Media backgrounder

The Laos-EU Voluntary Partnership Agreement

This media backgrounder provides journalists with information on the Laos-EU Voluntary Partnership Agreement, which aims to address illegal logging, improve forest governance and promote trade in legal timber products. The backgrounder explains the aims of the VPA, progress to date and next steps.

Quick read

  • Illegal logging creates social problems, environmental degradation and loss of economic opportunities. It undermines sustainable development and sustainable forest management.
  • In April 2012, Laos and the EU began a process to move towards negotiation of a Voluntary Partnership Agreement (VPA) to promote trade in legal timber products and improve forest governance. The Prime Minister approved formal negotiations in 2015. The first negotiation session will be held in 2017.
  • VPA negotiations usually take several years and the conclusion of such an agreement would represent is a long-term commitment by the Government of Laos to improve its forest governance and law enforcement.
  • Under a VPA, Laos would review its forest legislation and policy and, through a multistakeholder process, develop a timber legality assurance system so it can issue FLEGT licences to verified legal timber products. Laos would also make other commitments on transparency and independent monitoring.
  • Once FLEGT licensing begins, a valid FLEGT licence must accompany all exports to the EU of timber-based products covered by the VPA.
  • FLEGT-licensed timber products can enter the EU market without undergoing the due diligence checks required by the EU Timber Regulation.

The forest sector in Laos

The forests of Laos have undergone extensive change – first by commercial logging then conversion for agriculture, plantations and infrastructure. Legal and illegal harvesting of timber reduced forest cover from 70% of the land area in the 1950s to 40% in 2010. Deforestation and forest degradation remain significant challenges.

Forests make an important contribution to the economy of Laos, and provide jobs and livelihoods to local people. However, the forest resource is shrinking.

Primary products such as logs and sawnwood dominate exports from Laos, while secondary processing and production of timber products such as pulp and paper and furniture is minimal. In 2016, however, Laos banned exports of logs and raw logs and primary wood products.

Before the enforcement of the export ban, the main export markets for timber products from Laos were Vietnam and China. Direct exports of timber to the EU are currently minimal. They were worth about US$520,000 in 2014. Nevertheless, the other main Lao export markets are significant re-exporters of products manufactured from timber from Laos. It is therefore likely that some Lao timber used to reach the EU via these countries. 

What is a VPA?

A Voluntary Partnership Agreement (VPA) is a legally binding trade agreement between the EU and a timber-exporting country outside the EU. A VPA aims to ensure that all timber and timber products destined for the EU market from a partner country comply with the laws of that country.

In addition to promoting trade in legal timber, VPAs address the causes of illegality by improving forest governance and law enforcement. A major strength of VPAs is that they look beyond trade to consider development and environmental issues.

Stakeholders in government, the private sector and civil society develop VPAs through a participatory process. A VPA is, therefore, a vehicle for addressing the needs of different stakeholders and for including many people who have never before had a voice in decision-making.

VPAs are a key component of the EU Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan of 2003. Laos is one of nine tropical countries that are negotiating VPAs with the EU. Six more countries have ratified VPAs and are implementing the agreements. In 2016, Indonesia became the first VPA country to issue FLEGT licences.

Key elements of a VPA

Key elements of a VPA are described in its main text and annexes. In countries where VPAs have already been signed, these include:

  • A timber legality assurance system to verify that timber products are legal and can be issued with FLEGT licences.
  • Commitments to legal reforms, public disclosure of information and other improvements to forest governance.
  • A framework for overseeing, monitoring and evaluating implementation of the VPA and its economic, social and environmental impacts.

How a VPA promotes legal timber trade

A VPA partner country that has implemented a timber legality assurance system and other VPA commitments can issue verified legal timber products with FLEGT licences. The advantage of this is that FLEGT-licensed products automatically meet the requirements of the EU Timber Regulation (EUTR), which prohibits EU operators from placing illegally harvested timber and timber products on the EU market.

The EUTR entered into force in 2003. It requires EU operators to perform due diligence checks to ensure the timber products they place on the EU market are legal. FLEGT-licensed timber meets the due diligence requirements under the EUTR.

A VPA partner country can only issue FLEGT licences through a timber legality assurance system that the EU and the partner country have agreed on, developed and tested. Before a country can begin FLEGT licensing, the EU and the partner country must confirm that the country’s timber legality assurance system works as described in the VPA. Confirmation by the two parties means that the system is robust and will issue FLEGT licences only to legal timber products.

