SmartWood’s certification of the Forest Industry Organisation – FIO’s history

28 Aug


By Chris Lang. Published by WRM, August 2003.

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Thailand’s Forest Industry Organisation was established in January 1947 as a state-owned forestry enterprise. Operating under the Ministry of Agriculture and Cooperatives, FIO was established to carry out three main activities: logging in concession areas; logging in non-concession areas including the sites of proposed reservoirs and dams; and the use or sale of confiscated wood either illegally cut or illegally imported into Thailand.

Until the January 1989 government ban on inland timber concessions in Thailand, 80 per cent of FIO’s income came from logging (Suphaphan 1994). In 1988, the organisation had a total income of US$37 million with profits for the year of about US$4 million.

Thailand’s forests were simply mined. Timber production peaked at 4.5 million cubic metres in 1968, and by the mid-1980s the country became a net importer of timber. The area of forest declined from 274,000 square kilometres in 1961 to 143,000 square kilometres in 1989.

The 1989 logging ban deprived the FIO of logging opportunities in inland forests (logging concessions continued in mangrove areas) and “everything collapsed overnight” according to Chittiwat Silapat of FIO. The organisation survived by selling timber stockpiled in its yards, and by running up debts. “If we were a private company, I think we would be bankrupt” said Chittiwat (Chittiwat 2000). By early 2001, the agency had accumulated debts of about US$11.5 million.

In July 1997, the director of the FIO, Narong Sukree, was transferred to an inactive post at the Ministry of Agriculture and Cooperatives, after failing to tackle the FIO’s financial problems. Deputy Agriculture Minister, Pravat Utamok, who authorised the transfer, told the Bangkok Post “I have not heard of any progress in the assignments I gave Mr Narong in the past six months. Everyone in the FIO administration committee agrees he deserves it” (Bangkok Post 18 July 1997).

In September 1998, the government passed a Cabinet resolution which required FIO to streamline its operations and to privatise some of its businesses. Two years later, the Agriculture Ministry asked the Cabinet to consider postponing repayment of two FIO loans. FIO was required to pay two debts before the end of the year 2000: US$6.9 million to Krung Thai Bank and US$4.6 million to the FIO Pension Fund. The loan granted by the Pension Fund had already been extended for more than one year (The Nation 2 February 1999).

FIO’s 1999 Annual Report, reveals the precarious nature of the organisation’s finances. In 1999, the company’s total expenditure was 920 million baht (US$21.9 million). Total income was 902 million baht (US$21.5 million). To make up the loss, FIO sold land valued at 150 million baht (US$3.6 million). The previous year, FIO had made a loss of 226 million baht (US$6.3 million) (FIO Annual Reports, cited in SCC Natura 2001: 5).

In 1999, a despairing Col M.R. Aduladej, then FIO’s managing director, told the Bangkok Post, “All of our money-making channels seem to be closed. I see no reason why the FIO should stay” (Uamdao 1999).

Today, the FIO’s main activities are commercial tree plantations timber processing and auctioning of illegal timber. The organisation has a total of 144,000 hectares of tree plantations, mainly of teak, rubber, and eucalyptus. The FIO has four sawmills for processing timber and for producing furniture, doors and windows for the local market. The FIO is also the majority shareholder in the Thai Plywood Company, which is a separate company set up under the FIO to undertake wood production. In 1996, the FIO processed 104,980 cubic metres of teak and 176,180 cubic metres of other tree species including eucalyptus.

Until recently, FIO’s teak plantations have only produced small-diameter timber from thinning operations. However, many of the plantations were established 30 years ago and the trees are now reaching the size where they can be marketed. In its Final Report for the Swedish-funded FIO Organisational Development project, SCC Natura’s consultant Tomas Jonsson states: “FIO’s plantations produce wood from thinning operations but within the next years mature timber will be available from clearfelling operations” (SCC Natura 2001: 5).

