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					                                                                                    International Forestry Review 5(3), 2003           195


OVERVIEW

Illegal logging and the illegal trade in forest and timber
products
D. BRACK

Head of the Sustainable Development Programme, Royal Institute of International Affairs, Chatham House,
10 St James’s Square, London, SW1Y4LE, UK1

Email: dbrack@riia.org



INTRODUCTION                                                             recover and grow in developed countries, most of the world’s
                                                                         forests are still located in a small number of areas – the
The destruction of the world’s forests is a well-known by-               Amazon Basin, Central Africa, South East Asia and the
product of the development of modern society. Of the                     Russian Federation – where they are significantly threatened.
forests that originally covered the Earth 80% have been                      Logging for wood products is responsible for about one-
cleared, fragmented or otherwise degraded by logging,                    third of total global deforestation; and possibly more than
mining, clearance for agriculture or urbanisation. Although              half of all the logging activities in the most vulnerable
increased public awareness, re-afforestation initiatives and             regions are conducted illegally. Worldwide, estimates
improvements in air pollution levels have helped forests to              suggest that illegal activities may account for over a tenth


    BOX 1 Illegal activities associated with the timber trade2
    Illegal logging                                                      Transfer pricing
    • Logging in breach of contractual obligations (e.g. without         • Nil profit accounting and manipulating revenue flows for
        an Environmental Impact Assessment).                               services to avoid revenue.
    • Illegally obtaining concessions through, for example, corrupt
        means.                                                           Illegal processing
    • Logging nationally-protected species without explicit              • i.e. at unlicensed facilities.
        permission.
    • Logging outside concession boundaries.                             Grand corruption
    • Logging in prohibited or protected areas such as steep slopes      Characterised by long-term, strategic alliances with high level
        or river catchments.                                             of mutual trust. For example, companies providing support to
    • Removing under-sized or over-sized trees.                          senior politicians, political parties or major components of the
    • Laundering illegal timber through a concession.                    state’s apparatus to:
    • Use of old log permits or licences to collect illegally felled     • Obtain or extend a concession or processing licences.
        timber to ‘sanitise’ illegal timber.                             • Avoid prosecution or administrative intervention for non-
                                                                            compliance with national legislation.
    Timber smuggling                                                     • Negotiate favourable terms of investment, i.e. tax holidays
    • Log import/export in defiance of trade restrictions and/or            or non-collection of statutory duties etc.
      national control measures.
    • Unauthorised or unreported movements across state                  Petty corruption
      boundaries.                                                        Shorter-term, more tactical, employer-employee relationship,
    • Avoidance of CITES restrictions.                                   facilitated by and may develop into grand corruption. Most
                                                                         obvious as graft given to or solicited by junior officials to:
    Misclassification                                                    • Falsify harvest declarations.
    • Under-grading and misreporting harvest.                            • Avoid reporting restrictions.
    • Under-valuing exports.                                             • Overlook petty infringements
    • Misclassification of species to avoid trade restrictions (e.g.     • Ignore logging or laundering of logs from outside proscribed
      mahogany) or higher taxes.                                            boundaries.

1
    RIIA maintains an independent website acting as a central point of information on all aspects of the current international debate
    around the control of illegal logging and forest crimes: www.illegal-logging.info
2
    Taken from Duncan Brack and Gavin Hayman, Intergovernmental Actions on Illegal Logging (Royal Institute of International
    Affairs, March 2001; available at www.riia.org/sustainabledevelopment/). For a more extensive discussion, see D. J. Callister, Corrupt
    and Illegal Activities in the Forest Sector: Current Understandings and Implications for World Bank Forest Policy: Draft for Discussion
    (World Bank Forest Policy Implementation and Strategy Development Group, May 1999).
196      D. Brack

