Supplementary memorandum from Mr Duncan
Brack, Royal Institute of International Affairs (Chatham House)
Following my forest investment-related evidence
to the EAC, I am keen to clarify my statement that I am unable
to give reliable data illustrating the scale of different types
of UK or EU investment in sectors in timber producing countries
at high risk of forest illegality.
By definition, reliable data relating to illegal
acts is scarce. What is available has rarely been tried in a court;
so it is often contested and at best relates to "alleged
illegality".
Public sector investment data is reasonably easy
to access, apart from support provided via export credit companies.
Improving scrutiny and accountability for investment decisions
in export credit provision across the EU would be a positive step
in increasing knowledge of international investment patterns in
the region.
The most easily accessible data giving a global picture
of private investment flows is that on Foreign Direct Investment
(FDI). This is collected and collated through various mechanisms
by UNCTAD, the IMF, the WTO, and the OECD among others; and is
generally based on the reports of central banks. Unfortunately
this information is considered by most analysts to be unreliable
and incomplete, and, more importantly, what is available is seldom
consistent or disaggregated enough to illustrate sectoral trends.
For example, forestry is variously combined with agriculture,
natural resources and fishing.
In addition to the weaknesses of FDI data, it should
also be noted that there is a wide range of transactions that
are not captured by it, particularly loans and other forms of
debt, including bonds and project finance. Forestry investments,
particularly outside the pulp and paper sector, are also often
too small to register against sectors such as oil and gas or in
mechanisms such as the Equator Principles. And finally detailed
information is often compromised by the complexity of the corporate
structures in the forestry sector, particularly in Asia.
Specific detailed information can be gathered from
case studies undertaken by NGOs; however these case studies can
only indicate some kinds of investment decisions and patterns
and are, naturally, chosen by the researching NGOs on the basis
of their strength as campaigning tools.
The private sector lending community tends to
rely on two main information sources, Dealogic (UK) and Thomson
(Canada). However, in addition to being hugely expensive to subscribe
to, these databases have a bias towards European and North American
companies and can only list an individual company in one sector,
which often results in forestry holdings that are part of multisectoral
conglomerates, being lost.
An independent, authoritative and relatively current
"map" of forestry investments would be of great value
to NGOs, government agencies and organisations like Chatham House,
both in focusing political will on potential improvements in financial
decision-making and in better understanding the impacts and thus
responsibilities of the UK and EU's investment sectors. Such a
map would ideally combine information from a range of sources
including the international financial media, company reports and
filings, company registries, stock exchange information and publicly
available analysts reports, and focus, at least initially, on
the largest 50 operators in producer countries with forest governance
problems, particularly in Asia, Central Africa and South America.
November 2005
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