Background by linxiaoqin


									Illegal Logging Update and Stakeholder Consultation
Royal Institute of International Affairs, Chatham House, 10 St. James’ Square, London SW1.
Wednesday27th - Thursday 28th July 2005. Chairs: Duncan Brack, Rosemary Hollis
(Chatham House), John Hudson, Hugh Speechly (DFID).
Short introductions were given by Duncan Brack (Chatham House) and John Hudson (UK
Department for International Development)

Impacts of reduction of illegal logging in European Russia on the EU and European
Russia forest sector and trade – Dr. Andreas Ottitsch, Program Manager Dr. Alexander
Moiseyev; Senior Researcher Lauma Kazusa, European Forest Institute
The research methodology, assumptions and results of the study were presented in detail by
Dr Ottitsch. The project compared production and consumption data for the North West
region and concluded, based on the limited and relatively unreliable data available, that price
increases would neutralise the negative financial impacts of reduced trade on forest owners
in Russia, although some scenarios pointed to potentially negative impacts on the Finnish
pulp and paper industry.
The assessment worked on the assumption that around fifteen percent of total timber
extraction in North West Russia is of unknown origin, of which around half is consumed
domestically and half thought to be exported. Of exports, analysis suggested that around
seventy five percent is covered by relatively robust private sector chain of custody although
the presentation reported that a lack of transparency in these schemes undermined their
credibility with some stakeholders.
The full powerpoint file including statistics is available at www.illegal-

The discussion began with questions about the price implications for the Finnish and Russian
forestry sectors. The level of impact was discussed in some detail and it was suggested that
increased costs could be passed to consumers rather than borne by industry if it would
become uneconomic. The likelihood of international competition holding global prices down
was raised and it was hoped that efforts to reduce illegal supplies in all regions
simultaneously would help to raise prices for legal producers who would otherwise lose out
as a result of restricted supply.
There was also general discussion about the need for robust tracking systems, the
complexities of crossing national boundaries with these systems and the importance of
appropriate levels of transparency.

All figures assumed in the research were subject to question by NGOs and trade analysts
working in the sector.

Forest Investment study – Jade Saunders, Associate Fellow, Sustainable Development
Programme, Chatham House
A short presentation detailing the main recommendations of a study discussed in detail at
previous meetings. The study presented an overview of global financing for forestry and
related high-risk sectors and set out a series of recommendations for action by EU Member
States and partner organisations. The aim of the recommendations is to improve the level of
due diligence exercised in forestry investment, with a view to reducing legitimate financing for
illegal forest practices. Four key areas of financing, both private and public, are identified in
the paper. The key forestry sectors identified in the paper are those which are most capital-
intensive and as a result have the greatest external capital investment. These are the pulp
and paper sector, agribusiness, and the extractive and infrastructural sectors.
The EU Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan identifies
improved financial due diligence as a key tool for reducing the supply of illegally logged
timber. It highlights the need for clearly defined, legal and sustainable supplies of timber for
all large-scale capital investments in the forestry sector, such as pulp and paper mills, and
proposes that banking due diligence be improved to take this, as well as the key social and
environmental risks associated with investment in the forestry sector, into account. Particular
emphasis is given to investments made with public funds, such as export credits.
Priorities highlighted were:
            To further explore and elucidate the business case for legal forestry and the
              potential material risks of illegal forestry;
            To improve government policy coherence on forest governance, focusing
              primarily on the investment criteria, transparency and accountability of
              investment with public funds, particularly on the part of Export Credit Agencies
              (ECAs), development banks and public pension funds;
            To ensure that investment experience in the timber sector is reflected in efforts
              to improve regulation and enforcement across the financial sector in developed
              and developing capital markets;
            To promote the development of international norms and standards for
              operations and governance in the forestry and forest lands sectors;
            To encourage the spread and transparent, credible implementation of the
              Equator Principles – thereby mainstreaming responsible lending practices.
The full powerpoint file of this presentation is available at www.illegal- and the full report is available at http://www.illegal-

Discussion followed about the potential for investors to be held legally responsible for the
impacts of their investments, and the likelihood of the European Commission taking forward
recommendations on investment in the light of the FLEGT Action Plan.

