PROJECT INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Report No.: PIDA400
Public Disclosure Copy
Project Name Natural Resources and Environmental Governance Technical
Assistance (P129769)
Region AFRICA
Country Ghana
Sector(s) Forestry (60%), Other Mining and Extractive Industries (40%)
Lending Instrument Technical Assistance Loan
Project ID P129769
Borrower(s) Ministry of Finance and Economic Planning
Implementing Agency Forestry Commission, Ministry Of Environment Science and
Technology, Ministry of Lands and Natural Resources, Minerals
Commission, Environmental Protection Agency
Environmental Category B-Partial Assessment
Date PID Prepared/Updated 04-Apr-2013
Date PID Approved/Disclosed 04-Apr-2013
Estimated Date of Appraisal 00000000
Completion
Estimated Date of Board 30-May-2013
Approval
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Decision
I. Project Context
Country Context
1. Ghana’s landscapes and oceanscapes provide a tremendous wealth of resources such as oil
and gas, gold, forests and fish. This generous natural resources endowment has driven sustained
economic growth and poverty reduction and will likely continue to do so in the near future. In order
to sustain natural resources development institutions Ghana must be capable to plan and manage the
development of those resources into other forms of wealth in an efficient, equitable and sustainable
manner. The proposed Technical Assistance project aims at improving the capacity of government
agencies in planning for the use and managing natural resources in selected sectors. The proposed
project will support the analytical work, policy dialogue, consultations and actual on the ground
implementation of innovative solutions to address critical sector challenges identified in the first
phase of the Natural Resources and Environmental Governance Program (2008-2012).
2. Ghana’s growth during the past two decades has been closely associated with its terms of
trade in major commodities. Figure 1 below, shows the importance of terms of trade for gold and
cocoa as a driver of growth during the 1990-2011 period. In the future, commodity prices are
expected to be more intimately associated with growth, because oil recently became a primary
source of fiscal revenue and foreign exchange, in addition to gold and cocoa. The prospects on oil
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and gas production will accentuate the historical positive association between terms of trade
changes of commodities and growth. In 2011 Ghana started producing oil and is expected to
commence natural gas production after 2013. Ghana’s oil exports, USD 3.5 billion per year, are
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expected to double in the next 3 to 5 years. Natural gas production is expected to exceed by 400
million cfd, the current level of domestic consumption in the same period.
3. Thanks to natural resources wealth poverty reduction has been significant in Ghana in the
past two decades. The number of the poor declined from 7.9 million people in 1992 (or 52 percent
of the population at that time) to 6.3 million people in 2006 (or 29 percent of the population at that
time). Thus, while the population in Ghana grew by 6.9 million between 1992 and 2006, the
number of poor was reduced by 1.6 million - a remarkable and commendable achievement. Given
positive real private per capita income consumption growth rates since 2006, it is likely that the
poverty incidence has continued to drop. However Ghana’s poverty reduction has been driven by
natural resources based growth rather than by improvements in equity. The prospects natural
resources based growth and poverty reduction remains positive.
4. To ensure that the recent gains in poverty reduction and growth are maintained Ghana
needs to address the root causes of macroeconomic instability that often limits the quality of public
expenditures and, also critically address the issues that threaten the sustainability of the of the
resources on which its prosperity is based on.
II. Sectoral and Institutional Context
5. A conjunction of historical factors and market and institutional failures put both long-term
natural resources based economic growth and environmental sustainability at risk. Renewable
natural resources, such as forests and fisheries that could be managed to yield harvests in perpetuity
have been “liquidated�?, undermining the possibility of sustainable wealth creation. The rents from
mineral resources development are still perceived to not having contributed to the benefit of the
wider society and social and environmental issues abound in mining and urban areas compromising
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the health and wellbeing of Ghanaians.
