Georgia Forest Sector Rationalisation and Institutional Development Plan
Review of Proposals and Final Recommendations
RWA International
in association with
LTS International Ltd
22 May 2003 / Forest Sector Rationalisation and Institutional Development Plan for Republic of Georgia / RWA InternationalBeckets House
34 Market Place
Ripon
HG4 1BZ
UK
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Contents
Acronyms
Summary
1Introduction
2Review of proposals
2.1Ownership of forests
2.2Separation or integration of forest authority and forest management functions
2.3Management of the state forest fund
2.4Location of Forest policy and legislation functions
2.5Enforcement
2.6Annual harvest
3Transformation
4Conclusions
Annex 1: Workshop participants and consultation respondents
Annex 2: Summary of responses to consultation
Annex 3: SFD income and expenditure 2003 and forecast for 2004-2008
RWA InternationalForest Sector Rationalisation and Institutional
Review of Proposals. 22 May 2003Page 1Development Plan: Government of Georgia
Acronyms
cum sob / Cubic metres of solid wood measured over barkcum sub / Cubic metres of solid wood measured under bark
FSDC / Forest Sector Development Centre
FSRIDP / Forest Sector Rationalisation and Institutional Development Plan
GoG / Government of Georgia
IMF / Institute of Mountain Forests
IPP / Institute of Plant Protection
MAF / Ministry of Agriculture and Food
MEIT / Ministry of Economy, Industry and Trade
MENRP / Ministry of Environment and Natural Resources Protection
MF / Ministry of Finance
MIA / Ministry of Internal Affairs
PADP / Protected Areas Development Plan
SDPA / State Department of Protected Areas, Natural Reserves and Hunting Ranges
SFD / State Forest Department
SRP / State Representative of the President
WB / World Bank
RWA InternationalForest Sector Rationalisation and Institutional
Review of Proposals. 22 May 2003Page 1Development Plan: Government of Georgia
Summary
Initial proposals
1.RWA’s consultants’ initial proposals for restructuring, which were disseminated in the Consultation Paper on Restructuring Options dated 20 March 2003, envisioned a mix of state and community forest ownership. State forests outside the protected areas network would be managed by a single State Forest Management Enterprise with powers to engage in harvesting, processing and other commercial activities as well as continuing to licence use rights. Forests inside the protected areas network would continue to be managed separately.
2.Forest policy, legislation, supervision and enforcement would be vested in the Ministry of Environment and Natural Resource Protection (MENRP), though supervision and enforcement could be vested in a separate State Forest Service accountable to the Ministry. The State Forest Management Enterprise would be established as a legal body of public or private law with a Management Board accountable to an organ of the Executive Government. Research and education and training institutions would be developed in the direction and to the extent needed to support the new institutional framework during and after transformation.
3.The present system of licensing forest use and the adoption of administrative prices would be replaced with a system in which forest managers would determine what quantities to sell, to whom and at what price, within the limits of forest management plans approved by the MENRP. The State Forest Management Enterprise would be permitted to retain all the income it generated (subject to paying relevant taxes), which it would be able to invest in forest protection and management and new income-generating activities.
Feedback from consultation
4.Consultation revealed considerable support for these proposals but respondents also raised a number of concerns and suggested some alternative options. The main concerns were:
a)Restructuring should be designed to support Georgia’s forestry policy objectives. Major restructuring should be delayed until a national forestry policy and strategy have been developed.
b)The timetable for transferring ownership of the Local Forest Fund to communities should take account of the capacity of community managers and the State supervisory body.
c)There should be closer institutional connections between the Useable State Forest Fund and the State Forest Fund inside Protected Areas.
d)The amount of the timber harvested in relation to the annual allowable cut: estimates of the annual harvest vary widely, but it is clear that the figure is substantially higher than long term sustainable production.
5.The alternative models proposed by stakeholders were:
a)In relation to management of the forests presently managed by SFD:
One large enterprise with smaller, independent enterprises for the Autonomous Republics.
Multiple state forest enterprises with territorial responsibility coinciding with Georgia’s administrative regions.
b)In relation to forestry authority functions:
A Ministry of Forests that would have primary responsibility within the Executive Government for forestry policy, legislation, supervision and enforcement, perhaps also with responsibility for protected areas policy, legislation and supervision.
Consultants’ conclusions and recommendations
6.The consultants draw the following conclusions:
a)There is not yet a strong enough consensus on a new institutional model to guarantee sufficient support to implement radical change.
b)The chosen institutional model needs to support Georgia’s forest policy objectives; a national forestry policy and programme should be developed before radical change is initiated.
c)The future of Georgia’s forests is critically dependent on energy supply policy. Demand for fuel wood will continue to exceed sustainable harvest levels by a substantial amount for some years and there is little that radical restructuring can do to address this pressure.
d) The consultants also have reservations about the capacity of forest related institutions to manage rapid, major change.
