Why don’t we make the loggers pay? · 2015-07-24 · WHY DON’T WE MAKE THE LOGGERS PAY? |STUMPAGE VALUE AND POLICY FAILURE IN GHANA'S FOREST SECTOR 6 ADL Air-dried lumber CSO

Country Report February 2015

Forests

Keywords: Forestry, Forest Governance LearningGroup, Natural resource management

Why don’t we makethe loggers pay?Stumpage value and policy failurein Ghana’s forest sectorGene Birikorang

About the authorsGene Birikorang, Hamilton Resource Consultants, Accra, [email protected]

AcknowledgementsThe author would like to thank colleagues in Civic Response inGhana and the International Institute for Environment andDevelopment in the UK for enabling this work, for collaborationthroughout, and for reviewing earlier drafts. This document hasbeen produced with the financial assistance of the EuropeanCommission and UK aid from the UK Government. Its contents arethe sole responsibility of the author and do not necessarily reflectthe views of the European Commission, the UK Government or theinstitutions involved in this initiative.

About Civic Response Civic Response is a leading natural resource and environmentalgovernance policy advocacy organisation working to entrenchresource rights. Founded in 2003 in Accra, Ghana by a group ofactivists with experience in resource rights campaigns both locallyand globally, Civic Response undertakes activities which addressthe policy needs of communities who depend directly on naturalresources, particularly forests. We are actively engaged in the globalclimate change discourse especially as it relates to forests.

Produced by IIED’s Forest GovernanceLearning GroupSince 2003, the Forest Governance Learning Group (FGLG) hasbeen facilitated by the International Institute for Environment andDevelopment (IIED), with teams active in 10 countries in Africa andAsia (Cameroon, Ghana, Uganda, Tanzania, Malawi, Mozambique,South Africa, India, Indonesia, and Vietnam).

Over more than a decade, FGLG has built its capability to influencepolicy and improve decision making about forests – researchingissues with marginalised communities, connecting diverse groupsof opinion formers, and applying practical tools.

First published by International Institute for Environment andDevelopment (UK) in 2015

Copyright © International Institute for Environment andDevelopment

All rights reserved

Birikorang, G. (2014)Why don’t we make the loggers pay?Stumpage value and policy failure in Ghana’s forest sector. CivicResponse, Accra, and International Institute for Environment andDevelopment, London.

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Stumpage fees due from the timber industry are a keycomponent of forest communities’ welfare andcontribute to the cost of forest management andtimber regulation. Yet, as the research presented inthis report shows, the Forest Commission’s failure toreview stumpage in Ghana has led to millions ofdollars of lost revenue from stumpage fees over theperiod 2003-2012. The report outlines theunderlying reasons for this noncompliance, theimplications of non-review for forest resourcesmanagement and makes recommendations toaddress shortcomings and inform future policyactions to protect the interests of the state and forestowners in forest tax imposition.

ContentsSummary/ Preface 4

Definitions 5

Acronyms 6

Background/Abstract 7

1 Introduction 8

1.1 Background1.2 Immediate research objectives1.3 Structure of the report

2 Research approach and findings 10

2.1 Research approach2.2 Methodology

3 Findings 12

3.1 Provisions under LI 1649 and implied FC mandate3.2 FOB value of air-dried lumber (ADL)3.3 Timber harvest volume and structure: impacts onstumpage fee levels3.4 FC stumpage policy management 2003–2012

4 Discussion and way forwards 16

4.1 Policy issues4.2 Potential risks for conflicting revenue andenvironmental objectives4.3 Risk of revenue loss through timber laundering4.4 Timber industry performance and developmentindicators: knowledge gaps

5 Recommendations 20

5.1 Managing a fiscal transition under VPA5.2 Specific recommendations

References 22

Appendices 23

1 Cameroon, Ghana, Malawi, Mozambique, South Africa, Uganda, Tanzania, India, Indonesia and Vietnam. A platform for opinion-formers addressing issues of forestpolicy related to China and India in Africa is also being explored.

2 See: www.iied.org/natural-resources/key-issues/forestry/forest-governance-learning-group

WHY DON’T WE MAKE THE LOGGERS PAY? | STUMPAGE VALUE AND POLICY FAILURE IN GHANA'S FOREST SECTOR

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The Forest Governance Learning Group (FGLG) is aforum of policy discussants operating across sevenAfrican countries and three Asian countries1 coordinatedby the International Institute for Environment andDevelopment (IIED).2 Its focus is social justice in forestry.Its objective is to study and catalyse national and sub-national forest governance reform processes byimproving tactical responses. Participants includeadministrators, analysts and activists interested in theagenda of the forest-marginalised. FGLG activitiesinclude participatory learning and analysis, capacitybuilding, network support, governance tool developmentand where appropriate direct intervention. It alsoengages with international forest policy processes suchas the Voluntary Partnership Agreement (VPA) on forestgovernance and trade between Ghana and the EU, andReduced Emissions From Deforestation And ForestDegradation (REDD). The FGLG is convened by CivicResponse in Ghana. Civic Response is also thesecretariat for Forest Watch Ghana (FWG), a coalition offorest-sector NGOs and individuals.

FWG is interested in forest governance reforms thatadvance the resource rights of marginalised groups andresource communities. FWG has long been acampaigner for reforms in the forest fiscal regime andbenefit-sharing arrangements to give greater value toresource owners and to ensure equity. It has alsocampaigned for a rationalisation of the current economicmodel of forestry which seems unable to promoteresource sustainability or economic development. FWGhas recommended the need for greater transparency bythe Forestry Commission (FC) in the framework of furtherpolicy reforms backed by a strict adherence to forest-sector laws, particularly those that govern the timberindustry. FWG is still interested in strict adherence to thelaw as required by the Forest Law Enforcement,Governance and Trade Voluntary Partnership Agreement(FLEGT-VPA) to ensure greater recovery of revenue fromforest resources which are exploited. Part of theadvocacy plan for 2013 intended to increase thecampaign’s momentum for fair benefit sharing byexamining the revenue loss to the state and to resourceowners due to the non-enforcement of stumpagearrangements.

Preface

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FOB FOB or ‘free on board’ is the contract price for timber or wood product exports, and isrepresented by the value of the product when laden on the shipping vessel or any othercarrier of the consignment.

Inflation indexing This is a macro-economic procedure for adjusting the current value of a commodity orservice by the extent of price increase over a previous period, such as to maintain thepurchasing value of that commodity or service. This ensures that the quantum ofcommodity or service purchased in the current period is the same as that purchased inthe previous period.

Stumpage fees This is the amount of tax imposed on the value of the standing tree.

