By Dato’ Dr Freezailah Che Yeom
Advisor to MPIC on Malaysia-EU FLEGT VPA

Introduction

There can be few people who are not aware of the state of world’s forests which has shrunk from some 6.0 billion hectares, before mankind had any impact on forests, to the current estimated area of 3.6 billion hectares, more or less equally distributed between tropical and non-tropical countries

The tropical forest crisis has spawned any number of conferences and initiatives to combat illegal logging and promote sustainable forest management, in the long-term.  Indeed, the whole world maybe said to be in a brain-storming session. Combating illegal-logging has also emerged in the agenda of the G-8 countries.

One of the earliest initiatives to combat illegal-logging was coordinated by the World Bank and certain countries under the Forest Law Enforcement and Governance (FLEG) programme under which a series of Regional Ministerial Conferences were held, the first being in Bali, Indonesia, in 2001.  Malaysia was of the view that such initiatives focusing solely on the supply side, without the element and link with, illegal timber trade, from the demand side, would be fundamentally flawed and obviously biased.

In 2003, the European Commission announced its Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan with several components, one which is activities to promote trade in legal timber through Voluntary Partnership Agreement (VPA).  Thus, with the inclusion of the element of trade, the EU FLEGT Action Plan differs from the earlier initiative coordinated by the World Bank.  Malaysia is the first country to commence formal negotiations to conclude a VPA which was announced on 25 September 2006.

This paper briefly discusses the essentials of the VPA and certain perspectives of the negotiations which need clarity on issues in the negotiations in addition to implications once the VPA is concluded.

Legality and Sustainability

The natural tropical forests in Malaysia, which is one of the twelve mega-biodiversity countries in the world, is a very complex ecosystem.  Managing such an ecosystem sustainably is both challenging and burdensome.  According to the ITTO, sustainable forest management (SFM) may be defined as follows :

“The process of managing permanent forest land to achieve one or more clearly specified objectives of management with regard to the production of a continuous flow of desired forest products and services without undue reduction in inherent values and future productivity and without undue undesirable effects on the physical and social environment”

The bottom-line of SFM are three vital dimensions, social, environmental and economic.   Amongst others, the lives and livelihoods of communities living in and around forest management units must not be adversely affected by timber harvesting; biodiversity must be conserved; environmental values protected and the inherent capacity of the ecosystem to provide goods and services, undiminished.  In addition, such management and harvesting operations must also be economically viable not only during the first cut but also in the long-term during subsequent rotations.

SFM is assessed by independent auditors using principles, criteria and indicators in the process of forest certification.  These principles, criteria and indicators are formulated through stakeholder consultations in an open and transparent manner in which all stakeholder groups take part.  The Malaysian Timber Certification Council (MTCC) operates such a scheme. The Malaysian Timber Certification Scheme (MTCS), in accordance with international norms, consists of 9 Principles and Criteria, each with several indicators and verifiers.

Currently, ten forest management units, covering 4.85 hectares are certified under the MTCS in Peninsular Malaysia and Sarawak.  Another forest management unit, Deramakot, totaling 55,083 hectares, have been certified under the FSC scheme in Sabah.  The total area of certified forests in Malaysia represents about 34 % of the total permanent reserved forests. 

Malaysia has the highest percentage of certified forests managed sustainably in relation to its total area of permanent forests in a tropical country.  We can therefore speak from experience the challenging tasks on the implementation of SFM and forest certification.  Suffice it is to say that they require skills, resources, both financial and human and strong institutions apart from commitment at all levels.  Our success in forest certification is attributable also to the hard work and dedication of our forest managers and the support of industry which I must not fail to acknowledge.  Equally, we are most appreciative of the support from and participation by non-governmental environmental and social stakeholder groups especially in the development of the MTCS.  I must stress that implementation of SFM and certification is largely country-driven to be successful.

I have taken time to go into some details about SFM because we need to distinguish sustainable timber from legal timber.  Obviously, legal timber also needs to be verified through some form of auditing based on selected principles, criteria and indicators which forms a sub-set of those which define sustainable timber.  Nevertheless, the selected principles and criteria characterize and define legal timber must comply with relevant legislation dealing with local communities, labour, environmental management, payment of statutory charges and procedures that will ensure that timber harvested is from a legal origin. 

