Document of The World Bank

Report No: 30234

IMPLEMENTATION COMPLETION REPORT(IDA-29400 IDA-29401 PPFI-P9360)

ON

CREDITS

IN THE AMOUNT OF US$ 42.3 MILLION

TO THE

HONDURAS

FOR A

RURAL LAND MANAGEMENT PROJECT

October 14, 2004

Environmenmentally and Socially Sustainable Sector Management Unit (LCSES)Central America Country Management Unit (LCC2C)Latin America and the Caribbean Region (LCR)

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

(Exchange Rate Effective January 31, 2004)

Currency Unit = Lempira 17.81 = US$ 1US$ 1 = SDR 0.670

FISCAL YEARJannuary 1 December 31

ABBREVIATIONS AND ACRONYMSAFE-COHDEFOR State Forestry Administration-Honduran Forestry Development CorporationAML Agricultural Modernization LawCAS Country Assistance StrategyCIEF Center for Forestry Information and StatisticsCMAT Land Administration Modernization ComponentDICTA Directorate of Agricultural Science and Technology GEF Global Environmental FacilityGIS Geographic Information SystemGOH Government of HondurasGPS Geographic Positioning SystemDAPVS Protected Areas and Wildlife Department (AFE-COHDEFOR)DICTA Directorate for Agricultural Science and Technology TransferFHIS Honduran Fund for Social InvestmentFONAC National Convergence FundFONADERS National Fund for Rural DevelopmentFPL Fund for Upland ProducersIDA International Development AssociationINA National Agrarian Institute MOF Ministry of FinanceMTR Mid Term ReportNGO Non Governmental OrganizationsPAAR Rural Land Management ProjectPAD Project Appraisal DocumentPATH Land Administration Project PCU Project Coordination UnitPROBAP GEF Honduran Biodiversity ProjectPRSP Poverty Reduction Strategy PaperPST Private Service ProviderPSR Project Status ReportPBPR Forestry and Rural Productivity ProjectRRNN Natural Resource Management Component SAG Secretariat of Agriculture and LivestockSAR Staff Appraisal ReportSINAP National Property Administration SystemSINAPH National System of Protected Areas of HondurasSINREC Integrated System of Registration and CadastreSINIT National System of Territorial InformationSURE Unified Registries System

Vice President: David de Ferranti

Country Director Jane ArmitageSector Director John Redwood

Task Team Leader/Task Manager: James Smyle

HONDURASRural Land Management Project

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 35. Major Factors Affecting Implementation and Outcome 106. Sustainability 127. Bank and Borrower Performance 138. Lessons Learned 159. Partner Comments 1610. Additional Information 18Annex 1. Key Performance Indicators/Log Frame Matrix 19Annex 2. Project Costs and Financing 21Annex 3. Economic Costs and Benefits 24Annex 4. Bank Inputs 32Annex 5. Ratings for Achievement of Objectives/Outputs of Components 35Annex 6. Ratings of Bank and Borrower Performance 36Annex 7. List of Supporting Documents 37

Project ID: P007398 Project Name: Rural Land Management ProjectTeam Leader: James W. Smyle TL Unit: LCSERICR Type: Core ICR Report Date: October 14, 2004

1. Project DataName: Rural Land Management Project L/C/TF Number: IDA-29400; IDA-29401;

PPFI-P9360Country/Department: HONDURAS Region: Latin America and the

Caribbean Region

Sector/subsector: General agriculture, fishing and forestry sector (86%); General public administration sector (14%)

Theme: Land management (P); Rural policies and institutions (P); Other environment and natural resources management (S); Other rural development (S); Biodiversity (S)

KEY DATES Original Revised/ActualPCD: 05/30/1995 Effective: 09/08/1997 12/22/1997

Appraisal: 12/12/1996 MTR: 12/30/2001 07/09/2000Approval: 03/20/1997 Closing: 01/31/2003 01/31/2004

Borrower/Implementing Agency: GOVERNMENT OF HONDURAS/SECRETARIAT OF AGRICULTURE AND LIVESTOCK

Other Partners: State Forestry Administration - Honduran Forestry Development Cooperation (AFE-COHDEFOR), Direction of Science and Technology for Agriculture (DICTA)

STAFF Current At AppraisalVice President: David de Ferranti Shahid Javed BurkiCountry Director: Jane Armitage Donna Dowsett-CoiroloSector Director: John Redwood Michael BaxterTeam Leader at ICR: James W. Smyle Augusta MolnarICR Primary Author: Takayuki Hagiwara (FAO/CP);

Ricardo Uberti (FAO/CP); Suzanne Raswant (FAO/CP)

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: SU

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S S

Project at Risk at Any Time: Yes

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The objective of the project was to improve management of natural resources and to increase productivity of the agriculture and forestry sectors in rural areas while at the same time reinforcing environmental protection. Specifically, the project was designed to: (a) modernize the system of rural land registration, laying a foundation for more effective land titling; (b) strengthen the forest administration of AFE-COHDEFOR in its new normative role and promote participation of local populations in managing their natural resources; (c) improve agriculture and forestry practices in upland farms in order to stabilize income and thereby decrease forest encroachment; and (d) rationalize the national protected areas system, putting representative areas of the nation’s ecosystem under management for their conservation.

The project objective attempted to address the following key problems: (a) limited access of poor upland farmers and forest producers in marginal areas to improved technology and extension; (b) the county’s antiquated system of registering and titling forest and agricultural land and its lack of a parcel-based record system; (c) conflicting claims to land title between small-scale farmers, agrarian reform enterprises, indigenous groups and farmers engaged in community forestry; (d) the weak institutional capacity of INA, DEC, AFE-COHDEFOR and DICTA for management and conservation of forest and land resources; and (e) the lack of systematic land use planning.

The objectives were in line with the priorities of the Government of Honduras (GOH) and the Bank’s country assistance strategy (CAS), as well as with the sector assistance strategy, all of which regarded as primary priorities poverty alleviation, public sector modernization and sustainable environmental and natural resource management. The project also addressed some of Honduras’ most important development problems: rural poverty, land tenure, deforestation and destruction of bio-diversity. In addition, this project tried to consolidate the Agricultural Modernization Law (AML) of 1992, which was supported by both the IDA (Agricultural Sector Adjustment Credit: AGSAC; CR. 2540-HO) and the IDB, and to maintain the momentum of the restructuring processes by providing investment resources, by fostering greater integration of social and environmental concerns into forest and upland management, as well as by improving technical soundness through consideration of lessons learned from earlier experiences.

3.2 Revised Objective:The project objective was appropriate and was not revised during the project implementation. It is noted, however, that the annex to the project Staff Appraisal Report (SAR) containing the project’s Performance Monitoring Indicators (Annex G) stated the project objectives in terms slightly different than those in the main SAR text, although the substance was not changed. The objectives as phrased in Annex G of the SAR were as follows: (i) strengthen the technical and administrative capacity of AFE-CODEFOR at the central, regional, and local levels in order to plan, execute and supervise forestry management (corresponding to (b) of the original objective); (ii) bring significant areas of national forest under sustainable management and increase outputs and environmental functions of the forest resource base (corresponding to (b) of the original objective); (iii) strengthen the protected areas system in Honduras with improved infrastructure, self-financing mechanisms, clear demarcation of area boundaries and improved training for staff (corresponding to (d) of the original objective); (iv) channel technical assistance and research funds to upland producers and NGOs as well as to producer or community organizations with experience in innovative technology transfer programs (corresponding to (c) of the original objective); and (v) pilot and evaluate a viable system for land administration based on an integrated parcel-based legal and physical information base (folio real legal) (corresponding to (a) of the original objective).

3.3 Original Components:The project included the following two components: (i) Land Administration Modernization (CMAT); and (ii) Natural Resources Management (RRNN). Under the CMAT, two sub-components were designed: (a) Phase 1 (pilot); and (b) Phase 2 (expansion). The RRNN included three sub-components: (a) Forest Management; (b) Fund for Upland Producers; and (c) Biodiversity Conservation.

- 2 -

The Project Coordination Unit (PCU) was created as subordinate to the Secretariat of Agriculture and Livestock (SAG); the PCU held the overall management responsibility of the project. The PCU was established as an autonomous agency in order to facilitate channeling of resources and to allow it to operate free of government administrative regulations and salary constraints. This was done in consideration of the lessons learned from the Bank’s previous projects in the country. AFE- COHDEFOR was assigned as the main counterpart institution for forest management, which was one of the main activities of the RRNN. It is important to note that AFE-COHDEFOR was under restructuring directed by the AML and the project aimed to support the restructuring process and to reinforce its institutional capacity.

3.4 Revised Components:The project’s two main components were maintained as foreseen in the SAR. A few months after Hurricane Mitch, in support of the country’s emergency reconstruction efforts, US$4.1 million of the credit was reallocated to an “Emergency Infrastructure” component that was to design and supervise investments in the Sula Valley, located in the Department of Cortés. The activities included in the amendment were to reconstruct levees in northern Honduras’ highly populated flood plains, thus preventing flood damage during the next rainy season. Also, in response to the disaster caused by Hurricane Mitch, a stronger emphasis was placed on developing forest management activities with municipalities for community groups in order to generate temporary employment and enhance community commitment to resource protection. Emergency food supplies were provided in order to meet short-term food shortages and seeds distributed to upland producers in order to avoid subsequent food crises. A total of US$8.3 million of incremental expenditures were incurred as the direct result of the changes introduced into the Project in order to respond to the disaster left by Hurricane Mitch and to redo cadastral surveys and work on the geodesic grid, and to retake aerial photography in Mitch-affected areas. Because of these incremental expenditures, in July of 2001 a supplemental credit of US$8.3 million was approved by IDA in order to ensure that Mitch-incurred expenses would not result in a financial shortfall and prejudice the project’s ability to achieve its’ original development objectives.

3.5 Quality at Entry:Overall quality at entry is rated satisfactory. The project objective was consistent with the GOH’s development plan and the Bank’s CAS in Honduras. Project design incorporated valuable experiences and lessons learned form other Bank-financed projects and previous experiences in LAC region. The SAR and the appraisal team explicitly acknowledged the complexity of the project, as well as paying a great deal of attention to institutional arrangements. However, less consideration was given to the technical appraisal and pre-existing data for the CMAT. This was partly due to lack of local-technical expertise of the preparation team who had dealt with the Honduran registry and cadastral systems, and had experience in advanced infor- mation systems such as GPS and GIS. The appraisal team could not precisely predict the accuracy of the existing data and unit costs; this led to an over-ambitious physical target for this component.

An initial assessment team from the World Bank’s Quality Assistance Group found the “Quality at Entry” of the project to be satisfactory

1. Peer reviewers and Bank decision-makers endorsed the project design and objectives,

which were consistent with the CAS. The team also found that the project addressed Honduras’ most important development problems and made use of the Bank’s comparative advantage in the development business through its technical and policy analysis capacity. However, the assessment team stated that the project was risky, and the risk was not fully exposed in the appraisal report (after receiving this assessment, the SAR explicitly analyzed the risks and identified three major risks: (a) complexity; (b) Government commitment; and (c) institutional capacity. It recommended that the Bank be ready to put significant supervision resources into this project, to be prepared for the inevitable problems that were bound to emerge at the various stages in the development of the project and to accept implementation delays. Furthermore, it recommended that a precise supervision plan and better defined monitoring indicators, which would facilitate possible decisions about project (or component) re-design or exit, were absolutely necessary and would be critical factors for the project. Despite the foreseen risks, the view of the assessment team was that the Bank should take on the risks and support the project.

4. Achievement of Objective and Outputs

- 3 -

4.1 Outcome/achievement of objective:The project is rated as “satisfactory”, though it is noted that Government has rated the project as “highly satisfactory”.

Despite serious delays due to Hurricane Mitch, the project activities were successfully implemented and their outcomes were highly positive for the country. The project had a very positive impact on sector policies and institutions, as well on the technical capacity of its target population.

In pursuit of its objectives, the project adopted an innovative pilot approach that required flexible and demand-driven management. The project was noteworthy for its focus on quality rather than on simply quantitative targets. Its emphasis was on learning by doing and by examining different methodologies. As a result of its innovative and flexible approach, the project was able to provide important development platforms for the next decade of the development of the country in land administration and natural resource management. At the completion of the project, two new IDA projects, based on the PAAR’s main components - Land Administration Project (PATH, Project ID: P055991), and Forests and Rural Productivity Project (PBPR, Project ID: P064914) were created.

