FAO STAFF
Extracts from a paper prepared by the Forestry and Forest Products Division in co-operation with the regional economic commissions of the United Nations for the United Nations Conference on Trade and Development.
STUDIES presently under way and recently conducted by FAO in collaboration with the regional economic commissions of the United Nations indicate that by 1975 the developing regions will require annually about U.S.$3 billion 1 worth of forest products over and above their 1959-61 needs. This is additional to the imports (well over half a billion dollars) they are currently receiving from the advanced countries. Regardless of the important prospects already described in recent issues of Unasylva for expanding exports to the developed countries, rising requirements in the developing countries offer opportunities for a rapid expansion of their forest industries which, if properly directed, will ensure the establishment of efficient units to take full advantage of wider markets and the complementarity of forest and other fiber resources. An industry based on a secure domestic and local market is much better poised to enter the arena of intercontinental trade than one which has no such base on which to gain experience and from which to expand. It is imperative that future planning of forest and forest industry development in the developing countries should take full account of the wider potential markets now in the offing.
1 1 billion = 1,000 million.
The possibilities are summarized in Table 1. This rests on the assumption that by 1976 the developing countries will have established capacity (a) to cover their own extra needs of all categories save pulp and paper, of which they would import about one quarter of their extra needs, processing themselves the other three quarters and some 2 million cubic meters (s) of sawnwood, and (b) to raise their exports of processed forest products to the developed world by U.S.$1 billion annually.
For this target their aggregate investment requirements would amount to U.S.$5 billion. Though their pulp, paper, and sawnwood imports would have risen by U.S.$600 million, their total trade balance on the forest products account would have improved from a current net import of U.S.$200 million to a net export of U.S.$200 million, and a sound basis would have been laid for a rapid and progressive rise in net export earnings in the subsequent years.
The FAO paper submitted to the United Nations Conference on Trade and Development describes and analyzes the trade pattern in forest products and thus reveals some of the opportunities with respect to increasing the export earning potential of the developing countries. The responsibilities for realizing this potential devolve upon both the importing and exporting countries. Without a broad many-sided approach to this problem it is unlikely that the volume of trade, its composition and its pattern of flow can be changed significantly so as to foster the growth of a more broadly based industrialization of the developing countries and the expansion and diversification of their export trade. In this and in the following section, attention is focused on various measures which can be taken by the developed and by the developing nations, individually and jointly.
Increasing access to markets
Any hope for expanding and diversifying the export trade of the developing countries must, in the first instance, rest on increased access to the markets of the developed countries. Removal of obstacles to such trade must, accordingly, be a matter of high priority. The prevailing level and structure of tariffs presents a barrier to the expansion and broadening of the trade flow in forest products from developing to developed countries. This is evident from an examination of existing tariffs imposed by the major industrialized countries on the principal categories of forest products entering international trade.
In most of the industrialized countries there are no import tariffs on unprocessed wood in the round: sawlogs, veneer logs, pulpwood, pitprops, and various miscellaneous items. Some countries, notably Japan and Australia, however, have tariffs on some species as high as 20 to 27.6 percent. There are usually no tariffs on most types of unplaned sawnwood. Where they still remain they are seldom over 10 percent, although minor instances exist of tariffs being as high as 20, 30, or even 60 percent. Until recently the United Kingdom and France maintained tariffs on both round-wood and sawnwood (6 to 20 percent) designed to give preference, through exception, to the Commonwealth or to former French colonies. ²
² The European Economic Community (EEC) countries were in the process of changing tariffs to establish a Common External Tariff of 5 or 8 percent on most logs and 10 or 13 percent on most sawnwood when other developments brought about an agreement for a change more favorable to developing countries. From 1 January 1964, EEC countries and the United Kingdom have abolished tariffs on logs and wood roughly sawn for 35 tropical species.
a Quantity figures are represented in the following unite: (i) roundwood, million cubic meters ®; (ii) sawnwood, million cubic meters (s); (iii) plywood/veneers, million cubic meters (s); (iv) woodpulp, million metric tone; (v) paper and paperboard, million metric tons, (vi) fibreboard and particle board, million metric tons.
b Included in sawnwood, plywood, and veneers and board products.
c Included in paper, paperboard, fibreboard, and particle board. The infrastructural investment chargeable to log transport (or to coastal shipping) is not included.
