18 January 2013

Liberia: PUP- Triggered Venoms: The Silent and Debilitating Mishaps

Photo: Greenpeace International
Logging destruction.


While there may be cheers and sense of approbation greeting Government's tough stance against logging, there are also little known but crippling repercussions that too many people have come to brush aside. And except some sense prevails to able some people and institutions to decipher the intrigues of the game being played in some quarters, the backlash is sure to reverse the socioeconomic gains of the last seven to nine years.

Liberia economic recovery could go in hibernation by the time a moratorium imposed by Executive Order 44 takes time to bite in coming months. The Order essentially puts a halt to forest harvesting in the busiest but somewhat exploited and poorly regulated concession system, Private User Permits (PUPs). But the moratorium does not come without cost. Government estimates to lose over 10-15 million United States Dollars in revenue and several hundred jobs. The problem could even bite harder at the community level, where local businesses would be hard hit.

Liberia being one of the world's poorest countries, the revenue expected from fees and taxes around timber harvesting from PUPs would hurt key investment projects the Liberian government has designed as part of the current budget cycle and by extension part of the President's Five Year development agenda and the long term development roadmap, Vision 2030.

The hardship would further compound an already soaring unemployment situation. With intermittent upheaval along Liberia's border with Ivory Coast, the full extent of the impact of this moratorium on PUPs and unemployment would take a while to be fully contextualized.

For starters there are basically four concession systems governing the forest sector - the Forest Management Contracts (FMCs), Timber Sales Contract, Forest Use Permits and Private Use Permits. As seen from the report of President Sirleaf's Special Independent Investigation Committee, "the forestry concession system has been heavily criticized as based on misleading data and for an unworkable fiscal regime."

The key point of emphasis and hence the basis for the explosive rise in the issuance of PUPs has been the structure of royalty, fees, land rental and bid price and how these affected investors' capacity to engage with the sector.

The report summarizes this problem succinctly: "FDA, forestry experts, operators, and SGS have all stated there are two main issues with the FMC system; (1) the mapping of forest cover was technically incorrect, misleading investors and resulting in a situation of high capital investment with minimal economic returns, and (2) the bid premium is prohibitive in that operators are expected to pay a high bid premium each year when in fact the harvestable area covering the FMC is significantly smaller. These two issues, it is argued is at the core of why operators sought the opportunity to conduct logging operations in areas that contained high valued timber and under conditions that were not financially burdensome."

But questions remain unanswered. Who structured the concession system this way and why was it so deliberately structured to be investment unfriendly? Did the Liberia government fully understand the economic implication of these structures, and were external actors involved?

It seems greater attention was not placed on the subject in the President's Committee report although the issue was flagged as the underlying cause of the problem with abuse in the PUP system. Advocacy groups like Citizens United to Promote Peace and Democracy in Liberia (CUPPADL) might appear bogus or lacking fuller understanding of these issues in their latest reaction of the SIIB report but the linkage being drawn to carbon trading and green house emission is worth further researching.

It is true that there has been global effort to reduce CO2 emission through forest based conversation mechanisms. Some proponents of the theory believe thick rain forests host vast carbon resources that could potentially offset the emission of the world's largest polluters. The problem has been the lack of a proper mechanism through which countries that save their forest spaces from income generating activities like logging and timber can be justly compensated by those emitting the world's deadliest pollutants.

Since 1992 when the United Nations Framework Convention on Climate Change was introduced, global efforts to reduce greenhouse gas emission have accelerated with the inception of the 1999 Tokyo Treaty.

But much has not been achieved as far as the UNFCCC mandate is concerned. Though Tokyo set three mechanisms to reduce emission," the Clean Development Mechanism (CDM), Joint Implementation (JI), and emission trading (known as the carbon market)", developed countries have been criticized for not fully supporting these initiatives but instead are heaping pressure on developing countries to conserve their forest spaces.

Another critical issue is the fact that although the developed world has accepted the blame for CO2 emissions, and is required by this protocol to provide the aid for global projects aimed at reducing these emissions, the treaty does not require these countries to reduce domestic emissions, but rather to take responsibility for such emissions on a global scale. Some developing countries have expressed concern that developed countries would use this loophole to ignore responsibility to reduce their own emissions.