If SFM is a destination, it is reached only after a long and difficult journey at the end of which sustainable timber is produced.  But on such long journey, to achieve SFM, major milestones will be encountered, one of which is where legal timber, as specified under the VPA, maybe assured.  The challenge therefore is to determine at which point in the journey towards SFM, legal timber is obtained.  We believe that we have struck the necessary balance in the proposed TLAS which will be presented later.

The VPA

The EU, to its credit, has accepted that, whilst sustainable timber is the ultimate goal, in the meantime, legal timber is acceptable.  This is being pragmatic because if sustainable timber is demanded, then we have to wait a long time before it may be obtained.  And in the meantime business as usual will continue.

It is emphasised that the VPA, once concluded, will be legally binding and only timber which has been verified as legal, through a Timber Legality Assurance System (TLAS), may enter the EU market.  Current work is focused on developing the TLAS which is the main component of the VPA.  The TLAS has three main elements

• Definition of Legal Timber
• Principles and Criteria of Legal Timber
• Details of Control Procedures for TLAS

It has been agreed that six principles with appropriate number of criteria will define legal timber.  Every criteria, under each of the six principles, will then be developed in a tabulated form as control procedures to facilitate licensing by the designated authority. It will also be subjected to periodic independent monitoring.

Stakeholder Concerns

An important feature in the process to develop the TLAS is stakeholder consultations in an open and transparent manner during which the Ministry of Plantation Industries and Commodities, seeks the views and inputs from all stakeholders on major issues and proposals.  To date, four such stakeholder consultations have been convened; in Putrajaya (6 March 2007), Kota Kinabalu (22 June 2007), Kuching (15 March 2007) and Kuala Lumpur (17-18 March 2008).  These consultations were well attended and stakeholders were able to present their views and concerns freely.  The First Consultation was informative in order to create awareness about the VPA and important issues to be addressed in the negotiations with the EU.  At the Second Consultation, initial proposals on the TLAS were introduced.  At this consultation also, procedures on the conduct of stakeholder consultations were discussed and adopted.  Proposals for the TLAS, taking into account inputs from the previous consultation, were presented at the Third Consultation held in Kuching.   The TLAS proposals were intensively discussed and certain changes were proposed.  These suggested changes, together with the written submissions received, were duly considered and the TLAS was amended  by the Working Group (WG) and the National Steering Committee (NSC) as appropriate.  The revised, TLAS was then subjected to further examination at the two-day Fourth Consultation to finalise the TLAS.  Clarification was also provided in writing on suggestions not considered necessary or feasible for inclusion in the TLAS.

Certain stakeholder groups raised concern that the process of the stakeholder consultation followed was not adequate and inappropriate including timing, distribution of documentation, choice of Moderator and reporting by the secretariat.  It is to be noted that the process and procedures followed were as adopted at the Second Consultation.  It is accepted that these procedures are not permanent and can be reviewed and amended from time to time based on experience and resources.  On the issue of resources, the support from the EU is gratefully acknowledged.  The procedures for consultations must be considered as an evolving process but due consideration has to be given to implementation, practicality and other constraints.  Nevertheless, the need to review the procedures should be considered at the appropriate time based on concrete proposals from stakeholders from time to time.

Another issue and concern that is often raised is on incentives which at times, surface as green premium.  This is equally of concern to the EU in their negotiations because implementation of the VPA will mean higher costs.  There must be some differentiation between timber verified for legality under the VPA and non VPA timber.  Another related issue concerns the importation of timber from non VPA countries.  It is to be noted that both sides recognise this problem.  Indeed, a market study has been undertaken in order to determine what measures may be instituted to ensure some advantage for a VPA timber.  The findings of this study will be presented later for discussion at this briefing.

