CIRAD UPR40 Working Paper / Document de Travail 40400

Communautarist networks in African rainforests
Jean-Marc Roda, Nsitou Mabiala
Dr Jean-Marc Roda : Forest products economics, CIRAD, France Nsitou Mabiala Director of forest industries at the Ministry of Water and Forest Resources, Gabon.

Since the 1970s world trade in unprocessed wood or preprocessed wood reached a stable level between 150 and 200 million m3, while, since 1985, world consumption varies between 3.2 and 3.4 billion m3 annually1. Thus, woodwork networks seem to be caught between two worlds with virtually independent structures, on the one hand, in developed countries, and, on the other hand, in developing countries. However, this apparent period of stabilization was undoubtedly a period of development, preparing the implementation of new organizations of production, whose forerunners emerge since the mid-1990s. The determining criteria are the ability to react and the rigorous response to demand. The very flexible strategies of supply and the mobility of capital are organized by companies on a global scale, which casts doubts on forest policies. If, on the world scale, approximately half of the production is used to produce energy and the other half for lumber or woodwork, the distribution varies from one country to the other. Wood for producing energy accounts for 80 percent of wood consumption in developing countries, and this is the case in a considerable majority of tropical countries. Besides, the consumption of wood in these countries continued to increase since the 1960s – from 1.2 to 2 billion m3 annually in direct relation with the growth rate of the population. On the contrary, the developed countries, with a consumption fluctuating below 1.5 billion m3 since the 1980s, use only 20 percent of this volume for energy purposes. At world level, less than 30 percent of the non-tropical wood is used for energy purposes. In other words, the tropics supply more than 70 percent of world consumption of wood for producing energy and less than 20 percent (that is 280 million m3) of the world production of lumber for industrial purposes. The case of tropical Africa is well beyond the average of developing countries or tropical countries, with 91 percent of the volume of wood produced for energy purposes. Besides, the destruction of rain forests, which causes concern in Western media, is constantly associated by these to the exploitation of lumber and its export towards the West with its “expensive way of life. In fact, it is not the case: on one hand, the deforestation is above all caused by agriculture and animal breeding2; on the other hand, lumber exploited for international fields (hard wood coming from the rainforests) needs a small quantity in comparison with other demands.

The nature of wood and timber trade
An initial logic that explains this separation between the tropics and the rest of the world lies in the fact that wood is a heavy building material. It is consumed essentially on the spot. International trade concerns only very weak proportions, all the more weak when it concerns preprocessed products. For example, less than a hundredth of non-tropical wood for energy purpose and less of a ten thousandth of tropical energy-purpose wood is exported, while it’s the case for the approximately 9 percent and 7 percent of respectively tropical and non-tropical raw wood, intended for lumber or for the industry. More precisely, international trade does not simply involve wood from wet forests, or approximately 10 percent of the volume of the tropical wood barks, 20 percent of that of tropical sawing, and 60 percent of tropical plywood. And still, world trade in these three main types of products remains weak compared in equivalent volume to unprocessed timber: it represents globally from 3 to 4 percent of world consumption of these products.

CIRAD UPR40 Working Paper / Document de Travail 40400
Besides the logistic foundation of this separation, the differentiation of markets and demand plays an essential role. Considering lumber for example, Asia and Latin America, which represent approximately 55 percent of world population, consume respectively about 92 percent, 90 percent and 80 percent of the wood barks, sawing and tropical plywood. On the other hand, Africa produces respectively 9 percent, 6 percent and 2 percent of these same products and consumes only 6 percent, 2 percent and 2 percent. Because if Europe and North America are in theory the most profitable markets for tropical forest products, they are also, in practice, more and more selective and very competitive markets, with a relatively weak total demand from the point of view of volume. Besides, the processing industries settled in tropical countries often suffer from an unfavorable climate for long-term investment: they do not dispose of qualified employees, or reliable and maintained public infrastructures. Considering these conditions, they especially find in the less demanding Asian markets in terms of respect for quality and specifications, dates and delivery periods, an ideal partner for selling a good part of their production.

