3. The Potential of Commercial Forestry to Reduce Poverty

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3. The Potential of Commercial Forestry to Reduce Poverty

GARY DUNNING
THE FORESTS DIALOGUE

Introduction

Global poverty is one of the most pernicious and complex challenges of our time. It is also a leading root cause of many other forms of human suffering and conflict. More than ever before, the global struggle to reduce poverty to bringing together leaders from all sectors, which in turn in generating many new ideas and major initiatives. Within this dialogue the forest sector may have much to offer in terms of offering solutions to the problems which need to be addressed.

Forests can, and do, provide vital “safety nets” for those living in and around them. But can forestry truly lift people out of poverty by providing a steady, stabilizing income stream? The answer, of course, is yes, but much needs to happen for this prospect to be fully realized by the poor on a wide scale. The Forests Dialogue’s (TFD) initiative on forests and poverty reduction seeks to maximize forestry’s potential to reduce poverty. Through convening international multi-stakeholder dialogues, TFD facilitates the sharing of strategies and experiences to catalyze the formation of partnerships and motivation to realize forestry’s full potential in reducing poverty.

This paper explores the early work on the potential of commercial forestry to aid in the reduction of poverty. Particular emphasis will be places on the enabling environment and drivers for pro-poor forestry, as well as serious obstacles ahead.

Background

The mission of TFD is to create an ongoing international platform for leaders to discuss key issues related to achieving sustainable forestry. Several years ago, the role of forests in reducing poverty was added to TFD’s list of key issues. Since then, TFD has developed an initiative on understanding how to maximize commercial forestry’s potential to reduce poverty. While it is obvious that traditional commercial forestry can be very profitable. TFD’s initiative explores effective pro-poor strategies and seeks to identify models that facilitate a higher percentage of profits reaching the hands of the poor within forest-dependent communities.

Early on in the development of TFD’s forests and poverty reduction initiative, it became apparent that despite strong interest from key stakeholders, little information or case studies were available on this subject. To fill this gap, and assist in focusing subsequent discussions, TFD enlisted the help of a leading scholar on the issue, James Mayers of the International Institute of Environment and Development (IIED) in the United Kingdom. Mr. Mayers surveyed existing literature and IIED’s vast experience, and wrote a paper aptly titled “Poverty Reduction through Commercial Forestry: What evidence? What prospects?”

The paper provided a firm foundation for our first dialogue convened in South Africa in June 2006, which brought together nearly 30 experts. It was a great start and yielded passionate discussion among the participants. This paper highlights what TFD has learned so far in this process and how we intend to incorporate this knowledge to catalyze pro-poor forestry in the future through this initiative.

Poverty

Poverty is a very complex and deeply entrenched reality in nearly every society throughout the world. It is clearly one of the primary root causes for much of the human suffering and conflict that we see today. So beyond the simple moral imperative to do something about this pervasive problem, we have many more self enlightened reasons for working to reduce poverty. For the forest sector to tackle poverty, we must also work to understand it in all its complexity. Poverty is not simply a lack of employment or stable income. It can involve a lack of assets like land or education, or lack of access to infrastructure like roads and sanitation, or basic services like healthcare. Most importantly, poverty can involve a lack of rights or a voice to address these challenges. If we are to reduce poverty through action in the forest sector, we must factor in each of these complex variables and root causes as well.

The forest sector is perhaps better placed than any other sector to help lift people out of poverty. Forests are an amazing and resilient resource. If we look at some of the poorest nations on earth we find that many are forest rich. In these areas, forests have always played a vital role as a “safety net” for those living in and around them. It is therefore no wonder that so much attention and innovative research has gone into better understanding this relationship and how to further increase the benefit or forests as safety nets for poor people.

Income from timber, on the other hand, has been given little attention by the forces working to reduce poverty. This lack of attention needs to be addressed as we move forward to find solutions within the forests sector which lead to poverty reduction and improved livelihoods.

Potential of commercial forestry

Is this lack of attention on the potential of timber to reduce poverty warranted? Can commercial forestry actually reduce poverty? Has it pulled people out of poverty so that they do not slide back in? It has in places where the conditions are right, but the existing evidence is not very strong. We need to do more to fully understand this relationship between timber production and poverty reduction.

