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Executive summary

A region of rapid change... a time of transition

During the past several years, the Asia-Pacific region has experienced rapid and often tumultuous political and socio-economic change. The Asia-Pacific Forestry Sector Outlook Study, conducted under the auspices of the Asia-Pacific Forestry Commission (APFC), has been carried out against this backdrop of diversity, dynamism and contrast.

Economic growth in a number of the region's countries has been among the fastest in the world; since 1945, the region's economy has grown seven times faster than the world average. Since mid-1997, however, the region has undergone a significant economic downturn, with negative growth in many economies - the impacts of which have yet to be clearly determined. Nonetheless, from this dislocation, the region is expected to resume rapid economic growth, with associated strong demand for a wide range of forest products and services.

Economic growth in the region has been accompanied by enormous social and political transformation. Dramatic changes are occurring in the way people work, where they live, what they spend their money on, and countless other aspects of life. The perspectives of the people living in Asia and the Pacific toward forests and forestry are evolving in concert with socio-economic changes, and emerging environmental perceptions and institutional attitudes.

The future of forestry is shaped by current choices

The policies, choices and decisions that will determine the future of forests and forestry in the region lie in the hands of the member countries of the Asia-Pacific Forestry Commission. The key challenges are to achieve balance among the multiple roles of forests to deliver the greatest overall benefits, and to adopt measures that keep the sector responsive to changing needs without compromising the sustainability of forest resources.

Countries rich in resources have more options for meeting diverse demands placed on forests. The capacity to choose also derives from general economic and institutional strengths. It is, however, unrealistic to expect immediate and dramatic shifts in the way forests are managed and used in the region.

Many actions can be taken unilaterally by individual countries, but others require multilateral co-operation -matters of trade, responsible stewardship standards, management of international waterways and watersheds, and research and education are some of the areas where co-operation can yield considerable benefits.

Economic and social background

The most important drivers of demand for forest products are population and economic growth. The Asia-Pacific region accounts for 55 percent of world population (more than 3 billion people) and annual population growth is currently averaging 1.4 percent. This is expected to continue through 2010. The region accounts for 25 percent of world GDP and annual growth has averaged 2.6 percent since 1980. The recent economic downturn will significantly affect this growth rate for the next several years.

Notwithstanding the economic downturn in the region, a sizeable share of the population is achieving rapidly rising prosperity and purchasing power. A large middle class is emerging in many countries of the region.

Economic growth has been heavily skewed, however - the greatest growth has been in Japan (which accounts for more than 50 percent of Asia-Pacific's GDP). Substantial growth has also occurred in the People's Republic of China, Indonesia, Thailand, Malaysia and the Republic of Korea. The rest of the growth has been in a handful of relatively small countries or territories. The Asia-Pacific region remains generally poor, although demands for modern products and services are growing.

The overall importance of forestry in national economies is generally limited. The countries with the largest forest and forest products sectors (Japan, People's Republic of China, Indonesia and Malaysia) all have large economies. In these countries, forestry's large gross value contribution comprises a smaller proportion of exports and GDP than many of the smaller countries. Nonetheless, in both Indonesia and Malaysia forestry still accounts for around 10 percent of the economy. In several countries, forestry contributes very significantly to the economy:

· 10 percent or more to GDP in six countries (highest in Bhutan);

· 10 percent or more to merchandise trade in eight countries (highest in Cambodia); and

· 10 percent or more to both GDP and merchandise trade in four countries (highest in Solomon Islands).

Overall, demands for the full range of goods and services of forests are increasing throughout the Asia-Pacific region.

Demands for services of forests

Services of forests are important, whether they have a formal market (such as for grazing, ecotourism, and recreation) or are largely intangible (such as cultural and spiritual values or biological diversity conservation). Achieving sustainable financing to manage forests for non-marketed services is a major challenge.

Among the range of services, the most significant include:

· ecotourism: the market for ecotourism (not all forest-based) is estimated at around US$6 billion annually and is growing at 10 to 25 percent annually. Ecotourism and forest-based recreation clearly have the potential to become increasingly important for forestry in the region;

· watershed protection: demands for water are increasing dramatically in the region. The contribution of forests to water quality and flow are extremely important in this respect. As several major river basins cross international boundaries, the potential for actions in upstream countries to have major impacts on downstream countries must be carefully considered;

· protective and habitat functions of mangroves: mangroves help protect coastal areas and provide critical habitat for wildlife and fish. Despite these values, mangrove areas are shrinking and being degraded at a rapid pace. These changes are putting at risk the livelihoods of millions of people and the integrity of coastal environments;

· carbon sequestration: there are promising emerging opportunities for developing countries to capture investment funds in forestry for carbon sequestration (through major afforestation of under-utilised lands and areas of low productivity); and

· biodiversity conservation: the region harbours a large proportion of global biological resources, many of which are increasingly threatened by spontaneous and inappropriate development.

