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The Myanmar FLEGT process

Disclaimer: This text has been produced with the assistance of the European Union and the Governments of Finland, France, Germany, the Netherlands, Spain, Sweden and the United Kingdom. The contents of this site are the sole responsibility of the European Forest Institute's EU FLEGT Facility and can under no circumstances be regarded as reflecting the position of funding organisations.

Contents

1. The country ..................................................................................................................................... 2

2. Progress .......................................................................................................................................... 2

3. Briefings .......................................................................................................................................... 3

Small and micro-sized entities in the Mekong region’s forest sector - A situational analysis in

the FLEGT context ........................................................................................................................... 3

Cross-border timber trade in the SAARC area ............................................................................. 11

4. Resources ...................................................................................................................................... 17

5. Websites ....................................................................................................................................... 18

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1. The country

Forest cover in Myanmar is approximately 29 million hectares or about 43% of its national territory. The forest area is owned by the State, but management rights can be granted to communities or private companies. According to IUFRO’s 2017 global teak study Myanmar - well known for its natural teak (Tectona grandis) - has nearly half of the world’s 29 million hectares of natural teak forests. Between 2010 and 2015, Myanmar lost 2.7 million hectares of forests, about 8.6% of its forest cover.

In 2019, Myanmar’s timber exports to the EU were worth about EUR 45 million, an increase compared to EUR 32 million in 2017 but a sharp fall compared to EUR 66 million in 2007. The forestry sector accounted for approximately 0.1% towards Myanmar’s GDP and 5% to its state revenues during the fiscal year 2017/18.

Forests are the responsibility of the Ministry of Natural Resources and Environmental Conservation (MONREC). The State-owned Myanma Timber Enterprise (MTE) is responsible for the harvesting, processing and sale of commercial timber. Private forest plantations were allowed to be established in 2006 under long-term land leases with the State but they are not yet a source of timber for export.

The Government of Myanmar committed to improve the governance of its forest sector and started to engage with FLEGT in 2015. In November 2018, the national Multi-Stakeholder Group was formally established to represent the interests of all forest sector stakeholders in guiding future activities related to FLEGT in Myanmar. The Multi-Stakeholder Group has representatives from civil society organisations, the Government and the private sector. There are also multi-stakeholder groups in states and regions to ensure that local perspectives are taken into account.

Myanmar is one of the four Mekong countries where the EU FLEGT Facility is supporting the participation of small and micro timber enterprises in legal supply chains.

2. Progress

Recent developments

The forestry sector has been undergoing a reform process in recent years. In 2014, a log export ban made it illegal to export unprocessed logs and in 2016, a logging ban halted all timber extraction in the country for one logging season. A 10-year logging ban in the Bago Yoma region, Myanmar’s most important region for teak production is in place.

Myanmar’s new Forest Law 2018 was passed on 20 September 2018, replacing the old 1992 Forest Law. Myanmar drafted new Forest Rules and collected over 2000 comments through consultations in states and regions in 2019. National and regional multi-stakeholder groups discussed the Forest Rules and provided inputs into public consultations.

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A timber legality workshop took place in late 2017 followed by discussions on this topic by the Multi-Stakeholder Group in 2018 and 2019. In 2018, the Chain-of-Custody Dossier providing an overview of all legally required documents in the timber supply chain, from the assignment of the Annual Allowable Cut to export, was developed by MONREC.

In November 2019, close to 150 stakeholders representing the Government, the civil society and the private sector from all 15 states and regions gathered for a workshop with EU participation in Myanmar’s capital Nay Pyi Taw. The event aimed to obtain stakeholder input in identifying strategic FLEGT priorities focusing on achieving legal harvest, public access to information on forest and trade related legislation, and information related to legal timber harvest in Myanmar.

In February 2020, a Training of Trainers workshop for the Multi-Stakeholder Group representatives from Myanmar states and regions took place in Yangon. The training provided the participants with technical and facilitation support to debrief stakeholders in states and regions on the outcome of the November workshop. The debriefs will take place throughout 2020 and collect further feedback from stakeholders to form the basis for the work plan of the FAO-EU FLEGT Programme.

