Dr. Michael Adams and Jeiro Castaņo
Dr. Michael Adams obtained his B.Sc. (Hon) Forestry
and PhD in Wood Industries
Technology in Bangor,
University. He has twenty-five (25) years experience
in
tropical forestry and forest products marketing in the
following
countries: Zambia, 3 years as Marketing Manager;
Guyana, 4 years as
Marketing Operations Adviser; Grenada,
4 years as Forestry Development
Adviser; Malaysia, 9 years
as EU Team Leader with the ASEAN Timber
Technology
Centre (ATTC) and five (5) years in Japan with ITTO.
A consultant of numerous companies and international
agencies, advising public and private enterprises on timber
utilization,
market development, feasibility study formulation
and project management.
Abstract
The presentation consists of two parts. The first presents an overview of the supply and demand of timber in the world. The supply and demand panorama is illustrated by data on exports and imports of timber products by main trading regions from 1990 to 2000. A distinction is made between primary and secondary forest products in order to distinguish differences between these product categories. The analysis is intended to show the trend in forest product trade and to illustrate markets in the process of expansion or contraction.
The second part of this presentation offers an overview of government interventions and policies, issues and problems being faced by the timber sector. In compiling this overview several documents have been reviewed to capture those issues and problems occupying international attention. The overview draws on the Report of the Intergovernmental Forum on Forests, the ITTO Libreville Action Plan, 1998-2001 and the FAO's Strategic Plan for Forestry.
There are several urgent and common themes being addressed internationally and the paper highlights issues of Trade and the Environment, Sustainable Forest Management and Certification, Market Access and Trade Barriers, Undocumented Trade and Illegal Harvesting, Forest and Biodiversity Conservation and the Future Supply and Demand for Wood and Non-Wood Products.
The creation of the International Tropical Timber Organization (ITTO) is a key international response to concern about tropical forests. It was originally conceived as a commodity organization to promote trade in tropical timber. But by the time it was established in 1986, this concept had evolved and ITTO become more an agency for sustainable development through trade, conservation and best practice forest management. The organization operates under the International Tropical Timber Agreement (ITTA), 1994. The ITTA is often categorised as a developmental agreement which seeks to promote the international trade in tropical timber, the sustainable management of tropical forests and the development of tropical forest industries through international cooperation, policy work and project activities.
Presently, the membership of the ITTA, 1994 stands at fifty-six (56), comprising 30 producing members and 25 consuming members including the European Community. ITTO country members account for almost 90 percent of the value of all primary tropical timber trade and 76 percent of the world's tropical forest area. Although ITTO is an intergovernmental organization, it has an open-door philosophy towards members of the trade, non-governmental organizations (NGOs) and other relevant interest groups.
Global Economic Trends
In late 1999, the IMF reported that global output (real GDP) grew by 2.5% in 1998, down sharply from the 4.2% achieved in 1997. The IMF projected growth of 3% in the world economy in 1999,and 3.5% for 2000. The substantial slowing in growth in 1998 was due to economic contraction in Asia, Latin America and the countries in transition (the former Soviet Union). In 1998, GDP of all developing countries grew by 3.2%, still well above the 2.2% growth achieved in developed countries.
Due to the on-going economic problems in some developing countries and the strong growth experienced by the US and other developed economies, these growth rates converged to 3.5 and 2.8%, respectively in 1999. The IMF expects growth in developing countries to jump to 4.8% in 2000, versus a drop to 2.7% in advanced economies.
Developing Asian countries were hit hardest by the economic crisis, dropping from 6.6% growth in1997 to 3.7% in 1998. While the IMF predicts a recovery in developing Asia for 1999 and 2000 (to 5.3 and 5.4% GDP growth, respectively) this will depend largely on increased demand from Japan and the newly industrialized economies in Asia, as well as the ability of China to maintain economic growth.
Africa weathered the economic crisis best, maintaining growth above 3% from 1997-99 and with a projected increase to 5% in 2000. Latin America was affected longer by the crisis, with GDP growth dropping three percentage points to 2.2% in 1998 and further to just 0.1% in 1999 as countries like Argentina, Ecuador and Brazil continued to struggle in recession. Latin American economies are projected to recover in 2000 and grow by 3.9%. Many EU economies saw economic growth pick up in 1998, with an aggregate increase in real GDP of 3.5%, up from 2.3% in 1997. Economic growth was projected by the IMF to be 2.6% in 1999 and 2.7% in 2000. The German economy grew by 2.3% in 1998 after only 1.8% growth the previous year.
The Japanese economy went into recession in 1998, with GDP declining by 2.8% after growing only 1.4% in 1997. Low interest rates, deflation and rising unemployment along with the weakening yen (which fell by up to 50% against the dollar in 1997-98 before regaining much of its value in late 1998 and 1999) were factors in and symptoms of Japan's decline.
The economic turmoil in Asia spread to many other developing (and some developed) economies in 1998, as investors took fright and currency speculators probed for weakness. It also resulted in some severe IMF led austerity packages being implemented in countries like Thailand and Indonesia who had to seek international assistance to support their economies. ITTO commissioned a study on the extent of and causes of the economic downturn and its impact on timber markets in 1999. This report, "The Downturn in the International Tropical Timber Market" is included in the references.
Production and Trade in Wood Products
The total value of world trade in forest products, which fell some 3.9 percent between 1997 and 1998, is estimated to have increased by 5 percent in 1999 to about US$140 billion. This recovery in trade reflects the moderate improvements in demand in Asian markets, better prices for some products, and strong growth in North American and European economies.
World roundwood production in 1999 (excluding storm felled material) is estimated to have increased by 2% over 1998. The increase in industrial roundwood production was higher by 2.4%. Fuelwood continues to account for over 50% of global roundwood production. However, the estimated 1.6 percent increase in production of fuelwood and charcoal in 1999 means that its share of total production declined slightly.
Coniferous log (including pulpwood) production is estimated to have grown slightly in 1999, though not all countries had production increases. Coniferous log production in China, for example, fell as a result of the new environmental policy affecting logging rates.
World production of non-coniferous logs has been declining for many years but is estimated to have increased by around 13% last from the lows in 1998. This was mainly a reflection of the recovery in the production of tropical logs. In addition, there was a modest increase (2%) in the production of temperate hardwood logs. In Europe, production of temperate hardwoods increased and there appears to have been some penetrations of tropical hardwood markets by temperate timbers.
Trade in industrial roundwood, both in value and volume, was significantly affected by the Asian crisis. The impact was most severe for those producers dependent on the Asian markets, particularly the Japanese market. Tropical logs are beginning to lose market share to softwoods in Japan, particularly logs from Russia and the Baltics. On the plus side, the demand for tropical logs in China is strong. Exports of logs from the Russian Federation had been falling for some years because of internal economic problems. However, Russian log production in 1999 is reported to be higher than in 1998, and log exports to Europe and Japan have risen substantially.
North American log exports rose by 4 percent last year. However, their share of the Japanese market fell slightly. Most of the log trade in Europe are intra-regional and volumes traded there have been relatively stable.
Global sawnwood production increased by about 2.5% in 1999. However, the global market conditions for lumber have been unexciting.
Overall trade in sawn softwood in 1999 is forecast to have increased by some 2.5% over 1998 levels. This increase is largely attributable to continued growth of the US economy although slight recovery in Asia, and China's logging restrictions also helped with the growth. US sawn softwood exports were higher than in 1998, although US exports to Japan were down. Canadian exports to the United States were also up while exports to the US from other suppliers increased significantly.
Production of temperate sawnwood also increased in 1999. European production ended its decline, while production in North America also increased.
Global production of wood-based panels grew slightly in 1999. The increase was a combined result of new processing capacity and higher operating rates for existing plant. North American output of panels was higher being driven by demand from the housing sector. The picture for plywood remains gloomy. Plywood continues to lose market share to other wood-based panels. In the US, OSB output will shortly exceed that of plywood for the first time ever.
Production of tropical plywood, which was growing up to 1997, declined in 1998 and again in 1999. The long-term trend for production of tropical plywood appears down. There are increasing difficulties with log supplies in some major producer countries. There is also market substitution of tropical plywood by other panel products such as OSB, MDF, particleboard and softwood plywood.
