Thai See Kiam
Mr. Thai See Kiam
is the Director, Forest Plantation Unit, Forest Department
Headquarters, Peninsular, Malaysia. His current position involves a technical
cooperation project between Malaysia-Germany, namely Forestry Planting
Material Procurement Programme as project coordinator; joint Rubber Forest
Project with Rubber Research Institute Malaysia; coordinator for Forestry
Department on matters relating to forest fire prevention and management; and
one of the team leaders involved with internal assessment of "Malaysian
Criteria and Indicators for Forest Management Certification.
Forest plantation development is a relatively new sector in Malaysia. Although trial planting of various indigenous and exotic species has been carried out since the early 1900's, commercial forest plantation only started in the 1950's with the planting of teak in Kedah. Through the 1960's and 1970's, several attempts were made to establish commercial forest plantation mainly by the Forestry Departments in Peninsular Malaysia and by government corporations in Sabah. The Federal government has provided several incentives in the form of tax relief to encourage investment in this sector. Some state governments, on the other hand, also allocated land for forest plantation purposes. In the 1980's, the rapid development of the timber-based industry also saw the discovery of rubber wood as an important source for furniture manufacturing as the result of rubber wood availability from large replanting programme. The rubber wood industry has now matured into billion ringgit foreign exchange earner. However, the long term supply of rubber wood is now in question as a large percentage of the old rubber areas has been converted to other more profitable crops such as oil palm. In view of the increasing importance of rubber wood industry, steps have been taken to find new rubber clones which can produce high latex yield as well as high wood volume at the shorter rotation. Through the early selection and trial planting, several clones from RRIM 900 series, and the newly launched RRIM 2000 series have been identified for future replanting programme. The planting of these latex-timber clones provides intermediated income from tapping while ensuring higher timber volume at shorter rotation of 15 to 20 years.
The need for the development of forest plantation has long been recognized as an important step to supplement sustainable supply of timber from the natural forests in the country. However, commercial forest plantation development in Malaysia is relatively new as compared to other regions like Europe and North America, where forest plantations have been established since several hundreds years ago.
Traditionally, the management of forest resources in Malaysia has always emphasized on the selective felling of matured tress and leaving sufficient trees behind for future crop. The prescription of conservative felling regime worked very well in the 1950's through the 1970's when harvesting was confined mainly to lowland dipterocarp forests, and the demand from timber industries was rather limited. Line planting of indigenous timber species was carried out only in areas where natural regeneration was found to be inadequate.
Since late 1970's the demands for timber began to exceed the supply from the forest, partly due to the increasing international trade in tropical timber, and partly due to the strict adherence to the annual felling coup in the Permanent Reserved Forests by the government as well as the slowing down of forest clearing for agriculture development. In order to sustain the vitality of the wood-based industries which has been contributing significantly to the economic and social development and providing healthy foreign exchange for the country, there is a need to look for alternative sources of timber supply other than from the natural forests. One of the obvious choices is the development of forest plantation sector through the launching of the Compensatory Forest Plantation Project (CFPP) in 1982. During the same period, another development emerged where rubber wood from the replanting of matured rubber estates found its way into the timber market and eventually became an important source of raw material for the export of high value furniture. This paper attempts to trace the development of the forest plantation sector in this country and the future role of rubber wood as an important source of timber.
The planting of forest species in the early years was limited to line planting of some selected indigenous species, particularly heavy hardwood species such as Neobalanocarpus heimii (chengal), Intsia palembanica(merbau) and Shorea spp(balau), as well as Palaquium spp (nyatoh taban) for gutta percha.. Trial planting of indigenous species carried out produced varying results, with little success in the open planting as compared to line planting under certain degree of shades. Some well-known exotics were introduced since the 1880's, which include Swietenia macrophylla, Eusideroxylon zwageri, and Hevea brasiliensis. During this period, works on rehabilitation of mining land were also carried out with some exotic and indigenous species.
Tectona grandis (teak) was among the most notable exotic species to be planted in a plantation in this country. It was first introduced in Penang in the 1800's and the earliest record of teak plantation establishment was in Sungai Raya rubber estate in Langkawi Island in 1915. This oldest stand of teak was acquired by the Kedah State government in 1983 and is now being maintained as one of the seed stands for seed collection by the State Forestry Department. The planting of teak was extended to mainland Kedah dan Perlis in the 1940s and 1950s. With the improved financial position, ease of establishment and high demand for quality teakwood, new interest in teak planting emerged in the 1980's particularly in Kedah, Perak and Kelantan. By the end of 1999, the total teak plantation established by these states in Peninsular Malaysia is 2,433 ha.
During the late 1950s and early 1960s, large scale experimental planting of several fast growing exotic species was conducted, particularly Pinus, Araucaria and Eucalyptus species, mainly in anticipation of the development of the pulp and paper industry in Peninsular Malaysia. It was projected then that the consumption of paper and paper products would increase tremendously in tandem with the increasing population and social economic development in the country. The development of pulp and paper industry would serve to reduce dependence on imported paper products. By end of 1985, a total of 3,560 ha of mainly Pinus caribeae were established in the four major states of Pahang, Johor, Selangor and Negeri Sembilan. The planting of pine was discontinued in the 1980's when the plan to establish pulp and paper in one of the four states did not materialize. As the result of the change in plantation objective, these plantations are now being managed for longer rotation sawlog regime.
