Commission VII: The industrialists

Chairman:	A.P. THOMSON (New Zealand)
Vice-chairmen:	A. PIHA (Finland)
	A.R. JOSEPHSON (United States)
	S. KLABIN (Brazil)

Secretariat note

Moderator:	M. GONZALEZ MUZQUIZ (Mexico)	Technical secretaries:	J. SWIDERSKI FAO)
			E. FIAÑO (Argentina)

Over fifty papers, general and special, have been prepared for Commission v''. They cover the whole range of forest industries and a wide spectrum of problems. It would be impossible. however, to deal with all of them in the course of a one-day session. Of necessity we have to be selective and concentrate on the most important issues from the point of view of this congress. What are these issues? Obviously, for a congress of world foresters, the subject of the changing pattern of wood requirements by forest industries and the still unresolved problem of utilization of some types of forest resources is of great interest. Then socioeconomic and environmental aspects of forest industries are close to the basic theme of the congress: Forests and socioeconomic development. It is suggested therefore that our discussion concentrate on the following three main items:

1. Trends and prospects in the industrial utilization of wood.
2. The development of forest industries and their contribution to economic growth.
3. Forest industries and the conservation of the environment.

There might be some difficulties in keeping the discussion strictly within the limits of these items. It is understandable that none of them can be considered completely in isolation from others; they are all interrelated. influencing each other and depending on each other. But still, a general breakdown of our whole discussion must be made as a matter of convenience if we are not to cut continuously across the borders of all issues in the course of our discussion without achieving a concentration necessary for any meaningful exchange of views and ideas. This is the more important since many papers do, in fact, cut across the borders of the main items and, if we discussed them on the "author by author" instead of " item by item" basis, it would be much more difficult to achieve a clear comparability of views expressed in them. A list of all papers submitted to Commission VII is in front of you. They have been shown under the main items they deal with but, in fact, many of them have application to other items under discussion.

It should be emphasized that the fact that some papers receive somewhat less attention in the following statement by no means indicates their lesser importance; it is just that they do not fall within the mainstream of the three items which are suggested for priority consideration in view of the time limitations. It is certain, however, that all these papers once distributed throughout the world, will reach the people and organizations interested in them and make the expected impact.

1. Trends and prospects in the industrial utilization of wood

The changing pattern of wood raw material supplies for forest industries is one of the most important features of the development of wood processing technologies on one side and forest management on the other. Obviously, technology is shaped by the specific economic situation but experience shows that sound new technical developments spread rather fast from their place of origin to countries with similar socioeconomic conditions. Hence the great importance of exchanging views and experiences on particular species in specific areas: what proved possible in one place today may be possible or indeed necessary elsewhere tomorrow.

Thirty papers presented to Commission VII deal predominantly with specific aspects of wood as raw material for forest industries; another ten papers (listed under item 2) touch upon this matter one way or another. For the sake of convenience let us divide the discussion into four major subjects:

1. Changing patterns in the utilization of established wood species.
2. Utilization of so-called "secondary species."
3. Plantation resource.
4. Research in wood products.

CHANGING PATTERNS IN THE UTILIZATION OF ESTABLISHED WOOD SPECIES

Koch reviewed in his paper the experience in processing southern pines, i.e. hard pines native to the southern part of the United States.

"Most pine plantations are planted or seeded to 500 or more trees per acre, thinned at intervals, and finally clear-cut on the shortest rotation permitted by the market for which the wood is grown. The resulting small diameter of the average plantation-grown log is probably the dominant factor shaping recent technological developments in the industry."

Mechanical processing of these small-diameter logs required introduction of new techniques. Central to most of them is the chipping headrig.

"This machine converts logs into timbers (cants or flitches) by removing the peripheral wood in the form of pulp chips or flakes for particle boards. Neither sawdust nor slabs are created.

With its companion, the chipping edger, this machine is probably the most important innovation in timber conversion achieved during the 20th century. It enables logs in diameter classes from 6 to 12 inches (15.2 to 30.5 cm) to be profitably made into lumber."

Giordano in his paper on trends and prospects of the industrial use of wood also considers the chipping headrig " a truly new concept aimed to achieve integral use of wood."

The most appropriate selection of saw and veneer logs is of great economic importance. Koch says:

"Logs generally yield higher value if they can be converted into veneer and plywood rather than into lumber. Veneer manufacturing, however, usually is profitable only if logs are 12 inches (30.5 cm) or larger in diameter. This fact, together with the special capabilities of the chipping headrig, is resulting in the establishment of new processing centers for full-length stems. In these centers, lower portions of the stem are removed for conversion into veneer; tops 6 inches (15.2 cm) and smaller are chipped entirely; and the intermediate portion-that 6 to 12 inches in diameter -is converted into lumber via chipping headrigs. Thus maximum value is recovered from all portions."

Another technical development enables high recovery sawing of not only small-sized but also badly shaped logs, e.g. crooked hardwood logs, etc. This is made possible by the application of overhead feeders which carry the sawn logs by the ends, suspended between carrying arms. This development is described by Moul.

The minimum diameters for southern pines indicated in Koch's paper as IS cm for sawing and 30 cm for peeling represent a definite progress in lowering the requirements for wood raw material for these two important forest industry sectors.

In relation to plywood production this is confirmed by Cullity. He states that the economic conversion of logs of an average diameter of 30 cm into low-cost veneer was possible due to "change in the basic market for plywood from the furniture to the construction industry (therefore a change in the quality of the raw material required) associated with the development of efficient machinery for the conversion of small-diameter logs from man-made forests." Cullity also underlines that this development " basically derives from the original development of the Finnish industry, taken up and adapted to the needs of a man-made softwood forest in the south-east of the United States."

In the field of thin veneer production Cullity stresses the impact that the surface finishing systems and automated lay-up of veneers will have on the raw material requirements of the plywood industry. He is not, however, specific about the exact character of this impact; something that could perhaps be more closely defined in the course of the discussion.

Giordano dwells on this subject in a little more detail, stressing particularly the role of new methods of colouring veneer from certain wood species in the furniture industry which requires uniform surfaces. But obviously, the subject is extremely broad: there are a number of surface finishing materials and methods, a number of technologies for their application, etc. This whole complex problem has a direct bearing on the veneer market and indeed on the whole market of board products, and definitely deserves attention during the discussion.

While talking about the size of wood raw material for mechanical forest industries, it is worth noting that detailed studies in sawmilling. described in the paper by van der Walt, Laurens and Van Vuuren, suggested " that logs under 21 cm be sold as pulpwood and that slabwood and drymill waste be kept as boiler fuel." This relates to pine plantations in South Africa, and it would be useful if the discussion could provide similar information in relation to other species and other areas of the world.

In the area of particle board production Maloney and Marra discuss the changing requirements from wood raw material. From solid residues and roundwood as initial raw material in the United States the particle board industry switches to a large extent to planer shavings for which a suitable technology was developed. The authors indicate that " planer shavings enjoy a cost advantage of about $19.00 per ton in the production process, making them a clear first choice in the spectrum of available raw materials for particle board." They point out, however, that in North America " it is expected that the amounts of planer shavings and plywood trim will decrease because-the lumbering and plywood industries are also improving their technology. Improved sawing techniques and abrasive planing are now reducing the amount of planing necessary and, concomitantly, the quantity of useful shavings and sawdust. Furthermore, improvement in pulp and paper technology is resulting in more sawdust and shavings being used for this purpose. The particle board industry, therefore, faces stronger competition for previously available raw material." This competitive situation does not seem to present any danger for the board industry because " particle board is in a most advantageous position in being able to use a large variety of materials successfully in board products. For the future, these materials can include bark, forest slash, industrial refuse, municipal refuse and agricultural residues, all of which have received experimental attention for manufacture into particle board."

Trutter, who describes the European trends in the particle board industry, describes how this industry started after the second world war with wood residues (not very successfully), later reached a high degree of development based on roundwood and then, due to the development of special machines and technologies, turned back almost completely to wood residues. Even " the previously useless sander dust from particle board production is now reutilized for the manufacture of extra-fine surfaces, and sawdust considered before useless is now processed into surfaces meeting the highest demands."

The fibreboard industry accepts, as mentioned in Asplund's paper, a wide range of raw materials. The paper, however, is devoted mainly to the most acute problems of the wet method production technology and does not go into details of raw material requirements. Perhaps this is something which could be covered by our discussions; it would also be useful to elaborate during the discussion on the raw material flexibility of the wet method versus the dry method of fibreboard production.

We are now in a particularly interesting moment of development: with the broad application of the dry method of fibreboard manufacturing and, as pointed out by Maloney and Marra, the increased use of fibres in particle board production, the trend seems to be " the elimination of the previously distinct differences between hardboard and particle board." This seems to help in creating a particularly promising market for low-grade wood for this growing sector of forest industries. It is hoped that the discussion will be able to cover this development in some depth.

Giordano puts in his paper the development of wood technologies and wood products into a perspective of the last two or three decades. While discussing the most recent situation he draws our attention to the problems which can be defined as: wood and plastics- competition or symbiosis. The same question is also put by Uysmura who deals with wood competitors in a broader sense, mainly in reference to Japan. He mentions, for example. that in Japan " the production of aluminium sash is increased and while the production of wooden fittings from 1965 to 1970 was 1.3 times. the production of aluminium fittings increased as much as 7 times and 45 percent of the demand of fittings was made of aluminium. Likewise, the wooden beam is replaced by light section steel and parts of furniture by low foam plastic."

Uysmura can see, however, how wood could defend its position: "Development of aluminium sash can be checked by development of better wooden sash and advancement of section steel beam stems from shortage of large dimension timber but since laminated wood beam or wooden case beam can be produced rationally, they can compete with the former. Although substitution by low foam plastic in the production of furniture and fittings is strongly pushed forward, the cost is considerably high and eventually, such substitution may be limited to some industrial art object which takes much time and it is not likely that every field of wood utilization is to be replaced by low foam plastics."

For the future Uysmura seems to be optimistic about the " symbiosis" of wood with other materials: " For instance, with combination of inorganic matter with plywood, the ideal construction material which is of high strength and more resistant to fire can be produced. If plastic is injected into wood, a material with high dimension stability and rigidity can be produced. With reduction of defect of wood to manifest the merit more effectively, the combination with other material should be promoted. This is the way to avoid the substitution by other material."

In the field of pulp and paper one of the important changes is the industry's acceptance of a growing proportion of short-fibre wood for purposes for which predominantly long-fibre raw material was used before, e.g. for newsprint production. One example of this shift is presented in Picornell's paper describing the first newsprint mill in the Philippines which uses principally dipterocarp residues from integrated operations, and plans for the future an additional use of fast-growing species, such as Eucalypt or Gmelina. This is an encouraging example for many other parts of the developing world where newsprint is imported and there is an insufficient source of long-fibre resource for establishing domestic production. The discussion will certainly reveal more examples of newsprint production from nonconventional fibre raw material.

The magnitude of the problem of fibres for newsprint can be demonstrated by some figures taken from various sources for sixteen countries of south and southeast Asia and for Latin America. In every one of these regions an additional capacity of two million tons would have to be established in order to meet the increased demand for newsprint in 1985. This would involve an investment expense close to one thousand million dollars.

The main wood raw material problems of the pulp and paper industry lie in the area of utilization of " secondary " species, especially those appearing in a mixed species composition in tropical countries. Papers dealing with this subject will be reviewed in the following chapter.

UTILIZATION OF SO-CALLED "SECONDARY SPECIES"

As is well known, the bulk of the problems connected with the utilization of secondary species is related to tropical forests. Preston points out in his paper that nearly half of the forested lands of the world are covered by these forests and yet they "contribute less than twenty percent to the total world use of industrial wood and consequently contribute far less than their potential to the economic development of the countries in which they occur, mainly developing countries. " As he further states," statistics compiled by FAO indicate that affluent countries consume approximately 85 percent of all industrial wood, of which only about 3 percent is tropical hardwoods from a very limited number of species. However, increasing demand for timber products in the developed countries combined with dwindling supplies of prime species, increasing pressure for alternative use of forest lands, and stringent environmental controls in the affluent countries of the North, have served to focus increasing attention on the utility of the tropical forest resource. Statistics which indicate a very nearly four-fold increase in imports of tropical hardwoods by developed countries during the past twenty years illustrate the increasing reliance on tropical forests."

