A REVIEW OF THE SOCIAL COSTS OF
ILLEGAL LOGGING
Prepared for
Department of Agriculture, Fisheries and Forestry
June, 2010
Final Report
Sheridan Coakes Consulting Pty Ltd
NSW Office
PO Box 30
BOWRAL NSW 2576
Tel/Fax: 02 4862 3936
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Email: [email protected]
Website: www.coakesconsulting.com
Department of Agriculture, Fisheries and Forestry
June 2010
Table of Contents
Executive Summary ....................................................................................................................... 1
1.0
Introduction....................................................................................................................... 4
1.1 Illegal Logging .................................................................................................................. 5
2.0
Methodology .................................................................................................................... 6
3.0
Definition of Forest Dependent Communities ..........................................................11
4.0
Review Findings ..............................................................................................................14
4.1 Draft Regulatory Impact Statement ..........................................................................14
4.2 Stakeholder Submissions ...............................................................................................14
4.3 Summary of Selected Literature Review ...................................................................17
4.3.1
Exclusion of Forest Dwellers from Traditional Areas ........................................21
4.3.2
Changed Natural Environment..........................................................................23
4.3.3
Commercial Distortions ........................................................................................25
4.3.4
Transfers of Welfare Away from the Public Sector .........................................26
4.3.5
Violation of Human Rights ...................................................................................29
4.3.6 Introduction of Social Pathologies ..........................................................................32
4.4 Study Limitations and Directions for Further Analysis ...............................................35
5.0
Conclusion ......................................................................................................................36
6.0
References ......................................................................................................................38
7.0
Appendix .........................................................................................................................44
7.1 Summary of Stakeholder Submissions ........................................................................44
7.2 Literature Resources Reviewed ...................................................................................49
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List of Figures
Figure 2.1: Methodology Flowchart ........................................................................................... 6
Figure 2.2: Elements of the five capital areas .......................................................................... 8
Figure 4.1: Matrix 1 .......................................................................................................................16
Figure 4.2: Interconnectivity Analysis .......................................................................................18
Figure 4.3: Matrix 2 .......................................................................................................................20
List of Tables
Table 7.1: Resources Reviewed ................................................................................................49
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Sheridan Coakes Consulting Pty Limited 2010
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Department of Agriculture, Fisheries and Forestry
June, 2010
Executive Summary
The Department of Agriculture Fisheries and Forestry (DAFF) is preparing a Regulation
Impact Statement (RIS) to assess the costs and benefits of potential policy options to
support the Australian Government’s commitment to combat illegal logging and
associated trade.
The Centre for International Economics (CIE) prepared a draft RIS in the second half
of 2009. The draft RIS acknowledged that assessment of the benefits and costs of
policy options should take into account the social costs of illegal logging. The report
noted there were “intangible benefits” to Australia of a socio-political nature in
pursuing action to restrict imports of illegally logged timber and wood-products.
Stakeholder submissions in response to the draft RIS identified a number of concerns,
particularly regarding the analysis of the social costs of illegal logging:

Australian domestic wood product industry issues

Undermining of human rights

Political patronage and conflict

Intimidation and violence

Redistribution of wealth
DAFF recognised the need for additional consideration of the moral dimensions of the
policy dilemma and this report supplements the draft RIS with a brief analysis of the
social costs associated with illegal forest activities in developing countries.
This analysis of social costs involved the use of the Five Capitals model of sustainable
livelihoods as developed by the UK Department for International Development. The
concept treats a community’s social environment as a stock of assets (or forms of
capital) on which a community draws to sustain its way of life.
This framework helps to illuminate how illegal logging activities can have impacts, not
just on incomes and economic assets of affected communities, but on many of the
important building blocks of sustainable communities – and outlines how an impact
on one form of community asset can have consequent impacts on other forms of
community capital.
A generic socio-economic profile has been developed to create a snapshot of a
typical forest dependent community, identifying the common characteristics of these
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communities around the world. The profile was developed using the Five Capitals
framework, distinguishing the shared aspects of livelihood for each capital held by
the communities. The profile is broad in nature, but creates a useful snapshot when
considering the social costs of illegal logging on these communities.
Illegal logging and corruption are complex issues. Figure 0.2 in section 1.9 illustrates
the interconnected nature of the drivers and impacts of illegal forest activities.
Six key social cost themes emerged from the synthesis of the reviewed literature on
illegal logging:

Exclusion of forest dwellers from areas on which they depend for a livelihood
A number of social costs to forest-dependent communities can arise from their
exclusion from logged areas. These include displacement from traditional lands, loss
of hunting and collecting areas, and diminished access to natural resources and the
loss of context in which traditional knowledge is valuable, with its benefit to traditional
livelihoods.

Changed natural environment from removal of trees
Changes to the natural environment through the practice of illegal logging can have
far reaching social costs for forest-dependent communities. Such costs include the
loss of biodiversity and ecosystem services such as carbon sinks, as well as the loss of
genetic material with potential for commercialisation. Other costs associated with a
changed natural environment include a loss of protection from extreme weather
events, reduced soil and water protection and an increase in pollutants.

Commercial distortions
Commercial distortions occur when there are “externalities” involved in an activity.
Externalities that present costs to forest-dependent communities arise from increased
resource wastage, the redistribution of wealth and the competitive disadvantage to
legal loggers. Unequal employment opportunities are a reality for forest dependent
communities, along with poor recognition of workers’ rights and the reduced
incentive for private investment.

Transfers of welfare away from the public sector
Distribution of benefits (or welfare) from an economic activity are determined by
some combination of market forces and public policy. The social costs that arise from
transfers of welfare away from the public sector include lower market prices for
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timber, a reduction in state taxes and royalties and consequent pressures on service
provision, as well as the depreciation of public infrastructure.

Violations of human rights
The most significant costs to forest-dependent communities that arise from denial of
human rights include the disenfranchisement and disempowerment resulting from use
of political patronage, intimidation and violence, the use of timber resources to
support conflict or persecution and inequity in access to justice for forest dependent
communities.

Introduction of social pathologies
The concept of social pathologies uses a biological metaphor to suggest parts of
society, like parts of the body, can suffer breakdown and disease when exposed to
something foreign. The social costs to forest-dwelling communities that can result
from introduced behaviours include discrimination, violence and disregard for human
rights, bribery and the undermining of traditional decision-making structures,
prostitution, an increase in sexually transmitted infections, drug use, human trafficking,
and organised crime.
An examination of illegal logging in light of the six themes identified above highlights
the significance of the social impacts that illegal logging can have on forest
dependant communities. The social costs have far reaching implications for
indigenous and forest-dependent communities around the world.
The social costs identified and the discussion of the nature of the impact illegal forest
activities have on affected communities presents policy makers with an improved
understanding of why there is value to the Australian public in what the CIE found to
be ‘intangible benefits’ of taking action to reduce illegal logging.
This report aims to inform the preparation of the RIS to examine the costs and benefits
of options to achieve the Government’s policy objectives.
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Introduction
The Department of Agriculture Fisheries and Forestry (DAFF) is preparing a Regulation
Impact Statement (RIS) to assess the costs and benefits of potential policy options to
support the Australian Government’s commitment to combat illegal logging and
associated trade.
The Centre for International Economics (CIE) prepared a draft Regulation Impact
Statement (RIS) for DAFF that was released for public comment in the second half of
2009.
The draft RIS acknowledged that assessment of the benefits and costs of policy
options should take into account social costs of illegal logging and recognised the
limitations of an economic welfare analysis in supporting the making of an ethical
decision. The report noted there were “intangible benefits” to Australia of a sociopolitical nature in pursuing a restriction on illegal timber and wood imports. However,
further detail of these intangible benefits was not described. In addition, a number of
submissions on the draft RIS pointed to a need for more recognition and analysis of
the social costs of illegal logging to inform government decision making.
Consequently, in February 2010, DAFF engaged Coakes Consulting to supplement the
work of the draft RIS with a brief analysis of the social costs associated with illegal
forest activities in developing countries. This report is not a social impact assessment
of how the potential policy might affect Australia, nor is it a political analysis any
future policy.
The objectives of this study were to examine the 18 stakeholder submissions received
on the draft RIS, to identify the key social issues of concern to stakeholders, and to
develop a literature assessment of social issues associated with illegal logging as
experienced in developing countries of interest.
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1.1 Illegal Logging
Seneca Creek (Seneca Creek, 2004) identified several types of illegal forest activities:

