Opportunities in forest plantation management

Dr N Yogaratnam - Tree crops Agro Consultants

Forest plantation area in tropical countries was 67.5 million hectares in 2005, covering 1.4 percent of the total land area of those countries.

The Asia-Pacific region comprises 37 countries. With 54 million hectares it has by far the largest tropical forest plantation extent (more than 80 percent of the tropical total).

Of this, India has 33 million hectares, which is 60 percent of the regional total. Indonesia and Thailand also have large areas of plantations; combined, these three countries account for 90 percent of the regional total. China has the largest planted forest area of 45.1 million ha, which is 38 percent of the total non-tropical plantation extent. Total world extent is reported to be 139.77 million hectares. Sri Lanka’s forest plantations cover an insignificant extent of about 93,000 ha. Over 95 percent of this are managed by the state, viz. the Forest Department and Wildlife Conservation Department. Exotic species grown include, Teak (31,700ha), Mahogany (2,800), Pines (16,500), Eucaliptus (9,175 ha) and other species (12,225ha). Few newly established companies in this business are; Help Green (Teak), Green Wood (Teak) and Touchwood (Mahogany).

Trends and perspective

The total tropical forest plantation area more than doubled from 1995 to 2005 with an average annual growth rate of 8.6 percent.

The highest rate was in the Asia-Pacific region (9.4 percent per year), and the lowest was in Latin America and the Caribbean (4.3 percent per year).

Asia-Pacific

The total area of forest plantations in Asia-Pacific increased from 24 million hectares in 1995 to 54 million hectares in 2005.

A large part of this was due to the rapid expansion of forest plantations in India, from 14.6 million hectares in 1995 to 32.6 million hectares in 2005. Several other countries of the region, notably Indonesia, Thailand and Malaysia, also significantly increased their forest plantation areas during the period.

The survival rates in many plantations are rather disappointing. Estimates of plants surviving are between 63 and 77 percent. This indicates that the total area might be 25 to 35 percent less.

Nevertheless, many small plantations have not been included in the FAO survey such as 300,000 ha in Bangladesh. In Pakistan 90 percent of the fuel wood comes from farms which are also excluded from the statistics.

Rubber

The plantation area would receive another boost if crops such as rubber, oil palm and coconut are included. Rubber alone covers about 9 million ha in Asia, with 3.04 million ha in Indonesia, 1.83 million ha in Malaysia, 1.78 million ha in Thailand and 0.122 million ha in Sri Lanka.

There is no reason to distinguish between forestry plantations and some estate crops.

Furthermore, from an environmental point of view there is no difference between an intensively managed rubber plantation and an intensively managed eucalyptus, acacia or pine plantation.

In fact, some of the small holdings offer considerable biodiversity and other non-timber forest products and services.

Diversity

The plantation sector has been beset with difficulties and continues to be a contentious and troubled area in some countries. Principal conflicts arise from struggles over resources, especially land, and labour relations.

Particularly in Thailand, commercial eucalyptus plantations have been described as incompatible both with forest conservation and with village livelihood.

Many villagers have protested against plantation schemes. Plantation establishment has experienced setbacks because of social problems in the past; such problems appear to have decreased in recent years.

The controversies regarding the choice of exotics such as eucalyptus and acacias, however, ultimately did not lead to a shift towards the use of indigenous species. In Thailand, Eucalyptus camaldulensis is today the most popular species planted by both the private and public sectors.

The objectives for establishing plantations among the countries of the Region are very diverse, and have changed over time. The objective of the first plantations was predominantly timber production, with initial efforts reaching back to the last century. Most initiatives appear to have responded to a perceived crisis. Pine plantations in Peninsular Malaysia were created in the 1960s to support the pulp and paper industry.

It was followed by a larger project based on Acacia mangium in the 1980s, to compensate for a decline in supply from natural forests.

Plantations in other countries were established in order to rehabilitate degraded lands, to assist in rural development, and/or to increase fuel wood supplies.

Tree planting programs became major development tasks for governments in many countries in the Region, with much effort dedicated to identifying and developing tree species for particular purposes.

