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8. A summary of the present - a setting for the future

From the past - the future
Key forestry themes in the Asia-Pacific region

From the past - the future

The key to providing meaningful forecasts of the future is understanding the past and the complex interplay of incentives and disincentives that have created patterns of land use, forest utilisation (including conservation and preservation), trade, investment, and the host of interrelated outcomes that constitute the "forestry situation." If the key forces that guide decision-making are identified and understood then it is possible to predict with some certainty what decisions are likely to be made in the future and the outcomes of those decisions. At the same time, developing future outlooks is fraught with difficulty and uncertainty. Imperfect information, the complexity of the task, irrational decision-making and a host of often unexpected circumstances all broaden the margins for error.

Nonetheless, the task is worthwhile. Only by examining the broad range of factors that affect people's decisions and behaviour, and by systematically assessing forests in the context of these factors, will anything approaching a true picture of the situation emerge. And by acquiring better insights into the situation, new policies can be formulated to improve future outcomes.

Key forestry themes in the Asia-Pacific region

Increase in demand for forest products and services
Increasing restrictions on access to forests
Growing pressures for sustainable forest management
Greater attention to multiple roles of forests
Trade will remain important
Increasing globalisation and regionalisation in forestry industry
Demands for social equity will continue and increase
New roles for all sector participants

Two attributes are of overwhelming importance in describing the Asia-Pacific region. It is a region of contrasts, and it is a region of change. It is, nonetheless, possible to identify broad themes that appear to be the most important features of the future direction for forestry throughout the Asia-Pacific region. By definition, these propositions are highly generic, but at the same time they are trends that cut across, and affect, all countries in the region. Particular countries' responses to the challenges and opportunities inherent in these themes will differ according to the respective behavioural incentives within each country. The Asia-Pacific Forestry Sector Outlook Study notes eight interrelated key themes (Box 8.1) that are described in greater detail in the sections that follow.


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

· Physical and regulatory constraints on forest resources will continue to increase.

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

· Increased attention will be paid to the multiple roles performed by forests and efforts to achieve the benefits of multiple use forest management.

· Trade will continue to be an important element in the forestry sector.

· Globalisation and regionalisation in the forestry industry will increase.

· Demands for social equity will continue and increase.

· New roles and opportunities will emerge for all sector participants

In addition to these, the question of progress related to technology must be considered. Leadership in any facet of the sector requires progress in the technological fields. Yet, present indications are not encouraging (Box 8.2). Apart from small enclaves, the region has to date not been moving as fast on the technological front as it has capacity to do.


Determinants and driving forces for technological change: Technological changes in the Asia-Pacific forestry sector have occurred at different paces throughout the region. In most countries, technology modernisation is confined to small pockets. Changes have mostly been limited to a small segment covering the modern wood industry and short-rotation plantations. Most of the technological changes have been investment driven (i.e. investors bring with them new technology). Hence, there is a gap between developed and developing countries, and between the more advanced developing countries and the weaker developing countries. These features and driving forces seem likely to persist for the outlook period to 2010. However, environmental considerations are expected to become more important and could lead to fairly rapid adoption of more environmentally friendly technologies.

Forestry technologies and expected scenarios: The natural forests of the region have benefited little from technology-driven productivity gains. Similarly, most public-sector industrial plantations are managed on low-productivity regimes. Community plantations have even lower yields and most have been grown from unselected seed. Improved productivity gains will likely be confined to pockets of plantations primarily managed by the private sector.

The focus of biotechnology companies on high-value non-timber forest products, especially medicinal plants, and for synthesising new products, will continue. This will mostly be in developed countries and a small number of developing countries. It is unrealistic to expect major breakthroughs in biotechnology uses in wood production during the time horizon of this outlook study.

Due to low public sector investment in research, there is limited knowledge of ecosystems and - therefore, despite interest in sustainable management, mixed cropping and intensive multiple-use management techniques will change little by 2010. In agroforestry, homegarden systems have little scope for significant improvements as they are already highly productive; however, the proportion of commercially important species in homegardens is expected to increase. In other agroforestry systems, plantation-forestry technologies are being transferred and adapted but mostly where farmers are supported by industries. Thus, farm woodlots linked to industrial wood processing will generally be the most intensively managed.

Sustainability and environmental concerns: These concerns are leading to more rigorous environmental standards. Diffusion of technologies to reduce industry emissions will increase but small-scale mills, particularly for paper, may for economic reasons largely remain incapable of fulfilling standards. Low-impact logging systems, rehabilitation of natural forests, and mixed plantations are outcomes of the increasing concern for the environmental value of forests.

