11. Implications and choices

Policy implications and choices
Summary of implications
Alternative scenarios for future forestry policies
Indicative implications for investment
Implications and choices for regional co-operation

Policy implications and choices

The scope of policy choices
Policy options

The scope of policy choices

The forestry sector can contribute to societies and economies in many important ways. Countries rich in forest resources can include industrial forestry among the "engines" for economic development, employment creation and foreign exchange earnings. Policies oriented to social needs can focus forestry in ways that help maintain rural welfare or provide basic needs. Policies aimed at environmental services or protection can provide important ecological benefits (often without compromising economic contributions).

While national forestry policies tend to recognise the many potential contributions of forests, the relative emphasis must necessarily vary by country. Furthermore, the emphasis should appropriately be re-oriented over time as economies and external forces change and as society's values and priorities evolve. Achieving a suitable balance among economic, environmental and social objectives is a complex process. In many cases, it is possible to advance all three objectives simultaneously by applying greater skills, technology, or efficiency, or by introducing improved management approaches or institutional reform. In other cases, trade-offs may have to be made, requiring difficult and painful policy decisions.

The great diversity of countries and circumstances within Asia and the Pacific means that some countries are much better positioned than others to pursue specific forestry development policies. Wealthier countries can afford to conserve much of their remaining natural forests for their environmental, social, recreational and aesthetic values; they face no survival pressure to liquidate forests to finance national development. On the other hand, poorer countries or those undergoing rapid development have greater need to harness forests for national development. The very poorest countries simply cannot afford to forego the economic benefits available from forest exploitation.

The dilemma facing almost all governments in Asia and the Pacific is that the global community is calling for greater conservation of forests while the majority of their people are demanding more forest exploitation. Moreover, within Asia-Pacific countries, there are often higher-income people whose priorities may be more akin to those in the industrialised world (i.e. they too want more social and ecological goals for forests) alongside poor people who depend on direct exploitation of forests for survival policy-makers are in the unenviable position of having to balance these views and perspectives.

Concerns for the protection of the local environment, for subsistence use of NWFPs, or for global issues like biodiversity conservation and combating climate change, are being felt across all countries in the region. But the priority these concerns receive varies, often with the financial and institutional capacity of countries to address such concerns. Limits to choice are most apparent at the local level. Even if governments wish to conserve forests, local people (who are least informed about and may care little for global concerns) often continue to clear forests. The large areas of forests that have been encroached upon, the large number of human settlements in national parks and protected areas and the progressive degradation of conservation areas is ample evidence of this. The de facto "choice" is often in the hands of the people on the ground even if, de jure, it is supposed to lie with government.

Another dimension of choice equally constrains both developed and developing countries - that is, the many policy decisions that are made outside the forestry sector, but that have major impacts on forests and forestry. As emphasised in earlier sections, the very extent of forest resources in the region often depends upon decisions made outside the sector or upon the pace and direction of overall economic and social change.

The forecasts of supply and demand for various forest goods and services presented earlier have largely been based on assumptions of no significant changes from current trends. Thus, for example, forecasts of consumption and production of processed products have been based on assumptions of no radical changes in the structure of the wood-processing industry or in consumers' preferences. More importantly, the forecasts for roundwood supply and demand have been based on assumptions that there will be no significant technological changes in harvesting or processing, no major changes in the extent of protected areas, and a continuation of current plantation establishment and other land-use trends.

Of course, many of the factors influencing the supply and demand for forest goods and services can, in fact, be altered in positive or negative directions by policies designed to achieve specific objectives. Of key importance for policy-makers is recognition that policy choices made today will have significant impacts on the future of forests in the region. Policy-makers have substantial power to shape the future of forestry by actions that are taken now and in the near future.

This chapter attempts to support the policy-making process by briefly reviewing the current and ongoing developments in forestry in the Asia-Pacific region that were discussed in detail in previous sections. It highlights possible implications of these developments and provides broad indications of sectoral responsibilities (within and outside the forestry sector). By extension, these sectoral responsibilities point toward opportunities for effective intervention. The chapter also provides indicative implications for investment in the forestry sector.

The primary focus of this concluding chapter, however, is the examination of several future orientations that policy-makers might choose to increase the economic, environmental and social performance of the forestry sector in the region. Each orientation scores differently in each of these dimensions. For example, a move to increase harvesting efficiency is economically valuable, but may also have environmental benefits. Greater protection of forest areas will have a higher environmental value, but may be less beneficial or even detrimental from an economic point of view. The scope for pursuing each of these orientations differs widely among countries. Some countries may attempt to proceed in several directions simultaneously. Thus, it is not practical to try to describe a comprehensive "economic" or "environmental" scenario. Rather, attempts are instead made to quantify what benefits each orientation might achieve and how such orientations might be pursued. Suggestions regarding what policy and institutional changes might be necessary to achieve each orientation and what impacts they might have on the production of forest goods and services are also provided.

Policy options

Policy choices made now will impact crucially on the availability of forest goods and services in the region in the future. Some policy options are fully within the control and mandate of forestry officials. Other policy choices, however, lie outside the forestry sector, but have major impacts on forests. Still others require joint decision-making and implementation by forestry and related sectors (Table 11.1). For example, the possibility of expanding plantations in crowded countries requires joint decisions to be made by forestry and agriculture policy-makers.

Related to policy development is the need for effective co-ordination. To make better use of forest resources on forest lands targeted for clearing for agriculture, for example, agricultural officials, forest industries, and consumers must work closely together to effectively salvage forest resources before they are wasted. Similarly, encouraging greater use of alternative woods such as rubberwood will require co-ordinated policies by the industrial tree crops, forestry and processing sectors. Increasing the collection and recycling of wastepaper will require co-operation with environment ministries, industry, and consumer organisations. Restructuring of industries in the main timber-processing countries of tropical Asia and the Pacific will demand co-operation among forestry, industry and finance agencies.

Table 11.1: Sample forest policy options

Policy objectives	Aspect of forestry affected
Increase the rate of plantation establishment*	Area
Establish protected areas	Area
Increase green areas	Area
Increase recycling*	Quantity
Increase use of wood residues	Quantity
Increase harvesting efficiency	Quantity
Increase processing efficiency*	Quantity
Increase plantation yields	Yield
Modify harvesting intensity (due to management practices)	Yield
Increase use of timber from conversion forest* (salvage)	Quantity
Modify/plan the proportion of harvest sourced from arable land and open forest*	Quantity
Modify/plan the proportion of harvest from tree crops outside of the forest*	Quantity

* Policy options requiring joint action by forestry and related sectors.

Summary of implications

Table 11.2 summarises the main developments now underway in the forestry sector in Asia and the Pacific and highlights the possible implications of these developments. This summary provides the basis for subsequent in-depth analysis of selected implications.

A central issue for the region is whether or not policy-makers are realistic in expecting forests to provide ever-increasing volumes and levels of goods and services, while at the same time applying ever more rigid environmental restrictions and controls. While analysis suggests that the region is indeed capable of providing most of the forest goods and services being demanded, this capability is contingent on bold and innovative policies that will enable the sector to expand into new areas and increase efficiency throughout.

A combined agenda for policy, technology and market development seems to emerge from analysis of ongoing developments and their implications. This agenda includes the following:

· for policy-makers: to review the effectiveness and practicality of policies affecting supply and demand for forest products, pricing of forest resources, equity and access to forests and contributions of forestry to national and local development;

· for scientists and technologists: to develop affordable ways to use non-wood and non-forest raw materials as complementary sources of wood and fibre, to increase the efficiency in conversion of raw material into finished products and to identify effective incentives to push forestry development in desirable directions;

· for market specialists: to accelerate the shift of Asia-Pacific consumption patterns toward wood and fibre products that better reflect the rich endowment of low-quality fibre rather than products that demand large-diameter logs; and

· for forestry sector planners: to develop the necessary information to support analysis in all the above fields as a basis for rational decision-making, with forestry options considered pragmatically in a broad context.

Table 11.2: Summary of developments and their implications for response

Development	Implications	Main sectoral responsibility
		Within forestry	Outside forestry
The significance of forestry in the economy is likely to decline even if in absolute terms the sector grows. [It is normal in the process of development for primary sectors - agriculture, forestry among them - to grow slower relative to other sectors.]	· Institutional visibility of the sector may decline and with it, the attention of governments; a major response could be to broaden the range of contributions, including values to which governments and society attach great value today.	· ·
	· Economic importance of wood products seems likely to decline in relative terms; the social and political importance of forest services seems set to increase.	· ·	· ·
	· Some exporting countries are promoting greater secondary processing for greater returns.	·	· ·
	· Need to maintain research and development for sustained competitiveness.	· ·	· ·
Policies in favour of sustainable forest management will strengthen and their application may withdraw more forests from production.	· Tighter limits for management decisions. Withdrawal of natural forests from production is likely to continue. There is a need for plantations and more trees outside the forest for wood supplies.	· ·	· ·
	· Develop programmes for holistic management of forests for wood, non-wood products and services; promote research and development for such management	· ·	· ·
	· Create capacity for monitoring and complying with larger number of new conventions and the greater enforcement of older environment-related conventions, codes of practice, etc.	· ·	· ·
Pressure on ecosystems will continue to grow.	· Where populations are still low, continue to conserve representative ecosystems. In more populous Asia, lack of land may require innovative conservation approaches with greater interface with people.	· ·	·
Services of forests are beginning to enter the economic arena.	· Monitor better and quantify where possible; encourage private-sector concessions for services that can be commercialised (e.g. ecotourism, bioprospecting and R&D for genetic resources; carbon-capture afforestation).	· ·	· ·
	· Study pricing and commercialisation possibilities for water to finance upstream conservation.	·	· ·
	· Integrate services into sustainable forest management planning and implementation.	· ·	·
In general, non-wood forest products (NWFPs) continue to make progress only slowly.	· Sharpen focus in promotional efforts and move away from supporting all NWFPs irrespective of success or growth potential.	· ·	·
	· Establish focal point agencies to mobilise contribution of support to selected candidate NWFPs and give them capacity to lead.	· ·	·
	· Encourage domestication for the winning NWFPs.	· ·	·
Wood energy will remain very important.	· Despite importance, wood energy has failed to be mainstreamed: focus on achieving this in planning and policy within forestry, agriculture and energy sectors.	· ·	· ·
	· Secure attention for wood energy as an essential element for rural development.	· ·	· ·
Supplies of large logs for sawmilling and veneer/plywood manufacture are getting tighter and in some countries, have run out.	· Encourage restructuring of industry designed for large logs as it gets obsolete and replace with technology for smaller material; if necessary, by raw material price management.	· ·	·
	· Encourage change of consumption patterns toward products that can be manufactured from smallwood and residues.		· ·
Residues emerge as a major potential raw material and, if used fully, could make the clearing of much forest unnecessary.	· Encourage collection for industrial processing of residues; policies similar to those which encourage recycling may serve as models.	·	· ·
	· Encourage collection for processing (or some in situ processing) of forest harvesting residues. The problem is poor financial feasibility. Price incentives may be essential in some instances, at least initially.	· ·	·
	· Review industrial location policy and structure of industry to encourage spatial distribution and types of industry that can facilitate collection of residues for transfer among complementary industries.	·	· ·
Trade in industrial wood products will remain strong and even grow in importance.	· Maintain liberal stance of economies.		· ·
	· For exporter countries, maintain responsiveness to international concerns linking trade with environment (e.g. certification, CITES application to timber, etc.) and follow closely emerging conventions and codes of practice, including international initiatives on criteria and indicators for SFM.	·	· ·
	· Leave private industry freedom to achieve international competitiveness.	·	· ·
Trees growing outside the forest, including agricultural tree crops, are already important sources of both fuelwood and industrial raw materials.	· Develop institutional mechanisms for sectoral agencies in agriculture and forestry to jointly support these activities; may include consultative, clearinghouse and collaboration arrangements, including in research and development (as done for rubber/rubberwood and for palm oil/palm oil fibre in Malaysia).	· ·	· ·
	· Make collaborative "social" forestry and other participatory forestry activities more commercially focused.	· ·	·
	· Involve private sector which is important for agricultural tree crops.	· ·	· ·
Wasteland potential for forestry remains far from being realised.	· Seek new investment sources, such as carbon capture funding using tradable pollution rights under the Climate Change Convention, when operational.	· ·	·
	· Bottlenecks include the social needs of marginalised people that use degraded lands as common-property low-value pasture, etc., seek their involvement and gain from afforestation.	·	· ·
	· Maintain environmental forestry programmes (e.g. the People's Republic of China's protection afforestation), including through voluntary efforts of society.	· ·	·
Forest dwellers will remain but the conditions for their lifestyles will change rapidly - partly due to influx of settlers but also to economies modernising.	· Loss of access to extensive forests due to settlement and other claims on forests threaten traditional lifestyles that increasingly become dead-end options. Traditional dwellers might survive but only by further receding and becoming more marginalised. A more positive advance would be to give them skills, ability and power to choose alternative lifestyles. Contact with in-migrants and education could play a large part.	·	· ·
Collaborative forest management and social forestry (with people living near forests or on farmlands) will start consolidating.	· Need for institutionalisation of policies that permit richer forests to be co-managed with rural people and encourage profitable enterprises so that collaboration provides livelihoods and is attractive.	· ·	·
	· Make social forestry less subsistence-oriented.	· ·	·
	· Need for greater private-sector involvement in collaborative forest management and social forestry to provide markets and technical cooperation.	·	· ·
Forestry for urban areas will become important and will start diversifying significantly beyond amenity orientation (due to many large cities being poor).	· Need for urban green areas to have multiple purposes, including production functions.	·	· ·
	· Institutional gaps in responsibility for urban forests (city administrations versus forestry services?) will need resolving.	· ·	· ·
	· Need for research and development into highly productive forests to compensate for high land costs.	· ·	·
Institutions remain weak-particularly with regard to skills and research.	· Greater specialisation and networking among universities.	·	· ·
	· Need for more client-driven research and for networking to strengthen weaker centres.	· ·	· ·
	· Focus research agendas on areas of potential success or particular needs that help the sector remain relevant and competitive.	·	· ·
	· Promote capacity development in working across sectors (to service trees outside forests, conservation in populated areas, wood energy in total energy context, etc.).	· ·	· ·
	· Strengthen statistics and information on the sector and at its interface with linked sectors.	· ·	·
	· Develop mechanisms for more secure funding, including internal ones such as greater commercialisation of some services and better pricing of goods and services.	·	· ·
Non-wood fibre for pulp and paper will remain relevant in some countries with limited forests.	· In view of environmental concerns, promote mechanisms for cost-spreading joint treatment of effluent or develop low-cost treatment technologies.		· ·
	· Continue closure of the particularly small mills unable to afford pollution abatement.		· ·
	· As the raw materials are abundant, in countries where forest supplies will always be difficult, consider R&D for process technologies specifically for these raw materials rather than adaptations from wood pulping.		· ·
Recycling of used paper will increase.	· Complement dependence on imports with domestic programmes to collect and sort wastepaper and provide incentives for re-pulping rather than alternative uses.		· ·

