THE WORLD BANK Report No. 36638-GLB August 2006 Strengthening Forest Law Enforcement and Governance Addressing a Systemic Constraint to Sustainable Development Environment and Agriculture and Rural Development Departments SUSTAINABLE DEVELOPMENT NETWORK THE WORLD BANK Report No. 36638 ­ GLB STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G ADDRESSING SYSTEMIC CONSTRAINT A TO SUSTAINABLE DEVELOPMENT August 2006 Environment and Agriculture and Rural Development Departments Sustainable Development Network © 2006 The International Bank for Reconstruction and Development / THE WORLD BANK 1818 H Street, NW Washington, DC 20433 USA Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com . All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. Contents EXECUTIVE SUMMARY ............................................................................................................................... XI 1. INTRODUCTION......................................................................................................................................1 2. GLOBAL PROBLEMS FOREST CRIME ........................................................................................................5 OF LAW AND THE OREST F ...............................................................................................................................5 Scope of the forest law enforcement and governance approach............................................................6 Types and Magnitude of Illegal Logging and Other Forest Crime..........................................................8 Priority Regions and Countries.........................................................................................................13 3. SUPPORT FOR TRENGTHENING OREST AW NFORCEMENT AND OVERNANCE S F L E G ....................................................15 National Law and Forest Law Enforcement Systems..........................................................................15 National FLEG Processes.................................................................................................................16 Regional FLEG Processes.................................................................................................................18 Multilateral and Bilateral Initiatives and Programs............................................................................21 Government Initiatives to Promote Responsible Timber Procurement.................................................24 Civil Society and Private Sector Initiatives........................................................................................25 Summary Assessment of Forest Law Enforcement and Governance in the World................................28 4. WORLD BANK EXPERIENCE FOREST LAW ENFORCEMENT IN AND OVERNANCE G .....................................................31 World Bank Lending and Advisory Services......................................................................................31 Linking Forestry to Broader Governance Issues Within the Bank .......................................................35 Public Sector Governance................................................................................................................35 Governance and Anticorruption Diagnostics.....................................................................................37 Financing Private investment...........................................................................................................37 Corporate Social Responsibility........................................................................................................39 Legal and Regulatory Reform...........................................................................................................40 Anti-Money Laundering/Combating the Financing of Terrorism.........................................................41 The Extractive Industries Transparency Initiative..............................................................................42 Emerging Directions of the Bank in Forest Law Enforcement and Governance....................................43 iii STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G 5. FOREST LAW ENFORCEMENT AND OVERNANCE G : A FORWARD APPROACH ..........................................................47 Drivers of Illegal Logging and Other Forest Crime.............................................................................47 A Potential Framework to Combat Illegal Logging and Other Forest Crime .........................................49 Assessing Drivers and Responses to Forest Crime .............................................................................58 6. CONCLUSION ......................................................................................................................................61 7. REFERENCES ......................................................................................................................................65 ANNEX 1. A FRAMEWORK FOR SSESSING OTENTIAL ESPONSES TO OREST RIME A P R F C .............................................69 LIST BOXES OF Box 1.1. Costs and Consequences of Forest Crime............................................................................2 Box 2.1. Conflicting Forestry Legislation.......................................... ...............................................6 Box 2.2. What Makes a Good Forest Law............................................................................................6 Box 2.3. What Do Illegal Logging and Related Crime Look Like............................................................7 Box 2.4. China and the Trade of Illegal Timber and Timber Products.................................................10 Box 2.5. Money Laundering.............................................................................................................11 Box 2.6. Sales of Oak to the Yerevan Brandy Company in Armenia ....................................................12 Box 2.7. Development Value of Forest Land Conversion May Not Match With Legality........................13 Box 3.1. Forest Law Enforcement in China....................................................................................16 Box 3.2. Challenges in Forest Law Enforcement in Indonesia............................................................17 Box 3.3. Bosnia and Herzegovina Action Plan................................................................................17 Box 3.4. President Putin Promotes the Russian National Action Plan for Preventing Illegal Logging and Associated Trade............................................................18 Box 3.5. The Asia Forest Partnership............................................................................................20 Box 3.6. Convention Against Corruption.......................................................................................22 Box 3.7. Outline of Japan's Guideline for Verification of Legality and Sustainability of Wood and Wood Products..............................................................................................25 Box 3.8. IUCN Program on Illegal Logging.....................................................................................26 Box 3.9. CIFOR Research Program on Forest Law Enforcement and Governance .................................27 Box 3.10. Industrywide Codes of Conduct.......................................................................................28 Box 3.11. Voluntary Corporate Codes of Conduct to Promote Legal and Sustainable Forestry.................29 Box 4.1. Forest Law Enforcement in the World Bank Forest Sector Work in the Philippines.................32 Box 4.2. Recent World Bank Forest Law Enforcement and Governance-Related Documents.................34 Box 4.3. Nigeria Forest Sector Assessment....................................... .............................................34 Box 4.4. Illegal Logging and the Lao People's Democratic Republic Hydropower Project.....................35 Box 4.5. Integrating Governance and Anticorruption Elements in CASs: Example of Ghana.... .............37 Box 4.6. GAC Diagnostics Tools: An Analytical and Empirical Contribution to Local Capacity Building and Action Programming....................................... .....................38 Box 4.7. Forest Law: A Manual for Sustainable Development................ ...........................................40 Box 4.8. Ad hoc Experts Meeting on Investigating and Prosecuting Illegal Logging Cases: Lessons Learned..............................................................................................................40 iv CONTENTS Box 4.9. Workshop on the Strategy to Fight Illegal Logging Through the Implementation of the Law on the Crime of Money Laundering... .................................................................42 Box 5.1. Illegal Logging and Other Forest Crime: Motive, Means, and Opportunity..............................48 Box 5.2. What Is Good Forest Governance..................................................... ...................................50 Box 5.3. Impact of Energy Tariffs on Illegal Logging in Azerbaijan.....................................................50 Box 5.4. Balancing Timber Demand With the Legal Supply in Indonesia........ ....................................50 Box 5.5. Interagency Task Force in Albania...................................................................................51 Box 5.6. Legal Reform in Bolivia Has Limited Success.....................................................................51 Box 5.7. Linkages to Anti-Money-Laundering work.............................. ..........................................52 Box 5.8. Forest Crime Prevention in Cambodia................................. .............................................53 Box 5.9. Development Policy Loan to Gabon Focuses on Natural Resource Governance.......................53 Box 5.10. Hi-Tech Detection Systems.............................................................................................54 Box 5.11. Independent Forest Monitoring in Cameroon: What's Next?..................................................56 Box 5.12. Suppression and World Bank­Supported Criminal Justice Activities......................................57 LIST FIGURES OF Figure 2.1. Corruption and Illegal Forest Activity...............................................................................8 Figure 4.1. Good Governance Has Many Dimensions................................ .......................................36 Figure 5.1. National Action and International Cooperation for Controlling Forest Crime........................49 LIST TABLES OF Table 2.1. Indicative Estimates of Illegal Logging in Selected Countries...... ..........................................9 Table 2.2. Global Volume and Value of Suspicious Wood Products......................................................9 Table 2.3. Average Annual Deforestation, 1990­2000......................................................................13 Table 4.1. Forest Law Enforcement and Governance Components in the Forestry Portfolio, by Region........................................................................................................................33 Table 5.1. An Example of Potential Drivers and Forest Law Enforcement and Governance Responses to Forest Crime .............................................................................58 This report is the product of a team composed of Tapani Oksanen (Task Team Leader and Senior Forestry Specialist, SDN/World Bank), William B. Magrath (Lead Natural Resource Economist, EASRD/World Bank), Nalin Kishor (Technical Specialist and FLEG Coordinator, SDN/World Bank), and Karin Perkins (consultant). In preparing this report the team has greatly benefited from the input of the more than 30 Bank staff who participated in the Bank-wide workshop organized in December 2005 in Washington, DC, and numerous Bank staff and external experts consulted in the course of the work. Detailed comments were provided by the peer reviewers: Mohammed Bekhechi (Lead Counsel, LEGEN/World Bank), Jose Edgardo L. Campos (Lead Public Sector Specialist, PRMPS/World Bank), and Giuseppe Topa (Lead Specialist, AFTS3/World Bank). In addition, the following people provided valuable written comments to the report: Gerhard Dieterle (Forest Adviser, SDN/ World Bank), Colum Garrity (Public Sector Specialist, PRMPS/World Bank), Theodore S. Greenberg (Senior Financial Sector Specialist, FSEFI/World Bank), Andrey Kushlin (Senior Forestry Specialist, ECSSD), and Laura Tlaiye (Sector Manager, ENV/World Bank). The Environment Sector Manager for the task is Laura Tlaiye, and the Environment Department Director is James Warren Evans. v Abbreviations and Acronyms AAA analytical and advisory activities ASEAN Association of Southeast Asian Nations CAS Country Assistance Strategy (World Bank) CEPI Confederation of European Paper Industries CIFOR Center for International Forestry Research CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora COMIFAC Commission en charge des Forêts d'Afrique Centrale CSR corporate social responsibility EITI Extractive Industries Transparency Initiative ENA Europe and North Asia EU European Union FAO Food and Agriculture Organization of the United Nations FATF Financial Action Task Force on Money Laundering FIAS Foreign Investment Advisory Service FLEG Forest Law Enforcement and Governance FLEGT Forest Law Enforcement, Governance, and Trade FSEFI Financial Market Integrity Unit (World Bank) GAC governance and anticorruption IBRD/IDA International Bank for Reconstruction and Development/International Development Association IFC International Finance Corporation IMF International Monetary Fund ITTO International Tropical Timber Organization IUCN International Union for the Conservation of Nature and Natural Resources MCPFE Ministerial Conference for the Protection of Forests in Europe NGO nongovernmental organization OECD Organisation for Economic Co-operation and Development OED Operations Evaluation Department (World Bank) PPATK Indonesian Financial Transaction Reports and Analysis Center PRSP Poverty Reduction Strategy Paper vii STRENGTHENING FOREST LAW ENFORCEMENTAND OVERNANCE G UNECE United Nations Economic Commission for Europe UNFF United Nations Forum on Forests VPA voluntary partnership agreement WBI World Bank Institute WWF World Wide Fund for Nature Vice President: Katherine Sierra Sector Director: James Warren Evans Sector Manager: Laura Tlaiye Team Leader: Tapani Oksanen viii Preface T he World Bank has been engaged with of implementation with concrete and visible Forest Law Enforcement and Governance impacts. (FLEG) processes since the first Ministerial The intended audience includes practitioners FLEG Conference for East Asia in 2001. The outside and within the Bank, those within the importance of curbing illegal logging and other forest sector, and those working with broader forest crime is also highlighted in the Bank's 2002 governance reforms. The report will address Forest Strategy. At the country level, the Bank, both the Bank's efforts and those of the broader particularly in the past several years and with community involved in FLEG. In fact, given the an increasingly sharp focus on combating forest partnership nature of this work, it makes little crime as part of broader forest sector operations, sense to attempt to compartmentalize these. It has an even longer track record of supporting is expected that the report will make the Bank's improved forest governance and law enforcement. views on how to move the FLEG agenda forward The Bank is by no means working alone in this transparent to other partners and contribute to area. An increasing number of actors, including an open and frank dialogue. A more internally governments, nongovernmental organizations, focused Bank document will be developed after private sector companies and associations, consultations with the partners on the broad ideas and international organizations are working in presented in this report. partnership to address these issues. From an One of the more difficult issues was to find almost taboo subject discussed only indirectly the right balance between the relatively narrow and in vague terms, illegal logging and other issue of law enforcement, derived from the urgent forest crime has become part of the mainstream concern about illegal logging and trade of illegal dialogue on sustainable forest management. timber, and the much broader and more diffuse This report arises from the need to take stock issue of forest governance, requiring a longer-term of both the Bank's efforts in this arena and the developmental approach. In the course of the broader partnership approaches at the national, work it has become clear that different actors and regional, and international levels. It seeks to experts have varying opinions and understanding assess current approaches and experiences on this. Equally, there are different views on and set the stage for a discussion on how to whether FLEG efforts should focus on timber and move effectively forward beyond dialogue, other primary forest products or cover the whole negotiation, and piloting to effective scaling up spectrum of possible illegal activities including ix STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G wildlife poaching, arson, and illegal conversion of the management and use of natural resources forest lands for other uses. are facing similar problems and are attempting to The report attempts to define the balance and solve them through efforts at different levels. The scope in a way that is in line with the mainstream forest sector seems to be in many ways ahead of thinking in the Bank. It is evident, however, the curve, and the FLEG processes and related that the scope needs to be discussed and defined actions at the country level could offer valuable in each region and country based on regional lessons to inform these efforts. Thus, this report and national priorities, and will and should be should not be seen as only of relevance to the different depending on the context. An overall forest sector and FLEG processes, but needs to definition, such as presented in this report, is only be distributed more widely to actors and experts useful as a general framework for this discussion. in other sectors working on governance and law Finally, in the course of this work it has enforcement. become clear that many other sectors dealing with x Executive Summary Problem Description erosion of institutions, the spread of corruption across the economy, and lower growth. Finally, Forest crime, including illicit activities such forest crime creates negative environmental, as illegal logging, illegal occupation of forest economic, and social consequences also at the land, woodlands arson, wildlife poaching, and global level. Forests are a global public good, and encroachment on both public and private forests, their degradation imposes global costs such as and corruption is rampant throughout the world. climate change and species loss. It is particularly troubling in developing countries, Despite the magnitude of the problem, there where illegal logging in public lands alone causes are few instances of prosecution and punishment. estimated losses in assets and revenue in excess In fact, if there are prosecutions it is the poor, of US$10 billion annually, more than six times the looking to supplement their meager livelihoods, total official development assistance dedicated to who are victimized and sent to jail. Large-scale the sustainable management of forests. As much operators continue with impunity. Arguably, as US$5 billion is lost annually to governments this is the worst form of violation of equity and because of evaded taxes and royalties on legally justice, arising from a clear failure of governance sanctioned logging. Within developing countries, and it needs to be addressed. 1 billion extremely poor people depend upon Differentiating between illegal activities driven forests for part of their livelihoods, and as many by poverty (fuelwood and fodder collection as 350 million people living in and around needs, for example) and those resulting from forests are heavily dependent on forests for their outright greed and involve organized criminal livelihoods and security. These vulnerable groups activity, is helpful in formulating effective and are at risk from illegal logging and removal of equitable responses to address these complex timber and nontimber products from the forests. problems. Generally, initiatives aimed at reducing Moreover, violations of protected areas poverty would help address the poverty-related boundaries threaten the conservation of forest driver. Poverty reduction approaches targeted at resources and biodiversity. Legitimate forest forest-dependent populations involved in forest enterprises are subjected to unfair competition crimes will be a particular necessity, especially through price undercutting and discouraged from in situations where broad development programs making socially and environmentally responsible will likely lead to only gradual reductions in investments in the sector. There are less visible-- poverty. though highly insidious--costs resulting from the xi STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G These approaches must deal with issues provide a robust framework for the systematic connected to land tenure arrangements, access assessment of national programs and international rights, overly complex laws and regulations actions. It builds on a body of expert knowledge biased against the poor, and transparency and and professional law enforcement practice stakeholder participation in decisions directly that is only just now being brought to bear on affecting their livelihoods. On the other hand, problems in the forest sector while at the same combating large-scale criminal activities requires time acknowledging that failures of broader both targeted action in directly improving governance systems often lie at the heart of forest forest law enforcement so that criminals are crime. While other frameworks and models are apprehended and punished. It would also available and can be equally useful, the main include more fundamental changes to improve message here is one of the urgent need to increase the broader governance environment in the the knowledge content of the debate on forest forest sector and in the society at large to help crime and to improve the technical content of strengthen law enforcement efforts. national programs and development assistance. Trade in timber and timber products, In many countries, law enforcement capacity originating in response to demand from and expertise exists in other sectors and needs developed countries, has also been identified to be marshaled in new ways to support forest as an important driver of illegal logging. Illegal development. In others, specialized capacity logging has been found to depress world prices needs to be developed within forestry agencies. of timber products, and the financial proceeds Exploitation of new enforcement innovations and from the sale of illicit forest products often wind opportunities, made possible, for example, by the their way, through money-laundering schemes, introduction of anti-money-laundering legislation, into such nefarious enterprises as supporting the adoption of the UN Conventions Against terrorism, armed conflicts, human and drug Transnational Organized Crime and Corruption, trafficking, and protection of war criminals. and by other new legal and judicial innovations, Consequently, combating this phenomenon will require new skills and capacity. requires both strengthening forest governance in Beyond more and better knowledge, it is problematic producer countries and implementing clear that enormous investments will be required environmentally and socially responsible to achieve the needed control on forest crime. procurement policies in consumer countries. No one knows how much will be needed. To As the trade of timber products is often routed a large extent, investments in better resource through third countries (China, for example, re- management, social development, and industrial exports about 70 percent of its timber imports), it restructuring will spill over into improved is important to engage all countries--producers compliance with laws and regulations. But and consumers--in the forest products' supply substantial amounts of resources will be needed chain to address the problem. specifically for specialized and increasingly sophisticated forest law enforcement capacity Forward-Looking Approaches and Areas building. for Action, Risks, and Challenges The means, motive, and opportunity construct The conceptual constructs suggested in this is of particular value in suggesting areas of report for understanding the sources and drivers comparative advantage across potential partners of crime (means, motives, and opportunity) in improving forest law enforcement and and the structure of forest law enforcement governance. For example, consumer countries systems (prevention, detection, and suppression) and industry have particular niches in helping to xii EXECUTIVE SUMMARY reduce the motive for illegal logging by reforming important in countries where export demand markets and public procurement policies that is a significant driver of illegal activities in discriminate against stolen material. Governments the forest sector. It should be noted that--at and financial institutions can help limit the least in principle--these measures could be development of excess wood processing plants also extended to other products (for example, and equipment by requiring and exercising due wildlife or products that derive from illegal diligence in assessing wood supply and land conversion of forest lands). availability in consideration of wood-based and · Integrate anti-money laundering and asset agro-industrial investments. Producer countries forfeiture laws into the fight against forest have obvious priority in respect of improving crime and related corruption: These tools, forest management as an approach to reducing along with the UN Conventions Against the opportunities available for illegal activities. Corruption and Transnational Organized Based on the discussion and analysis Crime, provide strong and effective regimes presented in this report, forest crime would have that governments can use to fight forest crime to be addressed through multifaceted approaches. and related corruption. Such approaches need to: Specific opportunities for action by the international community include: · Address key drivers both within and outside the forest sector: Some governance issues · Deepening the technical content of relating to forest crime lie entirely within the Forest Law Enforcement and Governance forest sector while other governance issues (FLEG) processes at the international and affecting forests and forest-dependent people national levels, mobilizing opportunities extend beyond the forest sector. for multilateral enforcement action, and · Combine actions with both short- and long- integrating the regional FLEG processes into term implications in a realistic stepwise existing structures for regional cooperation. plan: Visible short-term impacts are often · Promoting collaboration between the needed to create and maintain momentum, progressive elements of the industry, whereas long-term work with the structural international financing institutions and drivers is necessary to ensure that these international nongovernmental organizations efforts are sustainable over time. Early "wins" involved in the FLEG process to develop, (for example, significant increases in forest improve, and harmonize safeguards and due revenue) are important factors to motivate diligence on forest investments. The aim continued efforts. should be both to ensure the legality of the · Address both failures of law and failures of timber used and to mitigate the risk for other implementation: On the one hand, ensure forest crimes, such as poaching, arson, and that the correct laws and policies are in place. encroachment of forest areas, resulting from On the other, work to enforce the law. This forest industry investments. two-pronged approach to legal compliance · Ensuring effective coordination between the is the only way to ensure that the full range implementation of the European Union Forest of motivations, opportunities, and means for Law Enforcement, Governance, and Trade illegal behavior is addressed. (FLEGT) Regulation and Action Plan and · Strengthen supply-side measures with other forest law enforcement and governance measures to control imports of illegal timber efforts. The aim should be strengthen the and wood products: This is especially linkages between the voluntary partnership xiii STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G agreements envisioned in the FLEGT action Involvement in forest law enforcement and plan, and the lending and advisory operations governance is not, however, entirely new or novel, of the international financing institutions, and the Bank and others can have a constructive especially the World Bank. role by linking existing forestry work effectively · Exploring the potential of the Extractive with broader efforts to improve governance Industries Transparency Initiative as a means in client countries. Forest law enforcement of increasing the transparency of the forest and governance work may sometimes be at sector financial flows in some key forest the frontier of the international community's countries, especially where a relatively small capacity to deal with problems of armed groups, number of companies operate large forest political interests, and criminal organizations. concessions. Development practitioners will need new skills and knowledge, some of which will have to be Focusing more directly on illegal logging built through experience, to deal with problems and other forest crimes will not always be a such as blending promotion of systemic and long- natural or comfortable role for development term governance reforms with targeted crime- agencies including the Bank. Inevitably, it will suppression programs. involve development agencies in complex and The world's problems of forest law controversial issues regarding the quality of laws enforcement and governance problems will never and put these institutions at times at odds with be entirely or permanently eliminated. Nor will powerful interest groups defending the status quo they be solved only by jails, courts, and arrests. for personal gain, including in some cases high- Dramatically improved resource management, level government officials. Consequently, there are effective rural development services and poverty two potential areas of risk which the international reduction serving forest-dependent communities, community needs to be aware of: industrial restructuring, protected areas systems · As with any complex and controversial issue serving the needs and aspirations of local involving different interests and actors, there communities, and all the other components of are reputational risks related to work with sustainable forest sector development and just forest law enforcement and governance. The and equitable economic and social development Bank and its partners need to be especially will, in the end, be more important. sensitive to issues related to human rights Credible penalties, effective enforcement, and equity in their work. Transparency and fair and just legal systems are, however, and advocacy and support to participatory essential ingredients to the control of forest approaches are important means to avoid crime. Forest law enforcement and governance these types of risks. should not displace the established focus of · A more vigorous engagement with forest forest sector development strategies or assistance. law enforcement and governance will also More sophisticated technically and analytically inevitably involve difficult issues related to sound forest law enforcement and governance national sovereignty in the management of work should, however, be added to the array of natural resources. This political risk needs to interventions and approaches supported by the be carefully managed. global community. xiv 1. Introduction F orest crime, including illicit activities socially and environmentally responsible such as illegal logging, illegal occupation investments. There are less visible--though highly of forest land, woodlands arson, wildlife insidious--costs resulting from the erosion of poaching, encroachment on both public and institutions, the spread of corruption across the private forests, and corruption is rampant economy, and lower growth. throughout the world. It is particularly troubling Forest crime likewise has negative in developing countries, where illegal logging environmental, economic, and social in