Stumpage rate This is the indicator of the portion of the value of timber or timber price set aside as aforest tax or stumpage fee. It is assumed to have taken into consideration all costs ofproducing the timber, loading, transport and handling costs, as well as profit of theoperator.

Timber price In the general fiscal context, it is the value of the standing tree; in the context of the LI1649 stumpage formula, it is the gross value of timber at the processing point.

Trigger This is the prior policy action that is expected to be in place by a dateline as a conditionfor release of donor support under multi-donor budget support programmes.

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ADL Air-dried lumber

CSO Civil society organisation

CvR Civic Response

EU European Union

FAO Food and Agriculture Organization of the United Nations

FC Forestry Commission

FGLG Forest Governance Learning Group

FLEGT Forest Law Enforcement, Governance and Trade

FOB Free-on-board

FPIB Forest Products Inspection Bureau

FSD Forest Services Division of the Forestry Commission

FWG Forest Watch Ghana

HRC Hamilton Resources and Consulting

LI Legislative instrument

MLNR Ministry of Lands and Natural Resources

MoFEP Ministry of Finance and Economic Planning

MTEF Medium-term expenditure framework

NREG Natural Resources and Environmental Governance Project

PSCLF Parliamentary Select Committee on Lands and Forestry

REDD Reduced Emissions from Deforestation and Forest Degradation

RMSC Resource Management Support Centre

SRA Social responsibility agreements

TEDB Timber Export Development Board

TIDD Timber Industry Development Division of the Forestry Commission

TIF Timber information form

TUC Timber utilisation contract

VLC Verification of Legal Compliance

VLO Verification of Legal Origin

VPA Voluntary Partnership Agreement

Acronyms

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The Forestry Commission is mandated to chargestumpage fees. According to legislation, stumpage feesrepresent royalties to the landowner and charges for thecost of felled timber which provide a basic return to thelandowner and contribute to the cost of forestmanagement and timber regulation. But between 2003and 2012, forest revenue from this has lostapproximately US$ 16 million in real value –equivalent tofour times the potential contribution of the timber industryto forest communities’ welfare under social responsibilityagreements (SRAs).

This research paper examines the fiscal performance ofthe Forestry Commission in the context of legislativeprovision and other reform criteria for safeguarding thereal value of stumpage fees due from the timber industry.It further examines the undercurrents of FC’smanagement of the forest fiscal system, including thefocus of political decisions in addressing forest fiscalpolicy, sector management of the fiscal regime, and thelimitations of institutional regulations at both key levels ofinstitutional regulation: Resource Management SupportCentre (RMSC) and Timber Industry DevelopmentDivision of the Forestry Commission in Ghana (TIDD).

Key issues are drawn from observations made anddiscussed to inform the way forward. These include thelack of support for a rational forest fiscal policy thataddresses both forest community interests and the needto invest in the Forestry Commission; potential risks forconflicting revenue and environmental objectives; the riskof revenue loss through timber laundering; and thechallenges and implications of an empirical industryknowledge gap confronting TIDD.

Recommendations are made to address theseshortcomings at two broad levels. First, the paperrecognises that many of the issues it addresses borderon the Ghana-EU Voluntary Partnership AgreementProtocols. At the second level, the paper recognises thatthere is a need to address other issues that relate topolicy and governance reforms that are not providedunder legislation and therefore lie outside the VPA. In theshort term, it is envisaged that policymakers will addressthe need to restore real value to stumpage and in themedium to long term manage a fiscal transition to bringon board the long-term development of the VPAimplementation as a neutral (incentive-based) forestfiscal regime.

Keywords: Timber price; stumpage rate; stumpage fees;inflation indexing

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1

Introduction

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1.1 BackgroundForest Watch Ghana (FWG) has observed that theForestry Commission (FC) does not comply withprovisions of the Timber Resources ManagementRegulation LI 1649 which require the Commission toupdate stumpage fees quarterly. According to LI 164921(2), stumpage fees represent royalties to thelandowner and charges for the cost of felled timberwhich provide a basic return to the landowner andcontribute to the cost of forest management and timberregulation (Government of Ghana, 1998). Thus, as aresult of the non-compliance of FC, the interests of thestate and forest owners in forest tax imposition andappropriation have not been protected. According toSchedule 3 of LI 1649, ‘Timber price is 35 per cent ofthe free-on-board (FOB) value of air-dried lumber ofthe species (i.e. estimated roundwood equivalent),based on the previous quarter’s average of suchexports as published from time to time by the ForestProducts Inspection Bureau’ (ibid). The FC has not, byimplication of a mandatory quarterly review, compliedwith regulations since 2004. This implies a loss ofrevenue to the state and resource owners.

1.2 Immediate researchobjectivesCivil society is interested in assessing the impacts ofvalue loss through the non-review of stumpagecompounded by the long-term effects of resourcedepletion and seeks to conduct a two-phase study intothese impacts. The immediate objective of this researchis to assess the extent of real revenue loss to the stateand forest owners and the underlying causes for thefailure of FC to review stumpage fees. The scope ofwork is described in more detail in the specific terms ofreference for the research (Appendix 1).

1.3 Structure of the reportThis report is organised into four sections. Section 2briefly sets out the approach to the research and itsmethodology. Section 3 presents findings of theresearch. Section 4 discusses emerging importantissues from the research’s findings and makes specificrecommendations to address FWG’s concerns asinterpreted from the scope of work included in theterms of reference.

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2

Research approachand methodology

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2.1 Research approachThe research approach involved regarding stumpage feepayment as a fiscal ‘policy’ rather than in the context ofits actual levels or rates of collection. This permitted alogical treatment of issues relating to the currentmandate of FC and the legitimacy of possible futurepolicy actions. From these considerations, it has beenmore convenient to draw conclusions on theirimplications for forest resources management and theVoluntary Partnership Agreement with the EU.

2.2 MethodologyThe following methodologies were used:

• Collecting and analysing annual timber information form(TIF) reports from RMSC Reviewing stumpage feerates for the period 2003–12 with FC

• Determining stumpage rates and fees due fromharvested timber species

• Analysing trends in air-dried lumber (ADL) FOB pricesover the period 2003–12 and the real (hidden) impactof inflation on the purchasing power of stumpage valueas primarily determined by FOB prices over the sameperiod

• Examining and analysing species volume and valuesaccording to their market classifications

• Analysing the implications from research results andrecommendations, and

• Producing a report containing findings of the research,a discussion of important emerging issues andrecommendations on ways forward.

