Document of The World Bank Report No.: 28325 PROJECT PERFORMANCEASSESSMENTREPORT REPUBLIC OF INDONESIA CORALREEF REHABILITATIONAND MANAGEMENTPROJECT PHASE I (LOAN 43050-INDAND GEF GRANT28373) March 31,2004 Sector and ThematicEvaluation Group OperationsEvaluation Department Currency Equivalents Currency Unit = Indonesian Rupiah 199811999 1USD= Rp. 10.600 2002 1 USD = Rp. 7.800 199912000 1 USD= Rp. 7.500 2003 1 USD= Rp. 9.000 2000 1 USD = Rp. 5.000 2004 1 USD= Rp. 8.600 2001 1 USD = Rp. 7.800 Abbreviations and Acronyms ADB Asian Development Bank APL Adaptable Program Loan ANDAL Environmental Impact Assessment (AnalisaDampak Linkungan) AusAID Australian Agency for International Development BAPPENAS National DevelopmentPlanningAgency (BadanPerencanaan Pembangunan Nasional) CAS CountryAssistanceStrategy CBM Community-Based Management COREMAP Coral Reef ManagementProgram CRMP CoralReefManagement Plan DKP Departmentof Marine Affairs and Fisheries(DepartmentKelautan dun Perikanan ERR economicrate of return GEF Global EnvironmentFacility GO1 Governmentof Indonesia LBRD International Bank forReconstruction and Development ICR Implementation CompletionReport LIP1 Indonesian Institute of Sciences(LembagaIlmu Ilmu Pengetahuan Indonesia) MCS monitoring, controland surveillance NGO nongovernmental organization OED OperationsEvaluationDepartment PAD Project Appraisal Document PMO Project Management Office Pokja Working Group (KelompokKerja) PPAR Project Performance Assessment Report Fiscal Year April 1-March 31 Director-General,OperationsEvaluation : Mr. GregoryK. Ingram Director, OperationsEvaluationDepartment : Mr.Ajay Chhibber Manager, Sectorand Thematic Evaluation Group : Mr. AlainBarbu Task Manager : Mr.Andres Liebenthal OED Mission:Enhancingdevelopmenteffectivenessthroughexcellenceandindependenceinevaluation. About this Report The Operations EvaluationDepartmentassessesthe programsand activities of theWorld Bank for two purposes:first, to ensurethe integrityof the Bank'sself-evaluationprocess andto verifythat the Bank'swork is producingthe expected results,and second,to helpdevelop improveddirections, policies,and proceduresthrough the disseminationof lessons drawnfrom experience. As part of this work, OED annuallyassessesabout 25 percent of the Bank's lendingoperations. Inselectingoperationsfor assessment, preferenceis given to thosethat are innovative,large, or complex; thosethat are relevantto upcomingstudies or countryevaluations;those for which ExecutiveDirectors or Bank managementhave requestedassessments; and those that are likelyto generate importantlessons.The projects,topics, andanalyticalapproaches selectedfor assessmentsupport largerevaluation studies. A ProjectPerformanceAssessment Report (PPAR) is based on a review of the ImplementationCompletion Report(a self-evaluationby the responsibleBank department)and fieldwork conducted by OED. To prepare PPARs, OED staff examine projectfiles and other documents, interviewoperationalstaff, and in most cases visit the borrowingcountryfor onsitediscussionswith project staff and beneficiaries.The PPARtherebyseeks to validateand augmentthe informationprovided inthe ICR, as well as examine issuesof special interestto broader OED studies. Each PPAR is subjectto a peer review process and OED managementapproval. Oncecleared internally,the PPAR is reviewedbythe responsibleBank department and amended as necessary. The completed PPAR isthen sent to the borrowerfor review; the borrowers' comments are attached to the document that is sent to the Bank's Board of ExecutiveDirectors.After an assessment reporthas been sent to the Board, it is disclosedto the public. About the OED Rating System The time-testedevaluationmethods used by OED are suitedto the broad rangeof the World Bank'swork. The methods offer both rigor and a necessary level of flexibilityto adaptto lendinginstrument,projectdesign, or .OEDevaluatorsallapplythesamebasicmethodto arriveattheir projectratings.Following is ratingscale usedfor each evaluationcriterion (more informationis availableon the OED website: rg/oed/eta-mainpage.html). Relevanceof Objectives: The extent to which the project's objectivesare consistentwith the country's currentdevelopmentprioritiesand with currentBank countryand sectoralassistancestrategiesand corporate goals (expressedin PovertyReductionStrategy Papers,CountryAssistanceStrategies,Sector Strategy Papers, OperationalPolicies).Possibleratings: High, Substantial,Modest, Negligible. Efficacy: The extentto which the project's objectiveswere achieved, or expectedto be achieved, taking into account their relativeimportance. Possibleratings: High, Substantial, Modest, Negligible. ncy: The extent to which the project achieved, or is expected ta achieve, a return higher than the cost of capitaland benefitsat leastcost compared to alternatives.Possibleratings: High, Substantial, ligible.This ratingis not generallyappliedto adjustment operations. Sustainability: The resilienceto riskof net benefitsflows over time. Possibleratings: Highly Likely,Likely, Unlikely,HighlyUnlikely,Not Evaluable. InstitutionalDevelopmentImpact: The extent to whicha projectimprovesthe abilityof a countryor region to make more efficient, equitableandsustainableuse of its human, financial, and natural resources through: (a) betterdefinition,stability, transparency,enforceability,and predictabilityof institutionalarrangements and/or (b) betteralignment of the missionand capacityof an organizationwith its mandate, which derivesfrom these institutionalarrangements.InstitutionalDevelopment Impact includes both intendedand unintended effects of a ntial, Modest, Negligible. Outcome: The extentto the project's major relevant objectiveswere achieved,or are expectedto be Highly Satisfactory,Satisfactory,ModeratelySatisfactory,Moderately Unsatisfactory,Unsatisfactory,HighlyUnsatisfactory. BankPerformance: The extent to which services provided by the Bank ensuredquality at entry and supported implementationthroughappropriatesupervision(includingensuringadequatetransitionarrangements for regular operationof the project). Possibleratings: HighlySatisfactory,Satisfactory, Unsatisfactory,Highly Unsatisfactory. BorrowerPerformance: The extent to whichthe borrower assumedownershipand responsibilityto ensure qualityof preparationand implementation,and compliedwith covenantsand agreements,towards the achievement of developmentobjectives and sustainability.Possibleratings: HighlySatisfactory,Satisfactory, Unsatisfactory,Highly Unsatisfactory. ... 111 Contents Preface ................................................................................................................................. v PrincipalRatings ............................................................................................................. .. vi1 Key StaffResponsible ..................................................................................................... vu.. Summary ........................................................................................................................... ix Background ........................................................................................................................ 1 Assessment .......................................................................................................................... 3 Relevance................................................................................................................. 3 Eficacy .................................................................................................................... 4 Objective (a): Strengthenthe Policy, Strategy. and Legal Framework for Coral Reef Management ........................................................................ 4 Objective (b): StrengthenInstitutional Capacity for Coral Reef Management........................................................................................... 5 Objective (c): Design and Implement Pilot Community-Based Management in Two Sites ..................................................................... 7 Objective (d): Design and ImplementPilot Coral Reef Monitoring, Control, and SurveillanceSystems........................................................ 9 Obejctive (e): Design and Launch a Public Awareness Campaign for Coral Reef Management.................................................................................. 9 Eficiency................................................................................................................ IO Quality at Entry...................................................................................................... 13 Supervision............................................................................................................. 13 Importance of Adaptabilityand Time for Pilot Projects............................ 16 Need to IntegrateProject Activities with Impact Data Gatheringand Monitoring........................................................................................... 16 Need to Assign Full Time Staff for Project Implementation..................... 17 Need to Provide Techcal Guidanceto Community-basedDecisions.....17 Potential for Local FisheriesDevelopment................................................ 17 Potentialfor Greater Empowerment of ParticipatingVillages..................18 Annex A Basic Data Sheet . .............................................................................................. 19 Annex B: EconomicAnalysis of COREMAP Program ................................................ 