The reasons for the low utilization of mixed tropical forests, i.e., their high degree of heterogeneity, the frequently unfavourable physical, mechanical and technological characteristics of the wood, transport difficulties, etc., have been long expounded.

A good example of the complexity of problems related to the utilization of heterogeneous tropical forests is given in the paper by Gonzales Flores, Barrios and Panduro which describes the situation in Peru where there are 65.5 million hectares of natural broadleaved forests, often with up to 100 species per hectare. This tremendous potential contributed in 1969 only 3.2 million m³ of wood.

Preston stresses in his paper that "it becomes increasingly important for this resource to be used efficiently and non-destructively. This, in turn, means that a much higher percentage of the species growing in the heterogeneous tropical forests must find utility." As one of the means for achieving this task Preston suggests the establishment of a central clearinghouse for information on tropical hardwoods and their marketing. Some 300 research units in 50 countries deal currently with tropical timbers and publish a great number of papers. However, the vast volume of knowledge must be properly organized in a standardized system, using modern communication and computer techniques. No doubt, this subject deserves special attention in the course of the discussion.

Among papers contributed to Commission VII, two deal exclusively with the utilization of mixed tropical hardwoods in pulp and paper production. One is by Higgins et al., Pulping of tropical hardwoods; the other is by Cardenas, Practical experiences in pulping mixed tropical hardwoods. The first deals with laboratory pulping in Papua, New Guinea; the other contains a description of practical experience gained in commercial pulping and paper-making carried out since 1963 by Pulpapel S.A. in Cali, Colombia, using local mixed tropical hardwoods as raw material. It seems that the forests in Colombia are more homogeneous: about three quarters of total volume is made up there by 20 out of about 100 species as opposed to 30 out of about 100 species in Papua. In both cases kraft pulp was produced. Both papers are in agreement that mixed tropical hardwoods can provide pulp components for a wide variety of papers and boards from fluting to high-grade cultural papers. This conclusion is very encouraging indeed; yet, in relation to a number of other tropical forest areas all over the world, a number of questions remain still to be answered:

Where and how to separate undesirable, recalcitrant wood species (e.g. with a very high density, or latex or silica content. Higgins et al., for example, suggest leaving undesirable trees in the forest; but should other solutions, e.g., taking them to the road, be excluded?).

What are the trends in marketing of pulp from mixed tropical species? Will shortage of short-fibre raw material of established quality facilitate marketing of pulp from mixed tropical hardwoods in the foreseeable future?

Should pulp mills, based on mixed tropical hardwoods, plan to use them once only and then replace them by homogeneous plantations? Or would it be even better to use the lead time needed for an industrial project to clear-cut the natural tropical forest and establish a homogeneous man-made fibre resource on which to base the new pulp mill?

It is hoped that the discussion will be able to go into at least some of these important problems. Despite the many questions left open, each study provides us with definite answers to some questions. To the forester it is interesting to note, e.g., that the study by Higgins et a]. suggests the feasibility of storing mixed tropical hardwood chips in outside piles; the loss of wood substance does not cause any appreciable difference in pulp yield: attacked during biodeterioration are the carbohydrates which are easily lost during the pulping anyway. This finding may be important also for industries other than pulp and paper; e.g., the fibreboard and particle board industry which can use chips as their basic raw material input.

The wood-based panels sector, as a potential consumer of secondary species, is discussed in Pleydell's paper. He sees clearly the investor's tendency to look for " big volumes of single species of the best possible characteristics for plywood, blackboard and chipboard manufacture" but recognizes that boards (plywood and particle boards) " do represent one way of utilising the right secondary species because primarily they offer a way of turning attention away from the individual identity of the species in favour of presenting the consumer with another kind of product meeting a market performance specification. Greater market intelligence and competition are pointing more towards specialist boards overlaid or otherwise treated and again this offers ways of using secondary species."

Booth describes three concrete examples of successful marketing of hitherto unused tropical broadleaved species processed into structural lumber, plywood, decorative veneer and laminated structural elements. One example refers to the Central Timber Manufacturing Plant (CTMP) of the Forest Department of Guyana. The aim of CTMP is to develop markets for timber from forests other than the well-established greenheart. " By concentrating on good quality production the CTMP has grown into the leading producer of quality products in floorings, sidings and mouldings in the country. Thus, with help from FAO) the Forest Department has been able to widen the range of species used by employing diffusion preservation of green sawn lumber from perishable species and to expand into the sawmilling field by using a mobile sawmill in good quality forest which had been previously logged only for greenheart." Many private sawmillers who initially were reluctant to take the risk " now cut nothing but secondary species which were initially brought to market through the efforts of the CTMP. Furthermore, a number of these secondary species are now entering export markets in a big way." Another case described by Booth concerns the Australian white birch (Schizomeria ovata) which has a wide perishable sapwood easily reduced to powder by lyctus borers. Due to government-sponsored research (Commonwealth Scientific and Industrial Research Organization) boron compounds were used to preserve sapwood which enabled production of marketable sawn timber for joinery and furniture and ordinary plywood. Further research work led to the use of sodium fluoride for preservation instead of boron; this enabled the application of phenolic glue for high-value waterproof plywood. Later, other kinds of veneer treatment (with a mixture of copper pentachlorophenol) enabled production of high-grade rot-proof marine plywood and also of decorative veneer, which meant the highest promotion of the erstwhile " Cinderella" species. These two examples refer to individual species. The third example concerns mixed broadleaved rain forest species from Australia on a "run of the bush" basis which were successfully converted into laminates for the urban housing markets.

It is worth stressing that in all these cases governmental organizations and funds played a decisive role. It is hoped that the discussion will look into the role of the various sectors of the national economy (private, government, cooperatives) in contributing to the solution of one of the most difficult problems facing forestry and forest industries in many tropical countries: expanding uses and markets for the hitherto unused wood species. While discussing this subject it is worth keeping in mind Booth's approach to development of secondary species as a "Research and Development problem essentially similar to and governed by the same laws as product development in the large manufacturing enterprise. The factors which define the possibility of success are volume available, properties of the species and marketing strategy."

It cannot be overlooked that in all success stories described by Booth preservative treatment of wood paved the way to success. In this connexion attention should be drawn to Price's paper which is the only one presented to Commission VII dealing exclusively with problems of wood preservation. In his contribution he states that " wood preservation allows and encourages the utilisation of less naturally durable secondary species by improving their performance so that they become 'as good as ' or ' better than' primary durables." Price provides a number of examples of making secondary tropical species usable through preservative treatment and in effect saving money as compared to the use of "primary" species. For example, low-cost houses in Malaysia built from pressure-treated secondary species cost 15 to 20 percent less than houses from primary durable species which could be used for export purposes. That is why Price suggests that" wood preservation should properly be looked upon as a saving - and not a cost."

In addition to the main sectors of forest industries, such as pulp and paper, sawmilling, and wood-based panels, secondary species could also find outlets in such areas as production of charcoal, heating and power generation. Charcoal production as indicated by Booth " is possible from any species but in practice because the charcoal must have a certain minimum crushing strength, hardwoods of medium to high density are preferred raw material. The future of charcoal has always been regarded as somewhat dubious but nowadays with the possible exhaustion of fossil fuels and the steady rise in their price and growing markets for activated carbons in the fight against pollution the future of charcoal calls for cautious reappraisal. In fact, while the use of charcoal as a household fuel in many parts of the world has been declining, in others its use for metallurgical and chemical use has been expanding."

A paper prepared by Oiwa and Kishimoto deals exclusively with charcoal production. It demonstrates " that rubber wood from the Malayasian plantation which was wasted or burnt up has for the first time been converted into industrial charcoal of over 82 percent ' fixed carbon ' content to meet the requirements of the pig iron blast furnace of the Malaywata steel project." As much as 400 000 tons of rubber wood are to be converted into charcoal, which shows the economic importance of the operation.

As with charcoal, the use of wood for heating and power generation is on the decline. As indicated by Booth, however, with " modern methods of wood collection and combustion the use of wood for electricity generation in certain sites appears to be economically feasible and has the advantage that it is a renewable resource. It seems likely that we will see some developments in this field in the coming years as a means of solving the very difficult utilization problems complex high density tropical forests pose in certain areas. " It is interesting to note in this context that-as pointed out by Morgan-" well over 60 percent of energy requirements for wood products production in North America comes from burning wood residuals (hog fuel), a renewable resource."

The future of the use of secondary wood species for production of charcoal and electrical power is one of the most debatable problems, it seems that a lot more economic facts and data will be needed in order to form a proper judgement. But the discussion could at least indicate the necessary studies which have to be carried out.

While talking about the conspicuous problems of utilizing mixed tropical hardwoods one should remember that, as pointed out by Preston, ' heterogeneous hardwood stands are not unique to the tropics. For example, approximately one half of the forest area in the United States is in mixed hardwoods. Growing in these forests are some 114 species from 36 genera which attain commercial size, forming approximately 45 commercial groups. Of these, only 8 species and commercial groups, constituting 35 percent of the growing stock, have continuously high market value. Untold thousands of research dollars devoted to the remaining 65 percent in an attempt to improve their marketability have led to no spectacular changes. The simple fact is that the timbers which are not on the preferred list fail in one or more of the marketing criteria."

Koch describing the utilization problems of hardwoods growing on pine sites estimates that "for every ton of growing pine there probably is another ton of unutilized hardwood. The marketing of potential hardwood products, as well as the technology for their manufacture, must therefore command the attention of researchers."

Fuller utilization of hardwood presents problems also in the U.S.S.R., as mentioned by Vorobiov. " In the U.S.S.R.'s European portion the volume of allowable cut is, for the time being, under-utilized in hardwoods (primarily birch and aspen). The utilization of the mentioned resources will certainly require the progressive development of industrial hardwood processing and of small-sized logs in particular. One of the measures for improving this situation in the future is improvement of species composition in the forests which again is linked with the programme of increasing the productivity in forests in the U.S.S.R." Vorobiov mentions an example from the Moscow region which shows that " on the sites supporting the above-mentioned birch and aspen stands with an annual increment of 2-3 m³ per hectare it is quite realistic to grow pine and spruce crops with an annual increment of 5-10 m³ per hectare."

As can be seen from the papers contributed by authors from various parts of the world the utilization of secondary hardwood species is a global problem; however, there is no global solution and therefore the exchange of views and experiences in this field during the discussion could be very beneficial to all participants.

PLANTATION RESOURCE

The growing role of man-made forests as a source of industrial wood raw material is reflected in several papers presented to Commission v''. Zañartu, Ortiz and Yudelevich in their paper deal with this subject in relation to Chile." The success of Chile in the creation of an important raw material source in Pinus radiata plantations, in establishing a vigorous forest industry on that basis, and in timing this accomplishment with the diminishing resource and increasing inaccessibility of the native forest is a textbook example of well thought out synchronizing of the action by the private enterprise, the incentives by the Government and the know-how of foresters. " At the moment, there are slightly over 300 000 hectares of P. radiata plantations in Chile predominantly in industrial concentrations, with a standing volume of 64.5 million m³ and an annual increment of about 4 million m³. During 196670 average annual production from these plantations was 300 000 tons of pulp, 242 000 tons of paper and board, and 30 000 tons of fibreboard and particle board. The value of this production is about 90 percent of the total of Chilean forest products.

Another striking example of the industrial role of forest plantations is presented by van der Walt, Laurens and van Vuuren, who point out that the softwood sawmilling industry in South Africa depends entirely on pine plantations for its raw material. There are at present approximately 500000 hectares of pine plantations in existence in the country. From an insignificant production of softwood sawnwood the output grew to over 600 000 m³ in 1971 replacing 89 percent of previously imported building timber by locally produced softwood sawnwood. This presents a shining example of how a country which previously imported up to 100 percent of its softwood requirements can gradually become self-sufficient through establishment of coniferous plantations.

