| United Nations | E/CN.17/IPF/1996/19 |
Economic and Social Council
Distr. GENERAL
15 August 1996
ORIGINAL: ENGLISH
COMMISSION ON SUSTAINABLE DEVELOPMENT
Ad Hoc Intergovernmental Panel on Forests
Third session
Item 3 of the provisional agenda*
* E/CN.17/IPF/1996/13.
INTERNATIONAL COOPERATION IN FINANCIAL ASSISTANCE AND
TECHNOLOGY TRANSFER
Programme element II
Report of the Secretary-General
SUMMARY
The present report comprises two sections: the first section discusses
financial mechanisms and the second technology transfer. The report
recognizes that there are limited opportunities to increase funds from
international public sources other than official development assistance (ODA)
to finance sustainable management of forests. Several case-studies quoted
in this report suggest that there is some potential for raising additional
financial resources at the domestic level in developing countries, although
the majority of the developing countries, particularly the least developed
countries with low forest cover, may have limited ability to raise sufficient
funds to finance the activities required to achieve sustainable development
of their forests. External sources of public funds, particularly ODA, are
therefore still needed to finance forest activities as well as to leverage
private sector investment in these countries. Market-based instruments (MBIs)
also need more attention. The private sector is considered an important major
group for investment in sustainable development of forests. Policy reform and
formulation of better incentives to attract these investments might emerge as
one of the priorities in the coming years in many developing countries. For
several types of funds, as discussed in this report, it is of critical
importance to overcome uncertainty and risks related to their investment.
Establishment of an information system to speed up private sector
investment is also considered.
The second section of this report discusses technology transfer as an
important step for developing countries to leapfrog in terms of managing
their forest resources on a sustainable basis, and of developing
competitive and more efficient forest industries. The majority of
technologies for forest management required by developing countries are
well known and are already being practised in some developing countries.
This experience could be shared. Some of the proposed measures to
encourage more effective transfer of technology to developing countries
include using technology needs assessment (TNA) as a tool for analysing
requirements for technology; strengthening research and development (R and
D) institutions, particularly in the developing countries; exploring the
possibility of new international research institutions for sustainable
forest management; and developing global databases specific to sustainable
forest management and forestry.
In view of limited financial resources and the need to optimize the
existing available funds, in-country coordination and coordination among
donors are crucial. National forest programmes (NFPs) provide a good basis
for setting priorities on cooperation including financial assistance and
technology transfer between developing countries and donors.
CONTENTS
Paragraphs Page
INTRODUCTION ....................................... 1 - 9 6
A. Mandate ....................................... 1 - 6 6
B. An overview of the second session of the Ad Hoc
Intergovernmental Panel on Forests ............. 7 - 9 7
I. PROGRESS ON FINANCE .................................. 10 - 40 7
A. Different countries, different needs ........... 13 - 17 8
B. Discussion in the Commission on Sustainable
Development .................................... 18 - 21 10
C. Innovative public financing .................... 22 - 29 12
1. Domestic sources .......................... 22 - 24 12
2. Prospects of public financing from
international sources ..................... 25 - 29 12
D. Innovative private sector financing ............. 30 - 35 14
1. Creating conditions to attract capital flows
to sustainable forest management ........... 31 - 34 14
2. Prospects and other opportunities .......... 35 15
E. Innovative financing through combined public and
private financing ................................ 36 - 40 16
1. Potential and opportunities of combined public
and private financing ...................... 37 17
2. Information system to enhance private sector
investment in developing countries ......... 38 - 40 18
II. PROGRESS IN TECHNOLOGY TRANSFER ........................ 41 - 60 19
A. Technologies for forestry ........................ 42 - 46 20
1. Forest management .......................... 43 - 44 20
2. Forest product utilization ................. 45 - 46 20
B. Technology needs assessment (TNA) ................ 47 - 48 21
C. Cooperation in technology transfer ............... 49 - 52 21
1. Technical cooperation among developed and
developing countries ....................... 49 - 50 21
2. Technical cooperation among developing
countries .................................. 51 - 52 22
D. Increased use of information technology in
technology transfer .............................. 53 - 56 22
E. Research and development to support sustainable
forestry ......................................... 57 - 60 23
III. EFFECTIVE COORDINATION ................................. 61 - 77 25
A. Background ....................................... 61 - 64 25
B. National forest programmes (NFPs) as fundamental
coordination instruments ......................... 65 - 69 26
1. Decentralization of forestry development and
financing ................................... 66 - 67 26
2. Institutional coordination arrangements at
national and subnational levels ............. 68 - 69 27
C. Donor coordination in NFP implementation .......... 70 - 73 27
D. Effective coordination at the international level 74 - 77 28
An information system to improve coordination ... 77 29
IV. CONCLUSIONS AND PROPOSALS FOR ACTION ................. 78 - 88 29
A. Public finance ................................... 79 - 80 29
B. Private sector investment ........................ 81 - 82 30
C. Technology transfer .............................. 83 - 86 31
D. Coordination ..................................... 87 32
E. Information systems .............................. 88 33
Boxes
I. Case-studies: innovative public financing ............. 13
II. Case-studies: innovative private sector financing ..... 16
III. Case-studies: innovation through mixed public and private
financing ............................................... 18
Tables
1. Proportion of countries in the various country groups (classified
by per capita income range) within each category of total country
forest area, and contribution of each group and each category to
total world forest cover, 1990 ........................... 9
2. Matrix of policy options and financial instruments ...... 11
INTRODUCTION
A. Mandate
1. The present report describes progress on the implementation of United
Nations Conference on Environment and Development decisions related to
programme element II, "International cooperation in financial assistance
and technology transfer for sustainable forest management", of the work
programme of the Ad Hoc Intergovernmental Panel on Forests. The work under
this programme element is guided by the decisions taken at the third
session of the Commission on Sustainable Development and the first session
of the Ad Hoc Intergovernmental Panel on Forests, and further elaborated at
the second session of the Panel, held in Geneva, 11-22 March 1996.
2. The third session of the Commission and the first session of the Panel
emphasized the need to explore and consider ways to address the areas
relating to the transfer and development of environmentally sound
technology on favourable terms as mutually agreed and the mobilization of
financial resources to assist developing countries in pursuing policies and
comprehensive strategies for achieving sustainable forest management,
taking into account the ongoing work of the Commission and other relevant
processes. Consideration should also be given to ways of improving
efficiency and coordination of bilateral and multilateral assistance in
delivering forestry programmes, including proposals for cooperation at
national and international levels (a) within and among all relevant
multilateral institutions, including United Nations organizations and the
World Bank and (b) between bilateral and multilateral donors.
3. At the second session of the Panel (see document E/CN.17/1996/24), the
Panel emphasized that Agenda 21, 1/ particularly chapter 11, the
Non-legally Binding Authoritative Statement of Principles for a Global
Consensus on the Management, Conservation and Sustainable Development of
All Types of Forests (Forest Principles) 2/ and the relevant work of the
Commission on Sustainable Development provided the general framework for
relevant deliberation in the Panel, which should focus, however, on
forest-related aspects of international cooperation in financial assistance
and technology transfer (para. 40). It was recognized that additional
levels of funding from all sources, including public and private sector
investment, were needed to bring about sustainable forest management
(para. 43). The Panel also felt that more emphasis should be given to the
formulation of recommendations and options for action on technology
transfer (para. 57). It also highlighted the need to further strengthen
North-South and South-South cooperation in technology transfer (para. 57).
4. This report was prepared by the United Nations Development Programme
(UNDP) as the lead agency for programme element II, in consultation with
the secretariat of the Ad Hoc Intergovernmental Panel on Forests in the
Division for Sustainable Development of the Department for Policy
Coordination and Sustainable Development of the United Nations Secretariat.
Preparation of the report benefited from the outcome of the inter-sessional
workshop on finance (co-sponsored by the Government of Denmark, South
Africa and UNDP, and convened from 4 to 7 June 1996 in Pretoria, South
Africa) held in support of this programme element, as well as relevant
material produced by the Commission on Sustainable Development.