public lands alone causes estimated losses in consequences at the global level. Forests are a assets and revenue in excess of US$10 billion global public good, and their degradation imposes annually, more than eight times the total global costs such as climate change and species official development assistance dedicated to the loss. The financial proceeds from the sale of illicit sustainable management of forests. As much forest products may wind their way, through as US$5 billion is lost annually to governments money laundering schemes, into nefarious because of evaded taxes and royalties on legally enterprises such as supporting terrorism, armed sanctioned logging.1 But the consequences of conflicts, drug trafficking, and protection of war forest crime in developing countries go well criminals. beyond financial losses. (See box 1.1.) Forest crime largely results from weak Within developing countries, 1 billion extremely governance and subsequent poor law enforcement poor people depend upon forests for part of their in the forest sector. Poor quality of forest sector livelihoods, and as many as 350 million people governance is a chronic characteristic of many living in and around forests are heavily dependent developing countries, and this poor quality on forests for their livelihoods and security. These is often symptomatic of the quality of overall vulnerable groups are at risk from illegal logging governance in these countries. and removal of timber and nontimber products A review by the World Bank's Operations from the forests. Moreover, violations of protected Evaluation Department (OED) of the performance areas boundaries threaten the conservation of of the Bank's 1991 Forest Strategy (Lele et al. forest resources and biodiversity. Illegal logging is 2000) pointed to the failure to address governance believed to be depressing world prices of timber issues as a serious gap in the Bank's work in products, leaving legitimate forest enterprises forestry, and recommended that the Bank help subject to unfair competition and discouraging reduce illegal logging by actively promoting 1 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 1.1. Costs and Consequences of Forest Crimes It is estimated that global illegal logging in public lands alone causes losses in assets and revenue in excess of US$10 billion annually, more than six times the total official development assistance to the sustainable management of forests. Another US$5 billion per year is estimated to be lost because of uncollected taxes and royalties on legally sanctioned timber harvests. In the context of international timber trade, in Indonesia, for example, the low-end estimate of the royalties, reforestation fund, and export taxes payments that are not being paid to the government on stolen timber amount to US$600 million per annum. This amount is more than twice what the government spent on subsidized food programs for the poor in 2001. In addition to the direct financial losses including a leakage of local and central government revenues, illegal logging and other forest crimes are associated with many negative economic, social, and environmental impacts. Illegal logging­induced deforestation is associated with landslides and large-scale deaths and destruction of property in Philippines and Thailand in the 1980s. Forest degradation linked to illegal logging and other forest crimes threatens biodiversity and increases carbon emissions and the costs associated with global climate change. The livelihoods and security (both economic and social) of local communities and indigenous forest-dependent peoples are often threatened because of the illegal logging and removal from the forest, since the rich and powerful often encroach upon the rights of the poor. Where the poor are employed in illegal operations, they tend to get marginal gains while the ringleaders skim off the bulk of the money. A study by the Environmental Investigation Agency and Telepak Indonesia estimates that a local laborer gets less than 10 percent of the value of the timber harvested for an illegal operator. In addition, benefits to the poor are transitory as the large operators abandon a site once its commercial potential is exhausted. Illegal logging distorts the marketplace, and legitimate forest enterprises are subjected to unfair competition through price un- dercutting and discouraged from making socially and environmentally responsible investments into the sector. An analysis for the U.S. estimates that domestic roundwood prices would be 2­4 percent higher if "suspicious" roundwood production were eliminated. In the absence of competition from illegal producers, the United States would be able to increase its exports of wood products by about US$460 million per year. Illegal forest operations can be linked to conflicts and wars. "Conflict timber" is the term associated with such activities, and in countries such as Cambodia, Liberia, Côte d'Ivoire, and the Democratic Republic of Congo, revenues from illegal logging fund national and regional conflicts, thereby creating political instability in which entrenched interest groups continue their exploitative activities. The lack of transparency and good governance further compromises any efforts at improvement, for example, by providing opportunities for money laundering and generating finances for political campaigns and weakening the rule of law in forest areas, disrupting legitimate economic activities, and eroding institutions. The illegal money generated from forest crimes often finds its way into activities such as providing slush funds for corruption in other sectors, land speculation, gambling, and human and drug trafficking, all of which have deep negative impacts in the economy at large. Sources: World Bank (2004a); Environmental Investigation Agency (2001); Seneca Creek Associates (2004). improved governance and enforcement of laws increased transparency, access to environmental and regulations. As a result, the Bank placed information, and public participation in client forest governance and illegal logging high on countries. the agenda in its 2002 Forest Strategy. Indeed, The Bank currently finances more than US$300 the Bank committed itself to collaborate with million in forest law enforcement and governance borrower countries and partners to reduce activities in its portfolio of forestry-related by half the estimated annual financial losses projects as part and parcel of promoting sound from illegal logging by 2013. Likewise, the forest management. Through its Forests Team2 Bank's 2001 Environment Strategy (World Bank and regional forestry specialists, the Bank is also 2001) emphasizes the comparative advantage actively involved in supporting a coordinated, of the Bank in supporting better governance, high-profile Forest Law Enforcement and 2 INTRODUCTION Governance (FLEG) process in partnership with practice, ameliorating supply and demand governments, nongovernmental organizations imbalances, increasing people's participation, (NGOs), and the responsible private sector. Since and reforming forest land tenure. It will also, 2001, for example, the Bank has organized and unfortunately, require addressing crime and facilitated, in conjunction with both producer and criminals in both frank and sophisticated ways, consumer country governments, three regional ensuring that the force of law enforcement falls FLEG ministerial conferences.3 on genuine threats to the sustainable development In the past decade, the international of natural resources and does not become an community has recognized the magnitude of added burden on the poor and disempowered. illegal logging and other forest crimes problems and has responded with a growing number of Objective and Structure multilateral, bilateral, civil society, and private This report takes stock of current approaches in sector initiatives. These have increased the promoting forest law enforcement and governance attention paid to forest crime in participating and seeks to help better frame discussion on ways countries, including at high political levels, and forward at national, regional, and international have helped to erode the associated sense of levels. The report outlines ways forward for taboo. The regional FLEG processes, anchored combating illegal logging and other types of forest in international environmental diplomacy and crime in the context of a strategy of promoting political negotiations, are perhaps the most visible economically, environmentally, and socially manifestation of this concern (see chapter 3). The sustainable forestry in client countries. It is processes are expected to create a demand for expected that the report will also contribute to better governance and improved law enforcement improved coordination and collaboration between at the country level (which is where the law the Bank and key partners involved in these enforcement problems will fundamentally get efforts. resolved) as well as at the multilateral level. Chapter 2 discusses the nature and modalities These processes have already led to some of forest law and the specific kinds of forest concrete, albeit still insufficient, action to address crimes that have gained international attention. It specific forest governance and law enforcement presents available estimates of the problem at the issues in some key countries, such as Indonesia global and specific country levels and attempts to and Russia. define the boundaries of forest law enforcement Ultimately, improving forest law enforcement and governance. and governance in developing countries will call As recently as five years ago, illegal logging on governments, international organizations, and forest crime were politically charged topics, civil society, the private sector, and others rarely discussed in country level or international to expand their conventional approaches to forums. Global sensitivities have changed. Today, forestry and to work in new, unfamiliar, and crime, corruption, and, specifically, forest crime potentially risky ways. Improving forest law have come to the forefront of the global debate enforcement and governance may turn out to be on sustainable forestry. Thus, Chapter 3 discusses largely about helping to establish overarching the key regional and international efforts to systems of anticorruption mechanisms, increased facilitate and support forest law enforcement transparency, and the rule of law. It will probably and governance and their achievements and the also involve deepening the technical quality of challenges they face. forest and natural resource management, and Chapter 4 then describes the Bank's thereby increasing predictability in forestry experience in this area, including its broader 3 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G efforts in supporting good governance. It approach to improving forest law enforcement identifies areas where synergies within the Bank and governance based on a framework that can might be achieved. These are clearly of relevance be used to inform and structure analytic work for other development agencies that support and discussions at the country level and can help efforts to reform forest governance as well as identify areas where international support can governance more generally and are interested in effectively complement country-level efforts in achieving more from their programs. general. Chapter 5 lays out a causal model of forest Finally, Chapter 6 discusses putting such an crime and a classification scheme for potential approach into practice. interventions. It then presents a forward-looking 4 2. Global Problems of Forest Crime L aw is one instrument of policy (such as · Conflicting legislation (see box 2.1) investment and incentives) to achieve Failures of implementation, on the other hand, development outcomes. Much forest include: law establishes objectives and institutional structures and confirms ownership in respect · Poor dispute resolution, which can lead to of these provisions. The concern is broadly one solutions outside the law of implementation. A more limited portion of · Unfair application of the law (for example, forest law and general law governing property bias, patronage, corruption, and so on) is concerned with crime and the remedy is · Failure on the part of forest agencies to follow enforcement. As will be discussed later in this the law report, criminal law consists of a large range of · Lack of capacity to enforce the law actions and potential interventions. Measures to · Lack of capacity to administer the law prevent, detect, and suppress crime are directed · Lack of coordination among government at particular activities proscribed by law. agencies · Lack of enforcement of laws outside the Law and the Forest forest sector (for example, in banking or Forest crime ultimately results from a failure of immigration law) the rule of law. Rosenbaum (2002) classifies two · Lack of government oversight4 types of failure in the legal system that lead to The right laws must exist, and they must criminal behavior: failures of law and failures of be enforced. What are the "correct" laws, then, implementation. Failures of law include: with respect to forests? Although some general · Clashes of norms, when "the rights to the guidance can be provided based on legal expertise resources as set out in law are not the same (box 2.2), there is no easy and straightforward as the rights that people or communities answer. It needs to be analyzed and debated at believe that they are entitled to have" the national level by different forest stakeholders, · Undetectable violations, when the law is and is finally decided by the national parliaments written in such a way that makes it difficult or other government institutions entrusted with to enforce this responsibility and accountable for their · Weak penalties, resulting in insufficient decisions to the public. What is, however, clear is punishment to deter criminal behavior that often the laws are not correct, especially from 5 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 2.1. Conflicting Forestry Legislation Box 2.2. What Makes a Good Forest Law Indonesia offers an interesting example where economic policy reform created a legal conflict. In this case, de- Although there is no one-size-fits-all description of a good centralization vested local bupatis with the authority to forest law, lawmakers can design laws in ways that resist unilaterally issue logging licenses inside the national forest illegal activities and corruption by doing the following: estate. This contradicted the earlier provision of requiring prior approval from the national level authority, and led to a spate of "illegal" over-cutting (purportedly to benefit · Avoid legislative overreaching: Do not write laws that the needs of local people), compounded by local-level exceed national capacity, that are more elaborate corruption and poor capacity for monitoring and enforce- than necessary to achieve the intended policy, or that ment. are socially unacceptable. · Avoid unnecessary requirements for licenses or permissions: These add to the burden on both To remove the contradiction between local and national government and private sector resources and offer legislation, a new Presidential Instruction issued in March opportunities for corruption. Make sure license and 2005 requires governors and district heads to "revoke control requirements serve a genuine purpose. and revise" decrees that are in contravention of legislation · Promote transparency and accountability: These in the sector of forestry. In other words, regional laws, serve both to deter bad acts and to make their which allow provincial or district authorities to unilaterally detection easier. Where the law grants discretion to issue timber concessions inside the national forest estate officials, it should provide standards for exercise of (without prior approval from the national level), must be that discretion. immediately struck from the books. · Enhance the stake of local, nongovernment interests in forest management: The law can do this by better Source: FAO (2005). recognizing existing rights or by creating new oppor- tunities for local people to benefit from forest man- agement. Without local support, law enforcement in forest areas is difficult. · Adopt the law through a broadly participatory pro- cess: This promotes a sense of ownership of the law the point of view of the poor and marginalized among stakeholders and a resulting respect for it. groups in the society, and that these groups · Increase the effectiveness of law enforcement mech- anisms in the law: Set appropriate penalties and have are often not able to get their voices heard in effective enforcement powers and procedures. legislative reform processes. This is echoed in a recent report (Colchester Source: World Bank (2006). 2006) that examines the social and political economy implications of forest law. Colchester et al. argue that many existing forest laws actually harm the poor, and that current forest Furthermore, it is not sufficient to have the law enforcement and governance efforts often correct laws. Rather, transparency is critical. This focus too heavily on enforcement of legislation includes both broad dissemination of the laws and and not enough on getting the laws correct. A ensuring that the language is understandable to similar argument is made by Savcor Indufor Oy the public. (2005), who distinguish between poverty-driven Scope of the forest law enforcement and commercially driven illegal activity, and and governance approach argue that the efforts to combat poverty-driven forest crime should, instead of emphasizing While illegal logging currently captures the law enforcement, focus on closing the huge gap greatest international attention, there are several between legal supply and demand (especially kinds of forest-related crimes with serious of fuelwood) that exists in many countries (for impacts at both national and global levels. In example, by legalizing currently illegal forest use addition to timber theft in its different forms, by local communities). forest crimes include corruption and other fiscal 6 GLOBAL PROBLEMS FOREST CRIME OF crimes related to the use of the forest resources. available agricultural lands, powerful economic These crimes, whether addressed in forest laws or interests, and political and social upheavals, such other legislation, are commonly addressed under as war and famine. Instead of enforcement per se, forest law enforcement and governance. The these issues are better dealt addressed through same should apply to labor and environmental wider processes such as land use planning, legislation directly related to forest operations land reforms, national forest programs, poverty (box 2.3).5 reduction strategies, and other development Forest crimes also include wildlife poaching, planning instruments with a much wider scope arson, and encroachment on forest lands, and broader reach. which may have little or no connection with While illegal logging and other forest crime the use and misuse of timber resources. Of can, from a national point of view, be important these, poaching and, to a more limited extent, in both small and large and high-forest and low- arson are addressed in this report because they forest countries owing to its negative economic, are often also addressed in forest legislation social, and environmental impacts, from a global and their drivers can be thought of in the same perspective it is possible to give some indication framework as illegal logging and other timber- as to where these impacts are likely to be most related crime. Some forest crime is driven almost harmful (table 2.1). Figure 2.1 also indicates how entirely by factors outside the forest sector, such the problems in the forest sector are linked to as demographic pressure, unequal distribution of broader issues of governance. Box 2.3. What Do Illegal Logging and Related Crime Look Like Illegal logging and other related crime takes various forms including, among others: · Timber theft · Unauthorized harvesting of wood · Noncompliance with regulations related to timber harvesting · Evasion of taxes and fees · Noncompliance with regulations concerning transport of export of timber · Noncompliance with labor laws · Noncompliance with environmental laws · Illegal logging and other related crime take place at different stages of the production chain: · In the award of forest concession and timber procurement contracts · By harvesting in areas where such rights do not exist (for example, conservation or protected areas) or regarding protected species that should be off limits for exploitation (for example, species on CITES (Convention on International Trade in Endangered Species of Wild Fauna and Flora) appendix II, such as broad-leaved mahogany) · During the actual timber harvesting operations · During the transport and processing of timber · During timber export · Equally, illegal logging and other forest crimes can involve both criminal and administrative infringements, and can take place primarily in violation of forest laws and within the purview of the forest authorities, or can involve breaking laws and regulations completely outside of their enforcement capacity (corruption, fraud, noncompliance with labor laws). Source: Modified from Blaser et al (2005). 7 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Weak governance in the forest sector is Figure 2.1. Corruption and Illegal inextricably tied to weak governance in society Forest Activity more broadly. Therefore, while forest law enforcement and governance must be embedded 0 Over 20% Over 50% in a sound strategy for overall forest sector Russia Other Asia West and Central Africa management, it should also relate to more Brazil general efforts to address governance and rule (TI) of law. It is through the linkage between efforts Acceding Indonesia China EU in the forest sector and broader governance 5 Other Latin America and law enforcement initiatives that forest law Corruption Japan Malaysia enforcement and governance become part of the High mainstream efforts in combating corruption and USA Eu-15 crime and promoting good governance in general. Canada 10 ­10 0 10 20 30 40 50 60 70 80 Types and Magnitude of Illegal Logging High % Suspicious Log Supply and Other Forest Crime Illegal Logging and Trade Source: Seneca Creek Associates (2004). Note: Bubble size represents the volume of suspect round- Estimating the extent of illegal logging and wood, including imports. trade in illegal timber and timber products presents a number of problems, and regardless of the definitions and methodology used, the exact magnitude cannot be known with that the value of suspicious wood products certainty.6 Speculation about illegal activity worldwide may be as high as US$23 billion. Of can, nevertheless, be examined in a rigorous the total of illegal timber, the study estimates that fashion using a number of well-accepted tools about US$5 billion enters world trade (table 2.2), and methods. Discrepancies in wood supply- representing as much as 10 percent of the value of demand balances, import-export statistics, price global trade of primary wood products. trends, revenue realization, forest cover change The study also estimates that 12 percent estimates, and other red flags are all incomplete of global softwood roundwood exports and but important indicators and measures of as much as 17 percent of global hardwood illegal logging. These can be consolidated into roundwood exports are of suspicious origin. a coherent story that can motivate concern and Less than 4 percent of global trade in softwood follow up through an intelligence cycle.7 Available lumber and plywood originates with timber of data, however, are sufficient to illustrate the suspicious origin, but as much as 23 percent magnitude of the problem. Table 2.1 provides of hardwood lumber exports and 30 percent of estimates of illegal logging as a percentage of total hardwood plywood exports might be considered wood harvest in 17 countries. Illegal logging in suspicious. The trade of timber products is often these countries is believed to range from 10 to 15 routed through third countries, adding another percent of total harvest in northwest Russia to up trade-related dimension to the problem (box to 80 percent of total harvest in Bolivia and Peru 2.4). An economic analysis based on simulations and 90 percent in Cambodia. from the Global Forest Products Model suggests In an in-depth, multicountry study of illegal that this illegal material depresses world logging, Seneca Creek Associates (2004) found prices by 7­16 percent on average. This has 8 GLOBAL PROBLEMS FOREST CRIME OF Table 2.1. Indicative Estimates of Illegal considerable negative implications in terms of Logging Selected Countries their competitiveness to those producers who (various years) invest in the legality and sustainability of their Country Percent of total production products. By volume, firewood accounts for the Bolivia 80 largest single use of wood around the world. Brazil 20­47 In developing countries, most firewood use is Cambodia 90 Cameroon 50 consumed for domestic and small-scale industrial Colombia 42 uses and is based on family labor or informal Ecuador 70 supply systems that are often based on sources Gabon 70 of supply outside of officially recognized forest Ghana 60 areas, such as farmland, brush and scrubland, Indonesia 70­80 and other scattered trees. A substantial portion Laos 45 of fuelwood collection takes place outside of Malaysia Up to 35 Myanmar 50 formal forest management and in some, perhaps Papua New Guinea 70 in many circumstances, is in violation of the law. Peru 80 This is one, very common, example of how forest Russia 10­15 (northwest) laws in many countries unjustly, and with little 50 (far east) or no positive environmental benefit, criminalize Thailand 40 large numbers of poor and vulnerable people. Vietnam 20­40 Fortunately, criminal enforcement and penalties Sources: Savcor Indufor Oy (2004); FAO (2005) ; European are often not pursued against subsistence users Forest Institute (2005). and collectors of fuelwood. The mere presence, however, of laws and regulations that poverty Table 2.2. Global Volume and Value of impels people to violate puts people at risk of Suspicious Wood Products extortion and abuse, furthering vulnerability and disempowerment. Volume (thousands Value of cubic meters) (US$ million) Other timber-related crime Production There is a range of illicit activities associated with Roundwood 130,994 12,053 timber harvesting and trade, beyond cutting trees Lumber 25,236 6,917 where and when it is proscribed. Such associated Plywood 9,957 3,535 activities include irregular timber sales; corruption Subtotal 22,505 Imports in the award of concessions and service Roundwood 19,973 1,624 contracting; evasion of taxes, royalties, and other Lumber 5,780 1,477 fees by enterprises or by communities or private Plywood 5,125 1,820 forest owners; circumvention of labor laws; Subtotal 4,921 and unauthorized wood processing. Corruption Exports and other financial crimes often involve money Roundwood 17,967 1,231 laundering, adding another dimension to the Lumber 6,928 1,846 constellation of what should be considered forest Plywood 5,237 1,718 Subtotal 4,795 crime (box 2.5). Although no reliable estimates are available, Source: Adapted from Seneca Creek Associates (2004). anecdotal evidence and stakeholder interviews 9 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 2.4. China and the Trade of Illegal Timber and Timber Products Rapid economic growth and growth in wood processing for exports in China has led to a burgeoning demand for timber and other forest products at the same time as domestic restrictions on logging have constrained domestic supplies. In addition, the country has emerged as a competitive supplier of finished wood products such as furniture and wood-based paneling, with ready markets in the United States (which accounts for 35 percent of China's exports) and Europe. These developments have resulted in wood imports into China rising from US$6 billion in 1996 to US$16 billion in 2005. These imports come principally from Russia (far east), Indonesia, Malaysia, Papua New Guinea, New Zealand, and Thailand. It is feared that the Chinese demand (which does not currently distinguish between legally and illegally produced timber for imports) is escalating the problem of illegal logging in several of the producer/supplier countries that are characterized by a situation of weak forest law enforcement and governance. The domestic and international dimensions of this issue make it into a complex problem. Solutions will need to consider (bilateral and multilateral) actions from a menu of reinforcing options: · Continue to strengthen forest law enforcement and governance in producer countries such as Russia, Indonesia, and Papua New Guinea · Encourage China to discriminate between legally and illegally procured timber for imports into China (and enact a ban on any imports identified to be illegal) · Encourage China to invest in development of industrial timber plantations and streamline management of its existing old-growth forests · Encourage consumers in the United States and Europe (as the largest purchasers of China's wood products) to purchase only products made with (verified) legally produced timber · Cooperate (bilaterally or multilaterally) at the level of customs agencies to identify and impound (as necessary) shipments of illegal timber and timber products Sources: White et al (2006); World Bank (2005f); China National Forestry Economic Development Center (2006). suggest that in state-owned forests financial losses hunting for commercial wildlife trade (Wingard due to corruption can be as high as or even higher et al. 2005). This trade, much of it illegal, is than those due to stolen timber (Savcor Indufor escalating in scale across the globe, from the Oy 2005). Corruption can occur at the local vast, multimillion dollar trade in animals or level and be petty or it may involve high-level their parts across Asia for their meat, skins, as officials inside or outside the forest administration pets, and as medicines, to the "bushmeat trade" facilitating the supply of major quantities of illegal across Africa. Increasing trade can be attributed timber. Common practices include undergrading, to several factors, including growing access underpricing, and manipulation of timber data to increasingly small and fragmented natural (for example, to mask industrial timber harvesting habitats, a change from traditional to efficient as "sanitary cuttings") (see box 2.6). In practice, modern hunting technologies, loss of traditional the distinctions between illegal logging and other hunting controls, and the addition of big business timber-related crime become blurred. The same into a previously local-scale subsistence activity. perpetrators may be responsible for outright theft The loss is accelerated by demand from a growing or corruption-related illegal logging depending on middle class in urban areas and globalization that the local situation. facilitates international trade. In east and Southeast Asia, the illegal trade in Wildlife Poaching wild animals and plants is estimated to be worth It is believed that the single greatest threat facing millions of dollars. In the early 1990s, the illegal many species of wildlife across the world today is wildlife trade in Vietnam was conservatively 10 GLOBAL PROBLEMS FOREST CRIME OF Box 2.5. Money Laundering Most forest crimes that are of interest from the development and criminal law enforcement points of view generate illicit income. While pilfering firewood for domestic use, and poaching of wildlife for subsistence consumption, can be serious problems, international attention is, and ought to be, focused on crimes involving corruption and organized crime. Anti-money laundering and asset forfeiture laws are important tools to fight forest crime, corruption, and organized crime. The Financial Action Task Force on Money Laundering (FATF), which is recognized as the international standard setter for anti- money-laundering efforts, defines money laundering as "the processing of ... criminal proceeds to disguise their illegal origin" in order to "legitimize" the ill-gotten gains of crime. A money laundering predicate offense is the underlying criminal activity that generated proceeds, which, when laundered, results in the offense of money laundering. In its 40 recommendations for fighting money laundering, FATF specifically designates corruption and environmental crime among the list of 20 designated categories of offenses that must be included in money laundering laws as predicate offenses (World Bank 2004d). In order to illustrate the importance of illegal logging, Indonesia added forestry crime and environmental crime in its 2003 money laundering law. Money laundering and related laws provide a number of