I am sure that the discussion will add more examples of industries based on plantations. The examples of New Zealand and Australia are well known; Tanzania, Kenya and other east African countries are in the process of developing their plantations. Surely more countries will embark on large plantations programmes in the future. As Meyer stresses in his paper, several African countries ..." are suitable for the establishment of man-made forests that are capable of producing wood at very much higher growth rates, that are often five to ten times higher than these the traditional wood products exporting countries such as Scandinavia and North America which are located in more temperate climatic zones. " As one of the interesting potential developments Meyer mentions Madagascar, which will probably become the second country in east Africa that will eventually (about 1985) have a large (250000 tons per year) bleached softwood chemical (kraft) sales pulp mill intended for the world export market, based on 100000 hectares of pine and eucalyptus plantations in the Mangoro area which were started a few years ago. The total cost of the project has been estimated at about U.S.$140 million. One problem which seems to deserve particular attention in the course of the discussion on plantations for the pulp industry is: what should be planted-hardwoods or softwoods? The answer is a rather complex one and has to take into account the tree breeders' considerations along with the economic and technical aspects of the industry to be based on these plantations: long-term markets and prices of long-fibre versus short-fibre pulp (they in turn depend on the long-term trends in the composition of the paper furnishes); yields of wood per hectare and yield of pulp from wood, etc. There is no paper on this subject but perhaps the discussion could help to fill this gap, to some degree at least.

Very often comparisons are made between the increments in natural forests and in plantations. It is well known that comparisons by volume are in most cases misleading and-in relation to pulpwood at least- rational comparison can only be made by tonnage. Caution is also required in relation to sawlogs in view of the differences in the quality of sawn timber. Borgin indicates that " the main reason was found to be not the difference in the average density of the bulk structure of the wood but was mainly caused by the much larger density gradient of the fast-grown wood from warm climates. It is therefore not the difference in density as such but the distribution of density and the different microscopic structures of fast-grown and slow-grown pines which are responsible for the better quality of pines grown in cold climates.

This is, of course, not an inherent or inevitable effect of the rapid growth of wood in warm climates since there are other species grown in warm climates which are both stable and durable. It is more likely it is a detrimental effect of warm climates and other growth conditions on pines transplanted from their natural habitat."

Another paper devoted to research results on plantation woods is Ferreira's Wood specific gravity variations on Eucalyptus grandis Hill ex Maiden ...

We know about the breeders' and geneticists' work on tree improvement; but are we industrialists in close enough touch with them to make them aware of our requirements? And how to reconcile the long-term character of their work related to plantations with the changing situation in the forest products' markets?

Obviously answers to these questions are not easy, but this should not discourage discussion on them.

Forest industries must look far into the future while deciding on the type of plantation they want as a raw-material base. Garnum stresses that " the link between forests and industry should be strengthened so that national and regional planning could be undertaken in an integrated manner. Planning must be carried out on the basis of tomorrow's technology, so as to derive maximum advantage from new techniques and machinery. Unless an integrated approach is followed, it is possible that man-made forests might be established to supply raw material not demanded or not usable by industries, and that wood-hungry industries might be set up to convert raw materials which are in inadequate supply."

Man-made forests have similar problems with their undersized material, residues, etc., as natural forests have. Such material could be used for fibreboard or particle board production; in developing countries, however, markets for these products are frequently too small and investment capital too high. Research carried out in the Tropical Products Research Institute (United Kingdom) indicates the possibility of utilizing such second-grade plantation raw material for the production of cement-wood building materials. The subject is dealt with by Chittenden in his paper dealing with wood-cement blocks and wood-wool slabs. In the first case the wool material is used as an aggregate in cement; in the other, as long strands in the cement as a binder. We are reminded that all cellulosic materials inhibit cement setting (" poisoning of cement"), for which wood sugars and hemicelluloses are responsible, and that as a palliative " cement accelerators " (e.g. calcium chloride or magnesium chloride) are used which help to form around the wood a layer of cement which prevents further penetration of the " cement poisoning " substances of wood. Tropical hardwoods tend to have more extractives than timbers from temperate zones and their " cement poisoning " effect cannot be fully offset by the application of accelerators. Hence the use of mixed woods for such wood-cement blocks or slabs is in most cases not possible. Such materials present, however, as stated by Chittenden, " a useful outlet for the smaller and lower grades of timber from the increasing number of plantations in the tropics, and as such represent a useful contribution to an integrated forest economy. " Hallak points to the role wood-cement products could play in low-cost rural housing

RESEARCH IN WOOD PRODUCTS

There are several papers dealing with different aspects of wood research activities, results of research and their application directed toward greater and improved utilization of the forest resource.

Some of these papers have already been discussed whenever their subject coincided with the main lines selected for the discussion (Ferreira, Higgins et al., Chittenden, Pierovich and Smith, Borgin). Others deal with matters which also in one way or another affect eventually the improvement in forest resource utilization They include: Ostalski and Grochowski who pre sent the results of past research and a comprehensive programme for further work on bark utilization. Liz zarrago and Hilal deal with the false heart of quebracho blanco and conclude that it can be used for decorative purposes and that its mechanical properties are not affected. Campá et al. describe research results on the improvements of properties of wood through irradiation Karstedt and Mesa describe research results on sylen of four indigenous pine species in Cuba. Oktem examines in his paper three national standards for the assessment of the plywood glue-blond quality-U.S., British and Turkish. Tagudar's paper presents a particulary, encouraging example from the Philippines on how through cooperative effort and pooling combined re sources of several forest industries, funds and facilities became available for forest products research serving directly the sponsoring industries. Bosman demonstrates how concentrated research serves efficiently an important sector of forest industries in a country. Monsalud's paper describes the whole range of forest products ret search in the Philippines.

It is impossible to go into the technical details of all these research papers but the role of research in changing the raw material pattern of forest industries will certainly feature prominently in the discussion.

2. The development of forest industries and their contribution to economic growth

For the purpose of this discussion we should at first separate general issues for individual discussion, as we did with item 1, in order to get a clear picture of several distinct factors which affect each issue. We can then combine the issues in a meaningful discussion of forest industry development strategies.

Five main issues which we can distinguish in this broad topic, so ably covered by the papers before you, are:

1. The gross contribution of the various forest industries to the economy (added value).

2. The sources of economic growth in the forestry sector; i.e. the relative roles of capital, labour, forest resources, and technology in various forest industries, and the various combinations of these factors under different conditions.

3. The impact of economies of scale and integration.

4. The problems of financing forestry and forest industry development, and the role of foreign capital in this field.

5. Social aspects.

There are, of course, important interrelationships among all these issues, but let us try to get a firm grasp on each one before trying to tie them together.

THE GROSS CONTRIBUTION OF THE VARIOUS FOREST INDUSTRIES TO THE ECONOMY

Added value is, as generally known, the unduplicated addition to sales value of each successive production process. When summed across the sector and across the whole economy in annual national statistics, the resulting total is gross national product.

Added value can be built up on a case study basis, as has been done by Eklund in his paper. This " snap shot" approach has the advantage of providing comparisons of alternatives, without all the problems inherent in national/sectoral statistics.

So we should keep in mind conditions specified by Eklund and remember that he makes no claim for the, general validity of his conclusions. He deals with Scandinavian conditions at the price level of 1970. Also, as he states: " Only the value added in industrial processing has been analyzed in some detail. One has to remember that the main part of wood raw material cost belongs to the total value added of the economy. It can be excluded when making comparisons between different forest industries. But if the decision must be made between forest and some other industries, one has to take into account the value added generated in wood production."

In spite of the necessary limitations, Eklund's paper reveals many interesting insights into the scope and nature of the differences in value added between the various forest industries. He rightly points to the usefulness of relating value added (VA) to inputs-that is-VA per unit of wood, VA per man, etc.

From the wealth of material Eklund provides, let us choose a few of these indicators for comparison. In looking at value added per cubic metre of wood, we must first consider the joinery industry case in which this is nearly three times as great as any other segment. It is also high in value per capital input, though VA per employee is low as the industry is very labour intensive. This manufacturing industry is a valuable one for development to the extent that market conditions permit. In comparing it with other forest industries, Eklund points out that " ... it is important to note that the value of other raw materials (glue, paint, hardware) is higher than that of wood. " Mottet, in discussing a more active role for the forest industries in economic development in the central European region, stresses the role of secondary manufactures from lumber, plywood and boards:

"It seems rather clear that the maximum value added is to be found in the processing industries ... [of which] furniture is a striking example."

In comparing the larger forest industries, we can choose one important segment (say the 70000 m³ sawmill including residue sales) and use it to index some of the others (Table 1). If we set VA/m³ in this sawmill example equal to 1.0, the index for the plywood mill with residue proceeds is equivalent to 1.6. For the particle board mill the index is only 0.59. It is interesting to note that the large (216 000 l/year) bleached kraft pulp mill has the same index as the particle board mill.

TABLE 1. - VALUE ADDED (VA) INDICES¹

	(VA ²/m³ ®	VA/capital	VA/employee	Capital/employee	Net foreign exchange earnings³/capital
sawmill I - 70 000 m³(s)/year	1.00	1.00	1.00	1.00	1.00
Sawmill II - 265 000 m³(s)/ Including residue proceeds	0.92	0.97	1.69	1.79	1.04
Excluding residue proceeds	0.25	0.49	0.82	...	...
Construction plywood mill- 40 000 m³/year (including residue proceeds)	1.60	0.62	0.91	1.50	0.60
Particle board mill - 50 000 m³/year	0.59	0.38	1.39	3.71	0.54
Bleached sulphate pulp mill - 216 000 t/year	0.59	0.48	5.86	12.38	0.53
Newsprint and groundwood mill - 300 000 t/year	0.73	0.49	4.97	10.20	0.65

¹Based on Eklund's data.
² VA/m³® = Value added per cubic metre of roundwood input.
³Assuming all equipment must be imported, but not fuel or chemicals.

The index for the 300 000 t/year newsprint and groundwood mill is 0.73.

The sawmill also compares favourably in value added per capital input. If it is again set at 1.0, then plywood is 0.62 and bleached sulphate and newsprint are about 0.50. It must be remembered that in these comparisons the value of wood residues (chips, sawdust) is attributed to the seller, that is, to the sawmill and plywood mill. This transaction, of course, requires a buyer, and the close interdependency of the two types of production (wood products and fibre products) should not be forgotten. The large sawmill generates only 0.36 as much value added when not selling residues as when it can sell both sawdust and chips.

When comparing the forest industries on the basis of value added per employee, the picture changes in favour of the more capital-intensive industries. If the small, residue-selling sawmill is again used for an index (1.0) the VA/employee index in plywood with residue sales is slightly lower (0.91). However, in the large bleached sulphate mill the VA per employee is 5.9 times as great as for the base sawmill, and the large newsprint integrated with a groundwood mill is 5.0 times as great. The extra capital/man required to achieve this productivity is also shown in the table.

These examples show that value added related to different inputs may point to different directions. Only a careful analysis of all indices, with due consideration to the critical factors, can result in optimum decisions.

Added value is influenced by prices, and therefore a brief consideration of this aspect is worthwhile. The price stability differs significantly for various forest products.

Smith is convinced that "the lumber industry is subject to severe price fluctuations which, because of its atomized structure, individual firms are compelled to accept ... In contrast the pulp and paper industry has a history of relatively stable price levels."

Nylinder analyses the past 20 years in Sweden and concludes that "sawnwood prices, particularly of medium quality spruce, have fluctuated more than pulp prices."

In addition to short-run fluctuations, long-run price trends are very important. How is a segment doing in its cost performance relative to the economy as a whole, and to competing materials? Will price increases reduce consumption significantly, and in which products?

Smith feels that there are indications of long-term problems for lumber:" The industry worldwide exhibits a steadily increasing price for its product and a declining per capita demand. In the U.S., for example, the price of lumber expressed in relation to the price of other commodities has been rising at about 2 percent per year for many decades."

Nylinder finds that in Sweden the price of pulp products rose less rapidly than the general cost of living; that is, their relative price has decreased over the past 20 years. The price trend of sawnwood has also been one of slow decrease, when measured in fixed money terms, but this decrease has not been as pronounced as in the case of pulp.