Demand for non-wood forest products (NWFPs)

NWFPs comprise an important, though generally poorly monitored, aspect of forest production. They are of particular significance to forest-dependent people. The Asia-Pacific region is estimated to account for up to 40 percent of the world's NWFP exports. At local levels, key NWFPs include food, fodder, medicines and building materials such as thatch, bamboo and rattan.

There are a number of diverse challenges related to mainstreaming NWFPs. Only a few NWFPs have proven economically dynamic and a number of problems arise from the small scale and economic weakness associated with most NWFP production and processing. A major constraint to date may well have been a failure to identify and focus upon the few NWFPs that have the greatest importance now or that demonstrate the greatest promise for the future.

Demand for wood energy

Woodfuels are a basic need for 2 billion people in the Asia-Pacific region; they account for 70 to 80 percent of the total roundwood harvest. While woodfuels' share of total energy use is declining, the absolute volume of woodfuels used continues to increase. Despite this, in many countries wood energy is still largely considered a traditional "poor people's fuel." A major challenge is to bring wood energy use more into the mainstream, including policy agendas.

Salient issues relating to woodfuel utilisation include:

· the primary supply problem for fuelwood is uneven distribution and accessibility. Consequently surpluses exist simultaneously with pockets of shortage. At the regional and national levels, potential woodfuel supplies almost invariably exceed current demand - shortages are largely localised;

· on average, two-thirds of woodfuel supplies come from non-forest land rather than from forests; and

· in economically fast-growing countries, woodfuel demand is slowing down and may soon decline. In most countries, however, woodfuel will remain of central importance well beyond 2010.

Demand for and trade in industrial forest products

The Asia-Pacific region produces nearly 280 million cubic metres of industrial roundwood annually. Increasingly, industrial roundwood is being processed domestically. Manufacturing into secondary and finished products for export is also increasing. Considerable attention is being devoted to developing processing capacity for new products. A notable trend is toward rapid expansion of processing capacity for medium-density fibreboard and pulp and paper. Some countries are undergoing major restructuring of the industrial processing sector to adapt to the realities of reduced raw material supplies, smaller logs, and increased dependency on plantation-grown wood and non-traditional raw material sources (rubber, oil palm).

There has been rapid growth in the consumption of forest products - even faster than income and population growth. The Asia-Pacific region's output and consumption of many commodities are of similar orders of magnitude as for Europe and are approaching those of North America.

The Asia-Pacific region is the world's largest net importing region of industrial forest products. Japan will continue to be the region's largest importer of forest products. Therefore, changes in Japan's consumer preferences, economic growth or the extent of harvesting of Japan's forest resources, could significantly re-orient trading patterns. Two major areas of uncertainty concerning trade will be future supply developments in the Russian Far East and in the two largest developing countries - the People's Republic of China and India.

The most important features of the industrial wood sphere in the Asia-Pacific region are that:

· recent years have brought a greater emphasis on fibre processing as opposed to manufacturing of solid-wood products. Particularly, there has been a relative stagnation in the production and consumption of sawn timber in comparison with panel products. The increasing scarcity of large-diameter logs suitable for sawing is accelerating the transition to engineered wood products and non-wood alternatives;

· the growth in roundwood consumption has slowed relative to the growth in the output of products derived from it (i.e. sawnwood, panels, pulp and paper). This trend is due to gains in efficiency and greater reliance on recycled material, alternative raw materials and residues;

· only a few countries dominate the production and consumption of most industrial wood products;

· a high proportion of recycled and non-wood fibre is used in the production of paper and paperboard in the region relative to the rest of the world;

· several non-traditional timber producers, particularly among the Mekong countries and Melanesia, are emerging as potential sources of supplementary wood supplies;

· there is increasing substitution of coniferous timber for hardwood resources. Several countries have rapidly maturing plantations that will provide increased volumes of timber in the next decade.

