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Juan Seve

Mr. Juan Seve has 30 years of professional experience
(15 years of which are concentrated on international activities)
in the environment and natural resources sector, focusing
primarily on planning, policy and economic analysis and
modeling, and forest products and raw material engineering.
Working with private industry, government ministries and donor
organizations, he has expertise in all aspects of field project
management including team mobilization, coordination of
inter-institutional collaborative efforts, preparation of work
plans and budgets, monitoring and evaluation, and training.
For one year starting in September 1998, he worked as Forest
Resources Advisor under the Natural Resources Management
Program, USAID/Indonesia. From 1994-1996, he played a major
role in the development of the National Natural Resource
Management Program in Niger as Project Director for the
USAID-funded Agriculture Sector Development Grant-Phase II.
This involved technical support to an in-country process designed
to promote changes in the role of Foresters, as well as assistance
with studies on decentralization, tenure reform, and training in the
economic analysis of NRM interventions. He prepared and
strengthened the planning capabilities of the Philippine Department
of Environmental and Natural Resources, served as Senior Policy
Specialist on USAID's design of Asia/Near Eastern Europe Regional
Environmental Project and assessed environmental policy in Malawi
for a World Bank economic report. He is currently implementing the
USAID/Philippines Environmental and Natural Resource Accounting
Project whose goal is to develop an analytical understanding of the
impact of environmental and natural resource utilization/conservation
policies on economic growth/development.


The subject is introduced by brief descriptions of historical examples, the extent of forest plantations in the world today, and the basic idea that man-made forests constitute land use investments largely driven by economic considerations.

Subsequently, the technical and economic characteristics of plantation forests are discussed in detail. From a technical standpoint, land availability, manpower needs, species/site considerations, nursery management and seedling supply, plantation establishment, stand treatments, protection needs, equipment, infrastructure, and research efforts are emphasized as factors implying both major costs and specific forms of know-how. From an economic standpoint, exclusivity and transferability of land use rights, open markets for inputs and outputs, access to capital, and technical capability are stressed as basic conditions for long-term plantation investments. Such investments must be able to compete for land and other factors of production against alternative opportunities that an economic environment may offer. While most of the sections focus on commercial plantations, protection and smallholder aspects, as well as the role of the State are also briefly discussed.

A third section presents a simple economic model that shows under what conditions of markets and policies, and on what types of land economic agents will be interested in investing in forest plantations. The model is based on the interaction of value functions of different forms of land use, and on the cost of maintaining secure land use rights. A major result of the application of the model is that forest plantations can be expected to occur in some of the areas in which the natural forest has been cleared or degraded, but definitely not in all. Some areas are expected to remain under forms of land use that are not sustainable. The model also shows that the area on which forest plantations can be expected to occur can increase or decrease due to changes in both markets and the policy environment. A brief discussion stressing the importance of a stable policy environment completes this section.

Concrete examples from different parts of the world (southwestern France, Chile, New Zealand and China) are presented in the next two sections. The French case is given special attention since it represents two centuries of sustainable forest plantations, which are the dominant form of land use in a particular region. These plantations are largely the result of commercially oriented private initiative, but the State also plays an active role, and so do local governments. The cases of Chile and New Zealand both represent successful forest products economies based on plantations, which have been recently enhanced by major changes in their respective policy frameworks. The Chinese case, while focusing mainly on smallholders, illustrates the importance of clear rights regarding tree planting.

A concluding section stresses the importance of three fundamental elements that drive forest plantation investments, i.e., markets, property rights, and a stable policy environment, and proposes a brief list of items for discussion reflecting the implications of the analyses and examples presented for strengthening a forest plantation program in the Philippines.

Introductory Remarks

Forest plantations are not anything new. In southwestern France, for example, there are records of man-made forests as early as year 1500, as well as evidence of trading in forest products, both wood and non-wood from maritime pine (Pinus pinaster) plantations. These early plantations resulted mainly from the initiative of private landlords as well as smallholders and communities, primarily for commercial purposes (i.e., the trade of wood and resin products), but also for direct household needs. In this same area there are records of zones planted with pines and other vegetation to control the advance of sand dunes before 1600 (Sargos, 1997). Therefore, there is evidence of commercial, smallholder and community man-made forests, for both production and protection purposes, from as early as 400 to 500 years ago. This particular region of Southwestern France is known as the "Landes de Gascogne," which is nowadays a compact plantation forest of more than one million hectares. While ownership is more than 90% private, with more than 40,000 owners of all sizes, the State plays a limited but effective role in the management of this area, and so do local governments (Montané 1994). The "Landes" are indeed a good example of intersectoral cooperation applied to sustainable forest management. Given its long history of man-made forestry, examples from this particular region will be discussed more thoroughly in the fourth section of this paper.

Closer to home, teak (Tectona grandis) was successfully introduced to Sri Lanka as early as 1680. This same species was successfully planted in Java in 1829, in India in 1840, and in Bangladesh in 1871. Additionally, eucalypts were successfully planted in India in 1790 (Evans 1992).

At present, according to FAO estimates, plantation forests exceed 100 million hectares worldwide (Montané 1994). This area, to a large extent, has resulted from the inclusion of plantation programs in the national forest policies of many countries in recent years, especially since the mid-sixties (Evans 1992). For the most part, these man-made forests have concentrated on industrial plantations; however, they have also included plantations for protection purposes, as well as rapidly expanding agroforestry and social forestry efforts. This important area of forest plantations reflects a sizable set of investments in which economic agents of several categories have participated, namely, enterprising individuals, private sector enterprises, communities, rural households, governments (both national and local), international funding organizations, and non-governmental organizations (NGOs).

While for all economic agents involved forest plantations constitute an investment (i.e., the application of resources in an effort to attain a greater benefit in the future), different agents will invest their resources with different purposes in mind. For example, a private enterprise will emphasize commercial benefits, a rural household will probably be more interested in satisfying more direct needs for fuelwood and fodder, and national or local governments may focus on controlling erosion, restoring watersheds, and other types of public interest investments. One way or another, forest plantations constitute a form of land use, in which land may be competing with other possible uses, and the application of other resources, such as capital, labor and know how, which also compete against other investment opportunities.

I. Forest plantations: a long term investment

Regardless of the type of benefit expected (whether commercial, social or other), the development of forest plantations involves the creation of fixed physical capital. Like any investment of this type, planted forests require sacrificing current consumption, so that a capability that combines factors of production to produce goods and services in the future can be established. Apart from the standard features of capital investments, forest plantations have some specific characteristics. As a form of land-use, there is no opportunity for change over a long period of time, and returns on investment are delayed for several years.