Alternative scenarios for future forestry policies

Background to the policy analysis
Options for the future
Synthesis and common themes for future policy development

Background to the policy analysis

The future of the forestry sector in the Asia-Pacific region will depend on the extent to which forestry policy-makers choose to focus on each of the three dimensions noted above - economic, environmental or social orientations. Concentrating on the economic utilisation of forests over the next decade will result in a very different type of forestry than will result if environmental improvements and sustainability criteria are the driving forces behind policy. Similarly, a very different outcome is to be expected if the primary concern of forestry policy is with social development and equity issues.

Irrespective of the orientation of countries' policy thrusts, the main features expected to influence the future of forestry in the region are summarised below:

Adequacy of wood supplies at the global level. A broad consensus among recent studies is that wood supplies at a global level will be adequate to meet demands for both industrial wood and woodfuels in the immediate future. For the Asia-Pacific region, however, it is evident that several countries, especially in South Asia, are facing localised woodfuel shortages. Not surprisingly, these countries are also those with the lowest utilisation rates of industrial wood. Nonetheless, for the region as a whole it appears that potential supplies are abundant. The main uncertainties regarding future supplies of wood relate to restrictions that might be placed on harvesting in natural forests and the rates of plantation development.

Attention to the multiple roles of forests. The past 30 years have seen a broadening in understanding of the multiple roles of forests. There is now a general acceptance among decision-makers and forest managers that forests should be managed to facilitate the provision of wood, non-wood products and services, and that these should be produced in a manner that takes account of the environmental, economic and social dimensions of forestry. Implementation of such integrated forest management is, for the vast majority of forests in the region, still a distant prospect. There remains disagreement on the best methodologies to achieve integrated management, and often resistance from people whose livelihoods are impinged upon. The overall trends, however, are toward adjusting and developing regimes to provide more balanced forest management and this should continue beyond 2010.

Dependency on trade. The region as a whole will undoubtedly remain heavily dependent on imports to meet demands. Asia and the Pacific is expected to remain the world's largest net importing region for the foreseeable future, with the inter-regional wood trade deficit likely to increase. The general thrust toward more liberal trade policies, through the World Trade Organization and regional agreements such as APEC and ASEAN, should help match supply with demand and ensure more efficient production and processing of wood. Nonetheless, it is notable that most of the countries that face the most severe pressure on wood supplies (e.g. in South Asia) do not participate in the key regional trade agreements and lack the capacity to participate adequately in trade. For these countries, the policy focus in the future is likely to be on developing domestic production capacity to alleviate supply shortfalls.

Dominating influence of Japan. Despite the rapid growth that is expected in the rest of the region, it is likely that Japan will continue to be the main driving force in determining the patterns of forestry supply, demand and trade within the region. Japan is the region's leading importer of forest products and almost all the region's exporting countries are dependent on the Japanese market. Any changes in Japanese consumer preferences, economic growth or domestic harvesting levels could significantly alter trading patterns.

Importance of a few suppliers within the region. The present concentration of wood producing countries within the region will not change before 2010, but the importance of individual countries within this group is likely to change. For example, wood supplies from the major producers of Southeast Asia are expected to level off or decline (particularly if they pursue their stated policies of restricting production from natural forests). On the other hand, production in North Asia and the AIEs is expected to increase. This will lead to a general shift from hardwood to softwood supplies in the region. Several other countries (including Viet Nam, Myanmar, Laos, Papua New Guinea and Fiji) have the potential to become relatively important suppliers in the region.

Supply and demand balance uncertainties. There are two major areas of uncertainty in the future supply-demand equation for the region. The first is the extent to which the Russian Par East will be able to supply forest resources to meet demand in Asia (particularly North Asia). The second is the extent to which demand for forest products in the People's Republic of China will increase and the country's capacity to meet demand from its own resources. China's own forecasts suggest that a doubling in the consumption of forest products by 2010 is not unlikely. In this event, not only will China's forest resources be placed under considerable pressure, but so too will the ability of key suppliers to match this demand, particularly if the Russian Far East is unable to contribute significantly.

Strong growth in the consumption of reconstituted wood panels and paper products. It is very likely that the already ongoing shift toward the use of reconstituted wood panels such as medium-density fibreboard and oriented strandboard will accelerate, while production and use of sawnwood and hardwood plywood will remain stagnant. In line with most other regions of the world, the greatest growth in demand is expected in the paper and paperboard sector. It is this sector, however, that offers significant opportunity to relieve pressure on forests through recycling.

Pressure on supplies. While the region apparently has enough wood to meet foreseeable demands, analysis of potential supplies and demand suggests that there may be considerable pressure on supplies within the region by 2010. This pressure may be intensified largely by restrictions that countries have indicated they might put on supplies (particularly from the natural forest). Historical evidence suggests, however, that such pressure is unlikely to result in significant price increases. It is more likely to lead to changes in the utilisation of different types and sources of wood, increases in harvesting and utilisation efficiency and changes in production mixes. As described below, the region has vast scope to accommodate such changes, but successful adaptation will depend in part on the policies that countries pursue in the near future.

Moves toward sustainable forest management. At the centre of global forest policy debate is the issue of sustainable forest management. Most of the tropical countries in the Asia-Pacific region have subscribed to ITTO's Objective 2000 for achieving exports of tropical timber and timber products from sustainably managed sources by the year 2000. Most of the temperate countries are participating in the Montreal Process to develop criteria and indicators for sustainable forest management. Commitment to these processes, and a variety of other initiatives under the auspices of the United Nations Commission on Sustainable Development, development of forest codes of practice and certification programmes is gradually improving forest management. This is likely to lead to reduced harvests of wood from natural forests in the short term, but increased supplies in the future. It will also result in improved environmental functions of forests, including harvested forests.

Demands for social equity. A significant trend in a number of countries is a move toward devolving responsibility for forest management to local communities or private entities. Overall, this reflects governments' general interest in empowering people and providing them with resources to improve their own livelihoods. It is also a response to the increasingly vocal demands of people for a stake in managing resources for their own benefit. There remains considerable danger that traditional forest dwellers may be marginalised, but these groups are increasingly being given a voice in the decision-making process - either directly, or through concerned NGOs. The social dimension of forests, while probably still subject to significant institutional neglect, will receive increasing attention through 2010 and beyond.

Options for the future

It is against the general policy background discussed above, that the following six options to increase and improve the use and management of the region's forest resources have been developed:

1. increase production from forest plantations;

2. improve efficiency in forest harvesting and wood processing;

3. encourage structural change in the wood-processing industry;

4. stimulate greater utilisation of non-wood and non-forest fibre (including wastepaper) to supplement traditional wood fibre supplies;

5. increase the area of natural forest in protected areas; and

6. increase the potential for supplying forest products from non-forest areas.

The first four options can be seen as having mostly economic benefits, although they will also have substantial environmental and, to a lesser extent, social benefits. Option 1, in particular, could have considerable environmental benefits if plantation expansion emerges as a major tool for sequestering carbon and mitigating climate change. Similarly, Options 2-4 will each produce greater efficiency, which in most cases will lead to substantial environmental benefits by reducing waste.

Option 5 would mostly improve the environmental performance of the sector. Total exclusion of harvesting of forest products from increasingly large areas of natural forest could be considered economically (and possibly also socially) detrimental. There is, however, still considerable scope for movement in this direction without necessarily leading to negative economic impacts.

Option 6 is mostly about broadening supply sources for both wood and non-wood forest products. This option would produce significant social (and possibly environmental) benefits as much broader participation in forestry would be emphasised through agroforestry, farm forestry, and the permanent tree crops sub-sector of agriculture. It would not necessarily have much of an impact on supply as the option deals mainly with the issues of where and from whom wood is procured rather than how much is harvested.

The way in which such policy options might be implemented and the effects they might have (particularly on wood supplies) are described below. Of course, these options should not be seen as mutually exclusive. Countries may wish to choose one or several of them depending on their individual circumstances.

Increase production from forest plantations

Overall, current rates of plantation establishment in the region are about 1.5 million hectares per annum, with only a few countries, including the People's Republic of China, India and Indonesia, accounting for much of the total. Several other countries in the region, including Japan, New Zealand and Australia, have already invested heavily in plantations in the past. A major proportion of current planting, particularly in the tropical zone, is with short-rotation species for the production of pulpwood.

