28311908834_86d1d8a6cd_k.jpg

Annual report

EU FLEGT Facility: Highlights and insights from 2016

Introduction

This report presents the EU FLEGT Facility’s progress towards its 2016 objectives. Section 1 shares the Facility’s insights into what is happening in Voluntary Partnership Agreement (VPA) countries and the three regions where the Facility is active. Section 2 presents a summary and highlights of the Facility’s progress. 

1. Key insights

FLEGT licensing is revealing important lessons for the EU and VPA countries

The start of FLEGT licensing has already provided important technical, trade and communication lessons for the EU, Indonesia and other VPA countries that are moving towards FLEGT licensing. 

  • Since Indonesia started FLEGT licensing, issues have emerged related to: Harmonized System (HS) commodity codes; interpretation of the product scope of Indonesia’s VPA; consistency between trade documents and FLEGT licences; and Customs declaration procedures in VPA countries, the EU and non-EU markets. The EU and Indonesia, together with the Facility and other FLEGT partners, should continue to monitor and clarify these issues.
  • Many questions are emerging around the FLEGT licence, raising the importance of communication and preparing the market to receive FLEGT licences. The  answers to frequently-asked questions and the online information point, which the Facility developed in coordination with the EC, are serving as useful tools for explaining FLEGT licences, competent authorities and import/export procedures. The EC, EU competent authorities and Indonesia should continue to track use of these resources and address new questions and concerns.
  • EU-based operators tend not to be aware of the broad scope of VPAs, including the level of stakeholder engagement in VPA processes, the social and environment requirements in VPA legality definitions or the extent of legal and institutional reforms countries undertake to ensure their timber legality assurance systems have the necessary checks and balances. This became clear, for example, when EU trade representatives visited a VPA country and spoke to stakeholders involved in the process. More understanding by the market of the reforms taking place in VPA countries will contribute to preparing the market for FLEGT licences.

Joint tools help the EU and VPA countries agree on priority actions and track progress towards agreed milestones

Progress accelerates when the EU and the VPA partner country jointly discuss and agree upon actions and milestones. For instance, a joint action plan enabled Indonesia and the EU to prioritise work, track progress and decide when to start FLEGT licensing

  • While Ghana had previously used an action plan to guide its own activities, the EU and Ghana did not use it to discuss progress together. This changed in 2016, when the parties began using a streamlined plan to jointly assess progress, identify areas to address before FLEGT licensing can start, and make decisions such as when to launch the second evaluation of the legality assurance system. This approach has helped accelerate VPA implementation. 
  • The Facility expects to see similar benefits in Liberia, which has been struggling to organise and prioritise activities. In 2016, the Facility worked with VPA-related projects to develop a planning tool, which the Joint Implementation Committee (JIC) has now adopted. The tool helps stakeholders and projects understand VPA implementation needs and make plans for the required measures and activities. It will also help the JIC to plan, monitor and prioritise VPA implementation activities. 
  • The development of such joint tools need not wait until implementation is underway. Vietnam and the EU have already agreed to develop a joint VPA implementation framework with annual work plans, a stakeholder engagement plan and a communication plan.

High-level political commitment is critical to VPA progress

Experience from several VPAs shows that the presence – or absence – of high-level political commitment can mean the difference between swift progress or a stalled process.

  • A joint statement of commitment by Vietnam’s Prime Minister and European Commission (EC) President Jean-Claude Juncker in December 2015 injected energy into the VPA negotiations. As a result, six negotiating sessions took place in 2016, compared to four in the previous five years. Vietnam overcame all political obstacles and the parties agreed in principle on the content of the VPA before the year ended.
  • In Laos in 2015, the then Prime Minister approved the VPA process, which paved the way for civil society to be involved at all levels and added vigour to the process. This high-level commitment continued in 2016 when the new Prime Minister issued an order strengthening control of the forest sector. This order led to a log export ban being resolutely enforced for the first time and created a link between the VPA process and national reforms – with government seeing the VPA as consistent with and supportive of that agenda.
  • In contrast, in some other VPA countries while there is clear and sustained interest within forest departments, the level of political support for the VPA from the sector minister and from other relevant ministries is less obvious. This hampers VPA progress at all levels. Experience shows that direct dialogue between the EU and VPA country governments can boost political engagement in VPA processes and help to unblock challenges.

