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Annual report

EU FLEGT Facility: Highlights and insights from 2017

Introduction

This report presents the EU FLEGT Facility’s insights into what is happening in FLEGT countries and the three regions where the Facility is active.

Key insights

FLEGT is influencing transformative change

Transformative change is underway in many of the countries in which the Facility works. This change is manifesting in cross-government coordination, stronger institutions, different ways of working, enhanced transparency and more effective participation by forest stakeholders in decision making processes. The commitments and dialogue accompanying the partnerships between the EU and respective FLEGT countries have provided insight into what it takes to transform institutions and improve accountability, while exposing challenges and identifying the levers that drive change.

The Facility observes examples of significant change — both positive and negative —in most processes throughout their evolution. Where some countries show positive signs of increased coordination or institutional strengthening in any one year, others may show a tightening of control and reduction of interaction with stakeholders. Positive change is slow, and stand-alone events may not seem important enough to provide impact or be seen as noteworthy developments. But with the luxury of hindsight, and examples from numerous processes, we see how small changes can potentially lead to larger impact.

In 2017, we noted a number of examples of how stakeholders are changing and influencing forest governance in their countries:

Cross-government coordination is improving. Even though inter-ministerial coordination is essential for effective VPA implementation, the VPA in the Republic of the Congo had remained very much the business of the Forestry Ministry. But in 2017, the new IT software tool for managing the legality and traceability data caught the interest of the Ministry of Finance. It sees the software as a perfect tool to provide more transparency to forestry production and related revenues. Enhanced revenue collection is essential as the Republic of the Congo is struggling to balance its budget. The contribution of forestry has become relatively more important as oil prices have fallen. The Ministry of Finance and the MEF are now collaborating to explore solutions. This is unprecedented. The Ministry of Finance has already offered to host the system in its data centre and discussions on sharing internet and tax resources are on-going to ensure the operationalisation of the IT tool.

Personalities matter when it comes to coordination and collaboration. The Facility has seen in a number of VPA processes in 2017 how personalities can have a crucial impact for better or for worse. Frequent changes in both donor agencies and in many partner country administrations mean that the relationships that underpin a fruitful dialogue need constant rebuilding and adjustment.

Government institutions are strengthening their efforts and tools to increase regulatory clarity. This comes in the form of better procedures, supply chain oversight, information management, transparency, and in some cases, restructuring. Drivers for these changes have been multiple: exposure of the problem, push for more robust systems, and the demand for evidence of compliance. In Liberia, the VPA implementation has singled out the Ministry of Labour as the only administration, which has no means to execute its mandates in rural areas. This finding has allowed a discussion to find practical solutions for the enforcement of labour requirements in forest concessions.

For transparency commitments to translate into genuine accountability, countries need not only to make information public but also develop procedures for gathering, storing and accessing such information. This can often mean re-structuring collection and retrieval systems, outlining what part of the data is to be made public, as well as encouraging an institutional mind set change.

However, institutional changes of the kind we are seeing require countries to build capacities to follow new procedures, establish effective systems, and re-align management in a short period of time. This has been particularly challenging for governments. Markets are creating pressure for results. Some changes may potentially expose these countries more than others, without perceived added benefit in the short term. This in turn leads to stakeholder frustration and creates opportunities for opposing interests to gain support.

Governments are changing their decision-making processes and their exposure to and involvement of the public. Vietnam prepared its VPA implementation framework through a multistakeholder process. It has set up a Multi-Stakeholder Implementation Core Group to foster effective communication, provide feedback on the implementation of the VPA and propose issues for the EU and Vietnam to consider in meetings of their joint bodies. Importantly the Core Group is co-chaired by the forest administration and a revolving stakeholder representative (currently a civil society leader). In Laos, the Lao CSO FLEGT Group provides a basis for the participation of civil society organisations (CSOs) at all levels of the national process and in the bilateral negotiations.

Governments and institutions face multiple challenges in this transformation to be more open. They include: knowing how to organise and establish dialogue when there is often no culture of such dialogue; the capacities of the different parties to engage as professional partners; the ability to find compromise amid opposing agendas; other government departments operate differently – not with such openness to dialogue; and resources (human, financial) to manage this new dialogue.