Early experience with the indigenous tree species showed that most of the popular species require maturity period of 50 to 70 years for high quality timber production. However, growth records compiled by the Forest Research Institute Malaysia indicate that some of the individual trees are capable of high diameter growth of average 2.0cm per year. This provides potential for the reduction of maturity period to the region of 30 to 50 years. Some of these species include Dyera costulata, Shorea ovalis, S. aprvifolia, S. leprosula, S. bracteolate, S. macroptera, Palaquium gutta, and Dryobalanops aromatica.
The search for fast growing hardwood species began in earnest in the late 1970's when severe timber shortage was envisaged to occur by the year 1990 for the peninsula. Several exotics including Acacia mangium, Paraserienthes falcataria and Gmenila arborea were short-listed as the potential for the establishment of short-rotation crop to produce general utility timber. The mill processing capacity in the peninsula then was 13.2 million m3 per year as compared to the projected timber production of 8.12 million m3 from the natural forest by 1990's. Hence in 1982 the Compensatory Forest Plantation Project was launched in the states of Pahang, Johor, Selengor and Negeri Sembilan with the projected target of 188,000 ha. The project was co-financed by loans from the Federal Government of Malaysia and the Asian Development Bank. In the second phase of the project, three states of Perak, Kelantan and Terengganu were included.
By the end of 1999 the total area planted was only 62,800 ha, comprising mainly of Acacia mangium and small percentage of Paraserienthes falcataria. The planting target was reduced in the final stage of second phase of the project in order to reduce financial burden to the states involved. In 1992, there was a moratorium imposed on the planting of A mangium due to the extensive occurrence of heartrot disease in many plantation sites. This was followed by several studies by experts both within and outside the country on the courses of action to be taken. The moratorium was lifted in 1994 following a comprehensive report by three consultants engaged by the ADB.
In 1996, the National Forestry Council proposed that all forest plantations established under the CFPP be privatized in line with the National Privatization Policy as there were interests shown by the private sector to invest in them. Since then the state governments having the legislative authority over land and forestry matters, have been negotiating with various interested parties towards privatizing of the forest plantations. While none of the states has finalized the privatizing process, the four major states are in the advanced stage of finalizing the process. Other states like Terengganu, Kelantan and Perak are not expected to privatize their plantations due to the size of these plantations being too small and that these states plan to continue managing the existing plantations with their own financial resources.
In the state of Sabah, forest plantation development started even earlier than the peninsula, i.e. since early 1973. In contrast to the Peninsular Malaysia, the forest plantation in Sabah is initiated through state corporations and later followed by private and public companies. Among the major corporations involved include the Sabah Softwood (SSSB), Sabah Forestry Development Authority (SAFODA), Sabah Forest Industries (SFI), and Innoprise Corporation (ICSB). Earlier planting was carried out with tropical conifers to supply long-fibre material for the planned pulp mill. However, since the late 1970's, other fast-growing hardwood were introduced, predominantly Acacia mangium, Gmelina arborea, Paraserianthes falcataria, and Eucalyptus deglupta. In the recent years, local timber and plantation companies have also started to be involved in the establishment of forest plantations mainly to export as chips to Japan and Indonesia. At the end of 1999, more than 138,000 ha of forest plantations have been established (Anuar,2000)
In the state of Sarawak, forest plantation sector has yet to take off the ground. To date about 13,000 ha has been established by the State Forest Department comprising Shorea macrophylla (3,700 ha) and Acacia mangium (4,700 ha) as the major species, and the rest are indigenous species. However with the current plan to establish two integrated pulp and paper mills in Sarawak and 1,000,000 ha of plantation as the major of fibre material, the potential turning Sarawak into a major forest plantation state is very great.
Recognizing the potential and the needs to sustain future growth of the timber industries in this country, the government provides the following incentives in particular to promote investment in forest plantations:
In addition to the fiscal incentives, several State governments are currently providing incentives in terms of low land premium and annual rent for companies undergoing forest plantation projects in the states concerned. Sarawak and Sabah governments have identified large tracts of lands for forest plantation development. In the states of Pahang and Johor, special committees are formed to coordinate and to process land application for forest plantation projects. In the case of Johor, some 37,000 ha of stateland have been identified to be developed by private companies, of which approval have been given to three companies for the purpose. Similarly in Pahang several companies have been allocated about 7,000 ha of statelands under long-term lease to carry out forest plantation projects.
Despite the early encouraging enthusiasm shown by the private sector and various incentives provided by the government, the forest plantation sector in Malaysia has been growing at a very slow pace. Amongst the major constraints faced by the prospecting investors include :-
Hevea brasiliensis (rubber tree) was first introduced in Malaysia, then Malaya, in 1877 when nine seedling of para rubber were planted at the Residency in Kuala Kangsar, Perak. A year earlier, the first batch of seedlings arrived at the Singapore Botanical Gardens. It was through the enthusiasm of H.N. Ridley, then the Director of Singapore Botanical Garden who later developed effective tapping method, and encouraged the planting of rubber in Peninsular Malaysia. Rubber planting at that time was unsystematic and was facing competition from coffee cultivation due to high coffee price. The decline of coffee prices in to 1890's forced the planters to look for alternative crops and rubber trees were inter-planted with coffee as insurance.
