dd ee zz riri oo hh utut AA e e 29835 rr uu ss oo clcl ss DiDi c c blibli uu GLOBAL PP ENVIRONMENTAL FACILITY dd ee zz riri oo hh utut AA e e rr uu ss oo clcl Philippines and Indonesia ss DiDi c c blibli uu Marine Aquarium Market Transformation Initiative PP (MAMTI) dd ee zz riri oo hh utut AA e e rr uu ss oo clcl ss DiDi c c blibli uu PP GEF Project Document dd ee zz riri hoho January 2004 utut AA e e rr uu ss oo clcl ss DiDi c c blibli uu PP KEY ACRONYMS AND TERMS ACF Asian Conservation Foundation ADB Asian Development Bank AKKII Indonesia Coral Shell and Ornamental Fish Association (Asosiasi Koral, Kerang, dan Ikan Hias Indonesia) BFAR Philippines Bureau of Fisheries and Aquatic Resources BFARMC Barangay Fisheries and Aquatic Resources Management Council BMT Bohol Marine Triangle BSAP Biodiversity Strategy and Action Plan Bupati Head of Regency in Indonesia CAMP Collection Area Management Plan (required by MAC EFM Standard) CAS Country Assistance Strategy CBD Convention of Biological Diversity CCIF Conservation and Community and Investment Forum CFH Collection, Fishing and Holding Standard (MAC Core Standard 2) CI Conservation International CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora COREMAP Coral Reef Rehabilitation and Management Program CRM coastal resource management CRMP Coastal Resources Management Project DENR Philippines Department of Environment and Natural Resources DKP Indonesia Ministry of Marine Affairs and Fisheries (Departemen Kelautan dan Perikanan) EFM Ecosystem and Fishery Management (MAC Core Standard 1) FAO Philippines Fisheries Administrative Order FARMC Philippines Fisheries and Aquatic Resources Management Council FASPO Philippines DENR Foreign-Assisted and Special Projects Office FRMP Philippines Fisheries Resource Management Project GCRMN Global Coral Reef Monitoring Network GEF Global Environment Facility GOI Government of Indonesia HHT Handling, Husbandry and Transport (MAC Core Standard 3) ICRAN International Coral Reef Action Network ICRI International Coral Reef Initiative ICM integrated coastal management ICRM integrated coastal resource management IFC World Bank International Finance Corporation IMA International Marinelife Alliance ITMEMS International Tropical Ecosystem Management Symposium IUCN World Conservation Union IUCN/SSC IUCN Species Survival Commission Kabupaten Indonesia Regency KKP Kabang Kalikasan ng Pilipinas (WWF Philippines) LGU local government unit MAC Marine Aquarium Council MAMTI Marine Aquarium Market Transformation Initiative MAQTRAC Marine Aquarium Trade Coral Reef Monitoring Protocol MAO Municipal Agricultural Officer MFI Micro Finance Institution MMAF Indonesia Ministry of Marine Affairs and Fisheries (DKP) i MPA marine protected area M&E monitoring and evaluation NGO Non-Governmental Organization PAWB Philippines DENR Protected Areas and Wildlife Bureau PCSD Philippines Palawan Council for Sustainable Development PENSA IFC Program for Eastern Indonesia SME Assistance PHKA Indonesia Directorate General of Forest Protection and Nature Conservation (National Park Authority) PTFEA Philippine Tropical Fish Export Association RC Reef Check SME small and medium enterprise TNC The Nature Conservancy UNDP United Nations Development Programme UP-MSI University of the Philippines –Marine Science Institute USAID United States Agency for International Development WRI World Resources Institute WSSD World Summit on Sustainable Development WWF Worldwide Fund for Nature ii PROJECT BRIEF 1. IDENTIFIERS: PROJECT NUMBER: 506049 PROJECT NAME: Marine Aquarium Market Transformation Initiative (MAMTI) DURATION: Five (5) years IMPLEMENTING AGENCY: International Finance Corporation (World Bank) EXECUTING AGENCY: Marine Aquarium Council (MAC) REQUESTING COUNTRY OR COUNTRIES: Philippines, Indonesia ELIGIBILITY: Philippines: CBD Ratification on 8 October 1993 Indonesia:CBD Ratification on 23 August 1994 GEF FOCAL AREA: Biodiversity GEF PROGRAMMING FRAMEWORK: OP2: Coastal, Marine and Freshwater Ecosystems 2. SUMMARY: The Philippines and Indonesia support globally significant marine biodiversity on coral reefs that are being degraded by many factors, including destructive fishing practices used by the marine aquarium trade. Market transformation through international Marine Aquarium Council (MAC) Certification can ensure the marine aquarium industry is sustainable and responsible and create incentives for achieving global benefits of biodiversity conservation, reef management, protected areas and reef restoration - thereby contributing to poverty alleviation, sustainable livelihoods and food security. The MAMTI project will mainstream this transformation by: 1) building the capacity of community stakeholders to develop certified ecosystem management, 2) ensuring there is scientific assessment and monitoring of coral reefs and marine ornamentals stocks for management, 3) establishing no-take zones and reef and stock restoration, 4) building the capacity of marine ornamentals collectors to become certified, 5) increasing the financial resources and business skills for collectors to participate in a sustainable trade, 6) increasing the participation of exporters, importers, and retailers in certification, and 7) raising the awareness of, and demand for, certified marine ornamentals among consumers. 