components that can be employed to greater effect in forestry. Gener- ally, money laundering laws (adapted from World Bank 2004e): · Are a separate offense that carries jail time and fines · Allow for seizure and confiscation of the proceeds of crime · Allow law enforcement access to bank and other financial institution records · Require financial institutions to file suspicious and sometimes cash/large transaction reports, and to identify the beneficial owners of legal entities · Establish financial intelligence units, which, among other things, receive suspicious transaction reports from financial institu- tions · Provide expanded channels for international cooperation Anti-money-laundering regimes impose requirements on financial institutions that are intended to inhibit financial transactions by criminal enterprises and to provide information on suspicious behavior to the appropriate authorities. Banks, for example, should be expected to be aware of the normal legitimate business patterns of their customers, and to report suspicious transactions. In forestry, this would translate into banks being aware of the licensed quotas or sanctioned timber purchases of their clients and the official salaries of customers holding public forestry positions (and their contrasting purchases and account behavior). In March 2004, the Bank and Fund Boards decided that anti-money laundering and combating the financing of terrorism should continue to be a regular part of the work of the Bank and Fund Boards and endorsed the FATF Recommendations on Money Laundering and Terrorist Financing for the preparation of the "Reports on the Observance of Standards and Codes." estimated at US$24 million annually. In 2002, it wildlife without permits, and exploiting wildlife was estimated at US$66.5 million. In early 2004, beyond stated quotas, is adding additional stress Chinese law enforcement seized the skins of 31 on wildlife numbers. Consequently, because of tigers--there are only 50 tigers estimated to be left limited baseline data, weak capacity, and poor in the wild in China--worth more than US$1.2 enforcement, much of the nominally legal trade million. contributes to the demise of wildlife throughout All trade in species categorized as endangered the region (World Bank 2005a). is illegal, both under international environment treaties such as CITES and under implementing Arson legislation enacted by national legislatures. Fire is involved in a large percentage of all Many other species, though not endangered, deforestation and is often the last in a sequence are traded through permits, many of which are of assaults that destroys the integrity of a natural provided using quotas to limit harvests. Trading system. In many natural ecosystems, particularly 11 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 2.6. Sales of Oak to the Yerevan Brandy Company in Armenia According to Armenian Forest code from 1994 (still in force), only sanitary and improvement cuttings are allowed in Armenian forests (that is, removal of dead, infected, and very old trees), and cutting down healthy trees is prohibited under any circum- stances. In 1998, the Yerevan Brandy Company (YBC) decided to buy 2,000 cubic meters annually of high-quality oak for a period of 15 years to produce new barrels for the ageing of the brandy produced in their Yerevan factory. YBC originally explored various alternatives for purchasing the quantities of oak wood required for the production, including importing the oak wood from neighboring countries. However, in the end a contract to purchase mainly Armenian oak wood from the Armenian forest administration was established. The country's forestry service will supply this wood to the distillery at an agreed price of US$120 per cubic meter. Experts estimate that the market value of timber of this quality oak is US$200 per cubic meter. Within the 15 years of the agreement, 30,000 cubic meters of high quality, often centuries old, oak will be illegally felled by a government agency and sold below the market price because the government has favored a private company. Source: Savcor Indufor Oy (2005). dry savannahs, fire occurs naturally, and in some Indonesia, and other countries. All three types of regions human-induced fire has been practiced arson are often specifically prohibited by law, but for so long that it is intertwined with co-evolved the case of arson for slash-and-burn agriculture is natural systems that are similarly sustainable similar to that of illegal fuelwood use by the poor and are often indispensable for the livelihoods of (that is, it may be more indicative of failures of indigenous communities. law than failures of implementation). Fire is also a recognized tool of sustainable Wildland fire, on the other hand, results forest management when employed as a from four types of events: natural risks, such as controlled part of harvesting and regeneration lightning strikes; accidents (escaped fire from systems or as a component of an integrated domestic or land clearance, industrial accident, protection system that regulates the build or other unintentional cause); negligence; and up of fuel and the risk of conflagration criminal arson. Criminal arson arises where there (especially relevant to park and protected is relevant legislation or regulation, or where areas management). Fire is also employed intent and recklessness rise to higher levels of as a practical and legitimate tool in land abuse. development, conversion of forest land to Many countries, including Indonesia and alternative uses, and in systems of rotational Brazil, legislate and regulate the use of fire but agriculture. nonetheless experience repeated and costly However, while fire can be a natural feature episodes of uncontrolled fire. Though estimates and an important management tool, fire caused vary, the 1997 fires in Indonesia, for example, by arson can pose serious risks to forests, burned 2­5 million hectares of land, affected 75 human safety, and property. Arson can include million people as a result of haze and smog, and subsistence slash-and-burn agriculture, illegal cost the region US$4.5 billion (Dennis 1999). and uncontrolled use of fire to clear grasslands to These fires were in large measure due to gross promote regrowth, and use of fire to clear land for violation of standards and regulations governing commercial agriculture. The latter has contributed the conduct of land clearance operations related to widespread forest destruction in Brazil, to oil palm development. 12 GLOBAL PROBLEMS FOREST CRIME OF Encroachment Table 2.3. Average Annual Global deforestation is estimated to total nearly Deforestation, 1990­2000 9.4 million hectares per year (see table 2.3). Thousand hectares Percent Some unknown but very substantial portion of global deforestation takes the form of illegal Africa 5,262 0.78 Asiaa 364 0.07 encroachment into forest areas. As discussed Oceania 365 0.18 in Chomitz (2006), this aggregate deforestation Europe ­881 ­0.08 results from the individual decisions of millions North and Central America 570 .10 of large and small actors, most of whom are South America 3,711 0.41 driven largely, if not exclusively, by economic World 9,391 0.22 motivations. Deforestation can be, and often is, economically and socially desirable, making Source: FAO (2001). a.The data for Asia are heavily influenced by China, which way for profitable and sustainable agriculture gained an average of 1,806,000 hectares of forest cover and other land uses and can, of course, be annually from 1990 to 2000. environmentally catastrophic in terms of losses of biodiversity. In the same way, deforestation may be legal and officially sanctioned or may be initiated and executed illegally by a range a cloud of criminality over millions of poor of interests ranging from corporate agricultural people in Indonesia, Brazil, and elsewhere. These interests to ranchers to poor slash-and-burn should not be pursued through a conventional farmers desperately seeking a livelihood. A enforcement approach but should be addressed by special challenge for law enforcement policy reforms to provide tenure and livelihood security posed by forest land encroachment is that and access to investment and services, providing in many instances illegal encroachment will a sound legal basis for development. be desirable while legal conversions may be Priority Regions and Countries undesirable (see box 2.7). The dilemma of enforcement of the integrity Limitations on data concerning forest crime, of the forest estate is that large numbers of poor including lack of availability for some countries people currently occupy the official forest estate and inconsistencies in measurement and in many countries. This illegal occupancy casts treatment of different types of forest crime, Box 2.7. Development Value of Forest Conversion May Not Match With Legality Social desirability Legality Desirable Undesirable Legal Example: Settlement schemes based on zoning Example: Conversions to pasture or cropland and assessment of land capability and environ- driven by distorted prices or other policy incentives mental assessment Illegal Example: Spontaneous agricultural develop- Example: Conversions conducted by ment on suitable sites by indigenous proscribed methods (for example, fire) or communities based on illicitly obtained permissions or authorizations 13 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G make comparisons across countries difficult. addition, because international trade is a powerful Nonetheless, it is possible to see, for example, driver of illegal logging, producer countries in the case of illegal logging, that the problem is are as complicit as consumer and intermediary considerably more extensive in certain countries. processing countries in contributing to illegal Available estimates suggest, for example, that the logging, and reforms are necessary in both. volume of illegal logging in Brazil, Indonesia, an Thus, identification of priority countries for d Russia is significantly higher than in several action needs to be considered carefully, and, in other forest-important countries (see figure 2.1 determining where efforts of the international and table 2.1). community should focus, other factors (such as At the same time, illegal logging and other the willingness and ability of the government to forest crimes are widespread throughout the assert leadership in addressing these issues) must world, including in developed countries. In also be taken into account. 14 3. Support for Strengthening Forest Law Enforcement and Governance A s recently as five years ago, illegal logging the basis of many historical, philosophical, and and forest crime were politically charged economic factors (Reichel 2005), and forest law topics rarely discussed in country-level enforcement systems are even more varied and or international forums. Global sensitivities based, in part, on issues related to the nature and have changed. Today, crime, corruption, and, value of the forest resource. Forest and natural specifically, forest crime have come to the resource law enforcement does tend to differ from forefront of the global debate. In 2003, the general law enforcement, because of the merger Convention Against Transnational Organized of the territorial and operational management Crime came into effect, and in 2005 the UN functions of forestry agencies, with those of law Convention Against Corruption. Presently, enforcement. Planning and execution of timber numerous initiatives and actions are implemented sales, for example, involves the forestry agency by governments, multilateral and bilateral with compliance monitoring and enforcement of agencies, international NGOs, and private sector timber sales contracts, enforcement of harvesting companies to support forest law enforcement practice requirements, and rate of cut constraints. and governance. Some of these take place at the Compliance monitoring and enforcement international and regional levels, and combine constitutes one phase of a continuum that political dialogue and targeted development continues on to criminal investigation and assistance with support to country-level action prosecution. Most all countries have tradition and and measures to control, and eventually halt, experience with forest law enforcement efforts. forest crime and international trade in illegal Forestry in many countries is in many ways timber and timber products. Others take place excessively steeped in a para-military and policing at the country level supported by the country mindset and the paraphernalia of uniforms, arms, programs of multilateral and bilateral financing and hierarchy. Even where these traditions have institutions and/or actions by NGOs, research weakened, all modern forestry sectors are marked institutions, and the private sector. with more or less formal procedures, guidelines, and standards to guide routine operations, National Law and Forest Law remedies, and sanctions that are evoked by Enforcement Systems deviations and abuse. Law enforcement is one of the essential functions Forest law enforcement is usually not the of governments. Criminal justice systems vary on exclusive domain of forestry agencies and 15 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G requires coordination and cooperation with suppression efforts with the whole range of other other mainstream criminal law enforcement aspects of forest law enforcement (as will be organs of government. These include the detailed in chapter 5) has only recently come on police, the prosecutor, and the judiciary, some the agenda of international development agencies of which may have national or local authority through such mechanisms as the regional FLEG and, importantly, interest and expertise in process. forestry issues. All the issues of intersectoral cooperation and coordination that arise in other, National FLEG Processes more conventional, aspects of natural resource A small set of countries is beginning to address management and development arise in the law forest crime through concerted, coordinated, enforcement sphere. In some countries, at least multistakeholder, national-level FLEG processes some forestry officials have the status of law (box 3.3). The experience with these processes enforcement officers. In others, their powers of has demonstrated that it is as much a political arrest, confiscation, and detention are markedly process as it is technical, and involves conciliation limited and constrained (see boxes 3.1 and 3.2). of the various stakeholder interests in a manner As forest crime becomes more sophisticated that enables change. Where the economic stakes and targets more valuable assets, the need for in illegal activities are high, powerful interest law enforcement agencies to work at comparable groups can forcefully protect the status quo levels of technical expertise will increase. even if the outcome is clearly negative from the Unfortunately, few developing country forestry society's point of view. agencies possess capabilities in criminology, law There is rarely one stakeholder group that enforcement, forensics, and law that are sufficient is able to push through a major change in the to meet today's needs. Increasing capabilities, in established power balance. Instead, successful a way that balances the needs for specific crime change processes rely on coalitions of several Box 3.1. Forest Law Enforcement in China In China, the Forest Security Bureau is responsible jointly The Proportion of Different Types of Forest Administrative Offences to the State Forestry Administration and the Ministry of (2001-2005) Public Security. The forestry security system consists of Other administrative 6,726 forestry security units in 30 provinces throughout Illegal timber purchase or process offences the country and employs nearly 60,000 staff. In 2004, 6% 10% the budget for forest public security agencies was 50.00 Stolen logging million Yuan (US$6.5 million). Units of the Forest Security 7% Bureau have the authority to investigate forest-related crimes; collect evidence; issue summons; detain, seize, Over logging 9% and make arrests; and conduct surveillance. Since 2000, the Forest Security Bureau organized five special crack- Deforest or destroy seedling down campaigns aimed at serious illegal activities in 1% different forestry regions. Forestland encroach or alter Illegal timber 2% From January 2002 to October 2005, forest public secu- transportation 65% rity agencies accepted and heard 639,400 forest-related cases, consisting of 42,000 crimes (8,808 of them seri- ous crimes) and 597,400 administrative offences. Source: China National Forestry Economic Development Center (2006). 16 SUPPORT FOR TRENGTHENING OREST AW NFORCEMENT AND OVERNANCE S F L E G Box 3.2. Challenges in Forest Law Enforcement in Indonesia World Bank/World Wide Fund for Nature (WWF) work describes issues faced in forest law enforcement in Indonesia. Investiga- tors (forest police and the police) have limited capacity to collect evidence and follow a case through to prosecution because investigators have insufficient understanding about recent forest laws and sanctions, court procedures, and forest crimes. Ministry of Forestry investigators lack authority to conduct arrests and to file case dossiers with the prosecutor. Other law enforcement authorities (such as prosecutors and judges) are also unfamiliar with forest penalties and sanctions stipulated in recent forest laws. This often results in the dismissal of forest crimes or the handing down of light penalties. In some cases, law enforcement agencies, such as the police, military, and the forest police are reluctant to capture or prosecute forest criminals because these officers are directly involved in, or otherwise supporting and benefiting from, illegal forest activities and have very little to gain from enforcement operations. This situation is worsened by the fact that law enforcement operational responsibilities are very fractured owing in part to decentralization or weaknesses in the current organizational structure. It is cur- rently not clear who is responsible for setting priorities or providing oversight or supervision to the forest police and investigators, setting training standards, or ultimately accountable for the performance of forest law enforcement programs. Finally, effective suppression can be dangerous work, especially when it targets powerful actors such as government officials, military personnel, and timber tycoons. There have been numerous cases where forest police, park rangers, and members of NGOs have been injured or killed for attempting to suppress illegal timber theft. Others have been subjected to intimidation and threats of violence. Many enforcers would prefer turn a blind eye to timber theft rather than suppress illegal logging activity if there is a risk of violent reprisal for suppression efforts. Source: World Bank/WWF (2005). interest groups with different capacities. Local Box 3.3. Bosnia and Herzegovina and international NGOs have often managed to Action Plan bring the problem of illegal logging out in the open and raise awareness among politicians During the past several years, the governments of the and the general public of the need to act. two entities of Bosnia and Herzegovina--the Federation Representatives from interest groups directly of Bosnia and Herzegovina and Republika Srpska--along with the donor community, have become increasingly involved in timber production can wield concerned with forest sector governance. Excessive illegal considerable influence among their peers and harvesting of forests began during and directly following colleagues. High-level political champions (box the 1992­5 war. Since the end of the conflict, forest protection has improved, but illegal logging--mostly in 3.4) are also required who are able to fend off the form of nontransparent selling of timber by forest efforts to slow down the implementation of the management companies--continues to be problematic. In proposed measures through behind-the-scenes an effort to address the situation, the entity governments, supported by the Bank, are formulating an action plan to maneuvering. target illegal activities in the forest and wood-processing Partners willing to support forest law sectors, including theft and corruption-related crime. At this stage, the action plan is limited to addressing forest enforcement and governance can be found among crime associated with management of state forests and many stakeholder groups. Ministries of finance public forest enterprises, and has two main components: and local municipalities are probably interested in improvement of external control and internal development of public forest enterprises. The action plan is intended to the increased tax revenue that reduction of illegal be undertaken in coordination with reforms in broader for- activities could bring about. Forest enterprises est sector policies (exposing remaining state-owned wood may be motivated to join the effort because of processing industries to competition or privatizing them) and more general governance reforms (strengthening of market pressure or ethical reasons. Local people the judiciary). whose rights are trampled by illegal loggers are potential partners as well as NGOs concerned Source: Savcor Indufor Oy (2005b). 17 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 3.4. President Putin Promotes to characterize the more promising initiatives the Russian National Action currently underway, such as: Plan for Preventing Illegal · Establishment of a mechanism for Logging and Associated Trade interministerial coordination, and a forum for stakeholder participation Following the 2005 Europe and North Asia (ENA) FLEG Ministerial Conference, Russia formulated a national · An analytic process for assessing the action plan for preventing illegal logging and associated magnitude, scope, and dimension of the trade. The plan identifies socioeconomic, legal, sectoral, problems related to law enforcement and and intersectoral causes of illegal logging and suggests measures dealing with (a) improving legislation regarding governance taxes, penalties, and administration; (b) improving the · Creating awareness, information sharing, sector governance system regarding interagency coordi- nation and cooperation and information; (c) improving and, if necessary, whistle blowing to "name forest management practices regarding forest inventories, and shame" the worst perpetrators of forest forest leases, remote sensing and monitoring, and for- crimes est certification and conservation; and (d) developing socioeconomic mechanisms, including civil-society par- · A consultation and consensus-building ticipation, environmental awareness, and building up the process to define the scope of actions and image, value, and market share of legal forest products. priorities The plan also identifies concrete areas of international cooperation, including follow up to the ENA FLEG process · Detailed definition of the actions, responsible at the regional level. stakeholders, mechanisms of implementation, and financing (internal and possible external) President Putin has publicly denounced the wastefulness with regard to the nation's forest resources, pointed to · Obtaining the political endorsement and the need for structural reforms in the sector, instructed support for the law enforcement and the ministers to settle all disagreements regarding the proposed Russian Forest Code, and promoted the action governance actions plan to combat illegal logging, noting that this challenge has an international dimension. Regional FLEG Processes Source: Federal Forest Agency of the Russian Federation Since September 2001, regional FLEG ministerial (2006). conferences have been conducted in East Asia (2001), Africa (2003), and the ENA region (2005), co-organized by both producer and about protection of the environment, human consumer governments in close collaboration rights, and democracy. In addition, there are the Bank. Some of the major G8 countries always individuals in all stakeholder groups and (especially the United States, United Kingdom, institutions including public forest administration and the Russian Federation in the case of the who need no other motivation than pursuit ENA FLEG) as well as the European Commission for fairness and justice. External partners can have played a key role in these processes by reinforce and support these progressive groups providing political and financial support.8 These and, within the boundaries of their mandates, efforts have increased the attention given to this facilitate their work at the political and technical issue within participating countries, including levels. at high political levels, and led to concrete, The aim of a FLEG process is to bring all these albeit still insufficient, action to tackle specific partners together to enable them to reinforce governance issues at the national and regional each other. Although it is evident that there will level, involving both producer and consumer not and should not be any standard model(s) for countries. The regional approach has allowed such processes, some common elements seem for: 18 SUPPORTFOR TRENGTHENING OREST AW NFORCEMENT AND OVERNANCE S F L E G · Multistakeholder technical meetings where cooperation and/or decrease resistance to experiences with forest law enforcement and different types of actions to combat illegal governance issues are shared logging and forest crime · Intergovernmental negotiations for the · Helped to identify priority actions regionally drafting of a ministerial declaration and and nationally and facilitated exchange of action plan to improve forest governance and experiences and best practice combat illegal logging and associated trade · Created some level of basic data on illegal · Other regional stakeholder meetings both logging and other forest crime as a basis for prior to and as a follow up to the ministerial informed, multistakeholder discussions, and declarations. as a means for establishing baselines against which to monitor progress National-level actions with multistakeholder · Provided a network for information participation have assisted in the preparation sharing between different actors (donors, of input to the conferences as well as the international organizations, researchers, development of follow-up action plans. NGOs, government officials, more progressive The regional FLEG processes have aimed to private sector) and contributed to better create the high-level political commitment and coordination of activities the political space at national and regional levels · Influenced the incorporation of illegal logging to address these complex and politically sensitive and other forest crime in several regional issues, in partnership with major stakeholders processes, such as the Commission en charge from civil society and the private sector. While des Forêts d'Afrique Centrale (COMIFAC) the success of these regional processes owes to and its Plan of Convergence in the Congo the commitment of participating governments and Basin, the Association of Southeast Asian other stakeholders, the Bank has played a critical Nations (ASEAN) through its meetings of role getting these processes off the ground. senior forestry officials, the Asia Forest To date, the regional FLEG ministerial Partnership (box 3.5), and the Ministerial processes have: Conference for the Protection of Forests · Increased awareness on the impacts and in Europe (MCPFE). These initiatives can causes of illegal logging and other forest be seen in part as complementary to the crime, and improved understanding of the FLEG ministerial processes. In part they different types of actions in and around the have adopted the illegal logging agenda as a forest sector that are needed to create the means to strengthen the regional ownership conditions for legality of the FLEG initiatives in relation to the · Established combating illegal logging and regional ministerial processes, which by other forest crime as a shared responsibility some countries are seen as being strongly of producers and consumers of forest product influenced by the interests of a specific where governments, civil society, and the group of consumer countries (for example, private sector all have distinct roles to play, Gulbrandsen and Humphreys 2006). and provided some level of understanding regarding these different roles Beyond the more direct impacts listed above, · Created a political platform and momentum the regional FLEG processes have arguably that different actors (within the government, also intensified action by several key European donor agencies, civil society groups/NGOs) governments with large imports of suspicious can use to mobilize resources and obtain timber and timber products to halt illegal imports 19 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 3.5. The Asia Forest Partnership real sense, an international partnership for forest law enforcement and governance has formed, at Launched at the 2002 World Summit on Sustainable least in part, as a result of these regional FLEG Development, in Johannesburg, the Asia Forest Partner- processes. ship comprises 17 producer and consumer nations and 17 intergovernmental and civil society organizations. The legitimization and rhetoric and building Supported by the government of Japan, the Asia Forest of partnerships that has resulted from the FLEG Partnership promotes sustainable forest management ministerial processes has, so far, had mixed through support for control of illegal logging, control of forest fires, rehabilitation and reforestation of degraded impact on actual enforcement and compliance. lands,anddevelopingcapacityforeffectiveforestmanage- Few major reforms in forest law enforcement and ment. The Asia Forest Partnership forest law enforcement and governance-related activities include harmonization governance systems at the national level have of initiatives to combat illegal logging, including Asia resulted from the ministerial meetings (Indonesia FLEGT, the Pan-ASEAN Timber Certification Initiative, and and Russia being the most significant exceptions). so on; supporting cooperation among customs and other relevant agencies; developing minimum standards of le- A number of governments of countries with an gality, timber tracking, and chain of custody systems; and important role in the forest products production verification systems. The Asia Forest Partnership offers a and marketing chain are still only marginally, if mechanism to engage on forest law enforcement and governance with several important Asian governments, at all, committed to addressing this issue. A large including both producer and consumer countries. It is share of the industries operating in countries especially important in terms the Japanese market, one of the major consumers of both legal and illegal forest affected by illegal logging and other forest crime products in the region. are not engaged in any meaningful way. This is the case especially with industries exporting to Source: http://www.asiaforests.org. less environmentally sensitive markets and/or for domestic consumption. Much more needs to be done to fully capitalize on the opportunities available under FLEG. Some of the more specific (for example, through public procurement policies considerations include: and collaboration with the private sector). Donor assistance to activities related to forest law · Expressions of political commitment have enforcement and governance has intensified, and value, but this needs to be better exploited: there have been a number of bilateral memoranda National FLEG constituencies are beginning of understanding and similar undertakings to to take root through the actions of NGOs address illegal logging and other forest crime. and other international agencies including There are also signs that industry associations bilateral memoranda of understanding. and some of the key multinational companies are However, there is a need to foster these increasingly serious in addressing this issue as further by encouraging ownership at the part of their corporate social responsibility (CSR) country level and by continuing to actively policies and actions as an outgrowth of FLEG engage with governments of key countries diplomacy. In addition, a number of prominent uncommitted or only marginally committed international and national NGOs have this issue to the ministerial declarations. It is also high on their agendas and continue their work necessary to keep the momentum of these with advocacy, information, and piloting of processes going by maintaining senior level concrete approaches, often supported by the same policy-making (ministerial-level) involvement donor countries otherwise active in forest law and follow-up ministerial meetings to take enforcement and governance and in some cases stock, re-endorse, and further develop the in partnership with the private sector. In a very FLEG declarations. 