Value addition/end use efficiency: Major breakthroughs in developing new products and processes, especially related to plant- and animal-based pharmaceuticals and other products, will be spearheaded by transnational corporations. Linked to these will be some increase in the efforts to domesticate and systematically cultivate some medicinal and aromatic plants. In wood industries, most processing is dominated by traditional technologies especially for sawnwood. Main efficiency gains will come from recycling. Other major gains could arise from investment in new panel-production capacity to use small-diameter logs and to process more residues than at present. Patent laws could, however, limit the easy access to processing technologies. Wood-energy applications will need to introduce available technological options on a wider scale if woodfuels are to avoid remaining outside the mainstream.

Information: Remote sensing techniques and communication and information processing are all expected to achieve higher diffusion rates and to develop new techniques. Rapid developments in these technologies are making forest inventory, forest damage assessment (from pests, diseases and fire), monitoring forestry operations, etc., easier and simpler. Technologies to monitor forest cover, degradation, and damage from fires and pests, on a fairly large scale will be widely applied. In this regard, the difference between developing and developed countries will be narrowed. A wide gap is, however, expected to persist with regard to micro-level application of remote sensing.

Source: Adapted from Nair (Personal communication, FORSPA).

Increase in demand for forest products and services

There is little doubt that demand for the goods and services provided by forests will increase throughout the foreseeable future - a proposition that is as self-evident as it is pervasive in forestry decision-making. The greatest challenge in the forestry sector arises from the realisation that forests are not limitless resources, but are subject to the fundamental economic questions relating to allocation of scarce resources.

At the most basic level, prices and relative purchasing power will determine how resources are allocated throughout the region (Box 8.3). Notwithstanding cultural and ecological differences, a simple comparison of current consumption patterns for goods and services of forests in the AIEs of the region, compared with patterns in other countries, clearly indicates the disparities created by wealth. Industrial wood consumption on a per capita basis is an order of magnitude greater in the AIEs than in any other sub-region. Conversely, consumption of wood for fuel is negligible in the industrialised countries.

A key point is that, as populations and incomes increase, not only will demands for agricultural and urban land, industrial wood products, and fuelwood increase, so too will demands for forest conservation, non-wood forest products and other non-extractive services of forests. Emerging perspectives in the Asia-Pacific (and globally) include recognition and acceptance of a much wider set of forest values, but in the context of increasing demands on forests for all these outputs. In resolving this demand conflict, market forces are initially likely to play a subsidiary role to policy and legislative instruments. For governments in poorer, often forest-depleted countries, the decision becomes one of balancing economic, social and environmental benefits to determine the best possible welfare outcome for their people.

To a considerable extent, demands placed on forests follow a hierarchy of needs.78 In the poorest countries where obtaining food, fuel, shelter and money are daily concerns, the primary demands on forests are to satisfy evident physical or survival needs. In the most wealthy countries, where survival is not at stake and physical needs are adequately met from non-forestry pursuits, aesthetic values attached to forests may well take precedence, particularly given that the economics of harvesting forests in wealthy countries (for example, Japan) may be relatively unattractive.

78 Maslow (1954).

Economic performance, technological advancement, population growth and urbanisation are the key determinants of demands placed on forests. Subsidiary determinants are price competitiveness of forest products and services compared to non-forest substitutes, and consumer preferences for forest products and services compared to non-forest products and benefits. Trends toward urbanisation may well be the area of greatest change in the medium term for the bulk of countries in the Asia-Pacific region.

A discernible urban drift is forecast for almost all countries of the region (although absolute numbers of rural residents will continue to increase for a significant number of countries, including several large ones). This shift breaks a direct dependence on land and consequently lessens pressures to convert forest lands to agriculture. Conversely, for those who remain there may be incentives to compete with urban prosperity by increasing clearing and harvesting of forests.

Population pressures, in part, have led to Asia and the Pacific arguably being the world's most environmentally degraded region. Nonetheless, the region has enormous biological wealth and, with more careful husbandry of its resources, the potential for a "re-greening" of the region need not be prohibitively expensive. The potential to recover some costs of restoring degraded forest areas and reforesting wastelands (through, for example carbon credits) provides opportunity for some revision of development philosophies for forestry in the region.


Overall, fibre and wood availability is abundant in Asia and the Pacific and looks likely to remain so for the near- to medium-term future. However, wood scarcity is still common in some parts of the region. The most common causes of such scarcity are:

· Poor accessibility (due to policy, economic, or physical reasons);

· Mismatches between current consumption patterns and wood availability (i.e. the region's dependence on processing large logs which are becoming increasingly scarce); and

· Mismatches between the location of trees and forests and locations of high demand.

In particular, the region's predilection toward processing large logs from the natural forest will be a pressing issue in the near future.

Currently, the long-term prospects for sawlog supply are bleak. An analysis of non-coniferous sawlog supply carried out under the FAO Global Fibre Supply Study (GFSS) showed that the region's long-run sustainable yield of sawlogs will be only 59 percent of current harvest levels. This is considerably worse than in other tropical zones.1 The analysis also snowed that investment in better logging practices could alleviate this decline, but this would require massive investment in training.

