DRAFT. Safeguard Diagnostic Review for

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized DRAFT Safeguard Diagnostic Review for SR8 Piloting the Use of Bhutanese Systems to Address Environmental and Social Safeguard Issues in the Proposed World Bank-Assisted Rural Access II Project Equivalence and Acceptability Report

2 ii November 2006

3 iii TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS...IV EXECUTIVE SUMMARY...VI BACKGROUND... VI PROJECT DESCRIPTION...VII STRUCTURE OF THE REPORT...VII RESULTS OF EQUIVALENCE ASSESSMENT...VIII RESULTS OF ACCEPTABILITY ASSESSMENT... X INTRODUCTION... 1 PROJECT DESCRIPTION... 1 DONOR ACTIVITIES AND COORDINATION... ERROR! BOOKMARK NOT DEFINED. BACKGROUND... 1 RATIONALE FOR PROJECT SELECTION... 2 STRUCTURE OF THE REPORT... METHODOLOGY AND PROCESS FOLLOWED IN DETERMINING EQUIVALENCE AND ACCEPTABILITY... PART I. EQUIVALENCE ANALYSIS... 4 APPLICABLE WORLD BANK SAFEGUARDS AND EA CATEGORY... 4 LEGAL STRUCTURE FOR APPLICABLE SAFEGUARDS... 4 EQUIVALENCE TO OPERATIONAL PRINCIPLES OF OP 4.00, TABLE A1: DISCUSSION RELEVANCE OF DIFFERENCES TO RAP II PROJECT CONCLUSIONS OF EQUIVALENCE ANALYSIS MEASURES TO ATTAIN EQUIVALENCE R MEASURES TO SUSTAIN EQUIVALENCE IN THE RURAL ROADS SECTOR PART. II ACCEPTABILITY ASSESSMENT ENVIRONMENTAL GOVERNANCE PROCESS IN BHUTAN INSTITUTIONAL AUTHORITY AND CAPACITY OF AGENCIES WITH ENVIRONMENTAL MANDATES IN THE ROADS SECTOR PERFORMANCE AND OUTCOMES... 4 CONCLUSIONS OF ACCEPTABILITY ASSESSMENT MEASURES TO ATTAIN ACCEPTABILITY FOR RAP II MEASURES TO SUSTAIN ACCEPTABILITY IN THE RURAL ROADS SECTOR PART III. ROLES AND RESPONSIBILITIES OF RGOB AGENCIES AND OTHER STAKEHOLDERS RESPONSIBILITIES OF RGOB AGENCIES AND OTHER STAKEHOLDERS RESPONSIBILITIES OF THE WORLD BANK PART IV. PUBLIC CONSULTATION AND DISCLOSURE REPORT ON OCTOBER 24, 2006 PUBLIC CONSULTATION AND DISCLOSURE WORKSHOP ANNEXES ANNEX A. EQUIVALENCE ANALYSIS MATRIX ANNEX B. REFERENCES ANNEX C. LIST OF PERSONS MET DURING EQUIVALENCE AND ACCEPTABILITY MISSIONS... 82

4 iv ABBREVIATIONS AND ACRONYMS ADB AEC BoQ CA CAB CAS CSEMP DC DANIDA DANTAK DCA DEC DoF DoLG DoR DYT EA EAA EC ECoP ECPHR EMP EFRC EFRC-SP EO EToR EU EUSPS FMU GEF GYT IBRD ICR IDD IR MoA MoHCA MoWHS MRG NA NCD NEC NECS NEPA NES NH Asian Development Bank Application for Environmental Clearance Bill of Quantity Competent Authority Contractors Association of Bhutan Country Assistance Strategy Contractor s Site Environmental Management Plan Development Clearance Danish International Development Assistance Border Road Engineering Program (Government of India) Department of Cultural Affairs Dzongkhag (District) Environmental Committee Department of Forests Department of Local Governance Department of Roads Dzongkhag Yarge Tshogdu (District Development Committee) Environmental Assessment Environmental Assessment Act Environmental Clearance Environmental Code of Practice Environmental Code of Practice for Highways and Roads Environmental Management Plan Environmentally Friendly Road Construction Environmentally Friendly Road Construction-Support Program Environmental Officers Environmental Terms of Reference Environment Unit Environment and Urban Sector Programme Support (DANIDA) Forest Management Unit Global Environmental Facility Geog Yarge Tshogchung (Block Development Committee) International Bank for Reconstruction and Development Implementation Completion Report Investigation and Development Division (DoR) Involuntary Resettlement Ministry of Agriculture Ministry of Home and Cultural Affairs Ministry of Works and Human Settlements Monitoring and Reporting Guideline National Assembly Nature Conservation Division National Environment Commission National Environment Commission Secretariat National Environmental Policy Act National Environment Strategy Natural Habitats

5 v OP PAP PCP PPAH PCR PPD PRSP RAP I RAP II RECP RGoB SDR SNV TC UCS UNDP UNEP WWF Operational Policy Project Affected People Public Consultation Plan Pollution Prevention and Abatement Handbook Physical Cultural Resources Policy Planning Division (DoR) Poverty Reduction Strategy Paper Rural Access Project Second Rural Access Project Regulation for the Environmental Clearance of Projects Royal Government of Bhutan Safeguard Diagnostic Review Netherlands Development Organization Tender Contract Use of Country Systems United Nations Development Programme United Nations Environment Programme World Wildlife Fund CURRENCY EQUIVALENTS (Exchange Rate Effective November 1, 2006) Currency Unit = Bhutanese Ngultrum N45.08 = $1 Vice President: Country Director: Sector Director: Acting Sector Manager: Team Leader: Praful C. Patel Alastair McKecknie Constance Bernard Kseniya Lvovsky Malcolm Jansen

6 vi EXECUTIVE SUMMARY BACKGROUND 1. Beginning in March 2005, the World Bank has been supporting a limited number of pilot projects in which lending operations are being prepared using the borrowing country s systems 1 for environmental assessment (EA) and other environmental and social safeguards, rather than the World Bank s operational policies and procedures on safeguards. The rationale for using country systems is to scale up development impact, increase country ownership, build institutional capacity, facilitate harmonization and increase cost effectiveness. These pilot operations are governed by a new operational policy (OP/BP 4.00) on Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank-Supported Projects. 2 OP/BP 4.00 elaborates on the approach, enumerates the criteria for assessing country systems, and specifies documentation and disclosure requirements and respective roles of the Borrower and the World Bank. 2. The World Bank considers a Borrower s environmental and social safeguard system to be equivalent to the World Bank s if the Borrower s system, as determined by the World Bank, is designed to achieve the objectives and adhere to the applicable operational principles set out in Table A1 of OP Since equivalence is determined on a policy-by-policy basis in accordance with Table A1, the World Bank may conclude that the Borrower s system is equivalent to the World Bank s in specific environmental or social safeguard areas in particular pilot projects, and not in other areas. Before deciding on the use of country systems (UCS), the World Bank also assesses the acceptability of the Borrower s implementation practices, track record, and institutional capacity. The above approach and criteria for assessment were developed with inputs from external stakeholders such as representatives of governments, bilateral and multilateral development institutions, civil society organizations, and the private sector and is consistent with commitments made by the development community in the Paris Declaration on Aid Effectiveness of March The Royal Kingdom of Bhutan (RKoB) is a small country with a limited number of donors and a small public administration where a harmonized approach to environmental and social safeguards can lower transaction costs and enhance local systems and capacity for safeguards implementation. Achieving a harmonized approach requires an assessment of the country s safeguard systems (policies, laws and regulations) as well as the broad institutional arrangements for environmental and social safeguards management. Such an exercise would in the long term help Bhutan improve its overall environmental and social safeguard management system as well as provide opportunity for Bhutan to understand and better manage environmental and social safeguards in its broader development program. It would also provide a basis for reaching agreement among the main donors for harmonization around Bhutan s country systems. 1 Country systems is defined as the country s legal and institutional framework, consisting of its nation, subnational or sectoral implementing institutions and relevant laws, regulations, rules and procedures that are applicable to the proposed pilot project. 2 OP/BO 4.00 can be viewed at this website: D00776B19?OpenDocument The Bank s environmental and social safeguard policies will apply to the areas which the Bank has determined not to be equivalent to its applicable policy framework and will continue to apply to all projects that are not part of the pilot program. 4 The full text of the Paris Declaration can be viewed at: ttp://

7 vii 4. Two prospective Bank-funded projects were selected for piloting the Use of Country Systems (UCS) as part of a World Bank Board-approved pilot program for addressing environmental and social safeguard issues as governed by the OP 4.00: the Second Rural Access Project II (RAP II) and the second Urban Development Project (UDP II). 5. Bhutan was selected for participation in the pilot program due to the relatively recent and therefore advanced state of its laws and regulations corresponding to World Bank environmental and social safeguards, in particular, Environmental Assessment (EA), Natural Habitats (NH), and Physical Cultural Resources (PCR), all of which are triggered by the RAP II Project. In addition, Bhutan s satisfactory performance in implementing the environmental and social safeguard requirements applicable to the RAP I project, as noted in the Bank s draft Implementation Completion Report (ICR) on RAP I, suggests that Bhutan s system may be sufficiently robust to provide the basis for piloting in the rural roads sector. 6. The application of UCS to Bhutan and to the RAP II project is consistent with other donors current priorities and programs that seek to contribute to the enhancement of Bhutan s environmental and social policies, laws, institutional capacity and performance and to the development of the rural roads sector, in particular, the Asian Development Bank (ADB), the Danish International Development Agency (DANIDA), and the Netherlands Development Organization (SNV). PROJECT DESCRIPTION 7. The development objective of RAP II is to provide all-season road access to targeted rural communities. The project will focus on three Dzongkhags (districts): Wangdue Phodrang, Dagana, and Pemagatshel, where the average distance and walking time from a beneficiary village to an all-season road ranges from 4 to 54 km, or 1 to 15.5 hours. The proposed RAP II is a follow-up operation and it is designed to replicate the positive lessons and good practices from RAP I in three new districts of the country. Its objective of rural access expansion is also assigned a high priority by the RGoB s Poverty Reduction Strategy, its Ninth Five-Year Plan ( ) and the IBRD s Country Assistance Strategy for Of the eight World Bank safeguard policies included in the UCS pilot program, four are applicable to the project: Environmental Assessment (EA), Natural Habitats (NH), Physical Cultural Property (PCP) and Involuntary Resettlement (IR). The remaining environmental and social safeguards Forests, Pest Management, Safety of Dams and Indigenous Peoples are not applicable to the RAP II project. STRUCTURE OF THE REPORT 9. Part I of this Safeguard Diagnostic Review (SDR) comprises the Equivalence Analysis carried out by World Bank legal and policy staff in collaboration with Bhutan s National Environment Commission (NEC), its Office of Legal Affairs and officials at other agencies with legal authority over decisions in the rural road construction sector, including the Ministry of Works and Human Settlements (MoWHS) and the Ministry of Agriculture (MoA). Part II comprises the Acceptability Assessment carried out by World Bank policy and technical staff in collaboration with NEC and other Bhutanese agencies charged with the implementation of laws and regulations dealing with the environmental and social impacts of rural road construction. The conclusions of Parts I and II of this report include measures designed to ensure that Bhutan s systems reach and sustain equivalence and acceptability in connection with the implementation of

8 viii the RAP II project and also contribute to the enhancement of Bhutan s capacity to implement its environmental safeguards throughout the roads sector and beyond. RESULTS OF EQUIVALENCE ASSESSMENT 10. A comparative analysis was conducted on the RGoB s laws and regulations corresponding to the World Bank s safeguards on EA, NH, PCR and IR per the Operational Principles of OP 4.00 Table AI. The results of this comparison are presented in matrix format in Annex A of this report. 11. Bhutan s policies, legislation and regulations pertaining to the EA process and EA documentation are relatively recent and reflect international best practice to a significant extent, with the consequence that there is a substantial degree of equivalence between Bhutanese EA systems and the required elements of OP 4.00 Table A1 with respect to EA, NH and PCR. 12. Remaining differences between Bhutan s systems and the Operational Principles of OP4.00 Table A1 for EA, NH and PCR include: EA: Absence of required reference in EA documentation to: o o o Transboundary and global concerns; Bhutan s international environmental commitments as reflected in treaties and conventions its has ratified; and The World Bank s Pollution Prevention and Abatement (PPAH) Handbook or equivalent international environmental standards; NH: Lack of clear preference for siting projects on previously converted lands; and PCR: Lack of standard provision for dealing with chance finds. Relevance of Equivalence Findings to RAP II Project 1. A number of these differences are not relevant to the RAP II project and therefore, the project may not be the most appropriate vehicle for addressing them. The RAP project does not raise issues involving transboundary, global concerns or Bhutan s international environmental commitments. The PPAH does not include guidelines for rural road construction. Therefore, there is no imperative for the project to adopt measures designed to bridge these differences with respect to Bhutan s EA system. 14. Differences with respect to NH and PCH are relevant to the RAP II project and need to be addressed within the scope and term of the project. 15. With respect to IR there is some congruence between Bhutanese systems on land acquisition and the Objectives and Operational Principles of OP 4.00, to the extent that the Land Act (LA), the primary legislation applicable to land acquisition in Bhutan, does require that when the government acquires land it shall inform affected people and enter into consultation with them about the content of the compensation scheme prior to any land taking. Affected people are to be compensated through allocation of replacement land or through financial compensation according to the classification of the land taken. People whose land is acquired and who choose replacement