Before focusing upon the economics of forest plantations as an investment, it may be a good idea to reflect upon some technical aspects. While it may not be immediately apparent, plantation forestry involves a considerable number of technical factors that will affect the economic and social performance of a forest plantation program. Not only do most of these factors represent economic costs, but also their proper combination and handling require specific capabilities and know-how, which are also part of the investment effort.

Basic to the development of any forest plantation program is the availability of a sufficient area of suitable land for lease, purchase or change in land-use. Whether this land is owned by private individuals or entities, by local communities, or by the government, public authorities promoting the program must provide for the adequate structure of rights and obligations that will enable large areas to be committed to a particular form of land use over long periods of time. A forest plantation program will also require critical amounts of manpower at the professional, specialized and unskilled levels. Additionally, important volumes of funds must be consistently available over several years.

Above and beyond the basic factors of land, labor and funding, many other factors, most of them related to plantations as a production process must be taken into account, particularly since they will affect the economic success or failure of plantation operations. Early in the development of a plantation program, serious consideration must be given to the choice of species and provenances, and their proper matching with sites. This site-species matching must not focus only on needs for commercial wood, but must also take account of the needs of local people and site protection and conservation requirements. In this species-site matching exercise, opportunities for combining tree planting with other forms of land-use (e.g., agroforestry) must also be examined. Part of this site-species matching work requires some technical analyses such as an understanding of growth rates, conditions and patterns, and possible rotations of the main candidate species.

Plantation forestry involves the establishment and management of nurseries, which constitute a production system in its own right, with its own set of inputs, outputs and management requirements. Nurseries must be able to provide the right amount of plants, of the right species, of the right quality, at the right time, and at the right place. Among the essential factors of nursery success is the procurement of quality seeds in the right amounts, which must be properly stored and treated.

After seedlings are grown in nurseries, planting proper takes place, which is normally the most costly and critical operation among plantation forestry activities. To ensure good survival and early growth, major costs are incurred in site preparation, drainage, initial fertilization, and weeding. Other critical elements at planting time that will affect future plantation performance are quality seedlings, the timing of planting and proper spacing. Once the early survival of a plantation stand is assured, treatment operations involving new costs continue in the form of thinning, and perhaps pruning and some additional fertilization. Also, throughout the life of a plantation, management must provide for protection against hazards (e.g., fire, diseases and pests), and for the maintenance of machinery, equipment and infrastructure permitting the continuing management of the plantation operation. Finally, at the end of the rotation, harvesting systems, including road and skid trail layout, as well as felling techniques must be implemented to minimize site damage in preparation for the next rotation of tree crops. Decades of experience have shown that forest plantation programs seldom end with the first rotation, and in looking forward to successive rotations, such programs must remain mindful of maintaining site quality through cultural treatments, and invest in research efforts focusing on trials for testing species/provenances, responses to various silvicultural treatments, tree improvements and protection against diseases and pests.

As can be seen from this very brief description of the technical aspects of plantation forestry, this is not a simple business. On the contrary, it requires important costs, significant amounts of specific know-how, and involves several factors of risk of failure. Additionally, since the benefits derived from such efforts are not obtained until after several years, most economic agents will require certain conditions before embarking into this type of investment. It is important to stress, however, that as previously mentioned, there are tens of millions of hectares of plantation forests in the world today, which means that various economic agents over several decades and even centuries have invested in forest plantations expecting future benefits. Some of these investments have failed, but it is fair to say that perhaps most have been successful, as evidenced by the continued expansion of forest plantation activities in the world today.

While there is a recent emphasis on agroforestry and other forms of social forestry schemes, as well as plantations for watershed protection and other resource conservation purposes, most forest plantations throughout history have been driven by production or commercial motives. Various countries have designed systems of incentives (mostly fiscal and financial) to enhance forest plantations, but the expectation of commercial gain has remained the major motivating force behind most man-made forest efforts. This implies that a fundamental consideration in launching or strengthening a forest plantation program is the access to a market where the proceeds of a plantation can be sold at a competitive price.

What would be the conditions (at least in a theoretical sense) under which an economic agent would be willing to undertake an investment in plantation forestry? First and foremost, economists assume that the agent who plants trees on a hectare of land owns or leases the right to exclusive collection of the proceeds of that which he has planted. In return for this exclusive right the agent expects to pay a land rent. If he owns the land outright, he will pay this rent to himself at an opportunity cost rate determined in a competitive market. If he leases the land he will pay the rent to a private owner or to the government at a competitive price (Samuelson 1976).

Apart from the exclusive rights to the land and its proceeds obtained at a competitive price, the economic agent is assumed to know about certain features of the markets in which he operates. These assumptions include:

Under these assumptions, it can be proven that the agent can determine an optimum rotation period, which results from maximizing the present discounted value of all net receipts (excluding land rents) calculated over an infinite chain of cycles, or what turns out to be the same, maximizing the present discounted value of net receipts over the first cycle, but with the market land rental included in those receipts.1 Additionally, this is theoretically a sustainable solution (Samuelson 1976). This is essentially the optimal solution developed by the German forester Martin Faustmann in 1849, which has been supported over time by several authors as theoretically correct.2

An important point in this theoretical approach is that the present discounted value calculation implies the existence of a positive interest rate, which clearly militates against long-lived investment projects. Compound interest is indeed the legitimate return that economic agents must earn in forest plantations if they are not to employ their land, labor and available funds in other more lucrative uses.

One major lesson from this theoretical approach is that forest plantations are economically no different from other investment opportunities, and that wood is economically no different from other commodities transacted in competitive markets. As wood becomes scarce, it will become more expensive. As long as there remain important needs for wood that people will want to satisfy, the price of wood will rise to the level necessary to keep a viable supply of it forthcoming (Samuelson 1976). This is where forest plantations come in as part of the solution to a problem of wood scarcity.

Yes, Professor Samuelson's framework focuses strictly on the production aspect of plantation forestry, but most of us know (including Samuelson) that land use is subject to all kinds of externalities, and as a result, many land-use problems are often handled through regulatory processes. Nevertheless, on the basis of decades of experience, there is reason to believe that private economic agents motivated by the expectation of financial returns can effectively handle a major part of forest plantation efforts.

