Compiled by S.A. Dembner
Stephen A. Dembner is the Editor of Unasylva.
A synthesis of the results of the Workshop on the Reform of the Forestry Sector towards a Market Orientation for Countries in Asia, organized by the FAO Forestry Policy and Planning Division in Fuzhou, China, from 21 to 26 March 1994.
A number of former centrally planned economies in Asia are undergoing a significant reorientation of their economy to allow market forces to stimulate economic growth and a more efficient production and distribution of goods and services. The capacity to earn foreign exchange through increased competitiveness on export markets is another major concern in the current macroeconomic reform process.
Forests and trees constitute a natural resource of recognized importance for the economy, for the welfare of rural people and for the environmental stability of all countries concerned. Therefore, the forestry sector is also being affected by the economic reform. This situation poses a considerable challenge to the countries' present forestry policy and institutional and managerial capacities. It is necessary to ensure that the reform process stimulates a more efficient utilization of forest production and a higher performance of forestry activities. At the same time, the long-term sustainability of the resource and its public services, such as protection and conservation, must be maintained.
The challenge consists in defining suitable arrangements for forest operations and processing activities with an adequate share of responsibilities between public institutions and local communities, farmers and private enterprises. As in all other economic sectors, public forestry institutions are confronted with the need to: adapt their role and responsibilities in line with the new sectoral policies and the need for participatory planning and management; provide information and extension support and facilitate intersectoral coordination; and ensure control and supervision in the context of shared responsibility with local communities and private enterprises.
The situation is further complicated by the difficult economic situations which countries are facing, a scarcity of investment funds, the competition for priority-setting by policymakers among the many pressing problems confronting their societies and a lack of previous practice and managerial skills to operate under the new economic system.
The reform process in forestry requires a re-examination of current forestry policies and of the institutional framework within which they are being implemented. The role of state forestry institutions must be reexamined in line with the required shift from a direct operational role towards the provision of effective support to the emerging private and communal forestry and forest industry sectors. Forests and their management and utilization must be appropriately integrated in the emerging land management systems, ensuring adequate environmental safeguards. When developing strategies for appropriate integration, customary traditions and practices should be taken into consideration.
Agenda 21 of the United Nations Conference on Environment and Development (UNCED), held in 1992, emphasized the need for support and assistance to countries in the process of reform to strengthen their national capacity for conserving and sustainably managing their forest resource for environmentally sound socio-economic development.
Additionally, some of the countries concerned had expressed the desire to receive assistance in finding appropriate ways and means to make this changing process more effective and to do so with careful consideration of their technical, managerial capacity, without negatively affecting the productive capacity of their forest resources on which many people depend, especially from the rural areas.
This context underlined the importance of providing countries with a forum to exchange information, discuss their experiences and draw some lessons that could facilitate more effective progress in the reorientation of their forestry sectors towards a market economy without affecting the long-term sustainability of the resource. This was the main goal of FAO's workshop, organized within its programme of forestry policy advice to member countries. A complementary goal was to obtain from the countries themselves clear indications of their perceived capacity-building requirements to guide external support for their current efforts.
The Workshop on the Reform of the Forestry Sector towards a Market Orientation for Countries in Asia was attended by experts from China, Laos, Mongolia, Myanmar and Viet Nam. The overall objective of the workshop was to provide a forum to discuss the reform of the forestry sector in line with the new macroeconomic and policy orientation adopted by their governments. The main emphasis was on policy, institutions and economic aspects of the reform process.
More specifically the workshop's objective was to enable the participants to:
· analyse the different approaches and options being followed by countries to reorient their forestry development; learn about their experiences in adapting the above-mentioned aspects to the new socio-economic conditions under which the sector must operate while ensuring the sustainability of its multiple roles and benefits;· identify and understand the main difficulties and issues in the forestry sector's reform process, particularly regarding forestry policy, forestry institutions and legislation, rural people's participation in forest management and utilization, market oriented systems, land tenure and forest conservation and protection;
· identify possible mechanisms for further exchanges of information and experiences and cooperation among the countries in the process of reform towards a market orientation; and
· identify specific action areas or subjects in which external technical assistance, in particular from FAO, could facilitate the reform process.
Individual country reports presented by China, Laos, Mongolia, Myanmar and Viet Nam revealed that countries are at varying stages of transition to market economies and that the understanding of market principles varies greatly.
