LEGAL AND REGULATORY ENVIRONMENT AFFECTING THE VALUE CHAINS

3. Legal and Regulatory Environment Affecting the Value Chains

PLanTaTIon WooD Harvesting, transporting, and marketing of planted wood are key hurdles among CBFM agreement holders (POs) and private plantations within Leyte Island, and could mirror what might be happening nationwide. The processing of permits for harvesting/cutting and transport are considered bottlenecks that negatively affect many of the functions along the wood value chain. The harvesting, transporting and marketing of planted wood are primarily governed by DENR Memorandum Circular (DMC) Nos. 1997-09 and 1999-20, DENR Administrative Order (DAO) Nos. 200021 and 2004-04 for trees planted in private lands. For CBFM areas, the guidelines were initially provided for by DAO Nos. 1996-29 which were subsequently amended by several administrative orders thereafter, such as DAO 1999-29, 1999-35 and 2000-29. » annEx I: ThE TITLES anD bRIEf DESCRIPTIon of ThESE PoLICY ISSUanCES. » annEx J: a SUmmaRY of ThE REqUIREmEnTS foR REgISTRaTIon, haRVESTIng, TRanSPoRT anD DISPoSITIon of TImbER, naTURaLLY-gRoWn oR PLanTED, foR PREmIUm anD non-PREmIUm haRDWooDS anD foR faST-gRoWIng PLanTaTIon SPECIES).

DMC 1999-20 governs the registration, harvesting, transport and marketing of wood and by-products coming from tree plantations within private lands. Tree registration is encouraged for all private tree plantations, although in reality, it has become almost a requirement that all tree plantation owners who intend to sell and transport their logs outside of their respective plantations must comply with. Tree registration was presumed to make the processing of documentation requirements for future harvesting and transport of timber/lumber from private lands much easier (DMC 1997-09). To register the tree plantations, the following documents are needed (DMC No. 97-09):

(1) Letter of intent, (2) Certified photocopy of either certificate of land Ownership Award (CLOA), Land

Title or Tax declaration of untitled alienable and disposable (A&D) lands with pending application for titling, (3) Certification of tree plantation ownership from the Barangay Captain or Municipal

Mayor, and (4) In cases where tree planter/applicant is not the sole owner of the land, an authorization to do so from his/her co-owner.

Registration can be done for newly established, fully established and mature plantations. According to DAO 2000-21, the harvesting of registered non-premium tree species did not require a cutting permit except for the planted premium species for which a special private land timber permit (SPLTP) is prescribed. However, the non-requirement of a cutting permit for all tree species, even in private lands, has been suspended under the administration of the current DENR Secretary (as per March 10, 2009 dialogue with the RED of Region 8). In the case of naturally-grown trees in private lands, their cutting, gathering and utilization were also previously governed by DAO 2000-21 and a special

The transport of harvested forest products required documents as stipulated in DMC 99-20. Before transporting, the owner of forest products must secure and accomplish the self-monitoring form (SMF) which should be assigned with a control number by the CENRO concerned. Prior to the release of the SMF, the CENRO personnel would have to inspect the tree products to be transported. SMF would suffice as a transport permit but it should be accompanied by a photocopy of the certificate of tree plantation ownership (CTPO) during transport. With the SMF, the marketing/disposition of wood and wood products was presumed to have no further restrictions provided the wood was supplied to legitimate buyers. The goal was to provide benefits to the tree plantation owners as a form of recognition of their participation in the government’s tree planting program. But the status of SMF as a transport document for harvested trees from private lands has also been recently suspended.

Upon completion and submission of all documents to the CENRO concerned, the farmer would still have to wait for at most one month before he or she would get an approved cutting and transport permit. But the duration would depend on the volume to be harvested and species. For larger volumes, approval would be done at the higher level of DENR and additional documents would have to be submitted. This also meant a longer waiting period before getting an approval.

In 2000, the DENR issued Administrative Order No. 11 revising/updating the manual of approval, which contains, among others the delegation of authority in the different levels of DENR pertaining to documents dealing with the utilization of forest resources (» annEx K). The protocols and signing authorities greatly depend on the type of activity and the volume of harvestable wood or forest products. As commonly experienced by private land plantation owners and POs in CBFM areas, the processing of some documents would take considerable time because approval had to be done by higher DENR authorities (e.g. by the PENRO, Regional Executive Director, or even by the DENR Secretary). Thus, there had been cases where the applicants had to wait for long periods before relevant documents were signed that would enable them to legally benefit from the fruits of their labor.

