INTRODUCTION
There are few certainties about the current pandemic. One, however, is that its economic impact will put a strain on already-limited public resources. In both developed and emerging economies, public spending will need to be smarter and more efficient in the coming years. This should include spending that can deliver climate commitments and the Sustainable Development Goals (SDGs) while also bolstering demand for domestically produced goods.
Public procurement policies for timber may not grab headlines, but they deserve renewed attention. Their adoption is on the rise in emerging economies, particularly in countries currently negotiating or implementing a Forest Law Enforcement Governance and Trade (FLEGT) Voluntary Partnership Agreement (VPA) with the European Union (EU). These agreements are designed to guarantee that all timber exported to the EU come from legal sources. A public procurement policy for legal timber can help national governments deliver on their VPA commitments,[1] as well as give domestic manufacturers a boost relative to other countries where imports can come without such legality guarantees.
The size of government spending in many countries means that procurement can offer a powerful incentive for change. While the scale of government procurement varies, the public sector is often a country’s largest single consumer of wood products for construction and public works as well as office furniture and paper products. In Indonesia, for example, the government is estimated to account for 30 percent of timber product demand. In Ghana, the government buys 60 percent of the formal furniture sector. Thus, commitments to procure only legal or legal and sustainable timber offer an effective means for governments to increase the economic benefits for responsible industry within the country, while also supporting national and global forest governance and climate objectives.
A BRIEF HISTORY OF PUBLIC PROCUREMENT POLICIES FOR TIMBER
In the early 2000s, particularly in Europe, several governments and municipalities began to develop policies encouraging the use of independently verified legal and/or sustainable timber in all public contracts. By 2020, more than 30 countries have now developed a procurement policy specific to timber and many more have adopted green procurement strategies or policies that include requirements for timber products.
These early policies aimed to show leadership in environmentally sound procurement practices, while also creating local and global incentives for trade in legal and sustainable timber. However, public procurement policies were early initiatives which were ultimately deemed not to go far enough. Enthusiasm waned as governments and stakeholders (including European Member States, the US, Australia, Japan and Republic of Korea) decided to go one step further and develop regulations designed to exclude illegal timber from their markets altogether.
PUBLIC PROCUREMENT POLICIES IN EMERGING ECONOMIES
A number of emerging economies were also early adopters, using procurement as an opportunity to set specific requirements for either the federal/national or municipal governments when buying paper, furniture, and other wooden products. Several states in Brazil, as well as the national governments of China[2] and Mexico[3], for example, developed some form of policy between 2006 and 2010.
However, more recently, VPA countries have started to develop and implement new policies. Ghana, for example, has made efforts to link up producers with domestic market operators to pilot the approach and Indonesia is conducting the first phase of study to capture the state of implementation of a policy first developed from 2015.[4] In 2018, the Cameroonian Ministry of Forests and Wildlife created an ad hoc working group to prepare a draft text on the promotion of legally sourced timber in government contracts.[5] Most recently, in February 2020, the Prime Minister of Vietnam requested that the Ministry of Planning and Investment and the Ministry of Agriculture start to develop a framework of legal requirements for timber products that are purchased for use by all state agencies. My Forest Trends colleague based in Vietnam, Phuc Xuan To, discusses the history and implications of Vietnam’s public procurement policy in an accompanying blog.
Effective implementation of these new public procurement policies, in conjunction with a FLEGT VPA process, present opportunities to increase the economic benefits for responsible industry within the VPA country, while also supporting national and global forest governance and climate objectives. They do so by:
- Preparing industry for a graduated approach to VPA implementation. Virtually all FLEGT VPAs include commitments by governments to ensure that all timber will be legal – whether destined for export or domestic markets. If implemented in a FLEGT VPA country prior to a VPA, a timber procurement policy raises awareness and prepares industry for future requirements under a VPA. Leading companies are typically the first to revise their purchasing and supply chain practices to demonstrate that they can verify the legality and sustainability of the timber supplied through their government contracts. Once they do this, they’ll find – as did their counterparts in Europe – that it is often simpler to have one consolidated supply chain rather than two (verified and unverified). These companies could begin to supply verified legal and sustainable timber to all customers.
