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Executive Summary

This paper presents an overview of the various approaches that developed and developing countries have used in designing national forest funds. It is based on a study of legislation in over forty countries and a review of some of the few empirical studies of forest fund performance. The overview may serve as checklist of issues and options for policymakers who are designing funds. It also may illuminate ongoing discussions about appropriate international roles in forest financing.

The paper presents some of the common arguments for and against the use of dedicated funds. Understanding these may help improve fund design.

Finally, this paper describes some likely future roles for funds to promote sustainable forest management.


What is a National Forest Fund?

As used here, the term "national forest fund" does not refer to a specific model, but instead describes a constellation of approaches. In their most basic form, forest funds are designed to set aside a portion of national revenues for forestry purposes. They exist for more than a single government budget cycle, segregating specific forestry-related revenues and earmarking them for investment in the forest sector. Starting from this basic model, there are many variations.


The Range of Variations

Forest funds vary with respect to their organisation, income sources, uses, and oversight.

Organisation. The simplest funds are little more than entries in the account books of the government, under control of the forest or finance ministry. More complex funds may have separate institutional structures, such as a separate agency to administer the fund or a separate advisory board. In some nations, the institution administering the fund is partially or fully independent, perhaps existing as a corporation or trust. Rather than co-ordinating spending on a national level, some funds are decentralised spending entities, holding money for local management units or communities.

Income Sources. Funds may draw income from general government revenues, sales from government forests, forest-related taxes, forest law enforcement, donations, fund-supported projects, loans, and innovative fees tied to forest environmental services. Some funds take income from a broad range of these sources while others specialise on a narrow range.

Uses. Many funds support government activities in the forest sector. They may support general administration of the forest bureaucracy. They may support management of public lands, perhaps including land purchases. They may support government actions for the general benefit of the forest sector, such as market promotion, research, public education, insect and disease control, and fire fighting. They may support public participation in government forest policy activities.

Funds can also directly support private and community forestry. They can finance reforestation and afforestation, management planning, and plan implementation. Some funds make payments to promote non-commodity uses of forests, such as production of environmental services.

Funds can also support other private activity. Some funds promote forest-based manufacturing. Some support economic development of forest communities.

Oversight. Fund legislation may create mechanisms to protect the integrity of the fund. These may include requirements for transparency, advisory boards, record keeping and accounting, or regular auditing.


Main Arguments For and Against National Forest Funds

The common arguments in favour of forest funds include these:

Funds can help meet needs for long-term investment. Sustainable resource development requires long planning horizons. Funds can serve as a surrogate voice for the interests of future generations.

Funds can shield the forestry sector against the fluctuations and unpredictability of national budgets. They can insulate forest programmes from changing political winds and compensate for the traditional economic undervaluing of forests and the political weakness of forest constituencies.

Funds can help stimulate more effective forest management by government agencies. By creating a pool of money that will not be forfeit if unspent at the end of a budget cycle, they encourage more efficient spending. They can also be designed to free forest administration from rigid bureaucratic rules.

Funds can allow for greater oversight of forest spending. By isolating forest funding, setting up record keeping requirements, and requiring independent audits, a fund can make bureaucracies more accountable.

The common arguments against forest funds include these:

Funds can trap capital in the forest sector. In some nations, it would be better to invest forest income to develop other sectors.

Funds can prevent ideal allocation of government budgets. They exempt forests from competing fairly for scarce government funds.

Funds can transmit misleading economic signals to bureaucrats. For example, funds that generate income from commercial activities on government forests may lead managers to undervalue environmental services. Funds that guarantee a base income to forest agencies can weaken the incentive to spend that income wisely or can give government budget makers an excuse to cut support to forestry from general revenues.

Funds may invite corruption. Keeping money outside the normal budgeting process may increase opportunities for illegal diversion or mismanagement.