3. Briefings

Small and micro-sized entities in the Mekong region’s forest sector - A situational analysis in the FLEGT context (Publication date: 17 June 2019)

Member States of the Association of Southeast Asian Nations (ASEAN) use different indicators to define micro, small and medium enterprises. While the two main indicators used by ASEAN member States are the number of employees and the amount of capital1, others include installed electrical power use, annual revenue and annual production capacity. Literature exists on the state of micro, small and medium enterprises in ASEAN countries. However, little is known about the small and micro-sized entities (SmEs) engaged in the forestry sector in the Mekong region, their characteristics, the number and gender of

1 For example, according to Decree No.25/GOV (2017) on the Classification of Small and Medium Enterprises, a micro-sized enterprise in Lao PDR refers to enterprises with a total asset not exceeding LAK 100 million (USD 11,700) and annual revenue not exceeding LAK 400 million (USD 46,800).

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people involved, the related supply chains, or their levels of compliance with relevant regulations2.

In this context, the Swedish International Development Agency (Sida) supported the EU FLEGT Facility in conducting regulatory assessments of forest and timber-based SmEs in Lao People’s Democratic Republic (PDR), Myanmar/Burma, the Kingdom of Thailand and the Socialist Republic of Vietnam. The assessments were conducted from June 2017 to June 2018. They used a supply chain analysis model, which assumes that by understanding the interactions between actors in specific supply chains, it is possible to identify points of intervention. In total, the EU FLEGT Facility assessed 14 supply chains3 producing timber products for domestic and in part for international markets. The assessments found that these supply chains consist predominantly of informal households that operate without business registration. This brief synthesises the results from these assessments. It also includes preliminary findings from ongoing pilot studies in Mekong countries undertaken by the EU FLEGT Facility.

(Source: EU FLEGT Facility)

2 This brief uses the acronym ‘SmE’ with lower case ‘m’ rather than SME to exclude medium-sized enterprises, which in some countries can employ up to 300 workers. The SmE acronym is used in our assessments to differentiate these small and micro-sized entities from the mainstream micro, small and medium enterprises, or the more commonly used SME. 3 Supply chains assessed in the four countries: - Lao PDR (1. timber from forest conversion for the domestic market; 2. timber from village forest areas for customary use; and 3. Timber from unidentified sources for sawmills and traders in domestic or international markets) - Myanmar (1. timber used for furniture; 2. timber used for doors and window frames; and 3. timber used for wood-based handicrafts) - Thailand (1. domestic plantation rubber-wood for the export market; 2. domestic plantation teak for domestic and export markets; 3. rain tree/garden tree for domestic and export markets; 4. reclaimed/recycled hardwood timber for domestic and export markets) - Vietnam (1. imported rosewood used in wood villages for domestic and export markets; 2. domestic acacia plantation timber for domestic and export markets; 3. domestic rubberwood plantation timber for domestic and export markets; and 4. domestic scattered trees for domestic and export markets).

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Key findings

SmEs characteristics

SmEs in the forest and timber sector can include individual tree growers, plantation smallholders4 community forest and village forest entities, household entities5, small-sized entities in the primary and secondary processing sector, traders and community entities. Among the 14 supply chains analysed, the main actors in the four countries are individual tree growers and timber processors that operate formally or informally. In most countries, having a business registration is a key indicator that distinguishes between formal and informal businesses. For example, in Vietnam, business registration is the criteria used by the General Statistics Office to differentiate formal from informal businesses6.

The assessments found that individual tree growers are an increasingly significant source of timber for the national timber industry in the four countries. In Vietnam, the 1.4 million tree growers possess an average of one to two hectares of forestland per household. They play a crucial part in the plantation timber supply chain. They annually produce approximately 10 million cubic metres of timber with a value of USD 500-700 million7. This production feeds the wood chip and value-added timber processing industries for domestic and international markets. In addition, one study estimated that there are more than 300 wood villages in Vietnam. These wood villages employ tens of thousands of households and hundreds of thousands of labourers, including both household and hired labour in the manufacturing process of timber products8. In Lao PDR, only approximately 17 percent of household timber-processing entities are registered. The situation in Myanmar/Burma is unknown because official data does not capture businesses that operate without registration9.

