This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade.

The Indonesian government has taken a number of important steps to tackle illegal logging and the associated trade, most notably with the ratification of the Indonesia–EU FLEGT voluntary partnership agreement in 2014. The process of negotiating this agreement has contributed to the introduction of a national timber legality verification system (SVLK), clarification of the relevant legal framework and significantly improved engagement with stakeholders in the forest sector. There have also been important developments in recognizing indigenous peoples’ tenure rights to forest land and resources.

However, implementation and enforcement challenges remain. In particular, progress is hampered by a poorly functioning decentralized governance system, persistent corruption and insufficient transparency of information.

The private sector has responded positively, with growing awareness of the issue of illegal logging. While uptake of voluntary legality verification has recently declined, with the need for this now circumvented by the introduction of the SVLK, the area of forest certified as being managed sustainably increased in 2012.

An analysis of data on timber production and consumption suggests that illegal logging has decreased since 2000, and the findings of the expert perceptions survey tend to confirm this for the period 2010 to 2013. In part, these findings reflect a shift towards plantations and away from natural forest harvesting. However, legal ambiguity over the permitting process for forest conversion may mean that levels of illegality are higher than these data suggest.

Building on the government’s response to illegal logging will require effective implementation of the SVLK including addressing identified shortcomings. Improved land-use planning to support effective control and monitoring of forest conversion is also needed. Increased resources and training for enforcement officials are required, while efforts to tackle corruption in the sector should be stepped up. The government should clarify the rights of indigenous peoples through concrete actions such as developing clear processes for mapping and registering their land claims.

This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade.

The Brazilian government has made slow progress in tackling illegal logging and associated trade since the previous Chatham House assessment, in 2010. Illegality, corruption and fraud remain widespread in the forest sector, despite a relatively strong legal framework. Considerable efforts have been made to improve law enforcement in the sector but these have been hampered by poor coordination between the relevant government agencies, limited resources and inadequate penalties. At the same time, attempts to involve a range of stakeholders in policy discussions and decision-making have stalled.

The private sector’s response to illegal logging is perceived to be weak, despite the reasonably high uptake of sustainability certification schemes. Initiatives are under way aimed at promoting a legal and sustainable market for timber within Brazil, with the engagement of the private sector. However, such undertakings are modest given that the majority of the country’s timber production is consumed domestically.

Considerable investment in systems to monitor timber and revenue flows is required to tackle fraud, while the regulation of sawmills needs to be tightened to reduce the scope for the laundering of illegal timber. The imposition of appropriate sanctions and ensuring the collection of financial penalties could help to fill the gap in resources that is impeding effective enforcement.

Clarification of the regulatory framework is needed – in particular, those regulations related to the fiscal regime for the forest sector – as is the simplification of the processes for approving forest management plans. The latter is a priority if smallholders are to be able to engage in legal and sustainable forest management. An extensive programme of outreach and training is a prerequisite for ensuring such engagement. Finally, efforts to promote legal timber on the domestic market should be intensified and expanded.

This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade. 

The Ghanaian government has taken a number of important steps to reduce illegal logging and related trade, most notably with the signing of the Ghana–EU voluntary partnership agreement in 2009. This agreement has prompted improved multi-stakeholder dialogue within the sector as well as a process of legal reform. Considerable effort has also been put into the development of a timber legality assurance system, which has been successfully piloted. However, a number of enforcement and administrative challenges remain, particularly in relation to tenure and land and resource rights, as well as broader governance challenges including corruption.

Awareness of the issue of illegal logging has improved among the private sector, and the area of natural forest that is verified as legally compliant has increased considerably in recent years. However illegal practices remain widespread in the country. Illegal chainsaw milling is prevalent, predominantly supplying the domestic market. Illegality is also an issue in supply chains for export, albeit at a lower level. Trade data discrepancies indicate that illegal trade is a problem, in particular for tropical logs, and there is a lack of clarity over the legality of many logging permits.

A key challenge for the country is its declining resource base. The forest sector has shrunk considerably over the last 15 years as a result of this, and the situation looks set to worsen. Wood-balance estimates indicate that timber consumption considerably exceeds sustainable harvesting levels. 

In order to make further progress in tackling illegal logging, the process of legal reform and efforts to improve enforcement need to continue. Priorities include: a review of fiscal policies for the sector; improvements to land administration; completion of the conversion process of logging rights; and implementation of the legality assurance system across the country. Efforts must also continue to address the challenge of illegal chainsaw milling, which will require a range of approaches from legal reform to developing alternative livelihood strategies. 