Tests expose challenges and increase understanding

The Facility’s analysis of how to improve VPAs highlighted the need to do more testing, encourage assessments, and to do this early to help identify challenges, gaps and inconsistencies, and increase understanding. Tests and assessments took place in a number of countries in 2016. 

While it is normal to subject a VPA legality definition to a field test, in Honduras the testing went further and also looked at the verification methodology. This approach not only helped identify gaps in two key annexes but also highlighted governance challenges, such as the inclusion of smallholders in the informal economy. 

Actions countries take through their VPAs help them achieve broader SDG and climate goals

The Facility analysed ways countries’ VPA activities can contribute to broader initiatives taking place in the country. Results show that deliberative stakeholder processes, institutional reforms, forest management upgrades, better enforcement of environmental and labour standards, and increasing social benefits to communities are just some of the ways VPA activities can help countries make progress towards Sustainable Development Goals (SDGs) and meet climate commitments in their Nationally Determined Contributions (NDCs). The challenge is to link the different in-country processes, to encourage coordination and avoid duplication of efforts. VPA processes do however take time. To change attitudes and overcome political challenges requires long-term commitment. Nonetheless, VPAs are effective tools countries can use to make progress toward SDG and NDC targets, and are therefore interesting mechanisms for donors to finance and support. For more information see the Facility’s factsheet VPAs for SDGs, and briefing note FLEGT VPAs and National Determined Contributions: Understanding Opportunities.  

In post-conflict contexts, natural resource governance is critical but overlooked in strategies for rebuilding

The Facility’s analysis of the role of the timber sector in crisis and post-crisis situations, using Central African Republic as a case study, concludes that while addressing natural resource governance is critical for a country’s stability, it is often largely ignored.

  • In a context of institutional frailty when a new government must bring evidence of its legitimacy, natural resources are particularly vulnerable to wrongful exploitation. To ensure that natural resources are not a destabilising factor but rather play a positive role in the rebuilding of the country, improving their governance is imperative. In post-conflict situations, key governance issues must be addressed to ensure the forest sector contributes to the country’s recovery, and doesn’t act as a peace spoiler. 
  • The Facility’s findings are relevant to other countries, such as Myanmar and Liberia, and to broader considerations of how to promote stability and sustainable development in places where natural resources have fuelled conflict: The UN estimates that natural resources played a role in more than 40% of all intra-state conflicts.

Oversight, structure, ownership of system development contracts could be improved to advance VPA progress

Implementing a VPA often requires countries to invest in areas of improvement which has been a target of technical assistance development projects.The further development of a country’s existing verification, information management, or supply chain control capabilities are common examples of where improvement has been needed. This often involved support to: assess and articulate needs; develop procedures; improve data capture, storage and sharing; build capacity; and/or purchase equipment.

However, it is challenging for some countries to summarise their needs, articulate these needs into a system specification and ensure these are reflected appropriately in the contract negotiations with service providers, and to oversee contracts to ensure delivery according to the outlined objectives. 

Capacities, size and scope of contracts, and in some cases the specialised focus of the issue (i.e. IT software design and implementation), have been challenging for forest agencies. 

The success of these contracts has been in some cases undermined by the lack of country ownership and limited participation from the government in both the oversight and the implementation of activities. This reduces the efficiency and sustainability of project delivery. 

Government ownership should be reinforced in the contracting stages. Donor-financed projects should support not only the technical improvements but also reflect how to enhance government capacity to advance contract negotiations fairly and maintain oversight and ownership throughout the life of the project.

Problems the Facility has observed creating big delays stemmed from situations in which:

  • Needs were not well understood and so were not clearly articulated in the contract, making it difficult for the service provider to understand the main objectives
  • Timber legality assurance system support contracts often require on the ground presence and strong oversight/monitoring, which is more rigorous than what typical ODA donor financed contracts provide
  • Forestry departments did not know how to structure support in a contract and how to outline the appropriate timing for such support
  • Financing was tied to certain timelines and cycles and in some cases EU, EU member state or VPA country government procurement cycles. 
  • Small service providers, such as local IT businesses involved in system development for the private sector, struggle to access complex procurement processes

Shifts are underway in the global timber trade and efforts to control it

The Facility’s analysis reveals some shifts in trade patterns with relevance to FLEGT and VPAs.

Global timber markets have recovered from 2008 global economic and financial crisis. Based on early statistics, the EU timber markets in 2014 and 2015 showed increases in EU imports including an increase in tropical timber imports.

