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of 125
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Linking Sustainable ForestProduct Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15thNovember, Kuala Lumpur
1
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Timber Certification and the Role
of ITTOEmmanuel ZE MEKA, Executive Director
International Tropical Timber Organisation
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Bruno Cammaert
FAO Regional Office for Asia and the Pacific
Bangkok
PEFC Week, Kuala Lumpur,
November 2013
State of forestry in the
Asia-Pacific Region
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Structure of the presentation
Forest cover change
Forest products
Forest use and tenure
Drivers of change
Progress towards SFM
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Forests of Asia and the Pacific - 2010
OF TOTAL LAND AREA
740,000,000ha
26%But only 0.2 ha
per person
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Forest area by sub-region2010
(million ha)
255
80214
191
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Forest Area Change 1990-2010
0
100
200
300
400
500
600
700
800
East Asia South
Asia
Southeast
Asia
Oceania Asia and
the Pacific
Area(million
hectares).
1990 2000 2010
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Primary forests
19% OF ASIA-PACIFIC FORESTS
30%OF SOUTH EAST ASIAS FORESTS
34% OF THE WORLDS FORESTS
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Other naturally regenerated forests
63%OF SOUTHEAST ASIAS FOREST
65%OF ASIA-PACIFIC FORESTS
60% OF THE WORLDS FORESTS
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Planted forests
16% OF ASIA-PACIFIC FORESTS
7% OF SOUTHEAST ASIAS FORESTS
7% OF THE WORLDS FORESTS
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Wood productsindustrial round wood
010
20
30
40
50
60
70
80
millionm3
Import & Export of Industrial Roundwood (Asia)
Import
Export
0
5
10
15
20
25
millionm3
Import & Export of Industrial Roundwood (Oceania)
Import
Export
ASIA
OCEANIA
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Wood productssawn wood, panels, and
paper
0
20
40
60
80
100
120
millionm3
Sawnwood Production
020
40
60
80
100
120
140
160
180
millionm3
Wood-based Panel Production
0
20
40
60
80
100
120
140
160
180
milliontonnes
Paper and Paper Board Production
Asia
Oceania
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Wood productskey trends
Significant decline in woodproduction in some countries
Exhaustion of forest resources
Concerns about environmental
protectionRegional focus Internationalfocus
Round wood exports Value-added exports
Emergence as a majorproducer/exporter of woodenfurniture
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Forest Tenure
Forest ownership in Asia-Pacific
Private
sector
4%
Owned oradministered
by
governments
68%
Owned or
designated
for use by
communities
28%
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Forest Use
32% primarily for theproduction of wood andNWFPs
20% multiple-usemanagement
14% Conservation ofbiodiversity
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Key drivers of change
What happens to forests and forestry is
determined to a large extent by whathappens outside the forestry sector and
by larger societal changes.
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Key drivers of change: Demographics
Asia-Pacificworlds mostdensely populated region
Population increase
3.6 billion (2005)4.2 billion (2020)
Greatest increases indensely populated
developing countries
Urban population38% people in urban areas (2005)
47% people in urban areas (2020)
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Key drivers of change: Economics
High growth rates increasing thedemand for food, fiber and fuel
Poverty rates will decline, but thenumber of poor will remain high
Recent reductions, export orientatedcountries hit hardest (e.g., Cambodia,Malaysia, Thailand)
Swelling middle class
Structural changes: Declining importance of agriculture in
income and employment Globalization Diminishing importance of the role of
governments
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Key drivers of change: Agriculture
Agricultural expansion is theprimary reason for forestconversion in many countries
A few agricultural cropsaccount for a largeproportion of deforestation
Rubber plantations are
expanding in forest areas
Oil palm plantations set tospread significantly
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Key drivers of change: Infrastructure
Road network expansiongreatest in moredeveloped countries
Impacts greatest in less
developed countries
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Key drivers of change: Politics and
policies
Greater democracy and political accountability
Transparency in functioning and accountabilityof public institutions and officialsrights toinformation
Forest governance under increased public
scrutiny
Demands for participation in public policydecision making
Shift from timber-focused management tomultiple-use management
Greater emphasis on ecosystem services andsustainable development
Potential contributions of forestry to green
economy
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Key drivers of change: Societal and
Environmental concerns
Local and national issues andactions
Global and regionalenvironmental
drivers:
International commitmentsand the outcomes of climatechange negotiations
Pressure from stakeholdersin the global forest resource
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Progress toward Sustainable Forest
Management
Improved stakeholder participation andlocal forest tenure mainstreamed intoNational Forest Programmes
Sustained efforts in
REDD+ readiness
FLEGT: demand and supply
Third party certification of
legality, SFM andChain-of-Custody
Payments for ecosystem services (PES)
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Thank you
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25
Snapshot of Forest Certification
in the Asia regionBen Gunneberg, Secretary General
PEFC Council
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Forest Certification Globally
26
90%
10%
72%
28%
10% of the world forests are certified (UNECE/FAO 2013) 28% of industrial roundwood production is certified
60% of total certified area is PEFC
60%
40%
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Forest Certification in Asia
27
98%
2%
2% of forests in Asia are certified (UNECE/FAO 2013) 8% of forests in Southeast Asia are certified (WB/Profor 2012) 11% of production forests in Southeast Asia are certified
(WB/Profor 2012)
8%
92%
11%
89%
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National progress in Asia
28
0
1
2
3
4
5
6
MillionHectares
CFCCSGEC
LEI
FSC
PEFC
Source: 2013, Certification systems published data
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MarketsChain of Custody
29
6609
775378
FSC
PEFC
SGEC
Total of 7768 CoC certificates in Asia
Source: 2013, Certification systems published data
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Reasons for optimism?