China has perhaps made the most dramatic reforms among the participating countries, particularly in its special experimental zones for market reorientation (see Box on Sanming Prefecture, p. 58). Between 1978 and 1991, China initiated numerous economic reforms in the forestry sector, including: the allocation of hilly land for private use (with ownership remaining collective) through contracts of 30 to 50 years which may be transferred or inherited; the development of shareholding schemes for land use, trade liberalization and forest product marketing; encouraging joint ventures and foreign investment; implementing multiple forms of the "contract production responsibility system"; reducing state involvement in setting prices for forest products (the percentage of state-monopolized timber purchases declined from 81 percent in 1980 to 10 percent in 1993); establishing tax incentives for forestry development; and forcing corporations to raise capital for investment from loans rather than from state financial allocations. These reforms were accelerated in 1992 when China officially adopted the goal of creating a "socialist market economy" by the end of the century. Under the recently adopted programmes, added emphasis will be placed on "pushing forest enterprises to market", developing forestry through the endeavours of the entire population, increasing economic support to forestry through tax policies, incentives and investments in infrastructure and strengthening administrative support to forestry.
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Sanming Prefecture Sanming Prefecture, located in the northwest of Fujian Province, includes 12 countries which cover 2.3 million ha. About 70 percent of the prefecture is covered with forests. In 1988, approval was granted for Sanming to be established as a pilot reform zone for collectively managed forest areas. The foundation of Sanming's forestry reforms lies in the establishment of a "joint-stock system" of management, whereby forest resources are collectively owned by villages through the distribution of shares or stocks to individuals but are managed on a unified basis under competitively awarded contracts. Dividends are divided among the stockholders once a year. Stock ownership may be inherited or transferred within the village, but not to outside interests. Additional stocks may be acquired by providing labour for forestry operations or by direct cash payments. More than 1300 stockholder associations have thus far been established in Sanming to coordinate forest management decision-making and encourage sound forestry practices. |
Laos has experienced periods of radical economic change in recent years. The period 1975- 1980 was characterized by the nationalization and collectivization of private enterprises and properties. All land was proclaimed state property and private ownership and tenure were abolished. Between 1981 and 1986, the process of nationalization and collectivization was still encouraged, but more attention was given to the creation of state enterprises. Since 1986, Laos has pursued a "new economic management mechanism", with a stronger market orientation, including the recognition of individual land-use rights. As in China, landownership lies with the people collectively, but land-use rights are being allocated to individuals. Many of the existing wood-based factories have been privatized - sold or leased primarily to foreign investors from Thailand, Hong Kong, Taiwan Province of China, the Republic of Korea, China and Japan.
Economic liberalization has brought considerable environmental problems to the forestry sector in Laos, as administrative protection is very weak relative to the economic forces pursuing the rapid exploitation of resources.
Mongolia has only very recently embarked on market-oriented reforms (beginning in 1991), but change is occurring very rapidly. Privatization is the keystone of Mongolia's reform policies. A first phase, during which the former pastoral cooperatives were abolished in favour of private pastoral rights, has nearly been completed. A second phase emphasizes the privatization of state-owned enterprises, including forestry enterprises. By early 1994, about 60 percent of all small and medium-sized state enterprises had been privatized. As in Laos, there is considerable apprehension in Mongolia that the transition to a market economy may put forest resources at a greater risk. It is recognized that strong mechanisms and incentives are needed to ensure sound natural resources management.
Myanmar had a thriving competitive private sector from the time of independence in 1948 until 1962. Between 1962 and 1988, however, centralized planning dominated the economy and, by 1989, the eroding economic system encouraged Myanmar to join other countries in the region moving towards an increased market orientation. Logs and sawnwood are the dominant export from Myanmar, generating 32 percent of all foreign exchange. The state still directly controls the harvesting and sale of teak resources in all areas of the country except those bordering Thailand, but the private sector has increasingly become involved in non-teak production and export since 1989. Since 1990, Myanmar has greatly expanded the number of short-term "purchase contracts" issued for timber exploitation in the border areas with Thailand, with nearly 400 contracts active in early 1993. Serious problems have been encountered under the purchase contract system, with frequent violations of environmental and financial regulations. This has led Myanmar to cancel all purchase contracts as they expire. Now reviewing the situation, Myanmar expects to develop new regulations and incentives aimed at encouraging long-term investment and downstream processing within the country.
