Large acquisition of rights on forest lands for tropical

Commercial Pressures on Land

Large acquisition of rights on forest lands for tropical timber concessions and commercial wood plantations

Our Mission A global alliance of civil society and intergovernmental organisations working together to promote secure and equitable access to and control over land for poor women and men through advocacy, dialogue, knowledge sharing and capacity building. Our Vision Secure and equitable access to and control over land reduces poverty and contributes to identity, dignity and inclusion.

The Rights and Resources Initiative is a strategic coalition of international, regional and community organizations engaged in development, research and conservation. Together, we are working to encourage greater global commitment and action on pro-poor tenure, policy and market reforms. The RRI coalition is formed by a group of core Partners: the Coordinating Association of Indigenous and Community Agroforestry in Central America (ACICAFOC); Civic Response; the Federation of Community Forestry Users, Nepal (FECOFUN); the Forest Peoples Programme; Forest Trends; the Foundation for People and Community Development; Intercooperation; the Samdhana Institute; Tebtebba (Indigenous Peoples’ International Centre for Policy Research and Education); the Center for People and Forests (RECOFTC); and the World Agroforestry Centre (ICRAF). RRI’s overall program is supported by the following donors: the UK Department for International Development (DFID); the Finnish International Development Agency (FINIDA); the Ford Foundation; the Norwegian Agency for Development Cooperation (Norad); the Swedish International Development Cooperation Agency (Sida); and the Swiss Agency for Development and Cooperation (SDC).

Cover illustration: © Aldo di Domenico 2011 The opinions expressed in this report are those of the author, and can in no way be taken to reflect the official views of the International Land Coalition, its members or donors. ISBN 978-92-95093-20-1

© 2011 the International Land Coalition

Large acquisition of rights on forest lands for tropical timber concessions and commercial wood plantations Prepared by: Augusta Molnar, Keith Barney, Michael DeVito, Alain Karsenty, Dominic Elson, Margarita Benavides, Pedro Tipula, Carlos Soria, Phil Shearman and Marina France January 2011

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Acknowledgements ILC wishes to thank the following donors, whose support made possible the research under the Commercial Pressures on Land Initiative: Canadian International Development Agency (CIDA) European Commission (EC) Kingdom of the Netherlands – Ministry of Foreign Affairs International Fund for Agricultural Development (IFAD) Swiss Agency for Development and Cooperation (SDC) The views expressed herein can in no way be taken to reflect the official opinion of these donors.

ILC would appreciate receiving copies of any publication using this study as a source.

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Foreword The International Land Coalition (ILC) was established by civil society and multilateral organisations who were convinced that secure access to land and natural resources is central to the ability of women and men to get out of, and stay out of, hunger and poverty. In 2008, at the same time as the food price crisis pushed the number of hungry over the one billion mark, members of ILC launched a global research project to better understand the implications of the growing wave of international large-scale investments in land. Small-scale producers have always faced competition for the land on which their livelihoods depend. It is evident, however, that changes in demand for food, energy and natural resources, alongside liberalisation of trade regimes, are making the competition for land increasingly global and increasingly unequal. Starting with a scoping study by ILC member Agter, the Commercial Pressures on Land research project has brought together more than 30 partners, ranging from NGOs in affected regions whose perspectives and voices are closest to most affected land users, to international research institutes whose contribution provides a global analysis on selected key themes. The study process enabled organisations with little previous experience in undertaking such research projects, but with much to contribute, to participate in the global study and have their voices heard. Support to the planning and writing of each study was provided by ILC member CIRAD. ILC believes that in an era of increasingly globalised land use and governance, it is more important than ever that the voices and interests of all stakeholders – and in particular local land users - are represented in the search for solutions to achieve equitable and secure access to land. This report is one of the 28 being published as a part of the global study. The full list of studies, and information on other initiatives by ILC relating to Commercial Pressures on Land, is available for download on the International Land Coalition website at www.landcoalition.org/cplstudies. I extend my thanks to all organisations that have been a part of this unique research project. We will continue to work for opportunities for these studies, and the diverse perspectives they represent, to contribute to informed decision-making. The implications of choices on how land and natural resources should be used, and for whom, are stark. In an increasingly resource-constrained and polarised world, choices made today on land tenure and ownership will shape the economies, societies and opportunities of tomorrow’s generations, and thus need to be carefully considered. Madiodio Niasse Director, International Land Coalition Secretariat

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Table of contents Acknowledgements Foreword Table of contents List of figures, tables, and boxes Acronyms Executive summary

ii ii iv vi vii ix

Introduction

1

1 Concessions – Global and regional overview

2

Africa region Latin America region Asia region

2 Status of concessions in key countries Key Asian countries Key African countries Key countries in Oceania and Latin America

3 Revenues, impacts, and benefit streams Cambodia Malaysia Francophone Central and West Africa Indonesia Peru

4 4 5

6 6 13 16

19 19 20 22 25 26

4 Social benefits and social terms of contract

27

5 Overlaps of timber concessions with indigenous territories and local communities

30

6 Expansion of independently verified certification systems and legality of trade

33

Impacts of EU and USA demand for timber legality on behavior of concessionaires Status of FSC certification

33 34

7 Trends and tendencies

36

8 Regional issues and challenges

37

iv

9 General observations

39

10 Conclusions and recommendations

42

References Annex 1: Table of concession data from 2008 From exclusion to ownership Report, RRI – Concession Annex 2: Table 1 sources