SmE operators and traders often use their houses as storefronts and processing workshops. This practice contributes to unsafe and unhealthy working conditions. In particular, the assessments have found lower level of compliance with occupational health and safety and environmental standards.

SmEs mainly produce for the local market. In contrast, the medium to large-sized processing enterprises mostly comply with the national requirements for registration. Their market reach is far greater and wider than that of SmEs. In general, the assessments found that the percentage of timber processing households operating in the four countries with business registration is significantly lower in comparison with unregistered entities.

4 Each country has its definition of and threshold to differentiate ‘plantation smallholders’ from other entities. 5 According to nationally-defined characteristics, household entities can include tree growers, micro entities in the primary/secondary processing sector and traders. 6 Pasquier-Doumer Laure, Xavier Oudin, Nguyen Thang. 2017. The importance of household businesses and the informal sector for inclusive growth in Vietnam. A co-publication of the Vietnam Academy of Social Sciences and the French National Research Institute for Sustainable Development. 7 EFI EU FLEGT Facility. 2018. Diagnoses and regulatory assessment of small and micro forest enterprises in the Mekong Region. Internal Document. 8 Tô Xuân Phúc, Dang Viet Quang, Nguyễn Tôn Quyền, Cao Thị Cẩm. 2018. Wood Villages in the context of

market integration: Status and policy options for sustainable development. Forest Trends. 9 Myo, E. 2017. Identifying major labour policy issues in Myanmar. Japan Labour Issues 1: 83-94.

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Finally, the assessments indicated that in the four Mekong countries, a majority of individual tree growers and processing SmEs are not part of any business association or any form of sector organisation, whether they operate formally or informally. The legal frameworks in these countries enable the formation of groups, cooperative enterprises and industry associations. However, the assessments found that individual tree growers and processing operators, in particular in Lao PDR and Myanmar/Burma, do not regard membership of business associations as beneficial. Nonetheless, in practice, the national timber industry associations in Lao PDR and Myanmar/Burma are influential. They gain preferential treatment with respect to access to timber sold at auctions for example. They are also consulted in the setting of timber quotas and in regulatory reform processes. When SmEs do not participate in these structures, they are often unaware of relevant information related to applicable regulations, support initiatives and other business development opportunities. This in turn makes cooperation among SmEs more challenging. Cooperation could help them obtain common benefits such as increased market access, larger job orders, material procurement, and access to training and technology.

Reasons for SmEs to remain informal

While playing a major role in the national economies and rural livelihoods, literature suggests that the principal barriers to the formalisation of SmEs are unfamiliarity with regulations, lack of incentives and lack of understanding of the benefits of being formal10. This resonates with the situation of SmEs in the timber-processing sector in the four countries studied. In these countries, most informal household businesses do not register their business, partly because they think they do not have to do so, even if their business operations surpasses the national thresholds for business registration (for example, the number of workers employed and/or total income). This highlights the need to circulate more extensively information on regulations, as well as relevant support programmes for registered SmEs, possibly in a standardised format, across different jurisdictional levels in country.

Informal SmEs in the four countries that reach the national thresholds for registration currently have very few incentives to register their businesses. In addition, as mentioned above, a majority of these entities see no advantage in becoming formal. SmEs operating mills or timber processing shops in the assessed supply chains hardly ever request their local suppliers to provide evidence of the origin of the timber, the payment of taxes or fees, or compliance with environmental and occupational health and safety regulations. They do not provide this evidence to their customers either. In addition, the sanctions in case of non-compliance may not have a deterrent effect. They can be less onerous than the costs of operating with a business registration. For example, interviewees in Thailand reported that to reduce transaction costs due to the complex, bureaucratic, contradictory or overlapping requirements, SmEs often need to make unofficial payments to authorities. If formality means fewer profits while unofficial payments can address such issue, the case for SmEs to operate informally remains. Moreover, the assessments found that SmEs often neglect basic occupational health and safety standards in their workshops due to a lack of awareness, the absence of controls or financial constraints.