Legality & Governance issues being addresses at the highestlevels
FSC actively promoting certification in many countriesthroughout the regionresults are evident
PEFC working to scale up its Asia Promotions Initiative andexpand our presence in the region
Number of national certification organizations emerging with thepotential to achieve wider uptake in forests & markets
Companies continuing to make commitments to sourcingsustainable productsdriving up demand signals
WBCSD Declaration, Consumer Goods Forum, Unilever, etc
30
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THANK YOU
PEFC International10 Route de lAroport, 1215 Geneva, Switzerland
31
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Linking Sustainable ForestProduct Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15thNovember, Kuala Lumpur
32
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33
PEFC Stakeholder Dialogue 2013The EU FLEGT Action Plan lnfluencing
Forest Industry Transformation
EFI FLEGT FacilityAsia Regional OfficeKuala Lumpur, Malaysia14 November 2013
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EU FLEGT Action Plan 2003Objective:
Address the driving forces of illegal logging both on thedemand side as well as in the timber producing countries
Course of Action/Main InstrumentsPublic Procurement Policies (demand)Voluntary Partnership Agreements (supply)EU Timber Regulation (demand and supply)
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35
FLEGT Global Historical perspective
1999 2000 2001 2002 2003 2009 20102004 2005 2006 2007 2008
G8
Forestry
Action
Program
-1998-IL as 1 of5 areasof action
2011 2012
US Lacey Actamendment
AustralianIllegal Logging
Prohibition Act
East Asia
FLEG
Bali
Africa
FLEG
Yaound
Europe &
North Asia
FLEG
St Petersburg
Regional FLEG ministerialmeetings
FLEGT
EU Action
Plan
FLEGT
regulation
FLEGTimplementing
regulation
EU Timber
regulation
EU FLEGT AP
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36
What is a Voluntary Partnership Agreement?
Legally-binding bilateral treaty (not voluntary onceagreed)
Timber-producing countries agree to licence theirtimber exports as legal
EU agrees to accept only licensed importsBacked by EU trade legislation (2005 FLEGTRegulation)
Legality assured through an agreed Timber LegalityAssurance System (TLAS)
Supported where necessary with developmentcooperation
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EU Timber RegulationWhat products are covered?
Most timber products are covered. The products covered may change in future.
Covered (almost all):
Not covered:
1
2
Solid wood products
Flooring
Plywood
Pulp and paper
Recycled products
Musical instruments
Printed matter including
magazines, newspapers and books
Some special products, like wooden
toys
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40
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41
How do businesses comply with the EU Timber
Regulation?
accompanied by FLEGT- license which attests to its legality.
Other means of providing information on legality
Private sector initiatives :Timber certified under the main
forest certification schemes is still subject to due diligence
requirements.
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42
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43
FLEGT-related discussions at ASEAN level
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Promoting specific regional exchange toshare lessons and address challenges
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0
100
200
300
400
500
600
700
800
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
mioU
China s forest products imports from Malaysia
others
veneer
particleboard
fiberboard
paper
plywood
sawn wood
logs
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46
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
MioU
China s forest products imports from Indonesia
others
particleboard
fiberboard
veneer
plywood
wood chips
paper
sawnwood
pulp
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47
0
100
200
300
400
500
600
700
800
900
1000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
MillionUS$
China s forest products imports from Vietnam
others
veneer
wood charcoal
paper
Sawnwood
Furniture
Logs
Wood chips
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48
0
200
400
600
800
1000
1200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
mioU
China s forest products imports from Thailand
others
fiberboard
wood pulp
particleboard
paper
wood chips
sawn wood
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49
0
50
100
150
200
250
1 2 3 4 5 6 7 8 9 10 11 12
mioU
China s forest products imports from Laos
Others
Sawn wood
Logs
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50
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Thank youEU FLEGT FacilityTomi Tuomasjukka00358 50 433 [email protected]
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China-Africa FLEGT VPA Information-sharingWorkshop, October 2013.
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Thank-you.
