Tech giant Amazon (AMZN 0.95%) smashed expectations last quarter, showing it made big improvements in profitability. The good news for investors is that this doesn't look to be a one-off result. Amazon's margins are stronger, especially in its largest segment.
That data point has investors impressed with the company and buying the stock again. Here's why.
The company's North America business is back to generating strong margins
In the midst of Amazon's supersized growth during the pandemic, the company, along with others in the tech industry, hired staff aggressively. Ultimately it overestimated how strong demand would be and ended up adding too many resources. That led to worsening margins, particularly in the company's North America operations, which account for the bulk of Amazon's overall revenue.
But with Amazon laying off staff and working on improving its margins over the past year, there has been a big improvement in the segment. Last quarter, which ended June 30, the segment's operating margin was up to 4% -- the highest it has been in two years. During the period, North America operating income totaled $3.2 billion, which was a huge improvement from the $627 million loss it incurred a year earlier.
Image source: Company filings. Chart by author.
Amazon's international segment was the only one to report negative operating income. Overall, the company's consolidated operating profits totaled $7.7 billion and were more than double the $3.3 billion that Amazon posted a year ago.
Amazon improved margins even as sales grew
Amazon's growth rate declined in recent quarters as the pandemic-fueled boom in spending receded. But a positive sign is that even as the company worked on reducing its expenditures, all of its major segments reported at least 10% year-over-year revenue growth last quarter.
Image source: Company filings. Chart by author.
Achieving double-digit percentage revenue growth while also cutting down on costs is a big accomplishment for the business. And while growth investors may be discouraged by the declining growth rate, it's likely a bump in the road for the behemoth. As economic conditions improve, there should be an improvement in the company's growth rate. Amazon also launched Bedrock, which helps companies build artificial intelligence (AI) applications, which may be another growth catalyst down the road.
Most importantly, Amazon got back to growing its business more efficiently.
Is Amazon stock a buy?
In light of the stronger performance this year, share prices of Amazon are up nearly 60% year to date. The S&P 500, by comparison, is up by just 14.3%. Amazon stock trades at a hefty 106 times earnings but with the business looking like it's on the right track and profitability potentially improving as the year goes on, that multiple should come down over time. Analysts boosted their price targets for the tech stock, with its upside now around 20%.
Amazon may seem expensive now, but for long-term investors, it can be an excellent buy. Its fundamentals are stronger and the company's growth opportunities remain plentiful.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.
Lake Como in northern Italy's Lombardy region.
Westend61 | Westend61 | Getty Images
John and Roman Cresto made millions of dollars selling themselves as e-commerce "experts" who could teach regular consumers and investors the secret to selling success on Amazon and Walmart, for a price.
They splashed lavish vacations and high-end cars across their social media account, creating a multimillion-dollar image of success that federal regulators now say was fueled by falsehoods and deception.
The case is the latest example of the Federal Trade Commission cracking down on deceptive e-commerce consultancies that target consumers and fledgling online businesses. A robust industry of consultants and agencies, often referred to as "coaches" or "gurus," have emerged as retailers increasingly move online and marketplaces on sites such as Amazon and Walmart flourish. These coaches often claim to have struck it rich in e-commerce and will pass along their expertise to users who pay for expensive courses with no certain of success.
The FTC on Tuesday asked a judge to bar the Cresto brothers from doing business temporarily, in connection with a lawsuit the agency filed earlier this month in U.S. District Court for the Southern District of California.
The Cresto brothers "promised to expertly manage the operations of automated online stores" on both Amazon and Walmart through their companies, including Empire Ecommerce, doing everything from finding products to fulfilling orders, the complaint says. They charged consumers anywhere from $10,000 to $125,000 for the initial investment, and $15,000 to $80,000 in additional funding as working capital, the FTC alleged.
