KRISHNA ACHARYA
DEPARTMENT OF FOREST RESEARCH AND SURVEY
NEPAL
SUSHANTA ACHARYA
LIVELIHOODS AND FORESTRY PROGRAM
NEPAL
The main forest management strategy of Nepal, based on forest dependent peoples’ participation, is known as community forestry (CF). This approach was formally introduced in the late 1970s to encourage active participation of local people in forest management as a means to improve livelihoods. Since then, a strong legal and policy framework has been adopted to secure local people’s rights and access to forests. By 2006, community forestry had grown to involve one third of all households in the country. Under the community forestry program, local people decide on forest resource management and utilization and distribution of benefits to community members. Local people are organized into Community Forest User Group (CFUGs). The Community Forestry Program in Nepal is one of the most recognized success stories for community-based forest management.
The primary motive for promoting community forestry initially was its potential to provide basic forest products such as firewood and forage to rural people, to improve their livelihoods, and to preserve the hills of Nepal from further degradation (Acharya 2002; Malla 2000). The promotion and implementation of CF in Nepal significantly affected the life of many people in the rural areas of Nepal. The CFUGs that have been established in many communities are concerned with sustainably producing a wide variety of forest products based on local demands (Branney 1996). By 2006, about 14,500 CFUGs are involved in forest management, silvicultural operations, utilization of resources and the marketing of various forest products.
With its advancement, community forestry has been recognized increasingly as a viable means for poverty reduction in Nepal (Kanel 2004; Gentle 2000). The tenth government periodic plan specifically mentions CF as an approach to address rural poverty in Nepal. During the fourth National Workshop on Community Forestry, there was extensive debate on how community forestry can contribute to poverty reduction. Secure access to resources, and the recognized decision-making authority of the poor in the management and utilization of community forestry for equitable benefits sharing were the major challenges identified (Kanel 2004).
The community forestry policy of Nepal is regarded as a progressive method for establishing rights of local people over forest resources; however, the promotion of forest-based enterprises has been limited. Recently, more CFUGs are initiating poverty alleviation activities, helping to establish community forestry as a recognized pro-poor program. The main areas of intervention include the promotion of income generating activities and establishment of concessions for forest products distribution. The income generating activities include domestication of non-timber forest products (NTFPs), support to livestock production, and establishment of Forest-Based Small-Scale Enterprises (FBSSEs). The recent focus of FBSSEs is on the promotion of NTFP domestication, linked to the establishment and management of NTFP-based enterprises (Subedi 2006; Binayee et al. 2004). Subedi et al. (2002) argued that forest-based enterprises have the potential to contribute to better management of natural resources, along with providing income and employment opportunities to poor and disadvantaged groups. A considerable amount of information has been gathered in the past on NTFP-based enterprises. However, evidence suggests that a large proportion of benefits is captured by outsiders, especially middle men (Sharma 2003), and the poor are not always able to fully exploit the opportunities available from community forestry.
The development of small scale enterprises based on the existence of local resources, local skills and local markets could be a good option for poverty alleviation. Subedi (2006) believes that enterprise-oriented community forest management can generate positive outcomes for both conservation and local livelihood development, while Angelsen and Wunder (2003) identified small-scale wood processing enterprise development as a high priority area for poverty alleviation. This paper brings together information that is currently available from two wood based FBSSEs in Nepal and examines their impacts on forest management and livelihood development.
The first case study describes a furniture enterprise, located at the Bharkhore CFUG in Parbat district. The second highlights an Agricultural Implements Production Enterprise (AIPE) located at the Ghorlas CFUG in Myagdi district.
Case study 1: Furniture enterprise, Parbat
Establishment
A series of meetings and discussions were convened in the Bharkhore CFUG to initiate activities to improve the livelihoods of the poor, where different households were identified to initiate a range of household based activities. During this process, five households and the CFUG agreed to establish a furniture enterprise. The criteria for the selection of households were the wealth category of the household, the possession of traditional skills and a willingness to participate. The CFUG formed a furniture sub-committee to implement the establishment of the furniture enterprise. The decision to establish the enterprise was forwarded to the district level network of the CFUGs, known as the Federation of Community Forest Users, Nepal (FECOFUN). FECOFUN helped to identify a bilateral donor, the Livelihoods and Forestry Program (LFP), which agreed to support the enterprise development. The District Forest Office (DFO), Parbat that analyzed the prospects of such an enterprise facilitated the overall process. A business plan was prepared, including analysis for such an enterprise based on current furniture supply and demand.
