Monday, October 19, 2020

53 Forest Corporations in India-II. Some experiences

In the previous post, some background and general issues of state forest corporations were discussed; now to specifics, based on personal experience.

Struggles of a forest industries corporation

My very first regular posting was to just such a forest corporation’s field unit in a small town in the Western Ghats of Karnataka. Its core operation was an old sawmill inherited from the erstwhile Forest Engineering wing of British days. The saw mill’s heart was a legacy horizontal steam engine with a huge vertical metal flywheel, which imparted rotary motion to rods running overhead to which were attached individual machines with belts. The pride of the sawmill was its main breakdown sawing machine, the logs being fed by a rolling trolley onto the endlessly looping band saw. The saw band was quite broad and thick, with the result that it produced as much sawdust and waste as cut wood. The problem was compounded by the difficulty in procuring proper saw blades, and the frequent malfunctioning of the saw blade sharpening device, all imported but ageing contraptions. The original role of the unit was to produce railway sleepers, but since the railways had switched to concrete or steel sleepers, the sawmill had to produce cut wood for other general uses. Because of saw blade problems,  the surfaces of the cuts were often bowed or rutted, making for much wastage. The standing joke was that the mill’s first priority was to produce enough waste wood for the boiler, with the production of sawn wood being a secondary consideration! Another huge handicap was that the sawmill was saddled with a large work force of some 300 persons (originating in a plan for weaning away a community from a way of life that was damaging to the forest), which was some ten to twenty times the work force of a commercial mill with a comparable output (which rarely went above 10 cubic meters a day). The seasoning kilns also were fairly inefficient. There had also been a sudden spate of recruitment at the supervisor level at the inception stage of the corporation. At that time, much was made of the promise of modernization, technology improvement, infusion of finance from banks, and expansion of products and markets, and so on.

If these problems were not enough, the corporation had taken up a whole variety of other ‘projects’, such as medicinal and aromatic plants, pineapple and fodder grass, and others which I have forgotten. None of these had really worked out well, and dealing with these scattered field installations was wasteful of time and money. The mill was able to meet some of its overheads only because the forest department had an arrangement of giving butt-end pieces of large logs of teak and other valuable hardwoods at a concessional price. Bespoke contracts were given for supply of timber to other government agencies like the road transport corporation (for building truck bodies) or the schools directorate (for school furniture).

A particularly brilliant and entrepreneurial officer was posted to head the corporation, around the time that I was ready for my first posting, and he more or less hijacked me into the said field unit. Under this officer’s guidance, the corporation gradually wound down the unprofitable side ventures, and tried to find alternative work with the support of the forest department: for example, taking on the logging and extraction activities of the neighbouring forest divisions. During the time I was with this corporation, a number of fuelwood depots were also set up in the eastern dry tracts of the state, to provide domestic fuelwood and bamboos at controlled rates in lieu of the entry of farmers into the forest under the prior “pre-paid license” system. Years later, when the corporation went into almost terminal difficulties in meeting the salaries of the employees, it was even awarded a portion of the net sale proceeds of the logged timber, as a further financial support from the government. These measures were resisted by local cooperative forest labour societies, which were already getting preferential allotment of logging works (as a part of the government’s strategy of giving legal work to the local people who had been dependent on removal of timber and other produce directly from the rich forests of the Western Ghats, at the cost of forest fires, damage to young pole crop, soil erosion, wildlife poaching, and so on).

My own contribution, if I remember rightly, was to introduce a couple of modern electricity-powered sawing machines, push for a switch from steam to electricity (this was in the 1970s!), and take measures to reduce the production of sawing waste (which not only fed the boiler, but was also taken home by the workers for their domestic fuel requirements).

Such measures kept the corporation going for many decades, but the saw mill field units gradually sank and were closed down in due course of time. Many years after that first posting to the field unit, I also had occasion to work as managing director at the helm of this forest industries corporation, thus giving a broad view of the whole range of operations over the entire history of the company. Attempts to revive the old saw mill units did not gain traction. The only successful wood processing unit left was the one at the state capital, mainly because of the brisk demand for its products such as made-to-order doors and windows, and furniture, in the burgeoning construction industry. The unit had a very good reputation for producing quality products from wood that was seasoned and treated on its own premises, further bolstered by the confidence in the quality and genuineness of the wood used. As timber supply from the forest department tapered off with the ban on green fellings, the unit switched successfully to timber bought in the open market: imported logs to a great extent, and some innovative sources like rubberwood from the rubber plantations, acacia wood from the mature trees planted here and there, and so on. For the rest of it, recourse was had mainly to the logging activities on behalf of the forest department to cover the salaries of permanent staff, and total staff strength was gradually brought down as retirements took place in the normal course.

So this hands-on experience in the forest industries corporation brought home to me the typical deficiencies and handicaps of our government undertakings. In this case, they included old legacy plant and machinery, bloated legacy load of employees, deficiency of market demand, lack of focus, diversion of attention into unprofitable projects, and so on.

Problems of forest plantation projects

While this corporation had only a limited scope for rescuing itself from its weaknesses, I had a better experience of the other forest corporation I came to head later in my service career. This was a forest ‘development’ corporation that had been set up around a kernel of the extensive forest department plantations of pulpwood (eucalyptus, acacias, casuarina, etc.) and rubber (raised for the rehabilitation of Tamilian workers repatriated from Sri Lanka). Now that I think back upon it, there was also a chunk of cocoa plantation, raised under god knows what scheme. A special project had been pushed through to raise tamarind in blocks, combined with small timber and manila fiber-producing agave (which is a scrub species used for soil conservation and natural fencing in dry lands). A foray had also been made into tea in some degraded land in Coorg (Kodagu) district, and I think there was also a tiny bit of coffee somewhere. There was also a separate corporation for cashew development in my state (and this one tempted some of our senior officers to engineer the setting up of a factory to produce feni, the liquor based on the pulp of the cashew fruit).

I think the underlying rationale was that our mixed miscellaneous forests were not contributing their mite (or might, as the Indian expression would have it) to the economic strength of the country, and the route to increasing their physical and economic productivity would be to replace the poor mixed growth with intensively cultured, superior, commercial forest- and tree-based crops such as teak, pulpwood, rubber, and so on. This was the approach settled upon by the post-independence National Commission on Agriculture in its interim report on man-made forestry (NCA,1972), and also urged by mainstream economists - including the great Samuelson (1974), who questioned the physical sustained yield  model of traditional forestry as being financially inefficient and wasteful. Somewhere along the way, the corporation had also been saddled with the staff and remaining crops of a ‘joint sector’ plantation company set up in collaboration with a prominent rayon manufacturing company. This joint sector corporation had run into rocky waters by the attack mounted by our environmental warriors, and the private partner had been forced to relinquish its portion, although it was ultimately compensated by the government for its share of the investment.

It is apparent that many, if not most, of these ventures had been drawn up as ‘bankable’ projects, and put through the appraisal procedures of commercial banks and funding agencies in their initial stages. On paper, then, these were all financially attractive projects that should have solved the problem of the low-investment low-productivity trap that was diagnosed as the fundamental problem of the forest sector in India. In reality, most of these projects failed to live up to their promise, and in many instances could not keep up the interest and principal repayments. In other words, they became ‘non-performing assets’ in banking jargon.

Each project may have had its own problems, much as Tolstoy’s unhappy families were each unhappy in their own way, but some factors can be seen commonly. The simplest factor was that the projections in the project proposals may have been too optimistic; they commonly assumed the best performance reported (or imagined!) in the best of conditions, as applicable over the whole geographical extent and time span of the proposed project. As against this, the actual sites obviously exhibited a range of productivity classes, very few of them conforming to the best in the models. Needless to say, a host of other factors may have conspired to depress the actual performance: deterioration in planting stock quality, slippage in timeliness of operations, inadequate inputs, vulnerability to failure of rains, biotic disturbances from pests and diseases, animals, and even from human sources, and so on. The plans and projections, extrapolated from the best and most optimistic models, were rarely achieved in the actual yields, which were distributed over a wide range in much lower productivity bands.

The answer is to fool-proof the growing assets against such hazards, by such measures as providing artificial irrigation to eliminate the effects of drought, and so on. But such interventions are costly, and are not usually provided in forestry projects, which are extensive in area and left to the mercy of nature. Indeed the plantation of forest species (pulpwoods or small timber) often mimics the natural forest, where seeds fall in their thousands but only a fraction of them grow to maturity. Thus a commercial crop may start with planting at a few thousand plants per hectare, but these are thinned by design over the subsequent lifetime, until the final stand may have only a few hundred stems per hectare. The growth pattern in a horticulture or agriculture crop is quite different, as the initial spacing corresponds to the final spacing, and each plant is nurtured individually and contributes to the final yield. This of course has to be the case with coffee or rubber plantations, even when grown by a forest corporation!

Management lapses and sheer failures could also contribute. A common bane of public sector companies is that the top management (especially the politicians and the politically ambitious civil servants at the top) may tend to use them to garner influence and prestige, that is by lavish spending for publicity, functions, foreign trips, entertainment, prestige buildings, unnecessary or unproductive purchases and investments, unplanned side ventures, and so on (not to mention provision of personal facilities like extra vehicles for personal use, domestic servants, or even outright corruption, which of course we do not talk about in polite company).

Private plantation schemes turning into a scam

Incidentally, it was not only the government forest ventures that were performing below expectations: some of the commercial tree plantation ventures floated in the 1990s may also have come a cropper owing to this quirk of forest tree stands. Many of these were floated as investment schemes, prospective investors being offered a guaranteed return of one cubic meter per tree in something like 15 to 20 years (Balooni, 2000). They seem to have engaged some foresters as advisors, adding to their credibility.The investor was also promised a share in the title to the land. Obviously this looked like a really good deal, and many individuals were tempted to put some of their savings into these companies. 

I recall that some of us younger foresters did have some discussions on these schemes at the time, especially as the growth and production promised seemed to call into question the forest department’s own productivity record. If these private outfits could achieve such sterling results, why couldn’t the forest departments do the same? However, the more we examined it, the less credible did their claims appear. The productivity of our tree species is laid out in what are called Yield tables, produced by our central forest research institutes. If you look at the tables for teak, for example, average crops may yield a few cubic meters stem timber from a whole hectare of plantation, rather than one tree. However, as we were not asked for our technical advice, most of us kept our own counsel, as we could not question the credibility of these public prospectuses without attracting libel suits. The most we could do was to just refrain from putting our own money into such schemes, without overtly attacking them, and leave people to draw their own inferences from our actions.