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3

Findings

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3.1 Provisions under LI 1649and implied FC mandateRegulation 22(2) of LI 1649 provides the basis forcalculating the stumpage fee payable in respect of anytimber. Schedule 3 of the Regulations sets out theformula for calculation (see Box 1).

3.2 FOB value of air-driedlumber (ADL)The free-on-board price (FOB) is the most flexiblecomponent of the stumpage formula, because it is basedon publicised export prices of ADL. According toSchedule 3 of LI 1649 (Box 1), the stumpage valuemust, for any specific period, depend on the previousquarterly export prices as advised by TIDD’s exportpermit report. This implies that at least, in considerationof this factor, stumpage fees should be published by FCin every quarter, whether FOB prices change or not; andin order that current stumpage fee levels may bear anunchanged relationship to the Ghanaian Cedi value ofexports – assuming there were no changes in the otherfactors determining their levels (a) percentage of timberprice (35%) and (b) stumpage rate.

3.2.1 Timber priceIn the stumpage formula, the price of timber is related tothe FOB value of ADL. It is not directly referenced fromexternal market prices for timber, which couldtransparently be published as is done with ADL in TIDD’sexport permit reports. While global evidence could lendsupport to a validation of the FOB value as published,‘timber price’ as derived depends more on domesticempirical evidence or some validated research results.Determining timber price was an issue prior to LI 1649coming into force. Under-pricing of timber in the 1990sresulted in over-harvesting as the timber industry did nothave any incentive to improve its efficiency of timberrecovery (Birikorang et al. 2001). Meanwhile, the industryconsidered that the high cost of production did notwarrant an increase in stumpage fees. Thus, anyadjustment in the timber price factor (percentage of FOBvalue of ADL) required, at the time, some level ofconsensus before it could be admitted into legislation.Historically, the Parliamentary Select Committee onLands and Forestry (PSCLF) had insisted on this prior tothe passing of LI 1649. The FC subsequently compliedwith the PSCLF suggestion and reached consensuswith the timber industry to set the percentage of FOBprice at 35 per cent. This set a precedent for thisprocedure which may be applied in the future.

3.2.2 Stumpage rateThe Forestry Commission classifies species according totheir market strength and status of inventory. The rates

vary between 5 and 20 per cent, depending on theclassifications: ‘high’ (20 per cent), ‘moderate’ (10 percent) and ‘low’ (5 per cent) demand. The classification ofspecies is based on FC’s informed decision, whichappears as Schedule 2(1) to LI 1649 (see Appendices 2and 3). Depending on their market status, species couldbe placed under the appropriate point on the graduatedscale. Similar to quarterly reviews of FOB price, but notnecessarily with the same frequency of publication, FCwould be required to publish changes and accordinglyreflect them in the graduated scale, as a matter of policy.

When combined, the timber price of 35 per cent, FOB ofADL and stumpage rate determine the value of rawtimber in a unit of ADL. Decisions on these indicators area matter primarily for policy, and not legislation. Thestumpage rate in the formula is an indicator thatsuggests what proportion of the value of timber aftercost of production, transport and profit remains as theresidual value, which should be the target of taxation. It isstill the responsibility of policy to prevent a depreciationof the value of stumpage.

3.3 Timber harvest volumeand structure: impacts onstumpage fee levels Over the ten-year period studied (2003–2012), bothofficial (legal) timber harvest and stumpage fees revealeddeclining trends (Figure 1). The declining trend wasmore drastic in the stumpage value of harvests than withlegal harvest volumes. This suggests that the averageCedi value of stumpage has been on the decline.Particularly after 2005, increasingly higher proportions of

BOX 1. FORMULA FORCALCULATING STUMPAGEFEESStumpage fee = Tree Volume x Timber Price xStumpage Rate

Where:Tree Volume is computed in cubic metres accordingto the measurements taken of each tree felled)Timber Price is 35% of the free-on-board (FOB)value of air-dried lumber of the species, based onthe previous quarter’s average of such exports aspublished from time to time by the Forest ProductsInspection Bureau.Stumpage rate for each timber species is the per-centage specified in Schedule 3 of these regulations(See Appendices 2 and 3).

Source: LI 1649, Schedule 3 Regulation 22 (2)

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moderate- and low-demand species of the national totalhave been harvested, conforming to expectations fromearlier studies (Birikorang et al. 2007; Mayers et al.2008). This is largely due to the depletion of primaryspecies caused by over-exploitation by industry. Thus,towards the second half of the period a stabilisationtrend in the volume of timber was accompanied by agenerally declining trend in stumpage revenue. In 2012,expected stumpage fees stood at Ghȼ 5.7 million,compared to Ghȼ 8.5 million in 2003 (Figure 1).

3.4 FC stumpage policymanagement 2003–2012In 2003, the FC board approved stumpage fee rates tobe increased progressively throughout the year to avoidany shocks to the industry. As of 1st October 2013, andaccording to FC’s corporate division, the stumpage feelevels represented 75 per cent of the 2003 target. The75 per cent adjustment was also achieved at the end of2003. Thus, from 2004 to 2012, stumpage fees haveremained unchanged (Appendix 2).

A comparison of FC’s applied structure of stumpagerates and the schedule of stumpage rates as providedunder Regulation 22 (1) indicates that there has been nochange in the structured ratings for timber species(Appendix 2). Over the last two decades, the industryhas introduced more than 30 species to the exportmarket. However, at present, there are a number ofspecies that could be counted among the species nowtraded on the export market and, to a lesser extent, thedomestic market that have remained in their old marketclassifications. Thirteen species could potentially beupgraded (Table 1). This deficiency can be linked to thecontrasting trend in timber harvest volumes and theircorresponding values.

TIDD’s periodic market intelligence should have broughta progressive shift of these moving species up throughthe various market categories, as the relative strengths ofmarket demand would have suggested.