43 47 51

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List of figures, tables, and boxes Tables Forest concessions in nine selected tropical producer countries Indonesia’s active production forest concessions, 2001-2009 Community plantation areas, Indonesia Community management units authorized, Indonesia (data up to August 2009) Planned expansion community management under REDD+ Number of national and provincial economic land concessions for timber, Cambodia Community forestry and pre-moratorium concessions Forest concessions by administrative departments in Peru Official government forest revenues, Cambodia (ELCs), 19922001 States with relatively small forest areas or relatively low expected revenue from forestry and negative revenue, Malaysia Gross revenue, net revenue, and expenditure for timber producing Malaysian states Government forestry revenue (concession royalties, taxes) from industry in nine Central and West African countries Forestry non-tax revenue in Indonesia

vi

3 6 7 8 9 11 12 17 20 21 21 22 25

Acronyms ANP

Protected Natural Areas

BBP

Permanent Production Forests

CAR

Central African Republic

CEB

Compagnie Equatoriale du Bois

CF

Community Forest

CFA

Compagnie Forestière des Abeilles

CIB

Congolaise Industrielle du Bois

CoC

Certificate of Custody

DGFFS

Dirección General Forestal y de Fauna Silvestre

DLH

Dalhoff Larsen and Horneman Group

DR

Reforestation Fund in Indonesia

DRC

Democratic Republic of Congo

ENRA

Enzyme Refiners Association

ELC

Economic Land Concession

EU

European Union

FLEGT

Action Plan for Forest Law Enforcement, Governance and Trade

FAO

Food and Agriculture Organization

FFI

Fauna and Flora International

FSC

Forest Stewardship Council

GDP

Gross Domestic Product

GOI

Government of Indonesia

GPS

Global Positioning System

Ha

hectare

HKm

Hutan Kamasyarakatan

HPH

Hak Pengusahaan Hutan

IHH

Iuran Hasil Huta

IHPH

Iuran Hak Pengusahaan Hutan

IHTR

Izin Hutan Tanaman Rakyat

IIAP

Instituto de Investigaciones de la Amazonía Peruana

vii

IIKR

Izin Industri Kayu Rakyat

INEI

Instituto Nacional de Estadística e Informática

IPK-MA

Izin Pemungutan Kayu Masyarakat Adat

LSLA

Large-scale Land Acquisition

NTFP

Non-timber Forest Product

NGO

Non-governmental Organization

PFA

Protected Forest Areas

PSDH

Provisi Sumber Daya Hutan

REDD+

Reduced Emissions from Deforestation and Forest Degradation

RGC

Royal Government of Cambodia

RRI

Rights and Resources Initiative

SERNAP

Servicio Nacional Áreas Naturales Protegidas

SFM

Sustainable Forest Management

SICNA

Sistema de Información sobre Comunidades Nativas de la Amazonia

TRC

Transformation REEF Cameroon

UN

United Nations

USA

United States of America

USD

United States Dollars

VPA

Voluntary Partnership Agreement

WWF

World Wildlife Fund

viii

Executive summary °

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The data on forest management and use within industrial timber concessions continues to be extremely poor for the forested tropical countries, including those nine studied in depth in this update. A large percentage of tropical forest areas are in transition – not actively being logged or planted – and are in a state of open access. Except for a small percentage of total timber concessions that are independently certified as complying with a minimum set of standards, there are little reliable data on the impact of logging activities on forest resources or on revenue streams. In a number of cases, governments continue to allow concessions despite negative revenue streams to the formal state apparatus. Global trade and investment in forestry is increasing, but there is no evidence that globalization, in and of itself, will support a significant increase in the adoption of independent certification standards for legality or sustainable forest management. There is little evidence to support the notion that those concessionaires now focused on the export of raw or minimally processed timber will eventually be attracted to invest in value-added domestic processing at a significant scale. This raises challenging issues in terms of the debate over new large acquisitions of rights to forest lands for hydrocarbon and mineral exploration and extraction, commercial tree and perennial or annual crop plantations, or new infrastructure. Implicitly, the debate around forest-land concessions has assumed that the investor holds a genuine interest in securing long-term access to commercially valuable resources. However, what is clear from this review is that most forest lands allocated to large-scale concessionaires are not managed as legally mandated, or in a sustainable manner. As such, formal forestry concessions may be as great a contributor to degradation and deforestation as completely unallocated, open access forests. There is limited consistency between the written contractual arrangements and what is implemented on the ground in the forest lands allocated or designated for allocation. The discrepancies show up in the location of the concessions; volumes extracted and revenues generated from the concessions; profitability; impact on forest sustainability, including future regeneration of commercial timber species; overlaps with communities and indigenous peoples; under-compliance with social and environmental regulations, including requirements for local consultation and participation; and the protection of livelihoods and cultural and social values. There are indications that some of the new timber plantation contracts awarded on loggedover forests in Indonesia, Cambodia, and Laos are disguised logging operations, with limited sharing of the returns of such development with State trustees. The total area of industrial scale timber concessions is declining overall in the countries studied, except Laos, due to reallocation of degraded, logged forests to other concessions, reclassification of degraded or deforested lands as non-forest lands, recognition of local and indigenous peoples’ rights to forest lands, and cancellation of concessions without reallocation due to the stricter application of contract agreements and laws and regulations. Site evidence indicates that a significant area of logged over forests will not sustain logging over the longer term and that many of these forests are converted over time to other uses.

ix

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x

Despite the lack of clear evidence that the concession business model is advantageous relative to other forest management models, in Africa and Asia industrial concessions continue to be the favored system to allocate unlogged production forest by national and provincial governments. This is despite evidence that logging has not proved sustainable in numerous instances – even with sustainable forest management (SFM) –, that contract cycles are not based on the forest’s ecology, and despite increasing local claims to manage or control forests. There is limited information regarding the non-timber forest product production, volume removed, value or value chains, and benefit streams, yet this is seldom a serious factor in policy decisions to retain forest lands under timber concessions or not. Timber concessions, including plantations, continue to be significantly larger than forest lands in community ownership or administration in Asia and Africa, though not in Latin America. In eight tropical countries with updated data, there are 258.94 million hectares of concessions on forest lands and 120 million hectares for timber, compared to 23.21 million hectares for use or owned by communities. REDD dialogues have increased interest in promoting locally controlled forestry where population pressures are evident. Africa continues to have the highest percentage of timber exported as round or unprocessed logs (20% of production, compared to 11% for Asia and less than 1% for Latin America). Higher-value processing of wood in African producer countries is quite limited. For example, although Gabon recently implemented a logging ban, evidence from existing concessions indicates that sawn wood processing is not profitable; the ban may, therefore, result in a shift to less responsible concession operations as operators move to reduce costs. Trends in installed processing capacity in Africa have been generally flat, with most investment installations established decades ago. This belies emerging evidence of more significant investments in wood processing technology by emerging economies, such as China, India, Vietnam and some countries in the Middle East. Domestic and regional market demand for finished products is growing throughout the tropical countries, but this demand has a very uneven impact on the extent and nature of the timber concessions. In Africa, most regional incremental demand for pulp, paper, and finished wood products is being supplied by imports from China and other countries, not by Central or West African producer countries. In Asia, commercial plantations are the increasing source of domestic product supply – established in logged over forests or bare areas controlled by the State. There are considerable overlaps between forest concessions, local customary rights, and indigenous peoples’ claims to forest lands, but it is extremely hard to find nationwide data on the extent of this overlap. In Cameroon, the State gazetted, permanent forest domain overlaps with the settlement or use areas of at least 2,638 communities, including indigenous communities. There are 51 overlaps with 581 concessions in the Peruvian Amazon and titled native community land, indigenous peoples' territorial reserves or multi-use protected areas. Many community ownership claims are in flux due to population growth and internal migration, as in Cambodia,