9 ix land as compensation are allowed to identify replacement government owned land of equal size and value in the same district. Although the law does not require this in practice, it appears that compensation is often provided to affected people without formal legal rights or claims to lands to be expropriated. 16. However, substantial differences were found between Bhutanese systems and the following Operational Principles of OP 4.00 Table A1 with regard to IR. In particular, Bhutan s legislation does not include provisions for: Avoidance or minimization of IR to the extent possible; Improvement or restoration of livelihoods of project affected peoples; Assessment of potential social and economic impacts of involuntary land taking or restriction of access to parks and protected areas; Consultation with project affected peoples on issues other than compensation; Provision of information and assistance to displaced persons; Implementation of resettlement plans and entitlements prior to project implementation; and Assessment of results of resettlement action plans. Environmental and Social Safeguards Chosen for Piloting 17. The above findings indicate that there is substantial equivalence between Bhutan s systems and the requirements of OP 4.00 Table A1 with respect to EA, NH and PCR. The relevant differences that remain with respect to EA are not relevant to the RAP II project and are best addressed in an alternative context. The differences with respect to NH and PCR are relevant to the RAP II project but can be readily addressed within the scope and duration of the project through the measures proposed below. It is, therefore, proposed that these three environmental safeguards be further considered for piloting under OP 4.00 in the RAP II project, subject to: The gap filling measures designed to reach and sustain equivalence as proposed below; and The findings and recommendations of the Acceptability Assessment included in Part II of this report. 18. With respect to IR, the differences between Bhutan s systems for land acquisition and mitigation of impacts on project affected peoples are significant, profound and are clearly relevant to RAP II. Therefore, it is proposed that the Bank continue to apply its traditional safeguard mechanism OP 4.12 rather than Bhutan s own systems to the assessment and management of the IR impacts associated with RAP II. Recommended Measures to Attain Equivalence for the RAP II Project 19. The relevant substantive differences between Bhutan s systems and the Operational Policies of OP 4.00 Table A1 identified in the above Equivalence Analysis could be readily

10 x addressed by revisions to the Code of Environmental Practices for Highways and Roads (CEPHR), which is within the administrative authority of the NEC and is a legally binding requirement in road construction contracts as described in the main section of this report. 20. The following specific changes are to be made in the CEPHR, with respect to NH and PCR: NH: o Preference for siting projects on previously converted lands: a provision stating clear preference for siting projects on previously converted lands. PCR: o Chance Finds: provision to ensure that the terms of reference provided by the CA would provide for the protection of unanticipated chance finds encountered during road construction implementation as well as PCR previously known and/or surveyed. Recommended Measures to Sustain Equivalence for the Rural Roads Sector 21. The RGoB has for some years recognized the need for a more holistic approach to environmental law and regulation. Such recognition was expressed at the outset of the current Ninth Five-Year Plan for which the Environmental Sector Plan called for the development of an umbrella law (the National Environmental Policy Act or NEPA) to facilitate implementation of such an approach. The July 24, 2006 Draft of the NEPA ( NEPA Draft ) provides a longerterm opportunity for addressing the differences identified in the Equivalence Analysis with respect to EA and NH. Bhutan is also in the process of drafting a Conservation of Archeological Heritage Act. Although an English-language draft is not yet available, based on interviews with knowledgeable officials, enactment of provisions contained in the current draft could provide an alternative opportunity to bridge the Equivalence difference that applies to PCR. Accordingly comments on the most recent NEPA draft are proposed in the Equivalence section of this report and in the Equivalence Matrix (see Annex A). 22. Likewise, although it is not proposed to include IR as one of the safeguards to be piloted in the RAP II project, the onging reform of the LA provides the RGoB with an opportunity to address the issues identified above with respect to the legal framework for land acquisition and IR in Bhutan. Issues that are conducive to such an approach are highlighted in the Equivalence Matrix (see Annex A). RESULTS OF ACCEPTABILITY ASSESSMENT 2. Overall, the Acceptability Assessment demonstrates that the agencies and private contractors responsible for implementing Bhutan s environmental policies, laws, regulations and guidance have the overall capacity to fulfill their responsibilities. The National Environment NEC, together with its Secretariat (NECS), is reasonably well organized and has sufficient resources to carry out its role of reviewing EAs and conducting overall compliance monitoring. The Department of Roads (DoR) has the authority and resources to implement the national policy of Environmentally Friendly Road Construction (EFRC) on the scale required for the RAP II project. Other agencies responsible for granting consent and monitoring the impacts of the project on NH and PCR, including the Department of Forests (DoF) and its Nature Conservation Division (NCD), under MoA, also appear to have the requisite expertise and resources to

11 xi accomplish their assigned missions under the RAP II project. Based on the record of the recently completed RAP I project, during which EFRC was introduced in Bhutan, additional resources and training are needed both within DoR and among the contractors and subcontractors for the RAP II project if the lessons and full benefits of EFRC are to be successfully applied in the RAP II project. The technical assistance component of RAP II, along with the continued efforts of other donors in the environmental and roads sectors in Bhutan, provide substantial opportunities to attain Acceptability for the RAP II project. 24. Contrasting levels of Acceptability were found with respect to the EA clearance process and the compliance monitoring process. 25. EA Clearance Process. The existing EA clearance process, which is centralized under NECS, has become increasingly robust and efficient since the enactment of the Environmental Assessment Act (EAA) in 2000 and in particular since the Regulation for the Environmental Clearance of Projects (RECP) was issued in 2002 clarifying NECS roles and responsibilities for EA review and clearance. NECS has hired qualified specialists for each major sector as circumstances have required and has been able to carry out its internal screening and review processes generally within the time frames set forth in the RECP. By all accounts, and as reflected in EA documents for the RAP I project that have been approved by NECS, it has met its regulatory responsibilities with respect to the procedural and substantive requirements of the EAA and the RECP, including the requirements for public consultation as part of the EA process. However, as documented in this and other reports, NEC s efforts to decentralize the EA review process to line ministries, departments and to a lesser extent to District Environmental Committees (DECs) has not succeeded due to severe limitations of capacity in the line ministries, in particular DoR and the majority of the DECs. 26. Compliance Monitoring: The capacity limitations at the line ministry and DEC levels have had the effect of limiting the effectiveness of compliance monitoring of Environmental Management Plan (EMP) implementation in the rural roads sector, based on this review and other sources cited in this report. Although NEC carries out periodic site inspections it cannot provide continuous on-site monitoring as is needed in order to identify and implement corrective measures during a road construction project. In any case, responsibility for implementation and compliance of EMPs by road contractors is the responsibility of the DoR. Although EFRC techniques were introduced conceptually to DoR as early as 1999 and into the RAP beginning in 2002, with substantial technical support from SNV, these techniques have yet to be fully integrated into the EMP and Compliance Monitoring Procedures followed by DoR. Proposed Measures to Attain Acceptability 27. To meet the Acceptability criteria for OP 4.00, a number of capacity building measures would need to be completed within the scope and duration of the RAP II project. At the operational level, the guiding principle for these measures would involve the further implementation of the objectives of the Environmentally-Friendly Road Construction Support Project (EFRC-SP) initiated with substantial support from SNV in the context of the RAP I project. 28. Accordingly, the following measures were discussed and agreed to at the Public Consultation Meeting on this report held in Thimphu on October 24, 2006: Coordinated management of the EA process for RAP II. Under NECS guidance designated Environmental Officers (EOs) in DoR and MoWHS are to undertake review

12 xii and approval of EAs for RAP II; Contractors are to be held directly accountable for implementation of EMPs and to provide progress reports to field engineers. Specifications regarding EFRC and related monitoring requirements are to be included in contact documents. Reporting requirements are to form part of contract covenants. Field engineers shall submit monthly EMP compliance reports to the Project Coordination Unit; EOs, with support from the Assistant Project Coordinator and Project Monitoring Engineer, shall provide regular (no less than quarterly) progress reports to the Project Coordinator. Reporting formats shall be reviewed on a regular (semi-annual) basis and revised as needed to ensure effective communication; Contractor payments shall be linked to compliance with EMP requirements; DECs are to be empowered to carry out compliance monitoring with independent line reporting to NEC. DECs shall coordinate with field engineers to review compliance at regular intervals, no less than bi-monthly. NEC is to provide regular, on-the-job training to DECs for this purpose; Satisfactory Project Completion per EMP requirements shall be certified jointly by EO/DoR and NEC on the basis of site visits to verify compliance with EMP safeguard requirements; and NCD, DoF and the Department of Cultural Affairs (DCA)/MoHCA shall be consulted, respectively, on all compliance matters relating to biodiversity, and protected areas and cultural resources. Proposed Measures to Sustain Acceptability in the Rural Roads Sector 29. Within the context of the RAP II project, but not limited to its scope and term, the RGoB has agreed to a number of additional capacity building measures to be implemented with support from the Bank and other donors, principally, DANIDA, ADB, SNV, and GEF: Enhancement of management abilities of key institutions and stakeholders at the District level. This effort, also to be funded by GEF, 5 will seek to enhance institutional and individual capacities for EAA implementation, compliance and monitoring at the national and district levels, by focusing on strengthening the linkages between these governance levels. To this end a new position within NECS will be established to function as the key governmental environmental focal point and contact person for the twenty DECs. Enhancement of environmental assessment capacity in MoWHS/DoR. It is clear that the progressive delegation of authority and responsibility for EA, EMP and project monitoring to line ministries remains incomplete, particularly in the case of MoWHS. The few environmental positions that are filled in the Ministry are scattered among different units (PPD, DoR, DUDES) with little or no coordination between them. If DoR in particular is to play a substantive role in determining the terms of reference for and reviewing EAs for road construction projects, it will need more dedicated and trained 5 Request for GEF Funding, Enhancing Global Environmental Management in Bhutan s Local Governance System, April 28, 2006.

13 xiii environmental staff in particular staffed trained in understanding and mitigating the ecological impacts of road construction projects in biologically rich areas. Enhancement of DoR s technical resources for EA. As recommended by the EFRC-SP Mid-Term Review, DoR should encourage EFRC-SP to make best use of available and affordable tools and concepts provided by the latest geotechnical resources. DoR needs better aerial and satellite maps and improved GIS based mapping capability to enable it to develop site-specific landslide risk and land susceptibility maps capable of providing better information in road planning, location and alignment, to reduce environmental costs and damages. This would require acquisition of maps (1:10,000 scale in preference to the 1:5,000 to 1:50,000 topographic maps currently utilized), map interpretation facilities, training and skills development for GIS mapping, technical assistance and training support, training of field engineers to use improved mapping facilities to ensure best alignment of roads and identification of appropriate mitigation methods when hazards are inevitable. These measures would enable better design and reduce maintenance costs for future road networks in Bhutan. Continued EFRC training in DoR, MoA and Districts. Already over 80 percent of DoR technical staff have been trained in EFRC techniques and their implementation, amounting to approximately 1,400 people. However, about twenty percent of the field engineers and staff still need to be trained. It is necessary that such training be imparted on a regular basis, as well as refresher courses of ERFC implementation. SNV will support one week training workshops/refresher courses for contractors and contractor staff in EFRC implementation. Training will also be extended to MoA and District staff, particularly as these institutions are responsible for participating in monitoring project impacts as well construction of farm and power tiller roads, that are required to incorporate EFRC techniques. At the district level, the GEF project will support the costs of EOs in sixteen of the twenty districts beyond the four pilot districts already supported by NECS, as well as the establishment of designated office space and basic equipment for the DEC members to carry out their tasks. NECS will finalize the terms of reference of the EOs. Improved EMP implementation. Improved capacity, training and skills development for field engineers are needed on timely preparation, approval, implementation, monitoring and reporting of EMP implementation, including establishment of monthly progress report formats to monitor and report on EMP implementation, to keep in line with the monthly physical/financial reporting requirements. DoR recognizes that EFRC monitoring needs to capture baseline, compliance monitoring and impact monitoring. Refining/integration of EFRC into the new formats for monitoring and evaluation needs to take place, so as to fully capture the benefits of ERFC implementation. Job-specific contractor training. Workshops should be held for two-three days with each contractor, prior to the start of work to determine how the overall EFRC concept will be applied to each particular road segment, so that appropriate resources (manpower and equipment) are allocated to the contract. Compliance with all aspects of contract agreements should be strictly enforced. The contractor must be made aware that noncompliance with any contract clause is a breach of contract which can lead to reworking of contract tasks, penalties, suspension and even termination of contracts. 0. A summary of these capacity building activities, the beneficiaries and proposed schedule is included in Table 2 in the Acceptability section of this report.

14 INTRODUCTION PROJECT DESCRIPTION 1. The RAP II development objective is to provide all-season road access to targeted rural communities. The project will focus on three districts: Wangdue Phodrang, Dagana, and Pemagatshel, where the average distance and walking time from a beneficiary village to an allseason road ranges between 4 and 54 km, or 1 to 15.5 hours. RAP II is a follow-up operation and is accordingly designed to replicate the positive lessons and good practices from RAP I in three new districts of the country. 2. The physical component of the RAP II project will cost an estimated $7.44 million and will involve the construction of three feeder roads of approximately 75 kilometers in length; improvement of 15 kilometers of existing feeder roads; and the privatization of routine maintenance.. The institutional development and implementation support element of the project will provide approximately $500,000 towards organizational development of the newly established Investigation and Development Division (IDD) within DoR. RAP II will support IDD in the following areas: Monitoring and reporting; Data collection for traffic and road condition surveys; Quality Assurance; Work, procurement and contract management system; Technical innovation and engineering; and Environmental management. BACKGROUND 4. Beginning in March 2005, the World Bank has been supporting a limited number of pilot projects in which lending operations are being prepared using the borrowing country s systems1 for EA and other environmental and social safeguards, rather than the World Bank s operational policies and procedures on safeguards. The rationale for using country systems is to scale up development impact, increase country ownership, build institutional capacity, facilitate harmonization and increase cost effectiveness. These pilot operations are governed by a new operational policy (OP/BP 4.00) on Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank-Supported Projects. OP/BP 4.00 elaborates on the approach, enumerates the criteria for assessing country systems, and specifies documentation and disclosure requirements and respective roles of the Borrower and the World Bank. 5. The World Bank considers a Borrower s environmental and social safeguard system to be equivalent to the World Bank s if the Borrower s system, as determined by the World Bank, is designed to achieve the objectives and adhere to the applicable operational principles set out in Table A1 of OP Since equivalence is determined on a policy-by-policy basis in accordance