Past and future of tropical timber trade
Formerly, the business of tropical wood corresponded to the pattern of imports by industrial nations of primary products coming from the rest of the world. It is no longer the case because of the world competition in the field of workforce and the increasing role of developing countries in supply and demand of manufactured goods. It is in this category of countries that one finds the first-ranking exporters of secondgrade transformation products made of tropical wood. The flows which previously essentially moved in the direction of Europe have changed after World War Two with the economic boom in East Asia. Japan was at the origin of a strong growth of the business of wood, until its imports peak in the 1970s (in 1974, it represented on its own 55 percent of the world imports of wood barks and products of first-grade transformation). Up to the beginning of the 1990s, this country was the essential mainspring of demand in tropical wood, while Malaysia, Indonesia and the Philippines were the main suppliers. From this moment, transformation, which had its core essentially in Japan and Korea, is relocated to Malaysia, Indonesia and India. Since approximately twenty years, Europe’s consumption of tropical wood has fallen (between 4 percent and 5 percent of world consumption of round wood, sawn wood and plywood, equivalent to unprocessed timber), while with globalization, the pattern of trade in these types of wood continues to evolve, becoming mainly dominated by developing countries or countries in transition, in particular in Asia. If Brazil is the first consumer of tropical sawn wood and the second of tropical round wood after Indonesia, it is nevertheless Asia, which controls the fields of tropical wood by consuming about 70 percent of raw materials or first transformation wood, in equivalent to round wood. Nevertheless, the imports of unrefined tropical wood towards developed Asia have been regularly dropping since the 1980s, a case that corresponds to the decline of available resources in tropical Asia (rarefaction of the surfaces of high-income natural forests). Yet, the demand does not decrease, and tension increased on costs leads to a reorganization of transformation. In particular since the opening of China, in 1993, the imports of Asia in development are in an almost exponential increase, in spite of the 1998 Asian financial crisis. Therefore, transformation is currently shifting towards China. At the same time, demand affects the entire planet, and more and more Africa’s or South America’s exports are absorbed by Asia, which has become the world crossroads of tropical wood (imports of raw materials, exports of finished products). As for raw tropical and preprocessed products, Africa remains a minor actor, even though one can expect that its role will increase in the future.

The “global village” of rainforests
Our world is henceforth globalized and interconnected as it has never been before. Technology, telecommunications, transportation have accomplished such progress that distances have never seemed so short. Regardless of their field of activity – including the wood sector – companies worldwide are facing fierce competition with competitors that are no longer simply local, but also international. Many markets in a sector and a specific region, which were formerly the reserved domain of a few companies, are open to other companies from all countries. This is why the industrial sector of Africa’s wet rain forests, which was under the control of Western capital, currently experiences an increasing breakthrough of Asian capital. This phenomenon was undoubtedly

CIRAD UPR40 Working Paper / Document de Travail 40400
encouraged by an unprecedented deployment of new communication technologies, which contributed to redefining the spatial and temporal dimensions of the competition scene, by attaching particular importance to relationship networks between economic actors. Opportunities and dangers overlap at the moment in a complex way, for all the small or big companies: opportunities of connecting to international networks and penetrating into new markets, the threats of confrontation with new competitors in a very volatile environment. Apart from the activities of States and major multinationals, groups of community actors increasingly intervene in the domain of competition, by opposing States or pursuing dialogue, by influencing public opinions and participating in trade. In facts, a part of the decision-making parameters is gradually decentralized towards these communities to the detriment of States and institutions. The communities in question are of very different order: territorial communities, non-governmental organizations, terrorist or criminal groups, diasporas … Among the latter, diasporas that spread before contemporary globalization often find in current conditions a convenient ground for expressing a very strong business dynamics, where the rules of life of the group prevail over the institutions and legislation of the territory where it lives

New Actors in African rainforests
Because of the increasing Asian demand in wood, very dynamic Asian companies, organized in a network, appeared in all the sectors of moist rain forest development. These companies, which are very mobile and interactive, controlled in a few years 4 million hectares in Central Africa and 6 million in the Amazon Basin; Western operators, which traditionally controlled these zones, regard them with distrust. For a long time the latter were rather positive about Asian demand for American and African wood, insofar as it was expressed by the purchasing of round wood by the aforementioned operators. Then the Asian ambitions of establishing their presence in zones that were traditionally dominated by Western operators caused concern, as far as governments, in particular in Africa, considered these ambitions with benevolence. For these governments indeed, the introduction of new actors allowed to overcome confrontation with usual partners and create greater margins for operation. Besides, the predictable increase of local production related to this planned development was supposed to lead to additional tax revenue, as well as the creation of new jobs. Nevertheless, the community of the Western operators did not believe in the real possibility of Asian penetration and new rivalry. It was advisable to think that “Asian” methods, with very extensive modalities of exploitation in homogeneous forests, were not applicable in Africa. The floristic structure of these forests, their great heterogeneousness, seemed to push aside the hypothesis of extensive production as in Asia. And considering the regular intensification of taxes on exports of round wood, one could not see the profit in shipping African wood to Asia. In the same way the manufacturing cost seemed to be able to be a barrier for the Asians, because of the high cost of local labor and the supposed non-viability of long-term projects of importing expatriate Asian employees. Now Asian operators finally proceeded to a concrete offensive, displaying a very high level of productivity (60 m3/ha instead of the usual 10 m3/ha by Western operators), high commercial aggressiveness and “phased” operation methods capable of causing concern about the compatibility of these practices with the sustainable management of forests. At the same time these practices, on the whole, did not seem fundamentally different from those of “traditional” European operators, simply they were more rapid. And these companies appear to be capable of making most of these forests, while rapidly adapting themselves to local difficulties as in systems of periodic sub-contracting, which are preferred by certain purely African firms, bringing hope about positive influence on local development.