By the early 1900's the demand for natural rubber increased as the result of the expansion of automobile and electrical industries. New land regulations were introduced which provided low rents for land granted for rubber planting also stimulated interests in rubber planting. Thus began the new era of rubber planting which was most ideal for the physical, economic and political conditions of Malaysia in the early twentieth century. The rubber trees seemed to thrive better than its original habitat in South America due to the absence of its natural pests such as leaf blight. The suitability of climatic conditions and the liberal government allocation of land, coupled with the availability of cheap labour led to rapid expansion of rubber land in Malaysia. By the year 1930, more than 1.25 million ha were established, of which 61% were by large estate holdings.
Figure 1. Rubber and Oil Palm plantations
Between the 1930's and 1950's there was little investment in new rubber planting due to the Great Depression, the Second World War and the State of Emergency. There was a major change in the history of land development in the newly independent Malaysia beginning 1960. While the investment by large estate remained sluggish, new planting was carried out by smallholders as a result of planting grants provided by the government as well as through various land development agencies such as FELDA(Federal Land Development Authority), FELCRA (Federal Land Consolidation and Rehabilitation Authority), Rubber Industry (Replanting) Board, and later RISDA (Rubber Smallholders Development Authority). By the year 1971, the total land under rubber was 1.78 million ha, of which 63% were under smallholders. In the 70's and 80's, new land developments were dominated by oil palm which has since become the golden crop due to its shorter return to investment and less labour intensive. Indeed the decade of the 1980's was the beginning of decline of rubber sector due to several factors including labour shortage, declining latex prices, competition from other rubber producing countries, and rising cost which give rise to reduced profit margins. The competitiveness and viability of the industry was in question. This led to the conversion of old and mature rubber stands into oil palm and other more profitable crops particularly by the estates. The drastic reduction in replanting of matured rubber in the 90's has also been attributed to the reduced replanting in tandem with decrease in export of rubber products. By the end of 1998, the total area under rubber went down to 1.55 million ha as shown in Figure 1 below.
It was also during the decade of 1980's that saw the emergence of rubberwood as an important source of raw material for the timber industry in Malaysia. Prior to that, rubber trees felled for replanting were burnt completely without any economic value, except in the northern state of Kedah where it was used as fuel by a steel mill. Realizing the potential role of rubberwood in the future, the Ministry of Primary Industries established a Rubberwood Research Committee in 1978 to co-ordinate research in the utilization of rubberwood. This led to the successful discovery of preservation, processing and drying techniques by the Rubber Research Institute Malaysia (RRIM) and the Forest Research Institute of Malaysia (FRIM), which enabled the rubberwood to be an important export item for the furniture industry. Promotion of rubberwood products was also carried out agressively by the Malaysia Timber Industry Board (MTIB) and the industry both locally and in the international market. From the humble beginning of 1980 when the export value of rubberwood sawn timber was RM 4.5 million, the rubberwood industry expanded tremendously to 1989 when the total export value of RM 89.9 million.
An export levy and quota was imposed on rubberwood sawn timber in the 1990's to encourage down stream activities and to enhance export value of finished products. Hence in the last decade the growth of rubberwood wood-based industry was even more impressive with the export values leapfrogging from RM 282 million in 1991 to RM 3,120 million in 1999, as shown in Table 1 below.
Table 1: Export of Malaysian Rubberwood Furniture
|Year||Value (RM million)|
|(Source : MTIB)|
Aside from sawn timber and furniture products, rubberwood is also exported in other forms such as mouldings, MDF, chipboard, and Builders' Carpentry & Joinery. The exports of these products as compared to sawn timber are shown in Table 2.
Table 2: Exports of Malaysian Rubberwood Sawn timber and Rubberwood Products 1993 - 1999 (RM Million)
The supply of rubberwood in the near future (2000 to 2003) is expected to remain stable based on the projected replanting target of between 55,000 to 63,000 ha per year. However, with the country still recovering from the last economic crisis, the funding needed for replanting activities is still in doubt. Even with the government's allocation of replanting fund of RM 500 million, the actual areas for replanting with rubber may not reach the target set by the government when some of the rubber lands will eventually be converted to other more lucrative crops such as oil palm. This implies that the long-term prospects of rubberwood supply is not very bright.
The fragmented nature of the rubber lands poses another difficulty in ensuring fuller utilization of the available rubberwood from replanting activities. Of the total planted area of 1.78 million ha, almost 84% are under smallholdings. Studies have shown that based on the past and current replanting rates, the gross volume of rubberwood available range between four to six million m3 whereas the consumption recorded by the primary processing mills is around two million m3. This is due to many of the replanted areas located in remote areas where the cost of transportation of raw materials is not viable for full utilization. In most cases, the size of smallholdings range between only two to ten hectares thus not attractive for economic harvesting of the timber.
Another issue faced by the rubber holders is the stagnant prices of rubber (latex) as well as the low rubberwood prices. While the latex prices hover below RM 3.00/kg, the rubberwood prices have been increasing but very gradually. The rubberwood log prices increased from RM 35 in 1990 to the current (2000) RM 85/m3. However the rubberwood log prices is still very low compared to other species from the natural forest such as Red Meranti (RM 700/m3), Nyatoh (RM 650/m3), and Mixed Light Hardwood (RM 390/m3). The low rubberwood prices are attributed to the following factors:-
Rubber planting in Malaysia in the past has been based on planting material promoted by the Rubber Research Institute, which emphasized on improved latex yield. With the new interest in rubber wood, RRIM's breeding activities has moved towards the selection of quick growing clones with good latex yield as well as timber production. The selection of these new latex-timber clones (LTC) are based on the several important characteristics including latex yield, resistance to wind damage, resistance to diseases, girth increment during tapping, respond to wounding, resistance to dryness and etc.
