multipurpose tree species research for small farms: strategies ... - part

A number of appraisal reports of financial
institutions have been studied to determine the
major criteria affecting the selection of projects
for funding. All but one were tree production
projects, including social forestry. The basis for
funding decisions seems to be the financial and
economic internal rates of return, regardless of
whether the ultimate objective of the project is
social or commercial. In many cases, the
project has been designed to protect the
investment/loan, often at the expense of
potential benefits for the villagers. When the
primary objective of a social forestry project is
to benefit people, the author believes there
should be some criterra representing this
objective in the fuiding process.
Background
The process leading up to the decision to
fund a project has always been an intriguing
subject to outsiders. If the decision making
process of the donor agencies were known, it
would facilitate the project design process.
Each donor agency has its own criteria for
such decision making. In some cases, the
decision to fund a project may be on
humanitarian grounds alone. In others,
however, the financial return is more important.
It is difficult to understand the funding
process completely as only approved project
documents are available for analysis. In spite off
this limitation it was useful to study the rating
and funding systems. The main obicctive was to
determine the common dcnominators of the
projects, if possible. The scope of the study was
limited to projects dealing with tree production
with available project documents or appraisal
reports. The twelve documents, chosen at
random, include two projccts funded by the
Asian Development Bank (ADB), nine projects
fundcd by the Internation'il Bank for
Reconstruction and Development (IBRD), and
one project jointly funded by the IBRD and the
United Nations Development Programme
(UNDP). Components and expected outputs
Comparative Analysis of Appraisal Methods for
Funding Forestry Projects
Sathi Chaiyapechara
Royal Forest Department
Bangkok, Thailand
69
for each of the projects are summarized in
Table 1with a brief description included at the
end of this paper. The reports are listed in the
Appendix.
Types of Tree Production
Tree production can be divided into two
broad categories -- social forestry and
commercial production. They differ in their
basic concepts, non-profit versus profit-oriented
production of trces. Even among the social
forestry models, the approaches and goals of the
groject design team often cause the project to
be more profit-driven than humanitarian. They
recover the costs of social forestry by stressing
the profit component of the project in order to
repay the loan, regardless of the intended
beneficiaries. Several of the pro.ects, however,
demonstrated a humanitarian spirit by providing
free seedlings, land and other inputs to help
marginalized sectors of the population improve
their standards of living. The size of the loan
was often similar between these two types of
projects. The projects from Bangladesh and
Utar Pradesh are examples of projects
designed to safeguard the investment.
Examples of benefit sharing arrangements in
social foresty projects include providing
bamboo to tribal peoplc in the hills in the
Karnataka project in India, or distributing 25%
of the forest products to the villagers after
rehabilitating degraded forests in West Bengal.
Although benefit sharin could be used as a
criteria inprocct appraisal, it was not
mentionc a:, a justification for funding.
In commercial tree production, such as the
Trcc Crops Project in Sri Lanka, or the
Woodfue Supply Prcinvestmcnt Study in
Thailand, the appraisal was a straightforward
cost and bcnefit analysis.
Types of Funding
The type of projected funding greatly
influences the project appraisal process. For a