Project Completion Report on Private Sector EU-FLEGT-VPA Acknowledgements Acronyms ______

his project completion report is made possible through the following MFPMF executives, mem- Tbers and staff. Without their untiring efforts and team work, this project would not have been DFID Department for International Development (DFID)/UK possible to complete and produce the final project completion report. EFI European Forest Institute EU European Union Project Advisory Team: FAO Food and Agricultural Organization FLEGT Forest Law Enforcement Governance and Trade Dr. Sein Win President, MFPMF GDP Gross Domestic Product Dr. Myo Lwin EC, MFPMF GTF Global Timber Forum U Barber Cho Advisor, MFPMF MFPMF Myanmar Forest Products Merchants Federation U Zaw Win Advisor, MFPMF MOECAF Ministry of Environmental Conservation and Forestry U Kyaw Thu Chairman, Myanmar Rattan & Bamboo Entrepreneurs Association MTE Myanmar Timber Enterprise U Nyan Win Chairman, Wood-based Furniture Association NES National Export Strategy TLAS Timber Legality Assurance System VPA Voluntary Partnership Agreement

Report Writing:

Mr. Charles Pradhan National Project Coordinator U Maung Maung Thein Htaik Assistant Executive Officer, MFPMF

Project Completion Report on Private Sector EU-FLEGT-VPA 1 2 Project Completion Report on Private Sector EU-FLEGT-VPA

Table of Contents

Executive Summary

Chapter I: 1. Introduction 2. Myanmar and EU Forest Law Enforcement, Governance and Trade (FLEGT), Voluntary Partnership Agreement (VPA) Process 3. MFPMF Organizational Objectives and Involvement in FLEGT VPA 4. Project Objective 5. Project Implementation Methodology Executive Summary 6. Project Activities yanmar, a tropical country in Continental South East Asia, has a total land area of 261,228 square Chapter II: miles (676,577km2). Its length from south to north is about 2,090km and the maximum width 7. What is FLEGT ? from west to east is about 805 km. Myanmar is regarded as a land of diverse culture, traditions and 7.1 Meaning of FLEGT Mnatural resources and it is endowed with one of the largest forest cover in the region. According to FAO an- 7.2 Legal timber nual report 2001, 52.3% of the total land area was covered with forests. Although Myanmar has a rich forest 7.3 Timber legality assurance system, resource and long history of sustainable forest management, the forest depletion rate is becoming fast through 7.4 Control of the supply chain: Wood tracing systems and chain of custody legal and illegal logging process. At present based on the available information, Myanmar’s Forest area is about 7.5 Legality assurance systems: requirements for verification, 48% and 10% is the primary forest while other claims only 3.1% of the primary forest is left. (National Export 7.6 Voluntary Partnership Agreements (VPA) Strategy/Forestry Products Sector Strategy, 2015-2019). The Myanmar forest sector generates around 1% of 7.7 Guidelines for independent monitoring GDP with goods and services traded nationally and internationally. This sector also supports/creates employment/jobs and livelihoods of 50-60% of the population. However, this sector has challenges and issues linking 8. What does Myanmar “Wood-Based Private Sector” understand about FLEGT? with illegal logging, sustainability in supply of raw materials, limited investment, human rights abuses, forest governance and corruption. Chapter III: 9. Overview of International Trade Requirements/Trends and FLEGT VPA Action Plan The Forest Law Enforcement, Governance and Trade (FLEGT) process represents a first response to the 10. Major issues and challenges of private sector in FLEGT VPA worldwide problem of illegal logging. Logging is considered “illegal” when timber is harvested, transport- 11. Private stakeholders mapping and communication strategy ed, processed, bought or sold in violation of national or international laws. It is challenging to give a precise 12. Role of private sector and position on FLEGT VPA process: figure for the volume of timber that is illegally logged in the world, but it is estimated that illegal extraction 13. MFPMF/ FLEGT VPA process linking with Forestry Sector National Export Strategy (NES) costs timber producing countries approximately US$10 to15 billion per year in lost revenue (FAO, 2014). According to Interpol, illegal logging constitutes 50 to 90 percent of the volume of forest activities in tropical Chapter IV: countries. Apart from these economic consequences, illegal logging also has negative effects in environmental 14. Recommendations of next steps on “Private Sector Engagement in the FLEGT VPA Process”. and social terms, particularly in the shape of the loss of biodiversity or the destruction and degradation of 15. Conclusion Remarks of Advisory Committee, MFPMF. ecosystems and the livelihoods of local forest-dependent people. In this context, the FLEGT VPA process is an Annexes: opportunity to deal with above mentioned issues. Based on Myanmar Government indication of its intention • Photos to pursue FLEGT VPA and Myanmar private sector involvement in FLEGT Task Force, MFPMF a Leading • Survey Forms Federation (more than 1600 members including forest products exporters) acknowledges that private sector • Checklist/KII Questionnaire is a key stakeholder in FLEGT VPA Process and its needs to be better organized, put forward proposals and

