The Case of the Georgian Forest Reform: Transition from Centrally Planned to Market Oriented Forest Management GLOBAL POLICY BRIEFING | GLOBAL ENVIRONMENT The Case of the Georgian Forest Reform Transition from Centrally Planned to Market Oriented Forest Management Ann Inasaridze, June 2013 KEY POINTS • The administrative and economic system that existed in the former Soviet Union was not able to detect consumer preferences and surpluses, eventually leading to unsustainable resource allocation and ineffective natural resources management. • The Georgian government supported the idea to transfer the forest use rights to private stakeholders for better forest management and utilisation. • Using the Georgian government reform example in the forest sector as a case study, this policy briefing tries to critically assess the implementation process of this new forest policy and its impacts on Sustainable Forest Management (SFM). • The new policy refers to the tenure reform in Georgia, which implies transfer of Forest Use Rights to the private sector, while land remains under the state’s ownership. The government cedes responsibility for forest management and retains only forest licensing and control functions. • In particular, this policy briefing critically evaluates the new policy instrument that was used in Georgia, in order to identify the aspects that hindered SFM. • The outdated National Forest Inventory (NFI), the improperly designed auctions that hindered competition, the poor enforcement capacity of the government and the lack of public participation were among the causes, which were responsible for the failure of the reform. • The experience in Georgia has shown that the governmental officials preparing the new forest policy, have overlooked several aspects at the initial stage of the reform, which resulted in improper forest resource utilisation. • This policy briefing recommends that the role of the government through a properly designed policy mechanism, is significant in order to ensure the effective implementation of the main principles of sustainable forest governance, such as transparency, accountability, equity, competition and innovation. • This policy briefing concludes that a country should first build its policy implementation capacity before relying on market forces for natural resources management. KEYWORDS Illegal logging, corruption, Sustainable Forest Management, Georgia, centrally planned economy, market oriented economy, tenure, forestry reform, sustainability, natural resources management, forest governance, forest privatisation, rights of investors, threat to biodiversity, transparency and accountability, competitiveness and efficiency, international practices, forest utilisation plans. Racha Region, Georgia goldmercury.org
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The Case of the Georgian Forest Reform: Transition from Centrally Planned to Market Oriented
Forest Management
GLOBAL POLICY BRIEFING | GLOBAL ENVIRONMENT
The Case of the Georgian Forest Reform Transition from Centrally Planned to Market Oriented Forest Management Ann Inasaridze, June 2013
KEY POINTS
• The administrative and economic system that existed in the former Soviet Union was not able to detect consumer preferences and
surpluses, eventually leading to unsustainable resource allocation and ineffective natural resources management.
• The Georgian government supported the idea to transfer the forest use rights to private stakeholders for better forest management
and utilisation.
• Using the Georgian government reform example in the forest sector as a case study, this policy briefing tries to critically assess the
implementation process of this new forest policy and its impacts on Sustainable Forest Management (SFM).
• The new policy refers to the tenure reform in Georgia, which implies transfer of Forest Use Rights to the private sector, while land
remains under the state’s ownership. The government cedes responsibility for forest management and retains only forest licensing
and control functions.
• In particular, this policy briefing critically evaluates the new policy instrument that was used in Georgia, in order to identify the
aspects that hindered SFM.
• The outdated National Forest Inventory (NFI), the improperly designed auctions that hindered competition, the poor enforcement
capacity of the government and the lack of public participation were among the causes, which were responsible for the failure of the
reform.
• The experience in Georgia has shown that the governmental officials preparing the new forest policy, have overlooked several
aspects at the initial stage of the reform, which resulted in improper forest resource utilisation.
• This policy briefing recommends that the role of the government through a properly designed policy mechanism, is significant in
order to ensure the effective implementation of the main principles of sustainable forest governance, such as transparency,
accountability, equity, competition and innovation.
• This policy briefing concludes that a country should first build its policy implementation capacity before relying on market forces for
The Case of the Georgian Forest Reform: Transition from Centrally Planned to Market Oriented
Forest Management
In that particular case, the licence for timber extraction
was allocated close to the village, where people use
forested areas for several social purposes. One rural
inhabitant claimed, that granting forest use rights to one
person will deteriorate their livelihoods, as they will be
deprived of the right to enter the forest (Human Rights,
2008). Regarding this concern in the UK context, the UK
government in 1989, before the announcement of its
plan to sell 100,000 hectares of the Forest Commission
estate, declared that “No woodland would be sold that
there were public access rights to unless the same access
can be guaranteed”(Adam Smith Institute, 2002).
2.4. Forest Monitoring Capacity
Successful implementation of forest reform depends on
maintaining an effective mechanism of state control. The
creation of the Inspectorate of Environmental Protection
(IEP) within the newly established Forest Agency can be
seen as positive step in the development of the forest
sector.
Despite the fact that the detection of illegal activities
through this agency is possible, still this mechanism
appeared to be too weak to control the entire territory.
