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Tropical Forest Research Network |
HOW CAN THE ORGANISATIONAL CHALLENGES TO MULTI-SCALE PARTNERSHIPS BETWEEN FORESTRY COMPANIES AND LOCAL COMMUNITIES BE OVERCOME?
By James Mayers and Sonja Vermeulen
The international wood fibre industry is increasingly driven by market globalisation and demands for decentralisation and democratic local-level governance. Partnerships between multi-national forestry companies and local community groups or individuals are emerging as a response to these forces. An international review of the wide variety of partnerships, deals and informal arrangements between forestry companies and community partners, coordinated by the International Institute for Environment and Development (IIED) and covering over 50 cases in 22 countries, has identified successes and sticking points. A few of the key challenges encountered by the private sector and local actors in working together are highlighted in this article.
Complexity and transaction
costs: rigid versus flexible models
One of the biggest hurdles for companies is how to deal with a large number
of scattered farmers or groups - not only how to collect or distribute raw materials
and products efficiently, but also how to negotiate, determine roles, reach
agreements, establish cost-benefit sharing mechanisms (with groups and within
groups) and continually review the arrangements. Communities suffer from similar
problems of scale that beset companies. As individuals they have a limited ability
to negotiate efficiently and effectively, or to access affordable services such
as transport.
Companies tend to favour simple, replicable models for dealing with transaction costs, based on standardised contracts and a clearly delimited set of extension services and channels for communication. The simplicity in itself may be an asset in attracting farmers and communities, but may also be at the expense of the flexibility required to make deals suit local circumstances and bring benefits to local livelihoods. More effective company strategies devolve power and budgets to local staff, while maintaining core principles of partnerships - a 'loose-tight' model of management. For communities, the key solution is to create groups, cooperatives and other alliances. Even small associations can improve efficiency significantly, as cooperatives of women outgrowers have discovered in South Africa. Locally based, smaller organisations may offer better services to communities: Indian outgrowers have found that cooperative banks process loans much more quickly than the bigger commercial banks. Third parties can also be crucial in spreading the costs of transaction. Government forest bureaux in China, for example, play a useful brokerage role between groups of farmers and multinational forestry companies.
Uncertainty - how to
cope with risks
Forestry is a long-term and uncertain business and dependence on a partner adds
another element of risk. The typical business approach of coping with risk,
through financial insurance, is an ingredient that is missing from company-community
deals because small-scale farmers are unable to secure insurance policies. Internationally
there is a tremendous untapped opportunity for the insurance sector, particularly
smaller local companies, to find a niche as a service provider to company-community
forestry collaborations. Small-scale farmers and community groups could also
benefit from using growers' associations or other groups to provide an attractive
business option for agricultural insurance companies.
Risk mitigation can also be built into the contractual arrangements between company and community. The capability to resolve uncertainty and cope with risks may be improved where schemes are introduced in phases, rather than using a bandwagon approach, and where both sides keep ambitions simple at first, within a learning cycle philosophy. Outgrower schemes in Indonesia and Australia have benefited from the renegotiation of contracts as market conditions have changed. A similar degree of flexibility can be built into the more technical aspects of tree-growing partnerships in order to reduce associated risks. One problem in South Africa has been outgrowers harvesting immature trees and thus losing out on profits, simply because they panic about mounting debts to the partner company. A solution to this is to design farming systems to include early revenues from trimming trees, partial harvesting or intercropping.
Single or mixed production
systems?
Company-community deals need to consider the trade-offs between forest goods
and services and between forestry and other land uses. Local groups seek multiple
benefits from forests for different purposes. Emphasis on single commodities
in forest areas has historically been associated with community disenfranchisement
and poverty after a short boom. Simple forestry models, as opposed to accommodating
mixed land use, may prejudice against local livelihoods by encouraging broad-scale
transformation of rural landscapes to forestry, and a type of forestry based
on single species and single products. When markets are dominated by the economies
of scale, farm-forest systems are unlikely to be recognised and profitable.
Under pressure from community partners, some companies have conceded better terms for multi-purpose forest management in agreements with outgrowers and tenant farmers. In South Africa, companies have found that intercropping with legumes in the first two years not only gives growers early income, but also improves soil fertility. Where markets for raw materials are more competitive, as in India, small-scale producers of wood fibre are not controlled by minimum areas under trees and are able to divide farm land among multiple uses, sometimes confining trees to small strips along field boundaries.
Both companies and communities can consider activities other than tree growing. Secondary processing is generally more profitable than production, for instance, and emerging small-scale businesses in countries including Canada, Papua New Guinea and Mexico have found that forest service industries, such as transport, chainsaw operations, inventory and mapping, can be very successful options. Some non-timber forest products are highly profitable, for example those feeding into horticulture business. Other options include tourism and the management of forests for environmental services for which there are emerging markets.
Further information:
More information on this article can be found in:
Mayers, J. and Vermeulen, S. (2002). Company-community forestry partnerships:
from raw deals to mutual gains? Instruments for sustainable private sector forestry
series. International Institute for Environment and Development: London, United
Kingdom. (http://www.earthprint.com)
Contact address:
James Mayers and Sonja Vermeulen
Forestry and Land Use Programme
International Institute for Environment and Development
3 Endsleigh Street
London WC1H 0DD, United Kingdom
E-mail: james.mayers@iied.org
sonja.vermeulen@iied.org
Website: http://www.iied.org