INVESTING IN TREES AND LANDSCAPE ... - PROFOR

issues should be dealt with before the investor is on the scene. Once the hard investor arrives,
the community needs to confirm that an appropriate process was followed and that this entity
can make enforceable deals. Otherwise, the investor faces a future risk of disagreement over the
terms of the deal and “submarine” claims (emerging after an intentional delay) regarding land and
resources. The agreement could include a statement to the effect that the investor has evidence
that the constitution and ownership of the company is a proper reflection of the will of the broader
community, but it is hard to see how this could be ascertained by an investor in practice.
It thus makes sense to widen the definition of this principle to include participation in designing
the enterprise, and to create articles of association that define rules and procedures that balance
the rights of shareholders with the need for company officers to make effective business decisions
that are in the long-term interests of the company and all its shareholders, such as replacing a
nonperforming executive. Such a structure should be careful not to discriminate between different
classes of shareholders if that means diminishing the autonomy of the local rights-holders (e.g.,
voting and nonvoting shares, preferred stock).
Understanding rights and obligations, and committing to local control
Where there is no clear legal tenure, it can be said that the land is not “locally controlled” and
thus investment in local forest or landscape enterprises is not possible. It could be argued that
tenure is the fundamental necessary condition for investment. Yet rights-holders often believe that
involvement with an investor might lead to clarification of tenure; indeed, this outcome could be
more important to them than direct financial rewards. How would this happen in practice? Perhaps
an investor has more influence with the national or local government? Not all such deals end happily.
The palm oil estates in Indonesia endow each of the outgrowers with a 2-hectare plot of land, but
in many cases this arrangement has proved to be less valuable than the previous arrangement of
communal access to a very large area of forest. So formal tenure may be a retrograde step from
the status quo.
As part of the process of securing long-term tenure security, rights-holders may need to be prepared
to work with the government to encapsulate their rights into an existing legal framework (for instance,
a concession or lease) that permits fair use of the resource, even if this does not in the short-term
advance their ultimate goal of freehold tenure (Elson 2010). Some compromise might be required
by local rights-holders to allow investment to proceed, with the stated long-term goal of obtaining
more permanent formal tenure in the future. The consensus among rights-holder groups is that
recognizing and securing land tenure and user rights is a precondition for sustainable forest and
land management. Rights are thus a precondition for rural development, as tenure is an asset and
releases the value locked up in land and forests. However, governments often need to be convinced
that there is no loss to the state by transferring state forest land to local people—this misconception
stands in the way of tenure reform in many countries.
Clarity of tenure is of interest to all parties in the deal, but their interests vary in subtle ways.
Rights-holders might have various ideas about how tenure maps onto their usually quite sophisticated
understanding of multiple overlapping layers of state-defined and customary practice ownership,
management, and use rights. Tenure can be tied to issues of self-determination or intracommunity
politics, and can often have a complicated legacy.
Chapter 3. OPPORTUNITIES AND CONSTRAINTS FOR INVESTING IN FORESTS AND TREES IN LANDSCAPES
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