6. According to the findings of the Country Environmental Analysis (CEA ), the high rate of
natural resource degradation represented an annual cost of about 10 percent of GDP, representing
almost half of Ghana’s US$ 1.5 billion annual Official Development Assistance. Out of the total US
$730 million costs of lost productivity due to damage to five classes of natural assets and of
damages to human health , the two highest costs are from timber depletion (US$270 million) and
inadequate potable water supply, sanitation and hygiene (US$180 million). Although the cost of
environmental degradation has decreased as share of GDP, as per recent EPA’s estimates, the rate of
resources depletion continues to increase - especially in forests and fisheries. Fast urbanization is
also exposing a growing number of citizens to the negative effects of air pollution and the
deficiencies of and inadequate potable water supply, sanitation and hygiene.
7. Building upon the insights of the CEA, the Government of Ghana (GoG) decided to launch
a five-year (2008-2012) Natural Resources and Environmental Governance (NREG) program. With
the overall objective of ensuring economic growth, poverty alleviation, increasing revenues and
improving environmental protection the program aimed at addressing the governance issues in the
forestry and mining sector and to improve environmental management.
8. Fisheries and oil and gas sector were also considered for inclusion in NREG. Discussions
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held with the Fisheries Department and Ministry of Food and Agriculture concluded that it was
more efficient to support the fisheries sector through the Bank’s Agricultural DPO series. NREG
partners concerns that the rapid growth of the oil and gas sector could overwhelm the already broad
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NREG agenda lead to a decision to also leave this sector out of the program .
9. The NREG program was technically and financially supported by the Netherlands, United
Kingdom, France and European Union and by the World Bank (NREG Partners). The World Bank
has supported the NREG program through a first series of three programmatic DPOs (NREG-I,
2009-
2010), totaling an amount of US$40 million.
10. The objectives of the three operations in this DPO series were to: (a) ensure predictable and
sustainable financing for the forest and wildlife sectors and effective forest law enforcement; (b)
improve mining sector revenue collection, management, and transparency; (c) address social issues
in forest and mining communities; and (d) mainstream environment into economic growth through
Strategic Environmental Assessment (SEA), Environmental Impact Assessment (EIA), and
development of a climate change strategy.
11. Achievements of the DPOs include progress in specific reforms (e.g. passing of the Forest
and Wildlife Policy and Climate Change Policy in Cabinet), and strengthening the institutional
platform for sector dialogue. Performance against the stated PDO indicators and broader
demonstration of outcomes on the ground has been compromised by weakness in the design of the
Program Assessment Framework and respective results indicators, which were often ambiguous and
imprecise. The program has nevertheless resulted in a step change in the dialogue and government
ownership within areas, such as natural resources revenue management and transparency.
12. In early 2011 an active dialogue between the Government of Ghana, Development Partners
and the World Bank, begun for the preparation of a second phase of World Bank support to the
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NREG program. Drawing on the lessons learned at the MTR and ICR it was agreed that the new
phase would: 1) focus on a smaller number of key reforms, and cross cutting issues complementary
to broader investments supported by other DPs (including the VPA-FLEGT, FCPF and FIP); and 2)
include a linked TA operation to strengthen policy analysis, implementation and stakeholder
consultation. The sector issues identified and rationale for interventions in the TA discussions are:
(a) Revenue forecasting and macro-economic management: The predictable and sustainable
financing for the natural resources and environmental sector has not materialized and government
program in the NRE sector continue to rely significantly on ODA. The r ecent developments in the
Euro Zone have increased the uncertainty of this source of financing for the sector. Studies such as
the Revenue Forecasting Study, prepared under the NREG program indicate that revenues in
forestry and mining would allow adequate financing for the sector through increased tax revenues
and consequent reinvestment in the MDA programs if adequately captured and collected. However,
such indication needs to be better measured and documented so that the actual contributions from
the sectors to the economy translate into predictable and adequate government budget allocations for
the MDAs.
