Project Completion Report on Private Sector EU-FLEGT-VPA€¦ · 7.4 Control of the supply chain:...

Project Complet ion Report on Private Sector EU-FLEGT-VPA

Project Complet ion Report on Private Sector EU-FLEGT-VPA Project Complet ion Report on Private Sector EU-FLEGT-VPA

Acknowledgements___________________________________________________________________________

This project completion report is made possible through the following MFPMF executives, mem-bers and staff. Without their untiring efforts and team work, this project would not have been

possible to complete and produce the final project completion report.

Project Advisory Team: Dr. Sein Win President, MFPMF Dr. Myo Lwin EC, MFPMF U Barber Cho Advisor, MFPMF U Zaw Win Advisor, MFPMF U Kyaw Thu Chairman, Myanmar Rattan & Bamboo Entrepreneurs Association U Nyan Win Chairman, Wood-based Furniture Association

Report Writing: Mr. Charles Pradhan National Project Coordinator U Maung Maung Thein Htaik Assistant Executive Officer, MFPMF

Acronyms_________________________________________________________________________

DFID Department for International Development (DFID)/UKEFI European Forest InstituteEU European Union FAO Food and Agricultural OrganizationFLEGT Forest Law Enforcement Governance and TradeGDP Gross Domestic ProductGTF Global Timber ForumMFPMF Myanmar Forest Products Merchants Federation MOECAF Ministry of Environmental Conservation and Forestry MTE Myanmar Timber EnterpriseNES National Export Strategy TLAS Timber Legality Assurance SystemVPA Voluntary Partnership Agreement

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Table of ContentsExecutive Summary

Chapter I:1. Introduction2. Myanmar and EU Forest Law Enforcement, Governance and Trade (FLEGT), Voluntary Partnership

Agreement (VPA) Process3. MFPMF Organizational Objectives and Involvement in FLEGT VPA4. Project Objective5. Project Implementation Methodology 6. Project Activities

Chapter II:7. What is FLEGT ?7.1 Meaning of FLEGT7.2 Legal timber 7.3 Timber legality assurance system, 7.4 Control of the supply chain: Wood tracing systems and chain of custody7.5 Legality assurance systems: requirements for verification, 7.6 Voluntary Partnership Agreements (VPA)7.7 Guidelines for independent monitoring

8. What does Myanmar “Wood-Based Private Sector” understand about FLEGT?

Chapter III:9. Overview of International Trade Requirements/Trends and FLEGT VPA Action Plan10. Major issues and challenges of private sector in FLEGT VPA11. Private stakeholders mapping and communication strategy12. Role of private sector and position on FLEGT VPA process:13. MFPMF/ FLEGT VPA process linking with Forestry Sector National Export Strategy (NES)

Chapter IV:14. Recommendations of next steps on “Private Sector Engagement in the FLEGT VPA Process”.15. Conclusion Remarks of Advisory Committee, MFPMF. Annexes:

ExEcutivE Summary

Myanmar, a tropical country in Continental South East Asia, has a total land area of 261,228 square miles (676,577km2). Its length from south to north is about 2,090km and the maximum width from west to east is about 805 km. Myanmar is regarded as a land of diverse culture, traditions and

natural resources and it is endowed with one of the largest forest cover in the region. According to FAO an-nual report 2001, 52.3% of the total land area was covered with forests. Although Myanmar has a rich forest resource and long history of sustainable forest management, the forest depletion rate is becoming fast through legal and illegal logging process. At present based on the available information, Myanmar’s Forest area is about 48% and 10% is the primary forest while other claims only 3.1% of the primary forest is left. (National Export Strategy/Forestry Products Sector Strategy, 2015-2019). The Myanmar forest sector generates around 1% of GDP with goods and services traded nationally and internationally. This sector also supports/creates employ-ment/jobs and livelihoods of 50-60% of the population. However, this sector has challenges and issues linking with illegal logging, sustainability in supply of raw materials, limited investment, human rights abuses, forest governance and corruption.

The Forest Law Enforcement, Governance and Trade (FLEGT) process represents a first response to the worldwide problem of illegal logging. Logging is considered “illegal” when timber is harvested, transport-ed, processed, bought or sold in violation of national or international laws. It is challenging to give a precise figure for the volume of timber that is illegally logged in the world, but it is estimated that illegal extraction costs timber producing countries approximately US$10 to15 billion per year in lost revenue (FAO, 2014). According to Interpol, illegal logging constitutes 50 to 90 percent of the volume of forest activities in tropical countries. Apart from these economic consequences, illegal logging also has negative effects in environmental and social terms, particularly in the shape of the loss of biodiversity or the destruction and degradation of ecosystems and the livelihoods of local forest-dependent people. In this context, the FLEGT VPA process is an opportunity to deal with above mentioned issues. Based on Myanmar Government indication of its intention to pursue FLEGT VPA and Myanmar private sector involvement in FLEGT Task Force, MFPMF a Leading Federation (more than 1600 members including forest products exporters) acknowledges that private sector is a key stakeholder in FLEGT VPA Process and its needs to be better organized, put forward proposals and