The furniture enterprise was established in 2004. Out of a total investment of NRs. 57,800 (approximately US$ 780), LFP supported NRs. 35,800 (US$ 480) as a grant. The grant was used to purchase equipment such as a small circular saw, planer, electric motor, etc. The CFUG provided NRs. 10,000 (US$ 135) in the form of a non-interest loan and additional raw wood supplies equivalent to NRs. 6,000 (US$ 80) to start the enterprise. The remaining NRs. 6,000 (US$ 80)of the total investment was supplied by the entrepreneur households.
Products and production mechanism
The enterprise mainly uses round logs, saplings and poles as input materials. There are four types of products from the enterprise: two main products and two by-products. The main products are house construction materials and furniture, while firewood and saw dust are the by-products generated during processing: i) the customer brings raw material to the enterprise, which then produces the requested products and charges for the service; ii) the furniture enterprise provides its services by visiting the customer's house and produces the requested products on site; and, iii) the customer places an order for the products and the enterprise produces and delivers. In all three instances, the enterprise sets the price for the products or the rate of the services provided.
The average annual maintenance cost of the enterprise for the past two years, including the annual lease for land, electricity charges and workshop maintenance, is about NRs. 20,000 (US$ 270). The raw material consumption is 6–8 ft3 per day, varying from a minimum of 2 to a maximum of 20 ft3 per day (< 1m3). The past two years of data show that a significant proportion of species processed are from outside the Bharkhore community forest, either originating from adjoining community forests or from private lands. The primary species used during the past two years was as follows: sal (Shorea robusta) 30 %, sallo (Pinus roxburghii) 40–50 %, utis (Alnus nepalensis) 20 % and others (chilaune- Schima wallichii, katus - Castonopsis spp, and sisso - Dalbergia sissoo) 10 %. It should be noted sallo is not available within the CFUG area and is being imported from other parts of the country.
Employment and income
The enterprise has generated year-round employment for four individuals and one additional skilled employee outside the community. Since the establishment was supported by grant from the donor, income was realized immediately and has since risen sharply. The monthly average income for the past 24 months was NRs. 10,000 (US$135) per household for four households after deducting the monthly payment of NR 6,000 (US$81) to the outside employee (one household of the original five dropped out of the enterprise). The total income from the furniture enterprise during the past two years is NRs. 720,000 (US$ 9,730). The earned income has been used to pay back loans received by the entrepreneur prior to establishing the enterprise.
Forest management and the enterprise
The CFUG has adopted a regulated harvesting system which is defined in the operational plan. The forest is divided into five blocks and each block is harvested annually. The system allows a steady supply of forest products to the community and ultimately to the enterprise. In addition, an increasing availability of plantation trees is also contributing to the supply of raw materials to the enterprise. The harvesting mechanisms, such as sectioning of logs, has been carefully applied so as to reduce waste and maximize recovery during processing. Production from nearby community forests and private farms also supplies significant amounts of raw material to the furniture enterprise.
Record keeping and monitoring
There are provisions in the community regulations that require the enterprise to update its record of inputs and outputs monthly, which the CFUG then has to monitor. The record keeping system is currently very poor, with only a few instances where monthly records have been updated and maintained. The entrepreneurs have not felt that formal record keeping is important, as it was not required in their traditional jobs. The CFUG also has not been able to conduct the required monitoring and enforce the requirement. A contributing factor to the poor record keeping is the low literacy levels of the participating households. However, the households involved generally believe that the enterprise is profitable and doing well.
