Not by Timber Alone: Economics And Ecology For Sustaining Tropical Forests

Not by Timber Alone: Economics And Ecology For Sustaining Tropical Forests

by Theodore Panayotou

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Not by Timber Alone presents the findings of the Harvard Institute for International Development study, commissioned by the International Tropical Timber Organization, that examined the economic value of tropical hardwood forests as productive living systems and the potential for their multiple use management.


Not by Timber Alone presents the findings of the Harvard Institute for International Development study, commissioned by the International Tropical Timber Organization, that examined the economic value of tropical hardwood forests as productive living systems and the potential for their multiple use management.

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Not by Timber Alone

Economics and Ecology for Sustaining Tropical Forests

By Theodore Panayotou, Peter S. Ashton


Copyright © 1992 Theodore Panayotou and Peter S. Ashton
All rights reserved.
ISBN: 978-1-61091-292-1


Introduction and Overview

THE CURRENT debate over the use of tropical forests pits economic growth directly against conservation. Exploiting the forests for hardwood timber is often considered the growth-oriented option, while production of non-timber goods and services is seen as environmentally sound but unprofitable. However, multiple-use management for timber and non-timber goods and services both maximizes economic growth and conserves the forest's value for the future. Indeed, the value of hardwood-producing forests can be enhanced with full accounting of non-timber goods and forest services through multiple-use management: Under certain conditions, in fact, the value of such non-timber products and services can surpass the value of the standing timber. Non-timber forest products are defined as non-timber wood products such as fuelwood, charcoal, pulp, chips for composite materials, fencing, poles, and implements, as well as non-wood forest goods such as game, fruits and nuts, cords and fibers, and latexes. Forest services include environmental benefits and ecological services derived from natural forests such as soil, water, and species conservation, recreation and tourism, protection against natural disasters such as floods and landslides, and preservation of wildlife and biological diversity. Tropical forests also serve as regulators of regional and global climate patterns through evapotranspiration and carbon sequestration.

This book has three objectives: first, to identify and evaluate the non-timber products and services that can be obtained from tropical forests; second, to determine the extent to which full accounting and enhancement of these products and services in a multiple- use management framework would help ensure the sustainability of tropical hardwood timber supplies; and third, to identify gaps in knowledge and make recommendations for future research. The study covers the tropical forest regions of Africa, Latin America, and Asia/Pacific.

Since World War II, international trade in tropical timber products has increased enormously, while real prices have risen only modestly. The demand for tropical hardwoods is expected to continue rising as a result of population and income growth. Even if per capita consumption of forest products in developed countries declined, as it has in the United States, total domestic consumption in most tropical countries is expected to double in 25 to 35 years, given present population growth rates (2 to 4 percent) in these countries. This anticipated growth in domestic consumption will limit tropical timber exports and exert upward pressure on tropical timber prices. More threatening to the tropical timber trade, however, are the ongoing depletion and degradation of the resource base and the mounting opposition of indigenous populations and environmental groups to destructive logging practices in natural forests.

The U.S. Interagency Task Force on Tropical Forests concluded in 1980 that if present trends continue, the world's tropical forests outside Central Africa and the Amazon Basin would be "nothing but scattered remnants" by the year 2025. By the turn of the century, Latin America is expected to be supplying two-thirds of all exports of tropical hardwood timber (Grainger 1987). Prices will be substantially higher because harvesting and transport costs will increase as timber sources shift from Southeast Asia to the more heterogeneous and distant Amazonian forests, assuming that substitution with temperate timber is limited. The basic problem is not the anticipated higher prices but the continuing failure of these prices to reflect the increasing scarcity of the timber resource, the deteriorating condition of the resource base, and the inadequate investment response to the expected price increases.


In economic terms, the most serious problem faced by the tropical timber trade is the undervaluation of the resource by governments of tropical countries. As owners of over 80 percent of the world's tropical forests, developing country governments have been unwilling or unable to capture more than a small fraction (10 to 50 percent) of the stumpage value or scarcity rent of the timber resource. The undervaluation of tropical hardwood timber and its resource base, the tropical high forest, combined with overvaluation of the net benefits from forest conversion, has led to excessive deforestation, failure to implement natural forest management, and underinvestment in forest plantations.

The problem is further compounded by these factors: (1) insecurity of tenure resulting from logging concessions that are shorter than felling cycles, lack of concession transferability, and uncertain renewability; (2) logging concessions that are awarded on a political rather than an economically competitive basis; (3) regulations that require concessionaires to begin harvesting their sites by a stipulated time; (4) tax structures based on marketable timber removed, rather than the potentially marketable timber on the site, thereby encouraging high-grading and damage to the remaining stand; and (5) disregard of customary use rights, which leads to interference and encroachment on concessions by members of local communities.

