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AUGUST 2009

33

TECHNICAL SERIES

INTERNATIONAL TROPICAL TIMBER ORGANIZATION

ENCOURAGING INDUSTRIAL FOREST

PLANTATIONS IN THE TROPICS

Report of a global study

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TEChNICAL sERIEs

RepoRt of a Global Study

ENCOuRAGING INdusTRIAL FOREsT

PLANTATIONs IN ThE TROPICs

ITTO TechnIcal SerIeS #33

InTernaTIOnal TrOPIcal TIMBer OrGanIZaTIOn

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Encoraging Intrial Foret Plantation in te Tropic

Rr G S

ITTO Ti Sis no 33

by STCP Engenharia de Projetos Ltda

The International Tropical Timber Organization (ITTO) is an intergovernmental organization promoting the conservation and sustainablemanagement, use and trade of tropical forest resources. Its 60 members represent about 80% of the worlds tropical forests and 90% of the globaltropical timber trade. ITTO develops internationally agreed policy documents to promote sustainable forest management and forest conservationand assists tropical member countries to adapt such policies to local circumstances and to implement them in the field through projects.In addition, ITTO collects, analyses and disseminates data on the production and trade of tropical timber and funds projects and otheractions aimed at developing industries at both community and industrial scales. All projects are funded by voluntary contributions, mostlyfrom consumer member countries. Since it became operational in 1987, ITTO has funded close to 1000 projects, pre-projects and activitiesvalued at nearly US$350 million. The major donors are the governments of Japan, Switzerland and the United States.

Front cover photo credit: Gadjah Mada UniversityBack cover photo credit: CIB

ITTO 2009

This work is copyright. Except for the ITTO logo, graphical and textual information in this publication may be reproduced in whole orin part provided that it is not sold or put to commercial use and its source is acknowledged.

ISBN 4-902045-52-4

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FOREwORd

steps that tropical countries can take to pursue

plantation development in a sustainable andeconomically efficient way.

Since the report was commissioned, the world hasundergone a major financial crisis, the depths ofwhich are only now starting to be understood. Thereducion in demand, prices and flow of capital intotropical countries has already affected investmentsin forest plantations and is likely to have a majorimpact on the development of the sector for sometime. It is still unclear when and how the globaleconomy will rebound from this extraordinary

recession. Moreover, the outcomes of negotiationson post-2012 arrangements on climate change, whichcould also have important implications for plantationdevelopment, are also unknown. Nevertheless, I believethat this report will greatly assist countries in ensuringthey are fully prepared to encourage investment inplantation forests when economic conditions permit.

Emmanuel Ze Meka

Executive DirectorITTO

In 2004 the International Tropical Timber Council,

the governing body of the International TropicalTimber Organization (ITTO), decided, among otherthings, to conduct a study on encouraging private-sector investment in industrial forest plantation inthe tropics. STCP Engenharia de Projetos Ltda, aBrazil-based consultancy firm, was duly appointedto conduct the study. This report is the result.

The purpose of the study was to analyse and reporton the key factors that determine the success orfailure of commercial plantations in selected ITTOproducer and consumer countries. This is important:

tropical countries have many natural advantagesin the production of wood from plantations, and arobust plantation-based wood industry can make asubstantial contribution to economic developmentand rural employment. Some tropical countries havetaken great strides in developing their plantation estatesand are now reaping the benefits of the vibrantwood-processing industries that have sprung up tomake use of these new resources. Others, however,have lagged behind. This report explores the factorsbehind successful plantation development, and the

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ACkNOwLEdGMENTs

This report is the result of the work commissioned

by ITTO from STCP Engenharia de Projetos Ltda(Brazil). The work was directed by Dr Ivan Tomaselliand coordinated by Dr Marcelo Wiecheteck, andinvolved the following STCP consultants: JeffersonGarcia, Adriano Custodio Olsemann, BernardDelespinasse, Rafael Dias, Marisa Baida, GiseleBatista, Marco Tuoto, Roberto Bonse, SofiaHirakuri and Julio Paupitz.

The assessment of field information in selected countriesin Latin America and the Caribbean, Asia-Pacificand Africa involved two external consultants: Mr

Don Wijerwardana (New Zealand) and Mr AlhassanAttah (Ghana). Their efforts were very importantfor improving the accuracy of information in thosecountries.

Mr. Alf Leslie (Australia), working as senior advisor

to the project, made an important contribution inseveral phases of implementation, including in thereview of a draft version of the document. MarkkuSimula (Finland) provided peer review and substantiveediting.

Several members of the ITTO Secretariat greatlycontributed to and facilitated the implementationof the study. Their support, particularly that of DrManoel Sobral Filho and Mr Emmanuel Ze Meka,is gratefully acknowledged.

The efforts of governments, several national and

international organizations, and the private sector,in contributing relevant information to the study isalso acknowledged.

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ACRONyMs

ABAFT Bahia Planted Forest Producers

Association (Brazil) ABIMCI Brazilian Mechanical Wood

Industry Association

ABIMVEL Brazilian Furniture IndustryAssociation

ABIPA Brazilian Wood Panel IndustryAssociation

ABRAF Brazilian Forest PlantationProducers Association

ACR Santa Catarina Forest CompanyAssociation (Brazil)

AfDB African Development Bank

AIMA Ecuadorian Wood WorkingIndustry Association

AMS Minas Gerais SilvicultureAssociation (Brazil)

ANICC National Veneer and PlywoodIndustry Association

ANFA National Particleboard

Manufacturers Association

APRE Paran Forest CompanyAssociation (Brazil)

APROPACA Venezuelan Pulp, Paper andBoard Producers Association

AREFLORESTA Mato Grosso ReforestationAssociation (Brazil)

ASIFLOR Steel Producers ForestDevelopment Association (Brazil)

ASOINBOSQUE Forest Industry Association(Venezuela)

ASOPLANT Venezuela Forest PlantationAssociation

ASOTECA Ecuadorian Teak and TropicalWord Producers

BB Bank of Brazil

BNDES National Economic and SocialDevelopment Bank (Brazil)

BRACELPA Brazilian Pulp and Paper Association

CIRAD French Agricultural ResearchCenter for InternationalDevelopment

CODEVASF Development Company of theSan Francisco and ParnabaValleys (Brazil)

CONAFOR National Forest PolicyConsultative Council (Peru)

CONAMA National Environment Council(Brazil)

CORMADERA Development Corporation forthe Forest and Wood WorkingSector of Ecuador

CORPEI Export and InvestmentPromotion Corporation(Ecuador)

DI Direct investment

EFCA Central American Forest Strategy

EFWI Economic Freedom of the

World IndexFAO Food and Agriculture Organization

of the United Nations

FDPP Forest Development Programof Piau (Brazil)

FGHY Fast-Growing High-Yieldinginitiative (China)

FISET Sectoral Investment Fund (Brazil)

FONDAFA Agriculture, Forest and FishingDevelopment Fund (Venezuela)

FRA FAOs Forest Resources Assessment

FRG Guyana Regional Fund (Venezuela)

GDP Gross domestic product

ha hectare

INRENA National Institute for NaturalResources (Peru)

JKPP Participatory Mapping Network(Indonesia)

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Kgoe Kilograms of oil equivalent

KPSHK Community Forest SystemDevelopment Group (Indonesia)

IAIF Forestry Investment

Attractiveness Index (Indice deAtraccin de Inversin Forestal)

IBAMA Brazilian Environment andNatural Resources Institute

IIFM Indian Institute of ForestManagement

ITTO International Tropical TimberOrganization

m3 cubic meter

MAF Ministry of Agriculture andForestry (New Zealand)

MAI Mean annual increment

MARN Ministry of the Environment andNatural Resources (Venezuela)

MAT Ministry of Agriculture and Land(Venezuela)

MTC Malaysian Timber Council

MTIB Malaysian Timber Industry Board

NAP National Afforestation Program(India)

NRP National Reforestation Plan (Peru)

NGO Non-governmental organization

OECD Organization for EconomicCooperation and Development

OSINFOR Forest Resources and WildlifeFauna Supervision Office (Peru)

PFE Permanent forest estate

PIA Promotion of Investment Act(Malaysia)

PLANAP Plan of Action for the IntegratedDevelopment of the Parnaba

Valley (Brazil)PNFR National Forestation and

Reforestation Plan (Ecuador)

