Alf Leslie
ALF LESLIE is Reader in Forestry Economics at the University of Canterbury, School of Forestry, Christchurch, New Zealand.
Managing a natural tropical moist forest raises as many problems as it tries to solve
The management of moist tropical forests has exercised the minds and tested the patience of foresters from the earliest days of extensive commercial utilization, when the principles applied were those of what is now somewhat disparagingly referred to as "classical forestry." This is hardly surprising, for the early phases of tropical forestry overlapped the later stages of the classical period, and most tropical foresters in any event were educated in the classical tradition. Inevitably, sustained yield and natural regeneration became the dominant objectives. As Catinot (1974) says, management along those lines, to maintain for the most part the initial ecology of the tropical forest, is the sense in which management of natural forests is understood in this article. The issue, then, is the economic implications of the replacement of the existing forests, rather than the economics of their exploitation.
In recent years, the guiding principles have been gradually relaxed: natural regeneration has been the first to go. In the face of repeated disappointments, enthusiasm for natural regeneration has wilted badly. Under a variety of pressures, the worldwide trend toward plantations of quick-growing species is, in some form or other, being accepted, often reluctantly, by tropical foresters as the only tenable answer. Economics apparently shows that it could hardly be other-wise.
Sustained yield has held out a bit longer, but it too now seems to be losing ground for a variety of reasons (Smith, 1962; 1969) - one of considerable significance for tropical countries being its blatant inconsistency with the realities of national economic underdevelopment. Sustained-yield management locks up large areas of land and large blocks of realizable capital, two scarce commodities in most developing countries. Therefore sustained-yield management of the low-yielding natural forest is almost indefensible (Lee, 1973).
To some degree the disenchantment with sustained yield arises from an obstinate misconception that the principle allows of only one interpretation-replacement of a forest as it is utilized by a new one on the same site with essentially the same composition and structure although, it is hoped, of higher productivity. But, even if valid, that view of sustained yield is not the only one. There are several other equally or more valid forms, and one, "compensatory plantations," now has many adherents in tropical forestry.
The basic assumption of tropical forestry, implicit though it may be, is that natural management is possible and desirable. All that needs to be done is to find the appropriate variation of monocyclic or polycyclic management for the conditions applying in a specific forest. But almost universally, it seems that the search for the appropriate methods is a particularly difficult and unrewarding task. Thus, after a century or so of determined effort to mould the tropical moist forests into a managed natural state the solution to the problem is apparently to be found in abandoning the natural forest.
To a large degree economics gets the blame (or the credit) for this trend away from natural management systems in tropical forestry. That natural management is too difficult to justify the effort is itself an economic judgement. But there are other factors: the natural tropical forest is too expensive in land requirements, too costly in its capital requirements, too slow and uncertain in its response to treatment relative to alternative land uses and so on. We should see just how far these arguments hold and why the management of moist tropical forests is so unimpressive economically as to justify their abandonment. But before turning to that aspect there are several other reasons for the retreat from natural management worth mentioning.
For one thing, even the most ardent supporter of natural forest systems could not deny that all the effort in tropical forestry has yielded very few reliable and reproducible methods for natural regeneration of moist tropical forests. As an FAO study observed in 1974: "Far too little is known about silvics and the silviculture of the different moist forest communities and thus appropriate silvicultural systems can be confidently prescribed for only a few limited areas." The replacement of natural forests by plantations is therefore a rational move toward making the future wood supply in tropical areas much less uncertain. Plantations also have an added appeal in that management then becomes concerned with species and methods about which something is known, instead of groping with something about which, relatively speaking, nothing is known.
We may suspect that reasons of that sort are fundamentally more compelling than the economic ones which get the blame. Economics in fact may be little more than an excuse. After all, no more can be said about the economics of tropical forests than is known quantitatively about their silviculture and behaviour under management. Since the latter is, by general agreement, so little, almost nothing definitive can be said about their economics.
Of course there are exceptions to the generalization that the moist tropical forests have proved to be very difficult, if not impossible to manage as natural forests. However, as Baur (1964) shows, most of the possible methods have been tried somewhere and in the main have been found wanting. The consequent tendency to abandon natural forest management is almost inevitable.
Most of the reasons advanced for the difficulties of managing the moist tropical forests as natural forests derive from the complex structure and biology of these forests, which, as Richards (1973) points out, are the most complex ecosystems on earth. Most of the effort that has gone into making them more economic to manage has therefore been on the ecological side. Yet the problem of the management of moist tropical forests (Vannière, 1975) is economic much more than biological in origin.
As long as man, living in or adjacent to the moist tropical forests, used them or the land they occupied in a subsistence culture system at an intensity which did not exceed their recuperative capacity, no problem of management arose. Shifting cultivation in those circumstances was a stable and efficient land-management system rather than the menace that the literature of tropical forestry has labelled it. As long as there were no drastic changes in the physical environment or disruptions of the culture, the natural forest structure was able to maintain or replace itself. Any management problems those societies encountered in relation to forests were different from those of modern forestry in two important respects. Firstly, the impact of the use of the forests, either for products and services or for land, was on nothing like the scale associated with modern industrial utilization; and secondly, the problems were, for the most part, solved as those stable human-forest systems evolved and were maintained in dynamic equilibrium over long periods of time.
A similar situation obtains, even under modern conditions, whenever the moist tropical forest is reserved from industrial use in favour of environmental protection, recreational purposes, wildlife or aboriginal reserves. The only problem in managing the natural forest in those circumstances is to protect it from excessive pressures of human use or invasion.
Industrial utilization of the moist tropical forest, however, imposes a drastic change in both the environment and the symbiotic human culture system. The shock to the human society can be mitigated or aggravated by the way the industrial use is introduced and applied, but it cannot be eliminated. Much the same thing applies to the forest. Even so, the breakdown of stability does not create a forest management problem unless it is intended or desired to replace the forest after utilization with another of similar composition and structure on the same site.
Thus it takes a combination of two economic factors-industrial utilization and a specific type of reinvestment to create the situation in which the complex biology of the moist tropical forests turns their management into a problem. But the fact that the problems are economic in origin does not mean that economics necessarily offers the answer. The stable society-forest systems that evolved in pre-utilization times were based on institutional arrangements which incorporated economic considerations but were not dominated by them. It is that sort of situation which present-day societies will have to devise if the moist tropical forest is to survive as a significant ecosystem.
That of course raises an obvious question: should the moist tropical forest survive? And that propounds another: can it survive? Doubts about the ability of the moist tropical forest to renew itself are raised by Gomez-Pompa et al. (1972) and substantiated by May (1973) in his analyses of stability in model ecosystems. Those studies highlight structural features of moist tropical forests which may mean that they cannot, in general, survive the type and scale of disturbance associated with commercial utilization. If that is so, then natural management is an illusion. The moist tropical forest will almost surely disappear since it could only survive to the extent that it was not exploited for timber or agriculture. On present indications that will only be on a very small scale. This returns to the question: why should it survive?
The elimination of the tropical forests would, as Richards (1973) explains, "have important consequences for life on earth, although the nature and magnitude of those consequences cannot be foreseen with precision." The rub lies, of course, in the latter part of the quote. The moist tropical forests may, through some global climatic effect, be an essential element in climatic stability. However, Richards views the possibilities of that as relatively small. That the effects of virtual destruction of the large blocks of tropical forest "cannot be foreseen with precision" is probably the only accurate observation that can be made at the moment. The catch is that the answer will not be known with certainty until after the event. Since it will then be too late to find out that they did indeed have an important global environmental role, some caution is perhaps warranted. A certain level of insurance is good economics. The role of the moist tropical forest, whatever it is, may not depend wholly on its retention as natural forest: its replacement by plantations and agricultural tree crops could serve the same purpose, provided the areas are large and contiguous enough. But as it is all a bit speculative, Good-all's (1975) proposals for an analytical approach based on computerized simulation modelling to explore possibilities in tropical forest management has a great deal to recommend it.
