Mafa E. Chipeta is Senior Forestry Officer. Policy and Planning Division. FAO Forestry Department.
This article is based on a paper prepared for the Denmark/South Africa/UNDP Workshop on Financial Mechanisms and Sources of Finance for Sustainable Forestry, held in Pretoria, South Africa from 4 to 7 June 1996. It presents perceptions of the main opportunities and constraints to funding forestry development for Asia and the Pacific, Africa and Latin America and the Caribbean. These perceptions were derived from a series of regional studies carried out by FAO. The Organization believes that, in the current search for innovative ways to increase funding for forestry, beneficiaries' preferences and perceptions of bottlenecks should not be ignored, as they may offer useful insight for designing better funding priorities and approaches than those currently in place.
The natural forests of Asia and the Pacific already support the world's most dynamic tropical timber Industry
FAO has carried out questionnaire surveys for Asia and the Pacific (1993), Africa (1995) and Latin America and the Caribbean (1996). These surveys were carried out for the Organization's intergovernmental Regional Forestry Commissions, under the auspices of which special seminars on funding have been organized. The seminars have offered senior forestry officials (Commission participants are heads or senior representatives of national Forestry Departments) an opportunity to share experiences and ideas of how to attract funding for forestry development. The results of the FAO enquiry have been discussed by the relevant regional commissions, and reports on Asia and the Pacific and Africa are now available (FAO, 1994 and 1996).
In all three regional studies, FAO sent questionnaires to governments, and to donor and multilateral funding agencies, requesting figures on domestic as well as foreign funding from both the public and private sectors. There were three main areas of thrust in the surveys: the magnitude of overall funding flows (both domestic and foreign); fields of funding; and perceptions of opportunities and constraints. This article focuses on the third aspect.
The response rate from governments was best for Africa while, from donors, it was best for Asia and the Pacific. In all cases, an incomplete response means that there are some weaknesses in the results but, nevertheless, the perceptions identified through the studies give an indication of the views of beneficiaries, who were the main questionnaire respondents.
Responses were received from seven developing countries and one developed, four donor countries from outside the region, and eight international agencies.
The Asia and Pacific region holds great potential for forestry investment. Its natural forests already support the world's most dynamic tropical timber industry; timber plantations in temperate countries of the region have also attracted heavy industrial investment and further resources development. Among the main opportunities identified were: creating new forest or tree resources, particularly in heavily populated and highly deforested countries - including investment by rural people in tree growing in farming systems and in small-scale processing enterprises; new plantations to increase timber supplies; processing of non-wood forest products such as rattan for higher domestic value added; and infrastructure to support tourism based on forest and wildlife resources.
The Regional Forestry Commission's seminar on investment felt that constraints to investment originate primarily from inappropriate policies, poor institutional capacity and difficult procedures, whether on the part of aid recipient countries or donors.
It highlighted three key problems faced by many developing countries of the region: the low business orientation of forestry administrations, bureaucratic delays and unsuitable tenure policies, laws and practices. It also noted the shortage of viable and well-prepared projects that are able to compete successfully for scarce investment funds with non-forestry projects. In abbreviated form, other factors affecting investment in many developing countries include: a lack of or the inbality of policies to encourage private sector participation; institutional inadequacies (including skill shortages); a lack of incentives; weak economic conditions and inadequate infrastructure; environmental policies (e.g. those discouraging investment in forest utilization); political or social instability; and uncompetitive wage and other input costs.
Farmers and rural communities (who have a cumulatively important investment potential) suffer, on the one hand, from interim cash flow problems before the eventual harvest of tree products and, on the other hand, a lack of access to the equivalent of farm credit in forestry.
Regarding donors and external agencies, the seminar felt that their policies, priorities and procedures were sometimes applied too rigidly and with inadequate attention to recipient countries' circumstances. Futhermore, by funding only areas that they themselves consider a priority, donors contribute to lopsided development. Other problems identified were the relative neglect of productive forestry owing to a focus on socially or environmentally oriented projects and the fact that donors often target only the poorest as beneficiaries, thereby leaving unattended some other good investment opportunities.
In Africa responses came from 29 countries, the highest number among the three regional surveys. Only one donor, the African Development Bank (AfDB), provided information, and therefore the results predominantly reflect the views of beneficiary governments.
According to questionnaires received before the seminar, the main perceived opportunities were: forest industries, trade and forest products utilization; forest conservation and wildlife protection and forest plantations. Strong concern was expressed that heightened environmental awareness and interest in conservation of biological diversity (where forests can play a major role) are not reflected in increased forestry investments.
In formulating its forest policy, the AfDB suggests areas of opportunity, including the following: i) the development of industrial raw material sources to reduce strain on tropical hardwood log supplies; ii) fuelwood supply; iii) agroforestry development; iv) forests for environmental protection; v) processing capacity expansion; and vi) training and other institutional capacity strengthening.
The key constraints agreed on by the funding seminar of the African Forestry and Wildlife Commission can be paraphrased as follows:
· funding is generally not adapted to the long-term nature of forestry;
· forestry is perceived by funding sources to be less attractive than competing claims for funds (owing to incomplete valuations of forestry's multiple benefits);
· forestry is not properly "marketed" or convincingly presented to politicians and other constituencies so as to gain their support;
· efforts to attract investment by all interest groups, especially the commercial private sector, are limited;
· policies are often outdated, inadequate or conflicting and are not conducive to investment;
· weak institutions;
· inadequate national political will and commitment to forestry, including failure to have forestry as an essential part of national development plans;
· low budgets for forestry, often worsened under rigidly enforced structural adjustment programmes;
· poor coordination among main players, including donors or funding agencies.
