THE PROCESS AND MAIN FINDINGS OF FAO POLICY STUDIES IN AFRICA AND THE CARIBBEAN

Ma Qiang

The reform of fiscal policies in the context of national forest programs in Africa

Currently, FAO is implementing a project on sustainable forest management (SFM) in African ACP (Afrique-Caraîbes-Pacifique—signatories of the Lomé Convention) countries under its Partnership Programme with the European Commission. The project has the overall objective of assisting national forestry administrations to direct their policies and institutions towards SFM effectively.

Under the component "Review and Reform of Fiscal Policies Affecting Forest Management", selected African countries have prepared country reports.

The main objective of the country reports is to investigate the current situation with respect to financing government forestry institutions from revenues collected from the forestry sector and from general government revenues collected from individuals and other sectors of the economy.

Consultants were hired to produce the reports with the supervision of FAO technical staff. A suggested outline was given to guide the preparation of the reports. The consultants were asked to provide information in five main areas:

Revenue sources and amounts—describe and quantify the different charges collected from the forestry sector by all levels of government.

Administration of charges—describe the way in which charges are determined and revised, methods of collection, monitoring and checking.

Total revenue collection—report on the total amount of revenues collected from the forestry sector and their disbursement between different agencies.

Total government expenditure—report on total government expenditure in the forestry sector, including: administration; reforestation funds; direct support to forestry; state forest enterprises; and support to other institutions. Quantify the various sources of finance used.

Analysis of the revenue system—comment on the strengths and weaknesses of the current forest revenue system in terms of the contribution of forestry charges to expenditure in the sector and the impact that it has on SFM. Recommend how the system might be improved to increase revenues and support SFM.

Thirty-seven countries have agreed to prepare reports and 31 reports have been received.

Synthesis of country reports

This paper summarizes the information presented in the country reports. It compares and contrasts the many different ways in which forest revenue systems are designed and implemented and presents some estimates of the total financial flows between governments and the forestry sector.

The regional workshop was held from 13 to 16 November 2001 in Abuja, Nigeria. The workshop reviewed the country papers, and discussed the challenges and strategies for fiscal reform. A synthesis paper was presented at the workshop as well. Ten topics were prepared for group discussions:

Charging for non-wood forest products (NWFPs) and services: What types of charges can be used and what products/services can they cover? What are the country experiences? When and where is charging desirable?

Other forms of innovative financing: What other sources of finance are available to support SFM? How can they be used? What experiences have countries had with such sources?

Collecting charges from large-scale commercial producers: What are the problems with collecting charges from large-scale producers? Where and how have they been overcome and what remains to be improved?

Collecting charges from many small producers: What are the problems with collecting charges from many small producers? Where and how have they been overcome and what remains to be improved?

Fiscal policies in other sectors: What positive/negative influences do fiscal policies in other sectors have on forestry? How have these influences affected forests? How can forestry administrations improve the situation?

Forest funds: What are forest funds and how do they operate? When and where are they appropriate? What experiences have countries had with forest funds?

Revenue sharing and charge collection with communities: When and where has revenue sharing worked well and why? What are the country experiences? How can this be implemented successfully?

Improving service delivery: How can forestry administrations improve forest monitoring and charge collection with their limited resources? What have been the experiences with greater administrative autonomy?

Governance and administration: What are the main types of unacceptable behaviour and poor administration in the forestry sector? What can be done to overcome these problems?

Revenue collection under decentralization: What issues does decentralization raise? How can they be addressed? What are the country experiences?

Main findings

Structure of forest charges

The structure of charges can be as important as the level of charges. It can affect:

- the efficiency of charge collection;

- the way that forests are managed; and

- the benefits of forests to different stakeholders.

Forest revenue systems in many countries try to take this into account by using charges that vary by type of forest, activity, product and type of producer. There are many variations in the way that charges are assessed (e.g. on the basis of area, volume or value).

State forests or forest reserves

The state claims ownership of most or all natural forests in many countries.

Private forests and community forests

Private forests are not common in Africa and governments do not generally collect revenues from production in privately-owned forest plantations. Community control, ownership or management of forests is becoming more common.

Natural forests and forest plantations

Most countries use different ways to assess and collect charges from natural forests and forest plantations.

Generally, it is more difficult to collect charges in the natural forest and the charges used there are more complicated.

Production

All countries use production charges. They are based usually on volume or the number of trees cut. Some countries also use area-based charges.

Conveyance

A few countries have conveyance charges by volume or transport type—mostly for fuelwood.

Processing

Processing charges are also usually a fixed amount per month or year, sometimes based on capacity.