The impact of FOB pricing and its adjustment forinflation were also studied during the research period.Theoretically, trends in the Cedi equivalent of FOBprices for ADL analysed indicate, generally, a steady


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0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

STU

MPAGE VALU

E, G

Hȼ

ANNUAL HARVEST

VOLU

ME, M

3

Annualharvest

Annualstumpagevalue

Figure 1. Timber harvest volume and corresponding stumpage value trends, 2003–2012

Table 1. Potential species movements in market categories

Potential species forcategorisation under‘moderate’ demand

DantaChenchenDahoma

(3 species)

Current list

Papao, Awiemfosamina,Aprokuma, Bediwenua/Canarium, Onyina, Akasa,Shedua Ayan/Bonsamdua,Edinam, Guarea, Nyiangon,Kaku, Mansonia, Koto/Kyere,Onyinakoben/ Bombax,Emire, Ofram, Wawa,Rosewood/Kpatro, Avodire

Current list

Essa, Danta, Otie,Potrodom, Denya,Wawabima, Wonton,Chenchen, Dahoma,Others

LOW DEMAND SPECIES MODERATE DEMAND SPECIESPotential species forcategorisation under‘high’ demand

Papao, Awiemfosamina,Bediwenua/CanariumAkasa, Edinam,Nyiangon, Mansonia,Koto/Kyere, Wawa,Avodire

(10 Species)

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increase in value even though sometimes the FOB(Euro) price dropped (Appendix 5). This is the effect ofthe official exchange rate adjustment. Where inflation isnot taken into account over the trend period, stumpagewould lose value. In practice, over the period, none of theadjustments – FOB adjustment by legislation or inflationindexing by governance reforms – took place. In theresearch methodology, the history of assumed FOB-linked values of stumpage have been used as a base andthe corresponding rates of annual inflation used toestimate the real value of stumpage in the particular year(Appendix 5). On the basis of this methodology, twotypes of drivers of stumpage loss and their financialimpacts were estimated. The first driver is the failure byFC to comply with legislation on the use of FOB as areference price. The second is the absence of a sectorpolicy to adopt indexing of FOB-linked stumpage fees toinflation. Over the period, resource owners lost on theaverage about GHȼ 560,000 (US$ 300,000) on thebasis of non-legal compliance (FOB adjustment) andabout GHȼ 2.8 million (US$ 1.5 million) annually – fivetimes the ‘current’ FOB scenario – for not pursuingsimultaneously legal compliance and further governancereforms. The overall impact is an annual averagestumpage loss of about GHȼ 3.4 million or close to US$2 million over the period (Table 2).

Thus, over the period, forest owners have lost theopportunity to collect about GHȼ 30 million (US$ 16million) from the timber industry – or close to four timesits potential industry contribution to social responsibilityagreements (SRAs). This is because the annual potentialloss was allowed to increase progressively over theperiod – resulting in significant losses (Figure 2).

Table 2. Summary of period analysis of stumpage loss (GHȼ thousands)

Nominal stumpage fees 61,044 6,104Stumpage fees (FOB related), current 66,115 6,611Stumpage fees (FOB related), real 2003 pricing 40,651 4,065Loss due to non-application of FOB pricing 5071 507Loss due to unadjusted FOB for inflation 25,464 2,546Total loss 30,535 3,053

PERIOD ANNUAL

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GHANA CEDIS

Figure 2. Real loss in stumpage value

Source: Appendix 6

Source: Appendix 6

-10,000

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

Stumpage fees (FOB valuation)

Real FOB (2003=100)

Unrealized Stumpage

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4

Discussion and ways forward

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4.1 Policy issuesIt is immediately observed from the stumpage lossanalysis that FOB adjustment alone is not enough toprotect the real value of stumpage. Further, it is the leasteffective approach to maintain stumpage value whencompared to inflation indexing.

In attempting to answer why FC has not adjustedstumpage fees for close to a decade, one should look foranswers outside the period of research. In as early as2001, it had been established that the sector sufferedfrom policy failure. Failure to adjust stumpage fees in theperiod 1990–99 produced results similar to thosedescribed here in the subsequent decade. Commitmentsof the FC board in the 2000s did not include adjustingstumpage fees to their real levels. Strong industrysentiments on the board perhaps made it easy toconfuse symptoms with real underlying or root causes.There was the persistent argument that industry was notmaking a profit because of high costs and that it neededhigh volumes of timber to break even. So increasingstumpage fees was out of the question. But in the forestfiscal context that pushed for appropriate timber pricingto create incentives for sustainable forest-use practices,the industry argument rather propagated the ‘problem’and not the ‘solution.’ While a person sick with malarianeeds to take the bitter quinine to be cured, they shouldnot take it after getting better.

Regarding stumpage rates, in general the FC has nottaken advantage of its mandate to promote the industryby using its market intelligence and RMSC’smanagement-of-species inventory data to move speciesup the graduated scale of stumpage rates, inconsultation with the Administrator of Stool Lands, asimplied under LI 1649.

To understand the implications of non-renewal ofstumpage fees – and how advocacy can address theseimplications – it is necessary to put the current policy ofstumpage depreciation in the context of political decisionmaking. Historically, stumpage fees have been theorthodox approach to taxing commercial forestexploitation. Leakage in stumpage fees had beenobserved in the early 1980s and recommendations toplug the leakage have included e.g. a shift from a unitvolume-based to fixed tree volume-based calculation(World Bank, 1986). These recommendations did notwork. Preparations for the forest management projectproposed competitive bidding to be adopted inallocating timber resources. The follow-up legislation, theTimber Resources Management Act or Act 547 in 1997fell short of specifying competitive ‘bidding’, by providingfor competitive ‘procedures’.

Political decisions have always been influenced by theconsideration that price reforms will cause unemploymentin the timber industry. But there was enough evidence tosuggest that the level of employment generated by the

industry was based on the unsustainable use of forestresources (Birikorang et al. 2001). Failure to reformtimber pricing has resulted in continued over-harvestingand the creation of timber scarcity, a massive ‘crunch’caused by unplanned industry capacity andunemployment in the mid-2000s. An important adverseeconomic impact of these political decisions has beenthe compulsion of the state to rely on its budgetaryresources to create employment and provide sociallivelihoods, not to mention the cost of social instabilityamong Ghanaian society. Under the option of pricereform, the same unemployment would still haveoccurred. The difference between this option and thepolitical decision in favour of business as usual is that thereform option would have generated opportunities tofinance the cost of social adjustment from the industry’sown pocket – and not the state budget. So the option ofreforming pricing policy is always a less costly one.

Stumpage fees contribute significantly to the FC’sbudget. The medium-term expenditure framework (MTEF)of the Ministry of Finance and Economic Planning(MoFEP) allocates budgets to sector ministries which inturn re-allocate funds in accordance with their prioritiesand overall political direction. So to a large extent, the FCbecomes vulnerable to circumstances of unrealised ordepreciating stumpage values. Studies in the mid-1990semphasised that sustainable forest management requiredvaried forms of incentive systems to be effective. Inaddition to a forest fee system that resourced the stateand adequately rewarded timber operators, it wasnecessary also to equitably reward and actively engageforest communities to participate in forest protection andimprovement systems (Mayers, et al. 1994). The FAOalso acknowledged in the late 1990s the strategicimportance of the Forest Services Division (FSD) of theForestry Commission that had in the mid-1990sembarked upon a number of approaches includingprogrammes such as collaborative forestry and socialresponsibility systems to accomplish forest communityengagement, and concluded that ‘without bringing in therural people on whose land the forest grows, any effort tosignificantly improve the forest will not succeed’ (FAO1997). This notwithstanding, FSD’s budget releasesbetween 2005 and 2011 was less than 25 per cent of itsfinancial plan. In 2005, FSD’s administration and servicesexpenditure amounted to US$ 3.1 million (Birikorang etal. 2007). In 2006, it planned but realised far less than abudget of US$ 8.5million (Essiam, M., 2013). Incomparison with this budget, it received a total of US$2.3 million in 2010 and for the first three quarters of 2011a total budget of US$ 667,000 (Ibid.). Thus, FSD has notbeen adequately resourced to achieve results in line withthe global appreciation of its strategic importance. Whilethis has affected quality forest-management services andenvironmental protection, depreciating stumpage has ledto forest communities becoming frustrated by underpayment.

