Forest governance encompasses all aspects of the exercise of authority of formal and informal institutions in the management of a nation's forest resources.
Governance comprises activities by the government, the private sector and civil society and the relationships between them. Good governance translates into effective government institutions and an enabling framework (through policies, incentives, appropriate laws and strong enforcement, etc.) for these three sectors to operate in harmony to achieve national objectives, such as economic efficiency, economic and social equity, improved environmental quality and more sustainable forest management.
Weak governance in the forest sector, prevailing in many countries, has negative environmental, economic and social consequences. This chapter focuses on one of the most important aspects of weak governance: forest crime and corruption. In many countries, illegal operations proliferate and governments are unable to control their own bureaucracies or to enforce adherence to the "rules of the game" by commercial corporations and civil society entities. In extreme circumstances, private corporations or powerful groups are able to sway government and to "purchase" decrees, legislation and regulations for their own benefit.
Corruption - a subject that was until recently considered taboo - has come to the forefront of the international dialogue on forests. It has been openly discussed in major fora recently, and is being tackled by governments, NGOs, the private sector and international organizations through a range of initiatives. All this interest has been stimulated by an increasing awareness worldwide of the immense costs associated with corruption and other illegal activities. It has also become apparent that ongoing efforts to improve forest management will have limited value unless accompanied by measures to reduce forest crime. Finally, it is becoming much more difficult to keep illegal and corrupt activities hidden, owing to the efforts of the media and NGOs and to the rapid spread of information that has been made possible by new information technologies.
This chapter describes the effect of crime and corrupt activities in the forest sector and the efforts of various stakeholders to suppress them. The first section describes illegal forest activities and why the forest and forest industries sector may be more susceptible than other sectors to illegal activities. This is followed by a discussion of the magnitude and impacts of illegal and corrupt forest activities. The next section attempts to answer the questions: can illegal and corrupt activities be combated effectively? And if so, how? The final section describes efforts to combat forest crime.
Individuals, groups of individuals and institutions may engage in illegal activities and undermine governance in the forest sector. There are many types of illegal forest practices (see Box 20 for some common examples).
Examples of illegal practices in the forest and forest industries sector
ILLEGAL OCCUPATION OF FOREST LANDS
ILLEGAL TIMBER TRANSPORT, TRADE AND TIMBER SMUGGLING
TRANSFER PRICING AND OTHER ILLEGAL ACCOUNTING PRACTICES
ILLEGAL FOREST PROCESSING
Source: Based on Contreras-Hermosilla, 1997.
Public servants may approve illegal contracts with private enterprises. Private commercial corporations may harvest trees of species that are protected by law from timber exploitation. Individuals and communities may enter public forests and illegally take products that are public property. Illegal activities do not stop at the forest. They travel down the line to operations in transportation, processing and trade of forest products. Individuals or corporations may smuggle forest products across international borders or process forest raw materials without a licence. Corporations with strong international links may artificially inflate the price of imported inputs or deflate the volume and prices of their exports to reduce their tax liability and to facilitate the illegal transfer of capital abroad.
Many illegal activities simply result from the inability of governments to enforce the law. Unfortunately, in many other cases, illegal activities are the result of corruption. Corruption is a complex concept that has many interpretations and different meanings. Here, corruption is defined as "the unlawful use of public office by politicians or civil servants for private gain".
According to this definition, corrupt acts are illegal acts that:
Involve public officials. A private individual stealing wood from a public forest is performing a criminal act but, according to this definition, not a corrupt one. While corruption involves civil servants, most frequently a party from the private sector or civil society is also implicated.
Involve public property and power. Public property may be tangible (e.g. timber) or intangible (e.g. selling knowledge about government negotiating positions on timber concessions). Frequently, private property is also involved. Thus, corrupt civil servants may use the power of their office to extract bribes from the private sector without strictly compromising public property. This form of corruption is better described as extortion.
Are perpetrated for private gain. A public official who misuses public forests without deriving private gain may qualify as negligent and incompetent (and thus is not free from prosecution), but not as corrupt.
Are intentional acts. A public official who unknowingly uses public forest resources illegally is also negligent and incompetent, but not corrupt.
Some authors distinguish between petty and grand corruption (Tanzi, 1998). In grand corruption, the bribes are large. Frequently, the attitude is that petty corruption is somehow more "acceptable" because it is generally committed by poorly paid officials and the assumption is that the scale is so small that it does not really have much overall effect on forest resources. However, this assumption may be faulty: the aggregate effect of widespread petty corruption may have an impact as substantial as a few instances of grand corruption (Callister, 1999).
In some cases, grand corruption may be easier to detect, but it may be more difficult to control and punish because of the greater political power wielded by the corrupt partners. Often, persistent and unchecked grand corruption indulged by people in high positions creates favourable conditions for petty corruption, thus altering social values and norms.