Tariffs on veneers and plywood are sufficiently high to have a distinct effect on the feasibility of establishing processing plants outside the importing countries. In few of the developed countries are tariffs on veneers very low or nonexistent. In most cases they are from 10 to 20 percent, but in some cases, as in Canada and Australia, they are as high as 25 and 37.6 percent, respectively. Tariffs on plywood are usually between 10 and 20 percent, but several countries have higher tariffs - one as high as 57.5 percent. Fibreboard and particle board tariffs are usually in the range of 10 to 20 percent, but are as high as 70 percent in the case of New Zealand.
Woodpulp and newsprint are generally tariff-free or have only low tariffs applied to them. On the other hand, tariffs on other papers are generally in the order of 10 to 20 percent. For certain types of partly manufactured paper (e.g., paper cut to letter size or treated paper), tariffs are much higher and ad valorum rates of 40 to 60 percent are not uncommon.
The effect of this tariff structure on the development of processing plants in the developing countries and on the expansion and stabilization of export earnings of these countries may perhaps be too much stressed.
The removal of tariffs from tropical products, including tropical forest products, has been included as a short-term objective of the General Agreement on Tariffs and Trade (GATT) Program of Action undertaken within the framework of the GATT Program for the Expansion of International Trade. ³ Some progress has been made in eliminating tariffs on tropical forest products. However, many tariffs on a wide range of processed forest products remain to limit access to the markets of industrialized countries. Evidently, measures which would facilitate the entry of processed goods are considered to run counter to the short-term interests of some industry and trading groups in the developed countries. Given the long-term interest of all the developed countries in increasing their imports of processed products from the developing countries, it is not likely that these sectional interests will prevail. Appropriate policies designed to ease the necessary readjustments to the increased flow of imports will doubtless be instituted as is usually done in every dynamic economy to soften the impact on sectors adversely affected by secular changes in trade and technology.
³ See GATT, Basic instruments and selected documents, 1959, Paris.
These are two further aspects of the tariff question that may be noted. One is that the removal of tariff barriers tends largely to benefit other industrialized countries which can rapidly expand their output of forest products. The other is that the largest deficits or impending deficits occur in Europe and Japan, and there are also grounds for expecting that the supply of tropical hardwoods to North America and the centrally planned economies might expand. Special measures will be needed to ensure that exports from developing countries may expand to take advantage of these markets made available through the removal of tariff obstacles.
These measures may take the form of selective reduction of the tariff barriers in such a way as to assure the developing regions of an expanded market. This preferential treatment accorded to developing regions may not, however, suffice to give the developing countries a foothold in this market unless other complementary measures are taken.
The range of possible lines of action apart from tariff reduction which the developed importing countries themselves might take to encourage an increasing volume and altered pattern of trade with the developing countries is best surveyed in relation to various categories of forest products. Clearly, measures appropriate for tropical woods and their products (of which the developing countries are the exclusive suppliers) must differ from those appropriate for pulp and paper and coniferous sawnwood. Likewise a distinction should be made between increasing the volume of trade in the products in crude or semiprocessed forms and in processed or manufactured forms. This is, of course, significant not only in terms of the value per unit of trade flow: it also affects the stability of the trade, the value added, and the contribution of trade to the industrialization and diversification of the economy of the exporting countries.
Tropical hardwood and their products
The potentialities for expanding the flow of trade in tropical hardwoods rests not only in increasing the present volume of trade but also in diversifying its pattern in terms of both production and markets. The overwhelming bulk of trade in tropical hardwoods consists of exports from west Africa and southeast Asia, but other countries of these regions and of Central America and South America have reserves which could be mobilized.
Here the problem is not merely one of expanding the market for these commodities but also - and more important - one of increasing the proportion of processed products in the export flow from the developing countries. There are some special difficulties for the developing countries in establishing a completely new chain of integrated operations from logging to the sale of plywood, veneers, and sawnwood in the light of the fact that it is usually market-originating capital which has in the past undertaken such vertical integration on the basis of assured markets. It is easier for the investors to "back up," so to speak, to their sources of supply than for the suppliers to expand production and hope to win new markets. Accordingly, the most feasible, though not necessarily most desirable, approach might be to induce the manufacturers, distributors, and users of processed wood products, such as wholesalers, plywood and furniture makers, to extend their operations through financing wood-processing industries and the associated forest operations to the countries producing or capable of producing tropical hardwoods.