Harvesting without authority in designated national parks or forest reserves;

Harvesting without or in excess of concession permits;

Failing to report harvesting activity to avoid royalty payments or taxes; and

Violating international trading agreements such as Convention on International
Trade of Endangered Species (CITES).
Admittedly, in practice, and in the developing world context in particular, there are
challenges defining degrees of legality, particularly where there is a possibility of
legality being falsified. Human Rights Watch (2009) illustrates the difficulty in defining
legality in a study in Indonesia:
“…because the central ministry has little capacity to enforce this change in
the field, many local administrations do not respect this restriction on their
authority and continue to issue their own permits anyway, thus multiplying the
amount of clearcut logging while providing a veneer of apparent legality to
what is fundamentally illegal wood.”
Defining appropriate legality is clearly difficult, even within the timber-harvesting
component of the supply chain. Therefore, to limit ambiguities involved in defining
illegal forest activities across the entire wood product supply chain, this report follows
the Seneca Creek definition of illegal forest activities and considers only the timberharvesting component. Consequently, the focus of this report is mainly on forest
dependent communities who are most affected by illegal harvesting.
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Methodology
The methodology for the current study is based on secondary data review and key
informant interviews. To meet the study objectives, the following chart summarises
the methodology employed.
Figure 0.1: Methodology Flowchart
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The step process was utilised to ensure best use of knowledge acquired in
preparation of the draft RIS, to leverage the expertise of Department personnel, and
to respond to the timeframe for completion of the RIS. The steps included:
Step 1 – the draft RIS was reviewed for its coverage of social issues and to provide the
context to understand stakeholder submissions.
Step 2 – the 18 stakeholder submissions were examined for identification of social
issues and relevant references/resources.
Step 3 – DAFF project officers were interviewed for background knowledge and to
provide direction on refinement to the scope of the review.
Step 4 – comprised a review of key literature/resources identified by DAFF, references
provided in the draft RIS and a time-bound review of reports and communication
material
produced
by
environmental
and
human
rights
organisations, intergovernmental organisations and trade bodies.
non-government
The documents
reviewed are included in Section 7.2 of the appendix.
Step 5 – Synthesis of issues raised in the review of literature and systematic
consideration of how documented illegal logging practices interact with aspects of
livelihoods of forest-dependent communities.
In relation to Step 5, the five capitals model or sustainable livelihoods approach (DFID,
1999) has been utilised to document how logging practices interact with aspects of
livelihoods of forest-dependent communities.
This conceptual framework treats a community’s social environment as a stock of
assets (or forms of capital) on which a community draws to sustain its way of life. The
framework helps to illuminate how illegal logging activities can have impacts not just
on incomes and economic assets of affected communities but on many of the
important building blocks of sustainable communities; and crucially, how an impact
on one form of community asset can have consequent impacts on other forms of
community capital.
In the model, there are five types of sustainable capital:

Natural

Economic

Physical

Human

Social
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Figure 0.2 illustrates some of the key community assets that make up each of the
capitals, with further detail provided on each capital area.
Figure 0.2: Elements of the five capital areas
Source: Coakes Consulting, 2009
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1.1.1
June, 2010
Natural Capital
Natural capital, or environmental assets, is any stock or natural resource such as
oceans, forests, oil and gas, or agricultural land that has inherent value or generates
sustainable economic and commercial activities. Relevant natural capital provided
by forests includes the ecosystem services (such as pollination, water filtration and
earth stabilisation) as well as food sources and wood (for construction of
dwellings/means of transport or for trade). In the case of forest communities, access
to resources from forest management areas is crucial for ongoing industry
sustainability.
1.1.2
Economic Capital
Economic capital is defined as the extent of financial or economic resources within a
town or community. The status of a community’s economic resources has significant
implications in relation to its resilience and adaptive capacity.
For instance, a
community lacking in economic capital and which is also predominantly reliant on a
specific industry sector such as forestry, is likely to be more vulnerable to change and
consequently more likely to experience greater difficulties in adapting to such
changes.
1.1.3
Physical Capital
Physical capital is broadly defined as a community’s built infrastructure and services.
This may include social infrastructure (e.g., hospitals, schools) as well as soft
infrastructure / service provision (e.g., health care, aged care, child care). A sound
level of physical capital is important in supporting optimisation of a community’s other
key capital areas.
1.1.4
Human Capital
Human capital refers to the health and welfare of human beings, their knowledge
and skills, as well as their overall capacities to contribute to ongoing community
sustainability.
1.1.5
Social Capital
When assessing interaction of particular activities (such as logging) with how a
community functions, it is also important to consider how individuals, groups,
organisations and institutions within a community interact and co-operate. Social
capital is a multi-faceted concept that is broadly defined as the dynamics and
strength of relationships and / or interactions within a given community.
Social
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capital may be referred to as the degree of social cohesion and inter-connectedness
between community members.
Matrices were developed to illustrate the clusters and differences of issues raised by
stakeholders (Matrix 1); and to illustrate how the social costs of illegal practices affect
the various capitals (Matrix 2).
To expand on these relationships, a conceptual chart was prepared to illustrate the
interconnected relationship between the key drivers of illegal logging and the
impacts on the livelihoods of forest-dependent communities.
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Definition of Forest Dependent
Communities
The term forest-dependent can have broad meaning, usually referring to the
economic ties of the community including recreation and amenities as well as
infrastructure, to the local living traditions and sense of place. Mishra et al (2008)
estimated that 250 million people belong to indigenous cultures across 70 countries,
collecting the majority of their food sources from hunting and agricultural methods.
Forest dependent communities exist around the world in many countries and vary in
complexity and relationship to forest environments. However, similarities do exist
amongst forest-dependent communities and generalisations can be made that are
likely to apply to many. The five capitals model allows a snapshot of forest-dependent
communities to be developed, capturing the typical aspects of livelihood common
to those communities.
1.2 Natural Capital
Many forest dependent communities are rich in natural capital. The rich natural
capital of these communities supports their livelihoods across all of the five capital
areas. The following aspects of livelihood highlight the common characteristics and
attributes of the natural capital of forest dependent communities.
Wood can be used in tools and hunting implements and can be valued of itself for
construction, a means of transport (canoes, carts) or can be traded.
Food resources can include forest flora (nuts, fruit, roots). The natural capital of the
forest includes wildlife (fishing and hunting) and products of animals (such as honey
and skins). Often rich in biodiversity, forest dependent communities utilise the ecosystems for their livelihoods. Flora and fauna can be used for sustenance, medicine
or clothing purposes, and also creates economic opportunities for trade and profit.
Land tenure is often undefined in forest-dependent communities particularly in
developing nations, where customary and traditional land tenure rights are often at
odds with contemporary and legal definitions of land tenure. This leads to uncertainty
and at times, poor standards of forest resources management by governments and
logging companies, both legal and illegal.
Even when land tenure is defined,
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neighbouring communities will access the forest for food, medicine and other
resources. For example, an Indian socio-economic and socio-ecological study into
the Sambalpur Forest Division in Orissa (Mishra et al, 2008) found that 22 per cent of
the sample study respondents were considered landless, yet still dependent on forests
for their livelihood.
1.3 Economic Capital
Economic capital is the stock of financial wealth (savings) and income available to a
community.
Forest dependant communities are likely to have relatively fewer sources of income
and poorly diversified stocks of wealth and this can create vulnerabilities in
responding to change in economic circumstances, such as those resulting from illegal
logging.
A Canadian study into the Boreal forest region (Patriquin et al, 2007) found that
unemployment and poverty rates are consistently high with family incomes
continuing to fall behind communities beyond the Boreal region who are not forestdependent.
1.4 Human Capital
Forest dependent communities are more common in developing countries, where
the general health and education levels are poorer than those of developed
countries and communities. The following aspects of livelihood are common human
capital characteristics of forest dependent communities.
Poor and landless people are often highly dependent on the forest for nutritional
purposes. Local people use the forest to meet household needs relating to food and
medicine. Community health of forest dependent communities is also dependent on
the public finances of a community, which will generally be lower than mainstream,
well represented communities. The lack of public health infrastructure leads to lower
levels of community health.
A lack of public infrastructure such as educational facilities is a common
characteristic of forest dependent communities, contributing to lower levels of
education and training, impacting upon employment opportunities when they arise.
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The distance of communities from the nearest school, as well as poverty and lack of
educational opportunity may result in greater vulnerability to change.
The levels of knowledge and intellectual property will be relatively low in forest
dependent communities, stemming from the lack of education facilities and
opportunities. However, often indigenous communities dependent on the forest
maintain strong cultural and traditional knowledge.
1.5 Physical Capital
Forest dependent communities are often poorer in physical infrastructure and receive
fewer services often reliant on forest resources for shelter.
Information and communication services and infrastructure for forest dependent
communities are generally poorer in remote areas. This can impact upon education
levels and a community’s ability to rise out of poverty.
Access to clean water will typically be lower in remote areas and communities will
tend to rely on natural processes and traditional water collection methods creating
vulnerability which can impact upon the health of communities.
1.6 Social Capital
The following aspects of livelihoods are common social capital characteristics of
forest dependent communities.
Forest dependent communities often have strong cultural identities and heritage,
closely linked with the forest and natural environment. Landmarks and relevant
features of the landscape can hold cultural and spiritual importance to communities.
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Review Findings
A selected literature review was the basis for the analysis of the costs of illegal logging
to forest communities in source countries. This section draws out the relevant points
made by each group of documents examined.
1.7 Draft Regulatory Impact Statement
The draft RIS provided a benefit and cost analysis and found there to be an overall
net cost for unilaterally implementing import restriction and product disclosure –
mainly due to imports to Australia representing a very small fraction of the
international timber trade.
The scope of the cost-benefit analysis specifically
excluded the quantification of several intangible benefits.
The intangible benefits identified in the draft RIS included the following:

Australia providing a role model to other trading partners;

Australia ‘sending a message’ to trading partners that they should also invest in
measures to curb illegal logging, with the initiative could be seen as a step
towards more effective national and multilateral moves to improve the
sustainability of all logging - legal or illegal;

A sense of morality for those Australians concerned about the issue;

A stronger position for Australia to negotiate international actions if the country
is not seen to be benefitting from illegal or unsustainable behaviour in other
countries; and

Maintenance of existence values such as people gaining benefits from knowing
the forests in other countries are not illegally logged.
1.8 Stakeholder Submissions
The key social costs and issues raised in the stakeholder submissions were impacts that
related to the forest industry and consumers within Australia, and the undermining of
human rights in foreign countries.
Other social costs and issues raised included
displacement of Indigenous communities from traditional lands and loss of ecosystem
and hunting grounds.
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The most frequent social costs identified across the submissions included:

Domestic issues

Undermining of human rights

Political patronage and conflict

Intimidation and violence

Redistribution of wealth,
Typically, organisations involved in production and trade of wood products in
Australia were concerned not only about the domestic cost burden of compliance
relative to effectiveness but also about the condition and exploitation of developing
world forest communities.
Non-government organisations submissions tended to focus on limitations in the
treatment in the draft RIS of the environmental and human rights costs of
deforestation and corruption associated with the logging industry in developing
countries.
The social costs of illegal logging identified in the stakeholder submissions are
summarised in Figure 0.1 and are further described across specific stakeholders in
appendix 7.1. The viewpoints identified in Figure 0.1 are not necessarily indicative of
overall stance of stakeholders, but instead, reflects the issues specifically identified in
the submissions received by the CIE in response to the draft RIS.
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Figure 0.1: Matrix 1
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1.9 Summary of Selected Literature Review
A review of key literature highlighted by DAFF established the following:

Much of the literature is concerned with establishing the extent of illegal forest
activities, the commercial value of illegal production and the economic
welfare costs of illegal logging activities avoiding royalties and taxes;

Discussion of the social costs of illegal forest activities is frequently linked to the
social and environmental degradation costs of legal logging – partly due to the
difficulty in distinguishing between legal and illicit activities.
References provided by the CIE draft RIS and selected campaign groups/nongovernment organisations and industry association materials tended to be rich in the
discussion of contextual issues (such as the nature of corruption and even specific
mechanisms whereby corruption arises in the wood product industry in specific
countries). However, they provided little insight into the social costs of illegal logging
on forest-dependent communities.
The interconnected nature of the drivers of illegal forest activities and the
interconnectivity of the impacts of these activities are illustrated schematically in
Figure 0.2.
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Figure 0.2: Interconnectivity Analysis of Drivers and Impacts of Illegal logging practices
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Six social cost themes emerged from the synthesis of the reviewed literature. These
are:

Exclusion of forest dwellers from areas on which they depend for a livelihood;

Changed natural environment from removal of trees;

Commercial distortions;

Transfers of welfare away from the public sector;

Violations of human rights;

Introduction of social pathologies.
The relationship between these social costs and the affected parts of developing
world livelihoods are further summarised in Figure 0.3.
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Figure 0.3: Matrix 2
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1.9.1
June, 2010
Exclusion of Forest Dwellers from Traditional Areas
The legal zoning of forest areas for logging can be a suspicious activity in itself.
Authorities can zone unsustainable yields in national or regional plans possibly due to
a combination of factors including poor natural resource management capacity and
corruption.
Exclusion from certain forest resources can also occur through illegal occupation by
logging operators, often actively facilitated by corruption within administrative
government, police and the military.
Costs to forest-dependent communities that arise from exclusion from logged areas
include:

Displacement from traditional lands

Loss of hunting / collecting areas

Loss of biofuel sources

Loss of the context in which traditional knowledge is valuable (and hence its
loss of benefit to traditional livelihoods)
Displacement from traditional lands can mean forest-dwellers are denied customary
access to wood products for fuel, art, shelter or trade. It can mean reduced or
denied access to hunting and non-wood forest product (eg honey, nuts, berries,
beeswax, bush meat, manure and medicines), collection areas and ecosystem
services (such as access to clean water and flora/crop pollination).
Reduced access to wood produce can in turn affect incomes (if wood surplus to
sustenance is traded) and denial of tenure effectively reduces the wealth of forestdwellers that is stored in their access to natural products. Even if compensation is
provided (by resettlement or some other mechanisms), there is likely to be an
intergenerational transfer of wealth as a sustainable store of wealth is foregone for
shorter-term gains.
There are impacts on health resulting from exclusion from important forest areas.
Reduced access to foodstuffs affects nutrition and changes to water access /
wastewater disposal and to traditional medicines can affect public health in
communities.
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Displacement to impaired land can lead to communities subsisting on marginal
agricultural areas or moving closer to the source of potential disease, for example,
closer to the habitats of mosquitoes with potential to be a vector for disease.
Traditional knowledge and skills will tend to be less valuable if communities are
denied access to traditional places and resources – the context in which the
knowledge exists.
Moreover, collective community knowledge (i.e. regarding
groundwater flows, weather patterns or geological features) is sometimes obtained
by loggers without payment for the benefits that such knowledge brings in managing
logging operations.
Intellectual property rights to traditional knowledge are an
increasingly important livelihood issue for remote communities.
Forest-dependent communities’ stocks of physical capital can be impacted by
exclusion, in that homes may be destroyed by loggers’ intimidation or community
relocation.
Archived media reports hosted by the Chatham House project
(illegallogging.info, nd) contain numerous reports of intimidatory behaviour such as
violence against protesters, destruction of their homes and influencing police to
silence critics of the logging.
Materials for traditional forms of shelter may not be accessible or new skills may be
required to construct dwellings in areas to which communities are relocated. Physical
relocation or severance to customary routes can frustrate traditional exchanges
(including trade) and communication, and so further marginalise indigenous people
from decision-making processes.
Displacement from traditional lands can also have important socio-cultural and
economic costs to the social capital of a community, for example, cultural practices
and spiritual beliefs are often closely tied to the physical character of the forest.
In some societies for example, shamans are believed to be messengers between the
natural world and spirit worlds.
Community perceptions of a shaman’s ability to
communicate with sprits and utilise forest products – essentially their connection to
place - can be a source of healing.
Specific places can hold significance as sites of origin myths, group history,
ceremonies (including burial) and other practices (such as cultural initiations). Denied
access to these areas can have profound costs on the cultural life of these
communities and on their continued cohesion/sustainability.
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Exclusion and/or relocation and changes to traditional land tenure systems and
livelihoods can have profound effects on social organisation and power relations
within a community. The potential of a community to demonstrate leadership and its
collective sense of purpose (sometimes referred to as “strategic capital”) can be
adversely affected by such changes.
Perceptions of how benefits from illegal
logging are distributed across the community bear associated impacts which affect
social cohesion. Greenpeace (2010) relates the view of Brian Baring, one of the
Gingilang clan in Papua:
“The logging companies create tension amongst our people. Some people
take the temptation to earn money but the money never comes back to
everyone.”
Such issues of equity and procedural fairness can create or amplify fault lines in the
community exposing division along family, craft/occupation, and caste, tribal or
ethnic lines.
1.9.2
Changed Natural Environment
Legal logging results in changes in the natural environment that may or may not be
sustainable depending upon the natural resource management regime in place.
However, illegal logging has been characterised as taking place in national parks
and other reserves that, although having theoretical protection because they are
vulnerable, are often exploited nonetheless. Furthermore, illegal logging will have less
oversight by forest management authorities and uncertain tenure will tend to
discourage investment in environmental management infrastructure.
Human Rights Watch (2009) identified perverse incentives to the forest industry that
can result in environmental degradation, as has occurred in Indonesia. In one
instance, provincially issued permits, which were designed to limit a single operator’s
logging area to 100 hectares, were repeatedly issued, effectively permitting logging
companies to harvest contiguous blocks of forest beyond the intended limit. This
allowed these companies to clear larger areas, whilst bypassing national permitting
processes usually required for large operations. A cycle of corruption followed with
loggers continually paying bribes to avoid obtaining proper licenses.
It was also
noted that often, district parliaments would regulate to tax illegally harvested wood,
rather than attempt to halt illegal logging.
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June, 2010
These changes to the natural environment have social costs; the costs to forestdependent communities that arise from changes to the natural environment include:

Loss of biodiversity

Loss of genetic material with potential for commercialisation

Loss of eco-system services and sinks

Reduced extreme weather protection

Reduced soil and water protection

Increase in pollutants
Loss of biodiversity from destruction of habitat affects stocks of natural capital
available to communities by reducing the abundance of wood and non-wood forest
products. The direct social cost is in reduced access to foodstuffs but an indirect and
potentially longer-term impact is a loss of genetic material with research values or
commercial application in advanced applied biology (such as western medicine or
in agriculture) or other as yet poorly defined technologies.
Traditional owners of
affected land might otherwise reasonably expect to benefit from exploitation of
unique genetic material.
Eco-system services are either:

Provisioning – production of food or water

Regulating – control of climate or disease

Supporting – such as nutrient cycles

Cultural – spiritual or recreational benefits
Loss of eco-system services can mean social costs from reduced effectiveness or loss
of:

Drinking water filtration through wetlands and other ecosystems

Waste water treatment

Decomposition of wastes

Reduced pollination

Reduced air filtration (and subsequent loss of carbon sink potential)

Reduced soil and groundwater protection with risks of erosion and landslides

Reduced coastal protection

Reduced protection from extreme weather events
The reduction of these natural capital assets has an effect on human capital assets,
particularly nutrition, public health and traditional knowledge.
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Department of Agriculture, Fisheries and Forestry
June, 2010
Changes to the environment include not just reduction of forested areas but also the
environmental management practices of logging operations. The Chatham House
supported web project (www.illlegal-logging.info, Chatham House, undated)
illustrated how changed tenure and poor environmental management by loggers
impacts upon health in PNG, through National Intelligence Organisation reports that
people died after drinking water from the Karoa River following the dumping of fuel
drums. Others reportedly fell ill when fuel and industrial waster were dumped in the
Purari River.
A changed natural environment reduces the economic capital base of forest
dwelling communities due to reduced biodiversity and reduced ecological function.
Immediate surplus-trading incomes are also potentially reduced, as is the earning
potential of future generations. Illegal logging may lead to underpayment of royalties
to traditional land owners, who in turn can not earn money through legal logging
activities of already harvested forests. Where genetic material is lost, this may be a
cost to the whole of the producing country through lost economic growth –
effectively a transfer of wealth from governments to the illegal loggers.
Progressive legal timber operations are more likely to manage impacts of operations
and implement community development projects such as the construction of
infrastructure for communities, whereas illegal operators are less likely to do so.
The collected wealth of communities (animal stock, possessions, homes, tools,
weapons, jewellery) can be reduced in value due to extreme weather events
including landslides and floods, due to the loss of protection from illegally harvested
forests. (European Commission, 2008).
Similarly, extreme weather events can affect community infrastructure such as health
posts, school buildings, roads, water sources and waste management facilities. In
turn, damage to such facilities can reduce a community’s stock of human capital so
that health and education outcomes suffer.
Cultural assets, including ceremonial places (such as burial grounds), can be
affected
by
changed
environment
including
clearing/excavation,
changed
landscape character and extreme weather events.
1.9.3
Commercial Distortions
Commercial distortions occur when there are ’externalities’ involved in an activity.
Illegal logging activity has costs and benefits not reflected in market prices –
25
Department of Agriculture, Fisheries and Forestry
’externalities‘
June, 2010
Much of the literature reviewed (for example Seneca Creek, 2004)
focuses on the size of economic distortions and (for example, ARD, 2003) ‘rentseeking behaviour’ and corrupt practices.
Externalities that present costs to forest-dependent communities arise from:

Increased resource wastage

Redistribution of wealth

Competitive disadvantage of legal loggers

Unequal opportunity for employment

Poor recognition of workers’ rights

Reduced incentive for private investment
Illegal logging can result in inefficient use of forest resources. Practices include
logging in the most accessible areas of forests thereby avoiding costs associated with
less accessible areas. In comparison, legal logging may involve logging whole areas
incurring higher average costs across a permit area. The effect can be that some
timber resources are ‘stranded’ being uncommercial to harvest. This practice, even if
legally permitted, can affect public finances through reduced royalties.
Legal logging operators are placed in a position of competitive disadvantage to
illegal operators due to the cost of legitimate operational requirements and revenues
payable to governments. As noted by the submission from the Uniting Church (2009),
there is effectively a transfer of income from legal loggers to illegal actors. Such anticompetitive pressures will tend to undermine industry efficiency and put cost
pressures on legitimate businesses that may reduce employment outcomes and put
downward pressure on real wages.
In such an environment, management
commitment to anti-discriminatory employment practices may waiver resulting in
unequal employment and contracting opportunities.
The most marginalised and
least skilled in the potential labour pool, and most likely to experience discrimination,
can be indigenous people. Reduced employment and on the job training will tend
to erode skills and technical knowledge and thus undermine a community’s stocks of
human capital. Poor safety culture can lead to serious injury and death. Progressive
legal operations are also more likely to seek free, prior and informed consent for
proposals from indigenous peoples.
1.9.4
Transfers of Welfare Away from the Public Sector
Distribution of benefits (or welfare) from an economic activity are determined by
some combination of market forces and public policy. When markets fail to allocate
26
Department of Agriculture, Fisheries and Forestry
June, 2010
benefits according to legitimate value adding and when the intent of public policy is
frustrated by corrupt practices, the distribution of welfare can be inequitable.
The World Bank Forest Sourcebook (2008) found that illegal logging in public lands
can alone result in potential losses in assets and revenue in excess of US$10 billion per
year, while governments can lose up to US$5 billion per year from tax evasion and
royalties owing on otherwise legally sanctioned logging.
Seneca Creek (2004) documented the endemic nature of corruption in many
developing countries, and mechanisms and parties to corruption across a number of
countries. They found that illegal logging in Indonesia can generally be attributed to

local people and log brokers receiving protection from local security officials,

district government officials approving logging licenses which are in fact
illegal under national law, and

national forestry units who log illegally.
GRID-Arendal, a collaboration centre of the United Nations Environment Program
reported the findings of Indonesia NGO Telapak of how the middlemen are the most
profitable in illegal logging. While forest dependent community members involved in
illegal logging gangs will receive just US$2.20 per m 3 of timber, at the same time,
brokers receive US$160 per m3, whilst Singaporean based exporters of sawn
Indonesian hardwood charge US$800 per m3 to ship to western markets.
Social costs that arise from transfers of welfare away from the public sector include:

Lower market prices for timber

Reduced state taxes and royalties and consequent pressures on service
provision

Depreciation of public infrastructure.
The literature on the cost of suspect logging to public finances is extensive.
Corruption, including bribery, is a central theme. Revenues to government are lower
than would otherwise be the case when:

Volumes of harvested wood are under-reported

More wood is harvested than is permitted

Suspect timber (produced with lower costs than legitimate sources) is
discounted in price (reflecting some risk to purchasers) and places downward
pressure on market prices for legitimately taxed product
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Department of Agriculture, Fisheries and Forestry

June, 2010
Prices are held artificially low (for example, by ‘rigged’ auctions or transfer
pricing within transnational corporations)

Royalties and fees are not paid

Royalties are erroneously calculated using unrealistic market log prices or
exchange rates

Inefficient or misguided subsidies are paid for forestry activities
Human Rights Watch (2009) provides an indication of the magnitude of bribes
involved in smuggling of wood from Ketapany, Indonesia to Sarawak, Malaysia,
reporting that up to US$500,000 in bribes can exchange hands per day to allow the
smuggling of wood worth up to US$6.6 million. The bribes represent just eight per cent
of the total value of the wood compared to the 15 per cent that would be paid in
government fees for legally harvest wood.
An effect of reduced revenues is a transfer of wealth from the population as a whole
(represented by public sector finances) to elites involved in illegal production/export
and ultimately to buyers in export markets (including Australia). The social cost to
forest-dwelling communities, as well as other communities, can be reduced service
provision and higher levels of poverty than would otherwise be the case.
Such
relative disadvantage can affect community cohesion and lead to conflict between
sections of the community over control of timber resources such as that characterised
by Thomson and Kannan (2004) as Type 2 timber conflict.
Thompson and Kannan characterise two types of conflict around timber resources:
Type 1 conflicts are funded by sales of forestry resources; Type 2 is conflict due to
competition for controls of forestry resources. The social costs of intimidation, violence
and war can be horrific.
Illegal loggers are less likely to make appropriate contributions to provision of industry
and community infrastructure though payment of taxes and charges. When illegal
logging activities use public assets (such as access roads, railways and ports) these
assets depreciate (with ‘wear and tear’). This asset depreciation represents a further
shift of wealth from the public sector and legitimate producers to beneficiaries of
illegal logging activity.
Illegal loggers also gain a ‘free ride’ on other public
infrastructure and programs that have ‘public good’ qualities such as mosquito
eradication programs, law and order services and export promotion services.
Indeed, illegal loggers are able to extract much more value from some services
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Department of Agriculture, Fisheries and Forestry
June, 2010
through corruption - such as the use of police and military services for private security
and intimidation (World Bank Forest Source Book, 2008).
The transfer of wealth away from the public sector has funding implications for core
public services including health and education adversely affecting communities’
stocks of human capital. A reduction in state revenues can lead to the breakdown
of physical capital assets. Human Rights Watch (2009) cites estimates of a US$2 billion
annual loss as being equal to the amount World Bank health experts estimate would
be sufficient to provide a package of basic health care benefits to 100 million of the
nation’s poorest citizens for almost two years.
Bribery can have a profound effect on how a community perceives its ability to
influence it future. The effect can be extremely disempowering and affect both the
degree of cohesion in the community (especially when some members obtain some
benefit from illegal logging, such as employment) and its sense of identity and
difference.
1.9.5
Violation of Human Rights
Human rights are variously interpreted in different jurisdictions; however, widely
understood principles are contained in the Universal Declaration of Human Rights
adopted by the United Nations General Assembly in 1948. Perhaps more relevant to
the context of illegal logging is the 2007 General Assembly resolution 61/295, United
Nations Declaration of the Rights of Indigenous Peoples and in particular, Article 10:
“Indigenous peoples shall not be forcibly removed from their lands or
territories. No relocation shall take place without the free, prior and informed
consent of the indigenous peoples concerned and after agreement on just
and fair compensation and, where possible, with the option of return.”
Other important human rights declared by this resolution include:

Freedom from discriminatory treatment

Liberty and security of person

Freedom to cultural, spiritual, health and cultural practices including languages,
traditional education, and media

Equal access under employment laws

Participation in decision-making that affects rights and development

Secure enjoyment of the means of sustenance including spiritual connection to
traditional lands
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Department of Agriculture, Fisheries and Forestry

June, 2010
Process to give due recognition of traditional law, traditions, customs and land
tenure systems

Protection of the environment and productive capacity of traditional lands

Access to dispute resolution and justice systems
Where these rights conflict with the interest of logging operations, human rights can
be impaired and where indigenous people are disadvantaged in accessing the
justice system, the impairment of rights may be sustained in the long-term. The World
Bank Forest Sourcebook highlights an important issue:
“Some countries regulate forest use based on the attitudes and values of the
mainstream culture in ways that do not accommodate traditional uses by
Indigenous Peoples.
Typical issues of contention include communal
ownership, recognition or non-recognition of sacred sites in forest areas,
regulation or prohibition of hunting and prohibition of shifting cultivation.”
Legal logging is not free of human rights violations.
Much of the human rights-
focused literature reviewed for this report did not discriminate between legal logging
and illegal logging effects on human rights when describing the existing situation of
forest-dwelling communities. Indeed, the legality of treatment of indigenous people is
part of the complex definition of legal and illegal logging.
However, distinctions are made between legal logging and illegal logging with
respect to the order of magnitude of human rights violations. The most significant
costs to forest-dependent communities that arise from denial of human rights include:

