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Annual report

EU FLEGT Facility: Highlights and insights from 2018

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.

Insights

There was good momentum and progress with FLEGT in 2018

Bilateral dialogues between the EU and VPA countries continue to drive progress: Overall, there was strong momentum in VPA processes in 2018. Three more countries achieved key milestones:  Guyana and Honduras both initialled their VPAs with the EU and thus concluded their respective negotiations; the EU and Vietnam signed their VPA and are preparing implementation activities.

A second round of VPA negotiations took place between the EU and both Laos and Thailand. There were also six meetings of the Joint Implementation Committees (JICs) for five further VPAs. These meetings are where the EU and a VPA partner country assess progress, discuss challenges and outline next steps. In the case of Liberia, the 2018 JIC meeting was the first with the country’s new Government. There were two JIC meetings between the EU and the Republic of the Congo, following a stock-taking exercise in 2017 that reinvigorated the process. 

In 2018, a similar stock-take revitalised talks between the EU and Côte d’Ivoire and led them to agree to continue their VPA negotiations and have a political dialogue early in 2019. Strong stakeholder discussions around the stock-take indicated good momentum moving forward. The EU and Cameroon also agreed to undertake a stock-take early in 2019. These exercises are proving to be useful for assessing the situation, evaluating practical ways forward, and rebuilding consensus around priorities.

Some highlights of 2018

Some highlights of 2018

Clockwise from top left: Guyana-EU VPA initialling; Congo-EU APV follow up report presentation; Vietnam-EU VPA signing; Honduras-EU VPA initialling

Source: EU FLEGT Facility

Some highlights of 2018

Clockwise from top left: Guyana-EU VPA initialling; Congo-EU APV follow up report presentation; Vietnam-EU VPA signing; Honduras-EU VPA initialling

Source: EU FLEGT Facility

Markets are taking note and supporting legal timber: In October, South Korea became the first country in East Asia to implement mandatory legislation that regulates the legality of imported and domestic timber and timber products. South Korea has reached out to many of its markets to inform them about its new legislation, and has so far drafted 45 supplier-country guidelines for its national operators. Timber products verified as legal by FLEGT VPA systems are deemed to comply with the legality requirements of the new legislation. In a further boost for FLEGT, China and Indonesia are having technical exchanges on China’s potential recognition of FLEGT-licensed timber. To inform this dialogue, the Chinese Academy of Forestry has nearly completed a study exploring how China could recognise FLEGT-licensed timber from Indonesia.

Growing interaction among VPA countries is boosting progress through lesson-sharing, collaboration and new synergies

There has been an increase in exchanges among VPA countries. This appears to reflect both growing national ownership of VPA processes as well as an intrinsic value of the VPA approach. Progress in one country can lead to efficient action in another, including through synergistic effects.

For example, Indonesia welcomed a delegation from Laos to share experiences on independent monitoring. And a delegation from Vietnam travelled to Laos to discuss the legality of cross-border timber trade. In November, a delegation from Laos visited Liberia and, together with a team from the Republic of the Congo, also visited Ghana. These visits allowed exchanges on timber legality assurance system design, stakeholder engagement and other aspects of VPA implementation.

Ghana and Liberia share timber legality lessons with Laos and Congo

Source: Forest & John Bitar & Co. Ltd.

Ghana and Liberia share timber legality lessons with Laos and Congo

Source: Forest & John Bitar & Co. Ltd.

In October, forest ministers from Cambodia and Vietnam agreed to work together to closely manage and unify the issuance of permits under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) in order to avoid having counterfeit permits or illegal export licences. Later in the month, representatives from the two countries held a policy dialogue on legal and sustainable timber trade.

Regional initiatives are also bringing together VPA countries. In August, government, civil society and private sector representatives from member States of the Association of Southeast Asian Nations (ASEAN) and China met in Thailand to share their progress and strengthen collaboration on timber legality, forest governance and trade. Legality assurance systems and import controls were key themes. In November, representatives of the police, customs and forestry authorities from many of the same countries met to develop collaboration on controlling movement of illegal timber.