Centrally planned economies are in a position through their state trading organizations to assist the developing countries in expanding their forest operations, and in establishing processing facilities, through negotiating long-term trade agreements which assure a large and sustained market for the processed products and thereby the financial viability of processing plants. The east European and U.S.S.R. markets, which today accept only a negligible volume of tropical woods, represent an important potential. All these economies are placing greater emphasis on diversifying the range and improving the quality of their durable consumer goods, including furniture. At the present time their per caput consumption of tropical hardwoods is very low compared with that in western Europe. Should they decide to plan deliberately for a steadily rising utilization of tropical woods, they could provide a new and important trade flow, most of which could and should be in processed form.
Coniferous sawnwood
The developing countries play only a minor role in world trade as a source of coniferous sawnwood. Europe constitutes the most significant international market for the trade in this important type of wood. Most of Europe's import needs are drawn from the U.S.S.R., with varying quantities purchased from Canada which is able to provide dimensions not readily available in Europe or the U.S.S.R. As the only other significant flow, Brazil supplied Europe with paraña pine.
The likelihood of the developing countries making a greater contribution toward meeting Europe's deficit in sawn softwood is worth some attention. Though in the aggregate they may never constitute a major source of supply for Europe's import needs because of the scattered nature of their reserves of suitable resources, the possibilities of such expansion which do exist bear mention since they will, for the particular countries involved, offer opportunities for export earnings. The crucial issue will center on price and quality and, in this respect, some developing countries may prove competitive.
Sawn softwood from Chile produced in low-cost plantations of radiate pine located close to shipping ports is being marketed in Argentina and Peru. Some shipments to Europe have been made. It might perhaps win a place in the European market if its price could be brought down sufficiently to offset high freight costs and quality differences. The same prospect holds for plantation conifers of east and southeast Africa, which are favored by lower freight costs than Chile for the Mediterranean market but which are less favorably located in relation to ports. For the tropical pines of southeast Asia, a possible market prospect might be developed in meeting Japan's needs for sawnwood imports. Central American pine also holds some promise of export expansion.
It would be rash expect any substantial increase in the flow of coniferous sawnwood exports from the developing countries to the developed countries of Europe which constitute the major wood deficit area. Even Brazil's exports of paraña pine to Europe, which have an established market, cannot be expected to increase, despite increasing demand. The sustained supply is not sufficient to meet both the growing demand in Brazil itself and in the River Plate area and that of overseas importers. In any case, the U.S.S.R. and Canada, as traditional suppliers with great supply elasticities, enjoy more favorable prospects of meeting Europe's increasing import needs than the developing countries as a whole.
To expand the exports from developing countries to any significant degree would call for measures which definitely discriminate in their favor.
Pulp and paper
The prospects for establishing a substantial export trade in pulp and paper from the developing countries to the European market are very favorable in the longer term, although circumstances for entering the market are not propitious for the immediate future.
At the present time Scandinavia iv supplying the hulk of wood pulp which other European countries import to feed their growing paper industry, as well as providing newsprint, kraft, and other mass-production grades of paper; Canada supplies substantial quantities of newsprint; and Europe itself is a net exporter of pulp products to other regions. However, conditions are changing rapidly. In western Europe, for example, between 1949/1951 and 1959/61, production of paper rose by 93 percent and that of pulp by 73 percent. Yet over this period western Europe's net export, of pulp and paper combined, to other regions fell from 1.83 to 0.69 million metric tons. The trend in eastern Europe was similar. These trends may be expected to continue. There are now but few unutilized coniferous reserves in Europe capable of sustaining additional pulp and paper capacity. Indeed, the rather anomalous current excess of capacity in western Europe stems largely from a race between companies to pre-empt the remaining sizable reserves of conifers. This is why many mills, especially in northern Europe, are presently restricting their operating ratios and why several new projects are being deferred. This situation will not endure. Toward the end of the decade, demand will have caught up with present (and projected) capacity, and in the 1970s the European deficit will grow.
To meet this situation steps will undoubtedly have to be taken to extend the available resources in Europe, in the short term, by diverting more fuelwood to industrial use, by pulping more hardwood, by intensifying the use of thinnings, and by shortening rotations; in the longer term, by undertaking vigorous programs of forest improvement, quick-growing plantations, and afforestation on lands becoming available as a result of the technical revolution which is taking place in European agriculture. These measures, however, can only modify, they cannot fundamentally transform, the outlook. Moreover, it would be economically unsound to push the effort too far, since beyond a certain point the costs of creating additional resources in Europe would greatly exceed the cost of developing existing resources, or creating new ones in other regions. It may be noted that European production of short-fiber pulps, making use of low-grade hardwoods, straw, reeds, and eucalyptus plantations can be expanded to meet a part of this need.
