In 2002, Finland s Ministry of Foreign Affairs (MFA)

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1 report Finnish forestry aid fails to deliver For the past five decades, companies and government agencies of Finland have been active players in tropical forestry worldwide. Since 1965, Finnish forestry industry exports have often been subsidised by the government s official development aid. Now, as the Finnish Government is preparing its new aid policy on forestry, the aid provided to the sector during the 1990s has been evaluated. Timo Kuronen summarises the evaluation findings and questions whether the evaluation actually evaluated anything at all. In 2002, Finland s Ministry of Foreign Affairs (MFA) decided to evaluate its development assistance in the forestry sector. This marked the first time in almost 40 years of forestry sector aid that the results of this aid would be evaluated. The evaluation was to support the revision of the MFA s forestry aid policy or Forest Sector Cooperation Guidelines to follow the Millennium Development Goals adopted by the United Nations General Assembly in June/ Sept The MFA allocated a budget of 253,000 euros for the evaluation process, and awarded the contract for the evaluation of Finnish forestry aid during the 1990s to the Scottish consultancy firm LTS International Ltd. The evaluation report was released in March According to the Terms of Reference (TOR), the main objective of the evaluation was to provide the basis for improving future aid policy in the forestry sector. Lessons learned from the past cooperation, apparent best practices and clear recommendations were needed. The evaluation had to cover both the action in partner countries and the guiding policy and mechanisms of delivery and administration. The evaluator had to analyse the forestry sector aid s impacts in relation to fulfilling the three main goals of Finnish development cooperation: 1) alleviation of widespread Timo Kuronen works with KEPA, an NGO umbrella organisation in Finland, and has been working with the Foundation for Ecological Recovery in Thailand for the past five years. He can be contacted at timo.kuronen@kepa.fi poverty; 2) prevention of global environmental threats; and 3) promotion of equality, democracy and human rights. Beneficiaries of the Finnish forestry interventions had to be clearly identified. Key informants for the evaluation were identified as government officials at various levels, women and men of local communities, NGO personnel, consultants, and other donor agencies contributing to the forest sector development in respective partner countries. What did the evaluation find out? The Evaluation of Finnish Forest Sector Development Co-operation lists its main findings as follows: 1. Sound but isolated technical projects; 2. Limited coherence but good relevance; 3. High calibre technical competence; 4. Limited complementary skills; 5. Unwillingness to mentor; 6. Complex MFA and aid delivery institutional landscape; 7. Very superficial problem analysis resulting in failure to address key issues of poverty, livelihoods; and gender and equity; 8. Weak monitoring of impact compared with monitoring of input use; 9. Misunderstanding of forestry as simply part of environment; and 10. Lack of impacts on wider goals. Page 52 Watershed Vol. 9 No. 3 March June 2004

2 These findings are summarised below. Technical projects were sound but isolated (1.,2.) The evaluation found out that the Finnish forestry projects during the 1990s tended to be technically sound, but essentially they were too isolated from wider issues. Such projects may be described as operating inside a bubble, remote from the wider natural resource and developmental environment in which they are placed. Technically sound but isolated might be attributed to the fact that forestry engineers were often in charge of implementing the projects. TA staff were mostly competent but unwilling to mentor (3.-5.) The interviewed people told the evaluators that the personal and technical skills of Finnish consultants were high. In few cases, personnel appointments were made that were not appropriate. Because project delivery is contracted to consulting companies, they often propose individuals for certain positions because they are available rather than because they are ideally suited for the job. Due to auditing and management control standards of MFA, expensive consultants spend substantial amounts of their time on financial control and reporting. Finnish consultants were criticised because they were reluctant to share their knowledge or assist local staff and counterparts to develop their skills and knowledge. Ministry and consultant companies keep losing information (6.) According to the evaluation, there is little institutional memory within MFA in Helsinki. The information relating to specific projects stays with the individuals and companies who have been involved in implementation, rather that within the MFA. Information files on individual projects within MFA is very limited and it was difficult for the evaluators to access. Additionally, the responsibility for project delivery is not clear-cut. Contracting companies have responsibility for delivering inputs and achieving outputs, the MFA for monitoring progress and the embassies for steering projects in conjunction with local partners. The present arrangements appear to rely too heavily on haphazard personal links, rather than documentation and a transparent process. The rapid expansion of forest industry in Finland after the World War II led to exports of forestry machinery to various tropical countries in 1950s. Finnish development assistance in the forestry sector began in 1965 with training in mechanical wood processing in Africa. At that time, the Ministry for Foreign Affairs (MFA) was openly combining the provision of political support to supporting trade for Finnish companies. In 1972, the establishment of an independent department (Finnish International Development Agency, FINNIDA) within the Ministry introduced some separation of aid from political and trade objectives. Between 1972 and 1992, growing Finnish aid funds were used for enlightened self-interest development assistance that supported Finnish industry and companies. During the 1980s, the focus in forest aid gradually shifted from wood industry and forestry training towards planning and institutional development, in accordance with the guidelines of the UN-supported Tropical Forestry Action Plan. By 1994, Finland had financed or cofinanced 13 Forestry Master Plans or National Forestry Action Plans globally. Severe economic crisis in Finland in the early 1990s led to a sharp decrease in aid money. In order to support both entry into new market areas and economic growth at home, the new aid policy focused on selected certain Finnish exports, including pulp and paper technology, that would be combined with development assistance programmes. This aid policy coincided with the booming economies in Southeast Asia, and Finnish exports to Indonesia and Thailand were supported in the form of interest subsidies for export credits and credit guarantee. At the end of 1990s, Finnish firms, including Stora Enso and UPM Kymmene, took advantage of the Asian economic crisis to acquire shareholding in many major Southeast Asian pulp and paper companies. Watershed Vol. 9 No. 3 March June 2004 Page 53