3. COSTS AND FINANCING (MILLION US): Sources of Funds: GEF: Preparation (PDF B): 0.295 Project: 6.620 Sub-Total GEF: 6.915 Co-Financing: Preparation (PDF B): 0.368 Donor/Sponsor Contributions: 6.924 Industry Investment: 8.074 Sub-Total Co-Financing: 15.366 Total Project Cost without Project Preparation: 21.618 Total Project Cost with Project Preparation: 22.281 4. OPERATIONAL FOCAL POINT ENDORSEMENT: Name: Mr. Rafael E. Camat, Jr. Title: Assistant Secretary Organization: Foreign-Assisted and Special Date: 15December 2003 Projects Office, DENR, Philippines Name: Mr. Effendy A. Sumardja Title: Special Assistant Minister for Intl. Relations iii Organization: Ministry of Envt., Indonesia Date: 10 December 2003 5. IA CONTACT: Sam Keller, IFC Projects Officer Tel. +1 202 473-2891 [email protected] TABLE OF CONTENTS Page 1. PROJECT SUMMARY 1.1 Background 1 1.2 Transforming the Marine Aquarium Market 3 1.3 Barriers to Transforming the Marine Aquarium Market 5 1.4 Rationale 6 1.5 Objectives 8 1.6 Activities and Outputs 8 1.7 Outcomes 16 1.8 Beneficiaries 18 1.9 Indicators 19 1.10 Risk Assessment 21 1.11 MAMTI Management 24 2. COUNTRY OWNERSHIP 2.1 Country Eligibility 27 2.2 Country Drivenness 28 2.3 Country Endorsement 31 3. PROGRAM AND POLICY CONFORMITY 3.1 Conformity with GEF Operational Program 31 3.2 Project Design 32 3.3 Sustainability 33 3.4 Replicability 37 3.5 Stakeholder Involvement 38 3.6 Monitoring and Evaluation 40 4. FINANCING AND COST EFFECTIVENESS 4.1 Project Budget 42 4.2 Monitoring and Evaluation Costs 44 4.3 Co-financing and Leverage 44 4.4 Cost Effectiveness 44 4.5 Alternative Project Approaches Considered 44 5. INSTITUTIONAL COORDINATION AND SUPPORT 5.1 Core Commitments and Linkages 45 iv ANNEXES Page 1. Project Design Log Frame 48 2. Detailed Project Description of Activities 53 3. Detailed Project Timeline 71 4. Detailed Site Project Timeline 73 5. Site Selection Criteria 74 6. Site Capacity Building Module Flow Chart 76 7. Project Budget and Co-Financing 77 8. Project Staffing 82 9. Cost Effectiveness Analysis 86 10. Incremental Cost Analysis 87 11. Stakeholders Involved in Project Design 95 12. Map: Philippines Marine Aquarium Trade and Initial Project Sites 98 13. Map: Indonesia Marine Aquarium Trade Initial Project Sites 99 14. Year 1 Sites: Philippines and Indonesia 100 15. Supporting Documents from the Project Partners 120 16. Summary of MAC Business Plan 121 17. Analysis of Certified Supply Generation 128 18. Response to Government Focal Point Review of PDF-B 129 19. Response to IFC Issues Raised during PDF-B Phase 132 20. Frequently Asked Questions (FAQs) On Transforming the Marine Aquarium Trade 137 21. IUCN Scientific Review 147 22. Response to IUCN Scientific Review 150 23. STAP Technical Review and Response to STAP Review 154 v 1. PROJECT SUMMARY 1.1Background 1.1.1 Global significance of marine biodiversity in Indonesia and the Philippines Coral reefs are the second most diverse ecosystem on earth. They provide global benefits, including genetic material for drugs, coastal protection from storm waves, coral sand beaches and diving for millions of tourists, subsistence and commercial food supplies (e.g. providing food to over 350 million people in Asia alone), and the basis of a global fishery for marine aquarium organisms. Coral reefs are facing a global crisis due to overfishing, destructive fishing, pollution and sedimentation. The world’s most extensive, diverse and threatened reefs are in the Philippines and Indonesia, and these countries supply more than 80% of marine aquarium fish and (for Indonesia) much of the live coral in trade. Almost all of this is for export, with reports indicating only 1-2% of the harvest is for the domestic market. Southeast Asia is the global center of marine diversity. It contains more than one third of all the world’s coral reefs, and over 600 of the 800 reef-building coral species in the world. A greater variety of species exist on a single island in this region than on all the coral reefs in the Caribbean. Indonesia and the Philippines together hold 77% of the region’s coral reefs, including the majority of South East Asia’s best-preserved reefs. These reefs of the Wallacea Bio-Region have been identified by the major conservation NGOs (TNC, WWF, WRI and CI) as a global priority conservation area. The 24,000+ islands in Indonesia and the Philippines make up the world’s largest archipelago, home to about 17% of the total number of species in the world, including 25% of the world’s fish species. These countries contain over 100,000 square km of coral reefs or about 25% of the world’s total. Indonesia has nearly 81,000 km of coastline and its vast oceans extend over nearly 6 million square kilometers. All of the world’s 15 families of reef-building corals are represented here, with a total of 80 genera and 452 species. These high diversity reefs serve as a reproductive reservoir for seeding other areas throughout the region due to circulating and seasonally changing currents. Because of upwelling of relatively cool waters from the south, the area is also somewhat protected from bleaching events, which have damaged so many reefs around the world. 