What do these long-term trends in the competitive position of forest products tell us? Do they indicate that lumber is a poor long-term bet? Or that past research and development in the lumber industry have been inadequate and improved performance is possible in the future? Does the history of stable pulp prices provide a sound indication of future events? What are the effects of these price trends on value added and on the strength of forest industries in their competition for priority in development plans of the national economy?

In addition to the question of price stability and trends, we should consider in our discussions the question of raw material value, as this also can have a significant effect on value-added comparison between forest industries and on comparisons with other types of industry. Eklund points out that the value added through stumpage and logging should always be taken into consideration when comparing forest industries with other sectors, although he excludes them from his comparisons between forest industries.

Nylinder concentrates on the problem of raw wood value, and the allocation of wood raw material to various mills and mill complexes, to maximize the returns to forestry. He calculates, for Swedish examples, "the capacity of the pulp industry and sawmills to pay for their raw timber."

He states that "knowledge of the size of this payment capacity is of the utmost importance in the preparation of instructions for selecting assortments, for the calculation of the stumpage value at the forest and hence also for planning and directing production in the forestry sector." He defines payment capacity:" The price forest industry can pay for its raw material corresponds to the difference between revenue and total costs (apart from the cost of the timber itself), due allowance being made for a reasonable profit."

Nylinder outlines the technical problems inherent in such calculations, and clarifies some important relationships; e.g. the effect of a log's size on its value to various mills, and the difference in such values for integrated and nonintegrated mills.

But many interesting questions remain, especially for a developing country where wood may not be as scarce in relation to established industry capacity as in Sweden. In trying to claim the surplus which Nylinder defines, what are the relative market and bargaining strengths of the forest owner, the mill owner, the banker, and the worker? What is a due allowance for a reasonable profit? How important is the payment for timber in relation to the overall economic effects of the industry? Might there be cases in developing countries where a zero or negative payment would be sound on overall socioeconomic grounds?

CAPITAL-INTENSIVE VERSUS LABOUR-INTENSIVE PROCESSES

If a developing country has surplus labour, employment of this labour will, of course, be of great concern. But should it be the dominant concern if growth of gross national product per caput is the dominant objective? What are the economic growth implications of the different manpower and capital requirements of different forest industries?

We know that the range of these requirements across the forest industries is great. Eklund's figures show part of the range, but they could be considerably expanded at the labour-intensive end of the spectrum; e.g., small sawmills in developing countries.

Eklund notes that there is considerable scope for varying the manpower/capital relationships within saw-milling and plywood production. However, there are serious limitations to the possibilities for substituting labour for capital in pulp and paper production. The nature of the processes involved, the quality control requirements, plus the economies of scale with current technology, all dictate the use of complex, expensive machinery.

Does this imply that lumber and plywood industries should always be favoured in labour-surplus developing countries? Smith outlines two possible general lines of strategy: (1) the labour-intensive strategy which seeks to maximize output/capital or employment per capital, or a combination; (2) the " unbalanced growth " strategy, which would use capital-intensive industries in a labour-surplus economy to deliberately set up a chain of disequilibria in the economy which would foment, in the process of adjustment, dynamic change and more rapid growth.

Although he cautions that detailed strategy must reflect certain aspects of each local situation, Smith favours the latter strategy, and feels that: " Those who argue that immediate maximum labour absorption is a more important objective, may be short-sighted. A programme aimed at maximizing the rate of investment may well do more over a decade or so to provide work for the unemployed than capital-saving, labour intensive investments can do in the immediate future."

Smith argues that the distribution of income which will result from a labour-intensive strategy will reduce the saving rate and therefore the rate of capital formation in the country as a whole. (Low-income earners are generally able to save a smaller proportion of their income than high-income earners or companies.) With a lower rate of investment, the expansion of production, and especially the expansion of output per man, will be slower. He is convinced that ' industries that would be particularly well suited for developing nations then would be large scale, machine-paced, process-centred industries that must be maintained in top working order and observe high quality standards for output ... To the extent that economic development in the long run is the goal and where the forestry resource is such that it can play a major role in that development, we must be prepared to concentrate our efforts on the more capital-intensive forest industries; modern sophisticated industries with numerous external economies, viable, flexible products for the international market, and dynamic technologies which increase productivity and consequently the value of human effort."

Even if we do not all agree with the thesis, Smith has raised many interesting questions for our discussion. What about other barriers to pulp and paper establishment in developing countries (e.g., skills, markets, capital)? What is the role of capital in development in relation to the role of education (labour quality increases output per man), and to other growth factors? How does the growth impact of stimulating domestic demand through increased local wages compare with the impact of increased payments for imported capital?

In contrast to Smith several authors (Page, Eklund, Garnum) consider sawmilling and other simple mechanical wood processing industries to be particularly suitable for the initial stages of development in developing countries due to their flexibility in labour/capital substitution, readily available markets, moderate requirements as to the quality of labour, etc.

Page indicates that " Generally the effect of scale of operation decreases as the cost of labour decreases. The data also indicates that developing countries can afford to operate small mills, requiring less capital, employing larger labour forces, but remaining competitive ... For example, in a country in which sawmill labour costs $2 per shift, a mill and drying and dressing plant with a log intake capacity of 60 cubic metres per shift and costing approximately $500 000 can be operated at the same basic cost as a larger mill of 190 cubic metres per shift costing $1 200000 in a country where labour costs $10 per shift. In addition, the smaller mill employs an additional 23 man-shifts for every 100 cubic metres produced."

Stacey, on the other hand, stressed in his paper: " The high capital investment required for economically sized pulp and paper mills means that the country needs to have a buoyant economy to provide its share of the equity capital. It also needs to have reliable services and facilities since mills need to run continuously for approximately 340 days a year."

The problem of capital versus labour-intensive forest industries is a very real one and deserves special attention during the discussion.

ECONOMIES OF SCALE: INTEGRATION

Unit cost of production declines rapidly with increased scale of operations in several segments of the forest industries. The most significant effects are seen in pulp and certain paper mills. Nylinder and Eklund confirm this important economic fact in the papers before you. Since the most important effect is on investment costs, Nylinder isolates this element in his Figure 6, for various pulp mills. For example, the investment cost for bleached pine sulphate declines very steeply as daily capacity rises from 100 tons per day (TPD) to 300 TPD (from 205 SwKr/ton to 100 SwKr/ton); it still declines, but less steeply, to '70 SwKr/ ton at 700 TPD; then gradually levels off at even larger mill sizes. Eklund shows the same effect of scale on production costs in the manufacture of sack paper in his appendix 5-1. Production costs in 100 TPD mills are 50 percent higher than in 300 TPD mills, and in mills larger than 300 TPD further economies are possible, but at a greatly reduced rate (costs at 500 TPD are about 6 percent lower than at 300 TPD).

The implications of these economies of scale are significant for the developing countries. As Eklund points out: " In most branches of these industries the increase in mill size makes the production more capital intensive in relative terms, although capital costs per unit of raw material and product become lower." Large, capital-intensive mills may present serious problems of financing for developing countries (this will be discussed in a separate section). Another problem which frequently arises is that of inadequate domestic markets in relation to the output of a large, economical pulp mill. Interesting questions for discussion arise here. What is the real balance between social benefits and costs in protecting (with tariffs, etc.) a high-cost local pulp or paper mill? Under what conditions can developing countries with small domestic markets (but adequate forests) embark on new pulp and paper projects in direct competition with experienced, technologically mature, producing regions? What are the real possibilities for rationalization of pulp and paper production within one developing region or subregion, common market or other grouping?

In contrast to the pulp and paper industry, sawmills do not achieve very significant reductions in cost per unit with increases in mill size. Smith states that: " The lumber industry in most developing nations enjoys few significant economies of scale ... bigger firms have little cost advantage over smaller ones." The figures of Nylinder and Eklund cover a range of mill size which would be labelled " large" in most developing countries, but they also reveal relatively small reductions in per unit investment cost with increasing mill size.

Page produces graphs related to small-size hardwood sawmills which demonstrate that " modern, labour-saving equipment commences to become effective in reducing establishment costs and labour intensity at about 40 metres of log processing capacity per shift. Beyond 50 cubic metres of log processing capacity per shift increase in labour productivity is roughly proportional to increase in log intake. Important reductions in capital expenditure per unit volume of log intake are achieved up to approximately 100 cubic metres intake per shift. Beyond this intake the main benefit is in increased labour productivity."

Van der Walt et al. analysed the situation in South African sawmills and came to the conclusion that " the effect of economies of scale is much more pronounced for direct labour cost than for total production cost, the f factor for total mill labour cost being only 0.555 as against 0.820 for total production cost of mill. For fixed manufacturing cost (depreciation of interest on cost of machinery and buildings) the f factor¹ was found to be larger than one in respect of all the production centres except the wet mill and also larger than one for the mill as a whole. This indicates that there is no benefit of economies of scale for fixed manufacturing cost in the South African softwood sawmilling industry, but rather that unit cost increases with size of mill, wet mill excluded."

(¹ f = an empirical exponential coefficient which may fluctuate between 1 and 0 in the formula:

y1/y0 = (x1/x0) f

y0 = input of the productive factor at the production scale x0
yl = input of the productive factor at the production scale x1)

However, does this mean that there are no significant economies of scale in this industry? Are the important economies of scale all on the cost side? What is the impact of sawmill size on product quality? What is the impact on research, development and innovation?

The important interaction between single-process economies of scale, and the integration of these processes (horizontally or vertically), are clearly shown by Eklund and Nylinder. For example, Eklund shows a total unit-cost saving of 10 percent in sack paper production when integrated with a pulp mill, compared with the same mill in an unintegrated operation. The advantages of integration of chemical and mechanical wood industries has always been recognized. The same applies to integration between sawmills or plywood mills with fibreboard or particle board mills which can utilize their wood residues.

The importance of sales of wood residues has become so great to sawmills and plywood mills in Scandinavia that " the utilization of residues is an economic prerequisite for sawmill and plywood mill investments" according to Eklund.

In addition to integration of forest industries, Nylinder feels that effective vertical integration of logging and industrial processing can yield important gains in total value and reductions in total cost. In comparing integrated forestry and logging with independent production he finds, for example, that under Swedish conditions the stumpage value in integrated forestry increases relatively more rapidly with increasing diameter than in non-integrated forestry. In this connexion it is worth mentioning that some countries try to develop models for fully integrated forest and forest industries planning; for example, Partyka has described in his paper a mathematical formulation of the forestry and forest industries sector of Poland, which seeks to " optimize this integrated system in a long-term approach. " The effects of various forest industry strategies on net export income, on investment outlays, on total sales income, and on the status of forest growing stock are quantified in the model. " Results of computations indicate that the application of mathematical methods and electronic computation technique permits the construction of an optimal plan of the integrated system, and to determine monetary effects in relation to purposes put before the system by the national economy."

Given that the production of many forest products should be integrated, vertically and horizontally, many questions of development strategy remain: how much of the integration needs to take place within one firm or agency, or at one site? How best can an underdeveloped forest industry sector move from its present industry structure to a more desirable structure?

We should not leave our discussion of economies of scale and integration without at least brief consideration of the other side of the coin-are there any serious diseconomies of scale or of integration? Is economic and/or social flexibility inhibited by very large, "one-lump" investments? Do large organizations dampen individual initiative and creativity?

FINANCING FOREST INDUSTRY DEVELOPMENT: THE ROLE OF FOREIGN CAPITAL

Both of the authors who deal most closely with this topic, Dow and Yoho, are in agreement on the need for foreign capital for the forestry sectors of the developing countries. Yoho " accepts the assumption that such investment constitutes an efficient and effective means whereby the host or developing country can achieve its desired economic development potential."

Dow goes even further, stating there is " a desperate need for the assistance of foreign capital and expertise to secure the establishment of all types of industries in developing countries."

However, the authors are less in agreement on the "need" of the developed countries to export capital. Dow feels that "increasing quantities of ... the super abundance of financial technological industrial and mar " keting skills in the developed countries ... will have to be invested overseas, especially in the developing countries."

Yoho takes the more cautious view that "since the supply of capital in any country is limited, the amount available for any investment activity is directly related to the price that can be offered for it."