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perspectives in this VPA process. In line with MFPMF organizational objectives and realization of private sector needs to participate in FLEGT VPA process, MFPMF has taken a challenge to plan and implement the project called “Identifying Needs to Improve Private Sector Engagement in the EU-FLEGT VPA Pro-cess”. The main objective of this project is to enhance better understand how all the different private sector operators interrelate, identify their specific issues and priorities to enable them to better collaborate and communicate more effectively to be able to address domestic and international requirements. The project

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clearly shows that 98% of the respondents think that the causes of Myanmar’s flood situation, and climate change are due to deforestation and forest degradation. 96% of the respondents think that deforestation and illegal logging are linked. 77% of the respondents claim that they get raw materials from MTE and 73% of the respondents think that if they buy raw materials from MTE, it is legal. About 65% think that if we do not buy from MTE, it is illegal. About 85% claim that if they get raw materials from MTE, they will not buy from illegal sources. About 46% respond claim that they know about Myanmar-EU FLEGT process. Key findings include majority of the private sector stakeholders have low level of awareness and under-standing on EU-Myanmar FLEGT VPA, stakeholders interpretation and understanding of “Legal Timber” is limited and most of them think that buying raw materials from MTE is legal so that they believe they are doing legal business. Majority of the stakeholders are unclear about the advantages and disadvantages of the FLEGT VPA, it is considered that majority of the private sector stakeholders do not have appropriate access to information about FLEGT VPA process (Respective Language) and within the private sector, it is observed that for the common good cause, there is lack of culture of working together and team work approach to achieve the desired results.

The Republic of the Union of Myanmar has developed “National Export Strategy” which includes “For-estry Products Sector Strategy (2015-2019)”. It has been realized that since NES will be the major plan for the export of the Myanmar’s forest products, there should be a strategic linkage with EU-Myanmar FLEGT VPA process. In future, the FLEGT VPA will influence the export business of the forest products with legal timber issues and government to government VPA process.

This report recommends as follows:d Private Sector Network continue to work on Awareness Raising through “Informa-

tion, Education and Communication (IEC)”/Communication Strategy on EU-Myanmar FLEGT VPA Process.

participation and involvement in FLEGT VPA process.

Stakeholders including missing ones and Market Players”.-

opment Partners/Donors/GTF.

Chapter I:1. Introduction:

The FLEGT process represents a first response to the worldwide problem of illegal logging. Logging is considered “illegal” when timber is harvested, transported, processed, bought or sold in viola-tion of national or international laws. It is challenging to give a precise figure for the volume of

timber that is illegally logged in the world, but it is estimated that illegal extraction costs timber produc-ing countries between US$10 billion and US$15 billion per year in lost revenue (FAO, 2014). According to Interpol, illegal logging constitutes 50 to 90 percent of the volume of forest activities in tropical coun-tries. Apart from these economic consequences, illegal logging also has negative effects in environmental and social terms, particularly in the shape of the loss of biodiversity or the destruction and degradation of ecosystems and the livelihoods of local forest-dependent people. Such illegal logging is also usually closely linked to poor governance. Lastly, the high demand for inexpensive wood on both domestic and export markets contributes to illegality in the forest sector. In an effort to eliminate illegal logging and its associated trade, the European Union (EU), recognizing a shared responsibility with timber producing countries in the trade in illegally sourced timber, EU adopted its FLEGT Action Plan in 2003, in recog-nition of the increasing public concern with the social, economic and environmental consequences of illegal logging and associated trade worldwide. A key element of the Action Plan is a proposal to establish Voluntary Partnership Agreements (VPA).

FLEGT VPAs are bilateral agreements between the EU and timber exporting countries, which aim to improve forest sector governance and ensure that the timber and timber products imported into the EU are produced in compliance with the laws and regulations of the partner country. Although there is no obligation for any country to enter into a VPA with the EU, once agreed they are legally binding on both parties, committing them to trading only in wood products that can be verified as legal. Under these agreements exporting countries develop systems to verify the legality of their timber exports to the EU. The EU and member states support partner countries to establish or improve systems which verify legal compliance.

2. Myanmar and EU FLEGT VPA:

Myanmar, a tropical country in Continental South East Asia, has a total land area of 261,228 square miles (676,577km2). Its length from south to north is about 2,090km and the maximum width from west to east is about 805km and the country has four important river systems, flow-

ing in the north-southerly direction, of which the Ayeyarwady River, the main water way, is navigable for about 1,450 km. Myanmar is regarded as a land of diverse culture, traditions and natural resources and it is endowed with one of the largest forest cover in the region. According to FAO annual report 2001, 52.3% of the total land area was covered with forests. Although Myanmar has a rich forest resource and long history of sustainable forest management, the forest depletion rate is becoming fast through legal and il-legal logging process. At present based on the available information, Myanmar’s Forest area is about 48% and 10% is the primary forest while other claims only 3.1% of the primary forest is left. (National Export Strategy/Forestry Products Sector Strategy, 2015-2019). The Myanmar forest sector generates around 1% of GDP with goods and services traded nationally and internationally. This sector also supports/creates employment/jobs and livelihoods of 50-60% of the population. However, this sector has challenges and issues linking with illegal logging, sustainability in supply of raw materials, limited investment, human rights abuses, forest governance and corruption. In this context, the FLEGT VPA process is an opportu-nity to deal with above mentioned issues.

