Analyzing the investment effects of forest rights devolution in Nepal’s community-managed forest enterprises

Abstract

This study critically explores the investment effects of forest rights devolution in Nepal's communitymanaged forest enterprises (CFEs). Forest rights devolution, starting from the late 1980s, opened the door to fundamental changes in the scale and structure of forest governance. Local-level user groups (UGs) for different types of community-based forest management (CBFM) were created, with community forestry (CF) receiving priority support from the government's forestry ministry. Under the 1993 Forest Act and 1995 Forest Regulations, community forestry user groups (CFUGs) were recognized as self-governing, independent, autonomous, perpetual and corporate institutions. Taking advantage of these devolved and secure tenure arrangements, CFUGs began to quickly form across the country, crafting their own local governance institutions. Once forests began to regenerate and meet subsistence needs, CFUGs and other types of UGs, such as those in buffer zone community forests, started to form CFEs to achieve further livelihood, social equity and income generation gains. CFEs were grafted onto the existing community-based governance institutions. Over this nearly 30 year period, many CFEs have been formed, some have survived, and new ones are being created each year. It has been a period of considerable, if unstable, growth for the CFE sector.This study employs the concept of enabling and asset investments (Elson 2012) to analyze how UGs have established and managed CFEs. Based on primary data from interviews with 12 CFEs, and secondary data from published, government and gray literature, our research examined the investment effects on how UGs have structured CFE management, what the goals of CFEs have been, and how they negotiated the regulatory requirements, and non-regulatory conditions, in order to build their forest-based enterprises.The high export demand for Nepal's non-timber forest products (NTFPs) from India (and elsewhere), especially the diversity of medicinal and aromatic plants (MAPs) from its forests led the Government of Nepal (GoN), from the late 1980s, to develop policy support to expand this trade. Later, in the late 2000s, trade and industrial policies began to reflect these same priorities recognizing the significant potential of MAPs to support Nepal's economic growth. As such, the majority of CFEs are engaged in harvesting and trading raw NTFPs. The combined effect of weak bargaining power, high transaction costs and inadequate processing facilities across the value chain means that traders buy these products from CFE harvesters at low prices. Beyond those supplying raw NTFPs, CFEs have focused on processing opportunities that permit value addition, such as essential oil extraction, handmade paper, fruit juices or wood-based products. The government, donors and I/NGOs have all contributed, enabling investments to help pilot CFEs through idea development, CFE registration, equipment purchases, staff training and building private sector partnerships.viii Whether informal or formalized, UGs retain prime ...