Overall global trade in wood-based panels increased in 1999. Plywood, particularly tropical plywood, remains the one product for which a recovery in traded volumes has yet to be seen.
ITTO country members exported about 55 million m3 of tropical timber in 1999. Tropical timber exports made up less than a quarter of total timber exports in 1999 and the market share of tropical timber exports has been declining for most of the 1990's, reflecting tighter supplies of tropical timber and greater availability of alternative timbers.
Figure 6. Tropical Timber as Percentage of Total Timber Trade (roundwood equivalent)
Countries in the Asia Pacific, led by Malaysia and Indonesia, made up over 70% of the total exports of tropical timber in 1999. Exports from Brazil and Cameroon are far smaller at about 3% of total exports of tropical timber. Brazil's minor role as tropical timber exporter is explained by the fact that most timber production is directed to satisfy the needs of the huge regional and domestic market.
Exports of primary products have declined significantly in Indonesia and, particularly, in Malaysia while they have been stable or increasing in Brazil and Cameroon. Malaysian and Indonesian exports of tropical timber declined by 34% and 18%, respectively, in the period 1993-1999. These two countries are adopting policies aimed at exports of finished wood products. Primary tropical timber exports are expected to continue to fall in all producing regions in the medium-long term since there is a trend towards an increasing proportion of log production being processed domestically.
The composition of tropical exports by producing regions is illustrated in Figure 9. Asia-Pacific exports are composed mainly of plywood (59%) and sawnwood (16%), driven by Indonesian plywood exports and Malaysian exports of sawnwood and plywood. Latin American exports, led by Brazil, are mainly of plywood (48%) and sawnwood (41%). Only Africa exports a higher proportion of logs than processed products, with log exports making up 53% of total roundwood equivalent export volume in 1999.
Figure 7. Composition of exports of tropical timber by producing region, 1999 (% of roundwood equivalent volume)
World imports amounted to about 320 million m3 (rwe) of primary timber (temperate and tropical) in 1999, with developed countries taking up 98% of these imports. The EU with 37% (115 million m3) was the world's largest importer of primary timber in 1999, led by Italy (6%), UK (5%) and Germany (5%). The United States with 28% (90 million m3) was by far the world's largest single importer of primary timber products in 1999, followed by Japan with 15% (47 million m3).
Japan, with 17 million cubic metres of imports, was the world's largest importer of tropical timber in 1999. China, second with 11 million cubic metres of tropical imports, has become a key player in the tropical timber trade displacing the EU to third place in 1999. 1999 imports in the EU totalled 10.2 million cubic metres, led by Italy, France, UK and Belgium.
Except for China and the USA, imports of primary tropical timber products have been declining for most of the 1990's. Import of primary tropical timber products dropped by over 9% from 60.9 million m3 in 1993 to 55.4 million m3 of rwe in 1999. This decline reflects the declining availability of tropical logs and the growing orientation towards secondary processing by tropical timber exporters, as well as a growing environmental pressure and an increased use of substitutes (softwoods and non-wood products) in consuming countries. The decline of primary tropical timber imports, coupled with a 34% increase of temperate timber imports have led to a steady loss of market share by tropical timber as illustrated below.
Tropical timber has lost market share with respect to temperate hardwoods and softwoods and substitutes over the past years. The market share of primary tropical timber imports (as compared to all primary timber imports) has fallen from 24% in 1993 to 17% in 1999. The loss of market share by tropical timber has been particularly important in Europe and Japan.
Primary tropical products have lost a 26% of market share in EU due to increasing imports of temperate timber (mainly from Eastern and Central Europe and the US) and declining availability of tropical timber.
Despite the fact that tropical timber products have a greater market share in the Japanese timber market as compared to EU, these products have lost 7% of the market share between 1993-1999. Japanese tropical timber imports from SE Asia have declined due to tighter log supplies and the slowdown in construction as a result of the economic recession in Japan. Moreover, Japanese manufacturers are increasing the proportion of softwoods used in plywood production, as well as investigating lamination and other techniques to allow re-use of concrete form-ply.
Several plywood manufacturers have established joint ventures for plywood, other panel production and substitutes such as OSB and MDF in producer countries. These factors, together with a depressed market and a declining supply of logs, suggest that Japanese (and most other consuming countries') production of plywood from tropical logs will continue to decline.
Figure 15 also shows that Japanese imports of temperate timber products were strongly affected during the 1997-1998 Asian financial turmoil, but these products have been recovering much more quickly than their tropical counterpart.
Figure 8. Japanese primary timber imports, 1993-99 (1000 m3 roundwood eq.)
Finally, Figure 16 shows one of the fastest growing markets for tropical products. China, ITTO's second largest importer of tropical timber after Japan, is the only main consumer that imports more tropical than temperate timber products. Chinese imports of timber have doubled since 1993. This increase was due to the impact of a domestic logging ban and continuing relatively high economic growth. China's tropical timber imports will continue to grow linked to the pace of economic growth, imports are also helped by a comparatively strong yuan. Notwithstanding, the market share of tropical timber products has dropped from 80% in 1993 to 64% in 1999, a trend that is expected to continue due to increasing temperate timber imports from Russia and other northern countries.
Figure 9. Primary timber imports of China 1993-99 (1000 m3 roundwood eq.)
The trade of secondary processed wood products (SPWP)1 is expanding and primary timber products and other raw materials are increasingly being diverted to downstream processing.
Global imports of SPWPs totalled just over US$31 billion in 1998, the most recent year for which global figures are available, with ITTO consumer countries absorbing almost all of these imports.
The EU with 50% (US$15 billion in 1998) is the world's largest importer of SPWP, led by Germany, France and the UK. The United States with 30% (US$9 billion in 1998) is by far the world's largest single importer of SPWP and the largest importer from tropical countries. Other countries such as Japan (6%), Switzerland (4%) and China (4%) import much less.
Compared to 1994, SPWP imports in 1998 increased in the USA, China and the EU. Around two-thirds of consumer country imports in 1998 originated from other consuming countries. Notwithstanding, consuming countries increased SPWP imports from developing countries by 29% from 1994 to 1998.
Transportation costs, tariff levels (import tariffs tend to be higher for SPWP than for primary timber products) and regional marketing relationships play a role in the differences in market share held by developing producers in the major markets for SPWP. However, there is clearly a substantial opportunity for all producing countries to increase their share for these products, in particular in the huge and growing European market.
The breakdown of SPWP imports by major product categories is presented in Figure 20. Two-thirds of SPWP imports in 1998 comprised wooden furniture. Cane and rattan furniture (18%) and builder's woodwork (mouldings, dowels, etc., 16%) are far behind as the second and third most valuable types of SPWP imports, respectively.
Figure 10. Imported SPWP 1998 (% of value share)
Asia Pacific, led by Malaysia and Indonesia, is currently by far the most important exporting region for SPWP. This reflects the increased focus on secondary processing in the region, particularly in Malaysia, which became ITTO's largest developing country exporter of SPWP in 1998.
Added-value product exports from Latin American and African countries are at present small in global terms. Value-added processing in African countries is still minimal although the development of secondary processing is being considered a priority by several African governments.
Figure 23 shows that SPWP imports from tropical producers (US$4.3 billion) were over 56% of their total value of primary tropical timber product imports in 1998, up from 28% in 1994.
Figure 11. Global Imports of Primary and Secondary Tropical Timber Products, 1991-98 (billion US$)
The development of new processing technologies and raw material supplies (e.g. rubberwood) allows the use of a wider range of tropical wood species in furniture and other SPWP production and consequent increases in production and exports. The contribution of SPWP to the forest sectors of developing countries will continue to grow in the coming years, with corresponding reductions in exports of primary tropical timber products.
The first part of this paper has shown that the supply of timber in international markets has increased in the 1990s due to growing production and exports of temperate hardwoods and softwoods.
Canada and Nordic countries have driven the upward trend of temperate timber exports, while falling production in Malaysia and Indonesia is driving down tropical timber exports.
The upward trend in temperate timber supply has been propelled by expanded plantations in temperate countries, which is reflected in positive annual rates of reforestation in those countries.