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It is also observed that the Natural Resources andEnvironmental Governance Project (NREG), the Ghanagovernment’s multi-donor dialogue platform governingthe performance assessment framework of the forestsector also failed to encourage policy making affectingstumpage fees. The FC relied in the 2000s on stumpagefees (and in later years on competitive biddingresources) for more than 60 per cent of its budget. Butpolicy triggers, defining specific policy actions to becompleted by targeted periods, were progressivelywaived annually to enable MoFEP to access budgetsupport funds. At the same time, a lack of understandingof how FC’s finances worked caused MoFEP to restrictbudget releases to the FC. So while the politicalcommitment to maintain an appropriate timber pricingstructure was lacking, NREG also failed to push forforest fiscal reforms in this respect.

4.2 Potential risks forconflicting revenue andenvironmental objectivesIn line with expectations of an assessment of the impactof VPA, the annually recorded harvest volumes oftraditional species have considerably reduced (Mayers etal. 2008), thus contributing significantly to the decline inannual stumpage values. High-demand speciescomprising of traditional (primary) species accounted forless than 10 per cent of annual harvests, but 29 per centof stumpage value over the research period (Figures 3and 4). The high proportion of moderate- and low-demand species is very conspicuous.

Since September 2006, TIDD’s export levies have beenreduced from 3 per cent to 1.5 per cent, with one-thirdof the levies collected (0.5 per cent) committed to anescrow account for the financing of forest plantations.TIDD’s revenue, consolidated in FC’s corporate receipts,

has been reduced from about GHȼ 6000 annually toGHȼ 3000, while stumpage fees linger at around GHȼ9000. Given the increased reliance on stumpage fees,there is the risk that FC’s financial distress mighttranslate into using forest planning to increase itsrevenue by allocating more high stumpage-ratedtraditional species to the yields of timber utilisationcontract (TUC) holders than is ‘allowable’. There is,therefore, the risk that a persistent loss of real stumpagevalue could compel FC to include more expensive andscarce timber species in the annual allowable cut (AAC),given FC’s trial role of forest planner, revenue managerand forest-performance monitor.

4.3 Risk of revenue lossthrough timber launderingStudies in timber regulations in the 2000s established asignificant discrepancy between the species recorded atthe harvest level and those captured at the export end(Hansen et al. 2007). Laundering of timber species toavoid paying the appropriate stumpage fees is a risk tosecuring future stumpage revenues, as well ascompliance with environmental and ecologicalprescriptions of the FC. RMSC manages and controlsforest inventory data to support forest planning at theforest management unit level and to regulate the annualharvest plans of TUC holders. The inventory-datamanagement is largely based on analogue rather thandigital (electronic) data. This is a weakness, as analoguedata are tamper-prone. There is therefore a pressingneed to build RMSC’s capacity to develop and managedigitised forest-inventory data in order to overcome thechallenges posed by potential timber laundering. This isimportant to the legality assurance system (LAS). Untilthis is achieved, both the state, FC and forest ownersremain exposed to the risk of timber laundering.

Figure 3. Shares of categories of species in average of 2003–12 harvest volume Figure 4. Shares of categories of species in average of 2003–12 stumpage value

Low demand 29%

Moderate demand 63%

High demand 8%

Low demand 14% High

demand 29%

Moderate demand 57%

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4.4 Timber industryperformance anddevelopment indicators:knowledge gaps No comprehensive research into the financial andeconomic aspects of industry and their related policydiagnosis has been done since the wood industry andlog export ban study in 2001 (Birikorang et al. 2001).The wood industry is observed to have undergone agreater degree of consolidation. Some structuralchanges are also suggested by changes in the currentcomposition of exports, namely relatively less ADL andmore plywood and other timber products. The absenceof an updated technical and financial audit of the industryhas created technical data and knowledge gaps onindustry characteristics and behaviour, posing achallenge to TIDD that must advise on a future review ofthe structure of timber pricing as provided in Regulation22 (2) (see Box 1). Presently, TIDD is a step behind,instead of being a step ahead of industry. It should beable to assume leadership in diagnosing changes inindustry development and behaviour, draw technical andeconomic implications from them, and cause policy todirect industry development and integration, particularlyin development of the domestic market. The possibleexercise of executive powers to change stumpage fees

faces a potential constraint in the form of an abandonedstrategic role of TIDD necessary to build alliances withinter-related public institutions and the PSCLF.Changing the rate of FOB values assigned as timberprices is the only factor that can be excluded from theuse of an executive instrument by MLNR. As explainedearlier, adjustments in the rate of FOB values will requireparliamentary approval. In the long term, this may not benecessary, but it will largely depend on how TIDD takescontrol of the management of the industry’s developmentpath.

Generally, the use of an executive instrument is subjectto the existence of regularly informed forest stakeholders.It is observed that not much of TIDD’s market intelligenceis disseminated, and none in the case of economicintelligence, to inform the executive and legislature. Oneof the key strategies in 1985 of establishing the TimberExport Development Board (TEDB) and Forest ProductsInspection Bureau (FPIB) out of one organisation, theerstwhile Ghana Timber Marketing Board was to createa separate institution, with TEDB to provide, among itsfunctions, economic intelligence to the MoFEP, while theFPIB was allocated the function of approving exportprices. These separate institutions now comprise theTIDD. Resumption of the economic intelligence anddissemination of its current market intelligence reportscould facilitate a smooth adoption of EIs in makingcurrent stumpage values responsive.