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Linking Sustainable ForestProduct Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15thNovember, Kuala Lumpur
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FOREST CERTIFICATION & ILO CORE LABOURCONVENTIONS
BWI BUILDING WOOD WORKERS INTERNATIONAL
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BWIBUILDING WOOD WORKERS INTERNATIONAL
WHO WE ARE
The BWI (www.bwint.org) :
Global union Federations on Wood, Forestry,Construction and Building Material Sectors;
328 Free and Democratic Trade Unions around theworld, 89 of them in Asia-Pacific Region;
Representing more than 12 million members around theworld;
Number of International Framework Agreements (IFAs):
Mission: to promote the development of trade unionsin our sectors throughout the world and to promote
and enforce workers rights in the context ofsustainable development.
Pacific Rim Forestry Network SUPPORT GROUPSILO
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Japan/ChinaGovt Agreement
PacificIP-SFM
Legal NetworkOrganising
Unsustainable Logging
SEA
Unsustainable loggingOutsourcing
FC/MNCOrganising
Online
Capacity Building
Solidarity Actions
South Asia
Unsustainable loggingSelf-Help Groups
Organising
ILORegional Networks
REGIONAL INITIATIVES
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REGIONAL INITIATIVES
WOOD IS GOOD, CERTIFIED WOOD IS THE BEST!
Promoting Forest Certification Schemes coupledby organising unions in certified companies
Japan
Malaysia
Indonesia
Vietnam
Myanmar
New Zealand
India Nepal
Pakistan
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REGIONAL COOPERATION POSSIBILITIES
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REGIONAL COOPERATION POSSIBILITIES
WOOD IS GOOD, CERTIFIED WOOD IS THE BEST!
Pan-ASEAN Timber Certification Initiative
Climate Change
ASEAN
ADB
PILOT PROJECT COOPERATION ON MYANMAR FOREST
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PILOT PROJECT COOPERATION ON MYANMAR FORESTCERTIFICATION
CERTIFICATION: WHY IS IT IMPORTANT?
Certification:
Ensures legality of the woods andproducts;
Secures a higher priced, highly soughtafter timber;
Adds value to the wood products:Myanmar Timber is $500 per ton vs.Malaysian Timber is $20,000 per ton;
Enables unions to organise and promotedecent work.
PROPOSED PROGRAMME COOPERATION FRAMEWORK
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PROPOSED PROGRAMME COOPERATION FRAMEWORK
Evolve the national forestry certification scheme through
tripartite mechanism process
Confidence and Capacity Building Measures
Strengthening of Technical Assistance in cooperation withMTCC and PEFC
Tripartite workshop on promotion of Decent Work Agenda inwood and forestry industry
Training progarmme on ILO Core Conventions
Joint training for auditors
Exchange programme Trade Union Development
FOREST CERTIFICATION & ILO CORE LABOUR CONVENTIONS
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FOREST CERTIFICATION & ILO CORE LABOUR CONVENTIONS
CERTIFICATION: WHY IS IT IMPORTANT?
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Linking Sustainable ForestProduct Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15thNovember, Kuala Lumpur
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Responsible Asia Forestry and TradeA partnership for strengthening capacity and sharing knowledge
Chen Hin Keong, Forest Trade Programme Leader, TRAFFICAndrew Ingles, Chief Technical Adviser, TNC
November 2013
RAFT (2012-2015)
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( )
Provide capacity building & knowledge sharing services
to promote trade in responsibly harvested &
manufactured wood products
More verified legal products traded
More forests independently certified sustainably managed.
RAFT recognizes the Forest Stewardship Council (FSC)certification scheme as the current premium standard
Reduced CO2 emissions from land-use change & forestry
RAFT P
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Institute for Global Environmental Strategies (IGES)
Analytical inputs on timber legality and sustainable forest management
certification
Conducted a RAFT study on the potential role of Customs Authorities
Produced the first draft of the ASEAN chain of custody guidelines for timber
Undertaking a comprehensive review of timber legality issues in PNG
RAFT Partners
TFT (The Forest Trust)
RAFT work in Indonesia, Vietnam, Lao PDR & China
Develops industry guidance documents for producers, processors &
exporters on how to meet legality requirements
Provides in-person practical training to:
improve the level of legality compliance
make progress towards credible certification standards in the factory &
forest
RAFT P
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Tropical Forest Foundation (TFF)
RAFT work in Indonesia & Papua New Guinea
RIL training for forest concessions & training organisations
Facilitates legality & chain-of-custody audits & related trainings for forest
industries and concessions
Provides certification support in technical & management matters
RAFT Partners
TRAFFIC, the Wildlife Trade Monitoring Network
RAFT work in China, Indonesia, Lao PDR, Myanmar, and Viet Nam
Contributes to awareness raising of forest managers & processors about: specific steps to ensure compliance with relevant forestry legislation
where operators can find additional resources & assistance
Provides support & capacity building for selected companies & industry
associations on legality standards & verification systems
RAFT P t
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WWF Global Forest & Trade Network (GFTN)
Alongside TRAFFIC, developing practical guidance for establishing legality
verification systems including:
updating GFTNs Guide to Legal and Responsible Sourcing and
Exporting in a Shifting Legal Landscape
raising awareness and understanding of legality issues
Providing technical assistance to selected tree growers, companies, industry
associations & training institutions regarding legal compliance
Providing support to forest management companies for mainstreaming legal
& responsible forest management using GFTNs existing model, tools and
learning
RAFT Partners
RAFT P t
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The Nature Conservancy (TNC)
Provides strategic coordination for the RAFT Partnership as a whole
Implements activities at the regional level and in China, Indonesia & PNG
Supports policy and systems development governing land management &spatial planning
Provides technical support to national timber legality verification systems in
China and Indonesia
Pioneering logging practices that reduce carbon emissions
Helping roll out community-based natural resource management in PNG
RAFT Partners
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.