At a subsequent conference in Bali, Indonesia, some developing nations called for "binding commitments of financial support on behalf of developed countries, to finance projects that would be geared towards mitigating and adapting degrading livelihood activities in forests". Additionally, developing countries demanded technology transfers from the developed nation on favorable terms.

None of these commitments have been met and carbon offsetting as an option has itself been so complicated and volatile that a system to fully regulate the practice and ensure communities are duly compensated is still very far from being operationalized.

Therefore, care has to be taken in addressing the PUP issue, especially in light of the global political imbalance relating to greenhouse gas emission and the campaign for conservation. The flaws and abuse do certainly exist, but the Global Witness call and the SIIB recommendations seem overstretching the issue and raising alarm bells without providing clear empirical and market data that point to genuine threats.

These alarm help conservationist arguments but provide little reprieve to a country in dire need of investment funds and communities desperate to make ends meets. So CUPPADL claims that the US Forest Service, the European Forest Service, Global Witness and their Liberian affiliates were all involved in the structuring of the FMCs and that there was a deliberate desire to see these structure fail, must be reviewed on its merits. It alleges also that logging activities did not resume several months previously scheduled due to external maneuvering.

If these assertions are true, then there is a genuine cause for concern. The author does not see any basis to fault Global Witness and its Liberian counterparts, but is deeply concerned about Western-backed interests in saving Liberian rainforest, when key greenhouse emission targets as enshrined in the Tokyo Treaty are abandoned by the United States and other key pollutants.

If the FMC system was designed to fail and the PUPs provided a loophole for companies to do business and provide the country with needed revenue and job opportunities, then we must find a balance. Again, we detest the manner and form of the PUP abuse but internal government weaknesses cannot be borne by a private landowner or an investor. Of interest also is the deliberate absence of any provision in either the SIIB report or the Global Witness report on what happens to these forest dependent communities and/or how alternative livelihood sources can be explored.

Even more alarming is a recent report in the" News Newspaper" that claimed the government could potentially lose a whopping 119 Million dollars as a result of the moratorium on PUPs. The paper in one of its recent publications, quoting data in its possession provided breakdown of annual contribution by logging industry. The report said Government revenue would accrue US$40 million from stumpage/export fees, while US$10 million would be realized directly from port related charges. Salaries and wages paid to Liberians and resident workers will amount to $25 million, while fuel and related expense would cost US$40 million. Furthermore, government would raise US$4 million from income tax. All of these economic contributions are exclusive of other indirect effect, the paper disclosed.

"According to the highly sourced data, the total Liberian forest is about 2.4 million hectares excluding Protected, Reserved and National Park Forests. The data further argued even if the logging industry harvests half of the total forest hectares a year, while replanting 2 million hectares annually in line with International Tropical Timber Organization (ITTO) regulations, forest revenues would yield US$285 million per year," said the News Newspaper.

The revenue calculated in the paper's report is largely based on the overall timber trade but the non-viability of the FMCs and the TSCs strengthened the paper's economic calculus.

We understand that the Liberian President has been under increasing pressure from the international community to institute the moratorium, although a court case is pending on a previous moratorium. On the other hand, the President is being criticized for flouting the law by instituting Executive Order 44 when the case was still pending in the Supreme Court. The lower court recently ruled that it cannot assume jurisdiction of the same case brought on by government as the matter was pending before the Supreme Court.

With non-performing FMCs and companies still lagging behind in back taxes, a moratorium on PUPs, coupled with low revenue returns and an anticipated budget deficit, the government is bracing for what economic analysts fear would be a failed budget cycle and tough economic downturn.

The international community must provide some answers, especially as pressure mounts over livelihood challenges and the abrupt disruption of economic activities across parts of the leeward counties. But with a country once termed as a pariah, a smuggling ground for conflict diamonds and harvesting platform for conflict timbers, Liberia's back is at the wall and its internationally revered President is powerless to fight back.

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