In 1990, a joint effort to test out the new rubber clones for timber as well as for latex production was launched by the Forestry Department and the Rubber Research Institute of Malaysia. A pilot planting project was carried out to test potential clones which had been selected for high timber and latex production. The main objectives of the project are :-
By the end of 1999 a total of 1,700 ha of pilot plantation had been established in various locations. Among the promising clones tested include RRIM623, RRIM900's series, PM10, PB235, PB260, and the newly launched RRIM2000's clones. Potential clones recommended by RRIM are categorized into two groups. Group I refers to clones that have proven tract records, tested and yield performance of five years in large scale clone trials recorded. Some of these clones are projected to yield between 1,500 to 2,000 kg of latex annually, and wood volume per tree between 0.75 m3 to 1.3 m3 per tree at age 15. These figures are more that 200 to 300% higher as compared to the old clones which now being harvested by the industry. Group II refers to clones which are selected in small scale clones trials based on five years yield record and the secondary characters available. These include clones from RRIM900 series and RRIM2000 series. The projected latex yields are between 2,000 to 3,000 kg per year and total timber per tree between 1.0 to 1.3 m3. at year 15. The performance of these clones in different climate, soil and disease environment are not available. Therefore these clones are only recommended for planting under close monitoring.
In an effort to encourage planting of rubber for timber as well as latex production, a preliminary guide has been produced to provide recommendations relating to planting density, fertilizer application, weeding programme, pruning and thinning schedules. The choice of management regime depends on the objective of planting, whether for solid wood production or for wood chip or fibre. Tapping is also optional depending on the financial strength of the company and the rubber latex price. Generally it is expected that tapping is necessary to generate cash flow for the developer and improve financial viability. However tapping is recommended from year 7 onwards to allow good girthing of the trees and thus improve timber quality.
The development of forest plantation in Malaysia has come to a full circle, starting from rubber plantation in the early days, to trials of various indigenous and exotic species, and now coming back to rubber, but mainly for timber production. The final choice of species depends very much on economies and market demands, as well as the objective of plantation establishment. In view of low rubber prices and shortage of labour, there is a need for the government to introduce new incentives and technologies to improve financial income of the rubber planters. The introduction of latex-timber clones may be one option which provides better income and at the same time ensure long-term supply of raw material for the emerging rubber wood furniture industry. At the same time, other timber crops are not to be discounted. Fast-growing species like Acacia are ideal for chipwood production required by the emerging pulp and paper industry and general utility timber for constriction industry. On the other hand, the planting of some indigenous species such as meranti and exotic such as teak are suitable for the production of high quality timber on a longer-rotation basis.
Ani Arope, Ariffin Mohd. Nor and Tan Peng Hua. (1983) Rubber Owners' Manual: Economics and Management in Production and Marketing. RRIM. Kuala Lumpur. 334pp.
Anuar Mohammad.(1999) The status and direction of forest plantation development in Sabah. Paper presented at the "Seminar on Forest Plantation: Towards Greater Efficiency and Productivity." Tawau, Sabah. 6 November, 1999.
Mohamad Abu Bakar. (2000) Agro-management of Rubber Forest Plantation. Paper presented at the seminar on "Rubber Forest Plantation: Smart Partnership Towards Rubber Forest Development" Sungai Buluh, Selangor. 22 May 2000.
Mohammad Nazuri Hashim, Zaleha Ahmad, and Noor Laila Mohd Halip.(2000) Supply, Demand and Pricing for Rubberwood. Paper presented at the seminar on "Rubber Forest Plantation: Smart Partnership Towards Rubber Forest Development." Sungai Bulug, Selangor. 22May 2000.
Radzuan Abd Rahman. (1995) Economic Viability and Competitiveness of the Malaysian NR Industry. Proceeding of the Rubber Growers' Conference 1995 held in Kuala Lumpur, Malaysia. 17 -19 July 1995.
Ramli Othman, Masahuling Benong, Md Zain Ab Aziz, Naimah Ibrahim,Shamsuri Hidzir,and Zarawi Ab Ghani. (1998) Newer Rubber Planting Materials For Wood Production. Paper presented at the seminar on Rubberwood Supply. 17 November 1998. Sungai Buluh, Selangor.
Salleh Md Nor and S. Appanah. (1995) Reforestation of the Rubber Sector. Proceedings of the Rubber Growersa' Conference held in Kuala Lumpur, Malaysia. 17-19 July 1995.
Yusof Yahaya and Ridzuan Salleh. (1999) An overview of Teak Plantation in Peninsular Malaysia. Paper presented at the International Teak Conference: Teak Beyond Year 2000, at Chiangmai, Thailand, 23-25 August, 1999.
Wijewardana is the Director of International Forestry Policy of
the New Zealand Ministry of Agriculture and Forestry. He holds a Master
degree in Economics. Born in Sri Lanka, He has been working on policy
issues relating to New Zealand forestry for the past 20 years. Most of the
time, he has been the Chief Economist with the New Zealand Forest Service.