This question is important for the developing countries, as it greatly affects their bargaining strength when seeking foreign capital. And, indeed, a bargain must be struck between the divergent goals of the investor and the recipient country if this needed capital flow is to take place. Yoho cites the dominant goal of private investment capital as being the return on investment- but not just in the host country. Return on total company capital is likely to predominate over the local investment. In practice this sometimes means a particular search for " sources of raw material and places for primary processing in developing countries." An important element in the expected return on investment is the risk factor the company attaches to operations in a particular country. Risks and uncertainties may be " technical" (e.g. new species utilization) or " political." Yoho stresses that the latter may be very real in a company's calculations, whether warranted or not, as " the market sources of capital usually permit the foreign investor little choice but to accept current opinion."

Dow deals with a broader spectrum of foreign capital, classifying it into four basic types:

(a) capital aid from international sources;
(b) capital from bilateral aid;
(c) private business capital;
(d) regional " self-help" capital.

In dealing with private business capital, Dow lists its advantages such as " economies of scale ... ease of mobilization of money, technology and management, first class marketing, development of good export earnings, a leading part of integration and diversification of the forest industries ... etc."

However, he cautions against accepting foreign private capital on a wholesale basis without reference to possible local drawbacks; for example, " the destruction of local entrepreneurships, the closing of the door on certain investment opportunities in the host country, the predilection for the export of raw materials ... [the export of dividends to] parent companies ... [and] the overseas investment of the savings accruing ..." Dow concludes that " foreign capital must therefore in the future conform to national development priorities and integrate with national development plans."

Yoho is not in disagreement with the necessity for foreign companies to adjust as much as possible to meet the major goals of the host country, which he lists as being to maximize gross national product (GNP) per caput, including secondary income through linkage effects. There is also a goal of stability in GNP, in addition to growth. According to Yoho. countries also want:

to provide employment for their population;
to build up the capital stock and infrastructure of the country;
to train local labour and management in modern methods;
to improve their balance of payments position.

Both authors recognize that the crucial problems arise in the delicate balancing act between the goals of the investor and of the host country. Yoho offers a code of conduct for each participant which should avoid the building up of mutually harmful pressure on either or both participants. Contract flexibility and continuing communication are two important elements. Yoho suggests specific stages be defined in each investment project, at which point contracts are renegotiated and ownership patterns re-examined.

Both authors agree that most countries will want to see local participation increase over time, in all their industries. But how to achieve this goal is, of course, a difficult question. Yoho rules out, at the beginning of his paper, the route of " long term sacrifices on the part of labour and consumers" as a way to accumulate local capital. He feels it is ' too slow and painful." No doubt some countries will disagree with him on this point, but questions of" degree" quickly enter this debate. Dow feels that local capital sources are often not well mobilized for equity participation at present and that "in many cases, local capital is being used for financing [foreign owned] operations."

Yoho feels that" fair market" practices should govern any local participation, or" buy-back" of equity capital:" In all cases ... host country participation should arise only from bona fide purchases of stock shares at market price in the several companies organized to handle separate stages of the total project."

In practice, there would seem to be many potential problems with such a solution and these are interesting questions for our discussion. The complete lack of effective share markets in many developing countries, and the tortuous structure of some international companies, may be mentioned as examples of such problems, from the host country point of view.

However, as Yoho and Dow point out, if the foreign investor feels that his capital may be expropriated unfairly, he will demand high risk premiums. This leads to high exported dividends, host dissatisfaction, and so on, in a cycle of mistrust, rising costs and reduced mutual benefits. Dow feels that bilateral aid could play an increased role in" insuring" private capital against the extra risks and uncertainties involved in investment in developing countries. This is a very important issue which no doubt deserves discussion. As we know there is some action along this front at the present time-the United States, Japan, Canada and the western European nations are exploring a multinational approach. The

World Bank has been debating a scheme for several years which could set up an International Investment Insurance Agency.

The United States has the Overseas Private Investment Company, and the Federal Republic of Germany, the United Kingdom and some other industrialized countries also have their own official or quasi-official agencies for insuring business investment abroad. Could increased use of these facilities improve the availability of forest industry investment capital at a rate which developing countries could better afford?

In dealing with the role of foreign private business capital in the forest industries of the developing countries neither Dow nor Yoho conceal that serious problems do exist: they admit that many will continue to be encountered. However, both are optimistic that mutually beneficial arrangements can still be negotiated for many forest industry developments in the future.

Dow goes on to discuss the pros and cons of bilateral aid capital, international aid capital and regionally controlled capital such as that from regional development banks. He feels that bilateral aid has" in many cases, quite deservedly got itself a very bad name. Many developing countries associate ' aid with raid ' ... the record of useless and costly feasibility studies, of superficially cheap money for ill-conceived projects, and of high cost of goods bought with tied-aid are all there to be seen ... together with attendant pay-back troubles which can become worse in the future."

There are, of course, some excellent accomplishments to the credit of bilateral aid, but there is need for clearer terms of reference and objectives, acceptable to all parties concerned (just as in the case of private capital).

International capital aid, the United Nations Development Programme (UNDP), the International Bank for Reconstruction and Development (IBRD), etc., is mainly hampered in Dow's view by being so obviously inadequate to the overall task of development, under the present capital budgets of these organizations. Better integration of infrastructure and training investments by UNDP with industrial follow-up by the International Development Association and IBRD would be a positive step.

Capital within the region, or at least under regional control, is cited as one of the most hopeful lines of development." The growing number of regional development banks attest to the need for bringing together, on the one hand, the regional governments, and sources of international capital available to them and, on the other, the public and private sectors in the individual countries."

Besides identifying and harnessing local funds alongside foreign capital, such institutions can develop realistic regional policy outlooks for important economic sectors, including forestry. The location and integration trends of forest industries, shipping routes and facilities, export financing, specialized training, market integration, and so on, can all be influenced positively by such institutions. In addition, the; " political connections and financial weight are sources of assurance to foreign investors ...," if such regional bodies are well organized and supported by regional members.

In addition to the direct questions of capital inputs from the developed to the developing world, several important subsidiary questions are mentioned, though only briefly. For example, the role of foreign capital in transferring technology from the more advanced forestry sectors of the world is important. Yoho argues that in the more technological, capital-intensive segments of the industry (e.g., pulp and paper) there is a case for a higher degree of foreign equity participation than in the simpler technologies (e.g., logging and sawnwood). Dow feels strongly that there should eventually be local control in all segments. The question of the optimum" capital intensity" of processes for the stage of development of the host country has already been discussed before but may be greatly affected by the ownership of the operation and the terms on which foreign capital is accepted.

Another "side effect" (which can dominate the whole situation) is the nature of market ties which the foreign capital brings with it. Some developed country paper markets are virtually fully supplied by vertically integrated raw material production. To enter the final market is often much easier for a developing country if it has a partner from the market country involved in its production developments. A related problem is that of international freight rates; some developing countries have felt it necessary to develop their own shipping capability to get economic rates and participate in this important (transportation) sector of development.

Although the conclusion of the authors is that the flow of foreign capital and know-how into the forestry sectors of developing countries should be encouraged and expanded, many very basic questions remain regarding the conditions under which this should happen, from the point of view of both parties. The discussion will certainly look into this fundamental question.

The main problems considered in this chapter have so far concentrated around the role of foreign private capital in forestry and forest industries development, which has been a" hot" issue widely discussed at various meetings, symposia, etc. One should not forget, however, that there are some basic conditions which must be met, no matter whether the capital is foreign or domestic. They are dealt with by Roxas who indicates that the first condition is sufficient size of the concession and "the second prerequisite is security of tenure. If it takes 35 years before the licence holder can go back to harvest their residuals in a logged-over area, it must be assured of tenure in order to provide an inducement for it to manage and preserve the residuals during their growth period. This is a commitment of resources over a span of 35 years for each plot for each cycle. No company will undertake the responsibility and the cost involved in policing, preserving and managing residual forest areas until it were sure that it had firm hold of the timber." There are both foresters and industrialists at this congress, so let us hope for a dialogue on this issue.

SOCIAL ASPECTS OF FOREST INDUSTRIES

One of the most widely recognized social aspects of forest industries is their influence on employment and social welfare. A very illuminating example of these influences is provided in Klabin's paper. He describes seven integrated pulp and paper enterprises in southern Brazil which accounted in 1971 for 70 percent of Brazilian production of pulp and 41 percent of paper and paperboard. Direct employment in these enterprises was over 11000 employees and was surpassed by indirect employment which was generated by them in forestry (logging, transport, plantations) amounting to approximately 14000 workers. "Both the direct and the indirect employment created by pulp and paper enterprises have helped to maintain poles of activity of considerable importance to the development of the Brazilian hinterland."

When evaluating the impact of forest industries on employment, not only backward but also forward linkages should be observed. For Scandinavian conditions as indicated by Eklund" production, harvesting and transport of wood and distribution of products together create at least as many jobs as the industrial processing. These phases can be carried out by a big labour input or by highly mechanized, capital intensive methods according to local conditions." An example quoted in Eklund's paper shows that a 300000 t/year newsprint operation will create 600 jobs. of which 310 in manufacturing, 110 in forestry and 180 in product distribution. There is a striking difference between backward employment linkages in Scandinavia and in Brazil: whereas in Scandinavia one job in the paper mill will create 0.35 jobs in forestry, in Brazil the corresponding figure given by Klabin is 1.3; this reflects the differences in the degree of mechanization of forest operations, obviously influenced by the differences in socioeconomic conditions in the two regions. These differences are also reflected in some other indices which can be derived from the papers in front of us: average investment cost of creating a job in the pulp and paper industry in Brazil is U.S. $25 000 while in Scandinavia it is about 7 to 12 times that figure.

Papers presented to Commission VII do not contain figures on the employment impact of further conversion of such basic forest products as sawnwood, wood-based panels, paper, etc. Neither do they provide figures on the employment of the suppliers of forest industries. There are some indications on the magnitude of this latter problem: Nelson mentions that during 1970 the paper and allied products industry in the United States shipped $24600 million worth of goods and paid out $5 300 million in salaries and payrolls. It has been estimated that in the United States the industry purchase of chemicals ranges upward of $1000 thousand million per year. Freight costs also total about $1000 thousand million. Expenditures on new plant and equipment are in this same value range. Obviously behind these thousands of millions of dollars of suppliers and transporters there is a considerable number of jobs.

Anyway, the impact of forest industries on the employment in further conversion and in supplying industries and services is considerable and it is regrettable that we cannot quantify it. Perhaps the discussion will enrich our knowledge or at least suggest that competent organizations undertake appropriate studies. They may be very useful while advocating the expansion of forest industries.

Some sectors of forest industries are particularly suitable for accelerating economic and social development in developing countries due to their flexibility in the selection of the degree of labour intensity. Page advocates primary conversion (in this case sawmilling of tropical hardwoods) as the take-off point for the developing countries because" the level of labour-intensity can be chosen and regulated according to the social and economic needs of particular regions." He stresses that the vital need for greater employment opportunities in the developing countries must be kept clearly in mind and points out that labour costs in the forest industries of developed countries are up to ten times higher than those in many developing nations and that such a premium should be taken advantage of. An opposing view on this subject is taken by Smith:" Labour-intensive forest industries have been traditional in developing nations, but are not always the optimum choice, especially where maximum economic development is the goal. While they afford opportunities for employment at minimized capital investment, they rarely result in the capital reinvestment essential to continuing economic growth. Capital-intensive industries such as pulp and paper result in high productivity from labour, and generate high spin-off of external economies which stimulate an expanding economy." We are now faced with two opposing views as to which forest industry in developing countries should come first: labor-intensive or capital-intensive. It will be for the discussion to suggest an answer to this fundamental question. While seeking an answer to this question it is worth quoting Nelson who put the problem in an historical perspective in relation to the United States:" The per capital consumption of round and sawn wood products has declined while it has increased for veneer and especially for pulp products. Thus in summary in North America, wood has generally held its place in terms of total volume moving in commerce over time. But it has lost ground relative to population trends and to other commodities moving in trade. The group of wood products most affected adversely in this shift has been those products reaching the consumer nearest their natural state, while those that have come out best in this process are the products that have been changed the most from their natural state in the manufacturing enterprise. In other terms, the change has been away from labour intensive toward capital intensive products or manufacturing activity..."