1.1.2 Threats and root causes of marine biodiversity loss in Indonesia and the Philippines Overall Threats • Destruction of coastal and marine habitats and unsustainable and illegal harvesting. The single largest threat to marine biological diversity are illegal and destructive fishing practices; including fishing with explosives, cyanide fishing, and the use of illegal trawl nets. All of these contribute to the closely related problem of overfishing. Although there is some legislation in place, enforcement, and education to address these threats, the practices continue largely because these techniques are widespread and overwhelm the capacity of government and conservation organizations to address them. • Coastal water pollution. Untreated domestic sewage from coastal towns, cities, and ships is being dumped directly into the sea, or reaches the nearshore marine environment through rivers and canals. Tailings and sediments from quarrying and mining in coastal and agricultural chemicals (e.g. fertilizers) and aquaculture waste (i.e. resulting from the use of fertilizers, feeds, and chemicals) can impact nearshore waters. Plastic bags and free-floating nets result in the death of threatened marine species that ingest or become entangled in them. Leaks and spills of oil and fuel from ships periodically damage marine ecosystems. Root Causes Ultimately, the decline in marine biodiversity is linked to macro trends affecting the coastal areas and marine resources of Indonesia and the Philippines, including the following: 1 • Population growth. Population growth rates of over 2 percent annually and the increasing concentration of population and development near the coast are placing mounting pressure on coastal watersheds, waters and resources. • Poverty and limited economic opportunities. Limited opportunities coupled with resource depletion and degradation results in poverty that forces people to use destructive and unsustainable harvesting methods to meet their immediate needs. These methods result in further resource depletion and degradation, creating a downward spiral of poverty. • Institutional and policy issues and limited enforcement of existing regulations. Inappropriate, overlapping and conflicting policies and institutions; shortage of expertise; inadequate information, education, and communication capacity; and weak policy mechanisms are often part of the problem in many areas. Where the central government has devolved nearshore resource management, there is often a lack of technical knowledge and resources to implement effective management. In many cases, laws and regulations have been developed, but enforcement is weak or lacking. • Public and stakeholder awareness and involvement. Marine resources and ecosystems are not well understood by local communities, governmental agencies, and NGOs and there is generally a lack of awareness and local stakeholder participation in nearshore resource management. • Limited information for management. In many areas there is a lack of appropriate scientific information on nearshore marine resources and ecosystems and their use, with few baseline assessments and monitoring programs. When scientific information is available, it is often not interpreted and applied to management. 1.1.3 Threats to coral reefs: Destructive fishing and overfishing The coastal areas of the Philippines and Indonesia are some of the most heavily populated in the world. With rapid population growth rates, the pressure on coastal resources is exceedingly high, with every member of each family often involved in resource extraction of some type. The pressures have now reached unsustainable levels. The principal threats to the region’s coral reefs are destructive fishing and overfishing. The 2002 Global Coral Reef Monitoring Network (GCRMN) report, “State of the World’s Reefs”, documents how destructive fishing and over fishing have led to ecological destabilization and are even pushing some high-value reef organisms to the brink of extinction. The most destructive techniques include: • Blast fishing: the use of primitive bombs for food fishing, largely for subsistence consumption and domestic markets. • Poison fishing: the use of sodium cyanide to capture marine ornamental (aquarium) fish as well as live food fish (primarily for Chinese restaurants). This has spread from the Philippines to Indonesia and other countries and has become more common in the recent past. The results of destructive coastal fishing have been devastating. According to the WRI’s “Reefs at Risk” report, almost 90 percent