Environmental Impacts of Trade Liberalization in the Wood and Wood Products Sector of the Lao PDR

The wood and wood products sector in Lao PDR is undergoing significant transformation. In the wake of increasing demand for wood resources, declining natural forests, low-value exports and illegal trade, the Government of Lao PDR has implemented a number of reforms to address these issues. This paper examines the environmental impacts of trade liberalization on the wood and processed wood products sector, focusing on the wood-processing industry and its supply of wood from natural and plantation forests.

Key findings:

• Regional demand for wood is high and main importers of Lao wood and wood products are Thailand, Vietnam, China and Japan. Significant demand is now coming from China, with imports of timber products to that country rising from 14 million to 45 million cubic metres in just 10 years.

• Lao PDR needs to continue to reduce the export of low-value wood products and work towards adding value to its domestic wood-processing sector. To do so, understanding, integrating and increasing relationships with regional and international markets is vital.

• The capacity of wood-processing factories in Lao PDR is estimated to be high. However, the efficiency of factories is low due to the prevalent use of old machinery, low technology with low recovery rates and low value-added products. Moreover, there is a lack of certification of processed wood products for exports.

• While measures have been taken to ensure that more value from such exports is retained in-country, a number of issues such as illegal logging and timber exports (reducing supply for local businesses) and an underdeveloped, under-resourced local wood-processing industry are hampering this effort, and fuelling environmental issues such as forest decline, biodiversity loss and loss of watershed services.

Key recommendations:

• encourage value-addition to stimulate processing industries and obtain greater economic returns while minimizing resource use;

• strengthen dual policies on plantations and production forests to ensure a sustainable supply of timber for the wood and wood products sector. Promote the scaling-up of forest management certification;

• continue to improve law enforcement in the forestry sector; and

• promote cooperation mechanism between public and private sectors, including in forestry, plantations and wood-processing.