The decline in tropical timber exports was due to:
The supply of primary tropical timber products from natural forests is expected to continue to decline but the trade in SPWP is expected to increase significantly in the coming years particularly as plantation resources find their way into downstream production.
The first part of the paper provided an overview of the world timber supply and demand scenario. Now, in the second part of the paper, I will try and address the impact of government interventions and policies as they affect the timber trade, and then elaborate some of the issues and problems the sector is facing.
I make no excuses that this will focus largely on the tropical timber sector, but having said that, many of the problems and issues are of a global nature affecting temperate tropical and boreal forests, be they natural forests or plantations.
A segmented presentation such as this, addressing issues and problems discretely, runs the risk of sending the wrong signal. Issues of trade and the environment, of sustainable forest management and certification, of market access and trade barriers, of undocumented and illegal harvesting and trade, of biodiversity conservation and future supply and demand are intimately linked, one the result of, or the creator of, the other.
Those of you who may have read me before will perhaps recognise this early warning as a veiled excuse, for when I drift from issue to issue it is more by accident than design.
As you will have seen in the first part of the paper, there have been some marked changes in the timber trade in the past 5 years. The foundation for these changes was laid, in part, some 10 years ago, by those dedicated and responsible environmental groups that, in the early 1990s, spotlighted worldwide deforestation and inappropriate forest management. I say in part because, coincident with the growth in power of the environmental movement and the commitment of governments to act to conserve their forests, there were some fundamental changes taking place with regard to demand for all commodities, including timber.
Looking back, perhaps the most appropriate phrase that is in vogue today that captures the essence of the changes in the trade of commodity wood products in the early 1990s would be "globalisation". At the time we talked of substitution and market penetration but in hindsight it was more complex than that. Yes, there was substitution taking place, softwoods for hardwoods, temperate hardwoods for tropical hardwoods, particleboard, OSB and MDF for plywood, but there were also more subtle changes in the market place and along the supply chain.
Consumers were becoming more discerning and better informed of the various new products (OSB is a relatively new product) and new suppliers were emerging (countries such as Malaysia amongst a host of other countries) as added value product exporters of note. In the mind of the consumer, the boundaries of end-use suitability were merging too; softwoods could work alongside hardwoods or vice-versa. In the trading sector there were also significant changes, the long held tradition of the exclusive softwood or hardwood agent/importer began to crumble. All traders were slowly but surely moving to trade in all products to maintain the bottom line.
The foundations for these changes were laid and trends were emerging but it was probably the Asian financial crisis and the ensuing re-ordering of global economies which accelerated the trends in the timber sector, changes which are clear and irreversible today.
The extent to which tropical forests were being managed sustainably and the extent to which they were being lost were the first things on which information was needed when ITTO became operational early in 1987. With work on collection and dissemination of such information at FAO already advancing, the ITTO Council lost little time in approving a study to assess the extent of sustainable forest management.
This study, undertaken by the IIED of London under the leadership of Professor Duncan Poore, eventually published as the well-known book No Timber Without Trees, found that very little of the world's tropical forests were being managed to anything like a sustainable standard. It also addressed what became one of the key issues for the ITTO, marking a turning point in its development, that sustained yield management for timber is not, on its own, sustainable forest management.
The study on the status of sustainable forest management in the tropics was one of the first global-scale analyses conducted by ITTO and, in fact, one of the first of its kind. The finding that so little of the tropical forests were under sustainable management at the outset of ITTO's work in 1987, striking as it was, was not the only important feature revealed by this survey. It certainly showed the enormous scale of the problem, but equally important, it also pointed to the solution.
The conditions which were found for those forests that did qualify as being sustainably managed (as defined in 1989), namely security of tenure, effective planning and yield control and environmentally sound harvesting, for example, were the clues as to what had to be done.
Although ITTO's survey showed that only small areas of tropical forests were under good management at the time of evaluation, it led to a number of major decisions and activities in ITTO. One of the first was the development of a series of guidelines for sustainable forest management, followed by a set of criteria and indicators for the measurement of sustainable forest management.
In the development of the criteria and indicators, the ITTO played a pioneering role. Following this was the commitment of members to the principle of sustainability as articulated in the form of ITTO's Year 2000 Objective, which established the time-frame for and gave direction to members' efforts towards sustainability with a greater sense of urgency.
How far have we come in the last decade?
In late 1999 the ITTO commissioned a review of the progress made by ITTO member countries to the Year 2000 Objective. One of the specialists for the report was Dr. Duncan Poore who undertook the very first review for ITTO. The other was Mr. Thang Hooi Chiew, whom most of you will know, I am sure. The report notes: "very considerable improvement over the situation recorded in 1988 or in the 1995 Mid-term Review. ..." and says "It is possible to affirm that significant progress has been made in policy and legislative reform in almost all producer countries in all three continents."
Poore and Thang remark that "considerable progress has been made in most countries in establishing a permanent forest estate". This has been mostly on State land, but on private land the same end has been achieved "by providing more security of tenure, by financial incentives and, sometimes, by legislation". A greater degree of consultation with local communities "is having some effect in gaining local support for sustainable forest management and reducing encroachment and damage." Nevertheless, "illegal logging and poaching" remain problems in many countries.
Despite the improvements noted in many countries and efforts to devise new strategies for sustainable forest management, "there is not yet strong evidence that the strategies are being acted upon". Almost all country reports advanced the lack of trained personnel and of finance as the main reasons for this. The impression, say Poore and Thang, "is that the will to implement is there [but] the means are lacking."
More Needs to be Done
Poore and Thang conclude that "ITTO has probably done more in the 15 years of its existence than any other organisation to advance the idea of sustainable tropical forest management". And they list a number of success stories. Balancing these successes, though, were a number of lost opportunities. The first set of criteria and indicators, for example, "were a dilute version of those proposed by the consultants at the time. If a more definite version had been accepted then, more rapid progress might have been made sooner." Poore and Thang also criticise ITTO for failing to engage more in timber and forest certification and for failing to publicise its achievements and to help producer countries publicise theirs.
Poore and Thang make a large number of recommendations to assist member countries to achieve sustainable forest management. The task has been started but is far from done. The first step, they said in the review, is to revitalise the Objective itself.
The Year 2000 is a stimulating concept and the International Tropical Timber Council (ITTC), at its 29th Session, reaffirmed its full commitment to moving as rapidly as possible towards achieving exports of tropical timber and timber products from sustainably managed sources.
The recently concluded ITTC decided to render assistance to member countries in identifying those factors which severely limit further progress towards achieving Objective 2000 and sustainable forest management and to formulate an action plan to overcome these constraints. Implementation of the action plans will be facilitated through intensifying international collaboration and the strengthening of national programmes by implementation of demonstration projects and reduced impact logging training facilities.
Action will also be taken to establish ITTO Objective 2000 Boards, or nationally appropriate focal groups, to both build broad based support and high level commitment.
The international process to define the principles and criteria for sustainable forest management, both in the tropics and in temperate and boreal forests, is highly dynamic and has been gaining momentum since the 1992 UNCED Conference. ITTO is active in this area along with some 20 or more organizations or processes worldwide, involved in this work.
Timber certification has been evolving in the past ten years and has emerged as a global issue after an initial focus on tropical forests. While the objective of timber certification in distinguishing products from sustainably managed sources has been generally accepted, there are concerns on a host of issues including the proliferation of initiatives, the credibility of schemes and the possibility of it being used as a means to discriminate against particular products.
The coverage of timber certification from the global perspective is still very small and production volumes amount to less than 3 percent of global trade. Yet the trend is steadily picking up and the coverage of timber certification will undoubtedly increase at a relatively fast pace in the years ahead.
Timber certification is still evolving and the issues will continue to be debated. As discussed below a number of salient issues need to be addressed and attended to immediately.
Proliferation of Schemes
The sheer diversity and range of forest management regimes and product certification schemes being developed around the world is a cause for concern. This has the potential to create confusion in the market place. The main fear is that there will be claims of superiority of some schemes over the others, as well as unequal treatment and possibly discrimination against particular schemes.
