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Strengthening the ability of smallholders in the Mekong region forest sector to operate legally and sustainably

This event will bring to life experiences and lessons learned from tackling the challenges smallholders face to operate legally and sustainably in the forest sector in the Mekong region. The event will explore ways to strengthen the technical and operational skills of smallholders and create an enabling environment for them to contribute to forest governance, rural livelihoods and gender equality.

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Legality in the forest sector: New insights into obstacles and incentives for MSME formalisation

Worldwide, at least 41 million people work in the informal forest sector – more than three times the 12.5 million employed in formal forest sector related businesses. 

In the informal forest sector, micro, small and medium-sized enterprises (MSMEs) are often characterised as “illegal”. This is the case when their modes of production, sources of raw material or legal status do not conform to their country’s regulatory requirements. 

In a new joint report, Promoting legality within the private forest sector: obstacles and incentives to formalization, the FAO-EU FLEGT Programme and the European Forest Institute (EFI) make a case for acknowledging the complex circumstances of forest-sector MSMEs, particularly in countries where requirements for legality compliance and achieving formal status are unclear.

If MSMEs do opt to formalise their business, the authors argue, there should be incentives and support to ensure that they benefit from formal status. This includes business development and credit, access to markets, and increased ability to participate in legal and sustainable supply chains. 

Formalisation will not always be desirable or practical for all forest sector MSMEs, the authors acknowledge. Where the rule of law and / or law enforcement is weak, policy and legal contexts are unlikely to be conducive to these enterprises entering the formal forest sector. 

The report builds on the experiences of the EFI and the FAO-EU FLEGT Programme, whose programmatic work has focused on helping MSMEs to produce and process legal timber for integration into legal and sustainable value chains.

Read the report:

Promoting legality within the private forest sector: obstacles and incentives to formalization

In the informal forest sector, micro, small and medium-sized enterprises (MSMEs) are often characterised as “illegal”. This is the case when their modes of production, sources of raw material or legal status do not conform to their country’s regulatory requirements. In this brief, the FAO-EU FLEGT Programme and EFI make a case for acknowledging the complex circumstances of forest-sector MSMEs and argue that if MSMEs do opt to formalise their business, there should be incentives and support to ensure that they benefit from formal status.

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MSMEs important partner to improve forest governance and reducing deforestation and forest degradation

Micro, small and medium-sized timber producers and processors play a critical role in meeting the growing demand for forest products worldwide, as well as making vital contributions to livelihoods and national economies. It is estimated that micro, small and medium enterprises (MSMEs) provide over 50 percent of total forest-related employment, with the figure in some countries as high as 80 to 90 percent of employment. Additionally, MSMEs are the main suppliers to domestic and regional markets in tropical timber-producing regions. The demand for forest products is growing significantly, placing more pressure on national forest resources.  Forest sector MSMEs are central to ensuring that forest resource use is legal and sustainable into the future.

To better understand strategies to support MSMEs towards these goals, the FAO-EU Forest Law Enforcement, Governance and Trade (FLEGT) Programme and the European Forest Institute (EFI) hosted a webinar entitled ‘How has supporting MSMEs to operate legally and sustainably improved forest governance and livelihoods?’. The webinar explored how changes in forest-management and timber processing practices generated through the support of the Programme and EFI have increased market access and enhanced the competitiveness of MSMEs while reducing their vulnerability to shifts in international and domestic markets. 

The event centred around three key themes:

  • Building the capacity of MSMEs to operate legally and sustainably
  • Integrating MSMEs into legal supply chains
  • Helping MSMEs overcome barriers to formalization

Participants heard from two project beneficiaries (Mr Wichat Prathanrat, Deputy Permanent Secretary of Banthi Subdistrict Municipality, Thailand, and Mr Le Phi Chien, Director of Bach Viet and Moc Dan Dan Phuong JSC, Viet Nam) followed by a panel discussion moderated by Ms Sheam Satkuru from the International Tropical Timber Organization.

Supporting forest-sector MSMEs to be legal and sustainable

Panellists highlighted the need for assistance to MSMEs to be tailored towards their unique needs and available resources. Mr Laurent Ayemou, an independent expert on MSMEs and former project manager for the Association des Voluntaries pour le Service International (AVSI) in Côte d’Ivoire, outlined that tailored capacity building not only strengthened technical capacity but also encouraged formalization, increased competitiveness, and subsequently increased income, generating livelihoods.