PRC Peoples Republic of China

PREP Private Reforestation ExtensionProject (Thailand)

PROMECIF Process to Improve the BusinessClimate for Forest Investment(Brazil)

PRONAF Florestal National Agricultural FamilyStrengthening Program (Brazil)

PROPFLORA Commercial Plantation andForest Rehabilitation Program(PROPFLORA)

RMB Renminbi (Chinese currency)

SBS Brazilian Silviculture Society

SEMAM/PR Environment Secretary of thePresident of the Republic (Brazil)

SFM Tropics ITTOs Status of Tropical ForestManagement in the Tropics 2005

SFA State Forest Administration

SFM Sustainable forest management

SODEFOR Society for Forest Development(Cte dIvoire)

SOFO FAOs State of the Worlds Forests

US$ United States dollar

WAHLI Indonesian Forum ofEnvironmental NGOs

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CONTENTs

frwr 3

acknwgmns 4acrnms 5

exciv smmr 11

1 Inrcin 21

Study objtiv 21

Outputs 21

2 Mhg 23

Spifi objtivs 23

Sop of wok 24

Characterization of products and species 24Geographic coverage 24

Mtodoogy 28

3 ovrviw rs nins 31

Topi outis 32Forest plantation area and distribution 32Analysis 37

no-topi outis 40Forest plantation area and distribution 40Analysis 44

4 Ss cmmrci rs nins in sc Itto mmr cnris 47 Fost pttios wodwid 47

Fost pttios i ITTO mmb outis 47

commi fost pttios 49Asia and the Pacific 49Africa 60Latin America and the Caribbean 69

no-topi ITTO osum outis 82

5 Cs sis 95

cs study 1: ommi tk pttios 95

Main plantations and geographic distribution 96Current situation 97Main challenges 98Outlook 99

cs Study 2: Piu Fost Pogm, Bzi 99Recent developments 100Geographical area of the FDPP 100Forestry Development Program 100

cs study 3: t sussfu mktig of ubbwood, topi pttio timb 103Recent developments 103Geographic distribution 105

Rubberwood market 105Outlook 106

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6 prscs r n cnsrins insri rs nin vmn 108

Mi ftos fftig ivstmt i idusti fost pttios 108Supra-sectoral factors 108Inter-sectoral factors 111

Intra-sectoral factors 113 Mi ostits o idusti fost pttio dvopmt 114

Oppotuitis 119

7 emns n Itto srg r nin vmn 121

likig idusti fost pttio dvopmt ostits to ITTO objtivs d tios 121General aspects 121

rommdd sttgis d tios fo ITTO 123Strategic country-level actions supported by ITTO 123Other strategic actions 125

Tables

Table 2.1 List of ITTO producer countries visited during the study 23

Table 2.2 Countries defined as tropical for the purposes of the study 25

Table 3.1 Total forest plantation area in the three tropical regions: estimates from two FAO publications 31

Table 3.2 Total global forest plantation area, by tropical and non-tropical region, 2005 32

Table 3.3 Forest plantation area in the three tropical regions, 2005 33

Table 3.4 Forest plantation area in tropical Asia and the Pacific, by country, 2005 34

Table 3.5 Forest plantation area in tropical Africa, by country, 2005 35

Table 3.6 Forest plantation area in tropical Latin America and the Caribbean, 2005 36

Table 3.7 Forest plantation area change, 19952005, three tropical regions 37

Table 3.8 Average annual growth in plantation area in selected Asia-Pacific countries, 19952005 3 9Table 3.9 Average annual growth in plantation area in selected tropical African countries, 19952005 3 9

Table 3.10 Average annual growth in plantation area in selected countries in tropical Latin Americaand the Caribbean, 19952005 40

Table 3.11 Forest plantation area, four non-tropical regions, 2005 41

Table 3.12 Forest plantation area in non-tropical Asia and the Pacific, by country, 2005 42

Table 3.13 Forest plantation area in non-tropical Africa, by country, 2005 43

Table 3.14 Forest plantation area in non-tropical America, by country, 2005 43

Table 3.15 Forest plantation areas in non-tropical Europe, by country, 2005 45

Table 3.16 Industrial forest plantation areas, non-tropical developed countries, 19712000 46

Table 4.1 Forest plantation incentives in selected ITTO member countries in the Asia-Pacific region 4 9

Table 4.2 Commercial planted area, productivity and sustainable production capacity of forestplantations, India 52

Table 4.3 Commercial planted area, productivity and sustainable production capacity of forestplantations, Indonesia 55

Table 4.4 Commercial planted area, productivity and sustainable production capacity of forestplantations, Malaysia 57

Table 4.5 Commercial planted area, productivity and sustainable production capacity of forestplantations, Thailand 59

Table 4.6 Commercial planted area, productivity and sustainable production capacity of forestplantations, Republic of the Congo 62

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Table 4.7 Commercial planted area, productivity and sustainable production capacity ofplantations, Cte dIvoire 63

Table 4.8 Commercial planted area, productivity and sustainable production capacity forestplantations, Gabon 64

Table 4.9 Commercial planted area, productivity and sustainable production capacity of forestplantations, Ghana 67

Table 4.10 Commercial planted area, productivity and sustainable production capacity of forestplantations, Nigeria 69

Table 4.11 Commercial planted area, productivity and sustainable production capacity of forestplantations, Brazil 74

Table 4.12 Commercial planted area, productivity and sustainable production capacity of forestplantations, Ecuador 76

Table 4.13 Commercial planted area, productivity and sustainable production capacity of eucalyptforest plantations, Peru 79

Table 4.14 Characteristics of FRG financing, Venezuela 81

Table 4.15 FONDAFA financing policy 81

Table 4.16 Commercial planted area, productivity and sustainable production capacity of forestplantations, Venezuela 82

Table 4.17 Total and productive forest plantation area in ITTO consumer countries, 2005 83

Table 4.18 Main forest programs in China since 1978 85

Table 4.19 Categories of major forest plantation incentives in China 86

Table 4.20 Commercial planted area, productivity and sustainable production capacity of forestplantations, China 87

Table 4.21 Forest area in Finland, 2003 88

Table 4.22 Commercial planted area, productivity and sustainable production capacity of forestplantations, Finland 91

Table 4.23 Commercial planted area, productivity and sustainable production capacity of forestplantations, New Zealand 94

Table 5.1 Commercial teak plantation area in the main tropical countries, 2005 97

Table 5.2 Mean annual increment of teak plantations in selected countries 97

Table 5.3 Sustainable production capacity of teak plantations in the major tropical countries, 2005 9 8

Table 5.4 Sustainable production capacity of rubberwood plantations in leading tropical countries, 2005 106

Table 7.1 Key limiting factors related to ITTO cross-cutting actions 121

Table 7.2 Key limiting factors related to ITTO goals and actions for reforestation and forest management 122

Figures

Figure 2.1 Distribution of tropical and non-tropical countries for the purpose of the study 26

Figure 2.2 Study approach 29

Figure 3.1 Worlds ten top-ranking forest plantation countries by area, 2005 32

Figure 3.2 Share of total tropical forest plantation estate, by region, 2005 33

Figure 3.3 Main tropical countries with forest plantations, 2005 33

Figure 3.4 Country share of forest plantation area, tropical Asia and the Pacific, 2005 34

Figure 3.5 Country share of forest plantation area, tropical Africa, 2005 36

Figure 3.6 Country share of forest plantation area, tropical Latin America and the Caribbean, 2005 37

Figure 3.7 Forest plantation area distribution, four non-tropical regions, 2005 41

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Figure 3.8 Ten largest forest plantation estates, non-tropical countries, 2005 41

Figure 3.9 Country share of forest plantation area, non-tropical Asia-Pacific, 2005 42

Figure 3.10 Country share of forest plantation area, non-tropical Africa, 2005 43

Figure 3.11 Country share of forest plantation area, non-tropical America, 2005 44

