11. The development of forest plantations in Thailand - Narong Mahannop^[131]

INTRODUCTION

Thailand covers an area of 51.3 million ha and shares borders with Myanmar, Lao PDR, Cambodia and Malaysia. Administratively, Thailand is divided into five regions, comprising the Northern, Northeastern, Central, Eastern and Southern regions. The country is further divided into 76 provinces (chang wad) and 716 districts (amphur). Since 1931, the capital has been Bangkok (Krung Thep Maha Nakhon).

The country’s climate is influenced by the southwestern and northeastern monsoons. There are three distinct seasons, namely the wet season from late May to late November, the cold season from early December to late February and the dry season from March to May. Average temperatures range from 25.0-28.5×C and annual rainfall is 600-3 800 mm.

The population of Thailand is approximately 62 million. Population growth was above three percent during the 1960s, slowed to 1.8 percent during the 1980s and dropped to below one percent in recent years. The average population density of Thailand is about 121 persons/km² and about 20 percent of the population lived in urban areas in 1999.

In 2001, the Gross National Income per capita was US$1 930. The value of exports decreased from US$68.0 billion in 2000 to US$63.2 billion in 2001, while the value of imports decreased from US$62.4 billion to US$60.7 billion. The main source of revenue is from the tourism sector, estimated at US$4.4 million in 2001. Between 1970 and 1999, the contribution of the forestry sector to the Gross Domestic Product (GDP) declined markedly at first in relative terms and since the imposition of the logging ban in 1989 also in absolute terms. The relative importance of agriculture decreased from 28.9 percent in 1970 to 11.5 percent in 1999 (Table 1).^[132]

Table 1: Contribution of forestry and other economic sectors to the

Sources:

a) Office of National Economic and Social Development Committee (2000);
b) Office of Agricultural Economics (2000)

Role of the forestry sector in the economy

Significant periods in the development of the forestry sector

Thailand’s forestry sector has developed in four distinct stages:

• Early exploitation phase: Logging for commercial purposes began with the signing of the Bowring Treaty in 1855. In the following years, Thailand entered a number of trade agreements with France and the U.S.A. in 1856, Denmark in 1858, Portugal in 1859, Holland in 1860, Prussia in 1862 and Norway and Sweden in 1868. Teak was in high demand, and the governor of each municipality authorized logging without any involvement by the central government until the Royal Forest Department (RFD) was established in 1896. The RFD had the mandate to regulate forest exploitation, particularly of the teak forests of the north.

• Forest production and management phase: From the mid-1890s to the early 1960s, forestry contributed significantly to Thailand’s economic development. Forest production generated foreign exchange, government revenue and contributed to the opening of the frontier for agricultural development. Forest management was not guided by a formal forest policy, but was generally supervised by RFD officials. The country was an absolute monarchy until 1932. With the democratic reforms of the 1930s, politicians became closely linked to forest management. Their main efforts were directed at converting natural forests to agricultural land for the rural people. The RFD, as the government agency responsible, attempted to regulate forest production by enacting a number of important forestry laws and training foresters who were to enforce the law. In 1947, the Forest Industry Organization (FIO) was established under the umbrella of the RFD. Its tasks included expanding logging activities, increasing income to facilitate redemption payments to the allies of the Second World War and rehabilitating the country in the aftermath of the war. In 1956, the FIO became a state enterprise under the umbrella of the Ministry of Agriculture and Cooperatives. Its new areas of responsibility included technical support to the main forestry activities, including logging, wood processing, furniture manufacturing and wood preservation.

• Peak exploitation phase: From the 1960s to the mid-1980s, timber harvesting peaked, export-oriented agriculture expanded and national economic development gained momentum. At the same time, concern for the country’s natural forest was growing. To decelerate deforestation and forest degradation, a number of policies were introduced to slow the progress of logging by five percent per year and to set aside 50 percent of the total land area as reserved forest. Other measures included:

  • encouraging the private sector to rehabilitate degraded forest lands after the completion of logging operations;

  • establishing forest protection units;

  • establishing a Forest Policy Division;

  • revising the Forest Law;

  • promulgating the Wild Animal Reservation and Protection Act (1960) and the National Park Act (1961); and

  • enacting the National Reserve Forest Act (1964).

• End of forest exploitation phase (dawning of a new forestry era): Starting in the late 1980s, the country entered a fourth stage, which is characterized by an increased awareness of the adverse effects of forest exploitation and the search for a new approach to forest management. Forest resources had declined to a point where the nation had to emphasize forest conservation rather than further forest exploitation. Consequently, timber imports increased significantly and the government looked for ways to involve the private sector in generating alternative wood supplies after the logging ban was imposed in 1989.

Role of the public and private sectors in forestry

From the late 1900s until recently, the RFD managed most activities in the national forests alone, particularly forest harvesting, nature conservation, watershed management, forest protection and forest plantations. The FIO was also involved in forest harvesting and forest plantation development. Other government agencies (for example, the Department of Agricultural Promotion and the Land Department) had limited involvement in forestry. Consequently, a number of conflicts arose among the different state organizations regarding the utilization of forest lands. The situation was further aggravated by unstable and vague policies, poor law enforcement, forest encroachment by poor as well as influential people, strong opposition to forest plantation development by non-governmental organizations (NGOs) and poor administration by government organizations. The results of the RFD’s and FIO’s monopoly were twofold. First, it led to a steady decline in forest cover (Table 2). Second, it crowded out the private sector, which in turn steered clear of investment in forest plantations for decades.

Table 2: Changes in forest areas and agricultural land, 1961-1998

Source: Office of Agricultural Economics (2000)

Even before the imposition of the logging ban, the 1987 National Economic and Social Development Plan incorporated private sector involvement in forest plantation development. To mitigate forest degradation, community participation in forest management is also widely accepted, especially because about 12 million people occupy the national reserve forest. The role of the private sector and communities is highlighted in the new Constitution, promulgated on 11 October 1997. It promotes and encourages public participation in natural resource management, including forests (Box 1).

