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Chatham House British Academy19 May 2014

Author nameDateChatham HouseBritish Academy19 May 2014

Lessons from Ghana, Indonesia, Malaysia and Papua New Guinea

Simon Milledge, IIED

Legality-related challenges faced by small-scale and community forest producers and enterprises

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Chatham House British Academy19 May 2014Characteristics of SMFEs

Flexible, highly diverse

Rapid job creation

Supply domestic markets and exports

Less capital‐intensive, high IRR

Address broader dimensions of poverty: resource rights, local wealth, entrepreneurship, social capital

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Chatham House British Academy19 May 2014

Learning from the pastWhy the focus on exports/formal sector?

Drivers of major initiatives

Emphasis on foreign exchange earnings

Visibility, number and ease of working

Emphasis on resources not people

Underestimated value

Political economy

Low ‘domestic demand’ signals

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Chatham House British Academy19 May 2014Assessing feasibility

Sociological

Economic

Environmental

Political

Administrative

Financial

Technical

Institutional

Remote

Industry

Operating

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Chatham House British Academy19 May 2014Sociological challenges

Perceptions: SMFEs, informal sector

Mistrust: bad advice, exploitation

Societal concerns: market signals

Poverty: illiteracy, labour availability

Social capital: underdeveloped

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Chatham House British Academy19 May 2014Economic challenges

Industry trends: domestic markets increasing relative to export markets, outpacing enabling environment

Resource availability: supply-demand mismatch

Competition: from imports

Subsidies: in an inadequate policy environment

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Chatham House British Academy19 May 2014Environmental challenges

Land degradation and declining quality of forest resources

Unsustainable harvest levels driven by:- high demand- excessive competition- major land allocations to large-scale enterprises- ineffective regulation- corruption- weak incentives for sound management

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Chatham House British Academy19 May 2014Political challenges

Unsupportive legal framework: insufficient focus on the laws that affect small-scale and community forestry – resource access & control

Insecure tenure: creates uncertainty

Illegality: chainsaw milling illegal but unenforceable, inequitable use of enforcement

Dispute resolution: lack of support

Regulatory inconsistencies: ineffective regulation, discretionary and discriminatory concession allocations, corruption

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Chatham House British Academy19 May 2014Administrative challenges

Regulatory processes: Unclear, complex, excessive - land allocation, business registration, trade permits, taxation, finance

Poor quality of data: land, informal sector, SMFEs

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Chatham House British Academy19 May 2014Financial challenges

Investment incentives: price incentives uncompetitive with other permitted land uses, high transaction costs, low security

Partnerships: low bargaining power

Sources of finance: financial management, collateral, start-up capital, risk profiles, terms, financing avenues

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Chatham House British Academy19 May 2014Technical challenges

Certification: low awareness, high cost, inflexibility of standards, lack of market-place differentiation

Information: markets, contracts, land allocation and financing

Forest management: plantation inputs, natural forest management

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Chatham House British Academy19 May 2014Institutional challenges

Capacity: finance, business skills, quality control, marketing, negotiation

Support: training, mediation

Organisation: cooperatives and associations

Collaboration: participation and partnership, less on recognition and decision-making authority

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Chatham House British Academy19 May 2014

•Market signals•Business skills•Organisation•Finance, cost

• Industry structure• Harvesting

practices

• Legal reform• Tenure• Formalisation• Enforcement

• Public perception• Livelihoods• Resource access• Benefits regime

Social acceptance Legality

Economic viability

Environmental sustainability

• Legality needs to be addressed together with wider priorities

• Includes structural reform/enabling environment aspects (c.f. coloured text) and more operational areas

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Chatham House British Academy19 May 2014Where focus is needed

Legality definition

Tree tenure and benefits regime

Inclusive management and benefit sharing

Financial instruments and incentives

Adequate training and improved product

Improved enterprise organisation

Trade chain partnerships