Mr. Wijewardana has closely followed the development of plantation forestry
in New Zealand. The initial focus of government policy was to encourage
plantation through a range of incentives, and a major effort in research. By
mid 1980's a critical mass of a million hectares had been established through
direct state planting as well as private sector investment. The critical decision
was made in 1986 to remove subsidies and sell off the state-owned forest
assets. As Chief Economist, he was closely involved in this decision making
Less than 50 years ago, most of the wood used in New Zealand came from natural forests. But since then this picture has changed dramatically. For the year to March 2000, out of 18 million m3 of wood harvest, only one half of one percent came from natural forests, and the rest from plantations. In another six years time the annual wood supply is forecast to increase to more than 30 million m3, almost all of which will be from planted forests. The size of the planted forest estate has grown five fold since 1950 - from 336,000 hectares to 1.7 million hectares.
The purpose of this paper is to assess the role of policies followed by the government, on plantation forestry development in New Zealand. It will consider the key aspects of policy and legislative enactments that resulted in such a favourable outcome. The paper will conclude with the lessons learned from the experience of almost a century of forestry development.
The history of planted forest development in New Zealand is a history of long term vision, consistent government policy and the ability to quit government involvement once its role had been fulfilled. At the beginning, legislation, support and encouragement were all focused on establishing a resource to take the pressure off the depleting natural forest. In 1987, after over 60 years of such involvement, the government decided to get out of direct involvement in planted forestry. All taxation and other incentives to forest planting were removed and a government owned corporation was established to manage the state owned plantations. Three years later it began a process that resulted in selling off the half million hectares of forests it owned, to domestic and overseas bidders. Since then the focus has been on creating the appropriate environment for the industry to function efficiently. More recently greater emphasis has been placed on environmental protection and conservation aspects of forests.
The total land area of New Zealand is 27 million hectares, slightly larger than the United Kingdom and slightly smaller than Japan. Settlement by Maori, and later colonisation by Europeans, have had profound impacts on the pattern of land use in New Zealand. In its pre-human state, New Zealand had almost 80 percent forest cover. One-third of this forest was cleared during an estimated thousand years of pre-European settlement. A further third has been cleared in just over 100 years following European settlement.
The arrival of Europeans saw New Zealand rapidly converted into an economy and landscape dominated by agriculture. New Zealand became the "food basket of Britain", and this role remained pre-eminent until Britain entered the European Common Market in the early-1970s. The dissipation of the British market, over the past 25 years, has seen considerable diversification in the New Zealand economy. Nonetheless, more than 50 percent of the land remains in agricultural uses (Fig.1). The closed natural forest, a reasonable proportion of which is virgin forest, covers 24 percent and planted forests presently cover around five percent of the land area.
Source: Ministry of Agriculture and Forestry
At present, almost the entire remaining natural forests owned by the state are managed for conservation with no timber production. Yet a large and vibrant forest industry has been established in New Zealand based almost entirely on planted forests. The 1.7 million hectares of these forests produce three times the volume of wood consumed in New Zealand. It has made forestry the third largest export earner. In the year to June 2000 US$1.4 billion of forest products have been exported. This was 13 per cent of all merchandise exports.
Given the existence of large areas of natural forest this shift would not have occurred at such a pace if not for the vision and the foresight of our forebears. The establishment of the planted forest resource began in the 1870s with trialling of a range of species, by a number of forestry enthusiasts. In fact, even at this point, concern regarding the depletion of New Zealand's natural forests was evident. A number of small groups advocating the need for preservation of the country's natural forests, were finally rewarded by the appointment of a Royal Commission on Forestry. The Commission reported to the Government in 1913. The report noted that the natural forest was not inexhaustible, the existing methods of use were wasteful and that natural forest species were not commercially suitable for afforestation. The Commission recognised that future needs for wood would have to come from imports or from large scale planting of introduced tree species.
The report was a landmark in the establishment of the planted forest estate. A review of the natural forest estate, undertaken by the government in response to the report of the Royal Commission, showed that balancing the expected future total wood production from natural forests against anticipated future domestic requirements for timber would result in exhausting wood supply from these forests by 1965-70. Government decided to mount an extensive afforestation programme to increase the area of state planted forests.
Due to the intervention of World War I the report did not begin to have any impact until 1919 when the Forest Service was established as the government forestry arm. The first major piece of legislation was the Forest Act of 1921-22. It not only laid out the organisational structure for the State Forest Service but also charted a new policy direction, away from export restriction and price control, to a State forestry programme to enhance the availability of wood. The establishment of the Forest Service helped boost the level of forest planting. Once again, there was a slowing down of the rate of new planting by the time of the Second World War. With the resurgence of afforestation by 1948 the recognition of the important role of the industry was evidenced by a more comprehensive Forest Act of 1949. It covered all aspects of the sector including state wood processing. From then on the planting rate increased steadily through, until the mid 1980s. This growth was driven by renewed recognition that forestry had the potential to be among New Zealand's most important export based industries. Still, the government faced some opposition from farmers who feared forestry would take over good farming land.
