3. Constraints and challenges in forest plantations

3.1. Strategies in establishing forest plantations - issues to be resolved

In Malaysia, while forest plantations are a lucrative option to supply the ever increasing demand for wood on a sustainable basis, the planting of timber trees on a plantation scale is constrained by a number of other factors that are critical.

3.1.1. Ecology

The establishment of forest plantation involves extensive alteration of the ecosystem particularly when heavy equipment is employed. The complex closed nutrient cycle in tropical rain forests is disrupted for a long time. This can lead to reduction of productivity unless meliorative measures are undertaken. Furthermore, mono-cultures further destabilize the system and require heavy use of fertilizers and pesticides. Many slow-growing species grown under fast plantation conditions have poorer quality. There is the problem of species-site matching for the heterogeneous area of large plantations. The danger of fire may also increase in exotic species plantation.

3.1.2. Land

It is an established fact that land is the world’s most valuable resource and public scrutiny of land is becoming more intense with each passing year. With increasing population the competition on land for agriculture and development is ever increasing.

For a forest plantation investment to be commercially viable a large area is required. The size of the land required will vary with the objective of the plantation. If the timber is for sawmilling and furniture manufacturing then an area of around 15,000 to 20,000 ha would suffice. On the other hand, if the objective is in establishing a chip or pulp and paper mill then an economic-sized plantation should be in the range of 90,000 to 200,000 ha. It would always be desirable to have a single contiguous piece of land area and if not, the required land area should just be in about two or three nearby parcels only. This is to ensure easy and efficient management of the activities. It is always preferable that the acquired land is close to basic amenities and near a relatively accessible road system and within an economic range to a processing mill or market. As an example, to operate efficiently a pulp or a chip mill the plantation should be located within a 100 km radius. Otherwise, exorbitant cost for the transportation of logs would render the operations uneconomical.

Another factor is that land is under the State’s jurisdiction. This implies that in Peninsular Malaysia a large plantation project may stretch across state borders. Land being a state prerogative implies that commercial organisations may have to deal with different procedures adopted by individual State governments. Often inquiries on information regarding land can become very difficult. Details for example on information regarding forest reserves are obtainable from the respective State Forest Departments while that on State land is obtainable from the Department of Land and Mines or Department of Agriculture. The setting up of a coordinating agency is desirable to overcome this and thus encourage the easier establishment of plantation forests.

Besides sufficient land the location with suitable infrastructure and the premium rate for leasing are also crucial factors. Considering the long period of investment required in forest plantations many companies in Malaysia have requested that they be given the prerogative of allocating a fraction of the land leased for planting agricultural plantation crops which can begin providing some revenue after three years of establishment. This is considered a necessary activity to cushion the long waiting period before final harvests. However, according to the Forest Department such a request is not permissible unless the land allocated is State land and lies outside the forest reserves. Forest reserve land is strictly to be planted with forest trees. If forest reserves are ever to play a role in forest plantation establishment this issue needs to be reviewed.

The leasing period for land requested by commercial organisations varies. In order to attract their interest in forest plantations, land should be made available for leasing ranging from a period of at least four rotations or up to 99 years. The intention is to have tenures long enough to assure that sufficient returns are obtained for the investments ploughed in.

Another concern that is slowing down the commercial sectors’ participation in forest plantation investments, either as joint venture partners or outright investments, is the issue of claims for customary rights by natives residing in affected logged over forest lands where plantations are to be established. In Sabah for example, although these lands belong to the State and are untitled, under the provision of the Land Ordinance a native can claim customary rights on them as long as he or she has been living in it for at least three years. Such issues need to be resolved before investors would consider investing in forest plantations.

Besides forest reserves, Malaysia has more than 1 million ha of idle lands. Such lands include tin tailings, BRIS (sandy) soils and ex-shifting cultivation and abandoned paddy lands. A recent survey jointly carried out by the Forest Research Institute Malaysia and The Forest Department of Peninsular Malaysia (1996) on land area with potential for forest plantation development is shown in Table 13. These lands with some inputs could be converted into productive forest plantations.

