Domestic funding is one of forestry's primary sources of funds and may come from both public and private sources. Governments may raise funds from the private sector through royalties and taxes and reinvest them in forest management through public institutions, enterprises on state-owned land, or in support to the private sector. It is frequently difficult to classify funding from the public sector as it is expended on a broad range of activities, both structural and operational, and is implicit through activities such as incentive/disincentive regimes, policy reform, institutional development and strategic planning.
It can be argued that to be truly sustainable SFM should not require any external funding and in an ideal policy environment, this may be the case. However, it is more often true that revenue generated by government through forestry activities, weather public or private, is not reinvested into forest management, but leaks out to other sectors of the economy because the revenues are controlled by the treasury rather than forest departments.
Public financing capacity constraints mean that the role of the public sector in SFM may be limited. However, the public sector has a fundamental role to play in providing a conducive policy and operational environment to foster SFM.
Private domestic investments are made at all levels from forest dwellers to large industrial operations, although the investments of small enterprises and farmers are often overlooked. Private investments are limited by productivity, profitability and the local legal framework. Again, the local policy environment is crucial in providing incentives for investment by both small and large private enterprises and farmers.
SFM requires bringing together both public and private investments in a conducive policy environment that provides the right incentives for investment. Providing this investment environment is firmly in the domestic realm but, where appropriate, should attract external funding to assist in its achievement.