Two major policy objectives are likely to drive plantation development in the region between now and 2010. The first is the desire to increase wood supplies from plantations, either to expand overall supplies, or to substitute for wood currently obtained from natural forests. The second is the desire to reclaim derelict land or "wasteland." In pursuing either of these policies, it is quite likely that future plantation development will differ from current approaches. Thus, it is useful to examine the possible scope of such changes.

Increasing the rates of planting with the current species mix would have some impact on wood supplies before 2010 because plantations are often grown on rotations of only 5 to 10 years. Because, however, sawlogs are increasingly in short supply in the region while pulpwood is relatively plentiful, strong arguments can be made for increasing the planting of longer-rotation species with a view toward sawlog production. Although significant supplies from new sawlog plantations would not materialise before 2010, it seems appropriate to suggest that countries carefully consider opportunities for increasing the rate of plantation establishment for sawlog production in the near future.

With respect to the types of land to be planted in the future, it should be recognised that most countries in the region will be reluctant to allow forest plantations to be developed on land with good agricultural potential. Even if formal regulations do not restrict planting on prime agricultural lands, the cost of such land is likely to preclude most tree-planting operations. An additional constraint on the type of land to allocate for tree plantations is the reluctance of most countries to convert natural forests into plantations except when they are already highly degraded. Thus, it is likely that most countries will focus plantation development on degraded lands.

Policies to encourage afforestation of derelict land or wasteland will not only solve the problem of providing land for tree plantations without reducing agricultural potential, but will also have other positive benefits. For example, without countervailing measures, wastelands and degraded lands have a tendency to expand in area. Increasing tree cover is a proven measure to arrest the spread of wastelands. Furthermore, forests can renew the productivity of wasteland soils or protect them from further degradation, so that these might be more productive for agriculture at a later date.

Developers often hesitate to invest in planting degraded and scrub land because of its relatively low productivity and poor profitability, the lack of residual forest on the land (which can be cleared and sold to help defray plantation establishment costs) and competing tenure claims made by various groups and individuals. Governments often attempt to overcome these obstacles by offering public subsidies for establishment, such as grants, tax concessions and other incentives. A very important point, however, is that plantation establishment, particularly for sawlog production, is often unprofitable in many countries simply because log prices are kept very low by governments that maintain artificially low stumpage rates for timber coming from natural forests.

A relatively new prospect for encouraging plantation development is to provide measures for sequestering carbon. While specific details are still to be clarified, the Kyoto Protocol lays a foundation for potentially vast new investment in forest plantations in Asia and the Pacific. Depending on the credits that investing countries might obtain in exchange for supporting plantation establishment and the market mechanisms that are eventually established under the Kyoto Protocol, plantation investment could conceivably escalate dramatically in the corning years. It is still too early to predict with any degree of certainty how this might affect plantation establishment in Asia and the Pacific, but policy-makers would be well advised to monitor these developments carefully.

Taking into consideration the above points, policy-makers need to assess the extent of plantations that should be established to achieve specific objectives. A recent estimate by the Asian Development Bank (quoted in Blakeney, 1995) suggests that about 50 million hectares of plantations should be established in the region over the period 1995-2005 to restore degraded lands and meet wood demand (Table 11.3). This figure is far less than the total area of degraded lands in the region (Box 11.1), but would be a significant step toward meeting formal objectives of restoring degraded lands and would make a significant contribution to future wood supplies.

Table 11.3: Estimated forest plantation establishment requirements in the Asia-Pacific region, 1995-2005

Type or purpose of forest plantation	Area required (million ha)	Investment US$ billion
Reforestation to restore and secure ecological balance	25	10.0
Fuelwood plantations to provide for increasing population	17	8.5
Industrial plantations to meet increasing demand	8	6.5
Total required (over 10 years)	50	25.0

Source: Blakeney (1995).

The figures for plantation establishment presented by Blakeney (Table 11.3) may be somewhat higher than necessary, particularly with respect to fuelwood plantations. They do, however, provide a reasonable starting point for the analysis of what might happen if a more aggressive policy of plantation development were pursued in the region. Given that existing plans are to plant about 23 million hectares over the period to 2010, an additional 27 million hectares would have to be planted to meet Blakeney's total estimated requirements. Most of the areas planted under such an ambitious plantation establishment programme would likely occur in North, South, and Southeast Asia (Table 11.4). Assuming that longer-rotation tree species would comprise much of this additional planting, possible effects on potential wood supplies in the long run are also presented in Table 11.4.

Box 11.1: AVAILABILITY OF WASTELANDS FOR AFFORESTATION If past trends continue, the total area of "other land" in the Asia-Pacific region will increase by 27 million hectares, to 640 million hectares, by 2010. Not all of this total, or the incremental increase, will be degraded land, but it is important to emphasise that such areas are vast and represent an enormous potential for tree planting. Because they are attractive for little else, they may be relatively easily released for forestry. The following examples give an indication of the scale of degraded lands in the region. Degraded lands account for 22 percent of total land in Bangladesh, and 21 percent and 30 percent in India and Thailand, respectively. In some countries, wastelands are predominantly eroded landscapes that may have been formerly productive; in others, they are arid or desert (e.g. parts of Australia, the People's Republic of China, India and Pakistan). In a few locations, the land has been degraded by salination from inappropriate irrigation; in yet others, forest clearing has given way to undesirable grasses or shrubs (such as the Imperata grasslands of Indonesia, the Philippines and elsewhere). Degradation of land is on the increase. Indonesia, for example, reports that such lands have increased from 12.52 million hectares at the start of the Fourth 5-year Plan to an estimated 25.03 million hectares by the Sixth Plan, of which a third is within forest areas. Degraded lands are expanding in several countries at the same time that other areas are being reclaimed and rehabilitated (e.g. in the People's Republic of China, India and Pakistan). Out of a total land area of nearly 88 million hectares, Pakistan has nearly 33 million hectares (37 percent) of wastelands that could be planted with trees. Of this, 25 million hectares are degraded rangelands and the rest are desert or tidal lands. The land classification of Pakistan suggests that planning and policies need to consider current uses of degraded and wastelands. Many of these areas are currently being used for grazing despite their low productivity; therefore, any tree-planting initiatives will need to blend appropriately if they are to be socially acceptable. Source: J. Blakeney (1995). Increasing the private sector role in forest resource expansion and rehabilitation in Asia. A draft Best Practice Technical Dissemination Note, Asia Technical Department, World Bank, Washington DC.

Table 11.4: Scope and likely impacts of a more aggressive plantation establishment policy in the Asia-Pacific region

Region	Plantation area in	Baseline projection of supply potential by 2010			Additional area by 2010 under	Additional impact on long-run supply potential
	1994 (million ha)	area (million ha)	sawlog production (million m3)	pulpwood production (million m3)	a more aggressive plantation policy (million m3)	sawlog production (million m3)	pulpwood production (million m3)
AIEs	11	12	72	30	+2	+16	+7
NIEs	3	3	9	5	+0	+0	+0
North Asia	14	22	59	142	+9	+32	+72
Southeast Asia	6	12	7	73	+7	+28	+0
South Asia	7	15	2	108	+7	+9	+32
Pacific Islands	0	0	0	1	+2	+8	+0
All Asia-Pacific	40	63	149	357	+27	+93	+109

Table 11.4 assumes that long-rotation crops should be planted (in addition to existing plantation plans) in all areas except North and South Asia, where additional planting might be comprised of 50 percent long-rotation crops to meet industrial and environmental objectives and 50 percent short-rotation crops to meet fuelwood needs. On the basis of these assumptions and current yields in each of the sub-regions, an expanded planting programme would potentially yield an additional 200 million cubic metres of plantation-grown wood per year across the whole region, split about equally between sawlog and pulpwood (or fuelwood) production.

It also seems logical to concentrate additional planting for industrial wood supplies in Southeast Asia and, to a lesser extent, the Pacific Islands. These two sub-regions currently have the greatest pressure on the natural forest from commercial logging operations (primarily for sawlog extraction). If new planting in these sub- regions focuses on longer-rotation plantations for sawlogs, the additional sawlog production potential would reach 28 million cubic metres and 8 million cubic metres per annum in Southeast Asia and the Pacific Islands, respectively. This could reduce the percentage of potential sawlog production being utilised (using the 2010 production estimates) from currently predicted levels of 100 percent of the sustainable cut level to around 70 percent.

In addition to the financial investments needed to pursue an expanded plantation establishment programme (Table 11.3), other developments in the sector are needed to increase production from forest plantations. For a start, improvements in plantation establishment techniques are required. Currently more than 20 percent of all new planting in the region fails, leaving large areas that are left unplanted or that have to be replanted at additional expense. Better site preparation and species-site matching and selection would invariably lead to better plantation results. Indeed, plantation yields are currently well below potential and could be increased significantly. Such improvements might easily lead to greater benefits, in terms of wood production, than would be achieved by expanding the area of plantations. Substantial research in site and species selection, establishment techniques and human resource development in these and other areas are needed, however, if significant gains are to be realised.

Another issue that requires attention is that of land conversion practices. Recent forest fires across much of the region have highlighted how policies designed to stimulate plantation development can have unwanted side effects. Better management of land conversion should involve a thorough investigation of sites that are best suited for conversion most appropriate conversion techniques. This applies equally to land conversion for agricultural purposes.

Several policy issues related to the investment environment for plantations need further review by countries in the region. While several countries purport to attract foreign investment capital and joint ventures for plantation development, they continue to restrain such investment through unnecessary bureaucratic procedures, restrictive investment requirement and limits on profit repatriation. Plantation establishment is unattractive in many countries because regulations encompassing forest production fail to differentiate between production from natural forests and plantations. Furthermore, in some cases, the private sector is encouraged to invest in plantations but is not given full control over their management and use. Cumbersome restrictions on harvesting and transport of wood constrain investment in many places. Such situations should be explored and the problems remedied.

A final issue that should be examined is that of subsidies and regulations for afforestation vis-a-vis pricing of logs. The profitability of plantation establishment is often reduced by low log prices, brought about by deliberately administered low prices on logs from natural forests. Subsidies are used to partly overcome this fundamental weakness in the sector, but in return this often leads to the sorts of bureaucracy and cumbersome regulation referred to above. It would be better for all if governments seriously reviewed their pricing policies for products coming from natural forests. Setting higher (i.e. more realistic) prices for wood from natural forests would make plantation establishment more attractive and thus reduce the need for subsidies and regulation. Some sectors of the forest products industry would undoubtedly resist attempts to increase the price of wood from natural forests, but such moves would likely benefit the sector as a whole in the long run.

Improve efficiency in harvesting and wood processing

Significant economic gains could be made in many countries of the region by improving harvesting and processing efficiencies. Such improvements would permit increased outputs of products from existing levels of raw material inputs and should lead to greater profitability. This strategy could also result in substantial environmental benefits, particularly if more efficient use of raw materials leads to reduced harvest levels in natural forests.

Current rates of product recovery range from about 50 percent to 80 percent for harvesting, and from about 40 percent to 60 percent for log processing (Table 11.5). As harvesting and processing efficiencies are directly correlated with potential raw material supplies from residues, improvements in harvesting and processing efficiencies will not result in any net increase in potential supplies of raw materials. Because of the impending shortage of large-diameter sawlogs, however, improved harvesting efficiencies that lead to increased availability of sawlogs will be of significant benefit to the sector.

