Learning from Southeast Asia: Creating business models for forest restoration

By Will McFarland, SNV Vietnam

We have high hopes for forest landscape restoration. If the global community can work together strategically, shared benefits will include human wellbeing, reduced pressure on the environment, and significant progress towards climate and development goals.

The Global Landscapes Forum (GLF) provides an opportunity to share ideas on how these results can be achieved. I believe it is vital that we focus on enabling viable business models — creating opportunities for private actors to benefit from restoration will subsequently result in investment, skills, innovation and more, opening new doors for restoration worldwide.

To contribute to sharing ideas and making progress on restoration, SNV Netherlands Development Organisation convened a workshop in Hanoi, Vietnam focused on the restoration of natural forests across Southeast Asia. Countries in the region have been undertaking forest restoration projects for decades.

Following the rapid degradation of natural forests that occurred in the late 20th century, and faced with diminished public (for example, ecosystem services, biodiversity) and private (for example, timber production) returns from these forests, government-funded restoration projects were implemented across the region with varying degrees of success. Taking the local knowledge gleaned from these projects about restoration techniques, policy requirements and business models to a broader audience is vital if we are to achieve effective forest landscape restoration fast enough.

The forest restoration workshop in Hanoi produced many conclusions, success stories and recommendations related to different GLF themes. Including, for example, on how modern monitoring technology is making it easier to engage and involve more stakeholders in forest restoration. The workshop also clarified the relevance of the landscape approach — discussion of natural forests was impossible without consideration of both planted production forests and the agricultural land that borders natural forests, or the livelihoods of those who inhabit and work among this matrix of different land uses.

FOCUS ON BUSINESS MODELS

However, in this forum I would like to focus on lessons learned about how best to create business models for restoration, and thereby encourage investment in, and finance for, forest restoration – issues particularly pertinent to the experience of SNV.

The need to supplement the limited domestic and international public investment for restoration efforts is widely acknowledged. The diversity of actors and institutions present at the GLF is testament to a shared vision to encourage private finance to invest in forest landscape restoration. However, on the ground, among local-communities, we have not seen the fruits of this effort. Instead, restoration of forests remains under-funded.

As an international development organization, SNV supports market development and access across many agricultural commodities. By linking farmers and producers to markets, they gain access to sustainable livelihood opportunities. In parallel, networks of local business providing inputs and support services also grows.

People invest time and money into these enterprises and businesses and they grow further. Where markets and business models exist, it is easy to make a similar case to invest in agricultural restoration (even though delivering and accessing the finance may still be challenging). Our work on palm oil in Indonesia and cocoa in Ghana, for example, demonstrates the benefits of such a restoration strategy. We are able to successfully deliver restoration and replanting initiatives, and the next step for us is to unlock access to finance for smallholders to deliver this at scale, independently and sustainably.

However, in Southeast Asia, public or private funding and investment for forest restoration is lagging because at the moment it is difficult to find and present truly convincing businesses cases. As a result, the funding or investment, from either public or private sources, is not flowing fast enough to drive the desired scale of restoration. For example, in Vietnam our ENRICH project has contributed, alongside other actors, to a comprehensive evidence-base on restoration techniques for natural forests. But the full realization of the findings of these projects is hampered by a lack of public funding available to deliver restoration, exacerbated by insufficient resources for communications and restricted extension services leads to waste.

SUCCESS STORIES – RIGHTS TO BENEFIT

In Indonesia, the establishment of Ecosystem Restoration Concessions (ERCs) has attracted private investment commitments to restore over 600,000 hectares of land. Companies are incentivized by rights to earn returns from the land through carbon credits to future timber sales once ecosystem balance has been satisfactorily restored. On a smaller scale, but similarly instructive, in Vietnam, there are probably thousands of cases where families and communities are tasked with supplying the labour to protect and maintain replanted forests, in return only for the right to collect fuelwood and non-timber forest products.

In both cases, the prospect of significant returns from the investment of money or time may be small or many years away, but they show how creating the right to earn benefits mobilizes resources from stakeholders who are prepared and able to compare the risks with the rewards. In many countries, these rights are typically not available to private actors, or are not transparently shared among and between different actors. Resolving this can unlock investment and innovation in an inclusive manner.

MULTI-STAKEHOLDER LANDSCAPE APPROACHES

A clear outcome of the workshop was that two things must occur to create these business models: public sector predominance over forest management must be relaxed, and truly enabling a landscape approach must be achieved.

Historically, forests, forestry and environmental protection have been the domain of the state. Funding for forest restoration in Vietnam, Laos and Indonesia also traditionally came from the government. At the moment, limited scope exists for private actors to benefit from forests. Significant changes to policy, legal frameworks, and the governance paradigm are needed in order to loosen this grip and create space for private actors to find a role in, benefit from, and ultimately invest in, forest restoration. By truly operationalizing a landscape approach – one that balances competing land use demands — these aims can be realized.

In Vietnam, this is certainly the exception, not the norm. Forest restoration has historically been led by forest managers with responsibility for small and fragmented areas of forest, managing their forest estate separate from the mosaic of agricultural and productive forest land in between. Indonesia’s ERCs are instructive in this case (despite other acknowledged concerns) because the concessions are so large that they cover “landscapes.”

This scale requires forest managers to create zones within them, and understand how productive land, and protection areas, interrelate and support each other to achieve ecological, and socio-economic, objectives. It forces them to take the needs and dynamics of different actors, sectors and land-uses into account – something that is frequently counter-intuitive to existing governance structures and ways of working.

Our workshop in Hanoi demonstrated that the technical knowledge to restore forests for a variety of conservation or productive uses exists. The confluence of finance institutions and professionals at the GLF shows the interest and availability of investments into restoration. The message from Southeast Asia is that to fully achieve our restoration objectives, we need to create “investable opportunities” by giving the private sector, including local communities, the right to benefit from restoration, identify feasible business models, create market linkages and allow them to take risks.