23 This report was prepared by Andres Liebenthal. who assessedthe project in September2003.The report was editedby William Hurlbut. and Soon-WonPak provided administrativesupport. V Preface This is the Project PerformanceAssessment Report (PPAR) of the Coral Reef Rehabilitationand Management (COREMAP)Project, whxh was supported by IBRD Loan No. 43050 in the amount of $6.9million and GlobalEnvironmentFacility (GEF) Trust Fund Grant No. 28373 in the amount of SDR 3.1 million (US$4.1million equivalent).Theproject was approved on March 31, 1998,and is expected to close on July 31,2004, following the third extensionfi-omits original closing date of October 31, 2001. The project supportedthe firstphase of the Government of Indonesia's Coral Reef RehabilitationProgram, which was also supportedby separateprojects of the Asian Development Bank (ADB) and the Australian Agency for International Development (AusAID). Ths report is based on the drafi COREMAPPhase I Final Report,prepared by the borrower, the Project Appraisal Document (Report No. 17333-W), loan documents, project statusreports, project financed studies, and discussionswith Bank staff,borrower staff, project consultants, and representatives of civil society organizationsand local communitiesinvolved in the project. In September 2003, an Operations Evaluation Department(OED)missionvisited the project sites in Indonesia in parallel with the final supervisionand implementationcompletionreport preparation missionundertaken by the East Asia Region. The collaboration and warm hospitalityof Bank operationalstaff, government officials, civil societyand communityrepresentativeswho assistedthe mission are gratefully acknowledged. Followingstandard OED procedures,the draftPPAR was sent to the borrower for comments,but none were received. In accordance with the Bank's disclosurepolicy, the final report will be availableto the public followingsubmissionto the World Bank's Board of Executive Directors. vii Principal Ratings ICR* ICR Review** PPAR Outcome n.a. n.a. ModeratelySatisfactory Sustainability n.a. n.a. Not Evaluable Institutional n.a. n.a. Substantial DevelopmentImpact Bank Performance n.a. n.a. Satisfactory Borrower n.a. n.a. Satisfactory * The ImplementationCompletionReportfor COREMAP-I, which had beenscheduledfor completionby late 2003, has been postponed in linewith the extendedclosing date of the project. ** The ImplementationCompletionReport (ICR) is a self-evaluation by the responsibleoperational division of the Bank. The ICR Review is an intermediateOED productthat seeks to independentlyverify the findings of the ICR. Key Staff Responsible Project Task Manager/Leader Division Chief/ CountryDirector Sector Director Appraisal Sofia Bettencourt Geoffrey Fox Dennisde Tray Midterm Sofia Bettencourt MarkWilson Mark Baird Completion ThomasWalton MarkWilson Andrew Steer ix Summary The Government of Indonesia launched the Coral Reef Management Program (COREMAP)in 1998as a 15-yearprogramwith the objective "to protect,rehabilitate and achieve sustainableuse of coralreefs and associatedecosystemsin Indonesiawhich will, in turn, enhance the welfare of coastal communities."The program was divided in three phases: (i) a 3-year "Initiation" Phase designed to test and develop viable community-basedmanagement (CBM) systemsin selectedpilot areas; (ii) a 6-year "Acceleration"Phase to build upon and expand CBM systemsto other sites; and (iii) a 6- year "Institutionalization"Phase for ensuringthe sustainabilityof program activities. In support,the Bank/GEF COREMAPproject has been designed as an adaptableprogram loan (APL) in threephases that parallel those of the GOI'sprogram. The objective of Phase I of the COREMAPproject (COREMAP-I)was "to establisha viable framework for a national coralreef management systemin Indonesia." The outcome of the project is rated moderately satisfactory.%le the project's relevance is substantialand its efficiencyis high, it was onlymodestly effectivein establishing a viable framework for national coralreef management in Indonesia. The key elements of a supportivelegal frameworkhave been drafted but not officially approved and enacted.An institutionalcapacityfor coral reef managementhas been established at the Indonesian Instituteof Sciences (LIPI), but its transfer to the Department of Marine Affairs and Fisheries (DKP), and its extensionto the district and community levels is stillunder way and is fraught with risk. The CBM approachwas implemented in two pilot sites, but the designneeds to be substantiallyrevised to ensure its sustainabilityfor the longterm and demonstrateits viability. The institutionaldevelopment impact of the project is rated substantial.The project created the institutionalframeworkneeded to implementthe program, including the nationalPMO, districtworking groups, and village communitygroups.While there are still areas for improvement, and some of the capacitywill be lost in the transition from LIPI to DKP, and from Phase I to Phase 11,ths architectureis consistentwith the decentralization strategyof the GOI, replicable as COREMAP expands, and adaptableto local customs and circumstances. The sustainabilityof the project is not evaluable at this time. While the economic justification for COREMAPis robust,because of the high global benefits of protecting Indonesia's coralreef diversity,insufficient informationis availabletojudge the resilienceto risk of the other major factorsthat need to be considered. The Bank's performanceis rated satisfactory.The preparation of the project was underpinnedby extensiveanalysis,and GO1ownership was strong. The design of the project was unusuallycomplex, but responded to the needs of the strategy and the lack of a robust institutionalcounterpart.Supervision focused on developmentimpact and responded flexiblyto drastic changesin institutional and country conditions. Theborrower's performanceis rated satisfactory.The GO1committedin the mid- 1990sto a community-based coral reef management strategy,and supportedit steadfastly while slowlycreatingthe policy and institutionalframeworkneeded to implement it. X Nevertheless,progress in the approvaland enactmentof the policy, strategy, and legal frameworkhas been slow,with attendantrisks for the sustainabilityof the program, and donor coordinationwas inadequate. Four lessons emergefrom the experienceof the project: Imuortance ofAdautabiZitvand CautionforPilot Projects: As the pilot for a three-phaseAPL, the subjectproject was designed with ample allowances for flexibilityand learning. Even so, the project required three extensions from its originalcompletion date, and severalkey requirementsfor the long-term success of COREMAPremain incomplete and untested. In addition, the sustainabilityof the CBM-centeredstrategyhas not been demonstrated. Thispoints to the need for adaptabilityand caution in regard to the expansion of the COREMAPprogram in Phase 11,until the viability of the approachhas been established. Need toIntegrateProject Activities with Im-pactData Gatheringand Monitoring: A major flaw inproject implementationwas the lack of coordinationbetween project activitiesand the baseline surveys and monitoringprovisions. Unless this is corrected,it will not be possible to determineproject impact and validate the rationale for the CBM strategy,even in the long term. This unsatisfactory state of affairscould have been avoided with the assignment of managers with geographicalresponsibilities to ensure that the differentcomponents are effectivelyintegrated at all locations. Need toAssign Full-TimeStaffforProjectImplementation:The PMO's extensive reliance on part-time staffweakened the controland direction of the technical aspects of the project, and encouraged a situationwhere most of the work was done by consultantsand contractors. This contributedto delays in project implementation,inadequate technicalsupervision of and integrationbetween project components, and limited transfer of knowledgefrom consultantsto national staff.Many of these problems could have been avoided with the appointment of full-timestaff forproject implementation. Need to Provide Technical Guidanceto Community-basedDecisions: %le community empowermentis central to CBM, it can lead to poor decisions,as indicated by the findings about thepoor biodiversityqualityin one of the sanctuaries,the failure of seaweedcultureprojects, and investments in unviable electrificationschemes.Thispoints to the need to ensurethat community-based decisionsare informedby soundtechnical guidance. GregoryK. Ingram Director-General Operations Evaluation 1 Background 1. Indonesia is the world's largest archipelago,with more than 17,000islands and an 81,000-kilometercoastlinerich in coral reefs, seagrasses, and mangroves. Its marine environmentis one of the richest of the world, with about 2,500 species of mollusks, 2,000 species of crustaceans, 6 species of sea turtles, 30 of marine mammals, and more than 2,000 species of fish. It has approximately42,000 squarekilometers of coral reefs, or 16percent of the world'stotal. With over 70 genera and 450 species recorded, Indonesialies at the center of the world's coralreef diversity. 2. Coral reefs are a major productive and aesthetic asset,playing a key role in fisheries,marine tourism, and coastalprotection.Healthyreefs are an importantsourceof food and economicopportunitiesfor some 67,500coastal villages in Indonesia.Coral reefs also play an important role in marine-based tourism, attractingdivers and providing white sand for beaches. In addition,fringing coralreefs dissipatewave energy, thereby protectingcoastallands from storms and wave erosion. 3, Despite their importance, Indonesia's coralreefs are under seriousthreat from poison and blast fishing, overfishing,sedimentation, and pollution.In a 1994survey,the Indonesian Instituteof Sciences (LIPI) found 70 percent of the sitesto be in poor to fair condition.The onlyknown study of coralreef degradation over time, in Pulau Seribuoff Jakarta Bay, shows a steady declineof 3-6 percent a year in live coral reef cover since 1969.Urgent management interventionswere therefore needed to protect Indonesia's reefs. 4. Thekey issues for coral reef managementwere identifiedas: (i) poor management of existing threats; (ii)unclear institutionalmandates and inadequate institutional capacity;(iii) a weak policy and legal framework; and (iv) insufficientinformation.The major threats-overfishingand destructivepractices(blast and poison fishing)-are exacerbatedby a high demand formarine products, opportunitiesfor substantialprivate gains,weak enforcement of existinglaws, and an open-accessregimethat discourages communityaction.Responsibilityfor managing Indonesia's marine areaswas dispersed through numerous government agencies. Policies and regulations followed sectoral priorities, and failed to properly address coastalissues. Legal loopholessuch a prohibitingcyanide (poison) fishingbut allowingcyanideuse to tranquilize fish made it extremelydifficultto enforce existinglaws,Finally, informationrequired for marine management was fragmented and difficultto access. SECTOR STRATEGY 5. The community-basedmanagement (CBM) approachwas chosenbased on the realizationthat government agenciescannot effectivelymanage the extensivecoral reef areas without the close involvement of coastalvillages. The CBM design is based on the followinglessons gained from similarprograms in the region: (i) habitat managementin the form of reef sanctuaries (no-takezones) is generallymore effectivethan management aimed at specific stocks;(ii) reef management has been most successfulwhere communitieshave been organizedand empowered to manage local reef resources; (iii) reef management systemsneed to be flexible and adaptable, building upon local 2 ecologicalknowledge and traditionalmanagement systems;(iv) external threatsneed to be addressedthrough effectiveenforcement;(v) reef managementhas been most successfulwhen local stakeholdersderive quick and direct economicbenefits fromreef management; and (vi) local support shouldbe established first for a limited set of clear and achievable goals of direct interestto localpeople. 