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FOREST GOVERNANCE IN FEDERAL SYSTEMS: AN OVERVIEW OF EXPERIENCES AND IMPLICATIONSFOR DECENTRALIZATION

WORK IN PROGRESS

Hans Gregersen, Arnoldo Contreras-Hermosilla, Andy White and Lauren Phillips

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FOREST GOVERNANCE IN FEDERAL SYSTEMS:An Overview of Experiencesand Implications for DecentralizationBy Hans Gregersen, Arnoldo Contreras-Hermosilla, Andy White and Lauren Phillips

Forest TrendsMarch 12, 2004

ii FOREST GOVERNANCE IN FEDERAL SYSTEMS: An overview of experiences and implications for decentralization

© 2004 by CIFOR

All rights reserved. Published in 2004Printed by SMK Grafika Desa Putra, Indonesia

Cover photo by C. Cossalter

Published by Center for International Forestry Research Mailing address: P.O. Box 6596 JKPWB, Jakarta 10065, IndonesiaOffice address: Jl. CIFOR, Situ Gede, Sindang BarangBogor Barat 16680, IndonesiaTel: +62 (251) 622622Fax: +62 (251) 622100E-mail: [email protected] site: www.cifor.cgiar.org

iiiHans Gregersen, Arnoldo Contreras-Hermosilla, Andy White and Lauren Phillips

LIST OF AUTHORS vi

ABSTRACT vii

1. INTRODUCTION 1

2. DEFINITIONS: FEDERAL GOVERNMENTS AND DECENTRALIZATION 3

3. FOREST GOVERNANCE IN MAJOR FEDERAL SYSTEMS OF GOVERNMENT: AN OVERVIEW OF CURRENT PATTERNS 5

4. DECENTRALIZED FOREST GOVERNANCE IN FEDERAL AND NON-FEDERAL COUNTRIES: KEY FINDINGS FROM EXPERIENCE 74.1 Findings Regarding the Implementation of Political Decentralization 74.2 The Forest Sector within a Broader Context: The Importance

of Cross-Sectoral Roles and Linkages 94.3 Importance of Ensuring Adequate Capacity, Resources,

Incentives and Accountability 94.4 Findings Related to Participation of Civil Society and Private Sector 10

5. IMPLICATIONS FOR INITIATIVES TO DECENTRALIZE GOVERNANCE 125.1 A Framework for Decentralized Forest Governance 175.2 Key Considerations for Designing Decentralized Government Entities 17

6. CONCLUDING COMMENTS 19

REFERENCES 20

ANNEXES 281. AUSTRALIA 28

1.1 Background and Forest Ownership 281.2 Forest Governance 281.3 Concluding Comments 31

2. BRAZIL 312.1 Background and Forest ownership 312.2 Structure of Government 312.3 Forest Governance 322.4 Concluding Comments 34

TABLE OF CONTENTS

iv FOREST GOVERNANCE IN FEDERAL SYSTEMS: An overview of experiences and implications for decentralization

3. CANADA 353.1 Background and Forest Ownership 353.2 Role of the Federal Government 363.3 Role of the Provincial Government 373.4 Concluding Comments 37

4. THE UNITED STATES OF AMERICA 384.1 Background, and Forest Ownership 384.2 Federal Forest Service 394.3 Concluding comments 40

5. THE RUSSIAN FEDERATION 405.1 Background and Forest Ownership 405.2 Forest Governance 415.3 Concluding Comments 42

6. MALAYSIA 436.1 Background and Forest Ownership 436.2 Federal Forest Management Responsibilities 436.3 State Forest Management Responsibilities 446.4 Malaysia's Concession System 446.5 Concluding Comments 45

7. NIGERIA 457.1 Background and Forest Ownership 457.2 Role of Federal Government 457.3 Role of Sub-National Governments 467.4 Forest Revenue and Financing System 467.5 Forest Management 477.6 Concluding Comments 48

8. INDONESIA 498.1 Background and Forest Ownership 498.2 Role of the Central Government 498.3 Forest Governance 518.4 Concluding Comments 52

9. INDIA 539.1 Background and Forest Ownership 539.2 Structure of Government 549.3 Forest Governance 559.4 Concluding Comments 56

10. NEPAL 5710.1 Forests and Forest Production 5710.2 Forest Institutions 8910.3 Forest Legislation and Governance 5810.4 Biodiversity Protection: A main goal in Nepal 6010.5 Concluding Comments: Issues and Challenges 60

11. BOLIVIA 6211.1 Background and Forest Ownership 6211.2 Structure of Government 6211.3 Forest Governance 6311.4 Concluding Comments 64

ACKNOWLEDGEMENTS 66

LIST OF TABLES

TABLE 1 - Roles of Forest Agencies in Federal Systems: Overview of Current Practicein Eight Major Forest Countries 67

TABLE 2 - The Decentralization of Forest Institutions: Potential Advantages, Dangers andExamples of Policy Options 72

TABLE 3 - Policy Interventions Needed to Build Strong and Effective Linkages In ForestGovernance Systems 76

TABLE 4 - Meeting Requirements for Effective and Efficient Sustainable Forest Management 77

ENDNOTE 79

vHans Gregersen, Arnoldo Contreras-Hermosilla, Andy White and Lauren Phillips

vi FOREST GOVERNANCE IN FEDERAL SYSTEMS: An overview of experiences and implications for decentralization

Hans M. Gregersen, ChairStanding Panel on Impact AssessmentScience CouncilConsultative Group on International Agricultural Research (CGIAR)P.O.Box 498, Solvang, CA, 93464, USAEmail: [email protected]

Arnoldo Contreras-HermosillaForest Trends FellowVia Vittorio Emanuele 21Labro, Rieti 02010ItalyE-mail: [email protected]

Andy WhiteSenior Director, Policy and Market AnalysisForest Trends1050 Potomac Street NWWashington, D.C. 20007E-mail: [email protected]

Lauren PhillipsIntern, Forest Trends1050 Potomac Street NWWashington, D.C. 20007E-mail: [email protected]

AUTHORS

viiHans Gregersen, Arnoldo Contreras-Hermosilla, Andy White and Lauren Phillips

Internationally recognized problems such as illegal logging and uncontrolled deforestation, as wellas the broader political trends, are driving many countries to reconsider centralized systems ofdecision-making and direct government implementation of forest programs. The experience offederal systems of government in distributing authority and responsibility among different levels ofgovernment and to the private and civil sectors are particularly instructive in this context - bothbecause the majority of the world's forests are in countries with federal systems, and becausethese systems are decentralized by design. The paper assesses the experiences of eight countrieswith federal systems including Australia, Brazil, Canada, India, Malaysia, Nigeria, Russia, and theUnited States (U.S.). The paper also assesses the experiences of the non-federal countries ofBolivia, Indonesia, and Nepal, since each of them has recently undertaken initiatives todecentralize governance. Overall, the analysis finds that federal systems of government are notonly highly varied and complex, with authority and responsibility fragmented across many sectorsand levels of government, and that dynamic tension between levels of government is a permanentfeature of this type of political system, but that federal administrative systems are in a particularlysubstantive period of transition. The paper also finds that federal systems are indeedfundamentally different than non-federal governments and that to be effective decentralizationinitiatives should carefully reflect the existing distribution of knowledge, resources, capacity andincentives of each key government entity and stakeholder involved, and design accordingly. Thepaper presents key lessons from this diverse experience and concludes with a framework ofelements for policy makers to consider when engaging in new initiatives to decentralize forestgovernance.

ABSTRACT

1Hans Gregersen, Arnoldo Contreras-Hermosilla, Andy White and Lauren Phillips

The role of government has been the focus ofgreat debate in recent years. Much of thisdebate has focused on the reality of reducedgovernment, increased reliance on markets andon private initiative as well as on the importantcontributions of civil society and the privatesector in providing public services. At the sametime, there has been widespread and activedebate on the optimal roles of different levelsof government: that is, how governmentauthorities and responsibilities should bedistributed among different levels ofgovernment. A World Bank study in 1999 foundthat more than 80 percent of all developingcountries and countries with economies intransition are currently experimenting withsome form of decentralization (Manor 1999).

The forest sector has not escaped thesetrends. Internationally recognized problemssuch as illegal logging and uncontrolleddeforestation are increasingly identified as due,to a large degree, to weak governancestructures. These problems, as well as thebroader political trends, are driving manycountries to reconsider the role of governmentin administering their forest resources and manyothers to actively move away from centralizedsystems of decision-making and directgovernment implementation of forest programs.

Unfortunately, the flurry of debate andpolitical activity has often not benefited fromthe careful analysis of broader experience.While there is tremendous experience andinnovation across the globe there have beenrelatively few attempts to understand howdifferent levels of government interact andbalance authority and responsibilities in theforest sector, and how local governments andthe private sector as well as the civil society arebrought into the picture and influence theprogress towards improved management offorest resources.

In this context the experience of federalsystems of government in administering forestresources is particularly valuable. Federalsystems of government are composed ofmember states (or provinces) and thus have, bydefinition, decentralized systems ofgovernance. Responsibilities and authorities arevested with the central, federal governmentand some with meso level (state, provincial,etc.) levels of government. In federal systems,in contrast to centralized systems, meso andlocal-level governments are often wellestablished, with long-standing politicalconstituencies and various accountabilitymechanisms that enhance the performance ofthese levels of government. Most importantly,the meso levels of government (states,provinces, etc.) not only have responsibilities,but also real authority and legal rights becausethey are part of a federal system defined by aconstitution.

Our purpose in this paper is to review theexperiences of selected major forest countrieswith federal systems of government and derivelessons for policy actors considering futuredecentralization initiatives, whether through afederal system or some other system ofgovernment. The study focuses on the federalgovernments of Australia, Canada, Brazil, India,Malaysia, Russia, Nigeria, and the U.S. Bolivia,Indonesia, and Nepal have undertaken majordecentralization programs and are thus alsoincluded, even though they do not have federalsystems of government. These eleven countriescontain over 60 percent of the world's forests.

The political history of each of thesecountries is unique. They adopted decentralizedforest governance systems at different points inhistory. Their combined experience presentsboth common threads and dramatic differences.Those countries that adopted federal systems ofgovernment early on have largely adjusted to

1. INTRODUCTION

the administrative demands of harmonizing theoperation of central and sub-national levels ofgovernment, while others are still strugglingwith the complexities of the process ofdecentralized management. Some have beenmore successful in securing benefits ofdecentralized systems of governance whileminimizing the associated dangers and costs.Given limitations of time and space, weunfortunately can only scratch the surface ofthe intricacies and nuances that go to make upthe evolution of each country's forestgovernance and management systems.

The paper is organized as follows: In section2 we provide background information anddefinitions of federal systems anddecentralization. This information is aimed atassisting readers understand the particular caseof federal systems and the particular definitions

that we have adopted for this text. Section 3focuses on the federal countries and describesthe current distribution of authority andresponsibility among the different levels ofgovernment-and identify patterns across thecase studies. This section, as well as thosefollowing, is based on the case studiespresented in Annex 1-11). These annexesprovide an overview of the main elements offorest governance in the countries and theirexperiences as their systems of governancehave evolved. Section 4 presents the keyfindings and lessons of all 11 countryexperiences with decentralized forestmanagement. In section 5 we build on thefindings and lessons from both federal and non-federal governments to derive implications forpolicy actors interested in pursuingdecentralized forest administration systems.

2 FOREST GOVERNANCE IN FEDERAL SYSTEMS: An overview of experiences and implications for decentralization


The last section of the paper provides finalthoughts for policymakers.

Countries with federal systems ofgovernment share responsibilities and authority,generally through the provisions of aconstitution, between national level centralgovernment and meso, state, provincial orregional and local levels of government. Powersbetween these levels are divided andcoordinated in such a way that each level enjoysa substantial amount of independence fromeach other. This implies the existence of aconstitution describing clearly the division ofpowers and a means for resolving disputes. Mostimportantly, in contrast to simple devolution ofspecific powers and responsibilities from centralto lower levels of government, federations usethe principle of constitutional non-centralization rather than decentralization(Olowu 2001).

In other words, as we will see in the variouscases, when a group of independent states orprovinces decide to create a federation and afederal system of government, they confer,generally through a constitution, certainspecific responsibilities and authorities to thefederal government in the interest of all states.All other powers, responsibilities, rights, etc.,remain with the states. In contrast, unitarygovernments may have sub-national levels ofgovernments, but these are not constitutionallyempowered to make decisions on keygovernment services and functions; rather, theyare subordinate units of the unitarygovernment. Indeed, for these reasons, use ofthe term 'decentralized' is somewhat awkwardin the case of federal governments. In most ofthe federal governments reviewed, includingAustralia, Canada, Malaysia, and the U.S.,authority for forest administration was never"centralized" at the federal level. Because ofthis confusion, we use the term '"decentralized"

to refer to the non-centralized distribution ofauthorities and responsibilities. Other federalgovernments, notably India and Russia began ascentralized governments, later adopted federalconstitutions, and have been, or are, in theprocess of 'decentralizing' authorities andresponsibilities.

In a federal system, central government(most often called the federal government)usually has responsibilities for those resources,activities and events that affect more than onestate and that are involved in the production ofnational public goods, and in some casesproduction of international or global publicgoods associated with the environmentalservices derived from forests. The memberstates generally have responsibility for andoversight of those resources, activities andevents that affect mainly the state in question,the regulation of private forest practice andenterprises, and for those functions that dependheavily on local participation and involvement.Often, the federal government influences orcontrols state activity through federal laws,incentives and checks and balances related touses of resources. Member states, in turn,generally regulate and guide the actions oflower levels of government-municipalities,districts, etc.-local community entities, privateindividual landowners and private companiesoperating within the states.

Variations between federal systems ofgovernment are considerable, however. Thereare differences in the relationship between"responsibility" and "authority" at differentlevels of government within federations; thereare differences in terms of distribution of fiscalresponsibilities; and there are many otherdifferences that distinguish various federalforms of government in the countries reviewedand in those not formally reviewed in this paper.Federal systems of government can be

2. DEFINITIONS: FEDERAL GOVERNMENTS AND DECENTRALIZATION

simultaneously decentralized in some respectsand centralized in others, and indeed there isconstant tension between different levels ofgovernment over the distribution ofresponsibilities and authorities.

The term "decentralization" also meritsadditional clarification. Definitions of thedifferent types of decentralization vary and thesame terms are sometimes used in inconsistentways in the literature on the subject. In thispaper we adopt the definitions in Box 1.


BOX 1: Different Types of DecentralizationPolitical decentralization: Groups at different levels of government-central, meso and local-are empowered to make decisions related to what affects them.

Administrative decentralization: Different levels of government administer resources andmatters that have been delegated to them, generally through a constitution. In terms ofdecentralization as a process of change, and according to the level of transfer ofresponsibilities, it is useful to distinguish between (i) deconcentration, which redistributesdecision-making authority and financial and management responsibility among levels of thecentral government; there is no real transfer of authority between levels of government. Itmay involve only a shift of responsibilities from federal forest service officials of the capitalcity to those stationed in provinces, districts, etc (ii) delegation transfers responsibilities andauthority to semi-autonomous entities that respond to the central government but are nottotally controlled by it. Public forestry corporations and in some cases implementation unitsof some forestry projects-often donor supported--are examples of this form ofdecentralization; (iii) devolution transfers specific decision-making powers from one level ofgovernment to another (which could be from lower level to higher level of government, in thecase of federations, or government transfers decision-making powers to entities of the civilsociety. Regional or provincial governments, for example, become semi autonomous andadminister forest resources according to their own priorities and within clear geographicalboundaries under their control. Most political decentralization is associated with devolution.

Fiscal decentralization. In this case, previously concentrated powers to tax and generaterevenues are dispersed to other levels of government, e.g., local governments are given thepower to raise and retain financial resources to fulfill their responsibilities.

Market decentralization: Government privatizes or deregulates private functions, such asoccurred in the case of New Zealand forest sector.

Source: Based on World Bank 2000. Administrative decentralization. www.worldbank.org/publicsector/decentralization/admindecen.htm


This section briefly describes the currentstructure of forest administration in the eightmajor forested countries with federal systemsof government and identifies particular patternsin the distribution of government authority.Table 1 provides a simplified overview of themain roles and responsibilities of the differentlevels of government in the eight countries withfederal governments.

Perhaps one of the most important findingsof our analysis is that most, if not all, of thecountries are undergoing important transitionsin their forest administration-and the roles,functions and orientations of forest agenciesand forest management are in substantial flux.We arrived at this conclusion after discoveringthat there was often disagreement or generallack of knowledge as to the actual distributionof authority and responsibilities in manycountries, as well as from learning that therewas often a wide discrepancy between the"official" and the "real" distribution of power.This flux and these discrepancies made the taskof identifying the current status ofadministration a challenge. For these reasonsthe information presented in Table 1 and thegeneral patterns described below should betreated with some caution. These findingsrepresent our understanding at the moment-butwe recognize that the actual status is very fluidin many of the countries studied.

Points below highlight key patterns of forestadministration across the eight federalcountries.

1. Federal structures of forest governance tendto be complex, multifaceted and to havestrong cross-sectoral linkages, e.g., withagriculture, water, transportation, etc.,sectors (cf. Schmithüsen 2003; Broadhead2003). In all cases the federal forest agencyis only one of a number of federal agenciesadministering public forest lands. Strong

roles of other agencies and linkages to othersectors appear to help create the "checksand balances" that enable a measure ofaccountability to broader society and ensurethat the forest sector reflects the concernsof the stakeholders-particularly beyondthose directly involved in the forestry sector.In some countries, the number of othersectors involved can run into the hundreds.In the United States, for example, there aresome 31 other federal entities that interactdirectly with the U.S. Forest Service inplanning and managing federal forest lands,and many others that have a more indirectlinkage (Ellefson and Moulton 2000).

2. With the exception of the United States, inall federal countries examined in this reviewgovernments own a majority of all forestlands. Interestingly, of these seven countrieswhere public forest predominates, majorityownership rests with the federalgovernments in three of the countries(Brazil, India, Russia). In contrast, anotherfour countries, Australia, Canada, Malaysia,and Nigeria, it is the state or provincial levelthat owns the majority of all forest lands.Federal ownership is substantial even in theUnited States where the federal governmentowns about 35 percent of all forests, thestates own about 5 percent and the privatesector owns the majority-about 60 percent isprivate property.

3. Policies and government structures to dealwith the private sector and the civil societyvary widely from country to country. Insome, such as the United States, the size ofthe private sector is considerable and,accordingly, federal as well as stategovernments have established regulationsand programs to encourage and regulateprivate enterprises. India, in contrast,

3. FOREST GOVERNANCE IN MAJORFEDERAL SYSTEMS OF GOVERNMENT:AN OVERVIEW OF CURRENTPATTERNS

denies private corporation access to publicforests and induces corporations to establishpartnerships with small "non-forest" owners.In some countries, the access of non-governmental institutions to the governmentdecision-making process is encouraged,while in others such linkage is not promotedactively.

4. In many countries, federal and/or stategovernments do not officially recognizetraditional land ownership rights. Thus, theydeal in different ways with the interactionsbetween local populations and localgovernments with profound implications forthe sector's governance.

5. The degree of responsibility and authorityfor the forest sector vested in the federalgovernment and other tiers of governmentvaries widely. In some federal countries theadministration of the forest sector isrelatively centralized, while in others mainresponsibilities and authority reside either inthe second or even third tiers of Governmentwith the Federal Government having a muchless potent role. In Brazil, for example, untilrecently, most key decisions andimplementation of programs were under theaegis of the Federal Environment Institute,while in contrast, in Malaysia, states enjoy ahigh degree of autonomy to design and putin operation their own programs.

6. In countries such as Australia, Canada, India,Malaysia, and the U.S., comparatively strongmeso-level government forestry agenciesdominate the picture, to some extentbecause there is little federal forest landand the functions given to the federalagencies are less. At the same time, federalentities hold key responsibilities in suchareas a trade, research, internationalrelations in forestry, and establishment ofenvironmental standards. In Brazil, the U.S.and several other cases, there is morefederal forest land ownership and thus moremanagement responsibility for public landresides within the federal agencies.

7. Federal forest agencies tend to beresponsible for managing federal forestlands and providing overall leadership onforestry matters, but often have limitedjurisdiction over the regulation of forestpractice on private lands-responsibility heldin most cases by member states orprovinces.

8. Countries where a majority of the forestland is "owned" by the central/federalgovernment and managed by the centralforest agency (e.g. Nigeria, Russia) tend tobe the countries where central agencies areweak and control of public forest lands veryweak. Countries where a majority of forestlands are publicly owned, but "owned" bystate, or provincial level governments (e.g.Canada, India) tend to have a better recordof effectively controlling the public forestestate. Thus, decentralized ownership ofpublic lands appears an effective strategy atleast in some cases.

9. However, in most cases, the power of theforest administration agencies, both at thefederal and state/provincial level, vis-à-visother agencies of government is relativelyminor. Forest public administrations atfederal and state levels are often subsidiarybodies of Ministries of Environment orAgriculture or relatively less powerfulMinistries of Forestry or similar bodies. Insome cases the jurisdiction of forestagencies is shared with other powerfulagencies, such as in the case of Brazil andthe United States. A proper management ofinter-sectoral and interagency linkages isdifficult and not often achievedsatisfactorily in most federal countries.Australia is an exception, where thegovernment spends considerable effort andresources in securing public forestadministration based on a broad process ofconsultation and decision making, involvingvarious agencies and actors of the privatesector.



The 11 countries studied present a rich array ofhistory and experience in forest governance andoffer some general findings and lessons forthose policy actors considering initiating orfurthering the decentralization of theirgovernance structure. These findings andlessons are organized below in four categoriesrelated to: (1) the implementation ofdecentralization; (2) the role of forestry withinthe broader political context and theimportance of cross-sectoral linkages; (3) theimportance of ensuring adequate capacity,incentives and accountability; and (4) theimportance of ensuring adequate participationby civil society and the private sector.

4.1 Findings Regarding theImplementation of PoliticalDecentralization

1. In most federal countries, decentralizationprocesses involved sovereign states assigningauthority and responsibilities to a centralgovernment formed through a constitutionalprocess. Exceptions include the Bolivia,India and the Russian Federation, wheredecentralization efforts involved devolutionfrom central to meso and local levelgovernments.

2. Even in countries where the centralgovernment owns most forest lands(Indonesia, Nepal, Nigeria and Russia), therelative power of the federal forest publicadministration is low and forest agencieswere generally incapable of influencing themain course of events. The forest sector wastherefore a follower more that a leader inthe decentralization process. This featureseems to have been more pronounced in

those cases where the central governmentowns a minority share of the forest land,which is the more common occurrence(Canada, India, and Malaysia).

3. In all countries, the process of debating andadjusting the distribution of authorities andresponsibilities between federal, meso andlocal levels of government is dynamic, i.e.,it is an open-ended process. There areongoing tensions between different levels ofgovernment, political forces advocating forgreater or lesser degrees of authority orresponsibility. Often, these tensions havecontributed to a better definition andunderstanding of governance responsibilitiesand authority at different levels,consequently reinforcing administrativecheck and balances. Thus, decentralizationprocesses can be seen as evolutionary, thebalance of powers undergoing constantpressure and revision. In some cases, it is amuch more revolutionary process (e.g.Bolivia, Indonesia and the former SovietUnion).

4. In all cases, what now appear as effectiveand efficient decentralized systems tookmany years to achieve, with a number ofadjustments to the many unforeseen eventsfaced along the way. The present is a periodof transition in countries such as Bolivia,Indonesia, Nigeria, and Russia, withproblems that are more than just "growingpains."

5. In all countries examined, the evolution ofthe distribution of forest administrationauthorities and responsibilities betweencentral, meso and local levels of governmenthas been a small part of a much broadernational processes of balancing authorities

4. DECENTRALIZED FORESTGOVERNANCE IN FEDERAL AND NON-FEDERAL COUNTRIES: KEY FINDINGS FROM EXPERIENCE


and powers in the countries in response toshifting goals, needs, resources and politicalprocesses.

6. Decentralization of responsibilities andauthority to the third level is generallydifficult for a number of reasons. First,because these levels of government haverarely been vested with adequate authority,revenues and accountability mechanisms-and thus they lack the capacity and politicalconstituencies necessary to handle newresponsibilities. Second, decentralizationinitiatives frequently assign responsibilitieswithout the complementary rights orresources to motivate adequateperformance. And third, because second-level (meso) governments are sometimesinadequately prepared, or involved inmediating between the central and localgovernments. In some cases, such as Indiaand Nigeria, local, third-tier governmentshave been given additional responsibilities,but not necessarily adequate authorities andcontrol over revenue to perform adequately.In other cases, such as Indonesia,empowering third-tier level of governmenthas resulted in a loss of national policycoherence and intense tensions as differentlevels of government struggle for control. Inthis case, local governments had largelyoperated as extensions of the centralgovernment-and they had no capacity toeffectively manage their newresponsibilities. The decentralizationinitiative skipped right over the provinciallevel, devolving power to local governments.Nepal and Bolivia are more positiveexamples, where decentralization to localuser groups/communities (Nepal) and tomunicipalities (Bolivia) has had promisingresults-largely because, in addition to newresponsibilities, these local entities weregiven clear rights to benefit from forests andmanage revenues.

7. Decentralization initiatives in federalcountries appear easier to conduct, and aremore effective in the short-run than in non-federal countries. This is because local andmeso-level governments in federalcountries, except in the new federalcountries of Nigeria and Russia, havetraditions and developed local capacity formanaging government responsibilities.Decentralization initiatives in non-federalcountries are much more challenging,because they necessarily entail developinglocal government capacity, and setting newprecedents for the management of revenuesand enforcing accountability. More

successful decentralization initiatives, suchas that in Bolivia, anticipate the need forbuilding capacity and incentive structuresfor performance, while those that are lesssuccessful, such as the case of Indonesia payinadequate attention to this issue. Thisexperience suggests that policy makers needto be careful in drawing lessons fromdecentralized governance in federalgovernments for application to non-federalgovernments.

8. In most of the countries, there was areasonably good understanding of theobjectives pursued during thedecentralization process, but less clearideas of the operational mechanisms neededto ensure a smooth transition. In mostcountries, satisfactory operation ofdecentralized systems of forest governancedepends much on identifying and puttinginto place the right mechanisms for carryingout the decentralization process to ensure areasonably smooth, harmonious operation ofthe various government structures.

9. When administrative and technical humanresources are scarce, urban issues withgreater political visibility, such as health,education and transportation infrastructure,tended to receive greater attention than themanagement of forests, particularly whentheir governance spills over administrativeboundaries. Among non-urban issues,agricultural themes received greaterattention. Some of these activities, such asthose that provide incentives for theexpansion of agriculture in Brazil, in factincreased the pressure on forests.

10.Decentralization processes were oftenparalleled by deconcentration of centralgovernment forest related functions. Forexample, in the United States, devolution offorest administration authorities to thenewly incorporated western states (and tothe private sector through land grants) wasparalleled by deconcentration of the U.S.Forest Service's functions and some of itscentral decision making to regional offices.

11. Ironically, while there is a trend towarddecentralization of forest governance withinmany countries, there also are developingclear arguments for mechanisms, central oreven international (e.g. through globalconventions), to ensure that activities andevents that affect more than one state andthat are involved in the production ofnational or global public goods associatedwith the environmental services derived

from forests are being adequatelyconsidered by those with the mandate tomanage them.

4.2 The Forest Sector within aBroader Context: The Importanceof Cross-Sectoral Roles andLinkages

1. In most of the countries studied, a greatmany different government agencies inaddition to the forestry agencies areinvolved in decisions related to theprotection, management and utilization offorest resources. An extreme example is theU.S., where many hundreds of differententities are involved at the state level. Atthe federal level, the U.S. Department ofAgriculture-Forest Service's strategic planfor 2000 involved coordination with 31 otherfederal entities.

2. In most countries, cross-sectoral linkagesand impacts are important in shapingapproaches to forest governance. Sectorssuch as judiciary, agriculture, energy,transportation, environment, help shapeeach country's approach to forestadministration, management and utilization.The complexities mount when one combinesthe numerous cross-sectoral linkages thatexist with the different responsibilities ofdifferent levels of government and agenciesat a given level. Australia has relativelysuccessfully coordinated and consolidatedfunctions where possible. The importance ofcross-sectoral linkages and opportunitieshave become quite evident recently in thecase of Nepal.

3. Because of the numerous inter-sectorallinkages and the relatively low level ofpower and authority of public forestadministrations, effective decentralizationin the forest sector could only take place inany significant degree when functions ofgovernment in other sectors and dimensionsof governance, such as taxation policy, lawenforcement and political participation alsowere subject to decentralization. Problemsarise if this is not achieved, as shown incountries such as Brazil, India, Indonesia,and Nigeria.

4. However, all cases show that simultaneousand balanced fiscal, administrative andpolitical decentralization involving not onlythe forest administration but also relatedsectors and functions is extremely difficult

to achieve in practice. Problems arise ifthere is not a balance achieved, as shownagain in such countries as Brazil, India,Indonesia, Nigeria, and Russia.

5. The degree and extent of decentralizationvaried during different periods in givencountries, e.g., in Brazil, India and theUnited States. This illustrates the conceptmentioned above that the process is a verydynamic one and depends on politicalphilosophies and government-wideadjustments to the public administration ingeneral, not only in the forest sector andforest-related agencies.