Anecdotally, we know that commercial forestry can be pro-poor. It can take people beyond subsistence to sustained income, and it can serve as a vehicle for increasing access to infrastructure and facilitating access to rights. As such, it can provide a route out of poverty. On a macro-level we know that commercial forestry has a significant impact on national economies. The commercial forestry sector contributes between 5 and 10% of GDP in some countries (Steele and Kragt 2006) and comprises an average of 3% of exports (FAO 2005). The big question that needs to be addressed is how much of this income reaches the poor in such a way that it reduces poverty. World Bank fugures suggest not much. Income from non-wood forest products (NWFPs) play a larger role for individuals, living in or near forests at 22%, compared to just 2% of income derived from timber (Vedeld et al. 2004). There is clearly not enough data available on this subject, but it is clear that more income to the poor can and should come from timber.

Well-conceived, pro-poor commercial forestry projects would certainly improve not only family income, but could also address other roots aspects of poverty, such as access to markets, land tenure security, workers rights, development of skills, development of infrastructure and good governance. A strong commitment to pro-poor commercial forestry would also lead governments to better address issues like the collection and equitable distribution of revenues and the curbing of illegal logging.

Pro-poor forms of commercial forestry

There are several forms of pro-poor commercial forestry. The first is focused solely on public forests and government’s ability to manage them effectively in order to effectively capture revenues. The emphasis intrinsic to this form of pro-poor forestry is the reinvestment of capture revenue into mechanisms that directly benefit local communities and the forests. Unfortunately, progress here appears to be relatively weeks.

Another common form of pro-poor forestry is based on out-grower schemes. This is generally where companies develop contracts with local, small landholders to produce fiber or timber to be processed at the companies’ mills. These schemes are important, widespread and appear to be contributing to reduce poverty. In South Africa these schemes provider US$ 130 per ha per year, or roughly 20% of what is needed to be above the poverty line (Mayers 2006). There are several obstacle to entering such out-grower schemes, such as actually owning or possessing land upon which to grove and harvest forests products, and being able to negotiate fair contracts with large companies on your own. These schemes also have a tendency to favor plantation systems over natural forests.

Small and medium forestry enterprises (SMFE’s) are yet another form of pro-poor forestry that has had considerable attention and study of late, including several important several important publications from IIED (Mendes and Macqueen 2006, for example). SMFE’s can represent up to 80% of the forestry in a country (Mayers 2006). They offer great potential to bring people out of poverty. In rural areas they may be one of the few options available to people for meaningful income generation. They can help to disperse walth and power, particularly in regions that support multiple SMFEs. However, it is a volatile and fragmented sector, where on average 75% of enterprises fail in the first three years (Mayers 2006).

Finally we have larger scale company-community partnerships that may have various elements from all of the above, but are typically driven and designed by the companies, often to meet their corporate social responsibility commitments, which may have as an objective to be pro-poor. There are few examples and even fewer studies of the impact of these projects to pull people out of poverty. Some ready examples include Mondi’s and Sappi’s initiatives in South Africa, Klabins work in Brazil, and Stora Enso’s efforts in China. These projects present the greatest unknown potential and deserve further study. The key drivers in these projects are partners with clearly articulated ideals, direct involvement by the poor and negotiated benefit sharing. This is the form of pro-poor commercial forestry that The Forests Dialogue will invest considerable time and energy on in the future.

Enabling conditions

Policies that favor the poor should also favor pro-poor commercial forestry. With recent attention and action by governments this seems more feasible. Macro-level changes such as forest sector restructuring initiatives or land restitution efforts offer the opportunity to rethink the best means and mechanisms for commercial forestry to favor the poor.

The continued development of strong community structures, as well as the formation of small holder and labor organizations, will help to enable equitable corporate and community partnerships to develop. For instance, the International Labor Organization’s core labor standards provide important tools for workers and communities to engage in self organization and promotion. Such initiatives will help to ensure a relative balance of power at the negotiating table.

The formation of strategic partnerships among key stakeholders improves knowledge sharing and understanding, and it builds empowerment and trust. Strong and equitable social partnerships are important for promoting pro-poor policies and for maintaining a corporation’s social license to operate in both develop and developing countries. It is certainly in a corporation’s long-term interest to ensure win-win relationships which are productive and stable.

Also important is a broad awareness and understanding of the multiple issues which can impact on the success or failure of pro-poor commercial forestry, such as an understanding of the underlying causes of poverty, the potential of pro-poor forestry and models that offer tested solutions.