Source: Ministry of Agriculture and Forestry
This was overcome partly, by promoting agriculture and forestry as complementary land uses with the latter to use land not ideally suited for farming. In addition, a range of government incentives was introduced in the early 1960s. The Farm Forests Act of 1962 introduced a low interest loans scheme. But its success was limited. In 1965, to enhance the incentive, the Forestry Encouragement Act was enacted to allow for half the loan to be treated as a grant. In addition, low interest loans were also made available to local authorities for afforestation. Figure 2 shows the resulting growth in new planting.
By mid 1980s New Zealand had a plantation forest estate of one million hectares - one half of which was owned by the state. With an average rotation length of 28 years the radiata pine based plantation forest estate was providing increasing volumes of wood. A combination of factors helped in the establishment of planted forests. The first was the long-term vision of the Government on the need for action to avert a wood supply problem that was foreseen to arise more than 50 years later. Another was the consistency of policy and commitment through direct involvement of the government to mount a large afforestation effort. A third was the incentive regime, which helped not only to attract private investors into forestry but also to overcome the opposition from the farming lobby. It also helped local authorities to get involved in afforestation. These were complemented by the research effort that had been undertaken to identify different exotic species suitable for New Zealand conditions. A forest research institute was established in 1947, which undertook multi-faceted research into plantation forestry, and is now a premier research institution in planted forestry. But none of these would have happened if not for the enthusiasm and support of the public to preserve what was left of the natural forest and to use planted forests for wood. That support strengthened the Government's resolve to continue with its policy.
Projections made in early 1980s showed that by 2005, the annual wood supply would rise to about 22 million cubic meters, a two and a half-fold rise from that of 1985. This led to a complete rethink of the way these state-owned planted forests were managed. About the same time, the government was confronted with low economic growth, high inflation and an uncompetitive export sector, as well as being burdened with a massive external debt. The new Government that came to power in 1984 had to take radical measures if the economy was to be restructured. In a package of measures introduced in 1984-85, corporation of state owned planted forests constituted one of the key elements. Other forces were also coming together suggesting that restructuring of the Government forestry administration was needed. A more commercial operating environment was regarded as necessary to maximize returns from the forecast surge in wood supply in the 1990s. This included the undertaking of investment in down stream processing. It was estimated that an additional seven billion dollars of new capital expenditure would be required if the increased volumes of wood were to be processed locally. The domestic capital market was unable to support such a massive level of investment.
At the same time, the environmental movement was seeking to ensure that the government broadened its focus to consider not only wood supply, but also other aspects of sustainable management, including environmental issues.
Additionally the government policy of the day was to clarify organizational objectives and, thereby enable transparency and accountability. In particular the Government was keen to reduce its involvement in the economy, which at that stage was very high relative to other OECD countries. The government's role was seen as creating the appropriate environment for the private sector to operate efficiently.
The decision to corporatise the commercial functions of the New Zealand Forest Service were made in September 1985. The New Zealand Forestry Corporation, a state owned enterprise, was formed and empowered to operate as a commercial forestry enterprise.
It was further decided that the non-commercial functions of the New Zealand Forest Service be transferred to two new government departments, the Department of Conservation (which manages the state's natural forest estate) and the Ministry of Forestry (which had policy, forest health and protection and forestry research functions) (Figure 4). The roles of the Ministry of Forestry were transferred to a new Ministry of Agriculture and Forestry just two years ago. In 1992, the research arm of the Ministry of Forestry was formed into a stand-alone Crown owned research institute.
Figure 3: The Restructuring of the Government Forestry Administration
Source: Ministry of Agriculture and Forestry
Although corporatisation was an improvement over state management of the forestry investment, it did not provide an adequate return to the owner. Nor did it have the discipline of a publicly floated commercial entity with stock exchange listing. In the absence of competitive bids the government and the Corporation could not agree on the price to be paid for the forestry assets. In December 1987 the Government decided to sell off cutting and management rights to the 550,000 hectares of planted forest it owned.
The ownership structure of the planted forests, since the sales that concluded in 1996, can be seen in Figure 5. The change in the ownership structure was also brought about by significant private sector transactions, such as the sale of a major shareholding of Carter Holt Harvey to International paper. There are at least eight major overseas companies now involved in New Zealand forestry - mostly in large forestry operations. Among them are two important Chinese investments in Wenita Forest Products and Central North Island Partnership with Fletcher Challenge. There are also major US Companies, such as International Paper, which owns the largest forestry company with 333,000 ha of forest, and Weyerhaeuser and Rayonier, Japanese investors, Juken Nissho, and Pan Pac Forest Products and Malaysian and more recently, Korean investors have also invested in New Zealand planted forests. Farmers and other small-scale investors own a third of the forest estate.
Figure 4: Planted Forest Ownership, 1999
Source: Ministry of Agriculture and Forestry
Privatisation has not only brought new management skills and greater processing capacity but also enhanced access to overseas markets. These were in addition to three billion dollars of government revenue from the sale.
The willingness of the Government to make a radical departure from traditional thinking helped to bring about large economic benefits to the country through forestry. It cannot be denied that there were some costs associated with the privatisation, especially in terms of employment in the sector. Immediately following the restructuring, employment in forestry in the public sector declined from seven thousand to less than three thousand full time equivalents. Some of those displaced found employment as contractors with the new owners. Efficiency gains and improved labour productivity, which help improve competitiveness, were expected to generate greater income and job opportunities in other areas of the economy.