Current forest production and conservation policies

The National Forest Policy (1989) stipulated that 40 percent of the total land area should be covered by forests, of which at least 25 percent was to be designated as conservation forests and 15 percent as production forests. This target was reaffirmed in the Seventh National Economic and Social Development Plan (1992-1997).

The Agricultural Development Plan, a component in the Ninth National Economic and Social Development Plan (2002-2006), stresses the conservation and rehabilitation of 30 percent of the total area of the country. The Plan also promotes productive forest plantations, private plantations and community forestry covering an area of 5.12 million ha.

Consumption and production of wood products

No data are available on consumption or production of wood products from 1906 to 1960. Timber production from natural forests gradually declined during the 1980s and dropped to very low levels during the 1990s. Between 1980 and 1989, the domestic consumption of timber fluctuated. The increase particularly in the late 1980s and early 1990 coincided with high economic growth rates (Colaco 1998). Consumption peaked in 1989 at 3.4 million m³. Timber production declined rapidly after the imposition of the logging ban and timber imports surged until 1997 when economic activity declined due to the Asian financial crisis. Exports remained poor throughout the period. (Figure 1).

Source: RFD (2001)

Figure 1: Wood consumption, exports, imports and production in Thailand, 1980-2001

Table 3 shows the breakdown of imports to Thailand between 1997 and 2000, and the serious extent to which the nation is dependent on importing roundwood and wood products.

Table 3: Wood imports from 1997 to 2000 (million US$)

Source: Department of Customs (2001)

In 2002, five pulp factories using eucalyptus produced on average 925 000 tonnes/year. The annual demand for eucalyptus wood for pulp production is estimated at 4.2 million tonnes, requiring a plantation area of about 56 000 ha (to be cut every five years).
While wood production from natural forests and teak plantations declined, supplies from rubber plantations increased dramatically (Figure 2). In 1982, rubberwood (Hevea brasiliensis) was valued at 120 baht/tonne. It increased to 550 baht/tonne in 1993 and 900 baht/tonne in 2002. Presently, rubberwood is valued at 156 250 baht/ha. Once processed, the rubberwood fetches 375 000 baht/ha. Moreover, the rubberwood supply is continuous and generated in large volumes every year, encouraging investments in the processing industries.

Sources: National Statistical Office (1990-1995) and RFD (1996-2001); data for rubber (1990-1996) Forestry Research Centre (1997)

Figure 2: Production of rubber, teak and other wood in Thailand (selected years)

PLANTATION DEVELOPMENT IN THAILAND

The first forest plantation was established by the RFD in 1906 using teak (Tectona grandis). After 1910, the teak plantations were developed for wood production and forest restoration after logging. In 1939, the RFD created the Forest Plantation Division. By 1960, forest plantations covered about 6 000 ha. Private sector involvement in plantation development was insignificant, although mangrove plantations have been established since 1932 to meet demand for charcoal.

Forest plantation development has been mentioned in all the National Economic and Social Development Plans and the RFD promoted forest plantations particularly for watershed protection between 1965 and 1975. Between 1975 and 1978, Eucalyptus spp. and Acacia auriculiformis were introduced to rehabilitate the national reserve forest lands. In addition, the global energy crisis drew attention to the need to promote fast-growing trees to produce fuelwood. Between 1978 and 1987, many community forestry plantations were established throughout Thailand. Towards the end of this period, the government intended to increase the area of forest plantations by about 80 000 ha per year, while at the same time decreasing the area deforested annually from 768 000 ha to 80 000 ha. Forest plantation development was highlighted in the Fourth National Economic and Social Development Plan. However, the total area planted annually averaged only about 43 400 ha.

The promotion of private sector participation in forest plantations on national reserve forest lands and private lands increased in subsequent National Economic and Social Development Plans between 1981 and 1996. On the national reserve forest lands, a shortage of available land limited the planting target to 48 000 ha per year. In the late 1980s, eucalyptus became the favoured species for private plantations. Opposition by local villagers and NGOs against the use of eucalyptus grew when environmentalists declared that “commercial eucalyptus plantations are incompatible both with forest conservation and with village livelihood(s)” (Lohmann 1990, p. 9; see also Lang 2002). Despite this opposition to eucalyptus and commercial plantations, the RFD maintained a strong interest in agroforestry and community forestry throughout this period.

After 1993, the use of forest plantations for environmental conservation was recognized. In 1994, two important projects supporting private sector involvement in forest plantation development were initiated. The Private Reforestation Promotion Project offered farmers 18 750 baht/ha over five years. By 2001, a total of 390 032 ha had been planted under the project. The second initiative, the Fast-growing Tree Reforestation Project, provided free seedlings and fertilizers to farmers to replace cassava and rice with fast-growing trees. About 98 152 ha were reforested under the project before it terminated in 1997. By 2001, 656 540 ha of forest plantations had been planted by the RFD (Table 4).

Table 4: Forest plantations established by the RFD between 1961 and 2001 (ha)

The FIO has been involved in forest plantation development since 1967. By 2001, it had planted an area of 77 643 ha and taken over the management of an additional 75 529 ha established by the RFD and the Provincial Forest Logging Company. The Thai Plywood Company Ltd. started planting in 1967 and covered an area of 3 907 ha by 2001.

Until the mid-1990s, the RFD was the main engine of plantation development, with the exception of rubber plantations. This changed briefly in the aftermath of the imposition of the logging ban and the passing of the Re-afforestation Act of 1992. However, when the Asian financial crisis drastically reduced budgets for incentive schemes investor interest was quickly dampened (Figure 3).