The Cresto brothers also took 35% of any profits from their "partners'" e-commerce stores, the complaint says. By June 2022, less than 10% of Empire-managed stores generated sales, the FTC alleged. By October 2022, Amazon had either suspended or terminated most of those stores for violating its policies around intellectual property and a business method called dropshipping, where companies never actually have the inventory they're selling, and instead order products through a manufacturer after a shopper makes a purchase, the complaint says. The majority of Empire's storefronts on Walmart's marketplace were either never activated or terminated for policy violations, according to the FTC.
Despite the suspensions, Empire for years continued to falsely promote the success of its Amazon businesses by recruiting affiliate marketers to post splashy videos online claiming they made "significant passive income" through Empire's automation services. Empire was able to lure more than 60 new clients through this affiliate marketing scheme and netted over $1.5 million in commission fees, the FTC alleged.
"In truth, most of Empire's clients lost money and virtually none made the advertised amounts," the agency wrote in its complaint.
The suspensions left Empire's clients deeply in debt, the FTC alleged, "because Empire typically had its clients pay for inventory on credit cards." Empire refused to refund victims tens of thousands of dollars that victims had paid out to Empire or for goods sold, the FTC alleged.
The two brothers made more than $22 million from their clients, the FTC alleged.
The millions that the Crestos diverted for themselves were spent on high-end cars, vacations and even a luxury wedding in Italy, according to the FTC complaint and social media posts.
At the beginning of this year, after selling Empire, the Crestos spun up a new business called Automators AI, which claims to teach consumers how to use artificial intelligence to become online sellers making "over $10,000 per month in sales," and use popular AI chatbot ChatGPT to create customer service scripts, the FTC alleged. The scheme is ongoing and defrauding consumers of tens of thousands of dollars, according to the FTC.
Amazon spokesperson Curtis Eichelberger told CNBC in a statement that the company investigated the Cresto's scheme, and supported the FTC's case.
"Scams like these prey on aspiring entrepreneurs, and we will continue to be vigilant to stop these scams," Eichelberger said. "We encourage anyone interested in selling on Amazon to use the many free resources available to them, starting with Amazon itself."
Walmart did not immediately respond to CNBC's requests for comment.
As the clock ran down on Empire's alleged fraudulent behavior, the Cresto brothers attempted to pawn off their businesses to another operator, Daniel Cohen.
Cohen is now suing the Crestos, alleging that they deceived him about the true state of the business and used him to deflect blame from themselves.
In October 2022 — the same month the FTC alleged most of Empire's working Amazon stores had been suspended — the Cresto brothers approached Cohen, a Florida businessman, about buying their empire. Roman Cresto showed projections that suggested his business was strong and highly profitable.
Cohen told CNBC in an interview that the Crestos first messaged him via Instagram and that they met over Zoom later that month. John Cresto assured Cohen in that Zoom meeting that Empire was not facing any litigation or major concerns, beyond a "couple" of unhappy clients.
"It was something I asked them, because I do know this industry," Cohen told CNBC. The Crestos also offered him projections that claimed Empire collected up to 50% of profit from the thousands of stores they supposedly operated.
"I'm not sure where they got their projections from," Cohen told CNBC. "Maybe at some point they did have a store that performed well, and maybe they just used that result for everybody, but I believe most of it was likely made up."
Cohen agreed to buy the Crestos' business Nov. 7, 2022, wiring them $100,000 the following day. Two days later, the Crestos revealed five ongoing "legal disputes" being handled by their defense firm, Stubbs Alderton & Markiles.
"I paid Roman 490k total for 6 stores … between LLC set-ups/fees, credit card feeding, virtual store fees, their software on several that they told me would push my stores to the top, etc, etc, they scammed me for well over $525k total," one email from a client read, according to Cohen's lawsuit.
Dozens more complaints were languishing in an inbox, detailing alleged negligence or "shady" dealings by the Cresto brothers.
"I paid you guys $65k for a experienced store. Since starting my store has done no where near the projections. Now my store has stopped having any sales at all. I need to know why this is and what happened. I am starting to feel like I was scammed and I need to get my lawyer involved," read another email cited in Cohen's lawsuit.