15 2 with Table A1, the World Bank may conclude that the Borrower s system is equivalent to the World Bank s in specific environmental or social safeguard areas in particular pilot projects, and not in other areas. Before deciding on the use of country systems (UCS), the World Bank also assesses the acceptability of the Borrower s implementation practices, track record, and institutional capacity. The above approach and criteria for assessment were developed with inputs from external stakeholders such as representatives of governments, bilateral and multilateral development institutions, civil society organizations, and the private sector and is consistent with commitments made by the development community in the Paris Declaration on Aid Effectiveness of March RATIONALE FOR PROJECT SELECTION 6. Bhutan is one of eight countries being considered thus far for piloting UCS, specifically the proposed World Bank-assisted Rural Access II Project (RAP II). The World Bank has considerable relevant experience in the rural roads sector in Bhutan, having supported the RAP I project which became effective in June 2000 and closed in June The Bank has also supported projects in related sectors such as sustainable land management, forestry and other sectors with environmental and social impacts similar to those associated with the construction of rural roads. 7. On the basis on this experience, Bhutan was selected for participation in the pilot program due to the relatively recent and therefore advanced state of its laws and regulations corresponding to World Bank environmental and social safeguards, in particular, EA, NH, and PCR, all of which are triggered by the RAP II Project. In addition, Bhutan s satisfactory performance in implementing the environmental and social safeguard requirements applicable to the RAP I project, as noted in the Bank s draft Implementation Completion Report on RAP I, suggests that Bhutan s system may be sufficiently robust to provide the basis for piloting in the rural roads sector. The Bank acknowledges that this performance may be attributed in part to the contribution of other donors, including SVN, in introducing environmentally sound road design and construction practices through the Environmentally Friendly Road Construction Support Project (EFRC-SP). DONOR ACTIVITIES AND COORDINATION 8. The application of UCS to Bhutan and to the RAP II project is consistent with other donors current priorities and programs that seek to contribute to the enhancement of Bhutan s environmental and social policies, laws, institutional capacity and performance and to the development of the rural roads sector. Of specific relevance to the RAP II project and to this SDR is the support that DANIDA is providing for legislative reform and capacity development through Environmental and Urban Sector Program Support (EUSPS); ADB s technical assistance for enhancement of environmental capacity within sector ministries, at the local level and in the roads sector, 6 and SNV s EFRC-SP. 7 In addition this exercise will benefit from the joint United Nations Development Programme (UNDP)-RGoB assessment of Bhutan s capacity for global 6 Asian Development Bank, Technical Assistance to the Kingdom of Bhutan for Capacity Building to Implement Environmental Assessment Procedures, August 2005; ADB Loan to Help Improve and Expand Bhutan s Road Network, ADB press release, October 0, Netherlands Development Organization (SNV), The Road to Sustainability: Environmentally Friendly Road Construction,: Bhutan; See also, Hendrik Visser, Reindert Augustijn and S.N. Rai, Environmentally Friendly Road Construction in Bhutan: Providing Access to Rural Communities While Protecting the Environment Seminar on Sustainable Access and Local Resource Solutions, November 28-0, 2005.

16 environmental management, 8 and the joint work undertaken by Bhutan s NECS and the United Nations University on environmental governance in Bhutan. 9 STRUCTURE OF THE REPORT 9. Part I of this report comprises the Equivalence Analysis carried out by World Bank legal and policy staff in collaboration with NEC, the RGoB s Office of Legal Affairs and officials at other agencies with legal authority over decisions in the rural road construction sector, including MoWHS, and MoA. Part II comprises the Acceptability Assessment carried out by World Bank policy and technical staff in collaboration with NEC and other Bhutanese agencies charged with the implementation of laws and regulations dealing with the environmental and social impacts of rural road construction. These agencies include the Policy Planning Division (PPD) and the DoR/ MoWHS; DoF and DoF s NCD/MoA; and the DCA/MoHCA. Annex A to this report contains a matrix summarizing the major equivalence findings relative to the Objectives and Operational Policies of OP 4.00, and the remaining differences and measures designed to bridge these differences. METHODOLOGY AND PROCESS FOLLOWED IN DETERMINING EQUIVALENCE AND ACCEPTABILITY 10. The methodology used to determine equivalence between Bhutan s EA systems and the Objectives and Operational Principles of OP 4.00 that are applicable to the proposed project involved: (a) a close analysis of Bhutan s laws, regulations and the CEPHR as these pertain to four environmental and social safeguards (EA, NH, PCR and IR) that are triggered by the RAP II project; (b) interviews with Bhutanese officials, private consultants and members of civil society who are responsible for or otherwise involved in the implementation of Bhutan s legal and administrative framework for the rural roads sector; (c) consultation with other donors engaged in projects to support the development of Bhutan s legal system for EA and EMP and its institutional capacity both in general and in the specific context of the rural roads sector; (d) a critical review of the RAP I project from the perspective of Bhutan s implementation of its own environmental and social safeguard laws and regulations; (e) a review of EAs under way for projects financed independently of the World Bank or other donors that apply environmental and social safeguard conditions; and (f) a site visit to a rural roads segment under construction that is not being supported by the Bank or similar donors. 11. The SDR process included two dedicated Missions. The first, in May 2006, focused on determining Equivalence of Bhutan s laws, regulations and mandatory codes of practice with the corresponding environmental and social safeguards of the Bank. The second Mission in September 2006 focused on determining the Acceptability of Bhutan s implementation practices with respect to the three environmental safeguards for which Equivalence had been determined. 8 RGOB, NECS, UNDP, National Capacity Self-Assessment for Global Environmental Management and Action Framework, September 2005, p. xvi. 9 NECS and the United Nations University, Environmental Governance in Bhutan National Case Study, June 2004.

17 4 PART I. EQUIVALENCE ANALYSIS APPLICABLE WORLD BANK SAFEGUARDS AND EA CATEGORY 12. Of the eight World Bank safeguard policies included in the UCS pilot program, four are applicable to the project: EA, NH, PCR and IR. The remaining IBRD environmental and social safeguards Forests, Pest Management, Safety of Dams and Indigenous Peoples are not applicable to the RAP II project. The project has been screened as IBRD Category B for purposes of EA. Policy Framework LEGAL STRUCTURE FOR APPLICABLE SAFEGUARDS 1. The 2005 Draft Constitution of the Kingdom of Bhutan (Draft 2005). Bhutan is in transition to a constitutional monarchy; the draft Constitution is scheduled to be adopted in early Although the draft Constitution has no current force of law, it is frequently cited as a source of policy guidance. Should the draft be adopted in its current form Bhutan would become one of the very few countries in the world which has incorporated environmental conservation as a constitutional mandate. The draft Constitution, which was released in March 2005 for public review and comments, provides for environmental conservation in its Article 5. The Article states that: Every Bhutanese is a trustee of the Kingdom s natural resources and environment for the benefit of the present and future generations and it is the fundamental duty of every citizen to contribute to the protection of the natural environment, conservation of the rich biodiversity and prevention of all forms of ecological degradation including noise, visual and physical pollution through the adoption of environmentally friendly practices and ethos; The Royal Government shall: (a) protect, conserve and improve the pristine environment and safeguard the biodiversity of the country; (b) prevent pollution and environmental degradation; (c) secure ecologically balanced sustainable development while promoting justifiable economic and social development; and (d) ensure a safe and healthy environment; The Government shall ensure that, in order to conserve the country s natural resources and to prevent degradation of the fragile mountain ecosystem, a minimum of 60 percent of Bhutan s total land shall be maintained under forest cover for all time; Parliament may, in order to ensure sustainable use of natural resources, enact environmental legislation and implement environmental standards and instruments based on the precautionary principle, polluter pays principle, maintenance of intergenerational equity; and reaffirm the sovereign rights of the State over its own biological resources; and Parliament may, by law, declare any part of the country to be a National Park, Wildlife Reserve, nature reserve, protected forest, biosphere reserve, critical watershed and such other categories meriting protection.

18 5 14. Bhutan The country s current development philosophy is articulated in the statement of His Majesty King Jigme Singye Wangchuck that Gross National Happiness is more important than Gross National Product. For the last two decades, Gross National Happiness underscoring that economic, spiritual and environmental well-being are all equally important has remained the guiding principle for the Bhutanese in pursuing national development efforts. Around this main tenet, Bhutan has designed its Vision Statement titled Bhutan 2020: A Vision for Peace, Prosperity and Happiness, providing a 20-year perspective of development goals and objectives. The Vision Statement features environmental conservation as one of the five main development objectives and emphasizes the need to ensure that choices made in response to the many challenges that confront the nation embody the diversity of the natural environment. 15. National Environment Strategy. The National Environment Strategy (NES) titled The Middle Path launched in 1998 was derived through an inter-sectoral and consultative process. The NES enshrines the concept of sustainable development and identifies three main avenues for such development: hydropower development based on integrated watershed management; agricultural development based on sustainable practices; and industrial development based on effective pollution control measures and environmental legislation. It also examines a number of areas of special importance for environmentally and culturally responsive economic development. These include tourism, roads, financing mechanisms for sustainable development, public health, urbanization, gender and natural resource management, environmental impact assessments, and population. Finally, it goes on to outline five key crosssectoral needs that the country must effectively address to integrate environmental considerations into economic development planning and policy-making. These needs pertain to information systems and research; institutional development and popular participation; policies and legislation; training and education; and monitoring, evaluation and enforcement National Forest and Renewable Natural Resources Sector Policies: Bhutan s National Forest Policy places priority on conservation of forests and associated resources for their ecological functions. Economic benefit from forest resources is considered secondary and is to be derived within sustainable limits. Bhutan s Renewable Natural Resources Policy emphasizes people-centered economic development that has prospects for long-term sustainability, balanced and equitable development of the country s renewable natural resources and distribution of benefits, and development strategies that are environmentally friendly and ensure the integrity of the country s fragile ecosystem. 10 RGOB, NECS, UNDP, National Capacity Self-Assessment for Global Environmental Management and Action Framework, September 2005, p. 29.

19 6 Legal Framework 17. The following table provides an overview of the legal framework for Environmental Assessment and Management that is directly applicable to the Roads Sector in Bhutan: Table 1- Legislation Applicable to the Roads Sector Legislation Objective Environmental Assessment Establishes procedures for the assessment of potential effects of strategic Act 2000 plans, policies, programs, and projects on the environment, and for the determination of policies and measures to reduce potential adverse effects and to promote environmental benefits. The Act requires the RGoB to ensure that environmental concerns are fully taken into account when formulating, renewing, modifying and implementing any policy, plan or programs. Regulations for the Environmental Clearance of Projects and Strategic Environmental Assessment 2002 Road Act 2004 Forest and Nature Conservation Act 1995 Includes procedures for the implementation and enforcement of the Environmental Assessment Act 2000 and establishes conditions and methods for the use of Strategic Environmental Assessment where applicable. In relation to environmental management, the Act accords the DoR power and function to adopt and promote environmentally friendly techniques in the implementation of road construction activities. It requires that all road construction and maintenance works conform to environmental considerations, geological stability considerations and preservation of agricultural land. Provides for the protection and sustainable use of forests, wildlife and related natural resources of Bhutan for the benefit of present and future generations, and covers forest management, prohibitions and concessions in government reserved forests, forestry leases, social and community forestry, transport and trade of forestry produce, protected areas, wildlife conservation, soil and water conservation, and forest fire prevention. Promulgated for the enforcement of the Forest and Nature Conservation Forest and Nature Conservation Rules 2000 Act Dzongkhag Yargye Contain numerous provisions for environmental management by local Tshogdu and Geog Yargye community bodies at the district and block levels. Tshogchung Acts 2002 Source: IBRD, Environmental Management Plan, Sustainable Land Management Project Summary of Applicable Laws: Environmental Assessment 18. Environmental Assessment Act 2000 (EAA). The Environmental Assessment Act of 2000 establishes procedures for the assessment of potential effects of strategic plans, policies, programs, and projects on the environment, and for the determination of policies and measures to reduce potential adverse effects and to promote environmental benefits. It establishes the requirement that an Environmental Clearance (EC) shall be a prerequisite for the issuance of a Development Consent (DC). 11 EC is defined under Article 6 of the EAA as the decision issued in writing by the [NEC] Secretariat or the Competent Authority (CA) to let a project proceed, which includes terms to ensure that the project is managed in an environmentally sound and 11 Article 6 of The EAA defines Development Consent as the approval issued or renewed by a competent authority in the form of a license, lease or permit for land use or construction.

20 7 sustainable way. The Act also requires the RGoB to ensure that environmental concerns are fully taken into account when formulating, renewing, modifying and implementing any policy, plan or program as per regulations that may be adopted within the appropriate provision of the Act. The Act outlines the steps in EA process; the information required to be publicly disclosed in the EA, as well as during and after the EA process; the functions and powers of agencies charged with implementing the EAA; monitoring and control of offenses and penalties; and appeals and dispute resolution procedures under the Act. These issues are addressed in more detail in Part II (Acceptability) of this report. 19. Regulation for Strategic Environmental Assessment 2002 (RSEA). The RSEA was promulgated with the specific purpose to: Ensure that environmental concerns are fully taken into account by all government agencies when formulating, renewing, modifying or implementing any policy, plan or program; Ensure that the cumulative and large scale environmental effects are taken into consideration while formulating, renewing, modifying or implementing any policy, plan or program; Complement project-specific environmental reviews as per RECP and to encourage early identification of environmental objectives and impacts of all government proposals at appropriate planning levels; Promote the design of environmentally sustainable proposals that encourage the use of renewable resources and clean technologies and practices; Promote and encourage the development of comprehensive natural resource and land use plans at the local, district and national levels; and Outline the duties of government agencies in formulating, renewing, modifying, or implementing any policy, plan, or program, the principles of strategic environmental assessment, and essential contents of the environmental statement. 20. Regulation for Environmental Clearance of Projects (RECP). To implement the Environmental Assessment Act 2000, regulations were promulgated in 2002 for the environmental clearance of projects and for strategic environmental assessment. The RECP define responsibilities and procedures for the implementation of the Environmental Assessment Act 2000 concerning the issuance and enforcement of EC for individual projects and to: Provide meaningful opportunities for public review of potential environmental impacts of projects; Ensure that all projects are implemented in line with the sustainable development policy of the RGoB; Ensure that all foreseeable impacts on the environment, including cumulative effects, are fully considered prior to any irrevocable commitments of resources or funds; Ensure that all feasible alternatives are fully considered; ensure that all feasible means to avoid or mitigate damage to the environment are implemented;