Figure 3: Annual planting rates of forest and rubber plantations between 1960 and 2001

Phase I: National forest abundance (between 1906 and 1960)

Between 1906 and 1960, Thailand had substantial areas of natural forest cover. The RFD was strongly focused on managing forest production and the revenue generated from logging activities. In 1941, the Forest Act was promulgated to control forest harvesting, timber transport, wood processing and wood marketing. The Act made no reference to forest plantations and little attention was paid to their development. As long as timber was plentiful in the natural forest, neither the government nor the private sector paid much attention to forest plantation development. This also meant that no direct incentives were offered. By 1960, the private sector had planted only a modest area of about 8 500 ha (about 70 percent of which was teak).

Phase II: Forest exploitation until the imposition of the logging ban (between 1960 and 1989)

The three decades between 1960 and 1990 witnessed the rapid decline of Thailand’s natural forest resources. Annual deforestation rates peaked at almost six percent in the late 1970s and were still as high as 1.5 percent one year before the logging ban was imposed in 1989. Official data indicated that forest cover decreased from about 53 percent of the total land area to 25-28 percent, although critics of the official statistics put the figure below 20 percent.

Aware of Thailand’s dwindling natural forests, successive governments promulgated policies and regulations to address the problem. In 1964, the National Reserve Forest Area Act was enacted. Its objectives included the protection of 50 percent of the country as natural forest, conservation of natural resources and support of agricultural and economic development.

To achieve the 50-percent target, forest plantations were promoted within the reserve forest. Article 20 permitted villagers to utilize degraded reserved forest areas that could not be restored to natural forest, by managing the forest or planting trees under conditions and duration stipulated in license agreements.

In 1969, the Ministry of Agriculture and Cooperatives endorsed the unlimited use of reserved forest land for forest plantations. Ten years later regulations were passed to allow reserved forest land to be rented for establishing plantations. The National Forestry Policy of 1985 attempted to address several forestry-related problems. The policy contained 20 sections on natural resource management issues, conservation, utilization, rehabilitation and administration. It dealt for the first time comprehensively with the need to expand and promote large-scale industries and stipulated that community forestry should be implemented (Faichampa 1990). Ten sections promoted reforestation by the private sector and provided the following guidance:

• Role and responsibility sharing among various government agencies and the private sector in forest management and development shall be promoted;

• Forty percent of the country shall be kept under forests. The forest area shall be divided as follows:

  Protection forest: 15 percent of the country shall be kept as protection forests for nature conservation, recreation and environmental quality protection;

  Production forest: 25 per cent of the country shall be designated as production forest to produce timber and other forest products.

• The public and private sectors together shall develop and manage the forest to achieve the objective of providing perpetual direct and indirect benefits to the country;

• The state shall establish a forest development plan as part of the natural resource development plan in the National Social and Economic Development Plan to harmonize the utilization of forests and other natural resources;

• Efficiency in timber production shall be increased through appropriate forest management techniques using both selection and clear-cutting systems. After clear-cutting, replanting should commence immediately;

• The state shall promote reforestation by the public and private sectors for domestic industrial consumption. Export of wood and wood products shall be encouraged. Community forestry such as reforestation on public land by the private sector, tree planting on marginal agricultural land and establishment of woodlots for household consumption shall also be promoted;

• The state shall encourage integrated wood-processing and pulp and paper industries to realize the whole-tree utilization concept;

• Forest Acts shall be amended to support efficient forest resource conservation and utilization;

• Wood energy as a substitute of fossil fuel shall be promoted through energy plantations; and

• Human resources and rural settlement planning must conform with national natural resource management and conservation plans.

Despite this strong statement of intent, lack of competent government officials stifled further progress towards involving the private sector. A forest development plan was prepared by the Danish Cooperation for Environment and Development (DANCED) but was never approved by the government. Little progress was made regarding energy plantations. In 1990, the Thai Forestry Sector Master Plan was prepared by the RFD, the Finnish International Development Agency (FINNIDA) and the United Nations Development Programme (UNDP) but again it was not approved by the government.

In 1987, the Cabinet passed an Economic Land Policy to classify the land into two categories, that is, private land and forest land. The policy encouraged the private sector to participate in forest plantation development, a key component of the economic development of the forestry sector. The Land Policy both endorsed and strengthened the National Forest Policy. Recently, the government has also considered adopting a progressive land tax policy to encourage the conversion of uncultivated land to productive land.

Scale of private sector involvement

Primary data on the scale of private sector plantations are weak. However, some insights can be obtained from the areas rented. Based on the number of rental agreements, a total of 146 plantations - comprising 81 plantations by private individuals, 44 plantations by companies, and 21 state enterprise plantations - were established. Individuals rarely planted areas larger than 320 ha each and the highest number of plantations was in the 80-160 ha bracket (Figure 4).

Note: 1 ha = 6.25 rai

Figure 4: Farm size of individuals who rented national reserved forest land for forest plantations under Article 20 from 1978 until 1989

By 1989, the total area of plantations on rented land in reserved forests amounted to 33 536 ha (Table 5). Due to the concern over forest conversion and escalating land-use conflicts, the approved rental area decreased after 1990. The scheme also suffered from high cost and bureaucratic procedures in seeking approval, which explained to some extent the private sector’s disinterest.

Role of research and development, and extension

In 1964, the RFD established a research station in Chiang Mai to focus on using pine and other fast-growing tree species for pulp production. In 1967, it set up a Nursery Centre to study the genetics of teak and pine in Lampang Province, and to produce and distribute seedlings to selected community groups and the general public. The Silvicultural Research Division was also strengthened and mandated to conduct research on forest plantations, silvicultural systems and watershed improvement in 1972. Three years later, a new policy was introduced to support forest plantation development and communities living in forest areas. At the same time, the National Reserve Forest Land Division, the Wildlife Conservation Division and the Watershed Conservation Division were established. A Nursery Section under the Silvicultural Research Division was also initiated to produce seedlings for reforestation and afforestation. In 1982, the Central Forestry Research Laboratory and Training Centre were created to conduct research on forest plantations in northeast Thailand.

