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How community tenure is facilitating investment in the commons for inclusive growth


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Presented by Steven Lawry on World Bank Land and Poverty Conference 2018

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How community tenure is facilitating investment in the commons for inclusive growth

  1. 1. Common benefits How community tenure is facilitating investment in the commons for inclusive growth STEVEN LAWRY1, SOPHIA GNYCH1, ILIANA MONTERROSO1, ANUKRAM ADHIKARY2 1Center for International Forestry Research 2Forest Action Nepal World Bank Land and Poverty Conference 2018 Session 07-07: Community Rights for Environmental Benefit Funding: International Food Policy Research Institute (IFPRI) and CGIAR Research Program on Policies, Institutions and Markets (PIM) (Activity Number 176)
  2. 2. The investment imperative • $4.5 trillion annually needed in public and private finance to meet SDGs. • Reducing global environmental degradation and mitigating climate change requires large amounts of private capital if sustainable land use is to become business as usual. • Private enterprises—from small farms to large corporations—must make fundamental changes in agricultural, forestry and land use practices if the AFLOU sector is to contribute to holding the global temperature increase to 1.5 degrees centigrade. • Alongside restructuring of land use practices, technological innovation, regulatory reforms and improved supply chain management will be required. • Importantly, there remain large barriers to investment in sustainable use of natural resources in developing countries, including in contexts where natural resources such as forest, pastureland and fisheries are held and used in common.
  3. 3. Types of devolution forest rights models by region Source: Based on Lawry and McLain, 2012:56. Devolution of Forest Rights and Sustainable Forest Management. Volume 1.
  4. 4. Standard model for forest based SME investment Source: Castrén, Tuukka, Marko Katila, and Petri Lehtonen. 2014. Business Climate for Forest Investments: A Survey. Washington, DC: Program on Forests (PROFOR).
  5. 5. 1. Commonly held resources are not subject to sale or purchase, hence resources cannot be used as collateral and outside investors cannot hold shares in common-pool resources (Antinori. 2000, Feder and Feeney, 1991). 2. The varying aims of right holders within a commons can complicate achievement of consensus about investment goals increasing transaction costs and levels of perceived risk and uncertainty on the part of investors. 3. Community institutions may lack the capacity, protocols and experience to negotiate and manage investment partnerships and commercial enterprises (Antinori and Bray 2005). 4. The social character of commons ownership requires that benefits be shared across the entire community of right holders, often in the form of investments in infrastructure, education and employment opportunities. The equitable distribution of benefits may be especially important to women and the poorer members of the community (Lawry et al 2016). Perceived barriers to investing in the commons
  6. 6. Investing in the commons This research demonstrates that: 1. Barriers to commons based investment are not insurmountable and that private investment in community-owned resources is taking place. 2. Investment readiness is determined by a set of “rules of the game” or mechanisms, that develop and evolve over time to provide assurance to all stakeholders that the obligations of each party will be met. The rules are not always the same, and depend on the problem, the time, and the place. The variety of partnerships and investments that emerge provide insights to what we call the assurance problem. 3. Community rights have fostered investment that recognize the social character of commons ownership and delivers environmental and social returns as well as profits, that then supports further investment.
  7. 7. Successful country cases “Successful” country case studies that 20 years ago devolved significant forest use, management and other rights to communities: 1. Guatemala - Community Forest Concessions (CFCs) 2. Mexico – ejidos and indigenous communities 3. Nepal - Community Forest User Groups (CFUGs) 4. Namibia – Community Based Natural Resource Management (CBNRM)
  8. 8. Methods • Review of scholarly and grey literature. • Collation of information from fieldwork visits, workshops, observation, interviews and document analysis. • Financial data (often “best-estimates”) including donor financial reports and annual reports of user group associations.