Table 11.5: Current harvesting and processing efficiency in the Asia-Pacific region

Region	Harvesting efficiency	Processing efficiency in sawmills and plymills
AIEs	78%	60%
NIEs	78%	50%
North Asia	81%	50%
Southeast Asia	50%	49%
South Asia	62%	47%
Pacific Islands	50%	40%
All Asia-Pacific	66%	51%

Note: All figures represent the proportion of utilisable product produced per unit of raw material input. The harvesting efficiency is an average of efficiency of production in the natural forest and plantations.

Currently, efficiency is generally greater in the more developed parts of the region both in terms of log recovery from the forest and sawnwood and plywood recovery from sawlog inputs (Table 11.5). There is, therefore, apparently tremendous scope for efficiency gains in some parts of the region. The current differences between log recovery rates in different parts of the region can be partly explained by differences in forest types. Tropical moist forests typically have a low density of commercially utilisable logs, many layers of understory at different vertical levels and little established harvesting infrastructure. Harvesting is therefore usually more difficult in these types of forests and recovery rates are lower.

Many studies of harvesting in tropical forests have shown, however, that log recovery can be significantly increased with better inventory and planning, more efficient road design and layout, improved felling practices (e.g. directional felling, cutting of lianas and creepers before felling) and better training in bucking and crosscutting. Investments in these measures have proven to produce immediate economic benefits. Such measures also could be expected to produce longer-term economic benefits by reducing damage to residual trees. Moreover, by reducing the disturbance to the forest and minimising soil erosion, these improved practices also yield substantial environmental benefits.

Examination of case studies from the region suggests that, in the areas where harvesting efficiencies are currently very low, recovery could be increased by at least 10 percent in many cases. The sub-regions with the lowest current recovery rates are Southeast Asia and the Pacific Islands. As a tentative projection, therefore, it is assumed that harvesting recovery rates in the natural forest in Southeast Asia could be raised from 50 percent to 65 percent by 2010 and from 50 percent to 60 percent in the Pacific Islands. Such efficiency gains would increase potential sawlog availability by about 20 million cubic metres, or 3 percent, in total. This would allow the share of potentially available sawlogs that would need to be cut in Southeast Asia to meet production requirements to fall to less than 80 percent by 2010 (Table 11.6).

Similarly, improvements in processing efficiency could help to diminish the pressure on forests by reducing the volume of logs required to manufacture the same volume of products. The scope for improvement in processing efficiency is perhaps even greater than that for harvesting efficiency. The spread in percentage recovery among regions is less, but improvements in processing efficiency can probably be applied more widely and more readily throughout the region.

Table 11.6: Effects of potential improvements in harvesting and processing efficiencies on sawlog availability, production and utilisation in the Asia-Pacific region in 2010

Region	Baseline			Improved harvesting			Improved processing			Both improvements
	avail. (million m3)	prod. (million m3)	util. (%)	avail. (million m3)	prod. (million m3)	util. (%)	avail. (million m3)	prod. (million m3)	util. (%)	avail. (million m3)	prod. (million m3)	util. (%)
AIEs	94.5	62.5	66	94.5	62.5	66	94.5	62.5	66	94.5	62.5	66
NIEs	13.0	1.9	15	13.0	1.9	15	13.0	1.6	12	13.0	1.6	12
North Asia	304.5	73.9	24	304.5	73.9	24	304.5	63.7	21	304.5	63.7	21
Southeast Asia	89.0	84.3	95	106.9	84.3	79	89.0	72.5	81	106.9	72.5	68
South Asia	48.1	28.7	60	48.1	28.7	60	48.1	24.5	51	48.1	24.5	51
Pacific Islands	8.1	10.8	133	9.6	10.8	113	8.1	8.2	101	9.6	8.2	85
All Asia-Pacific	557.2	262.0	47	576.6	262.0	45	557.2	233.0	42	576.6	233.0	40

The main technical reason why some countries might have lower rates of processing efficiency than others is if they are forced to process smaller logs. The highest rates of processing efficiency are, however, currently found in the countries with temperate forests (i.e. those with generally the smallest logs). This suggests that, with technological improvements, processing efficiency in the tropical countries of the region should be able to match the rates found in the temperate regions, or perhaps even surpass them.

Using data from the FAO Yearbook of Forest Products, trends in processing efficiency have been calculated for the period from 1962 to 1988 (Figure 11.1). Data deficiencies are suspected of skewing the calculated efficiencies as much as 5 to 10 percent higher than empirical evidence would suggest. Nonetheless, the calculations and trends provide some useful insights with regard to processing efficiencies and patterns in the region:

· the AIEs have the highest rates of processing efficiency in the region, followed by the NIEs. The Pacific Island economies having the lowest rates of efficiency, and South and Southeast Asian countries lie somewhere in the middle;

· the processing efficiency in many sub-regions actually appears to have declined over the period. It is suspected that this might be due to a negative correlation between log supply and processing efficiency, both of which have shown strong trends over the period. That is, in many of the major log producing countries in the region, processing efficiency has gone down as log supply has increased (and logs have become cheaper);

· the rates of processing efficiency achieved in the AIEs have been fairly stable over much of the latter part of the period suggesting that they have perhaps approached the maximum possible efficiencies for the types of logs they are processing; and

· based on the trends for AIEs and NIEs (which probably produce the most reliable statistics), processing efficiencies can be practically improved by about 1 percent per year if starting from relatively modest levels of efficiency (e.g. NIEs from 1978 to 1988). Efficiency gains of only about 0.5 percent per annum are practically feasible if starting from already reasonably high levels of efficiency (e.g. AIEs from 1962 to 1972).

Based on these calculations of potential efficiency gains, it is not unrealistic to expect that processing efficiencies could be increased by 13 percent by 2010 in the Pacific Islands and by 8 percent in all other countries except the AIEs. Such improvements could potentially reduce the region's requirements for logs for sawnwood and plywood production by about 30 million cubic metres, or just over 10 percent, by 2010 (Table 11.6).

Figure 11.1: Trends in sawlog processing efficiency in the Asia Pacific region, 1962-1988

Source: FAOSTAT.

Note: The above trends are three-year moving averages. Processing efficiency has been calculated by dividing total sawnwood, plywood and veneer sheet production into apparent sawlog and veneer log consumption. All the trends shown above are considered likely to be on the high side due to under-reporting of log production.

Because it has been assumed that such gains in processing efficiency could be made across the region (except the AIEs), the resulting total reduction in the pressure on wood supplies in the region would be somewhat more than the assumed achievable benefits from improvements in harvesting efficiencies. If policies and strategies were effectively implemented to achieve these gains, the proportion of total availability of sawlogs that would have to be cut to meet requirements in the region would fall from 47 percent to 42 percent. Most noteworthy is that under these assumptions, utilisation of potential log supplies in the two regions under heaviest pressure (i.e. Southeast Asia and the Pacific Islands) would fall significantly (Table 11.6).

If effective measures were taken to achieve gains in both harvesting efficiency and processing efficiency, the results would be even more dramatic. Under such a scenario, utilisation of potential supplies would fall to 40 percent overall for the region, and under 100 percent in all sub-regions (Table 11.6). This would clearly be the most desirable outcome in terms of protecting and extending the region's valuable forest resources.

Two major thrusts are needed to achieve significant improvements in harvesting and processing efficiencies -investments in human resource development and investments in new technologies and equipment.

Based on ITTO estimates for employment in logging, sawmilling and plywood manufacturing in the region, and current productivity rates, there are about 30,000 people employed in logging in Southeast Asia and the Pacific Islands and 120,000 people employed in sawmilling and plywood manufacturing (excluding the three AIEs). Obviously, it will be a major task to upgrade the skills of these people to the levels that are necessary to achieve the efficiency gains outlined above.

While enhancing human resources would go far toward improving efficiency, there is also significant opportunity for installing more efficient machinery and equipment in the region. New technologies such as computer-controlled sawmills and smaller self-centring spindles on log peelers can achieve dramatic increases in product recovery.

While tax incentives and subsidies can be used to motivate improvements in human resource development and installation of efficient modern equipment, more efficient and effective policy approaches might include appropriate pricing of forest resources. The incentive to invest in machinery and training to increase product recovery is much higher, for example, when log levies are US$100 per cubic metre (as in Malaysia) compared with around US$25 per cubic metre (in several other countries). Thus, appropriate pricing of the resource (which, in many countries in the region, means increasing log levies) is crucial to the achievement of improved efficiency.

Encourage structural change in the wood processing industry

At present, a very large portion of the region's wood products industry is oriented toward the production of sawnwood and plywood (Figure 11.2) and the industry is heavily dependent on large-diameter logs (particularly in Southeast Asia and the Pacific Islands). Analysis indicates that in these two sub-regions, the volume of logs that will be required to meet projected sawnwood and plywood production levels will come very close to the maximum potential sustainable supply in the future. In several countries, the maximum potential sustainable supply may even be exceeded (implying that, at the projected harvesting levels, some countries will be cutting wood faster than the forests are growing it).

The anticipated scarcity of large logs will likely create upward pressure on prices in the region. This in turn will logically encourage many producers and consumers to substitute other types of panel products that can be manufactured from smaller logs and alternative raw materials (e.g. particleboard and fibreboard) for traditional plywood and sawnwood. Historical trends and experience in Europe and North America provide evidence to suggest that such substitution will follow in Asia and the Pacific. Already, production of wood panels other than plywood has increased from almost nil to about 10 percent of the solid wood products sector in the region (Figure 11.2). ITTO analysis even suggests that plywood production in the region might decrease over the period to 2010 due to log scarcity (against a backdrop of increasing wood-panel production and consumption overall). The APFPM estimates that plywood production will continue to grow strongly through the year 2010, but it is heavily influenced by past growth trends and the currently large investment in plywood processing capacity in the region.

Figure 11.2: Historical development of the production of solid wood products in the Asia-Pacific region, 1961-1996

The consequences of a more rapid shift to the production and use of other types of panels will be twofold. Firstly, the industry will have to restructure and grow in sectors such as particleboard and fibreboard production, rather than plywood production. For some countries, this will require a radical departure from previous forest industry development policies that were largely driven by the profitability of plywood production and the cheap and widespread availability of large logs.

The second consequence of such a shift in production orientation is that wood processors will be able to achieve higher rates of product recovery and utilise a much wider range of raw material inputs. Particleboard and fibreboard recovery rates are typically about 60 percent to 65 percent, compared with 50 percent for plywood production. On the input side, new technologies for making particleboard and fibreboard permit the use of harvesting and mill residues, agricultural tree crops and forest species currently considered as not commercially viable for sawnwood and plywood production, and smaller-sized timber that might typically be found in non-forest areas.

The likely effects of a rapid shift in production present interesting supply implications and opportunities (Table 11.7). Without major changes from the current production orientation, plywood production in the region is expected to increase from 26 million cubic metres per year to 34 million cubic metres per year by 2010, requiring 68 million cubic metres of large-diameter logs (based on current efficiency levels). Total roundwood requirement for all wood-based panel production would be around 94 million cubic metres.

If, however, plywood production is held at 1994 levels, and the industry is able to shift rapidly toward other forms of panel production, the outlook is quite different. The contribution of particleboard and fibreboard to the total mix of panels could increase from 11 million cubic metres currently to 24 million cubic metres by 2010 (rather than the 16 million cubic metres previously projected for 2010). This would reduce the overall roundwood requirement in the region in 2010 by 3 million cubic metres due to the better product recovery in the production of particleboard and fibreboard relative to plywood. More importantly, however, it would hold the volume of sawlogs required at 52 million cubic metres, effectively shaving 16 million cubic metres from the projected sawlog requirements for 2010. Because most of the logs used for plywood in the region come from Southeast Asia and the Pacific Islands, shifting orientation rapidly from plywood toward particleboard and fibreboard would have particular economic and environmental benefits for these two sub-regions.

