Forest Certification in Malaysia

1. Forest Certification in Malaysia Mohd Shahwahid H.O. Director, Research Management Center, Universiti Putra Malaysia UPM 43400, Serdang, Selangor Malaysia msho@econ.upm.edu.my

2. Paper presented at the Symposium “Forest Certification in Developing and Transitioning Societies: Social, Economic, and Ecological Effects” Yale School of Forestry and Environmental Studies New Haven, Connecticut, USA

3. Ownership and Tenure Total area of forests: 19.01 million hectares (57.9% of land area) Of which 16 million ha are natural forest • 14.19 million ha are designated as Permanent Forest Estate (PFE) • 10.53 million hectares of the PFE are production forests • 3.66 million hectares being protection forests. • 1.8 million hectares located outside the PFE are designated as national parks and wildlife sanctuaries.

4. Ownership and Tenure • Separation of power over land (forest) matters (Article 74(2) of the Malaysian Constitution) • Forestry - jurisdiction of State Governments including on power of decision over resource use and allocation. • Federal Government: provision of advice and technical assistance to the states, training, research

5. Two potential conflicting views: • Forests are a physical and economic resource, controlled by the State Government, private logging companies and individuals. • Forests are a physical, social, cultural and spiritual resource, for livelihoods as well as the basis of beliefs, identity and survival, by indigenous and forest dependent peoples. • Indigenous communities: have usufruct rights over forest goods and services. • Native customary rights (NCR) land.

6. Markets • Total sectoral export (not inclusive of furniture) was 13.8 million metric ton valued at US$2.7 billion (2002). • Low value per unit volume for industrial round wood and sawn wood than for wood-based panels. Major export destinations of Malaysian forest products were China (31.2%) and Japan (25.1%). Other important destinations were Korea (5.6%), U.S.A. (4.3%) and Netherlands (3.5%).

7. Contributor to country’s socio-economic development: • US$3.7 billion in Value Added (4.7%) of GDP • Export of forest sector (excluding furniture) 2.8% of total export earnings. • Imports were valued at US$1 billion => net exporter of US$1.8; • Total forest revenue US$368.8 million. • Employment of about 2% of the nations labor force. • Industrial Master Plan (1985-2005): earmarked to for domestic and export economic growth

8. III. THE EMERGENCE OF FOREST CERTIFICATION consumer-driven, market-based and done on a voluntary basis • to allay doubts about forest sustainability • financial requirements of forest management certification schemes • to be based on a Malaysian certification program • to ensure continued market access of Malaysian timber products

9. Initial Support Government took leadership. Why? Advantages in ensuring: • a consistency of criteria and indicators applied; • a balance the views of the different parties involved; • a greater accountability to the public; • a greater transparency in the schemes used; and • an additional channel for presenting their interest to labeling authorities.

10. Initial Support • Two certification programs: • MTCC • FSC Private Sector • satisfy its client, both the State Government and timber product importers • Forest harvesting rights were getting scarcer and there was excess demands to obtain these privileges. • Perceived view that MTCC is supported by Government • To demonstrate and inform consumers that timber products are from a well-managed forests, thereby ensuring their products’ continued popularity and sale. • Popularity of FSC certification and MTCC is certain markets

11. Initial Supports Environmental and indigenous peoples’NGOs Why? • actively participated in the formulation of policies and implementation procedures of the MTCC to influence and incorporate their conservation and social interests. • means of gaining recognition of native rights to forestland, particularly the NCR land. • NGOs set criteria for certification systems: • should be institutionally and politically adapted to local conditions, cost effective, accepted by all involved parties and compatible with generally accepted international principles • be transparent and credible to consumers and • based on objective and measurable criteria

12. Institutional Design • MTCC program • driven directly by the Government guided by: • ITTO’s C&I in the first phase • FSC’s P&C in the second phase. • MTCC certification program is supported • Forest Departments of various states • Long-term concessionaires from the state.

13. FSC is initially supported by the Malaysian-German SFM Project in Sabah • Private sector either for best practice acknowledgement or meeting requirements set by international consumers.

14. MTCC Certification Program Motivated by the country’s commitment to ITTO’s Guidelines for Sustainable Management of Natural Tropical Forests and its Criteria for the Measurement of Sustainable Tropical Forest Management (CMSTFM). Policy decision-making exercise through two levels of committee: • National Committee on Sustainable Forest Management (NCSFM) • Working Party on Sustainable Natural Forest Management (WPSNFM)

15. Implementation monitored by: • Task force to develop an effective mechanism and procedures for the periodic monitoring on the implementation of all the activities • Technical Monitoring Committee • National Timber Certification Council, Malaysia (NTCC) with wide representations formed in October, 1998. • NTCC was later renamed as Malaysian Timber Certification Council (MTCC).

