Forest industries in the attack on economic underdevelopment

Some aspects of development policy
The products of forest industries in the economy - present and future
Characteristics of forest industries
Characteristics of the forest base
Features of forest industries relevant to development
Resources, technology and research
Determining the role of forestry
Planning for forest industrial development

JACK C. WESTOBY

This article was prepared by JACK C. WESTOBY, Chief, Forest Economies Branch, Forestry and Forest Products Division, FAO, in collaboration with ISAAC KISSIN (Brazil), LUIGI SPAVENTA (Italy), ALBEN URBANOVSKY (Yugoslavia) and the staff of the Forest Economics Branch.

This article appears in The state of food and agriculture 1962

FOREST INDUSTRIES present many special features. They furnish a very wide range of products, both consumption goods and intermediate goods flowing into many sectors of the economy; the demand for these rises sharply with economic growth. The industries vary considerably in their raw material and other factor requirements. In most of them alternative technologies can be successfully employed. They are based on a renewable resource. This resource is intimately linked with agriculture.

These features suggest that potentially forest industries can play a significant part in promoting economic growth in presently low income countries. This chapter represents a preliminary attempt to assess their potential role. The analysis is far from complete, and many important aspects are treated cursorily or not at all. The purpose of the chapter will have been served, however, if it succeeds in drawing the attention of policy makers to certain major considerations which are sometimes overlooked, and if it encourages economists and for esters to undertake a more profound and detailed study of some of the problems raised.

Some aspects of development policy

The postwar period has seen a growing awareness of the need for economic development in those areas of the world which the industrial revolution had left untouched. Development problems have acquired first place not only in the attention of governments and international organizations but also in the social sciences, where they have provided the common denominator for the integration of different branches of analysis and of different disciplines. This impact is also being felt in the specialized fields of study devoted to the economic and technical problems of single sectors or industries. Specialists and technicians can no longer disregard the wider context in which industries and sectors operate; that context is not a constant but a variable - perhaps the most important variable. Today sector problems and targets are at once subordinate to, and integral instruments of, general problems and aims of development.

In the following pages an attempt will be made to look at the forest industry sector in the light of the growth problems of economies at the beginning of their development processes. Forests are a most important asset of a country's wealth - an asset that even very poor countries possess or could possess - for they provide a renewable raw material for a whole range of industries which have acquired great importance in many industrially advanced countries. This asset is very often neglected in less developed economies, or exploited only as a raw material for export. This raises a number of obvious questions. What are the propulsive possibilities of the forest industries sector for the less developed areas? What can the role of this sector be in a development program aimed at attaining self sustained growth?

To answer these questions vague and general considerations on what prima facie appear to be the merits of forest industries will not suffice. Economic theory and techniques of development programing have progressed considerably in the past few years. Although the field is certainly not clear of controversy and many unsolved points yet remain, substantial agreement has been reached as to the criteria which should orient choices and as to the data which are necessary to apply the criteria in practice. Thus sector analysis should follow the main lines set by general economic analysis, if the necessary integration between the two for the purposes of development is to be reached.

We shall therefore start by reviewing in general terms some of the considerations relevant in sector analysis, and by defining the data and the elements of knowledge needed to appraise the economic possibilities of the forest industries sector.

DEVELOPMENT AIMS - A POLITICAL CHOICE

Underdevelopment is a relative and to some extent a subjective notion. Some economies are defined as underdeveloped insofar as there are others which are more developed; and the former "are those which are dissatisfied with their present economic condition and want to develop."¹ For such countries economic growth has become or is becoming a matter of ideology, since it is bound up with the achievement of a truer independence - economic as well as political - and of higher standards of human dignity as well as of material well-being for the population. An understanding of the fact that development in its aims and motivations is not solely a matter of economics is essential in order to avoid false controversies on a number of points, and to apply economic tools with more accuracy and to better purpose.

¹ROBINSON J., Notes on the theory of economic develop meet. In Collected economic papers, V. 2. Oxford, Black well. 1960 p. 96-97.

First among these points is the need for public intervention. This follows almost by definition from the decision to change the existing situation of backwardness and from the fact that the existing situation is frequently the outcome of nonintervention or intervention of the wrong kind. If that decision is accepted, there can be no argument as to whether a power external to the market, for example, the state, should interfere with the "free play of market forces." In underdeveloped economies the object of intervention must be defined in very broad terms; since it is a question not of a single sector or of a single area, but of the whole economy lagging behind, intervention should, directly or indirectly, in milder or more energetic form, embrace the whole system. This, of course, amounts to saying that planning is necessary, meaning by planning the over all co-ordination of public intervention in various fields, aimed at attaining clearly defined and mutually consistent targets of policy. Over all planning does not necessarily mean direct public intervention in all fields. It is compatible with the predominance of private enterprise (provided it is guided by an adequate system of incentives and sanctions). It means essentially awareness of the ends to be reached in the first place, and then systematic programming of the use of all the available policy instruments with these ends in view.

From this approach to development policy it follows that, once the plan frame is defined, a number of excessively debated issues, such as the demarcation of public and private sectors, or the contraposition of agricultural development to industrialization, take on a truer significance. The solution of these and other similar problems cannot be reached in the abstract, but must be instrumental to the final aims, and even more important, the actual administration of the plan. This also applies to a large extent to the controversy of light versus heavy industry or more generally of immediate welfare versus long term growth. In all cases, while the solution will depend on the structural conditions and the physical endowments (that is, the data) of the economy concerned, the main element of choice is political, since the definition of the general ends of the plan is mostly the result of a political decision.

FINANCIAL APPRAISAL AND SOCIAL EVALUATION

A second and equally important consequence following from the principles stated above concerns the evaluation of benefits and costs of investment policies and projects. Benefits and costs should be estimated with reference to the aims set in the plan, and policies and projects be classified accordingly. Since the aims of the plan or more generally of development policy concern the entire community and not single producing agencies, it is not surprising that this kind of evaluation may diverge, and indeed will often diverge, from the private criteria of evaluation.

The principle of distinguishing between private evaluation and social evaluation - between financial appraisal (in terms of monetary returns in the short run or to special groups) and economic appraisal (in terms of both short- and long-term returns to all people affected) - has already full acceptance in the advanced economies for all the so called public utilities, that is for sectors of general interest in which it is admitted that financial benefits and costs to particular firms may not coincide with the benefits and costs for the community. The good reason why the same principle has a much broader application in less developed economies is that in such conditions, at least for a time, nearly all economic activities must be considered as public utilities since the historic trend has shown a general divergence between private and social interest.

Private and social evaluations may diverge for reasons which have their origin in micro- as well as macroeconomic, in static as well as dynamic, considerations. First of all the price system in an underdeveloped economy is often not "significant," that is, is not such as to insure either a technical or an economic optimum, since it does not reflect the relative scarcity of goods and factors; nor, a fortiori, does it reflect the scale of priority established in a development policy. Secondly, a given investment project may have a number of "secondary" benefits which do not appear in the form of money returns to the firms most directly involved, but which should be included in an economic appraisal; these consist essentially in "the increase in net incomes in activities stemming from, or induced by, the project."² Finally, account should be taken of secondary effects from a dynamic point of view. These can be grouped under the heading of external economies of production and consumption: investment in a propulsive sector will on the one hand create favorable conditions on the supply side for investment in other sectors; on the other hand, through its demand for inputs and through the new demand arising from the higher incomes of the newly employed, it will enlarge the market for other industries, thus providing the incentives for new investment on the demand side. This last consideration reflects the fact that, with lack of capital, lack of demand is also a most important obstacle to development.

²This is the definition given in: UNITED STATES INTER AGENCY COMMITTEE ON WATER RESOURCES, SUBCOMMITTEE ON EVALUATION STANDARDS. Report to Interagency Committee on Water Resources: proposed practices for economic analysis of river basin projects. Washington, D.C., 1958.

THE DATA NEEDED FOB INVESTMENT DECISIONS

Whichever investment criterion is adopted, certain types of data are needed to evaluate the economic impact of investment in a given sector. These can be grouped as follows.

Technological data

Such data regard the shape and the range of the production function. Independently of whether the choice is oriented toward higher or lower capital intensity, in can be said that the wider the range of the production function (that is, the higher the number of techniques available), the more suitable, ceteris paribus, a sector is for investment in a less developed country, because the possibility of adaptation to the general aims of policy and to the structural conditions of the country is greater. The study of the production functions requires:

(a) a knowledge of the internal structure of the sector (the wider and the more integrated this is the greater the flexibility in decisions, owing to the possibility of combining different techniques at different levels of production);

(b) a knowledge of labor productivity, value added, capital output ratio and surplus per unit of output and capital for each technique available; in this connection it should be noted that the production function relevant for an underdeveloped economy does not necessarily coincide with that of a more advanced country; technical progress has undoubtedly been biased by factor availability and prices of advanced countries, and there are possibilities, to which not enough thought has yet been devoted, of devising techniques more suitable to different conditions.

Investment and cost data

These data are needed not so much for estimating actual production costs, which vary with input prices, as for checking the consistency of projects against the availability of funds and the size of the market. Technological indivisibilities may prevent the adoption of a given technique at less than a certain minimum scale, which might turn out to be too large relatively to the size of the market and to the amount of funds available.

This group of data can also include the physical characteristics of inputs and outputs, the relative weight of which plays an important role in deciding to what extent a sector has, in a given country, a relative advantage vis-à-vis the rest of the world and where the industry should be located.

Demand data

These data, on the other hand, give an idea of the importance of the sector and condition the choice of techniques and sizes. Demand projections also make it possible to estimate the gross import saving effect of investment in a given sector.

Secondary and indirect effects

Some of these effects belong to the general category of external economies. Others are more precisely connected with the creation of a new supply of some goods or service which will stimulate the development of other activities outside the sector. Still others stem from the creation of new demand which widens investment opportunities in other sectors: this happens through increased consumption expenditure by the newly employed, and through the input requirements of the new producing activity. The degree of backward and forward linkage of a sector with other sectors is considered a very important index of priority in sectoral allocation, since it measures the cumulative expansionary effect that a given investment may have on the whole economy.

In the following sections an attempt will be made to provide some of the data and elements of knowledge listed above for forest industries. We shall start with an assessment of present and future demand conditions for forest industries products, since these constitute an essential frame for the problems we are considering.

The products of forest industries in the economy - present and future

In this section we shall: (a) examine the structural characteristics of the demand for forest products, their role in the world economy, and the interdependence between forest industry and other sectors; (b) illustrate the present situation of production, consumption and trade of forest products in the two great blocks³ into which the world can today be divided - the developed areas such as western Europe, North America, the U.S.S.R., Oceania and Japan, and the less developed areas in Africa, Latin America and the rest of Asia; (c) analyze the dynamic characteristics of demand for forest products in order to estimate its prospects in the less developed areas; (d) draw some conclusions regarding the extent to which future requirements should be satisfied by local production in the less developed areas.

³The main justification for this crude dichotomy (with debatable components in either block) is statistical convenience.

STRUCTURAL CHARACTERISTIC'S OF DEMAND

Even if one decided to overlook the variety of products, techniques and economic organizations of the sector under examination, some major distinctions must nevertheless be traced inside it. Wood removed from forests can be used either as fuelwood or for industrial purposes; here we shall only be concerned with industrial wood, since it is evident that fuelwood is secondary⁴ from the point of view of economic growth. Industrial wood can be employed either in uses where, though undergoing several transformations, it maintains intact its chemical and physical structure, or as a raw material in chemical processes where it loses, so to speak, its individuality. Thus we have on the one hand sawlogs transformed into sawnwood, which is in turn used for construction, shipping and manufactured products; veneer logs, transformed into veneers, plywood and blackboard, also used for construction and manufacture; logs transformed into sleepers; pitprops, piling and poles. And we have, on the other hand, pulpwood transformed into pulp by mechanical and/or chemical action, and then manufactured into paper and paperboard. An intermediate position between these two groups is occupied by two more recent products - fibreboard and particle board; from the manufacturing point of view they are nearer to the second group, but from the point of view of demand characteristics they should be considered in the first group, since they are employed in much the same uses as sawnwood and plywood.

⁴Secondary, but by no means negligible. Examples of a situation where fuelwood can contribute to economic growth are: (a) in heterogeneous hardwood forests, if alternative fuels are expensive or unavailable, species of negligible commercial value can be used to power wood transformation industries; (b) several successful iron smelting operations make use of wood charcoal, thereby reducing the need for good coking goal; (c) in fuel-hungry south Asia, where most dung is burned instead of being returned to the soil, village fuelwood plantations may be the key to a rise in agricultural productivity.

In physical terms sawlogs account for a much greater volume than pulpwood. By far the most important use of sawnwood is construction, followed by packaging and manufacturing; the latter, however, covers an enormous number of products - from furniture to railroad cars, parts of motor vehicles, handles, toys, ladders, and pencils. In residential building wood is essentially used for framing, sheathing, millwork and flooring. The major pulpwood product is paper, followed by paperboard; and the most important types of paper are newsprint, printing paper, paper for wrapping, and bags.

It is unnecessary to give further details to show that wood products, directly or indirectly, must have a large share of final demand, and a share which is spread over a very large number of items.⁵

⁵The major wood transformation industries, and the uses to which their products are put, are shown graphically in Figure I on page 176.

Both these facts are confirmed by quantitative observations. In 1953 the sector of forest and forest products (including both wood products and furniture and paper and paper products) accounted for 7.2 percent of the total value added and for 9.25 percent of total world employment of mining and manufacturing industries in the world, thus ranking fifth among industries in terms of value added and fourth in terms of employment.⁶ The breakdown for the two main branches is the following: 4.2 and 3.1 percent of value added and 7.9 and 2.2 percent of employment respectively for wood products and furniture and for pulp, paper and paper products. This shows a remarkable difference between the two main branches in labor productivity, which is higher than the average in paper and paper products and much lower than the average in the other branch.

⁶UNITED NATIONS STATISTICAL OFFICE, Patterns of industrial growth 1936-1958. New York, 1960.

TABLE 1. - INDICES OF INTERDEPENDENCE OF FOREST INDUSTRIES

	Ratio of value of purchased inputs to value of total production			Ratio of value of intermediate demand to value of total demand
	Average all industries	Wood and wood products	Paper and paper products	Average all industries	Wood and wood products	Paper and paper products
Japan	48.7	68.2	62.8	46.1	29.6	80.2
Italy	43.8	71.6	53.8	41.1	43.1	75.3
United States	42.6	42.1	56.6	41.9	40.4	79.2
Norway	36.4	51.5	55.7	30.4	29.1	42.5

SOURCE: Based on CHENERY H. B. and CLARK, P. (3., Interindustry economics. New York, Wiley 1959, p. 230.

The "spread" of uses of forest products, or rather the extent to which they enter into other products (the degree of indirectness of the sector), is evidenced, with some limitations, in the available studies of interindustry interdependence by means of input/output tables. Two coefficients are relevant in this connection: the ratio of the value of purchased inputs to that of total production of a sector, which indicates how far production in a sector "involves the indirect use as compared to the direct use of capital and labor;"⁷ and the ratio of the value of intermediate demand to that of total demand for the products of a sector, which shows the extent to which the sector "sells its output for further use in production."⁸ These ratios for a given sector should be compared with the average or mean values of the ratios for the whole economy. This comparison is provided in Table 1 for four countries - Japan, Italy, the United States of America, and Norway - which shows the average ratios for the economies as a whole and the ratios for wood and wood products and paper and paper products taken separately.

⁷CHENERY, H.B. and CLARK, P. G., Interindustry economics. New York, Wiley, 1959, p. 205.

⁸Op. cit., paragraph 201.

It appears from these figures that in both subsectors and in all countries (with the exception of the United States for wood and wood products) the ratio of the value of purchased inputs to the value of total production is considerably higher than the average; it should be noted, however, that the purchase of inputs is concentrated, as is to be expected, in agriculture and forestry, from where the raw material is taken. More significant, as an indication of the linkages of the sectors considered with the rest of the economy, are the ratios of intermediate demand to total demand. Here there is a divergence between paper and paper products, where the value of the ratio is very much higher than the average, and wood and wood products, where it is lower (though not very much lower) than the average. This is essentially due to the fact that in input/output tables, construction is included in final demand; as a consequence, the share of wood and wood products used in construction, which would normally be considered as intermediate products (for example, wood for framing and sheathing or for concrete forms), appears only in final demand. Thus the values of the second set of ratios tend to be undervalued for wood and wood products relative to other sectors. When this is taken into account, and considering the high values of the ratio for paper and paper products, we reach the conclusion that the sector of forest products as a whole has a high degree of indirectness and of interdependence with other sectors.