Disenfranchisement and disempowerment resulting from use of political
patronage

Intimidation and violence

Use of timber resources to support conflict or persecution

Inequity in access to justice
Without alternative livelihoods, loss of tenure impoverishes communities with impacts
on incomes/wealth and health which effectively limits their right to equitable and
culturally appropriate development.
Though forest-dependent communities are sometimes involved as labour in illegal
logging, they are often marginalised when these employment opportunities arise.
Illegal logging can impact on the already low socio-economic levels of forest-
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Department of Agriculture, Fisheries and Forestry
June, 2010
dependent communities, further affecting education and training levels and
impacting on employment opportunities.
Given the complexity of securing access to logging areas, the capital equipment
required and the requirement to access ports, Illegal logging activities are often
sustained through corruption of officials. In relation to conflict timber, Thomson and
Kannan (2004) state, “Governments are almost always complicit in conflict timber
activities”.
In addition to the discussed transfer of welfare effects, social costs arise due to the
centralisation of political influence and executive power. Corruption and centralised
decision-making can affect virtually any aspect of a community’s livelihood.
Revenues from illegal logging are used to fund election campaigns and successful
candidates then reward logging operators with timber concession on favourable
terms, strengthening the grip of elites on decision-making and over-riding the rights of
forest-dwelling communities. The right to be consulted is not respected, contributing
to an environment where other basic human rights are ignored.
Human Rights Watch (2009) illustrated how corruption and illegal logging revenues
can entrench political elites, noting that in Indonesia, those controlling government
revenue from the forests would use the funds to maintain patronage networks. For
example, they claim that billions of dollars from the ‘Restoration Fund’ was used for
non-forestry development projects by former President Soeharto.
Human Rights Watch also highlighted that in 1998 an audit of forestry taxes in the
Reforestation Fund discovered up to $5.2 billion was lost in the previous five years to
corruption (including inflated budgets and overstating areas to be planted),
inefficiency, and tax evasion involving companies owned by President Soeharto’s
close associates and family members.
In Indonesia for example, Human Rights Watch (2009) believes ‘the ability of citizens
to hold the government accountable is curtailed by a lack of access to public
information’.
Effective control over contentious situations is often affected by corrupt use of the
police and security force powers. This can take the form of intimidation or actual
violence by bribed agents of the executive arm of governments against forestdwellers, government workers, campaign groups or the media (Bulkan and Palmer,
31
Department of Agriculture, Fisheries and Forestry
2008).
June, 2010
AIDESEP (2007) reports on conflict between illegal loggers and indigenous
people in Peru:
“Every year, AIDESEP receives reports about killings perpetrated against the
isolated indigenous people. Since 2002, four violent encounters were reported
in the area of the Territorial Reserve Madre de Dios, along the Piedras River,
with the death of people on both sides”.
Illegal logging operations have benefited from corruption of the justice system by the
bribing of state prosecutors to drop prosecutions and appeals, or by influencing
judges. It appears powerful intermediaries are more likely to escape conviction and
there have been cases of indigenous people involved in basic labouring jobs being
prosecuted and incarcerated. Human Rights Watch (2009) provides a summary:
“Indonesian Corruption Watch reports that of the 205 logging cases they
monitored between 2005-2008, 156 of the prosecutions (76 per cent) were
against low-level labourers. Of the 49 cases against government officials or
high-level businesspersons, 35 (71 per cent) were acquitted. Of the 14 highlevel actors who were convicted, nine received sentences of two years or
less”.
The Chatham House project, ‘illegal logging.info’ (nd) relates how forest-dwellers can
be victims of the justice system and illegal logging, noting that poor communities can
be the first to be accused of illegal logging as police and forestry officers are
reluctant to accuse armed and powerful actors.
The costs of complying with
complex forestry regulations can lead to the criminalising of traditional people.
4.3.6 Introduction of Social Pathologies
The concept of social pathologies uses a biological metaphor to suggest parts of
society, likes parts of the body, can suffer breakdown and disease when exposed to
something foreign. Social problems can arise as a result of dysfunction of a society
which are much larger than the initial externally imposed change – in this case the
actions of the loggers and in particular, temporary or introduced workforces.
The social costs to forest-dwelling communities that can result from introduced
behaviours include:

Discrimination, violence and disregard for human rights

Bribery and the undermining of traditional decision-making structures

Prostitution and exploitation of sex workers
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Department of Agriculture, Fisheries and Forestry
June, 2010

Increase in sexually transmitted infections

Illicit drug use and establishment of drug supply networks

Alcohol use and abuse

Gambling

Human trafficking

Money laundering
Some of these costs result from legitimate logging operations, but are likely to be
more pronounced in operations controlled by criminal networks, where workforce
management practices are not as well developed.
Opening up of new areas to logging and creation of access roads can accelerate
the exposure of forest-dwellers to outside influences and erode cultural identity
through the introduction of drugs, alcohol and other social ills.
Workers without a connection to a place or knowledge about their environment tend
not to treat that place with the same respect as indigenous people. Social costs to
natural capital include degradation of the environment such as pollution.
Greenpeace (2010) has documented short case studies including the story of Brian
Baring:
‘Brian Baring grew up in a traditional village in Papua New Guinea as one of the
Gingilang clan, of the Borong tribe:
“I have seen our forests destroyed by foreign companies. They don't respect us
or our culture or our sacred sites. They run over our food gardens with their
machinery and drive their trucks and bulldozers through our streams, polluting
them with oil and mud. The loggers simply take the trees they want ...In the
process, they destroy much more of the forest...There are areas of bare land
and grassland where there used to be forests.
My uncle tells me that the
hunting is not so good anymore, that the animals have gone”.
A culture of discrimination in employment, non-compliance with employment and
health and safety laws, increased gambling, and drug use can affect household
wealth in communities but conversely can marginally increase government tax
revenue and unreported income from illicit sources.
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Department of Agriculture, Fisheries and Forestry
June, 2010
Bribery can drive the cutting of corners in environmental management or
occupational safety, while the costs to health and human capital include the spread
of disease and the burdening of pubic health services.
Finally, an influx of workers can also make additional demands on existing community
infrastructure and services such as community health posts with a consequent
reduction in service delivery for the indigenous community.
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Department of Agriculture, Fisheries and Forestry
June, 2010
1.10 Study Limitations and Directions for Further Analysis
There are a number of limitations to the preceding analysis:

High-level and context-free
The preceding analysis has canvassed the diverse nature of potential social costs of
illegal logging across the whole of the developing world. Clearly, costs will differ
widely from country to country and from region to region within developing countries.
A sound understanding of specific illegal forest activities in an area and knowledge of
the affected people and their livelihoods would allow for a specific analysis of the
social costs in an area.

Costs of policy intervention
The analysis task was to illustrate the social issues and detrimental effects of illegal
forest activities on forest-dependent communities. There may be some benefits to
such people from current illegal logging practices, such as short-term employment in
logging operations or individuals benefitting from corrupt payments. However, given
the scale of costs as outlined in this report, not only on forest-dependant communities
but on societies as a whole the social costs of illegal logging far outweigh any short
term benefits derived from illegal operations.

Supply chain
This analysis is limited to an examination of illegal activities most closely associated
with irregular harvesting of timber. It is not concerned with transport/shipping, timber
trade, wood processing/manufacturing or manufacturing of products containing
wood. Neither does the scope include supply of inputs to harvesting activities. Other
social costs will occur elsewhere in supply chains involving suspect timber.

Australia
Some stakeholders have asserted an import restriction regulation will have adverse
social impacts in Australia.
This review has not assessed social changes within
Australia as a result of any policy actions.
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Department of Agriculture, Fisheries and Forestry
June, 2010
Conclusion
Economic welfare analysis (such as that which forms the core of CIE’s draft RIS) is
limited in its ability to support decision-making on matters that many stakeholder see
as moral and leadership issues. Indeed, the mere attempt to monetarily quantify the
costs and benefits of difficult moral issues can be offensive to some stakeholders.
Hence, consideration is being given to some of the social costs associated with illegal
forest activities. This report summarises the nature of illegal logging and the social
costs that result on forest-dependent peoples. It does not attempt to quantify the
extent of such problems or provide political analysis.
The basis of this review of social costs of illegal forest activities is consideration of the
range of stakeholder submissions received on the draft RIS and a select review of key
literature.
Six social cost themes emerge from the synthesis of the entire reviewed literature.
These are:

Exclusion of forest dwellers from areas on which they depend for a livelihood;

Changed natural environment from removal of trees;

Commercial distortions;

Transfers of welfare away from the public sector;

Violations of human rights;

Introduction of social pathologies.
It is important to analyse the social costs of illegal logging, as they have far reaching
implications for indigenous and forest-dependent communities around the world, as
well as in Australia.
An examination of illegal logging in light of these themes
identified the significance of the social impacts the illegal logging can have on forest
dependant communities.
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Department of Agriculture, Fisheries and Forestry
June, 2010
The social costs identified and the discussion of the nature of the impact illegal forest
activities have on affected communities presents policy makers with an improved
understanding of why there is value to the Australian public in what CIE found to be
‘intangible benefits’ of taking action to reduce illegal logging. Understanding how
large this benefit is would require specific fieldwork and even then, it may be
challenging to quantify full costs and benefits. Even if the values to Australians are
known and affect the cost benefit analysis, there is no escaping the key driver of
policy in this area being the welfare of overseas citizens – it is essentially a moral
question.
Some other important policy questions with respect to the social costs of illegal
logging include:

What would be the costs to forest-dependent communities of ending illegal
logging activity and what support would need to be put in place during a
transition?

