A FRAMEWORK FOR UNDERSTANDING THE IMPACTS OF ILLEGAL AGRO-CONVERSION AND NATIONAL OBJECTIVES FOR FOREST AND LAND AND TYPOLOGY OF ILLEGALITIES

Governments establish a legislative framework – policies, laws, and regulations – in order to best manage their resources. This framework should be developed to incorporate “good governance” principles, including: participatory and equitable policies and laws; transparent and efficient processes, reinforced by monitoring and evaluation; effective implementation that achieves policy objectives, including through enforcement where necessary; and accountability, including anti‐fraud and anti‐corruption mechanisms; all underlain by the application of the rule of law.

A country’s legislative framework should advance four primary and legitimate objectives of the state with respect to its forests and land.

First, the legislative framework should foster a stable economy through rational land use and the promotion of investment in optimum use of natural resources. The natural resource sector – and land in particular – can be used for purposes that are capable of delivering sustained value over time through self‐regeneration. This might be achieved through sustainable forest management, including timber extraction, extraction of non‐timber forest products, and promotion of eco‐tourism; or through the conversion of forests to other uses, including agriculture, when achieved with consideration of land rights, social and environmental impact, economic benefits, and food security. Good governance encourages investment that supports a stable economy, while its absence encourages risky practices with short time horizons that degrade the environment, inflame tensions with local communities, and exacerbate corruption, and land speculation that fails to generate the promised economic outcomes.

Second, a legislative framework will maintain ecosystem and cultural services, as forests for example provide clean water and air, generate raw materials and food, reduce soil erosion, provide habitat for pollinators and other species, and provide cultural and spiritual services for many communities and indigenous peoples. While not often part of the formal economy, the economic value of these services can be quite large, meaning they significantly contribute to citizens’ well‐being.

Third, the legislative framework should protect the rights of citizens whose lives and livelihoods depend on natural resources, including statutory and/or customary rights to ownership, use, and/or access to forests or forest products. Not only does this provide for and improve the lives of citizens – which is a primary purpose of government – it also serves to reduce internal conflict.

Finally, an effective legislative framework may generate tax and other revenues from sustainable and equitable land management that can be used to provide goods and services to enhance the welfare of its citizens. In the land sector, this may include both taxes (income, corporate, etc.) and royalties paid by operators to government for the right to use a public asset, including stumpage fees in the forestry sector and concession fees and land rental feels for conversion of forest to field. If the taxes, royalties, and fees are less than the value of the lost asset (market, ecosystem service, etc.) then the sector is effectively subsidized, and the “public good” suffers – even if someone is making money and/or creating employment.

When these objectives clash, trade‐offs must be made, and this decision‐making is inherently political. Such political decisions are made through a legislative framework where objectives become policy, which generates law, which in turn requires regulations for elaboration and implementation. These regulations serve as countermeasures to individual self‐interest, necessary to prevent the occurrence of actions that would adversely affect the “common good.” Thus, the legislative framework is a fundamental component of risk management meant to ensure the achievement of the national objectives. As such, violations—like illegal deforestation—undermine the national good. It is not only the violations themselves that do this, but also the failure on the part of government to enforce its laws and regulations. Where individual behaviour is at odds with this national interest/common good, compliance with the legislative framework is costly, thus requiring enforcement.

The government’s proper institutional objectives are not always the sole, or even the primary, drivers of decision‐making regarding how and when the “rule of law” is enforced. This is because “government” is made up of individual actors—politicians, bureaucrats, civil servants—whose self‐interest, or interest as a member of a privileged group, is often in conflict with the national interest. Corruption—the use of an official position for private gain—is one such conflict of interest. Corruption includes decisions by individual actors in government to manipulate the legislative process—including failing to invest in enforcement —in order to create conditions that allow them to exploit the system. This may include elite capture of the policymaking process so as to weaken regulations in a way that benefits the elites.

Corrupt politicians, bureaucrats and law enforcement undermine compliance with the law and thus the national interest in natural resource management by accepting or demanding inducements to allow commission of crime or for omission of duty, including inter alia:

# Inefficient revenue collection, when rent‐seeking or rent‐seizing officials use their positions to solicit bribes in exchange for permits, licenses, concessions, stakeholder interest, or allowing unrecorded/ undervalued production;

# Failure to implement best practices and sustainable management reduces long‐term availability of resources, ecosystem and cultural services;

# Inequitable distribution of costs and benefits, when investor protection is given primacy over human rights, property rights, and environmental policy; and,

# Financial crime and organized crime resulting from the above illicit activities or attracted to the forest sector for other reasons.

In other cases, operators undermine the national interest even without the compliance of corrupt officials. Where enforcement is lacking, fraud—the intentional deception, through concealment and/or misrepresentation, in order to gain an unfair or illegal advantage—can rob the state of revenue and result in unacceptable social and/or environmental impacts. In this way, weak governance feeds on itself, undermining democracy more broadly.

We now turn to the “rule of law” related to forest clearing for industrial agriculture by developing an “idealized” pathway, beginning with policy‐formulation, through to the actual harvest and removal of trees. With respect to industrial agriculture, a legislative framework based on the principles of good governance and implementing best practices with respect to industrial agriculture covers all steps in the following process, inter alia:

# Land‐use planning sets out why certain uses may occur in certain areas but not others, with participation of landowners, affected populations, and different levels of government.

# Changes of zoning, e.g., to allow conversion of forest to agricultural land uses, may be in the national interest. Such changes must be transparent and include public consultation.

# Land rights assessment, facilitated by a land rights cadaster (registry), ensures that there are no pre‐existing claims. Communities affected by proposed forest clearing are entitled under international law to free, prior, informed consent.