CONSUMPTION, PRODUCTION, AND TRADE

Table 2 gives, for the two groups of areas, developed and less developed, the production, total consumption and consumption per head of the main categories of forest products. Several striking facts emerge from this table.

The production of forest products is very heavily concentrated in the developed world. Consumption is even more highly concentrated, the less developed areas relying on the advanced regions for a substantial proportion of their supplies of certain categories. At the same time the population of the less developed areas is over twice that of the developed areas. Thus consumption per head of forest products in the less developed areas is extremely low: one seventeenth of that in the developed areas for sawnwood; one twenty-third for paper and board.

The position of less developed areas vis-à-vis the rest of the world is further illustrated in Table 3. Also in the case of forest products the less developed countries are exporters of raw material and importers of manufactures; they export sawlogs; are more or less in balance, in quantities, for Sawnwood (considering that their deficit is to a large extent due to the lack of coniferous forests, so that in aggregate they are exporters of broad-leaved Sawnwood but importers of coniferous sawnwood); and they are net importers of fibreboard and especially of pulp, paper and board. (The table does not include wood manufactures, such as furniture.) As a result, in spite of their very low level of consumption, the less developed countries show a net deficit in value terms. Not only is the unit value of products much higher than the unit value of materials (though not by 80 much as in the case of products of other industries, since raw material accounts for a very large part of inputs, especially in wood products), but also the value of imports is increased, relatively to the value of exports, by the whole amount of freight, which, for the largest part, accrues to developed regions who own the largest share of merchant fleets.

TABLE 2. - PRODUCTION AND CONSUMPTION OF FOREST PRODUCTS, 1957-69 AVERAGE

	Unit	Developed areas	Less developed areas	Ratio A:B
POPULATION (1958)	Million	923	1 956	Just under half
PRODUCTION
Industrial wood	Million cubic meters ®	842.9	103.2	8
Sawnwood (including sleepers)	Million cubic meters (a)	288.3	133.7	8
Wood-based panel products	Million cubic meters (r equiv.)	38.01	23.04	13
Paper and board	Million metric tons.	60.0	23.4	18
APPARENT CONSUMPTION TOTAL
Sawnwood	Million cubic meters (s)	286.7	135.0	8
Wood-based panel products cubic meters (r equiv.)		38.3	23.0	13
Paper and board	Million metric tons	58.1	5.3	11
APPARENT CONSUMPTION: PER 1 000 CAPITA
Sawnwood	Cubic meters	310.0	18.0	17
Wood-based panel products	Cubic meters (r equiv.)	41.7	1.5	28
Paper and board	Metric tone	63.0	2.7	23

NOTE; ® = roundwood; (s) = sawnwood.
¹Including an estimate of 0.4 for unrecorded production. - ²Including an estimate of 0.61 for unrecorded production.

TABLE 3. - TRADE OF LESS DEVELOPED AREAS, 1957-59 AVERAGE

	Unit	Quantity			Value
		Exports	Imports	Net trade1	Exports	Imports	Net trade1
		Million stated units			Million $
SAWLOGS	Cubic meters ®	7.6	1.2	+ 6.4	152.3	40.0	+ 112.3
SAWNWOOD
Coniferous	Cubic meters (s)	1.5	3.6	- 2.1	68.8	155.3	- 86.5
Broadleaved	Cubic meters (s)	1.6	0.8	+ 0.8	83.5	46.7	+ 36.8
Sleepers	Cubic meters (s)	0.2	0.2	-	5.7	29.3	- 23.6
Veneers	Cubic meters (s)	0.07	0.02	+ 0.05	4.6	3.9	+ 0.7
Plywood	Cubic meters (s).	0.18	0.25	- 0.07	21.5	24.7	- 3.2
Fibreboard	Metric tons	0.04	0.08	- 0.04	3.3	10.2	- 6.9
Particle board	Metric tons	0.02	0.02	-	1.1	2.1	+ 1.1
Pulp	Metric tons	0.06	0.57	- 0.51	9.9	83.4	- 73.5
Newsprint	Metric tons	0.03	0.91	- 0.88	3.6	152.3	- 148.7
Other paper and board	Metric tons	0.05	1.05	- 1.00	13.1	258.6	- 245.5
TOTAL VALUE2					406.0	873.0	- 467.0

¹+ = export surplus; - = Import surplus. - ²Including some manufactured products (SITC 2d, 25, 03, 84).

NOTE: ® = roundwood; (a) = sawnwood.

The final figures in Table 3 show a net over-all deficit in value terms (for SITC Divisions 24, 26, 63 and 64) of U.S. $ 467 million. Besides the items listed in the table, this figure includes certain manufactures of wood and paper. It excludes, however, many finished goods of wood and paper, such as furniture, prefabricated houses, books, newspapers and other printed matter, and so on. Were these included the deficit would be considerably greater.

This situation is all the more striking considering that many of the less developed areas have their raw material ready at hand, and that not all the deficit sectors necessarily require, as will be seen later, exceptionally complex techniques.

DYNAMIC CHARACTERISTICS OF DEMAND

In estimating demand trends for forest products the main variable to be taken into account, as in the case of all other products, is income. However, a rather precise relationship between income and consumption holds only for pulp products. In the case of other forest products this relationship is complicated by the interaction of other factors, and especially by an interdependence, which becomes relevant particularly in low income areas, between demand and supply.

Very high correlations have been obtained between consumption per head of paper and board and national income (normally gross national product) per head. These relationships hold both for paper and board in total, and for the several broad categories of paper and board. They hold whether the parameters are studied in space, through cross-sectional analysis, comparing many countries at a given time, or in time, comparing the evolution of consumption and income in a given country or region over a period of years.

The relationship is not a linear one; in fact, income elasticity declines as income rises. Thus at income levels of around $100 per head, elasticity is as high as 2.5 to 3; at levels of around $200 to $400 per head, it ranges from about 1.5 to 2.5. At European income levels, roughly $500 to $1,000, it is well over unity. For the United States of America, with an income per head of well over $2,000 it is below unity for most categories.⁹

⁹ FAO. World demand for paper to 1975, Rome. 1960.

This decline in elasticity as income rises applies to each of the major categories of paper and board as well as to paper and board as a whole. But the decline is not uniform. Thus at low income levels of $50 to $150 per head the elasticity for cultural papers (newsprint, printing and writing paper) is somewhat higher than that for industrial papers (other papers and paperboard). At $200 to $250 per head the elasticity is about the same - something under 2. At higher income levels, from $800 and up, the elasticity for industrial paper is much higher than that for cultural papers. These data lead to the conclusion that a remarkable expansion in the demand for paper and paper products is to be expected in the less developed countries - an expansion much more rapid, for equal rates of income growth, than in more advanced countries.

There has, in fact, been a marked increase in consumption per caput of paper and board in the less developed world over the last decade, as the figures in Table 4 show:

TABLE 4. - CHANGES IN PER CAPUT CONSUMPTION OF PAPER AND BOARD, 1946-48 TO 1957-59

	1946 48	1957 59	Percentage increase
	Kilograms per caput
Developed areas.	36	62.9	63
Less developed areas	1.49	2.85	91

In the light of the earlier quoted demand elasticities, it may seem surprising that relative progress in the less developed world has not been more marked. It should be recalled, however, that during the 1950s the rate of per caput income growth in the less developed areas lagged considerably behind that in the more advanced areas.

When we turn to the other principal forest products, however, it is much more difficult to pronounce with certainty on demand trends. Factors other than income heavily influence the demand for sawnwood and for wood-based sheet materials. Demand for all these products consists overwhelmingly of derived demand. In many of the end-uses in which they are employed, these products can substitute each other to a high degree. Thus for many purposes plywood, fibreboard and particle board are all technically feasible solutions, and the material adopted will depend on relative prices. Moreover, all three can take - and have taken to a considerable extent over the last decade or two - the place of sawnwood over a broad range of end-uses. Finally, there is a high elasticity of substitution in many avenues of utilization between all the products of the forest industries sector and the products of other sectors of the economy such as bricks, cement, steel in construction, metals and plastics in furniture and packaging. These considerations tend to deprive the concept of income elasticity of demand of much of its empirical relevance, since the coefficients which can be estimated on the basis of time-series or of cross-sectional analysis conceal the effects on demand of the other factors which have been mentioned.

From what has been said it is clear that the trend in demand for these products will depend largely on their price relative to each other and to the products of other sectors. Simple price relatives furnish no clear guide, however, since technical progress - which always tends to be material-saving, both for wood and for its competitors - can considerably modify the impact of relative price movements.

An assessment of the available data¹⁰ leads to the conclusion that, taking sawnwood and wood-based panel products together, demand does increase with income, and, at low levels of income, increases at a rate equal to or greater than the rate of increase in income.

¹⁰Notably detailed surveys carried out recently in Uganda, Kenya, Tanganyika and Ghana by Pringle, Arnold, de Backer and von Maydell.

Thus for sawnwood and wood-based sheet materials as well as for paper and board economic growth will bring rapidly increasing requirements in countries at present with low incomes.

FUTURE REQUIREMENTS AND ALTERNATIVE SUPPLY POSSIBILITIES

There have recently been prepared estimates of forest products requirements in the underdeveloped regions of the world by 1970. These estimates are based largely on regional studies of timber resources and requirements presently under way, or recently completed, by FAO in collaboration with the regional Economic Commissions of the United Nations.

A substantial rise in industrial wood requirements by 1970 is foreseen in all the less developed regions (Table 5). This increase ranges from 56 percent for Latin America to 83 percent for Asia. For the less developed areas as a whole the increase is 72 percent.

For these regions, the current decade will thus bring need for an additional 32 million cubic meters (sawn) of sawnwood, 8.6 million tons of paper and board, and 8 million cubic meters (in roundwood equivalent) of plywood, fibreboard and particle board.

TABLE 6. - FOREST PRODUCTS: RECENT CONSUMPTION AND ESTIMATED 1970 REQUIREMENTS IN THE LESS DEVELOPED REGIONS IN ROUNDWOOD EQUIVALENT

TABLE 6. - ALTERNATIVE SUPPLY PROSPECTS FOR ADDITIONAL ROBUST FOREST PRODUCTS REQUIREMENTS

These estimates are relevant to the problem of investment in the sector of forestry and forest products, since they show the demand on which an expanded productive capacity could rely, or, alternatively, the cost, in terms of foreign exchange of not expanding productive capacity at a rate sufficient to meet additional demand.

Table 6 provides a tentative estimate of these costs, under various hypotheses. Hypotheses A and B represent two extremes: under A it is assumed that productive capacity will not be expanded at all so that all additional consumption will be satisfied by imports, and under B that production will be expanded so as to meet entirely the increase in consumption (that is, leaving net imports unchanged). Both hypotheses are rather unreal, but are interesting insofar as they show that the capital cost of expanding productive capacity (hypothesis B) and hence of ensuring a constant flow of output, is not much greater than that of importing the required additional quantity of products in one year.

SUMMARY

It is now possible to draw some conclusions regarding the "demand side" of forest products with reference to less developed areas.

(a) Forest products account, in the world total, for a substantial share of industrial production and industrial employment.

(b) (consumption, however, is very unevenly distributed between the developed and the less developed regions - per caput consumption in the latter being extremely low.

(c) The expansion of the forest products sector is strictly connected with general industrial expansion and with the growth of income both through technological interindustry relations and through income demand relations. The former are shown by input output tables in the form of a high degree of indirectness of the sector; the latter find expression in high coefficients of income elasticities of demand. These relations show that, if the expansion of demand for forest products can be considered as an effect of income growth, the expansion of supply of forest products, on the other hand, owing to its forward linkages, can be a stimulus to the expansion of other sectors.

(d) The share of less developed areas in total production is even lower than their share in total consumption. In other words, their productive capacity is not even up to their very modest requirements. As a consequence they are heavy importers of manufactured products, although net exporters of raw material (sawlogs and veneer logs).

(e) The net trade situation in value terms is even more unfavorable. Transportation costs are very high for the exported raw material and are fairly high on the imported products, but transportation profits seldom accrue to the less developed areas, since they do not own important merchant fleets. On the other hand, the f.o.b. price of imported products is much higher than that of exported raw material, since the former embodies all the value added in manufacturing.

(f) Future prospects for the less developed areas are no brighter as far as their net trade position is concerned. Income elasticity of demand is very high, not only for paper and paper products but also to a lesser extent for wood products. Even if the rate of expansion of productive capacity continued at the rate of recent years, the net deficit would increase substantially by 1970, with a considerable addition to the already heavy burden in terms of foreign exchange. Only if something more is done can this burden be reduced. The economic problem is to see which cost is higher relative to benefits - that of investing in the sector or that of paying for increasing imports.

FIGURE 1. - Forest products flows chart

TABLE - WOULD's PRIMARY INDUSTRIES COMPARED (1960)

This problem will be considered in subsequent sections, but two things should be said immediately. First, the problem of comparing costs and benefits is economic and not financial; all benefits, direct and indirect, short- as well as long-term, should be considered and weighed against costs for the community, that is, social costs.

Secondly, the problem cannot be given a ready-made solution on the basis of the traditional doctrine of international trade and specialization. A static theory cannot account for dynamic phenomena, nor can it justify the result of past trends, such as the concentration of forest industries (or of any other industries for that matter) in more advanced areas. Traditional international trade theory takes for granted that industries are where they are, but cannot explain why they are there. Such a theory is founded on a given distribution of external economics and is valid within its limits, but it cannot be used to infer that such distribution is the optimal one or that it cannot or should not be altered. Very few advantages are really natural, in the sense that they cannot to some extent be created in the long run. In the case of forest products the natural element underlying the existing forest industry pattern might be the distribution of conifers. This in turn depends, however, on the favored position of conifers, which technical progress, especially if consciously oriented, could undermine, not to speak of the fact that it might also be possible to alter the existing distribution of conifers. In any case, all arguments in favor of maintaining the status quo which are based on the theory of international specialization are only valid when long-term advantages in terms of accumulation and reinvestment, and social advantages in terms of external economics, are neglected - that is, only when applied to a static context - but cease to have any relevance when the question is exactly that of creating those advantages in order to change the status quo.

Characteristics of forest industries

THE GLOBAL PATTERN

The simplified forest products flow chart shown in Figure 1 demonstrates schematically the place of primary forest industries in relation to the forest on the one hand and to other branches of the economy (including final consumption) on the other. It also brings out some important interrelations between the forest industries, whose demands on raw materials are largely complementary but in part competitive, and whose products, too, are to some extent substitutive and hence competitive, but also complement each other in many respects in satisfying the needs of other sectors and of final consumers.

A general idea of the relative importance of the major primary forest industries can be obtained from Table 7.

The contrasts between the four main groups emerge clearly from a comparison of some of the ratios involved (Table 8).

TABLE 8. - SELECTED RATIOS: WORLD s PRIMARY FOREST INDUSTRIES (1980)

Forest industry	Gross value of output per unit of raw material	Investment per person employed	Investment per unit of raw material	Employment per unit of raw material
	$ per m3 ®.	1.000 $	$ per m3 ®	No. per 1,000 m3 ®
Sawmilling	27	2.6	15	5.7
Pulp and paper	57	23.8	151	6.4
Plywood	40	4.2	45	10.5
Board produce	57	9.3	74	8. 0

The pulp and paper industry, followed by board products, is a good deal more capital-intensive than either plywood manufacture or sawmilling. Moreover, it yields the highest gross product per unit of raw material. Since both pulp and paper and board products operate mainly on small-dimensioned woods, do not

make use of high value timbers and are in fact utilizing to an increasing extent wood residues, both from other forest industries and from forest operations, their lead over plywood manufacture and sawmilling in terms of value added per unit of raw material is even more pronounced than is shown in the table.