UK market premiums for verified legal and sustainable timber – Rupert Oliver,
Independent Consultant.
The study was based on a series of six-monthly reports which aimed to assess price
premiums for verified legal and sustainable timber in the UK market. Product coverage
included rough sawn lumber, dimension products, mouldings, decking, and panel products.
Geographical focus was on ‘high risk’ supply countries: Indonesia, Malaysia, Cameroon,
Ghana, Ivory Coast, Republic of Congo, Democratic Republic of Congo, Gabon, Brazil and
Russia. The study concluded that some premiums were available for public sector contracts,
in contrast to the rest of the construction market.
Demand drivers identified were retail company commitments to certified products and, more
recently, public procurement policies and the perception that government contracts now
require independently certified supplies. A key conclusion of the study was the need for
greater clarity with regard to the forms of evidence that are acceptable under the UK public
procurement policy and for improved coordination and technical harmonisation of policies
between EU Member States to ensure consistent market messages.
Two key stages in the maturation of certified supply and market price were identified. The
first is when suppliers seek a premium price in the early stages of offering certified wood
products to offset initial investment; the second is when availability of competing certified
products increases, the ability of companies to demand a premium diminishes and the extra
costs are increasingly absorbed by the supplier.
The study concluded that the UK market for certified softwoods has already reached the
second phase as the result of wide availability of supplies and established networks,
whereas the market for certified plywood and hardwoods has not. The latter market lacks
supplies as the commodities are often imported from countries that have been slow to certify.
Some countries face challenges relating to governance and a lack of infrastructure and
others, primarily the Eastern USA, are structured around small-scale forest ownership and
have a large domestic market which has very limited demand for certified product. The study
also highlighted detailed operational factors linked with increased costs for certified products,
recognising that the impact of these was easier for the large-scale trade to mitigate.
Specific premiums were identified for the following products:
           Malaysian meranti sawn lumber offered at three to four percent premium, could
             increase when Malaysian Timber Council (MTC) certification meets government
             procurement criteria for ‘sustainable’ timber;
           Verified African hardwoods, mainly from Ghana, Cameroon and Republic of
             Congo offered with independent chain-of-custody assessments and assurances
             of legal status, struggling to achieve two percent premiums;
           Forest Stewardship Council (FSC) certified American hardwoods achieving
             three to nine percent;
           FSC-certified Brazilian products achieving a wide range of premiums depending
             on product and availability; decking, for example, can be as high as thirty
             percent but tends to be used for government contracts and where appropriate
             time has not been set aside for timber sourcing.
The full powerpoint file of this presentation is available at www.illegal-

Chain of custody (CoC) and non-certified verification
Participants were concerned that a lack of clarity about government and internationally
agreed standards for non-certified chain of custody/product verification schemes was
undermining progress and disincentivising investment in the private sector. It was also felt
that some buyers do not understand the importance of CoC in ensuring legal and sustainable
claims are credible, leading to even lower demand for credible products. It was also noted
that the UK’s tropical timber market currently includes only five to ten percent certified ‘legal’
or ‘sustainable’ products, underlining the importance of non-certified timber in the short term
at least. Improved clarity on these issues will be established during phase two of the UK’s
Central Point of Expertise on Timber (CPET) and through communications efforts with local
Communication and support
Many participants felt that market messages were not getting through to all parts of the
supply chain as effectively as necessary. This was particularly true of the small and
disaggregated joinery sector. It was proposed that government should develop procedures
for assessment and enforcement of its procurement policy in order to maximise
implementation and communicate the message as clearly as possible. It was also suggested
that a communications effort in smaller sectors, perhaps via trade associations would be
useful. It was noted that the joinery sector association has recently developed a code of
conduct relating to legal procurement.
In addition to smaller private sector players, the importance of larger companies and trade
associations developing Corporate Social Responsibility policies which incorporate illegal
logging risks was highlighted. In addition to the timber market, the general construction
industry was highlighted and the importance of government agencies such as the Carbon
Trust and Building Research Establishment
Premium pricing for government contracts
The possibility of government contracts increasing premiums for certified hardwood was
suggested, with private sector participants suggesting that a twenty percent premium should
be an acceptable ‘cost of sustainability’. However it was noted that MTC-verified legal timber
was currently failing to achieve a five percent premium on a regular basis.

China trade update - Kerstin Canby, Forest Trends
The presentation built on work detailed in the previous meeting notes. Rapid growth in
Chinese exports in the last seven years was illustrated, as was domestic demand with paper
thought to be the most significant sector.
Most exports appeared to leave the country via Hong Kong where re-exporting is usual,
primarily to the USA and Japan. Exports to the EU, while less significant in total, showed an
increase of 700 percent over the period, of which a noteworthy percentage appeared to
supply UK demand. In addition to the rapid growth, China has also successfully diversified
both its import and export markets, with implications for leverage over its actions.
In conclusion it was felt that although Chinese processing has expanded at an exponential
rate, its profits were not necessarily showing the same growth. The country was thought to

be vulnerable to change in market preferences and reduced supplies of timber in
neighbouring countries as planned plantations were not yet mature.
The full powerpoint file of this presentation can be found at www.illegal- and further information can be found at

The likelihood of India replicating China’s processing expansion was raised and it was
suggested that similar growth in domestic demand and low-cost processing capacity would
be in place in India within around fifteen years.
Question relating to the reliability of Chinese official statistics were raised and it was noted
that within the region, they gave a relatively reliable picture, capturing for example a
significant rise in log imports that were apparently from Malaysia when Indonesia
implemented a log export ban.
It was suggested that the EU FLEGT process may be a mechanism through which efforts
could be made to establish prior notification requirements, standards and audits for customs.
It was also noted that the 2001 Asia Forest Law Enforcement and Governance process
(FLEG) recommended harmonisation of customs codes.