6. It was also realized that the CBM approachcould not be successfulwithout a supportingframework to contain externalthreats. This frameworkneeded to include: (i) , an effectivenational strategyfor coral reef management; (ii) secureuser rights for coastal communities; (iii) effectiveenforcementto protect communities against external threats; (iv) increased awareness among decisionmakers of the threats fzcingthe reefs; and (v) strengthenedmanagement capacity. PROJECT OBJECTIVES AND COMPONENTS 7. The Government of Indonesia (GOI) launchedthe Coral Reef Management Program (COREMAP)in 1998as a 15-yearprogram with the objective"to protect, rehabilitate and achievesustainableuse of coral reefs and associated ecosystems in Indonesiawhich will, in turn, enhancethe welfare of coastalcommunities."Theprogram was divided in threephases: (i) a 3-year"Initiation" Phase designed to test and develop viable CBM systemsin selectedpilot areas; (ii) a 6-year "Acceleration" Phase to build upon and expand CBM systemsto other sites; and (iii) a 6-year"Institutionalization" Phase for ensuringinstitutional(administrative,economic, and financial)sustainabilityof program activities.In support, the Bank/GEF COREMAPproject has been designed as an adaptableprogram loan (APL) in three phases that parallelthose of the GOI'sprogram. COREMAPhas alsobeen fundedby loans from the ADB and grants fiom AusAID. 8. The development objectiveof Phase I of the COREMAPprogramwas "to establisha viable framework for a national coralreef management systemin Indonesia." In support,the specificobjectivesof the Bank/GEF COREMAP I project were to: Strengthenthe nationalpolicy, strategicplanning and legal framework for coral reef management; Strengthenthe institutionalcapacityfor coral reef management sufficientlyto enable expansionof the COREMAPprogram; Design and test pilot CBM in two sites (TakaBone Rate NationalPark in South Sulawesiand Lease Islands in Maluku); Test and evaluatemodels of coral reef monitoring, control and surveillance (MCS) systems at the national level and in target provinces; and Design and launchnational and local public awarenesscampaigns for coral reef management. 3 9. The BanMGEFproject was coordinatedwith parallel projects by other donors:` (a) A national coral reef information,research, and monitoring system and Coral Reef Information and TrainingCenters (fbndedby ADB); (b) National capacitybuilding and training (funded by AusAID); (c) Pilot CBM and enforcementin SenayangIslands, Riau (fundedby ADB), and Kupang Bay, East Nusa Tenggara (fundedby AusAID); and (d) Initial CBM activities in sixprovinces (fundedby GOI). 10. These objectives did not change. However, political turmoil and poor security conditionsled to the termination of initial CBM activitiesin Maluku and Kupang, and their substitutionby new pilot CBM sites in the Padaido Islands in Papua (fundedby the Bank), and Maumere Bay in East Nusa Tenggara (fundedby AusAid). Assessment OUTCOME 11. The outcome of the project is moderatelysatisfactory.While the project's relevance is substantial and its efficiencyis high, it was onlymodestlyeffectivein establishinga viable framework for national coral reef management in Indonesia. The key elementsof a supportivelegal frameworkhave been drafted, but not officially approved and enacted.An institutional capacityfor coralreef management has been established with LPI, but its transfer to the Department of MarineAffairs and Fisheries (DKP), and its extension to the district and communitylevels is still under way and is fraught with risk. The CBM approach and the MCS componenthave been implemented in two pilot sites,but the designneeds to be substantiallyrevised to ensuretheir sustainabilityfor the long term and document its benefits. Relevance 12. The relevance of the project is substantial.Its objectivesare more consistentwith past CAS objectives,which gave higher priorityto sustainableresourcemanagement, than those of the current CAS,which focus on improvingthe climate for investmentand making service deliveryresponsiveto the needs of the poor. Nevertheless,the project's focus on policy and legal reform, strengthenedenforcement, creatingdemand for good governanceat the local level, and close collaborationwith other donorsand NGOs is supportiveof the current CAS. In addition, the project is also consistent with the three broad objectivesof the Bank's Environment Strategy:(i) improvingpeople's qualityof life, (ii) improvingthe prospects for and qualityof growth; and (iii) protectingthe quality 1.These activitiesare mentioned for context only and are not evaluated in the report. 4 of the regional and global environmentalcommons.Finally, the project is consistent with the GEF's Operational Strategy, in particular the OperationalProgram on Marine, Coastal and Freshwater Ecosystems.* Efficacy 13. The efficacy of the project is modest. Following a slow start, remarkableprogress was achieved under difficultcircumstances.A national strategy, and the key elements of the supportive legal framework, havebeen drafted and discussed, but they are yet to be officiallyapproved and enacted.An institutional capacity for implementing the COREMAPprogram has been establishedwith LIPI, but its transferto DKP, who will be responsible for Phase 11,is still underway, and the transition is fraughtwith risk. A lot has been learned from the implementation of the CBM approachin the two pilot sites,but the designneeds to be revised to ensure its sustainabilityin the long term and replicabilityin other sites. The MCS componentwas successfwllyimplementedin the two pilot sites,but much remainsto be done to make it financially sustainable. The followingsections review the efficacy of the project to achieve specificproject objectives. Objective (a): Strengthen the Policy, Strutegy, and Legal Frameworkfor CoralReef Management 14. Theproject supported the objective of strengtheningthe nationalpolicy and strategyframeworkby drafting a National Policy and Strategyfor Coral Reef Managementin Indonesia, and sponsoringa series of national and provincial consultative workshops for its preparation. The draft addresseskey issues and highlightsthe importance of community-basedmanagement. The DKP is reviewingthe document for eventual adoption as nationalpolicy. At this point, it is still awaitingofficial endorsement in the form of a ministerialletterrecommendingthe implementation of the strategyto relevant agencie~.~ 15. The strengtheningof the legal frameworkfor coralreef management was pursued through the preparationof 7 drafts of legislation and 12legal papers. At the national level, the most important were inputs provided to DKP for the draftingof the revised Fisheries Act and the CoastalZone Management and SmallIslands Act, both of which are being discussed with legal experts fi-omrelevant agencies and the State Secretariat (SekretariatNegara) in preparationof their submission to the National Legislature (DewanPenvakilan Rabat).A major focus was the strengtheningof provisions to curb illegal and destructivefishingpractices (such as blasting and poisoning), and the clarificationand coordination(cross-authorization)of enforcementjurisdictions in coastal areas. 2. Talung the diversity of country, sectorand global (GEF) strategies into account,the relevance of the specificobjectives can be rated as follows: (a) strengthenthe nationalpolicy, strategicplanning and legal frameworkfor coralreef management-substantial;(b) strengthenthe institutionalcapacityfor coralreef management-substantial;(c) designand pilot CBM-high; (d)test and evaluatemodels ofMCS -lugh; and (e) designand launchpublic awareness campaigns for coral reef management-substantial. 3. Tlus is one of the output indicatorsfor effectivenessof Phase 11. 5 16. At the district level, the proposed legalreforms focused on the coordination of the enforcement of fisheriesand coastal zone regulations and on securinguser rights for coastalcommunities. Thesereformswere pursued in both pilot areas. 17. In SouthSulawesi,this effort concentratedon the preparation of a district law for the coordination of monitoring, control, and surveillance (MCS) activities for the Taka Bone Rate National Park and surroundingareas in SelayarDistrict.Extensive consultationswere held with all key stakeholders,including local representatives of the Fisheries and Marine Affairs Agency, the National Parks Authority, Police, Navy, district legislature, NGOs, village and subdistrictheads, and representatives of local communities. The end product, a draft district law on "TheUtilizationof the Conservation Area in Taka Bone RateNational Park"has been submittedto the Selayar District Legislature for approval. 18. In Papua, the legal reform effort aimed at the institutionalizationof local rules and customsfor marine resourcemanagement in the traditionalvillages of Padaido Islands and East Biak, in Biak District.After three and a half years of extensiveconsultations with representatives of the local communities and churches, village and sub-district heads, localNGOs, members of the Biak Customary Counciland district legislators, a draft District Law has been prepared and submitted to the Biak District Legislature for approval. 19. Overall, the project made substantialprogress in conceptualizing, drafting, disseminating,and gaining acceptanceforkey elementsof the legal frameworkneeded to support the implementationof a CBM-centeredstrategyfor coral reef management. The fact that the entire set of draft legislation has been produced in a participatorymanner and proceeded to the point of being submitted to the legislativebodies is a major ac~omplishment.~On the other hand, as long as the needed legislationhas not been enacted, there is no assurancethat the key language will be incorporatedin the national laws and the complementarylocal laws will be passed. Theproject's efficacyin pursuing this objectivewas modest. Objective(b):StrengthenInstitutional Capacityfor CoralReef Management 20. The specific objective for Phase I was to develop sufficientinstitutionalcapacity for coralreef managementto enable the expansionof the program in Phase I1at the national and local levels, and its eventualmainstreaming into line agencies. The approach taken was to establisha national Program Management Office (PMO) at the Indonesian National Instituteof Sciences(LIPI) in Jakarta, and provincial and district-levelworking groups (Pokjas)made up of relevant agencyrepresentativescoordinatedby the provincial and districtplanningbureaus (BAPPEDAs),supplementedby staff fi-omlocal NGOs and universities. In 1999, a decisionwas made to transferresponsibilityfor COREMAP Phase I1to the newly createdDKP, but leaveLIPI in chargeofPhase I until its conclusion. 4. The outputindicatoris that the draftlegislationbe completedand submittedto the National Legislature. 6 21. At the national level,by the end of Phase I the PMO included a full-timeDirector, part-timeAssistant Directors to manage the technical teams for monitoring, control, and surveillance(MCS),public communications,the CoralReef Information and Training Centers(CRTICs), and CBM, and part-time staff secondedfrom LIP1and DKP for the technical teams. The extensiverelianceon part-time staff significantlyreduced the ability of managers and staffto maintain control and directionover the technicalaspectsof the project, and encouraged a situationwhere most of the work was done by consultantsand contractorswith little integrationbetween consultantsand PMO technical staff.This resulted in significant delays in project implementation,inadequate integrationbetween different project components, and limited transfer of knowledge from consultantsto national staff. 