Forest and tree resources

The Asia-Pacific region covers one-quarter of the world's land area and has 15 percent of the world's forest and wooded land. This represents about 28 percent of the region's land area but is equivalent to only a quarter of a hectare of forest or wooded land per person - the lowest ratio for any region. In practice, in countries such as Bangladesh, the average person has hardly any forest, while in countries such as Papua New Guinea there is a relative abundance of forest. Of a total of some 550 million hectares of forest in 1995, the five leading countries account for two-thirds of the area. An even greater concentration of forest plantations exists.

Forest cover in the developed countries of the region has essentially remained constant in recent years. In contrast, forest cover has declined substantially in developing countries in the region, particularly in tropical regions. In the tropical countries of Asia, deforestation amounted to 3.9 million hectares per year between 1981 and 1990. The major direct cause of deforestation and forest degradation in Asia and the Pacific is clearing for agriculture (including shifting cultivation). Land-use changes have varied considerably among the sub-regions.

In addition to forest loss, there have been substantial changes in quality. Over the last decade, extensive areas have been converted to "other wooded land." Excessive cutting of timber causes forest degradation, although often more important contributors to forest clearing are logging roads, which facilitate migration and new settlements. Fires, open grazing, fuelwood harvesting, mining, irrigation and hydroelectric projects, and urban expansion are other important local causes of deforestation and forest degradation. Rates of deforestation in the region are expected to generally decrease as fewer easily accessible forest areas remain to be cleared and agricultural intensification takes root in a number of countries.

The Asia-Pacific region leads the world in tropical forest plantation development. More than 22 million hectares have been planted, representing three-quarters of the world's total. In the temperate areas of the region even larger areas of forest plantations have been established. Additionally, the Asia-Pacific region possesses most of the world's 14 million hectares of rubber and coconut plantations. Oil palm is another tree crop that has potential to supplement forest fibre in the region.

Until recently the important wood supply roles played by trees outside forests was little understood. It is now evident that non-forest trees, treecrops and non-wood cellulose provide very significant volumes of both fuelwood and industrial fibre.

Efforts to bring timber harvests within sustainable levels include: improving forest management practices, increasing forest conservation, accelerating plantation development, providing forest-derived benefits to a broader range of people, and offering incentives to individuals and corporations to encourage development of forest resources on community and private lands.

Forest management objectives have evolved considerably in Asia and the Pacific in recent years. There is notable reorientation in many countries toward social and environmental objectives. Many countries are reducing their reliance on natural forests as a source of industrial roundwood and are shifting to other sources. Most countries of the region have accelerated reforestation efforts in recent years.

Many countries are giving increased attention to forest conservation, exemplified by the creation or expansion of protected areas. The region has just under 3,000 protected areas in total, covering nearly 9 percent of the land area. Protection does not cover all representative ecosystems, however, and many "parks" exist only on paper. A protection-related practise of regional significance has been the tendency to restrict timber harvests or to withdraw large areas of natural forests from wood production.

People and forests

The region has four main types of people/forest relationships:

· generally socially marginalised people who live inside forests;

· people who live outside - but near - forests;

· people engaged (often as employees) in forest-based commercial activities; and

· urban dwellers who require forests and trees for aesthetic and recreational reasons and for material goods.

The region has a population of forest-dependent people estimated at between 430 and 450 million people - or about 15 percent of total population. This includes a large number of people living outside forests, but who use forests and can participate in managing them. In international policy considerations, actual forest dwellers attract particular attention because they have few options other than those the forest offers.

For people living outside forests but who need forests (mostly farming populations), collaborative management of nearby forests is increasingly practised. Principally, this is achieved through agreements between state forest departments and local communities, mostly to manage degraded state forests.

Regarding urban forestry, a key attribute of cities is the diversity of needs among various income strata, ranging from amenity planting (parks, roadside trees, etc.), to production forests for food, woodfuels and other needs. Forestry is, however, at a relative disadvantage due to high land values and alternative lucrative options for land use, including real estate development.

Policies and institutions

The forestry sector in the Asia-Pacific region is undergoing substantial policy change in response to broader developments such as economic growth, globalisation of economies, privatisation, trade liberalisation and UNCED-related attention on sustainable development (particularly sustainable forest management).

Two main areas of institutional adaptation that are emerging relate to: (a) creating a supportive environment for the private sector in an age of economic liberalisation; and (b) enhancing the effectiveness of participation by local communities and individuals in forest management.

Throughout the Asia-Pacific region, most forests are officially under the control of central or state governments. Despite this responsibility, central government resources are insufficient, leading to a history of government forest management failures. A desire to correct this, to reform economies toward a stronger market orientation, and a commitment to more socially oriented forest management have all been factors in a recent trend toward decentralisation and devolution of forest management responsibilities.