Cohen also told CNBC that Stubbs Alderton & Markiles agreed to serve as his law firm, before firing him as a client and telling Cohen that they would now represent the Cresto brothers.
"From a moral perspective. It just doesn't smell right," Cohen's present attorney, Nima Tahmassebi, told CNBC.
Attorneys at Stubbs Alderton & Markiles did not respond to CNBC's inquiries about their handling of the cases. The Cresto brothers did not respond to CNBC's request for comment.
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NASHVILLE, Tenn. (WSMV) – A Nashville church’s congregation helped fulfill wish lists for teachers at two Metro Nashville Public Schools, among other good deeds.
On Aug. 22, church members from all Cross Point Church locations came together for an event at the Nashville campus called One Church. The goal was to rally people to invest in the next generation of Tennesseans, according to a media release.
The group raised enough funds to fulfill Amazon wish lists at two schools and provided financial resources for a hygiene closet at Jere Baxter Middle School in East Nashville. Dr. Kisha Cox, principal at Jere Baxter Middle School, said the needs are great there, with many teachers using their own resources in the classroom.
“A lot of our families were experiencing financial challenges – they just didn’t have the basic needs,” Cox said in the release. “We started a clothing closet, and we have a washer and dryer here where families can come and wash their clothes at no cost. We’ve noticed that when scholars don’t have the basic needs, they are often disconnected from the learning process because they are thinking about where their next meal is coming from. Most of the resources and supplies are purchased by staff members.”
The church said the event was about coming together to make a difference for those who need it most.
Copyright 2023 WSMV. All rights reserved.
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Amazon back-to-school fair to provide 10,000 backpacks with supplies to Baltimore students
Tuesday, August 22, 2023
Katarina Hein, WBAL NewsRadio 1090 and FM 101.5
Amazon is holding a Back-to-School Fair where they will provide 10,000 students in Baltimore City and Baltimore County with the resources they need to succeed this school year.
The fair will take place on Saturday, Aug. 26 from 12:00 p.m. - 4 p.m. at the Robert C. Marshall Recreation Center in Baltimore.
Above just backpacks and school supplies the fair will provide:
- Free haircuts
- Face painting
- Food trucks
- Community and health resources
- Live entertainment
The event will be hosted by employees from Amazon’s metro Baltimore Fulfillment Centers and Delivery Stations.
In doing so, Amazon hopes to reiterate the importance of equal access to not only an education but also educational items.
The fair will also feature appearances and interview opportunities with representatives from Baltimore City and Baltimore County Public Schools, Baltimore City Recreation & Parks, and Amazon.
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Under Navneet’s adept leadership, the company has earned a spot among the “25 Fastest Growing HR Companies in India.”
In a country striving for a brighter socio-economic future, the challenge of unemployment has emerged as a critical issue. With the highest rate in 45 years, the need for innovative solutions is greater than ever. This is where Navneet Singh, the founder and CEO of Avsar, steps in with a mission to bridge the gap between job seekers and employers. Let’s delve into Navneet’s inspiring journey, the growth of Avsar, and his impact on India’s recruitment landscape.
Early life and ambitious beginnings
Navneet Singh’s journey began in the modest town of Begusarai, Bihar. Growing up in a typical 90s childhood alongside his elder brother and parents, he developed a strong foundation rooted in traditional values. After completing his schooling from KV Begusarai, Navneet embarked on a path of higher education, eventually graduating with a B.Sc. in Biotechnology from MS Ramaiah College in Bengaluru.
Driven by a hunger for knowledge and a passion for human resources, Navneet pursued an MBA in Marketing & HR from the same college. His educational pursuits set the stage for a remarkable career that would later see him impacting the lives of countless job seekers and employers.
He worked with Ola Cabs for seven months as an Assistant Manager before joining Swiggy as a Senior Consultant in Bengaluru.
Founding Avsar: A vision for inclusive employment
During his time at Swiggy, Navneet noticed that organisations like Swiggy required consistent human assistance, whereas job seekers struggled to find suitable roles.