16. MTCC’s Function • Development and implementation of : a timber certification system training programs standards a system to oversee and monitor implementation and appeal mechanisms; • Establishment of networks and cooperation with national and international bodies to facilitate cooperation and mutual recognition arrangements; and • Collection, processing and dissemination of data and information

17. Standards FSC 10 principles and 57 criteria (P&C) are applicable globally to all FSC-certified forests: • Principle 1: Compliance with laws and FSC principles • Principle 2: Tenure and use rights and responsibilities • Principle 3: Indigenous peoples’ rights • Principle 4: Community relations and worker’s rights • Principle 5: Benefits from the forest • Principle 6: Environmental impact • Principle 7: Management plan • Principle 8: Monitoring and assessment • Principle 9: Maintenance of high conservation value forests • Principle 10: Plantations

18. Standards • MTCC program is new requiring the formulation of criteria, indicators, activities and management specifications • Done at • national level to provide a common framework for monitoring and evaluating progress • forest management unit (FMU) level assess directly the sustainability of forest resource management, conservation and development in practice.

19. C&I and activities formulated from reviewing • P&C for Forest Management of the FSC, Tropenwald Initiative (TI), Principles and Recommendations as enshrined in ITTO's Guidelines on the Conservation of Biological Diversity in Tropical Production Forests.

20. MTCC • Launched certification program in October 2001 but not supported by all parties. • WWF Malaysia’s concerns were then: • MTCC standard used was not developed through a multi-stakeholder, consultative process, and emphasizes economic considerations while failing to adequately safeguard social values and environmental conservation. • MTCC sees its scheme as being transitional but not clearly demonstrated due to the lack of a work plan and timeline to progress towards FSC compatibility. • Nevertheless, MTCC label is able, in principle, to provide a verification of legal compliance and a verification of legal origin but requires strengthening.

21. MTCC argued its phase by phase scheme. • Relevant concerns tabled by various stakeholders are adopted • A new standard developed based on the P&C of the FSC. • Development of new MC&I through several meetings of: • multi-stakeholder National Steering Committee (NSC) and • regional consultation held separately in Peninsular Malaysia, Sabah and Sarawak.

22. MTCC seeks Endorsement from FSC: • NGOs and indigenous people peoples were invited to participate, and provided comments and critiques in the building of the MTCC scheme • Owing to perceived insufficient response to critical “stakeholders” issues, indigenous people and NGOs pulled out. • Differences in Vision too wide. • Cooperation between MTCC and FSC collapsed. • Planning for formation of an FSC National Working Group (FSCNWG) as a new body to advance the work of the NSC.

23. Forestry Problems • Small scale and isolated illegal logging, deforestation, and loss of biodiversity in harvesting activities are typical grievances faced by a rapidly developing nation. • Illegal logging within the certified FMUs - better chance of being checked. • Monitoring the use of imported illegal logs by domestic processors proved more challenging e.g. Case of Ramin logs.

24. Roadblocks and Challenges a. Indigenous People • Avenue of access by indigenous people and NGOs to forest policy processes. • Critical issues not resolved • Indigenous people and NGOs felt their presence might be used to legitimize consultative process • Lack of NGO approval forms the biggest roadblock and challenge to MTCC certification. b. Land and Forest Disputes • Concern over full recognition of NCR over land of the Orang Asal (indigenous peoples), in accordance with the native laws and customary practice of the particular native community.

25. c. Lacking Consensus within Social Group • Multi-Stakeholder National Working Group into 3 or 4 different sectors is not working well since they are not working towards a common goal of SFM but instead promoting their own interests. d. FSC endorsement for MC&I • MTCC has to adopt the FSC’s P&C to obtain FSC endorsement

26. IV. THE REACTION TO CERTIFICATION Forest Policy Community and Stakeholders • Fear that indigenous people tribal lands were signed off to logging concessions without their consent. FSC wants more legal rights for workers and indigenous peoples. • Malaysian agencies felt that their own system is adequate and an encroachment on its national sovereignty. • Despite lengthy and repeated explanations, MTCC’s program unable to receive support from majority of indigenous people

27. Forest Owners • ITC’s interest: produce internationally recognized certified timber. • Begun seeking additional certification: • FSC program • ISO 14,000 EMS

28. IV. THE REACTION TO CERTIFICATION Current Status of Forestland Certification MTCC has certified • seven FMUs with a total of 2,310,567 ha (2003). • MTCC-ITTO SFM project at Ulu Anap involving another 170,000 ha (underway) FSC has certified • Perak Integrated Timber Complex (PITC) with an area of 9,000 ha (2002) • Deramakot Forest Reserve, Sabah involving an area of 55,000 ha (1997). • Malaysian-German SFM project at Ulu Baram involving 170,000 ha (underway) where the MTCC certification program is underway.