Project Completion Report on Private Sector EU-FLEGT-VPA 3 4 Project Completion Report on Private Sector EU-FLEGT-VPA perspectives in this VPA process. In line with MFPMF organizational objectives and realization of private sector needs to participate in FLEGT VPA process, MFPMF has taken a challenge to plan and implement Chapter I: the project called “Identifying Needs to Improve Private Sector Engagement in the EU-FLEGT VPA Pro- 1. Introduction: cess”. The main objective of this project is to enhance better understand how all the different private sector operators interrelate, identify their specific issues and priorities to enable them to better collaborate and he FLEGT process represents a first response to the worldwide problem of illegal logging. Logging communicate more effectively to be able to address domestic and international requirements. The project is considered “illegal” when timber is harvested, transported, processed, bought or sold in viola- has taken a two pronged approach and method to plan and implement the project activities “Quantita- tion of national or international laws. It is challenging to give a precise figure for the volume of Ttimber that is illegally logged in the world, but it is estimated that illegal extraction costs timber produc- tive and Qualitative Investigative approach” and “Multi-Stakeholders Consultative Approach”. The findings clearly shows that 98% of the respondents think that the causes of Myanmar’s flood situation, and climate ing countries between US$10 billion and US$15 billion per year in lost revenue (FAO, 2014). According change are due to deforestation and forest degradation. 96% of the respondents think that deforestation to Interpol, illegal logging constitutes 50 to 90 percent of the volume of forest activities in tropical coun- and illegal logging are linked. 77% of the respondents claim that they get raw materials from MTE and 73% tries. Apart from these economic consequences, illegal logging also has negative effects in environmental of the respondents think that if they buy raw materials from MTE, it is legal. About 65% think that if we and social terms, particularly in the shape of the loss of biodiversity or the destruction and degradation do not buy from MTE, it is illegal. About 85% claim that if they get raw materials from MTE, they will not of ecosystems and the livelihoods of local forest-dependent people. Such illegal logging is also usually buy from illegal sources. About 46% respond claim that they know about Myanmar-EU FLEGT process. closely linked to poor governance. Lastly, the high demand for inexpensive wood on both domestic and Key findings include majority of the private sector stakeholders have low level of awareness and under- export markets contributes to illegality in the forest sector. In an effort to eliminate illegal logging and its standing on EU-Myanmar FLEGT VPA, stakeholders interpretation and understanding of “Legal Timber” associated trade, the European Union (EU), recognizing a shared responsibility with timber producing is limited and most of them think that buying raw materials from MTE is legal so that they believe they are countries in the trade in illegally sourced timber, EU adopted its FLEGT Action Plan in 2003, in recog- doing legal business. Majority of the stakeholders are unclear about the advantages and disadvantages of nition of the increasing public concern with the social, economic and environmental consequences of the FLEGT VPA, it is considered that majority of the private sector stakeholders do not have appropriate illegal logging and associated trade worldwide. A key element of the Action Plan is a proposal to establish access to information about FLEGT VPA process (Respective Language) and within the private sector, it Voluntary Partnership Agreements (VPA). is observed that for the common good cause, there is lack of culture of working together and team work approach to achieve the desired results. FLEGT VPAs are bilateral agreements between the EU and timber exporting countries, which aim to improve forest sector governance and ensure that the timber and timber products imported into the EU The Republic of the Union of Myanmar has developed “National Export Strategy” which includes “For- are produced in compliance with the laws and regulations of the partner country. Although there is no estry Products Sector Strategy (2015-2019)”. It has been realized that since NES will be the major plan for obligation for any country to enter into a VPA with the EU, once agreed they are legally binding on both the export of the Myanmar’s forest products, there should be a strategic linkage with EU-Myanmar FLEGT parties, committing them to trading only in wood products that can be verified as legal. Under these VPA process. In future, the FLEGT VPA will influence the export business of the forest products with legal agreements exporting countries develop systems to verify the legality of their timber exports to the EU. timber issues and government to government VPA process. The EU and member states support partner countries to establish or improve systems which verify legal compliance. This report recommends as follows: • MFPMF and Private Sector Network continue to work on Awareness Raising through “Informa- tion, Education and Communication (IEC)”/Communication Strategy on EU-Myanmar FLEGT 2. Myanmar and EU FLEGT VPA: VPA Process. yanmar, a tropical country in Continental South East Asia, has a total land area of 261,228 • Prepare stakeholder engagement plan. square miles (676,577km2). Its length from south to north is about 2,090km and the maximum • Capacity building (orientation/training) of MFPMF and Private Sector Stakeholders for effective width from west to east is about 805km and the country has four important river systems, flow- participation and involvement in FLEGT VPA process. Ming in the north-southerly direction, of which the Ayeyarwady River, the main water way, is navigable for • Need to appoint “Strong Focal Person/Coordinator” for effectively interact/consult with “Private about 1,450 km. Myanmar is regarded as a land of diverse culture, traditions and natural resources and it Stakeholders including missing ones and Market Players”. is endowed with one of the largest forest cover in the region. According to FAO annual report 2001, 52.3% • Need to look for funding for continuing EU-Myanmar FLEGT VPA Process together with Devel- of the total land area was covered with forests. Although Myanmar has a rich forest resource and long opment Partners/Donors/GTF. history of sustainable forest management, the forest depletion rate is becoming fast through legal and illegal logging process. At present based on the available information, Myanmar’s Forest area is about 48% and 10% is the primary forest while other claims only 3.1% of the primary forest is left. (National Export Strategy/Forestry Products Sector Strategy, 2015-2019). The Myanmar forest sector generates around 1% of GDP with goods and services traded nationally and internationally. This sector also supports/creates employment/jobs and livelihoods of 50-60% of the population. However, this sector has challenges and issues linking with illegal logging, sustainability in supply of raw materials, limited investment, human rights abuses, forest governance and corruption. In this context, the FLEGT VPA process is an opportunity to deal with above mentioned issues.

The EU FLEGT Facility, hosted by the European Forest Institute (EFI), supports countries involved in discussions with the EU on FLEGT to assist them in preparing, negotiating and implementing their VPA.

Project Completion Report on Private Sector EU-FLEGT-VPA 5 6 Project Completion Report on Private Sector EU-FLEGT-VPA This support is provided through guidance, from the Facility’s experts with knowledge and expertise on In 2010, Myanmar Forest products Timber Merchants Association (MFPTMA) was renamed to Myan- the process and related topics, to national stakeholders and supporting partners and institutions; as well mar Timber Merchants Association (MTMA) which was formed in annexation with UMFCCI, under as through additional short term technical assistance in response to needs identified by stakeholders in the license number (33) dated 10-5-1993 notified by the Ministry of national Planning and Economic country together with the EU. In November 2013 the Ministry for Environmental Conservation and For- Development. With the new formation of Executive Committee of MTMA, the name of MTMA was estry (MOECAF) requested the EU for a dialogue on FLEGT VPA. In January 2015 a multi-stakeholder again renamed to Myanmar Forest Products Merchants Federation (MFPMF) on 5th, June 2015. inception workshop was held to help structure and plan work to be undertaken during the FLEGT VPA process preparation phase. MOECAF has indicated and signaled that the next six months would consti- tute an information sharing and awareness raising period for stakeholders in the country with the view to inform and prepare for the anticipated VPA negotiations. An interim Task Force, with balanced repre- sentation from the different stakeholder groups will guide the implementation of the FLEGT VPA preparation phase work plan and the establishment of the longer term VPA negotiation structures. The UK Department for International Development (DFID) has indicated that it is prepared to support Myanmar in the VPA process, through the provision of advisory support to MOECAF that will lead this process on behalf of the Government. 3.1: MFPMF Organizational Chart:

2.1: Myanmar Forest Products Merchants Federation (MFPMF)/Private Sector, FLEGT VPA Process and Global Timber Forum (GTF):

ased on Myanmar Government indication of its intention to pursue FLEGT VPA and Myanmar private sector involvement in FLEGT Task Force, MFPMF a Leading Federation (more than 1600 members including forest products exporters) acknowledges that private sector is a key stakehold- Ber in FLEGT VPA Process and its needs to be better organized, put forward proposals and perspectives in this VPA process. In this context, MFPMF realizes to identify private sector needs and challenges with members and associates, clear understanding of the different private sector actors, roles, how they operate/interrelate, general strength and capacity within private sector constituency to undertake the VPA negotiation and implementation.

In line with Myanmar Private Sector involvement in FLEGTVPA process, the Global Timber Forum (GTF)which is an international communications and networking hub for timber trade federations, national and regional industry bodies, and others in and associated with the sector is supporting MFPMF to prepare and participate in VPA process by providing financial assistance (£ 37,500) for project called “Identifying Needs to Improve Private Sector Engagement in the EU-FLEGT VPA Process”. As an official process, Ms. Rachel Butler (Manager/GTF) and Dr. Sein Win (President/MFPMF) signed an agreement on 30th July, 2015 and the project period is between 1st August and 30th September, 2015.

3. MFPMF organizational background, objectives and involvement in FLEGT VPA:

yanmar’s history of timber industry is linked with British colonization. After the annexation of Myanmar by the British, timber industry was mostly monopolized and controlled by five major British firms. Myanmar nationals were allowed to do small amount of lower grade teak Mharvesting and the entire hardwood business. Myanmar nationals were engaged in harvesting hardwood log, saw-milling, local furniture industry and export of hardwood saw timber and it was recorded that in Yangon, there were five plywood factories belonged to local entrepreneurs. After Myanmar’s independence, foreign timber companies were nationalized and their timber business were terminated. From 1963 on-wards, all the non-teak hardwood timber business was again nationalized and local private timber business came to halt. In 1988, Myanmar Government adopted market oriented economy and permitted private sector to resume hardwood timber business. Due to certain condition, hardwood log harvesting and exporting business was banned in 1993. After that, private sector was allowed to export value-added wood product only with the aim to re-organize the timber business people. Timber products are estimated to represent around 98 % of the forestry products sector’s total output. Rattan and non-timber products are estimated to represent around 2 % of the forestry products sector’s total output.

Project Completion Report on Private Sector EU-FLEGT-VPA 7 8 Project Completion Report on Private Sector EU-FLEGT-VPA 3.2: MFPMF Organizational Objectives: 6. Project Activities: / The main objectives of Myanmar Forest Products Merchants Federation (MFPMF) are; - To get awareness on forest and biodiversity conservation and cooperate with forest depart- Based on above mentioned project implementation approach/methodology, the project has conduct- ment on conservation of forest resource for sustainability. ed all the project activities as per the planned schedule. - To cooperate in forest plantation establishment for ensuring sustainability of nation’s natural resources. Date/Period - To protect forest resources with the aims to develop wood-based industries promoting the (August/Sep- Sr.No Activities Conducted Remark value-added finished products and generating national revenue. Moreover to create more job tember 2015) opportunities in local wood-based industries. - To make concerted effort in wood-based industry related activities under the guidance of Ministry of Environmental Conservation and Forestry (MOECAF). Project Action Plan Development and Agree- - To help member for extending existing market to new international market. 1 ment meeting/workshop with Executive Com- August 24 mittee (EC) 3.3: MFPMF involvement in FLEGT VPA process: Based on MFPMF organizational objectives and realization of private sector needs to participate in FLEGT VPA process, MFPMF has taken a challenge to plan and implement the project called “Identifying Needs to Yangon FLEGT VPA Inception Workshop, Sky 2 August 26 Improve Private Sector Engagement in the EU-FLEGT VPA Process”. Star Hotel

Mandalay FLEGT VPA Inception Workshop, 4. Project Objective: 3 September 13 The main objective of this project is to enhance to better understand how all the different private sector op- and Focus Group Discussion, Hotel Manadalay erators interrelate, identify their specific issues and priorities to enable them to better collaborate and communicate more effectively to be able to address domestic and international requirements. 15 Wood- Based Factories/Sites visited Between 4 Key Informants Interview Conducted August 28 and 5. Project Implementation Approach and Methodology: September 22 The project has been planned and implemented through project advisory committee and supporting committee consisting six members. The project advisory committee recruited a “National Project Coordinator” to plan and implement the project activities effectively. Key Informants Interview at Furniture/Bam- 5 September 17 boo/Rattan Exhibition 5.1: The project has taken a two pronged approach and method to plan and Implement the project activities: Project Advisory Meeting with GTF team for 6. September 19 Project Progress Reporting and Feedback A. Quantitative and Qualitative Investigative approach:

Review of project documents, secondary data/information and primary data collection through quantitative 7 Community Forestry Field Visit (Hmawbi area) September 23 method (check list, survey questionnaire, interview) and qualitative method (Key informant interview with semi-structured questionnaire, focus group discussion with topic guide/check list) and stakeholder mapping Yangon FLEGT VPA Final Workshop September 29 by reviewing all the MFPMF member list, wood-based industries, Bamboo/Rattan, location/place and updat- 8 ing and map drawing. 9 Project Completion Report September 30 B. Multi-Stakeholders Consultative Approach:

In order to achieve the project objective, participatory consultative approach has been applied to interact, share and communicate FLEGT VPA related information and issues within concerned private sector stakeholders and among multi-stakeholders through inception workshop, formal/informal interaction, field/sites visit at woods-based industry, shops and community forestry/plantation areas.