What about forest plantations at the smallholder or village level? While in these cases the emphasis is not normally on the selling of commodities to maximize net returns based on commercial transactions, small farmers are also economic agents attempting to maximize their well-being. Most often, smallholder and village plantations are undertaken to provide for direct needs such as fuelwood, fodder, fencing, food (as in the case of fruit trees) and as shade and protection of agricultural crops (e.g., shelterbelts). However there is also evidence that under certain conditions, smallholders do plant trees in anticipation of future markets (Evans 1992; Hyde and Sève 1993), implying that even under social forestry programs, the access to markets must not be neglected. A basic condition for these plantations to occur appears to be the security of rights, as mentioned above under the assumptions of the theoretical approach. Another, more practical condition, seems to be the provision of seedlings (often at subsidized prices) through governmental extension services or NGOs.3

What about forest plantations for protection and conservation purposes? There is ample evidence that in tropical countries the loss of forest cover has led to extensive damage particularly derived from soil erosion. This is largely due to climatic factors (such as prolonged heavy rains, major changes in relative humidity and high temperatures) and the inherent fragility of tropical soils, but also to land use practices such as periodic burning of grasslands. While these problems have long been recognized, little protective planting has been performed, and much of what has been done has failed, although the reasons for failure are rarely technical (Evans 1992). The complexity and interdisciplinary nature of conservation efforts associated with forest plantations require coordination of several government agencies at national, regional and local levels. Additionally, effective watershed management involves not only forestry, but also agriculture, hydrology, engineering, and social capabilities related to the participation of the local people. The coordination of these many disciplines requires a comprehensive organization lacking in many developing countries (Evans 1992).

Regardless of whether the results will be commercial forests, agroforestry activities, or watershed management/conservation efforts, a plantation forestry program will constitute a major investment of land, human, material and financial resources. Additionally, while the bulk of the program may end up in commercial plantations conducted and managed by the private sector, the State will have to play an active role (not only in setting policies and providing a leadership and coordinating role, but also as a direct agent), and so will local governments and NGOs.

The role of the State as the key actor in the design of a national forest plantation program and in creating the enabling policy conditions for its implementation is fairly obvious. However, State agencies will also have to play a more direct role in specific activities for which the private sector will not face the motivation of the markets. Protective plantations, for example, while economically important through their effect on environmental and resource conservation, do not have a direct financial return, and therefore, either the State or other public agents will have to assure the implementation and management of such investments. Additionally, under social forestry and agroforestry schemes, either directly, or through local governments or NGOs, the State will have to ensure an adequate supply of seedlings for a variety of situations, as well as technical services to communities and smallholders to ensure the success of activities in the field. Another role for government agencies at various levels would be the coordination of efforts to protect forest plantations against hazards, particularly fire. Finally, a forest plantation program with a long-term vision must be supported by a research effort that will ensure continuous improvement in the quality of planting stock, in the proper matching of species/provenances and sites, in soil management and maintenance and in optimizing stand treatments.4

In sum, while the private sector is expected to play a major role, a necessary condition is that private agents need to be convinced of expecting an economic advantage from committing large amounts of resources over long periods of time to the development of forest plantations. This will depend on a number of factors that will undergo further review in the next section. Smallholders and communities will also need to see the advantage in taking a long-term perspective. Finally, the State will also have to play an active role and commit resources to those aspects of the program, which while economically important, will not have direct financial returns and may require a continuing commitment of public funds.

II. A simple economic model

The diagram shown in Figure 1 is a simple representation of a landscape with two forms of land-use, namely agriculture and forestry (Hyde et al. 1996). This simplified model will help us understand under what conditions of markets and policies, and on what types of land, economic agents will be interested in investing in forest plantations. The vertical axis measures the value of land as a productive asset, while the horizontal axis represents distance from, or access to markets. Before going any further, it must be noted that this model is based on the premises of an economy of competitive markets, as discussed in the previous section, where the structure of rights and obligations of economic agents is clearly defined.

Agricultural land is represented by the value function extending from the vertical axis to point D. The value of farmland is highest at the intercept of the vertical axis, and it declines with increasing distance or decreasing access to the market, which is represented by the origin. Forest land is shown by the value function extending from the vertical axis to point C. Additionally, since land ownership involves some costs of excluding others and claiming its benefits privately, the upward sloping function cr shows the marginal cost of establishing and maintaining secure rights to the land. While the cost of obtaining legal title may remain constant with distance or access, the cost of excluding trespassers may increase substantially up to the point that no security effort, no matter how costly, will exclude illegal users in remote areas (Hyde et al. 1996).

Figure 1. The landscape of forest development


The agricultural land-use value function and the forest land-use value function intersect above point A. From the origin to this point, since agricultural values are higher than forest values, the natural forest has been cleared over time to make room for agricultural activities. To the right of point A, however, forest values are higher than agricultural values, and land from point A to point C will be used to obtain benefits from forest products. The area to the right of point C remains as unharvested forest because the costs of its utilization exceed the value of the products removed.

So far, nothing has been said about the sustainability of either of the two forms of land-use considered. A major factor in sustainable land use will be the cost of securing property rights represented by the curve cr.5 The functions showing agricultural land value and the cost of secure property intersect above point E. This implies that, in the absence of a competing forest value, farmers would be interested in investing and managing sustainable agriculture between the origin and point E. Under these same conditions (i.e., no competing forest value), the area between points E and D (where agricultural land value is zero) will be treated as an open access resource to be exploited for short-term advantage (Hyde et al. 1996). Similarly, forest users will be interested in investing and practicing sustainable forest management in the area extending between points A and B, while the area between points B and C (where forest land value is zero), will remain as an open access forest, which will be left to regenerate without investments and harvested periodically for short term gain. In the diagram, however, as previously discussed, forest use begins to compete favorably with agriculture to the right of point A. Under the conditions displayed, therefore, it can be expected that there will be sustainable agriculture from the origin to point A, sustainable forestry from point A to point B, no unsustainable agriculture in any significant amount, open access (unsustainable) forest use from point B to point C, and uncut natural forest to the right of point C.

An important conclusion that can be drawn from examining this model, is that under conditions of competitive markets and clearly established usage rights, sustainable forest management can be practiced by private economic agents in areas where it provides long-term economic advantages if the cost of establishing and maintaining such rights is included. However, no sustainable management can be expected in areas where the increasing cost of maintaining usage rights precludes investments in maintaining the resource. From the standpoint of forest plantations, which are perhaps the most important form of sustainable forestry nowadays, these can be expected to occur in some areas where the natural forest has been logged or otherwise degraded, but definitely not in all.

