Annual report

EU FLEGT Facility: Highlights and insights from 2017


This report presents the EU FLEGT Facility's progress towards its 2017 objectives and a summary of lessons learned. Section 1 shares the Facility’s insights into what is happening in FLEGT countries and the three regions where the Facility is active. Section 2 presents a summary and highlights of the Facility’s progress and lessons learned. 

1. 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.

2. Summary of Facility delivery

Overall delivery is positive

The Facility’s work was structured into 23 deliverables. These cover 16 FLEGT countries — of which one is FLEGT licensing, six are implementing VPAs, eight are negotiating VPAs, and one is not in a formal VPA process — as well as four regional deliverables, including China, and three cross-cutting deliverables.

Overall, the Facility's delivery on its work plan is positive (see Figure 1). Outputs not achieved were mostly in the SMEs component, planned for 2017 but postponed due to the delay in delivering the small and micro enterprise assessment and country reports. For the 16 FLEGT country deliverables, outputs that were not achieved mostly belong to intervention areas related to lessons learnt and domestic market measures.

Lessons learned from FLEGT deliverables

The Facility is involved in all VPA countries, and thus can see when a critical mass of experience emerges to offer lessons for other countries. In 2017, we saw a number of areas where countries were advancing to offer insight into strengths and weaknesses. These are highlighted below.

Independent audits

Independent audits are foreseen in each VPA as part of the timber legality assurance system with the objective of improving the system’s credibility. In 2017, the independent audit was operating in four countries (Ghana, Indonesia, Liberia and Republic of the Congo). The Facility was involved in all of these audit processes — evaluating reports, reviewing terms of reference, providing lessons learned from other processes. As a result, the Facility has noticed emerging trends of which to be aware and cautious. Unfortunately, audits are proving more challenging than expected in terms of contracting and of auditors understanding their role. The audits are crucial for the credibility of the FLEGT process once licensing begins, so they are important to get right. The likely teething problems justify the launch of independent audits relatively early in the implementation process.

Impact monitoring

Impact monitoring, a legal obligation in each VPA, is a mechanism for the parties to examine whether a VPA is having the desired outcomes. It can also identify unintended negative effects for the parties to address and mitigate (in line with the VPA article on social safeguards). In 2017, five countries were active in advancing impact monitoring baselines (see box, below). The Facility has supported all of these processes, by participating in impact monitoring meetings, supporting reflection, and providing countries with expertise as needed as they develop monitoring frameworks and methodologies. Facility support has been strengthened through a Facility-financed consultant contract which supported impact monitoring work in Cameroon, Ghana, Liberia and the Republic of the Congo.

In the Facility’s experience, two challenges for monitoring are the availability of data and the capacity of a country to collect, store and analyse information regularly. However, governments and donors often underestimate the capacity and intra-ministerial coordination needed for the work.

Key lessons emerging from this work include the importance of embedding monitoring in existing reporting mechanisms. In Ghana, the Forestry Commission was clear that the success of a newly-introduced framework would depend on the ease with which existing administrative structures and reporting processes could accommodate it. Ghana’s framework is therefore based on existing reporting structures and mechanisms.

Another important lesson is that for many VPA countries, data collection and monitoring is dictated by specific project needs and is thus fragmented, not having a holistic overview of the forest sector. After reviewing the first collection of baseline data in Ghana, the Joint Team on Impact Monitoring in Ghana anticipates that impact monitoring data will help centralise disparate information produced by the various units, provide a practical view of what is happening across the sector, and present it in a coherent manner to facilitate evidence-based decision making. This may be similar for other countries.

Status of impact monitoring in five VPA countries

Ghana finalised its impact monitoring framework, which monitors change at both the national and sub-national level, and has compiled baseline data for six impact areas. The Joint Monitoring and Review Mechanism tasked the Joint Team for Impact Monitoring (JTIM) to take this work forward. The Facility is a team member as is the EU Delegation. In 2017, the JTIM presented their framework and baseline data to stakeholders to identify and correct gaps. This will be taken forward with stakeholders in 2018. Ghana has also established the institutional structures for the framework to function and collect data regularly, having established an impact monitoring facilitator.

Indonesia started impact monitoring work in 2016, when a consultant team prepared a methodology that the Joint Implementation Committee approved that same year. In 2017, the consultant team focused on compiling baseline data for five impact areas. This has been a challenging task as many of the data needed are partial or not available. The consultants were able to only collect data on three of the impact areas. DFID has been supporting this process through their MFP3 program and in collaboration with the Ministry. The Facility has been supportive in reviewing reports and accompanying the process. In 2018, the impact monitoring work will review the methodology, build on lessons learnt on data availability but also assess usefulness of some of the indicators. Experience will also be needed on how to analyse trends.

Liberia and the EU agreed on a monitoring framework which includes a site-based approach for impact monitoring. Liberia also developed baseline studies of several large concessions. This work highlighted data gaps and what could be done to improve data gathering and monitoring. The Facility financed consultant team has been helping Liberia develop their framework and methodology.

The Republic of the Congo has drafted a 5-year monitoring and evaluation framework, which will be used in 2018 to finalise an impact monitoring framework and launch the necessary baseline studies.

Cameroon started work on impact monitoring in 2015, and different stakeholder groups have revised and agreed to a draft impact monitoring framework. Further work is needed to test the framework and compile baseline data.

