World Growth Forestry and Poverty Project Newsletter – Issue 43

World Bank: Forestry projects conserve forest, neglect the poor

A recent internal review by the World Bank’s Internal Evaluation Group (IEG) has been highly critical of the institution’s decade-long record in the forestry sector. In particular, the review is critical of the Bank’s record on poverty alleviation in its forestry projects.  

The IEG set out to review the Bank’s 2002 forest strategy and its USD2.6 billion budget for forest projects over the past decade.

The review’s conclusions state that “The World Bank Group‘s forest interventions have contributed substantially to positive environmental outcomes, but poverty reduction, for the most part, has not been satisfactorily addressed.”

The review in part places blame for this on the Bank setting the expectation that it could successfully address the tension between conservation, poverty alleviation, and growth objectives. The review states that “expectations, as envisioned by the 2002 Strategy, have not yet been met.”

Instead, it appears from the review that the Bank has prioritised conservation while neglecting these other objectives.

Bank management has subsequently published a response to the recent IEG findings, expressing “strong disagreement” over some of the contentions made in the report. In particular, the Bank rejected the evaluators’ criticism of its support for industrial timber concession reforms in tropical forests. The response states that sustainable forest management is a viable approach to ensuring long term conservation and development goals. The International Finance Corporation- also noted the important contributions of commercial forestry and the forest sector in general to broader economic development.

However, the response did not disagree with the broader finding that poverty had not been addressed by the program.

World Bank supported forest programs appear to be facing greater internal scrutiny across the board. An internal evaluation of the Bank’s Forest Carbon Partnership Facility, which funds REDD+ in developing countries, also revealed massive inefficiencies in the program, noting that it cost around USD22 million to disburse just USD5million in grants.


Doubts still lingering over EUTR

The European Union timber regulation (EUTR), which makes it an offence to place so-called illegal timber or timber products on the EU market, is expected to come into effect in less than two weeks’ time. Yet the mechanism to support the new regulations remains far from complete.

None of the Voluntary Partnership Agreements, which were introduced as a means to ‘fast track’ timber products into Europe from exporting nations that comply with the new regulations, are operational, and will not be so before the EUTR is introduced on March 3.

The signing of the Indonesia VPA was recently delayed to April 2013, despite the two parties concluding the VPA in May 2011.  The EU has also stated that it wants to add conditions to the existing arrangement in Indonesia, requesting regular audits to be added to the schedule.

To add to the confusion, the UK-based Timber Trades Journal has reported that Indonesian media had incorrectly reported that Indonesian SVLK-licensed timber would be recognised by European authorities.

The confusion arose following a press conference held by EU Ambassador Julian Wilson, where it was stated that SVLK timber would be recognised once the VPA was operational.

However, as pointed out in a World Growth report issued earlier this month, there have been significant delays between signing and ratification of VPAs and their eventual operation. In one case in Africa, the signing of a VPA almost two years ago has not been followed by an operational phase.

This current policy uncertainty for timber exporting countries that have signed onto VPA processes to avoid the complications of the EUTR means they will now have to face the new requirements under the EUTR regardless.

There is also widespread uncertainty over how the new regulations will pan out in practice. 11 EU member states have not yet nominated an authority to process the licenced imports, let alone allocating resources and setting out details of monitoring systems and sanctions.

According to the International Tropical Timber Organization (ITTO), timber producing countries are concerned over how the new regulations will impact overall trade. Some European buyers are already identifying uncertified wood from certain countries such as Papua New Guinea, the Solomon Islands and most African nations as ‘high risk’, the ITTO notes.

Despite these concerns and those laid out in a recent report by World Growth, EU-funded NGOs such as FERN maintain that VPAs will not gave negative economic impacts and local communities.


A Green Peace for APP?

Indonesian forestry company APP’s most recent sustainability update is arguably the biggest piece of forest industry news over the past 12 months. The update was effectively the announcement of a peace deal between APP and campaign group Greenpeace. However, Greenpeace’s previous form indicates nothing is certain.

APP’s concrete and realised commitments since the launch of its sustainability roadmap in 2012 have been cautious thus far. The company has taken a sensible approach for company that has literally millions of hectares of forest land under its direct control, and thousands more controlled by suppliers.

Rather than caving to NGO demands immediately – as has been the case with many companies attempting to manage risk – the company is assessing what the situation is on the ground before it sets its targets on HCVF and high carbon stock assessments. However, there are three areas where the company may run into difficulty.