5. This report should be seen as being on a continuum that includes the
report of the Secretary-General on this programme element
(E/CN.17/IPF/1996/5) prepared for the second session of the Panel. It does
not dwell on issues that were already addressed in detail in the previous
report, but takes into account the issues raised during the second session
of the Panel regarded as needing further analysis, as well as those raised
and discussed during the Pretoria workshop on finance mentioned above.
6. The report of the Secretary-General before the Panel at its second
session provided information and a preliminary analysis of the overall
situation as regards this programme element, as well as an outlook for
forest development in the area of financing and technology with particular
reference to international cooperation.
B. An overview of the second session of the Ad Hoc
Intergovernmental Panel on Forests
7. While considering this programme element at its second session, the
Panel felt that its further deliberations could benefit from an elaboration
of and greater emphasis on a few specific issues. The Panel felt that
there was a need for analysis of mechanisms and policy options relevant to
actual and potential international and national financial services;
suggestions on criteria and indicators for monitoring financial flows,
market forces and consumption patterns; examination of funding for relevant
capacity-building programmes; and study of the roles and scopes of national
environmental funds, pricing, subsidies and deforestation charges
(para. 60).
8. In connection with the private sector, the Panel emphasized the need to
examine its role, including in international trade and investment, and to
examine the feasibility and desirability of codes of conduct in sustainable
forest management (SFM). The role of innovative funding sources and
mechanisms, as well as the need for improved coordination among donors,
multilateral agencies and recipient countries, was also felt to warrant
more in-depth study and exploration.
9. As regards transfer of technology, the Panel felt the need for
examining ways and means of promoting more effective transfer of
technology, in both public and private domains; identifying suitable
existing and potential mechanisms; and strengthening North-South and
South-South cooperation, as well as increasing the role of research
organizations.
I. PROGRESS ON FINANCE
10. It is generally recognized that there is a depletion of forest
capital worldwide owing to deforestation and forest degradation. This is a
global phenomenon occurring in tropical, temperate and boreal forests. As
discussed in the meeting co-sponsored by the Government of Denmark, South
Africa and UNDP, developing countries are attracting gross investment of
about US$ 20 billion per annum from domestic and foreign sources. At the
same time, however, they are suffering a disinvestment (or depreciation) of
forest capital estimated roughly at about US$ 45 billion per annum, as a
result of deforestation. This results in a net negative investment of some
US$ 25 billion per annum. Without major changes in policy and regulatory
regimes, this huge investment gap will continue to increase.
11. It should also be noted that domestic funding for forestry has risen
substantially in several developing countries. However, during the last
few years many donors have reduced official development assistance (ODA)
and forestry ODA has declined in real terms. These trends should be
reversed. Moreover, forestry ODA goes to relatively few countries among
those that require such assistance. A promising new emphasis is a shift in
forestry ODA from traditional to sustainable forest management, rural
development and conservation. Both socio-economic and environmental
benefits of forestry justify an increase in the sector's share of ODA which
now stands at only 3 per cent of the total. In addition, ODA contribution
in 1993 was only 27.2 per cent of the needs of the forest sector as
specified in Agenda 21, chapter 11 ($1.54 billion, against an annual need
of $5.67 billion).
12. Meanwhile, private investment flows to developing countries have been
rising and are now five times greater than ODA. One critical task is to
direct private investment towards sustainable forest management. SFM can
provide an efficient, effective and least-cost alternative when social and
environmental benefits are included in the overall economic equation. In
developing countries, however, the current flows of private investment are
highly concentrated among a few countries with export potential while
serious shortages of funds are experienced in countries where forestry is
oriented towards domestic markets.
A. Different countries, different needs
13. There is no patent solution or path for achieving SFM that it is
suitable for all countries to adopt or follow. There are many factors that
determine their priorities, strategies, and needs. Countries' individual
characteristics influence their capacity to mobilize financial resources;
effectively utilize financial assistance; and adapt, adopt and develop
technologies to achieve sustainable forest management. However, the
relationships between the size of forest cover, per capita income and the
level of forest development may, to some degree, provide a crude but
illustrative picture, indicating the possibility of adopting similar
approaches to addressing the issues of finance and technology transfer, by
countries located in proximity to each other in the matrix provided in
table 1.
Table 1. Proportion of countries in the various country groups (classified by
per capita income range) within each category of total country forest area,
and contribution of each group and each category to total world forest cover,
1990
(Percentage)
Country group by gross national product (GNP) per capita in dollars
----------------------------------------------------------------------------
Total >$15000 $4000- $2000- $1000- $500- <$500 Total %
Forest $15000 4000 $2000 $1000
Area in a
Country
---------------------------------------------------------------------------
> 50 mha 13.27% 0 38.23% 3.54% 3.19% 8.68% 66.9%
(2) (2) (2) (1) (3) (10)
---------------------------------------------------------------------------
30-50mha 1.15% 3.74% 2.48% 4.05% 11.42%
(1) (3) (2) (4) (10)
---------------------------------------------------------------------------
10-30mha 2.68% 1.88% 1.69% 1.26% 5.29% 12.8%
(5) (4) (4) (3) (11) (27)
---------------------------------------------------------------------------
5-10mha 0.24% 0.69% 0.92% 0.70% 1.22% 3.77%
(1) (3) (4) (3) (6) (17)
---------------------------------------------------------------------------
<5mha 0.71% 0.58% 0.84% 0.20% 0.41% 1.91%+ 4.65%+
(10) (11) (16) (10) (18) (33) (98)
---------------------------------------------------------------------------
Total % 17.81% 0.82% 44.54% 6.35% 8.04% 21.15%+
(18) (12) (28) (20) (27) (57)
Note: Numbers in parentheses in the body of the table represent
number of countries corresponding to a given percentage.
14. Several important points relevant to financial assistance and
technology transfer for SFM, are illustrated in table 1. About 67 per cent
of total world forest cover is located in 10 countries with forest cover of
more than 50 million hectares (ha) each. Combined with another 10 countries
endowed with a forest cover in the 30-50 million ha range, a total of 20
countries represent 78 per cent of the world's forest cover. Of these 20
countries, 3 are characterized by per capita income greater than $15,000, 7 by
per capita income between $1,000 and $4,000 and 10 by per capita income of
$1,000 or less, representing 14.42 per cent, 45.5 per cent and 18.4 per cent
of the world's forest cover respectively.
15. Forests in 115 "less forested" countries (less than 10 million ha)
represent about 8.42 per cent of the total world's forests. About 60
countries of this group, with per capita income of $1,000 or less, contain
only about 4.24 per cent of total world's forests.
16. The information in table 1 should also be viewed in light of the
relative development level of forest-based industry. In this context, it
should be noted that only a few developing countries, namely, Indonesia,
Malaysia and Brazil, belong to a group of high-level exporters of wood
products in the international market and by implication also have a highly
developed forest-based industry. Several other countries such as Chile,
Gabon, Cameroon and Papua New Guinea also have substantial exports of
forest products but at a relatively lower level. It is possible for a
country with low forest cover but with high per capita income to import
forest products from elsewhere. Several developing countries such as the
Republic of Korea, China, Taiwan Province of China and Thailand are now
among the major importers of forest products in the international market.
17. Needless to say, the countries as characterized by the different
categories in the matrix of table 1 have equally differentiated
need-profiles concerning financial assistance, technology transfer and
points of most effective intervention for achieving sustainable forest
management.
B. Discussion in the Commission on Sustainable Development
18. The subject of financing sustainable forest management (SFM) involves
the application to the forest subsector of the results of the analysis of
financing sustainable development in general that has been undertaken by
the Commission on Sustainable Development regularly since the United
Nations Conference on Environment and Development, most recently at its
fourth session (18 April-3 May 1996).