4.2 Outputs by components:4.2.1 Land Administration Modernization Component (CMAT)The CMAT had a substantial development impact on land administration and became one of the most important development instruments of the country. Among the main achievements, this component was successful in: (i) creating a web-based folio-real, the Unified Registries System (SURE), which is currently regarded as an international best practice

2; (ii) making possible the passage of two new laws: the Property Law and the Territorial

Management Law; (iii) providing normative guidelines for the national cadastre and registry; (iv) establishing effective methods for the regularization of land tenure (the methodology includes the capture of field information, juridical investigation, conflict resolution and titling); (v) supporting the creation of the Integrated System of Registration and Cadastre (SINREC), which is composed of the Presidency and the Supreme Court, and is chaired by the head of National Convergence Fund (FONA) with the PAAR’s PCU as the technical secretariat; (vi) demonstrating the importance of creating an integrated national property agency: Instituto de Propiedad (Property Institute); (vii) ensuring government’s full commitment to this project objective by highlighting it as a high priority in the PRSP and the 2002 – 2007 Government Plan; (viii) supporting decentralization of land administration and strengthening municipalities by providing training and the new computerized system; and (ix) establishing a mechanism of tenure security for the poor. During the last CAS discussion, the GOH explicitly requested IDA to create a project using the results of this component as a high priority item. PATH was established as a result of the success of this component.

In addition, this component was successful in demarcating and titling some 27,500 ha of indigenous lands to 13 communities of Tolupanes. It has been commended as a best-case example in participatory demarcation in a recent IDA review (Indigenous Peoples Development Plans - Thematic Review. 2002. LCR QAT). The CMAT also demonstrated its effectiveness in natural resource management through implementation of the modernized system of rural land registration in forest cadastres for five public forest management blocks and through support to demarcation, delimitation, tenure diagnostics, and preliminary development of conservation easements when a public roads program found that it was planning improvements to a road running through the last known habitat of an endangered hummingbird, found only in Honduras (the “Colibri Esmeralda”).

A total 47,574 ha of land in the Department of Comayagua is now registered in the new computerized parcel-based property registry system (folio real), with 145,000 parcels. This system is innovative in providing an instrument for land-conflict management. The project was also successful in demarcating municipal, as well as urban and rural boundaries (institutional jurisdiction: municipalities for urban area and INA for rural area). The Ministry of Governance and Justice have certified 96% of the boundaries of the Department of Comayagua. Comayagua is the first department that has received certification by the ministry and has reached agreement on resolution of boundary disputes among the 21 municipalities.

- 4 -

The GOH considers the technically competent PCU to be the leader in the sectors of property rights, land tenure and regional planning. The PCU actively participated in the elaboration of the drafts of the Territorial Management Law, the General Water Law, and the Forestry Law. In addition, CMAT has developed the National System of Territorial Information (SINIT), as an instrument for the support of territorial planning and management, in which eight institutions of the government have participated.

4.2.2 Natural Resources Management Component (RRNN)Although the RRNN also faced some delays after hurricane Mitch, this component progressed steadily at a satisfactory level and completed most of the physical targets identified in the SAR. The main beneficiaries of this component were AFE-COHDEFOR, municipalities and communities of upland farmers. The project had good success in increasing technical effectiveness of public forest management through the introduction of lower cost and more efficient and effective means of public pine forest management that outsourced forest management planning to private firms and forest management activities to communities and local groups, by supporting the decentralization of management processes, and by increasing transparency and civil society participation in the development and execution of public forest management plans. The project also initiated approaches for strengthening the participation of local populations in direct management of the public forestlands in which they reside. Due to the complexities of forestland tenure, the as-yet-limited institutional capacity to promote and facilitate community forestry and the limited market opportunities (among others), the development of community forestry as a fully viable option will require more time and concerted effort. Having developed new approaches for involvement of municipalities and local populations in the forest management planning process, the project in its last year began to apply these approaches increasingly in land use, development and forestry in order to promote greater community participation. The results with respect to changing the land-use pattern among farmers and upland communities are mixed. Here as well, more time and effort will be required in order to bring about significant improvements in land-use among the targeted poor. These aspects are taken into account in the follow on Forests and Rural Productivity Project (PBPR).

4.2.2.1 Natural Forest Management Sub-ComponentThere were two main objectives of this sub-component: one was to reinforce the technical and administrative capacity of AFE-COHDEFOR at the central, regional, and local levels in order to plan, execute and supervise forestry management of eleven forest management blocks (unidad de gestión forestal); and the second, to support AFE-COHDEHOR’s overall program of decentralization and increase transparency and community participation in forest management. On completion, the project had created nine forest master plans for nine forest management blocks that cover a total of 560,073 ha of public forestland. Currently, seven of the plans are under implementation and 295,000m

3 of logs were sold through public auctions.

The project also contributed to constructing and/or rehabilitating three regional offices and eleven field offices for AFE-COHDEFOR; providing vehicles and geographic information systems as well. In addition, the project carried out forty-one training sessions for AFE-COHDEFOR field technicians and 270 public workshops. The major focus of public involvement was the prevention of forest fires. The project was successful in reducing forest-fire incidents (in the Department of Yoro: from 385 cases in 1997 to 63 in 2001) by raising public concern and designing contracts with municipalities in order to prevent forest fires, as well as developing effective methods of forest fire prevention. Fire control proved to be effective in protecting natural regeneration of tree seedlings and at the same time, in increasing a stand’s volume with shorter intervals of cutting cycles. Furthermore, by employing a selective logging silvicultural method that aimed to maintain seed trees for the natural regeneration period, the project promoted appropriate stand density control which has increased tree growth and reduced cutting cycles. This has all been made possible by having master plans that contain a stand’s stock assessments and that encourage plan-based management. Unfortunately, many of these successes remain to be institutionalized and the capacity created within AFE-COHDEFOR to continue to systematically apply these. This is due, among others to the problems described in Section 5.2 and to the as yet-pending institutional and legal reforms required in the sector in order to provide a basis for a functional state forest agency.

The project has contributed to the still on-going restructuring processes of AFE-COHDEFOR. The institutional strengthening activities created new learning, approaches and a framework that is serving as a basis for many of

- 5 -

the significant AFE-COHDEFOR reforms being undertaken by the current government. The project also supported public consultations with forest sector stakeholders on both forest policy and in the development and revision of the new Forestry Law currently in the Congress for approval.

The project faced great challenges in developing approaches to incorporate the rural poor living in, but without legal access to, public forests. At the outset, the boundaries of the public forestlands were unknown and it required a significant amount of time and resources to delimit public forest lands and to develop and implement the socio-economic diagnostics and surveys necessary to identify the households dwelling in and using public forest- lands and to understand their uses and livelihood systems that depended on access to those lands. Efforts to incorporate local populations into forest management were thus primarily pilots and learning activities that took the form of outsourcing of forest management activities to community groups to generate employment (e.g., establish- ment and maintenance of fire lines, forest road maintenance), pilot incorporation of forest dwelling households into forest management plans, structured learning subprojects (through the Fund For Upland Producers) for community forestry and titling of forest lands to indigenous communities (Tolupanes). Through the project itself significant changes in overall participation of the poor in natural forest management did not occur, however, a strong experiential base was developed that GOH plans on replicating and expanding upon as part of the implementation of the Poverty Reduction Strategy (PRS). The PRS identifies forestry as a priority sector and proposes to apply the approaches to regularization of forestland tenure, community forestry and public forest management developed through the PAAR.

It is questionable if AFE-COHDEFOR’s Center For Forest Information and Statistics will be able to continue to update the data that became available with the project, since the cost to maintain such data is relatively high and work was a yet ongoing to transfer the know-how to maintain the data to the institution. Thus, actions taken in the last year of the project to link the forest information systems into the national land information system framework and to jointly manage and maintain the information base with the National Forestry School were important steps toward sustaining the project gains.

The strong focus on community forestry and the institutional sustainability of the forest information system, among others, are welcome elements in the follow on Forests and Rural Productivity Project and reflect the lessons learned.

4.2.2.2 Fund for Upland ProducersUpon completion, the project covered a total of 9,814 families in the three Departments. This significantly exceeds the target of 6,500 families specified by the SAR. The importance of this achievement can be seen not only in the quantitative outputs, but also in the extension mechanism that the project developed and employed. The project was successful in establishing an outsourcing extension mechanism whereby the government could contract with private extension service providers in order to execute agricultural extension programs for poor upland farmers in public forestlands. The main objective of this outsourcing extension mechanism was to promote effective, efficient and transparent implementation of extension services for farmers with whom the GOH had not traditionally worked as GOH’s economic priority had been to provide services to those farmers with most potential, i.e., those who had agricultural lands in the plains.

These private service providers were mostly local NGOs and private companies. The project selected companies directly through interview and review of the competing entities. After the selection, the project had the providers sign contracts. The project then provided training to extension workers who were employed by the providers. A total of 111 training courses were held and 2,598 (2,195 male and 403 female) participants were trained by the project.

The most important aspect was the system of evaluation. The project was successful in creating an innovative evaluation system whereby the project was able to monitor the results of extension activities and to feed back the project and farmers’ evaluations to the providers. When the providers failed to meet the required outputs, the providers were responsible for completing the requirements. This ensured that target farmers received standardized services from the providers and in so doing, increased farmers’ confidence in the project.

- 6 -

Many providers had little experience in other than agricultural extension in more favorable lowland environments as well as very limited experience in community development and organization. This required the project to focus a significant amount of its training resources on orientation and transfer of basic knowledge to the providers’ field extensionists. Also, the more difficult working conditions found in the project’s target communities (remoteness, difficulty of access, lack of facilities, etc.) and lack of financial compensation for these led often to problems with too-frequent turnover of extension workers and lack of continuity in the provision of extension services by the same extension workers. In addition, through its workshops and training in target communities, the project tended to focus more on technical and gender aspects than on broader community development and organization, which were outside the narrower objectives being pursued of developing, validating and implementing a mechanism to finance the private provision of technical assistance, training and extension services to households of rural poor below the subsistence level and lacking household food security. Given the successful establishment of the mechanism through the PAAR, the follow on PBPR project is expected to now strengthen the focus on organization and community-based participatory planning in pursuit of broader impacts on overall community development.

4.2.2.3 Biodiversity ConservationMost of the activities foreseen by this sub-component of biodiversity conservation were completed and their performance has been rated satisfactory. The primary objective of this sub-component was to strengthen existing SINAPH areas. This sub-component was also designed to complement the GEF Honduran Biodiversity Project (PROBAP). The main target was to increase the management and execution capacity of the Protected Areas and Wildlife Department (DAPVS) of AFE-COHDEFOR. The project reinforced 13 units of eight protected areas within three Departments of Francisco Morazán, Yoro and Olancho.

The project with the PROBAP produced an ecosystem map that covers the whole country using the UNESCO classification. This was done in order to reinforce the SINAPH and in order to restructure the national protected areas system through the re-grouping of 107 protected areas. In addition, 14 information centers with office space and dormitories for park rangers, as well as fourteen park trails were constructed or rehabilitated. Five manage- ment plans that cover 124,281 ha were prepared. The project was also successful in demarcating eight protected areas for a total of 251,171 ha. In order to strengthen the personnel capacity of DAPVS, 21 training courses, as well as 16 seminars and field visits for staff were conducted. Forty workshops were held in order to increase public awareness; 1,975 persons participated. Local park management committees were established, involving local stakeholders, in order to enhance civil society participation in the management and conservation of the protected areas. The project also contributed substantially to the conceptualization, design and national dialogue on establishing a Fund for Protected Areas to cover the operational costs of basic protected areas management by non-government entities. This latter has borne fruit with GOH currently committed to passing the enabling legislation for the fund and making an initial deposit of US$3.5 million.

Together with PROBAP, the project successfully contributed to the discussion on the direction of protected areas and biodiversity conservation under the new Forestry Law currently in the Congress for approval.

Four eco-tourism attractions planned in the SAR were not constructed although plans were prepared. The aim of the attractions was to contribute to the sustainability of the SINAPH by establishing self-financing mechanisms. In order to reinforce the SINAPH and to increase management capacity, GOH and the project considered it more important to construct the aforementioned information centers rather than the eco-tourism attractions. A particularly critical area where project impact was minimal was in the strengthening the Department of Protected Areas and Wildlife (DAPVS). During the life of the project, the minimal political and institutional commitment and support for the strengthening of the protected areas institutional framework ultimately made efforts to do so largely unsuccessful.

4.3 Net Present Value/Economic rate of return:The PAAR was a pilot project that intended to lay the groundwork for future expansion of investments in land administration, forest management and public provision of extension services to the rural poor. A principal outcome of the PAAR experience was the formulation of two subsequent project approved and under implementation: (i) Land Administration Program (PATH) and Forest and Rural Productivity Project (PBPR). The relatively high expected returns to from these two projects – a 44% ERR for the PATH and up to 25% for

- 7 -

community forestry in the PBPRs – are due in large measure to the groundbreaking work and institutional building carried out by the PAAR.