These aggregates and averages, however, conceal great differences in the scale of operations (and factor requirements) within each main group, as we shall see shortly when we discuss some of the principal features of each industry group in turn. First, however, we should note that there are a number of minor primary forest industries omitted from these tables: other industries concerned with wood transformation, such as charcoal, wood-wool manufacture and wood distillation; and industries concerned with the extraction and refining of tanning materials, resins, lacs, oils, and the like. Thus, total employment in the primary wood-transforming forest industries reaches close on 6 millions, while about the same number are engaged in the secondary forest industries - furniture, container, box, match and other wood-working, and various paper converting industries.

THE SAWMILLING INDUSTRY

In the sawmilling industry, the size of establishment varies from small mills (often mobile) in the forest, producing a few cubic meters a day for local needs, to highly mechanized mills with an annual capacity of several hundred thousand cubic meters, producing for export or serving large consumption centers. All have their place; optimum size and location can be determined only in the context of raw material supply, markets served, and communications between the two. Communications bulk largely in determining location, given the high incidence of transport costs on the raw material delivered mill and the finished product delivered to the market. Value added in processing is small, and economies of scale in the mill installation not of decisive importance Typically the cost of logs delivered mill represents 50 to 70 percent of mill production costs. Because of this, and because of the need to carry an adequate stock of logs to assure continuous operation and of processed sawnwood to meet customers' requirements, working capital needs are heavy, often amounting to as much as fixed investment.

Labor needs vary within very wide limits, depending on the type of material sawn, the degree of mechanization and, of course, on the efficiency of operations. To produce 1 cubic meter of sawn softwood in a mill of 10-15,000 cubic meters of annual capacity in a less developed European country requires 10 to 14 man-hours; in a larger mill of 20-35,000 cubic meters of annual capacity, only 7 to 10 man-hours are needed. The more homogeneous the log intake, the greater the possibilities of mechanization and labor-saving. Hence, labor productivity (as measured by output per -man-hour or man-year) is normally much higher in sawn softwood mills than in mills sawing hardwood. In predominantly coniferous forest areas - North America, the U.S.S.R. and northern Europe - softwoods comprise 85 to 95 percent of the raw material for sawmilling as compared with 10 to 40 percent in Asia, South America and Africa.

International trade in coniferous sawlogs is only about one third that in hardwood sawlogs; moreover, a much smaller proportion of the trade is intercontinental. The interregional hardwood sawlog trade consists mainly of tropical timbers. It is obvious that advantage would accrue to the developing countries if a greater proportion of their tropical timbers could be processed before export. Indeed, several countries have successfully adopted measures to favor exports of sawnwood instead of logs. There are limits, however, to what can be achieved in this direction since technical factors, perhaps no less than political factors, have determined the way in which this trade has developed historically.

International trade in tropical hardwoods includes a variety of stock, constructional timbers, but consists mainly of higher value woods for use in furniture, etc. In the past there have been many developing countries, for example in west Africa and central America, which have achieved a considerable export of hardwood logs, and sometimes also of sawn hardwood, while the domestic market has absorbed little or no sawnwood. Today, domestic markets for sawnwood are beginning to grow. If efforts are made to find local markets for secondary species (perhaps after treatment) and subexport grades of the better-known species, the cost of forest operations can be reduced, exporting power strengthened and perhaps, in some cases, the way opened for more processing before export. With greater emphasis in the developing countries on centrally-inspired programs for housing, school building and so on, there are new opportunities for positive action in this direction.

A large proportion of the raw material entering the sawmill, a proportion ranging from 25 to 50 percent - perhaps averaging 40 percent for the world as a whole - emerges from the process in the form of slabs, edgings and sawdust. This material, at one time wasted, today can be almost all turned to industrial account if there are appropriate forest industries in the vicinity to use it. The slabs and edgings can be chipped for pulp or board manufacture and even the sawdust and shavings from planing mills can be utilized in other wood-processing industries. The possibility of utilizing sawmill residues has already considerably modified the economics of sawmilling in the developed areas of the world and has in many cases encouraged the integration of forest industries.

As yet, these potentialities have scarcely been realized in the developing countries. But if in most of these countries the time is not yet ripe for creating giant integrated forest industry complexes, there are few where it is not already possible to introduce successfully one or more small industries operating wholly or partly on mill residues, manufacturing particle board, or wood composition boards or blocks for constructional purposes. Alternatively, when a new sawmill is planned, the possibility of associating with it from the outset such a related enterprise may enhance both its prospective financial return and its social evaluation.

TABLE 9. - RESTIVE IMPORTANCE OF VARIOUS COST COSTS IN THE PRODUCTION OF PULP AND PAPER

Sawmilling is usually the first forest industry to be established. It does not require a high degree of technical skill on the part of its labor force, but only on the part of a few key technicians. It is much more flexible in location, in size of plant, and in finished product than any of the other primary forest industries. If export demand is good, the industry can concentrate on high-quality production of lumber to dimensions required by the overseas market, using substandard production resawn for the local market. Should export demand cease or require different specifications, the industry can quickly adapt itself to the changed requirements.

THE PULP AND PAPER INDUSTRY

Second of the primary industries in terms of raw material requirements and value of output, but far and away the largest in terms of capital invested, the pulp and paper industry has grown rapidly in recent years. During the decade 1950 to 1960 world production of pulp rose from 34 million tons to 59 million tons, and of paper from 43 million tons to 74 million tone.

This industry is much more heavily localized than the sawmilling industry mainly because, although wood costs represent the main item in total production costs and a cheap wood supply is essential, other process materials and production factors assume considerable importance^.11 The pattern of production costs varies considerably with the process used, the size of plant, the location, and according to whether the process is integrated (pulp and paper) or not. Some of the main characteristics are deducible from Table 9.

¹¹Nonintegrated paper production operating on purchased pulp, and production using a substantial furnish of waste paper or nonwood fibres, are not, of course, tied to the wood supply.

While wood costs still represent one third to one half of total production costs, it will be observed that first, capital charges are high; secondly, process chemicals assume a considerable importance, especially for bleached grades; thirdly, power, steam and water represent a very important element; and fourthly, labor costs are relatively small.

Obviously wood costs have an important, though not, as in sawmilling, a dominant influence on total costs. The wood costs shown in Table 9 are for wood delivered mill; labor represents the major element in this cost. Thus, while the mill operation itself is not labor-intensive, the associated forest extraction operations are so. Investment needs for this industry are certainly heavy. Typical requirements (fixed investment in the mill only, excluding working capital and any necessary infrastructural investment) for medium-sized mills of 100 tons per day capacity (or 30 thousand tons per year) in a less developed country range from $12 million to over $ 20 million, depending on location, process and production program.

More than one half of this investment consists of equipment, engineering fees, etc., normally requiring foreign exchange outlay in a less developed country. On the other hand, pay-out time (total investment divided by annual gross output) is not high - ranging from eighteen months to three years.

However, there are a number of indivisibilities in the technological process which make for sizable economies of scale. These are particularly pronounced for newsprint and for kraft pulp and paper. A general indication of the variation of capital costs with size-of mill for some typical mills is afforded by Table 10.

Clearly, given the high impact of capital charges on production costs, a small mill must enjoy compensating advantages to compete successfully with a larger rival.

Power requirements are also high, normally ranging from 350 to 550 kilowatt-hours per ton of bleached sulphate pulp to 1,700 to 2,000 kilowatt-houre per ton of newsprint. Hence the importance of cheap power supplies, especially for mechanical pulp and newsprint. Conversely, this industry, as a major industrial consumer, can assure power developments a needed outlet, thus influencing the feasibility of projected hydro works.

TABLE 10. INFLUENCE OF TYPE AND SIZE OF PULP AND PAPER MILLS ON FIXED INVESTMENT

Mill type	Dally capacity metric tons
	25	50	100	200
	Fixed investment in $1,000 per daily ton
NONINTEGRATED
Unbleached chemical pulp	236	176	135	105
Bleached chemical pulp	325	240	190	150
INTEGRATED
Unbleached paper	230	180	140
Bleached paper	295	235	185

SOURCE: Report Or FAO/ECAFE conference on pulp and paper development prospects in Asia and the Far East, Tokyo, 1960.

The fresh-water requirements in pulp and paper manufacture are quite high, especially for bleached grades of chemical pulp and certain special papers. Typical needs (in cubic meters of water per ton of pulp or paper) are: groundwood, 50; unbleached sulphate pulp, 300; bleached sulphate pulp, 450; dissolving pulp, 600; newsprint (integrated with groundwood), 100; kraft paper (integrated with pulp), 400; paperboard (integrated with pulping of straw and waste paper), 400; and cigarette paper up to 1,000. An integrated paper mill with a daily output of 100 tons consumes about 40,000 cubic meters of water, which equals the needs of a city of some 150,000 inhabitants; in Finland forest products industries account for about 80 percent of the entire water consumption.¹²

¹²TÖTTERMAN, HARALD, Die Wasserfragen der Finnischen Zellstoff- und Papierindustrie. Paperi jàa Puu, 43(4) 1961.

For the production of chemical pulp considerable quantities of chemicals are required, both for cooking and bleaching. Thus, for every 1,000 tons of bleached pulp produced, 200 to 500 tons of chemicals are consumed. This shows the importance, so far as chemical pulp operations are concerned, of convenient access to the basic materials, salt and limestone.

The bringing of large quantities of raw materials to the mill, and the shipping of the finished product, entails a considerable transport problem. Thus, for a 100 ton per day mill, daily transport tonnage may average 500 to 1,000 tons, and considerably exceed these figures at peak periods. Thus, not only is good transport organization necessary: heavy expenditure may be required on transport facilities, such as roads, rail, harbors, and trucks. This point also serves to underline the intimate relationship between pulp and paper development and general infrastructural development.

Space precludes, a detailed discussion of available pulping processes, and of the fibrous materials to which each is specially adapted. It is sufficient to mention here that, even though the major part of the world's pulp and paper is still made from traditional coniferous species, there are very few timbers, coniferous or broad-leaved, which cannot today be pulped by one or other of the available processes, and that there are processes suited to a wide variety of nonwood materials, including bamboo, esparto and other grasses, cereal straw and bagasse (sugar cane waste). It should be added, too, that one of the cheapest sources of fibre for papermaking is waste paper, which can replace fresh fibre to a considerable extent in many grades, and wholly in some grades of paperboard. Thus, in western Europe, no less than 25 percent of paper consumed is recovered for remanufacture, and waste paper accounts for 36 percent of the fibre furnish of paper grades other than newsprint and kraft paper. The cost of waste paper is made up largely of collection and sorting costs; hence the higher and more concentrated the consumption of paper, the cheaper is waste paper as a raw material. With consumption rising rapidly in the developing countries the opportunities for utilizing waste paper are growing, and there are very many countries which could already support a small but economic paperboard production based on this material.

Though labor requirements for pulp and paper manufacture are modest, a fairly high proportion, ranging from 36 to 46 percent, needs to be skilled. Hence the need for schemes of intensive mill training when starting new projects in the developing countries.

The characteristics of the pulp and paper industry already described may have given the impression that there is no scope for small-scale operations, for mills of 5 to 10 tons/day, for example. This is not so. Even in the industrialized countries, small mills often comprise 80 percent of the total number, though accounting only for some 10 to 25 percent of the total output of paper and board. These include mills making speciality papers,¹³ such as cigarette, electrical and currency papers, which are almost universally produced in small units. But they include many more mills (usually nonintegrated mills) making strawboards, tissues and other grades of paper and board for local consumption. Small-scale operations have the following favorable aspects: utilization of local fibrous raw materials and reduced transport charges; local sale with low distribution Costs and ready adjustment to local market requirements; adaptation to limited water supply; fewer technical personnel and skilled labor needs; relatively small capital requirements (though this will not necessarily apply to certain high-value, specialty papers); use of locally made machinery; geographical dispersal of employment opportunities. Quality need not necessarily suffer in small-scale operations.

¹³For which demand is likely to be very small in countries in the early stages of industrialization.

Thus, while it would clearly be mistaken policy to plan the long-term development of the pulp and paper industry mainly on the basis of small-scale mills, such mills can sometimes play an important part in the early stages of the industry.

PLYWOOD, FIBREBOARD AND PARTICLE BOARD

Plywood

World plywood production, around 3 million cubic meters in 1938, today stands at well over 15 million cubic meters, having more than doubled during the last decade. There has been a great expansion both in the use of hardwood plywood for decorative purposes (panels, doors, table tops and the like) and of utility softwood plywood for constructional purposes. This expansion has been largely bound up with technical developments (improved glues, surface treatments, new products), with the favorable price trend of plywood as compared with sawnwood, and with labor saving applications of plywood in the construction industry.

The most important factor in the location of plywood mills is the availability of large-diameter logs of good form, whether indigenous or imported, suitable for peeling or slicing. Much of the industry which has been built up in Europe and Japan has been based on imported tropical hardwoods. With veneer size logs becoming progressively scarcer, technical progress in the industry has concentrated on making use of smaller diameter logs and lower quality material, for example, by cutting out defects, patching and reducing core size. The transformation coefficient in plywood manufacture is fairly low, losses on conversion amounting to 50 to 70 percent (40 to 60 percent on veneer manufacture). Frequently all or part of these residues will be used as fuel for steam and power needed in the plant for hot presses, driers, etc. But if a commercial outlet is available for them, this can have a decisive influence on the economics of operation. Blockboard manufacture is largely a branch of the plywood industry. There is also a notable trend to integrate the plywood and particle board industries, not only because the latter use the residues of the former, but also because much particle board is veneer-faced and because both industries serve the same consuming sectors, construction and furniture.

The cost of wood raw material represents 30 to 50 percent of total manufacturing Costs, the other important process material being adhesives (resins, casein, blood albumen, soyabean, etc.) of which about 25 to 35 kilograms are required per cubic meter of plywood. With the growing importance of moisture-resistant and waterproof plywood, the consumption of urea and phenol resins has increased rapidly.

Investment costs, though higher than for sawmilling, are much lower than for pulp and paper manufacture - about $100-$200 per cubic meter of annual capacity. Scale economies are less pronounced than for pulp and paper; they relate mainly to power and presses, only mills operating on large quantities of homogeneous material (for example, Douglas fir plywood) and manufacturing standard grades can fruitfully introduce much mechanical handling and some automation control.

Labor needs per cubic meter of output vary substantially, depending upon the degree of mechanization, log sizes, average thickness of veneer, need for patching, and so on. In less developed countries more than 10 man-hours per cubic meter may be used if circumstances favor heavy reliance on manual handling. The proportion of skilled labor needed may range from 20 to 35 percent.

What has been said under sawmilling concerning the opportunities in developing countries for carrying out further processing before export applies also to plywood manufacture. Here it is perhaps useful to note a recent trend toward establishing nonintegrated veneer plants, making green or drier veneer, to feed local or overseas plywood plants equipped simply with a press or drier and press. Such veneer mills require little investment, and can operate on a limited supply of veneer logs. Shipment of veneers saves weight and space compared with shipping logs.

Blockboard, laminated board, etc., are included in the broad category of plywood, and output of these products has increased parallel with the production of particle board. Blockboard can be manufactured almost manually, with but limited equipment. It is of considerable interest to many developing countries since it can not only replace imports, but also offers an outlet for thinnings and small-diameter logs from coniferous plantations as well as for sawmill residues.

Fibreboard

The fibreboard industry, with a world output (1960) of well over 4 million tons, has many affinities with the pulp and paper industry. The problems of wood supply are similar, as is the stage of pulp preparation, if the traditional wet processes are employed. Process chemicals are not normally required, and the sizing materials and additives which impart particular qualities to the finished product do not represent an important element in total costs. Wood costs may account for 20 to 40 percent of the total, depending on the size of mill (though they may fall to 10 percent if cheap residues are available), while fixed charges (mainly depreciation and interest on working capital) may account for 30 to 20 percent, again depending on size of mill. Thus, as with pulp and paper, scale economies are significant. Fixed investment per daily ton may range from $90,000 to $100,000 for a mill of 6,000 tons annual capacity, down to around $30,000 for a mill of 50,000 tons annual capacity. In fact, fibreboard production lends itself to small-scale operations less readily than several branches of the pulp and paper industry.

