Current initiatives and futurechallenges to Japan’s timber
Japan’ssector

Krystof ObidzinskiCenter for International Forestry Research (CIFOR)
International seminar for tackling illegal logging
Yokohama, 3-5 December 2007

Structure of the Presentation
1) Current significance of the issue of illegal logging
 How widespread is illegal logging and trade?
 How much money is involved?
 What actors are involved? What are impacts?

2) Overview of the international efforts to address illegallogging
 Strengths and limitations of each3) Japanese efforts to deal with the illegal logging issue
4) Future challenges
 Opportunities for potential engagement of G-8

Forest crime is a global problem, withmajor implications in Asia-PacificEstimated illegal timber production and trade-- Curtin (2007), MoFr (2006):
 $23$23 billion
billion worth
worth ofof timber
timber products
productsareare produced
produced fromfrom illegal
illegal wood
wood
annually
annually 25%
25% ofof globally
globally traded
traded hardwood
hardwood
lumberlumber ofof suspicious
suspicious (illegal)(illegal) origin
origin 30%
30% ofof globally
globally traded
traded hardwood
hardwood
plywood
plywood ofof suspicious
suspicious (illegal)(illegal) origin
origin Illegal
Illegal logging
logging continues
continues toto be
besignificant
significant inin timber
timber production
production in
in AsiaAsiaPacificPacific
 E.g.
E.g. inin 2006
2006 illegal
illegal logging
logging inin
Indonesia
Indonesia estimatedestimated at
at 52
52 million
million m3m3

Illegal logging results in significant
revenue losses in producer countries
Globally, World Bank (2006)
estimates annual losses of: US$ 10 billion in assets &revenues, due to illegallogging on public lands
 US$ 5 billion in government
taxes and royalties, due tolegally sanctioned logging

Illegal logging is a major driver offorest degradation and deforestation
In Indonesia, approximately 2 million hectares is losteach year – and a similar area degraded
Causes include: Logging outside licensed
concession areas
 Logging above approved levels
 Harvesting of protected species
 Unlicensed forest conversion
 Logging in protected areas‘Need-based’ vs. ‘greed-based’forest crime
Key distinction: ‘Need-based’ forest crime is driven by poverty,
and involves small-scale actors seeking to meetbasic needs ‘Greed-based’ forest crime is driven by profit andis highly organized, involving large amounts ofmoney and powerful actors

‘Greed-based’ forest crime –Who’s involved?
Illegal timber mafias include: Military, police, and other law enforcement agencies
 Corrupt forestry officials
 Illegal timber brokers
 Licensed concession-holders operating beyond contract
 Wood processing companies
 Shippers, exporters, customs officials
 Financiers (both formal and informal sector)! These networks are often national and regional in scale

Overview of international efforts toaddress illegal logging
1) Conventional law enforcement
2) Certification / legal verification
3) Green procurement policies
4) Voluntary partnership agreements
5) Regional and multilateral processes

Conventional law enforcement
Periodic ‘crackdowns’ often focus on ‘the little guy
with the chainsaw, not the big guy with the bankaccount’ Prosecution of elite actors israre, and convictions even moreso (e.g. 2% conviction rate inIndonesia)
 Disagreement over the definitionof “legality” between FLE
agencies Police and armed forces areoften directly involved in forest
crime, and judicial systems areweakCertification and legal verification
FSC and other certification systems provide tools forlog tracking and chain of custody assessments by
third parties

Certification is gaining
acceptance, but faces constraints:
 Certification schemes apply
varying definitions of legality
 Certification is often too expensive
for small producers
 Price premiums for certified
products have not alwaysmaterialized Step-wise approach iscontroversial

Green procurement policies
As major purchasers, governments can strongly
influence demand for legal timber products
 Japan’s 2001 ‘‘GreenGreen
Japan’sPurchasing LawLaw’’ A number of EU countries
have implemented similar
policies (e.g. UK, Netherlands,Germany) Legality incorporated as a prepre-requisite Various verification
mechanisms

Japan’s efforts
to address illegal logging
 Introduction in 2001 of ‘Green Purchasing Law’
 Legality (Goho) incorporated as ‘criteria for evaluation’ Guideline for the verification of legality drawn up in 2006
 3 approaches: i) certification; ii) codes of conduct;iii) individual company procedures
 Significant progress to date: 120 industry groups or
6000+ trading companies verified
 Private sector given high level of autonomy
 Questions about the robustness of (third party)
verification