6. National forest congresses or fora with broadpolitical support (e.g., Canada or theMalaysian National Forestry Council) canhelp bring different stakeholders together toshape a strong national vision for forests anda strategy that can be adopted and adaptedby the sub-national levels of government,civil society, the private sector and theinternational community. Similar fora havebeen used in Australia, Nigeria, and the U.S.

4.3 Importance of EnsuringAdequate Capacity, Resources,Incentives and Accountability

1. Effective and efficient forest governanceappears to depend more on the capacitiesand capabilities of the individual managingentities than it does on any particular formor degree of decentralization orcentralization of management functions.More specifically, such capabilities arerequired in both central and meso or lowerlevels of government for a decentralizedforest governance system to functioneffectively and efficiently in a federalsystem of government.

2. Weak administrative and technical capacityat the local government level, e.g., in thecases of Bolivia, Brazil, India, Indonesia, andNigeria, often prevented effective functiondelivery-such as monitoring and control ofactivities in forest reserves-which in turnresulted in opportunities for local elite orprivate sector domination of decisionsinvolving forest resources. Thus, legalreforms are not enough. Institution buildingis also needed.

3. Countries such as Nigeria illustrate the factthat decentralization of administrativeresponsibilities without the provision ofcommensurate financial resources creates


incentives to manage resourcesunsustainably for immediate revenuegeneration to finance local governmentoperations. Furthermore, even if centralgovernment financial resources flow tosecond or third tiers of government(Indonesia), local government incentives torapidly deplete forest resources may beintense if there is a high level of uncertaintyover forest resources control and authority.

4. In some countries, decentralizing financialresources without a proper mechanism toensure responsible fiscal management led tolocal government unaccountability,excessive indebtedness, and lack of localgovernment interest in administering forestresources and to a lack of fiscal resourcesthat were needed at the central level tomeet national forest management priorities(Brazil). This void also facilitated the localcapture of decisions on these resources bypowerful economic and political interestsfor rent-seeking purposes.

5. In Nigeria, state governments have receivedonly limited authority with most of theresponsibilities and power going to sub-statelocal governments instead, even though suchlower levels of government have littlecapacity to manage forest resources. Theresult often is turmoil and lack of anyprogress in forest management.

6. Decentralization in the forest sector of mostof the countries was generally characterizedby initial scarcity of managerial andtechnical resources at the state and locallevels of government (Bolivia, Brazil, India,and Indonesia). In these circumstances somesub-national governments have eitherignored forests or used them inunsustainable manner rather than providingleadership and initiative in improving themanagement of forest resources in theirjurisdictions. This has led, in some cases toincreased federal regulation of states orprovinces, particularly related to suchthemes as environmental protection.

4.4 Findings Related toParticipation of Civil Society andPrivate Sector

1. All cases indicate that the private sector andcivil society play a crucial role indetermining the success of governance offorest resources. The cases of Bolivia, Nepal,and the U.S. illustrate the importantcontributions that local civil society

organizations can play, not only inadministering forest resources, but also inactively ensuring government accountabilityto civil and private sector concerns.

2. In some cases (Brazil and Malaysia), state-level public administrations have beenstrengthened but little power and authorityhave percolated to local governments and topotential partners in the civil society andthe private sector.

3. In some situations, national andinternational NGOs have entered intoproductive partnership with local entities tosupport measures to improve localgovernance and protection of forests(Bolivia, Brazil, Indonesia, Malaysia, Nepal,and U.S.). These partnerships appear tohave worked better in cases where therewere mechanisms and channels for effectivecommunication not only between levels ofgovernment but also between them andother stakeholders as well.

4. Where the private sector owns the majorityof the forest land (e.g., U.S.), the states'forest agencies and associated governmententities are often responsible for regulatingthe private sector, with a main focus onenvironmental impacts of commercial forestactivities and fair business practices in thecase of industry. The federal governmentalso gets involved with the private sectorthrough various incentive and fiscalprograms. In other cases (Australia, Bolivia,Canada, Indonesia, and Nepal), there also isactive involvement with the private sector,but more through the granting andregulation of long term concessionagreements and other forms of contracts forprivate use and management of public lands.

5. In nearly all countries, the governments atlocal, meso and federal levels haveconsiderable interaction with IndigenousPeoples, tribal groups, etc., who have claimson land and forest resources and form partof the overall forest governance picture.Such interactions at times turn contentious,such as in Indonesia, where the governmenthas not adequately responded to theirconcerns, and since governments often arereluctant to recognize traditional rights(even in cases when these rights areestablished in the constitution and/orrelated legislation). Bolivia and Nepalprovide positive examples, wheregovernments have recognized communityforest rights, vesting these stakeholderswith strong incentives to protect andimprove their forest resources.



6. Experiences in countries such as Australia,Bolivia, Canada, India, Nepal, and the U.S.suggest that local citizen group participationis needed to avoid higher level governmentsimposing measures that may clash with localconditions and traditions (such as imposingstrict conservation measures in areastraditionally used by local communities).This is particularly important in the non-federal countries reviewed. Politicalincentives to include greater participation indecision making may increase if advocacygroups can help to organize disadvantagedgroups, increase public awareness of thecosts of maintaining the status quo, andprovide some of the technical services (suchas monitoring and dissemination ofinformation) that local governments may beill prepared to provide.

7. Often the drive towards more decentralizedforest governance was followed by shifts inthe public-private balance, both in terms ofmanagement and in terms of forest

ownership, e.g., in the cases of Australiaand the U.S., and in Canada in terms of long-term contracts with the private sector.

These are general findings, ones that we foundto hold in more than one of the case studycountries. There are many other findings uniqueto each country that are mentioned in the casesthemselves. Many of the findings apply acrossthe board in countries that have decentralizedsystems of government or are moving towardsthem. They illustrate the fact that building asuccessful forest governance system requiresthe input and consideration of agencies, civilsociety groups and other entities far beyond thenarrow confines of federal, meso and local levelforest agencies. One also can draw generallessons from the cases; and in the next chapterwe look at what we think are some of the keylessons within the context of a generalframework of the key considerations in asuccessful decentralized forest governancesystem.


5.1 A Framework forDecentralized Forest Governance

Based on our interpretation of the experiencesof the 11 countries studied, we suggest that thebasic framework for successful decentralizedforest governance entails: (1) appropriate andeffective sharing of authority to make decisionsand raise revenues and sharing ofresponsibilities for forest related activitiesamong levels of government according to theirindividual abilities and needs; (2) effectiveenforcement of accountability at all levels ofgovernment to ensure the citizens and civilsociety groups that government agencies areacting fairly, efficiently and effectively in termsof carrying out their various mandates; and (3)effective linkages with the other sectors thataffect or are affected by what happens in theforestry sector, such as finance, the judiciary,agriculture, energy, transportation, etc.

In more detail, the possibilities of successare conditioned by:

1. Appropriate sharing of decision-makingauthority and responsibilities for forestmanagement between different levels ofgovernment. This includes effectivefinancing arrangements and revenuesharing mechanisms for different levels.Questions of particular concern that need tobe considered in each country include: • Is there adequate technical and political

capacity to govern and make publicinterest decisions at each level accordingto its assigned responsibilities?

• Do the existing laws clearly harmonizedifferent national, regional and localobjectives and functions?

• Are there effective two waycommunication and support functions thatlink states and lower levels of government?

• Have tenure issues been sorted out, notonly ones related to the private sectorand indigenous groups, but also betweenland controlled by different levels ofgovernment and different agencies?

• What responsibilities are best carried outcentrally, at state level and at local levels?

• Which responsibilities are best given toor shared with the private sector orcommunity civil society groups?

• Are fiscal responsibilities coexisting withmanagement responsibilities to makesure that responsibilities can beadequately discharged?

• Is there adequate and clear ability to taxand charge at local levels without doubletaxation?

• Are there clear mechanisms in place tolink forest revenues to budgets andexpenditures at the different levels ofgovernment?

• Are there incentives to tax and charge atlocal levels (often missing due to localpressures on government)?

• Are there transfers from centralgovernment (in lieu payments, transfersin kind, etc.)?

2. Effective enforcement of accountability atall levels of government. The main issuesrelate to:• Is local political competition allowed and

encouraged by higher levels?• Is there transparency in government

decisions and actions at all levels?• Is there adequate public participation in

decision-making?• Are there good accountability links

between different levels of governmentand do different levels of governmentsupport accountability needs of otherlevels?

5. IMPLICATIONS FOR INITIATIVES TO DECENTRALIZE GOVERNANCE


• Are there effective public checks andbalances on power use and misuse, e.g.,through courts?

• Is there adequate public information toensure clear "rules of the game," andtransparency for all stakeholders?

3. Appropriate and effective linkages withother sectors and non forestry agencies(including public-private sector links). Thekey questions to be addressed relate to:• Are power sharing among sectors and

conflict resolution options effective atall levels of government?

• Are there effective relationships with theprivate sector and regulation of privateactivity?

• Are there effective mechanisms togovern and support intra governmentallinkages and authority sharing?

A point to stress here is that it is therelationships or balances that are createdbetween authority, accountability mechanisms,responsibilities, and revenue sharing atdifferent levels of government that determinethe effectiveness and efficiency ofdecentralized systems of forest governance.Thus, for example, power withoutaccountability can lead to arrogance, blatantfavoritism and corruption. Decentralized powerwithout accountability can be worse thancentralized authority with accountability, if itleads to exclusion of certain stakeholders and tolocal corruption and waste. Therefore, while itis essential that decision-making authority bevested along with responsibilities in localgovernments, it is equally important that themechanisms for accountability be in place.

Similarly, responsibility without authorityleads to ineffectiveness. The same is true ofresponsibility without resources to meet it. If alocal government entity is given responsibilityfor general forest management, then it alsomust have authority and the secure and stableresources to carry out those responsibilities. Aswill become evident in the discussion, adequateresources in some countries have notaccompanied added responsibility; and theresult has been ineffectiveness at best andfailure over time to meet the responsibilities. Inother cases, responsibilities have been split,leading, for example, to fiscal volatility; or theyhave been unclear, leading to duplication ofefforts or not effort at all.

A variation on this theme is that in somecases intermediate levels of government (oreven the central government) retain control offinancial resources. Since the possibility ofdischarging responsibilities and exert authorityis tied to the availability of financial resources,this in fact means that the government entity

that controls finances also, de facto, controlsthe activities that depend on those resourcesfor implementation, even though in law and onpaper, the activities are the responsibility of adifferent level of government.

The third element in the list-cross-sectorallinkages-relates to the complexity of forestgovernance in most democratic systems, wherethere are many different actors andstakeholders with different interests, differenttime lines and different perspectives on whatthe nation's forests are supposed to contributeto the nation. The cases illustrate thesecomplexities, both the benefits when they areadequately understood and considered and theproblems that can arise when they are ignoredand an imbalance in power results. It isimportant that all stakeholders have a forumand mechanism for making their interestsknown and considered in planning and decision-making. And it is important that there are clear"rules of the game" (allocation of ownership,responsibilities, resources, and authority) andmechanisms to avoid overlaps, conflicts, andlack of needed action created by confusion.Decisions regarding forests often are some ofthe most complex and contentious that a nationand its states face. In a decentralized system, itis not just different levels of public forestadministration that matter, but a whole host ofother formal and informal entities, as will bediscussed below.

In what follows, we use our framework andthe empirical evidence from the cases toprovide general insights or lessons for thoseinvolved in the development andimplementation of decentralized forestgovernance structures.

5.1.1 Sharing Authority, Responsibilitiesand RevenueThere are numerous policy options available tohelp ensure that the potential advantages ofdecentralization are realized and that thepotential disadvantages are avoided orminimized. Most of these have been used in onesituation or another in the countries reviewed.Some of the main policy interventions that canbe used to avoid the potential dangers and takeadvantage of the opportunities for potentialgain are described in Table 2. Key insights aredetailed below and organized in threecategories: sharing authority, sharingresponsibilities, and sharing revenue.

Sharing Authority• Parallel decentralization. Political, fiscal

and administrative decentralization shouldmove in harmony. Several of the cases(Brazil, India, Indonesia, and Nigeria) showthat without devolution of authority andfiscal responsibility along with management

responsibilities, local level governancebecomes ineffective and can cause failuresin the system. Effective decentralizedmanagement generally involves devolutionof not only management functions, but alsosome authority or rights, including theauthority to raise revenue dedicated toforest management and conservationfunctions.

• Strong central government guidance andoverall authority. Decentralized managementdoes not necessarily mean less need for astrong central government. For functions thatremain with the central government, theremust be a commensurate power to enforcethem. The central government must have theinstitutional authority to enforce the rule oflaw on those levels of government and actorsthat refuse to accept it. If this capacity is notin place, decentralization is likely to take offin an informal manner with decisions by localgovernments rapidly taking over the vacuumleft over by the formal process of the centralgovernment. This is, so far, the experience of Indonesia,where the precipitous decentralizationprocess has created uncertainties aboutauthority and responsibility and steriletensions between the previously powerfulcentral Ministry of Forests and the third tierdistrict governments that now concentratemost of the de facto power. The lack of astrong central government is certain toproduce frictions between levels ofgovernment and lead to administrativedisorder leading to further loss of nationalpolicy coherence. In some countries, thelack of clear rules of the game and therelative weakness of the central ministry toenforce the law result in state and localgovernment forest resource-relatedinitiatives that, while giving importance tolocal priorities, nevertheless disregardnational objectives and forest policycoherence and often favor local elites.

• It is not merely a matter of devolution ofauthority and rights from central to lowerlevels of government. Even within state andlocal levels of government themselves,decentralization is likely to be more difficultwhen existing powers (often local elites)need to relinquish control of valuableresources or will in some other way bedisadvantaged by the shift in authority. Thepressures on local government officials fromsuch entities can lead to a situation wherethe local elites effectively are making thedecisions to their advantage. There is thedanger, such as in some local governments inIndia and Indonesia, that decentralizationmay perpetuate or even reinforce the powerof local elites, who are better positioned to

adapt and gain from a rapidly changinginstitutional environment, leaving thedisadvantaged, the illiterate, women andpoor behind. Decentralization is likely towork when there is a political will and socialcontext that is coupled with adequateresource endowments and a substantialshare of the benefits going to thesedisadvantaged groups. Shifts in authority orpower are easier when there is little to loseor when they merely formalize rights alreadyeffectively held by local government orcommunities.

Sharing Responsibilities• Clear rules of the game. Ambiguous

allocation of responsibilities and authoritywill result in greater opportunities forcorruption in the administration of thenation's forest resources as the room fordiscretionary management decisionsincreases. Different groups have greatincentives to rush to establish claims,legitimate or not, over the most valuableforest resource and to exploit them as fastas possible, before these claims arechallenged. This is the situation in Indonesiaand Russia, where the imperfect legalframeworks have created challenges toauthority, frictions between levels ofgovernment and, in some cases, capture offorest resources by companies andcommunities acting in concert with localofficials. If responsibilities are not clearlyestablished, understood by all, and enforcedby government agencies with unchallengedauthority to do so, then local elites candominate the decentralization process tothe point that they can effectivelyundermine its expected benefits.

• Appropriate responsibilities for each levelof government. Each level of governmenthas a role to play in the governance of anation's forests. For example, someresponsibilities are better suited to thefederal government and different agencieswithin it, such as the maintenance of thosenational public goods that can benefit all ormost states and local jurisdictions (throughresearch, controls on international andinterstate trade); and some things are betterdone by the states, such as hands-onmanagement of forests where the localinterests should predominate and regulationof private activity. Still other aspects aremore effectively and efficiently taken careof by the private sector, regardless ofwhether the forest land is privately owned ornot or by some non-governmentalorganizations with greater flexibility andunderstanding of the perspectives of localgovernments and local communities..


For instance the roles of the private sectorare quite similar in Canada, Malaysia, andthe U.S., even though there are quitedifferent conditions in terms of forestownership and private sector access to forestresources. Ideally, government functionsshould be discharged at the lowest possiblelevel where effectiveness and efficiency arepossible. However, some of the problems inmanaging forest resources in a satisfactorymanner have arisen because of the vaguenature of the assignment of responsibilitybetween the municipal, state and federalgovernment. This can lead, among otherthings, to overlapping and sometimesconflicting actions. It is imperative to havedetailed regulations to provide a clearadministrative framework for operation andcarrying out respective responsibilities, as isshown in the case of Indonesia, for example.Such a framework needs to not only specifywhat needs to be done, but also how (whatmethods are and are not acceptable in agiven situation). This general lesson holdswhether we are talking about federal-staterelations or state-local relations.

• Balance between authority andresponsibility. Experience in a number ofcountries shows emphatically theimportance of avoiding decentralizationschemes that shift responsibility andauthority for certain functions, but not forother related functions. For example, thelack of stricter correlation between theauthority to incur debt and spend and theresponsibility for such actions and forgenerating the revenues to spend hasproduced strong inducements to fiscalirresponsibility in states. In India politicaldecentralization has been quite effective,but the authority of local governments toincur debt, or tax and have independentsources of finance is lacking. This in turn canaffect state budgets for forest governance.

Ensuring Adequate Financing Arrangementsand Revenue Sharing• Financial resources transfers and

accountability. Transfers of resources, bothfinancial and in kind, from central or federalgovernment to the states and the privatesector are common occurrences in all 11countries. Such transfers are a necessaryreality in terms of providing incentives andthe ability to carry out forest managementactivities at the state and local levels inorder to create results that are sociallydesirable beyond the borders of a localcommunity, county or state. Such desirableoutputs include environmental services, butalso goods such as timber. At the same time,a close watch has to be kept on resource

transfers to make sure that they areeffectively and efficiently administered andused. It is all too easy to make transferswithout having the necessary checks andbalances on their use. The result can bewaste and deviations from desired policyand action outcomes, as illustrated inseveral of the countries studied. In Bolivia,for example, some municipal governmentstreat central government transfers offinancial resources earmarked for forestrydevelopment activities, as discretionaryfunds that can be used for other purposes.

• Revenue independence. Local governmentsneed to have a degree of independence inraising and capturing financial resourcesthat are dedicated to the forestry sector,rather than being completely dependent onallocations from the state government. Thisis because there is no real autonomy if thehigher levels of government have exclusivecontrol of financial allocations. Yet, as in thecase of India mentioned above, localgovernments often are prevented fromimposing taxes or charge for forest uses. Thesame is the case in Brazil. In these cases thedecision making power rests with the levelof government that controls finances andthis may or may not coincide with localpriorities. Mechanisms are needed to easethe severe pressures (often from local elitesand power bases) that are put on localgovernments when they try to raise revenuesthrough forest use and timber harvest feesand charges. At the same time local revenueindependence should take place in anadministrative environment of transparencyand checks and balances by variousstakeholders to avoid the natural tendencyto over exploit forest resources for short-term financial and political gain (Indonesia).

• Local government incentives. When localgovernment financing is secured throughtransfers from other levels of government,there is little local government incentive toengage in local revenue raising activitiesthat may upset local voters and powerfuleconomic interests. On the contrary, suchstrategy may favor the capture of localgovernment in sectors that are currently notproducing government revenues but thatgenerate substantial private financial gainsas the incentives for keeping governmentout of those sectors increases. The Brazilianexperience also shows that localgovernments can influence publicinvolvement by targeting financialcontributions to activities, such asconservation, that may be considered asdesirable.


5.1.2 Enforcement of Accountability• Ill-defined authority and responsibility

feeds poor governance. As discussed above,accountability is key to good governance inthe sector. Accountability can only bepowerful if authority and responsibility linesare well defined. Incentives for quickexploitation of forest resources to satisfylocal government financial demands as wellas the capture of these resources for corruptdeals are potent in a government structurewhere the lines of authority andresponsibility are not well defined andaccountability is ignored. Illegal logging andcorruption at the local level seem to haveincreased in countries such as Russia andIndonesia, after decentralization. "Rules ofthe game" with well-defined authority andresponsibility for the various functions of thepublic administration must be clearlyunderstood by all, as illustrated in several ofthe country cases.

• Tensions among groups at various levelscan help ensure accountability. Some ofthe tensions created between the variousentities as they watch each other carry outthe responsibilities and guarding the rightsassigned to them, are healthy and have insome cases created a much needed set ofchecks and balances on government forestgovernance actions. Such checks andbalances can ensure effectiveaccountability. In the United States, thecontinuing tension between advocates ofstate forest ownership and governance andthose who advocate strong, continuing ormore federal governance is a healthyinteraction that results in higher levels ofaccountability and public focus on the U.S.forest estate and what happens to it. Civilsociety watchdog organizations have beencreated in various forms in most states orprovinces in the reviewed countries,although they definitely are weaker in somecountries than in others. Given their nature,it is evident from the cases that if thegovernment, particularly the federalgovernment, does not recognize thelegitimacy of such groups, then they tend tobe ineffective. In other cases, ignoring suchgroups has led to strife and sometimesviolent conflict. An interesting point is thatin some of the countries studied,international NGOs appear to have had andbe having a greater influence than the localones.

• Transparency. Local governance is likely tobe more effective if there are systems ofdecision-making, reporting and auditing thatare transparent and easily understood by all,thus strengthening the need foraccountability mechanisms. This relates to

the need for clear "rules of the game" interms of who has the authority to do whatand what the real incentives for action arein reality.

5.1.3 Catalyzing the Contributions of CivilSociety and Private Sector and CreatingEffective Cross-Sectoral LinkagesThe 11 country examples studied in this paperhave used a wide variety of policy mechanismsas a means of guiding the development of theirforest sector across different governmentagencies and the private and civil sectors. Whilethe roles of public, private, and civil sectorsvary, and the types of linkage and theirstrengths vary from country to country, anumber of common policy interventions havebeen used to catalyze the contributions of eachsector and to build supportive andcomplementary linkages. Table 3 provides anoverview of the types of policies that exist inthe eleven countries reviewed and that canhave potential for use in forest sectordecentralization exercises in other countries.Key insights are listed below.

• Interactions between government and thecivil society. In most of the countriesreviewed, the pressures between civilsociety interest groups and governmentagencies are stronger than between thelevels of government. This is an importantlesson. Quite often, governments spend aninordinate amount of time and effort to getfederal-state forestry relations organized,when the real effort needs to be devoted tothe question of government (in general)-civilsociety-private sector linkages. This is wherethe pressures tend to be today; this is wheremuch of the innovation in management andco-management is taking place; and this iswhere many of the checks and balances onillegal forest activities will be put in place.

• Linkages between decentralizedstructures of government. Effective linksare needed not just between differentsectors within a state or district, but alsothere is a need for inducements forcooperation between neighboring districtsfor managing forest resources forenvironmental externalities such as erosionand watershed-wide coherent programs.Decentralized structures of governmentmust have a proper framework andincentives to achieve greater coordinationamong districts for environmentalmanagement of functions that spill overadministrative boundaries. These weremissing in several of the countries studiedand the results were ineffectivemanagement of watersheds and


deterioration of environments. Analternative to formal interstate pacts orlocal incentives for cooperation is used insome countries, where federal governmentstake a stronger role in areas where there areimpacts of actions across state, provincial orother meso-level boundaries.

• Decentralization and stratified societies.Decentralization is more difficult in the caseof highly stratified societies in which ethnic,tribal, income and/or gender prejudices aredeeply rooted. Cultural changes are a keyingredient in effective decentralization, andunless such changes occur, there likely willbe a strong tendency to erect bureaucraticbarriers to protect the status quo, or at leastto slow down the pace of decentralization.Government capacity building is necessarybut it is unlikely to be a sufficient factor tochange perceptions and cultural biasesquickly. Recognizing the legitimate rights ofvarious cultural groups is an importantaspect of the decentralization process, evenif it involves shifting significant authorityand forest ownership to such groups.

• Catalyzing the private sector. The privatesector is a key player in most major forestedcountries. In some, such as New Zealand,the private sector has the major role, whilein others, such as India, it has a muchnarrower and less critical role. In terms ofpolicy interventions and what can beexpected of the sector, it is worth notingthat private industry in a market or mixedeconomy responds to market and policysignals that affect its ability to profit, growand be secure. If appropriate signals do notexist, then only in rare instances willindustry initiate actions that are sociallydesirable but financially irrational (i.e.,involve lowering of profits, sales, orgrowth). Changes in the way industrymanages forest lands will take place whenfinancial signals stimulate desired change.

• Key here is the fact that industry expectsgovernment to make policies that create alevel playing field and a stable environmentfor industry. This means introducing somestability in land use, tenure, and in theforest area available for management andsustained yield timber harvesting. In most ofthe nine countries reviewed, a mix ofapproaches to adjusting forest land andforest available to the private sector is used.On one end, in India, private corporationshave practically no access to public forestresources. Long term contracts formanagement of public lands are common insome countries, while in others, such asAustralia, there have been large-scaletransfers of public land managementauthority to the private sector.

• In addition, in a number of countries,policies have been formulated to encourage(by providing incentives) industry toparticipate in longer term management ofthose public lands set aside for multiple uses(e.g., in Australia, Canada, and Malaysia).These policies have been joined with othersthat generate revenues for local people fromthe use of the forests in their regions, eitherdirectly, or through formal pay backs and "inlieu" payments from the central governmentto states and local governments. However,there also are examples where governmentshave given mixed signals, not clearlydefining which lands will be available longterm for production of forest products. Insuch cases of uncertainty, industry tends tomove on to other countries or other regionswhere conditions are more stable. Stabilityof policies and a "level playing field" for allparticipants are two key policy requirementsfor a healthy private sector to operatewithin a given country's systems of forestgovernance.

5.2 Key Considerations forDesigning DecentralizedGovernment Entities

Finally, the cross-country analysis indicatesquite clearly that effective and efficientgovernance of a nation's forests under a federalsystem of government can take place under awide variety of conditions with regard to forestownership, authority, financing options, balanceof management responsibilities betweenfederal, state, local and private entities,financing and funding options, and generalpolitical contexts. However, it is equally clear,both from the failures and successes, that theexistence of a productive, sustainable forestsector depends very much on the organizationaland technical capacities and competences ofeach of those entities that do carry out theresponsibilities assigned to them and on theincentives that they face to meet theirresponsibilities and use their authority in a fairand constructive fashion. To be most effective,public forest management entities at each levelof government should have:

• Knowledge/technical capacity to setappropriate management objectives for theforest responsibilities under theirjurisdiction, to design the actions needed tomeet those objectives, to know how, whenand where to implement the actions, andwhere to go to get expert advice andinformation. As mentioned, a critical issue in


the context of this discussion is that forestsector executives at sub-nationalgovernment levels must understand andfollow national goals and at the same timeunderstand and accommodateprovincial/state goals and provide guidanceand integrate objectives that institutions inlower strata of government-such as localmunicipalities-will also have to follow.

• Resources to do what needs to be done. Thisrelates to the whole discussion above onlessons related to human and financialresources, mechanisms, and budgetformulation and implementation. It relatesto how countries link forest relatedresponsibilities and thus budget needs to therevenues collected from forest use.Authority and financial resources mustmatch responsibilities.

• Rights and authority to make decisions inthe management of the forests under theirjurisdiction, given acknowledged goals andobjectives. In other words an enabling policyenvironment must exist for a forestgovernance agency to succeed. A main issueis that there has to be a capacity to ensureoverall coherence so that subsidiary levels ofgovernment do not contradict nationalpriorities. At the same time, nationalpriorities cannot violently clash with thoseof provinces or regional bodies. There has tobe some hierarchy of objectives and amechanism that will ensure that the wholescheme will have a degree of coherence inforest governance. There must be a cleardivision of responsibilities between thevarious tiers of government. Of course, it isnot just a matter of authority but alsonational vision for forestry and the capacityto achieve coherence and capacity toenforce. This relates to the nextrequirement; namely

• Motivation to manage in a transparent, non-corrupt, equitable fashion. This includes theissues related to reducing illegal activitythat is so rampant in some of the countriesstudied. This relates closely to theaccountability mechanisms mentioned in thefinal bullet below. It also relates centrally tothe question of incentives. Motivation isdriven by both positive incentives as well as"negative" incentives, i.e., incentives not todo something. These generally come throughlaws that have strict penalties if broken. Inbetween are the voluntary restrictions onforest use and misuse, typified in many ofthe state forest management practicesguidelines established in Australia, Canada,and the United States.

• Accountability mechanisms that ensurethat sub-national governments (as well asthe central government) will have their

major decisions constantly scrutinized bythe public, by official oversight mechanisms,advocacy organizations, financing entitiesand so on. Capital markets are able toconstrain irresponsible fiscal decisions andlocal voters may influence local decisions ifthese decisions affect forest land values.One of the problems of decentralization notpercolating to lower levels of governmentand to entities of the civil society and theprivate sector is that local governmentofficers are not always elected by the localpopulations. When this happens, there areno government incentives to fosterparticipation and to promote transparentdecisions. Mechanisms must be designed tosecure transparent decision-making andparticipation. This is why successfuldecentralization most often is associatedwith democratic values and democracies.

Of course, no government entity isautomatically endowed with optimal levels ofknowledge and motivation to perform. For thisreason, it is important for decentralizationinitiatives-which commonly assign orredistribute rights and authority and perhapsthe accountability mechanisms, and sometimesresources, to different levels of government-bedesigned to reflect the existing distribution ofknowledge and motivation, and then, inparallel, initiate and implement a program toincrease the capacity of each entity in theseareas. A number of policies exist or can bedesigned to ensure that all entities have theprerequisite knowledge, authority, resourcesand motivation to manage effectively in thecontext of the overall national goals forsustainable forest governance. Table 4 providesan overview of the types of policy instrumentsthat have been useful in the nine countries inhelping entities to meet the requirements foreffective management, recalling that in manyof the countries reviewed, the private sectorhas a prominent role to play, and thus also mustbe addressed in the overall policy context.

