COVER PAGE INFORMATION
1. Country: Republic of Armenia
2. Focal Area: Biological Diversity
3. Operational Program: OP#3 Forest Ecosystems and OP#4 Mountain Ecosystems
4. Project Title: Natural Resources Management and Poverty Reduction
5. Total Cost: US$ 17 Million (IDA/GEF)
6. PDF Request: US$210,000
7. In-kind contributions: US$ 14,000 Government, US$ 65,000 (PHRD grant, effective/ EU-
8. Requesting Agency: The World Bank
9. Executing Agency: Government of Armenia;
Implemented by the Ministry of Nature Protection
10. Duration: 16 months (November 2000 to December 2001)
PROJECT STRUCTURE

11. Project objectives
The project development objective is to improve management of the natural resource base in (soil, water, forest, fishery, and biodiversity) that would enhance sustainable economic growth of poor rural communities located in priority watersheds. In particular, the project will: (a) develop and implement participatory micro-watershed management plans in selected local communities; (b) support implementation of on-site technical packages that would promote conservation of biodiversity and natural resources while generating also economic benefits to local communities (i.e. improved farming practices, pasture management systems, and reforestation); and (c) strengthen the capacity of local institutions responsible for natural resources management and moderate conflicts between various resources users.
The global development objective of the project is to conserve ecosystems of global biodiversity significance through involvement of local communities, in partnership with state and local governments. The project will take an integrated ecosystem management approach to preserve biodiversity resources with global significance, while supporting local economic development and environmental management goals.
12. Global significance
The project has the potential to address local and global environmental issues such as land degradation, protection/conservation of plant and animal biodiversity and improving carbon sequestration by providing support for (i) establishment of diversified traditional and alternative land use systems to enhance sustainability; (ii) development of integrated range land production and grazing management; (iii) development of alternative fodder sources, and (iv) in situ conservation of flora and fauna population in the project area. Improvement/rehabilitation of vegetation cover including forests and conservation of biodiversity shall be achieved through direct involvement of local population and local stakeholders .
The project provides a comprehensive response to national biodiversity and ecosystem conservation priorities through measures for sustainable use of biological and natural resources. Besides multiple environmental benefits the project is expected to generate short-term economic benefits which would maintain the interest of local communities to continue with sustainable natural resources management activities even after the end of the project. Through targeting important national biodiversity conservation goals the project will generate global benefits extending to recovery of forest and mountain steppe habitats, protection of endemic flora and fauna. The project will contribute to more effective regional collaboration towards conserving biological resources in the Lesser Caucasus. It is expected that in the long run the resource management approaches could be replicated beyond the targeted districts on a national scale using the implementation experience accumulated during the project, contributing thus to larger scale conservation of biodiversity resources.
13. Background
Armenia is situated in the meeting zone of the Caucasian, Iranian and Mediterranean flora and fauna regions and has a territory of 29,000 sq. km which contains extremely diverse natural landscapes and ecosystems. It is a mountainous country with only 28 percent of land area located below 1,500 m elevation. Armenia’s habitats contain nearly all plant communities found in the southern Caucasus and 50% of the region's floral diversity. Of around 17,500 species of invertebrate and vertebrates recorded in Armenia, approximately 300 are considered to be rare or declining. A total of 99 vertebrates are currently listed in the Armenian Red Data Book, and a number are considered internationally threatened (according to the IUCN Red List of Threatened Animals).