# A preliminary impact assessment ensures that the proposed use will not unacceptably undermine ecosystem services and/or community interests.

# Permitting is how government selects an operator. A competitive tendering process may be required, including financial, technical, and legal pre‐qualification; a performance bond may ensure companies meet their responsibilities.

# Environmental and social impact assessment (ESIA) follows with more detail and further consultations with affected communities. An avoid/mitigate/offset hierarchy is employed to optimize harm reduction. It should be in a company’s interest to align public expectations with reality to generate and maintain social license to operate.

# Mapping and field delineation demarcate the exact boundaries of operations, including setbacks where operations are to be avoided or are prohibited, and to map forest clearing blocks and assess timber volume and value.

# Prior to ground operations, companies report detailed annual plans, including impacts on communities, labor, security, and environment.

# Forest clearing takes place according to regulations related to the use of fire (usually prohibited), slash removal, appropriate soil preparation, and sale of wood.

# Government will require companies to pay taxes and royalties of various types throughout operations.

# Companies are required to compensate communities affected by operations, including those with usufruct rights.

Some countries also require “benefits sharing” with affected communities.

In land use as in other sectors, laws and regulations may be weakened by elite capture of the policymaking process, and the principles of “good governance” violated through capture of officials who weaken oversight, provide unnecessary tax breaks in the guise of incentives, and/or allocate permits to certain individuals over others—both in contravention of the public good.

Once the legislative framework is established, however, compliant behaviour—for good or bad—is, by definition, legal. Illicit operators may, however, offer—or corrupt officials may demand—payment (e.g., bribery, extortion, grease payments, hush money) in order to allow violations of law and regulations. Here we develop a typology of such crimes, in the rough order that they occur, related to deforestation for industrial agriculture.

1. Operators and officials may pervert the law or regulation in the allocation of conversion rights by:

# Manipulating the zoning process in order to improperly open up forests for conversion, including those with high

conservation value and/or claimed by local people;

# Failing to follow gazettement procedures, including failing to investigate pre‐existing use/ownership rights, and/or

ignoring indigenous/customary rights;

# Failing to consult and obtain community consent;

# Failing to compensate parties affected by industrial agriculture;

# Providing unfair advantage in the bidding/permit allocation process; and,

# Allowing fraud and/or failure in environment & social impact assessments (ESIA), mitigation efforts, and/or other

management requirements.

2. Operators and officials may undermine the permitting process by, inter alia:

# Committing fraud in ESIA management, including the actual assessment, as well as the avoidance and mitigation of harms, and in monitoring and reporting;

# Committing fraud in surveys of timber volume/value;

# Failing to map concession boundaries, including failing to identify and avoid set‐asides;

# Providing false information to communities and/or coercing/intimidating them;

# Failing to craft adequate social agreements and benefit sharing agreements; and,

# Failing to comply with labor laws.

3. Operators and officials may pervert the law/regulation during land clearing by:

# Clearing in advance of obtaining all licenses/permits;

# Illegal use of heavy machinery without proper licenses;

# Illegal use of fire to clear forest and slash, or accepting claims that third‐parties are responsible for fires related to

agricultural concession areas rather than the concessionaires themselves;

# Illegal use of mechanical soil treatment;

# Clearing outside concession areas and/or harvesting protected species;

# Clearing more than the legal maximum area of the concession;

# Clearing steep slopes, culturally important trees, and/or other no‐go areas; and,

# Trafficking illicit timber felled from any of the above areas.

4. Operators and officials may undermine law enforcement, including by, inter alia:

# Failing to inspect, monitor, and, where appropriate, indict law‐breakers;

# Manipulating evidence/witnesses/court cases;

# Violating judicial independence; and,

# Failing to enforce penalties (e.g., fines, court‐ordered compliance plans, jail time).

5. Operators and officials may commit tax evasion and other financial crimes, including:

# Fraud in reporting and tax returns such as false declarations or self‐assessments;

# Failure or falsification of audits;

# Improper transfer pricing;

# Underpayment of tax/royalties/fees & other penalties; and,

# Money laundering.

Half of all tropical deforestation is the result of the illegal conversion of forests to industrial agriculture. This process creates financial losses as it undermines a country’s natural resource management objectives, including economic activity to generate jobs, investment and tax revenue; production of timber and non‐timber forest products; the maintenance of ecosystem functions like water provisioning; and protection of the rights of indigenous people. Governments pursue these objectives through legislation, law, and regulation that— when effective—serve to limit operators who pursue private interest counter to national interest. When the rule of law is violated, the common good suffers. Illegalities undermine peace, security, and democracy itself, as agri‐business corrupts local elections, and forest clearing generates grievance among locals, often fuelling violence and conflict. 

Illegal deforestation costs host countries at minimum $4,000 per hectare from just three major classes of loss: tax evasion, the loss of ecosystem function, and conflict with forest communities. Globally, illegal deforestation for industrial agriculture generated losses of more than $17 billion per year during the early 2000s to forest countries, excluding the value of climate stabilization.

While the costs of deforestation to a nation are substantial, they are rarely borne by agricultural operators. However, often wealthy and politically powerful agriculturalists incur the costs of compliance when effective policies and laws to serve the common interest are in place and enforced. This conflict of interest between individual actors and the national good makes enforcement necessary, but rarely sufficient. Case studies suggest that halting illegal deforestation requires both enforcement and incentives – either positive incentives such as payments for environmental services, or negative incentives such as limiting market access to deforesters through supply‐chain approaches such as deforestation moratoriums. If forest countries follow this model in aggressive campaigns to halt illegal forest conversion for industrial agriculture, they would reap major economic benefits.

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