In due course, most of these projects landed in problems as the production failed to match the promises (https://en.wikipedia.org/wiki/Anubhav_Plantations). The Securities Board of India, the watchdog body to ensure a safe investment market, clamped down on these schemes (https://www.sebi.gov.in/sebi_data/attachdocs/1300276223382.pdf). Some of the project proponents were even prosecuted, and had to spend some time in jails (https://www.watchoutinvestors.com/Press_Rel-T/cis/0001.pdf). 

My own hunch is that some of them in the initial offerings may have been well-meaning but mis-informed. Perhaps they looked at the yield tables, which show the volume expected per hectare (differentiated between the main stem timber and smallwood, which cannot be valued at timber prices), and mistook these figures as the volume expected per tree. This of course would amount to a gross blunder, and it is indeed difficult to accept such a lack of attention on their part. Perhaps the project proponents were genuinely convinced that they could achieve these extraordinary yields by applying fertilizer, irrigation, and genetics. In summary, they exhibited the unreasonable optimism of project proponents seen everywhere, but in an extreme form.

Rescuing a forest plantation corporation

When I took charge as MD of the forest development corporation, it seemed to have entered an irretrievable end stage, with defaults in repayment of its huge debts (taken in previous years for the fanciful tamarind and timber plantation projects). The prices for its rubber products (mainly liquid latex) seemed to be falling. The previous bosses had developed the narrative that only a massive financial infusion could save the corporation, which government was not very willing to consider, as a large chunk of capital had already been given in the form of plantations and land. There was also some fanciful (again!) suggestion of diversifying into some modern, dynamic activities (like eco-tourism, which was a hot topic after the success of a jungle tourism corporation). In fact the previous bosses had ventured into a joint sector operation to construct just such a jungle lodges-type resort in the heart of a  national park, but this had run into problems with the courts and had had to be abandoned (again, the private party was happily compensated for its losses after litigation and arbitration).

One of the curious facts of the real world is that one is often thrown into situations which have no relation to one’s previous experience or training. This is of course common in the state sector, but is not unknown in the private sector either, as the biographies and memoires of private sector CEOs demonstrates. A new CEO brought in from outside has to gain an understanding of the situation and the people, and initiate appropriate action, within a reasonable time – maybe a couple of months or less. There is an approach to the new leader’s role termed “the first 90 days” that serves well in this context (see below). A little secret: it is easier to follow on behind a poor past management, as the unresolved issues themselves suggest the appropriate remedies and responses – at least for the first 90 days! The public servant can usually get away with this much of agenda in the short span of his charge (usually a couple of years, to a maximum of three years).

A few remarks about the 90-day principle: this is a nod to the book The First Ninety Days by Michael D. Watkins (2003), which expands on the idea that a new CEO has to get on top of his or her new charge within a reasonable period, say 90 days, or else lose the plot. (It also has a sibling, The First Ninety Days in Government, by Daly, Watkins and Reavis, that adds a few plausible examples of government officials in similar challenged situations). Of course, I had no knowledge of this book or the principle, let alone the methodology, during my CEO days; it was all done by common sense and listening, mainly to staff and employees and customers. My home-spun approach was to make a list of outstanding issues over the initial weeks of discussions with the staff, clients and workers, and outline the steps needed to resolve each of them over the ensuing months (and in some cases, years). Some items were quite obvious, especially those involving the reversal of unwise decisions in the past (such as contracting costly management consultants!). Some involved collecting field information and developing better practices and protocols. Some were concerned with identifying cost savings and time-wasters, and gradually rationalizing activities. Some were to do with sorting out basic staff problems, such as promotions, seniority issues, confirmations, old arrears of payments, pay revisions and so on. A more long-term intervention involved our rationalizing our land holdings, getting rid of the unproductive acres (we gave up some 40,000 hectares out of 80,000), and working more intensively on the better land parcels that were located in contiguous chunks. Such rationalizing measures not only reduce costs, but also make protection and management more efficient and convenient. Of course, the traditional executive may baulk at such self-denying measures, because they may think that their market influence or importance is proportional to the size of buildings or land holdings.

Often one will find the existing officials and employees themselves coming up with their diagnoses and suggestions, not to talk of the company’s customers and clients. On the whole, these may be the best sources for the new CEO’s ideas, because they will probably have the highest stake in the long-term health of the concern. One has to be wary of ambitious colleagues and superiors, however (especially the high government functionaries and political bosses), who may well want to extract the maximum personal benefit with little regard for long-term sustainability.

The one most significant initiative I took was to talk to the lending banks and get them to agree to a rescheduling of repayments. The one idea they gave was that even if the principal could not be paid as per schedule, it was important to keep up interest payments, and especially to project a resolve to keep the loan servicing alive. The mistake the previous management had made (in my understanding) was to rebuff the lenders and basically tell them to take a hike. Good personal interactions are really important in dealing with such matters.

The secret, as far as I have been able to understand, is that one should treat a corporation as if it was one’s household. My simple suggestion to my financial manager (who turned out to be quite the wizard) was to set aside little sums from each incoming payment in as simple a form as bank fixed deposits. From my experience with my own personal budget planning, I sensed that the best way to build up reserves is to remove cash from circulation. I am glad to say that my financial manager caught the point, and gradually built up the reserves, and was able to start servicing the outstanding loans, and finally succeed in liquidating them some years after I left (with a helpful adjustment of terms and rates by the banks, if I remember correctly).

This apparently became a habit in this corporation, for I got the impression that they had built up quite a sizeable corpus over the years, all without taking on new loans or getting any great financial support from the government. My principle was that there should be enough money in the reserves to sustain the staff salaries for a decent period if markets crashed, or even to liquidate the company and pay off all the terminal benefits, if such a situation should come to pass at any time (the covid pandemic, for instance!). One of the advantages of corporate accounting I found is that it is difficult for an outsider (such as a curious minister!) to ferret out such reserves, as they are buried in annexures and subsidiary account sheets. It’s also important to keep showing only a very small profit, if at all, or a small loss on occasion, in the annual accounts, so that  people don’t get tempted to make monetary demands on the corporation. So few of our public persons have a genuine concern for the long-term health of our institutions; most are on the look-out for some immediate gains. To simplify things, it is best for a public sector company to just keep the money in fixed deposits; anything else (like land or stocks) will get the manager into trouble with audit.

Colleagues have often criticized such measures as against the corporate culture or gentlemanly style expected. Some of them feel a sense of responsibility for the larger economy, and think that public corporations should keep spending a lot of money to create jobs and keep the ‘animal spirits’ alive in the economy. I think that is a mistaken notion. To be frank, the average small corporation is not going to make such a great positive impact if it takes on huge loans and spends liberally, or conversely a material negative impact on the larger economy if it cuts down on expenditure. It will make a better contribution by ensuring the long-term sustainability of its operations, and by achieving a reasonable return on investments made in the past. Government has various other instruments of its own with which to activate demand or, conversely, to quell inflation, which we need not worry about in our small sphere of activity.

Similarly, some managers think they can control the market price of their products by withholding supplies when the market falls. This again is a fantasy, especially when you are left holding large stocks of a perishable commodity like rubber latex. I understood early on that the smart thing to do was to sell early in a falling market; hoarding product would not really influence the price, as we were one among many hundreds of sellers. Some of the earlier CEOs had tried to ‘play’ the market, withholding stocks in a falling market, which usually does not end well (in distress sales at a throwaway price, in fact).

 In this context, I must say that even a rudimentary familiarity with the basic principles of economics or management is really helpful. For instance, two principles from economics made my decision making process vastly simpler. One is the principle of ‘sunk cost’, which encourages you to look at each option afresh, without getting over-awed by past investments (why throw good money after bad). This principle, in fact, is essential to justify closing a poorly performing project that is draining funds with little prospect of reasonable returns, since audit authorities would raise objections to throwing away the past investments. The other was the understanding of competitive markets: that a single firm has little power to dictate market demand and price, something which some of my predecessors seem not to have accepted. A third important principle could be the power of compound interest, whereby even a small rate of growth or accretion mounts up over time to appreciable levels (applicable to my strategy of accumulation of reserves, obviously, and in reverse, to the importance of paying off the interest accruals as soon as possible). Many more such principles and approaches can be thought of, by relating basic management and economics principles to real life situations.

Often one observes senior management or the principal agents in high levels of government frantically casting about for new things to do, fresh avenues to explore. Often this sort of hyper-activity ends in hare-brained and wasteful schemes. Self-styled experts and consultants are all the time circling around trying to sell the latest snake ointment. My suggestion is to first focus on improving the core activities of the company, those which are actually bringing in the revenue, rather than solely going after expenditure schemes. One has to be especially careful about large expansion or investment schemes, a better option being a type of ‘organic’ growth based on prior experience and tailored experimentation. An analogy I can offer is a large airplane, or an ocean liner: one makes any course changes slowly and carefully, and definitely not on the basis of ‘creative destruction’ or ‘chaos theory’ models that management gurus and economic advisors seem to love nowadays. Unfortunately, this is a rather boring style of managing the corporation; ambitious senior personnel love large spending projects that can make them look dynamic and provide the funds for entertaining influential people and building an exciting career.

A golden rule: Keeping long-term employee interests in focus

There is always some controversy about who the principals are in the case of a public corporation. Whose interests should be given priority by management? Under the neo-liberal dispensation, it is argued that hired managers owe their first loyalty to the owners, the shareholders. This often leads to short-term priorities in the private sector that may run the company down to increase returns to current shareholders. In the case of a government company, the people as a whole are supposed to be the stockholders. How do we interpret the interests of the people at large? The managers are on their own in this, and many are tempted to just serve the selfish, short-term interests of the political boss of the day. My own experience has been that the simplest way of arriving at a good long-term strategy is to make the stability and security of the employees the first priority. On the whole, it is these people who will have the greatest commitment to the long-run viability and sustainability of the concern. Most other stakeholders will tend to see it as a milch cow to be exploited for selfish, short-term interests.