1 Source: Reino E. Pulkki (1998): Conventional versus environmentally sound harvesting: impacts on non-coniferous tropical veneer log and sawlog supplies. In Unasylva, Vol. 49,193 1998/2. FAO, Rome.

The region has three options to address this issue: invest in better logging and processing techniques to more efficiently use large trees; establish plantations for sawlog production and diversify supply sources more widely; or change processing patterns toward more reconstituted wood products (such as in Europe and North America). There are already signs that some countries in the region have started to take the latter course of action.

In Indonesia,2 the dominant processor of large logs, production of sawlogs has stagnated. The reported harvest level for 1995 was about 27 million cubic metres, having peaked at 30.3 million cubic metres in 1992. The composition of panel products manufactured is also shifting: in 1991 particleboard constituted 4.2 percent of total panel production but by 1995 it was 8.9 percent of a higher total; plywood output peaked at 11.91 million cubic metres in 1993 and has returned to its 1992 level. This trend will probably continue in Indonesia and be followed by others in the region.

2 Country Report - Indonesia: Document APFSOS/WP/45.

Increasing restrictions on access to forests

Deforestation and degradation have undoubtedly been the most notable forest resource trends in the Asia-Pacific during the past thirty years. For example, the Forest Resource Assessment 1990 estimated annual deforestation between 1981-1990 in tropical countries of the Asia-Pacific to be 1.2 percent.

There are no reliable statistics on forest degradation but it is known to be even more extensive than deforestation. With both forest area and overall forest quality declining, it seems evident that the future holds greater physical resource constraints. In a climate of increasing demands on forests such a trend seems to presage disaster. There is certainly a perception that the biggest challenge is shortage of forest resources relative to needs. That the Asia-Pacific region is already a leading net importer from other regions of many forest products lends weight to the concern.

Of equal concern is the rapid loss of forests that is threatening the capacity to provide many environmental services. Part of the reaction to this has been increasingly strict legal restrictions on access to forests. In the Philippines, for example, logging has been banned in old-growth forests. India, Australia and New Zealand have also introduced similar controls and the trend is likely to continue. In Thailand, the "logging ban" of 1989 has been a key factor in the country becoming the world's top importer of hardwood sawnwood. The Malthusian "forest crisis" conclusion is, however, too simplistic and the ability of people and technology to adapt to these changing market dynamics should not be underestimated.

Several adaptive measures are being implemented. Strong incentives have emerged to better utilise available resources. Improved agricultural techniques mean the agricultural land base becomes more productive and less new land must be cleared to feed growing populations; eventually the area of farmed land will shrink as marginal agricultural land will not be needed under highly productive agriculture. Forests can then regenerate as is happening in developed countries. Similarly the development of fast-growing tree plantations in countries such as the People's Republic of China, Indonesia, New Zealand, India and Australia mean that wood and wood fibre for industrial products and energy can be produced more intensively, thereby reducing pressures on natural forests. Technology improvements also help alleviate scarcity. The development of a variety of reconstituted panel products, more efficient sawing technology and patterns (and productive outlets for residues), utilisation of recycled paper as a major fibre source, and the development of technologies and applications to use non-traditional wood and fibre sources (e.g. rubberwood, coconut and oil palm) all help produce greater outputs from existing resources.

The need for major changes in production techniques is becoming increasingly evident as changes in the nature of the forest resources available for production become evident. The most important changes will result from an increasing scarcity of large tropical logs suited to current sawing and peeling facilities. With a high proportion of available production forest having been cut over at least once, many of the largest trees have been removed. As a result, wood processors in major roundwood importing countries (Japan, the Republic of Korea, and the People's Republic of China) have already begun to substitute coniferous wood from North America, Russia, and New Zealand. Similarly, there has been a marked growth in consumption of panel products, particularly of fibre-based MDF, OSB and particleboard. There has been enormous investment in MDF facilities throughout the region in recognition of the need to alter processing techniques and products to the changing resource environment. Such newly popularised products have the additional advantage of using residues thus stretching limited roundwood raw material further.

In the tropical countries, a scarcity of large logs should not be interpreted as a shortage of fibre. There are still enormous wood-fibre resources in Asia and the Pacific in terms of secondary species, harvesting residues left in the forest, small logs, and mill residues. Many of the production forests have been exposed to high impact logging techniques that have rendered many of the remaining trees unsuitable for high-value solid wood applications. Nonetheless, there is enormous potential to utilise this fibre in reconstituted applications, while using improved harvesting and silvicultural interventions to improve the quality of degraded forests.

For panels, paper and paperboards, there are few technological limitations on the fibres that can be successfully processed into substitutes for wood products (such as reconstituted boards or pulp for paper). Suitable non-wood fibres (agricultural straw, bagasse, etc.) are abundant in the. region.

