EST MANAGEO NUNITY INVOLVEMEN

RFM Use

fro The Association windong^an FunlC"jeersionHdd, Is

Promotion Of Clean Development Mechanism In The Framework OfSustainable Forest Management With The Community InvolvementITTOIAPHI Pre-Project FFD 47/02(F)The pre-project was executed to determine practical and feasible designs of the CDNprojects and it was achieved by conducting a series of activities namely assessin andprioritizing the potential of CDM projects in the selected locations and identifying keyfactors that affect the sustainability of the project. The second objective was to develoa project proposal, which aims to promote Clean Development Mechanism in thecontext of Sustainable Forest Management.

International Tropical Timber Organization (ITTO)ITFO was established in 1986 under the International Tropical Timber Agreement (ITFA)following increasing worldwide concern about the fare of the tropical forests. ITTObattles as much for tropical forest conservation and development, as for trade oftimber, now listed as a commodity by the UNCTAD (United Nations Conferences forTrade and Development). InO is based at Yokohama, lapan.

The Association of Indonesian Forest Concession Holders (APHl)APHl was established in 1983. Its mission is to increase the ca acit of theconcessionaires and the forest estates managers in achieving sustainable forestmanagement. APHi is managed by a Management Board, and currenrly administer 15regional commissariats in Indonesia located in 15 provincial capitals. As of April2002,the members of APHl consist of 306 concessions that manage 34,605.950 hectares ofnatural forest and 83 timber estates operators that manage plantation forest with totalarea of 3,776,928 .hectares.

Cover photograph by Lorry Carver

PROMOTION OF

CLEAN DEVELOPMENT MECHANISMIN THE FRAMEWORK OF

SUSTAINABLE FOREST MANAGEMENTWITHTHE COMMUNITY INVOLVEMENT

Pre-Project Completion ReportFFD 47/02 (F)

,,25 FEB 11/3

ITTO

Executing AgencyDrs. R, Robianto Koestomo

Chairman of Foreign Affair of APHl

Pre-Project CordinatorDr. Untong Is handar

INTERNATIONAL TROPICAL TIMBER ORGANIZATIONand

THE ASSOCIATION OF INDONESIAN FOREST CONCESSION HOLDERS

Itro

,!I, ,re^I "^ cola^

11 Pre-Project Coinpl^ton R^port, PPD 47/02 (F)

List of FiguresList of Annexes

Glossary of AcronymAcknowledgements

CONTENTS

Pre-Project Completion Report

Part I. BCecutive SummaryI, Background Information About The Pre-Project

a. Key Problemb. Specific Objectives and Outputsc. Pre-project Strategyd. Pre-project Planned Duration and Planned

Overall Cost

2. Pre"Project Achievementsa. Outputs Achievedb. Specific Objectives Achievedc. Contribution of the Development Objectives

3. Target Beneficiaries Involvement4. Lesson Learned

a. Development Lessonsb. Operational Lessons

5. Recommendations

Page

IV

Part 11. Main Text

I . Project Implementation2. Pre-Project Results3. Synthesis of Analysis

IV

V

Vll

Part 1/1. Conclusion and Recommendations

I. Development Lessons2. Operational Lessons3. Recommendations for Future Projects

3

3

3

4

4

Pre-Project Completion Report. PPD 47/02 (F)

4

5

5

5

5

6

7

7

8

10

I I

I I

12

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25

26

26

1/1

List of Figures

: Discussion with farmers and localFigure Icommunities

Figure 2 : Discussion with local governments; Mr.Abdullah Hich

Discussion with local stakeholdersFigure 3Figure 4a : An example of commercial plantation

developed by the communityFigure 4b : The grassland occupied by cattle stallFigure 4c : The grassland for cattle grazingFigure 5 : Landsat STM FIR 125161 dated 91une 1989Figure 6 : Landsat 5 TM PIR 125161 dated I May 1998Figure 7 : A view of the selected areaFigure 8 : Technical discussion among interested

parties at Le Me ridien Hotel, October 18,2002

List of Annexes

An nex I

Annex 2

Letter of Support From The Regent ofTanjung jabung Timur, lambi ProvinceOrganization structure of the Pre-ProjectPPD 47/02 (F)

6

Table

8

9

Table I

13

13

14

: Type of partnership implemented by PT. WKSand PT IVIHP with local community

15

16

18

19

IV

29

31

Pre-Project Coinpl^tion R^port, PPD 47/02 (F)

20

Glossary of Acronym

ASOsiasi Pengusaha Hutan Indonesia (The Associationof Indonesian Forest Concession Holders)Badan Perencanaan Pembangunan Daerah (ProvincialDevelopment Planning Agency)

BAPEDALDA Badan Pengendali Dampak Lingkungan Danrah(Provincial Environment Impact Mitigation Unit)Community Based Forest ManagementClean Development MechanismCommunity Forest (Hutsn Kernasyarakatan)Conferences of the Parties

Designated National AuthorityElang GunungHak Fengusahaan Hutan (Forest Concession Company)Hutan Rakyat dengan Pola Kernitraan (CommunityForest with Partnership System)Hutan Tanaman Industri (Industrial Plantation Forest)Hutan Tanaman FDla Kernitraan (Plantation Forest withPartnership System)International Tropical Timber OrganizationLembaga A1am Tropika IndonesiaLand Use, Land Use Change and ForestryMusi Hutan Persada