The results from the PAAR project are generating a number of important economic benefits, including increase in land value due to enhanced tenure security and increased productivity in natural resources use (agricultural and forestry), however the full benefits will only materialize over the next decade. The project also contributed to the strengthening the institutional capacity at the central and local levels in land administration, the agriculture and natural resource sectors and for promotion of biodiversity conservation, which are pre-requisites for the successful implementation of the new projects and Governments continued reforms in land and forestry. The economic analyses of the project carried out by the Borrower and by the Bank for the formulation of the two follow-on projects for land administration (PATH) and forestry/agriculture (PBPR) indicate that the project was a good investment for Honduras. Cost/benefit analyses shows that the project has positive economic impacts. This assessment confirms the project SAR conclusion that: “50 percent of project investment funds going to directly productive investment would produce measurable economic returns necessary to justify almost 75 percent of the total proposed project costs” (see Annex 3).

The Borrower’s economic and financial analysis was used, in part in the discussion of the Natural Resources Management Component. This was agreed with the Borrower beforehand and was reviewed by them afterward, and found to be satisfactory.

Land Administration Modernization Component (CMAT). The main economic benefit is estimated from the increased property value due to regularization considered as a summary indicator of the capitalized value of three major benefits associated with land regularization: improved investment and environmental conservation incentives, marketability, and ability to use land as collateral for loans. Estimates of the direct economic benefits were derived in two steps. First, the Project’s regularization activities resulted in about 72,000 urban housing properties and 77,000 rural properties (total 149,000 properties) being registered. Second, to use a more updated value of the incremental value associated with regularization of tenure, the values estimated during the appraisal of PATH were used. These estimates refer to the whole incremental value of land regularization which will be accomplished in the coming years; for the economic analysis of PAAR a conservative estimate of only half of the estimated incremental of the value of smaller properties was considered. The incremental value is expected to be obtained over a period of 15 years after 2005. Costs of the CMAT and 40% of the cost of UCP are imputed to the land component. The stream of benefits and costs are discounted to calculate the net present value (10% discount rate) and internal rate of return. Under these considerations, the NPV of the component is estimated at US$ 2,362,000 and the ERR at around 13%.

Natural Resources Management Component. Benefit cost analysis of the productive and natural resource management activities was estimated by the l

Borrower to be 1.7. This figure was calculated based on the actual project costs and the estimated project impacts on forest and agricultural production.A detailed analysis of forest management suggested strongly that the model of institutional support and l

development proposed is viable. Under very conservative assumptions the ERR was estimated to be above 50% with potential changes due to project investment leading to a doubling of the value of national land and timber. At full development, up to 18,000 full time jobs are expected to be created through implementing forest management plans in the almost 600,000 ha of pine forests brought under management through the PAAR. The results of forest management activities were also evaluated individually (see Annex 3). The following l

activities showed very positive benefit-cost ratios; i) tenure and usufruct (determining the location and legal situation of national forests); ii) forest planning; iii) forest inventory; iv) promotion and consultation; v) forest management; vi) fire prevention and suppression; and vii) forest research (including the support for the development of the new forest law).The Fund For Hillside Producers (FPL) had a positive internal rate of return (IRR). IRRs for crop production l

ranged from 25% in Olancho to 35% in Yoro. The net benefits for forestry and livestock activities did not apparently generate positive economic returns over the life of the project. For livestock, few project farmers maintained livestock and the income from these did not justify the expense. As a pilot, the FPL provided

- 8 -

important lessons regarding best practices to obtain positive impacts, these include: micro-irrigation, agroforestry (forestry combined with crop production through inter- planting and other technologies), natural forest management for (pine) timber and non-timber products, marketing and commercialization linkages, and, where possible, value-added production. Based on the experience of the FPL, the analysis shows that for an improved menu of subprojects (agroforestry, improved marketing, etc.) the returns are high. For individual agro-forestry models, returns ranged from 34% to 41%. Given these (and based on assumptions of differing mixes of activities) the ERR for the component is at minimum 20%.

4.4 Financial rate of return:Land Administration Modernization Component (CMAT). One of the main financial benefits from the PAAR was to reduce transaction costs and generate future, consequent savings to the economy from increased efficiency of service delivery. Because they are intangible, these benefits are not amenable to benefit-cost analysis. While they can only be measured against an unlikely counterfactual scenario, they are substantial. The PAAR-developed methods form the basis for GOH’s future investments in land administration so the PAAR’s land regularization costs can reasonably be used as an indicator of future regularization costs. The PAAR-generated cost savings in tenure regularization in the urban context are approximately US$409 per property and in the rural context US$ 24.70 per hectare. The total expected cost savings during the next four years from the IDA-financed PATH project alone (which targets about 30% of the country’s real estate property) are on the order of US$ 186 million, against total costs of about US$25 million.

Fund For Hillside Producers. The FPL generated significant improvements to family income through introducing improved practices to traditional production systems. Analysis of the FPL, reported in the Borrower’s draft Implementation Completion Report, estimated that on average households participating in the FPL increased their incomes by 57%, from $670 per year to $1,050 per year. Analysis of the FPL carried out during the preparation of the PBPR found:

That with reasonable market price expectations (good incomes) and a good adoption rate, the benefit/cost ratio l

was 1.4 (NPV = $1,435/family) and with modest adoption rates the benefit/cost ratio was 1.3 (NPV=$1,098). That for farmers moving from a traditional corn and beans production system to the improved production l

system, returns to labor almost tripled (from L35 per day to L99 per day).The vulnerability of households to market price reductions is demonstrated by the worst case scenario where l

adoption rates are modest and income is reduced by 10% (modest income). Under this scenario, the benefit/cost ratio drops below one. The returns from the typical agroforestry models were estimated to range from 34% to 41% with benefit/cost l

ratios from 1.8 to 2.0 and NPVs averaging more than $2,650. Forestry activities such as community usufruct contracts in national forests for small-scale logging, firewood, and resin tapping also showed positive results, though profitability was strongly influenced by transport costs and any usufruct fees or administration charges that might be levied by the State Forest Agency. Under appropriate conditions, returns of over 100% with benefit/cost ratios exceeding 1.25 and NPVs averaging $3,700 per participating household are expected.

Thus overall, the project generated positive returns in all components and served to prepare new projects with high projected ERRs due to the pilot work done under PAAR.

4.5 Institutional development impact:The role of the project in bringing about institutional changes was substantial. The project supported the restructuring processes, such as the streamlining of AFE-COHDEFOR (from more than 1,000 staff to under 350 within five years). It supported the development of plans for forest management, as well as necessary infrastructure and essential equipment such as cars and computers. This compensated for the serious reduction in personnel and helped to increase the efficiency of the institution. While these contributions to AFE-COHDEFOR were significant, unfortunately the institution itself had a very uneven performance during the project, severely limiting the possibility of the project to institutionalize its impacts.

The project was successful in supporting dialogues and in providing relevant information and data for the elaboration of new laws such as the Property Law, the General Water Law and the Territorial Management Law. The project also laid the groundwork for the new Forestry Law that is currently under consideration in the

- 9 -

Congress. As a result of the CMAT, GOH passed a new law establishing the Property Institution. SURE, the web-based cadastre and registry system was established at both central and municipal levels of the GOH and training provided for those who would be using the system in their daily work.

The outsourcing method for extension was new to Honduras and its impact was mixed. It is clear that it contributed to development of a private sector extension capacity in upland areas. This mechanism also supported the restructuring processes of the SAG without reducing support for the poor in remote mountain areas where the government extension services rarely reached. The project’s training courses for extension workers from these providers as well as the transparent evaluation system also ensured capacity-building and better management among the extension service providers. The promotion of the appropriate technologies in upland agricultural landscape allowed participating farmers to initiate producer groups. It has also developed and provided to GOH a successful model that currently is being utilized as the basis for development of the Secretariat of Agriculture and Livestock’s new program for providing of extension services to small producers. However, once the financing was terminated, these institutions, including private sector providers and producer groups, faced difficulties in continuing activities that the project had promoted. In order to ensure sustainability, the follow-on PBPR project will continue to provide services, and is establishing the links to other sources of funds and supporting the institutionalization of the approach in order to ensure longer-term sustainability beyond the PBPR project period.

The current PCU under PATH and PBPR is now considered to be the leading technical unit in the sector of property rights, land tenure, regional planning and natural resource management. Among others, the PCU has established a multisectoral GIS system which is be used by many ministries and projects to support decision making and it directly assists the Cabinet by providing information for national planning and policies. The PATH and PBPR projects, which rely upon the continuation of the PCU, are also supporting its incorporation into the regular public administration so that its capacity in project administration and expertise in multisectoral planning and coordination (upon which there is heavy reliance by other government institutions) may be sustained.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:The destruction caused by hurricane Mitch was profound; the country is still recuperating from the damage. It is estimated that about 5,660 people died. The project lost information, data and equipment. In addition, unexpected resource re-allocation was carried out for some emergency relief activities including emergency infrastructure activities in the Sula Valley. Field-surveys had to be rescheduled and postponed for several months after the hurricane. The project had trained about 70 field staff for the CMAT, but the contract to hire these trainees took several months to finalize because of necessity of rescheduling work plans. This delay of the contract caused serious damage to the component: many trainees had to look for other jobs and the project had to train new field staff.

The activities of the RRNN subsequent to the hurricane were also restructured to devolve responsibility for a wide range of activities to municipalities and producer groups. On the one hand, those activities contributed to the generation of employment and created additional support for communities and the municipal government for the post-Mitch reconstruction. On the other, however, it took months to restructure the component’s implementation.

In addition, the reforms to the registry law as well as institutional arrangements for conversion to a new registry model of folio real were not carried out when planned since the Government and Congress were occupied in post-Mitch recovery activities. These were, however carried out later in the project and now form the basis for the PATH project whose objectives include the consolidation of the institutionality for the folio real. New demands were placed on the CMAT team to address increased conflict due to post-Mitch pressures on forested areas and agricultural frontier areas in the PAAR sites.

5.2 Factors generally subject to government control:During the one-year period from late 1998 to late 1999, the project’s efforts in the forest sector were derailed when a downward spiral in the public forestry institution performance began as a result of mismanagement. Information

- 10 -

and evidence collected by AFE-COHDEFOR's Executive Board and the Ministries of Agriculture and Finance, and the conclusions that were drawn from them at that time amply supported this contention. Beyond the allegations of mismanagement, there were much more serious contentions of growing and increasingly bold, institutionalized corruption and illegality. These led to, among others, USAID retiring all support from AFE-COHDEFOR in May 1999. Following significant pressure and widespread consensus on the need for GOH to act, joint action was taken by the Executive, SAG, Ministry of Finance and AFE-COHDEFOR’s Board to replace individuals implicated in the agency’s problems. A semblance of reasonable governance was restored in AFE-COHDEFOR, but it was another year before the damage was overcome and the project could fully re-engage with AFE-COHEDEFOR. The Bank played a key role in the ultimate resolution of the problems, through the project team’s close monitoring of the situation and engagement with and assistance to the actions by GOH (through SAG and the Finance Ministry) attempting to halt these problems and by Bank management that directly raised the issues to the Executive as overall governance concerns and tied their resolution to future Bank support for certain critical assistance to the country.

The only other difficulties encountered were in providing timely counterpart funding and the delay of the approval of the project by the Congress.

In the early years of the project, slow disbursement of Bank resources, due to complicated internal administrative procedures, caused delay of some activities. Streamlining the procedures in the GOH and reinforcing the administrative capacity at the PCU resolved this. A recent Bank evaluation of the local capacity for project procurement was rated satisfactory and the Bank acknowledged local capacity to carry out the two new projects at the PCU.

5.3 Factors generally subject to implementing agency control:The director of the PCU was replaced once after the governmental administrative change in 2001, but this change did not cause major turnover of the personnel of the project staff at the PCU. The low turnover of personnel in the PCU ensured continuity in administration and field operation. The clear focus of the new administration of the CMAT redirected the component and the number of staff was increased under the administration.

5.4 Costs and financing:The total project cost was US$41.8 million at appraisal, including IDA (US$34.0 million), GOH (US$6.4 million) and beneficiary (US$1.4 million) financing. This was increased by US$9.6 million (IDA US$8.3 million, GOH US$1.3 million) through a supplemental credit dated 22 November 2001. The supplemental credit was made necessary following Hurricane Mitch and the series of resulting emergency expenditures financed by the project as well as additional costs suffered due to the loss of equipment and the need to redo substantial parts of the rural cadastre in Comayagua because of changes in landforms and loss of surveying monuments.

During the life of the project, formal re-allocation between expenditure categories was affected a total of 4 times. In great measure this reflects the pilot and learning nature of the project, which required flexibility in re-allocating costs as circumstances changed, sometimes drastically (e.g., as a result of Hurricane Mitch).

