Corruption in Timber Production and Trade An analysis based on case studies in the Tarai of Nepal by Keshab Raj Goutam Submitted in fulfilment of the requirements for the degree of Doctor of Philosophy of the Australian National University April 2017 ii Declaration This thesis contains no material which has been accepted for the award of any other degree or diploma in any university. To the best of the author’s knowledge, it includes no material previously published or written by another person or organisation, except where due reference is provided in the text. Keshab Raj Goutam 07 April, 2016 iii iv Acknowledgements I sincerely acknowledge the support and encouragement of many people and institutions in helping me write this thesis. First of all, I would like to extend my appreciation to the Ministry of Forest and Soil Conservation of the Government of Nepal for its support for my scholarship and study leave, and to the Australian Department of Foreign Affairs and Trade (DFAT) for providing me the Australia Awards Scholarship to pursue the PhD degree. I sincerely express my special appreciation and thanks to my principal supervisor and chair of the panel, Professor Peter Kanowski. Drawing from his vast reservoir of knowledge, he not only supervised me but also helped in all possible ways to bring this thesis to its present shape. He always encouraged me to improve my research with timely feedback and comments. I would like to extend my sincere gratitude to Dr. Digby Race, a member of my supervisory panel, who also chaired the panel for half of my PhD course, when Professor Peter Kanowski was administratively unavailable to continue as chair of panel. He not only helped me in developing ideas to analyse data but also provided important inputs to build arguments on different aspects of timber trade and corruption. I wish to offer my sincere thanks to Professor Lorraine Elliott, an advisor on the panel, for her critical analytical as well as methodological inputs to this thesis. Her deeper theoretical and empirical understanding of corruption and crime was extremely beneficial for the analysis and interpretation of research findings. I would like to extend my sincere thanks to Dr. Hemant Ojha, another advisor on the panel, for his support in helping me better understand the theoretical linkages. With his academic expertise in Nepal’s socio-politics and forest governance, he also helped me in data collection and analysis, and importantly, in the interpretation of results. In Nepal, many government and non-government institutions and people from different areas, including from the communities and the private sector, helped me in collecting data. I am grateful to all the anonymous interviewees and participants in the focus group discussions. Some of them not only allowed me to come to their homes to undertake individual interviews but also welcomed me like an important family member. I am also thankful to Bishnu H Paudyal, Buddi S Poudel, Suman Subedi, Manoj Chalise, Bimal Acharya, Amul Acharya and Sony Baral for their support during my fieldwork and helping me collect official data. Back in Canberra, I am grateful to the Fenner School of Environment and Society of the ANU for providing me with a very inspirational academic environment. I acknowledge the secretarial support from Amy, Cathy and Dianne, IT support from Karl, John, Steve and Sean, v and finance services from Tony and his colleagues. I would like to thank Professor Stephen Dovers, Director of the School, and Dr. Jack Pezzey, Associate Director (Higher Degree Research), for their every support during the course of my study. I am thankful to Dr. Susanne Holzknecht for copy-editing the thesis. Colleagues at the School such as Nelida, Yuqi, Marcos, Ben, Darren, Miles, Floney, Boase, Hatem, Francis, Kathy, Clare, Kelly and Wendy helped me in different ways, and I am thankful to them for making me part of the Fenner community. I am grateful to Gina Abarquez, Elaine Ee and Rozana Muir of the Australia Awards Liaison Office at the ANU and Sunita Gurung of the DFAT office in Nepal for all the support I received throughout my research in Australia and fieldwork in Nepal. Nepali community in Canberra supported me in various ways during the course of my study. I am especially thankful to Ramesh Sunam, Kamalesh Adhikari, Thaneshwar Bhusal and Puspa Sharma for their valued inputs in various stages of my research. I also offer my big thanks to Maniram Banjade, Binod Chapagain and Ram P Ghimire for their inputs during our discussions on my research questions, analyses and findings. Many thanks go to Manju Ghimire Subedi and Tek B Khadka for helping me with data entry and transcription. Thanks to Eak Rana and Thakur Bhattarai for their inputs to my research design and