20 SUPPORTFOR TRENGTHENING OREST AW NFORCEMENT AND OVERNANCE S F L E G · FLEG processes have been largely isolated promote exchange of experience, technical from the mainstream of the international practice, network building, and other criminal justice regime: FLEG ministerial formal and informal technology transfer, meetings have not involved agencies with this has developed only recently and in broad multisectoral oversight or criminal limited ways. A perhaps false dichotomy is justice responsibilities. The recent ENA FLEG perceived separating technical aspects of law declaration is the only one, for example, enforcement and governance from political to take note of the UN Convention on and policy aspects rather than seeking a Transnational Organized Crime. Systematic merger and reconciliation of these two development of these linkages should be important dimensions. high on the forest law enforcement and governance agenda. Multilateral and Bilateral Initiatives · Regional discussions of common law and Programs enforcement problems have yet to identify International Law Enforcement Cooperation or mobilize significant opportunities for multilateral enforcement action: Apart from A serious barrier to investigating transnational identifying a limited number of potential crimes is that governments have exclusive areas of true multilateral cooperation sovereign power nationally and almost none (customs enforcement, certification, and elsewhere. Countries affected by these forest so on), where implementation measures crimes involving transnational dimensions are under discussion, FLEG regional differ in their political, social, economic, and processes have generated disappointment legal systems and cultures that generate friction among some stakeholders for not having for the police and other enforcement agencies. developed regional enforcement mechanisms Enforcement powers are severely restricted when as such. Clearly, there is a need to better a criminal investigation crosses the border, and motivate producer and consumer countries investigative efforts are complicated by a lack of to collaborate to implement multilateral understanding of political and legal structures action. Better involvement of the regional and language. Frequently there is confusion development banks, and integration of the about who has jurisdiction. Without agreements follow up of the ministerial conferences in governing cooperation, these situations create the work programs and high-level meetings many opportunities for domestic and international of institutions can help advance the organizational conflict among law enforcement development of such regional agendas, such agencies, jurisdictions, and countries. as ASEAN; the International Tropical Timber The development of transnational cooperation Organization (ITTO); COMIFAC; MCPFE; is an increasingly common response to Food and Agriculture Organization (FAO) transnational organized crime. Cooperation is regional forestry committees; UN Economic defined by high-level bilateral and multilateral Commission for Europe (UNECE), Timber assistance treaties with other nations through Committee; and the UN Forum on Forests which states may agree to exchange subject (UNFF; emerging regional work programs). matter experts and investigative expertise and to · Regional FLEG processes have to be made a provide training for police. Treaties set out rules strong force in supporting effective reforms for the sharing of intelligence and other evidence of national level enforcement: Despite some and for determining jurisdiction in specific effort to utilize FLEG follow-up meetings to cases. They establish standards for investigative 21 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G methods, the extradition of offenders, and the transnational organized crime, including the imposition of sanctions. creation of domestic criminal offences to combat Political will must exist among senior officials the problem, the adoption of new frameworks in a country to target transnational organized for mutual legal assistance, extradition, law crime and to develop the cooperative relationships enforcement cooperation, and technical assistance required for successful investigations and and training. (See box 3.6 for details on key prosecutions. Many poor countries and emerging provisions.) democracies lack this basic infrastructure, and other barriers are corruption, nationalism, Forest law enforcement and governance: whether treaties governing law enforcement UN organizations and international processes can be negotiated, and whether agreements domestic policy objectives conflict with the The UNFF has kept the problem of illegal development of common law enforcement goals harvesting of forest products and associated (Reuter and Petrie 1999). trade high on its agenda since the issue was first Recent developments in these areas which raised in the mid 1990s. Governments at the may prove important in forest law enforcement 2002 World Summit on Sustainable Development and governance include the UN Convention called on UNFF to "take immediate action on Against Transnational Organized Crime and domestic forest law enforcement and illegal the UN Convention Against Corruption. The international trade in forest products."9 At its former is a legally binding instrument committing second and third sessions, in 2002 and 2003, ratifying states to a series of measures against the UNFF adopted resolutions on measures to Box 3.6. Convention Against Corruption The UN Convention Against Corruption has provisions addressing four key issues: · Prevention: It promotes prevention of corruption, with measures directed at both the public and private sectors through measures, such as the establishment of anticorruption bodies and enhanced transparency in the financing of election campaigns and political parties. States must endeavor to ensure that their public services are subject to safeguards that promote efficiency, transparency, and recruitment based on merit. Once recruited, public servants should be subject to codes of conduct, requirements for financial and other disclosures, and appropriate disciplinary measures. Transparency and accountability in matters of public finance must also be promoted, and specific requirements are established for the prevention of corruption, in the particularly critical areas of the public sector, such as the judiciary and public procurement. Those who use public services must expect a high standard of conduct from their public servants. · Criminalization: It requires countries to establish criminal and other offences to cover a wide range of acts of corruption and goes beyond previous instruments of this kind, criminalizing not only basic forms of corruption such as bribery and the embezzlement of public funds but also trading in influence and the concealment and laundering of the proceeds of corrup- tion. Offences committed in support of corruption, including money laundering and obstructing justice, are also covered. · International cooperation: Countries agreed to cooperate with one another in every aspect of the fight against corruption, including prevention, investigation, and the prosecution of offenders. Countries are bound by the convention to render specific forms of mutual legal assistance in gathering and transferring evidence for use in court to extradite offenders. Countries are also required to undertake measures that will support the tracing, freezing, seizure, and confiscation of the proceeds of corruption. · Asset recovery: Asset recovery, which is a fundamental principle, is particularly important issue for many developing countries where high-level corruption has plundered the national wealth. Effective asset-recovery provisions will support the efforts of countries to redress the worst effects of corruption while sending a message to corrupt officials that there will be no place to hide their illicit assets. 22 SUPPORTFOR TRENGTHENING OREST AW NFORCEMENT AND OVERNANCE S F L E G be taken at the national and international levels CITES aims to control the international trade to strengthen legislative frameworks, to build in certain critically endangered species and enforcement capacity for monitoring and control to regulate and monitor trade in other species and to create verification techniques to help that are believed to be vulnerable to over control illegal logging. Subsequently, at the fourth exploitation. By extension, it could have a role and fifth sessions of the UNFF, illegal logging and in combating illegal logging, especially when the associated trade issues were considered in terms operational definition of domestic sustainability of their impacts on local communities and their includes considerations against illegal logging. sources of livelihoods. The Forum Secretariat In practice, the role of CITES in combating has developed active relationships with regional illegal logging is limited because of the relatively FLEG processes, and has been working with specialized species included in its appendices, civil society to bring their experience into the and because the tracking of the chain of custody policy discussion. In February 2006, member from the forest to permit application is seldom states reaffirmed their commitment to forest law implemented (Chen 2006). enforcement and governance at the UNFF's sixth The inclusion of illegal logging and other forest session. crime on the agendas of these intergovernmental ITTO has also advanced the forest law forest policy-related forums (in the case of enforcement and governance agenda. In 2001, ITTO with a mandate on trade) is a clear sign the International Tropical Timber Council, of the increasing openness that governments the governing body of ITTO, decided to help have to discuss and address these issues in producing countries devise their own measures intergovernmental dialogue. Together with the on forest law enforcement, and since then more active role that the formal regional bodies both analytical studies and conferences have have taken, this is likely to reduce the future been conducted on this topic. Further, ITTO need for ad hoc or parallel high-level meetings has financed US$5.7 million in governance- for the purpose of establishing high-level political related activities across 10 projects. The recently commitment. However, owing to the lack of or renegotiated (January 2006) International Tropical limitations to effective civil society and industry Timber Agreement contains a specific reference participation in these forums, the need for more to strengthening the capacity of members to inclusive political processes can not be entirely improve forest law enforcement and governance, ruled out. At minimum, however, meetings will and address illegal logging and related trade in focus less on general statements and declarations tropical timber. This is the first legally binding (already addressed by these more formal forums) international instrument to address illegal logging and more on concrete and specific commitments and in this sense can be considered a milestone on action based on these. for forest law enforcement and governance. Together, ITTO and the FAO published a European Union Regulation and Action 2005 report on best practices (FAO 2005) and Plan on Forest Law Enforcement and Trade are currently implementing a set of regional The European Union (EU) Regulation on FLEGT workshops based on this publication.10 Other FAO was approved by the member states in December activities in this area include, joint organization 2005 and is now operational. The regulation is of a workshop on forest law enforcement and supported by a FLEGT action plan emphasizing governance with the UNECE, Timber Committee EU support for improved governance in wood- in 2004, and including this issue on the agenda of producing countries, and a licensing scheme to the FAO regional forestry commission meetings. ensure only legal timber enters the EU. In 2005, 23 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G the EU initiated financing for seven projects Basin, the Amazon Basin, and Southeast Asia, totaling 20 million supporting the FLEGT action and emphasizes good governance, community- plan, implemented by international NGOs, based actions, technology transfer (for example, including also a trust fund provided for the Bank integrated monitoring systems), and harnessing for the facilitation of the regional FLEG processes. market forces to promote transparent and legal An essential part of the EU FLEGT is the practices in the sector. The United Kingdom and negotiation of Voluntary Partnership Agreements Germany are implementing similar programs. (VPAs) between the EU and interested timber Many other bilateral agencies are also actively producing countries. VPAs aim to develop an involved in financing forest law enforcement and understanding between producing and importing governance-related projects and programs, either countries that only timber originating legally will as stand-alone activities or coordinated with be exported and allowed to be imported under broader programs. All of these bilateral initiatives the partnership. Such agreements are currently have been important partners in the regional under negotiation in Cameroon (led by Germany), FLEG processes, and several have provided Congo and Gabon (led by France), Ghana (led resources for the Bank to enable effective by the United Kingdom), Indonesia (led by the facilitation of specific events. In many countries European Commission), and Malaysia (led by there is active collaboration and considerable the Netherlands). It is evident that, if successful, synergies between the bilateral country programs the implementation of the VPAs will result in an and the Bank's efforts in this area. increasing demand for country-level financing in such areas as strengthening and reforming laws, Government Initiatives to Promote regulations, and institutions in the forest sector, Responsible Timber Procurement strengthening the capacity of indigenous and Several, particularly European, countries have for rural communities to manage forests sustainably, a number of years used government procurement independent certification of sustainable forest policies as a means to encourage the use of management, implementation of timber tracking sustainably and legally harvested timber and systems, forest products and trade-related wood products. Germany, for example, has since information and statistics, and monitoring of the 1970s required sustainable tropical timber forest cover changes to detect illegal activities. for federal building projects, and more recently This will provide both the need and opportunities several authorities at state and municipal levels for improved collaboration between bilateral and have adopted similar procurement policies. In multilateral financing institutions, including for 1997, the United Kingdom issued voluntary the Bank. guidance advising government departments to purchase timber products from sustainable and Bilateral Initiatives legal sources, and in 2000 announced that this Several industrialized countries have launched was to become a binding commitment. In 2003, their own initiatives aimed at reducing illegal Denmark published voluntary guidelines for logging in affected countries. In the United States, public procurement of tropical timber. France for example, in 2003, President Bush launched developed a timber procurement policy favoring an Initiative Against Illegal Logging as a means Forest Stewardship Council and equivalent to assist developing countries to combat illegal certified timber in 2002, and the Netherlands has logging, the sale of illegally harvested timber a similar policy in place (Brack 2005). Outside products, and corruption in the forest sector. The of Europe, Japan has introduced a government initiative focuses geographically on the Congo procurement policy favoring wood and wood 24 SUPPORT FOR TRENGTHENING OREST AW NFORCEMENT AND OVERNANCE S F L E G products that have been harvested in a legal and Civil Society and Private Sector sustainable manner, and has issued a Guideline Initiatives for Verification of Legality of Wood and Wood Products to support the verification of legality and International NGOs play an important role as sustainability (box 3.7). partners to promote forest law enforcement and As discussed in the previous chapters, there governance. Their efforts are especially notable has been a close link between these demand- in: side actions and the regional FLEG processes. On · Increasing awareness of the extent and the one hand, the same governments pioneering impacts of illegal logging and other forest these approaches have been active promoters of crime at the global, national, and local levels the FLEG and, on the other hand, the ministerial · Engaging in advocacy to combat this issue declarations have committed them to moving · Conducting research and analysis forward with action in their own countries and contributing to an understanding of the scope helped to extend this approach toward other and causes of and potential solutions to forest consumer countries. crime Box 3.7. Outline of Japan's Guideline for Verification of Legality and Sustainability of Wood and Wood Products 1. Summary This guideline indicates several points to which the supplier of wood and wood products should pay proper attention when they verify legality and sustainability of their supplies. 2. Definition (Outline) (i) Legality The timber should be harvested in legal manner consistent with procedures in the forest laws of timber producing countries. (ii) Sustainability The timber should be harvested from the forest under sustainable management. (iii) Methods of Verification (Example) · Forest Certification and Chain of Custody · Verification under the authorization of industry association · Original method of each company The three methods described in the Guideline are example, and other methods [having] the same level of reliability as these three methods may be acceptable. 3. Preservation of Documents Concerned Documents concerned should be preserved during definite terms. 4. Assessment and Review This guideline would be assessed and reviewed after enforcement. Source: http://www.illegal-logging.info/documents.php. 25 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G · Helping governments, industry, and example, Forest Trends and FERN) are carrying local civil society groups to find ways of out analytic, advisory and advocacy work. addressing forest crime The Forests Dialogue, an NGO hosted by Yale University, has served as a facilitator of an Among others, the International Union for the industry-NGO dialogue on illegal logging and Conservation of Nature and Natural Resources other forest crime both at the national level in (IUCN) and the World Wide Fund for Nature affected countries and during the FLEG regional (WWF) have taken an active role in forest law ministerial processes. On the national level, enforcement and governance both as regards the the number of NGOs involved in forest law international FLEG processes (for example, IUCN enforcement and governance activities is too large has facilitated effective civil society participation even to attempt mentioning the most important in the ministerial conferences) and in terms of actors. concrete interventions to pilot approaches to A number of nongovernmental research forest law enforcement and governance at the institutions are engaged in important analytical national level (box 3.8). work regarding forest crime. The Center Global Witness and the Environmental for International Forest Research (CIFOR), Investigation Agency are two of the main NGOs in collaboration with several bilateral and involved in investigating forest crime at the multilateral development agencies, has a national level, and have also played important dedicated research program on forest law advocacy roles internationally. Greenpeace enforcement and governance issues (See box likewise has been active in awareness raising 3.9.) Other prominent international research and advocacy, and several other NGOs (for institutions with forest law enforcement and Box 3.8. IUCN Program on Illegal Logging The IUCN's forest law enforcement and governance vision is to promote locally and nationally appropriate forest governance ar- rangements that directly improve local livelihoods and deliver sustainable forest management. Its vision is based on the principles of equity, transparency, participation, and action. IUCN's objective is to catalyze the implementation of forest law enforcement and governance-relevant actions that have been jointly prioritized by key government, private sector, and civil society actors and that are capable of achieving demonstrable impacts. In working toward this objective, IUCN employs a tripartite approach where government, industry, and civil society stakeholders work together to find and implement solutions. IUCN also works to strengthen policy-practice linkages. IUCN has eight full-time professional staff devoted to forest law enforcement and governance in Africa, Asia, Latin America, and the Commonwealth of Independent States. IUCN's priorities are to: · Raise awareness of, and commitment to, forest law enforcement and governance among NGOs, communities, and other stakeholders · Strengthen civil society input to official FLEG processes · Support tripartite national action plans on forest law enforcement and governance · Pilot test innovative governance approaches in the field · Provide information, tools, and training to key actors who have a role to play in implementing forest law enforcement and governance reforms · Address legal, economic, and institutional constraints to implementation · Identify and respond to the specific constraints that governments face in implementing cross-border control of illegally logged timber · Proactively capture and share lessons learned Source: IUCN (2006). 26 SUPPORT FOR TRENGTHENING OREST AW NFORCEMENT AND OVERNANCE S F L E G Box 3.9. CIFOR Research Program on Forest Law Enforcement and Governance Goal: CIFOR's goal is to contribute to the reduction in illegal forest activities by fostering good governance, through research on: · Causes of illegal forest activities · Impacts on livelihoods, the environment, and the economy · Policy options and processes leading to their adoption, implementation, and enforcement Strategy: CIFOR seeks to work in partnership with international organizations, governments, NGOs, the private sector, and research institutions in southern and northern countries to develop practical policy options, and to support their adoption and implementa- tion by providing world-class research outputs, organizing and participating in policy forums and workshops, and through capacity building for impact-oriented research. Focal research issues: · Causes of illegal forest activities and policy and market failures · Impacts of illegal forest activities and law enforcement on livelihoods, and how increased rural peoples' control over forest resources may be harnessed to reduce illegal forest activities · Relationship between trade and illegal forest activities, and how market mechanisms and nonmarket mechanisms may be used to control illegal forest activities · How public policy failures may be reduced through improvements in accountability and transparency and thus reducing illegal forest activities · Opportunities and constraints presented by formal and informal policy processes to the adoption of policy options, their implementation, and enforcement CIFOR (2005) discusses the use of anti-money laundering laws to fight illegal logging. Among other issues it discuses some forest crime money laundering typologies. Source: http://www.cifor.cgiar.org. governance-related research activities include financing for specific research projects and Chatham House (Royal Institute of International contributing to outreach activities. Affairs, U.K.) and the European Forest Research Where the private sector is concerned, there Institute. These institutions offer excellent are several examples of working toward codes opportunities for collaboration on analytic of conduct that ensure the legality of timber, work on illegal logging and dissemination of some of them implemented in collaboration information through their outreach mechanisms with international NGOs. A number of trade to international and national-level actors engaged federations across Europe and in the United in forest law enforcement and governance. States have been working on behalf of their World Resources Institute has focused members to improve corporate governance and especially on developing approaches for transparency in timber trade. As an example, the monitoring forest cover changes and detection U.K. Timber Trade Federation is developing a of illegal activities in the forests through remote Code of Conduct and a Responsible Purchasing sensing technologies. The Program on Forests, Policy that will act as a fast track for companies a multidonor trust fund program housed at the wanting to comply with the U.K. government World Bank, includes governance as one of its requirements (Gulbrandsen and Humphreys thematic focus areas and has already collaborated 2006). The Confederation of European Paper with several of these initiatives, providing Industries (CEPI) launched its Legal Logging Code 27 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 3.10. Industrywide Codes of Conduct Many examples of industrywide codes also exist. CEPI has declared a set of principles committing their members to the purchase and use of wood only coming from legal logging. The CEPI code includes the following commitments: · Members commit to conduct logging operations in full compliance with any law that is applicable to their activity and location · Members commit to purchase only wood that is legally logged · Members will have and implement procedures concerning wood procurement and compliance with laws that correspond to the underlying principles of the Environmental Management System · Members shall make sure that the legality of the logging of purchased wood is correctly documented · Documents concerning wood procurement shall be properly maintained and made available upon request to any entitled authority with a mandate to control legality · Members undertake to make their staff aware of the preceding principles and to train staff adequately in this respect Similar declarations have been made by other associations that are prominent users of timber, such as the International Council of Forest and Paper Associations, the Inter-African Forest Industries Association, the Japanese Federation of Wood Industry Association, and the American Forest and Paper Association. Sources: Confederation of European Paper Industries (2005); FAO (2005). of Conduct for the Paper Industry during the sustainability) of these products. Many forest ENA FLEG Ministerial Conference in November industry projects are financed without due 2005 (box 3.10). The WWF Global Forest Trade diligence regarding the legality and sustainability Network has established buyer groups in some of the timber they use. Collaboration with the 20 countries committed to sourcing increasing progressive elements of the industry and its quantities of certified forest products for its associations, and efforts to sharpen the due members. Such entities as the Tropical Forest diligence on forest industry financing as regards Trust work to link directly buyers with producers the legality and sustainability of timber, continues of certified sustainable (and hence legal) wood, to be a challenge, especially as regards companies or with producers whose procurement chain is that operate on the less environmentally savvy moving toward sustainability. markets (that is, markets outside of Europe and Some of the major international forest the United States). products' companies, such as Stora Enso, or companies that are major purchasers and sellers Summary Assessment of Forest Law of wood products, such as IKEA, have actively Enforcement and Governance engaged with the regional FLEG processes, in the World and invest in collaboration with NGOs and There is a groundswell of activity--national development of verifiable and externally audited and international, public, and private--related timber procurement chains verifying the legality to illegal logging and other forest crime and of their timber and wood products (box 3.11). addressing underlying broader forest governance Despite these encouraging trends, it needs issues. The regional FLEG processes have to be recognized that much of the forest provided a forum for the various actors and products industry still purchases its timber stakeholders to come together, work to build and other wood-based raw materials without synergies, and create new opportunities for any mechanism to verify the legality (or cooperation. Much is being done to study 28 SUPPORT FOR TRENGTHENING OREST AW NFORCEMENT AND OVERNANCE S F L E G Box 3.11. Voluntary Corporate Codes of Conduct to Promote Legal and Sustainable Forestry Corporate codes of conduct are voluntary initiatives by which corporations, either independently or as members of associations, commit themselves to follow self-defined principles of social and environmental responsibility. This also often includes compli- ance with the laws of countries in which they operate. Stora Enso, a European timber and paper company, actively works to combat illegal logging and related illegal activities where it operates. The company's strategy to ensure the legal origin of its wood purchased in Russia includes: · Recognizing and analyzing the risks related to legality and sustainability issues · Focusing on long-term partnerships and investments · Having local representative networks · Increasing its own logging operations · Keeping the supply chain as short as possible · Offering training and cooperation to promote supplier's awareness of sustainability issues · Having active stakeholder dialogue and development projects IKEA has developed a, "staircase model approach" to promote legal and sustainable forestry among its suppliers. Requirements include the legal sourcing of wood products. IKEA, in partnership with WWF, has developed a wood tracking system to ensure that there are no leakages along the chain of custody. The partnership has also established producer groups committed to extracting only legally sanctioned harvests. While it is too early to assess the impact of such initiatives, they are likely to become increasingly important instruments in the fight against illegal logging and forest corruption. Sources: Jantunen (2006); FAO (2005). and understand the problem of forest crime, the forest sector efforts and the broader attempts particularly illegal logging, to raise awareness of to promote good governance and combat its scope and consequences and to develop and organized crime. Forest law enforcement and test approaches to address these issues at the governance efforts, both at the country level and country and local levels. within the FLEG processes, are still to a large Several timber importing countries--though extent limited to the forest sector, including by no means all of the most relevant ones--are primary and secondary production and trade, taking important steps to reduce and ultimately while often important tools and experience to eliminate international demand for illegally address these issues are outside the sector. harvested wood. International organizations Some of these broader issues and potential are promoting collaboration and political will linkages are discussed in the next chapter. Given among their members in addressing forest the wide scope of the topic, this discussion is law enforcement and governance. Some forest limited to those approaches and initiatives where products companies are engaged in efforts to the Bank is a major partner, and consequently ensure the legality of their operations. where the possibilities for immediate action to What is missing then? Where are the major create synergies are most promising. The Bank's needs for strengthening this collaboration to broad and deep involvement in these issues achieve concrete results on the ground? One of should, however, ensure that the most relevant the more obvious gaps is the weak link between initiatives and approaches are captured. 