An adequate supply of fresh water is required; water needs are similar to those for newsprint production. Power requirements, at 300 to 800 kilowatt-hours per ton of product, are less than for newsprint but more than for chemical pulp. Labor needs (in the mill) are modest, ranging from 12 to 40 man-hours per ton. Fibreboard production can be based on a wide variety of coniferous and broad-leaved species, including suitably blended mixtures, and is eminently suitable for utilizing residues (including even bark and sawdust) from other forest industries. There is a growing trend to the use of unbarked wood.

In recent years several dry processes for fibreboard manufacture have been developed. These processes may well come to have an interest for developing countries since investment is somewhat lower and there is no need for large supplies of fresh water. Resins are, however, needed for bonding purposes.

Particle board

The particle board industry is essentially a postwar development. Over the 1950-1960 decade world production grew from about 15,000 tons to nearly 2 million tons. Like fibreboard, particle board can make use of a very wide variety of species, coniferous and broad-leaved, as well as flax, bagasse, and wood residues; indeed, this industry developed in the first instance to make use of wood residues. It is, in fact, this tolerance in raw material requirements that confers on both these board industries a special attraction for countries with tropical forests, wherein frequently only a small proportion of the available timber (species and sizes) are suitable for the other major forest industries.

Investment in a particle board mill of intermediate size represents roughly half that in a fibreboard mill of comparable tonnage. Though there are economies of scale, relatively small mills can be economic, particularly if operating on locally available residues or serving a captive market. The average capacity of mills in 1956 in Europe, North America and the world as a whole, was 4,200, 2,500, and 3,500 tons respectively. Investment Cost ranges from about $12,000 to $30,000 per daily ton, depending on the process used and hence on the type of board produced.

There are fewer restrictions on location than in the case of fiberboard. Water is not needed. Power requirements are modest, 100 to 300 kilowatts per hour per ton of board, as are mill labor requirements, 5 to 20 man-hours per ton. A key consideration, however, is the availability and cost of resin, normally urea, or phenol resin. This bonding material, which represents about 5 to 8 percent of the weight of the finished board, may account for 15 to 35 percent of production costs, depending on the process used and the cost of resin. Thus resin Costs may frequently exceed wood costs. Obviously, if resin has to be imported, this sharply diminishes the import-saving value of the project.

MISCELLANEOUS AND SECONDARY FOREST INDUSTRIES

In addition to the major forest industries just discussed there are very many other smaller industries based on raw materials of forest origin. These are so diverse that no simple grouping is wholly satisfactory for classification purposes.

Though some of these smaller industries are little more than extensions of the sawmilling and veneer industries, they may be separately established, particularly where the existence of a suitable resource or the needs of a consumption center make this advisable. In some instances the raw materials may even be imported.

Wood turning, with handles for agricultural implements and sports goods, woodenware and spools as principal products, is one example. The manufacture of match blocks in the form of sawnwood or veneer is another. Small plants (or units within larger plants) are suitable for producing shingles, pencil slats and briarwood pipe blocks, often for export, where appropriate raw materials are available. The manufacture of cooperage and other wooden containers and of wood wool are complementary to certain food and drink exporting industries as well as to the shipping of many manufactured goods. The capital requirements per unit of wood consumed are of about the same order as those for smaller sawmills. Mills may, however, be quite small in size. A large proportion of the production costs are made up of charges for skilled and semiskilled labor but this varies considerably from industry to industry. Raw material costs tend to be quite important in the total.

The chemical distillation of wood yields a large variety of products, the more important of which are charcoal and methyl or wood alcohol. When coniferous woods are used various oils and tars are also produced. In addition to its common household and commercial uses for cooking and heating, charcoal has a number of important industrial uses, such as in steel manufacture, water purification, and tobacco curing. One of the developing countries has recently made a major use of charcoal in the manufacture of Portland cement. The capital requirements for wood distillation plants are not excessive. Charcoal alone may be produced in simple pit methods requiring no capital. The other products are, of course, lost in this case.

A number of extractives from wood and bark provide the raw material for several small but important industries. Some species of pine are suitable for the tapping of a resinous exudate used for the manufacture, by a distillation process, of turpentine and resin. A considerable amount of labor and little capital are required in the industry. The trees may also be used for their timber. Products of this industry are important in a variety of chemical industries.

The production of tannins, most important raw materials in the hide and leather industries, may be based on a great number of woody and herbaceous plants. The most important sources have been the wood of the quebracho, which is common in South America; bark of the chestnut, oaks and hemlock, which were the important materials in North America and Europe; mangrove bark, common to many tropical coasts; and the bark of wattle, which has become an important plantation tree for this purpose. A wide variety of species found in the developing countries are suitable for tannin production. Export markets have been poor in recent years but domestic production for local leather industries is logical for most developing countries.

The final group of industries to be briefly summarized here are the secondary wood and paper manufacturing industries, which use as their raw materials the products of sawmills, plywood and veneer plants, board mills and paper mills. They may be closely associated with mills producing their raw materials or may, by contrast, be widely decentralized near consuming centers. Their products are most varied, supplying consumers, literally, from cradle to grave. Among the more important of the secondary wood-using industries are furniture manufacturing; joinery plants producing such things as doors, window sashes, moldings, and even prefabricated houses; boat-building; manufacturing of vehicle bodies - wagons, truck bodies, etc. Although they may frequently do their own initial processing, wood-turning and container plants sometimes are simply secondary manufacturing units. Paper-using plants also produce a great variety of goods, including corrugated boxes, carbons, paper bags and sacks, waxed containers, envelopes, napkins and exercise books. These industries tend as a group to be labor-intensive - calling for a wide range of skills - and to use relatively high cost raw materials. Capital requirements are generally modest to low. Plants can often be small and decentralized but there are some economies of scale for the more mechanized. These industries can often be developed as units in industrial estates. They are often well suited to developing countries because they tend to be labor-intensive, and can usually vary in size. Even in countries with little or no forest resource they can be operated on imported materials saving appreciable foreign exchange on the value added. Many wood-deficient developing countries are now importing products of the secondary wood and paper industries to a value in excess of their imports of all other wood and paper products. By contrast some countries in this category, such as Israel and the United Arab Republic, have developed these secondary industries to a high degree.

Characteristics of the forest base

Many of the characteristics of the forest industries which we have just discussed are determined largely by the nature of the raw material on which they operate and the conditions under which that raw material is supplied. Our assessment of the potential role of forest industries in developing countries would therefore be incomplete without at least a cursory glance at the forestry sector.

Supplying wood, the raw material of the forest industries, is the major function of the forestry sector of the economy. There are two fundamental phases of the timber-supplying forestry operation: logging, the felling and transportation of logs to the market or to the wood-user; and forest management, which is concerned with the provision of standing trees ready for felling. These two phases are intimately interwoven and, in turn, they often have a distinct bearing on the other major function of forestry - assuring the flow of nontimber goods and services inherent in the forest environment. The nonwood production of the forest is considered in a later section. Here we are concerned with the forest as the "woodshed" of the forest industries.

SOME CHARACTERISTICS OF FORESTRY

A most striking, although not always obvious, characteristic of forestry is the complexity and variability of the production function. The forest grows, not as the simple summation of trees growing as individuals, but in a competitive race for space and nutrients in which the development of each tree affects that of its neighbors. According to environment and to their historical development forests vary from simple groups of trees of the same age and of the same species to heterogeneous mixtures of trees of many ages and of a vast number of species. Fairly homogeneous forest stands of a few coniferous species and of fairly simple age structure, which are typical of the more northern temperate areas, lend themselves well to the techniques and economies of mass production logging. The tropical rain forest with its myriad diverse species, typical of many of the developing areas, demands, in its exploitation, either a search over sizable areas for individual trees, or logging and processing techniques capable of handling most heterogeneous raw materials. Trees grow at vastly different rates, according to their species, their physical environment and the competition from their fellows. The age of felling depends not only on the numerous combinations of these factors, but also on the kind of product being cropped. Thus there may be pulpwood cut from fast-growing plantation species after six or eight years of growth, or veneer logs harvested from 200- to 300-year-old trees from the natural forest.

As a tree grows it builds upon its former frame, making it larger and larger, accumulating annual growth from year to year. Over any appreciable area, however, individual trees at various stages of their life fail to withstand competition and die. The rate of mortality is high when many trees of similar sizes are competing or when numerous individuals reach "old age." In the natural forest, except in times of epidemic losses due to disease or insects, the mortality losses balance the accumulation of annual increments and the net result of the dynamic change within the forest is little or no change in total volume of standing trees.

Natural forests do, however, represent an accumulation of past annual growths which have, generally, built up heavy volumes of large, old and frequently valuable trees. Such forests have often been exploited as a cost-free timber mine or reservoir of forest capital without regard to problems of replacement. In the early stages of development in many countries, this exploitation without renewal has enabled the accumulation of other forms of capital. Such a "free loan" has often brought in its train the social Costs of abrupt declines in local economic activity and of abandoned towns. Nevertheless, exploitation of the natural forest has played an important role in the development of these countries.

The use of natural forests without concern for replacement, that is, the liquidation of forest capital, can occasionally be justified - but only under very special conditions. Normally, where continuity of supply has to be assured, there must be provision for successive cropping from the same areas. Plans and schedules for this may take a variety of forms and involve different intensities of use.

These are largely conditioned by two inherent characteristics of the forest. The first characteristic is the identity of factory and product, a characteristic shared to some extent with meat production and fisheries. The act of cropping destroys a part of the forest capital (the wood factory) but in so doing harvests as a product an accumulation of annual "interest" or growth. It is thus possible to vary the actual volume and time of harvest within fairly wide limits - to delay the harvest, storing the crop as it stands, or to accelerate the cutting temporarily, borrowing from the capital. This flexibility of the harvesting period is a characteristic of forestry which offers distinct advantages. Of course, continuous in excess of growth potential will eventually destroy the forest. At the same time, the removal of trees does profoundly affect the growth of their neighbors or permits the establishment of new trees. Thus, within limits, harvesting can promote the net growth or rate of production of the forest.

The second characteristic concerns the very large areas upon which forestry is practiced. This makes close supervision difficult, and the progress of production equally difficult to observe.

In its least intensive form forest management may differ from capital liquidation only in that it ensures a future crop, either from trees not felled at the time of the initial cut or from new trees. The most elementary approach to supply continuity consists of a simple progression of harvesting throughout the forest, returning to the first area of cutting when the next crop matures.

Most natural forests have such a variation in tree size that a complete cropping of commercial species at the time of initial felling is inappropriate. In such cases, two or more crops may be taken from a given area during the span of years that corresponds to a rotation.

Intensive management is characterized by more frequent returns to the same area. Not only are final crop trees removed; thinning, the removal of small and intermediate-sized trees, is also undertaken. This reduces potential losses through mortality and favors the growth of the remaining trees, permitting the annual growth to accumulate on fewer and larger individuals.

With increasing intensity of use come other measures, including protection from fire, insects and disease. Harvestable growth has been doubled or trebled in many well-managed natural forests by means of a wide range of techniques including thinning, weeding, pruning, enrichment planting, seed source selection, and drainage.

Planting forest trees in unforested areas or within cutover areas in the natural forest has, of course, long been a recognized technique. But plantation forestry has made spectacular advances in recent decades. Forestry genetics can assure high quality breeding material. With the use of selected seedlings, by tilling and fertilizing the soil, plantations can produce as much as ten times the growth of the natural forest.

The shift to what are essentially agrotechnical methods presents many advantages; convenient selection of species and rotation period; a more homogeneous crop, lending itself to mass production removal and processing techniques; co-use of the land with agricultural crops in the first few years after establishment; reduction of supervision and transport costs by concentration; and freedom to plan the sequence of age groups for orderly harvesting (as distinct from accepting the age patterns in the natural forest). Another distinct advantage is the possibility of complementing production from the natural forest.

Prospects for further development in plantation forestry are most promising. Incredible growth rates, particularly in tropical regions, have been obtained, sometimes with species which have done poorly in their native habitat. A promising area of investigation, as yet scarcely explored, is the application of fertilizers, trace elements and hormone compounds. Along with more widespread and better organized research and experimentation, facilities for the exchange of information have expanded. It is the improved organization, no less than the increasing scale of research effort which guarantees new breakthroughs.

An adaptation of plantation forestry - now commonly called linear forestry - has evolved in a number of countries, usually those with much land in agricultural use. Fast-growing species are planted in rows along motor roads, railroads, canals, rivers, terrace edges and field boundaries. They have often been established as boundary markers and for their shade, windbreak and erosion control functions. These plantations have often supplied much industrial wood as well as fuelwood. In some areas, they have proved so profitable that they have led to forest plantations of the normal type on land formerly under agriculture.

THE LOGGING PHASE

Logging methods, in addition to being greatly affected by the nature of the terrain and by the climate, are also much influenced by the nature of the product harvested, by the structure of the forest and by the form and intensity of forest management. Methods vary from the most elementary of hand methods to heavily mechanized operations. Generally, the more highly mechanized operations have developed under one of two conditions - where a uniform forest and easy terrain encourage mass production techniques, or where difficult terrain poses special problems. Although some measure of mechanization improves efficiency, there remain many instances where hand methods, or at least methods requiring little capital, are equally or even more effective.

Logging must often have a seasonal pattern because of rainfall and resultant ground conditions, because of snow or ice conditions, extreme fire hazards, or volume of stream flow. In many cases seasonal labor requirements for logging complement those for agriculture,

SOME ADVANTAGES INHERENT IN FORESTRY

The characteristics described above are those which are responsible for the flexible productive function in forestry (forest management plus logging), permitting ready adaptation to conditions which vary greatly in space and time.

On the one hand, output itself may readily be varied with little change in the nature or quantity of inputs. There is at any time a considerable choice of the form in which the output will be harvested. With new opportunities opened up by the technology of processing and changed economic conditions, a shift in the product can be readily accommodated. In this way, material originally planned or grown for veneer logs or sawlogs can be used, with few limitations, for pulpwood - even after being felled and transported to a mill. Wood considered originally only of fuelwood quality may, with technological improvements, be used as pulpwood or as raw material for particle board. Much pulpwood may even be used for sawlogs. The time of harvesting is flexible within considerable limits, permitting adaptation to short-term fluctuations in demand, without danger of spoilage or excessive problems of storage.

On the other hand, there exists marked flexibility and possibility of variation in the combination of inputs. Even in the exceptional case where forest capital is liquidated without planned replacement there are a variety of choices on land input (land here in the sense of land plus forest growing stock). One can harvest little from much land, or more from less; the choice determines the relation between direct and indirect costs of harvesting. The former choice means relinquishing timbers of marginal value; but it may serve an "opening up" function over and above forest exploitation.

If, as is normal, continuity of supply is the aim, then to the choice of variation in logging input are added numerous alternatives within forest management, as well as between the two major phases of forestry. Generally, the greater the input of land, the larger is the portion of wood cost made up by logging cost; the less the use of land, the larger is the portion composed of timber growing Costs. More extensive forestry over large areas calls for less labor for timber growing but more for the creation of what may be temporary infrastructure, and more into logging labor and transportation capital because of the greater distances. Plantation forestry is the extreme case of limiting land input.

In the growing of timber, time itself is an important input, which varies with the type of forest, the product and management intensity. The cost of time is interest on engaged capital; this is why the more intensive practices tend to be associated with a short rotation period.

Evidently the many choices available, both as regards combination of input and patterns of output, give rise to numerous problems of decision. What is relevant in our present context, however, is that they also offer a multitude of possibilities in the supplying of raw material for domestic industry or for export. This range means that there is virtually no country, whatever its stage of economic development, whatever its forest endowment, for which forestry is not an appropriate economic activity. Experience has shown that, even in countries with little natural forest of value, plantation and linear forestry can transform the situation speedily, opening up entirely new perspectives.

Features of forest industries relevant to development

A general appraisal of investment prospects in the forest industries sector can now be attempted. The question is: Given a decision to undertake industrial investment, to what extent can investment in the sector under review be recommended for its short- and long-term advantages?

The individual situations in the countries included in the group of less developed regions vary greatly. Therefore, arguments and conclusions will necessarily have to be stated in very broad and general terms. The general indication they provide will apply more to some countries and less to others: this indication, however, may provide an incentive to undertake more detailed country reviews to show how far the propositions of this chapter are relevant in individual cases.