There are several reasons to believe that the forest and forest industry sector may be more susceptible than other sectors to illegalities and corruption. This seems to be the case at least in many tropical and subtropical countries, where forest ecosystems are very complex, access tends to be difficult and the visibility of illegal operations is lower because of generally insufficient monitoring systems and weak media. The reasons why these countries, in particular but not exclusively, are susceptible to forest crime and corruption are as follows:
Forest activities in these countries often involve large areas and take place in remote places, far from public scrutiny, the media and official controlling agencies; independent checks are rare and the enforcement capacity of public controlling agencies over vast and remote areas is normally low.
In forest-rich countries, forest resources are valuable but timber volumes and their quality are seldom known with precision.
Most forestry departments must grant broad discretionary powers to local forestry officers to measure, classify and sometimes value forest products because these activities take place in the field, far from decision-making centres. Largely unsupervised officials are commonly empowered to certify volumes and qualities of wood extracted from forest concessions.
Even when detailed forest inventories are available, logs are highly variable, voluminous and of different species. Commercial volumes are difficult to quantify when, for example, logs are affected by central rot, and sometimes the identification of species leaves latitude for "mistakes". If different prices are established for different species and qualities of logs in different localities where concessionaires operate, possibilities to downgrade qualities and species emerge. Much must be left to interpretation and discretion rather than to objective and precise measurement (this is one of the reasons that impel governments to establish area-based uniform fees in forest concessions).
Government officers, who are frequently on low pay and are largely unsupervised, oversee high-value products over large areas. Under these circumstances, the incentives to engage in corrupt acts are strong.
The large number of regulations and permits that governments issue in their attempt to optimize the use of forest resources generate additional opportunities for corruption every time an unsupervised public official must approve those permits or enforce the regulations. Timber transit permits are notorious examples of well-intentioned, but widely circumvented, rules. Moreover, regulations are often poorly designed, constantly changing and open to interpretation, making them easier to bend.
Penalties are commonly minimal in comparison with the potentially high returns from corruption. Furthermore, when corruption is systemic, it is difficult to identify and punish corrupt officials and partners in the private sector or civil society when so many others, possibly including the enforcers themselves, may also be corrupt.
Finally, in numerous cases, comparatively powerless government forest controllers operating in isolated regions are forced to participate in illegal acts or risk physical harm. Violence is not foreign to attempts to monitor and control illegal operations by the forestry administration.
High timber values, low visibility, low pay, a far from standardized product, broad discretionary powers to decide on a number of highly subjective matters, poor objective information, uneven distribution of power among players and the improbability of harsh punishment, all create a favourable environment for illegal activities and corruption.
Illegal forest activities and corruption happen virtually everywhere in the world: in industrialized societies, in developing countries and in countries with economies in transition.30 Although countries with economies in transition have been receiving attention recently, the media tends to continue its focus on developing countries and, particularly, on forest-rich tropical countries. This is due partly to universal concerns about the importance of these forests in terms of biological diversity conservation and the fact that their degradation affects so many of the world's poorest people. However, countries with sparse forest resources, such as those in the drier regions of the world, are obviously not immune to crime and corruption. While individual corrupt acts and bribes in these countries may be small, their aggregate effect can be substantial, as can their negative impacts on large numbers of poor people. Nevertheless, forest crime in these countries attracts less attention from the media, environmental NGOs, development specialists and international assistance agencies.
In all these situations - in forest-rich and forest-poor countries, in industrialized, developing or transition economies - forest crime is difficult to quantify. No global or regional assessments of the magnitude of illegal and corrupt activities in the forest sector exist and it is difficult to know whether they are increasing in frequency or magnitude. However, available information, albeit partial, shows that illegal and corrupt activities are prevalent in many countries.
Studies have been carried out on corruption in the forest sector, some of which have been well publicized. One study, commissioned by WWF a few years ago, estimated that most of the timber exports from various countries in Asia were illegal (Dudley, Jeanrenaud and Sullivan, 1995). A recent joint report by WWF-Belgium, WRI and WWF International, sponsored by the European Commission, mentions cases of corruption in various countries of Africa, the Pacific and the Caribbean (Sizer and Plouvier, 2000). Research carried out by the Global Forest Watch initiative, recently launched by WRI, reveals that in one central African country, over half of all the active logging licences in 1999 were illegal (with offenders operating with expired licences or logging in parks and reserves) and that the legality of allocations of 23 other timber concessions was in doubt (WRI, 2000a). This research also showed that many of the offending companies and individuals that operated outside the law were never prosecuted because of the influence of a "higher authority". Several institutions such as the Environmental Investigation Agency, Global Witness and Friends of the Earth have researched forest crime in a number of other countries and shown that it is a critical problem facing the sustainable management of forest resources (see Environmental Investigation Agency, 1996; Global Witness, 2000; Glastra, 1999).