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5

Recommendations

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5.1 Managing a fiscaltransition under VPAOn a number of occasions, policy decisions have beenconducted in a rush without adequate consultation andbacking from an analytical framework that best informspolicy. A case in point is the institution of socialresponsibility agreements (SRAs), which evolved simplyby the attractive convenience of industry being directedto pay an additional 5 per cent of stumpage fees. In theview of the current research SRAs have been a failure.Communities in districts with depleted forests receiveinsignificant sums of money while the key issue ofdebating transparency in the use of district assemblies’dominant share of stumpage fees remain. In addition,experiences of competitive bidding for plantation timberresources have shown that some landowners havehijacked the concept of SRAs and claimed control ofthem.

It is observed in this research that provisions underregulations alone are not enough to fully recover real lossin stumpage value. The reader will appreciate at thispoint that even a bad policy is still circumscribed by law.So any discussion of policy gaps beyond what isachievable under legislation must happen outside theVPA, unless the policy specifics are defined under thegovernment of Ghana’s commitment to governance asprovided under Section 5 of Annex II of the VPA. Forthese reasons, recommendations made in the section onpolicy issues (Section 4.1) are structured to permitexploration of short- to medium-term opportunities forMLNR and the NREG to work out and implement atimber price reform outside the VPA agreement thatrestores the real stumpage level. In the medium to longterm, MLNR will concern itself with a fiscal transition tolong-term implementation of the VPA. It is expected thatthis approach will influence a clear definition of thegovernment of Ghana’s commitment to governanceunder Section 5 of Annex II of the VPA.

5.2 Specificrecommendations Specific recommendations are also made on key issuesthat need to be included in a consultative process formanaging the fiscal transition under the VPA. In the shortterm:

• The FC should begin to implement quarterly reviews ofstumpage fees indexed to both the FOB value of ADLand the quarterly average rate of inflation.

• MLNR and FC should together develop a short- tomedium-term forest fiscal strategy. Using the dialogueplatform with the technical committee of NREG, theyshould seek to have this strategy and its financial planincorporated in MoFEP’s medium-term expenditure

framework (MTEF). While the short-term reforms willimprove forest communities’ incentives to protect trees,incorporating the forest fiscal and financial plan inMoFEP’s MTEF will improve dialogue concerningMoFEP providing adequate funding for FC to meet itsforest environmental management goals.

• MLNR should recognise CSOs as FC’s partners inpolicy implementation and provide support for buildingtheir capacity. This should strengthen CSOresponsiveness to VPA protocols relating to theVerification of Legal Compliance (VLC) and Verificationof Legal Origin (VLO) under Ghana’s VPA with the EU.

In the medium term:

• FC should actively engage CSOs to participate inmonitoring the supply chain of timber as this will beregulated under the Legality Assurance Scheme.

• FC should pursue a priority agenda for RMSC capacitybuilding to ensure the credible traceability of timbervolume and value.

In the long term, MLNR should take the lead in pursuinga long-term vision of reaching an MLNR/MoFEP/FCtripartite memorandum of understanding on managing along-term forest fiscal strategy under which MLNRmanages forest fiscal policy through executive ratherthan legislative instruments. This MoU must be endorsedby the Cabinet.

Managing the strategy will require TIDD to be adequatelyresourced to update knowledge on industry performanceand development. It must also institutionalise industryconsultation to support MLNR’s application of executiveinstruments. The long-term challenges facing TIDDinclude continuing to review the 35 per cent timber priceand both the current stumpage rates and the marketratings of species to support both industry growth andemployment generation.

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Essiam, M., Finance Manager, Forest Services Division.Personal communication. 2013.

Birikorang, G., Okai, R., Asenso-Okyere, K., Afrane, S.and Robinson, G. (2001). Ghana Wood Industry andLog Export Ban Study. Forestry Commission report tothe Ministry of Lands and Forestry. Forestry Commission,Accra, Ghana.

Corporate Planning Unit, Forestry Commission, Currentstumpage rates, 2013

Essiam, M., Finance Manager, Forest Services Division.Personal Communication, 2013.

Government of Ghana. (1998). Timber ResourcesManagement Regulation 1998, LI 1649.http://faolex.fao.org/docs/pdf/gha68466.pdf

Hansen, C. P., and Treue, T., Illegal Logging In Ghana.Policy Brief, No. 5, December, 2008; FORESTLANDSCAPE

Mayers, J., Howard, C., Kotey, E. N. A., Prah, E.,Richards, M. (1994). Incentives for the SustainableManagement of the Tropical High Forest in Ghana. IIED,London, UK. http://pubs.iied.org/7510IIED

Mayers, J., Birikorang, G., Danso, E.Y., Nketiah, K.S. andRichards, M. (2008). Assessment of Potential Impacts inGhana of a Voluntary Partnership Agreement with theEC on Forest Governance. Forestry Commission,Government of Ghana and IIED, London.http://pubs.iied.org/G02594.html

U.N. FAO Update On Sustainable Forest Managementand Certification: Example From A Developing Country– Ghana 38th Session of Advisory Committee On PaperAnd Wood Products. Rome, 23-25 April, 1997

World Bank (1986). Ghana Forest Sector Review

References

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Terms of reference to determine the financial loss tolandowners and the state due to the non-review ofquarterly stumpage fees since 2005.

BackgroundAccording to Schedule 3 of the Timber ResourcesManagement Regulation LI 1649 (Government of Ghana1998), “Timber price is 35 per cent of the free-on-board(FOB) value of air-dried lumber of the species (i.e.estimated roundwood equivalent), based on the previousquarter’s average of such exports as published from timeto time by the Forest Products Inspection Bureau.” TheFC has not, by implication of a mandatory quarterlyreview, complied with regulations since 2004. Thisimplies a loss of revenue to the state.

There are widespread controversies surrounding thegirth limits of felled trees for individual tree species andby implication the legitimacy of the conduct of inspectionby the regulatory institution. Resource scarcity poses arisk of extraction of trees below their minimum girth. Thisis a challenge for timber legality under the VPA.Furthermore, civil society is interested in how thesustainability of various endemic species can beguaranteed. A long-term policy that links markets tosilvicultural practices and determination of the annualallowable cut needs to be implemented alongside theVPA. The implications for future revenues and how theyextend the trajectory of future stumpage levels shouldalso be appreciated.

Civil society is interested in assessing the impacts ofvalue loss due to the non-review of stumpagecompounded with the long-term effects of resourcedepletion, and seeks to conduct a two-phase study toexamine these impacts.

The broad objective of this first phase consultancy is toseek to protect the interest of the state and forestowners in forest tax imposition and appropriation.According to LI 1649 21(2), stumpage fees representroyalties to the landowner and charges for the cost offelled timber which provide a basic return to thelandowner and contribute to the cost of forestmanagement and timber regulation. The immediateobjective of the consultancy is therefore to discover whathas been lost in potential revenue to the state andresource owners from the non-review of stumpage.