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and there are few protections for untitled communities against large land acquisitions. Community forestry programs continue to expand very slowly in Asia and Africa, although there may be opportunities of expanding these through REDD+ funding, but there is very little planning around existing capacity for government programs to implement their targeted transfer or recognition of forest rights. Brazil has worked with local communities to expand its recognition of extractive reserves and the areas recognizing indigenous peoples' forest rights and territories. Indonesia has ambitious plans to expand community forestry, but implementation is slow. In the absence of secure tenure rights of indigenous peoples and local communities, there are problems of open access, both in areas no longer in active concessions (16.4 million hectares in Indonesia) and in indigenous reserves and titled areas where log traders operate in the Amazon. There are increased pressures from commercial agriculture and continued overlaps for mining and oil and gas exploration and exploitation. There is much less sustainable forestry than promised by existing forest management plans and logging contracts. Even in areas where Reduced Impact Logging is practiced there is serious forest degradation, and many areas designated for fixed cutting cycles cannot sustain an economic second or third harvest following the agreed cycle. Many concessions continue to operate as short-term windfalls to concessionaires and government revenues. States differ in their ability to capture these profits, with weaker States ceding most profits to concessionaires and stronger States appropriating a greater portion. And, clearly, issues with forest land concessions are shaped by broader problem-governance contexts in many developing States. Forest lands that have been previously logged have a poor track record of sustainable regrowth and management. Other powerful interests often claim these areas for mining, commercial agriculture or infrastructure expansion, or agricultural settlers or pastoralists come to occupy them. Asner et al (2009) cited in Global Witness estimates from figures for the Brazilian Amazon, for example, are that 17% of the forest area ‘selectively logged’ in 2000 was completely cleared by 2002 and a third of this forest area was completely cleared by 2004.

xi

Introduction The following report synthesizes the existing data on large acquisition of forest land rights through timber concessions in developing forested countries, using the information from Rights and Resources Initiative’s (RRI) 2007 and 2008 analyses of forest ownership and administration. For a selected set of countries with high dependence on industrial-scale forest concessions, updates were possible because of the availability of new data. The countries, selected on the basis of availability of updated information at national or provincial level, were: Cambodia, Indonesia, Liberia, Malaysia, Papua New Guinea, and Peru in Asia and Latin America and Cameroon, Central African Republic, Congo Brazzaville, Democratic Republic of Congo (DRC), Gabon, Ghana, and Côte d’Ivoire. Compared to other developing countries as a whole, concessions are important to these countries’ forest economies. The total concession area is about half of that area studied in the earlier RRI tenure assessment of 15 countries with concessions (re-compiled in Annex 1 of this report). Data has been provided by RRI from the recent forest tenure studies and database (compiled by Augusta Molnar, Michael de Vito, and Jeff Hatcher) and updated with inputs from Dominic Elson, Phil Shearman, Keith Barney, Carlos Soria, Pedro Tipula, Alain Karsenty, and Margarita Benavides. ‘Timber concessions’ are tracts of land that governments grant to industrial firms or other groups for a stated purpose and a limited period of time. Concessions on forest lands are often granted to industry for logging, harvesting non-timber forest products, mining, exploration for and exploitation of oil and gas, and agricultural production. In some cases, concessions for community forestry or for conservation provide legal protection to forest resources and the livelihoods dependent on them. This analysis has concentrated on concessions granted by governments to industrial firms or private investors/firms in natural or planted forests or for establishment and management of new timber or nontimber forest product plantations. The minimum unit of analysis is 5,000 hectares, as data is not available in any of the countries selected for any significant smaller scale analysis. It does not specifically include community forestry or conservation concessions, except where data was offered by those consultants undertaking the country updates.

1

1

Concessions – Global and regional overview Table 1 and Figure 1 below present the area of concessions awarded on forest lands in Africa, Asia, and Latin America with available data. This information on concessions cannot be assumed to be complete, due to the poor availability of data, yet the basic situation is evident: industrial concessions are orders of magnitude larger than the areas legally recognized as designated for communities and/or indigenous peoples. In the nine countries with data, there are at least 258 million hectares of concessions or unallocated concessions on forest lands, 139.5 million hectares for timber exploitation, compared to 23.21 million hectares of forest land designed for use or owned by communities, a ratio of more or less 10:1. A comparison of 15 forested countries RRI compiled in 2008, and updated here, shows that total area allocated to industrial concessions in forested lands was 412 million hectares, of which 188 million hectares were allocated specifically for timber production. This compared to 142 million hectares designated for or owned by communities (117 million hectares excluding Papua New Guinea, where all forest land belongs to communities), which were reported for 15 countries in the 2008 RRI forest tenure assessment (Annex 1). RRI found that the ratio of industrial concessions to forest land designated for or owned by communities is 3:1, or closer to 4:1 if Papua New Guinea is excluded from the equation (2008). Even in the nine updated countries presently studied, data for timber concessions is dynamic. For example, there are 3.4 million hectares of inactive timber concessions in Cambodia, held by 12 companies, that still require formal cancellation; Indonesia has started to allocate forest lands to community plantations and management; and DRC has reduced the official area of approved timber concessions to less than 10 million hectares but not yet re-designated the category or allocation of the areas being reincorporated into the State domain. Gabon has a large area allocated to timber, but with the new logging ban, it is not clear how concessionaires will reposition themselves. There are overlaps in many of these countries between timber, community areas, and other extractive concession areas, particularly in Peru for productive forest areas and oil and gas exploration.