19. The deliberations of the Commission on Sustainable Development on
financial issues of Agenda 21 have been supported by extensive
documentation. 3/ This documentation describes trends in official
development finance, the extent of progress in dealing with the external
debt problems of developing countries, and the role of the private sector
in financing sustainable development, and its content is therefore not
recapitulated here. It also describes a wide array of policy approaches,
including enabling policies to encourage more private sector financing,
innovative financing mechanisms at the national level such as economic
instruments and national environmental funds, and such international
innovative mechanisms as jointly implemented (JI) activities in the context
of the United Nations Framework Convention on Climate Change. 4/
20. One of the major contributions of the work on finance in the
Commission on Sustainable Development has been the elaboration of a matrix
of policy options and financial instruments cross-classified by several
sectors. Regarding the forest resources sector, the matrix identifies a
number of specific financing instruments, and also includes others that are
relevant under the sector headings of sustainable development, biodiversity
and fragile ecosystems. Those portions of the matrix are reproduced in
table 2.
Table 2: Matrix of policy options and financial instruments
---------------------------------------------------------------
SECTORS ECON & PROPERTY RENT SUBSIDY
FINANCIAL RIGHTS CAPTURE/ REDUCTION
REFORMS RESOURCE
PRICING
---------------------------------------------------------------
SUSTAINABLE competitive secure full-cost reduce
DEVELOPMENT capital property pricing energy &
markets rights capital
subsidies
---------------------------------------------------------------
BIODIVERSITY -environ. biodiversity prospecting reduce
funds patents fees land
-venture conversion
capital subs.
---------------------------------------------------------------
FOREST environ. -long-term forest -below-
RESOURCES funds concessions product cost
-bidding pricing timber
sales
-conversion
subs.
---------------------------------------------------------------
FRAGILE environ. communal pricing of removal of
ECOSYSTEMS funds property ecological land
rights functions conversion
and
agrochem.
subs.
---------------------------------------------------------------
---------------------------------------------------------------------------
SECTORS TAXATION ENVIRON. INNOVATIVE INNOVATIVE
CHARGES DOMESTIC GLOBAL
MECHANISMS MECHANISMS
---------------------------------------------------------------------------
SUSTAINABLE -green taxes depletion of -ecolabelling joint
DEVELOPMENT -reduction of pollution -ecofunds implemen-
distortionary charges -sustainable tation
taxes development
equity funding
---------------------------------------------------------------------------
BIODIVERSITY habitat deforestation -bioprospecting -patents
protection charge fees -intellectual
subsidy -ecotourism property
fees rights
-scientific -TCCs
tourism (tradable
fees conservation
credits)
--------------------------------------------------------------------------
FOREST forest deforestation -watershed -tradable
RESOURCES concession charge chgs. forest
taxes -tradable protection
reforest. obligation
credit -carbon
offsets
--------------------------------------------------------------------------
FRAGILE differential differential -relocation TCCs
ECOSYSTEMS land-use land use incentives
taxes charges -TDRs
--------------------------------------------------------------------------
21. The scope for using many of these instruments is discussed in the
following sections of this report. It is perhaps worth noting that forest
sector finance may also be considered in so far as it relates to the four
distinctive services that it is meant to facilitate. The first is the
economic development of forest activities where finance is mobilized
primarily by enterprises producing for the domestic or international
market. The second is the economic services that government often provides
to encourage private sector development, for example, by provision of
transportation infrastructure, extension services, pre-investment studies,
and so on. The third is the management of protected areas, which is
normally undertaken by government, and the fourth is the provision of
extraterritorial environmental services such as carbon sequestration and
biodiversity which is often closely related to the management of protected
areas.
C. Innovative public financing
1. Domestic sources
22. Domestic sources have contributed and will be contributing most of the
financing for activities in support of sustainable forest development. Two
strategic approaches may be employed as regards forests: first, increasing
revenues and second, reducing costs due to unsustainable forest practices.
A number of factors are associated with lesser investment in the forest
sector and most are related to undervaluation and lack of awareness of the
multiple values of forests (please refer also to the reports of the
Secretary-General to the Panel at its third session on programme elements
III.1 (a) (E/CN.17/IPF/1996/20) and I.1 (E/CN.17/IPF/1996/14). The use of
market-based instruments (MBIs) is one potential approach for generating
new and additional resources at the domestic level. The objective of MBIs
is to accomplish full-cost pricing, reflecting depletion of the natural
resource as well as other associated environmental, social and/or economic
costs. This could be achieved by increased rent capture; resource
user-fees; environmental charges; environmental performance bonds;
subsidies/incentives; outright sale of land and/or resources; and licensing
and concession auctions.
23. During the last decade, MBIs have been used quite successfully in some
developed and developing countries for generating additional revenues and
reducing costs due to environmental damage, through fiscal means and
through fees and charge systems. Experiences from countries with high
forest cover and a higher level of forest-based industrial development in
applying increased royalty rates, performance bond deposits and other
fiscal measures to increase revenues for SFM indicate a potential for
replication in countries with similar profiles. Developing countries such
as Indonesia, Brazil and Malaysia would fall into this category.
24. For countries with a relatively extensive forest cover, but with less
developed forest-based industry, the focus would be to create the necessary
environment and incentives to attract private investment for sustainable
forest management and utilization. On the other hand, countries with
limited forest cover, low per capita income and few forest-based
industries, but a high demand for forest products and services, that are
facing the challenge to fulfil subsistence needs, may experience severe
difficulties in trying to mobilize domestic, private and public funding.
International cooperation is expected to play a particularly critical role
in financing SFM in this category of countries.
2. Prospects of public financing from international sources
25. Apart from forest-related ODA, there is a dearth of major
international mechanisms geared towards financing forest-based activities.
The Global Environment Facility (GEF), while important, focuses mainly on
forest-dependent resources and functions, supporting incremental costs
relating to activities involving conservation of biodiversity and
mitigation of global climate change. GEF is not designed to leverage
funding for SFM and forest-based economic development.
26. ODA can be used more effectively to leverage private sector
investment. Indeed, without public funds, the private sector will often
find it difficult to invest in early stages of both SFM and the development
of forest-based industries. ODA, however, is likely to remain severely
limited.
27. Innovative mechanisms for financing sustainable development have been
proposed and discussed intensively in such forums as the Commission on
Sustainable Development. Some of the proposed schemes have been
particularly relevant to forest-related activities, such as joint
implementation (JI). Others, such as debt-for-nature-swaps, are applied in
some developing countries but not yet on as large a scale as that hoped
for. Most of these schemes have been proposed with the marketability of
forest-dependent resources and services, such as biodiversity and carbon
sequestration in mind.
28. Most of the existing proposals to increase revenue, through MBIs and
other innovative schemes, are intended to support the development of forest
resources in producing countries. As these are benefits of forests that
extend beyond the border of countries, so are there also common issues and
shared challenges that extend beyond an individual nation, and that are
more appropriately addressed at the international level. As many MBIs have
already been used successfully to generate financial resources for the
development of forests at the national level, there may be a potential for
the MBI concept to be emulated at the international level. The additional
revenue from MBIs at the international level could be used as a source
complementary to ODA and GEF of support of forest activities at the global
level. Consideration of further exploration of various innovative ways to
generate additional revenues at the international level is suggested.
29. Five case-studies of innovative applications of public financing for
SFM are shown in box I. These case-studies, presented at the Pretoria
workshop sponsored by Denmark, South Africa, and UNDP, illustrate how
public funds and MBIs can be used to bring about shifts in forest
management and conservation practices.
Box I. Case-studies: innovative public financing
- The World Bank Sustainable Forestry Market Transformation Initiative
(SFMTI) and the establishment of the Biodiversity Conservation Network
by a $20 million United States Agency for International Development
(USAID) grant demonstrate the uses of international public funds to
leverage other sources of capital so as to create necessary incentives
to bring about shifts in forest management and conservation practices.
- A project carried out by a Costa Rican non-governmental organization
in Central America is an example of foreign government funds of the
Finnish International Development Agency (FINNIDA) being used to
support the local capital market infrastructure by actually creating a
local banking system to provide credit to poor rural farmers for
forestry-related activities.
- The case of a project in the Niger where the government has introduced
and refined well-known market-based mechanisms, such as user fees for
fuelwood, illustrates different ways in which fiscal incentives have
been changed to bring about more sustainable forest management.