The EU FLEGT Facility, hosted by the European Forest Institute (EFI), supports countries involved in discussions with the EU on FLEGT to assist them in preparing, negotiating and implementing their VPA.

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This support is provided through guidance, from the Facility’s experts with knowledge and expertise on the process and related topics, to national stakeholders and supporting partners and institutions; as well as through additional short term technical assistance in response to needs identified by stakeholders in country together with the EU. In November 2013 the Ministry for Environmental Conservation and For-estry (MOECAF) requested the EU for a dialogue on FLEGT VPA. In January 2015 a multi-stakeholder inception workshop was held to help structure and plan work to be undertaken during the FLEGT VPA process preparation phase. MOECAF has indicated and signaled that the next six months would consti-tute an information sharing and awareness raising period for stakeholders in the country with the view to inform and prepare for the anticipated VPA negotiations. An interim Task Force, with balanced repre-sentation from the different stakeholder groups will guide the implementation of the FLEGT VPA prepa-ration phase work plan and the establishment of the longer term VPA negotiation structures. The UK Department for International Development (DFID) has indicated that it is prepared to support Myanmar in the VPA process, through the provision of advisory support to MOECAF that will lead this process on behalf of the Government.

2.1: Myanmar Forest Products Merchants Federation (MFPMF)/Private Sector, FLEGT VPA Process and Global Timber Forum (GTF):

Based on Myanmar Government indication of its intention to pursue FLEGT VPA and Myanmar private sector involvement in FLEGT Task Force, MFPMF a Leading Federation (more than 1600 members including forest products exporters) acknowledges that private sector is a key stakehold-

er in FLEGT VPA Process and its needs to be better organized, put forward proposals and perspectives in this VPA process. In this context, MFPMF realizes to identify private sector needs and challenges with members and associates, clear understanding of the different private sector actors, roles, how they op-erate/interrelate, general strength and capacity within private sector constituency to undertake the VPA negotiation and implementation.

In line with Myanmar Private Sector involvement in FLEGTVPA process, the Global Timber Forum (GTF)which is an international communications and networking hub for timber trade federations, na-tional and regional industry bodies, and others in and associated with the sector is supporting MFPMF to prepare and participate in VPA process by providing financial assistance (£ 37,500) for project called “Identifying Needs to Improve Private Sector Engagement in the EU-FLEGT VPA Process”. As an official process, Ms. Rachel Butler (Manager/GTF) and Dr. Sein Win (President/MFPMF) signed an agreement on 30th July, 2015 and the project period is between 1st August and 30th September, 2015.

3. MFPMF organizational background, objectives and involvement in FLEGT VPA:

Myanmar’s history of timber industry is linked with British colonization. After the annexation of Myanmar by the British, timber industry was mostly monopolized and controlled by five major British firms. Myanmar nationals were allowed to do small amount of lower grade teak

harvesting and the entire hardwood business. Myanmar nationals were engaged in harvesting hardwood log, saw-milling, local furniture industry and export of hardwood saw timber and it was recorded that in Yangon, there were five plywood factories belonged to local entrepreneurs. After Myanmar’s indepen-dence, foreign timber companies were nationalized and their timber business were terminated. From 1963 on-wards, all the non-teak hardwood timber business was again nationalized and local private timber business came to halt. In 1988, Myanmar Government adopted market oriented economy and permitted private sector to resume hardwood timber business. Due to certain condition, hardwood log harvesting and exporting business was banned in 1993. After that, private sector was allowed to export value-added wood product only with the aim to re-organize the timber business people. Timber prod-ucts are estimated to represent around 98 % of the forestry products sector’s total output. Rattan and non-timber products are estimated to represent around 2 % of the forestry products sector’s total output.

In 2010, Myanmar Forest products Timber Merchants Association (MFPTMA) was renamed to Myan-mar Timber Merchants Association (MTMA) which was formed in annexation with UMFCCI, under the license number (33) dated 10-5-1993 notified by the Ministry of national Planning and Economic Development. With the new formation of Executive Committee of MTMA, the name of MTMA was again renamed to Myanmar Forest Products Merchants Federation (MFPMF) on 5th, June 2015.

3.1: MFPMF Organizational Chart:

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3.2: MFPMF Organizational Objectives:

/ The main objectives of Myanmar Forest Products Merchants Federation (MFPMF) are; - To get awareness on forest and biodiversity conservation and cooperate with forest depart-

ment on conservation of forest resource for sustainability. - To cooperate in forest plantation establishment for ensuring sustainability of nation’s natural

resources. - To protect forest resources with the aims to develop wood-based industries promoting the

value-added finished products and generating national revenue. Moreover to create more job opportunities in local wood-based industries.

- To make concerted effort in wood-based industry related activities under the guidance of Ministry of Environmental Conservation and Forestry (MOECAF).