Many government forestry agencies in poorer developing countries remain weak. A key problem in many other countries is the low hierarchical profile of government forestry agencies. Budget allocations and staff resources for forestry are often inadequate to effectively monitor forestry resources and ensure sustainable management. An obvious weakness in a number of countries is poor enforcement of laws and regulations - in the weaker countries, even the supervision of concessions leaves much room for illegal activities and irresponsible harvest practices.

A setting for the future

Analysis of the current status and trends in Asia-Pacific forestry has led to identification of eight broad themes that are likely to be most important in determining the future of forestry in the region.

1. Demand for the broad range of products and services presently supplied by forests will continue to increase.

2. Physical and regulatory constraints on forest resource use will continue to increase.

3. Pressures for sustainable management (and other environmentally oriented policies) will continue to gather force.

4. Increased attention will be paid to the multiple roles performed by forests and to efforts for forest ecosystem management.

5. Forest products trade will continue to be an important element in the forestry sector.

6. Globalisation and regionalisation in the forestry sector will increase.

7. Demands for social equity will continue and increase.

8. New roles and opportunities will emerge for all forest sector stakeholders.

Driving forces for change

In broad terms, the central driving forces for change in the Asia-Pacific region are socio-economic. Population pressures and increasing prosperity are the key factors. During the past 20 years a number of environmental and social factors have received much greater prominence and have resulted in a changed forestry paradigm for the Asia-Pacific region. Concerns over deforestation and forest degradation, pollution, climate change, indigenous people's rights, empowerment of local communities and urban environments have become - in many instances - paramount over commercial wood production.

A central theme of the APFSOS study is that the future will be determined by how various tensions and conflicts among economic, social and environmental dimensions of forests are resolved. The most important driving forces for change are those that arise from inappropriate balances among these core dimensions.

The outlook for Asia-Pacific forestry

In the future, less tangible roles of forests will likely become more appreciated and valued (e.g. protective functions, cultural and aesthetic values). The implicit costs of physical uses (e.g. for energy and industrial timber purposes) are likely to receive greater attention. Clearly, demands on the region's forests and conflicts over use will increase.

Outlook for services of forests

· Despite its very rich biological resources, the region is not capturing the full commercial potential for forest-based opportunities from bio-prospecting and product development; greater efforts are needed if the region hopes to benefit commercially from these resources.

· The potential to conserve more biological resources in the future is constrained by high population pressure. There is little room in many countries to expand strictly protected areas and any new protected areas may need to be in more loosely defined conservation categories.

· Competition for fresh water will escalate in the coming years. There will be increasing opportunities for pricing of water and compensating communities located in and near watersheds for protecting and maintaining viable sources of water for downstream use.

· With rising prosperity, the desire for nature experiences among middle class people will offer many opportunities for ecotourism development, but tapping this market will require sound preparation and competitive strategies.

Outlook for NWFPs

· There will likely be increasing commercialisation of some NWFPs, resulting in larger-scale exploitation. Many high potential NWFPs may be domesticated and so enter the agricultural arena.

· The importance of subsistence use of some NWFPs will likely decline as alternative products and alternative sources of income emerge. Growing prosperity may reduce the number of people whose livelihoods depend on NWFPs.

· A variety of factors may cause the disintegration of traditional systems for using NWFPs, including the settlement of migrants in forest areas and increasing competition with incompatible forest uses.

· Commercialisation of NWFPs with high potential for economic exploitation will increasingly be controlled by powerful interests - often at the expense of forest-dwelling people - unless specific policy measures are taken to favour local people.

Outlook for wood energy

· Demand for woodfuels will continue to grow; it will likely increase by 25 percent by 2010.

· In 2010, there will still be far more wood available for fuel than is needed; sustainable production from farmlands alone is expected to meet some four-fifths of total needs. Unequal distribution of woodfuel resources, however, will be an increasing problem.

· Wood energy has the potential to partially enter the economic mainstream but this is unlikely to occur within the period to 2010. Strategic policy support and action will be required if wood energy programmes are to become a central element of overall energy and economic development planning.

· Uplifting the non-industrial uses of wood energy will be a difficult task due, among other things, to the low socio-economic status of most woodfuel users, poor financial feasibility of large-scale wood-energy plantations, unclear government policies for bio-energy development and incomplete information on wood energy.