Resistance to closing a failed concern

I have also faced the opposite problem, that of closing down a terminally ill corporation. Closure of ailing concerns is always a difficult decision, and nobody likes to take the responsibility for such a negative and buzz-killing option. There are always people with bright, and impractical, ideas, like setting up new units in a more hopeful sector like tourism or information technology. Unfortunately the old and tradition-bound staff can seldom be easily transformed into bright and dynamic youngsters. If the company is not closed down, these old-timers will end up getting neither their salaries (because the company has run out of paying activities), nor such terminal benefits as they may be entitled to on closure, such as gratuity and pension. Sometimes it is better for all concerned to be done with such ‘sunset’ concerns. But it is usually traumatic to the controlling officials concerned to take such decisions, and the problems are allowed to fester on. Sudden policy changes or ‘acts of God’ (like the corona virus or war) may also make a corporation unviable. In my state, for example, the government has issued orders banning the planting of eucalypts anywhere (even in private lands). Unless some alternatives are developed, this is going to make the future of my erstwhile corporation uncertain. My recommendation is that a good corpus of reserve funds should be maintained to meet any such eventualities, so that employees made redundant can be pensioned off at any time.

Some examples from the larger corporate world

Before wrapping up, I would like to refer to some examples from industry at large. The first is the account of the revival of the behemoth IBM, by its CEO Louis V. Gerstner, Jr. He has titled his book Who Says Elephants Can’t Dance?, suggesting that it is not just government companies that suffer from a sense of diffidence, but that even a large private corporation may be seen as too slow and bureaucratized to survive in the fast-changing market. Gerstner also describes the initial learning curve of a person who comes to lead a company from outside, without any serious experience of the particular sector or industry. His account is surely of great interest to people like our senior civil servants, who have to suddenly take charge of large, usually ailing, public corporations at a moment’s notice. Another impressive account is that by V. Krishnamurthy (At the Helm: A Memoir), which is of even greater interest and relevance to us, as it is about his experiences in a number of large government corporations, like BHEL (Bharat Heavy Electricals Ltd) and SAIL (Steel Authority of India Ltd). A third is Jitender Bhargava’s account of the gradual deterioration of India’s prestigious air carrier (The Descent of Air India), which documents the mistakes that are made in public corporations when short-term and selfish interests of political and bureaucratic bosses at the higher levels are allowed to dictate actions. This is not an indictment of public companies per se, as private airlines have also been tanking, not just because of adverse market conditions, but also because of faulty management strategies and misplaced priorities.

A larger world-wide study of the differences between the more successful and longer lasting corporations, and their less successful peers, is contained in the landmark book Built to Last by Collins and Porras (see their 10th Anniversary edition, 2004). They studied pairs of companies in similar sectors, like Ford and GM, IBM and Burroughs, Sony and Kenwood, General Electric and Westinghouse, Hewlett-Packard and Texas Instruments, and so on. The first named in each pair showed extraordinary growth over a long period, taking off especially between 1960 and 1990, as measured by cumulative stock returns in comparison with their peer in the samples as well as with the general market. Now one may think that the highly successful companies were blessed with some special advantages, or inspired visionary leadership, or ruthless market machinations or financial wizardry. Not so, say Collins and Porras: they go on to debunk some popular myths (12 in number) about extra-successful corporations. For a sample: the success story does not necessarily start with some “great idea” that occurred to a genius, say in his morning bath; many of the great companies cast about for a good product, and went through initial failures, before going on to greater success (Sony started with a rice cooker!). It doesn’t necessarily depend on “great and charismatic visionary leaders” so much as on institution-builders (this should be comforting for our civil service plodders landed with big companies!). The best companies have not focused only on maximizing shareholder wealth or profits; they are “equally guided by a core ideology – core values and a sense of purpose beyond just making money”. The visionary company does not believe in change as a fetish: it “almost religiously preserves its core ideology”, the core values “form a rock-solid foundation” that “do not drift with the trends and fashions of the day” (again, comforting to our chief executives in fairly old and dowdy industry segments). Successful companies follow an experiment-and-confirm process of evolution, rather than sophisticated and complex ex-ante strategic planning. The best companies don’t necessarily bring in management expertise from outside: they don’t necessarily believe in disruptive leadership. And so on; all appearing very reassuring to the average administrator or bureaucrat who may be overawed by the potential for flashiness in the corporate world and his or her own limitations in this regard. In other words, our government functionary can plod his or her way to success, and does not have to assume that one has to be a charismatic high-flyer like the magnates of the private sector.

Summary learnings, and a caveat

The core learnings of use for civil servants landed with problematic corporate roles, as I gather from all these sources and my own experience, are something like this. Learn early on how to learn on the job. Listen to the most important stakeholders, the employees. Treat your company like the responsible parent of a household. Resist short-term and selfish interests of outsiders. Beware the seduction of snake-oil vendors. Like Ulysses on his boat, you’re best off blocking your ears and eyes to offers of loans, unless you are absolutely sure of being able to generate funds to repay the loans. Better still, first build up a corpus of savings that can meet investment needs for  plant and machinery, and then shop for the best terms for outside money if interest rates are low and your corporation can get tax breaks on the expenditure. Keep interest payments up to date, and retire loans as early as possible (unless you keep them for tax deduction purposes). Control non-essential and vanity expenditure with an iron hand (my poor Chairman had to make do with worn-out carpets and tatty curtains), because all the subordinate officers will emulate the chief’s spending habits. Concentrate on making your existing core activities more efficient, and your current employees more competent, before running after new hare-brained schemes. Figure out how to future-proof your company, such as building up your own cash reserves to be able to ride through hard times without too much distress, or even to meet the premature retirement payments to your employees if the company goes under. Hide your assets and your successes under a large bushel, to avoid predators and opportunists feasting on your hard-won gains. Over the first 90 days, talk to your employees and clients, and draw up a list of specific measures that can be reasonably taken in your term of two or three years, and work to achieve these items. Give priority to resolving long-standing issues of the employees, and refurbishing and renewing the plant and machinery. Most of all, refrain from taking on fresh long-term liabilities (debts or permanent employees) and passing on a huge load of such problems to your successors.

Finally, let me record a caveat and a disclaimer of sorts. Some of my colleagues may well think that my views are prejudiced by my early experiences, and that it is still possible to set up such ventures with due care about using better planting stock, better cultural practices, and tighter management. To overcome the deficiencies of government, the proposal is frequently made of entrusting management control to private entrepreneurs (e.g. a Public-Private Partnership model). I may be pardoned for being more than skeptical. We have already seen how such ventures run into problems of financing, management control, and opposition from environmentalists (for a good discussion, see Bhushan and Saxena, CSE, 2016; Agarwal and Saxena, 2017). The private partner usually wants to push the entire risk onto the government, while retaining management control and first call on incomes. This obviously introduces ‘moral hazard’ in many forms (the less the risk, the more adventurous or neglectful one can be). My state government has in the past paid out substantial sums to reimburse private partners when such joint ventures fell through (see above). One of the specific  problems for forest corporations is that government forests cannot be placed as collateral for taking out loans, because the courts are clear that private entities should not be allowed entry. Of course parliament may enact suitable enabling legislation, as is its prerogative, but even these are liable to run aground on legal principles.

One of the difficulties in making a balanced judgment on dynamism versus maintaining the status quo in public sector undertakings, is that those who initiate large (and costly!) ventures are rarely around at the reckoning. Those with influence and the knack of enrolling the support of political bosses get in when these programs or projects are in the formative stages, when funds are flowing and everybody is upbeat. The plodders and politically less savvy are landed with the responsibility of rescue and rehabilitation usually when the first heady years of investment and innovation are over, and sober reality starts to sink in. The innovators and trail-blazers can always turn round and blame the followers and plodders for not implementing things properly, i.e. not throwing good money after a bad investment. It is almost impossible to throw doubts on the future viability of a new project, even though its deficiencies may be obvious (the emperor’s new clothes syndrome), for the critic will be branded a cynic, a kill-joy, a ‘permanent pessimist’. These things have an inexorable logic of their own, like the inevitability of a Greek tragedy.

This article of mine is meant to be of some help to the average public official who is thrown into the midst of these contentious problems, and who has to keep things running and the home fires burning ‘in spite of the gods’. If newer and better ways of dealing with commercial forestry in the public sector are developed, perhaps my suggestions and insights may well be ignored.

References

Agarwal, Shruti and Ajay Kumar Saxena (2017). The Puzzle of Forest Productivity: Are Forest Development Corporations Solving It Right? Centre for Science and Environment, (CSE), New Delhi.

Balooni, Kulbhushan (2000). Teak investment programmes: an Indian perspective. Unasylva 201, Vol.51, pp.22-28.

Bhargava, Jitender (2013). The Descent of Air India. Bloomsbury Publishing India, New Delhi.

Bhushan, Chandra and Ajay Kumar Saxena (2016). Fumbling with Forests: Why We Should Not Handover Forests to the Private Sector. Centre for Science and Environment  (CSE), New Delhi

Collins, Jim and Jerry I. Porras (2004). Built To Last: Successful Habits of Visionary Companies. 10th Anniversary Edition. Random House Business Books, London (2005).

Daly, Peter H. and Michael Watkins, with Cate Reavis (2006). The First Ninety Days in Government:  Critical Success Strategies for New Public Managers at All Levels. Harvard Business School Press, Boston.

Dhar, S.K., J.R.Gupta and Madhu Sarin (No date). Participatory Forest Management in the Shivalik Hills: Experience of the Haryana Forest Department. Sustainable Forest Management Working Paper No.5. Ford Foundation, New Delhi.

Gerstner, Louis V., Jr. (2002). Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround. HarperCollinsPublishers, London.

GoI (1990). Review of the Working of the State Forest Development Corporations in India. Draft Report by The High Level Study Team. Government of India, Ministry of Environment and Forests, New Delhi (April 1990).

Krishnamurthy, V. (2014). At the Helm: A Memoir. Collins Business, HarperCollinsPublishers, Noida, India.

NCA (1972). Interim Report of the National commission on Agriculture on Production Forestry – Man-Made Forests. Government of India, Ministry of Agriculture, New Delhi. (August 1972).

Poffenberger, M (1990). Joint Forest Management for Forest Lands: Experiences from South Asia. Ford Foundation, New Delhi.

Samuelson, P.A. (1974). Economics of forestry in an evolving society. Journal of Public Enquiry, 14(4): pp.466-492.