  9. 9. Realist synthesis approach (Social) Context (Intervention) Context Mechanism Outcome Social and environmental context including: 1) socioeconomic, 2) political, 3) biophysical 4) time elapsed since the property intervention occurred Bundle of rights: Regulatory reforms change the communities’ ability to manage, use and benefit from resources. Decision making based on the assurance that each party will meet their obligations and commitments Volume of financial investment including: 1) Origin of investment 2) Investment mechanism 3) Volume of investment 4) Target sector 5) Expected returns or benefits
  10. 10. The Mayan Biosphere Reserve Source: CONAP-CEMEC
  11. 11. Guatemala - Mechanisms • Conservation in the center: sustainable forest management the vehicle • Regulatory basis: third-party certification; co-management  High transaction costs to comply with the normative (Group certification; forest vs. value chain vs. timber/non-timber product) • Rights granted came about through the introduction of a protected area  State retained alienation rights • All concession contracts required collective organization – a legal entity that would become the right receiver (Community Concessionaire) – and resource extraction based on management plans • Demand for new institutions – collective action to access rights  concessionaire organization  community forest enterprise
  12. 12. Investor: International donor investment Volume: over US$ 300 million (Between 1989 – 2016 PRISMA, 2016). USAID US$ 150 Million; IADB (About USD80 Million); KFW (About USD20 Million) Sector: Environment; Protected Areas Returns: Setting the institutional and regulatory framework)  Setting up community concession model as co-management mechanism to administer Multiple Use Zone  local institutions and organizations Dynamics • Before 2000, over 50% of this funding was channeled to strengthen the institutional and regulatory framework involved in protected area (Conservation Focus)  Strengthening government institutions; providing technical assistance • Establishing Community Forest Organizations (1997-2002) – Establish Concessionaire Organizations  Promote second level community forestry initiatives (ACOFOP)  Development of the management model • 2006 –2010: Timber focused (management, building organizational, processing and commercialization capacities)  Non-timber forest products  Other ecosystem services (Tourism; Biodiversity conservation; Carbon) – including carbon trade  Value Chain development • 2010 – Onwards: Organize institutional and legal framework to develop REDD & other PES mechanisms  Up scaling community enterprises (FORESCOM)  Up scaling Social Mobilization (National Alliance of Community Forests; Mesoamerican Alliance of People and Forests)  Considerable decrease in donor investment. Guatemala – Investment outcomes
  13. 13. Guatemala – Investment outcomes Investor: Community Concessionaire Organization Volume: Between 1994 – 2002  a total of 12-community concession contracts (7,000 ha to 85,000 ha for a total of 390,000 ha) were signed between 1994 and 2001. Concessionaire-Organization Membership base: organized resident and non-resident local community groups  12 Community Concessionaire Organizations legally established: About 2,000 families directly involved) Returns: Local regulations vary across  Eg. 20 % of net income should be invested in social development needs, 40 percent re-invested to cover or production costs and 40 % distributed as dividends. Household level: based on membership status and residency: (1) employment generation - Over 50,000 days worked since 1995, directly involving 2,000 families (members) and an additional 3,000 or more indirect individual beneficiaries (non-members)., (2) distribution of income from commercially valued forests - Increased household incomes derived from the distribution of timber sales profits represented over a 33 per cent increase between 2000 and 2010 Communal level social investments: (1) Health, (2) Education, (3) Infrastructure: roads, improved working environment – insurance. key agents for promoting development, playing a key role in providing social services that are the responsibility of the State. second level organization – Community Association of Community Forest Concessions, ACOFOP (2015) – Second level community based-enterprise FORESCOM (Rosales, 2010); – AMPB (regional and international advocacy)
  14. 14. Investor: Community concession enterprises Volume: Over USD7 Million –Net Income (2010 – 2016) Sector: Commercial; production Return: • Reinvestment in the community enterprise (all active concessions invested in their own lumber mill; capitalization; development of value chains) (Stevens et al., 2015; Stoian, 2006; Nittler and Tschinkel, 2005) • Creation of the Community Enterprise of Forest Services Ltd. (FORESCOM) - develop a market for lesser-known tropical tree species, provide technical assistance and upscale industrial timber processing. • Income from collective timber sales is distributed to members - invested in social (communal) infrastructure on an annual basis • integrate other non-timber activities, diversify livelihood options and generated value added Guatemala – Investment Outcomes 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 InUSD Income from Timber and Non-Timber Forest Extraction Timber forest product sales Non-timber forest product sales 527,808.3 835,805.2 705,741.4 1,539,831.0 1,568,846.3 1,078,061.4 1,148,023.0 107,481.9 186,551.0 131,300.7 104,396.0 163,011.5 626,120.8 554,320.3 0.0 200,000.0 400,000.0 600,000.0 800,000.0 1,000,000.0 1,200,000.0 1,400,000.0 1,600,000.0 1,800,000.0 2,010 2,011 2,012 2,013 2,014 2,015 2,016 Net Income (2010 a 2016) Ingreso EFC $ Ingreso FORESCOM $ Source: ACOFOP, 2015; FORESCOM, 2017
  15. 15. Nepal – Mechanisms • District Forest Offices forest-based enterprises in Nepal, define the distance between forest areas and location of enterprises and resource extraction rates. • Political instability, weak accountability of the State and non-state institutions, corruption, and illegal activities affect the investment climate and business environment in general. • Many forest-based enterprises have limited human resource and technological capacities. • Small scale of CFUGs limits commercial viability of enterprises in terms of resources base and productivity. • Physical landscape of Nepal limits connectivity and access to market. • Management and Accountability mechanisms (e.g. review of operational plans, financial audit and reporting) are practiced by CFUGs but there are large differences in outcomes between project supported and non–supported districts.