Figure 3.12 Country share of forest plantation area, Europe, 2005 44

Figure 4.1 Change in forest plantation area, by region, 19902005 47

Figure 4.2 Average annual growth (MAI) of forest plantations, Brazil 74

Figure 4.3 Plantation area in top ten ITTO consumer countries, 2005 82

Figure 4.4 Total annual forest regeneration and planting in Finland, 19702005 89

Figure 4.5 Total annual forest increment and removals, Finland 90

Figure 4.6 Forest species in forest plantations, Finland 91

Figure 4.7 New Zealand land use 91

Figure 5.1 Main countries with teak plantations 96

Figure 5.2 Distribution of commercial teak plantations, by tropical region, 2005 96Figure 5.3 Location of Piau and the region of influence of FDPP 100

Figure 5.4 Main components of the FDPP 100

Figure 5.5 Functioning structure of the forest plantation component of the FDPP 101

Figure 5.6 Countries with the most significant areas of rubber plantations 105

Figure 5.7 Rubberwood prices in the Malaysian domestic market (ex-factory) 105

Boxes

Box 3.1 German experience in forest plantations 44

Box 4.1 Credit mechanisms for forest plantations in Brazil 72

Box 4.2 Use of enabling incentives, New Zealand 93Box 5.1 Fijis experience with forest plantations 99

Box 5.2 Preliminary results of the FDPP 102

Box 5.3 Project Green Energy (Energia Verde project) 102

Box 5.4 Fordlandia: The dream of a rubber Eldorado 104

Box 5.5 Inadequate consideration of timber utilization 107

Box 6.1 Direct investments in forest businesses in Latin America: attractiveness for forest investment 109

Box 6.2 Invasion of the Aracruz nursery 115

Box 6.3 Fiscal incentive program to encourage commercial forest plantations in Brazil 117

Box 6.4 Capital subsidies for plantation development in China 118

Rrncs 126

annx 1 lis cncs 130

annx 2 M qsinnirs 132

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EXECuTIVE suMMARy

Overvie

Forest plantations in tropical countries

Area and location

In 2005 the forest plantation area in tropical countrieswas 67.5 million hectares (Table A), covering 1.4%of the total land area of those countries.

The Asia-Pacific region comprises 37 countries. With54 million hectares it has by far the largest tropicalforest plantation estate (more than 80% of the tropicaltotal). Of this, India has 33 million hectares, which

is 60% of the regional total. Indonesia and Thailandalso have large areas of plantations; combined, thesethree countries account for 90% of the regional total.

Tropical Africa, which comprises 47 countries, has atotal of 4.6 million hectares of forest plantation. With0.7 million hectares, Nigeria has the largest share ofthis, followed by Sudan with 0.64 million hectaresand Madagascar with 0.35 million hectares.

The tropical Latin America and Caribbean regions8.8 million hectares (13% of the total tropical forestplantation estate) are distributed among 39 countries.

The largest areas are in Brazil (5.6 million hectares,65% of the regional total), Venezuela (10%) andPeru (7%).

Trends and perspectives

The total tropical forest plantation area more thandoubled in the period 19952005; Table B shows thatthe average annual growth rate in area was 8.6%. Thehighest rate was in the Asia-Pacific region (9.4% peryear), and the slowest was in Latin America and theCaribbean (4.3% per year). The total area of forest

This document is the report of a study on encouraging

private-sector investment in industrial forest plantationsin the tropics. It assesses the success of forest plantations,taking into account ecological, economic and socialaspects and their overall contribution to sustainabledevelopment in accordance with the ITTO Guidelines

for the Establishment and Sustainable Management of

Planted Tropical Forestsand ITTO action plans. Whilethe study focuses on forest plantations for timberproduction, it also takes into account secondaryproducts such as firewood and wood pulp that mightcontribute to the economic success of plantations.The report highlights lessons learned in selected

countries through their experiences with commercialforest plantation development. Potential strategiesto assist ITTO producer countries in the developmentof commercial plantations are also presented.

The study covers tropical timber species as definedin the International Tropical Timber Agreement (1994):

non-conifer tropical wood for industrial uses, whichgrows or is produced in the countries situated betweenthe Tropic of Cancer and Tropic of Capricorn.

Adjustments were made to this definition so that

countries with territories in tropical and non-tropicalzones were properly included in or excluded from thelist. A brief analysis of forest plantations in non-tropicalcountries was also carried out because of theirimplications for global timber trade.

The study was based largely on secondary information,but also included primary data collected in aquestionnaire survey and through visits by the studyteam to eleven ITTO producer member countriesin the three tropical regions (Africa, Asia and thePacific, and Latin America and the Caribbean).

Table A Forest plantation area in tropical regions, 2005

tric rgin

ln r

(000 h)

pnin r

(000 h) % n r

asi-Pi 1,104,000 54,073 49

afi 1,652,000 4,620 028

lti ami d t cibb 2,250,000 8,805 039

TOTal 5,006,000 67,498 135

Source: FAO (2006a), adapted by STCP.

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plantations in Asia-Pacific increased from 24 millionhectares in 1995 to 54 million hectares in 2005. Inlarge part this was due to the rapid expansion of forestplantations in India, from 14.6 million hectares in1995 to 32.6 million hectares in 2005. Several othercountries of the region, notably Indonesia, Thailandand Malaysia, also significantly increased their forestplantation areas during the period.

Tropical forest plantations practically doubled in theAfrican region over the period albeit from a muchsmaller base than in Asia-Pacific from 2.2 millionhectares in 1995 to 4.6 million hectares in 2005. Thehighest growth was in Nigeria, Cte DIvoire and Sudan.

The forest plantation area expanded by about2.8 million hectares over the period in tropicalLatin America and the Caribbean, from 6.0 millionto 8.8 million hectares.

Forest plantations in non-tropical countries

Area and location

Forest plantations in non-tropical (i.e. temperate andboreal) countries cover about 120 million hectares(Table C). Of the four regions, non-tropical Asia-Pacific

has the largest forest plantation area, with over 50%of the total, followed by Europe (27%) and non-tropicalAmerica (17%).

China has the largest planted forest area (45.1 millionhectares), which is 38% of the total non-tropicalplantation estate. Combined, four countries China,Russia, the United States and Japan account for75% of the total.

Trends and perspectives

Until recently, commercial forest planting in non-tropicalcountries has been growing; in most developedcountries, however, other environmental and economic

priorities have resulted in reduced investments inindustrial forest plantations. In Japan, Korea andAustralia, for example, the area of new plantationestablished in each five-year block between 1971 and2000 declined (in Japans case from 275,000 hectaresin 197175 to 44,000 hectares in 19962000). Onthe other hand, the rate of new plantation establishmentincreased over the period in New Zealand and Chileas those countries sought to develop and expandtheir timber exports.

Table B Forest plantation area change, 19952005, three tropical regions

tric rgin

t nin r

(000 h) % chng,

19952005

% nn

chng1995 2005asi d t Pi 23,995 54,073 1254 94

afi 2,158 4,620 1141 88

lti ami d t cibb 6,046 8,803 456 43

TOTal 32,199 67,496 1096 86


Table C Forest plantation area in the non-tropical regions, 2005

Rgin

ln r

(000 h)

pnin r

(000 h) % n r

no-topi asi-Pi 2,830,000 64,622 23

euop 2,260,000 32,015 14

no-topi ami 2,239,000 19,803 09

no-topi afi 728,000 3,423 05

TOTal 8,057,000 119,863 15


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In several non-tropical countries, especially in thenorthern hemisphere, forest plantation productivityis relatively low and land is expensive. This hasencouraged investors to turn to other regions wherereturns might be higher. In the last decade, the moveof investors to temperate countries in the southernhemisphere has accelerated, but some of those countriesare now beginning to place strict conditions on theexpansion of large-scale forest plantations.

Commercial foret plantation

Overview of ITTO producer (tropical) countries

The rapid expansion of forest plantations in Asia-Pacific,particularly in India, Indonesia, Malaysia and Thailand,seems to be associated largely with a favorable

investment climate and strong demand for woodproducts in the region. Brazil has also had a goodinvestment climate; private investment in industrialforest plantations there increased significantly in thelast decade. In many other countries, however,particularly in Africa, the investment climate hasbeen poor and only limited investments in forestplantations have been made.

Tropical forest plantations are composed of a relativelysmall number of species. Eucalyptusis the most widelyplanted genus because of its adaptability to different

soil and climate conditions, high productivity andthe strong demand for eucalypt wood. There is atotal of 8.5 million hectares of eucalypt plantationin tropical countries (24% of the total).