Nori Government OrganizationNational Study on StrategyPeraturan Pemerintah (Regulation)Subsidiary Body for Scientific and Technical Advice/Subsidiary Body for ImplementationSustainable Forest ManagementThem atic Nap Path/RowUnited Nations Framework Convention on ClimateChangeUndang-undang (Act)Warung InformasiWire Karya SakeiWorld Wildlife Fund

APHl

BAPPEDA

CBFM

CDM

CF

coP

DNA

ELGUN

HPH

HRPK

HTl

HTPK

ITFO

LATIN

LULUCF

I, IHP

NGO

NSS

PP

SBSTA/SBl

SFM

TM PIR

UNFCCC

uu

warsi

WKS

WWF

Pre-Proj^. t Completion Report, PPD 47/02 (F) V

Vl Pre-Pro^C Coinpl^tion R. port, PRD 47/02 (F)

We would like to express our sincere thanks to the Council of InO thatexpressed confidence to APHl to execute the projectA special thanks isalso expressed to the donor countries, Switzerland and lapan that financethe pre-project. We grateful Iy acknowledge the support from the Ministryof Forestry that endorsed the pre-project proposal to ITFO. We expressour thanks for the assistance and generous support of the Ministry ofEnvironment in its capacity as the National Focal Point for Climate Change.Special appreciation is extended to Dr. Manoel Sobral Filho for hiscontinuing support to APHl by providing prompt assistance to theexecution of the FFD 47/02 (F). A special thanks is also extended to Dr.Eva Mueller for her patience to assist us. We thanks to the InO Secretariatthat has been very helpful to focilitate the project completion. We areindebted to Dr. Iuergen 81aser of the INTERCOOP of Switzerland, forhis on-hand assistance in developing the project proposal to show thatthe donor placed a special interest to the project.

ACKNOWLEDGEMENT

During the introduction of the project we had to invite companies thatmay be willing to cooperate to execute the project. 16 our surprise, theresponse had been oveiwhelming. For that. we acknowledge the positiveparticipation of Ir. Agus Wahyudi from PT Arum Abadi, Ir. Putri Tjaturf"om PT Tanjung Redeb Hutani (PT TRH), I"Agus Iwan MR from PT KayuMas Group, Ir, Syahriani S, Meliala and Dr. Sudibjo Markus from PT RiauA"d^Ian Pulp and P^per (PT RAPP), Ir. Suhardi from Pr Pola I"ti Rimba, Ir,Pardi Hidayat from PT ITCI Hutani Manunggal* Ir. Herry Rousyikin fromPT Finantara Intiga, Ir. Antistin from PT Musi Hutan Persada (PT MHP), Ir,Sri Isbudi Hartani from PT INHUTAN1 11, Ir, Tri Handoko from PTAdindo

Hutani Lestari, and Ir. Iwan Djanuarsyah from Pr Surya Hutani jaya (PrSHI). A special thank^ i^ ERt^"dad to I", Muhandis Natadiwiry^, th^President Director of PT INHUTANI I who personally attended themeeting. The meeting concluded that Kalimantan will riot fit for the projectsince the efforts to invite the participation of the local community will bedifficult and time consuming.

In the subsequent meetings, the participation of Mr. Ans Adhianto theDirector of PT Wira Karya Sakti myKS) and in Hardjono An sinan theDirector of PT Musi Hutan Persada (MHP) enriched the discussion

Pre-Project Completion Report, PPD 47/02 (F)

that led to the conclusion that the project could be executed in Sumacra.Following the meeting the Learn visited the proposed areas. For that, weappreciate the service of Ir. Sabar Siregar from PT MHP that guided us tovisit the proposed areas allocated by PT I'IHR Our appreciation to Ir.Hardjono Artsman and Ir. Sabar Siregar that allowed us to talk to thefarmers-transmigrants in the area offered for the project. We thank Mr.Ans Adhianto and Ir. Purvvadi Supriyanco from PTWKS for their supportto seek the suitable locations in lambi. Those companies were within theshort list of possible company, however, the CDM project required thatthe area should cover at lease 5,000 hectares in a contiguous location.Only PT WKS could provide such location. Twice we went to lambi todetermine the exact location, and finally we found the suitable area,namely Rantau Rasau in Tanjung jabung Timur. Mr. Aris Adhianto and Ir,Purwadi Supriyanto went to a greater extent that we could talk to thecommunity in Rantau Rasau.

We acknowledge the political supportfrom Dr. FirwanTan, SE, M. EC. DER,Ing. , the Chief of lambi Provincial Development Planning Agency(BAPPEDA), that chaired the meeting attended by Chiefs of Services atthe Provincial level, to Mr. Harunata, the Regent of Lahat, South Sumatera,to Mr. Usinari Ermulan the Regent of Tanjung jabung Bamt and to Mr.Abdullah Hich, the Regent of TanjungjabungTimur; both of lambi Province.Without such support the Learn will simply foil to visit the area. We wouldlike to express our sincere thanks to Mr. Adj Warsita Adjnegoro, thePresident of the Association, that never fail to support us in any conditionsand to encourage us when we were depressed and discouraged.