Total expenditures amounted to US$44.8 million. The differences between the appraisal estimates and the final total were primarily attributable to a series of factors: (i) depreciation of the SDR at negotiation, the original credit of SDR 23.5 million was valued at US$34.0 million whereas its actual value became US$30.9 million thus also reducing counterpart obligations; (ii) GOH counterpart obligations were formally reduced following Hurricane Mitch in recognition of the fiscal crisis created by the rebuilding efforts; (iii) the beneficiary contribution, estimated at appraisal to be US$1.4 million and consisting primarily of in-kind labor contributions, were not accounted for in the final overall project cost.

The actual expenditures approximated the initial budget. The expenditures in the CMAT reached US$ 15.1 million (World Bank: US$ 13.9 million) at the end of the project from the initial budget of US$ 11.8 million. The RRNN amounted to US$20.5 million (World Bank: US$ 18.2 million) at the end of the project compared with the initial budget US$ 23.1 million. The PCU expenditure was US$4.8 million (Word Bank: US$ 3.4 million) compared with a budget of US$4.1 million. Emergency expenditures for the rehabilitation of works in the Valle de

- 11 -

Sula after Hurricane Mitch absorbed US$ 4.4 of actual expenditures. The total World Bank credit financed US$40.0 million of expenditures (89% of total financing), while the GOH contribution was about 60% of the initial estimate (for the reasons detailed above).

6. Sustainability

6.1 Rationale for sustainability rating:The overall sustainability of the project is rated as likely for several reasons indicated below. It is important to note that from the outset the project was seen as the first phase of a two-phase program. The two new IDA projects Land Administration Project (PATH, Project ID: P055991) and Forests and Rural Productivity Project (PBPR, Project ID: P064914) are designed to consolidate and build upon the PAAR. This is crucial as otherwise the difficulties faced by the project with respect to promoting broad participation of local populations in managing their natural resources would cast doubt on the sustainability of some elements. For example, if the FPL were to terminate at this time, rather than being further strengthened through the new PBPR project and integrated into SAG’s overall programs, the outsourcing mechanism that the fund created would also cease. The strategy for the long term sustainability resides in the institutionalization of the instruments and approaches developed through the PAAR and, in the case of the FPL in linking to existing programs (e.g., FONADERS, FHIS) and SAG’s replicating the model programmatically through it’s other multi-lateral and bi-laterally financed projects. The project’s strong focus on the development of the service provider mechanism and technology transfer was needed in order to successfully develop the approach. The next generation strengthening efforts, through the PBPR, are required in order to emphasize community organization and development, marketing aspects, and participatory natural resource management in order to favor sustainability.

Government’s commitment to land administration. The GOH is fully committed to the program and currently implementing PATH financed by IDA. The GOH included land administration in the PRSP, the recent CAS and the 2002-2007 Government Development Plan. In May 2002, the executive and judicial branches of the GOH signed an agreement to integrate the cadastre that is administered by the executive branch of government and the real estate registry that is managed by the judicial branch. This agreement created the Integrated System of Registration and Cadastre (SINREC). The SINREC is composed of the Presidency and the Supreme Court, and is chaired by the head of National Convergence Fund (FONAC) with the PAAR’s PCU as the technical secretariat

3.

The web-based technological platform, SURE, has become the de facto standard in the operation of cadastre, registry and regularization in Honduras. In addition, the project was successful in providing the Congress with sufficient grounds for ratification of the aforementioned new laws and the establishment of the Property Institute. These legal frameworks serve as the foundation for sound land administration. Furthermore, the SURE is designed to link with local municipalities and other governmental institutions where actual land titling processes are taking place. These services are supposed to generate income for these authorities. PATH is to consolidate the results of PAAR.

Government’s commitment to natural resource management. The GOH is also committed to bringing about sustainability in natural resource management in rural areas. The GOH decided to include natural resource management in the PRSP, the recent CAS and aforementioned Development Plan. The results of the project guaranteed GOH’s interest in development of the follow on project; PBPR financed by IDA. In addition, the GOH ratified the General Water Law and is currently preparing the new Forestry Law to reflect solid and recognized achievements of the project. In the new forestry law, the GOH plans to expand forest co-management and usufruct mechanisms with communities in order to improve the living standards of the rural poor while increasing forest protection. The project also established a mechanism for resolving forest tenure conflicts through the regularization of the traditional rights of forest populations by demarcating the limits of land tenure boundaries. Much of the progress today in GOH’s strategy and policy for rural lands, public forestry and provision of extension services to the rural poor in public forest lands has been due to the PAAR project’s contributions. Among others, the project’s assistance in areas of policy and legal reform while demonstrating practical solutions to such complex issues as regularization of lands, management of public forestlands, and privatization of extension services has increased GOH commitment by raising awareness of the issues and showing how to respond to them.

Strengthened AFE-COHDEFOR. Concrete steps have been taken to date by the GOH for forestry sector

- 12 -

reform reinforced by the restructured AFE-COHDEFOR. Currently, the GOH has a plan to use a Poverty Reduction Strategy Credit (P074758, under preparation) as a vehicle for finalizing the reforms sought. As the result of the project, the central and regional offices of AFE-COHDEFOR in the Departments of Francisco Morazán, Yoro and Olancho are now well equipped with forestry master plans, operation plans and biodiversity conservation plans, as well as renovated infrastructure and modernized equipment for carrying out ground operations. Progress has been made in the decentralization of decision making to the municipal level and provision of support for assuming these responsibilities. AFE-COHDEFOR is implementing auctions for national forests according to these plans. (Before starting the project, indiscriminate harvesting was taking place in order to provide remuneration for the institution’s staff.) At the same time, the forest fire controls employed by the project proved to be effective and have reduced forest fire incidents. These activities, including plan-based forest management, are expected to contribute income to the national treasury. These advances, however, have yet to be adequately institutionalized in the public forest agency due to inadequate performance of AFE-COHDEFOR. The roots of the performance problems have lain primarily in the over-dimensioning of the agencies role, recurrent problems with corruption and lack of transparency and a historical lack of political will on the part of government to address these problems. The current GOH administration has embarked on a profound reform of the legal and institutional framework, with support from the PAAR and utilizing the lessons learned through the project. The PBPR will assist to continue on this path of reform.

6.2 Transition arrangement to regular operations:The pilot nature of the project has been confirmed in so far as experience gained as a result of its activities has been used in the formulation of two new projects. The PCU remains the focal point of these new projects. The role of these projects is to consolidate the results and lessons learned from PAAR. Installation of SURE in public entities and massive training courses for the users of SURE are planned in PATH. Consolidation of community participation and organization, as well as incorporation of local stakeholders into public forest management processes, is programmed in PBPR.

Forestry master plans and operation plans, as well as biodiversity conservation plans have been submitted to AFE-COHDEFOR and are being implemented. Auctions for timber harvesting are generating income for AFE-COHDEFOR. So far 295,000m3 of timber has been harvested4

under the plans. As personnel in AFE-COHDEFOR has been reduced, the current volume of timber is estimated to be roughly equivalent to the costs of maintaining the institution.

The above developments are proper steps in the direction of sound transitional arrangements, especially with the PATH and PBPR’s particular attention to the issues of: (a) integrating the independent PCU into the regular structure of the administration, as there is considerable reliance on this unit for generating plans, development mechanisms, data and information that contribute to policy dialogues, as well as developing and maintaining the information platforms; and (b) the severe fiscal constraints that could result in shortfalls in provision of counterpart funding, suggesting a risk that GOH may not be able to maintain the level of services initiated with the projects.

7. Bank and Borrower Performance

Bank7.1 Lending:The overall Bank performance in identification, preparation assistance and appraisal has been rated satisfactory. The project was consistent with the GOH and Bank development priorities and strategies, as well as Bank’s CAS. The Bank’s inputs in terms of staff and skill-mix were considered as adequate during the preparation and implementation of the project, but there were some shortfalls in technical design. As a pilot, some design elements for the more complex aspects of the project were overly theoretical, particularly as far as the design for the CMAT that was very ambitious and lacked a strong and successful technical model that it could emulate. The quality assessment team carefully analyzed the project design and gave thoughtful advice to the appraisal team. The team also urged the importance of careful design and implementation of monitoring. The SAR included indicators (see the SAR annex G), but these indicators were not properly designed and created some confusion during implementation. The lack of proper economic and financial analysis in the SAR also created some difficulties in measuring impact in economic terms. During implementation, the project encountered several difficulties that the

- 13 -

quality assessment team had foreseen and predicted. The initial technical design for the CMAT and the eventual discovery of serious errors in the already existing cadastral and registry data were a critical factor in serious delays and sharp increase in the workload of the component. The delay of this component also affected other activities that relied on the results of the CMAT. These problems were greatly overcome in the last two years of the project, but required some scaling back of the original targets. The design for the self-financing mechanism for the Biodiversity Conservation sub-component was also over ambitious. The project could not carry out the construction of eco-tourism attractions, partly because of land tenure problems that resulted in GOH’s inability to provide the lands for the facilities and, instead, gave priority to the construction of Park information centers.

The adoption of a flexible and innovative approach demonstrated its effectiveness in mitigating the complexity of the institutional arrangement and technical difficulties of the project. However, some risks could have been avoided. During preparation, the Bank, together with the GOH, should have analyzed existing data in more detail as well as the system of registry and cadastre of the Department of Comayagua.

This project was risky. However, as a pilot (especially in an IDA country) this was to be expected. Ultimately, it turned out to be one of the best examples of good land administration. Learning from some difficult experiences encountered during this project, the Bank has been able to design the successor projects better and lay out key indicators that can be seen in the Project Appraisal Document of PATH.

7.2 Supervision:Overall Bank supervision is rated satisfactory. All annual reports exhibit the progress of the project quantitatively. However, qualitative figures were not consistent with the monitoring indicators of the SAR; this was especially observed in the CMAT. This was partly because of the constant changes of the CMAT due to testing and adaptation of different technologies and methodologies that made establishment of effective monitoring indicators and methods difficult.

Supervision missions were composed of a broad mix of international and local professionals. The core supervision team was maintained throughout the project, notwithstanding the fact that task team leader was changed in the year 2002. A total 17 supervision missions including the mid-term evaluation were carried out. In addition, the Bank assisted the PCU in conducting a series of workshops early in the year 2000 (after encountering serious delays due to hurricane Mitch) in order to revise the work program and the technical aspects of the CMAT. The workshop resulted in clarification of strategies, goals, and changes in the technology and monitoring indicators. It was acknowledged as a turning point in the CMAT. Supervision reports realistically reflected the project’s performance, especially the difficulties of the CMAT component and the restructuring processes of AFE-COHDEFOR. The MTR did not result in restructuring of the project’s objective and components. However, the project strategy and work programs for the CMAT were well analyzed and its decision to complete the registry and cadastre in the Department of Comayagua created favorable conditions for the project to refine its sophisticated web-based information infrastructure.

It was wise to introduce assessments during implementation: independent organizations such as universities were used. These taught much about how the results of such a “pilot project” could best be implemented in future projects.

The Bank’s flexible decision to support emergency relief activities after the hurricane and to amend the credit agreement was well considered: these continue to contribute to the project’s success and to stabilize communities that suffered from the disaster.

7.3 Overall Bank performance:Overall Bank performance is rated satisfactory.

Borrower7.4 Preparation:The project preparation by the borrower was rated satisfactory. The borrower committed adequate resources to the preparation efforts. A national preparation team composed of many professionals in the areas of natural resource

- 14 -

management, forestry, agriculture and land administration was assembled by the SAG, INA and DEC.

7.5 Government implementation performance:The performance of the GOH is rated satisfactory in spite of often-late provision of counterpart contributions. The GOH provided full support to the project. The Ministry of Finance (MOF) together with the SAG closely monitored project progress. The high level of government commitment was seen in the selection and maintenance of staff for the PCU; competent professionals were recruited and kept on following changes in government administration and sectoral authorities. This continuity of the technical staff was extremely important to achieving the PAAR’s successes. The ratification of new laws also showed the GOH’s high level of commitment. Close coordination and involvement of municipalities and regional offices of AFE-COHDEFOR were effective in promoting the GOH’s decentralization efforts.

7.6 Implementing Agency:The performance of the SAG and its respective implementing agencies, departments and institutions subordinate to the ministry was rated satisfactory. The PCU at all levels was well staffed for effective implementation of the project. The management and institutional capacity of the PCU has been progressively strengthened through new recruitment and technical assistance. Suggestions and recommendations from the supervisory missions and the MTR were successfully carried out by the PCU. The transparency and accountability of project management ensured prompt and rigorous monitoring and evaluation by the MOF and the SAG. There was strict compliance with disbursement and procurement rules and regulations throughout the project implementation period.

7.7 Overall Borrower performance:The overall borrow performance was rated satisfactory.

8. Lessons Learned

On the basis of the above review and assessment of the project, the following lessons can be drawn for similar projects:

Horizontal communication leads to faster and better troubleshooting. For the first four years, the project staff followed the chain of command. When project staff faced a problem, he/she had to ask supervisors and then the question went up to the project component coordinators, to the project director, and finally to the World Bank, the task manager. If the task manager needed to consult with other staff at the Bank, the question flowed through the chain of command. Sometimes, the question was lost in the system and never answered, which caused several delays in project implementation. The new project administration allowed project staff or project component leaders to communicate directly with Bank staff and/or consultants. This horizontal communication management improved problem solving and increased effectiveness and efficiency in decision-making.