29 4. World Bank Experience in Forest Law Enforcement and Governance O ver the past three decades, the World It was recognized that a large share of Bank has amassed significant experience fuelwood consumed by poor people was collected in the forestry sector. This chapter outside of formal forestry management and discusses the evolution and current state of institutions and often from lands not formally Bank involvement in forest law enforcement recognized as forests. While seldom explicitly and governance. It also describes work in addressed as an issue of law enforcement, other sectors as the Bank sharpens its focus on there was recognition that forestry agencies governance issues. Finally, the chapter indicates (especially in Africa and India) traditionally where the Bank is heading in addressing forest had a police orientation and were frequently in law enforcement and governance within the conflict with local people and forest-dependent institution and identifies potential areas of communities. Forestry agencies and personnel synergy between the Bank's forestry program and in these countries often considered subsistence its broader governance-related initiatives. use of forest by the poor as pilferage, and saw expansion of subsistence agriculture into forest World Bank Lending and areas as a major threat. A theme that underlay Advisory Services Bank forestry work at the time, as well as much Prior to 1978, the Bank's work in forestry was of the international thinking on forestry, was sporadic and limited to a very few industrial that forestry was excessively dominated by a forestry-oriented plantation and forest engineering policing and controlling mentality and needed to projects as well as small forestry components be reoriented to a development focus that saw associated with multifaceted agriculture and people and their behavior as the basis for sector rural development projects. From 1978 forward, development. the Bank departed into a new direction, trying to The analysis and vocabulary of the time catalyze forestry in support of poverty alleviation was dominated by notions of the tragedy of and environmental quality. A particular issue the commons, open access externalities, and that emerged early on was the wood energy collective action. In terms of operational designs, dependence of the rural poor, the burdens this took the Bank into a social and community imposed, especially on women, of declining wood forestry portfolio that eventually exceeded 36 supplies, and the potential role of community projects totaling nearly US$1 billion between 1979 mobilization in improving forestry outcomes. and 1990 (OED 1991). 31 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G During this time, Bank involvement was more in 1983 (box 4.1), and in general these issues limited in forest-rich countries, to some extent started to appear in a more systematic way because of a usually unstated recognition of in project design in the 1990s. The Bank's serious governance problems, which to the extent explicit attention to forest law enforcement and they were acknowledged at all, were referred governance has gradually grown and has become to with euphemistic code words such as "rent- more technically and institutionally sophisticated. seeking." Illegal logging was not given serious or Adjustment operations in Papua New Guinea lasting attention, either within the Bank or in the in the 1990s supported introduction of private forest community generally. The relative wealth sector administration of log export taxation. and prosperity of forest agencies in particularly Work in Cambodia in the late 1990s involved the well-endowed countries was certainly recognized first use by the Bank of forest law enforcement but, as with corruption generally, was not professionals in policy analysis and project considered an appropriate or relevant concern for design. Experiments in third-party independent the Bank or development policy. monitoring of forest crime reporting, support for The earliest explicit attention to forest crimes case tracking systems, and recommendations in Bank project design was in the Philippines for timber theft prevention planning were Box 4.1. Forest Law Enforcement in the World Bank Forest Sector Work in the Philippines In the Central Visayas Regional Project, FY1983, forest destruction was addressed as an attribution to illegal occupancy on logged-over areas with attendant use of fire for land clearance. The project employed a social forestry approach that aimed to stabilize land use by securing tenure rights and providing development services to communities that, nonetheless, were seen (by the government and the Bank) as "illegal forest occupants." Evolving out of this experience, the subsequent Philippines Environment and Natural Resource Sector Adjustment Program, FY1991, contained further elements of a more refined approach to communities, as well as the first Bank support to substantial efforts to confront large-scale illegal logging. The operation supported policy and investment work in social forestry and tenure regularization and provided support to a strat- egy for improved enforcement in areas where illegal operations were prevalent. It aimed to help the Department of Environment and Natural Resources intensify direct management presence within the forests, implement a plan for an intensive monitoring and enforcement, and provide technical assistance. Innovative features included: · Cooperation with the Department of Justice to speed up prosecutions and reduce obstructionism of local courts · Cooperation with the Department of Interior and the local government to assist in apprehensions, including a mobile strike force and involvement of the Philippine national police in monitoring committees at all levels · Introduction of a multiple-point monitoring system including surveillance at lumber mills, aerial surveillance of forests to identify illegal cutting and processing, and ground surveillance of access and transport routes · Program monitoring by committees at central, regional, and provincial levels, including central and local government, military, church, and other NGO representation · Legal services to ensure well-prepared court cases, through contract hiring of lawyers and assistance in prosecutions · Provision of adequate transportation and communications equipment to field personnel responsible for enforcement · Programs to win community support and defuse the livelihood issue, such as targeting various existing government programs to generate constructive means of livelihood The Multi-Sector Forest Protection Committees developed under the operations were considered one of the most successful efforts of the project and eventually grew to a nationwide system, but proved largely unsustainable because of budget constraints following completion of the program. 32 WORLD BANK EXPERIENCE FOREST LAW ENFORCEMENT IN AND OVERNANCE G among the innovations. In Africa, similar work Lending operations including independent monitors was developed in There are currently more than 50 active forestry Cameroon, and timber and post conflict issues are projects in the Bank's lending portfolio, with now being addressed in Liberia. a total cost of US$2.7 billion and total Bank Country Assistance Strategies commitment of US$1.6 billion. A November 2005 assessment of these projects shows that To examine the extent to which forest law some 35 projects have clearly identified forest enforcement and governance and related issues law enforcement and governance components, are taken into account in Bank Country Assistance totaling an estimated US$310.8 million.12 Thus, Strategies (CASs) today, a review of the most forest law enforcement and governance activities recent CASs for 18 forest-important countries was accounts for 11 percent of total project costs carried out.11 These 18 countries represent 75 across all 51 forestry projects, and 22 percent of percent of all forests in developing countries. total project costs for the 35 projects with forest Seventeen of 18 CASs mention forestry, with governance components (see table 4.1).13 11 containing explicit forestry components. In terms of specific forest law enforcement and Nine CASs mention forest law enforcement and governance activities, some of the areas of forest governance issues specifically, with at least seven governance addressed in Bank projects are: outlining forest law enforcement and governance activities (both lending and nonlending) to be · Development of national level forestry undertaken. Five CASs link deforestation to policies and management plans governance issues, and six describe linkages · Capacity development for public agencies to between poverty and deforestation. better address forest crimes Table 4.1. Forest Law Enforcement and Governance Components in the Forestry Portfolio, by Region Cost as Fleg as Total Number Total percent of Bank Fleg percent of Fleg as number of fleg cost (US$ total forestry commitment amount total forestry percent of Region of projects projects millions) portfolio (US$ millions) (US$ millions) portfolio total fleg Sub-Saharan 9 5 515.1 19 289.7 108.9 21 35 Africa East Asia/ 8 7 772.9 29 431.1 40.3 5 13 Pacific Europe/Central 11 9 396.5 15 265.6 32.7 8 11 Asia Latin America/ 19 13 691.9 26 328.8 123.1 18 40 Caribbean Middle East/ 3 0 203.5 8 139.5 0.0 0 0 North Africa South Asia 1 1 127.1 5 108.2 5.8 5 2 Total 51 35 2707.0 100 1562.9 310.8 11 100 Note: In the interest of space, this table uses a lowercase abbreviation (fleg) for forest law enforcement and governance. Here, fleg should be taken as individual activities, projects, or initiatives related to the broader issue, and should not be confused with multistake- holder FLEG processes. 33 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G · Support public awareness activities Box 4.2. Recent World Bank Forest · Support for natural resource inventories Law Enforcement and activities, transparency in concession Governance-Related Documents allocation, forest certification, and chain-of- custody verification · "Tools for Civil Society Action to Reduce Forest Cor- · Development of forest law enforcement ruption" reporting and monitoring systems and · "Going, Going, Gone: The Illegal Trade in Wildlife in provision of equipment and capacity East and Southeast Asia" · "Reforming Forest Fiscal Systems: An Overview of development for staff responsible for Country Approaches and Experiences" management of protected areas · "Technologies for Wood Tracking: Verifying and Monitoring the Chain of Custody and Legal Compli- Examples of this work are presented in the ance in the Timber Industry" boxes throughout this report. Analytical and advisory activities and other nonlending activities assistance, knowledge management, as well as An essential and increasingly important part of training and research services.14 the Bank's contribution to development is the Since issuing the 2002 Forest Strategy, the analytical and advisory activities carried out Bank has produced several important forestry- for client countries. These activities provide a related publications that include discussion of foundation for defining strategic priorities and forest law enforcement and governance issues informing policy dialogue and decisions on (box 4.2). projects and programs and comprise economic The Bank also has prepared country-level and sector work and nonlending technical forest sector reviews in several countries (see Box 4.3. Nigeria Forest Sector Assessment While forestry constitutes only 2.5 percent of Nigeria's gross domestic product, approximately half of the country's population relies on the forest for energy, fodder, construction materials, income, and medicine. Between the 1960s and 1995, Nigeria's forest cover decreased from 10 million hectares to 3.1 million. "What are the specific and overriding problems in the Nigerian forestry sector? First, forest management is nonexistent and because of this the forests, even in the reserves, are degrading. Second, current revenues in the Nigerian forest sector are minimal because fees are set arbitrarily low and do not reflect the real market price of timber. Third, low timber prices and low fees, coupled with protectionist policies, such as the import tax and the log export ban, mean that the wood industry is inefficient, resulting in ore demand for wood which is met through illegal and other channels. Fourth, there is no relationship between forest planning, forest management, and the revenue system. Fifth, while we know a lot about the Nigerian forestry sector through several recent studies, there is a gap of knowledge in the area of appropriate policies for Nigeria, particularly fiscal policies. Without an appropriate forest fiscal policy and forest management system in place, forestry in Nigeria will inevitably be unsustainable, with low benefits to the state and, therefore, to communities.... Five issues are critical in transforming the sector: [1] Ruthlessly creat- ing and funding effective forest management systems in each state; [2] reforming the forest revenue system on a state-by-state basis; [3] refining the legal and regulatory framework governing the management of forest land; [4] restructuring related sectors, such as the private sector wood industry to ensure economic sustainability and viability; [5] Strengthening the social safety net for the most threatened communities by developing alternative employment opportunities." Source: Excerpted from World Bank (2005g). 34 WORLD BANK EXPERIENCE FOREST LAW ENFORCEMENT IN AND OVERNANCE G box 4.3) with a focus on forest law enforcement Box 4.4. Illegal Logging and and governance. Further, as part of its analytical Lao People's Democratic and advisory work, and as an integral part of its Republic Hydropower Project strategic approach to forest governance, the Bank has actively supported international and regional In Lao PDR, during consideration of the Nam Theun 2 initiatives on forest governance, including the hydroelectric power project, the Bank conducted a series of assessments of compliance with government com- three regional ministerial FLEG conferences. At mitments to prohibit logging in the proposed reservoir the country level, the Bank has supported the site pending completion of project appraisal and project development of national-level action plans related implementation. In 2000, a Bank/government mission employing satellite image analysis and helicopter and to controlling illegal logging and improving forest ground surveys documented serious instances of non- sector transparency for Albania, Armenia, Bosnia compliance with uncontrolled logging proceeding in the and Herzegovina, Indonesia, and Russia. In some reservoir area and in sites planned to receive resettled communities and in the national protected area covering cases, Bank work related to investments in other the reservoir's watershed (World Bank 2000c). Based on sectors can also involve issues of illegal logging these results, the government and the Bank reassessed and forest governance (box 4.4). the requirements for forest protection and the govern- ment instituted stricter controls and accountabilities for compliance with project preparation agreements. Linking Forestry to Broader Governance Repeated assessments in 2003 and 2005 supported the Issues Within the Bank good intentions of the government and the efficacy of its efforts and supported the Bank's decision to support the Ever growing attention is being paid to project with a guarantee and a grant for environmental and social protection measures. governance and corruption issues within the Bank, as evidenced by Bank President Paul Wolfowitz's Jakarta speech on the subject, and the recent Board paper on this topic ("Raising the Bar on Anticorruption: Improving Governance and Accountability, Fostering Development," is likely to be highly indicative as to where these April 17, 2006), describing the Bank's position synergies can be found in general. The emerging and its emerging strategic approach to sense of urgency to tackle the governance issue engagement with clients and bilaterals. at a corporate level provides a real window of The Bank finances a vast array of investment opportunity to bring forest crime into the broader and nonlending activity aimed at improved Bank focus on controlling corruption. governance and public and private sector Public Sector Governance management. Indeed, the US$22.3 billion invested by the World Bank in FY2005 in the areas of The Bank's Public Sector Governance program law, justice, and public administration accounted has three priorities: for 24 percent of all International Bank for · Support public sector reform through a Reconstruction and Development/International combination of "voice" and partnership, Development Association (IBRD/IDA) lending competition, and internal rules and restraints (World Bank 2005c). Lending for public sector · Tailor reform interventions to institutional management alone represented US$9.6 billion--or and political realities through systematic 10.1 percent of total Bank commitments--at institutional and political assessments the end of FY2005. Identifying where the · Investment in long-term institution building opportunities lie for cooperation among Bank Group units working on forest law enforcement Building on its Anticorruption and Public and governance and broader governance reform Sector Governance strategies, the Bank has 35 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Figure 4.1 Good Governance Has Many Dimensions Citizens/Firms Political Accountability · Political competition, broad-based political parties · Transparency & regulation of party financing · Disclosure of parliamentary votes Checks & Balances Effective Public Civil Society & Media · Independent, Sector Management · Freedom of press, FOI effective judiciary · Ethical leadership: asset · Civil society watchdogs · Legislative oversight declaration, conflict of · Report cards, client surveys (PACs,PECs) interest rules Citizens/Firms · Independent · Cross-cutting public Private Sector Interface · Streamlined regulation Citizens/Firms oversight institutions management systems: (SAI) meritocracy, public · Public-private dialogue finance, procurement · Global initiatives: · Extractive Industry Transparency UN, OECD · Service delivery and · Corporate governance Convention, anti- regulatory agencies in · Collective business associations money laundering sectors Decentralization and Local Participation · Decentralization with accountability · Community Driven Development (CDD) · Oversight by parent-teacher associations & user groups · Beneficiary participation in projects Citizens/Firms developed a multipronged strategic framework for The Public Sector Governance Group has improving governance (figure 4.1). also identified a need to introduce differentiated Based on an OED assessment, the Public strategies for low and high-risk countries,15 with Sector Governance Group has identified five more intensive support and oversight required priority areas going forward: for high-risk countries. Preliminary thinking about the approach in such countries suggests · Integrate governance anticorruption in the emphasizing: design of sectoral reforms and operations and address capacity and skills gaps in sectors · Governance diagnostic to support CAS, · Develop a better understanding and focusing on political corruption management of political economy of reforms · Focused interventions in governance in · Tackle political corruption (party finance, critical sectors, harmonized with other donors electoral corruption, and so on) with partners (or, if no sectoral entry point, community- · Develop partnerships and new instruments driven development) to support demand-side initiatives (working · Public financial management indicators to with civil society, media, parliamentarians) monitor country systems · Develop innovative pilots in leadership · Country portfolio performance reviews and ethics to empower critical mass of · Proactive engagement with the Bank's reform champions and strengthen shared Department of Institutional Integrity16 to commitment to public service minimize operational and reputational risks 36 WORLD BANK EXPERIENCE FOREST LAW ENFORCEMENT IN AND OVERNANCE G (See box 4.5 for an example of the approach then applies action learning methods to link the used in the Ghana Country Assistance Strategy.) diagnostic surveys, their application, collective With all the experience that it has gathered, action, and learning at the country level. The the Public Sector Governance Group has WBI governance team has been involved concluded that, in high-risk countries where over the past few years in diagnostic work in corruption is more endemic and well entrenched, several countries. Detailed diagnostic surveys focusing on sectoral entry points for governance and reports are available for eight countries reform and anticorruption initiatives is likely to (Albania, Cambodia, Indonesia, Latvia, Malawi, get most traction. This is clearly of great relevance Romania, Slovakia, and Thailand). In addition, to efforts to improve forest law enforcement and there is a large number of countries that collect governance since it allows for the possibility of not only the diagnostic survey results and the using the forest sector as one such entry point, report, but also focus on follow-up initiatives specially in countries where this sector is a developed and implemented locally.17 Several of significant part of the economy. these are priority forestry countries (especially Cambodia, Indonesia, Bolivia, Honduras, Brazil, and Madagascar). Including forest sector Governance and Anticorruption diagnostics surveys in these countries as a means Diagnostics of facilitating informed debate and building up a The WBI has developed and is helping implement consensus for reforms on forest law enforcement a governance and anticorruption (GAC) diagnostic and governance is an area where obvious assessment (box 4.6). The GAC assessment uses synergies could be found. an integrated approach to capacity building, Financing Private investment governance, and anticorruption that emphasizes rigorous empirical diagnostics and analysis, The International Finance Corporation (IFC) is policy advisory services, collective action, and a major financier of private sector involvement knowledge products. in forestry operations in developing countries. Using a multidisciplinary approach and based In fact, IFC financing for forestry activities in on close partnership with stakeholders, WBI FY2005 was more than double that of IBRD/IDA, Box 4.5. Integrating Governance and Anticorruption Elements in CASs: Example of Ghana Governance and anticorruption are increasingly an area of focus in CASs. During FY1998­FY2001, about 75 percent of the CASs recognized corruption concerns explicitly or implicitly. This percentage had grown to 100 percent during the FY2002­FY2004 period. Now that the issue is in the mainstream, more attention needs to be devoted to improving effectiveness and results. The Ghana CAS provides a good example of the evolving approach. Ghana is a country with a substantial incidence of corruption. The CAS used the Poverty Reduction Strategy Paper (PRSP) as a basis for describing the government's efforts at addressing corruption. It identified critical entry points as improving the ability of the parliament and other accountability institutions to per- form oversight of the executive, decentralization of service delivery provision, improve local government and public expenditure management, and so on. The CAS identifies a full array of lending and nonlending instruments such as annual Poverty Reduction Support Credit, Citizen's Report Cards (for the education sector), loans for community-based and community empowerment projects, World Bank Institute (WBI) training programs for parliamentarians, anticorruption and judicial reforms, and so on, to achieve the targeted results related to improvement in public sector performance and control of corruption. Source: World Bank (2006d). 37 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 4.6. GAC Diagnostics Tools: An Analytical and Empirical Contribution to Local Capacity Building and Action Programming In-depth country data provide a key input to knowledge, action learning, and design of strategies. It empowers citizens, enterprises, legislators, and reformists in government, and builds momentum for reform. A set of empirical diagnostic surveys can assist countries in their preparation of action programs, promoting broad participation and consensus building. The GAC diagnostics are an example of such tools. The GAC diagnostics consist of in-depth, country-specific surveys of thousands of households, firms, and public officials that gather information about vulnerabilities within the country's institutions. Key features of the GAC diagnostics comprise the following: · Multipronged, separate surveys of users of public services/households, firms, and public officials, which permits triangulation of the results · Use of experience-based (versus opinions/generic) type of questions · Broad governance and service delivery conceptual framework · Rigorous technical specifications at the implementation stage The design and implementation of the surveys: · Foster learning through the close collaboration between external experts and local counterparts · Promote long-term, sustainable partnerships among local stakeholders · Obtain an initial benchmark of governance and public sector performance · Monitor on a regular basis governance and public sector performance The analysis developed with this approach encourages local stakeholders to make use of the results to promote a constructive debate on institutional reforms and can lead to a consensus on concrete changes. The agency-specific data steer the debate on institutions rather than individuals, de-politicizing the problem and facilitating the reform process. amounting to about US$250 million. It is therefore impacts consistent with IFC's standards; to critical for the Bank and IFC to work together on categorize projects in order to specify disclosure issues related to illegal logging. IFC can support requirements; to help identify opportunities to sound governance in the forest sector in two improve social and environmental outcomes; and principal ways: through upholding its social to monitor a client's social and environmental and environmental sustainability standards in performance throughout the life of the project. its operations and through promoting corporate The IFC has recently revised its performance social responsibility within the private sector. standards (see IFC 2006). In the operations it finances, the IFC places IFC also promotes corporate social responsibility on the client for managing social responsibility through support for the Equator and environmental risks and impacts in a manner Principles, which are a voluntary set of guidelines consistent with IFC's standards. A key part of for managing environmental and social issues the client's role in this area is the company's in project finance lending. They are based on engagement with affected communities through the IFC's social and environmental standards disclosure of relevant project information, and apply globally to development projects in consultation, and informed participation. IFC's all industry sectors with a capital cost of US$50 role is to review client assessments of social million or more.18 The Equator Principles were and environmental risks; to assist the client in formally adopted by 10 international banks at developing measures to avoid, minimize, mitigate, IFC headquarters in 2003. Since then, more or compensate for social and environmental than 40 major international financial institutions 38 WORLD BANK EXPERIENCE FOREST LAW ENFORCEMENT IN AND OVERNANCE G have adopted the principles. The IFC and · Survey and analyze ongoing and planned these other institutions will not provide loans corporate social responsibility activities to projects where the borrower will not or is in sectors most closely linked to national unable to comply with their respective social competitiveness and environmental policies and procedures that · Develop strategies to enhance transparency implement the Equator Principles. and accountability, and harmonize existing Integrating explicit measures to prevent illegal laws and regulations logging and other forest crime in these processes · Design sector-specific educational and would offer a concrete way to move the forest law training opportunities enforcement and governance agenda, with private · Design approaches that maximize synergies companies and with public and private financing between public sector inspectorates and institutions. Private sector financing institutions, supply chains' monitoring and inspection including the IFC, should also consider ensuring schemes based on corporate social the legality of the raw material flows as an responsibility initiatives important measure to mitigate financial and The Corporate Social Responsibility Practice reputational risks involved in investments to in FIAS provides project support to World Bank increase forest industry production capacity. With colleagues on a request basis in several ways: the increasing attention given to the legality of timber and wood products both by public sector · Identify ways in which CSR activities can be and private buyers alike, failure to demonstrate built into lending operations the legality of the purchased or harvested wood · Undertake baseline diagnostic surveys of used as raw material for such products is a risk CSR activities in a specified sector in a given factor for the profitability of the investments. country and work with a country team This is especially the case regarding companies to develop proposals and actions for CSR aiming to export to environmentally sensitive components of projects markets. These risks need to be mitigated in the · Provide recommendations on government investment planning phase due diligence (for roles that would support CSR activities example, by assessing the availability of legal · Engage companies and/or industry sectors in roundwood, domestic and possible imported, CSR discussions with government for the planned capacity expansion, and by · Undertake follow-up diagnostics to assess encouraging certification as a market driven-tool project outcomes19 to address both legality and the broader issue of Incorporating legality of raw material flows sustainability). into CSR training, advisory work, and related Corporate Social Responsibility lending operations and follow-up diagnostics, especially supporting small and medium Within the Bank/IFC's Private Sector industries in implementing cost-effective Development Vice Presidency, the Foreign approaches for legality verification, would Investment Advisory Service (FIAS) promotes contribute both to ensuring the viability of these CSR through advisory services to national companies in the increasingly discriminating governments on CSR frameworks to enhance their markets and in promoting legality and good forest country's competitiveness and attractiveness to governance. investment. Specifically, FIAS is working with borrowing country governments to: 39 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Legal and Regulatory Reform Box 4.7. Forest Law: A Manual for The Environment and International Law Unit of Sustainable Development the Bank's Legal Vice Presidency contributes to improved governance in several ways. The unit There is widespread international consensus that improv- ing legal frameworks is a critical part of addressing the reviews projects to assess whether (a) projects multiple challenges facing forests. The legal staff of the are in compliance with the Bank's safeguard Bank and FAO have prepared a manual on forest law to policies, (b) there is need to assist countries assist forests, economists, and other development profes- sionals, as well as lawyers, to identify legal issues that in preparation of new environmental laws and impinge on forests (see World Bank, forthcoming). The regulations, and (c) projects are in compliance publication attempts to provide a step-by-step guide to the full range of issues that should be considered in assessing with relevant international conventions. The unit the adequacy of forest legal frameworks, and presents also works with IFC and other multilateral lending options for addressing those issues. It is not intended to institutions to assess environmental policy and be prescriptive but instead to serve as a methodological tool, helping the development specialist understand how legal issues posed by private sector involvement best to think through a particular problem and assess the in development projects. An important part of relevant legal responses. the unit's work is providing advice to borrowing countries on development of environmental legislation. Such technical assistance has included assisting countries with forest use­related for assessing the quality of legal and regulatory regulations.20 frameworks and the strengthening of the capacity The main synergies between the Bank's legal of public prosecutors to effectively close cases and forestry expertise lie in developing guidance of forest crime (boxes 4.7 and 4.8). The Bank Box 4.8. Ad hoc Experts Meeting on Investigating and Prosecuting Illegal Logging Cases: Lessons Learned While priority should be on prevention and deterrence of illegal logging, arson, wildlife crime, corruption, and other forest-based crimes, governments and the public need to be able to rely on investigatory and prosecutorial capabilities that can ensure compli- ance with the law and punishment of offenders. Globally, there is only very limited successful experience in the prosecution of violations of forestry law, and no track record of money laundering prosecutions based on forestry crime predicates. The ad hoc meeting in Manila in March 2006 was the first ever assembling the lessons of experience and assessing capacity building and related needs in the investigation and prosecution segment of the forest law enforcement system. Among other issues the discussions focused on ideas for enhancing the investigation and prosecution of illegal logging cases using money laundering, asset forfeiture laws, and interagency strike forces. The Manila meeting focused on a number of possible next steps and issues including: · Developing a list of best practices, based upon the actual experience of others, would help investigators and prosecutors have the maximum impact in the prosecution of illegal logging cases. · Identifying legal issues that cause problems including: statutes of limitations, evidentiary use of photographs and computer analysis, corporate liability, use of circumstantial evidence, presumptions regarding proving intent (for example, that the concessionaire intended to steal can be established by showing that the amount the company is logging in an area is in excess of the amount prescribed by permit, the concessionaire is cutting at odd hours, or the concessionaire is found outside of the area covered by the permit), and admission of global positioning systems evidence to prove encroachment. · Developing specific ways to use anti-money laundering and asset forfeiture laws in illegal logging investigations and prosecu- tions. · Developing points of contact among and between foresters, prosecutors, and investigators as a means to strengthen inter- national cooperation in illegal logging cases. 