PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB520 Project Name Coral Reef Rehabilitation and Management Program Phase II Region EAST ASIA AND PACIFIC Sector General agriculture, fishing and forestry sector (100%) Project ID P071316/P071318 Borrower(s) GOVERNMENT OF INDONESIA Implementing Agency Ministry for Marine Affairs and Fisheries (MMAF) Environment Category [] A [X] B [] C []FI []TBD (to be determined) Safeguard Classiflcation [] SI [X] S2 [] S3 [] SF []TBD (to be determined) Date PID Prepared December 3, 2003 Date of Appraisal December 17, 2003 Authorization Date of Board Approval April 22, 2004 1. Country and Sector Background Sector Importance. Indonesia is the world's largest archipelago, containing at least 2.6 million hectares of coral reefs. This is roughly 25 percent of coral reefs in the region and 8 percent of the world's coral reefs. The Indonesian coastal and marine sector, and in particular the small-scale fisheries supported by coral reef ecosystems, is a significant productive asset for the country and the millions of poor fishers dependent on them. Healthy coral reef ecosystems can annually produce marine products worth on average US$ 15,000 per square kilometer, and are an important source of food and livelihoods for roughly 9,969 coastal villages across the country. Government Sector Strategy. The Government of Indonesia (GOI) identified coral reef ecosystem management as a national priority in the mid-1990s and as a result, requested the Bank's assistance to finance the first phase of a proposed three phase Adaptable Program Loan (APL) program, called the Coral Reef Rehabilitation and Management Program (COREMAP). Because of the importance of these coral reef ecosystems, the Government's current medium-term development strategy (PROPENAS) and the Guidelines of State Policy (1999-2004) support a coastal and marine sector policy which includes efficient and sustainable management of maritime resources, the rehabilitation of damaged coastal and marine ecosystems, and improvement of the socioeconomic conditions of coastal communities. Moreover, a new Ministry for Marine Affairs and Fisheries (MMAF) was established in 1999 with the mandate to ensure sustainable use of Indonesia's coastal ecosystems. Key Sector Issues and Institutional Constraints. Despite prioritizing the health of coral reef ecosystems and aiming poverty reduction and income-generation activities at marginalized coastal villages, the Indonesian coastal and marine sector, and more specifically the small-scale coral reef fisheries sub-sector, is still beset with the dual constraints of pervasive poverty in coastal communities and extensive degradation of coastal resources. Currently, local government institutions lack the capacity to effectively work with communities to overcome these two sector constraints. More specifically, over 53% of fisher families in the proposed program areas are poor and live below the poverty threshold of $1/day. They are highly dependent on small-scale reef fishing for their livelihood, with many claiming that their income from fishing is not sufficient to meet even their basic subsistence needs. Moreover, with the country's economic crisis, poor land-based agricultural farmers have taken to the sea to fish as a last resort for own-consumption. Faced with these pressures, destructive and illegal fishing methods (cyanide and blast fishing) are often used in an attempt to increase fish catches. The result is that almost two-thirds (65%) of Indonesia's coral reefs are now considered threatened from over- fishing, and almost half are considered threatened specifically from destructive fishing practices. In the past 50 years, the proportion of degraded coral reefs in Indonesia has increased from 10 to 50 percent. As a result, many of the small-scale coral reef fisheries in Indonesia have reached a level and mode of exploitation where the only way to increase future production and local incomes is to protect critical coral reef habitats and reduce fishing effort. However, coastal fishing communities need help to make these behavioral changes. Currently capacity at the District level to assist coastal fishing communities to sustainably manage this important resource is limited. This is the major institutional constraint facing the sector to be addressed by the proposed program. Government Response to Key Sector Issues and Constraints. GOI has begun to address these sector constraints through recent policy shifts towards decentralized coastal resource management focused on collaborative partnerships between communities and government, and the use of marine reserves and larger marine protected areas. A growing body of empirical evidence suggests that such marine reserves or 'no take zones' can rejuvenate depleted fish stocks in a matter of years and allow the coral reef ecosystems that support them to recover to healthy and productive levels. Based on this evidence, and with support from the COREMAP APL, GOI has made a sectoral policy shift toward decentralized and collaboratively managed marine reserves (termed marine conservation areas (MCAs)) as an important tool in the sustainable management of coral reef ecosystems and the fisheries they support. There is now agreement across the relevant line Ministries (Ministry of Marine Affairs and Fisheries (MMAF), responsible for coordinating efforts in coastal waters outside of marine parks and the Ministry of Forestry, responsible under law for managing national marine parks) that the establishment of marine reserves within larger marine protected areas (MPAs), through a collaborative planning process with communities, will revive coral reef ecosystems and thereby rejuvenate small-scale reef fisheries, which will in turn, directly increase the welfare of these communities. This is now supported by a national strategic effort toward decentralized marine conservation areas management outside national parks, and marine protected areas inside of national marine parks. COREMAP Phase II reflects this strategic effort by shifting overall program responsibility to the recently established MMAF and implementation responsibilities directly to the districts. Moreover, the advent of decentralization (law 25/1999) makes collaborative partnerships between District Governments and Communities possible. 