Previous PageTable Of ContentsNext Page

II. 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. As succeeding sections of this paper will illustrate, there is significant variety — and increasing variety — amongst national funds in terms of their objectives, structure and financing.

In their most basic forms, national forest funds generally share the following characteristics:

They are devices designed to ensure that some portion of national revenues is set aside for forestry purposes.

They are created to exist for more than a single government budget cycle — that is, they are more than just an item in a spending plan that might or might not be repeated in subsequent plans.

Their creation and replenishing usually entail the segregation of a specified percentage or category of forestry revenues (such as fees, taxes, royalties, etc.) from the general treasury and an earmarking of those revenues for reinvestment into the forestry sector. These resources may be supplemented by money from other specified sources, such as government appropriation or international donors.

This "basic" approach is one that is approximated by a number of the countries whose laws were reviewed for this study. The Forest Development and Management Fund created in Malawi’s Forestry Act 1997 provides a typical example. The Fund consists of various categories of payments, including levies on wood felled or extracted by the Forestry Department; sale proceeds of seized forest produce; voluntary contributions; and sums appropriated by Parliament or donated by foreign governments or international agencies. The Fund is administered by the Minister responsible for forestry, and is to be used for "the conservation, augmentation and management of forest resources and forest lands in Malawi." According to one assessment, establishment of the Fund means that Malawi’s Forestry Department now retains up to 80% of the taxes and fees it collects (Landell-Mills, 1999).

But while this basic model may serve as a starting point for discussions, there are many national funds that diverge — often significantly — from this model with respect to several variables. These variables are explored in detail in Part III, below, but it is useful to introduce them here in summary form to help illustrate the breadth of the field with which we are concerned:

National forest funds vary with respect to their structure and governance: At one end of this spectrum, a fund may be nothing more than a segregated account within a government’s budget, required by law to be spent a certain way. At the other extreme, a fund may have an institutional life of its own, as a separate legal entity with an autonomous governing body and professional management (British Columbia’s Forest Renewal BC). In an increasing number of cases, fund-like mechanisms are created as part of the restructuring of public forestry institutions, and the spinning off of some management functions into autonomous or quasi-autonomous agencies that are expected to be at least partially self-financing (Landell-Mills and Ford, 1999).

National forest funds vary with respect to the range of actors they support: Some funds, such as Malawi’s and Lithuania’s, are primarily intended to support the activities of public forest agencies managing public forests. But in other instances, funds may be primarily focused on support to private forest owners (the Forest Trust Fund in Norway, or the Woodland Incentive Program Fund in Maryland, USA); may support a mix of public and private actors (France’s Fonds Forestier; Costa Rica’s FONAFIFO); and, in at least one intriguing case, may be funded by, supportive of and operated by private actors (Brazil’s Carajás Forest Fund). An interesting recent trend is the increasing use of funds for promoting decentralised actors in forest management, such as local governments and community-based organisations.

National forest funds vary with respect to the range of activities they support: Forest fund objectives can range from the simple to the sophisticated. They may narrowly focus on a few activities, such as paying employee rewards and death benefits in Sri Lanka, or may provide a wide-range of financial services to both private and public actors, while also serving to facilitate international investment into national forestry, as in the case of Costa Rica’s funds. Between these two points on the spectrum, there are many variations, as will be described below.

National forest funds vary with respect to the sources of their funding: The "classic" sources of income for national forest funds are forest revenues, earmarked for reinvestment into forestry. However, one finds mentioned in different national laws a wide variety of other potential sources. There are recent examples of funds designed not so much on the principle of reinvesting revenues, but on the principle of "internalising externalities"; that is, capturing environmental values of forests through various "polluter pays" or "beneficiary pays" mechanisms.


One question that arises in attempting to define national forest funds is how they differ from other types of funds that have emerged in recent years, particularly a category of fund usually referred to as "environmental funds" or "conservation trust funds". It is possible to draw some distinctions based on various factors such as historical origins, sources of funding and emphasis.

For example, national forest funds as an approach are older in origin, have typically relied mainly on national revenues and are primarily concerned with channelling the investment of such revenues to ensure greater support for a range of forestry activities. By contrast, environmental funds, as that term is normally used, began to appear in the 1990’s (though their numbers grew quickly --— by one count there were at least forty-six in existence world-wide by 1997, with many more in the pipeline) (Bayon, et. al., 1999). Their funding has been largely international in origin, with debt-for-nature swaps accounting for many of the funds created, and with GEF, the World Bank and other multi-lateral and bi-lateral donors also serving as important sources of capital. While environmental funds often rely to some extent on revenues generated by the activities they support (through user fees, taxes and the like) they are much more likely than typical forest funds to have core start-up funding, frequently in the form of an endowment that is used exclusively to earn interest to generate the fund’s operating capital. The main focus of environmental funds has been on providing support for the conservation of protected areas, or on making grants to non-governmental organisations or civil society organisations for conservation and/or sustainable development projects (Bayon, et. al., 1999). They are therefore less likely than standard forest funds to provide basic support for the ongoing activities of government departments.

On the other hand, many environmental funds do address a number of forest-related issues. Although their emphasis is on forests as providers of environmental services or as biodiversity habitats, rather than on the full range of issues related to sustainable forest management, one could make a case for their inclusion in the extended family of "forest" funds broadly defined. Indeed, as one considers some recent innovations amongst forest funds, the distinction between the two types of funds becomes less clear, and it seems plausible that in the future the lessons emerging from environmental funds may be increasingly brought to bear on the design or redesign of forest funds. In particular, forest funds may increasingly look to environmental funds for lessons on (a) developing more accountable, more inclusive, and more professional governance structures; (b) accommodating the interests of a wider range of stakeholders in forest management, including non-governmental organisations and the private sector; (c) serving as more attractive conduits for international funding into the forestry sector; and (d) serving as focal points for experimentation with innovative financing mechanisms designed to "internalise the externalities" of forest management.

Environmental funds have been the subject of a much richer literature than exists for forest funds. Hence, notwithstanding the occasional difficulties in drawing a clear line between the two types of funds, environmental funds will not be an explicit focus of this paper, though reference will be made to some of the lessons they hold for forest funds



Previous PageTop Of PageNext Page