40 WORLD BANK EXPERIENCE FOREST LAW ENFORCEMENT IN AND OVERNANCE G recognizes that to effectively address forest crime, laundering and the financing of terrorism are legal reform should include a broad range of global problems that not only threaten security stakeholders and assess legislation beyond just but also compromise the stability, transparency, the forestry codes. and efficiency of financial systems, thus Getting the justice system to work better, undermining economic prosperity. particularly for the poor, is one of the most The Bank's objective is to provide support important tasks of legal and judicial reform in to client countries through technical assistance, developing countries. The poor are often bypassed assessments, knowledge sharing, and advocacy by justice systems, contributing to further work to strengthen the integrity of the financial impoverishment and insecurity and contributing sector in the countries. The Bank has included to high levels of conflict and, sometimes, anti-money laundering/combating the financing vigilantism and other violence. Most studies and of terrorism as part of the development mandate development work on justice systems focus on in the financial sector as it relates to and formal legal institutions: the police, prosecutors, reinforces its complementary work on governance and courts. Reform proposals follow suit. Yet and legal framework issues. In March 2004, the justice is not simply the realm of the state and its Boards of the Bank and International Monetary formal legal organs. Comprehensive strategies for Fund (IMF) agreed to provide additional resources improving poor people's access to justice should to support anti-money laundering/combating thus encompass both formal and informal dispute the financing of terrorism as part of the regular resolution, starting with people's experiences and work of the Bank and IMF. The Boards approved not just the legal system. an expansion of Bank/IMF responsibilities in The Bank is now supporting research action both assessments and technical assistance to programs in multiple countries, including cover comprehensively the revised international Indonesia and Cambodia, where natural resource standards established by the FATF. crime and illegal logging are particularly serious, The opportunity to launder proceeds from under the theme of Justice for the Poor. In doing illegal timber operations is an important enabler so, it aims to: underlying forest crime. Large-scale illegal logging generates significant proceeds. Anti-money · Understand the preferences and expectations laundering and asset forfeiture laws can help in of the poor in resolving disputes and the investigation and prosecution of illegal logging defending their interests and other forest crimes, especially when money · Identify patterns in the interaction between flows through financial institutions at some stage poor communities, village institutions, and in its laundering. Promising initiatives harnessing the legal system the potential of the anti-money laundering laws to · Identify what factors enabled poor village tackle forest crimes are developing in Indonesia. communities to defend their interests (See box 4.9.) successfully in an environment of The Financial Market Integrity Unit (FSEFI) of institutional weakness the Bank provides, among other things, assistance Anti-Money Laundering/Combating on (a) design of the institutional framework (for the Financing of Terrorism example, regulatory frameworks for covered sectors), (b) legislative drafting, (c) supervision In recent years, worldwide efforts to combat of financial institutions, and (d) financial money laundering and the financing of terrorism intelligence units. (See FSEFI's Web site at http:// have assumed heightened importance. Money www.worldbank.org/amlcft.) 41 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 4.9. Workshop on the Strategy to Fight Illegal Logging Through the Implementation of the Law on the Crime of Money Laundering On November 16, 2005, the Indonesian Ministry of Forestry, the Indonesian Financial Transaction Reports and Analysis Center and the World Bank sponsored a one-day workshop on the issue of fighting illegal logging through the implementation of the Law on the Crime of Money Laundering. This law (Number 25/2003) was enacted in 2003 as a revision to the original law (Number 15/2002) on the Crime of Money Laundering. While the original law was a milestone for addressing money laundering in Indonesia, it was revised to, among other things, expand the list of predicate offenses to include forestry and environmental laws. The workshop offered the first opportunity to bring law enforcement, foresters, and the financial sector together to discuss issues, seek ways of collaboration using the new legal tools available, and to establish a concrete course of action for the future. Two basic recommendations were formulated: · An interagency body should be established to address policy and regulatory issues relating to the connections between illegal logging and money laundering. · A task force of investigators and prosecutors should be established specifically to pursue illegal logging cases involving money laundering and corruption. The Extractive Industries The Bank has found that the EITI process Transparency Initiative is most effective when there are well-defined streams of revenue going to government Launched in 2003, the Extractive Industries from the sector, as opposed to many different Transparency Initiative (EITI) supports improved revenue flows. It also is helpful to have governance in resource-rich countries through a limited number of actors (for example, the full publication and verification of company concessionaires) who account for a majority payments and government revenues from oil, of production. It has also proven very gas, and mining. Today, some 20 countries in important to have strong commitment from Africa, Latin America, and the Caucasus are the participating government. EITI is limited implementing EITI to varying degrees, with to reconciliation of payments from resource an emphasis at this point on Africa. With a sectors to the government and does not concern secretariat in London, the Bank provides technical itself with what becomes of that revenue. expertise in implementation of the program. Nonetheless, despite the relatively narrow The EITI process involves a commitment from scope of the program, EITI has opened a government to: dialogue on transparency issues in the involved · Increase transparency sectors and has given participating countries · Create multistakeholder committees confidence to tackle larger governance issues (including, importantly, civil society) related to the resource sectors. · Identify an independent administrator Though not directly related to illegal logging to undertake financial reconciliation of at this time, EITI may have scope to inform or payments and receipts at some future point incorporate efforts related · Disclose financial information from to forest law enforcement and governance, companies and government agencies especially in those countries where the forest · Publicly disseminate and discuss the sector is of major economic importance and disclosed information relatively few big players dominate the sector. · Review the process 42 WORLD BANK EXPERIENCE FOREST LAW ENFORCEMENT IN AND OVERNANCE G Emerging Directions of the Bank in governance include support to PRSP processes Forest Law Enforcement and Governance and the alignment of the Bank's CAS with these Forest Law Enforcement and processes, work on governance diagnostics and Governance in Operations integration of governance and anticorruption elements in the CASs, and the design of Although only 10 percent of Bank forestry project specific capacity building programs based on commitments can be ascribed as direct support the diagnostic surveys (Poverty Reduction and to forest law enforcement and governance, in Economic Management Network and WBI). Other the broader and more important sense that relevant areas of the Bank's work focus on anti- underlies the view here of the contribution of money laundering and financial investigation governance and the rule of law to forest sector (FSEFI), EITI, Justice for the Poor, and customs development, essentially all of the Bank's work modernization. The Department of Institutional in forestry supports the forestry law enforcement Integrity's investigative approach to allegations and governance agenda. The Bank's work on of corruption in Bank-funded projects provide plantation expansion addresses, if incompletely, potentially powerful instruments to combat redressing supply and demand imbalances, and illegal logging and forest crimes. The Bank's legal the Bank's forest sector work has long addressed department is carrying out important work in issues of forest revenue systems reform, rent developing a benchmark study for assessing the recovery and timber taxation, balanced and quality of legal and regulatory frameworks. market-based approaches to forest industries Similarly, some of the work with corporate development, and expanded community control social responsibility and social and environmental of forest resources. These approaches, if done issues in the operations of the IFC (for example, correctly, are all fully consistent with and investment safeguard policies) is extremely supportive of a humane and socially responsible relevant to the forest law enforcement and approach to forest crime prevention. Aside from governance issues. On the legal side, the doing more, doing better in these established 2006 Bank legal opinion on criminal justice areas of sector development is central to the discusses the development justification for Bank Bank's future work in forest law enforcement and involvement in criminal justice, provides a governance. categorization scheme to guide determining the What follows are trends that are emerging in Bank's potential role in specific circumstances, the Bank's work in forest law enforcement and and proposes development of guidelines and governance. process for review of Bank activities. The opinion reinforces the longstanding Bank approach of Bringing the Bank Group's efforts in forest basing its activities on an economic rationale, law enforcement and governance and broader avoiding political interference and involvement in governance reforms together to gain improved particular criminal cases. synergies. The forestry work of the Bank Group needs As discussed in earlier chapters, the forestry to be more consciously informed by and aligned portfolio is nested within the Bank's overall with these initiatives. The expertise accumulated approach to governance and anticorruption and in these specialized fields has only rarely been is consistent, if not fully aligned, with the wide brought to bear on the problems of forestry. Where range of governance work being led by other it has, as, for example, in the area of anti-money sectors in the Bank. Some of the more relevant laundering, it is clear that there is enormous work of other parts of the Bank Group on potential, but also very substantial transactions 43 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G costs involved in working across sectoral lines. can be singled out as particularly high-risk There is particularly a need to strengthen joint activities in which the Bank would not pursue. analytic work across the Bank's organizational As the Bank's legal opinion points out, beyond boundaries, familiarize specialists from other adherence to the Articles of Agreement, police areas to the special circumstances of forestry, activities are prone to risks of human rights abuse and improve the understanding among external and other reputational risks that merit special stakeholders of the relevance of these tools. safeguards, guidelines, and expertise that the Bank does not have in place. Systematically integrating forest law This does not, however, restrict the Bank enforcement and governance issues in country from support for a wide range of activities that forestry dialogue would normally be thought of as forestry crime Most of the Bank's important forest sector client suppression. Work would address capacity countries are also affected by severe governance building and might not need to be specifically problems in general. In these situations, targeted to activities at the forest level. Anti- promoting transparency of information and money laundering, customs, and training of civil society participation are key issues in judges and prosecutors would fall into this combating illegal logging and forest crime, as is category. focusing efforts to combat high-level corruption. Establishing broader linkages to anticorruption Targeting knowledge management to achieve efforts, as discussed in the previous section, are synergies with other Bank operations an important part of this work. State-of-the-art analytics and knowledge There are also opportunities provided by the management are critical to identify the policy lending instruments (development policy best possible options to address forest law loans, poverty reduction strategy credits, and so enforcement and governance issues, and in on) to be exploited, which have become a rapidly raising the confidence level regarding the expanding part of the Bank's lending portfolio, to effectiveness of the proposed actions. Increasing mainstream forest governance issues into Bank attention to enforcement and governance has operations. If designed with proper due diligence, produced a spate of research from both within these can be an important tool in creating the and outside the Bank. At the same time, there correct macroeconomic incentives. There are have been significant analytical achievements on important lessons to be learned from development the broader governance issues. policy loan programs underway in Cameroon, From the forest law enforcement and Democratic Republic of Congo, Gabon, and Lao governance perspective, there is strong PDR. added value to linking the Bank's knowledge The Bank will need to continue to be management efforts more directly to the Bank's cautious in approaching direct support to crime portfolio of country-level investments, and by suppression. Field capacity building (basic bringing the broader governance experience and mobility, communications, skills, equipment, knowledge in the Bank to bear on enforcement and remuneration) for forestry guards as an and governance-related work. Ensuring that established area of Bank forestry practice would the country-level experiences supported by the not seem to present serious risks, but may justify Bank are analyzed and disseminated to benefit consideration by the proposed special review other Bank-supported interventions and those mechanisms described by the Bank's general supported by other partners will also help move counsel. Provision of weapons, weapons training from analysis to practice. 44 WORLD BANK EXPERIENCE FOREST LAW ENFORCEMENT IN AND OVERNANCE G While there is good information on many for the Bank's participation in individual global issues (such as timber theft prevention, chain- programs. The Bank's Strategic Directions Paper of-custody, and log tracking systems), critical for FY2002­4 identified three comparative gaps remain that the Bank should address in advantages for the Bank at the global level (global collaboration with other partners. An illustrative mandate and reach, convening power, and ability list of important areas for focus includes: to mobilize financial resources) and three at the country level (multisectoral capacity, expertise in · Developing diagnostics to benchmark the country and sector analysis, and in-depth country- forest crime and state of forest governance level knowledge) (World Bank 2004c). in client countries and identify indicators While the success of the regional FLEG to monitor the progress of proposed ministerial processes is owed to the commitment interventions of participating governments and other · The role and involvement of local stakeholders, the Bank has played a critical communities in forest law enforcement and role getting these processes off the ground. It is crime prevention evident that the Bank has successfully exercised · The role of independent monitors in making its strong convening power and goodwill with forest operations more transparent and both the donor community and client country providing legal operators with positive governments to initiate and nurture the regional incentives FLEG processes including organizing the · Institutional (and incentive-compatible) ministerial conferences. It has also been relatively reforms of forestry agencies (or equivalent) effective in mobilizing financial resources for in client countries and includes gaining a specific activities at the regional and country better understanding of the role of incentives levels to move these processes forward. (including salary structure and so on) for civil The Bank's role in international discussions servants of forest law enforcement and governance issues · Approaches to forest industry restructuring has helped to legitimize an open and frank and retrenchment that will efficiently and discussion of problems of forest law enforcement effectively help address imbalances in wood and governance. What had until fairly recently supply and demand been a taboo subject is now being addressed · Demand for financial resources, as well by UNFF, ITTO, FAO, MCPEF, Asia Forestry as for technical assistance, arising from Partnership, ASEAN, Amazon Cooperation Treaty the successful implementation of the Organization, and others (see chapter 3). The international/regional FLEG programs and Bank should actively support the efforts of these investment implications for the Bank (and organizations to include forest law enforcement other donors) and governance issues in their debates, decisions, · Establishing information management and and reporting in order to anchor the issues utilizing geographic information systems for of forest crime prevention, detection, and overall monitoring of the forest resource suppression in broader intergovernmental work, Role of the World Bank in Regional and including international cooperation. International FLEG Processes The Bank, because of the size of its forestry portfolio, its prominent role in bringing generic The Bank's Internal Evaluation Group asserts issues of governance and anticorruption into the that "a significant comparative advantage for the development debate, and its specialized expertise Bank" is arguably the most important criterion in related issues has a special obligation to bring 45 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G its resources to effectively support the regional and governance supporters and to engage and international FLEG processes and debate. with important private sector actors and In particular, the Bank has an important role to importing or intermediary countries in the play in ensuring that the move from rhetoric to forest products trade chain; this would be implementation continues, is based on a sound especially critical for the Bank when such analytic basis, involves all critical actors, and is imports undermine the viability of (Bank- based on inclusive and participatory processes, supported) projects in producer countries as advocated by the Bank's forest strategy. This · Promoting and facilitating effective means: linkages between the FLEG processes and broader processes and initiatives for forest · Using the Bank's global mandate and reach governance reforms at different levels, such to support integration and follow up of as the UNFF, FAO, and ITTO the regional FLEG ministerial conferences · Developing stronger linkages between the into existing regional structures (ASEAN, regional ministerial FLEG processes and Bank COMIFAC, MCPFE, and so on) to ensure that projects and country dialog; this is critical the defining characteristics of frank and open both in terms of maintaining and increasing dialogue based on analytic information and the commitment of the Bank's regional civil society and private sector participation staff in the FLEG processes and in terms of are strengthened strengthening the implementation in client · Using the Bank's convening power to countries through investment and advisory strengthen coordination and collaboration services provided by the Bank between international forest law enforcement 46 5. Forest Law Enforcement and Governance: A Forward Approach T his chapter describes the need for a causal Numerous theories have been advanced to model of forest crime and points to the understand the sources and causes of both crime policy implications and to a classification in general and forest crime in particular. Many of interventions. It then describes how it models offer important insights into the causes of translates into specific activities and responses. crime and the formulation of policies to prevent In addition to the previous chapters, this proposal and respond to crime. None, however, is able to draws from a review of the law enforcement concisely and confidently predict all crimes or to and criminal justice literature and experiences recommend comprehensive policies and programs in countries where more systematic work in this to eliminate it. Some models of criminogenesis area has been carried out in the past few years emphasize structural aspects of society: wealth (for example, Indonesia, Russia, and Bosnia and disparities, differential opportunities, class, and Herzegovina).21 It should be emphasized that ethnic schisms. Others focus on psychosocial the aim is not to present a blueprint model but aspects of criminals and potential criminals a general framework that will help practitioners considering individual morbidity and other in countries, as well as agencies supporting such experiences that may lead to criminal behavior. work, to develop effective ways of addressing Most relevant to forest crimes seem to be these complex issues. approaches that emphasize incentives and economic motivations.22 Drivers of Illegal Logging and A useful model to analyze the causes of Other Forest Crime crime combines motive, means, and opportunity. The underlying causes of illegal logging and Persons motivated by greed, need, or other other forest crimes are complex, and often reflect desires employ the tools (means) available fundamental problems in forest policies, forest to them to exploit the existing vulnerabilities legislation and regulations, and institutional (opportunities). Motive, means, and opportunity mandates and capacities. These are aggravated by form a framework to understand the origins factors outside the forest sector, such as lack of and incidence of, and potential policy responses transparency and accountability in public sector to, illegality. Using these elements to analyze institutions that provide opportunities for corrupt illegal logging and other forest crimes illuminates practices, and weak judicial systems providing fundamental drivers of the problem. (Magrath et little deterrent to illegal operations. al. forthcoming). Box 5.1 presents an overview 47 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 5.1. Illegal Logging and Other Forest Crime: Motive, Means, and Opportunity Motive · Overriding need to generate foreign exchange · Imperative to finance military operations · Poverty and lack of alternative income · Lack of affordable fuel alternatives · Denial of access by local people to resources they need for subsistence or livelihoods · Indiscriminate (that is, regarding legality of origin) demand for timber in neighboring countries · Indiscriminate international demand for timber · Economic factors and policies favoring forest conversion · Low cost of illegal timber (that is, ineffective sanctions) and rent-seeking business culture in the forest sector companies · Overcapacity in the wood processing industry · Difficulty complying with legal regulations (especially by small-scale producers/concession holders, communities, and private forest owners) · Bureaucratic laws related to forest management (that is, cost of complying with laws is too high) Means · Roads, navigable rivers, harbors, and other transport infrastructure · Labor in forest areas (often without alternative sources of livelihoods) · Capital to finance illegal logging and other forest crime · Equipment for logging and transport of timber and wood products · Opportunities for money laundering to hide financial proceeds Opportunity · Weak governance in parts or all of the country (that is, conflicts and war) · Breakdown of institutional controls and lack of accountability of public officials · Rapid and disorganized decentralization and lack of institutional capacity at decentralized levels · Ambiguous forest land tenure (that is, lack of legal definition, overlapping uses, conflicting laws, and so on) · Inadequate or inappropriate legal framework (that is, not based on a social contract with key forest users) · Lack of or weak recognition of customary rights (of local and indigenous communities) · Weak internal organization of these communities · Inadequate inappropriate prescriptions for forest management and use (regulations) · Lack of reliable and up-to-date information on forest resources and their use · Weak, poorly managed, and/or corrupt forest administration · Ineffective and/or corrupt law enforcement · Ineffective and/or corrupt judiciary · Poorly managed forest administration · Weak governance or contradictory policies in sectors related to forestry · Weak control of illegal exports in producing and/or imports in purchasing countries Source: Modified from Puustjarvi (2006a). of some important drivers derived from a set of they operate provides an opportunity for illegal country-level studies and assessments.23 action) (figure 5.1). The responses to illegal Illegal logging and other types of forest crime logging and other forest crime then need to focus take place when these three factors are in place on reducing the motivation for unlawful action, simultaneously (that is, when there is a motive foreclosing the opportunities, and eliminating the to act illegally, the potential illegal operators have means available to those operating outside of the the means to do so, and the context in which boundaries of the law. 48 FOREST LAW ENFORCEMENT AND OVERNANCE G : A FORWARD APPROACH Figure 5.1. National Action and International Cooperation for Controlling Forest Crime Foreclosing Eliminating Means National International Opportunity Financial due Mutual legal diligence assistance National International Anti-money Financial due Improve forest laundering Diligence, anti- management money laundering Legal and judicial Asset foreiture Asset forfeiture reform Crime Reducing Motive National International Rural Export market Development reform Penalties Public procurement policies Enforcement Although this, at first glance, may seem trivial, it on economic, social, and cultural factors as well has important implications regarding the definition as the type of forest resource and its ownership/ of most appropriate approaches to address forest tenure arrangements. An appropriate set of crime. Some of the possible actions (for example, responses can only be defined at the country level many of those dealing with the motives and in processes involving the key stakeholders who opportunities) are related to broader economic interact with the forest resources. and social factors, requiring long-term action in the context of broader development efforts (for A Potential Framework to Combat Illegal example, addressing demand-supply imbalances or Logging and Other Forest Crime broader institutional failures in the society). Confidence in institutions, the ability to plan for In all areas there are, however, factors that the future, physical safety, and other features can be eliminated with targeted (relatively) of sound overall governance and the rule of short-term actions (for example, eliminating law in the economy are essential parts of an finance for projects without secured legal raw- enabling environment for sound forestry (but material supply, improving financial control not sufficient by themselves). If the overall through external audits, improving monitoring governance situation is poor, it will act as a drag and information dissemination, controlling access on forest sector governance. But, by the same to routes of transport, closing factories to reduce token, efforts to reform the overall governance overcapacity, and eliminating export demand for situation can provide a powerful opportunity to illegal timber and wood products). improve the governance situation in the sector The ways these drivers operate are highly (box 5.2). country (and even location) specific, and depend 49 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 5.2. What Is Good Forest Governance Governance is the process by which public officials and public institutions acquire and execute their authority to provide public goods and services. Forest sector governance, then, refers to the modus operandi by which officials and institutions (both formal and informal) acquire and exercise authority in the management of the resources of the sector to sustain and improve the welfare and quality of life for those dependent on the sector. Good forest governance is characterized by predictable, open, and informed policy making based on transparent processes, a bureaucracy imbued with a professional ethos, an executive arm of government accountable for its actions, and a strong civil society (including the private sector) participating in public affairs, and all behaving under the rule of law. Thus, key features of good governance include adherence to the rule of law, transparency and low levels of corruption, voice of all stakeholders and accountability of all officials, low regulatory burden, and political stability (see also World Bank 2000b). Source: Blaser et al. (2005). Prevention crime prevention. In these areas the linkages to Prevention combines elements of promoting broader land use, industrial, rural development, good governance in and outside the forest sector and poverty reduction policies, strategies, and in general, with more specific actions focusing legislation are evident. on forest crime prevention. Effective prevention Forest crime prevention often links with of forest crime may need to address forest broader public sector governance and institutional product supply and/or demand issues, such as reforms through specific actions to combat rural energy (box 5.3) or industrial processing capacity (box 5.4). Such fundamental issues as forest land tenure and access rights of the local and/or indigenous communities to timber and wildlife need also be considered in forest Box 5.4. Balancing Timber Demand with the Legal Supply in Indonesia The Ministry of Forestry estimates that the total legal Box 5.3. Impact of Energy Tariffs on annual harvest of Indonesian native forest timber is ap- Illegal Logging in Azerbaijan proximately 17 million cubic meters and the installed capacity of the forest industry is approximately 74 million cubic meters. While some of this wood (especially for The government of Azerbaijan plans to revise and in- the pulp and paper mills) comes from existing industrial crease tariffs for natural gas. Also the tariffs for electricity plantations, it is estimated that the great majority (approxi- consumption will be increased. Unless social protection mately 75 percent) of the timber is sourced illegally. This measures are undertaken, these changes will affect the is because most of the commercially viable timber avail- poverty level in the regions and especially in the moun- able from legal forest concessions has been exhausted tainous and upper mountainous territories with high levels and industrial forest plantations have not been developed of unemployment and low income. Deterioration of living quickly enough to meet the shortfall. conditions and decrease in the paying capacity of even those people that currently use energy supplied by gov- As an important component of its strategy on prevention ernment will considerably increase man-caused impact of illegal logging and law enforcement, the government of on the region's forest resource, and subsequently result Indonesia will develop a comprehensive wood industry in their intensive degradation. Twofold increase of illegal restructuring plan to bring Indonesian mill demand into logging volumes can be expected. balance with the nation's legal timber supply. Source: Savcor Indufor Oy (2005b). Source: World Bank/WWF (2005). 