In a famous case of a detailed inquiry of forest crime and corrupt acts in the forest sector, a judge in a Pacific island nation concluded that:
"It would be fair to say, of some of the companies, that they are now roaming the countryside with the reassurance of robber barons, bribing politicians and leaders, creating social disharmony and ignoring laws in order to gain access to, rip out, and export the last remnants of the province's valuable timber. These companies are fooling the landowners and making use of corrupt, gullible and unthinking politicians.... It is doubly outrageous that these foreign companies ... have then transferred offshore secret and illegal funds ... at the expense of the landowners and the government. There can be no doubt that the timber industry, by its very nature, is conducive to acts of a criminal nature contrary to law and proper government ministration."
A recent study of forest crime in a Southeast Asian country attempted to estimate the magnitude of illegal activities by comparing official figures of production of wood in the country during 1997/98 with the roundwood equivalent of domestic apparent consumption plus exports minus imports. This latter calculation produces a rough estimate of "apparent production". By comparing official production with apparent production, the analyst determined a gap of unexplained production reaching some 33 million m3. This exceeds official production, which is declared at 29.5 million m3. In other words, more than half of the forest extractions may be illegal in that country (DFID, 2000b).
Clearly, there is reason to believe that forest crime and corruption are serious problems that conspire against countries' efforts to establish systems of sustainable forest management.
Most people would agree that sound governance cannot be achieved without compliance with the law and that illegal acts should be combated. The remedy consists of better laws, and then effective monitoring, detection and harder punishment. Opinions are more mixed, however, in the case of corrupt acts. Ethical considerations aside, some argue that corrupt activities contribute to economic efficiency because they allow investors and entrepreneurs to avoid immensely complex and sometimes seemingly absurd bureaucratic regulations. In this view, corruption is the "grease" that keeps the wheels of forest development spinning. By avoiding government restrictions, corruption is tantamount to deregulation. The proponents of this line of reasoning also maintain that corruption contributes to economic efficiency because the most efficient firm - the firm with the lowest costs - will be able to pay the highest bribes and thus will win the contract, such as for a timber concession. Similarly, a company or individual that values time highly will be inclined to pay bribes to jump the line and have their papers or contracts processed faster. Thus, here too, corrupt behaviour would seem to increase economic efficiency.
However, there is much evidence to show that illegal activities and corrupt behaviour are economically inefficient and negatively affect the sustainability of forest management and social equity. Far from being an economic lubricant, corruption distorts the allocation of investments in the forest sector. Government officials accepting bribes may make decisions that only by chance coincide with those that are of most benefit to the country. For example, certain harvesting and transportation equipment may not be well suited to the conditions of a specific country, but they may be chosen because a supplier pays bribes to win the contract. Furthermore, inappropriate capital-intensive projects and technologies are sometimes preferred because they make it easier to "skim off" substantial sums.
Moreover, in corrupt environments, a vicious circle tends to come into effect. When corruption is tolerated, government officials have an incentive to create new rules that multiply the need for companies and individuals to pay bribes in order to have things done. For the same reason, corrupt officials may resist efforts to simplify regulations. Thus, recommendations to streamline timber concession systems, for example, may not be followed because reforms may close the door to opportunities for malfeasance. Corruption, therefore, may not be simply a reaction to cumbersome regulations, but may be a cause of them.
Similarly, payments to speed up bureaucratic procedures by "jumping the line" may act as a powerful incentive for bureaucrats to slow down such procedures. Bribes may secure an individual firm a higher position in the line (e.g. for obtaining export permits), but the average time of processing applications may slow down considerably. Corruption in these cases tends to feed itself in a downward spiral of economic inefficiency in which more corruption leads to increased inefficiencies, and so on.
Furthermore, when the discretionary power of government officials is high, they are able to customize bribe-seeking behaviour by charging higher bribes to the companies that are most able to pay. These are often the most efficient companies but sometimes they may be those supplying substandard products and services.
Several researchers have tested hypotheses that rationalize corruption based on its presumed economic benefits. Evidence from several sectors provides no support for the "efficient grease" concept (Kaufmann and Wei, 2000). Although none of these empirical studies has focused on the forest sector, there is no persuasive argument to believe that impacts would be different. In fact, when corruption is widespread, responsible companies tend to avoid investing in the corrupt country or sector (Kaufmann, 1997). This is because the costs of operating in corrupt environments can be very high. Research shows that the average added cost of corruption in the forest sector in a corrupt country is about 20 percent. This is equivalent to a very high corporate tax (Tanzi, 1998).
In addition, profits made by companies and proceeds accruing to corrupt government officials are generally sent abroad or hoarded as unproductive assets, thus negating the potentially productive use of capital.
