Structural reforms: forest information systems and the legal framework
One key focus for reform initiatives has been the strengthening or development of systems to improve information management and to track and license legal timber. Such systems are important tools to support effective governance of the sector. Through improving the quality of data and its management, forest information systems facilitate effective decision-making and oversight by government officials. If data are published, this can also enable civil society to monitor the sector.
Strengthening information systems has at times been a domestic priority – as exemplified by Brazil – and it has also been the focus of much international support, both within the framework of the VPAs and outside these processes. This focus on information systems has at times been criticized for being overly technocratic: for example, the risks of information systems being circumvented by existing networks of elite actors have been highlighted. An additional criticism has been that such systems favour big business at the expense of SMEs, because the latter are less able to meet the requirements of licensing (an issue which will be revisited below). However, the processes of negotiating and developing information systems have contributed to improved forest sector governance in certain countries.
As highlighted in Chapter Three, the establishment of timber-tracking systems under the VPAs has entailed a review of the national legislation, leading many countries to effect legal and policy reforms. The fact that a range of stakeholders have been involved in these processes has not only improved their robustness, but has meant that these reforms have included issues that have previously been neglected. For example, the development of the wood-tracking system in Ghana played an important role in instigating reform with regard to the system for social responsibility agreements.
The increased availability of data facilitated by the establishment of information systems has also contributed to improvements in governance in some countries. In Indonesia, for example, improved access to robust data has enabled more effective law enforcement by government and independent monitoring by civil society – although further improvements are needed, with civil society continuing to face challenges in obtaining information. In Ghana, improved data on forest production and revenues has helped to improve compliance with benefit-sharing arrangements on the part of operating companies, because communities have been able to negotiate more effectively and government officials have been able to provide better oversight.
Given low levels of revenue collection in some countries, it had been hoped that information systems would have a positive impact in this area. For example, the government of the Republic of the Congo collected only about 60 per cent of the harvesting taxes due in the period 2000–19, representing annual shortfalls amounting to millions of dollars.
In Ghana, improved data on forest production and revenues has helped to improve compliance with benefit-sharing arrangements on the part of operating companies.
Systems for managing financial information are also an important tool to facilitate revenue collection, although they too are only part of the solution. For example, Malaysia and Indonesia have such systems in place and both countries have good rates of collection. In other countries, however, broader governance challenges have meant that revenue collection has remained poor in spite of the strengthening of financial management systems. In Ghana, disagreement between the government and the private sector around the process of converting existing timber permits resulted in certain fees not being collected for a number of years, while in Liberia widespread corruption continues to undermine the revenue collection system.
Thus, investment in information and timber-tracking systems cannot by themselves overcome endemic corruption or guarantee political commitment to reforms. This is also clear from reported instances of fraud and corruption linked to the issuance of timber permits, and timber-tracking systems in Brazil and Indonesia. The experience of Cameroon, where the development of a robust timber-traceability system has been mired by delays and disagreements between the government and international donors, also highlights the limitations of this approach.
Procedural reforms: transparency, participation and accountability
Improvements in transparency, participation and accountability in the forest sector have been achieved in some countries. These have been integral to the structural reforms outlined above, with enhanced participation in policy design and delivery leading to improved legal frameworks.
Increased participation and transparency have also strengthened the role of civil society in monitoring the forest sector in a number of countries, including Cameroon, the DRC and the Republic of the Congo. In Cameroon, for example, the establishment of a network of NGOs engaged in independent monitoring has proven valuable in holding powerful actors – within government and the private sector – to account, while also helping to strengthen the voice of rural communities. Similarly, in the Republic of the Congo, civil society monitors have supported law enforcement and have used their expertise to contribute to legal reforms.
VPAs have played a role in driving these changes. The participation of civil society and businesses in the negotiation and implementation of the VPAs has resulted in increased openness on the part of government towards non-state actors, along with a growing acceptance that the latter can play a valuable role in shaping policy. In Laos and Vietnam, the government has been engaging civil society in policy discussions for the first time as a result of the VPA process. A similar trend has been observed in the Republic of the Congo, where civil society organizations now have the opportunity to be ‘agents for change’ in the≈sector, which had previously been entirely controlled by the government.
The extent to which forest communities and marginalized groups have been able to be included in the conversation has not always been ideal. For example, there was no direct representation of local and indigenous communities in the negotiation of the VPA in the Republic of the Congo, although this has been addressed in the implementation phase. Furthermore, it has proven challenging to overcome existing inequalities. In Laos, traditionally powerful actors have dominated the country’s VPA process, risking the further marginalization of forest communities and informal operators.
However, the overall trend has been towards greater transparency and engagement, and in some countries this is evolving into a normal way of working. In contrast, the participation of civil society in Brazil’s forest sector has declined in the past decade. In the 2000s and 2010s, Brazil chose not to engage in international cooperation mechanisms on forests due to principles of sovereignty. This did not hinder the country in developing accountable systems in which civil society co-managed public policies with the state. Co-management practices, however, have been retrenched since 2013, and this retrenchment accelerated following the impeachment of President Dilma Rousseff in 2016. The case of Brazil acts as a reminder of how political swings can quickly weaken governance mechanisms that have taken decades to develop.