- To help member for extending existing market to new international market.

3.3: MFPMF involvement in FLEGT VPA process:Based on MFPMF organizational objectives and realization of private sector needs to participate in FLEGT VPA process, MFPMF has taken a challenge to plan and implement the project called “Identifying Needs to Improve Private Sector Engagement in the EU-FLEGT VPA Process”.

4. Project Objective:The main objective of this project is to enhance to better understand how all the different private sector op-erators interrelate, identify their specific issues and priorities to enable them to better collaborate and com-municate more effectively to be able to address domestic and international requirements.

5. Project Implementation Approach and Methodology:The project has been planned and implemented through project advisory committee and supporting com-mittee consisting six members. The project advisory committee recruited a “National Project Coordinator” to plan and implement the project activities effectively. 5.1: The project has taken a two pronged approach and method to plan and Implement the project activities:

A. Quantitative and Qualitative Investigative approach:

Review of project documents, secondary data/information and primary data collection through quantitative method (check list, survey questionnaire, interview) and qualitative method (Key informant interview with semi-structured questionnaire, focus group discussion with topic guide/check list) and stakeholder mapping by reviewing all the MFPMF member list, wood-based industries, Bamboo/Rattan, location/place and updat-ing and map drawing.

B. Multi-Stakeholders Consultative Approach:

In order to achieve the project objective, participatory consultative approach has been applied to interact, share and communicate FLEGT VPA related information and issues within concerned private sector stake-holders and among multi-stakeholders through inception workshop, formal/informal interaction, field/sites visit at woods-based industry, shops and community forestry/plantation areas.

6. Project Activities:

Based on above mentioned project implementation approach/methodology, the project has conduct-ed all the project activities as per the planned schedule.

Sr.No Activities Conducted

Date/Period(August /S ep-

tember 2015) Remark

1Project Action Plan Development and Agree-ment meeting/workshop with Executive Com-mittee (EC)

August 24

2 Yangon FLEGT VPA Inception Workshop, Sky Star Hotel August 26

3 Mandalay FLEGT VPA Inception Workshop, and Focus Group Discussion, Hotel Manadalay September 13

415 Wood- Based Factories/Sites visitedKey Informants Interview Conducted

Between August 28 and September 22

5 Key Informants Interview at Furniture/Bam-boo/Rattan Exhibition September 17

6. Project Advisory Meeting with GTF team for Project Progress Reporting and Feedback September 19

7 Community Forestry Field Visit (Hmawbi area) September 23

8 Yangon FLEGT VPA Final Workshop September 29

9 Project Completion Report September 30

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Chapter II7. What is FLEGT?

7.1: Meaning of FLEGT:

FLEGT stands for Forest Law Enforcement, Governance and Trade. The EU FLEGT Action Plan sets out a program of actions that forms the European Union’s response to the problem of illegal logging and

the trade in associated timber products(Source: EU Briefing Note 3, Series 2007).

7.1.1: Origins:

Illegal logging results in serious environmental and social damage, as well as costing governments an estimated $10 billion every year in lost revenues. This was recognized in a G8 Summit in 1998, where measures to tackle illegal logging were discussed and an ‘Action Programme on Forests’ formally ad-

opted. Subsequently, in April 2002, the European Commission hosted an international workshop to dis-cuss how the EU could contribute to measures to combat illegal logging. At the World Summit on Sus-tainable Development (WSSD), held in Johannesburg in the same year, the European Commission set out a strong commitment to combat illegal logging and the associated trade in illegally-harvested timber. The EU published its first Proposal for a FLEGT Action Plan in May 2003.A number of other initiatives, arising from both national and international commitments, have also developed in parallel. In particular, three regional FLEG (Forest Law Enforcement and Governance) processes have been established in South East Asia, Africa (AFLEG) and Europe and North Asia (ENAFLEG). These processes, co-ordinated by the World Bank, have resulted in ministerial commitments to identify and implement actions to combat illegal logging in each region.

7.1.2: The EU FLEGT Action Plan:

The Action Plan sets out a range of measures that aim to combat the problem of illegal logging. These focus on seven broad areas;

The Action Plan aims to provide financial and technical support and advice to timber-producing countries to achieve the following objectives:

enforcement has been weak;

and through which all stakeholders can engage in policy dialogue;

including support for independent forest monitoring;-

tions in the implementation of new governance procedures;

local people to help prevent illegal logging.

The Action Plan encourages private sector involvement, including support to build private sector capacity in producer countries. Such support may be aimed, for example, at higher standards of forest management

and legal compliance, improved supply chain management, and adoption of corporate social responsi-bility standards. European Commission and Member State grants to support the Global Forest Trade Network and the Tropical Timber Action Plan are examples of this type of activity.

7.2: Legal timber:

The process for deciding which laws are included in a definition of legality is the responsibility of the country in which the laws apply and, if a definition is to be a component of a legality assurance system to underpin a trade agreement, it must be endorsed by the country’s government. However,

the nature of the process has a major influence on the definition’s acceptability to different stakeholders. Checking compliance with and enforcing a definition of legally-produced timber requires that the defini-tion is clear,operationally workable and objectively verifiable. It must be easily understood by staff of both forest operators and enforcement agencies.