Both Mr Peter Zormelo, the Head of Trade and Industry Development (TIDD) at the Ghana Forestry Commission and Mr Ngo Sy Hoai, Vice President & Secretary-General of the Vietnam Timber and Forest Product Association (VIFORES), highlighted practical impacts that capacity building had. Through Programme and EFI support, VIFORES and TIDD have supported MSMEs to re-organize their production spaces and offered them training to reduce wastage and increase efficiency when processing timber.

Further emphasizing the need for formalization in the forest sector, panellists discussed how integration into legal supply chains incentivizes legality. Mr Zormelo explained how ensuring that MSMEs had adequate access to legal raw materials acts as a bedrock for operators to pursue legality and formalization. To this end, TIDD has established the Domestic Timber Trade Network, which creates business-to-business links between MSMEs and others in the timber sector, boosting the supply of legal timber on the domestic market.

Mr Zormelo’s experience echoed the experiences described by Mr Prathanrat during his testimony. In Thailand, legal revisions allowed the use of reclaimed timber as a legal source of raw material for MSMEs, boosting the domestic supply of resources. This has allowed a number of processors in Mr Prathanrat’s subdistrict to operate legally  and, subsequently, form an association of operators that use reclaimed timber.

Ultimately, a range of barriers that inhibit the ability of MSMEs to formalize remain. Ms Alejandra Ospitia, the Chief Executive Officer of the Federation of Forest Entrepreneurs in Colombia (FEDEMADERAS), spoke of the legal uncertainty and constant changes in regulation experienced by Colombian MSMEs. The panel identified a number of strategies to overcome these barriers, including legal clarification, training, public-private collaboration, and revising tax and fiscal policies to promote  competitiveness.

The future of support to MSMEs

Across Thailand, Viet Nam, Côte d’Ivoire, Ghana, and Colombia, it is clear that work on integrating MSMEs in legal supply chains generated knowledge that allowed MSMEs to improve their own production process, increase competitiveness, and strengthen business to business links. As such, business development remains important in supporting  MSMEs.

In closing the event, Ms Valerie Merckx, Head of FLEGT and REDD Unit at EFI, stated that the event  illustrated how MSMEs can be part of the solution to improve forest governance and meet sustainable development goals. MSMEs should be encouraged to adopt legal and sustainable sourcing and processing practices through specialized trainings, with  legal frameworks adapted to their unique circumstances. By developing an enabling environment, support to MSMEs allows them to thrive, becoming essential for rural economies, jobs and livelihoods, and sustainability.

You can watch the full recording of the webinar below.

The FAO-EU FLEGT Programme and EFI would like to thank our project beneficiaries and panellists Mr Wichat Prathanrat, Mr Le Phi Chien, Mr Peter Zormelo, Mr Ngo Sy Hoai, Ms Alejandra Ospitia, and Mr Laurent Ayemou for their time and contributions to the event, as well as Ms Sheam Satkuru for her expert moderation during the event.

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Webinar to explore how support to MSMEs improves forest governance and livelihoods

MSMEs play a critical role in meeting the growing demand for timber products worldwide. In many countries, they represent around 85% of all forestry enterprises and can support the fight against illegality by providing a source of legal, traceable timber. In an upcoming webinar, the FAO-EU FLEGT Programme and the European Forest Institute (EFI) will host a discussion on how support to micro, small and medium enterprises (MSMEs) can improve forest governance and livelihoods.

Over the last decade, the FAO-EU FLEGT Programme and EFI have supported MSMEs to operate legally and sustainably. The joint webinar will explore how this support has improved market access and enhanced the competitiveness of MSMEs, while reducing their vulnerability to shifts on the international and domestic market.

Panellists will offer perspectives from Asia, Africa and Latin America on building MSME capacity to operate legally and sustainably, integrating MSMEs into legal supply chains, and helping these enterprises to overcome barriers to formalisation.

The discussion will be moderated by Sheam Satkuru, Director of Operations for the International Tropical Timber Organisation. 

COVID-19 takes a heavy toll on Myanmar’s wood-based micro and small businesses

The COVID-19 pandemic is exacting a devastating toll on wood-based micro, small and medium enterprises (MSMEs).

MSMEs are the backbone of Myanmar’s economy. They constitute 99% of formally registered enterprises, and generate significant livelihood and employment opportunities. But the pandemic has had severe impacts on customer demand, revenue, finances, workers and the availability and distribution of raw materials. Myanmar’s MSMEs also face difficulties accessing support from COVID-19 relief programmes.

These are the findings of a survey of some 200 MSMEs conducted by the European Forest Institute (EFI) and the Sagawa Institute of Organization Development. Members of the Myanmar Arts and Craft Association and the Wood-Based Furniture Association were surveyed as part of EFI’s Sida-funded work in support of forest- and timber-based MSMEs in the Mekong region.