7.These points argue against planning now for a future model that would require radical change and instead to strengthen the present system in such a way as to address the opportunities and threats that face Georgia’s forests while keeping open the possibility of moving to one of a number of different models in the future. The uncertainty of the country’s future territorial structure and the forthcoming Parliamentary election add considerable force to this conclusion.
8.The consultants recommend that transformation should begin by strengthening the main forestry authority and forest management institutions to improve their effectiveness and efficiency. Actions during this period would include:
Removal of duplications, collisions and ambiguities from the legal framework by amending relevant forestry related legislation.
Strengthening the MENRP’s capacity to carry out its forestry authority functions by: developing more effective and efficient systems for evaluating forest management plans, controlling forest management, enforcing forest law and monitoring forest extent and condition. Staff capacity and other resources should be developed to match them to need.
Strengthening the SFD’s capacity, in particular by:
Extending the powers of the SFD so that it may engage in harvesting timber and non-timber forest products and provision of services (eg. grazing, tourism) in order to increase income.
Abolishing the system of administrative price setting and enabling the SFD to sell products and services at market prices.
Applying a rebate of the order of 50% in the resource use taxes paid by SFD and enabling the SFD to retain all income from forest use after tax for investment in capacity building and protection and management activities.
Increasing the coverage of new style forest management plans to the greatest possible extent.
Internal reorganisation and developing staff capacity and other resources to match them to need.
Facilitating better management of the Local Forest Fund by assessing forest condition and managers’ skills and equipment needs, then implementing a programme to address needs.
9.During this initial phase of transformation, the Government of Georgia should engage with forest sector stakeholders to:
a)Develop a national forest policy and national forestry strategy.
b)Review options for more radical change in a second phase of transformation which would begin two to three years after the start of the initial phase.
10.The financing plan for the first phase of transformation will assume harvesting at a rate that may be substantially higher than the sustainable harvest; i.e. sacrificing some forest capital in the short term in order to be able to safeguard forest capital in the longer term. This is a scenario that should be considered during the development of a national forest policy, which makes that process all the more urgent. This approach will generate higher income to finance strategies to provide the rural population with energy and increased investment in forest protection and management.
11.We have made tentative estimates of the SFD’s income and expenditure for five years following the start of the first phase of transformation (i.e to 2008 assuming the first phase starts in 2004). The estimates indicate that gross income from the territories managed by SFD could be increased from 3.3 million GEL in 2003 to 18.8 million GEL in 2008. If the SFD pays 100% of resource use taxes to the State Budget, over the five years 2004-2008 the total additional “profit” (above the 2003 baseline) after paying resource uses taxes, income and other taxes would be around 16.5 million GEL; this is the amount available for strengthening. The cumulative additional payments to the State Budget amount to 25 million GEL. If the SFD pays 50% of resource use taxes to the State Budget, over the five years 2004-2008 the total additional “profit” after taxes would be around 29.7 million GEL. The cumulative additional payments to the State Budget amount to 16 million GEL. The consultants are of the opinion that strengthening will require the amounts generated by a resource tax rebate of 50%.
12.Looking ahead to the second phase of transformation, the consultants are of the opinion that the optimum future model is one or more state forest management enterprises established as legal bodies of public law with territorial responsibilities that complement the future regional governance structure of Georgia. State forest management enterprises established as separate legal entities and supervised by an organ of the Executive Government constitute the most widely adopted model in transition countries (e.g. Slovenia, Czech Republic, Poland, Slovakia, Estonia, Latvia, Lithuania, Hungary). as well as in western European countries (e.g. Great Britain, Republic of Ireland, Finland, Austria, Norway). Transition countries that have adopted this model have implemented it without the initial transformation phase that the consultants are proposing. We consider that this initial phase is necessary in Georgia for the reasons we have stated above.
RWA InternationalForest Sector Rationalisation and Institutional
Review of Proposals. 22 May 2003Page 1Development Plan: Government of Georgia
1Introduction
13.This document is an output from the Forest Sector Rationalisation and Institutional Development component of the Georgia Forests Development Project. The report presents the consultant team’s review of their proposals for a new institutional framework for the governance of the forestry sector. The review takes in account feedback from consultation with stakeholders.
14.The core proposals, which were set out in the component Interim Report and the Consultation Paper, were:
Separation of forest authority and forest management functions,
Cancellation of the SFD’s forest authority functions and strengthening of those functions within the MENRP,
Establishment of a new “state forest management enterprise” to manage the forests presently managed by SFD. Forests presently managed by SFD and SDPANR to be retained in state ownership; ownership of the Local Forest Fund to be transferred to local governing bodies and further areas of the State Forest Fund identified for eventual transfer to local governing bodies;
Removal of licensing of use rights from state regulation and state control of forest management maintained through management plans and environmental and people protection legislation;
Powers to supervise and control forest managers retained in a single state organisation and consequently to remove such powers from other institutions.
Second order proposals related to the future of the SFD’s five subordinate organisations, funding of forest management planning, extension, research, education and training, and public awareness.
15.Issues raised by the proposals were:
The nature of the state forest management enterprise (public body or private body, and if a private body a JSC or LTD).