Nelson states further that with" the accumulation of capital that comes with the conversion of old growth natural forest timber stands into wood products comes the possibility of progressing from labour intensive to capital intensive type of enterprise." And here another question arises for our discussion: How much capital accumulation for the capital-intensive forest industries in developing countries is really likely to come from conversion of old natural forest stands into simple wood products?

Klabin points out that the forest operations of the large pulp and paper enterprises not only help to absorb local surpluses of rural workers, but also achieve the important function of creating poles of activity in a hitherto undeveloped hinterland. Into these poles of activity the enterprises bring comprehensive social welfare activities, including schools and hospitals. The importance that the enterprises attach to their social responsibilities is illustrated by the fact that they provide courses, and even overseas fellowships, not only on technical subjects, but also on subjects such as work safety and hygiene, human relations, etc.

Fast-growing communities around industrial enterprises often cause serious social and economic problems. This is vividly described in Lansigan's paper." When the company stayed on and the settlement metamorphosed into a permanent village or town, the company manager often found his millsite surrounded by a community grown congested and slummy. So preoccupied would be the manager with his work in the company that, before he knew it, he had social problems on his hands. In time the orderliness of his company compound and the coziness of the housing for his personnel would be such a disquieting contrast to the congestion and squalor beyond the fence as to be a constant area of irritation." Such situations could be remedied if, as pointed out by Lansigan, the company adopts a forward-looking policy on social improvement. As an example of such policy Lansigan describes the developments in the former village of Mangagay in the Philippines. In 1952 Mangagoy had a population of some 150 people when the Bislig Bay Lumber Company started logging and sawmilling operations there. The company subsequently expanded its operations to include the manufacture of plywood and, eventually' newsprint and kraft paper. As a result the population grew to some 40 000. Such a rapid growth overstrained the capacity of the municipal government, and the company itself undertook a major share of providing facilities and social services. This included resettlement of squatters from forest land, the construction and operation of a hospital, subsidizing the construction and operation of schools, and even providing assistance and advice to local agricultural smallholdings. All this was realized by socially oriented Bislig Community Development Projects.

The role that the Bislig Bay Lumber Company has played in the creation of a township illustrates not only the substantial sociological impact of forest industries but also the immense responsibility some forest enterprises bear in doing so.

This example seems to prove what Nelson stated in his paper:" Where political, economic and technological systems work together in harmony, social progress and improvement in the general welfare should be the result." Nelson also emphasizes the role many forest products play in the changing way of life of our society: "During the past half century in our domestic economy of the U.S.A. a revolution in the distribution of commercial products has taken place. The development and growth of the economy, along with the dispersion of the population to the suburbs, has created huge new markets for products packaged and shipped in paper and paperboard. Paperboard for packaging includes the product used in the corrugated shipping container, which is used to ship most of our food, clothing and home appliances through the channels of distribution from factory to home. Without our packaging paper" board it would be impossible to run a modern supermarket which is now the central core of our distribution system for domestic products." We have here an example of a changing society creating markets for new forest products-and new forest products accelerating the changes of the society. The big question is: will this harmony between social changes and development of forest industries continue?

There is also another question, posed by Roxas in his paper on the Paper Industries Corporation of the Philippines (PICOP): how to reconcile the necessary concentration of resources with the wide distribution of benefits? The answer is. according to Roxas, by" ensuring that the ownership of any company exploiting natural resources be distributed as widely as possible. In other words, the management of the resources must be given to public corporations with the necessary capital resources and professional management and technical skills to achieve the optimum of conservation and exploitation. But the ownership of these enterprises must be distributed as widely as possible. The PICOP complex is unique in the forestry resources industry in the Philippines as being the only corporation that has openly and widely distributed its shares. With 11000 stockholders, it has the largest number of individual shareholders of any enterprise having a timber concession".

While dealing with social and economic aspects of the utilization of forest resources one should not neglect one area which carries enormous employment opportunities and where jobs are created at a predominantly negligible capital cost: minor forest products. They include natural gums, resins, seeds, tanning materials, cork, rattan, charcoal, etc. In addition to employment they often constitute an important source of foreign exchange earnings. As examples (taken from other sources), value of oilseeds, nuts and kernels exported in 1966 from Ethiopia amounted to $250 million, from Nigeria to $200 million; gum arabic worth $20 million was exported from the Sudan in 1965 and Argentina exported quebracho tanning extract to an amount of 107 000 tons in 1968.

The importance of minor forest products to the socioeconomic development is brought out clearly in Rique's paper. Other papers deal with specific products: Szczerbakow deals with the development of new methods of stimulating resin flow, based largely on his invention; Bianchi reports on the chemical composition of brea gum; Gurgel Filho and Vencovsky report on research on gum extraction in Brazil; Oiwa and Kishimoto, as mentioned under item 1, describe the use of waste rubberwood for charcoal production; de Oliveira describes the possible utilization of waste cork for soil improvement. Most of these papers are concerned mainly with technical aspects of minor forest products. It is therefore hoped that the experience of participants in the discussion will help to throw some light on the possible social aspects, especially on the employment impact these industries can make in developing countries.

The social potential of the rather neglected section of minor forest products seems to confirm what Steenberg said in his keynote speech to the congress:" Many more patterns in the forestry sector conducive to social and economic progress are awaiting identification." Maybe the discussion will attempt a step in this direction.

3. Forest industries and the conservation of the environment

There are only two papers dealing exclusively with this subject but quite a few other papers touch upon the environmental problems in one context or another. This is not surprising since concern about out environment has become part of our thinking and inevitably influences any industrial undertaking. Three distinct areas can be identified in the papers dealing directly or indirectly with the conservation of the environment and natural resources: conservation of nonrenewable resources through the increased use of wood; problems of forest residues; pollution abatement in forest industries.

Morgan takes a very broad approach to the conservation of natural resources. He stresses that" population growth and growth in the world's standard of living could be impeded in the future by the earth's limited supplies of nonrenewable resources. Substitution of renewable resources for non-renewable resources where possible could significantly increase the lifetimes of the non-renewable resource reserves. Wood offers- a very strong substitution opportunity because it conserves nonrenewable fossil fuels as well as key minerals, contributes to the maintenance of the temperature, humidity, and composition of our atmosphere, and increases man's utilization of the energy of the sun. Wood (as a biodegradable material) also alleviates waste disposal problems and is itself a source of energy."

Morgan's reasoning is influenced by the Massachusetts Institute of Technology (MIT) study initiated by the Club of Rome and published in the book The limits to growth.² This study stresses that "population, wealth per capita, and expectations are all growing exponentially and this is occurring on a planet with finite non-renewable natural resources and a finite capability for the maintenance of a balance of life;" then it tries to answer the question: Which constraint will limit the growth first: land, capital, nonrenewable resources, pollution or technology? It found that" assuming no major changes in human values or the world system of interactions of population, capital, etc. (as they can best perceive them), that non-renewable resource depletion would be the first cause of world collapse." Wood substitution could conserve such important nonrenewable natural resources as iron, aluminium, petroleum, tin and natural gas.

(² Limits to growth ... by D.H. Meadows and others. New York, Universe Books, 1972.)

Although the findings of the MIT study underlining Morgan's reasoning are not undebatable (and perhaps some participants will wish to express their own views on this subject) their impact on the thinking of policy-makers in many parts of the world is recognized. But as to the real impact of the Limits to growth philosophy on wood demand-there seems to be no full agreement among foresters themselves even when they refer to exactly the same conditions and indeed come from the same country. I have in mind the views of Pierovich and Smith. They say" public concern over environmental pollution or resource depletion from processing competing non-renewable resources may, in time, radically increase wood demand, but this is uncertain." They see, however, the increased demand for wood as coming from environmental and economic pressures; they say" there is a growing public concern over pollution and depletion costs associated with competing non-wood materials. Restrictions on processing of petrochemicals and metals that would raise costs and force prices up would substantially increase the demand for wood. Yet another possibility is in the use of forest residues to replace fossil fuels and hydroelectric installations for power generation." No doubt, this difference of opinion between Morgan and Pierovich and Smith will stimulate a discussion on this subject. Irrespective of the differences of views or underlying reasons, however, there seems to be agreement on the tendency toward the increased usage of wood which, according to Morgan," has to be accompanied by a global effort to increase the availability of wood." This, in turn, can result" from increased per acre growth yields, increased per acre removals, and increased utilization of the removed wood."

The increased utilization of harvested wood depends -among other things-on the development of residual product technologies. While considerable progress has been made in the utilization of industrial wood residues (as mentioned in item 1), forest residues still pose a considerable environmental and economic problem. Pierovich and Smith can see the reason for this; they say that" industrial research and development organizations probably will continue to concentrate on mill and plant residues, deferring attention to residues in the forest. To wood manufacturing firms, this approach is logical, costs have already been incurred in delivery of material to a plant and in partially processing it." They indicate that forest residues, apart from being a fire hazard, cause stream pollution. are unsightly and present an obstacle to planting or other forms of regeneration. The magnitude of the problem is demonstrated by their example of clear-cut Douglas fir forests of the North American west coast where forest residues amount to up to 450 tons/ha. Fifty to seventy percent of the residues from clear fellings are potentially usable but decisions on their best use are not easy; the authors provide in their paper a clear framework for systematic thought as a useful tool for decision-making by forest managers.

Several papers presented to Commission VII deal with what is described by the" catch phrase"-" the fuller utilization of the tree." It is hoped that with time the fuller utilization of trees will decrease the environmental and economical pressures on forests. Koch thinks, for example, that" the tonnage of merchandizable products made from the average southern pine stand in 1980 will be double that possible in 1960." The discussion will, no doubt, take a closer look at this bold statement (which takes into consideration not only wood but also needles and bark). Morgan quotes examples of what has really been achieved in fuller utilization of trees: approximately 56 percent of each tree on the average is currently removed from Weyerhaeuser lands, as compared to 39 percent in 1950. Morgan considers, however, that there is a good deal of room for improvement and that they are" in striking distance of using 96 percent of the above-ground material in southern pine stands, 83 percent of the above-ground material in southern hardwood stands and 90 percent of the above-ground material in the Douglas fir stands." Achievement of these goals would mean not only a considerable economic contribution but also a tremendous environmental improvement.

The greatest danger to the environment, however, does not come from forest residues but from forest industries, especially from the pulp and paper industry. These problems are dealt with in Freyschuss' paper:" the emission of wastes from this industry always affected the quality of the environment: dust, sulphur dioxide and odorous gases from pulp mills pollute the air. Solid wastes of an organic and inorganic nature break down slowly in the recipient waters, influence the oxygen balance of the water system, damaging its organisms. Dissolved organic wastes are responsible for the main damage; as a result of biodegradation they strongly influence the oxygen balance and may be toxic to water organisms."

Modern technology is available for a radical reduction of these wastes and it may be expected that this technology will be further developed during the current decade. Steenberg mentioned in his keynote address to this congress that among the new research efforts of the pulp and paper industry, those to combat pollution problems outweigh all others at the present time. The damage already done to many rivers, lakes and sea bays is in most cases reparable provided the waste discharge is greatly reduced. Considerable improvement has already been achieved in the last few years. Further progress depends on financing available for pollution abatement facilities. Freyschuss indicates that" the necessary reconstruction of the forest industries for solution of the pollution problem requires very big investment and will lead to increasing operating costs. The economical consequences of pollution control will also mean that many small and old mills will have to close down during this decade, as they have no chance of solving the pollution problems at a reasonable cost. Consequently the solution of the pollution problems, together with other factors, will lead to a change of the technical and economical structure of the forest industries."

We cannot expect the discussion to go into details of the highly technical matters related to pollution abatement in the pulp and paper industry. Numerous meetings, symposia, etc., national and international, are held periodically in all parts of the world. But certainly we cannot be indifferent to some basic questions as, for example: How does the pulp and paper industry rate among industrial polluters? What is the cost of pollution abatement? Should this cost be borne by the industry alone? And what will the influence on prices be? (We know from other sources, e.g., that an 85 percent BOD [biological oxygen demand] removal from the effluents of a 750 t/day bleached sulphate pulp mill in North America adds about 4 percent to the total costs of manufacturing a ton of pulp. At 98 percent BOD removal the cost is about 12 percent, and it is conceivable that at zero pollution level it would be 40 percent.) And then there is another question of particular importance to the whole forestry sector: how is the increased production cost of pulp and paper going to influence expansion plans of this industry and consequently the demand for wood?