In the beginning of this section, it was mentioned that this simplified model could help understand conditions of markets and policies that would affect the interest of economic agents in undertaking forest plantations. This can be illustrated by shifting either the value functions or the tenure cost function. In the diagram, the dashed line extending from the vertical axis to point C' represents a shift to the right in the forest value function (i.e., an increase in forest value). Such a shift can come about either through market forces without any policy intervention (like an increase in demand for wood products over time), through the opening of new markets (such as a new policy of international trade facilitation), or even through policies that favor forest land value (e.g., special fiscal treatments). Such a shift would have two important effects. First, there would be an expansion of the area in which economically profitable sustainable forest management can be practiced (i.e., the area between points A and B expands to the area between points A' and B'). This expansion would derive from a reduction in the area of sustainable cropland (i.e., the area between points A and A'), on which forestry would now be more profitable than agriculture, and from a reduction of the area of open access forests (i.e., the area between points B and B') in which it has now become profitable to invest in sustainable forest management. Second, an expansion of the area of open access forest (i.e., the area extending from point C to point C') can also be expected as it now becomes profitable to cut into new forest areas previously left uncut.

While not shown in order to avoid overcrowding Figure 1, or to avoid overcrowding this paper with additional figures, this type of model can be used to examine the effects of several other changes, of which we can give a few examples:

There are many other possibilities: while the above discussion considered the shift of one of the functions in the diagram at a time, it is perhaps more common in the real world that several of these shifts are taking place simultaneously, thus affecting in many ways the economic opportunities for the establishment of forest plantations. Policy changes such as fees, taxes, forest charges, subsidies, regulatory restrictions, incentives favoring particular forms of land use, etc., all trace their effects through these shifts.

At least three important lessons can be learned from this simple model. First, as mentioned earlier in this section, economic agents, as they attempt to maximize their well-being, will show interest in investing in forest plantations under conditions that will make them expect an economic advantage with reasonable certainty. Not all land previously covered with forests will satisfy these conditions. Some will be dedicated to sustainable forms of land use with higher economic benefits than forestry (e.g. sustainable agriculture or urban development); some other areas will support forest plantations, and perhaps other forms of sustainable forestry; and finally some will remain as open access land where no sustainable use can be expected. Second, the area in which investment in forest plantations can be expected is by no means permanent. As discussed, this area will vary as a result of market forces affecting land use margins, even in the absence of policy changes. Third, the policy environment can make a major difference in the extent of the area in which sustainable forestry will be practiced. Public policies can be of several kinds, from macroeconomic measures and broad-based institutional reforms affecting the whole economy, to very specific instruments and prescriptions focusing on particular sectors. The economic agent, especially when facing opportunities for long term investments will react favorably to a stable policy environment, and therefore policy options must be analyzed in an integrated fashion, with explicit consideration of how they interact with each other.

It is clear that the simple model has focused on private agents expecting economic gains from commercial transactions derived from the utilization of forest resources. However, some may ask, what about forest plantations carried out by communities and smallholders, and what about protection forests? Well, that is why we have consistently referred to this diagram as a simple model, i.e., in order to focus on certain aspects of plantation forestry we have left some out. The reason we focused on private economic agents is simply because most of the areas reforested in the world has been driven by economic agents expecting some kind of direct economic return from their investment. Smallholders, however, are often integrated into some kind of market for forest products. In an informal way, they carry out a similar kind of economic reflection to sort out trade-offs, and by the way, this kind of informal economic thinking is also performed if the focus is on direct household needs, i.e., what will the household gain (in terms of shade, forage, fuelwood, etc.), from the time and effort applied to planting trees, even if the seedlings are subsidized?6

Regarding forest plantations for protection purposes, these are not represented in the model, simply because private economic agents will rarely embark in substantial investments that do not have a direct return, regardless of how beneficial such investments may be for the society at large. While private agents can be expected to be economically more efficient in investments leading to marketable outputs, this efficiency is unlikely for non-marketed services like environmental benefits. Forest plantations for environmental protection purposes are investments of a more social nature, not too different from road infrastructure, or public education, and they are often conducted by some type of public authority and with public funding. However, these are investments nonetheless, and they are conducted in the interest of generating environmental protection advantages for society. While markets will not directly provide information to assess the values of such advantages, they can be estimated indirectly, and therefore it is possible to conduct calculations that represent the economic efficiency of investments in protection plantations.7 In the diagram shown in Figure 1, protection plantations are likely to occur in the area extending from point B to point C, i.e., the open access forest, especially if there is a risk of environmental damages, such as erosion or flooding that certain economic agents must endure through no choice of their own (i.e., externalities). If investments of this kind are to be economically efficient, public authorities, just like private economic agents will need to apply economic calculations to ensure that the costs do not exceed the benefits. It must be remembered that inefficiency in public investments results in a loss to society.

While most of the discussion in this section revolved around a simple diagrammatic model, a major intent was to show the effect of economic forces and policies on opportunities for investing in forest plantations. The importance of a stable policy environment, especially when facing long-term investments, cannot be overemphasized.8 Investors need to know what to expect, including overall sociopolitical and institutional stability, macroeconomic policies, overall environmental policies, access to markets, tenure rights, and regulations specific to the forestry and forest products sector. As mentioned in Section II, interest rates militate against long-lived investment projects, but an unstable policy environment is probably an even more negative factor. In the presence of macroeconomic instability and policy uncertainty, economic agents will underinvest in plantations because they cannot be sure of obtaining the full return on their investments before the economic or policy environment turns to their disadvantage (Hyde et al. 1996). In terms of Figure 1, an unstable policy environment could mean that economic agents do not have confident expectations about whether government rules defining cr (the function showing costs of secure land use rights) will either relax or become more confining. Such environment could also mean that the agent does not know whether government log marketing requirements will relax or tighten. Under such uncertainty, firms will behave as if cr and the forest land value function were to the left of where they actually are, in order to protect themselves against potentially unfavorable policy changes. This would result in less land under sustainable forest management than if the policy environment was stable.

Finally, as the needs and aspirations of a society evolve over time, institutions and policies must adjust. This brings up the importance of open and participatory deliberative processes, involving the different sectors of a society, so that policy and institutional changes can be implemented with enough transparency for expectations about change to remain consistent.

III. A case: two hundred years of sustainable forest plantations

In the introductory section, it was mentioned that the "Landes de Gascogne" in Southwestern France would provide examples given its long history of forest plantation management. While nowadays, France cannot be considered a developing country, one of the reasons for selecting this region is that it has shown over centuries that forest plantations are and can remain an economically viable and sustainable land-use option. Additionally, from the standpoint of economic development, during most of the nineteenth century, as France was slowly but surely becoming an industrialized nation, the Landes was a comparatively underdeveloped region, which owes most of its current prosperity to forest plantations.

By far, the most important species in those million hectares of forest plantations is the maritime pine (Pinus pinaster), and therefore the "Forêt landaise" is clearly a monoculture, although it has proven to be sustainable, at least over more than two hundred years.9 This is largely because the soils in the Landes are poor, and this species is well adapted to such conditions. Additionally, from a commercial standpoint, Pinus pinaster has proven to be versatile enough in that it has provided transformation activities over time with raw materials that have adapted well to changing markets.

