Forests Sourcebook - HCV Resource Network

useful first cut in understanding country capacity in regulating
the environment.
Identifying and screening macro policy reforms. The
second part of the task of identifying and prioritizing situations
where more intensive due diligence on forest outcomes
is required involves examining the specific nature of those
policy operations. Development policy operations come in
many flavors, from macro scale to specific sectoral reforms.
Moreover, they may mix reforms across different scales.
Table 6.1 presents a list of typical reforms in World Bank
development policy loans and potential forest linkages. However,
this can only serve as a guide, and initial country conditions,
such as the nature of its environmental problems, its
resource endowment, and the policy and institutional setting,
are critical in determining the direction and magnitude
of effects of individual reforms on the environment.
There are certain sectoral macro policy reforms that
immediately raise red flags. These include agricultural
reforms, such as reforms in land markets and improved
rural finance; reforms of government institutions, such as
marketing boards, which can potentially strengthen resource
management; energy price reforms; natural resource price
reforms; changes in exchange rate regimes; and trade policy
reforms. In contrast, closer assessment can be required for
reforms with less apparent impacts on the forest sector, such
as macroeconomic, public, and fiscal reforms that include
tax policy reforms, reforms to promote foreign direct investment,
and the like.
The sectors in which many World Bank policy operations
are concentrated (such as Central Government Administration
and the General Public Administration sector) do not
immediately suggest a direct or indirect link with forest
outcomes. However, a closer examination of the thematic
Table 6.1
Typical Reforms in Policy-Based Operations, and Potential Forest Linkages
Potential implications
Sector Reforms for forests
Energy Typically encompass pricing, subsidies, ownership, and regulatory Fuel substitution could potentially push
issues.
people to use biomass.
Agriculture Reforms may span land markets, product markets, subsidies, Extension of agriculture in forest-rich
rural finance, input prices, trade taxes, irrigation institutions, and countries could potentially lead to
reform of government institutions such as marketing boards and deforestation.
stabilization funds.
Financial Financial sector reforms cover privatization, writing down of bad Not much impact expected. a
loans, recapitalization of the banking system, and regulatory issues
(among many possibilities).
Health, education Reforms typically cover financing, resource allocation, level of access, Not much impact expected.
and effectiveness of expenditures.
Potential to reduce or
Macro Reforms manage any negative outcomes
Public expenditures, Reform programs embrace expenditure frameworks, budget Could be detrimental if public expenditure
public sector transparency, financial management, accountability, priority setting, for protecting forests is cut during major
management service delivery efficiency, and the skills, professionalism, and fiscal consolidation.
remuneration of the public service.
Tax reform Reforms deal with tax incidence (income, assets, corporations, Will have an impact to the extent it involves
consumption), tax rates, exemptions, deductions, and the
taxation in forest or agriculture sectors.
complexity of the tax system.
Fiscal federalism and Decentralization reforms aim to increase the efficiency of service Provides opportunity for shifting forest
decentralization delivery, accountability, effectiveness, capacity, and adequacy of governance to local levels.
regulatory frameworks at the local level; they may also embrace
fiscal decentralization.
Private sector Reforms deal with business climate issues—business taxation; Will have an impact to the extent private
development regulation of entry, operation, and exit; bankruptcy procedures; sector involvement is envisaged.
protection of property rights; and operation of capital markets.
Trade reform Typically includes elimination of non-tariff barriers, reduction Reforms undertaken in the presence of
and simplification of tariff rates, reform of customs procedures, and preexisting market, policy, or institutional
regulations relating to foreign direct investment.
imperfections in the forest resource sector
may lead to adverse effects.
Source: Mani 2004.
a. There are different schools of thought on this subject; note 5.4, Strengthening Fiscal Systems in the Forest Sector, suggests a different outcome.
NOTE 6.3: IDENTIFYING THE NEED FOR ANALYSIS ON FORESTS IN DEVELOPMENT POLICY REFORMS 231