(b) Forestry: the forest sector has historically been a critical sector in Ghana as it provides a
significant number of jobs and livelihoods to large portion of the Ghanaian population. However,
forest resources are depleting at an alarming rate. From the country’s original forest cover of 8.2
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million hectares at the turn of the century, only 1.6 million hectares remain today of which 16% of
forests are considered to be in a “healthy�? state. The annual sustainable harvest in Ghana is
estimated to be about 1 million m3. The actual consumption is estimated at 3-5 million m3. The
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domestic market is considered to absorb a large majority of the timber production in Ghana (about
85 percent of the total production), mostly supplied by informal sources. Both the formal and
informal sectors rely on inefficient processing units, leading to significant waste (sawmill
conversion efficiency is estimated at 30-40%). Although the demand for wood is high, there is very
limited investment as policy and market failures fail to provide an adequate enabling environment
for private sector investments. Firms have been closing and jobs lost in the wood processing sector .
The challenges confronting Government include: (i) addressing failures in the incentive framework,
through the provision of technical assistance to improve benefit-sharing and tree tenure schemes; (ii)
reducing the disconnect between timber supply and demand through the development and
implementation of programs and policies for increasing the supply of wood and reduce waste in
processing; and (iii) improving the organization effectives of government agencies for planning and
monitoring forest sector policies, programs and projects.
(c) Mining. Mining is one of the leading industrial sectors in Ghana: with a large gold
production (ranking 9th worldwide and 2nd in Africa), the mining industry became the largest
contributor to direct taxes in 2010 with 23 percent, corresponding to about 6% of GDP. The mining
industry also directly employed 12,300 people in 2009 typically generate indirect and induced
employment with a multiplier effect of 5-7. In parallel, the number of artisanal and small-scale
miners is continuing to escalate in line with rising gold prices: artisanal and small scale miners
(ASM) include legally registered, informal, and illegal miners, estimated at 500,000 to 1 million in
Ghana.
Over the past years, the Government of Ghana and the Minerals Commission have generally shown
strong commitment to improving management of mineral resources through policy changes,
including revisions to the fiscal regime, drafting of regulations and guidelines, and strengthening of
human resource capacities. More specifically, Ghana is one of the few countries in the region that
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has attempted to regularize artisanal mining, starting in the late 1980s, when small-scale mining was
legalized. However, important governance and capacity challenges remain along the Extractive
Industry (EI) value-chain, including: (i) Monitoring of operations - Artisanal and small scale mining
(ASM); (ii) Environmental degradation of mining has also been raised as a cost to Ghana; (iii)
Collection of revenues; (iv) Mining-induced economic growth and employment generation and (v)
diversification of the mineral resource base, beyond gold.
(d) Environmental Management and Climate Change: Ghana has pioneered the
mainstreaming of environmental dimensions within sectoral policies through Environmental
Assessment and the adoption of the Strategic Environmental Assessment (SEA). SEA has been
conducted in various sectors (e.g. Oil and Gas, mining and transport) and new legislation is under
preparation to mandate the use of SEA in sector planning processes. The priority is now on making
sure that the institutions in charge of this mandate have the appropriate capacities to implement the
prescriptions emanating from EA and SEA on the decentralized manner. Additionally a better
understanding of the value of ecosystem services could, along with the revenue forecasting efforts in
MoFEP, help to inform budget allocation decisions in support of the MEST and EPA mandates in
protecting the environment. The Government of Ghana sees response to climate change as part of its
development agenda, recognizing that it must be mainstreamed into policies and sectoral activities.
A comprehensive National Climate Change Policy was approved by Cabinet in 2012. The policy
aims at ensuring a climate resilient and climate compatible economy while achieving sustainable
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development and equitable low carbon economic growth. The policy emphasizes the combination of
work on adaptation with mitigation in key sectors such as energy and transport. Ghana has recently
moved to lower-middle income status, which opens up new possibilities to access funds for
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managing Climate Change risks. The Government of Ghana has however ide ntified critical
weaknesses that hamper the environmental management and the climate change agenda to fully
materialize, inter alia: (i) insufficient Governmental capacity for decentralization, (ii) Knowledge
and capacity gaps in climate change and, (iii) Inadequate Private sector participation in
implementation.