10 International Labour Organization 2002. Resolution concerning decent work and the informal economy.

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(Source: EU FLEGT Facility)

Consequences of SmEs remaining informal

Even if SmEs can continue to operate informally, this practice contributes to the creation of an unclear and unfair business environment for them and other stakeholders in the supply chains. For example, while informally operating households are not required to issue invoices with tax codes, their customers may be subject to such requirements. This could unintentionally lead to a misunderstanding, where as a precautionary measure, medium and large export-oriented enterprises exclude these informal households from their vertical supply chains to comply with international market demands. This stresses the need for information on supply requirements applicable to informally operating households to be made available to medium and large export-oriented enterprises.

In addition, the assessments indicated that a majority of the informally operating SmEs exceed thresholds for registration. These entities are therefore required to pay government taxes based on their financial turnover rate but often do not do so11. Workers for these informal SmEs, specifically those that reach the taxable income thresholds, do not contribute to the national tax system either. Nor do these SmEs provide benefits and entitlements to their workers to increase their profit margins. This practice therefore creates unfair competition and deprives the government of public revenue, thereby limiting its ability to provide social services. This in itself is a vicious cycle.

SmEs within the assessed supply chains often raised bureaucratic obstacles as a substantial impediment to their business viability. There are two types of bureaucratic obstacles: insufficient, unclear or unnecessarily burdensome legal frameworks; and improper or inadequate monitoring and enforcement of compliance. These two factors frequently overlap and explain why many SmEs that surpass the registration thresholds operate informally. Such SmEs could be excluded from legal supply chains on the ground that they are not legal operators, as defined by the applicable national laws listed in the timber legality definition of the Voluntary Partnership Agreements (VPAs) on Forest Law Enforcement, Governance and Trade (FLEGT) of the studied countries. Finally, due to various constraints for accessing legal and affordable timber, some SmEs will try to continue to deal with illegal timber. The revision and effective implementation of relevant regulations might

11 These can include income tax, contribution tax and profit tax.

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prevent the circulation of illegal timber in the supply chains. This would lead some SmEs to cease their economic activities and migrate to other sectors, for example agriculture or trading. However, since many SmEs are engaged in timber processing as their main source of income, their closure could have broad livelihood consequences.

(Source: EU FLEGT Facility)

Gender gaps: women empowerment and participation in SmEs

Participation and empowerment of women, through equal opportunities and equal wages, are enshrined in the national regulatory frameworks of all four countries. However, implementation of these frameworks has been challenging. In Vietnam for example, the National Gender Equality Strategy (2011-2020) emphasises the need to support women-owned enterprises and women workers in various economic sectors. However, there is no definition on what constitutes a women-owned enterprise. Government agencies therefore face difficulties in identifying which businesses are eligible for support. In Lao PDR, the 2013 Labour Law provides a legal basis for equal wages for women and stipulates that female employees have an equal right to employment in production, business and management. In practice, the assessment found that female employees in the assessed supply chains tend to be paid less than men for the same work. Interviewees suggested that this discrimination is rooted in broader traditional, cultural and social arrangements. Finally, women appeared to be better represented in management and financial roles in smallholder plantations, and less in primary and secondary processing activities. For example, interviewees in Lao PDR considered the wood processing sector to be a male-dominated sector that is unfit for women due to the demanding physical tasks.

FLEGT VPAs can create incentives for SmEs to operate formally

Lao PDR, Thailand and Vietnam are moving closer to achieving and demonstrating legality in their timber supply chains, mainly through their VPA processes. Many studies have cautioned that if SmEs do not participate meaningfully in governance reform processes, existing challenges for their legal operation might increase.

Formal business operations in the VPA context and competitiveness are not mutually exclusive. The VPA processes can bring opportunities for both formal and informal SmEs.

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First, once the national systems to assure the legality of timber are operational and the countries start issuing FLEGT licences, formally operating SmEs integrated in the vertical supply chains could have a comparative advantage. For example, timber product exports have been increasing since Indonesia began issuing FLEGT licences12. Sources suggest that this increase benefited small farmers that supply plantation timber as the price of raw material certified under the Indonesian system to assure the legality of timber increased. Evidently, area of forests planted by smallholders on private land is increasing in Indonesia (Java)13.