7.3: Timber Legality Assurance System (TLAS):

The EU FLEGT Action Plan identifies a range of measures to address the problem of illegal log-ging and related trade. The Action Plan places particular emphasis on governance reforms and capacity building in timber-producing countries. This is supported by actions aimed at reducing

the trade and use of illegally-harvested timber and promoting the use of legally-harvested timber in the EU. The EU proposes to do this through Voluntary Partnership Agreements (VPAs) between the EU and timber-producing countries where illegal logging is a problem.An important part of each VPA will be establishment of a licensing scheme to ensure that only timber products that have been produced in accordance with the national legislation of the exporting country are imported into the EU. Under the li-censing scheme, import into the EU of timber exported from a Partner Country will be prohibited unless the timber is covered by a valid license. However, trade in timber products from non-partner countries will be unaffected. The purpose of a legality assurance system (LAS) is to provide a reliable means to dis-tinguish between legal and illegally produced forest products. Issuance of licenses by Partner Countries requires a system for ensuring that only legally-produced timber is licensed for export. This must include checks of forest operations and also control of the supply chain from harvesting to export. Such a legality assurance system includes five components:

Country must be met and provides criteria and indicators with which to test compliance with these laws.

-duction chain from harvesting to the point of export.

control of the supply chain.

that all requirements of the LAS are being implemented as prescribed.

7.4: Control of the supply chain: Wood tracing systems and chain of custody:

There are effective mechanisms for tracing timber throughout the supply chain from harvesting to the point of export.

traceability of timber or timber products.-

ed and confirming it is consistent with the areas for which use rights have been allocated-

ported. This includes logs from forested areas being converted to other land-uses, using appropri-ate methods of identification and documentation.

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maintained whenever it is transported. No mixing with material from illegal or unknown sources is allowed during transport or at insecure interim storage locations.

-ber terminals,to ensure that material from legally verified sources is kept segregated from material from all other sources or, if mixing is allowed, that material from unknown sources and material which was harvested without legal harvesting rights is excluded.

into processing facilities is from legally verified sources or, if mixing is allowed, that material from unknown sources and material which was harvested without legal harvesting rights is excluded.

that segregation or mass balance approaches are properly implemented. Arrival at point of export: All material (logs, log loads or processed timber) arriving at the point of export is accompanied by the documentation necessary to confirm that it has been legally verified.

of timber or timber products at each stage of the supply chain, including reliable pre-harvest esti-mates at appropriate accuracy of the volume of standing timber in each harvesting site. All data are recorded in a way which makes it possible to reconcile them with the prior and subsequent links in the chain in a timely manner. Reliable reconciliation is carried out for the entire supply chain.

7.5: Legality assurance systems: requirements for verification:

Verification provides adequate control to ensure the legality of timber to be licensed. Verification must be sufficiently robust and effective to ensure that any non-compliance with requirements, either in

the forest or within the supply chain, are identified and action is taken in a timely manner to resolve the problem. The intensity of verification should be proportional to the specific circumstances in the Partner Country.

to perform their jobs and are adequately supervised.-

vide means to ensure transparency of the system.

and the organizational level have been identified and documented and are being effectively managed and controlled.

involved with forest operations (e.g. forest guards), there must also be a component of the verifi-cation process carried out by other personnel who are not routinely involved with either the forest operations or line management of the field-based monitoring personnel.

-ed and ensures that the process is systematic, transparent, evidence-based,carried out at regular intervals and covers everything included within the scope.

7.6: Voluntary Partnership Agreements (VPA):

The EU FLEGT Action Plan recognizes that, as a significant consumer of wood products, the EU shares responsibility with timber-producing countries to tackle illegal logging and its associated trade. How-

ever, there is currently no practical mechanism for identifying and excluding illegal timber from the EU market. The FLEGT Action Plan therefore proposes the development of Voluntary Partnership Agreements (VPAs) between the EU and individual timber-producing countries (FLEGT Partner Countries). These agreements are designed ultimately to eliminate illegally-produced timber from a Partner Country’s in-ternational and domestic trade. A VPA is a binding agreement between the EU and a Partner Country by which the EU and the Partner Country undertake to work together to support the aims of the FLEGT Ac-tion Plan and to implement a timber licensing scheme. To enable this, a new European Regulation on the implementation of the FLEGT licensing scheme has been adopted.

Key elements to consider in designing and implementing VPAs are likely to include:

people by taking account of indigenous and local communities’ livelihoods associated with forests. Partner Countries will also be encouraged to link FLEGT issues to their poverty reduction strategies and to monitor the impacts of VPAs on poverty;

during the design and implementation of VPAs. This should include ways to involve the private sec-tor in efforts to combat illegal logging but should also ensure that any requirements imposed are not an undue burden on small-scale producers.