Saxena, N.C. (1997). The Saga of Participatory Forest Management in India. Center for International Forestry Research (CIFOR), Bogor, Indonesia.

Watkins, Michael D. (2003). The First Ninety Days:  Critical Success Strategies for New Leaders at All Levels. Harvard Business School Press, Boston.


Sunday, October 18, 2020

52 Forest Corporations in India-I. Background

Managing State Corporations 

A forest officer in India is often assigned positions of responsibility in public sector corporations with little preparation or prior training. In this of course the forest service is not unlike many other professions, whether in the public sector or the private. If you look at the stories of many leaders of the corporate world, you will frequently come across this phenomenon of people being pitch-forked into positions of great responsibility in completely unfamiliar fields. As the central character in an American TV serial says, “I knew exactly what to do… but at a more fundamental level, I had no idea what to do”! Obviously, it becomes almost inevitable that one falls back upon some broad general approaches in this type of situation. Some would even hold that being a stranger to the domain is in a way an advantage, as it allows you to bring a fresh and unprejudiced approach to the strategic choices to be made.

On top of the unfamiliarity with the particular field of activity, and general sense of unpreparedness for the corporate world, the forest officer also has to contend with the considerable limitations of working in the government sector. Decisions that could be made in an instant in the private corporation, may take ages in the public sector. However, even the exacting government procedures do not necessarily insulate the officer from the outside world: at every step of the way, one has to contend with pressures from politicians, administrative superiors, and various interest groups, who usually are quite ready to sacrifice the corporation for their short-term interests (e.g., see Bhargava, 2013, on Air India’s sad story). This sort of situation again calls for some special techniques and approaches if one is not to be engulfed by the situation.

My own experience of the public sector forest corporation started with my first regular assignment, immediately after the six-month on-the-job training period in the state of allotment (that follows upon the 2-year course in the national forest academy and the 4-month training at the national administration academy). With this appointment, incidentally, my entire career was yanked out of the course that I had, in my innocence, imagined for it in the wildlife wing. Once cast into the forest corporation, I was also type-cast – into the special duty-deputation mould (away from the regular territorial forest organization), and could never get back into the mainstream sufficiently to ask for specific postings that would conform to my own liking or ambitions.

One effect of such seemingly random postings is that one is repeatedly confronted with fresh challenges, in new and unfamiliar fields and working contexts: sometimes in the corporations, sometimes in research or education, sometimes on deputation outside the department, and so on. As one progresses in one’s career, it becomes apparent that the civil services are more or less a pool of reasonably competent administrators, to be redeployed as and when desired in different wings and sectors of the government machinery. This induces a healthy disregard of one’s own high worth or indispensability, and a certain sense of gratitude at having at least a reasonable posting in a reasonable location, with a reasonable superior (boss) and reasonable performance expectations! The down side is, of course, that one seldom develops a sense of having grown professionally in a particular field of expertise. It feels as if one is always starting from scratch in each new position, which may be why retiring forest officers are frequently heard saying that it feels like just yesterday that they joined the service, or that they feel like they have just scratched the surface in learning about the forests!
 

Need for forest corporations

The concept of forest corporations was mooted in the National Commission on Agriculture (NCA) report, which had a whole volume devoted to the forestry sector, apart from interim reports on individual sub-sectors, here the one on intensive man-made forestry (NCA, 1972). The reasoning was that India has huge tracts of degraded forest and scrubland that could be profitably converted into intensive plantations of industrial raw material like pulpwood. Indian forestry was said to be stuck in a low-investment, low-returns trap, and in need of large infusions of finance from outside to jolt it into a high-investment, high-returns trajectory. Since there were only limited funds available with government, such investment could come only from the financial institutions, such as banks and agricultural finance corporations. To be able to tap these sources, it would be necessary to set up forest corporations that could draw up ‘bankable’ plantation projects, and get large loans from the financial institutions. Government would provide the initial resources of land and some budget to start off these corporations, but they would have to be self-supporting in course of time.

In hindsight, criticism has been made of this whole chain of reasoning. The degraded ‘jungle’ that the policy-makers castigated as unproductive and useless, turned out to be the places from where the local communities were drawing biomass resources – for instance, firewood or brushwood, fodder, mulch, and in some cases even bamboo and other forest products. Of course, many of these resources were not being managed in a sustainable manner, but as the social critique developed over the years, this was ascribed to the insecurity of tenure of the local communities in the forest, rather than to their ignorance or short-sightedness. But forest officers, of course, felt that the forests were being treated as something of a ‘no-man’s property’, and that the only way to retrieve the situation would be to tighten control and keep people (and their livestock) out, as recommended by the NCA as well.

Thus forest departments took to this scheme with enthusiasm, corporations were set up, project proposals drawn up, and banks were persuaded to advance loans. Large areas were planted to fast-growing exotics like eucalyptus, which went mainly to pulp and paper mills or to the construction sector as scaffolding material. In their enthusiasm in increasing the ‘productivity’ of the Indian forest, even good moist or dry ‘mixed miscellaneous’ forests were cleared and converted to pulpwood plantations, let alone the degraded or scrub forest tracts. The already existing forest management units (the territorial divisions) also took up industrial or commercial plantations on cleared jungle, in a bid to increase the productivity of the forest lands under their charge, and contribute to the national economy.

Move to participatory modes

Unfortunately, many of these commercial plantation ventures did not do very well in the longer term. Due to a combination of factors, they did not live up to the promise of greater productivity, and often they could not find a remunerative price for the product. Many of them had deferred the periodic payment (to the lenders) of interest on loans, royalty or ground rent to the forest department, remittance of taxes, and so on. They had not been very successful in attracting any large funding from the agricultural finance institutions, due to the long time horizons of forestry projects and the difficulty of guaranteeing the 15% internal rate of return (IRR) usually required by them. These problems were confirmed by a special committee to look into the state of the forest corporations, set up by the Ministry of Environment and Forests, Government of India (GoI, 1990).  The committee recommended (among other things) induction of management graduates, to help put up a convincing case to the finance institutions.

Among the reasons for the low survival rates and low outturn in the forest corporation plantations, surreptitious removals by humans must be considered. Local communities, the rural and semi-urban people at large, were used to taking material from the forest as a part of their life style. These people continued to go in and take fuelwood and poles (small timber) from both the remaining natural forest and the new plantations. As a consequence, the plantations were often of low density (stems per hectare), and thus could not maximize growth and yield over the given land area. There was constant conflict between the people and the forest staff, often resulting in violent confrontation. Social scientists, and some foresters themselves, had a growing feeling that a better, more ‘sustainable’ relationship had to be forged between communities and the state apparatus.

Some experiments in participatory forestry were taken up by individual forest officials with local communities, sometimes supported by academics or donor agency personnel in various parts of the country. Many of these experiments and early experiences are documented in a series of case study reports brought out (among others) by the Ford Foundation in India. Some of these experiences have achieved something like iconic status at least among Indian foresters and environmentalists, such as the Arabari experiment in West Bengal, and the soil and watershed restoration efforts in the Sukhna Lake upper catchment in Haryana (Poffenberger, 1990; Dhar, Gupta and Sarin, no date; Saxena, 1997). Such experiments showed that it was possible to forge a more cooperative, win-win relationship with local communities, and participatory or ‘joint’ forest management was made a national policy by the revised National Forest Policy of 1988, and a recommendation to adopt a participatory approach in forest development issued to the state governments by the central Ministry dealing with forests. These ideas were reflected in the frontispiece of the GoI report (1990) which quoted the following words from the “Planet of the Year” issue of the news magazine Time, 2 January, 1989: “Man must abandon the belief that the natural order is mere stuff to be managed and domesticated, and accept that humans, like other creatures, depend on a web of life that must be disturbed as little as possible”.

The next article will give some actual experiences in stare forest corporations, and relate them to the larger context of executive management of such entities over the long term.

[This article is being posted after a very long gap. I have spent the last few years getting degrees in different disciplines: Sociology, Philosophy, and a diploma in Sanskrit! Now with the Covid pandemic closing down outdoors activity, the time is ripe to work on the blog again!Thanks for viewing!]

References

Agarwal, Shruti and Ajay Kumar Saxena (2017). The Puzzle of Forest Productivity: Are Forest Development Corporations Solving It Right? Centre for Science and Environment, (CSE), New Delhi.

Balooni, Kulbhushan (2000). Teak investment programmes: an Indian perspective. Unasylva 201, Vol.51, pp.22-28.

Bhargava, Jitender (2013). The Descent of Air India. Bloomsbury Publishing India, New Delhi.

Bhushan, Chandra and Ajay Kumar Saxena (2016). Fumbling with Forests: Why We Should Not Handover Forests to the Private Sector. Centre for Science and Environment  (CSE), New Delhi

Collins, Jim and Jerry I. Porras (2004). Built To Last: Successful Habits of Visionary Companies. 10th Anniversary Edition. Random House Business Books, London (2005).

Dhar, S.K., J.R.Gupta and Madhu Sarin (No date). Participatory Forest Management in the Shivalik Hills: Experience of the Haryana Forest Department. Sustainable Forest Management Working Paper No.5. Ford Foundation, New Delhi.

Gerstner, Louis V., Jr. (2002). Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround. HarperCollinsPublishers, London.

GoI (1990). Review of the Working of the State Forest Development Corporations in India. Draft Report by The High Level Study Team. Government of India, Ministry of Environment and Forests, New Delhi (April 1990).

Krishnamurthy, V. (2014). At the Helm: A Memoir. Collins Business, HarperCollinsPublishers, Noida, India.

NCA (1972). Interim Report of the National commission on Agriculture on Production Forestry – Man-Made Forests. Government of India, Ministry of Agriculture, New Delhi. (August 1972).

Poffenberger, M (1990). Joint Forest Management for Forest Lands: Experiences from South Asia. Ford Foundation, New Delhi.

Samuelson, P.A. (1974). Economics of forestry in an evolving society. Journal of Public Enquiry, 14(4): pp.466-492.

Saxena, N.C. (1997). The Saga of Participatory Forest Management in India. Center for International Forestry Research (CIFOR), Bogor, Indonesia.

Watkins, Michael D. (2003). The First Ninety Days:  Critical Success Strategies for New Leaders at All Levels. Harvard Business School Press, Boston.