Furthermore, corrupt behaviour tends to deter long-term forest investment because risks in corrupt environments are higher. While the "efficient grease" argument assumes that each side of the corrupt contract will adhere to the terms of that contract, this is frequently not the case. Promises tend to remain unfulfilled mainly because this opens the door to more bribes. Of course, there is no recourse to the courts to force compliance with the terms of a corrupt agreement. Furthermore, when changes in contracts depend on the whim of corrupt officials, who may be replaced in the next political reshuffle, the incentive to invest in long-term operations naturally fades away. All these factors tend to reduce the level of private forest investments.
So far, corrupt behaviour between government and the private commercial sector has been examined. Yet some of the same forces against economic efficiency also operate in the relations between government and institutions and individuals of civil society, such as rural communities or rural people in general. In these cases, corruption tends to be more violent ethically because some members of civil society are very weak. Public officials, abusing their power, are often able to extract money from some of the poorest and most disadvantaged people. Strictly speaking, and according to the definition of corruption, these are not corrupt acts because one of the partners does not carry them out voluntarily. These are criminal acts, better characterized as extortion. In extreme cases, the poor may have to pay for access to some forest goods and services already granted to them by law, such as the right to collect fuelwood from public forests. Refusal to pay bribes often results in the fabrication of cases against them, compelling people to "fall in line" and to be victims of corruption with no remedial action. Aside from their possible negative effects on economic efficiency, these illegal acts go against equity and the dignity of disadvantaged groups.
Furthermore, as public money is channelled into private pockets instead of into the state treasury, corruption reduces public revenue. As already indicated, the amounts involved are often likely to be substantial. Such diversion of funds is likely to be relatively more damaging in developing countries, where investment funds are very scarce and the need for national economic growth and improved conditions for the poor is more pressing.
In summary, contrary to the "efficient grease" theory, the impacts of corruption on forest governance, economic efficiency, forest management and equity are numerous and mostly negative. Corruption undermines the state's capacity to impose law and order in the sector. It undercuts economic efficiency because it leads to poor decisions and misallocation of scarce economic resources. It acts as a deterrent to private sector investment in the sector. It affects the quality of forest management because it favours the quick and wasteful utilization of public forests for private gain rather than for national benefit. As corruption disproportionately hurts the poorest segments of society, the poor perceive government to be unfair and in favour of those who already have plenty. This increases the possibilities for social unrest, if not violent conflict. For example, in 1994, Chiapas State in Mexico was the scene of an armed uprising against the federal government. The rebels were mainly impoverished Indians protesting against expulsion from their farmlands and forest tracts by large-scale cattle ranchers and loggers operating in collusion with corrupt public officials.
There is little doubt that illegal activities can be combated effectively by improving monitoring systems, passing simpler laws and ensuring strict enforcement. But when it comes to corrupt activities, sceptics question whether they can be fought effectively. Some argue that, when corruption is systemic, it becomes "part of the culture" accepted by all, and therefore any action to combat it is likely to be ineffective. Others point out that, under these circumstances, combating corruption in one group of activities - such as those related to forest resources and industries - is a losing proposition because one segment of government cannot be completely isolated from the total system of governance, and that the government as a whole therefore needs to be reformed before integrity in forest-related activities can be achieved.
These arguments are not supported by evidence. Recent cases reveal that even in societies where corruption is systemic, the majority almost invariably rejects it, thus refuting the argument that corruption is an integral part of the culture. This does not mean that its eradication is an easy task. When corruption permeates the whole government apparatus, is organized and faces no effective political challenge, it is extremely difficult to combat it in the forest sector (Johnston and Doig, 1999). In these cases, fighting corruption in the forest sector may perhaps produce short-term changes, but there is a real danger that these changes will not be sustained.
However, not all situations involve systemic corruption. When corruption is less entrenched, reforms in an individual ministry or line agency can render notable results. In the case of forest activities, installing more transparent mechanisms such as auctions in timber concessions, reducing the discretionary power of individuals in allocating subsidies, enlisting the help of stakeholders from the private sector and civil society, employing a third-party monitoring agency and promoting privatization, all contribute to reducing corruption. The case of Bolivia, described in Box 21, is an example of how actions in the forest sector can succeed.
A strong push for reducing forest crime: the case of Bolivia
Policy and legal reforms in Bolivia's forest sector are some of the most far-reaching anywhere, and they contain specific strategies to combat forest crime and corruption. Legislation was approved after a lengthy period of political discussion involving different stakeholders from the private sector, civil society and the government. The development of the analytical framework was strongly supported by an international assistance project, which provided impartial and sound information and recommendations to decision-makers.
According to the country's Constitution, all natural forests are the property of the state. All forest harvesting is done by the private sector and, before the new law, was performed under short-term contracts with the government, based on volume charges. It is generally recognized that the old system provided a number of opportunities for forest crime and corruption to arise.