DEMAND EXPANSION AND IMPORT-SAVING EFFECT

A partial argument for investment in the forest industries of less developed countries arises from the present situation and future prospects of demand relative to present supply possibilities. As has already been seen, the group of less developed countries, in spite of their very low levels of income and per caput consumption, already now presents a substantial deficit in net trade of forest products, and this trade deficit is bound to increase very rapidly, at least in absolute terms, unless very large investment is undertaken.

Final and intermediate goods with an income elasticity of demand as high as that of forest products (and especially of paper and wood-based panel products) pose difficult problems to developing countries. One of the most important obstacles that these countries have to face in their growth process is their balance of payments situation, since they normally have a structural deficit on current account which is likely to become bigger and bigger as the growth process gets under way. The increasing deficit is normally due to imports of the capital goods necessary for industrialization, which may be compensated for by loans and grants restoring the equilibrium on capital account, and to imports of commodities the consumption of which increases in proportion or more than in proportion to income. In order to maintain the deficit within reasonable limits, without holding in check the growth process, imports of goods other than capital goods must be restricted with tariffs and quotas, and at the same time the domestic productive capacity of previously imported goods must be expanded, so as to deal with additional requirements.

The magnitude of the import-saving effects resulting from expanding domestic production of forest products, is not by itself, however, a decisive argument for investing in the sector, since an equally relevant import-saving effect might be obtained by expanding the production of other goods with a similarly high income elasticity of demand. The heart of the matter consists in choosing which commodities should be consumed at the expense of others. Since the given amount of capital will not suffice for expanding domestic production of all goods, there will be some goods the consumption of which must be restricted in order to prevent a growing trade deficit. Hence the case for investment in forest industries cannot rest simply on the import-saving effect that an expansion of such industries would have but should be supplemented by other arguments.

Of such arguments there are plenty, stemming from structural characteristics of supply and demand, in part already examined in earlier pages.

CHARACTERISTICS OF THE RAW MATERIAL AND LOCATIONAL FACTORS

One set of arguments derives from the nature and properties of the raw material employed in forest industries.

First, wood is the only raw material that nearly all inhabited regions of the world have available and can reproduce from existing forests, or could possess by establishing plantations. It is a general principle of development policy that priority should be given to industries processing local raw materials, since the presence of the latter in part offsets the external diseconomies that have prevented industrialization in the past. Nevertheless, it is often forgotten in underdeveloped economies that their forests - which the very lack of development has in many cases helped to preserve - are as important a source of natural wealth as mineral deposits; if properly exploited, forests represent a most important incentive to the beginning of industrialization.

A second argument for expansion of forest industries, again connected with the characteristics of forest industries inputs, rests on location theory. Of all the major raw materials, wood is usually the most difficult to transport. Not only is forestry tied to extensive areas of land, so that transport can never start from a permanent position, as it does for instance in the case of coal; in addition, wood as cut in the forest is a bulky material varying in size and shape, and the extent to which these can be altered for the sake of easier transport is severely limited by the future use of wood and by other factors. Finally, forest industries, as was shown above, are typically weight-losing, and the wood raw material accounts for a substantial proportion of total production costs.

Less developed regions, though already exporters of broad-leaved sawnwood and plywood, still export a considerable quantity of sawlogs, which are then sawn or felled in importing countries. Here, evidently, there is a prima facie case for expanding sawmilling and plywood capacity by an amount sufficient to satisfy not only growing internal demand but also to substitute exports of processed wood for exports of sawlogs. It is a case which, for once, could find support even in the traditional theory of international specialization, since this substitution of exports would result in a net decrease in costs owing to the saving in freight. This advantage has so far been insufficiently exploited, partly for certain technical reasons (which are not, however, insuperable), but mainly because of the lack of infrastructure which characterizes all less developed countries. This, however, should no longer be an obstacle if a consistent development policy is pursued: as has already been stressed, investment in forest industries is appraised in this chapter not in isolation but in the general context of an over-all development policy which presupposes, as a preliminary step, the building of social overhead capital and implies the installation of industries also in different sectors. In this case the cost of infrastructure can no longer be considered as a cost to be borne for the sake of a single investment project in a simple sector: what was true for the colonial exploitation of one or very few export goods (and made it financially convenient to export the raw material rather than process it locally) does not apply with reference to the over-all economic growth of a country.¹⁴

¹⁴The same reason suggests that in the long run, where possible, a policy of forestry development should be followed that aims at creating the supply of the types of wood (especially conifers) which are now lacking, in order to minimize the burden of necessary imports.

Location factors are similarly important for wood-based panel products and for pulp and paper. For the manufacture of many grades of paper, however, an admixture of long-fibre pulp is needed, and many developing countries at present lack indigenous sources of long fibre. In the long run, adequate forestry development can usually fill the gap; in the short run, long-fibre pulp has to be imported. In the meantime there are often excellent prospects for the local manufacture of short-fibre pulp to be combined with imported long-fibre pulp in the local manufacture of paper.

An even better utilization of local resources will, of course, be attained as technical progress leads to the substitution of the types of wood which are locally available for those which have to be imported - especially of broad-leaved sawnwood and wood-based panel products for coniferous sawnwood and -of short-fibre for long-fibre pulp in paper manufacture.

TECHNOLOGICAL ADVANTAGES OF FOREST INDUSTRIES

Another set of arguments in favor of forest industries rests on the characteristics of the technologies in use in the industries themselves. It was pointed out earlier

that the wider the range of the production function and the greater the flexibility relative to scale, the more suitable a sector is for investment in the less developed countries. Forest industries, taken individually, present these advantages.

First, in the production of the raw material, expensive mechanization can often be postponed and unskilled labor used instead. Logging often takes place under conditions where expensive mechanization is not a pressing necessity, and is sometimes uneconomical owing to the heterogeneity of the environment and of the produce. Quite often and especially in regions where it tends to be plentiful, manual labor assisted by animals or relatively cheap machinery can hold its own in competition with expensive machines. Thus the owner of a small forest industry is normally in a position to do his own logging without incurring heavy initial expenses; and, as long as labor remains relatively cheap, larger operators will also be able to postpone far-reaching mechanization in the forest. The possibility of postponing the use of expensive machinery in the production of raw material is distinctly helpful in less developed areas, since it reduces capital requirements while at the same time providing considerable employment possibilities for labor possessing only the types of manual skill commonly found in agricultural areas.

Secondly, the physical properties of wood render it relatively easy to work mechanically, so that many products can be manufactured adequately with the use of fairly simple machinery. The difficulty of transporting the raw material on the one hand, and the ease with which it can be worked on the other, make it possible for small, or fairly small, units to be economical in the manufacture of such basic products as sawn timber, veneer, and mechanical pulp: the proximity of raw material supplies, and sometimes also the possibility of selling locally a large part of the product, go a long way toward compensating for the disabilities of size. Where conditions are favorable, the manufacturing unit can be increased step by step, as additional capital and qualified manpower become available. Even certain types of integration are possible on quite a small scale. This possibility of growth by degrees is very useful in developing economies.

DEMAND FOB FOREST PRODUCTS: INDIRECT ADVANTAGES AND EXTERNAL ECONOMIES

We have noted that a major problem of development policy consists in the sectoral allocation of a limited amount of capital and in deciding for which commodities production should be expanded and for which instead consumption must for some time be restricted in order to prevent a growing balance of payments deficit. Characteristics of supply, as examined so far, provide good indications for the choice; but, also independently of them, characteristics of the commodities and of the needs that they satisfy can be of help.

Many commodities with a high income elasticity of demand are consumption goods, introduced into advanced countries at relatively high income levels. These are also demanded in less developed countries in spite of lower average incomes, especially where, as is often the case, there are conspicuous inequalities in income distribution. Sometimes imitation or demonstration effects are at work. Such goods can, on all counts, be considered less essential since they satisfy less urgent needs. Admittedly this is a value judgment more than an economic evaluation; but hardly anybody would or should hesitate in the choice between better food, more clothes, and education on the one hand, and cars, radios and the like on the other. From this point of view there can be little doubt that the consumption of forest products in a country is as good an index as any of the standard of social, as well as material development of the population: in the less developed areas the products of forest industries can help the attainment of some of the essentials of material well-being and of human dignity - ranging from suitable housing and furniture to the possibilities of instruction and the diffusion of books and newspapers. There can therefore be little doubt that the sector ranks rather high in the scale of priorities that should be established in determining for which goods production should be expanded and demand completely satisfied, and of which instead consumption should be restricted.

This consideration is reinforced by the consideration of other indirect effects of investment in forest industries on the economy as a whole, mainly consisting in the creation of external economies in a broad sense.

The first group of economies to be noted are not external to the sector, but concern the mutual relations between the industries within the sector: the installation of some forest industries tends to pave the way for complementary production within the area concerned and make the sector as a whole to some extent self-propelling. Forest exploitation commonly yields wood of different kinds and grades, and the mechanical conversion of wood usually leaves a substantial amount of residue that can be utilized by other branches of forest industry. With rising demand for wood products of different kinds on the one hand and increasing value of the raw material on the other, existing industries often provide the incentive to the establishment of new enterprises and complementary types of utilization tend to develop. In sum, the heterogeneous nature of the wood resource, together with the versatility of wood and its unwieldy character in the raw state, tend to stimulate new industrial activities within the area, often within the same enterprise.

External economies of a most important type arise from the fact that forest industries should normally be localized as near as possible to the forests, and hence are normally decentralized in the hinterland of the regions concerned. This "back-wood" character of forest industries creates a natural tie between them and various infrastructural undertakings. When a new road opens up forests to sawmilling and is used to transport sawn timber to the consuming centers, the economic benefits thus derived may contribute substantially toward amortizing the cost of the road; logging roads may help to extend the regional road system; the establishment of a hydro-electric plant may permit the building of a newsprint mill, which, once in operation, is bound to become a major customer of the electric plant; and so forth. This interrelation is an important feature of forest industries, notably in the early stages of development, and may be a very effective factor in preventing the occurrence of "dualism" in economic growth, that is, of a cumulative differentiation between two parts of the same region.

A further indirect advantage arises in forestry from the high flexibility of forestry work, and from the consequent possibility of utilizing labor that is temporarily idle. Due to the perennial nature of trees, neither intervention in their growth through silvicultural treatment nor the final harvest of the wood is tied to a strict time schedule; and although climatic factors associated with the seasons of the year affect different kinds of work in the forest, this influence is much less pronounced than in agriculture. Such flexibility is important in less developed areas. Since many kinds of forestry work are well suited to the employment of relatively unskilled labor, a labor potential which otherwise would be wasted can be utilized in current production or for the formation of savings in the shape of future yields of raw material.

But possibly the most important of the indirect effects of installing forest industries is of an eminently dynamic character. Forest industries can be considered a propulsive sector, that is, a sector the expansion of which is liable to induce spontaneous investment in other branches of production. This is due to the fact that the forest industries have a very strong forward linkage with other sectors. A high degree of linkage makes a sector a good starting point for industrial growth: investment there, by inducing demand and providing supplies for other sectors, widens investment opportunities in the economy as a whole and has a multiplier effect - not in the traditional sense of the word, which is based on final demand and on the consumption of income by the newly employed, but in the sense of increasing interindustry demand.

SUMMARY

Few of the advantages of forest industries that have been listed so far can be translated into a financial evaluation, singe they are not liable to find expression in terms of money. This makes it difficult to attempt a quantitative comparison of costs and benefits and a precise assessment of social profitability. All the said advantages, however, should be taken into account by planners when making decisions on the allocation of available investment resources - with particular care, singe, in the case of forest industries, social benefits may sometimes be as important as the financial profit.

A tentative estimate has already been made of the financial cost of an increase in productive capacity sufficient to prevent the trade deficit from rising. The capital cost per unit of additional production is but little greater than the cost per unit of imports. But the former cost would be borne once and for all over a period of years; the latter would be a recurring cost. The total investment required over the decade - some $5,000 million - is a forbidding sum. But this must not be conceived as a sudden lump sum investment; it would be a gradual, progressively rising investment, spread over a number of years. Viewed in this light, there are no grounds for regarding such a target as unrealistic.

Resources, technology and research

Analysis here has so far brought out many cogent reasons why countries in the early stages of economic development should give special attention to the establishment or expansion of forest industries. These stem, essentially, from the structural and dynamic characteristics of the demand for forest products, from the flexibility and range of the production functions of forest industries, and from the fact that nearly all the less developed countries possess unused or insufficiently utilized forest resources, or could possess them within a short space of time.

The first two points have been amply demonstrated. The third, commonly taken for granted, requires examination, since the naive assumption that unused forests spell industrial opportunity has in the past been the source and origin of much disillusionment and many disappointments.

VARIETY OF FOREST RESERVES

It was pointed out earlier that in most developing countries the forest reserves differ considerably in composition and quality from those of the industrially advanced countries which have succeeded in building up important forest industries.

Natural conifers

Perhaps a score of these less developed countries possess significant areas of natural conifers. These consist mostly of pine species and, while some of these areas are readily accessible, others lie in remote places with difficult terrain. In general, given reasonable management, regeneration and growth rates are good - usually much higher than in the coniferous forests of North America, northern Europe and the U.S.S.R., but somewhat less than the rates achieved in the intensively managed artificial coniferous forests of, say, Denmark and the United Kingdom.

Planted forego

Quite a number of developing countries already possess substantial areas of planted forests - various types of pine, and such broad-leaved species as poplar, willow and eucalypts. As has already been mentioned, phenomenal growth rates are frequently recorded in these plantations; more than five times the rate in the natural coniferous forests of the north temperate zone is quite common.

However, important as are these coniferous forests and plantations (important precisely because currently available technology is well adapted to their utilization), they are nevertheless exceptions in the less developed regions of the world. In fact, more than nine tenths of the forest reserves of Asia, Africa and Latin America consist of broad-leaved forests, and these vary greatly in their nature, and consequently in the problems and prospects of their development. A brief summary of the major types will illustrate this point.

Tropical rain forests

Tropical rain forests represent perhaps the popular concept of undeveloped forest resources. These occur in greatest abundance in high rainfall areas near the equator, particularly in the basins of the Amazon and the Congo and in the peninsular and insular areas of southeast Asia, but they also range quite widely in smaller concentrations over other parts of the tropics. They cover some 1,000 million hectares and comprise 40 percent of the forests of the developing countries. The stands are dense and are composed of numerous species, only a few of which at present provide important commercial woods (such as the mahoganies, okoumé, wawa and greenheart). Of the total volume of growing stock, frequently no more than 5 to 10 percent consists of currently marketable species. The buttressed and fluted bases of the trees, and the abundant growth of climbing vines and creepers, add greatly to the exploitation problem caused by the heterogeneity of the stands.

Moist deciduous forests

Moist deciduous forests are found in tropical and near-tropical areas which have seasonal variation in temperature and rainfall, often on mountain slopes. The stands are also dense but are less heterogeneous than the rain forest. Conifers are sometimes found in admixtures. This forest type is one which has been subjected to considerable population pressures (with consequent clearing for agriculture and shifting cultivation) as well as to the exploitation of a few desired species such as teak and podocarpus. This type accounts for about 200 million hectares - nearly 10 percent of the forests in the developing regions.

Dry deciduous forests

Dry deciduous forests are found in those tropical and subtropical areas which have limited rainfall. They are particularly abundant in eastern South America, south-central Africa and southern Asia. The density of the stands is greatly affected by the amount of precipitation, and in drier locations they become open and

interspersed with thorn scrub thickets and frequent savannas. Many of these forests have been subjected to frequent burning and sometimes to overgrazing. Except in the moister locations where a few species have commercial value, the trees are very badly formed. These forests comprise about 800 million hectares or 35 percent of the forests under discussion.

Temperate hardwood forests

Temperate hardwood forests account for approximately 50 million hectares of the forest reserves of the developing countries. These forests, found largely in east Asia, parts of the Himalayas and southern Latin America, sometimes include conifers.

Mangrove and bamboo forests

Miscellaneous types of more restricted distribution include the mangrove forests of tropical coastlines and bamboo forests. Bamboos are an important component of wet evergreen, moist and dry deciduous forests; they also are found at high altitudes and temperate climates in Asia, and pine bamboo stands frequently follow in the wake of shifting cultivation.