Trees outside forests also provide a hugely significant contribution to wood supplies, particularly for fuelwood purposes. The best estimates are that two-thirds of all fuelwood in the region comes from outside forests. As fuelwood consumption accounts for almost 75 percent of all wood used in Asia and the Pacific, this means that about half of the region's entire demand for wood (excluding imports) is being met from sources that, until recently, were discounted from wood supply equations.

The inclusion of trees in farming systems and around homesteads has a long tradition in many countries of the region. In several countries (e.g. Bangladesh, Pakistan, Sri Lanka and much of India and the People's Republic of China), wood from farmlands supplies not only household fuel needs, but also surprising amounts of industrial needs.

Trees and NWFPs in farming systems are also elements of a wide range of agroforestry systems in the region. Agroforestry has been the forest management system least affected by technological changes and lacks remunerative markets and basic inputs such as improved seeds. A notable trend, however is that wherever profitable markets have been established tree planting has prospered.

Apart from scattered and informal integration of trees in agriculture, the region is a leader in plantations of domesticated trees, particularly of rubber, coconut palm, and oil palm. Wood is increasingly coming from these tree crops: rubber alone covers about 9 million hectares in Asia (3.04 million hectares in Indonesia, 1.83 million hectares in Malaysia, and 1.78 million hectares in Thailand).

If penalties for breaking regulations or traditional restraints are negligible or avoidable, they will be ineffective as deterrents to individuals who stand to gain from unsustainable practices. As a consequence of inadequate policing capacity and lucrative incentives to break forestry regulations, illegal logging, NWFP harvesting, and wildlife poaching is prevalent in a number of Asia-Pacific countries. Similarly, inadequate inventory records, an absence of effective monitoring, and the perverse incentives built into many concession agreements promote poor or illegal harvest practices by many forestry concession holders.

Growing pressures for sustainable forest management

The principal efforts toward sustainable management regimes for forestry in the Asia-Pacific region have focused around the 1992 UNCED outcomes, notably calls for "the formulation of scientifically-sound criteria and guidelines for the management, conservation and sustainable development of all types of forest." A large number of meetings, fora and organisations have moved to address the issues of sustainable management.

At the global level, the principal dialogue on sustainable forest management was picked up from the April 1995 Commission on Sustainable Development (CSD) review of forests, followed by the Intergovernmental Panel on Forests (IPF). IPF reported to the Fifth Session of the CSD in April 1997 where it was determined that evolution of the IPF programme should be carried forward by an Intergovernmental Forum on Forests (IFF).

Distinct from the global stream of policy dialogue, three major efforts relevant to Asia-Pacific forestry have worked to develop criteria and indicators for sustainable management. ITTO has developed national-level criteria and indicators for sustainable management in tropical forests. The Montreal Process has developed national-level criteria and indicators for sustainable management in non-European temperate forests. Through a non-governmental process, the Forest Stewardship Council has developed criteria and indicators applicable at the forest-management-unit level.

While intense interest is evident in the principles of sustainable forestry management, it is clear that few forests in Asia and the Pacific are currently being managed sustainably. It is highly doubtful, therefore, that appropriate incentives to encourage sustainable forest management are in place. For countries where population pressure is already very high, it must also be asked, "Should better incentives be offered to those who seek to provide forest products from farmlands (farmers, tree-crop growers, etc.)?" Creating such incentives is a major challenge facing policy-makers striving for sustainable forest management. To date, successful market mechanisms that enable practitioners of sustainable management to recover their greater costs have yet to be demonstrated on a large scale.

While certification of sustainable management holds promise for some areas and products, it has not been adequately demonstrated that significant numbers of consumers are prepared to pay a premium for timber from sustainably managed forests. As a consequence the economic incentive structure remains tilted against sustainable forest management. Furthermore, certification focuses on internationally traded products while on a global scale, most forest products are consumed domestically. Consequently, at present, persuasion is largely on moral or ethical grounds as opposed to financial rationale. Should "green consciousness" gather momentum this balance could begin to shift.

Widely varying estimates have been made of cost and productivity differences between "environmentally friendly" and traditional harvesting. Some estimates are of costs being 5 percent above traditional methods; others suggest costs up to 25 percent higher. Most estimates anticipate that sustainable forest management would also result in lower net harvested volumes (e.g. 9 to 18.4 percent less for Indonesia), but it is expected that the lower damage to residual stands and faster regrowth after logging will compensate in the long term.

Progress has been made in the following areas: adopting codes of good practice (Box 8.4); reducing waste from wood residues and in complementary industries; improving tree felling operations; implementing low-impact wood extraction systems; and improving forest road construction. While some countries in the region (e.g. Malaysia and Indonesia) have made considerable progress toward implementing sustainable forest management, change is slow. By the end of this century, the area managed under improved harvesting practices will probably be no more than 10,000 hectares.