Table 13. Land area with potential for forest plantation development (ha)

(Source: FRIM & FD 1996) * - Native customary land Na - Data not available

3.1.3. Species selection

A review of about 45 reforestation projects in the tropics revealed that about 95% of all projects utilized exotics in the reforestation programmes. Sixty percent of all projects carried out their species trials in parallel with their project activities. About 60% of the projects received additional information during their life span that resulted in new species selection (Evans 1982, Abod 1995).

For plantations, although indigenous species are available, a greater preference is given for the selection of exotic species. The reasons for this are:

• There is generally a lack of adequate knowledge in the propagation and silvicultural management of indigenous species;
• There is generally plentiful supply of seeds of the exotic species;
• The exotic species are easy for handling; and
• The exotics are fast growing and high yielding.

There is a great challenge ahead to carry out adequate studies on the indigenous species to see their viability for forest plantations.

3.1.4. Inadequate supply of quality planting material

In general high levels of productivity are achieved when genetic and physiological potential of the species are well matched with management practices which promote rapid growth. Valuable improvements can be made in important properties such as stem form and wood density through selection and breeding. One major constraint that is currently perceived is the shortage of good planting material for the various plantation programmes. Quality seeds and plus trees that have been selected and reproduced by vegetative methods are inadequate to meet current and projected needs. While efforts are being stepped up to overcome this problem middlemen and overnight nurseries are providing planting material whose genetic sources are unknown. FRIM has now signed MOUs with four private nurseries to step-up production of quality planting materials of the required species while the Forest Department of Peninsular Malaysia is in the process of setting up the National Seed and Planting Material Procurement Centre at Lentang, Pahang to address this need also. In Sabah and Sarawak too similar efforts are underway.

3.1.5. Labour and mechanization

Labour supply is another issue of great concern. In Malaysia the agricultural sector is experiencing a shortage of labour because of the rural to urban migration of youth to work in factories. Although the labour requirement in forest plantations is less then in agriculture it still has to compete for labour in an expanding Malaysian economy where the working conditions in other industries are usually more conducive.

A natural tendency is for the plantation sector to engage foreign workers. The foreign labour recruitment process had never been efficient. The weaknesses have been attributed to inconsistent government policy on foreign workers’ employment coupled with lack of dedication of the foreign workers resulting in extremely high turnover of manpower. One option to alleviate the labour shortage is increased mechanization. Machines developed in countries like Finland and Canada for example are environmentally friendly and highly flexible in their operation in forest plantations.

3.1.6. Finance and private involvement

The planting of timbers on a plantation scale is constrained by a number of economic factors as well. These are:

• The high initial capital investment to establish the forest plantations;
• The long period between initial planting efforts and harvesting and thus the corresponding concern for the high capital cost or interest being carried until harvesting period;
• The high biological and economic risk involved in forest plantations; and
• Unattractive and inappropriate investment incentives provided by the government for forest plantation investments in the past.

3.2. Government tax incentives and regulations

Considering the constraints to private venture in forest plantations, in order to attract such ventures, the Government has recently offered a monetary incentives package in the form of:

• Pioneer Status: Tax exemption from corporate tax of 100% for 10 years on all statutory income;
• Investment Tax Allowance: An investment tax allowance at the rate of 100% of the statutory income for 5 years.

The above incentives though in place are not yet sufficient to attract private sector venture into plantation forestry. Perhaps the situation could be improved if the following could be put in place:

• Provision of ‘group relief’ which would encourage companies with other business ventures to undertake forest plantation activities since losses incurred in forest plantation in the initial years can be offset against income of other profitable ventures.
• Exemption at the state level on royalty payments and quit rent for at least the first rotation
• Setting up of plantation forestry fund which offers a soft loan or subsidy for establishing new forest plantations and management costs.

3.3. Privatisation

Commercial ventures in forest plantation development are relatively few and new in Malaysia when compared to USA, Chile, Brazil, New Zealand or Japan and China in Asia. In view of the rapidly declining resources the Government should formulate new policy directions and incentives to promote privatisation of the existing forest plantations or even establish new forest plantations. Only then can long term security of wood and the growth of an expanding wood-based industry in this country can be assured.