FLEGT is transforming the capacity of civil society which is helping them become an active contributor to improve forest governance. This can be seen in civil society’s increased capacity to monitor forests. In the Congo basin, independent observation of the forest sector by local civil society groups in the Congo basin was non-existent just over a decade ago. Today, there are well-organised networks doing effective work and being considered as potential information sources to improve enforcement. Many in the region attribute this to targeted FLEGT investment over the past ten years that has built the capacity of civil society groups. At an event in Cameroon in November, Interpol representatives noted the presence and professionalism of civil society independent observers in the Congo Basin, their standardisation of data collection methods and their potential to contribute to efforts to address illegality. Interpol now sees possible opportunities for these networks to contribute to law enforcement efforts. The conference revealed that the current capacity of civil society organisations makes them relevant interlocutors that are organised and recognised by the administrations and international organisations in charge of forestry issues. Capacity, and use of independent observation findings, both remain issues but the upgrade from ten years ago is noteworthy.

In Indonesia, the Government has strengthened recognition of the rights of independent forest monitors from civil society in the latest revision of the SVLK (timber legality assurance system) regulation. The revision includes protections for independent forest monitors, access to information and monitoring sites, and specifies that the Government may facilitate efforts to obtain sustainable funding. Independent forest monitors have now created a trust fund to support their activities.

There is growing private sector engagement with efforts to promote legal timber trade. In Vietnam, four industry associations organised a workshop with Forest Trends called ‘Vietnam timber industry says NO to illegal timber’, and issued a joint statement, to coincide with initialling of the VPA, on the use, production and trade of legal timber and timber products.

The China National Forest Products Industry Association (CNFPIA) released its voluntary timber legality verification standard. Compliance by members of CNFPIA and the China Timber and Wood Products Distribution Association, which jointly account for more than 80% of China’s importers and exporters of timber and timber products, could have a significant impact on timber legality worldwide.

In the Republic of the Congo, the private sector reviewed and commented on the manual developed in 2017 for the management of non-compliances in the context of the VPA timber legality assurance system. This was the most significant private-sector participation in the VPA process for some years. This shows it is easier to engage the private sector on concrete pieces of work that can affect them (even negatively) than on a general dialogue. Companies there also expressed broad support for legality audits and the legality definition in general following a round of mock audits.

There are critical voices however as well. In Indonesia, parts of the furniture sector are questioning the benefits of FLEGT licensing. Both the EU and the Ministry of Environment and Forestry (MOEF) are directly engaged with them and provided information on EUTR. However, there are many misunderstandings. The private sector is also calling for more EU market-related communication on licences from Indonesia to help promote the benefits.

FLEGT licensing by Indonesia has successfully started and teething problems provide lessons for other VPA countries

Indonesia started to issue FLEGT licences on 15 November 2016. Within one year, it had issued more than 39 000 licences for exports to all 28 EU Member States with a total value of more than one billion euros. In addition, it issued more than 190 000 legality documents (V-legal Documents) for exports to other markets worth more than 10 billion euros. The Indonesian timber legality assurance system gives the authority to issue licences to independent private audit companies operating all over the country. The Ministry of Environment and Forestry conducts oversight.

With more than 2 000 registered exporters, 23 licensing authorities, 109 ports and a broad range of timber products, it has been a huge task to make licensing operational. Though capacity has been built for years, full operation of the licensing system required the Ministry of Environment and Forestry to conduct a series of awareness raising campaigns for private sector and local government officials, issue new guidance documents, and closely work with the EU and the Facility on the implementation of an action plan to address teething problems. This was despite Indonesia’s experience of issuing V-legal Documents for years.

Problems centred on mismatches between FLEGT licence information and the physical shipment (in particular in shipments by small-scale furniture operators), use of product codes (HS Codes), and mismatches between the paper licence and the licence database operated by Indonesia. The importance of an effective communication line between the EU Competent Authorities and the Ministry of Environment and Forestry became apparent.

FLEGT licences are a new export control measure between a VPA partner country and the EU. There is a need for all involved actors to fully understand the processes applied by each side and to learn about room to manoeuvre if problems occur. The Indonesian experience already guided a shipment test of timber products from Ghana to EU Member States that led to useful recommendations for Ghana’s licensing system. 