Tuesday, November 7, 2017

51 Forest Certification-V. A policy for India

From the broader topic of a SFM (Sustainable Forest Management) framework, we now come to the forest certification scenario. From the foregoing discussion, two main routes to a certification framework seem to emerge. One alternative would be to set up a government-led and supported national body to set the standards (in a participatory and consultative mode, of course), lay down procedures, give recognition to certifying agencies (i.e., do the accreditation of certifiers), and administer the certification and labeling process in toto. The second alternative would be to depend on an international standards-setting and accreditation organization like the FSC (Forest Stewardship Council) to take up the responsibility of operating its own system (suitably modified for local conditions), and leave it to individual actors to apply to them when required. A brief discussion of these alternatives follows.

[A pdf version can be downloaded at https://www.academia.edu/35114317/Forest_Certification_relevance_challenges_and_way_forward_in_India

Historically, the concept of Forest Certification (FC) has been inspired and driven mainly by environmental activists in the west, who wanted a credible and honest process to judge the sustainability (environmental, social and economic) of the timber and other forest products being sold in their markets, thereby offering better and more informed choices to their consumers. The basis of this would be that standards are set by the consumer forums and environmentalists, and latterly by social activists representing the interests of local communities and indigenous peoples. In the current environment of a general lack of faith in political leaders and government administrations, the less the process and its institutions are under the control or influence of national governments, the higher will be their credibility. This is why the FSC is considered a higher level of the FC systems, as the FSC itself is governed by the general body of the members, with equal weight of the three main groups or “chambers” of stakeholders: environmentalists, industry, and governments, and as the certifiers themselves are independent (private) concerns. The essence of the FSC system is its autonomy; hence any government-run process will automatically be suspect in its eyes. The FSC (or its main protagonist, the WWF) would have to be given the lead in the process of drawing up standards and processes, and setting up institutions; the Bhopal-India process would have to be done all over again, this time keyed to the requirements and expectations of international social-environmental NGOs and consumer organisations.

In contrast, the PEFC (Programme for the Endorsement of Forest Certification) reposes higher confidence in national governments and their ability to come up with such a scheme (with due consultation with all stakeholders). Because the PEFC does not itself set the standards, but looks at the country-level systems drawn up by the national organisations, it has been successful in bringing a much larger area under certification than the more exacting FSC. However, even the PEFC cannot blindly endorse country-level systems and standards, as its credibility will have to be maintained in the face of the higher bar set by the FSC. In fact, it is evident that some sort of convergence is taking place between the two international schemes: thus, FSC moved to include plantations in its P10, and FSC has also allowed for tailoring of the framework to national and regional (sub-national) local conditions. FSC also has different levels of certificate of the source (fully sustainable, mixed, etc.).

One of the main disincentives to the state in giving official endorsement to the FSC as the national enabler of FC would be the erosion of its own (i.e. the state forest department’s) autonomy, at all levels. The forest ministry in the national government would be now subject to policy direction from the FSC; at the field level, each FMU (Forest Management Unit) would have to satisfy the FSC inspectors, and also probably hand over much more power to the local communities than at present.

Of course, it would always be a more pleasant state of affairs to have a large proportion of certified forest than not; protagonists of certification present long lists of benefits that would accrue all around. But these would have to be weighed against the time, effort and financial costs that would be required. In the case of most government forests in the country, there would appear to be no great advantage in having a certificate of sustainability from an external agency. The forest divisions are no longer oriented toward timber production; conversion of the natural forest has been given up, partly by policy, partly due to various orders from the Courts. Indeed the major portion of timber is coming from trees outside the forest, and from imports. The old ‘silvicutural systems’ that are taught in the forest colleges are no longer in operation; mostly there are only salvage harvests of dead and fallen trees as far as timber is concerned. Sustainable forestry principles may in fact demand a return to regular harvests of matured stems according to those silvicultural systems, which may be a paradoxical result from the conservation activists’ point of view.

So it appears that an international certification scheme would be of little concern to the government forests. Perhaps it may be of interest to private producers or industries procuring wood from the farmers, like the pulp and paper mills, who may like to export their products with such a certificate, either of chain of custody, or sustainable forestry. In such a case, a government certificate would have little mileage in the international market, and they would be forced to resort to the international certification system, of which only the FSC-WWF network would appear to provide a feasible alternative. In this context, cost considerations would be relevant, and group certification may have to be resorted to. The FSC-WWF partnership would have to sponsor the building of a locally relevant and feasible platform for India.

Therefore, there would not seem to be a great necessity for a government-sponsored certification system in India at present, as long as private actors could access the FSC-WWF framework. However, this does not mean that the government should abandon the ongoing exercises at setting up a framework of standards and processes for the state forests. One of the considerations here is that India would not like to get left behind completely in the global effort to make forestry “sustainable” in terms of the international NGO definitions. Indeed, because of the century-long experience of “scientific”, “sustained yield”, forestry, with its successes and failures, along with the legislative innovations and judicial activism of more recent decades, India could well make very valuable contributions to the global discussion on these matters. India’s participation in international environmental (and even climate) forums, as a progressive member of the world community, would have more credibility if it had a vigorous SFM programme, especially as the consumers in India have so far not exhibited any great concern about the SFM aspects of the timber they are consuming, either domestic or imported.

To take forward the SFM discussions in the government sector, the forest ministry could obviously get a head start from the strong framework already available: the forest department institutions (especially the Working Plan Code and the planning and monitoring process in the states), the policy and law framework (especially the JFM and FRA frameworks), and so on. A quick pilot survey of the applicability of the Bhopal-India Criteria and Indicators (C&I) in a number of states threw up the conclusion that some 60% of the data called for in the Bhopal-India C&I are already available with the divisions, which would give them a good basis for further improvement. Because of financial and procedural bottlenecks, it is probable that much of the remaining data, which would require intensive research and specialist knowledge and skills, could be attempted on an experimental basis only, in a few locations of high significance from the biodiversity or local socio-cultural point of view. Methods to resolve human-animal conflict, for example, could be one such high priority area.

At this point in time, it would be judicious not to impose any national standards requirement of inspection and certification of the FSC type for India’s state forests. It has to be appreciated that the moment any such standard is notified by government, then it becomes obligatory for the state forests to satisfy these conditions. The entire process of inspection and assessment would pass on to external agencies. Forest divisions would be at the mercy of these inspectors, and may have to incur a heavy burden of finances, time and administrative effort to cater to them, on top of all their other duties. If the standards are too ambitious and aspirational, it may be physically impossible to meet them in all aspects (especially the social ones). This would provide sufficient grounds for a Court to find the forest department incompetent, and the forests could then be passed on to other agencies or even privatised under this garb.

There are also issues of a “conflict of interests”, or rather a  “nexus of interests”, where officials and environmentalists/NGOs who design the system, will also be the prime candidates for taking up accreditation or serving on the various committees and councils. A frequent ploy is for bureaucrats (including both forest service and administrative service officers) to create positions of influence and authority for their own post-retirement comfort. The gamut of activities associated with such national and international institutions provide very powerful incentives to both retired persons and to younger NGO activists in the form of meetings, travel opportunities, professional contacts, and a general sense of intense involvement. Such situations would give a happy hunting ground for unscrupulous operators to exert influence and extract their pound of flesh from the target organizations (forest departments, FMUs etc.). Any SFM or FC framework in the government sector will have to be carefully designed to avoid such an eventuality. As Upton and Bass (1995, p.xvii) remark, the forest sector needs to be clear about the utility, practicability and possible distracting effects of the forest certification undertaking.

If the government takes no action, however, that itself may well become a target for criticism by NGOs and international bodies, who may ascribe to the government a lack of responsiveness and modern outlook. The government, therefore, should continue the discussion and consultation on forest management, highlighting the experiments in people’s participation and empowerment in different spheres like biodiversity conservation, agroforestry, landscape restoration, JFM, FRA implementation, and so on. The new Working Plan Code also provides a good platform to intensify data collection and monitoring, coupled with production of gazetteers and progress reports, case studies, and so on. A systematic review and assessment of ongoing public forestry efforts can be taken up under the umbrella of strengthening of SFM viewed in the broad sense. Efforts should be continued to improve the extraction and processing of non-timber products, especially medicinal plants that are in danger of over-exploitation under market forces. This is also an opportunity to involve a wide spectrum of stakeholders and public policy advocates, including NGO activists, academics, donor agencies, and so on. These efforts need to be documented and incorporated in the working plan reports, so that they could feed into any certification of sustainability that may be sought due to consumer demand sometime in the future.

If it is desired to emulate the certification system of the FSC or other networks, an internal system of assessment and grading could be developed. This could have the provision to accord certificates of performance at successive graded levels, so that forest divisions could gradually come up to the desired optimal levels depending on the local conditions and constraints. The formal certification system could also start with labeling of forest products, rather than forest management units; the basic label could certify the legality of the source (Chain-of-custody certification), and successive higher levels could then include other aspects of SFM, like environmental, social, or economic.

Besides, if any particular state forest administration (Uttarakhand state, for instance) genuinely feel that they are well prepared to face the challenges of the certification process, then they should volunteer for an internationally credible system. This would probably entail a ‘scoping’ visit from an accredited agency of the FSC. The problem here is that there is no one accepted description of SFM or its performance requirements. A retired forester from the batches of the 1960s and ‘70s, for instance, may insist on taking out the calculated sustained yield (increment) from the forest; this may be a counter-productive result from the point of view of the conservationist. A wildlife protagonist may demand suspension of all removals, including dead and fallen trees, as they provide valuable niches for hole-nesting animals, fungi, etc. A social activist may press for transferring control entirely to the local communities, leaving the forest departments with no legal powers. All types of experts may have a basic hostility to the forest department, and the process may rapidly go out of its control. The forest department, therefore, has to think deeply whether it is worth risking this situation.

While we may give due credit to the Bhopal-India (B-I) process for its pioneering work, we should not be under any illusions about the gulf between the B-I framework and what will be demanded of the system by FSC (or even PEFC). Some FMUs may perceive a need to have certification for a certain product or group of products, e.g. medicinal herbs in the Himalayan forest. It is not clear whether the FMU will be able to contain the certification process to the desired products. We cannot predict in advance what extent of changes an individual expert or consultant will demand as a result of the scoping visits. This sort of trial run by any individual FMU should be closely followed by the whole forest service and the central ministry, and lessons drawn as far as certification of government forests is concerned.

