forest concessions - past present and future?national institutional capacities, including research,...

Forestry Policy and Institutions Working Paper 36

ForestConcessions-PastPresentandFuture?

Disclaimer

The Forestry Policy and InstitutionsWorking Papers report on issues in the work programme of Fao. These working papers do not reflect any official position of FAO. Please refer to the FAO Web site (www.fao.org/forestry) for official information. The purpose of these papers is to provide early information on ongoing activities and programmes, to facilitate dialogue and to stimulate discussion. The Forest Economics, Policy and Products Division works in the broad areas of strenghthening national institutional capacities, including research, education and extension; forest policies and governance; support to national forest programmes; forests, poverty alleviation and food security; participatory forestry and sustainable livelihoods. For further information please contact: For further information, please contact: Cesar Sabogal Forestry Officer Forestry Department, FAO Viale Delle terme di Caracalla 00153 Rome, Italy Email: Cesar.Sabogal@fao.org Website: www.fao.org/forestry Comments and feedback are welcome.

ForestConcessions-PastPresentandFuture?

BertyvanHensbergenConsultant

Food and Agriculture Organization of the United Nations

Rome, 2016

TableofContents

1 ExecutiveSummary...........................................................................................................1

2 Introduction......................................................................................................................7

2.1 Background............................................................................................................................7

2.2 Objective................................................................................................................................8

2.3 TheConcessionSystem..........................................................................................................8

2.3.1 Foresttenuresandforestrights..................................................................................11

2.3.2 Concessionsandresponsibilities.................................................................................11

2.4 Concessionsandtheirbenefits............................................................................................12

2.4.1 Concessionsandsustainableforestmanagement(SFM)............................................12

3 Concessionsaroundtheworld:successes,failuresandlessonslearned........................14

3.1 ConcessionsinLatinAmerica,WestandCentralAfricaandSoutheastAsia.......................15

3.1.1 Wherearetheconcessions?........................................................................................16

3.1.2 Whatarethebenefitsofconcessions?........................................................................18

3.1.3 Concessionsasameansforprotectingforests............................................................21

3.2 Publicforestconcessionsinotherregions..........................................................................22

3.3 Whyaresomeconcessionsmoresuccessfulthanothers?..................................................23

3.3.1 Smallconcessionsversuslargeconcessions?..............................................................24

3.3.2 Arecommunityheldconcessionsmoresuccessfulthanothers?................................26

3.4 Howcanforestcertificationhelp?.......................................................................................27

3.5 Whathavetropicalforestconcessionsachieved?...............................................................31

4 Whyistropicalforestrysodifficult??..............................................................................32

4.1 Thediversitydilemma?........................................................................................................32

4.2 Economicsoftropicalforestmanagement..........................................................................36

4.3 Theroleofmarkets..............................................................................................................38

4.4 Whyhavegovernmentsfailedtokeepthevalueinthecountry?.......................................41

4.5 Tropicalforestryandselfregulation?..................................................................................43

4.6 Illegality................................................................................................................................44

5 Thefutureofconcessions...............................................................................................47

5.1 Scenariosforthefutureoftropicalforestmanagement.....................................................47

5.2 Whatiswrongwiththeconcessionmodel?........................................................................52

5.3 Rightsbasedapproaches.....................................................................................................53

5.3.1 Workersrights,treatmentofworkersandhealthandsafety.....................................55

5.4 Theroleofcertification.......................................................................................................56

5.5 Towardsanewmodelfortropicalforestbusiness(Concessions2.0).................................57

5.5.1 Recommendationsforanimprovedconcessionsystem.............................................57

6 Bibliography....................................................................................................................60

ListofFigures

Figure1ExtentofIFLin2013..............................................................................................................30Figure2Diversityoftreespeciesbycountry.......................................................................................33Figure2LogabandonedinconcessioninCameroonforbeingtooshort(<3m).................................35Figure3Majortradeflowsoftropicaltimber.....................................................................................39Figure4Volumesoftropicaltimberforexportandforlegalandillegalconsumptiononthelocalmarket................................................................................................................................................41Figure5Informally/illegallyharvestedrosewoodandotherhardwoodlogsinBusekoMarket,LusakaZambia(HJVH,2015)...........................................................................................................................44Figure6WorkersfieldaccommodationinaconcessioninGuyanaconsistsofatarpaulin................55

ListofTables

Table1Summaryofforestarea(1000sha)andconcessionareasincludedintheregionalreports.DetailsinTable3...................................................................................................................................7Table2Dimensionsoverwhichforestresourcerightscanbeallocatedindicatingbroadlyhowcommonlythisoccursforeachcriterionvalueinthecaseofconcessions.........................................16Table3Forestrevenuesbyregion.......................................................................................................17Table4Naturalforestandconcessionareasinthestudiedregions(Areas1000sHa).......................18Table5Volumesoflogsharvestedandexportsalesvaluesinselectedcountries(datafromconsultantreports)..............................................................................................................................19Table6AreasandbeneficiariesoftheMayaBiosphereReserveConcessions...................................20Table7Sometypicalsocialbenefitsassociatedwithforestconcessions...........................................29Table8CorrectiveactionrequestsrequiringimprovedmanagementintropicalforestscertifiedbyFSC.......................................................................................................................................................29Table9CostsoflogsincountriesoforiginandsellingpricesofboardsintheUKofarangeofhardwoodspecies................................................................................................................................39Table10Quantitiesoftimberrequiredforarangeofproducts.........................................................39Table11Scenariosfortropicalforestmanagement...........................................................................49

ListofAbbreviations

AAC annualallowablecut

CIFOR CenterforInternationalForestryResearch

CIRAD CentredeCoopérationInternationaleenRechercheAgronomiquepourle Développement

CSR corporatesocialresponsibility

DRC DemocraticRepublicofCongo

FAO FoodandAgriculturalOrganizationoftheUnitedNations

FMU forestmanagementunit

FOB freeonboard

FPIC FreePriorandInformedConsent

FRA ForestResourcesAssessment

FSC ForestStewardshipCouncil

GDP grossdomesticproduct

IFL IntactForestLandscapes

ILCF InvestinginLocallyControlledForestry

ILO InternationalLabourOrganization

ITTO InternationalTropicalTimberOrganization

NGO non-governmentalorganization

NTFP nontimberforestproduct

OHSAS OccupationalHealthandSafetyAdvisoryServices

PES paymentforenvironmentalservices

PNG PapuaNewGuinea

PPP publicprivatepartnership

PUP PrivateUsePermit(Liberia)

REDD reducingemissionsfromdeforestationandforestdegradation

REDD+ reducingemissionsfromdeforestationandforestdegradationand

theroleofconservation,sustainablemanagementofforestsand

enhancementofforestcarbonstocks

RIL reducedimpactlogging

SFB BrazilianForestService

SFM sustainableforestmanagement

SRA SocialResponsibilityAgreement

1 ExecutiveSummaryConcessionsasmeansforallocatingrightsinrelationtonaturalresourceshaveexistedforhundredsofyears.Inforestryconcessionsarethedominantmeansofgrantingrightsinborealandtropicalpublicforests.Intropicalforestsconcessionshavereceivedamixedpresswithsomecasesbeingheavilycriticisedandothershighlypraisedbystakeholders.

Thisreportformspartofareviewprocessoftheconcessionsystemaimedatprovidingadviceonhowtheconcessionsystemintropicalforestscanbeimproved.ThisreviewisbeingcarriedoutbyFAOincooperationwithITTO,SFB(theBrazilianForestService),CIFORandCIRAD.Thereportisbasedonthreeregionalreportsproducedbyconsultants,discussionsduringanexpertmeetingheldinRomeinNovember2015andanextensiveliteraturereview.

Concessionsareoneofthemanywaysinwhichtheownerofforestrightsmaytransferthoserightstoathirdparty.Concessionsgenerallyinvolveamediumtolongtermtransferoftherightsandusuallydealwithlargeareasofpublicforestland.Theconcession-holderwillnormallypayfortimberrightsonavolumeextractedbasisoronanareabasisorsomecombinationofthese.

Inadditiontotherightstoharvesttimber,mostmodernforestconcessionsnowincludeavarietyofdutiesthattheconcession-holdermustfulfil.Thesedutiesoftenincludesomemeasureofforestmanagementandsilvicultureaswellastheprovisionofsocialservicesandinfrastructureforlocalcommunities.Forthisreason,somepeopledistinguishbetweenforestuseconcessionsandforestmanagementconcessions.Inpracticethereisawiderangeofrightsandresponsibilitiesassociatedwithforestconcessionswhichmaybesharedbetweenthegovernmentandtheconcession-holder.

Intheoryconcessionsofferameansforforestowners(usuallygovernmentsbutsometimescommunitiesorprivatelandowners)torealisethecapitalvalueoftheforestresourceinsituationswheretheyhaveneitherthenecessaryforestryskillsnorthecapitaltofinanceforestryactivities.Governmentscanusethisforestcapitaltomeetarangeofsocioeconomicandenvironmentalobjectivessuchas,generatingforeignexchange,creatingemployment,maintainingecosystemservicesandearninggovernmentrevenue.

Withinthetropicalareasencompassedbytheconsultantreports(LatinAmerica,SouthEastAsiaandWest&CentralAfrica)forestconcessionscoverabout123millionhaaccountingforapproximately14%ofthepubliclyownedforest.HowevertherearecurrentdifferencesbetweenthesituationinLatinAmericaandtherestofthetropicsduelargelytotheverylowconcessionareainBrazil-whichaccountsforaveryhighproportionofthetotaltropicalforestareaoftheregion,whileintropicalAfricaandSoutheastAsiaover20%ofpublicforestlandsareunderconcessions.Itshouldbenotedthatthesituationinrelationtoconcessionareasisverydynamicwithsomecountriesterminatingconcessionsystemswhileothersarestartingnewprogrammes.

Concessionshaveperhapsunfairlybeentargetedforfailuresthataremoregeneralfailuresofforestgovernanceandwidersocietalproblemsinthecountriesinwhichtheyoperate.Inparticularlargeconcessionsownedandoperatedbywellknownactorsindevelopedcountriesareperhapsmorelikelytocomeunderscrutinythanmoresecretiveorsmalleroperations.

Agenericproblemintropicalforestryaffectingconcessionforests,stateforestsandprivatelyownedforestsisthelackofforestmanagement.Thislackofforestmanagementisbasedonthelackoflongtermobjectivesfortheforestanditsresources.Withouttheseobjectivesnoactivitiesarecarried

outthataredesignedtoensureasustainedsupplyofgoodsandservicesfromtheforest.Forestmanagementplansinthetropicsareinmostcasesharvestingplansandinthebestcasestheseincludemeasuresaimedatreducingthenegativeimpactsofharvestingactivities.Thereisrarelyanyplantoeffectivelyreplacethedesirablespeciesthatareselectivelyremovedsothattheeffectofharvestingisthesequentialeconomicextinctionofcommerciallyimportantspecies.

Thepracticeofsilvicultureintropicalforestscancounteractthesenegativeimpactsbyensuringthereplacementofthecommerciallyimportanttrees.However,silvicultureisrarelypracticedsincethecostsofproducingseedlings,sitepreparation,weeding,thinningetc.haveoftenbeenconsideredtobeapoorinvestmentforacropthatwillbeharvestedin40to60years.However,recentstudieshaveshownthatcertaininterventionsareinfactprofitableforthelongterminvestor.

Afurtherproblemthatbesetsnotonlyforestrybutallsectorsoftheeconomyinmanydevelopingcountriesisweakgovernance.Thisisexacerbatedbythefactthatforests,althoughaverysignificantlandusetypeinmosttropicalcountries,israrelygiventhesignificanceitdeservesingovernment.ThusinEuropemorethan90%offorestagencieshaveaheadreportingdirectlytotheministerwhileinWesternAfricaonly11%ofheadsofagenciesreportdirectlytotheminister.Thisleadstoasituationwhereforestagenciesdonothavestaffofthecalibrerequiredtooperateeffectivelyinthemarketplaceandparticularlyinrelationtoevaluatingandmanagingconcessions.

Asaresultofthisweakness,concessionsmaybespecificallytargetedbyunethicalcompaniesseekingtoexploitweakgovernance.Thismaybecombinedwithcorruptionofpoorlypaidgovernmentemployeesandafailureofgovernmentagenciestocollecttheconcessionfeesduetothem.

Inmanycountriestheforestgovernancesystemfailstotakeproperaccountofthecustomaryrightsofforest-dependentpeople.Thisleadstosituationswhereconcessionallocationimpactsontherightsoflocalcommunitieswhichoftenresultsinconflict.Atthesametimeuncertaintysurroundingtenurewilldissuadeconcession-holdersfrominvestinginthekindofsilviculturalactivitiesrequiredtomaketropicalforestmanagementsustainable.

Ifanimportantobjectiveofforestconcessionsistoraiseforestrevenuesthenthiscouldbeusedassomemeasureofthesuccessoftheconcessionsystem.Worldwide,grossforestrevenuesareratherlowaveragingaboutUS$6/ha/yrwhileinAfricathefigureisUS$1/ha/yr.ItshouldbenotedthatinAfricaanincreasingpartofthebenefitsfromconcessionsaresupposedtobeintheformofsocialserviceprovision.Inpracticealmostanyotherlandusecouldgeneratemorerevenuethanforestry.

Forestrevenuestocentraladministrations,however,arenottheonlyeconomicfactortobeconsideredsinceothereconomicbenefitssuchasforeignexchangeandemploymentcreationarealsoimportant.ExportrevenuesarehighlyvariablerangingfromameagreUS$0.20toUS$233perm3oflogsproducedinasampleofcountries.AtthelocalleveltheseamountsmaybecomeimportantwithonecommunityconcessioninGuatemalageneratingUS$3760foreachfamilyfromtimberandafurtherUS$2000fromNTFPs.

Inmanycaseswhereconcessionshavebeendemonstratedtobesuccessfulinthetropicsthishasbeenachievedagainstabackgroundofsignificantdonorinvestment.

Socialbenefitsofconcessionsincludethegenerationofjobs(generallyintherangeof1jobper100-500ha)andotheraspectssuchassupportforeducation,watersupply,medicalcareandtransportinfrastructure.InWestandCentralAfricatheprovisionoftheseservicesisoftenarequirementoftheconcessionagreementwhileinotherareasthisisoftenenhancedwhereconcession-holders

undertakeforestcertification.Forestcertificationalsohasastrongsocialimpactwhenitrequiresconcession-holderstomaintainhighhealthandsafetystandards.

Wellmanagedconcessionsalsohaveapotentialtogeneratesignificantenvironmentalbenefits.Successfulconcession-holdersactinginpartnershipwithlocalrightsholderscanbeaneffectiveforceinpreventingtheillegalsettlementanddegradationofforestreservesandsomeconcessionshavebeenestablishedpreciselyforthispurpose.

Itiswidelybelievedthatsmallconcessionsheldbycommunitieswilloperatebetterthanlargeindustrialconcessions.Thishasledtocriticismoflargeconcessions,someofwhichcanexceed1millionhaandmanyfallinginthesizerangeof100,000to200,000ha.Verylargeconcessionscanleadtoaninefficientuseoflandparticularlywheretherearenoarea-basedfeessothatconcessionbidderscanapplyforlargeareaswithoutcostandconcentrateononlytheverybestpartswhileignoringtherest.Thiscanalsoleadtowastefuluseofthetimbersinceonlythebestisworthextractingbeforemovingontothenextsite.Asaresultlogsareoftenabandonedinforestorsawnwithpoorequipmentthatwasteslargevolumesduetosawinginaccuracyandkerfwidth.

Ontheotherhand,concessionsthataretoosmallfacetheirownproblems.Inmanytropicalforeststhedensityofcurrentlyvaluabletreesisverylowabletogenerateonly5-10m3/ha.Theminimumeconomicsizeforanefficientsawmillislikelytorequiretheinputfromanareaof20,000haharvestedoveraforty-yearperiodtoproducemarketableamountsoftimberfromasmallgroupofspecies.However,withbetterknowledgeandmoreintensivemanagementofsmallerareasitmaybepossibletoincreasetheproductionrateofdesirabletimberbysilviculturalinterventions.

Thereissomeevidencethatwherepopulationpressureisnottoohighcommunitymanagedforestsaremoreeffectivethancentrallymanagedforestsatpreventingforestdegradation.Manycommunities,however,lackthecapacitytomanageforestsandrequiresignificanttechnicalandfinancialsupporttolearnhowtodothis.

Forestcertificationstandardsareanimportanttoolforimprovingmanyaspectsoftropicalforestmanagementascarriedoutinconcessions.Themostfrequentimprovementshavecomeintheformofimprovedhealthandsafety,developmentofimprovedmanagementplansanduseofreducedimpactloggingtechniques.InAfricacertifiedconcessionshavehadsignificantpositivesocialandenvironmentalimpactsandtheengagementwithcommunitieshasledtoanimprovedsocialcontractwithforestdwellers.

Ithasbeenarguedthattropicaltimberbusinessesarenotprofitableenoughtogeneratelargeforestrentsfromconcessionsystems.Thislowprofitabilityisduetothelowdensityofdesirabletreescoupledwiththehighcostsofextractionandtransport.Ifthiswerereallythecase,thentherewouldbegreaterincentivestomakefarmoreefficientuseofthetimberthatisactuallyharvestedinordertoachieveacompetitiveadvantageinthemarket.

Whensilviculturalactivitiescanbeshowntobeprofitablethenitislikelythatconcession-holderswouldplacemuchmoreemphasisondoingthemcorrectlythanwhentheyaresimplyaregulatoryorcontractualrequirementthatisnotenforcedbyaweakadministration.

Onlyasmallproportionofthetimberspeciesavailablefromtropicalforestsareusedsincetheremainder-eventhoughtheyhavedesirableproperties-areunknownonthemarket.Increasingthenumberofspeciesacceptedbythemarketshouldimprovethesituationoftropicalforestsbyincreasingvaluedensity.Unfortunatelythecostsassociatedwithbringinganewspeciestomarketaresohighthatonlythelargestcompaniescouldattemptitontheirown.

Increasinglycountrieshavetriedtokeepasmuchaspossibleofthetimbervalueinthecountrybyinstitutinglogexportbans.Thiscommencedinthe1990sandhasbeenmoreorlesssuccessful.Insomecountriesthishasledtothedevelopmentofaninternalprocessingcapacitytomanufacturevalueaddedproductsandvirtuallyeliminatedlogexports,butinmanycountriesithasledtolarge-scaleillegalexportoflogs.Inothercountriesthesuddenimpositionoflogexportbanshasledtothetemporarycollapseoftheexportmarket.

Perhapsthegreatestreasonforcountriesfailingtoretainthetimbervaluehasbeentheirinabilitytocollecttherevenuesduetothem.Itisrareforcountriestocollectmorethan20%oftheirentitlementduetocorruptionandsystematicevasion.

Partoftheproblemrelatestofailuretoretainvaluewithinthecountryisduetothepoorindustrialperformanceoftheprocessingfacilitiesandtheinefficiencyofthetimbermarket.Manysawmillsindevelopingcountriesareequippedwitholdandwornoutequipmentwhichisincapableofsawingwithprecision.Thisleadstotimberwastageduringprocessingandcustomersdemandanexcessivedegreeofover-measuretoaccountfortherisksthatsomeboardsorpartsofboardswillbebelowmarketdimensions.Poordryingorcompletelackofseasoningleadstofurtherlossesduetosplittingoryetfurtherover-measurerequirements.Inaddition,oldandpoorlymaintainedmachineryisfarmoreenergydemandingthanmodern,wellmaintainedmachinerysothatenergycostsareexcessive.

Themarketfortropicaltimberishighlyinefficient.Itdemandsstandarddimensionsandunnecessarilylonglengthsofdefect-freetimberwhichleadstolargevolumesbeingrejected.Thebuyersarepresentedwiththesestandarddimensionswhichinmostcasesbearnorelationtotheproductstheywishtomanufacture.Improvedcommunicationbetweenusersandproducersshouldleadtosignificantincreasesintimberrecoveryforproducersandreductionsineffectivecostsforbuyerswhileallowingeachtoincreaseprofitssubstantially.Manufactureofvalueaddedcomponentsisrareintropicaltimber.

Privatelyownedforestsinthetemperatezoneareeffectivelyselfregulating.Ithasbeenarguedthatitisthesecurityoftenureofferedbyprivateownershipthatisthemajorfactorcontributingtoselfregulatingandthatthiswouldbereplicatedinthetropicsifsecurityoftenurecouldbeguaranteed.Withsecurityoftenureinvestmentsinsilviculturewouldbemadetoensurethelongtermproductivityoftheforest.Unfortunatelygiventheslowgrowthofforestsitislikelythatbusinessesseekingtooptimisetheirreturnoncapitalmaysimplyharvesttheentireforestestateasquicklyaspossibleinordertoreinvesttheircapitalelsewhere.Itisclearthatsomeformofenforceableregulationisnecessary.

Thesituationisexacerbatedbyotherrisksfacedbyinvestorspotentiallyleadingtoevenhigherdemandsontherateofreturnoncapital.Suchrisks,whicharecommonplaceindevelopingcountries,arepoliticalinstabilitythatcouldleadtoarbitrarychangesintenurerulesorevencompletelossoftenure.

Illegalityisamajorissueintropicaltimbermarkets.Mostofthisillegalityisassociatedwiththeinformalsectorwhichissuppliedbysmall-scalesawyersandaccountsforthemajorityoftheinternalmarketandexportswithintheregion.Mostoftheinformalsectorissmall-scalewithindividualoperatorsaccountingfor10sofcubicmetersoftimberannually.However,sincethissectorischaracterisedbynotpayingforthetimberandnopaymentoftaxes,thishastheeffectofdepressingprocessedtimberpricesmakingcompetitionfromlargerformaloperatorsalmostimpossible.Theinformalsectorisoftenaccompaniedbypettycorruptionofjuniorofficials.

Illegalityofmanyformsalsooccursinthelargerscaleformalsectorandisusedtoinflateharvestfarabovethevolumeslegallyallocatedparticularlyforhighvaluespecies.Thisillegalityisoftenaccompaniedbysmall-scalecorruptionandgrandcorruptionofseniorofficialsandpoliticians.Illegalityoccursformanyreasonsandisoftenacceptedaspartofthewayofdoingbusiness.

Theeliminationofcorruptionisdifficultandforthisreason,whenforestpolicymeasuresareproposed,analysisoftheireffectshouldassumeandtakeintoaccounttheexpectedimpactofillegalityandcorruption.

Thereportdiscussesarangeofscenariosforthefutureoftropicalforestmanagementandconcludesthatsuccessisonlypossibleiftherearesignificantimprovementsin:

• Forestgovernance• Forestmanagement• Timberbusinessperformance

Forestgovernancemustensurethatstakeholdersreceivetheirfairshareofbenefits.Forestmanagementmustbeappliedtoincreasethefutureyieldofhighvaluespecies.Timberbusinessesmustbecomemuchmoreefficientandreducewastageatallstagesofthesupplychain.

Concessionshavefailedforawidevarietyofreasonsincluding:

− concession-holdersdonothaveadequateskillsintropicalforestmanagementandsilviculture;

− scientificunderstandingoftropicalsilvicultureanditseconomicbenefitsispoorlydeveloped;

− weakgovernancemeansthatconcession-holdersdonotfollowthetermsoftheircontractsorthelaw.

Rightsbasedapproachesmaybeusedtoimprovegovernanceandtoensurethatstakeholderscustomaryrightsarerespected.Rightsbasedapproachescanensurethatthosewithcustomaryrightsareadequatelyrewardedwhentheserightsareallocatedtoothers.Wherelocalrightsholdersreceiveadequatebenefitsfromtheforesttheyaremuchmorelikelytoprotectandimprovetheforestresource.Wherelocalrightsholdersdonotreceivesuchbenefitstheyaremuchmorelikelytoseeforestlandasbeingofnovalueandtoactivelyconvertforeststootherlanduses.

Therightsofworkersareoftenbetterrespectedintheformalsectorthanintheinformalsectorsothatworkersemployedbyresponsibleandcertifiedconcessionsarefarbettertreatedthanelsewhereinthesector.