The million hectares of the Landes forest, the total area of which has remained virtually unchanged over more than 100 years, is 93% private, with more than 40,000 owners of all sizes, and is largely oriented towards the production of raw materials for the forest products industry. The remaining 7% is composed mostly of coastal protection forests owned by the State, as well as some community-owned forests (Lescourges 1994).

Historically, in the Landes, land-use was regulated by a well-defined structure of customary rights and obligations, both individual and community-based, which has existed at least since medieval times, with very limited intervention on the part of State authorities. Before the spectacular development of forest plantations in the nineteenth century, earlier planted forests coexisted with sheep raising, which constituted then the most important form of land use.

Two major operations conducted in the early nineteenth century favored the rapid expansion of plantation forests in the Landes: (i) the control of coastal sand dunes through plantations of trees and other forms of vegetation, as well as mechanical techniques; and (ii) the control of superficial water tables through drainage in the interior of the region. This second operation was facilitated by a law enacted in 1857 on the drainage and afforestation of the Landes de Gascogne,10 even though the evolution of land-use in favor of pine plantations was already well underway as a result of the economic decline of sheepherding and the increasing access to markets for forest products.

As forest plantations (driven by increasing access to markets and other factors), started taking land away from sheepherding, complex land use conflicts developed involving communities, private owners and the State, some of which were not finally resolved until the mid-twentieth century (Crozes 1994 & Gelpe 1994a). However, forest plantations finally prevailed, and by the end of the nineteenth century, the Landes forest was already well established with its million hectares largely dominated by Pinus pinaster (Favennec, 1994).

An important point must be made regarding the control of coastal dunes mentioned above. These efforts began in earnest in the early nineteenth century and for the most part have been conducted by the State as protection forestry projects in the interest of threatened coastal communities, infrastructure, wetlands, ponds and lakes, and pasturelands. These coastal forests are still State property today, and protection continues to be their main function, along with recreation (Favennec 1994).

Fire has been an ever-present problem in this region. Originally, shepherds used fire to control unpalatable vegetation invading pasturelands. During the nineteenth century, however, the above-mentioned land use conflicts often resulted in deliberate arson against pine plantations. More recently, especially in the mid-to late 1940s, major fires have burnt large areas due in part to insufficient fire control programs. Throughout the twentieth century, and especially in the second half, major efforts of forest fire control have been undertaken with the participation of the State, associations of private owners and local governments. These efforts, currently quite effective, have included fire-related infrastructure (e.g., firebreaks, access roads, and water supply), equipment, the establishment of a permanent forest firefighting force, the development of fire insurance instruments, and financial aid for reforesting damaged areas (Favennec 1994).

From a forest product standpoint, early major wood uses were lumber and charcoal making. However, resin, a non-timber forest product, was the dominant part of the early economy of forest plantations in this area, and continued to play an important economic role well into the twentieth century.11 Nowadays, the Landes forest supports the largest and most diversified forest products industry of any region in France, including lumber, plywood, composite panels, as well as pulp and paper, and almost all of the harvested volume is processed locally.

Given this broad-based market, the objective of the large majority of forest owners in the Landes is to attain the highest possible production of high quality wood, in the least amount of time, in harmony with maintaining the local ecosystem. An important dimension of this raw material market is that wood quality has a major price effect (Favennec 1994). For this reason, most owners are willing to incur major investments in silvicultural treatments, which consistently include site preparation, genetically improved seedlings, drainage, fertilization, weed control, pruning, and thinning, all of which are costly operations. Such investments, supported by research programs, both public and private, have resulted in the doubling of stand productivity over the past 25 years (Arbez cited in Gelpe 1994b).12

The role of the State in research and support services has been most important in the area of silviculture. Not only have State research agencies played a major role in tree improvement (particularly the establishment management of seed orchards and the certification of seed sources) and sophisticated silvicultural modeling; State agencies also play a major role in research on the effects of production forest management on the environment and the conservation of biodiversity, and in further development of sand dune control techniques.13

In this day and age, the Landes de Gascogne is a prosperous and dynamic forest region, competing effectively in an open international market, which has proven over decades and even centuries of private plantation forestry, that this is a sustainable and viable land use option, provided that certain conditions are present. Among these, the following are worth mentioning:

Finally, a brief word about reforestation incentives: France has developed, especially during the twentieth century, a number of incentive policies to enhance reforestation. As a result of such policies, France's forest cover has grown from about 11 million ha at the end of World War II, to approximately 15 million ha today. The most important among these policies have been the exoneration of property taxes enacted in 1934 and the National Forestry Fund, established in 1946 to provide financial incentives for reforestation (Meyer 1968). While these policies may have facilitated the continuity of forest plantations in this region, the Landes forest had been completely established by the turn of the century, and therefore, it did not originally benefit from either policy. This suggests that more basic economic and institutional conditions may be more important than sector-specific incentives for the development of forest plantations.

IV. Other cases

While their history is not as long as that of the Landes de Gascogne, there exist several other examples in different parts of the world where forest plantations have prevailed as major forms of land-use. Apart from Nordic and central European countries (e.g., Sweden, Finland and Germany) with their long forestry history, more recent, but still major lessons of experience can be found in the United States (particularly the Southeast), Brazil, Chile, China, New Zealand and others. This section will focus on experiences from Chile, New Zealand and China. All these experiences are similar in the sense that vast areas have been reforested in recent decades in all these countries, but they are also different from the standpoint of their institutional and policy contexts.

Chile: a forest economy based on Pinus radiata

The large majority of Chilean forest plantations (currently a total of 1.8 million ha) are made up of Pinus radiata, which, much like Pinus pinaster in the French southwest constitutes large areas of monoculture. Although this Californian species was introduced to Chile in 1885, it was not until 1935 that forest plantations began in earnest (Scott 1962). While an exotic, Pinus radiata has found in the coastal areas of central Chile ideal conditions of soil and climate, where it has become a major factor of the land-based economy over the past half-century.14 Most early plantations were established on degraded soils that could no longer support sustainable agriculture. Throughout their history, these plantations have been largely the product of private investments, in which small owners have always played a major role.

Through forest legislation introduced in the early 1930s, the State began encouraging the establishment of forest plantations, especially by means of tax exonerations, and the distribution of subsidized seedlings. However, the major force behind the early development of planted forests was the economic advantage anticipated by small owners and corporations from a fast-growing and versatile species (Scott1962). Over time, these expected benefits have largely materialized, and the development of wood-using industries followed a dependable source of raw materials, which eventually led to further expansion of forest plantations that continues to this date. By the late sixties, when the total plantation area covered approximately 370,000 ha (roughly 20% of the present forest plantation area), plantations had largely surpassed native forests as a source of raw material for the Chilean forest products industry (Contreras and Sève 1970).