In 2016, Navneet’s journey took an entrepreneurial turn when he, along with three college friends – Satyabrata Sethy, Nitish Rao, and Prateek Jha – established Avsar. With a mere Rs. 15 lakh investment, the company’s inception marked the beginning of a transformational journey.
Avsar, a tech-enabled HR services company, aimed to offer end-to-end HR solutions catering to the needs of both job seekers and employers. Starting with just one person, the company’s dedication and commitment paid off. Today, with its headquarters based in Gurugram, Avsar boasts an impressive workforce of 200 employees spread across seven cities in India.
Scaling heights and impacting lives
Avsar’s trajectory has been nothing short of remarkable. The company swiftly expanded its services to address a wide range of HR needs. From staffing and recruitment to compliance management and talent acquisition, Avsar’s comprehensive solutions cater to various employment challenges faced by both job seekers and employers.
Under Navneet’s visionary leadership, Avsar’s growth has been astounding. From a turnover of Rs. 34 lakh in its initial fiscal year, the company’s revenue soared to Rs. 3 crore in 2017-18, and subsequently crossed the significant milestone of achieving a turnover of Rs. 100 crore in 2019-20. Such exponential growth attests to Avsar’s effectiveness in bridging the gap between job demand and supply.
Personal life
Beyond the boardroom, Navneet’s personal life reflects his commitment to making a difference. He is happily married to Monika, and together they have a young son named Atharv. Monika’s involvement in their NGO, Atharv Seva, emphasizes the couple’s dedication to child education and hygiene.
Navneet’s personal interests, including golf and studying self-help, investment, and business-related books, mirror his approach to life – a mix of strategy, continuous learning, and holistic well-being
Shaping India’s recruitment landscape
In a landscape where job opportunities are sought by millions, Navneet Singh and Avsar stand as beacons of hope. Their commitment to inclusivity and the betterment of both job seekers and employers has made Avsar a game-changer in the HR services sector. As India’s unemployment challenge persists, Navneet’s vision and Avsar’s services continue to play a crucial role in shaping a more promising future for both individuals and the nation’s economy.
Avsar, an end-to-end HR service provider, considers the aspirations of both the jobseeker and the employer, offering a variety of services such as contractual staffing, payroll and compliance management, CXO and executive level hiring, lateral recruitment, and volume hiring.
Awards and recognition
Avsar’s accomplishments have not gone unnoticed. Under Navneet’s adept leadership, the company has earned a spot among the “25 Fastest Growing HR Companies in India.” This recognition solidifies Avsar’s position as a key player in driving positive change within the recruitment landscape.
Amazon Prime Air Boeing 767s parked at CVG in 2021. ATI operates plane in rear, Atlas Air operates ... [+]
© 2021 Bloomberg Finance LPFor a company that has no union contracts, Amazon AMZN is engaged with a rather large number of labor unions.
Teamsters organized a group of drivers in Palmdale, Calif., in April. An in-house union organized warehouse workers in Staten Island in April 2022. Additionally, Amazon’s aviation division employs eight airlines, most of them with one or more unions. At Air Transport International (ATI), the primary airline flying for Amazon, the Air Line Pilots Association says low pay means pilots are leaving at a rapid rate.
ALPA said Thursday that for the second consecutive month, ATI was unable to fill its captain vacancies. Year to date, 155 of ATI’s 575 pilots have resigned, the union said; last year, 127 resigned. “With our ferocious attrition rate, we lost 50% of our pilots in the last year and a half,” said Mike Sterling, chairman of ATI’s pilot group.
The primary reason is low pay. At ATI, a 12-year Boeing 767-300 captain earns $281.87 hourly. At Delta, a 12-year Boeing 767-300 captain earns $349.50 hourly. First year ATI pilots earn about $68,000, whereas some regional airlines offer better pay, bonuses, and a path to fly at a major carrier. “I see no reason why you would come to ATI today,” said Sterling, a Boeing 767 captain with 27 years at ATI.