Trade or sale

Charges on international trade are usually based on volume or value. Charges on domestic trade are usually for fixed time periods (e.g. monthly licence fees).

In addition, many countries collect charges at several different stages and producers in some countries have to pay 10 or more charges. Generally, charge structure is very complicated. This may lead to many opportunities for evasion and high administrative costs.

Forest charges may be collected from the production of many different types of forest goods and services.

Fuelwood and charcoal

Roundwood

All countries collect charges on industrial roundwood and most also collect charges on fuelwood production. Usually charges are levied by volume or area.

Processed products

Charges on processed products are mainly charges related to international trade.

NWFPs and services

Charges on NWFPs are also common, but are limited usually to one or two of the most common or commercial NWFPs. They are charged normally by volume or as fixed-fees (e.g. monthly permit fees). Charges for other goods and services are mostly for hunting and tourism. A few countries are trying innovative charges.

Most countries collect charges from a full range of goods and services. However, there may be scope for new types of charges or sources of funding for new and innovative types of goods and services, for example:

payments for carbon storage;

payments for catchment protection;

joint ventures for conservation projects; and

compensation for other uses of forestland.

Many countries try to distinguish between different types of forest user, presumably for socio-economic reasons. Many countries allow subsistence production for free. Some countries recognize different scales of operation and charge less for small producers.

Large-scale commercial producers

Small-scale commercial producers

Artisans

Subsistence production

The different systems are complicated and sometimes confusing. A few countries noted that free user rights sometimes lead to evasion of charges.

Very few countries revise their charges regularly.

Most countries revise charges every three to five years on average.

A few countries revise their charges very infrequently.

If charges are not revised frequently, inflation reduces their real value over time.

There are six main ways to set charges:

Market mechanisms include auctions, sales by tender and sales by negotiation. In many cases, these mechanisms are used for the sale of forest products from plantations.

Residual valuation or stumpage valuation is a method of estimating the value of standing trees, by subtracting the harvesting, extraction and processing costs from the value of forest products (i.e. roundwood or, in some cases, forest products such as sawnwood and wood-based panels).

Another approach to setting forest charges is to try to calculate the cost of replacing the forest resources removed or damaged by producers.

Most countries use more than one of these methods. Very few countries use market-based methods when setting their forest charges. Very few base their charges on values or costs.

According to a comparison of historical trends in real forest charges (1990-1999) and the methodology used to determine forest charges, using methods based on markets, values or costs may result in increases in charges.

There are four processes used to collect forest charges and monitor charge collection:

Roundwood from plantations

In forest plantations, most countries use market-based or replacement cost methods when setting charges. Production volume is measured usually in some detail and charges are paid in advance. Monitoring is sometimes difficult, particularly when low-paid staff are monitoring large sales of valuable timber.

Area-based charges in concessions

Charges based on the forest concession area account for a major share of revenue collection in countries with well-developed forest concession systems (e.g. in West Africa). These charges are paid normally in advance at the start of each year or the start of the licence period.

Volume-based charges for industrial roundwood production

Charges based on the volume of production are the most common types of charge and are used in nearly all countries. Volume-based charges are difficult to implement, because they require detailed and expensive measurement, grading and monitoring of production. Charges may be paid in advance or in arrears and are centralized or decentralized, depending on the country. Legal production is marked often with an official stamp, but monitoring is still difficult. Again, fraud may be a problem.

Charges for fuelwood and NWFPs

Usually, charges for fuelwood and NWFPs are either based on weight or volume of production or flat-rate charges (e.g. a fixed amount per year). Because of the large number of small producers, measurement and monitoring is often difficult, particularly with volume/weight-based charges. Because of the scale of production, more often than not, charges are paid in the field. The costs of collection are often high and the level of charges is low, so the efficiency of charge collection is also often very low.

In all but two countries, total revenue collection has increased over the last decade. However, after adjusting for inflation, revenue collection has fallen in eight countries. Total revenue collection can increase due to higher charges, improved levels of collection or increased production. It is difficult to tell which of these factors have contributed to increased revenue collection.

Revenue collection per cubic metre is an indication of how much the government receives for the use of the resource. This figure is also more comparable among countries that have different levels of production. Revenue collection per cubic meter is variable but generally very low. It is generally highest in countries with a high proportion of industrial roundwood production and exporter countries (e.g. in West Africa). The average is only US$0.19 per m³.

Many countries could not provide information about trends in expenditure. Expenditure has increased in all countries except two, but by less than inflation. After inflation, expenditure has increased in only five countries. Trends in total expenditure are affected strongly by trends in external support.