This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade. 

The government of Lao PDR has taken a number of steps to reduce illegal logging and associated trade. Most notably, it has made progress towards negotiations with the EU on a voluntary partnership agreement (VPA). This has prompted the establishment of a multi-stakeholder steering committee and a technical working group and the revision of several land and forestry laws to include provisions related to the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan.

However, significant implementation and enforcement challenges remain. The legal framework is unclear and, at times, contradictory. Implementation by central and local governments is inconsistent, and internal mechanisms to oversee government decisions are limited. Moreover, enforcement capacity is weak and there is a lack of transparency. The available evidence suggests that illegal practices are widespread in the forest sector.

Awareness of the issue of illegal logging has improved, including in the private sector. The area of natural forest certified under the Forest Stewardship Council (FSC) scheme has been gradually increasing in recent years. However, a key challenge for the Lao forest sector is pressure on forest resources from agricultural plantations, mineral extraction and infrastructure development.

In order to make further progress in tackling illegal logging, the government should push ahead with preparations for the VPA negotiations, ensuring that the lead agencies are appropriately engaged and resourced to implement a credible dialogue process. Data on the allocation and management of forest resources should be systematically collected and made available to the public in order to enable effective forest monitoring. In addition, accountability mechanisms, including anti-corruption strategies, should be clearly defined and implemented by all relevant ministries to ensure that forest resources are exploited legally and for the benefit of the country. 

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. 

The Japanese government has continued to engage on the issue of illegal logging and related trade, but its approach remains focused on ‘soft’, voluntary measures rather than establishing legally binding requirements. It has been actively promoting the country’s legality verification system, known as the goho-wood system, and this is helping to raise awareness of the issue of illegal logging in Japan. However, the system is not only voluntary but has serious design weaknesses which limit its ability to eliminate illegal products from Japan’s market.

While the number of companies registered as goho-wood suppliers has increased, this may be occurring at the expense of sustainability certification, which is more demanding and expensive. The number of companies in Japan with FSC chain-of-custody certification remains low.

Japan’s imports of timber-sector products at high risk of illegality are estimated to have declined significantly since the start of the century, though levelling off since 2010, while imports of high-risk paper-sector products are estimated to have gradually increased over this period. Levels of high-risk imports remain significantly above those of the other consumer countries reviewed. These are currently estimated to comprise 12 per cent and seven per cent of total timber- and paper-sector products respectively.

It is recommended that the government develop further legislation to control imports of illegal products, including a requirement for risk assessment and mitigation as well as third-party monitoring. Such legislation would also help support the government’s policy to promote the domestic timber industry. Until such legislation is passed, Japanese industry should implement more robust risk assessment and mitigation procedures.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. 

The French government has been engaged on the issue of illegal logging and the related trade: the government played an active part in the development of the EU Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan and has been supporting the negotiation and implementation of voluntary partnership agreements (VPAs) in producer countries.

The government has also been actively promoting the production and consumption of sustainable timber, providing funding for forest-management related projects in producer countries and establishing the National Group on Tropical Forests to facilitate a multi-stakeholder dialogue on forest policy. Media coverage of illegal logging has increased considerably since 2007, indicating greater awareness of the issue among the general public.

This response, as well as increased sourcing of sustainably certified products by the private sector, is thought to have been a factor in the decline in imports into France of timber-sector products likely to be illegal. The proportion of timber-sector imports at high risk of illegality is currently estimated to be two per cent. The proportion of highly processed products such as furniture has grown significantly, as has the share coming from China, with a parallel decline in imports of logs and sawnwood from central and West Africa.

However, there remain a number of areas for improvement by the government. In particular, with legislation now in place to implement the EUTR, this should be rigorously enforced and sufficient resources put in place to enable this. Furthermore, the effectiveness of the sanctions regime should be monitored. The planned review of the public procurement policy should be undertaken, and monitoring of its implementation should also be introduced.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade.

The United Kingdom has shown a strong response to the problem of illegal logging and related trade; of the five consumer countries studied, it scored highest in the assessment of laws, regulations and policies related to this issue.