21 8 Encourage the use of renewable resources, clean technologies and methods; ensure that concerned people benefit from projects in terms of social facilities; Help strengthen local institutions in environmental decision making; and Create a uniform, comprehensive data base on the environmental and cultural conditions and assets in the country. Summary of Applicable Laws: Environmental Management for the Road Sector 21. Road Act The Road Act, issued in August 2004, establishes powers and responsibilities of various agencies for road planning, design, construction and maintenance at the central, district, block and municipal levels. The Act also provides the framework for setting technical standards and requirements. In relation to environmental management, Section 4(1)(h) gives the DoR the power and function to adopt and promote Environmentally friendly Road Construction [EFRC] techniques in the implementation of road activities. Section 7(2) requires that all road construction and maintenance works conform to environmental considerations, geological stability considerations and preservation of agricultural land. 22. Environmental Code of Practice for Highways and Road (ECPHR). Under Article 7 of the EAA, the CA for issuance of a DC is directed to attach environmental terms to the DC which may contain applicable codes of best practices. Under these circumstances adherence to the terms of the ECP becomes mandatory when referenced in the EC and/or DC for a project. Such reference is standard operating procedure for ECs provided by NEC for all projects in the rural roads sector. Subsequently, ECPs have been issued by NEC under the authority of the EAA for a number of sectors, including the road sector. Accordingly, the ECPHR, issued by NEC in 2000, is a legally enforceable document for road construction projects, including RAP II. 2. In general ECPs are applied to all stages of a project such as planning, study, survey, design, tendering, contract documentation, project execution and supervision, operation, maintenance, and rehabilitation. The ECPHR is to be used by all parties involved with road construction and maintenance activities. According to NEC, the ECPHR is to be considered as part of the standard operating practices for all DoR road construction, maintenance and rehabilitation activities and must also become part of the project tender documents and contract document packages. 24. An ECP consists of a simple and summarized environmental management plan for every project stage. Each management plan is supplemented with an annex where the required explanations and suggested instructions and/or specifications can be found. The management plan is kept in table form and summarizes the following: Sequence of the project activities to be carried out; Potential negative environmental impacts for each activity; Proposed mitigation measures; Need for public participation and co-ordination with other government agencies; Socio-economic and cultural considerations;

22 9 Need to budget mitigation measures; Supervision requirements; and Monitoring and evaluation requirements. 25. The ECPHR requires that all work items concerning environmental issues must be included in the Tender Contract (TC), as quantified work items in the Bill of Quantity (BoQ), and as clauses in the Technical Specifications. This requires the contractor to calculate costs and to execute them in a technically correct manner. To facilitate EFRC implementation, right of way clearance and associated permanent structural works must be tendered as one package so that such support structures are constructed before spoil material deposition or back filling of retaining walls can start. The ECPHR requires that provision for corrective environmental mitigation measures be incorporated into the construction/supervision and operations/maintenance stages of the project and sets forth a checklist of such potential measures for each of these stages.

23 10 Environmentally Friendly Road Construction Since its introduction in 1999 EFRC has become the de facto standard for environmental management in the road construction sector in Bhutan, supplementing, but not supplanting the ECP for the Road Sector. The Netherlands Development Organization (SNV) introduced the concept of EFRC to the Department of Roads (DoR) in 1999 and until 2002 focused its support on creating an enabling environment for EFRC. It was not until 2002 that SNV began introducing EFRC at the operational level, within the context of the ongoing RAP I project. EFRC design aims to minimize where possible cuts into mountain slopes. Where slopes are fragile and prone to landslides, part of the road width is made in fill, by constructing retaining walls. Box cut designs are avoided as much as possible in order to reduce the volume and height of cut. The cutting of trees is kept to a minimum and limited to within the road corridor. Excavators are used in place of bulldozers, which allows for the loading of tippers and the transport of excavated surplus material and debris to selected disposal sites. Excavation is undertaken in benches starting from the top batter with a smaller excavator and subsequently excavation to the final level with a medium sized excavator. Controlled blasting is adopted in order to minimize damage to the surrounding hill environment and to prevent destabilization of the slopes. Marshy areas are drained before excavation is allowed through the construction of gravel drains and other water management structures such as catch drains. Barriers constructed out of logs or boulders are used to catch falling materials and in some cases to allow for controlled dumping of excavated materials. These features are especially important to protect the valley side vegetation from damage and to create spoil disposal areas near the excavation site. The latter is important since transport of excavated materials is relatively expensive. A new design for retaining walls, with gabion boxes, has been introduced. These walls are permeable and are flexible enough to adapt to small slope movements. Bioengineering works are carried out in conjunction with the construction of support structures such as breast- and retaining walls. The use of selected vegetation to stabilize and protect slopes against erosion in the monsoon season has proven to be both successful and cost-effective. Preliminary comparative investment analysis shows that road using EFRC techniquesmay cost up to t 5 percent more than conventionally built road,s but this additional cost can be offset by the eighth year of the road operation due to low maintenance cost. In addition, roads built with EFRC techniques would reduce social and economic costs which would otherwise result from frequent road blocks due to landslides. source: SNV

24 11 Summary of Applicable Laws: Environmental Monitoring 26. Environmental monitoring is referenced in the EAA wherein NEC is given the authority under Article 4.2 to monitor and control compliance with the terms of environmental clearances. NECS is directed under Article 5.4 to issue regulations and guidelines concerning monitoring and controlling compliance. The CA is authorized under Article 9. to monitor, control and enforce the terms of the environmental clearance attached to development consents, including ordering sanctions and compensation for environmental damage. This monitoring authority gives the CA and/or NECS the right to enter project sites with or without prior notification in order to ensure compliance with the terms of an EC, the make visual inspections and spot checks, interview employees, occupants or other persons on site, collect samples, inspect and take copies of relevant data or documents and take all other measures necessary to the control of the environment. The respective roles of CAs, NEC and NECS with respect to persistent noncompliance with environmental conditions as well as penalties for non-compliance, appeals and dispute resolution are set forth in Articles 40-4 and Articles of the EAA. 27. The allocation of responsibility between NECS and the CA for the conduct of compliance monitoring of projects is delineated in the RECP, along with detailed instructions on compliance orders, appeals, legal challenges, sanctions and compensation. 28. Environment-related provisions of the laws governing the authorities of district (Dzongkhag) and block (Geog) level Development Committees are provided in the DYT and GYT Acts of 2002, respectively, which give the DYT and GYTs the power and function to adopt procedures and rules to implement national laws and enforce national regulations on a broad range of activities relating to the construction of roads, such as extraction and conservation of forests; mining and quarrying; designation and protection of monuments and sites of cultural and historical interest; designation and protection of areas of special scenic beauty or biodiversity; parks and sanctuaries; control of noise pollution; conservation and protection of water resources, lakes, springs, streams, and rivers; community forests; prevention of illegal encroachments on land and forests; prevention of construction of structures, whether on national, communal or private lands within 50 feet of highways falling in local area; and protection and preservation of sacred sites that are not part of custody of a monastic body or central agencies. Summary of Applicable Laws: Protection of Natural Habitats 29. The Forest and Nature Conservation Act was enacted in 1995 in keeping with evolving conservation needs and to allow for community stewardship of forest resources. The objective of the 1995 Act is to provide for the protection and sustainable use of forests, wildlife and related natural resources of Bhutan for the benefit of present and future generations. It covers forest management, prohibitions and concessions in government reserved forests, forestry leases, social and community forestry, transport and trade of forestry produce, protected areas, wildlife conservation, soil and water conservation, and forest fire prevention. 0. To support the implementation of the Forest and Nature Conservation Act 1995 MoA promulgated the Forest and Nature Conservation Rules The Rules establishe regulations for forest management, private and community forestry, establishment and management of protected areas, wildlife protection, and prevention of forest fires, land clearance, and other activities potentially impacting soil, water and wildlife resources, among other things.

25 12 Summary of Applicable Laws: Physical Cultural Resources 1. Bhutan does not have legislation specific to immovable physical cultural property. A draft Conservation of Archeological Heritage Act is in the early stages of preparation (an English-language version is not yet available). There is existing legislation that is applicable to trade in artifacts but it does not apply to most forms of physical cultural property as defined in the Bank s OP 4.11 on PCR. 2. Bhutan s National Environmental Strategy addresses the need to promote sustainable development without compromising the country s cultural integrity [and] historical heritage. Likewise, the EAA and the RECP require that EA reports describe and analyze project impacts on culturally significant sites and mandate review of EA applications by the Ministry of Home and Cultural Affairs (MoHCA). Legislation authorizing block level administrative bodies (GYT) mandates these local authorities to administer, monitor and review block level plan activities, including maintenance and preservation of monuments not under the custody of central agencies or monastic bodies. Summary of Applicable Laws: Involuntary Resettlement. The social impacts of Involuntary Resettlement in Bhutan are addressed in the Land Act (LA). The Act also incorporates Royal Decrees and resolutions of the National Cabinet and National Assembly both of the past and subsequent years. It stipulates procedures and requirements for registration of land, entitlement to land, right to possession of land, land valuation and taxation, land transaction, allotment of government land, construction or renovation of social infrastructure such as irrigation channels and roads on landed property and sharing of benefits from such infrastructure, use of grazing land, land tenancy, and land conversion and encroachment. At the present, a national task force is reviewing the LA to make it more suitable for evolving development needs. The revised LA is expected to be presented and discussed at the National Assembly in EQUIVALENCE TO OPERATIONAL PRINCIPLES OF OP 4.00, TABLE A1: DISCUSSION 4. A comparative analysis was conducted on the RGoB s laws and regulations corresponding to the World Bank s safeguards on EA, NH, PCR and IR as per the Objectives and Operational Principles of OP 4.00 Table A1. The results of this comparison are presented in matrix format in Annex A. The major findings of the analysis are discussed here, with an emphasis on differences between Bhutan s systems and the required elements of OP 4.00 Table A1 and the relevance of these differences to the RAP II project. EA 5. Bhutan s policies, legislation and regulations pertaining to the EA process and EA documentation are relatively recent and reflect international best practice to a significant extent, with the consequence that there is a substantial degree of equivalence between Bhutanese EA systems and the required elements of OP 4.00 Table AI with respect to EA. 6. Remaining differences between Bhutan s EA system and the Operational Principles for EA contained in OP 4.00 Table A1 include: 12 RGoB, NECS, UNDP, National Capacity Self-Assessment for Global Environmental Management and Action Framework, September 2005, p 29.

26 1 7. Transboundary and global concerns. One potentially significant difference with respect to EA is the absence of any requirement to assess potential impacts of the project on transboundary and global concerns. There is implicit reference to transboundary and global concerns in the EAA Section 18 requirement that the NECS may issue an EC only after finding that a project is consistent with the environmental commitments of the Kingdom. A similar implicit reference to transboundary impacts is found in the requirement included in the RECP, Annex C, Section 8 that EA include cumulative impacts on other projects work or activity in the immediate surroundings and region. However, in the absence of a more explicit statement requiring that EA address global and transboundary issues, it is unclear whether these provisions would effectively provide for their inclusion in the EA process. 8. International environmental commitments. Related to the absence of any reference to transboundary issues in Bhutan s EA system, is the absence of any explicit reference to Bhutan s international environmental commitments, such as those involving trade in internationally protected species or to domestic legislation enforcing such commitments, such as the Conservation of Biodiversity Act. Although such an intent is evident in the National Environmental Strategy which emphasizes Bhutan s adherence to commitments it has made through international conventions there is only a general, undefined reference in the EAA (Section 18) to the requirement that an EC may be issued only when the NECS is satisfied that a proposed project meets the environmental commitments of the Kingdom. 9. Application of World Bank s Pollution Prevention and Abatement (PPAH) Handbook: In many countries that have made extensive use of World Bank or other multilateral development bank funding, the PPAH is cited as a benchmark for qualitative and quantitative environmental criteria (inputs, technical processes outputs) with respect to pollution abatement and control. In a Guidance Document issued by the NECS in 1999 as background for the issuance of the 2000 EAA by NEC, there was discussion of criteria for the selection of parameters for consideration in Bhutan. The discussion was based on known waste streams of existing industries [and].emission standards for selected parameters for a number of countries and for World Bank-funded projects in developing countries.the World Bank standards are based on bestpractical-technology and on levels of waste quality that are routinely achieved by well-run industrial operations around the world. For this reason it is recommended that the RGoB adopt standards that closely approximate those of the World Bank Although Bhutan s EA system does not include any references to the PPAH per se, the absence of such references is not a substantial difference with the Operational Principles of OP 4.00 Table A1 for this project for two reasons. To begin with the PPAH does not include any criteria for the construction and operation of rural roads and therefore would not be applicable to the RAP II project. With respect to other sectors, the objective of referencing the PPAH is to ensure that a country s domestic environmental legislation provides for some international benchmarking with respect to the standards it applies to various pollutants and industries. Although Bhutan s legislation does not make any reference to the PPAH, many of its Environmental Codes of Practice do reference other international standards, such as those issued by the World Health Organization and the Food and Agriculture Organization. NH 41. Bhutan, a country with an extraordinarily high level of intact biodiversity and primary forest cover, has some of the most progressive conservation and protected areas management 1 NEC Guidance Document, 2000,

27 14 policies among developing countries. Therefore, it is not surprising to find that its legal system incorporates virtually all of the elements of OP 4.00 Table A1 with respect to the protection and conservation of natural habitats, with the following substantial difference: Preference for siting projects on previously converted lands. The only difference in Bhutan s system of conservation and protection of natural habitats with respect to the Operational Principles of OP 4.00 Table A1 is the absence of any requirement that preference be given to development on lands previously converted from wilderness as compared to lands that remain in their natural state. This issue may be addressed implicitly in the requirement in the Forest and Nature Conservation Rules providing that land located within protected areas, water catchments or land containing high forest may be avoided. Some Bhutanese officials suggested that the term may could be a mistranslation of the Dzongkha term for must, which if rectified in the English language version of the Rules, would partially address this difference. In any case, a general policy of avoidance in siting projects is not necessarily the same as a policy requiring a preference for converted lands when alternatives are considered. PCR 42. As noted above, Bhutan has not enacted specialized legislation designed to protect immovable cultural property, such as archeological, paleontological, historical and sacred sites during the development process. However, the need to protect such sites is strongly referenced in the NES and requirements to do so are included in the EAA, the RECP, and legislation pertaining to the responsibilities of local authorities. Collectively, these laws and regulations address nearly all of the required elements of OP 4.00 Table A1 with respect to PCR. There is one aspect where differences remain: Chance Finds. OP 4.00 Table A1 requires that for materials that may be discovered during project implementation ( chance finds ) there be provision for chance find procedures in the context of the PCR management plan or PCR component of the EMP. Bhutan s legislation does not address the issue of chance finds. References in the EAA to cultural heritage appear to restrict its treatment to the pre-implementation phase and to known sites or those discovered during the EA process, and do not make any provisions for unanticipated discoveries of PCR during project implementation. LA 4. With respect to IR there is some congruence between Bhutanese systems with respect to land acquisition and the Objectives and Operational Principles of OP 4.00 Table A1 to the extent that the LA does require that when the government acquires land it shall inform affected people and enter into consultation with them about the content of the compensation scheme prior to any land taking. Affected people are to be compensated through allocation of replacement land or through financial compensation according to the classification of the land taken. People whose land is acquired and who choose replacement land as compensation are allowed to identify replacement government owned land of equal size and value in the same district. Although the law does not require this in practice, it appears that compensation is often provided to affected people without formal legal rights or claims to lands to be expropriated 44. However, substantial differences were found between Bhutanese systems and the following operational principles of OP 4.00 Table A1 with regard to IR:

28 15 Avoidance or minimization of IR. Although the LA states that government expropriation of land can only be undertaken for national and public interest purposes, it does not predispose the government to avoid or minimize IR, which is an Operating Principle of OP 4.00 Table A1; Improvement or restoration of livelihoods. Although the RECP (Art. 2.7) states as one objective of the RECP to ensure that concerned people benefit from projects this does not equate to the objective that the livelihoods and standards of living of displaced persons be improved or at least restored relative to the higher of pre-displacement levels or levels prevailing prior to the beginning of project implementation, as does an Operating Principle of OP 4.00 Table A1; Assessment of potential social and economic impacts of involuntary land taking or restriction of access to parks and protected areas. The LA requires only that land surveys be undertaken prior to expropriation but no impact assessment of land taking or access restriction is required by Bhutan laws or regulations. This is inconsistent with OP 4.00 Table A1 which requires that census and socio-economic surveys of the affected population be conducted as well as assessment of the potential social and economic impacts of involuntary land taking or restricted access to parks or protected areas; Consultation with project affected peoples (PAPs). OP 4.00 Table A1 requires that legal provision be made for consultation with PAPs with respect to planning and implementation of IR, including compensation, development assistance and the establishment of grievance mechanisms, with particular attention to the needs of vulnerable groups. With the exception of compensation, neither the LA nor the applicable environmental legislation provide for such consultation with PAPs on development assistance or grievance mechanism or make any particular provisions for vulnerable groups; Provision of information and assistance to displaced persons. OP 4.00 Table A1 requires that displaced persons be informed of their rights, be consulted on options and provided with feasible resettlement alternatives and needed assistance for loss of assets (at full replacement cost), including relocation assistance, transitional support and development assistance, cash compensation under appropriate conditions and civic infrastructure and community services as required. The EAA and the Codes of Environmental Practice: Highways and Roads provide for extensive consultation with concerned people. The LA requires prior consultation with displaced persons affected by land acquisition, including the content of the proposed compensation schemes, but there is no requirement in Bhutan s laws or regulations to provide information or assistance other than compensation to displaced persons; Timing of implementation of resettlement plans and entitlements. OP 4.00 Table A1 requires that all relevant resettlement plans be implemented prior to project completion and that resettlement entitlements be provided prior to displacement or restriction of access. Under the LA, only land substitution provisions are required to be implemented prior to land acquisition. There is no such requirement applicable to cash compensation or other resettlement requirements; and Results Assessment. OP 4.00 Table A1 requires that upon project completion, an assessment be conducted as to whether the results of the resettlement instrument have been achieved taking account of the baseline conditions and the results of resettlement

29 16 monitoring. As noted above, Bhutan does not require baseline assessment; nor is there any provision for monitoring of resettlement outcomes. RELEVANCE OF DIFFERENCES TO RAP II PROJECT 45. Not all of the differences between Bhutan s systems and the Objectives and Operating Principles of OP 4.00 are relevant to the RAP II project. A rural roads project by nature does not raise transboundary or global issues nor does it implicate any of Bhutan s international environmental commitments. The PPAH does not include guidelines relating to the construction of rural roads; therefore the lack of reference to the PPAH in Bhutan s EA legislation is not relevant to the RAP II project. On this basis, it can be concluded that there are no relevant differences with respect to Bhutan s EA legal system that need to be addressed as a prerequisite to using Bhutan s EA system as a basis for the RAP II project. 46. With respect to NH, the absence of a requirement in Bhutan s legal system that preference be given to siting projects on previously converted lands is relevant to the siting and alignment of rural roads. Likewise, with respect to PCH, the absence of a generally applicable provision for dealing with chance finds is also relevant to the construction of rural roads. These two differences would need to be addressed in the context of the RAP II project in order to use Bhutan s systems for RAP II. CONCLUSIONS OF EQUIVALENCE ANALYSIS 47. With respect to EA, NH and PCR the above findings indicate that there is substantial equivalence between Bhutan s systems and the Objectives and Operating Principles of OP 4.00 Table A1. The relevant differences that remain with respect to EA (absence of references to transboundary and global issues and Bhutan s related international commitments and to the World Bank s PPAH) are not relevant to the RAP II project to the extent that the project does not raise issues involving transboundary, global concerns or Bhutan s international environmental commitments. The PPAH does not include guidelines for rural road construction. Therefore, there is no imperative for the project to adopt measures designed to bridge these differences with respect to Bhutan s EA system. 48. With respect to NH (in particular the requirement of OP 4.00 Table A1 that projects be sited preferably on previously converted lands) and PCR (with respect to provisions relating to chance finds ) differences are relevant, but can readily addressed within the scope and duration of RAP II through the measures proposed below. It is, therefore, recommended that these three environmental safeguards be further considered for piloting under OP 4.00 in the RAP II project, subject to: (a) the measures designed to attain equivalence as proposed below and (b) the findings and recommendations of the Acceptability Assessment included in Part II of this report. 49. With respect to IR, although there is some congruence between the objectives of Bhutan s systems and the objectives of OP 4.00, the differences between Bhutan s systems for land acquisition and mitigation of impacts on project affected peoples and the operational principles of 4.00 are significant, profound and are clearly relevant to a rural road construction project. These differences may be attributed to the fact that the governing legislation of Bhutan regarding land acquisition dates from 1979, well before the institution of current resettlement policies and practices among multilateral development banks and other donors. Given the necessity of a significant revision of the LA in order to address these differences, a process that has only recently begun, and that the RAP II project is nearly at the IBRD Appraisal stage, it is

30 17 highly unlikely that the RAP II project would be an appropriate vehicle for addressing these differences. 50. Therefore, it is agreed that the Bank will continue to apply its traditional safeguard mechanism, OP 4.12, rather than Bhutan s own systems to the assessment and management of the IR impacts associated with the RAP II project. Moreover, Bhutan is currently undertaking a substantial revision of the LA to be presented at the forthcoming session of the National Assembly and has invited the World Bank to participate along with other stakeholders in providing comments in the context of that ongoing review process. MEASURES TO ATTAIN EQUIVALENCE 51. The following proposal for measures to attain and sustain Equivalence between Bhutanese and World Bank environmental safeguards was discussed with NECS during a meeting at the conclusion of the Acceptability Mission held in Bhutan from September 11-21, The proposal is limited to two of the three environmental safeguards (NH and PCR) which are under consideration for piloting under OP 4.00 within the RAP II project and for which relevant differences remain between Bhutan s systems and the Operational Principles of OP 4.00 Table A1. As noted above, no measures are proposed with respect to EA as there are no relevant differences between Bhutan s systems and OP 4.00 that need to be addressed within the context of the RAP II project. Likewise no measures are proposed with respect to IR, as this safeguard is not being proposed for piloting under the RAP II project. 52. It was agreed that all of the relevant differences identified in the above Equivalence Analysis could be readily addressed by clarifications of existing laws and regulations and/or amendments to the CEPHR. Such amendments to the CEPHR could be accomplished under the administrative authority of NEC. NH Preference for siting projects on previously converted lands: include a provision stating clear preference for siting projects on previously converted lands. PCR: Chance Finds: include a provision to ensure that the terms of reference provided by the CA would provide for the protection of unanticipated chance finds encountered during road construction implementation as well as PCR previously known and/or surveyed. MEASURES TO SUSTAIN EQUIVALENCE IN THE RURAL ROADS SECTOR 5. Beyond these administrative measures, the RGoB has for some years recognized the need for a more holistic approach to environmental law and regulation. Such recognition was expressed at the outset of the current Ninth Five-Year Plan ( ) for which the Environmental Sector Plan called for the development of an umbrella law (the National Environmental Policy Act or NEPA) to facilitate implementation of such an approach. Bhutan is also in the process of drafting a Conservation of Archeological Heritage Act. Although an English-language draft is not yet available, based on interviews with knowledgeable officials, enactment of provisions contained in the current draft could provide an alternative opportunity to bridge the Equivalence difference that applies to PCR.

31 The most recent, July 24, 2006 draft of the NEPA ( NEPA Draft ) that has been shared with the World Bank provides longer-term opportunities for addressing the differences identified in the Equivalence Analysis for two of the three environmental safeguards proposed for piloting: EA and NH. Accordingly, comments on the provisions proposed in the current NEPA draft are included in the Equivalence Matrix (Annex A to this report) and are summarized below. EA o o Transboundary and global concerns. Article 10. of the NEPA Draft would authorize NEC to ensure that the EA process would include the requirement for transboundary consultation when a plan, program or project may have an impact on a neighboring country. Enactment of this or an equivalent administrative measure in the CEPHR would bridge the difference between the ambiguous references in the EAA and RECP to the environmental commitments of the Kingdom and to cumulative impacts on other projects work or activity in the immediate surroundings and region and the Operational Principle of OP 4.00 with respect to the inclusion of transboundary and global concerns in the EA process. International environmental commitments. Article 10 of the NEPA Draft would require that international (bilateral and multilateral) environmental agreements ratified by the National Assembly shall be enforceable as any other domestic laws. The difference between language of EAA and the Operational Principle of OP 4.00 Table A1 with respect to the need to reference Bhutan s international environmental commitments in the EA process could be bridged by: (1) enactment of Article 10 of the NEPA Draft; (2) an equivalent administrative measure in the CEPHR under the administrative authority of NEC; or () other administrative measures clarifying the responsibility of NECS to ensure that the EA process references all applicable domestic legislation, including legislation implementing Bhutan s international commitments. NH: Preference for siting projects on previously converted lands: the enactment of Articles 5.4 and 5.9 of the NEPA Draft that would require that development activities shall be strategically planned and executed in harmony with the carrying capacity of the country s sensitive ecological setting and geographical terrains and should be planned to cause the least possible change in the environment would partially meet the requirement that preference be given to development on lands previously converted from wilderness as compared to lands that remain in their natural state. The difference would be fully addressed were language to be added stating a clear preference for siting projects on previously converted lands. PCR: Bhutan is also in the process of drafting a Conservation of Archeological Heritage Act, for which an English-language draft is not yet available. Based on interviews with knowledgeable officials, enactment of provisions contained in the current draft could provide additional opportunities to bridge the Equivalence differences that apply to PCR, in particular with respect to provisions for chance finds. IR: Likewise, although it is not proposed to include IR as one of the safeguards to be piloted in the RAP II project, the ongoing reform of the Land Act provides the RGoB with an opportunity to address the issues identified above with respect to the legal framework FOR land acquisition and IR in Bhutan. Issues that are conducive to such an approach include the following, and are noted in the Equivalence Matrix, in Annex A of

32 19 this report: o o o o o o o Avoidance or minimization of IR; Improvement or restoration of livelihoods; Assessment of potential social and economic impacts of involuntary land taking or restriction of access to parks and protected areas; Consultation with project affected peoples (PAPs) with respect to planning and implementation of IR, including compensation, development assistance and the establishment of grievance mechanisms, with particular attention to the needs of vulnerable groups; Provision of information and assistance to displaced persons; Implementation of resettlement plans and entitlements prior to project completion and that resettlement entitlements be provided prior to displacement or restriction of acces; and Assessment: as to whether the results of the resettlement instrument have been achieved. 55. Given the prospect of substantive legislative changes affecting the EA, NH and PCR safeguards during the course of the RAP II project and consistent with its responsibilities under OP 4.00, the Bank will assess the effect of these changes on this Equivalence Analysis and will discuss them with the RGoB Per OP 4.00, para. 6. If, during project implementation, there are changes in applicable legislation, regulations, rules or procedures, the Bank assesses the effect of those changes and discusses them with the borrower. If, in the judgment of the Bank, the changes reflect a further improvement in the country systems, and if the borrower so requests, the Bank may agree to revise the legal framework applicable to the operation to reflect these improvements, and to amend the legal agreement as necessary. Management documents, explains, and justifies any changes to such framework, and submits them for Board approval (normally on an absence of objection basis). If the country system is changed in a manner inconsistent with the legal framework agreed with the Bank, the Bank s contractual remedies apply.

33 20 Organizations of Government PART. II ACCEPTABILITY ASSESSMENT ENVIRONMENTAL GOVERNANCE PROCESS IN BHUTAN 56. His Majesty the King, the National Assembly, the Royal Advisory Council, the Judiciary, the Council of Ministers and the Sectoral Ministries are organizations that play a crucial role in the governance of the Kingdom of Bhutan. After a reformation of the Government in 1998, the Coordination Committee of the Council of Ministers was given full executive powers. Under this process, the country is governed primarily through the cabinet. The Council of Ministers is headed by the Prime Minister, who also currently serves as Minister of Foreign Affairs. The central government consists of nine other Ministries, five Commissions, the Royal Bhutan Army, Royal Bhutan Police, Royal Body Guards and several autonomous bodies. Ministries include: Foreign Affairs, Planning, Works and Human Settlements, Communications, Trade and Industry, Finance, Health and Education, Agriculture, and Home Affairs. The Five Commissions are: Planning Commission, the Royal Civil Service Commission, the Special Commission for Cultural Affairs, Dzongkha Development Commission and National Environment Commission. 57. A Royal Advisory Council consists of 9 councilors to advise the King and his Ministers. Six councilors are elected by the people, and two come from the monastic body. The chairman to the council is nominated by the King and acts as Government representative in the council. 58. The National Assembly (NA) has 150 members of whom 105 are popularly elected for a term of three years. The monastic body elects 10 monastic representatives who serve for one year terms, while the remaining 5 members are government representatives nominated by the King. The NA normally sits twice a year. 59. Bhutan is divided into 20 Dzongkhags (districts) of which larger Dzongkhags are subdivided into Dungkhags (sub-districts). Dzongkhags are further sub-divided into 196 Gwogs (blocks). Gups (heads of blocks) assist Dzongdags (district heads), and Dungpas (sub-district heads) with the collection of taxes, mobilization of labor for community services and public construction projects, settlement of disputes, and many other activities including implementation of development programs. Decentralization has been a major thrust of government reform in Bhutan since 1981 when it was adopted an official development strategy with the establishment of the District Development Committees (Dzongkhag Yargye Tshogchung (DYTs) and in 1991 the further delegation of administrative authority to Block Development Committees (Gewog Yargye Tshogchung) or (GYTs). The strategy was significantly accelerated in the Ninth Five Year Plan ( ). 15 Environmental Assessment Process 60. The EA process is outlined in the RECP and is closely linked to the issuance of DCs for proposed projects. The issuance of DCs is delegated to the CA, typically line ministries such as 15 Karma Ura and Sonam Kinga, Bhutan- Sustainable Development through Good Governance, Center for Bhutan Studies, Thimphu, May 2004; RGOB, National Environmental Committee Secretariat and United Nations University, Environmental Governance in Bhutan National Case Study, June 2004, p 12.