In 1986, the RFD set up the Office of Private Reforestation and Extension to support the private sector in establishing commercial forest plantations. Its responsibilities included assistance in sourcing financial support through cooperatives, marketing, wood processing and long-term plantation management. In accordance with the government policy to reforest logged-over areas, the FIO expanded its mandate to cover reforestation in 1974.

Table 5: Area of plantations on rented reserved forest land, 1978-1994

Types and impacts of direct incentives

Renting of reserved forest land

Since 1960, support for forest plantation development included the renting of reserved forest areas by the private sector, and the production and distribution of free seedlings to communities and the general public.

Most private sector representatives indicated that they needed few direct incentives to establish and expand plantation and wood-processing activities (PACMAR Inc. 1989). Apparently, prices for wood products in domestic and international markets were sufficiently attractive to trigger investments. However, company representatives recommended that the government consider lease agreements to both private firms and occupants of forest land to increase land availability and resource security.

The 1969 regulation that permitted the unlimited use of reserved forest land for forest plantations was revised in 1979 to enable the private sector to rent the reserved forest land. Renting an area of up 1 600 ha required the approval of the Director-General of the RFD. With support from the Board of Investment Promotion and approval from the Ministry of Agriculture and Cooperatives, private investors could lease areas larger than 1 600 ha for up to 30 years. The rental period depended on species planted and expected rotation lengths. The regulation was subsequently modified several times (Table 6). In 1987, the maximum area that could be rented was reduced to 320 ha and in 1992 to eight ha. The main reason for this drastic reduction was that large tracts of land encouraged forest conversion, which led to land-use conflicts. According to the Thailand Development Research Institute (TDRI 1989, p. 68) unsettled land disputes became “the single major obstacle to large-scale plantations, not the shortage of investment funds, not the lack of government policy.”^[133]

Table 6: Changes in policies on renting degraded national reserve forest land

Supplying tree seedlings for plantations

In 1978, the RFD started to produce and distribute free tree seedlings to the general public. Farmers could obtain 50 seedlings at one time, and in some cases even up to 500 seedlings. Seedling production was high between 1977 and 1980 (Figure 5) to enhance people’s interest in public forest plantation projects that established 45 794 ha in 1977, 15 489 ha in 1978, 8 645 ha in 1979 and 1 069 ha in 1980 in 38 provinces. The RFD continued to produce seedlings for the Year of National Trees (from 1984 to 1988) and the Northeastern Green Project (between 1987 and 1991).

Besides forest plantation development, the government also supported the growing of rubber trees. In 1960, the Rubber Replanting Aid Fund (RRAF) was set up to assist farmers in rubber production. Jurisdiction over the rubber plantations was handed to the Committee of National Rubber Plantations which monitored rubber plantations covering 1.92 million ha. Financial support for the fund was generated from taxes on rubber exports. Through the RRAF, planters could receive cash payments for up to 2.4 ha. The payments were increased over the years (Table 7) and are still in effect today.

By 1962, about 1.16 million ha had been replanted using better quality planting stock on private land. In 1975, the RRAF had also offered incentives to farmers for tree species other than rubber. Since 1987, farmers who do not own rubber plantations can also obtain financial support to plant rubber of high-yielding stock in the Rubber Plantation Extension Zone. By 2000, the area under rubber had reached 7.2 million ha. Between 1960 and 2001, the owners of 843 561 farms had replanted about 1.25 million ha with rubber trees.

Figure 5: Number of seedlings produced by the RFD between 1975 and 1989

Table 7: RRFA’s payment rates for replanting with rubber and other trees species (1965 to 2002)

Lessons learned

The years between 1960 and 1989 are characterized on the one hand by unprecedented deforestation rates and on the other by the slowly growing concern for the future of Thailand’s forests. A number of significant policies were drafted, among them the National Forest Policy (1985) and the Land Policy (1987), to address the problems. However, it was not until the mid-1980s that firm steps were taken to initiate forest plantation development. The main incentives offered were free seedlings and the renting of degraded reserved forest land at low cost for planting trees. Both incentives were insufficient to significantly attract the private sector to tree planting (Figure 6). In fact, the rental agreements led to disputes over land use and resource security, and resulted in some cases in the destruction of plantations. Although some circles blamed the conflicts between different stakeholders on species’ choice (eucalyptus), land availability, illegal encroachment of reserved forest land and land speculation were more important impediments to a more organized plantation expansion.

In comparison to the slow progress in plantation development, the RRAF, which offered generous financial grants to rubber growers, was largely responsible for stimulating the planting of more than 40 000 rubber plantations per annum throughout the 1980s. The rubber promotion scheme in Thailand is interesting because it demonstrates the effectiveness of financial grants in stimulating the planting of rubber trees, particularly because most grants are financially more attractive and provide more flexibility than the free seedlings that were offered to farmers.

Figure 6: Forest plantation development in Thailand, 1960-1989

Phase III: After the logging ban (1989-present)

Devastating floods and landslides, which took the lives of 400 people in Nakorn Srithammarat Province in November 1988, had a major impact on Thailand’s forestry sector. The most significant one was a nationwide logging ban imposed in January 1989. Following the imposition of the ban, attention was firmly focused on how Thailand could obtain adequate wood supplies required for domestic consumption. The concern over raw material shortages as well as surging wood imports was reflected in a flurry of legislation, policies and cabinet resolutions passed after 1990, of which the most important and relevant to forest plantation development was the Re-afforestation Act (1992).

The main purpose of this Act was to support reforestation of restricted tree species (for example, teak and dipterocarps) by the private sector on private land. The Act described the types of land on which forest plantations might be registered and established. Under the Act, any individual or entity owning a forest plantation could register with the RFD, and thus would receive formal approval for felling the trees. This registration was particularly important for owners of teak and dipterocarp plantations so that they would not be apprehended for illegal logging.
Sections 10 to 13 covered the harvesting and transport of wood. Section 14 stipulated the waiver of all royalty fees. Although the Act was to support private sector plantation development, some passages were rather restrictive. For example, the Act referred to only restricted tree species; no reference was made to other economically important plantation species, such as eucalyptus, neem (Azadirachta indica), rosewood (Pterocarpus macrocarpus) and ironwood (Hopea spp.).

