LIBERIA: FORESTRY / TIMBER SECTOR UPDATE

UNCLAS MONROVIA 001090

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/W-DBANKS
INR/AA-BGRAVES
AF/EPS, EB
AID FOR AFR/WA-YMALCIOLN
ACCRA AND DAKAR FOR FCS

E.O.12958: N/A
TAGS: EAGR PGOV EINV EAID SENV LI
SUBJECT: LIBERIA: FORESTRY / TIMBER SECTOR UPDATE

REF: 2006 MONROVIA 1333


1. (SBU) SUMMARY: The Liberian Forestry Development Authority
(FDA) has missed key deadlines in the chain of deliverables
necessary for the resumption of commercial logging in Liberia. Much
of the legal framework for the forestry sector is in place and the
FDA has made substantial strides toward putting the FDA back in
order financially and technically over the past year. But the FDA
has failed to implement critical steps necessary to restart the
logging industry in line with the government's target to advertise
and award timber sale contracts by October 2007. As a result, the
first timber contracts may not be issued before January and very few
are likely to be issued at all before the end of Liberia's fiscal
year next June 30. The chain of custody contract that is the
foundation for monitoring the legality of the new system (and is
partially funded by the United States) is stalled and the FDA has
done little to address sensible civil society concerns on
significant issues including illegal chain sawing, land tenure and
community forestry. Meanwhile, the GOL is set to expand Liberia's
network of protected parks and is increasingly embracing the idea -
at least in theory - of carbon markets as a conservation measure and
a potential revenue source for the country. END SUMMARY.

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BACKGROUND ON LIBERIA'S TIMBER INDUSTRY
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2. (U) The Liberian commercial timber industry has been both a major
economic engine of growth and a key source of corruption and
mismanagement. At the height of forestry production prior to the
1990-2003 war, export of timber products contributed nearly 25% of
national foreign exchange and the sector employed more than 8,000
seasonal workers. During the war (but before United Nations
sanctions in 2003),armed militias controlled many concession areas
and timber exporters amassed over US$64 million in tax arrears on
more than US$100 million in exports per annum between 1997 and 2003.
The GOL handed out 26 million acres of forestry concessions for
only 10 million acres of actual forest. A concession review
committee established in 2005 determined that not one of 70
contracts reviewed could demonstrate legal compliance.


3. (U) The lifting of UN sanctions in 2006 has made the resumption
of commercial logging a key priority of the GOL. The industry could
potentially provide up to US$20-25 million in annual government
revenue and 10,000 jobs with 2.5 million hectares under contract.
The Liberian Forest Initiative (LFI),a collaboration between the
United States, World Bank, European Commission, non-governmental
organizations and the GOL, began in 2004 to address the reform
requirements of UN Security Council sanctions on timber,
specifically working to improve timber revenue management
transparency and accountability and sustainable forest management
programs based on commercial conservation and community forestry.

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COMMERCIAL FORESTRY - FDA SUCCEEDS ON INITIAL REFORMS...
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4. (U) Since passage of the National Forestry Reform Law in October
2006 (reftel) the Forestry Development Authority (FDA) has made
substantial strides toward putting its operations back in order
financially and technically in an effort to prepare for the re-start
of forest management. The FDA completed a difficult staff
downsizing exercise to reduce the number of employees on the payroll
from 519 to 295 at a cost of almost US$640,000 (of which the United
States contributed US$200,000). The Governance and Economic
Management Assistance Program (GEMAP) and LFI are assisting the FDA
to finalize standard internal operating procedures. In addition,
U.S.-funded GEMAP and LFI advisors have worked with the FDA
financial, procurement and human resources departments to establish
internal controls and procedures for all financial transactions,
including but not limited to cleaning up the payroll, petty cash,
procurement, disbursement, payables and billing transactions. The
FDA installed a computerized accounting system linked to the chain
of custody to ensure accurate tax payments. In May 2007, for the
first time in years, the team began publishing financial statements
each month.


5. (U) With assistance from the LFI, the FDA also drafted a legal
framework of ten core regulations, a Code of Harvesting Practices, a
protected area network proposal and a draft of the National Forest
Management Strategy - all submitted to the FDA Board of Directors in
June 2007 for approval. The ten regulations need only to be signed
into full force and effect and they will form the foundation for the
legal re-start of commercial logging. The National Forest
Management Strategy must be vetted through regional and national
workshops and is the last document that must move forward before
logging can start.