RAFT Support:
Some financial support for selected buyer-supplier
dialogues & international knowledge sharing events
Mostly provides technical assistance to governments,
forest managers, wood processors, & buyers of wood
products through its implementing partners
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www.responsibleasia.org
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Linking Sustainable ForestProduct Supply Chainsthrough Asia
PEFC Stakeholder Dialogue 2013
14-15thNovember, Kuala Lumpur
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RECOFTCs Regional Experiences
with Forest Smallholders
Martin Greijmans
14 November 2013
PEFC Stakeholder Dialogue, Kuala Lumpur
Brief Organizational Background
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Brief Organizational Background
Mission:Local communities and indigenous people areactively engaged in sustainable management of forest
landscapes
Vision:Capacity development for optimum social,economic, and environmental benefits
Engages with various stakeholders, including
governments, NGOs, private sector and local communities
Since its foundation in 1987, has trained over 25,000
people from more than 27 countries
3 Guiding Principles
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3 Guiding Principles
Good
governanceFair benefits
Strong and
secure rights
Transforming
Forest
Conflicts
People, Forests,
and Climate
Change
Securing
Community
Forestry
Enhancing
Livelihoods
and Markets
RECOFTCs Functional Approach
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RECOFTC
Knowledge
Hub
Training and
learning
networks
Research,
analysis and
synthesis
Strategic
communication
Piloting and
demonstrating
RECOFTCs Functional Approach
F t S llh ld
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Forest Smallholders
More than 450million peopledepend on forests in Asia and thePacific, earning an income of 20%
Forest-based community enterprisesaccount for 13-70% of all forestryenterprises
ForInfo Project
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84
jTeak Collateral
Background: Teak harvested prematurely
for immediate cash needs
Lack of economic and
silvicultural consideration
Issuing Teak Management
Certificates:
Tree valuation data, Farmeridentity, Plot location
Information for future
planning: thinning plans and
thinning products
ForInfo Project
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Outcomes:
Smallholders secure clearer tenure rights
Longer rotation of teak cultivation,
mature trees more valuable Used as collateral for microfinance loans
Certification provides stand and financial
valuation
Improve negotiating power ofsmallholders
Securing user rights and creating access to microfinance
for smallholder teak plantations
jTeak Collateral
FSC T i i f T i A i
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FSC Training of Trainers Asia
Aim:
Develop pool of localtrainers to support and
respond to specific needsof smallholders inachieving FSC certification
More clearly link
certification to livelihoods,value chains, businessmodels, and enhancedmarket linkages
FSC, PEFC, REDD, FLEGT may exacerbateregulations for communities & smallholders
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November 25, 2013 87
Different scale of regulatory barriers according to forest type and
tenure arrangement
The number of
regulations increase
along the continuum
from plantations to
natural forests, while forincome per hectare is
the opposite (i.e. higher
for plantations than for
natural forests)
regulations for communities & smallholders
RAFT and Conflict Transformation
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RAFT and Conflict Transformation
Promote social justice in
SFM practices In part by reducing incidence
and negative impact of
natural resource conflict
RAFT and Conflict Transformation
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RAFT and Conflict Transformation
Approach with RECOFTC:
Training of Trainers in Conflict
Transformation
Build confidence, skills, andconnections of practitioners
working with timber industry
Promoting collaborative
management and conflictresolution helping producers
attain certification
Promoting HCVF as a standard
FLEGT & RECOFTC Th il d
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FLEGT & RECOFTC Thailand
In Thailand FLEGT allows for renewed claim
for communities to play a role and become a
respected actor in the timber sector RECOFTC is raising awareness of the CF
Networks and CSOs about VPA process
Enabling them to participate actively futuregovernment-led consultations
Wh t N t?
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Whats Next?
