Southeast Asia marks progress in combating illegal timber trade

by Pei Ling Gan, 04 January 2017 © FLEGT.org

Representatives from eight member states of the Association of South East Asian Nations (ASEAN) shared their achievements in developing reliable timber legality assurance systems at a workshop in Jakarta, Indonesia from 6-8 December 2016.

Participants share their achievements in developing reliable timber legality assurance systems by EU FLEGT Facility

Indonesia shared its success in becoming, in November, the world’s first country to issue FLEGT licences through a Voluntary Partnership Agreement (VPA) with the EU.

An open, transparent process and trust-building through dialogue were both crucial to the VPA’s multi-stakeholder approach, said Mardi Minangsari, of Indonesia’s Independent Forestry Monitoring Network, who has tracked the process as a civil society representative for 15 years.

Vietnam, meanwhile, is expected to sign its VPA with the EU in March 2017, having begun negotiations in 2010. The country is a major hub for the global timber trade, importing wood from more than 80 other countries for processing and re-export.

How to incorporate the legality of imported wood was “one of the most important topics that took up a lot of negotiation time,” said Huynh Van Hanh, standing vice-chair of the Handicraft and Wood Industry Association in Vietnam who gave a presentation on behalf of the Vietnamese delegation.

Thailand, another major timber importer and processor in the region, reported that it would begin field tests of its timber legality definition in 2017.

Banjong Wongsrisoontorn, Director of the Forest Certification Office in Thailand’s Royal Forest Department informed the workshop that Thailand had submitted its draft VPA annexes on legality definition, product scope and supply chain control to the EU in 2016.

Laos is also finalising its legality definition and is hoping to conclude VPA negotiations with the EU in 2018.

“The VPA process is complex,” said Dr Khamfeua Sirivongs, Head of the FLEGT Standing Office and Deputy Director of Forest Technique Standard Development Division, in the Lao Ministry of Agriculture and Forestry. “One of our main challenges would be to keep stakeholders in the private sector and civil society engaged.”

Malaysia, Myanmar, Cambodia and the Philippines are also taking steps to strengthen their national timber legality assurance systems.

Such a system has been in place in Peninsular Malaysia since 2013. In 2016, the Malaysian government introduced a legality requirement for timber products imported into Peninsular Malaysia from 3 January 2017.

While VPA negotiation has stalled in Malaysia since 2014, the Malaysian government recognised that “legality verification is necessary to meet current market demand, not just in the EU,” said Eleine Juliana Malek, Principal Assistant Secretary of the Timber, Tobacco and Kenaf Industries Development Division, at Malaysia’s Ministry of Plantation Industries and Commodities.

Myanmar, which is preparing for a VPA, is carrying out a gap analysis of its timber legality assurance system, which it developed in 2013.

“The analysis is being done to strengthen the Myanmar timber legality assurance system to meet international [legality] requirements,” said Phyo Zin Mon Naing, Assistant Director of Forest Department, at Myanmar’s Ministry of Natural Resources and Environmental Conservation.

Cambodia is implementing recommendations from an independent timber trade flow study conducted in 2014, and is building its capacity to engage in a VPA process, said So Lorn, Deputy Director of the Department of Forest Industry and International Cooperation in Cambodia’s Forestry Administration.

tlas-workshop-flegt2Although the Philippines is not currently engaged in a VPA process, it is upgrading its timber legality assurance system to comply with the ASEAN Criteria and Indicators for Sustainable Forest Management.

“What we have in the Philippines now is a ‘one-way traffic’: once the logs are processed into lumber we cannot trace it back to the forest of origin,” said Raul M Briz, chief of the Forest Protection Section in the Forest Management Bureau of the Department of Environment and Natural Resources. “We hope to achieve 100% ‘back to stump’ traceability for our wood production.”

He added that the new timber legality assurance system would be subjected to a nationwide multi-stakeholder consultation before it is implemented.

Fostering ASEAN cooperation

Thang Hooi Chiew, an independent consultant who conducted a study on the feasibility of a regional mechanism for mutual recognition of timber legality, reported that it is highly feasible to develop an ASEAN Timber Legality Verification Scheme.

He said such a scheme could be based on the ASEAN Criteria and Indicators for Legality of Timber, which would need to be reviewed and revised against global standards.

However, he said “it is best that a phased approach be adopted,” as ASEAN member states are at varying stages of developing timber legality systems and certification schemes.

Thang also recommended assessing the capacity of existing and potential certification bodies to carry out training on forest management and chain-of-custody certification, and strengthening regional customs cooperation to facilitate legal timber trade in the region.

Representatives from the ASEAN secretariat and EU FAO FLEGT programme also shared potential collaboration opportunities at the regional level.

Earlier in 2016, the ASEAN Ministerial Meeting on Agriculture and Forestry officially adopted the Work Plan for Forest Governance in ASEAN (2016-2025).

Dian Sukmajaya, a senior officer from the ASEAN secretariat, said plans are now being made to develop a regional framework for mutual recognition of timber legality, and help small and medium forest enterprises to meet international trade requirements, among others.

“We also hope to encourage private sector to market forest products from legal sources,” Sukmajaya added, noting that more must be done to raise consumer awareness in the region.

tlas-workshop-flegt3

Meanwhile, the EU FAO FLEGT Programme is exploring potential synergies between timber legality assurance systems and forest certification schemes.

The programme’s regional coordinator Bruno Cammaert suggested that recognition between timber legality assurance systems and certification could reduce the burden on operators and enhance verification, monitoring and complaints mechanisms.

Other topics discussed during the workshop include civil society’s role in developing timber legality assurance systems, the empowerment of small and medium forest enterprises, and control of imports into ASEAN countries.