Project Completion Report on Private Sector EU-FLEGT-VPA 9 10 Project Completion Report on Private Sector EU-FLEGT-VPA Project Completion Report on Private Sector EU-FLEGT-VPA Project Completion Report on Private Sector EU-FLEGT-VPA Project Completion Report on Private Sector EU-FLEGT-VPA Project Completion Report on Private Sector EU-FLEGT-VPA and legal compliance, improved supply chain management, and adoption of corporate social responsi- Chapter II bility standards. European Commission and Member State grants to support the Global Forest Trade Network and the Tropical Timber Action Plan are examples of this type of activity. 7. What is FLEGT? 7.2: Legal timber: 7.1: Meaning of FLEGT: he process for deciding which laws are included in a definition of legality is the responsibility of the country in which the laws apply and, if a definition is to be a component of a legality assurance LEGT stands for Forest Law Enforcement, Governance and Trade. The EU FLEGT Action Plan sets out system to underpin a trade agreement, it must be endorsed by the country’s government. However, Fa program of actions that forms the European Union’s response to the problem of illegal logging and Tthe nature of the process has a major influence on the definition’s acceptability to different stakeholders. the trade in associated timber products(Source: EU Briefing Note 3, Series 2007). Checking compliance with and enforcing a definition of legally-produced timber requires that the definition is clear,operationally workable and objectively verifiable. It must be easily understood by staff of both 7.1.1: Origins: forest operators and enforcement agencies. llegal logging results in serious environmental and social damage, as well as costing governments an estimated $10 billion every year in lost revenues. This was recognized in a G8 Summit in 1998, where 7.3: Timber Legality Assurance System (TLAS): measures to tackle illegal logging were discussed and an ‘Action Programme on Forests’ formally ad- he EU FLEGT Action Plan identifies a range of measures to address the problem of illegal log- Iopted. Subsequently, in April 2002, the European Commission hosted an international workshop to dis- ging and related trade. The Action Plan places particular emphasis on governance reforms and cuss how the EU could contribute to measures to combat illegal logging. At the World Summit on Sus- capacity building in timber-producing countries. This is supported by actions aimed at reducing tainable Development (WSSD), held in Johannesburg in the same year, the European Commission set Tthe trade and use of illegally-harvested timber and promoting the use of legally-harvested timber in the out a strong commitment to combat illegal logging and the associated trade in illegally-harvested timber. EU. The EU proposes to do this through Voluntary Partnership Agreements (VPAs) between the EU The EU published its first Proposal for a FLEGT Action Plan in May 2003.A number of other initiatives, and timber-producing countries where illegal logging is a problem.An important part of each VPA will arising from both national and international commitments, have also developed in parallel. In particular, be establishment of a licensing scheme to ensure that only timber products that have been produced in three regional FLEG (Forest Law Enforcement and Governance) processes have been established in South accordance with the national legislation of the exporting country are imported into the EU. Under the li- East Asia, Africa (AFLEG) and Europe and North Asia (ENAFLEG). These processes, co-ordinated by the censing scheme, import into the EU of timber exported from a Partner Country will be prohibited unless World Bank, have resulted in ministerial commitments to identify and implement actions to combat illegal the timber is covered by a valid license. However, trade in timber products from non-partner countries logging in each region. will be unaffected. The purpose of a legality assurance system (LAS) is to provide a reliable means to dis- tinguish between legal and illegally produced forest products. Issuance of licenses by Partner Countries 7.1.2: The EU FLEGT Action Plan: requires a system for ensuring that only legally-produced timber is licensed for export. This must include he Action Plan sets out a range of measures that aim to combat the problem of illegal logging. These checks of forest operations and also control of the supply chain from harvesting to export. Such a legality Tfocus on seven broad areas; assurance system includes five components: • Support to timber–producing countries; • A definition of legally-produced timber: A standard that sets out clearly which laws of the Partner • Activities to promote trade in legal timber; Country must be met and provides criteria and indicators with which to test compliance with • Promoting public procurement policies; these laws. • Support for private sector initiatives; • Control of the supply chain: Requirements for systems to trace wood products through the pro- • Safeguards for financing and investment; duction chain from harvesting to the point of export. • Use of existing legislative instruments or adoption of new legislation to support the Plan; • Verification: Requirements for verification of both compliance with the legality definition and • Addressing the problem of conflict timber. control of the supply chain. • Issuance of licenses: Details of who will issue licenses and how it will be done. The Action Plan aims to provide financial and technical support and advice to timber-producing countries • Independent monitoring of the systems by a third-party: A way to provide credibility by ensuring to achieve the following objectives: that all requirements of the LAS are being implemented as prescribed. • Improved governance structures, and development of reliable verification systems where forest law enforcement has been weak; 7.4: Control of the supply chain: Wood tracing systems and chain of custody: • Policy reform that focuses on laws and regulations that are appropriate to the country in question, and through which all stakeholders can engage in policy dialogue; There are effective mechanisms for tracing timber throughout the supply chain from harvesting to the • Improved transparency and information exchange between producing and consuming countries, point of export. including support for independent forest monitoring; • Each link in the supply chain has been identified and, for each link, there are controls to ensure • Capacity building and training in producing countries,including support for governance institu- traceability of timber or timber products. tions in the implementation of new governance procedures; • Standing timber: There is a mechanism for checking the location of standing timber to be harvest- • Support for the development of community-based forest management and the empowerment of ed and confirming it is consistent with the areas for which use rights have been allocated local people to help prevent illegal logging. • Logs in the forest: Logs or log loads are clearly identified and documented prior to being transported. This includes logs from forested areas being converted to other land-uses, using appropri- The Action Plan encourages private sector involvement, including support to build private sector capacity ate methods of identification and documentation. in producer countries. Such support may be aimed, for example, at higher standards of forest management • Transport: Identification, documentation and other information for legally-produced material is