Under the ASEAN Work Plan on Forest Law Enforcement and Governance (FLEG), governments and the private sector have drafted an ASEAN code of conduct on timber imports that ministers are set to endorse in 2019.

TLA Workshop

TLA Workshop

Chiang Mai, Thailand, July 2018

Source: EU FLEGT Facility

TLA Workshop

Chiang Mai, Thailand, July 2018

Source: EU FLEGT Facility

Indonesia and EU successfully addressed technical challenges with FLEGT licences

Indonesia started to issue FLEGT licences on 15 November 2016. Within two years, it had issued more than 70 000 licences for exports to all 28 EU Member States with a total value of over two billion euros. In this time, there have been some teething issues with the content of FLEGT licences. These include mismatches between licence information and the physical shipment (in particular for shipments by small-scale furniture operators), in the use of ‘HS’ product codes, and between the paper licence and the data in the Ministry of Environment and Forestry’s online portal, which publishes real-time information on issued licences.

To address these issues, the Ministry of Environment and Forestry continued awareness-raising campaigns for the private sector and local government officials, clarified the regulatory framework and coordinated with Customs. Indonesia worked closely with the European Commission (EC), EU Competent Authorities and the Facility. Weekly updates on issues the Dutch Competent Authority identified with licences proved especially useful, and have shown a strongly declining trend since mid-2018 (Figure 1).

The EU and Indonesia have started to explore electronic licensing to further reduce issues with licences and to accelerate information exchange. Work will continue in 2019. Meanwhile, the Indonesian experience has already guided discussions between the Government of Ghana and stakeholders in that country on the licensing system it is implementing.

Figure 1.

Figure 1.

Issues with FLEGT licences reported each month by the Dutch Competent Authority in 2018

Figure 1.

Issues with FLEGT licences reported each month by the Dutch Competent Authority in 2018

VPA promotion of transparency benefits businesses and civil society

Transparency in the forest sector matters because people need to know about laws, decisions and business activities that affect them. This enables them to use such knowledge to good effect. The 2018 report on progress under the New York Declaration on Forests showed that VPA processes have promoted increased transparency. 

All VPA countries commit to increasing public access to forest sector information, and they are doing so even before VPA negotiations have concluded. In Laos, for example, the VPA process has led to the development of a forest legality compendium, a document that compiles and explains legislation related to the timber supply chain. Stakeholders have used this document to expose and discuss gaps and inconsistencies in the legal framework, and thereby build a stronger legality definition.

Operators can use information made public through VPA commitments to improve business practices and due diligence. Indonesia, for example, now lists all legally-verified companies online, enabling importers to check whether an exporter is certified and exporting verified legal timber. Indonesia also now publishes information on cases of non-compliance by legality-verified companies and conformity assessment bodies. And in Ghana, the Forestry Commission and civil society groups have developed a ‘timber transparency portal’ that gives real-time information on logging permits, companies and timber exports.

Civil society groups can also use such information and VPA transparency commitments to support independent scrutiny of the forest sector, curb corruption and illegal logging, and push governments to address the problems.

Indonesia JIC meeting

Source: EU FLEGT Facility

Indonesia JIC meeting

Source: EU FLEGT Facility

EU imports of FLEGT-licensed timber are rising, but have yet to reach their potential

Indonesia is still the only VPA country that is issuing FLEGT licences, which it began doing in November 2016. According to the International Tropical Timber Organisation (ITTO), the EU’s imports of wood products from Indonesia increased by 7% in the first half of 2018, increasing Indonesia’s share of total EU imports from 15.7% to 16.6%. The ITTO also suggests that Indonesia has benefitted from increasingly strict enforcement of the EU Timber Regulation (EUTR), with which FLEGT-licensed products automatically comply.