It is important to emphasize that we shouldnot get caught up in the debates over local vs.federal vs. private forest management, to theextent that we then ignore what may be evenmore important, namely, the requirements forgood governance that apply to each agencyregardless of the level of management and thebalance between the responsibilities of entitiesat different levels. In the final analysis, itmatters less how the responsibilities andauthority for governance are split betweenagencies at different levels of government, ifthe individual forest agencies do not meet thebasic requirements for efficient and effectivegovernance.



Since the early 1980s, decentralization hasspread around the world. This report draws oncase studies of eight countries with federalsystems of government and three countries thathave centralized governments that in sumcontrol the majority of the world's forests. Theobjective has been to identify factorsconnected with success and extract lessonsfrom their experiences that other countries canuse in improving their decentralizationinitiatives.

The examination of the countries indicatesthat decentralization offers great opportunitiesfor improved forest management, but also greatchallenges. Decentralization is far from beingthe solution to the ills of the forest sector,because significant possible disadvantages anddangers match its potential benefits. Progresstowards achieving the many potential benefitsof decentralization faces hazards that are noteasy or simple to overcome.

This review attempted to determine whatcombinations of factors make decentralizationundertakings work in a satisfactory manner inthe forest-based sector, using federal countriesas the framework for the analysis. Findings areas relevant to situations in all countries that arestarting down or want to continue down theirpaths towards greater decentralized forestgovernance. Many countries that do not havefederal systems of government, regardless oftheir current level of decentralization, are infact operating with forest sector governancesystems that are similar to those found in thecountries with federal systems of government.

In all cases studied, developing an effectiveand efficient path towards decentralization

took many years to achieve, with a number ofadjustments to the many unforeseen eventsfaced along the way. The present is a period oftransition in countries such as Russia andNigeria, with problems that are more than just"growing pains". The future of forests in suchcountries will depend heavily on the building ofeffective forest governance capacity in bothmeso and lower levels of government and theskill and willingness of high level governmentofficials, politicians and forest managers in thepublic and private sectors to steer the processand avoid administrative chaos and financialcrises, which tend to create fertile conditionsfor the "capture" of government for privateends.

The present review also provides evidencethat transitions to more decentralized systemsof forest governance are extremely complex.This exploratory study has barely touched onthe intricacies involved. Additional analytical isneeded to contribute further to a better graspof the factors that shape success and thedynamics of the decentralization process. Whilethere is a vast and rich literature ondecentralization and forest management andgovernance, much of it does not specificallyassess the issues associated with the incentives,the political economy, and other factorsinfluencing the functioning of countries' forestadministration systems and particularly not withthe capabilities and managerial and governancecapacities of the entities within such systems.Such additional assessment is needed.

6. CONCLUDING COMMENTS


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1. AUSTRALIA

1.1 Background and Forest OwnershipAustralia is a large commonwealth with a forestresource of some 164 million hectares (ha),covering about a fifth of the continent's area. Ofthe total forest area, about 1.5 million ha isplantation forest. This small portion of the totalforest estate provides over 50 percent ofAustralia's wood needs (and 70 percent of thesawnwood produced in Australia). About onequarter of the native forests are privatelyowned and three quarters in variousgovernment ownerships. At the same time,adding private leases of public land to privatelyowned forest land, the result is that more than70 percent of Australia's forests and woodlandsare on privately managed land, with theremainder being managed by state, territoryand other government agencies. Australia'sforests are important to the country, both froman environmental perspective and an economicone (the forest industry is one of Australia'slargest manufacturing industries, with anannual turnover of more than $15 billion).

As in all countries with federal governmentsystems, Australia's history of forest governanceand relationships between different levels ofgovernment, and between government andprivate landowners and industry has beencheckered, with various experiments in forestgovernance giving way to others as old issuesare resolved and new ones emerge. It appearsat present that Australia now has a solid set ofinstitutions in place to assure progress in movingtowards the dual objectives of forest protectionand growth of economic benefits from foreststhrough ecologically sustainable forestmanagement.

1.2 Forest GovernanceThe Commonwealth forestry activities aremainly handled through the Department ofAgriculture, Fisheries and Forestry, althoughother agencies are involved as well. TheConstitution confers certain specific powers onthe federal government, with all other powersnot so conferred residing with the individualstate and territorial governments; and thesepowers relate to land tenure, land use andwater supply. The result is that most forestgovernance issues and responsibilities residewith the states and territories. They all haveforestry programs and agencies that deal withforestry. No state has a discrete forestryagency: all of the old Departments, ForestServices and Forestry Commissions havedisappeared. Forestry is now just a smallcomponent of larger integrated departments ormulti-resource agencies like Primary Industries,Natural Resources and EnvironmentalConservation and Land Management, etc.

At the same time, the government ofAustralia has clearly specified responsibilitieswith regard to the country's forest estate. Theserelate to international trade in forest productscoming from such lands and they relate to avariety of environmental concerns andresponsibilities.

1.2.1 MechanismsOver the years, different mechanisms have beendeveloped to ensure the activities of all levelsof government are complimentary andcoordinated. Some have worked better thanothers, and many adjustments have been made.

One can identify several important keyelements in the current Australian governmentrelations with states and territories in terms ofharmonizing forest conservation, managementand use and establishing an effective andefficient balance of authorities andresponsibilities. These are:

ANNEXES

• The National Forest Policy Statement (NFPS)signed by the Commonwealth and all statesin 1992.

• The establishment of Regional ForestAgreements (RFAs) to implement responsibleforestry in a win-win fashion in terms ofCommonwealth and state and localobjectives and relationships; and related

• The establishment at the Commonwealthlevel of the Forest Industry StructuralAdjustment Package (FISAP) which was aninitiative to help forest industry and workersadjust to changes brought about by the RFAprocess.

• The consolidation (in 2001) of ministeriallevel dealings with all natural resourcesmanagement issues into the NaturalResources Management Ministerial Council(NRMMC) and, in the case of the "industryrelated" issues, the Primary IndustriesMinisterial Council (PIMC). Both weredesigned to streamline the ways in whichgovernment (Commonwealth/State/Territory) dealt with NRM, including forestryissues.

• Establishment of conservation focusedmechanisms that link Commonwealth to thestates and territories, including the NaturalHeritage Trust in 1997, which funds, amongothers the National Landcare Program whichincorporates some aspects of local forestry.

All of these mechanisms provide the basis forAustralia to establish and implementdecentralized forest governance andmanagement within the states and territories,while protecting national interests andresponsibilities related to, for example, tradeand environmental protection. In what follows,some of the details of these programs and howthey have functioned will be briefly overviewed,drawing out some of the lessons that can belearned. It should be noted before starting thatthere are varying interpretations of the successof these various mechanisms and varyinginterpretations of how they came to be. Theissues, as in the case of most other countries,revolve around the question of what and howmuch land should be logged and how much of thenative vegetation on private freehold land can becleared for conversion to agriculture.

1.2.2 The National Forest Policy StatementThe NFPS is the culmination of many debatesand earlier accords that had been developed toshape the future of Australian forestry and toestablish an effective and solid workingrelationship between the differentstakeholders. This Statement was jointlydeveloped by the Commonwealth, States andTerritories through the Australian ForestryCouncil and the Australian and New Zealand

Environment and Conservation Council inconsultation with other relevant governmentagencies, the Australian Local GovernmentAssociation, unions, industry representatives,conservation organizations and the generalcommunity. The Statement was signed by allparticipating governments, with the exceptionof Tasmania, at the Council of AustralianGovernments' meeting, held in Perth inDecember 1992. Tasmania became a signatoryto the Statement on 12 April 1995. TheStatement was developed concurrently with thedevelopment of the Ecologically SustainableDevelopment National Strategy and the NationalGreenhouse Response Strategy.

1.2.3 The Intergovernmental Agreement onthe EnvironmentThe 1992 Intergovernmental Agreement on theEnvironment was developed concurrently toprovide a co-operative national approach to theenvironment and to provide better definition ofthe roles of respective governments. TheAgreement endorses ecologically sustainabledevelopment as the basis for land use decisions.It also identifies the circumstances in which theCommonwealth government may have an interestin land use decision-making processes at the statelevel. Some of these include the following:

• places listed on the Register of the NationalEstate;

• activities that involve export and wherestates are required to seek Commonwealthapproval for export licenses or foreigninvestment to use area on the Register ofNational Estate;

• where the Commonwealth government hasobligations under international conventions;

• where the state and Commonwealthgovernments are proposing an area fornomination under the World HeritageConvention;

• where proposals for resource use transcendboundaries and affect two or morejurisdictions;

• where other responsibilities underCommonwealth Acts of Parliament requireit; and

• where other conditions under theIntergovernmental Agreement on theEnvironment require it.

Most of these links to state activity wereincorporated into the [Commonwealth]Environment Protection and BiodiversityConservation Act of 1999. In carrying out itsresponsibilities, the Commonwealthgovernment may merely accredit a state'sprocesses, if these are deemed to meetCommonwealth standards and requirements.



1.2.4 The Comprehensive RegionalAssessments and the Regional ForestAgreementsTo determine how best to meet both centralgovernment and state or territorial needs andresponsibilities with regard to forests, allgovernments have agreed to what are called"Comprehensive Regional Assessments" (CRAs).These assessments lead to a single agreementrelating to the joint obligations for forests in aregion. A complex set of rules and proceduresare negotiated between Commonwealth andstate governments and the end result areRegional Forest Agreements (RFAs). TheseAgreements encompass:

• establishment and management of a systemof forest reserves (Protected Areas) which iscomprehensive, adequate andrepresentative,

• ecologically sustainable management ofthose parts of the forest estate in whichproduction is permitted, and

• development of an efficient, internationallycompetitive timber industry.

RFAs are agreements between individual statesand the Commonwealth and recognize the rangeof economic and environmental obligationswhich each tier of government has regarding thelong term management and protection of forestvalues in specific regions. RFAs are intended torecognize and meet the legislative obligationsand policies of both Governments. RFAs areintended to provide stability through theestablishment of a sustainable resource base forindustry, while at the same time ensuring theprotection of Australia's biodiversity, old growthand wilderness through a reserve system andcomplementary off-reserve management.

In addition to state and territorial andCommonwealth interests, the RFAs have to bedesigned and agreed upon in a way that takesindigenous interests into account. (Thisdirective is similar to one included in the Landand Resource Management Planning processtaking place in the province of British Columbia,Canada). The Native Title Act 1993 recognizesand protects native title rights and interests. Inrecognition of this Act:

• where any Government action to implementan RFA could affect native title, the actionwill be taken in accordance with the NativeTitle Act; and

• an RFA is not intended to influence in anyway native title claims that may arise.

Many changes in land classification haveoccurred as a result of the implementation of aComprehensive, Adequate and Representative

(CAR) reserve system, in which the tenure ofmore than 3 million ha of forest land changedfrom Multiple Use (which allows for timberharvesting) to Nature Conservation Reserve. TheCAR reserve system was a key objective of theRegional Forest Agreement process.

One can see that there is great complexityand need for a great deal of inter-sectoral inaddition to intergovernmental dealings in orderto get workable RFAs established. So far, thereare 10 such agreements in place in four states.

1.2.5 Commonwealth GovernmentThe Commonwealth's principal involvement inforest issues derived from the Export ControlAct 1982 which had been invoked to regulatethe export of woodchips and unprocessed wood,as an indirect control over state-approvedlogging for export woodchips. In assessingapplications for export licenses under this Act,the relevant minister was required to ensurethat a range of Commonwealth obligations aremet.

The Forest Industry Structural AdjustmentPackage (FISAP) is a CommonwealthGovernment initiative to help forest industrybusinesses and workers adjust to the substantialreduction in the native forest resourcesavailable to industry resulting from the RegionalForest Agreement (RFA) process.

1.2.6 State GovernmentsAs mentioned, the NFPS also recognizes thatstate, but not territorial governments haveconstitutional responsibility for land usedecisions and primary responsibility for forestmanagement. These responsibilities also areconsidered in drawing up the RFAs. To fulfill thisresponsibility the states have enactedlegislation that allocates forest land tenuresand specifies the administrative framework andpolicies within which public and private forestsare managed.

With regard to the private sector, andparticularly privately owned native forests,state governments pursue public objectiveswith the private sector through several distinctinitiatives. They include:

• creation of a range of incentives to promoteecologically sustainable forest managementon private lands

• education programs, e.g., such as throughthe Landcare Program and other communitygroups;

• applying to private land codes of practicethat apply to public lands;

• encourage compliance with ecologicallysustainable forest management objectives;

• rationalization of the tax laws applied toprivate native forest lands;

Finally, regarding Commonwealth-Stateinteractions, the Australian Forestry Council,representing the state and the Commonwealthagencies with responsibility for forestry, hasdeveloped a set of national principles to beapplied in the management of native forestresources used for wood production on bothpublic and private lands. ("Forest PracticesRelated to Wood Production in Native Forests:national principles"). These principlesdetermine a consistent and scientific basis forsound management to which all states arecommitted. Specific prescriptions by thedifferent states conforming to the nationalprinciples take into account the wide range offorest types, conditions, and situations applyingdue to natural and cultural variations.

1.3 Concluding CommentsThe Australian experience shows that thesuccessful operation of a federal system offorest administration requires a very complexgovernment structures, clear and harmonicrules, intensive consultation andaccommodation of diverse interests, includingthose of indigenous populations, the civilsociety and the private sector. A great deal ofdata and information must move between thedifferent levels of government. A critical massof well-trained government staff is also neededto keep the government structure functioningsmoothly.

2. BRAZIL2.1 Background and Forest OwnershipBrazil is one of the largest democracies of theworld and is the fifth largest country interritorial size. Natural forest resources spreadfor 565 million hectares (ha) or 66 percent ofthe country's land area. This is more tropicalforest than any other country in the world.About 95 percent of this forest is within theAmazon. The Amazon forests contain vasttimber resources, at least half of the world'sspecies and store large amounts of carbon (140-350 tons per ha).

The rest of the country's forest resourcesstretch along the Atlantic coast, one of therichest in biodiversity and most threatenedecosystems in the world (deciduous forestsbehind the Atlantic forests and arid forests inthe Northeast). In the south, (especially inParaná, Santa Catarina and Rio Grande do Sul)there is a transition zone of coniferousAraucaria forests. Extensive areas of theAtlantic and Araucaria forests were cleared foragriculture (FAO 2003).

There are some 230 conservation areas on 45million ha and the government has pledged toincrease this area by 25 million ha. In addition,

the government has designated over 98 millionha as protected indigenous reserves, home tosome 300 indigenous groups. Many of theconservation and indigenous reserve areas areillegally occupied and logged.

There are about 5.5 million ha of forestplantations mainly in the south of the country.The rate of plantation is about 135,000 ha peryear. The national deforestation rate, one ofthe highest of the world in absolute terms, wasabout 2.5 million ha for the period 2001-2002(CIFOR 2003). About 13 percent of the Amazonis deforested.

Forest resources sustain a sizeable industrythat employs 1.5 million people (Virgilio et al.2002). The country is the largest producer andconsumer of tropical timber and only a smallproportion of the national output is exported.

Natural forests are publicly owned but largeareas have been claimed by colonists and thenconverted to non-forest uses.

2.2 Structure of GovernmentBrazil's federal structure comprises 26 states, afederal district, and more than 5,500 third-tiergovernments, the municipios. Interactionsbetween these three levels of government havefluctuated over the years from authoritariancentralized decision making to periods whendecentralization forces have dominated and thepower of sub-national governments hassubstantially increased.

The 1988 Constitution granted considerablepolitical, tax power and fiscal resources tostates and municipios. Public control of thenational economy decreased as privatizationand liberalization took hold. Under theConstitution, each level of government(federal, state and municipal) has their ownexecutive and legislative branches. Howeverstate and federal district legislation cannotconflict with federal legislation.

The new Constitution specified the roles ofthe different levels of government.Responsibility for local functions such asprimary education and preventative health carewere assigned to the municipios. The federalgovernment retained functions that werenational in scope such as defense and foreignaffairs. The rest were the responsibility of thestate, shared in different degrees by the centralgovernment. Similarly, responsibility andresources for the implementation ofdevelopment programs was largelydecentralized from the federal government tothe states, municipios and local communities.(van Zyl et al. 1995). From a fiscal point of view,the new structure of government was veryfavorable to sub-national governments whichwere granted sweeping spending powers. Brazilbecame one of the most fiscally decentralizedcountries in Latin America (World Bank 2000b).


By the mid 1990s, centrifugal forces startedto show, with signs of governmentfragmentation, of inadequate representation,and of inefficiencies in the allocation and use offiscal resources. First of all, the political systemprevented the implementation of policies aimedat reducing inter and intra regional differences,creating a problem of "over-decentralized" and"asymmetrical federalism" (Ramos 1998).Second, sub-national autonomy was high withregard to revenues, expenditures and access tocapital markets, and state governments oftenirresponsibly used this power to overspend andfor political patronage based on extensivehiring. And although sub-national governmentshad the power to tax, they were reluctant to doso because of the negative political implicationsof increased taxation. State fiscal deficitsexploded. There were no mechanisms toprevent the central government from bailingout deeply indebted sub-national governmentsand the central government often ended uppicking up the tab for state overspending (TylerDickovick 2003). This created a financialdependency of sub-national governments on thecentral transfers to finance their operations.Massive transfers from the national treasuryflowed to sub-national governments.

As a consequence, Brazil started to becomedifficult to manage as a coherent entity andnational debt expanded to dangerously highlevels. In the late 1990s federalism became thesubject of broad national debate as local andstate fiscal deficits ballooned and the centrestruggled to impose fiscal discipline (Selcher1998).

In the mid 1990s, under the CardosoPresidency (elected in 1994 and re-elected in1998), and in a successful move to fiscaldiscipline, the National Congress was given therole of controlling the public budget, includingthat at the state and municipio level (Llambi2001). Banking on his enormous popularity,President Cardoso was able to impose fiscalresponsibility on the states, a process thatculminated with the approval of acomprehensive Fiscal Responsibility Law in 2000(Tyler Dickovick 2003).

2.3 Forest GovernanceBefore 1988, responsibilities for forestmanagement resided with the centralgovernment. After the adoption of the newConstitution, the federal government, statesand the federal district can legislateconcurrently on matter related to forests.

The Ministry of Environment was establishedin 1992 and assumed responsibility for planningand implementation of environmental policies.The federal Brazilian Institute of Environment(IBAMA) was created in 1989, from the fusion ofseveral other previous federal agencies,

including the Brazilian Forest DevelopmentInstitute (IBDF) and with responsibility for theimplementation of national environmental andforest policies . Initially, and despite theConstitution's emphasis on decentralization,IBAMA adopted a centralized model of forestadministration. IBAMA's main responsibilitieswere to administer a program of forest subsidiesand to design forest policies, both functionsrequiring a strong centralized approach(Hirakuri 2003). These functions were lost whenthe Ministry of Environment acquired theresponsibility for policy formulation andsubsidies program was substantially scaleddown. However centralized approaches toforest administration persist despite IBAMA'spower to transfer some of this authority andresponsibility to sub-national governments. Adetailed study of the nature and effects ofdecentralization of municipal governments invarious parts of the Amazon reveals that despitegreat variations between local governments,forest decentralization at that level has beenminimal (Toni 2003).

There are several cultural, fiscal andpolitical reasons for the apparent inconsistencybetween the earlier national decentralizationdrive and the continuing influence of thefederal government in forestry matters.

Local governments and populations have along tradition of considering forests as obstaclesto development and therefore initially state andlocal governments were uninterested inpromoting forest management. The example ofthe Amazon is telling. As mentioned, the greatmajority of the country's forest resources are inthe Amazon. Early Brazilian policy for thisregion made emphasis on increasing governmentpresence and populating this vast area undervarious development schemes, such as the TransAmazon settlement program. Largely this wasdue to the widespread perception that therewere global pressures to "internationalize" theAmazon, and other threats to Brazil'ssovereignty that needed to be fought byoccupation and physical presence of Braziliansettlers in the area. During this period anattitude towards forest management as asecondary consideration and to consideringforests as impediments to developmentprevailed. The expansion of agriculture,infrastructure and human settlements at theexpense of forests were preferred options.Decentralized governments and agencies paidlittle attention to forests.

The lack of priority accorded to forestryissues was evident in the official policy andlegal framework. For example, sustainableforest management was not specified as apriority until 1965, with the publication of theForest Code, Law 4771. However, this legalprescription was ignored for the next 21 years.


Guidance on what sustainable managementimplied did not come until 1986 when Law 7511stipulated it as a requirement. In 1989 thegovernment defined for the first time whatsustainable forest management entailed inpractical terms. Only in 1995, almost 30 yearsafter the Forestry Code had been issued, didIBAMA begin to require forest managementplans. In these circumstances much of the legalprescriptions governing forest managementwere administrative decrees that had limitedlegal power and were easily challenged in thecourts (Hirakuri 2003). State and localgovernments understandably preferred to stayaway from a sector where law enforcement wascontentious.

Further, the magnitude of Brazilian forestecosystems is such that it is difficult for localgovernments to promote appropriate forestmanagement. Municipios as well as many statessimply lack technical and managerial expertiseas well as funds to manage forest resourceseffectively. (Hirakuri 2003).

Most fundamentally, given the dependencyof sub-national governments on centralgovernment financing, there was little interestin establishing forest management prescriptionsand establishing taxes, resource fees and lawcompliance controls that could alienate localpolitical constituencies and powerful elites.

Finally, lack of coordination between thedifferent layers of government and conflictinglegislation issued by the federal, state andmunicipal levels created frictions that localgovernments preferred to avoid by keepingtheir distance from assuming keyresponsibilities in local forest management. Forexample, in the past the federal NationalColonization and Agrarian Reform Institute,INCRA, sometimes ignored state zoning plansand installed settlements in areas designatedfor other purposes by the state (Lele et al.2000). Similar problems exist between IBAMAand FUNAI, the Indian Affairs Agency. IBAMA isthe only agency that can issue sustainable forestmanagement infraction reports in indigenousreserves but physical enforcement is in thehands of FUNAI. When FUNAI agents detect aninfraction they cannot act, because IBAMA mustissue the infraction report first. ConverselyIBAMA may detect a problem and issue aninfraction report but has no power to seizeillegal forest products or in any other wayenforce the law (Hirakuri 2003) Unclear rules ofthe game and the ensuing frictions betweengovernment agencies greatly diminishes theinterest of state and municipal governments tohave a more intense and direct involvement inthe management of the sector.

Hence, in short, there are both few fiscalincentives and strong political and technicaldeterrents for local governments to take control

of the administrative responsibilities ofmanaging forest resources. As a result, in thepast there was great sub-national governmentapathy towards forest management and thefederal government had to continue to take upa large part of the responsibility for theadministration of the sector. This, and given themagnitude of the country's forest resources, thefederal government could do only in animperfect way. Partly because of the shortageof resources, financial, managerial andtechnical, most of the national harvest tookplace in illegal ways and deforestation ratesincreased.

Recently, national and state governmentsstarted to issue legislation to push for greaterinvolvement of sub-national governments in themanagement of forests and there are signs thatcertain aspects of local forest governance arebeginning to change (Toni 2002).

Some of this change is due to the recent useof financial incentives increasingly beingadopted by some of the states. An importantsource of municipal financing is the productsand services tax (ICMS). States transfer 25percent of this tax to municipios. Some statesbegan to use this transfer to favor municipiosthat have environmental conservation areas,the so-called "ecological ICMS" or "green ICMS."This is interesting some executives in localgovernments that are beginning to seeinvestments in the forest sector as an openingfor accessing financial resources withoutestablishing unpopular and politically difficultlocal taxes. It is now financially advantageousfor municipios to participate more intensely inlocal forest management and to regulateprotected areas. Some are going further byoffering incentives to private owners toestablish private reserves.

Some analysts point out that given thatforest decentralization and the interest of localgovernments is dependent on strong financialincentives, other fiscal tools could beconsidered such as the participation of sub-national governments in the administration oftimber concessions in national forests. Althoughthe National Forest Program includes theparticipation of local governments in timberharvesting, it is not yet clear how this can beaccomplished in practice by the municipios.

The federal government and its ActiveCommunity Program have also tried to fosterlinkages between local governments and thelocal population. Under this program,municipios stimulate discussions for thepreparation of Sustainable Local DevelopmentPlans. These plans should have the support ofall levels of government. The Program has metwith modest success. At the beginning of 2002only 157 municipios participated in thisprogram. Again, there is no strong incentive for


local governments to promote this type ofinteraction. And in certain cases, differingpriorities of poor local and of entrenched andpowerful elites of loggers and cattle ranchershave led to intense frictions and clashes (Toni2003).

Further, law 9985 passed in the year 2000,creating a National System of NatureConservation Areas (SNUC). This law prescribesthe participation of municipios in themanagement of forests. However, most of theconservation areas have been created by thefederal government, often in conflict with localpriorities and in weak consultation with localstakeholders. Also these conservation areasremain plagued by the problems of vague landtenure rights.

The Programa Nacional de Florestas (PNF)was released in 2000 (Decree 3420, Macqueenet al. 2003). The Plan is composed of projectsdesigned with the participation of all levels ofgovernment and the civil society. The Plan isgoverned by a Coordinating Commission thatincludes representatives from other strata ofgovernment, the private sector and the civilsociety (Government of Brazil 2000). Variousnational and international NGOs participate invarious programs and projects in partnershipwith international and national agencies andcontribute to raise awareness, increase politicalpressure for action and supply some of thetechnical expertise that may be in short supplyin some of the state and, specially,municipalities.

An interesting observation is that because ofthe variation in the systems of incentives forlocal government to involve themselves in localforest management, decentralization in theforest sector has moved in directions that are theopposite of national trends. When a powerfuldecentralization effort was under wayimmediately after the 1988 Constitution, therewas little interest on the part of localgovernments to assume responsibility for themanagement of their forest resources. Realresponsibility remained with the nationalgovernment, which in turn had to operatethrough weakened federal agencies. The Cardosopresidency and its fiscal centralization trendscoincided with a growing interest on the part ofsome local government in managing forestresources. This was mainly due to a change inincentives to local governments and arguably toincreased pressure from public national andinternational opinion as well as advocacy groupsthat increasingly focused their action on thedeforestation and degradation of nationalforests. Further, the central government hasbegun to push for a greater role of localgovernments and groups of the civil society inpromoting better administration of forests inprograms such as the SNUC and the PNF.

2.4 Concluding CommentsExperiences in parts of Brazil are extremelydiverse-not a surprising trend in such a variedcountry. There are substantial differences in theintensity and impact of forest decentralizationbetween, for example, the Atlantic Forest,where environmental awareness, localadministrative capacity and transparency tendto be greater, and the Amazon, wheregovernment institutional capacity is lower andpower of local elites and timber interests isgreater (Lele et al. 2000). In some cases, localgovernments have been able to integratedifferent sectors of society, including NGOs anddisadvantaged groups such as Indian populationsand extractivists, and other levels ofgovernment in forestry initiatives. At the otherextreme there have been generalized cases ofapathy, local capture of government byinfluential groups and increasedmismanagement of forest and deforestation.

This case makes it clear that proper forestgovernance requires clear rules of the game andclear division of vertical and horizontalresponsibilities between levels of governmentand government agencies. The delays in issuingregulations related to the Forest Code created anumber of problems and pressures that had tobe resolved by administrative decree, ofdubious legal potency and thus susceptible tochallenge in the courts. The unclear division ofauthority and responsibilities between federaland sub-national governments and betweendifferent agencies such as IBAMA, FUNAI andINCRA created high levels of uncertainty andtherefore reluctance in sub-nationalgovernments to become actively involved inforest management.

As a related theme, successful operation ofsub-national levels of governments requiresproper incentives for these governments tobecome involved in forest management. If stateand municipal government financing is securedthrough transfers from the center, there is littleincentive for state and municipal government toengage in revenue raising activities that mayupset local voters and powerful local economicinterests. If political costs of imposing order inthe sector implies alienating politicalconstituencies, and generate few directbenefits, it is likely that state and localgovernments may become more reluctant toact. Thus, if the financial proceeds ofsustainable forest management either aremodest or the local government can more easilyobtain financial resources from elsewhere, forexample from the center, local governmentdecision makers may not have enoughincentives to work for decentralized forestmanagement. Other sectors and activities withmore important political payoffs wouldnaturally receive higher priority.



If forest resources have been traditionallyconsidered as "free gifts" of nature and asimpediments to development of other activitieswith more immediate returns, it is likely that anegative attitude towards local forestmanagement may prevail among thepopulation, voters and decision-makers. InBrazil, clearing of forests was often regarded asa sign of progress (Pandolfo 1994). This culturaltrait may be difficult to change in the shortterm. If this is the case, state and municipalitiesmay be more reluctant to follow nationalprescriptions for sustainable forestmanagement.

The Brazilian experience also illustrates theconvenience of avoiding decentralizationschemes that shift responsibility and authorityfor certain functions and not others and thattransfer duties without transferring therequired funds. The lack of stricter correlationbetween the power to incur debt and spend andthe responsibility for such actions producesstrong inducements to fiscal irresponsibility.

