There are a variety of reasons why countries offer incentives for plantation establishment, although it is difficult to design a subsidy program that creates the intended effects without undue negative impacts. Subsidies have always been heavily scrutinized, since they inevitably disadvantage competing investments and distort the market. Scrutiny is intensifying with continuing pressure on eliminating trade barriers and investment distortions.
Gregersen (1984) defined incentives as “public subsidies given in various forms to the private sector to encourage socially desirable actions by private entities.” Direct incentives include cost sharing, subsidized credit, fiscal incentives, reduction of uncertainty through loan guarantees, insurance, forest protection agreements, and provision of land tenure (Gregersen and Houghtaling 1978). Indirect incentives include provision of market information, extension and education, and research (Keipi 1997). The incentive programs discussed here are provided by governments; projects funded by development banks and other foreign aid organizations are excluded.
