CHALLENGE
The reform of state forest management has become a priority issue in Northeast China. Unlike the collective forest areas of Southern China, Northeast China's state forest enterprises (SFEs) have not been successfully transformed. A decline in timber productivity (due to overexploitation and degradation of forests) has been acompanied by economic stagnation and heavy fiscal obligations toward state forest enterprise workers, leaving SFEs highly dependent on subsidies and transfers.

APPROACH
Although the World Bank has been an important partner of the Chinese government in the forestry sector over the past 20 years (supporting over 3 million hectares of plantation establishment and over 1 million hectares of protected areas), its engagement on forestry policy reforms has been limited. With PROFOR support, the World Bank's East Asia and Pacific staff sought to inform policy and institutional reforms in key state forest management areas in Northeast China, to promote the transformation of practices toward economic viability, sustainable forest resource management, and local livelihood security.

The resulting study, State Forest Reform in Northeast China: Issues and options, was published as a Working Paper by PROFOR in October 2013.

Research for this study coincided with the Government's internal evaluation of the first phase of the Natural Forests Protection Program (1998-2010) and the formulation of the program's second phase.

The study drew on several background reports including: a historical review of forest management in the Northeast China by the State Forest Administration; an analysis of extensive data on forest resources and socio-economic conditions from two surveys conducted in 2005 and 2009 surveys by Jintao Xu and Xuemei Jiang; and a critical review of performance and lessons at existing pilot reform sites and state forest enterprises, by Yuehua Wang and Zhenbin Gu. The background papers were originally written in Chinese and shared at a workshop held in Beijing in May 2012. Several of the background papers are available in translation in the annexes of the document

MAIN FINDINGS
The study considers three options for institutional reform:

• the centralization of state forest management;
• the decentralization of local management responsibilities to the province;
• and a combination of the two, with clearly delineated functions and responsibilities.

Ultimately, whichever option is pursued requires current functions and control to be reallocated, and this issue remains divisive and politically sensitive.

The paper concludes by stressing the importance of consolidating stakeholders’ interests to create a common vision for the reform. The assessment of the ongoing pilot reforms will provide a solid foundation to evaluate options for moving forward, though the reforms will need to be set in the context of the wider challenges of social service provision, infrastructure development, and achieving an appropriate balance between resource extraction and protection.  There is considerable scope for the northeastern forests to support the local and national economies, through timber extraction as well as diversified uses including tourism and nontimber forest products.  Achieving this requires central government leadership to reform the current system and put in place the necessary institutional framework and incentive structures.