Credibility
To be credible, certification schemes must be independent, transparent, participative and free of any conflict of interests. National certification programmes are particularly vulnerable to criticism in this regard. As such, several authors have called for the assessment and issuing of certificates to be separate. Mutual recognition could contribute to enhancing the credibility acceptance of various schemes particularly in the international market place.
Mutual Recognition
Harmonization in certification standards has been advanced as a means to facilitate trade and avoid confusion. However, due to the diversity of forests and forest products coming from different parts of the world, such a proposal has received mixed reaction. Furthermore, harmonization, if at all feasible and acceptable, may be secured at too low a level of standards, thereby defeating the whole purpose of timber certification. `Equivalency' and `compatibility' have been offered as alternative terms. Even so, `equivalency' suffers from the same drawback as `harmonization' while `comparability' is regarded as a watered-down term that lacks precision.
Despite these constraints, there remains an urgent need to promote the convergence of initiatives and schemes at a level of standards that can be widely accepted. Lately, `mutual recognition' has gained momentum as a practical way forward to facilitate acceptance.
The Indonesian experience provides a good example of how mutual recognition can be nurtured. An ITTO-supported initiate, Lembaga Ekolabel Indonesia (LEI) is reportedly undertaking mutual recognition process with the FSC in order to enable LEI's certification system to be recognized in the lucrative European and North American markets.
Similar mutual recognition possibilities are also being explored between the newly established National Timber Certification Council (NTCC) of Malaysia and the FSC. Although progress in mutual recognition is promising, the many NGOs and consumer groups are treating this issue with some skepticism.
The Pan European Forest Certification Scheme (PEFC), is a framework for the mutual recognition of European national forest certification schemes. The PEFC scheme, a voluntary private sector initiative, aims at providing assurance to buyers that the wood products they buy come from forests that are independently certified by a third party and managed according to the Pan European Criteria.
The anticipated rapid growth in the use of the PEFC could pitch the scheme headlong into competition with the Forest Stewardship Council (FSC). Environmental NGOs are skeptical about whether PEFC is as effective in representing wider stakeholder interests as the NGO backed system.
By way of highlighting this issue of mutual recognition, a recent statement from the US based International Wood Products Association (IWPA) is pertinent. In July this year, the IWPA released a statement on certification which acknowledges interest in the US in certified timber products, recognizes the efforts that many countries are making with regard to improved forest management practices, and addresses efforts toward a process for mutual recognition between credible and market-oriented sustainable forest management standards and certification systems.
Limited market demand
At this point in time on the evolution of markets for certified timber, the final consumer is not a significant player. Although progress has been achieved in the development of timber certification, there has been no parallel improvement in demand for certified and labeled timber and forest products. Despite public interest in the conservation of forests, there is no mass market demand for certified wood products. Very few consumers even know what certification is. According to the UN/ECE Timber Committee the consumer market for certified wood products was less than 1% of total European consumption in 1997.
There is growing interest in certified wood products in European countries driven especially by the Pan European Certification Programme. However, several European analysts have expressed concern that the market could grow too fast. Companies in various markets and levels of the supply chain cite lack of supply as their biggest challenge to market development.
Costs and Prices
Despite the additional costs attached to timber certification, consumers have shown no willingness to pay more for certified timber. For the producer the issue is more one of maintaining market access than of securing higher prices or premiums for certified timber. Such a situation is rather unfortunate, especially in terms of its implications for the competitiveness of certified timber vis-ā-vis alternative products in international markets and possibly for sustainable forest management.
The question of who pays the cost of certification and SFM is an issue occupying the timber industry. With little hope of a `green premium' for certified wood the costs associated with certification have to be absorbed by the timber industry. Under these circumstances certification becomes just one more, but additional, production cost item.
With prices for logs, sawnwood and plywood currently at such very low levels one could ask; to remain competitive in the market, where will savings be made during production to compensate for rising costs from certification? Are sufficient savings in production costs possible?
Interestingly the tobacco industry is facing a similar situation. Tobacco sales are falling, costs are rising and the tax burden cannot be shaken off. What to do? According to the Canadian government, the tobacco industry in Canada has found a way: team up with your foreign partners, smuggle the product and avoid the taxes. We have to be careful to ensure that by forcing the forest industry to higher costs we do not risk increasing the conditions for illegal practices.
If the final consumer is unwilling to pay a premium for `green' wood then consumer countries have to be convinced of the importance of free market access for certified timber and wood products.
Biodiversity is a topical issue and an integral part of the issue of the sustainability of forests. So great has become the symbolic importance of forests within society that those managing them are expected to justify their actions against both philosophical and scientific principles. This extraordinary requirement, combined with the difficulty in producing simple, unambiguous management guidelines means that forest management is highly dynamic and must be practised within a far broader framework than ever before.
Concern over the loss of biodiversity is matched by anxiety over human dependence on a relatively small number of domestic animals and crop plants, an issue relevant to the topic of this workshop. With regard to the establishment of commercial crops, plantations have received a bad press.
The public often fails to make the important distinction between exploitation of natural forests carried out in a non-renewable manner and plantations, which are managed as a long-term investment.
Any fair assessment of plantations has to take into account the actual land-use prior to planting and also comparison with other likely alternatives rather than comparison with what is presumed to be ideal land use.
Plantations may be considered detrimental to biodiversity if they replace natural ecosystems or traditionally managed ones. Even so, a plantation may be the lesser of a number of possible evils, including the growing of crops other than trees in a formerly forested area.
It is unrealistic to expect plantations to replicate all of the aspects of a natural forest. Even so they may play a positive environmental role as buffer zones protecting sensitive areas. They can be used to prevent or even to some extent reverse land degradation. If nothing else, they may relieve pressure on other areas. Fuel wood and community plantations are good examples here.
Planted forests have a role to play within the context of achieving the sustainable management of tropical forests. Accordingly, the ITTO Guidelines for the Establishment and Management of Planted Tropical Forests (1993) have been developed on the basis of a collaborative effort by an eleven member panel of experts comprising representatives from ITTO producing and consuming member countries, environmental NGOs, U.N. Agencies and the Timber Trade.
Access to markets is influenced by a wide range either of formal institutional measures, which restrain trade intentionally, or in many cases, unintentionally.
While trade restrictions are the focus of formal international multilateral negotiations held under the auspices of the World Trade Organisation (WTO) there have been many bilateral and regional negotiations which have also been addressing the subject of trade barriers and restraints. The Association of South East Asian nations (ASEAN), the European Union (EU), the North American Free Trade Agreement (NAFTA), the Mercosur Agreement (Southern America's Common Market) and the Asia-Pacific Economic Co-operation (APEC) all have trade restrictions on their agendas.
Of note are the efforts of APEC which is seeking to speed up the rate of trade liberalisation. In 1997, APEC members agreed to include forest products as one of the fifteen Early Voluntary Sectoral Liberalisation (EVSL) sectors. Reservations on the initiative were, however, expressed by several APEC members largely on environmental grounds and this led APEC to move the tariff elements of the EVSL to WTO in 1998. Several countries continue to express concerns on the proposals and little progress has been made.
Further details on trade restraints can be obtained from the ITTO study on market access (ITTO 1999). The UN-ECE/FAO Timber Committee Annual review for 1999-2000 also contains a chapter on this topic (ECE-FAO 1999).
In recent years tariff barriers have declined in most of the main import markets and tariffs worldwide will continue to decline in the light of the bilateral, regional and global negotiations referred to above. The extent of the declines differs with market and product, but few developed country tariffs are particularly high for most forest products.
Even a relatively low import duty can add a substantial extra cost and give domestic producers considerable protection. Tariffs in developing countries have also been declining rapidly, although many are still higher than in the main developed countries.
The effective use of tariff structures by governments to manage trade flows is very well illustrated by China's recent modification of its import duties on roundwood. In 1998, China's imports of plywood primarily from Indonesia and Malaysia were booming. Low priced plywood was flooding the market to the extent that local plywood manufacturers could not compete. Mills in China were closing and employment opportunities were lost. Acting to address the situation, the Chinese government moved to cut the import duty on roundlogs while maintaining the duty on plywood. The result was immediate and is well illustrated by import statistics. China's imports of logs leaped, local mill output of plywood resumed and imports of plywood fell sharply.