  16. 16. Nepal– Investment outcomes Donors • Volume/scale: donors have provided at least US$ 237 million over the last 30 years to community forestry (e.g. DFID = over USD 72 mil, IFAD USD 13 mil) • Target sector: forest and community development, with income generation and training and workshop activities, capacity building, Infrastructure often channeled through NGOs and civil society • Returns: Measurable environmental benefits, Poverty alleviation and development, improved equity (for women and poor community members), empowerment of rural communities, greater sense of agency Government • Volume/scale: GoN funding over 20 years has been at least US $8 million (MSFP, 2013) • Target sector: Public investments in policy, socialization of new regulation, mapping, licensing etc • Returns: o The transfer of rights directly to the local communities. o Improved forest conditions, o enhanced resource mobilization, o Employment – 640 person days employment per CFUG are generated, which at an average wage of NRs. 200 per day (for unskilled manual labour) equates to an income contribution of NRs. 128,000 per CFUG to its members. Provide more employment particularly for Dalits and extrem poor
  17. 17. Nepal – Investment outcomes Community Forest User Groups (CFUGs) • Volume/scale: Study by MSFP, 2013 based on 14,571 CFUG estimated that o Total income of all CFUGs US$ 49 million/year o Average expenditure US$ 30 million/year o US$ 137 per household per o US$ 36 donor investment per household per year. • Target sector: Forest management plans, protection/enforcement, infrastructure, education, health care. • Returns: Community forestry user groups have built natural, financial and social/institutional group capital. The rural population have benefitted from increased supply of forest products such as fodder, timber, fuel wood, NTFPs as well as services such as water sources, maintenance of soil fertility and climate stabilization.
  18. 18. A tentative model of the investment effects of forest rights devolution
  19. 19. Rights can catalyze investment in community forest enterprises • Rights devolution “triggers” new kinds of action (social and economic) at the local level and externally that lays foundations for investment in new forms of CFEs. • Two key points to keep in mind: (1) “investment readiness” as a process of internal and external social and economic development that unfolds through stages, and, (2) The strongly social character of the process, determined by the social, collective character of the resource rights.
  20. 20. Stage 1: Inward investment and development of representative institutions • Characterized by capacity building and significant investment in community representative organizations, provided by donors, government and NGOs. • Communities gain in confidence and agency, creating new space for decision making around forest use. • At this stage, we also see local investment (from remittances and savings) into housing, education and health.
  21. 21. Stage 2: Community institutions gain confidence, local leaders and entrepreneurs emerge • A review of the institutional/legal framework promoted by the initial devolution, coupled with investment in infrastructure, education and institutions. • Technical capacity building improves the condition of natural resources. Additional investments are critical to support the emergence of CFEs and cottage industries. • The formation of associations representing CUG interests is key to developing a supportive framework. • In parallel, CFEs cement their “social character”, ensuring that poor sections of the community are protected and supported.
  22. 22. Stage 3: Stronger local social capital attracts new forms of capital. • Stronger representation, credibility and assurance at a national level, which attracts new forms of financial investment. • CUG federations begin to give greater attention to promoting commercial investment. • Improved community capacity enables diversification and investment into new sectors, as well as the development of value chains and adherence to global market standards.