Firmer reasons for concern, in Richards' (1973) view, are associated with the loss of an irreplaceable source of untapped biological knowledge and the reduction which would occur in the gene pool for further plant and animal evolution. The consequent elimination of options would reduce the genetic engineering flexibility that mankind may need in the future.
To the extent that these are compelling reasons for concern about their destruction, the surest way of ensuring their survival would be not to use them on a commercial scale or convert them to agriculture or other uses. But at this stage it is doubtful whether the developing countries in which the moist tropical forests are located would be or should be impressed enough by global considerations to resist large-scale utilization and conversion. A relatively few scattered reservations for scientific, historical, wildlife protection and recreational purposes are the most that could be hoped for on these grounds. It may, in fact, be all that is really needed.
The case for large-scale management of the moist tropical forest must therefore rely mainly on showing that it is a more effective form of land use than the alternatives. On this point opinion is sharply divided and, in part, the approaches to the management of moist tropical forests reflect that division. The difficulties arise, fundamentally, from the low rates of commercial increment typical of tropical forests and the long rotations required for growing commercial crops. Almost inevitably comparative analyses based on cash flows discounted at anything like realistic rates show the moist tropical forest unable to hold its own against any feasible alternative.
The economic implications of any activity arise from evaluations of the products of that activity (its outputs) relative to what was used in that activity (its inputs) to produce the outputs. The link between inputs and outputs-the production process by which inputs are combined and transformed into specific outputs-comprises the technology of that activity, corresponding in forestry roughly to silviculture. Forest management then is the deliberate intervention to manipulate the natural production process into some specific combination of outputs considered to be more useful or more satisfying and to maintain that output for some specified time. As long as no permanent drastic change in the forest's composition and structure is induced by the manipulation, the system is regarded as being one of natural management.
There are several complications about the forestry production process which make its analysis as an economic activity somewhat different in practice if not in principle from most other activities. One is that the forest itself is simultaneously the product, the producer and an input. To some degree that is true of production in general, but for most processes it is possible to distinguish the three aspects well enough for them to be treated as separate entities. In forestry the distinctions are much more blurred and hence analysis and management less clear-cut. A second complication is that time in forestry is a major and perhaps the major input. Again the difference between forestry and other production processes is one of degree. Almost no production process is instantaneous. Time is always needed for the process of combining and transforming inputs to run from initiation to completion. In most activities it is never short enough to be ignored but rarely long enough to be dominant. In forestry, on the other hand, the time for the production process to run its course can range from a decade to centuries. One associated result of that is that the production process can, after a certain time, be terminated earlier than originally planned, provided a given end product of smaller size or in smaller quantity or a different end product or a different combination of end products is acceptable. Conversely, the production process can be carried on for considerably longer than originally planned, accepting again variations in the form, quantities, quality or combinations of end products. Another result is that labour inputs are, except at the final felling stage, actually capital inputs because of the time-deferred outputs associated with them.
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The moist tropical forest will almost surely disappear since it could only survive to the extent that it is not exploited for timber or agriculture. On present indications that will only be on a very small scale. Which returns to the question: why should it survive? |
These characteristics of forestry as an economic activity forced foresters to develop a specialized field of applied economics, largely outside mainstream economics and concerned primarily with taking time into account as a major input in the evaluation of alternatives and projects in forestry. The fundamental device is to treat time as a capital cost by accumulating the monetary value of inputs and outputs exponentially at some specified or implied rate of compound interest. But the solution to the problem of time as an input created another problem - that of the so-called burden of compound interest - which has troubled forestry ever since.
The moist tropical forest will almost surely disappear since it could only survive to the extent that it is not exploited for timber or agriculture. On present indications that will only be on a very small scale. Which returns to the question: why should it survive
The device of compound interest for measuring time as an input automatically gets over the problem of com paring inputs and outputs that occur at different times. They are, in effect, reduced to the same point in time. But there is still another problem of incommensurability to overcome before an evaluation can be made. This one arises from the differences in the physical nature of inputs and outputs. In their basic form physical quantities of different items cannot be added, subtracted, multiplied or compared.
The transformation to a common measurement is usually effected by expressing the quantities as values in terms of money. It is a simplification which only works readily for those items for which market prices exist and it works well only for those items whose market prices are fairly close approximations to their social values.
All of this adds up to the fact that to make an economic evaluation in forestry requires a great deal of quantitative information regarding:
· The quantities and prices of the inputs (costs) and their timing.
· The quantities and prices of the outputs (returns) and their timing.
· The way in which outputs change or are affected as given inputs are varied.
· The time between an input and its output or its effect on output.
· The interest rate.
When these requirements are considered in relation to the management of the moist tropical forests two things are strikingly obvious. The first is a paucity of quantified information in many aspects, which approaches complete ignorance in the case of the relationship between intermediate treatments and final outputs. The second is that what is known or can be guessed at points to a relatively small wood volume output associated with relatively costly treatment and long production periods under natural forest conditions. In other words, the information that is available about moist tropical forests suggests that their management could be relatively high in capital demand and relatively low in quantity of wood output. The economic implications of that observation from limited knowledge are, however, very deceptive. A low yield combined with a long rotation and an expensive treatment process may be uneconomic. That it is so regarded is evident from much of the literature (e.g., Lowe, 1974) but whether it is really uneconomic depends on a number of other things. One of those is the influence that other variables such as prices have on the values of the outputs and inputs. Another is the criterion by which the ratio of value of output to value of input is judged to be economic or otherwise.
But before turning to those aspects we should mention one important qualification arising from the dominance of time in forestry-the matter of uncertainty associated with time-dependent occurrences. It can rarely be assumed with certainty that an event whose occurrence lies in the future will actually occur, or occur exactly as and when expected. Hence, all future dated elements in an economic evaluation are, strictly speaking, expectations and their values are expected values. Economic evaluations can, therefore, never he deterministic, except in retrospect. That applies with double force in forestry where the stochastic nature of measurements of biological relationships is compounded by the uncertainty associated with the occurrence and level of future events (Goodall, 1975).
It would be impossible, therefore, to exaggerate the importance of uncertainty in forest management. As Shackle (1967) points out, "it cannot be plausibly maintained that a future date has to be anywhere near twenty years away, for it to be quite beyond the range of illumination from even the most comprehensive knowledge of the past.... five years is long enough for anything to happen". Nothing could illustrate more vividly the width of the gap between the problems with which forest economics is concerned in practice and the attitude of theoretical economics.
Fundamentally, there are only two approaches to silviculture, be the forest concerned tropical or temperate, coniferous or broadleaved, pure or mixed. These two approaches are the even-aged or monocyclic systems and the uneven-aged or polycyclic systems. Ecologically, some species or forest types can be managed under one of these systems alone, but the choice in
Given the possibility of choosing either monocyclic management or polycyclic management in the moist tropical forest, economics should have a great deal to offer.¹ For after all, economics is a discipline concerned with choices between alternatives under specific conditions. So much so that some views regard economics as a science, if not the science, of choice (Walshe, 1970). This does not claim that all the arguments relating to the choice between monocyclic and polycyclic systems are economic ones, but that in the process of weighing the alternatives, an economic evaluation should be helpful.
¹It must be emphasized that the terms monocyclic and polycyclic are being used here with reference to management in the silvicultural sense as distinct from the regulatory sense. Uneven aged or polycyclic management in the regulatory sense is a function of the size and constitution of the territorial unit of management control (the compartment) and not necessarily of the ecological character of the species or type.
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As long as man used moist tropical forests in a subsistence cultural system, at an intensity which did not exceed recuperative capacity, no problem of management arose. |
The relative merits of monocyclic and polycyclic systems were discussed in some detail by Dawkins (1958) in one of the earliest applications of the terms to forest management. Although his argument was developed largely in terms of the Ugandan situation the principles can and have been extrapolated to a pan-tropical level. Not a great deal has been added since then to the basic principles. However, the careful evaluation by Vannière (1974) of the arguments on both sides provides a valuable and much needed clarification of the modern status of the controversy.