In addition to tariffs, a wide range of non-tariff measures can influence trade. These include a variety of rules and procedures, ranging from health and technical standards to measure influencing price. Non-tariff measures are much more complex and difficult to recognise and quantify compared to tariff measures. Undoubtedly, most are marketing obstacles to be overcome rather than attempts to disturb trade flows. However, in some cases, the way the regulations are administered have resulted in trade disputes between countries.
Although import restrictions are the most obvious barriers to trade in forest products, export restrictions are of considerable significance for trade.
Export restrictions are common in most producer countries and in some consumer countries. These restrictions have had a major impact on world trade patterns for some forest products, notably logs and plywood.
Restrictions on log exports have traditionally been associated with promotion of the domestic processing industry in timber producing countries. Other aims range from attempts to increase the financial return to the country, efforts to ensure adequate wood supplies for the domestic wood-working and other wood-based industries (especially in competition with overseas log buyers), through to attempts to protect forests from overuse. Indonesia has been in the news recently in this respect as reports are circulating that the government is seeking IMF approval for the reinstatement of the log export ban (or at least a reversal of the declining log export duties) in order to help tackle the problem of illegal felling for export.
Log export controls have increased markedly in recent years, especially as many tropical countries have attempted to retain logs for domestic processing, or as is the case more recently, to reduce harvesting levels.
Quotas allocated to a specific country or a quota limiting eligibility for a particular tariff rate (e.g. the Generalized System of Preferences (GSP) rate) exist in a number of cases. In general, their use has declined, but for some products in some markets they still create difficulties. For example, the EU imposed import quotas on board and panel products. It also has tariff quotas or tariff ceilings on newsprint, fibre-building boards, builders' woodwork and some furniture items.
Other measures imposed by importers which can have restrictive effects depending on the way in which they are implemented are import licensing procedures and customs procedures. These can often provide domestic producers with protection from imported products.
In addition to formal restrictions, many measures may be considered impediments to trade rather than formal trade restrictions. They are actions which either are legal WTO rules or largely outside the boundaries of existing international agreements as presently defined. They usually have no direct links to official government regulations, though in a number of instances they may be unofficially encouraged by governments. Nevertheless, they have many similarities to formal restrictions, often have a similar effect, and in many cases their intention is the same- to restrict trade.
The most recent, however, are measures aimed at limiting trade to forest products made from wood coming from a sustainably managed forest resource. Examples are certification and eco-labelling; and restrictions or bans and boycotts by local municipalities and the retail trade.
In Europe, actions of this type have been especially prevalent in Germany, the Netherlands and the United Kingdom. An important and as yet unresolved question is the extent to which these actions are, or may be, a restriction on trade by discriminating either intentionally or unintentionally amongst producers.
Some retailers and timber traders have taken decisions to cease handling certain products and, in response, perhaps, to some unknown level of consumer resistance to buying wood products. The restrictions are either absolute or linked to restricting the use of timber to "approved" supplies. The main target, either implicitly or explicitly, has usually, but not exclusively, been tropical timber. Recently, it has emerged that first Home Depot and now Low, both substantial builders suppliers in the US, have adopted environmental retail policies which favour timber products from sustainable sources.
As mentioned earlier, there are questions as to whether certification does, or might, act as a trade barrier. Although many supporters argue that certification is not a trade restrictive practice, it has many of the characteristics of one.
There is now ample evidence to suggest that sustainable forest management and forest conservation efforts are being undermined by illegal trade practices such as illegal logging and the avoidance of payment of timber royalties, duties etc.
Given the nature of the illegal trade, its scale and value are difficult to estimate. However, various studies suggest that it is widespread. The scale of illegal logging, and the growing evidence around the world, indicates that this is not a problem of illegal felling by small land owners or small time unregistered loggers but involves a wide range of companies and multi-nationals who have found ways to trade in wood outside of the law.
The very lucrative nature of the illegal timber trade is difficult to resist; when one company is seen as getting away with illegal acts others are tempted to follow suit, leading to further illegal practices. Forest losses may increase even further as governments, persuaded by the lack of reliable revenues from logging, support the conversion of forests to higher yielding alternative uses.
The illegal timber trade has been shown to cause enormous financial losses to nations. By avoiding timber royalties and duties as well as hiding profits to avoid tax, companies operating illegally are robbing national governments of money for development.. Illegal international trade practices often knowingly or unknowingly involve agents, shipping companies, banks and importers.
In the Philippines, it has been reported that a Philippine Senate Committee estimated that the country lost as much as US$1.8 billion per year from illegal logging during the late 1980s.
The recently concluded World Bank/WWF Alliance Workshop held in Indonesia provided the most recent updated examples of the extent of the problem around the world.
Illegal activities in the timber trade are not restricted to tropical forests, nor are they confined to developing nations. Again cases quoted in the Indonesian workshop implicate companies in the US, Canada, Scandinavia and Europe.
If there is any common theme in this presentation that is relevant to the topic of this workshop, it is that on all issues discussed there has been significant change over the past few years. Change will continue and the pace of change will accelerate. For a fast growing plantation crop, even 10-15 years is a long time in today's financial world. Market demand will change, there will be profound shifts in sources of supply and the distinctions between softwood and hardwood and tropical and temperate will have less and less meaning as the costs of trade (shipping opportunities improve and trade barriers come down) and as technology generates new composite products. Plantation wood in the Philippines will have to compete directly in the Philippine domestic market with radiata pine, US hardwoods and Russian softwoods and with alternative and substitute materials.
To be successful, plantations must take full advantage of the specific growing conditions for each and every site. All too often in plantation programmes, opportunities to match site to species are missed in the rush to plant. My very first managerial job was as marketing manager with a World Bank funded plantation project in Zambia. Tens of thousands of hectares of Eucalyptus grandis plantations had been established, the objective being to provide raw material for a pulp mill. Even half way into the 9-year rotation, studies revealed that a pulp mill was not financially feasible. In tackling the task of finding markets for a wood, hardly suited to anything but pulp, it was with real disappointment to see the way eucalyptus had been blanketed over good and bad sites.
Careful planning and imaginative selection of species to suit available sites and future markets is the way forward. As a timber technologist, I was taught to believe that if foresters could provide a continuous and large supply of any species then technology would provide the answer as to how to use the wood. I do not believe that any longer. Zambian eucalyptus taught me that and I suspect we may all be taught the same lesson with Acacia mangium.
The Philippines has a long history as a producer of fine wood and fine wood products. Sadly, the natural forests have all but disappeared and the vibrant timber industry, which provided a livelihood for hundreds of thousands of workers, has declined. A successful plantation programme could revitalise the timber industry and provide much needed employment opportunities. The country has a hardworking and well educated workforce, wood processing skills are high and the country boasts of a strong timber research capacity to support industrial revival. It also has a considerable experience in plantation establishment and management. The ingredients are all here for a new beginning for the timber industry.
The issues of trade and environment and of certification have been dealt with in this paper from an international perspective. Plantation wood traded internationally today faces all the uncertainties and hurdles that have been described. While all of the issues discussed in the paper are relevant to plantation wood traded on a domestic market, the relative importance of issues in a local market could be quite different. But, certainly, the plantation manager of today and tomorrow must be flexible in approach, open to new ideas, and well informed of the global environment in which they are operating.