FIO’s record provides a good indication of its likely future performance barring a major restructuring of the organisation and a complete overhaul of the organisation’s thinking and operations. The impact of FIO’s “management” on Thailand’s forests, and the way the organisation deals with local people have caused many NGOs in Thailand to question the role, if any, that FIO should play in the future.

To highlight some of the basic, structural problems within FIO, some of the controversies in which FIO has been involved are outlined below.

Ban Wat Chan

The example of the FIO’s activities in the Ban Wat Chan forest in northern Thailand illustrates how the interests of the FIO and those of villagers are often contradictory.

Since the mid-1908s, FIO has had plans to clearcut an area of 24,000 hectares of old-growth pine forests in Ban Wat Chan in Chiang Mai province. The operation was eventually cancelled after strong opposition by Karen communities who were concerned about the impacts on their livelihoods from the logging of their forests.

FIO received considerable international backing for its logging plans in Ban Wat Chan. In 1984, the Finnish forestry consultants, Jaakko Pöyry, produced a feasibility study for the “Ban Wat Chan Forestry Project”. In 1990, FIO reached a funding agreement with the Nordic Investment Bank, set up a sawmill and prepared to start logging operations. The following year, Jaakko Pöyry produced another study, this time funded by the Nordic Project Export Fund and entitled “Preparation of a plan for integrated rural development”.

Karen villagers living in the area questioned the “science” behind the project, particularly the idea of cutting trees over 200 centimetres diameter, which FIO claimed to be “old and dying”. Karen villagers pointed out that old trees formed an important part of the ecosystem and contributed to the biodiversity of the forest. Unlike FIO and their consultants, Karen villagers see more than a supply of timber in the forest. A village representative explained: “More than 4,000 village people live in 15 Karen villages and depend on the Ban Wat Chan pine forest that is habitat for plants and herbs used by the communities” (Watershed 2000: 49).

In 1998, FIO returned to Ban Wat Chan, this time wanting to remove 2,000 “dead trees” from the pine forest. An FIO official said, “the trees should be removed and sold to make money. Leaving the trees to decompose where they are is completely useless” (Watershed 2000: 49). Villagers again rejected FIO plans, forcing FIO to withdraw from Ban Wat Chan once again. Villagers pointed out that large areas of forests would be damaged, “since the trees are scattered over a 24,000 hectare area and cannot be removed without roads” (Watershed 2000: 50).

Despite the fact that the FIO’s logging plans have twice been stopped by local opposition, FIO has recently made further attempts to involve itself in Ban Wat Chan’s forests. A recent FIO management plan proposes that FIO enters the ecotourism business. Again FIO is seeking international funding, in this case from the Japanese Bank for International Cooperation.

In cooperation with the Thailand Authority on Tourism, FIO has begun construction of four ecotourism centres costing US$3.3 million each, one of which will be located in the Ban Wat Chan forest. Local communities have voiced concerns that the ecotourism plans threaten the Ban Wat Chan watershed forest. Villagers have stated that the expansion of roads in the hilly and forested terrain is increasing soil erosion and forest degradation.

“The FIO’s ecotourism project continues to pose a major threat to the Wat Chan pine forest and the livelihoods of local communities,” said Hataishanok Intharakhamhaeng of Project for Ecological Recovery (Watershed 2000: 51).

Pulp plantations

Since the 1980s, Thailand’s local communities have opposed large-scale tree plantations, particularly of eucalyptus. Plantations have forced villagers from their farmlands, replaced community forests and commons, and lead to water scarcity and soil erosion.

In several instances in Thailand, villagers have successfully regenerated their community forests on land previously planted with eucalyptus. In the early 1990s, in Nong Yak village in Surin province, eight communities grouped together to re-establish community forest on land reclaimed from an FIO eucalyptus plantation. The forest has regenerated and today provides many services and products to villagers. Sa-ad Koonchat, spokesperson of Nong Yak village’s Community Forest Recovery Committee, summed up the problem people in his village faced in an interview with Watershed magazine:

    “We began to protest when we realised that a eucalyptus plantation is not a forest. Before, the natural forest was very important for us. We gathered mushrooms, bamboo shoots, insects and herbs for food. There was water, and there were animals and birds. The forest was cool and peaceful. Eucalyptus plantations gave us no benefits, there was nothing to eat.