G8 Feedback – Katharine Thoday, UK Department for Environment, Food and Rural
Affairs (DEFRA)
The aim of the G8 was to refocus political attention on forest governance issues and initiate a
discussion among the development assistance community on the importance of
complementary action. It was recognised that G8 members represent a significant element of
the global consumption of timber as well as donor funds and these dual roles were felt to be
vitally important. It was noted that G8 environment and development ministers met for the
first time and illegal logging was on the agenda for their discussions.
Stakeholder consultation was central to developing these discussions and the main
recommendations were:
         Excluding illegal products from markets;
         Using government procurement to protect markets for verified legal and certified
            sustainable timber;
         Using money laundering legislation to capture the proceeds of forest crime;
         Encouraging industry to act voluntarily;
         Ensuring G8 policy coherence;
         Promoting transparency;
         Supporting forest policy reform;
         Improving information and communication;
The concluding ministerial statement included agreement on a range of actions ‘with each
country acting where it can contribute most effectively‘. These included support for regional
FLEG/T processes, timber-producing countries’ domestic efforts to improve forest
governance and national efforts to reduce demand for illegal timber in EU-member-state

markets. It was proposed that these actions should be subject to a review by governments in
The full powerpoint file of this presentation is available at www.illegal-

The proposed review process was discussed and it was noted that, although no concrete
plans had been developed to date, officials would meet in the sidelines of the Europe and
North Asia (ENA) FLEG St Petersburg meeting in November 2005 to establish a plan.
The US’s attitude to public procurement was discussed and it was noted that this was in part
due to the federal structure and in part due to concerns relating to the domestic industry. It
was reported that some developments at the state level were under way.

EU FLEGT: Action Plan progress – Neil Scotland, DG Development, European
For background detail on the aims and scope of the EU FLEGT Action Plan please see
previous meeting notes.
Implementation of the Action Plan is currently under way through the development of
voluntary partnership agreements with timber-producing countries. These agreements will
bring together development assistance, governance reform support and measures to combat
the trade in illegal timber. Current discussions are under way with Cameroon, Republic of
Congo, Gabon, Ghana, Indonesia and Malaysia. They will also be supported by public
procurement policies, private sector initiatives and financing reform.
The formal process of negotiating partnership agreements is currently proceeding through
the EU legislative process, an Ad Hoc Group of Commission and member states, informal
consultations with key countries and the provision of development assistance.
The legislative process should be complete by the end of the UK’s Presidency and will result
in a timber import licensing scheme and a mandate for formal negotiation of partnership
agreements on which the scheme will be based. Current discussions are focused on three
unresolved issues:
           The potential for circumvention of the scheme.
           The appropriate level of product coverage for the first phase of the scheme: A
              smaller group of products may be simpler and easier to implement with
              certainty, a larger group would have more impact on global trade.
           The most effective way for licenses to be issued: licenses could be issued either
              to specific operators or per cargo. If licenses are issued to operators there is a
              risk that infractions will be too politically important to punish effectively in
              situations where governance is weak. If licenses are issued to individual
              shipments there is a risk that delays in administrative processing will encourage
              infractions, or that irresponsible companies may try to evade the system in a
              percentage of their shipments. There will also be important implications for
              smaller operators.

Many of these issues have been taken up in the Ad Hoc group, which is able to discuss
substantive issues in some depth. A work programme has been established for this group
and efforts are under way to support the formal Commission and Parliamentary processes.
In addition to discussions, substantial technical assistance funds have been made available
to Indonesia (€15m), Vietnam and Central Africa; pilot projects are under way on forest
governance themes (€16m) and there has been investment in regional FLEG processes
Future priorities include financing, particularly via European export credits, and continued
support for discussion and technical alignment of member state public procurement policies.
The full powerpoint file of this presentation is available at www.illegal- and further information can be found at

VPA negotiating mandates
It was noted that the first phase of the scheme would be likely to be expanded to include
further partners and products.
Concern was raised about the inclusion of independent monitoring criteria in partnership
agreements. It was felt that the concept was widely accepted in Central Africa but less so in
Asia. It was thought unlikely that an agreement would be negotiated without the inclusion of
an independent element.
It was made clear that partnerships would be made on a voluntary basis, and would be
unlikely with re-exporting or processing countries at this point, or with countries such as the
US and Canada where governance was not in question. It was noted, however, that timber-
producing countries involved in a partnership which also imported timber from neighbouring
countries would be required to do so in a demonstrably legal way, if the imported timber was
then re-exported in any form to the EU. It was hoped that loopholes in the bilateral nature of
the agreements may be addressed through options under discussion in other work at
Chatham House and within the Commission.
Further clarity on the Commission’s definition of terms such as ‘chain of custody’, auditing
and monitoring was requested.
Procurement policies
It was made clear that although the Commission was keen to facilitate cooperation between
member states on procurement policies, the issue was not one of EU competence and as
such was not subject to harmonisation. Technical alignment was being encouraged and it
was hoped that those states which had not yet established a policy would do so soon.