From the point of view of economic analysis the essential elements in the two systems relate to the costs, the yields and the time intervals between successive cuts. In this respect Vannière's (1975) discussion of the factors that influence levels of costs and returns in tropical silviculture in west Africa is particularly useful. In some discussions a great deal is made of the shorter felling cycles under polycyclic systems compared with monocyclic systems. The difference in itself is of no economic significance. What matters is whether it takes longer for a tree of a given species to grow from seedling size to a given specification under one system than under the other. And on that point the evidence is mute. Although opinions are plentiful it will apparently be a long time before the question is cleared up, if Palmer's (1974) observations regarding the sporadic and unpredictable growth rates of individual trees in tropical forests are any indication.
The next aspect then is the number of trees per unit area of forest of the various species that grow to commercial dimensions and qualities during the time period in question under the two alternative systems. These two criteria the growth rate of individual trees and the number of trees per unit area combine into the single one of current or mean annual increment for a given forest type under the alternative systems. On such a basis Dawkins (1958) calculated for the Ugandan tropical forests with which he was dealing that the maximum mean annual increment of sawlogs under polycyclic systems could not exceed 1.5 cubic metres per hectare but, under a monocyclic system, it could be two to four times higher. He concluded that in the light of those comparisons no economic arguments were needed to support his choice of a uniform (monocyclic) system.
At the risk of some oversimplification the advantages that monocyclic systems have over polycyclic systems in that line of argument can be said to derive from two sets of observations and related deductions. The first observation is that the natural tropical forest carries a wide range of size classes per unit area on any given area (Wyatt Smith, 1949; yolk, 1968; Fox, 1971). Its main deduction is that tropical forests have a structure which would allow cyclical harvesting of commercial-sized trees at relatively short intervals of time, with recruitment from the lower size classes continually replacing the larger stems removed at each felling; the implicit assumption being that the smaller size classes are, in general, advanced growth.
The second observation is that a large number of the smaller stems and seedlings are destroyed or damaged by the felling and logging of the larger size trees. The data in this respect are neither as extensive nor as well documented as those for size class distribution. Dawkins (1958) indicates from his experience that the area of damage associated with the removal of one tree of 70 cm DBH is not likely to be less than 0.02 ha. Thus under a polycyclic system at least 2 percent of the area of advanced growth is lost at each felling with every mature tree removed. The deduction is, as Vannière (1974) points out, that there is a danger of wiping out the main advantage of the polycyclic system. The underlying assumption again is that the smaller size classes are advanced growth. With such an extensive clearance associated with the removal of a single mature tree, the polycyclic system in moist tropical forest is really a scattered series of small clear fellings. It is not a big step to deduce that the clear-felled area may just as well be concentrated in one or a few areas (that is monocyclic) or on a small number of areas (group selection) as being scattered over several thousand small patches.
Without attempting to cover all aspects of the question here, so well reviewed by Vannière we should add that, from the economic point of view, there are at least three points, apart from the assumptions regarding diameter growth rates, which could do with further clarification. In the first place, the argument that equates volume increment with value increment overlooks the possibility that the choice between polycyclic and monocyclic systems depends on the value of output as well as on the quantity. A high-priced group of species producing annually 2 cubic metres per hectare of timber priced at $8 per cubic metre standing is more productive, in a value sense per unit area, than a faster growing group of species with five times the final mean annual increment (MAI) cost at $1.5 per cubic metre. Differences in volume increment alone do not necessarily clinch the argument one way or the other. Thus, in considering the choice of a management system for the moist tropical forest as natural forest, it is essential to define clearly the criterion or decision rule by which the alternatives are to be judged. Whether it involves measurement of the output in physical or monetary or social terms is one aspect, not the only one. At least as important is how that output is related to the input since it is that relationship which ultimately measures efficiency. The argument favouring the monocyclic system is based on an assessment of the volume of output relative to a unit of land input averaged over a unit of time. That is, it expresses the output-input relationship in terms of two of the inputs. To the extent that efficiency is at its highest point when the return to the factor in most limited supply is maximized, then output per hectare per year is a valid criterion, particularly since capital in most developing countries and land in a considerable number are among the most limiting factors. It could, however, in some circumstances, be more appropriate to express output as a ratio per head of population or per job created, or per dollar invested or per dollar of foreign exchange earned or saved
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The stable society-forest systems that evolved in pre-utilization times were based on institutional arrangements which incorporated economic considerations but were not dominated by them. It is that sort of situation which present-day societies will have to devise if the moist tropical forest is to survive as a significant ecosystem. |
The second point that could be made regarding the simplified argument is that it does not relate the outputs from the alternative systems to the corresponding inputs, or it implicitly assumes that the inputs under both systems would be exactly the same. Most tropical silvicultural systems seem to involve relatively high inputs for tending or refining during the early stages in the development of a new stand or a young tree or in the transition from the unmanaged to the managed state. Their influence on the economics of forest management is well appreciated in tropical forestry. Baur's (1964) comprehensive review of tropical silviculture shows a largely common approach to tending, releasing and refining treatments in a wide range of rain forest types and administrative systems, combined with a fairly common sequence of variation, particularly simplification, in the timing, intensity and frequency of the treatments. An impression from that study is that the input may be less under a polycyclic system than under a monocyclic one. However, his point relating to cabinet timbers "as being able to afford the high price that an intensive true selection system must charge" would throw some doubts on that deduction. In the absence of definitive data to the contrary the implicit assumption that there is no significant difference between the two systems in their silvicultural input requirements is, as Tran Van Nao's (1974) review suggests, the most reasonable one.
One caveat must however be entered. There is clear agreement that polycyclic systems are more difficult to administer and supervise, regardless of whether the treatments applied involve more or less labour input. If that is so, then polycyclic management does, as implied by Baur (1964), require a higher total input for it to be implemented with equal effectiveness. However, the qualification really applies to an intensive polycyclic system. The polycyclic management systems actually in operation in tropical forestry rarely approach that level of difficulty. In general they amount to little more than the cyclic removal of stems above a fairly high standard of marketable quality, combined with refining treatments similar to those applied in monocyclic systems. It is hard to see that any higher level of managerial input would be required to apply that sort of management than would be needed to apply a monocyclic system. In fact, it is hard to see that there is any real difference between the two systems as actually applied or that there could be, as long as the major part of the wood grown in tropical forests remains unutilized (Catinot, 1974).²
²Catinot's results are derived from inventories covering more than 15000000 hectares of tropical forests in west Africa and refer to trees of 60 centimetres plus in diameter. The BSIP study, being based on four individual plots of 0.4 hectare each, probably overestimates yields for large tracts of forest and refers to all wood above 10 centimetres in diameter. The Sarawak study involved a series of 40.2 metre (two chains) wide line transects totalling 36 hectares and sampled 190 hectares of hill dipterocarp forest while the logging operations were in progress. Market conditions in 1972 (the time of the BSIP study) were considerably more buoyant than in 1973 (at the time of the Sarawak study) and would thus affect the utilized outputs recorded.
There is another element on the input side which could vary between the two systems and tends to be overlooked in silvicultural discussions of management economics. This element is the opportunity cost represented in the trees retained in order to regenerate or safeguard the regeneration of the forest or to serve as ingrowth during the next cutting cycle. From the economic point of view the revenue forgone by not logging those trees at a given time or by the deferment of their replacement by another crop represents an investment (Fedkiw and Yoho, 1960). It is therefore an item of cost for which allowances for any differences between the alternative systems must be taken into account.
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Studies on tropical forest wildlife have hardly started, so that evaluation of the economic implications is sheer guesswork. The same could be said for the other noncommercial values. |
Whether the principle amounts to an important point in practice is rather hard to determine. In tropical forestry, trees below the market size or specification for sawlogs usually have no value either as sawlogs or for other uses. The opportunity cost in terms of revenue forgone in such cases would be nil. A discounted present value might be estimated from diameter or quality increment data in relation to the width of the gap between present size or quality and the minimum marketable standard. This could be a valid approach if a market did exist for immature trees. However, in the circumstances prevailing in most tropical forest areas, it might be more realistic to assume a kinked value-size or quality curve, in which trees have no market value up to a certain specification and hence their retention involves no opportunity cost investment. It is also common for defective trees to be retained as seed trees or shelterwood and, again, no opportunity cost in a revenue-forgone sense is represented by their retention. In addition, while there may be differences between the two systems in the value of retained trees per unit area over an annual coupe, it does not follow that those differences would hold for the forest as a whole. The data relating to growth rates of individual trees or various species under different stand conditions are too weak for the principle to be applied quantitatively in most cases. Nevertheless it is a factor that could affect the choice between alternative systems for the management of tropical forests and one whose omission could make partial comparisons based on some costs and some returns quite misleading.