Japan’s efforts
to address illegal logging (cont) Leading role in stressing the urgency over the illegal
logging issue at G8 forum Japan’s leading role in climate change mitigation
process (Kyoto Protocol)
 Generous support for REDD to sustain tropical forests
 Long-standing and continuing support for AFP –information exchange platform on forest governance inAsia-Pacific The world community certainly hope that this willcontinue

Voluntary Partnership Agreements
VPA’s initiated by UK-Indonesia in 2002, now endorsed by
the EU under FLEGT – structured as bilateral agreements
based on producer country legality standards
 Mutually agreed mechanisms
for verification
 BUT, lack of universal
participation creates loopholes Assumes producer govt’s havecapacity & will to assess legality
 Focus on legality, notsustainability or social impacts
 Pulp and paper not included

Regional and global processes
Since 2001, FLEG has facilitated a broad dialogue on
illegal logging and trade in key regions. In Asia-Pacific,
it has been enhanced by Asia Forest Partnership.
 Emphasis oni) inter-govt cooperationii) technical collaborationiii) multi-stakeholder forum

 Very successful at raising
global profile of illegal logging
 But concrete actions limited
 Increasing participation ofChina and Malaysia
encouraging

Future challenges – and potential
opportunities for G-81) Impacts of forest law enforcement on livelihoods
2) Role of law enforcement agencies in forest crime3) Corporate reporting and disclosure standards (inrelation to forestry investment – timber/biofuelplantations)4) Trade liberalization
5) Financial due diligence and anti-money laundering
6) Effective support for REDD

Impacts on livelihoods
Links between illegal logging and rural livelihoods arecomplex, and need to be understood better
 Large numbers of rural poor areengaged in informal timber sector
 Law enforcement can undermine
their livelihood security
 Law enforcement alsodisproportionately targets ruralpoor
Japan’s potential contribution:
help find ways to enablecommunity based timber to enter
major timber markets legallyRole of law enforcement agencies
in forest crime In many countries, the police and military are actively
involved in illegal logging syndicates Formal and informal involvement of security forces in thetimber business often due to inadequate allocations fromthe state budget Efforts to curtail illegal logging ultimately require effective
and professional law enforcement agencies
Japan’s potential contribution: Provide assistance forcapacity building (professionalization) of forest law
enforcement agencies in producer countries

Corporate reporting and disclosure
Improved transparency and accountability for forestry
corporations is critical to ensure operations are fully legal
 Currently no industry standard forreporting on wood sourcing
 UNEP Global Reporting Initiative
provides a useful framework
 Important given the growing investment
in timber and biofuel plantations (e.g.
Indonesia seeks 20 billion for 14 million
ha of new plantations by 2016)
Japan’s potential contribution:
replicate sector-wide the exemplary
conduct of Japan’s pulp and paper
producers e.g. Oji Paper, NipponPaperTrade liberalization
Emergence of WTO and other trade liberalization
initiatives has facilitated global expansion of trade inforest products
 China has fueled much of thegrowth India may be following a similar
growth path
 Legality verification not always
a priority
Challenge for Japan: can its
procurement withstand thecontext where not all the players
are meeting the same standard?

China’s projectedwood demand to 2015

Financial due diligence
Given prevalence of forest crime, banks need improved
tools to ensure they do not finance illegal activities
 Improved due diligence could
strengthen risk analysis andsocial-environmental impact
assessment
 Banks need access to forestry
expertiseJapan’s potential contribution:
greater support for internationaland national (in producercountries) initiatives to combat
corruption and money launderingEffective support for climate change
mitigation through REDD
Given vast financial resources being made available for REDD
programs in countries with poor (forest) governance, donors
need improved tools to ensure they do not finance illegal
activities
 REDD will offer payments per hafor avoided deforestation
 Japan has recently committed $2
billion to this new scheme World Bank’s carbon trade facility
with similarly large resources
Challenge for Japan and other
donors: ensuring that funds areused effectively and responsibly anddo not support illegal activities

Thank you for your attention…