In 1999, an administrative order entitled “Revised Guidelines in the Implementation of the Resource Use Permit in Community-Based Forest Management Program” was issued (DAO 1999-35). Among others, DAO 1999-35 bans commercial logging in natural forests within CBFMA areas. This was amended by DAO 2000-29 which further regulated the harvesting and utilization of forest products within CBFMA areas. DAO 2000-29 had set the basic requirements for forest resource utilization which included an (1) affirmed CRMF, (2) an affirmed AWP, (3) ECC and (4) RUP.

Previously, as provided for in Section 2, DAO 1999-35, an affirmed work plan shall serve as a permit to sell logs, lumber and other forest products to legitimate buyers but this was superseded by DAO 2000-29 which stipulated that the RUP shall serve such purpose instead.

Resource Utilization Permit (RUP) is necessary to harvest the planted trees legally. Based

on responses from the interviewed POs in Leyte, the prerequisites that have to be complied with prior to the issuance of RUPs are the following:

(1) assessment performance evaluation report (through criteria and indicators - C&I); (2) harvesting /marketing /replanting/ rehabilitation plan; (3) inventory report in universal transverse mercator (UTM) blocking; (4) cutting map in UTM (operational map & plan); (5) Environmental Management Bureau (EMB) clearance - certificate of non-coverage; and (6) self-monitoring form.

The authors attempted to locate the administrative order upon which these requisites were based but we could not find the corresponding issuance.

In an apparent effort to simplify the procedures in the processing and approval of CBFMAs, CRMFs, AWPs and RUP, DENR released DAO 99-29 amending the DAO 96-29 provision requiring endorsement/affirmation by concerned LGUs and other government agencies of such documents. Instead, the concerned LGUs and government agencies would simply be provided with copies of approved CBFMAs, CRMFs, AWPs and RUPs for their reference in assisting DENR and concerned POs in the implementation of CBFM programs. In 2003, however, DENR backtracked in relaxing the requirement regarding LGU participation in the approval process when it issued DAO 2003-11. The latter administrative order stipulated that all applications for CBFM would have to be endorsed individually or jointly by concerned legislative councils of barangay, municipal, or provincial local government units depending on the jurisdiction/coverage of the area.

CBFMA holders in Leyte Island have to endure the cumbersome processing of documentary requirements and permit applications. The POs that had gone through such process complained of: (1) technical difficulties in accomplishing the required documents; (2) time consuming process of approval; and (3) costly documentary requirements.

DENR personnel have different levels of understanding and varying interpretations of their organization’s policies vis a vis harvesting, transport and marketing of forest products. Laws and policies were imposed and implemented in accordance with the personnel’s own understanding of the rules. Consequently, farmers received different instructions, recommendations, suggestions, and pieces of advice on how to accomplish the documentary requirements. Often, the POs had to deal with presumed changes in documentary requirements and processing systems, particularly while in the midst of waiting for the approval of submitted documents (e.g. when there is a new office head or a change of leadership). In effect, POs had to go through the tiresome process all over again, with additional time-consuming and costly documents to fulfill.

There is an existing regulation, DAO 98-43, which exempts CBFMA holders from the payment of administrative fees such as application fee, license/permit fee, service fee, rental fee and other fees such as oath fee, appeal fee and authentication fee. The DAO explained the policy on the basis of “POs, being the poorest of the poor, (are) having difficulty in the payment of forest charges and administrative fees, resulting in their inability to take advantage of the opportunities provided, or resulting in unprofitable operations.” Thus, while it was acknowledged at the highest level of the DENR administration when the CBFM program was established, the recognition of the need for POs to economically gain from their activities in CBFM areas seems to have be fallen into oblivion not only among some field DENR personnel in Leyte but even in the succeeding

Upon completion of all documents, POs would then face the prospect of indefinitely waiting for approval of their application. The usual time duration experienced by Leyte POs, from processing up to the final approval of the RUP would be at least two years, with one PO reporting to have waited six years until the first RUP was approved. Some of the PO key informants lamented that the entire permitting process is disadvantageous and counterproductive, thereby preventing POs from earning good income from their tree plantation within a reasonable period of time.

Despite the difficulty of pursuing actions in accordance with policy regulations, farmers were still keen on harvesting the planted trees to earn revenues from their undertakings. Some farmers alleged that they had to pay grudgingly “SOP” (“standard operating payments”) and several other undocumented fees while processing the required documents in order to fast track the permitting system. Farmers still hope to earn income from their labor, as a government “partner” in reforestation projects while foregoing other incomeearning activities. This appears to be a strong motivating factor that has sustained the farmers’ interests in the CBFM program.