3 The small size of the forestry sector in Finland, and the pattern of movement of individuals between forestry companies and the MFA, means that there is considerable overlap in terms of the individuals involved in any project. Due to significant concentration in the forestry-consulting sector in Finland, it will become increasingly difficult to find independent Finnish consulting companies to undertake activities requiring independence such as monitoring, review and evaluation. This explains why LTS International Ltd., a company based in Scotland, did the evaluation of Finnish forestry sector aid. Problem analyses failed to address poverty, livelihoods, gender and equity (7.) Finland has a forest history with considerable rural poverty and forest dependency. According to the evaluating team, it is surprising that very little in terms of background and experience from this has been translated into overseas forestry development. Two critical areas, social and economic, appear to be poorly represented in nearly all the field projects reviewed. The result of this is poor appreciation of the situation within which the project takes place, weak baseline information and at times unimaginative strategies. Linked to this is a general lack of confidence when faced with criticism. The level of knowledge of social development in relation to strategies such as collaborative management seems weak. Lacking is the information how the proposed interventions will impact on different groups. Awareness of natural resource economics, especially where livelihoods issues dominate and subsistence use of resources is prevalent, seems to be limited. Money was monitored, not the impacts (8.) Monitoring of the progress and impacts of the individual projects at MFA is left to advisers. Currently there is only one Forestry Adviser within MFA who handles the bulk of the bilateral programme. He cannot be expected to be sufficiently familiar with all projects to provide detailed guidance and has relatively little authority to make changes. The evaluation reasons thus progress is being judged too heavily by input delivery instead of by project results and impacts. The overall summary of projects shows high efficiency (= disbursement) but somewhat less good effectiveness (= output). Most importantly, it shows limited impacts in most cases, illustrating the tendency for projects to be too small, isolated and disconnected to be effective. Forestry was understood as environment (9.) The evaluation team perceives that within Finnish aid, Forestry has been subsumed within the wider theme of Environment. Forestry has been seen as primarily relevant to the environment ignoring poverty, governance and rights issues other than rather superficially and rhetorically. Wider development goals not reached (10.) As for the wider impacts, the evaluation found out that in terms of rhetoric forestry was relatively consistent with Finland s wider development goals (poverty reduction, prevention of environmental threats; and promotion of equity, democracy and human rights) but the impact other than on the environmental goal was extremely limited. Overall, the finding is that forestry-based interventions are valid for Finland but a much wider vision is required. Important issues such as gender and livelihoods, as well as governance, have not been included yet. Evaluation of the projects in the Mekong Region The evaluation gave the following comments on the projects in the Mekong Region: The Master Plans were comprehensive documents and provided a solid base for forward planning. However, the lack of impact from them appears to be that the tool provided was inappropriate. Although the Thailand Master Plan has provided some guidance, it has not been used to the extent required to justify the cost of its creation. The US$4.7 million Thai Forestry Sector Master Plan (TFSMP) aimed to formulate a national level master plan for the development of the forestry sector in Thailand. Despite its wide-ranging issues, the TFSMP had an overwhelming bias towards planning for the development of industrial forestry and the pulp and paper industry and formulating the relevant policies and developing institutions to implement the plan. The plan recommended handing almost 3.7 million hectares of land for companies or contact farmers for fast growing tree plantations. Page 54 Watershed Vol. 9 No. 3 March June 2004