2. Objectives Contribution to GOIs Sector and Poverty Objective. This program significantly contributes to GOI's objectives of (i) sustainable utilization of the coastal ecosystem, (ii) decentralized natural resource management; and (iii) raising income levels and improving living standards in the coastal zone and on small islands, particularly in small-scale fishing communities, through marine reserves. Through collaborative management partnerships, Phase II will help to rejuvenate coral reef fisheries and diversify the livelihood opportunities of participating program fishing communities. This, in turn, will increase their income and living standards, thereby contributing to GOI's anti-poverty objectives. Contribution to the Objectives of the CAS. The proposed Indonesia Country Assistance Strategy (CAS) sets the context for COREMAP Phase II by moving away from concepts like protect the poor to a focus on empowering the poor. With this focus, the new CAS seeks to address the core issue of governance in Indonesia, throughout all sector projects and programs, as well as achieve two objectives: (i) to improve the investment climate and (ii) to make service delivery responsive to the poor. According to the CAS, these two objectives would be achieved through four business platforms for development assistance: (a) community-driven development platform, (b) local services platform, (c) public utility platform and, (d) national lending platform. Based on lessons learned from Phase I, this second APL phase has been designed to reflect the emphasis placed on empowerment in the new CAS, with proposed activities aiming to empower vulnerable coral reef-dependent communities to sustainably co-manage their coral reef fisheries resources. Furthermore, Phase II seeks to directly address governance issues by (a) developing new methods to give a voice to these reef-dependent communities who are often excluded from development opportunities; (b) investing in human capital development by supporting activities in community and local government capacity building with a strong emphasis on education; (c) assisting each of the 416 participating villages to create and sustain village financial management systems and train, accredit and elect a village financial manager and bookkeeper that is consistent with the law; and (d) promoting a participatory process by which reef- dependent communities themselves identify their development needs and are responsible for implementing a development plan, agreed upon by the community and supported through a collaborative management arrangement with District government. Such collaborative management arrangements provide an innovative way to improve the accountability of local government in their support services to poor coral reef dependent communities, within the context of the decentralization framework. In addition to addressing the core issues of empowerment and governance in reef-dependent communities and their local governments, COREMAP Phase II indirectly contributes to the following CAS objective: creating income opportunities for poor households. Program affected peoples' incomes are expected to stabilize as a result of creating "fish banks" under this program (see Technical Annex 8: Economic and Financial Analysis). This second APL phase also seeks to mobilize traditional savings not currently utilized for productive activities through an extension of private business-oriented, faith-based savings and loans systems already operating in the program area. Phase II will support the CAS objectives through the platform of community-driven development (plus), by empowering coastal villages and communities to collaborate with local government to sustainably co- manage and rehabilitate the fisheries resources, which will improve their livelihoods. As such, the second phase of COREMAP does not depart from the CAS in content or in any other significant respect. 3. Rationale for Bank Involvement Rationale for Bank Involvement in the Sector. Based on the importance of healthy coral reef ecosystems to the livelihoods of fishers living in 9,969 coastal villages in Indonesia (approximately 15% of all Indonesian villages), the coastal and marine sector, and more specifically, the small-scale coral reef fisheries sub-sector, clearly represents the nexus between poverty and environment. This nexus is one pillar of the World Bank's new rural development strategy, Reaching the Rural Poor (2002), providing a clear rationale for the Bank's continued involvement in the coastal and marine sector in Indonesia through the Coral Reef Rehabilitation and Management Program (COREMAP). Development Hypothesis for Bank Involvement in the Sector. The proposed Program's development hypothesis, also reflected in GOI's recent policy shifts (see section A. 1: Country and