2

Table 1: Forest concessions in nine selected tropical producer countries 1 Total of forest lands designated for and owned by communities and indigenous peoples (million hectares) Comments

Country i

Forest lands under concession (million hectares)

DRC

22.91 (timber) ii 6.90 (diamond) iii 3.70 (mining) iv Total: 33.51

CAR

3.40 (timber) v 1.97 (diamonds) vi Total: 5.37

Congo

7.36 (timber) vii 1.28 (copper and diamond) viii Total: 8.64

Gabon

6.98 (timber) ix 9.90 (diamonds) x 0.23 (gold) xi 1.81 (oil and gas) xii Total: 18.92

Cameroon xiv

4.95 (allocated timber) 1.15 (unallocated timber) 0.30 (gold) xv Total: 7.26 1.14

Indonesia

32.7 (allocated timber) xvi 37.78 (unallocated) xvii 0.23 32.77 (onshore oil) xviii (CFM/plantation Total: 102.62 planned 2010 = 11.3)

Cambodia

Economic Land Concessions (timber) (0.89) xix Pre-moratorium concessions (3.3) xx Total: 4.19

0.18

3.3 million ha of forest land are from pre-moratorium concessions, the majority of which should be cancelled eventually due to agreement violations

Malaysia

Total allowed logging area: 0.51 xxi

Total reported logging area: 1.00

May not reflect area officially under concession

Peru

7.4 (allocated timber) xxii 10 (unallocated timber) xxiii 56.13 (onshore oil exploration) xxiv Total timber: 17.4 Total: 73.53 21.2

Total

Total timber: 139.32 Total forest: 258.74

0.00

Timber concessions allocated to companies from Liechtenstein, Portugal, Switzerland, Lebanon, Belgium, Italy, China, and India

0.00

Timber concessions allocated to companies from China, Lebanon, France, and Malaysia

0.46

Timber concessions allocated to companies from Germany, Denmark, China, Italy, and Lebanon

0.00

Timber concessions allocated to companies from France, Switzerland, Malaysia, China, Portugal, Italy, and Denmark. xiii Most oil and gas is offshore

Timber concessions allocated to companies from China, France, Italy, Lebanon, and the Netherlands Concession blocks average 85,000 ha, although in Papua the average is 200,000 ha

17.2% of the Amazon has been legalized for indigenous peoples and 9.9% of the Amazon is pending legalization. Oil exploration overlaps with other concession and community areas

23.21

Sources: See Annex 2

1

Updated from Sunderlin, Hatcher and Liddle’s 2008 report by RRI with new country data. A full list of references, according to the Roman numeral endnotes, is provided in Annex 2.

3

Africa region For industrial timber activity, the concession regime prevails in Africa. Concessions are granted for periods ranging between 15 years (renewable) in Cameroon, to 99 years (the maximum legal lifespan of a company) in the Central African Republic. There are more stringent standards with timber concessions (silvicultural rules, local wood processing obligations, etc.) than for agricultural large-scale land acquisition (LSLA). Forest concessions can be very large, and there are currently concessions of more than 1 million hectares in Congo and DRC on one single block. If one considers the cumulated area a group can concentrate in the same country, this can go up to 5 million hectares (DRC). In contrast, recent acquisitions of arable lands are generally on smaller scale, and rarely go beyond 12,000 hectares. The widely publicized unrealized Daewoo deal in Madagascar was on 1.2 million hectares and this large size is one explanation of its failure. Forest concessions are larger since the land use is different from agricultural land: low extraction rates on large areas are common practice. Thus, scale is one criterion marking a difference between large-scale arable land acquisitions and timber concessions, though not a key one. The announcement by some media (e.g. the April 15 2009 telegram from Reuters) of a 10 million-hectare deal between Congo-Brazzaville and the (white) South African farmers was simply misinformation: the deal is actually for 200,000 ha of arable land, with degraded infrastructure, in the Niari department, which was conceded in the 1980s to foreign agricultural companies and abandoned due to the civil war and the subsequent insecurity.

Latin America region Compared to other tropical forested countries, Latin American countries have significantly reduced the area under industrial timber concessions, both in natural forests and plantations, with the greatest concentration of concessions still in Peru. The absolute area of public forest land administered by state governments in eight South American tropical forest countries has decreased from 453 million hectares in 2002 to 227 million hectares in 2008, and now represents 36% of their forest estate. This is the result of increased recognition of indigenous peoples’ ownership claims to territories or collective indigenous lands (Native Communities in Peru) or reservation of indigenous peoples’ territories for their administration as culturally defined protected areas.

4

Asia region In Asia, large allocations to industrial timber and tree plantation concessions persist in State-claimed forest lands, and allocations of former timber concessions to other commercial plantations including palm oil, rubber, annual crops, among others, are increasing. The area under timber concession area is changing, with greater concession allocation to new plantations including the reallocation of logged over areas, a result both of policy shifts and declines in available primary forest area. Only in Laos and Cambodia are there significant new concessions being created, primarily in agroindustrial plantations. Decentralization policies affect forest land allocation in Indonesia, as provincial authorities now have an incentive to fragment blocks into denuded lands for community plantations and logged over forest to private contracts. While many countries in the Southeast Asian region are large timber exporters, in Malaysia and Indonesia high domestic demand exists for timber, which can also establish significant pressures on forests. In Lao People’s Democratic Republic (PDR), concessions can be State-private sector joint ventures, supplying raw materials and processed products to the key regional markets of China, Vietnam, and Thailand.

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2

Status of concessions in key countries Key Asian countries Indonesia Indonesia’s forest management system includes production forest concessions, industrial plantations, community plantations, and community forests (with the subset of village forests). In theory, Indonesia’s production forest concessions are designed to promote sustainable timber production. Production forests are further sub-classified as either permanent production forests or limited production forests. Referred to as HPH (Hak Pengusahaan Hutan), production forests are usually granted in blocks averaging 85,000 hectares – though in Papua the average size is 200,000 hectares. The current number of concessions in Indonesia, which has declined over the past decade, is 299, of which 248 are active. Concessions may be inactive if the company has been liquidated, the permit has been withdrawn, or the permit has only recently been received. In 2001 there were 400 concessions comprising 46.2 million hectares. By 2005 this had fallen to 257 active units with 24.8 million hectares; little has changed since 2005. There are reportedly 16.4 million hectares of ‘open access’ production forest in the former HPH plots (Forestry Ministry 2007), where illegal logging and the absence of any management plan continue to degrade natural forest areas. Table 2: Indonesia’s active production forest concessions, 2001-2009 Year

# concessions

# active

Total hectares

2001

400

NA

46.2 million

2005

257

NA

24.8 million

2009

299

248

25.3 million

NA= not available

Industrial timber plantations were originally planned as a way to sufficiently supply the pulp, paper, panel, and plywood industries without clear-felling natural forests. Tax collected from this was to be reinvested in plantation development. In practice, such plantations have actually fueled forest destruction to open up new land, which has not been developed and remains degraded. Beset by massive corruption, only 30% of the 10 million hectares of cleared forest were actually converted to plantation.

