Elsevier

World Development

Volume 62, October 2014, Pages 155-168
World Development

Market Signals of Unsustainable and Inequitable Forest Extraction: Assessing the Value of Illegal Timber Trade in the Eastern Arc Mountains of Tanzania

https://doi.org/10.1016/j.worlddev.2014.05.011Get rights and content

Summary

Natural forests and woodlands of the Eastern Arc Mountains (EAM) in Tanzania are under threat from deforestation and degradation. The estimated annual revenues from EAM hardwood for domestic use are USD 10 million in terms of planks, and twice as much when processed into furniture. Timber profits are largely captured by people whose livelihoods do not directly depend on other EAM ecosystem services. Market data, such as declining plank sizes and shifts to low-quality timber species, contain possible early warning signals of unsustainable hardwood harvesting. Policy recommendations include simplifying regulations for legal trade, developing sustainable financing, and increasing softwood supply.

Introduction

Wherever the lack of or weak enforcement of rules makes illegal trade more profitable than legal trade, illegal resource use and markets are likely to arise (Brack & Hayman, 2002). Many illegal activities in forestry sectors around the world take place in countries with high levels of corruption (FAO, 2001), which either allows logging to occur illegally, or results in no action against transport, trade, and manufacturing of the (illegally) harvested logs or planks. An estimated 15–30% of international wood trade, and 50–90% of timber harvest in tropical countries, is thought to be illegal (Nellemann, 2012). Illegal logging has, therefore, become a policy issue of international importance, and was made a priority area of the British presidency of the G8 in 2005. The IMF–World Bank meeting in 2006 initiated the G8 Illegal Logging Dialogue in order to address corruption and promote good governance as well as poverty reduction. The EU has adopted the FLEGT Action Plan under which voluntary partnership agreements can be set up with timber exporting countries to ensure legal trade; and the US Lacey Act (a conservation law) adopted a special amendment to prevent illegal logging in 2008.

Illegal logging generates high private rents for extractors because it avoids the costs of licenses, royalties, and less-intensive harvesting levels, although some bribery is also generally necessary. This opportunity to generate high private rents may lead to higher extraction rates than is optimal for social welfare maximization (Palmer, 2001). Other forest stakeholders are not compensated for the negative impacts of illegal logging. The negative externalities of unsustainable timber harvesting include effects on (non-marketed) ecosystem services of global importance such as biodiversity conservation, carbon storage and emissions, and eco-tourism. Local and regional externalities relate to direct forest uses such as lower harvesting of non-timber forest products, soil degradation, reduced water-regulating capacity of catchment areas, and reduction of pollination and cultural values. However, the timber trade creates jobs and cash income which may be vital to people in rural communities where many live near the poverty line, and provides important material resources to urban people. Enforced regulation of the timber industry thus comes at a cost to some, but provides benefits to other interests, both locally and to the global society at large.

A decline in forest resources represents a major policy problem and urgent action, based on interdisciplinary research, is needed to achieve more sustainable forest management in many parts of Africa, including Tanzania. The largely illegal nature of the forest sector means that there is little market-based evidence to inform decision-making and to estimate the severity of the problem, let alone to assess the distributional effects of possible policy interventions. In addition, biophysical stock assessments, based on large-scale forest surveys are costly and often remain unachievable for developing countries, where many of the remaining hardwood resources are located. Moreover, sustainable harvesting or species growth rates are unavailable for many tropical timber species. Alternative, faster and cheaper pragmatic assessment methods may provide a way forward.

This paper addresses hardwood extraction from the natural forests and woodlands of the Eastern Arc Mountains in Tanzania, a global biodiversity hot-spot under increasing pressure from deforestation and forest degradation (see Section 2). The main goal of the paper is to inform policy development and decision-making by assessing (a) the economic value of timber extraction from the Eastern Arc Mountains forests and woodlands, (b) the distribution of the associated benefits throughout the timber commodity chain, and (c) markets signals of the sustainability of hardwood extraction. While under (a) we aim to provide insight into the magnitude and significance of the forest policy issue, under (b) we show how the interests of different actors are served, thereby informing how future forest policies could be developed to ensure a more equitable use of forest resources. By analyzing various market variables (c), which are relatively easy and cheap to collect compared with large-scale physical stock and extraction assessments, we aim to provide policy-relevant information giving us clues about the sustainability of extraction levels. We link our findings to forest policies in Tanzania and suggest changes to simplify legal timber production, to invest in plantation programs and to encourage new organizational and sustainable financing mechanisms.

Section snippets

Timber trade in the Eastern Arc Mountains of Tanzania

As a result of drivers such as population growth, development of infrastructure and competition over resources and agricultural land, forest and woodland cover in Tanzania is being lost at an increasingly rapid rate (Hosonuma et al., 2012). The Eastern Arc Mountains (hereafter EAM) region of Tanzania (Figure 1) harbor some of the most biodiversity rich forests in the world (Burgess et al., 2007), yet they are under severe pressure from conversion for agriculture and degradation due to

Methods and data collection

In many countries, research on hardwood extraction from natural habitats is complicated by the illegality of the sector. A major methodological challenge lies in data collection (Gavin, Solomon, & Blank, 2009). The absence of reliable sector data and the difficulties of primary data collection mean that estimates of total volume are hard to generate. National statistics on the contribution of the forestry sector to GDP do not reflect the large illegal proportion (and often high values) of the

A short description of the timber trade in the Eastern Arc Mountains

Based on interview information as well as the study by Wall and Wells (2000), we were able to characterize the organization of the timber supply chain in the EAM of Tanzania. Hardwood extraction in the natural forests and woodlands of Tanzania is an informal industry with low capital investments, where most of the timber is pitsawn by hand. Local farmers get involved in pitsawing to earn additional money in-between agricultural seasons. They work either for themselves or for timber dealers and

Market signals of potential (un)sustainability

The economic analysis of the timber production chain and the market data in particular reveal some important information about the potential of sustained supply of hardwood from the EAM.

Discussion and policy recommendations

In our analysis we have used market-based data to illuminate the largely illegal timber trade from the EAM and highlight some potential signals of unsustainability. Consumption-based assessments of the volume of hardwood extracted from the EAM to supply rural and urban households also show that the forests and woodlands provide a sizable source of financial revenues. The estimated value is about USD 10 million annually, based on the price that the buyers pay for planks, onto which carpenters add

Acknowledgments

This work is part of the wider Valuing the Arc program (www.valuingthearc.org), supported by the Leverhulme Trust (UK) and Packard Foundation (USA). Additional funding was provided by the Danish Ministry of Foreign Affairs (DANIDA) through its performance contract with the University of Copenhagen. The authors wish to honor the memory of Stephen Ngowi, a cherished friend and colleague, who participated in the field work but sadly and unexpectedly passed away on January 13, 2013.

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