While FLEGT licensing is an important goal, it is not the end point of a VPA process. Governance reforms, legislative and policy reforms, impact monitoring, improvements to the timber legality assurance system and other activities continue after the start of FLEGT licensing.

Through progress on VPAs, the EU Timber Regulation and dialogues with other important timber markets, including China, the EU and the VPA partner countries are contributing to a growing global movement to address trade in illegal timber and timber products. The United States and Australia also prohibit the placing of illegal timber on their markets. The process to achieve FLEGT licences may therefore help VPA partner countries such as Laos meet the legality requirements of markets beyond the EU.

The Laos-EU VPA

Although the VPA negotiation process began in 2012, it was not until June 2015 that the Prime Minister authorised formal negotiations. Following the approval, Laos quickly set up its negotiating structure – establishing a National Steering Committee and appointing a Chief Negotiator. In October 2015, Laos communicated to the EU its readiness to negotiate.

Laos and the EU will negotiate the terms of the VPA through a cooperative process: both parties share the goal of fostering good forest governance and addressing illegality.

The EU advocates for wide participation, in order to foster significant national ownership, stakeholder engagement and a broad consensus that will promote effective VPA implementation.

Experience shows that VPA negotiations are complex and take place over a period of years. The national stakeholder process plays a key role during the negotiations. Stakeholders discuss, and consensus emerges, on fundamental issues related to forest legislation and policy, supply chain controls, access to information and transparency, and independent monitoring.

Following the conclusion of negotiations, Laos and EU will sign and ratify the VPA and its commitments will become legally binding. A Laos-EU joint body will oversee the implementation of the VPA and respond to concerns as they arise. VPA implementation can therefore improve as it proceeds.

In order to issue FLEGT licences as required by the VPA, Laos will build on existing national initiatives to develop a robust timber legality assurance. Laos will begin issuing FLEGT licences only when the timber legality assurance system has been successfully tested, and when Laos and the EU are satisfied that it functions as described in the VPA.

VPAs must also include commitments to improve transparency, accountability, legislative clarity and other aspects of governance.

Efforts to tackle illegal logging in Laos

Laos has made some efforts to address illegal logging and manage its forests sustainably. The Government of Laos recently strengthened its ban on the exports of raw logs and primary wood products from natural forests, and plans to improve the forestry sector by increasing intensively-managed tree plantations.

The government is revising major laws, including the National Land Policy and Forestry Law. The Prime Minister also established a National Steering Committee in 2015, giving Lao civil society organisations a historic opportunity to influence policies that affect forest governance.

Laos has made steady progress since 2012 when it expressed interest to the EU in the FLEGT VPA process. In 2015 the Prime Minister’s Office approved the VPA process and importantly provided for a full multistakeholder process that includes Lao non-profit associations participating at all levels.

Laos chose to enter the VPA process to:

  • Improve law enforcement, capacity and the overall governance regime in the forest sector
  • Progress towards improving local livelihoods through sustainable management of forests
  • Maintain access to regional and EU markets for Lao timber

Laos also aspires to raise awareness of the benefits of timber legality, improve forest governance and strengthen existing policies. The VPA process could also benefit the ongoing revision of land and forest laws.

Key dates:

  • 1990s: Laos begins revising its natural resources management policies due to concerns about sustainability
  • 2005: Laos publishes its ‘Forestry Strategy to the Year 2020’
  • 2007: Laos puts stronger focus on enforcement by creating the Department of Forest Inspection after the revision of Forestry Law
  • 2010: The Lao government requests an informal information exchange with the EU to begin preparations for a VPA process
  • 2011: Laos and the EU undertake studies to prepare for VPA negotiations
  • 2011: Lao government begins to revise the National Land Policy
  • 2012: In April, VPA negotiation process officially starts
  • 2012: Laos sets up an inter-departmental Working Group on FLEGT and appoints a Focal Point
  • 2013: Ministry of Agriculture and Forestry opens a FLEGT standing office to provide support on the VPA process with support from Germany’s Agency for International Cooperation (GIZ)
  • 2015: Prime Ministerial Decision No. 65/PM of 19/8/2015 establishes a multistakeholder National Steering Committee for the VPA
  • 2015: In October, the VPA National Steering Committee has its first meeting
  • 2016: Prime Minister issues Order No. 15/PM of 13/05/2016 on ‘Strengthening Strictness of Timber Harvest Management and Inspection, Timber Transport and Business’
  • 2017: First face-to-face VPA negotiations between the EU and Laos

