Of late, the nation has been shocked by news concerning the impact of the timber industry on the environment, especially to rural settlements surrounding the logging areas.
Amid the push by non-governmental organisations (NGOs), and the assurance given by the state governments on the sustainability of logging projects, very little is publicly said about the real results meant to be achieved by the logging activities carried out in those areas — modernisation.
It seems that while Malaysians desire modernisation and its consequent boost to the nation’s economy, they are not necessarily willing to pay the price demanded by their aspirations.
In reality, economically speaking, almost all logging activities carried out in Malaysia are a means to an end, and the end pursued by the states invariably boils down to the need of getting enough resources to shoulder the two main expenses of the states, which are the development and maintenance expenses.
What this means in practice is that state governments would only agree to a particular logging project if it brings value to the states’ economy and citizens’ wellbeing, either monetarily through the timber tax and royalties, or long-term growth, such as in the case of the creation of plantation sites, planted with commercially viable trees with a high market value in both local and global economies.
Despite this objective, recent public pressure had coerced certain states to rethink their approach to rural development.
The subsequent “thinking process” that followed had led to the existence of a huge void within the states’ economies, as some of them have opted to suspend the activities which is one of the main contributors to the states’ economy, while they engage in developing new ways to generate economic income.
This economic “void” affected everyone. While some of the new ideas were mooted to reduce the states’ dependency on timber and plantations were credible, the development of each idea nonetheless required its own maturity period before they could deliver results.
This means that the states involved would have to bear with the disappearance of income from the old economies, until newly developed economies are able to generate their own income for the state.
This could take years, and being a democracy, the term limit poses a serious dilemma to each state government.
On one hand, meaningful change would take years to achieve and, on the other hand, the ruling coalition only has a few years to fulfil its objective.
Recognising financial resource, or more specifically — the lack of it — as the primary challenge that hindered the states’ progress towards the new economies, the more obvious solution would be to request for a special policy treatment from federal policymakers to aid the states in handling the challenges they face.
With regards to this, the Ecological Fiscal Transfer (EFT) comes as one of the more practical policy actions to take.
In simple words, EFT is a practice where the federal government redistributes the income it receives from public revenues, such as taxes, to the state governments that are currently undertaking serious measures to conserve its natural resources.
As it is, there is no formal policy to support EFT practice in Malaysia. Because of this, states often end up shooting themselves in the foot every time they make the extra push to go green, when they realise the high opportunity cost of conserving nature.
In most cases, this had led to them having to abandon their conservation efforts later on.
With the EFT in place, our state governments would have an official channel to bring in the necessary financial resource, to negotiate the impact of losing a huge chunk of their financial income due to the undertaken conservation efforts.
Consequently, this could also safeguard the interest between the state timber industrialists and the rural communities.
To have a logger speaking in support of conservation efforts might be shocking to some, but in reality, loggers are among the main economic actors in the state they operate in, and as such, the prosperity and sustainability of their states’ economy is always a constant priority.
Why? Because good economy means good business.
Being a mediator between Kedah’s logging industry, the state government and the rural community had placed me in the constant position of being caught between the demand for compensation by the logging companies, the inability of the state government to compensate due to their limited financial capacity, and the constant demand from the rural community for development.
With all these interests in hand, each passing minute is a reminder that a middle ground would need to be created.
EFT could be the worst option we have, except when we consider the alternative.
The writer is a former NST journalist and currently chairman of the Kedah Timber Association