About our work

The EU FLEGT Facility, supported by the Swedish International Development Agency (Sida), works to contribute to poverty eradication and sustainable forest management in Asia through support to the implementation of the EU FLEGT Action Plan.

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VPAs and SMEs in Mekong countries

Understanding the situation of small and informal forest products enterprises in the Mekong region in the context of FLEGT Voluntary Partnership Agreements

Summary

The Swedish International Development Agency (Sida) is funding the EU FLEGT Facility to:

  • Increase knowledge about small and micro enterprises (SMEs)* and smallholders in the Mekong region.
  • Address potential challenges for these timber companies to operate legally in the context of FLEGT Voluntary Partnership Agreements (VPAs).

The work will fill critical information gaps by assessing these sectors in Laos, Myanmar, Thailand and Vietnam, paying particular attention to the potential impacts of VPAs on women. It will help national stakeholders to identify ways to ensure SMEs and smallholders can more easily participate in the supply chains covered by national timber legality assurance systems.

*Small, micro and informal forest-products entities

Background

Countries across the Mekong region are engaging in processes to negotiate Voluntary Partnership Agreements (VPAs) with the EU to address illegal logging and promote trade in legal timber products.

VPAs are among the measures of the EU Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan. Under a VPA, a country makes a commitment to develop a timber legality assurance system. It also commits to export only verified legal timber products of types listed in the VPA to the EU. Most VPA countries expand this commitment to all market processes. To do this, VPA countries must define legality and often need to change their regulatory frameworks.

It has become clear that, in some countries, strictly enforcing the existing regulatory framework could harm small and micro enterprises (SMEs) in the formal sector and smallholders in the informal sector. Unintended social, economic and environmental consequences could be caused by factors that include:

  • More stringent enforcement of laws and regulations
  • Costs of demonstrating compliance with applicable legality standards
  • Modernisation of value chains to meet legality requirements

As a result, implementing a country’s VPA could potentially stifle small-scale businesses and increase rural poverty. If, however, the VPA takes account of the special needs of small enterprises and the informal sector, it could raise understanding, create economic opportunities and alleviate poverty.

It is therefore important that VPA processes consider such risks early in the process and explore specific support mechanisms for SMEs and smallholders to overcome barriers to legal operation.  

A fundamental challenge, however, is the near absence of reliable data on this sector. Very little is known about the number of people involved, material flows and value chains, or current levels of compliance with relevant laws and regulations. There is also little information about the differentiation of gender roles in the region’s small and informal forest products sectors. This makes it difficult to predict how enforcement of existing legal frameworks might affect women. See the section on Gender.

The EU FLEGT Facility aims to fill these information gaps and help stakeholders to develop solutions. The following activities are supported by the Swedish International Development Agency (Sida).

Factory staff measure and register teak logs, Yangon, Myanmar. Credit: EU FLEGT Facility

Goals and activities

The objective of this work is to contribute to poverty eradication and sustainable forest management in Asia through support to the implementation of the EU FLEGT Action Plan.

Over three years, the intervention aims to:

  • Improve understanding of how small forest products enterprises, including those in the informal sector and supplying domestic markets, operate in Laos, Myanmar, Thailand and Vietnam. This will include research on the structure, dynamics and governance of selected value chains, including the different roles of women and men. The research will review the barriers that prevent small-scale producers and processors from participating in the formal sector and high-value markets.
  • Analyse the regulatory obstacles facing small enterprises and the resulting impacts on their viability, and potential economic and environmental contributions to national economies in Laos, Thailand and Vietnam.
  • Prepare recommendations for policy and regulatory reforms that take account of the needs of small enterprises and women in particular. The EU FLEGT Facility will work with stakeholders from governments, the private sector and civil society to define measures to support the participation of SMEs and smallholders in supply chains regulated by VPAs.

The project will run in parallel with VPA processes. It will contribute where possible to the preparation, negotiation and future implementation of VPAs while avoiding disruption to these processes. At each stage the project will consult with stakeholders to seek their input and share results.

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About Sida

Sida is a government agency working on behalf of the Swedish parliament and government, with the mission to reduce poverty in the world. For more information visit the Sida website: www.sida.se

Publications

Information note: Diagnoses and regulatory assessments of small, micro and informal forest-products enterprises in the Mekong Region (English, Thai and Vietnamese)

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