Reasons for success
The main reasons for the successful operation of the furniture enterprise are as follows:
The furniture enterprise demonstrates a multi-party partnership modality for developing a FBSSE within a CFUG. The enterprise consists of five major stakeholders: individual households organized into a CFUG, a sub-committee, LFP (donor), consumers of forest products, the CFUG and FECOFUN. The main reasons for its success are the employment opportunities, earned income, the fact that repayment of the entrepreneurs' loan can be made after production of the furniture, and an almost immediate realization of earned income and savings. In addition, the furniture business is going well and is perceived by local consumers as providing a needed service, which can be regarded as a positive indicator. The FBSSE is based on local resources, local skills and a local market, all of which are easily accessed.
Case study 2: Agricultural implements, Myagdi
Establishment
A household-based AIPE was established by the Ghorlas CFUG in the year 2004. Four poor farmers having traditional skills were encouraged to engage in the commercial production of agricultural implements. A simple informal business plan was developed that described the households involved, existing supply and demand, operation of the potential market, cost estimates, and the procedure for formation of a sub-committee. The plan recognizes that it is real challenge for farmers to secure traditional agricultural implements, such as ploughs, during the planting, growing and harvest season. The plan indicated that the local forest resources, local market and local skills necessary for the enterprise were available, but there was a lack of motivation to fill the market need. To overcome this inertia, the CFUG provided various types of support, from facilitating the initial establishment to the marketing of the products once they were being produced. The DFO and the LFP supported the creation of the FBSSE by providing financial assistance. A sum of NRs. 3,600 (US$ 49) was provided to each household to support the purchase of tools necessary for producing the agricultural implements. In general, the cost associated with purchasing tools and subsequent maintenance is lower than the financial assistance provided by the DFO and LFP. The average purchase price for one set of tools required for establishing an AIPE is NRs. 1,500 (US$ 20). The main equipment in the set includes an axe, saw, sharpener and hammer. One set can prepare hundreds of finished products, while regular servicing and maintenance is provided by the farmers on site with limited or no additional costs other than the time and labor involved.
Products and production mechanism
The CFUG operational plan prescribes provision of deformed or crooked trees and other wood materials to the AIPEs for product production. The AIPEs primarily use logs and saplings, which the CFUG directly provides along with other wood at a rate of 60 ft3 (1.7 m3) per year per entrepreneur at half the price that other users must pay. In addition to charging the reduced rates, the CFUG has coordinated with two nearby CFUGs for necessary raw materials to support the AIPEs.
There are six different products being produced. The local names of these products are halo, juwa, danda, mohi, lidko and anau. The aggregate of these components make a complete set of traditional agricultural equipment for a family farm. The size of these implements varies from lengths of 75 cm to 250 cm, so their production does not require long or large-sized raw wood materials. The preparation of these products with their specific size, shape and structure requires a great amount of skill however. These skills have been handed down from generation to generation. The past two years of production by the entrepreneur households is presented in Table 1. The quantity of the various products produced varies significantly from one farmer to another. The reasons for this discrepancy include the willingness of the individual to produce the products combined with their ability or skill at marketing their services and products.
Table 1: Quantity of production during the past two years
|
Name of the entrepreneur |
Kinds of products and quantity produced in the past two years (number of implements) | |||||
|
halo |
juwa |
danda |
mohi |
lidko |
anau | |
| Purna |
250 |
25 |
30 |
10 |
2 |
25 |
| Jeet |
150 |
10 |
12 |
2 |
1 |
0 |
| Dharma |
120 |
5 |
10 |
3 |
0 |
0 |
|
Nara |
100 |
5 |
6 |
7 |
3 |
0 |
|
Total |
620 |
45 |
58 |
22 |
6 |
25 |
Pricing mechanism and marketing
The price for each of the products has been fixed by the CFUG and not by the entrepreneur. The CFUG-regulated pricing system is intended to make the entrepreneurs accountable to other members of the CFUG, while fixed pricing avoids problems related to the development of monopolist pricing, facilitates the selling of products outside the CFUG, and creates a perception among all community members that the benefit from this enterprise development is not limited to only a few households. One complete set of products costs NRs. 1,140 (US$ 15), the price of which has been constant for the past two years. The prices of the products are generally less expensive than before establishment of AIPEs, and CFUG members benefit from easy access to these necessary products so there is no interruption in agricultural production during critical times. There is no problem in finding a market for the products, as they are being sold based on advanced booking directly at the entrepreneurs’ homes. The customers are from the CFUG and neighboring villages. As an example of the ready market demand, the average farming household in the region requires 1–3 halos each year.