Finally special appreciation is extended to two national consultants Dr.Rizaldi Boer and Dr. Upik Rosalina from Bogor Agriculture University(IPB) and to Dr. Carmenza Robledo Abad, the International CDMConsultant, for their superb and exceptional services beyond the call ofduty.

Dr. Untung Is kindarPre-Project Coordinator

Vlll

Robianto Koestomo

Executing AgencyChairman of Foreign All^Iir of APHl

Pre. Proj^. t Coinpletio" R^po"t, PPD 47/02 (F)

PRE. PROjECT COMPLETION REPORT

a) Title

Pre-Project Identification

by Serial Numberc) Executing Agency

d) Host Government(s)e) Starting Datefj Durationg)' Project Cost

PROMOTION OF CLEAN

DEVELOPMENT MECHANISMIN THE FRAMEWORK OF

SUSTAINABLE FOREST

MANAGEMENT WITH LOCAL

COMMUNITIES INVOLVEMENT

PPD 47/02 (F)The Association of the Indonesian

Forest Concession Holders (APHl)Indonesia

August 15,2002.August 15,2002 - December 15,2002us$ 53,000

Pre-Proj^, t Coinpl^tm" R^po"t, PPD 47/02 (F)

2 Pre-Project Coinpl^tion Report, PPD 47/02 (F)

PART I.

Executive Summary

I. Background Information About The Pre-Project

a. Key Problem (Pre-project Situation)

Complying to the national development policy that was driven by economicgrowth orientation, timber-based forest management was in place forthe last decades. As a result of unsustainable harvesting practices,establishment of wood-based industries which were riot properI Iannedthat caused imbalance supply and demand for raw material, illegal 10 in ,lack of stakeholders participation especially local communities, has leftmore than 30 million hectares of degraded forest and critical land.

The change from centralized to decentralized system in inaria in forest,which is now in place as the consequences of UU No. 22/1999 and PPNo. 25/2000, somehow causes the fragmentation of the forests based onadministrative criteria rather than resources ecosystem-based. On theother hand, SFM concept can only be achieved if economic, social, andenvironments are addressed in an integrated manner in itsoperationalization. There are also technical and non-technical problemsin handling the three dimensions of SFM in the operational level, es eciallin meeting the need of people in and surrounding the forest for immediateincome and the need to meet the criteria required for the two otherSFM elements (economic and environment), Implementation of CDM-LULUCF projects in the form of multi-component ro'ects could beexpected to become good model for SFM implementation at operationallevel.

Central Kalimantan is a province that has big potential for CDM-sinkimplementation project. However; there are some technical and nori-technical problems that may be encountered during the implementationof the project. In order to understand the problem a pilot project needto be implemented. A preliminary analysis in the form of pre"pro^Ctshould be carried out in locations that have different level of social risks.With this approach, it is expected that the pilot projects will

Pre-Project Completion Report, PPD 47/02 (F) 3

provide basic information about what would be a practical, feasible andeffective designs for CDM projects that should be implemented in locationsexposed to different level of social risks.

b. Specific Objectives and Outputs

The specific objectives of the pre-project are:

(1) To determine practical and feasible designs of the CDM projects.This specific objective was achieved by conducting a series of activitiesnamely assessing and prioritizing the potential of CDM projects inthe selected locations and identifying key factors that affect thesustainability, of the project. The output of this objective was a practicaland feasible design of CDM project in the selected locations.

Clean(2) To develop a project proposal which aiming to promoteDevelopment Mechanism in the framework of Sustainable forestmanagement, This specific objective was achieved by conducting anumber of discussions with related stakeholders and preparing anITFO project document. The output of this objective was an ITFOproject document ready for submission.

c. Pre-project Strategy

The pre-project concept addresses directly the current requirement forthe implementation of CDM projects. The pre-project can be viewed asa learning process to increase understanding on how to develop and todesign feasible and practical CDM project for LULUCF, A series ofdiscussion with related stakeholders and site visits to collect data andinformation necessary for the formulation of the project document wasthe main strategy in the pre-project.

d. Pre-project Planned Duration and Planned Overall Cost

This pre-project's planned duration was 4 (four) months and its plannedbudget was Us $53,000, The donor countries funded the pre-projectwere Governments of Swiss and lapan.

4 Pre-Proj^. t Coinpletio" Report, PRD 47/02 (F)

2. Pre-Project Achievements

a. Outputs Achieved

The pre-project were expected to produce two main outputs, namelya practical and feasible design of CDM project in the selected locationsand ITFO project document that is ready for submission to ITFO. Thepre-project has produced the InO Project Document entitled 'Forestfundscope restoration Grid re^restotion in lambi Province of Sumotro usingthe Cleon Development Mechonism {CDM) scheme' are all in line with theabove recommendation, but could riot produce fully the first output. Noactions were taken to avoid this after a better understanding of the natureof the CDM. To produce this output, a longer time is re uired and itshould be part of CDM project design document development. However;a number of intermediate outputs have been produced afterimplementation of activities related to the first output.

b. Specific Objectives AchievedThe pre-project has achieved partly the first specific objective and

fully the second specific objective. A better understanding on how todevelop a practical and feasible design of the CDl'I projects was gained.

c. Contribution of the Development ObjectivesDuring Pre-Project, consultation and discussion with stakeholders have

been done in the form of workshop involving a wide range of stakeholders,formal discussion with local government, informal discussion with farmersand local communities (Figure I). The stakeholders are now aware of theimportance of clean development mechanism (CDM) in promotingsustainable forest management with the local community participation.The local government has provided a political support for the success ofthe project implementation (see Annex I), namely from the Regent (MrAbdullah Hich) and the Regency level Administrative Officers, riotablythe Forest Service (Dinas Kehutanan), the Agriculture Service (DinasPertanian), the Land Gazettment Service (Badan Pertanahan NasionalKabupaten) and the Environmental Impact Management Service (BapedalKabupaten). The political support from the Regent and the Governor forthe implementation of the CDl'I project were also provided.