34 21 the MoA, the Ministry of Trade and Industry and MoWHS or a Department within one of these ministries and at the regional level, the DECs. There is also a list of minor activities for which no EC is required. 61. Under the EAA, a CA may not issue a DC for a project unless either: (a) the CA issues an EC for the project; or (b) NECS issues an EC for the project. The determination of whether the EC shall be issued by the CA or by NECS is stipulated in Annex 2 of the RECP which sets forth the specific activities for which each designated CA is authorized to issue an EC. It is explicitly stated that the NECS is the CA for all activities not listed in Annex 2. With respect to rural roads the limited activities delegated to MoWHS in its capacity as CA are road widening/curve improvement; monsoon damage restoration works, permanent works (retaining walls, breast walls, causeways); bridges; and road alignments of less than one kilometer and not falling within protected areas. The DoF is delegated EC authority for road construction within forest management units under its jurisdiction. DECs have EC authority for farm roads of less than 5 kilometers, power tiller roads, mule tracks, private roads of less than 500 meters, and the construction of labor camps. Therefore, essentially all activities to be conducted under the auspices of the RAP II project, with the exception of labor camps, require an EC to be delivered by NECS. 62. Under Article 17 of the RECP, for those activities located within the boundary of a protected area; or within 50 meters of a public park, human dwelling, hospital, school or sacred landscape or site, or any other sensitive area designated by the NECS whether or not listed in Annex 2- NECS is also the CA. In addition, for these projects, other concerned agencies (as specified in NEC s Application for Environmental Clearance Guideline for Highways and Roads) are required to provide official clearance before a CA can submit a request to NECS for an EC. There is also an unspecified category of projects which do not require a DC, but which nonetheless require an EC from NECS. Once the CA has done so, it forwards the application to NECS. NECS then conducts a desk study of the application and may request additional information from the CA. In fully reviewing the application the NECS may conduct a site visit to verify information included in the application. 6. The CA has 15 days to acknowledge receipt of an Application for EC (AEC) during which time it must first assess the EC application for adequacy of information. Applicants are free to consult the CA or NECS prior to submitting an application to determine whether the proposed activity is subject to the RECP as well as the potential scope and duration of the EA process. If the type of activity is listed in Annex 2 of the RECP, the application stays with the CA. If not listed, or listed in Annex 2, but falling within the boundary of a protected area; within 50 meters of a public park, human dwelling, hospital, school or a sacred landscape or site, or any other sensitive area so designated by NECS (per Article 17 of the RECP) the CA still has to confirm whether the application conforms with the CA s own regulations before forwarding it to NECS. The CA or NECS has up to three months to screen the project to determine the level of EA required and to asses the adequacy of the application to meet criteria specified by law and regulation. NECS or the CA must screen and assess the application using criteria and procedures outlined in Chapter III of the EAA. 64. The full screening process leads to one of three outcomes: 1) rejection of the application; 2) issuance of an EC; or ) requirement for further studies, including a full EA. If screening determines that a full EA is required, the time frame in which to conduct the EA is negotiated between the applicant and the CA or NECS. The CA/NECS has up to three months to issue or deny the EC based on the findings of the EA report. Within 15 days of decision the CA is required to notify the public of its decision. Based on the EC, the applicant has up to one month

35 22 to undertake a legal agreement to comply with the EAA. Any decision by the CA may be appealed for up to 0 days from the date of public notification. 65. ECs are required at a minimum to specify binding mitigation and compliance measures and appropriate monitoring, recording and reporting requirements. All ECs (whether issued by NEC or another CA) may be effective for up to five years and may be renewed with or without changes to environmental terms and conditions. EA Requirements for Highways and Roads Sector 66. Prior to the enactment of the EAA and RECP, the NEC, with financial and technical support from the ADB, issued sectoral EA guidelines for six sectors, including roads. Following the enactment of the EAA and RECP, NEC undertook, again with ADB financial and technical support, to revise and expand the guidelines to conform them to the new legislative and regulatory framework. 16 The revised Application for Environmental Clearance Guideline for Highways and Roads was issued by NEC in August (EA Application Guideline) The EA Application Guideline itself does not appear to have any legal or regulatory authority, although it makes references to legal requirements of the EAA and RECP in connection with certain practices. However, the Guideline is intended primarily to assist the CA or the NEC [to] review the project and determine the level of environmental assessment required. If used by applicants in combination with the EA requirements in the EAA and the RECP, the Guideline provides a useful template for EA in the roads sector. 68. With respect to EA, the Guideline recommends a detailed project description including project objectives; relevance to overall national planning; funding sources; total estimated project cost; project location, specified in road chainage, with maps at a 1:50,000 topographic scale showing existing roads, rivers, protected area and administrative boundaries; and construction specifications including quantities of materials used, excavated materials and explosives. 69. Recommended baseline data includes topography and geology, water course crossings, an inventory of land use, vegetation, protected areas, forest resources, social parameters (population, houses, services, infrastructure), cultural heritage sites and aesthetics. In connection with consideration of project impacts the Guideline recommends consideration of both project (i.e., non-road) and road alignment alternatives. 16 In addition to the highways and roads sector, the expanded list of guidelines includes forestry, hydropower, new and existing industries, mines and mineral processing, power transmission lines, tourism and urban development. 17 Application for Environmental Clearance Guideline for Highways and Roads, NEC, August 2004.

36 2 EMP Requirements for Highways and Roads Sector 70. With respect to EMP, the EA Application Guideline recommends a tabular format that describes projected impacts from each stage of project activities and specifying mitigation measures and their estimated costs. It also recommends a detailed breakdown of environmental

37 24 costs related to construction, including materials and supervision. The EA Application Guideline recommends that the applicant be held responsible for ensuring that Environmental Terms (ETs) that are attached to the EC are carried out, including all activities to be implemented by contractors. It recommends use of a mechanism of attaching the ETs to the contract document so that the contractor has a clear understanding of the environmental requirements that are to be adhered to during construction. It is also stipulated in the EA Application Guidelines that at the time of tendering, the contractor will be required to prepare a Contractors Site Environmental Management Plan (CSEMP) that shows how the contractor will implement the ETs that are included as part of the tender specifications. The CSEMP is to be included as part of the contract documents and is to be evaluated as part of the overall tender. 71. Although the EA Application Guideline is not a binding document, its substantive recommendations relating to EMP and monitoring have been incorporated into the Code of Environmental Practice for Highways and Roads (ECPHR) issued by DoR in According to DoR the ECP are to be considered as part of the standard operating practices for all DoR road construction, maintenance and rehabilitation activities and must also become part of the project tender documents and contract documents packages The ECP consists of a detailed EMP template for every project stage from planning, studying and surveying, through design, tender documents, construction and supervision; and operation and maintenance. The EA Application Guideline recommends that monitoring responsibilities should be the responsibility of the EC applicant and are to be detailed as part of the EC. 7. Individual EMPs are required for each project stage summarizing: The sequence of activities to be carried out; The proposed mitigation measures; The need for public participation and coordination with other government agencies; Socio-economic and cultural considerations; The need to budget mitigation measures; Supervision requirements; and Monitoring and evaluation requirements. 74. In July 2005, under the auspices of the EFRC-SP, DoR issued the Guideline for the Preparation of an Environmental Management Plan. 20 (EMP Guideline) The Guideline is designed to be used by contractors and states that contractors have a legal obligation [to prepare] the EMP in accordance with the Application for Environmental Clearance Guideline for Highways and Roads and the National Standard Bidding Document. It is further stated that the contractor s responsibility is to prepare the EMP based on the EA and update the EA in order to make it more site specific and applicable. The EMP Guideline specifies that all contractors are 18 RGOB, Department of Roads, Environmental Codes of Practice: Highways and Roads, April Ibid. 20 MoWHS/DOR/EFRC-SP, Guidelines for the Preparation of an Environmental Management Plan, Version I, July 2005,

38 25 required to submit a general EMP along with other bid documents. After the contract has been awarded the selected contractors is required to submit a further detailed EMP, which has to be updated regularly during implementation. Detailed outlines are provided for the components of a general and detailed EMP. No-Objection Certification 75. According the EMP Guideline, in order to obtain an EC, a No Objection Certificate (NOC) must be obtained from all relevant parties. For a roads project, the following NOCs are specified: Agency/ people concerned Dzongkhag/City Corporation Department of Forest (DoF) Department of Culture (DoC) Nature Conservation Division/DoF Municipal authority Private owner Private property owner Department of Health Department of Education (DoE) Department of Energy Telcom Authority Department of Roads Circumstances Dzongkhag Administrative approval Damage or acquisition of sokshing or tsamdo forest Located within 50 m of cultural or religious site Located within boundary of protected areas Located within 50 m of public park Located within 50 m of human dwelling Need to acquire private property Located within 50 m of hospital Located within 50 m of school Require relocation of power line Require relocation of telephone line Require access from highways and feeder roads Public Consultation Process 76. The public consultation process applicable for EA for significant projects is specified in detail in Articles 1 and Annex 1of the RECP. The CA is authorized to issue an EC only after local authorities and affected persons are adequately informed and consulted Public Notice: Applicants are required to provide written notice to local people through newspapers or other media prior to any public hearing. Public Disclosure: Local authorities are responsible for making copies of all EA documents and decisions available to the affected community and open for public inspection. Public Comments: The public and other agencies are provided with at least three weeks from the notice of public availability of EA documents to submit comments. Public Consultation Plan (PCB): The CA or NECS may order the applicant to submit a proposed plan for public consultation, notice and review procedures beyond the minimum requirements outlined above, and may order changes to any such PCB to ensure that concerned people and organizations are adequately informed, have adequate opportunity to express their views and to ensure that such views are adequately taken in to account. Each applicant is required to implement any such PCB at its sole expense. Verification of Public Consultation: The CA or NECS is required to review and evaluate the implementation of the public consultation process and to verify the findings of any public consultation.

39 26 Public Disclosure Requirements 77. Public disclosure requirements are outlined in detail in Chapter IV of the EAA. Under Article 28, when a decision on an EC has been taken, NECS or the CA is required to make a public announcement of the decision and make the following information available to the public: Project description; Environmental Terms: Measures to avoid or mitigate potential adverse impacts and enhance positive benefits: Main reasons and considerations on which the EC decision is based, including the basis for the acceptance or rejection of views and arguments presented by other authorities and concerned people; and A non-technical summary of the above information Monitoring and Compliance 78. Under Article of the RECP, NECS is required to conduct compliance monitoring of project that do not require DC and may also conduct spot checks for listed projects under Article 44 of EAA. Under Article 4 of the RECP, the CA is responsible for monitoring compliance for Projects listed under Annex 2 of the RECP. 79. For the roads sector, DoR issued a Monitoring and Reporting Guideline (MRG) in July 2005 under the auspices of the EFRC-SP 21. The MRG introduces three levels of monitoring to be selectively incorporated into each phase of the project cycles as described below: Baseline Monitoring,: measurement of environmental parameters prior to project inception; Effects Monitoring: measurements of environmental parameters during project implementation that can be attributed to the project; and Compliance Monitoring: periodic sampling or measurement to ensure that the regulatory requirements are observed and the standards are met. 80. Construction phase: In this phase of the project, three levels of monitoring are pertinent:. routine monitoring, periodic monitoring and evaluation. Routine monitoring is the responsibility of the construction contractors and occurs as the project advances. Records are required to be maintained for by the contractor. For periodical monitoring an external team (to be recommended in the EA on a case-by-case basis) is recruited as appropriate to carry out this monitoring. The cost of this monitoring is be included in the project budget for. Whenever feasible, biannual periodic monitoring should be carried out, once during monsoon and once during the dry season. Projects may be subjected to evaluations e.g. midterm and final evaluations to meet ecological requirements. The findings of the mission is be used to better manage the project to mitigate some of the adverse impacts. 21 MoWHS/DoR/ SNV-EFRC-SP, Monitoring and Reporting Guideline for the Department of Roads, July 2005.