22. At the local level, COREMAPworking groups (Pokjas)had been establishedin the districtgovernmentswith staff from relevant agenciesand local NGOs involved in the project.By the time of the mission, the two pilot districtsof Selayar (for Taka Bone Rate) and Biak (forPadaido) had activePokjas with a track record of regular meetings, effectiveinter-agency coordination,project management,progressreports, support from the District Chiefs (bupatis)and positive engagementwith the District Legislatures. 23. Another issue relates to the fact that the PMO was organized along thematic lines, with assistant directors and technical teams responsiblefor MCS, CRTICs, CBM, and public communicationsfor the entire COREMAPprogram, without geographical responsibilities.This contributedto inadequate integrationof the program components, with the result that, as found by the mission, there was no coordinationbetween CBM and MCS activities at the two pilot siteswith the socioeconomicand reef health surveys conducted by the CRTICs at the same locations. This result could have been avoidedwith the assignment of managers with geographical responsibilitieswho could have ensured that the different components are effectivelyintegratedat all location^.^ 24. Overall,while Phase I has shown the feasibilityof its organizationalmodel for project implementation,the sustainabilityof this approach as a model for capacity building remains to be demonstrated, giventhe high turnover rate of participating agency staff, at the national and districtlevels, and the fact that most of these effortswere supported by consultants and financedby project funds.Themainstreamingof institutionalcapacity for coral reef management in relevant line agenciesat the national and district levels remains a major issue to be addressed in Phase 11.On this basis, the project's efficacywith this objectiveis rated modest. 5. The assignmentof a "provincial coordinator"was attemptedin SouthSulawesi,but his effectivenesswas hampered by the GOI's institutionalframework at the time, which gave the provincialgovernmentlittle authorityto coordinate across sectoralministries.Followingthe recent decentralizationof the GOI, the authorityofprovincial and districtgovernmentsto coordinatesectoralactivitiesin theirjurisdictions is much greater. 7 Objective (c): Design and Implement Pilot Community-Based Management in Two Sites 25. The CBMProcess: The design and implementationof the CBM approach in two pilot siteswas the central objective of the project. This involved a complex series of steps includingthe development of CBM guidelines,the contracting of a local NGO to implement the approach at each site, and for eachparticipating village: (i) the participatoryformationof community groups and selection of community-based motivators; (ii) theparticipatorydevelopmentof a coral resourcesmanagementplan (CRMP) and proposals for the utilization of village grants (for example, for village infrastructure) and establishment of seed funds; (iii)the approval, implementation, and managementof the CRMPs, and village proposals for infrastructure and seed funds; and (iv) the establishment of baselines and monitoring arrangementsfor coral reefs and socioeconomicdevelopment. Participatingvillages would be eligible for block grants (up to a total of Rp. 150millionper village), with 30 percent payableupon approval of the CRMP, 30 percent upon approval of the village grant utilization proposal, and the remainder upon implementationof the CRMP. 26. By the time of the assessment mission, in September2003, the CBM approach had been nearly fully implemented at the fivevillages in Taka Bone Rate but, due to a delayed start,onlypartly implemented at six villages in Padaido.Each participating villagehad elected three motivators,formed three community groups (for reef conservation,production activities,and women), formulated a CRMP with an identified sanctuary(no-take zone) and community-based"reef watchers" to monitor fishing activitiesin village waters and report on violations of the sanctuaryor illegal activities (blastingand poisoning).In Taka Bone Rate, the villages had also largelyimplemented theirblock grant proposals. In Padaido,they were still at the preparation and review stage and the block grantshad not yet been disbursed. 27. Preliminary Results: Overall, while the project has largelysucceededin designing the CBM approach and implementingit in the two pilot sites, its efficacyis modest, as it is still too earlyto establishif the piloted design is sustainableand will yield the expected benefits in terms of village development and coralreef protection.In Taka Bone Rate, 12 of the block grants were invested in village improvements such as communitymeeting places, clean water reservoirs, and diesel-based electrificationschemes. While these choicesreflect clear villagepriorities, the electrification schemeshave not been designed to adequatetechnical standards,and are not being managed in a financially sustainable way.6They pose shock and fire hazards, and are certain to fail. In hindsight, it is evident that such investmentsshouldnot have passed the technical reviewprocess of the NGOs and PMOS,and that alternativeapproaches,includingsolarphotovoltaichome systems, would have been more appropriate.' 6. E.g., tariffs do not cover operating costs, and there is no provisionfor equipment maintenance, repair and replacement. 7. Some lessons may be learned fromthe experience with similar systems in remote Pacific island countries. See: SolarEnergy: Lessons fromthe Pacific Island Experience,by A. Liebenthal,S. Mathur and H. Wade, World Bank TechnicalPaper 244 -Energy Series,Washmgton, 1994. 8 28. The experiencewith the use of seed funds for the establishmentof community revolvingcredit schemeshas been much more favorable. The fundshave been used by groups and individuals for a variety of purposes, includingthe purchase of nets and other fishingtools, establishment of small shops, seaweedculture,and fish storage and transport.Simplebut soundrecord keeping systemswere establishedin every village, with the individualloans and repayments displayed in village communitycentersto provide transparency and accountability. In most of the villages, aportion of the interest incomehas been set aside as a contribution to support coral reef conservation and monitoringactivities(that is, pay for the reef-watchers).The repayment rate has reached 63 percent, with most of the shortfall due to the failureof three seaweed cultureprojects' (in one village) and lack of realization that that the fundswere to be repaid (in one village). 29. On the conservation side, the mission identified several criticalissues that need to be addressed in the follow-onPhase I1project: Lack of Integration Between Project Activities and Baseline Data: The mission found that there was no correlationbetween the sanctuariesidentified in the village CRMPs and the stations(line intercept transects)used for the reef health statusbaseline surveys. Without coordinationbetween baselineobservation stations, reef sanctuary locations, and control sites, it will not be possible to determinethe impact of the COREMAP, even in the longterm. Incomdete Program Baselines: A review of the baseline socioeconomicand biophysical surveys9indicatesthat they did not includeinformation about the fishingpressurebeing exerted in the waters surroundingthe pilot sites," and about the qualityof the coralreefs as a whole, rather thanjust at specific stations. Without suchbaseline data, the criticalmass of scientificinformation needed to establishwhether COREMAP will be acheving its expectedbenefits over time does not exist. Inadeauate Oualitv Control of Sanctuaries: One of three sanctuaries inspectedby the mission covered an areawhere the coral had alreadybeen destroyed. That is, it had no biodiversityvalue." This again (seepara. 27) points to weaknesses in the 8. Due to poor site selectionand unsuitable cultivationtechniques. 9. Thebaseline socioeconomicandbiophysical surveys were undertakenunder a complementaryproject fundedby the ADB and managedby the COREMAPPMO throughthe establishment of districtand national-levelCoralReef Information and Training Centers, as noted inpara 9. 10.E.g., suchinformationas fish stocks,number of active fishermen;number, sue andtype of fishmg vessels; type size and number of fishmggear used; fish speciessought and caught, and marketprices for differenttypes of fish. 11.E.g., suchinformationas speciesdiversity, speciesdistribution,identificationof habitattypes, and overall quality of the reef. Thereis also the issuethat most of the line intercepttransect stations were located at the reef edge, which tends to be the area richest in biodiversity,but do not constitute a representative sample of the coralreef as a whole. 12.Inprinciple, a degraded siteis not necessarily a bad choice for a sanctuary,as it can serveas a demonstrationsite for how quickly corals and fisheriesrecover following their closure.But given the absenceof baseline data on the sanctuarysuch a rationaleis not supported by the evidence. Rather, in the 9 technical guidanceprovided by the localNGO, and in the technical review process of the PMOS. Overall efficacyof this objectiveis rated as modest. Objective(d): Design and Implement Pilot CoralReef Monitoring, Control, and Surveillance Systems 30. This objective was pursuedby designing and piloting a MCS model that involved: (i) the organization and empowermentof community-based"reef watchers" to patrol the reefs and act as the eyes and ears of the system, and (ii) back up by law enforcement agenciesto capture and prosecutethe violators. The implementationof this approach required coordinationwith the CBM component,which underpinned the community's supportof the reef-watcherprogram, and the relevant enforcement agencies,including DKP, the coastalpolice, the navy,13and the park guards (in the Taka Bone Rate National Park).14For the two pilot sites,these units were provided with equipment,including speedboats,transport vessels,radar, radios, Global Positioning Systems (GPS), and cameras, as well as operationalmanuals, guidelines, and training. At the national level, the MCS componentwas managed from 2000by the DKP's DirectorateGeneral of Surveillance. 