  23. 23. Summing up • Devolution of forest rights to communities has catalyzed investment in collectively held forests and other natural resources. • Emergence of legitimate community-level governance organizations important pre- condition to attracting and retaining investor interest • As a collectively held resource, all rights holders must benefit from investment. • Significant revenue invested in public goods (roads, health, education). • Considerable gains in local income observed, and enhancement of collective tenure has been shown to lead directly to household level investment in housing, education and health in some settings • Forest cover improved in Guatemala and Nepal (wildlife populations grew in Namibia community conservancies) • Considerable donor grant investment in capacity building, law reform and policy, building links with private sector associated with these generally successful examples • Major international blended public-private finance effectively bundled in Guatemala. Evidence that this is attracting commercial credit from domestic banks.
  24. 24. Selected bibliography Antinori, C., and Bray, D.B. 2005. Community Forest Enterprises as Entrepreneurial Firms: Economic and Institutional Perspectives from Mexico. World Development, Vol. 33 (9), 1529-1543. Baynes, J., Herbohn, J., Smith, C., Fisher, R. and Bray, D.B. 2015. Key factors which influence the success of community forestry in developing countries. Global Environmental Change, 35, 226–238. Bray, D.B., Antinori, C., Torres-Rojo, J.M. 2006. The Mexican model of community forest management: The role of agrarian policy, forest policy and entrepreneurial organization. Forest Policy and Economics 8, 470-484. Carter, J. with Gronow, J. 2005. Recent experience in collaborative forest management. CIFOR Occasional Paper No. 43, CIFOR, Bogor, Indonesia. Cronkleton, P., Pulhin, J., and Saigal. 2012. Co-management in community forestry: How the partial devolution of management rights creates challenges for forest communities. Conservation and Society. Volume 10 (2), 91-102. Hatcher, J. and Bailey, L. 2011. Tropical forest tenure assessment: Trends, challenges, and opportunities. ITTO Technical Series no. 37. RRI: Washington DC/ITTO: Yokohama. Holland, M.B., Jones, K.W., Naughton-Treves, L., Freire, J-L., Morales, M., Suárez, L. 2017. Titling land to conserve forests: The case of Cuyabeno Reserve in Ecuador. Global Environmental Change 44, 27-38. Nagendra, H. 2008. Do parks work? Impact of protected areas on land cover clearing. Ambio, 37, 330–337. Pena, X., Velez, M.A., Cardenas, J.C., Perdomo, N., and Matajira, C. 2017 Collective Property Leads to Household Investments: Lessons From Land Titling in Afro- Colombian Communities. World Development 97, 27-48. Reyes Rodas, Renaldo, Justine Kent, Tania Ammour, Juventino Galvex. 2014 “Challenges and opportunities of sustainable forest management through community forest concessions in the Maya Biosphere Reserve, Peten, Guatemala, In, Forests under pressure-Local responses to global issues. In Pia Katila, Wil de Jong, Pablo Pacheco, Gerardo Mery (eds) IUFRO World Series Volume 32. Vienna. Robinson, B.E., Holland, M.B., and Naughton-Treves, L. 2014. Does secure land tenure save forests? A meta-analysis of the relationship between land tenure and tropical deforestation. Global Environmental Change, 29, 281-293. Runsheng, Y, Zulu, L., Jiaguo, Q., Freudenberger, M. and Sommerville, M. 2016. Empirical linkages between devolved tenure systems and forest conditions: Primary evidence. Forest Policy and Economics 73, 277-285. Schlager, E., Ostrom, E., 1992. Property-rights regimes and natural resources: A conceptual analysis. Land Economics 68, 249–262. Sciberras, M., Jenkins, S.R., Kaiser, M.J., Hawkins, S.J., & Pullin, A.S. 2013. Evaluating the biological effectiveness of fully and partially protected marine areas. Environmental Evidence, 2(4). Sharma, B.P., Lawry, S., Paudel, N.S., Adhikari, A., Banjade, M.R. 2017. Has devolution of forest rights in Nepal enabled investment in locally controlled forest enterprises?, Paper prepared for presentation at the “2017 World Bank conference on land and poverty”, The World Bank - Washington DC, March 20-24, 2017. Thanh, T.N. and Sikor, T. 2006. From legal acts to actual powers: Devolution and property rights in the Central Highlands of Vietnam. Forest Policy and Economics 8(4):397-408. Velez, M.A. 2011. Collective Titling and Process of Institution Building: The New Common Property Regime in the Colombian Pacific. Human Ecology. Vol. 39, 117-129.
  25. 25. THANK YOU