Lebanese and Italian Competition
It may seem that these networks of companies can be powerful tools of local development in very particular cases, when they are forced by a powerful external factor or face a situation of durable land security, which incites them to invest in the long run. They allow individuals and companies to cross, from villages in the vague economic and political environment, border-zone and commercial barriers, to circulate capital and goods even in incredibly unfavorable circumstances. However, these networks of Asian companies are not almighty, and they suffered bitter failures in Central Africa during the Asian crisis of 1997-1998, which deprived them of their preferential markets. Ever since

CIRAD UPR40 Working Paper / Document de Travail 40400
they come back under other forms, by acquiring companies, by taking participations, by placing at the head of companies which they control Westerners having worked for years in Asia and having the necessary “guanxi3” for business with Asia. Besides, if the networks of “Asian” companies monopolized the attention of professionals in the sector, it turns out that the other “non-Asian” networks developed in the same places and sometimes over a much longer period of time. The latter, that almost always come from the Lebanese and Italian communities, have organizations and a behavior very similar to that of the Asian companies. In fact, regardless of the cultural origin of these networks, the obtained performance may be explained by the speed and mobility of capital, by a very flexible structure in non-contractual groups and associations of companies, finally, by a vision of exploitation at a world level. This is maybe due to the fragmentation and the lack of real cooperation between traditional operators, in particular on the African scene: the weak competitiveness of Western operators in Africa has been criticized for a long time. A study carried out in 1993 already highlighted, among others, the need for developing, at least on domestic markets, flexible production and network organizations.

A challenge for sustainable development
For the moment, the exploitation of moist rain forests and trade in corresponding wood products are of crucial importance for producer countries, because the revenue is still high. Besides, many tropical countries henceforth consume almost all their production in order to meet their growing demand. International trade has led to the decline of Africa’s share for the benefit of Asia, considering its very strong demand and capacity to organize a low-cost transformation process that drains the entire world’s resources, and for its strong regional dynamics. Explainable both for the heterogeneousness of the tropical wood of the region but also for the drawback of numerous producing countries’ economies, the comparative advantages of the various countries, or fields, are at the moment less determining for the competitiveness than their comparative disadvantages: the success of the production systems is a question of flexibility, ability to react, adaptability and capacity transaction, all factors that exactly characterize the networks of Asian, Italian, Lebanese companies, etc. These constant changes reflect a profound reorganization of the production system and marketing of tropical wood at the world level. It must be analyzed in detail in order to be able to understand the underlying factors. Obviously, this reorganization is in line with the context of recurring issues relating to developing societies. What are the means of producing more with greater return and without damage for the environment in a sustainable way? But also, what are the means of assuring, in the framework of liberalization-globalization, controlled territorial development, by limiting vulnerability, poverty, conflicts, and providing for flexible production in the context of world trade? One notices in particular that in the case of the sector of tropical wood, the reorganization of production systems raises questions relating to decentralized decision-making and relationships, which are simultaneously threatening and promising, maintained with the production process by some forms of flexible organization, for example, some company networks. The development of moist rain forests causes much concern in Western countries, notably regarding the durability of the last natural forests, while a profound reorganization of production and marketing systems of wood is in progress. The most evident feature of this evolution is the unprecedented development of networks of companies characterized by flexibility, the ability to react, the adaptability and the capacity of transaction. It may seem that in certain contexts the activities of these networks can be the driving force of economic development, via their unique capacity to link the local and global levels and generate activity in complex and unpredictable economic and political situations, as in the case of Mozambique. At the same time a certain number of professionals in the sector, as well as NGOs and scientists, challenge their “predatory” attitude to natural resources. Thus, the problem consists in improving the understanding the complex impact – positive as well as negative – of these company networks on sustainable development, grasping and explaining the relationships between these various factors, as well as their links with other human, economic and political factors which are part of the environment of tropical wood production systems.

Notes 1. According to figures , Lpublished by the UN Food and Agriculture Organization, 2004.

CIRAD UPR40 Working Paper / Document de Travail 40400
2. Ibidem. 3. “Guanxi” is the Chinese term describing a wide-ranging network of interpersonal relations, a sort of “business assurance,” which is necessary in order to make profit with Asian partners. ------------------------------------------------------------------------

JEL codes L14, L22, L23, L69, L73, O55, Q23, Z13