31. By the time of the mission, this model appearedto be functioningreasonablywell at the local level, and its efficacyis rated substantial. Of particularnote were the successful arrests, prosecution,andjailing of illegal fishers at both Taka Bone Rate and Padaido,and a reported reductionby MCS of illegalbombing and cyanidefishing.The main issue relates to the financial sustainabilityof this approach,since the district governments only have the budget to keep MCS activitiesgoing at a much reduced scale after the project is completed. There is also a problem with the GO1budget process, which results in no operation and maintenance fundsbeing available at the start of the fiscal year, thus causing the MCS operations to cease for severalmonths every year and reducing the credibilityand effectiveness of the program. The efficacyof this objectiveis rated as substantial. Obejctive (e):Design and Launch a Public Awareness Campaignfor CoralReef Management 32. Theproject financed a public awareness campaign to promote the need for sustainablecoral reef management and encouragethe adoption ofpositive behavior. Its efficacywas substantial.The campaign involved numerous activities, includingtwo live nationaltelevision shows,pamphlets, mobile displays at six national exhibitions, productionof popular songs,radio and TV spots,teacher kits and training, on thejob absenceof technicalguidance, it is quite possible that the communitysimplychose the site so they could benefit fromCOREMAP funds with minimum loss of fishmgrevenue. 13.In general,the coastalpolice havejurisdiction within 4 nautical miles (nm) of the coast, the DKP between 4 and 12nm,and the navy beyond 12nm. 14.The park guardshavejurisdiction w i t h the boundaries of the (Taka Bone Rate) national park. 10 trainingand thesis support for university students, and contests and games for elementary school students.The qualityof the campaignwas recognizedby its receipt of a Golden Quill Award from the International Associationof Business Communicatorsin 2002, and its effectivenesswas documentedby before and after surveysin target areas. The mission was particularlyimpressed by the high level of activities that continued followingthe completionof the consultant contract (in November2002), a good indication of the sustainabilityof the campaign. OED rates efficacy for this objectivehigh. Efficiency 33. The efficiencyof the project is high. Its appraisalwas underpinned with an unusually thorough and detailedeconomic analysis of coral reef degradationin Indonesia," which was updated for the (draft) appraisal of the Phase I1project (see Annex B). The analysis considered the potential net benefits of healthy coral reefs in the form of sustainablefisheries,coastalprotection (erosioncontrol), tourism and recreation, and estimatesthe extent to which these benefits will be affected by ongoing damage trends, includingpoison fishing,blast fishing, coralmining, sediments(from logging and mining activities),and overfishing. The analysis also considered the sensitivityof these benefit estimatesto assumptions about fish yields over time, which will depend on the effective enforcement of CRMPs. On this basis, the region (in its draft ICR) estimates that the economic rate of return (ERR) for the Taka Bone Rate site is 19percent, with a `high'estimateof 49 percent and a `low'one of 1percent. The ERR for the Padaido site is 12percent, with a `high'of 23 percent and a `low'of 1percent. The ERR for the Taka Bone Rate site is comparable to that obtained at appraisal, of 17percent in the `standard' scenario.l6 34. In the view of the assessmentmission, the ERR methodologyis exemplary and represents a model for other biodiversityprojects, for which economicanalyses have been sparse, mainly due to the difficultyof obtaining adequatedata. Faced with this same difficulty, the project team searchedthe literature for applicabledata and identified necessary and defensibleassumptions. While some of the data and assumptions canbe questioned,their strengthsand weaknesses are transparentlydiscussedin the project's appraisal document, and partiallytaken into account for the sensitivityanalyses. Finally, the fact that the ERR is based on `local'benefits, and doesnot includethe `global' benefits of coral biodiversityprotection,for which some estimatesare higherby an order of magnitude," suggeststhat the ERRSare conservative. 35. It is, nevertheless,unfortunate that the baseline surveys and monitoring arrangements for the project have not contributed the informationneeded to update and 15.See Cesar, H. S. J., (1996):EconomicAnalysis oflndonesian CoralReef. WorkingPaper Series"Work in Progress", World Bank, WashingtonDC. 16.The appraisalhas no estimate for the Padaidosite, whch was added later. 17.SeeRuitenbeek, J. (1999):Blue Pricing of Undersea Treasures-Needs and Opportunitiesfor EnvironmentalEconomicsResearch on CoralReef Management in South East Asia. Paper presented to the 12thBiannual Workshop of the EnvironmentalEconomicsProgram for SouthEast Asia, Singap[ore,11-14 May, IDRC, Singapore. 11 validatethe economicrationale for the COREMAPprogram. This points again to the importanceof establishingbaselines of and monitoring information aboutthe fishing pressure being exerted in the waters surroundingthe pilot sites, and about the qualityof the coralreefs as a whole, as discussed in para. 28. INSTITUTIONAL DEVELOPMENT IMPACT 36. The institutional developmentimpact of the project was substantial. Theproject supported the GOI's decision to designate the newly created DKP as the agency responsiblefor the equitable and sustainablemanagement of coral reef resources, where therehad been none before. Theproject also createdthe entire institutionalframework needed to implementthe program, including the national PMO, the districtpokjas, and the village community groups. While there are still areas for improvement, and there is a risk that some of the capacitywill be lost in the transitionfrom LIPI to DlSP, and from Phase I to Phase 11,this architecture is consistent with the institutional decentralization strategyof the GOI, replicable as COREMAPexpands, and adaptableto local customs and circumstances. It constitutes a major achievement. 37. The full impact of the strengthened legal and policy framework for coral reef management is not evaluableat this time, sinceit has not yet been officiallyenacted, and the baseline information is inadequate.For the MCS component, indicationsare that enforcementpressure has increased. In 2003, the MCS program has been successfulin apprehending and prosecuting 10violators in Taka Bone Rate and 9 in Padaido. Other apprehensionshave been made, but turned over to village authoritiesin the belief that the applicationof customary (adat)sanctionswould be more effectivethan ajail term. For the CBM component,there is some evidence that the participatoryCRMPs, village grant proposals and implementation, and revolving fund credit schemeshave strengthened community-based decision-makingprocesses, and involved them in lobbyingfor communityuser rightswith the districtlegislature. 38. The impact of theproject is also reflected in the abandonment of plans for an oil refineryon Selayar, about 50 miles from Taka Bone Rate National Park. When a proposal to establish a 150,000-barrel-per-dayrefinerywas announced in 1999,the Chairman of LIPI, on behalf of the COREMAPprogram, wrote to the President of Indonesiato inform him of the legal requirement for a prior environmental assessment (ANDAL), and of the need to involve COREMAP as a stakeholder.The COREMAPteam invitedthe Bank to comment on the ANDAL, which it found to be seriouslydeficient.Theproject sponsors were then reported to be planning a new ANDAL, to internationalstandards. A year later, the proposed site for the refinerywas moved to anotherpart of Sulawesi. SUSTAIN ABILITY 39. The sustainabilityof the project is not evaluableat this time. Overall, while the economicjustification for COREMAPis robust, not onlybecause of the local benefits but alsobecause of the high global benefits of protecting Indonesia's coralreef diversity, insufficientinformationis available tojudge the resilienceto risk of the other major factorsthat need to be considered. This is not surprising,consideringthat the projectwas 12 onlydesigned to supportthe first (`Initiation')phase of a long-termprogram,but it points to a number of areas where urgent actionis needed to ensurethat benefits of the program will be sustainable. 40. The technicaland environmentalsustainabilityof the project cannotbe evaluated in the absence of adequatebaseline surveysthat are coordinatedwith the impact and control areas of the project,both for the CBM and MCS components, and cover the critical mass of scientificinformationneeded to establishthe benefits of the COREMAP program. Given the long timeframe required for the expected benefits (in terms ofreef health, village incomes, etc.) to materialize, these baselines need to be established as soon as possible. 41. The fiscal and financial sustainabilityof the program cannot be evaluated, since COREMAP'Stransfer to DKP and the district and village governments is still under way. While each of the entitieshas expressed an interest in the continuationof the program and a willingness to sharein its costs, the adequacyof the budgetaryprovisions, particularly for the enforcement support component of the program,has not been established.At the communitylevel, the continued operation of the revolvingcredit schemesappears to be consistentwith local customs and capacities,but the electrification schemes are unviable and need to be replaced with more appropriateapproaches. 42. The socialsupport for COREMAPwas effectively developedat the national level by the public awareness campaign,and in the participatingcommunitiesby the empowermentarising from the recognition of the villages' role and rights in managing their coastalresources, as well as the immediatebenefits of the villageinfrastructure investments and the revolving funds. The sustainabilityof this support will, however, greatlydepend on the continuationof the national campaign,the enactment of the national and local laws recognizingthe communities'role and rights, and the streamof benefits derived from the village grants. Shouldthese declinebecause of lack of political resolve, inadequate budgets, or financialfailure, the communities' support for coral reef conservationwill also be at risk. / 43. Theresilienceof the institutionaland policy supportframeworkfor COREMAP will depend largelyon the final approvaland enactment of the draft legislationprepared by theproject at the national and districtlevels. Without the proposed legal reforms, the bans on blasting, poison and other illegal fishingpractices, and the allocationof unities,will be difficult to enforce,and the communityreef e subject to challengeand retaliation. 13 Quality at Entry 45. Theproject was solidly groundedin an extensivebody of biodiversityassessment and policy papers that grew out the 1992Rio Conferenceon Environment and Development.Both the Indonesia BiodiversityAction Plan (1993) and Indonesia's Agenda 21 (1996) emphasize community-basedmarine resourcesmanagement.The Bank was one of the key agenciesthat launched the 1995GlobalRepresentative System of Marine ProtectedAreas (`PAS) initiative,which identified Indonesia amongthe world- wide priorities for MPA intervention.The Bank'sMarine Markets Transformation Initiativewas also launchedto find solutions for the livereef fish trade, one of the most important threats to Indonesia'sreefs. The 1996EconomicAnalysis ofIndonesian Coral Reefs'8supportedprojectpreparation. Thepreparationof the project was also assistedby the GOI's establishment of an inter-agencypreparationteam in 1995,which commissioned and funded extensive socioeconomicand ecologicalsurveysof priority program sites. 