Table 11.7: Implications for sawlog and other roundwood requirements of a shift toward other (non-plywood) wood-based panel production in the Asia-Pacific region

	Baseline projection for 2010			Projection if all growth in wood-based panel (WBP) production was in "other" (non-plywood) panels
	Plywood (million m3)	Other WBP (million m3)	Total WBP (million m3)	Plywood (million m3)	Other WBP (million m3)	Total WBP (million m3)
Production	34	16	50	26	24	50
Sawlog requirement	68	0	68	52	0	52
Small roundwood requirement	0	26	26	0	39	39
Total roundwood requirement	68	26	94	52	39	91

To a large extent, the industry structural changes described above are likely to occur without specific help or direction from forestry administrations. However, forestry policy-makers can probably influence the speed with which the restructuring will take place. In some countries that are currently heavily dependent on plywood production (e.g. Malaysia and Indonesia), it is probably quite important that forestry policy-makers act to encourage and assist this restructuring.

In countries that have existing measures to support the plymilling and sawmilling industries, policy-makers should consider adjusting these or extending them to other types of wood processing so that the transition to other types of panels can be more easily achieved. Of particular importance in this respect are policies that encourage utilisation of mill residues for panel production, or at least remove any existing barriers to such use.

A second area of support that could help accelerate the shift toward other types of panels is focused research, development and training, aimed at developing and applying the skills and techniques needed for producing other types of wood panels. Some countries have already initiated programmes along these lines (e.g. Thailand and Malaysia, in the case of processing rubberwood for sawnwood and medium-density fibreboard; and Malaysia in the case of processing empty fruit bunches from oil palm fibreboard production). Many others, however, have no meaningful programmes to assist these types of transitions. As the comparative advantage in plywood production in the region (based on the cheap and widespread availability of large logs) declines, such developments will become ever more important if the region's wood-panel industry is to remain competitive.

Finally, to facilitate the transition to particleboard and fibreboard, concession agreements and raw-material pricing policies should be reviewed and revised as necessary to encourage greater utilisation of smaller-diameter timber. Wherever revenue systems focus on the collection of flat-rate volume-based charges for roundwood extracted from the forest, there will always be incentives to high-grade or extract only the best and largest logs from the forest, leaving behind the smaller logs, tree tops and harvesting residues.

Stimulate greater utilisation of non-wood and non-forest fibre

The anticipated high rate of growth in paper production and consumption offers considerable scope for policy development. Many opportunities exist for increasing the use of non-traditional fibres in paper production. Non-wood fibres, agricultural tree crops, mill residues, and recovered paper could all play major roles in this expansion. For example, the potential for utilising sources such as oil palm fibre for paper-making is currently under examination, with potential fibre availability estimated at as much as 1 billion tonnes per annum. Bamboo, bagasse and agricultural crop residues are already commonly used in making paper in India and the People's Republic of China and offer prospects for wider application. Almost certainly, however, the greatest scope in this area is for the expanded use of recovered paper.

Current projections indicate that the region is likely to recover slightly less than 60 million metric tonnes of paper, or 45 percent of consumption, in 2010 (Table 11.8). In contrast, the theoretical maximum potential recovery is estimated to be around 90 million metric tonnes, or about 70 percent of anticipated consumption. However, the maximum effective rate of paper recovery is dependent on the mechanical properties of wastepaper used in the pulping process. Other technical and economic factors also preclude the theoretical maximum recovery rate from being achieved. The current recovery rate of just over 50 percent in the AIEs is probably much closer to the maximum that is technically and practically feasible when all these factors are considered.

Table 11.8: Projected paper consumption, wastepaper recovery and maximum potential recovery in the Asia-Pacific region in 2010

Region	Recovered paper production (million MT)	Paper consumption (million MT)	Recovery rate(%)	Maximum potential recovery (million MT)	Utilisation of potential recovery (%)
AIEs	26	49	53	34	76
NIEs	8	29	27	20	40
North Asia	19	36	52	25	76
Southeast Asia	4	11	36	8	50
South Asia	2	6	33	4	50
Pacific Islands	0	0	n.a.	n.a.	n.a.
All Asia-Pacific	59	131	45	92	64

Currently, recovery of wastepaper in the NIEs is partly hampered by the lack of processing facilities capable of handling this resource, and the large rural populations of South and Southeast Asia make wastepaper collection an expensive proposition in these sub-regions. Nonetheless, it is not unreasonable to expect that recovery rates in these three sub-regions could reach 40 percent by 2010 if supportive policies were enacted.

At 40 percent recovery rates, it is projected that 18 million metric tonnes of wastepaper would be collected in the NIEs, South and Southeast Asia in 2010. This would be 4 million metric tonnes above current expectations (the base-case scenario). Such an increase in wastepaper collection over that originally forecast would lead to the substitution of 10 million cubic metres of small roundwood. Although this represents only 1-2 percent of the baseline forecast production level for small roundwood in these three sub-regions, such a development would make a small contribution toward extending roundwood supplies in the region, and would have substantial environmental and social benefits for these countries outside the forest sector.

To substantially increase rates of wastepaper recovery, countries will probably need government intervention. In developed countries all over the world, high rates of wastepaper recovery have usually only been achieved with the aid of public subsidies for recycling schemes and government directives to retailers and industries (and in some cases, consumers) requiring collection and use of wastepaper. It is unlikely that the situation will be any different in Asia and the Pacific. Currently, however, except in a few AIEs and NIEs, no government subsidies or interventions are in place to support recovery of wastepaper. Small entrepreneurs with a profit motive undertake almost all the recycling that now takes place. In this regard, current recovery rates and those indicated in the base-case scenario of the outlook study, reflect the rates of collection that would normally take place as a commercial activity.

If countries wish to increase collection beyond the level projected in the baseline scenario, they must consider subsidising schemes to collect wastepaper that would otherwise not be profitable to recycle. Another approach would be to enact legislation or regulations that encourage or force recycling and re-use. Such policy instruments are largely outside the traditional remit of most forestry agencies, however. Therefore, if a strong case exists for such measures (e.g. on the grounds of limited wood supplies), forestry policy-makers will need to work closely with those responsible in this area (e.g. environment and industry ministries).

Increase the area of natural forest in protected areas

All over the world, a major concern for forestry agencies is to strike an appropriate balance between production of forest commodities and protection of forest resources. Most countries in the Asia-Pacific region are improving the manner in which timber is harvested to reduce the negative environmental impacts of forestry operations, and nearly all have some areas of forest in which harvesting activities are completely banned. The degree to which forests are excluded from timber production varies considerably, however, from country to country. Some countries (e.g. Myanmar and Papua New Guinea) have very little woodland in formal protected areas (i.e. where harvesting is completely banned). Others (e.g. Indonesia, New Zealand and Bhutan) have significant proportions of their forests within protected areas. Still others have total bans on logging in natural forests throughout the country (e.g. Thailand and Sri Lanka), even though those forests may not be strictly designated protected areas. Total logging bans are often a last attempt to protect a country's dwindling forest resources, but it is questionable whether they can be successful without significant investment in forest protection and control (Box 11.2).

Forest harvesting can be compatible with many environmental services such as soil and watershed conservation and carbon sequestration if carried out properly. It can also be compatible with protection of species that are not drastically affected by occasional disturbances or the removal of selected timber trees. Complete exclusion is most appropriate in areas where soils are highly prone to erosion (e.g. on steep slopes) or biodiversity is particularly fragile or highly valued (e.g. mangrove forests).

Currently, about 100 million hectares, or just over 20 percent, of the natural forests in the Asia-Pacific region are either in legally protected areas or areas covered by complete logging bans. A few countries such as Thailand and Indonesia, however, account for a major share of this total (Table 11.9). IUCN suggests that it would be desirable to have 10 percent of all representative ecosystems in legally protected areas, implying that in some countries in the region the extent of protected areas should be expanded.

Box 11.2: THE TOTAL LOGGING BAN IN THAILAND Since 1960, Thailand's forest cover has fallen from 54 percent to 27 percent, with annual deforestation rates in excess of 3 percent for much of the period. In response to this situation, the Thai Government introduced, in 1989, one of the most drastic forms of environmental protection in the forest - a complete ban on logging in the natural forests countrywide. Consequently, Thailand's industrial wood harvest declined by half from its peak of 6.2 million cubic metres in 1979 to less than 3 million cubic metres today. Current production comes mostly from plantation-grown timber, agroforestry and farm forestry plantings, rubberwood, coconut wood and mangroves (which are exempt from the logging ban). Illegally harvested timber from the remaining natural forests and imports (both legal and illegal) provide the rest of the country's wood supplies. In the future, Thailand's wood processing industry will be based on the development of a significant plantation resource and on developing its status as an importer and re-processor of commodity wood products. With respect to the tatter development, the value of forest products imported into Thailand has increased from US$0.5 billion in 1988 to US$1.6 billion, while exports have expanded from US$140 million to US$320 million over the same period. The success of drastic measures such as complete logging bans in achieving conservation objectives is open to question. Logging per se (particularly if conducted carefully) does not contribute significantly to large-scale deforestation, although it often makes the forest more accessible and vulnerable to clearance for agricultural purposes. In Thailand's case, for example, it is believed that agricultural encroachment (currently estimated to exceed 200,000 hectares per annum) is the primary cause of deforestation. There are also arguments that commercial activities can lead to greater protection of forests than total exclusion because concessionaires may have a vested interest in protecting the forest and, therefore, maintaining a permanent presence to guard the resource. Forests that are available for commercial exploitation also tend to be visited more frequently by staff of forestry agencies for the purposes of monitoring and control. To succeed in conserving forests, logging bans must be accompanied by adequate measures for protection, monitoring and control. Current evidence suggests that most forestry agencies in the region are underfunded and understaffed to provide such protection and control.

Table 11.9: Effect on wood production potential of increasing the extent of protected areas to a minimum of 10 percent of the natural forest in all countries in the Asia-Pacific region by 2010

Region	Area of natural forest in protected status						Potential wood supply from the natural forest in 2010
	Existing in 1994		With an increase to a minimum of 10%		Change (1994 to 2010)		Baseline	Increased protected area	Change in potential
	(million ha)	% of NF	(million ha)	% of NF	(million ha)	% change	(million m3)	(million m3)	(million m3)	% change
AIEs	12.9	21	17.2	29	+4.3	+33	19.0	18.3	-0.7	-4
NIEs	0.6	10	0.8	13	+0.2	+33	3.9	3.5	-0.4	-10
North Asia	13.9	13	14.5	13	+0.6	+4	158.3	158.1	-0.2	-
Southeast Asia	61.4	29	65.1	31	+3.7	+6	158.8	158.6	-0.2	-
South Asia	11.3	18	11.6	18	+0.3	+3	10.9	10.8	-0.1	-1
Pacific Islands	1.8	4	4.1	10	+2.3	+128	7.5	7.2	-0.3	-4
All Asia-Pacific	101.9	21	113.3	23	+11.4	+11	358.4	356.5	-1.9	-1

Note: Countries/territories currently with less than 10 percent of natural forest in protected areas are: Fiji, Japan, Laos, Mongolia, Myanmar, Nepal, Pakistan, Papua New Guinea, Solomon Islands, Vanuatu and Viet Nam.

To increase the area of natural forest under protection to a minimum of 10 percent of the natural forest area in all countries, 11 countries and territories in the region would have to expand their protected area systems. Of these, however, only Papua New Guinea and Japan would have to increase their protected areas to a significant extent. If additional protected areas were designated mainly in forest areas not currently allocated for timber production, such expansion would have a negligible impact on future potential roundwood supplies in the region. It is estimated that such measures could be implemented with a resulting reduction of potential timber supplies from natural forests of only about 2 million cubic metres, or 1 percent of projected production in 2010 (Table 11.9). Only Papua New Guinea might experience problems meeting its projected log production requirements if the 10-percent minimum protected-area target were to be achieved.