Other important tree species used for industrialplantations in tropical countries are: pines (Pinusspp)(18%), used for solid wood and pulp production;rubber (Hevea brasiliensis) (18%), used for latex andsolid wood; teak (Tectona grandis) (17%); and acacias(Acacia spp) (9%). Various other broadleaved speciesmake up 14% of the tree species planted for

industrial purposes.

Asia-Pacific region

The forest sector in the tropical countries of theAsia-Pacific region has a high dependency ongovernment forest policies, development strategiesand sectoral plans and programs. In most countriessignificant progress has been made in reforming andupdating forest policies and legislation to meetnational demands driven by fast economic growth,market liberalization and other factors. Many types

of forest plantation incentives have been applied.

Forest plantations have emerged in the region asa means of addressing deforestation and reducingthe gap between wood supply and demand, and inrecognition of their potential multiple economic,social and environmental benefits. Nevertheless,governments and development agencies have oftenbeen criticized for the mixed results achieved throughtheir plantation policies.

The regions industrial forest plantation estate ismainly composed of eucalypts, rubberwood, teakand acacias. Eucalyptusis the most widely plantedgenus, followed by rubberwood and pine.

Productivity is variable: under certain conditions,high-yielding, genetically improved rubberwood andeucalypts have produced mean annual increments

(MAIs) of 20 m/ha/year. Pine plantations can alsoachieve relatively high MAIs (eg average of 12 m/ha/year in Thailand and 10 m/ha/year in Indonesia).Other species such as teak, acacias and lesser-cultivatedbroadleaved species generally achieve MAIs in therange 46 m/ha/year. In Thailand, acacias producean average MAI of 8 m/ha/year.

Africa

The public sector has a strong influence on economicdevelopment in African countries, including in forestplantations. Although the role of the state is decliningin all aspects of the economy, it is still significant inthe forest sector.

Given the resources at their disposal, most forestinstitutions in sub-Saharan African countries haveexcessive responsibilities, which result in heavyworkloads but diminishing budgets. The generaltrend of changes to government policies relatedto forestry and forest plantations suggest that theinfluence of the public sector in forest plantationdevelopment is likely to decline. On the other hand,change is occurring only slowly and the emergentprivate sector is still very small and insufficientlycapitalized.

The establishment of industrial plantations and socialforestry programs through the active participation ofrural populations appear to be feasible alternatives.Such initiatives can support economic growth andsocial development. Efficient implementation, however,will require improvements in institutional frameworksand legislation, shifting responsibility from governmentto the private sector and allowing local communitiesand civil society a much greater role.

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Productive forest plantations in Africa are composedmostly of eucalypts and pines (1.0 million and 0.7million hectares, respectively). Other popular speciesare teak, rubberwood and other hardwood species.

Forest productivity can be high: a eucalypt plantationin the Republic of the Congo, for example, achievedMAIs of 19 m/year/ha. Plantations ofGmelina arboreain Nigeria and teak in Cte dIvoire have reportedMAIs of 15 m/year/ha and 11 m/year/ha, respectively.African hardwoods such as framir (Terminaliaivorensis) are thought to have lower productivities(less than 10 m/year/ha).

Latin America and the Caribbean

In the past few years the forest sector in Latin Americaand the Caribbean has increased its production andtrade of plantation-based products.

The increased environmental regulation of naturalresources, the enlargement of protected areas, andprotection policies have all affected wood productionin natural forests. The impact on wood supply hasbeen to increase transaction costs and reduce thecompetitiveness of natural forest timber. On theother hand, increased plantation-based productionand consumption have begun to substitute for woodproduced in natural forests.

Administrative and institutional reforms in the 1990shave had a significant effect on the regions forestsector. Many countries combined institutions dealingwith forests and other renewable natural resourcesunder a single administrative system for protectedareas and forests. These systems have the purpose ofimproving coordination, reducing costs and avoidingthe duplication of functions.

During the 1980s and 1990s the forest industry inthe region underwent significant structural adjustmentand consolidation, although the process varied greatly

between countries and industrial segments. Theproduction increase that occurred in the region formost forest products was a result of higher exportsrather than increased domestic consumption.

The most commonly planted tree species in theregion are eucalypts and pines, accounting for 44%and 47%, respectively, of the planted area.

The Latin America and Caribbean region has thehighest forest plantation productivities in the tropics up to 90 m/ha/year (under controlled conditions).The average MAI is 22 m/ha for eucalypts (althoughhigh-yielding clone plantations are achieving MAIs

of 3035 m/ha/year), 18 m/ha/year for acacias,13 m/ha/year for pines, and 9 m/ha/year for teak.

Overall prospects for the tropics

The tropical forest plantation estate is expected tocontinue to expand. Higher forest productivity in thetropics, lower investment and production costs, andthe comparative availability of land (although landavailability will also be a constraint see below), amongother factors, will tend to divert investments in forestplantations from non-tropical to tropical countries.

The investment climate and increasing demand forwood will be the main factors influencing the rate ofplantation investment. To a certain extent this willfavor the Asia-Pacific region, where the investmentclimate is generally good and the demand for woodis increasing rapidly.

In Latin America and the Caribbean, the area of industrialforest plantations will also increase but at a slower pace.In Africa, the industrial forest plantation area is notexpected to increase significantly in the next few years,unless the investment climate there improves significantly.

Innovative financing mechanisms, such as the KyotoProtocols Clean Development Mechanism (CDM)and payments for environmental services, will beimportant in promoting plantations as part of

community development.Plantations will continue to be based on only afew species selected for their comparative advantages(ie productivity, availability of technology, industrialdemand, and other aspects). In view of recentdevelopments, eucalypts are expected to increasetheir share in the medium term.

Land availability and environmental pressures willact to limit forest plantation development, especiallyin the Asia-Pacific region. The sector will increasinglyemphasize productivity gains, thereby reducingthe sectors demand for land and increasing thecompetitiveness of tropical forest plantations in Asia.

The expansion of plantations, and gains in forestproductivity, will help reduce pressure on naturalforests; this is already the focus of the forest policiesadopted by several countries. On the other hand, theincrease in timber supply from plantations (and apossible over-supply) could also create problems for thesector. Private investment in natural forest managementwill tend to decline and other financing sources willbe needed in the future to improve the managementof natural tropical forests.

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ITTO consumer (non-tropical) countries

Forest plantations in ITTO consumer membercountries play a significant role in global woodproduction. Although, the area of planted forests

is impressive, the area of productive plantation forcommercial use is much smaller; only a portionof Chinas total plantation estate, for example,is reported as productive.

Cae tie

The consultant selected three case studies to highlightsuccessful experiences in industrial tropical forestplantations. Case study 1 examined teak plantationsin selected countries, case study 2 dealt with anemerging forest plantation program in northeastern

Brazil, and case study 3 reviewed the production andtrade of rubberwood products.

The Brazilian case study received attention for thepioneer character of the program, which involvesthe integration of industrial forest plantations into amajor regional development effort to promote socialand economic development in one of Brazils poorestregions. Lessons learned from the study include:

theprogramdemonstratesthevalueoftheproactive

involvement of government in promoting publicpolicies through industrial forest plantations; and

Theprogramisbeingconductedunderaprocess

that can be assessed by other interested partiesunder similar conditions.

The foci of the other two case studies, teak andrubberwood, are two major commercial tree speciesthat show the potential value of forest plantationsin the tropics. Teak and rubberwood plantations,particularly in the Asia-Pacific region, have thecapacity to supply a large portion of the marketdemand for timber, especially in the furniture

industry, thereby substituting for hardwoods fromnatural forests. Both species have attracted theattention of investors in many tropical countries:teak plantations now cover an area of 5.7 millionhectares worldwide and rubberwood plantationscover 6.2 million hectares. Prospects are good forboth species, due at least in part to:

publicpoliciesthatprovideincentivesfor

plantation investment, mainly in Asia-Pacific;

growingprivateinvestmentinthosespecies;

thelikelihoodofincreasedrestrictionsonthe

harvesting of natural forests;

increasingmarketdemandforteak;and

thepreferenceofanumberofforest-based

industries for plantation timber.

Opportnitie for intrial foret

plantation

Main factors affecting investment

in industrial forest plantations

The Inter-American Development Bank recentlycarried out a study on the attractiveness of forestinvestments in Latin America and the Caribbean.It developed what it called the Forest Investment

Attractiveness Index to measure the climate forinvestments in sustainable forest businesses, takinginto account supra-, inter- and intra-sectoral factors.