Over the greater part of these forests there has, as yet, been no systematic exploitation, but only a scattered and sporadic use of the forest by local populations for fuel and rudimentary constructional material. Even so, there are vast areas which have been commercially exploited in the past or are being so today. To a large extent this exploitation has been geared to the production of unprocessed wood for export. Progress in establishing local forest industries has been disappointing. And the reason is not that available technology has but limited applicability to the kind of forest reserves which these countries possess. This much is clear if we recall that several of the less developed countries do possess "orthodox" coniferous forest reserves still undeveloped, reserves which differ little from, and are no whit inferior to, those resources which already sustain sizable forest industries in the industrially advanced countries. These reserves remain an unrealized potential, even though their composition would readily permit industrialization on the basis of existing technology. Evidently, technology is not all.

In any case, currently available technology is by no means as irrelevant to the circumstances of developing countries as is often supposed. At this stage it may be useful to take a quick look at some of the technological trends which have been at work in the industrially advanced countries over recent decades.

RECENT TECHNOLOGICAL TRENDS

Two basic trends can be distinguished, and both have intensified in the postwar period: the broadening of the raw material base for the forest industries, and the fuller utilization of the forest crop.

Both these trends have their origin in the particular circumstances facing established forest industries in the advanced countries. Thus limited availability, or rising costs, of the species preferred for mechanical pulping (spruce, fir, hemlock and pine) has led to the use for groundwood of poplar, aspen and eucalypts. Among the chemical processes, the earliest to be adopted on a large scale was the sulphite process, also suited mainly to the dominant species of the north temperate zone - spruce, firs, hemlock and some pines. Since the early 1930s, however, there has been a spectacular expansion in sulphate pulping capacity, an expansion due to the fact that this process, with greater flexibility and great tolerance to partially decayed wood and bark, can be used for pulping practically all kinds of fibrous raw materials. Finally, since the last war, there have been developed a number of pulping processes which combine mechanical and chemical action, offering higher yields than those obtained by pure chemical processes, and capable of substituting both mechanical and chemical pulps over a wide range.

Thus, over the last 30 years, the relatively narrow raw material base of the paper industry in the advanced countries has been expanded to include all the resinous pines (especially in the United States), birch (formerly a "weed" tree in Scandinavia), most temperate hardwoods (alone or in mixtures) and various agricultural residues (notably cereal straw and sugar cane waste). For example, hardwoods accounted for 15 percent of pulping raw materials in Europe in 1961, as against a negligible percentage in 1945. At the same time, much greater use has been made of wood residues from sawmills and plywood plants for pulping. The volume of residues so pulped in Europe rose from 4.5 million cubic meters in 1956 to over 11 million in 1961.

Though the technological progress which has brought about a broadening of the raw material base of the pulp industry has had its main impulse in the raw material supply situation in the advanced areas of the world, it has incidentally made possible the establishment or expansion of the pulp industry in the less developed areas which, by and large, are lacking in the coniferous species which constituted the industry's traditional material. The impact has come not only through the devising of new pulping techniques, but also from a modification of the traditional pulp furnish for the manufacture of different types of paper. It has become increasingly possible to substitute short-fibre pulp for the coniferous long-fibre fraction, without major sacrifice of quality and strength properties. Today there are very few developing countries that do not possess fibrous resources from which it is technically possible to make most grades of paper.

Similar considerations (supply and price) have prompted the remarkable expansion in the advanced countries since the war of the fibreboard and plywood industries, and have brought into existence a completely new industry - particle board - which has grown spectacularly over the last decade. Technical improvements have enabled plywood to replace sawnwood, the real cost of which has risen, in many end-uses.

Fibreboard has made similar gains, thanks to improved properties, a broadened raw material base and an improved relative price. The case of particle board is even more striking. Initiated in wood-deficit Germany and making use mainly of mill residues, the industry was favored by improved and cheaper synthetic resins and captured a large part of the market (for example, as furniture core) previously held by sawnwood. However, the product proved so competitive that it soon spread to the wood-surplus countries of northern Europe, to the United States and to many other parts of the world. Today, particle board plants exist in nearly 50 countries.

Even the sawmilling industry, which has seen no radical technical advance for half a century, has been affected to some extent by the trends just discussed: there is greater emphasis on precision sawing and high yield. Thanks to important advances in wood preservation techniques, less durable species hitherto despised can be given a reasonable life in service and hence find new markets.

These technical advances have been realized by means of research directed toward the solution of those problems which confront forest industries in the industrially advanced countries. The volume of research directed to the specific problems of the less advanced countries is still negligible. But an important incidental effect of these advances is that they have created immensely greater technical possibilities for successfully establishing forest industries in the less developed countries. If these possibilities have so far scarcely been realized, the reason is that as yet efforts to adapt and transfer existing technology to the circumstances of the developing countries have been sporadic, unco-ordinated and often halfhearted. This, in turn, is due to the fact that the socio-economic context necessary for the adaptation and application of technology has only recently matured in many of the less developed countries and has still to mature in others.

WHERE RESEARCH IS LAGGING

The main need is for the adaptation of available technology, and for applied research rather than for basic research. This is not to deny the need for fundamental research, both for the discipline and training it provides and for the possibility it always offers of radical new discoveries. But, in terms of simple cost/benefits, efforts on a less exalted plane are likely to be more fruitful.

In research, as in technology, emulation of the organization and methods of the more advanced countries is seldom appropriate. There is usually much more to be learned from those countries which have themselves still to contend with serious problems of regional backwardness and are vigorously trying to face up to them. The special contribution which such countries can make is still insufficiently appreciated.

Because the forest resources of the developing countries differ considerably in location, composition and distribution from those of the more advanced countries, one of the most important areas for applied research and experimentation is into the economic and technical factors which bear on the cost of extracting the raw material supply for industry and hence on the raw material input cost per unit on processed output. For the most part these studies should be conducted on the spot, although there is great scope for the coordination of parallel studies on a regional basis. Some of the subjects requiring urgent attention are: minimum input techniques for attaining certain types of forest following exploitation of the original stand; inexpensive methods of protecting from fire, grazing, etc., in ways that allow for the interests and traditional habits of the local inhabitants; plantation forestry as related to all species of possible interest (here time is important, and the need is for small-scale experiments to be started as soon as possible to gain time, without waiting for the funds needed for A comprehensive program); suitable logging tools, and suitable combinations of different types of logging equipment with manual work and the use of animals, adapted to the local environment and labor conditions; and methods of low-cost forest road construction and maintenance.

Another desirable area of research concerns problems of storage and shipment, both before and after conversion. So far inadequate attention has been paid to checking or controlling decay, warping, discoloration, etc., under varying climatic conditions. Specially important are the problems involved in shipping processed wood overseas under different conditions.

Much work has already been done on the physical and chemical characteristics of secondary species, but this work has all too often been carried out in metropolitan countries and aimed at testing candidate export species. More helpful would be engineering studies of the usefulness of these species, with or without preservation, for local housing and nonresidential construction, harnessing prefabrication techniques. More work is needed on the properties of plantation species and secondary hardwoods in relation to different pulping processes and for various board products. Cheaper and better glues and resins, where possible manufactured from locally available materials, are needed to improve the properties of plywood and particle board under severe climatic conditions. As regards research on pulp and paper processing, the great need is for scaling down the economic production of pulp within the known processes (notably the semichemical and the soda and sulphate processes), and for adapting plant design to semiskilled labor. In sawmilling there is little need for new machines, but great need for improved plant layout as well as considerable scope for the introduction of modern methods of stock control.

These are but a few of the promising avenues for research and experimentation. All require essentially an objective review of what is already known, and an intelligent adaptation of that knowledge to the specific conditions of developing countries - particularly as regards the local raw materials, the possible scale of operations, and locally available labor and skills.

A large part of the problem is an informational one. The volume of new and relevant information increases annually, and international and national arrangements for pooling, analyzing, transmitting and receiving the relevant information are failing to keep pace. Awareness of what has been done elsewhere is A prerequisite for the successful exercise of the imaginative approach and flexibility which alone can ensure the effective adaptation of existing technology to the special circumstances of the developing countries.

MAKING CAPITAL GO FURTHER

We have seen that several of the principal forest industries are capital-intensive, so far as the processing plant is concerned. It is a common characteristic of countries in the early stages of the growth process - at any rate as soon as they have committed themselves to a conscious development program - that capital is scarce and expensive. On the other hand, most, though by no means all, the developing countries do possess a reserve of unemployed or underemployed rural labor, sometimes amounting to the equivalent of 30 percent of the active rural population. There is, therefore, a clear need for economizing in capital provided this is consonant with efficient and economic operation. It does not by any means follow that labor-intensive techniques are invariably to be preferred to capital-intensive ones.

While the choice of techniques must take into account the alternative impact on operating costs, other considerations will frequently bear on the final decision. Labor-intensive methods may be preferred because for political and social reasons it is necessary to create employment opportunities. What should not be overlooked is that factor availability can change rather quickly as the process of industrialization proceeds. Labor which is plentiful and cheap today will certainly, as it acquires skills, organization and an increased sense of dignity, become scarcer and dearer tomorrow. This is not a regrettable contingency; it is the very purpose of development. The corollary is that, in selecting techniques and designing mill layouts, labor-intensive methods should be limited to those stages of the process which lend themselves to ready mechanization at a later stage when it becomes economic. This applies above all to materials handling operations at either end of the production process.

Forestry and forest industries provide many opportunities of absorbing under- and unemployed labor. Even in the developed countries almost all operations in the forest are carried out by manual labor. Afforestation, thinning, pruning, nursery work and some aspects of insect and fire control, for instance, do not lend themselves readily to mechanization: these operations are mechanized but rarely, and only in those countries where labor is extremely scarce and expensive. The same is true for many aspects of forest exploitation - save in those few instances where large log sizes compel mechanization. What should be emphasized here, however, is that limited or negligible mechanization should not imply primitive methods of work. In all these phases there is ample scope for spectacular increases in productivity by the provision of suitable transport and simple well-adapted tools. These tools should be designed to meet local conditions and in many cases it will be possible to organize their manufacture locally in small workshops.

So far as the wood-processing plants themselves are concerned, it is to be feared that in the past many opportunities of capital-saving have been neglected. This may be due in part to the fact that it is frequently easier for an entrepreneur, contractor or consulting engineer to operate from established design and layouts rather than think through every aspect with a view to capital-saving under local conditions. In mill construction, for example, manual labor can often be used in substitution of expensive construction machinery for excavating foundation and roadmaking. Buildings can make use of cheap, local building materials and, if the climate allows, outside construction may be adequate for certain phases of the operations. Thorough advance planning by key personnel can do much to cut down actual construction time and hence capital costs. For example, a pulp and paper mill which might take 18 months to construct in an industrially advanced country commonly takes three years or more in a less developed country; this alone adds 5 to 10 percent to the investment cost. Seldom can the margin be cut down to zero, but effective preplanning can reduce the margin and effect considerable savings.

Multipurpose machines offering flexibility in the production program often have advantages over single-purpose machines where production series are small; this is relevant not only in paper-making, but in such industries as furniture and joinery manufacture. Shonfield¹⁵ attaches much importance to good obsolescent machines, claiming that much of the equipment required during the early stages of industrialization can readily be provided secondhand. Certainly this is a source not to be scorned, for it should be recognized that the relative factor, availability that made these machines obsolescent elsewhere, is very different from that in the developing countries. In fact, some of the important forest industries existing today have made their start with secondhand equipment. It would be a mistake, however, to exaggerate the part which secondhand equipment can play:

(a) it is not always well adapted to local raw materials;
(b) spares and replacements often pose major problems;
(c) it tends to make excessive demands on skilled labor.

It may be observed in passing that the recent trend toward automation in process control in the industrialized countries is very relevant to industrialization in the developing countries. There is nothing either bizarre or contradictory in installing electronic equipment inside the mill, where it can replace special skills that take many years of training and experience to acquire, and making lavish use of manual labor in the woodyard.

¹⁵SHONFIELD, ANDREW, The attack on world poverty. London, Chatto and Windus, 1960, p. 163 et seq.

It is common knowledge that operating ratios (the relation between actual output and nominal or all-out capacity) are much lower in developing countries than in industrialized countries. This is one of the main sources of capital wastage. The most frequent causes of stoppages and high breakdown time are low standards of maintenance and delays in obtaining replacements and spares. Sustained effort can reduce these losses, for example, by special emphasis on planned preventive maintenance or by standardizing auxiliary equipment such as electric motors and pumps There are, in fact, many types of auxiliary equipment common to forest industries and other sectors of industry. Careful study of joint requirements may well establish a case for domestic production of these items. This is not only a useful way of effecting import substitution; the fact of their being locally available can do much to employ fixed investment more effectively in all the industries served, by reducing shutdown time. Central repair shops, serving several industries, can also contribute.

Many of the forest industries - plywood, veneer, blackboard, joiners, furniture, paper conversion, to name a few - are suitable for operations on a modest scale and can be accommodated on industrial estates where all types of common services can reduce the capital needs for each individual venture and also assure efficient deployment of managerial and other skills.

Forest industries in developing countries often require relatively much more working capital than their counterparts in industrially advanced countries for lack of effective co-ordination between production programs at the mill and sales trends. Special attention to these problems, and the adoption of various simple systems of stock control which have now been developed can help to reduce working capital needs.

The difficulties imposed on developing countries by the limited size of the domestic market have already been sufficiently stressed. At the same time it has been made clear that, so far as forest products are concerned, markets are in continuous, and often very rapid, expansion. All new ventures, therefore, should be planned from the outset with a view to subsequent expansion. This concerns not only the raw material catchment area, but also land, buildings, plant layout, etc., as well as, in some cases, the selection of process plant. This may require slightly higher investment per unit of output in the first instance, but will lead to very substantial capital savings later - perhaps within two or three years. In the pulp and paper industry, for example, the new investment needed to add a given capacity expansion to an existing mill is generally only 50 to 70 percent of that required to establish a separate mill of equivalent capacity.

This brief discussion of capital-saving possibilities is not, of course, comprehensive, but merely indicative. It serves to show, however, that many possibilities exist, not all of which have been realized in the past. One reason, of course, is that hitherto the total market for forest industry equipment in the developing countries has been rather small in relation to the annual requirements in the industrially advanced countries. The consequence has been that but few manufacturers have devoted much attention to the special needs of the developing countries. Over the next decade these equipment needs will represent A very considerable market in their own right. It was seen earlier that total investment needs in primary forest industries in the less developed countries could amount to $5,000 million up to 1970 if industrial development should take place to the extent needed to prevent imports of processed wood goods from rising. Two thirds or more of this sum would represent expenditure on forest industry equipment. It is clear that those equipment manufacturers who concentrate on designing and making what is needed, rather than on selling what they are accustomed to making, will be in the best position to take advantage of the opportunities this expanding market affords. It is clear, also, that the scale of expansion in many of the larger developing countries offers opportunities for the domestic manufacture of some, if not all, of the necessary equipment.

Determining the role of forestry

The intimate interrelation between the forestry and forest industry sectors means that a coherent forestry plan is a prerequisite for the sound long-term development of forest industries. Planning forestry with due regard to the other economic sectors involves:

(a) estimating the future demand for wood and for the noncrop utilities that the forests can provide: this refers both to the forests already in existence and to those that may have to be created;

(b) estimating the size and the nature of the forest resource, and appraising the extent to which essential production factors might be available for forestry;

(c) determining the plan within the context of the economic needs of the country AS also the measures for the execution of the plan.

Planners, especially in countries where the economy is in the early stages of development, will often find inadequate the data on which decisions are to be based. Such lack of data ought not to delay planning unduly. Plans, however provisional, should be formulated and applied; they can be revised as additional knowledge becomes available. This is particularly important where tendencies hostile to forests are at work that may cause considerable damage in a brief span of time.

ESTIMATING TEE DEMAND FOR WOOD

Consideration must be given to the future internal demand for wood in all forms, ranging from fuelwood and saw timber to the wood-component of elaborate products such as paper and board, and to plans for export, if any.