In addition to the Re-afforestation Act, several resolutions that concerned forest plantation development had been passed by the Council of Ministers, including:

• Establishment of rubberwood sawmills (24 January 1989)

  The Cabinet agreed to permit the establishment of rubberwood sawmills throughout the country. There had been restrictions in some provinces since 1960. In early 1994, operators were allowed to set up sawmills processing wood belonging to a group of 13 plantation species.

• Classification of the National Reserve Forest Area (10 and 17 March 1992)

  The Council of Ministers agreed on land-use zoning of the National Reserve Forest area. According to the zoning, 27.56 percent of the total land area was set aside as conservation forests, 16.16 percent as production forests and 2.21 percent was available for land reform.

• Renting of degraded forest lands (not exceeding eight ha each) by the private sector (14 September 1993)

  The Minister of Agriculture and Cooperatives became responsible for the rental agreements that enabled degraded forest land to be leased by the private sector for the purpose of planting trees.

• Re-organization of the FIO (1 April 1997)

  The FIO should play a role in encouraging the private sector to invest in forest plantations.

Unfortunately, resolutions were passed that constrained private reforestation. For example, on 15 May 1990, the Cabinet temporarily suspended the renting of degraded forest land. On 8 September 1992, it prohibited the use of the National Reserve Forest lands for private forest plantations apart from those meeting the following criteria:

• The land area for plantations must not exceed eight ha;

• Planters must grow tree species specified in the Forest Plantation Act (1992);

• Planters must occupy the land for more than five years; and

• Planters must have converted the land from agricultural production to forest plantation or agroforestry.

While the government continued to strengthen forest conservation and initiated various reforestation projects, the pulp industry, composed of five main producers (Table 8), started to encourage farmers to grow trees for pulp production.

Table 8: Pulp production in Thailand, 1999

Scale of private sector involvement

Primary data on the scale of private sector plantings are limited. The registration of forest plantations under the Re-afforestation Act (1992) can offer some insights, but it provides only a partial overview of the ownership of forest plantations (Table 9).

A number of factors account for the low numbers of registered plantations. The Re-afforestation Act did not stipulate the registration of forest plantations for tree species other than Tectona grandis and Dipterocarpus alatus. Potential planters were unfamiliar with the Re-afforestation Act. The registration process was extremely slow and it was not necessary to register until a decision was made to fell trees.

Table 9: Number of forest plantations registered with the RFD in Thailand, 2000

Source: RFD (2001)

It is difficult to obtain data for the area of eucalyptus plantations in the country, as the RFD has not developed a standard reporting procedure and most plantations belong to the private sector. Data for only some years are available from different studies (Table 10).

Table 10: Eucalyptus plantations in Thailand, 1986, 1995 and 1997

Sources:
* Data came from RFD (2001), although the methodology was unclear
** Forestry Research Centre (1997)
*** Sunthorn-Hao (1999)

Based on data from 57 062 farmers who joined the Private Reforestation Extension Project (PREP) between 1994 and 1996, the average size of forest plantation area was three ha. This is confirmed by a sample of 3 604 farmers who participated in the PREP (Figure 7). They had an average farming area of 9.87 ha, with 2.96 ha being devoted to plantations. Most farmers
(62.5 percent) owned farming areas between 0.16 and 6.40 ha each. Only nine percent owned farms greater than 16 ha.

Figure 7: Size of farming areas and forest plantations of PREP participants

Role of research and extension

Since the RFD’s reorganization in October 1992, the Silvicultural Research Division has been responsible for research on tree improvement, seed tree management, forest plantations and forest soils, and the Forest Product Research Division for research on forest products. The new Private Reforestation Office has to prepare plans and promote tree planting as an alternative to agriculture, and to disseminate information, provide financial support, analyse markets and assist in registration. It is divided into five sections:

• administration section;

• private reforestation fund;

• reforestation extension section;

• private reforestation management section; and

• marketing and wood utilization section.

The regional, provincial and district forest offices support the RFD’s research and extension activities. The district offices are mainly responsible for liaising with the farmers.

Types and impacts of direct incentives

The early 1990s saw the development of numerous incentive schemes that were mainly administered via projects. In addition, the RFD continued to provide seedlings and lease degraded reserved forest lands to the private sector. Affected by the eight ha areal restriction, private companies decided to offer incentives to farmers to encourage them to produce raw material for the wood-processing (many pulp) industries.

Government support

Since 1991, the RFD and the Bank of Agriculture and Agricultural Cooperatives have initiated four projects or schemes to support private sector involvement in plantation development:

• Reforestation and Extension Project in the Northeast of Thailand (REX), initiated in 1991;

• Private Reforestation Extension Project (PREP), initiated in 1994;

• Fast Growing Trees Reforestation Project, initiated in 1994; and

• Overseas Economic Cooperation Fund (OECF) for forest plantations, initiated in 1998.

The Reforestation and Extension Project in the Northeast of Thailand (REX)

Under the REX, the RFD was responsible for carrying out reforestation and providing extension services to assist in the Green Northeast Programme. Reforestation activities were to be carried out by local people. Over a period of eight years, the RFD produced and distributed 89 million seedlings (Figure 8).

Source: RFD (1999)

Figure 8: Number of seedlings produced and distributed by the RFD, 1991-1998

The Private Reforestation Extension Project (PREP)

In 1994, the government initiated the PREP, through which the RFD provides funds to smallholders interested in planting trees. The farms of eligible farmers should not exceed 16 ha per family which has property rights to the land, or the land should be rented from the RFD. The PREP’s main objectives are to:

• Encourage farmers to grow trees on their land;

• Produce wood for domestic use and to decrease dependence on wood imports;

• Generate employment in rural areas; and

• Decrease forest destruction.

