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I. Introduction

The search for ways to improve the financing of sustainable forestry is taking place on several different fronts simultaneously. Much recent attention has focused on nascent or potential global mechanisms, including carbon funds and various international transfer mechanisms. At the same time, a variety of techniques are also being explored at national levels to increase the magnitude, and improve the effectiveness, of investments in sustainable forest management from both public and private sources (Richards, 1999; Moura Costa et al., 1999).

One group of mechanisms that figure prominently in many current national strategies are specialised funds created specifically to support forest management, frequently referred to as "national forest funds."

National forest funds are not new — in one form or another, they have long been a feature of the institutional landscape in various parts of the world. The United States’ Knutson-Vandenberg Fund dates to 1930 (Rosenbaum, 1993), while Spain’s Patrimonio forestal del Estado was established in 1939 (Fontaine, 1961). France’s Fonds Forestier was created in the mid-20th century as a direct response to the devastation of France’s forest industries during World War II (Liagre, 1997). By the late 1970’s, FAO reported that provisions concerning forest funds were present in the legislation of at least ten Latin American countries (McGaughey and Gregersen, 1988). In the last two decades, there has been a steady proliferation of national funds created by legislation in countries throughout Africa, Asia, the Pacific, Eastern Europe and the former Soviet Union.

This paper provides an overview of the various approaches that both developed and developing countries around the world have used in designing national forest funds. This overview has two inter-related purposes.

First, it is intended to serve as a detailed checklist of issues and options for policymakers engaged in the design or redesign of national funds, or of analogous forest financing mechanisms at all levels. Drawing primarily from a review of national forestry legislation, the paper describes the main structural and operational issues surrounding forest funds, and illustrates the variety of national responses to these issues.

Second, it is offered as a contribution to ongoing discussions about appropriate international responses to the financing predicament facing forestry in many parts of the world. There is increasing consensus that the quest for better international financing mechanisms is in large part a search for more effective national counterparts; that is, institutions at national level with the capacity to absorb, manage, utilise and build upon international investment effectively. An appreciation of national forest funds, with attention to some innovative features that have emerged in recent years, will be an important part of that search.

National forest funds are often the subject of controversy, and as Part IV of this paper reports, there are frequently cited policy and economic arguments both for and against the use of such funds. However, one of the messages of this study is that there is a dearth of detailed, systematic and empirical research into the actual operation and effectiveness of national forest funds. Existing literature on the concrete experiences of national funds is extremely thin, and with the exception of certain examples distinguished by their innovativeness or their notoriety — such as Costa Rica’s FONAFIFO or Indonesia’s Reforestation Fund — national forest funds seldom receive sustained international attention. Indeed, it may well be the case that some of the funds described in this paper exist in legislative form only, having never been funded or put into operation.

Given the current state of available information, therefore, it is beyond the scope of this study to offer detailed findings as to the actual functioning of national funds, their effectiveness in practice, or the quantum of financial resources they handle. Instead, this paper is intended in part to provide a starting point and conceptual framework for future research along these lines.


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