6

In addition to production forests and industrial timber plantations, community plantations were conceived as a means to accelerate plantation development through encouraging communities to invest in developing timber lots either individually, as cooperatives, or as a joint venture with a private company (Elson 2010). The community plantations were also to be established with the intent of supplying the pulp and paper industries; however, as it is currently set up the scheme encourages local politicians to allocate abandoned plantations with bare land for communities and stocked forest for investors. The goal for the community plantations was ambitious, with an intended 1.2 million hectares established by 2009 and 5.4 million hectares established by 2016. The 5.4 million hectares are an important part of the overall plan to have 9 million hectares of new plantation development by 2016, along with 3.6 million from industrial timber plantations. The reality, however, is far from the stated goal. Table 3 below illustrates the disparity between areas identified as suitable for community plantations and the number of permits issued. Although 350,000 hectares were identified as suitable plots by local governments, currently only around 21,000 hectares of community plantations have actually been approved (Elson 2010). Based on the current rate, Indonesia will have 108,000 hectares of community-managed plantations by 2016, falling short of the stated goal by 5.2 million hectares. This shortfall will likely increase pressure on natural forest areas to make up the difference in supply. Table 3: Community plantation areas, Indonesia Area identified Permits issued

Cumulative shortfall

Year

Community plantation target

2007

200,000

0

0

200,000

2008

400,000

150,554

8,794

591,206

2009

600,000

197,169

12,363

1,178,843

Community Forestry Management Units are issued for 25-35 years. Since these areas are not explicitly designed for timber production, they do not have the strategic importance of community plantations (Elson 2010). Timber extraction is mandated in production areas and non-timber forest product (NTFP) collection is allowed in protected areas. The intention is to support restoration of damaged forest areas. In practice, however, community forestry programs have been small-scale and unevenly applied. Ongoing conflicts between traditional communities and concessionaires, as well as uncertainty over the meaning of customary laws, have contributed to the lack of progress. As with community plantation areas, there is a serious discrepancy between areas identified as suitable for community forests and permits issued, as outlined in Table 4.

7

Table 4: Community management units authorized, Indonesia (data up to August 2009) HKm 2 Units

Province

Area identified

Permits issued

7

Bengkulu

2,068

0

8

Lampung

22,189

5,718

14

DIY

1,157

1,238

17

Bali

150

0

18

NTB

4,068

752

19

NTT

1,248

0

27

Sulawesi Tenggara

500

0

31,380

7,708

TOTAL

Village Forests are a variant of the community forest management scheme. They are allocated under the control of the village administration, within narrowly defined limits. Thus far, this scheme seems to have been largely ignored by provincial offices, with only one small area in Jambi being granted a permit for 2,356 hectares (Elson 2010). Since the data in Table 4 was collected, a 2007 law was drafted in order to address many of the problems by issuing new forms of community leases. According to a recent postCopenhagen report by the Forestry Ministry (2010), part of the carbon mitigation strategy in the land use sector will be to stimulate reforestation. The report claims that the targets for certain types of community forest will be as follows:

2

HKm is the acronym for the Bahasa Indonesia term Hutan Kamasyarakatan, the social forestry program

8

Table 5: Planned expansion community management under REDD+ Community plantation (HTR 3) and Year

Community forest (HKm)

Village forest (Hutan desa)

industrial plantation (HTI 4) (not disaggregated)

2010

400,000

100,000

450,000

2011

400,000

100,000

550,000

2012

400,000

100,000

500,000

2013

400,000

100,000

600,000

2014

400,000

100,000

550,000

2015

400,000

100,000

450,000

2016

400,000

100,000

550,000

2017

400,000

100,000

500,000

2018

400,000

100,000

600,000

2019

400,000

100,000

550,000

2020

400,000

100,000

500,000

Total

4,400,000

1,100,000

5,800,000

The report gives no indication of how these targets might be achieved, nor does it acknowledge the failure to roll out community forestry over the past ten years.

Malaysia Malaysia’s two largest timber-producing states are Sabah and Sarawak, located in Borneo. The revenue from logging in these two states appears to be a “one off” gain, as the “de facto if not official” policy on concessions seems to be the logging of primary forests followed by conversion to agriculture (Shearman 2010b). This conclusion is supported by a strong correlation between the decline in forestry revenues and an increase in hectares under oil palm, which suggests increasing annual deforestation and replacement with oil palm plantations. This revenue model appears to break down in the states with smaller forest areas: the 2008 Malaysian Auditor General’s Report states that relatively small forest areas receive little revenue from logging or, as is the case in the states of Sembilan and Kedah, actually lose money.

3

HTR is the acronym for the Bahasa Indonesia term Hutan Tanaman Rakyat, which is the community plantation program.

4

“HTI” stands for Izin usaha pemanfaatan hasil hutan kayu pada hutan tanaman industri dalam Hutan Tanaman, which is the usage permit for forest timber products from industrial plantations.

9

Although set up with the intention of protecting natural forest area, abuse of the permanent forest reserve has led to the scheme actually putting pressure on the forest estate. The government is allowed to take parts of the permanent forest reserve area and convert it to other uses, so long as they replace it with an equivalent area from outside of the reserve. The permanent minimum has declined, however, as in almost all states the forestry administration has failed to replace the equivalent amount of forest, if any at all (Shearman 2010). In the case of Malaysia, significant pressure on the natural forest area comes from the corruption and abuses in the logging industry. In Sarawak, for example, there is evidence that the annual quota for the amount of forest that may be logged has been substantially breached (Ibid.). Other problems with forestry administration include concessionaires allowed to go beyond their designated area, permit irregularities, subverting the required environmental assessment, and documented water and soil pollution from logging. Some states have an annual logging quota, which is often ignored, especially in Sarawak, where quotas were significantly breached.