Second, the legality requirement for timber sources within the supply chains could offer SmEs economic and political opportunities. For example, a recent study found that the higher demand for legal timber offers a comparative advantage to formal SmEs that deal with high-value and highly regulated tropical hardwoods. In terms of political opportunities, formal operation helps SmEs to be better represented in policy dialogues that have implications for them. This is particularly true for those SmEs that are at the household level, where no organisational structure, communications or regional trade clusters exist. These opportunities generally materialise by SmEs joining associations.

Third, regulatory reforms associated with the VPA process could facilitate individual tree growers’ access to financial loans. For example, in Thailand, standing trees grown by farmers are now accepted by government banks as collateral to support loans14.

Fourth, VPA experience shows that, if all stakeholders actively participate in the VPA process, it can bring various benefits to SmEs. For example, in Thailand, the VPA process has simplified the regulatory framework, and the EU FLEGT Facility’s work with SmEs operating with reclaimed wood has helped them integrate the legal supply chain.

Another example is the ongoing pilot study carried out by the EU FLEGT Facility in collaboration with the Food and Agriculture Organization of the United Nations (FAO) in the Attapeu province in Lao PDR. This pilot aims to find viable means for 21 SmEs to comply with the Government’s regulations and improve their competitiveness. At the second VPA negotiation session between the EU and Lao PDR, held in June 2018, parties agreed that there is a need to increase the involvement of the informal sector/household businesses in the VPA’s multi-stakeholder consultation process. This should also create opportunities for the creation of clusters or associations, the building of tactical coalitions with key stakeholders, capacity building and access to credit. The assessments did not systematically evaluate SmEs’ participation in the VPA processes. Nonetheless, they have shown the importance of understanding the specificities of SmEs and the potential challenges and opportunities they might face as a consequence of the VPA processes.

12 According to the International Tropical Timber Organization, the EU’s imports of wood products from Indonesia increased by 7% in the first half of 2018, increasing Indonesia’s share of total EU imports from 15.7% to 16.6%. 13 Andrea Johnson. 2016. Barriers and Opportunities for micro, small and medium enterprises under demand-side legality policies. CATIE-Finnfor and Forest Trends. 14 While this is a positive development, it would be necessary to follow up on the conditions of the loan, particularly on loan default. Remaining issues to address include whether the bank will repossess the trees that were used as collaterals and how this repossession will affect the borrowers’ livelihoods.

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(Source: EU FLEGT Facility)

Crosscutting policy recommendations

While the Governments of the four countries should lead on the crosscutting recommendations listed below, other stakeholders, including development partners, civil society and private sector actors, should provide relevant support. It is recommended to:

1. Clarify and improve legal frameworks through processes aimed at defining timber legality. These processes should identify and address overlapping or contradictory regulations that affect SmEs. Clarifying land-use policies and instituting tenure reforms is the first and most essential step to support forest-based SmEs. Legal frameworks affecting SmEs involved in timber processing also need to be clarified, particularly those related to business registration, taxes, and occupational health and safety.

2. Support the creation of SmE groups and their organisational structures to increase their competitiveness. These platforms serve two main purposes. First, they make it easier for those who could provide information, finance and other business development services to access SmEs. Second, the platforms should enable SmEs to better express their needs in policy processes, including VPAs. This horizontal integration should also increase SmEs’ access to information, finance and other business development services. This in turn should increase their competitiveness and eventually allow for their direct integration in vertical supply chains. With a reduced number of intermediaries within the supply chains, groups of household businesses could cooperate directly with larger companies to increase information flows and reduce transaction costs.

3. Provide incentives and technical support to SmEs that reach the registration thresholds to register their businesses. At the same time, those that are close to the registration thresholds should be encouraged to formalise as this will likely improve their operating conditions and prospects for growth. This implies addressing the disincentives towards formalisation and clarifying the regulations on business registration thresholds. Incentives for SmEs’ formalisation could include restructured tax systems for SmEs, streamlined registration and permitting procedures, and access to credit. Where possible, VPA processes should pay special attention to the situation of SmEs that

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surpass the thresholds for registration as required by national law. VPA processes should also consider measures to overcome potential challenges that come from the implementation of systems to assure the legality of timber.

4. Support synergies among relevant initiatives led by national stakeholders/beneficiaries, and where relevant, in partnership with development partner-led initiatives. This is of particular importance for supply chains where SmEs represent a key source of employment and use a substantial amount of forest resources.