Pre-Project Completion Report, PPD 47/02 (^ 5

4.0

=^^ :^.^==.

-^.,, .

E:=^^.,^;^^

^...

I^^

Figure I. Discussion with farmers and local communities

At national level, the Ministry of Environment as a national focal point forclimate change, has also provided support to the project by involving stafffrom the Ministry of Environment during the formulation of the projectconcept, and the implementation of the pre-project as well as thepreparation and completion of the InO Project Document The Ministryof Environment stated that this project would be the first on CDM-LULUCF issues in Indonesia, The other significant point is that the projectis initiated by APHl with stakeholder participation. The Ministry ofEnvironment considered that this project is a pioneering work, in whichall stakeholders can learn how to develop a validated CDM-LULUCFproject as well as to address non-technical and technical issues ofimplementing CDM-LULUCF project.

3 . Target Beneficiaries Involvement

The main direct beneficiaries of the pre-project are the members of theAPHl, Ministry of Forestry, local governments, communities adjacent theproject areas, local universities and NGOs. The final proposal producedwill have more far-reaching benefits at the planning

Pre-Project Coinpl^ton R^port, PPD 47/02 (F)

implementation and monitoring levels as well as at the community level.Various outputs of the pre-project will also be beneficial to other ITrOmember countries.

4. Lessons Learned

a. Development Lessons

' There are many companies interested in joining the project (namely12 companies), yet many of them suffer one main drawbacki. e. securingfree-conflict area (clean and clear),

' Their interest in joining the project is mainly due to incentives thatthey will gain from environmental service generated by the CDMproject.

' The selected companyis willing to cooperate in executing the project,since it foresees the future benefits (incentives from environmentalservices i. e. carbon) that will accrue by cooperating in the executionof CDM project.

' Local governments have shown their enthusiasm to the CDl'l projectsince they see the CDM project as one of the alternative foreigninvestment, which could be utilized to support the local development(Fig""^ 2).

' Local stakeholders including NGOs (e. g. Warsi, Pinang Sebatang, ElangGunung etc. ) have shown their positive perception for the inclusionof LULUCF under CDM. However; they are aware of the complexityof CDM-LULUCl; therefore, capacity building is one of the crucialstep for the success of the CDM projects. In addition, awarenessraising would also be needed to encourage and involve local communityin project (Figure 3).

' The difficulties in identifying eligible "Kyoto Land" in the degradedforest area for the proposed project (an area of about 5.000 toI0,000 hectares in a adjoining location that forms a single unit) andwithin accessibility.

' Increasing the understanding of local government to the nature ofCDM-LULUCF project, the status of land is one of the key elementsfor the success of project implementation. By abiding to UU No.

Pre-Project Coinpl^tion R^po"t, PPD 47/02 (F) 7

Figure 2. Discussion with local governments: Mr. Abdullah Hich

22/1999 (Decentralization), local government is willing to promulgatelocal law to expedite the implementation of the project outsideforestland with special emphasis on land tenure and status

' Ensuring the project sustainability, a transparent and clear agreementamong the involved parties should proceed prior to projectimplementation.

b. Operational Lessons

' APHl as an executing agency has set up Pre-Project organization(Annex 2). The organization has shown its effectiveness and efficiencyin formulating the project proposal within the targeted time. The directInvolvement of Dr. largen Blaser from the donor agency in thepreparation of the project proposal has contributed significantly tothe success of the pre-projectDr. Biaser has consulted with the Secretary General of the Ministryof Forestry on the need to submit the project proposal to InO toinform the support of Swiss Government to the proposed project

Pre-Proje^t Coinpletio" R^port, PPD 47/02 (F)

, ..:~^

Figure 3, Discussion with local stakeholders

and as responsibility and accountability pre-project report of the executingagency (APHl).

' The pre-project is executed by the APHl. In the course of theeyecution of the pre-project, the selected industrial plantation companyassisted APHl in identifying the areas and the community.

' The process of project proposal formulation has taken inputs andreceived supports from stakeholders, i. e. the donor agencyrepresentative, the international consultant, the national consultants,the project administrative staffs, the members of the company andthe representatives of the local government (the provincial and theregency).

' APHl will continue to consult with stakeholders prior to the executionon the proposed project to maintain collaboration among thestakeholders and to initiate measures minimizing the risks of theproject (land status, land tenure, infertile soil, mismatch of specieswith soil fertility and silvicultural skill of the community, mismatchbetween community and company needs with respect to product),

Pre-Project Coinpletio" Report, PPD 47/02 (F)

' The participation of APHl in the negotiation of the SBSTA/SBl andCoPs of the UNFCCC. APHl should play proactive role in theestablishment of the Designated National Authority (DNA). Withthe establishment of DNA, current and future CDM projects couldbe registered and acquired benefits including this first proposed CDMproject.