Projections of demand as conditioned by internal consumption and export possibilities must be made for the next 15 or 20 years, indicating the size and composition of the demand at convenient intervals, for example, of five years. These demand projections (which specify roundwood needs from the forest) are derivations of the more detailed demand projections required to specify forest industry plans - both for the next industry planning period, be it three, five, or seven years, and for the perspective plan of 15, 20 or 25 years which, in this sector, should provide the frame for the shorter term plan. Since many undertakings in forestry require considerably more time than 15 or 20 years to reach fulfillment, changes in demand in the more distant future should also be considered. It is true that the possibility of relevant action within the period of the short-term plan may be limited, but this is no reason for disregarding likely long-term changes. The long-term prospects are particularly relevant to decisions concerning, and provisional measures directed to, integrated land-use policies, including questions of forest reservation.

Internal consumption and export are interdependent. They are complementary when leading to economies of scale, or when, by creating a more varied market, they permit a fuller utilization of the resource: as is well known, intensive forest exploitation commonly yields wood of different species, or of the same species but appropriate to different uses, or both, while the industrialization of the wood yields produce of different grades, and sometimes several joint products. On the other hand, there are also situations where export and internal needs cannot be reconciled, and planners must weigh advantages of export earnings against future difficulties in supplying those needs.

In considering future demand, the possibilities of deliberately planned substitution should be Appraised. Many products based on wood can be substituted by others that are not, and vice versa; in addition, there are important and steadily expanding possibilities for substitution within the field of wood proper. Kinds and qualities of wood that are relatively abundant or can be quickly grown in plantations may serve as substitutes for scarcer materials. Imaginative substitution can be of great importance to a growing economy as an import-saving or export-earning device. In certain cases it may be found worthwhile to use temporary substitutes that are to some extent inferior. Substitution may involve technical study and, in addition, inertia and bias may have to be overcome.

ESTIMATING THE DEMAND FOB THE NONCROP UTILITIES OF FORESTS

These utilities, nowadays often termed forest influences, may be grouped as follows, using a recent classification: ¹⁶

¹⁶FAO. Forest influences. FAO Forestry and Forest Products Studies No. 16, Rome, 1962, p. 248-249.

(a) Direct influences, roughly corresponding to mechanical effects, or rather to influences in which mechanical action appears to play a preponderant part. This category includes the protective action of the forest against fall of stone from rooks or screen areas lying above the forest, or against avalanches, and especially the manner in which it acts as a windscreen.

(b) Indirects influence, comprising those in which the physicochemical influences play the principal though not the only, role. These are the influences which, by modifying the environment, let the forest affect soil retention and the water cycle.

(c) Psychophysiological influences - a category that apparently has to be differentiated - although, as for the other categories, the influences that may be grouped in this category are derived largely from mechanical or physicochemical effects. But they have now become so great, particularly in heavily industrialized countries where there is a marked population increase, that they cannot be ignored. These are the influences which directly interest man, since they provide him with a better environment: purified air, rest and recreation areas (green belts), tourism, sports, and so on.

Forest influences form part of the socio-economic infrastructure of a country; as might be expected, the general public is not aware of their usefulness to the same extent as in the case of infrastructural elements that enter the everyday life of most citizens, such as roads, schools, or medical services. Also, scientific knowledge on some of the more complex influences of forests is relatively little advanced. Yet there can be no doubt that their over-all importance to a community is enormous.

From the point of view of planning, forest influences must be appraised in relation to the economic and other sectors of life that these influences serve: the protective effects of a shelterbelt have no significance except in relation to the crops that are shielded from winds; the hygienic and recreational values of a green belt only acquire meaning when considered in relation to a town. In this sense, forest influences are the concern of the agricultural planner, the urban planner, etc., and it is their function to decide whether the aims that they have in view should be attained with the aid of forestry or through other means, whenever there is a choice of means.

However, since forests rarely serve only noncrop functions - they nearly always also produce, or can be made to produce, wood at the same time - and since, on the other hand, every forest can acquire some of the noncrop functions under certain circumstances, these functions, or influences, of forests are inseparable from forestry planning. It is necessary, therefore, to estimate future requirements in relation to likely developments in farming, colonization, urban expansions, and so on. These appraisals are indispensable elements of the plan for the forestry sector, but they can be derived only from the other economic sectors and the over-all needs of the region.

In planning the treatment of a forest, it is often difficult to decide whether a certain area deserves special consideration on account of the noncrop functions that it may be exercising or may come to exercise in the near future; common sense suggests that uncertainty in this respect justifies cautious treatment.

ESTIMATING THE SIZE AND THE NATURE OF THE FOREST RESOURCE

This involves the perusal of the available data and the collection of new data by means of forest surveys and related studies. In regions possessing major forest resources, such surveys may require many years of work, yet some of the data may be urgently needed for planning. Often situations arise that call for no small measure of judgment in deciding on geographic priority and the degree of precision to be aimed at in surveys. It is convenient to distinguish three types of survey, of different intensity, each appropriate to different phases of planning.

Reconnaissance surveys are designed to furnish at low cost preliminary information concerning the location and extent of large areas of forest.

At the next stage, more detailed classification of forest areas is required, together with estimates of volumes of standing timber and some information about species and dimensions. Nation-wide coverage at this intensity will eventually be required; in developing countries areas so inventoried can be considered as the first contributions to the national forest inventory. Though obviously more expensive than reconnaissance surveys, costs per unit area need not be high, and already provisional decisions, positive or negative, can be taken - so far as the timber supply is concerned - about potential projects.

For a final decision, and in particular for the working plan which will embody management decisions in relation to the timber supply area, more intensive working plan inventories are required. Detailed forest maps will be essential, as will volume estimates, by species and diameter classes, and preferably also by quality classes. Costs per unit area will be a good deal higher than for national forest inventories and, a fortiori, for reconnaissance surveys.

Until recently, one of the most serious obstacles to forest industry development in the less advanced countries was the high cost of obtaining essential data concerning the forest resource. This state of affairs has now been radically altered. The tremendous advances made in aerial photography and photo-interpretation techniques: new high precision cameras, wide-angled lenses, infrared photography, improved films and electronic printers have all played their part in producing better quality aerial photographs from which more information can be extracted. Again, the application of modern statistical sampling techniques to forest surveys has made possible greater precision at lower cost. Finally, modern methods of data processing have facilitated the compilation and analysis of inventory data.

Information will be required not only on the physical nature of the forests - their area, location, composition, wood volume, growth, and so on - but also on their distribution according to ownership and the size of individual properties; these latter considerations may have a decisive influence on the pattern of subsequent development. The extent and methods of treatment and utilization, industrial and other, as also the noncrop functions of the various forest areas, must be checked.

APPRAISING THE AVAILABILITY OF PRODUCTION

The availability of land, manpower, and capital must now be appraised.

Land

Afforestation will involve occupying land at present not under forest. Conversely, some of the existing forests may have to give way to arable farming, pasture, and townships. In either case, sound decisions on the most appropriate use of a given area of land cannot be made except within the framework of an integrated land-utilization program.

The transfer of land from forestry to other uses ought not to be undertaken without sound reasons; such transfer has led to regrets in countless instances. The relinquishment of land from forestry may involve several losses. In the first place, the area concerned obviously ceases to produce wood. Secondly, total wood production in the locality may be lowered to the detriment of future supplies to the population of forest-industrial development. Thirdly, and in spite of good intentions to the contrary, important noncrop functions of the forest are liable to be impaired. In addition to all this, clearing very often involves appreciable waste of wood that is difficult or even impossible to avoid. Probable losses must be weighed against the benefits of transfer and, if the latter is decided upon, losses must be minimized as much as possible.

Needless to say, the withdrawal of land from forestry hardly makes sense unless it is permanently suited to the new use. Many of the colonization schemes of the past did not pay sufficient regard to the capacities of the soil and, now that the need for a more equitable distribution of farmland has become a pressing issue in many countries in Latin America and elsewhere, there is a danger that haste, expedience, or both may lead to a repetition of past errors. Under certain circumstances properly conducted colonization can help to ease agrarian problems. But, unless the land is right for the purpose, an extension of cultivation will not bring relief to rural misery but will only extend its bounds.

It is also worth bearing in mind that forestry can often assist colonization in a very direct manner: work in forests can help to equalize the distribution of the work of settlers throughout the seasons of the year, and

can provide them with much-needed cash income; in certain cases, controlled grazing in the forest can benefit cattle while reducing the fire hazard to the forest; and so on. These aspects of forestry are sometimes overlooked in the clamor for more agricultural land.

Manpower

The treatment and exploitation of the existing forests and the establishment of plantations in new areas demand the application of manpower of various levels of skill. In underdeveloped economies, managerial and professional skills tend to be scarce, and so does skilled labor, while unskilled or semiskilled labor tends to be abundant, although scarcities may occur locally or at certain seasons of the year. Often the availability of capable management is decisive. Where this can be found, a large proportion of the administrative and manual tasks in forestry can be broken up and distributed in a manner that permits economy of scarce or relatively scarce skills, while also facilitating training at different levels. Such training should avoid wastefu "spreading out"; it should be confined to essentials, so as to build up rapidly the required manpower.

Although continuity of operations is very important in forestry, much of the manual work is not tied to a strict time schedule, so that it is possible to use seasonal surplus labor from agriculture, unemployed labor, etc. These important possibilities must be taken into account.

Capital

The characteristic scarcities of capital in underdeveloped economies affect forestry in common with all other activities. Forestry needs depend relatively little on foreign-exchange availabilities provided it is possible to substitute expensive equipment, which would have to be imported, by the use of labor, rendered more productive with the aid of suitable tools or of inexpensive small machinery.

Since public ownership occupies a very important place in forestry throughout the world, a large part of all forestry activity is in the hands of government departments, either central or local. Their finance usually follows the general budgeting procedures of the country or locality concerned; occasionally special funds or block grants are provided to cover departmental expenses over a period of years. Forest departments in most countries have come to be regarded as entities of A quasi-commercial nature; they are expected to show the highest possible financial return that is compatible with sound operation. However, it is unusual for a department to show surpluses in the early stages of work, even when it controls valuable forest resources, since considerable inputs are needed to bring the forests under proper management. Moreover, sales of produce have to be carried out in a manner more conducive to forest-industrial development than to departmental revenue.

With the development of international finance designed to benefit the less developed countries, some governments have been able to obtain finance from international and bilateral funds, either in convenient loans or as grants. In this way, they have obtained infrastructure] investments that have facilitated, or will eventually facilitate in a fairly immediate manner, the development of their forests. Such investments include the building of roads and of power plants within, or in the vicinity of, forest regions. There seems to be no palpable reason why similar finance should be impossible for certain investments in forestry proper, such as afforestation that may be required in order to supplement a local forest resource, where for example the latter provides a good basis for initiating a forest industry but planting by government is needed to assure long-term supplies. In a case like this, payment of interest and amortization of the principal may, in fact, be easier to perform than in the more conventional infrastructural loan, since the assurance of funds for afforestation will create the possibility of selling wood to industry from the existing public forests.

Credit capital plays an important part in the forestry of commercial companies; such finance is normally obtained for the sum total of their activities, of which forestry is one. In a number of countries, the government has made available special long-term credits to forest owners, communities and co-operative societies for such purposes as afforestation and the drainage of forests. Usually this type of credit is linked to certain measures of government control, and it can be a useful policy instrument for assisting, subsidizing and controlling nonstate forestry.

DETERMINING THE PLAN AND THE MEASURES TO BE ADOPTED

In many of the less developed countries, forestry programs will have to be judged to a very great extent by their over-all effect on the balance of payments and the increase of national wealth as related to certain objectives. For instance, a forestry program might be appraised by the extent to which, in providing the raw material basis for forest industries, it will contribute to the amount of capital available for such annual investment in the economy as is considered necessary in order to maintain a certain rate of economic growth. Whatever the criteria adopted, the quality of the decisions in determining the forestry plan will depend to a great extent on the knowledge and planning available for all the sectors of the economy, including the foreign trade related to each.

No matter what the total input assigned to the forestry of the region, the distribution of this input will vary according to the technical condition and the economic significance of forest stands; and intensity of treatment may range all the way from minimum protection against destructive agencies, notably fire, in remote areas, to the most intensive management and silvicultural treatment in the neighborhood of wood-using industries. Normally working plans will be drawn up, laying down the objectives and working procedure for each major area and its subdivisions. In some cases, exploitation may be carried into virgin
forest areas. In principle, the working of these areas is desirable, since it means mobilizing new resources
and, where a fire hazard exists, it will facilitate control, by rendering these areas more accessible, creating settlements of forest workers that can be called upon in an emergency, and so on. However, there is also some danger involved. The opening-up of these areas may distract attention from the need for better utilization practices in those already being worked; it may mean the extension of undesirable practices of exploitation. Not infrequently it may be wiser to leave alone new areas of virgin forest until organizations of forestry has progressed to a stage when they can be handled with relative ease.

Technically, afforestation work need not differ from the replanting of felled areas. Financially, there is often an important difference, since the latter type of planting is undertaken within a going forestry concern, whereas the former very often is not. In regions very poor in forest, afforestation is unlikely to alter the position radically within the normal span of the forestry plan. Yet a great deal can often be Accomplished with relatively modest input, for instance where wood from fast-growing plantations can supplement wood-waste from different sources to an extent permitting the establishment of a local industry.

Forestry occupies a somewhat peculiar position in the political thought of most developed countries, including those with liberal economies, in that public ownership or at least a large measure of direct or indirect intervention in private and other nonstate enterprise has long been regarded as a necessity. In the course of time, a vast body of experience has been gained, under the most varied conditions, on methods of administration, organization management, and exploitation best suited to public forests, the techniques of selling their produce, the role of the state in forestry education and research, and so forth, as also on the scope and the limitations of numerous techniques of state intervention through assistance and legislative control. In many cases, assistance by the state has proved more effective, and control less irksome, when exercised through the intermediary of co-operative and other associations of forest owners.

Those concerned with forestry in the less developed countries will be able to draw on this vast experience when considering methods of handling public forests and of ensuring over-all co-ordination through public intervention. One word of caution is perhaps necessary: planning that overreaches itself, that fails to take account of local limitations, especially those imposed by the size and training of the professional and administrative staff of forest departments' is a travesty of planning. In the past there have been too many instances of forest JAWS enacted whose provisions have proved inapplicable in practice because of lack of means of enforcement and for want of popular acceptance. There have been concessions granted, containing admirable provisions for silvicultural measures to accompany exploitation, which provisions have been ignored in practice for lack of professional control. Ambitious planting programs have been announced in a blaze of publicity only to die a silent death as earmarked funds are quietly diverted to other uses.

The lesson is not that those responsible for the establishment and execution of forestry plans ought to lower their aims or stifle their sense of urgency. The lesson is rather that, unless provision is made within the framework of the plan for the creation of trained cadres and for the guaranteed career prospects that will ensure the forest service against wastage, the plan is incomplete.

Planning for forest industrial development

In their general aspects, the problems of planning the development of forest industries have much in common with the problems of planning any industrial sector. With these general aspects of industrial development planning and programing we shall not concern ourselves here since they are already reasonably well documented.¹⁷

¹⁷For example, in the publications of the United Nations Division of Industrial Development and those of the regional economic commissions of the United Nations. There is, however, no satisfactory compendium as yet of specific information - technical requirements, operating data, etc. - regarding the forest industries sector. FAO has at present under preparation a bibliography for forest industry development and hopes to publish later on e manual for forest industry planning.

We shall, instead, content ourselves with drawing attention to certain special aspects of planning for forest industry development which stem from the particular characteristics of these industries and their relationship with other sectors of the economy.

TIME FOB FOR

The forester and the industrial development planner inevitably differ in the emphasis they lay on the different time horizons for planning. We have already drawn attention to the long-term nature of many forest operations, and the consequent need for long-term projections of requirements, however approximate, to provide an order of magnitude of future demands on the forest in its capacity as a "woodshed" for forest industries. Few other sectors of the economy have the same need to look so far ahead, since very long-term considerations, for example to the end of the century, weigh less heavily on current decisions. The industrial planner, certainly, is concerned mainly with the current or imminent general economic planning period, whether it be three, five or seven years. In recent years there has been a trend to the use of perspective planning - setting out broad outlines and provisional targets for up to 15 or 20 years ahead, as a background for current planning. The current plan, in these cases, is seen as the first instalment of the perspective plan. The perspective plan itself (as well as its second instalment, the next short-term plan) is progressively modified and adapted in accordance with new data on needs and possibilities - and in particular in the light of achievements of past plan periods.