Under the aegis of an ad hoc Working Group on Sustainable Forest Management of the Asia-Pacific Forestry Commission (APFC), the region is working toward establishment of the Code of Practice for Forest Harvesting in Asia-Pacific, a non-legally binding set of guidelines and benchmarks for responsible harvesting. Forest harvesting practices, particularly timber harvesting activities, are among the factors under the control of foresters by which they can contribute to achievement of responsible management of forests. The code provides guidelines for harvesting production forests with minimal adverse impact on the forest environment. It is designed to balance commercial considerations with protection of environmental and social values.

The Code of Practice is designed to cover all countries in the Asia-Pacific region and complements the Code of Conduct for Logging of Indigenous Forests in Selected South Pacific Countries developed in 1995 and national codes of practice in use or under preparation in a number of countries. Being regional, the code is necessarily broad and countries that have not already done so are encouraged to develop national codes to provide more location-specific guidance for harvesting practices under their conditions. Among other purposes, the Code of Practice for Forest Harvesting in Asia-Pacific is intended to serve as:

· an active tool to support implementation of sustainable forest management (SFM);

· an interim minimum set of guidelines to improved harvesting practices against which aspects of SFM can be assessed against criteria and indicators;

· a guide for countries that wish to develop specific national codes; and

· a support for forest administrations seeking government backing and political support for improved forest harvesting practices.

While recognising the importance of all forest products and the benefits of multi-purpose forest management, the primary focus of the draft code is on timber harvesting. This is because the harvesting of timber has greater impact on forest ecosystems than the harvesting of other products. With due modification, however, the code's general principles and approaches can be applied also to non-wood forest products in a national or location-specific context.

To have a significant impact, the draft regional code and related national ones need to be given wide publicity and promoted so as to garner more visible political and administrative support at national and regional levels, Following adoption, national legal authorities should be designated to implement the regional and associated national codes; furthermore, capacity should be built up in how to apply harvesting codes in the context of overall pursuit of SFM.

Source: P. Durst (Personal communication, 1998).

Greater attention to multiple roles of forests

Forest values can essentially be classified into four types:

· provision of wood products: mainly industrial roundwood and fuelwood;

· provision of non-wood products: a range of other physical products of forests including food, fodder, vines for weaving, composts and fertilisers, medicines, perfumes, animal by-products and chemicals;

· provision of services: these include, agricultural services, watershed services, carbon sequestration services, ecological services, socio-cultural services, aesthetic and scenic services; and

· opportunity costs of forests: this relates mainly to the value of forest land being utilised for alternative purposes such as agriculture.

Some of these uses can be mutually exclusive and it requires imagination to implement integrated management systems in a way that harmonises uses and enables the forest to provide elements of all values. Difficulties are accentuated by incentive structures that favour one forest value over another.

It is generally accepted in economic circles that resources should be allocated to their most valuable purpose. In the forests of the Asia-Pacific region there are a number of impediments to this efficient allocation. Most important is the fact that many of the values of forests are intangible, difficult to value and virtually impossible to collect revenue against. For example, many of the aesthetic and scenic values of forests have a strong "public good"79 component to them. Often, however, because no mechanism is in place to collect revenue against these less tangible values, decision-makers prefer benefits that give financial returns such as industrial harvesting or land clearing, even if their true value may be lower than that of the intangibles. The key challenge for forest policy-makers is to find ways of making less tangible values explicit, to make the public aware of them, and particularly to capture these values in financial terms. Perceptions that non-timber forest values cannot be economically realised will have to be altered. Mechanisms for valuing non-timber forest outputs and identifying beneficiaries will have to be developed. Investment in the provision of services of forests must be mobilised. Integrated and sustainable management for the full range of forest values must be encouraged. Commercialisation of biological resources, ecotourism, carbon sequestration, and watershed maintenance are all areas that show promise.

79 A public good is one that can be consumed costlessly by an infinite number of people and for which it is impossible to control or regulate consumption.

Trade will remain important

With 55 percent of global population but only 33 percent of the world's wood production, it is not surprising that the Asia-Pacific region is a net importer of industrial forest products.

In the area of trade, Japan's economic power80 leaves little doubt that it will be hugely influential in the development of future industry and development. In 1995, Japan accounted for 44 percent of the region's imports by value. Consequently, developments in the Japanese domestic forestry industry are of vital interest to forest product exporting countries (Box 8.5).

80 For comparative size of national and sub-regional economies in the region, see Chipeta, Whiteman & Brooks (1997). Review of Asia-Pacific Economic and Social Development Till 2010 (with focus on economic growth and population: Document APFSOS/WP/47. FAO, Rome/Bangkok.