50 FOREST LAW ENFORCEMENT AND OVERNANCE G : A FORWARD APPROACH corruption (for example, through increasing the Box. 5.5. Interagency Task Force accountability and transparency of forest sector in Albania institutions, by introducing specific measures to tackle high-level corruption, by reducing Illegal logging and a general breakdown of law and order the discretionary powers of public officials, in the late 1990s severely hampered Albania's ability to by instituting the right staff incentives, and protect its forests. The government recognized that the Ministry of Forestry alone could not effectively address by improving the transparency of commercial illegal logging. In 2000, with the support of a World transactions) (box 5.5). Increasing civil Bank forestry project, the government established an society and private sector participation (for interministerial task force for the protection of the forest estate. Chaired by the Ministry of Forestry, the Task Force example, through public-private partnerships Commission for Forest Resource Protection now involves and consultative processes) can also improve 11 ministries, including the Ministry of Public Economy institutional transparency and accountability. and Privatization, the Ministry of Local Government, the Tourism Development Committee, the Ministry of Environ- Often preventive measures deal with the ment, the Directorate for State Police within the Ministry quality of the forest legislation and regulatory of Public Order, the Directorates of Taxes and General Customs within the Ministry of Finance, and the Ministry framework. Motivation and opportunities for of Justice. Establishment of the national-level task force forest crime can be reduced by ensuring that has led to the creation of prefecture- and district-level the legitimate needs of different stakeholders intersectoral collaboration to address illegal logging in the field. As yet, the national task force does not include the are recognized and that laws and regulations private sector or civil society. are formulated in a way that is in line with the capacity of the different groups of forest users to Sources: Savcor Indufor Oy (2005b); World Bank (2004b). comply with the legal requirements and does not put legal operators in a situation that makes the costs of compliance unreasonable (box 5.6). At the level of the forest management unit, forest crime prevention is promoted by ensuring Box 5.6 Legal Reform in Bolivia that there is adequate information available Has Limited Success on the forest resources and legal harvest (for example, through forest inventories and In Bolivia, indigenous people's historically ambiguous management plans that are of an appropriate land tenure has led to conflicts with cattle ranchers, technical quality and detail), and by ensuring that farmers, and timber extractors. The Agrarian Law of 1996 forest management plans contain the appropriate was meant to resolve these conflicts through reforming tenure-related laws. Though the new legal framework means to prevent crime (for example, by closing has achieved significant progress, success has been roads after harvesting, employing routine patrols, hampered by cumbersome procedures and complicated bureaucratic processes. Actual land titling has been slow and determining what sort of tree marking and owing to complicated procedures for the demarcation log labeling systems is used). and regularization of land occupation. Families engaged Improving the capacity of both forest and in extraction of nontimber forest products have ended up being neither forest concessionaires nor owners. judicial authorities to enforce forest legislation is High costs of developing management plans, complex also a key issue in crime prevention and may also processes involved in registering and gaining permits, and require the adjustment of penalty codes to ensure a prohibition on chainsaw use for processing timber have limited efforts to regularize small-scale timber producers. that they constitute an effective deterrent to forest Farmers on the agricultural frontier are opting to obtain crime. deforestation permits to clear forests rather than undergo- Prevention may also deal with finance to ing the complex and costly process for obtaining harvest- ing permits to selectively cut trees on their land. eliminate the means to fund illegal operations. This may include such actions foreclosing Source: Colchester (2006). 51 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G opportunities for the laundering of profits from Box 5.7. Linkages to Anti-Money- illegal forest operations (box 5.7) or ensuring that Laundering Work banks and international financing institutions do proper due diligence on the availability of legal Anti-money-laundering laws are in place in more than 100 timber and the existence of mechanisms to ensure countries, with more countries expected to enact legisla- legality (for example, through audited timber tion in the coming year. These laws provide powerful and important tools that can help countries fight corruption tracking systems) before financing forest industry and environmental crime, including illegal logging and capacity expansion or logging operations. trafficking in endangered species. Financial intelligence Promoting independent forest certification units established pursuant to anti-money-laundering laws provide countries with a worldwide network to rapidly and other demand-side measures related to access financial data in both source and destination coun- corporate social responsibility can be a powerful tries. Within the World Bank, East Asia and the Pacific and instrument for forest crime prevention, especially FSEFI (anti-money-laundering unit) have been working to integrate anti-money-laundering laws into the forest law in cases where demand for timber and other enforcement and governance program, including work in forest products is driven by export markets. This, Indonesia. The World Bank's Environmentally and Socially Sustainable Development Network is working with FSEFI together with forest financing, introduces an to synthesize best practices and promote understanding international dimension to these strategies. and use of these tools. Effective crime prevention may also require positive incentives for those complying with legal requirements, especially in situations where they initially have to compete with illegal operators. Historically, most countries have lacked These may involve, for example, reduced reliable information on deforestation trends concession fees for independent third-party even at the aggregate. This is changing now as a certified producers. result of synergistic advances in technology and Monitoring and information, public education, institutions. These changes have the potential to and awareness are areas of prevention where drastically reduce the cost of forest monitoring governments can cooperate with the private and to enable civil society to use this information sector and civil society groups such as NGOs. to more fairly balance interests in the forest External monitoring of forest cover change, (Chomitz 2006). Specifically, improvements in forest concession management, logging and remote sensing have resulted in satellite images timber transport, and the publication of the of low enough cost and high enough quality that information in a way accessible to a broad they can be used to detect deforestation and other group of stakeholders can be powerful tools in changes in the forests. crime prevention. This is especially important A forest crime prevention strategy will by in countries severely affected by corruption. definition overlap with broader strategies for Information campaigns can also inform the forest sector development as well as development public about the provisions of forest law and strategies outside of the forest sector (public thereby ensure that users are at least aware sector reforms, fiscal systems reforms, reforms of rights, restrictions, and prohibitions. In of the judicial system and police, anticorruption addition, information campaigns can provide strategies, to name a few) and require coordination the justification for restrictions by informing across sectors. An example of the kinds of the public of the damages that restrictions are elements that can be included in a sectoral intended to prevent, and indicate actions that the prevention strategy is presented in box 5.8. public can take to support law enforcement efforts Forest crime prevention has also an important (for example, ways to report illegal activity). cross-sectoral dimension. Rather than preventing 52 FOREST LAW ENFORCEMENT AND OVERNANCE G : A FORWARD APPROACH Box 5.8. Forest Crime Prevention illegal deforestation, many agricultural policies in Cambodia and incentives in developing countries actually promote encroachment. Policies that confer The Cambodia Forest Concession Control and Manage- ownership rights based on clearance, price ment Pilot Project (2000) supports prevention of illegal interventions that indiscriminately favor logging in several ways. The project finances: agricultural uses over natural land uses, and other · Strengthen capacity of the Forestry Department's Le- policies have been widely noted and are often the gal and Litigation Office and the Ministry of Environ- subject of reform efforts on their own economic ment to monitor illegal logging and launch effective merits. Often these policies coincide with and prevention activities · Introduce systematic data collection and analysis directly contradict other measures aimed at techniques, provide equipment and contractual ser- protection of forest resources. Usually, and more vices, and training and technical assistance · Assist concessionaires, provincial forestry offices, appropriately, these are approached as problems national parks, and protected areas managers and of policy harmonization and intersectoral affected communities with design and implementa- coordination, but the impact of reforms can have tion of timber theft prevention plans and disseminate information on the government's forest crime pre- important and positive law enforcement benefits. vention program using media, training programs, and Linking forest law enforcement and other mechanisms governance with broader planning frameworks · Provision of guidance and exercise quality control over concessionaire preparation of detailed manage- (for example, national forest programs or other ment plans types of sector and/or macroeconomic reform · Strengthen capacity of the Forest Management Office of the Forestry Department to oversee concession programs) is not only advisable but an absolute operations and ensure compliance with plans and necessity to avoid overlaps and duplication of conditions established under the Forest Planning and efforts and may require specific institutional Inventory Component arrangements (see box 5.9). As preventive Source: World Bank (2000a). Box 5.9. Development Policy Loan to Gabon Focuses on Natural Resource Governance In Gabon, the forest sector is the second largest employer and earner of foreign exchange, accounting for 15 percent of total foreign exchange earnings. Lax enforcement of laws and contracts in the forest sector has resulted in significant foregone govern- ment revenue. The government also recognizes that improving governance in the sector is key to attracting more responsible investors. A 2005, US$15 million, Development Policy Loan from the World Bank seeks to increase the contribution of renewable natural resources to national income to help reduce the country's dependence on declining oil resources while protecting the natural resource base. The project focuses on strengthening the policy and institutional framework for the management of natural resources through greater transparency and accountability and better enforcement of laws and regulations. The project covers forests, fisheries, biodiversity, and mining. It is supported by a US$10 million grant from the Global Environmental Facility for managing national parks and biodiversity. The forest reform program is the most detailed and comprehensive undertaking supported by the project. The government intends to reorganize the commercial forestry sector, reconfigure Gabon's forest landscape, and set the stage for a more socially, economically, and environmentally coherent land-use planning taking into account nonindustrial forest uses. It has committed to review all logging permits, repossess those that are in the hands of noncompliant companies and individuals, step up the enforcement of fiscal measures and the obligation to prepare sustainable management plans, strengthen forest controls in the field, change the mode of access to permits from discretionary to transparent and competitive and maintain a moratorium on the allocation of new permits until the new allocation procedures are in place, eliminate pricing distortions and bottlenecks to industry development coming from the monopolistic marketing board, and introduce procedures on forest use that protect the rights of indigenous people and other forest-dependent rural poor. Source: World Bank (2005d). 53 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G measures target the fundamental problems with the rest of the law enforcement program are underlying illegal logging, many of them can be just as important as the sophistication of the data expected to take effect only in the medium and collection processes. long term. Even indirect methods can be used to assess With respect to situational crime prevention how widespread illegal activity actually is. For (forest management unit timber theft prevention example, comparisons of data on production, planning), and some aspects of fraud prevention consumption, and trade in forest products often in commercial timber sales systems (log tracking show significant disparities between trading and chain of custody systems for example), partners' recorded exports and recorded imports. there are important potentially significant public These differences can indicate the potential investment needs that must be met if forest law magnitude of timber theft, smuggling, and enforcement objectives are to be met across the transfer pricing. Similar consistency checks developing world. The Voluntary Partnership between forest revenues and reported harvest can Agreements currently being negotiated between also be useful. Green accounting, as well, can some key developing timber producer countries indicate the existence of forest crime. Detection and the European Union are likely to further should also involve a process to determine if any increase demand for support to this type of institutional weaknesses exist that can create investment. opportunities for timber theft. These opportunities can result from inadequate boundary marking, Detection product marking, product measuring, product Detection refers to various methods of collecting and processing information on forest crime and related trade with the objective of identifying illegal activities and facilitating the design of improved policies. Detection includes monitoring Box 5.10. Hi-Tech Detection Systems and surveillance to determine if and where crime is occurring. This kind of information is In Brazil, the state of Mato Grosso set up a system that crucial for setting priorities and for evaluating registered the location of large properties and used remote sensing to track the properties' compliance with land use other elements of the enforcement program. regulations. In Cameroon, NGOs are using remote sensing Remarkably, few governments have systematic to correlate the construction of new logging roads with log- forest crime monitoring programs. As a result, ging concessionaire's reports of timber extraction (Global Forest Watch 2005). Mismatches may indicate mischief. even the most basic data on illegal activity is Roads without logs may mean that producers are evading seldom available to guide priority setting and taxes. Logs without roads suggest timber laundering (for the allocation of enforcement resources. The instance, taking timber from a protected area but repre- senting it as coming from a legal concession). In neither kinds of information that are needed include of these examples has official enforcement been entirely the geographic incidence of different crimes, the successful. But the ability of outside groups to monitor the behavior of both private parties and government may type of crimes that are occurring, the type of exert pressure for both to comply with laws. As informa- perpetrator, and the apparent level of crime. tion continues to get better and cheaper, new possibilities Detection systems include satellites, aircraft, open up. Several groups are working on ways to use the Moderate Resolution Imaging Spectroradiometer satellite and ground monitoring and surveillance to cheaply detect large-scale deforestation, at an annual personnel to document the location, type, volume, frequency or better, for whole nations or even for the and if possible the identity of violators involved world. At the global level, this would constitute a quantum leap in tracking global deforestation. in illegal logging activities (box 5.10). However, the procedures used to draw inferences for use Source: Chomitz (2006). 54 FOREST LAW ENFORCEMENT AND OVERNANCE G : A FORWARD APPROACH tracking, or an inadequate process of checking for impediment to forest law enforcement and revenue payments. governance. Without adequate baselines, it is At the level of specific incidents, detection virtually impossible to authoritatively determine merges into investigation. This involves collecting losses in forest area and volume and it is similarly evidence and documentation as the basis for impossible for governments to sensibly allocate arrests, judicial proceedings, fines, or other scarce enforcement resources, much less to bring action. Specialized expertise is needed to employ to court compelling evidence of encroachment, techniques that are appropriate to the suspected theft, and corruption. The basic thrust of the crime and the national legal system. need for better data collection and analysis is Crime monitoring data are also important for not law enforcement specific, but stands on its evaluating the enforcement program's impact and own in investment priorities for consideration by efficiency and for providing feedback to program development agencies. planners. Without defensible and realistic While also not new or unique to international baseline data, claims concerning the impact of work on forestry, promotion of wider access to the program cannot be verified, and thus the data, public disclosure of plans, environmental credibility and commitment of enforcement assessments, contracts, revenues, and other programs are left subject to question. In many information is an area where emphasis could instances, disingenuous governments and corrupt be increased. Supporting independent forest officials seem to find the absence of monitoring monitors can be an effective tool to increase forest data and crime detection systems a convenient sector transparency, especially in countries with screen. For these reasons, and because crime weak overall governance. Forest sector disclosure monitoring systems can be established with policies could be developed in appropriate relative ease, systematic crime detection programs countries in the context of development policy should be one of the first priorities in a forest law operations and poverty reduction support enforcement and governance program. operations. International efforts similar to the EITI However, detection programs are subject to can focus on securing better public disclosure manipulation, self-censorship, and physical risk. and accountability on public revenue aspects of Policy makers need to anticipate and manage forestry. these hazards by providing training and support Beyond broad forest cover change monitoring for project personnel, institutional independence, and revenue tracking at aggregate levels, crime and interagency oversight and by ensuring public detection at the forest management level depends disclosure of information. In Cambodia, the critically on there being established baselines of use of an international NGO, Global Witness, the approved and legal management programs, to independently monitor the veracity of the again as a basis for identifying discrepancies and government's crime reporting statistics is a deviations. Here, routine investment support to unique strengthening arrangement, and the same detailed, professional, and scientifically valid approach is now being tested in Cameroon (box forest management planning is needed. The need 5.11). Another NGO, Global Forest Watch, uses the for appropriate planning procedures and outputs global availability of satellite imagery and Internet (plans, maps, budgets, schedules) cuts across all communications to assemble objective information management objectives (production, protection, on forest crime and quickly disseminate it to large and so on) and, while scale and format may vary, audiences with minimal risks. across management arrangement (commercial The lack and weakness of even the most concession, community management, farm basic forestry information is a fundamental and private forestry, public agency, and so on). 55 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Box 5.11. Independent Forest Monitoring in Cameroon: What's Next? Independent monitoring of logging has been used in Cameroon since 2001. The mandate of this third-party observer is to ac- company forest officials on control missions in the field and verify compliance and discrepancies between the mission's activities and official procedures. The observer's reports are made public. They inform the government, donors, and civil society and give them tools to take action. The observer also provides assistance to use remote sensing technologies and to better organize the case-tracking system. The observer does not supersede the government as the responsible entity of law enforcement, and prosecution of offenders remains with the latter. Experiences from Cameroon show that third-party forest monitoring can be beneficial in the following ways: · It protects control officers against intimidation or corruption from companies and/or other officials, and it also protects companies against racketeering. · It levels the playing field to the advantage of responsible companies and/or other officials. Some international buyers now refuse to purchase from companies of poor reputation. · It augments reform-minded people in the government and helps them to find dysfunctions of the system, and its impartial status supports internal change processes. · It fosters accountability by providing first-hand field evidence allowing civil society to question officials on tracking illegal activities. · It can help to restore the credibility of the timber (exporting) industry and help to secure international markets. · It capitalizes on the wealth of information passed by local communities, NGOs, industry members, and forest officials by providing a confidential avenue for information to be made public. The remaining obstacles include: · Very few cases though well documented have gone all the way through the legal process to the point where fines were imposed or concessions withdrawn · Programming of missions depends on the bureaucratic process that hinders rapid responses before evidence of illegal logging operations is concealed · The oversight committee is dominated by the Ministry of Forests with no input from the Ministry of Finance, civil society, or the private sector. Until recently its inertia has created a situation where the government could assert that it had an independent observer without the observer being truly operational. · The ability of the donor community to provide support has fluctuated, resulting in a cycle of intense activity followed by periods of dormancy owing to lack of instructions from the host ministry. Experience from Cameroon shows that third-party monitoring can only be effective if the following conditions are met: · Political will to undertake controls, to levy penalties, and to overcome inertia both in the Ministry of Forests and in the judiciary system · An adequate legal framework with simple procedures and clear sharing of responsibilities among the various institutions Source: World Bank (2006b). Based on awareness of the risk and frequency force after destructive activities have occurred of illegal activity, development agencies can and or while they are underway. From the Bank should make greater effort to incorporate a crime perspective, it is also an area where the Bank prevention mentality into the resource planning has strict guidelines based on its mandate that initiatives that they support. define its level of involvement (box 5.12). Suppression measures pose risks to agency Suppression personnel, the public, and the lawbreaker. In Suppression of illegal activity should be the last any responsible suppression program, these risks recourse in a forest law enforcement program, need to be systematically considered in light of because it almost inevitably involves the use of the probability of success, the accountability and 56 FOREST LAW ENFORCEMENT AND OVERNANCE G : A FORWARD APPROACH Box 5.12. Suppression and World Bank­Supported Criminal Justice Activities Much of what is considered suppression is related to criminal justice. To date, the World Bank has involved itself in criminal justice only in a limited way, primarily through support for capacity building activities. For example, in the forestry sector, the Brazil Ron- donia Natural Resources Management Project (1992) included financing construction of outposts for the State Forestry Police, as well as equipment, materials, salaries, and other incremental operating costs. Among nonforestry operations with criminal justice components, the Bank has supported, for example, assessments of law enforcement institutions (police, prosecutors, and so on) in dealing with anti-money laundering. A recent opinion from the Bank's legal department concludes that while interventions in the criminal justice sector can be permit- ted under the Bank's mandate, any particular proposed intervention should be "grounded in reasonable economic rationale and should avoid interference or the appearance of interference in the political affairs of a member country." A discussion note accompanying the legal opinion argues that "engagement in the criminal justice sector would complement and reinforce current Bank strategy in other areas. The Bank's anticorruption strategy, for example, would be enhanced if the Bank were able to assist members in connection with the criminal law aspects of fraud and corruption. And work in the sector would be a logical extension of the Bank's current work in legal and judicial reform to enhance the rule of law." Further, "the Bank should avoid support for investigations, prosecutions and judgments under criminal laws in specific cases. Instead, the Bank should focus its support on institutional capacity building, technical assistance, and other activities that address sector or subsectorwide issues." Source: World Bank (2006a, 2006c). transparency of the suppression effort, and the need to be tailored to local circumstances. skills and training available to law enforcers. However, these arrangements also clearly Depending on the nature of the forest crime need to incorporate adequate provisions for and the suspected offender, the risk of violence accountability and transparency that are is a genuine and legitimate concern for forest commensurate with the likely use of force law enforcement authorities. In many countries, and the need for security and confidentiality. forestry officials are routinely exposed to threats, Interagency arrangements in which the police, intimidation, and actual violence, and bodily military, customs, other law enforcement harm and loss of life are not uncommon. The agencies work together with natural resource indiscriminate use of force also poses risks to the agencies are common and can be effective. public at large. Because the people involved in Experience with special task forces suggests that criminal activity at the field level are often simply a variety of institutional arrangements can be laborers (and usually poor people with few effective, provided resources, budgets, planning, alternatives) working at the direction of others, and reporting provisions are in place. However, genuine ethical reasons exist to question the use without measures such as these, any institutional of force. arrangements can be rendered ineffective. In response to these kinds of threats, law Where extraordinary suppression efforts are enforcement practitioners can sometimes draw needed, planners need to take special measures upon experience and intelligence about violators to provide training for staff members at all levels. to develop risk-success matrices. These are Expertise that is not commonly available in used to make appropriate preparations for forestry agencies includes specialized skills in safe conduct of suppression operations, or to investigating criminal activities, documenting determine when safe operations are a practical crimes, handling evidence, and preparing judicial impossibility. Institutional arrangements for proceedings. In highly dangerous or specialized major suppression efforts or crackdowns investigations, training appropriate for undercover 57 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G operations, firearms safety, and other special Assessing Drivers and Responses to expertise may be needed. Forest Crime As can be seen, the complexity and risk of suppression efforts underlies the value of Forest law enforcement programs need to be measures to avoid through sound prevention and formulated at the national and local levels detection efforts the emergence of a serious law building on established laws, institutional enforcement problem. Where such efforts fail, or arrangements, the interests and capabilities are not made, the problems of suppression can of different stakeholders, and the specific rapidly become nearly insurmountable. crime problems being encountered. Many of Empirically, suppression of forest crime the specific interventions and tools discussed in developing countries is very limited and above and described throughout this report can essentially ineffectual, providing very little simultaneously contribute to more than one of the deterrence to further crimes. Akella and Canon enforcement functions of prevention, detection, or (2004) disaggregate the deterrent effect into low suppression. probabilities of crime detection, prosecution, and Annex 1 brings the drivers of forest crime conviction and, similarly, low expected sanctions (motive, means, and opportunity) together with and penalties. In sum, few forest crimes are the prevention-detection-suppression framework prosecuted, and few offenders are punished. in several typical typologies of forest crime. Table Table 5.1. An Example of Potential Drivers and Forest Law Enforcement and Governance Responses to Forest Crime Potential drivers Typical contexts (motive, means, opportunity) Potential responses Type Irregular timber sales, · Low risk of sanctions · Improve procedures for timber sales and P award of concessions, awarding concessions to increase and service contracting transparency and accountability · Increase proportion of timber P sold/concessions awarded through competitive bidding · Poorly motivated staff in public · Reorganize public forest administration P forest administration/enterprises to increase staff motivation · Poorly organized and corrupt · Enhance effectiveness of financial D financial audit system audits on public forest administration/enterprises · Improve data management and D transparency in public forest administration/enterprises · Inefficient legal procedures · Strengthen cooperation with S police force and judiciary · Amend penalty code P Note: P, prevention; D, detection; S, suppression. 