What drivers of behaviour, structural reform and executive action need to be
addressed in supply chains to change culture towards facilitation payments
and promote good governance?

What social costs exist elsewhere in the supply chains of manufactured
products containing wood?

What would be the social impacts in Australia associated with compliance?

Is there value in undertaking survey and/or economic analysis of Australian’s
willingness to pay for certified products or will such findings cloud what is
essentially a moral, political question?

How much global action could be encouraged by an Australian commitment
to proactive action to reduce illegal logging?
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Department of Agriculture, Fisheries and Forestry
June, 2010
References
AIDESEP 2007, Illegal logging and international trade in mahogany, National
Association of Amazon Indians in Peru, Santa Catalina-La Victoria, Peru, viewed
March 2010,
<http://www.illegal-logging.info/uploads/Mahogany_reportEng.pdf>
Australian Forest Growers 2009, AFG Submission on the Regulatory Impact Statement:
Proposed new policy on illegally logged timber, Braddon, ACT, viewed March 2010,
<http://www.thecie.com.au/RIS%20illegal%20logging/5%20%20Australian%20Forest%20Growers.pdf>
Australian Plantation Products & Paper Industry Council 2009, Submission on the draft
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Braddon, ACT, viewed March 2010,
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>
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38
Department of Agriculture, Fisheries and Forestry
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products
derived
from
such
timber,
Indufor, Finland,
viewed
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2010,
<http://ec.europa.eu/environment/forests/pdf/ia_report.pdf>
39
Department of Agriculture, Fisheries and Forestry
June, 2010
European Commission 2008, Communication Paper – Addressing the challenges of
deforestation and forest degradation to tackle climate change and biodiversity loss,
Environment DG, B-1049 Brussels, Belgium, viewed March 2010,
http://ec.europa.eu/environment/forests/pdf/sec_2008_2619.pdf
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Impact Statement, Brussels, Belgium, viewed March 2010,
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Environment DG, B-1049 Brussels, Belgium, viewed March 2010,
http://ec.europa.eu/environment/forests/pdf/summary_deforestation.pdf
Food and Agriculture Organizations of the United Nations (FAO) 2007, FAO Yearbook
of Forestry Products, Rome, Italy, viewed March 2010,
<http://www.fao.org/forestry/publications/en/>
Furnishing Industry Association of Australia 2009, Submission to the Centre for
International Economics (CIE) – Regulatory Impact Statement (RIS) – Proposed new
policy on illegally logged timber, Kariong, NSW, viewed March 2010,
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Greenpeace Australian Pacific 2009, Response to the Draft Regulatory Impact
Statement, Sydney, NSW, viewed March 2010,
<http://www.thecie.com.au/RIS%20illegal%20logging/14%20-%20Greenpeace.pdf>
GRID-Arendal 2010, Collaboration Centre of UNEP, Norway, viewed March 2010,
http://www.grido.no/wrr/049.htm
Human Rights Watch 2009, “Wild Money”: the human rights consequences of illegal
logging and corruption in Indonesia’s forest sector, New York, NY, USA, viewed March
2010, http://www.hrw.org/en/reports/2009/12/01/wild-money
Humane Society International 2009, Submission to the Draft Regulatory Impact
Statement proposed new policy on illegally logged timber, Avalon, NSW, viewed
March 2010,
<http://www.thecie.com.au/RIS%20illegal%20logging/6%20%20Humane%20Society%20International.pdf>
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June, 2010
Kaimowitz, D 2003, Forest law enforcement and rural livelihoods, International Forestry
Review, Volume 5, Issues 3, Special Issue, Illegal Logging, viewed March 2010,
< http://www.cfa-international.org/>
Kanowski, Prof. A 2009, Draft Regulatory Impact Statement – Proposed new policy on
illegally logged timber, The Fenner School of Environment & Society, Australian
National University, Canberra, ACT, viewed March 2010,
<http://www.thecie.com.au/RIS%20illegal%20logging/3%20%20Professor%20Peter%20Kanowski,%20ANU.pdf>
Lochner, K, Kawachi, I & Kennedy, B.P 1999, Social Capital: A guide to its
measurement, Health and Place (5), pp 259-270.
Ministry of Agriculture and Forestry 2008, Labelling of illegal timber products, prepared
by Ogle Consulting for MAF Information Services, Wellington, New Zealand, viewed
March 2010,
<http://www.maf.govt.nz/forestry/illegal-logging/labelling-of-illegal-timber-products/>
Mishra, P.C, Tripathy, P.K, Behera, N, & Mishra, B.K 2008, Socio-economic and Socioecological Study of Sambalpur Forest Division, Orrissa, Department of Environmental
Sciences, Department of Economics, School of Life Sciences, Department of Home
Science Sambalpur University, Jyoti Vihar 768 019, Sambalpur, Orissa, India, viewed
March 2010,
<http://www.krepublishers.com/02-Journals/JHE/JHE-23-0-000-000-2008-Web/JHE-23-2000-000-2008-Abst-PDF/JHE-23-2-135-08-1737-Mishra-P-C/JHE-23-2-135-08-1737-MishraP-C-Tt.pdf>
National Association of Forest Industries 2009, Draft Regulatory Impact Statement
proposed new policy on illegally logged timber – NAFI Submission, Deakin West, ACT,
viewed March 2010,
<http://www.thecie.com.au/RIS%20illegal%20logging/7%20%20National%20Association%20of%20Forest%20Industries.pdf>
Patriquin, M.N, Parkins, J.R & Stedman, R.C, 2007, Socio-economic Status of Boreal
Communities in Canada, Oxford Journals, viewed March 2010,
< http://forestry.oxfordjournals.org/cgi/content/full/80/3/279>
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June, 2010
Richards, M, Wells, A, Del Gatto, F, Contreras-Hermosilla, A & Pommier, D 2003,
Impacts of illegality and barriers to legality, Illegal Logging Info, Chatham House,
London, UK, viewed March 2010,
<http://www.illegal-logging.info/uploads/1_Barriers_to_Legality.pdf>
Richardson, D 2009, Illegal Logging – A Simple Solution to a Difficult Task, LSE Ltd & the
SRR Program, viewed March 2010,
<http://www.thecie.com.au/RIS%20illegal%20logging/16%20%20Dean%20Richardson,%20LSE%20Ltd%20&%20the%20SRR%20Program.pdf>
Roberts, G 2006, The Rape of PNG Forests, The Australian, viewed March 2010,
< http://www.illegal-logging.info/item_single.php?it_id=1531&it=news>
Seneca Creek 2004, “Illegal” Logging and Global World Markets: the Competitive
Impacts on the US Wood Products Industry, Maryland, USA, viewed March 2010,
<http://www.illegal-logging.info/uploads/afandpa.pdf>
Setiono, B 2008, U4 Brief – Corruption and forest revenues in Papua. Chr. Michelsen
Institute, Bergen Norway, viewed March 2010,
<http://www.cmi.no/publications/file/3049-corruption-and-forest-revenues-inpapua.pdf>
Testimonials from the forest 2010, Greenpeace Australia Pacific, Sydney, NSW, viewed
March 2010,
<http://www.greenpeace.org/australia/issues/deforestation/overview/evidence/testi
monials>
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Queensland, viewed March 2010,
<http://www.thecie.com.au/RIS%20illegal%20logging/8%20%20Timber%20Queensland.pdf>
Thomson, J & Kannan, R 2004, Conflict Timber: Dimensions of the Problem in Asia and
Africa Volume 1, ARD Inc, Vermont, USA.
42
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June, 2010
Uniting Church in Australia 2009, Submission to proposed new policy on illegally
logged timber, issues paper November 2009, Justice and International Mission Unit,
Synod of Victoria and Tasmania, Melbourne, Victoria, viewed March 2010,
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Impact Statement on ‘illegal logging’, Mascot, NSW, viewed March 2010,
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June, 2010
Appendix
1.11 Summary of Stakeholder Submissions
1. Australian Timber Importers Federation Inc (ATIF)
ATIF supports the economic analysis undertaken in the draft RIS and believes it
identifies practical measures to inform industry and Government action to attain the
objective of restricting illegal logging.
ATIF acknowledge there are wider social justice implications associated with illegal
logging. The submission also notes that the domestic timber industry already incurs
substantial costs in adherence to environmental forest management practises in
protecting the domestic reputation.
ATIF connected an increased cost of timber and therefore reduced consumption as
a building product relative to substitutes (such as cement/concrete and metal) with
increase carbon emissions and environmental impacts in developing countries.
2. Furnishing Industry Association of Australia (FIAA)
The FIAA submission claims the order of magnitude of costs and benefits identified in
the draft RIS appear reasonable; however, a greater attempt to price the intangible
benefits needs to be made. FIAA believes there are potentially large reputational