Between the early 1930s and early1970s, the Chilean economy benefited from a stable but restrictive policy environment concentrated on internal growth and protectionism. In this policy environment, forest products industries benefited from strong trade protection measures against foreign competition, with effective protection rates way above 100%.15 Toward the end of this period, and particularly between the mid-sixties and early seventies, plantation-based forest products industries experienced substantial growth. However, despite all this effective protection, much of this growth was due to an increasing participation of the State in new major facilities (Wisecarver 1988). In other words, the protectionist policy environment was not enough to encourage the private sector to undertake major investments. During this period, drastic land reform policies with a socialistic orientation were introduced. Under the threat of expropriation, private owners were discouraged from committing long-term investments in their properties. As a result, the annual rate of private plantations declined dramatically, and the State began to play a dominant role in forest plantation activities. This brief period of instability in the policy environment was drastically reversed in the mid-seventies.

The policy environment changed drastically with the military takeover of 1973. Basically this was a move away from socialism toward the enhancement of private property rights, a market economy with free pricing mechanisms, an opening to foreign trade and a confinement of the role of the State to activities that would not be properly carried out through private initiative (Wisecarver 1988). From a strict forest policy standpoint, new legislation was enacted in 1974 for the purpose of stimulating forest plantations. This new legislation provided for the rebate of 75% of plantation costs up to year 1994. While the majority of the plantations established in the 1970s and 1980s benefited from the rebate, large areas were also planted without the benefit of such incentives. This shows that the confidence in a consistent overall policy environment and the respect for property rights has been a paramount factor in leveraging both the natural economic advantages of forest plantations as well as specific incentives.16

Another major factor in the expansion of the Chilean forestry sector, particularly since the mid-seventies has been a major change in policies dealing with trade liberalization. The Chilean economy has become virtually open to world markets in all types of commodities. This opening of foreign markets for all products has allowed Chile to realize its comparative advantage in the forestry sector. For example, exports of all manufactured forest products expanded at an annual rate of more than 12% between the mid-seventies and the mid-eighties, thus enhancing the income of forest plantation owners.17

The main lesson to be drawn from the Chilean experience is that private economic agents have created a sizable forest resource. However, the mere presence of a resource is not enough to realize its potential contribution to the wealth of a nation. An overall policy environment allowing for its complete utilization is also necessary. Major changes implemented since the mid-seventies favoring open markets and private property rights have evolved into a stable and predictable policy environment. This has probably been the most important factor favoring the expansion of a diversified forest product economy based on forest plantations.

Privatization of forest plantations in New Zealand

From a technical standpoint, New Zealand's experience with forest plantations is not too different from that of Chile. Like in Chile, virtually all the New Zealand forest products economy is based on forest plantations; the main reforestation species, by far, is also Pinus radiata. The forest plantation area is about the same in both countries (1.7 to 1.8 million ha); and productivity and rotation ages are entirely comparable.18 One minor difference is that plantations in New Zealand started in earnest about 15 to 20 years earlier than in Chile (Scott 1962).

New Zealand has had a long tradition of government-operated enterprises, including postal services, petroleum refining, communications, electrical power, forest production, air transport, marketing of farm products, railroads and others. In the late seventies, however, facing a situation of serious national debt and foreign trade deficits, the major political parties in parliament agreed that many governmental enterprises were being inefficiently operated (Hall 1997).

In 1984, 52% of plantation forests in New Zealand were government-owned. This was the result of a long period of dedicated work over which the New Zealand Forest Service achieved outstanding productivity levels, demonstrating a potential imitated on private lands. In the 1980s, however, the Forest Service was accused of being an inefficient organization because of the large number of employees, resulting from continued social policies of subsidizing forest plantation operations to relieve unemployment, provide low cost housing, and keep stumpage prices very low to favor the domestic wood industry (Hall 1997).19 The disestablishment of the New Zealand Forest Service began in 1985, and was to be completed in early 1987 with its commercial functions vested in a State-owned enterprise, the New Zealand Forestry Corporation, Ltd. The overall privatization process, however, was not completed until 1996, i.e., 11 years after it was initiated.

The privatization of New Zealand's public forest plantations was a difficult process, which went through several steps and much debate. Initially, there was an internal reorganization in moving from Forest Service to State-owned enterprise, then there were lengthy negotiations on how to set a valuation of the forest estate to be transferred to the newly created enterprise, and it was finally decided to auction the forest assets and let the market determine the values.20 The auction process, which started in 1990 and was originally designed to last a few months, was not completed until 1996. The vast majority of public plantations were finally sold, except for a small area under indigenous claims, which is still being managed by State-owned enterprises (Hall 1997; Clarke 1998).

The present status of the New Zealand forestry sector can be summarized as follows: (i) State ownership of plantations has been reduced from more than 50% in 1989 to less than 5% in 1999; (ii) over the same period, forest plantation area has expanded from 1.2 to 1.7 million hectares with record plantings from 1994 to 1999; (iii) major amounts of foreign investment have flowed into plantations and forest products industries, especially from the US, Japan and other Asian sources; and (iv) forest products exports have increased from NZ$900 million in 1989 to NZ$2.4 billion in 1999. Regarding new plantations, it is worth mentioning that the large majority of these have been conducted by individual owners and small organizations (Koller 2000).

Two major lessons can be derived from the New Zealand experience on privatization of forest plantations. First, although successful in the end, this was a long, complicated and frustrating process, much longer and difficult than originally anticipated. This reflects the importance of the political will of public authorities in seeing the process through. Second, during and after the privatization process, New Zealand's forestry sector has become highly dynamic. While not all the new dynamism can be attributed to the privatization of public plantations, it is clear that the forestry sector now benefits from a much higher participation of private economic agents, both individual and corporate. These new participants have wasted no time in taking advantage of market opportunities, which have been a major factor in the recent expansion of forest plantations.

Tree plantations and policy reforms in China21

While the experiences in Chile and New Zealand have shown, albeit in completely different ways, the importance of a combination of open markets and policies as they affect private investors interested in timber production, the analysis of the Chinese experience focuses more on the interactions of forestry and farming in an institutional context in which the influence of State authorities is paramount.

China's central government started focusing on land rehabilitation in the early 1950s. Its initial emphasis was on various engineering and biological measures, including afforestation for windbreaks, for fixing sand, and to control salinization. The very limited new forest resources were rapidly depleted, however, after the collectivization and industrialization movements that began in 1958. Collectivization raised doubts about ownership security for the forest resource and backyard furnaces for steel production consumed much of the remaining wood. The economic adjustments of the early 1960s promoted multi-purpose afforestation activities for environmental protection and improved farm productivity. However, one of the effects of the Cultural Revolution of 1966 and the political struggles that dominated Chinese society for the next decade was that both agricultural and forestry production stagnated (Yin and Hyde 2000).