- The case of British Columbia, Canada, shows how revenues generated
from royalty increases can be reinvested in the forestry sector to
stimulate the transition to improved forest management.
- The Fundacio'n de la Cordillera Volca'nica Central (FUNDECOR) case in
Costa Rica demonstrates how innovative uses of international and
public funds can be used to provide small forest landowners with the
necessary incentives for improving management practices.
D. Innovative private sector financing
30. At present, private capital flows into the forest sector in emerging
economies are quite significant. In China, an investment of $300 million
in foreign capital is planned over the next four years, and in the
successor States of the former Union of Soviet Socialist Republics, $5
billion of United States Overseas Private Investment Company (OPIC)
guaranteed investment is expected over the next five years. In Papua New
Guinea, Malaysian timber companies have invested more than $509 million in
the forest sector over the last five years. Billions of dollars of foreign
capital are being invested in paper, plywood, and medium-density fibreboard
plants that are being built across southern Asia to meet the fast-rising
demand for paper and wood products. It is clear that the obstacle to
financing SFM from the private sector is not one of insufficient capital;
rather, the critical challenge is to redirect and channel existing private
sector resources, their capital market investment vehicles and services to
activities supporting SFM. This can be accomplished by educating capital
markets about the investment opportunities in SFM; by packaging and
structuring these opportunities in ways that are easily understood and
recognizable to private sector investors; and by reducing risks and
incremental costs specific to an emerging industry.
1. Creating conditions to attract capital flows to
sustainable forest management
31. There are several strategic elements in capital markets'
infrastructure, that is, mechanisms and systems, that facilitate the flow
and increase the effectiveness of investment capital. These strategic
elements need to be properly developed in order to build the context and
conditions necessary to attract and "jump-start" private sector financing
for sustainable forest development. They include:
(a) Engaging and educating capital markets;
(b) Mitigating sector and emerging market risks;
(c) Funding some costs of internalizing environmental externalities
such as forest inventories;
(d) Funding some costs of directing capital flows into a new
investment area.
32. In order to mitigate various risks in private sector investments,
several types of funds could be created, such as early-stage funds and
sector-specific funds. Additional funds targeted to the preparation of
project and investment plans, and forest inventories are also needed to
cover part of the costs of directing capital flows into a new investment
area.
33. Other considerations with respect to attracting investment in SFM
include political and macroeconomic stability, access to land and the
security of property rights. Developing countries, therefore, need to
create enabling environments which are critical for investment in SFM.
They include:
(a) An effective and appropriate regulatory framework;
(b) A clearly defined forest policy;
(c) Transparent, participatory and democratic decision-making
processes;
(d) Capacity in key areas.
34. As discussed in the Panel at its second session, it is also critical
that the policy reforms aimed at attracting investment by the private
sector be complemented by policies and regulations that also encourage
sustainable forest management. There is a need, therefore, to formulate
codes of conduct, incentives for better forest management practices, and
other forms of innovative measures to encourage private sector activities
that reduce damage to the environment.
2. Prospects and other opportunities
35. Several of the case-studies discussed during the Pretoria workshop
co-sponsored by Denmark, South Africa and UNDP provide multidimensional
examples of innovative private sector financing in SFM that could be
emulated elsewhere. Lessons learned from these case-studies (box II) and
discussion in the meeting include the following:
- There are opportunities to direct existing flows of capital to
the sustainable development of forests;
- Large forest sector companies in Sweden, Finland, Canada, the
United States of America, Malaysia, Japan, New Zealand, and
Brazil are potential sources of financing for sustainable forest
development and for forest-dependent industries;
- Projects providing environmental training for the financial
sector on environmental assessments, investment criteria,
environmental "due diligence" processes and the like have been
funded by some multilateral agencies, and could be extended
further to prepare the ground for investments in the forest
sector;
- Partnering of an established and successful traditional forest
sector player with an emerging sustainable forest development
enterprise in a developing country could be an effective way to
transfer business capabilities to an SFM industry and increase
the likelihood of survival for an emerging business.
Box II. Case-studies: innovative private sector financing
- Xylem Investments of the United States is perhaps the first company
that has successfully attracted United States investors to forestry
investment in forest plantations in developing countries.
- The O Boticario Foundation is an example of a private sector funding
vehicle established to internalize environmental externalities. The
Foundation has been established through the contribution of 5 per cent
of the net profits of O Baticario, a natural-beauty-care corporation
that is dependent on Brazil's natural resources for the ingredients of
its product lines. The O Boticario Foundation provides grants for
biodiversity conservation.
- The Polish Environmental Protection Bank has as its charter mission to
provide preferential loans for environmental protection projects.
While the Bank does not focus on the forest sector, the model could be
replicated and focused on financing of forest investments in many
countries.
- Piqro, a high-quality laminated flooring manufacturer in Mexico, shows
how international and domestic investment can be combined to both fund
sustainable operations and create vital market linkages in the local
sustainable forest value chain.
E. Innovative financing through combined public
and private financing
36. Combined funding instruments could provide public financing
institutions with a good opportunity to leverage and multiply private
capital moving into sustainable forest development. In many developing
countries, the private sector depends on public funds to lower the risks of
investing in emerging sectors like sustainable forest management and the
early development stage of forest-dependent industries. In the past,
public funding in developing countries for the forest sector was directed
towards supporting forest conservation programmes and building the
institutional capacity of national forest agencies. The discussion in the
present subsection focuses on the use of public funds to attract private
sector investments to sustainable forest operations.
1. Potential and opportunities of combined public
and private financing
37. Several case-studies of combined public and private financing
presented at the Pretoria workshop co-sponsored by Denmark-South
Africa-UNDP are shown in box III. Lessons learned from these case-studies,
include the following:
- Public-private financing partnerships provide an effective means for
the public sector to leverage its shrinking resources;
- Public funds can play a key role in directing the attention of the
private sector to emerging investment opportunities in SFM, by
financing the development and feasibility studies costs of
environmentally focused investment funds, as exemplified by the case
of the Biodiversity Enterprise Fund for Latin America;
- Public financing can also be used to reduce the "due diligence",
technical evaluation and deal preparation costs associated with forest
sector investments, thereby making associated investments more
attractive to private partners;
- Public funding can be critical in moving large sums of private sector
investment into sustainable industries, as in the case of OPIC's
guaranteeing of the fund of the Global Environmental Fund, Inc.
(GEFI);
- Public funding is especially critical for creating early-stage funds
for sustainable forest management and forest-dependent industry, where
the cost of assessing and establishing smaller, start-up ventures can
often be prohibitive;
- Many environmental-stewardship organizations and government agencies
lack the capital needed to achieve their conservation objectives, and
therefore need to find ways to access private investment. The United
States Tax-exempt Bond for Public Purpose Forestry example offers a
model of how this goal is being achieved in the United States.
Box III. Case studies: innovation through mixed public
and private financing
- The Global Environmental Fund, Inc. (GEFI)/United States Overseas
Private Investment Company (OPIC) Fund offers an example of how
guarantees (provided by the Overseas Private Investment Corporation)
were leveraged to raise the investment capital for a venture fund
targeting developing- country environmental industries.
- Involvement of the Danish International Development Agency (DANIDA) in
Ghana is a pioneering example of a bilateral aid agency's assisting in
covering the environmental externality costs associated with the
transition of a Ghanaian business to sustainable forest management.
This case also constitutes a noteworthy example of how a public agency
can strengthen market linkages between a local SFM operator and a
foreign trading partner.
- Tax Breaks for Reforestation in Panama shows how the Panamanian
Government has developed a tax incentive programme to facilitate
domestic and foreign private sector investment in enterprises that
reforest degraded agricultural lands.
- The use of Tax-exempt Bond for Public Purpose Forestry shows how an
existing tax instrument - the tax-exempt bond - can be adapted for
application to the forestry sector in the United States, and
potentially many other countries. The Biodiversity Enterprise Fund
provides a good example of how public funds have been used to leverage
private sector equity investment and pay for the cost of deal flow
development.