The third point at which the question of monocyclic and polycyclic systems needs to be amplified relates to the assumption that the smaller sized classes are, by and large, advanced growth. Evidence from Malaysia and Nigeria (Baur, 1964), indicating the successful development of regeneration following release, suggests that the assumption could hold in those forests, at least as far as the smallest sized classes are concerned. However, it is equally possible that the smaller sized classes are retarded growth rather than advanced growth Dawkins (1958) hints at this possibility, without developing the implications, with respect to the choice between monocyclic and polycyclic management. If the smaller sized classes were retarded growth this fact, from an economic point of view, would appear to tilt the scales against the polycyclic concept, unless the trees or certain high-valued species among them had a tremendous capacity to respond to release. On that point, as on so many others, bearing on the economic aspects of tropical forest management, too little is known to be of any use.
Overall then, economics can add little to the problem of identifying the appropriate natural system of management for moist tropical forests. The fault does not lie with economics. Whatever the faults of economic theory - and they are many when it comes to providing guidelines for management in practice - it at least points to a number of significant questions concerning the silvics of moist tropical forests, which must be answered before any firm verdict can be rendered in the case of monocyclic versus polycyclic management.
As Goodall (1975) points out, that in itself is a significant function.
Concern with how to manage moist tropical forests under natural systems implicitly assumes that large enough areas will remain under natural management long enough for the question to be of some practical significance, which at present seems most unlikely. Apart from the claims on the forested land for other uses, tropical forestry itself is increasingly becoming a matter of establishing and managing plantations in the tropics rather than of managing tropical forests as natural forests.
Therefore, we should first consider the economic implications for natural tropical forestry relative to alternative forms of land use and other forms of forestry. The question revolves around the criterion of "better".
The usual criterion applied consists in the expected average annual rate of return on the investment incurred by the organization responsible for forestry per unit area of land under various alternatives. The expected performance of the alternatives is thus compared in terms of criteria such as land expectation, net discounted revenue, present net worth, internal rate of return and other variants expressing a rate of return on the organization's investment. Since the major item in the capital investment under most forms of tropical forestry is the interest accumulated on the costs of the various inputs, a great deal of effort - managerial and intellectual - has gone into escaping from this burden of compound interest.
The various escape routes thus devised include:
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I ignoring compound interest II Counting in benefits regarded as not covered or inadequately covered in the financial calculations Increasing outputs III Shortening the rotation |
The first device in each pair constitutes, in fact, a special case of the second. Ignoring compound interest, for instance, is equivalent to using a special low rate of interest equal to zero. To count additional benefits is one way of increasing output. To shorten the rotation is to reduce the input of time. Thus, the expected performance under natural tropical forest management can only be improved by reducing the interest rate or by reducing its impact by applying it to a lower value of inputs, or to a higher value of outputs, or for a shorter time. The economic implications for tropical forest management can be explored by considering each of these possibilities as they relate to lowering the costs of management or increasing the returns to management.
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Some people apparently feel that as a measure of efficiency in resource use financial return should be the principal, if not the only valid criterion. The fact remains that efficiency is often deliberately relegated in favour of other objectives. Any full evaluation of management systems for moist tropical forests should therefore not only take account of social values, but also assess them in relation to all social goals. |
One of the most controversial concepts in forest management has been, and to some extent still is, the validity of compound interest and the appropriate rate to apply when necessary. The very extensive literature on the matter has proved, to the satisfaction of forest economists at least, that the approach embodied in the Faustman formula is entirely valid and substantially correct. Most forest managers seem to agree judging from their concern with shortening rotations and reducing silvicultural costs. But, as Mutch (1962) and Gaffney (1960) point out, forest policies in the United Kingdom and the United States of America show little evidence that compound interest considerations have had much influence in practice on the major decisions taken. The same might be said of a number of other countries.
The persistence of natural management of moist tropical forests could be just another example of the coexistence in forestry of contradictory theory and practice. It is well established, and widely accepted, that positive rates of interest, other things being equal, put long rotations and low yields at a disadvantage compared with shorter rotations and higher yields, and also that the higher the rate of interest, the greater the disadvantage. Since one of the well-attested characteristics of tropical forests is their general low yield and slow growth rates (Rollet, 1973; Catinot, 1974; Nwoboshi, 1975), positive interest rates would almost inevitably make natural management less economic than plantations or other forms of land use. If the rapidity with which natural systems are being abandoned in tropical forestry is any guide, then the implications of compound interest are, in fact, having a much more pronounced influence on the management of tropical forests than they are on temperate forests.
But there are two qualifications to consider before taking at face value those conclusions from low yields and slow growth. The first is that the explicit qualification, "other things being equal", does not always hold. The second relates to the implicit assumption that the financial rate of return to the organization responsible for the forest is the appropriate criterion.
One of the most obvious respects in which other things may not be equal is the difference between the two extremes of open plantation and natural regeneration systems in the cost of establishment of the new crop. Even allowing for the costs of the repeated tendings characteristic of natural management systems (Hughes and Lang-Brown, 1965; Lowe, 1974), there is no comparison between their total in the range $50-90 per ha (Lowe, 1974; Burgess, 1974) and the cost of conversion to an open plantation in the order of $250-350 per ha (IBDF, 1974; Lowe, 1974). The partial clearance methods for plantation establishment, such as enrichment and line plantation and agri-silviculture, are logical modifications arising from the high cost of open plantation establishment, and may effect reductions of 50 percent or more. But, as pointed out earlier, a comparison on the basis of cash outlay alone could be misleading. Other costs can be involved. Those opportunity costs associated with differences in maturation time and land values are automatically taken into account in the discounted cash flow analysis, via the rotation. The opportunity costs of marketable trees retained as seed sources or as shelterwood in a natural system of trees of marketable potential destroyed in clearing or tending must be added explicitly. Since defective trees or desirable species generally remain standing under the natural systems in practice, the advantage with full costing would tend to move further in favour of the natural system.
Because of the influence of the interest rate on accumulated costs over a rotation, and the relatively greater risk of complete or partial failure with it (Burgess, 1974; Nwoboshi, 1975) a natural forest system would need to have quite a large advantage in initial and continuing costs over the plantation alternative. Some idea of the margins necessary to break even can be gauged on the ratios in Table 1.