benefits to the industry from certification and disclosure, that some costs of
compliance are known and that the full cost to industry should be calculated and
weighted against the reputational benefits.
3. Professor Peter Kanowski – Australian National University
The submission from Professor Kanowski states that an analysis of the intangible
benefits should be the basis of Australia’s position on the issue of illegal logging. While
Australia plays a small role in the illegal logging issue, this submission maintains that
action should still be taken.
4. Uniting Church in Australia – Justice and International Mission Unit
The Uniting Church submission asserts that the DRAFT RIS was heavily influenced by
the CIE’s worldview and ideology, to the exclusion of other views and value systems,
and was heavily reliant on economic analysis, whilst being deficient in social analysis.
The submission noted a number of social costs associated with illegal logging
including wealth redistribution (questioning whether the wealth transfers increase the
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gaps between the rich and poor), as well as bribery and corruption, leading to the
use of armed intimidation of local communities. The submission also notes the impact
on legal logging operations through lower market prices and tightened profit
margins, leading to lower standards of operation. It is also noted that legitimate
logging organisations are also less likely to make social investments back into the
community.
5. Australian Forest Growers (AFG)
The AFG submission emphasises that the Australian Government has an obligation to
ensure that all imported timber is obtained from lawfully managed forests, and this
should be the key focus of policy on illegal logging.
AFG raise concerns that illegal overseas loggers are not subject to environmental and
social codes of conduct allowing market prices to be driven down, both domestically
and internationally.
6. Humane Society International
The
Humane
Society
International
considers
the
evaluation
of social
and
environmental costs and benefits in the draft RIS to be inadequate. It feels the report
“[dismissed] all that cannot be attributed with a dollar value to a list of intangible
benefits.”
The social costs identified in the submission include the redistribution of wealth, with
local and indigenous communities not sharing in the profits from illegal logging. The
submission also maintains that Government action will provide a sense of morality for
those Australians concerned about the issue.
7. National Association of Forest Industries (NAFI)
The NAFI submission supports the findings of the draft RIS in general, acknowledging
the difficulty in qualifying or quantifying the expected costs to society from the
introduction of the policy.
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8. Timber Queensland
Timber Queensland interprets the draft RIS as proposing that Australia should not
address illegal logging due to the nation being a part of the world trade in illegal
timber. The submission asserts that Australians do not want to be part of the problem,
stating that consumers have a reasonable expectation that timber has come from
legally harvested forests.
9. Australian Plantation Products & Paper Industry Council (A3P)
The A3P submission asserts all consumers have the right to know they are purchasing
legal paper and wood products through measures to restrict imported products from
illegally logged sources. A3P maintain the intangible benefits identified in the draft
RIS should be taken into account with some attempt to value the benefits.
The social issues raised by A3P in regard to illegal logging include the need to provide
reassurance to consumers they are not contributing to the illegal logging problem,
and the importance of reducing the economic, environmental and social
consequences of illegal logging where it occurs, particularly on local communities
10. Australian Window Association (AWA)
The AWA submission did not discuss the social impacts of illegal logging but maintains
that some attempt should be made to price the intangible benefits (morality and
ethical issues) of action.
11. Department of Infrastructure, Energy and Resources (DoIER)
The DoIER submission concentrates on the compliance burden on the domestic
industry in Australia and State Governments of addressing illegal logging through
verification.
12. East Gippsland Shire Council
The East Gippsland Shire Council submission supports a policy position to restrict
illegally imported timber without cost to domestic producters, as timber production
and harvesting is a significant contributor to the Shire economy.
The Shire identified the social impact that, without a strong timber industry, many of
the small and remote East Gippsland communities would not survive, creating
significant impact on the social fabric of the region.
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13. Decorative Wood Veneers Association (DWVA)
The DWVA submission states only a small part of the market in Australia would pay a
premium for certified timber veneers, and the implementation of poorly conceived
regulations could aggravate the problem by imposing a higher cost on legal loggers
with no reduction in illegal logging.
14. Greenpeace Australia Pacific
The Greenpeace response to the draft RIS raises concerns the report does not
address the Federal Government’s election promise to ‘seek to ban the sale of
illegally logged timber imports’.
The social costs and issues of illegal logging discussed in the submission include the
substantial impacts upon communities dependent upon forests for shelter and
sustenance, along with the profits from illegal logging to fund armed conflict and
lead to human rights abuses. Greenpeace believe consumers in Australia should pay
increased prices for timber products for an assurance that they have been sourced
legally.
15. Window and Door Industry Council (WADIC)
The WADIC submission to the draft RIS provides support for the general assessment
that the broad societal and economic costs of proposed regulations outweigh the
benefits.
WADIC was particularly concerned about the domestic social and
economic impacts upon small businesses through any policy targeting illegal logging.
16. Dean Richardson, LSE Ltd & the SRR Program
This submission from a forest industry consultant in Papua New Guinea recommends
tackling the problem at the source. This response identifies a social cost of illegal
logging in PNG in the use of police force to dispel local opposition to illegal logging,
and highlights the difficulties with corrupt governments and corrupt business practices
that make it problematic to address the problem at the source.
17. European Commission (EC)
The EC submission focuses on the technicalities of implementing compliance
standards and highlights some moral drivers in developing policy. It states that
European consumers, traders and decision-makers alike no longer want to be
associated with products that are associated with criminal activity.
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18. Construction Forestry Mining Energy Union (CFMEU)
The CFMEU submission contends that efforts to restrict illegal trade in timber should
incorporate principles consistent with the CFMEU proposal for reducing emissions from
Deforestation and Degradation and to address measures to combat driving factors
including: unclear land tenure, including inadequate recognition of indigenous rights
and interests, poverty, and food security issues.
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1.12 Literature Resources Reviewed
Table 7.1: Resources Reviewed
Document
Source
Illegal Logging and International Trade in Mahogany
AIDESEP
The Deforestation Communication – A Citizens Summary
European Commission
Breaking the Rings of Forest Corruption
Illegal-logging.info
Assessment of the impact of potential further measures
to prevent the importation or placing on the market of
illegally harvested timber or products derived from such
timber
European Commission
Addressing the challenges of deforestation and forest
degradation to tackle climate change and biodiversity
loss
European Commission
“Wild Money”: the human rights consequences of illegal
logging and corruption in Indonesia’s forest sector
Human Rights Watch
Labelling of illegal timber products
Ministry of Agriculture and
Forestry, NZ
Impacts of illegality and barriers to legality
Illegal-logging.info
Corruption and forest revenues in Papua
Chr. Michelsen Institute
Testimonials from the forest
Greenpeace Australia
Pacific
Forests Sourcebook – Practical guidance for sustaining
forests in development cooperation
World Bank
Human pressure on the Brazilian Amazon forests
World Resources Institute
Forest law enforcement and rural livelihoods
Commonwealth Forestry
Association
FAO Yearbook of Forestry Products 2007
Food and Agriculture
Organisations of the UN
49