Viet Nam began economic reforms in 1986, but few initiatives were taken in the forestry sector until 1992. Thus, most of Viet Nam's experiences must be considered experimental. In 1992, a new land law was enacted, facilitating the allocation of forest land for use by individuals and groups for periods of 50 years or more. Under the law, farmers can work the land, transfer use rights or use the land as collateral for loans. Over 1 million ha of forest land have already been allocated; as many as 3 million ha are targeted for allocation by the year 2000. Complementing this clarification of land-use rights are aggressive efforts to attract foreign investments and joint ventures in forestry.
In the course of the workshop, the participants organized themselves into two working groups, focusing on Forest Policy and Institutions and on Economic Aspects of Market Orientation in Forestry. They discussed issues that had emerged from the presentation and discussion of the country reports and thematic papers prepared by the workshop organizers. For each topic, the working groups focused their attention on: main lessons learned in the market reform process; major issues encountered; significant needs for information or knowledge to address these issues; and the role of regional cooperation and external assistance in facilitating and accelerating the reform process towards market orientation. A concise synthesis of their conclusions and of the plenary discussions is presented below.
There is ample evidence that rural people continue to depend on the forest to a significant extent for food, fodder and fuel. With the increasing movement of people into cash economies, however, there is also an increasing need to assure people access to forest resources, not only for subsistence products but also for products that can be sold to obtain additional cash income.
There is no single right prescription for forestry's transition to a market-oriented economy. Caution is needed and it is necessary to proceed gradually while assessing the impacts and carefully monitoring the effectiveness and sustainability of the reforms. Each country's unique social, cultural and historical characteristics favour different approaches for reorienting the forest economy and culture. Market-oriented reforms cannot be made in isolation from other sectors of the national economy, nor from the policies of neighboring countries and the international economic environment.
Countries moving from centrally planned to market-oriented economies are proceeding with a wide array of mechanisms and instruments to convey land and resource use rights to individuals and groups, including contracts, leases, joint management agreements and stock distribution. In many cases, however, the procedures for conveying use rights and the objectives for such transfers are poorly defined. Clarification is needed with respect to those eligible to secure land and resource use rights, the extent and type of land and resources to be conveyed, the land and the resource uses to be permitted and the duration of the permits and agreements.
In Viet Nam, a 1992 land law facilitates the allocation of forest land to individuals and groups
In many countries implementing market reforms, landownership remains with collectives but land use rights are being conveyed to individuals. This raises the need for precise clarification of which rights are accorded to individuals and especially which rights can be transferred, sold, inherited or used as collateral for loans.
Special problems arise in allocating the use of forest resources to individuals in countries with significant populations of shifting cultivators or nomadic herders. Reconciliation of new market-oriented individual use rights with traditional customary use patterns is necessary.
There are important justifications for maintaining some forest lands under government jurisdiction (e.g. to protect key watersheds, maintain fragile wildlife habitats, sustain endangered resources and biological diversity, manage national parks, etc.), especially externalities that are unlikely to be provided under private ownership or management. Attention must be given to identifying such areas and providing for adequate government management and protection of critical resources.
Protection of the long-term sustainability of forests and their wood and non-wood goods and services is a primary concern of foresters and planners in all countries. An effective mix of economic incentives, motivational policies, education and extension must be combined with appropriate loans, regulations, monitoring and enforcement to ensure responsible resource management by those who are provided access to forest resources. In some countries, the role of government in providing these controls and incentives has not been clarified, leading to overexploitation by those to whom resources have been allocated.
Reform towards a market economy does not necessarily mean privatization, but it requires competition to stimulate a higher performance. Effective instruments and policies are needed to stimulate competition and an appropriate legal framework is needed to encourage and reward creativity and efficiency in all enterprises, even if they remain under state control.
Under central planning, state-run enterprises provided employment and social services for significant numbers of workers and their families. The movement towards market-oriented economies has meant the reduction or elimination of many such enterprises. Governments and planning officials are struggling considerably to develop effective "social safety nets" to support former employees of state-run enterprises through the transition.
Countries are also struggling to determine appropriate roles for government forestry agencies under new market - oriented forestry approaches. Relevant roles appear to exist in: the collection and dissemination of market information; monitoring forest harvesting; ensuring environmental protection and dealing with externalities; providing technical assistance to new forest resource users; preventing monopolies; ensuring the equity and promotion of social goals; export promotion; and research. However, clear mandates have not been given to forestry agencies to carry out these roles, nor has adequate in-service training been provided to reorient forestry agency employees in these new roles.
Copies of the full report of the workshop, the national reports and the resources papers prepared by FAO may be obtained by writing to the Forestry Policy and Planning Division, FAO, Viale delle Terme di Caracalla, 00100 Rome, Italy.