Is it possible for the developing countries to take advantage of this situation? The developing countries, in their bid to capture part of the growing pulp and paper market in Europe, start off with many disadvantages such as distance to the market, lack of capital, of managerial and technical skills, and in some instances of cheap power and chemicals. However, some countries have one decisive advantage which may offset all these disadvantages, namely, a rapid rate of growth. In Chile, Brazil, and parts of east and central Africa, coniferous fiber is being grown at 5 to 10 times the rate (per hectare per year) that is possible in the cool temperate zone of the northern hemisphere where pulp and paper production today is heavily concentrated. And there are many other areas, in Africa, Latin America, and Asia, where new resources - in the shape of plantations of quick-growing conifers - could be created in suitable locations. Similarly, with respect to short-fiber pulps, some extra-European sources might be developed as cheaper sources of supply, as for example, eucalyptus pulp from Madagascar or North Africa, okoumé pulp from Gabon, bagasse pulp from the United Arab Republic or from Central and South America.
One important aspect of this overall problem is how to enable the developing countries to valorize their coniferous resources when they lack the financial and technical means to do so.
Development aid possibilities
The situation described above clearly suggests the need not merely for the removal of trade barriers but also for measures which would go further and promote expanding exports from the developing countries. To achieve this purpose there is great scope for agreements which would open new channels of trade and thereby expand the flow of trade. These agreements need not only provide assured markets but, of no less importance, they can provide the basis for both bilateral and multilateral capital flows for individual projects and for infrastructural investments. These would be necessary in order to increase the supply from the resources in the developing countries and, as far as possible, augment that supply in the most fully processed form in order to increase value added per unit of resource and thereby the export earnings of these countries.
The scope for trade/development agreements (which may, but need not necessarily, include an aid element) rests on the mutual interest both developed and developing countries have in establishing new trade flows. There is a mutual interest at government level. There is also a mutual interest at the sector level on the part of both industry and trade.
Consider for example the prospective shortage of long-fiber pulp in Europe. There is something anomalous about a situation in which we have, on the one hand, perhaps a dozen European countries anxious to locate and assume new, continuous supplies of long-fiber pulp and, on the other, perhaps as many developing countries anxious to valorize their coniferous resources but lacking the technical and financial means to do so. Obviously, a series of development/aid projects could confer mutual advantages. The prospective importer would furnish part of the capital, some or all of the equipment, technical and managerial services, and assist in getting the mill established and running, providing the requisite training and advising on the associated forest operations. Repayment could take the form of long-term contracts for part or all of the pulp produced, the selling price of which could be reviewed periodically in the light of trends on the international market. Government short- or medium-term credits could help to tide the sponsoring agency or group over the installation and running-in period. Should third-country expenditures be required (e.g., for part of the equipment, or for specialist services) this would be suitable for financing by such international lending institutions as the International Bank for Reconstruction and Development (IRRD) or International Development Association (IDA). The sponsoring agency in the prospective importing country might be a state agency in a centrally planned country or, in the market economy countries, a consortium of existing paper industry interests and equipment manufacturers It would often be appropriate to include a considerable aid (as distinct from commercial) element in any such bilateral arrangement. The important thing to note is that any aid element in this type of project is one that leads directly to trade.
We have been considering long-fiber pulps, but clearly the same type of project would be valid for other categories, e.g., for newsprint. Here newspaper publishers in the prospective importing countries, as well as paper merchants, might well be interested. Integration between newsprint manufacture and newspaper publishing is already very common and widespread. Similarly, kraft paper production would present considerable interest for paper importers and for manufacturers of packaging containers.
We have focused attention on the scope for arrangements between European countries and developing countries leading to new export flows in pulp and/or paper. But this is only one example. Other developed countries with a present or prospective wood deficit might be equally interested. And the pulp/paper sector is, of course, not the only appropriate forest products category. Plywood, veneers, coniferous and broadleaved sawnwood, even board products, all offer the possibility of mutually advantageous trade/development arrangements.