46. The designof the project as an adaptableprogram loan (APL)was appropriate, given the need for flexibilityand learningwhile pursuing a balancebetween conservation and development in a very inadequatepolicy and institutionalsetting. The project design was unusuallycomplex, as it needed to organizeand empowerwidely dispersed and rem-ote island communities in the absence of supportivelegal,policy and institutional frameworks. The appraisalof the technical and economic aspectsof the project was as thorough as could be expected, given the limitationsof the scientificunderstanding of coral reefs, their interactionwith local fisheries, and the nature of destructivethreats. Supervision 47. Flexible and EffectiveResponse to Problems:This was an extraordinarily challengingproject to supervise. Aside from an intricatedesign involvingpolicy reform and institutionalcapacity strengtheningat differentlevels, and community development in two remote and dispersed project sites,the projecthad been launched shortlyafter the 1997financialcrisis in a period of economic and politicalupheaval,and was severely affected by civil conflict,the creation of DKP in 1999,and the 2001 "big bang" decentralizationof the GOI. That the project still managed to deliver on many of its objectivesis largelya tributeto the qualityof supervisionand the government's commitment to the project. 48. Seriousethnic and religiousconflict in Maluku made it impossibleto implement the pilot project in the Lease Islands, and led to its replacementby the Padaido site, which had been under preparation for Phase 11.This site is now progressingwell, followingsome initial delays. 49. The creationof the DKP in 1999led to a crisis for the project, due to the transfer of several of its best staff from the PMO to the new agency. While this was a logical developmentthat would help the program in the long term, the uncertaintiessurrounding the fate and ownershipof the program, and the shortageof staff contributedto serious 18.Cesar (1996)op.cit. 14 delays in project implementation. The lack of progress was vigorously pursued by the supervisionteam, noted in the PSR's with a series of unsatisfactoryproject ratings until the problem was resolved about two years later. 50. Focus on Development Impact: The decentralizationof government functions entailed a major transfer of budgetary, development, and enforcementresponsibilities from the national to the district levels. The supervisionteam took this challenge as an opportunityto shift project ownership and responsibility as much as possibleto the districtlevel, where DKP was also represented. Unfortunately,the financialmanagement aspectsremained centralized with LIPI, which led to extensive delays between community-leveldecisions, district-level reviews, and central-level approvals.This was the most important source of complaints noted by the assessmentmission. This discrepancybetween decentralized decision-makingand centralized approvals is expected to be resolved for the Phase I1project. 51. Even before decentralizationbecame the norm, the risks of excessivetop-down managementhad become apparent in the implementationof the CBM component in Taka Bone Rate, where serious conflictswere observed.Under pressure to meet contractual deadlines,the NGO facilitatorshad attempted to rush decisions with community groups without adequateconsultationwith traditionalvillage decision-makers. This led to allegationsof favoritism and lack of support for CRMPs and village grant proposalsby village and districtauthorities,and required the replacement of the facilitators. 52. Compliancewith Safeauards: Theproject's compliancewith the Bank's safeguardpolicies had been uneventful from the time of appraisal until the 7thsupervision mission, in May 2001,when the mission learned of the resettlement of 12 familiesfiom Latondu Kecil island in Taka Bone Rate, followingits designation as a no-go sanctuary by the National ParksDepartment in 1998.Sincethe resettlement had not been canied out through COREMAP,the supervision team concludedthat the Bank's OD 4.30 on InvoluntaryResettlement had not been violated. Nevertheless, the team followed up with the park manager and the CBM facilitator to ensurethat the GO1had taken the necessary actionsto restore their living conditionsat least to pre-resettlement levels, and to facilitatetheirbenefiting from COREMAP'Scommunitydevelopment aspects. 53. Despite these arrangements, a spot check by the assessment mission found that the resettled familieshad not yet benefited from the CBMprogram, and their living conditionswere below averagefor the host island (LatonduBesar). While the mission concursthat the Bank's involuntaryresettlement policy had not been violated, it also recommends that, sincethe resettlement was a consequence of the type of activitythat COREMAP supports(that is, the creation of coral reef sanctuaries),and it was important to establisha model of good practice for the future,the project needed to ensurethat this reservoirof dissatisfactionwas addressedby ensuringthat the resettled group is involved in and benefits from ongoingCBM activitieson the same island.The supervisionteam is followingup on this recommendation. 15 BORROWER PERFORMANCE 54. Theborrower's performance has been satisfactory,but onlymarginallyso. The GOI, specificallyBAPPENAS, committedin the mid-1990s to a community-basedcoral reef management strategy,and steadfastly supportedthis concept while slowlycreating the policy and institutionalframeworkneeded to implement it. Thepreparationand implementation of the projectwas adequately supportedwith counterpartfunds dwing a period of major economic crisis and rapid political and institutional change.Nevertheless, LIPI's oversight of key areashas been weak. Also, progress in the approval and enactmentof the policy, strategy,and legal framework, for which DKP has been responsible, has been slow,with attendantrisks for the sustainabilityof the program, and donor coordinationwas inadequate. 55. GO1ownership of the project was strong, as demonstratedby its fundingof preparatory surveys, but the implementationarrangementswere risky, sincethey centered on LIPI, a scientificinstitutewith limited fieldpresence and little communityorientation. At appraisal, this was understood to be a temporary arrangement in the presence of an institutional vacuum for coral reef management. Eventually, in 2000, the mandate was given to the DKP. However, since DKP will onlybe responsiblefor the project from Phase 11,the Phase I project is left in a slow and delicatetransitionfrom one agencyto the other, with limited ownership and commitment on both sides. The transitionhas also resulted in losses of institutionallearning and capacity. 56. until 2001,it had only assigned a part-time directorto the PMO, with attendantweak LIPI's ownershipof the project has been less firm,as indicatedby the fact that, leadership and oversight.A more important consequence is that the project failed to deliverin key areaswhere LIPI shouldhave been expected to excel, such as the coordination of baseline surveyswith project impact and controlzones, and the provision of technical guidanceto participatingvillages in regard to seaweed culture and coral reef sanctuaryselection. 57. The full extent of DKP's ownership and commitment to the COREMAP strategy remains to be demonstrated.While somehesitation may be understandablein light of DKP's recent creation and LIPI's responsibilityfor Phase I, the mission has seen little indicationof DKP's effort toward endorsingthe draft National Policy and Strategyfor CoralReef Management, the incorporation of the recommended inputs into the new FisheriesAct and the CoastalZone Management and Small Islands Act, and the assignmentof full-timequalified and enthusiastic staffto COREMAP activities.This is an areawhere timely action would be important to ensurethe sustainabilityof the results of Phase I, and the successof Phase 11. 58. In addition,while COREJMAPwas designed and appraised as an integrated program with componentsfunded by the BanMGEF, ADB, and AusAID, the coordination of the donors in the course of implementationhas been inadequate, even though they were all managed by the same PMO. This is likelyto have been mainly due to the weak leadership indicated above and the fact that the PMO was organized alongthematic lines, with nobody responsible for coordination of all componentsat a specificproject site. As a result, there has been a seriouslack of integrationbetween the CBM and MCS activities 16 fundedby the Bank/GEF, and the baseline surveysof reef and socioeconomicconditions fundedby ADB. LESSONS 59. Themain lessons that emerge from the experience of the project point to the need to proceed with caution with the expansion of the program in Phase I1in order to allow workable and sustainablearrangementsto be established for the implementation of the strategy, the integration of project activitieswith impact data gathering and monitoring, and the provisionof technical guidance for community-baseddecisionmaking. Importance ofAdaptability and Timefor Pilot Projects 60. As the pilot for a three-phase APL, the subjectproject was designedwith ample allowances for flexibilityand learning. Even so, the project required three extensions from its original completion date, and severalkey requirements for the success of COREMAP, such as the internal organization and implementation arrangementswithin DKP, the integration of project activities with data gathering and impactmonitoring, and theprovision of technical guidanceto local communities,remain incomplete and untested. In addition, the sustainabilityof the CBM-centeredstrategyhas not been demonstrated. Thispoints to the need for adaptabilityand cautionin regard to the expansion of the COREMAPprogram in Phase 11,until the viabilityof the approachhas been established. It also points to the advisabilityof extendingthe APL beyond the 15- year horizon envisaged at appraisal. Need to Integrate Project Activities with Impact Data Gatheringand Monitoring 61. A major flaw in project implementationwas the lack of coordinationbetween the CBM and MCS activitiesand the baseline surveysand monitoring provisionscarried out under a complementaryproject fundedby the ADB. Without close integrationbetween baseline surveys,sanctuarycreation, and surveillanceactivities,it will not be possibleto determinethe impact and validate the rationale for the COREMAPstrategy, even in the long term. This unsatisfactory stateof affairs appearsto be largelydue to the PMO's having been managed by a part-timedirectorfor the first three years of the project, and it being organizedalong thematic lines, with assistantdirectors and technicalteams responsiblefor MCS, CRTICs, CBM, and public communications for the entire COREMAPprogram, without geographicalresponsibilities.The ensuing lack of integrationcouldhave been avoidedwith the assignment ofmanagerswith geographical responsibilitiesand the dutyto ensurethat the different components are effectively integratedat all 10cations.'