Sector Issues), is that in order to address this poverty-environment nexus in the coastal and marine sector, communities and local government institutions will have to collaborate to jointly identify and effectively co-manage marine reserves and larger marine protected areas. The Bank has played a critical role to this end. Through COREMAP Phase I, coral reef management systems were tested in pilot sites, with lessons learned contributing to this hypothesis. Moreover, these lessons learned emphasize the importance of placing the community at the center of coral reef ecosystem management (see Section B.4: Lessons Learned). In addition to COREMAP, the Bank has substantial experience in placing the community at the center of the development process, through the Kecamatan Development Project (KDP). Over the past five years, this project has focused on building participating villages' capacity for making choices regarding social capital improvements and on improving local level governance. Through adaptive learning, COREMAP Phase II builds on both the many lessons from Phase I and KDP village empowerment systems, and brings in a technical support context to further increase the development impact. This overall development hypothesis has wider endorsement beyond Indonesia. At the World Summit on Sustainable Development (WSSD), countries around the world set a target to establish representative networks of marine protected areas by 2012. More recently, the G8 countries and the Bank in the May 2003 ministerial meetings in Evian, France concluded that "global sustainable development and poverty reduction requires healthier and more sustainably managed oceans and seas." The G8 and UN leaders promised to maintain the productivity and biodiversity of important and vulnerable marine and coastal areas. Moreover, the meeting stated that the "establishment of ecosystem networks of marine protected areas by 2012 in their own waters and other regions is a priority." The G8 and UN leaders also pledged to work with other countries to help them establish marine protected areas in their own waters. Donor Activities in the Sector. The environment-poverty nexus in the coastal and marine sector in Indonesia is well recognized by the donor community. Since its inception, COREMAP has been supported by multiple donors, including the Global Environment Facility (GEF), the Asian Development Bank (ADB), and the Australian Agency for International Development (AusAID), in addition to the Bank. Several donors (USAID and JICA), private sector organizations (Operation Wallacea) and a host of international, national and local NGOs directly and indirectly support the proposed COREMAP Phase II program and its objective of establishing collaboratively managed and sustainable coral reef ecosystem management systems. These partners are all very active in this sector and have helped to inform the proposed program design. Comparative Advantage of the Bank in the Sector. In the coastal and marine sector, the World Bank has a comparative advantage in (i) policy dialogue: to facilitate the needed reform in the management of coral reef ecosystems; (ii) coordination: to enable collaboration between multiple donors to parallel and co- finance complementary activities; and (iii) convening power: to bring together stakeholders from community, district, province and national levels to reach consensus for resolving competing demands on coral reef ecosystem resources; and (iv) sustained commitment: to promote sector adjustments and policy reforms over the extended period of the COREMAP APL. Unique Contributions of The Bank's Involvement. Through COREMAP, the Bank has demonstrated its capacity to bring together various stakeholders concerned with Indonesia's coral reefs and associated ecosystems, and the coastal communities dependent on them for their livelihood. The World Bank is uniquely positioned to engage with regional and intemational initiatives in coral reef ecosystem conservation such as that of RUCN's World Commission for Protected Areas (Marine). Furthermore, the Bank is currently involved in two international efforts that specifically complement the proposed Phase II program, namely the Marine Market Transformation Initiative (MMTI) which is collaborating with external partners in finding solutions for the live reef fish trade, one of the most significant threats to the health of Indonesia's coral reef ecosystems; and, (ii) the World Bank/GEF Global Program of Targeted Research and Capacity Building for Coral Reefs, which seeks to build networks of scientists from the developed and developing world to fill critical gaps in our knowledge about factors which determine resilience and vulnerability of reefs under various forms of stress. Together, the Bank and GEF are positioned to be seen as global leaders in knowledge development and program support of the coral reef conservation and sustainable use effort. 