition of therivers is poor throughout the year. Three quarters of the rivers show fecal coliform counts in excess of500 per 100 ml. in the dry season which is dangerously above WHO standards. In urban areas,groundwater resources are becoming increasingly contaminated through poor sanitation facilities. Thechemical contamination of stream water in urban and peri-urban areas is becoming a common problemdue to the improper disposal of industrial waste. Eutrophication of water bodies and the growth of waterweeds including water hyacinth threaten fish resources and other economic uses. Bilharzia, longendemic in parts of Malawi, has recently appeared in some locations along Lake Malawi, which couldthreaten tourism in the country.

Fisheries

1.11 Although reliable data are not available, evidence suggests that Malawi's fish resources areunder threat from overfishing and declining water resource quality. Increased fishing efforts anddeteriorating water resources quality are associated with declining catch rates. In Lake Malombe fishproduction dropped from 10,000 tons per year in 1986 to 200-300 today. Localized declines are beingobserved in Lake Malawi, although it is difficult to assess the overall production potential of the entirelake. The degradation of breeding areas and overfishing has also threatened entire species, such as theNtchila spp., which, abundant in the 1950s, is now almost extinct.

Biodiversity

1.12 Malawi's rich biodiversity, which includes more that 6000 species of flora of which many areendemic or near-endemic, is under threat from forest and land degradation. The scientific, agriculturaland medicinal values of this biodiversity is only beginning to be appreciated. Many species are now onlyfound in forest reserves and conservation areas, although these too suffer from encroachment anddegradation. Wild fauna are also threatened by loss of habitat and poaching and this degradation of thewildlife estate undermines efforts to develop and expand the tourism industry. In this sector, similar tothat of forestry, local communities have borne most of the cost of wildlife and conservation activities,and yet legally have received only very limited benefits. Only recently has this begun to change withmuch greater emphasis being placed on the role and rights of communities living in or near protectedareas.

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Human Settlement

1.13 In the rural areas, about 40 percent of the population do not use pit latrines, which has an impacton surface and other water resources. Although predominantly rural, Malawi has annual urban growth ofabout 7-10 percent in the four main urban areas - Blantyre, Lilongwe, Mzuzu and Zomba. These citiesare facing enormous problems in the face of this very rapid growth. Typical problems include:inadequate waste disposal and water systems (with severe endemic and epidemic disease hazards) - only30 percent of the urban population is connected to waterborne sewerage or septic tanks; few establishedsolid waste landfill sites; high degrees of informal settlement or "squatting"; rapid degradation of forestresources in urban and peri-urban areas due to energy demand; a lack of recreational facilities; degradedand polluted water courses, and above all, virtually no resources to tackle these urgent problems.Institutional (community-based) structures to help address these problems are virtually non-existent. Thesolutions currently being financed by the donors are often high cost - e.g., water borne sewerage systemsfor Lilongwe when water availability is a major problem for many parts of the city. Also the generalability to pay for operation and maintenance is very limited, particularly in the poorer areas. Theproblems are serious and the situation is expected to deteriorate even further over the next several yearsdue to even more rapid population growth. Tackling these issues and planning for the future will requirea significant investment in capacity development at the local level, and a highly paLrticipatory process ofurban environmental planning.

Climate Change

1.14 As an agricultural economy, principally dependent on rainfed subsistence farming, Malawi ishighly vulnerable to drought and other extreme climatic events. If, as suggested by theIntergovernmental Panel on Climate Change (IPCC), climatic variability increases over the comingdecades, Malawi will suffer from an increased incidence of drought and changing weather patterns.Meteorological monitoring and drought proofing will become essential tools in helping Malawi to adaptto longer term trends, and will also have short term benefits in helping to smooth out fluctuations inagricultural output and GDP.

ENVIRONMENTAL MANAGEMENT FRAMEWORK

Background

1.15 The National Environmental Action Plan (NEAP), adopted in December, 1994, was preparedusing a highly participatory approach involving government, the private sector, non-governmentorganizations (NGOs) and traditional leaders. The NEAP identified the critical environmental issuesfacing Malawi, and outlined a series of actions that should be taken in order to redress the problems ofresource degradation. The NEAP represented a crucial step towards establishing a policy andinstitutional framework for environmental management, and identified the following elements necessaryto facilitate its implementation:

(a) clearly defining institutional responsibilities and strengthening capacity;

(b) formulating guidelines for Environmental Impact Assessment (EIA) and instituting amechanism for their implementation; and

(c) developing an Environmental Policy and Framework Law.

1.16 The NEAP, while identifying a list of priorities for investment and capacity building, did not gointo great detail or adequately address the tradeoffs between different interventions. The Government of

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Malawi therefore decided to develop the Environmental Support Programme (ESP) which would have asits overall objective to "integrate environmental concerns into the socioeconomic development of thecountry". The ESP is intended to support the umbrella framework incorporating strategies, policies andpriority programs to address environmental problems. The ESP covers the actions of many differentactors (government, non-government, community level) all of which play a crucial role in environmentalmanagement in Malawi. The ESP is also designed to solicit resources to tackle Malawi's keyenvironmental issues, while providing a framework to help reduce duplication of effort.

1.17 The design of the ESP has taken place in a highly participatory fashion, involving a number ofTask Forces, a series of consultative exercises for community-based pilot activities, technical inputs froma broad array of local and foreign sources including expertise from other African countries. Successivedrafts of a synthesis report for the ESP have been prepared and used to define more precisely the policy,institutional and investment priorities which can be supported by the Government and by theinternational community. Although not covering every activity falling under the broad category ofenvironment and natural resources management, the ESP document (copy on file) includes the mainelements of policy reform and institutional development, and itemizes an investment program valued atover US$120 million (over 5 years). In May 1996, an ESP Roundtable held in Lilongwe, broughttogether a broad range of Government departments and agencies, including members of municipalitiesand local government, NGOs and donors, to discuss the strategy contained in the draft report on the ESPand provide feedback on program priorities and focus.

1.18 The brainstorming and priority setting exercises undertaken during the Roundtable underscoredthe following three themes: (i) the need for community participation and involvement in any effort toimprove environmental management and encourage the sustainable development of natural resources;(ii) the need for capacity building, at the community level, and in the agencies and NGOs charged withimproving environmental management; (iii) the need to improve coordination amongst the differentactors involved in improving environmental management. In addition, participants ranked the followingtopics very high in designing interventions: (iv) environmental education, (v) land degradation; (vi)water resources management; and (vi) pollution in urban settlements. Annex 2 contains a summary ofthe workshop. Subsequent workshops have been held on watershed degradation in the Shire Rivercatchments, on environmental education for which a national strategy has been prepared, and oncommunity-based natural resource management.

Policy Framework and Legislation

1.19 The National Environment Policy (NIEP) (copy on file) was adopted by the Cabinet in February1996. The NEP seeks to:

(a) promote the efficient utilization and management of natural resources;

(b) facilitate the restoration and maintenance of essential ecosystems and ecologicalprocesses;

(c) enhance public awareness of the importance of sound environmental management; and

(d) promote cooperation between government, local communities, women's groups, NGOs,and the private sector in the management of the environment.

1.20 To provide a sound basis for environmentally sustainable development, the NEP specifiesguiding principles and strategies for both national and sectoral policies. At the national level, the NEPrecognizes that poverty is one of the root causes of environmental degradation. Poverty alleviation istherefore critical for natural resource conservation and sustainable utilization. Proper economicincentives are more effective than enforcement to induce people to undertake sustainable resource use

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and improved environmental management requires an enabling economic framework in which theopportunity cost of using natural resources is reflected in their market prices. A key element in the NEPis the recognition that communities have a right to benefits from sustainable utilization of naturalresources on all public and customary land.

1.21 The NEP sets out the principles for institutional coordination, focusing on advocacy, policyformulation, authority to oversee compliance, and legal status derived from appropriate legislation. TheNEP outlines the generic requirements for improved environmental management, including frameworklegislation, environmental planning, impact assessment, environmental education and public awareness,private sector and community participation, demographic planning, and land tenure focusing onempowering local communities to manage common property resources while protecting their rights. ThePolicy also provides overall guidance on policies for agriculture, forestry, fisheries, parks and wildlife,water resources, energy, industry, mining, and tourism.

1.22 The Environmental Management Act (EA-) (copy on file) was approved in June 1996. Thisenvironmental framework law establishes the institutional and legal framework for environmentalmanagement in Malawi. The Act sets out the duties and responsibilities of the Minister, the Director ofEnvironmental Affairs, the National Environmental Council, the Technical Committee and DistrictEnvironmental Officers. The EMA provides for the introduction of Environment Impact Assessment(EIA) together with appropriate powers for the Minister and the Director of Environmental Affairs.Other key elements of the legislation include: a series of provisions on environmental management,pollution control, and legal sanctions, and; provision for the establishment of the Environmental Fund forthe "protection and management of the environment and the conservation and sustainable utilization ofnatural resources".

1.23 Under the NEP and embodied in the EMA, provision is made for a review cf all sectoral policiesand legislation. To the extent that there are inconsistencies between sectoral legislation and the EMA,the provisions of the EMA will prevail. This work has already started, commencing with a full review ofsectoral legislation to be followed by modifications where necessary to legislation and policies.

Present Institutional Arrangements

1.24 The NEP and the EMA establish the institutional structures for environmental management inMalawi. The National Councilfor the Environment (NCE) is a high-level body whose Chairman isappointed by the President. Membership includes the Principal Secretaries of Ministries, the GeneralManagers of the Bureau of Standards and the National Herbarium, and nominees from the private sector,NGOs, the National Commission for Women in Development, and the University of Malawi. Meeting atleast four times per year, the NCE will have an advisory and watchdog role on environmentalmanagement, on integrating environmental considerations in all aspects of economic planning anddevelopment, and ensuring inter-agency coordination. The EMA also makes provision for a TechnicalCommittee on the Environment (TCE) designed to provide technical and scientific advice to the NCE,conduct studies and propose standards and guidelines for environmental control and management. At theDistrict level, there is provision for the appointment of a District Environmental Officer (DEO) to workthrough the District Development Committee (DDC). Other committees that have been establishedinclude the Parliamentary and Cabinet Environment Committee.

1.25 The Environmental Affairs Department (EAD) within the Ministry of Research andEnvironmental Affairs (MOREA) has the overall mandate for the coordination of environmentalprograms. The specific responsibilities of the EAD are to:

(a) act as Secretariat to the National Council for the Environment;

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(b) in close collaboration with line ministries, formulate environmental policies andstrategies and advise government;

(c) assist line ministries to integrate environmental considerations in their sector strategies;

(d) collaborate with macro-economic authorities to establish natural resources accountingsystems;

(e) coordinate with all stakeholders in environmental management;

(f) advise concerned ministries and other agencies on environmental regulations;enforcement and compliance, assist in arbitration in environmental issues;

(g) monitor adherence to international environmental treaties;

(h) develop environmental information systems (EIS);

(i) promote environmental training, education and public awareness;

(j) support initiatives in decentralization as they relate to environmental management; and,

(k) coordinate preparation of regular "state of the environment" report.

1.26 The Environmental Affairs Department is a "light" structure which has been restructured tocomprise four Divisions: Monitoring and Management, responsible for monitoring, environmentalimpact assessments and pollution control; Education and Outreach; Policy and Planning and Legal whichincludes legislation and regulations, compliance and enforcement, and international conventions (seeAnnex 1). The EAD is being strengthened and its 18 established positions were fully staffed byJuly/August 1996.

1.27 The EAD is responsible for coordination of cross-sectoral environmental matters.Implementation of projects and programs is the responsibility of technical ministries, departments andother implementing organizations. The Ministry of Natural Resources, comprising the Departments ofForestry, Fisheries and National Parks and Wildlife are primarily responsible for these natural resources,while the Ministry of Agriculture has responsibility for agricultural extension, research and soilconservation. The Ministry of Irrigation and Water Development has primary responsibility for waterresources in Malawi, together with the national Water Resources Board. The Ministry of Energy andMining has overall responsibility for energy policy and planning.

1.28 A network of environmental focal points has been established in each of the appropriateimplementing agencies, consisting of senior staff who will be permanent contact points for EAD. Thesefocal points will have specific responsibilities for coordinating environmental activities and bring majorenvironmental issues to the attention of the EAD, and will receive specific training in environmentalplanning, management and EIA. Linkages are also being developed with local governments(municipalities and Districts). Agreement was reached during negotiations on the official designation ofthe focal points (para. 6.1 (d)).

1.29 In parallel with the EAD, there is an apex environmental NGO, CURE (Coordinating Unit for theRehabilitation of the Environment). CURE provides a coordinating and information disseminationfunction for environmental NGOs, many of which worked on refugee and relief programs. CURE hasalso provided training in participatory appraisal techniques, and serves as a clearing house forinformation on environmental activities being undertaken by NGOs and community-based organizations.

ENVIRONMENTAL AGENDA

1.30 The Environmental Agenda has been well identified in Malawi through the highly participatoryprocesses of the NEAP and the ESP. In the face of the many constraints, reversing or slowing down

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environmental degradation in Malawi will be a complex challenge for which there are no easy answers orquick solutions. The process of tackling the policy and legislative issues is well advanced and muchprogress has been made in establishing the institutional framework. Maintaining the momentum tostrengthen the institutions concerned is now essential to implement the new legislative framework. Akey element of the agenda will be to translate the good intentions expressed in the policy into theeffective empowerment of local communities.

1.31 As highlighted by the ESP Roundtable, the most critical points of emphasis on the agendainclude: effective participation of the population, requiring the implementation of new approaches toenvironmental management which empower and provide capacity to communities; capacity building atall levels (communities, government and non-government structures and organizations); improvedcoordination to ensure that the many interventions by the different actors are working in the samedirection; significant emphasis on raising environmental awareness through education andcommunication.

DONOR ASSISTANCE FOR THE ENVIRONMENT

1.32 The NEAP and ESP process has already engendered contributions from a range of sourcesincluding notably, USAID, which has committed about US$40 million in both balance of paymentsresources, in support of policy and institutional changes, and project funding for priority capacitybuilding and investment activities. Other donors including UNDP, Japan, EU, KfW/GTZ, UK-ODA,DANIDA, Netherlands, and CIDA have contributed to preparation activities and/or have made fundingcommitments to elements defined in the ESP. Total commitments or expressions of interest from donorsin the broad category of environment amount to about US$120 million over five years. Full details areprovided in the ESP document.

LESSONS LEARNED

1.33 IDA's participation in the Environmental Support Programme is based on a major multi-stakeholder preparation effort following from a highly participatory NEAP process. This effort hasdrawn from experience in other countries in Africa and elsewhere and from ongoing operations inMalawi. Only the GEF/SADC Lake Malawi/Nyasa Biodiversity Conservation Project has been provideddirectly for environmental purposes. However, much of the prior and ongoing IDA lending (agriculture,forestry, social infrastructure, urban, water) has a direct impact on the environment. The main lessons,including those from similar Environmental Support Programs are: (i) avoid overly ambitious goals andtry to minimize the inevitable complexity of this kind of program to the extent possible; (ii) set clearpriorities through a process of consensus building and enhancing ownership of program objectives on thepart of the relevant stakeholders; (iii) take a highly participatory approach to program preparation andimplementation; and (iv) start with a modest and flexible program to strengthen institutional capacityand initiate the process of change. It has to be recognized that implementing a process ofenvironmentally sustainable development is a long-term challenge, particularly when the pre-conditionsare not favorable. Developing a strong policy, legal and institutional framework for environmentalplanning and management is a critical element in this process. This framework can be expected toevolve over time as institutions mature and as programs are implemented. In terms of overallenvironmental management, the key lessons applied to this ESP include the principle that empowermentof the groups most closely affected by environmental degradation is a sine qua non. Providing peopleand local communities with the tools (intellectual, physical and legal) to face these challenges requires,in most cases, changing traditional (usually top-down and hierarchical) attitudes and practices.