Forestcertificationisanimportantbutoftenmisunderstoodtoolforimprovingforestmanagement,butitcannotonitsownmakeabusinesssuccessful.However,theperformancestandardsusedinforestcertificationcanbeusedforguidancewhereforestmanagersareattemptingtoimprovetheirbusiness.Toooftentherelationshipwithforestcertificationsystemsandforestmanagersisoftheform"letusdotheabsoluteminimumrequiredtoobtainthecertificate".Ifinsteadtheobjectivebecomes"letusdothemaximumpossibletoimproveourforestmanagementbusiness",thentheforestcertificatewillbecomeeasilyavailableifandwhenitisneededtosupportthebusiness.Withabettermanagedbusinessandimprovedproductivityprofitswillflowduetoreducedcostsandincreasedrevenues.

Thereportconcludeswitharangeofrecommendationsforimprovementsintropicalforestmanagementandconcessionsgroupedasfollows:

• Revisedandimprovedgovernance• Facilitatingforestbusiness• Improvedforestmanagement• Involvinglocalstakeholders

Forconcessionstobecomesuccessfultheymustbebasedonasuccessfulbusinessmodelfortropicalforestmanagement.Insuchabusinessmodel,forestsarewellmanagedandabletoprovideanassuredflowofallresources,thetenurerightstotheseresourcesareallocatedwithinaframeworkofgoodgovernancethatallowsbusinessestooperatewiththeminimumpossibleinterferenceandwithoutcorruption,andtheproductsfromtheforestareprocessedefficientlyintohighvaluegoodsthatreturnsignificantvaluetotheforest.

2 IntroductionBackgroundForestconcessionshaveintherecentpastbeenthedominantgovernancetoolfortheharvestingandmanagementofnaturalpublic/State-ownedforestsinmanytropicalcountriesaswellasbeingdominantinborealareasofRussiaandCanada.TheyarelessimportantintemperatezonesbutareinuseintheforestareasofEasternEuropeaswell.However,theconceptofconcessionsisnotanewoneandtheyhavebeeninusesincethe1700sforawiderangeofnaturalandothertypesofresources1wheretheyhaverangedfromconcessionsofperpetualtransferrablerightstomuchmorelimitedrights.

Forestconcessionshavereceivedamixedpress.Insomecases,beinghailedasnotablesuccessesintropicalforestmanagement2,3whileinothercasesbeingvilifiedasfocusofcorruption,disenfranchisementofcommunitiesanddeforestation4,5.

Thereisnointernationalsystemforreportingonconcessions.Theregionalreports6producedforthisstudyindicate(Table1)indicatethatthereareatleast122millionhaoftropicalforestsconcessionsaccountingfor14%ofState-ownedforests.Thesuccessorfailureofforestmanagementunderconcessionsisthereforeakeyfactorinfluencingthesafeguardingofforestresourcesatthegloballevel.

Table1Summaryofforestarea(1000sha)andconcessionareasincludedintheregionalreports.DetailsinTable4

Totalforestarea

Publicforestsarea

Publicproductionforestsarea

%offorestinpubliclands

%ofpubliclandsforproduction

Industrialconcessions

%ofpubliclandsunderconcessions

LatinAmerica 718,820 425,368 43,582 59% 10% 18,597 4%

West&CentralAfrica

262,365 260,227 68,173 99% 26% 56,114 22%

SouthEastAsia 222,694 180,909 114,920 81% 52% 48,122 27%

Studyregions

1,203,879 866,503 226,675 72% 19% 122,833 14%

1HardinR.2011.ConcessionaryPoliticsProperty,Patronage,andPoliticalRivalryinCentralAfricanForestManagement.CurrentAnthropology,Vol.52,No.S3.2Radachowsky,J.,etal.2011.ForestconcessionsintheMayaBiosphereReserve,Guatemala:Adecadelater.ForestEcol.Manage.doi:10.1016/j.foreco.2011.08.043.3Anon.2004.ConservationConcessionProtectingforestecosystemswithpaymentsforecosystemservicesinGuyana.https://www.cbd.int/financial/pes/guyana-pesconcession.pdf.4WorldRainforestMovement.2015.Whytheforestconcessionmodeldoesnotsolvethestructuralproblemsofloggingandwoodextraction?Bulletin217.5GrayJ.A.2002.ForestConcessionPoliciesandRevenueSystems:CountryExperienceandPolicyChangesforSustainableTropicalForestry.6(1)KarsentyA.2015.TheContemporaryForestConcessionsinWestandCentralAfrica:ChronicleofaForetoldDecline?.(2)ChanB.2015.StatusofForestConcessionsinSoutheastAsia.(3)GretzingerS.2015.LatinAmericanexperiencesinforestconcessions.

Againstthisbackground,FAOandITTOhavelaunchedaninitiativeincollaborationwiththeBrazilianForestService(SFBinitsPortugueseacronym),CIFORandCIRAD,toreviewthecurrentsituationofconcessionsandtopreparerecommendationsaimedatguidingdecisionmakersintheimplementationofforestconcessionsystemswhichshouldbeabletoanswertheneedsoflocalpeople,tobeeconomicallyefficientwhilemaintainingtheintegrityofforestresources7,8.

TheimmediatepurposeofthisreportistoserveasbackgrounddocumenttotheInternationalWorkshopWhatfutureforforestconcessionsandalternativeallocationmodelsformanagingpublicforests?,tobeheldinBrazilinthesecondhalfof2016.Itisalsoexpectedthatthedocumentwillbeofwiderinteresttopolicymakersandotherstakeholdersinterestedinregulationofrightstoaccessanduse,mainstreamingofsustainableforestmanagementandtenure.

Thereportbuildsonthreeregionalreports9,10,11completedin2015andpresentedatanexpertmeetingconvenedbyFAOinRomeon24thand25thofNovember2015.

ObjectiveTheoverallobjectiveofthisreportistoproviderecommendationsonhowcurrentforestconcessionsystemscanbeimprovedsothatconcessionsarebetterabletomeetforestpolicyobjectives,especiallyregulationofrightsandmanagementpractices.Itisexpectedthattheserecommendationswillhavetheflexibilitytobeapplicableinawidevarietyofsituations,contributingtomaximiseforestcontributiontosociety.

Therecommendationswillcoverawiderangeofissuesincluding:

• howtheallocationofconcessionscanbeimproved;• howthegovernanceofconcessionscanbeimproved;• howconcessionscanbefittedbetterintothesocial,politicalandenvironmentallanduse

frameworks;• howconcessionscanbemademoreprofitableforentrepreneurs,landownersandlocal

communities;and• thefutureofcommunitymanagedconcessions.

Basedonevidenceraisedfromthethreeregionalreports,theexpertmeetingandotherrelevantsources,itisenvisagedthatthereportwillcontributetomakeforestconcessionsamoreeffectiveandefficientforestandtenurepolicies’instrumentandafullysustainablebusiness.

TheConcessionSystemConcessionsarelegalinstrumentsbetweentwopartiesusuallytheStateandaprivateentitythatconferrightsfromtheStatetotheprivateentityinexchangeforapaymentorprovisionofservices.Inthecontextofforestry,concessionsmayrefertosimplerightstoharvesttimberorotherforestproductsorontheotherhandrightstomanageforestresourcesinthelongterm.

7GrayJ.A.2002.ForestConcessionPoliciesandRevenueSystems:CountryExperienceandPolicyChangesforSustainableTropicalForestry.8FAO.2001.Governanceprinciplesforconcessionsandcontractsinpublicforests.FAOForestryPaper139.9KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?10ChanB.2015.StatusofForestconcessionsinSoutheastAsiaconcessionsinSoutheastAsia.11GretzingerS.2015.LatinAmericanexperiencesinforestconcessions.

Concessionsaresimplyoneformofallocatingrightsoverforestresources.Thereisenormousvariationinthespecificrightsandresponsibilitiesassociatedwithconcessions.Concessionsarewellknownfromotherspheresofbusinesswheretheyaresimilarlyvariable.Asaresultdefinitionsofconcessionsareequallyvariable).

Somedefinitionsof(forest)concession

Atitsmostgeneral,the‘concession’issimplyanygrantingofrightsbetweentwopartiesanditisusuallygovernedbytermssetoutinacontract(concessionagreement)betweentheparties.

However,whenspeakingofforestresourcerightsconcessions,theusagehasbecomesomewhatmorerestrictedsothatitismorenormaltotalkofconcessionsbetweenstatesasownersofresourcerightsandotheractorsincludingindividuals,communitiesandcorporationsasusersoftheseresources.SuchrightsmayormaynotbetransferrableandmayalsoinvolvemultiplepartiessuchasthecaseofPUP(PrivateUsePermit)concessionsinLiberia12.

Thetermsofconcessionagreementsareextremelyvariablebothintermsoftheirscope,responsibilitiesandduration.Differentcountrieshaveverydifferentapproachestoconcessionsbothintermsoftheirdurationandinthewaythattheylevycharges(Table2).

12deWit,P.2012.LandRights,PrivateUsePermitsandForestCommunities.LandCommissionofLiberia.

ForestConcession1.Atemporary(orterminable)anddefinedfacilityinvolvingtheuseofaforestoritsproduce,sanctionedbytheownerofaforesttoindividualsorcommunities—synonymforestprivilege.2.Acontract,license,orpermitgrantedtoafirmorapersontoextractandmarkettimber(timberconcession)orotherproducecommerciallyfromadefinedareaoftheforestwithinagivenperiod—Noteatimberconcessionmayspecifythenumber,type,andsizeoftreesthatmaybeharvested.http://dictionaryofforestry.org/dict/term/forest_concession

ForestconcessionSystemofawardingharvestingrightstoindividuals,privatecompaniesand/orcommunitieswhoassumetheriskandresponsibilityofforestresourcesexploitationand/ormanagement.[FSC(2015)FSCDirectiveonFSCForestManagementEvaluations.FSC-DIR-20-007EN]

ConcessionAsitisdefinednowadays,the“modern”concessionisviewedasawaytodeliverservicesofpublicandcollectiveinterestthroughanassociationofprivateinvestmentandpublicregulation.[Karsenty(2007).OverviewofIndustrialForestConcessionsandConcession-basedIndustryinCentralandWestAfricaandConsiderationsofAlternatives.CIRAD].

ConcessionAnygrantofrights,land,orpropertybyagovernment,localauthority,corporation,orindividualhttp://www.collinsdictionary.com/dictionary/english/concession

ConcessionAgreementAnegotiatedcontractbetweenacompanyandagovernmentthatgivesthecompanytherighttooperateaspecificbusinesswithinthegovernment'sjurisdiction,subjecttocertainconditions.Aconcessionagreementmayalsorefertoanagreementbetweentheownerofafacilityandtheconcessionownerorconcessionairethatgrantsthelatterexclusiverightstooperateaspecifiedbusinessinthefacilityunderspecifiedconditions.Regardlessofthetypeofconcession,theconcessionaireusuallyhastopaythepartythatgrantsittheconcessionongoingfeesthatmayeitherbeafixedamountorapercentageofrevenues.http://www.investopedia.com/terms/c/concessionagreement.asp#ixzz3teXRDW61

Withinthisvariability,however,itispossibletostatethatforestconcessionsaregenerallybasedon:

• longertermagreements(>20years)usuallycoveringatleastonecompleteharvestingcyclefortheforest.

• landthatisdirectlyownedbytheStateorallocatedtocommunities• theallocationoftherighttoharvesttimberand/orotherabovegroundresources.• verylargeareasofland(>50,000ha)forindustrialconcessionsandsomewhatsmaller(3,000

–50,000ha)forsmall/medium-scaleoperationsandcommunityconcessions.• concession-holdersacquiringresponsibilitiesandrightsfortimberharvestingandforest

management.

Table2Dimensionsoverwhichforestresourcerightscanbeallocatedindicatingbroadlyhowcommonlythisoccursforeachcriterionvalueinthecaseofconcessions.Cellshighlightedingreenarethecommonsituationforconcessions,thoseinorangearelesscommonwhilethoseinyellowarerarelyfoundforconcessions.Notethattimbermaybefurthersubdividedbyspeciesandpurpose.

DIMENSION CRITERION

Duration 1yr 2-5yr 6-20yr 21-40yr 41-99yrLandOwnershipbeforeconcessiongranted

Private Lease State Communal Privateundercommunallaw

Resourceclassesgrantedbyconcessionagreement

Timberonly NTFPonly Timber+NTFPs

AllAboveGround

AllResources

Responsibilitiesofconcession-holder

TimberHarvestingonly

AllaspectsofForestManagement

DevelopmentofPublicInfrastructure

ProvisionofPublicSocialServices

Fees&Taxesleviedonconcession-holder

FeespaidwithApplication.

FeesbasedonVolumeharvested

FeesbasedonAreaofconcession

FeesbasedoncombinationofVolumeandArea

FeebasedonStandingVolume

Typeofconcession-holder

PrivateIndividual

Anycommercialentity.

Nationalcommercialentity.

Non-ResidentCommunity

ResidentCommunity

Areaofconcession

1-100ha 100-3000ha 3000-30.000ha

30.000-1.000.000ha

Typeofprocessforgrantingconcession.

ClosedProcess,privateandsecretnegotiationbetweengovernmentandconcession-holder

QualifiedProcess.Negotiationbasedonapre-qualificationoftechnicalandfinancialcompetence

TransparentProcess

ProcessInitiatedbyconcession-holder

ProcessInitiatedbyAuthorities

Stateshaveotherwaysofallocatingtimberrightswhicharenotgenerallyconsideredtobeconcessions.Themostcommonalternativestoconcessionsusedbygovernmentstoderiverevenuefromforestresourcesinclude:

• standingtimbersales• logsales(roadside,forestgate,delivered)

• shorttermharvestpermits• mediumandlongtermlandleasesthatincludeforestresourcerights• forestlandsales• jointventureforestrycompany• State-owned‘independent’forestrycompany

Inmorerecenttimesthereareincreasingdemandsthatconcession-holders,inadditiontotheirrightstomanageforests,haveobligationstoprovidearangeofsocialserviceswhicharemoreusuallythedirectresponsibilityofgovernments.Theseincludesuchthingsastheprovisionofeducationalandhealthcareinfrastructureandservicesaswellasthedevelopmentoftransportinfrastructure.

Foresttenuresandforestrights

Theconcessionconferstheholderacertainparcelofrights.Theserightsareusuallydifferentfromandindependentoftherightsassociatedwithlandtenure.Therearesignificantdifferencesbetweencountriesinthewayinwhichtheserightsaredividedsothatinsomecasesforesttenureprovidesmanyoftherightsassociatedwithlandtenure(i.e.privacy,rightstoconstructinfrastructure)whileintheotherhandtherearecaseswherelandtenuredoesnotincludetreetenure.

Foresttenuresexistunderavarietyofrightssystemsrangingfromformallawtocustomarylawincludinginformallyacceptedtraditionsandpractices.Thisresultsinmanysituationswheretherearetenureconflictsarisingoutofthedifferentrightssystems.Thisislikelytooccurwherethereareoverlappingtenureseitherunderthesametenuresystemortenuresunderdifferentsystems.

Sinceconcessionsaregrantedbygovernmentsundertheformallegalsystemitismostlikelythattherewillbetenureconflictsbetweenlegalrightsoftheconcession-holderandcustomaryortraditionalrightsofcommunitieslivingonorusingthesameland.InAfrica,forexample,only16%oftheState-ownedforesthasnootherforesttenurerightassociatedwithit13.

InmostcasesitisimpossibletotalkofFreePriorandInformedConsent(FPIC)forlandallocatedtoconcessionssincecommunitiesandindigenouspeoplesarenotconsultedatthetimeofconcessiondelineation.

Concessionsandresponsibilities

Allpartiestoconcessioncontractshaveresponsibilitiesinrelationtothemasdosomeotherparties(NGOsetc.).

Forgovernmentsthismeansthattheconcessionsofferedshouldensurethattheforestresourcesareusedforthebenefitofthepeople.Atthesametime,governmentshaveresponsibilitiestotheglobalcommunityofnationsasdescribedinanyinternationalconventionandtreatytowhichtheysubscribeandwhichmaylimithowtheycandealwiththeirforests.Itisalsoimportanttorecognisethattherightsassumedbygovernmentstodisposeofforestresourcesoftenpredateindependence.Suchrightswereusuallyputinplaceforthebenefitofthecolonialauthoritiesandwithlittleornoconsiderationforlocalpopulations.

Concession-holdershaveresponsibilitiesassetoutintheircommercialcontractswiththeStateaswellasresponsibilitiestofollowlocal,nationalandinternationallaws.ResponsiblebusinesseswouldbeexpectedtooperateinlinewiththeUNGlobalCompactwhichincludesfairtreatmentoflabour,

13FAO(2014)Tenuresecurityforbetterforestry.UnderstandingforesttenureinAfrica.ForestPolicyBrief.

respectforhumanrights,avoidanceofcorruptpracticesandminimisingnegativeenvironmentalimpacts.

Insomecasescommunitiesaredirectlyimplicatedintripartitecontracts(State,company,community)inthemanagementofconcessionswhilstinallcasescommunitieswillbeaffectedparties.Inpracticecommunitybenefitsareoftencontainedinsocialresponsibilityagreements(SRA)whichusuallyoffercommunitieslimitedbenefits.CommunitiesneedsupportfromNGOsandothersinordertonegotiatefairSRAs.

ConcessionsandtheirbenefitsStategovernmentsshouldmanagetheirnaturalresourcesprincipallyforthebenefitoftheircitizens.Forestsformasignificantpartofthenaturalcapitalinmanycountries.Inmostdevelopedcountries(withtheexceptionofCanadaandRussia)governmentsmanagetheirforestsusingtheirownresourcesandderivevaluefromthemultipleresourcesthatforestsprovide(e.g.fromtourism,hunting,watersupplyandtimbersales).TimbersalesaremostoftensoldintheformofstandingtimberbutinsomecountriesState-ownedforestorganizationsselllogsatroadsideordeliveredtoprocessingfacilities.

Intropicalcountriesmostgovernmentsdonothavethehumanresourcesorcapitalrequiredtomanagetheirownforestsandthereforeemployagentsbymeansofconcessionstodosoforthem.Governmentsdevelopconcessionsystemsinordertomeetmultipleobjectivesandtoachievemultiplebenefits.Thesebenefitsincludesocial,environmentalandlocaleconomicdevelopmentaswellasrevenuegenerationandforobtainingforeignexchange.

Concessionsareallocatedtocommercialcompanieswhoareexpectedtopayforthetimberharvested(forestrent)andtorenderarangeofsocial,environmentalandeconomicdevelopmentservicesinexchangefortheirexclusiverights.Inrelationtotheforestresourcetheseservicesmaybelimitedinscopeormayincludeallaspectsoftheforestmanagementcycleincluding,inventory,harvesting,regenerationandsilvicultureaswellasmanagementofbiodiversityassets.Socialdevelopmentservicesoftenincludeaspectssuchasschoolsandmedicalfacilities,facilitiesforforestregulatoryagencies,andgeneralinfrastructuresuchaswater,powersupplyandroadsandbridges.

Inorderforthismodeltowork,companiesmustbecapableofmakingaprofitfromtimberresourceswhileatthesametimemeetingthecostsofthesocio-economicandenvironmentalservicestheyareexpectedtosupply.

Recentlygovernmentshavemadesomeforestlandsavailableforconservationconcessionswherethemainobjectiveismaintenanceofbiodiversityandenvironmentalservices.Suchconcessionsareusuallyexternallyfundedwhichmayincludepaymentforenvironmentalservices(PES).

Concessionsandsustainableforestmanagement(SFM)

Concession-holdersinpartnershipwithgovernmentagenciesareexpectedtoachieveSFM.Responsibilitiesinsuchpartnershipsmaybedividedinmanywayswithgovernmentagenciestakingmoreorlessresponsibilityformanyaspects(e.g.inventory,landuseallocation,harvestallocation,biodiversityconservationetc.).

FAOcommissionedaseriesofstudiesduringthelast15yearsaimedatidentifyingcasesofexemplarytropicalforestmanagementandoutof227casesthatwerenominatedorselected,27wereconcessions.Althoughthisisasmallpercentageofthetotalnumberofcases,theyaregenerallyofmuchlargersizethantheotherexamplesandthereforerepresentaverysignificantarea

ofthetropicalforestareaundermanagementconsideredinthestudies.TheexemplarycaseslargelyoverlappedwiththecountriesandregionssummarisedinTable1andwouldrepresent3%ofthetotalareaofconcessions.

Ifthese27casescanbeconsideredexemplarytheremustalsobeotherconcessionsthatcanbeconsideredasrepresentinggoodoradequateforestmanagement.Thismustincludeconcessionsthatarecertifiedunderavarietyofschemesandwhichwerenotincludedinthestudies.

CriteriadevelopedforevaluatingSFMrarelydealwiththebenefitsfromtheforestinaquantitativeway.Thiscanbeconsideredtolimittheirusefulnesssinceatthelocallevelitisindividualdecisionsbasedonlandusebenefitsthatdeterminesthefuturewellbeingoftheforest.Wherebenefitsfromalternativelandusestotheindividualaregreaterthanforestbenefitsrationalindividualswillchoosetoreplaceforestswithalternativecrops.

Thelevelofbenefitsfromtheforestwillsimilarlyinfluencegovernmentdecisionmaking,withfewgovernmentsbeingpreparedtomakelargeinvestmentsinthemanagementofforeststhatprovidelittlerevenue.ThisisquiteclearfromtheemphasisofpaymentsforforestprotectionintheREDDdiscussions.

PoorForestManagement

Forestmanagementinthetropicsincludingforestmanagementinconcessionsremainspoorforarangeofreasons.Perhapsthemostimportantofthesereasonsisthefailuretoseta-prioriobjectivesfortheforest.Theseobjectivesshouldbebasedontherangeofgoodsandservicesthattheforestisexpectedtosupplynowandintothefuture.Oncetheseobjectiveshavebeendetermineditisnecessarytodevelopamodelforhowthiscanbeachievedinthelongterm.Thiswillrequireavisionofthespeciesandage/sizedistributionofthefutureforestandasilviculturalplanonhowthiscanbeachieved.

Thislackoflongtermobjectivesfortheforestmeansthatinrealityforestmanagementplanshavelittletodowithmanagementoftheforest.Theycanbebetterdescribedasreducedimpactharvestingplanswithenvironmentalandsocialsafeguards.

Thelackofproperforestmanagementplanninghasledtoarangeofforest‘management’systemswhichhavelittleornobasisinascientificunderstandingofforestdynamicsandwhichcanbeshowntoleadtoforestdegradationandtheeconomicextinctionofthespeciestargetedforcurrentharvesting.

Silviculture,thatis,theactivemanagementofforestvegetationtoachieveforestresourceobjectives,isalmostabsentintropicalforests.Silviculturefortheproductionoftimberrequiresanunderstandingoftheecologyoftimbertreeswithintheforestecosystem.Thisunderstandingisincreasinginthetropicsalthoughitstillfallsfarbehindtheknowledgeintemperatezoneswhereresearchwasstartedmuchearlierinresponsetothedepletionofthetemperatetimberresourceandthesubsequentestablishmentoflarge-scale,industriallyorientedforests.

Thereishoweversufficientknowledgetoshowthatcertaininterventionsaimedatsustainingtimberresourcescanbebothsuccessfulandeconomicallyviable.Forexample,theactivemanagementandenrichmentplantingofcanopygapscreatedbyharvestinghasbeenshowntobebothecologicallyandeconomicallyviable.

Theapplicationofsilviculturecarriescostswhichshouldbesupportedbyreturnsfromthefuturebenefitsandwherethisisnotclearthencostlyinterventionswillbeavoided.Concession-holdersare

unlikelytoengageinsilvicultureonavoluntarybasiswhenfutureforesttenureisuncertain.Theyareequallyunlikelytocarryoutlegallyrequiredsilviculturewhengovernanceandenforcementofcontractsisweak.

Thefailuretoimplementforestmanagementanditsassociatedsilvicultureislikelytoprovedisastrousforthefutureoftheforestsandtheiraccompanyingbiodiversity.

Aretheexpectationsfromconcessionsrealistic?

