SCOPE Forestry in Malaysia THE MALAYSIAN TIMBER LEGALITY ASSURANCE SYSTEM AND RELATED Illegal logging EXPERIENCE FROM VPA NEGOTIATIONS Emerging market requirements Timber legality & Sustainability Subtopic No. 12 Importance of FLEGT VPA B.C.Y Freezailah Voluntary Partnership Agreement (VPA) VPA FLEGT Process Further work ASEAN – MARD - EU FLEGT ASIA TLAS Training Workshop Verification of Legal Timber under VPA & Hanoi, 24-25 November 2010 Certification of Sustainable Timber Conclusions
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FOREST LAND USE IN MALAYSIA IN BRIEF MALAYSIA 2006 (million ha) SOCIAL CONTRIBUTION
TOTAL FOREST AREA Land area – 32.95 million ha 18.35 A major sector in Malaysia’s (55.7%) economic growth, revenue Multiethnic population of about earning and employment National Parks/Wildlife 24.8 million State land/ Permanent Reserved Forests & Bird Sanctuaries Alienated Land (8.3%) Total exports USD 6.28 billion Federation of 13 States & 3 (18.5%) (73.2%) (2009) 13.43 Federal Territories 3.39 1.53 Production Totally Accounts for 3.9% of GDP Production Totally Protected Forestry – State responsibility (SFM) Protected (Conversion) Empoyment about 337,000 Coordination by NLC 3.39 10.81 2.62 1.53 Source: Forestry Departments of Peninsular Malaysia, Sabah & Sarawak workers Ministry of Natural Resources and Environment
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1 HISTORY OF FOREST EXPORT OF TIMBER PRODUCTS – 2009 EXPORT BY DESTINATION – 2009 MANAGEMENT IN MALAYSIA (RM Million) (RM Million)
UAE EU Mouldings 599 2,706 686 3% Others 14% First Forest Officer appointed in 2,170 (4%) Logs Japan (11%) 2,021 3,736 USA 1901 (10%) 19% 2,393 12% Matang mangroves managed Sawntimber 2,345 since 1904 (12%) India Bukit Nanas Forest Reserve 1,336 Fibreboard Others 7% Furniture 1,033 4,553 South Korea gazetted in 1906 6,248 (5%) 24% 1,141 (32%) Plywood China Taiwan 6% Singapore Forest Ordinance enacted in 1907 4,987 667 Australia 838 (26%) 3% 721 801 4% 4% 4% TOTAL : RM 19.49 Billion Source : MTIB Source : DOS & MTIB
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Major Timber Products Exported to EU-2009 ( in RM Million) ILLEGAL LOGGING EMERGING MARKET REQUIREMENTS Global concern - loss of assets and revenue, environmental impact, biodiversity loss Green consumerism Illegal logging estimated at $23 billion annually (8-10% of global total) Increasing demand for timber and timber products from a sustainable or legal source Recent study by WWF of illegal timber in EU market (July 2008) Efforts directed to combat illegal logging and its associated trade 16-19% illegal largest quantity from Russia Markets and public procurement policies in many developed Top exporters of illegal wood into the EU; countries now demand legal timber assured through due diligence or credible verification system (TLAS) oRussia (10.4); Indonesia (4.2);China (3.7); Brazil (2.8); Belarus (1.5); Ukraine(1.5);Bosnia H (1.2); Cameroon (0.645); Gabon (0.590) million EU Timber Regulation / VPA m³ of RWE. TOTAL : RM 2.7 Billion US Lacey Act Malaysia 0.28 million m³ of RWE. About 1.4 % USD 871 Million Public Procurement Policies on Timber Products of other Negative perceptions about Malaysia Source : MTIB countries
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2 IMPORTANCE OF FLEGT VPA TIMBER LEGALITY & VOLUNTARY PARTNERSHIP AGREEMENT Sustainability & Legality Of Malaysian Timber SUSTAINABILITY • Logs harvested from 3 land categories: (VPA) Sustainable timber product of SFM (social, Permanent Reserved Forests (PRF) State Land (SL) 2003 EU FLEGT Action Plan environmental & economic factors) Alienated Land (AL) Bilateral Partnership Agreements between EU and Sustainable timber assured through certification • PRF under SFM Timber Exporting countries schemes, e.g., PEFC, FSC, LEI, MTCS etc. 1/3 certified mainly under MTCS and logs are legal & sustainable logs from uncertified PRF are legal VPA focus on legal timber SFM / certification long-term goal • SL & AL not under SFM but logs harvested are legal Legality definition based on existing laws of • 80% of Malaysia’s total log production are harvested from uncertified PRF, exporting country Legal timber milestone on journey to attain SFM / SL & AL sustainable timber • Need for TLAS to assure legality of logs harvested from SL / AL and TLAS based on existing control and licensing system uncertified PRF Legal timber embraces relevant legislation dealing VPA legally binding • VPA recognises timber from uncertified PRF, SL and AL as legal license with social, environmental & economic aspects with under FLEGT VPA TPM lesser number of criteria and indicators FLEGT Licensed Timber is recognized as legal timber by EU and public procurement policies of various EU Member Countries Market benefits Verification of legal timber through TLAS Provide an assurance system that can address the demand for legal timber in Capacity building assistance other environment-sensitive markets