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RATIONALE FOR IDA INVOLVEMENT

1.34 The Government's request for IDA assistance is a logical outcome of the partnership betweenMalawi, the Bank, and other donors which has been developed over the past years during the preparationof the NEAP and the ESP. To date, the Bank's efforts have been focused on providing support to aMalawian-driven process, rather than designing a specific IDA project. With IDA's role being one of"lender of last resort", it is only at this stage that the definition of an IDA contribution to the ESP can beachieved. Significant progress has already been made towards the development of a sound legal, policyand institutional framework, a large measure of consensus and awareness-raising has been achieved, andthe level of ownership of the overall program is very high. Given the severity of Malawi'senvironmental problems and the likely social and economic impact of continued deterioration of thenatural environment which could undernine Malawi's growth prospects, fully integrating environmentalconsiderations in Malawi's development process is essential. Continued support for environmentalmanagement is entirely consistent with the Bank's central focus of poverty reduction as expressed in theCountry Assistance Strategy (CAS). It is also consistent with efforts to decentralize decision-makingand empower local communities. Finally, ITF's contribution is designed to complement other donorinterventions in this area and other IDA operations (including National Water Development, MalawiSocial Action Fund, Agricultural Services, Local Government, and the ongoing adjustment operations).

2. THE ITF CONTRIBUTION TO THE PROGRAM

OBJECTIVES AND SUMMARY

2.1 The ITF contribution, the Environmental Management Project (EMP), designed to complementthe activities of other donors, will support the Government of Malawi's efforts to implement the ESPwhich will focus on: (i) strengthening the coordination capacity of MOREA, the ESP's lead agency, andimproving its regulatory, information management, promotion and coordination capabilities; (ii) abroad-based program of environmental education; (iii) promoting a shift in the responsibility forsustainable resource management, and the reversal of degradation, to the community level; and (iv)supporting initiatives in key areas of environmental degradation. Underpinning the ESP is theenvironment and natural resources management policy and legislative review process supported byUSAID and UNDP. An important design element is the gradual transfer of the management of naturalresources from government departments to the local communities. In Malawi, this approach has beencalled "co-management of natural resources". It has been tried on a pilot basis in parts of the country,with reasonable success, and has been used more broadly in other countries in Southern Africa.Although not proven to work under all circumstances, it presents perhaps the only remaining solution foreffective natural resource management in the situations of high population density, and weakenforcement capability, which prevail in Malawi.

2.2 The ITF-financed Environmental Management Project, is estimated to cost some US$13.7million. ITF would finance four main components (amounts include price and physical contingencyallowances): (i) Institutional Capacity Building and Strengthening of the Environment InformationSystem (US$ 3.0 million); (ii) Environmental Education (US$ 2.0 million); (iii) Community-BasedEnvironmental Management (US$ 6.1 million) and (iv) Environmental Actions and Studies (US$ 2.6million).

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DETAILED DESCRIPTION

2.3 Institutional capacity building (US$ 3.0 million). The ESP will be coordinated and monitoredby MOREA. This component of the EMP would include support for training and operations, to enable itto carry out its policy, monitoring and control functions. The training of persons selected as focal pointsin line departments, regional and district administrations and NGOs would also be covered. MOREA'sinformation systems, financial and logistical management capabilities would be strengthened. Supportwould include training courses, workshops, vehicles, equipment, technical assistance and operating costsas needed. USAID and UNDP are also involved in these activities, in a fashion complementary to theITF. Agreement was reached during negotiations that a training program for MOREA, environmentalfocal points and designated staff in other institutions, will be furnished to IDA by December 31, 1997(para. 6.1 (b)). In order for MOREA to fulfill its mandate effectively it will require sufficient contiguousoffice space to house the staff under recruitment. During negotiations the Government indicated that itexpected this issue to be resolved by December 31, 1997. In addition to general support for institutionaldevelopment, two specific areas of MOREA's activities have been identified for improvement:

* Environment Information System. A vital aspect of MOREA's role is to monitor the statusof the country's natural resources, the effectiveness of its resource management programs,and to understand the causes of degradation and misuse. The USAID is providing supportfor this function with a technical assistance team, training and equipment through itsNATURE program, focusing on the Middle Shire Valley. The ITF resources wouldcomplement the USAID funded activities, and, based on an assessment of effective demandfor environment and natural resource information, broaden the scope of the informationsystem, including information provided by communities involved in formalized resourcemanagement.

* Environmental Impact Assessment and Regulation. The regulations governing thepreparation of environmental assessments are under review by Parliament, and should beapproved shortly. ITF would support a unit in MOREA charged with reviewing, auditingand participating in the environmental impact assessment process. Support would includetraining, technical assistance and equipment necessary to provide the expertise and datamanagement capabilities to exercise this function effectively. This activity will rely on theinformation provided through the Environment Information System as well as on theawareness created through the Environmental Education component. Agreement wasreached at negotiations, that the guidelines and regulations for environmental impactassessment will be published by December 31, 1997 (para. 6.1 (a)).

2.4 Environmental education (US$ 2.0 million). The component would draw on the strategydeveloped in a USAID/UNDP/World Bank-funded study carried out in May 1996, and would provideresources for both formal and non-formal approaches to building environmental awareness and educatingthe population in the benefits of sound environmental management and the consequences of misuse ofrenewable natural resources. The objectives of this activity are to: (i) increase public environmentalawareness and participation; (ii) integrate environmental education into the formal education system;(iii) improve the quality of environmental information and access to such materials; and (iv) identifyformal and non-formal systems for dissemination of environmental information, decentralizing this tothe lowest level. Expenditures would cover such costs as preparing, producing and disseminatingpublications, posters and audiovisual materials on environmental topics, holding workshops, andproviding input into curriculum design for public and private schools on environmental topics.

2.5 Community-BasedEnvironmentalManagement (US$ 6.1 million). The objective of thecomponent is to develop the capability of communities to manage the natural resources which they

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control and depend on for a livelihood. It is founded in the belief that many communities in Malawihave the capacity to manage their commonly held resources sustainably, and execute their owndevelopment projects, but lack the impetus and initial capital to get started. These activities would befacilitated through both NGOs and line departments of the Ministries involved in natural resourcesmanagement. To enhance the sustainability of community level natural resources management, it will benecessary for communities to benefit directly from these interventions. Agreement was reached atnegotiations that communities who have entered into co-management arrangements for forestry andwildlife areas under the ESP to share the revenues earned from the sustainable exploitation of suchreserves (para. 6.1 (c)). Without fixing a specific percentage going to communities, it was agreed thatthis would be based on experience to date where at least 30 percent of revenues earned are allocated tocommunities.

2.6 Community Mobilization and Environmental Micro-Projects. This component, to beimplemented with support from NGOs, would focus on communities capacity building to improveenvironmental management in both rural and urban areas. Small-scale environmental activities, based onproposals originating in communities would also be funded. This component would operate under thesupervision of a Steering Committee. At afirst stage, community level activities would be initiated bysystematic client consultation and "community mobilization" provided by an NGO and funded under theprogram. In the course of the community mobilization, community environmental managementcommittees or equivalent, would be identified or formed. These committees would prepare communityenvironmental management plans. At a second stage, these management plans would be financed from a"micro-projects" window. These "micro-projects" would be put forward by the community committees.As necessary, technical assistance would be provided from an appropriate source (NGO, Government orother entity). Selection of communities would be based on a set of criteria indicating environmentaland/or natural resource problems, potential for successful resource management, and an indication ofcommunity involvement. During the pilot phase, 16 communities are included in selected Districts.Later on, groups of 8 to 10 communities in targeted Districts would be covered (see Annex 4 for details).

2.7 Forest Resources Co-Management. To overcome encroachment problems and to increaseproduction from the Forest Reserves and woodlands owned under customary tenure, communitiesadjacent to the selected reserves and in areas of potential for forest development, would be encouraged toenter into agreements with the Forest Department on the co-management of these resources. Suchcommunities would be "mobilized" using mechanisms outlined above. The co-management of some ofthe smaller plantations within the Forest Reserves may also be included. On a pilot basis, communitieswith forestry resources would be organized to put in place a sustainable wood production and marketingoperation. Also, under this component, limited support could be provided to the Forestry Department todevelop strategies for management of indigenous forests, implementing the Forestry Policy, anddeveloping a regional forestry planning capacity. Agreement was reached at negotiations that theGovernment would carry out a functional and expenditure review of the Forestry Department by March1998, focusing on disengagement from commercial plantation activities (para. 6.1 (e)).

2.8 Biodiversity conservation in Protected Areas in the Lower Shire. A system for the co-management of wildlife in National Park periphery zones has been developed and practiced in pilot areasin Northern Malawi. Using these techniques, ITF would support community capacity building to becarried out under the community natural resources co-management program, for the communitiesbordering Protected Areas at Lengwe National Park, Majete and Mwabvi Game Reserves and wouldprovide limited support for training of field staff in community-based management techniques.Contingent on agreement on the role of the Department of National Parks and Wildlife in support of theco-management approach to wildlife management, and on the basis of the community consultative andplanning process, minimal infrastructure would be rehabilitated in these areas.

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2.9 Urban Environmental Management. Urban environmental problems were highlighted in theNEAP, and in para. 1.13. IDA would support limited interventions in Lilongwe, Blantyre, Zomba, andMzuzu to complement IDA's current involvement in improving municipal management through theongoing Local Government Development Project. This component would complement other activities inurban areas, by focusing on community mobilization through NGOs to develop strategic urbanenvironmental service plans, and drawing on the environmental micro-projects funds for communitybased activities such as installation of public water kiosks to be managed by the communities, on-sitesanitation, urban open space and watercourse reclamation. Limited funding would be included foremergency pollution abatement measures, such as the sewage treatment facility in Zomba.

2.10 EnvironmentalActions and Studies (US$ 2.6 million). IDA would support a series of targetedactions in areas of high priority on the environment agenda. These resources are intended to supportplanning and implementation of environmental programs or tackle critical problems, and will beallocated through the Annual Work Planning exercise. Planning is well advanced for some of the actionswhich could include:

* Climate Change and Long Lead Forecasting Pilot. Malawi's rainfed agricultural economy isvulnerable to variations in precipitation and temperature. In recent years, dramatic advanceshave been made in understanding the dynamics of the southern Africa climatic regimes andhow these regimes are connected to global phenomena such as the El Niflo/SouthernOscillation (ENSO) events. Improvements in global climate modeling and new understandingof ENSO "teleconnections" or links with climate forcing factors, is enabling climate predictionto become a practical and applied science. Long lead climate forecasts are now being used invarious agricultural economies around the world. South Africa has taken the lead in climateresearch and prognostic science. This component would enable the Meteorological Departmentto develop such forecasts, tailored to the needs of key users, some of whom could be expectedto pay for tailored information.

* Water Hyacinth Control. This fast growing weed, present for some years in the Lower Shire,has now been sighted in southern Lake Malawi and in the northern portions of the Shire river.It threatens to seriously affect fishing, hydropower generation, water transport, water supplysystems, tourism and biodiversity in the catchment. ODA is financing a thiree year researchprogram to establish the effectiveness of biological control methods. The project wouldprovide additional finance, to develop the institutional framework and supjport field operationsneeded to deal with the threat. IDA support would be contingent on the commitment of theGovernment to address this environmental problem in a vigorous and holistic manner. A firststep would be the identification of the appropriate coordination and implemnentation agency fora control program which brought together all relevant stakeholders.

* Bilharzia Control. This debilitating disease is endemic in parts of Malawi, and has recentlyappeared in certain locations along Lake Malawi. Infection rates are high in water sidelocations, especially among young people. The disease can be contracted at some of Malawi'smost valuable tourist sites. In addition to affecting the health of the exposed populations, thedisease will affect the revenue earning ability of lake-side resorts, an important source offoreign exchange for the country. Eradication of bilharzia requires a multi-faceted approachinvolving health education, fisheries regulation, snail habitat treatment, waiter supply andsanitation improvements, and medical treatment of infected patients. A national program forbilharzia abatement is under review by the World Bank, for funding under health relatedoperations and within the context of Malawi's overall health program. Support for furtherpreparatory and pilot activities could be funded from this project.

* Lake Malawi National Park. This park on the Nankumba peninsula requires improvedmanagement and infrastructure. Studies of the park have been carried out with CIDA and GEF

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financing. The project would provide additional finance to put in place the actionsrecommended by the studies (such as improving waste treatment in the lakeside villages,relocation of certain facilities). Such support would depend on agreement betweenGovemment and the enclave communities on a suitable approach to park management.

* Supportfor the Policy Planning Unit (PPU) in the Ministry of Lands and Valuation. With theestablishment and operation of the Presidential Land Commission, the demands placed on thePPU, for policy, analytical and implementation of the Land Commission recommendations willincrease. In order for the PPU to be able to respond to this growing demand, resources will beneeded for additional logistical support and short-term assistance.

3. PROJECT COSTING AND FINANCING

COST ESTIMATES

3.1 The total cost of the EMP is estimated at US$ 13.7 million, including physical contingenciesestimated at US$ 0.6 million and price contingencies at US$ 0.7 million over the 5 year implementationperiod. Cost estimates exclude taxes and duties. The base exchange rate was Kwacha 15 for one USdollar (June 1996). The distribution of local and foreign costs by component is shown below.

Table 1: Project Cost Summary(US$ millions)

% Foreign % TotalComponent Local Foreign Total Exchange Base Costs

MOREA Institutional Strengthening 0.2 1.3 1.6 85 13Environment Information System 0.4 0.4 0.8 47 7Environmental Impact Assessment 0.1 0.2 0.3 71 3

Subtotal Institutional Development 0.8 2.0 2.8 72 22

Environmental Education 1_0 0.8 1.8 42 14Subtotal Environmental Education 1.0 0.8 1.8 42 14

NGO-Based Community Environmental 1.6 0.5 2.1 24 17Management I

Forest Resources Co-Management 0.6 1.0 1.6 63 13Wildlife Co-management 0.7 1.1 1.8 59 14

Subtotal Community Environmental 2.9 2.6 5.5 47 44Management

Environmental Actions and Studies 1.2 1.2 2.4 49 19

Subtotal Environmental Actions and Studies 1.2 1.2 2.4 49 19

Total Base Cost 5.9 6.5 12.4 52 100Physical Contingencies 0.3 0.3 0.6 52 5

Price Contingencies 04 0.3 0.7 46 6

TOTAL PROJECT COSTS 6.6 7.1 13.7 52 111

Note: Totals may not add up due to rounding

3.2 Contingencies. Physical contingencies vary between 5 and 10 percent, depending on theexpenditure item. On price contingencies, it is estimated that international inflation will be some 2.3

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percent per annum over the 5 year life of the credit. It is assumed that the local exchange rate wouldadjust to compensate for differences between local and international inflation.

FINANCING

3.3 The ITF would finance 90 percent of expenditures, with a credit of US$ 12.4 million. TheGovernment would contribute some 10 percent of total expenditures by providing an increasing share oflocal costs, principally operating costs and allowances, and the costs of local training efforts. Afinancing table, by type of expenditure, is shown below.

Table 2: Financing of Expenditures, by Category

Government % ITF % Total __________________________ Amount Amount Amount

I Foreign 0.1 t 7.0 98.9 71 51.8If Local (Excl. Taxes) 1.3 19 .5 5.3 80.5 6.6 48.2

Total Project 1.4 10.0 12.4 90.0 13.7 100.0

PROCUREMENT

3.4 Procurement of works and goods for all ITF-financed components shall be ijn accordance withthe "Guidelines for Procurement under IBRD Loans and IDA Credits," published January 1995, andrevised in January 1996 and August 1996 and shall be subject to the restrictions for the Interim TrustFund (ITF). World Bank Standard Bidding and Contract documents shall be used for all ICB andconsultant contracts. Procurement arrangements are summarized in Table 3.