ATI pilots have negotiated since 2020. Their contract became amendable in March 2021; they entered mediation this year. “Our company doesn’t appear to be ready to finish anytime soon,” Sterling said. “It may be that the relationship they have with Amazon, where they are in the contract cycle, is hindering their ability to negotiate with pilots.”
In October, Amazon reached a deal for Hawaiian Airlines to operate ten A-330s starting this fall. In that case, Sterling said, “Amazon appears to have negotiated a contract that supports industry pay and benefits. We think Amazon is willing to pay market rate, I also suspect that they do not want to increase the rate of their ATI contract midterm. We appear to be mid-cycle and the escalators in the contract don’t support what is earned at other carriers.”
According to planespotters,net, Amazon’s operates a fleet of 94 aircraft, with 83 in service. The Boeing 767-300 is the number one aircraft, with 58 in the fleet and 54 in service. The planes fly with Prime Air livery. Of the active aircraft 39 are flown by ATI, 25 by Atlas, 12 by Sun Country, with the rest operated by five other airlines, planespotters shows.
Because of ATI’s pilot shortage, Sterling said, “We bounce back and forth between fly all day, rest, then fly all night. Day to night transitions are extremely fatiguing.” But he noted, “We like working for Amazon and we provide high reliability. Our issue is with our corporation. It’s time for them to recognize what a new contract looks like.”
ATSG Group operates three airlines, including ATI. On the August 4th earnings call, Rich Corrado, CEO of ATSG, said, “We’re in mediation with both of our pilot unions at Onmi and ATI. We’ve always been able to come to agreement with our unions. Our goal is to get the right contract where we can attract and retain the pilots we have, and then also have the cost structure from which we’re able to compete for business.” Cortino said he doesn’t expect either contract “will be settled prior to 2024.”
ALPA is not the only union Amazon keeps at a distance. In April, the Teamsters organized 84 drivers and dispatchers at Battle Tested Strategies (BTS) a Palmdale, Ca.- based delivery firm that contracted with Amazon. Amazon declined to negotiate. On June 24, the drivers and dispatchers struck. Since then, they have picketed 10 Amazon warehouses throughout the country.
Amazon said it terminated BTS before its workers unionized, accusing it of six breaches of contract, including failing to pay for insurance, according to The Associated Press. BTS was among more than 3,000 delivery service partners recruited by Amazon to drop off packages to customers, the AP said in a story Wednesday.
“Despite the absolute control it wields over BTS and workers' terms and conditions of employment, Amazon has refused to recognize and honor the union contract,” Teamsters said, in a prepared statement. “Instead, Amazon has engaged in dozens of unfair labor practices in violation of federal labor law, including terminating the entire unit of newly-organized workers.” Amazon did not respond to an email.
Meanwhile, at the Staten Island warehouse where an in-house union successfully organized about 8,000 workers in April 2022, progress on a contract has stalled. Amazon won’t recognize the union, workers don’t agree on how to respond and no other Amazon warehouses have been organized.
John Samuelsen, president of the Transport Workers Union, said Amazon “wants to be the last man standing” in resisting labor unions. He said Teamsters have the resources and infrastructure to battle Amazon, and suggested that union efforts in Staten Island could benefit from affiliation with the Teamsters.
TWU represents dispatchers at Hawaiian and Sun Country, which both fly for Amazon, another indication that the Amazon strategy of avoiding unions is not wholly successful when it uses airplanes. “There is no doubt that the airline industry is heavily unionized and that ALPA has an excellent record,” Samuelsen said. “The more that Amazon expands into the airline industry, the more it will see fight backs.”
KEY POINTS
- Many people get great value out of Prime memberships through free two-day shipping and streaming content.
- Now, Amazon is offering free early access to movie and show screenings through its Prime Premiere program.
- If you've never tried Prime, you can snag a free 30-day trial to see if it might be worth joining.
For many people, getting an Amazon Prime membership is an easy call. For $139 a year, you get access to perks like unlimited free two-day shipping on orders of any size and access to loads of streaming content, from music to movies to TV series.