findings. I am especially grateful to my sister Samjhana and friend Gyanu Sapkota as they always provided me and my family a homely environment in Canberra. I am also thankful to Kumar and Shanti Sapkota, who not only provided their support but also offered me to live with them as a family member in the last critical three months of my research. I acknowledge the encouragement and support from many Nepali colleagues at the ANU, and their families, including Jyotsna, Babukaji, Dipak, Sushma, Saraswoti, Nabaraj, Govinda, Mohan, Mandip, Savitri, Suvash, Rajan, Surya, Mukti, Jhalak, Tek Kumar, Umesh, Pramila, Anupama, Bishal, Monica, Bikram, Prakash, Amrit, Shruti, Sandesh, Sangita, Ashutosh, Khusbu, Sreejana, and Pawan. I would also like to thank Nepali community outside the university. There are many people who helped me during my stay in Canberra such as Binod, Krishna, DD, Rajesh, Lok, Santosh and Samjhana. Back home, I would like to thank my mother, brothers, sisters, parents-in-law, brothers-in-law, sisters-in-law, nephew and nieces and all other members of my family for their continuous support, love, care and trust. I cannot express how much I am indebted to my wife Sirjana and son Pradez (Pukulu). They are the reason behind my energy, passion and dedication to initiate, carry out and accomplish this research. My wife lost her mother while I was conducting my fieldwork in Nepal and I must say, it was my wife’s love and support, even in critical times of this kind, that allowed me to continue to focus on my research. vi Abstract Corruption in the production and trade of timber from Nepal’s Tarai forests is a historically narrated but little investigated phenomenon. This research explores how various actors interpret, define and practice corruption at different stages of timber trade chains from the three main forest governance and management regimes – government, community and private forests. It focuses on three key questions: 1) the forms and level of corruption; 2) the actors involved in corruption, their motivations, and institutional arrangements and processes enabling them; and 3) anti-corruption responses. The research applies a case study approach, and uses a value chain framework to structure the analysis of timber production and trade from two Tarai districts. It employs mixed methods, based primarily on qualitative analysis supported by quantitative data. Individual interviews (n=143), focus group discussions (n=10), observations, and a review of official documents and records, were used to collect and triangulate data. The research suggests that timber governance in Nepal’s Tarai is characterised by systemic, institutionalised and decentralised corruption, in which multiple, mutually-reinforcing corrupt practices, including bribery, fraud and theft, patronage and favouritism, illegal pressure, and conflicts of interest, occur as common phenomena along the timber trade chains from all major forest governance and management regimes. In many instances, corruption has involved illegal forest activities that resulted in unsustainable management of forests and reduced revenues to government and communities. Community forests experience a higher degree of corruption than government-managed forests, mainly due to the weak accountability structures of community forest governance. The core actors engaged in timber-related corruption comprise forest officials and local political and economic elites; they have forged a nexus at the local level, and maintained relations with other powerful social actors from local to central levels, through bribes and political networks. Many of these actors perceived some forms of corruption and illegal forest activities as acceptable behaviours, and rationalised them in various terms. Such perceptions and rationalisations have ultimately facilitated the perpetuation of corruption. Despite comprehensive legal-institutional arrangements and strong civil society engagement, the response to corruption in Nepal in general, and in the timber sector in particular, has been ineffective; this failure is attributed to issues in both the design and enforcement of anti- corruption strategies. Some of the anti-corruption measures applied in the timber sector have led to negative social, economic and ecological consequences, and have become counter- vii productive for corruption control. The findings suggest that although the factors contributing to corruption are primarily visible in the ‘loopholes’ of legal-institutional arrangements and poor law enforcement, the underlying factors – the broader socio-political and economic contexts of the country – are especially significant in its persistence and ubiquity. In particular, the ‘culture of corruption’ in Nepali socio-politics, which has