The founder of the enterprise, functions of ownership over the enterprise, function of ownership over the state forests.
The vehicle of establishing the enterprises rights and responsibilities.
The composition of the Board of the enterprise and the process for appointing Board members.
Whether to establish a State Forest Service to be responsible for supervision and control of forest management organisations
The position of the SDPANR in the proposed system.
16.Consultation on the proposals and issues that they raised was carried out between 28 March and 22 April. The consultant team organised 6 consultation meetings (Box 1), arranged for the consultation paper to be made available from the CENN web site and invited written comments.
17.175 people participated in the consultation meetings[1] representing the Parliament, 11 Executive Government organs, 11 Region and District Governing Bodies, 20 non-governmental, education and private business organisations and 9 media organisations. There were 14 written submissions. The list of participants and respondents is at Annex 1 and their comments are summarised in Annex 2.
Box 1: Consultation meetings28 March, 2003: SFD Central and district office staff meeting, Tbilisi
30 March, 2003: NGO meeting, Tbilisi
01 April, 2003 : East Georgia regional meeting, Telavi
03 April, 2003: West Georgia regional meeting, Kutaisi
04 April, 2003: South Georgia Regional meeting, Borjomi
07 April, 2003: Central Government meeting, Tbilisi
2Review of proposals
18.Respondents focused most of their comments on the core of the future institutional framework and the timetable for restructuring, the latter being especially important in relation to the development of a national forestry policy. The timetable also needs to take into account the political uncertainty in the run-up to the forthcoming Parliamentary election scheduled for November. , the process of wider government reform, and related sector development projects, in particular the Protected Areas Development Project funded by the Global Environment Facility. Respondents commented on a number of other issues, the most important being the annual timber harvest from Georgia’s forests.
19.We begin this review by considering the core of the future institutional framework. We look first at the ownership of forests because the pattern of ownership plays a major part in determining the most effective and efficient framework of government institutions. Next we consider whether to separate forest authority functions and the function of managing state forests. Then we discuss how best to organise the management of state forests within the future model and where to locate the functions of policy and legislation, supervision and enforcement within a future structure, assessing each option against a number of criteria (Box 2). We then look at the financial flows out of forests and into forest protection and management. Lastly we discuss the transformation process.
20.We will develop other aspects of the model after a decision has been taken on our recommendations and we will include them in the Strategic Action Plan. These will include the future role of the Eco Police and other central government and local government organs, the future of SFD subordinate organs within the system, and strategies for research, education and training; these are support functions and therefore do not influence the decision on the future framework.
Box 2: Criteria for assessing elements of the modelCosts. These include transformation costs (the money required to establish the knowledge, skills and physical capacity required for the new model to operate effectively, including: staff training, relocation and redundancy; provision of office accommodation, vehicles, machinery and equipment) and operating costs (the money required to maintain the new model in an effective state.
Complexity of the transformation process. The more complex the process, the greater the risk that transformation will fail. Reasons for failure could include insufficient drive to tackle complex change or insufficient capacity across government to manage transformation. Complexity also affects the cost of transformation; for example, the cost of lawyers’ time to prepare new laws.
Ease of establishing effective connections and relationships between actors in the new model. Relationships and co-ordination between actors within an institutional model determine whether the model will be effective at achieving policy goals. For example, the position of forestry relative to other sectors in the Executive Government will effect the degree to which other stakeholders are supported and engaged in activities that contribute to the achievement of policy goals. The effectiveness of relationships will also determine the extent to which the model encourages and supports long term strategic sector economic development and private sector participation.
Stakeholder acceptability. This includes acceptability to the Parliament and key actors in the Executive Government, non-governmental organisations, private business and civil society.
2.1Ownership of forests
21.Several respondents expressed reservations about privatisation of forests, though this was not a significant aspect of our proposals in the consultation paper. We noted in the Interim Report that private ownership plays an important role world wide and that before the Soviet system more than 40% of Georgia’s forests were in private ownership. Now, however, private persons do not have the capacity to manage and the State does not have the capacity to enforce forest law in private forests. We therefore agree with the respondents’ reservations; transfer of the ownership of state forests to private persons should not be on the agenda for the time being.
22.In our proposals we envisioned forests in community ownership with a substantial part of the national forest fund remaining in state ownership for the foreseeable future. The only reservation about transfer of ownership to communities was in relation to the timing of the transfer, the MENRP arguing for a preparation period long enough to allow sufficient capacity to be built. In practice many local governing bodies are already operating with as much power as an owner over parts of the Local Forest Fund because Executive Government organs do not have the capacity to exercise the ownership rights of the State. The FDP does not have a detailed picture of the precise territories or condition of the Local Forest Fund, or of the capacity of the bodies that are managing it. The picture is almost certainly a mixed one, however, with some parts of the Local Forest Fund suffering from lack of protection and poor management while other parts may be faring better. Before substantial change in the tenure arrangements for the Local Forest Fund, the Executive Government and other stakeholders need to have more detailed information.