Laos’s timber legality assurance system

Under a VPA, Laos would commit to develop a system for assuring the legality of its timber. As in all VPAs, the timber legality assurance system must have the following five components:

  1. Legality definition: The legality definition states the aspects of a VPA partner country’s law for which the timber legality assurance system evaluates evidence of compliance.
  2. Supply chain controls: Supply chain controls ensures that timber products verified as legal remain legal throughout all processes associated with the supply chain. Supply chain controls also prevent verified legal products being tainted by unverified products entering the supply chain.
  3. Verification of compliance: Verification of compliance involves checks that all the requirements of the VPA legality definition and supply chain controls have been met to ensure that timber products are legal.
  4. FLEGT licensing: A FLEGT licensing authority issues FLEGT licences to consignments of timber products that the verification mechanism has confirmed are legally compliant. FLEGT licensing cannot begin until a joint evaluation of the timber legality assurance system by Laos and the EU confirms that the system works as described in the VPA (see Next steps).
  5. Independent audit: The independent audit regularly checks that all aspects of the legality assurance system work properly. An annex to the VPA provides terms of reference for the auditor. 

How the Laos-EU VPA can improves forest governance

Greater participation in decision-making

In 2015 the Prime Minister of Laos set up a multistakeholder National Steering Committee on the VPA, giving stakeholders in Laos unprecedented access to influence policies that affect forests.

The Prime Ministerial Decision specifies members of the National Steering Committee from government as well as participants from:

  • The Lao National Chamber of Commerce and Industry, which represents wood industry associations
  • ‘Mass Organisation’, which encompasses trade unions, youth union, women's union, etc.
  • Non-profit associations / civil society organisations (see below)

The VPA process is therefore becoming a vehicle for addressing the needs of different stakeholders and for including many people who have never before had a voice in decision-making.

Opportunities will need to be sought to ensure that all stakeholders – in particular non-profit associations and those hard to reach parts of the private sector – can fully engage in the VPA process and can confidently raise their interests and concerns.

Growing opportunities for civil society to influence forest policies

In August 2015, 20 civil society groups established a platform called Lao CSO FLEGT and chose five organisations to represent them in the VPA process:

  • Lao Biodiversity Association
  • Wildlife Conservation Association (WCA)
  • Association for Community Training and Development (ACTD)
  • Rural Research and Development Promoting Knowledge Association (RRDPA)
  • Maeying Houamjai Phathana (MPH) — Women Participation in Development Association

The organisations were chosen based on the relevance of their work to FLEGT, level of interest in the VPA process, English skills, attitude towards forest governance, and willingness to represent CSOs in the negotiations. An independent observer was also present to ensure the election process was free, fair and transparent.

Representatives from the five associations will take part in the National Steering Committee, the National Support and Development Committee and the Technical Working Group.

Enhanced capacity to address illegal logging

The VPA process is strengthening the capacity of government, the private sector and civil society to work together to address illegality in the Lao forest sector. Full participation in policy making processes is relatively new in Laos and capacity building is necessary to further develop this. The Lao government also aims to use the VPA process to build the capacity of the timber industry in the country. This means having more value-adding industry, reduced exports of raw logs and primary products from natural forests and more intensively managed plantations of industrial tree crops. With increased capacity in these areas the government of Laos sees the VPA process as an opportunity to have greater access to the EU market and increase revenues from export.

Effective control of forest conversion

Forest conversion has provided the main source of timber since the moratorium on logging in production forest areas. As such Lao would be the first country entering a VPA process where most if not all its timber is derived from conversion. This presents Lao and the EU with the opportunity to explore ways forward that can best address legal and illegal conversion.

More transparency

VPAs signed to date include an annex that lists the information the government of the timber-exporting country commits to making publicly available.

Legal reforms and improved legal clarity

The VPA process in Laos provides opportunities to clarify what is legal and to identify overlaps, gaps and contradictions in the legal framework. 

Next steps

Start negotiation sessions

The first negotiation session is anticipated for early 2017. Through negotiations Laos and the EU will agree upon the content of the VPA and its annexes, including important aspects such as the legality definition, the scope of products the VPA will cover, the design of the timber legality assurance system and commitments to make information public. Based on experiences in other countries, this negotiation process is expected to take several years.