The Government resolve to persist with the policy changes was tested on many occasions. The greater exposure of the forest industry to external competition meant that the price of logs for domestic use was determined more by overseas buyers than the local market. In 1993, following a major upturn in international markets, the price local sawmillers had to pay for their logs soared. This led to independent sawmillers - those who were outside vertically integrated operations - seeking government intervention to limit price increases, which were having an obvious flow on effect on the cost of living through higher house prices. However, the Government maintained its policy of non-intervention and commitment to free market approach. This stance helped enormously in the success of privatisation.
The restructuring of the government's forestry administration had its impact on the private sector too. At that time, around half of the one million hectare planted forest estate of the country was owned by private industry. A major rationalisation that took place, apart from transactions such as the sale of Carter Holt Harvey to International Paper made the industry more efficient and competitive. At the same time, there was a marked decline in new planting by major forestry companies in anticipation of the sale of state owned forests.
The phenomenal changes within the forest industry alone may not have brought about major improvements to the competitiveness of the sector unless they were accompanied by similar changes elsewhere in the economy. The government was responding to a fundamental economic problem of persistent low growth and high inflation. The response was the liberalisation within all major sectors including trade, foreign exchange and labour markets. As a result, within a short span of six years New Zealand changed from one of the most controlled economies to perhaps the most open economy in the world.
This general economic restructuring reinforced the benefits of privatisation of forests. The internal competitiveness of New Zealand forestry industry, (measured in terms of the relative ability of the industry to attract resources from the non-tradable sector of the economy) has improved considerably since 1985. Labour productivity (in terms of units of output per person) rose by over 65 percent in the sawmilling sector and over 75 percent in the paper-manufacturing sector from 1988-1997. The consumption of energy per unit of product is another indicator of efficiency. Energy intensities per unit have fallen by 13 percent for lumber and nearly 45 percent for panel processing during this period. Although energy intensities have increased by 11 percent for pulp and paper processing during this period, since 1995, energy usage has also been on a downtrend. In lumber processing, the recovery ratio has increased by almost 14 percent between 1984 and 1997.
A good indicator of improved competitiveness is the relative labour cost. A comparison of labour costs of a number of OECD countries is shown in Figure.6. The impact of reforms is seen in the lower costs in New Zealand compared with most other countries.
Figure 5: Comparative Labour Costs, 1997
Sources: UN Monthly Bulletin of Statistics/ Lee (1999)
Parallel with the improving internal competitiveness is the expansion in the volume of production and export of all product groups. Lumber, production rose 44 percent and exports by 145 percent from 1984 to 1997. Fibreboard production increased by nearly four times and exports by a massive thirteen-fold. Paper production was up by 26 percent but exports were lower at 17 percent during this period. As figure 7 shows, between 1984 and 1997, not only the composition changed to a greater variety of products but also the value of forestry exports increased nearly four folds. A less desirable feature, however, was the sizeable increase in the export of logs, an unprocessed product. Although total roundwood production in New Zealand increased by around 84 percent over this period, the volume of log exports were up ten-fold.
Source: Ministry of Agriculture and Forestry
Another significant change was the surge in new planting since the restructuring.. This was even after ceasing direct government involvement and removing all other government incentives to afforestation. As seen in Graph 2, new planting reached the highest ever-recorded level of 98 000 ha in1995.
Source: Ministry of Agriculture and Forestry
- Assumes an average harvest age of 28 years, which is the current management practice.
- Assumes a conservative scenario that no new planting takes place.
Private investors, mainly small-scale growers such as farmers, were now using marginal farmland for tree planting. The increase in new planting was helped by a surge in international demand that coincided with the privatisation
The direct involvement of the Government in forestry ceased in 1987. But that did not mean the Government no longer had a role in the evolving shape of the forestry sector. Its main role has been to ensure the maintenance of an appropriate environment for the efficient operation of industry. In addition, the Government had to ensure that its other broader policy objectives were met. The two main areas of involvement were enacting sustainable resource use legislation which promotes sustainable management of natural and physical resources, and multilateral negotiations on trade and environment issues so that the industry operates based on internationally agreed sustainable management guidelines to ensure that there will be no market impediments for exporters.
As a part of promoting these aims the Government legislative measures have been supplemented by moves to progress and document sustainable forest management through implementing the Montreal Process Criteria and Indicators. New Zealand is one of 12 countries in the Montreal Process which has developed a common set of Criteria and Indicators. At the same time, the forest industry is working towards developing a timber certification scheme and seeks mutual recognition with other similar processes. At the rate countries are developing such tools it is clear that in future they will become part of forest management in most countries.
Planted forests play a critical role in the sustainable management of all forests. Although they are largely intended to produce wood and non-wood products such as medicinal products the line that separates forest plantations from natural forests is often a thin one. This is because both types of forest produce a common range of products and services. In New Zealand, both the government and the forest industry, have paid considerable attention to sustainable forest management. Several major pieces of legislation have been enacted over the years for this purpose. One of these is the Resource Management Act of 1991, which promotes the sustainable management of natural and physical resources. This covers all forests. The other, more specifically targeted to natural forests, is the 1993 Amendment to the Forests Act which requires private owners of natural forests to apply a management plan or permit approved by Government if any logging is to be undertaken. In addition to these the government has also targeted forestry to protect areas of major soil erosion. The East Coast Forestry project provides government subsidies for private planters who plant in this area to control soil erosion. Legislation has also been enacted to ensure all natural forests, including those privately owned, are managed in an ecologically sustainable basis.