It is important to note, however, that Japan's economy is mature and can, at most, sustain growth in the range of 2 to 2.5 percent per annum. By contrast, the already large economy of the People's Republic of China has recently grown at 9 to 10 percent per year; India's at 5 to 6 percent annually; and many economies in ASEAN at 6 to 10 percent per year. Thus, with the Japanese market likely to remain largely stable in terms of overall wood volumes traded, a decisive feature of future market conditions in the region will be the extent to which the demand for wood develops in very high-population countries (e.g. the People's Republic of China, India, Indonesia, Pakistan, Bangladesh).


Japan is one of the most highly forested countries in the world with forests covering about 25 million hectares, or 67 percent of the total land area. More than 40 percent (10.4 million hectares) is classified as plantation forests. The total growing stock is currently estimated at 3.5 billion cubic metres, with a mean annual increment of around 100 million cubic metres, of which annual roundwood removals have, however, averaged only 24 million cubic metres between 1993 and 1995. Consequently, Japan's wood resources have steadily increased at a time when resources have declined in many other countries.

Not all of Japan's forests, however, can be considered as production forest. The long-run sustainable wood supply from forests that are available for production is estimated at 70 million cubic metres. Plantation forests could supply around 60 million cubic metres and natural forest supplies could contribute a further 10 million cubic metres. However, these are estimates that do not take proper account of institutional and economic restrictions or demand. And they are highly optimistic under the current economic realities faced in forestry.

Until about 30 years ago, forestry was one of the most profitable rural industries in Japan. However, during the last three decades the price of wood has been unable to keep pace with the costs of forestry activities. For example, in the past 15 years, plantation costs have more than doubled while stumpage prices for typical Japanese coniferous "sugi" declined by almost half. The average internal rate of return for a sugi plantation has gradually decreased and is presently estimated at less than one percent. Consequently, private forest owners, who control about two-thirds of the forests, are unable to profitably maintain silvicultural and harvest operations except in the most economically favourable stands. At the current level of wood prices, it is estimated that 35 percent of private forests (6.1 million hectares) and 54 percent of national forests (4.2 million hectares) can be profitably harvested (although this calculation ignores sunk growing costs). One of the key variables is the proximity to forest roads. If the government were to adopt an aggressive scenario, such as doubling the extent of the forest road network and drastically reducing the cost of harvest and reforestation, all plantation forests could become viable production forests. In such a case, the maximum profitable production from forests in Japan would rise to an estimated 40.3 million cubic metres.

Presently, annual wood demand in Japan totals 112 million cubic metres, thus the current average removals averaging 27 million cubic metres are only about a quarter of demand, with more than three-fourths of wood demand being met through imports. Consequently, although Japan has a huge biological potential of wood supply, the economic realities constrain its development. However, Japan still has the possibility to rapidly increase wood production if internal problems can be solved, or if external factors (such as export bans imposed by foreign countries) push the price of wood to levels whereby domestic harvesting becomes competitive.

Future scenarios are outlined in the Japanese Government's "Basic Plan on Forest Resources" and "Long Range Demand and Supply Projection on Important Forest Products," the fourth revisions of which were approved by Japan's Cabinet Council in late 1996. The maximum projection for domestic production in 2015 is 40 million cubic metres while total demand is estimated in the range of 119 to 126 million cubic metres. If, however, current forestry trends continue in the future, then wood supplies from domestic forests could decline by 17 million cubic metres while total demand remains at around 115 million cubic metres. Certainly, the most likely scenario is that demand for imported wood, which is expected to shift to plantation forests gradually, is likely to be stable or increase in the foreseeable future. Consequently, Japan's high dependency on imported wood is not expected to change drastically in the next few decades.

Source: Ishihara, H. (Personal communication).

Trade will continue as a major means of alleviating wood shortages in the Asia-Pacific region. Increasing scarcity of large tropical logs is being countervailed by imports of large coniferous softwood logs, largely from the Russian Far East, Canada, the United States and New Zealand. Patterns of supply sources are also changing. Traditional Asia-Pacific suppliers of logs, such as the Philippines, Indonesia, Thailand and Malaysia, have given way to Papua New Guinea, Solomon Islands and Myanmar as supplies have become depleted and exporting countries move toward value-added processing.

Government interventions in trade have created a host of conflicting incentives throughout the Asia-Pacific region, many of which have had significant unintended impacts. Probably the dominant interventions have been those designed to promote domestic processing, particularly the use of log-export bans, taxes and quotas. These actions can have impacts in a number of spheres. A ban acts by artificially removing demand for logs. A consequence of this is that the value of logs on the domestic market will generally decline, assisting the international competitiveness of domestic industry and promoting employment opportunities. However, a major price reduction also reduces incentives for processing efficiency, encourages wastefulness, and reduces the returns to forest owners (and consequently incentives for reforestation and forest management).