However, from the early 1980s onwards, the trend has gone slowly towards multi-purpose species, designed for soil improvement, provision of fuel wood and for the wood industry. In fact, many plantation projects had hidden agendas.

This is particularly the case of the large scale private plantations which started to emerge in 1983/84, Since then, private corporations in the Regions have made substantial investments in hardwood plantations to supply downstream processing industries, particularly the pulp and paper and reconstituted wood panel industries.

The plantation sector is diverse in terms of ownership, scale, species planted and production purpose. The diversity explains why it is difficult to present a coherent picture of what happened in the sector and what will most likely to happen.

Plantation forestry is an evolving concept but is most often interpreted as the relatively intensive management of monocultures for the production of a relatively narrow range of products.

Ownership

Upto until about 25 years ago, in most countries of the Region it was the State that initiated large-scale reforestation or afforestation programs in order to build up new sources of raw material and to rehabilitate degraded areas.

The success of these plantations was rather limited and many suffered from multiple problems including low quality planting stock, weak links to markets and social problems.

Several other factors beside the technical advances explain the enormous growth of plantations and with it a shift from state to private management. In the former centrally planned economies, fundamental changes have taken place in rural areas with regard to land management systems.

In China, for example, collective land management was replaced by a family contract system.

This change has significantly facilitated reforestation in parts of China, more efficient resource management and the development of processing facilities.

Similarly, the government in Vietnam gives 50 years renewable use rights over degraded areas to individual farmers in an attempt to stimulate private investment in reforestation.

While the transition to a market economy explains an increase in tree growing in countries such as Vietnam and China, in other parts of the Region it is industrial growth that has triggered a transformation of the rural areas.

Private sector

Off-farm employment opportunities become increasingly available which result in a decreasing pressure on the land locally. Labour shortages in parts of Indonesia, Malaysia and Thailand have resulted in land left idle, a rise in land prices and a change in land use. Coupled with an attractive market-driven demand for wood, smallholder timber plantations and private tree growing have sprouted up in the Philippines, Nepal, Laos, India, and Thailand. Private involvement does not suffer from many of the inherent problems of social forestry interventions. On the other hand, as recent studies from Laos and India indicate, it is predominantly absentee landowners and large farmers, with the support of substantial non-crop incomes, who can take advantage of the demand for wood.

The picture is not uniform because resource poor farmers also replace annuals with perennials in order to concentrate on improving their income through wage labour. In some cases, close collaboration between the wood processing industry and small-scale suppliers has boosted reforestation.

The emergence of many small-scale land owners in the plantation sector is paralleled by massive corporate investments in wood production.

Both players have reduced the role of the State in the sector. Plantation establishment is coupled particularly with the production facilities for pulp and paper in Indonesia.

Faced by prospects of further diminishing supplies from the natural forests, the wood panel industry has also opted for plantation management. This includes plantations of fast-growing tree species, and further involvement in producing rubber.

The impact of private sector involvement will be a significant increase in plantation area, the mechanization of silvicultural and harvesting operations and increased productivity due to the intensification of management and the use of improved planting stock.

Challenges

1) Lack of information on the current status of commercial tropical plantations: the general lack of reliable information on a number of forest-related issues contributes to a lack of transparency and reduces the likelihood of favourable investment decisions;

2) Land tenure: land tenure and, in particular, the absence of well-defined property rights have been key obstacles to attracting investment in industrial forest plantations in producer countries. The resolution of conflicts over land tenure rights and improved law enforcement are prerequisites for achieving industrial forest plantation development;

3) Lack of capacity: low capacity in the technical and organizational management of forest plantations and a lack of dialogue between the public and private sectors hinders efficient and effective plantation development;

4) Insufficient research and development: despite significant recent achievements in the establishment of forest plantations in the tropics there is still much to be done in basic and applied research to ensure that plantations are sustainable, productive and cost-effective;

5) Lack of financing mechanisms: few tropical countries encourage forest plantations through subsidies or beneficial financing schemes. Public funds are still limited and private financing is just emerging; and

6) Competition for land: worldwide, the public scrutiny of land ownership and land use has become increasingly intense.

Industrial forest plantations compete for land with agriculture and cattle-raising in most tropical countries, especially those with large populations. The strong competition for land affects land prices and constitutes a barrier to forest business.