  • Trade data suggests that VPA countries have increased exports of timber and timber products to China and India, while their exports to the EU have declined. 
  • While VPA countries have developed trading partners in their regions, they are enticed to export to more lucrative markets such as the EU and China.
  • Together, the EU and the four countries with EUTR-like legislation account for over half of China’s exports and a third of China’s imports of wood and paper products; therefore together they constitute a significant force to require thorough proof of legality for sources of China’s timber imports, as well as for China’s exports to their countries.
Figure 1: Exports of wood and paper products from VPA countries to the EU (2015)

Figure 1: Exports of wood and paper products from VPA countries to the EU (2015)

Source: Eurostat Comtext

Figure 1: Exports of wood and paper products from VPA countries to the EU (2015)

Source: Eurostat Comtext

2. Summary of Facility progress

Overall progress

1. The Facility’s work was structured into 25 deliverables, of which 16 are country deliverables and 9 are regional and cross-cutting commitments. Annex 1 presents full details of progress under each deliverable.

2. Overall, progress is good (see Figure 2). 

VPA deliverables

1. There is significant in-country support for VPAs and now that FLEGT licences are a reality, international markets are increasing their interest. The VPA processes in Cameroon and Guyana have faced challenges and those in the Democratic Republic of the Congo, Gabon and Malaysia are essentially inactive. However, in all other VPA processes there has been important activity and political interest in making progress.

2. Most of the Facility’s efforts in 2016 concentrated on:

  • Helping the EU and Indonesia reach the milestone of FLEGT licensing
  • Preparing the EU market for FLEGT licences
  • Helping Ghana advance towards FLEGT licensing
  • Providing technical and strategic support to reinvigorate VPA implementation in the Republic of the Congo and the Central African Republic
  • Helping Vietnam and Honduras increase momentum with their new-found political support to try to conclude negotiations early in 2017

3. As part of the Facility’s support to the Indonesia VPA process, it analysed data to inform the EC and EU Member States about possible technical issues related to Customs clearance of FLEGT-licensed shipments. The Facility and its consultant met with the EU Taxation and Customs Union (TAXUD) which helped clarify some issues, such as transit timber and data exchange between the EU’s FLEGIT and Indonesia’s SILK databases.

4. The Facility worked with the EC to develop an online information point on FLEGT licensing, with questions and answers on Indonesia’s timber legality assurance system and FLEGT licensing procedures, information for EU operators and details of EU competent authorities. EU operators make intensive use of these resources.

5. The Facility helped advance work on VPA impact monitoring systems in Ghana, Liberia, Cameroon and Indonesia. Progress by Indonesia and Ghana in 2016 should result in impact monitoring baselines being shared in 2017, and the institutional frameworks being operational to monitor impacts over time. In Liberia, stakeholders were exposed to impact monitoring and discussions started to frame future work. Indicator development started in Cameroon and involved Cameroonian civil society, government and the EU Delegation. 

Figure 2: Progress towards the Facility’s 158 objectives in 2016

Figure 2: Progress towards the Facility’s 158 objectives in 2016

(achieved: 79.1%; partially achieved: 14.6%; not achieved: 4.4%; not applicable: 1.9%)

Source: EU FLEGT Facility

Figure 2: Progress towards the Facility’s 158 objectives in 2016

(achieved: 79.1%; partially achieved: 14.6%; not achieved: 4.4%; not applicable: 1.9%)

Source: EU FLEGT Facility

6. In its formal ‘client representative’ role, the Facility invested significant effort in the review and evaluation of the software developed for the Republic of the Congo’s timber legality assurance system. As a result, the software development was concluded by December 2016. However, the need to support both parties in the software contract management, led the Facility to invest much more time than anticipated. This raises the question of whether such on the ground support is better implemented through a consultant focused on that activity.

7. The Facility analysed the role of the timber sector in crisis and post-crisis situations, using Central African Republic (CAR) as a case study, and concluded that addressing natural resource governance is critical for a country’s stability. The crisis in CAR affected the timber sector less than other sectors such as mining, and pre-crisis structures are still in place. This means that the timber sector has great potential to contribute to peacebuilding and stability by providing jobs, public revenues and a space for dialogue among stakeholders, provided CAR tackles its governance issues.