    “For fifteen years, we lived with the eucalyptus, protesting against it. We went to the subdistrict council, to the district chief, to the provincial government, and then to Bangkok. We told them the problems. They said they understood the problems, but couldn’t see a solution. They said they would solve the problems, then they did nothing. For 15 years we had this problem. I wondered, were they stupid? They could not see simple solutions.

    “If there is no forest, we can’t live. Three years ago we decided to solve the problem by ourselves. We cut down the FIO’s eucalyptus trees on 35 rai [5.6 hectares] of land. The police tried to arrest us, but they couldn’t – there were too many of us” (Watershed 1998: 35).

Since 1996, several other communities in northeastern Thailand have succeeded in forcing the government to remove the eucalyptus trees and return the lands for village farming and recovery of community forests.

In the early 1990s, FIO planned a US$168 million joint venture pulp mill in Si Sa Ket in northeast Thailand. Siam Cement Group and Advance Agro, two Thai pulp and paper companies, were to have held a majority share in the project, with a 10 per cent share held by the Industrial Finance Corporation of Thailand.

A wide range of villagers and environmental organisations opposed the proposed project. Villagers wrote letters to the FIO, the Science Ministry, the Office of the Prime Minister’s Secretariat and to the province’s nine MPs, asking for the plan to be reconsidered (Walakkamon 1995). In April 1994, about 200 villagers from Kanthararom district in Si Sa Ket province rallied in front of the provincial hall in protest at the proposed pulp mill (Bangkok Post 19 April 1994). The project was eventually shelved as a result of the local opposition.

FIO’s Chittiwat Silapat dismissed the villager’s complaints, in a view which typifies FIO’s technocratic approach to forestry. He said, “Once the pulp mill had been established it would have benefited the local people and they could have had more jobs, and at the same time can create more forest cover. Even if it was eucalyptus” (Chittiwat 2000).

Recently, the Chinese government has offered FIO the possibility of getting involved in another pulp mill project. Four years of talks between the Thai and Chinese governments to establish a US$1 billion plantation and pulp project have come to nothing, and in 2001 Thai newspapers reported that the Chinese government was looking at FIO’s plantations as a source of raw material for the proposed pulp mill (Ploenpote 2001) (The Nation 28 August 2001). The pulp would be exported to China.

The proposal once again brought the FIO into opposition with NGOs and local communities. Pakphum Withantiwat, an advisor to the Assembly of the Poor, Pornpana Kuaycharoen of Project for Ecological Recovery, Surapon Duangkhae of Wildlife Fund Thailand and Daycha Siripat, an advisor to the Alternative Farming Network have all given press interviews opposing the project. NGOs have also organised seminars to discuss the possible impacts of the project.

Illegal logging

FIO has been implicated in several scandals concerning illegal logging in Thailand. In 1994, police investigating logs found in the Salween National Park discovered that the wood belonged to FIO, and brought charges against the organisation, alleging that it was involved in illegal logging practices. The amount of logs imported from Burma appeared to exceed a quota agreed to between the FIO and the military dictatorship in Burma.

In 1997, FIO was associated with another illegal logging operation in the Salween National Park. Trees were illegally cut down in Thailand, shipped across the Salween River to Burma, and stamped as Burmese timber which was then imported by Thai companies. A forestry official exposed the scam and revealed that FIO officers were involved (The Nation 14 March 1997).

One of FIO’s most controversial roles is that of auctioning illegally logged timber. In February 1998, Senator Meechai Ruchupan announced that FIO was partly to blame for the destruction of forests in the Salween area. Meechai argued that FIO auctions of seized logs simply encouraged further illegal felling, since operators could buy back the timber at auction, after which the timber becomes legal (Bangkok Post 18 February 1998).