In 1996, a new law introduced drastic changes, including the introduction of a uniform area charge. While it may have some shortcomings, this method has the undeniable advantage of eliminating interpretation and the use of discretionary power in assigning timber concessions. The annual fee is US$1 per hectare of concession. Thus, a 100 000 ha concession pays US$100 000 per year, a clear and simple calculation with no room for alternative interpretations. At the same time, the responsibility for field-level forest operations was transferred to private firms. Management plans, following government guidelines, are now prepared by independent forest professionals, who are also legally responsible for their implementation. The private operators are required to produce five-year audits by a recognized independent body to prove that the prescriptions of the plans are being applied in practice. Concessions will be auctioned using transparent bidding processes and will last for a period of 40 years, subject to the approval of the five-year audits.
The head of the executive forestry agency, the Super-intendencia Forestal, is selected from a list of three names provided to the President by a two-thirds majority of the senate. The Superintendent's assignment lasts for six years, thus straddling the presidential period, which is four years. Financing for the Superintendent is independent from the National Treasury, and the funds come largely from the direct collection of concession fees. The Superintendent holds annual public hearings to report to the public on the agency's progress and the use of financial, human and capital resources. An independent international third party controls the transit of wood, although the government carries out parallel verifications. All these measures have been designed to minimize political interference and the use of public office for private purposes as well as the incidence of corruption and forest crime in general.
The implementation of the reforms has not been without difficulties, but they have been widely recognized as having successfully reduced corruption.
Given the reality that policy actions against forest crime and corruption normally face stiff resistance from vested interests, their effectiveness will largely depend on the political will and determination of government officials to push for reforms. Illegal activities and corruption are symptoms of deeper problems in governance. Obviously, long-term solutions must attack the underlying causes of corruption rather than its immediate manifestations. This may take a long time - in fact, a very long time. The underlying causes are numerous and complex and include weak law enforcement, great inequalities in the distribution of economic power, a lack of protection of property rights, the prevalence of undemocratic decision-making processes, and so on.
Stricter enforcement, alone, is unlikely to suppress forest crime. Illegal and corrupt activities often provide the only employment and survival options for a number of people. Policies to fight corruption must consider that these people will only adopt legal alternatives to the extent that these exist. Alternatives must somehow be provided by government to generate monetary and other incentives for rural people to move away from the illegal use of forests.
In addition to tackling the fundamental causes of forest crime, measures that make it difficult to occur and increase can help. Prevention is a positive step, but so is deterrence. It may not be possible to eliminate forest crime, but at least some measures can be taken to achieve a second best, a situation where the environment is less favourable towards illegal acts.
The policy measures described in the following points are in line with this reasoning and are particularly appropriate in situations where corruption is not systemic and the government is determined to improve governance. However, a word of caution is in order: in most cases, measures to combat forest crime are not likely to have an effect unless they are implemented in packages, consisting of different measures that can be used to varying degrees depending on a country's specific circumstances. Individually, each measure would contribute to fighting forest crime but would be unlikely to solve the overall problem by itself. For example, the promotion of better forest resources monitoring may help in detecting illegal acts, but it will have little effect if the penalties for corrupt acts are not severe enough.
Increase the rewards for integrity. This is a policy aimed at preventing forest crime. If forestry officers are poorly paid or promotions are related more to patronage than to quality of service, there is little benefit in being honest. In such a context, the costs of losing a job are low and the propensity to accept bribes naturally increases. Granting higher salaries for forestry staff is an obvious and desirable reform because it would increase the pain of losing a desirable job but, although this may be a necessary condition, it is not sufficient in itself. The best-paid officials are often the most corrupt ones. In fact, in certain circumstances, a higher pay may only lead to more problems: an official with a good salary may demand higher bribes to offset the risk of losing the job if caught. Thus, higher salaries for forestry staff should only be part of a much more complex response. Another drawback to this policy measure is that, in many cases, it runs counter to the prescriptions of structural adjustment programmes, which normally insist on reductions in public sector spending. This potential obstacle can be eliminated if cuts in unnecessary jobs create enough savings to keep aggregate spending at a lower level, even if the remaining civil servants receive a higher pay.
Increase the probability of detection. This set of measures is also mainly oriented towards the prevention of forest crime and corruption. It includes better assessments of forest resources (including improved estimates of their commercial value) and the wide dissemination of the results, particularly to the media and watchdog NGOs. It may also include asking a third party (preferably an international institution of known reputation) to provide independent auditing, monitoring and reporting. The work of this outside institution should supplement the action of national forest institutions, and efforts must continue at the same time to strengthen government capabilities and foster an anticorruption culture. This is the model established in Cambodia, where a forest crime monitoring unit was created in 1999, composed of two separate government offices and an independent international monitor (Global Witness), to detect and contribute to suppressing illegal forest activities.
Increase penalties. This set of measures is oriented towards punishing parties for corrupt acts, and is thus aimed at deterring such action in the future. Penalties can act as deterrents if they are heavy enough and if they are commensurate with the economic value of the offence. In addition, penalties would be more effective if they were levied on both the government official and the private parties participating in the corrupt deal. Governments could also cancel all contracts with private firms or civil society groups involved in illegal activities, and they could blacklist corrupt private firms and other groups or individuals, thereby excluding them from future government contracts.