8. The Facility put field testing into practice in the Honduras negotiation process, guiding and participating in a test of the draft legality definition and draft verification methodology. The test was conducted as a ‘reality check’ to anticipate challenges. Representatives from the government, civil society, indigenous peoples’ groups and the private sector travelled to different regions across the country, gathering views of more than 200 stakeholders. This identified both system gaps and forest governance challenges. This step in the negotiation process enabled stakeholders to better understand the impact of the formal commitments in the VPA annexes, in terms of accountability of those engaged in implementation, particularly on current practices in the forest sector. All participants and interviewees were able to see the value of the VPA and better understand how the complementary measures included in a specific annex of the VPA could help address the identified challenges. 

9. The Facility provided support on timber trade analysis to inform discussions in partner countries, regions and with the EC. Key outputs of this support included: reports on Thailand’s wood and paper products trade, and on China-EU-VPA country trade of wood and paper products; a brief report on Indonesia-EU trade analysis; and an analysis of Intra-African trade. This support drew on the EFI Forest Products Trade Flow database, with recent upgrades improving the utility of this tool for use in responding to extraordinary requests for and analysis of COMTRADE data. The Facility will continue providing this support in 2017 in accordance with needs identified in country and regional work plans.

10. The Facility is increasing its understanding of gender dimensions of VPA processes, and will continue to do so in 2017, through a process of ongoing reflection. In Liberia, the Facility is liaising with an FAO-funded project in the hope it can provide baseline gender-related information for VPA impact monitoring. In 2017, the Facility began preparatory work for its assessment of challenges facing SMEs in Laos, Myanmar, Thailand and Vietnam, which will pay attention to the potential impacts of VPAs on women. The Facility will also consider if and how women benefit from the Cameroon’s restoration, in 2016, of payments to communities of a percentage of the RFA, an annual forest tax.

Regional deliverable: Asia

1. The Facility successfully integrated the FLEGT agenda into the relevant work plan of the Association of South East Asian Nations (ASEAN). The Work Plan for Forest Law Enforcement and Governance (FLEG) in ASEAN (2016-2025) was endorsed in October.

2. The ASEAN sub-regional timber legality assurance workshop provided a platform for ASEAN Member States to share information and improve mutual understanding of VPA processes and has built interest in regional actions.

3. China participated in the ASEAN sub-regional timber legality assurance workshop and, having seen evidence of the advances made by VPA countries, has suggested a mutual recognition mechanism between China and ASEAN countries, especially Indonesia.

4. The Facility provided the space for civil society organisations working on FLEGT in their respective countries to share national experiences, explore opportunities for regional exchanges and discuss roles they could play to engage at the national and regional levels.

5. The Facility updated the EC and EU Delegations on developments in other markets such as Japan, Australia, South Korea and China.

6. The Facility guided a gap assessment of Myanmar’s timber legality assurance system and an exercise to map stakeholders and their interests. Despite some tension around the start of the gap assessment related to the risk of a low level of participation and the related potential lack of objectivity of the results, the project has proven to be useful. It has identified weaknesses of the Myanmar system and, in the meantime, the illegality of Myanmar timber has been exposed internationally. The stakeholder mapping focused on identifying the level of influence and the level of interest of a wide variety of forest-sector stakeholders. This has been very useful as a first step that was able to highlight stakeholder’s interests publicly without raising controversy.

Regional deliverable: Africa

1. The Facility analysed trade in Africa as part of its 2016 focus. This included understanding current data related to African trade, networking with those working on the subject, and compiling statistics on certain African countries. Major trade issues that emerged include multiple and complex tariff barriers, non-tariff barriers and other barriers to intra-African trade. The Facility’s analysis also showed the lack of reliable data, including inconsistencies among sources, to be a key challenge. Discrepancies in the customs regimes between West and Central African regions present major political and technical bottlenecks. 

2. The Facility worked to integrate forest governance into regional agendas and events, including those of the Central African Forests Commission (COMIFAC), the International Timber Trade Organization (ITTO) and Congo Basin Forest Partnership. The Facility also participated in and helped organise African participation in a China-Africa forests dialogue in Beijing. These events offered the Facility the opportunity to integrate VPA lessons into discussions of climate, trade and conservation. 

Cross-cutting deliverables

Strategic Reflection

1. Strategic reflection has included analysis of ways to improve the VPA instrument. This analysis covered: timber legality assurance systems, contracting, assessments and testing, more strongly guided and sequenced negotiations, VPA legal architecture and VPA milestones. 

2. In the second half of 2016, the Facility explored several recommendations, such as testing the verification methodology in Honduras. Others that appear in the Facility’s 2017 work plan include the systematic implementation of ex-ante assessments in Laos and Myanmar, risk based approaches in the timber legality assurance system of Vietnam, and milestones.