Obviously, if large new areas of forest currently used for timber production are put into protected areas, the effect on potential timber supply will be much greater. Even if all additional areas needed to meet the IUCN targets (approximately 11 million hectares) were to come from areas currently allocated for timber production, it is anticipated that there would be a resulting decline of only about 11 percent in the potential timber supplies from natural forests, or a decrease of about 1 to 2 percent in overall fibre supplies.

Therefore, the results of this analysis show that achievement of the IUCN target would have little impact on total wood supplies in the region. Indeed, it is reasonable to expect that any production restrictions associated with an increased environmental focus would increase the incentive to improve wood utilisation efficiency. This, in itself, would be a desirable outcome from both economic and environmental perspectives.

The major requirement for expanding protected area systems in the region is significant additional investments in forest protection and conservation management (particularly for trained staff, equipment and local services and extension for people living in and near protected areas). Using estimates of US$2 to US$10 per hectare per year as the required level needed for effective protected area management¹⁰³ implies the need for an additional US$20 million to US$110 million to meet the needs of expanding the region's protected area systems to the IUCN target levels. Moreover, it is well recognised that current investment for managing existing protected areas is grossly inadequate. Therefore, the overall investment needs for protected area management in the region are likely to be several times greater than the level estimated for simply expanding the region's protected area systems.

¹⁰³ J. Paine (1997). Status, trends and future prospects for forest conservation including protected areas in the Asia-Pacific region: Document APFSOS/WP/04.

Increase the potential for supplying forest products from non-forest areas

A significant trend in many countries of the Asia-Pacific region is the devolution of forest management responsibilities away from centralised government agencies in favour of local and community organisations and individuals. This decentralisation and devolution process has taken many forms, from the privatisation policies of New Zealand, to the development of community forest management in Nepal and India, to land and forest allocation programmes in the People's Republic of China and Viet Nam. Decentralisation of forest ownership and use does not, however, merely constitute a redistribution of profit opportunities. Rather, as such a move involving communities, companies and individuals more directly in forest management, is more likely to stimulate these groups to actively participate in the future development of forestry and, hopefully, lead to less deforestation and forest degradation.

The last scenario to be considered in this analysis, therefore, addresses the issue of who will produce forest products in the future and under what circumstances. The choice of who should produce forest products is closely linked to the question of who benefits from forestry activities. As such, it is mostly about the social dimension of the sector's performance rather than its environmental or economic performance.

Table 11.10 shows current relative levels of production and the potential for increasing social benefits from the sector by increasing wood supplies from each source (similar tables could be developed for other forest products and potential sources of production, but lack of data limit such analysis to qualitative approaches). The first row shows the likely levels of social benefit derived by using wood supplies from each source. For example, using trees outside the forest (TOF) is likely to have high social benefits because such sources of supply are generally owned by smallholders and farmers who are often among the poorest members of society. Using recycled and non-wood fibre (RNW) might also have high social benefits because non-wood fibres tend to come from smallholders and collection of recycled material provides many job opportunities for poorer people in urban areas.

The next section of Table 11.10 shows the relative production potential of each source for the Asia-Pacific region as a whole in 1994, followed by an estimate of where current production probably comes from (by sub-region). It is not possible to accurately match current production with potential or to estimate exactly where current production comes from but some broad features of the current supply situation are known. For example, it is known that wood from natural forests accounts for a major part of supply in Southeast Asia and the Pacific Islands. Similarly, it is also generally recognised that wood from plantations accounts for a major share of production in the AIEs, NIEs and North Asia.

The bottom portion of Table 11.10 shows the relative production potential from each source estimated for 2010 and the scope for increasing social benefits through potential increased focus on each source. This analysis is quite subjective and the situation is likely to vary considerably from country to country. Nonetheless, the generalised analysis provides a starting point for policy-makers to consider the relative social impacts of emphasising various sources for obtaining forest products.

Table 11.10: Current probable levels of wood and fibre production from various sources and potential for increasing social benefits by increasing supplies

Supply source	NF	PL	OWL	TOF	HRE	WPR	RNW
Relative social benefit from wood & fibre production from each source	low	moderate	high	high	moderate	low	high
Relative production potential across the whole region in 1994 (%)	15	9	2	32	30	3	8
Probable level of production from each of these sources by sub-region
AIEs	low	high	low	moderate	nil	moderate	high
NIEs	low	high	low	low	nil	moderate	high
North Asia	high	high	low	high	nil	moderate	moderate
Southeast Asia	high	low	low	moderate	nil	low	moderate
South Asia	low	moderate	low	high	nil	moderate	moderate
Pacific Islands	high	low	low	low	nil	low	low
Relative production potential across the whole region in 2010 (%)	12	16	2	31	27	4	9
Potential for increasing social benefits from the sector by increasing utilisation of each of these sources
AIEs	low	low	low	moderate	low	low	low
NIEs	low	low	low	low	low	low	low
North Asia	low	moderate	moderate	moderate	moderate	low	moderate
Southeast Asia	low	moderate	moderate	high	high	moderate	moderate
South Asia	low	low	low	moderate	moderate	low	moderate
Pacific Islands	low	low	low	moderate	high	moderate	low

NF = Natural forests
TOF = Trees outside forests
RNW = Recycled and non-wood fibre
PL = Plantations
HRE = Harvesting residues
OWL = Other wooded land
WPR = Wood processing residues

The potential for increasing the social performance of the sector by changing patterns of supply is summarised, by sub-region, below.

Advanced Industrialised Economies and Newly Industrialised Economies. These countries are generally well-off, so the scope for increasing social benefits by changing supply patterns in these sub-regions is probably very limited. There is some potential to increase wood supplies from trees outside the forest (TOF) in some countries, which might serve to stimulate rural employment modestly. Increasing the production of other forest services, such as recreation, ecotourism and landscape enhancement is, however, more likely to increase the social benefits of the sector in these countries.

North Asia. North Asia already uses a diverse range of wood supply sources and is likely to continue to do so in the future. Thus, the scope for increasing social benefits from the sector by altering supply sources is limited. However, forestry in this sub-region is projected to grow considerably overall, providing income and employment opportunities to a wide range of people. It is expected, therefore, that this will bring a modest improvement to the welfare of many people across a wide range of backgrounds.

Southeast Asia. Wood production in Southeast Asia is currently heavily concentrated in the natural forests (NF), with considerable production from trees outside the forest (TOF) in Malaysia, Thailand and the Philippines. Probably the greatest scope for increasing social benefits would be to gradually shift away from using wood from the natural forests (in countries where this dominates) in favour of trees outside the forest. This would likely benefit primarily smallholders in these countries. Increasing the utilisation of harvesting residues could also employ a significant number of people (including, perhaps, indigenous and forest-dwelling communities), and has the potential to increase social benefits significantly. More generally, as in North Asia, the sector is projected to grow considerably overall, and this will provide income and employment opportunities to a wide range of people.

South Asia. The scope for increasing the social performance of the sector in South Asia is limited by the fact that generally the opportunities for increasing production are quite limited. Sources of wood supply likely to have high social benefits, such as trees outside forests (TOF) and plantations (PL), already account for a very high proportion of all wood and are likely to continue to do so in the future. However, some growth in supplies from trees outside forests, from plantations, and from the collection of wastepaper is foreseen and this could have moderate social benefits to the people of these countries.

Pacific Islands. Wood supplies in the Pacific Islands are generally dominated by production from natural forests (NF) and this is likely to continue in the future. Increasing the utilisation of harvesting residues (HRE) probably has the most scope for increasing income and employment and, thus, the social benefits of the sector in this sub-region. Increasing supplies from trees outside forests (TOF) and utilising a greater extent of wood processing residues (WPR) also have some scope for increasing the social benefits of the sector, but only modestly.

The above analysis of the social performance of the sector has been carried-out purely in terms of production of roundwood and fibre. This aspect of the social development of the sector is the only one that easily lends itself to quantitative review. However, in terms of the more general social performance of the forestry sector, other impacts resulting from policy directions taken by countries in the near future could be equally, or more important, to the people of the region.

One such development is the movement toward greater community and private-sector involvement in the forestry sector. This has major implications for wood supplies as production is increasingly shifted to plantations, trees outside forests and recycled materials. Wider application of such a policy would also entail greater involvement of local communities in the management of natural forests. Both of these courses of action have wider implications and potential benefits far beyond simple production of wood and diversification of rural income and employment opportunities.

Firstly, in many countries, governments have invested significant resources to police the natural forests against encroachment. By diversifying the benefits of the sector to individuals and communities, the motivation to destroy the forest is reduced or eliminated. This minimises confrontation and frees government resources for other programmes. Nepal's moves to grant management authorities to forest-user groups, India's development of Joint Forest Management programmes, and community-based forest management programmes in Laos and the Philippines are demonstrating the broad-based social benefits of these approaches.

A second social benefit from such initiatives is that, by increasing community involvement in forest management and production, forest goods and services are more readily obtained by people who would otherwise often go without. For example, within an atmosphere of trust and mutual understanding, it is quite possible for local communities to collect fuelwood and NWFPs from the natural forest and plantations without confrontation with concessionaires or government agencies. In more developed countries, such use can take the form of hunting, fishing and other types of recreation, which are very compatible with timber production, but may currently be discouraged because of a lack of understanding among interested parties.

Finally, diversifying sources of supplies provides enhanced opportunities for the development of human resources and skills and greater choices for people with regard to livelihoods. Of key importance, is the impact that broadening forest product supply sources has on the development of small-scale rural enterprises and independent livelihoods. In many cases, this might be achieved through non-traditional commercial forest uses, including forest-based services (e.g. ecotourism) or non-wood forest products.

Without strong government intervention there is little reason to expect that, within the next decade, there will be significant changes in the sources of supply used to meet raw timber and fibre needs. If governments wish to increase the social performance of the sector, therefore, they will need to consider implementing measures to encourage the use of other sources of wood. As with other policy objectives, pricing is a key tool available to governments to bring about change (e.g. if wood from the natural forests becomes more expensive, wood from smallholders starts to be more attractive). However, governments should also consider more proactive forms of intervention such as training and extension to develop skills and opportunities in the private sector. Community management, including management of valuable timber resources, would also be one way of stimulating wider involvement in the sector. Such changes will undoubtedly require re-orientation and restructuring of forestry agencies away from traditional monitoring and control approaches, instead and with a focus on extension and social development services. Several countries in the region have already begun this shift, but many are still locked in outdated and ineffective bureaucratic structures and procedures.

Synthesis and common themes for future policy development

The preceding analysis serves to highlight the tremendous scope for forestry policy-makers in the region to increase the performance of the sector in all three dimensions - economic, environmental and social. The analysis has concentrated on industrial wood supply, largely because this is the aspect of the forestry sector where most information is available. However, there is also tremendous scope and need for increasing other forest outputs such as fuelwood, NWFPs and forest services. Changes in these outputs are more likely to score highly in the social and environmental dimensions.

Most analysis indicates that wood and fibre demand generally will not exceed the anticipated potential levels of supply before 2010, but that future needs may approach potential supply for some types of wood and in some countries. Analysis also indicates that by using resources more efficiently, and expanding the resource base in the future, supplies and raw material requirements can be modified to accommodate any potential problems. Furthermore, it is apparent that the environmental and social performance of the sector could be improved by increasing the area of natural forests under protected status and by increasing the diversity of supplies used in the region. Both of these changes would bring about significant environmental and social benefits and could easily be achieved without significantly upsetting the future wood supply and demand balance.

