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Adjustments to the scenario


Fuelwood in the equation of Asia Pacific forestry
Estimated elasticity of demand and supply
Conifer and non-conifer sub-sectors


The results for the ITTO Scenario #2 described here, while 'reasonable' are subject to several potential factors influencing the interpretation of results for the Asia Pacific region at present. These conditions are briefly noted here as cautionary and indicative of aspects that may warrant further investigation or analysis.

Fuelwood in the equation of Asia Pacific forestry

The scope of the present study did not permit an examination of the structural formulation of either the ITTO Tropical Trade or Log Supply models. Hence it is not known in detail how the question of fuelwood is modeled in terms of timber supply. However, it is observed here that almost all of the major regional analyses and other studies of the Asia Pacific Region forestry sector examined in the course of the present study focus almost entirely on the commercial or industrial component of timber production and use, with scant attention to fuelwood (or other Non-timber Forest Products). As noted at several instances in this review, fuelwood is the single most dominant form of timber consumption in the Asia Pacific region and will likely constitute the most significant driver of forest sector development in future forest policy throughout much of the Region. Consumption of almost 750 million cubic meters of non-conifer and 96 million cubic meters of conifer timber other than industrial roundwood (as consumed in 1994) simply cannot be left outside the explicit formulation of future scenarios focused on the approximate 300 million cubic meters of industrial production. There is virtually no discussion of fuelwood in the ITTO Scenario #2 (nor any of the other scenarios for this ITTO analysis or other major studies cited). This could represent a major shortcoming of our present understanding of possible future scenarios for the Asia Pacific Region

Estimated elasticity of demand and supply

The estimation of elasticity's for demand and supply of forest products is difficult and complex, given the diversity of products, markets, price information and measurement and other factors. Cross-product elasticity's are even more elusive in quantitative terms yet critical to questions of substitution. Long run elasticity's do, conceptually, capture substitution as part of the dynamic adjustments of markets in response to changing relative prices. It is well known that elasticity's can change over time as the underlying economic relationships adjust. Hence a 'long term' elasticity for sawnwood for a particular market demand estimated in 1975 may reasonably be expected to differ than the same relationship based on 1990.

A survey of 'recent' estimates of price elasticity for South-east Asian tropical timber was reported by ITTO and is reproduced in Table 78. Both supply and demand elasticity's are included in this review. The time series interval for estimation of the various elasticity's is also shown, indicating that data from the 1970s to the mid-1980's was most commonly utilized. Only the work of Vincent included data reaching to 1989.

Short run elasticity's are limited to the work of Constantino as reported in Table 78, The emphasis here is on the longer term, including the possibilities for dynamic market adjustments including substitution.20 It is highly possible that in the changing dynamics of globalization of markets and trade for forest products that elasticity's have/are adjusting, potentially upward in absolute values indicating the more likely interdependence of products and markets (including substitutes). This would imply greater and more fluid regional and inter-regional adjustments and a dampening of price impacts over time. This significant influence is captured in the ITTO Scenario #2 (in comparison particularly with the ITTO 'base case' analysis) yet it is impossible to determine the particular significance of the elasticity's utilized in the analysis without the simulation under identical conditions with the exception of changed elasticity's. If long term elasticity's have indeed increased, it would be expected that the results of Scenario #2 would be even more moderate with higher levels of substitution and perhaps lower supplies from 'new sources' due to the price effects.

20 It should be noted that demand elasticity's have a negative (-) sign, indicating that price and quantity are inversely related. Supply elasticity's in contrast are positive (+) since higher prices are considered to induce positive (higher) output. Export demand would therefore have negative (-) signs, while export supply would have positive (+) signs for price elasticity's. Elasticity's of substitution would typically be positive (+) since the demand for a commodity would be positively correlated with the price movement of a potential substitute.

Conifer and non-conifer sub-sectors

Because of the large interests in tropical forests of the Asian Pacific region, the primary focus has largely been on the tropical component (sub-sector). However, as this review indicates, within the broader definition of Asia Pacific there is a large and growing importance of the conifer sub-sector, accounting for almost 213 million cubic meters of production in 1994, including 116.6 million cubic meters of industrial roundwood. While the Region had a small (600 thousand cubic meter) net deficit in all non-conifer roundwood (tropical and temperate), the region was experiencing a large deficit (17.5 million cubic meters) for conifer roundwood. Plantations (industrial or commercial) within the Region are favoring conifers as evidenced by New Zealand, China, Indonesia and several other countries. The CINTRAFOR CGTM explicitly models conifer and non-conifer separately by consumer and producer regions. The interactions are not clearly discussed in the case of the ITTO Scenario #2 outcomes, hence it is not presently possible to fully investigate how the ITTO Tropical Timber Trade Model incorporates the dual nature of the timber sector. It is clear however, that the future scenarios for the Asia Pacific Region will need to fully integrate conifer and non-conifer influences.

Table 78: Price Elasticity Estimates for South-East Asian Tropical Timber


Tune Period

Short Run

Long Run

1. This Study


Indonesia - log supply

1968-84


0.20


Indonesia - log export demand a/

1968-84


- 1.51


Indonesia - sawnwood supply

1968-88


0.27


Indonesia - sawnwood domestic demand

1968-88


- 0.36


Indonesia - sawnwood export demand

1974-88


- 0.68


Indonesia - plywood supply

1975-88


0.31


Indonesia - plywood domestic demand

1975-88


- 0.91


Indonesia - plywood export demand b/

1975-88


-0.46

2. Constantino (1988) c/


Indonesia - sawnwood export demand d/

See note

- 0.08

- 0.21


Indonesia - plywood export demand

1975-85

- 0.26

- 0.58


Importers - elasticity of subst., tropical and temperate sawnwood

1975-85

1.30

2.11


Importers - elasticity of subst., tropical and temperate plywood

1975-85

0.75

1.23


World - elasticity of substitution, source of origin, sawnwood

1979-85

2.50

4.39


World - elasticity of substitution, source of origin, plywood

1979-85

4.56

12.3

3. Vincent (1992) e/


Peninsular Malaysia - log supply

1973-89


1.1


Peninsular Malaysia - sawnwood supply

1973-89


1.7


Peninsular Malaysia - sawnwood domestic demand

1973-89


- 0.55


Other tropical exporters - log export supply

1973-89


2.7


Other tropical exporters - sawnwood export supply

1973-89


0.7


Importers - tropical log demand

1973-89


- 1.59


Importers - tropical sawnwood demand

1973-89


- 5.67

4. Vincent (1989) f/


Malaysia - log supply

1960-85


0.64


Malaysia - sawnwood supply

1960-85


1.00


Malaysia - plywood supply

1960-85


1.00


Malaysia - sawnwood domestic demand

1960-85


- 0.27


Malaysia - plywood domestic demand

1960-85


- 0.94


Other SE Asia exporters - log supply

1960-85


0.46


Other SE Asia exporters - sawnwood supply

1960-85


1.00


Other SE Asia exporters - plywood supply

1960-85


1.00


Other SE Asia exporters - sawnwood domestic demand

1960-85


- 0.53


Other SE Asia exporters - plywood domestic demand

1960-85


- 0.85


Importers - SE Asian and Malaysian sawnwood demand

1960-85


- 1.22


Importers - SE Asian and Malaysian plywood demand

1960-85


- 0.46

Source: ITTO. 1993a. The economic linkages between the international trade in tropical timber and the sustainable management of tropical forests.


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