Elliot Morley MP, Minister of State for Climate Change and the Environment, DEFRA
The Minister gave a wide ranging speech noting the importance of the UK’s international lead
on the issue of forest governance. He noted that this championing stemmed from its place as
the world’s forth largest importer of timber with a vociferous civil society concerned with both

environmental protection and poverty alleviation. The level of debate and collaboration
between stakeholder groups evident at this meeting and G8 consultations were also praised.
The importance of bringing the EU process to fruition was highlighted, as was the level of
support required by producer countries to improve forest governance. In addition to the
development of the FLEGT licensing scheme there was clear support for a ban on the import
of illegal logs in order to address the question of circumvention of the scheme.
The full text of the draft speech is available at www.illegal-

FLEGT Voluntary Partnership Agreement Negotiations

Malaysia – Vincent van den Berk, International Affairs, Department of Nature, Ministry
of Agriculture, Nature & Food Quality
The Netherlands has been involved in informal partnership discussions with Malaysia since
May 2004. A series of meetings involving bureaucrats and technical experts has been held
and a joint understanding of the aim and potential of a partnership is beginning to emerge.
EU markets are important for Malaysia but not uniformly so. While the peninsula exports
significant quantities to European trade partners, Sarawak is more closely involved with
neighbouring processing countries such as China.
Critical issues at this point are the importance of protected markets and premium prices and
the involvement of independent monitors and stakeholders in policy development and the
operation of the scheme.
The full powerpoint file of this presentation is available at www.illegal-

Ghana – Clare Brogan, FRR Limited
Around sixty percent of Ghanaian exports go to the EU, and as a result the government is
keen to negotiate an agreement as soon as possible. Talks to date have involved
government, industry and civil society as well as development officials. There has also been
some discussion in the press.
Current total timber production is over twice the legal annual allowable cut; however this is
felt to be a failure of implementation and enforcement rather than a flawed policy framework
and efforts are already under way to improve revenue collection.
The main concerns reported from Ghana were the importance of EU markets to Ghana’s
exporters compared with the importance of Ghanaian timber to the EU, the need for
development assistance and capacity-building to design and implement an effective system
and the volume and value of timber affected by the scheme. It was also reported that
industry representatives feared that the Government of Ghana would be moved to establish
an agreement in return for development assistance without considering the impact of
decisions on the trade, and that they have had negative experiences relating to Independent
Forest Monitoring (IFM) and certification.
 Key preparatory activities were identified:

            Consultative development of legality definition;
            Poverty and social impact assessment;
            Cost-benefit analysis;
            Development and implementation of a communication strategy within Ghana;
            Support for the ongoing ‘Validation of Legal Timber’ domestic process.
The full powerpoint file of this presentation is available at www.illegal-

NGO perspectives on Ghana discussions – Kyeretwie Opoku, Ghana Forest Watch
It was felt possible that the negotiations of partnership agreements would serve the NGO
agenda, and groups were keen to be involved as a result. Forestry discussions were
reported to be critical in the country and natural-resource-related conflicts had already
resulted in deaths in some cases. In the light of this, basic concerns were highlighted: the
importance of ensuring that timber revenues benefit forest-dependent people as well as
elites in the private sector and government, that governance criteria are robust and
monitored and that funds are made available to build capacity in the NGO sector.
Clear support for a ban on illegal imports into the EU was registered, as was a call for the EU
to use international influence to expand the scheme to other producer and consumer nations
and establish price incentives for those countries that were involved and implementing the
scheme in a credible manner.
An acceptable definition of legality was felt as a minimum to follow existing national forest
regulation; however it was asserted that under the current Timber Resources Management
Act there are currently no legally-granted concessions in Ghana.
The full powerpoint file of this presentation is available at www.illegal-

Serious concerns were raised about the lack of transparency relating to negotiating
mandates to date. NGO participants felt that any substantial discussion of the issue was
impossible without a formal mandate and minimum requirements being publicly available.
Where informal discussions have been established it was hoped that appropriate guidelines
relating to the inclusion of civil society were being followed. It was also felt that addressing
countries with the worst governance problems first may lead to the development of lower
standards than may be achieved in other timber-producing countries.
The Commission was keen to reassure participants that meetings with both NGOs and the
private sector had been undertaken and that the current stage was aiming to develop shared
analyses through consultation, and relationships on which to base future negotiations rather
than formal agreements.

Private sector initiatives

Timber Trade Action Plan – Donna Day Lafferty, Tropical Forest Trust
The development and background of the Timber Trade Action Plan was described in detail.
The plan aims to deliver a template for self-regulation across the EU in partnership with three
national federations, Belgian, Dutch and British, representing over forty percent of the total
EU import of tropical timber. The template will include standards for chain of custody
systems, monitoring and the identification of legal timber. Operations will begin in four
producer countries, Cameroon, Gabon, Indonesia and Malaysia, and the plan will last five
In practice the Action Plan aims to deliver 350 gap assessments and workplans and thirty
five fully operational supply chains with legal documentation independently verified through
chain of custody. This represents around twenty percent of the total import of participating
federation members.
Regular communications about progress will be undertaken by the project team.
The full powerpoint file of this presentation is available at www.illegal- and further information will be available shortly at

Funding for the Action Plan has been provided by the European Commission with matched
investment on the part of the federations and their members.
Legality standards will be set nationally but the team will provide clarify for traders about
which legislation is pertinent to them and how they can check it. All of the producer countries
involved will also be working towards FLEGT voluntary partnership agreements so standards
will be set through that process.
It was also suggested that although the Action Plan will only operate on a business-to-
business basis the group should take on governance issues using their lobbying power in the
countries in which they work.