Scope of workThe consultant will conduct a study to:

• Project the extent of lost revenue to the state from2003 to 2012

• Examine the underlying reasons for the failure to reviewstumpage

• Examine the legal, political and policy implications ofthis non-review for forest resources management andthe Voluntary Partnership Agreement, and

• Make recommendations for a VPA verification protocolto ensure that the law is being enforced.

DeliverablesThe consultant will produce the following documents forCivic Response:

• A report detailing the loss of revenue year by year, dueto the non-review of the stumpage fees policy and itsimplications

• A PowerPoint presentation of findings, to be made toforest stakeholders, and

• A four-page policy brief for dissemination to:• State institutions and agencies (Parliament, Ministry ofLands and Natural Resources, Forestry Commission),and• Civil society, communities and resource owners.

Appendix 1.Terms of reference

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Appendix 2. Stumpagerates (marketclassifications)*

* Reference: Timber Resources Management Regulations, L.I., 1649, Schedule 2, Regulation 2(1) (Government of Ghana, 1998).

TRADE NAME LOCAL NAME BOTANICAL NAME STUMPAGE RATEHigh demand Depleted species Class 1 20%African Walnut Dubini-Biri Lovoa trichilioides

Afrormosia Kokrodua Pericopsis elata

Aningeria Asanfina Aningeria altissima/robusta

Black Hyedua Hyeduanini Guibourtia ehie

Candollei Penkwa-Akoa/Omu Entandrophragma candollei

Iroko Odum Milicia excelsa/regia

Mahogany Krumben/Odupon/Dubin Khaya spp.

Makore Baku/Makore Tieghemella heckelii

Opepe Kusia Nauclea diderrichii

Sapele Penkwa Entandrophragma cylindricum

Utile Efuobrodedwo Entandrophragma utile

Moderate demand Available species Class 2 10%Afara Ofram Terminalia superba

Afzelia Papao Afzelia africana/bella

Albizia Awiemfo Samina/Okoro Albizia ferruginea

Ayan Bonsandua Distemonanthus benthamianus

Avodire Apapaye Turreanthus africanus

Bombax Onyina-Koben Rhodognaphalon brevicuspe

Canarium Bediwonua Canarium schweinfurthii

Ceiba Onyina Ceiba pentandra

Ekki Kaku Lophira alata

Gedu-Nohor Edinam Entandrophragma angolense

Idigbo Emeri Terminalia ivorensis

Mansonia Oprono Mansonia altissima

Obeche Wawa Triplochiton scleroxylon

Ogea/Daniella Shedua Daniella ogea/thurifera

Pterygota Kyere/Koto Pterygota macrocarpa

Antrocaryon Aprokuma Antrocaryon micraster

Guarea Kwabohoro/Kwadwuma Guarea spp.

Longhi (Blanc) Akasa Chrysophyllum albidum

Niangon Nyankom Heritiera utilis

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TRADE NAME LOCAL NAME BOTANICAL NAME STUMPAGE RATELow demand Abundant species Class 3 5%Celtis Esa Celtis mildbraedii/zenkeri

Danta Danta Neosogordonia papaverifa

Homba Otie Pycnanthus angolensis

Missanda Potrodum Erythronphleum guineense

Okan Denya Cylicodiscus gabunensis

Sterculia Wawabim Sterculia rhinopetala

Wonton Wonton Morus mesozygia

Antiaris Chenchen Antiaris Africana

Dahoma Dahoma Piptadeniastrum africanum

Other species


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Appendix 3. Annualstumpage fee levels bytimber species SPECIES

High demandAsanfenaUtileCandolleiHyeduaniniMahoganyOdumKusiaMakoreSapeleWalnutAfromosia

Moderate demandPapaoAwiemfosaminaAprokumaBediwenua/CanariumOnyinaAkasaSheduaAyan/BonsamduaEdinamGuareaNyiangonKakuMansoniaKoto/KyereOnyinakoben/BombaxEmireOframWawaRosewood/KpatroAvodire

CURRENT STUMPAGE RATES¢/m3 ¢/m3 ¢/m3 ¢/m3 ¢/m3 ¢/m3 ¢/m3 ¢/m3 ¢/m3Q1/2011 2010 2009 2008 2007 2006 2005 2004 2003

25.20 25.20 25.20 25.20 25.20 25.20 25.20 25.20 25.2031.60 31.60 31.60 31.60 31.60 31.60 31.60 31.60 31.6021.69 21.69 21.69 21.69 21.69 21.69 21.69 21.69 21.6933.03 33.03 33.03 33.03 33.03 33.03 33.03 33.03 33.0324.28 24.28 24.28 24.28 24.28 24.28 24.28 24.28 24.2825.17 25.17 25.17 25.17 25.17 25.17 25.17 25.17 25.1718.03 18.03 18.03 18.03 18.03 18.03 18.03 18.03 18.0326.72 26.72 26.72 26.72 26.72 26.72 26.72 26.72 26.7227.37 27.37 27.37 27.37 27.37 27.37 27.37 27.37 27.3722.61 22.61 22.61 22.61 22.61 22.61 22.61 22.61 22.6150.87 50.87 50.87 50.87 50.87 50.87 50.87 50.87 50.87

11.96 11.96 11.96 11.96 11.96 11.96 11.96 11.96 11.966.38 6.38 6.38 6.38 6.38 6.38 6.38 6.38 6.386.38 6.38 6.38 6.38 6.38 6.38 6.38 6.38 6.386.38 6.38 6.38 6.38 6.38 6.38 6.38 6.38 6.384.78 4.78 4.78 4.78 4.78 4.78 4.78 4.78 4.7810.36 10.36 10.36 10.36 10.36 10.36 10.36 10.36 10.366.54 6.54 6.54 6.54 6.54 6.54 6.54 6.54 6.5410.32 10.32 10.32 10.32 10.32 10.32 10.32 10.32 10.328.24 8.24 8.24 8.24 8.24 8.24 8.24 8.24 8.249.57 9.57 9.57 9.57 9.57 9.57 9.57 9.57 9.5712.44 12.44 12.44 12.44 12.44 12.44 12.44 12.44 12.448.77 8.77 8.77 8.77 8.77 8.77 8.77 8.77 8.7711.96 11.96 11.96 11.96 11.96 11.96 11.96 11.96 11.9612.64 12.64 12.64 12.64 12.64 12.64 12.64 12.64 12.644.78 4.78 4.78 4.78 4.78 4.78 4.78 4.78 4.7810.68 10.68 10.68 10.68 10.68 10.68 10.68 10.68 10.685.95 5.95 5.95 5.95 5.95 5.95 5.95 5.95 5.956.18 6.18 6.18 6.18 6.18 6.18 6.18 6.18 6.18