The government played an active part in the development of the EU’s FLEGT Action Plan and has subsequently been supporting the negotiation and implementation of voluntary partnership agreements with producer countries. The government has also been providing a significant amount of funding, through the Forest Governance, Markets and Trade Programme, to initiatives aimed at tackling the trade in illegal timber and improving forest governance.

The private sector in the UK has also been proactive, as reflected in the increase in the number of companies with chain-of-custody certification and in the amount of certified wood-based products on the UK market. A high level of media coverage of illegal logging also indicates that there is widespread awareness of this issue.

This response is thought to be partly responsible for the decline in imports into the UK of timber-sector products likely to be illegal, currently estimated to comprise three per cent of the total. However, there has been a significant shift in the types and sources of high-risk products coming into the UK, reflecting changes in the global timber industry: a growing proportion is coming from China and comprises more highly processed products such as furniture.

While the UK has been one of the most proactive European countries in addressing illegal logging and the related trade, further action could be taken. Cooperation with the Chinese government and its private sector would be beneficial. Systematic monitoring of the UK’s timber procurement policy is also required, and the efforts made to date to enforce the EUTR will need to be maintained.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. 

Efforts to tackle the problem of illegal logging and related trade have continued in the United States; the Lacey Act amendments in 2008 have influenced behaviour within the industry and high-profile enforcement cases have increased awareness of the issue. 

The impact of the Lacey Act on levels of illegal imports into the US is uncertain. The proportion of imports of high-risk timber-sector products is estimated to have declined since 2010, while that of paper-sector products has stayed at about the same level: in 2013, high-risk imports were estimated to comprise five per cent and two per cent of the totals respectively. However, there has been a significant shift in the types and sources of high-risk products coming into the country, reflecting changes in the global timber industry: a growing proportion is coming from China and comprises more highly processed products such as furniture.

Though the Lacey Act is an important piece of legislation for tackling the trade in illegal timber, several implementation and enforcement challenges have arisen since the amendments were enacted, in particular the interpretation of ‘due care’. Improvements to the procedure for processing import declaration forms are also required to ensure effective enforcement of the act. In order to effectively tackle illegal logging and the related trade, the US government should also continue to encourage its trading partners to strengthen their forest governance.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. 

The Netherlands has shown a strong response to the problem of illegal logging and related trade: the government played an active part in the development of the EU’s FLEGT Action Plan, and has been supporting the negotiation and implementation of Voluntary Partnership Agreements with producer countries.

The government has also been promoting the production and consumption of sustainable timber. It has a comprehensive procurement policy, established the Sustainable Trade Initiative and helped to launch the European Sustainable Tropical Timber Coalition.

As a result both of these government actions and of promotion by the private sector, there is a high proportion of certified wood-based products on the Dutch market as well as a large number of companies with chain-of-custody certification. A high level of media coverage on the issue of illegal logging also indicates that there is widespread awareness of this issue.

This response is thought to be partly responsible for the decline in imports into the Netherlands of timber-sector products likely to be illegal, currently estimated to comprise two per cent of the total. However, there has been a significant shift in the types and sources of high-risk products coming into the country, reflecting changes in the global timber industry: a growing proportion is coming from China and comprises more highly processed products such as furniture.

While the Netherlands has been one of the most proactive European countries in addressing illegal logging and the related trade, further action could be taken. A key challenge will be effective enforcement of the EU Timber Regulation given the Netherlands’ role as a major conduit for timber to the rest of Europe. Systematic monitoring of its timber procurement policy is also required.

At the end of November amidst much speculation, OPEC kept its formal production level of 30 million barrels per day in what appears to be an oversupplied market. This controversial decision was taken because cutting production would cede market share to the growing production flooding out of the US. The immediate result was a significant fall in oil prices.

The 'official' logic behind the decision was twofold. First, it was contended that weak demand was temporary because of slow economic growth and would recover next year. Second, the argument went, lower prices would close high-cost production from the shale technology revolution. In other words, current prices were too low and the market, allowed to operate, would rectify this.  Many (rightly) saw this decision as a significant landmark in global oil markets. In effect, OPEC had ceded any semblance of control over the market and prices, instead launching the oil price onto a sea governed by market forces.