Project Completion Report on Private Sector EU-FLEGT-VPA 15 16 Project Completion Report on Private Sector EU-FLEGT-VPA maintained whenever it is transported. No mixing with material from illegal or unknown sources is Key elements to consider in designing and implementing VPAs are likely to include: allowed during transport or at insecure interim storage locations. • Social safeguards – VPAs should seek to minimize adverse impacts on local communities and poor • Secure interim storage: There are adequate controls at secure interim storage facilities, such as tim- people by taking account of indigenous and local communities’ livelihoods associated with forests. ber terminals,to ensure that material from legally verified sources is kept segregated from material Partner Countries will also be encouraged to link FLEGT issues to their poverty reduction strategies from all other sources or, if mixing is allowed, that material from unknown sources and material and to monitor the impacts of VPAs on poverty; which was harvested without legal harvesting rights is excluded. • Arrival at primary processing facilities: There are adequate controls to ensure that all wood accepted • Stakeholder involvement – Provision should be made for regular consultation with stakeholders into processing facilities is from legally verified sources or, if mixing is allowed, that material from during the design and implementation of VPAs. This should include ways to involve the private sec- unknown sources and material which was harvested without legal harvesting rights is excluded. tor in efforts to combat illegal logging but should also ensure that any requirements imposed are not • Control within processing facilities: If mixing is allowed then there are adequate controls to ensure an undue burden on small-scale producers. that segregation or mass balance approaches are properly implemented. Arrival at point of export: All material (logs, log loads or processed timber) arriving at the point of export is accompanied by the documentation necessary to confirm that it has been legally verified. 7.7:Guidelines for independent monitoring: • Designation of authority: The Partner Country Government formally authorizes the independent • Quantities: There are robust and effective mechanisms for measuring and recording the quantities monitoring function and allows it to operate in an effective and transparent way. of timber or timber products at each stage of the supply chain, including reliable pre-harvest esti- • The Partner Country Government provides the Third-Party Monitor with a formal mandate to access mates at appropriate accuracy of the volume of standing timber in each harvesting site. All data are the people, documents and sites necessary to carry out its function. recorded in a way which makes it possible to reconcile them with the prior and subsequent links in • The Partner Country Government ensures that the conditions necessary for the effective operation of the chain in a timely manner. Reliable reconciliation is carried out for the entire supply chain. the Third Party Monitor are in place. • The Partner Country Government ensures that adequate funding and resources are available to al- 7.5: Legality assurance systems: requirements for verification: low-full functioning of independent monitoring. • Independence from other elements of the LAS: There is a clear separation between organizations and erification provides adequate control to ensure the legality of timber to be licensed. Verification must individuals that are involved in management or regulation of the forest resource and those involved in Vbe sufficiently robust and effective to ensure that any non-compliance with requirements, either in Independent Monitoring. the forest or within the supply chain, are identified and action is taken in a timely manner to resolve the • Organizations and individuals with a direct role in the operation of the LAS or with a commercial problem. The intensity of verification should be proportional to the specific circumstances in the Partner interest in the forestry sector are not involved in any aspect of independent monitoring. Country. • The Third-Party Monitor has no commercial or institutional relationship with any organization in- • Verification is carried out by a government, market participant or third-party experience necessary volved in the operation of the LAS or whose activities are subject to monitoring. to perform their jobs and are adequately supervised. • Appointment of the Third-Party Monitor: There is a transparent mechanism for the appointment of • Verification activities are carried out under an adequate documented management system and pro- the Third-Party Monitor and clear, publicly-available rules regarding its operation. vide means to ensure transparency of the system. • The terms of reference for the Third-Party Monitor are approved by the JIC and made public prior to • There is a robust system in place to ensure that all potential conflicts of interest at both the individual the selection process for the Third-Party Monitor. and the organizational level have been identified and documented and are being effectively managed • There are clear guidelines for engaging the Third Party Monitor, which include an appropriate selec- and controlled. tion procedure that is open to all qualified domestic and international applicants and ensures trans- • Where verification activities are carried out by field based monitoring personnel who are routinely parency and value for money. involved with forest operations (e.g. forest guards), there must also be a component of the verifi- • The Third-Party Monitor’s contract or agreement with the Partner Country Government provides for: cation process carried out by other personnel who are not routinely involved with either the forest freedom from interference in the operation of the Third-Party Monitor’s activities; access, within the operations or line management of the field-based monitoring personnel. limitations prescribed by national legislation, to government and company information relating to the • There is a clear scope setting out what has to be verified. The verification methodology is document- operation of the LAS; access to the forest estate and timber transport, storage,processing and export ed and ensures that the process is systematic, transparent, evidence-based,carried out at regular facilities that are relevant to the operation of the LAS; payment of the Third-Party Monitor’s fees or intervals and covers everything included within the scope. costs based on the work undertaken regardless of the nature of its findings; and safeguards concerning the protection and use of commercially-confidential information. 7.6: Voluntary Partnership Agreements (VPA): he EU FLEGT Action Plan recognizes that, as a significant consumer of wood products, the EU shares 8. What does Myanmar “Wood-Based Private Sector” understand about FLEGT? Tresponsibility with timber-producing countries to tackle illegal logging and its associated trade. How- s a leading network of wood –based private sector, MFPMF has been actively and seriously involvement ever, there is currently no practical mechanism for identifying and excluding illegal timber from the EU Ain moving forward for the FLEGT VPA process. During project implementation period, the project market. The FLEGT Action Plan therefore proposes the development of Voluntary Partnership Agreements team has conducted questionnaire survey, key informant interview (KII) using semi-structured question- (VPAs) between the EU and individual timber-producing countries (FLEGT Partner Countries). These naires and focus group discussions. The key questions asked were deforestation,climate change and disaster agreements are designed ultimately to eliminate illegally-produced timber from a Partner Country’s in- linkages, illegal logging, legal/illegal timber, raw wood materials from Myanmar Timber Enterprise (MTE), ternational and domestic trade. A VPA is a binding agreement between the EU and a Partner Country by demand/supply issues, and awareness on FLEGT and understanding. A total of 48 respondents who are in which the EU and the Partner Country undertake to work together to support the aims of the FLEGT Ac- wood based industry business (N=48) were asked through survey questionnaires and 22 Key Informants tion Plan and to implement a timber licensing scheme. To enable this, a new European Regulation on the (N=22) were interviewed by utilizing semi-structured questions/check list. Key findings were presented implementation of the FLEGT licensing scheme has been adopted. through the following tables:

Project Completion Report on Private Sector EU-FLEGT-VPA 17 18 Project Completion Report on Private Sector EU-FLEGT-VPA Table 2: Key Informants Interview: Key stakeholders (Wood Based Factories, Table 1: Understanding Legal logging and FLEGT VPA N=48 Furniture Business) understanding and interpretation of FLEGT VPA: No/ Sr. N=22 Key Questions Yes Do not Don’t know No agree Sr.No Key statements Percentage (%) Did you know about Myanmar floods recently Key stakeholders who said that certificate for legality of forest 1 48 (100%) - occurred in some parts of the country? 1 products (for export) issued by forest department is valid doc- 20 (90%) ument Do you know that the causes of this kind of 1 2 flood situation, and climate change are due to 47 (97.9%) Key stakeholders who consider that raw materials buying from (2.08%) deforestation and forest degradation? 2 MTE is legal timber to meet the requirement of EU-FLEGT 15 (68.18%) VPA process Do you believe deforestation and illegal logging 2 3 46 (95.83%) are linked? (4.17%) Key stakeholders who consider that the raw materials they are 11 3 12 (54.54%) 4 Where do you get your raw materials? MTE=37 (77.08%) buying from government sources are “Legal” (22.91%) If you buy raw materials from MTE, Do you 5 35 (72.91%) - 12 (25%) Key stakeholders who understand the EU-Myanmar FLEGT think it is legal? 4 5 (22.72%) VPA process If you buy raw materials from other sources 13 6 31 (64.58%) 4 (8.3%) (Not from MTE), Do you think it is illegal? (27.08%) Key stakeholders who think that if EU FLEGT VPA is done, 5 5 (22.72%) the border illegal logging will be totally disappeared. Willing to If you get required raw materials from MTE, buy=1(2.08%) 41 7 will you buy raw materials from other illegal Key stakeholders who think that if EU FLEGT VPA is done, the Less Price=6(12.5%) (85.41%) 6 14 (63.64%) sources? border illegal logging will be reduced. Illegal Logging business is due to the demand 8.1 39 (81.25%) - Source: MFPMF/Private Sector Need Project, A brief survey, September 2015. in market?

Illegal Logging business is due to the supply n order to measure the understanding and participation of key stakeholders in FLEGT VPA process, 8.2 9 (18.75%) - side market? IMFPMF team has conducted “Key Informants Interview (KII)” with 22 key informants involved in wood B = 40(83.33%) based industries. According to National Export Strategy/Forestry Products Strategy (2015-2019), there are Which is causing more forest destruction? Bor- 7 9 IN = 1(2.08%) - currently around 100 wood-based active industries in Myanmar and wood products industry is composed der Illegal logging or in country illegal logging? (14.58%) of 258 sawmills, nine plywood & veneer mills, 1497 recutting mills and 1588 small production units. In Do you know about legal forestry products trad- 25 addition, under the state-owned MTE, the industries for the manufacture of value added wood products 10 ing system between Myanmar and EU which is 22 (45.83%) - (52.08%) include five furniture factories, five plywood factories, two moulding factories and one flooring & moulding “FLEGT VPA” factory. During the key informants interview, it was clear that about 5% of the respondents understand about If you get information on FLEGT, will you be 6 11 42 (87.5%) - the EU-Myanmar FLEGT VPA process. About 90% of the key stakeholders who said that the certificate for interested in FLEGT? (12.5%) legality of forest product (for export) issued from the forest department is valid document to prove the legal Source: MFPMF/Private Sector Need Project, A brief survey, September 2015. timber. About 68% of key stakeholders who claim that forest products buying from MTE is legal or legal timber which is demanded by EU-FLEGT VPA process whereas stakeholders who actually understand the Above table clearly shows that 98% of the respondents think that the causes of Myanmar’s flood situation, and EU-Myanmar FLEGT PA process are about 23%. About 36% of the key stakeholders think that if EU FLEGT climate change are due to deforestation and forest degradation. 96% of the respondents think that deforesta- VPA is completed, the border illegal logging will be disappeared whereas about 64% think that if EU FLEGT tion and illegal logging are linked. 77% of the respondents claim that they get raw materials from MTE and VPA is completed, the border illegal logging will be reduced/less. 73% of the respondents think that if they buy raw materials from MTE, it is legal. About 65% think that if we do not buy from MTE, it is illegal. About 85% claim that if they get raw materials from MTE, they will not buy from illegal sources. About 46% of the respondents claim that they know about Myanmar-EU FLEGT process.

Project Completion Report on Private Sector EU-FLEGT-VPA 19 20 Project Completion Report on Private Sector EU-FLEGT-VPA Focus Group Discussion:

• During the project period, focus group discussions were conducted with some key stakeholders. It was observed that majority of the stakeholders are strongly believe that they buy raw materials from MTE and it is legal and they are getting legal timber.

• Some key stakeholders are not comfortable to talk about legal and illegal timber issues and they claim that what they are doing wood-based business is totally legal and they are exporting their products to India, China, Europe and USA.

• Majority of the stakeholders claim that they know about Myanmar-EU FLEGT PA process but they do not have clear information on FLEGT VPA. Most of them heard about FLEGT VPA but they do not clearly understand about FLEGT VPA.

• Majority of the stakeholders are of the opinion that government process of getting wood-based materials, certification, chain of custody, producing wood products/finished products and exporting procedure is very tiring/long process and doing wood business is a great challenge.

• Majority of the stakeholders support the EU-Myanmar FLEGT VPA process and all the concerned parties/stakeholders (Government, CSOs/NGOs, Private Sector) should work together to complete and achieve FLEGT VPA process for smooth implementation of legally exporting timber business to Europe and other countries as an internationally acceptable manner.