Beyond the forest: Broad landscape approach Link with agriculture and energy policies
Improve capacity of small entrepreneurs
Business planning & development skills Links to markets, finance, policy processes
Ex: Rights and Resources Initiative (RRI) collaboration, Ongoing efforts to engage communities and improve role
in forest sector RECOFTC brokering PPP processes: collaboration withprivate sector with increased understanding, mutual gain
Ex: Stora Enso
Forest Connect AsiaAsia
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Forest Connect Asia Support smallholder enterprises
to connect to each other, policies
and markets
FCA to build enterprise capacity,
facilitating and broker linkages,
pilot and document best practices
in their specific context
Thank You
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For further information, please contact
Martin Greijmans
www.recoftc.org
Thank You
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Linking Sustainable ForestProduct Supply Chainsthrough Asia
PEFC Stakeholder Dialogue 2013
14-15thNovember, Kuala Lumpur
94
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Investors supportingtransformation towards
sustainability in the forestry
sector
Adam Grant
Manager, Certification and Environmental Markets
PEFC
Kuala Lumpur, Malaysia
November 2013
Important Note
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Slide 96
New Forests 2013. This publication is the property of New Forests. This material may not be reproduced or used in any form or mediumwithout express written permission.
The information contained in this publication is of a general nature and is intended for discussion purposes only. The information does notconstitute financial product advice or provides a recommendation to enter into any investment. This presentation has been prepared withouttaking account of any personsobjectives, financial situation or needs. This is not an offer to buy or sell, nor a solicitation of an offer to buy or
sell any security or other financial instrument. Past performance is not a guide to future performance. Past performance is not a reliable
indicator of future performance. You should consider obtaining independent professional advice before making any financial decisions. Theterms set forth herein are based on information obtained from sources that New Forests believes to be reliable, but New Forests makes no
representations as to, and accepts no responsibility or li ability for, the accuracy, rel iability or completeness of the information. Except insofaras liability under any statute cannot be excluded, New Forests, including all companies within the New Forests group, and all directors,
employees and consultants, do not accept any liability for any loss or damage (whether direct, indirect, consequential or otherwise) arising
from the use of this presentation.
The information contained in this publication may include financial and business projections that are based on a large number of assumptions,any of which could prove to be significantly incorrect. New Forests notes that all projections, valuations, and statistical analyses are subjective
illustrations based on one or more among many alternative methodologies that may produce different results. Projections, valuations, andstatistical analyses included herein should not be viewed as facts, predictions or the only possible outcome. Before considering any
investment, potential investors should conduct such enquiries and investigations as the investor deems necessary and consult with its own
legal, accounting and tax advisors in order to make an independent determination of the suitability, risk and merits of any investment.
New Forests Advisory Pty Limited (ACN 114 545 274) is the holder of AFSL No 301556. New Forests Asset Management Pty Limited (ACN 114
545 283) is registered with the Australian Securities and Investments Commission and is an Authorised Representative of New Forests
Advisory Pty Limited (ACN 114 545 274, AFSL 301556). New Forests Inc. has filed as an exempt reporting adviser with the Securities andExchange Commission.
Overview of New Forests
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Slide 97
Founded in 2005
Managing forestry investment for
institutional investment clients
Currently managing nearly US$2 billion in
assets in the Asia-Pacific region
Head office in Sydney; 38 employees in
Australia, New Zealand, Singapore, and
San Francisco
Managing over 420,000 hectares of land
and forestry assets across the Asia-Pacific
region and United States
New Forests has generated excellent
returns to our clients over 8 years, and hasaimed to operate as a leading sustainableand responsible investor in the forestry
sector
What Differentiates New Forests?
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Slide 98
Strategically, New Forests is
1. Focused on Asia Pacific opportunities
Unique for a TIMOheadquartered in Sydney with an office in Singapore Largest forestland owner in Australia and active in markets throughout
Australia, New Zealand, and Asia
Providing investors with exposure to the integrated Asia Pacific regionaltimber tradeextensive experience in domestic and export markets
2. A leader in sustainable forest management
Investment team experienced in sustainable forest management andenvironmental markets; company-wide Social and EnvironmentalManagement System
Member of Forest Stewardship Council (FSC) International and FSCAustralia
Signatory to United Nations Principles for Responsible Investment (PRI)
3. Forward Thinking Engaged with international NGOs, and participating in global initiatives
including World Economic Forum Global Council, Aspen Institute, etc.
New Forests Business
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Slide 99
New Forests Pty Ltd (Sydney)
Sydney
Australia New ZealandForest Fund
Australia New Zealand
Forest Fund 2
Singapore
Tropical Asia Forest Fund
San Francisco
The Eco Products Fund
Forest Carbon Partners
Mitigation Partners*
Back Office, Administration, Risk and Compliance Systems and Governance
Financial and Forest Resource Modeling Services
Sustainability and Responsible Investment
Investor Services
Tropical Asia Forest Fund - TAFF
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Slide 100
TAFF is a commingled fund investing in tropical timber plantations in SouthEast Asia with US$171 million in commitments. Clients include pensionfunds and development banks.