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VPA PROCESS MARKET STUDY NEGOTIATING STRUCTURE Informal consultations since April 2004 Market study on impact of a FLEGT VPA between Malaysia and Formal negotiations announced September 2006 Malaysia-EU National the EU by Forest Industries Intelligence Ltd. Negotiations through SOM supported by TWG; 2 Negotiations Undertaken in 6 major EU markets National Analysis of trade data and structured interviews SOMs and 9 TWG meetings held; several Senior Steering Negotiating • 80 Timber trade and industry companies video-conferences Officials Committee Team • 21 Trade associations Preparations by Malaysia Meeting (NSC) (SOM) • 29 Government departments • NSC - Mandate to the Negotiating Team • 21 NGO’s • WG I - Legal drafting & General provisions 3 Working NGO’s supportive of VPA but some concerns on Malaysian • WG II – TLAS Groups (WGs) forestry • WG III - Market Benefits and Capacity Building Technical Little willingness by EU private sector to pay premium for VPA Working timber Major issues subjected to Stakeholder Consultations; Group (TWG) Public procurement 25% of overall trade TLAS, Market Benefits Stakeholder Potential for premiums Consultations
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3 MARKET BENEFITS & PROMOTION TIMBER LEGALITY ASSURANCE SYSTEM (TLAS) STRUCTURE OF TLAS Malaysia’s request for market benefits include: Full acceptance Development of TLAS involved extensive Regional basis; Peninsular Malaysia, Sabah, Sarawak Harmonisation of PPP consultations with stakeholders Annex A lists relevant legislation throughout the production Incentives for use of VPA timber Components chain to be complied clustered under 6 principles; Right to Green premium harvest, forest operations, statutory charges, other users’ IMM • Product coverage rights, mill operations, trade and customs Measures by EU • Definition of Legal Timber Communication on public procurement • Principles & Criteria of Legal Timber (Annex A) Principle divided into criteria with corresponding control Due diligence regulation (DDR) • Control Procedures (Annex B) procedures in tabulated form to facilitate monitoring by TPM Initiatives with other major markets • Sources of Timber (Annex C) Annex B provides control procedures for each criterion in a VPA product visibility campaign • Third Party Monitoring (Annex D) tabulated manner indicating principle and legislation Capacity building assistance addressed, enforcement agency and means of verification • Management of Seized Timber (Annex E)
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TECHNICAL EVALUATION OF TLAS IMPLEMENTATION / MONITORING INPUTS BY STAKEHOLDERS OF VPA International & 3 Malaysian Consultants; Development of TLAS Licensing of VPA timber by existing authorities 6 stakeholder consultations / briefings 2 Sept – 9 Oct 2008 Informal meetings Assess auditability, adequacy, capacity TPM to verify implementation of TLAS Meetings with Minister building needs, effectiveness TPM and cost Written submissions IMM to monitor market benefits implications Technical evaluation of TLAS Roles of RB and JIC • Discussions with consultants Based on Consultants’ Report, EU raised • Written submissions some issues to be addressed Mid-term Review • Presentation and discussion of consultants’ Draft Report and Malaysia in general agreement; the issues further written submissions During implementation of TLAS raised clustered into: • Public summary of TPM’s reports Issues addressed before signing VPA • RB to seek and receive views from stakeholders on the TLAS Issues to be addressed with EU assistance for and its implementation capacity building • Consideration of report by JIC Issues for further reflection Review of TLAS
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4 Verification of Legal Timber under VPA & Certification of Sustainable Timber LEGAL TIMBER SUSTAINABLE TIMBER CONCLUSIONS P&C on social, environmental & P&C on social, environmental & Scope economic issues required by law & FURTHER WORK economic issues required by law forest sustainability VPA is on legal & not sustainable timber Substantial progress Bilateral Agreement (VPA); Legally Application Voluntary Strategic and catalytic role of VPA to achieve timber binding Finalisation of TLAS legality and SFM in the long-term Status Governmental Non-governmental EU approach; consultations, assistance for capacity Capacity building projects Supporting Legislation EU DDR PPP in certain countries building, market benefits Market benefits Institutional Arrangement JIC/RB NGB (e.g. MTCC) Assessment Third party monitor Certification body Stakeholder inputs and concerns Issuance of Compliance Legal drafting Licensing authority for timber export Certification body VPA cannot solve all problems; some outside scope of Document VPA/forestry sector Administrative & funding arrangements Market Performance Independent market monitor - Success depends on stakeholder cooperation; Market promotion Development Process Relevant authorities & stakeholders Stakeholders Funding Government Private sector assistance for capacity building; and market response Source of Timber All forest land Permanent Forest Estate VPA unprecedented and legally binding; steep learning curve Level of Application System-based / Operator-based Operator-based Need for pragmatism Entry into all EU countries Acceptance under PPP (public & Benefits of Implementation Acceptance under PPP of certain private) 25 27 countries (e.g. UK) 26
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