Political and financial incentives to actionmay increase if advocacy groups can helporganize disadvantaged groups, increase publicawareness of the costs of maintaining the statusquo, and provide some of the technical services(such as monitoring and dissemination ofinformation) that sub-national governmentsmay be ill prepared to provide. There are casesin which national and international NGOs haveentered into partnership with local governmentsand agencies of the national government tosupport measures to improve local governance.In any case, participation is needed to avoidcases of governments imposing measures thatmay intensely clash with local conditions (suchas imposing strict conservation measures inareas traditionally used by local communities.

Arguably action by national andinternational NGOs has helped to induce moreaggressive decentralized programs to improveforest management. The recent political pushby the central government to increase civilsociety participation and more transparency indecisions affecting forests can only strengthenthe trend to improve sub national involvementin administering the nation's forest resources.

The government capacity to deal withforestry issues is generally limited. Whenadministrative and technical human resourcesare scarce, urban issues with greater visibility,such as health, education and transportationinfrastructure, tend to receive greaterattention than the management of complexforest ecosystems that spill over administrativeboundaries. Among non-urban issues,agricultural themes such as rural credit receivegreater attention. Some of these activities, suchas those that incentive the expansion ofagriculture, may in fact increase the pressure

on forests. Unless there is a certain critical massof local government capacity, illegal activitiesand tax evasion practices that negatively affectlocal revenues are likely to expand.

3.0 CANADA3.1 Background and Forest OwnershipThe history of federal forest policy in Canada islong. The federal system started with the BritishNorth American Act enacted in 1867. That actbrought the colonies of Quebec and Ontario(known then as Upper and Lower Canada) andNova Scotia and New Brunswick into "OneDominion". Manitoba was included in 1870,British Columbia decided to enter in 1871, andPrince Edward Island in 1873. The other Prairiecolonies were governed as territories untilSaskatchewan and Alberta were admitted asprovinces in 1905. Finally, Newfoundland joinedin 1949, under the Terms of Union betweenCanada and herself, thus completing thepicture. In addition, there are three territoriesthat are an integral part of Canada-the Yukon,the Northwest Territories, and as of 1999,Nunavut. Together, these territories containabout 40 percent of the area of Canada and agreat deal of forest.

The British North America Act (BNAA) spokein its preamble of forming a "union," of"federally" uniting the provinces under theCrown. Like the American Constitution,however, it did not make clear just what itmeant by those terms. It generally is concededthat the BNAA extended authority for bothnation building and province building as the twofocal points of Canadian development.Recognizing the new nation would need acountrywide basis on which to build for it to livein the world of nations and of internationaltrade, the act granted strong powers to thecentral government; but power over such areasas education, civil law, health and welfare,property, and civil rights was left with theprovinces. Indeed, by its own words in thepreamble, the BNAA posits "a Union wouldconduce to the Welfare of the Provinces..." Theact, which has-with amendments-served asCanada's constitution to this day, thus acceptedregional differences and regional expression ofthem as a fundamental precept of the Canadiangovernmental arrangement. (ACIR 1981)

Forestry and the legislation and policies thatshape it in Canada have evolved through fivestages, the first starting before the BNAA of1867. The first stage (up to the mid 19thcentury) was a period of unregulatedexploitation. This was followed by an era ofregulation imposed to earn revenue (mid to late19th century), where the Provinces, bolsteredby the 1867 Act, consolidated their control overthe forest lands within their boundaries.

In the third stage, there was a focus onconservation (late 19th to mid-20th centuries)in response to devastating effects of widespreadexploitation. Civil society groups providedinfluential input in shaping policies andspreading awareness of forestry issues (e.g., theCanadian Forestry Association), and the federalgovernment stepped in with the appointment ofa federal forestry commissioner to deal withvarious trans-provincial issues and concerns.Both federal reserves and provincial ones wereestablished (e.g., through the federal 1906Dominion Forest Reserves Act and Ontario andBritish Columbia's reserves acts). Provincialforest services were formed, the first one beingin Quebec in 1909. Scientific forestry wasintroduced across the nation.

The fourth stage was one involving theintroduction of scientifically based "timbermanagement" (starting mid 20th century),which still focused on the income generatingopportunities that forests provided Canada andits provinces. Forest inventories came into theirown to provide improved information on theforest resource and its changing nature. Itbecame clear that there had been considerabledepletion of the forest resource and concernswere starting to mount. Many of the provincesresponded with the appointment of RoyalCommissions, and these in general ended theirwork recommending a move towards sustainedyield forestry. During all of these changes, theprovinces took the lead, with the federalgovernment providing research and othersupport. Links to the private sector took adifferent form. Most provinces adoptedincentive-based tenure systems in which long-term rights to Crown land were granted inexchange for a commitment to practicesustained-yield forestry. The granting ofextensive area-based licenses remains largely inplace today, as well as some volume-basedtenures.

Gradually, during the 1970s and 1980s,interest in forest uses other than timberproduction started to mount and complaintsabout the timber focus grew from civil society,much as was the case in the USA and inAustralia. Thus started the current and fifthstage, still in progress, which is labeled the"sustainable forest management" stage. Severalattempts were made to raise the role of thefederal government in forestry, and separatefederal departments of forestry have beenestablished twice, although both were short-lived. Most recently, in 1993, the then existingDepartment of Forestry was restructured withina broader Natural Resources Canada-CanadianForest Service, and its overall size was reduced.Devolution continued, and even some corefederal activities in forest research anddevelopment were curtailed. Funding for

federal-provincial forestry agreements ended in1996-1997.

About half of Canada's land area, or some416 million ha, are classified as "forest" land.Much of it is open, non commercial forestcomprised of natural areas of small trees,shrubs and muskeg. Some 235 million ha areclassified as public and private forests formultiple uses. About 23 million ha are protectedfrom harvesting by legislation, and a great dealmore land is protected by public policy in theprovinces. Fully 94 percent of Canada's forestsare publicly owned, (71 percent is owned by theprovinces and territories, 23 percent by thefederal government), and the remaining 6percent is owned by some 425,000 privateentities.

3.2 Role of the Federal GovernmentThe British North America Act grantedownership and legislative authority over mostpublicly owned forest lands to the provinces.This exclusive provincial jurisdiction over forestresources was confirmed in a ConstitutionalAmendment in 1982, which also enabledprovinces to levy indirect taxes related tonatural resource revenues. The federalgovernment's jurisdiction over forestry is mostlylimited to the 23 percent of total forest lands itcontrols in the Yukon, Nunavut and Northwestterritories, although it also has theconstitutional authority to indirectly influenceall forest management in Canada, e.g., throughits influence and controls related to trade andcommerce, science and technologydevelopment (research), environmental laws,federal fisheries legislation, Indian lands, and soforth. It should be noted that the federalgovernment owned and had jurisdiction overnatural resources (including forests, minerals,petroleum, etc. in the three prairie provinces(Alberta, Saskatchewan, and Manitoba) until1930, at which time jurisdiction was ceded toprovincial governments.

In terms of the focus of this paper-the linksbetween federal and provincial and territorialgovernments-there were significant changesduring the mid 20th century. In 1930, forexample, the federal government devolvedjurisdiction over forests to the three prairieprovinces. Prior to that, federal control overthese lands had provided the federalgovernment with significant leverage in termsof its influence on forestry. After the transfers,the federal forest service control andmanagement was restricted to the northernforests and a small percentage of federal landsin the provinces (such as Indian reserves,national parks and military bases).

In 1949, the Canada Forestry Act was passedand it enabled the federal government to enterinto cost-shared conditional-grant programs



with the provinces, initially focusing on accessroad construction and mill modernization. Itwas only after the Canadian Council of Resourceand Environment Ministers (CCREM) was formed(1971) jointly by the provinces and federalgovernment that federal efforts began to focusmore on forest management and regeneration.In 1987, the National Forest Sector Strategyoutlined clearly the federal role in areas withinits jurisdiction (e.g., trade enhancement, publiceducation and forestry research). The federalgovernment had already devolved its forestrelated administrative duties to the territorialgovernment in the Northwest Territories in1986.

3.3 Role of the Provincial GovernmentSince the mid 1800s, provincial and territorialgovernments have enacted legislation regardingforests that has adjusted to the changing social,environmental and economic perceptions of thevalues placed in forests, although it cannotsatisfy all the diverse perceptions of the role offorests that exist in Canada. Provincialdifferences in legislation and in regulatorymechanisms are significant. Recognition of thelegitimate rights of Aboriginal people has cometo the forefront in the past few decades, and inmany parts of Canada, they have become majorfactors in the progress of forestry and forestuse.

A point to keep in mind is that there havebeen constant tensions between the provincesand the federal government over sharing ofpower. Those tensions came to a head in theseventies "…at the First Minister's ConstitutionalConference in Ottawa, February 5-6, 1979, thenature of the discussions which took placebetween the heads of governments at that timecan be gleaned from Prime Minister PierreTrudeau's statement following the conference.Mr. Trudeau declared the national governmenthad gone 'a very considerable distance' at theconference 'to satisfy feelings of regionalalienation, feelings of provinces who felt thatthey were endangered by federal preeminencein legislative areas.'" (ACIR 1981) As discussed inthe case of the U.S., such tensions, if balanced,can be healthy in terms of keeping both stateand federal governments focusing on efficiencyand effectiveness in government and keepingthem more focused on accountability in order toavoid loosing powers to the other.

3.4 Concluding CommentsWhile environment, sustainable developmentand ecosystem management have grown inimportance in the minds of Canadians and worldcitizens in general, a continuing major factordriving forest management and many of theforestry issues in Canada is the importance tothe economy of Canada's forest industry and

trade in forest products. There are hundreds offorest dependent communities in Canada (onesin which more than fifty percent of thecommunity's base income is dependent on forestbased activity). One in 16 Canadians dependedon the forests for work in 1996. Forestindustries employ some 350,000 people directlyand indirectly some 770,000 Canadians dependon the forests for employment. Forest productssales generate over 58 billion (Canadian) dollarsannually, and make a net contribution of someC$34 billion, or more than half, of Canada'sannual trade surplus (National Forest StrategyCoalition 2003). Thus, economic benefits fromforest industry are an important factor inCanada's thinking about forests. Similarly, theenvironmental aspects of the forest are clear inthe minds of Canadians today. These twointerests often conflict and are the basis fordebates that lead to changing legislation,regulations and approaches to forestmanagement. The issues arise more betweencivil society groups and both provincial andfederal levels of government rather thanbetween the two levels of government.

In 1998, all the provincial and federal levelministers with primary responsibilities relatedto forests signed the Canada Forest Accord. Agreat number of private and civil society groupsalso signed the accord, including the NationalAboriginal Forestry Association, CanadianInstitute of Forestry, and others. While it is aflowery, highly political document in a way, atthe same time, it reflects the Canadian will towork together in land management. It alsoreflects the strength of the movement towardincreasing the effective involvement of thepublic in making decisions on the 94 percent offorest land that belongs to the public domain.Indeed it has been stated that "…one of thediscerning features of Canadian resourcemanagement in the 1990s has been atremendous innovation and progress in publicparticipation in the forest sector." (Chambers2003). Many provinces and territories now havelegislation that requires public participation inforest management.

The public organizations involved in federaland state/territorial management of forests inCanada recognize the importance of continualinteraction and cooperation. In fact, as in thecase of Australia, they have joined together inthe Canadian Council of Forest Ministers (CCFM)that is focused on making more effective andefficient linkages between federal andprovincial/territorial entities. Canada, likemost of the other countries reviewed, is a goodexample to illustrate how long it takes to movetowards a satisfactory system of forestmanagement and administration in a federalsystem of government. A main lesson from thiscase and others is that it is unrealistic to expect

a newly established federation to move rapidlyinto a stage where it has an effective andefficient forest governance system that isresponsive to both the national and the regionalneeds and wants.

4.0 THE UNITED STATES OFAMERICA4.1 Background and Forest OwnershipThe United States (U.S.) began as a set of stateswith their own laws and lands which cametogether as a confederation. Morecentralization occurred over time. Thiscontrasts with the sequence of events in manyother countries in which the country wasdivided into multiple states, anddecentralization and devolution occurred later.As territories and states were established withinthe U.S. and as grants of land went tocompanies (e.g., the railways) and to privateindividuals through various means of transfer,the ownership mix gradually shifted to mostforest land being in private ownership. Atpresent, more than 77 million hectares (ha) in41 states are in the national forest system (outof a total federal ownership of 105 million ha),while only about 15 million ha are in stateownership, and some 180 million ha are inprivate hands, including both industrial andnon-industrial ownership. Thus, in contrast tosuch countries as Australia and Canada, forestownership in the U.S. is predominantly private,and some 80 percent or so of timber productioncomes from private lands. Federal governmentownership is heavily concentrated in the West(since these were the states that were formedafter the federation was formed) and privateownership is concentrated in the South (almost90 percent of the forest land in the South isprivately owned). The heavy concentration ofprivate forest land creates some issues andresponses that are different from countrieswhere public ownership predominates.

4.1.1 Federal OwnershipIn contrast with many other federations, wherethe constitutions gave all or most forestownership to the states or provinces, forestsinitially were placed in the "public domain"under what is now the federal government.Thus, 1789 Constitution had a "Property Clause"that reads:

The Congress shall have power to dispose ofand make all needful rules and regulationsrespecting the territory or other propertybelonging to the United States; and nothing inthis Constitution shall be so construed as toprejudice any claims of the United States, orany particular state."

The U.S. Supreme Court has upheld the right

of the federal government to hold land in itsownership unless Congress directs it otherwise.Formal federal forest reserves were establishedin 1891 with the passage of the "Forest ReserveAct." It authorized the President to create"forest reserves." These early reserveseventually (1907) became the national forests(currently some 77 million ha) undermanagement by the U.S. Forest Service, createdin 1905. It was evident that, while the USCongress in the early days was in favor of afederal forest reserve system, there was concernfor how much of the public domain would be putinto federal hands for management and thus notavailable for use and revenue generation withinthe states. Thus, as mentioned below, in 1907the U.S. Congress restricted the President fromestablishing any new federal forest reserves insix western states without the consent of thestates (Williams 1999).

4.1.2 State Ownership and ConflictThere was a great concern from earliest days ofprofessional forestry that adequate support andguidance be given to the private forest landholders, as well as the states. Initially, the focuswas on helping states to formulate their ownforest policies and to assist them inscientifically surveying the forest resourcesunder their jurisdiction. In more recent times,many states have established forest practiceslaws that guide private forest management. Thefederal government provides substantialresources to states and to the private sector,both through direct incentive payments andthrough contributions in kind, e.g., throughfederally funded research and extension andother means of sharing knowledge and creatinginnovations in forest management that can beapplied in many states. National public goodsprovided to states, but paid for by the federalgovernment, are an important aspect of thefederal support for state and private forestry.

There have been many attempts by statesand counties within them to take over control offederal lands. It has been a contentious issue inthe U.S. since the early days. Some notabledebates on states' rights with regard to federallands related to:

• The 1907 Public Lands Convention, called bythe governor of Colorado, which called forthe cession of public lands to the states andfor restriction of national forests;

• The Federal Appropriations Act of 1907,which among other things forbid theexecutive branch (the President) fromcreating or enlarging national forests in theWest, except by Act of Congress;

• The spate of State Resolutions for federalland transfers to the states that were passedand presented by western states between



1913 and 1919;• The so called "Sagebrush Rebellion" (the

tensions at times built into violence) of theearly 1980s during the presidency of RonaldReagan, who was a strong advocate forturning some federal lands back to thestates; and

• The introduction in 1980 by Utah SenatorOrrin Hatch's of Senate Bill 1680 relating totransfer of land from federal to stateownership. The U.S. Forest Service, in itseffort to defend its lands against transfer tostate control produced an interesting draftreport. It is worth noting the 10 mainreasons for continued federal ownership thatwere in the conclusion of that report:

1. National forests represent a heritagethat is of national and not just localinterest.

2. Transfer of lands would likely lead toeventual private ownership, andsubsequently a loss of access,wilderness, opportunities for solitude,and other amenities.

3. Environmental protections would bestronger under federal management.

4. States would bear a significant financialburden trying to manage federal lands.

5. The transfer of management to stateswould, "submerge professionalmanagement under short-term politicalexpediency."

6. While acknowledging some publicrelations problems, the Forest Servicehad citizen participation programs inplace, with more and improved programson the way.

7. National forests under federal carewould better protect national interests,such as security and energy needs.

8. National forest management goalsinclude social factors that states wouldlikely dispose of in the quest to maximizeprofits.

9. "Active and passive users" support thenational forests -- not just thosepopulations closest to the forest lands.

10.The change in management from federalto state would increase uncertainties formanagement of national forestresources.

In sum, the agency declared:Transfer of land ownership drastically vitiatesthe Nation's Heritage and its national securityneeds." Many of the points raised by the ForestService were on-target, and by 1983, theSagebrush Rebellion in its immediateincarnation had fizzled, due to a combination ofpublic opposition, court rulings against state

control, inconsistent objectives by the rebelsthemselves, and the departure of SecretaryWatt.

Healthy tensions have existed and beenmaintained over the years between those whofavored federal/central and those who favoredstate and more local, control and managementof forest lands. Even today, there are strongopinions on both sides (cf. Thomas 1995). Mixedinto these tensions related to levels ofgovernment and forest responsibilities havebeen the varying views on private forestry andforest ownership and responsibilities.

4.2 Federal Forest ServiceDeconcentration of management within the U.S.Forest Service (as distinct from devolution ofmanagement responsibilities to states) tookplace throughout the early years, as federalforesters moved out into the regions and startedmanaging national forest lands on the ground,regional administrative offices wereestablished, experiment stations focusing onregional issues were created, and links to thestates were strengthened through the Branch ofState and Private Forestry, created within theForest Service in 1908 (Williams 1999). Concernssurfaced early on regarding the adequacy of thelocal knowledge of what to do to manage forestsproperly, the resources to do what needs to bedone, and the institutional mechanisms andincentives to actually carry out what needs tobe done.

A key need in many countries is effectivefire protection. The U.S. was and still is one ofthem. Before 1911, the US Forest Service couldnot help with forest fires in the states unlessthey had entered national forest lands. In 1911,the Weeks Act was passed and it allowed theForest Service to help no matter where firesstarted and ended. This turned out to be acrucial change as population and access toforest increased, and fires became more of amajor problem in U.S. forests.

Similar federal-state relationships wereestablished in the case of forest pests in 1947,through passage of the Forest Pest Control Act,which recognized a federal responsibility forforest insect and disease protection on allownerships. The Cooperative ForestManagement Act of 1950 expanded the ForestService's cooperative efforts to technicalassistance and extended managementassistance to all class of ownership. Theprovisions of this act were updated andexpanded in the Cooperative ForestryAssistance Act of 1978, which was amended inthe 1990 farm bill. Increasingly, theresponsibilities under State and Private Forestrywere delegated to U.S. Forest Service's regionaloffices.

4.3 Concluding CommentsAs mentioned, even today, there is some publicdiscontent with the specific ways in which theU.S. Forest Service manages the nationalforests. Thus, "…despite sincere efforts by theU.S. Forest Service to improve modes of publicinvolvement, the contentiousness andfrequency of conflict continues to escalate"(Germain et al. 2001). Federal agencies ingeneral face much stricter requirements forpublic participation than do state and localagencies; and the federal government facesmany challengers who want to see more forestland go into state and local hands so they canproduce revenues for the states and moreclosely meet local wants (Thomas 1995).

Similar concerns with undue federalinfluence relate to state regulation of forestpractices. For example, the State of Oregon'skey piece of forestry legislation is the 1971Forest Practices Act. It was issued as a directresult of the formulation of the federal CleanWater Act (CWA), finally enacted in 1972. Thefederal CWA worried the Oregon forest industryabout possible unwelcome federal and/or stateregulation of forest practices on private lands.The industry feared that a non-forestry agencymight end up with regulatory responsibility overforest practice regulations, with uncertain andunpredictable consequences for industriallandowners. In addition, there was a widelyheld belief among forest industry officials thatstate regulation of private forest practiceswould be much less severe than federalregulation.

Even at the level of federal forestmanagement, the situation is complex, withmany arguments over the best way to managefederal lands. There are several agencies thatmanage federal forests, and their managementapproaches and goals often are quite similar,which leads to calls for consolidation in onedepartment or another. There are in factcontinuing proposals to merge two major forestmanagement agencies, the U.S. Department ofAgriculture's Forest Service and the Bureau ofLand Management (BLM), which is in theDepartment of the Interior (Gorte and Cody1995 provide the history of the debate).

The dominant focus of forest interests hasshifted over time in the U.S., from an earlyalmost exclusive focus on forests as beingnuisances that need to be cleared or, at best, asource of timber and other products, to thepresent-day dominant view of public forests asbeing sources of environmental services-watershed and biodiversity protection,recreation and other amenity services. At thesame time, there are those who feel verystrongly that forests in a local area also should

be used to generate revenues for local levels ofgovernment. The changing mix of viewsconcerning purposes has had implications interms of the debates on federal vs. state andprivate ownership and management. There isevidence that state agency management andinnovation are more likely to focus on timberprovision, revenue enhancement and economicdevelopment, and federal agency managementand innovations are more likely to focus onenvironmental protection and related services(Koontz 1997 and various references citedtherein). In the specific case of timberproduction, the U.S. Government AccountingOffice, studying in detail differences betweenfederal and state agency management fortimber production, argues that state agencies(in the states studied) sell more timber volumeper acre than does the U.S. Forest Service, andbecause of lower costs for the states (associatedwith fewer and less restrictive requirementsthan in the federal case) they return moreresources to the states (GAO 1996), despite thefact that the Forest Service is required to giveback to the counties in which national forestsexist a significant portion of their grossrevenues in lieu of property taxes. A number ofissues surround the "in lieu" payments tocounties, including the fact that they aredeclining in many areas because of the ForestServices move away from timber production andtoward environmental services, which generallyresults in less revenue for the states (Gorte2000).

5.0 THE RUSSIAN FEDERATION 5.1 Background and Forest OwnershipThe Russian Federation forest policy andadministration have been in flux since the 1993Constitution was passed. Russia currently isundergoing some major reform in terms of theforest sector. Thus, this brief overview focuseson and emphasizes the transition process andwhat is being done during it, rather thanfocusing on existing forest management systemswhich soon will change. At the outset, it isworth mentioning that a clear, consensus visionfor the future of Russian forestry still remains tobe established. That is required before many ofthe elements mentioned below can fall intoplace.

The Russian Federation is made up of 89administrative units, including 21 republics, 6krays, or territories, 49 oblasts (regions), 2federal cities (Moscow and Saint-Petersburg), 1autonomous oblast and 10 autonomous okrugs.Russia has by far the largest land area and forestarea in the world-some 1,689 million ha of landand some 851 million ha of forest land. Thus,about 50 percent of the land area is forested.


Significantly, of this total forest land anestimated 17 million ha are in plantations.Forests play an important role in the lives ofRussian people. Eight percent of the activepopulation has employment directly orindirectly related to the forest sector. Overall,the lives of about 20 million people are directlyconnected to forests. Wildlife and other nontimber forest outputs are important in parts ofRussia. In terms of industrial products, in 2001,Russia's timber and paper exports were worth$4,100 million and forest industry accounted for4 percent of total outputs and exports of Russia.Potential tax revenues from the forest sectorare estimated as being between $2,500 and5,500 million per year, which indicates why thesector is important to Russia (Debroux et al.forthcoming)

Forests of Russia have remained federalproperty (94 percent of total forest in Russia),but the budget to support managementactivities barely covers half of what is requiredto do an adequate job. Further, the Russianforest industry sector collapsed during theperiod from 1988 to 1998. Illegal logging isrampant (Sheingauz 2001 as cited in Shvidenkoibid).

5.2 Forest Governance5.2.1 Federal Forest Service and Sub-National ResponsibilitiesA law passed in 1996 reorganized the FederalForest Service (FFS) with 81 regional forestcommittees and 1740 district forestcommittees. Forests and forestry are currentlyregulated by the 1997 "Forest Code of theRussian Federation" as well as forest codes ofvarious administrative units ("subjects"). Majorchanges are now under consideration and mostagree that they are needed. Thus while themajority of Russian forests are federal property,the Forest Code of the Russian Federationdelegates a number of important forestmanagement functions for these forests to thesubjects of the Federation. However, Petrov(forthcoming) points out that:

The management functions and associatedauthority are not accompanied by respectiveobligations. For example, governmentauthorities of the subjects are able to makedecisions on the allocation of forest plots forlease and free use, decisions which ultimatelydetermine the level of income from forestry.However, the federal government is responsiblefor financing the protection, renewal andorganization of forest use. This unequaldistribution of rights and obligations leads toconflicts in forest administration and forest use.Further conflict stems from the fact that in somesubjects, authority for forest administration hasbeen delegated to local governments, which donot belong to the official system of government

authorities and thus do not perform stateproperty management functions.

Leskhozes are state enterprises (a type ofregional forest service) responsible for forestadministration, harvesting, wood processing,and forest renewal. They were established inthe 1930s when forests were nationalized. Theyremain today as state institutions (as providedin the Fundamentals of Forest Legislation,adopted in 1993). Their financial activities areregulated by the Budget Code of the RussianFederation. The leskhozes system is in need ofreform to introduce more competition,incentives for efficiency and effectiveness, andresponsibilities with regard to forestmanagement. As the private sector enters thepicture more strongly, reform in the Leskhozesis even more important (Petrov forthcoming).

5.2.2 Russian Federation Forest Managementin TransitionWhat of the future? The World Bank has beenactively involved in helping the RussianFederation with its forest reform, and it isuseful to quote in full a section of a recentreport (Debroux et al forthcoming) that lays outcurrent Russian intentions:

The recently approved Concepts and thecurrent draft laws foresee that the Forest Fund(forest estate) will remain under ownership ofthe Federal authority. Other forests will remainunder ownership of the Subjects of theFederation (Regions and Municipalities) or otherpublic authorities.

Those documents also indicate thatsustainable management of forests willincreasingly rely on contractual relationshipsbetween Owner and User of the forests. Inaccordance with civil law principles, these "usercontracts" will set the rights and obligations ofboth parties. The overall orientation is todelegate management operations and marketactivities to forest users while focusing the roleof public services on strategic and regulatorycore-functions. The forest user should then takeresponsibility for implementation of sustainableforest management plans and payment of rentalfees in exchange of secured access to theresource; while the administration will focus onlaw enforcement. Such orientation relies on aclear demarcation between public and privatemandates, and is in line with the disengagementof the State from production and commercialactivities, as applied in other sectors. Fourcategories of such "user contracts" or"delegation contracts" are being set up by thecurrent draft laws: concession, lease, non-timber lease, and short-term use. Throughthose contracts, parcels of the Forest Fund willbe rented, not sold. It is important thatownership of the forest remains with the publicauthority.


However, the Bank also understands that thepublic authority will continue to directlymanage a significant part of the Forest Fund.Not all forests can fall under user contractsbecause they would not, or not yet, beprofitable from a private-sector point of view orbecause they have a protection status.Consequently, direct management should focusprogressively on protection forests, young ordepleted stands, forest reserves, and toofragmented or inaccessible areas.

In conclusion of the above analysis the Bankunderstands that forest management in Russiawithin the next 10-20 years will eventually fallunder two main systems corresponding to twosubsets of the Forest Fund:

• Under user contract management, forestswill be managed by forest users under thesupervision of the forest administrationaccording to the provisions of "delegationcontracts". This system will progressivelybecome regular practice for most productionforests (Group III-B of the Law).

• Under direct management, forests will bemanaged by the forest administrationthrough its execution body. This system willfocus on non-production forests (Groups I, IIand III-A of the Law) and on productionforests where concessions and other usercontracts are not, or not yet, viable.Ultimately, no "final harvesting" will beconducted in these forests. In the short-termhowever, final harvesting in these forestswill remain necessary as part of a transitionperiod.

In each district, a forest land-use planningoperation should map all forest areas of theForest Fund according to their classification ingroups I, II and III of the Law (sustainableproduction; environmental protection; others).Such forest zoning should be conducted by theforest administration through a participatoryprocess including all interested stakeholders.Through this participatory process, thegovernment as owner of the forest willdetermine which areas will be allocated underuser contracts or remain under directmanagement. The forest zoning will also showthe size and boundaries of proposed concessionareas, and set the timeframe for their gradualallocation overtime (10-20 years).

The plan is to have one single Federal ForestAdministration, with regional and districtoffices reporting to the federal level. However,as mentioned above, the subjects of theFederation will share some authority with thisfederal forest administration through regionalregulation-making bodies; but such regulationswould be enforced through the Federal ForestAdministration. There likely also will be some

form of forest implementation agencies thatwould be responsible for direct implementationof forest operations, where they are notcontracted out or carried out by forest users,under the auspices of the Federal ForestAdministration.

The question arises: what will happen to theexisting leskhozes? The analysis of options is stillunderway. There are approximately 1800leskhozes; one per district (about 8,000);representing approximately 200,000 workers (60percent of which are state forest guards). TheWorld Bank (Debroux et al. forthcoming) hasanalyzed this question and suggests threeoptions:

• Leskhozes could specialize and focus onstrategic and regulatory functions; or

• Leskhozes could specialize in directmanagement of forests not under usercontracts as described above.In these two options a new entity wouldneed to be created to fulfill the alternatefunction.

• The third option would be for leskhozes tosplit into two separate entities with the firstbeing in charge of strategic and regulatoryfunctions and the second being in charge ofdirect management of forests.

Advantages and feasibility of the three optionsstill need to be carefully assessed. Careful andcomprehensive restructuring plans will alsoneed to be developed later on in order to takebest advantage of the social and technicalcapital of the leskhozes. The final restructuringpattern may vary from place to place across theFederation, in order to take into account theinitial situation of each leskhoz and the scopefor regulatory and implementing services thatare needed in each district (depending on areasto be transferred under user contracts).