Some of the threatened vertebrates include mouflon (Ovis orientalis gmelinii), wild goat ( Capra aegagrus) , marbled polecat ( Vormela peregusna), European otter ( Lutra lutra), brown bear (Ursus arctos), manul ( Felis manul), lammergeier ( Gypaetus barbatus ), imperial eagle ( Aquila heliaca ), great bustard ( Otis tarda ), little bustard ( Tetrax tetrax ), and Caucasian black grouse ( Tetrao mlokosiwiczi ). Large portion of endemic plant and animal species are available only in this land as genetic resources . The territory of Armenia is also located in the crossways of migratory ways of birds.
The project area will include a variety of mountain, forest, meadows and steppe ecosystems in
Gegharkunik and Tavoush districts, which host a significant share of the country’s biodiversity resources. Specifically, forests in these districts have significant role in fauna conservation and for creation of transboundary wildlife corridor between Armenia and Georgia. Two main protected areas in the geographic area of the project are the Sevan National Park (1,500 sq.km) and Dilijan State
Preserve (290 sq.km). Specifically, Lake Sevan National Park harbors unique alpine lake ecosystem and its littoral habitats. Dilijan National Reserve is a unique forest ecosystem preserving many endangered species in southern Caucasus which are dependent on broad-leaved forests for their existence. In addition the area is rich for its cultural heritage amenities, which together with unique ecosystems carries significant potential for developing eco- and natural heritage tourism. Currently these protected areas are affected by pressure from illegal economic activities. The proposed project for the first time provides resources and technical assistance backed up by strong Government commitment to address in an integrated manner issues like weak institutional capacity, lack of enforcement and inefficient management in the two protected areas.
Main Sector Issues . Environmentally sustainable development will become one of the main challenges in the years to come when Armenia struggles to find its way out from the economic crisis.
In Gegkarkunik and Tavoush districts economic difficulties during the past decade have exacerbated unsustainable use of land resources as a result of natural soil erosion, lack of rotation and generally poor farming practices. Currently more than half of the arable land in the project area is moderately to severely eroded. Overgrazing is a serious issue in the project areas, which has caused significant changes in both vegetation and species composition in steppe and meadow ecosystems. Illegal cutting in forests for timber and fuelwood on steep slopes has accelerated soil erosion process, which causes negative environmental impacts both locally and in downstream areas. Altogether some 10% of the forest cover has been lost since the beginning of transition. Pressures on the environment and biodiversity resources are expected to increase as gradual degradation of rural infrastructure (i.e. irrigation systems, rural roads, energy supply) and decreasing purchasing power of rural population, combined with recent natural disasters (i.e. drought) may further increase pressures on marginal lands and forests.

Root Causes . The main root causes of biodiversity loss are closely related to overall economic crisis since the beginning of transition which has increased the number of people who depend on utilization of natural resources for their livelihoods. In addition, natural resource degradation is closely linked to prevailing poverty levels. This is especially the case of protected areas in Gegharkhunik and
Tavoush where root causes for biodiversity losses are grazing pressure and poaching of resources by the population which is largely involved in subsistence agriculture. Other root causes of environmental degradation are related to: (i) lack of intersectoral coordination and participatory approach in natural resource use; (ii) weak institutional and enforcement capacity of regulatory agencies; (iii) limited access to financial resources and technical advice needed for more sustainable management of arable and pasture lands; (iv) lack of alternative income generating activities in rural areas; and (v) lack of public awareness of sustainable management of natural and biodiversity resources.
Approach to Address Issues.
The project will address these issues and root causes of degradation of natural resources by pursuing conservation of biodiversity through development of integrated ecosystem management approaches at the local micro-catchment levels with direct involvement of local communities. It will provide opportunity to test new innovative mechanisms to encourage local government and community support for biodiversity conservation through developing appropriate economic incentives for sustainable use of natural resources. Coordination of project activities with on-going World Bank projects in Armenia, and activities carried out by other donors (UNDP Agribiodiversity Conservation Project) allows to take a broader approach to address crosscutting issues such as mitigation of rural poverty, lack of inter-sectoral cooperation and public awareness.
Development of participatory, community based institutions and project management mechanisms will be key elements of the project. The design of the project has evolved as a natural outcome of the
National Environmental Action Plan (NEAP) and National Biodiversity Strategy and Action Plan and aims to provide support to following up on the government commitment for protecting biodiversity and improve rural living standards through promoting sustainable management of natural resources.
14. Project Description and Components :
A. Project Description.
The project will offer new opportunities for poverty reduction in rural areas by supporting sustainable productive activities targeted to reduce pressures on environmentally sensitive areas and productive natural resource base in selected watersheds. As such, the project is expected to contribute to raising local incomes by introducing sustainable agriculture practices, while protecting globally and regionally important biodiversity resources, nature and cultural heritage values. The project will support the cooperative efforts of affected communities and authorities in Tavoush and Gegkarkunik districts to integrate new knowledge into their routine management practices and will lead them how to apply ecosystem management concepts in specific field situations
B. Preparation Approach and Components . The project will take an ecosystem approach to natural resources management where conservation activities will become an integral part of the management of specific natural resources. The project is being conceived as highly participatory, both in design and execution. Participation of both beneficiaries and implementing institutions is expected to engage them in a dialogue, which will synthesize user group’s interest and environmental concerns.
Participation will result in heightened sense of local ownership and appreciation of nature assets, which is necessary and logical prerequisite for implementation of conservation activities whose benefits are beyond local interest. Participation framework that defines broad development interests of communities will assist to develop and measures at relatively low overall cost. Specifically, the project will build the local capacity to absorb the project investments. Project components include:

(a) Participatory watershed management US$ 7.0 mill (IDA/GEF).
This component will finance improved social and technical approaches of natural resources management in selected micro catchment areas. Investments will be provided to implement technical packages that would increase the productivity of farmlands, control soil erosion and stop the degradation of pasturelands. Training and technical assistance would be provided on participatory planning, multi-level consensus building and technical aspects for sustainable management of natural resources before technical packages were implemented at the farm level. At the community level, emphasis will be given to strengthen those key areas needed to effectively implement the project – dispute resolution over the use of natural resources, participatory planning and decision-making.
(b) Forest management US$ 4.5 mill (IDA/GEF). The component will provide direct payments or in-kind compensation (seeds, fertilizers, rehabilitation of infrastructure etc.) for local communities and individual households for undertaking reforestation activities as agreed in the work programs.
Sustainable economic growth would be stimulated by arranging of mid-term contractual arrangements with rural households and transferring of responsibility for implementation of agreed works (e.g. responsibility for rehabilitation/ planting for x hectares and years). Regional and local administrations will play an important role in the selection of pilot areas and in organizing the implementation of agreed work programs. In addition the project would cover the cost of necessary international and local experts who would assist in the implementation of the activities and training activities; purchase of necessary equipment for the implementation of the planned activities; and expenses related to the training courses for selected forestry personnel. In addition the project would provide assistance in the development of National Forest Program (NFP) and strengthening of State
Forest Administration.
(c) Protected area management and biodiversity conservation US$ 4.5(IDA/GEF).
This component will support on-site protected area management with global environmental significance through taking an ecosystem approach to promote biodiversity conservation at the watershed level.
Specifically, the component would support strengthening of the management of Lake Sevan National
Park and Dilijan State Reserve. The activities will include the inventory of biodiversity resources and habitats; development of management plans and land use zoning; training for park staff; financing of basic monitoring equipment; and improvement of basic nature tourism infrastructure
(i.e. hiking trails, visitor centers, and information boards). In addition, the project would finance mechanisms for adoption of biodiversity conservation and sustainable use principles adapted to local experience and develop incentive schemes to use traditional varieties by the local communities. The project would provide both training and technical assistance activities as well as funds for pilot projects to demonstrate traditional approaches to biodiversity use.
(d) Project coordination and management US$ 1.0 mill. (IDA). This component would finance technical assistance to develop project management and financial management capacity, and would fund financial services, training, vehicles, equipment, and operating costs of a Project Implementation Core Unit within the Ministry of Nature Protection and its local technical support units in the two locations.
Financing.
The Government recognizes the significance of environmental problems in Armenia but they are not considered a national priority for public expenditure. The project is designed as a fully blended IDA/GEF investment operation and the whole project is expected to generate increased income overtime. GEF grant financing is sought to finance the initial incremental cost for promoting integrated ecosystem management and is expected to yield multiple environmental benefits. During preparation project-financing arrangement would aim at fair cost and risk sharing to reflect the expected local and global environmental gains.

The requested technical assistance will facilitate and possibly leverage donor partnership financing for specific conservation activities. Without international support Armenia ecosystems will continue to suffer from habitat change and destruction, over use of biological resources, land degradation and soil erosion, unsustainable timber and fuel wood harvesting.
Implementation Arrangements.
The proposed project will be implemented over a period of five years. The Ministry of Nature Protection would be responsible for project oversight and implementation the project activities in coordination with the Ministry of Agriculture and other stakeholder agencies and beneficiary groups. Forest management and protected areas activities will be the responsibility of the Department of Forestry (Hyantar) and the Department of
Protected Areas, respectively within the MoNP. The project would develop mechanisms to strengthen cooperation among all relevant central and local Government structures to ensure effective implementation of activities at the local level. Partnerships between NGOs, research organizations and communities groups would be used in planning and implementation of community-level activities. The implementation of the project will build on NGO experience and existing community arrangements.
A Project Implementation Core Unit located in the Ministry of Nature Protection and its local technical/implementation units would supervise and provide technical advice for the implementation of the project. In order to facilitate preparation, institutional coordination and decision-making for project preparation activities Project Preparation Unit (PPU) and the Project Preparation Steering
Committee (PPSC) have been established. The PPSC is a consultative body which membership includes representatives of relevant sectoral ministries and regional authorities. It is expected that the
PPSC will consult with local research institutes and NGOs as appropriate.
16. PDF Block B Outputs
The expected outputs of this PDF Block B grant will form the basis of a GEF project document for submission to GEF Council and will include:
(a) Management plan, guidelines and investment plans for the Lake Sevan National Park and Dilijan
State Preserve , based on innovative and cost-effective integrated ecosystem management approache.
The plans will include habitat conservation activities linked to PA management plans and based on land use consistent with biodiversity conservation, and professional development and training in integrated eco-system management, and public education and awareness activities;
(b) Comprehensive assessment of planning capacity, policy and institutional issues with recommendations for a framework to facilitate participatory implementation and accommodate the needs of local communities;
(c) Public Participation Plan targeting partnership with local communities living within or adjacent to the Lake Sevan National Park and Dilijan State Preserve for planning and implementation of ecosystem management activities. The plan will include mechanisms for conflict resolution among resource users;
(d) Training Plan for the institutions responsible for project implementation activities;
(e) Detailed Investment Package for the Protected Areas and Biodiversity Conservation project component coherent with the investment plans of the Participatory Watershed Management and
Forest Management project components; and