- The Fund for Sustainable Enterprises (FSE) is a recently designed
investment that will be initially capitalized at $10 million-$20
million. Funds for FSE will come from the Multilateral Investment of
the Inter-American Development Bank (MIF), and will be matched 3:1
from sources such as non-governmental organizations, foundations,
corporations and so forth. It is an example of how multilateral funds
will be leveraged to raise domestic and international investment.
2. Information system to enhance private sector investment
in developing countries
38. During the workshop in Pretoria, a database on incentives and other
investment opportunities in the developing countries was considered a
useful means to speed up private sector investment. Indeed, the rapid
developments in information technology, user-friendly software and the
widespread use of the Internet warrants considerations being given to
establishing an Internet-based information system to facilitate private
sector investment in the developing countries. The private sector or a
relevant international agency may wish to initiate and host such an
information system.
39. This information system could be developed to provide relevant
information to facilitate the marketing of potential investment
opportunities such as for forest concessions, conservation projects and so
on to the private sector, non-governmental organizations or other
interested parties. This could be accomplished by wider dissemination of
information about available opportunities, incentives and regulations in
different parts of the world. Forest owners or Governments could take
advantage of this system to identify a wider range of potential candidates,
and assess the package deals offered and the track record of potential
investors. Such a system may include relevant information on items such
as:
- Governments or forest owners: incentives and enabling conditions
in the country; specific forest areas or land (size, stocking and
other relevant information on the resource); preferred types of
management (for timber production, reforestation, biodiversity
conservation, and so on); preferred schemes: joint venture, JI,
debt-for-nature swaps and so on; other conditions, such as local
participation, technology transfer and so forth;
- Private sector and non-governmental organizations: profiles of
companies or organizations; areas of interest (for example,
timber production and industries, reforestation, biodiversity
conservation, and so on);
- Funds: list of funds, their target interests and target groups;
guidelines on how to apply.
40. It should be noted that many forest companies, countries, national
forest agencies, non-governmental organizations active in forest-related
activities, multilateral development banks, international organizations and
bilateral agencies already have Web sites on the Internet. Initially, it
would be a matter of designing a home page with the appropriate linkages to
existing sites and soliciting the cooperation of participation sites to
make the appropriate information available and accessible. Further
in-depth analysis and consideration of this suggestion are proposed.
II. PROGRESS IN TECHNOLOGY TRANSFER
41. In most cases, development of specific technologies in forestry is a
long-term process. Projects to select suitable species for industrial
forest plantations, studies on growth and yield to measure the impacts of
various forest management regimes, and other undertakings, are but a few
examples of activities that require many years of intensive study before
useful results can be produced. Technology transfer and exchange of
information and experiences, therefore, are critical elements for
developing countries as regards "leapfrogging" in know-how and technology
for sustainable development of their forests.
A. Technologies for forestry
42. There is an unprecedented accumulation of technological capability in
the world today, including for forestry. Much of it, however, remains
unrecognized, underutilized and inadequately shared. It is recognized that
no single technology or a set of technologies can be appropriate to all
countries. Technologies are often specific for different ecological zones,
socio-economic needs and environmental considerations. They are also
specific to a large number of activities such as forest resource
development, reforestation, sustainable harvesting, value-added processing,
integrated waste management, product development and marketing.
Considering the present and future challenges facing forests, and ever-
increasing diverse demands placed on the sector, technological innovations
are critical for sustainable management and utilization of forests.
1. Forest management
43. The technological change and innovation that have taken place during
the last decades in forest management, silviculture and logging practices
have led to improved formulation of forest management practices, higher and
improved yield, lower cost of production and reduced damage to ecosystems.
Modern forest management applies silviculture techniques to increase yield
and quality of timber of commercial species through controlled
regeneration; and replanting with improved-yield and disease-resistant
seedlings, developed through modern breeding methods including
biotechnology. Similarly, the use of technology in harvesting is evolving
from the employment of animals and simple machines to that of tractors,
helicopters and balloons which, together with an improved harvesting plan,
could increase production as well as reduce ecological damage to the site.
44. Many of these innovations and improved methods have originated in the
developed countries. Some of the developing countries - those with a long
tradition of applying forest management guidelines and with a higher level
of forest-based industries - have already adapted some of these
technologies. The harvesting techniques of "reduced impact logging",
"balloon logging" and "helicopter logging" have been tried with some
success in developing countries, reflecting potential opportunities for
technology transfer through North-South as well as South-South cooperation.
The latter would rely on adapted technologies or locally developed
technologies and could shorten the transfer process of acceptability, owing
to the similarity in conditions and culture between the "transferors" and
the recipient countries.
2. Forest product utilization
45. During the last several decades, the innovations in technologies for
forest product utilization have seen great improvement in terms of higher
recovery, and improved quality of material in terms of durability and
protection, as well as in the development of new products such as medium-
density fibreboard (MDF), higher utilization of non-wood forest products,
and so forth. The development of panel products, with their advantages in
terms of cost and technical properties, has involved a move from plywood to
particle board and MDF, reflecting an evolution from the use of basically
solid wood to the use of fibre. Obviously these technological developments
will change the future direction of forest resources and products which
will further influence traditional forest silviculture and other forestry
practices.
46. Many of the technologies for products manufacturing come with an
investment package where training of key personnel is included in the
purchase of equipment. Although many of the big manufacturing companies
acquire such technology through direct purchase, the majority of small and
medium enterprises (SME) still require some assistance and concessions to
acquire these technologies. In addition, training is always needed to
improve the cost effectiveness of the products manufacturing, particularly
as regards the adaptation of these technologies to local conditions and
techniques involving the use of wood such as drying, finishing and so on,
which are peculiar to the individual timber species used. This kind of
information is often obtained only through research and development (R and
D) at the national and regional levels. Exchange of information and
lessons learned through South-South cooperation offer much promise and need
to be promoted.
B. Technology needs assessment (TNA)
47. At its second session, the Panel considered that priority in
technology transfer and capacity-building should be given to the following
areas: information dissemination to improve land-use planning and
improvement of forest yields; technology and methods that could reduce
environmental damages due to current forestry practices; species research
for tree improvement for rehabilitation, reforestation and nursery
development; technology and methods for retaining forest values, including
biological diversity; incorporation of indigenous knowledge in plant
utilization; new and renewable sources of energy; environmentally sound
logging technologies; and development and implementation of national forest
strategies (E/CN.17/1996/24, para. 58).
48. As indicated in paragraph 42 above, the majority of technologies for
managing forests are well known. However, there is a need to identify
technological capacities and requirements for countries in view of their
different level of forest development through technology needs assessment
(TNA). TNA, necessary for sustainable forest development, should be an
integral component of national forest programmes, and should be used as the
basis for technology cooperation so as to accelerate the implementation of
NFPs.
C. Cooperation in technology transfer
1. Technical cooperation among developed and developing countries
49. Transfer of technology from developed to developing countries takes
effect in different ways and involves private entrepreneurs, bilateral and
multilateral assistance agencies, the Consultative Group on International
Agricultural Research (CGIAR) and regional research institutions,
non-governmental organizations and foundations. Foreign investment in
developing countries is often associated with a technology package,
including training of experts and workers, management and marketing
contracts, foreign equipment and patented technology. Examples of all
these forms of cooperation can be found in the forest-based industries of
several developing countries.
50. Bilateral and multilateral forestry projects are the most common means
of knowledge and technology transfer in forestry. There are many national
and regional forest research institutes that have long received
international assistance. The Food and Agriculture Organization of the
United Nations (FAO), the International Tropical Timber Organization (ITTO)
and other forest-related institutions, have published technical
publications and provided updated technical information covering almost all
aspects of forests. The People and Plants Initiative of the United Nations
Educational, Scientific and Cultural Organization (UNESCO) (jointly with
the World Wide Fund for Nature (WWF) and the Royal Botanic Gardens, Kew,
United Kingdom of Great Britain and Northern Ireland (RBG, Kew)), the
database of the United Nations Environment Programme (UNEP) on
environmentally sound technologies, the Zero Emissions Research Initiatives
of the United Nations University (UNU), the Medicinal Plants Programme of
the World Health Organization (WHO), aimed the programme of the United
Nations Industrial Development Organization (UNIDO) related to industrial
processing and marketing are among the many examples of multilateral
technology transfer and cooperation.