Reduce discretionary power of government officials. Because forest crime is more likely to occur if a few officials have considerable discretionary power over decisions that involve large values, reducing that discretionary power contributes to preventing corruption. For example, if only a few officials, unobstructed by controlling bodies, can award timber concessions or decide on the eligibility of firms to receive subsidies, the potential for corruption is increased. This potential can be reduced by simplifying norms, including export procedures, eliminating subsidies and making the awarding of concessions subject to transparent procedures such as open and independent bidding systems. These measures are also likely to improve economic efficiency. Certain operations can be privatized, thus replacing bribes with legal payments determined by market values. Furthermore, when the possibility exists, it may be advisable to promote overlapping institutional responsibilities, thus reducing the discretionary power of one single agency or individual. For example, forest guards may control permits for the transport of wood but this could also be done by the regular police force. Collusion in such circumstances is less likely. As with all the policy measures described, the application of this measure, alone, may not eliminate corruption, as a given operator may be forced to pay bribes twice. However, it would at least create incentives that reduce people's willingness to pay high bribes while also reducing the probability of corruption being undetected.
Streamline the policy, legislative and regulatory framework. Related to the previous measures, fewer, simpler and clearer government rules would reduce opportunities for their subjective interpretation and for malfeasance. For example, if a subsidy policy is cancelled, the associated opportunities to use the programme for personal gain disappear; and if procurement is based on standardized items, it provides a benchmark for judging decisions and spotting violations. In some cases, it is possible to introduce mechanisms for losers (e.g. of a government timber concession contract) to have a formal opportunity to challenge the government decision and sue the government if evidence of malfeasance is unearthed. Legal recognition of the customary rights of local populations would improve the possibility of their reporting misdoings. Rules should be established that stipulate clear responsibilities and procedures for granting concessions and other access and use permits in public forests.
Increase the use of market mechanisms. Markets can sometimes be used more intensely to avoid "command and control" policies and reduce opportunities for engaging in corrupt acts. If markets are reasonably competitive, administratively fixed prices (e.g. for awarding concession contracts) can be replaced by more open and transparent market mechanisms and the free play of demand and supply forces. Incentive and fiscal policies could be established to set market signals in the direction of more sustainable forest management.
Involve the media, NGOs and the public in combating forest crime. Various independent environmental NGOs, acting as "watchdogs", in collaboration with the media, have been instrumental in uncovering illegal operations in many countries and have frequently succeeded in forcing corrective action. These types of operations could be encouraged by government policy. The media can be a powerful instrument in unearthing and disseminating information about forest crime. The power of the Internet is already being used intensely to monitor and evaluate illegal activities and to provide an easy communication channel for "whistleblowers". Enhanced public awareness of the nature of forest resources and the way in which they are used usually helps in creating pressure for better governance. In contrast, secrecy creates "rents" for those who possess information. Local people and NGOs can be engaged in fighting illegalities if, for example, they are informed about concessions granted and are provided with maps delineating concessions and areas affected by harvesting permits.
Committed governments and citizens are not alone in their concern about forest crime or in their efforts to implement preventive policies and punish offenders. With the increasing awareness that corruption in the forest sector is costly but can be combated effectively, a wide range of initiatives to reduce its impact are being undertaken by governments, NGOs, the private sector and international assistance agencies.
A number of developing countries are adopting legislation that incorporates some of these recommended policy elements to reduce forest crime and corruption. For example, the Malaysian Minister of Primary Industries has reportedly met with industry executives and demanded that they respect the laws of the countries in which they operate. Punishments in the form of fines and prison terms were increased for illegal loggers. Not long ago, the government fined 20 large companies involved in transfer pricing and forced them to pay back taxes.
In the Philippines, the Department of Environment and Natural Resources recently stepped up efforts to reduce illegal logging. The difficulty in combating entrenched logging syndicates in this country is illustrated by the fact that the enforcement efforts of the Department generated violent reactions, with the result that five of its staff investigating corrupt acts were killed in 2000 alone (Government of the Philippines, 2000).
