Forest economics and finance
Sustainable forest management programme in African ACP countries: review and reform of fiscal policies affecting forest management
(EC-FAO Partnership Programme (2000-2002) - Project GCP/RAF/354/EC)
Fiscal policies include the collection of taxes and charges by the government and government expenditure. Fiscal policies in the forestry sector and in other sectors have a major effect on sustainable forest management because they affect the profitability of forestry and other land uses. Therefore, as part of the EC-FAO project on sustainable forest management in Africa, countries have been invited to review their fiscal policies in order to examine how well they support sustainable forest management and to make recommendations for fiscal policy reform.
In most African countries, fiscal policies in the forestry sector include a range of charges or fees for the use of forest resources and direct expenditure by the government on forest management and policy implementation. Such policies can have both positive and negative impacts on forest management. On the positive side, they can subsidise the production of social and environmental benefits (e.g. biodiversity and watershed protection) or penalise the production of undesirable outputs. However, on the negative side they can also have unintended effects that are detrimental to forest management.
In general, the charges collected by governments from the forestry sector are very low. The aim behind setting such low charges is usually to stimulate domestic employment and industrial development. However, this can reduce the incentive to invest in better forest management, encourage waste and poor harvesting practices and reduce the amount of revenue collected from the sector. Government expenditure on forestry is also generally very low. In many countries, the government owns the majority of forest resources and this low level of expenditure results in very little investment in sustainable forest management.
Fiscal policies in other sectors can have even larger effects on forest management than fiscal policies in the forestry sector. The sectors with the most impact on forestry include: agriculture; mining; energy; transport; and infrastructure development. In these sectors, fiscal policies often affect forestry by subsidising competing uses of land and the conversion of forest.
The overall objective of this project is to assist national forestry administrations to direct their policies and institutions towards the goal of sustainable forest management. Under this component on fiscal policies, the specific objectives are as follows:
- to review the current status of fiscal policies affecting the forestry sector in countries and to make recommendations for fiscal policy reform;
- to identify barriers or obstacles to reform and suggest how these might be overcome; and
- to share experiences between countries in terms of successes and failures in fiscal policy reform.
Most project activities have been implemented by national and regional institutions in Africa, with technical assistance and guidance from FAO. Activities have included workshops and the production of reports in the following main areas:
Country reports. Country reports have been produced that review the main fiscal policies (within and outside the forestry sector) that have an effect on forest management. Country reports have been produced for over thirty countries in Africa. A synthesis paper has summarised this information for all countries and estimated total revenue collection and government expenditure in the sector.
Thematic reports. Thematic reports have investigated some of the most important aspects of fiscal policies in greater detail. Some of these reports have synthesised all of the information collected from countries on one topic, while others have analysed a particular topic in greater detail in one country.
Case studies. The project has supported more detailed work in four case study countries (Namibia, Nigeria, Senegal and Sudan). This work has attempted to help these countries to implement their recommendations for fiscal policy reform. This has been done by supporting further research and analysis and workshops on fiscal policy reform.
Workshops. Workshops have been held to discuss the findings of the country reports and case studies and to develop feasible fiscal reform proposals for countries in the region to consider. The final activity will be to present this information to a panel of regional experts.
Workshop proceedings. Workshop proceedings include copies of country papers presented at the workshops plus a record of the discussions and conclusions reached at the workshops. A regional workshop has been held to discuss and compare fiscal policies across Africa and workshops have been held in some case study countries to examine the scope for fiscal policy reform in more detail.
Thematic and country reports. Thematic and country reports include the contributions of experts working in the African forestry sector on the topic of fiscal policy reform. Country reports have examined the level of charges, total revenue collection, total government expenditure on forestry and the policy and institutional arrangements for revenue collection and government expenditure. They have also proposed recommendations for fiscal policy reform. The thematic studies have investigated a number of topics in greater detail, including; revenue sharing; fiscal policies in other sectors; governance; trends in revenue collection and expenditure; and charges on the production of non-wood forest products.