ConcessionsareexpectedtodeliverSFMwhilesimultaneouslyofferingsignificantfinancialreturnstostatesandtoconcession-holders.UntilrecentlySFMinitsbroadsensewasnotconsideredintheconcessionmodelatallandconcession-holderssimplyharvestedtimberand‘shared’incomeswiththeState.Concession-holderscouldbeexpectedunderthismodeltobegoodatthelowestcostextractionoftimberfromtheforestwithlittleconsiderationofotheraspects.

Inthemodernconcessiontheconcession-holderisexpectedtofulfilanenormousrangeofadditionaltasks,manyofwhichhavenothingtodowithforestry(e.g.provisionofhealthcare,provisionofeducation)aswellastheadditionaltasksthatcomeaspartofSFM(e.g.biodiversitymanagement,silviculture).Mostoldconcessionmanagerswillnothavethetrainedstafftodealwiththeseissuesandinmanycasessincethetasksarerelativelynewthiscapacityisrarelyfoundinthecommercialenvironment.Experiencedtropicalforestbiodiversitymanagersarenotwidelyavailablesincemostoftheexpertiseisconcentratedinacademicandresearchorganizations.

Institutionalsettingsandconcessions

Inalmostallcasestropicalcountrieswithconcessionsystemshaveinstitutedthematleastpartlybecauseofalackofhumanresourcecapacity.Thislackofcapacityisendemictotheentiresystemandmeansthatgovernanceisgenerallyveryweak.Forestagenciesarenotusuallyapriorityofgovernmentsandthisisreflectedinthefactthatalthoughforestoftenaccountformorethan40%ofthelandtheheadsofforestagenciesrarelyreportdirectlytotheministerresponsibleforforests.Thislackofcapacityfurtherimpactsonthecompetenceofthestaffinvolvedintheevaluationofconcessionsandthesupervisionoftheconcessioncontract.Furthermore,thislackofcapacityencouragesconcessionstobetakenupbycompaniesthatseektomakeuseofthisweaknesstoavoidhavingtocomplywiththetermsofconcessionsandwithforestrylawsingeneral.

Whencombinedwithpoorlypaidstaffintheregulatoryauthoritythisleadstosituationswherecorruptionofgovernmentofficialsbecomescommonplaceintheforestsector.PoorlypaidstaffcometorelyonfacilitationpaymentsinordertosurvivewhichhasthefurtherconsequencethatStaterevenuesfromforestsarereducedduetonon-collectionofrevenues.

3 Concessionsaroundtheworld:successes,failuresandlessonslearned

Thereiscurrentlynoconsolidateddataforforestconcessions.TheGlobalForestResourcesAssessment14reportsonmanagementrightsofpublicly-ownedforests.Itshowsanincreaseintheshareofpublicforestsmanagedbyprivatebusinessfrom3%in1990to15%in2010.Somecountries,onavoluntarybasis,reportonareaand/ortimberproductionfromforestconcessionsintheirFRAcountryreport(e.g.Cambodia,Mozambique)basedonadministrativerecordsorad-hocstudies.14FAO(2010)Globalforestresourcesassessment2010.MainReport.FAOTechnicalPaper163.

Althoughthisdocumentfocusesonconcessionsintropicalcountries,thereareforestconcessionsalsoinotherpartsoftheworld.ByfarthelargestconcessionareasoccurnotinthetropicalforestbutinthecooltemperateandborealforestzonesofCanadaandRussia.Canadaalonehas265millionha(76%ofitstotalforestcover)underforestconcessions15.Russiahasover600millionha(68%ofitstotalforestcover)definedasproductionforest16,withalmostallofthisareacurrentlyState-ownedandavailableasconcessions.

Theforestsectoroutlookstudy17hasidentifiedillegalloggingasasignificantprobleminRussiawithupto20%ofalltimberand50%oftimberintheRussianFarEastbeingharvestedwithoutproperpermits.Corruptioninthesectorappearstoplayanimportantpartinfacilitatingtheillegalbusiness.Itisclearthatlargevolumesareeitherbeingdirectlytaken(byharvestingoutsideofpermittedareas)orarebeinglaunderedthroughconcession-holders.

Canadaappearstohaveamoresuccessfulconcessionsystembutithasreceivedcriticismforanumberofreasons.Mostconcessionsareallocatedbynegotiation18ratherthanbycompetitivetender,therearecasesofoverlappingtenureswhichhavebeenproblematical19andtherehasbeenacriticismthatthelowstumpagepricesareaformofsubsidytoCanadianforestcompanies20.

ConcessionsinLatinAmerica,WestandCentralAfricaandSoutheastAsiaThecurrentsituationofconcessionsinthesetropicalregionshasbeeninvestigatedbyconsultantsaspartofthisinitiative.Intheseareasmostforestrevenues21areexpectedtoflowtogovernmentfromconcession-relatedfeessothatitisinstructivetodeterminetowhatextenttheserevenuesactuallyflow.Itisthisrevenueflowthatinmanycasesistheprincipaljustificationforassigningconcessions.

InTable3wecanseethatworldwide,forestrevenuesaverageapproximatelyUS$6/ha/yronpublicly-ownedlandsbutthatrevenuesinAfricaaremuchloweratonlyUS$1/ha/yr.Furthermore,revenuespervolumeoftimberaremuchlowerinAfricathaninAsiaandSouthAmerica.ItshouldbenotedthatthefiguresforPapuaNewGuineaareincludedinOceaniaandthisleadstoalargeinflationoftherevenue/haforpublicareassinceonly3%ofthelandisStatelandandPNGleviestaxesontimberharvestedfromcommunityland.OnefurtherobservationisthattherevenuesinEuropearemuchmorelikelytobebasedonsoftwoodsthantherevenuesfromtropicalforestswhicharebasedonhighervaluehardwoods.

15GlobalForestWatch.2014.PressRelease,IndustrialConcessionsCoverOverOneQuarterofCanada.27Feb2014.16FAO.2012.TheRussianFederation:forestsectoroutlookstudyto2030.FAO.17FAO.2012.TheRussianFederation:forestsectoroutlookstudyto2030.FAO.18GrayJ.A.2003a.ForesttenuresandconcessionexperienceinCanadaandselectedothercountries.19GrayJ.A.2003a.ForesttenuresandconcessionexperienceinCanadaandselectedothercountries.20MyersN.&KentJ.2001.PerverseSubsidies:HowTaxDollarscanUnderminetheEnvironmentandtheEconomy.IslandPress.Washington.21SomecountriesalsocollectrevenuesforNTFPsandfirewoodfromlocalcommunitymembers.

Table3Forestrevenuesbyregion22.

Wherearetheconcessions?

ThetropicalregionscoveredbytheconsultantstudiesdiffermarkedlyintheareacurrentlyunderconcessionswithLatinAmericahavingamuchlowerpercentageofpubliclandsallocatedtoconcessions.FromTable4belowwecanseethatthisdifferencebetweentheregionsislargelyduetotheeffectofBrazilwhichaccountsforalmost75%oftheforestareaofthestudiedcountrieswith516millionha,ofwhich313millionhaisinpublicownershipbutonly840,000haisallocatedtoconcessions.IfBrazilisremovedfromconsideration,thentherestofLatinAmericaissimilartotherestofthetropicalregionsherecovered.

Thesituationinrelationtoconcessionsinaregionisquitedynamicwithcountriesincreasingordecreasingtheirconcessionareasrapidlyinresponsetochangesofgovernmentandpressuresfromstakeholders.ThusinBoliviathe2000ssawarapiddecreaseinforestconcessionsaslandwasallocatedforindigenouscommunityforestryinstead,Cambodiasawadecreaseasconcessionswerecancelledduetoperceptionsofmismanagement,whileBrazilhasseenanincreaseduetothestart-upofanewconcessionsprogramme.

22FAO.2010.Globalforestresourcesassessment.MainReport.FAOTechnicalPaper163.

Table4Naturalforestandconcessionareas23,24,25,26inthestudiedregions(Areas1000sha)

Totalforestarea

Publicforestsarea

Publicforestsforproduction

%offorestinpubliclands

%ofpubliclandsforproduction

Industrialconcessions

%ofpubliclandsunderconcessions

Bolivia 53,500 38,611 8,987 72% 23% 2,107 5%

Brazil 516,000 313,000 4,300 61% 1.37% 840 0.27%Peru 67,992 18,821 5,513 28% 29% 7,110 38%

Guatemala 3,657 1,536 450 42% 29% 450 29%Guyana 15,200 12,200 6,850 80% 56% 6,500 53%Suriname 14,758 11,300 4,482 77% 40% 1,090 10%Venezuela 47,713 29,900 13,000 63% 43% 500 2%

LatinAmerica

718,820 425,368 43,582 59% 10% 18,597 4%

Cameroon 19,916 19,916 14,539 100% 73% 7,059 35%Congo 22,411 22,411 19,722 100% 88% 12,600 56%Gabon 22,000 22,000 9,900 100% 45% 14,272 65%

EquatorialGuinea

1,626 1,626 81 100% 5% 740 46%

CAR 22,605 20,571 4,747 91% 21% 3,059 15%DRC 154,135 154,135 7,707 100% 5% 12,184 8%

Liberia 4,329 4,329 1,082 100% 25% 2,300 53%Ghana 4,940 4,940 1,136 100% 23% 3,200 65%Cote

d'Ivoire10,403 10,299 9,259 99% 89% 700 7%

West&CentralAfrica

262,365 260,227 68,173 99% 26% 56,114 22%

Cambodia 10,094 10,094 3,331 100% 33% 3,300 33%Indonesia 94,432 85,933 56,093 91% 59% 23,992 28%LaoPDR 15,751 15,751 3,623 100% 23% 600 4%Malaysia 20,456 20,047 12,683 98% 62% 9,230 46%PNG* 28,726 862 7,182 3% 25% 11,000 38%

Phillipines 7,665 6,515 5,825 85% 76% 0 0%Vietnam 13,797 9,934 6,485 72% 47% 0 0%

Myanmar^ 31,773 31,773 19,699 100% 62% Unknown^ Unknown^SouthEast

Asia 222,694 180,909 114,920 81% 52% 48,122 27%

*InPNGConcessionsareissuedoverlandownedbycommunities(%isofTotalForestArea).^InMyanmarconcessionsareknowntoexistbuttheirscaleisunknownbutlargeintheborderareas

StudyRegions

1,203,879 866,503 226,675 72% 19% 122,833 14%

23KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?24ChanB.2015.StatusofForestconcessionsinSoutheastAsiaconcessionsinSoutheastAsia.25GretzingerS.2015.LatinAmericanexperiencesinforestconcessions.26FAO.2010.Globalforestresourcesassessment.MainReport.FAOTechnicalPaper163.

Whatarethebenefitsofconcessions?

3.1.1.1 Economicbenefits

Theinitialmotivationforofferingconcessionsisinmostcasestoprovideeconomicactivityinthecountry.Informationaboutthisisavailableinanumberofwaysbutisoftennotdirectlycomparable.FromTable3wehaveseenthatatleastinSouthAmericaandSoutheastAsiaforestsinmanycaseshaveapositiveimpactongovernmentrevenuewithavalueofaboutUS$5/ha/yr.ThesituationinAfricaissignificantlyworsethanthiswithacontributionofaboutUS$1/ha/yr.Itmaybethatthisdifferenceisnotasgreatasitseemsif,ashasbeensuggested,moreofthecontributionsinAfricaarecontributionsinkindsuchassocialservices.However,therearenotabledifferencesbetweencountries:MyanmarappearstogenerateapproximatelyUS$0.20inexportrevenuesperm3oftimberharvestedwhileMalaysiageneratesUS$215/m3(Table5Table5).BrazilappearstogenerateameagreUS$32/m3,butthemajorityofitslogproductionfromnaturalforestsgoesintoitsenormousinternalmarket.Cambodiaisalsoanomaloussincemostofthetimberproducedisfromforestconversion(atarateofapproximately200,000ha/yrrecently)27andmuchlargervolumeshavebeenproduced,mostofwhichhavebeenexportedillegallysothattheactualreturnpervolumeoftimberharvestedismuchlowerthangiveninthistable.

Table5Volumesoflogsharvestedandexportsalesvaluesinselectedcountries(datafromconsultantreports)

Country Logproduction(m3)

TotalExports(US$) US$/m3

Myanmar 5,290,000 1,053,284 0.20Thailand 8,700,000 658,663,000 75.71Cambodia 275,000 61,416,000 223.33Philippines 3,627,000 124,928,000 34.44Malaysia 17,170,000 3,695,633,000 215.24Indonesia 45,587,000 2,571,763,000 56.41Brazil 13,500,000 437,000,000 32.37

Surinam 308,000 1,900,000 6.17Guyana 299,000 48,100,000 160.87

Fromthisitisclearthatinatleastsomecaseslogsharvestedfromconcessionsaremakingsignificantcontributionstothebalanceofpayments.

ThefiguresinTable3areforrevenuesofalltypesincludingalltypesofforest.ThefiguresinformofUS$/m3aremorecomparablesincetheyincludeonlyrevenuesfrompublicly-ownedforestsandexcludefirewood.TheyrangefromaboutUS$6/m3inAfricatoUS$26/m3forSouthAmerica.Inbothcasesthetimberspeciesusedarepredominantlytropicalhardwoods.

Intheory,tropicalhardwoodsinLiberiahavemuchhigherrevenues/m3,28buttherehavebeensignificantproblemsincollectingthisrevenuesothatonly5%oftheannualfeewasactuallycollected.

Estimatesofbenefitsofconcessionsatthelocallevelarehardtofind;however,fortheconcessionsinnorthernGuatemala,consideredtobeanexampleofasuccessfulconcessionsystem,thereare

27BanksA,SlothC,HadleyGarciaD.&KoyRa(2014).Forest-LandConversionandConversionTimberEstimates:CambodiaCaseStudy.NEPCon&ForestTrends28IBIConsultants.2013.Forestconcessions—commercialforestrevenueprojectionmodelfinalreport:June2013.USAID.

somepublishedfigures29,30TheseconcessionsoccupyabouthalfamillionhaoftheMayaBiosphereReserveandareofseveraltypesincludingindustrialconcessions,non-residentcommunityconcessionsandresidentcommunityconcessions.Someoftheresidentcommunityconcessionshavesignificantnumbersofrecentimmigrantswithnoforesthistory.FromTable6belowwecanseethattheownershipandbeneficiarydensityisverylowwithabout11km2offorest/memberand2km2perbeneficiary.Notethatthenumbersdifferbetweenauthorswhohavelookedatdifferenttimes(e.g.Reyesetal.2014)31;however,theorderofmagnitudeofkm2/beneficiaryratherthanha/beneficiaryissimilar.Landparcelsof100ha/beneficiaryormorecanbeconsideredlargeformanypartsoftheworld.

Table6AreasandbeneficiariesoftheMayaBiosphereReserveConcessions

Industrial Nonresident Residentcommunity

Residentcommunity

withimmigrants

NoofConcessions 2 6 2 4 14

Areaha 132,304 195,084 137,356 68,392 533,136Beneficiaries 708 916 380 2,004Members 129 167 69 365

Area/Member 1,512 822 991 1,098Area/

Beneficiary 276 150 180 200

In1994inoneoftheconcessionstheharvestratewasofapproximately4m3/haofroundwoodandyieldedareturnofUS$218/ha32;thiswouldequatetoaboutUS$8/ha/yrona25yearcuttingcycle.By2011thecommunityofSanAndreswassellingtimberproductsworthUS$830,000fromitsconcessionof51,939haprovidinganaveragenetprofitofUS$3761foreachofitsmemberfamiliesatarateofUS$16.30/ha/yr.Thiswouldbeconsideredaverysignificantbenefitforitsmembers.Thishasbeenachievedbyinvestinginharvestingandprocessingequipmentandsellingdimensionedlumberonthenationalandexportmarket.

ItisalsoimportanttorecognisethatinthecaseoftheMayaBiosphereReserveconcessionstheharvestingofNTFPsisalsoanimportantsourceofincomegeneratingaboutUS$2500perpersonperyearfor2000fulltimeequivalentworkers.InpracticefamiliesearnaboutUS$2000fromNTFPsonaverage33.

29RadachowskyJ.,etal.2011.ForestconcessionsintheMayaBiosphereReserve,Guatemala:Adecadelater.ForestEcol.Manage.30GómezI.andV.E.Méndez.2005.AssociationofForestCommunitiesofPetén,Guatemala:Context,AccomplishmentsandChallenges.CIFOR.31ReyesRodas,R.,J.Kent,T.AmmourandJ.Gálvez.2014.ChallengesandopportunitiesofsustainableforestmanagementthroughcommunityforestryconcessionsintheMayaBiosphereReserve,Petén,Guatemala.32GretzingerS.P.1998.CommunityForestConcessions:AnEconomicAlternativefortheMayaBiosphereReserveinthePetén,Guatemala.33Radachowsky,J.,etal.2011.ForestconcessionsintheMayaBiosphereReserve,Guatemala:Adecadelater.ForestEcol.Manage.

TheeconomicbenefitsoftheconcessionsystemintheReservehaveonlybeenmadepossibleagainstabackgroundofsignificantforeignaidinvestmentestimatedatUS$92million34between1989and2003.ThisistheequivalentofUS$180/haorUS$46,000perbeneficiary.

3.1.1.2 Socialbenefits

Socialbenefitsfromconcessionscancomeinavarietyofforms(Table7).Someofthesearisetoagreaterorlesserextentsimplyduetothepresenceoftheactivitiesassociatedwiththeconcession35whilstothersariseduetoeithercorporatesocialresponsibility(CSR)programmesorasaresultofcontractualobligationsplacedontheconcession-holder36.Finallythereisagroupofbenefitsthatismorestronglyassociatedwithforestcertification.

InthecaseoftheMayaBiosphereReserve,inadditiontotheincomesharingthereisalsoasignificantamountofworkcreatedbytheharvestingandprocessingactivitieswhichwilladdsignificantlytotheincomeofsomeindividualseitherwithinorfromoutsidetheconcessionsmembers37.Theforeignaidexpenditurehighlightedabovewillalsohavecreatedsignificanteconomicactivityinthedistrictalthoughthemajorityislikelytohavebeenspentonsalariesforexternalconsultantsandfortheirsupportinthefield.

InBrazilitisestimatedthatconcessionscreate1jobforevery500haputundermanagement38andthiscompareswellwiththeapproximately1jobforevery250hacreatedintheMayaReserve.

Table7Sometypicalsocialbenefitsassociatedwithforestconcessions

Socialbenefitsassociatedwiththeoperationofaconcession• Employment• Skillstraining• Roadandtransportdevelopmentandmaintenance

SocialbenefitsasaresultofCSRprogrammesorcontractualobligations• Improvedcommunicationwithstakeholders• Educationalfacilities• Medicalfacilities• Companyshops• Localsourcingofgoodsandservices

Socialbenefitsassociatedwithforestmanagementcertification• Improvedhealthandsafetyconditionsforworkers• Improvedjobsecurity• Provisionofwater• Provisionofelectricity• Recognitionofindigenouspeoples’rights

ItisclearthatintheabsenceofforestcertificationinWestandCentralAfricaitisthecontractualobligationsassociatedwiththeconcessionthatarethemaindrivingforceforsocialbenefits.Thisseemstobelargelyduetoanincreasingemphasison‘inkind’contributionsinlieuofmonetary34GómezI.andV.E.Méndez.2005.AssociationofForestCommunitiesofPetén,Guatemala:Context,AccomplishmentsandChallenges.CIFOR.35Lescuyer,G.,S.AssembeMvondo,J.N.Essoungou,V.Toison,J.-F.Trébuchon,andN.Fauvet.2012.LoggingconcessionsandlocallivelihoodsinCameroon:fromindifferencetoalliance?EcologyandSociety17(1):7.36KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?37GómezI.andV.E.Méndez.2005.AssociationofForestCommunitiesofPetén,Guatemala:Context,AccomplishmentsandChallenges.CIFOR.38GretzingerS.2015.LatinAmericanexperiencesinforestconcessions.

payments39bywestandcentralAfricanGovernments.Whereforestconcessionshavebecomecertifiedthereisamuchhigherdegreeoflegalcomplianceandalsoahigherdegreeofvoluntarysocialactivitiesbeyondthelegalorcontractualrequirements.

Improvedhealthandsafetyconditionsforworkersisstronglyinfluencedbytherequirementsofforestcertificationschemes.ThisaspectisparticularlyimportantinAfricawherethesocialsafetynetisalmostnon-existentandwherethelossorincapacitationofalabourerhascatastrophicconsequencesforthedependents.

InSoutheastAsiaandLatinAmericathereisatendencyforthesocialbenefitstoberestrictedmuchmorecloselytothoseassociatedwiththenormaloperationoftheconcession,althoughinSoutheastAsiathereareoftenmoresignificantproblemsassociatedwithviolationofcustomaryrights.EventheexemplaryforestconcessionsinSoutheastAsiaarenothighlightedfortheirsocialdevelopmentimpactalthoughbettercommunityrelationsismentionedasapositiveaspect40.

3.1.1.3 Environmentalbenefits

Thepotentialenvironmentalbenefitsofsustainablymanagedandprofitableconcessionsarehuge.Wheresuccessfulforestmanagersareinapositiontopreventillegalsettlement,forestclearing,timbertheftandoverharvestingofNTFPs41,forestswillremainfunctional.Suchforestswillcontributetomaintainingbiodiversityandwillalsoprovideimportantenvironmentalservicestotheoutside,suchasadequatesuppliesofcleanwaterandcleanair.

IncasessuchastheMayaBiosphereReserve,wheretheconcessionswereestablishedaspartofapolicytoprotecttheforests,theyappeartohavebeenhighlysuccessfulatthis(albeitataveryhighcost).Oftheconcessionsoriginallyissuedbythegovernment,onlytwohavesufferedfromsignificantencroachmentandconversionfromforesttograzingpastureandhaveasaresultbeencancelledbytheauthorities.

InSoutheastAsiaandelsewheretheintroductionofreducedimpactlogging(RIL)hasinmanycasessignificantlyreducedthenegativeimpacts.

Wherepaymentforenvironmentalservices(PES)canbeeffectivelyimplementedasanadditionalincomestreamthisislikelytofurtherenhancetheenvironmentalimpactsofconcessionsasforexampletheRukingaWildlifeSanctuaryinSavannahWoodlandinKenya42.ItseemslikelythatthiscouldapplydirectlytotheMayaBiosphereReservewherepaymentsundertheREDD+frameworkhavebeensuggestedwhichwouldeffectivelydoubletheincomeperhectare43.

Concessionsasameansforprotectingforests

Thehistoryofconcessionsasameansforprotectingforestshasinthepastnotbeenahappyoneinanyofthethreeregions.InGhana,forexample,concessionshavebeenimplicatedinlargescale

39KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?40DurstP.B.,C.Brown,H.D.TacioandM.Ishikawa(eds).2005.Insearchofexcellence:ExemplaryForestManagementinAsiaandthePacific.FAO.41Itisassumedthatasuccessfulforestmanagerhascarriedoutthecommunityengagementnecessarytoensurethatforestconservationandprotectionisseenasbeneficialbythecommunity.42RukingaRanchLtd.2008.TheKasigauCorridorREDDProjectPhaseI–RukingaSanctuary.WildlifeWorks.43Hodgdon,B.D.,Hayward,J.andSamayoa,O.2013.Puttingtheplusfirst:communityforestenterpriseastheplatformforREDD+intheMayaBiosphereReserve,Guatemala.TropicalConservationScience.SpecialIssueVol.6(3):365-383.

forestdestructionbothbylegallyapprovedoverharvesting44,illegalharvestingandbyfailuretoprotectforestsfromencroachment.

However,itistooeasytoblameforestlossonconcessionswhenthereisawiderangeofotheractivitiesthathavecontributedtoforestlossonalargescale45.Loggingisconsideredtobeasecondarycauseafterlargescalearableandpastoralagriculture.

Theprotectionofforestsisdependentonasocialcontractinwhichthepartiesinvolvedagreeaboutthelanduse.Thisagreementwillonlybereachedifallofthepartiesareabletoperceivebenefitsfromtheexistenceoftheforestsufficienttooffsettheopportunitycostsofotherlanduses.Inmostcountries,governmentsandlandownersareunabletoresisttheforcesofdeforestationduetothelargevarietyofforcesthatareinvolved.Deforestationforagriculturetakesplaceatthescaleoftheindividualaswellasthelargelandholder.Wherecorruptionisrifedeforestationisoftendonewiththeconnivanceofthemostseniorfiguresingovernment.