A preliminary assessment indicated that theinvestment climate for establishing industrial forestplantations is much more favorable in the tropicalAsia-Pacific region than in the Latin America andCaribbean region. Tropical Africa has a generallyweak climate for forest investment. Supra-sectoralfactors are essential for understanding differencesamong the three regions in their business climates.

Overcoming the limitations imposed by some supra-sectoral factors, particularly those related to politicalstability and governmental transparency, would bea major step for most African countries. Addressinginter-sectoral factors such as the development ofadequate economic and social infrastructure, judicialprocesses and land tenure is also important, particularlyin tropical Africa and Latin America and the Caribbean.

Constraints to industrial forest plantation

development

Industrial forest plantation development faces a numberof constraints; these vary among ITTO producercountries but there are also many commonalities.Differences relate mainly to the importance of forestplantations to national economies, the size of theforest resource, the involvement and strength of theprivate sector, and the support received frominternational organizations.

The major constraints for industrial forest plantationdevelopment in tropical countries identified by theconsultants are:

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1) lack of information on the current status of

commercial tropical plantations: the generallack of reliable information on a number offorest-related issues contributes to a lack oftransparency and reduces the likelihood offavorable investment decisions;

2) land tenure: land tenure and, in particular,the absence of well-defined property rights havebeen key obstacles to attracting investment inindustrial forest plantations in ITTO producercountries. The resolution of conflicts over landtenure rights and improved law enforcementare prerequisites for achieving industrial forestplantation development;

3) lack of capacity: low capacity in the technical and

organizational management of forest plantationsand a lack of dialogue between the public andprivate sectors hinders efficient and effectiveplantation development;

4) insufficient research and development: despitesignificant recent achievements in the establishmentof forest plantations in the tropics there is stillmuch to be done in basic and applied research toensure that plantations are sustainable, productiveand cost-effective;

5) lack of financing mechanisms: few tropical

countries encourage forest plantations throughsubsidies or beneficial financing schemes. Publicfunds are still limited and private financing isjust emerging; and

6) competition for land: worldwide, the publicscrutiny of land ownership and land use hasbecome increasingly intense. Industrial forestplantations compete for land with agricultureand cattle-raising in most tropical countries,especially those with large populations. Thestrong competition for land affects land prices

and constitutes a barrier to forest business.

Opportunities

The study identified a number of likely developmentsin the commercial forest plantation sector at theregional and, to some extent, country levels.

Theindustrialforestplantationareawillincrease

rapidly in the next few years as a way of ensuringthere is an adequate wood supply for the globalforest industry. Plantation rates will be high insome Asia-Pacific countries, notably China, India,Indonesia and Malaysia, where government

incentives (subsidies, grants, tax concessions,differential fees, cost-sharing arrangements, andothers) are available. In Latin America and theCaribbean the area of industrial forest plantationswill also increase, but at a slower pace.

Thereisaprevailingperceptionthatthesupply

of timber from natural forests will graduallydecrease and production costs will grow. Thiswill contribute to the expansion of the forestplantation estate in all three tropical regions.

InmosttropicalcountriestheCDMandother

mechanisms for payments for environmentalservices are likely to play an increasing rolein plantation development. Access to thesefinancing sources for forest plantations is very

limited at the moment but could be enhanced. Inmanypoortropicalcountries,particularlyin

Africa, forest plantation programs will increasinglybe linked to poverty alleviation, communitydevelopment and the recovery of degraded land.These programs are likely to grow, contributingto an increase in plantation area, but the rate ofexpansion will depend on the support providedby international organizations and the financingmade available.

InLatinAmericaandtheCaribbeanandsome

Asia-Pacific countries, the lack of large contiguousland areas and environmental restrictions on landuse will mean that the expansion of industrialplantation area will occur mainly on small andmedium-sized properties. The forest outgrowerprograms promoted by the pulp-and-paper industryare likely to intensify and will help consolidateforestry activities on small rural properties. Thesepartnership programs are important in LatinAmerican countries, notably Brazil, and will alsoincrease in the Asia-Pacific region.

Theprivatesectorwillcontinuetobethemain

investor in forest plantations worldwide, particularlyin Asia-Pacific and Latin America and the Caribbean.

Domesticdirectinvestmentisthemainsource

of financing for industrial forest plantations, withforeign direct investments making only a minorcontribution. Timber investment managementorganizations have emerged recently, mainly inthe Latin America and Caribbean and Asia-Pacificregions, and are helping to finance industrialplantations.

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Inmostnon-tropicalcountries,inboththe

northern and southern hemispheres, plantationproductivity is lower than in tropical countriesand land is almost always more costly. Thisencourages investors to seek locations wherereturns might be higher.

ITTO trategie for promoting intrial

foret plantation evelopment

In general, this study validates ITTO plantation-related goals and reinforces the importance of relatedactions set out in the ITTO Yokohama Action Plan(20022006).

The factors restricting industrial forest plantationdevelopment associated with Goal 1 of ITTOs

Yokohama Action Plan (Support activities to securethe tropical timber resource base) include: a lackof attractiveness to businesses resulting from a poorinvestment climate; the low price of illegal products;a lack of innovative incentives mechanisms and thecomplexity, in some countries, of existing legislation;and land-use restrictions.

On the other hand, the factors restricting industrialforest plantation development associated with Goal 2of the Yokohama Action Plan (Promoting sustainablemanagement of tropical forest resources) can be

summarized as: the cost and complexity of forestcertification; the lack of information on forestplantations (especially sustainable production capacityfor policy definition and investors); the dissociationof community forest plantations from forest productmarkets; in some regions the loss of planted forest areasdue to, among other things, fire; and a lack of adequateknowledge on silviculture and forest management.

A favorable investment climate is fundamental to theexpansion of forest plantations, which is dependenton a combination of supra-, inter- and intra-sectoral

factors. ITTO should concentrate its efforts mainlyon addressing intra-sectoral factors (see below).

Strategic country-level actions supported by ITTO

ITTOshouldassistgovernmentsto:

Development/improvement of forest policies and

legislation

1) Create enabling policies and enhance politicalcommitment to forest plantation development;undertake land-use planning; combat illegal

logging and illegal timber trade; create

adequate incentive mechanisms and a conduciveinvestment climate; secure property rights forforest landowners and producers; and promoteinstitutional development, considering that:

in countries with a competitive advantagein industrial plantations, forest policiesand national strategies should includeindustrial plantations as a major area ofintervention, targeting both the meetingof domestic needs and the developmentof export-oriented production. This wouldrequire strategic planning supported byanalytical studies as well as adequatemechanisms in land allocation and tenure,training and extension, research anddevelopment and financing incentives

in less competitive countries, institutionalcapabilities will need to be upgraded tointegrate forest plantations within thenational planning system. This will requireanalytical studies to clarify the role of forestplantations, including their contributionsto economic growth, poverty alleviation,and environment conservation.

2) Reduce transaction costs by simplifying theadministrative procedures for the establishment

of plantation projects and the harvesting ofplantation timber (eg by revising forest laws,establishing clearing-house mechanisms, andother actions).

3) Develop innovative incentives and financingmechanisms for forest plantations, includingthose under the CDM, other carbon financinginitiatives, and avoided deforestation. Optionsinclude payments for other environmentalservices and special forest plantation trustfunds and securities.

4) Revise the legal framework related to land andnatural resource use by identifying bottlenecksthat prevent the adequate implementation offorest plantation programs. Legal reformswould also help to remove restrictive aspectsof current laws and the judiciary system linkedto the risks faced by long-term investments.

Definition and allocation of land for forest plantations

5) Identify priority zones for forest plantations(land and resource macro-zoning).

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6) Support forest plantation programs byenhancing national capacities for land-useplanning and the allocation of forest plantationareas in accordance with best practice.

Capacity-building

7) Promote and support research and developmentthrough concerted action among nationalgovernmental and private-sector institutions.

8) Develop ways of communicating relevantinformation and findings from research onplantation forests to stakeholders, includingthrough specialist publications.

9) Build up human resource capacity throughprograms for improving plantation-related

skills (professional, technical and vocational).10) Improve the national services such as

extension, advisory and technical assistance needed for the establishment and expansionof industrial forest plantations.