At the time of its first rural reforms in 1978, China faced a dwindling forest inventory. As a result, it was unable to satisfy the demands of the mills in its wood products industry. The dwindling forest cover also contributed to a major soil erosion problem, decreasing agricultural production, and expanding rural poverty. The first of a series of economy-wide reforms addressed some of the problems in agriculture. The primary reforms gave long-term household responsibility (the Household Responsibility System) for some land that had previously been farmed by the work teams of agricultural collectives, and also allowed households to sell increasing shares of their products in the open market. As a result, grain production increased more than twelve-fold by the mid-1980s.

Forestry gained from these agricultural policy reforms as farmers with newly acquired rights, particularly in the north central region understood the soil conserving properties of trees, and planted trees voluntarily. Harvests of trees increased, but so did forest inventory. Households in more forested regions observed the advantages of household responsibility rights in agriculture and demanded similar long-term rights to forestlands, which they began to obtain in the early 1980s. The first response of many households to the new forest rights was to harvest timber. Some local forestry authorities reacted by withdrawing the rights from some households and delaying the granting of household responsibility rights to others. The resulting uncertainty of household rights brought about an increase in short-run harvests and the forest inventory declined without replacement. Eventually, however, regions that had endured this policy uncertainty received firm household responsibility rights, leading to increases in both harvests and reinvestments in tree plantations. The response of farmers to household responsibility rights has been most favorable in regions where they have been introduced systematically and much less favorable in areas where their administration has been uneven.

Meanwhile, in the industrial Northeast, State commercial forests predominate, and their mission is to keep the mills supplied with wood. Over time, State administered timber prices have been kept low in order to support the mills. However, low prices have led to insufficient stumpage returns for the Ministry of Forestry. As a result, the Ministry's ability to manage State forests has declined, and so has the forest inventory (the harvestable stock on State lands in general is only one-fourth of what it was in 1959), and the entire State-run forest industries sector has suffered financial losses since 1990.

The experience of China has demonstrated a number of important lessons. First, even in a highly directed economy, increasingly secure property rights led to the creation of wealth as farmers became aware of the potential benefits of their investments. Second, just like in more market-oriented economies, a stable policy environment has been a major factor in encouraging tree plantations, even if they occur at the modest level of the farm household. Third, farmers, foresters and industrial managers, as economic agents, see clearly the advantages of being able to make decisions in response to market forces. Issues remain however, regarding inefficiencies in State management of industrial forests, and the possibility of an increased role of private initiative in the interest of increased economic efficiency should perhaps be considered.


Throughout this paper, we first characterized forest plantations as a long-term investment by reviewing some technical and economic aspects. Subsequently, through a simple economic model, some of the conditions under which plantation forestry can become a viable form of land-use, competing successfully against other uses on a sustainable basis were reviewed. Further, a number of concrete cases illustrated the principles covered in the previous sections, showing that investments in forest plantations do take place in a variety of contexts such as different stages of development and different sociopolitical systems. Despite the differences, three fundamental elements kept cropping up, both in the conceptual analyses and in the concrete cases: markets, property rights and a stable policy environment. The theory suggested and the concrete cases confirmed that, other things being equal, the more open the markets, the better defined the property rights, and the more stable the policy context, the better the opportunities for forest plantation investments.

The discussions on a few occasions briefly referred to incentives specifically designed to encourage forest plantations, such as special fiscal treatments, subsidies and concessional financing. The concrete cases reflect that while these sector-specific policy instruments may contribute to the creation and maintenance of forest plantations, they can be considerably more effective if the three fundamentals are present. Some of the cases even suggest that forest plantations can prosper without the benefit of specific incentives, but not in the absence of the three fundamentals.

Perhaps this is the most important lesson in this whole analysis: policymakers must understand these fundamentals, how they interact with each other, and under what conditions they create opportunities that make forest plantations a competitive land use option. A corollary lesson would be that policymakers should not confuse the secondary with the essential. This is especially important, since policy instruments like favorable tax treatments, subsidies and concessional financing all represent a cost to the economy at large. Why should forest plantations receive privileged treatment and not other long-term investments? This is indeed a legitimate public policy issue.

The role of the State was discussed on several occasions. While the cases showed that State agencies are more active in some countries than in others, they do have a presence in plantation forestry in all the countries reviewed. A relevant question is the extent to which such agencies as direct participants facilitate or constrain plantation forestry. Some cases showed plantation forestry prospering under limited but well targeted State participation, others showed expansion of plantation activity resulting from a reduction or even "de-programming" of State participation. The evidence reviewed strongly suggests that less direct participation on the part of the State is better than more of it, and that in general, a modest role targeted to activities where the private sector is less efficient, like environmental conservation, resource protection, research, and extension, appear to be advantageous for forest plantation activities. In this context, it is worth recalling that the "de-programming" of State involvement may be a long and difficult process, but in the end it can be a major booster of economic efficiency, and that a combination of political will, leadership and participatory approaches can be most helpful in achieving such major changes. Some may believe that a strong participation of the State is necessary to ensure that forest plantations reclaim as much deforested land as possible, or attain some arbitrarily specified target of forest cover. As we have seen these are expectations that will be frustrated by economic realities. Private agents have well defined economic orientations, and the State has limited resources to allocate among numerous public interest priorities.

What can be the implications of these analyses and examples for a country like the Philippines? Perhaps, instead of attempting to formulate a set of recommendations it may be more helpful to raise a few questions that can contribute to a constructive policy debate. It is with this intent that the following thoughts are proposed:

In closing, let us recall that in numerous cases forest plantations have shown good performance as sustainable land-use investments in the past. If we understand the conditions under which these investments perform, we can expect that they will continue to prosper in the future as a viable land-use option.

Literature Cited

Arbez, M. 1994. `Les bases scientifiques d'une sylviculture raisonnée.' Text box in La Forêt Landaise, Montané, J. (ed.). Editions Privat, Toulouse, France.

Clarke, M. 1998. Devolving Forest Ownership in New Zealand - Processes, Issues and Outcomes. International Seminar on Decentralization and Devolution of Forest Management in Asia and the Pacific, November 1998, Davao City, Philippines.

Contreras, A. y J.E. Sève. 1970. `Perspectivas de la Actividad Forestal Dentro del Desarrollo de la Economía Nacional,' in Actas VI Jornadas Forestales, diciembre 1970, Santiago, Chile.