40 Operational phase: For the operational phase. there are two levels of monitoring: routine monitoring and periodic monitoring. The site engineer is responsible for carrying out routine monitoring and is directed to inform the head of the Road Maintenance Cell responsible for that road for timely action. An externally formed team should carry out periodical monitoring, whenever feasible on a biannual basis. The team is normally proposed by the EA team commissioned for the particular project. The budget for this monitoring is included in the maintenance cost. 82. Detailed formats are provided for reporting of project progress and status of outcomes as well as checklists to be used by the project engineer or technical teams when monitoring fieldwork to stipulated design and specification requirements. Under DOR s EMP Guidelines, agencies other than NECS or DoR as the CA are also assigned monitoring responsibilities for roads projects. 22 These include: DoF: for any illegal tree felling or pouching, improper riverbed quarrying and impacts on nearby forested areas; NCD: whether construction activities are being carried out according to the park rules and regulations if the project falls inside or in the buffer zone of a national park or sanctuary; DCA/MoHCA: construction activities if near religious structures; and District Administration: construction activities within district boundaries. Appeals, Sanctions and Compensation 8. Suspected violations of the EAA are subject to warning letters and time-limited remedial measures including compliance agreements that must be approved by the CA or NECS. Disputes under the EAA are initially adjudicated by the NEC with final appeal to a Court of Law within 0 days of NEC decision. Sanctions under the EAA may include suspension or revocation of EC and payment of a fine. INSTITUTIONAL AUTHORITY AND CAPACITY OF AGENCIES WITH ENVIRONMENTAL MANDATES IN THE ROADS SECTOR 84. Agencies responsible for environmental assessment, environmental clearance, project implementation, monitoring and oversight with respect to the RAP II project NEC, MoWHS, DoR, MoA, DoF; NCD and DCA/MoHCA. District Environmental Committees (DECs) in the four Districts involved in RAP II also have an important and growing role to play in project implementation and monitoring. The National Environment Commission (NEC) and (National Environment Commission Secretariat (NECS) 85. Mandate of the NEC. The NEC was first established in 1989 by Royal Decree as a National Environment Committee as part of the National Planning Commission. Subsequently, as s result of the Paro Workshop on Environment and Sustainable Development held in 1990 and 22 MOWHS/DOR/EFRC-SP, Guidelines for Preparation of an Environmental Monitoring Plan, June 2005

41 28 coinciding with the start of the Seventh Five Year Plan ( ), the NEC was given the mandate of coordinating all environmental activities and monitoring the environmental impact of development. In September 1992, the NEC was officially delinked from the Planning Commission and began functioning as an independent organization. In September 1998 it was reconstituted under the Chairmanship of the Minister of Agriculture and given inter-ministerial representation for policy decisions and guidance on matters related to environmentally sustainable development and institution of measures to integrate environmental management in overall development process. 86. With respect to EA, The functions and powers of the NEC are established in articles 2 and of the EAA of Under Article 2 the NEC is directed to: Supervise the activities of the competent authorities and Secretariat, provide guidance and ensure the implementation of the EAA; Adopt regulations defining requirements for strategic environmental assessment of policies, plans and programs of the Royal Government; Adopt regulations specifying the time frame within which existing projects shall achieve compliance with the EAA; Adopt regulations and guidelines on public information, consultation, mediation and appeals, and on incentives for persons who may inform authorities about emergency situations under Article 48 of the EAA; Adopt regulations concerning decision-making and appeal procedures under this Act, where procedures do not exist under other laws; Adopt regulations concerning administrative sanctions, fines, and the payment of compensation for environmental damage resulting from projects that have received an environmental clearance under the EAA; Bring complaints to the Department of Legal Affairs for the prosecution of violations of the EAA. Adopt fine schedule under Article 52, of the EAA which may be reviewed and revised. 87. Under Article. NEC also has the discretion to: Adopt a list of projects for which the competent authority shall screen and issue the environmental clearance; Adopt emission control limits for projects under the EAA; and. Hear and decide disputes under this Act. 88. The role of the NEC has not evolved precisely as anticipated in the EAA. The composition of the Commission has been reorganized several times. Although the Commission has meet 22 times since 1992 including twice during 2006, there was a three-year hiatus ( ) during which the Commission did not meet due largely to a jurisdictional dispute over its Chairmanship With the appointment of the current Prime Minister in 2005 this issue was resolved

42 29 and the NEC now includes Ministerial-level representatives from the Ministries of Trade and Industry, Works and Human Settlement, Information and Communications as well as the Bhutan Chamber of Commerce and Industry, currently serving in the capacity as the representative of civil society. At its first meeting in 2006 the Chairmanship of the Prime Minister the NEC resolved to resume meeting on a quarterly basis. 89. The mandate of the NEC is to be reinforced in the Draft NEPA which states that the NEC is an independent, multi-sectoral authority and the highest decisionmaking body of all matters relating to the environment and its management in the country. The draft further describes the powers and rules of procedure of the NEC. Notwithstanding its right to delegate its powers and functions to other CAs, including DECs, nothing shall preclude the NEC from its cardinal responsibility of enforcing and administering the provisions of [NEPA]. 90. Mandate of the NECS with Respect to EA. Implementation of many of the above statutory functions of the NEC is assigned by policy and statute to its Secretariat, the NECS. The broad mandate of the NECS most clearly articulated in the Ninth Five Year Environmental Sector Plan ( ) which set forth several immediate, medium and long-term objectives for the NECS: 2 Strengthened overall environmental management and coordination within the environment sector; Establishment of an adequate legal framework for environmental management; Strengthened professional environmental management of sector activities; Strengthened Dzongkhags, Local Authorities and Line Ministries in basic environmental monitoring of development activities; Increased environmental awareness through integration of environmental issues in educational curricula and awareness programs; Implementation of pollution control and environmental management initiatives in pilot enterprises within the mining and industrial sector; Work towards a dialogue with private sector and financial institutions to support clean environmental activities and promote clean technology where possible; and Bring all existing industries and mines under the purview of the EAA. 91. According the Ninth Five Year Environmental Sector Plan, The EA Section of NECS has the mandate to implement and enforce the EA Act, 2000 and its supporting regulations. It further specifies that under the EAA and its subsequent regulations, the EA Section of NECS is mandated to review project proposals for both new and existing industries, mines, roads and other development activity that are not listed under Annex 2 of the RECP for issuance or rejection of 2 RGOB, NECS, Ninth Five Year Environment Sector Plan ( ) p.

43 0 EC. For projects requiring full EA NECS/EA will approve the Terms of Reference as per the RECP. NECS/EA is also required to report to the NEC on the implementation of the EAA Among the tasks assigned to NECS under the EAA and the RECP are: implementation of the EAA and supporting regulations, compliance monitoring; strengthening the capabilities of line ministries and updating the EA Sectoral guidelines. With respect to EA and compliance more specific objectives include: Ensure that all foreseeable impacts on the environment, including cumulative impacts are fully considered prior to any irrevocable commitment of resources or funds; Provide meaningful opportunities or public review of potential environmental impacts of projects; Conduct compliance monitoring of project that do not require development consent and conduct spot checks for listed projects under Article 44 of the EAA; and; Monitor and ensure that environmental terms and conditions issued with environmental clearances are implemented. 9. The statutory basis for the role of the NECS with respect to EA is codified in the EAA which requires that for all projects not specifically listed under Article.1, the competent authority shall forward the application and all related information regarding to the project to the NECS for screening. The NECS is given the role of identifying potential environmental impacts, issuing terms of reference for environmental assessments where required, issuing environmental clearances when it is satisfied that the requirements of A-18 of the EAA are met. NECS is also authorized to screen applications for projects which any agency seeks to undertake that does not require a development consent, and to issue environmental clearances in accord with Article 18. Decide on issuance of environmental clearance to projects under Chapter III; Monitor and control compliance with the terms of environmental clearances; Inform the competent authority of any violation of the terms of environmental clearance, or of any other potentially dangerous activities of a project under Article 40; Report annually to the National Environment Commission on the implementation and enforcement of this Act, and propose necessary amendments to it. 94. Under Article 5 NECS, in consultation with the concerned competent authorities, is authorized to shall issue regulations and guidelines concerning: Terms of reference for environmental assessments, environmental management plans, and other environmental assessment documents; Information to be included in the application for environmental clearance or development consent; Fee schedules to cover the costs of administering this Act; 24 Ninth Five Year Environmental Plan, p. 4

44 1 Monitoring and controlling compliance; Emergency response; Reporting on the implementation and enforcement of this Act; and Any other matters necessary for the implementation and enforcement of the Act. 95. Under Articles 6. NECS is vested with the powers and duties of a CA under Articles 9 for the environmental clearance of all projects not explicitly delegated to other agencies. Furthermore Under Article, 7 when the applicant itself a CA the NECS serves as the CA for purposes of EC with all the has the powers and duties assigned to the CA under the Act. Under Article 8, NECS may appoint an Environmental Assessment Advisory Board to provide technical advice on the environmental assessment and the environmental terms for a project. 96. Mandate of the NECS with respect to Public Notification and Consultation. As per the RECP, the NECS along with the CAs, have the responsibility of reviewing and evaluating the implementation of the public consultation process and verifying the findings of public consultation, publishing decisions on environmental clearance of proposed projects through appropriate media for dissemination of environmental information to the public. In addition to this NECS EA Section assisted by its Information, Communication and Outreach Section has the specific responsibility to disseminate information concerning the EA process and associated regulations. 25 However, it does not appear that NECS is required to maintain any systematic documentation or archive of its public disclosure process. 97. Mandate of the NECS with respect to Compliance Monitoring. According to the Ninth Five Year Environmental Section Plan, The Technical Division of NECS is charged with conducting compliance monitoring of the environmental terms and conditions of all new and existing mines and industries, including other development projects such as roads. Under Article of the RECP NECS is also directed to conduct compliance monitoring of projects that do not require DC and may also conduct spot checks for listed projects, in collaboration with technical experts from other agencies. Based on information collected during such tours, environmental monitoring reports are to be prepared for submission to the NEC, Council of Ministers and National Assembly on an annual basis Mandate of NECS with respect to the Roads Sector. In the Ninth Five-Year Environmental Sector Plan NECS identified the expansion and improvement of Bhutan s road network as vitally important to the national goal of promoting rural development and improving the quality of life of all Bhutanese people and as integral to the supply of materials, equipment and labor needed for development activities including tourism. At the same time, NECS observed that such roads must be planned and built in an environmentally friendly and culturally sensitive manner within an integrated framework to promote sustainable development. Specifically, NECS called for the elimination of destructive practices, such as side casting and improper disposal of construction material and the use of environmental surveys for all medium and large projects to be carried out as part of an integrated study involving a team of specialists in 25 Ninth Five Year Environmental Sector Plan, p Ibid.

45 2 engineering, agriculture, ecology, geology and sociology who work together throughout the entire planning and construction process In August 2004, NEC published its Guidelines for Environmental Clearance Application for Highways and Roads. The Guidelines include explicit specifications for road construction including those relating to disposal of excavated materials, slope stabilization and mitigation measures, including contractors site environmental management plans that reference EFRC practice Current Capacity. The critical role of the NECS in supporting the NEC was recognized in the Ninth Five Year Sector Environmental Plan. The Plan proposed strengthening the capacity of the NECS through streamlined internal management procedures designed to optimize use of its limited human and financial resources. This was to be achieved by having transparent and operational work plans and budgets, clearly structured lines of authority and management responsibility for key functions and concerns. NECS was also directed to work towards improving its financial and administrative systems, including introduction of an information and data management system and the development of clear Terms of Reference and work plans for each division with a clear division of responsibilities Internal capacity building of the NECS was to be focused on the following priority areas during the period of the Ninth Five Year Plan: 28 Integration of environmental concerns into the national planning process; Preparation of a strategic plan for the Secretariat; Formulation of a National Environmental Action Plan; Refining and expanding environmental objectives and standards; Continued development of a legal framework and enforcement/implementation of the EAA; Environmental information and baseline data collections and routine monitoring; Implementation of the environmental communications strategy; and Staff strengthening in terms of number of further training 102. Budget Support. To meet these objectives, NECS was provided with a total budget support package of 147,417 million Ngultrum (Nu) equivalent to approximately US $ million over the period of the Ninth Five-Year Plan. It was noted that this total represented a slight decrease from the total amount allocated to NECS as part of the Eighth Nine-Year Plan.. Of this amount 18.0 million Nu was to be allocated to implementation of the EAA and supporting regulations and million Nu to strengthening the administration and financial management of NECS. The balance of these resources was devoted to strengthening the national and international policy framework; drafting the NEPA; the development of environmental 27 Ibid., p Ninth Five-year Environmental Sector Plan ( ) pp 5-6

46 information management and environmental quality standards; and promoting social mobilization, environmental advocacy and awareness. 10. Through the Eighth Five Year Plan, the NECS budget was supported through various sources, the largest of which was DANIDA, which provided approximately 50 percent of total budget support. Other major donors included UNEP and GEF which collectively provided just under thirty percent. The RGOB provided percent. For the period covered by the Ninth Plan ( ) DANIDA has continued to provide approximately one-half of the total budget with the balance coming from the RGOB and other donors Organization and Staffing. At the present time the NECS is divided into three divisions: Administrative and Finance Technical Division, and Policy and Coordination. The Technical Division is responsible for environmental assessment, research, monitoring, statistics, information, communication and outreach. The Policy and Coordination Division deals with matters related to environmental policy, legislation and program coordination. Since 2002 the NECS has had a stable contingent of 40 full-time staff, including eight assigned full-time to the EC process. At a recent meeting of the NEC, the Commission endorsed a proposed reorganized structure for the NECS, which is awaiting approval by the Council of Ministers Level of Activity. As of early 2006 NECS reported to NEC that it had processed 588 applications for environmental clearances since the enactment of the 2000 EAA and supporting regulations in 2002 of which 85 percent resulted in the issuance of environmental clearances. In the most recent fiscal year it processed 180 applications for ECs in the of which 142 resulted in the issuance of an EC and 2 remained pending as of March 1, The major sectors of activity included power transmission lines (46%), roads (26%) and industries (14%). 29 According the NEC, annual compliance monitoring of existing industries and mines also continues to be conducted.. Environmental Capacity in Line Ministries 106. Under Articles 22 of the RECP all agencies are required to establish an Environment Unit (EU) responsible for reporting on implementation, enforcement and monitoring compliance with the EAA. Each such EU is required to report annually to the NEC on its implementation and enforcement of the EAA The report is required to include: 0 A list of applications for ECs and their status, giving reasons and justifications for all decisions; How the process of inspection, monitoring and enforcement is carried out; and Public comments received by the CA on each project The Ninth Five-Year Plan recognized that although NEC has overall responsibility for coordinating and initiating activities relevant to sustainable development in Bhutan, it has a limited role when it comes to enforcement of rules and regulations and program implementation. Accordingly the Plan directed NECS to take the lead in institutionalizing and strengthening capabilities in line ministries, districts and private organizations with respect to requirements 29 NEC, Brief Report on Bhutan s State of the Environment for FY April RECP Article 15.