Application of tools to help frame, implement and monitor actions moving forward

The European Commission has insisted more strongly on effective management tools for the VPA processes, with milestones, better oversight, etc. New tools are leading to different ways of working, improving coordination and leading to unexpected benefits. Political dialogue among the partners is crucial to make these tools and approaches effective.

  • Prompted by the EC, a stock-take of VPA implementation in the Republic of the Congo was organised in October 2017 and the Facility contributed technically and financially. It was coupled with a strategic planning retreat that resulted in the development of improved implementation planning and monitoring tools. While the stock-take documented issues that the two parties were largely aware of, the planning retreat, which included work on a theory of change, allowed people to have a fresh look on initial stakeholder assumptions and necessary actions to take forest governance forward. Both the stock take and the strategic planning retreat were timely and effective as Congolese stakeholders themselves identified and admitted the need to revise the way VPA implementation was planned and monitored, and because proper training was provided to make the planning tools useful. The resulting tools are fully owned by the Congolese stakeholders who are motivated to pursue the implementation according to the plan.
  • In Vietnam, in response to the EC's proposal and parties’ agreement on key elements for interim governance arrangements, key actors in Vietnam prepared a Joint Implementation Framework with support from the Facility financed FLEGT Facilitator. The framework provides a basis for strategising, overseeing and monitoring the implementation of the VPA. Stakeholders were consulted on the framework before it was endorsed by the pre-JIC. Vietnam has also begun preparing, with guidance from the Facility and the FLEGT Facilitator, an investment and resource plan to support implementation of the VPA timber legality assurance system.
  • In Liberia, monitoring by the Joint Implementation Committee (JIC) of the implementation of the VPA has improved with the use of the ‘forward planner’, which the Facility helped develop. It focuses on key priorities related to VPA implementation and helps to track progress effectively. In 2017, the Facility advised the JIC on how to use the forward planner to monitor the VPA efficiently. The JIC is now setting priorities and tracking progress around VPA timber legality assurance system principles and other elements according to the planner. The National Multi-Stakeholder Monitoring Committee (NMSMC) is also using the tool along with the action plan to discuss progress of agreed actions.
  • In Laos, the parties made progress on a joint assessment to support a shared understanding of the context, challenges and potential ways forward for the VPA. Initial scoping work conducted by the Facility identified components of the forest sector baseline for use in future monitoring, as well as gaps and priorities for assessment. Work on the latter assessments financed by the Facility has helped to identify policy and regulatory reforms and initiatives relevant to the VPA process, and opportunities and constraints to the use of supply chain information to provide evidence of timber legality.

Thematic work for cross-VPA learning and strategic guidance on FLEGT

The capture of FLEGT lessons by Facility’s experts provided the basis for cross-VPA learning on topics including:

  • The transfer of experience with shipment testing from Indonesia to Ghana
  • Guidance on how VPAs addressed land tenure to inform options for Honduras
  • Guidance on how Vietnam addressed imported timber to inform options for Thailand
  • Guidance drawn from Vietnam on negotiations relayed to Laos, and on transitioning to implementation made available to Guyana and Honduras

The Facility’s experts supported strategic reflection on key topics of broader relevance to FLEGT, including:

  • Supply side issues, by exploring options for using FLEGT to better address forest conversion and approaches to advance FLEGT in timber-exporting countries — this resulted in two papers prepared ahead of the EC’s conference in May on tackling deforestation and illegal Logging
  • Demand side issues, by comparing the EU Timber Regulation (EUTR) and Japan’s Clean Wood Act, and by analysing the VPA systems Indonesia and Vietnam use to control timber imports
  • Potential supply/demand synergies between EUTR implementation and FLEGT support to timber producing countries.

The Facility also systematically captured problems identified with FLEGT licensing and prepared an internal ‘Briefing on FLEGT licensing: Lessons learnt from Indonesia’, and conducted trade analysis to prepare targeted guidance on individual countries, such as Ghana.

Communication highlights

Strategic communication

The Facility supported FLEGT actors to communicate effectively and efficiently about FLEGT and its contribution to addressing broader development challenges. In particular, it produced a draft communication strategy for the Liberia-EU Joint Implementation Committee and continued its work with Ghana. It also facilitated communication activities in other VPA countries, including Guyana, Honduras, Laos, Thailand and Vietnam.

The Facility produced communication materials to raise visibility around the first anniversary of FLEGT licensing, generating news coverage that reached an estimated audience of 9 911 900 people across Indonesia. It generated social media materials used by partners globally. The Facility also provided content for a special edition of the European Timber Trade Federation newsletter.

Knowledge management

The Facility captured and shared knowledge about the impact of VPA processes on forest governance and the contribution of VPAs to broader development goals. It produced and commissioned content such as stories and social media activities, and proactively facilitated knowledge sharing through FLEGT.org. Overall, the Facility shared 47 feature stories, news stories and opinion pieces through FLEGT.org, the Facility website and Capacity4Dev.

Supporting media relations

The Facility contributed to more accurate and balanced media coverage about FLEGT and VPA processes by producing media content and advising partners on media engagement around milestones and contentious issues. It developed media rooms for eight VPA countries, in addition to the seven developed in 2016. The Facility also drafted press materials and talking points for VPA partners. A review of 2017 media coverage found that there were at least 1 970 media reports in 65 countries and 22 languages mentioning FLEGT or VPAs. More than half of all stories were published in Indonesia or Vietnam, while other VPA countries accounted for another 10% of the total. Coverage in EU Member States accounted for 13% of the total, making the EU the third largest source of coverage after Indonesia and Vietnam.

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  • 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.