Such comprehensive efforts would build up a distinctly national, India-centered, approach to SFM, while not succumbing to the danger of transferring control entirely to external actors. India can develop its own home-grown SFM framework, oriented toward practical action on the ground, rather than introducing onerous inspection procedures and demanding reporting frameworks under the instigation and control of external operators, that give the advantage to international consultant interests at the cost of national sovereignty.

References

Dilip Kumar, P.J. 2014. Managing India’s Forests. Village Communities, Panchayati Raj Institutions and the State. Monograph No. 32, Institute for Social & Economic Change, Nagarbhavi, Bangalore. Posted at https://www.academia.edu/9235210/Managing_India_s_Forests_Village_Communities_Panchayati_Raj_Institutions_and_the_State).

FRI. 2012. National  Working Plan Code. Draft prepared by Forest Research Institute Dehradun (Indian Council of Forestry Research & Education). Ministry of Environment & Forests, Government of India.

Gale, Fred and Marcus Howard. 2011. Global Commodity Governance. State Responses to Sustainable Forest and Fisheries Certification. Palgrave Macmillan UK.

Government of India. 2014. National Working Plan Code 2014. Ministry of Environment & Forests. Downloadable copy available at http://www.mahaforest.nic.in/act_rule_file/140898038616%20A%2001%20W%20P%20Code%202014.pdf

Higman, Sophie, James Mayers, Stephen Bass, Neil Judd and Ruth Nussbaum. 2006. The Sustainable Forestry Handbook. Second Edition, First South Asian Edition. The Earthscan Forestry Library. Earthscan Publications Ltd., London.

Humphreys, David. 2006. Logjam. Deforestation and the Crisis of Global Governance. Earthscan Publications Ltd., London.

Kotwal, P.C., M.D.Omprakash & Dharmendra Dugaya. 2008. Manual: Criteria and Indicators for Sustainable Forest Management in India: An Operational Framework. Operational Strategy for Sustainable Forestry Development with Community Participation in India: IIFM-ITTO Research Project. Indian Institute of Forest Management, Bhopal (India).

Lele, Sharachchandra and Ajit Menon. 2014. Democratizing Forest Governance in India. Oxford University Press, New Delhi.

MTCC. 2009. The First Ten Years 1999-2009. Written by Chew Lye Teng, Harninder Singh, Yong Ten Koong. Malaysian Timber Certifcation Council. Kuala Lumpur.

Upton, Christopher and Stephen Bass. 1995. The Forest Certification Handbook. Earthscan Publications Ltd., London.



Yadav, Manmohan, P.C.Kotwal & B.L.Menaria. 2007. Forest Certification. A Tool for Sustainable Forest Management. Centre for Sustainable Forest Management & Forest Certification: IIFM-ITTO Project. Indian Institute of Forest Management, Bhopal (India).

Monday, November 6, 2017

50 Forest Certification-IV. Bhopal-India standards for Sustainable Forest Management (SFM)

In India, the process of developing Criteria & Indicators (C&I) for Sustainable Forest Management (SFM) was entrusted to the Indian Institute of Forest Management (IIFM) Bhopal, the so-called Bhopal-India Process. This was one among the international consultations initiated under the aegis of the ITTO, and meant to address the needs of “dry forests in Asia” covering nine countries (Humphreys, p.122). From another perspective, the Bhopal-India Process was meant to come up with a national framework for India itself. I base my account on some of their publications: a “Manual” for C&I for SFM in India (Kotwal, Omprakash & Dugaya 2008), and a more general survey of the subject of “Forest Certification. A Tool for Sustainable Forest Management” (Yadav, Kotwal and Menaria 2007).

The publication by Yadav et al. (2007) gives a rapid overview of the concepts of SFM and C&I in the modern context, much like the other foreign publications already cited. Of special interest are the views on “why become certified” (p.47): demand from consumers for wood and paper products that have been independently certified as coming from sustainable forests; a mechanism to establish genuineness of claims to being sustainable; and in some countries, government requirements.

From the Indian context, my own feeling is that these considerations may not be very persuasive in the domestic market. Since much of the growing demand for wood products is being met from imports, the end consumer is not likely to reject a product (say, the Sustainable Forestry Handbook produced for the South Asian market) only because it does not bear the FSC certificate (I didn’t!). A few companies that wish to export their products may be keen to have a certificate: they will prefer to get it under an internationally recognized system. A purely government-run certifying outfit will not have much recognition (or credibility) in the western markets. Consumer organizations in those countries cannot be expected to assess and monitor foreign certifying frameworks unless the volume and value of merchandize traded is substantial. More than wood, there is the possibility that forest certification may be demanded for non-wood products like spices and beverages, medicinal plant products, aromatics, and similar. This may call for a different orientation in the certification strategy in India.

Another interesting item in Yadav et al. (2007) is their suggestions on the strategy for operationalizing the C&I in India (p.29). They make the significant point that a high level of commitment has already been demonstrated in the domestic context by such instruments as the National Forest Policy, the Joint Forest Management (JFM) orders, the several laws governing forests, wildlife, environmental conservation, etc. There is also the National Working Plan Code, which has “incorporated the strategy for operationalization of C&I”  (p.30). Now all that is required is to draw up the set of C&I suitable to the domestic policy and legal situation (including judicial orders), design reporting formats, and incorporate these in the WP Code. This will have to be followed by all the government forests in India, as they are required by orders of the Supreme Court to work the forests only on the basis of duly approved working plans.

A fairly well specified form of the C&I coming out of the Bhopal-India process has been presented in the second IIFM publication (Kotwal et al. 2008). This lays out a set of 8 Criteria, with a total of 37 related Indicators. This set is reported to have the endorsement of the Ministry of Environment & Forests (2008). Obviously the point of immediate interest would be to compare this with the international frameworks like the FSC. Here is the occasion for us to look at the actual list of C&I (or P&C in the FSC system), as in this very summarized table:

  8 Criteria (Bhopal-India)                             10 Principles (FSC)
C1. Extent of forest and tree cover               P1. Compliance with laws and FSC
C2. Biodiversity                                            P2. Tenure, user rights, responsibilities
C3. Forest health                                           P3. Indigenous peoples’ rights
C4. Soil & water conservation              P4. Community relations & workers’ rights
C5. Forest productivity                                 P5. Benefits from the forest
C6. Optimized forest utilization                    P6. Environmental impact
C7. Social, cultural, spiritual benefits           P7. Management plan
C8. Policy, legal, institutional Framework    P8. Monitoring and assessment
                                                                       P9. High Conservation Value forests
                                                                       P10.Plantations


A cursory glance is sufficient to realize that these are two very different beasts. The FSC system consists of 10 Principles and as many as 55 constituent Criteria (not counting sub-items), whereas the Bhopal-I is a somewhat smaller set (8 Criteria with 37 Indicators, not counting sub-items).  It is also obvious that these two frameworks have different orientations. FSC is strong on stakeholders’ status and interests (the user or neighbouring community, especially if they are “indigenous” people, the environmentalist global community, etc.). The national set of C&I tends to give greater attention to the physical and biological state and productivity of the forest resource itself.

We can attempt a cursory comparison of the two systems. P1 (Principle 1) of the FSC has 6 items, which talk of adherence to all national and local laws as well as international conventions in signatory countries, and long-term commitment to the FSC principles themselves. However, the FSC has an item (Criterion) that refers back to commitment to the FSC principles themselves. One could as well have a requirement of commitment to the principles of SFM (Sustainable Forest Management) itself, which is a sort of endless loop. In case of conflict between laws and FSC Principles, such cases “shall be evaluated for the purpose of certification, on a case by case basis, by the certifiers and the involved or affected parties”, which looks like jargon for leaving it to the field practitioners. The corresponding Criterion (C) in B-I (Bhopal-India) is C8, “Adequacy of policy, legal and institutional framework”, which is a “Process” or “Input” level condition, whereas FSC P1 is more of a “Performance” or “Outcome” criterion. In B-I, probably, adherence to the law is taken as a given. Other components in B-I C8 are the existence and implementation of an approved Working Plan (which occurs in FSC P7), number of forest offence cases, status of research & development, HRD efforts, Forest Resource Accounting (including biodiversity status, carbon sequestration), monitoring & evaluation, data collection and utilization, manpower, etc. These are actually management functions that occur is P7 in the FSC framework.

The second FSC Principle (FSC P2) concerns tenure and use rights, with 3 sub-items, with emphasis on the empowerment of local communities; P3 specifically covers indigenous peoples, and P4, community relations and workers’ rights. Here is where the gap between the two systems starts to widen. C7 of B-I does specify “Maintenance and enhancement of social, cultural, and spiritual benefits”, but measured in terms of participation rather than empowerment as such: enrolment in JFM (Joint Forest Management) committees, use of indigenous knowledge (not so much ownership of intellectual property rights and payment therefor), and maintenance of sacred groves. In the case of state forests, it would appear that forest departments themselves would desire a firm authority for themselves to protect and manage, rather that giving formal control to communities. Local forest-dependent tribal communities (the equivalent of FSC’s “indigenous peoples”) are provided for in the more recent enactment of what is popularly known as the Forest Rights Act (2006), but it would appear that the forest department does not have formal jurisdiction over these areas any more. As regards workers’ rights, the law of the land will be supposedly followed as a matter of course. The social environmentalists’ advocacy for transferring power over forests to the village community is well argued in Lele & Menon (2014), while I have tried to present the case for a more balanced, cooperative sharing of power between community and the state apparatus, in my monograph (Dilip Kumar 2014).

Principle 5 of the FSC covers “Benefits from the forest”, which include all types of products and services, at a sustainable level of harvest or drawal, stressing the multiple use, multiple user aspects. B-I is also informed with a similar multiple use sustainability approach, so there should not be any large distance in this respect. FSC has a separate mention of “Environmental impact”, P6, which talks of soil and water conservation, ecosystem protection at the landscape level, biodiversity, etc. These are also covered as separate items in B-I: C1 Extent of forest/tree cover, C2 Biodiversity, C3 Forest health, C4 Soil & water conservation, etc. What is not required by B-I is a formal EIA (Environmental Impact Assessment), which seems to be a requirement in FSC. Conversion of forest to plantations or non-forest use is expressly prohibited under FSC 6.10, except under certain stringent conditions. Such a clause is not seen in B-I, but then the entire issue is governed by the Forest Conservation Act 1980, not to speak of the various Court orders, hence it is probably taken as given in the legal-policy framework.