Forestry in Asia is changing:
Originated from logging concessions in natural forests
Low cost of timber from these concessions meant attractive returns were possible withoutoperating efficiently or sustainably
Natural forest timber has been largely depleted
Global concern over rainforest logging and a demand for certification and sustainableforest management models are on the rise
Fast-growing, high-quality managed timber plantation estates are emerging as the basisfor the future of the industry, which will require significant capital
TAFF will:
Invest in existing forestry enterprises or assets
Upgrade and expand those businesses
Help Implement modern forestry systems and practices
Obtain certification and where possible, access environmental markets
Exit after 10-15 years of investment
The Changing Forestry Landscape
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Slide 101
1. Shift to plantations and thedeclining economic frontier ofnatural forests
2. Global timber demandgrowing and restructuring toaccommodate Asian demandgrowth
3. Shifts in Pulp & Paper markets
and increasing demand forbio-energy, bio-fuels, andother bio-products
4. Rising institutional ownershipof high productivity timberplantations
5. Sustainability imperatives andthe pricing of ecosystemservices
Three-year old Teak PlantationSolomon Islands
Natural Forest Harvest in SE Asia in Decline
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Slide 102
Steady Decline in Natural Forest Logging in Malaysia and Indonesia
Source s: Malaysia Timber Council and personal communication with Yayasan Sabah; ITTO; Indonesian Forestry Department Annual Report, 2008.
5
10
15
20
25
30
35
40
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
LogProduct
ion(Mm
3)
Malaysian Log Production
0
5
10
15
20
25
1994 1996 1998 2000 2002 2004 2006 2008
Annualharvestlevels(m3m
illions)
Indonesian Log Production
Natural forests Plantation forests
Limited Plantation Investment
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Slide 103
Asia has lagged behind otherregions in the development of
commercial plantations for highervalue end uses. Significant
plantation areas in Indonesia,South China (approximately 6.0
million hectares) and Vietnam arebeing grown on short rotations
for chip/pulpwood only.
Source: New Forests Asia estimates based upon RISI 2011 Pulp and Chip wood Conference, ITTO 2005
Sus tainable Forestry Man agement Report, and government data sets. Data does not include rubber estates andis based on private/government commercial scale plantations not small holders (except for Thailand where
sm all scale private growers are fundamental to the industry)
Both China and Vietnam currentlyimport plantation hardwoods
from South America, NorthAmerica, Europe and Africa
primarily to fulfill demand forcertified timber. There are
significant cost advantages toregional sourcing.
Opportunities for TAFF
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Slide 104
Investing in Southeast Asia with
priority for Indonesia, Malaysia,
and Vietnam Attractive growing conditions,
low costs, and close access to
growing markets
Investment team in financial hub
of Singapore
Combination of existing and
greenfield plantations
Environmental, Social &
Governance (ESG) factors andenvironmental markets offer
value-add opportunities
4-year old clonal teak in Java
Sustainability as a Stay in Business Issue
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Slide 105
Institutional Investors requiresustainability policy, labour
policy, corruption and briberystandards, use of certification,and monitoring of performancestandards
Major consumer groups are
increasingly demandingcertification or product chain ofcustody documentation
Governments are underpressure to create business
environment that willencourage investment andsupport competitiveness oflocal industry
Sustainability at New Forests
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Slide 106
Responsible
Investment
SEMS
Certification &Responsible
Management
Sustainability Reporting
New Forests is a signatory to the UN
Principles for Responsible Investment
(PRI) and commits to integrating
Environment, Society, and Governance(ESG) principles into investment decision
making
ESG policies are implemented at the fund
level through a Social & Environmental
Management System (SEMS) with internal
auditing
The SEMS defines third-party certification
and responsible management
requirements relevant to the asset class
and type of investment
Sustainability reporting is integrated into
funds reporting structure and New Forests
publishes an annual Sustainability Report
covering responsible investment activities,
targets, and progress
TAFF Sustainability Goals
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Slide 107
Environmental, social and governance best practice will ensure TAFF
contributes to: Reduced greenhouse gas emissions and other forms of pollution
Maintenance or enhancement of high conservation value forests and biodiversity
Improvements in local livelihoods and safe working conditions
Recognition of indigenous rights
Third-party verified sustainable forest management will add significant value: Price premiums and better market access for certain products
Lower project and political risk through reduced social conflicts
Improved asset liquidity and lower risk-adjusted discount rates on exit
Lower cost of debt capital and better debt access, especially from development banks
Improved access to licences, operating permits or additional assets from host countries
Reputational risk reduction for fund investors
Opportunities for increasing operating efficiencies through better management
Opportunities for environmental market products from areas set aside from production
New Forests is committed to sustainable management of TAFF investments
Opportunity Costs in the Landscape
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Slide 108
Forests provide not only timber, but a myriad of other benefits related tofreshwater, carbon cycling, biodiversity conservation, human health, and wellbeing
These ecosystem services have not been priced and therefore are usedwastefully and disregarded in land conversion decisions
Leads to plantation and agribusiness industry using more land rather thanincreasing productivity per hectare
Policy in conflict with overwhelming economic fundamentals is difficult toenforce on a sustainable basis
Markets set prices for timber products, but how do we value other benefits?