At the beginning of the 1990s, Ghana faced a forestry crisis. Asia's timber demand and the operations of very aggressive corporations had caused a massive increase in illegal extractions. The Ministry of Forests took several steps to curtail the illegal traffic of wood; initially it imposed export taxes, and then an export ban. It also created a brigade to monitor forests. Unfortunately, these measures had little impact. In 1994, the Ministry renewed its efforts to combat illegal acts through several regulatory means, such as mandatory inspections by forest guards before exploitation, logging permits, transport permits and so on. These measures proved ineffective as well. At that point, the government took the critical step of making a genuine effort to involve other members of the private sector and civil society in the fight against the illegal use of forests, thus closing the triangle of good governance. The government involved farmers, forest owners, industrial operators, transporters and others. The main group concerned - forest owners - took the first step in supporting government efforts and, little by little, other private sector and civil society stakeholders joined in. As a result, illegal logging was substantially reduced, with the reduction in log supplies bringing about a fourfold increase in the value of marketed timber between 1994 and 1995 and, hence, an increase in government revenue (Bouderbala, 2000). Corruption has not disappeared in the forest sector; it is still reported to be a problem. Nevertheless, it is unquestionable that Ghana's efforts to fight corruption are a step in the right direction.
Bolivia is another country where the government has taken strong steps to fight forest crime (see Box 21). Most of the main actors, including the most sophisticated forest industrialists, support these measures, simply because the law introduces biases in favour of technologically advanced and innovative companies and against inefficient and technologically backward operators. As in all cases of reform, however, as long as the underlying causes of corruption persist, it is difficult to predict the course of future events.
NGOs have been part of the vanguard in combating illegal acts and corruption in the forest sector. Here, it is possible to mention only a few of the many groups involved. A notable example is Global Witness, an NGO that organized effective anticorruption efforts in Cambodia. International exposure and worldwide awareness raising by Global Witness operations motivated government and international agencies, including the Asian Development Bank, the World Bank, the International Monetary Fund and several bilateral donors, to support actions against corruption in Cambodia's forest sector.
Transparency International, an NGO dedicated to combating international and national corruption, produces the now famous Corruption Perceptions Index,31 which ranks countries according to degrees of perceived corruption among public officials and politicians. This NGO also helps committed countries to devise strategies for combating corruption. The main purpose of the Environmental Investigation Agency, an NGO based in the United Kingdom and the United States, is to investigate, expose and campaign against illegal trade in wildlife, illegal logging and trade in timber species as well as the destruction of the natural environment. The Environmental Investigation Agency has been instrumental in raising world awareness about the operations of unscrupulous corporations in illegal logging and trade. Environmental groups under the Friends of the Earth International Federation have carried out numerous studies and awareness-raising exercises in various countries, many of which have resulted in effective action against corruption in the forest sector.
The promotion and support of certification schemes by the Forest Stewardship Council provides a framework for companies and consumers to foster sustainable and "clean" forest management practices. While certification is not specifically focused on reducing forest crime, its sustainability requirements could help to eliminate forest crime that leads to unsustainable practices. Other NGOs are also helping to promote certification. For example, WWF's Global Forest and Trade Network brings together corporations interested in sourcing their wood from certified suppliers. While the global impact of certification is probably limited, because only a small fraction of the wood produced in developing countries is traded in international markets and only a small percentage of that is currently certified, certification provides an additional means of reducing forest crime. In early 2000, WRI launched Global Forest Watch, an initiative that uses satellite technology and the knowledge of partners to track developments such as mining, logging and other activities that may threaten forests if they are not properly regulated. It aims at introducing transparency and accountability in decisions by identifying the main actors behind these developments and the processes that lead to actions. Global Forest Watch is currently working in seven countries but, by 2005, it aims to expand its operation to 21 countries, covering 80 percent of the world's remaining large, undisturbed forest ecosystems. Its activities have already uncovered and documented several instances of illegal logging.
There are an increasing number of private sector initiatives to promote sustainable forest management and to avoid illegal and corrupt practices. These have been initiated by influential corporations that voluntarily adopt "codes of conduct" and lobby for transparent operations. Around the world, buyers' groups are proliferating. Formed by retailers and major users of wood with the aim of improving forest management worldwide, buyers' groups pledge to buy certified forest products.
An alliance of 42 timber companies committed to certification, Compradores de Madeira Certificada, was recently formed in Brazil with the assistance of WWF and Friends of the Earth Amazonia (WWF, 2000). The alliance helps to ensure that member companies' wood is not the product of illegal harvest. This is an example of private sector corporations and international and national NGOs joining forces in an effort that could help reduce corruption in forest operations.
Developed countries and their transnational corporations share a great part of the responsibility for the spread of corruption around the world. What is often overlooked is the fact that corruption in developing countries and economies in transition is frequently associated with companies from the industrialized world. The recognition that industrialized countries have a responsibility for reducing corruption connected with the operations of their international corporations has led to some corrective action. As early as 1977, the United States Foreign Corrupt Practices Act made it a crime for United States companies to bribe foreign officials. Unfortunately, this remained an isolated initiative for a long time. Until recently, corporations from other industrialized countries could conveniently deduct bribes to foreign officials from corporate taxes as "business expenses". In other words, bribing a foreign official was not only legal in industrialized countries, but openly encouraged through financial incentives.