3.5 Works. The Category of Works includes civil works for the construction of small buildingswithin three protected areas and the rehabilitation of some 50 km of minor roads. Contracts are expectedto be small, and unlikely to attract interest from international bidders. Civil works contracts estimated tocost equivalent of US$500,000 or less per contract up to an aggregate amount of US$1.2 million may beprocured through contracts awarded on the basis of National Competitive Bidding (NCB), in accordancewith the procedures satisfactory to IDA.

3.6 Goods. Procurement of vehicles and equipment by several implementing agencies, whereverpracticable, shall be combined into single contract(s) of US$100,000 or more and would be procuredthrough ICB. Furniture, office equipment and supplies would be procured under NCB procedures forcontracts estimated to cost less than US$ 100,000 up to a total of US$300,000 in aggregate. Contracts ongoods estimated to cost less than US$30,000 may be procured using national shopping, up to anaggregate amount of US$300,000. Goods, up to an aggregate amount equivalent to US$300,000 may beprocured through the United Nations Inter-Agency Procurement Services Office (IAPSO).

3.7 Consulting Services. Institutional, environmental, feasibility and other studies would be carriedout by consultants to be employed by the respective implementing agencies, whose qualifications,experience and terms and conditions of employment shall be satisfactory to IDA. Consultants shall beengaged in accordance with the "Guidelines for Use of Consultants by World Bank Borrowers and by theWorld Bank as an Executing Agency", published August 1981, and will also be subject to ITFrestrictions. Letter of Invitation (LOI) and Standard Form of Contract for Consultants' Services(published by the World Bank in June 1995) or other similar forms shall be used wherever applicable.Local and foreign experts may be recruited in specialized fields to assist in community mobilization and

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co-management, environmental information systems, environmental education and other environmentrelated fields, finance and training. Recruitment of NGOs under the Community MobilizationComponent will be managed by the MOREA, and such NGOs will be contracted for the provision oftraining and other services. No government salaries will be funded under the project. Where staff areengaged in project related field work, personnel allowances (per diems) will be paid using Governmentapproved standards. No sitting allowances will be paid.

3.8 Micro-Project Grants. Goods and works, estimated to cost less than US$20,000 and up to anaggregate amount of US$ 1,000,000 financed under the micro-projects grants component will be procureddirectly by communities and NGOs in accordance with the provisions of para. 3.15 of the Guidelines andthe modalities set out in the PIP. These grants, authorized by the steering committee, would cover suchexpenditures as: small-scale construction materials, inputs for establishment of nurseries, protection ofwoodland areas and watercourse reclamation, improved drainage and sanitation, and installation ofpublic water kiosks.

Table 3: Procurement Method by Type of Expenditure(US$ million)

Procurement Arrangements (US$ '000)International NationalCompetitive Competitive | Consulting

Bidding Bidding Other Services Total

A. Civil Works - 1.0 - | 1.0

(0.9) - _ _ (0.9)B. Vehicles and Equipment 1.8 0.3 0.6 2.7

(1.8) (0.3) (0.6) (2.6)C. Consultants - 2.8 2.8

(2.8) (2.8)D. Training 4.1 4.1

(3.3) _ (3.3)E. Community Grants - l 1.0 1.0_________________________________ j ________________ j j___________ (1.0) _____________ (1.0)

F. Operating Costs X 2.3 2.3- X 1 1(1.8) - (1.8)

Total 1.8 1.3 7.8 2.8 13.7

________________________ (1.8) (1.2) (6.7) (2.8) (12.4)

Notes: Totals may not add up due to rounding. (**) Includes IAPSO

3.9 Prior Review Procedures and Reporting. The Annual Workplan prepared each year by theimplementing agencies for review by IDA shall include details of the items to be procured (goods andservices) and the procedures to be adopted for such procurement within the limits given earlier and to beagreed by IDA. Requirements for IDA's prior review of procurement are as follows:

(a) Procurement of Goods. and Civil Works Contracts. Invitation for bidding, draft biddingdocuments, bid evaluation and award recommendations, for all contracts exceedingUS$100,000 for each contract, would all be subject to prior review and no objection byIDA;

(b) Contracts with Consulting Firms and Individual Consultants (Technical AssistancePersonnel). Terms of reference for all consultant services would be subject to priorreview and approval by IDA. Budgets, shortlists, selection procedures, letters ofinvitation, proposals, evaluation reports and contracts estimated to cost US$100,000 ormore for consulting firms and US$50,000 or more for individuals would be subject to

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prior review and approval by IDA. All sole source contracts and amendments tocontracts raising the contract value for firmns above US$ 100,000 and individuals aboveUS$50,000 shall be subject to prior review and clearance by IDA;

(c) Specific training activities would be undertaken in accordance with an annual trainingprogram reviewed and approved by IDA;

(d) Contracts below the prior review threshold would be subject to ex-post review by IDAon a selected basis (one in five).

DISBURSEMENT

3.10 The proposed ITF Credit of SDR 8.7 million would be disbursed over five years with anexpected Project Completion Date of June 30, 2002 and a Closing Date of December 31, 2002.

3.11 Disbursement Procedures. Disbursements from the Credit would be in accordance with thenormal IDA procedures set out in the Disbursement Handbook (November 1992). Once agreement hasbeen reached on the annual work program and budgets with the implementing agencies (MOREA, MNR,NGOs) disbursements from the credit can be made following the standard procedures, including:reimbursement of expenses incurred by implementing agencies against submission of disbursementrequests, direct payment to suppliers or replenishment of special accounts. Disbursement forexpenditures under the Micro-project component would require that appropriate arrangements had beenentered into between the Government and the community concerned (para. 6.3).

3.12 MOREA will centralize the disbursement procedures for the implementing agencies involved inimplementation of ITF-financed components. Agreement was reached during negotiations that aFinancial Controller and a Procurement Officer with expertise in the management of IDA-financedprojects will be stationed, by credit effectiveness, in MOREA's Administration and Gjeneral Departmentfor the initial years of the project to facilitate the management of the Special Account, as well asprocurement procedures and financial reporting (para. 6.2 (a)).

3.13 To facilitate disbursement, IDA will advance US$1,000,000 into a Special Account, inconvertible currency opened in a commercial bank acceptable to IDA. Upon effectiveness the advanceamounts will be deposited to the respective Special Account against disbursement application(s).Reimbursements should be grouped for replenishment of these Special Accounts and submitted forreimbursement every month or whenever the Special Account balances are reduced to one third of theoriginal amount, whichever comes first, through the standard channel of disbursement procedures for theSpecial Accounts. The account may be used to pay for expenditures in either local or foreign currenciesthrough the commercial banking system, against any category of expenditure. All replenishments shouldbe fully documented except in the case where statements of expenditure (SOEs) are authorized.

3.14 The implementation agencies may claim reimbursements on the basis of Statements ofExpenditures (SOEs) for:

(a) Civil works costing less than US$100,000 equivalent.

(b) Goods costing less than US$ 100,000 equivalent.

(c) Training, consultants contracts, studies and operating costs for single items costing lessthan US$100,000 equivalent for firms, and less than US$ 50,000 for individuals.

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3.15 The respective implementing agency shall retain all the relevant supporting documentation forreimbursements of SOEs for inspection by IDA. During the course of the annual audit of the ProjectAccounts, the auditors shall certify that all expenditures claimed under SOE.

Table 4: Disbursement of ITF Credit

AmountAllocated in Percentage of Actual

Category of Expenditure US$ 000 Expenditure Financed by ITF

1. Civil Works Contracts 800 90%2. Vehicles and Equipment 2,400 100 % of foreign

100% of local (ex-factory cost)90 % of local for other items procured locally

3. Consultants' Services 2,500 100%4. Training 2,800 100% through June 30, 2000,

60% through June 30, 2001 and40% thereafter

5. Goods and works for Micro-projects 900 95%6. Operating Costs 1,600 100% through June 30, 2000

60% through June 30, 2001 and_________ _ _ 40 % thereafter

7. Refunding of Project Preparation Advance 8008. Unallocated 600TOTAL 12,400 1

3.16 The disbursement categories for the ITF credit are presented in Table 4 above. Disbursementpercentages are calculated taking into consideration the identifiable taxes and duties.

ACCOUNTS AND AUDITING

3.17 The implementing agencies would maintain separate records and financial accounts for the ITF-financed components, using generally accepted accounting principles. A set of consolidated financialaccounts would be prepared every year. Responsibility for preparation of the component accounts wouldrest with the financial controller appointed for this purpose in the implementing agency for eachcomponent. The ITF-financed Financial Controller in MOREA would consolidate the financialstatements for ITF-funded activities, and arrange for the annual audit of the accounts in MOREA and therelevant implementing agencies. Agreement was reached during negotiations that the accounts for eachof the components would be audited by independent auditors satisfactory to IDA (para. 6.1 (g)). Acertified copy of the accounts, together with the auditors management report, would be submitted to IDAwithin 6 months of the end of the financial year. The certificate would include a statement covering theadequacy of the records and accounts used to support disbursements against Statements of Expenditure.

4. PROGRAM ORGANIZATION AND IMPLEMENTATION

PROGRAM IMPLEMENTATION

4.1 The National Council for the Environment will be a high level statutory body under theEnvironment Management Act, empowered to "recommend to the Minister (of Research andEnvironmental Affairs) measures necessary for the harmonization of activities, plans and policies of leadagencies and non-governmental organizations concerned with the protection and management of the

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environment and the conservation and sustainable utilization of natural resources."1 The leader of theCouncil will be appointed by the President. The Council will also include the Secretary to the Presidentand Cabinet, all the Principal Secretaries, a member from the Malawi Chamber of Commerce, a memberfrom the NGO community, and other high level officials. The Council will make recommendations tothe Minister on all key policy decisions related to environmental management, and set the stage for thecoordination of environmental activities under the Program, of which the proposed IDA project is aportion.

4.2 In addition, a Technical Committee on the Environment (of between 10 and 20 members) will beformed under the Council, to provide more detailed inputs into the Program, recommending on criteriaand standards for environmental control and regulation, and taking the lead in recommending studies ormitigation actions. This will provide a "working forum" for members of the various agencies engaged inthe implementation of the ESP to resolve coordination difficulties and address common issues.

4.3 The Environmental Affairs Department in MOREA will have the main responsibility forcoordinating the ESP, including the IDA-financed activities. However, other than training its own staff,developing capacity, enforcing Environmental Impact Assessment legislation and managing theEnvironment Information System, this Department will not be responsible for the direct implementationof any program components.

4.4 Project activities will be carried out by NGOs, by the line departments in the Ministry of NaturalResources (Forestry, National Parks and Wildlife, and Fisheries), and by other agencies (e.g.,Meteorology Department). The Water Hyacinth Component is likely to be implemented under contractwith an international research institute. The network of designated Environment Focal Point staff(stationed in participating agencies) will be trained to deal with environmental issues and informationmanagement, and will be responsible for the transmittal of environment and natural resource informationto MOREA. Other training, including community mobilization and co-management techniques will beprovided to the relevant field level staff in the line ministry departments, and to the NGOs participatingin the program.

4.5 The Community Environmental Mobilization and Micro-Projects component would be managedthrough the Outreach Unit of MOREA, which would be strengthened for this purpose, and supervised bya Steering Committee drawn from the public sector (including MOREA), the private sector, and theNGO community. Agreement was reached at negotiations that proposals for NGO based "mobilization"of villages, and for financing village environment and natural resource action plans and micro-projectswould be approved by the Steering Committee. Funds would be granted to the village, which wouldcontract services from NGOs or other providers as necessary. These activities are complementary to theactivities financed under Malawi's Social Action Fund (run by a Government department). Activitieswould be reviewed to ensure that the interventions are sensitive to gender. Model contracts will beprepared between MOREA and the NGOs for the community mobilization, training and micro-projectsactivities, and the modalities for administration and management of this component will be spelled out inthe PIP. Agreement was reached at negotiations that, prior to disbursement of funds for the micro-projects component, the Government and the communities would enter into arrangements set out in thePIP covering the terms and conditions for the use of the grants (para. 6.3).

4.6 ITF/IDA funding will be allocated to the various components on the basis of an EnvironmentManagement Project Annual Workplan and Budget, prepared by the participating agencies, andsubmitted to MOREA (and the Ministry of Finance) for review and approval. This document would bebased on the Project Implementation Plan, adoption of which is a Condition of Effectiveness (para. 6.2

Environment Management Act, 1996, Section 12 (c).

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(b). It will be reviewed annually by IDA and other participating donors, and this exercise, to becompleted by March 31 of each year, would be the key tool for ensuring focus, compatibility andcomplementarity amongst the many activities supported under the program by the various donors.Where feasible, funding will be based on the attainment of results specified in advance. Agreement wasreached at Negotiations that a draft of the Annual Workplan would be submitted to IDA for review andcomment by January 31 st of each year, and the final Annual Workplan would be submitted by March31 st of each year. The Workplans for other activities under the ESP, which support and complement theactivities under the Project, would be submitted to IDA by January 31 of each year (para. 6.1 (f)).

MONITORING AND EVALUATION

4.7 A strong monitoring and evaluation system will be part of the program. The monitoring andbudgeting system would be linked to ensure that the successful activities receive continued support.Disbursements of funds to implementing agencies would be linked to the fulfillment of monitorableindicators. Methods for enhancing the sustainability of the program would be investigated and built intoimplementation mechanisms where appropriate. One feature of the ESP will be to strengthen theEnvironmental Information System, in order to track environmentally important features in hot spotsaround the country. In addition, through the Annual Workplan exercise, a series of monitorableimplementation indicators will be established which will allow MOREA to track the implementationeffectiveness of the collaborating agencies and NGOs. One important feature will be to bring in thecommunities involved in improved natural resource management under the program to contribute theirobservations on natural resource status and use to the national monitoring system. Agreement wasreached at negotiations that the Government would submit progress reports on the implementation of theProject every six months, and provide progress reports on the ESP every year starting December 31,1997 (para. 6.1(h)). Agreement was also reached during negotiations on key indicators, for inclusion inthe progress reports. A set of draft performance indicators are shown in Annex 7.

MID-TERM AND IMPLEMENTATION COMPLETION REVIEW

4.8 The ESP and the ITF/IDA-financed contribution are inherently complex ventures, due to theneed to address environmental problems in a holistic fashion, and hence to engage a large number ofstakeholders in addressing such problems. There will be a large number of implementing agenciessupporting activities spread out in the "hot spots" for environmental action around the country. It isessential that a thorough, zero-based, Mid-Term review of the Environment Support Program and theITF/IDA contribution, be undertaken with the participation of all the major stakeholders. This reviewshould assess the effectiveness of the activities designed to strengthen the institutional framework forenvironment management (and the effectiveness of MOREA in particular), as well as the effectiveness ofthe NGOs and the community level activities, and progress in carrying out the various studies, andputting in place a response to recommendations. The outcome of this review should be brought to theattention of the National Council for the Environment, as well as high level representatives in donororganizations, so that measures can be taken to address fundamental problems, including adjustments inimplementation responsibilities, fund management and allocations as needed. Agreement was reachedduring negotiations that preliminary documentation for a joint Mid-Term review would be prepared forIDA review by December 31, 1999 (para. 6.1(i)). By June 30, 2000 a Mid-Term Review will have beencarried out and an action plan drawn up with a timetable for implementation of agreed recommendations.