(f) Implementation Plan with monitoring and evaluation arrangements consistent with the overall project implementation framework and specific monitoring indicators verifying the on-site benefits in statistical and qualitative measurement terms and project impacts.
17.
Eligibility
Armenia ratified the Convention on Biological Diversity (CBD) in May 1993. Recognizing the importance to contribute to the international effort to mitigate greenhouse gas emissions Armenia also ratified the UN Framework Convention on Climate Change (UN FCCC) in May 1993. In order to fulfil the basic provisions of these conventions Armenia has undertaken a commitment to contribute to international objectives by developing two national projects (i) First National Report to
CBD and Biodiversity Strategy and Action Plan, and (ii) Country Study on Climate Change, which were funded by GEF. As a result, Armenia has identified at national and regional level natural ecosystems and spheres of activity which are most vulnerable to climate changes effects and ecological consequences that need to be addressed through practical actions. The proposed project is directly linked to the efforts of the Government of Armenia to address national and global priorities by reversing land degradation, enhancing biodiversity and to contribute to international efforts to improve carbon sequestration..
This project is consistent with the GEF Operational Program #3 on Forest Ecosystems and OP #4 on
Mountain Ecosystems. It is based on the priorities identified in the biodiversity chapter of the NEAP
(1998), and in the Biodiversity Strategy and Action Plan (1999) and which are covered by the GEF operational strategy for biological conservation. The project will support in-situ conservation and sustainable bidiversity use in the Transcaucasus region. Proposed re-vegetation measures have potential to contribute to the global effort to mitigate anthropogenic releases of carbon dioxide. It responds to COP III guidance by promoting capacity building, especially for local communities; promoting conservation and sustainable use through adaptive management of forest landscapes, and meets the objectives of other international conventions. The project is complementary to the proposed GEF/UNDP medium sized national project for In-situ Conservation and Sustainable Use of
Agro-biodiversity now under preparation. This project is designed as a demonstration project to provide technical support for developing a mix of in-situ conservation activities of agro-biodiversity and land race and to develop a legislative and management framework for conservation and management.
Cross-fertilization between the proposed project and the UNDP demonstration project will be sought during preparation and implementation to reinforce the project design. This project will also build on the work carried out by other donors active in Armenia such as UNEP, UN-FAO,
USAID, and SIDA in the area of environmental protection and natural resources use.
18. National and International support
The Government of Armenia has identified its broad environmental priorities and its specific biodiversity conservation objectives, in the recent National Environmental Action Program (NEAP,
1998) and the Lake Sevan Action Plan (LSAP, 1998). The Government has requested the World
Bank assistance both technical and financial in support to their effort to design and implement the project to which high priority is attached. The proposed project builds also on the recommendations and priorities specified in the :

