The Netherlands – Mongolia Trust Fund for the Environment

1. The Netherlands – Mongolia Trust Fund for the Environment Progress Review Meeting Ulaanbaatar June 22nd, 2005

2. Outline • Mongolia: • Context • Environmental Challenges • The Netherlands – Mongolia Trust Fund for the Environment (NEMO TF) • Component I: Self-standing AAA • Component II: Co-financing of Environment Components in World Bank Ongoing Projects • Component III: Project Development • Disbursements & Commitments • Implementation Issues • Next Steps

3. Mongolia - Context • Mongolia: • Is a large, landlocked country (1.564 Km2) in Central Asia • Has a total population is 2.3 million (2000 Census): • 30% of which lives in Ulaanbaatar; • Overall, 78% of total population lives in ger areas; about 60% of urban population still lives in ger areas • Is one of the most sparsely populated countries in the world (1.63 people per Km 2) • Is heavily dependent on natural resources and the environment for its development and economic growth

4. Mongolia – Environmental Challenges • Growing population and changing lifestyles are intensifying pressure on the country’s fragile ecosystems • Overgrazing is degrading significant areas and displacing wildlife from his habitats • Pollution from industrial and urban sources is negatively affecting environmental quality • Human and financial resources for environment and natural resources management are limited, and institutional capacity is weak

5. Environmental Hotspots

6. The Netherlands – Mongolia Trust Fund for the Environment (NEMO TF) • NEMO TF was established in November 2004, with an endowment of US$ 5.88 million from the Dutch Government • It has three components: • Bank-executed technical assistance ($ 1.1 million + $ 0. 380 million for contingency) • Government-executed support for on-going projects ($ 3.6 million) • Government-executed preparation of new projects ($ 0.8 million) • NEMO TF represents an outstanding opportunity to achieve progress on environmental governance in Mongolia

7. Component I: Self-standing Technical Assistance • AAA activities under this component focus on the Green and Brown Agendas; specifically: • Green Agenda • Illegal Wildlife Trade in Mongolia • Forest Cover Mapping of Arkhangai, Khuvsgul and Bulgan Aimags • Assessment of the Success of Reforestation Projects in Mongolia • Updating Nomenclature of Selected Groups of Animals and Plants of Economic and Conservation Importance • Conference on Buddhism and the Environment • Brown Agenda • Tourism development in Mongolia and its Impacts on the Natural and Social Environment • Moving up the value-chain in livestock-based industries: Implications for Environmental Policy, Regulations and Management • Urban Environmental Services in Secondary Cities in Mongolia • Review of Toxic Chemicals Used in Mongolia • Total Netherlands TF Financing is US$ 1.1 million

8. Disbursements & Commitmentsfor Component I

9. Component II: Co-financing of Environment Components in WB Projects • Activities under this component complement already on-going loans and grants activities; specifically: • Second Urban Services Improvement Project • Total Loan Amount: US$ 20 million (an IDA Credit of US$16 M; an AusAID Grant of US$3.35 M, and an UB Municipality contribution of US$2.3 million); • Total Dutch Co-financing: US$ 1,850,000 for Community Development Sanitation in Ger Areas of Ulaanbaatar and the Geser Sum Sacred Urban Landscape Protection Initiative • Sustainable Livelihood Project • Total Loan Amount: US$ 22 million (APL) • Total Dutch Co-financing: US$ 200,000 for Well Rehabilitation on Wild Ass in the Gobi Desert

10. Component II: Co-financing of Environment Components in WB Projects (II) • Dynamics of Biodiversity Loss and Permafrost Melt in Lake Hovsgol National Park Project • Total Grant Amount: US$ 1 million (GEF MSP) • Total Dutch Co-financing: US$ 250,000 for the organization of the Workshop and Associated Training Program on Ecosystem Dynamics and Environmental Management • Strengthening Environmental Management Capacity at National and Local Level Project • Total Grant Amount: US$ 270,000 (IDF Grant for IDA Countries) • Total Dutch Co-financing is US$ 1.2 million for Strengthening Environmental Management Capacity

11. Disbursements & Commitmentsfor Component II

12. Component III: Project Development • The main objective of this component is to facilitate the development of environment and natural resources management projects; current effort focus on: • Forest Resources Management Project • Proposed Loan Amount: US$ 5 million (IDA credit • Total Dutch Co-Financing: US$ 750,000 • Retrofitting of Polluting and Inefficient Heat-only Boilers in Ulaanbaatar and Selected Aimags • Proposed Grant Amount: US$ 4 million (GEF grant) • Total Dutch Co-Financing: US$ 150,000

13. Disbursements & Commitmentsfor Component III

14. Implementation Issues • The Bank-executed activities (all under Component I) are complex; however, their implementation is relatively straightforward and on schedule • The implementation of the Government-executed activities involves six agencies, it is proving challenging, and experiencing delays due to: • The formulation of the Grant Agreement and financial management arrangements; • The need for the new Special Accounts to be opened in bank/s approved by the World Bank; • MoF has worked to simplify the disbursement processes for the NEMO TF by making itself the only signatory on Withdrawal Requests

15. Next Steps • Take stock of the status of disbursements and discuss/decide about possible reallocations of funds • Complete the contracting within USIP2 and SLP – allowing for work to be continued after final payments • Define the Forestry project and determine what can be spent (and on what) by December 1st, 2005 • Advance the work on retrofitting boilers • Review the existing timeline for components II and III to ensure timely completion of all the activities