Demand for timber has surged recently, particularly from China, creating investments into the timber industry in Africa. However, weak national forest governance systems exist in the supplier countries.
This presentation covers the log-export ban in both Mozambique and Gabon. With evidence from these two cases supporting the same conclusion: log-export bans are ineffective.
CIFOR Scientist Sigrid Ekman and Anne Terhegen, a representative of ICRAF as our partner on this project presented.
African log export bans and Chinese timber value chains: Examples from Gabon and Mozambique
1. THINKING beyond the canopy
African log export bans and Chinese timber value
chains: Examples from Gabon and Mozambique
Anne Terheggen & Sigrid-Marianella Stensrud Ekman
Anne Terheggen & Sigrid-Marianella Stensrud Ekman
2. THINKING beyond the canopy
African log export bans and
Chinese timber value chains
LEB (to increase domestic value-added, employment)
Is it effective for countries whose main market is China?
Context
Case Studies
- Mozambique
- Gabon
Impact of LEB
3. THINKING beyond the canopy
1. Context
Surge in demand for timber, particularly from China
Timber important export commodity
Influx of investments into the timber industry in
Africa, particularly from China
Weak national forest governance system in the
supplier countries
5. THINKING beyond the canopy
2.1 Mozambique
China: 90%
Timber exports per destination (m3) 2010
6. THINKING beyond the canopy
2.1 Mozambique: structure of timber industry
SLH = Simple License Holders Ch = Chinese Mz = Mozambican
7. THINKING beyond the canopy
2.1 Mozambique: Trade in timber
2007: Log Export Ban
Discrepancy between Mozambican and Chinese data
Export of logs and sawn Jambire timber (% of total exports)
(German & Werts-Kanounnikoff, 2012)
8. THINKING beyond the canopy
2.1 The Chinese preference for logs
Logs fetch a much higher price than sawn Jambire timber
in China
CNY/m3
9. THINKING beyond the canopy
2.1 Mozambique: illegal timber activity
Two main types of illegal activity:
-cutting timber illegally
-illegal export of logs (violation of LEB)
Bribes per container
- Forestry officials: $70 x 2
- Customs official: $70
- Provincial Department of Agriculture: $200
- Facilitator: $100
Huge incentive to export timber illegally as logs
10. THINKING beyond the canopy
2.1 Mozambique: Incentives for illegal trade in logs
Illegal export of logs Export of sawn timber
Extraction: $300/m3
Container (11m3 of logs):
$3300
Bribes: $510
Shipping cost: $2000
Chinese market: $750 /m3
Revenue: $8250
Extraction: $300 /m3
Chinese market: $650 /m3
Revenue: $7150
Sawmill:
1m3 sawn timber → 1.4 m3 logs
1 m3 sawn timber: $420
Container (11m3) : $4620
Shipping cost: $2000
Profit: $530 / containerProfit: $2420 / container
12. THINKING beyond the canopy
2.2 China as a Final Market
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
logs products logs products
Gabon’s export distribution (1997-2008, m3 in RWE)
Source: Terheggen (2010, 2011) & Kaplinsky et al. (2011)
13. THINKING beyond the canopy
2.2 Foreign investors’ value chain function
Forest stock
Company
inventory
Log
Tree
Port
inventory
Sawnwood
Inventory at
firm or port
Veneer
Plywood
Port
Port
b.iii
b.ii
b.i
a
drying
planing
varnishing
peeling
steaming
drying
Port
cutting
gluing
pressing
trimming
varnishing
optional
optional
optional
sawing
Inventory at
firm or port
Port
Inventory at
firm or port
China / EU EU and others
China
EU
Source: Terheggen (2010,
2011) & Kaplinsky et al. (2011)
14. THINKING beyond the canopy
2.2 Simulation exercise
Test of the viability of domestic processing (all logs are
channeled into a single sub-chain)
Extractive sector = economically ‘superior’
Processing sector = economically ‘inefficient’
Source: Terheggen (2010, 2011) & Kaplinsky et al. (2011)
15. THINKING beyond the canopy
2.2 Value added & unit profit
distribution
Value-addedUnitprofits(πu)
Source: Terheggen (2010, 2011) & Kaplinsky et al. (2011)
16. THINKING beyond the canopy
3. Conclusion
Should the log-export ban be maintained?
- Value creation or destruction?
- Employment creation?
- Loss of tax revenues /increased corruption
- Effect on the capacity to control illegal logging
17. THINKING beyond the canopy
3. Conclusion
Evidence from these two different cases support the same
conclusion: LEB is ineffective
Pursuing the wrong development strategy, especially in light
of the Chinese economic environment.
Notes de l'éditeur
Significant contribution to the countries’ national economies
2007 export ban : reflected in moz records, not so much in Chinese records.
Answer is: Chinese manufacturers LOVE logs. Much more demand – higher priceNumbers are in Chinese yuan /m3About 100 USD price differenceWhy?Not because of labour costs: Mozambican minimum wage is about half of that in ChinaProduction of antique furniture - efficiency higher in China, -skills and craftmanship lacking in Mozambique, -carved directly out of the logs
Rough calculations comparing the illegal export and legal Just to show you the huge incentive to illegally export logsDoes not include cost of running a sawmillExport wood legally as sawn timber: not only higher input costs, but also a LOWER price on the Chinese market.There is no incentive what so ever to conduct honest business
Of the total global tropical log trade = 68% consumed by China (11% OECD) = 14 mln cum China (2 mln cum)@ Gabon = start imports 1995/6, rapid increase@ Gabon = processed = sawnwood in particular since intro Forestry Code and lowest entry barriers (no spwp; ppwp largely EU driven)
Of the total global tropical log trade = 68% consumed by China (11% OECD) = 14 mln cum China (2 mln cum)@ Gabon = start imports 1995/6, rapid increase@ Gabon = processed = sawnwood in particular since intro Forestry Code and lowest entry barriers (no spwp; ppwp largely EU driven)
Value-added = normal behaviourUnit profits = highest in extractive sub-chain (positive in plywood but this is the chain with the highest entry barriers, currently EU dominated)
Log ban: to stimulate domestic procesisng: move up the value chainTake something and transform it to something that is valiued less on the market: value creation or destruction?Is the employment generated enough to make up for the loss of taxes and increased corruption? 30 per sawmill approx.-logs easier to trace than sawn timber. More difficult to control the origin of the timber. Could this have a negative impact on the fight against illegal logging?Illegal loging more serious at least from an environmental perspective than illegal export of timber as logs. Given rapid depletion of Mozambique’s forests, this should be a more immedaite concern.