Principle P7 of FSC covers the “Management Plan”, which is subsumed in C8 “Policy, legal, institutional Framework” under the B-I framework, as 8.1(b), “Status of approved Working Plan”. Of course the structure and requirements of the forest working plan itself are described in great detail in the National Working Plan Code of the government forest department, which has been revised in 2014 to incorporate the social, environmental and sustainability concerns of the SFM discussion. Most of these principles and requirements are therefore reflected in the National Working Plan Code 2014, which is substantially the same as a 2012 draft prepared by the Forest Research Institute, Dehradun. Interestingly, this draft itself has been tailored closely to the Bhopal-India framework, and in fact takes over the reporting formats in toto from it.

Another facet of FSC worth mentioning would be the special concern with protection of what are termed (P9) “High Conservation Value forests”. As explained in the Sustainable Forestry Handbook, six HCVs have been defined (Higman et al.2006, p.152): four are areas having significant biodiversity or ecosystem values, and two referring to local communities’ traditional habits and habitat. Some of these are also covered in B-I, e.g. C2 “Maintenance, conservation and enhancement of biodiversity”, referring to both notified PAs (wildlife sanctuaries, national parks, etc.) and biodiversity status in forests. Indicator 2.6(b) also brings in “Status of non-destructive harvest of Non-Timber Forest Products”, and 6.2(a) “Status of non-destructive harvest of wood”, which probably intends to highlight the need to minimize collateral damage to surrounding stems during tree felling. Criterion C7 covers the social aspects, including Indicator 7.3 “Extent of cult of cultural/sacred groves”, which may answer to FSC High Conservation Values HCV5 and HCV6.

It may be fair to say that FSC strives to impose, or elicit, specific actions in support of the various components of SFM as outlined above. When one comes to the B-I system, it seems to take for granted a functioning SFM framework already on the ground, and seeks to draw attention to specific aspects through a long list of reporting formats, rather than through action points. For biodiversity conservation, for instance, B-I asks for reporting on the existing Protected Area network, rather than requiring the process to bring out additional needs. This is understandable, since B-I was drawn up by an academic institute (albeit with wide consultation) on behalf of the forest department, which is already governed by an elaborate set of laws, Court orders, etc., and which is already in charge of a huge forest estate managed necessarily on SFM principles with stringent and detailed documentation and process requirements. As mentioned above, many of the actionable points are delegated to the Working Plan Code in the Indian set-up, whereas FSC seems to be incorporating much of the details of SFM into the certification standards themselves. In other words, FSC is designed up on an assumption that little of the SFM framework exists already; B-I is drawn up taking the sustained yield forestry basis of management, working plan system, and legal framework of the forest department as a given. In comparing B-I with FSC, therefore, it may be fair to stipulate the pre-existing legal and institutional framework of Indian forestry as part and parcel of the situation being scrutinised at the time of consideration for certification.

In the next section, we will try to pull together these observations and insights, review the options available, and suggest a possible response at the national policy level to the question of Forest Certification in India.



References

Dilip Kumar, P.J. 2014. Managing India’s Forests. Village Communities, Panchayati Raj Institutions and the State. Monograph No. 32, Institute for Social & Economic Change, Nagarbhavi, Bangalore. Posted at https://www.academia.edu/9235210/Managing_India_s_Forests_Village_Communities_Panchayati_Raj_Institutions_and_the_State).

FRI. 2012. National  Working Plan Code. Draft prepared by Forest Research Institute Dehradun (Indian Council of Forestry Research & Education). Ministry of Environment & Forests, Government of India. 

Gale, Fred and Marcus Howard. 2011. Global Commodity Governance. State Responses to Sustainable Forest and Fisheries Certification. Palgrave Macmillan UK.

Government of India. 2014. National Working Plan Code 2014. Ministry of Environment & Forests. Downloadable copy available at http://www.mahaforest.nic.in/act_rule_file/140898038616%20A%2001%20W%20P%20Code%202014.pdf

Higman, Sophie, James Mayers, Stephen Bass, Neil Judd and Ruth Nussbaum. 2006. The Sustainable Forestry Handbook. Second Edition, First South Asian Edition. The Earthscan Forestry Library. Earthscan Publications Ltd., London.

Humphreys, David. 2006. Logjam. Deforestation and the Crisis of Global Governance. Earthscan Publications Ltd., London. 

Kotwal, P.C., M.D.Omprakash & Dharmendra Dugaya. 2008. Manual: Criteria and Indicators for Sustainable Forest Management in India: An Operational Framework. Operational Strategy for Sustainable Forestry Development with Community Participation in India: IIFM-ITTO Research Project. Indian Institute of Forest Management, Bhopal (India).

Lele, Sharachchandra and Ajit Menon. 2014. Democratizing Forest Governance in India. Oxford University Press, New Delhi.

MTCC. 2009. The First Ten Years 1999-2009. Written by Chew Lye Teng, Harninder Singh, Yong Ten Koong. Malaysian Timber Certifcation Council. Kuala Lumpur.

Upton, Christopher and Stephen Bass. 1995. The Forest Certification Handbook. Earthscan Publications Ltd., London.

Yadav, Manmohan, P.C.Kotwal & B.L.Menaria. 2007. Forest Certification. A Tool for Sustainable Forest Management. Centre for Sustainable Forest Management & Forest Certification: IIFM-ITTO Project. Indian Institute of Forest Management, Bhopal (India).

Sunday, November 5, 2017

49 Forest Certification-III. Competing frameworks, country responses

In the preceding sections, we saw that the Forest Certification framework developed mainly by international NGOs in the west, resulted in the Forest Stewardship Council or FSC, which has developed a set of Principles and Criteria (P&C) for good forest management and chain-of-custody verification. We mentioned that third world national governments had reservations or suspicions about the FSC, tending to see it as yet another ploy by vested interests in developed countries to impose external controls (especially on less developed economies). Business enterprises in developed countries also were initially hostile, and tried to work out ways to avoid the hegemony of the FSC scheme. In this section we take a look at some of the responses in selected countries, and the shape of some alternative schemes for forest certification.

Forest Certification in Australia 

A detailed account of the response to certification schemes in the forestry and fishery sectors in three countries of the developed world (Australia, Canada and the UK) has been given by Gale & Haward (2011), Chapter 8 of which gives a summarized comparative analysis. In Australia, the “policy network” in the forest sector, representing the “triadic” interests of government, business and workers’ unions, was “opposed outright” to the FSC (op. cit., p.236), and was “dismissive of certification in general and the FSC in particular” (p.237). They felt that domestic environmental concerns had already been addressed by the “Regional Forestry Agreements” agreed in the latter half of the 1990s, and there did not seem to be any demand in the Asian export markets for any additional certificates of sustainability.

But when Asian markets slumped in the late 1990s following the “Asian currency crises”, Australian exporters had to turn to North American and European markets, where forest certification was already “well advanced”, so some authoritative certificate of sustainability was found essential. The network “moved quickly after 1999 to establish the AFS”, the Australian Forestry Standard, endorsed by the national Australian Standards institution in 2002. This was seen as a lower-cost and less onerous (e.g. in respect of restrictions on clear-felling) alternative to the FSC. However, by the end of the first decade of the new century, increasing awareness of the effects of unsustainable logging and its relation to biodiversity and climate change, and increasing environmentalists’ pressure, led to a higher expected standard for sustainable forestry. Progress in certification in Canada’s boreal forests increased consumers’ choice.  As a result, the FSC “began to gain ground” (p.238).

Forest Certification in Canada

In contrast to the above, Canada’s forest policy networks (government, industry, and other stakeholders) were “early adopters” of certification, reflecting the “critical role” of forestry in the economy (Gale & Haward 2011, p.173). However, industry interests perceived the FSC as a high-cost option, and so quickly moved to set up the Canadian Sustainable Forestry Certification Coalition, which funded the development of a competing standard through the Canadian Standards Association (CSA). Other possible options included the Sustainable Forestry Initiative (SFI) standards being developed by industry interests in the USA. For domestic Canadian companies, however, a home-grown scheme was considered more suitable. Despite this, Gale & Haward find that the FSC scheme has actually done better. One reason was the fairly pragmatic approach of the FSC players, in finalizing a regional standard for Canada’s boreal forests in 2004, that provided opportunities for pushing the FSC cause. The policy environment also became more “pluralistic” with inclusion of environmentalists and First Nations (p.246) in the process of formulating the FSC-BC Standard for British Columbia, which required logging companies to obtain FSC certification. The increasing preference for the FSC scheme was partly because the highly environment-conscious public came to have low confidence in the industry-backed certification schemes (p.247). Interestingly, at one stage (in 2001) the new executive director of FSC, Maharaj Muthoo, had signed an MoU to certify all Ontario Ministry of Natural Resources lands to the FSC standard, but this was unacceptable to the rest of the FSC organisation, and Muthoo was forced to resign (Gale & Haward, p.190). Nevertheless, New Brunswick state decided to make certification mandatory for major licensees in 2002, and Ontario in 2004. All this led to a jump in FSC certified area, from just 1 mha in 2004, to over 32 mha by end-2009, or “about 22 per cent of the total certified area of almost 150 million hectares” (p.191).

Forest Certification in the UK

In contrast to the neutral or competitive stance of government to forest certification in general (and FSC in particular) in the initial years in Australia and Canada, “the UK government played a major role in supporting FSC certification” through its main state agency, the Forestry Commission (Gale & Haward, p.222).  This mutual cooperation between state and FSC happened only after a period of intense debate and initial opposition within the “forest policy network”. During the 1970s and 1980s, the Forestry Commission had made gradual accommodation to “recreational, environmental and amenity interests”, and officially adopted the principle of ‘multiple purpose’ forestry (Gale & Haward, p.240). Despite this, the “network remained closed to external groups” and “strongly focused on protecting the rights of landowners, the interests of tree growers and the structure of the UK forest industry” (what is termed a “clientilistic” approach, p.249). Organizations representing those interests campaigned against the FSC, as impinging on private rights and imposing unacceptably high costs, and the Forestry Commission (which shared the dominant sustained-yield aggressive plantation-forestry paradigm) generally “sided with them” and sought some means for “sidestepping” FSC requirements (p.212, 252). The FSC in turn worked to develop an “exclusively non-state initiative” for a business-environmental partnership from outside. Two competing standards were thus under development during the 1990s: an FSC-Great Britain standard with the support of large NGOs like WWF-UK and FoE-UK (Friends of the Earth), and a state-sponsored UK Forestry Standard spearheaded by the Forestry Commission. The animosity between the FSC-led NGO campaign and the industry players was so high that the head of the Timber Growers’ Association (TGA) was moved to compare a WWF-organized meeting to discuss FSC certification to a ‘Nazi rally’, as repeatedly quoted by Gale & Haward in their book (2011, p.253).