Furniture workshop’s owner in Thaketa Township, Myanmar. Source: Agus Djailani, European Forest Institute.

The MSMEs were surveyed nationwide in August 2020, most of these micro and small businesses. The survey found that COVID-19 had forced most enterprises to stop or permanently close their business. A staggering 33.6% of respondents closed their operations permanently due to the crisis, while 65.2% stopped them temporarily.

As a way forward, an EFI briefing recommends that industry associations collaborate with the Government to ease the challenges that MSMEs face in distributing products and purchasing raw materials from official sources. The associations should also assist their members by providing documents and sharing information to help them access short- and long-term financial loans. Finally, associations have an important role to play in supporting business registration and licensing of informal enterprises to enable them to access COVID-19 relief programmes.

Read the briefing:

COVID-19 impacts on wood-based MSMEs in Myanmar

MSMEs are the backbone of Myanmar’s economy. They constitute 99% of formally registered enterprises and generate significant livelihood and employment opportunities. But the pandemic has had severe impacts on customer demand, revenue, finances, workers and the availability and distribution of raw materials. Myanmar’s MSMEs also face difficulties accessing support from COVID-19 relief programmes. These are the findings of a survey of some 200 MSMEs conducted by the European Forest Institute (EFI) and the Sagawa Institute of Organization Development.

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Supporting forest- and timber-based MSMEs in the Mekong region to operate legally and sustainably

Micro, small and medium enterprises (MSMEs) are a vehicle for development and generate almost half of jobs in the formal forest sector globally. They are key to local economies, generating significant livelihood and employment opportunities. Yet the recent economic crisis triggered by the COVID-19 pandemic has shown the vulnerability of MSMEs to sudden market developments.

A new brief describes the approach adopted by the European Forest Institute (EFI) over the last five years to support forest- and timber-based MSMEs in the Mekong region to operate legally and sustainably.  The publication highlights the challenges and solutions tested, and lessons learnt from EFI’s interventions.

Family-run workshop in a pilot MSME in Lamphun, Thailand. Source: European Forest Institute

If MSMEs are encouraged to adopt legal and sustainable sourcing and processing practices, they can be part of the solution to reducing deforestation and forest degradation.

Growing their capacities, business performance and access to legal timber will allow these enterprises to participate in supply chains destined for regulated markets. This would in turn make them more resilient as businesses, with the potential to alleviate rural poverty and reduce impacts from crises such as COVID-19.

To this end, EFI has explored approaches that help forest- and timber-based MSMEs in the Mekong region to operate legally and sustainably. In six pilot projects in four countries – Laos, Myanmar, Thailand and Vietnam –  EFI tested solutions to some of the key challenges that MSMEs face: low productivity and operational capacity, lack of formal registration and operating licences, and poor representation in policy processes.

This work, supported by the Swedish International Development Cooperation Agency, shows that specialised trainings can improve MSME’s operational capacity and regulatory compliance. The potential for FLEGT Voluntary Partnership Agreement (VPA) processes to trigger and accommodate legal reforms in support of MSMEs is also highlighted.

EFI’s pilots demonstrate the importance of regulatory revisions for resolving key challenges to MSMEs, and the need for interventions targeting these enterprises to integrate business continuity planning. Crucially, supporting MSMEs to access finance is critical to support them to rebuild after COVID-19, and to operate legally and sustainably. 

Read the briefing

Supporting forest- and timber-based MSMEs in the Mekong region to operate legally and sustainably

MSMEs are a vehicle for development and generate almost half of jobs in the formal forest sector globally. They are key to local economies, generating significant livelihood and employment opportunities. Yet the recent economic crisis triggered by the COVID-19 pandemic has shown the vulnerability of MSMEs to sudden market developments. This brief describes the approach adopted by the European Forest Institute (EFI) over the last five years to support forest- and timber-based MSMEs in the Mekong region to operate legally and sustainably. The publication highlights the challenges and solutions tested, and lessons learnt from EFI’s interventions.

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About the Forest Smallholders Project

Since 2016, the European Forest Institute (EFI) has been supporting wood-based micro, small and medium enterprises (MSMEs) in four Mekong countries to operate legally and sustainably. Under its Forest Smallholders Project, EFI has been testing solutions to MSMEs’ key challenges in pilot projects. Lessons learnt from these pilots are documented and disseminated nationally, regionally and internationally. Through its support to MSMEs, the Project promotes gender equality and women’s economic empowerment in the forest sector.

Disclaimer

This website has been produced with support from the Swedish International Development Cooperation Agency. The contents of this website are the sole responsibility of the authors and can under no circumstances be regarded as reflecting the position of funding organisations.