PT Daisy and Tanjung Timberindo: delivering traceability from forest to production –
Mark Thornton, TracElite; Emily Blackwell, Soil Association
The presentation began with an explanation of the tracking technology and its applications to
date. The first trees were tagged in Malaysia in 2004 and the system was refined and
expanded into two reserves in Indonesia in early 2005.
The system is based on a log tagging system which allows data about processing and log
transportation to be collected in the field by handheld scanners. Data is automatically
collated and reconciled in a central web-based database. Where anomalies are apparent the
system creates real-time warnings which must be addressed by group managers in order for
the system to continue to operate effectively. All elements of the system are audited and can
be made available to independent agents for the purpose of monitoring if a company requires

The Soil Association recently joined TracElite as an auditing body. The Association
established its forestry programme in 1992, was a founding member of the FSC and audits
under the Woodmark programme. The auditing includes both remote audits of the structure
and implementation of the TracElite system and field audits including on the ground
reconciliation of any anomaly warning created by the system.
The full powerpoint file of this presentation is available at www.illegal- and www.illegal- Further information is available at and
The discussion focused on the cost of the system and its practical applicability. It was felt
that although the system may represent an acceptable cost for large-scale producers,
smaller companies may not have the product flow to make the technology financially
feasible. It was noted, however, that the company was willing to work in partnership with
smaller scale companies, particularly with community-forest timber producers, to ensure that
costs were apportioned in a way that made the system possible.

UK Trade Federation Update – Andy Roby, UK Timber Trade Federation (TTF)
Andy Roby gave a short presentation outlining recent progress with the Indonesian Action
Plan and the TTF Responsible Purchasing Policy (RPP).
Work in Indonesia, combined with other efforts, led to the development of the Timber Trade
Action Plan and both UK and Dutch federations are now encouraging relevant members to
join this project. It was reported that traders are interested in beginning to assess Malaysian
and Chinese suppliers in a similar manner, although outstanding issues relating to the multi-
stakeholder definition of legality (see below) are holding back progress.
Implementation of the RPP is now under way with twenty seven federation members (around
thirty percent by volume), and will become compulsory next year. The policy is designed to
support members in assessing risk in their supply chains, and provide advice and credible
independent monitoring to help systematically remove high-risk and potentially illegal timber.
The policy is supported by an online risk assessment tool available at
The full powerpoint file of this presentation is available at www.illegal- and more information is available at

African Timber Trade Forums – Emily Fripp, Independent Consultant
A series of African Timber Trade Forums was established over the summer, linking EU
markets and buyers with African traders and producers. The meetings allowed for an
exchange of information about recent trends in European markets (FLEGT, public
procurement, increasing consumer sensitivity) as well as encouraging informal networking
and the creation of links between responsible suppliers and buyers. Meetings were held in
Ghana, Cameroon, Gabon and the Republic of Congo.
Specific issues in each country were covered in detail, but generally it was felt that:

             Domestic trade organisation and marketing is weak, undermining
              competitiveness with European companies operating in the region;
           Fiscal requirements of new or newly implemented systems lead to perception of
              loss of competitivity;
           Lack of international investment in African industry;
           Growing market presence of Chinese buyers and processors;
           Lack of clarity about international and domestic government action, particularly
              in the context of FLEGT voluntary partnership agreements.
Future priorities highlighted included improved education and investment in the sector and
supporting ongoing projects and research.
The full powerpoint file of this presentation is available at www.illegal-

Concerns were raised about the policy of engagement. Some NGOs felt that companies
should stop operating in countries without clearly defined and effectively implemented forest
law and an international licensing scheme. Others were happy with a process of engagement
with those suppliers who wished to work towards appropriate social and environmental
standards. It was recognised that an effective EU boycott of timber from any given country or
area would result in lower prices and higher sales to less sensitive buyers.
It was widely accepted that without independent third-party monitoring purchasing policies
and procurement initiatives would not have the necessary impact on the ground. It was felt
important to avoid schemes which existed primarily ‘on paper’.

