Illegal Logging and Related Trade: Indicators of the Global Response

Preliminary results for Republic of Congo, DR Congo & Papua New Guinea

Sam Lawson

Associate Fellow

Episode VI: ATTACK OF THE, ER, GOVERNANCE FAILURES

RECAP: Chatham House previously developed standardised indicators

for measuring illegal logging & associated trade, and the response

In 2008/09, examined 5 producer countries (Brazil, Cameroon, Ghana,

Indonesia, Malaysia), 5 consumer countries & 2 ‘processing’ countries

Look at:

Attention to the problem

Scale of the problem

Response of government & private sector

Different indicators for producer countries (where IL occurs) and

consumer and processing countries (import illegally sourced wood)

In 2012-2013, assessed 3 new producer countries (Rep of Congo, DR

Congo, Papua New Guinea)

Will shortly be publishing individual country reports, one-page summaries,

and providing all data on bespoke website

In 2013-2014, will also be re-assessing original 12 countries

Methods (Producer Countries)

Media review (qualitative, quantitative; global, local)

- High-level arrangements

- Legislative framework

- Checks & balances

- International engagement

- Supply & demand

- Tenure & use rights

- Chain of custody

- Transparency

- Allocation of hvsting rights

- Law enforcement

- Information management

- Financial management

GOVERNMENT RESPONSE

Confidential expert perceptions survey (~30 respondents, mix of gov, priv,

NGO/other)

ATTENTION

Policy assessment

Enforcement data

Revenue capture data

Methods (Producer Countries)

Wood balance analysis Measure of extent to which actual harvest exceeds licensed harvest

Unlicensed harvest = Consumption (dom + exports) – legal supply (prod + imports)

Growth of relevant voluntary schemes

Examination of trade data discrepancies for signs of illegal trade

EXTENT OF PROBLEM

PRIVATE SECTOR RESPONSE

Expert perceptions survey (all types of respondent)

Private sector addendum survey

Monitor sensitive market share

Confidential expert perceptions survey

Any other available information & evidence (country-specific)

Background / Context

Very little in-country processing, most timber exported as logs

Proportion of exports to ‘sensitive’ markets: Congo – 30% DRC – 40%,

PNG - <2% (proportion declining in all three)

DIFFERENCES

WHAT THEY HAVE IN COMMON

Handful of companies responsible for most industrial logging

Domestic markets mostly supplied by unlicensed ‘artisanal’ logging

Both industrial and artisanal log production increasing

Among the world’s largest tropical forest nations

Among the world’s largest tropical timber exporters

Among the world’s most corrupt nations (144, 150 & 160 of 174 –TI 2012)

Among the world’s poorest countries (121, 134, 180 of 180 – GDP PPP WB)

Private sector response: certification & verification

0%

5%

10%

15%

20%

25%

30%

2006 2009 2012 2006 2009 2012 2006 2009 2012

Republic of Congo DRC PNG

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Independent Certification & Verification, 2006-2012

Certified legal and sustainable

Verified legally compliant

Verified legal origin

Mostly suspended early 2013 due to issues with Danzer concession in DRC

Terminated early 2013 (conflict with local comms, illegal logging)

Will expire in 2016 and cannot be renewed

Lowest total of all 7 producer countries

Better than DRC & Gabon, but worse than Cameroon

Private sector response

Almost all production in Congo destined for sensitive markets is already

verified or certified; little likelihood of further growth – actually now declining

(along with sensitive market share)

SGS is phasing out its independent legality verification system, while

Rainforest Alliance is phasing out its VLO standard

Though in theory, FLEGT VPA LAS in most producer countries will make

voluntary legality verification redundant, there is likely to be a gap in-

between, during which EUTR is already in place => potential problems for

‘good guys’ wishing to demonstrate legality

Proportion of DRC exports destined for ‘sensitive’ markets rapidly declining

(90% in 2007; 40% in 2012) – at current rate, by the time any EU FLEGT

VPA is implemented, there may be no exports to the EU any more

Levels of illegal logging

Average estimates of proportion of harvesting illegal:

- Congo: 37% (wide range of views, from 20-90%)

