The forestry sector has been vitally important to Myanmar. When the country was isolated by sanctions, the selling of logs and wood helped bring in desperately needed hard currency. Exports of forestry products in 2011, the year political reforms began, broke $1bn. However, since the reforms began, much has changed. Myanmar, now open, is less in need of simple foreign currency inflows. It has other priorities. At the same time, increased engagement with foreign groups, companies and governments has led to a rise in the awareness of how to better manage natural resources.
The result is a dramatic shift in export policies and gradual reforms of the sector and the institutions that work within it. In the near term, the transition has been disruptive in terms of exports and is potentially challenging in terms of total production. Yet over the longer term, the sector is set to become stronger and more sustainable as systems are put into place to better manage resources and as the relevant institutions shift emphasis from output to conservation and balanced growth.
A Long History
Myanmar has well-developed methods and practices for harvesting and maintaining forestry assets. An early selection system was developed in 1856 by Dietrich Brandis, a German national who worked with the British Imperial Forestry Service. The Brandis Selection System became the Burma Selection System in 1920 and later evolved into the Myanmar Selection System (MSS). The MSS is still in use today.
For a time, the 1894 Indian Forest Policy guided activity in the sector. It was followed by the Burma Forest Act, which was passed in 1902 and remained in force until 1992, when a Forest Law was passed. Forest Rules were enacted in 1995 and followed by the National Code of Practice for Forest Harvesting, 1998. Sustainable forest management practices have been utilised since 1995, while the Timber Certification Committee of Myanmar was established in 1998. In 2008, reduced impact logging guidelines were published.
The Ministry of Environmental Conservation and Forestry is the sector regulator and has been in charge of conservation since 2006. A number of other government and government-related bodies are also active in the sector, including the Forest Department; Myanmar Timber Enterprise (MTE); the Dry Zone Greening Department; the National Commission for Environmental Affairs; the Forest Resource, Environment, Development and Conservation Association; the Forest Joint Venture Corporation; and the Timber Merchants’ Association.
Despite the laws, systems, standards and institutions in place, the sector has not been well-managed in practice. Implementation started breaking down in the 1970s and by the time of the 2011 reforms the sector was facing serious problems. Less strict controls in the past allowed for the overproduction and sale of logs, and this practice was largely responsible for the decline in forest land. Observers note that production has remained high and that the resources are still under threat since the 2011 reforms began.
It is estimated that the country has been losing 465,388 ha of forest a year, about 1.2% of its total. This is the equivalent of an area the size of Brunei annually. Between 1990 and 2010, about 20% of the country’s total forest land, or 7.4m ha, vanished. Total forest land declined from 41m ha in 1975 to 30m ha in 2010, according to the UN Food and Agricultural Organisation. The Myanmar Times has reported that the country has the third worst rate of deforestation in the world, following closely behind Brazil and Indonesia.
Factors that lead to deforestation include the clearing of forest for agriculture, illegal logging and the clearing of land for infrastructure projects. Observers note that while the conversion of land to agriculture has been ongoing for years, the government has recently been aggressively pushing large scale industrial agricultural developments, and this has come at a great cost to forestry.
Industrial agricultural development has become a pillar of the new government. It is estimated that 2.1m ha of land has already been allocated to agribusiness, and the government is expected to allocate another 4.5m ha. No single initiative accounts for the conversion of forestry land. Rather, it is the result of exemptions, loopholes and permits.
The industry publication Forest Trends notes that while Myanmar has a well-established set of rules and regulations guiding forestry, it lacks an internationally recognised certification system. It adds that the authorities have failed to distinguish between timber harvested in official forest production areas and timber sourced as a consequence of areas being cleared for agriculture.
Myanmar is undertaking a number of significant reforms. Due to the lifting of sanctions and the emphasis on foreign direct investment and value added, the country has started to look more closely at its priorities when it comes to forestry resources. The sense is that harvest management and processing should be a high priority and that exports for their own sake should no longer be pursued, recognising the need for conservation.
The most dramatic policy in this regard has been the export ban. As of April 2014 it has been illegal to sell unprocessed logs overseas. Myanmar produces a wide range of wood-related products, from woodfuel to fine furniture, but historically almost all exports of forest products have been in the form of logs. In 2013, logs accounted about 90% of all forestry exports. Moreover, there was a concern that domestic capacity in forestry was not being properly utilised, that workers in the sector were underemployed and that, more importantly, processing was not being adequately developed in the country. “Since logs were available, there was very little investment in processing,” says Pawan Sharma, country manager of Mayar India, one the largest timber exporters in the region.
The country is also looking closely at illegal exports, which are estimated to make up about 75% of all timber trade. In 2006, facing international pressure, neighbouring China cracked down on illegal logging from its side of the border by banning people from entering Myanmar to log and preventing logs from crossing the border. Yet after 2012, as the country opened more to the outside world, illegal activities picked up again.
In January 2015, 155 Chinese loggers were arrested in Myanmar and 153 of them received life sentences, although they were later pardoned. Reportedly, some 1600 logs were seized in the raid in which the loggers were arrested. Government officials said that 10,000 tonnes of illegal timber had been confiscated during the first half of 2015.
Some of the most serious reform efforts are being undertaken at the MTE. The State Timber Board (STB), which pre-dated the MTE, was formed in 1948 and had a monopoly on teak extraction. Non-teak activities were nationalised in 1964. The STB became the Timber Corporation in 1974 and then the MTE in 1989. The MTE still has a monopoly on all aspects of teak harvesting and processing.
Private companies have been allowed in the sector since 1988 and are active in business involving non-teak species, although logging of all species is generally undertaken by the MTE. Private teak plantations have been allowed since 2004. Timber concessions have historically been short term, running from 1-3 years, making it difficulty for private companies to make significant investments.
The MTE reforms are comprehensive. It plans on reducing the harvest in 2015-16 so that it is in line with the annual allowable cut as set out by the Forest Department, while it also hopes to better manage production so that it more closely matches demand. Government-owned saw mills and other wood-related factories are to be transferred to the private sector. The MTE is to be corporatised and then eventually privatised. Yet the MTE notes that it cannot be fully privatised as it has responsibility over natural resources, and as such a government role in its operations is always envisioned. “Over the last two years the MTE has handed over some of it's factory management to private entities on a long term lease,” Sharma told OBG.
The MTE was added to the US Office of Foreign Asset Control Specially Designated National (SDN) sanctions list in 2008, which limited Myanmar’s ability to export its timber products. However in July 2014, the MTE was exempted from the SDN list for a one-year period, and this was then extended in 2015 for two further years, meaning that wood products from the MTE can be legally imported.
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