Depending on the area you live in, you can argue that a Prime membership can pay for itself by virtue of savings on gas alone. If you'd normally spend $5 in gas to go back and forth from your closest big-box store, placing about 28 orders on Amazon per year allows you to break even on your $139 outlay. So if you commonly place three orders a month, you're getting your money's worth right there.
Meanwhile, Amazon is introducing yet another perk for Prime members that movie and TV fans in particular are apt to be thrilled with. So if you've been wondering whether your Prime membership makes sense to retain, you'll want to consider this latest offering.
How do exclusive screenings sound to you?
Although the main draw of an Amazon Prime membership is often the free two-day shipping, for some people, the streaming content is a really nice perk. Amazon is taking that benefit a big step further by introducing Prime Premiere.
It's a program that gives Prime members access to early in-person screenings of movies and TV series. Prime Premiere also includes access to photo opportunities at screening events, concessions, and special giveaways.
For each Prime Premiere event, members are allowed one entry. Event tickets are given out on a first come, first served basis. And because of this, it's unclear as to how easy or difficult tickets will be to snag. It's also worth noting that Prime Premiere events will only take place in select cities.
If you're psyched about this new benefit, you should know that the next Prime Premiere event is set to take place in early September. And we can expect details on future events to be announced as the program rolls out.
Should you join Amazon Prime?
While the Prime Premiere program sounds cool in its own right, the reality is that you may not want to bear the cost of a membership for that perk alone. It's hard to determine how easy or difficult it will be to snag tickets to early TV series and movie screenings. And it would be a shame to have to bear a $139 annual credit card charge for an option you don't end up getting to take advantage of.
However, if the idea of free two-day shipping appeals to you, and you're convinced it can help you save money by virtue of getting to make fewer trips to the store, then a Prime membership may be worth it. Plus, you do get the benefit of free streaming content included, among other perks.
If you're on the fence about a Prime membership, sign up for a free 30-day trial and see how it goes. You can always cancel after a month if you feel that Prime ultimately won't be worth paying for.
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- Amazon is paying US$1bn a year for Thursday Night Football
- Company has Premier League rights in UK
- NBA has been linked with a streaming package
Amazon plans to introduce new artificial intelligence (AI) features in its second season as the exclusive broadcaster of the National Football League’s (NFL) Thursday Night Football (TNF) and says the success of the venture will see it be more aggressive in pursuing rights for other sports properties.
The online retail giant had been a non-exclusive NFL broadcaster since 2017 before securing a US$1 billion-a-season, 11-year deal for the league’s first ever streaming-only package back in 2021.
While the company wanted to ensure both the NFL and viewers could be confident in its ability to produce and distribute TNF, it made significant moves to differentiate its production from rival broadcasters and appeal to younger audiences.
These included the ‘Prime Vision’ simulcast, which collated statistics, data and analytics from three different sources and overlaid graphics across the ‘All-22’ camera, which lets fans see every player on the field.
For season two, TNF plans to take further advantage of Amazon’s wider technology resources to Improve its coverage. According to Sportico, up to 20 potential features have been discussed with the company’s computer vision machine learning (ML) team with two headline additions available to viewers.
For season two, Amazon will use AI to indicate how close a team needs to get to the first down line before its algorithms would recommend running or passing the ball on fourth down rather than opting for a punt or a field goal.
This means two digitally-imposed lines will appear on a viewer’s screen at third down – one indicating a first down and another indicating how close they need to get before a fourth down attempt is the better option.
Meanwhile, a neural network can analyse video of a defensive formation and player positional and acceleration data in real time to determine whether a blitz – a defensive tactic designed to disrupt a pass attempt – is likely.
In a press conference ahead of the new NFL season, Amazon said demand for advertising was high given the ongoing Hollywood writers strikes that threatens the supply of scripted television and because of the streaming platform’s targeted advertising capabilities. This means the same partner can advertise different products to different viewers in the same slot.
The NFL, like Amazon’s other sports content investments, is designed to support its core retail business by driving Prime subscriptions.