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... BUT STUMBLES IN IMPLEMENTATION
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6. (SBU) Despite these notable early achievements in establishing
the legal and operational framework for forestry, the FDA has
stumbled in implementation of several critical steps necessary for
the resumption of commercial logging. First, the FDA Board must
sign off on the ten core regulations, which it has failed to do
since June despite FDA management approval. Secondly, the FDA must
complete vetting and approval of the National Forest Management
Strategy, field evaluation of the likely impact on forest resources
and affected communities, and the pre-qualification of commercial
logging companies. Only then can the FDA establish the prospectus
describing commercial logging areas that will be up for bidding,
advertise for tender, and award the first commercial contracts
through a competitive bidding process. The FDA suggested earlier
this year that these steps would be complete by the end of the rainy
season in October 2007, but as of September, they are still stuck on
step one, and time-consuming field evaluation didn't begin until
July.


7. (SBU) Besides slippage in the timeline for the resumption of
commercial logging, the FDA has failed to address a handful of
critical issues that have the potential to undermine the sector.
Illegal chain saw processing ("pit-sawing") continues unabated and
the FDA has not yet agreed on an appropriate policy to ban or
regulate the practice. The Liberian Environmental Protection Agency
(EPA) laws require all companies engaged in extractive industries,
including logging companies, to carry out rigorous Environment
Impact Analyses (EIA) and forest management planning, but a lack of
appropriate capacity within companies and the EPA will slow the
resumption of logging. The FDA has not responded to civil society
concerns that commercial logging should not resume until land tenure
issues are resolved - a process that is likely to take several years
- and that the FDA is providing inadequate focus on value-added
industries. Because of the FDA's prior track record, civil society
organizations are understandably uneasy over a return to business as
usual if contracts are tendered too quickly, without a vetted Forest
Management Strategy, or with inadequate attention to community
forestry issues (see paragraphs 9-10).


8. (SBU) All of these issues reinforce the importance of having a
solid chain of custody mechanism in place, and the most alarming
obstacle facing the FDA at present is the danger that contract
negotiations with Socit Gnrale de Surveillance (SGS),a Swiss
export-import monitoring firm, might soon collapse. The chain of
custody is the foundation for monitoring the legality and fee
payments of all logs from future commercial contracts. The USG is
providing US$1.64 million start-up support to make sure that the
chain of custody system will ensure traceability of log movement,
guarantee that illegal logs do not enter the system and make certain
that the GOL collects appropriate fees for logs cut and exported.
SGS won the provisional bid award in June 2007 to manage the chain
of custody system. The Inter-Ministerial Concession Committee
established the negotiation team comprising the FDA, United States
Government, Ministry of Finance (MOF),Ministry of Justice, Ministry
of Planning and Economic Affairs and the Ministry of State. A
negotiated position has been established for technical
implementation but the FDA and the MOF are at odds over the cost of
the contract. The FDA has put a premium on the integrity and
comprehensiveness of the technical aspects leading to an estimated
cost by SGS of approximately 12% of total sector revenue. But the
MOF is unwilling to pay more than 4% of sector revenue, without
providing any technical or financial foundation for the figure. If
SGS abandons the negotiations, the delays could cripple plans to
commence timber exports in the coming dry season. [Note: Forests are
inaccessible for commercial logging in the May-October rainy season.
End note.]

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COMMUNITY FORESTRY
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9. (U) The Working Group on Community Forestry, with representatives
from the FDA, civil society organizations, international
environmental NGOs and donor institutions, is coordinating efforts
to draft a comprehensive Community Forestry Law (CFL). This law
will define how communities can participate in sustainable forest
management in order to obtain economic benefits from forestry.
Donor support from the World Bank and the United States will ensure
funding to analyze existing laws and best practices in community
forestry both in Liberia and in other countries as well as holding
consultations with forest dependent communities to better inform the
development of the law. The USDA Forest Service will provide
assistance in a technical review of the draft law. Chapter 10 of
the 2006 Forestry Reform Law called for a community forestry law to
be completed by October 23, 2007, but a final draft is unlikely
before 2008.


10. (U) USAID is presently soliciting proposals for a land rights
and community forestry program in Liberia. This program will target
Nimba and Sinoe Counties, where other USAID programs are supporting
improved natural resource management and development activities. In
addition to developing pilot community forestry activities to test
best-practices in the Liberian context, this program also will
support efforts to better clarify land and property rights for
community ownership and control of land and natural resources.