7.7:Guidelines for independent monitoring:

monitoring function and allows it to operate in an effective and transparent way.

the people, documents and sites necessary to carry out its function.

the Third Party Monitor are in place.-

low-full functioning of independent monitoring.

individuals that are involved in management or regulation of the forest resource and those involved in Independent Monitoring.

interest in the forestry sector are not involved in any aspect of independent monitoring.-

volved in the operation of the LAS or whose activities are subject to monitoring.

the Third-Party Monitor and clear, publicly-available rules regarding its operation.

the selection process for the Third-Party Monitor.-

tion procedure that is open to all qualified domestic and international applicants and ensures trans-parency and value for money.

freedom from interference in the operation of the Third-Party Monitor’s activities; access, within the limitations prescribed by national legislation, to government and company information relating to the operation of the LAS; access to the forest estate and timber transport, storage,processing and export facilities that are relevant to the operation of the LAS; payment of the Third-Party Monitor’s fees or costs based on the work undertaken regardless of the nature of its findings; and safeguards concerning the protection and use of commercially-confidential information.

8. What does Myanmar “Wood-Based Private Sector” understand about FLEGT?

Ain moving forward for the FLEGT VPA process. During project implementation period, the project team has conducted questionnaire survey, key informant interview (KII) using semi-structured question-naires and focus group discussions. The key questions asked were deforestation,climate change and disaster linkages, illegal logging, legal/illegal timber, raw wood materials from Myanmar Timber Enterprise (MTE), demand/supply issues, and awareness on FLEGT and understanding. A total of 48 respondents who are in wood based industry business (N=48) were asked through survey questionnaires and 22 Key Informants (N=22) were interviewed by utilizing semi-structured questions/check list. Key findings were presented through the following tables:

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Table 1: Understanding Legal logging and FLEGT VPA N=48Sr. No Yes

No/Do not agree

Don’t know

1 Did you know about Myanmar floods recently occurred in some parts of the country? 48 (100%) -

2Do you know that the causes of this kind of flood situation, and climate change are due to deforestation and forest degradation?

47 (97.9%) 1(2.08%)

3 Do you believe deforestation and illegal logging are linked? 46 (95.83%) 2

(4.17%)

4 Where do you get your raw materials? MTE=37 (77.08%) 11(22.91%)

5 If you buy raw materials from MTE, Do you think it is legal? 35 (72.91%) - 12 (25%)

6 If you buy raw materials from other sources (Not from MTE), Do you think it is illegal? 31 (64.58%) 13

(27.08%) 4 (8.3%)

7If you get required raw materials from MTE, will you buy raw materials from other illegal sources?

Willing to buy=1(2.08%)Less Price=6(12.5%)

41 (85.41%)

8.1 Illegal Logging business is due to the demand in market? 39 (81.25%) -

8.2 Illegal Logging business is due to the supply side market? 9 (18.75%) -

9 Which is causing more forest destruction? Bor-der Illegal logging or in country illegal logging?

B = 40(83.33%)IN = 1(2.08%) - 7

(14.58%)

10Do you know about legal forestry products trad-ing system between Myanmar and EU which is “FLEGT VPA”

22 (45.83%) - 25(52.08%)

11 If you get information on FLEGT, will you be interested in FLEGT? 42 (87.5%) - 6

(12.5%)

Source: MFPMF/Private Sector Need Project, A brief survey, September 2015.

Above table clearly shows that 98% of the respondents think that the causes of Myanmar’s flood situation, and climate change are due to deforestation and forest degradation. 96% of the respondents think that deforesta-tion and illegal logging are linked. 77% of the respondents claim that they get raw materials from MTE and 73% of the respondents think that if they buy raw materials from MTE, it is legal. About 65% think that if we do not buy from MTE, it is illegal. About 85% claim that if they get raw materials from MTE, they will not buy from illegal sources. About 46% of the respondents claim that they know about Myanmar-EU FLEGT process.

Table 2: Key Informants Interview: Key stakeholders (Wood Based Factories, Furniture Business) understanding and interpretation of FLEGT VPA: N=22

Sr.No Key statements Percentage (%)

1Key stakeholders who said that certificate for legality of forest products (for export) issued by forest department is valid doc-ument

20 (90%)

2Key stakeholders who consider that raw materials buying from MTE is legal timber to meet the requirement of EU-FLEGT VPA process

15 (68.18%)

3 Key stakeholders who consider that the raw materials they are buying from government sources are “Legal” 12 (54.54%)

4 Key stakeholders who understand the EU-Myanmar FLEGT VPA process 5 (22.72%)

5 Key stakeholders who think that if EU FLEGT VPA is done, the border illegal logging will be totally disappeared. 5 (22.72%)

6 Key stakeholders who think that if EU FLEGT VPA is done, the border illegal logging will be reduced. 14 (63.64%)

Source: MFPMF/Private Sector Need Project, A brief survey, September 2015.

