Several key points can be identified as common to all three case studies and indeed to many other plantation projects around the tropics. These include:
One theme that emerges from the three countries is the need for the involvement of central governments (and commonly various offshore governments through aid arrangements) in getting long rotation hardwood plantations established. A number of reasons have been promulgated in explanation as to why this is the situation. Most revolve around the long time frames involved, uncertainty over land tenure or certainty of use rights, and the reluctance of most investors to become involved in a project unless there is the opportunity for almost immediate returns from their investment.
In these case studies, government involvement has been through the governments themselves planting the forest (and subsequently passing ownership to private owners via various mechanisms). This direct involvement does not require the types of incentives commonly sought by private investors such as tax breaks, concessionary loans, access to existing natural forest to provide short term returns and so forth.
What is notable is the very limited involvement of the private sector in establishing hardwood plantations in the region. It has become very much the role of governments with private investors not even following the lead provided and the technical infrastructure developed by governments.
Several commentators have noted that the use of customary land for long term projects is not seen as encouraging investment. Even where the government is the investor there are occasions where the investment in a plantation is transferred to another ownership without the consent of the investor (such as the Brown River case study in PNG), indicating to investors that risks of this nature do exist.
In many countries in the region it is not possible for investors to obtain freehold land, so they are obliged to use some type of lease arrangement. This extends even to small areas required for say a processing plant. For example in PNG, the government will freehold the necessary land and then lease it to the investor.
In Fiji the lease arrangement has worked reasonably well through the NLTB. There is a need to ensure, however, that the term of the lease is matched to the needs of the forest, for example the rotation length planned for the particular crop.
A clear understanding by both parties to a lease is required to minimise the potential for future disputes. These should be fully discussed during the negotiations, and fully documented. There is also a requirement for investors to comprehend the cultural situation that exists in some areas. For example, as discussed the ‘renegotiability’ of leases in PNG must be considered during the development of a project proposal.
The terms of any lease must reflect the needs of the local community and the landowners (often the same people), as well as the needs of the investor. The impact of the proposal must be considered from an environmental, economic and social perspective to ensure each benefit is maximised and equitably shared. Failure to observe these requirements is almost certain to result in difficulties at some point in the future, with the worst case being the failure of the plantation to ultimately deliver returns to either the investor or the community, or both.
Throughout the tropics, many of the problems registered by plantations have been related to social or environmental issues. Social conflicts have been mainly due to land claims by local communities, or to the lack of sensitivity to the needs and preferences of surrounding populations. Environmental conflicts have been related to poor matching of species to the conditions or soils, or susceptibility to fire pests and diseases.
Involving local communities in the making of decisions has helped to ensure a reasonably smooth existence for forests established with community liaison groups, such as some of the Fijian forests.
Local people are the ones who must live with the effects of the forest, such as the environmental and social impacts, and it is their land on which the trees are planted. They cannot be overlooked in the process of development of plantations that will exist for many years and possibly change their way of life.
The three case studies considered here have each in their own way highlighted the types of issues that can impact on a plantation. In particular they require clear objectives from the start, and consistency of management aims and achievement through the life of the project.
In the case of Fiji, the discovery of ambrosia beetles, and competition from the new pine project for funds, has resulted in a significant supply gap as harvesting approaches. In PNG, the transfer of the forest from government to private ownership resulted in the cessation of management of the established stands. In other forests there have been factors such as damage to existing trees by workers during operations, by fire from land clearing for agriculture, lack of weeding or thinning and so forth that have adversely impacted on the forest quality in the long run.
In general, these (with the exception of the land ownership issues) are not system failures as much as either blurred objectives or management failures.
On the question of funding, there can never be guarantees that funding will always be available. The three case studies highlight the need to, as far as possible ensure there are secure funding arrangements. Failure to do this can significantly reduce the overall value of the project or create problems at time of harvest and processing.
Many of the plantation projects developed in the region (whether softwood or hardwood) have been located in areas that previously had little or no exposure to a cash economy. Often the first exposure to cash came when the existing natural forest was logged. This was then followed by the development of a plantation on the cutover site.
Plantation development then occurs over a period of years until the site is fully planted and tending is complete. This is usually followed by a period of several years where there is little happening in the forest. By this time however the local people have grown accustomed to a wage and the associated social structures that come with cash. They are reluctant to accept the dislocation that can accompany a reduction in availability of paid work and therefore see the plantation as having adverse effects on their community. This encourages antipathy towards the project in particular and forestry in general. If you are a long term investor this is not the situation you would wish to create or encourage.
There does also exist the potential for governments to use the development of these plantations as a means to encourage small scale local businesses that contract to the forest to provide services. This in itself gives the local community greater ownership of the forest and greater interest in ensuring it is a success. This is an issue that governments need to consider as part of their overall social development policy.
As discussed in section 5.1, the government has been involved in the initial establishment of all three plantations considered here. As such there has been no direct need for incentives, tax holidays, tariff barriers or similar to get the forests underway.
The situation for private investors is quite different. Even with direct incentives and tax breaks, and indirect assistance through, for example the government developing the hardwood technology there has been very little uptake of the opportunities offered. This indicates that either the incentives were not large enough to make the project attractive when compared to other opportunities or the risks were considered too great.
The situation described for the Solomons shows that, while considerable incentive may be available, lack of understanding on the part of investors coupled with the perceived risk associated with tenure and use rights is enough to negate any economic benefits that have been put in place through incentives.
A further issue associated with incentives is highlighted by the Solomon situation and even more so with recent events in Asia and in particular in Indonesia. While the current government in a given country may have certain incentives or tax breaks in place, can they afford to maintain them for the life of the plantation - say 30 years? For investors, this matter of confidence about the economic environment they will be operating in, in the future tends to encourage them to locate in economies that are less liable to change dramatically in the future. Put another way there is greater security in stable economies that are more likely to be able to afford the investment and tax policies they have in place, for the longer term.
The first lesson from this appears to be that while tax incentives and the like are seen by investors as necessary, they must appear to be firstly affordable in the long term, and secondly they are no substitute for as stable predictable economy in which tenure security and use rights are guaranteed both in reality and in perception.
The second lesson appears to be perhaps more enlightening. Each of the case studies here has had government involvement in its establishment and each forest has in its own way become attractive to private investors once the resource has been created. From this it would appear that despite any move by a government to create a suitable economic climate to encourage initial investment in hardwoods there has been a reluctance by private investors to become involved. However once the resource is established and there is forest at or approaching maturity it is much simpler to attract investment. This perhaps tends to confirm the concept that the time frames and perceived risks are too great for private investors and this burden will largely fall to government regardless of steps taken to change this situatuion.
The challenge for governments then becomes one of successfully establishing forests with a view to exiting them once they are approaching maturity. This allows the private sector to focus on processing investment and restocking the forest following harvest and the government to focus on maximising the quality of the forest they create. Traditionally governments have either not addressed the question of processing at time of establishment or alternatively assumed that they will be required to do it. In either case this added dimension to the project can deflect a focus on the quality of the resource being created.