As the table shows, for a natural management system involving a 70-year rotation to beat a higher cost plantation on a 30-year rotation, given equal values of yield at rotation age its establishment cost, even at 30 percent, would have to be less than one third of that for the plantation, and the average annual cost of management and maintenance no more than one fifth. If the interest rate were 10 percent, natural management could only stand costs to the level of one fiftieth of those for the plantation. Even in a case where rotations were not likely to be greatly different, natural management costs would still have to be no more than half of those for plantations. The qualification regarding costs not being equal, although valid, thus would have to involve very large differences for it to have much relevance, unless (a) interest rates were very low or (b) the expected value yield from the natural forest was very much higher than that from the plantation replacing it, and (c) the chances of successful treatment were fairly high
TABLE 1. - RATIOS OF COSTS OF NATURAL MANAGEMENT TO PLANTATION MANAGEMENT WHICH WOULD EQUALIZE PRESENT DISCOUNTED VALUES
|
Rotation natural/plantation - |
Establishment costs |
Annual management costs |
||||
|
70/30 |
60/40 |
40/30 |
70/30 |
60/40 |
40/30 |
|
|
3% |
0.306 |
0.506 |
0.764 |
0.200 |
0.462 |
0.604 |
|
5% |
0.142 |
0.376 |
0.613 |
0.112 |
0.341 |
0.549 |
|
7% |
0.066 |
0.258 |
0.508 |
0.058 |
0.245 |
0.473 |
|
10% |
0.022 |
0.148 |
0.385 |
0.020 |
0.145 |
0.307 |
The case for a special low rate of interest for forestry, which the first of the above provisos implies, is rather unimpressive on economic grounds, particularly as far as timber production is concerned. Nevertheless, to the extent that there is a case for natural management of moist tropical forests as part of a general case for conservation and environmental protection for which a special low rate of interest may be appropriate, that rate would be equally appropriate for the tropical forest. But it would not apply to timber management per se which is where the problem really lies. However, the case which is still advanced in temperate and tropical forestry (Price, 1973; Rajkhowa, 1975) is quite often conceded, judging by the number of instances of official concurrence in low expected return timber-production projects. The de facto concurrence may of course be an unwitting one as seems to be the case in the United States, Canada and Australia, for instance. It must be more deliberate in the United Kingdom and Sweden. The fact that special low rates of interest are actually and deliberately applied in timber-production forestry is of fundamental importance. It suggests, as Mutch (1962) pointed out, that the economic criterion - the alternative rate of financial return - by which special low rates are rejected does not hold in practice. If that is so, it could be of particular significance to tropical forestry. After all a criterion which is invalid in assessing the economics of temperate forests can hardly be valid in tropical forestry simply because of the change of venue.
However, it appears that such strange logic does apply in practice. Countries which discard the financial criterion for their own forestry apparently endorse its use, through the international financial agencies, when it comes to forestry in other countries and in particular to tropical forest management. Nevertheless the evidence cannot be denied that when it comes to decisions relating to timber-production forestry, the criterion of financial return alone is far too narrow to be applied rigorously. Whatever alternative criterion is used, it will have the same effect as applying a special low rate of interest in the appraisal of investments in forestry. What the criterion may be and how it may be determined will be taken up later. Its relevance at this point is, however, quite clear. The re auction of the cost of natural forest management by a reduction of the interest rate in project appraisal is a practical possibility.
Although the application of a rate of interest lower than the alternative commercial rates may be justified in management appraisals for moist tropical forests, it may not be of any great advantage to the natural management systems. For one thing, the arguments which justify it for forestry may apply equally well to the alternatives. Certainly it would be illogical to apply it to natural forest management but not to artificial regeneration systems. Table 1 indicates that for a lower cost natural management system to compete with a higher cost plantation the value of its output must be considerably higher than that from the plantation.
The great amount of silvicultural and industrial effort that has gone into increasing the output from managed natural forests is moving in the right direction. An obvious starting point is to reduce the large proportion of wood that is by-passed under current commercial logging practice in tropical forests. Since the situation is primarily the result of the large number of trees in the heterogeneous mixtures characteristic of tropical forests which cannot be readily marketed, these secondary species seem to hold the key to successful management.
On the face of it there are good grounds for such a view: it is rare for more than 40 percent of the total wood volume produced by the moist tropical forests to contribute to the utilized output and, more commonly, it is less than 30 percent. Catinot (1974), for example, shows a range of 3 to 18 percent of the volume of commercial-size wood as being extracted from a number of west African tropical forests. A study of logging residues in the Solomon Islands showed that 25 to 30 percent of the total wood volume was removed in logging (Self and Trenaman, 1972) and a detailed study of logging in Sarawak found that only 40 to 50 percent of the solid-stem volume inventoried was actually extracted (FAO, 1972). Although the three sets of data are not entirely comparable, they certainly support the view expressed by Catinot (1974) that the moist tropical forest, wherever it is, is underexploited.
With full utilization, the output from moist tropical forests could be raised by 60 to 200 m³/ha Since secondary species would comprise about 75 to 90 percent of that unused potential, it is hardly surprising that a solution to the secondary species problem seems so promising. Considerations of the industrial prospects for the use of secondary species (Earl, 1968; IBDF 1974; Vannière 1975) would support such optimism. The fact that the opportunities are extolled far more vigorously than they are acted upon is, however, rather suspicious. Whether substantial increases in output would really bring about a significant improvement in the economic performance of moist tropical forests under natural management is debatable. The level of the potential quoted refers to the existing forests which, for the most part, have produced what they have produced with hardly any management input other than that necessary for their protection. Increased utilization of secondary species by increasing the valorized output would certainly improve the financial return from the present forests, provided the average price of the prime species was not diminished too much by the dilution with secondary species. But does it necessarily follow that the economics of their management under natural systems would be automatically improved also?
All natural management systems aim at achieving an improved structure, in the sense of a higher proportion of the primary species at maturity in the second crop than there is in the one now standing. A reduction of the secondary species component of the initial stand during the harvesting phase of management may be a prerequisite for regeneration of an enriched second crop in terms of primary species. The attention given to its reduction in post-logging and tending treatments in the various tropical silvicultural systems suggests that this is what is generally believed. The results on the whole suggest, however, that if the reduction of secondary species during their regeneration and establishment phases is effective, it is still not a sufficient or even an important factor. Nevertheless if natural management systems can succeed in regenerating and upgrading the second crop, then the substitution of a revenue-adding operation in one rotation for a cost-adding one in the next must improve their economic prospects.
But the economic performance of a particular method or operation is not an absolute measure in itself. It is always, implicitly or explicitly, relative to the alternatives to it. Thus, increased utilization of secondary species might improve the revenue-cost relationship for natural forest management but, if it reduced the cost of clearing, it could also do the same thing for alternative systems such as agriculture or forest plantations.
There is, however, another point which may be of some importance: if natural management systems could successfully and predictably establish an upgraded second crop, then it seems reasonable to expect at least the same, if not more, total production but concentrated on the currently preferred species. An increase in output in the current rotation is thus achieved by the utilization of the secondary species, but that in turn assists in bringing about a structural change by which the increase in output in subsequent rotations occurs by displacement of secondary species rather than by their utilization. The sequence is a very neat concept, if it works. But even if it can be made to work, it seems to hold a contradiction. If the secondary species problem can be solved by their utilization, what then is the point in additional silvicultural investment aimed at reducing their representation in future crops?
Thus, the increased utilization of secondary species and their perpetuation are an alternative technique in moist tropical forest management to, as well as being part of, the stand improvement techniques in the cur rent silvicultural systems. It should therefore be possible to appraise its effectiveness in economic terms in relation to the alternatives by standard marginal analysis along the lines of Worrell's (1960) classic study. Several difficulties stand in the way of doing that. One is that the data are almost certainly inadequate both in coverage and quality, for either direct use or as a basis for reasonably plausible guesses. Another is that the chances of widespread and consistent success in regeneration or in stand improvement under any of the alternatives, although different, are, judging by past performances, all discouragingly low. Hence, even a very favourable expected outcome in absolute terms for any of the natural systems could, on weighting for uncertainty, be hard pressed to compete with the plantation alternatives or, on suitable soils, agricultural alternatives.
An approach to natural management based on increased utilization of the secondary species therefore seems to be more promising on several counts. As timber resources become scarcer and real prices of established species rise, secondary species should gain wider acceptance and thus graduate into the marketable category. In other words, time, to some degree, will tend to ease the secondary species problem almost unaided by management or research. The same cannot be said for the silvicultural problems. Thus, the chances of achieving increased output by increased utilization of the secondary species in both existing and managed moist tropical forests could increase in relation to the chances of achieving increased output by selective regeneration techniques, and it should do so with less investment in research and management. The chances may not, of course, still be very high. However, on present indications, a little investment in increasing the utilization of secondary species seems to offer a better chance of improving the economics of natural management of tropical forests than a similar or larger investment in silvicultural technology.
There is one other aspect of increased output that has yet to be considered. In comparing a set of diverse inputs with a set of diverse outputs as occurs in forest management, it is necessary to reduce them all to some common denominator or numeraire. When the numeraire is money, as in most cases, then the relevant output is not just the volume or other physical quantity of material produced but the product of that quantity and the set of prices which apply. Thus, the economic output can be increased, not only by increasing the quantity of wood used or of usable wood produced, but merely by increasing the average price received for whatever wood is disposed of.