58 FOREST LAW ENFORCEMENT AND OVERNANCE G : A FORWARD APPROACH 5.1 provides an example of a single typology as discussed in this report, policy and program (irregular timber sales, award of concessions, and development can benefit from open, consultative, service contracting) taken from the much more and well-structured planning processes. This comprehensive assessment provided in the annex. level of planning can benefit from development of Issues of cost, risk, capacity, and commitment more detailed and specific menus of alternatives need to be addressed in the design of forest law laid out in a typology of forest crime context as enforcement and strengthening programs, and, described in annex 1. 59 6. Conclusion B ased on the discussion and analysis two-pronged approach to legal compliance presented in the previous chapters, is the only way to ensure that the full range it is proposed that forest crime be of motivations, opportunities, and means for addressed through multifaceted approaches. Such illegal behavior is addressed. approaches need to: · Strengthen supply-side measures with measures to control imports of illegal timber · Address key drivers both within and outside and wood products. This is especially the forest sector: Some governance issues important regarding countries where export relating to forest crime lie entirely within the demand is a significant driver of illegal forest sector, while other governance issues activities in the forest sector. It should be affecting forests and forest-dependent people noted that--at least in principle--these extend beyond the forest sector. Likewise, measures need not be restricted to timber and within the scope of law enforcement as it wood products and could be also extended relates to forest crime, some are limited to the to other products (for example, wildlife or forest sector, while other initiatives are less products that derive from illegal conversion sector-specific in nature. Important synergies of forest lands). can be obtained across these issues. · Integrate anti-money-laundering and asset · Combine actions with both short- and long- forfeiture laws into the fight against forest term implications in a realistic stepwise crime and related corruption. These tools, plan: Visible short-term impacts are often along with the UN Conventions Against needed to create and maintain momentum, Corruption and Transnational Organized whereas long-term work with the structural Crime, provide strong and effective regimes drivers is necessary to ensure that these that governments can use to fight forest crime efforts are sustainable over time. Early "wins" and related corruption. (for example, significant increases in forest revenue) are important factors to motivate Translating the emerging understanding of continued efforts. the development significance of poor governance · Address both failures of law and failures of and corruption has already been recognized implementation: On the one hand, ensure as a challenging and demanding area that will that the correct laws and policies are in place. require innovation, learning, and risk taking. On the other, work to enforce the law. This Effectively addressing forest law enforcement 61 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G and governance issues will require responding are reputational risks related to work with to important, and partly unresolved, ethical and forest law enforcement and governance. The operational challenges. These include: Bank and its partners need to be especially sensitive to issues related to human rights · How to develop credible interventions when and equity in their work. Transparency dealing with deeply flawed and compromised and advocacy and support to participatory institutions and governments approaches are important means to avoid this · Realistically and responsibly distinguishing type of risks. between problems that arise from weak · A more vigorous engagement with forest capacity and those that reflect weak law enforcement and governance will also commitment inevitably involve difficult issues related to · Appropriately pacing and sequencing national sovereignty in the management of pressures for reform in relation to the natural resources. This political risk needs to uncertain emergence of local champions and be carefully managed. consensus · Maintaining partnerships in the face of Involvement in forest law enforcement and delays, disappointments, and the inevitable governance is not, however, entirely new or needs for compromises novel, and the Bank and others can have a · Knowing whether and when to disengage constructive role by linking existing forestry work effectively with broader efforts to improve Forest law enforcement and governance governance in client countries. work may sometimes be at the frontier of the Forest law enforcement and governance international community's capacity to deal with problems are not new and will never be problems of armed groups, political interests, and entirely or permanently eliminated. However, criminal organizations. Development practitioners developing countries and the global community will need new skills and knowledge, some of have come in recent years to a new recognition which will have to be built through experience, to of the nature and significance of forest crime, deal with problems such as blending promotion of and there has never been such a wide and systemic and long-term governance reforms with strong consensus on the need for action and targeted crime suppression programs. collaboration to control illegal logging, illegal Focusing more directly on illegal logging deforestation, arson, wildlife crime, forest-based and other forest crimes will not always be a corruption, and the other crimes discussed in natural or comfortable role for development this report. As denial continues to give way to agencies including the Bank. Inevitably, it will action, the analysis and experiences underlying involve development agencies in complex and this report point to the need for new and controversial issues regarding the quality of laws, deepened national and international forest law and put these institutions at times at odds with enforcement efforts. powerful interest groups defending the status The constructs suggested in this report for quo for personal gain, including in some cases understanding the sources and drivers of crime high-level government officials. Consequently, and the structure of forest law enforcement there are two potential areas of risk which the systems provide a framework for assessment international community needs to be aware of: of national programs and international action. · As with any complex and controversial issue It builds on a body of expert knowledge and involving different interests and actors, there professional law enforcement practice that is only 62 CONCLUSION just now being brought to bear on problems in due diligence in assessing wood supply and land the forest sector. While other frameworks and availability in consideration of wood-based and models are available and can be equally useful, agro-industrial investments. Producer countries the main message here is one of an urgent need have obvious priority in respect of improving to increase the knowledge content of the debate forest management as an approach to reducing on forest crime and to improve the technical the opportunities available for illegal activities. content of national programs and development In terms of more specific priorities, the assistance. international community should: In many countries, law enforcement capacity and expertise exists in other sectors and needs · Deepen the technical content of FLEG to be marshaled in new ways to support forest processes at the international and national development. In others, specialized capacity levels, mobilize opportunities for multilateral needs to be developed within forestry agencies. enforcement action, and integrate the Exploitation of new enforcement innovations and regional FLEG processes into existing opportunities, made possible, for example, by the structures for regional cooperation. introduction of anti-money-laundering legislation, · Promote collaboration between the the adoption of the UN Conventions Against progressive elements of the industry, Transnational Organized Crime and Corruption, international financing institutions, and and by other new legal and judicial innovations, international NGOs involved in the FLEG will require new skills and capacity. process to develop improve and harmonize Beyond more and better knowledge, it is safeguards and due diligence on forest clear that enormous investments will be required investments. The aim should be both to to achieve the needed control on forest crime. ensure the legality of the timber used and No one knows how much will be needed. To to mitigate the risk for other forest crimes, a large extent, investments in better resource such as poaching, arson, and encroachment management, social development. and industrial of forest areas, resulting from forest industry restructuring will spill over into improved investments. These impacts can be either compliance with laws and regulations. But direct (for example, by increasing industrial substantial amounts of resources will be needed capacity beyond availability of the legal specifically for specialized and increasingly supply of roundwood either through a single sophisticated forest law enforcement capacity investment project or through the combined building. impact of several investments) or indirect The means, motive, and opportunity construct (for example, by opening up previously is of particular value in suggesting areas of inaccessible areas through the construction of comparative advantage across potential partners forest roads). in forest law enforcement and governance. As · Ensure effective coordination between the shown in figure 5.1, for example, consumer implementation of the EU FLEGT Regulation countries and industry have particular niches in and Action Plan and other forest law helping to reduce the motive for illegal logging enforcement and governance efforts. This by reforming markets and public procurement is needed especially concerning the VPAs policies that discriminate against stolen material. envisioned in the FLEGT action plan, and Governments and financial institutions can help the lending and advisory operations of the limit the development of excess wood processing international financing institutions, especially plant and equipment by requiring and exercising the World Bank. The implementation of 63 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G the VPAs is likely to require significant countries where a relatively small number of investment in the development of sound companies operate large forest concessions. policies, legislation, regulatory frameworks, The world's problems of forest law and institutional reforms and capacity enforcement will not be solved only by jails, building. These are areas where the Bank courts, and arrests. Dramatically improved and other international financing institutions resource management, effective rural are already involved in a number of priority development services, and poverty reduction countries, and close coordination is needed to serving forest-dependent communities, industrial bring about synergies and avoid overlapping restructuring, protected areas systems serving actions. Under the EU FLEGT, an increasing the needs and aspirations of local communities, number of projects are implemented by and all the other components of sustainable various organizations internationally or forest sector development and just and equitable in specific regions. These need also be economic and social development will, in the end, effectively coordinated. be more important. · Explore the potential of the EITI as a means Credible penalties, effective enforcement, of increasing the transparency of the forest and fair and just legal systems are, however, sector financial flows in some key forest essential ingredients to the control of forest countries. Though not directly related to crime. Forest law enforcement and governance illegal logging at this time, EITI may have should not displace the established focus of forest the scope to inform forest law enforcement sector development strategies or assistance. and governance, or at some future point More sophisticated, technically and analytically incorporate forest sector financial flows sound forest law enforcement and governance within its scope and mainstream these work should, however, be added to the array of into the discussion on financial flows from interventions and approaches supported by the private companies to the government. global community. The latter option could become feasible in 64 7. References Akella, Anita Sundari, and James B. Cannon. Promoting Prudent Banking for Sustainable 2004. Strengthening the Weakest Links: Forest Management: The Anti-Money- Strategies for Improving the Enforcement of Laundering Approach." Occasional Paper 44. Environmental Laws Globally. Washington, Bogor, Indonesia: CIFOR. 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World Bank, Washington, DC. World Bank. 68 ANNEX 1. A Framework for Assessing Potential Responses to Forest Crime W hile the prevention, detection, particular country there are a variety of potential suppression framework provides the forest law enforcement and governance responses elements for a strategy to address that aim to prevent, detect, and suppress illegal illegal logging and other forest crime, alone activity. it is not sufficient to determine appropriate From the table, where forest crime is driven policy responses in a given context. For by poverty (need as opposed to greed), efforts to practical purposes, this framework needs to diminish illegal activity are most appropriately be complemented with a more context-specific focused on prevention of the crime in the first assessment. While it is evident that a detailed place, through poverty alleviation efforts, land definition of appropriate forest law enforcement tenure reform, and the like. Much of this is and governance responses can only take place at beyond the scope of the forest sector, though the country level with the involvement of the key integrally related to broader development stakeholders, the aim of this annex is to present efforts. Prevention-related initiatives are likewise a generic discussion based on typical drivers important in combating commercially motivated (motive, means, and opportunity) in commonly forest crime. In these cases, prevention activities found forest contexts. are generally related to broader public sector Table A.1 presents a range of typical contexts governance reform and strengthening forest for illegal logging and other forest crime, as well sector management. In both scenarios, efforts to as an indication of some of the most common improve the supply-demand imbalance for forest drivers (motive, means, and opportunity) in each products are necessary to eliminate underlying context. Depending on the type of forest crime motivations. and the factors underlying that type of crime in a 69 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Table A.1. Potential Drivers and Forest Law Enforcement and Governance Responses to Forest Crime Potential drivers Typical contexts (motive, means, opportunity) Potential responses Type Illegal logging Illegal logging · People unable to meet their basic needs · Legalize illegal use and/or simplify P for securing subsistence regulations concerning access to public forest/wildlife resources · Create opportunities for income generation P · Lack/high cost of alternative energy · Offer alternatives to fuelwood as source P of energy Small-scale illegal logging · Poverty · Create opportunities for income generation P to enhance livelihoods by · Complex legal procedures related · Reduce bureaucracy and fees associated - People without legal access to harvesting and access to forest resources with legal timber harvesting forest land · Disputes over land tenure rights · Clarify land tenure, consider establishing - Managers/ owners of local tenure of forest land community forests - Private forest owners · Poorly organized, under-resourced, and · Strengthen forest law enforcement D+S corrupt forest law enforcement · Improve internal control on law enforcement staff D+S · Corrupt community leaders · Improve internal control in communities D+S · Criminal groups organizing illegal logging · Strengthen cooperation with police force and D+S · Inefficient legal procedures judiciary and target the organizers/financiers behind these activities · Amend forest-related legislation and penalty code P · Use money laundering and asset forfeiture laws Large-scale commercial · Poorly motivated staff in public forest · Reorganize public forest administration to P illegal logging administration/enterprises increase staff motivation · High cost of legal timber · Reduce bureaucracy and fees associated with P legal timber harvesting · Capacity of wood processing industries · Embark on phased program of capacity reduction P exceeding legal supply in wood-processing industries · Increase supply by establishing plantations or P adjusting forest management regulations · Export demand insensitive to legality · Collaborate with governments and private sector P of timber in importing countries to increase demand for legal timber/deter imports of illegal timber · Poorly organized and corrupt forest law · Increase resources and enhance independence of D+S enforcement and auditing system forest law enforcement · Enhance effectiveness of financial audits on public D forest administration/enterprises · Provide support to patrolling networks among D private forest owners · Use anti-money-laundering laws · Inadequate monitoring data on timber flows · Promote independent forest monitoring D and origin of timber · Improve data management and transparency in D public forest administration/enterprises · Promote responsible business practices (chain-of- P custody systems, certification) in private industries 70 ANNEX 1. A FRAMEWORK FOR SSESSING OTENTIAL ESPONSES TO OREST RIME A P R F C Table A.1. Potential Drivers and Forest Law Enforcement and Governance Responses to Forest Crime (cont.) Potential drivers Typical contexts (motive, means, opportunity) Potential responses Type · Inefficient legal procedures · Strengthen cooperation with police force and S judiciary · Provide owners/managers of community and S private forests with legal services · Amend forest-related legislation and penalty code P Conflict timber · High cost of armed conflict · Focus on conflict resolution/management P · Poor control of timber imports in recipient · Improve controls on origin of timber D countries · Ineffective international sanctions · Promote international collaboration in sanctioning S conflict timber Other forest crime Irregular timber sales, award · Low risk of sanctions · Improve procedures for timber sales and P of concessions and service awarding concessions to increase transparency contracting and accountability · Increase proportion of timber sold/concessions P awarded through competitive bidding · Poorly motivated staff in public forest · Reorganize public forest administration to increase P administration/enterprises staff motivation · Poorly organized and corrupt financial · Enhance effectiveness of financial audits D audit system on public forest administration/enterprises · Improve data management and transparency D in public forest administration/enterprises · Inefficient legal procedures · Strengthen cooperation with police force S and judiciary · Amend penalty code S Evasion of taxes, royalties, · Unreasonably high tax burden in relation · Adjust taxes as appropriate and other fees by enterprises to timber price and general tax level · Impose sanctions on enterprises found guilty P of tax evasion · Poorly organized and corrupt financial · Enhance effectiveness of financial audits on D audit system enterprises · Inadequate accounting systems in private · Oblige enterprises to provide required D enterprises information in an easily accessible form · Inefficient legal procedures · Strengthen cooperation with police force S and judiciary to achieve minimum acceptable level of compliance · Amend penalty code P Evasion of taxes, royalties, · Low risk of sanctions · Adjust taxes, royalties, and other fees to a level P and other fees by where most communities/private forest communities or private owners would make the payments voluntarily forest owners · Inadequate accounting systems in private · Promote sound accounting practices in D enterprises/communities community forestry 71 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G Table A.1. Potential Drivers and Forest Law Enforcement and Governance Responses to Forest Crime (cont.) Potential drivers Typical contexts (motive, means, opportunity) Potential responses Type · Enhance effectiveness of external financial audits D+S on community forests and private woodlots within the limits of available resources · Inefficient legal procedures · Strengthen cooperation with police force and S judiciary to achieve minimum acceptable level of compliance · Amend penalty code P Circumvention of labor laws · Indifferent attitude in enterprises toward · Impose sanctions on enterprises found guilty P labor laws of circumventing labor laws · Poorly organized and corrupt oversight · Impose sanctions or disciplinary actions on D companies proven to circumvent regulations · Inefficient legal procedures · Strengthen cooperation with police force and judiciary to achieve minimum acceptable level of compliance · Amend penalty code S Unauthorized wood · Strong domestic and export demand · Enable an increase in authorized processing P processing encouraging unauthorized wood processing capacity by increasing legal timber supply and illegal logging · Excessive bureaucracy related to licensing · Simplify licensing procedure P · Poorly organized and corrupt oversight · Impose sanctions or disciplinary actions on D companies proven to circumvent regulations · Inefficient legal procedures · Strengthen cooperation with police force and S judiciary · Amend penalty code P Wildlife poaching Wildlife poaching for · People unable to meet their basic needs · Legalize illegal use and/or simplify regulations P subsistence needs concerning access to wildlife resources · Lack of/high cost of alternative sources · Create opportunities for income generation P of food · Offer alternative sources of food P Wildlife poaching to engage · Poverty · Create opportunities for income generation, P in trade in animals and · Complex legal procedures to hunting of wildlife reduce bureaucracy and fees associated with animal parts legal timber harvesting · Disputes over hunting rights · Clarify hunting rights with focus on rural poor P · Poorly organized, under-resourced, and · Strengthen wildlife law enforcement D+S corrupt wildlife law enforcement · Improve internal control of law enforcement staff D+S · Corrupt community leaders · Improve internal control in communities D+S · Criminal groups organizing illegal hunting · Strengthen cooperation with police force and D+S by recruiting rural poor judiciary and target the organizers/financiers · Inefficient legal procedures behind these activities · Amend forest-related legislation and penalty code P · Use anti-money-laundering and asset forfeiture laws 72 ANNEX 1. A FRAMEWORK FOR SSESSING OTENTIAL ESPONSES TO OREST RIME A P R F C Table A.1. Potential Drivers and Forest Law Enforcement and Governance Responses to Forest Crime (cont.) w Potential drivers Typical contexts (motive, means, opportunity) Potential responses Type Arson Arson associated with · Poverty · Land tenure reform P subsistence-level slash- · Lack of viable alternative agricultural systems · Agricultural intensification P and-burn agriculture · Marginalization and disempowerment of · Legal reform to decriminalize slash-and-burn P indigenous peoples agriculture Arson associated with · Biased policies and incentives · Policy reform based on strategic environmental P large-scale land clearing · Weak regulatory controls of land assessment for commercial agriculture development · Regulatory reforms to monitor and control land P+D development Encroachment Conversion of forest land · Poverty · Land tenure reform P associated with subsistence- · Cyclical unemployment · Agricultural development P level slash-and-burn · Stabilization policies P agriculture Conversion of forest land · Distorted policies · Policy reform P associated with large-scale · Corrupt land access arrangements · Anti-money-laundering and asset forfeiture laws S land clearing for commercial agriculture Source: Adapted from Puustjarvi (2006b). Note: P, prevention; D, detection; S, suppression. 73 Endnotes 1. The global annual value of timber logged 5. However, while there is no internationally illegally on public lands (US$10 billion) was accepted definition of such key concepts estimated through a weighted average of of forest law enforcement and governance (available) country level estimates of illegal as illegal logging, much of this remains logging and scaling up by the estimated somewhat ambiguous and different area under forest cover. The annual global stakeholder groups use different definitions value of taxes and royalties evaded on to promote their agenda. In practice, legally sanctioned logging (US$5 billion) was exact definitions may only be possible at estimated by using a weighted average of the national level based on consultation, taxes evaded from available country estimates discussion, and consensus building. and scaling up by the total (global) value of 6. Difficulties in obtaining reliable estimates are logging. These estimates give an approximate due to the nature of the (illegal) operations, as idea of the magnitude of the problem but well as errors and incompatibility in statistical mask country-specific variations, which are data when indirect methods of assessment are dealt with elsewhere in this report. used (comparison of production, consumption, 2. The Forests Team is part of the export and import data). For a discussion on Environmentally and Socially Sustainable methodological issues see, for example, Blaser Development Vice Presidency. et al. (2005) and Ottitsch et al (2005). 3. While many use the term FLEG in a generic 7. The intelligence cycle (direction, collection, sense to describe the issue of forest law evaluation, analysis, and dissemination) is enforcement and governance, in an effort to a tool employed in many law enforcement distinguish the issue and specific activities settings to rationalize the use of scarce related to the issue from the multistakeholder resources in understanding the nature of processes, this paper will use the acronym criminal threats and to support a range FLEG only to refer to these multistakeholder of enforcement responses, including the processes. collection of more intelligence, collection of 4. Lindsay, Mekouar, and Christy (2002) also actual evidence, and other responses. See, for assert that illegal activities in the forestry sector example, World Bank/IMF (2005). result from both failure to enforce legislation 8. The G8 addressed illegal logging under its and inadequacies in the legislation itself. own Action Program on Forests, adopted in 75 STRENGTHENING FOREST LAW ENFORCEMENT AND OVERNANCE G the Birmingham summit in 1998. However, forest governance activities. Despite this, it the implementation of concrete actions has has been possible to ascertain general trends been at the initiative of the individual G8 concerning the Bank's support for forest nations. The G8 2005 summit in Gleneagles governance in its forestry portfolio. Where maintained illegal logging as an issue on its possible, information has been confirmed by agenda, and the final communiqué contains task managers. paragraphs referring to the issue, with 14. Economic and sector work refers to activities specific references to the Congo Basin and that involve analytical effort with the intent the Amazon, and the need for action both by of influencing client countries' policies and consuming and producing countries . programs and comprise formal and informal 9. United Nations Department of Economic studies of critical issues, either at the country and Social Affairs. Johannesburg Plan of level or for specific sectors. This work Implementation, Section IV, paragraph 45c: has traditionally underpinned the lending http://www.un.org/esa/sustdev/documents/ and investment operations. Nonlending WSSD_POI_PD/English/POIChapter4.htm. technical assistance is the transfer of skills 10. The first such workshop will be organized and knowledge for developmental purposes for the Amazon region in August 2006 in and a key instrument for improving policies collaboration with the World Bank and GTZ, and project design, enhancing skills, and co-hosted by the Amazon Treaty Cooperation strengthening implementation capacity. Organization and the government of Brazil. 15. High-risk countries are characterized by high Subsequent workshops are planned for the levels of state capture and high levels of state Congo Basin and Central America. corruption and pose the toughest challenge in 11. Cameroon, Democratic Republic of Congo, terms of reforms. These countries also present Republic of Congo, Ghana, Madagascar, substantial fiduciary and reputational risks to Mozambique, Cambodia, China, Indonesia, the Bank (World Bank 2006d). Papua New Guinea, Russia, Bolivia, Brazil, 16. Department of Institutional Integrity was Ecuador, Honduras, Mexico, Peru, and India. set up in 2001 and is primarily responsible 12. This assessment is based on a desk review for assessing the vulnerability of the Bank's of project appraisal documents for all stand- portfolio to corruption and illegal practices. alone forestry projects (that is, those projects 17. Benin, Haiti, Bolivia, Colombia, Ecuador, coded as 100 percent forestry), all projects Ghana, Guatemala, Guinea, Honduras, in any sector coded with at least 10 percent Mozambique, Madagascar, Paraguay, Peru, forestry ("forest component" projects), and all São Paulo, Brazil, Sierra Leone, and Zambia. full-size Global Environment Facility projects For more detailed information go to http:// coded as either Forest Ecosystem or Mountain www.worldbank.org/wbi/governance/ Ecosystem. This is believed to capture the capacitybuild/d-surveys.html#reports. vast majority of projects with forestry-related 18. A proposal under considerations proposes activities. All projects were active as of bringing down this threshold level to US$10 November 15, 2005. million. 13. Financial figures presented here should 19. http://www.ifc.org/ifcext/economics.nsf/ be interpreted with caution, as they are Content/CSR-AdvisoryWork. estimates based on available data. Project 20. LEGEN has been actively supporting the documents often do not provide sufficient Bank's regional FLEG processes, including the detail to separate out costs of individual preparation of the Africa Forest Legislation 76 ENDNOTES Review from Benin, Cameroon, Central 23. An assessment of illegal logging in 10 African Republic, Democratic Republic of countries was carried out based on available Congo, Republic of Congo, Gabon, Ghana, documents covering Cambodia, Myanmar, and Madagascar, Mozambique, and Tanzania. Indonesia from Asia; Cameroon and Liberia 21. See, for example, (FAO 2005) and the Oxford from Africa; Brazil and Honduras from Latin Handbook of Criminology. America; and Armenia, Russia, and Serbia 22. For an example and references to the standard from Eastern Europe and northern Asia. economic analysis of crime and punishment see Akella and Cannon (2004). 77 THE WORLD BANK 1818 H Street, NW Washington, D.C. 20433 USA Tel: 202-473-1000 Fax: 202-477-6391 Internet: www.worldbank.org/forests Cover images: Top left by Mark Hurley, all others from Photodisc Printed on recycled paper