In pursuing any of the options analysed above, it is likely that governments in the region will need to make changes in their forestry policies or support new directions for the development of the sector. Surprisingly similar changes are required for successful implementation of many of the options. Some of the changes to be considered are summarised below.

Pricing. Governments largely control the pricing of wood extracted from the natural forest in the region. Prices are often purposely set low to stimulate industrial development, but this has led to a number of unforeseen and undesirable effects, which are now constraining progress in the forestry sector. Low pricing of the resource discourages efficiency in harvesting and processing, reduces the incentive to invest in plantations and places alternative suppliers such as smallholders and recyclers at a disadvantage. Governments in the region should consider gradually increasing the price of wood extracted from natural forests to a level that more closely matches its true value.

Industrial regulation. Governments across the region have established a range of measures designed to stimulate the development of domestic wood-processing industries (e.g. preferential tax breaks, conditions attached to concession contracts, log-export bans, etc.). These should be reviewed to take into consideration the changes in wood-supply patterns that are expected in the future (i.e. fewer large logs from the natural forests, more plantation-grown wood and more recycled paper).

Institutional change. Forestry agencies in the region will be forced to deal with a wider range of forestry issues in the future. To increase the social and environmental performance of the sector, in particular, forestry agencies will likely need to devote more resources to these areas. Changes are also likely to be required within the traditionally powerful harvesting and utilisation sections of forestry agencies. Officials concerned with wood supply will increasingly have to adjust to working with large numbers of small suppliers rather than a few large concessionaires. Responsibilities and authorities will increasingly be decentralised and devolved to local and community groups, with government playing more supportive, less-controlling roles than in the past.

Human resources development. Virtually every aspect of change predicted for forestry in the future, or desired by policy-makers, will require massive levels of training and re-orientation. Considering the large numbers of people employed in the sector across the region, and the complexity of new technologies and practices, the task is indeed huge. To the extent that social objectives in forestry development are given greater prominence, human resources development becomes even more important - particularly where poor and underprivileged people become the focus of development.

Research. Future research will need to place greater emphasis on the technologies and processes that are likely to be employed to cope with changing patterns of supply. Research into improving plantation management and yields, processing of smaller trees, opportunities for increased use of wood residues and recycled fibres and efficient use of non-traditional timber crops are priority areas. Socio-economic research is critically needed to provide policy-makers with better understanding of the motivations of rural people with regard to producing and using forest resources, identify appropriate financial incentives and pinpoint efficient production strategies.

Investment. A later section of this chapter discusses the broader investment implications of anticipated and desired changes in the forestry sector in Asia and the Pacific through 2010. In terms of investment by the public sector, increased investment should be considered for protected area management, research, training, extension and institutional restructuring.

This list is by no means exhaustive, but provides an indication of the main areas where attention should be given for future policy development.

Indicative implications for investment

Investments needs in maintenance and general protection of forests
Investment needs for rehabilitation of degraded natural forests
Investment needs for development and maintenance of protected area systems
Investment needs for forest plantation development
Investment needs for non-forest sources of wood products
Investment needs in wood harvesting capacity
Investment needs in sawmilling capacity
Investment needs in the wood-based panels industry
Investment needs in the paper and paperboard sector
Investment needs for non-wood forest products and services
Total indicative average annual investment needs in Asia-pacific forestry

When applied to forestry, the term "investment" includes the costs involved in creating, managing and conserving forest resources, developing facilities for production and processing and marketing of forest products. Investment costs are influenced by several factors, including wage rates, levels of technology, availability of infrastructure, scale and organisation of operations, stage of development of the country involved, per capita income and propensity to save, level of efficiency and institutional support. In addition, integrated activities (e.g. multi-product or multi-purpose management) may be more cost efficient and require less investment. Furthermore, broad participation of local people, particularly in forest protection and resource creation, can help reduce investment costs substantially.

In the absence of detailed and specific information on the different variables at the country and product levels, any estimate of annual investment needs for forestry in the Asia-Pacific region to the year 2010 can only be indicative of the range of magnitude needed. The estimates presented here are based on the average annual changes anticipated in the baseline scenario developed for the outlook study.

Investments needs in maintenance and general protection of forests

It is assumed that the overall area of forest and other wooded land in the region during the period 1994-2010 will average approximately 797 million hectares. Annual investment costs for maintaining and protecting the resources base are estimated at US$2 to US$4 per hectare per year. Therefore, the indicative annual total cost for protection and maintenance of forests in the region is US$1,594 million to US$3,188 million (Table 11.11).

Table 11.11: Approximate annual investment needs for maintenance and general protection of forest and other wooded land in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	345	690
NIEs	20	40
North Asia	369	738
Southeast Asia	567	1,134
South Asia	199	398
Pacific Islands	94	188
All Asia-Pacific	1,594	3,188

Investment needs for rehabilitation of degraded natural forests

It is assumed that the total area of natural forest in Asia and the Pacific during the period 1994-2010 will average approximately 480 million hectares. Some 48 percent (about 230 million hectares) of the natural forests are estimated to have a crown density of less than 40 percent and require some form of rehabilitation. If the entire area were to be rehabilitated by 2010, approximately 14 million hectares per year would require attention. Assuming an investment cost of US$120 to US$180 per hectare, the total annual investment requirement for rehabilitation of forests in the region will range between US$1,680 million to US$2,520 million (Table 11.12).

Table 11.12: Approximate annual investment needs for rehabilitation of degraded natural forests in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	109	164
NIEs	25	38
North Asia	127	189
Southeast Asia	940	1,411
South Asia	328	491
Pacific Islands	151	227
All Asia-Pacific	1,680	2,520

Investment needs for development and maintenance of protected area systems

Assuming that the protected forest area requiring investment for infrastructure and other facilities is about 200 million hectares and that average annual investment required is US$5 to US$8 per hectare, the annual total requirement will be US$1,000 million to US$1,600 million (Table 11.13).

Table 11.13: Approximate investment needs for development of protected area systems in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	343	549
NIEs	3	6
North Asia	273	437
Southeast Asia	94	149
South Asia	283	453
Pacific Islands	4	6
All Asia-Pacific	1,000	1,600

Investment needs for forest plantation development

Plantation establishment costs vary with species used, intensity of site preparation, method of planting, the nature of protection, etc. For purposes of estimating the indicative annual investment required for plantation establishment in Asia and the Pacific, it is assumed that establishment costs will average US$650 to US$850 per hectare. With plantation establishment expected to average 1.5 million hectares per year, the overall investment requirements for the region will average between US$975 million and US$1,275 million. This will cover the silvicultural treatments and maintenance of plantations below 3 years of age. Protection and maintenance of older plantations is included under "maintenance and general protection" above. In addition, a third of the existing plantations are estimated to need rehabilitation ("beating up") during the period, costing about US$200 to US$300 per hectare. This implies an additional annual investment of US$300 million to US$450 million. The total investment for forest plantation development would thus amount from US$1,275 million to US$1,725 million per year (Table 11.14).

Table 11.14: Approximate annual investment needs for development of forest plantations in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	239	318
NIEs	60	80
North Asia	418	585
Southeast Asia	239	318
South Asia	303	398
Pacific Islands	16	26
All Asia-Pacific	1,275	1,725

Investment needs for non-forest sources of wood products

An estimated 260 million hectares of other wooded lands including rubber, coconut and other similar estate crops, farm woodlots, agroforestry plots, homegardens, etc., are estimated to exist in Asia and the Pacific. Of this amount, some 80 million hectares are managed for forest products and in the remaining area, yields of forest and tree products are incidental. The 80 million hectares that are intensively managed require regular inputs for improving the capital stock, these imputs are estimated at about US$20 to US$30 per hectare per year. Thus, a total annual investment of about US$1,600 million to US$2,400 million is required (Table 11.15).

Table 11.15: Approximate annual investment needs for developing non-forest sources of forest products in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	590	890
NIEs	20	30
North Asia	230	340
Southeast Asia	560	840
South Asia	160	240
Pacific Islands	40	60
All Asia-Pacific	1,600	2,400

Investment needs in wood harvesting capacity

Investment needs for wood harvesting vary greatly, depending on the type of wood being harvested (e.g. industrial roundwood versus fuelwood), terrain, equipment used for extraction, etc. Nonetheless, approximate investment needs can be estimated for indicative purposes.

Roundwood production in 1994 in the region was approximately 1,307 million cubic metres, of which 284 million cubic metres was industrial roundwood and 1,023 million cubic metres was fuelwood. These levels are projected to increase to 1,711 million cubic metres (consisting of 417 million cubic metres of industrial roundwood and 1,294 million cubic metres of fuelwood) by 2010, or an average annual increase of about 25 million cubic metres over the period. Assuming the incremental capital needs for harvesting the additional wood to be about US$4 to US$6 per cubic metre, the annual investment requirement for additional harvesting capacity will range from US$100 million to US$150 million per year. Additionally, about 10 percent of the fixed capital (equipment, machinery and infrastructure) will need to be replaced or enhanced each year, at an estimated rate of US$272 million to US$408 million per year. Thus, the total investment for wood harvesting will be approximately US$372 million to US$558 million per year (Table 11.16).

Table 11.16: Approximate annual investment needs for wood harvesting in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	18	25
NIEs	2	3
North Asia	107	161
Southeast Asia	118	177
South Asia	123	186
Pacific Islands	4	6
All Asia-Pacific	372	558

Investment needs in sawmilling capacity

The outlook for sawnwood through 2010 is for relatively slow growth, with output expected to increase only by an average of around 1.4 million cubic metres per year across the region. For this projected increase, an annual investment requirement of about US$108 million to US$216 million is estimated.

Much of the existing equipment in many sawmills requires replacement or enhancement, however. At least 10 percent of the existing plants, equipment and infrastructure will have to be changed, modified or enhanced. This investment requirement is estimated at about US$30 to US$60 per cubic metre of installed capacity, or a total of about US$300 million to US$600 million per year. Thus, the total annual investment needs for the sawmilling industry may range from about US$408 to US$816 million (Table 11.17).

Table 11.17: Approximate annual investment needs for the sawmilling industry in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	132	265
NIEs	12	24
North Asia	103	206
Southeast Asia	74	148
South Asia	83	166
Pacific Islands	4	7
All Asia-Pacific	408	816

Investment needs in the wood-based panels industry

Wood-based panels include a range of products, with varying capital investment needs for additional capacity. However, in the absence of specific information on related costs in different countries, the average investment for incremental output is estimated to be between US$450 and US$500 per cubic metre of installed capacity. The outlook for panel products indicates that production will increase by an average of about 0.86 million cubic metres per year. This will required an estimated annual investment of between US$387 million and US$430 million.

Existing technology and the condition and maintenance of plants and machinery in the panel-products industry is generally better than that in the sawmilling industry. It is estimated that the annual rate of replacement or enhancement will be about 5 percent of currently installed capacity, at a cost of about US$300 per cubic metre of capacity. This will require an annual investment of around US$639 million. The total annual investment needs for the wood-based panel industry will thus be between US$1,026 million and US$1,069 million (Table 11.18).

Table 11.18: Approximate annual investment needs for the wood-based panels industry in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	319	337
NIEs	28	28
North Asia	356	373
Southeast Asia	284	289
South Asia	34	37
Pacific Islands	5	5
All Asia-Pacific	1,026	1,069

Investment needs in the paper and paperboard sector

The incremental capital investment needed for one added unit of paper or paperboard manufacturing capacity is about US$2,000 to US$2,100 per tonne of installed capacity. Assuming that production will expand by an average of 3.2 million tonnes per year through 2010, it is estimated that investment needs for new capacity will range from US$6,400 million to US$6,720 million per year.