Each forestry worker is held responsible to check
thousands of hectares and at the same time, their
salaries are quite low, which again creates perfect
conditions for corruption. Monitoring is concentrated on
planned inspections of the selected entrepreneurs rather
than on random monitoring of license holders. Without
proactive and systemic monitoring, licence holders
might engage in activities such as excessive or non
registered harvesting and other breaches (e.g. cutting
the most valuable trees, and leaving sick and dried trees
on site). As a result of insufficient inspections, non
compliance with license conditions is a very common
phenomenon in Georgia (Inspectorate of Environmental
Protection Hot-line). In this regard, the certification
system, based on a third party audit as a safeguard
mechanism was initiated to address the deficiencies of a
weak governmental monitoring capacity. Initially, in
2007, the memorandum on cooperation between the
Georgian forestry department and the FCS was signed.
2.5 Introduction of Third Party Certification
The certification system based on market incentives has
gained international attention in forest governance
(Agrawal, 2008). National sovereignty can be seen as a
key barrier for implementing international forest
agreements at the moment. As a result, developing
countries see stringent environmental regulation as a
barrier for their economic development. Developing
countries see forests as a source of income and are
avoiding engagement in SFM that makes forest
utilisation more expensive (Dimitrov, 2005). As a result,
excessive harvesting of timber takes place in developing
countries that offer tangible economic benefits and are
not promoting forest protection and conservation (The
Economist, Dec 5, 2009).
7
The Ministry of Environment
Forest policy, legislation and
administration of forestry activities,
provision of subsidies.
Environment
Inspectorate
Control of movement of
wood along the roads and
control of Forest Use
Licenses holders.
State Forest Fund (2,2m)
Local Forest Fund (540,000 ha., 20%)
Commercial (600,000 ha., 21%)
Forest Agency Since 2010
Preparation of management
plans, monitoring and
controlling. However, forest
planning is still carried out by
the private contractors.
479 Guards/Rangers
One ranger per 5000 ha area of license
holders (Insufficient number of rangers
for their present tasks).
www.goldmercury.org goldmercury.org
The Forest Stewardship Council (FSC) is an international not for-profit, multi-stakeholder organisation established in 1993 to promote responsible management of the world’s forests.
The chart illustrates the structure of the Georgian Forestry Sector until 2010.
The Case of the Georgian Forest Reform: Transition from Centrally Planned to Market Oriented
Forest Management
6. REFERENCES AND SOURCES (Agrawal, Chhattre, and Hardin, 2008) ‘Changing Governance of World’s Forests’, Science 320: 1460-62. (Anderson, 2001) Economic Instruments and Clean Water: Why Institutions and Policy Design Matter/,OECD, Paris. (Caffera, 2011) ‘The Use of Economic Instruments for Pollution Control in Latin America: Lessons for Future Policy Design.’ Environment and Development Economics, 16 (3): 247-273. (Carter, 2007) The Politics of the Environment: Ideas, Activism, Policy. Second ed. Cambridge: Cambridge University Press. chapter 12. (CIPDD, 2009) Caucasus Institute for Peace, Democracy and Development (Unpublished paper) (Dasgupta, 2000) Valuing Biodiversity, University of Cambridge and Beijer International Institute of Ecological Economics, Stockholm. (Dimitrov and Radoslav, 2005) Hostage to Norms: States, Institutions and Global Forest Politics, Global Environmental Politics, Vol. 5, No. 4, Pages 1-24. (FAO, 2002) Forest and Forest Products/ Country Profile Georgia, United Nations, New York and Geneva. http://www.unece.org/fileadmin/DAM/timber/docs/dp/dp-26.pdf (FAO, 2011) Reforming Forest Tenure/Issues, Principles and Process (FAO, 2011) Decentralization and Devolution in Forestry http://www.fao.org/docrep/x3030e/x3030e0a.htm (Forestry Standards and Practices 2010), Tbilisi, Georgia. (Goulder and Parry, 2008) Instrument Choice in Environmental Policy/ RFF Discussion Paper. (Human Rights in Georgia, 2008) One More Georgian Forest Flogged off for Easy Money http://www.humanrights.ge/index.php?a=main&pid=7397&lang=eng (Japaridze, 2010) Review of the Current and Proposal Institutional Changes in Georgia (Final Report) FLEG / World Bank/Tbilisi (Karsenty. 2000) Economic Instruments for Tropical Forests/The Congo Basin case/ Instruments for Sustainable Private Sector Forestry CIFOR, CIRAD, IIED http://pubs.iied.org/pdfs/7557IIED.pdf (Kathuria, 2005) Controlling Water Pollution in Developing and Transition Countries - Lessons from Three Successful Cases. Journal of Environmental Management, 78: 405-426. (Macxharashvili, 2009) CIPDD/Forestry sector in Georgia, Policy Brief (McAllister, 2010) Dimensions of Enforcement Style: Factoring in Regulatory Autonomy and Capacity. Law & Policy, 32 (1): 61-78. (O’Connor, 2004) Applying Economic Instruments in Developing Countries: From Theory to Implementation/ OECD
