The forest industry has the potential to contribute to the economy and increase state revenues in many developing countries. The realisation of these opportunities depends on the governance of the forest industry and the ways in which forests are managed. Donors can play an important role in this process by providing funding and other support to developing country governments. This U4 Issue paper discusses how corruption influences the logging industry and deprives developing country governments of important revenues. It explains the concession system in forestry and the risks of corruption in forest sector contracts. Some policy implications are drawn, suggesting a ranking of strategies, with a particular focus on aid-related implications.