Concessionscouldbeanimportantmeanstoavoiddeforestationifthereisagreementbetweenallstakeholdersattheforestlevelaboutforestmanagementandaboutthedivisionofbenefitsfromtheforestthatproperlytakesintoaccountalllegalandcustomaryrights.ThishasprovedsuccessfulforcommunitymanagedlandsinZambiawhereasinglechiefdomcannowmustermoreforestguardsthantheentirenationalforestservice46.

PublicforestconcessionsinotherregionsPublicly-ownedforestsexistinalmostallcountriesandingeneralthosecountriesseektousethemforeconomicandsocialbenefits.Thebenefitssoughtdiffersignificantlyindifferenttypesofsocietyandfordifferentinterestgroupswithinsocieties.Thewaypeopleindifferentsocietiesvaluetheirforestresourcesdeterminestoalargeextenthowtheyareused.InsomecountriesforestsarevaluedmoreasrecreationalandlandscaperesourcesthanforthetimberandNTFPstheycansupply.

Thesedifferencesinpublicperceptionarelikelytoinfluencetheamountofresourcesthatgovernmentsarepreparedtoinvestinforests,theirprotectionandmanagement.IntheUnitedKingdon,forexample,therewasuproarwhenin2011thegovernmentproposedtoprivatisepartofthepublicforestestate47.ThispublicforestestateisfullymanagedbytheForestryCommissionanditscommercialarmForestEnterprise.AllmanagementactivitiesarecontrolledorcarriedoutdirectlybytheStateandtimberissoldeitherstandingoratroadside(30%).Theincomegeneratedbytimbersalesfromanareaof250,000haisvaluedat20millionpoundssterlingorUS$114/ha/yr48.

IncometoForestEnterprisefromallsourcesisaboutUS$350/ha/yr;however,thisisoffsetbyhighcostsofmanagementforpublicbenefitsothatoverallthenationsubsidisestheforestbyaboutUS$50/ha/yr.Thepublicbenefitderivedfromthispublic investmenthasbeenestimatedataboutUS$400/ha/yr49.Inanycase,thefiguresjustifytheinvestmentbythegovernmentintakingcontrolofallmanagement includingpartof theharvesting. It is notable that the timber revenues aloneare anorderofmagnitudegreaterthanthefigurefortheEuropeanaveragegiveninTable3above.

44Oduro,K.A.E.G.Foli,G.M.J.Mohren&W.K.Dumenu(2011)Ghana.45WWF.2015.WWFlivingforestsreport:chapter5savingforestsatrisk.WWF.46DaleLewis,COMACO.2015.Pers.Comm.47Bennett,O.andD.Hirst.2014.TheForestryCommissionandthesaleofpublicforestsinEnglandStandardNote:SN/SC/5734.HouseofCommonsLibrary.48ForestEnterpriseEngland.2015.AnnualReportandAccounts2014-15(Fortheyearended31March2015).HouseofCommons.49OurForests.2013.GovernmentWarnedonPublicForestEstate:GettheEconomicsRight!PressRelease.

ThisappearstobethesituationinmostEuropeancountriesandintheU.S.whereStatemanagedforestsoffergoodnetreturnstothegovernment.InEuropealmostallcountriessellstandingtimberfromtheirforestsasthemajorformofrevenuegeneration.Thetimberparcelsonsaletendtoberelativelysmallrangingfromtensofcubicmetrestoafewhundredsofhectares50.Buyersarerequiredtoperformaccordingtostrictperformancestandardsinharvesting51.Theharvestinglicencesaretypicallyofshortduration(onetothreeyears).

InEuropemoretraditionalconcessionsarefoundinSloveniaandMontenegro52.TheseconcessionswereestablishedinSloveniaafterthecollapseoftheSovietsystemwhenState-ownedforestcompanieswereprivatised.Thesecompanieswereallocated20yearconcessions.InMontenegro,whereforestsweredepletedafterpreviousmismanagement,concessionsstartedtobeissuedafterchangesinlegislationin2008.Theseconcessionswerefordurationsof7–30yearsandforbothtimberharvestingandtherenderingofpracticalmanagementservices,butnotmanagementplanning.

Bothcountrieshaveexperiencedproblemswiththeconcessionsystem.Forvariousreasonsneithercountryhasachievedtheforestrevenuesexpectedandasaresultcentralforestadministrationshavebeenleftshortoffinances.InthecaseofSlovenia,revenuecalculationsarebasedonpricessetaccordingtocostsofproductionandtimberprices.Companiesarealwaysabletoarguethatpricesarelowerthanrealityandthatcostsarehigher,thusreducinggovernmentrevenues.InMontenegro,wherestumpagesarehigher,70%ofrevenuesareallocatedtolocalmunicipalitiesandvolumesharvestedhavebeenlowerthanexpectedsothatthecentralforestadministrationdoesnotreceiveenoughincometocarryoutitsfunctionsofmanagementplanningandsupervision.

InSloveniatheconcessionsystemmaybeterminatedwhenthecurrentconcessionscometoanend53.

Whyaresomeconcessionsmoresuccessfulthanothers?Thereareexamplesofentireconcessionsystemsthatcanbeconsideredlargelysuccessfulandtherearealsoindividualconcessionsthatareincludedintheexamplesofexemplaryforestmanagement.

InspiteoftheproblemswithforestconcessionsinCanada54theyhavebeenoverwhelminglysuccessfulineconomictermsevenifnotindirectrevenueterms.TheCanadianforestsectorhasanannualcontributiontoGDPof$Can20billion55.Thisisprimarilyderivedfromconcessionsintheover90%offorestlandthatisState-ownedeitherfederallyorbytheprovinces.Thesectoremploysapproximately300,000peoplewithapayrollinexcessof$Can8billion.Itdoesthisfromatotalforestbaseof347millionhageneratingacontributionof$Can57/ha.Thisisanaverageoverallforesttypesincludinglargeareasthatarenotcommerciallyused.Inaddition,almost50%oftheCanadianforestareahasbeenthirdpartycertifiedaccordingtoatleastoneindependentforestmanagementstandardwhileabout20millionhaiscertifiedaccordingtomorethanonestandard.

50BUREAUOFLANDMANAGEMENT.2015.ProspectusThunderKatTimberSale.51BUREAUOFLANDMANAGEMENT.2015.ProspectusThunderKatTimberSale.52FerlinF.andA.Golob.2012.ForestconcessionandrelatedpublicforestryadministrationmodelsinSloveniaandMontenegro.53FerlinF.andA.Golob.2012.ForestconcessionandrelatedpublicforestryadministrationmodelsinSloveniaandMontenegro.54GrayJ.(2003a)ForesttenuresandconcessionexperienceinCanadaandselectedothercountries.55CanadianForestService(2014)TheStateofCanada’sForests2014.NaturalResourcesCanada.

Althoughonasmallerscaleandalsonotwithouttheirproblems,theMayaBiosphereReserveconcessionsdiscussedin3.1.1.1abovecanalsobeconsideredsuccessfulbutareyettoachievetheirfullpotentialtobenefitthecommunities.

InMalaysia,theDeramakotconcessionhasalsobeenconsideredsuccessful56generating20,000m3oftimberperyearfromanareaof51,000hawhilesimultaneouslyfulfillingconservationgoalsforarangeoflargemammalsincludingOrangUtang.ThishasbeenachievedbyintroducingRILandintensivesilviculture.However,asisthecasewiththeMayaBiosphereReserve,ithasbeenachievedonthebackofverysubstantialdonorsupport.

Ontheotherhand,manyconcessionshavefailedforawiderangeofreasonsincludinggovernance,economic,socialandenvironmentalfailures.

Smallconcessionsversuslargeconcessions?

Itiswidelyheldthatwhereforesttenureistransferredtoforestcommunitiesandwheretheareasinvolvedaresmallerthenthiswillleadtoimprovedforestmanagement.Itisnecessarytodetermineifthesepropositionsarereasonableandsupportedbyevidence.Inallcasesitisnecessarytorelatewhatcanbeconsideredassuccessfultotheforestmanagementobjectivesofthestakeholdersinvolved.

InAfrica,someconcessionownershavetenureoverforestsinexcessof1millionhainasingleconcession57(Danzer-IFO,RepublicofCongo).Animpressionofthescaleofthisconcessionmaybeobtainedbycomparingitinsizetosomesovereigncountries.ItisalittlesmallerthanJamaicaandLebanonbutlargerthanCyprus(theentireIsland)andTheGambiaandtwiceasbigasBruneiorTrinidadandTobago.Althoughthisconcessionisunusuallylarge,theaverageconcessionsizeintheRepublicofCongois240,000ha58oralmostasbigasLuxemburg.

Itisunderstoodthatinmanycasestheseconcessionsareremote,theirhumanpopulationdensityisverylow(0.5/km2)59andthatthereisverylittleinfrastructure.However,theallocationofsuchlargetenuresbygovernmentscanleadtoawiderangeofproblems.Wherevertherearepeople,particularlyindigenousandtraditionalcommunities,theallocationoftenurerightsbycentralgovernmentislikelytobeaninfringementofthecustomaryrightsofthosecommunitiesandevenwhereforestsappeartobeunoccupiedorunusedtheyoftenprovidecriticalresourcesforcommunities.Forexample,invillagesaroundthetownofNzarainSouthSudanthehunterswouldmakeanannualtwo-weekexcursiontoremoteforestsabout70kmnorthofthetowntohuntandobtainmeat,akeyissueinthisareawhereanimalproteinisveryexpensive.AlthoughthereisunlikelytobeimmediatecompetitionforresourcessuchasbuildingandservicetimberandNTFPs,theremaybelongertermimpacts.

Largeconcessionsmayleadtoaninefficientuseoftheforestarealeadingtolossesinpotentialincome.Thisisparticularlylikelywhenarea-basedfeesareverylowornon-existent60.

56LaganP.,S.MannanandH.Matsubayashi.2007.Sustainableuseoftropicalforestsbyreduced-impactlogginginDeramakotForestReserve,Sabah,Malaysia.EcolRes.57KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?58GlobalForestWatchData.Accessed26/01/2016.http://data.globalforestwatch.org/datasets/557bfc901c584b7a8884aa455cfa6de2_5?uiTab=table59WWF.2015b.LargestforestconcessionintheCongoBasinreceivesFSCcertification.60GrayJ.2002.ForestConcessionPoliciesandRevenueSystems:CountryExperienceandPolicyChangesforSustainableTropicalForestry.

Wherethecostofholdingaconcessionarelow,concession-holdersarelikelytoseeklargerareassimplytoholdtheirresourcesasaspeculationtowardsfuturevalues61.Whenthisisaccompaniedbyloweffectivetimberpricesitnotonlyaffectstherevenuesreceivedbygovernmentsbutalsothebehaviouroftherights-holders.Lowpricingfalselysignalsaresourceinoverabundancewhichresultsinwastefuluseoftheresources.Thiswastefuluseofresourcesisreflectedinallpartsofthevalue-chain,logsforgottenintheforest,logsabandonedatloglandings,logslefttorotinsawmilllog-yards,logssawnwithequipmentthatwastes20%ofthevolumeduetoexcessivekerfandinaccuracy,boardslostduetobaddryingprocessesetc.

Wherethemajorityofthetimberstockinacountryisheldinfewhandsthenthisleadstoaneffectivemonopolysituationwherethereisinsufficientmotivationforcompaniestointroduceefficiencieswhichwouldleadtogreatervaluebeingretainedinthecountryorregionofproduction.

Althoughoverlylargeconcessionsmaybeseenasnegativeforthesereasons,concessionsthataretoosmallarealsolikelytohaveproblemsforotherreasons.

Smallconcessionswillproducesmallvolumesandhavesmallincomes.Asaresultthemanagersoftheseconcessionswillhaveinsufficientcapacitytoengageintheinternationalmarketfortropicaltimberonfairtermsalthoughtheymaybebetterplacedtoserviceinternalmarkets.

Theinternationalmarketintimberislargelytradedintwoways:withround-logsloadedinbulkorwithboardscuttostandarddimensionsandloadedintocontainers.Smallconcessionownersareunlikelytohaveaccesstotheheavyequipmentthatisrequiredtoextractlonglogsfromtheforestandwillberestrictedtothemarketinprocessedboards.Iftheydoselllogstheywillbeforcedtoselltolocaltraderswhowilltakeadisproportionateshareofthetimbervalue.

Ifsellingprocessedboards,theywillberequiredtosatisfythemarketdemandforstandarddimensionsandlongboardlengthsandwillnotbeinapositiontodrytimberbeforeshippingsothattheywillberestrictedtothelowerendofthevaluespectrum.However,moreimportantly,theshippingunitisastandardcontainerwhichhasaloadedcapacityofapproximately30m3ofsawn-timber.Thisistheminimumshippingvolumethatmakeseconomicsensesincethetimbermustbecontainerisedtopreventsaltwaterdamageandexcessivedryingandforfumigationtomeetphytosanitaryregulations.Inmostcasestheproductionof30m3ofsawntimberwillrequiretheharvestingof150m3oflogs.Ifallofthelogswereofonespeciesthenthismightrequirethefullyieldfrom30ha(5m3/ha62)toproduceonecontainer.

Inrealitytherewillbesixorsevenspeciesofinterestsothattherewouldprobablybearequirementforaminimumannualharvestareaof200haifallspecieswereuniformlydistributed.Theyarenotuniformlydistributed,sothatinordertosatisfyanestablisheddemanditwouldbenecessarytohavealargerareaforanannualcoupe,possibly500ha.Ifthisisthenmanagedona40yearreturncyclethentheminimumviablemanagementunitwouldbeaproductionareaof20,000ha63.Thiscouldbemanagedtoproducefrom2,000-4,000m3oflogsperyearproducingperhaps500–1500m3ofexportboards.Thisassumesthatstandardpracticesaremaintainedandthatthereislittleornosilviculture.

Theremaybeotheradvantagesofhavingsmallerconcessionsthatproduceadditionalbenefits.Smallerareasmaybeeasiertoprotectfromillegalactivities,butperhapsmoreimportantlyitislikely

61Grut,M.,J.A.GrayandN.Egli.1991.Forestpricingandconcessionpolicies:ManagingthehighforestsofWestandCentralAfrica.62KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?63Itwouldnotbeunusualfor30%ofthetotalconcessionareatobeunsuitableforproductionforavarietyofreasons.

thatasmallerareawillbemuchbetterknownbythemanagers.Thisknowledgecouldbeusedtorefineharvestingandsilvicultureplanstomakemuchbetteruseoftheexistingstockandtoprovidesignificantlyincreasedregenerationrates.

AEuropeanforestmanagerwithanestateof1000hawillhaveknowledgeofeverystand(andeveryimportanthighvaluetree)ontheestateandwillusethisknowledgetodirecthisactivitiestoproducetimberinresponsetothechangingmarketdemand:whendemandislowandpricesaredownthemanagerwillcutless,reservinghisstockforthefuturewhenpricesarehigh.Specifictreesareretainedforspecificfuturecustomerssuchastoprovidemastsfortallships.Thisisonlypossiblewhenthemanagerretainsflexibilitywithintheframeworkofthemanagementplantovaryhisharvestpattern.Thisflexibilityisdeniedtoconcessionmanagersinthetropics.However,itmaybethatcommunitieshavethesameknowledgeoftheirownlandswhichcouldgivethemacompetitiveadvantageandenablethemtomanagesmallerconcessionareassuccessfully.

Afinalconsiderationrelatingtothesizeofconcessionsrelatestotheimpactsofcorruptiononconcessionsandtheimpactsofconcessions.Thepresenceofcorruptioncaninducepolicymakerstoallocatelargerconcessions64while,ontheotherhand,manysmallerconcessionsmaybemoresusceptibletobeingcorrupted65leadingtomorerapidforestdegradation.

Arecommunityheldconcessionsmoresuccessfulthanothers?

ArecentFAOpaper66hasreviewedcommunityforestryingeneralandfoundoutthatparticularlyinthesouththatcommunityforestryisbasedon‘collaborative’modelsinwhichgovernmentandcommunitiessharerightsandresponsibilitieswhicharegraduallydevolvedtocommunities.Inmostcasesthisdevolutionofpowerhasbeensloworineffectiveandthenumberofcaseswithwelldocumentedbenefitsissmall.

IntheMayaBiosphereReserveitisclearthatthesuccessfulcommunityconcessionshavebeenthosewherethecommunitiesinvolvedhaveatraditionofforestryandwheretheyareworkingonlandsknowntothem.Theconcessionsthathavefailedarethosewheretheconcession-holdersincludedahighproportionofrecentarrivalsfromotherpartsofGuatemala.Thisfailureisattributedbothtouncertaintyoftenureandlandspeculationaccompaniedbypressurefrompowerfulexternalactorsandorganised-crimesyndicatestocarryoutdeforestationforthepurposeofcattleranching67.

Thereissomeevidencethattransferringforestrightstolocalstakeholdersleadstoimprovementsinforestmanagementanddecreaseddeforestationrates68,69.InMexicoandinGuatemala,communitymanagedforestareashavelowerdeforestationratesthanprotectedareascloseby70.However,

64AmacherG.S.,M.OllikainenandE.Koskela.2012.Corruptionandforestconcessions.JournalofEnvironmentalEconomicsandManagement63,92–104.65Delacote,P.2010.Howconcessions'sizemayinfluencesystemiccorruptioninforestharvesting:atheoreticalassessment.WorkingDocumentINRA.66GilmourD.(2016)Fortyyearsofcommunity-basedforestryAreviewofitsextentandeffectiveness.FAOForestryPaper176.FAO,Rome67Radachowsky,J.,V.H.Ramos,R.McNab,E.H.BaurandN.Kazakov.2011.ForestconcessionsintheMayaBiosphereReserve,Guatemala:Adecadelater.ForestEcol.Manage.68Porter-Bolland,L.,E.A.Ellis,M.R.Guariguata,I.Ruiz-Mallén,S.Negrete-Yankelevich,V.Reyes-García.2011.Communitymanagedforestsandforestprotectedareas:Anassessmentoftheirconservationeffectivenessacrossthetropics.ForestEcol.Manag.69Bray,D.B.,E.Duran,V.H.Ramos,J.-F.Mas,A.Velazquez,R.B.McNab,D.Barry,andJ.Radachowsky.2008.Tropicaldeforestation,communityforests,andprotectedareasintheMayaForest.EcologyandSociety13(2):56.70Bray,D.B.,E.Duran,V.H.Ramos,J.-F.Mas,A.Velazquez,R.B.McNab,D.Barry,andJ.Radachowsky.2008.Tropicaldeforestation,communityforests,andprotectedareasintheMayaForest.EcologyandSociety13(2):56.

thereisconsiderablevariationbetweencommunities,partofwhichcanbeattributedtodeforestationpressures.Thus,inareasofhighpopulationdensityandhighdeforestationratescommunitymanagedforestsarenobetterthanformallyprotectedareasinpreventingdeforestation.

InTanzania,communitieshavebeenabletoachievetenurerightsovertheirforestsunderrevisedlegislationandwherethishashappenedthesecommunitieshaveprovedmoreeffectivethancentralauthoritiesatencouragingforestregeneration71aswellasprotectingforestfromfiresresultinginanimprovedforeststructure72.Inaddition,thetransferofforestownershipfromcentralcontroltocommunitiesinTanzaniahasinatleastonecaseresultedinatenfoldincreaseintheincomefromtimberderivedbythesecommunities73.However,suchcommunitiesfacesignificantchallengesinsecuringthefullpotentialvalueduetotheirlackofcapitalandtheknowledgeandskillstoprocesstimberandtoaccessmarkets.

InCameroon74ontheotherhand,community-ownedforestsappeartohavehigherratesofdegradationthanforestsformallyallocatedtoproduction.WhereCamerooniancommunitieshaveachievedrightstomanagetheirownforests,therehavebeensignificantproblemsforavarietyofreasons.Inmanycasestheforestsaretoosmallandtheforestmanagementplansaretoorudimentarytoallowforlongtermharvestplanning.Asaresult,communitiesareunabletoprovideareliablesupplyoftimbertothemarketandareunabletorespondproperlytoordersreceivedfrominternationalbuyers75.Regulatoryauthoritiesareveryslowintheissuingofannualcuttingpermitsleavingcommunitieswithjustafewweeksattheendoftheseasoninwhichtoharvesttheirallowance.Managementplansareproducedbyoutsiderssothatthecommunitieshavelittleknowledgeofthetruesituationoftheirresourcesandlittleinputintodecisionmakingaboutresourcemanagement.Inthefaceofthissituationitissaidthatmanyvillagesaresimplysellingtheirharvestallocationtolaundertimberharvestedelsewhere.

Inordertobesuccessfulanywhere,communitiesintropicalforestsrequiresignificantassistancetodevelopthenecessaryskills.Thisincludesskillstocompeteintheentirevaluechainincludingforestmanagement,governance,harvesting,processing,marketingandbusinessmanagement.Community-basedconcessionscertainlyhaveapotentialtodeliversocial,environmentalandeconomicbenefitsandwilloftenensurethatthesebenefitsarebetterdistributedamongststakeholdersbutcapitalandhumanresourcerequirementsmeanthatitisunlikelythatawholesaletransferofconcessionsfrombusinessestocommunitiesprovepossibleintheshortterm.

Howcanforestcertificationhelp?Forestcertificationsystemshavearisensincethe1990sandarebasedontwoquitedistinctbutcomplimentarypillars.Thefirstofthesepillarshasbeenthedevelopmentbyvariousmeansofstandardsfor‘responsible/sustainable’forestmanagementcapableofbeingappliedattheleveloftheforestmanagementunit.Thesecondpillarisasystemofcertificationbymeansofthirdpartyinspectionwhichofferscertificatestoorganizationsabletodemonstratecompliancewiththe

71MayLianaN.2013.EffectsofforestmanagementandlanduseonregenerationinREDD+villages,southeasternTanzania.MSCThesis.UniversityofMichigan.72KalongaS.K.,F.MidtgaardandT.Eid.2015.DoesForestCertificationEnhanceForestStructure?EmpiricalEvidencefromCertifiedCommunity-BasedForestManagementinKilwaDistrict,Tanzania.InternationalForestryReview,17(2):182-194.73SeverinK.K.,K.A.KulindwaandB.I.Mshale.2014.EquityinDistributionofProceedsfromForestProductsfromCertifiedCommunity-BasedForestManagementinKilwaDistrict,Tanzania.Small-scaleForestry.74Bruggeman,D.,Meyfroidt,P.andLambin,E.F.2015.Productionforestsasaconservationtool:EffectivenessofCameroon’slandusezoningpolicy.LandUsePolicy42:151-164.75Persobs.

standards.Thesecertificatescanthenbeusedtodemonstratecompliancewithmarketswiththeobjectiveofincreasingmarketshareand/ormarketprices.

Thequestionoftenaskedabouttheimpactsofforestcertificationwouldbebetterframedintermsoftheimpactsofcompliancewithinternationallyacceptedforestmanagementstandards.

Therehavebeennumerousattemptstodemonstratethepositivesocial,environmentalandeconomicimpactsofforestcertificationsystems;however,veryfewofthemhavebeenabletodemonstrateunequivocalproofofimpacts.Thisismostcommonlyduetoconfoundingexplanationsforobservedchanges76duetosuchthingsascertificationbeingpackagedwiththetransferofforesttenurerights77orcertificationcomingaspartofadevelopmentaidsupportpackage,bothofwhichwouldbeexpectedtohaveapositiveimpactirrespectiveofcertification.

Forestmanagersdonotoperateinisolationsothatpracticesintroducedincertifiedoperationsarelikelytobeadoptedinuncertifiedonesiftheyareseentohavebenefits.Similarly,governmenttechnicalsupportprogrammesthatareavailabletoallforestmanagersarelikelytoadoptstandardsthatareinlinewithcertificationstandardssothatimprovedpracticeswillbecomemuchmorewidespread.

Inanycase,certificationstandardshavechangedtheplayingfieldsignificantlyintermsofwhatisconsideredacceptableforestrypractice.ThusalocaladaptationofRILisnowarequirementofmostnewconcessioncontracts.