Allocation of resources and distribution of power
There has been little progress on resource allocation and the recognition of tenure and resource rights during the last two decades. In many countries, land and forest resources are still allocated without sufficient regard for the rights and needs of rural communities, and in particular those of indigenous peoples. Furthermore, artisanal producers and SMEs continue to face difficulties in operating formally and in accessing export markets.
The issue of land and resource rights has received less attention, within the context of legality initiatives, in part because the issue of land tenure has been considered beyond the remit of the VPAs. For example, while Ghana has seen remarkable progress in many aspects of forest governance, issues related to land and tree tenure remain unresolved. In the Republic of the Congo, despite progress on the recognition in law of the rights of communities and indigenous peoples, these have yet to be translated into changes on the ground.
More attention has been given to the SME sector, and a number of countries have undertaken reform processes that are aimed at enabling small-scale producers and enterprises to formalize their operations and to participate in international supply chains. For example, in the DRC legislative reforms were made in 2016 to enable artisanal loggers to operate legally. In addition, new regulations, introduced in 2014 and 2016, enabled the implementation of community-based forest management, and over 100 communities have since been granted rights to manage their forest resources. Targeted support to enable SMEs to operate legally and to obtain legality verification has also been provided within the framework of the VPAs in many countries, thereby helping to improve the operating environment for SMEs. For example, in Cameroon the VPA has reportedly contributed to an increase in the availability of information for SMEs, and in their technical capacity to operate legally, as well as a reduction in the informal taxes that they pay.
However, in many cases these efforts have yet to overcome the prevailing political and economic systems. The same study from Cameroon also noted that despite some improvements in SMEs’ capacity, technical and financial requirements continue to hinder them from operating legally. In most of the countries assessed, the legal framework remains poorly adapted to accommodate or incentivize SMEs to operate formally, and the odds remain weighted against them. For example, in Vietnam, the policy framework remains focused on large-scale operators; in their assessment of the governance reforms implemented in the country, the NGO Center for Sustainable Rural Development noted that ‘the tradition of communities in using and owning forests has not been institutionalized yet’. In spite of the legal reforms that have been implemented in the DRC, artisanal logging continues to be predominantly informal. The weak institutional framework and entrenched nature of informal systems in the country mean that there are few incentives to operate formally.
Supply- and demand-side measures in driving reform
The original intention of the FLEGT action plan was that the combination of demand-side and supply-side measures would facilitate progress towards establishing a legal and sustainable forest sector. In particular, it was hoped that strengthening the market for legal timber would encourage governments to implement and support reform of the sector, these incentives being created through the establishment of trade measures. As preceding sections of this paper have described, the various demand- and supply-side measures have led to progress in many areas. However, the extent to which there has been positive interaction between them is less apparent.
The various demand- and supply-side measures have led to progress in many areas. However, the extent to which there has been positive interaction between them is less apparent.
One reason for this is the uneven response in consumer countries – both within Europe and elsewhere. The implementation of the FLEGT action plan has meant that, in general, the EU has seen the most sustained levels of activity. However, as noted above, member states have responded very differently. The design and implementation of public procurement policies, the resources devoted to the enforcement of the EUTR and the penalties applying to non-compliance have all varied significantly between countries.
This has contributed to one of the weaknesses of the VPAs – that the EU’s partner countries have not seen enough rewards for their efforts. Exports of Indonesian timber products to the EU did increase after FLEGT licensing began in 2016, but the rise was small and it was evident mostly in exports to the UK and the Netherlands.
Stakeholders in Indonesia, and in other VPA partner countries, have highlighted the fact that FLEGT-licensed timber is not recognized by most EU member state public procurement policies, and has no visibility in consumer markets, where FSC and PEFC certification are the main labels. This reflects an underlying mismatch between the objectives of some of the policy measures. The focus of some initiatives, such as timber procurement policies, is on sustainability, which has made it difficult to promote legally sourced products in the market. This, together with uneven and inconsistent implementation of the EUTR, has meant that the benefits of FLEGT licensing have been less apparent than was hoped for.
Action on the part of other major consumer countries has also been varied. In those countries that have introduced market access regulations or public procurement policies, implementation has often been weak. Furthermore, a number of large importing countries, most notably China and India, have yet to take concrete action to regulate illegal imports. The lack of demand for legal timber in these markets has further reduced the incentives for reform.
With the growing adoption of demand-side measures by many countries, and most notably by China, this may change in the coming years. If China does regulate its imports, the great majority of wood-based products that are traded internationally will be subject to such requirements. Furthermore, the increased attention being paid by many countries to reforming their domestic markets may also help tip the balance in favour of legal and sustainable production.
Market mechanisms and economic incentives are only part of the picture, however. Political and social factors can prove equally – if not more – influential in shaping decisions and behaviours. Thus, national political priorities and local issues are often given precedence over any incentives created by international trade measures. Furthermore, corruption and limited capacity can hinder the influence of market mechanisms. In spite of these limitations, markets can provide a valuable entry point for discussions between trading partners, enabling the initiation of broader discussions in which the different political, social and economic priorities of stakeholders can be addressed – which has been the case with the VPAs, for instance. Thus, although the trade incentives of the FLEGT action plan have been weaker than hoped, the processes of dialogue and international cooperation that have taken place in parallel with these incentives have proven influential, helping to drive progress in forest governance by partner countries.