of the total global timber trade, itself worth over $150 bn         tax declaration – to survive. As the World Bank reported,
a year.                                                             ‘widespread illegal extraction makes it pointless to invest
    Illegal logging takes place when timber is harvested,           in improved logging practices. This is a classic case of con-
transported, bought or sold in violation of national laws.          current government and market failure’ (World Bank 1999).
The harvesting procedure itself may be illegal, including
corrupt means to gain access to forests, extraction without
permission or from a protected area, cutting of protected           TACKLING THE PROBLEM
species or extraction of timber in excess of agreed limits.
Illegalities may also occur during transport, including illegal     There is no global agreement on forestry. An attempt was
processing and export, mis-declaration to customs and               made to reach an agreement at the Rio ‘Earth Summit’ in
avoidance of taxes and other charges. Box 1 summarises              1992, but most developing countries regarded it as an
illegal activities associated with logging and the timber trade.    infringement of their national sovereignty. A series of
    Illegal logging is not confined to developing countries,        generally ineffective international bodies, the latest
of course, but the problems there are worse as resources            incarnation is the UN Forum on Forests, set up in 2001,
are limited, international companies which offer investment         has been created to act as a forum for debate. This lack of
are proportionately more powerful and civil society is              an overall framework for international enforcement has
weaker. Allocation of timber concessions has often been             hindered attempts to control what is a global problem.
used as a mechanism for mobilising wealth to reward allies          Nevertheless, there is growing interest in addressing the
and engender patronage. The clandestine nature of the               problem. The G8 Action Programme on Forests, launched
illegal activities makes their scale and value difficult to         in 1998, included illegal logging as one of its five key areas
estimate, but it is true to say that extensive unlawful             for action, and the World Summit on Sustainable
operations have been uncovered whenever and wherever                Development in August/September 2002 featured some
authorities have tried to find them. To give a few examples,        discussion of the topic. The World Bank, with support from
a joint UK-Indonesia study of the timber industry in                major donor countries such as the US and UK, is
Indonesia in 1998 suggested that about 40% of throughput            facilitating a series of conferences on Forest Law
was illegal, with a value in excess of $365 million (Indonesia      Enforcement and Governance; the first took place in
UK Tropical Forestry Management Programme 1999);                    Indonesia in September 2001 and the second is scheduled
more recent estimates comparing known domestic                      for Cameroon in October 2003.
consumption plus exports against legal harvesting, suggest               The European Commission’s action plan on Forest Law
over 70% of logging in the country is illegal in some way           Enforcement, Governance and Trade published in May
(Scotland and Ludwg 2002). Similarly, over 80% of logging           2003 includes proposals for a licensing system to identify
in the Amazon may not be compliant with government                  legal products in producer countries and license them for
controls (Ibid). Studies in Cambodia in 1997 by Global              import to the EU, provide capacity-building assistance to
Witness and the World Bank suggested illegal extraction,            producer countries, to give encouragement for voluntary
worth between $0.5–1 billion, may be over 4 million m3 a            industry initiatives and government procurement policy,
year, at least ten times the size of the legal harvest (Global      arrange to buy only from legal sources, and put pressure
Witness 1999). If this level of extraction continues, the           on financial institutions to scrutinise flows of finance to
country would be logged out in just ten years from when             the forestry industry.2
the industry officially began.                                           The UK Government in particular has been active in
    The scale of illegal logging represents a major loss of         pushing the issue up the agenda inside various forums,
revenue to many countries and can lead to widespread                including the G8 and EU. In April 2002 the UK signed a
associated environmental damage. A Senate Committee in              Memorandum of Understanding on forest law enforcement
the Philippines estimated that the country lost as much as          and governance with Indonesia, which may act as a pilot
$1.8 billion per year from illegal logging during the 1980s         for similar agreements between the EU and other major
(Callister 1992). The substantial revenues from illegal             producer countries (see Speechly in this issue) (Indonesia
logging sometimes fund and thereby exacerbate national              has signed similar agreements with other consumer
and regional conflict, the strongest recent example being           countries, including Japan and China).3
Cambodia, where Khmer Rouge forces were sustained                        There are three broad sets of actions that can be
primarily by logging revenues for several years in the mid-         undertaken by governments concerned with illegal logging:
1990s.                                                              reduce the demand for illegal timber, reduce the supply of
    The illegal trade may also distort the entire global            it, and control the trade that moves the illegal material from
marketplace for a number of key timber products, making             sources of supply to sources of demand.
it difficult for sustainable management – which has to                   To reduce the demand for illegal logs and timber
endure additional costs from good husbandry and proper              products essentially requires replacing it with a demand


2
    Available at http://europa.eu.int/eur-lex/en/com/cnc/2003/com2003_0251en01.pdf
3
    See www.illegal-logging.info/Bilateral.htm for copies of these agreements.
                                                                                       Illegal logging and illegal trade     197