5. Recommendations

In the Pre-project, it was apparent that the involvement of internationalconsultant will be much more effective when he/she is well informed inadvance about the condition of the sites and involved stakeholders before

their visit to the country. The role of national consultants to provideinputs and initial though on project document being developed is veryimportant, nevertheless the international consultant could provide betterand optimal assistant in developing the project document EXchange ofinformation and ideas with e-mail long before his/her visit greatly shapedthe understanding about the nature of the project. Direct involvementof Representative of the Donor Government will also has great impacton the success of pre-project implementation.

Early informed of the project to related stakeholders are also veryimportant. lets veryworthwhile ifinformal supportfrom the stakeholdersto the project idea is obtained before the submission of pre-projectproposal. This will smooth the process and reduce the time needed forthe development of ITFO project document.The early involvement of the stakeholders is also important. iris imperativethat the informal support from the stakeholders could be gained prior tothe submission of the pre-project proposal. This will smoothen the processand reduce the time needed to develop the ITrO project document.

10 Pre-Pro^Ct Completion R^port, RFD 47/02 (F)

I . Project Implementation

a. The most crucial differences between planned and actual projectimplementation:

' Geographic location: formerly decided to implement the projectin Kalimantan then shifted to Sumatra* due to security reasons,

' Companyinvolved:formerly invited the participation of Concessionholders, (HPH) then shifted to industrial plantation forest company(HTl), due to the fact that forest conservation is riot consideredas Kyoto activities.

' Area: formerly determined to implement the project in theforestland then moved to outside forestland (transmigration lands)*to avoid conflict of interest between the Ministry of Environmentthat operates under Decentralization UU 22/1999 with the Ministryof Forestry that operates Forestry UU 4/1/999, regarding landtitle and project ownership.

' Practical and feasible design for CDl'I project cannot be achieved,since this process requires longer time to finish, thus this activityis becoming part of developing document for CDM project design,

PART 11.

MAI N TEXT

b. Measures and action which could have avoided. these variations:deliberately no actions were taken to avoid the variations, after abetter understanding of the nature of the CDM Ishould riot be therehabilitation of natural forest, and the difficulties in meeting KyotoLand definition in the concession areas. Finally it was concluded thatthe proposed project would dealwith afforestation and restorationof plantation community in land outside the forest area.

c. Appropriateness of the assumptions made and correct identificationof the risk involved:

' Many of the location is prone to social disturbances with regardto land tenure, and it made the selection of area more difficult

Pre-Proj^. t Completion R^po"t, PRD 47/02 (F) 11

' The current project is relatively new and to reduce tension thatmaybe generated, therefore the Pre-Project Executing Agencyorganized a technical discussion involving all parties that may benefitfrom the project, among others the policy makers, experts indevelopment, NGOs and practitioners in private sector.

d. Project sustainability after project completion as a result of projectimplementation conditions:' The project sustainability will be maintained by the participation

of the private sector and the local governments, that are awarethat the project will raise benefits for them

' The project sustainability. will also be enhanced by the participationof the community as a result of awareness raising by the projectexecuting agency and the local government. that their prosperitywill be significantly enhanced by their cooperation and directinvolvement in the project.

e. Appropriateness of project inputs (quality and quantity): the inputs(budget components, the selection of the personnel, the selection ofthe national consultants) matched well with the requirements tocomplete the pre"project,

2. Pre-project Results

a. Situation existing after project completion:' Location for the implementation of the proposed project has been

identified, i. e. Rantau Rasau, Tanjung jabung Timur of lambi. Thecondition of the location is as follows:

Soil addicy (pH) is betw^^" 2.00-3.00, that could b^ improvedby fertilizing with BOP2000 to increase the pH to about 6.00.The area is potential for mixture of short rotation and longrotation multiple use tree species, and the community are willingto practice silvo"agroforestry (mixture of multiple use treesand forest trees), and to establish commercial plantations aswell, as long as they are involved and can participate (Figure 4a,4b, 4c).

12 Pre-Proj^, t Completion R^port, PPD 47/02 (F)

Figure 4a. An example of commercial plantation developed by thecommunity

Figure 4b. The grassland occupied by cattle stall

Pre-Project Coinpletio" Report, PPD 47/02 (F)

Figure 4c. The grassland for cattle ginzi

The communities who reside in the area are experienced inestablishing perennial crops, even though these are riotcommercially developed.

Socio-economic condition of the site for the implementation ofthe proposed project was identified. The socio-economic conditionof the site is as follows:

The communities owned the territory and on average they owntwo ha of land per family

Basic needs are riot met

Low State presence defined by bad infrastructure, insufficienthealth system, lack of schooling facilities, lack of judiciary system,lack of clean water and slash disposal focilitiesLack of technical skills of the people or of the local governmentsto manage peat landLow social network

Farmers having di^cult access to creditBecause of the social problems and environmental difficulties, thelocal community cannot achieve ariacceptable living standard.

Pre-Project Completion R^port, PPD 47/02 (F)

Figure 5, Landsat 5 TM Path/Row 125161 dated 9Iune 1989

*^""'

As a consequence, they are abandoning their land, it the trend is riotreversed perpetuity in poverty will persist.