~ 19.Another approachwould be to have criticalparts of the programfundedby pooled funds, which would require close coordinationbetween donors. 17 Need toAssign Full TimeStafffor Project Implementation 62. The PMO's extensivereliance on part-time staff significantlyreduced the ability of managers and staffto maintain controland direction over the technical aspects of the project, and encouraged a situationwhere most of the work was done by consultantsand contractorswith littleintegrationbetween consultantsand PMO technical staff. This contributedto significant delays in project implementation,inadequate integration between different project components and limited transfer of knowledge from consultants to national staff.Many of these problems couldhavebeen avoided with the appointment of full-time staff for the implementation of the project. Need to Provide Technical Guidance to Community-basedDecisions 63. While community empowermentwas a vital element of the COREMAP strategy, it can lead to poor decisions,as indicated by the findings about the qualityof biodiversity in one of the chosen sanctuaries,and investments in unviable electrificationschemes.The failureof the seaweed cultureprojects was particularly unfortunate, given LIPI's expertise in this area. This points to the need to ensurethat community-based decision- making processes be informed by sound technical guidanceto ensurethat mistakes are avoided. FUTURE DIRECTIONS 64. Based on the project's experience,it is possibleto identify additional directions that could enhance the benefits from the COREMAP strategy, and deserveto be considered for Phase I1and futureprojects. Potentialfor Local Fisheries Development 65. The commercial and artisanalfisheries in the project areas appearto be far from being fully and efficientlydeveloped, but the project has done little to examinehow the local communities could extract additional benefits from the fisheryresources around them. While the communities have been given full authorityover village grant and seed funds, their decisionsoften have not been informedby adequateexpertiseon technical and commercial aspects.In light of the ample fisheryresourcesin the project areas, the provision of additional expertise on technical and market issues to aid their sustainable developmentby the local communitieswould seemto be an area worth consideringto enhancethe localbenefits of the program. PotentialforRenewabJeEnergiesDeveJopment 66. Three of the five TakaBone Rate villages where CBM has been fully implemented chose to invest one of their three village grantsin a diesel-basedelectricity supplysystem.Whle this choice reflects village priorities, it was clear to the mission that the electrificationschemeshave not been designed to adequatetechnical standards,and 18 are not being managed in a financially sustainableway.2oThe installations are precarious, unsafe, and certainto fail, and shouldnot have passed the technicalreview process of the NGOs and PMOS.In light of the limited capacity of the villagesto manage and maintain an electrificationscheme,it would appear that simpler, more decentralized approaches, includingsolarphotovoltaic home systems, should also be considered." Potentialfor GreaterEmpowerment of Participating Villages 67. Based on the experience of the project, there seem to be additional opportunities to pursue the COREMAPobjective empoweringthe coastal communities as owners and managers of local reef resources. Thepotentialto transfer fwtherproject responsibilities to the communitylevel, and the need to supplement the village entities' sourcesof revenue present two directionsthat deserveto be pursued. 68. While the project has already engineered a major transfer of budgetary, development, and enforcementresponsibilities from the nationalto the districtlevels,the financial management aspects remains centralized, with extensivedelaysbetween community-level decisions,district-levelreviews, and central-level approvals. Thiswas the most important sourceof complaintsnoted by the mission. The need to address this issue would seem to offerthe opportunityto transfer greater authorityand responsibility for project implementationto the villages. 69. The sustainabilityof village support for the CBM and MCS components of the strategywill require greater attention to enhancing the communities'sourcesof revenue. The development of a user charge system that would enable the villages to collect and retain license fees from fishingboats, divers and tour operatorswould seem to be appropriate.Somesuch user charges already exist,but they are far fromreflectingthe economicvalue of the resource, and the revenues are sentto the central government. 20. E.g., tariffs do not cover operatingcosts, andthere is no provision for equipmentmaintenance, repair andreplacement. 21.Some lessonsmay be learned fromthe experience with similar systemsin remote Pacificisland countries. See: SoIarEnerrzv: Lessons fromthe PacificIsland Experience,by A. Liebenthal, S. Mathur and H. Wade, World Bank TechnicalPaper 244 -Energy Series,Washmgton, 1994. 19 Annex A Annex A. Basic Data Sheet CORALREEFREHABILITATIONAND MANAGEMENTPROJECT (LOAN 43O5-IND) Appraisal Actual or Actual as % of estimate current estimate appraisal estimate Total projectcosts 12.8 14.0 109 Loan amount 6.9 6.9 100 Cofinancing 4.1 4.1 100 Cancellation 0.0 FY99 moo FYOI FYOZ FY03 FY04 Appraisalestimate(US$M) 1.oo 5.00 6.90 6.90 6.90 6.90 Actual (US$M) 0.50 1.23 3.56 4.13 4.44 5.89 Actual as % of appraisal 50 25 52 60 64 85 Date of final disbursement: Revisedclosinadate is 07/31/2004. Original Actual Initiatingmemorandum 0711111995 07/21/1995 Negotiations 0911811996 01/19/1998 Board approval 1211611996 03/03/1998 Signing 0211411997 05/01/1998 Effectiveness 0411511997 06/30/1998 Closingdate 10/31I2001 10131I2003 Staff InDuts (staffweeks)* FY95 FY96 FY97 FY98 FY99 W O O FYOl FY02 FY03 FY04 Total Preappraisal 12.4 25.6 46.5 27.2 111.7 Appraisal 23.5 23.5 Negotiations 6.5 6.5 Supervision 4.0 42.4 41.2 18.6 21.3 17.7 25.5"* 170.7 *Accordingto Bank's accountingsystem, consultantweeks were recordedonly until FiscalYear 1999. Consultantstaffweeks *feeswere alreadyincludedin the inputvalues starting Fiscalyear 2000. **includesestimatesfor ICR mission. 20 Annex A Mission Data Date No. of Staff Specializations Performance (monthlyear) persons days in represented rating field Impl. Progress Dev. Obj. Identification1 04/26/1995 6 15I TTL-NAT.RES.ECON. (I); Preparation ENV. (1); TRAD.MNGT./USER RIGHTSSPC. (1) INST.SPC. 1011211995 6 15 TTL-NAT.RES.ECON. (I); COASTALZONE MGT.SPC. (1); ENV.(I) TRAD.MGT./USER- RIGHTSSPC.(l) 09/06/1996 5 15 TTL-NAT.RES. ECON. (I); VILG.GRANT SPC. (1) ; BIODIVERSITYSPC. (1); COASTALZONE .SPC. (I); MICRO-ENTERPRISE SPC.(I) TTL-NAT.RES.ECON (I); 04/22/1997 4 14 VILG.GRANT.SPC (1);CNTR.PROG. CORD. (1);SR.COORD. ENV.(I) TTL-NAT. RES.ECON.(I); 07/25/1997 9 33 ENV.ECON. (1); VILG.GRANT SPC. (1); COASTAL MGNTSPC(1);ENFOR. SPC.(l);MONITOR. SPC.(l); LAWYER (1); PROC. (1);DlSB. (1) Appraisal 12/19/1997 9 16 TTL-NAT.RES.ECON. (I); ENV.MGNT (1); PROJ.ECON. (1); CONFLICT. RESOLUTIONSPC. (1); ENVSPC. (1);AUDIT &ACCTN. (1); PROC. (1); VILG.GRANT SPC. (1) ; DISB. (1) Supervision 09/07/1998 7 12 SR. ENVIR.SPC. (1); SR. S S NAT. RES. ECO.mL (1); PROJ. MGN SPCIFACILIT.(1); PROJ. ECONOMIST(1); DISB/FINANC/REPORT. (1); PROCUREMENT(1); EXT. AFFAIRSMEDIA (1) 03/05/1999 5 12 TTL-NAT. RES. ECONO. (I); CO-TTL-ENVIRON. S S SPC. (1); SURVEILLANCESPC. (1); FINANCIAL SPECIALIST(1); PUBLIC AWARENESS SPC. (1) 21 Annex A Date No. of Staff Specializations Performance (monthlyear) persons days in represented rating field Impl. ProgressDev. Obj. 10/13/1999 5 12 CO-ML COASTAL MNG SPC. (I); CO-ML S S ENVIRON.SPC. (1); SURVEILLANCESPC. (1); AWARENESS SPC. (1); FINANCIALMNG SPC. (1) 03/07/2000 10 CO-TTL(COASTALMNG) (I); CO-TTL (ENV. MNG) U U (1); MCS SPECIALIST(1); POLICY+STRATEGY SPEC. (1); FINANCIAL (PART-TIME)(1); AWARENESS (PART- TIME) (1) 08/11/2000 9 CO-TTL (COASTAL MGMT; CO-TTL (ENV. S S MGMT); MCS SPECIALIST Midterm Rev. 11/07/2000 16 CO-TTL (COASTAL MGMT; CO-TTL(ENV. S S MGMT); FIN. MGMT; PROJECTMGMT. 05/10/2001 15 CO-TTL (ENV. MGMT.); MCS SPECIALIST S S 11/16/2001 34 TASK TEAM LEADER (ENV); CO-TASK TEAM S S LEADER(RES. ECON); FINANCIAL MANAGEMENT(1); MCS EXPERT(1) 02/28/2002 18 TTL ( LEAD ENV. SPECIALIST);CO-TTL S S (ECONOMIST);SR. BIODIVERSITYSPEC. ;MCS SPEC. 10/07/2002 12 TTULEAD ENV. SPECIALIST(1); S S ECONOMIST(1); MCS SPEC. (1) 10/03/2003 15 TASK TEAM LEADER(1); COMMUNITY-BASED S MGMT. (1); S Completion DECENTRALIZATION(1); FISHERIES/CBM(1); INSTITUTIONS(1); MCS (11 23 Annex B Annex B: EconomicAnalysis of COREMAP Programzz Coral reefs form the core of the livelihood for hundreds of thousands of Indonesian subsistence fishers, and a sourceof food securityin times of agriculturalhardship. They also provide a naturalbarrier against wave erosion,therebyprotectingcoastaldwellings, agricultural land, and tourism beaches. They are a potential source of foreign exchange from divers and other marine tourists. In addition, because of their uniquebiodiversity, they are of great interest to scientists,students,pharmaceuticalcompanies, and others. These and many InstitutepapeP estimated the potential sustainableannual economicnet benefits of healthy other functions give coral reefs an important and growingvalue. A recent World Resources reefs in SoutheastAsia. The results per squarekilometer of reef are given in Table B-1. Table B-1: Potential Sustainable Annual Economic Net Benefits per km2 of Healthy Coral Reef in Southeast Asia RESOURCE USE POTENTIAL ANNUAL NET (DIRECTAND INDIRECT) PRoDUCT1oN RANGE BENEFITS (US$) (RANGE) Sustainablefisheries (localconsumDtion) 10-30 t $12.000 -36.000 Sustainablefisheries (livefish export) 0.5 - 1t $2,500 - 5,000 Coastal protection(erosion prevention) $5,500 - 110,000 Tourism and recreation 100- 1000 persons $700 - 111,000 Aesthetidbiodiversity value (WTP) 600 -2000 persons $2,400 - 8,000 Total (fisheries & coastal protectiononly) $20,000- 151,000 Total (includingtourism potential) $23,100 -270,000 Source: Reefsat Risk inSoutheastAsia (Burkeet ai. 2002) Yet, despite their high potential values, the qualityof coral reefs in Indonesiais declining rapidly. Even remote reefs in unpopulated areas are not free from man-induced deterioration. At the moment, only 29 percent of Indonesianreefs are in good condition (that is, with more than 50percent live coral cover). In most areas, a variety of human-inducedthreats are responsiblefor the degradationofreefs. The relative importanceand the type of threatsvary tremendouslyby location.Powerful economic forces are drivingthe observeddestructive patterns of coral reef use, often rendering short-term economicprofits, sometimesvery large, to selected individuals. Measures for coral reef protection are often presumed to conflictwith economic development, and are said to require a sacrificeof economic growth. However, this perception stemsmainly from a failure to recognizethe magnitude of costs to the present and 22. This analysishas been preparedby Herman Cesar as Annex 12of the PAD for the COREMAPPhase I1 project. 