for legally produced material – which in turn requires some       what constitutes illegality. The definition of illegal logging
means of identification all along the ‘chain of custody’.         used above – ‘illegal logging takes place when timber is
No such system yet exists, though schemes established to          harvested, transported, bought or sold in violation of
identify sustainability of production, such as the Forest         national laws’ – relate to infringements of national
Stewardship Council certification scheme, generally imply         legislation, but in many countries forestry legislation is
legality of production as well.                                   often clearly inadequate. For example, a 1998 review of
    There is increasing interest in establishing a simpler        Cambodian forest legislation by the legal firm White and
certification system, identifying only legality of production,    Case found it was ‘difficult to obtain, difficult to analyse,
possibly as a first stage towards full sustainability. The UK–    provides few objective standards for forest protection and
Indonesia MoU includes provision for piloting such a              provides no integrated guidelines or standards for forest
system and, as noted above, the European Commission’s             management’ (White and Case 1999). An overview of
action plan envisages a requirement for a ‘license of legality’   Indonesian forest governance in 2001 revealed
for all imports into the EU from participating producer           inconsistencies and contradictions between laws and
countries. Government procurement policy, which in some           between government department decrees (Suparna 2001).
countries (particularly the UK) is moving towards sourcing        In countries such as Brazil different levels of government
only legally and sustainably sourced timber, is also a            – federal, state, and local – possess overlapping legal and
potentially important tool.                                       regulatory systems that may not always be consistent with
    Strategies aimed at reducing the supply of illegal timber     each other.
need to concentrate on the underlying economic, social and            In some countries there may simply be no clear
political drivers behind the illegal activities – and are         definition of what is and is not illegal. The definition
therefore difficult and complex to implement. Much illegal        of what is legal and what is not may depend on
logging stems from over-allocation of logging concessions         administrative order, or may be easily changed by local or
and processing licenses, frequently associated with               national governments seeking to maximise revenue.
corruption. Reform of the systems therefore usually               Many undesirable (and environmentally unsustainable)
requires thorough reform of legislation (which is often           practices in the forestry sector, such as excessive allocation
outdated and inadequate) and of the administrative                of quotas or processing capacity, may in fact be legal
systems which implement it. The reform of taxation                under existing laws. And even where the law is adequate, in
systems, which are currently often volume-based, thereby          terms of setting out clear definitions the compliance
encouraging maximum exploitation of concessions, is also          costs, such as applying for permits, may be so high in
a valuable route to follow. And it is important not to forget     terms of time or money that legal operations become
the involvement of local communities and the availability         uneconomic.
of alternative forms of employment and economic activity.             This should not be blown out of proportion: in some
    Finally, there are a number of points along the chain         important producing countries, legislation is clear and
of production and supply where enforcement efforts can            adequate, and it is its enforcement that is inadequate.
be aimed at controlling the trade in illegal timber. In           In these cases the application of external pressure
producer countries, specialised enforcement units – such          through the control of exports, coupled with capacity-
as the Malaysian task force set up by the police, Anti-           building, may well be a helpful reinforcement to assist
Corruption Agency, Forestry Department and the army –             domestic enforcement efforts. In many other countries,
bypassing local bureaucracies, have been used with some           however, reform of legal and regulatory systems is a
success. Private industrial surveillance companies can also       prerequisite for the effective control of the trade in illegal
be used; the Swiss firm SGS, for example, has been called         timber.
in to monitor customs departments, and increase revenue               Possible law reforms include creating clear definitions
collection, in a number of countries including Cameroon,          of illegal activities, including corrupt or improper allocation
Ghana, Indonesia and Malaysia. Close cooperation with             of concessions, reducing or removing discretionary powers,
local communities is helpful, both because they are good          establishing significant deterrent sanctions including
sources of intelligence and because the provision of              powers to confiscate equipment, and specifying
alternative employment opportunities is usually necessary         enforcement responsibilities at every stage in the timber
to end small-scale illegal activity. Much of this, of course,     commodity chain. Simplification is often called for,
requires the allocation of greater resources, in terms of         ensuring that legal activities are not so over-regulated that
finance and personnel – though as most cases of illegal           they become impossible or uneconomic for enterprises –
logging involve unpaid taxes or charges, investment here          particularly small-scale and community-based
can reap financial as well as environmental dividends.            organisations – to carry out. Reform of laws outside the
                                                                  forestry sector is also frequently necessary, including laws
                                                                  dealing with land ownership, bankruptcy and corruption.
DEFINING LEGALITY                                                 Transparency of all private and public activities to the
                                                                  outside world (including both domestic and foreign
An immediate problem facing any attempt to control the            observers) should be an important principle underlying all
trade in illegal timber and wood products lies in defining        such reforms.
198    D. Brack

REFERENCES                                                       SCOTLAND, N. and LUDWIG, S. 2002. Deforestation, the
                                                                   timber trade and illegal logging. Paper for EC workshop on
BRACK, D. and HAYMAN, G. 2001. Intergovernmental                   Forest Law, Enforcement, Governance and Trade, Brussels,
  Actions on Illegal Logging, Royal Institute of International     22–24 April 2002.
                                                                 SUPARNA, N. 2001. Forest Governance and Forest Law
  Affairs. (Available at www.riia.org/sustainabledevelopment).
                                                                   Enforcement in Indonesia. Paper for Forest Law Enforcement
CALLISTER, D. 1992. Illegal Tropical Timber Trade: Asia-
                                                                   and Governance East Asia Ministerial Conference,
  Pacific Cambridge TRAFFIC International.                         September 2001.
GLOBAL WITNESS. 1999. The Untouchables: Forest Crimes            WHITE and CASE. 1999. Legal Component – Report to Senior
  and the Concessionaires – can Cambodia afford to keep them?      Officials in the Royal Government of Cambodia and
  Global Witness. London.                                          International Donors. Summary Presentation. White & Case,
INDONESIA UK TROPICAL FORESTRY MANAGEMENT                          Legal Counsel, Washington, D.C.
  PROGRAMME. 1999. Illegal Logging in Indonesia. ITFMP           WORLD BANK. 1999. Forest Sector Review World Bank, New
  Report No. EC/99/03 Jakarta.                                     York, p. 40.

				
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