4. Description Program Lending Instrument and Basis for Selection. This Program is the second phase of a fifteen year Adaptable Program Loan (APL), a lending instrument which was selected because community-level interventions to enhance capacity for resource management and change behavior from destructive to sustainable practices require significant time and adjustment based on lessons learned over several phases. For this reason, the Government of Indonesia and the World Bank-Global Environment Facility are committed to a long-term program toward sustainable coral reef and associated ecosystem management. Long-Term Objective. The long-term objective of the COREMAP APL is to establish a viable, operational, and institutionalized coral reef management system in priority coral reef sites in Indonesia. Overview of APL Program Phases. Launched in May 1998, COREMAP is a fifteen year program financed by multiple donors and implemented over three phases to cover priority locations in ten provinces in Indonesia (South, North and Southeast Suluwesi, Riau, North and West Sumatra, Maluku, Papua/Irian Jaya, and East and West Nusa Tenggara). These three phases (and implementation periods) were originally envisaged as: (1) COREMAP Phase I: Initiation (1998-2001); (2) COREMAP Phase II: Acceleration (2001-2007); and, (3) COREMAP Phase III: Institutionalization (2007-2013). The program began by testing or 'initiating' coral reef management systems in four pilot sites, with the aim of generating lessons learned that would allow these pilots to be modified and 'accelerated' to cover a larger number of sites in Phase II, and to be operational and fully 'institutionalized' through Phase III. The first 'initiation' phase was much more ambitious and challenging than anticipated, resulting in three project extensions over a period from the original closing date of October 31, 2001 to June 31, 2004. In addition, since its inception, the political landscape of Indonesia has changed from strong central government authority to decentralization. As a result, the implementation time frame and institutional modalities have been adapted to these changes. The program phasing is now envisaged as: Phase I: Initiation (1998-2003), Phase II: Decentralization and Acceleration (2004-2009), Phase HI: Institutionalization (2010-2015). Objectives, Basic Features, Estimated Costs, Duration, Phase II Locations, and Institutional Responsibilities for Each APL Phase. * The objective of APL Phase I: Initiation (1998 - 2003); [Total Cost: US$ 33.1 million, US$6.9 million IBRD/IDA, US$4.1 million GEF, US$13.3 million Asian Development Bank and AusAID] is to establish a viable framework for a national coral reef system in Indonesia. This phase tested community-based coral reef ecosystem management pilots in priority sites and established the basis for a co-management framework for the COREMAP program. This initiation phase supported community-based ecosystem management and surveillance and enforcement activities in four pilot sites (Padaido Islands in Biak District, Papua Province; Taka Bone Rate National Marine Park in Selayar District, South Suluwesi Province, Riau, and Sikka/Gungua Palau Teluk Maumere Marine Park in NTT Province), as well as public awareness and policy reform activities at the national level. Phase I was executed by the Indonesian Institute for Sciences (LIPI). * The objective of APL Phase II: Decentralization and Acceleration (2004 - 2009); [Total Cost: US$74 million, US$56 million IBRD/IDA and US$7.5 million GEF] is that viable reef management systems are established in at least six priority Districts, through a financially sustainable program that is nationally coordinated but decentralized in implementation, in order to empower and to support coastal communities to sustainably co-manage the use of coral reefs and associated ecosystem resources, which will revive damaged coral reef ecosystems and in turn, enhance the welfare of these communities in Indonesia. The second phase expands the number of program sites to build upon the pilots tested in Phase I, adjusting the process of implementation to reflect the results and lessons learned, in particular, promoting collaborative management partnerships between communities and local governments. More specifically, the World Bank and Global Environment Facility will finance program activities in six eastern Indonesian districts in Phase II [(Selayar/South Suluwesi Province, Pangkajene Kepulauan/South Suluwesi Province, Buton/Southeast Suluwesi Province, Sikka/Nusa Tenggara Timur (NTT) Province, Biak/Papua Province, Raja Ampat/Papua Province) and each of the associated national/regional marine parks located in the same districts, namely, Padaido Marine Conservation Area in Biak District, Papua Province; Taka Bone Rate National Marine Park in Selayar District; South Suluwesi Province, Kapoposang Marine Park in Pangkajene Kepulauan District, South Sulawesi Province; Gungua Palau Teluk Maumere Marine Park in Sikka District, NTT Province; Raja Ampat Marine Conservation Area, Pulau Senyang Marine Park, Pulau Koflau Marine Park and Misol Selatan Marine Conservation Area in Raja Ampat District, Papua Province; Wakatobi National Marine Park in Buton District, Southeast Sulawesi Province]; the Asian Development Bank will finance a stand-alone project in western Indonesia in parallel to this APL, and AusAID will not finance any aspect of COREMAP due to a change in their policy of engagement in Indonesia (see Technical Annex 1: Country, Sector and Program Background). The recently established Ministry of Marine Affairs and Fisheries (MN4AF) will be strengthened to coordinate the Program, with implementation occurring at each participating District. Research and Education activities will be coordinated by the Indonesian Institute for Sciences (LIPI), while program activities within national marine parks will be implemented through the park authorities under the jurisdiction of the Directorate of Protected Areas (PHKA), within Ministry of Forestry. * The objective of APL Phase mI (2010 - 2015) [Total Cost: US$50 million, US$35 million IBRD/IDA] is to create viable reef management systems that are established in priority sites, operational, and