Other forest industries have their pollution problems too. The fibreboard industry which is the closest relative of the paper industry (as far as the wet method is concerned) can report achievements in pollution abatement. Asplund stresses that much attention has been given to the recycling of the process water by the wet method." The necessary amount of fresh water consumption has been lowered to a total of about 3 m³/ton of board produced and even lower. No process water will be discharged from the mill. This has made it possible to locate fibreboard factories in localities with very limited access to water." As is well known, it is exactly the difficulties in finding suitable location for wet method fibreboard mills because of water pollution problems which caused the development of the dry method of fibreboard production. Now we are learning from Asplund that through the new technology he describes in his paper the wet method has gained its freedom from siting problems. This seems to call for a re-evaluation of the entire situation of new investments in the fibreboard sector. Asplund's paper seems to revive the over ten-years-old dispute: wet or dry method for fibreboard production? Participants will certainly look into this problem and try to answer some more detailed questions such as: does the drastic reduction of water consumption described by Asplund cause no difficulties in maintaining the quality of the product? Are mills using the dry method really free from pollution problems (such as air pollution by board dust or danger of fires)?

Solid wastes from forest industries other than pulp and paper and fibreboard have been posing much less severe pollution problems. The use of sawdust for pulping, and fibreboard and particle board production is now quite common. Even dust from sanding of particle board is now often received (as mentioned in item 1).

We are considering here the utilization of wood residues in the environmental context. Understandably, this is also a major economic issue. In the U.S.S.R. for example, according to Vorobiov the whole orientation of the forest and forest industries sector in the current decade is toward the fuller" utilization of the accumulated wood waste throughout all stages or phases of processing-starting from logging, through sawmills. pulp and paper combinats and ending with marketing of delivered products."

Only bark waste which occurs in enormous quantities-as indicated by Freyschuss-" is still a great problem in most places and no technology is available today for economical reuse of the main part of the bark. Destruction by burning or use as landfill are today still the available methods for handling bark wastes-and only marginal quantities are used for other purposes." As an example of the magnitude of the problem, the amount of production of bark in the United States is quoted by Maloney and Marra as about 14 million tons from primary processing industries. The problem is receiving increasing attention from researchers, and perhaps the next congress will see at least the beginnings of a solution.

At the beginning of this note we dealt with the role of forest industries in the conservation of nonrenewable resources. One should not, however, forget that forest industries can also play a crucial role in protecting the renewable resource-forests. This is convincingly presented in Roxas' paper. After describing the irreversible destruction of tropical forests in many developing countries he describes how the Paper Industries Corporation of the Philippines (PICOP) reconciles exploitation with conservation: "PICOP makes full use of forest resources, going beyond logging and plywood alone, into using all forest and mill wastes for pulp and paper. Since full utilization of the forest products represents profit, and since the investments of nearly half a billion pesos in fixed plant and land improvements must be recovered over a long period of time, it becomes essential for the enterprise to keep the source of raw materials from the forest permanently flowing. This means forest management and conservation. An industrial complex of this type then makes it part of the business of industry to keep the forest permanent and to harvest according to a cycle of generation and growth that sustains the forest perpetually."

This economic motivation of forest industries to perpetually sustain forests is also mentioned in various contexts in several other papers. The discussion will. no doubt, take a profound look into this basic interrelationship between forests and forest industries, discuss the distortions and abuses which so often took place in this area in the past and outline proposals for strengthening links between these two inseparable sectors of the economy.

Commission VII papers

1. TRENDS AND PROSPECTS IN THE INDUSTRIAL UTILIZATION OF WOOD
General papers
Cardenas, P.R.	Practical experiences in pulping mixed tropical hardwoods
Chittenden, A.E.	Wood and cement-past and future
Giordano, G.	Tendances et perspectives dans l'utilisation industrielle du bois
Gonzales Flores, R., Barrios, E.D: & Panduro, F.M.	Utilización de los productos forestales tropicales - sus tendencies y perspectivas
Higgins, H.G. et al.	Pulping of tropical hardwoods
Koch, P.	Changing raw material supplies and their effect upon wood processing technology
Pierovich, J.M. & Smith, R.C.	Choosing forest residues management alternatives
Pleydell, G.J.	Increasing the utilization of secondary species through the manufacture of wood- based panels
Price, E.A.S.	Economic approaches to wood preservation
Vorobiov, C.I.	Main trends in forest utilization and forest management in the U.S.S.R.
Special papers
Argentine Chamber for the Plywood Industry	Young artificial stands and the provision of raw material for the plywood industry
Bianchi, E.M.	Composición quimica de la goma de "Brea"
Booth, H.E.	Secondary species development
Borgin, K.	The stability and durability of wood from pines grown in cold and warm climates
Bosman, O.L.	Research for the sawmilling industry in South Africa
Campá, J.P. et al.	Obtención de materiales madera-polimero
de Oliveira, A.L.F.	La caractérisation physico-chimique des résidus de la préparation des planches de liège (poudre de liège liège pulverisé)
Ferreira, M.	Wood specific gravity variations on Eucalyptus grandis Hill ex Maiden at 11, 12, 13, 14 and 16 years
Gurgel Filho, O.A. do Amaral & Vencovsky, R.	Research and experimentation on gum extraction
Hallak, E.	Aglutinantes minerales pare aprovechamiento de serrin de madera
Karstedt, P. & Mesa, M.	Descripción anatomica del xilamo de los cuatro pings endemicos de Cuba
Keer, G.A.	Timber drying-its economic justification
Lizarrago, A.J.B. & Hilal, S.J.	Efectos del" Corazón rojo", o" Mancha roja" del quebracho blanco en los caracteres del leño
Lombardi, C.R.	Test of a peeling machine for logs of red quebracho
Monsalud, M.R.	Forest products research in the Philippines
Moul, A.A.	High recovery bandsawing techniques for sawmills
Oiwa, Y. & Kishimoto, S.	Development of charcoal-making process using rubber wood as raw materials in Malaysia
Oktem, E.	Comparison of the bond degrade-accelerating systems of national plywood standards
Ostalski, P. & Grochowski, W.	Utilization of wood barking discards in Poland
Preston, S.B.	Information requirements for expanding markets for tropical woods
Renero, G.	The scarcity of wood and the use of substitutes during long periods changes the consumption schemes in detriment to the people
Szczerbakow, K.	New methods of stimulating resin flow
Tagudar, E.T.	Forest research in the wood industry in the Philippines
2. THE DPVELOPMENT OF FOREST INDUSTRIES AND THEIR CONTRIBUTION TO ECONOMIC GROWTH
General papers
Dow, E.	The role of foreign capital in forest industries development in developing countries from a developing country's point of view
Eklund, R.	A comparison of value added and some other features of different forest industries
Mottet, A.	Considerations théoriques sur une participation plus active de la forêt au développement économique régional
Nelson, A.W.	Social effects of changing pattern of forest industries development
Page, M.	Hardwood sawmilling: an economic means of assisting social development in tropical regions
Rique, T.	Los industrials y la búsqueda de nuevos productos extractivos forestales para lograr un aporte positivo al desarrollo económico y social del hombre
Uysmura, T.	How to develop the forest products industry
van der Walt, Laurens, H. C. & van Vuuren, M.	Planning and management of sawmills for the conversion of softwood sawlogs from man-made forests
Yoho, J.	The role and responsibilities of foreign capital for developing forest industries in developing countries
Zañartu, E. , Ortiz, M. & Yudelevich, M.	La contribución de las plantaciones de pino en el desarrollo de las industrias forestales de Chile
Special papers
Asplund, A.	Trends and developments in the manufacture of fibreboard
Cullity, D.	Trends and developments in the manufacture of veneer and plywood
Garnum, E.	Development of forest industries in Latin America and their contribution to economic growth
Klabin, S.	Industry, forestry and the human factor- the case of the Brazilian pulp and paper industry
Lansigan, N.P.	Wood industry and social amelioration
Maloney, T.M. & Marra, G.	Trends and developments in the manufacture of particle boards (North American situation)
Meyer, K.R.	Development of forest industries in Africa
Nylinder, P.	The payment ability of softwood for pulping and sawmilling
Partyka, T.	Optimization calculus in a long-term plan for the forest wood-working industry system
Picornell, P.M.	The first newsprint mill in S.E. Asia
Roxas, K.S.	Paper Industries Corporation of Philippines - a module for the management of the forest of a developing country
Smith, K.B.	Choosing forestry investments for developing nations
Stacey, D.	Development of forest industries in Asia and the Far East and their contribution to the economic growth
Trutter, G.	Trends of development of the particle board industry in Europe
3. FOREST INDUSTRIES AND THE CONSERVATION OF THE ENVIRONMENT
General papers
Freyschuss, S.	Adapting forest industries to changing environment
Morgan, H.E.	An industrialist looks at multiple forest uses

Report

Trends and prospect in the industrial utilization of wood

CHANGING PATTERNS IN THE UTILIZATION OF ESTABLISHED WOOD SPECIES

1. Growth trends in world markets for wood products and depletion of some traditional raw material resources have led to marked changes in technology and to the use of new raw material resources managed with increasing intensity.

2. From the forest to the market the trend is toward whole-tree harvesting and whole-tree utilization. Mechanized log sorting stations enable maximum flexibility of log selection for value recovery: poles, piling and veneer logs are frequently of highest value; sawlogs are usually intermediate and pulpwood lowest in value.

3. Small log utilization methods are now increasingly adapted. This technology permits manufacture of plywood from logs as small as 25 cm in diameter and lumber from logs only 15 cm in diameter. Substantial reductions in saw kerf and edging-losses have been achieved through the use of thin-kerf saws and chipping headrigs. Equipment has been developed for efficient sawing of small-size, badly shaped hardwood logs. Equipment and methods permitting significantly higher recoveries from large hardwood sawlogs from primary forests are continuously being improved and find wider application.

4. New technologies enable the use of planer shavings, sawdust, and even sander dust. These processes in turn result in the increasing availability of chips and fibres for pulp and for a widening range of panel products. In fact, in an increasing number of countries the ability of medium and large-scale sawmills and plywood mills to find outlets for their residues is crucial for their survival. It should be emphasized however that the trend toward the increased availability of marketable residues should not be detrimental to the yield and quality of the basic products such as sawnwood or veneer.

5. Wider applications and upgrading of timber and timber products are now made possible by the increasing use of technologies that enable manufacture of glulam, of structural members, finger-jointed elements, edge-bonded panels and through improved methods of stress grading, all of which increase recovery and marketability.

6. The boundary between fibreboard and particle board is becoming less distinct as dry and wet fibreboard develop increased production of medium-density thick fibreboards and particle boards are produced by blending both fibres and chips to yield a wider range of thicknesses, surface textures and densities. These developments have increased considerably the raw material base of the reconstituted wood panel industry.

7. The pulp and paper industry is also continually expanding the range of its products in response to technological progress. changing raw material availability and market demand. Of particular interest is the widening acceptance of short-fibre raw materials for products (e.g. newsprint) which traditionally are made from long-fibre species.

8. The feedback from these trends is already felt in forest management as industry moves to ensure the availability of its future raw material requirements in the most suitable form. The feedback effects produce problems and opportunities in resource management. Degree of pruning, mechanical thinning methods and tree length harvesting are now all related to future industrial needs.

SECONDARY SPECIES

9. The problem of efficiently utilizing the so-called secondary species from the forests of mixed composition is most acute in tropical forest regions but is not unique to this environment.

10. Judged from the viewpoint of opportunity for achievement, magnitude of resource area and lack of significant breakthrough, the industrial utilization of secondary species requires a major thrust, to coordinate world-wide planning effort at many levels of integration. Global solutions to be applied on a universal basis are not likely to be found. Instead regional and local solutions should be worked out and applied to fit the diverse conditions found in the world.