The Economic Linkages Between the International Trade in Tropical timber and the Sustainable Management of Tropical Forests. ITTO 1993
Conserving Biological diversity in Managed Production Forests, ITTO 1992
Report on the Downturn in the Tropical Timber Market, ITTO 2000
Report on the Impediments to Market Access for Tropical Timbers, ITTO 1999
Statutu and Potential of Non-Timber Products in the Sustainable Development of Tropical Forests, Proceedings of an International Seminar, Kamakura, Japan 1993
ITTO Guidelines on the Conservation of Biological Diversity in Tropical Production Forests, ITTO 1993
Trade and Environment, Special Studies 4, World Trade Organization, 1999
Certification: International Trends and Forestry and Trade Implications, Jean-Pierre Kiekens, ESE 1997
Timber Certification in Transition, ITTO 1999
Timber Certification: Progress and Issues, ITTO, 1999
Advance Un-Edited Text of the Substantive Parts of the Report of the Intergovernmental Forum on Forests, IFF Secretariat, 2000
ITTO Libreville Action Plan 1998-2001, ITTO 1998
UN/ECE Timber Committee Annual Review 2000
Review and Assessment of the World Timber Situation 1999, ITTO, 2000
Patrick B. Durst and Chris Brown
Mr. Patrick Durst is
currently the Senior Forestry
Officer of the Regional Office for Asia and
the
Pacific, Food and Agriculture Organization based in
Bangkok,
Thailand. Prior to joining FAO in 1994, he
worked with the USDA Forest
Service from 1980 to
1993, handling several important positions. He has
authored, co-authored, or edited more than 60
technical forestry and
economic articles, publications,
and books. He has also presented papers and
presentations at numerous professional conferences
and seminars. Mr.
Durst obtained his Master of Science
degree in Forest Economics from the
North Carolina
State University.
He finished his Bachelor degree in
Forest Management
at the University of Wisconsin-Stevens Point,
Wisconsin.
Mr. Chris Brown is a New
Zealand forest economics
consultant, specializing in international forestry
issues
with a particular focus on Asia-Pacific. For the past four
years,
he has worked as a consultant to FAO, initially as
a coordinator for the
Asia-Pacific Forestry Sector Outlook
Study, but more recently on forestry
plantation issues,
including authoring the FAO Global Outlook for Future
Wood
Supply from Forest Plantations. Mr. Brown's background
includes
seven years working for the New Zealand Ministry
of Forestry, predominantly
on issues relating to market
access for forest products and forestry sector
forecasting.
Mr Brown has a Masters Degree in Economics from the
University of Canterbury.
Abstract
Natural forests in the Asia-Pacific region are under increasing pressure to meet demands for wood and fibre, while continuing to provide a vast array of environmental and social services. Future increases in demand for wood are likely to be met largely from forest plantations. This paper reviews the current extent and distribution of the global forest plantation resource, as well as plantation distributions in the Asia-Pacific region. The paper provides a number of modelled scenarios that identify likely ranges of future plantation wood production. It also provides a brief review of key factors likely to determine future plantation investment patterns, as well as a brief overview of recent policy initiatives and trends relating to plantation establishment in the Asia-Pacific region.
During the past 30 years, the Asia-Pacific region has increased dramatically in importance as a consumer of forest products. The region now equals Europe in the consumption of all major wood and paper products, and trails North America only in the consumption of sawn timber and wood-based panels. Asian consumption trends have been largely driven by two key factors, increasing wealth (as evidenced by increased per capita consumption) and growing populations (evidenced in increased total consumption).
At first glance, the key trends on the supply-side suggest the region will have increasing difficulty in meeting consumer demand for forest products. The most evident-or at least the most publicized-trend in Asian forestry is deforestation and degradation of natural forests. Clearly, fewer natural forests will be available for wood production in the future due to conversion, degradation, and increasing restrictions on harvesting (including logging bans in many natural forests). Consequently, considerable attention has been focused on alleviating the anticipated wood and fibre shortfalls. For a number of Asian countries, a primary solution has been to markedly increase imports of forest products (e.g., both Thailand and the Philippines moved from being major exporters to significant net importers of forest products in the past decade). Other solutions have included increased levels of recycling, improved processing conversion efficiencies, introduction of new processing technologies (such as chipboard and MDF), increased utilisation of mill residues and, significantly, the establishment of forest plantations.
While there is scope for steady improvements in the efficiency of resource utilization (both in the forest and at processing plants), and some potential for increasing recycling rates, there is increasing recognition that future increases in wood demand will have to be met largely from plantation forests.
Forest plantations presently account for only a small proportion of the world's total forest area. FAO estimates that, in 1995, the global plantation estate totalled 123.7 million hectares, or approximately 3.5 percent of the world's total forest area (Pandey, 1997). Industrial plantations (plantations primarily established as a source of industrial wood and fibre) were estimated to account for 103.3 million hectares.
The Asia-Pacific region dominates the global plantation scene (Figure 1). Together, the Asia and Oceania regions account for almost half of the world's plantation forests.
Figure 1: Global distribution of
forest plantations by region in 1995 - Pandey, 1997
More revealing, however, is that only a handful of countries possess the bulk of global forest plantation resources. Five countries have each established more than 10 million hectares of forest plantations: China (21.4 million ha); United States of America (18.4 million ha); Russian Federation (17.1 million ha); India (12.4 million ha); and Japan (10.7 million ha). Together, these five countries account for 65 percent of the world's forest plantation resources. The overall concentration of forest plantations in a handful of countries is further demonstrated by the fact that only 13 other countries have an area of forest plantations exceeding 1 million hectares. Thus, 18 countries account for 87 percent of the world's plantations. Ten of these countries are located in the Asia-Pacific region.
While plantation forest areas can provide a very broad approximation of plantation wood production potential, the development of national age-class structures for plantation forests allows considerable refinement of these assessments. Age-class information enables more accurate assessment of the current level of wood production from plantations and likely future changes in production levels. FAO recently derived representative age-class structures on a country-by-country basis, consistent with published information (Brown, 1999). This classification for industrial plantations is illustrated, by region, in Figure 2.
Two dominant trends are apparent. First, the preponderance of Asian plantations compared with the other regions, is confirmed. This is particularly true for plantations established in the past decade. Asian plantations constitute 40 percent of the global total, and 57 percent of the plantations established since 1985. Including the plantations of Oceania raises the latter figure to more than 60 percent.
The second conspicuous feature is the very high proportion of plantations aged less than 15 years, particularly in developing countries. Overall, 54 percent of industrial plantations are less than 15 years of age, with 21 percent planted between 1990 and 1995 alone.
Figure 2: Derived
industrial plantation age-class structure by region 1995 - Brown, 1999
Only 2.2 percent of the plantations illustrated in Figure 2 are more than 50 years old. Another 15.6 percent are between 30 and 50 years old. The preponderance of young plantations reflects not only the rapid acceleration of planting in recent years, but also the harvesting of mature plantations in the older age-classes and a shortening of rotation lengths in many countries.
While plantations comprise a relatively small percentage of total forest areas (3.5 percent), they provide a greatly disproportionate share of the wood consumed globally. Figure 3 shows regional estimates of total roundwood production, industrial roundwood production and fuelwood production, from plantation forests, as a proportion of overall production for these categories.
Current plantation production is estimated to be supplying around 12 percent of the world's total roundwood. The production from those plantations that are classified as "industrial" plantations, however, constitutes a far greater proportion of reported industrial roundwood production. Current industrial roundwood production from plantations is estimated to be around 331 million cubic metres, or approximately 22 percent of global industrial roundwood production. In contrast, non-industrial plantations are estimated to contribute only 4.4 percent of global fuelwood production.
Plantation production for industrial roundwood is particularly important in the Oceania region, where 80 percent of industrial roundwood is plantation-grown. Africa (35 percent), South America (27 percent) and Asia (23 percent) also have above average proportions of industrial roundwood produced in plantations. Production from plantations in a handful of countries in each of these regions-Australia, New Zealand, Chile, China, Japan and South Africa-is sufficiently large to draw these regions ahead of the global average.
Figure 3: Estimated plantation wood supply as percent of total roundwood harvest - 1995 - Brown, 1999
Asia's three largest plantation countries-China, India and Japan-account for 78 percent of plantations in the region. The resources in each of these three countries are of markedly different composition. All of Japan's plantations, despite an increasingly heavy emphasis on protection functions (one-third of Japanese forests are classified as protection forests), are classified in this analysis as industrial plantations. Conversely, two-thirds of India's plantation forests are considered non-industrial plantations, mainly for fuelwood purposes.
The majority of Asia's industrial plantations are less than 15 years old (Figure 4). This is largely due to the very rapid acceleration in plantation establishment and the short rotations in China. Older age-classes predominate in Japanese plantations. In Japan, around 45 percent of forests are classified as plantations (10,067,000 hectares). Most were planted in the post-war reconstruction. The main species are sugi (Cryptomeria japonica), hinoki (Chamaecyparis obtusa), pine and Japanese larch (Larix leptolepis).