' PTWKS has full commitiment and ready to start negotiating withlocal community at Rantau Rasau, Tanjung jabung Timur of lambito develop partnership as early as 2003,

' L^"dsat 5 TM PIR 125161 dated 9I""e 1989 (Fig"re 5) and I May1998 (Figure 6) for the project area are now available to see theextent of the available Kyoto land,

b. Extend to which the project specific objectives was achieved. Duringthe implementation of activities related to the first outputs, there area number of intermediate outputs being produced namely:

Pre-Project Coinpletio" Report, PPD 47/02 (F)

=,,.

.^. ,

,

..

^

*

^

Figure 6. Landsat 5 TM Path/Row 125161 dated I May 1998

' Twelve forest companies that are interested in participating inCDM Projects, namely PT Sari Burni Kusuma, PT Berkat CahayaTimber, PT Me ranti Mustika, PT Finantara Intiga, PT SumalindoLestari jaya, PT. In hutani I, 11 and 1/1, PT Musi Hutan Persada, PT.Wira Karya Sakti, PTAraraAbadi, PT RiauAndalan Pulp and Paper.PT Wira Karya Sakti and PT Arara Abadi belonged to Sinar MasGroup and their products feed the pulp and paper mills, PT LontarPapyrus and PT Indah Kiat Pulp and Paper; respectively, PT WireKarya Sakti is the only company that did riot receive ReforestationFunds to establish industrial forest plantation. Pr Finantara Intigais the joint cooperation between PT In hutani 1/1 and PT StoreEnso (Finland).

. Short listing of the companies that may be potential or the ' mostlikely" probable companies to cooperate in executing CDM project,namely PT Wire Karya Sakti, myKS) lambi, PT Musi Hutan

Pre-P"o1ect Completion R^port, FFD 47/02 (F)

Pusad^ (MHP) Pal^in bang PT Fine"^"a Intig^. and PT RimA"ham"Pulp and Paper.

' Two selected companies committed to corporate forimplementation of the project. namely PTWira Karya Sakti* (WKS)lambi, PT Musi Hutan Persada (MHP) Palembang.

' Increased understanding of the twelve companies on the natureof CDM projects. Most of the companies stated that they wouldstart to identify lands that meet Kyoto definition and they mayparticipate in CDM-LULUCF project in the futureThe two selectedcompanies have learnt from field visits to lambi and Palembangthat finding large area of land, which meets Kyoto definition, wasriot easy. Most of heavily degraded forests in both sites areconsidered as forest according to Kyoto definition. Under Kyoto,Forest is an area with a minimum area of 0.05 - I ha with tree

crown cover of more than 10% - 30% with trees with a potentialto reach 2-5 meters in-situ. It may be a closed or open formation.juvenile stands that are expected to meet the definition of forestin the future are included. Thus under Kyoto definition, economicvalue of forest is riot taken into account. In the two sites even

though the degraded forests meet the Kyoto definition but theyhave no economic value. The companies have also learnt that onlygrassland land area or very marginal land such as acidic soils(swampy or peat) that can meet Kyoto land definition. In mostcases, only a few trees can grow in these lands and the crowncover is less than 30%. Potentially, at Subanjeriji, Benakat andLematang/Martapura of Palembang, about 40 to 60 thousands haof land belonged to transmigration people are abandoned anddominated by Imperoto cylindrico grassland. Similarly at RantauRasau, Tanjung jabung Timur of lambi, up to 12,000 hectares oftransmigration area in contiguous configuration are very acid andabandoned and can meet Kyoto Land definition (Figure 7).

' A resume of ideas and thought were compiled from a workshopon CDM implementation with special emphasis on achievingsustainable forest management and prosperity of the community,without ignoring the benefits for the companies involved. One ofthe important point in the resume in the workshop was proposalfor APHl to request the Ministry of Forestry to negotiate

Pre-Project Completion Report, PPD 47/02 (F) 17

Figure 7. A view of the selected area

at International forum (such as CoP meetings) to revisit the Kyotoforest definitions. The workshop was organized in Hotel Le Mendienon October 18,2002* attended by 30 persons from various

Gl,background and profession, including the NGOs (LATIN, PWWF). The Ministry of the Environment and the Ministry ofForestry represented the public sector (Figure 8).

' A number of partnership systems that have been implemented bythe two selected companies (Pr. WKS and PT. MHP) and the localcommunity are documented (See Table I).

Pre-Project Completion R^port, FFD 47/02 (^

^jinic^

,

- ,..

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Figure 8. Technical discussion among interested parties at Le MendienHotel, 18 October 2002

Pre-Project Completion Report, PPD 47/02 (F)

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,~,o TABLE I. Type of partnership implemented by PT. WKS and PT. MHP with local community.

Partnership system:GBFM (Community basedforest management)

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Managing plantation forest with communityin the concession areas, called plantationforest with partnership system (HTPK).The company lends money to thecommunity (via farmers' cooperative) inthe form of share of about 20%. The

community should pay back the money tothe company including the interest whenthe tree is harvested. After 16 years, theshare of the community could increasedepends on the benefit generated by theplantation. After 35 years, the farmer'scooperative may own 80% of the share.This program was started in 2000.