In spite of New Zealand's commitment to sustainable forest management its planted forests have come under some criticism for being based on an introduced and single species. We believe some of these criticisms are due to a lack of understanding of the role of these forests. In April 1999 five countries, Chile, Denmark, India, New Zealand and Portugal jointly convened an international experts meeting on the role of planted forests in sustainable forest management. The meeting, held in Chile, was attended by 74 experts from 32 countries and a number of environmental NGOs. Two key recommendations of this expert meeting were that the world needs more planted forests to meet the emerging wood shortages and that a new definition of plantation forests is needed. This is to reflect the fact that all forests have both ecological as well as economic values with some forests having more of one than the other. Plantations should be seen as a part of this continuum. (Figure 8). The current definitions of plantations do not take into account this combination of outputs.
The report of the experts meeting was presented to the Intergovernmental Forum on Forests at its third meeting. Since then the FAO has committed itself to convening an experts meeting to address the issue of definitions. The message of planted forests needs to be spread wider since its role needs to be duly recognised. In that sense this international meeting is making a major contribution to the debate although it is not specifically aimed at that.
Figure 8: Wood Production vs. Environment Values of Forests
It is important for this group to note that these are some of the issues we need to keep in mind to ensure that plantation wood does not face any impediments in the market place. Fortunately, there is widespread appreciation now of the essential role planted forests play, not only providing wood products but also contributing to global sustainable forest management.
New Zealand has a planted forest estate of 1.7 million hectares. It provides a wood harvest far in excess of its domestic needs and is the basis of an export industry, which is the third largest export industry in the country. Plantation forests also have helped protect the natural forest from exploitation for wood production.
The establishment of such a large area of planted forest has been made possible through a combination of factors. In the first place it was the vision of our forebears who recognised the need to establish an alternate resource if what was left of the natural forest was to be protected. Once the decision was made to set up a government department of forestry, and provide the necessary support for afforestation, it persisted with this policy making suitable adjustments to ensure targets were met. In the second phase, after almost three-quarters of a century, this policy was changed only after a critical mass of forest had been established. It was clear by that stage that the industry no longer needed public support for survival. Indeed it was felt that continued government involvement was inimical to the forest industry becoming more efficient and internationally competitive. Thus, in 1987, the government decided to divest itself of planted forests. From then on the government policy was to create the appropriate regulatory environment for the forest industry to operate freely and efficiently. In more recent times greater emphasis has been placed on conservation and the protection of environmental values of forests.
A factor that was critically important to both these stages of development was the consistency of government policy. Once a decision had been made the government persisted with it until the objectives were achieved. Some times this meant several decades. The privatisation of forest assets did not mean the government took a laissez faire approach to forestry. The shape of the forestry sector continued to be determined by macro economic and resource management policies of the government. Internationally, the government was closely involved with initiatives related to sustainable management to ensure domestic industry sectors were guided by these considerations. Also, as the forest industry expanded, with large volumes available for export, the government role has been to ensure no impediments are placed on its access to overseas markets.
These policies suited New Zealand conditions well. They may not apply the same way in another country. But there are important lessons in them. Often, the failure of government policy is when it continues to support industries, which have reached a stage of self-sustained growth. That is not only a wasteful use of tax payer's money but also leads to inefficiency in the industry. At present New Zealand has a thriving forest industry with expected wood supply to expand considerably in the future. The country is actively seeking more overseas investment to process this wood and more market opportunities to benefit from the large export surplus.
1. Reg J Birchfield and Ian F Grant, Out of the Woods - The Restructuring and Sale of New Zealand State Forests, GP Publishers, 1993
2. Chris Brown, In Depth Country Study - New Zealand, Asia Pacific Forestry Sector Outlook Study, Working papers, Food and Agriculture Organisation, 1997
3. Chris Brown and John Valentine, The Process and Implications of Privatisation for Forestry Institutions: focus on New Zealand, Unasylva, Vol. 45, 178, 1994/3
4. Role of Planted Forests in Sustainable Forest Management - Report of the International Expert Meeting, Sponsored by the Governments of Chile, Denmark, India, New Zealand and Portugal, 6-10 April, Santiago, Chile
5. Institute of Economic Research, The Real Barriers to Trade in Forest Products, Report to the Ministry of Agriculture and Forestry, October 1999 (Draft)
6. Dennis Lee, Case Study - New Zealand Forest Industry: Impact of Economic Reform (1984-1999) on Industry Structures and Performance, August 1999 (Draft)
7. Mary Clarke, Devolving Forest Ownership in New Zealand, New Zealand Institute of Economic Research, November 1998
8. Andrew Kirkland & Peter Berg, A Century of State-honed Enterprise, Auckland, 1997
9. Michael Roche, History of Forestry, Wellington 1990
10. Don Wijewardana, Privatisation of State Commercial Forestry Assets, Forestry Forum, The Ministry of Forestry Magazine 3, 1989.
11. Don Wijewardana, Forestry Sector in New Zealand: The Road to Success, Paper presented to a Conference o forestry Development, Beijing, November 1999
12. Don Wijewardana, Timber Certification in New Zealand, Paper presented to SPC/GTZ Timber Certification Workshop, December 1999.