Jay Marine, Amazon’s vice president of Prime Video and global head of sports, said the company would be looking to add more properties to its portfolio to ensure users not just sign up for Prime, but also stay signed up. The offer of free delivery and other perks mean Prime subscribers tend to spend more with Amazon than those without.
“We’ll continue to look at live rights,” Marine is quoted as saying. “We’ll be aggressive, but we’ll also be rational.”
SportsPro says…
Amazon’s NFL coverage highlights many of the advantages that streaming can offer over linear broadcasting.
The first is audience. Amazon’s debut season delivered the youngest median age of any NFL broadcast package since 2013. The second is technology. The combination of digital platforms along with the resources of the Amazon behemoth has delivered something entirely different from the league’s existing pool of broadcast partners. And its dynamic advertising experiments hint at the future of television and streaming video.
A few technical teething issues aside, TNF received critical acclaim in its debut season, winning a Sports Emmy. While some properties fear a lack of reach by going entirely behind a paywall, Amazon is now firmly established in the sports broadcasting landscape, working not just with the NFL but also the Premier League and Uefa. The NFL is so impressed, it has even given the company its first live Black Friday matchup.
It would not be a surprise to see the National Basketball Association (NBA), rumoured to be creating a streaming package in its next rights cycle, follow suit.
Protection of the Amazon rainforest, the most biodiverse place in the world, suffered a setback earlier this month when the eight countries that share the jungled region’s vast territory failed to sign a no-deforestation pledge at a conference in Brazil.
It disappointed environmentalists and Indigenous groups who had hoped the deal could demonstrate a new model for regional cooperation to protect biodiversity hotspots.
What happened at the “Amazon summit” halfway across the world mirrors conservation challenges facing Southeast Asia, another of such forest hotspots, experts say.
But short of a regional pledge – a feat not attempted in Southeast Asia – they believe that multilateral cooperation can still lead to better conservation, along with focusing on action that benefits all stakeholders.
“The failure of the Amazonian countries to agree on a no-deforestation pledge demonstrates the socio-political challenges of reconciling domestic economic agendas with regional environmental protection priorities,” said Professor Koh Lian Pin, director of the Centre for Nature-based Climate Solutions at the National University of Singapore.
“The same could be said of the Southeast Asian region, where each country also has to grapple with the trade-offs of development versus conservation,” Koh said.
Southeast Asia houses 15 per cent of the world’s jungles, and Indonesia has the third-largest rainforest globally, after the Amazon and Congo regions.
At least until recently, both the Amazon and Southeast Asia also had high deforestation rates – Southeast Asia lost a sixth of its forests between 1990 and 2020; the Amazon marginally less, losing one seventh of its forest cover.
Both regions are rapidly developing, with agricultural and urban developments encroaching into pristine natural areas. But while deforestation trended upwards in the Amazon since 2015, forest loss rates in many parts of Southeast Asia, particularly in Indonesia and Malaysia, have been declining against a 2016 high. Still, primary forest loss is climbing in countries like Laos, the Philippines and Singapore, the latest data shows.
Primary forest loss in many Southeast Asia countries have been on a downward trend from 2016 to 2022, though rates have been creeping back up in countries like Laos, Philippines and Singapore. Data: Global Forest Watch.
To date, the Association of Southeast Asian Nations (Asean) bloc has not floated regional no-deforestation pledges. Individual countries have made commitments, though not all appear watertight.
At 2021’s COP26 climate summit, eight Asean countries including Cambodia and Indonesia signed a global pledge to stop forest loss by 2030. However, Cambodia’s own national climate plan only commits to halving deforestation by then, and Indonesia had later backtracked on the target.
At 2022’s COP27, a similar global pledge against deforestation, seen as a follow-up, only had Vietnam and Singapore as signatories. Indonesia expressed interest but made no firm agreement.
Indonesia signed a US$56 million deal with Norway last November to prevent deforestation, after the two nations terminated a similar agreement in 2021 over payment issues.
