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NOT AS EASY AS FALLING OFF A LOG: Foreign Policy The Illegal Logging Trade in the Asia-Pacific Region at BROOKINGS and Possible Mitigation Strategies Vanda Felbab-Brown March 2011 WORKING PAPER Number 5 Foreign Policy at BROOKINGS WORKING PAPER Number 5 March 2011 NOT AS EASY AS FALLING OFF A LOG: The Illegal Logging Trade in the Asia-Pacific Region and Possible Mitigation Strategies Vanda Felbab-Brown A CKNOWLEDG M ENTS I wish to thank Bill Antholis, Seyom Brown, Kerstin Can- by, Michael O’Hanlon, and Theodore Piccone for their invaluable comments. Erasmo Sanchez provided excellent research assistance. F OREIGN P OLICY AT B ROOKINGS NOT AS EASY AS FALLING OFF A LOG: T HE I LLEGAL L OGGING T RADE IN THE A SIA -P ACI F IC R EGION AND P OSSI B LE M ITIGATION S TRATEGIES iii T A B LE O F C ONTENTS EXECUTIVE SUMMARY ............................................................v Supply-side Measures ......................................................vi Demand-side Measures....................................................viii INTRODUCTION.................................................................1 THE DEFINITION CONUNDRUM AND THE PARADOX OF LEGAL VERSUS SUSTAINABLE TIMBER..........5 THE GLOBAL SETTING—THE GROWING DEMAND FOR TIMBER ..............................7 THE SIZE OF ILLEGAL LOGGING AND ILLEGAL TIMBER TRADE ...............................8 THREATS POSED BY ILLEGAL LOGGING: THE TRADE-OFFS AND COMPLEMENTARITIES BETWEEN MONEY AND ENVIRONMENT................................11 THE STRUCTURE OF THE INDUSTRY .................................................16 ILLEGAL LOGGING AREAS AND TRAFFICKING ROUTES IN ASIA-PACIFIC ........................22 Countries with Timber Production near Historically Peak Levels .....................22 Countries with Timber Production past Historically Peak Levels .....................28 Overall Government Response to Illegal Logging in the Asia-Pacific Region.............36 POLICY CONSIDERATIONS: THE TRADEOFFS AND COMPLEMENTARITIES OF SECURING DIFFERENT ECONOMIC AND ENVIRONMENTAL OBJECTIVES .................................37 Managing the Supply ......................................................37 Regulatory Design.....................................................37 Greater Law Enforcement . .38 Border Control .......................................................40 Managed Logging versus Bans on Logging ...................................40 Involving the Local Community...........................................41 Alternative Livelihoods Efforts ............................................42 Plantations and Reforestation ............................................43 Certifying Wood ......................................................43 Carbon-for-Forest Payoffs ...............................................45 Managing Demand........................................................48 Encouraging Demand for Certified Wood: The Greening of Customers ...............48 Decreasing Demand for Wood ............................................50 CONCLUSIONS.................................................................52 RECOMMENDATIONS ............................................................55 Supply-side Measures ......................................................55 Demand-side Measures.....................................................57 F OREIGN P OLICY AT B ROOKINGS NOT AS EASY AS FALLING OFF A LOG: T HE I LLEGAL L OGGING T RADE IN THE A SIA -P ACI F IC R EGION AND P OSSI B LE M ITIGATION S TRATEGIES iv E XECUTIVE S U mm ARY Several positive developments for the world’s for- to national governments, local communities, and ests have taken place at the end of the 21st cen- the world. These include timber depletion and tury’s first decade. In the December 2010 Cancun deforestation, global warming, biodiversity loss, summit on global warming, countries agreed to intensification of other environmental threats, halt or reverse the loss of forests by approving pay- such as flooding and desiccation, higher eco- ments from rich countries to poor countries not to nomic costs, intensification of violent conflict, deforest as a way to offset their carbon emissions and exacerbation of corruption. under a mechanism known as Reducing Emis- sions from Deforestation and Forest Degradation Policies adopted to mitigate a particular threat, (REDD). Also, over the past few years, regulatory such as preventing flooding, often do little to frameworks to combat illegal logging in a number address other threats, such as preserving biodi- of key markets, such as the United States and the versity. Similarly, policies to combat illegal log- European Union, have been tightened to prohibit ging through mechanisms such as certification the importation of illegal timber or to demand of