- DRC: 63% (consistent among different stakeholder grps)

- PNG: 55% (big diff between govt ave – 40% and NGO ave – 70%)

PERCEPTIONS SURVEY RESULTS

PNG: 90% felt illegal logging to be either a major or the main cause of both

deforestation and forest degradation

Congo: 80% of respondents felt illegal logging was either a major or the

main driver of forest degradation in Congo

Extent of illegal logging:

DRC: 100% felt illegal logging to be either a major or main cause of forest

degradation, 85% that it was also a major/main driver of deforestation

Importance of illegal logging:

Recent changes:

DRC: Possibly worse since 5 yrs ago, but slightly better in last year

Congo: Majority believe there has been slight recent improvement

PNG: Very few note any improvement; 30% think is getting worse

Perceptions survey: Impacts of VPAs in Congo & DR Congo

CONGO REPUBLIC

DR CONGO

• 2/3 of respondents believed the FLEGT VPA was the most important factor

driving improvements, while every single respondent felt it was at least a

minor factor.

• 3/4 of respondents felt that illegal industrial-scale logging had reduced at

least in part to the VPA

• Forty per cent of respondents felt that the VPA had already had a positive

effect on livelihoods, and none felt it had had a negative impact.

• 4/5 of respondents felt the negotiation and implementation of the FLEGT

VPA was at least a minor factor in driving improvements

Some good news…

Levels of illegal logging: Republic of Congo

All the rest of the industrial production (mostly destined for China) should

be considered illegal, for a number of reasons:

~20% of all logging is unlicensed small-scale chainsaw logging to supply

domestic urban market

Most of the companies don’t have required Forest Mgmt Plans

Industrial log harvest does not significantly exceed official recorded volumes

Little or no outright smuggling of timber abroad, or under-declaration

33% of industrial log production in 2012 independently certified or verified;

more than total EU exports

All have large amounts of outstanding unpaid taxes

All have been found in breach of various regulations by IM-FLEG

A majority were found guilty of more serious offences

Most were illegally exporting logs in 2012

Studies show do not meet most elements of VPA legality definition

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

FSC-Certified as legal & sustainable, with approved management plan, but not every VPA legality indicatormet

Verified 'Legal Origin' by SGS, with approved management plan, but not every VPA legality indicator met

Logged within legal concession not independently verified legal, but with legally required management plan

Logged within licensed concession, but not independently verified legal and without legally requiredmanagement plan; most likely logged in violation of other important regulatory requirements

Illegal artisanal (non-industrial) logging for domestic markets

Republic of Congo - Typology

Levels of illegal logging: DR Congo

All the rest of the industrial production (mostly destined for China) should

be considered illegal, for a number of reasons:

~80% of all logging is unlicensed small-scale chainsaw logging to supply

domestic urban markets

Most of the companies don’t have required Forest Mgmt Plans

Industrial log harvest does not significantly exceed official recorded volumes

Little outright smuggling of timber abroad

Only ~8% of industrial log production currently independently certified or

verified

Most were found in breach of various regulations by IM-FLEG

Many were found guilty of more serious offences

A further ~10% is unlicensed chainsaw logging for export to Uganda/Kenya

Some ind logging carried out under illegally issued artisanal permits

DR Congo - Typology

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Independently Verified Legal (FSC CW; SGS VLC; SW VLO), but conflicts with local people laterreported; exported

Logged within legal concession not independently verified legal; IM-FLEG reports suggestillegalities in logging practices very likely; mostly exported

Illegal industrial logging for export, carried out under an improperly issued artisanal logginglicense

Unlicensed artisanal (non-industrial) timber, exported (mostly to Uganda/Kenya)