· Industrial use of residues at processing plants is more likely to prove profitable than establishing wood-energy plantations for power generation or processing of liquid-fuels from wood.

Outlook for industrial wood products

· Demand for all industrial forest products in the region will increase significantly with growing populations and resumed strong economic growth.

· Asia and the Pacific will continue to have more fibre potentially available - in gross fibre volume terms -than the quantity of wood products it consumes.

· Certain commodities, such as large-size logs and products made from them, will become increasingly scarce.

· Change in consumption patterns, particularly reduced use of sawnwood and plywood and greater reliance on reconstituted panels, will make it easier for the region to supply much of its own needs.

· Wastepaper use is expected to more than double, and in 2010 will account for more than half of the fibre used in paper and paperboard production.

· Asia and the Pacific will increase its net imports of all forest commodities except fuelwood.

The APFSOS has undertaken a major modelling effort to develop quantitative scenarios for future supply and demand of wood products. A baseline scenario quantifies expectations for consumption, production and trade in forest products, using assumptions that discount the current economic turmoil. A downturn scenario provides indicative forecasts applying lower growth assumptions relating to the ongoing economic disturbance.

Outlook for tree and forest resources

· Natural forests are likely to continue to be converted to other land uses, although perhaps at a declining rate. Only limited additional areas of natural forest are likely to be reserved in new protected areas unless buffer-zone development and other utilisation are permitted. Strict protection of areas will become increasingly difficult.

· Plantations will continue to receive considerable management attention and research support. To ensure continued attractiveness of plantation activities, greater policy support may be needed.

· Trees outside forests will be increasingly recognised as an important element in the wood supply equation.

Outlook for people and institutions

· If attention is focused on protecting traditional forest-based livelihoods including shifting cultivation, hunting and gathering of NWFPs, then forest dwellers and forest-dependent people will likely face a hostile and unstable future. The principal avenue for development appears to be building human capacities among forest dwellers so they can continue with forest livelihoods but also have the capacity to capture emerging economic opportunities.

· The future will bring numerous institutional challenges - the most significant ones are likely to relate to overall capacity building, including education and research.

· In the future, interest groups will undoubtedly more forcefully demand an active role in forestry decision making. This will not necessarily ensure that marginalised groups in many countries are adequately represented. This aspect may require specific attention by policy-makers. Building consensus and cooperation will be an important part of future decision processes.

Implications and choices

Within the forestry sector per se, very few effective policy measures can be taken to address deforestation, as most of its direct causes are driven largely by policies outside the forestry sector. Managers of the sector can, however, more actively enforce the law, promote corrective actions through afforestation and reforestation, encourage responsible stewardship for the forests that remain and demonstrate the relative importance of forests compared with alternative land uses. The policy choices that will most effectively control deforestation are related to increasing agricultural productivity, creating employment and alternative income-generating opportunities and raising prosperity in general so that direct dependency on natural resources is reduced.

Questions and issues that confront decision-makers include:

· how to keep forestry socially relevant, especially maintaining adequate attention to the needs of the poor;

· how to address the forest-related needs of a fast-growing urban population;

· whether to focus on maintaining forest dwellers in forest dependency or provide them with the capacity and tools with which to choose alternative livelihoods;

· how to secure appreciation of the value of non-commercial services of forests so that these are better provided for in budgets and national accounts;

· whether and how to mainstream NWFPs in forest management;

· how the development of tree resources outside forests can best be supported, including through appropriate policy and institutional measures; and

· whether wood energy should remain subsistence-oriented, or how best to encourage and enable it to enter the economic mainstream.

For industrial forest products, the most pressing policy choices will relate to:

· the nature of the industrial capacity in the region, particularly in Southeast Asia where the industry is currently oriented toward the use of large-diameter logs that will soon be in short supply;

· the tightening of raw material supplies, and related options for encouraging greater use of forest and mill residues;

· the relative emphasis between encouraging greater recovery of paper for recycling as opposed to developing additional pulpwood resources; and

· the extent to which policy measures should be used to mobilise additional resources in support of industrial forestry activities.

It is clear that commitment to research and development will be essential if forestry is to meet the emerging challenges and opportunities. An indicative guide to investment requirements estimates average annual investment needs for the Asia-Pacific forestry sector to be between US$15.5 billion and US$23.2 billion per year.

There are significant opportunities for greater regional co-operation in areas such as trade liberalisation, watershed management, sustainable forest management, education and research and in developing a regional perspective in global forest dialogue.

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