Participatory forest management would have further increased rural income and participation of forest protection. The main objective of the forest master plans and operation plans was to support AFE-COHDEFOR’s restructuring processes. These plans were highly technical. The project held public consultations more than 60 times to ensure community and local inputs into forest management plans and identify ways to incorporate interested groups into the benefits from public forest management, but to date only six community forestry pilots have been implemented. No large-scale and systematic incorporation of local communities into public forest management has yet been achieved. The lesson to be learned is that in designing a TOR for these plans, it would be appropriate to incorporate participatory planning processes. Currently, the new Forestry Law is under discussion in the Congress: as a result of this project the proposed law has pursued a new direction in participatory community forestry.

Conservation of upland soil and forests requires more than technology extension. Improvement in technology through the provision of technical information in the cultivation of uplands was important. There were, however, clear needs for initial investment capital in the form of some materials such as hoses for small-scale irrigation and other tools. The living standard of the rural poor whom the project targeted is very low: many of them do not have either the tools or the capital to change their cultivating styles to the more appropriate technologies that the project

- 15 -

envisaged. At the same time, risks associated with the conversion were not contemplated in the project. Thus, many farmers hesitate to convert on a large scale. Another important aspect is that “Familia enlace” (demo farmers in communities) who received more technical services and initial capital from the project were considered as “different” from other community members because they had more access to the project. Equal participation, ownership of the project, as well as equity issues should be included in extension activities.

Community development and organization requires flexible response to communities’ demands. Community development skills in managing groups and mobilizing community members were required in extension services and the protection of biodiversity. The type of extension services requested by rural beneficiaries varies and a technology-driven extension service is only one component required for community development and organization. It is essential to respect and respond flexibly to communities’ demands for development and organizations without losing the project’s objective. These lessons were well considered in the formulation of PBPR.

Lessons learned from the experiences of the project have been fully incorporated into the two new proposed projects financed by the IDA: PATH and PBPR.

PATH The pilot experience of the land administration component under PAAR allowed the GOH to field test land regularization methodologies and to apply various technical surveying standards, as well as to estimate unit costs (per property / per hectare) of overall cadastral surveying, regularization and registration activities. Project cost estimates and targets of PATH were elaborated based on the PAAR results.

PBPR The lessons learned through implementing the natural resource management component of PAAR were also instrumental in developing and piloting approaches for PBPR. PAAR tested: (i) institutional strengthening and reform in the administration of public forest lands by the State; (ii) forest management which incorporates the rights and usufruct of forest dwellers and communities; (iii) environmental impact assessment; (iv) the development and validation of criteria and indicators for sustainable management of pine production forest; (v) outsourcing of technical and operational activities to community groups; (vi) improving biodiversity conservation efforts, evaluating and prioritizing the Honduras National Protected Areas System (SINAPH); and (vii) resolving forest land tenure conflicts through the delimitation and demarcation of forest lands, and the communal titling of indigenous lands (Tolupanes). PBPR replicated and built upon these PAAR’s experiences.

9. Partner Comments

(a) Borrower/implementing agency:The project’s initial design required time and effort in order to make the concepts operational and to achieve the main objectives, partially due to the lack of understanding of country’s ambiguous land administration and natural resource management legal and institutional framework. Despite this situation, PAAR is a successful project, achieving great results in terms of national policies, institutional reform and land rights consolidation combined with an adequate resource management (specially forests). These results helped in the government’s Poverty Reduction Strategy and became priorities in GOH’s strategy, conducting to important institutional reforms during his first two years.

Early on, the project had a slow but ascending learning curve, picking up in its fourth year with the advent of the new administration, a strong formalization of the PCU and a fully trained acquisition unit took place. The UCP became the leading technical unit in the sector in terms of property rights, land tenure, regional planning and its intrinsically proven relationship with the land’s resource management.

Bank Performance The Bank’s performance during preparation was acceptable even though the design had technical deficiencies. During the project’s implementation and appraisal it was highly satisfactory and positive, especially thanks to the Task Managers, who had the flexibility required to carry out a pilot project of this kind, but with the technical background and experience required for decision making in terms of how the project was developing. The missions identified problems and constraints and assisted in the formulation of practical solutions, aiding technical staff.

- 16 -

The Bank’s and the project’s procurement teams, under the Bank’s supervision developed great local capacity in the PCU, which was recently evaluated by the Bank as highly satisfactory and capable of carrying out the new projects: PATH and PBPR. Technical local capacities where also developed, over three hundred technicians and professionals were trained to carrying out the multitudinous activities demanded by the project.

Borrower PerformanceDuring the first years the local capacity was limited, which affected on the project’s implementation rhythm; hurricane Mitch also had negative effects on the execution. The natural resources component had very good results and the relationship with AFE-COHDEFOR was clearly emphasized from the start, the Fund for Upland Producers, which had a late start, showed better results in terms of community participation and management techniques. The CMAT had a significant upturn after 2002, when all the technical processes conducting to land regularization where revised, the institutional coordination arrangement were strengthened with SINREC and the technological platform (SURE) to support cadastre, registry and regularization operations was implemented. The CMAT ended with the approval by Congress of new Property Law and creation of the Property Institute. The new Territorial Management Law better integrates the two components, especially within the devolution scope towards local governments.

Other CommentsThe “Satisfactory” rating of the project fails to take into account the achievements detailed below. Because of these, in addition to the other achievements described in this report, the project should have been rated “Highly Satisfactory”.

The project assisted to produce significant changes in Government policies in the forest subsector and in l

strategies for forest management. The project played an active role in the development of three fundamental laws that have been passed (Water and Sanitation, Land Use Planning Law, and the Property Law) and in the development of the Forestry Law, which is currently in Congress and expected to pass soon. The project experiences [in pine forest management in public lands] convinced Government that the State l

Forest Agency was over-dimensioned and assisted it to take decisions on the redesign of the agency, including what now has become the intention to establish a completely new Forest Service.The project experiences in forest management greatly contributed to a change in focus in the productive l

management of forest [from a timber-dominated model] toward multiple-use, community-forestry, and integrated management, including basic grain production [by households in forest lands] system as part of the management of the forest resources.The project was successful in introducing institutional change in the State Forestry Agency such that l

Community Forestry was accepted and adopted as the means for forest management with civil society participation.The project developed the instruments that may now be replicated and expanded upon (e.g., through the l

newly-approved Bank-financed Forests and Rural Productivity project) for regularizing the rights of people living in public forest lands and making forest dwellers aware of the benefits and costs of forest management. The forest ecosystems map produced by the project provoked a greater public awareness of the reality of forest l

conversion and the alarming deforestation and advance of the agriculture frontier countrywide.The project was influential in arriving at a definition of “forest” [for purposes of defining state interest in l

public forest lands] that resulted in a re-dimensioning of the public forest sector and policies on the restoration of degraded landsThe project validated the model of private provision of technical/extension services [to households of rural l

poor] for agriculture and forestry as well as methodologies for extension (“Familias Enlace” or Cooperating Families) that helped to increase the number of people reached.The project was also important in planting the seeds for payment of environmental services; in developing l

models of watershed management, elaboration and execution of lower cost management plans, co-management of protected areas; and the process for rationalization of the country’s protected areas’ system.

A great deal of effort and attention was put into systematizing and disseminating the experiences of the Upland Producers Fund. This has served both as a positive base for replication and expansion of the methodology and approach as well as for the Secretariat of Agriculture and Livestock’s current efforts to strengthen its policies and

- 17 -

programs for upland and hillside agriculture.

The review of the Land Administration component has well captured and summarized the essence of the project’s actual activities and outcomes.

(b) Cofinanciers:N/A.

(c) Other partners (NGOs/private sector):N/A.

10. Additional Information

1. The World Bank (1996), Final Report: Pre-Approval Quality at Entry Assessment, Honduras Natural Resources Management and Land Administration Project2. This web-based platform won the Bently Award in 2004. For more information:http://www.bentley.com/en-US/Corporate/News/Quarter+2/Bentley+Announces+the+Winners+of+the+BE+Awards+of+Excellence.htm3. The World Bank (2004) The PAD of Land Administration Project, pg 9.4. AFE-COHDEFOR (2003) Anuario Estadístico Forestal 2003. p78.

- 18 -

Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

1. Staff technically capable of carrying out their responsibility.

41 training sessions (Total participants: 25 forestry engineers and 76 promoters in the protected areas)

2. MIS of forest estate that allows monitoring of resource.

Strengthening CIEF and improvement of connectivity through SINIT

3. Environmental and social concerns incorporated into procedures.

3 private forest owner organizations and 2 agroforestry cooperatives were incorporated in the procedures.

4. Increased area of forest uder sustainable management with public involvement.

560,073 has. is under sustainable management (95% of the Project target national forests: this is 161% of the original target). 65 public consultations realized.

5. Increased income stream to local people from forests adn increased forest output.

57%*

6. Conservation of priority watersheds and environmental forestry practiced.

12 priority micro-watershed are under sound management.

7. Increased income from protected areas. Data not available.8. Freezing of invasions adn encroachment in protected areas as result of clear demarcation and improved protection.

8 protected areas were demarcated (250,000has.)

9. Improved administrative capacity to manage priority biodiversity.

Strengthened DAPVS in technical and administrative capacities.

10. Increased productivity of agriculture and forestry.

Increased productivity (60%) in corn, beans and coffee production.

11. Improved organization of 6,500 upland producers.

9,814 families organized into 443 groups of farmers.**

12. Creation of successful models for community forestry.

4 models (El Coyol, El Salitre, Matadero y Subirana).

13. Improved tenure security as incentive for investment in four Departments of Honduras

A total of 149,000 properties in urban and rural areas were registered and are to receive the land titles. The PAAR- generated cost savings in tenure regularization are approx. U$409/property (urban) and 24.70/hectare (rural). PAAR- developed methods form the basis for GoH's future investments in land administration.

14. Greaer tenure security for the rural poor. 72,000 (urban) and 77,000 (rural) parcels were measured and registered in SURE.

15. Increased forest conservation in frontier areas of Yoro and Olancho and reduced forest degradation elsewhere.

- 9 forest master plans for 9 forest management blocks created, covering a total of 560,073 ha. of public forestland.- Forest-fire incidents reduced in the Department of Yoro: from 385 cases in 1997 to 63 in 2001. - 13 units of DAPVS in Yoro, Olancho and F. Morazán were reinforced. - 5 management plans for PAs, covering 124,281 ha were prepared.

16. Modern land administration. Development of SURE.

* Evaluación de resultados, efectos e impacto del Fondo para Productores de Ladera. ** Informe final del Fondo para Productores de Ladera. Output Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

1. Equipped field (3) and regional (11) offices.

3 regional offices. 11 field offices.

2. Decentralized authority structure of field offices.

9 management plans were approved and under implementation (Guaimaca, El Porvenir, Carrizal-Jano, San Estaban, Jocón,

- 19 -

Agua Fría, Morazán)

3. Trained national and regional staff and private forest managers.

41 training sessions for technicians and 270 for local workers.

4. Catalogue of national forest estate. Catalogue redesigned to be compatible with and integrated into the new national land registry system.

5. Master plans for 344,000has. of public forest land and production plans for 110,000has.

Master plans for 560,073has.

6. EIAs and 60 public consultations on plans. 4 EIAs and 65 public consultations.

7. Priority watershed plans for six areas. 22 watershed plans and 32 diagnostics.

8, Auctions for 30,000has. of national forest areas.

295,000m3 (from more than 40,000 ha) ***

9. Four parks with eco-tourism attractions. 14 information centers for eco-tourists.

10. 10 protected areas under improved management.

9 protected areas under improved management. (Montaña de Yoro, Pico Pijol, Sur de Texiguat, Sur de Pico Bonito, Mico Quemado, Sierra de Agalta, La Muralla, Misoco y Chile)

11. Implementation of self-financing fund. Protected Areas Fund designed and agreed with country's legal constitution included in draft law submitted to Congress.

12. 120 proposals for upland for technical assistance funded.

51 proposals of technical transfer.

13. Strengthened services of 40 NGOs and producer organizations.

24 NGOs and 443 groups of farmers.

14. Focused research on upland agriculture and forestry management.

22 proposals financed.

15. Folio Real establisehed in four Departments of Honduras.

1 Department.

16. Modernized institution for Property Registry.

SURE

17. Increased number of landholder with clear title.

13 Tolupanes indigenous area of a total of 27,450 ha. demarcated.

18. Clear definition of land and forestry tenure in project area.

Survey methodologies have been developed and integrated into SURE.