The production sharing system of the proceeds of forest resources utilization among the different stakeholders within CBFM areas also needs to be scrutinized. The production sharing agreement with POs in the harvest of forest plantations owned by the government inside CBFM areas is prescribed by DAO 98-42. By definition, government-owned forest plantations include all reforestation/forest plantation projects administered/established by DENR like TLA, IFMA, SIFMA, ITP, CBFMA and other reforestation or plantation projects established with governments funds. Section 4 of DAO 98-42 provides that “The products or income derived from the utilization of government owned forest plantations shall be shared as follows: a. For the People’s Organization – 75% of the gross sales b. For the Government – 12.5% of the gross sales c. CBFM fund (created under sec.8 of EO 263) – 12.5% of the gross sales.”

Unfortunately, the sharing system practiced in Leyte presumably brokered by the CENROs assisting the POs, was not in consonance with what is provided for in DAO 98-42 (see Table 11 below). The exact amount could vary from one CENRO to another but more or less, the per cent sharing is approximately the same.

As per Republic Act (RA) 7161 of 1991, planted trees and other forest products harvested from industrial tree plantation areas and in private lands covered by existing land titles and by approved land applications are exempted from the payment of forest charges. This is reiterated in Section 2 of DAO 96-29, which includes in the list of incentives to POs, exemption from the payment of forest charges on timber and non-timber forest products harvested in plantations. On the other hand, naturally growing timber in public, alienable and disposable, and private lands will be assessed corresponding ad valorem tax taking into consideration production cost, species and grade of timber, government share, tariff duties, taxes, risk involved and a reasonable margin of profit for domestic and export market prices for wood and wood products (RA 7161). However, based on the scheme shown in Table 11, where the total share collected from farmers (government share and monitoring cost) amounted to almost 37.5% of the farm gate price of wood, it seemed that being exempt from paying forest charges had not made a significant difference in alleviating the financial burden of POs Monitoring fees are not prescribed by the

permitting guidelines but are paid for by POs to cover the per diem of some officers due Table 11. Production sharing system from forest plantations in CBFMA arto the limited funds of the government for field work. eas in Leyte Island.

PO share Details

Amount (Php/bd ft)

3.50

Per cent (%)

29.2

Government share (in lieu of forest charges)

Monitoring cost (CENRO, PENRO)

3.00

1.50

25

12.5

Operating Cost (Felling, bucking, hauling)

TOTAL (buying price per board foot)

4.00

12.00 33.3

100

Table 11. Production sharing system from forest plantations in CBFMA areas in Leyte Island.

RaTTan Activities in the rattan value chain that are seen to be affected by existing legal and regulatory structure and procedures are those associated with harvesting, trade (transport), and marketing functions. As in plantation wood, farmers in CBFM projects encounter difficulties in securing permits to harvest rattan canes that a number of the POs in Leyte still claimed to be abundant in their respective areas. Based on the conducted interviews, not all POs have enough planted rattan, hence, those that have engaged in rattan harvesting probably rely on augmenting their stock with naturally grown rattan. Farmers also appear to prefer naturally growing rattan to planted stocks, alleging that planted rattans are poorer in quality than the ones that grew naturally.

To harvest rattan legally, POs must secure a resource utilization permit (RUP) for rattan from the DENR through the CENRO that has jurisdiction over their area. The requirements are the same as for timber, which means that the documentation work, processing time, and costs incurred were almost insurmountable for most of the POs. In fact, POs that have several planted rattans complained that their rattans were already being poached by those who have engaged in illegally harvesting the resource. They alleged during the workshop that illegal harvesting was being done by gatherers coming from adjacent POs who were encroaching into their respective areas, and then sell the rattan canes without the necessary permits.

Hence, there are two types of rattan producers identified in Leyte. The first consists of those who cut or harvest rattan legally with the corresponding permits from the DENR to do so. The second group are those who cut/harvest illegally, i.e., without the necessary permits. The latter can be legitimately growing rattan within the CBFM area

but could not or would not secure the necessary permits, either for failure to comply with the requirements or for inability to get permit renewals due to alleged violations in the past. Possibly, there is another group which consists of rattan gatherers who neither plant nor secure the required permits to harvest rattan canes. For obvious reasons, it is difficult to determine how many fall in this category of rattan gatherers. Some farmer participants mentioned in the workshop that it was probably more profitable to engage in illegal harvesting rattan than to do so legally.

A specific national policy that governs the production and utilization of rattan is DENR Administrative Order (DAO) No. 04 series of 1989. DAO 1989-4 stipulates that the government’s objectives as far as rattan resources are concerned are: 1) To ensure the sustainable productivity, expand availability, and access to rattan resources for the continuing support to dependent industries and the generation of employment opportunities and revenues; 2) To provide a system of rational harvesting, and gainful and efficient utilization of the resources; and 3) To rationalize the industries, which are dependent on rattan as primary raw material.

Thus, on paper, the policy on rattan is designed to promote social justice (equal access to natural rattan resources), productivity of the resources, application of their true value (disposal of the resources only if their disposal generates enough funds for their renewal), and efficiency in resources/conservation/utilization (Revilla, 1988).