5.3 Concluding CommentsUnder the World Bank's model of forest reformin the Russian Federation, forest ownership andthus control will be retained by the federalgovernment, which is the opposite model fromthe Canadian and Australian models, where theownership and control of forests is primarilyvested with the provinces. Meanwhile, some ofRussia's forests are in a deteriorated state,particularly around a number of the populatedareas, but most remains in a reasonably goodstate, and some 26 percent is still unchanged byhuman activities. Petrov (forthcoming) pointsout that

"Throughout the last decade of economicand structural reforms in the RussianFederation, the forest sector has remained onthe sidelines, retaining several attributes of theold economic system, including:



• A monopoly of public ownership in forests;• Forest administration through, Leskhozes,

local-level forest administration structures,which combine both public administrationand forest management functions;

• A forest resource allocation system withoutany real competition; and

• A non-transparent financial systemcharacterized by low returns from forest useand government funding for forestmanagement operations."

Thus, forests during the transition period (1992to the turn of the century) have fared about thesame as before the Federation was formed in1993 (Shvidenko 2003). Regarding the earlierhistory, Nilsson and Shvidenko (1998) point outthat:

"the former Soviet Union paid reasonableattention to the forest sector and itsdevelopment… However, authoritarian politicalregimes, strongly centralized management, andthe lack of a sound economy made the forestsector's development insufficient. By the early1990s, huge problems accumulated in the Sovietforest sector, and the transition explicitlyrevealed and enforced these problems."

There is no question about the importanceof Russia's forest resources, both to the Russiansand to the rest of the world. Thus, it is urgentthat the Russians come together to develop astrong vision of the future of their forests, sortout the inter-sectoral issues, make appropriatearrangements for federal-subject sharing ofresponsibilities, authority and resources, anddevelops appropriate mechanisms for ensuringflexibility and response to the internationalcommunity and the agreements in which Russiaparticipates.

6.0 MALAYSIA6.1 Background and Forest OwnershipMalaysia, a country of 33 million hectares (ha)was formed in 1963 and consists of PeninsularMalaysia, Sarawak and Sabah. It is aconstitutional monarchy, made up of afederation of 13 independent states and twofederal territories (the capital city of KualaLumpur and the island of Labuan, off Sabah). Ithas a parliamentary system at the federal level,headed by a Prime Minister. The King of themonarchy is chosen for a five year term fromamong the royal families from the ninepeninsular states that have royal families.

Forests cover about 60 percent of thecountry's land base or some 19 million ha andare among the most complex forest ecosystemsof the world. Of this total some 18 million haare the inland Dipterocarp forests.Deforestation rates estimated for the period

1980-1990 reach some 237,000 ha per year. Malaysia also has some 4.8 million ha of tree

crops, mainly rubber, oil palm, coconut andcocoa. Rubber plantations produce excellentwood for furniture that Malaysia exports to theglobal market. Malaysia is a major producer andexporter of tropical timber. Products areexported to the Far East, Europe, West Asia andAmerica. There are more than a thousandsawmills, 177 plywood mills and some 2000furniture mills. The sector provides jobs forabout a quarter of a million people.

The Malaysian Constitution places land andforest ownership under the jurisdiction of stategovernments. Only in a few instances, occurringmainly in Sarawak, do forest lands belong tocustomary communities.

6.2 Federal Forest ManagementResponsibilitiesWhile the primary responsibility for forestry lieswith the states, the Constitution, under Article94(1), ninth schedule empowers the federalgovernment to formulate forestry legislationneeded to promote uniformity between states.Each state is therefore responsible for themanagement of its forests, but it does so undera forest policy that is common. The authority ofthe federal government extends to provision ofadvice and technical assistance on forestmanagement and development to the states, tothe provision of training and research facilities,and control of certain other functions related totrade and industrial development andenvironmental impacts of forest relatedactivities.

The National Forest Policy for themanagement and administration of the country'sforests, covering Peninsular Malaysia, Sabah andSarawak, was adopted in 1978 and then revisedin 1992 to take account of increased concernsfor the conservation of biodiversity, sustainableuse of genetic resources and participatoryforestry (Chandrasekharan 2003). NationalForest Policy implementation is governed in theeleven states of Peninsula Malaysia by theNational Forestry Act of 1984. The Act wasamended in 1993 to include more severepenalties for illegal activities and wood theft.

In order to coordinate and facilitateinteraction between the federal and stategovernments, and foster a coordinated commonapproach to forestry management, theMalaysian National Land Council-empowered bythe Constitution to formulate national policiesrelated to forest (and agriculture and mining)land use-established the National ForestryCouncil (NFC) in 1971. The NFC is a forum forfederal and state governments. The NFC is thehighest forest policy entity and is chaired by theDeputy Prime Minister. The responsibility forimplementing the decisions issued by the NFC


lies with the state governments.A number of other organizations also relate

to the forestry sector and its performance. TheForest Research Institute of Malaysia (FRIM)undertakes forest management and forestproducts research. The Malaysian TimberCouncil (MTC), established as a TrusteeCompany, promotes the development of thetimber industry in Peninsular Malaysia anddedicates a large share of its attention tomarketing issues, increasing the wood rawmaterial supply to the wood processing facilitiesand improving their technological levels. TheMalaysian Timber Industry Board (MTIB)established in 1973 has responsibility forfostering the development of the timberindustry. The Malaysian Timber CertificationCouncil (MTCC) was established in 1988,operates a national voluntary certificationscheme providing assurances to consumers thatproducts are sourced in sustainable managedforests. The Federal Ministry of PrimaryIndustries oversees, coordinates and monitorsthe activities of the State ForestryDepartments, FRIM and the MTC. A number ofother organizations exist at state levels, withsignificant forest management responsibilitiesor inputs. These include the Sarawak TimberAssociation, the Sabah Timber IndustriesAssociation, and the Sarawak Timber IndustryDevelopment Corporation. The federalgovernment taxes processing industries, boththrough export taxes and through income taxes.

6.3 State Forest ManagementResponsibilitiesUnder the Malaysian Constitution, land isdefined as a state matter. Each state isempowered by the Malaysian constitution toenact forestry laws and formulate forest policyindependently. As mentioned, overall guidanceis provided by the National Forestry Policy(NFP). In Sabah, the Sabah Forest Enactment1968 provides the legal basis to ensure thestatus of the Permanent Forest Estate, while inSarawak the Sarawak Forest Ordinance 1954provides the necessary legal framework.

The forests of Malaysia are divided into twomain groups, the Permanent Forest Estate andStateland Forest areas, also commonly calledConversion Forests. The former is the area offorest that is intended as permanent forest forthe benefit of the citizens and the latter is theforest that can be converted to other uses,including plantations. In more recent times,there have been efforts developing toincorporate the Conversion Forests back intothe PFE. The PFE comprises 14.3 million ha, ofwhich 3.7 million ha are broadly designated asprotection forests (soil and water protection aswell as amenity forests), and 10.6 million ha areavailable for productive purposes. An additional

2.1 million ha of forest outside the PFE isprotected in National Parks and WildlifeSanctuaries. Stateland Forests presentlycomprise around 3.5 million ha (FAO 2001). Thestate governments directly tax forest usersthrough concession fees, royalty taxes onvolumes of wood harvested, and income taxeson incomes earned from forest activity.

6.4 Malaysia's Concession SystemMalaysia has a rather unique concession system,where the private sector not only is involved intimber harvesting, but also with management ofa state's forests on a sustainable basis. FAO(2001) describes the situation in Sabah, forexample:

Opportunities for joint activities betweengovernment and the commercial private sectorhave been made possible through a 1997initiative of the State Government of SabahMalaysia. The government has established 27Forest Management Units (FMUs) with theobjective of ensuring sustainable forestmanagement (SFM) in the state. Each FMU isabout 100,000 hectares in size and managementagreements with private companies offer securetenure for 100 years. The FMUs are generallylogged-over areas or forests currently underlogging. The private sector is invited toparticipate in the management of these FMUsusing long-term SFM principles, includingdevelopment of conservation, natural forestmanagement and tree-crop plantations. Forestmanagement plans must be prepared andapproved by the Forestry Department. Similarly,other plans for harvesting, reforestation andother activities have to be prepared forapproval by the Forestry Department beforebeing implemented.

Each forest concession area or forestmanagement unit, whether inside or outside thePFE, must have a Forest Management Plan. FAO(2001) points out that …since the 1950s, thedevelopment and implementation of forestmanagement working plans has been mandatory.The plan contains a description of the area, theobjectives of management or prescriptions onhow the management unit is to be harvested, thespecies to be removed, the minimum cuttingdiameter limits, the annual allowable harvest,penalties for harvesting damages and a variety ofother prescriptions. Plans that encompassharvesting must specify the number of trees tobe left behind, road construction prescriptions,and measures taken to minimize soil erosion andother residual damage.

It is not clear the extent to which themanagement plans are uniformly checked andimplementation is supervised and monitored.

6.5 Concluding CommentsThe focus of forestry in Malaysia in the past was


dominated by timber interests and the desire ofthe country to earn significant revenue fromprocessing and export of timber and forestproducts. In more recent years, there appearsto be a shift in focus more towards sustainableforest management for multiple uses, includingenvironmental services. In this regard, thecountry has prepared national level criteria andindicators for sustainable forest management,has developed a domestic forest managementcertification system, and has a relatively robustforest regulatory and monitoring system. All ofthese are jointly put forth and administered bystate and federal governments.

The extent to which the move towardssustainable forest management for multipleuses is a real shift in aims (rather than rhetoric)is a matter of debate, although there is someevidence of real progress in terms of forestconservation. For example, a NationalConservation Strategy has recently beenformulated and incorporates Malaysia's forestconservation objectives and, as mentioned anational certification body has also beenestablished.

Malaysia has come a long way from its earlyrampant forest exploitation days toward astable system of sustainable forest managementand a balanced influence of federal and stategovernments in ensuring that both economicand environmental benefits flow from thecountry's forests. Malaysia has made illegallogging and other forest activities a seriousoffence: the amended National Forestry Act of1993 provides for very stiff penalties and longprison terms for illegal activity, and itempowers forest rangers to call in police andeven the armed forces to enforce the provisionsof the Act. Although these measures are inplace they may not be employed on a regularbasis, and illegal logging is still rampant.

7.0 NIGERIA 7.1 Background and Forest OwnershipPresently, forest reserves cover less than 10percent of Nigeria's territory. Total forest area isaround 13 million hectares (ha) mostly of thesavanna woodland type. The southern rainforest, the source of the country's timberresources, covers only 2 percent of the totalland area of Nigeria. It is being depleted at anannual rate of 3.5 percent per year, implyingdeforestation on a large scale. The persistentdecline in the national forest has been a sourceof concern to the federal government. In orderto arrest this situation, the government hasembarked on several programs and projects onreforestation and afforestation. In fact, it isestimated that there are some 700,000 ha ofplantations. However, over the past 20 years,plantation programs have been at a stand-still

except in a few states in which internationalagencies have been supporting plantingprograms.

Nigeria has a long history of forestmanagement and exploitation. In 1899 the firstNigerian Forest Department was created to dealwith timber and rubber trade and to establishforest estates. The British colonialadministration set up forest reserves, largely fortimber production, and the remnants of thesereserves constitute the present forest estate ofNigeria.

Nigeria is one of a growing number ofcountries in Africa that has, at least on paper, afunctional federal-state-local governmentsystem of forest governance and management.Responsibilities, authority and resources areshared, at least nominally, between the centralor federal government and the states and localgovernment authorities within the federation.The federal system of governance was adoptedin the 1954 constitution and later reaffirmed inthe 1964, 1979 and, most recently, the 1999constitutions. However, the Constitutions didnot spell out forestry duties for different levelsof government. The federation as it currentlystands has three tiers: the federal government;36 state governments; and 774 localgovernments. To keep the system in perspectivein what follows, it has to be looked at in thecontext of the fact that a succession of militarygovernments ruled Nigeria for 31 of its 40 yearsof independence. A democratically electedgovernment at all three levels-federal, stateand local-took office in May of 1999.

As in the case of other federal systems ofgovernment reviewed here, the first federalconstitution of 1954 gave the authority andresponsibility for forest management to theconstituent regional governments (3 at thetime). States were formed out of the regionsand there were 36 within the federation by1996. They were encouraged to develop theirown forest laws and policies in the context of abroader National Forest Policy adopted in 1988.However, while the 1988 Policy attempted toinvolve state and local government authorities(LGAs), no state has yet derived and publishedpolicies, programs or plans that fit within thenational perspective.

7.2 Role of Federal GovernmentThe central organ of Nigeria's forest governanceat the national level is the Federal Departmentof Forestry. The main functions of thedepartment include: formulation of nationalforest policy; land-use planning; forestrydevelopment and environmental management;the promotion and funding of projects ofnational interest; the co-ordination andmonitoring of forest activities arising frominternationally funded projects; research,


training and education; trade and industrialdevelopment; and institutional development.The federal government is only involved in theadministration of forest revenue in the eightnational parks in the country, where gate feesare paid by tourists and where there is someorganized harvesting of over-populated animals.

7.3 Role of Sub-National GovernmentsThe 1999 Constitution gives shared control overthe development of natural resources to thelocal governments and the states. However, thelanguage used is very vague and there isconfusion in the respective mandates betweenlocal and state governments and this leads toinefficiencies and inaction in many cases.Further ineffectiveness of state and localgovernments is caused by the highlyunpredictable and uncertain nature of fiscalresource transfers from federal to state andlocal governments. This is compounded by lowcapacities in many state and local governments,with many public agencies being weak in termsof internal controls and technical skills. This isparticularly a problem in the more recentlycreated states (World Bank 2002).

State governments award timberconcessions on the forest reserves within theirstates. Those harvesting timber pay royaltiesto the state. As pointed out elsewhere, "…moststate governments have tended to treat forestreserves as a resource for governmentpatronage, rather than as elements of nationalor state patrimony" (LTS 2001). Oftentimes,the revenues from concessions are sharedbetween state and local government andtraditional community rulers, but not in anyfixed proportions. In theory much of the forestland is considered to be owned by the localcommunities, held in trust for them by thestate governments. In theory, part of therevenues from use of the forest goes to thelocal communal landowners, although inpractice the funds often get diverted toothers. For this reason, local communitiesoften have no incentive to prevent illegallogging and often collude with the illegalloggers because they can get more out of suchcollusion (LTS ibid).

7.4 Forest Revenue and Financing SystemSince one of the key, major problems facingNigerian forestry is the inadequate and oftenuntimely financing for forestry, it is worthproviding a bit more detail on the forestrevenue systems and financing issues in Nigeria.

Historically, public funding of forestryprojects and programmes in Nigeria has beeninadequate and untimely at both the level ofthe Federal Government and stategovernments. In some states, it is as low as 1percent of the annual state budget (Federal

Department of Forestry 2001).A fairly recent, thorough and detailed

review of this subject is available (FederalDepartment of Forestry, 2001) and is drawnupon in the following paragraphs

Since the late 1970s, the collection of forestrevenues has been primarily the role of theState Forestry Departments in Nigeria. Thestructure of the forest revenue system inNigeria must, therefore, be viewed from thedifferent policies of the 36 individual states andthe Federal Capital Territory (FCT). However, itturns out that the structure of the forestrevenue system in most states contains thefollowing common elements:

• The authority to regulate and collect forestrevenues;

• Various models for assessing forest charges;• A variety of types of fees are used;• Different levels of charges exist in different

states to reflect local conditions;• Concession arrangements for long-term and

short-term forest harvesting; and• Revenue sharing formulas.

Charges differ across Nigeria because forestsare managed by the Forest Services ofautonomous state governments (and in somecases local governments in the NorthernStates). Each management authority is free todetermine both the level and structure of forestcharges and to vary these over time as it seesfit. This results in great differences in forestcharges for some species . The authority to setcharges is vested in the State ExecutiveCouncils, which receives technical advice fromthe Forestry Departments. However, there areno clear mechanisms for setting forest chargesin many state Forestry Services in Nigeria.Charges are set administratively with no statedperiod of review. Forest charges are notregularly updated. State Forestry Departmentsput a lot of pressure on state governments forregular upward review of charges, but these areoften turned down by governments due topressure from timber merchants, who influencethe governments and lobby them to refuseupward reviews.

All revenues have to be paid into stateaccounts and, as such, become very difficult toretrieve for forestry policies and programs.Funds that are meant to be reinvested in thesector to improve management of the forest arenever forthcoming. By and large, the forestrysector waits endlessly for government's toallocate funds, despite the fact that revenuesare generated all the time. Thus, the realproblem with revenue administration is the factthat in many states the forest resource is largelyseen as a supplier of regular funds into thetreasury, rather than as important natural


resource that should be developed throughinvestment. Thus, public funding for forestrydevelopment relies entirely on annualallocations from government. The StateDepartments of Forestry are allocated fundseach year to cover salary and wages as well asother operational of overhead costs. However,the amounts allocated are entirely inadequateto deal with the issues at hand.

Some states have adopted models of forestrevenue sharing between state and localgovernment and forest funds . Each state isindependent of the others in terms of policiesconcerning the forestry sector. However, basedon the historical relationships between states,some groups of states have adopted commonmodels of revenue sharing. It should be notedthat, although these models are set-out inlegislation, they often are not followed.

In sum, the government recognizes itselfthat the existing forest revenue system is noteffective:

Because of obvious administrative andmanagement lapses, illegal harvesting of forestproducts is rampart and it is estimated thatmore than 90 percent of minor forest productproducers and about 40 percent of timberproducers avoid payment of forest charges. Theforest monitoring system to control exploitationand transportation of forest products hasbroken down, because of a lack of patrolvehicles and an inadequate number of staff.Moreover, the uniformed forest staff is notmotivated and equipped enough to enforce thelaws concerning forest exploitation. Most often,forest products are exploited by ruralcommunities bordering the forests withoutpaying the necessary charges for permits tocollect the products.

The problem of the forest revenue system inNigeria is basically one of market failure. Thesetting and collection of forest revenues isdetermined by the government and is not basedon the interaction of supply and demand. Thus,because the market is not used to fix suitabletariff rates, the charges on forest harvesting donot result in prices that would equilibrate woodproduct demand with the sustainable level ofsupply. Another problem concerns the sharing offorest revenues. In theory, government issupposed to share a percentage of revenuescollected from outside forest reserves with localcommunities (25-40 percent in the savannahareas and 30-35 percent in the main forestareas). However, in practice, forest revenuesare not shared with stakeholders.

Also, in most states, forest revenues are notadministered through an independent ForestryCommission, but are paid into the state'sconsolidated revenue fund. This money is notusually made available to the forestry sector forforestry management and development.

(Federal Department of Forestry 2001).The frequent revisions to fiscal policies that

have taken place in the past have been largelydue to changes in government and most of thesechanges have not favored the forestry sector. Bythe period 1989-1992, fiscal discipline in Nigeriastarted to break down and huge deficits startedto accumulate. The fluctuations in policy haveexerted varying degrees of pressure on theforestry sector. The major areas where fiscalpolicies in other sectors affect the forestrysector are as follows: food security; domesticenergy supply; housing; trade; and industrialdevelopment. Policies in each of these areashave had a varied impact on the sustainabilityof forestry management.

7.5 Forest ManagementOriginally, the forest reserves wereadministered by local government authorities (atier below the state governments), since theyrepresented the local community forestlandowners. Gradually, and starting in the midsixties, the state governments started takingover the functions of the central and regionalgovernments and the authority of the localgovernments declined. Local governmentauthority (LGA) staff were often absorbed intothe state forest services or commissions as thestates took on a stronger management role forforests.

There was a period in the late seventieswhen the central government started tostrengthen the LGAs again. The LGAs were to begiven increasing autonomy by the states andwere initially given 10 percent of the federalexpenditure in the states. However, thedevolution of power to the LGAs fizzled in theearly eighties and they remained effectivelyunder state control, mainly because theirfederal funds were routed through the stategovernments (Caldecott et al. 1996). Therewere additional attempts to empower the LGAs,but states have effectively held onto the controlover forests. The forest managementdecentralization problems in Nigeria are mademuch more complex because of the strong rolesthat the many local communities andcommunity groups have had in Nigeria. Yet, asmentioned above, local communities andcommunity interests often are ignored by higherlevels of government in the case of forestrevenues. One of the problems that has arisen isthat while the states have the executiveauthority to manage the forests, their funding isdeclining. They depend heavily on federal funds(most derived from oil revenues) and thus thereis a great deal of uncertainty introduced. At thesame time, LGAs and the federal governmentcontrolled proportionally greater resources(Caldecott et al. 1996). Yet, as of today, despitethe increased funding available to LGAs, none of


them have yet demonstrated real concern forsustainable forest management. As in the caseof federal transfers to the states, transfers toLGAs are not sector specific. LGAs set their ownspending priorities.

Further confusing matters has been theproliferation of new entities and organizationsthat all have some stake in and/or claim onforests and related resources. Thus there are(LTS ibid): an Energy Commission that deals withfuel wood, the National Agricultural LandsDevelopment Authority that deals with landclearing, a national council that deals withwildlife, a Federal Environmental ProtectionAgency that deals with wildlife and variousother forest related matters, a River BasinsDevelopment Authority that deals with someforest areas, a National Parks Board that dealswith some forest areas, etc. The FederalMinistry of Trade controls trade policy related towood and wood products. The FederalDepartment of Agricultural Land Resources(FDALR), on behalf of the Federal Ministry ofAgriculture and Rural Development (FMARD), isarticulating agricultural land use and practicespolicy for the country. In recognition of thechanging strategy for natural resourcesmanagement, the national forest and wildlifepolicy is also being reviewed to make itsimplementation more participatory, while anational wildlife forest law is being developedwith involvement of all stakeholders.Furthermore, states are being encouraged toderive their legislation from the nationalframework (United Nations 2001).

7.6 Concluding CommentsThe uncertainties that have plagued theNigerian forestry sector for many decadescontinue. Thus, at the 41st Session of theNational Forestry Development Committee(NFDC), held in Minna this year, there wasstrong dissatisfaction that the Federal Ministryon Environment still had not convened ameeting of the National Council on theEnvironment to take up the National ForestryPolicy and legislative reviews. (Njoku 2003).These have been scheduled for a long time.

Nigeria recognizes the problem of constantflux in its overall program dealing withenvironmental management. For example, arecent report from the Federal Ministry ofEnvironment (1999) states that, in the case ofcombating desertification, efforts "…have beenadversely affected by frequent shifts in policyby government. Such policy shifts have beenobserved to be, as frequently as leaders-come-and-go and such shifts are dictated by thecountry's economic fortune or misfortune." Thesame fluidity of policies and approachescharacterizes the country's forestry programs,

although the history of flux is much longer thanin the case of formal efforts to deal withdesertification.

The National Forestry DevelopmentCommittee session in Minna was attended bydirectors of forestry from the 36 states of thefederation, ministry representatives, NGOs andcommunity based organizations. Many keypolicy issues were considered, includingprogress on the draft National Forest Policy andNational Forest Act, wildlife development andendangered species management, biodiversityconservation, etc. The participants urged theFederal Department of Forestry to expeditecompletion of work on the forest policy and theNational Forestry Act. Discussions centeredaround issues such as funding, illegal forestactivities, deforestation (still running between350,000 and 400,000 ha per year) and the needfor closer relations between state and federalforestry authorities (Njoku ibid). A state of fluxexists, but opportunities also exist for Nigeria toorganize its forestry more effectively andefficiently and to rationalize the activities ofand relations between community, privatesector, state and federal entities involved inforestry. Stronger links to the internationalcommunity and the international conventionsalso are planned and are desirable.

Forest Management in Nigeria today ismostly limited to government programs. All theforest reserves, which form the bulk of thenation's productive forest, are under themanagement of the states or local governments.The forest outside forest reserves (free areas),where most of the wood products in the marketcome from, are not put under any form ofsystematic management. The forest reserveshave for some time been seriously neglectedand have received little or no improvement interms of investment and management. Many ofthe large plantations of the 1950s, 1960s andearly 1970s were clear-felled in the 1990s. Asidefrom the pulpwood plantations of 1976-82 andthe African Development Bank/World Bankassisted projects in two southwestern state,there have been no large plantationsestablished (Adeyoju 2003).

The United Nations Environment Programmeand CIFOR (1996) suggest that there needs to bea stronger role for the local communities andthe private sector in forestry development andconservation in Nigeria:

Though the forest resources are treated as asource of revenue, the government at all levelshas not invested enough in their developmentand management. Equally, they lack the neededmanpower and funds to clean and patrol estateboundaries. The government alone is thereforeincapable of afforestation on a sufficient scaleto guarantee future wood supplies. There must


be reliance on individuals and communities,particularly in rural areas, to meet a substantialpart of their own needs. The private sectormust be involved in the development of forestestates and the management of existing ones toensure future industrial wood supply.

Nigeria faces many challenges in terms ofmoving ahead with the sustainable managementof its forest resources. Chief among these is howto stem the rapid rates of deforestation andforest degradation, to a great extent caused byrapid population growth and pressures frompoor people who depend on the forest for fuelwood, land and other outputs, but also causedby high incidents of illegal forest exploitation.Increasing institutional capacity, fiscal stabilityfor forestry programs, and the effectiveness offederal-state-local government relations areadditional challenges. A recent World Bankcountry sector background report for a programdealing with Nigerian local empowerment andenvironmental management (World Bank 2002)stresses the challenge of developing a strategyfor "…enhancing governance capacity (i.e.,transparency, accountability, inclusiveness andparticipation) amongst local governments andstates." The report stresses that the strategyshould focus on incentive based approaches.

In sum, the establishment of the FederalMinistry of Environment, with three technicaldepartments responsible for environmentalissues (such as desertification, environmentaldegradation, forest management andconservation) reflects the Federal Government'scommitment to sustainable forest management.The new focus of forestry management has beento review the national forestry policy, introducenational legislation for forestry and wildlife,review state forestry legislation, develop andupgrade forestry management skills, developforestry research, train and re-train forestryworkers and upgrade national forestry resourcesand support centers. The present administrationhas deep concern for forestry development. Thesupport to the sector ranks high in priorityrating. The main concern of government is tosustain the environment through afforestationprograms, in order to control desertencroachment, soil erosion and for forests tocontinue to provide goods and services to theeconomy.

In the various laws passed since the originalconstitution, it was reaffirmed that the stateshad a high level of political autonomy, but fewopportunities to generate revenues. Rather,they depended on the federal government forfunds. Thus, states competed for federal funds.The paradox is that on paper the federalgovernment is not strong in relation to thestates in terms of control and management offorests, but in practice it is strong because itcontrols the money. The tensions between

federal and state and local governments haveresulted in a less than optimum level of civilianparticipation in government. Rather, themilitary/central government has dominated thepolitical scene (Caldecott et al.1996).

8. INDONESIA8.1 Background and Forest OwnershipIndonesia is a vast country, the world's largestarchipelago, with more than 17,000 islandscovering 1.91 million square kilometers (sq km)lying in an area that measures some 2,000 kmfrom north to south and 5,000 from east towest. With some 212 million inhabitants, it isthe fourth most populous country in the world.It is an immensely diverse country with morethan 300 ethnic groups. Two-thirds of thepopulation resides in Java, which is the hub ofeconomic and political power.

The country has some 100 million hectares(ha) of tropical forests, second only to the vastexpanses of the Amazon and the Congo Basin.The low lands of Sumatra and Kalimantan areamong the most biologically rich and mostdiverse ecosystem on earth. According togovernment figures, protection forests coversome 33 million ha, while some additional 21million ha are conservation forests. Productionforests comprise about 58 million ha.

Forest resources generate an output that in1996 reached some $30 billion or about 10percent of the GDP and officially employedsome 800,000 workers and an undetermined butsubstantial number of informal workers.

There are more than 10 million ha of forestplantations. Since Independence some 65million ha have been lost to deforestation,including some 10 million ha that literally wentup in smoke during the great Indonesian forestfires of 1998. Current deforestation rateestimates are uncertain but it may be in therange of 1.5-2.5 million ha per year.

8.2 Role of the Central GovernmentFor more than three centuries, the Dutch ruledIndonesia until the Second World War ended it.The Dutch colonial government adopted asystem of forest administration that laterprevailed in independent Indonesia. This systemwas based on centralized government controland management.

Sukarno declared independence in 1945 andIndependence was officially recognized in 1949.A new Constitution in 1950 established thecountry as a Unitary Republic. The Constitutiondivided Indonesia administratively intoprovinces and territories, now numbering 33.Each province was divided intoregencies/districts, sub-districts and villages.Decision-making powers were concentrated inJakarta.

In 1957 after regional attempts to obtaingreater autonomy, and following civil unrest inSumatra, Sulawesi and West Java, Sukarnodeclared martial law. Ensuing economic collapseand intense conflicts induced General Suhartoto take power in 1965. His long government,under the New Order, afterward becameincreasingly centralized and authoritarian.

Several attempts to establish decentralizedgovernments that would grant greaterautonomy to demanding and eager regionswere, for some reason or another, largelyineffective and were eventually discarded. Law5 of 1974 raised the issue of regional autonomyagain but was never implemented. IndependentIndonesia was one of the world's mostcentralized countries. The degree ofconcentration of power is illustrated by the factthat in 1999 the central government collected94 percent of all fiscal revenue and 60 percentof the sub-national government's budgets werefinanced by transfers from the central treasury.This all changed with the fall of Suharto.