It is fairly general in tropical forestry for a graded series of prices to apply either to stumpage or to logs, according to status as species in world or local markets, and to quality as logs independent of species (e.g., Volk, 1968).
Many factors influence the general gradient and level of prices at a given time. Among the most important, from the longer term view, are the end uses and markets; the costs of logging, transport, processing and distribution; and the relative scarcity of a timber and of the availability of substitutes. But in the final analysis the value in the forest of a species derives from its value in the end-use markets. For many tropical countries the value of their forest resources depends, therefore, largely on prices in export markets. The possibilities for those countries to raise prices by unilateral action are rather limited, except with highly specialized species or qualities. Cartelization of the supply of tropical timbers by the tropical countries acting in combination might improve their bargaining power, but only to the extent that the tropical woods cannot be supplanted by woods from temperate forests or by other materials or by technological adaptation. Nevertheless, it is probably true to say that most existing stumpage gradients do not adequately reflect the range of end-use values. On the whole, they are probably rather too low for the better qualities, relatively too high for the less accepted species and qualities, and generally sluggish in response to changes in market levels and relativities. Within limits, therefore, adjustments could probably be effected by most countries in the stumpage gradients applying for their moist tropical forest timbers.
However, their freedom of action in effecting price changes is much less limited in one important field. One of the major costs between the forest and the end-user is the cost of logging. As a general rule it alone is equivalent to 25 to 35 percent of the price of processed wood. Any reduction in that cost could be reflected in a higher margin available to pay for standing timber. It is also fairly common experience to find logging costs in tropical forests varying by as much as 50 percent between operators, even under rather comparable conditions. There should be an obvious scope for some redistribution toward higher stumpage prices, merely by achieving a higher average level of efficiency in the logging industry. The fault does not lie always or entirely with the logging operators. Quite often, inefficiencies in logging are the result of anachronistic and badly administered procedures and regulations or of lax supervision and control measures. Some improvements in the price structure could therefore be effected completely from within the forestry sector itself. Inefficiencies in logging, obviously, arise from variations in the managerial and organizational abilities of the operators. There seems to be no need or justification for subsidizing inefficient operations with price structures geared to their costs.
Accordingly, it is not wildly optimistic to claim that an increase in the value of the output from most tropical forests could be effected by adjustments of the stumpage structure alone, without necessarily passing on any increased costs to the consumers. The scope is certainly there, but whether the procedures are is another matter. Most stumpage pricing systems in tropical forestry are based on administered prices, which are characteristically sticky anyway. Much worse, in the case of governmental agencies, they are particularly vulnerable to political manipulation either in their setting, or in their negotiation, or in their adjustment. A wider and more effective use of auction or tender systems as basic or auxiliary mechanisms for price determination in timber sales from tropical forests might help to minimize those problems.
No simple assessment can be made of the general effect of higher prices on the value of output as might be done for volume production. For one thing, the actual and potential gradients are likely to vary widely among the individual forests and with the circumstances at the time of a sale as well as with the countries and companies involved. For another thing, changes in relative prices could affect the quantities of the various species and grades logged. That would certainly be the case if the revised gradient involved stumpage reductions at the lower end of the quality scale so as to reflect more accurately the range of end market values. In fact, such an adjustment is probably a necessary part of any drive to increase the utilization of secondary species.
However, from the point of view of the economic implications of management in moist tropical forests, the significance of any such increases in the value of the output is not in their absolute level, but in their effect on the overall economic performance. In order to get some idea of the possible effects, a simplified, and of necessity, largely hypothetical example was developed initially on the basis of Catinot's (1974) data and classification for west Africa.
Three management situations were visualized as corresponding to the results that might be expected from various levels of increasingly intensive management (Table 2). At Level I it was assumed that management would be successful in regenerating and growing a second crop under natural conditions having much the same composition and output as the original stand but in rotations of 40, 50 or 70 years. At Level II, more intensive, but still natural management was assumed to establish successfully a second crop, having the same marketable output over the three rotations as the original stand, but enriched with a higher proportion of that volume in the currently preferred species.
The highest level of natural management, Level III, was assumed to be successful in achieving an increase in the volume of output over the rotations, as well as an enriched species composition.
Two stumpage gradients were applied to calculate the value of output under the three management regimes: the lower schedule (present) corresponding roughly to some present gradients; the revised schedule (revised) extending the range and increasing the steepness of the gradient appreciably.
Although little weight can be placed on the actual figures, the example is indicative of the possibilities for improving the economic status of natural management in moist tropical forests. The general order of magnitude of those possibilities can be gauged from the discounted values of added output under several of the alternatives as summarized in Table 2.
TABLE 2. - VOLUME AND FINANCIAL YIELDS IN SUBSEQUENT ROTATIONS UNDER A RANGE OF LEVELS OF MANAGEMENT INTENSITY AND STUMPAGE GRADIENTS
|
Log categories utilized |
Under present gradient |
Under revised gradient |
Under revised gradient |
||||||
|
Stump. |
Volume |
Value |
Stump. |
Volume |
Value |
Stump |
Volume |
Value |
|
|
Level I Management Intensity |
|||||||||
|
Present A |
3.50 |
5 |
17.50 |
7.00 |
5 |
35.00 |
14.00 |
5 |
70.00 |
|
Commercial B |
2.00 |
7 |
14.00 |
3.50 |
7 |
24.50 |
6.60 |
7 |
46.20 |
|
C |
1.00 |
8 |
8.00 |
0.50 |
13 |
6.50 |
0.40 |
15 |
6.00 |
|
Secondary |
0.35 |
|
|
0.10 |
10 |
1.00 |
0.05 |
15 |
0.75 |
|
Other residual |
0.15 |
|
|
0.05 |
0 |
0 |
0 |
3 |
0 |
|
Total |
|
20 |
39.50 |
|
35 |
67.00 |
|
45 |
122.95 |
|
Level II Management Intensity |
|||||||||
|
Present A |
3.50 |
12 |
42.00 |
7.00 |
12 |
84.00 |
14.00 |
12 |
168.00 |
|
Commercial B |
2.00 |
8 |
16.00 |
3.50 |
8 |
28.00 |
6.60 |
8 |
52.80 |
|
C |
1.00 |
5 |
5.00 |
0.50 |
10 |
5.00 |
0.40 |
15 |
6.00 |
|
Secondary |
0.35 |
0 |
|
0.10 |
5 |
0.50 |
0.05 |
8 |
0.40 |
|
Other residual |
0.15 |
0 |
|
0.05 |
0 |
0 |
0 |
2 |
0 |
|
Total |
|
25 |
63.00 |
|
35 |
117.50 |
|
45 |
227.20 |
|
Level III Management Intensity |
|||||||||
|
Present A |
3.50 |
15 |
52.50 |
7.00 |
15 |
105.00 |
14.00 |
15 |
210.00 |
|
Commercial B |
2.00 |
15 |
30.00 |
3.50 |
15 |
52.50 |
6.60 |
15 |
99.00 |
|
C |
1.00 |
20 |
20.00 |
0.50 |
25 |
12.50 |
0.40 |
30 |
12.00 |
|
Secondary |
0.35 |
0 |
|
0.10 |
20 |
2.00 |
0.05 |
25 |
1.25 |
|
Other residual |
0.15 |
0 |
|
0.05 |
0 |
0 |
0 |
5 |
0 |
|
Total |
|
50 |
102.50 |
|
75 |
172.00 |
|
90 |
322.25 |
Those values represent the approximate maximum investment per hectare in silvicultural and other yield improvement measures that could be covered by the expected returns. With the silvicultural cost of natural management running at the present minimum of around $50 per hectare, there can be little doubt that in terms of discounted cash flow analysis of the value of wood produced, the economic outlook for natural management of moist tropical forests is not bright. Even under very favourable circumstances - a very low discount rate, a relatively short rotation, a substantially increased stumpage gradient and a completely successful management system producing an appreciable enrichment in the composition of the new crop and a doubling of its commercial volume-the increased value of the output would barely cover the investment. In view of the very great uncertainty about the degree of success with current silviculture and the fact that there is no general case for applying low discount rates especially to natural management, then, as long as the criterion of economic viability is that of the net monetary value from wood production expressed as a rate of return to the forestry agency, the prospects for natural management virtually disappear. There will no doubt be exceptions. Some of the dipterocarp forest types in southeast Asia and/or forests particularly well placed for markets may be in that category. But for moist tropical forests in general the returns needed to make natural management for wood production economically viable, by the criterion just mentioned, are so high as to be, on present evidence, virtually unattainable. The alternative of a highly successful very low-cost management system is, on present evidence, an even more remote possibility. All of which suggests that measures for increased utilization of secondary species combined with steeper stumpage gradients offer more promise than silvicultural techniques.