IMPLEMENTATION SUPPORT PLAN

4.9 The IDA commitment to implementation support of the ITF/IDA contribution to the ESP willhave to be very intensive, particularly at the early stages. The complexity of the decentralized

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implementation network, and the need to nurture the development of the lead agency, MOREA, requirethat attention be paid to this project from persons with a range of environmental expertise. In particular,support will be needed over the first three years in institutional strengthening (for MOREA), in theestablishment of the procedures for Environmental Impact Assessment, in the setting up of theEnvironmental Information System, and in the implementation of the community nmobilization and co-management activities. Also, given the lack of prior exposure to IDA procurement and disbursementregulations in the lead ministry, implementation support missions should include expertise in these areasto ensure that the appropriate systems are set up, and correct procedures followed from the start of theproject. The World Bank Resident Mission will play a critical role in this effort, complemented by threeimplementation support missions planned for the first two years of implementation staffed to addressthese issues (Annex 5).

5. BENEFITS AND JUSTIFICATION

PROGRAM IMPACT

5.1 The Environmental Support Programme is designed as a long-term response to the problems ofenvironmental degradation in Malawi. The purpose is to integrate environmental considerations in theoverall development of the country. This is essential to reduce the cost and impact of unsustainableexploitation and deterioration of the natural environment which not only undermines Malawi's growthprospects in all sectors - including agriculture, tourism, industry, fishing - but also jeopardizes currentproduction levels and diminishes the quality of life for the citizens of Malawi.

5.2 The proposed program will help Malawi face these challenges. It will contribute to thestrengthening of the institutional and policy framework, enhance public awareness, and promote pilotcommunity-based initiatives in environmental protection and conservation. The prcgram will helpMalawi implement the EIA process to ensure that environmental considerations are fully integrated infuture investment in Malawi. The ESP is also expected to contribute to the process already underway ofempowering local communities and developing new ways of doing business which have more directpoverty reduction impact.

RISKS

5.3 The three major risks to program implementation are noted below. The first relates to therelative newness and limited resources of the central coordinating unit - the EAD in MOREA. Thesefactors coupled with the weak overall capacity in the public sector, and the potential fragmentation ofeffort induced by the plethora of donor interventions, could impede effective implementation of the ESP.Key factors and specific measures to mitigate these risks include: maintaining a coordination-onlyfunction for the EAD, with implementation the responsibility of sectoral ministries; capacity buildingand institutional strengthening for the EAD and line ministries are included as explicit objectives of theESP, and funding for this will be assured by USAID, UNDP, IDA and other donors; decentralization tothe lowest possible level of all pilot investment activities, with specific focus on developing community-based organizations and NGOs. On the question of fragmentation of effort, the ESP has been elaboratedwith one specific objective being donor coordination. Willingness to pool efforts and contribute to anoverall process has been strongly manifested by the entire donor community. Maintaining thiswillingness will require continued effort by the EAD, and coordination mechanisms have been developedduring the preparation of the ESP. It should also be noted that strong demand for an influentialenvironmental coordinating unit has been expressed at all levels of Malawian society.

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5.4 The second refers to the nature of environmental programs, which are cross-sectoral and involvemany stakeholders. These features, together with the demands for institutional capacity development,inevitably lead to some complexity and uncertainty in the design and implementation of specificinvestments. Key mitigating factors include: design flexibility to accommodate changes as lessons arelearned from implementation experience; decentralization to the extent possible; operating agreementsbetween the different entities involved in program implementation (e.g., the Community Mobilizationand Micro-Project Pilot Activities); use of existing institutions rather than creating new ones.

5.5 The third relates to the fact that improving environmental management over the medium to longterm will mean changing the incentive structure with respect to the management of natural resources.Inevitably there are competing interests in the use, ownership and benefits to be derived from naturalresources such as water, land, forestry, wildlife, and fisheries. However, it is by no means certain thatconflicting interests can always be reconciled. Policy changes which enable local communities to derivemuch greater benefits from sustainable use of natural resources are a necessary condition to improvedenvironmental management, but effectively empowering communities requires more than a policydecision, and does not happen overnight. The ESP aims to test and develop the concepts of communitymanagement and empowerment, as perhaps the only remaining solution to improved natural resourcesmanagement in Malawi. Significant uncertainties, particularly over access to land and other resources,remain, and long term political will is a critical determinant of success in this endeavor. The recentcreation of the Presidential Land Commission will help address the questions of ownership, but thepotential for conflict over natural resources remains high.

ECONOMIC ANALYSIS

5.6 The proposed IDA project, which is directed largely towards institutional strengthening and pilotprograms, is not susceptible to detailed cost-benefit analysis and rate of return calculation. No attempt ismade to reorder or assign priorities to specific interventions in the ESP. However, several attempts havebeen made to estimate the overall economic value of environmental products and damages in Malawi, asa means of both highlighting the importance of natural resources to the Malawian real economy and ofhelping to order priorities for intervention. The NEAP itself contains preliminary estimates of damagesrelated to environmental degradation, and the ESP document discusses the economic implications of a"4no-action" state. The estimates present (in 1994 market prices) the annual costs of the four highestpriority environmental problems as follows:

* soil erosion ($165 million)* deforestation ($55 million)* water pollution and lack of sanitation ($15 million)* degradation of fisheries ($4 million)

5.7 These estimates are based on very sketchy data and extrapolation from data in other countries(e.g., Nigeria), with the result that they are probably only of illustrative value. More recently, a reviewof available data on soil erosion and deforestation in the analytical framework of "Genuine Savings",indicates that the rates of genuine savings in Malawi, in a worst case scenario, have ranged from 7% to19% since 1980. This compares to a savings ratio of about zero over the same period using the standardmeasure (National Accounts) of net savings (i.e. national savings less the value of depreciation ofproduced assets). Other environmental problems, particularly water resources degradation andassociated health impacts may, however, be of much greater significance.

5.8 Preliminary analysis, during the preparation of the ESP, has examined the damage costs of twospecific problems - water hyacinth infestation and bilharzia. Although difficult to fully quantify, thegross economic value of the fisheries at risk from water hyacinth in the Middle and Lower Shire rivers is

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US$1-2 million. To this should be added the potential cost of clearing intakes for the hydropower plants,and water supply schemes for domestic and industrial use, obstruction of waterborne transport, andincreased health hazards (mosquitoes, snakes, crocodiles). In the case of bilharzia, studies havedemonstrated the significant economic losses associated with infection (through loss of working days).In addition, bilharzia is likely to have an impact on Malawi's tourism industry which is estimated togenerate about US$8 million per annum in value added. Since the Lake Malawi environment capturesabout 70% of tourist time, the threat of bilharzia could have a major impact on tourism revenues, andwould at least dampen growth. Economic analysis of the problem of degradation of the Middle ShireRiver catchment and siltation of the Shire River is included in Annex 8.

5.9 These examples only give a broad indication of the costs and likely benefits of environmentaldamage and interventions. Much work is needed to determine the benefits which accrue to individualhouseholds and to the economy at large. As an integral part of the ESP, training (e.g., in environmentaleconomics) and capacity building (e.g., in EIS) are included to help develop the data and analyticalcapacity to improve the quantitative justification for tackling Malawi's environmental problems.Through the use of analytical tools such as the "Genuine Savings" model, efforts will be made to "green"national income accounts, as provided for under the Environmental Management Act.

SUSTAINABILITY

5.10 The highly participatory NEAP and the ESP preparation processes, have led to very broadownership of the objectives and principles contained within them, and the need for sustained support toimproving environmental management in Malawi. In the short- to medium-term, donor assistance willbe essential to implement the ESP, since Malawi is dependent on external financing for more than 95%of the public investment budget. Ultimately, it will not be through the application of marginal additionalresources that sustainability will be achieved, but through the overall development process. There isagreement that responsibilities need to be devolved to the lowest level possible, and that it is the duty ofall citizens and entities in Malawi to play a role in environmental management. Forging a path towardsenvironmentally sustainable development will require a continuing process of adjustment over aprolonged period, together with a redirection of resource flows consistent with those actions. Thisprocess is not likely to be a smooth transition because of its inherently political nature.

5.11 An important feature of the project is its focus on capacity building at the community level, andthe creation of the social capital and the incentive structure sufficient to induce sustainable use ofcommunity natural resources. If this is successful, the pressure to continue Government-fundedprograms will diminish. Once the "one off' investment in community mobilization has been made(through NGOs), and small additional investments in community natural resource action plans have beenput in place, the returns in terms of behavior by community members, and the results in terms of thesustainability of resource management should be visible. A key feature of the approach is that thecommunities perceive, and receive, tangible benefits from adopting a more conservationist andsustainable approach to resource management, on wildlife, forests, fish or soil. In particular, revenuesfrom eco-tourism, or harvesting of wildlife or forest products should be shared with the localcommunities.

5.12 In the design of the ITF/IDA contribution to the ESP, care has been taken to ensure that therecurrent costs associated will be minimized. Much of the capacity building expenditure represents one-off training and complementary expenditure to support other donor activities in existing institutions.Recurrent cost implications, while minimal, will be progressively taken over by the national budget. Forthe line departments, particularly the Departments of Forestry and National Parks and Wildlife,improving revenue flows can be accomplished through increased stumpage rates for commercial forestexploitation, and through proceeds from enhanced tourism. Privatization or concession-leasing of forest

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resources (e.g., Viphya), and of National Parks or Game Reserves (e.g., Mwabvi or Majete) together withimproved revenue retention and distribution mechanisms provide another model for financialsustainability. No staff would be added to MOREA or MNR, although the filling of important vacancieswould be an important condition for continued IDA involvement. ITF/IDA funding would complementGovernment's resources and improve the operational capabilities of existing institutions with training,improved equipment and operating cost finance. The implication is that, after 5 years of implementation,the current annual operating budget of MOREA (about US$ 300,000) would have increased by 70%. Itis expected that this additional resource requirement, in support of a new and important Governmentfunction, will not be difficult to meet.

6. AGREEMENTS REACHED

AGREEMENTS REACHED DURING NEGOTIATIONS

6.1 During negotiations, the following agreements were reached:

(a) publication of guidelines and regulations on environmental impact assessment by December 31,1997 (para. 2.3);

(b) preparation of a capacity building and training program for MOREA, environmental Focal Pointsand designated staff in other institutions, acceptable to IDA, to be completed by December 31,1997 (para. 2.3);

(c) agreement would be obtained from the Ministry of Finance (by December 31, 1997) to allowcommunities who have entered into co-management arrangements for Forestry or Wildlife areas,under the ESP, to share in the revenues from the sustainable exploitation of these resources(tourism fees, timber and forest products fees and sales) (para. 2.5);

(d) that, by December 31, 1997, the Ministries and other agencies executing activities under the ESPwould formally designate staff with the appropriate qualifications and levels of authority as theEnvironmental Focal Point for that Ministry (para. 1.28);

(e) undertaking by March 31, 1998 a functional and public expenditure review of the ForestryDepartment (para 2.7);

(f) the Annual Workplan for the Project would be provided to IDA for comment by January 31 ofeach year. Final versions of the Annual Workplans would be provided to IDA by March 31 ofeach year. The Workplans for other activities under the ESP, which support and complement theactivities under the Project, would be submitted to IDA by January 31 of each year (para. 4.6);

(g) the accounts of the main components would be audited by independent auditors satisfactory toIDA. A certified copy of the accounts, together with the auditors management report, would besubmitted to IDA within 6 months of the end of the financial year (para. 3.17);

(h) progress reports on the implementation of the Project would be provided to IDA every sixmonths, and for the ESP as a whole every year, starting December 31, 1997 using indicatorsacceptable to IDA (para. 4.7);

(i) by December 31, 1999 the Government will provide IDA with a detailed assessment, bycomponent, of implementation achievements, problems and proposed solutions of the ESP, andthe IDA contribution to the ESP, sufficient to support a joint Mid Term Review which would becarried out by the Government and the Association by June 30, 2000 (para. 4.8).

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CONDITIONS OF EFFECTIVENESS

6.2 The conditions of effectiveness are:

(a) that a Financial Controller and a Procurement expert, with qualifications, terms and conditionssatisfactory to IDA, be in place in the Administration and General Department of MOREA (para.3.12); and

(b) adoption of the Project Implementation Plan (PIP) with the detailed costings and implementationschedules for the first year's Annual Workplan; satisfactory to IDA (para. 4.6).

CONDITION OF DISBURSEMENT

6.3 Prior to disbursement of funds for microprojects grants, appropriate arrangements (as set out inthe PIP) to have been entered into between the Government and the community concerned. Thesearrangements will establish the responsibilities of each of the parties, the flow of funds, and the reportingrequirements of each of the parties (para. 4.5).

RECOMMENDATION

6.4 With the above assurances, agreements and conditions, the proposed project would be suitablefor an ITF credit of SDR 8.7 million (US$ 12.4 million equivalent) to the Government of the Republic ofMalawi.

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Annex 1

ENVIRONMENTAL SUPPORT PROGRAMME

FUNCTIONAL ORGANOGRAM OF ENVIRONMENTAL AFFAIRSDEPARTMENT

Nainl Coni fo|nSTYO Cabinet Committee|the Enviromnment REEAVRCHMENDA for the Environment

AFFAIRS

l ParliamentaryPRINCIPAL SECRETARY Committee for the

l1 I Environment

Technical ENVIRONMENTAL Network ofCommittee on the AFFAIRS Environmental

Environment DEPARTMENT Focal Points

1 x Director of Environmental Affairs

I1 x Deputy Director of Environmental Affairs

|Education and Moiorn and Policy and |Outreach Management Legal Division PlninDivision Division Division

Education_& Awareness Inspection - Legislation & Regulations - Policy_ Environmental Standards - Compliance&Enforcement - Planning

_ Commutreacatn - Environmental Monitoring - International Conventions - Environmental Research_Outreach

Env. Impact Assessment

Pollution Control

Annex 2

ESP - ROUNDTABLE

(Malawi Institute of Management - 7-8 May)

1. The ESP Roundtable was attended by a broad group of representatives of agencies of local andcentral governments, NGOs, donors and the media. The purpose of the Roundtable was to:

(a) gain general understanding and acceptance of the programme approach to the executionof the Environmental Support Programme - led by the Malawi Government - under acommon policy umbrella;

(b) broaden an understanding of the various environment related programmes and projectscurrently underway;

(c) identify key issues in the execution of the ESP, and develop a consensus on how to dealwith them;

(d) contribute to the development of a common approach to standard elements of theprogramme (such as micro-projects, community natural resources co-management,environmental education); and

(e) identify donor support for different elements of the ESP.

2. The Roundtable was professionally facilitated and involved the use of computerized groupwareto identify and discuss key issues. 1/ Priority issues were identified and working groups were establishedto discuss the top seven in detail and make recommendations for action. These were:

* Participation was identified as the top priority for improved environmental management.Specific emphasis was given to facilitating the development of community action plans andeffectively empowering local communities. Key recommendations and proposed actionsincluded the need to change from the top-down planning approach, to inform and educatelocal communities, through NGOs, and providing a mechanism to channel funds tocommunities. It was recommended that the existing community structures be used to themaximum extent possible, and that training be provided at all levels.

* Capacity building: proposed actions included identifying and prioritizing skills gaps at alllevels including local communities, NGOs, MOREA and line ministries, followed by puttingin place training programs with intensive use of local training institutions. Capacitydevelopment for the implementation of the Environmental Support Program should also betied to improved performance and the use of monitorable indicators. Funds for capacitybuilding at all levels should be disbursed on the basis of good performance. Informationmanagement is central to the development of environmental management capacity.

* Coordination of the different activities in environmental management was seen as criticalfor the successful implementation of the ESP. The working group recommended that

A full Roundtable Report is available on file.