5. Identify and support alternative timber sourcing and production options for SmEs. These options will be needed where demand for timber exceeds supply from natural forests, and where SmEs wish to decrease their dependence on logs and sawnwood. They include shifting to planation timber or to engineered materials such as fibreboard, particle-board and veneer, bamboo and rattan, or even non-wooden materials.

6. Provide necessary support to improve and implement existing regulations aimed at bridging gender inequality gaps. Moreover, further research should be conducted to identify gender-specific constraints for equitable participation in the processing sector and in accessing business development support in supply chains.

Cross-border timber trade in the SAARC area (Publication date: 26 January 2017)

Key messages

The European Union (EU), the United States (US) and tropical countries (Côte d’Ivoire, Ghana, Malaysia, Myanmar/Burma and Nigeria) are expected to continue as leading timber trade partners for countries in the South Asian Association for Regional Cooperation (SAARC). Any timber trade between Myanmar/Burma and the SAARC region is likely to be minimal over the next 15 years as a result of Myanmar’s log export ban.

The SAARC region will remain a net importer for at least the next 15 years because domestic demand is estimated to grow faster than domestic production. The gap between recorded supply and consumption is expected to widen further in the future, increasing reliance on imports.

SAARC countries import large quantities of illegally sourced timber that go undetected due to a lack of effective policy measures. The illegal cross-border timber trade takes place within communities and by organised groups.

Forest law enforcement remains challenging in SAARC countries because of weak regulatory frameworks to control timber transport and verify the supply chain, a lack of resources and corruption in forest departments.

Recommendations to promote legal timber trade in the region include:

o Strengthen legislative frameworks and adopt responsible import policies; o Raise awareness of timber legality and the EU Timber Regulation (EUTR);

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o Promote sustainable forest management and forest certification; o Conduct further research on timber trade in the region; o Strengthen existing regional institutional mechanisms.

Introduction

This briefing is based on a study of the cross-border timber trade focusing on Bangladesh, Bhutan, India, Nepal, Sri Lanka and Myanmar/Burma. All countries except Myanmar/Burma are members of the South Asian Association for Regional Cooperation (SAARC). There is very little systematic information on timber and timber products trade flow between these countries and outside markets.

The main objective of the study is to provide a clear understanding of the timber and timber products trade, regulatory and policy frameworks, and institutional mechanisms in the SAARC region. It also provides an overview of the SAARC region’s timber trade with Myanmar/Burma and other important markets. It highlights challenges and opportunities, and provides recommendations for key target areas for Forest Law Enforcement, Governance and Trade (FLEGT) support, and for strengthening institutional mechanisms in the region.

Nepalese women carry wood harvested sustainably from a forest (Source: DFID)

Key findings, challenges and opportunities

Timber production and consumption

The recorded supply of timber from natural forests has been declining. Plantations and trees outside forests will remain the major source of timber. Social and community forests, small private plantations such as agroforests, farm forests and large-scale home gardens, and trees outside forests will continue to be the main domestic sources of timber in the SAARC countries.

Timber consumption has increased faster than the recorded supply. In all study countries except Bhutan and Myanmar/Burma, imports and unrecorded timber are filling the gap. The demand for timber is likely to grow further because of the increasing population and rapid

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economic growth in the region. As a consequence, the gap between the recorded supply and consumption will widen further in the future, and this will increase reliance on imports.

Trade policies that favour importing industrial roundwood through lower duties compared with other products, will provide incentives for increasing imports. This is particularly the case in Bangladesh and India. Such policies are also likely to encourage more unrecorded timber in the supply chain.

The demand for certified timber is growing especially in Bangladesh, India and Sri Lanka as these countries try to export more to markets that require certification. Timber industry companies and medium- and large-scale private plantation investors will play a key role in increasing the production of certified timber.

Cutting wood from the Sunderban, Bangladesh (Source: Oxfam International)

Trade patterns and links with trading partners

Overall, the SAARC region will remain a net importer for at least the next 15 years as domestic demand is estimated to grow faster than domestic production. India will remain by far the biggest exporter and importer of timber and timber products in the SAARC region.