Project Completion Report on Private Sector EU-FLEGT-VPA 21 Project Completion Report on Private Sector EU-FLEGT-VPA Project Completion Report on Private Sector EU-FLEGT-VPA Project Completion Report on Private Sector EU-FLEGT-VPA Summary of Key findings of the FLEGT VPA:

Based on above survey, Key Informant Interview and Focus Group Discussion, the summary of the key finding are presented below:

1. Majority of the private sector stakeholders have low level of awareness and understanding on EU-Myanmar FLEGT VPA.

2. Stakeholders interpretation and understanding of “Legal Timber” is limited and most of them think that buying raw materials from MTE is legal and they believe that they are doing legal business.

3. Majority of the stakeholders are unclear about the advantages and disadvantages of the FLEGT VPA. Chapter III

4. It is felt that majority of the private sector stakeholders do not have appropriate access to informa- 9. Overview of International Trade Requirements/Trends and FLEGT VPA Action tion about FLEGT VPA process (Respective Language). Plan:

5. Within the private sector, it is observed and felt that for the common good cause, there is lack of MFPMF members have been involved in national/international level trade requirement for many years and culture of working together/team work approach to achieve the desired results. gained some experiences in international trade requirements/trend and FLEGT VPA Action Plan process. Based on overview of the EU FLEGT VPA process, some of the issues and lessons learned need to be ana- lyzed from Myanmar’s context and understanding as follows:

(i): Market Restriction: Politically-motivated measure which includes trade embargo/sanction imposed by the world powers, such as United Nations, USA and EU. The Sanction on Myanmar was imposed by USA and EU in 2003 and 2007 respectively. At present, all sanctions are revoked. Environmentally-motivated measure includes certification for the sustainable forest management, license scheme for the legal timber and public procurement policy/guidelines. Type of certification and mode of enforcement is linked with legality, sustainability and voluntary and regulatory.

(ii): Illegal Timber: Illegal logging has no single definition, it is not a legal term derived from treaties, or court opinions, and neither is it a technical term that professionals use in a consistent way. In a general sense: “ Illegal logging takes place when timber is harvested, transported, bought or sold in violation of National Laws” which is in line with definition of FAO, 2014. Aspects under National Law includes harvest and transport, sales and processing, export and import, associated crimes and abuse of governmental authority.

(iii): Impact of Illegal Timber: It causes environmental damage, costing government billions of dollars in lost revenue, promoting corruption, undermining the rule of law and good governance and financing armed conflict. People are concerned about illegal logging through assessment of 5 areas: Social welfare, governance, revenue, environment and commerce.

(iv):Mitigation of Impact: EU Plan to mitigate the impact through European Union Timber Regulation (EUTR) which prohibits the placing on the EU market of illegally harvested timber and products derived from such timber, it requires EU traders who place timber products on the EU market for the first time to exercise “Due Diligence”, and other traders further down the supply chain must keep records of their suppliers and customers.

Project Completion Report on Private Sector EU-FLEGT-VPA 25 26 Project Completion Report on Private Sector EU-FLEGT-VPA • It was led by civil society groups, then later a multi-stakeholder process started, and facilitated by the (v): How Voluntary Partnership Agreement (VPA) is built up: government LEGT Action Plan supports for timber producing countries, activities to promote trade in legal timber, promoting ethical public procurement policies, support for private sector initiatives to promote Lessons Learned: “Corporate Social Responsibility (CSR)”, safe guards for finance and investment, use of existing • Genuine multi-stakeholder, participatory process takes a long time, patience, endurance and also Flegislative instrument or adoption of new laws to support the plan and addressing the problem of conflict timber. VPA is a WTO-Compatiable trade agreement between a producer country and the EU to work resources are needed to go through the process and the result is a robust and credible system. together to stop illegal logging. Although it is voluntary VPAs legally binding on 2 Parties once agreed. • The government’s role in providing the space for all stakeholders to be involved is important. Politi- cal will to incorporate input from stakeholders must be present so that whole process is worthwhile The goal of the VPA is focused on policy and legal reform, governance/transparency, capacity building, and the result is accepted. improve control, track and verify legal compliance, better capture revenues and rents, secure and im- • Representatives of stakeholders are self-selected, not appointed by government. prove market share. The basics of a VPA is concerned on legal and not sustainable timber. EU approach • Open and frank discussion are needed to flesh out issues and find ways to address and equity is im- is consultations, assistance for capacity building and market benefits and look for stakeholders inputs portant and each stakeholder has a voice. and concerns.Under VPA, almost all timber products covered, including solid wood products, flooring, ply wood, pulp and paper (not included: recycled products, printed papers such as books, magazines 10. Major issues and challenges of private sector in FLEGT VPA: and newspapers. The Regulation applies to both imported and domestically (inside the EU) produced timber and timber products.Timber Legality Assurance System (TLAS) defines what constitutes legal 10.1:Overview of Myanmar forestry products sector business environment issues timber, verifies compliance with the definition, trace products from forest to export, licenses export and The absence of certified quality standards for forestry products limits exporters’ capacity to access new provide assurance to markets and independently checks all elements of the system. TLAS is the main tool markets in developed countries for guaranteeing legality which consists of “Legality grid” a matrix which outlines the laws, verifiers and • Low logistics performance significantly hampers the export of forestry products indicators used to monitor enforcement of laws. • Limited access to finance and inadequate export finance mechanisms constrain the expansion of the Chain of custody: The wood tracing system which ensures only timber verified as legal will be exported sector or sold, verified and unverified timber should be kept separate. • The complexity of administrative procedures and documentation constrains the development of the Verification of legal compliance: The way the government or third party verifies no illegally sourceed sector and hampers export potential timber enters the chain of custody. Licensing: A FLEGT license is issued to timber verified as legal, and this allows it to be shipped to the • Insufficient power supply increases production costs and has a negative impact on the activities of EU. Through EUTR, legality is defined on the basis of the applicable legislation of the country of harvest sector factories covering: • The high commercial tax rate for forestry products exports reduces the sector’s attractiveness and limits FDI potential • Rights to harvest within legally gazette boundaries, • Payments for harvest rights and timber including duties related to timber harvesting. • Timber harvesting including environmental and forest legislation. • Third parties legal rights concerning use and tenure affected by timber harvesting. 10.2: Private sector in FLEGT VPA: • Forest sector-related trade and custom legislation. • Low awareness and understanding on EU-Myanmar FLEGT VPA VPAs are negotiated with 3 layers and 3 principles which include “ Environment (Forest Management/ • Vague understanding of “ Legality/Legal Timber” in line with EU-Myanmar FLEGT VPA Process Conservation), Economic (Trade/export, taxes/ registration/ fees), Social (Customary and access rights, • Inaccessible FLEGT VPA Information source/ Communication mechanism/ channels/ (Respective worker health, safety and labor)” which are again negotiated “Within” stakeholders groups, “Among” Language) stakeholders in country and with the “EU”. Based on overview of FLEGT VPA process, the legality de- • Missing of key private sector key stakeholders/ actors/market players in FLEGT VPA process velopment is through an interactive national consultation process involving multiple stakeholders and • Inadequate capacity building interests including those involved in enforcing forestry related legislation, operating in the forestry sector, • Uncontrollable illegal timber trade with neighboring countries involved/affected by forestry operations. • Using confiscated timber/abandoned timber/imported timber (vi): Lessons from a VPA Country- i.e. Indonesia Context: • Indonesia government admitted that illegal logging is a big problem and made it a priority issue to be addressed. • Measures taken to tackle illegal logging and its associated trade that included enforcement operations, international cooperation, policy change • One issue was highly debated: definition of timber legality • In 2002 following an MOU between Indonesia and UK, the work to define timber legality began