Althoughdifficulttodemonstrateunequivocallyitseemscertainthatpracticesassociatedwiththestandardsforforestcertificationhavebecomewidespreadinconcessionsandaremoredeeplyembeddedinorganizationsthathavechosentoengageinactualcertificationregardlessofthecertificationsystemused.

Themostunequivocalevidenceforimpactscomesfromthecorrectiveactionrequestsofauditors.Ananalysisofthistypeofrequestinnaturaltropicalforests,includingconcessionsandprivateownership,isshowninTable8.Fromthisitispossibletoseethattherehavebeensignificantimprovementsasaresultofcertificationinparticularinrelationtoworkersafety,managementplanningandtheuseofRILaswellasbiodiversityprotection.Itisofinteresttonotethatthelong-termeconomicviabilityofforestcompanieswasregularlyraisedbyauditors78andthisconcurswiththeview79thatforestconcessionsinthetropicsmaynotbeasprofitableasisoftenpresumed.

76vanHensbergenH.J.BengtssonK.MirandaM.&DumasI.2011.PovertyandForestCertification.77SeverinK.Kalonga•KassimA.KulindwaBaruaniI.Mshale(2014)EquityinDistributionofProceedsfromForestProductsfromCertifiedCommunity-BasedForestManagementinKilwaDistrict,Tanzania.Small-scaleForestry.78Peña-ClarosM,S.BlommerdeandF.BongersF.2009.Assessingtheprogressmade:anevaluationofforestmanagementcertificationinthetropics.TropicalResourceManagementPapers,Wageningen.79KarsentyA.2015ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?

Table8CorrectiveactionrequestsrequiringimprovedmanagementintropicalforestscertifiedbyFSC80.

InAfricanconcessionscertificationhashadsignificantpositivesocialandenvironmentalimpactsonthewayinwhichcertifiedcompaniescarryouttheirbusiness81andcomparedwithuncertifiedcompaniesthesocialenvironmentissignificantlybetter82.ThereistodayamuchgreaterdegreeofengagementwithlocalpeopleandindigenouscommunitiesincertifiedoperationsandthishasledtoattemptsbycertifiedcompaniestocarryoutFPICprocesseswithcommunitiesandtobettercompensatecustomaryrightsholders.

Thereishoweverevidencethatcertificationcanhelptoreducedeforestationandthatthiseffectisstrongerintropicalregions83,whereFSCcertificationismuchmoreprevalentthanPEFCcertification.Itshouldbenotedthatthisisbasedonacorrelationalstudyusinginformationforwholecountriesanditmaybethatcountrieshavingagreaterpolicysuccessincombatingdeforestationarealsothosewhereforestrybusinessesaremorelikelytoseekcertification.

Oneaspectofforestcertificationthathasbeenlittlediscussedisthefactthattheprocessofcertificationrequiresamuchhigherdegreeoftransparencythaniscommoninthetropicalforestrybusiness.Itisexpectedthatthistransparencywillleadtoagreaterlevelofaccountability84frombothforestmanagersandassociatedparties.Thisgreateraccountabilityisexpectedtoleadto

80Peña-ClarosM,S.BlommerdeandF.Bongers.2009,Assessingtheprogressmade:anevaluationofforestmanagementcertificationinthetropics.TropicalResourceManagementPapers,Wageningen.81KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?82CeruttiP.O,LescuyerG,TsangaR,KassaS.N,MapangouP.R,Mendoula,E.E,Missamba-Lola,A.P,NasiR,EckebilP.P.TandYembeR.Y.2014.SocialimpactsoftheForestStewardshipCouncilcertification:AnassessmentintheCongobasin.OccasionalPaper103.CIFOR,Bogor,Indonesia83Damette,O.andP.Delacote.2011.Unsustainabletimberharvesting,deforestationandtheroleofcertification.EcologicalEconomics70(6):1211-1219.84Fox,J.2007.Theuncertainrelationshipbetweentransparencyandaccountability.DevelopmentinPractice,17:4,663–671.

positivesocialandenvironmentalimpacts.Onesupposedstrengthofcertificationsystemsisthepublicavailabilityofthecertificationauditreportswhichrevealthecompliancesandnon-complianceswiththedefinedstandardnorms.Itishopedthatforestcertificationcanbeusedasatooltoreduceforestassociatedcorruptionintropicalcountries;however,thereislittleevidencethatthishassucceededanditisunlikelythatforestcertificationonitsowncanfulfilthisrole85.

IntactForestLandscapes

Intactforestlandscapes(IFL)aredefinedasforestareaslargelyfreefromhumaninfluencewithanareaofatleast50,000haandaminimumwidthof10km86.SuchareasarethetargetofprotectionactionsfromenvironmentalNGOssuchasGreenpeaceandWWF.AttheFSCgeneralassemblyof2014themembershipvotedtoacceptmotion6587whichseekstoprotectsignificantareasofIFLfromcommercialharvesting.Underthismotion,FSCcertificate-holderswillberequiredtosetasidelargeareas(adefaultlevelof80%)oftheIFLcontainedwiththeirFMUsandprotectthemfromharvestingorotherformsofdegradation.

ThisdevelopmentislikelytohavesignificantimpactsonconcessionsinseveralpartsoftheworldwherelargeextentsofIFL(Figure1)andconcessionsystemscoexist.ThisincludeslargeareasoftheCongoBasinandAmazoniaaswellasareasoftheislandsofBorneoandtheNewGuineainthetropicalzoneandRussiaandCanadaintheborealzone.

Figure1ExtentofIFLin201388

ThisdecisionbytheFSCmembershipwillposearangeofchallengesforcertifiedconcession-holdersintheseareaswhoarefacedwithlosingasignificantproportionoftheirharvestpotential.ThedelineationofIFLatthelocallevelmayleadFSC-certifiedorganizationstoseekmuchlargerforestconcessionsinordertoremainviablewhilecomplyingwithcertificationdemands.Italsorisksthatexistingcertificate-holderswillabandontheiroperationsorsellthemtouncertifiedoperators.Itis

85SøreideT.andA.Williams.2013.Certifiedintegrity?Forestcertificationandanti-corruption.U4IssueJanuary2013No1.86http://www.intactforests.org/concept.html87http://ga2014.fsc.org/motion-updates-205.motion-65-high-conservation-value-2-hcv2-intact-forest-landscapes-ifl-protection.88http://www.intactforests.org/world.map.html

alsolikelythatcertifiedorganizationswillbeunabletocompeteeffectivelywithuncertifiedcompanieswhentenderingforconcessions.

ItisthereforeimportantthatgovernmentsdeveloptheirownpoliciesinrelationtoIFLandconcessionsinordertoachievealevelplayingfieldiftheyaretoattractresponsibleconcession-holders.

Whathavetropicalforestconcessionsachieved?If,assuggestedin0,theobjectiveoftropicalforestconcessionshasbeentoemploythecapitaloftheforestforsocietalbenefit,thenthehistoryhasatleastduringtheperiodbetween1945and2000,beenasadone.Duringthisperiod,forestconcessionshavebeenoperatinginmanyoftheworld’spoorestnationsandthereislittleevidencethatconcessionshavecontributedmuchtodevelopment.Inmostcases,forest-dependentpeopleremainamongstthepoorestofthepoor89.

Thisfailuretosignificantlyimprovelivelihoodshasinmanycasesbeenaccompaniedbysignificantlossofordegradationoftropicalforests.Itisnotsuggestedthatconcessionshavebeensolelyordirectlyresponsiblefortheselosses;however,itisclearthattheirfailuretoprotecttheforestresourcehaspermittedthelossestooccur.Inaddition,therepeatedcreamingoftheforestundervariouspretextshasledtolargeareasofforestwithverylittletimberthatistodayconsideredofcommercialinterest.

Towardstheendofthelastcenturytherehasbeenasignificantchangeintheobjectivesofforestconcessionsingeneral,fromconcessionswhichwerealmostsolelyforthepurposeofgeneratinggovernmentrevenuebyharvestingexistingtreestoconcessionswheretheresponsibilityforsomeorallaspectsofforestmanagementweretransferredtotheconcession-holders.Itistobeexpectedthatiftheseresponsibilitiesaretakenseriouslyandthenecessaryforestmanagementactivitiestakeplace,therewillinthefuturebesomeimprovementintheforestresourceincludingitssocialenvironmentalandeconomicvalue.

Itissuggestedthatthefailureofconcession-holderstogeneratesignificantlocalvalueisthattropicalforestry(particularlyinAfrica)isnotthatprofitable90sothatthereislittlevaluetosharewithlocalstakeholdersandgovernments.Atthesametimethereisevidencethatinformalpaymentsforregulatorypermissionsaccountforalargeportionofthein-countryvalueandthattransferpricingisusedtohidetrueexportvaluesoftimberproducts(section0).

Thereisevidencethatsomeconcessionshavebenefittedlocalcommunitiesinanumberofways91includingdevelopmentofskills,developmentoflocalsmallentrepreneursandsuppliers,assistingcommunitiesinobtainingforesttenuresandbuildinghigherlevelcapacitiesrequiredfornegotiationwithcustomersandregulatoryauthorities.

Inaddition,inatleastsomecountriestherehavebeensignificantimprovementsinthequalityaswellasthequantityofemploymentandinparticularimprovementsinhealthandsafetyandtheprovisionofadequatepersonalprotectiveequipment.Theseimprovementsarelikelytobeassociatedwiththerequirementsofallcertificationschemesforminimumstandardsofhealthandsafetyperformance.Inareaswheresignificantvalueaddingactivitieshavebeenimplementedthishasincreasedtheemploymentandvaluecaptureincountry.

89ScherrS.J.,A.WhiteandD.Kaimowitz.2003.Anewagendaforforestconservationandpovertyreduction:Makingmarketsworkforlow-incomeproducers:ForestTrends,Washington.90KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?91GretzingerS.2015.LatinAmericanexperiencesinforestconcessions.

4 Whyistropicalforestrysodifficult??Tropicaltimberreachingmarketsindevelopedcountriesisingeneralsignificantlymoreexpensivethansimilartimbersfromtemperateforests.Thisoccursinspiteofthefactthattimberisgenerallyseenasafreegoodandlargevolumesaretakenthatarenever‘officially’paidforinthesourcecountries.Inordertojustifythesepricepremiumsontropicaltimberinacompetitivemarket,theremustbesignificant‘difficulties’involvedintropicalforestrythatleadtoincreasedcostsalongthevaluechain.

Thediversitydilemma?Tropicalforestsaresignificantlymorediversethantemperateforests(Figure2)92.AsinglehectareinaMalaysianforestcontainsmorethan250differenttreespecies93whereasahectareofaproductionforestinatemperatezoneisunlikelytocontainmorethan20treespecies.Thenumberofindividualsperspeciesinahectareoftropicalforestisalsolikelytobelow(1-2)94,sothatiftherearerelativelyfewspeciesinmarketdemandthenumberoftreesofinterestperhectarewillbesmall.

92BarthlottW.,J.Mutke,D.Rafiqpoor,G.KierandH.Kreft.2005.GlobalCentersofVascularPlantDiversity.NovaActaLeopoldinaNF92,Nr.342,61–83.93Suratman,M.N.2012.TreeSpeciesDiversityandForestStandStructureofPahangNationalPark,Malaysia.In:Lameed,G.A.,Ed.,BiodiversityEnrichmentinaDiverseWorld,473-492.94Suratman,M.N.2012.TreeSpeciesDiversityandForestStandStructureofPahangNationalPark,Malaysia.In:Lameed,G.A.,Ed.,BiodiversityEnrichmentinaDiverseWorld,473-492.

Figure2Diversityoftreespeciesbycountry95.

Inpracticetherearedifferencesinthevolumesoftimberofinterestindifferentpartsoftheworld.InSoutheastAsia,dipterocarpforestshavehighstandingvolumesofcommercialtimberthataresufficienttoencouragealucrativebusinessinclear-fellingforestonthepretextoffutureagriculturaldevelopment96.InBorneo,firstentryharvestvolumesinconcessionsmaybeashighas80m3/haundertraditionalmethodsand50m3/haisnormal97.InBrazil,yieldsofcommercialtimberareabout13m3/ha98duringeachharvestcyclewhileinAfricavolumesof4-5m3/haareusual99.Innoneofthesecasescanthecurrentharvestratebesustainedundercurrentmanagementpractices(seebelow).

Forestmanagementplanning

AllforestmanagementplansseenbytheauthorforforestsintropicalconcessionsinAfricaandLatinAmericaaremissingacriticalaspectofthemanagementcyclewhichisthelackoflongtermobjectivesforthetreeresource.Themostcomprehensiveplansseenincludedetailedplansforproperaccessandharvesting,reducedimpactlogging,goodbiodiversitymanagementplanningbasedoncomprehensiveidentificationofHighConservationValuesandsetasideareas,

95FAO.2005.Globalforestresourcesassessment2005.MainReport.FAOTechnicalPaper147.96ChanB.2015.StatusofForestconcessionsinSoutheastAsiaconcessionsinSoutheastAsia.97vanGardingenP.R,M.J.McLeish,P.D.Phillips,DadangFadilah,G.TyrieandI.Yasman.2003.Financialandecologicalanalysisofmanagementoptionsforlogged-overDipterocarpforestsinIndonesianBorneo.ForestEcologyandManagement183(2003)1–29.98GretzingerS.2015.LatinAmericanexperiencesinforestconcessions.99KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?

identificationofsocialimpactsanddetailedmitigationfornegativesocialandenvironmentalimpacts,amongstothers.

However,noneoftheseplansincludeplansforrenewaloftheresourcebasedonsomevisionofthefuturetimberandotherresourcerequirementsfromtheforest100.Followingthecommercialharvest,forestsaresimplyleftto‘recover’eventhoughitiswellunderstoodthatthisrecoverywillresultinaforestthatisquitedifferentintermsofthedistributionofeconomicallyinterestingspecies101.Ineffect,thehistoryoftropicalforestmanagementbasedonminimumfellingdiametersisahistoryofsequentialeconomicextinctionofthedesirablespecies102.Partofthisisduetoillegaloverharvestingbutthesystemitselfwouldleadtothesameresultsinceharvestedtreesarelesslikelytobereplacedinthecanopybyconspecificsduetointraspecificcompetition103.

Althoughtherehasbeensignificantimprovementinunderstandingoftheecologyofsometropicalforestspecies,forexamplemahogany(Swieteniamacropylla)104,thishasonlyrarelybeentranslatedintomanagementrecommendations.Inanycaseitoftenfailstotakeintoaccountregionalecologicaldifferencesintreelifehistoryprocesses105.

ItisnotablethatformahoganyharvestingintheBrazilianAmazontobecomesustainableoverthenextcentury,therewouldneedtobebothanincreaseinthenumberoftreesofharvestablesizeretainedinthestandcombinedwithasignificantincreaseintheinvestmentinsilviculturetopromotemahoganyregeneration.

Thischangeinmanagementwillhaveasignificantimpactonthefinancialviabilityofmahoganyharvestingbyreducingtheincomeandincreasingthecosts.ThesituationintheAmazonissimilarforforestsinAsia106andAfrica107,wheresignificantchangesinmanagementandsilviculturalinvestmentsarerequiredtobecomesustainable.However,itshouldbenotedthatharvestefficiencyinmosttropicaltimberoperationsislow(Figure3),withpoorlog-buckingpracticesleadingtoabandonmentinthefieldofsignificantvolumesoffelledtimber108,sothatthereispotentialforasignificantincreaseinvolumesrecoveredandhenceincreasedincomes.

100vonGadowK,M.Kurttila,P.Leskinen,L.Leskinen,T.NuutinenandT.Pukkala.2007.Designingforestedlandscapestoprovidemultipleservices.CABReviews:PerspectivesinAgriculture,VeterinaryScience,NutritionandNaturalResources2,No.038.101Karsenty,A.andS.Gourlet-Fleury.2006.AssessingsustainabilityofloggingpracticesintheCongoBasin’smanagedforests:theissueofcommercialspeciesrecovery.EcologyandSociety11(1):26.102Kometter,R.F.,M.Martinez,A.G.Blundell,R.E.Gullison,M.K.SteiningerandR.E.Rice.2004.ImpactsofunsustainablemahoganylogginginBoliviaandPeru.EcologyandSociety9(1):12.103FibichP.,J.Lepš,V.Novotný,P.Klimeš,J.Těšitel,K.MolemKipiroDamasandG.D.Weiblen.2016.SpatialpatternsoftreespeciesdistributioninNewGuineaprimaryandsecondarylowlandrainforest.JournalofVegetationScience.104GroganJ.,R.M.Landis,C.M.Free,M.D.Schulze,M.LentiniandM.S.Ashton.2014.Big-leafmahoganySwieteniamacrophyllapopulationdynamicsandimplicationsforsustainablemanagement.JournalofAppliedEcology.51(3)664-674.105GroganJ.,R.M.Landis,C.M.Free,M.D.Schulze,M.LentiniandM.S.Ashton.2014.Big-leafmahoganySwieteniamacrophyllapopulationdynamicsandimplicationsforsustainablemanagement.JournalofAppliedEcology.51(3)664-674.106vanGardingenP.R,M.J.McLeish,P.D.Phillips,DadangFadilah,G.TyrieandI.Yasman.2003.Financialandecologicalanalysisofmanagementoptionsforlogged-overDipterocarpforestsinIndonesianBorneo.ForestEcologyandManagement183(2003)1–29.107Karsenty,A.andS.Gourlet-Fleury.2006.AssessingsustainabilityofloggingpracticesintheCongoBasin’smanagedforests:theissueofcommercialspeciesrecovery.EcologyandSociety11(1):26.108Gerwing,J.J.,J.S.Johns,andE.Vidal.1996.ReducingWasteDuringLoggingandLogProcessing:ForestConservationinEasternAmazonia.Unasylva(FAO):17-25.

Figure3LogabandonedinaconcessioninCameroonforbeingtooshort(<3m)

TropicalForestSilviculture

Insection0attentionwasdrawntothefactthatsilviculturaltechniquesarerarelyappliedintropicalnaturalforestmanagement.Thisisduebothtotheperceivedhighcostsandpoorreturnsthatarethoughttobeachievedaswellasalackofknowledgeoftheimpactsofspecificactivities.

Silviculturalinterventionscanbeaimedatincreasingboththequantityandthequalityofthetimberproducedandthereisincreasingevidencethatbothofthesefactorscanbeofimportanceinensuringthatsilvicultureisbotheconomicallyviableandenvironmentallyacceptable109.

Arangeofsilviculturalinterventionshavebeencarriedoutintropicalforestsincludingenrichmentplantingundercanopyoringaps,soilscarification,earlyweeding,competitorremoval,selectivethinningandcreepercuttingamongstothers.

Aswouldbeexpected,competitorremovalandthinningcanenhancegrowthrateincreasingannualdiameterincrementbymorethan30%110inBoliviantropicalforests.Therehavebeenanumberofstudiesthatdemonstratetheeffectivenessofenrichmentplantingwithdesirablespeciesinthecanopygapsgeneratedbyharvesting111,112inbothLatinAmericanandAfricanforests.Thesehavealsodemonstratedthehighergrowthandsurvivalratesachievedbyplantingnurserypreparedmaterialincanopygaps.

Thesuccessintheuseofacombinationofmethodsisdemonstratedfromafinancialanalysisthatshowsthatevenwitha60yearreturnperiodtoharvestinvestmentsinthistypeofsilviculturearefinanciallypositiveforarangeofsituations113outperformingundermostcircumstancessituationsinwhichRILwasusedbutnotfollowedupwithanysilviculturalintervention.Theadditionalbenefits

109GünterS,WeberM,StimmB,andMosandlR.(2011)FiveRecommendationstoImproveTropicalSilviculture.InS.Günteretal.(eds.),SilvicultureintheTropics,TropicalForestry8,,Springer-VerlagBerlinHeidelberg,DOI10.1007/978-3-642-19986-8_34.110Mostacedo,B.,Z.Villegas,J.C.Licona,A.Alarcón,D.Villarroel,M.Peña-ClarosyT.S.Fredericksen.2009.EcologíaySilviculturadelosPrincipalesBosquesTropicalesdeBolivia.InstitutoBolivianodeInvestigaciónForestal.SantaCruz,Bolivia.111Doucet,J.-L.,etal.,Enrichmentoflogginggapswithmoabi(BaillonellatoxispermaPierre)inaCentralAfricanrainforest.ForestEcol.Manage.(2009),doi:10.1016/j.foreco.2009.08.018.112LopesJ.doC.A,S.B.Jennings,N.M.Matni(2008)Plantingmahoganyincanopygapscreatedbycommercialharvesting.ForestEcologyandManagement255300–307.113SchwartzG,,ALSBais,MPeña-Claros,MAHoogstra-Klein,GMJMohren&BJMArts(2016)ProfitabilityofsilviculturaltreatmentsinlogginggapsintheBrazilianAmazon.JournalofTropicalForestScience28(1):68–78.

fromthistypeofinterventionincludethepositivebiodiversityimpactofreplacingtreespecieswhosenumbershavebeensignificantlyreducedbyharvesting.

Silviculturalactivitiessuchasenrichmentplanting,siteclearing,weedingetc.,whentheyarerequiredbycontractorlaworbycompanyCSRpolicies,arerarelygiventheattentiontheyrequire.Asaresulttheyareoftenpoorlydoneandarenotsubjectedtothesametypeofefficiencychecksastheotherpartsofthebusiness.Ifinsteadthesewereseenasanintegralpartofthebusinessinvestment,itislikelythattheywouldbemanagedmuchmoreintensivelyandthatthiswouldleadtoreducedcostsof,forexample,seedlingproductionandthatthiswouldleadtohigherprofitability.Ontheotherhand,longterminvestmentrequireslongtermsecurityoftenure114.

EconomicsoftropicalforestmanagementInsection0aboveithasbeenalreadyhighlightedthefactthattropicalforestsingeneralhaveamuchlowerdensityofdesirabletreesthantemperateforestssothatinmanycasesonlyoneortwotreesareharvestedineachhectare115.Thisisassociatedwithincreasedcostsofaccessperunitofvolumeextracted.Therearemanyotherreasonswhythecostsofproductionmightbehigherintropicalforeststhanintemperateones,forexample116:

• difficultyofaccessduetoterrain,soilsandmoisture• poortransportinfrastructureleadingtohightransportcosts• highcostsofinformalpayments• longerdistancestoprocessingfacilitiesandports• lowworkerproductivity• largeandheavytreesmoreexpensivetoextract

Asaresult,itmaybeconsideredthatroundwoodfromtropicalforestsshouldbesignificantlymoreexpensivethanroundwoodfromtemperateforests.InLiberia,forexample,thecostsofextractionofUS$60/m3,transporttoportofUS$40/m3andamanagementoverheadofUS$15leadstoalogcostinexportharbourofUS$115beforeanyroyaltiesarepaid.Thegovernmentisalsoseekingtoextractarentinexcessof50%ofthelogprice.LogpricesofUS$170/m3meanthattheoperationisnotcommerciallyviable117.

Transportisakeylimitingfactorinthetimberindustryindevelopingcountrieswithhighpricesandlowqualityoftransportbeingamajorissue.CostsaremuchhigherinCentralAfricathaninFrancewithcostsin2007ofUS$0.12/tonne/kmandUS$0.05/tonne/km,respectively.Thusa100kmdistancefromforesttoportwouldaddUS$12pertonnetothecosts118.

ItisnotablethatvariablecostsareamuchhigherproportionoftransportcostsinAfricandevelopingcountriesthaninEurope119.Thisispartlyduetothelowercostofthesecond-handtrucksthatformthebulkoftheAfricanfleetbutalsoduetothehigheroperationalcostsduetothepoorroadconditionleadingtoslowermovementandhigherrepaircosts.Thus,improvementofinfrastructuremayservetoreducecostsandincreasethenumberofspeciesthatareeconomicallyviable.114SchwartzG,,ALSBais,MPeña-Claros,MAHoogstra-Klein,GMJMohren&BJMArts(2016)ProfitabilityofsilviculturaltreatmentsinlogginggapsintheBrazilianAmazon.JournalofTropicalForestScience28(1):68–78.115MoreinAsiandipterocarpforestthanothertropicalforests.116Particularlywhencomparingtimberconcessions.117IBIConsultants.2013.Forestconcessions—commercialforestrevenueprojectionmodelfinalreport:June2013.USAID.118Teravaninthorn,S.andG.Raballand.2008.TransportPricesandCostsinAfrica:AReviewoftheMainInternationalCorridors.WorldBank.119Teravaninthorn,S.andG.Raballand.2008.TransportPricesandCostsinAfrica:AReviewoftheMainInternationalCorridors.WorldBank.