Surapon Duangkhae, secretary general of Wildlife Fund Thailand, agrees that FIO’s auctions of illegally felled timber provide a “loophole” in the logging ban. He said,

    “In many cases, in the area that the company had a logging concession, after the logging ban they still do cutting. The forest department, the Forest Industry Organisation and the company, they are friends. The company sends workers into the forest to cut the trees, cutting huge areas, like in Salween, and then they ask the forest officer to arrest them. But when the forest officer gets to the area there are no workers, just logs. So they arrest the logs! And then FIO holds an auction and then the company that’s behind the scenes comes back and they win auction. It’s quite cheap from those auctions. This is a loophole” (Surapon 2002).

The amount that FIO earns from sales of illegal timber is significant, and plays a key role in ensuring the survival of the organisation, as the figures below indicate:

  • Between 1990 and 1995, FIO auctioned 133,200 cubic metres of confiscated teak logs. According to FIO’s 1995 annual report, this raised a total of about US$52 million (The Nation 3 January 1998).
  • Between October 1997 and January 1998, FIO auctioned 5,350 cubic metres of timber, most of which was confiscated from national parks (not including logs confiscated from the Salween National Park).
  • In 1999, FIO earned 567 million baht (US$13.5 million) from timber sales (including illegally logged timber). Of this total, FIO earned 235 million baht (US$5.5 million) from sales of teak and 116 million baht (US$2.7 million) from sales of other species giving a total of 351 million baht (US$8.3 million) (SCC Natura 2001: 25). If the remaining earnings came from illegally felled timber, FIO earned 216 million baht (US$5.1 million) from sales of illegally felled timber.

Illegal logging has also been reported in FIO’s own plantations. According to a 1998 report in the Bangkok Post, huge volumes of illegal logs have been sent to sawmills and furniture factories in several northern provinces of Thailand. The timber was cut in FIO plantations by well organised groups, including armed men guarding the logging trucks (Bangkok Post 15 March 1998).

Surapon Duangkhae commented,

    “The Forest Industry Organisation is facing problems in many areas; this is what I’ve heard. In Lampang, I’ve visited many times, and even in Phrae, timber from teak plantations has been stolen by people, just like in the forest area. FIO cannot afford to pay for a watchman to watch their plantations. And they found that it’s impossible to stop poaching within their plantations. It means that in the future I don’t think they will benefit from what they do with their plantations. The people around there will cut it. If a lot of people live there and they form groups or gangs, they see that they can work the area and take the logs, because they know that the Royal Forest Department or the Forest Industry Organisation cannot afford to protect it all the time” (Surapon 2002).

FIO’s forest villages

Since 1967, FIO has established a series of “forest villages”, the first of which was at Mae Moh in northern Thailand (Kuechli 1997: 167). The “forest village” approach uses a system based on the taungya system developed by the British in colonial Burma during the 19th century. Under the taungya system, Karen villagers provided labour for clearing, planting and weeding of tree plantations, in return for being allowed to grow crops for the first few years between the growing trees. When the trees grew, villagers moved to a new site and repeated the process.

A 1978 report by anthropologist Peter Kunstadter compared FIO reforestation projects with the swidden systems of Lua’ and Karen villagers. Kunstadter concluded that Lua’ and Karen swidden systems supported six to seven times the number of people for a given area compared to the FIO’s “forest village” scheme (Chapman 1980).

The system of forestry that FIO is still practising was out of date more than 20 years ago. At a conference in Chiang Mai, academic Ted Chapman stated,

    Taungya reforestation, as it is now practiced in Thailand, is clearly out of step with recent recommendations by FAO, IUCN, and other organizations concerned with the welfare of dwellers on the forest margins. At its Bandung meeting in 1974 IUCN issued guidelines for ‘Land Use Policy and Allocation of Land to Various Uses’ which recommended inter alia that ‘planning of the resource use should involve as far as possible consultation at local, regional and national levels with those people who are likely to be affected by the forestry operations'” (Chapman 1980).

