Sustainable Forest Trade in the Lower Mekong Region
Key Takeaways
2021 REGIONAL DIALOGUE
2021 Regional Dialogue
Is this the End of an Era for Illegal Logging?
The trend in wood products trade from the region is changing. While logs used to be the main exported product from Cambodia, Lao, Myanmar, this has changed drastically as a result of log export bans, and as the resource base gets gradually depleted. This MAY also mean that the era of massive illegal logging is behind us.
An Emerging Trend of Wood Products
The new trend of wood trade from the region is furniture (Viet Nam) and rubber sawnwood (Thailand), both of which rely on plantation timber and imports from other regions - not on domestic natural forests.
The Growth of Plantation Areas
Correspondingly, the region’s plantation area is growing. But, this is also worrying, because a major driver of deforestation is conversion of natural forests into plantation.
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Impacts of Banks and Financial Institutions
Banks finance investments in plantations can have a significant impact on the practices of companies.
Banks are starting to set policies related to non-deforestation, but they are still limited in the region (only Thailand and Vietnam have banks with such policies).
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Regional Trends
| China | Cambodia | Lao PDR | Myanmar | Thailand | Viet Nam |
| Volume (1,000 m3) | |||||
Tropical logs | 41 | 9 | 63 | 19 | 10 | 3 |
Tropical sawnwood | 5 | 55 | 135 | 79 | 3,623 | 221 |
Tropical veneer | 17 | 4 | 12 | 85 | 122 | 759 |
Tropical plywood | 740 | 152 | 5 | 3 | 90 | 1,118 |
MDF/HDF | 990 | - | - | - | 2,522 | 82 |
Particleboard | 257 | - | 4 | - | 2,520 | 39 |
| Value (USD 1,000) | |||||
Wooden furniture | 19,919 | 20 | 71 | 7 | 474 | 8,811 |
Builders woodwork and joinery | 1,745 | 1 | 5 | 69 | 41 | 277 |
Mouldings | 707 | 16 | 22 | 13 | 38 | 47 |
Other SPWPs | 5,339 | 2 | 5 | 1 | 154 | 299 |
Wood product trends are changing
2021 Regional Dialogue
There is a significant scale of trade in processed wood products from China, Thailand and Vietnam and the relatively small volume of exports of primary wood products with the exception of Thailand sawnwood (largely rubberwood), and the minimal scale of processed wood product exports from Cambodia, Laos and Myanmar.
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2021 Regional Dialogue
For example, China’s imports of Rosewood from the region is decreasing
97% �decrease since 2014
Logs have probably been the main form of illegal logging and trade from the region, so this trend may be very important. No doubt, this trend is a reflection of the policies (bans) enforced by the LMR countries on export. But also reflects that resources have been largely depleted.
2021 Regional Dialogue
Major Wood Furniture Trade Flows From the LMR, 2019, (USD million)
The new trend of wood products trade from the region is furniture (VN) and rubber wood (Thailand), both of which rely on plantation timber (and imports from other regions).
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2021 Regional Dialogue
Area Plantations Are On the Rise
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2021 Regional Dialogue
Banks finance investments in plantations can have a significant impact on the practices of companies.
Banks are starting to set policies related to non-deforestation, but they are still limited in the LMR (only Thailand and Vietnam have banks with such policies).
Banks’ Role
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2021 Regional Dialogue
Financial Institutions Have Links To Forest Related Supply Chains
Banks
Large-scale Agriculture
Large-scale Logging
Smallholder Farming
Small-scale Timber
Fuelwood and Charcoal
Tree Plantations
Smallholders
SMEs
Pulp + Paper & Timber Companies
Retailers
Consumers
Downstream
Upstream
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The main driver of deforestation in the region is from agriculture – including tree plantations. Investors and banks play an important role in financing industry, but need to ensure that this is done responsibly – no conversion of natural forests.
2021 Regional Dialogue
Policy | Cambodia | Laos | Myanmar | Thailand | Viet Nam |
Acknowledge societal and economic risks associated with environmental degradation | None | None | None | Six banks mention (out of seven) | None |
Acknowledge biodiversity loss and/or deforestation risks in its clients' activities | None | None | None | Four | One out of five |
Require clients in sectors highly exposed to adopt "no deforestation" commitments | None | None | None | Two | One |
Require clients in sectors highly exposed to conversion of natural ecosystems to adopt "no conversion" commitments | None | None | None | Two | One |
Only Thailand and VietNam have deforestation-related policies in regional banks
Source: Data from WWF Singapore’s annual sustainable banking assessment (SUSBA) for Thailand and Viet Nam. Additional research for Cambodia, Laos and Myanmar included the largest banks.
SUSBA is available at www.susba.org
Thai banks: BBL, Kbank, Krungsri, KTB, SCB, TBank, TMB;
Vietnamese banks: BIDV, Eximbank, VCB, VietinBank, VPBank
2021 Regional Dialogue
Supply and demand of timber – challenges and opportunities
Smallholders in the region are small. But they would also like to engage in certification and in sustainable supply chains.