Future Roles for National Forest Funds

Too little research has been done on the performance of funds to give definitive guidance on fund roles. However, some ideas embodied in existing fund legislation stand out as models for constructive use of funds.

Funds can be tools for decentralisation and devolution of forest management. National funds can channel assistance to sub-national governments and communities. Alternatively, multiple local-level funds can assure a stable base for local forest initiatives. Funds can also promote decentralisation by support of public participation in forest policy making or by support of community forestry.

Funds can encourage private sector initiatives. They can support industrial forestry or non-industrial forest landowners. They can tap economies of scale to provide goods or services that individuals acting alone would find difficult or expensive to acquire.

Funds can increase accountability and transparency. Funds can involve stakeholders outside the government in fund administration, require that forest spending follow public plans, and require regular independent auditing of that spending.

Funds can promote the production of environmental goods and services. Forests produce non-commodity goods like clean water and carbon sequestration. A fund can capture the value of these goods through taxes or fees on the beneficiaries, or in the case of carbon sequestration, through innovative systems of property rights. A fund can then return that value to forest owners. By effectively internalising economic externalities in the case of these non-commodity goods, funds can tap market forces to encourage more sustainable forest management.

Summary Table: List of Fund Legislation Reviewed



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Fund of the Directory General of Forest and Pasture

Reserves a percentage of revenues from government forests to support forest-related activities.


National Fund for Forest Development (FONDOBOSQUE)

Reserves revenues from multiple sources for forest projects.


reforestation fund

Uses income from a reforestation tax for reforestation projects.


Carajás Forest Fund

Private regional fund that assesses fees on pig iron manufacturers (industrial charcoal users) to fund creation of plantations to sustainably produce charcoal.


Concessions Cost Recovery Fund

Reserves a portion of the income from concessions to cover administration costs.

Burkina Faso

Fonds forestier

Holds donations and other income for use on forest, wildlife, and fishery projects.


Fonds Spécial de Développement Forestier

Formerly took money from multiple sources; now apparently takes money from annual budget allotment to use for forest purposes.


Forest Resource Improvement Association of Alberta

Quasi-public provincial entity that collects forest-related dues, levies, and fees and spends them on reforestation and forest management.


Forest Renewal BC (British Columbia)

Quasi-public provincial entity that receives a portion of forest royalties from Crown lands and spends on environmental, economic, and social projects related to forests.

Congo (Brazzaville)

Fonds d’aménagement et des ressoures naturelles

Receives income from multiple sources; finances work in forestry, wildlife, and aquaculture.

Costa Rica

Forest Fund

Receives income from multiple sources; spends on forest administration and other activities promoting sustainable forest development.


National Forest Financing Fund (FONAFIFO)

Focusing on small and mid-sized landowners, the fund takes income from various sources including a hydrocarbon tax. Can reimburse forest owners for provision of environmental services.


simple biological reproduction account

Collects a portion of income from timber sales plus the proceeds of a general tax on industry (representing value of environmental services) for financing reforestation.


National Fund for Forest Development (FONADEF)

Promotes activities to conserve and develop forest resources, particularly inventories, management, protection, and research.


communal forest funds

Individual funds for each communal forest receive income from forest produce to finance forest management.

Dominican Republic

Special Fund

Receives income from multiple sources, including the sale of special postal stamps; spends on conservation of forest resources, reforestation and agroforestry, fire and disease prevention, and extension work.


Forest Trust Fund

Receives income from donations and from compensation for environmental services; spends on sustainable forest development in priority areas.


Fonds Forestier National

Takes income from a tax on forest products and supports research, tree nurseries, forestry promotion, public education, public sector afforestation and forest protection, and private afforestation.


National Forestry Fund

Receives income from multiple sources for protection, development, and sustainable use of forests and promotion of community forestry.


Special Forest Fund

With income from multiple sources, the fund is spent on forest development, industrial forestry, management of natural forests, agroforestry, watershed restoration, reforestation, research, agroforestry education, and other purposes.


