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31. Government has a clearly defined set of national sustainable development priorities which has been well developed through the support of multiple donors. These national priorities, even with substantial donor support, have been found to fall well short of the level adequate to conserve all, or even most of Madagascar's biodiversity. Under the baseline activities proposed in PE2 (i.e. without GEF support), biodiversity actions would be limited to improving the management of 20 national parks and reserves. 19 other identified priority sites would remain unmanaged. Forest management would focus mainly on production, and inventory of the remaining biodiversity resources, including marine biodiversity, would remain incomplete. In particular, the root causes of biodiversity loss would be left unaddressed. These root causes require local and regional stakeholders to be brought into the biodiversity action process, weaknesses in central policies and institutions to be addressed, and significant action to be taken outside statutory protected areas as this is where the bulk of biodiversity is situated.
32. GEF resources will be used to cover the incremental cost of expanding these actions in ways that vastly strengthen biodiversity conservation in Madagascar. In particular, the Environment Programme would be extended to complete inventory of the still little known biodiversity of the forests and marine ecosystems of the country, identify and manage critical sites for terrestrial and marine protection, establish effective management at those known biodiversity sites that are of little ecotouristic value (i.e. the sites other than National Parks), and address the root causes of biodiversity loss through support to a programme of regional and district action. In some cases the GEF contribution will provide the incremental cost of the transition from one system of conservation to another. These cases include policy reform and administrative restructuring. In other cases, GEF will underwrite the cost of expanding existing approaches to high biodiversity value areas that are relatively low in governments national priorities owing to resource constraints. An incremental cost matrix is presented in annex D.
33. Incidental Domestic Benefits. Long term incidental domestic benefits will arise from increasing the value of non-timber forest products (NTFP's) through the introduction of sustainable management plans and from a review and revision of policies and mechanisms to address these. In particular the use, export and sale of an increasing range of products, together with the values associated with their genetic composition (bioprospecting), will be enhanced. In the long term, incidental domestic benefits may stem from increased ecotourism associated with the identification and establishment of new biodiversity reserves and national parks, including marine sites.
34. Cost Effectiveness. GEF resources are enabling a transition in conservation approach within Madagascar. This transition has been judged in a highly participatory process involving stakeholders, government, NGOs and donors, to be a major improvement in conservation effectiveness within the available resources, including GEF. This major increase in cost-effective conservation in the country is enabled in part by GEF resources and by the PRIF-designed investment by GEF. There is a consensus among the foremost experts in the world, and the people of Madagascar that this will lead to the most cost effective conservation process possible. The GEF contribution to the overall effort has both facilitated this high level of confidence in programme design and will play a critical role in its implementation.
ISSUES, ACTIONS AND RISKS
35. Policy risks. There are strong interactions between environment degradation, population increase and economic stagnation, including the stagnation of agriculture, so that the impact of the environment programme would be limited in the absence of significant progress on the other fronts. Madagascar's future can be seen within two extremes. First, with continued "muddling through", the prognosis is devastating -- net capital inflows will shrink rapidly, import capacity will be impaired, GDP per capita will continue to fall and poverty will rise rapidly creating the real possibility of social explosion. The second scenario for Madagascar's future could materialize if the government can overcome internal differences and reticence toward comprehensive reform, and formulate and implement a transparent and credible economic reform programme that would lead to a foreign investment rebound and lay the basis for export-led growth.
36. Policies that discriminate against agriculture have a direct impact on incentives for deforestation and shifting cultivation; more generally speaking, the incentive framework for agriculture development (e.g. rural infrastructure and access to markets, availability of social and financial services) determines land use intensification and thus has a direct influence on natural resources management practices; such issues are being addressed under the on-going structural adjustment dialogue as well as under various sector projects. Policies that discriminate against tourism development (e.g. visa regime, air transport monopoly) would also affect the programme negatively, because ecotourism is a major potential source of income from protected areas. These too are being adjusted through the reform programme.
37. Institutional risks are related to potential political instability, resulting in inter-institutional competition. Such a situation would compromise programme implementation, as it happened in 1994 with the creation of a separate ministry for the environment. The proposed institutional arrangements (para. 11) would address these issues by providing for more stability. Other risks are related to weak implementation capacity. Formal implementation capacity analyses are being carried out for ONE, ANGAP and possibly other agencies in order to formulate recommendations on how best to address this latter risk.
38. Programme management at the Regional Level. Integrating Madagascar's present governmental agencies into the regional approach to natural resource management will be a challenge. As the APPP is a new approach in Madagascar, careful design and adaptive implementation will be required to ensure that its full potential is realized. Fortunately, the on-going decentralization process is fully compatible with this integration. Under decentralization, annual work plans will be defined at the regional level, and regions will coordinate EP2 components with other programmes, as well as focus on various social and economic aspects of environmental problems. It is well understood that decentralization will take some time. Therefore, temporary Regional Programming Committees (RPCs) will be established until the regional governments are fully prepared to assume their new roles. RPCs will be comprised of all key stakeholders will be established to set priorities for the activities that are to be funded under EP2. A pilot process to establish and test these mechanisms is already underway.
INSTITUTIONAL FRAMEWORK AND PROGRAMME IMPLEMENTATION
39. The first phase programme worked primarily as a set of coordinated but independent projects. Under the second phase, programme integration would leap forward through the consolidation and strengthening of the annual programming and budgeting process, as well as the consolidation of the monitoring system. Implementation will be carried out by the various line agencies that were set-up during the first phase. High level policy guidance will be entrusted to a National Environment Council, under the Presidency of the Republic. Policy level coordination will be the responsibility of an Interministerial Environment Committee, also under creation; the Commissioner General for the Environment (CGE), within the Ministry in charge of the Environment (currently the Ministry of Agriculture) will chair the Committee on behalf of the Prime Minister (See Annex G). Operational level coordination will be carried out by ONE. The need to better define the border line between the EP2 and other programmes as well as to seek synergy between such programmes would be addressed through the regionalization of the annual programming process and the proposed Regional Fund. All the implementation arrangements, including monitoring and evaluation and the corresponding indicators, would be spelled out in an implementation manual, currently under preparation. The Government of Madagascar is in a process of on-going decentralization which will continue as EP2 commences, resulting in a change of roles for current governmental institutions. The APPP perfectly fits this changing administrative framework. GEF will facilitate the changes in roles.