23. Burke, L., E. Selig and M. Spalding.2002. Reefs at risk in SoutheastAsia. World ResourcesInstitute.72 PP. 24 Annex B future economy resulting from reef degradation. Table B-2 adapted from Cesaret al. (1997) shows the benefits to individuals and losses to societyfromeach squarekilometer of coral reef destruction,providing an economicrationale for preventive or remedial efforts.For coastalprotection and tourism losses,both "high" and "low" scenario estimates are presented,depending on the types of coastalconstruction and tourism potential. "High" cost scenariosare indicativeof siteswith high tourism potential and coastal protection value. "Low" cost scenariosare indicative of siteswith low tourism and coastalprotectionvalue. Some of the most importantvalues of coralreefs, such as those to future generations and intrinsicvalues, cannotbe quantified.However, sincethe economicbenefits from reef destructionoften are used tojustify continuation of these destructivepractices, quantifying the costs associatedwith coral reef degradation is important to make a balanced assessment of the benefits and costs of various threats. The analysisis mainlybased on observabledata, such as the value of the decline of fish catch or expendituresby hotels on infrastructure to temporarilyprevent beach erosion. Totalcosts should thus be interpreted as rough estimatesof the lowerrange of true costs associated with reef destruction.Thenumbers in Table B-1are generated on the basis of availabledata, using hypotheticalexamples of sites subject to one individualthreat. Table B-2: Total Net Benefits and Losses due to Threats of Coral Reefs in SE Asia (Net Present Valuez4in US$ 000 per km2) Fishery Coastal Sustainable Others (e.g. Threats protec- tourism biodiveristy) Poison Fishing Blast Fishing Coral Mining Sediment (logging) Overfishing Source: Adapted from Threatened Resource,"AMBO 26, f(1997): 345-358. Notes: -- n.q. = not quantified. The datapresented above are for SoutheastAsia (TableB-1) and for Indonesia (TableB-2) as a whole. For theprogram, a cost-benefit analysis(CBA)was carried out for the 6 target districts.The advantage of an analysis at a district level isthe actual use of real site data, rather than having to rely on countryaverages. 24. TheNet Present Value (NPV)provides a summary of the value of the resource, by aggregating annual benefits over a 20 year time period,but gives greater weight to the near futureby using a "discountrate``of 10% per year, whch means the currentbenefits of a future good is reduced by 10%for each year into the future. 25 Annex B The CBA at the districtlevel capturesthe three main quantifiablebenefits: fisheries,other local products derived from coralreefs and recreationhourism.Program benefits are carried forward 25 years, which is the evaluationtime horizon for the analysis. Below, the main assumptionsbehind the three main quantifiablebenefits are presented and data are given for each of these benefits for each of the districts.Data on the category"other local products" were not collected locally, but instead come from benefit transfers from R~itenbeek.'~ Main benefits are expected to come from the fisheries sector:the closure of reef areas is expectedto stabilizeyields compared to the "withoutprogram" scenariowhere yields are expectedto graduallydecline over time (seeFigure B-1). The graph gives both a central case as well as a more optimisticand a more pessimistic case, to mimic the uncertaintiesregarding the benefits of no-take zones. 140 1 120 100 80 60 40 20 8 i! 0 1 r + I # I , , I , I I , I I , I , z I I I , I I I I \ 3 6 2 9 \\ \3 $J 4 ,9 %3 $6 years &without` -w- w ith' centralestimate - -+-with' highestimate -c-with'lowestimate - Figure B-1:Fisheries benefits assumedin economic analysis The central estimate (FigureB-1) is in line with the recent literatureon the economics of no- take zones, as summarizedin Roberts et al. (2001). Village grants and associated alternative income generatingactivitiesare assumed to ensure that fishingpressure in the areas outside the no-take zones is not increasing with the closureof specific areas. We have conservativelyhypothesized that in the "central" estimate,the current yields will be maintained over time, after an initial drop due to the introduction of no-take zones. In the "without"program scenario,the fisheriesbenefits are supposedto decline graduallyover time to 50 percent of current levels.Due to lack of reef fisheries yield data, these data were calculatedbased on total reef area per district, local reef quality and assumed yields per level of reef quality.The latter ranged from 1to 4. Levels were obtainedper kecamatan based on expertjudgment by consultantteam members. It was assumed that a low level of 1 25. Ruitenbeek(2002) is basicallyRuitenbeek`sannexto the ADB COREMAPProject.There is no official quotationfor it. 26 Annex B correspondedwith a catch of 5 mt/km2/yr,while a levels 2, 3, and 4 correspondedwith catches of 15,25,and 35 mt/km2/yr,respectively. This was partly based on the literature26 and on expertjudgment from the fisheries consultant in the team. TableB-3: Cost and BenefitEstimates for the 6 programDistricts Pangkep Selayar Buton RajaAmpat Biak Sikka DistrictProgramcostsa 7.5 7.9 13.3 8.5 9.0 7.6 FisheriesValue (2003) 2.4 8.1 7.3 17.2 3.6 0.8 Local Products(2003) 1.5 4.4 5.6 5.2 1.7 0.5 TourismValue (2003) 0.1 0.4 I.6 0.2 0.1 0.2 ReefArea (km2) 374 1098 1402 1300 424 128 Reef quality index 1.8 2.0 1.6 3.2 2.3 1.7 Number of fishers 35,000 18,100 60,700 10,700 unknown 4,300 aexcludingdistrict Coral Reef Informationand TrainingCenters. Tourism levels were estimated for each of the districts.Tourism was assumed to increase at 5 percent per year in the "central" estimatebased on the enhanced attraction of the area due to the marineparks and marinetourism parks in the districts.Benefit transfer was used to estimate"other local products" (Ruitenbeek,COREMAP-ADB,2002). In order to arrive at actual value-added figuresper year from tourism and fisheries, it was assumed that the averageprice of fish is 2750 Rp./kg and that value added in local fisheries is 80percent of gross value (Cesar, 1996).For tourism, current expenditureson hotels and divinghorkeling trips were collectedfor the six districts.Additionally, 50percent was added for "other" expendituresof these tourists duringtheir stay. It was assumed that net value of tourism is 40 percent of gross value. For fisheries and tourism, a multiplier effect of 2 (i.e., 100percent) was assumed, given the largeunderemployment situationin each of the sites. Theresults are summarized in Table B-3. The COREMAPprogram involvesnearly 5,000 squarekilometersof some of the most pristine reefs in Indonesia. Hence, apart fkom quantifiablebenefits,there are a host of other benefits, such as globalbiodiversity.Thesehave not been used in the estimates.However, an estimate by Ruitenbeek puts this level at US$ 8.5 thousand per hectare, far more than the use values given in Table B-3 above. The detailed BCA results for the base case are given in TableB.4for the case of Buton. This indicatesthe annualbenefit and cost streams associatedwith the program for the caseof Buton. The resultingNPV at a 10percent discountrate is US$ 15.6million while the economic internalrate of return (ERR) is estimatedat 18percent in the base case. Other districtshave similarpatterns of annual costs and benefits. Philippines".Galaxea, Vol. 7, pp. 161-178. 26. McAllister, D. E., (1988) "Environmental,Economic and SocialCosts of Coral Reef Destructionin the 27 Annex B Table B-4: SummaryTable of Economic Analysis for Buton District (millionUS$) year: 1 2 3 4 5 6 7 8 9 1 0 2 5 N P V (10%) Quantifiable benefits 'with' Fisheries 7.3 6.5 5.7 5.9 6.1 6.3 6.6 6.8 7.0 7.3 7.3 61.2 Local Products 5.6 5.0 4.4 4.6 4.7 4.9 5.1 5.3 5.4 5.6 5.6 47.3 Tourism 1.6 1.6 1.7 1.8 1.9 2.0 2.1 2.2 2.3 2.4 5.0 21.4 Net benefitsAIG* 0.0 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 1.8 Total quantifiable benefits 14 13 12 12 13 13 14 14 15 15 18 132 Quantifiable benefits 'without' Fisheries 7.3 7.0 6.8 6.6 6.4 6.2 5.9 5.7 5.5 5.3 3.6 51.9 Local Products 5.6 5.4 5.3 5.1 4.9 4.8 4.6 4.4 4.3 4.1 2.8 40.1 Tourism 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 14.2 Totalquantifiablebenefits 14 14 14 13 13 13 12 12 11 11 8 106 Incrementalbenefits (25 yrs.) 0 - 1 -2 -1 0 1 2 3 4 5 1 0 2 6 InterventionCosts (COREMAPPhase 11) Buton COREMAP Phase11Costs 3.4 2.0 2.0 2.0 2.0 2.0 0.0 0.0 0.0 0.0 0.0 9.9 Net Benefits -3.2 -2.8 -3.7 -2.8 -1.9 -1.1 1.8 2.7 3.6 4.5 10.1 15.6 ElRR 18% *AIG are Alternative IncomeGenerating Activities. The results from the cost-benefit analysisfor the other districtsis given in Table B-5. As is clear from the table, quantifiableeconomicinternalrates of return range from 6 percent in Sikkato 21 percent in Raja Ampat. The differencescan largelybe explained from the relative size and health of the reefs in the different districts.As the benefits vary much more than the costs of addressing the problems,program management of the relatively smaller, less intact reefs has a much lowerrate of return than larger,more pristine areas. Table B-5:Economic Rates of Return for the 6 ProgramDistricts ('central' estimate) Pangkep Selayar Buton RajaAmpat Biak Sikka ElRR 'central' (%) 19 18 21 12 6 The estimatesare rather sensitiveto the assumptions, especiallythose related to trends in fish yields over time. If the no-take zones are less effective,for example,because of illegal fishingin these areas, the rates of return drop significantly.This also highlightsthe importanceof credibleenforcement of the no-take zone regulations. See also the sensitivity analysisdiscussed below. ProgramBeneficiaries:Over 100,000fishersin the area are involvedin reef-related fishing. These fisherswill directlybenefit from the activitiesunder the program. There incomes will 28 Annex B be stabilized compared to the "without program" case where these would decreasewith 50 percent or more over the coming25 years. Financial AnalysisResults:Under program preparation, no separatefinancialanalysiswas carried out. However,under the ADB part of COREMAP Phase 11,a detailed financialanalysis was carried out and a financial internalrate of rate (FIRR) of 16.7percent was calculated for the alternativeincome generatingactivities among others. SensitivityAnalysis: The estimatesare necessarily rather sensitiveto the assumptions, especiallythose related to trends in fish yields over time. If the no-take zones are less effective (for example, because of illegal fishingin these areas), the rates of return drop significantly. This also highlightsthe importance of credible enforcement of the no-take zone regulations. This is shown in TableB.6. Table B.6: Economic Rates of Return for the 6 Program Districts ('central' estimate and sensitivity) Pangkep Selayar Buton RajaAmpat Biak Sikka ElRR 'central' (%) 11 19 18 21 12 6 ElRR high (%) 22 40 37 49 23 14 ElRR low (%) Undefined 1 3 Undefined 1 Undefined