WASHINGTON, Mar 25 1994 (IPS) - The executive board of the World Bank has approved a controversial forestry loan for 8.7 million dollars to Laos, the Bank announced here Friday.

In an unusual action, the Bank agreed to report to the board in Jun. 1995 on how the 20.3-million-dollar project for which the loan was extended is progressing.

''The board wants to see if some of the concerns raised about this project are real or not. It doesn't want to wait for 10 years to get the answer,'' one Bank director told IPS after the board's meeting.

The project, which has been several years in the making, is aimed at better managing and exploiting the rapidly disappearing forests of Laos, one of the world's poorest and least developed nations.

!HH*he project, which is also being financed by the Global Environment Facility (GEF), the Finnish International Development Agency (FINNIDA), has been strongly criticised by a number of international non-governmental organisations (NGOs).

As late as last week, the Swedish Society for Nature Conservation and the Finnish Coalition for Environment and Development called on the executive director of the Bank who represents Nordic countries on the Bank's board to vote against the project.

They and other NGOs have argued that the project is too large and will overwhelm the existing capacity of the government's Forestry Department to manage the country's forestry resources which are being rapidly depleted by illegal logging operations.

They also charge that the project itself offers a ''top-down approach'' to forestry problems and does not adequately guarantee the participation and traditional rights of local communities.

Some donor countries, notably the United States, Germany, and the Nordic countries, have echoed these concerns.

In a Dec. 1993 report, the U.S. Agency for International Development (USAID) noted many of the NGO complaints, but concluded that the Bank had since addressed ''many, if not all,'' of the issues raised.

The Bank stressed in its announcement Friday that the project should go a long way towards alleviating many of the NGO fears.

''The staff put in an enormous amount of work in terms of consultation and preparation to make sure that this very sensitive and delicate project was workable,'' said Peter Stephens, a Bank spokesman.

''The Bank recognises that, to succeed, the project needs the support of everybody from the government to the people who live in the forests,'' he added.

The project, according to the Bank, will establish protected zones around intact natural forest areas and ensure their sustainability by improved management.

Price reforms affecting timber should also reduce pressure from logging interests, the Bank said.

''This project will -- for very little money -- have a dramatic effect on (Laos) in terms of preserving biodiversity, protecting people's source of income and increasing government revenue,'' said Yves Wong, the Bank's task manager for the project.

Logging in Laos has skyrocketed from about 6,000 cubic metres in 1964 to almost 600,000 cubic metres last year, says the Bank. An estimated 50 percent of the logging was illegal in 1993.

The project will consist of four major components, according to the Bank. It aims to strengthen the Department of Forestry to better manage the forest resources of the country. That will include enforcing tougher laws regulating logging.

Secondly, the project will seek to protect traditional forest users by providing long-term tenure to customary forest lands, incentives for efficient use and sanctions against over-use.

Thirdly, the elimination of price distortions which now encourage wasteful use of wood resources and protect an inefficient sawmill industry, should reduce logging and logging exports which now make up more than half of the value of all Laotian official exports.

Finally, the project includes a component for training local people in the protection and management of forests as a sustainable source of income and fuel.

The loan will be provided by the Bank's soft-loan affiliate, the International Development Association (IDA), which provides no- interest loans at a nominal annual service charge to the poorest countries. (END/IPS/JL/YJC/94)

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