Association of Environmentally Timber Producers of Russia - Darius Sarshar, GFTN
The Association of Environmentally Responsible Timber Producers of Russia (RAERTP) was
established by WWF in 2000. It is now one of twelve independent timber producer groups
operating around the world. The group has seventeen mills and concession holders as
members, controlling twelve million hectares of forest, and producing twenty four million m3
or around twenty percent of national production. In addition, there are currently twenty two
new applicants that have not yet been admitted to the group.
The group offers its members support for certification, access to sensitive buyers and a
stepwise approach to removing high-risk timber from their supply chains and an
internationally recognised model for responsible trading.
The key challenges to ongoing expansion were felt to be ‘no questions asked’ demand from
China and the lack of clear market premiums for certified goods.
The full powerpoint file of this presentation is available at www.illegal- and further information is available at

It was hoped that similar progress could be made with WWF groups in China.
Concern was raised about the length of time it would take producers to remove all high-risk
timber from their supply chains. It was noted that many producers serve a range of countries,
some of which may be less sensitive than EU markets, and therefore percentage claims
were acceptable under the scheme, as they are under the FSC scheme. However the group
is keen to establish credible standards for the area and is considering setting a framework
based on a five-year maximum before full implementation.
Weaknesses in Russian forest law were highlighted and it was pointed out that legality in
Russia does not correlate with internationally recognised standards for sustainable forest
management. It was hoped that many of the problems would be addressed under new
legislation which is currently under development.

Independent monitoring: IFM Guide Launch – David Young, Global Witness
Global Witness has recently published a Guide to Independent Forest Monitoring (IFM),
which was presented in some detail. The Guide covers the context and definition of IFM as
well as providing detailed support for the design and implementation of an effective IFM
scheme. The conclusions are based on primary evidence and experience in the field, and
cover many different approaches to IFM including monitoring by both NGO and private sector
IFM is defined as monitoring by an independent third party that, by agreement with state
authorities, provides an assessment of legal compliance and observation of and guidance on
official forest law enforcement systems. Schemes are thought to bring credibility to forest law
enforcement efforts and can improve trust and collaboration between stakeholders on the
ground and internationally.
The full powerpoint file of this presentation is available at www.illegal- and the guide can be found at

VERIFOR and the Ecuadorian experience – Hans Thiel and David Brown, Overseas
Development Institute
The Verifor project will explore institutional options for verifying legality in the forestry sector,
which support appropriate and equitable social and development objectives. It aims to
establish how it is possible to build independence into a system of interests, in order to
develop a nationally-owned and managed system for resource allocation and exploitation.
Phase One aims to analyse systems currently in place in the forestry sector and other
relevant resource situations. Phase Two will look to develop policy proposals at an
international and national level. Both phases will include work in a wide range of countries in
South America, East Asia, Central Africa and North America. Examples from outside the
forestry sector include nuclear inspection, multilateral environmental agreements (MEAs),
election monitoring, ombudsmen, food standards monitoring and peer review mechanisms
such as the Kimberley Process and New Partnership for African Development (NEPAD).

The project defines verification as ‘the process of gathering, interpreting and using
information to make a judgment about parties’ compliance with an agreement.’ The aim of
the process is to support law enforcement, build market confidence, improve international
policing and public protection, ensure efficiency and value for money and strengthen
The key contextual challenges facing verification agencies include the clarity of legal
definitions, the level of consensus and mobilisation around a cause and the quality of public
governance in country and internationally. Recommendations were also given for key
principles in verification and some proposed elements of a credible institutional system.
In addition to the project overview, lessons from the Ecuadorian case study were also
presented. The forest resource and legal context we covered, and the development and
recent implementation of the ‘Vigilancia Verde’ programme were described in detail. The
programme began in 2000 and was undertaken by a partnership of environmental NGOs,
legal enforcement agencies and the armed forces under the control of the forest authority.
Seizures of illegal material doubled in five months and more than 120 concession permits
were recalled. The programme also resulted in radically raised awareness of the issues
among the local population and an improved picture of the national forest resource.
However, the reaction from the local forest industry was less positive. SGS, the agency
employed to undertake much of the verification programme, had its offices occupied by force
and political lobbying resulted in the programme being declared unconstitutional in late 2003.
Recent political changes and the increasing likelihood of the FLEGT licensing scheme
coming into force look likely to rekindle political will and it is hoped that SGS’s contract will be
In all it was felt that political will, local institutional ‘ownership’ and unbending support from
the donor community would be central to the potential success of the programme.
The full powerpoint file of this presentation can be found at www.illegal- and
and more information is available at

Concern was raised about the Vigilancia Verde experience of effective implementation
leading to political opposition. It was noted that some step-wise or transitional systems create
a disincentive to early action and allow ‘free riders’ at early stages of implementation,
whereas the shock effect of total implementation in one stage can be difficult to weather
especially in countries that suffer from political instability.
The role of forestry professionals in producer countries was raised. It was noted that Costa
Rica gives a high degree of independence and self-regulation to professional bodies
representing these experts, but experiences elsewhere in South America have found
stakeholder panels more independent and credible, although none is felt to be completely
effective to date.
Concern was raised about the degree of independence granted to most monitors. The
inclusion of host-government veto rights over the publication of monitoring reports was felt to
undermine the process significantly. The development of trust and negotiation between
monitor and host government agency were thought to be of paramount importance.

