Lao PDR is a country that is rich in forests. However, complicated and selectively enforced regulations have prevented forests from providing their full range of benefits. Unclear laws and overlapping jurisdictions leave forests managers and wood manufacturers unsure of what rules to follow, and consequently, without access to high value markets for legal and sustainable products.

Since 2008, RAFT has been working with government, industry and communities to position LAO PDR as both a leader and beneficiary in an emerging regional shift toward sustainability. This includes: clearer regulations and better ability to implement them; new links between responsible producers, manufacturers and buyers through certification, and increased benefits to the people who work the forest.

Just over five years ago, certification was still a strange and poorly understood concept. But today, savvy businesses are taking notice of international requirements for legal timber in markets for the first time. This is a trend that could change the course of forest sector development and its ability to deliver real benefits to society in one of the region’s poorest countries.

RAFT partners TFT and WWF have been at the center of this development, combining forces to help a slowly-but-surely growing number of factories understand and take steps to comply with buyer demands for verifiable legality. “Responsible sourcing is important for a country like Laos, because this will allow them to access higher value markets”, said Katia Masias Brocker, Program Manager for TFT.

Good Business

Certification systems provide buyers with a way to know if timber products were produced both legally and sustainably. Demand for certified goods in major markets is creating business opportunities for companies that can meet the requirements, but Lao businesses have missed out because of limited management skills and low awareness.

In 2010, TFT helped 2 companies achieve the first 2 Forest Stewardship Council (FSC) Chain of Custody certifications in the country. In 2013, in partnership with the Lao Furniture Association (LFA), 4 new factories received hands-on training in legality and social compliance. These were 4 of 7 companies identified as candidates for legality training in an assessment undertaken by TFT, using 3 criteria: relative need for assistance; export potential; and, willingness to receive support and progress independently.

For some companies, the motivation for change comes from a desire to get more out of their country’s vast timber resources by accessing high value markets like Australia, Europe and the United States directly. “We will implement the training content to follow international regulations and requirements (…) and I think those markets will come to us because we have enough raw materials and low labor costs, and so can compete with other countries in the future”, said Mr. Bounyanh, Advisor to the LFA.

Healthy Competition

Even for those companies that supply raw materials for further processing and value-addition in neighboring Vietnam, the pressure to satisfy legality requirements is growing. In Vietnam in 2013 alone, TFT trained 20 factories in legality compliance and traceability in partnership with the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA) while WWF worked with 4 additional companies to develop responsible sourcing action plans.

Vietnam is the world’s 6th largest wood furniture exporter and the number one destination for Lao timber.

“Our main market is the EU and the customers are requiring us to provide the information of wood origin currently,” said Mrs Nguyen Anh Tuyet, Director of Truong Thinh Enterprise, one of 20 factories trained by TFT. “This is new to us; thus, we have met much difficulty. As a member of HAWA, our enterprise was selected to receive training. The training has been really effective and met our expectations. This helps us a lot in dealing with the business challenges we are facing.”

HAWA is Vietnam’s leading wood products industry association. With 332 members all over Vietnam, HAWA provides a valuable network to deliver training and share knowledge widely and is a key institution in RAFT’s efforts to scale up capacity building with the wood products sector in Vietnam.

“We are in the process of developing a Due Diligence System (DDS) for our members,” said Mr. Huynh Van Hanh, Vice Chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA). “This [training] might be able to help the members be less confused when they do their DDS. HAWA is highly appreciative and hope to get RAFT’s support to improve HAWA’s DDS in the next phases.”

Enabling policy environment – A new regulatory framework is emerging

The Lao Government is sending positive signals too. Perhaps most notably, it is in the preparatory phase for negotiating a Voluntary Partnership Agreement (VPA) with the European Union – a bilateral trade agreement that would close the European market to any Lao timber that does not satisfy an agreed definition of legality. This has included such actions as publishing a study of timber sector legality, hosting a number of multi stakeholder workshops and revising a selection of relevant forestry laws.

In a country with longstanding timber trade ties to a number of less-discerning regional markets, this has given companies more reason to pay attention to legality and the demands of high value markets overseas.

Trainings provided by RAFT partners have supported increased private sector participation in Lao PDR’s preparations for a VPA, while positioning those companies committed to responsible practices to benefit from the increased trade relations with high-value markets that it could help bring about.

“WWF is happy to see the government tightening measures on illegal timber harvest and trade. This move is a major step forward towards creating a favorable environment promoting biodiversity conservation and sustainable development,” said Khamseng Homdouangxay, Policy Coordinator, WWF-Laos. “Along with the log export ban, the Prime Minister’s order to strengthen strictness of timber harvest management and inspection and timber transport and business also stresses the vital importance of adding value to domestic wood production prior to export, which significantly benefits the country’s economy”.

While the sale of logs from primary forests converted to other uses, such as for hydropower dams, remains a key driver of deforestation that cannot be ignored, the gains to be made in a wood products sector long marred by low capacity and relative isolation from global markets remain urgently deserving of attention and investment.