About 80 participants from governments, private sector, civil society and observers from the EU delegations in the region attended this fifth sub-regional training workshop on timber legality assurance systems.

It was co-organised by the ASEAN Secretariat, the EU FLEGT Facility hosted by the European Forest Institute, and Indonesia’s Ministry of Environment and Forestry, with support from GIZ.

Gift or bribe? Drawing a clear line on corruption

by Gan Pei Ling / 27 Dec 2014 © Focus Malaysia

Can my company still send hampers to customers during festive seasons? What about treating a potential client to a free dinner or spa to secure a business deal? What sort of gifts could be consid­ered a bribe to solicit or retain business?

These are just some of the questions an upcoming amendment to the Malay­sian Anti-Corruption Commission (MACC) Act 2009 will soon throw up, especially for companies without an explicit anti-corruption policy.

On Dec 9, Minister in the Prime Minister’s Department Datuk Paul Low had announced that the Corporate Lia­bility Provision is expected to be tabled in Parliament in March. The provision allows the MACC and Attorney-General’s Chambers to investigate and prosecute not just staff accused of giving or accept­ing a bribe but also the company’s top executives for their failure to implement measures to prevent bribery.

The Performance and Management and Delivery Unit (Pemandu) says the draft amendment is not publicly available yet as the government is still finalising it.

However, Pemandu senior manager Lokman Affandy Yahya tells FocusM the Corporate Liability Provision is modelled after the UK’s Bribery Act. As such, companies’ management can safeguard themselves against legal liability as long as they have put in place adequate anti-corruption measures.

In other words, Malaysian companies would have to put in place corporate integrity system, which would include a clear gift policy, whistleblowing pro­cedure and staff training, among others.

The Selangor State Development Cor­poration (PKNS) is one of the companies that began implementing a corporate integrity system in 2012.

The Selangor investment arm esti­mates it has saved more than RM400 mil over four years since it began practising an open tender system and prohibits direct negotiation.

PKNS integrity manager S Normalis Abdul Samad says the savings were calculated based on the Public Works Department estimation of project cost minus the price quotations of contractors that won the tenders.

“We need to get the best prices, the best value for money without compro­mising on quality. We’re very stringent now,” Normalis tells FocusM in a phone interview.

She adds that the state-owned com­pany practises a no-gift policy.

“If a contractor sends a hamper to us, we will write a thank you letter but politely ask it to not do so anymore in future. We want to send out a clear signal that if you want to do business with PKNS, there is no need to give tips or hampers,” Normalis explains.

Transparency International Malay­sia’s (TIM) consultancy TI BIP Malaysia Sdn Bhd director Mark Lovatt, who worked with PKNS to set up a corporate integrity system, says other govern­ment-linked companies such as Telekom Malaysia and Tenaga Nasional Bhd have also begun implementing such a system on their own.

“Telekom Malaysia, for example, no longer allows its staff to accept ham­pers. The first year it did not decline but directed the hampers to be collected on a stage at its lobby and sent to charity homes,” he says.

The next year, few contractors sent hampers to Telekom’s headquarters as they found out that the hampers would not reach their intended recipients.

Apart from state-linked companies, some private businesses have also started implementing clear integrity policies and procedures to deter corruption.

Home-grown printer Thumbprints United Sdn Bhd chairperson Tam Wah Fiong tells FocusM that 16 years ago, his company spent over RM100,000 in entertainment cost annually to secure business deals.

Now Tam, an executive committee member of TIM, strictly prohibits his staff from bribing authorities. In addition, his company spends only about RM5,000 in entertainment cost per year, yet his business has grown four-fold since then, recording a revenue of RM36 mil last year.

When asked if he lost businesses when his company cut down its enter­tainment cost, Tam admits he did lose some clients but gained new ones.

“We gained access to the export market, the US and Europe. Reducing entertainment cost means our company competes strictly on price and the quality of our product and service. It forces us to be more competitive internationally,” says Tam.

He adds that bribery among busi­nesses creates an unhealthy culture where companies splurge on lavish dinners, karaoke sessions or spas to “entertain” potential clients to secure business deals.

“[Bribery] inflates the cost of doing business, and allows uncompetitive businesses to get away with providing sub-quality services or products,” Tam notes.

Tam adds that employers need to consider the implications of condoning bribery on their businesses: “If I can bribe my customers, won’t my vendors and suppliers try to do the same with my staff too?”

KPMG Malaysia Fraud, Bribery and Corruption Survey 2013 reported that 71% of respondents believed bribery and corruption was an inevitable cost of doing business.

However, if Malaysia wants to become a technologically-advanced and global­ly-competitive economy like Germany and the US, Tam believes local compa­nies need to think long term and focus on improving their product or service quality, rather than relying on bribes to stay in business.

While enacting the Corporate Liability Provision is unlikely to completely wipe out corruption, it would perhaps send out the right signal that Malaysian top executives are increasingly intolerant of bribery and anti-competitive behaviour in business.

Green drive fizzles out for some developers

by Gan Pei Ling / 12 December 2014 © Focus Malaysia

It’s increasingly common for developers to market their commercial or residential properties as “green” by stating their green building certification rating on advertisements.

But what do these ratings mean to potential buyers? And what happens when developers fail to deliver on property with “green” elements as advertised?

A check by FocusM with Green Building Index (GBI) Sdn Bhd reveals developers are free to advertise their GBI rating as soon as their projects have secured provisional certification.

However, the catch is there is no guarantee a property will be able to maintain its provisional rating after having gone through a completion and verification assessment (CVA) to receive the full award valid for three years.

Indeed, GBI general manager Herman Teo confirms there are cases in which “developers have dropped the rating [after the] CVA” though he declined to specify the number of such incidences.

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