But forest certification (FSC/PEFC) implies great challenges to smallholders because of their cost and technical requirements.
Control wood is one solution: Control wood (or “controlled sources” is one solution: this lowers the bar for smallholders, by allowing timber that avoids controversial sources (such as HVC sp or plantation timber converted from natural forests), to be mixed with certified timber and sold as “control wood”.
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BNBMG (big Chinese sawn wood importer) buys “sustainable timber” which is certified (FSC/PEFC).
But BNBMG do not buy from the LMR, because there is no certified timber
2021 Regional Dialogue
SilviCarbon (Swedish Lao plantation company) has 3000 ha of almost 100% certified FSC. But only 11% of their timber is sold as certified. The rest is sold without the logo, despite being certified.
SilviCarbon still continues to invest in FSC, but they notice that unless the government firmly sets the standards high, they are competing on an ‘unlevelled playing field’ because other companies are not being responsible
Case studies
Smallholder Association
Smallholder Plantation Company
The Status of LMR Regional Sourcing
2021 Regional Dialogue
According to BNBMG, sustainable timber is…
2021 Regional Dialogue
SilviCarbon’s timber is almost all certified. But only 11% of the timber they sell is purchased by a FSC certificate holder – the rest is sold as if it were not certified.
Market for natural tropical wood not included
2021 Regional Dialogue
The Playing Field For Sustainable Wood is Unlevelled.
Non-Certified Wood
Certified Wood
Wood Production Costs
SilviCarbon still continues to invest in FSC, but they notice that unless the government firmly sets the standards high, they are competing on an ‘unlevelled playing field’ because other companies are not being responsible.
2021 Regional Dialogue
Country Case Study: Smallholder Forest Owners in Vietnam
Common issues of forest management practices
In a cutting cycle
Scale
Plantation Forest Management
Income
2021 Regional Dialogue
Why Do Smallholders Want to Apply VFCS/PEFC FM Certification?
Receive Numerous Supports:
Public funding (Agricord, UNREDD)
Research institute, NGOs: training in best silvicultural practices, safety equipment, etc.)
Better Market Access & Conditions
(price premium, long-term buying contract, early damaged sourcing)
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2021 Regional Dialogue
Challenges That Smallholders Are Facing with Forest Certification
Complex requirements + lack of awareness & capacity
Farmer organizations lack of forest expertise
High implementation cost of forest certification
Buy-in of private sector is still limited
2021 Regional Dialogue
PEFC Controlled Sources: A Step-wise Approach to Full Certification – Ongoing Pilot Project
Timber from uncertified forest/plantation or non PEFC certified
PEFC Controlled Sources �(can be mixed with PEFC certified timber)
PEFC Due Diligence System
- a mechanism for the avoidance of material from controversial sources
Chip mills will:
Chinese buyer for woodchip- Textile 11 chip mills in Central Vietnam
Apply Due Diligence System for 15 000 ha
Nov 2021 to May 2023
Their sub-suppliers (smallholders) don’t need to be PEFC CoC certified
2021 Regional Dialogue
Overall advantages:
Delivery of sustainable and legal materials at lower cost & less resources
Can be done within a shorter timeframe
Move the burden of compliance to downstream actors (buyers)
Risks of controversial sources materials in the supply chain is eliminated/reduced.
Interim arrangement where SFM is not yet available
Smallholder’s Benefit:
What Smallholders �Need To Do?
PEFC Controlled Sources: Advantages & Implication For Smallholders
2021 Regional Dialogue
USTR-Vietnam Agreement
Signed October 2021 (1 year after investigation) Significantly beefs up VN-TLAS (consistent with FLEGT process)
Glasgow Declaration
China and Vietnam signed
Other countries: �Lao: ran out of time for signature - intentions to sign�Cambodia: ran out of time for signature – intentions to sign�Thailand: intentions to sign (following up)
US-China Declaration
Global Mechanism
Further Reading
Presentations and videos
https://drive.google.com/drive/folders/1fqhpsPR85NWLQJ3y5gppDN1kcrCcKRcb?usp=sharing
Project website
FREQUENTLY ASKED QUESTIONS: https://docs.google.com/document/d/16dy7iyrxXNUoeMjlmzGV8jo9NQWtZX-x/edit?usp=sharing&ouid=103637910083048676236&rtpof=true&sd=true
2021 Regional Dialogue
Videos, PPT, Agenda and Other Resources
https://drive.google.com/file/d/1dbHTgc36tOwVsuPo9e7hwqSbbi9fw0el/view?usp=sharing
https://drive.google.com/file/d/1RWMo1OTAWhuO8jLqzFFQMi2WTqixieM_/view?usp=sharing
https://drive.google.com/file/d/1uimaPYiqHgSewS8u8-qLS7wa4ipDS967/view?usp=sharing
2021 Regional Dialogue
Questions on Mural