A second economic problem is the common failure to account for the non-timber forest products and services in forest management and investment decisions. Non-timber forest products are generally referred to as "minor" forest products and are treated as such in those few cases where they are not totally ignored. For local communities especially, they are of major economic importance. Some, such as rattan and latex, are also significant in international trade.

A list of non-timber forest products would include thousands of items: exudates (gums, resins, and latex); canes (rattan and bamboo); edible nuts, fruits, vegetables, and fungi; game animals and fish; flowers and fodder; and innumerable plants with biochemically active and useful substances, including those for medicinal and pharmaceutical uses, condiments, and spices. Of the most important of these commercial products, rattan and bamboo are found in Asia; wildlife is prominent in Africa; and fruits, nuts, and fish are common in Latin America. Exports of non-timber forest products from Indonesia reached $120 million in 1982, an amount almost half as large as the government revenues from timber production, notwithstanding the fact that non-timber exports were far smaller in volume than timber exports. In some areas, such as the Iquitos region of the Peruvian Amazon, the potential value of non-timber forest products was found to exceed that of hardwood timber (Peters et al. 1989).

The management of multi-species tropical forests for both timber and non-timber products is best considered from the perspective of ecological guilds of species sharing similar regeneration requirements, rather than from that of individual species with different requirements. The production of hardwood timber and non-timber forest goods need not be mutually exclusive; instead, they can be joint products arising from the complementary exploitation of the same environmental resource base. Ecologically and silviculturally, the two cannot be easily separated; optimal management for the one may or may not constitute optimal management for the other, but reconciliation may often be possible.

Economically, for instance, non-timber forest products can both increase the return from silvicultural improvements and plantation investments and help alleviate a major disadvantage of forest investments relative to alternative investments. Forest investments in tropical hardwoods generally involve a long gestation period (50 to 70 years) between expenditures and returns, which creates a serious cash-flow problem in the often imperfect and distorted capital markets of developing countries. Non-timber forest products can provide an annual income to alleviate this cash-flow problem, thus affording the critical margin necessary for forest investments to attract scarce capital and land from competing uses. Considering the value of non-timber forest products can make the difference between a socially acceptable and sustainable timber industry and a logging enclave resented by the local population.


In addition to timber and non-timber products, tropical forests also provide important environmental benefits or services, such as regulation of droughts and floods, control of soil erosion and sedimentation of downstream waterbeds, amelioration of climate, protection against weather damage, groundwater recharge, purification of air and water by acting as a "sink" for greenhouse gases (including carbon dioxide in logged forests if the timber extracted from them is not burned), conservation of genetic resources and biological diversity, and generation of recreational benefits and aesthetic values. While not all tropical forests provide these services to the same degree or even exclusively, ignoring them results in a lower return on forest investment and causes environmental problems that can combine to make timber production a socially undesirable and ecologically unsustainable industry.

Examples, positive and negative, abound. The 1982 forest fire in eastern Borneo resulted in enormous losses of timber and non-timber production (estimated at over $6 billion—more than the export value of all forest products from Indonesia over two years) as well as increased soil erosion, local climatic changes, and extinction of species (Leighton and Wirawan 1986). Its severity, it is believed, resulted from the extensive logging carried out in the area. A study of the Tai forest of the Ivory Coast, which has the world's highest deforestation rate (7 percent per annum), found that rivers flowing from primary forests release twice as much water halfway through the dry season, and between three and five times as much at the end of the dry season, as do rivers from a coffee plantation zone. Had the watershed function of the forest been evaluated at the social scarcity value of water, less deforestation, including forest conversion to coffee plantations, might have been allowed. On a positive note, benefits of $30 million were estimated from a $1.8 million investment in reforestation of the watershed of Poza Honda reservoir in Ecuador, and $3 million to $10 million per annum in additional economic activity, including multiplier effects, were generated from the expenditures of institutions doing research in the tropical forests of Costa Rica.

The order of magnitude of these estimates indicates the potential benefits from taking environmental services into account in forest investment and management. Clearly, not all environmental services are compatible with logging. Conservation of soil and water, on the one hand, can be compatible with logging provided that adequate ground cover is maintained at all times and logging methods are regulated (e.g., clear-cutting of steep slopes is prohibited). Full conservation of genetic resources, on the other hand, is generally incompatible with logging, although it is fully compatible with conservation of water and soil resources, preservation of wilderness, and nature-oriented tourism.