With the New Order ending, Suharto leavinggovernment and the installation of a democraticgovernment in early 1998, calls for reformsacross the board intensified and some werequickly put in place (Reformasi).

In 1999 the government approved two laws,which were to be implemented at the beginningof 2001, that directed a process of massivefiscal, political and administrativedecentralization to provinces (propinsi),districts (kabupaten, local government in ruralareas) and municipalities (kota, localgovernments in urban areas) . Reforms in theforest sector would follow this drive for the vastreformulation of the structure of government inIndonesia

Law 22/1999 on Regional Governance, gaveautonomy and allocated a great deal ofresponsibilities to sub-national governmentsreserving for the central government a fewtasks that could only be accomplished at thenational level, including defense, security,justice, foreign affairs, fiscal affairs andreligion. The central government retained thesupervisory function of regional governments'activities to ensure national policy coherence.The central government also had the power tocancel local regulations if these were deemedto be against the national interest. Regions hadthe option of appealing these decisions to theSupreme Court .

Districts, considered closer to the peopleand therefore more apt to promotedemocratization, were assigned primaryresponsibility for administrative and regulatoryfunctions, with the provincial governmentsplaying a secondary role. Districts wereallocated "obligatory sectors" for which theyhave prime responsibility for management.

Environment, forestry and agriculture wereamong these. Nevertheless the centralgovernment retained control over naturalresources conservation thus creating thepossibility for overlapping responsibilities.

Provinces were assigned a double role asautonomous regions and as administrativeregions under the control of the President. Theyhave the authority to manage inter-districtmatters and to carry out certain mattersdelegated to them by the President. Thepossibility of decentralizing greater powers tothe provinces proved to be politicallycontroversial as the provincial governmentswere judged by some as too identified with thepolitical and power structures that prevailedduring Suharto's New Order. Also, some judgedthat decentralizing powers to some provinceswould further fuel centrifugal political forces,which would threaten the unity of the Republic.

In concert with the decentralization offunctions and responsibilities to districts andprovinces, Law 25/1999 mandated a substantialreallocation of financial resources to theregions. During the first year ofimplementation, the regional share ofgovernment spending jumped from 17 percentto 30 percent, a proportion that is expected torise further to some 45 percent (World Bank2003).

Further, under the decentralization law,heads of local governments (previously politicalappointees chosen at the central level) mustnow be elected officials selected by andaccountable to the locally elected parliament.

Awareness of the shortcomings of previousdecentralization attempts and theextraordinary political circumstance of thepost-Suharto Reformasi period, createdfavorable conditions and pressures for a "bigbang" approach to decentralization, with mostof the effort being implemented in short periodof time. Deadlines were tight. Within two yearsfrom approval of the decentralization lawsregulations were expected to be in place. Thedecentralization drive became intense andpractically irreversible when 2 million civilservants, or about two-thirds of the centralgovernment staff, were quickly transferred tothe local governments. Today, about threequarters of all government personnel work inthe regions as opposed to only 20 percentbefore decentralization. In 1999 local electionswere held in conjunction with national electionsonly two months after the decentralization lawwas approved (World Bank 2003a). Indonesiatransformed itself from one of the mostcentralized countries in the world to one of themost decentralized.

With scant preparation and with thegovernment distracted by the rapidly evolvingpolitical situation prevailing at the time,


characterized by struggles between theexecutive and legislative branches ofgovernment, some degree of confusion anddisorder was to be expected. The process wasmuch too drastic and massive to be conductedin a smooth manner.

Given these conditions it is surprising thatthe decentralization process did not completelyunravel. In fact, some of the expected benefitsof decentralization are already becomingvisible. The process is fundamentally changingaccountability in government and the nature ofthe relationship between citizens andgovernments. In addition to the previous singlelink with a distant central government,decentralization offers local populations routesof communication and influence to localgovernments as well. In many cases, althoughnot always, this appears to have increasedaccountability and better service delivery bylocal governments (World Bank 2003a).

8.3 Forest GovernanceThe 1950 Constitution established that forestswere to be managed by the government infunction of a vaguely defined "national interest"and paved the way for concentrating the controlof forest lands in the central government. In1967 a forest law firmly established totalcentral government control over forest landsand in 1974 a Consensus Forest Land Use Planplaced some 144 million hectares of forest-anarea equal to three-quarters of the nationalterritory-including 90 percent of the OuterIslands under the exclusive control of theMinistry of Forests . Traditional rights of forestcommunities and other groups that had claimsto lands, but no legal ownership title, becamelegally invisible thus creating the foundationsfor future conflict.

The centralized and concentrated structureof forest administration led to less thantransparent allocation of forest concessions toan also concentrated group of firms: by 1998, atthe time of the fall of Suharto's New Order, 12companies closely associated with the politicaland military elite controlled virtually all ofIndonesia's 60 million ha of forest concessions.Lack of transparency, so often linked toconcentrated and centralized structures offorest administration, created a fertile groundfor the proliferation of illegal activities and forcorrupt deals. Well-connected concessionairesroutinely violated the terms of their concessioncontracts with impunity, going to the extremeof invading some of the country's mostcelebrated national parks, the Gunung Leuser,Tanjung Puting and the Kerinci Seblat (EIA 1999;EIA and Telapak Indonesia 2001; World Bank2001). At the end of the decade, some 70percent of the forest harvest was carried out inillegal ways and deforestation had wiped out at

least 65 million ha-2.2 times the size of Italy(FWI/GFW, 2002). This system of administrationof forest resources has been blamed for thegreat forest fires of 1997-1998 that extendedfor 10 million ha, contaminating the regionalenvironment, causing great health hazards andextraordinary damage to the environment andthe economy.

Today, after the decentralization drive,management of most forest resources fallsunder the responsibility of district governments.Thus, the management of the money-makingforest concessions falls under districtresponsibility. In those cases where large forestconcessions spill over districts boundaries,districts can either establish jointadministrative arrangements or request theprovincial government to manage theconcession in their behalf. Provinces can alsotake over functions the districts cannotmanage, a provision that is likely to causeincreasing conflicts.

With regard to fiscal matters, the sub-national governments can now retain as much as70 percent of the revenues from forestexploitation (the proportion is different forother natural resources) and the centre mustallocate 25 percent of its revenues to districtsand municipalities (90 percent) and provinces(10 percent, see Table below). Localgovernments were instructed to actively searchfor their own sources of financing.

Problems in the forest sector abound.Decentralization laws have a number ofinconsistencies and contradictions with severalother pieces of legislation of the intricateIndonesian legal framework. This weakenseffective forest resource management andaccountability. The new Forestry Law, enactedin 1999 does not take the decentralization lawsfully into consideration, as there were no filtersin the legislative design process to ensure thatthe forest law, or other laws, for that matter,conformed to the decentralization legislativeframework. As a result, the Forestry Law iscentralistic in its approach, while thedecentralization laws make emphasis on bottomup planning, decision-making and programimplementation. The Forestry Law is thusfavored by the central ministry while districtsprefer to invoke the regional autonomy lawsthat give them greater powers. Frictionsbetween the central and the local governmentsare inevitable.

While laws were enacted, the expectedregulations have been slow to come. By thetime regional autonomy was supposed to start,on January 1, 2001, many of the key regulationswere not in place. Regulations of the ForestryLaw had not yet been issued at the time of thiswriting. The application of the new ForestryLaw would require a minimum of 21



Government Regulations, none had been issuedthree years after the law was enacted(Sembiring 2002). All this left much of the defacto decision making responsibility to thediscretion of untrained and unprepared localofficials, mainly at the district level. Withoutclear rules of the game as to who had authorityto do what and at which level of government,conflicts multiplied.

Local governments are uncertain about theprecise functions they are supposed todischarge to whom they are accountable fordelivering them, and about a number of keyfunctions. Beyond uncertain laws and missingregulations, many districts were not equippedto absorb the new responsibilities. They did notgenerally have the organization and thetechnical as well as administrative skills tomanage forest sector activities. An importantconcern is the availability of staff to make thedecentralized system work. In fact many of thestaff in the regions has been trained anddischarged functions in the past that were partof the previous intensely centralized system ofgovernment.

Due to the lack of clarity aboutresponsibilities and authority, disputes amonglevels of government have proliferated. Forexample, since the circumstances under whichconcession rights and timber licenses that canbe issued by various levels of government areunclear, districts, instructed to search for theirown sources of financing, issue timber licenseson lands already granted by the central Ministryto concessionaires. In an environment oflegislative uncertainty each level of governmentclaims authority to do certain things andvigorously rejects rights from other levels ofgovernment (CGI 2002). Predictably, districtstend to go after their own local priorities andnational laws, including the forestry law that

may reduce their freedom of action areroutinely ignored. The refusal to follownational laws is encouraged by the lack ofcapacity of the central government to enforcethem. Inn the forestry sector, decentralizationhas resulted in the breakdown of centralcommand and control structures and loss ofnational policy coherence (Contreras-Hermosillaforthcoming).

In these circumstances, and fearingappropriation or interference by other levels ofgovernment, forest resource-rich districts havea powerful incentive to accelerate resourceexploitation, giving only secondaryconsideration to the long term consequences ofunsustainable practices. Long term utilizationand management plans are conspicuouslyabsent. This is hardly unexpected. Experiencesin other countries show that cash-strapped localgovernments that are increasingly responsiblefor their own revenue generation activities tendto exploit resources unsustainably (Dupar andBadenoch 2002). Business and security forceshave allied themselves with local governmentissuing harvesting licenses in a fast race toobtain quick financial benefits. Controls overthe terms of contracts are weak and thereforethe incentives for illegal logging have increased.Corruption is widely suspected to be behindmany of these deals.

The Ministry of Forestry has resisted regionalautonomy because it threatens its control overprojects, resources and economic as well aspolitical power. Predictably, there have beenconflicting attempts to re-centralize decision-making powers (See Box 2).

8.4 Concluding CommentsThe Indonesian experience illustrates that theforest sector, even in a country where it hasgreat importance, will likely follow

Revenue Sharing Between Central and Regional Levels Related to Forestry Activities

Source of Revenue

PBB -Tax on property of land andbuildings*Tax on land and building transferContribution of forest concession (IHPH)Provision of forest resources (IHH)Reforestation fund (DR)Total revenue of central government(Dana Alokasi Umum)

CentralShare (%)

10.0

20.020.020.060.075.0

Producingprovinces

16.2

16.016.016.040.02.5

Non-producingprovinces

Producingdistricts

64.8

64.064.032.0

22.5

Non-producing

districts

32.0

District Share (%)Provincial Share (%)

* 9% is set apart as collection fee.Note: The current tariff levels approximately are: PBB: Rps 2,700/ha; IHPH: Rps 22,500/ha; IHH: Rps 64,000/cum forShorea spp and Rps 36,000/cum for mixed species; DR: US$14/cum for Shorea Spp and US$12/cum for mixed species.Source: Prof. Herman Haeruman 2001, as quoted in Chandrasekharan 2003


decentralization initiatives rather than initiatethem. The forest sector has been put underenormous pressures coming from outside thesector. The decentralization process has notbeen easy for the Central Ministry of Forestry,which has been forced to surrender many of itspowers to local governments. Decentralizationimplies a reallocation of power among agenciesand levels of government and it is natural toexpect that those that lose power will resistreforms. Decentralization processes musttherefore consider ways to reduce thisresistance.

The confusion created by an imprecise andconflicting legal framework paves the way forad hoc, discretionary and arbitrary decisionsand for intense conflicts between levels andagencies of government. It also creates theconditions for corruption. Uncertainties aboutthe allocation of power and responsibilities alsogenerate strong incentives for localgovernments in rich forest areas to depleteresources and to move away from sustainableforest management practices.

Even if rules are clear, the Indonesianexperience shows that forest resources will notbe properly managed if local technical andorganizational capacities are not available orcannot be created in a short period. While thecentral government made a genuine andeffective effort to transfer massive numbers ofgovernment staff to regions, many required retraining in the ways a decentralized system ofgovernment operates.

The decentralization process has createdunintended high levels of uncertainty about who

is empowered to do what. High levels ofadministrative uncertainty have contributed tocreate powerful incentives for localgovernments and other actors to race to obtainrents from accelerated forest exploitationbefore somebody else can obtain control offorest resources. In areas where resources arerich, this race to the bottom is naturally moreintense. This again underscores the need forclear rules of the game and for safeguards thatwould ensure the stability of the forest resourcebase.

A related source of uncertainty is theunclear situation of property rights affectinglocal traditional communities. While traditionalrights are recognized in theory, in practicecommunities have no rights to their traditionallands. As in the case above, this uncertaintycreates powerful inducements for resourcedepletion rather than for sustainablemanagement.

9. INDIA9.1 Background and Forest OwnershipIndia is the world's seventh largest country, hasa population of more than 1 billion inhabitants,but only about 1.8 percent of the world'sforests. Pressures on forest resources areconsiderable. On average there are less than 6hectares (ha) of forest per 100 people, aboutone tenth of the world figure. India has 433million people living on less than $1 a day, morethan one-third of the poor of the world. Three-quarters of them reside in rural areas and as

BOX 2: Decentralization and Conflict Between Layers of GovernmentIn 2000 the Government issued a decree on the Criteria and Standards for the Issuance ofTimber Utilization Concessions and Timber Harvesting Concessions. District, Provinces and theMinistry could issue Timber Utilization Concessions and districts could also issue permits toindividuals or community cooperatives for a maximum concession area of 100 hectares.Because of the ensuing abuse of the authority granted by this decree, particularly through theissuance of multiple small concessions, and the resulting rapid deforestation, the Ministrycancelled the decree 16 months after its enactment. Rural district chief executives werestripped by the Ministry of their power to issue concession licenses.

However, the districts have rejected the cancellation of this authority. Says H.H. Syaukani,the Kutai Kertanegara Rural District Chief Executive who is also the Chairman of the All-Indonesia Association of Rural Districts Governments: "For us there is no problem, as wealready have issued local legislation that cannot be revoked by a ministerial decree. We'll justignore this Minister of Forestry decree. In my opinion it does not exist. I am more accountableto the people than to the power holders. The local governments are being treated like theycan be ordered around". Other local governments are adopting a similar attitude. "ThisMinister of Forestry and Plantations decree does not form part of our legislative hierarchy…The authority over forest management should rest with the local governments…" saysDjuharman Arifin, the deputy speaker of the Riau local legislative council. Deforestation hascontinued at a high pace and is now more extensive than before with conservation areas andprotection forests being harvested openly.

Source: Effendi 2002

many as 200 million, half of them forestdwellers, depend on forests for their livelihoods(IIED 2000). Some 170,000 rural villages arenear forests (World Bank 2000a). Forests alsosupport some 270 million head of livestock (IIFM2003). These various demands have resulted inintense degradation of forests, lands and waterresources in many parts. There is substantialencroachment in many places. Deforestationestimates are uncertain because of the lack ofcomparable inventories over time, but it isthought to be considerable in many places.During 1980-1990 deforestation of the naturalforest is thought to have been some 340,000 peryear but according to more recent FAO figuresthis rate seems to have diminished. The countryalso has some 33 million ha of forestplantations, mainly eucalyptus and acacias.Many of them are in poor condition.

97 percent of all forests in India are theproperty of the government and most (85percent) are managed by the stategovernments, while the rest belongs tocommunities and private owners. Governmentforests are managed either directly by stateinstitutions or granted in usufruct to privateentities or to communities under a variety ofarrangements. Revenues from forest use accrueto the state governments. Trees are grownunder private ownership only on farms or oncommunity lands. Although most forests belongto the state, local populations make intensiveuse of all forests, public and private.

India is one of the 12 mega diversitycountries of the world with about 7 percent ofthe world's biodiversity. There are 16 majorforest types, from alpine pastures in theHimalayas to tropical rainforests, andmangroves in coastal areas. Water and winderosion, water logging and excessive saltdegrade nearly half of the land.

9.2 Structure of GovernmentIndia has had a federal system of governmentsince Independence and the constitution grantsconsiderable autonomy to the constituentstates. India has 35 states and Union territories.According to the Constitution of independentIndia, states are responsible for theimplementation of programs and nationalpolicies dictated by the center. Many statesdeveloped their own forest policies to adjustnational policy prescriptions to state conditions.Rural decentralization in general is essentially astate affair.

The 73rd and 74th amendments to theConstitution in 1992 decisively forced the pacetowards empowering local governments byinstructing states to decentralize to lower levels.Under the amendments, deconcentration isexpected to be complemented by devolution offull governance to local institutions. The

Amendments provided for greater accountabilityat the local level and promoted the use ofindependent audit of government operations.

The amendments officially gave legalstanding to a third tier of government. Thirdtier governments are known collectively asPanchayat Raj Institutions, or PRI, and theyoperate at district, block and village levels.The district is the main subdivision within thestate. A block is a large subdivision of thedistrict, and may include many villages. Thedemocratically elected village council (grampanchayat) is the basic local unit. Grampanchayat chairs are elected by the villagecouncil. In this fashion, the Amendment legallycreated a structure of government thatcombined parliamentary representativedemocracy with direct democracy.

The Amendment legally created PRI,comprising some 220,000 rural and urban localgovernments, forced local elections involving 3million politicians and established variousaccountability mechanisms. The amendmentsstipulated that all panchayat members beelected for five-year terms. Financial resourcesstarted to flow from the center to local levelgovernments to finance diverse activitiespromoting decentralization, mainly foremployment generation and infrastructureworks.

The 73rd Constitutional Amendment Act alsocreated the Gram Sabha, the village assembly, abody consisting of all voters in a village (or agroup of villages) within the area of a panchayatat the village (or a group of villages) level. Theconstitution of Gram Sabha for every GramPanchayat provides the legal opportunity for apolitical forum to people in every locality tomeet and discuss the local developmentproblems, and consequently understand the feltneeds and aspirations of the community. It is aninstitution to meet, discuss the administrativeactions of the elected representatives. Intheory, the Gram Sabha has extensive powersover the ownership of minor forest resources.

9.3 Forest Governance9.3.1 Forest Policies. During the colonial period, the management ofnatural resources was under the control of thecentral government. This notwithstanding,rural community access for subsistencepurposes was allowed, and even at this earlystage there were some cases of decentralizedco-government involving local communities.For example, the Forest Council Rules of 1931,half a century before decentralization became apopular concept in India, encouraged thecreation of some 1,000 village councils tomanage one-quarter of the Kumaon forestsresulting in the official recognition of villagecommunities and a closer linkage with


government . The Forest Councils gainedauthority from the colonial governments and inturn, they were required to regulate activitiesof their members (Agrawal 2002). Also, theIndian Forest Act of 1927, which is still the basicpiece of legislation of the forest sector,established the classification of village forests,to be managed by communities (section 28).These communities could retain revenues fromforest management. Possession rested with thecommunity. The state held ownership andissued forest management rules. This was not atrue decentralized system of management offorests in the sense that rights were bestowedon communities more as a privilege than as aright. Nevertheless, in these cases the centralgovernment relinquished some of its authorityin favor of communities.

With the Government of India Act of 1935the ownership of forests was transferred toState governments. After independence the roleof the central government increasedconsiderably.

The Forestry Policy Act of 1952 eliminatedthe autonomy of local communities establishedduring the colonial period. Further, in 1972, byvirtue of the 42nd Constitutional Amendment,and further emphasizing centralizedmanagement, forests were placed in the"concurrent list" empowering the centralgovernment to have decisive decision-makingauthority over management of the nation'sforests. In part, this was due to the perceivedlack of interest of states in sustainable forestmanagement and forest conservation as well asto the evidence of rapid deforestation anddegradation of forest resources taking place atthat time. The administration of forestresources became the shared responsibility ofboth the central and state governments. Theoperational duties, however, remained with thestates.

The Forest Conservation Act of 1980reinforced this increased centralized control bymaking it mandatory to obtain permission fromthe central government for converting forestland to non-forest uses. The Act was amendedin 1986 to expand its coverage to plantationsand clearing of vegetation on forest lands. Thetrend towards centralization severely limitedthe ability of state governments to makediscretionary decisions about forests (Singh1996).

However, the National Forest Policy of 1988signaled a dramatic change in governmentorientation, priorities and approaches to theadministration of national forest resources. Itmoved government priorities from managingforests for industrial and commercial productionto an emphasis on environmental quality and onmeeting the basic needs of the people,particularly the poor, living in or near the

forests. It recognized the linkage betweenpoverty and environmental deterioration andthe concept that effective forest managementcould not take place without the involvementand participation of local communities. For thefirst time, the needs and rights of local peoplewere established as essential ingredients offorest governance. The central governmentinstructed all states to involve localcommunities in the regeneration of degradedforests.

To translate the 1988 National Forest Policyinto action, the central government issued acircular in 1990 to all states and UnionTerritories with the guidelines for "Involvementof Village Communities and Voluntary Agenciesin the Regeneration of Degraded Forests",providing an operational impetus for JointForest Management (JFM). These schemes arelegal agreements between village communitiesand the local government to manage forestsaccording to a joint plan in whichresponsibilities of partners are specified. Thevillage community is represented by aninstitution specifically created for this purposeand that in different places has different namesbut it is most commonly referred to as theForest Protection Committee (FPC). All villagehouseholds have the opportunity to becomemembers of the committee, although inpractice this rarely happens. The rulesgoverning these committees and theirresponsibilities vary from state to state.Communities are entitled to receive part of thebenefits created by the partnership and areresponsible for the management andconservation of forests (Chandrasekharan 2003).According to the JFM scheme, funds should bemanaged jointly and in a transparent manner.

In some states panchayats also enter intoJFM agreements with the state ForestDepartment or providing support to the FPC andhelping in conflict resolution. Some observersindicate that there are risks in gettingpanchayats involved in JFM since the inclusionof a third party has the potential for upsettingand dislocating the existing relationshipbetween the state Forest Department and theFPC (Chandrasekharan 2003).

JFM schemes emphasize the creation of anenabling environment for the empowering andcapacity building of local communities and localgovernment officials (IIFM 2003). In a sense,these systems of local governance werepreceded by the experience of the informalVillage Committees in West Bengal, which werealready involved in managing forests long beforethe National Forest Policy of 1988 and theConstitutional Amendments 73 and 74. TheGovernment of West Bengal had formalizedthese approaches in 1989 (Agrawal 2002). JFMcreated a legal space for local participation in


the management of forests and for thepromotion of women's' and tribal roles indesigning forest actions and sharing thebenefits. JFM is now envisaged by thegovernment as the main mechanisms for therehabilitation of degraded areas.

A common and important limitation of JFMschemes was that they focused exclusively ondegraded areas. However, in 2002, the federalgovernment issued instructions to allow JFM inquality forests as well.

The decentralization of forest managementthrough JFM has taken place in a large scale inmany states of India. Today JFM covers morethan 14 million ha of forest lands in 27 statesand involves some 64,000 FPC and more than2.8 million families, with about 25 percent ofthem belonging to indigenous or disadvantagedcommunities (Chandrasekharan 2003). JFMexpanded rapidly in cases such as AndhraPradesh and Madhya Pradesh where stategovernments were more inclined to lendsupport to decentralization (Venkataraman andFalconer 1998).

Another case of partnership between thegovernment and local communities, involves themarketing of non-timber forest products. ForestDepartments, based on the rationale thatmiddlemen were exploiting producingcommunities, established marketing bodies andagreements with communities to eliminate themiddleman. While in theory this partnershipcould have helped communities to obtain alarger share of profits, in practice it has notworked well. Local marketing bodies andofficials, using their monopolistic power havebeen able to appropriate benefits with little orno change for communities. Corruption is widelysuspected as well. In some cases the"nationalization" of non-timber forest productsmarketing led to sharp declines in production(Shen and Contreras-Hermosilla 1996).

9.3.2 Forest InstitutionsAccording to the Constitution, both the centraland state governments may legislate on forestryrelated issues. However, state policies andlegislation are subordinate to, and must becompatible with central policies.

In 1985 the Union Ministry of Environmentand Forest (MoEF) was created. The MoEF isresponsible for policy formulation, planning,coordination of all forest developmentprograms. It also controls research, educationand training activities. The forest functions ofthe MoEF are carried out by the Department ofForests and Wildlife.

The State Forest Departments (SFD) aremainly concerned with the implementation offorest policies in individual states. Theefficiency of SFD is rather low as they haveshown a tendency to assume responsibilities for

which are not well prepared or have nocomparative advantage. Thus, they are involvedin industrial forest plantations, forest productsprocessing and marketing activities. Theseenterprise activities also tend to enter intoconflict with the law enforcementresponsibilities of the SFDs as they requirefundamentally different capacities(Chardrasekharan 2003).

The SFD have also proven to be ratherinflexible to change. The existing organizationalstructures have remained essentiallyunchanged, based on traditional managementwith accountability focusing not so much onresults but on adherence to budgetaryobjectives and allocations. As stated by ananalyst: "Some FDCs have taken up a wide arrayof (diverse and dissimilar) activities to improvetheir return on investment, including controlover marketing of non-wood forest products.Some states have also established processingindustries, government-owned corporate bodiesfor development of pulpwood, NWFPs, andwood processing industries. With very fewexceptions these public sector entrepreneurialefforts have been failures, resulting in great lossof funds and other resources" (Chandrasekharan2003).

The courts also have an important role in themanagement of the forest sector in India and insome cases they have established rules thatgreatly limit the states room for action andaccess of some populations to forest resources.

Partnerships with the private sector arepractically non-existent. State policies towardsprivate sector enterprises are quite restrictiveand this has resulted in private concerns relyingon small holders in "non-forest" areas forproductive activities involving a variety ofdifferent partnership arrangements. In somestates most of the forest production no comesfrom small holders and homesteads.

9.4 Concluding CommentsThe Indian decentralization process has beenuneven with important variations as statesapply different rules. In fact this is to beexpected as the Constitution aims at obtaining aminimum degree of uniformity only, to allow foradaptation to local conditions. Also, states havedifferent endowments of resources andpriorities that could call for different schemesof state en third tier governance.

However, many states have been reluctantto surrender their powers to lower layers ofgovernment. Often local governments aretreated as agents of the state governmentrather than as self-governing bodies. While theIndian Constitution defines PRI as institutions ofself government, there has been minimumadministrative and fiscal decentralization. ThePRI are not yet a third tier of government but



rather an extension of state government to thelocal level. This is facilitated by the fact thatlocal governments still have a limited capacityto handle the acquired responsibilities (WorldBank 2000c; World Bank 2003c).

To some measure this is facilitated by theoften unclear division of responsibilities andauthority between the different the layers oflocal government and the state. When thishappens the control of various decisionsnaturally reverts to the states. A number ofstate governments have kept the authority towithdraw some of the functional responsibilitiesof local government. Often decentralizationprograms are being used as a vehicle toconsolidate state powers.

Local governments do not have autonomy toset the level of local taxes and have noborrowing power and therefore continue todepend on the state government for financing.In addition, there is no political contestationinvolving the most valuable forest resources.When it comes to benefit sharing there havebeen various cases in which the state forestdepartment retains a disproportionate share ofthe financial benefits.

As noted, JFM has focused on degraded landsand forest resources that since colonial timeshad been allocated to communities for theirsubsistence. Even more, since there is nooperational definition of degraded forests,these are normally identified ate the discretionof local government officials. In some cases,the identification of degraded forests isextremely restricted thus limiting the optionsfor JFM. Local populations are attracted to JFMschemes because they provide a source of wageemployment (Baumann and Farrington 2003).Also, JFM provide a mechanism for localpopulations to keep outsiders from gainingcontrol over the forests local communities use.Further, the Forest Department often providesother incentives for participating in JFMschemes, such as wells, check dams and roadimprovements (Belcher 2004)

There is a danger of government capture.The Indian society is highly stratified and thereis always the danger that decentralizedgovernments will be captured by the localelites. Despite the emphasis of the legalframework on favoring disadvantaged groups,this has been hard to translate into reality.There are not only pervasive caste and genderbiases, but disadvantaged groups also lack thecapacity to have fast and accurate access toinformation about their rights and powers. Localinstitutions remain dominated by the elite.Further there is a concern that JFM frequentlyworks against those that formerly depended onforests but that have no recognized rights.Generally, rights are assigned based on

proximity and therefore geographically distantgroups may see their access to the forestcurtailed (Belcher 2004).

The Indian case also shows that there areprobable substantial gains from involving theprivate sector in the management of forestresources. Governments, either central orstate, should concentrate their efforts on thoseresponsibilities that nobody else in society cando. Government institutions have nocomparative advantage, but do have manydisadvantages, in organizing and operationmarket oriented entrepreneurial activities.These can be best accomplished by the privatesector at a potentially much lower cost tosociety.

Despite all of the above, the structure offederal, decentralized governance has clearlyimproved. Through decentralization,panchayats are generally empowered with anumber of functions, including the preparationof plans for the management of naturalresources. The decentralization process hascreated legal space to involve representation ofpeople from different strata, includingdisadvantaged groups such as tribal groups andwomen.

10. NEPALNepal is a small country (147,181 squarekilometers) with a population of some 23million. Significantly, about 86 percent of thepopulation lives in rural areas; and a large partof the rural population depends on trees andforests for fuel, food and livelihood. Nepal is aConstitutional monarchy with an electedparliamentary system. As of 1998, the countrywas divided into 5 development regions, 14zones, and 75 districts with districtdevelopment committees (DDCs) which arefurther divided into more than 3,900 villagedevelopment committees (VDCs) which werethe old panchayats (Shrestha 1998). Since 1997there has been a Maoist insurgency movementwithin districts in the central and westernregions of the country.