2. Technical cooperation among developing countries
51. Sharing of experiences among developing countries can occur through
direct exchange or through formal and informal networks. The Latin
American Dendroenergy Network, the African Forest Action Networks, and the
Asian Network on Medicinal and Aromatic Plants are some of the most active
networks. UNDP and other united Nations bodies operate technical
cooperation among developing countries (TCDC) programmes that could be
applied more directly in technology transfer for forestry. Technical
cooperation among countries in transition (TCCT), however, needs stronger
support and development.
52. There are many advantages and great potential for South-South
cooperation in technology transfer. Many developing countries share
characteristics as regards their forests' institutional developments and
culture. R and D activities in the utilization of rubber wood and other
techniques that have been developed in South-East Asia are suitable for
many countries in that region, such as Indonesia, Malaysia and Thailand.
Experiences in developing technologies for large-scale plantations and the
management of natural forests could potentially also be shared through
technology transfer.
D. Increased use of information technology in technology transfer
53. Rapid development in computer technology has improved the hardware and
software technologies used by forest-based industries to improve the
productivity and quality of products. Almost all of these new technologies
can be purchased in the open market.
54. Transfer of technologies will also benefit from rapid developments in
computer software and communication technologies. The development of more
powerful computers and the Internet have made large storage and exchange of
information affordable and more efficient. Many forest institutions, both
from developed and from developing countries, now disseminate information
on their activities through the Internet. A survey by UNEP has indicated
that, of the 84 information systems on environmentally sound technology,
there are only a few information systems, such as the Current Agriculture
Research Information System (CARIS), the International Information System
for the Agricultural Sciences and Technology (AGRIS) and the Centre for
Agriculture and Biosciences International (CABI), that contain some
substantive components related to forestry technologies. However, at
present, a number of forest-related institutions offer their databases and
some generously provide free access to their packaged information, while
others impose fees.
55. Several obstacles, however, have been encountered in respect of the
existing information systems. These obstacles include: difficulties in
accessing the systems; language barriers; the requirement of securing
package information rather than just technical information; the cost of
accessing the databases; and inadequate computer facilities.
56. In view of a lack of a specific information system dedicated to
technologies for forests, it would be useful to develop such a system, one
describing available technologies in forestry. The main objective of this
system would be to provide information on available technologies in
forestry applicable at various operational levels, and avenues for exchange
of results and lessons learned from applications of specific technologies.
The database could include information such as profiles of technologies,
their level of development, guidelines for use and specifications for those
technologies.
E. Research and development to support sustainable forestry
57. The significance of focused research and development, a crucial
underpinning for SFM, cannot be overemphasized. It should be noted that
policy-relevant and practical R and D is critical in:
- Clarifying and expanding the available set of options;
- Defining and explaining the consequences of alternative courses
of action;
- Minimizing those conflicts that arise from misunderstandings or
lack of evidence;
- Helping provide a basis for the progress that we all seek.
58. Compared with the rapid progress in other fields such as agriculture,
environment, energy, computer science and medicine, the innovations in
forestry during the past decades have been very limited. The Government of
Indonesia-Centre for International Forestry Research (CIFOR)-sponsored
Dialogue on Forest Research, held in 1995, concluded that the current state
of forest science was inadequate to provide reliable and comprehensive
information needed for timely decision-making in forestry. There is an
urgent need, therefore, for forest research to provide practical and
policy-relevant knowledge to assist decision-making that will sustain and
enhance the benefits of forests for present and future generations. Urgent
research priorities in forestry include criteria and indicators for SFM,
forest assessment and valuation, community participation, forest
conservation and cost-effective processing techniques. Additional elements
considered essential for providing a more comprehensive approach in
research to support SFM include:
- Integrated site-specific socio-economic and biophysical studies
to understand the relationship between human development and
forests;
- Periodic assessment of forests;
- Examination of trends of supply and demand of forest products;
- Forest policy at national, regional and global levels;
- Environmentally sound technologies of forest-based industries;
- Consideration of the impacts of pervasive external stresses such
as climate change, ozone depletion and air pollution on long-term
health, productivity and biodiversity of forests.
59. While the Consultative Group on International Agricultural Research
(CGIAR) institutions have mandates to conduct some forest-related
activities, the Centre for International Forestry Research (CIFOR) and the
International Centre for Research in Agroforestry (ICRAF) are the only two
international research institutions directly concerned with forestry. The
have programmes in policy development; management and conservation of
natural forests; reforestation of degraded lands; products and markets;
environmental and economic characterization of land-use systems; validation
of technologies and issues related to their adoption; and multi-purpose
tree improvement. There are also a few regional centres and institutions,
such as the International Centre for Integrated Mountain Development
(ICIMOD), the Inter American Institute for Cooperation on Agriculture
(IICA), the Centro Agronomico Tropical de Investigacion y Ensen~anza
(CATIE) and the Association of South-East Asian Nations (ASEAN) Institute
of Forest Management (AIFM), that are engaged in research and technology
transfer on specific aspects of forests within their respective regions.
These institutions are considered relatively meagre, however, in terms of
the magnitude of research needed to address critical and complex issues,
particularly in developing countries. In consideration of the enormous
multiple benefits provided by forests, wooded lands and trees, the
allocation of resources to forest research, in comparison, for example,
with agriculture, is seriously underfunded and needs to be greatly
enhanced.
60. While many research institutions in the developing countries are
underfunded and need substantial strengthening to carry out more effective
research to support SFM, a considerable amount of research on issues
related to developing countries is being conducted by institutions in the
developed countries such as the International Development Research Centre
of Canada (IDRC), East-West Center, the Natural Resources Institute (NRI,
United Kingdom-Overseas Development Administration (ODA)), RBG Kew, the
Forestry Programme of the French International Cooperation Centre of
Agricultural Research for Development (CIRAD-Fore^t), the New York
Botanical Gardens, the Australian Centre of International Agricultural
Research (ACIAR), the French Institute of Scientific Research and
Cooperative Development (ORSTOM), the Commonwealth Scientific and
Industrial Research Organization, Australia (CSIRO-Division of Forestry),
the Forest Products Laboratory of the United States Department of
Agriculture (USDA) Forest Service (FPL-USDA/FS) and the Tropenbos
Foundation of the Netherlands. The impressive amount of research
capability in these organizations, however, is no substitute for
strengthening capacity in developing countries. It is critical that
investment in forestry research, in both the developing and the developed
countries, be increased substantially to further strengthen their
collective capacity to carry out more intensive research in the
conservation and utilization of their specific forest types. Sustainable
forestry requires long-term investment and it must be based on sound
scientific knowledge to maximize benefits and minimize risks. In order to
maximize benefits and increase cost effectiveness, there is a need for an
international forum to establish a priority research agenda and
coordination mechanism.
III. EFFECTIVE COORDINATION
A. Background
61. The problem of financing sustainable forest management and
conservation has two main facets: the availability of funds and the
effectiveness of their use. Coordination is one way to improve
effectiveness. Individual projects may have been well designed and
implemented, but their impact has often been constrained by a lack of
necessary action in related fields. It is now widely recognized that
intersectoral coordination is particularly crucial in forestry, because it
involves large areas of land and it frequently competes with agriculture
and other sectors for the same land base. Another problem has been the
relative proportion of investments by the public and private sectors;
although the two sectors have different roles and decision criteria, they
need to be appropriately coordinated to maximize synergy.
62. Inadequate coordination of ODA among donor agencies sometimes
contributes to overlapping activities and conflicting approaches in forest
conservation and development. Extensive efforts have been made to improve
donor coordination at both country and international levels, but the scope
for improvement is broad, particularly for financing. The need for a
holistic approach was already recognized in 1985 when the Tropical Forest
Action Plan (TFAP) was launched to address the global problem of
deforestation through (a) policy reform; (b) intersectoral linkages and
coordination and (c) external financing and donor coordination. While this
was a good start, the experts at the Pretoria meeting pointed out that much
remains to be done in terms of donor coordination.