Those with knowledge of oil market history will see this as a very dangerous gamble based on two serious misconceptions. After the oil shocks of the 1970s, the market was in a similar position as now. Demand was falling and non-OPEC supply was rising. In response, to defend prices, OPEC (but effectively Saudi Arabia) cut production because the fall in demand was seen as temporary as a result of global recession and would shortly recover. It did not. Then when the oil price eventually collapsed in 1986, the OPEC view was that lower prices would quickly reverse as they would shut in high-cost production, specifically in the North Sea. These views in the 1980s were conceptual mistakes, still relevant today and likely to undermine OPEC’s current strategy. The mistakes are a failure to understand the difference between an income effect and a price effect on demand and the failure to understand the difference between a break-even price (what investors consider when deciding whether to invest in new producing capacity) and a shut-in price (what existing operators consider will cover variable costs and if not, will stop production from existing wells.).

While some of the fall in demand in the 1980s was because of the recession (an income effect), some was due to genuine demand destruction as the result of much higher prices (a price effect). Recession-induced lower demand reverses itself when the global economy recovers, but demand destruction is permanent. Today, part of the fall in oil demand is because oil prices have inexorably risen (from $32.40 in 2002 to $108.66 in constant 2013 dollars). Furthermore, many sources of recent oil demand growth, notably China and India, have been moving from subsidized domestic oil prices to higher border-based prices. OPEC’s expectations of quickly recovering demand may be optimistic as they were in the early 1980s.

OPEC is hoping lower break-even prices will reduce shale production.  Various estimates for the US shale break-even price have been bandied around (usually in the realm of $60-$80 per barrel). Most are far too high, because they ignore the fact that the recent boom in shale operations has grossly inflated project costs. If investment in new capacity slows, then project costs − and hence the break-even price − will fall.

However, in terms of OPEC’s current strategy, the break-even price is the wrong metric. What matters in the next few years is the shut-in price.  After the 1986 price collapse, a number of stripper wells in US (with high variable costs) did close, but the loss of production was minimal. North Sea production, which had been OPEC’s prime target, was hardly affected and actually increased in 1987. The current level of shut-in price for shale oil is again debatable, but almost certainly is well below $40 per barrel. Thus it will be some time before existing shale oil production falls, even if prices stay low.

Should the oil price fall towards variable costs, threatening shale supply, it will be the OPEC producers who must blink first. They will then try to take back control of the market, if they can.

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This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. The Chinese government has made notable progress in its efforts to tackle illegal logging and the associated trade. This has included the development of a draft national timber legality verification system (TLVS) and its active engagement with a number of consumer countries. The government’s plans to establish bilateral trade agreements with producer countries are also encouraging, although no formalized commitments have yet been made. Reflecting the growing awareness of the impact of Chinese companies overseas, the government has also been developing further guidance to promote sustainable forest products trade and investment.

The private sector is also taking action, with continued growth in the uptake of chain-of-custody (CoC) certification. Industry associations have been promoting legal and sustainable sourcing, and they will have an important role to play in testing the draft TLVS.

These steps are likely to have had an impact on the volume of illegal wood-based products being imported into China. However, trade data discrepancies and analysis of trade flows both indicate that illegal trade remains a significant problem. While imports of high-risk products are estimated to have declined since 2000, these are reckoned to comprise 17 per cent of the total by volume in 2013. This proportion is high compared with other timber-importing countries examined in this assessment.

In order to build on its response to illegal logging and related trade, the Chinese government should establish binding regulations and stringent controls on the import and export of illegal wood-based products. The draft TLVS should be further developed, including through pilot projects with timber-exporting countries and effective consultation with industry, civil society and other consumer-country governments. The government’s procurement policy should be strengthened through the clarification of its legality and sustainability requirements, the inclusion of a wider range of products within its scope, and the development of a robust mechanism to monitor compliance. 

Increased training for the private sector on due diligence, market regulations and legality requirements in consumer countries is required to stimulate further action by industry, and the work to elaborate further guidelines for companies operating overseas in the forest products trade should be continued. Awareness-raising initiatives for Chinese consumers should also be extended, in order to increase demand for verified legal wood-based products.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. 

The Vietnamese government has made some progress towards tackling illegal logging and the associated trade. It has negotiated a voluntary partnership agreement (VPA) with the EU, a process that has prompted a review of relevant legislation and improved the government’s engagement with civil society. In addition, it has signed agreements with Lao PDR and Cambodia in which it has committed to coordination on forest management and trade. However, there has been little progress in policy reform, and there is still no legislation regulating illegal timber imports.

There is a high level of awareness of illegal logging and associated trade within the private sector: Forest Stewardship Council (FSC) chain-of-custody (CoC) certification has increased rapidly, particularly in the furniture sector. But efforts are hampered by poor access to third-party verified raw material.