fully decentralized to local governments and institutionalized. By the end of the third and final phase, the COREMAP program would be fully institutionalized at the National, Provincial, District and Community levels, with sustainability ensured through a combination of local government financing, specific block-grant transfers to local governments, and private sector financing. Phase III would continue to expand the program to other priority sites in eastern Indonesia, with a focus on capacity building of the District Governments and Communities toward collaborative management under strengthened national coordination. Performance Triggers/Benchmarks for the APL Program and for Each Phase. In the original specification of the COREMAP APL, key benchmarks were established to enable the Bank to assist the Indonesian government to prepare subsequent program phases (see Table B1: COREMAP APL At-A- Glance). Table B1: COREMAP APL At-A-Glance COREMAP Plhase I Phase II Phase III Program Initiation Decentralizations & Acceleration Institutionalization Phases Years 1998-2004 2004- 2009 2010-2015 Development Viable framework for a Viable reef management systems Viable reef Objective national coral reef system established in at least six priority management systems in Indonesia established. Districts, through a financially established in priority sustainable program that is nationally sites, operational, coordinated but decentralized in fully decentralized to implementation, in order to empower and regional governments to support coastal communities to and institutionalized. sustainably co-manage the use of coral reefs and associated ecosystem resources, which will revive damaged coral reef ecosystems and in turn, enhance the welfare of these communities in Indonesia. Program Key Program National program institutionalization Inputs framework and pilot site Expansion of site management and full management decentralization Program Selayar district, S. Selayer and Pangkjene Kepulauan, S. Locations Suluwesi province; Suluwesi; Buton, S.E. Suluwesi ; Sikka, To Be Determined Biak district, Papua NTT; Biak and Raja Ampat, Papua province Benchmarks (I a) National COREMAP (2a) Satisfactory institutional capacity at (3a) COREMAP for Subsequent program strategy/policy provincial and district levels program strategy Adaptable discussed with key (2b) Compliance rates increasing incorporated into Loan and stakeholders; BAPPENAS (2c) Declining trends in mobile threats national policy Grant Ministerial Letter issued, and destructive practices (3b) Site planning and recommending strategy to (2d) Coral reef plans implemented implementation Financing involved agencies; satisfactorily according to program following program COREMAP 11 sites indicators in > 60% of sites strategic priorities, designed in accordance (2e) 75% of outputs and disbursements and fully with strategy reached; COREMAP 11 satisfactory decentralized to (lb) Institutional capacity regions evaluated as sufficient to (3c) Program expand program sustainability ensured (Ic)Compliance rates > (e.g. through block 10% in pilot sites grants to regional (Id) Community-based govemments tied to management pilots local performance) evaluated as workable (3d) At 75% of sites, models coral reef (I e) 75% of outputs and management plans disbursements reached; endorsed by local COREMAP I satisfactory authorities and implemented satisfactorily by local communities according to program indicators Based on a detailed assessment and review, an IUCN-led independent evaluation of the first phase (entitled Independent Evaluation Report: Coral Reef Rehabilitation and Management Program (COREMAP) Phase 1) concluded that the above benchmarks for the first phase were sufficiently met, allowing for the Bank to assist in the preparation of the second phase. This conclusion was based on the development and establishment of a comprehensive framework and program of national policy, monitoring, control and surveillance (MCS), public awareness, information and monitoring; and research in support of coral reef management during Phase I, which could guide and assist in the implementation of Phase II. More specifically, the assessment indicated: (i) institutional capacity was sufficient to warrant expansion given the new context of decentralization; (ii) community-based management pilots were workable models and the lessons were incorporated into the design of Phase II; (iii) over 75 percent of the outputs and disbursements were reached; (iv) a very high level of community involvement in coral reef resource management was achieved in a few pilot areas, resulting in a significant reduction in illegal and destructive fishing and coral mining in most of the pilot sites by more than 50%; (v) greater public awareness of the importance of coral reef resource management was generated; and (vi) stronger political will for coastal resource management and poverty reduction existed at all levels of government. Adaptive Learning Through COREMAP APL. The COREMAP APL represents the first time any developing country has initiated a program of such scale to target the sustainable management of coral reefs and associated ecosystems. For this reason, Phase I was designed to test approaches in several pilot sites, in order to generate lessons learned to inform the design of an expanded number of priority coral reef sites in Phases II and III. As such, Phase I generated a wealth of information and experiences which are reflected in the design of Phase II. In addition to adapting the design of Phase II to reflect these lessons learned, significant institutional developments have taken place in Indonesia over the course of Phase I, in the form of decentralization. Decentralization has created an opportunity to adapt the approach for coral reef ecosystem management in Phase H, placing greater emphasis on local government implementation and community responsibility than was originally envisaged at the outset of the APL. As a result, the national strategic framework for coral reef management in Indonesia is one of collaborative management or co-management, where communities are legally empowered to collaborate with local governments to sustainably manage coral reefs and associated ecosystems for which they are dependent on for their livelihood. 