21 March 2017 - chathamhouse.org
The UK Department for International Development’s (DFID) new Economic Development Strategy, published at the end of January, sets out an ambitious but pragmatic agenda for international development, focusing on investment in sustained, job-creating growth which will help countries move beyond the need for aid. On the UN’s International Day of Forests, it is a good time to showcase the role that UK leadership in tackling illegal logging and improving forest governance is primed to play in delivering this strategy.
For nearly two decades, DFID has shown remarkable global leadership on forests and a willingness to innovate that is rare among donor institutions. The results of that leadership and innovation have included increased sector transparency and accountability, to improved livelihoods for famers and forest-dependent people.
This fits well with the Economic Development Strategy’s stated ambition to create an unprecedented increase in the number and quality of jobs in poor countries and enable businesses to grow – as the strategy document notes, this requires more accountable and open governance, tackling corruption and helping governments raise their own revenue.
Other elements of DFID’s approach to forest governance also chime well with the strategy’s goals. The strategy includes references to tackling illegal logging, promoting sustainable palm oil supply chains, job creation in manufacturing, enabling smallholder farmers to tap into global value chains and focusing on increasing trade as an engine for poverty reduction. The strategy also notes a shortage of private and public investment in the world’s poorest countries.
Under DFID’s alignment of trade and aid policies, the UK private sector has already shown itself willing to embrace the legal trade and to establish new, lucrative trade relationships in forest countries that have invested in reform – allowing for value-added manufacturing in the UK. It has also meant more, and safer, jobs and improved livelihoods in these forest countries, with the incentive of market access in the EU and UK for wood exports – the latter alone worth L462 billion in 2016. To give one example, in Indonesia, a country in which the UK has provided significant investment for forest sector reforms, small scale producers have reported increased market access and profitability.
It is important to highlight these synergies because much of DFID’s work has been aligned at the European level through the FLEGT – Forest Law Enforcement, Governance and Trade – Action Plan, published by the European Commission in 2003, which set out a list of policy measures aimed at harnessing the power of the European market for timber to deliver forest governance improvements in poor tropical forest countries. When the UK leaves the EU, the main policy mechanisms of the action plan will remain with Brussels, so it is vital to consider how this leadership in the forest sector can continue to feed into the UK government’s broader trade and development goals.
Before the FLEGT Action Plan was developed, responsible European importers had invested in forest certification and also moved away from tropical timber, while being undercut by those willing to buy illegal timber. At the same time governments in many forest countries averted their eyes from illegal logging as well as inefficiencies and inequities in the sector, appearing to view the forest sector as, at best a very long hot drive from the comfort of the capital city, and at worst a fruitful rent seeking opportunity.
Key to the UK’s political commitment to investing in forest governance was a World Bank estimate that illegal logging in public lands alone caused losses in assets and revenue in excess of $10 billion annually, more than six times the total official development assistance dedicated to the sustainable management of forests. And as much as $5 billion was lost annually to governments because of evaded taxes and royalties on legally sanctioned logging.
The main mechanisms of the FLEGT Action Plan were therefore designed to support developing country governments to reform their forest sectors, improving transparency and equity through broad-based political processes and establishing tax collection systems and transparent supply chains, with access to the European market as the ultimate incentive.  
In practical terms, DFID’s investments to date have included support for: countries to clarify and reform the legal and institutional frameworks for the forest sector; civil society monitoring to reduce corruption and enhance government accountability; national timber tracking and revenue collection systems, and satellite monitoring of forests to improve law enforcement; and capacity building for small- and medium-sized forest enterprises to help them comply with the laws of the ‘formal’ sector. Complementary to this, significant support has also been given to promoting a legal and sustainable tropical timber market, through both voluntary and regulatory means, in the UK.
As DFID’s strategy notes, ‘Britain is redefining and reinforcing its place in the world… seizing new opportunities to be more outward-looking than ever; to strengthen international partnerships; and to build new relationships across the globe. DFID’s focus and international leadership on economic development is a vital part of Global Britain - harnessing the potential of new trade relationships, creating jobs.’ Investments in tackling illegal logging and improving forest governance have a head start on many sectors, where delivering improved transparency and accountability will be challenging without a regulatory framework which creates the necessary incentives for reform.
These investments need to be built on, to ensure that the forest sector continues to contribute to sustainable growth. At the same time, the valuable lessons that have been learnt need to be transferred to agricultural and other sectors, to speed their progress towards legal and sustainable trade. Jade Saunders, Alison Hoare