Employment and income
The creation of the AIPEs is a major source of additional income and employment to the farmers involved, though agricultural wages are still regarded as the primary source of income. The production of the products takes place within the household during leisure time. The data are encouraging, as they clearly illustrate that these FBSSEs are increasing household incomes. As shown in Table 2, the income generated is substantial and illustrates that AIPEs can lead to poverty alleviation in other locations.
Table 2: Earned income during the past years (NRs.)
|
Name of the entrepreneur |
halo |
juwa |
danda |
mohi |
lidko |
anau |
Total |
Total in US$ |
| Purna |
50,000 |
3,750 |
6,000 |
1,500 |
600 |
375 |
62,225 |
841 |
| Jeet |
30,000 |
1,500 |
2,400 |
300 |
300 |
0 |
34,500 |
466 |
| Dharma |
24,000 |
750 |
2,000 |
450 |
0 |
0 |
27,200 |
368 |
|
Nara |
20,000 |
751 |
1,200 |
1,050 |
900 |
0 |
23,900 |
323 |
| Total |
124,000 |
6,750 |
11,600 |
3,300 |
1,800 (6) |
375 (25) |
147,825 |
1,998 |
| Total in US $ |
1,675 |
91 |
157 |
45 |
24 |
5 |
Forest management and the enterprise
The production of raw wood from the CFUG is regulated by the operational plan and excessive removal is restricted. Silvicultural activities are regularly implemented as prescribed in the OP. Beyond the 60 ft3 (just under 2 m3) of subsidized wood provided by the CFUG to the entrepreneurs for production purposes, additional quantities are purchased from the neighboring CFUGs, which have been coordinated by the CFUG. Similarly, the entrepreneurs are free to collect raw materials direct from private tree growers or local markets. The AIPE demonstrates an opportunity to provide employment and generate income in rural areas that contributes to poverty alleviation while sustainably managing forest resources. This illustrates that good forest management and poverty reduction can go hand in hand.
In addition, the establishment of the AIPEs has had other positive forest management impacts. While previously there was little thought to what types of saplings were planted or how they were used, now the CFUG members recognize that certain species are in demand based on implement production needs. There is now a preference for planting species which will be used by the AIPEs, such as chilaune (Schima wallichii). This is also true for thinning and coppice management. It is safe to say that the CFUG members have a greater appreciation for these species that are now in demand, and it is being reflected in the OP. For example, chilaune is only allowed to be supplied to the AIPEs, unless the quality is inadequate for their use.
Processing of logs has become far more efficient, as illustrated by greater recovery rates, which is a direct result of the AIPE establishment and increased demand for specific wood products. While one round log used to produce only one agricultural implement, the introduction of rectangular sawn wood methods means that one log can be used to produce several products. The use of sawn wood also led to an improvement of the quality of products being sold due to reduced warping.
Record keeping and monitoring
The entrepreneurs and the CFUG are maintaining good records on the types of products being produced, the quantity of each product being produced, income generated, and the production times involved for different products. This has created a good database of information from which conclusions can be drawn and lessons learned.
Reasons for success
The main reasons for the successful operation of the AIPE enterprise are as follows:
This case study illustrates that FBSSEs that produce goods from locally available resources, using local skills, where there is the presence of a local market for the products have a high chance of success with proper support. It clearly demonstrates the potential of community forestry to develop and maintain FBSSEs through linkages with active forest management. The AIPEs also demonstrates that very small- scale enterprises can be commercialized. The success of these enterprises has been replicated in several neighboring CFUGs. Additional benefits include increased knowledge and appreciation by CFUG members of specific species in demand, increased efficiency in wood production to better supply the commercial activity, and improved availability of necessary farming implements for those in the immediate region which leads to savings in time and money.
