Sustainable Forest Finance Toolkit - PwC

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Malaysia – country briefing note 2 of 2New Application HOMENational industry and regulatorycontextThe primary government agencies responsible for regulatingtimber production and forest management within Malaysiainclude within Sabah the Sabah Department, within Sarawakthe Sarawak Timber Association (STA) and the SarawakTimber Industrial Development Corporation, (STIDC). Withinpeninsular Malaysia, forestry operations are regulated byState Forestry Departments.Country-specific sustainability issuesA challenge for forestry operators within Sarawak for anumber of years has been the issue of indigenouscommunities and their relationships with logging operatorsactive in their ancestral lands. This has been a particularlyhigh profile issue for the Penan peoples and the Samlingcorporation within Sarawak. Several international NGOsactively monitor the plight of the Penan peoples and otherindigenous groups, and continue to hold logging companiesto account for any alleged negative impacts on thesecommunities.Management integrity and low levels of transparency remain apotential risk for investors in the forestry industry withinMalaysia as a whole. Information on timber exports andvolumes, and information on concession holders and keyplayers within the sector, remains hard to obtain, and there areregular allegations of bribes and facilitation payments within theforestry sectorOpportunitiesFor progressive investors and forestry operators withinMalaysia, there may be upside opportunities through theprocess of getting operations certified to international standards.Although the debate around premiums obtainable for certifiedtimber products continues to generate controversy, it wouldappear that there are premiums achievable at least for certainparts of the value chain following certification to a credibleinternational standard.In addition, for companies managing large areas of naturalforest and potentially plantation forest, there may also bepotential to bundle benefits from a number of revenue streams,including timber revenues, carbon credit revenues, eco-tourismfees and income, and emerging markets for biodiversity offsets.Page 64pwc
Russia – country briefing note 1 of 3New Application HOMEKey facts on Russian forestry• One fourth of the world’s timber resources, but only 6% ofglobal logging• 4.7% of Russia’s industrial production• 26% of timber industry production is round timber• 24% of production is exported• Export of timber products in 2007 amounted to US$12.6bln• Round timber represents 37% of exported timber products• 35% of paper and cardboard and 46% of furniture areimportedNational industry and regulatorycontextThe Russian government views the sector as high-priorityand its key priorities have been to discourage industryplayers from exporting round timber, expand value-addedareas of domestic industry and to generally improveinvestment climate in the industry.To this end it introduced the New Forestry Code in 2007,alongside a programme to substantially increase customsduties on round timber exports and measures to improveinvestment attractiveness. At the present time it is unclearwhether the punitive tariffs of 80% outlined in governmentplans will ultimately be introduced.The new Forest Code transferred forest policy matters to theregions (oblast, krai & republics), and regions are required todevelop forest and forest industry policies.Forests are still owned by the state, and concessions aregranted for a maximum of 49 years for private individuals andenterprises.Concession are granted through tenders, and there are nolimitations on foreign legal entities.Concession owners face heavy obligations, includingbuilding of forest roads and other forest infrastructure, andensuring reforestation.Protected forest and enforcementAll forests are state owned – the large majority are part ofthe Lesnoy Fond, or forest fund, which also includes nonforestlands. However, some belong to other governmententities such as the Ministry of Defence or Ministry ofAgriculture. Russia’s forests have been divided into threecategories, which are organised around location andeconomic, social or environmental significance. Further,the Russian government designates some forests as‘specially protected natural territories’, including naturereserves and parks, spas and national monuments.UNECE-FAO reported in 2001 that around 5% of forestfund lands fall under this classification – however as theforest fund also includes some non-forest lands, it isdifficult to calculate an exact percentage. Various sourcesestimate that anywhere from 2-7% of Russia’s forests areprotected, according to common usage of the term.Special places and certificationForest certification has been receiving increased attentionin Russia in recent years. Public procurement policies aswell as private sector initiatives are driving the pushtowards forest certification in all industrial wood-producingregions of the world. According to UNECE-FAO, less than3% of Russia’s commercially accessible forests werecertified by mid-2006, compared to over 30% in NorthAmerica and over 50% in the EU/EFTA area, socertification still has the potential to expand rapidly inRussia. When Russia’s earlier Forest Code was adopted in1997, one stated goal was to provide only certified wood toWestern markets by 2007 – an ambition that clearly hasnot been met.Globally there has been a proliferation of forestcertification standards, but those with the broadest reachare administered by the Programme for the Endorsementof Forest Certification (PEFC) and the Forest StewardshipCouncil (FSC) respectively. The latter is far morewidespread in Russia. However the National VoluntaryForest Certification Council has been developing theRussian State Forest Certification System (RSFC), whichis now endorsed by PEFC. A Russian FSC Standard wasaccredited by FSC in November 2008.While certified products do not currently command a pricepremium, this may change as sustainable procurementpolicies continue to develop. Major domestic players likeIlim Pulp (now partly owned by International Paper) andAPPM have ramped up certification efforts in recent years– in fact, Ilim Pulp has more FSC-certified forest in Russiathan any other player and, in a further major initiative,became the first domestic forest products producer toprepare a corporate responsibility report. Also, mostWestern companies operating in Russia are choosing tosource certified wood as part of rigorous chain-of-custodyand procurement programmes. While Russia hasambitious aims in regard to certification, for the time beingthe drive toward greater use of certified materials willlikely be driven by those operators who export regularly tothe West and Japan. Further, certification comes at afairly high cost – so many logging companies arecurrently unable to finance the certification process.Page 65pwc
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Sustainable ForestFinance ToolkitTh
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Guidance for using the ToolkitThis
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How does economic development impac
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Challenges and problems associated
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Sustainability issues in the forest
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Costs and benefits of certification
Page 14 and 15: Costs and benefits of certification
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Page 18 and 19: Illustrative - Management Interview
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Page 22 and 23: Illustrative - Higher risk client a
Page 24 and 25: Legality issue briefing note2 of 5N
Page 26 and 27: Legality issue briefing note 4 of 5
Page 28 and 29: Small scale and community forestent
Page 30 and 31: Sustainable ForestManagement briefi
Page 32 and 33: Special places briefing note 1 of 4
Page 34 and 35: Special places briefing note 3 of 4
Page 36 and 37: Planted forests briefing note 1 of
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Page 46 and 47: Certification briefing note5 of 7Ne
Page 50 and 51: Pollution and EnvironmentalManageme
Page 52 and 53: Local communities and indigenouspeo
Page 54 and 55: Local communities and indigenouspeo
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Page 60 and 61: Brazil - country briefing note 1 of
Page 62 and 63: Indonesia - country briefing note 1
Page 66 and 67: Russia - country briefing note 2 of
Page 68 and 69: 2 Portfolio ManagementOne of the ha
Page 70 and 71: FMU / supply chain performance 1 of
Page 72 and 73: 3 Policy DevelopmentA carefully con
Page 74 and 75: Suggested Internal Bank ForestryPol
Page 76 and 77: Suggested Internal Bank ForestryPol
Page 78 and 79: 4 ProcurementIn 2007, the WBCSD and
Page 80 and 81: Sample procurement policy2 of 2Proc
Page 82 and 83: Appendix 1: Special places 2 of 3De
Page 84 and 85: Appendix 2: Client performancerequi
Page 86 and 87: Appendix 2: Client performancerequi
Page 88 and 89: Appendix 4: Consolidated duediligen
Page 90 and 91: Appendix 5: Acronyms1 of 1ASEAN Ass
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