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CONSERVATION
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11. (U) Efforts continue to create new parks within the country's
protected area network. A protected area workshop was held in Ganta
(Nimba County) during the first week of August 2007 with
representatives from the Liberian government, international
conservation organizations, the private sector and donor
institutions. The objective was to help the FDA establish its
methodology for the selection of new protected areas in Liberia.
The workshop also nominated three new protected park areas: Lake
Piso, Gola Forest and Wonegizi Forest. The FDA hosted another
meeting in Ganta in August to discuss the establishment of
trans-boundary parks between Liberia and Guinea, Sierra Leone and
Cote d'Ivoire.

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CARBON MARKETS - TARGET OF OPPORTUNITY?
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12. (U) Given the large percentage of forested area in Liberia, many
international conservation organizations have proposed carbon
sequestration programs as potential revenue sources for Liberia.
These emerging schemes could provide financial returns for
incremental reductions in deforestation levels as well as
reforestation activities. However, given that carbon markets are
relatively new and somewhat volatile, efforts to promote them in
Liberia require extensive pre-feasibility studies and testing on a
limited basis before any recommendations for widespread
implementation.

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LAND TENURE AND PROPERTY RIGHTS REFORM REMAIN ELUSIVE
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13. (U) Like many countries in Africa, Liberia has both statutory
and customary land tenure regimes. The statutory system was
fundamental to the development of rubber, timber and mineral
concessions, while customary institutions and usufruct rights
provided smallholders with access and security to land. However,
unchecked land appropriation and land speculation have led to
uncertainty and conflict. Many communities lost large areas of
customary lands, and land tenure issues are affecting the
development of forestry, mining and agricultural sectors.


14. (U) Forest resources in Liberia currently are held in trust by
the Republic for the benefit of the people according to the Forestry
Reform Law of 2006, which gives the government rights to determine
best management practices over forest resources, even where the land
is held by communities or private landholders. [Note: Plantation
trees planted on private lands are not within the jurisdiction of
the law. End note]. Many government records concerning land title
were destroyed during the civil war, and in other cases, land titles
were obtained without proper background investigation and correct
geo-referencing. In January 2007, the FDA requested that all forest
land deed holders submit their deeds to the FDA for review and
validation. To date, deeds for over 8 million acres of forest deeds
have been submitted ranging from several hundred acres to nearly
800,000 acres. Several of the largest deeds are subject to claims
by several groups within one tribe, overlap with other deeds and
when mapped can not be plotted as closed polygoQ.


15. (U) The members of the Forestry Reform Monitoring Committee
(FRMC) were aware of land and property rights issues as the Forestry
Reform Law of 2006 was being developed and recommended the creation
of a land commission. Civil society organizations maintain that the
1959 Hinterland Law recognizes customary rights (rather than central
government control) over forest resources adjacent to communities.
The Governance Reform Commission (GRC) held meetings with
stakeholder groups on land reform and established working groups
under a Land Steering Committee in early 2007, but these efforts
derailed when the legal status of the GRC expired in June. The GOL
plans to introduce a bill to create a dedicated Land Reform
Commission to the legislature in September 2007. Efforts to
conclude a Community Forestry Law and to resume tenders for
commercial logging sites in a manner acceptable to civil society are
highly dependent on a swift resolution to land tenure issues, but
progress has been slow.

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COMMENT
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16. (SBU) The resumption of commercial forestry is a top priority
for the GOL, as the sector should generate significant employment
opportunities and government revenues. Unfortunately,
implementation is slower than expected because the FDA is behind
schedule and the FDA has proven to be poor at communicating with
civil society and other stakeholders. At this point, the best the
FDA can hope for is advertisement of a few initial tracts in
November with a possible award the first quarter of 2008. A
breakdown in the contract negotiation with SGS would likely cause a
major delay, potentially erasing any logging gains during the dry
season. Even in the best of circumstances, commercial timber is
unlikely to have a significant economic impact this Liberian fiscal
year and the GOL is likely to fall short of its original timber
revenue forecasts. Land disputes are overwhelming an already weak
judicial branch, with cases usually being brought to court as
criminal cases, such as criminal mischief and trespass, although the
real issue is that of property ownership. Conflicts over land
ownership have already emerged in Nimba County, and continue to
exacerbate ethnic tensions between the Gio and Mano tribes on the
one side and the Mandingo on the other. The GOL's continued delays
in establishing a body to focus on land issues is a serious
hindrance to effective stabilization and reconstruction efforts in
the country. END COMMENT.

BOOTH