A major problem for forest industries is to find the necessary capital for development. Because of this, the views of bankers on forest industries are always of interest. Recently, the General Manager of the Svenska Handelsbanken was invited to address the Annual Meeting in Stockholm of the Swedish Association of Paper and Pulp Engineers. Many of the points made on that occasion, although directly addressed to a Swedish audience, bear recapitulation.
"We are often tempted to gaze through the veils that hide the future but seldom are we so justified in doing so as when we discuss forest industries. There are two main reasons. Firstly, forest industries are dependent on a harvest that takes decades to reach fruition and, consequently, all planning must be done long in advance... Secondly... forest industries require larger capital investments than most other industrial enterprises. In fact, investment capital per worker in the paper and pulp industry is considerably higher than the corresponding figure for industry as a whole. The greater an industry's capital requirements, the greater the need for accurate estimates of the future trend since the risk of failure is proportional to the size of the investment...
The production structure of forest industries has been characterized by a successive shift towards the manufacturing of more refined products. This is in itself quite a natural phenomenon... Emphasis has gradually switched from sawn and planed timber to paper pulp, and from paper pulp to paper and hoard. At present, production of timber products is, in terms of volume, on about the same scale as before the war, while pulp production has risen by 40 percent and the output of paper and board by more than 100 percent...
An interesting feature of this trend is that, at the same time as every phase has been characterized by the development of more highly refined products, it has been possible to use raw materials of poorer quality. Stunted timber, waste and hardwood - which were considered as more or less worthless until quite recently - have become of increasing importance as raw materials...
But production trends... have to an even greater extent been influenced by developments on the world market... Production has tended to increase at a more rapid rate than exports. Since the war, total world production of timber goods has risen by about 40 per cent while total exports of the same products are largely unchanged. World production of pulp has been practically doubled, but exports have only risen by some 20 percent... In the sphere of international trade we are at present living in a world of mixed aims. On the one hand, efforts are being made to liberalize international trade to a greater extent than hitherto On the other hand, most countries are seeking to achieve a greater degree of self-sufficiency as regards forest products, especially so in the case of paper and board and, to some extent, pulp. It is quite obvious that this is seeking to push the ball towards the other goal and bring about an improved division of labor and specialization between the countries of the world....
The future prospects of our forest industries are a mixture of both favorable and unfavorable factors. On the one hand, the market may continue to offer room for rapid expansion even in the future, and the current plans for a free trade area may well present great opportunities... On the other hand, we must allow for the possibility of continued expansion being hampered by a shortage of capital. This brings us to the question as to whether these industries cannot reduce their capital requirements by means of suitable economies. The task will not be an easy one, but the problems and the possibilities are the subject of keen attention...
One sphere in which I feel that... forest industries must be prepared to invest a great deal of capital and large labor resources is research and, by research, I mean both applied research and pure research. In particular, efforts must be directed towards long-term development work in which technical process research, product development and market assessment are coordinated so as to achieve a final aim.
Finally, I should like to repeat that we should not take too pessimistic a view of the problems of finding the necessary capital. We must find a solution simply because we cannot afford to let our forest industries slip into the doldrums. After we have continued for a time with a policy favoring certain other sectors of the economy we may realize that, when all is said and done, it is industry that forms the basis of a national economy and, in our case in particular, forest industries. It may then be realized that there is little point in adding upper stories to our national house without, at the same time, strengthening the foundations on which it is built."
Courtesy, Royal Forest Department, Thailand