ITTOshouldassistorganizationsofsmallholders

and communities to:

11) Facilitate interactions between government,the private sector and NGOs throughcapacity-building in negotiation and

conflict-resolution skills.12) Disseminate information about the importance

of forest plantations and their impacts onthe conservation of natural forests.

13) Support the organization of smallholders andcommunities interested in plantation development.

14) Build the capacity of stakeholders to participatein plantation development by conveningworkshops and providing specialized trainingcourses.

ITTOshouldassisttheprivatesectorto:

15) Support the adoption, by private-sectororganizations, of proper planning, includingin regard to financial aspects and risk assessment,taking into account the importance of land-useplanning, tenure rights and national guidelinesand regulations for forest utilization.

16) Disseminate to private-sector organizationsup-to-date information on the applicationof relevant international standards and bestpractices codes.

17) Disseminate information related to the role offorest plantations in climate change mitigation,soil and water conservation, and biodiversityconservation, and their direct contributionsto economic and social development.

18) Facilitate cooperation between the corporatesector, communities and smallholders throughappropriate types of partnerships andoutgrower schemes.

19) Through national and international fora,facilitate the active exchange of technicaland scientific information related to forestplantations.

20) Support innovative technologies that improveenvironmental performance (eg reduced-

impact logging).

Strategic actions to be implemented by ITTO

ITTO should:

Information base on timber plantations

21) Improve existing ITTO forest databases byincluding adequate information on industrialplantations. This will involve providing supportto producer member countries to developtheir systems. ITTO should also disseminate

information through its Market InformationService and other ITTO communicationvehicles.

22) Collect the information (eg through nationaland regional forest inventories, etc) on forestplantation resources such as planted area,tree species, distribution and sustainableproduction capacity necessary for decision-making to promote forest planting and timberutilization.

23) Share information, knowledge and technology

through cooperation with countries andother organizations (eg disseminate technicalinformation on plantation forests, includingforest planting methods and management,based on the lessons learned from successfuland unsuccessful plantation experiences).

24) Communicate information at the nationaland international levels through nationalworkshops, seminars and other events, andpublications using various media (printedand electronic).

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International and regional forums and seminars

25) Organize international and regional forums toexchange experiences in financing mechanismsand the development of strategies for forest

plantations in the tropics, taking into accountrecent developments in the United NationsFramework Convention on Climatic Change,the CDM, etc. ITTO should provide specificforums for small and medium-sized investorsrelated to potential forest development ventures,especially in emerging and developingeconomies where access to financial resourcesis often restricted to large corporations.

Policy development to improve the investment

climate for forest plantations

26) Support the implementation of nationalprograms to improve the business climatefor sustainable forest investment.

27) Develop national strategies to improve theattractiveness of plantation investment(domestic/foreign).

28) Promote regional initiatives for engagingnational institutions and professional,public and civil-society organizations in theidentification of forest development projects

that can be presented to investment institutionsand international development cooperationand aid agencies. This could be done, forexample, by coordinating the provisionof assistance with regional entities such asCorporacin Andina de Fomento, multilateraland regional development financingorganizations, and others.

Human resource development and institutional

strengthening

29) Support the development of human

resources in topics such as: themanagementofgeneticmaterial

nurserymeasures

species-specificsilviculture

appropriateharvestingtechnologies

firemanagement

pestanddiseasecontrol.

30) Promote the transfer of technology amongnational research institutions by facilitatingdialogue and funding fellowships for specifictraining and the investigation of technical

issues such as species selection, seed supply,nursery operations, plantation establishmentand management, and other aspects.

31) Develop guidelines for the participatory

formulation of plantation projects to be usedby stakeholders in producer member countriesin order to facilitate access to resources andtechnical assistance.

Guidance on the establishment and sustainable

management of planted tropical forests

32) Review the ITTO Guidelines for theestablishment and sustainable management

of planted tropical forests.

Other strategic actions

Although, in general, ITTO actions do nottarget government decisions directly associatedwith extra-sectoral factors (ie supra- and inter-sectoral factors), given ITTOs intergovernmentalnature there are a number of actions it can taketo address them. ITTO should:

Macroeconomic policies (supra-sectoral)

33) International trade:Continue to undertakeactions related to market constraints, includingon tariff and non-tariff trade barriers and

policies that address illegal logging and trade.34) Government transparency:Contribute to

international efforts that might, in the longrun, result in the adoption of improved planningpractices and a higher degree of participationby civil society. A lack of transparency canhave a detrimental effect on the developmentof the forest plantation sector.

35) Fiscal benefits in the economic environments oftropical countries:Support analytical work toassist governments in adjusting their fiscal

policies, such as by improving taxationefficiency in the forest sector.

Other related economic sectors (inter-sectoral)

36) Carry out analytical studies on the economicinstruments applied in agriculture to clarify theirimpact on the rehabilitation of marginal landsthrough forest plantations, and on land values.

37) Review experiences in other sectors relatedto technical education and training andfinancing mechanisms and determine their

applicability to forest plantation development.

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1 INTROduCTION

economic and social aspects and their overall contribution

to sustainable development. While the study focuseson forest plantations for timber production, it alsotakes into account secondary products such as firewoodand wood pulp that might contribute to economicsuccess. The report highlights lessons learned inselected countries through their experiences withcommercial forest plantation development. Potentialstrategies to assist ITTO producer countries in thedevelopment of commercial plantations are alsopresented.

Chapter 2 sets out the methodological approach taken

in the study, as well as its scope (ie the characterizationof products and species), geographical coverage, andassumptions. Chapter 3 presents an overview ofcommercial forest plantations, including the mostcurrent statistics on tropical forest plantation areaand distribution in Asia and the Pacific, Africa,and Latin America and the Caribbean. Trends and perspectives associated with the developmentof commercial forest plantations in those regionsare also discussed.

Chapter 4 reviews the status of commercial forest

plantations (both private-sector and community-based) in four selected ITTO producer countriesper region and three consumer countries.

Chapter 5 presents three case studies on commercialtropical plantations:

1) successful plantations, focusing on teak plantationsin the tropics (mainly in Africa and Asia-Pacific);

2) emerging plantation programs, detailing the structureand objectives of the recently implemented ForestDevelopment Program of Piau State (Brazil),

which is promoting eucalypt plantations forcommercial and protection purposes; and

3) the successful marketing of tropical plantation

timber, focusing on rubber plantations and thecommercialization of rubberwood, primarily inthe Asia-Pacific region.

Chapter 6 presents an analysis of the key factors thathave influenced the success or failure of commercialplantations in selected ITTO producer and consumer

At its 35th and 36th sessions, held in November 2003

in Yokohama, Japan, and July 2004 in Interlaken,Switzerland, respectively, the International TropicalTimber Council, the governing body of the InternationalTropical Timber Organization (ITTO), decided toimplement the following two strategic policy activities:

1) encourage private-sector investment inindustrial forest plantation in the tropics; and

2) conduct a market study on tropical forestplantation timber products.

To take advantage of potential synergies between the

two activities and to maximize their cost-effectiveness,ITTOs Executive Director invited submissions fortheir joint implementation, although separate reportswere to be prepared.

In September 2005, STCP Engenharia de ProjetosLtda submitted a proposal to the ITTO Secretariatfor a global study on tropical forest plantations. Afterevaluating all submitted proposals, in January 2006ITTO informed STCP that it had been selectedto undertake the work. Following the preparationand discussion of a study work plan with ITTO

in February 2006, STCP took the necessary stepsto implement the work plan.

st objective

The purpose of the study was to analyse and reporton the key factors that determine the success or failureof commercial plantations in selected ITTO producerand consumer countries. Aspects to be examinedincluded government policies, institutional factors,land tenure systems, the economics of productionand returns on investment, community benefits and

community involvement, ecological aspects, andtechnical issues. The specific objectives of the studyare given in Chapter 2.

Otpt

This report presents the results of the study onencouraging private-sector investment in industrialforest plantations in the tropics. It assesses the successof forest plantations, taking into account ecological,

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countries. A perspective is provided on the certificationof plantation timber, and the constraints to commercialplantation development in ITTO producer countriesare analysed.