Vestiges of the old prejudice against bilateral trade agreements, as unnecessarily restricting the normal expansion of trade on multilateral lines, still remain in some quarters. But the types of trade/development arrangement which has been outlined in the foregoing paragraphs is in no sense restrictive. On the contrary, it represents an instrument for the constructive expansion of trade, since without the capital flow built in to this kind of arrangement, the export capacity cannot be created.
We have considered above the various methods of financing the establishment of forest industries (including essential transport and communication systems as well as industrial plants), but the long-term improvement of the developing countries' forest resources especially in the field of coniferous plantation establishment must not be overlooked. Here attention centers not so much on the kind of financial arrangement but on the source of finance. Neither private capital from outside nor that specifically associated with forest industries development is likely to be available to finance plantations, the production from which cannot be related to a definite project. Nor do developing countries readily contemplate locking up scarce investment funds for periods of 20 years or more. But there is a very strong case for establishing coniferous plantations in suitable locations in developing countries. Though the returns are long-delayed in relation to investments in manufacturing industry, the eventual yield is high. Additionally there are important external economies to be reaped through such investment, since virtually all the investment generates income within the developing country, it relieves underemployment, it diversifies the sources of rural income and thus exerts a high multiplier effect. How then are such plantations to be financed? Here surely is a sphere where public financing could and should make a distinctive contribution. International sources such as IBRD and IDA must be ready to help finance such projects.
Multilateral agencies might play a key role in relation to infrastructural investment for transport, surveys, and training, and in particular for undertaking inventories of existing forest areas and increasing the degree of utilization through improved management practices and control. The assistance of such agencies may be of two kinds. One concerns the provision of survey data, technical skill and training, while international lending organizations can finance necessary investments in the physical infrastructure.
Another type of arrangement for providing assistance might involve utilization of the current surplus capacity for pulp and paper (including newsprint) in Europe and North America. While this excess and unused capacity exists in several of the developed countries, in many of the developing countries consumption is being artificially depressed through inability to devote sufficient precious foreign exchange to imports of these products. Shortages weigh heavily on newspaper size and circulation, on textbooks exercise books for schools, and even on paper for commercial and packaging purposes. These two elements - surplus capacity and latent demand - might be merged through development/aid programs analogous to the use being made of food surpluses for development purposes as in the World Food Program. It is, of course, less simple to devise suitable arrangements in the case of a commodity such as paper. Firstly, paper surpluses are potential, not actual. Secondly, recipient governments might need assurance that acceptance of aid in this form would not involve a curtailment of aid in other, less specifically tied, directions. Donor governments would doubtless wish to be assured that grants of paper would not affect current commercial exports. Their problems are similar to many that have been overcome by existing programs. It might be proposed that in the donor country the paper could be acquired by the government from the producers at marginal cost, while in the recipient country, the paper granted could be disposed of either in the public sector (e.g., for educational purposes) or commercially, receipts being placed in a counterpart fund to be applied to development projects. Paper aid for development is not a novelty; such grants have been made in the past by both Canada and Sweden. The information presently available to FAO and Unesco (the latter organization is intensely interested in the development of mass media and the availability of paper for educational purposes) suggests that the government of any developing country which can establish a clear need for paper grants and is prepared to formulate a suitable request will be able to evoke a positive response from one or more of the developed countries with present and potential paper surpluses.
This form of aid has an important side effect. In most developing countries the national market is extremely small, too small to support a domestic mill of economic size. Paper aid can serve as a market primer, bringing nearer the day when the establishment of domestic production facilities can be seriously contemplated.
Paper is not the only forest product for which capacity in the developed world is currently in excess of requiremeets and where this type of aid might be given. Aid in the form of woodpulp might also be contemplated in certain instances, as when nonintegrated mills in the developing countries have had to curtail operations for lack of foreign exchange with which to import pulp. Similarly, particle board and fibreboard could be given to the programs and the building of schools, hospitals, etc. Here, too, aid programs utilizing surplus capacity in the developed countries could make a constructive contribution to development while serving an important function as market primers.
The measures, from tariff removal to trade agreements, which have been mentioned in the foregoing pages as appropriate steps to be taken by the developed countries to foster an increased flow of exports in forest products from the developing countries, are not in themselves adequate. Even if all the measures suggested here were to receive swift endorsement and early implementation, this would still not dispense with the need for aid on an increasing scale. The slogan "trade, not aid" is a spurious one since in this sector, at any rate, the required expansion of trade cannot be secured without an increasing flow of aid not only in the form of investment capital but also in the form of professional and technical skills, with provision for training, and in the form of research and adapted technology.