Unlicensed artisanal (non-industrial) logging for domestic markets

Levels of illegal logging: Papua New Guinea

Detailed independent reviews of selective logging around 10 years ago

concluded that almost all production, though under an official license, was

illegal in some way

~10-15% of all logging is unlicensed small-scale chainsaw logging to supply

domestic urban market

Industrial log harvest does not significantly exceed official recorded volumes

Little or no outright smuggling of timber abroad, or under-declaration

20% of production now from forest conversion under controversial SABL

agri-business licenses, alleged to have been illegally issued

Only 4% of production verified or certified; little sign of growth

One common breach (illegal extension of concessions) ‘legalised’ since by

change to legislation

For other common illegalities (eg breaches of logging regulations), it is hard

to say for certain whether or not things have changed, but balance of

probability is that they have not

PNG - Typology

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2011

2005

Selective - Licensed - independently certified/verified

Selective - Licensed - from un-assessed companies, not certified or verified

Selective - Licensed - from concessions found to be illegal logging in 2003/04 & notverified since

Conversion - licensed under SABL/FCA but likely to have been issued illegally

Generic Typology: Country Comparison (2011)

0 1 2 3

Congo

DRC

PNG

Total timber harvest, legal +illegal, cubic metres (millions)

Industrial logging under license, independently certified or verified

Industrial logging under license, unverified, likely illegal in some way

Conversion logging, under license but likely illegally issued

Unlicensed artisanal logging, mostly for domestic market

Government Response - Congo

The government's response to illegal logging has been quite poor. Very few

of the necessary policies and regulations needed to ensure good forest

governance are currently being implemented.

There have been some recent improvements, however, and a large

majority of survey respondents believe political will has improved. The

response is better than in DRC or PNG

For most areas in which the government response is currently

deficient there is work ongoing to improve the situation, including in

the general legislative framework, chain-of-custody procedures, tenure &

use rights, allocation of harvesting rights, transparency, and information

and financial management.

Most of this work is being carried out as part of the VPA with the EU

Some areas not already being addressed include insufficiently dissuasive

penalties, poorly resourced enforcement, and problems with concession

allocation (3/5 most recent new logging concessions issued went to

relatives of President & Forest Minister)

Government Response - DRC

Among the poorest scores for government response of any producer

country assessed; all policy areas seriously deficient

Attempt to formalise artisanal logging turned into loophole allowing new

industrial logging

Insufficient political will, corruption and lack of transparency judged to be

most important impediments to govt response (but, most respondents did

believe political will had improved slightly in the last yr)

Forest law enforcement structures fundamentally flawed in all important

respects. Enforcement is so under-resourced and ill-coordinated that

infractions are rarely uncovered. Even where they are, the penalties applied

are not sufficient to dissuade those responsible from carrying on behaving

illegally.

Also scored worst of 7 countries assessed by Global Witness for forest

transparency (though slightly less bad than Malaysia and PNG)

Major gaps, inconsistencies and loopholes in legislative framework

Government Response - PNG

Legal framework is very strong compared with others, BUT fundamentally

undermined by major failures in implementation and enforcement

Transparency in PNG is amongst the poorest of the producer countries

studied

Enforcement of forestry regulations in PNG is almost non-existent.

Penalties are too low, and never fully applied in any case. Resources are

woefully insufficient illegality remotely

The only significant actions taken against illegal logging in PNG in recent

years have resulted from actions of courts, NGOs and customary landowners

Very little international engagement compared with other producers

Less sign of improvement in the government response than in most

other producer countries.

One positive note has been the recent development & piloting (under an

ITTO project) of a new chain-of-custody and information-management

system and a multi-stakeholder legality standard.

Recommendations

PNG – negotiate a VPA with the EU; finalise and make mandatory the new

draft legality standard and CoC system (including independent monitoring);

publish the CoI report on SABLs and act on it; increase transparency;

increase resources for enforcement & ensure dissuasive penalties are

applied

Congo – respond in a more meaningful way to the findings of the

independent monitor; increase monitoring and enforcement; ensure

dissuasive penalties are applied (including cancellation of concessions);

improve tax collection; improve info management and transparency

DRC – major improvements needed in every aspect of forest governance;

inc improve leg & regs; bring small-scale artisanal logging into formal

control; cancel all artisanal permits issued to companies; complete

‘conversion’ process of remaining concessions; improve information &

financial management & transparency

EU – encourage & assist the above countries to take the above actions; do

not allow VPAs to become active prematurely

Timber buyers – avoid all timber from these countries except that which is

independently certified or verified. And take a close look even at that.

THE END

Thank-you for coming