13. Following those discussions, and the recommendations from analytical under the first phase
of NREG, it was agreed that the proposed TA would focus on the following critical challenges:
(a) Revenue forecasting and -economic management: the TA would develop the capacity of the
Ministry of Finance and Economic Planning, especially at the Real Sector Division, to: (i) forecast
revenues from the different natural resources sectors (ii) plan policy and programs to optimize
revenue collection under a sustainable development framework, and (iii) provide a quantitative basis
to guide budget appropriations for MDA based on the economic contribution of each natural
resources sector and program implementation needs.
(b) Forestry: the TA would (i) contribute to address the policy and institutional failures
that are contributing to forest resource depletion by establishing an enabling environment for
increased private sector, farmers and community involvement in forest management, (ii) enhance
forest management capacity by state actors.
(c) Mining: (i) improve management of small scale mining activities; (ii) encourage
and monitor local procurement of goods and services by the mining industry; and strengthen mineral
tax administration.
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(d) Environmental management and Climate Change: (i) strengthen institutional
structures for decentralizing environmental management; (ii) mainstreaming ecosystem services
valuation into mainstream economic sector analyses and decision making; (iii) mainstreaming of
climate change into government planning; and (iv) strengthen capacity of government to access
climate related financing.
14. The proposed Project design is hence the result of the Bank’s dialogue with the Government
of Ghana in identifying cross cutting themes critical to the progress in the governance of natural
resources and the environment in Ghana. The project will inform possible next steps in the
partnership between the Ghana, the World Bank and other Development Partners and complement
ongoing or planned activities such Wealth Accounting and Valuation of Ecosystem Services
(WAVES), Ghana Extractive Industries Transparency Initiative (EITI), Forest Carbon Partnership
Facility (FCPF) and the Forest Investment Program (FIP).
III. Project Development Objectives
The Project Development Objective of the proposed TA operation improve institutional capacity of
key MDAs in NRE sectors in revenue forecasting, benefit-sharing, monitoring and district-level
service delivery
IV. Project Description
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Component Name
1. Supporting Policymaking and Knowledge Management:
2. Strengthening institutional capacity to support sustainable natural resources and environmental
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management:
3. Project Management and Related Capacity Building:
V. Financing (in USD Million)
For Loans/Credits/Others Amount
BORROWER/RECIPIENT 0.00
IDA Grant 5.00
Total 5.00
VI. Implementation
15. The TA operation falls under the overall responsibility of the Ministry of Finance and
Economic Planning (MoFEP) which will coordinate implementation with the other MDAs.
Implementation of the sub-component will be the technical responsibility of the leading sectoral
MDAs, while theNREG Secretariat under MoFEP will be responsible of fiduciary management of
the TA (procurement and financial management.
16. Steering Committee. The Technical Coordinating Committee (TCC) was established in 2007
by Government of Ghana and NREG Development Partners. The TCC was expanded in September
2010 to the Technical Coordinating Committee with a mandate to oversee the NREG reform
program: the TCC will also be mandated to act as the Steering committee for the proposed TA
operation. The TCC is chaired by MoFEP (Chief Director) composed of representatives of various
Administrations (MoFEP, MLRN, MEST, Min. Agriculture, Min. Energy, FC, MC, LC, EPA), as
well as of civil society . The TCC will be the governance body overseeing the TA operation and as
such will (i) guide the policy and institutional aspects and address (and prevent) any coordination
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issues between the various agencies involved in the operation implementation; (ii) approve the
annual work plan and associated budget (AWPB) and ensure its complementarity with and
relevance to the overall NREG reform program and (iii) oversee the implementation of the TA
activities and track progress. The TCC is expected to meet on a quarterly basis: at least once a year
(or upon convocation by the Chair), a TCC meeting will be convened to specifically discuss the TA
operation (cf. yearly planning and progress monitoring exercise). Ad hoc meetings may be convened
at the request of any of the TCC members to address any impending project issues.