The PREP is expected to continue until 2005 and involves about 795 full-time and 2 610 temporary staff. From 1994 to 1998, farmers participating in the PREP received 18 750 baht/ha over five years in installments of 5 000 baht/ha in the first year, and 4 375 baht/ha, 3 750 baht/ha, 3 125 baht/ha and 2 500 baht/ha in the following four years. Trees had to be planted on at least 0.16 and up to 16 ha. The maximum size was increased in 1998 to 32 ha because the RFD was concerned that the target of 1.28 million ha within eight years would not be reached. The RFD also realized that larger farms were more suited for investments in tree planting.

Farmers were advised to plant at least 1 250 trees/ha and selected species had to be one of 46 species listed by the RFD. The number of seedlings to be planted was reduced in 1999 to 625 trees/ha to cut costs and introduce agroforestry. The RFD also calculated that only 219-250 trees/ha would remain for the final harvest and viewed dense planting as unnecessary. The number of potential species was reduced to 38 because silvicultural knowledge and marketing opportunities for eight species were limited. Besides, farmers showed little interest in many species. The farmers were responsible for the overall management and had to ensure that survival rates did not drop below 85 percent in the first year after establishment. Between 1994 and 2001, the funds used by the PREP to support farmers reached 5.1 billion baht.

The target of planting 160 000 ha with trees per year was very ambitious and was reduced as early as 1996. By 2000, only 168 437 farmers had participated in the PREP and the area planted had reached only 390 032 ha (Table 11). Initially, the PREP was plagued by the inexperience of project administrators, forestry officers and farmers alike. Some farmers only joined the project because they felt compelled to do so. As a result, a considerable number eventually abandoned the project. In 2001, only 78 019 farmers were still with the project, accounting for a total of 165 484 ha. Over the years, the operation of the project improved, monitoring and evaluation provided insights into its progress and costs were cut by reducing planting densities. Unfortunately, the PREP suffered from the effects of the financial crisis in Thailand. Budget reductions were introduced in 1999. Since 2002, no additional funds have been made available, which may negatively affect the government’s credibility regarding its commitment to support the private sector in forest plantation development.

Table 11: Farmer participation in the PREP, 1994-2000

The Fast Growing Trees Reforestation Project

The RFD initiated the Fast Growing Trees Reforestation Project in 1994. Through the project, it provided incentives for the conversion of cassava and rice fields to fast-growing trees (for example, Azardirachta indica, Eucalyptus camaldulensis and Acacia mangium). The support included free fertilizer (62.5 kg/ha) and seedlings (1 250/ha), in addition to long-term, low interest loans (1.75 percent for up to 12 years) through the Bank of Agriculture and Agricultural Cooperatives for establishment and management activities. Between 1994 and 1997, the total area supported reached 98 152 ha (Table 12), which was considerably higher than the target of 68 800 ha. Most fields were planted with eucalyptus.

A second phase of the project was envisioned to convert an additional 240 000 ha of cassava and rice fields over a five-year period. However, the project was terminated in 1998, although technical support continued until 2001. Despite the absence of empirical evidence, it appears that farmers were encouraged not so much by the incentives, but more by expected higher returns from planting trees compared to cassava and rice on marginal lands.

Table 12: Area planted and the number of participating farmers in the Fast Growing Trees Reforestation Project, 1994-1997

Overseas Economic Cooperation Fund (OECF)

The Bank of Agriculture and Agricultural Cooperatives established the OECF for forest plantations in 1998. It provided 984 million baht in loans to farmers who intended to plant trees (with the exception of eucalyptus). Through the Fund, interest on loans was reduced by 1.75 percent. The amount that could be borrowed by a family was between 10 000 and 15 million baht, and must be repaid within 15 years. According to the plan, 984 farmers nationwide - 246 farmers in the north, 256 in the northeast, 216 in the central region and east, and 266 in the south and west, were to receive the loans.

Additional loans for forest plantations totalling 365 million baht and for agroforestry totalling
790 million baht were made available between April 1999 and 31 March 2001, once again excluding the planting of eucalyptus. Other conditions remained the same but interest was decreased by two percent.

Seedling distribution to the general public

By 1975, the RFD had established 13 nursery centres nationwide to produce seedlings for free distribution to the general public. The number was increased to 41 and 57 centres in 1988 and 1994, respectively. Of these, 13 centres produced the bulk required by the Private Reforestation Extension Project and the Royal Golden Jubilee Forest Rehabilitation Project between 1994 and 1997 (Figure 9). In total, the centres produced and distributed more than 970 million seedlings between 1989 and 2001.

Source: RFD (2001)

Figure 9: Number of seedlings produced and distributed by the RFD, 1990-2000

The role of the private sector in providing incentives

For a number of reasons, it is difficult to gain an adequate understanding of the role companies play in promoting forest plantations. Most company representatives hesitate to provide data about their operations and policies. However, it is clear that several companies operate out-grower schemes as they find it difficult to acquire sufficient land by themselves for the production of raw materials.^[134]

Phoenix Pulp and Paper Co. Ltd.

Phoenix Pulp and Paper Co. Ltd. was established in 1979 in Nam Phong District, Khon Kaen Province, Northeast Thailand. Estimated raw material requirements were 1 000 tonnes of bamboo and one million tonnes of eucalyptus in 2002. Most bamboo and all eucalyptus are supplied by local farmers. Other raw material sources include Phoenix Coopers which collaborates with the Royal Thai Army to establish plantations at selected sites controlled by the military. Raw Material Development Co. Ltd., a Phoenix subsidiary, was set up to secure additional raw material supplies for pulp production. About 24 million eucalyptus seedlings have been distributed to farmers since the firm was established.

Thai Plywood Co. Ltd.