timber legality do not necessarily enhance the due diligence standards. sustainability of logging practices or protect bio- diversity. Biodiversity preservation in particular Both deforestation and illegal logging in a num- is often the least emphasized aspect of regulatory ber of critical areas of rich tropical forests and designs. Forestry frameworks often lack comple- biodiversity, such as Indonesia, have slowed down mentarity between other policy objectives like over the 2000s as compared to the 1990s. Illegal preserving natural forests and biodiversity. Even logging in places such as Burma, Cambodia, and a policy such as REDD+, while potentially a sal- Indonesia, appears to have declined from their vation for the world’s forests, does not inevitably peak levels in the 1990s and early 2000s when yield full preservation of natural forests and bio- illegal logging often constituted more than 50% diversity. Whether measures to combat carbon of logging. But such declines have been accom- emissions are in harmony with preserving natural panied by intensifying deforestation and illegal forests will be critically dependent on the partic- logging in places such as Russia and Papua New ular design of the REDD+ program, including Guinea. Both forest depletion and increased law their price structure. enforcement in particular locales has driven this “balloon effect.” Illegality of timber extraction In the Asia-Pacific region, Indonesia, Cambodia, and smuggling has also become more hidden. Burma, Malaysia, Russia, and Papua New Guin- ea are, or at one point were, significant sources Thus, critical challenges remain. Still intense and of illegal timber. Vietnam, Thailand, Malaysia, prevalent in the Asia-Pacific region and elsewhere, and China are major processors and consumers illegal logging continues to pose multiple threats of illegal timber. Intense legal and illegal logging F OREIGN P OLICY AT B ROOKINGS NOT AS EASY AS FALLING OFF A LOG: T HE I LLEGAL L OGGING T RADE IN THE A SIA -P ACI F IC R EGION AND P OSSI B LE M ITIGATION S TRATEGIES v has significantly depleted the forests of several of and more effective law enforcement. Unfortu- these countries. Countries, such as Thailand and nately, there are no easy solutions to the problem; Malaysia, that are past their production or have and almost every single possible regulatory action instituted bans on logging experienced intense is either hard to implement or entails difficult deforestation and illegal logging in the 1980s trade-offs and dilemmas. The lack of common and 1990s. definition of timber legality compounds those problems. China is the epicenter and pivot of the world’s deforestation, illegal logging, and timber process- • Supply-side Measures ing and the world’s largest wood workshop, pro- cessing legal and illegal wood extracted from the Regulatory Design Asia-Pacific region, and increasingly also tropical A regulatory design should be stringent and Africa and the Amazon. Along with China, the enforceable, but not onerous. What that ac- United States, Europe, Japan, and increasingly tually means when such principles are being India and the Middle East constitute key con- operationalized for a specific country needs sumers of the world’s timber. to be evaluated on a case-by-case basis and is often very difficult to gauge. The mini- Facing forest depletion, environmental disasters, mum inescapable feature of a regulatory and intense Western pressure to mitigate defores- design is stable and clear property rights tation and illegal logging, including greener and regarding land and timber. Often countries tougher regulation in key Western markets, and lack the capacity or interest to develop such lured by the prospect of cash-for-forest transfers, property rights. governments in the Asia-Pacific region have pro- gressively recognized the threats posed by prob- Greater Law Enforcement and Border Control lematic logging. Laws and regulations regarding Neither industry self-regulation, nor even a logging have been progressively tightened, and strict regulatory design, have proven to be many countries in the region now have rather sufficient mechanisms to combat illegal log- stringent laws on the books. Effective and com- ging in the absence of effective law enforce- mitted enforcement, however, remains a major ment. Addressing corruption and capacity challenge. of law enforcement institutions is critical. But in the domain of illegal logging where The illegal logging economy involves a complex ascertaining legality or illegality of timber and diverse set of actors. These include illegal log- is highly complex, increasing law enforce- gers, logging and processing companies, timber ment faces difficult obstacles once medium barons, timber launderers, local

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