Independent Monitoring and Transparency as a Strategy for Reducing Illegal Logging:
Updates from Russia and Central Africa – Dr. Lars Laestadius, Project Manager,
Global Forest Watch Russia; Jim Beck, Assistant Program Manager, Global Forest
Watch Central Africa.
The Global Forest Watch programme was established by the World Resources Institute to
provide accessible, accurate and relevant forest landscape information for governments,
NGOs, industry and community groups in five key regions to help increase sustainable forest
management. The presentation focused first on work in Russia, established in 1999 as a
non-advocacy, expert data collection service using remote sensing. The project was felt to
have delivered low-cost, credible data by working with local constituencies and
demonstrating integrity and a clear focus on core goals and independence at all
The presentation illustrated the critical loss of forest cover in the area since the inception of
the project using satellite images of federally-protected areas from across the region. The
images have been an invaluable resource for civil society groups in the area which have
been able to better hold their government to account. In addition to the data collection
service, the group now plans to convene a forestry information forum, to allow it to play a
more challenging advocacy role, while maintaining its emphasis on constructive engagement
and debate.
The presentation detailed many of the challenges left over from Soviet forest management,
focusing particularly on the lack of transparency and poor infrastructure for management.
The second section on the presentation focused on similar work undertaken in Central Africa.
Work began with reports on the state of forests in Cameroon and Gabon and developed to
include Memorandums of Understanding (MoU) with each government; technical cooperation
and governance assistance with government agencies and NGOs; and industry engagement
through FORCOMS (an independent and voluntary monitoring system of forest concessions
in Central Africa).
Efforts to date have been focused mainly in Cameroon but similar work is under way in
Gabon and will shortly be established in the Republic of Congo. In Cameroon work under the
MoU has had three main strands: updating and digitising the boundaries for the various
forest titles; populating the boundaries with other relevant information on land tenure, and
management status; and tracking the development of logging roads in and around the forest
titles by using the interpretation of satellite imagery. These data sets have been combined
into an interactive ‘atlas’ which is currently being used by the Ministry of Forests (MINEF)
and civil society.
Full powerpoint files of these presentations are available at www.illegal- and www.illegal- and further information is available at

Asia Update

Indonesia-UK MoU and Draft Legality Standard – Moray McLeish, The Nature
The presentation provided detail about the stakeholder discussion, development and testing
of an Indonesian legality standard for timber production as part of efforts to help Indonesian

producers to supply legal timber. Other elements of this plan include technological solutions
for chain of custody and third party monitoring of production and transport.
The legality standard was developed in consultation with a wide range of stakeholders at the
local, regional and national level. The aim was to establish key principles of forest production
which would allow for the selection of a sub-set of relevant laws, and develop criteria,
indicators and guidance to allow for effective field audits. Seven key areas of law were
identified and sample indicators and audit guidance was detailed:
           Land tenure and use rights;
           Environmental and social impact;
           Community relations and workers’ rights;
           Timber harvesting laws and regulations;
           Forest taxes;
           Log identification, transfer and delivery;
           Timber processing, sales and shipping.
In-depth field testing took place earlier this year. Difficulties highlighted after testing included
the relative weakness of paper-based systems and the question of whether to include
processing facilities in forest audits and problems verifying prior informed consent, and
government gazettement procedures. Some tracking system teething problems were also
reported; however it was reported that the system has been fully adopted by the company
involved in the pilot project and the Government of Indonesia has committed to testing the
system with twenty more companies in 2006.
The presentation closed with a brief discussion of the potential for finding an ‘institutional
home’ for the standard and an exploration of potential costs for scaling up the system.
The full powerpoint file of this presentation is available at www.illegal-

Indonesia Draft Legality Standard – Taufiq Alimi, Indonesian Ecolabelling Institute
The NGO perspective on recent work in Indonesia began with the economic and political
context of the current problem. It was felt that the first concrete step in addressing decades
of mismanagement of forests is the establishment of a comprehensive standard of legality,
linked to sustainability and able to respond to social problems, hosted by a capable and
credible organisation. Second, compliance with such a standard should be required rather
than voluntary action, and must be subject to public scrutiny.
In the light of this the Ecolabelling Institute has been glad to work with donors and other
stakeholders to develop such a standard, and although there are some outstanding
concerns, generally feels the process to be beneficial to Indonesian forests and forest-
dependent people. It is hoped that the newly defined legality standard, when implemented,
will be a bridge to sustainable forest management and, eventually, certification.
The full powerpoint file of this presentation is available at www.illegal-

It was made clear that in addition to concession monitoring, the standard would be upheld
using satellite images, allowing for logging outside concession areas to be captured.

Concerns were raised about issues on which Indonesian NGOs could not agree, and the
level of involvement of the Ministry of Forests. It was also suggested that seventy five hours
of field testing was not enough for such a complex standard over such a wide area and that
appropriate funding had not been invested in raising capacity among civil society to allow
real participation in the process. Others felt that efforts to date had been laudable and that, in
order to ensure that the process was replicable, seventy five man-hours was an appropriate
balance between credibility and practicality, although there were calls for civil society
incentives to involvement.