The European Union (EU), the United States (US) and tropical countries will continue to be the leading trade partners for SAARC countries.

During the period from 2000 to 2013, paper, paperboard and wood pulp (besides industrial roundwood) were the main timber products that SAARC countries imported from the EU and US. Paper and paperboard, wooden furniture and handicrafts were the major timber products that were exported. Imports of these products from China were also substantial and grew rapidly.

In terms of value and volume, Côte d’Ivoire, Ghana, Malaysia, Myanmar/Burma and Nigeria contributed 80% of the industrial roundwood imported into the study countries in the SAARC region between 2000 and 2013.

Trade between Myanmar/Burma and the SAARC region is likely to be minimal over the next 15 years as a result of Myanmar’s log export ban which came into effect in April 2014. Trade

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between the SAARC region and Myanmar/Burma was largely one-way. The SAARC countries, particularly India and Bangladesh, imported industrial roundwood, mainly comprising teak (Tectona grandis), gurjan (Dipterocarpus spp.) and pyinkado (Xylia dolabriformis). Imports were worth hundreds of millions of US dollars, while exports to Myanmar/Burma were negligible.

India’s imports of plywood and veneer from Myanmar, which have been negligible compared with industrial roundwood imports, might increase slightly in the future. This is because of the scheduled reduction in import duties for these two products under the Association of Southeast Asian Nations (ASEAN) India Free Trade Area (AIFTA) Agreement. However, this increase will not come close to compensating Myanmar/Burma for the loss of its industrial roundwood exports.

To fill the vacuum created by Myanmar’s log export ban, the SAARC countries have started importing more timber from Malaysia and a number of new countries, such as Benin, the Solomon Islands and Surinam. The zero import duty set in 2010 under the AIFTA Agreement for the trade of industrial roundwood between India and Malaysia will act as a key policy driver, and will increase roundwood imports from Malaysia to India.

The scenarios for the most traded timber products and leading trade partners are likely to remain unchanged for the next 15 years because market factors, such as trends in demand and supply, are expected to remain the same.

Timber awaiting export to India in Liberia (Source: PROFOR)

Policy and regulatory framework, export–import procedures and controls

Forest law enforcement remains challenging in SAARC countries. The regulatory framework that controls timber transport and verifies the supply chain is weak. Timber production, processing and trade in particular, and forest resources in general are regulated by multiple acts and laws that have good provisions. However, a lack of resources and corruption in forest departments make effective forest law enforcement very challenging.

Export and import procedures are inconsistent across study countries in the documentation required and the checks carried out. This inconsistency, together with the geographic locations of these countries, results in variation in time required for, and costs associated with, exports and imports.

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The main means of recognising timber as legal is a transit pass. Forest departments check consignments of timber against transit passes at checking stations. However, a transit pass is only a piece of paper and forgery is not uncommon. Checks are manual and systems used at the forest checkpoints are not computerised. Technological improvements to the systems are needed to make the transit pass an effective way to control timber transport or to verify the supply chain.

Forest policies in all study countries lack explicit measures to control illegal logging. In addition, there is no mandate in the countries’ forest and international trade policies for effectively checking whether imported timber comes from a legal source. No documents proving timber legality are required for customs clearance. This leaves the door wide open for illegal timber imports.

Source, trade flows and markets for illegal timber

Inadequately enforced forest regulations allow large quantities of unrecorded timber, sometimes mixed with legal timber, to enter the domestic supply chain each year. Unrecorded timber meets a substantial part of domestic timber demand especially in Bangladesh, India and Sri Lanka. It is mixed with legal timber to some extent in all the study countries.

Private tree growers’ poor knowledge about timber legality and the absence of national systems for recording legal timber production data also contribute to the problem. Corruption in the forest sector is a major underlying problem.

The study countries import large quantities of illegally sourced timber that go undetected because of a lack of effective policy measures. A significant portion of the imported timber, particularly in India, is estimated to be sourced illegally. Because there is no policy mandate, imported timber can be cleared through the import procedures without proper checks for legality.

Illegal cross-border timber trade takes place within communities and by organised groups. Individuals trying to earn a living and organised groups move illegal timber across the border (especially from Nepal and Myanmar/Burma to India, and from India and Myanmar/Burma to Bangladesh). Communities on both sides of the border do not respect national borders when in need of timber.