4 Thai NGOs and community groups opposed the plan, asking Finland to withdraw from it. In 1995, as a response to criticism, FINNIDA commissioned the World Conservation Union (IUCN) to review the TFSMP. The review team stated, If implemented either partially or in full, the plan would have many widespread, permanent social, economic and environmental impacts. And, the project was established with serious flaws in its design and methodology. The master plan was never formally presented to Thai Cabinet for approval. The TFSMP was done by Jaakko Pöyry Consulting, with Finnish grant aid between 1990 to The Concessional Credit [to Phoenix] brought about positive social and environmental impacts and made use of leverage to achieve these by guiding management and investment of private capital. Phoenix Pulp and Paper Co., in Khon Kaen province in northeast Thailand has been the largest-ever beneficiary of interest-free credits (US$91 million) from Finland. According to FINNIDA, the construction of the second pulp line and waste water treatment plant was to bring positive development and environmental effects: more employment and income for eucalyptus farmers, and less effluents discharged from the mill despite the increased production. In reality, farmers have to carry the risks of growing the trees and supplying them to Phoenix on non-guaranteed prices. The plantation areas do not provide food or other non-timber forest products for local people. In addition, the wastewater problem of Phoenix was not solved with the credit. Jaakko Pöyry Consulting was contracted as the designer for Phoenix s new pulp mill, while equipment was supplied by the Finnish companies Ahlström, Sunds Defibrator and Valmet. The objective [of Pulp and Paper Training] was overambitious within a very short timeframe, and based on series of assumptions on the growth, consolidation and investment behaviour of the industry that have not held. This suggests that MFA should have been looking at alternative strategies to education to meet its overall objective. Between 1996 and 2003, Finland was funding the Pulp Phoenix Pulp and Paper Company in Khon Kaen, Thailand, pumps the treated water from the pulp mill into irrigation channels on its eucalyptus plantation. Farmers from fields adjacent to the plantation harvested their crops but found only empty husks and no rice. and Paper Technology Programme (PPT) at the Asian Institute of Technology in Bangkok. PPT s objective was to produce professionals for the Asian paper industry with knowledge of modern pulp and paper technology to develop a modern and ecologically balanced pulp and paper industry in the region. Knowing the problems of the Finnish economy in 1990s, a hidden objective of the programme might have been to train Asian engineering students to use Finnish forestry technology and thus increase the companies sales in the region. In Laos MFA found a way to maintain its presence despite institutional problems working in conjunction with other sources of investment [World Bank]. The FOMACOP project was a successful basis for future SFM [sustainable forest management] and rural development financed from the forest has been achieved. Watershed Vol. 9 No. 3 March June 2004 Page 55

5 Between 1995 and 2000, the Forest Management and Conservation Programme (FOMACOP) in Lao PDR was financed by the Government of Finland (US$5.6 million), the World Bank and the Global Environmental Facility. Its objectives were to promote sustainable forest management by developing forest and conservation policy and legislation, to promote village forestry, to improve the well being of villagers and to support biodiversity conservation. impact of the Programme has not been as significant as was originally anticipated. Together with the implementation of several of the Programme s components, the Programme has been very active in assisting local authorities in the land and forest allocation process and considered it as a precondition for the success of the Programme, particularly for environmental protection, forest management and poverty reduction. However, it is hard to measure exactly the extent of FOMACOP was halted after it ran into difficulties Clearly, the evaluation team realised that the the Programme s socio-economic impacts, partly because it has not been with the existing policy real beneficiaries of frameworks and on the evaluated adequately the forestry aid are consultants, issue of logging revenues with [a] suitable method from the areas managed government officials, forestry taking into account the by the newly established Village Forestry Associations. Several international NGOs were concerned on the nature of the village forestry: was the industry people, academics and international organisations. necessity of baseline data. Technical assistance for the VFFP was provided by Forest and Park Service of Finland, Jaakko logging by villagers undermining the traditional livelihoods and community forest practises? Another question: would Pöyry Consulting, Finnagro Ltd., and Viet Thong Co. Ltd., financed with Finnish forestry sector grant aid. villagers have been logging their community forests at all if FOMACOP had not been equating the sale of logs as development. Who are the real beneficiaries of Finnish forestry aid? The Finnish funding focused on the village forestry component of FOMACOP, with a consultancy contract awarded to Jaakko Pöyry Consulting. Other companies receiving contracts were CARE International and Burapha Consultants. The evaluation of Finland s forestry sector development assistance by LTS International pointed out some of the very same issues that the Finnish and Southern NGOs have been criticising Finnish forestry development assistance projects In Vietnam, there is evidence that on a limited scale the VFFP [Vietnam-Finland Forestry Sector Cooperation Programme] interventions have raised farmers income and there is some success in restoring forest cover. Like many similar donor-funded projects, it has failed to fully address the wider institutional context of replicability and constraints that exist on scaling up with the Government system. According to an independent analyst, Finland s support to the forestry sector is typically reflected in the VNFinFor Programme [VFFP] in Bac Kan province, which started in 1996 and is going to be completed in June The overall development objective of the Programme is to contribute to the sustainable rural development in Vietnam s mountainous region s through the integration of forestry activities in rural land-use and economic development. However, the for more than a decade. These key issues relate to poor planning, lack of knowledge of the complex social, cultural, economic and environmental issues in the recipient countries, and the questionable role of Finnish industry-based consultants as aid project implementers. However, LTS evaluation failed to fulfil the TOR demand of assessing the beneficiaries of the projects and include them as key informants in the evaluation process. Since most of the Finnish forestry projects have targeted rural communities, the evaluation team should have talked to community men and women affected by the aid. The team interviewed 170 people but the name list includes only one farmer in Vietnam. Clearly, the evaluation team realised that the real beneficiaries of the forestry aid are consultants, government officials, forestry industry people, academics and international organisations. Page 56 Watershed Vol. 9 No. 3 March June 2004