As more markets act to address illegality, greater EU engagement is needed to maximise benefits

More consumer markets are acting to control illegal timber imports. These shifts are resulting from growing recognition of the need to do this, exposure to measures being taken elsewhere, increased public pressure, and regional dialogue on timber legality. FLEGT has contributed to this change by promoting awareness and dialogue through, among other things, Facility-sponsored events. These developments represent a growing opportunity for the EU to engage with key markets and also create a new line of support for advancing FLEGT processes in producer countries.

  • Japan is putting its Clean Wood Act of 2016 into operation. South Korea’s legislation, which makes it an offence to import illegal timber and timber products, will enter into force in March 2018. There is an opportunity for the EU to cooperate with both countries and improve implementation of their laws by sharing lessons from the EUTR and promoting recognition by these markets of verified legal timber from VPA countries that have begun FLEGT licensing. Indonesia is already discussing this with Japan.
  • In October 2017, Australia announced reforms to its Illegal Logging Prohibition Act. Under the reforms, products certified by the Forest Stewardship Council (FSC) or the Programme for the Endorsement of Forest Certification (PEFC) are deemed to automatically comply with the legislation. FLEGT-licensed products are not – they only mitigate risks. The fact that FLEGT-licensed products do not have the same status as FSC or PEFC certified products in Australia could have a negative impact for FLEGT in the region and shows the importance of the EU engaging with this key market.
  • China’s State Forestry Administration is considering issuing measures to manage the legality of imported timber and timber products. The measures are an interim step that might eventually lead to a wider legal framework for addressing the legality of timber trade. The feasibility analysis on the incorporation of timber legality requirements into Chinese laws or regulations prepared in the context of the EU–China Bilateral Coordination Mechanism on Forest Law Enforcement and Governance informed discussions on actions that China could take to regulate the legality of timber imports. It is critical that the EU and EU Member States continue to engage in China to share the experiences from the EUTR and encourage the development of timber legality legislation. Import controls in China would have a significant impact on timber legality and the advancement of FLEGT processes worldwide.

Donors and governments are integrating VPAs, timber legality assurance systems and other FLEGT goals into other initiatives

There is growing recognition among donors and national governments that FLEGT can add value to other forest-sector initiatives, particularly REDD+ and wider national climate objectives.

  • The World Bank’s anticipated budget support to the Republic of the Congo includes three payment triggers explicitly related to the VPA: establishment and financing of the inter-ministerial committee for coordinating deployment of the IT tool (SIVL); publication of the regulatory text to operationalise the SIVL; and establishment of a state of play of the tax situation of the forest companies and recovery of any tax arrears by March 2020. The triggers have already been accepted in a meeting between the World Bank and the Government representatives. Final written validation is pending.
  • As part of its USD 40 million funding to support Laos in moving toward green growth, the World Bank in consultation with the FLEGT Standing Office has prepared a draft policy checklist and road map for a legal instrument to institute the timber legality assurance system, whose implementation it sees as necessary for achieving sustainable forest management.
  • In Liberia, Norway is using VPA work as a foundation for its broader forest and climate partnership, and is channelling part of its support through DFID and the EU.
  • Vietnam has included implementation of its VPA timber legality assurance system (VNTLAS) as one of the policies and measures necessary to strengthen law enforcement within its National Action Programme on REDD+, which the Prime Minister approved in April 2017.

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Endnotes

  • 1

    [1]A ‘programme logic’ is sometimes called a ‘logical framework’ and can be defined as an operational-focused tool that shows the sequence of activities, outputs and outcomes that a programme delivers over time. Markiewicz and Patrick in Developing M&E frameworks (SAGE Publications; 2016) say programme logic “indicates the intended causal connections and relationships between a program’s efforts and the intended results”.

  • 2

    [2]An EC-requested ROM evaluation of the FLEGT Facility took place in 2017. See Section 3 of this report for more detail.

  • 3

    [3]1. Participatory national decisionmaking; 2. Legislative and policy reform as identified in the VPA; 3. Timber Legality Assurance System; 4. Trade and FLEGT licences; 5. Domestic market measures; 6. Transparency commitments; 7. Communication; 8. Institutional strengthening and capacity building; 9. VPA monitoring structures and efforts; 10. Broader governance reforms and knock-on effects of the VPA into other sectors

  • 4

    [4]i) Policy reform; ii) Equitable and just solutions; iii) Verification systems; iv) Transparency and v) Capacity building.