What then led to a change of heart in the Forestry Commission toward FSC and third-party certification? The Forestry Commission started rethinking its forest management paradigm in the 1980s, and moved to “embrace multiple-purpose forestry”, which “called into question the absolutist notion of private property rights” (p.212). A “multi-departmental cost-benefit study” called into question the “domestic defence” rationale for the nation’s forest policy. Timber growers’ associations attempted to forestall pressure from public opinion by developing their own standards, such as the Forestry and Woodland Code for harmonizing the interests of industry and nature. WWF-UK, one of the main protagonists of certification, chose a pragmatic path of cooperation with the government and industry (with the Forestry Commission acting as a facilitator). These negotiations resulted in the UK Woodland Assurance Scheme (UKWAS) in 1997-8, which simultaneously meets international FSC Principles & Criteria for sustainable forest management. Following this, many industry members started endorsing third-party certification, “especially with respect to its role in controlling illegal timber imports” (p.213). There was “an immediate and dramatic shift in the UK forest network towards the FSC” as the UKWAS was experienced as an acceptable pathway to obtaining the FSC certification, which was seen as a “Gold Standard” in the market (p.255). Most certification of forests in the UK so far is stated to be under the FSC-UKWAS  umbrella.

Pan-European Forest Certification (PEFC)

In contrast to the UK response endorsing the FSC, another major competing scheme was launched in 1999 by forest owners in six European countries (Austria, France, Finland, Germany, Norway and Sweden), initially called the Pan-European Forest Certification (PEFC). Humphreys (2006, p.127) calls this a “World War!”, which reminds one of the “Nazi rally” accusation against FSC in the UK. The creation of the PEFC “was principally a forest owner reaction against the FSC” (Humphreys, p.127), and in part a response to the “European Commission’s reluctance to intervene in favour of European forest owners”. The distinction of the PEFC is that it is a “mutual recognition framework through which national certification schemes can recognize each other as having equivalent standards” (Humphreys, p.127, emphasis added), rather than a single set of criteria in itself. In 2003, it was relaunched as the Programme for the Endorsement of Forest Certification scheme.  PEFC uses nationally or regionally agreed sets of criteria and indicators (C&I) as basis for national-level standard setting. In Europe, PEFC uses the C&I adopted by the Ministerial Conference on the Protection of Forests in Europe (MCPFE) and its Operational Level guidelines. Humphreys does point out the different philosophies behind C&I frameworks (for SFM) and Forest Certification, but as we have discussed above, there is bound to be conflation of the two in most real world contexts, so perhaps too much need not be made of this issue. PEFC went ahead with recognizing and endorsing national-level (government-led) standards, in Australia, Chile, Brazil, Canada (Canadian Standards Association CSA), USA (US Sustainable Forestry Initiative SFI), and so on. By 2005, PEFC had certified (through these national schemes) by far the greater area, amounting to some 186 mha in 19 countries, as against some 68 mha in 66 countries by FSC. However some highly environment-conscious companies have opted for FSC certification (Humphreys, p.129).

Forest Certification in Malaysia

In the mid-1990s, campaigns by western NGOs against unsustainably haervested tropical timbers started biting into Malaysia’s exports (the primary source of the information presented here comes from the Malaysian Timber Certification Council’s publication The First Ten Years, MTCC 2009). Despite the international NGOs’ preference for a particular forest certification scheme throughout the world (p. 10; this refers presumably to the FSC), the Malaysian Timber Industry Board (MTIB) was given the task of developing a separate national scheme for Malaysia, following a multi-stakeholder seminar in April 1994. A “Pro Tem Committee on Timber Certification” (CTC) was set up and started functioning by early 1995 (including the WWF-Malaysia and Malaysian Nature Society), which then followed a phased approach to developing the certification system. The CTC recognized that international acceptance was already there for FMU (Forest Management Unit) level certification under existing systems like the FSC (Forest Stewardship Council), but wanted a national-level certification also for reasons of cost effectiveness.  In the meantime, the National Committee on Sustainable Forest Management (NCSFM) had been working from 1994 to elaborate the ITTO Criteria for Sustainable Tropical Forest Management, under a project supported by the Netherlands Timber Trade Association. All these initiatives were amalgamated in the National Timber Certification Council (NTCC) set up as an independent non-profit company (“limited by guarantee and not having a share capital") in late 1998. It was renamed the Malaysian Timber Certification Council (MTCC) in June 2001.

Over a 3-year period accompanied by multi-stakeholder discussions, the MTCC took up development of the certification standards, field-testing of the standards and assessment procedures, training of auditors, registration of independent assessor companies, registration of peer reviewers, formulation of rules governing the use of the MTCC logo, appeals mechanism, and public comminication on this new certification system. Finalised by end-2001, and launched in January 2002, the set of 6 Criteria and 29 Indicators for forest management certification was known as MC&I (2001). WWF-M withdrew on the grounds that this set was inadequate, and   that they should stick to a more elaborate, 50 indicators set that had emanated from consultations in 1999. However, on the understanding that western markets needed a more recognized international scheme, MTCC continued working with stakeholders including FSC, resulting in the Malaysian Criteria and Indicators for Forest Management Certification dated 11 August 2004, based on the FSC P&C as a template, called MC&I (2002). There are also additional standards for plantations, MC&I (Forest Plantations), and two standards for Chain of Custody  (COC). In 2008, it was renamed the Malaysian Timber Certification Scheme, MTCS. In 2009, the Malaysian scheme got endorsement from the PEFC as well.

Choosing between the forest certification schemes

The quarrel between the FSC and rival frameworks like the PEFC (or its constituent national schemes) would obviously come down to the actual standards set and to the rigour of monitoring and enforcement. In other words, the devil is in the detail. NGOs have criticised shortfalls in PEFC such as the lack of prohibition on future conversions of forest to plantations, allowing logging of old growth forests (Finland), lack of prohibition against genetically-modified (GM) trees, weak provisions on the rights of indigenous peoples (Humphreys, p.127), etc. Each of the rival schemes has tried to garner legitimacy by linking to international standards set-ups or through acceptance by governments. For example, PEFC obtained ‘associate status’ to the International Accreditation Forum (IAF), a body of national-level accreditation organizations; FSC failed to do so (Humphreys 2006, p.133). On the other hand, FSC helped set up another organization called the International Social and Environmental Accreditation and Labelling Alliance (ISEAL), “a group of international voluntary standard-setting, accreditation and certification organizations that aim to promote ecological sustainability and social justice and trade” (ibid.), but IAF has been unwilling to accord any recognition to it (as of Humphreys, 2006). Another framework being tried out (by WWF, for instance) is for a graded set of standards rather than a single cut-off, so that different organizations can aim at their preferred levels of performance in respect of different aspects like environmental, social, legal, and so on.

Developing countries where forest products are a significant portion of their national product or trade, often find themselves in a dilemma. On the one hand, there are the high expectations of environmental and social activists (such as the FSC’s founders) that may call for a major change from existing practices and legal-administrative frameworks. On the other hand, without certification that is responsive to such concerns and that is internationally recognized, they may lose out on market access. This choice may be especially significant for exporters of tropical timbers in tropical Africa, Southeast Asia and South America. The experience of Malaysia in dealing with forest certification, presents a good example.

References


Dilip Kumar, P.J. 2014. Managing India’s Forests. Village Communities, Panchayati Raj Institutions and the State. Monograph No. 32, Institute for Social & Economic Change, Nagarbhavi, Bangalore. Posted at https://www.academia.edu/9235210/Managing_India_s_Forests_Village_Communities_Panchayati_Raj_Institutions_and_the_State).

FRI. 2012. National  Working Plan Code. Draft prepared by Forest Research Institute Dehradun (Indian Council of Forestry Research & Education). Ministry of Environment & Forests, Government of India. 

Gale, Fred and Marcus Howard. 2011. Global Commodity Governance. State Responses to Sustainable Forest and Fisheries Certification. Palgrave Macmillan UK.

Government of India. 2014. National Working Plan Code 2014. Ministry of Environment & Forests. Downloadable copy available at http://www.mahaforest.nic.in/act_rule_file/140898038616%20A%2001%20W%20P%20Code%202014.pdf

Higman, Sophie, James Mayers, Stephen Bass, Neil Judd and Ruth Nussbaum. 2006. The Sustainable Forestry Handbook. Second Edition, First South Asian Edition. The Earthscan Forestry Library. Earthscan Publications Ltd., London.

Humphreys, David. 2006. Logjam. Deforestation and the Crisis of Global Governance. Earthscan Publications Ltd., London. 

Kotwal, P.C., M.D.Omprakash & Dharmendra Dugaya. 2008. Manual: Criteria and Indicators for Sustainable Forest Management in India: An Operational Framework. Operational Strategy for Sustainable Forestry Development with Community Participation in India: IIFM-ITTO Research Project. Indian Institute of Forest Management, Bhopal (India).

Lele, Sharachchandra and Ajit Menon. 2014. Democratizing Forest Governance in India. Oxford University Press, New Delhi.

MTCC. 2009. The First Ten Years 1999-2009. Written by Chew Lye Teng, Harninder Singh, Yong Ten Koong. Malaysian Timber Certifcation Council. Kuala Lumpur.

Upton, Christopher and Stephen Bass. 1995. The Forest Certification Handbook. Earthscan Publications Ltd., London.

Yadav, Manmohan, P.C.Kotwal & B.L.Menaria. 2007. Forest Certification. A Tool for Sustainable Forest Management. Centre for Sustainable Forest Management & Forest Certification: IIFM-ITTO Project. Indian Institute of Forest Management, Bhopal (India).