An additional service that biomass-rich forests provide is the sequestration of carbon, which, oxidized in the greenhouse gas carbon dioxide, may lead to global warming. Tropical moist forests embody 55 percent of the world's organic carbon in living biomass, equal to 188 billion tons, which is 34 times the carbon released from fossil fuel consumption annually Carbon sequestration, though a global benefit not captured by the countries in which tropical forests are found, has a potentially high value in the context of a possible international climate convention that would limit the allowable carbon emissions and create opportunities for trading permits for carbon emissions and sinks.


When managed at all, tropical forests tend to be managed for a single use, usually timber, although in recent years there has been a modest expansion of national parks and nature reserves managed for conservation and recreation, and village woodlots maintained for fodder and fuelwood. This study's fundamental premise is that multiple-use management of tropical forests holds the key to economic profitability, social acceptability, and ecological sustainability This form of management and investment will, in turn, ensure the long-term sustainability of tropical hardwood supplies.

Multiple-use management recognizes and attempts to evaluate all possible uses of tropical forests, without assuming that all uses should occur everywhere. Multiple-use management usually involves a full evaluation of all forest goods and services, and posits a set of criteria for selection of the optimal use or combination of uses to be permitted in a given forest area. Management systems are needed because multiple use of the same forest area may involve multiple users, numerous and conflicting management objectives, multiple time frames, and negative interactions among uses and users. Multiple-use management evaluates the complex ecological, economic, and social interactions and trade-offs among uses to determine the optimal use mix based on the criterion of maximization of net present value to the owner or decision maker.

One version of multiple-use management that simplifies the choice among large numbers of uses and their combinations is dominant-use management. This approach selects the use with the highest net present value as primary for a given forest area, and adds secondary uses to the extent that additional benefits exceed the extra costs. The benefit-cost calculations include the positive and negative interactions among these uses. Thus, certain areas are designated as timber forest in which collection of non-timber goods is allowed, while other areas are managed for watershed protection with limited logging and collection of non-timber goods. The negative interactions between logging and genetic resource conservation require that they be spatially separated, unless special extraction methods are used that may be unprofitable except for extremely valuable wood. For other uses, the conflicts are more apparent than real. For example, conservation of soil and water, which imposes certain restrictions on timber harvesting, is critical to sustainable timber management over the long run.

Seeking to maximize the net present value of tropical forests presumes the ability to estimate and compare the benefits and costs of all forest goods and services, in addition to quantitative knowledge of their ecological interactions and trade-offs. The lack of adequate and reliable information on non-timber goods and services makes such estimation difficult, though not impossible. Moreover, many of these goods and services are not traded, and therefore not valued, in formal markets. Rather, they are either consumed locally (non-timber goods) or are generated as intangibles or side effects outside the domain of markets and external to forest management (e.g., watershed protection and genetic conservation). Even timber, a major internationally traded commodity, is grossly undervalued, and its price is often subject to policy distortions such as taxes, subsidies, and tariffs that bear no relationship to social or environmental benefits and costs.

On the positive side, sophisticated methods have been developed in recent years for evaluating goods and services for which market prices either do not exist (most non- timber goods and all services) or do not reflect their true social scarcity value (some non-timber goods and quality hardwood timber). Selected valuation methods and applications reviewed in this study include productivity changes, cost-effectiveness, replacement and compensation cost, property values, and travel cost approaches.


Multiple-use management also requires certain modifications of existing silvicultural practices and logging technology, if it is to be implemented at the stand level. While it is difficult to develop separate management strategies for timber and non-timber species within the same forest, silvicultural methods should be modified to reduce undue damage to desirable non-timber species if they do not compete with timber species for space and light. The reverse should be practiced when non-timber harvest is the dominant use of the forest for economic or social reasons.


Excerpted from Not by Timber Alone by Theodore Panayotou, Peter S. Ashton. Copyright © 1992 Theodore Panayotou and Peter S. Ashton. Excerpted by permission of ISLAND PRESS.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Meet the Author

Theodore Panayotou is a fellow of the Harvard Institute of International Development (HIID) and lecturer in the Department of Economics at Harvard University. He is also a member of the Center for Tropical Forest Science. A specialist in environmental and resource economics, environmental policy analysis, and development economics, Dr. Panayotou has advised governments and institutes in Asia, Africa, and Eastern Europe as well as numerous other national and international institutions, on the interactions between the natural resource base and economic development. He received the 1991 Distinguished Achievement Award of the Society for Conservation Biology for his wide-ranging efforts to use economic analysis as a tool for conservation.

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