47 4 under the EAA. Annex 2 of the RECP designates a number of agencies as CA to screen, issue or deny environmental clearances for specified types of projects. NECS was specifically directed to work with selected staff of line Ministries to enable the latter to undertake basic environmental assessments of proposed rural roads, thus reducing the workload at the central level. The Plan also directed the EA Section of NECS to facilitate line ministries in setting up EU and to work closely with the units in coordinating environmental activities with the line ministries in implementation of the EAA and its regulations by among other things, conducting basic environmental training for sector heads and extension agents in the districts. The EA Section was charged with facilitating the designation by line ministries of environmental focal points NEC has assumed the major responsibility of ensuring coordination and consistency in the EA process, and through the creation of a hierarchy of interagency forums, each with distinct roles and responsibilities This entails three separate functions: Major decision-making and policy formulation and interpretation; Regular on-going process administration; and Technical advice and assistance to proponents in preparing EA submissions Pursuant to Article 8 of the EAA the NEC has appointed an Environmental Advisory Board. Current membership includes representatives from the National Assembly, the Bhutan Chamber of Commerce and Industry, the Ministry of Communications, MoA, MoHCA and the Ministry of Trade and Industry. 2 These functions are coordinated by the NEC Secretariat. The Secretariat is responsible, in consultation with line ministries, for elevating major policy and process issues to the Commission for decisions Each year the Secretariat reviews screening procedures with responsible ministries and revises them in light of the previous year s experience. Concurrently the Secretariat and the Ministry review the adequacy of environmental terms and conditions applied in permits and contracts issued by each Ministry. The Planning and Policy Divisions of each Ministry are be responsible for initial environmental scoping and screening decisions, according to the agreed-to procedures. Projects screened into the EA process (as opposed to those that might be dealt with by routine licensing) are be administered by ad hoc working groups chaired by the Secretariat. These working groups are responsible for the preparation of terms of reference for EA reports and impact management/monitoring plans, for reviewing and evaluating the completed reports and plans, and for involving local governments, and public NGOs in the EA process As work loads increase and ministries and local governments begin to acquire trained environmental staff, it is anticipated that more formal institutional structures will evolve to ensure process consistency with greater decentralization. To further this decentralization process and enhance the capacity of local governments on a continuing basis, the Department of Local Governance (DoLG) was created in MoHCA in In an effort to harmonize and institutionalize capacity building activities into the overall decentralization process, DoLG proposed an integrated Capacity Development Plan at the district and block levels to be prepared 1 Ninth Five Year Environmental Sector Plan, pp. 10, 0 and 5 2 Source: NECS NEC Guidance Document 2000

48 5 in collaboration with all relevant sectors. A joint Decentralization Support Program has been established by UNDP, UNCDF, SNV and DANIDA to assist the RGoB in the areas of decentralization. However, many of the designated CAs have yet to carry out their EA and clearance responsibilities. The EA process remains to a large extent a centrally-driven (NECs) function due to limited capacity within the mandated line ministries and departments. Ministry of Works and Human Services (MoWHS) 11. The Ministry consists of four Departments responsible for Roads, Urban Development and Engineering, Regulations and Corporations. The activities of the Ministry are coordinated by the Policy Planning Division (PPD) PPD. Each government ministry has a PPD with the role of coordinating the activities of each ministry both internally and with the National Planning Commission. The functions of the PPD in MoWHS are to: Formulate policies and develop plans related to physical infrastructure; Develop and implement acts, regulations and standards related to infrastructure; Set policies to promote the construction industry in the private sector; Promote research and development related to infrastructure and human services; and Develop plans and policies for human settlements The EU of the MoWHS is located in the PPD. PPD/EU is currently staffed with one fulltime Environmental Officer with an undergraduate degree in Environmental Engineering. Other units of PPD include a road engineer, an infrastructure engineer, an economist, a legal officer and a statistician. Its role is to: Review the environmental impacts of infrastructure projects; Issue ECs for infrastructure projects based on NEC guidelines (per Annex 2 of the RECP); Conduct public consultation of proposed infrastructure projects; and Conduct environmental monitoring of infrastructure projects. Department of Roads (DoR) 116. Under the Road Act of 2004, DoR is mandated to take the role of lead agency in coordinating all road construction in Bhutan. DoR has four main divisions: the Survey and Design Division for planning and design of roads; the Bridge Division for planning and design of bridges; the Mechanical Division for provision and maintenance of road construction equipment and machinery; and the Roads Division for construction, operation and maintenance of roads. One of six DoR policy objectives, is to mitigated damage to the natural environment, and one of its seven strategic objectives is the adoption of Environmentally Friendly Road Construction Techniques in road and bridge activities. With respect to the RAP II and other rural roads development projects, the major divisions of DoR charged with project implementation including

49 6 environmental clearances, management and oversight include the Standards and Quality Control Authority (S & QCA) with the responsibility for developing standards and ensuring quality in the public infrastructure projects Within the S & QCA, the Technical and Environment Monitoring Division has functioned as the EU of MWHS from January 200 through January The SQCA is identified as one of the CA for issuance of ECs for certain minor listed projects as per the Annex 2 of the RECP including road widening, bridge constructions,, urban road and drainage construction works. In January 2006 the EU was transferred to the PPD Division of the MoWHS DoR Contractual Authority. DoR has incorporated environmental provisions, in particular those associated with EFRC, into standard specifications and BoQ items for all feeder roads constructed under the RAP I project. In addition, the new Standard Bidding Document which applies to all construction works in Bhutan, includes a requirement for all contractors to supply an EMP as part of their bidding documents. Contractual EMPs are required to be monitored by the contractual agency s site representative. Failure to comply on the part of contractors may result in suspension of works or possible termination of contract, if the contractor fails to follow instructions to remediate contract defaults. The challenge is to ensure that these contractual provisions are fully implemented Environmental Management. DoR s Tender Contracts (TCs) for road construction projects explicitly reference the ECPHR. Standard clauses in the TCs oblige each contractor to prepare an EMP that conforms with the requirements stated in the ECPHR. This plan includes specific methods to be employed for: location of work and labor camps, drawings indicating how storage areas and adjacent surface waters will be protected against contamination, methods of spoil disposal, quarry and borrow area site operation, protection and restoration procedures and otherwise incorporate environmental mitigation measures into BoQs such that the contractor can calculate the item price and the total cost for their execution. Review by an EA specialist of the environmental requirements contained in each TC is required Monitoring and Supervision. Overall monitoring in DOR is the responsibility of DoR s PPD/EU, subject to spot checks from NEC. Direct monitoring of project construction impacts is the responsibility of DOR s Project Engineer and his supervisory staff. Other agencies, as well as Dzongkhag Administration also have specific monitoring obligations in areas that affect them as described below Compliance. Based on the results of monitoring, the Project Engineer has the authority to immediately stop the works in areas of concern when environmental supervision activities reveals a serious existing or imminent environmental hazard. The Engineer also has the authority to extend the contract duration and increase the cost of the contract for the implementation of remedial actions, provided the environmental problem was not caused due to negligence or noncompliance to the ECP by the contractor. Final acceptance of the completed works will not occur until the environmental clauses have been satisfactorily implemented DoR Human Capacity Resources. The activities undertaken by EFRC-SP in meeting stipulated its objectives can be broadly divided into three distinct but inter-related set of activities: develop wider awareness and skill base among stakeholders, support preparation of technical 4 National Capacity, p. 41 Communication from Sonam Choki, Engineering Unit, DoR, October 10, Environmental Codes of Practice for Roads Construction, Annex 6

50 7 manuals and guidelines to support EFRC, and provide advisory support to DoR for RAP implementation. 12. As part of the RAP I project (described below) technical assistance (TA) for mainstreaming EFRC was provided in partnership with Sustainable Development Secretariat (SDS) of Bhutan ( a multi-donor agency of the RGoB) and SNV. The project included full time temporary staff on contract for EM, whose overall responsibilities included: (a) liaising with NEC and World Bank for EA/EMP related activities; (b) contract management on EM related aspects; (c) implementation coordination of bio-engineering measures; (d) overall coordination of training and capacity building; and (e) EM implementation monitoring. The TA has also supported training programs including post-graduate studies, short-term courses, study tours and local training of DOR and project officials. Four DOR engineers completed their overseas postgraduate studies. In addition, a number of short-term courses, training, and study tours were provided to the DOR officials and other stakeholders The Investigation and Development Division (IDD) and the Geo-environmental Unit (GEU) have also been established in the DOR to undertake the development of standard specifications, quality assurance requirements, field investigations for the compliance with the standards, geotechnical investigation and supports, and environmental and social safeguard aspects. In addition, an Environmental Unit was established in September 2005 within the IDD to serve as the environmental coordinator for DoR. The IDD will be the focus of capacity enhancement activities in the RAP II project With respect to oversight and monitoring of construction activities, capacity enhancements are required to improve on-site, real time oversight of contractors and subcontractors. Supervision is limited by inadequate number of site-based staff, insufficient skills of site staff on the technical standards; and lack of clarity on roles and responsibilities of the existing staff and their representative institutions According to DoR management, approximately 80 percent of DoR operational staff has been trained in EFRC standards; the remaining 20 percent (about 60 staff), primarily in the field, have not been trained. Not everyone who has been trained is convinced that EFRC makes sense from an economic standpoint, given the higher up-front costs associated with implementing EFRC in Bhutan s challenging terrain. In addition, due to the high turnover of contractors continuing training is needed DoR Technical Resources. With respect to technical resources DoR appears to have regular access to existing aerial photographs of 1:5,000-1:50,000 scale covering most of the country. The Survey Board can produce topographical maps of 1:25,000 scale and, depending on the ruggedness of the area, 10m or 20m contour lines. These maps are a solid basis for designing of optimal alignments at an early project stage. Aerial photographs also allow a preliminary assessment of the geo-technical situation of the project area. An interpretation of the photographs enables an experienced engineering geologist to indicate potential geological weak spots on the topographical map. In addition, the assessment of all known socio -ecological data, taken from land use maps, property maps and satellite imageries, such as existing infrastructures, location of prime agricultural land, sensitive ecosystems and important cultural and religious sites, and its position on the topographical map further allow engineers to avoid sensitive sites or areas when selecting suitable road alignment options at the pre-feasibility study stage. However, DoR senior engineers believe that better topographic maps at 1:10,000 resolution combined with digital satellite mapping would produce more accurate alignments.

51 Organizational Capacity. A major objective of EFRC-SP was "to further strengthen the institutional and organizational capacity of the Department of Roads and other roadwork implementing agencies in Bhutan to sustain the EFRC concept Although as a direct result of the EFRC-SP the organizational capability of DOR to implement EFRC methods and introduce community maintenance contracting has demonstrably improved, these efforts have not, however, been fully converted into capacity building modules to meet the long term objectives of the project to build sustainable EM capacity within DOR There is justifiable concern that with the large turnover of staff from the RAP I to the RAP II project, that many of these capacity enhancements will be lost. 10. As noted in the EFRC-SP Mid-Term Review issued in August 2004, in order to develop DoR as an institution with the capability to lead, sustain and expand EFRC in Bhutan, it needs to demonstrate that it is organizationally and institutionally prepared to undergo a change process that it is yet to fully internalize. EFRC-SP now needs to focus on the change process within DoR, and this will need to be done with strong presence at the field level and sharing the information to make decisions and take actions at the central level. 11. Increased EFRC awareness among stakeholders has undoubtedly contributed to stronger sensitivity at the professional and policy level towards achieving quality of output and reducing environmental damage arising from road construction. These two key areas have been well supported and focused by EFRC through development of appropriate techniques, skills, training, documents and compliance mechanisms. However, while there has been heightened desire for quality, the tools and institutional mechanisms developed to achieve them are not yet fully functional..ministry of Agriculture (MoA) 12. MoA is the overall authority for management of renewable natural resources, which includes agriculture, livestock development and forestry. It is made up of three technical departments: Forests, Agriculture and Livestock. Apart from these technical departments, the Ministry directly operates a number of non-departmental services and facilities. These include the National Biodiversity Centre, Bhutan Agriculture and Food Regulatory Authority and Information and Communication Services. It also has established a Council for RNR Research to oversee, guide and coordinate the implementation of research programs Department of Forests (DoF). Established in 1952, the DoF is the oldest government department. It is the overall authority for the management of forest resources and wild biodiversity. In terms of land use and cover, forest is by far the most dominant land cover, with 72.5percent (including 8.1 percent scrub forest) of the country under forest cover one of the highest in the world. Almost all of the forests are natural, with plantation forest being just about 0.2 per cent. The Forest and Nature Conservation Act requires that at least 60 percent of the Kingdom s land area remain under forest cover. Outside the protected areas, the DoF has a countrywide network of twelve territorial forestry divisions for implementation of field programs and activities related to protection and management of forests and wildlife resources. 14. At the central level, the Forest Protection and Utilization Division is mainly responsible for matters related to forest land allotment, swapping, leasing, clearance and encroachment, coordination of forest demarcation and coordination and monitoring of supply of forest produce. 6 RGOB, NECS, UNDP, National Capacity Self-Assessment, op. cit.

52 9 The Forest Resource Development Division identifies forest management units (FMUs), carries out forest inventories in the FMUs, prepares forest management plans for the FMUs, and provides technical backstopping for implementation and monitoring of the forest management plans. The Social Forestry Division provides guidance and coordination for social forestry and extension programs, specifically community forestry, private forestry and school social forestry and also monitors reforestation/ afforestation activities in the field The role of the DoF of the MoA in the environmental clearance, implementation and monitoring of the RAP II project consists of providing approval, on a non-objection basis, to applications for EC submitted to CAs and NEC. To accomplish this mission, DoF appears and have substantial human and technical resources at its disposal, including a cadre of highly trained foresters at both the central and district levels, near state-of-the art forest and soils mapping technology and a thorough knowledge of the country s forest resources and their vulnerabilities. 16. NCD. The NCD has overall responsibility for designation, demarcation and management of Bhutan s protected areas systems which consists of nine protected areas, and associated buffer zones and biological corridors. NCD s role is critical for the safeguarding of natural habitats in Bhutan, given that Bhutan s biological resource is one of the richest and most diverse in the world. It ranks among the top ten percent of the countries with the highest species density (species richness per unit area) and is one of the countries with the highest proportion of forest cover in the world. The country is known to have more than 5,400 species of vascular plants, 600 species of birds and 190 species of mammals in the wild. These include several globally threatened species such as the tiger Panthera tigris, snow leopard Uncia uncia, clouded leopard Neofelis nebulosa, red panda Ailurus fulgens, takin Budorcas taxicolor, golden langur Trachypithecus geei, capped langur Trachypithecus pileatus, Asian elephant Elephas maximus, great onehorned rhinoceros Rhinoceros unicornis, serow Capricornis sumatraensis, black-necked crane Grus nigrocollis, rufous-necked hornbill Aceros nipalensis, and white-bellied heron Ardea insignis. 8 Table 2. Globally Threatened Species of Birds and Mammals in Bhutan 7 National Capacity,.p.7. 8 RGOB, NECS, UNDP, National Capacity Self-Assessment for Global Environmental Management and Action Framework, September p. x.