Joaquín Gonzalo Fernández Tomás
JOAQUÍN GONZALO FERNÁNDEZ TOMÁS is Subdirector de Extensión Universitaria de la Escuela Técnica Superior de Ingenieros de Montes, Universidad Politécnica, Ciudad Universitaria, Madrid, Spain.
In forestry project planning there are four elements - goal definition, vertical integration, financing and institutional approach - that are often treated as mere details of secondary importance within the overall planning and organizational strategy. Consequently, they do not receive adequate attention. However, once a project is started, they frequently prove to be critical to its success or failure. Public administration agencies must take full responsibility for the identification, assessment and resolution of these critical elements.
Some forestry projects are oriented toward the creation of forest resources with the aim of utilizing them at a date far in the future in comparison with normal rural community planning horizons. In the short term, the only contribution such projects can mane to community welfare is a limited employment capacity, often counterbalanced by the fact that the land assigned to forestry may have other potential uses of immediate profitability.
In the long term, however, forestry projects can make a very substantial contribution to the social and economic welfare of the community, since employment is much higher in logging operations than in the planting or maintenance of trees. There is also the added value of profits from the sale of forestry products.
It is very important, therefore, that rural development forestry projects are conceived dynamically. It is best to treat forestry as a secondary activity and, basically, complementary to other short- and medium-term production activities such as agriculture and grazing. In this way, forestry activities will gradually acquire greater importance in relation to other agrarian production activities. It is important that the rural community benefiting from the project understands the evolutionary nature of the contribution of forestry activities and does not have false expectations in the short term.
The relative dimensions of the forestry, agricultural and livestock components of an integrated project may also pose critical problems in rural settlement plans where the settlers have to make the additional effort of adapting themselves to new, and sometimes unknown, work and social environments. In such a situation, it may be advisable to treat the forestry component on a short-term basis in such a way that it is limited to absorbing labour that is seasonally idle because of lack of agricultural and/or grazing activity. Labour would be devoted almost exclusively to the planting and maintenance of tree stands. By using this approach - which clearly requires very careful planning - one can predict that labour needs will increase when the forest utilization operations begin years later. Such operations can be taken into account as a stage in the rural settlement programme.
What can be critical in forestry rural development projects is the degree of vertical integration in their design. To be "vertically integrated", a project should address itself to all stages of an operation - investment, maintenance, harvesting, production, marketing, etc. Frequently projects are to be found that result in the sale of roundwood at the roadside or at the millyard of the closest industry. What is not then taken into account is that the industry automatically becomes quasi-monopsonistic in the wood-producing community.
This is because roundwood has a very small marketing distance, a condition frequently aggravated by inadequate infrastructures for road transport. Sawn wood, on the other hand, has a much greater value per unit weight or volume, will absorb much greater transport costs, and can be marketed in a more extensive area, reducing the risk of monopsony.
There are thus two advantages to be derived from vertical integration. First, the added value obtained is much higher, because the margin of profit in sawmilling is typically greater than that of standing or felled wood production. Second, the risk of monopsony is eliminated.
It is advisable to point out that when a minimum degree of vertical integration is recommended - principally sawmilling, which is the most traditional activity and the one with the lowest capital investment requirements - it is not to be considered in terms of great industrial facilities but rather in terms of small modular workshops permitting a gradual expansion of installed capacity as wood harvests become more voluminous. Experience has shown that, in most cases, the hypothetical economies of scale of large facilities entail problems of management, organization and infrastructure which, on the whole, produce a negative balance.
Financing can be a critical area in forestry projects or in the forestry components of rural development projects, especially when international financing institutions to which governments have applied for loans are involved.
To a certain extent, these problems arise from the lack of experience such financing institutions usually have in forestry projects and the shortage of forestry experts in such institutions, especially in the evaluation departments.
Forestry rural development projects may have as their goal both sustained-yield harvests, in order to minimize fluctuations of labour needs, and installed industrial capacity for wood-processing. This means that the investments required to create growing stock should be spread out over a prolonged period of years - up to three or four decades - equivalent to the rotation of the forest species utilized.
The normal trend of financial institutions, and even of governments, is to restrict the whole investment to a four- to six-year period. This would perhaps be appropriate for agricultural and livestock projects, but not for forestry projects.
The consequences of scaling forestry projects to short-term investments can be catastrophic, since it would have a tremendous destabilizing effect. Production would be concentrated in a reduced number of years, requiring a great deal of labour and installed industrial capacity, followed by an even greater period of forestry unemployment and unused industrial capacity.
The administration and assessment of long-term projects are certainly much more costly in terms of money and effort than projects lasting only four or five years, but the alternative is a high risk of failure built into the project.
There is a possible intermediate solution, namely to prolong the investment period at least until the project begins to finance itself, this being possible in a considerably shorter time if the species used (or some of them) are fast-growing and if there are intermediate wood-producing cuts anal or markets for small-sized wood from thinnings.
Just as financing should be extended in time, it is fundamental that it be concentrated in areas extensive enough in space to allow for unified technical management. "Window" credit operations, in which national or international institutions generally make small loans to rural owners for forestry activities, ultimately result in mosaic-like, badly executed plantations, technically impossible to manage and posing great difficulties, even from the viewpoint of administering the loans.
The two main institutional approaches in forestry projects for rural development are considerations regarding the form of land tenure and the type of peasants' association through which the project is organized. These are closely interrelated. All such projects generally resort to one or another type of association.
A first consideration is that, if ownership is distributed among a group of individually owned properties, the management of forest resources in a given area may be extremely difficult. Individual interests would have to be compromised here to meet the requirements of a technical management plan, which necessarily involves the formal suppression of certain owners' rights in favour of the community enterprise. Consequently, it seems more desirable to plan projects, whenever possible, around a common property scheme, even though it may not lie within the cultural context of some countries. Communal non-individualized ownership should be considered different from any form of cooperation among individual owners.
Another very important consideration is soil rent. The prolonged period of time required for the realization of profits, possibly extending over many years from the initial investments to harvesting and sale, presents a real problem. Moreover, there is a concentration of such profits when they finally do occur. While an investment programme conceived in a series of stages, as suggested earlier, can help to alleviate the problem of concentrated profits, it will not help to shorten the period of time required until the first profits appear. Consequently, not enough money is invested and, worse, lands suitable exclusively for forestry are sometimes used for agriculture and grazing, which can lead to their eventual destruction.
The governments involved should try and solve this problem by including the annual rent of the land as a project cost and distributing it among the owners in the community. Obviously the determination of such income is very uncertain, as the future value of the products is unknown.
Even so, it is plausible to assume that the risk entailed for public administration, i.e., by society, would be compensated by the externalities of the forestry projects, which revert to society and not to the landowner. In any case, risks could be minimized by taking out an insurance on the future production of the project.