MOREA should be strengthened to carry out its functions, and that the ESP is the main toolfor MOREA to coordinate priorities. The key action proposed was for MOREA togetherwith the Ministry of Finance and EP&D to arrange regular meetings with donors. Otherrecommendations included: reviewing MOREA's coordination capacity and preparing anaction plan for strengthening it; rationalization of working groups and cornmittees, andprovision of the resources to meet and to carry out their functions; organization of regularcoordination meetings with key stakeholders; strengthening links between CURE andMOREA; more effort by CURE to work in the Northern and Central Regions; demonstrationof commitment by donors towards being coordinated; regularly updating the EnvironmentalFocal Point Directory; using the EIA process and Environmental Informat.ion Systems toimprove coordination and monitoring of the environment; examining opportunities for asingle monitoring and evaluation process and annual reporting system for the ESP.

* Environmental Education should be aimed at all levels of society, both through formal andnon-formal education channels. Specific actions proposed included: development of anational environmental education strategy; promotion of innovative ways of informing thepopulation through audio-visual, radio, and traditional media, using daily life experiences;establishment of environmental education steering committees; training and sensitization ofleaders at the local and national levels; MOREA to play a coordinating role for thepromotion of EE; donors should support the implementation of the strategy. (TheRoundtable was able to provide additional input for environmental education andcommunication strategy developed and jointly funded by the UNDP, USAID, and the WB.

* Water Resources Management was one of three priority thematic areas of concern inenvironmental management. The key recommendation was to consider the establishment ofa river basin management system, with catchment stakeholder groups. A combination ofregulation (policies, legislation and enforcement) and positive incentives was proposed forcatchment protection. Water quality control policies and regulations should be implementedor established where they do not exist. Existing programmes for water hyacinth control andBilharzia eradication should be strengthened with increased resources.

i Land Degradation was the second major thematic area. The key recommendation for actionwas to take a community development approach to combat land degradation anddeforestation, building on NGO and community based organization efforts. Critical areasidentified included the Middle Shire, the area around Lake Chilwa and the NankumbaPeninsular. Rather than developing new Government run projects in the Middle Shire,efforts should build on existing programs. Key actions included: making an inventory of allNGO and government current activities in the areas identified; define target areas andactivities; identify stakeholders and establish coordination mechanisms; find financing forthese activities. Other recommendations focused on the need to use indigenous knowledgeand cultural practices, and to review existing training programs and facilities to maximizeuse of local facilities and resources to develop capacity in this area. The need to improve thenational capacity to adapt to climate change and drought through the use oiF improvedmeteorological information was also recommended.

* Urban Settlement environmental issues were highlighted. Key recommendations included:the need to review the effectiveness of existing national policies on urban land tenure andmanagement of infrastructure and services; capacity building at the community level to

identify problems, and plan and manage urban infrastructure and services; financing offuture urban service provision to be tied to community and other lead agencies'organization, participation and cooperation. These activities should be coordinated by theMinistry of Local Government, MOREA, the Ministry of Housing and Local Authorities.

3. Other issues raised (but not discussed in specific working groups) included decentralization,population, gender concerns, alternative energy, and bush fires.

4. Overall, the Roundtable highlighted the need to focus on institutional and capacity developmentas critical constraints to tackling specific problems of environmental degradation. The implementationof the ESP will require significant efforts to ensure that all stakeholders participate, that capacity buildingtakes place at all levels, that there is strong demand for a coordination function within Government andamong NGOs, and that environmental education and awareness underpin the entire process.

I

Malawi: Environmental Support Program - Indicative Financing Commitments

Components by FinanciersUS$ Millions GOM IDA IFAD ADB USAID USAID USA ODA JICA KFW NORWAY EU UNDP UNDP GEF TBI Total

UNEP

National Environmental Management Capacity Buildi 0.55 5.00 5.60 0.30 0.83 0.09 2.00 14.37Soil Conservation and Fertility 0.20 0.92 0.66 0.17 20.74 2.31 25.00Forest Resource Conservation and Management 0.10 1.80 1.79 4.00 2.69 0.05 0.23 8.00 18.66Water Resources Conservation and Management 0.15 0.78 0.51 1.44National Parks and Wildlife 0.43 1.80 8.11 10.33Fisheries Resources 0.02 1.49 5.50 2.50 9.52Community Based Environmental Management 4.00Human Settlements and Demographic Planning 9.87 9.87Non-Project Assistance 30.50 30.50

1.42 14.32 0.66 1.79 40.10 0.17 0.30 4.18 9.87 8.11 0.05 20.96 0.83 0.09 5.50 15.32 123.68

w4

Annex 4

MALAWI - ENVIRONMENTAL SUPPORT PROGRAMME

ENVIRONMENTAL MANAGEMENT PROJECT

COMMUNITY MOBILIZATION AND ENVIRONMENTAL MICRO-PROJECTS

Concept

1. The objective of the component is to develop the ability of communities to improveenvironmental aspects of their lives, including manage the natural resources which they control anddepend on for a livelihood. It is founded in the belief that many communities in Malawi do have thecapacity to manage and execute their own development projects, but often lack the impetus and initialcapital to get started.

2. This component will help promote the mobilization of communities to improve environmentalmanagement in rural and urban areas. The component would be facilitated largely by NGOs with theactive involvement of line departments in Govemment. Activities under the component would beinitiated by systematic client consultations and "transformation training" provided by the NGO electing towork with or chosen by the community. Follow up activities could be financed from "micro-projects"funds, managed by MOREA, to support environment enhancing activities for the community.

3. In environmental management, communities, while indirectly benefiting from the externalities ofimproved resource management, may not perceive environmental degradation to be more important thanfor example, schools or health clinics. Environmental problems thus have to be pro-actively targeted atthe community level. The community micro-projects would be designed, implemented and monitored bythe communities supported, if they so choose, by NGOs, the private sector or extension workers. Fundswould be administered by the Accounting Unit in MOREA, with the final review and approval decisionsto be taken by the Community Mobilization and Micro-projects Steering Committee.

4. Theftrst stage of the process would be the capacity building, during which the community willidentify its needs and priorities through a participatory appraisal process, and formulate a communityenvironmental action plan. The plan will identify microprojects to be submitted to the SteeringCommittee for approval. The plan would also identify the committee or group within the communitycharged with carrying out the action plan, including the associated microprojects. The second stagewould be to finance implementation of those elements of the environment action plan approved by theSteering Committee. This implementation phase would be led by the village committee identified for thispurpose, and could be supported by an NGO designated by the village. This could be the same NGOwhich assisted in community mobilization.

5. It must be recognized that although many of the concepts have been tested on a small scale inearlier trials, this component is essentially an extended pilot operation. The concepts and structuresoutlined below will be the subject of continuous monitoring during implementation and will be adjustedas necessary following annual implementation reviews, and on the basis of regular consultation with thecommunities, participating NGOs and Government line departments. Particular emphasis will be placedon maintaining the community as the central focus of the program, and facilitating communities toidentify their own needs and challenges for environmental management, rather than prescribing certainactions or activities for them. Monitoring will also aim to ensure that the administrative burden does not

become too great to enable this to be replicated on a larger scale, and to ensure that there is convergenceof approach among different schemes.

Structure and Governance

Steering Committee

6. The Community Mobilization and Environmental Microprojects activity would have a SteeringCommittee consisting of representatives of the Government (MOREA, Ministry of Finance, Ministry ofNatural Resources, Ministry of Economic Planning and Development), the NGO community, and theprivate sector. The Steering Committee would review proposals on the basis of the criteria specifiedbelow, its consistency with regional and sectoral priorities, and MOREA policy and guidelines. Wherenecessary additional inputs would be sought from participating NGOs and communities.

Coordinating Body

7. MOREA would provide the leadership in the implementation of this component, through aspecial team constituted within the Outreach Unit of the Environmental Affairs Department. This teamwould include a contracted Coordinator of Community Mobilization and Environmental Microprojects(CMEM), supporting staff, a vehicle and office equipment. While the team is expected to provideleadership in carrying out this component, actual implementation would be contracted out as follows:

* entering into contractual agreements as required with an agency for the training of NGOs incommunity mobilization (including Participatory Rural Assessment techniques);

* entering into contractual agreements with NGOs for carrying out (i) community mobilizationactivities; (ii) preparation of community environment action plans; and (iii) monitoring theimplementation of such action plans.

In addition, the CMEM Team in MOREA, under the guidance of the Steering Committee and otherparties, would be responsible for:

* registering the NGOs who would participate in the program;* defining the areas to be targeted under the program;* receiving and providing initial review and feed back (as needed) on commtnity mobilization

proposals, ensuring that each proposal met the required criteria, and would be carried outaccording to standardized procedures;

* presenting the various proposals from the eligible communities and NGOs to the SteeringCommittee for approval;

* collecting the reports and monitoring the NGOs as the community mobilization activities arecompleted;

* overseeing the administrative and financial requirements of the program; and* commissioning periodic evaluations of the program by outside agencies.

Funding Mechanisms:

8. The funds for this activity will be managed by MOREA. Activities would be carried out on acontractual basis. One agreement, between MOREA and the training agency, will set out the proceduresfor training NGOs in participatory rural assessment and preparation of community environment actionplans. A second set of agreements, between MOREA and each of the participating NGOs, would set outthe responsibility of the participating NGOs in mobilizing communities and in monitoring theimplementation of the community environment action plans once approved. A third set of agreements

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would be established between MOREA and the community and would specify the nature of the grant tobe provided to the community for the implementation of the approved micro-project, and would set outthe responsibilities of the various parties in ensuring this grant is correctly used. Funds for financingcommunity micro-projects would be paid (in cash or kind) directly to the community as a grant, uponauthorization by the Steering Committee. MOREA will establish and maintain an accounting system forthe implementation of this component, through its central accounting system (to be reinforced with anaccounts clerk who would focus exclusively on this task).

Capacity Buildingfor Communities

Implementing NGOs:

9. Capacity building of the communities in environmental awareness (including natural resourcemanagement) would be carried out by NGOs, in collaboration with the relevant line ministries (i.e.Departments of Forestry, and Parks and Wildlife). After an initial publicity campaign, interested NGOscould apply to MOREA's Environmental Microprojects Team to determine eligibility to be in theprogram (see criteria below). Eligibility would be determined based on:

* track record in community based activities;* experience, interest or commitment to natural resource management activities at the community

level;* administrative capacity (ability to carry out agreed tasks, manage funds and report on them

responsibly and accurately);* ongoing activities with communities in the geographic area of relevance to the ESP.

10. The agreements for community mobilization would be standardized, and would be prepared onthe basis of negotiations between MOREA and representatives of the NGO community. Initial featuresof such agreements have been developed in the course of project preparation, and were field tested in thePilot phase of this component. A key principle would be to reimburse the NGO for direct costs incurredin carrying out the activity. Under the first (mobilization) phase of the agreement, the NGOs would carryout a participatory rural assessment, and work with the community towards the formulation of acommunity environmental action plan. This phase would conclude with the presentation of the actionplan by the community to MOREA.

11. In view of the desire to keep MOREA at arms length from actual implementation activities, andin light of MOREA's limited capacity to carry out community based activities, the responsibility formonitoring implementation of approved community action plans at the village level would also becontracted out to the NGOs involved in community mobilization. Under this second phase of thecontract, the NGO would monitor the community's efforts to use funds provided by MOREA toimplement the action plan, and assist where necessary to ensure a satisfactory outcome. Followingcompletion of village activities under the community environment action plan, the supervising NGOwould prepare a brief report on the activities completed.

Eligible Communities

12. Criteria for communities to receive "mobilization" training and capacity building could include:

* they are located in one of the priority areas for environmental intervention defined by MOREAunder the ESP;

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* communities to be "mobilized" should have shown some interest in, and commitment to,improving management of their natural resources;

13. Interested communities would participate in the program through participating NGOs, DDCs andother channels and request to be included in the CMEM program.

Community Based Environmental Micro-projects

14. The second stage following community mobilization activities, and the formulation of theenvironmental action plan, would be the financing of "micro-projects", i.e. activities or investments in thecommunity environmental action plan, which are related to improved environmental and natural resourcemanagement. Communities could receive support and encouragement from the NGO which provided theinitial training. Technical assistance (from NGOs, line Ministries, or other sources) would be identified,to assist the community in achieving its targets. Funds would be provided to the community on a grantbasis. Eligibility criteria could include the following to ensure that proposals:

* are a relevant piece of a coherent environmental management plan prepared by the communitycommittee charged with environmental and natural resource management responsibilities;

* include commitment by the community to behavior change and some kind of materialcontribution in labor or materials (at least 10 percent of the total value of the proposed micro-project);

* include financial provision for outside "technical assistance" where necessary to ensuresuccessful implementation of proposed project. This assistance could be contracted from a localNGO, or other source to be defined by community;

* do not include items which could be funded under MASAF (i.e. heavy infrastructure such asboreholes, water supply systems, school buildings, and health posts);

* are graduated and iterative. The community will have to build credibility that it can indeed usethe resources effectively. In this sense, the first community "project" would be relatively small,with an initial financial contribution of a maximum of, say, US$1,500-$3,000 for rural micro-projects. On successful completion of this, the community would be eligible to apply for asecond or third project. These amounts are indicative and will be reviewed during the course ofimplementing the program. A ceiling of US$5,000 is indicated for the set of microprojects to beimplemented under any given community environmental action plan in rural areas. A ceiling ofUS$20,000 has been set for microprojects in an environmental action plan in urban areas;

* include indicators of success, suggested by the community, for the micro-project to measureprogress during implementation. The community would also undertake to provide informationon the impact of the project (say on reforestation of areas, or reduction of soil loss, improvedwaste management).

15. The collaborating NGO would continue to work with the community, if requested, incoordinating and supervising microproject implementation, under contract to MOREA. Communitiescould, through the use of microproject funds, engage an NGO or other entity to provide more costlytechnical support (say in the design of civil works) needed to implement the action plan. With theexperience gained, the community will then be empowered to seek finance for further projects from otherfunding sources, such as MASAF and the EU Community Development Fund.

16. The microproject proposals would be worked out by the community along with the NGO whichprovided them with mobilization training. Once the environmental action plan was satisfactory, it wouldbe submitted to MOREA and the Steering Committee for review and approval. MOREA would maintaina registry of projects and would contract an assessment of their execution, as warranted.

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Line Ministry Activities

17. Within the context of the ESP, the line departments, including of Forestry, and Parks andWildlife, will be planning and implementing co-management activities which involve communitymobilization. The departments concerned have only limited capacity for doing the capacity buildingwork in communities and would therefore rely largely on NGOs and other organizations to carry this out.In particular, the Wildlife Department is likely to use NGOs in working with the communitiessurrounding the Protected Areas to develop co-management arrangements. This could be done eitherthrough direct contract, and financed out of the Departmental allocations for the co-managementactivities, or otherwise through the community mobilization component. This will allow the Departmentsto ensure that the activities are carried out in the priority areas that they have selected (e.g., forest reserveareas). Subsequently, the communities may wish to implement activities using the microproject funds. Inthis case they would apply for the funds in accordance with the same criteria as those established forNGO initiated activities. Training should also be provided for staff in line Departments in capacitybuilding for communities.