Recommendations to promote legal timber trade

There are a number of key areas where support on Forest Law Enforcement, Governance and Trade (FLEGT) could be targeted:

Strengthen legislative framework and adopt responsible import policies

Highlight the importance of strengthening the legislative framework and adopting more responsible foreign trade policies. This could introduce mandatory checks of the legality of timber imported by the SAARC region countries and Myanmar/Burma.

To prevent illegal logging, illegal cross-border timber trade and illegally sourced timber imports, strengthen existing legal frameworks and adopt import policies with a mandate for

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strict timber transport control and supply chain verification. Effective law enforcement and policy implementation are also necessary.

Raise awareness about timber legality and the EU Timber Regulation (EUTR)

Training for small-scale private tree growers about timber legality will reduce the volume of unrecorded timber in the supply chain. Such programmes can be run on public media platforms and at village or community levels.

Awareness-raising programmes can be used to target the forest industry, particularly in India. These should focus on the requirements of the EUTR and the risks of continued consumption of illegal timber.

Promote sustainable forest management and forest certification

It is important to promote sustainable forest management and forest certification. Because the problem of illegal timber is regional, and small-scale producers supply a significant quantity of timber, the potential for regional cooperation to promote group forest certification should be explored.

A joint action plan (involving several countries) is more likely to prevent illegal timber from entering the supply chain than a single-country approach.

Teak logs awaiting inspection in factory yard, Yangon, Myanmar (Source: EU FLEGT Facility)

Conduct further research on timber trade in the region

The following research could help to design better FLEGT-related activities in the region:

1. Assess the level of unrecorded domestic timber in the market and the extent to which illegal and legal timber are mixed.

2. Examine options to develop national systems to record legal timber production.

3. Identify regional systems that provide easy access to information on policy, regulatory frameworks, procedures and controls on timber production, processing and trade.

4. Assess how periodic monitoring of timber trade data could work.

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5. Examine the feasibility of using independent forest monitoring to improve the effectiveness of forest law enforcement.

6. Seek ways to minimise certification costs.

7. Explore links between timber legality and climate change, and between people’s livelihoods in border areas and cross-border illegal timber trade.

Strengthen existing regional institutional mechanisms

Despite known weaknesses, regional institutional mechanisms could provide a good base for future FLEGT-related activities in the SAARC region.

1. Strengthen potential regional partners

The SAARC Forestry Centre (SFC) could be strengthened through funding, training and capacity building to become a regional platform for dialogue on timber trade and legality.

Cooperation between SAARC and ASEAN regions on FLEGT-related activities could be explored, as the ASEAN region is likely to remain the leading partner for timber imports for the SAARC region.

2. Engage national institutions

The SFC could reach out to forest departments in the SAARC countries and Myanmar/Burma to help strengthen it as a regional platform on timber legality. National forest departments, with the support of their ministries, could help to bring forest corporations, timber industry and export promotion bodies on board. Civil society, non-governmental organisations, timber industry companies, and medium- and large-scale private plantation investors should also be engaged.

3. Strengthen regional trade mechanisms

The South Asian Free Trade Area (SAFTA) Agreement has not had a positive effect on the trade in legal timber products. Nevertheless, it could provide a good base for future FLEGT activities through provisions for harmonisation, simplification and cooperation on procedures and standards.

The European Forest Institute and the European Commission could work with the SAARC Secretariat and the SFC to strengthen SAFTA by including provisions such as mandatory checks on timber legality. Such provisions would reduce trade in illegal timber products and promote the trade of legal timber and timber products.

4. Resources

Baseline study Myanmar: overview of FLEGT

Final Report of the Myanmar Timber Legality Assurance System (MTLAS) Gap Analysis Project

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Myanmar Timber Chain of Custody Process: Documents and Actors

5. Websites

Forest Trends

RECOFTC Myanmar (The Center for People and Forests)

MTE (Myanma Timber Enterprise)

LoggingOff.info: Myanmar

VPA Unpacked: Helping you understand FLEGT Voluntary Partnership Agreements [Download Burmese pdf]