Taking into account the ITTO Guidelines for theEstablishment and Sustainable Management of Planted

Tropical Forestsand the ITTO Yokohama Action

Plan, the document recommends, in Chapter 7, thestrategies that ITTO could adopt to assist producercountries to promote private-sector investment insustainable commercial plantation development.

Annexes to the document include the complete listof contacted institutions and persons and the modelquestionnaires used for data collection.

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2 METhOdOLOGy

to consult with local authorities and private-sector

and other local experts, especially in countriesand regions with less-consistent information. Thefinal decision on the countries to be visited wasmade after consultation with the ITTO Secretariatand as set out in the work plan. A total of elevencountries were visited (Table 2.1); and

developedandappliedaquestionnaire,which

was completed by selected stakeholders coveringmost tropical countries.

STCP also made use of peer review in order to ensurethe quality of the final report. A preliminary report of

the study was presented to the International TropicalTimber Councils Committee on Reforestation andForest Management and suggestions by delegateswere taken into account.

More detail on the actions taken to reduce risks andimprove data quality for this study are presented below.

Table 2.1 List of ITTO producer countries visited

during the study

asi nh pcic aric

lin amricn h Crin

Idosi rpubiof cogo

Bzi

Mysi Gbo eudo

Tid G Pu

nigi Vzu

specific objective

The specific objectives of the study were to:

provide information on commercial plantationsin ITTO tropical member countries using existingsources such as ITTO and FAO as well as writtencontributions from ITTO member countries;

review the status of commercial plantationsin selected ITTO producer countries and in twoconsumer countries, including private-sectorplantations and those involving communityparticipation;

Based on the terms of reference set out by ITTO and

taking into consideration the time and resourcesavailable, this study was based largely on secondaryinformation, supplemented by primary data collectedthrough field visits to selected countries and througha questionnaire-based survey completed by variousstakeholders in the regions of interest.

Secondary sources included existing technical reportsand publications, the web pages of a large number ofinstitutions linked to the forestry sectors of tropicalcountries, STCPs own database and knowledge base,and official data from governments, international

organizations and others.An initial assessment of data sources indicated thatwhile information on forest plantations in the tropicsand on markets for tropical plantation timberproducts was generally available, the quality of theinformation was highly variable and often poor.

The three major sources of secondary information onforest plantations used in this study were: i) Status ofTropical Forest Management 2005(ITTO 2006a, referredto here as SFM Tropics); ii) State of the Worlds Forests(referred to hereafter as SOFO, FAO 2006a); and

iii) the FAO Forest Resources Assessment (referred tohereafter as FRA), most recently for 2005 (FAO 2006b).

SFM Tropicspresents an overview of the status offorest management in the tropics, including analysis,conclusions and recommendations as well as profilesof ITTO producer member countries organized byregion (Asia and the Pacific, Africa, and Latin Americaand the Caribbean). Among other things it canvassesplanted forests, institutional arrangements, forestcertification, and timber production and trade, in eachcountry. FRA and SOFO also constitute a relatively

good source of global information on forests; theywere used extensively in this study for identifying andconsolidating statistics on forest plantation area anddistribution.

To mitigate the risks associated with the use of poorand often inconsistent secondary information, STCP:

assignedaworkteamwithconsiderableexperience

in and knowledge of forest plantation issuesworldwide to carry out field surveys in selectedcountries (see geographic coverage below) and

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analyze the key factors in the success or failure

of commercial plantations in selected ITTOproducer and consumer countries, includinggovernment policies, institutional factors, landtenure systems, the economics of productionand returns on investment, community benefitsand involvement, ecological aspects and technicalissues, as well as lessons that could be learnedfrom other countries with successful commercialplantations;

analyze common constraints to commercial

plantation developmentin ITTO producercountries; and

recommend strategies that ITTO could adopt

to assist producer countries in promoting

private-sector investment in commercial plantationdevelopment that supports sustainable forestrydevelopment.

In its analysis of key factors involved in the successor failure of commercial tropical timber plantationsin selected ITTO producer and consumer countries,STCP took advantage of its experience gained inimplementing the 2005 study on the forest-sectorinvestment climate and the development of theInvestment Index for the Forest Sector for theInter-American Development Bank.

scope of or

Characterization of products and species

This study covers tropical timberspecies as definedin the International Tropical Timber Agreement, 1994:

non-conifer tropical wood for industrial uses, which growsor is produced in the countries situated between theTropic of Cancer and Tropic of Capricorn. The termcovers logs, sawnwood, veneer sheets and plywood(UNCTAD 1994).

STCP found it necessary, however, to broaden thescope of this definition so as to ensure comprehensivecoverage of the factors influencing the dynamics oftropical forest plantations. Since a number of countrieshave both tropical and non-tropical zones, STCP

decided to include the entire territories of all countriesthat were mostly located within the tropics. Thesewere: Bangladesh, Botswana, Brazil, India, Paraguay,Madagascar, Mali, Mauritania, Mexico, Mozambique,Myanmar, Namibia and Saudi Arabia. Australia andChina, which both have territory in the tropics, wereclassified as non-tropical because they are classifiedby ITTO as consumer rather than producer members.Table 2.2 shows the classification of tropical andnon-tropical countries for the purpose of this study,and Figure 2.1 depicts this graphically.

An adjustment was made to the definition to includeplanted coniferous forests, which in some tropicalcountries (particularly Brazil, Colombia and Venezuela)are quite significant. Such an adjustment wasimportant to account for market interactions betweenconiferous and broadleaved species, such as combinedplywood (which uses both pine and broadleaved speciesas raw materials), tropical sawnwood pine timber(which can substitute sawnwood hardwood in someapplications), and reconstituted wood panels (in whichboth softwoods and hardwoods are used as raw materialsand the products are not usually differentiated inthe market place).

Moreover, all tropical plantations were consideredto be part of the estate if they were growing in thecountries located between the Tropic of Cancer andTropic of Capricorn, regardless of whether they werenative to the tropics. In view of the importanceof the pulp-and-paper sector in improving thecompetitiveness of plantations (particularly throughthe utilization of small-diameter logs), pulpwoodwas added to the products covered in the study.

Geographic coverage

The study considers all tropical countries, althoughits focus is on ITTO producer members. Forestplantations and timber markets in non-tropical

regions also affect the trade in tropical timber.The study therefore includes a global overviewof plantation forests and industrial developmentsoutside the tropics.

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Table 2.2 Countries defined as tropical for the purposes of the study

aSIa aNd tHe paCIfIC

Bgds Philippines cook Isds not Mi Isds

Bui Dussm Sudi abi Fiji PuCambodia Sigpo F Poysi Papua New Guinea

India Si lk Gum Smo

Indonesia Thailand Kiibti Soomo Isds

lo Pops Dm rp est Timo Ms Isds Tog

Malaysia Uitd ab emits Miosi Vanuatu

Mdivs Vit nm nuu

Myanmar Ym nw cdoi

Om ami Smo niu

afRICaago Dem. Rep. Of the Congo Mdgs S Tom d Piip

Bi Djibouti Mwi Sg

Botsw equtoi Gui Mi Sys

Buki Fso eit Muiti Si lo

Buudi etiopi Muitius Somi

Cameroon Gbo Mozmbiqu Sud

cp Vd Gmbi nmibi Togo

ct afi rpubi G nig Ugd

cd Gui Nigeria Uitd rpubi of Tzi

comoos Gui-Bissu ruio Zmbi

Congo Brazzaville Ky rwd Zimbbw

Cte dIvoire Liberia Sit h

latIN-aMeRICa & CaRIbbeaN

Bolivia atigu d Bbud e Svdo ntds atis

Brazil Bms Gd nigu

Colombia Bbdos Gudoup Panama

Ecuador Biz Guatemala Puto rio

F Gui Bitis Vigi Isds hiti Sit Kitts d nvis

Guyana cym Isds Honduras Sit luiPguy cost ri Jmi Sit Vit d

Gdis

Peru cub Mtiiqu Trinidad Tobago

Suriname Domii Mexico Uitd Stts Vigi Isds

Venezuela Domii rpubi Motst

Countries in italics are ITTO producer members.

Source: ITTO, adapted by STCP.

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Figure 2.1 Distribution of tropical and non-tropical countries for the purpose of the study

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Metoolog

In commissioning two studies together (see Chapter1), ITTO expected that information collection andanalysis for both would be conducted concurrently,

with considerable benefits in terms of efficiency andcost-effectiveness.