FIO’s reforestation amounted to little more than the confiscation of land which villagers already used. Villagers have no say in the management of the plantations, and receive no income from the trees in the plantations, which in any case were planned to be cut after 60 years (Chapman 1980).

FIO’s plantation at Thong Pha Phum covers an area of 3,008 hectares, of which about 2,500 hectares is managed for timber production. More than 60 per cent is teak and 14 per cent is eucalyptus. SmartWood’s Public Summary notes that before the plantation was established in 1978, the land was used by Karen, Mon and Thai villagers (SmartWood 2001: 4). FIO moved about 50 families who were living in six villages to a “forest village” adjacent to the plantation. Villagers were offered plots of land to build their houses. FIO also built a school and Buddhist temple (Janssen 2000).

FIO’s Khao Kra Yang plantation covers 2,420 hectares, of which about 2,000 hectares is managed for timber production. Teak trees account for 80 per cent of the total area, with dipterocarp and eucalyptus making up the rest of the plantation. The RFD granted a “Permission to Establish Forest Plantation” at Khao Kra Yang to FIO in 1967 (SmartWood 2001: 4) and the plantation was established the following year according to SCC Natura (Berlekom 2000: 2). SmartWood’s Public Summary again points out that the land was in use by local farmers before it became a plantation. FIO established a “forest village” and villagers were allowed to grow crops between the young trees. According to SmartWood, however, since 1984 when the plantation was fully established, no agriculture has been carried out in the plantation (SmartWood 2001: 5).

Villagers did not receive land titles under the “forest village” scheme. In October 2000, Chittiwat Silapat explained that this is because “the area of the plantation is forest reserve land and is under the control of the Royal Forest Department.” He added, “They can live there, they can work there and they can pass their rights to their children. But we cannot give land titles to them” (Chittiwat 2000).

Noi[1], who today works in a forest village at Khao Kra Yang, described the forest village system,

    “We came to live here as members of the forest village. They gave us a place for our house and work as labour. In those days they never gave us cash, they would give us some compensation every year, like clothes, but not cash. We could use the land to plant the crops while planting teak for them. After three or four years we have to move. We still had to look after their trees but we had to move our cultivation area to another one of their plots and start planting. We have to work every day the whole year. The kind of work is to prepare the area for planting the teak saplings, applying fertilizer, weeding, and taking care of the plot, then cutting it when it is grown.”

Recently, FIO has promised to give land to villagers and she said that earlier this year FIO started to divide up an area of land near Khao Kra Yang. However, Noi said she still has no official land title. She said the wages she received are very low, and she planted cash crops to make money to buy rice. FIO has helped the forest village by building roads and schools. “Recently they are helping with village sports, sports equipment, a place for sports activities and a place for youth and children to have a place to play,” she said.

In the case of the first forest village at Mae Moh, the Electricity Generating Authority of Thailand claimed a large tract of land for a lignite mine to fuel the Mae Moh power station. As a result, there is no cleared land available for villagers’ crops. Villagers have to make their living by working in the plantation and by producing teak seedlings for other plantations in the region (Kuechli 1997: 170).

Many other forest villages face similar problems of land shortage. As a result, FIO has halved the growth cycle to 30 years – for the FIO this has the added benefit of giving FIO profits today rather than having to wait another 30 years as previously planned.

Virawat Dheeraprasert, chairperson of Foundation for Ecological Recovery (FER), a Thai NGO, explained that the forest villages failed to prevent forest destruction, since much of the labour that FIO used in their forest villages came from outside the area. He said,

    “The system was there to halt the extension of shifting agriculture. But the labour used by the FIO in their forest villages system, was mostly from outside the area, for example from northeast Thailand, and not the local people in the area. So the halting of the expansion of shifting agriculture is irrelevant in the local areas, because FIO is basically hiring outsiders, who then come and clear forest areas. . . . Because rotational farming does not expand, rotational farming doesn’t expand the agriculture area. But it’s quite efficient, in its use of farming area, except in situations where the local practice or culture has problems with influx of outsiders” (Virawat 2002a).

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[1] Name changed to protect identity.

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