Both trade data discrepancies and analysis of trade flows indicate that illegal trade remains a serious problem. The volume of imports of wood-based products at a high risk of illegality is estimated to have increased since 2000, while its share in the volume of total imports of wood-based products gradually declined until 2009 and then increased slightly: they are estimated to have comprised 18 per cent of the total by volume in 2013.

In order to build on its response to illegal logging and related trade, the government should establish a legal responsibility for Vietnamese importers to ensure that their timber sources are legal. Furthermore, to increase domestic demand for legal products, it should establish a public procurement policy requiring the use of verified legal products. Within the framework of the VPA, broad and effective multi-stakeholder engagement will be vital to ensure that a robust timber legality assurance system is developed. In addition, proactive partnerships should be forged with high-risk supply countries to establish legality criteria and indicators that reflect the full scope of the relevant legislation in those countries.

The discovery of valuable natural resources such as hydrocarbons or minerals in conflict-affected states or disputed regions can be a double-edged sword. While economic growth may help overcome conflict and consolidate peace, much of the academic literature links the economic, social and environmental impacts of resource development with an increased risk of violent conflict between or within fragile states. 

Recently however, the role of business in advancing peace has emerged as a topic of increasing discussion in academia and in forums such as the UN Global Compact. Resource development has also become a key objective for donor development strategies in fragile states such as Afghanistan, Somalia and Myanmar, on the assumption that extractive sector development can contribute to stability and security. 

This event will gather key stakeholders from business and policy to investigate if and where natural resource development has contributed to peace-building, built cooperation among stakeholders or helped to resolve, rather than exacerbate, tensions. If so, it will endeavour to draw out common, replicable lessons of what made these developments successful from a peace-building perspective.

The event will be held under the Chatham House Rule.

Katanga Province in the Democratic Republic of Congo (DRC) is immensely wealthy in minerals such as copper, uranium and gold, and is home to around fifty per cent of the world’s cobalt reserves. Rising outputs from the province’s copper and cobalt mines have contributed to the DRC’s average GDP growth of 8.5 per cent over the past two years. However, despite visible infrastructure developments in the province to service the industry, few Congolese are benefiting from the revenues and the economy is yet to diversify.

Moïse Katumbi Chapwe, the governor of Katanga Province, will discuss his approach to resource governance and will examine how regional governments can capitalise on resource revenues to improve livelihoods. 

Attendance at this event is by invitation only.

This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade. 

This assessment of the extent of illegal logging in Cameroon and the response to this issue suggests that progress has stalled since 2010. The reform of the legislative framework for the forest sector has yet to be completed; and while there have been improvements in the availability of forestry information, there remain many gaps. Furthermore, the principle of transparency has yet to be broadly accepted within the government. Enforcement is weak and information management systems are deemed inadequate. Most important, corruption remains widespread and the political will needed to drive change is felt to be lacking.

While there is evidence of progress in the private sector – the area of forests with legality verification and certification has increased – illegal activities are rife throughout the forest sector. Half of all timber production is estimated to come from the informal artisanal sector – mainly supplying the domestic market. However, illegal activities are also common in supply chains for export: timber originating from ‘small permits’ and sales of standing volume permits is thought to be particularly problematic. This is of particular concern, as the supply of timber from such permits is expected to increase owing to the growing pressure on forests from other sectors.

Since 2000 trade has shifted away from sensitive markets: the EU market’s significance as a destination for Cameroon’s exports of timber-sector products has decreased, while China’s significance has increased enormously. This has important implications for strategies on how best to tackle illegal logging in Cameroon.

In order to make further progress, markets for legal timber need to continue to be developed in key consumer countries – which, in the case of Cameroon, are now both the EU and China. Within Cameroon, further analysis of the political economy of the forest sector is required. Attempts to tackle corruption should be reinforced, and this would be facilitated by examining the experience of anti-corruption efforts elsewhere in the world. Further improvements to transparency are needed; the establishment of a new independent observer will be important in achieving this goal.

The next stages of legal reform will require broad consultation among stakeholders, in particular small-scale producers as well as local communities and indigenous peoples. Efforts to promote a legal domestic market should be intensified, including more extensive training and outreach for small-scale producers and processors. Finally, to improve enforcement efforts, continued investment in the training of enforcement agents and the provision of adequate resources are required.