Assistance in training and research
The need of the developing countries for professional and technical skills will undoubtedly be met in time as they advance economically and can provide the requisite teachers and facilities. In the short run it is clearly vital that the developed countries offer assistance in this sphere. For the immediate future the pressing needs are for qualified professionals and technicians in the various key sectors of the economy, including the forestry and forest industries sectors. The United Nations Special Fund, as well as the Technical Assistance programs of the United Nations and its specialized agencies, are paying particular attention to this problem, though the present scale of effort is hardly commensurate with the need, even taking into account the many substantial bilateral programs.
However, the vital importance of training as part of an aid program is increasingly recognized. Through the Expanded Program of Technical Assistance and the Special Fund of the United Nations, FAO has launched a program of forestry education to assist countries in planning, establishing, and strengthening the training facilities necessary to provide qualified personnel at all levels. Since 1962, forestry faculties, departments or schools, have been developed or assisted through multilateral projects in several countries, and more projects are under preparation. Training centers on special subjects are sponsored. But these efforts are to some extent handicapped by shortage of qualified personnel in the developed countries. To increase the supply of qualified personnel and to make effective use of them calls for national as well as international measures, and coordination of technical assistance programs. There is need to devote many more resources to financing schools and special training projects. Special incentives to universities and companies may be needed if experts are to be released to undertake assignments in the developing countries.
The responsibility of the developed countries for adapting and transferring suitable technologies to the developing countries is widely acknowledged. Indeed, the whole problem was discussed at length at the 1963 United Nations Conference on the Application of Science and Technology for the Benefit of the Developing Countries. Here the United Nations and the several specialized agencies are already making a useful contribution. In the forestry and forest industry sectors the work program of FAO has in recent years been heavily oriented toward facilitating this transfer of know-how.
However, experience to date has shown that there are considerable difficulties in achieving, firstly, the required switch of research effort in the countries, and secondly, appropriate mesas for applying the findings in the developing countries. Research efforts are scattered among a variety of institutions, public and private; in all institutions the resources available for research fall short of the needs of existing programs, so that it is difficult to secure any diversion of funds and personnel to attack problems of main interest to developing countries; and the co-ordination of research between research institutions in the developed countries is seldom satisfactory, even at the national level.
A review of the situation in the forestry and forest products sectors makes it clear that the need is not for exhortation. Good will is not lacking; governments and institutions, both public and private, have signified their readiness to co-operate. As yet, however, it has proved possible in only a few instances to secure the necessary concentration of effort.
One means of securing faster progress might be a more general acceptance of the principle of "problem adoption" by countries; that is to sap, a given developed country would agree to accept as its responsibility the solution of a particular problem of key importance to a group of developing countries. The adopting country would establish the required organization and feed in funds where necessary to ensure the orientation of research institutes, training institutes, and industry toward the solution of this problem, Where appropriate it would award fellowships, both for research and for in-service training, for candidates from the developing countries. It would collaborate with the developing countries in carrying out tests in situ, promoting pilot operations, and so forth. Finally, given an economic breakthrough and solution to the problem tackled, it would assist the developing countries in setting up commercial operations.
In the forestry and forest industries field there are many urgent problems which might be solved along these lines. For example, an important problem for many developing countries is the establishing of low-cost housing programs based on prefabrication techniques, making use in some instances of conifers, id others of secondary hardwoods. The solution of this problem calls for a many-sided attack: materials testing, preservation techniques, design of suitable unite; industrial organization of the supply of elements from the producing plants and their assembly into units; organization, financing, and credit of a housing agency; and so forth. There are several developed countries with considerable experience in all the aspects; if their experience to date were brought to bear , and if current research programs were but slightly modified and supplemented, it should be possible within a short space of time to produce a solution, technically, economically, and organizationally appropriate to the circumstances of the developing countries.
Another problem which might be tackled along similar lines is the economic production and practical application of satisfactory glues and resins from locally available animal and vegetable resources. In the plywood and particle board industries up to 20 and 50 percent respectively of the manufacturing cost may be made up by synthetic resins which, at the present time, have to be imported from advanced countries with sophisticated chemical industries. It is believed that recent technical progress in at least two advanced countries has made possible the economic production of phenol-type resins from a variety of tannin materials. As yet, however, no steps have been taken to make this new technology available to the developing countries which are in a position to make good use of it. Here again, problem adoption might be the best means of ensuring that this new technology is radiated and applied in practice.