Thai Plywood Co. Ltd. is a state enterprise established in November 1953 under the Ministry of Agriculture and Cooperatives. The company started a fast-growing tree plantation extension project in Lan Sak District, Uthai Thani Province, in western Thailand in 1989. As part of the project, the company had contracts with farmers to provide them with seedlings and fertilizers. The farmers had to cover these expenses incurred by the company only after the final harvest. Technical advice was provided free-of-charge and the company provided buy-back guarantees. The project was terminated in 1998 because of the farmers’ diminishing interest (Table 13).

Table 13: Number of farmers involved in the project by Thai Plywood Co. Ltd. and area planted, 1989-1998

Source: Thai Plywood Co. Ltd., personal communication

Siam Forest Tree Co. Ltd.

The Siam Forest Tree Co. Ltd. is part of the Siam Cement Group of companies. It has promoted eucalyptus plantations to support the Siam Pulp and Paper since 1992 and provides improved eucalyptus seedlings and technical assistance to farmers. The company plans to support plantation establishment on 1 600 ha/year, and had achieved 22 173 ha by 2001 (Table 14).

Table 14: Area of eucalyptus plantations supported by Siam Forest Tree Development Co. Ltd., 1992-2001

Source: Siam Forest Tree Development Co. Ltd., personal communication

Lessons learned

Three events had a significant effect on forest plantation development in Thailand during the 1990s and early twenty-first century - imposition of the logging ban in 1989, the global price hike for timber in 1993/1994 and the financial crisis since the middle of 1997.

The influence of the logging ban, both in economic and psychological terms, cannot be underestimated. Virtually overnight, the country was faced with securing new timber supply sources. Imports were one alternative, the other was heavy investments in plantations. The Re-afforestation Act of 1992 was specifically designed to support plantation development by the private sector. Various projects were initiated by the government. The results were mixed. While inexperience slowed down progress to some extent, the considerable funds that were made available and the attractive timber prices encouraged the private sector to plant more trees during the mid-1990s (Figure 10). However, the surge in plantation expansion was short-lived. The financial crisis that hit Thailand particularly hard in 1997 and the following years reduced the government’s ability to continue providing grants for plantation establishment. While falling timber prices had reduced interest in forest plantations, the crisis further dampened investor sentiments. These external developments make it difficult to assess the impact of the government incentives offered to farmers for growing trees and to judge the value of lessons that were learned in the 13 years since the imposition of the logging ban.

CONCLUSIONS

Between the establishment of the RFD in 1896 and the late 1970s, forest management in Thailand was strongly focused on timber exploitation. The RFD was responsible for overseeing the activities of logging concessionaires and generating revenue from the vast forest resources. Since the early 1960s, agriculture was expected to support and finance industrial development. Agricultural expansion was accelerated and supported by public investments, especially in transport and irrigation (Sugunnasil 1991). As a result, the increase in cultivated land was higher than population growth between the 1960s and late 1970s (Onchan 1990). Between 1960 and 1990, the agricultural population grew by 14 million people. During the same period, almost 15 million ha of forests were converted to farmland (Panayotou and Parasuk 1990).

Figure 10: Forest plantation development in Thailand, 1990-2001

Although the National Reserve Forest Area Act of 1964 was promulgated in an effort to maintain 50 percent of the country under forest cover, it became apparent in the late 1970s and early 1980s that overharvesting and forest coversion had led to unprecedented high deforestation rates. By 1980, the forest cover had dropped to below 35 percent. In the late 1970s, Thailand became a net importer of timber. Efforts to increase wood supplies through forest plantation development were negligible, although procedures were prepared for renting out degraded reserved forest land for tree planting in 1979. This had little effect; timber exploitation and forest conversion continued, albeit at a slower pace.

Concern over the continuing loss of Thailand’s natural forest grew during the 1980s; there was little effect on forest plantation development. The turning point in Thailand’s forestry sector was the imposition of the logging ban in 1989. In late 1992, the RFD was formally directed to shift its focus from forest exploitation to forest conservation. Over the following years, the government offered direct incentives - through various projects - to the private sector to accelerate forest plantation development.

Due to the absence of monitoring, it is difficult to review the response to the direct incentives offered. However, a number of proxy indicators show that forest plantations increased considerably. For example, eucalyptus plantations expanded from 53 524 ha in 1986 to 438 524 ha in 1997. The number of registered plantations also grew to 7 865, planting over 72 000 ha in 2000. More than 390 000 ha were established through support from the PREP between 1994 and 2000. The Fast Growing Trees Reforestation Project supported plantings on nearly 100 000 ha between 1994 and 1997.

Although the numbers appear impressive, assessing their significance and the contribution of direct incentives to the developments during the 1990s remains problematic for a number of reasons. First, not all the investors remained with the projects they signed up for. For example, 168 437 farmers joined PREP during the 1990s. However, only 78 019 remained in 2001. Second, there was very little information about project costs in general, and the costs of incentives, in particular. Between 1994 and 2001, PREP support amounted to 5.1 billion baht. This translates into about 13 077 baht/ha (for the 390 000 ha established), which is surprising as the support was supposed to be 18 750 baht/ha. Third, it is unclear to what extent investor sentiment was influenced by the global price hike for timber in the early 1990s. At the same time, Thailand’s economy and those of many other Asian countries were booming, which increased demand for wood products. Marginal farmland became available as increasing numbers of rural people found employment in the manufacturing and service sectors. There was an expectation that the “good” times would continue for many years to come.

The years of booming economic growth came to an abrupt halt in the middle of 1997, when Thailand became the first victim of the Asian financial crisis. This development had two immediate effects and one long-term consequence. First, government spending was drastically reduced, which affected all plantation projects. Most activities were scaled down or completely terminated (for example, the Reforestation and Extension Project in the northeast). Direct government planting also decreased after 1999 and the number of seedlings produced by the RFD fell from about 20 million in 1996 to below five million in 1998. Second, investors responded to future uncertainties and declining forest product demands by delaying investment decisions. Further plantings were deferred or abandoned.