Rattan may be cut, gathered, transported, and disposed only through a license issued by the DENR. The license has a 10-year duration with the option for renewing for a similar period at the option by the Department Secretary. The renewal of such license may be done only upon proof that sufficient rattan plants are still available for harvesting to warrant a viable and economic operation. The renewal of the license is based on the satisfactory performance of the operators and their compliance with the terms and conditions set by the license. Such license to cut and gather naturally grown rattan from forestlands and other areas shall be granted only through a public bidding.

Production of raw rattan poles shall be regulated in such a way that it shall not exceed the annual sustained yield capacity of the rattan resource. The sustained yield cut that may be granted annually is determined using the following formula (DAO 89-4):

× f where:

SYC = sustained yield cut in lineal meters on annual basis A = forested area in ha D = average density per hectare in lineal meters r = rotation period for 15 years f = 0.85 (recovery factor)

DAO 89-4 had set the limit for rattan license area at an Annual Allowable Cut (AAC) of 50,000 lineal meters.

Government encourages the planting of rattan to supplement the dwindling supply from the natural forests. Forestlands that had been declared available for rattan plantation development include brush lands and open lands, second growth forests, and forest tree plantation development projects or existing government reforestation projects.

To encourage the establishment of rattan plantations, the holders of the lease were supposed to be given the following incentives:

a)

b)

c)

d) The minimum rental fee of PhP 0.50 per hectare shall be imposed provided that there will be no rental fee payments for the first year of the lease; Provision of rattan seedlings at production cost and free technical assistance by the DENR field personnel; Forest charges on the rattan cut out of the plantation shall be 50 percent of the regular assessment; and Rattan raised in plantation belongs to the lessee who shall have the right to sell, contract, convey, or dispose of the said rattan in any manner he sees fit, in accordance with forestry laws, rules, and regulations, provided that the exportation of raw rattan canes shall not be allowed.

To sustain rattan plantation development, the collection of a specific amount from holders of cutting licenses in the form of Rattan Special Deposit (RSD) was introduced. The RSD would constitute a trust fund deposit to be treated in accordance with Section 65 and 66 of PD 705 as amended. It was supposed to be used for the replanting of areas with rattan pursuant to the conditions of the rattan-cutting license. But none of the POs interviewed in Leyte that were planting rattan indicated that they were able to collect any amount from the RSD to support their rattan plantation development work.

bamboo There had been only a few policy issuances from the DENR that are pertinent to or specifically focused on bamboo. In 1986, then Ministry of Natural Resources (MNR) (now the DENR) issued Ministry Administrative Order (MAO) No. 37 pertaining to the ban on the cutting of bamboo in Laguna and Rizal provinces. It was aimed at stopping illegal gathering of bamboo and all other activities related to bamboo cutting in the two provinces.

DENR Administrative Order No. 58 dated August 5, 1987 recalled the telegram directive of then Minister Teodoro Q. Peña suspending the issuance of permits for the cutting, transporting, disposition, and utilization of anahaw trunks or leaves and bamboos in Regions 3 (Central Luzon), 4 (Southern Tagalog), and 5 (Bicol Region). This effectively lifted the restriction on the cutting, transporting, disposition, and utilization of bamboo and anahaw poles and leaves. Rescinding the ban was purportedly done to ensure continuous supply of these forest products to cottage industries and fish pen operators and other end-users.

DENR Administrative Order No. 31 dated June 24, 1991, known as the “Revised guidelines for contract reforestation” included bamboo as a reforestation species. The revised provisions included surveying, mapping, planning, and comprehensive site development; monitoring and evaluation; supplemental/alternative silvicultural treatment; reforestation costs and budgets; contract management and penal provisions. It also prescribed the ceiling cost and other requirements of bamboo plantation on a per hectare basis at a minimum survival rate of 80 percent. In view of its commercial/industrial importance, the use of bamboo in the establishment and development of industrial forest plantations

Just like rattan, bamboo is considered a non-timber forest product (NTFP), and as such, its extraction, utilization and transport are supposed to be regulated by the DENR. However, reality shows that it is not. In practice, no DENR permit is needed for extraction etc. During the workshop, it was pointed out from a DENR official that bamboo was not really exempt from such requirements.

Nevertheless, the apparent absence or relaxation of regulatory policies dealing with bamboo in Leyte has its own downside. POs interviewed revealed that the theft of bamboo poles was rampant and has been a common problem among them. Mature bamboo culms were prone to be stolen, both in CBFM areas and in private plantations.

» annEx L : a DISCUSSIon of SomE oThER PoLICIES ThaT aRE Common To PLanTaTIon WooD, RaTTan, anD bamboo.