- Supporting Micro, Small, and Medium Enterprises (MSMEs). MSMEs across the board, not just those in the timber industry, already have significant disadvantages compared to their larger counterparts. Resource constraints often lead MSMEs to be more risk-averse and less willing to invest in new product lines. Accessing public procurement contracts is generally more difficult for MSMEs, especially as the size of the contract increases. By creating opportunities to scale up slowly through a graduated approach prior to full VPA implementation, MSMEs may be able to also broaden and deepen their skill-set gradually. How to support MSMEs, which in many countries make significant and diverse contributions to economic and social well-being, will remain a challenge as standards for legality shift. Evidence from China’s experience implementing the Environmental Labelling Program suggests that smaller and medium Chinese manufacturers have actually won the majority of contracts awarded, and it would be worth further investigating the factors that contributed to this outcome.
- Maintaining or securing new international market access. By preparing producers and manufacturers to supply timber that meets the VPA requirements, these producers will also be ready to meet the increasing international market demands for verified legal and sustainable timber. This will also help producers either maintain or increase their access to key markets that already require verified legal timber (such as the US, EU, Japan, and Australia) or those that are now developing or in the initial stages of implementing a timber import regulation (Republic of Korea, Thailand, Vietnam).
- Increasing domestic industry competitiveness vis a vis imported wood products. Countries with companies that are early movers in this space will increase their competitiveness relative to suppliers of imported wood products from other countries that cannot meet the requirements. In addition, weeding out cheap, illegal timber from the domestic markets can help increase the price of timber for the harvester, boosting the industry while also increasing tax revenues for the government.
- Improving forest management practices and securing jobs. Government-wide commitments to buy only verified legal and/or sustainable timber can raise the standards of forestry practices on the ground and make land use and forest governance more transparent. Policies incentivizing legal and sustainable timber also ensure the sustainability of supply for industry, securing industry jobs over a much longer term.
Of course, there are many barriers for governments to overcome, which has meant that implementation is in the very early stages in a number of VPA countries. These challenges mirror those anticipated in Europe in the early 2000s. Concerns include the possible costs and impacts of such policies on government budgets, the availability and supply of verified legal timber for the domestic market, and the risk of further burdening the industry – particularly MSMEs – during the COVID-19 era. Yet it is important, especially in these economically challenging times, for governments to use their limited resources to create deep-rooted and widespread positive environmental, social, and economic change.
As such, public procurement policies for timber deserve a fresh focus, particularly in emerging economies. They offer a path to increase international trade in legal timber, deliver broad climate objectives, bolster demand for domestically produced goods, and secure sustainable jobs for the long-term.
[1] For example, the VPA between Indonesia and the EU states “using the Indonesian TLAS, Indonesia shall verify the legality of timber exported to non-Union markets and timber sold on domestic markets, and shall endeavour to verify the legality of imported timber products using, where possible, the system developed for implementing this Agreement. The VPA between Ghana and the EU similarly states “Ghana shall endeavour to verify the legality of timber sold on domestic markets and of imported timber, using, where possible, the systems developed for the implementation of this Agreement.”
[2] China developed a green purchasing policy in 2006 which applies to certain categories of forest products based on its own Environmental Certification/labeling System. Timber and paper product categories such as wooden doors, wood-based panels, furniture, paper, and books have been added into the list of timber products covered between 2009 and 2017. Technical requirements for timber products covered by China’s environmental labeling standards vary by product and by source of the wood (domestic or imported). Standards require compliance with China’s forestry laws and regulations for domestic timber and with the national timber trade and import/export requirements for imported material.
[3] Mexico developed a national timber policy in 2007, which was included within the Purchasing, Leasing and Public Services Law and applies to timber and wooden furniture products. The policy requires that the origin of the products is known, and that they originate from legally and sustainably managed forests. For additional information, see https://sustainableforestproducts.org/node/61
[4] The government of Indonesia is seeking to implement a policy that requires companies supplying public institutions and ministries to be Sistem Verificasi Legalitas Kayu (SVLK, Indonesia’s timber legality assurance system) certified.
[5] For additional information on making legally sourced wood mandatory in government procurement contracts in Central Africa, see https://www.observatoire-comifac.net/docs/policy_brief/OFAC-Brief-01-en-web.pdf
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