These conclusions are valid only as long as the criterion-net monetary return on each investment for the forestry agency from commercial production-applies. Although it is the most widely used criterion in evaluating alternatives in forest economics, its accuracy and validity are rather doubtful.
For example, the exclusion of noncommercial outputs could, if they are important, lead to a serious understatement of the value of production. As for validity, an evaluation from the point of view of an individual unit of society does not necessarily hold for society as a whole: what is good or bad for the forestry agency in terms of its accounts may not, ipso facto, be correspondingly good or bad for society. A truer appreciation of the economic implications for natural management in moist tropical forests necessitates taking account of its role regarding noncommercial values relative to the alternatives to it, and judging its performance in terms of a social value criterion. The concept of social benefit-cost analysis was created for that purpose.
|
Most stumpage pricing systems in tropical forestry are based on administered prices, which are characteristically sticky anyway. Much worse, in the case of governmental agencies, they are particularly vulnerable to political manipulation. |
The problems of social evaluation which arise in applied benefit-cost analysis are well illustrated in the case of natural management of moist tropical forests. The common practice of listing the additional benefits associated with forestry to supplement the financial analyses is a recognition both of the inadequacy of purely market determined values as a basis for decision, and of the difficulties of measuring the extra-market values. As for management under natural systems, the output could obviously be increased by adding noncommercial values not covered or inadequately covered by financial analysis based on commercial output. But that would apply only if those values were likely to be greater under natural management than under the alternative forms of land use or of forestry. As Lee (1973) points out, it cannot be taken for granted that that is always so. Unfortunately the data on that point are even less adequate to support economic analysis than they are for wood production.
Species of wildlife whose habitat requirements restrict them to moist tropical forest would almost certainly be lost with conversion to plantations or agriculture. But they may not be much better off under natural management systems involving large-scale commercial operations and relatively short felling cycles. On the other hand, partial clearing under natural management may enhance the habitat for other species. But as Boulière (1973) points out, studies on tropical forest wildlife have hardly started, so that evaluation of the economic implications is sheer guesswork. The same could be said for the other noncommercial values. Definitive evidence on the relative effectiveness in soil protection and watershed management of natural forests compared to alternative covers is almost non-existent. Similarly, the relative recreational values have hardly been explored. The question of the role of large blocks of moist tropical forests on the global climatic balance seems also to be rather unclear. Obviously, any evaluation at this stage of the additional non-commercial output from moist tropical forest management must be almost completely speculative and subjective. Goodall's (1975) proposal for ecosystem simulation modelling could hardly find a more appropriate starting point than in this area.
Measurements in physical terms for the various forms of extra-market effects and their behaviour with stand treatments are lacking. Even if they were abundantly available the problem would still remain of applying a social value to them. How much would society really lose for another species to become extinct with the destruction of its habitat? That, and similar questions, are almost unanswerable but they are the essence of social valuation.
Lacking definitive studies, it may be justifiable to credit the moist tropical forest with being somewhat more productive than the alternatives insofar as total non-commercial values are concerned. It might also be assumed that the maximum output of those services would be reached in the absence of commercial use of the forests. At least the onus of proof to the contrary should lie on the alternatives. Whether the output would be less affected under natural management than under conversion to plantation or agricultural tree crops is hard to say, but the benefit of the doubt would probably favour natural management.
Therefore it might be reasonably claimed that the total value of all inputs from the moist tropical forest under natural management is higher than financial analyses alone would indicate. But how much higher, and whether it would be sufficiently to compensate for its relatively inefficient financial performance compared to the alternatives are open questions.
The principles are equally clear on the question of the validity of the financial criterion in assessing the economic implications of natural management. It is now generally accepted that an evaluation from the point of view of the organization responsible is likely to be only partially true from the point of view of society. The problem then is to devise a criterion of net social benefit which will stratify alternative uses of forest land and resources just as clearly as the financial criteria apparently do in the narrower financial analyses.
Apart from the fact that the financial criteria are not all that clear-cut and precise, the application of the concept of a social criterion in practice runs into a number of difficulties of its own. On the whole the problem tends to be handled in social benefit-cost analysis by discounted cash flow procedures modified to the extent that a wider range of items is included in the list of benefits and costs and these are entered as social (shadow) rather than market prices and that the discounting is made using a social discount rate. The relationship between the socially discounted sum of socially priced benefits and costs is then expressed in net present value ratios similar to the financial rate of return for criteria.
The computation of a social evaluation of moist tropical forestry would therefore be a fairly simple matter if:
1. A definitive list of the benefits and costs associated with the alternative possibilities existed.
2. Those benefits and costs were or could be quantified.
3. An agreed set of shadow prices for the various items in the list were available.
4. A value for the social discount rate were agreed.
5. The net present value type of criterion were the appropriate one on which to base the choice.
|
How much would society really lose for another species to become extinct with the destruction of its habitat? That, and similar questions, are almost unanswerable but they are the essence of social valuation. |
Unfortunately, a social evaluation for moist tropical forests breaks down on most of those points. The near impossibility, given present knowledge, of assessing the relative values, social or otherwise, of the non-commercial outputs from moist tropical forests under alternative management systems arises principally from the lack of data relating to the first two requirements. But even if those defects were overcome, the other provisos would still apply. Agreement on shadow prices would conceivably include the social discount rate which is only a special case of shadow pricing. But the range of authoritative opinions about the appropriate level of the social discount rate alone suggests that any such agreement is a long way off. Hence, the chances of making a definitive social evaluation of moist tropical forests under natural management are extremely slight at present. But that does not mean that the narrow financial analysis must be adopted by default.
As far as natural management of the moist tropical forest is concerned, a low social discount rate which, incidentally, has many supporters, as well as opponents, plus a higher value for noncommercial outputs credited to natural management would certainly improve its economic performance in relation to the alternatives. However the additional values credited would have to be quite substantial and the discount rate adopted very low, for the improvement in the net social benefit to be great enough to overcome the relative deficit in commercial viability. Neither of these is beyond the realms of possibility but it must be admitted that they do not appear to be highly probable.
But perhaps the most important reservation relating to a social benefit-cost evaluation of natural management of the moist tropical forest does not derive from its impracticability but from its narrowness. The reduction of all values to monetary terms and the evaluation in a monetary rate of return criterion is, in principle, no more than an extension of the financial criterion in commercial appraisals. The approach seems to be questionable in at least two respects. The first is the rather philosophical one which questions the validity of "an approach to life based on the principle of using monetary units as the common denominator of all that is important in human life" (Gross, 1966) or ridicules "this projection of all social institutions and practices back upon the market logic of exchange" (Hunt and Schwartz, 1972). The second aspect is a more technical one questioning the validity of a single criterion for judging social options. It is only too obvious that the financial return, no matter how calculated, is not the only objective of social or even business policy. Some people apparently feel that as a measure of efficiency in resource use it should be the principal, if not the only valid criterion. The fact remains that efficiency is often deliberately relegated in favour of other objectives. Any full evaluation of management systems for moist tropical forests should therefore not only take account of social values, but also assess them in relation to social goals.