On average, external support accounts for 35 to 40 percent of total expenditure, but it is very variable. Government expenditure per hectare is variable, but generally very low. To some extent, expenditure in different countries reflects donor priorities and does not necessarily reflect the importance of forests. The average is only US$0.82 cents per hectare.

Forest revenue, net government support and external support are the three main sources of funding. Forest revenue is most important in two countries and net government support is most important in seven countries. In all the other countries, external support accounts for the highest share of expenditure: 26 percent from forest revenue; 33 percent from net domestic government funding and 41 percent from external support.

Revenue is greater than expenditure only in Côte d’Ivoire and the Central African Republic. In all other countries, forest revenue does not cover total expenditure. It does not even cover domestic expenditures.

In many countries, forest revenue systems are complex and not easily understood. This complexity often tries to reflect market value, there is an easier way—use markets. Charges are too low and are not revised frequently enough, which makes SFM difficult. More efficient charges, such as area charges and flat-rate charges should be used.

In many countries, most national funding is spent on staff. This has little effect on SFM. Expenditure is generall y very low, and scarce resources are not spent effectively. Donors focus on investment in SFM but this reflects their priorities and is not sustainable. Countries seem to spend more on forestry where forest revenues are higher.

In many countries, it is unlikely that revenue will ever be enough to support SFM. In such cases, there are three options: privatize; protect; or continue to subsidize. However, there is still much room to improve revenue collection through greater efficiency. Low revenue collection is often a political or institutional problem, not a technical problem.

Part II. Forestry Policy Study in the Caribbean Countries

In 1997, the Division of Policy and Planning of the Forestry Department of FAO, in cooperation with the European Commission, initiated the project "Forestry Policy Study in the Caribbean Countries". The objectives of the study were to contribute to understanding the ways and mechanisms through which forestry policies are formulated and implemented, to describe their general effectiveness and to identify the needs and opportunities for strengthening the Caribbean countries’ capacity in forestry formation and analysis. The study covers 28 countries and territories of the Caribbean region.

This phase included a meeting with the consultants who had been recruited for the preparation of the country reports to ensure uniformity in the preparation of the reports and in the approach for the gathering of information, and to discuss the conceptual framework of research as an additional means of capacity building in the field of forestry policy. The outline for the preparation of the reports was proposed at the meeting.

Reports on forestry policies of 28 countries and territories were prepared between June 1997 and May 1998. An analysis and synthesis of the reports were produced based on the country reports.

The expert consultation was held in Trinidad, between 25 and 28 May 1998. The 28 country/territory reports, together with the synthesis, were the basic working documents of the consultation.

The objectives were to:

present the synthesis, analysis and conclusions of the FAO/EC study on forest policies;

discuss experiences and share information related to forest policy formation and implementation;

analyse the key policy issues confronting the forestry sector;

discuss the ways individual countries responded to key policy issues; and

identify options for forest policies and directions for national and international actions in support of the development of appropriate policies for sustainable development.

The results and outputs were expected to include:

an assessment of the findings and recommendations of the FAO/EC study on forest policies; and

the identification of specific actions at national and international levels to be supported by regional governments and the international community from 1999 to 2005.

The findings, conclusions and recommendations of the study were validated at the expert consultation. Some 50 participants attended the event, representing forestry and governmental planning agencies, international and regional organizations, NGOs, regional development banks and academic centres.

In all countries, there is a feeling that a general land-use policy and plan is a necessary normative framework for the sustainable use of forests. Policies that secure the participation of people are also considered necessary for improving the rationality and equity in granting concessions and in allocating land for forestry purposes.

Sustainable forest management is an important issue in all larger countries. The discussion centres on what are appropriate forest management systems, and the mechanisms for enforcing them. The restrictions on SFM include the lack of information on forests, undesirable selective extraction practices and the use of inappropriate technologies. The low percentage of forest under sustainable management is seen as a major weakness and an undesirable situation.

The pricing of the resource, and in more general terms, forest valuation, securing the compliance of contractors with the terms of contracts and the government’s capacity for securing SFM, are among the specific problems raised in the treatment of the significance of concession contracts.

Important issues prevailing in those countries with relatively rich forest resources are the linkage of national macropolicies with the forestry sector and public investment in the sector. It is felt, for example, that national accounts do not reflect the contribution of the forestry sector to economic development fairly. Moreover, the inadequacy of investment funds for the sector is a major hindrance not only to forestry development, but also to the progress of the nation as a whole.

The need to ensure that governments, while promoting forestry development and conservation, duly protect the rights of indigenous people and communities is an important issue in many countries which cries out for resolution.