Perspective planning has everything to recommend it, and it is significant that it is finding increasing favor in both centrally planned economies and in economies which rest mainly on free enterprise. However, the point that needs to be made in the present context is that, for forest industry development, perspective planning is mandatory. This much is evident from the characteristics of forestry as we earlier described them. To establish a pulp and paper mill in a given location in 10 or 15 years' time, it may be necessary to intervene in the forest now, to supplement the resource, or arrange for its eventual gradual replacement by plantations, or simply to ensure that the resource is still there when it is needed. But there is another consideration which argues for perspective planning. Some major projects in the forest industries sector may take from five to seven years to realize if, as is frequently the case, feasibility studies have to start with a detailed inventory of the forest resource. Such projects inevitably spill over from one plan period to the next. What is needed, therefore, is a forward planning group that can look ahead beyond the immediate plan period; this group can ensure that resources are not misallocated in the short-term plan. To meet the general targets which have been adopted, a series of specific projects should be under study. Some, as investigatory work is completed, can be immediately implemented; others will be discarded; others will be taken up as resources permit and the need arises. In other words, the short-term plan should not only include certain specific projects to be realized within the plan period; it should also include provision for data collection, pilot investigations and project planning needed for succeeding plan periods.

GETTING AND USING RESOURCE DATA

It is clear that data pertaining to the forest resource, the forest inventory, represent an important category of information required in planning forest industry development. No prospectus for investment in forest industries can be prepared without this information. Some of the technical aspects of obtaining these data were touched on in the preceding section. The point to be stressed here is that this is the kind of information governments must possess themselves. The cost of acquiring it, though very much cheaper than even a decade ago, is still considerable, and there may be an inclination to leave data collection to entrepreneurs and potential investors. This is a mistake. Unless governments have their own data they are in no position to weigh the pros and cons of various projects and pronounce on the validity of projects submitted to them. If concessions or contracts are eventually involved, they are unlikely to be able to negotiate these concessions or contracts on equitable terms. Moreover, even if privately-obtained data are turned over to the government, the likelihood is that the inventory will have been tailored to the expected requirements (areas, species, dimensions) of the private party, and will therefore be unsuited or inadequate for use in assessing the prospects for alternative projects, perhaps in other branches of forest industry. This point is particularly important at the present time when technology is making rapid strides; the possibility always exists that species and dimensions presently unconsidered may be effectively utilized in the not distant future.

In the past a common feature of forest exploitation in the developing countries has been single-commodity exploitation. This has meant that much useful timber has been left in the forest, since it was not adapted to the purpose of the operator or, sometimes, that timber extracted has been put to uses lower than its intrinsic qualities merited. Instances of integrated forest industry development, with integral utilization of the forest crop, have been rare. But governments have a profound interest in the fullest utilization of the forest crop, for technical as well as economic reasons, and will seek to influence operators in this direction when negotiating concessions. This they can hardly do without adequate knowledge of the forest resource.

PLANNING DEMAND

The broad indications of demand trends for forest products which suffice for establishing forest production goals will not, of course, be adequate for planning forest industry projects. Much more detailed investigations of present and potential markets for particular products and grades are necessary. In many developing countries the starting point for an assessment of current consumption will be an examination of the import statistics¹⁸ since imports are the only present source for many processed forest products. Demand projections, based on such parameters as per caput income and demographic growth, can be helpful. But for considering specific industrial projects it is necessary to get down to further detail by investigating, for instance, the specific requirements of other sectoral developments, and particularly of major potential consumers such as of bags for cement, of boxes and crates for fruit exports, of sawnwood and wood-based sheet materials for housing programs, and so forth.

¹⁸Here it should be observed that the forest products trade statistics of most developing countries are still lacking in the detail and accuracy that could render them useful for industrial development investigations.

It was noted earlier that most of the demand for forest products consists of intersectoral demand rather than final consumption. In many developing countries a substantial proportion of the total demand may well arise either in the public sector itself or as a direct consequence of government programs, such as railways and other utilities, housing, school buildings, works departments. Governments are thus well placed not only to encourage or promote the establishment of appropriate forest industries but also to influence production standards.

The significance of this role will be appreciated if it is borne in mind that, in developing countries, construction, as distinct from equipment, may account for 50 to 70 percent of total fixed investment. Thus housing and urban facilities have a large share wherever there is a substantial transfer of population from agriculture to industry, while the importance of public works and public utilities (roads, docks, transport, water, electricity, schools, hospitals, and government buildings) is always great in the first decades of development, declining thereafter. The great importance of construction has not always been fully considered in development programs, and the scarcity of building capacity has often been the principal obstacle to stepping up the rate of capital formation. A common error is failure to provide for the necessary output of building materials and components.¹⁹

¹⁹It is interesting to note that, in the U.S.S.R., one of the main principles m planning the material and technical basis of construction is that its development should keep ahead of the increase in the volume of construction envisaged in the plan. To this end, a higher rate of growth is planned for the gross output of the building materials industry then for the total volume of construction. See REPENKO, A. T. The material and technical implementation of housing programmes. Report on the seminar on housing surveys and programmes with particular reference to problems in the developing countries. Geneva, United Nations, 1962.

Not only can the government, as major consumer, decisively influence the demand for sawnwood, wood-based panels and other construction timber; by properly planning its demand it can help industries to specialize in making parts and components, such as panels, windows, doors, staircases, and bearing elements.

Skilled labor is often a bottleneck in expanding construction. For this reason special attention should be paid to labor-saving construction materials such as plywood, particle board, fibreboard and wood-wool board. In the developed countries, shortage of construction labor has been a major factor in increasing the demand for wood-based panels.

It is not necessary to discuss here the standard measures which a country may take to encourage industrial development; tax exemptions, tariffs, subsidies and the like. These are common to all industries, and here we are concerned only with aspects special to the forest industries. There is, however, one further point arising from the demand characteristics for forest products which is perhaps worth mentioning. It has already been noted that many of the forest products are broadly substitutive over a wide range of end-uses. This applies, for example, to the three major wood-based sheet material industries. If none of these industries exists at present, and if there are sound technical and economic grounds for preferring to develop one rather than the others, judicious import regulations can be helpful in both testing and priming the market.

THE IMPORTANCE OF INFRASTRUCTURE

The location of forests in relation to population concentration, the transport volumes and distances involved in both raw material procurement and product distribution, and the technical requirements of forest industries, all combine to make the development of this industrial sector - perhaps more than that of any other - heavily dependent on progress in creating certain basic infrastructural facilities; power, water, road and rail communications, and port facilities. At first sight, this fact might seem a discouraging one for developments in this sector. There can be no doubt that in the past it has had an inhibiting effect. Governments and private entrepreneurs, attracted by the idea of valorizing a particular forest resource by establishing a major forest industry unit, have often renounced the undertaking once it was realized that it would be necessary to create those forms of social overhead capital which already exist in the industrially advanced countries. The cost of providing these facilities, when shouldered entirely by an individual project, would add perhaps 50 percent to the cost of investment.

Today the situation has radically changed. Not only has the concept of industrialization as a conscious and organized process won full acceptance in the developing countries; it is understood that successful industrial development can take place only if governments deliberately set about creating the necessary infrastructure. The important thing from the planning standpoint is that infrastructural investment plans should take full account of the industry development possibilities they can provide. This applies when mapping out new roads and railways, siting power stations and power lines, or developing new or improved port and harbor facilities. Not only can judicious planning help to bring new forest industries into existence; the industries they generate will often represent the first major financial return on the infrastructural investment undertaken. In some oases, they may provide the decisive element in determining whether to undertake a particular infrastructural investment or not.

PLANNING FOR SPECIFIC AREAS WITHIN A COUNTRY

Next, a word on the area aspects of planning. The emphasis given to area planning, and the degree of initiative accorded to areas in both plan formulation and plan implementation, will vary from country to country. The central problem will always be how to harness most effectively local energies and enthusiasms without falling into inconsistency in aims and errors in phasing, both as between the several areas and as regards the relation between central and local targets. In large countries, of course, a considerable measure of decentralization is inevitable if planning is to be effective.

Planning by area assumes particular importance for forestry and forest industries. It is at this level that the noncrop functions of the forest can best be appreciated and the social implications of customary rights in the forest fully understood. Moreover, from the industrial aspect, while there are certain forest industries that must clearly have a national range in order to prosper, there are other branches which can successfully operate on a smaller scale. From the standpoint of economic development (including industrialization), there is much to be said for studying the forestry and forest industry development possibilities of a country not simply in terms of the country as a whole, but also in terms of defined forest-economic areas within it. These areas should be defined not simply on the basis of existing or potential forest resources, but also by taking into account population concentrations, other physical endowments, current and future claims on the land, and so forth. This approach can be helpful in assuring a clear orientation of the aims of forest policy in each area. Thus certain areas will be clearly marked to become principal wood reservoirs for major forest industries serving the whole country. In others, an ordered transfer of forest land to agricultural use, while retaining sufficient land under forest to supply industries serving local needs and to assure maintenance of noncrop utilities, can be permitted. Finally, there will be areas where the main emphasis will have to be placed on protective forestry, with forest industries playing a subordinate and perhaps negligible role.

AUTARCHY OR ECONOMIC INTEGRATION

Some developing countries, oppressed by the prospect of a steeply rising import bill for forest products, have already resolutely undertaken programs of forestry and forest industry development, and a careful examination of these programs suggests that, in one or two cases, national self-sufficiency in forest products is the implicit, though seldom explicit, ultimate goal. The programs already established do not overlook the fact that, in some instances, certain commodities produced from the indigenous forest resource will find difficulty in competing on even terms with the products of the industrially advanced countries. Justification is found in the pressing need to save foreign exchange, in the fact that industrialization in any sector is unlikely to succeed without a measure of protection, and perhaps even in the fact that a vigorous forestry program is required in any case to assure the flow of noncrop utilities of the forest. Sound as these arguments may be, it would be a serious mistake to suppose that they can be held to justify the goals of self-sufficiency in forest products in all instances.

Mention has been made earlier of the fact that current moves toward economic integration among the less industrialized countries can favor the development of certain industries by extending the market and thus overcoming the obstacle presented by small national markets in branches of the industry where scale economies are pronounced (such as newsprint and chemical pulp). This in itself is a very strong argument in favor of the confrontation, and if necessary adjustment, of national plans for forest industry development on the part of countries participating in economic integration schemes. Indeed, without such confrontation and adjustment, there is danger that mutually inconsistent plans may be pursued and the avowed aims of economic integration frustated.

But small national markets and economies of scale are not the only reasons for giving special attention to the forest industries within areas of economic integration. In the less developed countries, where economic integration schemes are already moving forward or are at present being discussed, there is often a wide disparity in the natural forest endowment and in the suitability for growing different types of timber. Moreover, there is often a large measure of complementarism in the nature of the forest resource held by different countries within the area, for instance, as regards short-fibred and long-fibred material for paper making. It is only commonsense that these disparities, and this complementarism where it exists, should be taken into account in any mutual agreement on these national development plans which will make for optimum regional economic development. The advantages lie partly in the programed international division of labor, partly in securing the optimum utilization of the region's forest resources. In many cases the adoption of national self-sufficiency in forest products as the goal to be achieved will mean deliberately foregoing these advantages.

AN ORGANIZATIONAL NEED

Whatever the role that may be accorded to public and private enterprise respectively in developing forest industries, there is, and must Always be, an indissoluble link between the development of this sector and the forest resources on which it is to be based. This Argues the need for a specially close and intimate relationship between those authorities responsible for the forests (usually the forest service, a department of the Ministry of Agriculture) and those responsible for planning and encouraging industrial development. Unless there is the closest co-ordination, the danger is always present that, on the one hand, the forester may forget that his function is to serve people, not to serve trees, while on the other the industrial developer may ignore, to the cost of the community and perhaps to his own, both the dynamics of the forest and its important functions other than as a wood-provider.

It is a regrettable fact in most developing countries (and for that matter in several more advanced countries) that as yet no effective link exists. That this has led in many cases to reckless and wasteful use of the forest resource is widely recognized; its legacy is felt in the significant proportion of total forestry effort which has now to be devoted to what are essentially rehabilitation measures. What is perhaps less widely understood is that this lack of effective collaboration has been largely responsible for the failure to recognize, plan and realize hundreds of perfectly sound and feasible forest industry projects.

It is idle to imagine that this situation can be remedied merely by establishing formal links. If foresters, forest utilization officers, industrial economists and development planners are to reach a mutual understanding of each other's problems and to explore creatively the development opportunities that lie in the forests, working contacts must be multiplied at all levels. These are the considerations which have led some countries, in which forest industries already play or are clearly destined to play a key role, to concentrate responsibility for forestry and forest industries in the same department or ministry. This solution is not likely to be universally valid; but the problem of achieving an organic and creative working relation between the two sectors has to be solved if a vigorous program of industrial development based on the forest is to be realized.

THE CHOICE

In the foregoing paragraphs we have referred to some of the problems of planning for forest industry development which Arise from the peculiarity of the forestry and forest industry sectors and their relation with each other. The list is intended to be illustrative, not exhaustive. Each example quoted, however, implies A particular responsibility on the part of governments if these sectors are to be effectively developed. This could hardly be otherwise, given the nature of the resource itself. And this is true whatever the political philosophy inspiring government action, whatever the type and degree of planning undertaken by governments to promote the welfare of their peoples.

It has been shown that the forests have a great potential as A source of human welfare, and that industrialization based on the forest can both contribute to and promote the general economic development process. Yet it must be acknowledged that the mobilization of the forest resource through the establishment of forest industries is not a prospect that brings unmixed joy to the hearts of many professional foresters. They know only too well that, if the forest is to fulfil its role, there must be exact knowledge of the resource, the forest must be brought under proper management, working plans must be devised, and extraction schemes worked out. Only thus can the resource base of industry be made secure. But these tasks require strong and effective forest services, and today forest services in many developing countries are still extremely weak. It is Awareness of the danger this situation represents, not any mistaken attachment to the idea of conservation as an end in itself, which impels many foresters to don the mantle of Cassandra.

But it would be a mistake to cherish illusions on this point. And it is an illusion to suppose that there exists a choice between mobilizing the forests now, and leaving them intact until forest services have been built up to the point where it is safe to open the forest gate. The technical and economic conditions for establishing new forest industries in the developing countries are maturing fast. In the course of the coming years many new areas of forest are inevitably going to be brought into use. The choice is between mobilization in the public interest based on sound planning and with adequate safeguards and with the forest services taking an active part and being built up in the process, and mobilization taking place in an uncontrolled and haphazard way, while weak forest services stand by helpless. This is the real choice.

It is in making this choice that the responsibility of government is engaged. For this is not a question which concerns a forest department alone; it concerns ministers of agriculture, economy, industry and trade; it concerns planning departments and development agencies; it concerns finance ministries and budget bureaus. Only concerted action on the part of all departments can ensure that forest industries play their part in the attack on economic underdevelopment, and that the immense contribution which forests, rightly used, can make to the development process is fully realized.

EIGHTH COMMONWEALTH FORESTRY CONFERENCE Delegations attending the Eighth Commonwealth Forestry Conference, held in Nairobi in June-July 1962, represented 17 member countries of the Commonwealth. They met under the chairmanship of C. Swabey, Forestry Adviser to the Department of Technical Co-operation, United Kingdom. The U.S.A. was also represented. FAO staff participating included L.J. Vernell, S. L. Pringle, H. G. Green (Nyasaland), and two officers serving in Tanganyika, R. I. Beazely and Lake S. Gill. The accompanying tours in Kenya, Uganda, Tanganyika, and Zanzibar provided the essential background to the Conference's recommendations in regard to future forest policy in East Africa. The features of most interest were the widespread plantations of quick-growing conifers, the potentialities for pulp and paper development, utilization problems, the management of montane semi-evergreen and rain forest, forest research, education and training needs, and the future of wildlife management and national parks.