The forest-based small-scale enterprise establishment initiatives of local communities may need strong moral, technical, institutional and financial support from the facilitating agencies. In both of the case studies examined, the enterprise-establishment process was initiated by the CFUGs, but the achievements were reached with the support of various other stakeholders. The furniture enterprise establishment was guided by the economic motivation of the entrepreneurs supported by the CFUG and facilitated by the forest users’ federation, DFO and LFP. The AIPE was a demand-driven initiative from the CFUG, with support and facilitation by the DFO and LFP. While there can be differences, the FBSSE establishment process and procedures can generally be summarized in the five steps presented in Table 3.
Table 3: Steps and main activities in establishing an FBSSE
|
Step |
Descriptions |
Output |
|
Identification of entrepreneurs |
Small group meetings to identify those with necessary skills, interest and willingness |
Entrepreneur households selected |
|
Identification of enterprises |
Forest products or species locally available, local skills available, local market present, resources for startup available |
Selection of proper enterprise |
|
Preparation of business plans |
Formal or informal, supply-demand market analysis, marketing plan, funding needs, identification of key stakeholders, defining roles and responsibilities |
A simple business plan developed and support funds secured |
|
Enterprise establishment |
Combine resources and develop an enterprise for processing |
Enterprise established |
| M&E |
Continuous support to stakeholders, including monitoring and evaluation based on good record keeping, for an extended period to ensure success of the FSSBE while also ensuring sustainable management of local natural resources. |
Continuous improvement, successful FBSSEs, livelihood development, poverty alleviation, and natural resources sustainably maintained. |
Investment, employment and income
The investment amount required depends on the nature of the enterprise being established. The furniture enterprise required a higher start up amount (NRs. 57,800 or US$ 780) compared to the AIPEs (NRs. 3,600 or US$49 per entrepreneur). The furniture enterprise created five full-time employment positions, while the AIPEs created part-time employment for five households. The total earned income from the furniture enterprises was NRs. 720,000 (US$ 9,730) during the past two years, while the four AIPE households earned NRs. 147,000 (US$ 1,990). The AIPEs require no full-time work positions, and all the income generated from AIPEs during the past two years is additional income to the entrepreneur households. Similarly, out of the income generated by the furniture enterprise, NRs. 288,000 (US$ 3,890) was additional income to the entrepreneur households (they estimated that they would have earned NRs. 432,000 – US$ 5,840 – as skilled labor if there was no furniture enterprise). The additional amount earned in both cases illustrates the significant potential of FBSSE promotion as support to poverty alleviation and livelihood development in association with community forestry. The enterprises in the case studies are providing employment and generating income in rural areas, indicating that good forest management and poverty reduction can go hand in hand. The commercialization of the AIPEs shows that forest management should not be considered in isolation, but should be linked with existing or traditional livelihood opportunities and farming systems that promote the use of local materials and skills, with a focus on providing employment to poor and vulnerable groups.
Raw materials and production
Both of the case study enterprises use wood as a raw material. Although the major source of raw material is community-managed forests, enterprises are utilizing resources from private lands and national forests. The main products from the furniture enterprise include house construction materials and different kinds of furniture, while firewood and saw dust are by-products generated during the processing. The APIEs produce at least six different kinds of agricultural implements used on local farms.
Market characteristics
Both of these enterprises target their goods and services to local markets. The furniture enterprise has faced competition from five or six similar private enterprises, while the AIPEs are selling their products as pre-ordered items sold directly from the household, with only those farmers who still make their own tools representing competition. The prices charged by community-based enterprises, as illustrated by the case studies, may be fixed by the entrepreneurs or by the CFUG in the operational program.
Nature of enterprises
Both enterprises are processing natural materials using low-tech, low-cost production techniques. The furniture enterprise can be classified as a workshop model employing relatively higher numbers, while the APIEs are operating at the household level as defined by Arnold (1994). The AIPE households are operating independently, while the furniture entrepreneurs are working as a unit.
Key stakeholders and roles
The community-based FBSSEs have five key stakeholders in both instances. These include the CFUG, DFO, LFP (donor), local people and the entrepreneurs. The willingness and commitment of the entrepreneurs are fundamental requirements. There should be a strong institutional, financial and material support from the CFUGs. The facilitation and institutional support of the DFOs and the LFP, along with the financial support from the LFP, were instrumental for success. The overall support from general members of the CFUGs, combined with positive attitudes of all involved, is essential for building a strong foundation. A simple conceptual model for FBSSEs is presented in Figure 1 below.