China's timber plantations comprise mainly of Cunninghamia lanceolata and a variety of pine species. More than 80 percent of China's plantations are considered industrial.
India, the third of the "plantation giants" in Asia, has a markedly different plantation focus with more than two-thirds of plantations designated non-industrial, largely for fuelwood purposes. Not surprisingly, India's plantations are dominated by fast-growing hardwoods, particularly, Acacia and Eucalyptus species. Teak (Tectona grandis) is the most commercially important timber species planted, totalling around 1 million hectares (Subramanian et al., 2000). Pakistan and Bangladesh also have a high percentage of plantations designated for fuelwood production. In addition to Acacia and Eucalyptus plantations, Pakistan also has significant areas planted with Dalbergia sissoo. Bangladeshi plantations are dominated by mangrove species, but the country also has between 70,000 and 200,000 hectares planted with teak (Haque, 2000).
Figure 4: Derived industrial plantation age-class structure by country - Asia 1995 - Brown, 1999
Other Asian countries with plantation resources exceeding 1 million hectares are Indonesia, Democratic People's Republic (DPR) of Korea, Republic of Korea, and Vietnam. Indonesia has planted 3 million hectares of predominantly industrial plantations. Tectona grandis, Acacia mangium and Pinus merkusii are among the most common of a considerable range of species. DPR Korea has established 2.2 million hectares of plantations, with Larix leptolepis and Pinus koriaensis accounting for around 60 percent of the resource. The Republic of Korea has planted slightly more than 2 million hectares, with Larix leptolepis and Pinus koriaensis also dominating, but with considerable area also planted with Populus species. Vietnam has established 1.05 million hectares with a variety of species, dominated by Pinus and Eucalyptus species.
Figure 5 shows the age-class distribution for plantation forests in Oceania. The dominant plantation species in Oceania is Pinus radiata, which accounts for 91 percent of plantation area in New Zealand and 62 percent in Australia. Other pine species (notably Pinus caribaea in Fiji, and Pinus caribaea and P. oocarpa in northern Australia) make up the bulk of the softwood plantations. Eucalyptus species in Australia predominate in hardwood plantations. Fiji also has significant areas of mahogany (Swietenia macrophylla) and teak (Tectona grandis) plantations.
Figure 5: Derived industrial plantation age-class structure by country - Oceania 1995 - Brown, 1999
Both New Zealand and Australia began plantation establishment prior to 1930. Significant areas of plantations are already mature and are being harvested. Substantial areas in New Zealand and Australia are in second, or even third rotations. New Zealand, Australia and Fiji all anticipate significant increases in their plantation wood production during the next decade.
New Zealand, Australia, Chile and South Africa comprise a grouping commonly known as the Southern Plantation Countries. These four countries all have large plantation estates, comprised mainly of Pinus radiata, and all have significant potential to rapidly expand exports of plantation-grown wood in the coming decade. These new plantation supplies seem likely to significantly alter the composition of Asia-Pacific wood and fibre markets. Leslie (1999) refers to this prospect as a "tidal wave of timber" and predicts that it will have particular impact on markets and forestry in Asia and the Pacific.
Figure 6 illustrates some significant trends in wood production during the past 40 years, comparing Southeast Asia with the Southern Plantation Countries. The graph visually highlights the fairly obvious point that countries with large tracts of natural forests are likely to have an advantage in providing timber in the short run. That advantage eventually tends to shift, however, toward countries with other competitive factors such as the ability to grow trees quickly, well-developed forestry infrastructure, and access to capital. Hence, the Philippines, having exhausted much of its natural forest advantages in the 1960s and having neglected to establish a significant plantation estate, steadily lost market share through the 1970s and 1980s and is now a minor player in international wood markets. Malaysia and Indonesia began logging their natural forests later and have exploited their natural advantage throughout the 1970s and 1980s. During the 1990s, however, there were signs that the fast-growing plantations of the Southern Plantation Countries were beginning to capture market share from Indonesia and, particularly, Malaysia. Over the next decade, given significant increases in plantation areas reaching maturity, this trend is almost certain to continue, irrespective of the difference in wood qualities from the respective countries.
Figure 6: Comparative shares of wood
production: Southeast Asian countries vs. Southern plantation countries - FAO, 1997
FAO has modelled three scenarios for future wood supply from forest plantations as part of the Global Forest Products Outlook Study on Plantations. The three forest plantation scenarios are:
Scenario 1 provides a baseline forecast by assuming that forest plantations will not be expanded beyond their current area and that all areas are replanted after harvesting.
Scenario 2 assumes that new planting will increase the forest plantation area at a constant rate of 1.2 million hectares per annum in total (equal to 1 percent of the current area of forest plantations).
Scenario 3 assumes that the annual rate of new planting which occurred in 1995 (4.71 million hectares in total) is maintained until the year 2010, after which it is reduced by 940,000 hectares at the start of each of the following decades (i.e. until it declines to zero in 2050).
In Figure 7, future wood production from industrial plantations under each of the three scenarios is compared with a forecast of industrial roundwood consumption derived using long-term trend analysis, to the year 2050.
Several points of interest can be noted:
1. There is little difference between the three forest plantation scenarios until 2010. This is because trees already planted will determine production over the next decade.
2. The heavy weighting towards the youngest age-classes in the global distribution means that even Scenario 1 (no new planting) shows a significant increase in wood production from forest plantations from 331 million to 712 million cubic metres. However, this growth in plantation production would be insufficient to keep pace with the expected growth in roundwood consumption, and additional new sources of wood or fibre would need to be secured to meet demand.
3. Under Scenario 2, plantation-grown wood supplies increase at approximately the same rate as projected new demand for roundwood. Scenario 2 shows an increase in plantation wood production to 906 million cubic metres. However, current levels of harvesting in natural forests, and recycling, etc. would need to be maintained if no other new fibre sources are found, or if utilization efficiency is not significantly improved.
4. Only Scenario 3, with its relatively large land-use implications, would enable forest plantations to substitute for wood production from natural forests. Scenario 3 expands plantation production to 1.5 billion cubic metres, approximately equal to current levels of global industrial roundwood consumption. Under Scenario 3, the industrial forest plantation share of industrial roundwood production is estimated to increase from the current 22 percent, to 64 percent in 2050.
Figure 7: Comparison of projections for industrial roundwood production with three plantation scenarios - Brown, 1999
The long-term production forecast from forest plantations is very sensitive to the assumptions made about future plantation establishment rates. Consequently, much depends on the future availability of land for new planting and perceptions of supply-demand balances for wood and fibre. In general, it should be expected that plantations will supply a high proportion of raw material to fibre-based industries and for the production of utility sawntimber. High-quality hardwood timbers are likely to continue to be obtained from natural forests (Leslie, 1999), although plantation-grown teak and mahogany can be expected to become increasingly important (Enters and Nair, 2000).
Intuitively, tropical and sub-tropical countries would seem to enjoy overwhelming advantages for plantation development vis-ā-vis countries in temperate and boreal regions. A recent Resources for the Future assessment (Sohngen et al. 1997) reflects this view when it suggests:
Because land is generally available for these plantations and because relatively small management inputs can lead to substantial future gains, subtropical plantations are a better investment than are temperate forests.
This view, however, perhaps pays insufficient attention to other elements of competitive advantage. Growth rates are only part of the equation for financial competitiveness. Overall rates of return are of key importance. And although rates of return generally bear a relationship to ecological potential (i.e. how fast a tree can grow), they also depend crucially on such factors as initial investment costs, interest rates, and the price of the final product that is produced. If growth rates were the only determinant of competitive-ness in plantation forestry, temperate and boreal countries such as Sweden, Finland, Russia and the Central European republics could never hope to compete with the likes of Indonesia and Brazil. The successes in plantation-based forestry by several such countries with relatively poor growing conditions illustrate the importance of many other factors.