On a regional basis these bans may also have compromised processing efficiencies by shifting processing from relatively technologically advanced facilities in consumer countries (where residues also had a ready market and therefore overall raw material use was more complete) to mills in log-producer countries. Such mills tend to be less efficient but even if they are state-of-the-art, most developing producer countries have limited domestic capacity to industrially use their own residues, which are therefore commonly wasted. Conversely the absence of government trade restrictions, or an inability to enforce existing restrictions, has also had detrimental impacts on forests in the region. In Papua New Guinea, for example, log exports have sometimes exceeded the allowable cut when upstream concession regulations have been abused.

Increasing globalisation and regionalisation in forestry industry

Developments in trade and sustainable management are key components of an overall trend toward globalisation in the forestry sector. The Asia-Pacific holds a pivotal position in the global development of forestry. Asia-Pacific's dominance of world population and its social and economic dynamism make the region a focal point for future global growth. Only a few countries in the region, however, wield sufficient power to cause significant shifts in the balances of various issues. Japan, the People's Republic of China, India, Malaysia and Indonesia carry sufficient weight to influence the development of most global policies. Other countries can apply more subtle influences (e.g. Singapore, through its liberal trade stance, New Zealand by taking a lead in plantation forestry and Pakistan through research on combating desertification).

Trade is the key beneficiary as well as economic influence governing regionalisation and globalisation. International interest in the markets of the Asia-Pacific region has increased as the economic strength of the region has increased. Probably the most crucial developments in industrial markets in the coming decade will be the evolution of the respective supply and demand situations in Russia and the People's Republic of China. These will be of enormous importance in determining balance in the forestry sector.

Global trends in trade policy have also had significant impacts on the Asia-Pacific region. The development of substantial regional trading blocs such as the European Union and North American Free Trade Area have been mirrored by the development of the Association of South East Asian Nations (ASEAN) which is working toward the development of an Asian Free Trade Area (AFTA). Similarly, Asia Pacific Economic Cooperation (APEC) provides a less structured trade forum with a specific mandate to promote "open regionalism" in trade.

A significant development in the internationalisation of the forestry industry has been a freeing of the global investment market that has resulted in the development of a number of truly multi-national forestry companies. Most countries have overseas investment in their domestic forest industries, if not in forests, at least in processing facilities, and most countries have companies that have invested in forestry mills abroad. There are a number of important outcomes from this investment internationalisation. These include:

· improvements in technology transfer (which accompanies capital);
· pressure to remove trade barriers;
· more efficient and strategic location of mills;
· more efficient marketing and distribution networks; and
· allocation of development capital to less wealthy countries.

Environmental issues are the other major area where globalisation is becoming important. Many forestry activities have global impacts (e.g. climate change) and have attracted global attention. Avoiding or mitigating environmental problems is often a costly endeavour and tends to reduce the economic competitiveness of companies and countries that attempt to institute environmental policies. Consequently, unless environmental options are pursued jointly and to comparable degrees internationally, environmentally progressive companies and countries may be penalised or forced out of business. In some cases, the problems are merely exported. For example, there is little gain from a global perspective, for one country to manage its forests sustainably, if the resulting decline in supply is merely made up by aggressive imports from a second country that is willing to tolerate unsustainable harvesting practices.

Demands for social equity will continue and increase

A central thesis of this outlook study is that forestry decision-making needs to occur across three very broad dimensions (i.e. environmental, social and economic). Typically, two of the dimensions - the economic and environmental dimensions - are clearly recognised and the relationships and trade-offs between these two facets of forestry are well understood. The third dimension - the social aspect of forestry - is less understood, less easily conceptualised, and has received generally less attention from decision-makers. Nonetheless, there is general recognition of the roles of forests in local people's livelihoods and at least a theoretical acceptance of the importance of involving local people in developing successful forest management strategies. In practice, however, it is the social aspects of forestry that are often most neglected, and are often sacrificed in pursuit of financial expediency.

There are innumerable instances of unsatisfactory or insensitive social policies being carried out in the region. Many of these examples can be traced back to colonial policies tending toward "custodial" forestry, but often sometimes much earlier. In the recent past, it is doubtful whether any country in the region has escaped criticism on some contemporary aspect of its social policies. Overt authoritarianism of many governments, repressive regimes, ethnic violence, and the harsh faces of right wing monetarist policies are some of the examples that can be cited across the region. Often, the rights of indigenous people have been ignored or repressed in favour of commercial interests.

In many instances, conflicts have resulted in disenfranchisement of communities. Generally, private sector companies dominate power relationships with communities, particularly in developing countries where communities may be poor, uneducated and without means to follow complex administrative processes. Such communities may easily be marginalised by "development" projects.

Demands for greater participation in forestry decision-making are increasing, however. In part, this may be a result of globalisation, which has brought greater exposure to outside ideas and greater international scrutiny. The changing faces and perspectives of governments are also encouraging this trend.