6 For example, LTS evaluation did not mention the fact that Phoenix pulp mill has caused severe problems for local communities since their low-lying rice fields have been polluted from the treated wastewater flowing from the irrigated eucalyptus plantations located on higher ground. Instead, the evaluation team applauded the socio-economic benefits of contract farming of eucalyptus. It comes as no surprise that the LTS team met only Phoenix managers and environmental engineers, not the farmers impacted by pulp mill operations, during their visit to the Phoenix mill in Khon Kaen. ing on behalf of the pulp, paper and plantations industry in the region. However, forestry aid (or any aid) is a deep political intervention in a country s social and development strategies. The LTS evaluation has completely missed this key point. Thus, from the point of view of civil society organisations and rural communities, the evaluation has failed. Since the evaluator, LTS International Ltd, is a forestry consulting firm and receive many contracts from aid agencies in northern countries, a more critical analysis of Finland s forestry sector aid (or that of any other country) was always unlikely. The evaluation also failed to The evaluation LTS was critical of insti- address the apparently fundamental bias regarding Finn- MFA, to the poor project tutional arrangements within failed to address the apparently fundamental bias ish forestry aid in the cycle management and to Mekong Region it supports regarding Finnish forestry aid the lack of independent a particular type of forestry development at in the Mekong Region it supports a particular type of actors in the Finnish forestry aid. But they are the expense of other more hardly likely to bite the forestry development at the local or environmentally hand that feeds them by, expense of other more local or sustainable alternatives. For for example, questioning example, even though it was environmentally sustainable whether Finnish forestry never officially adopted, the TFSMP strengthened Thailand s commercial forest strategy and the expansion of industrial tree plantations at the alternatives. companies and aid agencies should be involved in tropical forestry at all. But now that LTS International has evaluated very time when Thai civil society and rural communities were advancing local initiatives such as community forest management. Finnish forestry aid pretends to be neutral while workistry the Finnish forestry sector aid programme for the Min- of Foreign Affairs, one can only wonder if LTS will be competing for contracts to implement Finnish forestry projects in coming years. Selected references: Bui Minh Tam, (2003). Impacts of Finnish aid in forestry and rural development: Impacts of Finnish aid in Vietnam and Laos. Available at Evaluation of Finnish Forest Sector Development Co-operation (2003). Part 1: Main Report and Part 2: Country Reports. Prepared by LTS International Ltd. Evaluation Report 2003:2. Helsinki: Ministry for Foreign Affairs of Finland, Department for Development Policy. Available at and Koponen, Juhani (2003). Researching Finnish Aid. Presentation in a seminar on impacts of Finnish forestry sector aid on Available at Lang, Chris (2002). The Pulp Invasion. The International Pulp and Paper Industry in the Mekong Region. Montevideo: World Rainforest Movement. Sonnenfeld, David (1999). Vikings and Tigers: Finland, Sweden, and adoption of environmental technologies in Southeast Asia s pulp and paper industries. Journal of World-Systems Research Volume 5, Number 1 (Spring 99). Available at wsystems/jwsr.html Terms Of Reference for the Evaluation of Finnish Forest Sector Development Cooperation (2002). Helsinki: Ministry for Foreign Affairs (of Finland), Unit for Evaluation and Internal Auditing Watershed Vol. 9 No. 3 March June 2004 Page 57

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