Many developed temperate countries continue to have significant advantages in infrastructure, technology, labour skills, and lower interest rates compared with developing countries. Advantages arising from integrated processing and marketing are also important. Specifically, companies that own both forests and processing facilities enjoy significant advantages with respect to security of raw material supplies, stable raw material pricing and material scheduling. Similarly, processors located close to their markets generally capture marketing advantages. Having strong clusters of supporting industries is also important. The crucial point is that the ability to grow trees quickly is only one in a complex set of factors that determine success in forestry.
Another important asset is private sector flexibility in reacting to external events (e.g., policy changes) and to competitors' actions. A major policy change in one country may trigger significant changes and opportunities in other regions. For example, changes in (and uncertainty about) U.S. forest policies in response to the spotted owl issue, and concurrent log export bans imposed by Sabah and Indonesia in the late 1980s, had significant effects on wood prices around the Pacific Rim. In several countries, this stimulated additional plantation establishment. Similarly, there remains a variety of conflicting views over future scarcity of wood and fibre (Nilsson, 1996). To a large extent, this divergence of opinion is the result of the poor quality and scarcity of globally aggregated data. As data availability and quality improve, private sector and governments may alter their plantation strategies.
In terms of future plantation establishment, the prevailing economic principle may well be the law of diminishing returns. A case can be made, for example, that the best plantation sites (in comparative advantage terms) are already occupied. Consequently, future plantation sites will be less profitable and will confront investor portfolios already significantly weighted by existing plantation investments. Similarly, market perceptions of plantation-grown wood are that it is generally inferior to natural timber. While plantations may be able to expand their role in fibre-based industries, there remain considerable barriers to expanding market share held by, for example, luxury hardwoods. Plantation-grown teak (Tectona grandis) and mahogany (Swietenia macrophylla) may be exceptions to this rule.
Additional influences combine to create overall investment climates that are favourable or unfavourable for plantation development. A major transition has occurred with respect to government promotion of plantations. Many countries that previously used substantial subsidies to encourage plantation establishment or developed plantations largely through government programmes (e.g., New Zealand, Australia, Chile, Brazil, and Uruguay), have eliminated or reduced such support. Perhaps surprisingly, this has not always led to a slowdown in planting. The key has been to identify conditions in which forest management and plantation investments may prosper. These conditions include:
Plantation establishment in the Asia-Pacific region is largely being carried out according to three distinct models:
1. plantation establishment led by central- or state-government planting programmes;
2. plantation establishment under community-based development; and
3. private sector-led plantation establishment.
Many countries are utilising combinations of all three approaches.
Central government programmes
Central government-led plantation establishment is particularly notable in China and Vietnam.
The Chinese Government attaches great importance to forestry development. Key government-supported ecological programmes such as the Three-North Shelterbelt Development Programme, the Coastal Shelterbelt Development Programme, and the Taihang Mountain Afforestation Programme have been carried out as State planting programmes in the past. In 1998, China initiated the Natural Forest Conservation Programme, which imposed a logging ban covering more than 40 million hectares of natural forests in the upper and middle reaches of the Yangtze and Yellow Rivers, and will reduce annual national timber harvest by approximately 20 million cubic metres. Concurrently, China is accelerating reforestation and afforestation programmes, including the "Farmland to Forests" Programme to convert steep sloping farmland to forests, and new efforts to combat desertification. China plans to increase the country's forest cover from 14 percent to about 17 percent by 2010. To do so, the Chinese Government plans to establish at least 21 million hectares of new forests in the next 10 years. A substantial proportion of this will be plantations and areas planted through aerial seeding. Many of the new forests will be established primarily with ecological objectives in mind, but at least 5 million hectares of fast-growing, high-yield species will be included in the total (Yang, forthcoming). Interestingly, although plantation programmes in China are typically influenced strongly by the central government, private investment in plantations is increasing rapidly, both at the small-scale household level and larger corporate scales (including extensive corporate plantations in southern China often funded through foreign investment and joint ventures).
A central plan in Vietnam's current forestry strategy is the 5-Million Hectare Reforestation Programme, to be carried out by 2010. This programme includes plans for establishing 3 million hectares of intensively managed industrial plantation to help meet the country's future demands for wood and fibre. Significant resources have been allocated from the Government's central budget for state-led plantation establishment. As in China, however, the Government is gradually reducing its direct involvement in planting by providing support and incentives for household and corporate planting. The Government lends money at favourable interest rates and provides tax breaks and exemptions to encourage tree planting. Households that are allocated land for planting and development are issued land-use certificates, which guarantee tenure. Measures have also been taken to encourage foreign investment in plantations, through both donor efforts and joint ventures.
Community-based programmes
Community-based plantation establishment schemes are important in a number of countries including India, Nepal and the Philippines. Bangladesh, Laos, Myanmar, and Sri Lanka are also recognising the merits of, and endeavouring to implement, systems of community-based afforestation/reforestation and forest management.
In India, participatory activities in plantation establishment are largely based on the concept of Joint Forest Management. Nearly all States and Union Territories have issued detailed guidelines to involve local communities in the rehabilitating and protecting degraded forests through Joint Forest Management. The concept formally recognises the importance of local people in protecting, managing and developing forests, and envisages mobilising communities through the formation of Village Forest Committees. Communities are empowered to manage degraded forests, including carrying out reforestation activities, on a benefit sharing basis. India also maintains a strong network of federal and state government tree-planting schemes.
Nepal and the Philippines also have strong community forestry plantation programmes. Nepal has established community-based Forest User Groups, to which the Government devolves management authorities and responsibilities. Forest User Groups may receive cash subsidies as an incentive for planting and protecting forests, but the major incentive comes from the direct forest benefits (forest products) that are conveyed to Forest User Groups. In the Philippines, community-based forest management has been established as the key approach for forest management and development. It includes and consolidates a wide array of people-oriented programmes, including the Integrated Social Forestry Programme, Forest Land Management Agreements, and Certificates of Ancestral Domain.
Private sector-led planting
In New Zealand and Australia (among others), plantation establishment is mainly carried out by the private sector. In both countries, the government initially established a critical mass of plantations, but ownership and responsibility for plantation establishment and management has gradually been devolved to the private sector. Neither country no longer provides significant incentives or subsidies for plantation establishment. Plantation forestry is regarded as a business, and afforestation investments are primarily assessed based on potential profitability. Even without subsidies, both Australia and New Zealand have significantly expanded their plantation estates in recent years. The Australian Government expects the country will establish 3 million hectares of new plantations by 2020. The New Zealand Government anticipates the private sector will continue to plant approximately 100,000 hectares of new forests per annum for the foreseeable future.
Conclusions
A basic conclusion is that the role of plantation forests in meeting future wood and fibre demands will increase substantially during the next 30 years, irrespective of future rates of plantation establishment. Supplies of plantation wood over the next decade are already essentially determined by trees that have already been planted. In many countries, a large increase in the area of plantation forests reaching harvestable age is expected. Thus, by 2010, the annual yield of plantation grown industrial roundwood is estimated to increase from the current 331 million cubic metres to around 600 million cubic metres.
Beyond 2010, plantation production forecasts are increasingly dependent on assumptions about new planting rates, and on assumptions of improvements in annual growth increments. There is scope, depending on policy decisions and markets, for forest plantations to play a dominant role in industrial wood and fibre supplies. A more likely scenario is that the proportion of forest plantation-grown wood will increase, but natural forests will continue to supply a modest majority of industrial roundwood.
If countries wish to influence future scenarios for plantations, attention needs to be focused on creating conducive environments for investment-especially investments by the private sector. Important incentives include security of land and resource tenure, trade liberalisation and open foreign investment, political and macroeconomic stability, as well as credible and consistent government policies.
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Notes:
1 The primary categories of SPWP in trade are wooden furniture, builder's woodwork (joinery and other builder's wood), products for domestic/decorative use (table/kitchenware, ornaments picture frames, etc.), packaging/pallets, coopers' products (casks, barrels, etc.) and other manufactured products (tools, handles, brooms, shoe lasts, etc.). Since furniture and parts of cane and bamboo have become important tropical forest products exports for many ITTO member countries, the value of these products are also included in this analysis. Reconstituted panels, such MDF, which are obtaining growing importance as export processed timber products, are not included in the analysis. SPWP trade data was extracted from the UN Commodity Trade Statistics (COMTRADE) database.