It is also assumed that 5 percent of existing capacity will require replacement or enhancement each year, at a cost of US$1,000 to US$1,200 per tonne of installed capacity. This will require an additional US$3,730 million to US$4,476 million per year. Thus, the total annual investment needs in the paper and paperboard sector will be approximately US$10,130 million to US$11,196 million per year.

Because a large portion of the paper and paperboard industry is based on non-forest raw material inputs, total investment needs have been adjusted to attribute approximately 33 percent (US$3,332 million to US$3,722 million) to the forestry sector (Table 11.19).

Table 11.19: Approximate annual investment needs for the forest-based paper and paperboard industry in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	1,736	1,940
NIEs	106	118
North Asia	551	615
Southeast Asia	751	839
South Asia	188	210
Pacific Islands	-	-
All Asia-Pacific	3,332	3,722

Investment needs for non-wood forest products and services

No accurate information is available on the investment needs for growing, managing, harvesting and processing most NWFPs. Scientific management of NWFPs is, however, extremely important for the future sustainability of the forestry sector, particularly in terms of socio-economic and environmental benefits. An annual investment of US$1,500 million to US$2,000 million is, therefore, tentatively suggested, with an equally tentative distribution by country group (Table 11.20).

Table 11.20: Approximate annual investment needs for non-wood forest products and services in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	226	301
NIEs	24	33
North Asia	402	536
Southeast Asia	533	710
South Asia	189	253
Pacific Islands	126	167
All Asia-Pacific	1,500	2,000

Total indicative average annual investment needs in Asia-pacific forestry

In addition to the specific investment requirements estimated above, it is recognised that considerable investment is required for institutional support, human resources development and capacity building, research and technology development, extension services, information dissemination and institutional infrastructure. Investment needs for this component are tentatively estimated to be approximately 10 to 15 percent above the total annual investment in other categories. The total indicative average annual investment needs for the Asia-Pacific forestry sector are thus estimated to be between US$15,469 million and US$23,213 million per year (Table 11.21).

Table 11.21: Total estimated average annual investment needs in the forestry sector in Asia-Pacific, 1994-2010

Component Investment Activity	Range of investment needs (US $millions)
Maintenance and general protection	1,594	3,188
Rehabilitation of degraded natural forests	1,680	2,520
Development of protected area systems	1,000	1,600
Forest plantations	1,275	1,725
Non-forest sources of forest products	1,600	2,400
Forest harvesting	372	558
Sawmilling	408	816
Panel products	1,026	1,069
Paper and paperboard	3,332	3,722
Non-wood forest products and services	1,500	2,000
Sub-total	13,787	19,598
Institutional support 10-15 percent of total of (i) to (x)	1,379	2,939
Sub-total	15,166	22,537
Unforeseen/unaccounted items 2-3 percent of total (i) to (xi)	303	676
Total	15,469	23,213

Table 11.22 provides a breakdown of the estimated total average annual investment needs by country group.

Table 11.22: Estimated average annual investment needs by country group in Asia-Pacific, 1994-2010

Country group	Range of investment (US$ millions)
AIEs	4,563	6,511
NIEs	338	477
North Asia	3,345	5,010
Southeast Asia	4,656	7,107
South Asia	2,079	3,301
Pacific Islands	488	807
All Asia-Pacific	15,469	23,213

Box 11.3: FUNDING FOR FORESTRY DEVELOPMENT The challenge of securing "new and additional sources of funding" to enable developing countries to implement sustainable forest management (SFM) has been a prominent item on the agenda for international forestry dialogue associated with UNCED. For example, the new International Timber Trade Agreement (ITTA) calls for the establishment of a "Bali Partnership Fund" to support producing countries (many in the Asia-Pacific region) as they introduce SFM. The questions are - how adequate is funding for forestry in the region and how effective are institutional arrangements for it? There is unfortunately too little information to permit definitive answers, especially regarding what the countries themselves spend or invest in forestry. The Asia-Pacific Forestry Commission discussed the topic of forestry funding in 1993 and its assessment of issues is available as a FAO report.104 FAO has recently reviewed funding for forestry in developing countries and published the results in the FAO State of the World's Forests 1997 (SOFO) - much of that assessment is relevant to the Asia-Pacific region. Several points need to be highlighted: 104 Report on the In-Session Seminar on Forestry Investment in Asia and the Pacific. Fifteenth Session of the Asia-Pacific Forestry Commission, Colombo, Sri Lanka, August 1993. Report No. FO:MISC/93/14. FAO, Rome. · There has been relative neglect of often very important domestic forestry funding due to the preoccupation with international funding flows. In the absence of better information, the misleading impression is given that forestry development in the region is dependent on external funding; · Not all Asia-Pacific countries need external funding to the same degree. The industrialised countries are generally self-sufficient with regard to capital needs - at least in the long term, Some of the developing countries in the region have the world's highest savings rates. Before the recent currency and stock markets upheaval, the Republic of Korea, Singapore and Hong Kong SAR, China were among the world's significant net capital exporters. Other developing countries in the region (e.g. Indonesia, Malaysia) had, in spite of very high savings rates, even higher demand for external capital to fuel extraordinarily rapid growth. Low funding availability is a less important barrier to forestry development than a lack of interest in forestry on the part of policy-makers. · In some smaller countries, external funding can play a critical role. · Put in brief, the situation, paraphrased from the outline in the FAO State of the World's Forests 1997, appears to be as follows: Domestic official funding · Forest revenue itself is important in all countries endowed with productive forests, an example being Indonesia's official Reforestation Fund which reportedly receives 32 percent of total revenue and now stands at close to US$1 billion - it is used to promote the establishment of private timber estates. Applying a "user pays" principle, fees on water from forests are charged to downstream water users to fund upland conservation in Japan; tourism gate fees for wildlife parks (most countries) and for "scientific tourism" (in Indonesia) are other examples in the region. · Asia-Pacific countries have been among those trying innovative financing mechanisms: with tradable carbon dioxide permits for carbon sequestration (South Pacific, Malaysia); ecotourism charges (Thailand); and scientific tourism fees (Indonesia). Official Development Assistance (ODA) · Of total 1993 estimated ODA to the developing world of US$1.54 billion, the Asia-Pacific region accounted for 37 percent - the largest single share (US$0.57 billion) of the total - but a ratio that is far smaller than the region's size and economic weaknesses appear to warrant. These levels fall far short (under a third) of estimated needs to achieve UNCED goals. · Globally, forestry appears to account for about 1.6 percent of combined 1993 official and private funding transfers to developing countries and forestry ODA is declining just like total ODA; Private sector funding · Since 1991, all of the increase in international funding comes from the private sector which now represents some 60 per cent of total external transfers to developing countries. Most international private investment (all sectors) benefited only about ten countries: China absorbed the largest share, with the remainder going mostly to India, Malaysia in Asia and seven other countries outside the region. · Private-sector funding requires well-developed capital markets and this limits opportunities to only a few, already relatively well-off countries, even in a dynamic region like Asia-Pacific; this will leave the weaker countries marginalised until public support (both internal and ODA) helps to upgrade their capacities. Issues and future priorities for action · As for the world in general, the main funding-related issues for Asia and the Pacific include: shortage of information; weak policies and institutions (these restrict absorptive capacity for both ODA and private sector funding); concentration of private investment and aid on a few countries, A point highlighted by the 15th session of the APFC was that forestry agencies have a bureaucratic outlook rather than a development or investment orientation. · New mechanisms with significant potential include: tradable carbon emissions reduction credits (with possible use of wastelands for planting); bioprospecting and patent rights fees; diversion of "sustainability certification" fees; taxation of lucrative commodities (such as those displacing forests). · One avenue deserving exploration could be Build-Operate-Transfer (BOT) funding, which the region has tapped with great success for public infrastructure and for utilities. The potential for this in building major forest industry complexes could be considerable. Source: Adapted and abbreviated from State of the World's Forests 1997, FAO, Rome.

Implications and choices for regional co-operation

The nature of change in the forestry sector has implications not only for national policy orientations and choices, but also for collaborative choices and co-operation at a regional level. Increasingly, national policy directions are influenced by regional and global factors - thus national choices will also need to take into account policies in neighbouring countries and the tenor of international opinion in establishing balance between environmental, social and economic dimensions.

The following areas appear to require particular focus on international, regional or sub-regional co-operation:

· developing and refining trade regimes: Trade is crucial to meeting future economic aspirations of the Asia-Pacific countries, but is also of vital importance in alleviating environmental and social pressures. Within the global policy arena, a major emphasis is on addressing the trade and environment nexus, and developing non-discriminatory trade rules that also promote sound environmental practices. The ongoing evolution of international forest products certification systems similarly encourages countries to place greater emphasis on environmental dimensions of forests as a way to ensure future participation in the economic (trade) dimension. Within this broad framework, there will continue to be calls for trade liberalisation. Under APEC, the Asia-Pacific region should make considerable progress toward free-trade by 2010. This will affect both trade-flows and patterns of investment.

· sustainable forest management: Countries in the region are already co-operating in establishing mutually acceptable criteria and indicators for sustainable forest management through ITTO processes (tropical forests) and the Montreal Process (temperate and boreal forests). For countries with similar forest types, there will be benefits in co-operating and sharing information on how to meet various sustainable management criteria as well as how to measure performance. For a number of countries, co-operation in developing approaches for greater conservation and forest protection under conditions of high population density may prove worthwhile.

· watershed management: Where river systems cross international boundaries, joint action may be necessary to ensure appropriate policies are in place to enable downstream countries to obtain adequate water supplies without placing unrealistic burdens on upstream countries. This may require establishment of better mechanisms for management and policy negotiations and responsibility sharing for maintaining watersheds of international significance, particularly those originating in the Himalayas.

· new investment: There are potential benefits from adopting joint strategies for attracting investment from the new opportunities emerging from recent environmental agreements. Currently, the largest opportunities are for sustainable management of biological resources and for investment for carbon sequestration in exchange for pollution rights under climate change agreements.

· information sharing: An important aspect of globalisation is developing co-operative mechanisms and sharing information. Information and market intelligence are important factors for attracting investment or development aid. In effect, countries must market and promote their policy agendas. Co-operation to improve information on the forestry sector and related sectors (such as agriculture) will remain an important part of the policy agenda of international organisations and forums such as the APFC.

· education and training: The enormous facets of forestry mean it is not feasible for each country to provide specialised training in every sphere. Consequently, the development of new specialised regional training centres, such as the Regional Community Forestry Training Centre (RECOFTC), would enable better allocation of scarce training resources, promote sharing of information throughout the region and improve specialisation and networking.

· research: One of the areas where considerable progress can be made is through collaboration in transferring research and technology. Both IUFRO and FORSPA have agendas to assist and consolidate the gains from forest research networking. The recently established Asia Pacific Association of Forest Research Institutions (APAFRI) is also expected to increasingly serve this objective in the future. Particular areas that appear promising for such collaboration include technologies for managing and assessing trees outside forests; afforestation of wastelands, for carbon capture; urban forestry; management of selected biological resources; non-polluting processes for pulping non-wood fibres; technologies for mainstreaming wood energy as a commercial renewable fuel; domestication and management of selected high-potential NWFPs.

· a common voice for Asia-Pacific: A central theme of the APFSOS study has been the extensive similarities and commonalities among countries in the region. Nonetheless, in the international forestry arena there are few mechanisms - formal or informal - that draw the countries of the region together to discuss and develop supportive policy positions and to speak with a common voice on issues of significance for Asia and the Pacific. There may be significant benefits in further developing informal affiliations to promote an Asia-Pacific agenda in the international policy debate.