Project Completion Report on Private Sector EU-FLEGT-VPA 27 28 Project Completion Report on Private Sector EU-FLEGT-VPA 11. Private Stakeholders Mapping and Communication Strategy

MFPMF Stakeholders:

• MFPMF a Leading Federation Network ( 1622 members including operators exporting markets) • 462 members active • 132 Exporters members • 29 Bamboo and Rattan Companies • 53 Wood-based Furniture Companies

Stakeholder Mapping: • Wood-Based Private Sector is big • Some key/vital stakeholders are missing? • Need authentic/reliable information/data ? • Who are key private sector/actors and market players?

Communication strategy and mechanism: • Listing all the stakeholders, their role and influence • Mapping of all the stakeholders Development of Information, Education and Communication (IEC) strategy with respective languages

12. Role of private sector and position on FLEGT VPA process: • Key stakeholders in production forestry/VPA process are those that are directly involved in enforcing forest sector related legislation (Government). • Those that are operating in the forest and timber sector (Private Sector/Business) • Those that are directly involved or affected by forestry operation (Peoples/CSOs) • Private sector is not the first point of contact but they must deal with consequences • There are no common interpretation between the requirements of LACEY, FLEGT and Austra- lian illegal logging bill • Private sector is not consulted enough and at first when programs are developed. • For reasons of cost efficiency, private sector has a clear preference on only one certified brand • The comparability and acceptability of different certification systems remain key issues, particularly for tropical timber products

Private Sector Interest: • Expand and Secure Market Opportunities • Address all market requirements • Reduce additional costs/burden • Good governance system for Corruption • Strong desire for the speed up business process

Project Completion Report on Private Sector EU-FLEGT-VPA 30 Project Completion Report on Private Sector EU-FLEGT-VPA Private Sector involvement in FLEGT VPA Process: Chapter IV • To safeguard and maintain private sector interest, the private sector must be strongly involved in “ Legality Defining Process” • Assuring recognition and becoming confident in trade 14.Recommendations for Next Steps: • Improving and better forest governance for the stability of industry • Integrated system of legality assurance (MOECAF), Trade (MOC) and Customs (MOR) ensuring private sector equilibrium • MFPMF and Private Sector Network continue to work on Awareness Raising through “Informa- • Market access tion, Education and Communication (IEC)”/Communication Strategy on EU-Myanmar FLEGT • Impeding illegal logging and illegal timber trade VPA Process. • Strengthening export

• Prepare s stakeholder engagement plan.

13. MFPMF/ FLEGT VPA process linking with Forestry Sector National Export Strategy (NES): • Capacity building (orientation/training) of MFPMF and Private Sector Stakeholders for effective participation and involvement in FLEGT VPA process.

he Republic of the Union of Myanmar has developed “National Export Strategy” which includes “For- estry Products Sector Strategy (2015-2019)”. It has been realized that since NES will be the major plan • Need to appoint “Strong Focal Person/Coordinator” for effectively interact/consult with “Missing Tfor the export of the Myanmar’s forest products, there should be a strategic linkage with EU-Myanmar Private Stakeholders Actors/Market Players”. FLEGT VPA process. In future, the FLEGT VPA will influence the export business of the forest products with legal timber issues and government to government VPA process. • Need to look for funding for continuing EU-Myanmar FLEGT VPA Process together with Devel- The NES has three strategic plan which includes: (i) streamlining administrative rules and procedures, and opment Partners/Donors/GTF. assure reliable upstream supplies, (ii) improving the skills and capacity of the industry, (iii) increasing the sector’s sustainability. Since the NES has a plan of action consists of “ Raise awareness of illegal logging and illegal trading, change consumer and public perception on illegal logging and trading, Improve international 15. Conclusion Remark of Advisory Committee , MFPMF market share through value added products, these planned activities need to be strongly integrated with the FLEGT VPA process. • After reviewing the finding of the project, the Advisory Committee has the following opinion how to meet the legality requirement of forest products of Myanmar. • There will be two parts - • First Part - For the Current Supply Chain • Second Part - After VPA is complete or Myanmar TLAS is in action • For the second part, it is of the long journey and MFPMF shall corporate under the FLEGT VPA Process with all departments and organizations. • The first part is more important for the business as usual. The Advisory Committee believes there exist with respective obligation of the government sector and the private sector, - The Private Sector should strictly comply with the current regulation not to use any raw material from any other unknown source, except from MTE. (For the moment, the imported raw material is not yet included.) - FD and MTE should exert their effort to guarantee that they have complied with the existing rule and regulation. As a result, the legality of raw material can be assured, then the raw material shall be verified by the other party, at least by the second party.

Project Completion Report on Private Sector EU-FLEGT-VPA 31 32 Project Completion Report on Private Sector EU-FLEGT-VPA Project Completion Report on Private Sector EU-FLEGT-VPA