It may be that the main weaknesses of present quantitative social evaluation techniques really lie in that latter respect. Fundamentally, the problem of the natural management of the moist tropical forest in relation to human welfare is a social problem of which economics is a part, but only a part. The social relationships associated with various forms or levels of utilization in the moist tropical forest are as complex, wide-ranging and fragile as the biology of the ecosystem itself (Tosi and Voertman, 1964). They certainly cannot be incorporated into a single quantified value index at the present level of knowledge.
How limited a view a single criterion could give is evident from the Malaysian forestry development planning model (FAO, 1972; 1974). To assess the impact of a large number of feasible strategies for land use and forest management in Peninsular Malaysia the effects were calculated in terms of a number of the economic and social criteria considered to be relevant. Although these criteria were given equal weighting in the analysis, different weightings would, as the report points out, lead to different rankings for a given set of alternative strategies. The important point is that the scale of weights at any given time reflects a political rather than an economic ranking of priorities.
In reality several criteria are probably relevant in any decision situation and the criteria themselves as well as their weightings are likely to vary over time. It seems almost ludicrous to select one criterion as valid and dominant for all time in all places. But that is what social benefit-cost analysis techniques at present do.
Thus while there can be no doubt that social benefit-cost analysis represents a marked advance conceptually in the economic evaluation of resource use options, it still leaves, in practice, some serious gaps. As things stand, neither the data nor the analytical techniques provide strong enough grounds for rejecting outright the natural management of moist tropical forests or for endorsing it wholeheartedly as an economic proposition.
The implications for the natural management of moist tropical forests that flow from a consideration of the economic aspects depend first on what is meant by natural management. Taking natural management to mean the utilization of moist tropical forests for their wood and other products in such a way that the initial ecological structure is perpetuated without drastic or permanent change, the implications then depend on whether natural management is physically or ecologically possible. If it is not, then the economic implications are those that arise either from the disappearance of moist tropical forests as they are utilized, or from their reservation against utilization in order to prevent their disappearance. If, on the other hand, natural management is possible, then the economic implications are those associated with deciding whether it is, or could be made, worth while enough for moist tropical forests to be man aged .. under natural systems.
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Most existing stumpage gradients do not adequately reflect the range of end-use values. On the whole, they are probably rather too low for the better qualities, relatively too high for the less accepted species and qualities, and generally sluggish in response to changes in market levels and relativities. |
If natural management is, in general, ecologically impossible, as some ecologists now suspect or so difficult as to be not worth the attempt, as many tropical foresters apparently now feel, then the moist tropical forest will surely continue to disappear. Under present conditions, their reservation on a large scale without commercial utilization or conversion to agriculture, simply to preserve them as a major ecosystem, is hardly a serious option. For it to be so, the economic prospects for the great majority of the people in the countries of their main occurrence would have to improve much more dramatically and quickly than present indications suggest are likely. And for that to happen there would have to be an almost inconceivable change of attitude to international income redistribution.
The only relevant implications of the natural management of moist tropical forests being fundamentally or practically impossible are therefore those arising from its eventual disappearance. One of the potentially most damaging consequences would be global or regional climatic imbalance associated with the disappearance of the major blocks of moist tropical forest in the Amazon, Africa and southeast Asia. Although the possibility was fairly strongly mooted a few years ago (Richards, 1952; Dawkins, 1958) global climatic deterioration now seems to be discounted as a factor which would justify the type of worldwide action needed to halt the destruction of tropical forests. That something would be lost to mankind as a whole by the reduction or extinction of the many complex biological systems that make up the moist tropical forests is obvious enough. Exactly what would be lost is rather difficult to specify and what it would mean is almost unknowable. That there would be a psychic loss to quite a few people resulting from the disappearance of some speciality timbers from world markets is also real enough. But what it would all add up to is anybody's guess. The case for retaining the moist tropical forests, if they could not be managed as such, depends therefore on doubts about the future that are too speculative to match the urgency of private and public demands on their presence. The uncertainty may point to a need for caution, but it is hardly strong enough to justify a halt in the countries where the resources are located or to create conditions which would make the halt possible.
The lack of information which inhibits action to preserve the moist tropical forests if they are a non-renewable resource handicaps even more action to justify their management as natural forests if they are actually renewable. Right at the start, it is far from certain how to re-establish naturally most types of moist tropical forests after or in conjunction with harvesting (Catinot, 1974; Nwoboshi, 1975). Even if that were not so, then the lack of knowledge of stand dynamics in managed or unmanaged natural tropical forests virtually reduces silvicultural treatments aimed at maintaining productivity, let alone increasing it, to an act of sheer faith. Yet, it is only through increased productivity that moist tropical forests in general can compete with the alternatives under the intensifying pressures for land and resources. Fortunately the road to increased productivity is not confined to solutions to the biological problems of moist tropical forest management. Increased utilization of secondary species would give an automatic and substantial increase in output from both the present end future stands. Adjustments that raised the standing timber prices for the currently preferred and easily marketed species in relation to the less preferred and difficult to market species could give a substantial lift to the value of output. Such economic measures possibly offer more scope for achieving an increase in value productivity than the current biological approaches, and they would do it with much less uncertainty and at considerably lower investment cost. Equally significant, they do not involve waiting on solutions to the problems of the biology of stand development. But they do involve an understanding of markets and marketing, particularly in foreign countries, and a facility in business affairs and behaviour quite often beyond the expertise of tropical foresters in general.
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The best reasons for not completely abandoning natural management of moist tropical forests lie in the distinct possibility that decisions based on it being an uneconomic proposition could be mistaken. |
At the same time, there is on the biological side some scope for improving the ratio of output by reductions in the cost of management. It is not a promising field, unless the present crop when harvested can be utilized much more intensively. Even then, it is hard to see the improvement in economic performance resulting from cost reduction measures being great enough to have a really significant effect. The problem is that the major factor affecting the value-cost relationship is the interest rate, and any case for the application of a special low rate of interest in forestry investments is likely to be general for all forestry, rather than specific to the natural management systems. A lower rate would help to improve the relative economic performance of natural management, but it would need to be very low, and combined with a substantial reduction in rotation lengths, for it to make a significant impact on the gap between natural management and its competitors.
But there is no doubt that some overall improvement in the economic performance of natural management o moist tropical forests is possible. It is hard to see that the most which seems possible in silviculture or marketing will effect a big enough improvement in the performance of natural management, compared to what other forms of land use could do with the same resources, for it to become a responsible alternative. There is, however, one very important qualification to that observation: it holds only as long as the performances are judged in terms of commercial output valued from the point of view of the organization responsible for the forests. But that way of evaluating alternatives can be misleading if not completely erroneous. It tends, for instance, to leave too many things out, and to take too narrow a view of effects and their significance. However, once an attempt is made to extend the economic implications of natural management to a social level, the inadequacies of data on the wood production side are compounded enormously by the inadequacies of data on the environmental and social side. An evaluation that was somewhat speculative, but at least fairly clear-cut, could be replaced by another, much more speculative and anything but clear-cut. At the extreme, a social evaluation of natural management of moist tropical forests could show it to be or not to be a viable alternative to agriculture or plantations according to the answer that was wanted. In such circumstances, financial analysis may be a wrong guide to decision, but social analysis could be no guide. It is hard to say which is worse.
In part the difficulties can be traced to the data; they are clearly not good enough to provide definitive benefit-cost relationships. But a large part of the trouble also lies with the decision analysis techniques. They are either too narrow in the range of interest they consider, or too arbitrary in their valuation procedures, or too narrow in the range of objectives they include in their criteria to provide definitive benefit-cost relationships. But the major problem lies in uncertainty about the future. No analysis based on what is known now of the future can ever be definitive. Tropical foresters, like foresters almost everywhere, are forced to look too far into the future for them to be so sure about their assumptions that they can be dogmatic about their decisions. Some of the strongest arguments for the natural management of tropical forests lie therefore in the conceptual weaknesses of the case against such management.
The best reasons for not completely abandoning natural management of moist tropical forests lie therefore in the insurance it provides against the distinct possibility that decisions based on it being an uneconomic proposition could be mistaken.