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I

Annex 5

MALAWI ENVIRONMENTAL SUPPORT PROGRAMME

ENVIRONMENTAL MANAGEMENT PROJECT: IMPLEMENTATION SUPPORT SCHEDULE

Project Mission Activity Skill RequirementYear N0 SW

PYI I Launch: review of organization and management, - Task Team Leader 2accounting system, procurement arrangements and plan, - Financial 2

Sept. 1997 service contracts, training program, community based Analyst/Disbursement 2environmental management, work plans PYI. - Procurement Specialist 2

April. - Institutional Specialist 219971 - Community/NaturalMarch. Resource Specialist1998

2 Review of procurement, accounting, trainingM & E system, EIS, donor coordination, community based - Task Team Leader

Feb. 1997 environmental management, ElAs and enviromnental - M & E/EIS Specialist 2education. -Sociologist 2

- Environmental Education 2Specialist 2- EIA Specialist 2

3 Review of field activities, training, procurement,

disbursements, accounting, M&E, donor coordination. - Task Team Leader 2June 1998 Discuss PY1 perfornance and PY2 work program. - Procurement Specialist 2

-Community/Natural 2Resource Management

Specialist

PY 2

4

Oct. 1998 Review of field activities, training, procurement, - Task Team Leader 2April accounting, disbursements, M&E/EIS. - Ecologist 21998/ - Institutional Specialist 2March -M&E/EIS Specialist 21999 Financial Analyst 2

5- Task Team Leader 2

March 1999 Review of field activities training, procurement, accounting - EIA Specialist 2and disbursements. Discuss PY2 performance and PY3 -Climate Change Specialist 2work program. .. 2

-Health Specialist 2

-Procurement Specialist

Sept. 1999 Review of activities, procurement, disbursements, -Task Team Leader 2

financial perfonnance, and donor coordination. -Financial Analyst 27 -Sociologist/Ecologist

April

March Feb. 2000 Mid-term review and discuss annual work plan for PY4. -Task Team Leader 2

2000 -Project Design -EcologistVSociologist 2- progress in institutional development -M&E Specialist 2- effectiveness of training programs -Institutional Specialist 2-effectiveness of policy and legal frarnework -Procurement Specialist 2- effectiveness of the NGO and community level activities -NGO Technical Expert 2-progress in carrying out the various studies

-monitoring and evaluation

-Procurement

-Financial Performance

-Audits

-Disbursements-Donor Coordination

PY4 8

Aug. 2000 Review of activities, procurement, disbursements. - Task Team Leader 2- Ecologist/Sociologist 2- Procurement Specialist 2

April2000/ 9 Review of activities. Discuss PY 4 performance and PY5 - Task Teamn Leader 2March work program. - Financial Analyst 22001 Feb. 2001

- M&E Specialist 2

PY5

0 O Review of activities, procurement, disbursements. -Task Team Leader 2

2001/ Aug. 2001 -Ecologist/Sociologist 2

March -Procurement Specialist 22002 11 l

Feb. 2002 Review of PY5 activities, procurement, disbursements. -Task Team Leader 2

-Financial Analyst 2

l_________ -M&E Specialist 2

12April2002/ Dec. 2002 Program Closing Date.

June 200313 Review of activities, disbursements, implementation -Task Team Leader 2

June2003 completion report

June2 J-

MalawiEnvironmental Management Project

Project Cost Summary

(Kwacha '000) (USS '000)% Total % Total

Foreign Base Foreign BaseLocal Fortign Tntal xhange Costs Local Fortign Total Exchange Costs

A. Institutional DevelopmentMOREA Institutional Strengthening 3,SS5.0 20,137.5 23,692.5 85 13 237.0 1,342.5 1,579.5 85 13Environment Information System 6,532.5 5,767.5 12,300.0 47 7 435.5 384.5 820.0 47 7Environmental Impact Assessment 1.469.3 3.679.5 5.148i8 71 3 98.0 245.3 343.3 71 3

Subtotal Institutional Development 11,556.8 29,584.5 41,141.3 72 22 770.5 1,972.3 2,742.8 72 22B. Environmontal Zducation

Environmental Education 15.301.2 11256.0 26.557.2 42 14 1.020.1 750.4 1.770.5 42 14Subtotal Environmntal Education 15,301.2 11,256.0 26,557.2 42 14 1,020.1 750.4 1,770.5 42 14C. Commanity Environmental management

NGO-Based Community Environmental Management 23,178.8 7,533.8 30,712.5 25 17 1,545.3 502.3 2,047.5 25 17Forest Resources Co-Management 9,130.1 15,347.6 24,477.8 63 13 608.7 1,023.2 1,631.9 63 13Wildlife Co-management . 11.,067.4 15,750.8 26.818.1 59 14 737.8 1.050.1 1.7.87.9 52 14

Subtotal Community Environsental Management 43,376.3 38,632.1 82,008.4 47 44 2,891.8 2,575.5 5,467.2 47 44D. Environmental Actions and Studies

Environmental Actions and Studies 8,617.5 6,907.5 15,525.0 44 8 574.5 460.5 1,035.0 44 8Climate Change 2,425.5 4,602.0 7,027.5 65 4 161.7 306.8 468.5 65 4Water Hyacinth Control Program 6,311.8 4,117.0 10,428.8 39 6 420.8 274.5 695.3 39 6Natural Resources Policy Formulation 94s.0 2,130.0 3_.0750 69 2 63.0 142.0 205.0 69 2

Subtotal Environmental Actions and Studies 18.2q998 17,756.5 36,056.3 49 19 1.220.0 1.13.8 2.403.8 49 19Total BASELINE COSTS 88,534.0 97,229.1 185,763.1 52 100 5,902.3 6,481.9 12,384.2 52 100

Physical Contingencies 4,653.1 5,110.5 9,763.6 52 5 310.2 340.7 650.9 52 SPrice Contingencies 59395,5 48.784.5 108.179.9 45 58 374.8 314.4 689.1 46 6

total PROJECT COSTS 152,582.5 151,124.1 303,706.6 50 163 6,587.2 7,137.0 13,724.2 52 111

Thu Jan 23 18:12:32 1997

19-1 Project Cost Summary

MalawiEnvironmental Management Project

Project Cost Summary

(Kwacha '000) lUSS 1000)t % Total t % Total

Foreign Base Foreign BaseLocal ForeigU IoLal Exchange Soats LocaL Eoreiga Total BxehanLg Costa

I. Iavetment Coat.A. Materials 70.5 70.5 141.0 50 - 4.7 4.7 9.4 50D. Civil Works

Rehab.of Park Buildings 3,675.0 1,575.0 5,250.0 30 3 245.0 105.0 350.0 30 3Construction Buildings 3,136.9 1,344.4 4,481.3 30 2 209.1 89.6 298.8 30 2Rehab.of Park Roads 292.-5 i,282.5 4,27S.0 30 2 199.5 BS.A 285.0 30 _ 2Subtotal Civil Works 9,804.4 4,201.9 14,006.3 30 8 653.6 280.1 933.8 30 8C. Vehiclea 1,668.0 15,012.0 16,680.0 90 9 111.2 1,000.8 1,112.0 90 9D. 8quipment&Furniture 838.1 7,547.9 8,386.5 90 5 55.9 503.2 559.1 90 5S. Technical AsJidtasceTechnical Assistance International - 21,720.0 21,720.0 100 12 - 1,448.0 1,448.0 100 12Technical Assistance National 5.821.9 - S.821.9 - 3 388.1 388.1 -3Subtotal Technical Assistance 5,821.9 21,720.0 27,541.9 79 15 388.1 1,448.0 1,836.1 79 15F. TrainingStudy Tours - 2,625.0 2,625.0 100 1 - 175.0 175.0 100 1In Country Courses 7,555.1 7,555.1 15,110.3 50 a 503.7 503.7 1,007.4 so 8External Courses - 7,668.0 7,668.0 100 4 - 511.2 511.2 100 4Workshops 11,521.2 - 11,521.2 - 6 768.1 - 768.1 - 6Publications and Materials 859.5 - 8S9.5 - - 57.3 - 57.3 - -Community Mobilization(Rural) 12656.3 _ 1.406.3 14-062.5 10 8 843.8 93.8 9375 10 _a8Subtotal Training 32,592.1 19,254.4 51,846.5 37 28 2,172.8 1,283.6 3,456.4 37 28G. Studies 5,853.8 5,853.8 11,707.5 50 6 390.3 390.3 780.5 50 6V. Micro Projects GrantsRural Community Projects 7,087.5 787.5 7,875.0 10 4 472.5 52.5 525.0 10 4Urban/Peri Urban Communities 2,812.5 2.812.5 5.625.0 50 3 187.-5 187.5 37 5.0 so 3Subtotal Micro Projects Grants 9,900.0 3,600.0 13,500.0 27 7 660.0 240.0 900.0 27 7I. Other Investment Costs 5,715.0 5.715.0 11.430J. so 6 381.0 381.0 762.0 so 6Total invetaent Coats 72,264.2 82,975.4 155,239.6 53 84 4,817.6 5,531.7 10,349.3 53 84II. Recurrent Coots

A. OperatingMNaintenance CostsO0M for Vehicles 3,795.7 8,856.8 12,652.5 70 7 253.1 590.5 843.5 70 7OLM Other 333.3 777.0 1.110.0 70 1 22.2 5.1.8 74.0 70 1Subtotal Operating&Xaintenance Coat. 4,128.7 9,633.8 13,762.5 70 7 275.2 642.3 917.5 70 7B. Supplies&Materials 4,620.0 4,620.0 9,240.0 50 5 308.0 308.0 616.0 50 5C. Allowances&Perdiems 7.521 Q1- 7 -7 24 .50; - 501.4 - 4Total Recurrent Costa 1S.269.3 14.253.j _.523Ji 47 16 1,084.7 950.3 2,034.9 47 16Total BASELINE COSTS 88,534.0 97,229.1 185,763.1 52 100 5,902.3 6,481.9 12,384.2 52 100Physical Contingencies 4,653.1 5,110.5 9,763.6 52 5 310.2 340.7 650.9 52 5Price Contingencies S9.39S 5 48.784.S 108.179.9 45 s5 374.8 314.4 689.1 46 6Total PROJXCT COSTS 152,582.5 151,124.1 303,706.6 50 163 6,587.2 7,137.0 13,724.2 52 111

Thu Jan 23 18:12:34 1997

20-1 Project Cost Summary

MalawiEnvironmental Management Project

Expenditure Accounts by Components - Totals Including Contingencies(us$ '000)

Commninity Environmental ManagementInstitutional Development Environmental NGO-Based

MOREA Environment Environmental Education Community ForestInstitutional Information Impact Environmental Environmental Resources WildlifeStrengthening System Assessment Education Management Co-Manacement Co-management

I. lnvestment CostsA. MaterialsS. Civil Works

Rehab.of Park buildings - - - - - 394.1Construction Buildings - - - - 13.1 -Rehab.of Park Roads - - - - - - 309-3

Subtotal Civil Works - - - - - 13.1 703.4C. Vehicles 165.0 55.6 - 70.6 31.9 459 0 316.9D. Equipnent&Furniture 98.6 147.8 18.1 14.7 5.3 79.4 91.1B. Technical Assistance.

Technical Assistance International 616.0 - 130.8 361.7 117.4 21.2 195.6Technical Assistance National - - 2.4 40.1 - 63.8 4.8

Subtotal Technical Assistance 616.0 - 133.2 401.8 117.4 85.0 200.4F. Training

Study Tours 163.0 - - 27.2 - - -In Country Courses 169.2 33.0 100.8 155.8 28.9 201.3 272.6External Courses 250.1 - 43.3 96.7 - 100.3 -Workshops - 32.7 26.1 763.1 - 38.5 -Publications and Materials - - 63.5 - - -Community Mobilization(Rural) - - - - 1.0S9.i - -

Subtotal Training 582.3 65.7 170.2 1,106.2 1,088.1 340.1 272.6G. Studies 127.5 112.2 - 13.3 6.7 - 98.6R. Micro Projects Grants

Rural Community Projects - - - 587.5 - -Urban/Peri Urban Communities - - - - 418 9 -

Subtotal Micro Projects Grants - - - 1,006.3 - -I. Other Investment Costs - - 37.2 363.8 - - -

Total Investment Costs 1,589.4 381.3 358.7 1,970.4 2,255.6 976.5 1,683.0II. Recurrent Costs

A. OporatingsMaintenance CostsO&M for Vehicles 51.0 17.0 - - 17.0 490.2 250.7O& Other __ _ _ __

Subtotal Operating&Maintenance Costs 51.0 17.0 - - 17.0 490.2 250.7B. Supplies&Materials 56.7 315.9 13.8 - 5.7 140.6 39.7C. Allowances&Perdiems 42 5 198.5 - - 17 0 196-2 -

Total Recurrent Costs 150 2 531.5 13.8 - 39 7 827 0 290.4Total PROJECT COSTS 1,739.6 912.7 372.4 1,970.4 2,295.3 1,803.5 1,973.4

Taxes - _ _ _ _ _ _Foreign Exchange 1,478 .6 425.4 266.2 828.7 557.2 1,123.8 1,154.4

Thu Jan 23 18:12:38 1997

21-1 Expenditure Accounts by Components - Totals Including Contingencies

MalawiEnvironmental Management Project

Expenditure Accounts by Components - Totals Including Coutingencias(us$ '000)

Enyixm yLa1ign^anLWater Natural

Environmental Hyacinth ResourcesActions and Climate Control Policy

studies Change Proaram Formulation- Total

I. Invustuant CostsA. Materials - 10.0 - 10.0D. Civil Works

Rehab.of Park Buildings - - - 394.1Construction Buildings 305.0 - 1.9 - 319.9Rehab.of Park Roads -_-__ - - - 3093

Subtotal Civil Works 305.0 - 1.9 - 1,023.3C. Vehicles - 31.9 66.9 - 1,197.8D. Equipment&Furniture - 70.3 78.8 5.3 609.4Z. Technical AmLstance

Technical Assistance International - 81.9 - 64.3 1,589.0Technical Assistance National - 9.6 308.1 - 428.7

Subtotal Technical Amistane- - 91.5 308.1 64.3 2,017.7P. Training

Study Tours - - - - 190.2In Country Courses - 100.1 - 48.9 1,110.6External Courses - - 44.9 26.9 562.2Workshops - - - 060.4Publications and Materials - - 63.5ComAunity Mobilization(Rural) - --_- - __- 059 1

Subtotal Training - 100.1 44.9 75.8 3,845.9G. Studies 390.0 69.9 36.7 - 855.0R. Micro trojecta grants

Rural Cowmunity Projects - - - - 587.5Urban/Peri Urban Communities -_-_-_-_418-

Subtotal Micro Projects Grants - - - 1,006.3I. Other Investment Costs 450 1 - - - 851.1

Total Sinveatent Conte 1,145.1 363.7 547.4 145.4 11,416.5SS. lcurrant Coste

A. OperatingAMaintenanc- Costs001 for Vehicles 17.0 86.1 28.3 957.306M Other - M 8 28 3 - 6:1

Subtotal Operating&Kaintenance Costs - 71.8 114.4 28.3 1,040.5B. Supplies&Naterials - 56.7 39.3 28.3 696.7C. Allowances&Perdiems - 25-5 6981 22.7 570.6

Total Recurrent Coats - 154 0 221.a 794 2,307-7Total PROJlCT COSTS 1,145.1 517.7 769.2 224.8 13,724.2

Taxes _ _ _ _ _Foreign Exchange 511.2 337.4 299.7 154.4 7,i37.0

21-2 Expenditure Accounts by Components - Totals Including Contingencies

MalawiEnvironmental Management Project

Project Componenta by Year(us$ '000)

Totals Including Contingencies1997 199A 1999 2000 2Q Ttal

A. Institutional DavelopmentMOREA Institutional Strengthening 513.1 405.3 321.3 368.5 131.4 1,739.6Environment Information System 235.1 272.6 156.6 137.3 111.3 912.7Environmental Impact Assessment 175.5 91.4 76.8 22.8 5.9 372.4

Subtotal Institutional Development 923.7 769.3 554.7 528.6 248.6 3,024.8A. Environmental Education

Environmental Education 214.2 566.3 453.2 386.1 .3S, 350Q. -1-.922.4Subtotal Bnvironmental Education 214.2 566.3 453.2 386.1 350.6 1,970.4C. Community Environmental Management

NGO-Based Community Environmental Management 234.2 303.1 464.1 581.8 712.1 2,295.3Forest Resources Co-Management 655.7 435.3 284.5 222.2 205.8 1,803.5Wildlife Co-management 528.3 558.9 260.7 481.3 144.2 1.973. .