63. Sectoral characteristics and past experience clearly suggest that
there should be an increasing emphasis on programme, rather than on
project-based, financing. The frontier of development in the forestry
sector is not mainly in technology but rather in institutional and human
capital. There is a need to assign priority to the policy process as well
as to capacity-building, both of which need to be considered in programme
financing.
64. TFAP has been the subject of fierce debates, particularly about
transparency and participation. A major review of objectives, principles
and operating procedures was carried out in 1991 (see the report of the
Secretary-General on programme element I.1 (E/CN.17/IPF/1996/8) prepared
for the Panel's second session) through independent evaluations and
reviews. This exercise resulted in a recommendation to promote a
country-driven process and to prepare and implement national forestry
programmes (NFP) within a participatory, multidisciplinary and transparent
framework. This concept is now broadly accepted, and about 100 countries
have a national forest programme at some stage of development.
B. National forest programmes (NFPs) as fundamental
coordination instruments
65. At the international level, there is a general consensus about the
role of national forest programmes (NFPs) as a fundamental framework for
sustainable development. The basic NFP principles recognize the following
key elements (see document E/CN.17/IPF/1996/8): national sovereignty;
integration with a country's sustainable development strategy; partnership;
participation; a holistic and intersectoral approach; a long-term iterative
process; capacity-building; policy and institutional reforms; consistency
with national policy frameworks and global initiatives; awareness-raising;
and harmony with national and international commitments. NFP links
together strategic and operational planning and it is specifically designed
to increase effectiveness and efficiency in sustainable forestry
development at the country level, potentially leading to increased
commitments by potential sources of both domestic and external funds. From
the point of view of NFP, external financing provides not only the sectoral
framework, but also the basis for operational coordination and
harmonization of approaches towards forest development and conservation, to
avoid overlaps, and to increase and stabilize fund flows. The NFP process
is a continuous activity well adapted to a changing policy environment, and
provides the necessary basis for investment programming. For further
details related to NFP, please refer to the report of the Secretary-General
to the Panel at its third session on programme element I.1
(E/CN.17/IPF/1996/14).
1. Decentralization of forestry development and financing
66. Planning and implementation of SFM activities, where appropriate, may
preferably be decentralized and carried out at the district (or at the
appropriate local) level, with necessary incentives to the private sector,
non-governmental organizations and community-based organizations (CBOs).
Participation of donors and financial institutions is necessary in the
financing of forestry development funds that combine financing from
national and international sources, while maintaining decentralized
implementation. The principal implications of this approach for donors and
financing agencies would entail (a) using local administrative units as a
basis for designing donors supported programmes, (b) increasing reliance on
local resources in implementation, both human and material and (c) using
participatory structures for programme management, supported by transparent
mechanisms for financial control at the local level.
67. The emphasis given to non-governmental organizations and CBOs stems
from their comparative advantage as development and conservation agents
with the ability to reach and work with the rural population through
participatory approaches, their knowledge of local conditions and people's
priorities, their ability to mobilize voluntary labour and resources, their
ability to deliver services at low cost, and their independence and
flexibility, as well as the confidence and trust they inspire with regard
to representing local interests and introducing changes.
2. Institutional coordination arrangements at national and
subnational levels
68. Institutional coordination among those responsible for the
environment, forests, agriculture, land management, and industry in most
countries may not always be very effective owing to overlapping mandates,
conflicting objectives and a lack of appropriate coordination mechanisms.
Representation and participation of all involved bodies in decision-making
are essential; these include the ministry of finance, national and
commercial banks, environmental and forestry agencies and funds, grass-
roots lending associations, forest industry, forest owners and sectoral
authorities at the national and subnational levels, as well as external
funding organizations.
69. At the policy level, there is a need for increased coordination on
policy process and institutional strengthening as well as on the dialogue
between donors and the government to create favourable conditions for
financial flows. At the operational level, coordination needs to focus
mainly on improving efficiency and effectiveness through information
exchange, and simplification of administrative procedures, and by ensuring
that funds for NFP are directed towards priority areas as recognized in
NFP.
C. Donor coordination in NFP implementation
70. The designation of a major implementing organization as an external
core support agency (CSA) in some countries has been very helpful in
implementing the NFP process. The CSA helps maintain the momentum and
technical quality of the review and planning process, assists in the
coordination of external assistance, and provides inputs to capacity-
building. A country has at least four options for core support and
coordination tasks, namely, multilateral development banks (MDB), bilateral
agencies, UNDP and FAO.
71. UNDP is developing the concept of forest partnership agreements in
which national commitments and donor support would be brought together
under a legally binding agreement. This concept is based on the premise
that the interests of donors and recipient countries in preventing forest
loss or increasing tree cover as well as conserving biodiversity are in
accord. Such an agreement would need to be carefully negotiated to ensure
that long-term commitments are made and that any resulting programme is
country-led, reflecting national needs and requirements, particularly those
of local communities and forest dwellers, and not driven by the
requirements of the donor.
72. There is considerable scope for improving in-country cooperation among
the four major players mentioned in paragraph 70 above. Additional details
concerning international institutional arrangements are available in the
report of the Secretary-General to the Panel at its second session on
programme element V.1 (E/CN.17/IPF/1996/12), in the outcome of the
Swiss-Peruvian initiative, and in the Denmark/South Africa/UNDP Pretoria
workshop.
73. Appropriate indicators have to be designed for monitoring and
evaluating the effectiveness of international cooperation in financial
assistance and technology transfer to support the implementation of NFP.
These indicators could be designed to also measure political commitment of
the government, level of commitment by local groups, performance of
external agencies, successes of the programme (rather than the project)
approach and capacity-building. Potential indicators could also include
forest policy revisions and adoption by government, preparation and
implementation of the national forest programme, extent and nature of the
consultative process, coverage and accuracy of regular reporting procedure,
inclusion and integration of the NFP into the national sustainable
development strategy and the government budget, inclusion and integration
of donor programmes in the sectoral investment programme, sectoral
disbursements of various sources of financing and the forestry's share of
the total, number of project entities and number of long-term expatriates
working in forestry.
D. Effective coordination at the international level
74. At the international level, at least three activities are needed to
improve coordination: (a) harmonization of coordination and cooperation
between policy and planning frameworks at the country level to avoid
confusion and overlap, (b) critical evaluation of emerging approaches to
facilitate speedy adoption of feasible solutions and (c) easy access to
information at international, regional, country and project levels.
75. The harmonization of coordination and cooperation between policy and
planning frameworks needs the full participation of all parties involved,
both national and international. The Forestry Advisers Group of donors has
been important in this field, and its future work is expected to emphasize
coordination in country-level efforts through networking, but it will also
continue to contribute to policy development and other coordination issues.
76. The exchange of information and experience among countries will
continue to be increasingly important in the future. FAO's former TFAP
Coordination Unit (now the National Forestry Action Programme Support Unit)
has played a key role in compiling basic information on country-level
exercises. Reliability of the information depends on the commitment of
countries to providing the data and FAO's ability to obtain firsthand
information through other channels. The reports and database have mainly
served donor and international agencies and the usefulness of this
information needs evaluation.
An information system to improve coordination
77. Although there are existing information database systems developed to
manage the implementation of NFP in forest-related agencies, these
information systems should be reviewed and improved to enhance coordination
and increase the effectiveness of financial assistance and technology
transfer. The improved information systems should be able to provide
information to donors about priorities as determined by countries' NFP, and
about ongoing and completed projects and programmes. Countries would have
access to information, through the Internet, about funding opportunities
for their projects or programmes. In addition, information about ongoing
and past programmes would provide opportunities for exchange of information
and serve to avoid duplication. The system might contain at least the
following basic information concerning four principal aspects:
- Government or recipient agency: profiles of financial and
technical assistance, ongoing and completed projects, new areas
that require assistance;
- Donor and multilateral agencies: list of projects and their
profile, areas of interest and guidelines on how to apply for
assistance;
- Funds for technical support: list of funds, their target
interest and target group, guidelines on how to apply;
- List of experts.