10.1 Forests and Forest ProductionNepal has 5.8 million ha of forest land, which isabout 40 percent of the total land area of thecountry. In addition, there are more than15,000 ha of plantations. Although there hasbeen important progress in protecting andreplanting forests in some regions-particularlythe middle hills where a substantial portion ofthe forest is managed by communities,deforestation is a continuing problem at thenational level.

There are two quite distinct forest situationsand sets of issues. One relates to the lowlands,


or Terai forests, which contain high valueoutputs. The other relates to the hill forests,where the population pressures anddeforestation issues are most critical. Withregard to forest production, both timber andnon timber forest products are importantsources of livelihoods and income, with animportant segment of hill agricultureproduction dependent on incorporating forestlitter as organic material for soil building andrenewal.

10.2 Forest InstitutionsThe Ministry of Forests and Soil Conservation(MFSC) and the four departments under it arethe major government forestry institutions.MFSC is responsible for policy formulation in theforestry sector. It does that in closecollaboration with National PlanningCommission for the master plan and forestprograms and the Ministry of Finance for budget(Department of Forests 1997). It is alsoresponsible for drafting forest legislation inclose rapport with the Ministry of Law andJustice. The four departments under MFSC are:

• Department of Forest• Department of Soil Conservation• Department of National Parks and Wildlife

Conservation• Department of Plant Resources.

The ministry is also responsible in supervisingthe operations of the following parastatals anddevelopment boards:

• Nepal Rosin and Turpentine Industry• Herb Production and Processing Company• Forest Products Development Board• Forest Research and Survey Centre

Development Board.

The Timber Corporation of Nepal (TCN) underthe Ministry of Supplies is involved in themarketing of logs collected from thegovernment forests.

The Forest User Groups (FUGs) also comprisea prominent institution in the use andmanagement of the forest resource. (The 1993Nepal Forest Act gives legal authority to forestuser groups (FUGs) to assume management offorest areas in the hills of Nepal. Landownership remains vested with government butthe management control rests solely with theFUGs, which legally own the trees, developtheir own management plans, set prices forforest outputs and determine how surplusincome is spent).

Trade of forest products is carried out bothby the government sector agencies as well asthe private sector. Altogether four parastatals,

namely the Forest Production DevelopmentBoard (FPDB), Timber Corporation of Nepal(TCN), Herb Production and Processing CompanyLtd (HPPCL) and the Nepal Rosin and TurpentineCompany Ltd (NEROT) under the Ministry ofForest and Soil Conservation (MFSC), areinvolved directly in the trade of different forestproducts. The first two have mandates to sellthe timber (both round- and sawntimber) andfuelwood obtained either directly from theDFOs or from the plots provided by the DFOs forharvesting and logging. The HPPCL is involved inproduction, processing and the sale of differentmedicinal herbs. The NEROT is responsible forthe collection of resin and the processing andmarketing of rosin and turpentine. (Shresthaand Nepal 2003).

10.3 Forest Legislation and Governance:The Move toward Decentralization ofForest Management and CommunityForestryIn any discussion of decentralization of forestgovernance and management, Nepal featuresprominently, since it went from a fairlydecentralized structure to a highly centralizedmanagement and control structure and thenback to a decentralized structure when it wasrecognized that the centralized control was notworking. Thus, in 1957 all private andcommunal forest land was nationalized and putunder the new created Forest Department. TheForest Law of 1961 introduced permit and feesystems, and these were required for all forestproducts taken from the newly nationalizedforests. While the nationalized forests in thelowlands provided good income for thegovernment, it was found that the hill forestsprovided relatively little revenue for thegovernment. Further, it became increasinglyevident that the Forest Department was failingto control deforestation. In fact, in many areasit was worse.

In the 1970s there was limitedexperimentation with participatory forestry,and the results of this experience, plus otheranalyses of the worsening situation, led in 1978to a revision of the 1961 Forest Act. A set offorest rules were formulated in 1978 thatincluded the "Panchayal Forest (PF) andPanchayal Protected Forest (PPF) Rules." Upuntil 1990, the political units at the village levelwere panchayats.

Denuded national forest handed over to avillage panchayat for reforestation was knownas a PF. All the benefits of a PF would accrue toa village panchayat. If the forest land handedover for protection had trees/forest on it, thenit was known as PPF. The benefits from forestproducts sales were to be given to the nationalgovernment; but up to 75 percent of the

revenue could be given back to the panchayatfor its role in managing and protecting theforest.

Note that this was the start of the evolutionto the present community forestry program ofNepal. In 1978, the concept was to transferpart of the national forest estate to localadministrative and political units, but not to thetraditional users of the forest. People'sparticipation was considered essential, but thebest means to generate such participation hadstill not been articulated in the policy. Theconcepts became much clearer in the MasterPlan for the Forestry Sector (MPFS) that wasprepared between 1986 and 1988 and approvedin 1989. It recommended intensification ofcommunity forestry on a grand scale. Itprovides a 25-year policy and planningframework for the forestry sector. The long-term objectives of the MPFS are to:

• Meet the people's needs for forest productson a sustained basis;

• Conserve ecosystem and genetic resources;• Protect land against degradation and other

effects of ecological imbalance; and• Contribute to local and national economic

growth.

The MPFS guides forestry development withinthe comprehensive framework of six primaryprograms. They are:

1. Community and private forestrydevelopment;

2. National and leasehold forestrydevelopment;

3. Wood-based industries development;4. Development of medicinal and aromatic

plants;5. Soil conservation and watershed

management; and6. Conservation of ecosystem and genetic

resources.

The MPFS is an integrated and program-orientedapproach for developing the forestry sector. Theadoption of the approach was a turning point inthe history of Nepal's policy for the forestrysector. It provides the framework for the moreoperational five year plans prepared by theNational Planning Commission. (The mostrecent is the tenth five-year plan that was putinto operation in 2002).

In 1993 a new Forest Act was passed thatrepealed the earlier, 1961 Act. The 1993 Actwas a key piece of legislation, with a new focuson Forest User Groups (FUGs) as the mainmanagement units. This new communityforestry focus emphasized two majorcomponents:

(1) management of natural forests andenrichment planting of degraded forests ascommunity forests (previously the PPFs); and

(2) establishment and management ofcommunity plantations (previously the PFs);

A formal process was set in place to organizeFUGs and hand over control of national forestareas. It should be noted that actual ownershipof the forest land is not handed over to the usergroups and that there is a process in place forthe DFO to take back forest land if certainspecified requirements are not met. Finally, itshould be noted that the broaderDecentralization Act of 1992 furtherstrengthened the role of user groups as local-level development organizations (Shrestha1998).

According to the MPFS and the associatedforest legislation, the main features concerningcommunity forestry are that (Joshi 1997):

1.) All accessible forests can be handed over tousers (no area limit);

2.) The Forest User Groups (FUGs) have tomanage the forests as per the approvedconstitution and operational plan of landedover community forest;

3.) Any national forests suitable to beconverted into community forest will notbe given to other, such as leaseholdforests;

4.) District Forest Officer (DFO) can hand overforest to FUG. (It used to be theresponsibility of the Regional Director, thehigher authority);

5.) FUGs can use surplus funds in any kind ofcommunity development works;

6.) The FUG is an autonomous and corporatebody with perpetual succession;

7.) The FUG can fix the price of the forestryproducts irrespective of the government'sroyalty;

8.) The FUG can plant long term cash crops(e.g. medicinal herbs) without disturbingthe main forestry crops;

9.) The DFO can take the forest back from FUGif they operate against the operational plan(agreement). But the DFO must return it assoon as possible once the problem issolved.

10.) FUG can transport any forest productssimply by informing the DFO;

11.) FUG will not be disturbed by politicalboundary while handing over the forests;

12.) The FUG can establish forest-basedindustries;

13.) FUG can amend the operational plan simplyby informing the DFO;

14.) FUG can punish misusers (encroaches andthieves), who violate the rules of the plan;and



15.) Any agency can help users to manage thecommunity forest.

The government is still involved in forestadministration and governance locally. Thus,the District Forest Office is the institutional"gate-keeper" that formalizes the incorporationof users into a FUG through registration andallows users to extract certain quantities offorest products as indicated in the approvedoperational plan. Thus, coordination andcooperation between users (FGUs) and a DFO iscritical to the success of community forestry inNepal (Kanel 1998). The government hasestablished a Forestry Sector CoordinationCommittee to help smooth linkages betweengovernment and the FUGs. In addition, theFUGs have established various federations ofFUGs to help guide the implementation of thecommunity forest policy and establish solidrelationships with government agencies. Thekey one is a network called "Federation ofCommunity Forest Users of Nepal" (FECOFUN).The group operates in more than 75 districts inNepal. Decisions still are highly influenced bypolitical and non-forestry bureaucraticpressures, but groups such as this help toprovide pressure in the interest of the FUGs(Joshi et al., n.d.).

The current situation with regard to FUGs islaid out by Springate-Baginski et al. (2003): "Theforestland identified by the DFO for communityforestry was 61 percent of the total forests (anestimated 3,551,849 ha). Formation hasproceeded at the rate of about 1,000 FUGs peryear. By 2003 there were 12,079 formed acrossNepal, managing over 15 percent of Nepal'stotal forestland area, and over 28 percent ofthe land allocated to be handed to communities(Table 3). Given the resource constraints andongoing reorientation within the DFO, theprogress is remarkable. Nevertheless there issome distance still to go: for instance over twothirds of the forestland originally allocated forcommunity forestry is yet to be handed over."

A more recent institutional innovation, and avariation on the FUG model, is leaseholdforestry, where targeted groups of poor ruralpeople (as distinct from whole communities, asin the case of the official FUGs) are given a 40-year lease on a small area of forest. Therecurrently are some 1,800 household groupsparticipating with rights over plots of degradedforest totaling some 7,400 ha (IFAD 2004).

10.4 Biodiversity Protection: A Main Goalin NepalProtected areas have been established in Nepaland have a different institutional base thandoes forests and forestry within the CommunityForestry framework. The National Park andWildlife Conservation Act provides for five

categories of protected areas to help achievethe conservation of ecosystems and geneticresources. These are:• National Park: an area set aside for

conservation, management and utilization offlora and fauna together with the naturalenvironment.

• Strict Nature Reserve: an area of ecologicalsignificance set aside for scientific study.

• Wildlife Reserve: an area set aside for theconservation of animal and bird resourcesand their habitats.

• Hunting Reserve: an area set aside for themanagement of animal and bird resourcesfor hunting purpose.

• Conservation Area: an area managed for thesustainable development of human andnatural resources.

In addition to protected areas under theNational Park and Wildlife Conservation Act, thegovernment may designate any land in public orprivate ownership as "protected watershed"based on the Soil and Watershed ConservationAct.

In the short history of protected areas inNepal, diverse natural areas have been selectedto protect notable biological communitiesrepresenting the flora, fauna and culture of thecountry. To date there are eight National Parks,four Wildlife Reserves, one Hunting Reserve andtwo Conservation Areas totalling 2,105,100 ha(Department of Forests 1997). Currently,protected areas cover some 18 percent of thecountry's land area (Shrestha and Nepal 2003).A lingering problem is the lack of support forthose communities in and around major nationalparks and protected areas that cannot be usedby local communities.

10.5 Concluding Comments: Issues andChallengesDevolution and decentralization of forestgovernance and management in Nepal appearsto be achieving the desired results in terms ofslowing deforestation and forest degradationand getting denuded areas replanted (cf. Khanal2003). It also appears to be helping the ruralpopulations who now benefit from their ownmanagement activities. Yet, there still arefears among the population from the days ofnationalization. Many naturally fear that afterthey invest their time and effort in forestrestoration there will be another act ofnationalization. Thus, a major challenge for thegovernment is to work with the local groups tobuild confidence and stability. The centralgovernment has attempted in several ways toease the process of establishing productiveFUGs. Among other things, the authority tohand over forests to user groups has evolvedfrom regional directors down to district forest

offices, which helps to shorten the process. Atthe same time, Khanal (2003) points out thatthere have been increased attempts by theMinistry and Department of Forests to tightencontrol on the FUGs and to divert revenues fromthe local users to the government, e.g., in theform of royalties on timber harvests.Ultimately, in a government such as found inNepal, the central authorities have the controland thus need to exercise restraint in buildingbridges with local populations and a balance inexercising power that leads to building trust andcooperation in local communities.

A recent policy review for Nepal's forestrysector has identified some main constraints onpolicy implementation (Shrestha and Nepal2003). Some of the key ones are as follows:

• Political instability and lack of commitmentby the political leadership;

• Underestimation of the forestry sectorcontribution forestry to the nationaleconomy;

• Insufficient linkage between the forestrysector and other sectors; interdependenciesare not understood properly;

• Lack of financial and human resources;• Weak governance and M&E system; and• Threats from terrorism and insurgency.

Springate-Baginski et al. (2003) suggest that thekey constraint to further implementation ofcommunity forestry in Nepal is the inadequatecapacity of DFO to meet the new challenge ofconverting from a policing and protectionagency to one that facilitates and promotes thedecentralized community forestry program thathas shown so much promise. Communityforestry is under threat from a number ofgovernment policies:

• Management plan requirements place costsfor expensive inventories that are notapplied on state forest lands,

• a large area of informally managedcommunity forests continues to remainoutside the CFM model as these forests donot have approved management plans, and

• politicians and insurgents continue to seecommunity forests as a source of new taxesor rents rather than understanding theimportance of forest investment to alleviatepoverty and improve livelihoods.

A serious debate is underway. Recent policychanges have been announced to deregulate thesale of non-timber forest products, change oreliminate the role of parastatal anddevelopment boards for resin and herbprocessing, and to foment investment in forest-

based enterprises. (Himalayan Times, February27, 2004, "Forestry: Government PreparingPolicy on Herbs"). Nepal is working on theseconstraints and has a lot of support from outsideagencies-both NGOs and governments - inbringing to bear the experience of othercountries and the resources available foradvancing the community forestry approachthat has been taken in Nepal (Khanal 2003).With the significant outside support flowing in,Nepal faces the additional challenge of makingthe community forestry movement selfsustaining over time.

ReferencesDepartment of Forests. 1997. Asia-Pacific

Forestry Sector Outlook Study: CountryReport: Nepal. Working Paper No:APFSOS/WP/32. Food and AgricultureOrganization (FAO), Rome: (http://www.fao.org/DOCREP/W7719E/W7719E00.HTM).

Khanal, D.R. 2003. Pluralistic policy on forestmanagement: a challenge for communityforestry in Nepal. Paper 0747-C2, XII WorldForestry Congress, 2003, Quebec City,Canada.(http://www.fao.org/DOCREP/ARTICLE/WFC/XII/0747-C2,HTM)

Kanel, K. 1998. Policy reform and localparticipation in forestry: A case study fromNepal. The World Bank/World BankInstitute's CBNRM Initiative(http://srdis.ciesin.columbia.edu/cases/nepal-008.html)

International Fund for Agricultural Development(IFAD). 2004. Breaking new ground:Leasehold forestry in Nepal. EvaluationProfile No. 18, February, 2004. IFAD, Rome.

Joshi, A.L. 1997. Community Forestry In Nepal:1978 to 2010. Ministry of Forest and SoilConservation, Katmandu.(http://www.mtnforum.org/resources/library/josha97a.htm)

Joshi, A.L., Shrestha, K. and Sigdel, H. N.d.Deforestation and participatory forestmanagement policy in Nepal. WorldRainforest Movement: Underlying Causes ofDeforestation and Forest Degradation.(http://www.wrm.org.uy/deforestation/Asia/Nepal.html)

Shrestha, B. 1998. Changing forest policies andinstitutional innovations: User Groupapproach in community forestry of Nepal.Paper presented at the InternationalWorkshop on Community-Based NaturalResource Management (CBNRM),Washington, DC. May 10-14, 1998.(http://srdis.ciesin.columbia.edu/cases/Nepal-Paper.html)


Shrestha, S.M. and Nepal, S.M. 2003. Nationalforest policy review. Department of ForestResearch and Survey and Department ofForests, Nepal. Katmandu.

Springate-Baginski, O., Dev, O. P., Yadav, N. P.and Soussan, J. 2003. Community forestmManagement in the Middle Hills of Nepal:The changing context. Journal of Forest andLivelihood 3(1) July, 2003.

11. BOLIVIA11.1 Background and Forest OwnershipBolivia's geographical area is nearly 110 millionhectares (ha) with some 70 million ha located inthe lowlands (areas under 500 meters over sealevel). The country's forest resources coverabout 53 million ha, mostly situated in thelowlands north and north east of the Andes.Bolivian forests range from evergreen forests inthe north to dry deciduous forest in the southwith the latter having a greater potential woodproduction.

The nation's forest resources sustain arelatively small forest industry. Figures areimprecise but official records show that onlyabout 560,000 cubic meters are extractedannually for industrial purposes but as much asan equal amount may be harvested illegally.Still this represents a small proportion of theestimated 20 million cubic meters that could beexploited annually in sustainable manner. About60 percent of the timber flows to the nationalmarket while the rest is exported.

Until the mid 1990s all forest resources werelegally owned by the state, and theirexploitation and management took place underthe form of utilization concessions granted bythe government to actors of the private sector.Timber extraction was concentrated with a fewconcessionaires having rights to almost 21million ha. Only a few, most valuable, specieswere exploited.

Following policy reforms in 1996, thebalance of power and control over land andforest resources changed drastically.Concessionaires progressively reduced theirconcession areas to some 5.3 million ha. Thegovernment recognized indigenous communityownership of 22 million hectares in thelowlands, and distributed 23 million ha tomedium- and large-sized farms and 3 million tosmall-scale farmers. Municipalities have askedfor administration of some 2.2 million haformerly controlled by the central government.The central government also declared some 15million ha as protected areas. However, landownership rights are in fact uncertain. Forexample of the 22 million ha allocated toindigenous communities, only 3 million havebeen titled. Most forest areas have yet to have

clear boundaries, be demarcated and titled.Frequently there are overlapping claims yet tobe resolved. Because of this, there is doubtabout the total area of forest that remains inthe government hands and the area that is defacto controlled by communities, colonists andother actors of the private sector.

11.2 Structure of Government Before 1994, Bolivia was an extremelycentralized country with nine regions with localgovernments that had very little power orresponsibility. The Bolivian decentralizationeffort started in 1994 when the Congressapproved the Law of Popular Participation.

The Popular Participation Law, and thecomplementary Administrative DecentralizationLaw

that followed a year after, radically shiftedthe structure of power and control of resourcesaway from the central government and towardsDepartmental (Regions) and Municipal levels.The Administrative Decentralization Law wasrather limited in scope and was aimed atdeconcentrating some administrativeprocedures. The Popular Participation Law had afar more important impact.

According to the Popular Participation Law,four pillars supported the new structure ofgovernment:

• Resource allocation. 20 percent of all taxrevenues were allocated to municipalities,or about double the proportion prior to thepassage of the new law. The formula forfinancial transfers to municipal governmentswas based on population number, ratherthan on previous political considerations.Municipal governments also acquired controlover some local taxes (real estate, vehicles).

• Reform of municipal governmentresponsibilities. Responsibility for somesectors including education, health, culture,irrigation, roads and culture were alsoallocated to municipalities.

• Participatory approach. Local populationsand grass roots groups acquired the right toparticipate in Comités de Vigilancia(Oversight Committees), which couldpropose projects and supervise expendituresof public funds. These Committees alsoacquired the authority to suspenddisbursement of Popular Participation fundsif these were being misused.

• Creation of new municipalities andexpansion of territorial coverage andresponsibilities. Almost 200 newmunicipalities of a total of 311 were createdby the law. The Law also expanded theirjurisdiction beyond urban areas to thesurrounding rural areas (before the Lawthere were urban municipalities only and as


a result rural areas received little or noattention from government)

The Bolivian decentralization effort was heavilybiased towards giving greater powers, authorityand responsibility to municipalities, rather thanto the departments. To great extent this wasdue to a policy of poverty alleviation targetedaction as well as democratization in rural areas.Municipalities were judged to be closer to thepeople and achieve these objectives moreeffectively than distant central or departmentalgovernments.

Following decentralization the distributionof financial resources and public investmentchanged drastically in favor of municipalgovernments. Distribution of public investmentacross municipalities also grew a great dealmore equitable with the poorer municipalitiesreceiving a greater share. Local governmentsbecame more responsive to local needs. Perhapsbecause of the possible greater responsivenessto local needs, among other factors (localpower structures and strength of localinstitutions seem to have been contributingfactors), public investment also shifted fromlarge production and transportationinfrastructure expenditures to social servicesand human resources.

The Popular Participation Law increased therole of local civil society in running the municipalgovernments, formally recognizing local grassroot organizations-farmers, local committees,indigenous groups-as Community and Land-BasedOrganizations, (Organizaciones Territoriales deBase, OTB). The law entrusted them with adegree of control over local government budgetsby ensuring their participation in planningmedium term Municipal Development Plans. In1994, an amendment to the Constitution gaveindigenous communities the exclusive right totheir lands and territories (Tierras Comunitariasde Origen, or TCOs). Thus, the decentralizationeffort reached the lowest possible level ofgovernment and transferred variousresponsibilities and authority to organizations ofthe civil society and grass roots groups(Contreras-Hermosilla and Vargas Rios 2002).

11.3 Forest GovernanceBuilding on the decentralization frameworkestablished by the Popular Participation Law,the government drastically reorganized themanagement of the forest sector in 1996. TheForest Law 1700 was approved in July of thatyear. The Forest Law included a complex set ofprescriptions for ensuring sustainable forestmanagement, the administration of forestconcessions, promoting reforestation,combating forest crime and corruption, andinstitutional restructuring. However, one of its

most prominent features was the creation of amuch more decentralized legal and institutionalframework of forest administration andmanagement.

The new legal system puts a great emphasison decentralization with a number ofresponsibilities and financing transferred to thedepartmental governments. These are nowresponsible for implementing forestrydevelopment plans at the departmental level,and especially municipalities or unions ofmunicipalities (mancomunidades), whichbecame responsible for implementing localmanagement plans and for carrying outmonitoring and control activities within theirjurisdiction. Under the forestry lawdepartmental governments receive 35 percentof the timber concession fees and 25 percent offorest conversion (authorizations to deforest)fees to finance these implementation of theseresponsibilities. Municipal governments receive25 percent of the government receipts forconcession and forest conversion fees.

Legislation recognized the establishment ofLocal Community Associations (AsociacionesSociales del Lugar, ASL) which furthereddecentralized management by entrusting localpopulations with the management of somemunicipal forest lands. ASLs are groups oftraditional forest users, peasant communitiesand indigenous populations that depend onforests within the jurisdiction of themunicipality (Cordero and Andaluz 1998).According to Law 1700, municipalities mustassign use of 20 percent of municipal forests-theMunicipal Forest Reserves -as forest concessionsto these groups. The ASLs are oriented towardsthe commercial use of forests. The ASL schemelegitimizes collective entities made up of actorswho previously were stigmatized and regardedas illegal operators extractng wood from publicforests. Thus local groups functioning as ASLscould now legally access public forests througha preferential concession system. ASLs havepreferential treatment as they can accessconcessions without going through the publicauction process reserved for other timberutilization contracts.

To comply with their newly acquired forest-related responsibilities, municipalities or unionsof municipalities are required to createMunicipal Forestry Units (Unidades ForestalesMunicipales, UFMs). These are responsible foridentifying areas that will constitute theMunicipal Forest Reserves and for fulfillingseveral other functions such as helping localcommunities produce management plans,monitoring and controlling compliance withthese plans, halting activities that are contraryto the sustainability of forest resources, andpromoting forest plantations and agroforestry(Kaimowitz et al. Winter 1998/1999). These


responsibilities are expected to be financedwith the 25 percent of forest fees municipalitiesreceive (Pacheco 2002).

As mentioned, the government recognizedthe exclusive right of indigenous communities toutilize their traditional, community lands, orTCOs (Tierras Comunitarias de Origen), as longas they protect the integrity of their territories.While commercial uses of forests must complywith forest management plans, traditional andnon-commercial uses of forests do not requireauthorization from government (Lobo andDuchén 1999).

The government also accepted voluntarycertification as proof of compliance withregulations requiring sustainable forestmanagement plans. Many entrepreneurs andconcessionaires opted for certifying their forestoperations rather than dealing with thegovernment bureaucracy. This led to a rapidexpansion of the area under certified forestmanagement, which now exceeds 1 million ha.

11.4 Concluding CommentsThe Bolivian decentralization process wasintense and fundamentally reshaped theadministration of forest resources. The Bolivianforest sector policy reform experience is one ofthe few major exercises in developing countriesto rationalize the management of the country'sforest resources in consonance with widerdecentralizing changes in the whole system ofgovernment and achievements are, by mostaccounts, important. More than 7 million ha offorests are under sustainable forestmanagement plans and now the country is aworld leader in tropical forest certification withmore than 1 million ha of forest resourcescertified. Much of this is due to decentralizationof public functions to independent privatecertifying agencies.

Progress in reforming public forestryorganizations is remarkable, with thereplacement of a corrupt and inefficient centralpublic forest administration by one that is moreprofessional, focused and transparent. Thereare significant advances in decentralization torural communities of some of theresponsibilities and decisions for forestresources management. In many cases, thedecentralization process has redefined localpower relationships with groups that werepreviously marginalized not playing a greaterrole in the management of forest resources.Indigenous groups now have the legalopportunity to acquire control of traditionalforest lands (Pacheco 2002). However, someproblems have arisen during this process thatproduce insights on critical factors influencingthe forest decentralization effort:1. Partly to the rather revolutionary nature of

the reforms government staff in charge ofimplementation still have a limitedunderstanding of the spirit and letter of thenew policy and legal system. This problem,however serious during the early stages ofimplementation, has considerably subsided.In addition, there was a lag in properlyunderstanding decentralizing reforms on thepart of grassroots groups and the privatesector. Local groups organized in ASLs didnot have the capacity and experience tomanage a commercial enterprise (Kraljevic2002). An early dissemination and trainingeffort would have contributed to reducingthis problem.

2. The government and the forestryadministration institutions both at thecentral and sub-national level have beenunable in many instances to fully enforce thelaw, simply because of institutionalweaknesses. The decentralization process toadminister forest resources depends on botha strong central forest administration andcapable local institutions and in many casesthis has not happened.

3. Further, proper implementation of newlegislation by local governments requiressupportive action by various agencies, forexample, to sort out land claims and legalizeforest land ownership. This coordinationand interaction has been less than adequate.Land titling procedures, a responsibility ofthe central government, are lengthy andcomplex. The same has happened in thedelimitation of Municipal Forest Reserves.

4. Although the situation varies amongmunicipalities, linkages between the centralForest Administration and the sub-nationallevels of government are frequently notadequate. Departmental governments havebeen practically absent in the administrationof forest resources. (Pacheco 2002). Sinceprogress towards decentralization in theforest sector depends on action by severalagencies of government, greatereffectiveness could be achieved if thecritical inter-sectoral linkages wereanalyzed from the start. It is particularlyessential to harmonize legislation of relatedsectors that affect the process in the forestsector.

5. With the exception of management of theMunicipal Forest Reserves, municipalitieshave little discretionary power, with majordecisions still being made by the centralgovernment. National rules dictated by thecenter sometimes create insurmountablebarriers to implementation at the local level



(Pacheco 2002). Further decentralization ofresponsibility and authority is required forlocal governments to reflect localconditions.

6. The Bolivian experience also illustrates theimportance of a proper analysis of thefinancial impacts of forest sectordecentralization on various actors, public orprivate and the effect that this may have onthe management of forest resources.Economic incentives need to be structuredin such a way that the incentives affectingthe principal actors will be sufficient toensure their actions coincide with nationalpriorities. For example:

• Forest concessionaires and industrialists,key actors who would provide theeconomic drive for the sustainability ofreforms, do not appear to have hadenough economic incentive to gear theiractions to coincide with policy priorities.

• Municipalities treat forest income asdiscretionary funds that can be used tofinance activities other than forest-related ones as prescribed by law.

• Public administration of the forestrysector depends almost exclusively onincome from concession fees. This putsat risk the sustainability of governmentaction in the sector. Receipts fromconcessionaires are below the amountsprojected, either becauseconcessionaires are unable to pay thesefees or because they choose not to paythem for lack of effective governmentenforcement.

• While municipalities are expected tocontribute to the formation of ASLs, thecosts of doing so frequently exceedrevenues associated with this taskmaking local governments less interestedin implementing this scheme. Due to thereduction of forest fees receipts, thegovernment was forced to reduce by halfthe transfers to municipalities in 2002.And ASLs themselves are unlikely to getestablished unless they have financialsupport and then unlikely to succeed

unless the can operate at financialprofits.

ReferencesContreras-Hermosilla, A. and Vargas Rios, M.T.

2002. Social, environmental and economicdimensions of forest policy reforms inBolivia. Forest Trends, Washington, DC.

Cordero, W. and Andaluz, A. 1998. El proceso deotorgamiento de concesiones a Agrupacionessociales del Lugar (ASL). Nota Técnica, May.BOLFOR, Santa Cruz, Bolivia.

Faguet, J.C. 2003, Decentralization and localgovernment in Bolivia. An overview from thebottom up. Working Paper No. 29.Development Research Centre, LondonSchool of Economics, London.

Kaimowitz, D., Pacheco, P., Johnson, J., Pavez,I., Vallejos C. and Velez, R. Winter1998/1999. Local governments and forests inthe Bolivian lowlands. Network Paper 24b,Rural Development Forestry Network,Overseas Development Institute, London.