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PT. WKS

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Type of agreementsbetween company andlocal community

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Managing plantation forest with communityin the concession areas. In this system,the community involves in themanagement and gets incentives (wages,management fee and production fee) fromthe company. This program is started inI999.1n addition, the company alsoprovides support for the community forestablishing three types of commodity ofagroforestry (vegetables, livestock andfisheries), called agrotrisula. The companyalso provide loan for community toestablish multi purpose tree species(MPTS), Types of trees are mostly fruittrees randu (Ceiba petandra), jengkol(Parkia urdurata), sukun (Altocarpus sp, ),me linto (Gnetum gnemon) and durian(Duno zibenthinus).

Written agreement (Agreement Act). Thelength of the agreement 35 years'

PT. MHF

Written agreement (Agreement Act).Length of agreement is 8 years

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Role of NGOs in setting upthe agreement

Role of local government insetting up the agreement

Partnership system:Community forest

The company in collaboration with NGOsconducts training on cooperative system.Name of NGO involved was Elang Gunung(ELGUN).

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PT. WKS

Not directly involved

Managing plantation forest with communityin the outside the concession areas

(community land). This program is called ascommunity forest with partnership system(HRPK) and iris started in 1999. There aretwo system used in this program. The first isjoint Venture system and the second isbenefit sharing. In the first system, thecompany and local community cooperativeor NGOs or university foundation orgovernment agencies set up a joint venturelike a small company). This system is thesame as HTPK system. In the second system,local community or transmigration peopleoffer their land to be used by

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The company in collaboration with NGOsconducts training on agrotrisula program forthe community. Name of NGOs involvesare Yayasan Kaffah, Hikmah Cooperative. andPondok Pesantren Raudhatul Ulum.

PT. MHP

Not directly involved

The company in collaboration withcommunity has set up program calledcommunity forest. In this system, thetransmigration people who live outside theconcession area requested (offered) thecompany to use about 40% of their lands(0.75 halfarmer) for establishing theplantation, At present these lands areabandoned due to financial problem, Mostof these lands are covered by grassland.The company will provide loan to thefarmers through farmer-groups for buyingplanting materials, land preparation, planting,maintaining and harvesting. After harvesting,the community should pay bacl< the loan and

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Type of agreementsbetween company and localcommunity

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the company for establishing the plantation.The company will provide the farmersthrough farmer-groups (cooperative) withplanting materials, cost for land preparation,planting, maintaining and harvesting. Afterharvesting, the community will get 40% ofthe net profit and the company 60%,

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Role of NGOs in setting upthe agreement

FT. WKS

Role of local government insetting up the agreement

Written agreement. Length of agreement forjoint venture system is 35 years' while forbenefit sharing system is 6 years (onerotation).

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71

The company in collaboration with NGOsconducts training on cooperative system.Name of NGO involved was Elang Gunung(ELGUN) and PALEM

the farmers will get 40% of the net profitand the company 60. This program is startedin 1999.

The Company consults the local governmentin the implementation of the program.

PT. MHP

Written agreement. Length of agreement isonly for one rotation (8 years) and this couldbe extended under the new agreement.

The company in collaboration with NGOsconducts training on agrotrisula program.

As a witness during the signing of the landuse agreement between the farmers and thecompany

c. Impact of the project result on sectoral programme and on the targetbeneficiary: Due to the increase of the understanding of localgovernment and the target beneficiary on CDM Projects, they statedthat they are willing to start identifying lands that meet Kyoto definitionand developing map of the Kyoto Land. This will ease and shorten theprocess of the development of Project Design Document for CDl'I-LULUCE In addition, they also understand that many technical andnori-technical issues related to CDM-LULUCF projects need to beunderstood for increasing their capability to implement CDM-LULUCFproject successfully.

d, Project sustainability after project completion as a result of projectconceptualization, assumption and condition prevailing at completion:As the local government will provide fully support to theimplementation of the proposed project (seeAnnex-I), and also highcommitment of the selected company (PTWKS) and good experienceof the company in developing partnership with local community, it isvery likely that the proposed project will sustain and succeed.

3. Synthesis of the Analysis

(a) Specific objectives achievement(by Oatp"ts Partly(c) Schedule(d) Actual expenditure

Partly RealizedPartly RealizedOn time

As planned

Pre-Project Completion Report, PPD 47/02 (^ 23

24 Pre-Proj^. t C. in PIetion R^port, PPD 47/02 (^

PARTlll:

CONCLUSIONS AND RECOMMENDATIONS

I . Development Lessons

' After having a better understanding on CDM, the direction of thepre-project was slightly modified. Perception of most of the forestcompanies has changed, Initially, the companies assumed that CDlvlcould be implemented in degraded natural forest. However, as theCDM-Projectis allowed only in land that meets Kyoto Land definition.while most of the degraded natural forest (logged-over forest) cannotbe considered as forest that satisfy the requirement under K otodefinition, the participants for the proposed project then shifted fromHPH (forest concession companies) to industrial plantation forestcompanies (HTl).

' The forest companies understand that costs that will be covered bCDM projects will be limited to the amount of carbon saved orsequestered by the projects. As the price of carbon is very low, it isunderstandable that in most cases CDM will cover only part of theprojects costs and the benefit from selling carbon will be obtainedafter the projects are implemented. Thus, carbon generated by theCDM should be treated as an additional product of the project.