Cambodia After rampant illegal logging throughout the 1980s and 1990s, the Royal Government of Cambodia (RGC) established a moratorium on industrial logging contracts in 2001. This resulted in the issuing of a full ban on logging by forest concessionaires who did not hold the required licenses, and who did not hold approved forest management plans and environmental/social impact assessments (Barney 2005). As of 2009, the Forestry Administration states that there are seven primary spatial forest management models under development. These include the vestiges of the forestry concession model; annual bidding coupes; protection forests and protected areas for biodiversity conservation, wildlife management and ecotourism; community forestry; commercial community forestry; partnership forestry; and contracted forest managers for new plantations established using the provisions of the Economic Land Concessions Sub Decree.5 Most economic land concessions (ELC), established for a 70-year term, seem to be intended for plantations rather than direct logging. However, Global Witness asserts that many concession schemes are disguised logging operations. 6 Large ELCs are administered federally, although provincial governors have also issued small ELCs without

5

Cambodia Forestry Administration (2009). The Forest Carbon Partnership Facility (FCPF) Readiness Plan Idea Note (R-PIN) Template. www.forestcarbonpartnership.org

6

On its website, Global Witness argues that “Economic land concessions, i.e. concessions to create plantations, are now the primary vehicle for industrial logging in Cambodia.” (http://blooddiamondaction.org/pages/en/threats_to_forests.html)

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approval of the federal government. There are currently 85 operational national ELC’s covering a total area of 965,690 hectares (Table 6). Table 6: Number of national and provincial economic land concessions for timber, Cambodia National and Provincial Contracts

# contracts

ha

National Timber oriented ELCs

38

642,593

Total National ELCs

65

845,920

Total Provincial ELCs

47

< 1,000 each

As of 2008-2009

Since 2001, illegal logging has remained an ongoing problem, although the volumes of timber products moving across Cambodia’s borders have sharply reduced from the peak years of the late 1990s. 7 To date, with the recent exception of Cambodia’s Cherndar Plywood Mfg. Co., owned by the current head of the Cambodia Timber Industry Association, none of the remaining logging concessionaires has been successful in meeting Cambodia’s required forestry standards, which would allow for a resumption of legal, concession-based forest harvesting. At the same time, not all of the original logging concessions issued through the anarchic logging period of the 1990s have been fully revoked, indicating the enduring political power held by a small number of elite officials and allied concessionaires (Barney 2010). The general effect of this situation is a degree of policy drift in Cambodian forestry, with unclear or highly contested tenure and extraction rights often limiting the ability of any actor (private sector, the State Forestry Administration, or local communities) to introduce effective, value-enhancing management and conservation systems. The Cambodian government is making progress but it remains a painstaking and uneven process. The most economically powerful actors, particularly a new breed of private agri-business plantation investors holding ELCs, are often able to claim extensive de facto authority over forestlands. With regards to community forestry, the Forestry Administration stated its commitment to put 20% of the Permanent Forest Estate under Community Forestry Agreements by 2020. Despite this commitment, the application process is much more difficult than for an ELC. Of a reported 264 community forestry projects active across the country, only 94

7

Recent estimates from Forest Trends (unpublished manuscript) indicates that the volumes of Cambodia’s timber exports have fluctuated between 200,000-400,000 m3 (RWE) annually between 2000-2007; with the estimated values of $50-$80 million per year. These estimates do not include domestic consumption.

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have been awarded official agreement status as of May 2010. Another 200 community forestry sites are somewhere in the approval pipeline. ELCs remain opaque, ,although the approval process appears to be more streamlined and open to manipulation than community forest sites. As shown in Table 7 below, there were 12 pre-moratorium logging concessions, all but one of which have been cancelled; this final remaining concession should be cancelled as well under the existing rules. Table 7: Community forestry and pre-moratorium concessions Concession contracts

# contracts

hectares

264

180,000

94

NA

As of 2010 CF Projects Active CF Awarded with official agreement status In the approval pipeline

200

As of 2009 Remaining Forest concession agreements Remaining forest concessions after assumed cancellations

12

3.4 million

1

103,000

NA=not available

Laos Several types of logging quotas applied in natural forest areas determine timber concession arrangements. These include timber quotas at the national, district, and local levels, as well as “harvesting rights to dead wood, timber harvesting to repay international debt obligations, harvesting related to development projects, military harvesting rights, and logging quotas linked to plantation development” (Baird 2010). By law, industrial scale logging may occur only within National Production Forest Areas (PFAs), which must have complete inventories and sustainable management plans. There are currently around 51 PFAs covering a total area of approximately 3 million hectares of State forest land. Of these, only eight, totaling 657,000 hectares have completed, with donor assistance, the necessary inventories and management plans. A report by Forest Trends brings into question official national totals and suggests that actual timber exports for the past several years far exceed the official quotas, which do not reflect the reality in the forest sector. Although there are no foreign companies with direct logging concessions in Laos, there are many joint ventures in which Lao investors handle administrative and regulatory procedures, while the management and labor are Vietnamese (To Xuan Phuc 2009). Plantation concessions, which have seen rapid growth since 2004, primarily involve foreign corporations investing in agribusiness and commercial tree crop development. Actual plantation development lags far behind the total amount of land ceded. Despite a 2009 national moratorium on land concessions over 1,000 hectares, numerous agreements well in excess of the limit have been issued. This situation reflects a struggle

12

between the central and provincial governments over discretionary power over foreign investment. Provincial and local administrations set up concessions with foreign investors without the knowledge of the central government, and vice versa, creating a chaotic concessions sector with poorly defined concession boundaries, a lack of information about what is actually happening in concession areas. Significant under-pricing of land leases and royalties from forest-land resources are almost assured. The lack of a national-level concession inventory has exacerbated both confusion and abuses, although the national regulator is currently completing a national concession inventory. Free, prior and informed consent is, however, non-existent in practice in the concession sector. At times, community consultation has been completely absent, and villagers learn about a concession project only when bulldozers appear on their land.