These are but two examples; it is not necessary to extend the list here. None of these problems is being completely neglected. But none is moving toward a rapid and practical solution simply because efforts are not being concentrated for the purpose of specifically assisting the developing countries. If the principle of problem adoption by countries were accepted, this would at once lend purpose to many bilateral aid - which at present are less effective than they might be - and at the same time secure that concentration which could lead to an early solution.
The more specialized efforts of a problem adoption scheme are not enough. There must also be a greatly intensified program of subprofessional and professional education as well as the adaptation and application of research findings. These must be fostered mainly by international agencies, but can well be supported by bilateral arrangements.
The measures that need to be adopted by the developed countries, namely, reduction and removal of trade barriers, the increase of capital flows and technnical assistance in survey, training, and research will avail little unless there is energetic action on the part of the developing countries themselves. These countries face a host of problems - in trying to utilize their forest resources - effectively to increase export earnings and accelerate the process of industrialization. In the first place, generally lack an adequate data infrastructure indicating in sufficient detail the extent and nature of their resource endowments and the economic factors upon which to base forest development planning. Thanks to recent advances in survey techniques, it is now possible to obtain the essential data relating to the forest resource much more quickly and much more cheaply than was possible but a few years ago. This obstacle has thus become less formidable, though there is still a shortage of experts versed in the new techniques, particularly as applied to heterogeneous tropical forests.
Although the transport and communication infrastructure in these countries is generally very weak, serious obstacles to industrialization are the tariffs and other dues that burden imports of equipment, fuels, etc., in some of the developing countries. The forestry sector, in which transport costs are high, is particularly vulnerable in this respect. Forest resources arc sometimes geographically and usually remote from urban concentrations, from potential markets and from ports. Heavy investments in road, rail, and water communications, in port and harbor facilities, may therefore be required if these resources are to be valorized, as well as social investment at the site. Much of this investment will inevitably be multipurpose, and the forestry and forest industry sectors cannot be expected to bear the whole cost.
It may be observed in passing that the remote location of the forest resource also has a positive aspect. The creation of new forest industry complexes away from the present urban concentrations will provide the new poles of development so much needed in many developing countries. The establishment of new forms industries and of effective control and management of the forest resource will call for a wide range of managerial, professional, and technical skills. This, of course, is a problem common to all sectors.
We hare said earlier that the development of the forestry and forest industry sectors will call for a very considerable capital investment in the coming years. It must not be forgotten that the bulk of the capital needed for developing these sectors meat, as for all other sectors, be mobilized by the developing countries from within their own economies. Foreign capital inflows can only be supplemental to domestically generated capital. On a global basis, in relation to the requirements of the developing countries, the current capital flow from developed to developing countries is inadequate both in total and in its geographic and sectoral distribution; it is likely to remain so for many years to come. This applies to both private capital flows and to bilateral and multilateral grants and loans.
Given the chronic scarcity of capital, what are the arguments for affording priority to these sectors? They can be summarized briefly as follows: high elasticity with respect to income of the demand for forest products, especially at low income levels; high import-saving effect; considerable export potential; the multiplier effect of investment in-these sectors; the considerable external economies achieved; the considerable flexibility of the wide range of forest industries in relation to scale of operations and factor requirements.
It has been pointed out previously in Unasylva that the prospects for foreign capital entering these sectors are brighter than for other sectors of the economy because many of the developed countries will have a direct interest in promoting forest and forest industry expansion in the developing countries. This very fact at once warrants and is likely to encourage the direction of domestic capital into these sectors. "Warrants," because it stretches the total capital resources available. "Encourages," because domestic capital, public and private, will see advantage in being associated with foreign capital and the knowledge and skills it can bring to the development of these sectors.
It is important that, within the sectors, capital investment be wisely directed. The developing countries have a responsibility to assure this. In the past there have been serious cases of misinvestment. Sometimes, in their alacrity to realize substantial import savings, projects have been undertaken without regard to the sustained availability of the raw material. In other cases, insufficient attention has been paid to other production factors, water and chemicals, for example. In still others, unsuitable technologies have been selected.
The dangers of misinvestment are greater than ever today precisely because, in all parts of the developing world, there is a growing conviction of the need for a regional approach to problems of development. The case for a regional approach in the forest industries sector is particularly strong, since in many branches, especially newsprint, chemical pulp and fibreboard, scale economies are very pronounced while many national markets are still too small to support mills of economic size. A co-ordination of national plans is necessary efficient, low-cost industries, capable of entering the export market, are to be established. Moreover, such go-ordination will certainly facilitate the flow of capital to the sector.