' It is envisaged that CDM project should provide direct benefit tolocal community, and therefore the project required directinvolvementof local community. Without any financial support for investment, itwould be difficult for the community to develop CDM-LULUCFproject by itself, therefore development of partnership betweencompanies and local community to establish the CDM projects wouldbe essential.

' Lesson learnt from community development program conducted byforest companies can be used as a basis in developing partnershipssuitable for CDM project.

' As the partnership system would be adopted in the implementationof CDl'I project, institutionalization of the legal entity will be urgentlrequired.

Pre-Pro^C Coinpl^tio" R^port, PRD 47/02 (F) 25

2. Operational Lessons

' Good understanding of national consultants on the nature of CDMproject has focilitated the process of the implementation of the pre-project. Fortunately, the national consultants assigned by ITFO havedirect involvement in developing the National Strategy Study for CDM-LULUCF. The national consultants could actively participate in publicawareness program for CDM being set up by APHl prior to pre-project implementation.

' Deep commitment of the selected forest companyin the project alsoenhanced the implementation of the pre-project. Most of data andinformation required for the pre-project were made available to theconsultants by the companyThe company also provided good facilitiesto the team during site visit and preparation of the ITrO projectdocument.

' The international consultant, Dr. Carmenza RobledoAbad, has received

adequate data and information from the national consultants, Dr. RizaldiBoer and Dr. Upik Rosalina Wasrin, as well as from projectadministrators far before her visit to the site. This also acceleratedthe completion of the tasks. The most important was that the directinvolvement of Dr. 10rgen Blaser (representative of the donor agency)in the preparation of the ITFO project document has significantlyshorten the time required for the preparation of the project document.

3. Recommendations for Future Projects

' Development of CDM project will require long process. In addition,basic knowledge on non-technical and technical issues related to CDM-LULUCF project would also be required to enable stakeholders todevelop CDM project information note. It is recommended that InOprovide support for tropical timber producer countries to enable themember countries to formulate project proposals.

' Many proposals to deal with above issues are based on desk studies.Therefore, to have actual CDM-LULUCF pilot project is veryimportant for the improvement of understanding on CDM-LULUCF.

26 Pre-Project Coinpl^tion R^port, PPD 47/02 (F)

Without an actual and physical pilot projects implemented in the field,controversies on CDM-LULUCF may never be resolved. Strategyoutputs and activities described in the proposed project entitle'ForestLandscape Restoration and Reforestation in lambi Province of SumatraUsing the Clean Development Mechanism (CDM) Scheme' are all inaccordance with the above recommendations.

Responsible for the Report

Dr. Untung Is kandarPre Project Coordinator

January 31,2003Date:

Drs. Robianto Koestomo

Chairman of Foreign Affairof APHl as Executing Agency

Pre-Proj^. t Coinpl^tion R^pore PPD 47/02 (F) 27

.

28 Pre-Proj^. t Completion R^po"t, PPD 47/02 (F)

Annex I. Letter Of Support From The Regent Of TanjungjabungTimur,lambi Province.

BurATI TANJUNG JABUNG n^, UR

N, Inby : 1150/2?81BappedaSub. ice, : ^^!^,, ZEL^

,.

I acknowledge with thanks your letter of 8'th November 2002. Here, onbehalf of the government of Tenjung Jabung Tinur Regency I herewith wouldlike to support the proposed prqjec, rela, ed with integrated agofb, e^development for carbon sequestration services,

The goal of the projeciis inline with priority and policy of, he governrn", t10 enhance the prosperity of the local people in district Runt. u REsau , Regency ofTanjung Jabung Timor, the Province of lambi.

Considering the import"rice or p, viect activities for the improve mom ofenvironment condition and developmentI of 80010 econom5e conditions we doexpect that the proposed project will be realized soon and we hope it will beimplemented scarring fluon 2003.

This is also to ensure that coordination and involvement or all stakeholdaswill be maintained to success the irmyjgnenta. join of project and its gustainabjjj^r.

Ou, full support will also he equipped with legal bases in the form of localregula, ion. development of land relDbilil"tinn and managerheri, Inn andstrengtha, ing of local institutions. The needed foamci"I support to realize thesesupporting activities is also expected to be incl, ,ded in Ihe pro^Ci budgel.

MILTa Sabak. November 12,2002.

To

Execuiing Agency & Coordinator ProjCc,APRi. ,fro Pre Project FFD 47/02 us)Jakari"

Thank you and we look forward to hearing from you about the realmtior, or thisprqjcct.

R* of, Tanju, Ig Ja rig T@

Cc : - The Governor of, anti Province

Pre"Project Coinpl^tio" Repo, ~t, PPD 47/02 (F)

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30 Pre-Project Completion Report, PPD 47/02 (^

Annex 2, Organization structure of the Pre-Project PPD 47/02 (F)

Ir. AdjwarsjtaAdjne toPresident of APHl

Drs. R. Robianto Ko cmo

Chaimian of Foreign Affair of APHlas be curing Agency

Dr. Un Isfudar

Project Coordinator

Dr. Blaser

Representative ofDonor Agency

Pre-Pro^Ct Completion R^port, PPD 47/02 (F)

^.,

32 Pre-Proj^. t Coinpletio" R^port, PPD 47/02 (F)

IsBN : 979,838 i. o4-