of the coral reefs in the Philippines and Indonesia (as well as Cambodia, Singapore, Taiwan, Vietnam, Malaysia and China) are threatened. Fish larger than a few centimeters in length have become rare on many reefs. Indonesia and the Philippines together hold nearly 80 percent of all the threatened reefs in the region. When coral reefs are protected, the recovery of reef fish and shellfish populations can be dramatic and rapid. But when the living coral reef itself has been destroyed, siltation often becomes a problem, preventing the settlement and growth of young corals. In this case, the recovery of reefs is a decades-long process at best. 1.1.4 The need for market transformation 2 The only possibility to turn the tide of continuing reef degradation on a large scale is an approach that combines private sector incentives with government policy and regulation. Luckily, in the Philippines, and to a lesser extent in Indonesia, the relevant policies and regulations are already in place. What has been lacking is a system of sustainable private sector incentives that encourages and requires fishermen to comply with regulations for their own benefit. Apublic-private partnership is needed to solve the fundamental problems facing the marine environment in the Philippines and Indonesia. In essence, an umbrella of government policies and regulations is necessary to allow the private sector “engine” to push the train in the right direction. It is exactly this combination of government and private sector collaboration that this project will facilitate. In the Philippines, for example, cyanide and dynamite fishing have long been illegal. However, a lack of enforcement combined with a lack of incentives to follow the law has led to a dramatic and well-documented decline in the health of the marine ecosystem. Over the past few years, a number of demonstration projects have successfully shown that the tourism trade can be used as an incentive to stop illegal destructive fishing. Marine protected areas (MPAs) such as Gilutongan in Cebu are not only ecologically successful but economically sustainable through user fees charged to tourists. Unfortunately, the fundamental problem facing the Philippines, Indonesia and many other countries is that most reefs are not found in tourist areas – therefore the tourism solution is not viable for the vast majority of these high diversity reefs. In contrast to the tourism, over 200 collection areas for marine aquarium fish and coral have been identified in the Philippines, with many more in Indonesia. In these locations, using the marine aquarium trade to increase the value of the reef to fishermen in comparison to illegal and destructive uses provides a private sector incentive to replicate coral reef management and MPA successes at hundreds of reefs. The MAMTI project does not seek to open new areas to the marine aquarium trade or expand the market or demand. The focus is on transforming the marine aquarium fishery through certification in areas where marine ornamentals harvesting is already being undertaken for the market demand that already exists. In fact, total demand upon marine aquarium animals in the wild may decrease. The higher survival rates of marine ornamentals due the use of best practices during harvest, holding, transport, etc will reduce the fishing pressure, as a much greater percentage of the initially harvested organisms will now survive to market. 1.2 Transforming the marine aquarium market 1.2.1 The need and opportunity for market and industry transformation Destructive fishing practices and overexploitation, when used by the marine aquarium trade, are contributing to the depletion and destruction of the coral reefs of the Philippines and Indonesia. This creates poverty in coastal communities by removing or reducing economic and subsistence options for resource use. When undertaken responsibly, harvesting marine ornamentals alleviates poverty and supports sustainable livelihoods by providing one of the few potentially sustainable local industries in rural coastal villages that have few other options for generating income. Marine ornamentals are a high value reef product. Data from the Maldives show that aquarium fish sell for US$ 248/pound while food fish earn only US$ 3/pound. In Indonesia, aquarium coral sells for US$ 7,000/tonne, while only US$ 60/tonne is paid for coral harvested to make lime for construction. Reef destruction and degradation by the marine aquarium trade results from the use of cyanide to stun and catch fish, breaking of corals, and the over harvesting and poor husbandry of aquarium organisms. Cyanide use causes long-term habitat devastation by killing or damaging corals and other reef animals. Even when collected with nets, aquarium organisms often suffer from poor husbandry practices such as improper post-harvest handling, poor water quality during storage, and high packing densities that result in reduced survivorship. The unnecessary mortality from destructive fishing practices, and