Links with forest management
The case studies indicate that local people are able to modify their forest management practice in response to raw material demands. The system allows a steady supply of forest raw materials to the CFUGs and ultimately to FBSSEs. In addition, an increasing number of plantations are also supplying raw materials to the enterprises. The CFUGs can support such enterprises through supplying a set quantity of subsidized woody material to them. In this way CFUGs can also create a favorable environment for obtaining wood materials from neighboring CFUGs and private tree growers.
Figure 1: Conceptual framework for FBSSEs
Silviculture and species preferences: In the earlier years of community forestry, users gave little attention to beneficial aspects of various species while selecting seedlings for planting, generally using whatever species was available. However, the utilitarian benefit of the species is now the main criterion in selecting species for planting. During the removal of the plants in silvicultural operations, priority is now given to maintain and promote species such as chilaune (in the Myagdi case study), which is regarded as the best species for the production of agricultural tools.
Promoting private tree planting: A large number of plant species are maintained on the farms in the hills of Nepal. The FBSSEs have encouraged the planting or maintenance of selected tree seedlings on private land, while the CFUGs have established forest nurseries to promote private tree planting in order to supply the enterprises in the future.
Wood utilization: Harvesting methods, such as the sectioning of logs, have been carefully applied to reduce waste during processing and increase recovery rates. Modifications have resulted in the use of rectangular sawn wood, which means one log can produce several agricultural products as opposed to one, and one sapling can produce several logs in the future.
Policy and management implications
The development of policies in support of sustaining FBSSE development and related poverty alleviation must ensure that the policies have the intended results. Current policy issues include regulations that discriminate against the harvesting of various tree species on farms, requirements that place unreasonable costs or regulatory burdens for the transportation of products, location requirements for forest-based enterprises and registration processes that impede the development of FBSSEs, and other issues.
A thorough review of existing rules and regulations should be conducted to analyze how they impact on FBSSE development and operation. In this way any rules and regulations that have a chilling effect on the creation and profitable operation of such enterprises can be addressed in order to ensure the full poverty alleviation potential of community forestry in Nepal.
The case studies illustrate that the promotion and implementation of FBSSEs can affect the livelihoods of many people in the rural areas of Nepal, underscoring the relevance of community forestry in reducing poverty. The initiatives encompass a wide range of activities supporting the production of value-added forest products that range from subsistence-based agricultural implements to furniture enterprises. The case studies indicate that wood-based enterprises have an important place in the ongoing development of community forestry and local people are able to modify their management of forests to sustain the enterprises once established. Local market demand, local skills and local raw materials, combined with strong institutional support, are critical for successful FBSSEs. The selection of the right entrepreneurs and enterprise options, along with continuous follow up and counselling, are basic requirements for success.
Local people primarily benefited from the forest-based enterprises through entrepreneurial development, rather than as employment-wage laborers, which was the tendency in previous practice. Unlike other enterprises that utilize non-timber forest products, there is no room for middlemen to absorb most of the profits, due to direct local marketing and processing. There are easy and direct linkages between the suppliers of raw materials, the producers of the final products and the consumer. This has reduced the marketing chain and increased local benefits.
For the full benefits of these enterprises to be realized, there is a need for policy advocacy in favor of this concept in conjunction with promotion of community forestry, with a focus on disadvantaged and poor communities. In addition, the agencies and stakeholders facilitating FBSSE development process should initiate feasibility studies to properly identify appropriate enterprise development in each community forest. The support staff needs orientation on appropriate attitudes for working with the poor. The scaling up of best practices, based on experience and lessons learned, is equally important.
Finally, the existing primary fund collection mechanism in the community forestry program originates from rather limited earned income from the selling of low-value forest products such as firewood and timber to community users at subsidized prices. The benefit-sharing mechanisms of these funds do not allow income to pass as a direct benefit to individual households, and the majority of funds allocated for purposes that would not generally be classified as pro-poor activities. The provision of immediate and direct household-level benefits to the poor and vulnerable groups, which would lead to the significant reduction of rural poverty, is possible through the promotion of appropriate FBSSEs in community forestry programs.
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