The first is on its commitment to communities, and specifically the insertion of ‘free, prior and informed consent’ into its broader commitments. As World Growth has stated before, the FPIC concept is still being developed. It has to a large extent been distorted by environmental NGOs to pursue environmental concerns rather than social concerns by blocking new development projects. Already radical NGOs such as the Rainforest Action Network have commenced a lobbying campaign based solely on community rights.

The second is a new commitment to allow NGOs as independent observers to their operations. In this case whether APP is actually breaking laws or any broader commitments is actually irrelevant. NGOs such as Greenpeace and RAN fundamentally object to both plantations and to what it refers to as ‘industrial forestry’. Neither group has a problem with distorting data to further their own objectives.

The third is from Greenpeace itself. Greenpeace has stated on many occasions that it has “no permanent allies or enemies.” Their form in the past has been to force companies to commit to FSC certification, then work within FSC to tighten up certification standards.  How Greenpeace actually maintains its relationship with APP from now is anyone’s guess.


How China is about to change global forest certification

Recent data published by both the FAO and NGO WWF indicate that China continues to change the face of global demand for timber and forest products.  This, combined with recent developments in Chinese forest certification, is going to change forest certification across the globe.

The new FAO data shows that China has overtaken Canada in sawnwood production, and the U.S. in paper production and fibre furnish consumption. The Asia-Pacific region is now the largest producer of fibre furnish and China the largest consumer.

In contrast, production of fibre furnish has declined in both Europe and North America. Europe has experienced a sizable contraction in wood-based panel production since 2007, while China increased its lead as producer of these panels. Similarly, pulp and paper production and consumption has been increasing significantly in the Asia-Pacific region, but generally declining in Europe and North America.

China has also become a key player in international trade, with its imports of forest products now accounting for about 16 per cent of the global total. It overtook the U.S. in 2011 to become the largest importer of sawnwood, and has also become the largest importer of round wood and fibre furnish, as well as the largest exporter of wood-based panels globally.

Forest certification in China is based around the Chinese Forest Certification Council (CFCC) scheme, as well as a small number of FSC forest management certificates, plus chain-of-custody certification for PEFC and FSC.

According to a recent Chinese state presentation, FSC’s operations in China pose a legal risk because certification and accreditation is state controlled; there are currently legal exemptions for a number of FSC’s certifiers.  This throws into question whether FSC’s operating structure can actually operate within China.

The recent application by the state-endorsed Chinese Forest Certification Council (CFCC) for endorsement by PEFC is likely to mean that while FSC will be tolerated in the most significant forest products trading nation, it will never lead.


APEC: Illegal logging must not inhibit trade and growth

The APEC member economies’ Experts Group on Illegal Logging and Associated Trade (EGILAT) agreed on a five-year roadmap for achieving responsible forest management while safeguarding economic growth in the region at a recent meeting in Jakarta.

EGILAT, which held its third meeting in Jakarta on January 29-30, stressed on the importance of fair market access and consideration to socio-economic factors as key enablers to achieving sustainable trade in forest products.

Together the APEC economies account for over 50 per cent of the world’s forests and approximately 80 per cent of global trade in forest products. This makes the region a major player in the forestry sector.

The work plan and strategy documents identify strengthening policy dialogue and developing capacity to address illegal logging and associated trade, Increasing law enforcement cooperation and information sharing, and collaborating with international organizations and with industry and civil society to raise awareness as key tasks of the Group.

At this stage it appears to be the case that EGILAT is focusing on the important aspects of trade and development consistent with APEC’s broader goals. However, the push for the ‘greening’ of trade agreements by developed economies within APEC such as Australia and the US means it is likely there will be a stronger push on environmental issues within the organisation more broadly. The next EGILAT meeting will take place in Peru later this year.


Indonesian officials announce proposal to extend forest moratorium

Indonesian Director General of Forestry Hadi Daryanto has stated that Indonesia is seeking to extend the country’s forest moratorium.

Indonesia’s two-year moratorium on forest clearance was instituted in 2011 under the USD1 billion cooperation agreement signed with Norway to reduce greenhouse gas emissions from deforestation and forest degradation. It is set to expire this May.

Daryanto recently told a press conference that “the ministry of forestry would like to continue the moratorium and provide degraded land for business.”

A coalition of NGOs including Greenpeace, have issued a press release calling for the two-year moratorium on new forest concessions to be extended beyond May 2013.

The Indonesian Agriculture Minister has criticized the proposed ban, arguing the ban is unnecessary and should instead be replaced by revised permit criteria for palm plantations.

Daryanto also pointed out that palm oil plantation businesses often choose forested land over degraded land as degraded land often already contains inhabitants, and that relocating populations is time-consuming and expensive.

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