11. The greatest opportunity for success seems to lie in the possibility of integrating the various utilization processes available to take advantage of a whole array of wood products, market opportunities, infrastructure organization and sources of financing.

12. The main goal should be the development of species-tolerant processes in which the identity of individual species is to a large degree lost, e.g. through pulping or production of composite wood products.

13. Appropriate grouping of species for conversion into construction materials in accordance with performance specifications is an important way toward the greater acceptance of lesser used woods in the building and construction market, which is the major outlet for mechanical wood products.

14. In the field of pulp and paper, examples are known of successful large-scale commercial operations based on mixed tropical hardwoods. It should, however. be kept in mind that there is no general solution and each available species mix has to be carefully studied technically and economically. Chances for success are greater where pulp is intended for the domestic market. As far as international markets are concerned, priorities have to be given to projects with secured captive markets.

15. In order to facilitate and accelerate the establishment of markets for mixed tropical hardwood pulps. studies should be encouraged on their properties and applicability for various paper furnishes. These efforts should be coordinated so as to assure comparability of results on species from different areas including exotic plantation species and temperate zone hardwoods.

16. Example of successful utilization of mixed tropical species are also known in the field of mechanical wood products. such as construction plywood, structural sawnwood appropriately preserved and strength graded, glulam and others. These applications are sometimes combined with production of charcoal for metallurgical, fuel and chemical use.

17. One solution practical in certain areas is replacement of natural mixed forests by monocultures after making the best possible use of the existing stands. It should be realized however that these complex tropical forests are among the most fragile ecosystems that exist and, therefore, their conversion to plantation cultures is not always the long-range solution. The complexity of the problem calls for careful planning at the national and international level to prevent adoption of shortsighted piecemeal solutions which have already been seen to lead to the degradation of the forest and make rational exploitation uneconomic.

PLANTATION RESOURCE

18. The trend in utilization in the softwood plantations is toward integrated production of pulp, sawnwood and panel products, thus achieving higher output values per hectare. Hardwood plantations have not generally achieved this level of integrated utilization. They frequently attempt to reach high output values by high pulpwood yield per hectare. Thus arises the problem of species selection for future plantation establishment. Softwoods appear to give more options in utilization as they are proven for sawnwood, structural plywood, particle board as well as pulp. Where an assured market for pulp and certain types of panels is available hardwoods may be preferred because of high wood yields per hectare despite their usually more complex conversion technology.

19. The need for upgrading plantation forest products such as plywood and particle board for certain markets is linking natural and plantation forestry; utility hardwood from natural forests is used as veneer cores in plywood faced with plantation softwood, and as coreflakes in particle board with plantation pine faces. Hardwood veneers from tropical mixed forests are used for facing particle board.

20. The increasing utilization of plantation wood clearly illustrates the complete interdependence of technology, economics and management of both plantations and forest industries based upon them. There are great opportunities to maximize return on investment in the coordination of plantation management programmes with industrial technologies, product integration and market development. There is particular need for close cooperation between forest industrialists and tree breeders and plantation managers in selection and improvement of tree species and in identifying the most suitable plantation locations.

RESEARCH IN WOOD PRODUCTS

21. Forest products research should be an activity that by developing the forest resources of a country produces benefits for the people as a whole. It should contribute toward the full utilization of the country's forest resources and their conservation by undertaking investigations that are practical and market-oriented and that improve processing, recovery and application of forest products with the aim of achieving greater progress in the interest of the developing national economy. Large forest industries' enterprises often have their own research units. Small industries may also sponsor research through their associations or groupings of mills. Encouraging examples of such cooperative efforts already exist. Governments can encourage such sponsorship by appropriate tax concession. Government support and sponsorship are particularly needed in respect of such areas of research which serve rather small and dispersed enterprises, e.g. mechanical forest industries.

No institution is better than the people who compose it, and every effort should be made to improve the material and intellectual conditions of capable research workers and technicians to retain them in the service of the country concerned.

22. Educational and training needs in forest industry continue to grow with the use of more complex conversion processes. The need is serious for updating and expanding the knowledge of the middle-level employees of the processing complex.

Availability of modern textbooks and training manuals adapted for the specific needs of developing countries remains a serious problem.

A parallel need in the moderate-sized enterprise is the broadening of skills in the upper levels of enterprise management to adequately cover financial planning and budgeting, use of computers in control of processes and planning; and the techniques and economics of pollution control and resource management within the framework of environmental conservation.

The development of forest industries and their contribution to economic growth

23. For the establishment of a national forest industries development policy, the planners and policy-makers must consider, not only the financial soundness of the projects, which is normally a decisive investment criterion for an individual enterprise, but also other investment criteria needed to evaluate fully the economic and social aspects of industries' development, such as the impact of the industries upon economic growth, employment, balance of payments, available financial, managerial, forest, water or other critical resources, environment, and need for international cooperation. Opening up of new regions for development, strengthening of underdeveloped regions, and public investments needed for the supporting infrastructure are of particular importance in the case of forest industries. Forest industries often begin the social transformation of underdeveloped regions by providing employment, infrastructure and amenities such as schools, hospitals and other social institutions.

24. In forest industries' development which is based on a great diversity of wood raw materials, the development goals, constraints, and priorities vary greatly from country to country. As the methods of evaluating individual projects and different branches of the industry are of world-wide interest, analysis of the economic and social criteria and international exchange of information should be pursued further to assist the planners and policy-makers to promote sound development. Attention must be paid also to the interlinkages with other industries and infrastructure, such as shipping, chemical, and engineering industries.

25. Forest industries comprise a wide variety of different branches with different economic and social characteristics. Some branches, such as sawmilling and secondary wood manufacturing, are flexible with regard to economies of scale and labour versus capital intensiveness, while others, such as chemical pulp and bulk-type papers and paperboards, have very pronounced economies of scale and high capital intensiveness. The first type of industries is easily adapted to the early stages of developing economies. while the latter type creates structural problems resulting from their requirements for large markets, raw materials supplies and financial resources and for skilled management and labour, as well as for an adequate distribution system and infrastructure.

26. Integration of forest industries is needed to optimize the use of different species, sizes and grades of roundwood, to utilize residues and to save capital and labour. Heavy investments in infrastructure to open up new areas frequently require integrated use of resources but due to the resulting high total requirements of financial and human resources, gradual development in stages should be considered.

27. As compared with wood production and harvesting, primary industrial processing of wood increases the value added per net input of roundwood two- to threefold and primary and secondary processing together five- to tenfold. Consequently the national goal should be as high a degree of wood processing as the financial viability of the industries makes possible.

28. As export freights often comprise 30 to 60 percent of the CIF prices of wood products exported from the developing countries, every effort should be made to improve port and shipping methods, facilities, and organizations. An analysis of the cost structure in the processing and shipping of wood grown in the developing countries is needed to evaluate prospects for increased manufacturing near the source of wood production. Prospects for specialized shipping and changes in the structure of freight rates must be studied urgently.

29. Balanced income distribution between production, harvesting, processing and distribution of wood requires correct pricing of wood. To promote financially sound forest production, the pricing of roundwood should take into account the industrial value of wood considering the species, sizes and grades. Owing to the many economic and social benefits derived from forestry, forest industries, and associated economic activities, tax and other incentives are successfully used to promote investments in forestry.

30. Minor forest products (resins, gums, extractives, etc.) should be given full attention in national plans in view of the considerable socioeconomic role they play in several countries due to their labour intensiveness combined with low capital requirements.

31. Exports of manufactured forest products to industrialized countries have prospects for continuous growth. Industries in the developing countries may benefit from joint ventures with established industries in the developed countries not only through financial and management assistance but also through transfer of know-how, captive market outlets and powerful sales organization. Developing countries and developed countries should promote their trade in forest products on the basis of equality and mutual benefit. Foreign investors must strictly respect the sovereignty and equal status of developing countries and investments must be made strictly on terms and conditions satisfactory to both sides.

32. As the available financial resources are often a critical constraint in forest industries' development, efforts should be made in planning and management of the industries to save capital through proper design of the mills, development and choice of equipment, efficient construction and start-up of the mills, shift work, high rate of operation, integration, multiple use of infrastructure and other means.

33. Massive transfer of capital and know-how from industrialized countries is needed for the development of forest industries in the developing world. Transfer of financial resources can take place in several ways to meet the particular requirements of different countries, e.g. international loans, bilateral loans, aid, etc. Developing countries should use their own efforts to the maximum extent in conjunction with loans and aid to develop their own forest industries. Training must be promoted at different levels with special emphasis on the intermediate level of technicians. Investment surveys and industrial management advice are also needed for sound and efficient development. Product specifications, equipment design, and degree of mechanization and instrumentation have to be adapted in accordance with the specific needs of the developing countries.

Forest industries and the conservation of the environment

34. Forest industries influence the human environment in many ways, direct and indirect. These influences extend far beyond the industrial processing itself. The requirements for industrial wood influence the forest resource. The industrial activities influence the standard of living in the community. Many end products affect the quality of life and form part of the most immediate environment of human beings-their homes. Furthermore, forest products influence the level of use of competing products based on nonrenewable resources.

35. Two major considerations are of dominant importance regarding the present and future interaction of forest industries with the environment: their influence on their own renewable raw material resource-forests; and their potential for preserving some important nonrenewable resources through product substitution.

36. Large forest industries are long-term operations and tend to safeguard their raw material supply for long periods ahead, thus serving the cause of forest conservation. Utilization practices leading to degradation and eventual destruction of forests may, however, be caused by small scale, often mobile operations unless carried out under adequate forest law enforcement and unless forest management is supervised by appropriate forest authorities.

37. There is a considerable potential of forest products toward preserving of several finite nonrenewable resources. The awareness of the effects of the possible exhaustion of some nonrenewable resources on human life is a fairly recent one but its importance is growing and is likely to become an important factor in policy decisions regarding the development of natural resources. The great challenge for forest industries is to increase and improve its products interchangeable with plastics, steel, aluminium and fossile fuels and supply them at competitive prices, thus contributing to preserving natural resources vital for mankind's survival.

38. The relative ease with which forest products can be disposed of or recycled may also considerably influence the accelerated demand for them in an era of growing environmental concern. Forest products are biodegradable, a fact of enormous importance in solving problems of waste disposal. Recycling, especially of paper, has been practical for many years but recent efforts toward its more extended use have already led to gains in recovery rates in several countries. Intensive research including pilot-scale tests offers hope of further gains in the use of wood fibres from municipal waste, partly for new products with very large potential outlets. Consumer attitudes and government action can substantially influence further development in this field, and the consumer should be encouraged to use wood-based products which do not end up as permanent litter.

39. As far as water and air pollution from forest industries is concerned, in particular from pulp and paper mills, modern technology is available for a radical reduction of these wastes and it may be expected that this technology will be further developed during the current decade. Acceptable levels of discharge from mills will vary within wide limits with mill location, and the cost of reducing harmful effects will also vary sharply from mill to mill depending on process, size, and factors inherent in the structure of the mill itself. As a result of heavy investment in water-pollution abatement facilities emission of waste from pulp and paper mills is already decreasing in many countries and experience shows that recipient waters are improving.

Improvements have also been achieved in relation to air pollution.

40. In general the industries have been able to absorb the increased investment and operating costs but certain mills, especially old and small units, and mills using the acid sulphite process have had great difficulties and many of them may have to close during the current decade. The pollution problem therefore has important implications for the structure of the industry, and flexibility is needed in applying new regulations in order to avoid undue social disruptions. As far as large operations and new mills are concerned there is confidence that the forest industries will be able to meet the challenge of building an industry in balance with the environment.

41. The universal trend toward the fuller use of raw materials serves to conserve resources and also improves the environment by reducing the amount of unutilized residues.

New process developments have facilitated better utilization of small-sized wood and residues: instead of being burned with the resulting air pollution they are now largely recycled and converted into industrial products. Bark represents a special problem. A number of technologies have been developed to utilize bark for purposes such as fuel, mulch, as addition to particle and fibre board, etc. However, the bulk utilization of bark for purposes other than fuel still represents a challenge for forest industries. It is hoped that the current decade will see a solution to this problem which will both contribute to the economy of forest enterprises and protect the environment.