Region Value of Natural Vegetation Value of land converted to
Agriculture
Malaysia $500 (logging concession after
primary harvest)
$20,000 to $25,000 (oil palm)
Brazil $155 (Amazon frontier land) $420 (grazing)
US South $2500 (mixed timberland) $6250 (cropping)
Australia $1900 (woodland properties) $4850 (mixed cropping and grazing)
Innovating Markets
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Slide 109
New Forests established Malua
BioBank in 2008 with seed
investment from The EcoProducts Fund.
The project creates an
alternative economic value forBorneos rainforests and offers
sustainability solutions for oilpalm supply chain.Unlocking Demand for Biodiversity
-Roundtable on Sustainable Palm Oil (RSPO)
compensation mechanism for past HCV clearance
-Forest Stewardship Council (FSC) compensation
mechanism for past downwards conversion
Further Investment Potential-Carbon value through proven methodology
-Impact or CSR investment to catalyze biodiversity market
growth and establish sustainable brand value
Environmental Markets Lessons Learned
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Slide 110
Price signals work SO2market drove changes in fuel from high to low sulphur coal
EU Emissions Trading Scheme (ETS) drove $ billions into carbon funds and carbon
companies Australian water market restructured agriculture to increased efficiency and more
valuable cropping
US Mitigation Banking is a $billion+ turnover industry
The finance and investment sector can facilitate change Investment funds sprang up related to the EU ETS, Australian Water market, and
Mitigation banking industrycreates liquidity to meet market needs Markets create transparency in pricing; futures and options create stability; water
rights as collateral for investment in water use efficiency
Stability is necessary, but fine-tuning is also necessary Meddling by Government killed the SO2markets
Excessive allocations and unexpectedly huge offset supply have made the EU ETS
unstable
It needs to cost more to remain outside rather than inside a scheme Lack of price premium has hampered most voluntary certification schemes
REDD has struggled to have impact because private sector is disengaged andcontinues to operate on a business as usual basis
Towards the Future
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Slide 111
Projections are that global industrial roundwood demand will begin to plateau around 2.3-2.5
billion m3per annum in 2030.
100 to 150 million hectares of commercial plantation area (2.5-3.75% of world forest cover)
could supply most of this timber, while timber production from frontier regions (Canada,
Russia, tropical natural forests) will stabilize or decline. Biomass demand may double this.
Mechanisms to price ecosystems via
REDD, BioBanking, watershed
protection, etc. alongsidecommercial timber plantations could
produce the basis for the
stabilization of conservation and
production functions
Large scale deals like NZ, Australia,
Indonesia-Norway, Boreal Canada,
etc.
Ultimately this must be driven by
private capital and investment
Can forestry represent a natural infrastructure asset class?
Canopy view of New Forests Malua Biobank in Sabah, Malaysia.
Key Points & Conclusions
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Slide 112
World timber demand will continue to rise, markets will evolve to
encompass Asian demand growth
Supply increases will primarily come from timber plantations, ratherthan further expansion of the economic margin in primary forests
Increases in plantation area are more difficult to achieve than increases
in productivity of existing plantation baseland competition will also
rise among food, energy, and fibre crops
Institutional portfolios have gone from 5% real assets in 2000 to 15%real assets today, and likely will reach 25-30% by 2025huge inflow of
capital for real estate, infrastructure, agriculture, forestry, etc.
Need fopr a financing source for conservation as well as production
this could include REDD+, biobanking, water rights, no net loss supply
chains, etc.
Social and community integration via benefit sharing, consultation, and
governance models, and respect for traditional and legal rights will be
core to sustainable outcomes
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www.newforests.com.au
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Appendices
New Forests History
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Slide 115
July 2005Company established in Sydney and
receives Australian Financial Service Licence
May 2007Establishes US office
August 2008Establishes SE Asian office
October 2009Begins Funds Management Business
August 2010Closes the AU$490 million Australia New
Zealand Forest Fund
January 2011Closes AU$415 million acquisition of
270,000 hectares of Australian forest land from the
Receivers of Great Southern Plantations
2011-2012Acquires major softwood plantations and
softwood sawmills in Australia
June 2013Final close of the New Forests Tropical AsiaForest Fund, now with commitments of US$171 million,
and first close of the New Forests Australia New
Zealand Forest Fund 2 with AU$570 in commitments
June 2013 Makes first Asian investment, acquiring
Hijauan Benkoka plantations in Sabah
Supply from Russia is Declining
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Slide 116
Russian softwood exports have hit a wall
Russian log exports havefallen dramatically over
the past six years while
lumber exports have been
flat to slightly increasing.