A major issue raised and debated at all Stakeholder Consultations concern NCR matters.  This is a very complex subject which has also been debated in other fora such as the Second Malaysian Forest Dialogue held on 22-23 October 2007 which was focused entirely on this topic.  Recently, this was also an issue at a workshop organized by Transparency International Malaysia on 24-25 March 2008.  Let me assure this meeting that all of us are equally concerned on NCR issues and the need to ensure that the rights of local communities, lawfully established, are not in any way infringed by the VPA.  Indeed, in the TLAS, one principle is devoted to ‘Other Users Rights’.  Annex A of the TLAS lists the relevant legislation for Peninsular Malaysia, Sarawak and Sabah, whilst Annex B gives details and control procedures regarding this principle.  Some stakeholder groups argue that additional legislation on this issue should be included in the TLAS.  In addition, recognition must also be given to certain traditional practices with regards to NCR.  This problem is also compounded by issues relating to ‘user rights’ as against ‘ownership rights’.  During all the debates and discussions the responsible authorities gave their views stressing that such concerns have been adequately addressed to the extent possible under the legal framework and be based on the interpretation of the relevant laws by the responsible authorities.  And disputes will have to be settled through the judicial process.  Nevertheless, there may be grey areas in certain aspects of the laws that govern NCR issues.  They need to be reviewed and addressed, but such an exercise is not within the scope of the VPA which does not seek to enact new laws or amend existing legislation.

Another concern that has also been repeatedly raised by some stakeholders, is to have a more comprehensive coverage in laws and procedures that relate to labour and environment. These are included in the TLAS and specifically addressed at the ‘criteria’ level, as ‘Environmental Management’ and ‘Worker Safety and Health’.   Once again, I must stress that we are targeting legal timber in the VPA and therefore cannot really be expected to include a more comprehensive set of legislation on these issues which are appropriate in forest certification for sustainability.

Some stakeholder groups requested that they be given the opportunity to participate in the drafting of the TLAS on the basis that this procedure is followed in certain countries negotiating the VPA with the EU.   The VPA is being negotiated between the Government of Malaysia and the EU.  The proposed TLAS is drafted by an inter-agency Working Group comprising of the main responsible Government Departments and agencies.  The draft was then tabled for the consideration of the National Steering Committee before being subjected to a series of Stakeholder Consultations to receive the views and suggestions from all stakeholders to further refine the TLAS.  To date four Stakeholder Consultations had been held and such process is considered adequate.  Inclusion of all stakeholder groups in the Working Group to draft the TLAS is cumbersome and may be impractical.

Conclusions

The VPA, under the framework of the EU FLEGT Action Plan, may be singled out as a pragmatic yet strategic instrument to achieve sustainable management of tropical forests by accepting, legal timber, during a period of transition.  The VPA does not seek to enact new laws or amend existing legislation in order to formulate a TLAS.  It must, however, include the very essential legislation under each of the six agreed principles to define legal timber.

Apart from the TLAS, which is central to the VPA, other issues on incentives, independent monitoring, trade with non-VPA countries and the nature and extent of support for capacity building, have to be clarified and negotiated.

The TLAS has been the subject of four stakeholder consultations.  One stakeholder group is seriously concerned that coverage on NCR issues is inadequate whilst another group is concerned that too much legislation has been included to define legal timber for which market incentives are largely unknown.  In varying degrees, these two groups, are therefore not supportive of the VPA for quite different reasons.

In such a complex situation, with diverse interests and differing views, the Ministry of Plantation Industries and Commodities, as the lead Ministry, will have to make an assessment and determine whether progress could be achieved to benefit Malaysia as a responsible member of the international community.  Stakeholders must also appreciate that in the situation we are in the VPA can not address all their concerns to their entire satisfaction.  The VPA, in any case, is time bound and not cast in stone, and may be reviewed and strengthened from time to time based on experience and outcome.  It will not be without imperfections, but it will be an improvement on the status quo of the forestry sector.

From the perspective and outcome of the four stakeholder consultations, the future of the VPA is perhaps, somewhat uncertain.  Obviously, if some of us push all the items in our agendas excessively, there can be no VPA.  Even if a VPA is concluded, anti-VPA campaigns will be harmful.  In such cases can anyone be comforted and claim victory?  Victory, surely, is not for any of us but must be reserved for our precious forest heritage.  The VPA is a concrete, strategic and achievable target to reach our long-term goal of sustainable forest management which unites all of us including the EU and its member states.

I believe that we are on the right track with the VPA.  Let us therefore do our utmost to successfully conclude the VPA under the leadership of the Ministry of Plantation Industries and Commodities.