In order to measure the understanding and participation of key stakeholders in FLEGT VPA process, MFPMF team has conducted “Key Informants Interview (KII)” with 22 key informants involved in wood

based industries. According to National Export Strategy/Forestry Products Strategy (2015-2019), there are currently around 100 wood-based active industries in Myanmar and wood products industry is composed of 258 sawmills, nine plywood & veneer mills, 1497 recutting mills and 1588 small production units. In addition, under the state-owned MTE, the industries for the manufacture of value added wood products include five furniture factories, five plywood factories, two moulding factories and one flooring & moulding factory. During the key informants interview, it was clear that about 5% of the respondents understand about the EU-Myanmar FLEGT VPA process. About 90% of the key stakeholders who said that the certificate for legality of forest product (for export) issued from the forest department is valid document to prove the legal timber. About 68% of key stakeholders who claim that forest products buying from MTE is legal or legal timber which is demanded by EU-FLEGT VPA process whereas stakeholders who actually understand the EU-Myanmar FLEGT PA process are about 23%. About 36% of the key stakeholders think that if EU FLEGT VPA is completed, the border illegal logging will be disappeared whereas about 64% think that if EU FLEGT VPA is completed, the border illegal logging will be reduced/less.

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Focus Group Discussion:

During the project period, focus group discussions were conducted with some key stakeholders. It was observed that majority of the stakeholders are strongly believe that they buy raw materials from MTE and it is legal and they are getting legal timber.

claim that what they are doing wood-based business is totally legal and they are exporting their products to India, China, Europe and USA.

they do not have clear information on FLEGT VPA. Most of them heard about FLEGT VPA but they do not clearly understand about FLEGT VPA.

materials, certification, chain of custody, producing wood products/finished products and ex-porting procedure is very tiring/long process and doing wood business is a great challenge.

-cerned parties/stakeholders (Government, CSOs/NGOs, Private Sector) should work together to complete and achieve FLEGT VPA process for smooth implementation of legally exporting timber business to Europe and other countries as an internationally acceptable manner.

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Summary of Key findings of the FLEGT VPA:

Based on above survey, Key Informant Interview and Focus Group Discussion, the summary of the key finding are presented below:

1. Majority of the private sector stakeholders have low level of awareness and understanding on EU-Myanmar FLEGT VPA.

2. Stakeholders interpretation and understanding of “Legal Timber” is limited and most of them think that buying raw materials from MTE is legal and they believe that they are doing legal busi-ness.

3. Majority of the stakeholders are unclear about the advantages and disadvantages of the FLEGT VPA.

4. It is felt that majority of the private sector stakeholders do not have appropriate access to informa-tion about FLEGT VPA process (Respective Language).

5. Within the private sector, it is observed and felt that for the common good cause, there is lack of culture of working together/team work approach to achieve the desired results.

Chapter III9. Overview of International Trade Requirements/Trends and FLEGT VPA Action Plan:

MFPMF members have been involved in national/international level trade requirement for many years and gained some experiences in international trade requirements/trend and FLEGT VPA Action Plan process. Based on overview of the EU FLEGT VPA process, some of the issues and lessons learned need to be ana-lyzed from Myanmar’s context and understanding as follows:

(i): Market Restriction: Politically-motivated measure which includes trade embargo/sanction imposed by the world powers, such as United Nations, USA and EU. The Sanction on Myanmar was imposed by USA and EU in 2003 and 2007 respectively. At present, all sanctions are revoked. Environmentally-motivated measure includes certifica-tion for the sustainable forest management, license scheme for the legal timber and public procurement policy/guidelines. Type of certification and mode of enforcement is linked with legality, sustainability and voluntary and regulatory.

(ii): Illegal Timber: Illegal logging has no single definition, it is not a legal term derived from treaties, or court opinions, and neither is it a technical term that professionals use in a consistent way. In a general sense: “ Illegal logging takes place when timber is harvested, transported, bought or sold in violation of National Laws” which is in line with definition of FAO, 2014. Aspects under National Law includes harvest and transport, sales and processing, export and import, associated crimes and abuse of governmental authority.

(iii): Impact of Illegal Timber: It causes environmental damage, costing government billions of dollars in lost revenue, promoting corrup-tion, undermining the rule of law and good governance and financing armed conflict. People are concerned about illegal logging through assessment of 5 areas: Social welfare, governance, revenue, environment and commerce.

(iv):Mitigation of Impact:EU Plan to mitigate the impact through European Union Timber Regulation (EUTR) which prohibits the placing on the EU market of illegally harvested timber and products derived from such timber, it requires EU traders who place timber products on the EU market for the first time to exercise “Due Diligence”, and other traders further down the supply chain must keep records of their suppliers and customers.

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(v): How Voluntary Partnership Agreement (VPA) is built up:

FLEGT Action Plan supports for timber producing countries, activities to promote trade in legal tim-ber, promoting ethical public procurement policies, support for private sector initiatives to promote “Corporate Social Responsibility (CSR)”, safe guards for finance and investment, use of existing

legislative instrument or adoption of new laws to support the plan and addressing the problem of conflict timber. VPA is a WTO-Compatiable trade agreement between a producer country and the EU to work together to stop illegal logging. Although it is voluntary VPAs legally binding on 2 Parties once agreed.