In questionnaire replies, respondents had highlighted the lack of capital for investment and a lack of skills in project preparation and presentation. Other constraints not already included above were a lack of incentives and support for foreign investors, inappropriate land tenure policies, poor infrastructure, small domestic markets and currency devaluation.
Following the Asia and the Pacific and African experiences, specific efforts were made to reach the private sector in Latin America and the Caribbean but with only a limited response. Twelve developing countries responded, along with two donor countries, three development banks and a regional project and there were five responses from the private sector.
The main perceived opportunities appeared to be: plantations in general, both for protection and production; wood processing industries (new establishments or modernization): sustainable forest management; and non-wood forest products utilization, including wildlife-related business (especially ecotourism). Other suggestions mentioned included technology improvement, urban greening, forest management by municipalities and biological diversity protection.
It is worth mentioning that development banks particularly emphasized plantations for protection, community forestry and biological diversity conservation, all fields that were seldom proposed by the countries.
For the public sector, constraints that were repeatedly mentioned included: an insecure policy environment and poor procedures for investment; land tenure problems; a low preference for forestry by high-level governmental authorities; budgetary and funding (including credit) restrictions; a lack of technical knowledge of sustainable forest management and of information on investment and market opportunities; weaknesses in project formulation and implementation; and poor infrastructure.
For the private sector, the major perceived constraints were: the absence of a clear forest land tenure policy; the lack of a natural resource use policy including "unjustified" environment-related harvesting restrictions; a lack of or a poor system of fiscal incentives and weak public administration support; inadequate infrastructure and equipment (spare parts); complex legislation and bureaucratic regulatory arrangements; a lack of marketing, and poor efforts - if any - to promote, locally and worldwide, potential uses of tropical forest products (including lesser-used timber species); and poor credit availability to small farmers and rural communities.
For the donors and development banks that responded, the following constraints were pointed out: a "volatile" policy environment that increases the risk level for long-term investments; weak public institutions; inadequate knowledge by the private sector of international markets, including new ones for "green" forest products; a lack of incentives in general and particularly for sustainable management.
The opportunities and constraints highlighted in the seminars vary from region to region as might be expected; however, some similarities exist. In terms of opportunities, there is in all regions great interest in forest resources development, including plantations in particular. The balance between a focus on conservation versus production forests varies. Apart from this, there is a significant divergence: Africa and Latin America and the Caribbean, for example, give great importance to forest industries. It may be noted that the external community, including development banks, tends to favour conservation and almost no one specifically gives priority to forest industries.
In Latin America, forest plantations, both for wood and for other products, hove been identified as important sources of forest development opportunities. Pictured is a banana plantation in Costa Rica
With regard to constraints, it is assumed that a shortage of funding itself is an underlying concern in all regions; in the case of Africa, it is explicitly given as the primary preoccupation. However, among shared perceptions of constraints, those to be highlighted in particular are: the inadequacy or instability of policies, laws and regulations as a major barrier to funding; specific mention has been made in most cases about land tenure and policies on incentives. There is also a common feeling that decision-makers favour other sectors over forestry - in the case of Africa, the feeling is that this is due to poor "marketing" of the sector to those who make decisions and those who can invest. Institutional weaknesses are also commonly perceived to be a hindrance to funding and investment. Also often mentioned is economic and political uncertainty.
It is noteworthy that while policy and institutional constraints to funding receive priority, capacity building is not placed highest among the opportunities for funding or investment.
Finding ways to mobilize more funds must clearly be a primary objective for the future. However, appropriate attention to other perceived constraints must accompany action to mobilize funds. A better diagnosis of priorities and constraints will be an important factor in achieving success; improved efforts to match the perceptions of those who provide funds (whether they be domestic sources or external donors) will also require more information.
Thus there is ample justification for continuing to monitor funding flows but also the perceptions of both recipients of funds and providers. FAO studies to date are a beginning. In carrying out these studies, FAO has undergone a learning process and has now reached the stage where future work can yield good results subject to governments, donors and the private sector being willing to provide data. They will do this if they can see adequate usefulness in intercountry sharing of funding information. Without willing cooperation, there can be no future in information systems on the topic of funding.
It may be noted that, so far, FAO has the widest coverage of information on public funding in developing countries. Through its National Forestry Action Programmes Support Unit and its Regional Forestry Commissions it also has a framework with potential to reach almost all countries. In view of this, FAO is ready to play its part in any future initiative for upgrading information on general funding and investment.
FAO. 1994. Report on the In-Session Seminar on Forestry Investment in Asia and the Pacific. Fifteenth Session of the Asia-Pacific Forestry Commission, Colombo. Sri Lanka. August 1993. Document FO:MISC/93/14. Rome.
FAO. 1996. Report on the In-Session Seminar on Funding for Forestry Development in Africa. Tenth Session of the African Forestry and Wildlife Commission, Sanbonani, South Africa, November-December 1995. Document FO:MISC/96/1. Rome.
FAO. 1996. Survey on funding for forestry development in Latin America and the Caribbean. Nineteenth Session of the Latin America and Caribbean Forestry Commission. Panama City, 17-21 June 1996. Document FO:LAFC/96/5. Rome.
FAO. 1996. Survey on funding for forestry development in Latin America and the Caribbean: Tables. Nineteenth Session of the Latin America and Caribbean Forestry Commission. Panama City, 1721 June 1996 Document FO:LAFC/96/5 Supp. 1. Rome.