Kraljevic, I. 2002. Evaluación rápida de temasorganizativos que afectan al desarrollo delas ASLs. Documento Técnico 109/2002.Proyecto BOLFOR, Santa Cruz, Bolivia.

Pacheco, P. 2002. Contribuye ladecentralización a mejorar la gestiónforestal? CIFOR/BOLFOR, Bogor, Indonesiaand Santa Cruz, Bolivia.


The authors would like to thank DavidKaimowitz, Christian Kuechli, Laurence vonSchulthess, and Adrian Sommer for theirforesight in conceiving the workshop and fortheir invitation to prepare this analysis. As theproject unfolded many individuals contributedideas and materials, helping to ensure theaccuracy of the country profiles. The authorswould particularly like to recognize the inputsof Kolade Adeyoju, Mike Apsey, Brian Belcher,Neil Byron, Kerstin Canby, Ben Cashore,Cherukat Chandrasekharan, Hosny El Lakany,Sebastiao Kengen, Jon Lindsay, Jag Maini, AliMekouar, Miguel Serediuk Milano, Salleh MohdNor, Augusta Molnar, Sten Nilsson, LabodePopoola, Jesse Ribot, Alaric Sample, SaraScherr, Franz Schmithussen, Markku Simula andJeffrey Vincent. The authors would also like tothank three anonymous reviewers for anexcellent and insightful set of comments thathopefully are reflected in this final version ofthe paper.

ACKNOWLEDGEMENTS

67H

ans Gregersen, Arnoldo Contreras-H

ermosilla, Andy W

hite and Lauren Phillips

Brazil• Natural forests

are owned bygovernment

The Environmentand NaturalResourcesInstitute, IBAMA,has mainresponsibility forthe managementof forestresources

Note regarding terminology for the various levels of government:Federal & National = Central;State, Province, Subject, & Territory = Sub-national;Municipal, Sub-state, Municipios, & Panchayats = Local

TABLE 1 - Roles of Forest Agencies in Federal Systems: Overview of Current Practice in Eight Major Forest Countries

Public forestownership

Australia• ~25% private• ~75%

subnationallevels ofgovernment

Stategovernments (but notterritorialgovernments)legislate forestpractices andgrant licenses for forestmanagement onpublic land

Canada• 23% federal• 71% provincial• 6% private• Provincial

governmentslegislate forestpractices onprovinciallyowned land andgrant licensesfor forestmanagement;

• The Federal andprovincialgovernmentsmanage andregulate federaland provincialparksrespectively

India• 90% federal• 10%

communitiesand private

• forestadministrationis jointlymanaged by the federal and stategovernmentsbut the stateshave theprimaryresponsibilityforimplementation

• States areexpected todecentralize tothird tier levelsof government

Malaysia• Forest

ownership restswith the states.Only in a veryfew casesforests belongto customarycommunities

Nigeria• All "forest

reserves" (lessthan 10% of thecountry'sterritory) areunder the co-management ofstates and localgovernments,who awardtimberconcessions

• Constitutionally,the states havethe greatestcontrol overforestresources, butin reality thefederalgovernmentexerts morepower as itcontrols themoney

• Forested landsoutside ofForest Reservesare not putunder any formof systematicmanagement

Russia • 92% of forests

are federallyowned. Otherforests mayremain underownership ofthe subjects ofthe Federationor other publicauthorities

• The FederalGovernment canshare ownershipwith thesubjects

USA• 35% federal• 5% states• 60% private• The federal and

stategovernmentsdeveloplegislation fortheir landsrespectively

68FO

REST GO

VERNAN

CE IN FED

ERAL SYSTEMS: An overview

of experiences and implications for decentralization

Federal ForestAgency andFederalResponsibilities

AustraliaDepartment ofAgriculture,Fisheries andForestryResponsibilities:• Environmental

protection;• management of

the federalforest estate;

• control ofinternationaltrade in forestproducts;

• land use in theterritories;

• generaldirectives forforest resourcesmanagement forall states(overall sectoralstrategies)

BrazilIBAMA, linked tothe Ministry ofEnvironment. IBAMA hasregional officesResponsibilities:• centralizing

nationalenvironmentalissues;

• administersforests country-wide

SEMAM,EnvironmentSecretary of thePresidency • Responsibility

for NationalPolicyformulation andcontrol

CanadaNaturalResourcesCanada'sCanadian ForestServiceResponsibilities:• international

trade andrelations;

• management offederal land;

• nationalreporting;

• Aboriginalaffairs;

• nationalconsensusbuilding

Responsibilitiesforenvironmentalregulation as wellas science &technology areshared betweenthe federal andprovincialgovernments

India The CentralMinistry ofEnvironment andForests issuesnational policydirectives andhas responsibilityfor otherfunctions thatare national inscope, such asforestry researchand monitoring ofpolicyimplementation.

MalaysiaMinistry ofPrimaryIndustriesNFC, TheNational ForestCouncilcoordinatesplanning,management anddevelopment offorest resources.Responsibilities:• provision of

advice andtechnicalassistance tothe states,including theprovision oftraining andresearchfacilities;

• control offunctionsrelated totrade, industrialdevelopment,and theenvironment

• National ForestPolicyformulation

NigeriaFederalDepartment ofForestryResponsibilities:• formulation of

national forestpolicy;

• land-useplanning,forestrydevelopment,andenvironmentalmanagement;

• projects ofnationalinterest;

• research,training andeducation;

• trade andindustrialdevelopment;

• institutionaldevelopment

Russia Russian FederalForest Service,changing to theFederal ForestAdministrationResponsibilities:• financing the

protection,renewal andorganization offorest use.

• As part of itsprivatizationprocess, Russiais movingtowards asystem of usercontracts onproductiveareas of theForest Fund(Forest Estate);theunproductiveareas will bedirectlymanaged by theFederal ForestAdministration

USAVarious Federalagencies,including:• US Department

of Agriculture'sForest Service.

• US Departmentof the InteriorUS Bureau ofLandManagement,

• National ParkService,

• US Fish andWildlife Service,

• Bureau of IndianAffairs

• US Departmentof Defense.

• Each agency hasregulatory andmanagementresponsibilitiesfor differenttypes of landthey control.

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State ForestAgencies andStateResponsibilities

AustraliaForestry is t asmall componentof largerintegrateddepartments ormulti-resourceagencies.Responsibilities:• land tenure;• land use;• public forest

management;• water supply;• regulation of

private forestland practices

• Stategovernments(but notterritorialgovernments)legislate forestpractices andgrant licensesfor forestmanagement onpublic land

Brazil IBAMA cantransfer forestmanagementresponsibilities tothe states, butuntil now thisseldom hashappened in anysignificant scale.

CanadaMost provinceshave a Ministry ofForests (orequivalent).Responsibilities:• management of

provincial land;• allocation of

timber licenses;• forest policy

legislation;• data collection

India State ForestDepartmentshave mainoperationalduties. Statesalso adopt statepolicies thatmust be inagreementpolicies issued bythe CentralGovernment

MalaysiaStates have aForestryDepartment.Responsibilities:• land

tenure/ownership

• forest policy atstate level

• Implementationand monitoringof forestpolicies

NigeriaMost states havea State ForestryDepartment.According to theconstitution,states candevelop theirown forest policywithin theframework of theNational ForestPolicy, but as yetnone have doneso

Russia • The subjects

share someauthoritydelegated bythe FederalForestAdministrationthrough regionalregulation-making bodies;but suchregulations willbe enforced bythe FederalForestAdministration

• Leskhozes arestateenterprises (atype of regionalforest service)that combineforestadministrationand forestmanagementresponsibilities.

• Subjects canmake decisionsregardingallocation offorest plots forleasing and freeuse

USAState ForestDepartmentsregulate forestpractice onprivate land,private industry,and enforce statelaws. There is avariety or policy,legislative andenforcementarrangements indifferent states.

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of experiences and implications for decentralization

Coordination ofmultiple levelsof government

Australia• National Forest

PolicyStatement.

• Regional ForestAgreements;

• The AustralianForestry Councilhas developed aset of nationalprinciples to beapplied in themanagement ofnative forestresources usedfor woodproduction onboth public andprivate lands;

• NaturalHeritage Trust.

Brazil • The Programa

Nacional deFlorestas iscomposed ofprojectsdesigned withtheparticipation ofall levels ofgovernment andthe civil society,as well asNGOs.

Canada • The Canadian

Council ofForest Ministers(CCFM) isfocused onmaking moreeffective andefficientlinkagesbetweenfederal and sub-nationalentities;

• National ForestStrategy.

India • Third tier of

governmentrelationshipsare left mainlyto States.

• Joint ForestManagementhas beenemployed insome areas,which involvespartnershipsbetweengovernment andcommunities

• In Joint ForestManagementagreements,sub-stategovernmentsare responsiblefor forestresourcesplanning.

Malaysia• the National

Forestry Council(NFC) is a forumfor federal andstategovernments;

• Together thecentral andstategovernmentshave preparednational levelcriteria andindicators forsustainableforestmanagement,have developeda domesticforestmanagementcertificationsystem, andhave arelatively robustforestregulatory andmonitoringsystemincluding theNational ForestPolicy.

Nigeria• The National

Forest Policy;• Revenue sharing

systems are inplace betweenstate and localgovernments;

• The nationalforest andwildlife policy isbeing reviewedto make itsimplementationmoreparticipatory;

• A nationalwildlife forestlaw is beingdeveloped withinvolvement ofallstakeholders.

Russia • Federal

Government hasthe primaryresponsibilityfor coordinationbut in reality,the institutionaluncertaintypresent in theRussiangovernanceenvironmentpreventseffectiveharmonizationbetween levelsof government.

USA • There is no

formalmechanism tocoordinateforest policyacross levels ofgovernment -causing sometensionbetweenfederal andstate levels.Some states seefederalgovernmentinfluence asexcessive.

• There areseveral federalagencies thathavejurisdiction overfederal forestlands and theirmanagementapproaches areoften dissimilar.

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Regulation ofprivate forestpractice andindustry

Australia• State

governmentsapply the samecodes ofpractices as onpublic forestland

Brazil • IBAMA regulates

relationshipswith privatesector, but alsostates haveauthority to doso.

Canada • Provincial

governmentslegislate forestpractices onprivate forestland

India • Industry cannot

obtain leasesfor access toforestresources.Industry does nolonger obtainwood suppliesfromgovernmentforests.

• National Forestpolicyencouragespartnershipswith localcommunities forsecuring forestraw materialsupplies.

• Some sectors ofthe paperindustry remainprotected byimport tariffs.

Malaysia• State

governmentslegislate forestpractices withinthe broadercontext of theNational ForestPolicy

Nigeria• State

governmentscan developforest policieswithin thecontext of theNational ForestPolicy.

Russia • Four types of

licenses can begranted to theprivate sectorsuch that forestoperations andtheimplementationof managementplans will beundertaken byforest users(licensees)while thecentralgovernment orthe subjectsfocus onstrategic,regulatory, andenforcementactivities

USA • State

governmentslegislate forestpolicy forprivate forestmanagement.

• Federalenvironmentallegislationaffects forestpractice onprivate lands,mostimportantly theEndangeredSpecies Act andthe Clean WaterAct, with eachstate having theflexibility todesign itsregulatoryframework tocomply withnationallegislation.


Potential advantages

Deconcentrationreduces bureaucracyand reduces decision-making congestion atthe centre.

Faster decision-making, particularlyin the case of routinedecisions

Deconcentration leadsto institution buildingat the local level.Also leads to betterunderstanding ofconditions, needs andconstraints at thelocal level. Itfacilitates informationflows between localand centralgovernments andbetween institutionsof the civil societyand the private sectorand governmentinstitutions. There isa better scope forestablishingpartnerships withorganizations outsidethe government.Local knowledge canbe exploited morefully.

Potential dangers

Coordination, implementationand monitoring of nationalpolicies may be a great dealmore difficult

Economies of scale inimplementing certain actions(for example, procurement)may be lost.

The "broad picture" of nationalforest management anddevelopment may be lost.Decisions may be conditionedby local objectives that may ormay not coincide with nationalobjectives.

Decentralization may result inthe allocation of centralresources to regions, ethnicgroups or political associateswhich may threat nationalcoherence.

Decentralized organizationsmay have limited technicaland managerial knowledge.

Examples of policy options to dealwith disadvantages and profit frompotential advantages

Identify those national policies thathave an overriding importance over thepreferences of decentralized bodiesand establish clear rules for theirenforcement at national level,including penalties and rewards.

Some of these costs may beunavoidable. Procurement may bekept as a centralized operation but thecosts of doing so in terms of longeradministrative procedures, possibilitiesof corruption and lack of "touch" withlocal demands may be higher than thepotential benefits derived from scale.

Identify those national policies thathave an overriding importance over thepreferences of decentralized bodiesand establish clear rules for theirenforcement at national level,including penalties and rewards.Implement dissemination andawareness programs to promotenational policy objectives.

Ensure broad-based public discussion offorest decentralization policy issues.At minimum, this includesdissemination of information andestablishing consultative mechanismsinvolving key stakeholders.

Promote training and disseminationprograms to strengthen local technicaland managerial capacity. Promotedecentralization selectively, only tothose local institutions that are able todeal with the managerial and technicaldemands of the process. Whereadequate, tap local knowledge.

TABLE 2 - The Decentralization of Forest Institutions: Potential Advantages, Dangers and Examplesof Policy Options


Potentialadvantages

If decentralizationleads toprivatization, orto organizationsthat need tofunction asseparate profitcenters, decisionsare more subjectto the disciplineof the market. Atleast somesubsidizedoperations will beeliminated.

It is easier toinvolve localpopulationsparticularly ifactions requestedfrom them arelinked to benefitsharing.

Greater sense of"local ownership".

Potential dangers

Decisions may be conditionedby purely financialconsiderations that may notcoincide with national oreven local objectives.

Decisions may be socially orenvironmentally undesirableor unsustainable. Non-commercial objectives ofnational policy may be lost.

Local elites may control anduse decentralized institutionsfor their own benefit.Decision-making may be lesstransparent and lessresponsive.

If local governments do notproduce a substantialeconomic surplus, nettransfers from the centralgovernment may be lost.

Local ownership may be lostif benefit sharing becomesmore inequitable.Decentralized forestry officesmay be controlled by specialinterests. Decentralizationmay increase arbitrarinessand corruption.

Examples of policy options to deal withdisadvantages and profit from potentialadvantages

Identify national policies that have anoverriding importance over the preferencesof decentralized bodies and establish clearrules for their enforcement at nationallevel, including penalties and rewards.Establish incentives such as subsidies toinduce decentralized and privatizedinstitutions to conform more closely tonational priorities including those prioritiesthat are not financially attractive such asthose related to environmental quality(preservation of valuable ecosystems,biodiversity, carbon storage, etc) and socialimprovement (equity, the elimination ofpoverty, etc.).

Establish clear rules of the game so thatlocal space for decisions will beconstrained within the boundaries ofnational priorities (for example, the needto ensure sustainability of benefits derivedfrom forest management). Promotetraining and capacity building programs atthe local level.

Identify key stakeholder groups andpromote democratization of decision-making. Some common and uniform rulesof the game may have to be imposed onlocal institutions to ensure equitablesharing of benefits and costs. Promotetransparency in decision-making. Createchannels for community participation.Promote open and public procurementschemes.

Net economic transfers from the centralgovernment may be desirable on social andenvironmental grounds. Establish clearpolicies regarding central governmentsubsidies to local institutions, whatcircumstances may make these nettransfers acceptable.

Some common and uniform rules of thegame may have to be imposed to localinstitutions to ensure equitable sharing ofbenefits and costs. Identify keystakeholder groups and promotedemocratization and transparency indecision-making.

Encourage participation in decision-makingand a free flow of information. At thelocal level, focus on the establishment ofmechanisms for greater transparency.



Politicaldecentralization leadsto a larger share ofbenefits remaining inthe localities andcommunities thatgenerate them.

With politicaldecentralization,there is potential fora greater coincidencebetween localtraditions andinformal rights, onone side, and formalnorms imposed by thegovernment, on theother.

Political meddling bycentral powers maybe more difficult.

Potential dangers

Central government may loserevenues and manpower.

Local elites may gain controlof benefits and create greaterinequality.

There may be overwhelmingpressure to "mine" the forestfor immediate local benefit.

If formal norms werepreviously ineffective and defacto informal normsprevailed, decentralizationmay increase conflict betweenformal and informal norms.

Local government officialswith greater responsibility andpower may use decentralizedinstitutions for their ownpolitical and personalpurposes. Central governmentpolitical meddling may besimply replaced by localpolitical interference.

Decentralization may be avehicle for central politicalparties to penetrate the ruraland forest economy.


The loss of central governmentresources is an unavoidable cost ofdecentralization. Policies to promotetraining and capacity building programsmay alleviate these tensions.

Identify key stakeholder groups andpromote democratization of decision-making. Some common and uniformrules of the game may have to beimposed to local institutions to ensureequitable sharing of benefits and costs.

Establish and control forestmanagement minimum standards to befollowed by decentralized institutions.In certain circumstances, mining oflocal forest resources may be acceptedby policy.

If local norms led to sustainablelivelihoods and sustainable forestmanagement, then completedevolution may be in order, with aslittle meddling from government aspossible. If informal norms led tounsustainable practices, then a systemof incentives may be in order.Adequate policy decisions depend on aproper understanding of highly specificlocal conditions.

Promote local democratization,participation and transparency indecision-making. Design accountabilityrules including openness of decision-making processes and penalties formisuse of local resources for politicalgain.



With politicaldecentralization,corruption maydecrease if thediscretionary powersof central governmentofficials decrease andif, due to greaterlevels ofparticipation,decisions of localofficials can be moreclosely scrutinized.

Potential dangers

If monitoring and control fromthe centre are loosened,particularly if decentralizationis not accompanied byparticipation, there may bemore opportunities forcorruption. Local elites andlocal government officials mayconspire more effectively tocarry out corrupt schemes.


Promote local democratization,participation and transparency indecision-making. Design accountabilityrules including openness of decision-making processes and penalties formisuse of local resources. Establish atruly independent monitoring officeand an office to accept and investigatereports by "whistle blowers".Encourage the media to reportsituations where malfeasance issuspected. Diversify service providersfor increased choice. Increasetechnical assistance to foster public-private partnerships.


Area wherestrong Linkagesare required

SharingPower/Authority

EffectiveAccountability

SharingResponsibilities

Financing andRevenue Sharing

Linkages amongsectors

Areas of Policy Intervention

In most of the countries looked at, the ownership and authority over forestlands and their use was set by a constitution, which often gave all powers tothe provinces or states. Yet, authority for many key elements required forgood management, such as the right to tax and charge for forest use and togenerate revenues has remained with the central governments, althoughoftentimes fees are collected by the states or provinces and passed on to thefederal treasury. Authority related to forest development and conservationneeds to be looked at in a holistic fashion. Authority to develop a budgetneeds to be linked to revenue generation in order to encourage fiscalresponsibility.

In some cases, the provision for accountability of local authorities for theiractions has been de facto and not provided for in law nor in the normalbalance of interests and power in a local area, state or province. Ruling eliteshave dictated policies, including access to resources and use of forests. Forestcrime has been rampant and tolerated by local authorities. There is need forclear policies through law that assure full representation and accountabilityand provide for appropriate penalties for non compliance and the ability offederal authority to enforce laws. At the same time, law has to ensure abalance of power between federal and other levels of government and providefor protections for private property and activity. Often these requirements aremore fundamental and the laws deal with states rights and responsibilities asa whole rather than with a sector.

Responsibilities for forest management actions are often assigned on an ad hocbasis, although in some cases there have been formal agreements orresponsibilities have been dictated from the federal level. In certain cases,e.g., related to forest protection, river basin development, trade, etc., thereare clear reasons why the federal government has retained responsibilities(since protection often requires interstate actions); in other cases, there isequally clear reasons why the states should have the responsibility. In most ofthe countries reviewed, the share of responsibilities held by different entitieswere not always clear and they differed between countries, with theexception of certain clear cases of assignment by law. Overlappingresponsibilities also occur, generally because of lack of clarity in laws andregulations.

Different countries have different laws with regard to revenue sharing. Insome cases, the tendency has been for the central or federal government toprovide the major resources for state programs and also to collect therevenues from resource use. In some cases, the revenues are provided tostates on a formula basis, e.g., in the case in lieu payments provided whenlands are in federal ownership and they generate revenues that are sharedwith states in lieu of taxes. In other cases, states have clear rights with regardto revenue generation associated with forest use.

The country examples in many cases are not clear with regard to the formallinkages that have been established between sectors across the economy andbetween government, private and civil society entities. However, it is quiteclear that such linkages are important, that they often are better establishedin law and that various incentives often are required to develop effective crosssectoral linkages.

TABLE 3 - Policy Interventions Needed to Build Strong and Effective Linkages In Forest GovernanceSystems


Meeting theRequirementsRequires:

Publicmanagement offorests and"public goods"such as research,education andtraining functions

Laws andRegulations atdifferent levelsof government

AdequateKNOWLEDGE,

Information andcommunication

Basic inputs to theknowledgefunction throughpublic research,education andtraining.Managemententities need tohave adequatetechnical capacityas well asmanagerialcapability. Thepublic sector mostoften provides thesupport to buildcapacities.

Laws/regulationsoften encouragegroups to seek keyinformationneeded to manageeffectively andefficiently; clarityof legislation andregulations iscritical, as shownin several of thecase examples.

AppropriateAUTHORITY andRights

Wide distributionthrough variouspublic channels ofknowledge of therights held bydifferent groups isessential toeffective action;making the "rulesof the game" clearis a publiceducation as wellas communicationfunction makes thejob of managementmuch easier.

Basic to theestablishment ofauthority andrights in ademocratic society;also key to keepingcorruption andgraft in check;laws need toestablish theconditions forappropriate checksand balances onuse and misuse ofpower andauthority atdifferent levels ofgovernment.

AdequateRESOURCES to meetresponsibilities

It is not onlyavailability ofresources that isimportant, but alsothe knowledge ofwhich resourcesactually are neededto carry out theresponsibilitiesassigned.Governments runvarious loan andinsurance programscan be critical forsuccess, amongother things,reducing the level ofuncertainty and risk.

Laws are required toredistribute publicresources and/orgenerate newresources throughtaxation, etc.Regulatorymechanisms cankeep fiscalirresponsibility incheck and canprovide the meansfor a country and itsstate and localgovernments to getresources needed tofinance sustainableforest developmentand protection.

Strong MOTIVATIONto do what is rightat the right time;and not to do whatis wrong ("forestcrimes" andcorruption)

Public education,research andextension provideessential informationon potential benefitsfrom actions andinvestments of timeand resources. Thusmotivation dependson having the rightinformation in hand;public managementis necessary in thecase of public goodswhere no individualentity has theincentive to providethe particular goodor service, e.g.,education and otherservices, e.g., fireprotection.

Laws that createstability and clarityare required toprovide themotivation to doanything other thanwhat generates shortterm gain. Lawsoften provide themotivation for publicservants to acthonestly and in thepublic interest.

TABLE 4 - Meeting Requirements for Effective and Efficient Sustainable Forest Management

Requirements for effective management by Public, Private and Civil Society Entities:


Fiscal andFinancialmechanisms

Subsidizedresearch andfinancial grantsand loans can becritical in terms ofgeneratingrequiredknowledge.

Fiscal andfinancial changesoften arerequired toeffectivelyimplement newauthority andrights. Givingmanagemententities themeans andauthority to taxand fundbudgets/programscan be criticaland can stimulatefiscalresponsibility inlower levels ofgovernment.

Taxation; subsidiesand timberrevenues are basicpublic means ofgeneratingresources for publicforest managementat all levels; inmany countriescomplex systems offorest charges needto be replaced bysimpler forms;incentives fordesirable actionsand to avoidundesirable onesare basic tools in adecentralizedsystem ofgovernment.

Subsidies and publicpayments forsocially desirableservices(biodiversityconservation, forestprotection forcarbonsequestration andfor other socialpurposes) are thefundamental toolsthat provideincentive/motivation for groups tomanage forests insocially responsibleways.


1 Naturally, states or sub-national units ofgovernment generally confer responsibilitiesand authority for various functions to locallevels of government, or such may be donedirectly through the constitution.

2 Note, however, that federation still involvesdevolution of responsibilities and authority froma situation where, within a given state, all werecentrally held by the state to a situation whereit confers ("decentralizes") some powers to thefederal government, i.e., authority andresponsibilities are dispersed. Decentralizationrefers to a process of dispersion of authority,responsibilities, etc., but not necessarily fromfederal or central government to state or lowerlevels of government.

3 New Zealand is an extreme case ofdecentralization involving a shift from thepublic to the private sector.

Detailed information on Australia's forestgovernance can be found on the website of theGovernment of Australia's Department ofAgriculture, Fisheries and Forestry(www.affa.gov.au).

5 cf. forest related discussions on AustralianWilderness Society's website(www.wilderness.org.au).

6 IBAMA, however, does not have control overindigenous lands, which remain under theresponsibility of the Indian Affairs Agency,FUNAI. This is a substantial area, almost 100million ha (Toni 2003).

7 Since it provides such a detailed perspectiveon federal provincial and territorialrelationships over time in the forestry sector,we have excerpted the following paragraphs

from Natural Resources Canada's 1997publication, "The State of Canada's Forests:Learning from History, 1996-1997."

8 It is interesting to note that some 200corporations own 27 percent of all privateforest lands, whereas some 71 percent of allprivate forest land owners only own 3 percent ofthe land. Ownerships over 100 acres are held byless than 8 percent of all owners. (Thomas 1995)

9 The name "Sagebrush Rebellion" comes fromthe fact that President-elect Reagan sent atelegram to the "Sagebrush Convention" in Utah,stating: "best wishes to all my fellow "SagebrushRebels." The focus was on grazing lands ownedby the Bureau of Land Management and onlyperipherally involved national forest lands.(From the Forest Service Daily News Digest,December 1, 1980, as reported by the ForestHistory Society on its web site(www.lib.duke.edu/forest).

10 As reported by the Forest History Societyfrom draft materials from the Policy AnalysisStaff Group of the U.S. Forest Service.(www.lib.duke.edu/forest/usfscoll/policy/States'_Rights/1980_FSresponse.html).

11 The World Bank has been actively involvedwith helping Russia to rationalize its forestpolicy and management. In this sense, we arefortunate to have available the draftproceedings of a major recent workshop inMoscow sponsored by Russia and the World Bank(World Bank forthcoming). We also arefortunate that IIASA has been doing some majorwork on Russian forests (e.g., Nilsson andShvidenko 1998 and Shvidenko 2003). Thissection draws throughout on this set of papers.

ENDNOTES


12 As set out under the Federal Law "On GeneralPrinciples of Organization of Local Self-Government in the Russian Federation".

13 Since the term "concession" is oftenunderstood sensu stricto by opposition to "lease"and "short-term use", we will here use the term"user contract" or "delegation contract" to coverall four categories in a broad sense.

14 We are particularly thankful for thecomments from Prof. K. Adeyoju of theUniversity of Ibadan.

15 For example, the stumpage rate for Mansoniaaltissima is set at very different levels in thefollowing states: N 225 in Kogi State; N 500 inOgun State; N 750 in Ondo State; N 300 in LagosState; and N 1,000 in Ekiti State.

16 In 1993, the Federal Government directed allstate governments to pay 10 percent ofrevenues generated into a Forestry Trust Fundfor the management of forest resources. Thisdirective has not been implemented by manystate governments.

17 A World Bank report (1990) pointed out thatdeforestation is one of the most seriousenvironmental problems in Nigeria and that itaffects 50 million people with sustainableproduction from forest resources worth some$750 million annually.

18 Within districts and municipalities, there aresubdistricts (kecamatan). Within subdistricts,villages (desa in rural areas and keluharan inurban areas).

19 "Regions" refer to provinces and districts aswell as cities.

20 Main Government Regulation on ForestPlanning PP33/1974.

21 Basic Forestry Law 1999/41 (Undang-UndangDasar Kehutanan).

22 Kumaon includes the six Himalayan districtsof the new state of Uttaranchal, namely,Nainital, Almora, Bageshwar, Pithoragarh,Champawat and Uddham Singh Nagar.Uttaranchal lies in the northern part of Indiaamidst the Himalayas and dense forests. Thestate is bordering Himachal Pradesh in thenorthwest and Uttar Pradesh in the south andhas international borders with Nepal and China.

23 Among other things, local people hastilycleared forest land when the nationalization

was taking place so they could retain theirtenure of the land as "agricultural" land.

24 In 1990 they became the "VillageDevelopment Committees."

25 Based on Faguet, 2003

26 This matrix describes a highly simplified viewof the roles of the various agencies in federalsystems.

27 Due to the tremendous reform currentlyunderway in Russia, some of the information inthis table refers to potential outcomes of thenear future and not the present situation.

FOREST GOVERNANCE IN FEDERAL SYSTEMS: AN OVERIEW OF EXPERIENCES AND IMPLICATIONSFOR DECENTRALIZATION

WORK IN PROGRESS

Hans Gregersen, Arnoldo Contreras-Hermosilla, Andy White and Lauren Phillips

Hans G

regersen, Arnoldo Contreras-Herm

osilla, Andy White and Lauren Phillips

Interlaken Workshop on Decentralization in Forestry27-30 April 2004 Interlaken, Switzerland

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