Figure 2.2 presents a schematic view of the approachtaken by STCP. It shows that the study wasimplemented in three phases: i) inception; ii) data/information collection, field survey and analysis;and iii) reporting.

Phase 1: Inception

The inception phase, which began in the third weekof January 2006, included: 1) internal planning; 2)

briefing and consultation with the ITTO Secretariat;and 3) the preparation of a detailed work plan (whichserved both studies). In mid-February 2006 STCPpresented the draft work plan to the Secretariat andfinalized the plan after taking feedback into account.

Phase 2: Data collection, field survey and

analysis

In the second phase, efforts were concentrated on thecollection and analysis of primary and secondary data.Data collection involved:

thedesktopreviewofsecondaryinformation;

visitstoselectedcountriesandconsultationswith

officials, experts and other stakeholders; and

dispatchofquestionnairestostakeholdersina

number of tropical countries.

The latter two are described in more detail below.

Field surveys

To carry out the field surveys, STCP personnel visitedselected countries in the three tropical regions. Africa

was divided into English-speaking and French-speaking countries.

Prior to the visits, a complete checklist of informationand data to be gathered from stakeholders in eachcountry was prepared. This ensured that similarprocedures of data collection were applied in eachcountry.

The ITTO Secretariat provided a list of ITTO officialcontact points to be consulted. In each country anumber of relevant organizations were also identified

prior to the visits.

The following actions were taken during the countryfield surveys:

reviewofforestplantationandforestproducts

data, at the country level, to update and

improve information relevant to the study; and collectionofinformationatthecountrylevel

and, where possible, the exchange of views withstakeholders to facilitate the elaboration of threecase studies covering:

a. successful plantations

b. emerging plantation programs

c. successful marketing of tropical plantationtimber.

During the field visits STCP personnel were able tocontact a diversified group of stakeholders. Annex 1provides a complete list of institutions and personnelcontacted during field visits.

Questionnaires

An important complement and counter-check to thesecondary information gathered during the study wasthe preparation and circulation of questionnaires torelevant stakeholders in over 50 tropical countries.

The draft questionnaires were validated by the STCP

team, including those directly involved in the fieldsurveys, and sent to selected stakeholders by email.Separate questionnaires were developed for thefollowing stakeholder groups: private companiesand investors; government agencies and public bodies;financing institutions; civil-society organizations;and certification bodies. Annex 2 presents samplesof the questionnaires submitted to these groups.

Over 900 stakeholders were contacted duringthe survey process, with sequential follow-ups fornon-respondents.

Analysis

Three aspects related to plantation sustainabilitywere also considered in the study:

1) economic aspects;

2) environmental aspects; and

3) social/community-related aspects.

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Figure 2.2 Study approach

OUTPUT 1

DATA AND INFORMATION

COLLECTION

Review of information:

Investments in tropical

industry plantation

case studies

questionnaire

PLANTATION

SUSTAINABILITY ASPECTS

economical aspects

environmental aspects

social aspects

REPORTING PHASE

ITTO NEWSLETTER

ARTICLES

ITTO POLICY WORK

INVESTMENT

CLIMATE FACTORS

PRELIMINARY

INTERNAL PLANNING

BRIEFING AND CONSULTATION

ITTO HEADQUARTERS (FEB 2006)

DETAILED WORK PLAN

COUNTRY FIELD SURVEY

Update/improve information

for three case studies:

successful plantation emerging

plantation programs

successful marketing of

plantation tropical timbers

CRITICAL ANALYSIS

Key factors in success and failure

ELEMENTS FOR THE

ITTO STRATEGY

Support country initiatives

Promote private-sector investments

DRAFT REPORTS

Plantations in the Tropics

PRESENTATIONS

(NOV2006)

CEM & CRF

FINAL REPORTS

Plantation in the Tropics

Market Plantation Timber

OUTPUT 2

OUTPUT 3

OUTPUT 4

OUTPUT 5

DATA/INFORMATION

COLLECTION AND

ANALYSIS PHASE

INCEPTION PHASE

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The information collected from secondary sourcesand field surveys, as well as lessons learned from thecase studies, were critically analysed in order to identifykey factors in the success or failure of tropicalplantations. To facilitate the identification of thesefactors, the approach developed by STCP for theInterAmerican Development Bank on the analysisof factors affecting investments in sustainable forestbusinesses was used.

The analysis also considered the need to definekey elements of an ITTO strategy related to forestplantations in the tropics and the marketing oftropical plantation timber products. These wereidentified in two broad areas:

1) support for country initiatives on forest

plantations; and2) the promotion of private-sector investment.

In the process of defining elements for the ITTOstrategy on plantations STCP took into considerationITTOs objectives as specified in the ITTA, 1994,as well as relevant ITTO policy work. STCP basedits recommendations on its findings and analysis aswell as the inputs of stakeholders received duringfield visits.

Phase 3: Reporting

The last phase of the work was the preparation ofthe final draft report to be submitted to the ITTOSecretariat for its consideration. The report was

revised by the consultants senior project advisorprior to submission.

Two other products were prepared: a presentation forthe 34th session of the Committee on Reforestationand Forest Management, held in November 2006in Yokohama, Japan, and an article with a summaryof the study findings to be published in the ITTOnewsletter, the Tropical Forest Update.

Following comments received from the ITTOSecretariat and members of the Committee, the finalversion of the report was prepared and submitted topeer review prior to delivery to the ITTO Secretariat.

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3 OVERVIEw OF FOREsT PLANTATIONs

intropicalAfricatheFRAestimateislargerthan

that of SOFO. The largest discrepancy was forSudan: FRA estimated 5.4 million hectares offorest plantation while SOFO reported only641,000 hectares. In FRA, a large part of the areaclassified as forest plantation was semi-naturalforest, which in SOFO was not considered to beforest plantation. Substantial differences were alsofound in the data for Nigeria (344,000 hectares),Ethiopia (275,000 hectares) and Cte dIvoire(153,000 hectares);

comparedtootherregions,thedifferenceobserved

between the two sources for Latin America andthe Caribbean is rather small. Discrepancies aremost significant for Mexico (791,000 hectares),Peru (640,000 hectares), Venezuela (863,000hectares) and Costa Rica (178,000 hectares).FRA did not report on forest plantations forcountries such as Peru, Venezuela and CostaRica. Other major differences are found in theestimates for Cuba (222,000 hectares) andColombia (187,000 hectares); and

FRA considered two types of forest plantations: (i)

productive forests (forests and other wooded lands)with areas larger than 0.5 hectares and wider than20 meters; and (ii) protective forests.1 This separationis difficult to apply in practice and may be a source oferror; it probably accounts for many of the discrepanciesbetween the two reports. SOFO only presented the

1 FaO (2005) dfid podutiv pttio s Fost/ot wooddd of itodud spis d i som ss tiv spis, stbisdtoug ptig o sdig, miy fo podutio of wood o owoodgoods It dfid pottiv pttio s: Fost/ot woodd dof tiv o itodud spis, stbisd toug ptig o sdigmiy fo povisio of svis

This chapter provides an overview of forest plantations

worldwide, presenting country-level information onarea and distribution and an assessment of major trends.It is based on secondary data and covers tropicalcountries (as defined in Chapter 2) and non-tropicalcountries separately.

The data available on world forest plantation area varyaccording to source. The main reasons for discrepanciesbetween sources are related to: differences in thedefinition and classification of forest plantations;imprecise data reported for existing forest plantations;and different methods for measuring tree mortality

and classifying forest regeneration.In some cases, even data from the same institutionare inconsistent. Table 3.1, for example, shows thedifferences found in contemporary estimates of totaltropical forest plantation area in SOFO (FAO 2006a)and FRA 2005(FAO 2006b).

The estimate derived from SOFO is almost doublethat derived from FRA. Several comments can bemade on this discrepancy:

intheAsia-Pacificregion,thelargestdiscrepancies

are found in data on India, Indonesia, Thailandand Viet Nam. In all cases, SOFOreported alarger area compared to FRA (an additional29.3 million hectares for India, 6.5 millionhectares for Indonesia, 1.8 million hectares forThailand, and 984,000 hectares for Viet Nam).These differences were mostly due to differentdefinitions of semi-natural forest areas andforest plant

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