Source: FAOstat
0
10
20
30
40
50
60
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Millionscubicmetres
RoundwoodSawnwood
Canadian Supply Falling
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Slide 117
Policy Constraints and Mountain Pine Beetle impact will lead to near-term
decline in timber supply, leveling off in the medium to long term.
0
10
20
30
40
50
60
70
80
90
British
Columbia
Alberta Ontario Quebec
Canadian Timber Supply
2009 & 2050 Forecast
(million m3)
Softwood Annual Allowable Cut 2009
Estimated 2050
Source: Mark Kennedy, CIBC. Global Perspectives on Forest Products Trade. Presentation to Future Forestry Finance 2012.
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Australian Plantation Harvest Rising
Australian hardwood plantations are steadily replacing
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Slide 119
Australian hardwood plantations are steadily replacing
a declining supply from native forests
0
2 000
4 000
6 000
8 000
10 000
12 000
'000m3
Native and Plantation Hardwood Harvest
Native Plantation
Source : ABARES, Forest and Wood Product Statistics.
Increasing Importance of Plantations
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Slide 120
Global industrial roundwooddemand is likely to rise from 1.5billion m3in 2013 to 2.5 billionm3by 2050
Somewhat speculative forecastssuggest biomass energy, biofuelsand biomaterials demand coulddwarf industrial roundwooddemand over next 30 years*
Almost all incremental supply willcome from timber plantationsboth productivity enhancementand plantation area will need toincrease
Investment needed could rangebetween $100 and $500 billion tomeet these levels of demand
Source: FAO, 2010. Global Forest Resource Assessment.
*WWF, 2013 Living Planet Report
Plantation Productivity Can Increase
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Slide 121
0
200
400
600
800
15
20
25
30
2012 2025 2035 2045 2055 2065
T
RV-TotalRecoverableVolume(m3/ha)
Base Management Nutrition
Genetics TRV
AverageGrowthRate(m3
/ha/yr)
If industrial wood demandgrows at an equivalent rateto global GDP can we meetmuch of this viaproductivity enhancementrather than land base
expansion Investor strategies focus on
silviculture, nutrition, riskmanagement and geneticsto increase productivity by
50-100% over the next 50years
Example of Productivity GainsSoftwood in Australia
*Source: Timberlands Pacific Pty Ltd
What Government Policies are Needed?
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Slide 122
Future wood supply growth will largely be delivered byplantationsthis will be from existing plantations managed
more intensively and expansion of plantation areaexpansion
is a key policy challenge
As timber plantations take on increasing share of wood supply,innovation is needed in financial mechanisms for forest
conservationREDD, biobanks, supply chain initiatives
Social outcomes need to balance multiple stakeholders and
conflicting interests and rights. Innovations aroundconsultation/governance models, sharing in economic
benefits, community benefits are needed
A modern forest policy framework needs to address woodsupply, forest conservation and sustainability issues
TAFF Certification & Sustainability
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Slide 123
Third-party verified sustainable forest management will add significant value:
Price premiums and better market access for certain products Lower project and political risk through reduced social conflicts
Improved asset liquidity and lower risk-adjusted discount rates on exit
Lower cost of debt capital and better debt access, especially from development banks
Improved access to licences, operating permits, or additional assets from host countries
Reputational risk reduction for fund investors
Opportunities for increasing operating efficiencies through better management Opportunities for environmental market products from areas set aside from production
TAFF Certification Policy:
Achieve compliance against IFC Performance Standards within three years of acquisition on allassets including plantations, natural forests, and processing facilities
Achieve FSC certification on all natural forests within three years of acquisition if the assetmeets all FSC eligibility criteria
Where plantation assets do not meet all FSC eligibility criteria, engage an FSC-accreditedcertification body to undertake third-party verification of compliance with all applicable FSCrequirements and, depending on market requirements, pursue additional third-partycertification against an alternative certification system depending on market demands such asPEFC, LEI, FSC controlled wood, VLO, and/or VLC or other future standard that may bedeveloped
New Forests is committed to sustainable management of TAFF investments
External Motivations
N F d i d i S i l d E i l M
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Slide 124
New Forests designed its Social and Environmental Management
System (SEMS) in 2010 and began full implementation in 2011.
The SEMS is designed to systematically identify, manage, and reporton social and environmental issues and potential impacts.
The SEMS helps us win clients:
English pension fund manager said, Youre the only manager weve seen
who can show how they manage assets sustainably.
Dutch pension fund manager said, FSC certification is absolutely required
for us as a target and your SEMS shows us how you pursue that.
Provides a reference point and tool for due diligence
The SEMS helps us provide client services and meet requests:
Current clients ask to see audit reports
Streamlines responses to client inquiries
Risk management and continual improvement.
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Linking Sustainable ForestProduct Supply Chainsthrough Asia
PEFC Stakeholder Dialogue 2013
14-15thNovember, Kuala Lumpur