Subtotal Community Environsental Management 1,418.2 1,297.2 1,009.3 1,285.3 1,062.1 6,072.2D. Environmental Actions and Studios

Environmental Actions and Studies 212.5 337.2 250.3 170.7 174.4 1,145.1Climate Change 179.6 110.6 79.8 81.6 66.0 517.7Water Hyacinth Control Program 279.6 111.5 149.1 130.5 98.5 769.2Natural Resources Policy Formulation _7 .... 32.6 _ 162 16 ._C _22Lt

Subtotal Environmental Actions and Studies 7s9.6 G30.8 SllB 399.1 355.5j i2_656.8Total PROJECT COSTS 3,315.7 3,263.6 2,529.0 2,599.1 2,016.8 13,724.2

Thu Jan 23 18:12:42 1997

22-1 Project Components by Year

MalawiEnvironmental Management Project

Project Components by Year -- Investment/Recurrent Costs(US$ 000)

Totals Including Contingencies1997 199SJL 1999 2O000 2001 Tot Mw

A. Institutional DevelopmentYORSA Institutional Strengthening

Investment Costs 484.4 376.0 291.3 337.7 100.0 1,589.4Recurrent Costs _ 287 29-4 30.1 30.7 31.4 4 1502

Subtotal MOREA Inetitutional Strongthening 513.1 405.3 321.3 368.5 131.4 1,739.6Environment Information System

Investment Costs 107.3 175.0 56.7 35.3 7.0 381.3Recurrent Costs 127.8 97.6 99L8 102.Q 104. 3 51.315

Subtotal Environment Information System 235.1 272.6 156.6 137.3 111.3 912.7Environmental Impact Ase-sment

Investment Costs 175.5 88.0 73.4 19.3 2.3 358.7Recurrent Costs - 33 3.4 3 .36 L138

Subtotal Environmental Impact Assessment 175 5 91 4 76. 8 ._22_Q 5 9 372.ASubtotal Institutional Development 923.7 769.3 554.7 528.6 248.6 3,024.8S. *nvironmntal 7ducation

nvironmental EducationInvestment Costs 214-2 566. 3 453i2 386.1 .350.6 1970. 4

Subtotal gnvironmental Education 214.2 566.3 453.2 386.1 350.6 1,970.4C. Community Environmental Management

NGO-Based Community Environmental ManagementInvestment Costs 226.6 295.3 456.2 573.7 703.8 2,255.6Recurrent Costs 7.6 7.8 7.9 8 1 8-3 39.7

Subtotal IGO-Eased Community Environmental Management 234.2 303.1 464.1 581.8 712.1 2.295.3Forest Resources Co-Management

Investment Costs 521.3 278.8 119.0 43.7 13.8 976.5Recurrent Costs 1345 1565 1 1i5- 178.5 19 0. 227

Subtotal Forest Resources Co-Management 655.7 435.3 284.5 222.2 205.8 1,803.5Wildlife Co-management

Investment Costs 485.5 499.0 199.5 418.7 80.2 1,683.0Recurrent Costs 42.8 59.8 61.2 62 6 64-0 290-4

Subtotal Wildlife Co-management 528.3 558 9 276Q7 481 A 144 2 1 971 4Subtotal Community Rnvironmental Management 1,418.2 1,297.2 1,009.3 1,285.3 1,062.1 6,072.2D. Environmntal Actions and Studies

Environmental Actions end StudiesInvestment Costs 212.5 337.2 250.3 170.7 174.4 1,145.1

Climate ChangeInvestment Costs 137.0 83.7 52.3 53.5 37.2 363.7Recurrent Costs 42. 5 26_2 27.6 28. S40282 28 B

Subtotal Climate Change 179.6 110.6 79.8 81.6 66.0 517.7Water Hyacinth Control Program

Investment Costs 233.0 65.0 107.1 87.6 54.6 547.4Recurrent Costs 46.6 46-5 42.0 4292 43.8 221-8

Subtotal Water 8yacinth Control Program 279.6 111.5 149.1 130.5 98.5 769Q2Natural Resources Policy *ore lation

Investment Costs 72.8 56.0 16.7 - - 145.4Recurrent Costs 15.2 1.5R5 15.9 162 16.6 72_4

Subtotal Natural Resources Policy Formulation 87-9 71 - 326S L" 162 1L.6. 2aa 8Subtotal Environmontal Actions and Studies 7S9 .6 630.8 511.8 399.1 355 .5 2,656-1

Total PROJECT COSTS 3,315.7 3,263.6 2,529.0 2,599.1 2,016.8 13,724.2Total Investoent Costs 2,870.2 2,820.3 2,075.7 2,126.3 1,524.1 11,416.5Total Recurrent Costs 445.5 443.3 453.3 472.8 492.7 2,307.7

Thu Jan 23 l8:12:44 1997

23-1 Project Components by Year -- Investment/Recurrent Costs

MalawiEnvironmental Management ProjectExpenditure Accounts by Years

(US$ '000)

Totals Including Contingencies1997 1998 1999 2000 2001 Total

I. Tnvetment CostsA. Materials 8.5 0.8 0.8 - - 10.0B. Civil Works

Rehab.of Park Buildings 55.8 10.9 - 315.8 11.6 394.1Construction Buildings 214.4 105.5 - - - 319.9Rehab.of Park Roads 8.0 168.6 557 - - 309.3

Subtotal Civil Works 355.2 285.0 55.7 315.8 11.6 1,023.3C. Vehicles 690.4 382.5 11.1 113.7 - 1,197.8D. Equipment&Furniture 229.0 199.4 64.5 93.2 23.3 609.4F. Technical Agdstance

Technical Assistance International 437.6 467.2 342.3 206.9 134.9 1,589.0Technical Assistance National 132.3 60.6 93.1 87.9 54.9 ... A2D.L

Subtotal Technical Assistance 569.9 527.8 435.4 294.8 189.8 2,017.7P. Traiaing

Study Tours 53.1 81.5 55.6 - - 190.2In Country Courses 258.3 297.1 270.8 162.8 121.6 1,110.6External Courses 93.8 186.1 166.5 113.5 2.3 562.2Workshops 51.3 208.7 220.6 183.6 196.2 860.4Publications and Materials 3.7 21.7 26.6 7.4 4.1 63.5Community Mobilization(Rural) 66.4 136.0 208.8 284.5 363.3 1.059.1

Subtotal Training 526.7 931.1 948.8 751.8 687.5 3,845.9G. Studies 307.6 197.9 176.9 84.2 88.4 855.0H. Micro Projects Grants

Rural Community Projects 36.8 75.5 115.8 157.8 201.5 587.5Urban/Peri Urban Communities 39.95 40.4 S2.7 126.B 129.6 418.2

Subtotal Micro Projects Grants 76.3 115.8 198.5 284.6 331.1 1,006.31. Other Investment Costs 106.2 179.9 184.0 188.2 192.3 ___1.1J_

Total Investment Costs 2,870.2 2,820.3 2,075.7 2,126.3 1,524.1 11,416.5II. Recurrent Costs

A. OperatingaMaintenance CostsO&M for Vehicles 163.1 191.9 196.3 200.8 205.3 957.3O&M Other 29.0 13.1 13.4 13,7 14.0 83.1

Subtotal Operatipg&Maintenance Costs 192.2 204.9 209.7 214.4 219.3 1,040.5B. Suppliesh&aterials 160.0 133.9 131.3 134.3 137.2 696.7C. Allowances&Perdiems 93 4 104.5 112.4 124.1 136.2 570-6

Total Recurrent Costs 44S.5 443.3 453.3 472.8 _A.22.2 2,307.7Total PROJRCT COSTS 3,315.7 3,263.6 2,529.0 2,599.1 2,016.8 13,724.2

Thu Jan 23 18:12:47 1997

24-1 Expenditure Accounts by Years

MalawiEnvironmental Management Project

Procurement Accounts by Financire(US$ '000)

Local DutiesThe Government IDA _ Total For. (EXcI. &2AmlC_nL t Amonut t Amount % Exch. Taxes) Taxes

1. Civil Works 102.3 10.0 920.9 90.0 1,023.3 7.5 306.7 716.6 -2. Vehicles and Equipment 61.2 2.3 2,607.1 97.7 2,668.3 19.4 2,056.6 611.7 -3. Consultants - - 2,872.7 100.0 2,872.7 20.9 2,016.2 856.5 -4. Training 713.2 18.5 3,132.7 81.5 3,845.9 28.0 1,413.2 2,432.8 -S. Community Grants - - 1,006.3 100.0 1,006.3 7.3 268.0 738.3 -6. Personnel Allowances 131.4 23.0 439.2 77.0 570.6 4.2 - 570.6 -7. Operating Costs 353.4 20.3 13.33.8 79.7 1.737.1 12.7 1.076.3 660.. -

Total 1,361.5 9.9 12,362.7 90.1 13,724.2 100.0 7,137.0 6,587.2 -

Thu Jan 23 18:12:29 1997

17-1 Procurement Accounts by Financiers

(US$ 000)

CostsFinancing to beAvailabl Financed The Government

1DA Project CumulativeAmqunt Costs cash Flow Cash Flow

1 - 1,657.9 -1,657.9 -1,657.92 1,632.6 1,657.9 -25.2 -1,683.13 1,632.6 1,631.8 0.8 -1,682.34 1,610.1 1,631.8 -21.7 -1,704.05 1,610.1 1,264.5 345.6 -1,358.36 1,256.7 1,264.5 -7.8 -1,366.17 1,256.7 1,299.6 -42.8 -1,409.08 1,033.1 1,299.6 -266.4 -1,675.49 1,033.1 1,008.4 24.7 -1,650.710 648.8 1,008.4 *-359.6 -2,010.311 648.8 - 648.8 -1.361.5

Total 12,362.7 13,724.2 -1,361.5 -1,361.5

Thu Jan 23 18:12:30 1997

18-1 Disbursements by Semesters and Government Cash Flow

ENVIRONMENTAL SUPPORT PROGRAM - PERFORMANCE MONITORING INDICATORS

Narrative Indicators Measurement AssumptionsProject Development Objectives

Improved Policy and Institutional Adoption of National NEP adopted in February 1996, Improved policies will actuallyFramework Environment Policy and EMA enacted in June 1996. EMA make a difference and that there

Environment Management sets out role of EAD, and Public will be sufficient capacity andAct. Role of MOREA and Services Commission expedites political will to implement theEAD established and agreed recruitment of staff new policies

Promulgation guidelines and By December 1997regulations under the EMA

Revision and review of forestry 9/98sectoral policies and fisheries 9/98legislation parks and wildlife 9/98

soil conservation 9/98land tenure 9/99water/irrigation 9/98

Improved capacity to manage natural Increased staffing for Full staffing complement achieved Capacity development will beresources and environment at all MOREA and maintained 12/96, and annually sustainable - staff turnover,levels monitored thereafter political support for institutions

concerned remains high. MustEffective coordination of: Frequency of meetings maintain momentum through

training and replacement of staff* National Council for the Twice per year when turnover occurs.

Environment* Parliamentary Committee During each Session Availability of Funding.* Technical Committees on At least three times per year

the Environment regular with focal points - specific* ministries agenda* NGOs regular organized by CURE* donors monthly - thematic

Preparation of annual Annual Review processWorkPlans

Effective establishment of Official designation of focal pointsenvironmental focal points by 12/97network

EIS - Establishment of Demonstration pilot for Shire River Incentives for data collection andeffective EIS system - mapping and data input supply sufficiently strong for

accomplished (12/98) focal points and others to supplydata

Training Establishment and implementationof training programs for MOREA,line Ministries, NGOs,Communities12/97. Annually thereafter,numbers of training course andpeople trained

Effective empowerment of Areas of forest and public Forest resources co-managed Community empowermentcommunities for CBNRM land brought under effective Hectares/Numbers of Communities provides sufficient incentive for

management by communities mobilized and empowered annually communities to take control oftheir resource base

National parks and wildlife areasco-managed, numbers of Government commitment to co-communities mobilized. management remains strong.

Agreement by Ministry of Financeon revenue sharing by communities12/97

Enhanced Environmental Awareness Greater public awareness and Surveys, active participation of all Continued support at politicalinformed population levels of society in environmental level and active participation by

management groups includingNewspapers, radio, dance groups, parliamentarians, Ministers,environmental clubs, choirs traditional leadership structures

Outputs

Improved environmental capacity and Functioning lead Ministry, Efficient allocation of resources, Very efficient financialcoordination functioning committees (e.g. client satisfaction. Records of monitoring and control system

NCE), donor groups, NGOs meetings, and account ofdecisions taken

Functioning Environmental Quantitative: numbers of EIAs Sufficient trained personnel toImpact Assessment Process approved conduct and analyze EIAs

Functioning Environmental Quantitative: number of users,Information Systems size of databases, number of

projects using system

Better trained groups working on Numbers of people, Qualitative: surveys, client Timely delivery of high qualityenvironmental management in Malawi communities trained consultation, continued flow of training courses

resources

Enhanced Environmental Education Quantities of materials Quantitative: Numbers of training Effective coordination of effortdistributed courses (to be included in training among different Government

program to be developed during agencies, NGOs and donors toMaterials prepared and 1997). Qualitative: training minimize duplication of effortdisseminated through formal effectiveness (post-course and maximize leverage ofand non-formal education evaluation). Annual Report on ESP resourceschannels training

Enhanced Community Mobilization and Numbers of communities Quantities: Effectiveness Maintenance of GovernmentImplementation of Local Environmental mobilized for natural (To be evaluated during annual commitment to communityActivities resources/environmental work review and planning empowerment

management exercises). Communitysatisfaction

Numbers of communities Annual evaluation (numbers) ofimplementing co- communities, projects andmanagement and participantsenvironmental micro-projects

Components

Institutional Capacity Building and Procurement and Annual Report on progress and Maintaining the momentum ofStrengthening of the Environmental distribution of inputs, procurement and disbursement capacity development, withInfonnation Systems provision of training indicators necessary staff. Continued

resources commitment of resources.Effectiveness of capacity toprocure inputs and managefinancial systems

Maintain commitment andresource application. Sufficientcapacity to implementprograms. NGOs aresufficiently motivated andorganized to continue work.

Environmental Education Development and supply Annual Report and Work Plan Full collaboration with allof materials elements of formal and non-

formal education system,synergy with other initiatives

Community Based Environmental Timely supply of financial Annual Report and Work Plan Efficient management ofManagement resources program and line Departments

Environmental Actions and Studies Diverse Annual Report and Work Plan

Annex 8

MALAWI - ENVIRONMENTAL SUPPORT PROGRAM

MIDDLE SHIRE LAND DEGRADATION

Objective

1. The purpose of this annex is to review the currently available information on land degradation ofthe Middle Shire catchments and siltation of the Shire River. Some indication of the economicsignificance of the siltation is given. The efficiency of countermeasures are discussed, and ongoingefforts by the World Bank and/or other donors in collaboration with domestic institutions are discussed.

Land Degradation and Rehabilitation

2. Land degradation takes on many forms, but the one in focus in Malawi is soil erosion. This hasbeen identified as the main environmental problem in the National Environmental Action Plan. Whilethe cost estimates of environmental damage due to erosion provided in the NEAP can be questioned,there is no doubt that there is considerable scope for investment in low-cost, manual conservationtechniques. This annex only deals with the siltation in the Middle Shire River Catchment.

Benefits and Costs of Middle Shire River Catchment Management

3. The Shire River is of vital economic importance to Malawi as it:

* contains almost all of the country's power generating capacity* supplies water to major urban centers such as Blantyre and Limbe* supports a locally significant artisanal fishery* supplies irrigation schemes for valuable crops.

4. The problem in the Middle Shire River Catchment is one of long-standing siltation incombination of low water level in Lake Malawi. As a result, the Shire River actually stopped flowingfrom 1915 to 1937. While this gives some perspective to the current reported problems, it should berecogized that new installations of hydropower and water supply makes the economic damage ofinterrupted or diminished water flows greater than ever.