10.65 10.65 10.65 10.65 10.65 10.65 10.65 10.65 10.65

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Source: Corporate Planning Unit, Forestry Commission

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SPECIES

Low DemandEssaDantaOtiePotrodomDenyaWawabimaWontonChenchenDahomaOthers

CURRENT STUMPAGE RATES¢/m3 ¢/m3 ¢/m3 ¢/m3 ¢/m3 ¢/m3 ¢/m3 ¢/m3 ¢/m3Q1/2011 2010 2009 2008 2007 2006 2005 2004 2003

3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.19 3.194.62 4.62 4.62 4.62 4.62 4.62 4.62 4.62 4.623.42 3.42 3.42 3.42 3.42 3.42 3.42 3.42 3.423.59 3.59 3.59 3.59 3.59 3.59 3.59 3.59 3.594.39 4.39 4.39 4.39 4.39 4.39 4.39 4.39 4.393.59 3.59 3.59 3.59 3.59 3.59 3.59 3.59 3.592.39 2.39 2.39 2.39 2.39 2.39 2.39 2.39 2.393.15 3.15 3.15 3.15 3.15 3.15 3.15 3.15 3.153.59 3.59 3.59 3.59 3.59 3.59 3.59 3.59 3.592.39 2.39 2.39 2.39 2.39 2.39 2.39 2.39 2.39


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Schedule 3, Regulation22(2): Formula forcalculating stumpage feeStumpage Fee = Tree Volume x TimberPrice x Stumpage RateWhere Tree Volume is computed in cubic metresaccording to the measurements taken of each tree felled,using Smalian’s Formula as follows:

V = kL [ (db1 + db2) 2 + (dt1 + dt2) 2 ]

where V = the volume of the log

K = the constant 0.098

L = the length of the log

db1,db2 = the first and second diameters at the baseend, measured at right angles to each other

dt1,dt2 = the first and second diameters at the topend, measured at right angles to each other

Timber price is 35 per cent of the free-on-board (FOB)value of air-dried lumber of the species (i.e. estimatedroundwood equivalent), based on the previous quarter’saverage of such exports as published from time to timeby the Forest Products Inspection Bureau.

The stumpage rate for each timber species is thepercentage specified in Schedule 3 of theseRegulations.

Appendix 4. Formulafor calculatingstumpage fees

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Schedule 6, Regulation 40(1)Restricted timber species

Appendix 5.Restricted species

CLETUS A. AVOKAMinister for Lands and Forestry

Date of Gazette notification: 10th November 1998.Entry into force: 16th December 1998.

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LOCAL NAME TRADE NAME BOTANICAL NAMEEdinam Gedu-Nohor Entandrophragma angolensePenkwa Sapele E. cylindricumEfuobrodedwo Utile E. utilePenkwa-Akoa/Omu Candollei E. candolleiKrumben Mahogany Khaya anthotheca/grandifoliaDubini Mahogany K. ivorensisOdum Iroko Milicia excelsa/regiaKusia Opepe Nauclea diderrichiiBaku Makore Tieghemella heckeliiHyedua Black Hyedua Guibourtia ehieKokrodua Afrormosia Pericopsis elata

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Appendix 6. Economicanalysis of stumpageloss, 2003–12


A. ANALYSIS2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1 ADL, FOB Value, 410 399 396 410 418 400 427 440 485 628US$/m3

2 Foreign exchange 1.24 0.89 0.92 0.96 0.95 1.08 1.40 1.43 1.51 1.81 rate (GHȼ/US$)

3 ADL, FOB Value, 509 356 364 392 395 432 596 630 730 1136GHȼ/m3

B. RESULTS (GHȼ THOUSANDS) TOTALA Stumpage fees 8,510 6,918 7,003 6,352 6,208 6,096 4,476 5,178 4,623 5,680 61,044nominal

B Stumpage fees 8,510 4,846 7,161 6,830 6,256 6,664 6,183 5,474 5,355 8,835 66,115analysed, FOB only

C Real FOB, in 2003 8,510 4,298 5,519 4,744 3,925 3,590 2,792 2,231 2,007 3,034 40,651domestic prices(2003=base year)

D Loss on FOB (B-C) 0 548 1,642 2,086 2,331 3,074 3,391 3,243 3,348 5,801 25,464

E Loss on nominal 0 -2,072 158 478 48 568 1,707 296 732 3,156 5,071stumpage(unadjusted FOB)

Unrealised stumpage 0 1,524 -1,800 -2,564 -2,380 -3,642 -5,098 -3,539 -4,079 -8,956 -30,535(D+E)

SUMMARYPeriod Annual

Loss due to non-application of FOB pricing 5,071 563Loss due to unadjusted FOB for inflation 25,464 2,829Total loss 30,535 3,393

KnowledgeProducts

International Institute for Environment and Development80-86 Gray’s Inn Road, London WC1X 8NH, UKTel: +44 (0)20 3463 7399Fax: +44 (0)20 3514 9055email: [email protected]

IIED is a policy and action research organisation.We promote sustainable development toimprove livelihoods and protect theenvironments on which these livelihoods arebuilt. We specialise in linking local priorities toglobal challenges. IIED is based in London andworks in Africa, Asia, Latin America, the MiddleEast and the Pacific, with some of the world’smost vulnerable people. We work with them tostrengthen their voice in the decision-makingarenas that affect them — from village councilsto international conventions.

This research was part-funded by UK aid from the UK Government,however the views expressed do not necessarily reflect the views of theUK Government. This document has been produced with the financialassistance of the European Union. The contents of this document arethe sole responsibility of IIED and can under no circumstances beregarded as reflecting the position of the European Union.

Stumpage fees due from the timber industry are a keycomponent of forest communities’ welfare and contributeto the cost of forest management and timber regulation.Yet, as the research presented in this report shows, theForest Commission’s failure to review stumpage in Ghanahas led to millions of dollars of lost revenue from stumpagefees over the period 2003-2012. The report outlines theunderlying reasons for this noncompliance, the implicationsof non-review for forest resources management and makesrecommendations to address shortcomings and informfuture policy actions to protect the interests of the state andforest owners in forest tax imposition.

Why don’t we make the loggers pay? · 2015-07-24 · WHY DON’T WE MAKE THE LOGGERS PAY? |STUMPAGE VALUE AND POLICY FAILURE IN GHANA'S FOREST SECTOR 6 ADL Air-dried lumber CSO

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