Opportunities

The industrial forest plantation area will increase rapidly in the next few years as a way of ensuring there is an adequate wood supply for the global forest industry.

Plantation expansion rates will be high in some Asia-Pacific countries, notably China, India, Indonesia and Malaysia, where government incentives (subsidies, grants, tax concessions, differential fees, cost-sharing arrangements, and others) are available.

There is a prevailing perception that the supply of timber from natural forests will gradually decrease and production costs will grow. This will contribute to the expansion of the forest plantation estate in all three tropical regions.

In most tropical countries the CDM and other mechanisms for payments for environmental services are likely to play an increasing role in plantation development.

Access to these financing sources for forest plantations is very limited at the moment but could be enhanced.

In many poor tropical countries, particularly in Africa, forest plantation programs will increasingly be linked to poverty alleviation, community development and the recovery of degraded land.

These programs are likely to grow, contributing to an increase in plantation area, but the rate of expansion will depend on the support provided by international organizations and the financing made available.

In Latin America and the Caribbean and some Asia-Pacific countries, the lack of large contiguous land areas and environmental restrictions on land use will mean that the expansion of industrial plantation area will occur mainly on small and medium-sized properties.

The forest out-grower programs are likely to intensify and will help consolidate forestry activities on small rural properties. These partnership programs are important in Latin American countries, and will also increase in the Asia-Pacific region.

The private sector will continue to be the main investor in forest plantations worldwide, particularly in Asia-Pacific and Latin America and the Caribbean.

Domestic direct investment is the main source of financing for industrial forest plantations, with foreign direct investments making only a minor contribution.

Timber investment management organizations have emerged recently, mainly in Latin America and Caribbean and Asia-Pacific regions, and are helping to finance industrial plantations.

Outlook

The plantation sector in the Asia-Pacific Region has experienced substantial growth in the last 25 years. The expansion of industrial wood processing capacities together with dwindling supplies from the natural forests point towards further growth.

The speed of this expansion will depend on the nature of state interventions, price stability for wood products, collaboration between small-scale producers and the processing industry, and the impact of research on planting stock quality, plantation establishment and management, and the processing of raw materials.

Tree growing by small-holders has flourished despite state interventions and competition with subsidized supplies of wood from government sources. Notwithstanding those constraints, there is growing evidence from India to suggest that planting of trees for commercial ends has increased since the early 1980s.

Similar situations have emerged in other countries though they are far from homogeneous.

The transition to market economies in some of the Region’s countries has also triggered interest in plantations and the growth of downstream processing industries.

In other countries corporate players are increasing the areas under fast-growing trees while governments continue to announce ever increasing targets for further plantation development.

It seems almost certain that the share of the world’s wood production that comes from plantations will increase and that a large part of this increase will occur in the tropics. For this to happen, the plantation area and productivity have to increase substantially.

The questions that remain to be answered concern the limits to the growth of both.

Economic growth and agrarian changes are pointing towards decreasing competition between forestry and agriculture. The rural areas of the fastest growing economies are facing labour shortages with subsequent impacts on agricultural production.

This explains partially the interest in extensification and tree growing by smallholders.

At the same time agricultural production intensifies on a smaller share of the total land area, as food demands by a growing population increases.

Areas of degraded lands are also available for reforestation though, for obvious reasons, most private investors shun those risky locations.

Confrontations between rural communities and corporations involved in plantation establishment appear to have decreased. It seems that land use conflicts will not hinder a further expansion of the plantation sector.

Changes will also depend on the real and perceived environmental and social impact of plantations, export capacities of other regions (e.g., US hardwood lumber exports to Asia have more than doubled in the last ten years) and consumer demands.

The increased use of rubber cannot only be explained by the availability of an inexpensive resource and research success in processing rubber wood but also by the demand for light coloured wood and the perceived environmental soundness of using rubber as a raw material instead of wood from natural forests.

Sri Lanka’s forestry policy should also be strengthened further, in order to promote active participation of the corporate sector in this business.

Most of the Regional Plantation Companies showed some interest initially and established about 6,000 ha, but possibly due to lack of support from the State their interest has also dwindled.