(i) Biodiversity Strategy and Action Plan (BSAP, 1999) of Armenia identifies the need to improve and implement natural resources management systems relating to biodiversity conservation at the community level. It also gives high priority to sustainable development through integration of biological resource management into development of local communities and to reduce the rural poverty levels; and
(ii) Armenia Forest Sector Development Strategy prepared with the assistance of UN-FAO identifies challenges to sustainable forestry in Armenia, and the need to broaden the mandate to provide better protection to forest biodiversity. The strategy identifies the need for integration of biodiversity conservation to forest management activities, which is consistent with the GEF biodiversity conservation objectives.
Recognizing the importance to promoting sustainable development in rural areas through improved management of natural resources the Ministry of Nature Protection has signed a letter of endorsement
(see attached) requesting PDF Block B grant money as critical for the preparation of the project. At national level the Government has built a consensus to the proposed project approach which has materialized in the establishment of a Project Preparation Steering Committee with broad participation of central and local stakeholders. The project has been approved for entry in the pipeline of GEF funded projects by the GEF Secretariat. In view of the tight preparation schedule the
PDF B grant resources are critical to the preparation of the project.
19. Justification
The project would promote rehabilitation of ecosystems and conservation and sustainable use of biodiversity of the Transcaucasus, an area that has been identified as one of the 200 globally important ecoregions for terrestrial biodiversity. By rehabilitating local natural resources production base and providing alternative income generating opportunities to rural population the project will generate significant global benefits through recovery of critical forest and mountain steppe habitats, protection of endemic flora and fauna in southern Caucasus area. The project will contribute to more effective regional collaboration towards conserving biological resources, and will complement the objectives of the Bank/ GEF Georgia Protected Areas Development Project.
This project is consistent with the GEF Operational programs: Mountain Ecosystems and Forest
Ecosystems. Through an integrated ecosystem management approach the project aims at enhancing biological diversity in ecosystems where main threats arise from deforestation, illegal logging, poaching on plans and animals, unsustainable grazing and agricultural practices. It responds to COP
III guidance by promoting a comprehensive and cross-sectoral approach to implementing the
Convention on Biological Diversity, and by promoting capacity building, especially for NGOs; promoting conservation and sustainable use through adaptive management of forest landscapes, and meets the objectives of other international conventions.
The project is consistent with Article 8 ( in-situ conservation) of the convention on biological diversity as it will support protection, management and extension of protected areas in a region of internationally important biodiversity; promote environmentally sound and sustainable development of local communities living within or adjacent to protected areas, with a view to assuring more effective protection of these areas; promote recovery of threatened species through the development and implementation of plans and management strategies; and will support maintenance of viable populations of threatened and endangered species within and beyond protected area boundaries.

The project is consistent with Agenda 21 and guidance from the COP since it will promote conservation, management and sustainable use of threatened and endangered species; strengthen the involvement of local communities and build partnerships at the local, national and regional levels, promote cost effective measures to conserve biodiversity, including economic incentives and alternative livelihood opportunities for local communities, develop revenue generating activities such as nature and cultural heritage based tourism.
The PDF B Grant is critical for continuing with the preparation of the project biodiversity conservation activities given the severe shortage of public funding in Armenia. It would be difficult to find any alternative funds for project preparation in a situation where the budget of the Ministry of
Nature Protection barely covers the staff salaries and operating expenses. No funds have been allocated for monitoring of the state of environment, collection of baseline data, establishment of natural resources and biodiversity inventories and applied research.
The PDF B Grant enables to carry out necessary project preparation studies and develop implementation plans for GEF co-financed project components. The PDF Grant will also make an important contribution in developing project preparation and implementation capacity at the central and local levels. Finally, the Grant will improve information exchange about the importance of biodiversity resources in Armenia and strengthen collaborative efforts between foreign and local experts in developing effective biodiversity conservation approaches.
20. Timetable and Budget
The Project Concept Document has been approved by the Bank sector and country management on
January 6, 2000 and reflects the agreed concept of the IDA/GEF funded project at an early stage of identification. Project preparation is expected to be completed prior to pre-appraisal scheduled for
May/June 2001. A Project Concept Note has been prepared and was approved by GEFSEC on July
10, 2000 and the project has been approved for pipeline entry. The activities to prepare the proposed project will commence upon approval of this funding application. A project preparation mission is planned for end October 2000. The mission will agree with the Government of Armenia on the institutional arrangements for the use of the PDF-B funds and will assist the Government in developing necessary terms of reference for hiring local and international consultants. Draft Project
Pre-Appraisal/Appraisal Document and Project Implementation Plan are expected to be completed prior to appraisal of the project in and submitted for GEF Council approval in early 2002.
This implies the following project processing timetable:
Activity
Approval of Project Concept Note
Approval of PDF-B Grant Proposal
Project Preparation Mission
Project Pre-Appraisal Mission
Project Appraisal Mission
Submission to GEF Council
July 10, 2000
November 2000
November 2000
May 2001
September 2001
January 2002
Date

The estimated itemized costs and necessary budget to carry out the grant activities are as follows:
Preparation Costs US$’000
Cost items GEF GoA in-kind contribution
Parallel financing PHRD/EU
TACIS-JEP
20.0
Total
103.0 Protected Area Management and
Biodiversity Protection
80.0
Planning, Policy Development and 21.0
Institutional Capacity Assessment
Preparation of the Public
Participation Plan
20.0
Professional development and training needs
25.0
Project investment plan
Coordination Workshop
Project Coordination and Travel
Costs
Contingencies
Total
25.0
10.0
25.0
4.0
3.0
2.0
2.0
2.0
5.0
210.0 14.0
10.0
10.0
10.0
10.0
5.0
65.0
33.0
32.0
37.0
40.0
15.0
25.0
4.0
289.0

World Bank User
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