5. In late 1995, the Lake reached its lowest level since 1954, and the flow dropped to about 129cumecs, compared to a required base flow of 170 cumecs. It has been estimated that a further fall in thelake level of only one more cm would have caused the flow to cease entirely, as the lowest lake bar atSamama (the outlet of the lake into the Shire) has been rising to clog the water channel. This build-up ofsediment at entry is related to the siltation in the Upper Channel from Mangoche to Liwonde. In view ofthis, an emergency project including pumping of up to 70 cumecs from the Lake and into the UpperChannel (which will reduce lake level with about 7.5 mm), dredging at Nkula Falls and combined withlong-tern catchment conservation, is under way.

6. Sizing the magnitude of the problem, a recent study2 has estimated that gross field erosion in the7,350 km2 Middle Shire River study area is in the order of 25 million tons per annum. On the basis of

subjective but explicitly specified sediment delivery ratios for each of the ten catchments, the netsediment delivery into the Shire River is estimated to about 3.3 million tons per annum.

7. The urgency of catchment protection should not be driven by the magnitude of sunk costs--whichhave been referred to in the debate about protective measures. Rather, the future potential losses ofeconomic values at stake should be considered.

8. First, consider the value of hydropower. The total hydropower sales in 1 995 (as projected in1992) amount to about GWh 844, while the projected tariff was USc6.64/Kwh.3 T'his implies a totalprojected (full collection) revenue of about $56 million. Adding a provision for some consumer surplus,say up to USc1O/kWh we arrive at about $84 million in annual gross value of hydiropower production.Most of the costs of hydropower are fixed, making the net loss of power interruptions approach the grossvalue. In fact the cost of unforeseen power outages would be even higher per Kwh than indicated above.

9. Second, consider urban water supply. Data on gross sales of water are culTently not available,but there is some information about the defensive expenditures that are incurred as a result of siltation forthe major water urban water user; Blantyre (pop. 0.5 million). The costs fall into four categories:4

* Installation of dredging machinery used in emergency clearing of the water intake(installation cost about $30,000)

- Installation and running of a pontoon dredging system that evacuates sediment intodownstream water 0.5 km below intake (installation about $50,000 plus running costs about$7,000 per year, mostly for fuel).

* Adding of polymers, a liquid coagulant used to decrease water turbidiity (about $330,000 peryear);

- The potential construction of a sediment barrier with a scraping mechanism. While this isstill under study, a guesstimate is that it would cost in the order of $30,000-$70,000 toconstruct.

Hence the major defensive expenditures are not sunk costs.

10. Third, fisheries are affected by both the level of water flow and the level of turbidity in thewater. In the worst case scenario, flow would be entirely clogged, and marshes would gradually dry out.The latest available data5 shows that the catch of fish in Lower and Middle Shire amounted to about3,000 tons in 1992 and 1993. This was a significant decline from the peak year of 1989, with about12,000 tons of catch. Applying the national average unit price, the value of 3,000 tons in 1993 was aboutMK5.55 million. Using the exchange rate for 1993 (World Bank, 1993), this equals $1.4 million. Whilethis is a gross value, the major input cost is labor, and shadow price of this factor of production must beconsidered low.6 Hence, the net values at stake are not considerably lower than that. In terms ofemployment, the statistics only show results for the Lower Shire. This indicates a population offishermen and assistants (i.e. fishermen that do not own their boats) of about 2,000 in 1994-5.

11. Given this list of actual and potentially significant costs of increasing sedimentation, one mustexplore possible solutions. Green et al (1996:8) states that a reduction of erosion will depend mainly onthe introduction of conservation farming on the 4,900 km2 of land that is under cultivation in the studyarea, but that "The slow improvement likely to result from the measures involved would have little or noeffect on sedimentation in the short, or probably even in the medium-term.". The report, however, goeson to make the case for selective conservation interventions, based on-site damage considerations, i.e. thesoil loss impact on farm productivity.

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12. Technically, there are ways and means to drastically reduce the soil loss from cultivated land.Amphlett (1986)7 studied soil loss and a set of other parameters in four catchments with comparable size,slope, altitude and soil type, during 3-4 years. The results show a drastic average reduction in soil lossfrom almost 11 t/halyear for the "traditional cultivation" catchment, via 3 tlha for the "physicalconservation" treatment, to about 0.1 t/ha for the "full land use plan" catchment. While reservationsabout the accuracy of these measurements have been pronounced by a source close to the study, thesediment yield could be reduced substantially with a simple package of soil conservation measures.

13. The crucial issue is: how much this would cost? The absence of "model" conservationcatchments outside Agricultural Research Stations indicate that financial rationality is insufficient todrive such measures. The poor economic performance of large-scale mechanized conservation works inMalawi has been documented by Mwakalagho (1 985) . Later projects, however, have developedmanually based low-cost techniques. Even so, the overhead costs tend to be high, and it is vital tointegrate other farm improvements to raise productivity with conservation.

14. Detailed cost estimates developed for the proposed "Promotion of Soil Conservation and RuralProduction Project" (GFA, 1996) 9, which benefit from the implementation of a pilot project, show a totalcost of about $23 million for the agricultural component. The project document assume that some100,000 to 200,000 farmers will have joined the project at its closure.10 Assuming an average farm sizeof 1 ha per household, this implies a unit cost of $115-230/ha, including donor contributions,Government of Malawi counterpart funds, and local labor. It should be emphasized that the project willnot only promote soil and water conservation measures (expected to contribute directly to only some20% of the project's benefits) but also a package of yield improving measures including new varieties ofmaize, legumes and agroforestry techniques.

15. Using these figures for the Middle Shire River catchment, a rough calculation could illustrate themagnitude of the problem. If all the 490,000 ha of cultivated land in the Middle Shire River were to betreated at a unit cost of $150, the total cost would be staggering ($73.5 million). Targeting only one thirdof the most erosion-affected areas of the cultivated land above Nkula would then amount to some $21million in investment cost.

16. The exact impact of this type of targeted intervention cannot be foreseen with any precision, buta numerical example can serve to illustrate the magnitudes involved. Assuming that this type ofconservation would reduce the sediment yield with a 75% efficiency on treated land, i.e., areas with verysevere and severe erosion above Nkula, the order of magnitude in overall reduction could be about1 million tons of sediment per year. The annualized cost of the investment of $21 million (at 10% over20 years) is about $2.5 million. Ignoring the time profile of the project, the unit cost would therefore beabout $2-3 per ton of sediment retained.

17. The cost of sediment retention through soil conservation can be compared with the cost ofdredging. For the Nkula pondage, this has been estimated to $3-6 per m3 , much depending on thedumping site. l Assuming the bulk density of surface soil is about 1.4 g/cm3, this corresponds to adredging cost of about $2-4 per ton.

18. Far from all sediment that is released into the Shire River is trapped in structures below,however. There is very little information on the "trap efficiency" of dam structures, but Green et al(1996:7) report that the Nkula Falls reservoir may have lost half of its 3 million m3 storage over the last15 years, which implies an annual rate of about 140,000 tons. This is only about 7 percent of the totalsediment delivery estimated to enter the River above Nkula Falls.12 Using this assumption, the cost for

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preventing one ton of sediment to be trapped in Nkula pondage through watershed conservation would be$29-43 ($2-3/0.07). With such a low trap efficiency, it appears more cost-effective from an off-sitedamage perspective, to dredge the sediment that settle into the dam, rather than invest in soilconservation measures.

19. The point remains, however, that there could be localized areas that (a) are above the pondagethat (b) yield considerable sediment per hectare due to steep slopes and local and highly erodible soils,and (c) have a high sediment delivery ratio into the river due to proximity to the River and local drainageconditions, where the off-site benefits of conservation would make a significant contribution to theeconomic rationale to conservation.

20. Translating this off-site externality into a financial rationality for the farmers would require atransfer mechanism. This can only be established in an institutional environment where a holistic viewof the catchment is taken. The downstream beneficiaries could then pay for the service of upstreamcatchment protection. This would not be a "subsidy" but an integral part of payment for ensured waterand power supply.

21. So far, the discussion has taken an off-site damage perspective on soil erosion. Obviously, therewould be some on-site benefits to soil conservation measures. How significant could they be? Theanswer depends very much on (a) assumed initial levels of productivity and (b) the soil loss yield declinefunction applied.

22. The initial yield level can be illustrated with data adapted from the Agricultural Support13Programs farm models

Table 1: Baseline Gross Margins

Cultivation type Crop yield (kg/ha) Gross margiin ($/ha)

Local maize 800 55Local maize w. fert. 1,500 67Hybrid maize w. fert. 2,750 104

23. Assuming that the most common type of cultivation in the area is local maize, as in the rest ofthe country, the base line gross margin is only about $55 per hectare. If it is assumed that all input costsare taken ex-ante, that is that there is no saving in costs due to lower yield (which is not literally true),the losses in gross margin can serve as a measure of net economic losses.

24. As intervention would be selective in the larger catchments, we need to relate the preventedlosses to explicit baseline conditions of erosion. Targeting an area of about one quarter of the landwould cover the areas most affected, as shown in the table below.

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Table 2: Erosion Severity Classes in the Middle Shire River

Erosion severity Avg. loss t/ha % of Area

Slight 10 28Moderate 30 41Severe 55 23Very severe 75 8

Source: Adapted from Green et al (1996:16).

25. A soil loss of 75 t/halyear equals about 0.54 cm. (140 t/cm/ha, i.e. assuming a bulk density of1.4g/cm3 and 55 tons corresponds to about 0.39 cm. Applying the Boj6 & Hamilton (1996: 14-15)values of a yield loss of 3% per centimeter, implies an annual yield loss of about 1-2% per year. Thisequals a dollar or less per annum in gross margin loss per hectare. Even allowing for the accumulatedimpact of consecutive years of erosion, this is not enough to justify anything but very low costinvestment in soil conservation. This may be a reason why so little spontaneous conservation activitycan be observed.

Ongoing Soil Conservation Projects

26. It should be added that there are already considerable efforts underway to combat landdegradation, sponsored mainly by the EU, UNDP/FAO and IFAD, as well as many NGOs. With regardto the World Bank's involvement, there are two projects of particular relevance.

27. First, the comprehensive Agricultural Services Project (ASP)14 identifies "land resources andconservation" as one of its five main areas of activity in its extension component. In the financing plan atotal of about US$1.8 million (2.8% of total costs) is specified under the conservation component. ADBis listed as contributing almost all of this, while GOM contributes the rest. Hence, there is no direct IDAcontribution, but the project harbors undisbursed resources which could contribute to conservationactivities in priority areas.

28. ASP aims to train all extension staff in the country in low cost soil and water conservationpractices so that it becomes a mainstream activity in all Extension Planning Areas (EPAs). This processis not organized by watershed, and will be disseminated to any individual or group that is interested.Hence, targeting specific catchments in the Middle Shire River would require an additional and separateeffort, but would be possible to achieve within the framework of the program.

29. Second the recently effective National Water Development Project'5 which specifies soilconservation measures in selected catchments: Lunyangwa River, Chifuga/Chitete Rivers,Mpamadzi/Mariku Rivers, Mwanza River and Mzimba River. (The second to last is a tributary to theShire River). The measures will include restricting cultivation on steep river banks and other unsuitablelocations, revegetation and farmer education in 15 catchment basins for these measures. The costs arespecified as a total of US$1.6 million, of which 1.0 million constitute the local contribution. The totalcomprise only 2% of the project cost of US$130 million.

30. The principle for selecting target catchments is that they are directly delivering water to anintake for an urbanized area. A list of 56 rural catchments and a few urban ones has been established for

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the project. Only some of them are in the Middle Shire River, and the exact extent of intervention ineach one has not been defined. The extension message will be developed in collaboration with MOALD,FD and MOREA. A special Task Force involving them will be formed, but so far contacts have beenlimited to discussions held during the time of project design.

31. The conclusions to be drawn from this review are that:

* significant economic values are at stake in preserving an uninterrupted and less sediment-laden flow in the Shire River;

* based on off-site impacts only, the scope for cost-effective soil conselvation measures,which could complement dredging to ensure sufficient water supply, iis very limited;

* translating the economic rationale for control of off-site damage due to soil erosion into afinancial incentive for farmers would require an institutional entity capable of managingpayments from downstream users to upstream managers;

* there are already significant activities on-going to address land degradation that utilizeexisting domestic capacity to a high degree, and some of these could target selected areas inthe Shire River;

* the World Bank has two projects that can be used to apply limited resources to this problem;* further targeted interventions could also be sponsored by the financial mechanism for

community-driven projects included in the ESP;* the analysis to date demonstrates the need for a much improved system for gathering and

analyzing environmental information as a basis for policy and strategic decision-making.

See Bojb and Hamilton (1996) Malawi: Genuine Savings. World Bank (processed)Green, R.I., V.A.L. Mkandawire, H.L. Kandaya and M.I.M. Kapila (April, 1996) Study to Identify Sources of

Siltation in the Middle Shire river Catchment Area. MOREA and British High Commission. Lilongwe.3 World Bank (May 19, 1992) Malawi Power V Project. Staff Appraisal Report. Report No. 10055-MAI. WorldBank, Washington, D.C.4 Estimates made on the basis of data from the Blantyre Water Board (May, 1996).5 Department of Fisheries, Economic Report (1993) and Frame Survey Results (1994, 1995), unpublished data.6 See World Bank (May 24, 1993) Republic of Malawi: Agricultural Services Project. Staff Appraisal Report.Washington, D.C. which puts the shadow price at zero.7 Amphlett, M.B. (1986) Soil Erosion Research project, Bvumbwe, Malawi. Hydraulics Research, Wallingford.Report OD 78. In collaboration with the Ministry of Agriculture, GOM.8 A Critical Appraisal of Physical Soil Conseration in the Lilongwe Rural Development Project. MSc Thesis.University of East Anglia, Norwich, UK.9 GFA (1996) Promotion of Soil Conservation and Rural Production. Working Draft Report (February).Financing Proposal and background Documents of the Project.10 GFA (1996) Background document 6, p. 15. See annex 2 for average holding size per household and relativedistribution. The derived national average is 1.12 halhousehold. If 200,000 hectares are affected by the project atits completion, this is only 4 % of the total of 4.6 million hectares under cultivation in 1990 (Ibid., BackgroundDocument 1: p. 2)" Shepherd, J. Malawi: Sediment and Siltation. Briefing note for Mr. Wolfensohn, dated August 14, 1995.12 Green arrives at only 4 percent using different assumptions.13 World Bank (May 24, 1993) Republic of Malawi: Agricultural Services Project. Staff Appraisal Report.Washington, D.C.14 World Bank (May 24, 1993) Republic of Malawi: Agricultural Services Project. Staff.Appraisal Report.Washington, D.C.15 See World Bank (June 1, 1993) Republic of Malawi: National Water Development Project. Staff AppraisalReport. Washington, D.C.

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Annex 9

MALAWI - ENVIRONMENTAL SUPPORT PROGRAMME

ENVIRONMENTAL MANAGEMENT PROJECT: IMPLEMENTATION PLAN

TABLE OF CONTENTS

1. Introduction

2. The Program

(a) Scope(b) Objectives

(c) Description

(d) Risks(e) Costs

3. Implementation Arrangements

(a) MOREA Organizational Structure

(b) ESP Implementation Agreements with other Donors(c) Management Responsibilities

4. Planning

5. Procurement

6. Procedures

(a) Procurement Procedures(b) Implementation Procedures

7. Financing

(a) IDA(b) Government

(c) Others

8. Disbursements

(a) Accounts Management

(b) Schedule of Disbursements

9. Accounting and Audits

10. Monitoring, Evaluation and Reporting

ANNEXES

MAP SECTION

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