5. Financing Source: ($m.) BORROWER/RECEPIENT 10.7 INTERNATIONAL BANK FOR RECONSTRUCTION AND 26.5 DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION 30.0 GEF 7.5 Total 74.7 6. Implementation COREMAP is a nationally coordinated and decentralized program in implementation. National Level Responsibilities. The Ministry of Marine Affairs and Fisheries (MMAF) is the Program's Executing Agency (EA). On 5 February 2003, the MMAF Minister issued a decision letter [Surat Keputusan (SK)] No. KEP.03/MEN/2003 with endorsement from eight other Ministries and line agencies outlining the national institutional structure for Program coordination and implementation. This SK defines structures and duties as well as assigning government officers to positions. A National Steering Committee (NSC), National Technical Committee (NTC) and National Coordination Unit (NCU) are formed, which are responsible to the MMAF Minister reporting through the Director General, Coasts and Small Islands (DGCSI), MMAF. These national committees provide oversight, technical advice and national coordination support to COREMAP Phase II, respectively. National and Regional Marine Parks Authority. National marine parks in Indonesia have unique authority/status under decentralization. First of all, even though they fall under the institutional authority of the Ministry of Forestry, they are allowed to solicit and receive funds directly from outside sources and use those funds to manage the national marine park, which are located at the District level. In Phase II, 2 national marine parks and 4 regional parks (KSDA) will participate. Each of these entities will contain a PIU with procurement responsibility. However, procurement using Bank-GEF funds will be subject to review by District PMUs (each of which have a Bank-accredited procurement and financial management capacity-building professional TA-see next section) and quality control by the NCU. District & Sub-District Level Responsibilities. In each District, a Coastal Community Empowerment Board (CCE Board) will be created, initially through a Bupati SK and later legalized through a District Ordinance (perda). CCE Board-mandated activities include: (a) oversight, (b) conflict resolution, and (c) approval of annual implementation plans. The detailed program planning, implementation, and evaluation will be executed by a District Program Management Unit (PMU), comprising of key local institutions. The proposed institutional location of each District PMU is as follows: Dinas DKP (Sikka and Raja Ampat), Bappeda (Pangkep, Buton, Selayer, Biak). Each PMU is responsible for program management and procurement for district activities. Each PMU has a full-time procurement and financial management capacity-building technical assistance consultant. Sub-District Coastal Management Coordination Committees (CMC Committees) for productive and conservation activities will be established. Village Level Responsibilities. Approximately 416 villages are likely to participate in Phase II implementation in six districts. Each village will be empowered through local ordinances to co-manage the coral reefs and associated ecosystems. Village institutions established under the program include: (a) financial management system for transparent and accountable record-keeping for all program funds earmarked to the village, including trained, certified and elected village financial manager and an assistant/bookkeeper, (b) village reef watchers to collaboratively enforce village rules governing the village sanctuary and ensure no destructive fishing takes place, (c) faith-based savings and loans institution linked to already established BMTs/LKMs or equivalent institutional and accountability set-up for income generation groups, and (d) formal coral reef education program for children and youth. Implementation of Cornponents. The NCU in MMAF will be responsible for coordinating the implementation of Component A: Institutional Strengthening, although individual NCU member institutions will more directly implement and/or coordinate various sub-components (e.g. PHKA will be responsible for coordinating the National Marine Parks sub-component, etc.). The 6 District PMUs and 416 Communities will be responsible for the implementation of Component B: Community-Based and Collaborative Management, across program Districts. Finally, MMAF and LIPI will be jointly responsible for oversight and coordinating the implementation of Component C: Public Awareness, Education and Extension. MMAF will take the lead on Public Awareness and Extension. LIPI will take the lead in implementing the Education sub-component. 