A new paper on Ecological Economics argues that the policy on decentralised forest management in Nepal overlooks the complexity and conflictual potential of establishing effective and equitable user groups in the Terai.

Using case study evidence from five Village Development Committees in Nawalparasi and Rupandehi Districts in West Central Terai, the paper suggests that the combination of high forest value and weak institutional control mechanisms create opportunities for local elites to siphon off substantial shares of the benefits generated by valuable local forests.

The rents created by autonomous FUG policies give rise to stark distributional biases, a scramble for control and institutional instability within FUGs that control high value forests.

The paper estimates the extent of elite capture and argue that institutional reform needs are intimately linked to controlling what we call the hidden economy of forest user groups.

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Vegard Iversen, Birka Chhetry, Paul Francis, Madhu Gurung, Ghanendra Kafle, Adam Pain and Janet Seeley, High value forests, hidden economies and elite capture: Evidence from forest user groups in Nepal's Terai, Ecological Economics, Volume 58, Issue 1, , 10 June 2006, Pages 93-107.