The long-term effect of the financial crisis in Thailand was seen in the return of many rural people, who had lost their off-farm jobs, to work in their fields again. Thus, the area that was available for trees in the early 1990s quite quickly shrank and tree cover reverted back to annual crops.

The short-lived history of private sector involvement in forest plantation development is defined by two crises:

• The flash floods of 1988 that led to the imposition of the logging ban and subsequently the government’s commitment to forest plantation development; and

• The financial crisis that drastically curtailed government budgets, reduced - at least temporarily - wood product demands and dampened investors’ interest.

While the political events and changes in the economic conditions undoubtedly influenced investments in forest plantations, direct incentives accelerated a process that would have taken place at a slower pace in their absence. On the other hand, developments could have been faster and lasted longer if some of the impediments to forest plantation development had received more attention.

IMPEDIMENTS AND FUTURE DIRECTIONS

Lack of clear policy statement on forest plantations

Although the Re-afforestation Act of 1992 was designed to support private reforestation, there is no clear strategy for forest plantation development, which can be regularly reviewed and amended according to the general economic climate and the needs of both large- and small-scale investors. To rectify the situation, the RFD should prepare a strategy in consultation with representatives from key stakeholders in the private sector and civil society.

A clear and inherently consistent strategy should also address the removal of disincentives and legislative flaws including:

• The current Re-afforestation Act and supporting provisions are restrictive, as they do not cover all tree species;

• Restrictions on establishing new wood-processing industries in many provinces remain;

• The maximum area of degraded reserved forest land that can be rented for growing trees is limited to only eight ha. Many conditions for renting are very restrictive;

• Ownership and use of chainsaws are prohibited; and

• Timber of some species cannot be exported.

The following conditions are required to create a more attractive environment for forest plantation development:

• The Re-afforestation Act should be amended and cover all tree species. Plantation-grown timber should be exempted from taxes, premiums and fees. All plantations should be registered with the RFD and procedures for obtaining harvesting permits need to be simplified;

• The Forest Act of 1941 should be amended to allow for the unrestricted use of non-timber forest products derived from forest plantations. Restrictions regarding the establishment of new sawmills need to be revised;

• The National Reserve Forest Act 1964 should be revised to provide greater flexibility in the renting of degraded reserved forest lands. In particular, size restrictions should be lifted;

• Plantation owners and registered personnel should be allowed to own and operate chainsaws;

• Regulations on the export of timber should be lifted and export taxes reviewed; and

• Tax deductions for land used for forest plantations should be considered.

Research, extension, monitoring and capacity building

Since 1992, the Silvicultural Research Division has been responsible for research on tree improvement, seed tree management, forest plantations and forest soil. The Forest Product Research Division focuses its activities on forest product development. In 1996, the RFD established the Office of Private Reforestation and Extension to support the private sector in developing commercial forest plantations. Although these efforts are laudable and indicate government commitment to forest plantation development, research has made no significant impact and extension activities have not improved the knowledge of stakeholders involved in tree planting. Government officials and many investors poor grasp of relevant regulations and policies, and their inadequate knowledge of plantation establishment, management practices and economics continue to impede progress. Monitoring is weak and there is currently no database on forest plantations, annual wood supplies and demand by the processing industries. The problem is exacerbated by a common disinterest in providing proper services to the general public and interested small- and large-scale investors. There appears to be a serious problem with attitudes that is difficult to change in the short term.

Proposed solutions include: training to improve knowledge of policies and legislation concerning forest plantations; capacity building in plantation establishment and management at all levels; and wood utilization, and forest economics, including a comprehensive evaluation of the cost-effectiveness and efficiency of incentives in fostering plantation development. To facilitate monitoring, a thorough review of past developments and the creation of a database on forest plantations are required. Pilot models for effective extension should be developed. Most importantly, incentive systems need to be devised for government officials, which reward effective research and extension.

In addition, small-scale investors and farmers should be encouraged to organize themselves, form cooperatives and nominate representatives to liaise with government officials. Finally, access to improved planting material needs to be enhanced and assistance should be provided in marketing plantation-grown wood.

Providing balanced information and raising awareness

Since the late 1980s, forest plantation development has been negatively affected by environmental and social concerns over monoculture plantations. Eucalyptus was especially targeted and its promotion opposed by environmentalists. In some cases, this led to the destruction of nurseries and equipment (Puntasen et al. 1992). Although the discussion about the negative impacts of eucalyptus and the contributions that forests plantations can make is not as emotional as it was ten years ago, plantations still project a negative image.

The promotion of forest plantation development needs to be accompanied by the dissemination of balanced information on the potentials of tree growing, and the positive and negative impacts they can have in certain localities. The concerns of environmental groups and civil society should be taken seriously and addressed through open discussions.

Providing justified and adequate support to investments in forest plantations

There is great diversity among potential investors in tree growing. Farmers and small-scale investors have very different needs from large-scale commercial investors. In certain cases, growing trees may not be inherently unprofitable, which raises the question, “Under what circumstances are incentives in fact justified?” This is especially important as government budgets have declined in recent years and it is questionable whether the financial support that was provided in the early 1990s can be made available again at similar levels in the future.

Applied economic analysis that comprehensively weighs the costs of providing incentives against the perceived societal benefits, needs to be conducted to determine whether a particular level of support is justified. Any analysis should be of a comparative nature and incorporate assessment of alternative land uses.

If deemed necessary, incentive schemes should be tailored to the needs of different groups of investors. Small-scale investors, as individuals or as cooperatives, are probably best supported by direct cash payments as practised in some of the projects throughout the 1990s. Procedures for obtaining support should be as flexible and non-bureaucratic as possible, and could follow the model of the RRAF. Large-scale commercial investors are probably best served by indirect incentives including supportive policies and legislation, enhanced tenure security, the lifting of export and processing restrictions and deductions on land taxes.

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