No-deforestation commitments would have a stronger impact on a regional scale, since would mean that countries implement similarly strong policies, said Hidayah Hamzah, senior manager for forest and peat monitoring at non-profit World Resources Institute (WRI) Indonesia.
Hamzah noted there are existing regional initiatives protecting cross-border ecosystems, such as the Mekong river basin, running through China and several Southeast Asian nations. Non-profit WWF also has a forest conservation programme on Borneo island with the governments of Brunei, Indonesia and Malaysia.
“These commitments are a great first step, but more important are policy implementation in forest protection and law enforcement,” Hamzah said.
“It may not be productive to overly fixate on a no-deforestation pledge because a pledge on its own is just that, with no guaranteed outcome,” Koh said. A “common vision of a desired and sustainable future” that is science-based and involves the public and businesses is far more impactful, he added.
Such an approach involves a “longer and potentially painful” process of balancing conservation with ensuring equitable transition for communities that need more time, Koh said.
“Even without regional pledges, Southeast Asia has shown remarkable progress with regard to reducing deforestation,” said Dr Dindo Campilan, regional director for Asia at the International Union for Conservation of Nature (IUCN) – also citing examples of Indonesia and Malaysia, as well as Vietnam.
Regional networks in the region help with capacity building and rallying support, he noted, citing initiatives within the Association of Southeast Asian Nations (Asean), and the Asia Protected Areas Partnership which IUCN co-chairs.
The Asean bloc of 10 Southeast Asia countries has a 10-year action plan through to 2025, to eradicate hunger while “achieving sustainable forest management” – though quantitative targets are not set for conservation.
Campilan said steps such as stronger action against illegal logging, providing fiscal incentives, setting up protected areas and helping Indigenous communities secure land tenure have been shown to work in the region.
The scrutiny of palm oil, for which Indonesia and Malaysia are top global producers, has also resulted in stronger regulations and voluntary corporate no-deforestation commitments, Campilan noted.
But the measures have not placated everyone – the sustainable palm oil certifications of both countries have yet to be recognised by the European Union, which is set to ban the import of commodities linked to deforestation next year.
Greater data transparency from governments and businesses is also needed for monitoring and accountability, Hamzah said, noting that some information such as on forest concessions is still not publicly available.
Indonesia stands out among tropical countries for reducing deforestation, the main driver of which is now mining. Image: IndoMet in the Heart of Borneo, CC BY-SA 3.0, via Flickr.
Meanwhile, the failure of Amazon countries to commit to a no-deforestation pledge appears to have some uniquely local traits. Colombia had, unpopularly, used the same platform to lobby for an end to new oil development in the Amazon, Reuters news agency reported.
Brazil has also been a wildcard in recent years. After Amazon deforestation soared for years under previous president Jair Bolsonaro, conservation has now become a national priority under the new administration led by Luiz Inacio Lula da Silva – who had pushed for the regional conservation pledge. A personality like Lula arguably does not exist among Southeast Asian heads of states.
While deforestation in the Amazon continues to be driven by agriculture, forest loss in Indonesia is now primarily caused by mining.
“While a similar no-deforestation pledge could benefit Southeast Asia, it must be tailored to address the region’s distinct challenges,” said Tomi Haryadi, deputy programme director for agriculture, forest, and land use at WRI Indonesia.
Money matters
The Amazon nations, in a “Belem Declaration“, nonetheless agreed to better protect Indigenous peoples and collaborate on sustainable development.
There was a separate agreement involving other forest-rich nations, such as the Democratic Republic of Congo and Indonesia, to call for more conservation funding from wealthy countries.
The world had pledged last December to raise at least US$200 billion a year for biodiversity conservation by 2030, and to protect 30 per cent of the Earth’s lands and seas by then. But there is scepticism over fund disbursement, as a landmark US$100 billion climate finance pledge for 2020 had fallen short by 20 per cent.
Analyst Sustainable Fitch said the financial demands issued during the Amazon summit could set the stage for a “more confrontational COP28 [global climate summit] this year, with developing nations unifying more strongly in their calls for follow-through on existing pledges and additional climate finance from developed nations”.