Key African countries Liberia Prior to 2003, total log and timber production per annum peaked at 1-1.3 million meters3, with a value approximately USD 100 million. This accounted for 50% of Liberian export earnings. Between 2003-2006 Liberia embarked on a forest reform process that has included the revocation of all previous timber concessions, a new forest policy, revised forest legislation, and the issuing of supporting regulations. The progress of the reforms led the UN Security Council to lift sanctions on commercial logging in Liberia in 2006. As of July 2009, a total of seven Forestry Management Concessions have formally been designated over 1.1 million hectares, with three awarded. However, a reanalysis of remote sensing and forest inventory data underlying the forest management and logging contracts for the seven concession areas shows that there are serious discrepancies. Revenues are expected to accrue from 15 million meters3, when there are probably not more than 4.2 million meters3 available, calling into question the financial viability of all but two of the concessions, as well as the decision to follow a 25year cutting cycle, as the second and third harvests are unlikely to yield the anticipated returns. This case is important beyond Liberia: the Liberian government has received advice from a wide range of international specialists, yet still reached the point of signing contracts for seven concessions where sustainability is deeply questionable. The national forest strategy, based on the 2006 Forest Law and newly passed Community Rights Law, defines three pillars: economic, social and environmental objectives. The forest strategy includes both community forestry and commercial forestry. Commercial forestry is the sustainable production of forest products and the development of viable forest-based industries. Revenues from forest taxes and charges can be used to finance public sector administration, and public goods and services. Community forest management includes the production of wood and non-wood forest products, plus the use of

13

forests for other purposes such as: cultural rituals, future farmland and settlement areas, and the protection of sacred sites. Community forest management focuses on the interests of people who live in and on the fringes of forest areas. Lastly, forest conservation includes biodiversity conservation and maintenance of the other environmental functions of forests. Although these pillars are formally established and uncontested, one of the points of contention between civil society and Liberian forest service has been the interpretation of the pillars. While the government perceives the economic pillar as endorsing industrial scale concessions, civil society lobbies for communities to be the economic and social pillars – managing forests for commercial as well as livelihood or environmental goals with improved market access and returns.

Francophone Central and West Africa Forest concessions cover approximately 50 million hectares in forested countries of Central Africa (namely Gabon, Congo-Brazzaville, Democratic Republic of Congo, Central African Republic, Cameroon, and Equatorial Guinea). This represents about a quarter of the dense forest area, which is mostly publicly owned. In West Africa, according to FAO data, around 23 million hectares are earmarked for production purposes (one third of the total forest area), but not all those areas can be considered concessions defined as land granted to companies with a long-term contract and a set of environmental and social obligations (Karsenty et al 2008). The size of the concessions, the demographic patterns, and the land allocation history are closely related. West African countries are more densely populated than those of the Congo Basin. They were developed earlier and at a larger scale, especially Ghana and Côte d'Ivoire. These two countries have a specific “cocoa development story” associated with unregulated and profitable logging that has led to fragmentation and further deforestation of these coastal countries. Liberia and Equatorial Guinea, less populated than other coastal West African countries, have been out of this cash-crop story and have faced the “resource curse,” linked to diamonds (Liberia) and oil (Equatorial Guinea). Such “development” patterns have favored large-scale forestry and the design of large timber concessions (Karsenty 2007).

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Graph 1: Central Africa: Comparison of forest areas gazetted for production, under management 140.000.000 120.000.000 100.000.000 Hectares

80.000.000 60.000.000 40.000.000 20.000.000 0 Dense forest area

Product ion forests

Area gazette d for exploita tion

Area under forest mgmt process

Mgmt plan submitt ed/ agreed

Cameroon

21.436.00

10.500.00

7.000.000

4.347.791

338.771

Gabon

21.190.00

19.000.00

12.000.00

6.368.424

117.606

Congo

25.914.00

12.000.00

10.000.00

7.114.835

2.302.160

DRC

124.566.0

87.000.00

22.000.00

9.679.639

0

CAR

8.227.000

3.300.000

3.000.000

2.993.954

1.255.166

Equitorial Guinea 1.843.000

1.250.000

1.250.000

54.990

54.990

Source: Molnar et al. 2010.

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Key countries in Oceania and Latin America Papua New Guinea In Papua New Guinea, although forest people are constitutionally endowed with property rights over the forests they live in, there has been a government-led process of allocating forests to industrial timber concessionaires, in which local people have had uneven participation. Historically, there has been frequent failure to obtain informed consent from the broad base of communities before logging, particularly where there is limited and weak community capacity, and community leaders themselves are not representative nor held accountable. This situation has, however, improved substantially, if incrementally, over the past few years. There have also been occasional human rights violations in cases where forest owners object to the practices of the industrial concessionaires. Promised financial benefits from logging are either not delivered, or if delivered, were too small. When these small benefits are delivered, often leaders do not put them to sustainable use. Sustainable forest management is by and large not taking place in extant concessions. In 2009, 1,809 thousand meters3 of timber derived from active forestry concessions covering 5.27 million hectares, were exported. In the recent past, approximately 1.5 million hectares of forest have been allocated to agriculture development projects, meaning that they can now, theoretically, be clear felled.

Peru Peru has several types of land designations including protected natural areas (PNA), permanent production forests (BPPs), indigenous territories, and mixed areas of State control or coastal communities. In the Peruvian Amazon there are 34 PNAs at the national level. These include ten national parks, three national sanctuaries, three national reserves, seven communal reserves, four forest protection areas, and six reserved areas. Taken together, they cover an area of 15,524,383 hectares, equivalent to 19.8% of the Peruvian Amazon (Soria 2010; Tipula and Benavides 2010). A new forestry law, enacted on July 16, 2000, established the creation of BPPs – areas the state intended for forest management. These areas are defined units approximately 5,000 acres (2,023 hectares), which are delivered to individuals in the form of grants up to 40 years, through a bidding process. A licensee may obtain a maximum area of 50,000 acres (or 20,234.282 hectares). In August of 2009, there existed 17,778,078 acres (7,194,532.913 hectares) of permanent production forests, 22.7% of the Peruvian Amazonia, of which 7,470,325 hectares had already been under concession (Tipula & Benavides 2010).