There are other considerations which favor a regional approach. It makes possible the rational use of complementary resources available in neighboring countries (long-fiber and short-fiber material, papermaking fiber and processing chemicals, cheap hydropower, veneer loge, wood waste and synthetic resins, etc) . It favors the establishment of integrated forest industry complexes. Given a regional approach, it is possible to make economic use of scarce managerial and technical skills and to co-ordinate research facilities. The common tariff, a feature of all regional economic integration schemes so far proposed, is evidently but the first step. It may facilitate but it cannot of itself assure that the advantages of the regional approach are realized.
Some of the advantages mentioned can, of course, be realized without formal regional planning and even without a common market. Positive results can come from the confrontation and, where appropriate, adjustment of national development plans for this sector by pairs or groups of developing countries which have trade links or common trade interests.
As yet, few of the developing countries have been able to establish the planning structure and to find or train the requisite qualified administrative and professional personnel. However, there are indications of progress, with policies for forest industry development being more clearly defined in the contest of overall development policy, with administrative structure and processes being strengthened, and with programs for gathering and interpreting relevant information as a basis for policy being more effectively carried out.
The need for close links between those responsible for the sectors considered in this article and those responsible for overall planning is sufficiently clear. Even more obvious is the need for maximum co-ordination between those responsible for the management of the forest resource and those responsible for the development of forest industries. Yet in very many developing countries this lack of effective collaboration hampers the realization of soundly based forest industry development. In those countries in which forest industries already play or are destined to play a key role, responsibility for forestry and forest industries should be concentrated in the same department or ministry. Apart from the impetus this would give to forest industry development, it would be the best means of ensuring that the noncrop values of the forest were not neglected, and that unwise exploitation did not bring in its train floods, erosion, and water shortage.
The sooner the appropriate planning machinery and institutional arrangements just discussed are established the sooner they can become effective. The technical and economic conditions for establishing new forest industries in the developing countries are maturing fast. Those governments which are alive to the situation are already taking the initial steps, often seeking technical assistance from appropriate multilateral agencies, especially the Special Fund of the United Nations, the Expanded Program of Technical Assistance, and FAO, as well as from bilateral programs. Thus essential resource data are being assembled and analyzed, present and potential markets are being investigated and in some cases deliberately planned, the needed cadres are being trained, and pilot plans for demonstration and training established. Steps are being taken to secure the forest estate, and to bring key areas under effective management. Feasibility studies are being conducted, and medium- and long-term development plans adumbrated.
Nevertheless, having regard to particular opportunities offered by the forest and forest industries sectors, especially for building up a substantial export to the developed countries, it is to be feared that the pace of these developments is still too slow, and that many countries which do possess the necessary resource endowment have thus far failed to see the opportunities that lie ahead.
For the purposes of this paper emphasis has been placed on the export opportunities likely to arise for the developing countries by the year 1975. But the developing countries must not limit themselves to this time horizon, which has been selected only for expositional purposes. It is clear from the trends which have been delineated that export opportunities are likely to increase further in the closing decades of this century. The conditions exist for a progressive and profound modification of the pattern of international trade in forest products in favor of the developing countries. How far these opportunities are realized, by 1975 and in the decades to follow, depends on the speed with which the developing countries shape their policies in the years immediately ahead.
JOHANN ALBRECHT VON MONROY
We regret to record the death in Austria on 18 April 1964 of JOHANN ALBRECHT VON MONROY, one of the earliest members of the field staff of the Forestry and Forest Products Division which he joined in 1960. He served most recently in Turkey and before that had carried out important assignments on forestry development planning in Pakistan, India, Burma and Indonesia.
He was always concerned to assure the actual implementation of development schemes drawn up under his guidance and displayed in that connection great skill and resourcefulness, enlisting the cooperation of other specialized agencies of the United Nations, and of bilateral aid programs by means of which countries were enabled to obtain equipment. Von Monroy was also able to secure the co-operation of forest industries, research organizations and consulting firms in carrying out tests of raw materials in support of data from preinvestment surveys, leading to the establishment of new forest industries.
Von Monroy was, in fact, a pioneer of FAO's technical assistance program and was one of the most experienced, and certainly one of the most successful, of the Division's staff