The loss of forest cover is seen as one of the most negative results of the lack of institutional capacities and appropriate policies, as is the confrontation between conservationists and those espousing economic development.

Some issues specifically affect small island states. These include the availability and quality of water, the incidence of forest grazing and quarrying and mining. In all these matters, economic, social and environmental dimensions do not appear to have been assessed clearly.

It is evident that most countries of the region possess neither the necessary data nor the capacity to analyse the issues, and to formulate sound policies.

There appear to be three main approaches to forest policy formulation.

The first approach can be found in those countries, in which the methodology is explicit, and in which there are clear and legitimate procedures that define the different stages with regard to inputs and responsibilities in the preparation, analysis and decision-making process of policy formation.

Another approach is characterized by the existence of a set of stages, which begins with the identification of issues and ends with options for solutions. However, the process appears to be less structured than in the first approach in that procedures are less formal and are not always followed in a systematic way. Moreover, the stages are fewer.

The third approach is pursued by those countries that do not seem to possess a formal set of stages for policy analysis at the technical level. When confronted with the need to act on issues, ad hoc procedures are used.

The analysis of the country reports revealed that important progress in implementation and the achievement of goals has been obtained both in countries with a highly structured process and in some without. This, at first glance, might suggest that having a clearly defined process is not a determining factor. The degree of political will appears to be more important in determining successful outcomes. This political will is stimulated to a great extent by the process of policy formulation that is linked to public investment and implementation.

A clear and objective process for policy formation is necessary to maintain the political will. Of even greater importance, the process might be the essential ingredient for creating political will, where it does not exist, by providing sound evidence of the political and socio-economic implications of forestry-related issues. Not least, the process often forces governments to be more transparent and to present the rationality of decisions regarding their positions on forestry matters.

Countries with a less-structured process have a low correlation between the existence of a policy and its implementation, and between the existence of a policy and public investment. Hence these countries seem to be associated with poor quality of issue identification and description. The analysis and selection of options in these countries are mostly presented in a descriptive way, providing very little quantitative evidence of the political, social and economic implications of the various options that have been considered.

Most organizations that deal with forestry are underfunded and experience a chronic lack of personnel and equipment. It is evident that most often the best-qualified officers are concentrated at headquarters. With an almost universal lack of transport, their capacity is not utilized fully. The professional background of forestry agency staff is predominantly in the natural sciences.

The high number of agencies with responsibilities in the forestry sector is a major constraint to the achievement of goals in the sector. As there is little or no coordination of the activities of these agencies, there is much overlapping and a waste of resources. The problem is compounded by the inadequacy of the legislation establishing these agencies.

Effective decentralization of forestry administration, accompanied by the assignment of clear and specific geographical responsibilities and delegation of authority, seems to result in an improvement of performance and management. There also appears to be a positive correlation between the decentralization of forestry administrations and the commitment and response from local communities.

The function of policy analysis is almost totally absent in the structure of the forestry services. Policy analysis, especially when important resources are involved, remains with higher levels of the ministries that host the forestry organizations or with central planning agencies. The creation of specific policy analysis agencies or the creation of units within forestry institutions is an emerging trend. Another emerging approach is the establishment of organizations responsible for the environment, and assigning to them the responsibility for policy analysis and formation.

Policy research being carried out in the region is almost exclusively limited to studies for decision making related to technical issues and problems. The study of the policy-formulation process has been neglected almost completely.

A program approach at the regional level is considered to be the most appropriate way to support forest policy improvement and to address the key forest policy issues in the region. The general development objective of the program is "to enhance national and regional capacity to analyse, formulate and implement forestry policies that help improve people’s well-being and the sustainable management of forests and natural vegetation in individual countries".

The program will have the following main components:

Policy studies

The immediate objective of such studies will be to assist countries in addressing the most urgent issues requiring policy analysis. Under this component, issues, such as land-use planning, feral grazing, tourism and forestry will be analysed and policy options identified. This component will require the collaboration of international agencies with governmental and national experts.

Capacity building

The immediate objective will be to create, in the Caribbean region, a critical mass of policy analysis and the institutional framework necessary for policy implementation, i.e. a regional think-tank on forestry policy. Such improvement in human resources and institutions is expected to develop the capacity for addressing the region’s most urgent needs in forest policy analysis, formulation and implementation. One of the main activities under this component will be the training of government officers and personnel of private and non-profit organizations.

Information strengthening

Modern communication technology will be adapted for the collection, storage and sharing of strategic information and technical documents by governments and experts in the region. Institutional resources available in the region will also be used to conduct research on demands on forestry and to monitor, on a continuous basis, the achievements and performance of the forestry sector in the region.