Key drivers

There are number of key driver or motivators that favor the development of pro-poor commercial forestry. Most importantly, it needs champions. Chief among these are leaders with broad networks that can articulate a clear vision and the means to achieve it. It also takes bright and innovative doers, those that will test models, monitor progress and adept to their findings.

One of the most important motivators is strong market demand for a region’s forest products and relatively easy and open access to markets. For non-traditional pro-poor partners such as corporations and private sector investors, there need to be strong motivations for them to enter into these sometimes risky partnerships with the poor. Rural development for community stability or a social license to operate can be powerful motivators, but there are many others that need to be explored and fully understood.

Measurable progress is perhaps the most important motivator. However, this requires clear goals from a forest sector point of view, a strong articulation of social standards as they relate to forestry, measurable indicators, baseline livelihood data and continuous monitoring. Unfortunately, none of this currently exists in any comprehensive form.

Finally, incorporating standards of pro-poor forestry nto existing forest certification schemes may be an effective way to incorporate incentives for pro-poor commercial forestry. This will require careful design and study, but there is potential for this to drive pro-poor commercial forestry forward.

Barriers

Unfortunately, there appears to be more barriers than incentives, which currently limits the scale and spread of pro-poor forestry. These barriers need to be fully understood and actively addressed by all concern stakeholders.

From the communities to companies to government, there is a need for a better understanding of sustainable forest management and its potential to reduce poverty in rural areas. Misguided policies often act as a disincentive for the poor or companies to enter into pro-poor commercial forestry projects. Building capacity within government can help prioritize pro-poor forestry at the highest levels. Improving capacity in communities will help with organization, empowerment and business skills. And companies will need to build their capacity to work with the poor and improve their understanding of the issues surrounding this topics.

The sheer scale of forestry favors large operations. Costs of basic services, capital investment, access to land, environment impact assessments, and technical forestry advice all conspire to keep pro-poor commercial forestry out of reach of the communities that are in need of it the most. In addition, limited access to financing is a difficult barrier for many rural poor to overcome. Direct government and donor agency support, enactment of pro-poor policies that remove market access barriers, and the development of creative financing mechanisms could help with these issues.

There are of course many other barriers that need to be further analyzed and explored. For example, the fact that timber-related income tends to be seasonal at best, and that there can long delays from planting to harvest make this an unsteady, erratic and potentially high-risk business for many rural poor. The high cost of market entry is another barrier that poor individuals must take into account in their decision making. Other disincentives include the threat of illegal operators, unfair markets, irresponsible producers and lack of demand of socially and environmentally responsible products. These and other possible barriers need to be fully identified and understood.

Moving forward

Despite the formidable barriers and the time it will take to understand and overcome them, there are enough positive trends and real potential to convince many that pro-poor commercial forestry warrants a major push to scale up. We must start with comprehensive, collaborative and suitable strategies to build more pro-poor commercial forestry programs. Among other things, this will take more research and baseline data so as to demonstrate progress over time. In addition, there is a need for good pro-poor business models that can be easily understood, adapted and replicated. And for all of these it will be necessary to build strong, equitable cross-sector partnerships.

There are a variety of means to address these needs. TFD intends to do this through multi-stakeholders dialogue, development of best practices and standard, monitored trials on the ground and the crafting of a charter demonstrating the commitment of individuals and organization to support pro-poor commercial forestry. If you or your organization would like to join this initiative please contact The Forests Dialogue Secretariat, at info@theforestsdialgue.org.

References

Food and Agriculture Organization of the United Nations, 2005, State of the World’s Forests 2005. FAO, Rome, Italy.

Mayers, J 2006. Poverty Reduction through Commercial Forestry: What evidence? What prospects? The Forests Dialogue Research Publication Series, No. 2. Yale University School of Forestry and Environment Studies, New Haven, CT. (available at:www.theforestsdialogue.org/South%20Africa%20poverty%20dialogue.htm)

Mendes, A. and D. Macqueen, 2006. Raising forest revenues and employment: unlocking the potential of small and Medium Forest Enterprises in Guyana. Small and medium forestry enterprises series No. 12, 2006. International Institute of Environment and Development, London, England.

Steele, P. and M. Kragt, 2006. Growth and poverty reduction: What is the role of forests? Prepared for Environment and the Poverty-Environment Partnership. Draft February 2006.

Vedeld, P., A Angelsen, E. Sjaastad and G. Kobugabe Berg, 2004. Counting on the Environment: Forest Incomes for the Rural Poor. Environmental Economics Series No. 98, 2004. World Bank, Washington, D.C.

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