Despite the reported market increase, EU-based operators say timber legality and the availability of FLEGT-licensed timber are not yet key factors in their purchasing decisions. Even though they acknowledge that the certainty of legality that FLEGT-licensed timber provides has made trade easier, they say FLEGT is not a demand driver. Operators do take account of timber legality alongside social aspects and environmental compliance, but price, quality and availability are the main drivers of purchasing decisions. 

Feedback from the private sector is that they need more information about the sustainability credentials of FLEGT-licensed timber and that until a ‘critical mass’ of countries are exporting FLEGT-licensed timber, interest will remain limited. 

There is growing recognition of the important socioeconomic roles small and micro entities play in timber-exporting countries

Small and micro enterprises (SmEs) are a major force in the forest sectors of many timber exporting countries involved in FLEGT processes. However, they present significant challenges because they are: 

  • Highly diverse — including small businesses, households and even individuals 
  • Often informal — in some cases formal registration is a legal requirement but in others it is not
  • Poorly understood — in most countries, robust data on small and medium enterprises is outdated or not disaggregated, and for micro-scale entities it is nearly non-existent

Recent Facility assessments and other studies in the Mekong region have revealed that small and medium enterprises make about 90% of wooden furniture in Myanmar, that households manage more than 90% of the timber plantations in Vietnam (1.4 million households), and that small enterprises alone generated an equivalent to 29% of the total GDP in Thailand. 

These assessments also showed that timber-sector policies and laws do not adequately reflect the needs of household enterprises even though they play a key role in local — and, increasingly, international — wood markets and provide jobs and livelihoods for many people.

As VPA processes lead more countries to clarify their legal frameworks, increase law enforcement and change policy, smaller-scale entities could be vulnerable if their needs and challenges are not well understood. More work needs to be done to understand this group of actors so that practical solutions can be developed to help integrate them into verifiably legal supply chains.

Fortunately, national stakeholders, through access to relevant information, are beginning to recognise the socioeconomic importance of SmEs (both formal and informal). They are now considering this in the development of legality definitions and implementation of timber legality assurance systems. But there is still a long way to go, in particular with formalisation of the sector. 

Forest workers in Ghana

Forest workers in Ghana

Source: Forest & John Bitar & Co. Ltd.

Forest workers in Ghana

Source: Forest & John Bitar & Co. Ltd.

The FLEGT community and countries are starting to focus on gender-related issues

Donors have challenged the FLEGT community to consider gender inequalities and whether — and how — FLEGT could address them. Some organisations and projects have started to collect gender disaggregated information. And countries themselves are starting to recognise gender issues in their FLEGT deliberations. For example, work is underway to ensure the Honduras-EU VPA implementation framework can strengthen gender equality.

Experience suggests that, compared to men, women frequently have less of a say in decision-making processes related to forests and are less likely to receive a fair share of benefits arising from forest use. However, inequalities are often country-specific and more targeted analysis is needed to determine the barriers to equality.

Recent studies and project activities are showing that women working in the forestry and timber product sectors of VPA countries are often home-based or informal workers, and that they tend to be paid less and have less secure jobs than men. They also show that the forest sector is male-dominated despite women playing important roles through their work in plantation management and manufacturing, or as business owners or financial managers.

Studies are showing that while participation and empowerment of women, through equal opportunities and equal wages, are enshrined in the national regulatory frameworks for VPA countries in the Mekong, implementation of these frameworks has yet to happen. These studies revealed that the implementation of such frameworks faces not only technical gaps but also challenges rooted in broader traditional, cultural and social arrangements that hinder women’s participation and empowerment.

 

Zaida María Sánchez Mejía

Zaida María Sánchez Mejía

Coordinator of the Women’s Area of the Honduras Naua Indigenous Federation (FINAH), member of the Confederation of Indigenous Peoples of Honduras (CONPAH)

Source: EU FLEGT Facility

Zaida María Sánchez Mejía

Coordinator of the Women’s Area of the Honduras Naua Indigenous Federation (FINAH), member of the Confederation of Indigenous Peoples of Honduras (CONPAH)

Source: EU FLEGT Facility