16

Table 8: Forest concessions by administrative departments in Peru Forest concessions Department Huanuco

Area granted (ha)

# Concessions

278,963.00

47

40,505.74

7

Loreto

2,762,619.29

252

Madre de Dios

1,272,387.57

85

8,644.00

1

556,706.38

37

2,542,056.86

152

7,461,882.84

581

Junin

Pasco San Martin Ucayali Total

Based on the information of the Information System on Native Communities (SICNA) that manage the Instituto del Bien Comun, which had recorded 1,509 native communities in 2009, there are 13.4 million hectares certified in favor of the Amazonian Indians. Of these, 10.6 million hectares are demarcated in favor of 1,232 native communities and 2.8 million hectares for five isolated indigenous territorial reserves. According to the same register, there are 277 pending demarcations of communities with an approximate area of 2 million hectares, an undetermined number of requests for extension of communities, with approximately 1.8 million hectares and six territorial reserves applied for 4 million hectares. In total, there are an estimated 7.8 million hectares awaiting legalization. Based on these figures, it is clear that the indigenous peoples of the Peruvian Amazon currently own, and/or have possession of 21.2 million hectares, which amounts to 27.1% of the Peruvian Amazon. In total, 17.2% of the Amazon is legalized for indigenous peoples, and 9.9% of the Amazon is pending legalization. Coastal settlers, businesses’ agroforestry and biofuel crops, and available State land make up 30.4%. In the Peruvian Amazon there are approximately 2,000 coastal settlements, mainly located on the banks of major rivers like the Amazon, Ucayali, Huallaga, and Maranon Low. These settlements are made up of descendants of indigenous peoples and migrants from a few generations ago. They practice subsistence forest use similar to those of indigenous settlements. There is no law that covers the communal titling so some of these settlements have recovered their ethnic identity in order to process titling as native communities. It is not possible to give figures on the number of settlers, the area they occupy, nor of the farms or agricultural enterprises because there is no register of land ownership in the Amazon.

17

In Peru, there is substantial overlap in the areas of habitation of indigenous peoples, remaining natural forests, and mineral ores. Beginning in the early 1990s, Peru experienced a dramatic increase in mining investment by national and international companies; mining (mainly gold and copper) accounted for more than half of foreign exchange income in 2005. The government gave easements to mining investors and in so doing rescinded protection of collective land titles. With the recent increase in the price of oil, the government of Peru has allocated about 80 percent of the country’s Amazon forests for oil and gas exploration.

18

3

Revenues, impacts, and benefit streams Cambodia Prior to the moratorium, concessions in Cambodia were essentially a free for all. In 19971998 an estimated 4.3-4.7 million meters3, of timber was harvested, 95% of which is thought to be illegal. In 1996, the World Bank (WB), United Nations Development Program (UNDP), and Food and Agriculture Organization (FAO) projected that potential forest revenues to the Cambodian government could exceed USD 100 million annually, based on a recorded timber production of USD 1.6-4.3 million meters3/year and assuming compliance with stipulated post-reform standards. These estimates were later downgraded to USD 40-80 million annually, as the extent of pillaging of forest resources became known. Actual government revenues ranged from USD 6-12 million a year between 1996-2001. Progress is being made, though slowly. Many of the concessions of the 1990s were indeed cancelled. The remaining 12 logging concessions of 3.4 million hectares are in effect inactive on the ground, as none have met the requirements for a legally approved environmental/social impact assessment, inventory and sustainable forest management plans, although their formal concession contracts have yet to be actually revoked by the central government. The Cambodian government progress in moving towards community-based forestry should be encouraged, however this process also needs to be expedited and accelerated by the authorities.

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Table 9: Official government forest revenues, Cambodia (ELCs), 1992-2001 Year

Revenue (USD, millions)

1992

0.8

1993

1.4

1994

33.5

1995

21.5

1996

10.4

1997

12.5

1998

6.0

1999

9.5

2000

10.6

2001

7.4

Source: Cambodia Ministry of Economy and Finance 2002, in Barney 2010.

Malaysia Data is only available for one of Malaysia’s two largest timber-producing states, Sabah, but can be used as an indication for the other, Sarawak, as well. Forestry revenues in Sabah have declined presumably because forest area has also declined substantially. According to the Auditor-General’s 2008 Report, in Sarawak 139,680 hectares of permanent reserves were lost between 2003 and 2005, with another 18,322 hectares depleted between 2006-2008. Between 1990 and 2008, close to a million hectares of permanent forest reserve were lost, with only 4.6 million hectares remaining.

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Table 10: States with relatively small forest areas or relatively low expected revenue from forestry and negative revenue, Malaysia

Sembilan

2006

2006

2008

TOTAL (2006-2008)

Gross Revenue

1,581,958

2,814,599

2,203,443

6,600,001

Expenditure (estimated)

5,683,288

6,198,081

6,309,826

18,191,195

-4,101,330

-3,383,482

-4,106,382

-11,591,194

Gross Revenue

3,232,105

3,466,585

9,441,184

16,139,873

Expenditure (estimated)

5,878,411

6,275,176

7,165,659

19,319,247

-2,646,307

-2,808,591

2,275,524

-3,179,374

Net revenue Kedah

Net revenue Penang

Perak

Gross Revenue

14,555,741

Expenditure (estimated)

19,131,929

Net revenue

-4,576,189

Gross Revenue

26,692,245

Expenditure (reported)

27,968,104

Net revenue

-1,275,859

Table 11: Gross revenue, net revenue, and expenditure for timber producing Malaysian states 2006-2008 All years

All annual

Gross Revenue

1,337,745,574

Expenditure (reported and estimated)

348,523,847

Net revenue

989,221,727

Gross Revenue

445,915,191.18

Expenditure (reported and estimated)

116,174,615.62

Net revenue

329,740,575.56

Source: Government of Malaysia, Auditor General’s Report, 2008, http://www.audit.gov.my

Forestry revenues from Sabah and Sarawak have shown a significant decline in revenue that seems to correlate with the land conversion to palm oil use.

21

Francophone Central and West Africa Central and West Africa include 50% of Africa’s forests and generate USD 1 billion in timber export value, and USD 2.7 billion in total wood export value. Forest taxes vary considerably by country: annually totaling between USD 3.85 million in DRC, USD 40 million in Cameroon and up to USD 50 million in Gabon. In terms of non-oil contributions, the direct added value provided by the formal forest sector ranges from 3.2% Gross Domestic Product (GDP) contribution in Cameroon up to 10% in Congo Brazzaville (with 6.4 % in Gabon). Table 12: Government forestry revenue (concession royalties, taxes) from industry in nine Central and West African countries Country

USD/yr

Year

Gabon

50,000,000

2004

Cameroon

40,000,000

2004

Congo

20,000,000

2005

CAR

10,000,000

2005

DRC a)