IV. CONCLUSIONS AND PROPOSALS FOR ACTION
78. It is recognized that the ability of countries to finance their SFM
activities varies from country to country, depending on a combination of
factors such as national per capita income, as well as the size and quality
of their forest resources, the state of development of their forest-based
industry, and so on. These diverse factors also influence a country's
capability to raise financial resources and to acquire the required
technology.
A. Public finance
79. ODA is still a very critical instrument and could continue to play a
vital role as a source of finance for sustainable development of forests in
the developing countries. However, as the prospect of its increase in real
terms in future is not encouraging, the challenge is to ensure that ODA is
deployed more efficiently and effectively.
80. While there is a limited possibility for generating additional
resources through public finance, it could still be generated through
various market-based instruments such as taxes, levies, user fees, and so
on.
Proposals for action
The Panel may wish to:
- Request donor countries to increase the proportion of their ODA
contribution to support programmes for SFM and industrial
development;
- Urge countries, through their representatives on governing
bodies, to support increased and improved programmes for SFM in
multilateral organizations;
- Request relevant organizations in forest such as ITTO, FAO and
UNDP to set up a working group to further explore innovative ways
to generate additional financial resources, in particular at the
international level;
- Urge countries to introduce and continue using market-based
instruments (MBIs) such as user fees, and increase rent capture,
levies, and so on as a tool to mobilize domestic financial
resources and reduce cost owing to unsustainable forestry
practices.
B. Private sector investment
81. There is evidence of a shift in capital flows from public to private
sources to support SFM. It is critical, therefore, for countries to take
the necessary steps to introduce appropriate policy reforms to attract
private sector investment. The policy reforms aimed at attracting
investment by the private sector should complement policies and regulations
that also encourage sustainable forest management. There is a need to
formulate a code of conduct, incentives for better forest management
practices, and other forms of innovative measures to encourage private
sector activities that reduce damage to the environment.
82. Proposals for Action
The Panel may wish to:
- Urge developing countries to reform their policies and
regulations to attract private sector investment. Various
instruments such as financial incentives and leverage from public
funds may be introduced, where appropriate, in collaboration with
donors;
- Encourage countries to formulate policies and incentives that
favour forestry practices that are consistent with SFM.
Formulation of a code of conduct and, where necessary,
independent auditing to closely monitor harvesting practices may
be considered. The Panel, accordingly, may request FAO, ITTO,
UNEP and other relevant bodies, in cooperation with the private
sector, to develop a code of conduct for forest-based private
companies;
- Call upon developed countries to formulate and create incentives
to encourage their private sector to invest in sustainable forest
management and utilization in developing countries.
C. Technology transfer
83. Technology needs assessment (TNA), which requires consultation with
all interested parties involved in SFM such as government, non-governmental
organizations, private sector scientists, and so on, should be employed as
a tool to identify the technologies that are required for sustainable
management and utilization of forests.
84. Owing to similarity in terms of forest types, institutions and
culture, there is a considerable potential for South-South cooperation to
complement North-South cooperation in technology transfer.
85. Some obstacles to better use of current information systems, available
on environmentally sound technologies (EST), include lack of awareness,
language barriers, lack of training, difficulty in accessing the
information, lack of packaged information and lack of on-line facilities to
access these information systems.
86. Strengthening national research and training institutions is a
critical measure with respect to increasing absorptive capacity for
technology transfer and ensuring adequate capability to adapt these
technologies to local conditions.
Proposals for action
The Panel may wish to:
- Urge countries to assess and explicitly identify technological
requirements of their countries through TNA in order to achieve
sustainable management and utilization of their forests. The
assessment and identification of specific technology needs should
be consistent with the recognized priorities within their
national forest programmes;
- Call upon countries to formulate policies and incentives that
encourage the private sector to use environmentally sound
technologies (ESTs);
- Promote South-South cooperation in technology transfer through
private sector investment, joint ventures, exchange of
information and greater networking by institutions in the South;
- Request a group of internationally recognized experts, supported
by CIFOR, ICRAF and IUFRO, to propose measures to overcome
inadequate research capacity in the developing countries and to
develop and adapt technologies for SFM. Proposed measures may
include strengthening existing national research institutions,
encouraging national research institutions to play a more active
regional role and considering the feasibility of creating new
international research institutions and networks dedicated to
sustainable management and utilization of forests and forest
policy research.
D. Coordination
87. Coordination in financing sustainable forestry is critical to improve
effectiveness and efficiency in fund-raising and utilization, but it should
not be an end in itself. Poor coordination of funding often results in
waste or misuse of scarce resources. Coordination needs to be addressed at
the national, regional and global levels, and it should include all
interested parties, including the private sector.
Proposals for action
The Panel may wish to consider the following proposals for action to
strengthen coordination at the national and the international level:
(a) National-level coordination: steps to improve coordination
between in-country aid agencies and national interested parties reflect the
following points:
- Governments are primarily responsible for in-country
coordination;
- NFPs are established as country-driven processes and as a
framework for coordination of financing and international
coordination;
- In-country donor coordination is supported by an external agency,
selected by government and based on its long-term commitment to
the sector;
- Planning and implementation of development activities, wherever
possible, is decentralized and carried out at the district or
appropriate local level emphasizing incentives to the private
sector, non-governmental organizations and CBOs;
- All concerned national bodies including the finance ministry, the
private sector, national and commercial banks, environmental and
forestry funds, grass-roots lending associations, forest
industry, forest owners, sectoral authorities at national and
subnational levels and external funding organizations need to be
involved in the planning and implementation process;
- Pooling of resources needs to be encouraged as a means of
improving efficiency.
(b) International-level coordination: steps to improve
coordination of financial assistance at the international level include the
following:
- A shared vision of SFM developed by Governments, international
organizations and donor communities providing common objectives
and a basis for coordination;
- Elimination of duplication and competition between donors;
- Provision of a better flow of synthesized information on
programme progress, policy development, best practices and
lending strategies, including establishment of specialized
databases;
- Development of appropriate indicators for monitoring and
evaluation of the effectiveness of international cooperation in
financial assistance and technology transfer;
- Exploration of the feasibility of special partnerships for
forests, based on pooled resources supporting comprehensive
programmes, through further study and national experiments;
- Mandatory coordination (in-country and at the international
level) among intergovernmental organizations within the United
Nations system;
- Encouragement of informal coordination mechanisms such as the
Forestry Advisers Group and those of non-governmental
organizations.
E. Information systems
88. In view of the rapid progress of information technology and its role
in providing information services that support activities for sustainable
forest management, there is a need to review and improve existing
information systems. Attention should be given in three areas as discussed
in this report, namely, increasing private sector investment, speeding up
technology transfer to developing countries, and improving coordination.
It is desirable for the information systems to be Internet-based for this
would allow easy access and information-sharing among multilateral
agencies, countries' institutions, non-governmental organizations and other
interested parties.
Proposal for action
- The Panel may wish to invite relevant multilateral forest
agencies and international organizations to review and initiate
the development of improved information systems that support
activities for sustainable forest management, particularly so as
to facilitate private sector investment, speed up technology
transfer to developing countries and improve coordination in
financial assistance.
Notes
1/ Report of the United Nations Conference on Environment and
Development, Rio de Janeiro, 3-14 June 1992, vol. I, Resolutions Adopted by
the Conference (United Nations publication, Sales No. E.93.I.8 and
corrigendum), resolution 1, annex II.
2/ Ibid., annex III.
3/ See report of the Secretary-General on financial resources and
mechanisms for sustainable development: overview of current issues and
developments (E/CN.17/1996/4 and Add.1); note verbale dated 1 March 1996
from the Permanent Representative of Japan to the United Nations addressed
to the Secretary-General containing the Chairman's Summary of the Third
Expert Group Meeting on Financial Issues of Agenda 21 (E/CN.17/1996/28);
and Official Records of the Economic and Social Council, 1996, Supplement
No. 8 (E/1996/28), chap. I, sect. C, decision 4/14.
4/ A/AC.237/18(Part II)/Add.1 and Corr.1, annex I.
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Date last posted: 7 December 1999 12:45:30
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