19. Coordinated work program among DEC, NPR, INA, and municipal cadastre.

Work and coordination agreements were established with DEC, NPR, INA and municipal cadastres.

1 End of project

*** Anuario Estadístico Forestal 2003. P.78. AFE-COHDEFOR. Note. Following project closing, GOH committed US$ 3.5 million to initiate Forests and Rual Productivity Project's conditions pending passage of new Forestry Law expected from November 2004.

- 20 -

Annex 2. Project Costs and Financing

Project Costs by Component (in US$million equivalent)Appraisal Estimate

Actual/Latest Estimate

Percentage of Appraisal Project Cost By Component

US$ million US$ million A. Land Administration Modernization Pilot Phase 2.1 Post Pilot Phase 9.7 Subtotal 11.8 15.1 133.6% B. Natural Resources Management Improved Natural Resources Management 11.0 9.6 87.3% Fund for Upland Producers 6.8 8.0 117.6% Biodiversity Conservation 5.4 2.9 53.7% Subtotal 23.1 20.5 88.7% C. Project Coordination Unit 3.2 4.7 150.0% Base Costs 38.1 98.7% Physical Contingencies 1.4 Price Contingencies 2.3 D. Valle de Sula - 4.4

Total Project Costs 41.8 44.8 107.2%

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

- 21 -

Procurement Method Expenditure Category

ICB NCB Other N.B.F. Total Cost 1. Works 0.00 3.20 0.30 0.00 3.50 (0.00) (2.50) (0.30) (0.00) (2.80) 2. Goods 1.20 0.80 1.90 0.00 3.90 (1.00) (0.70) (1.50) (0.00) (3.00) 3. Consultants 0.00 0.00 16.60 0.00 16.60 (0.00) (0.00) (16.20) (0.00) (16.20) 4. Training 0.00 0.00 2.40 0.00 2.40 (0.00) (0.00) (2.40) (0.00) (2.40) 5. Sub-projects 0.00

(0.00) 0.00

(0.00) 7.20

(5.30) 0.00

(0.00) 7.20

(5.30) 6. PPF 0.00

(0.00) 0.00

(0.00) 2.00

(2.00) 0.00

(0.00) 2.00

(2.00) 7. Incremental Recurrent Costs 0.00

(0.00) 0.00

(0.00) 6.20

(2.20) 0.00

(0.00) 6.20

(2.20) Total 1.20 4.00 36.60 0.00 41.80

(1.00) (3.20) (29.80) (0.00) (34.00)

* Figures in parenthesis are to be financed out of IDA credit.

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Procurement Method Expenditure Category

ICB NCB Other N.B.F. Total Cost 1. Works 1.69 4.74 1.90 0.00 8.33 2. Goods 1.13 1.04 3.63 0.00 5.80 3. Consultants 0.00 0.00 16.85 0.00 16.85 4. Training 0.00 0.00 1.67 0.00 1.67 5. Sub-projects 0.00 0.00 6.24 0.00 6.24 6. PPF 0.00 0.00 0.00 0.00 0.00 7. Incremental Recurrent Costs

0.00 0.00 5.88 0.00 5.88

Total 2.82 5.78 36.17 0.00 44.77 Project Financing by Component (in US$million equivalent)

- 22 -

Appraisal Estimate Actual/Latest Estimate Percentage of AppraisalComponent Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF.

A. Land Administration Modernization

Pilot Phase 1.2 0.9 Post Pilot Phase 9.0 0.7 Subtotal 10.3 1.5 13.93 1.26 135.2 84.0 B. Natural Resources Management

Improved Natural Resources Management

5.0 6.0 7.63 1.86 152.6 31.0

Fund for Upland Producers 6.8 0.0 8.14 0.0 119.7 Biodiversity Conservation 4.1 1.2 2.52 0.33 61.5 27.5 Subtotal C. Project Coordination Unit 3.1 0.1 3.43 1.32 110.6 1,320 Base Costs 29.3 7.2 Physical Contingencies 1.0 0.5 Price Contingencies 1.9 0.5 D. Valle de Sula 4.35

Total 32.1 9.9* 40.00 4.77** 124.6 48.2 * This includes the estimated contribution by the Beneficiaries of the amount equivalent to US$1.44 million.** Contribution by the GoH only. Beneficiaries contribution were not accounted for in the final overall project cost.

- 23 -

Annex 3. Economic Costs and Benefits

I. OverviewIn most of the activities, the project had a pilot characteristic laying the ground for future expansion of investments. Main outcome of these experiences were the formulation of two subsequent project approved and under implementation: (i) Land Administration Program (PATH) and Forest and Rural Productivity Project (PBPR). The relatively high returns expected from these two projects – a 44% ERR for the PATH and up to 25% for community forestry in the PBPR – are due in large measure to the groundbreaking work and institutional building carried out by the PAAR.

The results from the PAAR project are generating a number of important economic benefits, including increase in land value due to enhanced tenure security and increased productivity in natural resources use (agricultural and forestry), however the full benefits will only materialize over the next decade. Benefit cost analysis of the productive and natural resource management activities was estimated by the Borrower to be 1.7. This figure was calculated based on the actual project costs and the estimated project impacts on forest and agricultural production. The project also contributed to the strengthening the institutional capacity at the central and local levels in land administration, the agriculture and natural resource sectors and for promotion of biodiversity conservation, which are pre-requisites for the successful implementation of the new projects and Governments continued reforms in land and forestry. The economic analyses of the project carried out by the Borrower and by the Bank for the formulation of the two follow-on projects for land administration (PATH) and forestry/agriculture (PBPR) indicate that the project was a good investment for Honduras. Cost/benefit analyses show that the project has positive economic impacts. This assessment confirms the project SAR conclusion that: “50 percent of project investment funds going to directly productive investment would produce measurable economic returns necessary to justify almost 75 percent of the total proposed project costs”.

II. Land Administration Modernization The land component enhanced the land security that, in turn, will contribute to increased agricultural investment and productivity, greater environmental management and improved land value. Main benefits include: a) direct economic benefits; b) indirect administrative savings; c) financial and fiscal benefits; and d) environmental benefits.

Main economic benefit is estimated from the increased property value due to regularization considered as a summary indicator of the capitalized value of three major benefits associated with land regularization: improved investment and environmental conservation incentives, marketability, and ability to use land as collateral for loans. Estimates of the direct economic benefits were derived in two steps. First, the Project’s regularization activities resulted in about 72,000 urban housing properties and 77,000 rural properties (total 149,000 properties) being registered. Second, to use a more updated value of the incremental value associated with regularization of tenure, the values estimated during the appraisal of PATH were used. These estimates refer to the whole incremental value of land regularization which will be accomplished in the coming years; for the economic analysis of PAAR a conservative estimate of only half of the estimated incremental of the value of smaller properties was considered. The incremental value is expected to be obtained over a period of 15 years after 2005. Costs of the CMAT and 40% of the cost of UCP are imputed to the land component. The stream of benefits and costs are discounted to calculate the net present value (10% discount rate) and internal rate of return. Under these considerations, the NPV of the component is estimated at US$ 2,362,000 and the ERR at around 13%. This result does not vary too much from the 17% estimated in the University of Maryland study involving a small sample of land reform beneficiaries and mentioned in the project SAR.

One of the main financial benefits from the PAAR was to reduce transaction costs and generate future, consequent savings to the economy from increased efficiency of service delivery. Because they are intangible, these benefits are not amenable to benefit-cost analysis. While they can only be measured against an unlikely counterfactual scenario, they are substantial. The PAAR-developed methods form the basis for GOH’s future investments in land administration so the PAAR’s land regularization costs can reasonably be used as an indicator of future regularization costs. The PAAR-generated cost savings in tenure regularization in the urban context are approximately US$409 per property and in the rural context US$ 24.70 per hectare. The total expected cost

- 24 -

savings during the next four years from the IDA-financed PATH project alone (which targets about 30% of the country’s real estate property) are on the order of US$ 186 million, against a total cost of about US$25 million.

III. Natural Resources Management The project generated a variety of benefits, including building or strengthening social capital, increasing productivity in natural resource use (agricultural, forestry, livestock) in a sustainable manner, promoting biodiversity conservation, strengthening institutions at the central and local level in the agriculture and natural resource sectors.

a) Forest management:The main objective of this sub-component was the strengthening of the technical and administrative capacity at central, regional and local level of the institution dealing with forest management (AFE-COHDEFOR).

A benefit-cost analysis of PAAR’s forest management activities in the national forests of Yoro was carried out and used, among others, to estimate the benefit-cost outcomes for the national forests of Olancho and Francisco Morazán as well. The sensitivity of the model results based on the Yoro analysis was examined. In addition, a qualitative evaluation of the social and environmental costs and benefits of the proposed forest management activities was carried out.

The study investigated the economic efficiency observed in PAAR’s use of its forest management tools. More specifically it: 1) did a benefit-cost analysis of PAAR’s forest management activities in the national forests of Yoro, 2) prognosticated the benefit-cost outcome for further involvement in the national forests of Olancho and Francisco Morazán based on what was observed in Yoro, 3) examined the sensitivity of the model results based on the Yoro analysis in anticipation of work in Olancho and Francisco Morazán, and 4) evaluated qualitatively the social and environmental costs and benefits of PAAR’s activities in forest management.

A soil expectation value (SEV) model was developed and used to estimate the optimal rotation age based on local conditions and purely financial considerations. SEV models are widely applied in forestry and provide an estimate of the financial return to bare ground that will be dedicated to timber and timber resource related products in perpetuity (Davis and Johnson 1987). The maximization of SEV is a well-known concept of fundamental importance to the economic evaluation of forest resource development projects. Similar techniques have been employed in Honduran forestry (Flores and Ruiz 1997). The results of this model provide guidance in the selection of a rotation age for the forest regulation model.

In order to evaluate the costs and benefits associated with these changes a forest regulation model (FRM) was developed. Patterned after the model employed in the creation of the 1997 forest management plan for Yoro the FRM takes into account the existing timber stands within the management unit. Management policies such as non-declining yield and prioritized harvesting schedules are also enforced and their impact on costs and benefits thereby incorporated in the analysis. It is in this model where we incorporate a reduced rotation age based on the SEV model, the accelerated transition period, the increased timber sale prices, reduced input costs and increased timber yields per hectare.

The following quantitative changes due to PAAR’s participation were examined using the FRM.• the rotation age was dropped from 40 to 35 years• the transition period to full regulation harvesting levels was reduced from 8 to 4 years• the gross revenue from timber sales was increased by 10 percent• the cost of regeneration was reduced by 20 percent• the cost of site preparation for harvesting was reduced by 25 percent• the net yield from timber harvesting is increased by 5 percent

The results of the with/without scenarios are compared in the following table that illustrates the present net worth of land and timber under a range of cost assumptions. The baseline case uses the most likely input/output price levels and a guiding rate of interest of 7% (the real rate, where future costs and returns are measured in current

- 25 -

lempiras). In the worst-case situation the expected input costs for forest management activities are increased by 20 percent, the gross revenue from stumpage is reduced by 20 percent and the interest rate is 9%. In the best-case situation the previous input/output price changes are reversed and the interest rate is set at 5%. The participation of PAAR results in strong positive returns under the full range of conditions illustrated in the table. In all cases there is at least a doubling in the present net worth of land and timber within the Yoro management unit due to PAAR's participation. The value of the timber and land under the most likely case scenario with full PAAR participation is 16,440 lempiras per hectare. This value is twice that observed in the worst case and half that observed in the best. It should be remembered when looking at these land with timber prices that they represent the average value for national forest land in Yoro under the conditions in which it is currently found and within the constraints that it is managed.

A more detailed examination of the FRM output for the baseline case gives the following changes in benefits and costs. For the total cost incurred by PAAR, which has a present value of 24,619,713 lempiras, the present net worth of AFE-COHDEFOR's Yoro operation goes from 233,447,772 lempiras to 527,017395 lempiras. These results yield a benefit-cost ratio of 11.9 for the full participation of PAAR in the management activities of COHDEFOR in Yoro.

No Participation by PAAR Input Price

Level Output Price

Level Present Net Worth of Land and Timber at:

(Lempiras per Hectare) Adjustment Factor Adjustment Factor Low 5% Interest Baseline 7%

Interest High 9% Interest

Worst Case 1.20 0.80 7,298 4,904 3,772 Baseline 1.00 1.00 11,599 7,639 5,724 Best Case 0.80 1.20 15,937 10,399 7,693

Full Participation by PAAR Input Price

Level Output Price

Level Present Net Worth of Land and Timber at:

(Lempiras per Hectare) Adjustment Factor Adjustment Factor Low 5% Interest Baseline 7%

Interest High 9% Interest

Worst Case 1.20 0.80 16,934 11,219 8,357 Baseline 1.00 1.00 24,805 16,440 12,235 Best Case 0.80 1.20 32,754 21,713 16,151

Economic Contribution by Category of Management ActivityThe results of PAAR's activities, evaluated in their aggregate impact above, are now evaluated individually. Individual tasks that significantly contributed to the achievement of the observed results in each case were identified and their costs summed and compared to the benefits derived. These benefit-cost ratios should provide a very tentative guideline to the establishment of future priorities in activity funding.