poor handling and husbandry puts added pressure on coral reefs as more organisms are collected to make up for those that die. The high levels of harvesting from limited extraction areas may then lead to overexploitation. However, there are marine ornamentals collectors and companies that employ responsible practices, proving that it is possible to have a sustainable, environmentally sound trade. Many in the industry and hobby (and other 3 stakeholders) support a sustainable trade. Prior to the Marine Aquarium Council, there has been no system to identify best practices and verify/label complying companies and products that allows consumers to chose responsible operators and sustainably-sourced products from reefs and fisheries that are well managed. The only possibility to transform the marine aquarium industry is an approach that harnesses private sector incentives to complement government policy and regulation. 1.2.2 The Marine Aquarium Council: International Standards and Certification To achieve market-driven conservation, sustainability and poverty alleviation in the marine aquarium trade, a comprehensive approach by an independent, multi-stakeholder institution was required. This organization must develop international standards, create certification and labeling of compliance, and raise awareness, demand, and confidence among all parties. The Marine Aquarium Council (MAC) was established in 1998 for this purpose. MAC is a not-for-profit organization that brings together the global aquarium industry, fishers and their communities, conservation organizations, public aquariums, hobbyists, scientists and government agencies to create international standards and certification to ensure the marine aquarium trade is environmentally sustainable, socially responsible, and economically viable. The MAC Standards outline the requirements for third-party certification of quality and sustainability in the marine aquarium industry. Several years of international, multi-stakeholder consultation were undertaken to develop three MAC Core Standards covering the entire “reef to retail” supply chain, as well as document “Best Practice Guidance” information that provide advice to industry operators on how they might be able to comply with the standards. • Ecosystem and Fishery Management (EFM) Standard:This addresses in-situ habitat, stock and species management and conservation by verifying that the collection area is managed according to principles consistent with the FAO Code of Conduct for Responsible Fisheries that ensure ecosystem health and the sustainable use of the marine aquarium fishery. • Collection, Fishing and Holding (CFH) Standard:This addresses harvesting of fish, coral, live rock and other coral reef organisms, handling prior to export, holding, plus packaging and transport to ensure the health of the collection area, sustainable use of the marine aquarium fishery and optimal health of the harvested organisms. • Handling, Husbandry and Transport (HHT) Standard:This addresses the handling of marine life during export, import and retail to ensure their optimal health, their segregation from uncertified organisms and proper documentation to show that they pass only from one MAC Certified industry operator to another. MAC Certification was launched in late 2001, and over 70 companies made public “statements of commitment” to seek to achieve MAC Certification. By 2003, following pilot efforts by MAC and its partners, MAC Certification had been achieved in the Philippines by several collection areas, collector's associations and exporters and by several importers and retailers in the U.S., Canada, the Netherlands and the UK. Initial demonstration site efforts have also begun in Indonesia. There are many issues that arise in transforming the marine aquarium trade through MAC Certification and a list of “Frequently Asked Questions” that are posed to MAC, and the responses, are found in Annex 20. Over the long-term, the role of MAC Certification in ensuring that the marine aquarium industry contributes to sustainable and healthy coastal communities and coral reefs will be supported and financed through cost recovery mechanisms derived from industry participation in certification. The MAC Certified industry is supportive of the need for full cost-recovery, fee-based, systems. This has been captured in the MAC Business Plan that was approved by the MAC Board of Directors and outlines a five-year roadmap to financial self- sufficiency for the core costs of operating MAC (Annex 16). MAC Certified marine ornamentals are now moving from "reef to retail" at a pilot scale, engaging market forces in realizing the "win-win" of linking conservation and sustainable use with responsible industry practices. The need now is to build on the successful pilot efforts and "scale up" to a critical mass of certification supply and participants in order to mainstream certification for a sustainable trade in the two most important source countries - the Philippines and Indonesia. 4