Crime and Justice in the Garden of Eden

1
Crime and Justice in the Garden of Eden

• Nalin Kishor
• Richard Damania
• (OPCS/ARD/ESSD Sponsored Presentation, May 4,
  2006, Washington DC)

2
Scale of Corruption in the Forest Sector

• Corruption in the forest sector is globally
  pervasive
• Has many forms
• Criminal illegal logging, smuggling, extortion
• Legal but corrupt state capture, institutional
  erosion, rent seizing
• Scale is vast but quantitative estimates remain
  elusive
• Illegal logging may cost 10bn per annum

3
Does Corruption Contribute to Deforestation?
4
Costs of forest corruption include

• Environmental losses local and global (climate
  change and biodiversity loss)
• Fiscal losses to state from lost royalties
• Livelihood losses to forest dependent communities
• Spread of crime and corruption to other sectors
• Undermining institutions (with growth
  implications)
• Undermining legitimate forest enterprises

5
Why is corruption and crime so globally pervasive
across the forest sector?

• Demand exceeds Sustainable Supply.
• Sustainable Supply is relatively inelastic (trees
  grow slowly).
• Profits from unsustainable logging profits from
  sustainable logging.
• Costs of unsustainable logging are public and
  benefits private
• ? High rents from unsustainable harvesting
• (Indonesia milling capacity 70m cum, allowable
  cut 15m cum recipe for corruption)

6
Typology of Corruption

• Commercial Scale Illegal Logging
• Big business, commercial operators, links to
  other crimes (drug, arms and people smuggling)
• Corruption Contagion
• Logs are bulky and can only be sold with
  connivance of host of institutions (transport,
  customs, police.)
• ?More widespread institutional decay
• Weak institutions - impede development and
  growth

7
Typology of Corruption (cont.)

• Grand Corruption and State Capture
• Legal logging but contributions paid to gain
  access to timber concessions
• Problem is widespread from Malaysia to Australia
  and beyond
• Often accompanies land use decisions (cattle
  ranching in LAC)

8
Typology of Corruption (cont.)

• Also linked to illegal logging
• Poor log tracking system
• The Alchemy of a Log

Broker illegal log Indonesia Gets 20/m3
Broker legal log Malaysia Gets 160/m3
Illegal Logger Indonesia Gets 2.2/m3
9
Typology of Corruption (cont.)

• Institutional Erosion and Rent Seizing
• Malaysia, India and Indonesia bequeathed strong
  forest institutions
• Timber boom 50s and 60s- dismantling of these
  institutions
• Why?
• Institutions are endogenous To capture high
  rents need to erode institutions that impede rent
  capture

10
Typology of Corruption

• Petty corruption and extortion
• Victims are most often subsistence dwellers
• In scale relatively small but likely huge poverty
  and livelihood impacts
• Admits of straightforward solutions
• Vest property rights
• Community-based forest management community
  woodlots (supply-side intervention)

11
Solutions (1)

• Solutions need to be incentive compatible
  institutions will not impose reforms that
  undermine their self interest
• Search for answers that
• Lower rents from unsustainable logging
• (Exogenous) demand side interventions
• Commercial (IKEA type model)
• Responsible public procurement
• Green consumerism
• Supply side interventions that are incentive
  compatible
• Interventions that make sustainable logging more
  attractive than unsustainable logging
• Payments for Environmental Services (esp. carbon)

12
Solutions (2)

• Search for answers that
• Improve the supply of good governance and
  increase incentive to utilize legally harvested
  timber
• Put native forests under forest management plans
  and certification
• Development of industrial plantations
• Institutional reform and strengthening
• Reform of forest service, incentive payments,
  transparency and accountability (global
  monitoring of forest stock, global log-tracking
• Improving the forest law enforcement and
  compliance system

13
Solutions (3)

• Search for answers that
• Generate the demand for good governance and
  strengthen the political will
• Improve accountability, develop strong
  multistakeholder processes (Philippines, Bolivia)
• Foster producer and consumer country
  collaboration at the regional and international
  levels (FLEG processes)

14
Solutions (4)

• Search for answers that
• Galvanize international cooperation and provide a
  platform for action
• Forest Law Enforcement and Governance
  (ministerial) processes (collaborative actions by
  producer and consumer countries at the
  regional and international levels).