7. Sustainability The borrower is committed to a fifteen year Adaptable Program Loan (APL) signed with the Bank in 1998. Interest and ownership of this program is evidenced by the borrowers' request for a scaled-up $55.8 million loan (from an original request of $30 million) for the second phase program. A policy shift toward collaborative district and community-led marine conservation areas establishment and institutional changes at the national level to support such a policy shift further illustrates the country's resolve toward coral reef conservation and the parallel benefit of poverty reduction of reef dependent communities through sustainable small-scale reef fisheries co-management. The issue of sustainability is examined from the perspective of institutions, policies, finance, and partnerships. Institutional changes, supportive policies, finance arrangements, and key partnerships formed at each level (national, district and local) are all necessary to ensure sustainability of the reefs and of this program. This is not easy to achieve. An incentive-based approach to sustainability is mainstreamed throughout the program, with the assumption that unless the program identifies appropriate incentives for all stakeholders to conserve coral reefs and associated ecosystems, it is unlikely to find much success. * Institutions. Collaborative management of the reefs (a legal agreement between local government and coastal resource dependent communities, giving responsibility to these communities to manage reef resource areas with the commitment of local government responsiveness to their needs in this endeavor) through reserves is the pillar of COREMAP Phase II. While their incentives for doing so vary, all key institutions (National, District, and Community-Based) subscribe to this. * Policies. A Ministerial Decree issued by Ministry of Forestry and a Memorandum of Understanding (MOU) between PHKA and MMAF makes collaborative management the key mechanism with which to manage coral reefs and associated ecosystems. Laws will be formulated at the village (perdes) and District (perdas) in support of marine reserves and collaborative management. Moreover, the newly revised Fisheries Law, includes a key Act on Coral Reef Conservation, prepared under the program's first phase. * Finance. Through implementation, the financing share contributed by Districts toward coral reef conservation will increase, with the Bank-financed share proportionally decreasing. A similar decrease in the Bank's financing share exists as the program progresses to the third phase. Specifically, the Bank-GEF will finance the initial capital costs of collaborative coral reef ecosystem management in each program district (e.g. village public infrastructure, monitoring and enforcement infrastructure, initial costs of promoting alternative livelihoods to fishing and economic diversification in coastal communities). Moreover, District govemments will cover an increasing share of the recurrent and operational costs. Many of the supported activities are scheduled to be completed before the completion of Phase II of COREMAP, with all remaining components targeted to be affordable within existing District level finance. The Bank will assist them in identifying permanent budget structures to finance post-program activities and identify other permanent funding mechanisms (see Technical Annex 7: Sustainability). * Partnerships. COREMAP cannot protect all of Indonesia's important coral reef ecosystems alone. The program needs the help of global, regional, and local partners to achieve the program's mission. The program will work with development banks, bi-lateral donors, national and local governments, civil society groups, communities, the private sector and research institutions. This program creates the national framework in which all partners can work together (in terms of resource mobilization and knowledge sharing) and toward achieving the program's overall objective.__Fortunately, there are many partner organizations already working together in preparing the second phase program. 8. Lessons Learned from Past Operations in the Country/Sector This second phase program directly reflects the lessons learned from Bank-financed operations such as COREMAP Phase I, Kecamatan Development Project, Kerinci Seblat Integrated Coastal Development Project and the Bank's ongoing analytic work on key themes such as Governance/Anti-Corruption, and Decentralization. The design also reflects innovations from a multitude of non-Bank financed projects and programs. First, as the second phase of an adaptable program loan, this program is designed from the 60-plus lessons learned from COREMAP Plhase I, as identified in the IUCN-led Independent Evaluation entitled Independent Evaluation Report: Coral Reef Rehabilitation and Management Program (COREMAP) Phase 1. This evaluation suggests that the limited geographical coverage of Phase I resulted in limited impacts on altering coral reef use patterns throughout the region, and improving institutional effectiveness to coordinate coral reef management. These results have been attributed to: (i) the inherent complexity of coral reef management and poverty reduction, particularly at the initial stages of such initiatives; (ii) limited resources available for community-based management and alternative income-generating activities; (iii) the lack of a supportive legal framework and weak enforcement of regulations; (iv) fragmented field implementation due to lack of cohesiveness between financing agencies and Project components; (v) the lack of a strategic approach and capacity in local government agencies to meet their enhanced role under the Law 22/1999 for management of inshore marine resources; and (vi) inadequate provision