The goal of the VPA is focused on policy and legal reform, governance/transparency, capacity building, improve control, track and verify legal compliance, better capture revenues and rents, secure and im-prove market share. The basics of a VPA is concerned on legal and not sustainable timber. EU approach is consultations, assistance for capacity building and market benefits and look for stakeholders inputs and concerns.Under VPA, almost all timber products covered, including solid wood products, flooring, ply wood, pulp and paper (not included: recycled products, printed papers such as books, magazines and newspapers. The Regulation applies to both imported and domestically (inside the EU) produced timber and timber products.Timber Legality Assurance System (TLAS) defines what constitutes legal timber, verifies compliance with the definition, trace products from forest to export, licenses export and provide assurance to markets and independently checks all elements of the system. TLAS is the main tool for guaranteeing legality which consists of “Legality grid” a matrix which outlines the laws, verifiers and indicators used to monitor enforcement of laws. Chain of custody: The wood tracing system which ensures only timber verified as legal will be exported or sold, verified and unverified timber should be kept separate.Verification of legal compliance: The way the government or third party verifies no illegally sourceed timber enters the chain of custody. Licensing: A FLEGT license is issued to timber verified as legal, and this allows it to be shipped to the EU. Through EUTR, legality is defined on the basis of the applicable legislation of the country of harvest covering:

VPAs are negotiated with 3 layers and 3 principles which include “ Environment (Forest Management/Conservation), Economic (Trade/export, taxes/ registration/ fees), Social (Customary and access rights, worker health, safety and labor)” which are again negotiated “Within” stakeholders groups, “Among” stakeholders in country and with the “EU”. Based on overview of FLEGT VPA process, the legality de-velopment is through an interactive national consultation process involving multiple stakeholders and interests including those involved in enforcing forestry related legislation, operating in the forestry sector, involved/affected by forestry operations.

(vi): Lessons from a VPA Country- i.e. IndonesiaContext:

rnment admitted that illegal logging is a big problem and made it a priority issue to be addressed.

-tions, international cooperation, policy change

government

Lessons Learned:der, participatory process takes a long time, patience, endurance and also

resources are needed to go through the process and the result is a robust and credible system.-

cal will to incorporate input from stakeholders must be present so that whole process is worthwhile and the result is accepted.

discussion are needed to flesh out issues and find ways to address and equity is im-portant and each stakeholder has a voice.

10. Major issues and challenges of private sector in FLEGT VPA:10.1:Overview of Myanmar forestry products sector business environment issuesThe absence of certified quality standards for forestry products limits exporters’ capacity to access new markets in developed countries

ics performance significantly hampers the export of forestry products

sector

sector and hampers export potential

sector factories

limits FDI potential

10.2: Private sector in FLEGT VPA: wareness and understanding on EU-Myanmar FLEGT VPA

Language)

cated timber/abandoned timber/imported timber

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11. Private Stakeholders Mapping and Communication Strategy

MFPMF Stakeholders:

Stakeholder Mapping:

Communication strategy and mechanism:

Development of Information, Education and Communication (IEC) strategy with respective languages

12. Role of private sector and position on FLEGT VPA process:-

forcing forest sector related legislation (Government).

-lian illegal logging bill

-larly for tropical timber products

Private Sector Interest:

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Private Sector involvement in FLEGT VPA Process:

“ Legality Defining Process”

private sector equilibrium

13. MFPMF/ FLEGT VPA process linking with Forestry Sector National Export Strategy (NES):

The Republic of the Union of Myanmar has developed “National Export Strategy” which includes “For-estry Products Sector Strategy (2015-2019)”. It has been realized that since NES will be the major plan for the export of the Myanmar’s forest products, there should be a strategic linkage with EU-Myanmar

FLEGT VPA process. In future, the FLEGT VPA will influence the export business of the forest products with legal timber issues and government to government VPA process.

The NES has three strategic plan which includes: (i) streamlining administrative rules and procedures, and assure reliable upstream supplies, (ii) improving the skills and capacity of the industry, (iii) increasing the sector’s sustainability. Since the NES has a plan of action consists of “ Raise awareness of illegal logging and illegal trading, change consumer and public perception on illegal logging and trading, Improve international market share through value added products, these planned activities need to be strongly integrated with the FLEGT VPA process.

Chapter IV

14.Recommendations for Next Steps:

and Private Sector Network continue to work on Awareness Raising through “Informa-tion, Education and Communication (IEC)”/Communication Strategy on EU-Myanmar FLEGT VPA Process.

participation and involvement in FLEGT VPA process.

Private Stakeholders Actors/Market Players”.

-opment Partners/Donors/GTF.

15. Conclusion Remark of Advisory Committee , MFPMF

After reviewing the finding of the project, the Advisory Committee has the following opinion how to meet the legality requirement of forest products of Myanmar.

There will be two parts -

Process with all departments and organizations.

exist with respective obligation of the government sector and the private sector, - The Private Sector should strictly comply with the current regulation not to use any raw

material from any other unknown source, except from MTE. (For the moment, the imported raw material is not yet included.) - FD and MTE should exert their effort to guarantee that they have complied with the existing rule and regulation. As a result, the legality of raw material can be assured, then

the raw material shall be verified by the other party, at least by the second party.

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Project Complet ion Report on Private Sector EU-FLEGT-VPA

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