Fortunately, this situation is rapidly changing. Following the lead of the United States, the Organisation for Economic Co-operation and Development's Convention on Combating Bribery of Foreign Public Officials in International Business Transactions went into effect in February 1999. Under the Convention, 34 countries, including all of the world's biggest economies, have made a commitment to adopt common rules to punish companies and individuals that engage in bribery. The Convention makes it a crime to offer, promise or give a bribe to a foreign public official in order to obtain favourable treatment in business deals (OECD, 2000a).
Many other international initiatives address forest crime and corruption directly or indirectly. The Libreville Action Plan 1998-2001 of the International Tropical Timber Organization (ITTO, 1998) contains several references to "undocumented" trade and forest activities, and "irregular" forest activities that evidently refer to illegal and corrupt actions in the forest sector. In 1997, the Organization of American States' Inter-American Convention against Corruption entered into force, with the aim of strengthening mechanisms to prevent, detect, punish and eradicate corruption in member countries. The Yaoundé Summit, held in March 1999 and involving five heads of African states, recognized problems of illegal poaching and logging and the need to combat these activities in countries participating in the Summit (for a discussion of the Yaoundé Summit, see Part III, p. 110). The extension of the Lomé Convention includes explicit provisions to support timber certification and thus, indirectly, actions to reduce illegal and corrupt activities.
The issue of corruption has been brought into the global debate on forests. The Intergovernmental Panel on Forests "invited countries to provide an assessment and share relevant information on the nature and extent of illegal trade in forest products and to consider measures to counteract such illegal trade". The Intergovernmental Forum on Forests included the "consideration of ... market transparency and the related issue of illegal trade in wood and non-wood forest products".
Similarly, at their meeting in Birmingham, United Kingdom in 1998, the Group of 8 (G8) countries32 reached an agreement on implementing an Action Programme on Forests that includes measures to combat illegal logging and trade. The G8 Summit in Okinawa, Japan, held in July 2000, reaffirmed these countries' commitment to fight illegal logging, with their pledge to "examine how best we can combat illegal logging, including export and procurement practices". In August 2000, the United Kingdom implemented this commitment with various initiatives, including the improvement of timber purchasing procedures by government agencies, action aimed at reducing consumption of illegal wood in the United Kingdom and cooperation with other countries to encourage good governance and to remove corruption.
In 1997, the World Bank launched a major initiative to address corruption. Its declared aims were to provide guidance in preventing fraud and corruption in Bank-financed projects, help countries that request Bank support to reduce corruption, take corruption issues into account in its analytical work and its dialogue in each country, and support international efforts to curb corruption. In 1998, the World Bank-WWF Alliance was launched. Within the framework of the Alliance, both institutions work with governments, the private sector and civil society in promoting improved forest management. Its targets include the increased protection, by 2005, of 50 million ha of forest areas under threat and of the 200 million ha under independently certified sustainable forest management. Although the aims of the Alliance do not explicitly include the fight against corruption, work to achieve its targets implies such action.
Illegal and corrupt activities threaten the world's forests, particularly but not exclusively in forest-rich developing countries. In some cases, and as a consequence of trade liberalization and globalization, illegal logging and trade appear to be growing. However, recent years have witnessed some encouraging developments. The subject is no longer ignored in major international conferences on forest sustainability. Arguments that attempt to rationalize corruption on the grounds of economic efficiency or as an excusable practice that is part of the culture of certain countries have been discredited by evidence. So have defeatist positions that suggest that corruption cannot be fought in isolated sectors or that corruption in poor countries is simply unavoidable.
Many NGOs and private sector institutions have launched campaigns that are directly aimed at stemming illegal activities and corruption in the forest sector. By exposing illegal and corrupt activities, these campaigns have effectively increased awareness of their economic, environmental and social consequences and have triggered action to combat them. In other initiatives, such as those concerning certification, the fight against illegal and corrupt acts is implicit but not less important.
In the fight against illegalities and corruption, words, rather than real action, frequently dominate. However, some governments have the necessary political will for translating words into action and reducing the incidence of illegal activities and corruption in the forest sector. The fight against crime and corruption includes such elements as the creation of stronger monitoring and enforcement systems; more transparent decision-making processes; simpler laws that reduce regulation and the discretionary power of individual government officers; much more severe punishments; and, above all, the effective involvement of civil society and of progressive private sector corporations. Such reforms need to overcome the resistance of entrenched and powerful vested interests. Some governments, with the support of NGOs and responsible private sector institutions, have made significant headway in overcoming this resistance. Keeping in mind the global values of forests, support from the international community should be secured for countries engaging in such an enterprise.
30 The Transparency International Corruption Perceptions Index lists only one developing country among the 20 least corrupt countries, while there are 14 developing countries (including several forest-rich countries) in the group of the 20 most corrupt nations. See www.transparency.de/documents/cpi/2000/cpi2000.html.
31 See reference in footnote 30, p. 91.
32 G8 comprises the world's seven most industrialized nations and the Russian Federation.