Crozes, D. 1994. `Le dernier moutonnier...' Text box in La Forêt Landaise, Montané, J. (ed.). Editions Privat, Toulouse, France.

Debazac, E.F. 1964. Manuel des Conifères. Ecole Nationale des Eaux et Forêts, Nancy, France.

Evans, J. 1992. Plantation Forestry in the Tropics. Second Edition. Clarendon Press, Oxford, UK.

Favennec, J. 1994. `Une forêt façonnée par l'homme,' in La Forêt Landaise, Montané, J. (ed.). Editions Privat, Toulouse, France.

Freeman, A.M. 1993. The Measurement of Environmental and Resource Values. Resources for the Future. Washington, D.C.

Gayo, J.R.C. 2000. Problems, Issues and Constraints in the Implementation of the Philippine Forestry Master Plan: Perspective of the Smallholder Tree Farmers. Forum on the Philippine Master Plan for Forestry Development, Asian Development Bank, February 2000, Manila, Philippines.

Gelpe, J. 1994a. `Sous le couvert de l'homme,' in La Forêt Landaise, Montané, J. (ed.). Editions Privat, Toulouse, France.

Gelpe, J. 1994b. `Entre ciel et terre,' in La Forêt Landaise, Montané, J. (ed.). Editions Privat, Toulouse, France.

Hall, O.F. 1997. New Zealand's Privatization of Forest Lands: Policy Lessons for the United States and Elsewhere? For. Sci. 43(2): 181-193.

Hyde, W.F. 1999. Forest Policy Brief. Background document for the first meeting of the Steering Committee for CIFOR's workshop on "Forest Policy Lessons of China's Reforms" held at Bogor, Indonesia, November 19, 1999.

Hyde, W.F., B.R. Harker, M.V. Dalmacio, and E.S. Guiang. 1996. Forest Charges and Trusts: Shared Benefits With a Clearer Definition of Responsibilities. Natural Resources Management Program (USAID/DENR), Development Alternatives, Inc. Manila, Philippines.

Hyde, W.F. and J.E. Sève. 1993. The Economic Role of Wood Products in Tropical Deforestation: the Severe Example of Malawi. For. Ecol. Manage., 57:283-300.

Johansson, P.O. and K.G. Löfgren. 1985. The Economics of Forestry and Natural Resources. Basil Blackwell, Oxford, UK.

Koller, B. 2000. Experiences and Lessons Learned in Forest Planning & Development in New Zealand and at BFI. Forum on the Philippine Master Plan for Forestry Development, Asian Development Bank, February 2000, Manila, Philippines.

Lescourges, Y. 1994. `Ce bois que l'on consomme' in La Forêt Landaise, Montané, J. (ed.). Editions Privat, Toulouse, France.

Meyer, F. 1968. Législation et Politique Forestières. Berger-Levrault, Paris.

Montané, J. (ed.) 1994. La Forêt Landaise. Editions Privat, Toulouse, France.

Samuelson, P.A. 1976. Economics of Forestry in an Evolving Society. Economic Inquiry XIV: 466-492.

Sargos, J. 1997. Histoire de la Forêt Landaise. Deuxième édition. L'Horizon chimérique, Bordeaux, France.

Scott, C.W. 1962. Le Pin de Monterey. FAO, Rome

Wisecarver, D. 1988. El Sector Forestal Chileno: Políticas, Desarrollo del Recurso y Exportaciones. Pontificia Universidad Católica de Chile - Instituto de Economía, Documento de Trabajo No. 112.

Yin, R. and Hyde, W.F. 2000. Trees as an Agriculture Sustaining Activity: The Case of Northern China. Forthcoming (submitted to Agroforestry Systems).



1 The opportunity cost of the land is represented either by an infinite chain of cycles after the first rotation or by the market land rental.

2 See for example Johansson and Löfgren (1985).

3 Within the framework of agroforestry schemes, home garden farming deserves particular attention, especially for a country like the Philippines with a very large upland population. The complexity and layered structure of this form of land-use comes closer to the structure of natural ecosystems and may lead to greater stability and therefore may be more desirable in the long run than simpler forestry or agriculture production systems (Evans 1992).

4 In many countries, this type of research is conducted under collaborative frameworks involving State agencies, universities and major private enterprises.

5 According to a study by T.P. Tomich (1995), cited by Hyde et al. (1996), the costs of protecting property rights increase with the size of the property as well as distance. This is an important consideration for countries in which large areas of forest land are owned by the State.

6 An interesting empirical analysis of the economic behavior of forest plantations by subsistence households is contained in Hyde and Sève (1993).

7 A thorough treatment of indirect methods of economic valuation can be found in Freeman (1993).

8 Stability means predictable and consistent expectations about change; it does not mean "no change."

9 It is worth noting that Pinus pinaster is not exotic. It is native to France and other countries along the Atlantic coast such as Spain, Portugal and Morocco, as well as the Mediterranean basin (Debazac 1964; Montané 1994).

10 This law, enacted under the Second Empire, i.e., the reign of Napoleon III, required communities to drain pasturelands, plant them with trees and either sell them or lease them to private operators.

11 There is evidence that production of resin in this area may be as old as two thousand years (Sargos 1997).

12 At present, mean annual increment is about 9.5 m3/ha/year, and rotations vary between 30 and 50 years (Lescourges 1994). While these numbers may not look too impressive in a Southeast Asian context, they represent one of the highest levels of performance in Europe.

13 Research activities are often undertaken as collaborative efforts involving State agencies, universities and private research and development organizations.

14 Mean annual increments of Pinus radiata in Chile vary between 20 and 30 m3/ha/year, with rotations that normally vary between 18 and 30 years.

15 These measures included high tariffs for finished forest products, bans on exports of logs and raw lumber, and other administrative obstacles to the export of finished products, while granting duty exemptions to the import of processing equipment (Wisecarver 1988).

16 Studies have argued that at a 10% real rate of interest, most Chilean plantations would still be profitable even without the financial incentives (Wisecarver 1988).

17 This is based on figures reported in nominal US dollars (Wisecarver 1988).

18 Interestingly enough, there are also major similarities in the composition of the native forest of both countries. In both New Zealand and Chile, southern beeches of the Genus Nothofagus are dominant in natural stands.

19 This is similar to the policies of internal growth discussed in the case of Chile, but with different policy instruments.

20 A Forestry Working Group, comprising government officials and private sector consultants was established in 1988 and charged with making recommendations on public forest privatization. In a report issued in October 1988 this Group advised that only the forests should be sold and not the land on which they stood. It recommended that the forest be sold as transferable cutting and management rights. (Clarke 1998).

21 This section draws largely from Hyde (1999).

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