of basic social services and few tangible returns to poor coastal communities. Key lessons from phase one that have been included into the design of the second phase include: (a) communities should be placed at the center of coral reef ecosystem management; (b) coral reef ecosystem management is most likely to be sustainable when local governments form partnerships with coastal communities (i.e. collaborative management); (c) collaborative coral reef ecosystem management is a process, and must be implemented as such, rather than in a compartmentalized or fragmented approach focused on individual components; and (d) as a result of the 1999 laws (laws 22 and 25) supporting decentralization, district governments should be charged with program implementation, with coordination and support from national government. The second phase program also benefits from experiences from the Bank-financed Kecamatan Development Project (KDP) in Indonesia. Specifically, Community Empowerment is now the first step in the process towards introducing collaborative management in program sites, and energizing the coastal communities to work together to find solutions to local resource management problems. In addition, funds will be transferred directly to the communities to support the community side of collaborative management initiatives, based on the example set by KDP. The poor performance of the recently completed Bank-GEF financed Kerinci Seblat ICDP in Indonesia was due in large part to a lack of capacity and institutional constraints in the park management authority. For this reason, COREMAP Phase II has allocated a specific, but integrated sub-component designed to strengthen the national marine park management authorities link to District government in program sites. Similar to COREMAP Phase I, Kerinci Seblat ICDP suffered from a lack of integration between components and implementing institutions. The in-depth analytic work around anti-corruption issues in Indonesia [Anti-Corruption Guide: Developing and Anti-Corruption Program for Reducing Fiduciary Risks for New Projects. Lessons from Indonesia; Fighting Corruption in KDP; Fiduciary Management for Community-Driven Development Projects. A Reference Guide; INDONESIA: Corruption in Indonesia, A development Perspective] forms the basis of the program's Anti-Corruption Strategy (see Technical Annex 7). More specifically, the second phase program will develop transparent and accountable village-based financial management systems to allow funds to be disbursed directly to communities. As mentioned previously, the second phase program is designed to be a nationally coordinated, but decentralized program in implementation. Decentralization is the fundamental basis for program implementation. This is designed, in part, based on the analytic work conducted by the Indonesia Country Team to better understand the way District government institutions work. Moreover, program specific structures for implementing a decentralized program come from the preparation materials produced for the proposed Bank-financed "GRIP" programs. The second phase also incorporates several key innovations outside of Bank programs including: Decentralized and Community driven Natural Resources Management initiatives currently being undertaken in Indonesia and South East Asia. These initiatives include lessons from the USAID supported Coastal Resources Management Projects in Philippines and Indonesia; Multi-donor initiatives in resource management and community participation in East Kalimantan, North Sulawesi, Lampung and Papua, UNESCO initiatives in Jakarta Bay, International NGO conservation initiatives in Komodo, Bali, Philippines and The Federated States of Micronesia and Fiji (World Wide Fund for Nature, The Nature Conservancy, Locally Managed Marine Area Network International Maritime Alliance, Marine Aquarium Council); Initiatives in legal reform led by the International Centre for Environmental Law, Transparency International, Indonesian Corruption Watch and Oxfam. The management tools promoted by the proposed Program are in line with international consensus, COP V (South Africa) and the September 2003 G8 + UN Resolution calling for sustainable marine resource management through marine protected areas. 9. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [X] [I] Natural Habitats (OP/BP 4.04) [X] [I Pest Management (OP 4.09) [ ] [X] Cultural Property (OPN 11.03, being revised as OP 4.11) [] [X] Involuntary Resettlement (OP/BP 4.12) [] [X] Indigenous Peoples (GD 4.20, being revised as OP 4.10) [X] [] Forests (OP/BP 4.36) [] [XI Safety of Dams (OP/BP 4.37) [] [X] Projects in Disputed Areas (OP/BP/GP 7.60)* [] [X] Projects on International Waterways (OP/BP/GP 7.50) [ ] [X] 10. List of Factual Technical Documents The Coral Reef Rehabilitation and Management Program: Phase I Evaluation Report. IUCN - The World Conservation Union, June 2002; COREMAP Phase II Preparation Project Design Report, Volume I, LIPI, Jakarta, May 2002. COREMAP Phase II Preparation Background Papers Project Design Studies, Volume II. Jakarta, May 2002. COREMAP Phase II National Program Implementation Plan, MMAF, Jakarta, November 2003 COREMAP Phase H District Implementation Plans, Jakarta, November 2003 11. Contact point Contact: Pawan G. Patil Title: Sr Economist Tel: (202) 458-4276 Fax: (202) 477-2733 Email: Ppatil(worldbank.org 12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop By supporting the proposed project, the Bank does not intend to prejudice therfinal determination of the parties' claims on the disputed areas