 |
Table of Contents |
 |
|
|
Issues for Discussion
These issues will inform the ADB forest policy review process.
We welcome your views, suggestions or other issues.
Development and Policy Challenges
A. Demographic and Development Imperatives
Food, livelihood, and water security. With the region's population projected to increase from about 3.3 billion in 2000 to an expected 4.4 billion in 2015, the increased and more prosperous human population will put additional pressure on the region's forests for forest products and land to increase agricultural production and for services, especially sustainable water supply. Over 430 million of the poorest people in the region live in rural areas and for them forests play an important role in achieving food and livelihood security. Water is emerging as a major social and economic challenge in the region. Economic transformation and integration. The trend for the manufacturing and service sectors to replace the agriculture and primary sectors as the dominant sectors for economic growth and development in the region is expected to continue. Globalization and regional cooperation and free trade agreements are expected to boost growth, promote more liberal trade policies, and increase economic integration. But these benefits will be put at risk if further environmental deterioration takes place. Increasing demands on a declining forest resource base. Projected population and needed economic growth would mean that the regional demand for wood products alone could increase from the present 1.2 billion m³ to around 3.8 billion m³.1 Market forces may induce more efficient production and consumption patterns in the long run. But as the growing cycle of trees is relatively long, and if most forests are lost, it will be difficult for the remaining forests to meet the emerging needs. Over-valuation of non-forestry land uses. Analysis of the oil palm, rubber and coffee production data and prices since 1970 suggests that the return for an investment in the three crops was around 10% in the 1970s and 1980s. These returns are not much higher than those obtained from forestry. The subsidies provided to these commodities in the form of free land and low interest credit, combined with the under-pricing of the forest resource through low royalties, have distorted the market in favor of these commodities. This has resulted in over capacity in these estate crop sectors, depleted forest resources and created a perverse incentive for conversion of forestland to other crops and land uses.
B. Governance, Market, and Policy Failures
Macroeconomic and fiscal policies. The 1997 Asian fiscal crisis drew attention to the importance of forests as an emergency reserve. Increased harvesting of timber was driven by DMCs' needs to increase foreign exchange earnings to balance trade and generate revenue as currency devaluation favored timber exports. Forests also became the safety net for millions of people laid off from the manufacturing and service sectors. But fiscal difficulties also contributed to reduced state budgetary expenditures thereby adversely affecting forest sector investments and management. Illegal Logging. About 45% of the region's recorded production was estimated to be from illegal sources in 2000 resulting in an aggregate annual loss of revenue to governments in the region of as much as $2.5 billion. Illegal logging raises the harvest above sustainable levels and reduces the potential future output, and the price of logs in the domestic market. This encourages wasteful use and contributes to forest degradation, exacerbates forestland tenure and use conflicts, reduces the incentive for logging companies to protect and regenerate forests, and leads to loss of livelihood opportunities and higher environmental costs that generally have an unduly heavy impact on the poor and vulnerable. Market failure. The economic value of forests for soil and water conservation, environmental amelioration, rural employment, as habitats for enormous biodiversity, and as cultural and livelihood assets are widely acknowledged. But these benefits are generally not marketed. Even when a monetary value is attributed to them, the link between the value and cash in government treasuries or people's pockets is not evident. "Low" market prices and rent capture. The supply side for most tropical timber is not constrained at sustainable levels as illegal logging keeps supply in line with demand, and the market does not operate to constrain demand through rising prices. For species such as teak, ebony, ramin, and mahogany, which are becoming scarce, prices are five to ten times the average for tropical hardwoods in general. Moreover, the market price for timber and timber products neither reflects the replacement cost of the resource nor the environmental costs associated with illegal logging and forest degradation. Compared with other sectors where natural resources are exploited, such as mining or oil and gas, the share of the economic rent captured by governments in forestry has been very low; typically 20-30% compared with 70-80% for oil and mineral exploitation. A major reason for the poor rent capture is the lack of any competitive bidding process and difficulties in controlling access to the resource and setting up optimal royalty levels that prevent felling of only high value trees and wastage.
C. Policy and Institutional Barriers
Technological orthodoxy and weaknesses. The biomass productivity potential of natural forests and plantations in the region is under-utilized because of outdated management technologies and practices. State-of-the-art forest conservation and development tools, such as ecosystem and landscape planning, vital for integrated forest, biodiversity and natural resource conservation and management, and technologies such as geographic information systems, biotechnology, forestry expert systems, and the Internet remain underutilized. Increasing needs but declining investments. Only about 3% of the $7 billion required to restore the 4 million ha of forest lost annually and maintain the conservation and economic potential of the remaining 490 million ha of natural forest in Asia-Pacific region, has been provided through international development assistance. Even national public sector investments are generally at 30 to 40% of the planned investments, which are in turn only a fraction of real requirement. Insufficient delivery capacity. An investment of about $50 to $55 million over 8 years is indicated as operationally feasible for a single project, due to the seasonality and labor-intensive nature of forestry operations and delivery constraints of state and nonstate sectors. Therefore, there is a need to diversify forest management and project implementation options and arrangements.
- These estimates are based on current processing efficiencies and income elasticity in demand for major products, and are indicative of trends and patterns of growth. They are not forecasts.
|
Projects 
Top of page
Back