3. The Facility captured lessons from VPA processes to demonstrate how VPA activities are also contributing to broader objectives. The Facility developed and distributed widely a factsheet and briefing paper on FLEGT and the Sustainable Development Goals and a briefing paper on FLEGT and Intended Nationally Determined Contributions (INDCs) in collaboration with the EU REDD Facility.

Strategic communication

1. The Facility facilitated strategic communication in support of the EU FLEGT Action Plan with emphasis on VPAs. In 2016, the Facility focused on Indonesia and Ghana, but also provided communication support and advice to other VPA countries. The Facility developed country-specific media rooms, with answers to frequently-asked questions that proved extremely useful once Indonesia began issuing FLEGT licences. The Facility also developed a FLEGT licence information point that provides information requested by EU Competent Authorities, the EU and operators in Indonesia and the EU. (see Figure 3).

2. To improve coordination of communication across the many FLEGT communicators, as well as accuracy and coherence of information and messages, the Facility co-convened a group of influential FLEGT communicators and worked closely with many others. In 2016, the Facility developed and implemented many communication strategies and plans, however, the areas of greatest focus were the independent evaluation of the EU FLEGT Action Plan and FLEGT licensing.

Figure 3: The FLEGT Licence Information Point (www.flegtlicence.org)

Figure 3: The FLEGT Licence Information Point (www.flegtlicence.org)

Figure 3: The FLEGT Licence Information Point (www.flegtlicence.org)

Knowledge management 

1. The Facility delivered on all planned web-based communication tools. It systematically captured and shared information, knowledge and stories through multiple channels: publications, websites, direct emails and others. The Facility’s direct emails brought real-time FLEGT news to over 2000 recipients in 77 countries. The Facility launched FLEGT.org, the FLEGT knowledge portal (see Figure 4). The Facility developed extensive knowledge packages to help the EC respond to the Court of Auditors report and the independent evaluation of the EU FLEGT Action Plan. 

2. The Facility supported reflections and work with the EC Directorate-General for International Cooperation and Development (DG DEVCO) and the UK Department for International Development (DFID) to improve monitoring, documentation and reporting of country VPA processes and the Facility’s contribution to these, as well as the contributions VPAs make to the action areas of the EU FLEGT Action Plan. The work ahead, outlined with DG DEVCO and DFID, will build on the current approach to documenting achievements to enable the Facility to document yearly progress together with a view on the status and quality of processes. This work will support reporting to internal, EC and EU Member States audiences. 

Figure 4: FLEGT.org is dedicated to sharing accurate information and practical knowledge about the EU FLEGT Action Plan (www.flegt.org)

Figure 4: FLEGT.org is dedicated to sharing accurate information and practical knowledge about the EU FLEGT Action Plan (www.flegt.org)

Figure 4: FLEGT.org is dedicated to sharing accurate information and practical knowledge about the EU FLEGT Action Plan (www.flegt.org)

Support media relations

1. The Facility monitored and assessed global coverage of FLEGT and VPAs in mainstream and trade media and shared its findings with the FLEGT community. It stimulated extensive media coverage around FLEGT licensing as planned in the communication strategy. The Facility developed online media rooms for nine VPA countries and launched an online media resource for journalists called FLEGT Media, which reached more than 5000 environmental journalists worldwide (see Figure 5). The Facility also implemented a communication protocol to help the EU, EC and VPA countries manage contentious media issues.  

Capacity building and partnerships

1. The Facility supported FLEGT and non-FLEGT actors in their efforts to build capacity to combat illegal logging and improve forest governance. It conducted sessions on specific aspects of the VPA for DG ENV and DG DEVCO, as well as integrated VPA lessons into multiple regional forums. The Facility made training materials accessible to the FLEGT community through FLEGT.org’s learning hub. The Facility also organised and participated in events together with non-FLEGT actors to build their capacity.

Figure 5: FLEGT Media – helping journalists report on efforts to combat illegal logging through the EU FLEGT Action Plan (www.flegtmedia.org)

Figure 5: FLEGT Media – helping journalists report on efforts to combat illegal logging through the EU FLEGT Action Plan (www.flegtmedia.org)

Figure 5: FLEGT Media – helping journalists report on efforts to combat illegal logging through the EU FLEGT Action Plan (www.flegtmedia.org)