Localprocessingoftimbershouldsignificantlyreducethetransportcostsasaproportionofthefinalproductcosts.Forexample,US$12/tonnewouldbe6%ofthevalueofalogpricedatUS$200/tonnebutonly2%ofaloadofsawn-boardsatUS$600/tonne.

Inmanycases,forestoperationsareonlyeconomicallyviablewhenthehighestvaluedspeciesareextractedsothatevenpermittedspecieswithacommercialdemandbutalowerpricearenotcollected120.

Itisoftenconsideredthatoperatorsintropicalforestsmakeexcessiveprofitsthroughavarietyofmechanismsincludingtransferpricing.Ifthisweregenerallytruethenthisshouldbereflectedinapricedifferentialbetweentemperatelogsandtropicalones.

Informationonthepricingoftimberandoflogsisdifficulttoobtainduetothesecrecysurroundingsuppliersandcustomersintimbervalue-chainsgenerally121.InTable9informationhasbeencollectedonarangeofbothtemperateandtropicalspeciesfromawiderangeofsources.Inaddition,withinaspeciesthereisanenormousrangeofpricingdifferenceaccordingtothe‘quality’ofthetimberproduct.AnattempttoovercomethisproblemhasbeenmadebyselectingpricesforlogsthatareofsawloggradeAandnotveneergradeandforselectingaboardproductascloseto25mmx150mmx2.4maspossibleandofFASquality.Theboardpricesareretailpriceswithlargevolumediscountsandapplytovolumesofapproximately1m3.Thefiguresshownaretheaverageofanumberofpricesobtainedandthesecouldbeveryvariable.Forexample,forteakboardsofplantationthepricerangeinEuropewasfromaboutUS$6000/m3toUS$18000/m3.ItshouldbenotedthatthelogpriceforashisstronglybiasedupwardsbyasinglepriceofferoverUS$1800/m3foraparceloflogsintheUK.ThiswasmuchhigherthanashlogpricesinFranceorSweden.

Table9CostsoflogsincountriesoforiginandsellingpricesofboardsintheUKofarangeofhardwoodspecies122.

BoardinEurope

US$/m3LogsinSourceRegion

US$/m3 Roundwood/Board%Ash 3689 682 18%Beech 3482 170 5%OakEuropean 4582 235 5%OakAmericanWhite 3547 296 8%Iroko 4356 325 7%Padouk 4519 319 7%Sapele 5259 342 7%Wenge 9692 473 5%Mahogany 6988 253 4%Meranti 2933 188 6%Teak 12973 500 4%InTable9wecanseethatinspiteofthelargerangeofpricesfordifferentspeciesandthedifferentoriginofthetemperateandtropicalspecies,thereisaremarkablecongruenceintermsoftherelationshipbetweenthelogpriceandtheboardpriceasapercentage.Inallcasesthisfallsintherangeof4–8%andthereisnoobviousdifferenceintermsoftheoriginofthetimber(itshouldbe120IBIConsultants.2013.Forestconcessions—commercialforestrevenueprojectionmodelfinalreport:June2013.USAID.121PoyntonS.2015.BeyondCertification.DoSustainability.Oxford.122Thisinformationisderivedfromanextensivesearchofpricesandreferstopublishedpricesfordatesfrom2013to2016.Asfaraspossible.theboardinformationisbasedonboardsofFASqualityofdimensions25mmx150mmx2.4m.Valuesareaverageofallvaluesobtained.

notedthatalthoughtheoriginofthetimberisknownitisnotknownifthepricingsinthetablerefertotimberprocessedinthecountryoforiginorelsewhere).

Thisresultsuggeststhatthereisnosystematicmarketfailureinthetropicaltimbermarketintermsofpricingwhenitiscomparedwiththemarketoftemperatetimber,atleastforthesewell-knownspecies.However,itisalsoknownthatthereisalargeamountofillegalharvestinginvolvingthenon-paymentofroyaltieswhichreducesthecostsofatleastsomeoperators.

Therearesomeinterestingvariationsforsomespecies.AlthoughteaksellsforaminimumofUS$6000/m3inEurope,plantationteakboardsareavailableinIndiaandChinaforUS$2397/m3andUS$4588/m3,respectively.ItmaywellbethatthemarketspecificationinthesemarketsisdifferentfromthemarketinEurope,particularlyintermsofallowingacertainamountofsapwoodintheboards.

Whatisclearfromarangeofsources123,124isthatharvestingnaturalforestsisnotasprofitableasmightbeimagined,particularlyiftheoperatorworksinfullcompliancewiththelaw.Thisisconfirmedbytheverylargenumberofconcessionsthatlieunworkedandabandoned.

However,itislikelythatinanumberofcasesthislackofprofitabilityisduetotransferpricing.AgoodevidenceofthispracticeisfoundatleastinPapuaNewGuinea,whereaverageFOBlogpricesaresignificantlybelowtheworldaveragesandcompaniessystematicallymakelosses125.

Whatisquiteclearisthatunmanagedtropicalforestswithgrowthratesofcommerciallyinterestingspeciesof0.1m3/ha/yrresultinginalogvalueincrementofUS$20-40/ha/yr,cannotcompetewithtemperateforestsinwhichthecommercialincrementofarangeofspeciesinmixedspeciesstandscanexceed5m3/ha/yr-andinsinglespeciesstandsofbeechforexample,canexceed10m3/ha/yr-givingannuallogvalueincrementsofUS$1000/ha/yr.TheyalsocannotcompetewithothertropicallandusessuchasoilpalmwithannualreturnsofUS$1000–3000/ha.

Paymentforenvironmentalservicescouldmakeasignificantdifferencetotheprofitabilityoftropicalforestoperations;however,atleastinBoliviaandBraziltherightstocarboncreditsisnotparcelledoutwiththeconcessionbutisretainedbythegovernment126.Itisalsopossiblethatrestrictionsplacedonforestmanagementinordertoachievecompliancewithcarbonschemesreducestheprofitability.

Althoughthereisnoevidenceofsystematicmarketfailureitisnecessarytorecognisethatthereisconsiderableopportunitytoimprovetheefficiencyofthemarketbyimprovingmarketcommunicationtherebyensuringthatthesmallsupplyoftimberisoptimallyused.Currentlymiddlemeninthemarketmaketheirprofitsbyarbitrageontimberprices,addinglittlevalue.Bymatchingcustomers’needstosuppliers’capacitiestheyshouldbeabletomakemuchhigherrevenueonthebasisofcustomersavingsandsuppliersrevenueincreases.

TheroleofmarketsThestructureofthemarketfortropicaltimbersplaysanenormousroleindetermininghowtropicalforestsareharvestedandmanaged.Thereisahugevariationinthedemandfordifferentspeciesindifferentmarkets.

123KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?124GretzingerS.2015.LatinAmericanexperiencesinforestconcessions.125MousseauF.&LauP.(2016)Thegreattimberheist:theloggingindustryinPapuaNewGuinea.TheOaklandInstitute.126GretzingerS.2015.LatinAmericanexperiencesinforestconcessions.

Somespeciesaresovaluablethattheirdemandineventhesmallestquantitiesensuresthattheywillbeharvested,oftenillegally.Forinstance,thedemandforrosewoodsinChinaformanufactureofextremelyhigh-pricedfurnitureisinthiscategory127.

Thebulkofthespeciescanbeconsideredascommoditytimberswhicharesuppliedtothemarkettosatisfydifferenttypesofdemand.Thesevaryfrommarkettomarketaccordingtofashion,availabilityandproximitysothatthemajorityoftropicalhardwoodsfromWestAfricaareexportedtoEurope128whileSoutheastAsianhardwoodsareexportedtoChina,JapanandUSA129.(Figure4).

Figure4Majortradeflowsoftropicaltimber130

Therequiredvolumesforcommoditytimbersdependontheirenduseandcanrangefromaslittleas1m3/yrtoasmuchas3000m3/yrforalargevolumemanufacturerofkitchencabinetdoors(Table10).

Table10Quantitiesoftimberrequiredforarangeofproducts

Typeofuser Unitvolumeconversion Typicalannualdemand(m3)Specialistfurnituremanufacturer

20–50chairs/m3,10tables/m3,3dressers/m3

1-10m3/yr

Largermassmarketfurnituremanufacturer

20–50chairs/m3,10tables/m3,3dressers/m3

50-1,000m3/yr

Highendwindowsanddoors 10-20doors/m3,50–100window 50-200m3/yr

127Wenbin,H.andS.Xiufang.2015.TropicalHardwoodFlowsinChina:CaseStudiesofRosewoodandOkoumé.ForestTrends.128Blackett,H.andE.Gardette.2008.Cross-borderflowsoftimberandwoodproductsinwestAfrica:finalreportEuropeanCommissionContractReference:2007/146818.129ForestTrends.2011.TimberTradeFlowMapsofChinaandtheMekongRegion.130ITTO.2012.AnnualReviewandAssessmentoftheWorldTimberSituation2012.DivisionofEconomicInformationandMarketIntelligence,InternationalTropicalTimberOrganization,Yokohama,Japan.196pp.

Typeofuser Unitvolumeconversion Typicalannualdemand(m3)frames/m3

Yachtdecking 0.5–1m3/yacht 50-100m3/yr

Engineeredwoodflooring 150m2flooring/m3:typicalhouse(0.5–1m3),hotel(10–20m3)

300-700m3/yr

LowvolumekitchencabinetdoorrangeforlargeDIYchain

50-70doors/m3 300m3/yr

Smallscaleguitarmaker 200-300guitars/m3 Lessthan1m3/yrLargescaleguitarmaker 200-300guitars/m3 1-100m3/yrBearinginmindthediscussioninsection0aboutareaproductivitywecanseethatasinglelargecustomerwillexhaustthesupplyofaparticularspeciesfromanAfricanconcessionof50,000haormore.Anyfurthervolumewouldhavetobeofanotherspecies.

Thereisaproblemwithintroducingnewspeciesontothemarketwhichrelatestothemarketdevelopmentcost.Thereareoftenmanyspecieswithappropriatetechnicalpropertiesforaparticularusebutonlysomeofthesewillalsobevisuallyattractive.Evenwhenaspeciesmeetsallofthedemandsforapurposeitwillbeunknownonthemarketanditwillbedifficulttopersuademanufacturerstouseitintheirprocessesaslongasthealternativeremainsingoodsupply.TheinvestmentrequiredtolaunchanewtimberontothemarketincompetitionwithothersislikelytobeseveralmilliondollarsandthiswouldrequireanassuredmarketandanassuredsupplyforperhapsUS$20millionworthoflogs.IflogsaresellingatalowerpriceforanewtimberinordertoattractcustomerswemaybeabletosellthematapriceofUS$200/m3.Thusweneedtosell100,000m3tomakeitworththecostofbringingthenewspeciestomarket.Inorderforasinglecommercialentitytoachievethesevolumesinathree-yearperiod(rememberingwewouldliketoseeareturnonthemarketinginvestmentof30%)werequireaconcessionofalmost1millionhaharvestedona30yearrotation.

Thus,althoughtheforestmaycontain30to40speciesthatwouldbeofcommercialvalue,atanyonetimeonlyamaximumofsixorsevenofthesewillbeinuse.Itisonlywhenthesupplyofaparticularspeciesapproacheseconomicextinctionthatcustomerswillstarttosearchforalternatives.Thesearchfornewspeciesisdemand-ledandnotproducer-led.

Domesticandregionalmarketsfortimberarealsoimportantconsumers.Inmostcasesthesemarketsaresatisfiedbytheinformal/illegalsupplyoftimberasdiscussedbelowinsection0.Inmanycountriesthesevolumesexceedthevolumestraded(Figure3)ontheexportmarkets131.Theillegalnatureofthesemarketshastheeffectofdepressinglocaltimberpricessincetheactorsrarelypayanyofthechargesortaxesrequired.Thismakesitdifficultforlegaloperatorstocompetesuccessfullyonthedomesticmarket.DuetotheirsizetheseinformalmarketsareofcriticalimportanceforthefutureofforestmanagementinAfricawheretheyareasignificantsourceofemploymentthathasbeenlargelyignoredbypolicymakers132.

131KishorN&LescuyerG.(2012)Controllingillegalloggingindomesticandinternationalmarketsbyharnessingmulti-levelgovernanceopportunities.InternationalJournaloftheCommonsVol.6,no2August2012,pp.255–270. 132CeruttiP.NasiR.BaxterJ(2015)Once‘invisible,’Africa’sdomesticloggerscomeintothelightTheEuropeanUnionisdrivinggreateremphasisonAfrica'sartisanalsector.http://blog.cifor.org/26637/africa-artisanal-domestic-logging-timber-vpa-flegt?fnl=en

Figure3Volumesoftropicaltimberforexportandforlegalandillegalconsumptiononthelocalmarket133

Whyhavegovernmentsfailedtokeepthevalueinthecountry?Forestryandassociatedprocessingactivitiesarehighlycapitalintensive,requiringequipmentthatisnotmanufacturedindevelopingcountries.Thereisthereforealargecapitaloutflowassociatedwithforestryinvestmentswhichareonlyrecoveredafterseveralyears.Wherethesecostsaremetbyexpatriateinvestorstheyarebalancedbycapitalinflows.

Inthepast,theindustrywascharacterisedbythelarge-scaleexportoflowvalueroundwoodtoothermarketswherethesecouldbeprocessed.Inanattempttoretainmoreofthepotentialvalueincountry,anumberofgovernmentshaveinstitutedlogexportbansrequiringatleastaminimumamountofprocessing.Inmanycases,businesseshaveattemptedtocircumventtheserestrictionsbyminimalprocessingina‘redqueen’gameinwhichgovernmentsimposeevermorestringentrestrictionstooffsettheattemptstoavoidrestrictions.

Ghanahashadalogexportbansince1994andatleastsomeprocessershavebeenabletoengageinhighaddedvalueactivitiessuchastheproductionofveneersandhighvaluemoldings.Mozambiqueestablishedselectivelogexportbansinthe1990sandasaresulthadsomesuccessindevelopingmarketsforspeciesnotcoveredbytheban.However,itsearlyexperiencewasofvaluesubtractedprocessing134ofthekindthathasoccurredinGabonrecently135underwhichtheexportedsawn-timberissoldatalowerpricethansawlogs136.

Countrieswherethelogexportbanhasbeeninforcehavealsobeensubjecttoleakyborderswithlarge-scaleexportsofroundwoodsuchasisoccurringinLaos137,Cambodia138andZambia139.Illegal

133KishorN&LescuyerG.(2012)Controllingillegalloggingindomesticandinternationalmarketsbyharnessingmulti-levelgovernanceopportunities.InternationalJournaloftheCommonsVol.6,no2August2012,pp.255–270.134AlimahIssufo,Pers.Comm.135KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?136MackenzieC.(2006)ForestgovernanceinZambézia,Mozambique:Chinesetakeaway!FinalreportforFONGZA.137ChanB.2015.StatusofForestconcessionsinSoutheastAsiaconcessionsinSoutheastAsia.

loggersinCambodiadevelopedtheirownroadnetworktocrosstheborderwithoutpassingcustomscontrolsandthesameoccursontheborderbetweenZambiaandTanzania.

InGabon,theimpactofthislogexportbanhasbeentoreducethevolumeandvalueoftimberexportsandtoreducegovernmentdirectrevenuesincethiswasleviedonlogsforexport.Aprocessofrestructuringhasbeenongoingsincethebanandinstalledprocessingcapacityisonlynowreachinglevelsequivalenttopreviouslogexportvolumes140.Therehavethereforebeensignificantshorttermlossesbothofrevenueandforeignexchange.

Governmentrevenuesarebasedontherangeofdifferentchargesleviedandthesedifferfromcountrytocountry.Regardlessofthetypesofchargesimposed,themajorfactorinlimitinggovernmentrevenuehasbeentheinabilitytocollecttherevenues.InCambodia,withitsverycomplexsystemofcharges,only10%ofexpectedrevenueswascollected141.InLiberia,whereasignificantportionofthechargewasarea-based,companiessoughttorenegotiatethesechargesafterconcessioncontractshadbeensignedandwithheldpaymentsamountingtomorethan95%oftheamountsdue,whilecontinuingtooperate142.

Theinabilitytoenforcecontract-basedchargesiscloselyalliedtotheinabilitytoenforcecontract-basedrequirementsforforestmanagementandtheinabilitytoapplyfinesandpenaltiesassociatedwithillegallogging.Poorgovernanceandlackoftransparency,coupledwithlackofcapacityaremajorissues143.Issuesrelatedtolegalityandcorruptionaredealtwithingreaterdetailin0.

Insomecasestransferpricing144hasbeenusedtotransferthevalueoutofthecountry,whilecompaniesmayalsotransferprofitstootherjurisdictionsbyoverchargingforimportedequipmentsuppliedbyrelatedcompanies.

Poorindustrialperformance

Manysawmillsintropicalcountriesareequippedwitholdfashionedandoftenwornoutequipmentwhichisincapableofsawingaccurately.Asaresult,thereisaverypoorconversionefficiencyfromroundwoodtosawntimber.Inaddition,duetosawinginaccuracythedemandforovermeasurefromcustomersinordertosecureminimumdimensionsaremuchhigherthanfortimberthatisaccuratelysawn.Sawbladesareoftenmuchthickerthantheyneedtobesothatsignificantvolumesarelostassawdustduringsawing.Similarlydryingisoftenimproperlycontrolled,bothinopenairseasoningandinkilndryingsothatfurtherlossesoccurduetodeformationandcracking.

Itisrarefortheconversionefficiencyfromroundwoodtosawnproductstoexceed30%.Thissituationisexacerbatedbyamarketthatdemandsstandarddimensionsofdefectfreetimber.Thesestandarddimensionsareinmanycasesmuchlargerandlongerthanrequiredbyendusersbutasaresultlargevolumesofusefultimberarerejected.

138ZhangY.,J.BamptonandB.vanHensbergen.2015.GlobalWitnessvVietnamRubberGroup.PublicSummaryofComplaintsPanelReport.FSC.139vanHensbergenH.J.andF.Njovu.2015.Theroleandfutureofguidelines,codesofpracticeandcertificationsystemsintheforestsectortosupportthegreeningofthebuildingandconstructionsectorinZambia.140KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?141SophanarithK.T.,N.KimPhat,M.KoikeandH.Hayashi.2006.EstimatingactualandpotentialgovernmentrevenuesfromtimberharvestinginCambodia.ForestPolicyandEconomics8(2006)625–635.142DorborJallahJ.,etal.2012.ReportontheIssuanceofPublicUsePermits(PUPs).ReportoftheSpecialIndependentInvestigatingBody(SIIB)presentedtothePresidentofTheRepublicofLiberia,H.E.EllenJohnsonSirleaf.19December2012.143REM.2009.IM-FLEG:ProgressintacklingillegallogginginCameroon.144Contreras-Hermosilla,Arnoldo.2002.LawComplianceintheForestrySector.

Old,poorlymaintainedandinefficientequipmentisalsoasignificantconsumerofelectricityoftenconsumingfivetimesmorethanmodern,wellmaintainedequipmentperformingthesamejob.Incountrieswithhighenergycosts(e.g.Ghana)thispoorenergyefficiencycanmeanthedifferencebetweenprofitableandlossmakingbusiness145.

Afewbusinesseshavesucceededindevelopingmarketsforsmalldimensionedtimberandforvalueaddedproductssuchasmoldingsorveneeredboardsandthiscanincreasetheconversionefficiencyfromroundwoodtofinalproductstoinexcessof60%.Thesebusinessesarelargeandsecureemployers,contributingsignificantlytolocaleconomicdevelopment.

Giventhepotentialcompetitiveadvantagesthatarepossibleasaresultofimprovedefficiencybothintheforestandinthesawmill,thisraisesthequestionofwhytherearenotmorecuttingedgeinvestorspreparedtotakeoutconcessions.

Tropicalforestryandselfregulation?Intemperateareas,privatelyowned-,andinmanycasesState-ownedforestryisregulatedbythevisionofalongtermreturn(intergenerationalforestry).Whyisthisdifficulttoachieveinthetropics?

Itiscommonlyarguedthatthemajorityofconcession-holdersintropicalforestsfailtocarryouttheiractivitiesinsuchawayastobesustainable.Thisrelatesbothtooverharvestinginsuchawayastodestroythefuturevalueoftheforestandinfailingtoapplysilviculturethatwouldensureforestregenerationofharvestedspecies.Ithasalsobeenarguedthatexcessiveareafeesinduceconcession-holderstoreducethelengthoftherotation146bysystematicallyoverharvesting.

Itisbelievedbymanythatthemajorproblemrelatestothesecurityoftenureandthat,ifconcession-holdersweregivengreatersecurity,theywouldbepreparedtomakethenecessaryinvestment.Therearetwoaspectsofthissecuritywhichareofimportance.Inthefirstinstance,governmentsmayissuetenureswhichareforfixedperiodswithoutanyguaranteeofrenewalandinsuchcasesitisarguedthatthereislittleincentivetoinvestorincurcostsonbehalfofsomeotherfuturebeneficiary.Inthesecondinstance,manycountrieshavelackedpoliticalstabilitysothattheriskofwarorarbitraryremovaloftenureisseenassignificant.

Thefirstriskleadsdecisionmakerstoreducetheirrateofinvestmentand/orcompliancewithcontractrequirementstowardstheendofacontractifthereisasignificantperceivedriskwhilethesecondtypeofriskcausesinvestorstoseekveryhighratesofreturnoncapital.Ratesof30%perannumarecommonindevelopingcountries.

Whileitmaybethatgreatercontractualsecurityoftenurewillincreasethepropensityofinvestorstomanagetheforestforfuturebenefits,theexistenceofthesecondclassofriskmeansthatinvestorswillcontinuetoseekforveryhighratesofreturn.

Inanycase,thereturnontheinvestmentisrelatedtotherateofincreaseinvalueoftheresourceandwhenthisratefallsbelowtheopportunitycostoftheinvestmenttherationalinvestorwill

145Asinglesawlineconsumedmorethan70kwtodoajobthatcouldbedonewithasawconsuming9kw.CostsofUS$35/hrasopposedtoUS$4.5/hr.146BoscoloM.andJ.R.Vincent.2007.Areafeesandloggingintropicaltimberconcessions.EnvironmentandDevelopmentEconomics12(4):505–20.

liquidatetheresourceandseekotherinvestments147.Thiswouldoccureveniftheresourcewasprivatelyownedbytheinvestorwithperfecttenuresecurity.

Theonlywayinwhichthistypeofbehaviourcanbecounteredisbyexternalregulation.However,thereislittlereasontobelievethatgovernmentswouldbemoresuccessfulatenforcingsuchregulationsforwhichtheygetnorewardthantheyareatcollectingforestrevenuesforwhichthereissignificantreward.Investmentincollectionofforestrevenuesisoneofthehighestreturninvestmentsthatagovernmentcanmake148.

IllegalityInmanytropicalforestcountriesthemajorityoftimberishandledthroughtheinformal(illegal)sector149,150.Mostofthistimberisdestinedfortheinternalmarket151orforexporttoneighbouringcountries.Forexample,mosttropicalhardwoodtimberinthemarketinKigali,RwandaissourcedillegallyinDRCwhilstalmostalltimberonsaleintheBusekoMarketinLusaka,Zambia(Figure4below)isinformally/illegallysourcedinsidethecountry152.

Figure4Informally/illegallyharvestedrosewoodandotherhardwoodlogsinBusekoMarket,LusakaZambia(HJVH,2015).

