Working Paper
Tree Plantations in the Philippines and Thailand

Economic, Social and Environmental Evaluation

The area of forest plantations in the tropics has increased for many reasons, but not the least as a result of natural forest depletion. Although forest plantations cannot qualitatively substitute the timber grown in natural forests, their importance in global forestry is steadily increasing. At the same time a heated public debate has been growing with them, focusing largely on the perceived negative environmental and social impacts of large-scale industrial plantations. This research report first discusses tropical plantations in global forestry. It emphasizes that tree plantations presently include much a wider range of categories, purposes, species variety and management forms than is commonly perceived. The study states that although industrial forest plantations are mainly established solely for economic reasons, private farm-forestry and governmental plantations more often have a variety of reasons for establishment. These reasons include expectations for positive social and environmental impacts of forest plantations, e.g. increased household security and soil conservation. Nevertheless the environmental and social impacts of plantations deserve much concern and the second part of the study widely reviews environmental and social but also economic impacts of plantations, all of which can be either negative or positive. One of the major problems in developing plantation forestry has been that the profitability analysis of plantations has based only on the economic criteria. Although financial profitability can be regarded as the most important single evaluation criteria for forest plantations in the tropics, the negative and positive social and environmental impacts should also be attempted to be included into the analysis. The focus of the empirical part of the work, therefore, has been to study to what extent it presently is possible to monetize the varying impacts of tree plantations and incorporate them into the "multilevel" profitability analysis. In two case study countries, Thailand and the Philippines, the profitability of industrial, community based and private reforestation was assessed for two most commonly used tree species in reforestation. The profitability assessments were aimed to be carried out at four different levels: based on comparisons between costs and benefits in market prices (financial profitability), economic efficiency prices (economic profitability), economic efficiency prices with the distributional weigh assessments (socio-economic profitability), and finally with including monetary valuation of environmental impacts into the economic analysis (environmental-economic profitability). For the environmental-economic profitability, the study evaluated the economic costs of transpiration and nutrient loss in harvesting, and benefits in erosion control and carbon sequestration. The results of the two case studies indicated that the economic profitability of reforestation is considerably higher than the financial profitability both in Thailand and the Philippines. It also became evident that the environmental-economic profitability was highly dependent on the environmental impact and valuation assessments; in this study, the environmental-economic valuation improved the economic profitability of reforestation. A conclusion derived from the socio-economic analysis was that the return to labour per hectare is very low in mechanized reforestation. The empirical basis of including environmental and social impacts into traditional profitability analysis of tree plantations requires much improvement and the work done still carries a character of methodological experiments. Nevertheless a conclusion is evident: if the social and environmental costs and benefits, evaluated in monetary terms, could properly be included into the solid framework of economic analysis, that would further encourage for environmentally and socially sensitive management practices in plantation forest development.