Executive Summary

ACCORDING TO a former director of the UN FAO: "over the last two decades, massive tracts of virgin tropical forests have come under exploitation, in all three under-developed regions. That exploitation, with a few honourable exceptions, has been reckless, wasteful, even devastating. Nearly all the operations have been enclavistic, that is to say they have had no profound or durable impact on the social and economic life of the countries where they have taken place... Local needs are not being met; the employment opportunities are trifling. A significant part of the exports, as logs or as primary processed timber, is exported 'within the firm', and transfer values are fixed to facilitate the accumulation of profits outside the country... The contribution of forestry to improving the lot of the common people has been negligible so far".¹

With regard to decreasing the impact of logging company operations on forests and forest peoples, a number of voluntary, market-based initiatives have been put forward, including voluntary codes of conduct for the logging industry and forest certification. Experience indicates that the former are ineffective and the latter will, at best, influence only a small part of the international market. Neither are likely to prevent the continuation of indiscriminate logging unless there is effective national and international regulation, and a strengthening of civil society, including the recognition and demarcation of indigenous and other local peoples' land rights. The basis of a regulatory framework for the logging industry already exists in the appropriate legislation of many host countries, which provide the minimum standards by which logging companies should operate. In some countries, however, this legislation is flawed and rarely enforced and tougher, clearer legislation needs to be developed. Effective government monitoring and enforcement, and the strengthening of civil society, including NGOs and community groups, are pre-requisites to the successful implementation of regulation at both national and international levels. A useful mechanism to explore is that of the responsibility of the transnational's home country for its companies' activities abroad.

Malaysian-based logging companies are far from unique in terms of the negative social and ecological impacts that they cause in some of the countries where they operate. A case study of Malaysian-based companies is, however, of particular relevance for a number of reasons:

§ the companies' recent rapid expansion to a large number of primarily Southern countries, an expansion promoted by the Malaysian government;

§ the concerns expressed by the Malaysian government that the country's reputation is being tarnished by some of these overseas operations. Federal government ministers have publicly urged companies to operate within the law and to be sensitive to environmental issues in host countries;

§ some of the largest Malaysian logging companies, based in Sarawak, are barely controlled at home as a result of the long-standing ties between politics and business;

§ Malaysian-based companies play a significant part in the international trade in tropical logs and timber products;

§ Malaysia is a prominent actor within the G77 regarding multilateral negotiations on forests;

§ Malaysia is an influential member of the producers' caucus at ITTO.

Unilateral action will not be sufficient to solve the problems related to logging at the global level. Malaysia is well-positioned, however, to show vision in controlling its transnational logging companies through providing an enforced regulatory framework within which its companies can operate, both at home and abroad. This would help to demonstrate Malaysia's commitment to South-South co-operation which enhances, rather than exploits, the host country's resources and people.

Malaysia is an important player in the international trade in tropical logs. In this report, an initial attempt is made to assess and identify the extent of Malaysian logging companies' control of the forestry sector in several host countries, using data from concession maps and other sources. The impacts of the recent Asian economic crisis are significant for the continued operation of many of the companies mentioned, as they have resulted in a downturn in log production and the cancellation of logging agreements. This may provide some political space to develop ways to control and regulate the industry and offer opportunities to implement small-scale, high-value community-based forest management in the future.

The political and legal frameworks of several countries where Malaysian-based transnational logging companies operate are weak and susceptible to influence from corporate interests. In the Malaysian state of Sarawak, home to some of the largest Malaysian-based transnational logging companies, politics and business are tightly bound. Due to the federal structure of the government, forests are controlled by the respective states. The constitutionally more autonomous nature of Sarawak worsens the situation. As a result, legislation has been changed to support logging and undermine the rights of forest peoples. A number of opponents of the logging industry have had their freedom of movement seriously curtailed.

Host countries often negotiate deficient contracts with overseas logging companies, granting tax holidays and other clauses which result in little or no benefit to the country as a whole. There is also a lack of transparency in the allocation of logging concessions/licences, which are often secured through political patronage rather than being in the broader national interest. The monitoring and enforcement capacity of most national governments is inadequate, with companies operating unchecked or under poor or non-existent forestry management plans in many cases. This has facilitated the negative excesses of the logging industry, including irreversible damage to forests, and illegal logging and trade. Information about companies' social and environmental impacts is gradually becoming known in large part due to the efforts of civil society at the local, national and international levels.

The disproportionate influence of the industry on policy development has led to widespread conflict over land rights in countries where large-scale logging occurs, as communities who have accessed forest resources for their subsistence and local needs find themselves excluded from areas which have been awarded, without consultation, as forest concessions. The subsistence livelihoods of many of these communities have been pursued within traditional customary rights over land and resources. Often, changes to land policy and land rights effectively criminalise traditional practices or bring local communities into sometimes violent conflict with loggers, who are often protected by police or other officials.

The negative social impacts caused by industrial logging are all too often overlooked in assessments of the damage caused by logging, particularly the high numbers of people affected, the wide-reaching nature of the problems created in people's lives and the potential costs in economic terms of replacing the lost benefits provided by forests. Logging results in declining food sources, such as wild game, fish, fruit, nuts and other edible forest plants. Damage to rivers and streams pollutes the most vital resource for survival—clean water—and undermines traditional agricultural methods. Local peoples' health often suffers as a consequence, with malnutrition and the spread of viral diseases becoming more prevalent in logged areas. Healthy, local cash economies based on non-timber forest products are eroded, even though they benefit local people both economically and socially far more than large-scale logging. Changes in social stability are profound, with women and children often suffering the most. As a result of these changes, conflict within communities is exacerbated. Opposition to logging at the local level has often resulted in violence, and sometimes death.

The culture of secrecy which surrounds logging operations and their ownership in many countries has generally ensured that the companies often operate without scrutiny from either government or civil society. Reliable independent information concerning corporate operations both within Malaysia and in the host countries is difficult to obtain and verify.

Informal networks are being established amongst parts of civil society (especially community groups and NGOs) both within countries and internationally to exchange information and to campaign against the negative impacts of indiscriminate large-scale logging. These networks are often the only source of information on companies' activities and provide vital input to the debate on the protection of forests to local communities, national governments and international fora. In the face of destructive logging practices, a number of community-based groups are taking development initiatives into their own hands. They have already shown that both they and the environment can benefit.

We hope that the conclusions drawn at the end of the report (see Conclusions) will help strengthen the movement towards socially, ecologically and economically sustainable forest management.