Merbau campaign impacts and East Asia FLEG update – Sam Lawson, Environmental
Investigation Agency.
The presentation included an overview of the recent EIA investigation into the trade between
the Papua province of Indonesia and Chinese timber-processing facilities. The trade route
was thought to be the most significant global route for illegal timber, in this case merbau,
much of which is then exported to the EU and North America. The investigation included
visits to source areas in Papua, along with undercover investigations in Indonesia, Malaysia,
Singapore, Hong Kong and China, plus market research in UK and USA.
Following the investigation, the Indonesian Government was reported to have improved
enforcement, seizing timber worth around $220 million, and some action had been taken in
Malaysia, which had been implicated in the supply as the result of falsified documents
apparently identifying the source of the wood there. Less action was reported at the Chinese
end. The main impact however was on the global trade in merbau, where total imports to
China fell by over eighty percent and log prices doubled.
Outstanding concerns included the opportunity for corruption when seized timber is
auctioned, the lack of any prosecution of apparent culprits and continuing disengagement of
critical government agencies in China. A range of detailed recommendations were put
forward, most of which centred on the vital importance of regional cooperation to enforce
forest law across national boundaries.
Progress under the East Asia FLEG was detailed next. It was reported that following a loss of
momentum last year, an interim steering committee was established, of which the Philippines
is Chair, working closely with Indonesia. The Committee identified two key areas for action:
regional enforcement cooperation and improved transparency and access to data. Future
plans include a regional enforcement workshop later in 2005 and task force and ministerial
meetings in 2006.
The full powerpoint file of this presentation is available at www.illegal-

The discussion revolved mainly around FLEG developments, particularly with the ENA FLEG
scheduled for November in Russia. It was noted that the Russian Government will be hosting
the event, and that, to date, fifteen countries are involved, most notably China. The
preparatory process has been moving forward throughout 2005, guided by an international
steering committee. Representation from government and civil society was reported to be
good, but industry engagement was poor. The event in November will have two main

strands: a series of open technical discussions and closed governmental negotiating
sessions, developing a declaration for Ministerial affirmation at the end of the meeting.

Public procurement : UK developments - Bob Andrew, UK Department of Environment,
Food and Rural Affairs
Detailed descriptions of the development and main elements of the UK public procurement
policy are available in notes from previous meetings in this series.
The main issues addressed at the meeting was the exclusion of social elements in the
definition of ‘sustainable timber production’ used in the policy; and the news that the
Programme for the Endorsement of Forest Certification schemes (PEFC) and Sustainable
Forest Initiative (SFI) certification schemes would soon be amended to meet the criteria
established by the government; and CPET, conceived as a support mechanism for
procurement officers buying verified legal and sustainable timber, will be fully operational by
the end of 2005.
The full powerpoint file of this presentation is available at www.illegal-

UK CPET Phase two report - Ruth Nussbaum, Proforest.
The presentation covered the full range of CPET’s planned output, identifying the current
status of each. Elements included:
           A telephone helpline
           Training and raising awareness
           Web-based support
           The evaluation of ‘Type B’ evidence (see discussion below)
           Continued reviews of certification schemes
           Monitoring of policy implementation
It was hoped that the scheme would be launched in September, allowing targets to be set for
government contracts to exclude all timber from non-verified sources within a given
timeframe. The policy includes all forest products, including paper, and projects in which the
government is a partner, such as Private Finance Initiatives (PFI), and support will be made
available for companies supplying for any relevant contracts.
The full powerpoint file of this presentation is available at www.illegal-

The decision to exclude social elements from the policy was based on the legal framework
established under the EU’s current procurement directives, although this interpretation is
disputed. It was noted that a coalition of Dutch NGOs were considering detailed legal
analysis of the issue and also proposed that the European Parliament may have a role in
clarifying the issue.
‘Type B’ evidence is required where timber supplied is not from a recognised certified source.
Under EU and WTO rules procurement policy is required to allow any certified source or its

equivalent. It is not currently clear exactly what the government consider to be credible
evidence of legality or sustainability outside the certification schemes which have already
been assessed. This point is critical as many companies have proprietary systems which
they hope will qualify. Concern was raised from an industry perspective about the lack of
clarity on this issue and it was noted that such a definition would only be able to operate on a
country-by-country basis.
The question of technical alignment of different EU procurement policies was also raised. It is
not possible for the EU to harmonise schemes as public procurement is a member state
competency rather than the responsibility of the Commission; however efforts have been and
continue to be made to ensure collaboration and where possible technical alignment of
schemes in order to reduce burdens on those companies that wish to supply more than one
EU government.

DFID Forest Governance Programme Assessment - Phil Dearden, Centre for
International Development and Training (CIDT), University of Wolverhampton.
A short presentation based on a recent assessment of the DFID Forest Governance
Programme was given. Results were overall positive, and it was felt that a ten year
programme was appropriate. Key lessons identified were:
          The importance of DFID and DEFRA’s collaboration;
          The importance of DFID’s working relationships with the European Commission;
          The positive impact of Chatham House as a neutral forum for discussion;
          The neutrality and depth of the illegal logging website;
          The importance of engagement with trade associations/banks/donors;
          The potential of the business sector to react faster than governmental
             processes when it chooses to;
          The vital importance of experienced and skilled programme management and
             effective teamwork.
The full powerpoint file of this presentation is available at www.illegal-


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