Tenure and Usufruct. There are four tasks within the tenancy activity. These tasks are directed at determining the location and legal situation of the national forests with particular emphasis on rural communities and their involvement in national forest occupancy and usufruct.

PAAR has made resolution of forest land occupancy and use conflicts a very high priority activity. There are strong indications that substantial progress is being made in this area through their cadastral survey and rural population census tasks. Another essential element in achieving a satisfactory resolution of this issue is PAAR's rural community activity in promotion and consultation. In performing this benefit-cost analysis we allocate their full tenure and usufruct budget and one-third of their promotion and consultation budget to this objective and expect that as a result of these efforts COHDEFOR will be recapturing a substantial portion of the funds now lost due to illegal "taxes" and reduced competition in the timber bidding process. We conservatively estimate an additional 10% increase in stumpage value due to PAAR's efforts in this area. A benefit-cost ratio of 4.66 is observed for the involved tasks of these two activities.

- 26 -

Forest Planning. There are three task categories identified within PAAR's planning activity. The collection of data and preparation of the maps essential to land management decisions is included here. Five-year plans are to be developed as well as plans relating to watershed and protection forests. All planning activity is to be integrated from the level of the long-range master forest plan to annual operating plans.

Through the efforts of PAAR the Yoro forest management unit has been able to maintain a level of planning effort that would not have been otherwise possible. Because of this support they are well prepared to aggressively pursue full implementation of the forest management plan. We think that PAAR's assistance has placed them about four years in advance of where they would be without it. We would assign all of the costs associated with this activity to this effort and estimate the benefit cost ratio to be 6.45.

Forest Inventory. Within inventory activity are two task categories covering all forest measurements. Timber stand information needed for any level of planning from the long-range forest master plan to operational plans is found within this activity. Also included is the marking of standing timber prior to sale.

The use of consulting foresters to do inventory and sale preparation work in lieu of COHDEFOR personnel has resulted in lower associated costs. We estimate that the sale preparation cost originally budgeted for this task were reduced by approximately one-quarter. In order to achieve this transition to the use and administration of consulting foresters in this task, PAAR expended funds from the inventory activity budget. We have applied an estimated expenditure of one-quarter the monies budgeted for this activity. A benefit-cost ratio of 1.75 is estimated for this task.

Promotion and Consultation. The promulgation and consultation activity has five task categories directed at communication with local communities. Active two-way communication with the rural population is sought through consultation on and explanation of forestry related activities. One-third of the funds budgeted to these tasks were charged to PAAR's work at resolving open or latent community opposition to normalized timber sales. The benefit associated with this cost has already been discussed in connection with Tenure and Usufruct activity.

Forest Management. There are six task categories within management activity. This activity is quite comprehensive and covers most aspects of forest management including protection, maintenance of forest access, silvicultural operations and sale administration.

Very significant reductions in the costs associated with accomplishing stand regeneration can be achieved through the use of municipal contracts. We estimate that regeneration costs can easily be cut by one-fifth or more using what has been learned in both Yoro and the El Cajon project. We estimate the cost of developing and institutionalizing this community based contractual approach to regeneration at one-quarter of PAAR's expenditures in this activity. A benefit-cost ratio of 5.36 is calculated for this undertaking.

Fire presuppression and suppression tasks done with PAAR funding have been impressive. Potential annual losses due to wildfire have been substantially reduced. These reductions in areas burned will result in increased annual yields at time of harvest, which is estimated to be in the order of five percent of current yields. One-quarter of PAAR's expenditures in this activity were assigned to presuppression and suppression related tasks. A benefit-cost ratio of 8.92 is estimated for these tasks.

Forest Research. Four task categories comprise research activity. These applied research tasks are directed at improving conditions contributory to sustainable forest management. Legal, technical and economic issues are addressed within this activity.

PAAR has taken a major role in the development of the new forest law. Under the proposed law COHDEFOR will be given more discretion in establishing rotation ages for the national forests. Economic considerations should enter into the determination of the appropriate rotation age. We feel that some movement toward a shorter rotation will be achieved because of the very substantial economic returns that can be realized. It is conservatively

- 27 -

estimated that the rotation age will be changed from 40 to about 35 years in Yoro. Certainly for mature timber stands experiencing low marginal value growth, such as those found in Yoro, an early conversion to an appropriate SEV rotation is economically justifiable. We estimate that PAAR expended about one-fifth of its activity budget in work related to this effort. The benefit-cost ratio of 11.9 (an ERR of over 50%) for this task indicates that it is money well spent indeed.

Social ImpactIn Yoro, the record shows that the involvement of communities and individuals in all aspects of forest management instigated through the PAAR project, has led to a lowered fire incidence. Obviously local people feel that they have now a personal stake in the health of the forest. It is too early to tell whether this will also lead to a reduction in fire damage, once a fire gets started. We have provided a quantitative estimate of this social impact and incorporated that estimate in the FRM model.

Another social impact is the resolution on the “timber tax” issue, where local and/or outside groups exact a fee upon harvesting. This impact has also been quantified and accounted for in the FRM model.

Employment is another important social economic impact. Based on some PAAR project data and data gleaned from the project El Cajon - which has a longer history than the PAAR project - we estimated the following numbers:

Site preparation for reforestation provides 2 man days/ha. At a steady state annual allowable cost of 873 ha l

this means 1746 man days/year.Planting shows 200 plant/man day. At a 2x2 m spacing this means 2500 plants/ha, which in turn means 12.5 l

man days/ha. Assuming that with the seed free method only 20% of the annual allowable harvest of 873 ha would have to be planted, this generates 0.2*873*12.5 man days/year or 2182 man days. The other 80% of the 873 ha will be handled through spot planting (complementation). Assuming this will take only 20% of the 12.5 man days calculated for planting, this will generate 0.80*873*0.20 man days or 2182 m or 1746 man days/year. Regeneration through planting and complementation will generate 2182+1746=3928 man days/year.Annual management activities are placed at 2 man days per ha per year, for a total for the 30555 ha in Yoro of l

61110 man days.Not counting sale preparation and harvesting (which may not involve the local people to any large extent), l

about 1746+3928+61110= 66784 man days of employment are generated for replanting/regeneration/all forest management activities. At 200 man days per full time employee per year, this means an employment of 334 full time persons. For 30555 ha this is about 1 full time person per 100 ha. In Europe this number used to be 2 persons, so this is a conservative estimate.

We have no estimates for employment multipliers for Honduras. In the US in rural areas, these tend to be about 1.8-2.7. If the multiplier could be assumed to be 2, total employment generated could be as much as 133568 man days in Yoro.

Environmental Benefits and Other ExternalitiesThe PAAR project can be credited with a number of environmental impacts. Economically, these are in the nature of externalities, largely non-marketable benefits.

As important environmental benefit provides through the PAAR project is the sustainability of the forest management, sound forest management coupled with the demonstration and construction of simple erosion control systems (rondos), will largely eliminate erosion and leads to a healthy pine forest. This, in turn, provides benefits such as carbon sequestration, a healthy wildlife and a maintenance of biodiversity (as stimulated through the seed tree method).

Another very important benefit is the area of water production. While trees are not the optimal vegetation if water yields are to be maximized (shrubs are), a healthy forest stand does regulate water intake and reduces water runoff in extreme precipitation cases (as happens in the recurring hurricanes). In meetings with the 3 mayors of

- 28 -

communities such as those from the city of Yoro, this benefit was obviously driven home after the impacts of hurricane Mitch. Clean water was obviously a product the communities were willing to pay for, including payment for forest management activities.

Finally, the seed tree method as employed in the management of the pine forests by PAAR, is conducive to the maintenance of biodiversity and the gene pool. The one negative environmental impact is in the harvesting phase as envisioned by the management plans. While these can, and are, mitigated, roading tends to produce negative impacts even when done carefully.

Olancho and Francisco MorazánThe Olancho and Francisco Morazán management areas have a biosocial environment similar to that found in Yoro. A high proportion of their pine forest is in the more mature age classes and the average site class is not likely to be much different from that of Yoro. These two areas also have rural populations that live in or near the national forests and are very attentive to COHDEFOR activities in these forests.

The economic analysis of PAAR's influence on COHDEFOR operations in Yoro has shown a very high benefit-cost ratio. PAAR's very positive impact on national forest land and timber value in Yoro was found to extend over a wide range of price levels and interest rates. Give the similarities between these three areas we anticipate no major departures from the previous results obtained in Yoro. In fact, we anticipate even higher returns. The experience now exists to execute selected tasks with greater speed and efficiency. There not only exists a cadre of well-trained PAAR and COHDEFOR personnel but a much improved level of communication and coordination between their respective offices in Tegucigalpa. Given a benefit-cost ratio of 11.9 for PAAR's work in Yoro, the similarities between these three forest management areas, and the wealth of experience gained, the same results should be fully expected in Olancho and Francisco Morazán.

b) Fund for Upland ProducersThe Fund for Upland Producers (FPL) provided funds for technical assistance and training to support agriculture, forestry and livestock subprojects for households of rural poor in marginal areas. The sub-component reached about 9,800 peasant families, exceeding significantly the target of 6,500 families specified in the project SAR. The achievement can be seen not only in the quantitative results, but also in the improvement of the extension mechanism, by which contracts with service providers are established to provide technical assistance to poor farmers. The mechanism is based on the effective, efficient and transparent provision of services to farmers. Service providers were mainly local NGOs and private firms. One of the most important aspects was the development of an evaluation system to monitor the results of extension activities and feedback service providers. These providers were made responsible for completing the required services when they failed to achieve the agreed results. This approach assured that farmers obtained standard services from the providers and increased the credibility of the project.

The evaluation of the FPL was carried out across a random selection of subprojects having completed an entire three year cycle. Data was used from 44 communities or 18% of all communities that have completed 3 years in the program. Activities analyzed included: improved agricultural practices for maize, beans, rice, coffee, vegetables, and fruits; crop diversification; forest tree nurseries; reforestation; forest management; planting shade for coffee; establishing improved pastures, forage pastures for hay, and drinking troughs; animal health and nutrition; soil and moisture conservation grass barriers, hillside ditches, stone walls, and individual terraces; cover crops and minimal tillage; crop residue management, and contour planting; improved cook stoves; home gardens; livestock management (pigs, chickens, and fish); metallic silos for grain storage; and latrines. Qualitative analysis was also carried out to estimate “client satisfaction” and perception of value of the subprojects and services received. The analysis of the improved menu focused on forestry activities in national forests (productive pine forest management, community usufruct contracts for timber and firewood, and resin tapping) and on crop production and agroforestry systems on-farm (sustainable basic grain production, shade coffee with timber species for shade, improved smallholder crop production of basic grains and coffee, and household agroforestry models – (i) basic grains, coffee, posts, firewood, rafters and beams, Cordia aliodora poles and timber; and (ii) basic grains and coffee; and basic grains, coffee, resin, timber).

- 29 -

Benefit-cost ratios were computed using discount rates of 5% and 10%, respectively. Internal rates of return were also calculated. The outcomes and indicators analysis looked at the impacts over project life. To complete the outcomes and indicator analyses, interviews with PSTs and farm communities were conducted in June 2003. Fifty percent of the communities in the 16 identified subprojects were randomly selected for interview (or 25% of all communities that have completed 3 years in the program). Communities were asked about the net benefits associated with the improved practices taught by the PST in the extension program (crops, livestock, forestry, soil conservation, and home improvement). The farmers from a given community were gathered together for a group interview (typically 10 to 15 farmers). To obtain cost data, separate interviews were conducted with the PSTs. PSTs were asked about their allocation of effort among the five extension activities (crop production, forestry, livestock, soil conservation, and family gardens and homes). The sum of these efforts must add to 100%. Since the amount of the total contract was known, it was possible to allocate funds to extension activities. Communities were also asked qualitative questions regarding their use of fallow land, length of rotations, their use of natural pasture versus improved pasture, and other related questions to complete an indicator analysis. While the outcomes analysis was focused on economic returns, the indicator analysis allowed for inferences to be made about the environment.

Overall, the FPL had a positive internal rate of return (IRR). The most successful extension activity was crop production followed by family gardens and homes. Poor peasant farmers value improved income making opportunities. Also, educational programs for the women (through the family gardens and homes initiative) provide positive economic returns as well as social ones. IRRs for crop production ranged from 25% in Olancho to 35% in Yoro. The net benefits for forestry and livestock activities did not apparently generate positive economic returns over the life of the project. For forestry, it would seem that the marginal results were due to an ineffective approach such that the returns for the types of activities promoted (primarily forest tree nurseries and reforestation) were too far in the future to have importance to these poor farmers. For livestock, few project farmers maintained livestock and the income from these did not justify the expense. The evaluation of soil conservation was mixed with low, but positive IRRs in Yoro (5%) and negative ones in Olancho. It is important to note that the environmental benefits accruing from these activities were not included in this estimate, thus the IRR is lower than actual should environmental benefits have been taken into account.