Itisimportanttounderstandthedifferencebetweenillegalityandcorruption.Anillegalactinforestryisanyactthatcontravenesthelawsandregulationsgoverningforestryortheprocessingofforestproductsorthetradeinforestproducts.Corruption,ontheotherhand,involvestheuseof

147Grut,M.,J.A.GrayandN.Egli.1991.Forestpricingandconcessionpolicies:ManagingthehighforestsofWestandCentralAfrica.148Grut,M.,J.A.GrayandN.Egli.1991.Forestpricingandconcessionpolicies:ManagingthehighforestsofWestandCentralAfrica.149KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?150AmacherG.S.2006.Corruption:AchallengeforeconomistsinterestedinforestpolicydesignJournalofForestEconomics1285–89.151KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?152vanHensbergenH.J.&NjovuF.(2015)Theroleandfutureofguidelines,codesofpracticeandcertificationsystemsintheforestsectortosupportthegreeningofthebuildingandconstructionsectorinZambia.ZambiaGreenJobsProgramme.

publicofficeforprivategain153.Corruptionitselfisinmostjurisdictionsanillegalactandisalsointheforestrysectorassociatedwithotherillegalactivities.However,muchcorruptionalsooccursincaseswhereallotheraspectsofforestoperationsarelegalbutwhereregulatoryauthoritieshavethelegallyauthorisedcapacitytodelaytemporarilyorindefinitelysuchlegalactivities.Inthesecases,corruptpaymentsareusedtoexpeditepermissions.

Illegalityassociatedwithforestrytakesmanyforms154,155whichmaybelooselygroupedinto:

• Illegallyharvestingtimbero Harvestingoutsideanareaforwhichavalidpermitisheldo Harvestingwithoutapermito Harvestingspeciestowhichthereisnoentitlemento Harvestingtreesnotincludedintheallocatedyieldo Harvestingdimensionsforwhichthereisnoentitlemento Harvestingforapurposeforwhichthereisnoentitlementi.e.communities

harvestingunderalegalexemptionfor‘ownuse’andthensellingcommercially

• Misrepresentationo Underdeclarationofharvestedvolumeo Misdeclarationofspeciesharvestedo Misdeclarationoftimbervaluesorundergradingo Useorreuseofpermitsandpermissionsforanalternativepurpose

• Illegaltransportandtradeo Transportwithoutpermitsorpaymentoffeeso Illegalexportoftimberoroflogso Transferpricing

• Illegalacquisitionofforestorforestlandtenureo Landinvasiono Misrepresentationinacquisitionofforesttenureo Failuretocomplywithlegalobligationsassociatedwithforesttenure

• Corruptiono Pettycorruptionassociatedwithregulatoryandbureaucraticrequirementso Pettycorruptionassociatedwithanyotherillegalitieso Grandcorruptionassociatedwithallocationofforesttenureso Grandcorruptionassociatedwithtradeintimberproducts

Causesofi l legality

Someillegalityassociatedwithforestrycanbeascribedtotheprohibitionoftraditionalactivitiesonvariouspretexts156,oftenbasedontheappropriationbycentralgovernmentsofcustomarytenures

153SmithJ.,K.Obidzinski,A.Subarudi,I.Suramenggala.2003.Illegallogging,collusivecorruptionandfragmentedGovernmentsinKalimantan,Indonesia.InternationalForestryReview5(3),293–302.154AmacherG.S.2006.Corruption:AchallengeforeconomistsinterestedinforestpolicydesignJournalofForestEconomics1285–89.155Contreras-Hermosilla,A.2002.LawComplianceintheForestrySector.47pages.StockNo.37205WorldBankInstitute.156FairheadJ.andM.Leach.1996.MisreadingtheAfricanLandscape:SocietyandEcologyinaForest-savannaMosaic.,CambridgeUniversityPress,Cambridge.ISBN0-521-56499-9.

andoftenwithahistoricalorigininthecolonialperiod.Thus,inGuineaforsometimethesettingoffiresinthesavannahs,atraditionalagriculturalactivity,carriedthedeathpenalty157.

Inothercases,illegalityisassociatedwithextremepovertysothatillegalactivitiesarecarriedoutsimplyinordertosurvive.Thisisthecaseinmanycountrieswheretimberisillegallyharvestedforartisanalproductionofcharcoalforsaleinurbancentres.

Inmanytropicalcountries,productionforestsareremoteanddifficulttoaccess,andasaresultthereisanalmostcompletelackoflawenforcementcapacity.

Inmanycases,illegalactivitiesaresoingrainedinforestrypracticesthattheonlycausetodaycanbeascribedtotradition.InGhana,forexample,itisstandardpracticetounder-measurelogsby20%inordertodecreasestumpagepayments.Thisillegalbehaviourisnotconsideredtobeinanywayquestionablebythoseinvolved.

Incaseswherethesalaryofforestofficersisfarbelowtheminimumrequiredforsubsistenceitisnotsurprisingthatpettycorruption,involvingpaymentforignoringillegalactivities,iswidespread.Acultureofthistypeofcorruptionisdifficulttobreaksincetheentiresystembecomesinvolvedandevenofficerswhoarenotdirectlyinvolvedbecomeguiltyoffailingtoreportitandarethenmadevulnerabletobecomingcorrupt.Itmustbeaddedthatsimplyincreasingforestofficersalariesisunlikelytobeaquickcureforthistypeofcorruption158.

Attheotherendofthescaleliethecasesoflargescaleillegalityinvolvedinallocationofforesttenures,transferpricing,falseaccountingetc.Thesecasesarealmostalwaystiedintosomeformofillegalityandmayalsoinvolvecollusion159betweenseniorofficialsandbusinesses.Inmanycases,itissimplynotpossibletoobtainaforesttenurewithoutresortingtocorruption.Oftenthistypeofcorruptionisassociatedwithperceptionsofentitlement160amongsthighgovernmentofficials.

Impactsofi l legality

Illegalactionsdenytherightfulbeneficiaries-betheycentralgovernmentsorlocalcommunities-thebenefitsfromtheforesttowhichtheyareentitled.Therehavebeenanumberofestimatesoftheimpactofillegalityintermsoflossestogovernmentrevenuebothnationallyandgloballyandtheamountsaresubstantial,ascendingtobillionsofdollarsinsomecountries161.

Illegalityalsocriminalisesthosethatparticipateinillegalactivitiesandalthoughthismightbeseenasadesiredoutcomeitmustbeconsideredifthisisalwaysthecase.AlargeportionoftheruralpopulationofZambia,Kenya,Tanzaniaetc.isdependentonillegalcharcoalproductionasameansofsurvival.Tocriminaliseentirepopulationsshouldnotbeadesiredoutcomeofalaw.Lawsarebasedonthe‘socialcontract’betweenthegovernorsandthegoverned,wherelawsaresowidelydisobeyedastobemeaninglessthereisclearlynosuchsocialcontract.

Whereillegalityiscombinedwithcorruptiontheimpactsbecomecatastrophicfordevelopmentandforforests,asdiscussedbelow.

157FairheadJ.andM.Leach.1996.MisreadingtheAfricanLandscape:SocietyandEcologyinaForest-savannaMosaic.,CambridgeUniversityPress,Cambridge.ISBN0-521-56499-9.158AmacherG.S.,M.OllikainenandE.Koskela.2012.Corruptionandforestconcessions.JournalofEnvironmentalEconomicsandManagement63,92–104.159AmacherG.S.2006.Corruption:AchallengeforeconomistsinterestedinforestpolicydesignJournalofForestEconomics1285–89.160MessnerE1981.Reactiveentitlementinelectivepublicoffice:apossibleprecursortopoliticalcorruption.AmJPsychother:35(3):426-35.161Contreras-Hermosilla,A.2002.LawComplianceintheForestrySector.47pages.StockNo.37205WorldBankInstitute.

Thereis,however,anotherimportantaspectofinformal/illegalproductionthatmustbehighlighted.Informalproducersdonotusuallypayfortheirwoodinanyway,simplyextractingitfromtheforestaccordingtotheirneedsandcapacities.Theyalsoavoidalloftheregulatoryandpersonaltaxesbyoperatinginacasheconomyonly.Forthisreason,theyareoftenabletoproducetimberatafarlowerpricethanformalproducersandconcession-holders.Thishastheeffectofbringingdownthemarketpriceoftimberinsidethecountryandmakesitdifficultorimpossibleforformalproducerstocompete.

Impactsofcorruption

Corruptionhasarangeofnegativeimpactsassociatedwithit.Inrelationtoconcessions,firstandforemostitmeansthatgovernmentsdonotachieveanoptimalrentfromtheconcession-holderssincelargeportionsofthe‘rent’arecollectedelsewhereinthevaluechain.Suchrent-collectingbehaviourisunlikelytobeeconomicallyefficientsincemuchtimeisspentinitscollectionandincoveringitup,timewhichotherwisecouldhavebeenspentonproductiveactivities.

Moreimportantly,however,theexistenceofcorruptionmeansthatalmostallotherpolicyinstrumentsbecomeineffectivesincethereisnomechanismforenforcingthem.Onceacorruptactionhastakenplacebothpartiesbecomeguiltyofinvolvementinit,bothinsituationsofcollusionandnon-collusion.Thismeansthatthreatsaimedatensuringenforcementofsomeaspectsofthepolicyrequirementsbecomelargelyineffective.Thus,whenoperatinginacorruptenvironmentitbecomesmuchmoredifficulttodesignandenforcepoliciesthatensureeconomicdevelopmentandforestconservation162.

Thecounterargumentthat,inthefaceofimpossibleregulatorydemandscorruptionisthe‘greasethatlubricatesthewheelsofdevelopment’,hasbeendiscredited163.

Eliminatingcorruptionanditsassociatedillegalitywillnotbeeasy.Policydevelopmentmusttakeintoaccounttheexistenceofillegalityandinthelongtermdevelopstrategieswhereillegalityandcorruptionceasestobetheoptimalstrategyforgovernmentofficials.

5 Thefutureofconcessions

Itisnotpossibletodiscussafutureinwhichforestconcessionsplayasignificantroleineconomicdevelopmentwithoutdiscussingthefutureoftropicalforestmanagement.Concessionsaresimplyonecommonwaybywhichgovernmentsseektoachievetheirgoalsfortheforestestate.Manyoftheproblemswithconcessionshighlightedbydiverseactorsareproblemsofforestmanagementandnotproblemswiththeconcessionsystemitself.Anysystemthatseekstocorrectthesituationwithconcessionsmustfirstaddresstheproblemswithtropicalforestmanagement.Itshouldberecognisedthatexternalconditions,includingthegovernanceofthelocalconcessionsystem,alsoaffecttheviabilityofgoodforestmanagement.

ScenariosforthefutureoftropicalforestmanagementThecurrentsituationfortropicalforestsisnotahappyoneastropicalforestscontinuetodeclineinareaandintegrityinlargepartsoftheworldforavarietyofreasons164.Ofthe11majordeforestationfrontsidentifiedbyWWFin2015onlyoneliespartiallyoutsidethetropicalzone165.162AmacherG.S.,M.OllikainenandE.Koskela.2012.Corruptionandforestconcessions.JournalofEnvironmentalEconomicsandManagement63,92–104.163Contreras-Hermosilla,A.2002.LawComplianceintheForestrySector.47pages.StockNo.37205WorldBankInstitute.

Inmanycases,theultimatereasonwhyforestsarenotprotectedisthattheyarenotperceivedasofferingsufficientvalueinthefaceoflandusealternatives;inafewcasestheyareperceivedashavingsuchhightimbervaluethatitisbettertocutthem(legallyorillegally)beforesomeoneelsedoes.

Thelargestcauseofdeforestationisforconversionoflandtoagriculturaluse,bothsmall-scaleinformalandlarge-scaleindustrial.Forforeststosurvivetheymustbeabletocompetewithalternativelandusesbydemonstratingvaluestreamsthatmakethemcompetitiveintheeyesoflocalstakeholderswhomaintainadefactocontrolovertheresources.

Forconcessionstobecomesuccessfultheymustbebasedonasuccessfulbusinessmodelfortropicalforestmanagement.Insuchabusinessmodel,forestsarewellmanagedandabletoprovideanassuredflowofallresources,thetenurerightstotheseresourcesareallocatedwithinaframeworkofgoodgovernancethatallowsbusinessestooperatewiththeminimumpossibleinterferenceandwithoutcorruption,andtheproductsfromtheforestareprocessedefficientlyintohighvaluegoodsthatreturnsignificantvaluetotheforest.

Atpresent,thisbusinessmodelisnotfullyimplementedanywhere.Tropicalforestsarenotmanaged,theyusuallyexistinanenvironmentofdeficientgovernanceandthebusinessmodelisgenerallysuboptimalandoftenunsustainable.

Forthistohappenitissuggestedthatthereneedtobesignificantimprovementsinthreefieldsofforestry:governance,forestmanagementandthetimberbusinessmodel.Onlyiftheseareallimplementedwillconcessionsbeabletohavethepositiveimpactsexpectedofthem.TheoutcomesofdifferentscenariosdependingonwhichtypesofimprovementsareimplementedaregiveninTable2whilethedetailsoftherequiredimprovementsaredescribedbelow.Itshouldbenotedthatthesearerequirementsforalltropicalforestmanagementsituationsandnotonlyforconcessions.

164WWF.2015.WWFlivingforestsreport:chapter5savingforestsatrisk.WWF.165WWF.2015.WWFlivingforestsreport:chapter5savingforestsatrisk.WWF.

Table2Scenariosfortropicalforestmanagement

Timberbusinessstatusquo

GovernanceForestmanagementStatusquo Improvedforestmanagement

Statusquo Forestlossforacorruptelite

Forestmanagementwithoutdevelopment'TheForestPoverty

Improvedgovernance Forestlosswithnegligiblebenefit

Lowvalueforestry'TheEternalForest

Improvedtimberbusiness

GovernanceForestManagementStatusquo Improvedforestmanagement

Statusquo

Commercialextinctionofforestsforthebenefitofthe

Sustainableforestryforthebenefitofthefew

ImprovedgovernanceShorttermbenefitsforallleadingtoloss

offorestcapital

Sustainableforestrywithlocaldevelopment

andvaluedforests'TheNewForestRich'

Improvedforestmanagement

Inordertomaintainandincreaseforestproductivityandforestvaluesitisnecessarytoinstituteproperforestmanagement.Insomepartsoftheforestthiswillrequiresignificantsilviculturalactivitywhilstinotherareascriticalhabitatsshouldbesetasidefornaturalresourceconservationpurposes.Thecomponentsofimprovedforestmanagementwillbe:

• Managementplanning• Appropriateharvestingconsideringtheregenerationofdesiredspecies• Assistedregenerationofdesiredspecies• Silviculturalthinning• Othersilviculturalactivities??• Reducedimpactlogging

Suchactivitiesassilviculturalthinningmayberequiredintheentireforestestateinadvanceoffutureharvestsandnotonlyinareaswherepastharvesthavetakenplace.Forexample,itmaybebeneficialtocarryoutreleasethinningoftargettreessomeyearspriortoenteringacompartmentforharvest.Itisunderstoodthatinmanytropicalforeststhesetypesofactivityarecurrentlyprohibitedandalsothatinmanycasesforestaccessroadsmustbedestroyedafteraharvesthastakenplaceinorderto‘protect’theforestfromincursion.Underaproperandequitablegovernancesystem,theseincursionswouldbepreventedbythelocalstakeholderswhoderivevaluefromtheforest.

Silviculturalthinningsarelikelytogeneratelargevolumesofsmalldiametertimberofawiderangeofspecies,soitshouldbefeasibletodevelopboththeprocessingcapacityandamarketforthistypeofmaterial.Wastetimbercanalsobeusedforbiomass.

Improvedgovernance

Itisrecognisedthattherehavebeensignificantmovesinrecentyearstowardsthedecentralisationoftheforestadministrationandrevenueallocation.However,thesemoveshavebeenfullyimplementedinonlyafewcases.Itmustalsoberecognisedthatthehistoricalfallinvalueofaforestofficercompensationhasbeenakeydriverinpermittingforestcorruption.InUganda,forexample,theForestOfficerSalaryin1988hadfallentoamere0.4%ofits1962valueinrealterms166.Thecomponentsofanimprovedforestgovernancesystemwillinclude:

• ForestAdministrationofficersadequatelypaid• Transparencyinallocationofforesttenures• Recognitionofcustomarytenures• Allocationofappropriaterevenuestocustomaryrights-holders• Simplificationofregulatoryrequirements• Eliminationofinefficientcharges• Revisionofforestlaws/regulationstomakeforestmanagementpossible• Eliminationofinappropriaterent-seekingbehaviourbygovernmentagenciesand

governmentofficials

Inmostcasestheportionofthetimbervaluethatreacheslocalrightsholdersisminimal,intherangeof1-2%ofthetimbervalue,andinsomecasestheamountreachingtheserightsholdersisactuallyzero167.Itislikelythatthesinglelargestincentivetosupportresponsibleforestmanagementandforestconservationistoensurethatlocalrightsholdersreceiveafairshareoftheforestderivedvalue.

Inmanycountries,thehighestsinglecostsofforestrybusinessesrelatetoinformalpaymentswhichareoftenintherangeofUS$60–100/m3168.Inmanycases,itcanbearguedthatthecomplexityofforestregulationsisintentionalsinceitfacilitatescorruptrent-seekingpracticesbyofficials169.

Lackoftransparencyintheallocationofforesttenuresisakeyissueinpreventingtheproperfunctioningofanefficientmarketforforestrights.Inextremecases,eventheresponsibleauthoritieslackknowledgeabouttheforesttenures170.

Improvedforestbusiness

Forestbusinessesinthetropicssufferfromawiderangeofproblemsthatleadtoinefficienciesbothintermsoftheirperformanceasbusinessesandintermsoftheireconomicperformanceinrelationtothecountry.Thecausesoftheseproblemsaremanifold,rangingfrominadequatehumanresourcestoriskminimisation,extremecapitalreturnratedemands,towastefulfieldandprocessingpractices.Itshouldbenotedthatmuchofthebehaviourofbusinessinvestorsappears

166WebsterG.andH.A.Osmaston.2003.AHistoryoftheUgandaForestDepartment1951–1965TheCommonwealthSecretariat.DOI:10.14217/9781848598171-en167Arumadri,J.2002.TheforestrevenuesystemandgovernmentexpenditureonforestryinUganda,FAO.168Contreras-Hermosilla,A.2002.LawComplianceintheForestrySector.StockNo.37205WorldBankInstitute.169Contreras-Hermosilla,A.2002.LawComplianceintheForestrySector.StockNo.37205WorldBankInstitute.170InCambodia,theForestDepartmenthadnoofficialmapsoftherubberconcessionsissuedfortheSeimaProtectionForest.(Pers.Comm).Theirexistenceonlybecamepublicafter8yearswhenmapswereobtainedandpublishedbyLicadho.

perfectlyrationalsuchastherequirementforveryhighcapitalreturnratesinsituationswheregovernmentsareunstable.

Oneadditionalaspectofimportanceisrelatedtothehistoryofthetropicalforestrybusiness,forthevastmajorityofitslifethebusinesshasbeenfocussedonharvestingofoldgrowthtrees.Asaresult,theexpertisethathasbeenbuiltupintheorganizationscarryingoutthebusinessisfocussedonthedifficulttaskofoptimisingtheharvest.Itisonlyrecentlythatmanagingtheforesthasbecomearequirementandasaresultthereislittlein-housecapacitytodoso.Infact,incomparisonwithtemperateforestry,wheretherearehundredsofyearsofexperienceandanaccompanyingandrapidlygrowingscientificliterature,thesilvicultureliteraturefortropicalnaturalforestsistiny.

Themarketfortropicaltimberisalsohighlyinefficientwhencomparedwiththemarketfortemperatetimber.Thetimbermarketremainsopaqueintermsofpricinginformationandthelackofdirectcommunicationbetweenend-usersandsuppliersmeansthatthereisenormouswasteofmaterialatallpartsofthevaluechainduetothedemandforstandarddimensionsbytraders.

Thestructureofthecommoditymarketforsawntimberwithitsdependencyonstandarddimensionsandgradesisahangoverfromapastwherecommunicationbetweentheend-userandsellerwasimpossibleduetothelongshippingperiodandpoortelecommunications.Thisresultedinasituationwheretheend-usersknewwhattheywouldgetintermsofsizeandpropertiesbutwhichdidnotnecessarilymeettheirneeds.

Thissituationislonggoneandend-userscannowcommunicatedirectlyandinrealtimewithsellers.Themarkethasnotyetadaptedtothisnewrealityinwhichasawmillcanprovidedimensionsthatexactlymeettheneedsofend-usersandinsodoingreducewastageatbothendsofthesupplychainresultinginverysignificantvaluerecoveryforbothparties.Anewtypeofagentisrequiredinorderforthismarkettofunctionefficiently.

ManyoftheseissueshavealreadybeendiscussedinChapter4.Correctingtheseproblemsrequiresarangeofimprovementsinbusinessessuchas:-

• Humancapacitydevelopmentforprocessing• Humancapacitydevelopmentforforestmanagement• Incentivestoensureafullutilisationoftheavailableyield(e.g.paymentforallocatedyield)• Incentivestoensureafulluseofthefelledmaterial(e.g.paymentforvolumefelledas

opposedtovolumeextracted)• Investmentinmoreefficientprocessingequipmenttoreducevolumelossesand

maintenanceandrunningcosts• Humancapacitydevelopmentfortimbermanufacture• Improvedmaintenanceregimesformachinerytopreventfailures• Bettermarketknowledge• Bettercommunicationwithendusers

Mosttropicalcountrieshavelittleornoresourceofskilledwoodworkersoutsideofthesectorthatmanufacturesmalleritemsforthetouristbusiness.Thus,arosewoodfurnituremanufacturerinZambianeedstoimport10mastercabinet-makersfromChinainordertomanufactureproductsthatwillsatisfythehighqualitydemandsofitsChinesemarket171.Thesecabinet-makerswilloveranumberofyearstraintheirZambiancounterparts.

171Pers.obs.2015.

Inordertoreducecapitalrisksprocessersintropicalforestsofteninvestinoldsawsandothermachinerywhichiswastefulbothduetosawinginaccuraciesandlargesawkerfs,butalsoduetohighenergyinefficiency.InonecaseseeninGhana,alargesawwasconsuming54kWofelectricityforajobthatcouldhavebeendonebyasmallersawusing9kWwhichwouldhaveresultedinasavingofUS$15peroperatinghour.Thissavingalonewouldhavepaidforthesmallersawinlessthanoneyear.

ForestInvestment

Thelastdecadeshaveseensignificantchangesinthepatternofconcessionownershipinmanypartsoftheworld.Thischangeisbestexpressedasamoveawayfromoldex-colonialcapitalmainlyfromWesternEuropetoneweasterncapitalwithsourcesintherapidlygrowingeconomiesoftheFarEast.Forexample,Chinesecompanieshadacquiredconcessionrightstoapproximately10%ofthedenseforestareaofGabonby2010172.Malaysian-ownedcompaniescontrolledthemajorityofforestconcessionsinLiberiain2013andIndiancompaniesownedthelargestforestconcessionsinGuyana.ThistrendisassociatedwiththeincreasingdemandfortropicaltimbersintheFarEasternmarket.ItisalsopossiblethatpartofthistrendisrelatedtothemuchlowerlegalityrequirementsoftheFarEasternmarketswhencomparedwiththeEuropeanorU.S.markets173.

Ineithercasethecapitalemployedintropicalconcessionsismainlyfamily-basedcapitaltakenfromotherbusinesses,sinceitishardtoobtaincommercialcapitalfortropicalforestryactivityotherthanplantations174,particularlyincountrieswithaperceivedhighpoliticalrisk.Inaddition,fewcompaniesmeettheinvestmentrequirementsofinternationalinvestorsincludingtherecenttrendofrequiringforestcertification175.

Whatiswrongwiththeconcessionmodel?Althoughconcessionshavebeenmoderatelysuccessfulinsomecases,thefailuresappeartooutnumberthesuccesses,ifwebasetheevaluationonrevenuecollection176whereitisrareforgovernmentstocollectinexcessof20%oftherevenuesduefromthetimbertaken.