29. IV. THE REACTION TO CERTIFICATION Current Status of the Certified Marketplace • 9,217 m3 of MTCC-certified sawntimber products exported to The Netherlands, Germany, Belgium, France and the United Kingdom (Feb 2004). • Danish Ministry of Environment and Energy has included the MTCC scheme as one of the accepted schemes in its document entitled Purchasing Tropical Timber: Environmental Guidelines . • 38 companies have received the MTCC Certificate for Chain-of-Custody (CoC) (January 2004) • Sales boosted for certified in eco-sensitive markets: • Innoprise Corp from Deramakot Forest • PITC is producing 12,000 m3/year. Facing difficulty in meeting demand

30. V. EFFECTS OF FOREST CERTIFICATION Power • Shifts in Power Dynamics among forestry circles. • ‘Threat’ to domination on forestry practices of Government agencies. • Despite the determination to improve forest management practices, the MTCC scheme has found that NGOs and indigenous people have a strong influence on market endorsement.

31. NGOs perceived: • The lack of transparency in its development process esp. in the run up to MC&I seeking the adoption of FSC principles. • The lack of environmental and social benchmarks within the standards; • The lack of consultation with stakeholders in the development of the standards; and • The lack of incorporation of stakeholder concerns (e.g. the indigenous people’s groups concerns and issues)

32. V. EFFECTS OF FOREST CERTIFICATION Social Certified concessions have an obligation to take care of the interest of local residence. PITC’s two social programs • Orang Asli or Indigenous People Program • Bumiputra Entrepreneur Development Program,

33. Economic Benefit • PITC receiving average price premiums of 37% varying between Germany, U.K. and Holland Cost • Incremental costs for compliance of additional forest management activities.

34. FSC certified PITC: • Increase in direct production cost [not inclusive of cost of pre-felling and post-felling activities] by 15% to US$23/m3. MTCC certified KPKKT: • Increase in overall log production cost [inclusive of pre-felling, felling and post-felling activities increased 50% to US$44/m3

35. V. EFFECTS OF FOREST CERTIFICATION Economic Shares of the incremental costs: • Forestry Department: 11.9% • Concessionaire: 23.5% • Harvesting contractor: 64.7%.

36. Components of the incremental costs: • Forestry Department: Supervisory and monitoring costs during tree marking and mapping operations and road design • Concessionaire: Preparation of EIA, Tree mapping and Salary & wages for supervision & monitoring • Harvesting contractor: Salaries and wages, material and machinery rental for excavators Effects upon annual allowable cut • No change but annual allowable volume reduced. • Cutting cycle can be longer

37. V. EFFECTS OF FOREST CERTIFICATION Environmental Greater planning and monitoring of the environment: • Redrafting of forest management plans to incorporate environmental, community participation and social considerations • Updating of 1:50,000 resource map from information recorded in the Forest Offence Record Book. Buffer zones were reserved even for seasonal rivers as well. • Excavators being used to replace bulldozers in cutting earthworks at sloping areas. • Revising License Closing Report to incorporate information related to environmental monitoring including information on area lost or destroyed after logging, number and length of secondary/skid trails and area of log yards.

38. CONCLUSION • New dimension in forest management: • Incorporation of social considerations and indigenous peoples’ concerns apart from sustainable timber production issues: • Forest management of PFEs has become more systematic, transparent and concessionaires more sensitive to accepted international trade practices and customers’ requirements. • The requirements of the CoC have made the country more conscious on controlling illegal logging. • Difficulty of resolving issues on NCR land.

39. Compliance with certification proved to be costly while price premiums advantage may not be sustainable • MTCC certification would continue to be seeked by forest concessionaires and the Forestry Department. • Rising adoption of FSC: Private firms being client oriented are likely to react to increasing customer’s requirement for this certification program. • Firms with MTCC certificates, likely to obtain FSC certificate to satisfy both state forest owners and wood product importers. • MTCC would continue to seek FSC endorsement.