17. Project Management. The NREG Secretariat under the Ministry of Finance and Economic
Planning (MoFEP) will have the overall responsibility of the TA operation. The NREG Secretariat
will be in charge of ensuring that the various entities involved in the NREG program, namely the
Ministry of Lands and Natural Resources (MLNR), Minerals Commission (MC), the Forestry
Commission (FC), the Ministry of Environment and the Ministry of Science and Technology
(MEST) and the Environmental Protection Agency (EPA) adhere to the Annual Working Plan,
project operational guidelines, and overall NREG program objectives. The NREG Secretariat, in
close consultation with the other agencies, will be responsible for the following functions: Planning,
Monitoring & Evaluation and Reporting as well as inter-sectoral coordination. (See Annex 3 on
Implementation Arrangements).
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18. Project Implementation. The MoFEP NREG Secretariat, acting as Project Management
Team, with support from the Economic Management Capacity Building Project PIU (EMCBP), is
responsible for fiduciary aspects of the TA operation (procurement and financial management). It
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will hold the overall project oversight responsibility in addition to implementing its own project
component. Each MDA will be responsible for preparing its respective annual work plans, Terms of
Reference/Technical Specifications for consultancies and services to be procured under the project
ensure technical and contract supervision for the activities under its responsibilities, and finally
accepting deliverables for payments. All fiduciary responsibilities will be carried out by MoFEP.
19. Fiduciary responsibilities. As mentioned above the MoFEP NREG Secretariat will hold the
overall fiduciary responsibilities (procurement and financial management) for the TA operation: in
order to cover these specific responsibilities, the MoFEP NREG Secretariat will rely on the existing
EMCBP project PIU that will be strengthened in order to accommodate the NREG TA needs, and
guide, coordinate and provide technical assistance (ensuring quality) on procurement. The existing
EMCBP Project Implementation Manual (PIM) was reviewed and it was agreed that the ECMB
PIM will be adjusted by the MoFEP NREG Secretariat to suit the needs of the NREG TA and will
contain detailed procedures and processes, including hierarchy of approval which would be cleared
by the Bank, prior effectiveness of the TA operation.
VII. Safeguard Policies (including public consultation)
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 ✖
Natural Habitats OP/BP 4.04 ✖
Forests OP/BP 4.36 ✖
Pest Management OP 4.09 ✖
Physical Cultural Resources OP/BP 4.11 ✖
Indigenous Peoples OP/BP 4.10 ✖
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Involuntary Resettlement OP/BP 4.12 ✖
Safety of Dams OP/BP 4.37 ✖
Projects on International Waterways OP/BP 7.50 ✖
Projects in Disputed Areas OP/BP 7.60 ✖
VIII.Contact point
World Bank
Contact: Flavio Chaves
Title: Natural Resources Mgmt. Spec.
Tel: 5337+4166 /
Email: fchaves@worldbank.org
Borrower/Client/Recipient
Name: Ministry of Finance and Economic Planning
Contact: Franklin Ashiadey
Title: EITI Coordinatior
Tel: 233302665587
Email: fmashiadey@gmail.com
Implementing Agencies
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Name: Forestry Commission
Contact: Oppon Sassu
Title: Donor Coordinator
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Tel:
Email: sasuoppon@yahoo.com
Name: Ministry Of Environment Science and Technology
Contact: Fredua Agyeman
Title: Technical Director
Tel:
Email: fredua_agyeman@yahoo.com
Name: Ministry of Lands and Natural Resources
Contact: Musah Abu-Juam
Title: Technical Director - Forestry
Tel: (233-24) 436-2510
Email: majuamuk@yahoo.co.uk
Name: Minerals Commission
Contact: Richard Kofi Afenu
Title: Manager, Sectoral Policy & Planning
Tel: 233243135479
Email: kofiafenu@gmail.com
Name: Environmental Protection Agency
Contact: Christina Assare
Title: SEA Coordinator
Tel:
Email: christina.asare@yahoo.com
IX. For more information contact:
The InfoShop
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The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-4500
Fax: (202) 522-1500
Web: http://www.worldbank.org/infoshop
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