There is general agreement that managing forests, and devolving the management of forests, to meet social needs and objectives is an excellent and worthwhile goal. A central development philosophy is that people work best when their own interests are at stake. A major problem, however, is that while defining and achieving social goals for forestry is generally consistent with environmental goal-setting, it is often less compatible with financial and economic goals relating to production, investment and trade. Social goals should, therefore, strive to match the hierarchy of a country or community's needs. This may suggest an initial emphasis on ensuring subsistence forest-dwellers' needs. However, an underlying and long-term goal for most countries is to provide people with greater self-determination.

Consequently, community forest management schemes have been established in a number of countries throughout the region. The programmes in India, Nepal and the Philippines have received the most international attention. A major challenge for all these schemes is overcoming the perception that participatory forestry cannot meet economic or production objectives efficiently. For example, only 2 percent of India's forests are currently operating under Joint Forest Management schemes. In many production forests, returns to governments from logging concessions are much higher than the returns that would be gained by turning forests over to poor or marginalised users.

New roles for all sector participants

A final key trend in the region is one toward changing roles for the key forestry sector participants. Within the three broad forestry dimensions: economic, social and environmental, it has been traditionally convenient, if highly simplistic, to represent the private sector, communities and environmental NGOs as the respective advocates (and perhaps beneficiaries) of each of these dimensions. Governments have seen themselves as arbiters among the groups, as well as generally: (a) having an active interest in each dimension (e.g. through industrial forestry activities by forestry agencies, management of parks and reserves, and community welfare programmes); and (b) providing supporting services (e.g. policy and legal frameworks, research, extension, education and training). In recent times, the lines of this simple model have become less discernible. While it is fair to say that economic dimensions continue to dominate forestry development in the well-endowed countries of the region, there is clear evidence that perspectives are shifting toward greater emphasis on the other dimensions. With this changing emphasis has come changes in the roles and behaviour of each of the key groups.

Perhaps the key change for governments in the region has been a shift away from the belief that GDP and wealth are the only measures of national success. Social, cultural, environmental and aesthetic values are increasingly seen as integrally linked goals alongside purely economic goals. As part of this change, most governments in the region have more clearly identified their roles as arbiters, and "participation" and "consultation" have become key watchwords in public affairs. Several, governments in the region have initiated efforts to devolve direct managerial responsibilities for forests. Privatisation and resource allocation have been undertaken by several countries, most notably, New Zealand, Australia, the People's Republic of China and Viet Nam. Devolution to community user groups has been significant, particularly in South Asia, the Philippines and Laos. The globalisation of environmental issues and governments' commitments to a range of global environmental agreements have also imposed a degree of environmental accountability on administrations throughout the region. Consequently, governments that have committed themselves to particular environmental targets have also been required to take a more active role in regulating the forestry sector to comply with international standards.

Government roles in the social dimension have also changed and matured. Increasing demands for community participation in forestry are requiring governments to carry out much more extensive consultative activities. Increased community participation generally also requires that communities be equipped with the "tools" to participate. Governments throughout the region are moving from prescriptive approaches to more facilitative approaches whereby people are assisted, encouraged and enabled to undertake forestry activities. The pace of change is slow, but progress is occurring.

Within the forestry sector, change is also occurring toward increased accountability. Increased regulation and monitoring by governments, greater pressure from environmental NGOs, and market demands for environmentally sensitive products are forcing companies to adjust both their practices and their attitudes. The private sector is increasingly seeing the benefits of being regarded as good corporate citizens, and particularly the benefits of voluntarily adopting environmentally and socially acceptable practices as opposed to having these prescribed and enforced. Moreover, the private sector is now more frequently working together with community groups and environmental NGOs to establish mutually beneficial projects. The establishment of the Forest Stewardship Council is just on example of an NGO private-sector initiative.

As government and private sector attitudes and perceptions have changed, so too have the methods employed by environmental NGOs. NGOs have generally become more sophisticated and constructive, moving away from the highly confrontational methods of the 1960s and 1970s. It is now usual for NGOs to work with government agencies, private sector and communities to achieve environmental goals. Environmental groups throughout the region sponsor a wide range of forestry projects. The roles of communities in forests have largely been a reflection of the changing roles of the other participants. Some communities have had forest management responsibilities devolved to them, others have received legislative protection of traditional forest-user rights. In general, the interaction of people with forests is undergoing considerable, and sometimes rapid, transition, but in varying ways around the region.

Forest communities of long tradition are being joined by an influx of new migrants with limited forest management traditions. The global economy is also having an impact on forest dwellers as alternative livelihoods are emerging.

One of the most important frontiers of people/forest interactions concerns farmers and others outside forests that depend on forests for varies needs and supplementary opportunities. These largely respond to commercial opportunities. Another important and rapidly growing frontier of interaction is with urban populations. As much of the urban growth is occurring in developing countries, the need for urban trees goes far beyond mere aesthetics. Poor urban dwellers need firewood and construction materials; they may even need forest-based medicines and some foods. New types of planning and policies are needed to make this access to forest goods a reality.

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