Fonds Forestier

A general forest development fund tapping several forest-related income sources.


Reforestation Fund

Gets income from a tax on logs, chips, and other raw materials; spends on reforestation, plantation development in non-productive forests, and rehabilitation of other lands.


Forest and Forest Resource Development Fund

Receives income from national budget and other sources; may be spent on a broad range of forest activities, including public education.


Forest Fund

Receives all fees collected under the Forest Act; may be spent on forest management and research, including assistance to private and community forests.


Forest Fund

Receives income from state forests plus forest-related fines and penalties; spends on state forest management and administration.


Fonds Forestier National

A special account under private management.


Forest Development and Management Fund

Receives income from multiple sources; spends on forest management with emphasis on working with local communities.


Forest Development Funds

Individual funds created in each state. Receive income from various sources and spend on state forest management and administration.


Fonds National de Développement Forestier

Receives income from taxes and fees and spends on reforestation and forest protection.


Forest and Wildlife Development Fund

No specifics given in statute.


user group funds

Participants in community forest programs keep funds that receive income from forest activities, donations, and government support; to be spent on forest management and community development.


Forest Trust Fund

Receives income from assessments on transfers of forest products. The money collected must be used to benefit the forest from which the forest products originated.


Special Deposit Revolving Fund

Receives income from forest-related fees; spends on various forestry projects.


Fonds forestier national

Receives income from sales of forest products from government forests, plus other sources; spends on government forest projects and on support to private and community forestry.

Solomon Islands

Forest Trust

Receives income from multiple sources including forest-related fines, license fees, and levies; spends on tree planting and tending, reforestation, and other purposes.

South Africa

National Forest Recreation and Access Trust

Specialised fund dedicated to recreation; notable for public participation and transparency provisions.

Sri Lanka

Forest Department Fund

Specialised fund devoted to law enforcement activities such as paying rewards and compensating forest officers injured in the line of duty.


Tanzania Forest Fund

As proposed in draft law, the fund would be a semi-independent trust, getting income from various sources and spending on forest development, including education, research, and community forestry.

Tanzania (Zanzibar)

Forestry Development Fund

Income from various sources to be used for a broad range of forest projects; fund establishment requires approval of Finance Ministry.


[fund for sylvo-pastoral development]

Supports private and collective efforts to improve forests and pasture lands outside of the State’s forest domain.

United States

Knutson-Vandenberg Fund

Takes receipts from timber sales on national forests and dedicates them to forest management and environmental projects in the forest generating the income.

Reforestation Trust Fund

Takes income from tariffs on imported solid wood products to fund reforestation and stand improvement on public forests.


Rural Fire Disaster Fund

Assists sub-national governments with forest fire fighting.


Land and Water Conservation Fund

Takes income from offshore oil and gas royalties and supports purchase of public lands by national and sub-national governments.


America the Beautiful Act

Example of establishment of urban tree-planting fund administered by independent NGO.


Woodland Incentive Program fund (Maryland)

Taxes land transfers to support small landowner forest management.


Chesapeake Bay Trust (Maryland)

Takes income from donations and sales of special automobile licence plates; supports reforestation to improve water quality.


Forest Resource Trust (Oregon)

Supports private lands reforestation in return for share of any future forest income; also markets resulting carbon sequestration.


Forest Fund

Receives income from various sources; spends on loans to forest land owners and light industry, forest land purchase, and public forest management. Spending follows long-term plan.


Forestry Fund

Receives forest-related government income, general revenues, and donations; spends on forest plantations, afforestation, and reforestation.


Forest Regeneration Fund

Receives income from a fee charged on all harvests; spends to plant new forests, restore damaged forests, and manage and protect existing forests.


Forest Revenue Fund

Receives income from licences, fees, and concessions.


Forest Development Fund

Promotes the wood processing industry and afforestation and reforestation programmes within the forest sector.


Fund for Joint Forest Management

Supports local forest management efforts.


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