(Pattanayak, Wunder and Ferraro, 2010). Show Me the Money: Do Payments Supply Environmental Services in
Developing Countries? Review of Environmental Economics and Policy, 4 (2): 254-274.Indonesia/ CSERGE Working
The Case of the Georgian Forest Reform: Transition from Centrally Planned to Market Oriented
Forest Management
(Pearce, and Warford, 1993) World Without End, Economics, Environment, and Sustainable Development, Oxford, Oxford University Press. (Pears and Moran, 1994) The Economic Value of Forest Diversity, Earthscan Publications Limited, London (Pei, 1998) From Reform to Revolution: The Demise of Communism in China and the Soviet Union (Rosander, 2008) Illegal Logging Current Issues and Opportunities for SIDA/SENSA Engagement in Southeast Asia/Copyright-RECOFTC&SIDA Bangkok, Thailand http://www.recoftc.org/site/uploads/content/pdf/Illegal_Logging_03_-_web-no-bleed_52.pdf (Recommendations of The Forest Stewardship Council, 2007) Cited in (Skodvin, T., Gullberg, A. T. and S. Aakre, 2010) ‘Target-group influence and political feasibility: The case of climate policy design in Europe’, Journal of European Public Policy, 17 (6): 854-873. (The World Bank, 2009) Forest Development Project/Report/Georgia http://web.worldbank.org/external/projects/main?pagePK=104231&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P044800
Internet Sources Adam Smith Institute, 75: Out of the Woods (2002) Sale and leasing of state forests http://www.adamsmith.org/80ideas/idea/75.htm Association Green Alternatives, Environmental Reports 2005-2012 http://www.greenalt.org/?lng=en_ -Does the Georgian Legislation Provide the Protection and Sustainable Use of Biodiversity? /Green Alternative /Policy Brief/ Tbilisi/ July2010 http://www.greenalt.org/webmill/data/file/publications/policy%20brief_biodiversity%20and%20EIA_ENG.pdf -Environment and Development in Georgia, Policy/Legal and Institutional Challenges in Selected Areas/ Tbilisi, 2007 http://www.greenalt.org/webmill/data/file/publications/Environment.pdf -Problems of Forestry Sector of Georgia: Illegal Activities and Legislative Collisions/Green Alternatives/ Tbilisi, 2006 http://www.greenalt.org/webmill/data/file/publications/problem_of_forestry_sector.pdf Biodiversity Hotspots/Conservation International http://www.conservation.org/where/priority_areas/hotspots/Pages/hotspots_main.aspx ENPI FLEG/Improving Forest Law Enforcement and Governance in the European Neighbourhood Policy East Countries and Russia /Regional Bulletin /June 2011 http://www.fleg.org.ua/fileadmin/user_upload/ufs/04.%20Program%20Information/4.02%20Program%20Components/4.02.05%20Public%20Awareness/FLEG_newsletter_4_ENG_.pdf Forests and the Biodiversity Convention Independent Monitoring of the Implementation of the Expanded Program of Work in Georgia/Global Forest Coalition, May 2008 http://globalforestcoalition.org/wp-content/uploads/2010/11/IM-Report-Georgia1.pdf Georgia: New Phase of Forest Reform http://www.illegal-logging.info/item_single.php?it_id=3164&it=news The World Group, 2006 Environment Matters/Combating Illegal Logging and Corruption in the Forestry Sector http://siteresources.worldbank.org/INTENVMAT/64199955-1162240805462/21127309/6Combating.pdf
The Case of the Georgian Forest Reform: Transition from Centrally Planned to Market Oriented
Forest Management
ABOUT THE AUTHOR
Ann Inasaridge is a Research Fellow at Gold
Mercury International. In the past, Ann has worked
at the Ministry of Environmental Protection and
Natural Resources of Georgia as a Strategy
Planning Specialist, responsible for developing,
coordinating and managing the Ministry’s strategy
for sustainable development. She has also
participated in drafting and developing the
Environmental and Resource Management Policy
of Georgia. Ann holds an MSc degree from the
London School of Economics and Political Science
("LSE").
List of Interviewees
(Jordania , 2013), Former consultant at the Legal Office of the Forest Department, Ministry of Environment, Georgia. (Kvernadze, 2013), Head of the Department of Sustainable Development , Ministry of Economic and Sustainable Development of Georgia. (Macharashvili, 2013), Biodiversity Programme Coordinator , NGO- Green Alternative, Georgia. (Namgaladze,2013), Forest Expert, Former Head of the Forest Office in Ambrolauri Region of Georgia (Osepashvili, 2013), Forest Officer, WWF Caucasus Program
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