As a pilot therefore, the FPL has provided important lessons as to changes in focus and improvements required under in order to improve impacts, these include: more focus on micro-irrigation, agroforestry (forestry combined with crop production through inter-planting and other technologies), natural forest management for (pine) timber and non-timber products, marketing and commercialization linkages, and, where possible, value-added production. Based on the experience of the FPL, the analysis shows that for an improved menu of subprojects (agroforestry, improved marketing, etc.) the returns are high. For individual agro-forestry models, returns ranged from 34% to 41%. Given these (and based on assumptions of differing mixes of activities) the ERR for the component is at minimum 20%.

Household-level impacts of the FPL were also evaluated. In FPL, the primary extension focus giving the best results was on improving cropping systems to increase income and reduce environmental damage (e.g., soil erosion). Improved cropping systems in FPL included better management of the traditional corn and beans and corn (two levels of improvement) and the introduction of corn with a mucuna (leguminous) cover crop. A similar process was followed with coffee. In analyzing these, variable adoption rates of these improved technologies were considered. Based on observations, assumptions were made regarding “good” adoption rates and “modest” adoption rates for different levels of management of the cropping systems (modest adoption, good adoption) versus “traditional” (without project) management. A further variable was added concerning price outlook, i.e., changing market prices resulting in income being reduced by 10%. Costs and returns for the cropping systems were calculated for these different alternatives at the village level and assumed to last for 20 years. The costs of the FPL extension program were based on 3 year subprojects. Net present values were calculated and compared. The benefit-cost ratio is significantly greater than one for all scenarios except for the modest incomes (from 10% reduction in market process) and modest adoption scenario. This highlights the importance of achieving good adoption rates (i.e., effective farm educational programs), marketing and commercialization support and value-added production where feasible to overcome possible turn downs in prices.

- 30 -

From a household perspective, significant improvements to family income were achieved by changing to improved practices from traditional production practices. A previous analysis of the FPL, reported in the Borrower’s draft Implementation Completion Report, estimated that on average households participating in the FPL increased their incomes by 57%, from $670 per year to $1,050 per year. This analysis found:

That with reasonable market price expectations (good incomes) and a good adoption rate, the benefit/cost ratio l

was 1.4 (NPV = $1,435/family) and with modest adoption rates the benefit/cost ratio was 1.3 (NPV=$1,098). That for farmers moving from a traditional corn and beans production system to the improved production l

system, returns to labor almost tripled (from L35 per day to L99 per day).That the vulnerability of households to market price reductions is demonstrated by the worst case scenario l

where adoption rates are modest and income is reduced by 10% (modest income). Under this scenario, the benefit/cost ratio drops below one. That the returns from the typical agroforestry models were estimated to range from 34% to 41% with l

benefit/cost ratios from 1.8 to 2.0 and NPVs averaging more than $2,650. Forestry activities such as community usufruct contracts in national forests for small-scale logging, firewood, and resin tapping also showed positive results. These activities profitability however are strongly influenced by transport costs and any usufruct fees or administration charges that might be levied by the State Forest Agency.

Results from Indicator Analysis. Based on interviews with communities, other positive outcomes associated with the FPL (particularly in terms of providing insights into environmental benefits) were:

Farmers are making better use of their land. In the average community the amount of land under crop l

production in community declined by 21% during the life of the project. Farmers are either being more productive on existing land or changing their cropping patterns to a more intensive use of the land with high value crops such as vegetables and fruits. Consistent with this observation, the amount of fallow land increased by 52% and the length of time it was rested – increased from 1.5 years to 2.6 years.Practice of soil conservation practices was successfully introduced by 2003 compared 2000 when soil l

conservation practices were essentially unknown/not applied by the project communities. Slash and burn agricultural practices substantially decreased with the number of farmers in the average l

community practicing slash and burn agriculture decreasing by over 60% in project communities. The use of natural pastures in the average community decreased by 41% and the use of improved pastures l

increased by over 650% (from an average of 1.4ha/community to 10.6ha/community).

c) Biodiversity Conservation The main objective of the sub-component was to strengthen the National System of Protected Areas of Honduras (SINAPH), in particular to increase the implementing capacity of the Department of Protected Areas and Wildlife (DAPVS) in AFE-COHDEFOR. The activities were carried out in collaboration with the Project for Diversity (PROBAP) financed by GEF.

The project strengthened 8 protected areas in 3 Departments (Francisco Morazán, Yoro y Olancho). The map of the Country Ecosystem was produced following the UNESCO classification. This allowed the strengthening of SINAPH and the restructuring of the protected area system regrouping 107 protected areas. The project supported the development of the new forest law; several documents were produced to assist in the discussion of the protected area and wildlife issues. Most of these benefits are no quantifiable and no attempt to estimate the economic rate of return was made.

- 31 -

Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/Preparation12/05/1994 (under separate TORs)

7 TEAM LEADER (1); WATERSHED TA (1); SOCIAL ASPECTS (1); LAND TENURE (1); FORESTRY (1); INDIGENOUS PEOPLES (1); TECHNOLOGY SPECIALIST (1)

05/30/1995 7 TEAM LEADER (1); WATERSHED TA (1); SOCIAL ASPECTS (1); LAND TENURE (1); FORESTRY (1); INDIGENOUS PEOPLES (1); PROJECT PREPARATION SPECIALIST (1)

Appraisal/Negotiation05/22/1996under separate TORs

6 TEAM LEADER (1); LEGAL COUNSEL (1); PROCUREMENT SPECIALIST (1); RUTA/UTN (2); WATERSHED TA (1)

12/12/1996 12 GOV. REP. (5); RUTA/UTN (2); TEAM LEADER (1); PROCUREMENT (1); WATERSHED TA (1); LAWYER (1); FINANCIAL (1)

06/22/2001Negotiations of Supplemental Credit PAAR

8 GOV.REP. (4); UTN (1); TEAM LEADER (1); LAWYER (1); WATERSHED TA (1); FINANCIAL (1)

Supervision07/17/2003 1 FINANCIAL

MANAGEMENTS S

10/30/1997 6 TEAM LEADER (1); WATERSHED TA (1); SOCIAL ASPECTS (1); LAND TENURE (1); FORESTRY (1); INDIGENOUS PEOPLES (1)

HS HS

03/04/1998 5 TEAM LEADER (1); FORESTRY (1); LAND TENURE (1); INDIGENOUS PEOPLES (1); ADMINISTRATION (1)

HS HS

06/03/1998 4 TEAM LEADER (1); S HS

- 32 -

FORESTRY SPECIALIST (1); LAND FUND TEAM LEADER (1); LAND FUND SPECIALIST (1)

11/21/1998 4 TASK TEAM LEADER (1); NRM SPECIALIST (1); LAND SPECIALIST (1); AGRICULTURAL ECONOMIST (1)

S HS

11/22/1998 9 TASK MANAGER (1); FINANCIAL ADMIN (1); BIODIVERSITY SPEC (1); PARTICIPATION SPEC (1); LAND ADMIN SPEC (1); ECONOMIST (1); SOCIAL ECONOMIST (1); FORESTRY SPEC (1); AG EXTENSION SPEC (1)

S HS

07/30/1999 9 FORESTRY SPECIALIST (1); TEAM LEADER (1); LAND SPECIALIST (1); WATERSHEDS SPECIALIST (1); OPERATIONS ANALYST (1); BIOLOGIST (1); FINANCIAL SPECIALIST (1); RESOURCE ECONOMIST (1); INDIGENOUS SPECIALIST (1)

S S

01/24/2000 9 TASK MANAGER (1); BIODIVERSITY SPECIALIS (1); NRM ECONOMIST (1), LAND INFORMATION (1); INDIDENOUS SPECIALIST (1); SOCIAL DEVELOPMENT (1); RUTA/UTN (2); NATURAL RESOURCES (1)

S S

04/07/2000 3 TASK TEAM LEADER (1); LAND SPECIALIST (1); ANTHROPOLOGIST (1)

S S

07/19/1999 2 FORESTER (1); UTN (1) S SS S

07/09/2000Mid Term

16 TTL (1); INDIGENOUS/SOCIAL (2); RURAL DEVELOPMENT (1); LEGAL (1); LAND SPEC. (2); BIODIVERSITY (1); WATERSHED TA (1); ENVIRONMENT/SAFEGUARDS (1);OPERATIONS (1); TEAM ASSISTANT (1); PROCUREMENT (1); OPERATIONAL ANAYST (1); FORESTRY (1); PROTECTED AREAS (1)

S S

- 33 -

02/20/2001 2 TTL (1) WATERSHED TA (1) S S05/23/2001 4 TTL (1) LAND (2);

INDIGENOUS (1); S S

06/11/2001 2 GENDER (1); RUTA (1) S S08/2001 1 BIODIVERSITY S S01/15/2002Transfer of Responsibilities

7 TTL (2); SECTOR LIDER (1); LAND (1); RRNN (1); TEAM ASSISTANTS (2)

S S

08/19/2002 9 TTL (1); LAND LEGAL (1); OPERATIONAL ANALYST (1); AGRIC.SPECIALIST (1); INDIGENOUS/SOCIAL (2); PROJECT ASSISTANT (1); LAND SPECIALIST (1); SAFEGUARDS (1)

S S

11/2002 under separate TORs

2 FINANCIAL MANAGEMENT (2)

S S

05/08/2003 7 TTL (1); OPERATIONS/PROCUREMENT (1); PROCUREMENT (1); FINANCIAL MANAGEMENT (1); BIODIVERSITY (1); NRM/SOCIAL (1); SOCIAL/INDIGENOUS (1)

S S

ICR06/12/2004 1 NRM SPECIALIST/FAO

(1)S S

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 240.0 741.10Appraisal/Negotiation 48.3 144.98Supervision 177.4 900.52ICR 10.00 16.00Total 525.7 1,702.60

- 34 -

Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

- 35 -

Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

- 36 -

Annex 7. List of Supporting Documents

1. Borrower’s ICR: Informe Final de Implementación – Proyecto de Administración de Areas Rurales (PAAR) 2. PAAR-SAR: Staff Appraisal Report – Rural Land Management Project, February 28, 19973. PATH-Project Appraisal Document – Land Administration Project, January 22, 20044. PBPR-Project Appraisal Document – Forests and Rural Productivity Project, June 16, 20045. Development Credit Agreement, June 10, 1997 (Amended April 29, 1999, November 27, 2000, November 22, 2001, March 15, 2002)6. Quality Assistance Group, 1996, Final Report: Pre-Approval Quality at Entry Assessment, Honduras Natural Resources Management and Land Administration Project7. Supervision Mission Aide Memoires and PSRs8. Annual Reports 1998, 1999, 2000, 2001, 20029. Trackman, B., Fisher, W., and Salas, L. 1999, The Reform of Property Registration Systems in Honduras: A Status Report, Harvard Institute for International Development10. Consejo Hondureño de la Empresa Privada (COHEP) y Instituto Libertad y Democracia (ILD), 2001, Activos Prediales y Empresariales Extralegales en Honduras11. PAAR – Análisis Económico y Financiero, draft paper12. Greulich , F. E. and Schreuder, G. F., PAAR, Economic Analysis of Forest Management Activities, University of Washington, Seattle, Washington13. Economic Evaluation of the Fondo para Productores de Ladera in Honduras, Jim Hanson14. Farm models using FARMOD software developed by Juan Morelli, Consultant for the FAO-WB Cooperative Programme in 2003. 15. Collion, Marie-Helene. 2002. Introduction to revitalization within public sector services. In Extension Reform for Rural Development: Case Studies of International Initiatives. William Rivera and Gary Alex (editors). The World Bank. Rural Development Family. SASKI. October 15, 2002.16. Rivera, William and Gary Alex (editors). 2002. Extension Reform for Rural Development: Case Studies of International Initiatives. The World Bank. Rural Development Family. SASKI. October 15, 2002.17. Rivera, William and Willem Zijp. 2002. Contracting for Agricultural Extension: International Case Studies and Emerging Practices. CABI Publishing, CAB International, Oxon, United Kingdom.18. Davis, L.S. and K.N Johnson. 1987. Forest Management, 3rd ed. McGraw-Hill, N.Y., N.Y.19. Flores, José and Santiago Ruíz. 1997. Manejo forestal: conceptos generales, rentabilidad en los bosques de pino de Honduras e impactos de política en su implementación. PRODEPAH. USAID Contract No. 522-0325-C-00-3298. Tegucigalpa, Honduras.

- 37 -

- 38 -