ThemodernconcessionisbasedonthegovernmentasPrincipalallocatingcertainrightsanddutiestotheconcessionaireactingasitsAgent177.Inthiscase,thegovernmentdoesnothavethecapitalortheskillstomanagetheforestandtoprovidealloftheotherservicesrequiredsuchaseducationandhealth.Theconcessionisbasedonfindinganagentwhohasalloftheseandthentoprovideacontractualinteresttotheagenttodothemanagement.

However,theagentsinthiscaseareforestrycompanieswhohavecomefromabackgroundintimberharvestingand/ortimberprocessingandusuallyhaveadequateskillsintheseactivities.Theseforestrycompanieshavenotneededtodevelopskillsintropicalsilvicultureortheothernew172Putzel,L.,Assembe-Mvondo,S.,BiNdong,L.B.,Banioguila,R.P.,Cerutti,P.,Tieguhong,J.C.,Djeukam,R.,Kabuyaya,N.,Lescuyer,G.andMala,W.2011ChinesetradeandinvestmentandtheforestsoftheCongoBasin:synthesisofscopingstudiesinCameroon,DemocraticRepublicofCongoandGabon.WorkingPaper67.CIFOR,Bogor,Indonesia.173MasieroM.PettenellaD.CeruttiP.(2015)LegalityConstraints:TheEmergenceofaDualMarketforTropicalTimberProducts?Forests,6,3452-3482;doi:10.3390/f6103452.174ClenaghanS,JacopoLeviMorenosandAlbertoThomas(2009)Ch3StimulatingprivatecapitalinvestmenttoachieveREDD+InForestInvestmentReview.ForumfortheFuture.London.175 BestC.&,MichaelJenkins(1999)CapitalMarketsandSustainableForestryOpportunitiesforInvestment-ThePacificForestTrust,ForestTrends. 176Grut,M.,J.A.GrayandN.Egli.1991.Forestpricingandconcessionpolicies:ManagingthehighforestsofWestandCentralAfrica.177GrayJ.2002.ForestConcessionPoliciesandRevenueSystems:CountryExperienceandPolicyChangesforSustainableTropicalForestry.

requirementssincetheyhaveneverhadtoperformtheminthepast.Asaresult,theyhavelittleornoin-housecapacityintheseaspects.

Thissituationiscompoundedbythefactthatthescientificunderstandingoftropicalsilvicultureisgenerallyatamuchlowerlevel178thanisthecasefortemperatesilviculture.Thisislargelyduetothefactthattherevenuesgeneratedbyforestsintemperatesystemsareenormouscomparedwiththeirtropicalcounterpartssothatbothbusinessesandgovernmentshavebeenpreparedtoinvestheavilyinresearch.

Inaddition,theconcessionsystemassumesthatconcession-holderswillfollowthelawsofthecountryandthetermsofthecontract,araresituation.Inmostcases,concession-holdersseektominimisetheiradherencetodemandsforforestmanagementtominimisecostsandmaximisevolumesbyharvestingoutsidethescopeoftheirpermits.InGhana,forexample,detailedfollowupofstumpsrevealedthatfouroutofthefirstfivestumpsexaminedwerenotincludedintheallocatedyieldevenforacompanyconsideredtobelawabiding179.

Anysolutiontotheseproblemsmustbebasedonarealisticviewofforestmanagementcapacitiesandsupportneedscoupledwithincentivesystemsthatrewardgoodbehavioursufficientlytorenderillegalityandnon-compliancewithcontractsunattractive.

Whendevelopingsolutionspolicyanalystsshouldconsidercorruptionandillegalityasoneoftherulesofthegamesincefailuretodosoislikelytoresultinpoliciesandpracticesthatdonothavethedesiredeffect180.

Rights-basedapproachesThecurrentsystemofforesttenurerightsinmanydevelopingcountriesisahangoverfrompreviouscolonialadministrations.Underthesesystemstherightstoforestproductsandinparticulartotimberoftenbecameseparatedfromothertypesoflandandresourcerights.Thesesystemssupplantedpreviouscustomaryrightswhichwereheldunderawidevarietyofsocialorganizationsinwhichrightswereallocatedtoindividualsinasystematicbutundocumentedway.

Thesepreviousadministrationssetupthoserightsunderalegalframeworkwhichislargelyinplacetoday.Inpractice,awayfromcitiesandlargetownsthetraditionalsystemshavecontinuedtofunctionwithrelativelylittleinterferencefromthecentre.Peoplehavecontinuedtousetimberandnon-timberforestproductsinmuchthesamewayasbeforetheadventofthecolonialpowers.

Manycountriesrunparalleladministrativesystemsinwhichthecentralisedlegalsystemrunsalongsidethecustomarysystemmoreorlesscomfortably.Inthesetraditionalsystemsandpartlyasaresultofthelackoftransport,infrastructuretimberwasmostlyusedandtradedlocallyforbuildingandmanufactureofawidevarietyofitems.Itisonlyrecentlythatthesetimbershaveacquiredasignificantvaluethroughdemandfromanurbanisedpopulationandtheabilitytogetthesetothemandtoexportharbours.

Thusitcouldbearguedthat,sinceremotecommunitiesnevermadelarge-scaleuseofthosetimbers,theyhavenotestablishedacustomaryrighttousingthemcommercially.Suchargumentmaywellbevalid,butwhatcannotbecontestedisthatthesecommunitieshavemadeuseofthe

178SitoeA.,E.ChidumayoandM.Alberto.2010.Timberandwoodproducts.InChidumayoEG,andGumboD.(ed.),TheDryForestsandWoodlandsofAfrica:ManagingforProductsandServices.179Pers.obs.180AmacherG.S.,M.OllikainenandE.Koskela.2012.Corruptionandforestconcessions.JournalofEnvironmentalEconomicsandManagement63,92–104.

landonwhichthesetimbersstandwithvaryingdegreesofintensity.Forestshavebeenusedforcollectionoftimber,NTFPs,forhuntingorasplacestohideintimesofwar181.Thereiseffectivelynoplaceinanydevelopingcountrythatisaccessibleonfootthathasnotbeenvisitedandimpactedbyhumanactivitysothatitisimpossibletofindareaswherethereisnopreviouslandtenureofsomesort.

Asaresult,althoughsovereignstateshaveappropriatedcentralisedformallandtenureovermuchoftheirterritory,bothcustomaryanddefactotenureresideswiththelandoccupants182.Theseoccupantsmaybelong-termresidentsormorerecentarrivalstoleratedwithinthecustomaryframework.Whengovernmentsattempttoallocateconcessionsoversuchlandthenthisoftenleadstoconflict.

Thissituationhasbeenincreasinglyrecognisedsincethe1980sandtherehavebeenavarietyofattemptstoaddressthesituation,including:

• requirementsthatlocalcommunitiesbeabletocontinuetraditionalactivitiesintheforest• requirementsthataportionoftheconcessionfeesisallocatedtocommunities• requirementsthatconcession-holdersnegotiatesocialresponsibilityagreementswith

communities• requirementsfor‘benefitsharing’overaffectedlands• requirementforFPICpriortoallocationofconcessions• allocationofconcessionstocommunities• transferoflandtitleorforesttenuretocommunities

Ontheotherhand,itisalsoclearthatwherecommunitieshavedefactotenureoverforestlandbutthislanddoesnotreturnbenefitstothemthentheforestisdegradedandappropriatedforotherlandusesthatgivegreaterreturns183.

Itislikelythatthefutureoftheforestinallcasesisdependentonthevaluethatthelocalcommunitiesderivefromthem,regardlessofthetypeofforesttenurearrangements,sinceitisthelocalcommunitieswhohavethebootsonthegroundandareabletodetermineifandhowconcession-holdersarekeepingtotheircontractualagreementsandarethusabletoinformthecompetentauthoritiesorindependentobservers.

Theinclusionoflocalcustomarytenure-holdersaswellasgovernmentandconcessionaireinatripartiteagreementnegotiatedunderFPICseemstobeaprerequisite.

Itmustbeaddedthatsimplytransferringallforestrightstolocalcommunitiesisunlikelytobesuccessfulinallcircumstances.Whengovernmentsdon’thavethecapacitytomanageforestsforbusinesspurposesthenitisevenlesslikelythatcommunitiesinremoteareaswillhavethesecapacities.Thisisparticularlythecaseforcommunitieswhowishtoaccessthehighervalueexportmarketswithgoodqualityproductssincethisrequiresverylargeareas,significantinvestmentandhumancapacitydevelopmenttobesuccessful.

Suchcommunitieswillrequireenormoussupportintermsofcapacitybuilding,planning,inventoryaswellassupportforneededcapitalandtechnicaladviceforprocessingetc.Thedifficultyshould

181DuringtherecentcivilwarinSudanfamiliesfromvillagesaroundNzarainWestEquatorialProvincefledintotheforestandlivedtherefordecadesbeforereturningtotheiroriginalvillageswhenhostilitiesceasedin2007.182Itisrecognisedthatwithpoliticalinstabilityandlargescalepopulationmovementsuchtenuremayhavebeeninplaceforonlyarelativelyshortperiod.183KarsentyA.2015.ThecontemporaryforestconcessionsinWestandCentralAfrica:chronicleofaforetolddecline?

notbeunderestimatedandwhereithasbeensuccessfulthishasusuallybeenonthebasisofsignificantverylongtermsupportoverseveraldecades.

Analternativeapproachwouldbetopartnersuchcommunitieswithentrepreneurs184,185inanapproachthathasbecomeknownasILCF(InvestinginLocallyControlledForestry).Inthismodelitisthecommunitythatobtainstheforesttenurerightsandseeksanentrepreneurwithcapitalandknow-howtohelpthemwithforestmanagementandprocessing.

ThistypeofapproachmayworkbestwhencommunitiesareabletobecomeorganisedinthemannerespousedbytheForestandFarmFacilityoftheFAO186.

Workersrights,treatmentofworkersandhealthandsafety

Thetreatmentofforestryworkersindevelopingcountrieshasinmanycasesbeenpoorbothintermsofemployment187andinhealthandsafetyissues.Ithastoberecognisedthatnotallemployersarefailinginthisrespectandthatinmanycasesthemoreformalemploymentofferedbytheformalbusinessesthatareabletotakeupconcessionsisofamuchbetterqualitythanthatofferedintheinformalsector188(Figure6).

Figure5WorkersfieldaccommodationinaconcessioninGuyanaconsistsofatarpaulin

Healthandsafetyissuesarecommonlyoverlookedbothintheforestandinprocessingfacilities.Partlythisisduetounsafeworkingpracticesandpartlyduetotheuseofoutdatedequipmentwhichdoesnothavemodernsafetyfeatures.Itisoftenalsoduetosafetyequipmentbeingpurposelydisabledinordertofacilitatemachineaccess.

184Elson,D.(2011).Investinginlocallycontrolledforestry:reviewingtheissuesfromafinancialinvestmentperspective.TheForestDialogue,NewHaven,USA.185Nhantumbo,I.,Macqueen,D.J.,Cruz,R.,Serra,A.(2013)InvestinginlocallycontrolledforestryinMozambique:PotentialforpromotingsustainableruraldevelopmentintheprovinceofNiassa.IIED,UK186FAO()ForestandFarmFacility.http://www.fao.org/3/a-i4848e.pdf187Asanzi,P.L.Putzel,D.GumboandM.Mupeta.2014.“RurallivelihoodsandtheChinesetimbertradeinZambia’sWesternProvince.”InternationalForestryReviewVol.16(4),16(4):447-459.188GretzingerS.(2015)LatinAmericanexperiencesinforestconcessions.

Theroleofoutsideinspectionisanimportantfactorthatcanlimitthehazardsinforestryactivitiesbutthisisanotheraspectwherecorruptionoftenresultsingovernmentinspectorsissuingsafetycertificatesinsituationswherenocareistakenatall.

Wheregovernmentledsafetymonitoringsystemsarenoteffective,thirdpartysystemssuchasofferedbyOccupationalHealth&SafetyAdvisoryServices(OHSAS)orforestcertificationinspectionscanservetoidentifyissues.Insuchcasesitisalwaysuptotheforestbusinesstobeopenformakingthenecessarychangestoensuresuccess.

Inmanycountries,particularlyinSoutheastAsia,thereisextensiveuseofmigrantlabourintheforestsectorandparticularlyinthiscasetheriskofabuseisveryhigh.TherearecertainrisksofforcedlabouranddenialofthefundamentalrightsofworkersaslaiddownintheILOCoreConventions189.

TheroleofcertificationThepotentialroleofforestcertificationislargelymisunderstoodbystakeholders.Governmentsandbusinessesexpectforestcertificationtocurethewoesofbusinessesandtoimmediatelycauseailingbusinessestobecomesuccessful.Thisiswishfulthinkingandfarremovedfromreality.Therearesignificantbenefitstogetfromcertificationbuttheyliemoreinrelationtoachievinggoodforestmanagementthanintheissueofthecertificateitself.Wherebusinessesseektoachieveforestcertificationforcertificationssakeortomeetsomeregulatoryrequirementtheywillinvariablybedisappointed.

Forestmanagement

Certificationstandardsrequireforestmanagerstotakeamoresystematicapproachtothepreparationandexecutionoftheforestmanagementplan.Thisensuresthatallimportantaspectsaretakencareof.Aspartofthisplanningitisvitalthatallsignificantimpactsaretakencareof,andjustasimportant,thatwhereverimpactsrelatedtoanaspectarenotimportantnoresourcesareallocatedtosuchissues.Thisshouldhavetheresultofreducingwastageandconcentratingresourceswheretheyaremosteffective.Iftheplanningiswelldone,thenforestmanagementbecomesmoreefficientwithasignificantreductionincosts.

Thekeybenefitofforestcertificationisthatitimprovesthewaythebusinessisrunandimprovestherelationshipbetweentheforestmanagerandotherstakeholders.Thisalsoactstoreducetherisksposedbyillegalactivitiesornaturalcatastrophes.

Forestmarkets

Forestownersonachievingcertificationoftencomplainthatasaresulttheydonotachievehigherpricesfortheirproducts.Therearetwoaspectstosolvingthisproblem:productqualityandmarketing.Noamountofcertificationcanturnapoorqualityproductintoanattractiveone,inthelongtermawell-managedproductionforestwillstarttoproducetimberwithbetterpropertiessothatthequalityoftheproductsmanufacturedfromthetimberwillbebetterandthusachievehigherprices.Intheshortterm,improvedharvestingandtransportwillproducetimberwithlessdamageandwithagreatervolumerecoveryduetoreducedwastageandthiswillleadtoanincreasedvolumeandqualityofproducts.Inaddition,iftheimprovedmanagementstyleoftheforestisalsoimplementedatthesawmill,therewillbeimmediateimprovementsinthequalityofproductsandreductionsinwastageandcosts.

189ILO(1998)ILODeclarationonFundamentalPrinciplesandRightsatWork.

Thisimprovementwillmeannothingtoestablishedcustomersusedtogettinglowqualityproductsatalowprice.Theywillsimplyrubtheirhandswithgleeandrefusetoofferasinglecentextra.However,theimprovementinqualitycombinedwiththecertificatewillenablemanagerstoseekalternativecustomerswhoarepreparedtopaymoreforthequalityandforthecertificate.Theinitialcustomer,nowbeingleftshortoftimber,islikelythentoincreasepriceoffers.

Thisdoeshoweverrequirethatforestmanagersengageinmarketingtheirproductsinnewmarketsandthisisanexpensiveactivitywhichislikelytorequiresupportfromgovernments,NGOsorforestsectororganizations.

Auditingandtransparency

Akeybenefitofcertificationusuallyoverlookedisthepresenceofexternalauditingandrequirementforamuchincreasedleveloftransparency.ThebenefitsofhavinganindependentexpertwithoutanyinternalconflictsofinterestreviewingthepracticesofanorganizationhaslongbeenrecognisedbybusinessesandhasledtothesuccessofthemanyISOperformancestandardsandtheirassociatedcertificationsystems.Forestmanagersseekingtolimitthecostsofcertificationusuallyselectthecertificationproviderwiththelowestcost.Thisisexactlythewrongapproach.Forestmanagersshouldseekoutthecertificationproviderwhoisabletoprovidethemwiththemostexperiencedandrespectedauditorswhowillbeabletoaddsignificantvaluetotheirbusinessbytheobservationstheymake.

Transparencyisakeyfactorinreducingundesirableoutcomesinforestmanagement.Transparencyenablesanorganizationtocommunicateitspracticestostakeholdersandengagewiththemopenlyforthebenefitofthebusiness.Transparencyallowsabusinesstodemonstratetoregulatoryauthoritiesandbusinessesthatitiscomplyingwithitsregulatoryrequirementsandthiscanbeapowerfultoolincombatingcorruption.

Transparencycanonlygosomeofthewayinconvincingoutsidersthatanorganizationismeetingitscommitments.Externalverificationisoftenrequiredandthisiswhereexternalauditorscansupplyanimportantservice.

Wherecompaniesareabletouseindependentauditingandtransparencytodemonstratetheircompliancewithallaspectsoftheircontractswithgovernmentitshouldnotbenecessaryforthegovernmenttoverifythisindependently.Itshouldthereforebepossiblefortheauthoritiestoreducetheregulatoryburdenoncompanieswhichcouldbeanimportantincentiveforcompaniestodotherightthing.

Towardsanewmodelfortropicalforestbusiness(Concessions2.0)Inmovingtowardsarevisedmodelfortropicalforestconcessionsitisnecessarytostatethatthereisno‘onesizefitsall’solutionsinceeverycountryhasitsownsocial,legalandforestsituation.ForestsinSoutheastAsiahaveamuchhighervolumeofcommercialtimberthanforestsinAfrica,communitybasedforestmanagementisfarbetterdevelopedinLatinAmericathaninSoutheastAsiaetc.

Therecommendationsbelowareaimedatallstakeholdersandareintheformofinterventionsthatmayberequiredfromgovernments,aidagencies,concession-holders,rightsholdersandotherstakeholders.Notalloftherecommendationsarerelevantforallsituations.

Recommendationsforanimprovedconcessionsystem

Revisedgovernance

1) Muchmoretimeandeffortneedstobeinvestedintheproperplanningofconcessionsbygovernments.Governmentsshouldavoidrushingtoallocatelargeareasinthehopeofshorttermreturns.

2) ConcessionplanningmustinvolveFPICagreementswithstakeholderspriortotheallocationofaconcession.Recognitionofoverlappingtenurerightsisapre-requisiteforeffectiveconcessions.

3) Systemsfortheallocationofconcessionsshouldbewhollytransparentwithfullpublicdisclosureofallinformationrelatingtocompetitivebids.Mechanismsshouldbeputinplacethatallowpublicinputintotheallocationdecision.

4) Modelsforgovernanceofconcessionsshouldpresupposetheexistenceofcorruptionandtakethisintoaccountaspartofthepolicyanalysisinsystemdevelopment.

5) Thesystemforallocationofconcessionsshouldbesimplifiedsothatallcommunicationbetweenabidderandthegovernmentshouldbethroughasinglepointofaccess.Allocationmustavoidunduedelaysthatarecostlyforbusinesses.

6) Governmentsshouldfocusmuchmorestronglyonthecontrolofillegalandinformalactivitiesthathaveanimpactonthemarketanddepressthepriceoftimber.Formalisationofthecommercialpartsoftheinformalmarketcouldbeanimportantsourceofgovernmentrevenuethroughgeneraltaxation.

7) Localstakeholdersincludinglocalgovernmentsrequireextensivesupportandcapacitybuildinginordertobeabletofulfiltheirroleinconcessionmanagement.

8) Governmentsshouldaimatamixedconcessionsystemwithbothprivateconcessionsandcommunityconcessionsbeingavailableinamixedeconomy.

9) Governmentsshouldallocatesignificantlymoreresourcesonthemanagementoftheforestsector.Thismustincludegreaterinvestmentintheregulatorysystemthroughreformandcapacitybuilding.

10) Thirdpartyobserversofalltypesshouldbewelcomedascontributorstogoodgovernanceduetotheirindependenceandaccesstoinformation.

11) Governorsshouldgovern.Itisnotadequatetohavecomplexsystemsofregulationthatareneverenforced,farbettertohavefewerlawsproperlyenforced.

Facilitatingforestbusiness

1) Concessionfeesshouldbemadeassimpleaspossibletocollectandshouldbebasedonarealisticappraisaloftheexpectedvalueoftheconcessiontothebusiness.However,feesshouldbesetinsuchawayastoavoidinefficientuseoftheforestresources.Biddersshouldhaveaccesstotheforestbeforetheysubmittheirbidsinordertomakerealisticbidsbasedonaproperknowledgeofthelikelycostsofaccessandofthequalityandquantityoftheforestresourcesavailable.Feesshouldtakeintoaccountthemarketpricesoftimbers.

2) Thereshouldbecompletetransparencyrelatedtothecollectionofforestfees.

3) Concessiontenuresystemsmustbemademoresecurebasedongoodperformance.Rollingtenuresofrotationlength(25-40years)refreshedattheendofeveryshorttermplanningcycle(5-10years)maygiveconcession-holdersthenecessarysecuritytoinvestinbetterforestmanagementpractices.

4) Upfrontchargesandperformancebondsrequiringcashsecuritypresentasignificantcosttobusinessesandalternativesshouldbeconsidered.Forexample,anequitybondinaparent

companywithdividendswithheldmaybeaneffectivewayforagovernmenttoobtainsecuritywithoutcapitalcoststocompanies.

5) Incentivesshouldbeavailabletoencouragecompaniestofulfilthetermsoftheircontractsandforsubjectingthemselvestoalternativesystemsofthirdpartyinspectionsuchasbycertification.

6) Small-scaleforestryrequiressignificantlong-termsupportinordertobeviableandtheyshouldhavesimpleregulatoryrequirementsinordertoreducetheregulatoryburden.Theregulatoryburdenisanimportantfactorinlimitingtheirattemptstoformalisetheirbusiness.Thereshouldbesignificantadvantagesandgovernmentsupportforinformaloperatorspreparedtoformalisetheirbusiness.

7) Small-scaleandcommunityforestownerscouldbesupportedbyentrepreneursinforestmanagementandprocessinginarealpartnership.

8) Therearelikelytobeadvantagesinsituationswheregovernmentsasownersoftheallocatedtimberrightsbecomepartnerswiththeconcession-holdersasopposedtoopponents.

Improvedforestmanagement

1) Forestmanagementplansshouldfocusontheessentials(e.g.realisingtheobjectivesfortheforestresource,mitigatingthemostsignificantenvironmentalandsocialimpacts.Forestmanagementplansshouldthereforebebasedonrealisticobjectivesandanassessmentofkeyimpacts.

2) Forestmanagementplansshouldbesupportedbydetailedtechnicalguidelinesthatensuretheywillbeexecutedproperly(e.g.instructionsonhowtocarryoutassistedregenerationofforestinaharvestinggap.)

3) Landscapelevelplanningshouldprecedeforestmanagementplanninginordertoidentifysuitableconcessions.Anintegratedlanduseplanningsysteminvolvingallpartiesabletoinfluencelandusedecisionsisvital.TheOneMapinitiativeofIndonesiaisanexampleofthisapproach.

4) Independenttechnicalexpertscanbeasignificantadvantageinprovidingimpartialadvicefreefromtheconstrictionsofgovernmentpolicyofinternalpoliticsofgovernmentorganizations.

5) Forestyieldplansshouldbebasedonrealisticexpectationsofgrowthunderthetypeofsilvicultureimplemented.Forexample,whereenrichmentplantingandtendingarecarriedoutincanopygapstheimprovedgrowthandtheselectionofspeciesshouldresultinhigheryieldswhichneedtoberecognisedbyincreasedharvestratesinthefuture.

6) Monitoringofperformanceisrequiredforkeyindicators.Itisrecognisedthatmonitoringiscostlyandshouldbelimitedtotheminimumnecessary.

Involvinglocalstakeholders

1) Socialimpactassessmentsmustbecompletedbeforetheallocationofconcessions.

2) Socialissuesandengagementmustbeincludedinforestpolicy.

3) AllcustomarytenuresshouldbeidentifiedandmappedpriortotheallocationoftenuresothatcustomaryrightsholderscanbeengagedinFPIC.

4) Specificsolutionsarerequiredtoaddresstheproblemsfacedbytheinformalsector.Theseshouldincludemeasuresaimedatdecriminalisingthesectorbysimplificationofforestcodesandallocationoftimberrights.

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